Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Good afternoon, everyone. Thanks for joining the next session with Jazz Pharmaceuticals. It's my pleasure to be hosting Bruce Cozadd, Chairman and CEO; as well as Stefan Faderl, who is the Therapeutic Lead in Oncology, Clinical Development at Jazz. Both of you, thank you so much for taking the time to join us today.

Yes. Happy to be with you.

Thank you.

Bruce, why don't you just kick us off with some opening remarks, and we can drive straight into Q&A. And for our listeners, feel free to send me any questions you have on the dashboard.

All right. Terrific. Well, thank you all for spending a few minutes with us today. As we discuss our business, I'll remind you, please do consult our SEC filings and refer to our fourth quarter and full year 2024 earnings announcement on February 25 for additional information and risk factors. If we refer to guidance today, it's as of the time we provided that guidance on February 25. And if we refer to non-GAAP financial measures, please refer to our earnings disclosures for a full reconciliation to GAAP. A couple of comments just entering setting us up for a conversation here. As a reminder, we did report total revenues of $4.1 billion in 2024, including the highest-ever annual revenues from each of our promoted commercial products, our sleep our epilepsy and our oncology portfolios are each annualizing at over $1 billion based on fourth quarter net product sales. And then, of course, we had some exciting developments late in the year with FDA approval for and launch of Ziihera in its initial indication of second-line BTC. We also disclosed coming into this year that we did settle with all 10 current Epidiolex and the filers with agreements allowing generic entry beginning in the very late 2030s. We did provide revenue guidance for 2025 of $4.15 billion to $4.4 billion, reflecting continued top and bottom line growth including about 5% year-over-year top line growth at the midpoint. And we started 2025 in strong financial position. And then since that time, of course, we announced on March 5, that we entered into a definitive agreement to acquire Chimerix, an all-cash deal. That acquisition should close this quarter in the second quarter pending customary closing conditions. Chimerix' lead clinical asset is dordaviprone, a novel first-in-class small molecule treatment for H3 K27M-mutant diffuse glioma, a rare high-grade brain tumor that most commonly affects children and young adults, and we believe this is a strong strategic fit with our capabilities in oncology. This provides us a potential launch this year and would create a durable revenue opportunity with patent protection into 2037 with the potential to receive patent term extension, if approved. And throughout the rest of 2025, you should continue to focus on our continued strong commercial execution to drive our growing and diversified revenue base and making key progress on R&D programs, including submitting an sNDA for Zepzelca in extensive stage first-line small cell lung cancer in the first half of this year that will give us the opportunity for more patients to be treated with Zepzelca for a longer duration. We're looking forward to presenting that data. We already said the top line was positive, but presenting that data at a medical congress that should support potential inclusion in NCCN guidelines and compendia listing. And of course, we're also looking forward to our Phase III HERIZON-GEA-01 trial data in the second half of the year for zanidatamab based on an updated assessment of progression events. On the financial front, we're looking forward to continuing to be good stewards of capital focused on long-term value creation. I can't resist making a comment about tariffs given what's going on in the world around us. And I'll say, per the communication on April 2, pharmaceuticals were among several classes of products, not subject to tariffs. We certainly have seen the recent comments that those tariffs are coming for pharmaceuticals, and we're closely monitoring this complex and evolving situation, including those potential sector-specific tariffs. We don't expect interruption of the supply of our medicines to serve U.S. patients, and our focus will remain what it always has been, which is delivering innovative and life-changing medicines to patients with serious diseases. So with that, Ami, happy to jump into your Q&A.

Great. Maybe just a follow-up on the comment related to the tariffs. As you said, they are most likely coming. What would that mean in terms of the cost of goods for the company? Anything you can share today with regards to dependence on countries outside the U.S. for pieces of the supply chain, that would be helpful. And then perhaps any comments around where IP is situated.

Yes. So I'll say it's a little bit of a complex situation, and it's hard to give quantitative information given that we have yet to see a specific policy to react to. It is certainly true that we have significant revenues in the U.S. with some of those products manufactured outside the U.S. You certainly can see in our regulatory filings that we have some company-owned manufacturing facilities, which are outside the U.S., specifically in Ireland, the U.K. and Italy. That doesn't mean that's the source of all of our products. We have, in some cases, manufactured some of our products, not in our own facilities, but through contract arrangements in the U.S. There are certain things we can do in the short term to minimize impact, including where we hold inventory in the short term. I think the real question is what is the long-term implication. And I will say that's complex to figure out too because it's unclear to us whether we're really looking at a long-term rational economic policy that you should expect will stay in place forever or for many years to come or whether you're looking at things that would be subject to revision again. And it's difficult when you're operating a business and you're trying to make long-term investment decisions, including about manufacturing capacity, where to make those investments require years to pay off, if you look at, getting a facility outfitted up and running and regulatorily approved to supply products in a regulated industry, you can't snap your fingers and make that happen overnight. So what the right long-term investment decisions are depends on your view, not only at what gets announced in the near but what plays out over the longer term. And I would say we'll try to be thoughtful about that. We do have IP that's outside the U.S. as well. That's a little different. That has to do with probably more tax implications. And again, we haven't seen anything specific to respond to yet to allow us to make a conclusion. I will say 2 other things. It's a good time to be a company with significant revenues and cash flow and financial flexibility. And I know not everyone in the industry is in that position. And as we see impact to valuations, you've heard me say, Ami, many times over the years, I don't like it when our stock price is down, but I like it when everybody's stock price is down because if you're a net acquirer of assets, that can have implications for your ability to invest and create value over time. And again, we'll have to see how things play out over a longer term, but I'll just remind people that in general, low valuations are not a bad thing for an acquirer.

Yes. That makes sense. The other thing that's top of mind for investors these days is just all the changes that have gone on at HSS and the FDA and as you sort of thought about the submission for Zepzelca and any other interactions with the FDA, have you seen any changes? Or perhaps if you can just share what experience you've had in terms of just the level of engagement with the FDA and getting feedback and such?

Yes. I mean I will say we interact with FDA very regularly across a portfolio of commercial products and R&D products. I don't think we've seen yet any change in responsiveness of FDA. We've benefited historically from the fact that a number of our products and product candidates are important treatments for patients without a lot of treatment options, and I think they've tended to go to the top of the priority list. You've seen breakthrough therapies. You've seen early approvals. You've seen accelerated approvals, priority reviews. I would hope those things under any scenario continue to be at the top of the priority list and get the most attention. Certainly, a lot of what we read about in changes at FDA have to do with more senior officials, policymaking groups as opposed to sort of the core review teams. So I'm not claiming there will be no impact. But as of yet, in terms of the standard review process, we haven't seen an impact and I'll remind you that we've got different types of interactions with the FDA ahead of us. It is true that through the Chimerix acquisition once closed, we'll be looking for an approval of a new product for a serious disease with a PDUFA date in August. A little different when you refer to Zepzelca and maybe even Ziihera in that, once we submit a supplemental approval request for Zepzelca in frontline maintenance therapy and Essentials extensive stage small cell lung cancer, we'll also be presenting that data publicly. People will be able to see the data at a major medical meeting. We'll be seeking inclusion in NCCN treatment guidelines. And with a product that's on the market, physicians will be able to use the product. It may even be reimbursed and generate revenues for us independent of getting to that FDA review process. We want to get it on label. We want to be able to promote it which we can only do once FDA acts, but it is a little bit different because it's a drug on the market. And I'd make similar comments as we get to GEA with zanidatamab, we've got a product that is on the market, thanks to our approval last year. That was part of our strategy to go for biliary tract cancer second-line approval first, even though it's a more limited revenue contribution. It allows us the ability to get that product on the market, so that if and when we come along with data in another indication like GEA, there may be the ability for people once that data is out and guidelines are updated to have access to the product and have it be reimbursed.

Yes. Okay. Let's switch gears to Chimerix and the asset that you've acquired through that. You have the PDUFA date coming up in second line in August, as you just mentioned. How do we -- how does one sort of think about any kind of risks surrounding that PDUFA date? What got you comfortable and then also, can you talk about the ongoing Phase III in first line for which this data that's going to be reported, the interim data for that also kind of around the third quarter of the year? So how do we sort of think about approval and then additional data in first line and path to approval in first-line expanding the label in first line?

Yes. Maybe I'll start and then ask Stefan to weigh in. And just as a reminder to people, we've announced the deal. The deal is pending. It has not closed yet. So we're not going to reveal any new Chimerix confidential information today. We're going to refer to comments that have already been made and our general assessment of the asset. But again, we think it's a great strategic fit in the rare oncology space. We'll leverage our capabilities, both on the development and the commercial, particularly the commercial side. These patients tend to be treated in the academic centers where Jazz already has a presence for Rylaze. And again, we think it's got a good durable profile. But Stefan, maybe you can comment a little bit on why we're excited about this in terms of regulatory path and what we see in terms of benefits of the product.

Yes. It's an exciting opportunity, again, I think, for Jazz with an additional oncology product this time. It addresses a population of patients with a particularly aggressive type of brain tumor called glioma, high-grade glioma. There aren't really many treatment options for those patients based on where it's primarily located in the brain and based on its growth pattern, as a matter of fact. It's located in deep structures in the midline like brainstem. So it's not easily accessible for surgery on the one hand. On the other hand, these tumors tend to grow in an infiltrative manner into the tissue rather than forming a well-defined sort of tumor mass that you would think you could just take it out. So that doesn't work. So those patients typically get radiation therapy to the area of the tumor and then it's really a follow-up and observation that all of those patients eventually will progress and eventually die and median survival in those patients with that standard of care is typically below 1 year. So dordaviprone has shown exciting results in a number of Phase II studies, which have been summarized in our mid-term analysis. And that's the basis of those data for the ongoing Phase III study, as you mentioned. PDUFA date is, as Bruce, I think mentioned at August 18, 2025, dordaviprone did receive priority review, that's very positive. We also see from the clinical studies and data we have so far, a positive risk-benefit profile, that supports the approval. Obviously, it mainly showed staticities in the range of fatigue, headache, nausea, vomiting, predominantly Grade I, II, a fairly low incidence of Grade III or higher treatment-emergent adverse events of around 9% to 10% in a very low rate of discontinuations or dose reduction. So in addition to the high unmet need, the dismal outcome with standard therapy, very encouraging data, at least from the Phase II, which were the basis for the accelerated approval and positive safety data, I would say, so adds to the confidence in terms of looking at the PDUFA date.

Okay. Maybe if you could also talk about how this fits into Jazz's core capabilities in terms of kind of a rare, relatively rare type of an oncology indication. And maybe if you could also speak to the market opportunity both in kind of second line and first line and how you see that evolve over time.

I mean, in general, I would say the fit is we've often gone after these serious diseases where you've got a unique treatment, either the only treatment or differentiated treatment where you've got a narrow group of patients funneling through a relatively small group of specialist oncologists that we can reach efficiently with our sales force. We certainly have done a nice job, I think, with Rylaze. I think, we've done a nice job with Zepzelca, now coming along with dordaviprone to follow on to those capabilities where patients and their families are really desperate to have a treatment option that has potential. As Stefan said, this is a terrible diagnosis and the prognosis is pretty inevitable with not a lot to offer. Not everyone is going to respond to dordaviprone, we understand that, but the opportunity for some patients to have a response and maybe even a durable response is a particularly exciting development. And then in terms of lines of therapy, Stefan, I don't know if you want to comment on that, just how it would be used in practice.

Yes. So there isn't much choice in second-line upon progression. So that is a huge unmet need, but even if you look at first line, as I said, the standard of care is pretty much radiation therapy and then observation. I hope nothing happens, but something always happens in this case. It's a disease that mainly affects children and young adults. As a matter of fact, it's obviously predominantly treated academic centers, which is a good overlap to Rylaze experience already with acute lymphoblastic leukemia, similarly niche diagnosis with a huge unmet need. The Phase III action trial is the first-line study ongoing. You alluded to it in your previous question, that study is designed in a way that patients would get standard-of-care radiation therapy. And then being randomized to the standard of care placebo, nothing beyond radiation therapy essentially versus 2 different doses or dose regimens of dordaviprone. So we have 3 arms, 2 investigational ones with regard to the dose and the drug and the standard of care arm primary endpoint would be looking at PFS and OS, and they should go very close with each other in a disease where there isn't much of a choice in subsequent lines of therapy. So that's what's going on there. So it's both an opportunity in the second line plus setting, but also in particular, I would even say in the first-line setting.

Let's switch gears to zanidatamab. You have the approval and you've launched it in BTC. And obviously, the bigger opportunity is ahead of us, particularly with the GEA ongoing Phase III, where the data is expected now later this year. If you could sort of just talk about, firstly, your level of confidence around the study with some of the expected -- or the unexpected longer time it has taken for the events to pan out in the study. So maybe kind of any kind of updated comments there? And what are you looking for in terms of -- what is sort of the bogey for the study compared to the current standard of care?

Yes. Thanks. So there's a number of, I think, features that would make us confident in the design of the study and the probability of success for the frontline study, 301 study #1. We base it on clinical data from actually independently conducted Phase II studies, both zanidatamab plus chemotherapy in 1 study and the second study with the addition of tislelizumab. These studies also conducted in different geographies and don't overlap in that sense as well. In those studies, we reported with including recent updates at ESMO 2024 median progression-free survival, somewhere between 15 and 16.7 months, which compares actually very favorably each 1 of those studies to the KEYNOTE-811 arms, if you want. I want to make the point here also that GEA to positive GEA is really driven by HER2 as the primary oncogenic driver, not necessarily primarily by PD-L1 expression in a subgroup of patients and having, a, as we think, superior anti-HER2 drug over trastuzumab that would give us an advantage here as well, mechanism of action we described it oftentimes in the past, is fairly unique in the way zanidatamab binds to its target, cross-links receptors on the top of -- on the surface of cells and leads to cap formation, cluster formation, internalization, interruption of HER2, HER3 activation and activation of complement-dependent cytotoxicity through producing the scaffolding on the top of cells that leads to the activation. We did make, I think, important and impactful design changes. As we increase the number of the patients on the 301 study from 714 to 918 that increase in size of the study helped us primarily to increase the powering of overall survival as a supportive end point, I would say, "to PFS" and by doing so increases the probability of success in the study. We have a very reproducible safety record with zanidatamab through the whole development program, Phase I, Phase II single agent in combination with various chemotherapies, chemotherapy regimens, and non-chemotherapy agents that has been very reproducible and highly manageable. And zanidatamab is a very flexible drug. It's not an antibody-drug conjugate that's somewhat burdened by carrying chemotherapy around. It's open to combination with very different agents. No, it's a Phase III study, a randomized study with the 3 arms, the chemo, zani chemo Dublin, zani chemo checkpoint inhibitor triplet and standard of care arm. It's an event-driven endpoint, PFS. So we need to wait for a certain number of events before we can actually do the analysis, turned out to be that the accrual of the events were somewhat slower than expected. That's not necessarily uncommon in similar situations. It doesn't necessarily mean anything bad for that matter, it can actually be positive and favorable sometimes and not something that worries us too much. We are blinded to the specifics of where those events were slower. Was it standard of care arm? Was it the experimental arm? I couldn't say and we are not supposed to know this. So that's important in terms of data integrity. But we have some confidence from historical data in terms of how the control arm most likely is going to perform. If you look at the pivotal Phase III trials in that space, starting with ToGA, and going all the way up to the KEYNOTE-811 studies. And I think these are the big Phase III randomized studies that should probably serve as a benchmarking here. The performance of the control arm, trastuzumab and chemotherapy has been actually in a fairly narrow range and very predictable between, if you look at median PFS, 6.7 and 8.1 month. So you never are secure from surprises, something can always happen, but I think if you look at sort of the historical road map, and President, if you will, it's probably low likelihood, and we are kind of looking at control arm expectations somewhat in that range that we saw in the KEYNOTE-8l1 ToGA study. So that's another, I think, factor to add confidence to the study as it is. In terms of PD-L1 expression, this was not part of the stratification factors. We do, however, collect those data and they will be part of the post-hoc further analysis. And we will, in due time, also present those data. The FDA will obviously have visibility to those as well. I want to make the point here that not all of those patients do express PD-L1, the high proportion that was found or what came through in the KEYNOTE-811 study have 85% PD-L1 expressers, above the threshold of 1 was probably a little bit enriched and might not necessarily reflect the true proportion of PD-L1 patients in this patient population, but, wherever it ends up, there is a proportion of patients who do not benefit from PD-L1 and the 301 study is set up to address those patients as well. I think primarily, we have really opportunity to replace trastuzumab regardless of PD-L1 status as well be very confident, we have the better and much more superior anti-HER2 drug in that circumstance.

Okay. All right. That was quite thorough. Perhaps maybe if you could switch gears and just talk about the breast cancer opportunity, which represents perhaps the biggest opportunity for Zani down the line in terms of its market size. Where do you see it positioned within the current treatment paradigm? And what is sort of the benchmark as we think about second-line or third-line metastatic breast?

We see opportunities in breast cancer across all lines of therapy and that means the whole bandwidth from early breast cancer looking at neoadjuvant -- adjuvant treatment approaches all the way up to use of zanidatamab in metastatic breast cancer. As everybody is aware, we are currently running a Phase III randomized study in later-line metastatic breast cancer, zanidatamab plus chemotherapy versus trastuzumab plus chemotherapy. The special, I think, attraction of that study is, is not that it's another study that is somewhat placed and situated in metastatic breast cancer, and there's many studies in the past that kind of have sort of put themselves in place, but I think the feature here is that we are positioning ourselves in patients who have progressed on or are intolerant to in HER2 that's a big player that causes a lot of disruptions, I think, in the metastatic breast cancer space is there are very little clinical data and that includes all the previous regimens that have been placed to climb and others. They don't really have included patients that have progressed in HER2. So that is an opportunity for zanidatamab to be among the first to occupy that space and show efficacy. So why would we be confident? We do have actually experience with zanidatamab in combinations in patients who have been treated and progressed on TDX before from actually a number of different studies. I just maybe want to highlight one study that one most recently presented at the San Antonio Breast Conference last year, which was the combination of zani plus evorpacept, a small study, but nevertheless, with different cohorts. But in the court of patients with HER2-positive breast cancer, all of those patients actually had T-DXd prior and the response rate in another way, is heavily pretreated population, median number of treatments were somewhat like 6 or 5 before. Response rate was still 33% and if you just focused on the centrally confirmed patients up to 55%. So there is evidence of activity of zani after T-DXd and I hope that will reflect it in the Phase III study. As well, we also have collaborations with I-SPY in early breast cancer as you may be aware, so that's an ongoing project in a neoadjuvant space and through our collaboration with MD Anderson. We're also running a study with them in early breast cancer of zani monotherapy as well as a couple of other cohorts that combine zani with relevant chemotherapies used in that space, too. We do have -- we have generated, I think, very positive data in a chemotherapy-free triplet as well with CDK inhibitors and endocrine therapy last year and before in San Antonio, with clinical outcome data, which compare very favorably to other reference studies in that space, and it may offer potentially patients who do not want to go for chemotherapy, you can tolerate it, another alternative there as well. Last not least, in a study outside breast, our pan-tumor study discover also includes a breast cancer cohort, post-T-DXd as well. So a very broad position, I think, of zani in breast cancer with actually good and confidence-inspiring data, I want to say, from Phase I/II data along the development program as well.

I did want to kind of talk about BDC, which is the indication that you have launched. Maybe you could can talk about how the launch is progressing, what's sort of the initial feedback and uptake and maybe just looking beyond later in the year, once you do have the GEA data, talk to us about how you're thinking about compendia listing and kind of when that might -- how long it might take following the data before physicians have the option to start using the drug in GEA.

So in BTC, second-line BTC, I would say the initial reception from HCPs has been very positive to have this treatment option. I think we've got the right team to execute on this launch given our infrastructure. There's a high overlap between that group that's diagnosing and treating BTC relative to our Zepzelca call universe. So we're in the right places to leverage our footprint and while we expect the revenue contribution to be modest from BTC given the limited patient population, again, that does set us up for the other part of your question, Ami, which is the ability to move quickly with GEA post data. Compelling data can cause NCCN to meet off-cycle and update their information quickly as we saw with BTC, honestly, post approval. So we'll be looking forward with positive data to get that published quickly, get that into guidelines quickly, maybe, Stefan, you could talk a little bit about the GEA landscape and how people might look to new data to alter practice.

Yes, you look at about -- in terms of HER2-positive patients across the U.S., Europe, Japan, 63,000 patients, about 12,000 in the U.S. it's a significantly bigger population of patients compared to BTC and a little bit smaller compared to breast cancer, where it's about 150,000. Nevertheless, patients in great need of therapies target their primary driver for the malignancy. The bench line marks really still the ToGA study actually, which I mentioned before for those patients who do not express PD-L1 above the 1-plus threshold at least. And for the PD-L1 positive patients, it's still the KEYNOTE-811 study, which still leaves room for improvement as well. So I want to repeat what I said before, but I think the 301 study fits very well into this picture. And given the activity of zanidatamab and all the other variables I mentioned before, I think, we're very optimistic about.

Okay. I want to switch gears and I got the 5-minute warning. So I want to switch gears and talk about Zepzelca and you're getting ready to sort of have the submission in first-line maintenance. Can you talk about what you're seeing in the small cell lung cancer market with the approval of IMDELLTRA, how that's impacting the utilization currently. Obviously, you're commercializing Zepzelca in second line. But then IMDELLTRA is also being assessed in first-line maintenance in combination with durvalumab. And so in a sort of scenario where that combination also comes forward, how do you think about marketing Zepzelca with atezo sort of against that product? How do you sort of see that market dynamic play out?

While we're seeing 2 different things. We're seeing the current second-line market, which is where we're operating, where we do have a new competitor. Despite that, we saw excellent growth certainly through 2024, 11% growth despite that new entrant in the market. And Zepzelca remains the treatment of choice in that second-line setting. A reminder that small cell lung cancer is frequently treated in community and outpatient centers. Zepzelca doesn't require monitoring while tarlatimab requires 24-hour inpatient hospital monitoring. Despite that, we are going to see some use, particularly you see use in the academic centers. But that headwind we're experiencing with a new entrant in this space is offset by the tailwind we think we're going to have when we can move up to the frontline setting. We've obviously seen our own data even though we haven't shared it publicly yet, other than that we hit both on progression-free survival, but also overall survival in the unwinding we had last year. We're really looking forward to presenting that data at an upcoming medical meeting and progressing to guidelines as quickly as we can, even as we pursue the FDA approval.

So I suppose, yes, I mean, so I guess the same dynamic will go through within -- do you think kind of would be sort of driven by the utilization of atezo in first line. Do you think that that's...

Stefan, you want to comment a little bit on how our approach and our data would compare generally with how people are treated in first line today.

Yes. The study was conducted with atezolizumab, which has the highest penetration in that first-line extensive stage small cell lung cancer space of durvalumab. Having said that physicians are very familiar. I think these days with almost any type of approved and available checkpoint inhibitor. And you might question you ask how exchangeable they are at the end of the day. So we don't see this so much of a problem, the treatment approach, whether use of the atezolizumab or durvalumab is still the same, chemo plus checkpoint inhibitor and induction for 4 to 6 months and then continue with the checkpoint inhibitor. And as per our data, that should be now a checkpoint inhibitor atezolizumab, that's where the data at least based on plus the lurbinectedin.

Okay. I'm being told we are out of time. So, unfortunately, I would have to close our session here. Thank you so much, both of you for taking the time to do this. And thanks for listening as well.

Thank you.

Thank you.

Thank you so much.