Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

We're going to get going here with our next company presenter at the BofA Annual Healthcare Conference. I'm pleased to be introducing Jazz Pharmaceuticals. We've got CFO, Phil Johnson; and Amal Bertrandt, Head of Clinical R&D and Oncology at Jazz. My name is Jason Gerberry. I cover SMID-Cap biotech and specialty pharma at BofA. And so thank you both for joining us.

And Phil, I think maybe the logical first place to start coming off of 1Q results. Jazz historically has some seasonality in 1Q. It felt like a pretty strong reaction by the Street in terms of the reaction to the print, even though I thought you reaffirmed the guidance. So maybe just the high points around 1Q and how you're feeling about kind of the full year numbers, maybe some of the oncology. It was sort of a broad-based maybe underperformance relative to consensus, but can you -- it sounds like you feel good about the full year outlook.

Yes. No, I appreciate the question. And first of all, thanks for having us again this year. Great to be out, great slate of investors to meet with. Looking forward to the continued interactions over the course of today. So first quarter results, we had about $898 million in revenue, roughly in line with our first quarter of 2024. That was really based on strong growth in our neuroscience products with Xywav and Epidiolex in particular. Jason, as you mentioned, Xywav does have seasonality that affects the first quarter where we see a significant number of patients that are getting their insurance reauthorized and not resulting in paying scripts until that reauthorization occurs. We actually feel really good about the underlying trends we're seeing there. We added 450 net patients compared to the end of the year, 325 of those in idiopathic hypersomnia. And even with both branded and authorized generic competition, 125 net patient adds in narcolepsy as well. We continue to feel really good about how we're competing with the only low sodium oxybate and our positioning there. Epidiolex had strong growth, double digits. That was affected by some inventory drawdown that was a bit greater in the first quarter than we typically see. We typically see that spread over the first and second quarters, but we feel very good about the progress there. And then oncology was certainly light relative to consensus and did post an 11% decline year-on-year. A little over half of that decline was driven by a dynamic here in the U.S. It doesn't happen often, but it does happen from time to time. Just based on the calendar, we actually only had 12 shipping weeks in the quarter, not 13. So that drove over half of that decline. We've had some dynamics competitively that have been affecting a couple of our products, Rylaze, where we talked about the expectation that the COG protocol change for pediatric ALL patients, we expect that to normalize here as we move into subsequent quarters. And then we had some additional competition that we saw for Zepzelca in addition to IMDELLTRA in the second line, great data that came out of the ADRIATIC study with Imfinzi in first line, limited stage. We're not in first line, but what that does mean is that those patients are taking longer to progress to second line and therefore, for some period of time, lower opportunity for us there. We're really looking forward to presenting at ASCO in June, the data from our Phase III IMforte trial, looking at Zepzelca in the first-line maintenance setting, having that published as well, rapidly seek NCCN treatment guideline inclusion. We've already made the submission to the FDA and then begin promotion once that would be approved. So we feel good about the longer term -- mid- to longer-term trajectory for Zepzelca. We also are really pleased that we closed in April, the acquisition of Chimerix, bringing dordaviprone into Jazz. This is a product that, if approved, would be the first treatment effectively pharmaceutical treatment for these patients. This is a specific type of brain cancer. This is H3 K27M-mutant diffuse glioma. It's a lot for a finance guy to say. But these are patients who have really poor prognosis. Typically, these are younger patients from time of diagnosis might have a year to live. From the time of recurrence of their disease, maybe only 5 months. So we're really looking forward to not only presenting some of this data at ASCO as well, but the upcoming PDUFA in August and potentially then rapidly bringing this treatment option to patients who are suffering from this severe disease. Also feel good about the momentum we have in our oncology portfolio, which I'm all can talk about more. We've got a number of different things coming up for zanidatamab, where we've got a CHMP recommendation for approval in Europe in second-line BTC. Typically, that's a 67-day period roughly to get the EC to then make their decision, but confident in the position we have there, looking forward to marketing that in Europe. We've got data we'll present at ASCO also for zanidatamab, not just for Zepzelca and dordaviprone. This particular case of data, I think I'm particularly interested for people to have a chance to see is in our Phase II study in GEA. This is a study design and then Jazz have been running. In the past, we presented data multiple times on this, but never were in a position to actually show a number for overall survival because it wasn't yet mature. So we have updated data to show there. I think it underscores what we've been seeing over time in that study, our confidence in the first-line Phase III study that is still on track to read out here in the second half of the year, probably the most widely cited catalyst for Jazz moving forward. Maybe 2 last things real quick. There's been a lot going on in Washington that can affect the sector and our company. We talked on our earnings call about one of those, which is tariffs have positioned the company well so that if tariffs do come in on imported pharmaceuticals into the U.S., there really be no, if any, impact to 2025 financials, and therefore, our guidance. Obviously, if these last longer, 2026, we'll need to look at. We do have ways of mitigating that, not just with inventory like we have the 2025 exposure, but also where products are produced. Our biggest exposure would be with Xywav. We do have U.S. production third-party capacity to be able to do that. And then we have some other mitigating strategies maybe for other parts of the portfolio. And last, I'd say, even with the $900-or-so million that went out the door to acquire Chimerix, we're still in a really strong financial position. So whether that's investing in our current marketed products, investing to rapidly move products through our pipeline or engaging in additional corporate development to bring in whether that's through licensing or acquisition, other assets from outside our walls to bolster our future growth prospects. We're in a really strong position to do that. So we feel very good about the year overall. We did confirm our top line revenue guidance, had really very modest tweaks other than that as far as an operational perspective. We pulled down our R&D slightly based on the early readout of a couple of studies, Phase IV studies for Xywav. The other changes that made the quarter a bit messy, I think, for people to understand really related to the Chimerix acquisition and then some legal settlements that we announced earlier.

Yes. So basically, flattish top line growth year-on-year in 1Q, a lot of drags, still have mid-single-digit growth at the midpoint for the full year. So kind of next 3 quarters, you'll start to see an uptick in growth as some of these lag factors kind of come off and you get to a more normalized growth for each of your key franchises?

Exactly.

Okay. So tariffs were up quickly. We don't need to belabor the point. I think the points on Xywav were very encouraging, at least from our perspective. You get a few questions about Epidiolex. I know the U.S. and the U.K. have worked towards a trade deal, but I don't know if we have much clarity around pharma specifically, but any viewpoints there?

Yes. We don't have clarity yet on tariffs on pharma. We keep hearing it's going to come, it's going to come. I expect at some point, there will be something. I don't think it's just going to be talk without any action. I think it's encouraging that the U.K. and the U.S. were able to come to an agreement relatively quickly and seems amicably. Hopefully, that portends something good for what may happen with further tariff discussions between the 2 countries, including on pharmaceuticals. Obviously, things have been highly volatile. So all I'd say is we're monitoring that with interest, and we'll be able to make appropriate actions, I think, based on what happens with both the U.K. as well as other countries on tariffs.

So maybe for Amal, just FDA disruption, you have 2 action dates on 2 cancer drugs. So is the messaging status quo with your interactions with the review teams as you go into these PDUFA for both Zepzelca and the recently acquired drug?

Yes. I mean, really, we haven't seen any disruption, thankfully, and things continue to go on time. So it's very encouraging to see that there have been no delays or disruption from this.

Yes. Okay. And maybe, Phil, some high-level questions before you go into the product specifically, but there will be true Xyrem generics next year. Xyrem, the brand was even lower than, I think it was like $30 million, $40 million in 1Q. So annualizing below $200 million. I imagine it's going to be even the exit rate will be even lower given kind of how that has evolved. So I guess the question is, what do you think true generics look like because you're going to kind of explain that to investors. I'm sure you're going to get that question a lot today. My understanding is they would have to drive indirect substitution with a product that they're not substitutable for in Xywav, if there was to be a meaningful impact of those or compete with Hikma, effectively if Hikma chooses to remain in the current arrangement that you have.

Yes. So you said there will be generics. Our working assumption is that's likely to be the case, but we don't know for sure. Just real quick to recap, there are 2 dynamics at play, one related to the main authorized generic player, Hikma, the other to other generics. Let me start with the other generics first. Regardless of what Hikma decides to do, those generics do have the ability to come into the market with their own true generics starting in 2026 effectively. Hikma has had for some time and still has the ability to come in earlier than that date. If they were to do that, the others also could advance their entry into the market. So maybe the calculus for Hikma is a little complicated by that fact. Let's assume that we get into 2026, and we do have Hikma and other generics coming into the market. What would be the impact to Jazz? So first, Hikma can either market the authorized generic or a true generic, but not both. So if they're marketing a true generic, that means that our authorized generic revenue would go away. We would presume that the Xyrem additional branded sales, whatever is still left, would likely come down pretty substantially in the face of true generics. And then the question mark is what does happen to Xywav because these are not generics of Xywav, they're generics of Xyrem. Xywav is the only low sodium oxybate in the market, whether that's current branded or authorized generics or potentially then generics. So it's not AB-rated. We're well positioned there. The FDA itself has commented on the significant health benefit, safety benefit that accrues of having low sodium as opposed to high sodium. We think this is relevant for physicians and patients and it's the reason why we're not only building the IH market steadily, but also faring very well in narcolepsy with branded and authorized generic competition. And I think increasingly, payers hopefully will value this as an attribute of the product as well. So what will happen to Xywav next year is the biggest question mark. And it's highly dependent as we look at different analogs on how many generics come in, what the timing of that is, what their pricing strategy is. We would expect in any event, there will probably be some disruption to Xywav. But again, I feel that we're well positioned. We'll continue to drive home the messaging that makes our product unique and differentiated that others cannot provide to patients and sort of see where we land going into 2026.

When the settlement was originally structured with Hikma, I remember there were terms, right, like where there was a first term, the second term of the deal and that affected royalties and different things like that. So is there a point of clarity, the arrangement with Hikma, like do they have to re-up on the arrangement and that gives you then clarity for a new set period of time? Just wondering how to think about that dynamic.

Yes. So the set points you're referring to were on the royalty rate. That effectively was up to the current rate starting early last year. And then the current contract current agreement does go through the end of 2027. So they're able to continue with authorized generic under these terms through that time if they choose to.

Okay. But they could break free from that if they choose to...

They will never do that ever since they signed the agreement.

Yes. Okay. All right. So maybe shifting gears to zanidatamab and the Phase III GEA, that's going to be still a second half 2025 update hasn't been narrowed at all, but no PFS delays announced on the most recent earnings call. I guess how confident are you now in terms of -- I imagine you're looking at the PFS event accrual that that's going to be a firm data update time line?

Yes. I mean, as time goes by, we're more and more confident, but we're still very confident in the second half of 2025. So that there hasn't been any changes there.

Okay. When we looked at KEYNOTE-811, the last major GEA Phase III in the space, I think from study start to data, that would kind of imply something like in the fall, like September, October-ish time frame. Is that a reasonable analog? Or would you say, each of these trials has some nuances and differences and it's probably hard to be too precise.

Yes. I mean if you look at all the trials that have read out for that control arm with Herceptin, the ToGA trial, JACOB and the KEYNOTE-811, they've been consistent, give or take a month there. So from the control arm perspective, we don't expect any major surprises. So what we're hoping on is that, that delay is probably coming from the 2 arms that contain zanidatamab.

And so I know the question that you guys get a lot is around IHC3+ as a demographic enrollment dynamic. And you could look to very small data set that Enhertu had, which had crazy high PFS, right? And they had like 90% IH3+ as a proportion of patients. Your Phase II data was in the high 80%, I believe. So on the one hand, I think investors maybe have concerned if you go to a Phase III, are you going to have similar high rates of IHC3 enrollment? And does that as a maybe prognostic factor, maybe not benefit the ToGA regimen as much? Because when we looked at a lot of like Phase III trials, the performance has kind of gradually come up, I feel like on ToGA regimen, but not that much. And in all those trials, I think the IHC3 representation in those studies has creeped up as well.

Yes. I mean they've been consistent roughly across the different trials in the 70% range that are -- or a bit more even than our IHC3+. So I don't expect any other major differences there. Now we do stratify by IHC2+ and 3+. So we're hoping that, that's going to be equivalent between the arms.

I would say not speaking to the composition of IHC2+ or 3+, but you're just looking at the data from the control arms in those various studies in the doublet we've seen sort of 6.7 to 8.1 months of progression-free survival. The last update that we had provided last year on the Phase II study, it's not the Phase III -- around the Phase II was 15.2 months. So even with degradation potentially in Phase III, we still feel like the data we've been seeing to date is indicating that this molecule is acting very significantly in this patient population, driving long progression-free survival, long duration of response, which sort of underpins our confidence in the Phase III readout later this year.

And this has been verified by 2 studies run by BeiGene and one by Zymeworks, which one we will be having updated data at ASCO that we're excited to share.

So on the co-primary endpoint, right, you have PFS, but you also have no OS detriment. And my feedback that we hear from clinicians is they want to see maybe at least a hazard ratio on OS similar to KEYNOTE-811, at least in your triplet arm containing the PDX agent. Is that the right way to think about it? And in general, when we get the initial update, I think you're saying the OS data will be more mature now given some of these PFS delays. So I'm trying to get a sense of when we get this initial update, how much of a read-through we'll have to OS. My sense is that if the PFS hazard ratio is very low, that tends to correlate pretty well with OS and that should have some read across or if we should just expect mature OS data later this year?

Yes. Just to clarify that the primary endpoint for the study are dual primaries. They're not co-primary, meaning they're not independently tied to each other. So we just have to be positive on one, right? And we're very confident with the PFS to OS. It just is going to depend on the maturity of the events. In terms of approval based on PFS in the frontline GEA setting, that is an approvable endpoint, and we're not concerned there. But yes, absolutely, there will need to be follow-up with the OS data like any of the other Phase III studies that have read out.

Okay. And with respect to OS, you wouldn't expect that to be muddied at all by the post-progression therapies that are available to patients. I mean this is a European trial, if I understand, they're going to have access to Enhertu post-progression, but they could get a zani-based regimen could easily kind of convert to Enhertu as could someone who's getting the comparator therapies.

Yes, that's correct. I mean based on the data that we have from the Phase II studies and the OS that will be presented at ASCO that we're seeing. We feel confident that, that's not going to be affecting the OS data and survival for patients progressing on to the different arms. So we don't anticipate that to be a major risk factor, especially based on the known OS data from HER2 that we know. And to your point as well, most of the patients were -- well, all of the patients were ex U.S. for the 301 trial.

How representative do you think that ASCO OS data is going to be from your smaller supportive study?

Yes. I mean it is definitely a smaller study, but we did enroll in the U.S., Canada as well as South Korea for that study. So European and Asian population, so it should be fairly similar.

Yes. So maybe speaking to data scenarios with the GEA study and focusing on the zani chemo arm, Arm B as we understand it. How -- I feel like everything is tied to that, right? Like that has to win, that has to show -- that will give doctors the truest apples-to-apples comparison to. And then there can be arguments to zani should be incorporated into whatever type of regimen that you have, right, as long as you show some incremental benefit with your PDX treatment arm. But -- so I'm curious, we oftentimes hear of like 2, 3 months PFS delta, right, as sort of a clinically meaningful threshold. Would you disabuse us of that notion? Or do you view things differently?

I mean, again, going back to the data that we've presented for the Phase II studies and a doubling of what we've seen historically for Herceptin combination as chemotherapy, we're hopeful that it's going to be better than that. But traditionally, yes, 3 months has been a minimum.

Yes. I mean, I guess the reason I say it that way is there's always the Phase II to Phase III effect size compression, how do we interpret some of the data sensors and the median duration of response. And so I guess, kind of contextualizing those data points, small data sample as well. I imagine ENHERTU is going to come down a lot from its Phase II, PFS benefit as well.

Yes. Yes. I mean, traditionally, we do see a shortening of PFS when you transition from Phase II to Phase III. And again, the Phase II is a single-arm trial. That being said, we've looked at it independently in 2 different studies. The response rates that we see are also very compelling, the duration of response and now mature OS data that gives us reason to believe that even if there is some attrition, it's not going to be significant to affect those study results. So -- and the study is well powered for that, too.

Yes. And I guess the other risk factor, if you will, call it that, is the JACOB trial and what we saw with Herceptin-Perjeta, which sort of similarly targets what zanidatamab does, the mechanistic rationale as to maybe why zanidatamab through the clustering of the receptors may drive more of an anticancer effect. We can look to the xenograft data. We can look to maybe BTC. What are some of the data points that you feel like most strongly make the argument as to why zani will achieve different outcomes than the modest PFS that Herceptin-Perjeta saw in the frontline GEA setting?

Yes. I mean -- so just to state that we are comparing ourselves just to Herceptin in the 303 trial. But we do have some data preclinically that do show that zanidatamab in preclinical models is superior to the combination of both Herceptin and pertuzumab. And if you do some cross-trial comparisons, we don't like to do that based on the data that we have from the BTC trials and other patients with cancer where there has been data for the combination of pertuzumab and Herceptin. We're encouraged that the response rates are significantly better than the 2 together. So some indirect clinical data, mechanistic data and preclinical data that is showing us superiority against that combination.

Yes. If the data in GEA are as you hope, how do you start to feel about breast cancer study, right? Because you're in another HER2-amplified tumor setting, in a setting where you're compared to Herceptin chemo, so same comparator, same type of malignancy setting. Does that offer strong read-through to the metastatic breast cancer study? Or do you feel like that's maybe a more complicated study in sort of the post-Enhertu setting? I know you have some data in post-Enhertu, but...

Yes. I mean we -- this is not the only subset of data that we have from the GEA. We do have several other breast cancer studies that have been run where we've seen the activity of Herceptin with different combinations and really encouraged of zanidatamab, sorry -- with different combinations and really encouraged by that data for breast cancer. So definitely, the GEA positive trial will give it a big boost because then we're directly comparing it, but there's also reason to believe that we have compelling data in the breast cancer space that should allow us to have a positive study for the metastatic breast trial.

Yes. Okay. You also have the pan-tumor study. That's going to be registrational. Can you remind us how many different settings? And is this upside to -- I think you guys talked about a $2 billion, I imagine that's mainly breast cancer and GEA of pan tumor. How big can pan-tumor be? What's going to be the cadence of data flow around that? I imagine it's all going to be one NDA -- BLA submission, right?

Yes, that's right.

When it's completed. So will there be incremental data sets along the way or more of just one data update to the Street with this type of study?

Probably one data update is what we're anticipating. Now that study has 3 different cohorts. One of them is cohort 1, which is in all HER2-expressing cancer where -- that have progressed on treatment, but have not received the prior HER2 agent. And then we have 2 other cohorts for GEA and breast cancer. And those are -- how we assess those may change depending on the data for the GEA trial and the breast cancer trial. So -- and those are post...

And in terms of the $2 billion number that you referred to, we talked about before, that does include BTC, GEA, pan-tumor and the metastatic breast cancer.

So maybe shifting gears to your core sleep franchise. And given that there's going to be a couple of orexin data sets coming up here, we're getting this question more in the context of how the ripple affect competitively to other modalities, including oxybate. I think what we hear and kind of what we understand like these agents should work in narcolepsy type 1, that's pretty straightforward. More, I guess, the open question is narcolepsy type 2 and idiopathic hypersomnia, IH, being kind of your big growth source. So when we think about NT2 and IH, wake promoters are available generically, right? So when you look at orexins as competitive threats, I mean, sometimes KOLs call them souped-up wake promoters. So do you feel like -- do you see the orexins as competitive in NT2 or IH? I get the logic in NT1 is kind of hitting a root cause of the disease, but maybe just thinking about the competitive interplay in those other settings.

So I guess the short answer would be we see these therapies being complementary to oxybate therapy and not competitive. Again, I think there's been promise that people have posited that the orexins will actually help to -- while they're taken during the day, normalize and restore quality of sleep during the night to get the underlying reason for some of the disability effectively that patients with narcolepsy and IH have. That's not what we've seen so far in the data though. What we've seen in the data so far is that they actually are very potent daytime waking agents, maybe the most potent that could come to market and be available, but not actually helping with quality of nighttime sleep and addressing the underlying cause of the diseases. And in some cases, actually for longer half-life molecules or if it's dosed later in the day, leading to some level of insomnia early in the night that's not helpful in the patient having restorative, less disturbed nighttime sleep. So again, we know the promises out there that some people have said for what orexins could do in that promise, if it were to hold true, there could be competition with oxybate. But again, that's not what we're seeing so far in the data as being really potent, effective daytime waking agents that would be used in combination with oxybate therapy.

Yes. Maybe I'm jumping around topics here in the last 2 minutes, but I'm all the Chimerix acquisition, the late line, given the short lifespan of these patients, it seems like the real opportunity is if you can break in the frontline, the Phase III ACTION trial is ongoing. I think there's an interim -- the first interim in second half. I don't know, has that come and gone yet or confidence that, that can kind of yield a positive result in early interims? Or would you say, hey, we're going to need to wait probably for second or final analysis in this setting?

Yes. It's hard to speculate on that one, to be honest. But so far, the trial seems on track for that initial interim readout for the ACTION trial in -- I believe it was towards the end of this year. But yes, I mean, the bigger population is definitely the frontline trial, and we'll see the results of the ACTION trial soon. So there's not going to be that much of a lag, hopefully, between...

I will say without committing there's going to be a change to protocol, we are working with our Chimerix colleagues to look at the protocol for the study. If I just go back to our prior licensing deal to Zymeworks, you may recall that we worked with them as well and looked at the powering for the study that was underway. And we decided to significantly increase from 714 to 918 patients recruitment for the trial. Trial is well powered for PFS, but we wanted it to be more sufficiently powered for overall survival. So I just want to -- we are looking actively with our colleagues at Chimerix on do we feel like we have the right setup for this particular trial for it to be successful. If we determine yes, we do, then we probably make any changes to the protocol. If we think there are ways we can enhance the protocol that can increase chances of success, we may -- we would do that.

And with regulatory for the second-line opportunity, just sort of the puts and takes or pros and cons here. It is a genetically predefined patient population that tends to afford some latitude, I think, with respect to not having a control arm in your study. There are a couple of data sets here. So I don't know, just your overall confidence in approval as you guys diligence the opportunity.

Yes. I mean, so far, we have been encouraged by the fact that the FDA hasn't requested an outcome, which means that hopefully, it's not going to be something controversial, and we're still on track for that PDUFA date. So engagement with the FDA has been good.

Okay. Well, we're out of time. So thank you both for joining us.

Thank you. Really appreciate it.

Thank you.