Jazz Pharmaceuticals plc (JAZZ) Earnings Call Transcript & Summary

Alrighty. Hello, everyone. I think we'll go ahead and get started. Thank you for joining us on day 2 of TD Cowen's 46th Annual Health Care Conference. I'm Joe Thome, one of the senior biotech analysts here on the team at TD Cowen. And it is my pleasure to have with me today several members of the Jazz Pharmaceuticals management team. We have CFO, Phil Johnson. We have the Head of Oncology Clinical Development, Amal Melhem-Bertrandt; and we have Head of Investor Relations, John Bluth, down there at the end. So thank you for joining us. Maybe before we dive into the individual programs, it'd be great to start with just a brief overview of the company's recent progress and maybe your outline goals for 2026. I know we had recent year-end financials. So if you want to kick it off and then we'll dive in.

Well, first, thank you very much for having us. A great conference, great to be in Boston, a great lineup of investors here to meet with and really pleased with the progress we've been making at Jazz. I appreciate your interest in the company. We will be making statements today that are forward-looking. Please do refer to our SEC filings, including the recent 10-K for the factors that may affect our business going forward. If we do refer to guidance, we're referring to the guidance that was provided on our most recent fourth quarter earnings call. So 2025 was an outstanding year for the company and one that sets us up really well for 2026. And I think shows significant progress in the commercial part of our business with the pipeline as well as in corporate development. So 2025 was a record year for us with our highest revenue ever, highest revenue quarter in the fourth quarter, 21st consecutive year of growth in revenue as a company, a pretty outstanding achievement. Really headlined with 12% growth in Xywav, 9% in Epidiolex and extremely strong start to Modeyso. Our oxybate franchise went over $2 billion for the first time. Epidiolex passed the $1 billion mark and our oncology franchise, again, above $1 billion. So really strong performance across each of our verticals. On the pipeline side, I'd highlight really practice-changing data that was presented on first-line maintenance use in small cell lung cancer in Zepzelca in combination with atezolizumab and then probably most notably the first-line GEA data of zanidatamab that really showed unprecedented results, including more than 2 years of overall survival. On the corporate development side, made some really good progress with the acquisition of Chimerix that brought Modeyso, again off to a really phenomenal start. Really great to have this option for patients that have had no drug alternative, basically, to help them with this really aggressive and rare form of brain cancer. That acquisition also brought some significant financial assets including a deferred tax asset that will reduce our future cash taxes by over $200 million, and then we did receive a priority review voucher, which we sold for $200 million. I think it's a high watermark in terms of sales price in the last 10 years, half of that then flowing to Jazz. So shaping to be a really great transaction, not only for the benefit that Modeyso can bring to patients, but the financial return it can provide to Jazz and our shareholders. Also complemented our presence in epilepsy with early-stage asset, clinical asset from Saniona that we have high hopes for. And I think on the back of the ANDA filings or ANDA settlements we had last year in Epidiolex that give us visibility to the very late 2030s in terms of the duration of that franchise, you should expect to see us continue to invest not only in Epidiolex, but in other assets to build out our epilepsy presence. If we think about sort of more broadly, apart from commercial pipeline and corporate development, we also had, I think, a very successful CEO transition last year from Bruce Cozadd, our long time CEO and Founder, to Renee Gala. I think it was well received both internally and with the Street. Also refined strategy that Renee rolled out at JPMorgan, sorry, for the commercial-free competitor earlier this year, really highlighting the company's continuing focus on establishing ourselves as a leading rare disease company. So if we think about 2026, again, great momentum coming into the year. On the financial side, provided our guidance, $4.25 billion to $4.5 billion in total revenue for the year. 2.5% growth at the midpoint. So hopefully, we'll have our 22nd consecutive year of revenue growth in 2026, really driven by strong growth in our combined epilepsy and oncology portfolio. We expect those products to grow in total double digits this year, again, buoyed by Epidiolex, Modeyso and Ziihera as well. On the pipeline side of things, last year, I think we took one of your top picks for the year off the board. The morning we were having this fireside chat last year with the announcement we were going to be acquiring Chimerix. We don't have that kind of an announcement to help you with. But we do have a little new nugget. So when we get into the pipeline side of things for 2026 on our most recent earnings call, we have said that rather than submitting zanidatamab to the FDA in the first half of the year, that would occur in the first quarter of this year. We've got a really great momentum with the agency, having gotten real-time oncology review, the breakthrough designation that we had disclosed on the earnings call, maybe, Amal, you can give the most recent update to where things stand.

Yes, happy to state that we've now completed the filing for the sBLA for GEA. So PDUFA clock starts. And yes, excited to see what comes next.

Yes. So the next step that you hear from us will be when we get a PDUFA date from the agency, but really pleased. The team has done a phenomenal job. If you think about this data in mid-November to have a completed submission by this point in the year is a phenomenal achievement by the team. I think shows Jazz's prowess in terms of being able to turn around these kinds of large complex studies quickly and also the agency's interest in these data as they see them also being really transformational for patients with first-line GEA. We also, on the pipeline side, late this year, early next year, could have the readout from the first-line study of dordaviprone that continues to be ongoing, the ACTION study where things are progressing well. And then on the corporate development side, we have very active efforts ongoing. And as Renee said, earlier in the year and on our call, a few weeks ago, you should expect to see us do one or more transactions this year, see great substrate, particularly, I'd say, in epilepsy, oncology and some other of the rare diseases and really are focused on dedicating additional management time and effort to ensure we're uncovering the really great opportunities and acting on those. Really pleased. We've got a new colleague on our Executive Committee, Tom Riga, as Chief Business Officer, bringing in additional senior management time and attention to these efforts and quite confident you'll see activity from us this year that will give you a really good idea of the direction we want to be taking the company going forward. But again, great momentum that we've got coming into the year, just recently hit an all-time company high on the stock price as well. So really feeling that this is sort of the start of another chapter for Jazz. It could be a really promising one. So looking forward to it.

Awesome. Great. Well, a lot to dive in on. Maybe we'll start with some aspects of the base business. And obviously, you mentioned the 2026 revenue guidance of $4.25 billion to $4.5 billion. Maybe if you could drill down a little bit as much as you can on sort of how you expect the individual components of that to look, whether it's broad neurology versus broad oncology? And obviously, there's been some focus on Xywav just given the increased potential for Xyrem generics and obviously, we might have a new Takeda compound this year. So how do you see that franchise evolving throughout the year?

Yes. So over half our revenue in 2025 came from the oncology and epilepsy part of our business, and again, see really good growth there, again, double-digit growth expected in 2026, driven by Epidiolex, Modeyso and Ziihera. Again, with the first quarter and now already in submission, if we get priority review from the FDA, which we would certainly hope for, you should expect to see revenue in 2026 from the GEA indication. We also have the possibility of NCCN guideline inclusion that absent the approval could also lead to potential utilization. Again, we will not promote for that indication until we have the FDA approval. But NCCN guideline inclusion would open up avenue for prescribers to get reimbursement for use in that first-line GEA setting. So we feel really good about that part of the business. On the oxybate, this has been probably the biggest question mark that both we and investors had coming into the year. I would say the way things are shaping up are certainly, I think, in a very positive trajectory. So we've got an agreement with Hikma on the authorized generic that allows that to go as late as the end of 2029. And then currently have 2 generics, Ascent and Amneal, who've expressed their intent and talked about some of their list pricing in the true generic portion of the market. But again, we could have had generics as early as 12/31/2025, and there could have been more than 2. So I would say the way things are shaping up at this point in time are pretty positive. We've also done a lot of work over the last couple of years to establish the unique benefit that Xywav offers that the authorized generic can't offer, the true generics can't offer, nor can the other branded competitor, which is low sodium. These are patient populations, patients with narcolepsy or idiopathic hypersomnia that are at an elevated risk relative to the general population for cardiovascular events and increased sodium content, including in data that we've generated has been shown to increase blood pressure, not something you want to do in a patient population that already has increased risk for cardiovascular events. We see this benefit being valued by physicians and patients already. I mentioned on our first -- our fourth quarter call, we've had accounts last year, for example, that put the authorized generic in the first position, you had to step through the AG to get to either LUMRYZ or to Xywav. In that particular account, we still have the leading share by quite a margin. So again, that unique benefit is offered by Xywav, we think does resonate. The other parts of our business that are high-sodium oxybate. So the authorized generic royalties that we get as well as our high-sodium oxybate product, Xyrem, we do expect a pretty significant decline in revenue this year, particularly in the remaining Xyrem revenue now that there will be generics to Xyrem available.

And then maybe can you talk a little bit about the progress in idiopathic hypersomnia and kind of how much growth remains for Xywav in the IH market? Obviously, making some good progress quarter-over-quarter, you can watch the patient adds. How penetrated into IH do you think you are and how much of a growth driver is this going to be going forward?

Yes, we definitely see this as a growth driver for a number of patients on Xywav moving forward, over 5,000 patients with idiopathic hypersomnia on Xywav at the end of 2025. The numbers we've seen and talked about in the past are roughly 37,000 IH patients sort of diagnosed and seeking treatment. Although we hear from many physicians that they have as many IH patients in their practice as narcolepsy patients. Those patient numbers of narcolepsy are probably more in that 70,000 range. So we certainly see there being opportunity for there to be upside beyond that 37,000 based on sort of what we're hearing in the marketplace. And we are having really consistent growth in IH. We do continue our efforts, both with consumer campaigns and physicians to drive awareness of the disease and the role that oxybate can play in helping patients manage their symptoms there.

And then if we do have an orexin compound maybe enter later this year, do you see this as something that patients would pick one or the other? Do you see combination use potential? Obviously, you have some experience with your own internal orexin pipeline. But I guess how do you see that kind of panning out?

We definitely see this as great news for patients with narcolepsy, in this case, in the near term NT1 patients. It does appear that orexins are probably the most potent wake-promoting agents that we've seen to date. What we've seen to date is wake-promoting agents being used in combination with oxybate. You've heard from Rob and others over the years, our view has always been that oxybates and orexins will be complementary and used together, that orexins would not replace oxybates. I know there's quite a bit of debate around that across the years. It does seem that the consensus is sort of converging on concomitant use of the 2 to help patients with narcolepsy and not one substituting the other. It is typically the case and has been for quite some time that newly diagnosed narcolepsy patients will get one or more wake-promoting agents first before they go on to oxybate. So that could delay compared to what we would have had in the past. The time it takes for a newly diagnosed patient to get to oxybate, but we do expect that many of them will have a need for that nighttime treatment, kind of benefits it can give in terms of restoring sleep and then the benefits that confer in the daytime as well. But yes, augmented with a more potent, more effective daytime waking agent in the orexins.

And maybe can you talk -- maybe shifting to Epidiolex. I think this is one of the most maybe underappreciated opportunities in the pipeline, especially after last year when you provided the update on sort of exclusivity. Can you remind us, I guess, where you sit with exclusivity on Epidiolex. As you mentioned, it's already a $1 billion drug. And where do you see the opportunities for growth in the current business and then maybe we'll get into some of the expansion opportunities that you mentioned?

Yes, certainly. So the ANDA settlements give us visibility to exclusivity to the very late 2030s. We haven't gotten more specific than that, but we did add the modifier very to late to try to convey sort of our confidence in going pretty deep into that decade with exclusivity. We do see additional ability to build that brand. There's a lot of opportunity still in adults. A number of these patients, particularly they have LGS, for example, don't get diagnosed until very late. It can take over a decade for them to get diagnosed. So we've been doing things to work with the community, including LGS, REST-LGS tool that helps to be able to understand if these patients, in fact, are suffering from this disease and could benefit from treatment with Epidiolex. We talked about initiating a Phase Ib study also in focal onset seizures and some work that we're doing. We haven't been exactly specific on the formulation, but formulation enhancement that could improve usability, particularly in adult patients. So we see additional opportunities to drive Epidiolex growth and also, as I mentioned earlier, to build on that franchise with additional corporate development, be that licensing or acquisition.

And maybe can you give us an update on the -- you obviously did in-license the Saniona compound. Kv7 is obviously a very interesting target for seizure disorders. Where do you think you would like to study this Kv7 and kind of when could that enter the clinic?

So we haven't given timing quite yet or specific seizure types that we would go after. This is a molecule we do think could be best-in-class, given the selectivity it has for Kv7.2 and 7.3 relative to 4 and 5, that allows us, hopefully, to drive up the dose, get the intended efficacy benefits and not some of the side effect liabilities, again, to be proven out, but that's the promise that we saw in the Saniona molecule and the reason for doing the licensing.

Great. Maybe we'll flip over to zanidatamab. Maybe on the currently approved indication since launch, kind of what are you seeing in the BTC market that gives you at least confidence that everything is going well from a marketing perspective and kind of laying the groundwork for GEA? Obviously, it's a smaller market, but kind of what are you seeing so far?

Do you want me to start...

Yes.

So I think really pleased with the initial feedback we're getting from physicians who are treating patients with BTC using zani. We estimate the overlap in the prescribing physician population between BTC and GEA to be about 90% or more. So clearly, this is a really important initial experience for physicians to be getting with the product. so that when they're able to go ahead and prescribe it for GEA, they know how to use zani, feel comfortable using it and then give it to appropriate patients with first-line GEA. But maybe, Amal, you want to comment on this one?

And definitely, the data that we've seen with our frontline trial support and even validate that zanidatamab is a best-in-class HER2 agent. So really excited, and we're hearing great feedback from oncologists. So...

And maybe jumping over to GEA. Can you just hit the high points of the recent data presentation, maybe both from the doublet and the triplet perspective. What have you seen that you find encouraging, if anything surprised you? Obviously, with the triplet, didn't see a huge difference on PFS, but obviously, you're seeing a great benefit on OS. So how do you kind of bring that all together?

Yes. So just to remind everyone of what the experiment was, right? It's a 3-arm trial. And in 2 of the arms, we're comparing zanidatamab to Herceptin. And based on that comparison, the zanidatamab containing arm beat Herceptin. So that was the fundamental experiment. We have now shown that we can -- we've decisively shown that we beat Herceptin in a registrational, large, randomized trial. The surprising part was what we were aiming for was to hit on PFS, but we also hit on OS as well for the triplet, and we saw a trend towards the benefit for the doublet. In addition, what we also saw is that in several subgroups that we looked at specifically the PD-L1 subgroup, we saw a benefit for zanidatamab across not only PD-L1 negative, but PD-L1 positive, so effectively beating Herceptin on all these parameters, which is really exciting.

I may just add, as you think about looking at the space, we're working with many sell-side analysts, talking to many investors beforehand, how can we understand how your trial results might compare to other results that have been posted in this space. One of the things that was, I think, heartening when we looked at was the PFS in our control arm, which was 8.1 months. Coincidentally in KEYNOTE-811, that same control arm also had a PFS of 8.1 months. And if you look at the time course of those events, those curves effectively overlap at all time points. So it does give you a comfort that this is a similar patient population that had similar benefit on the same regimen in PFS, which is unaffected by subsequent treatments. So then you go on to what the subsequent treatments provide? And let's focus on PFS first. We saw 12.4 months of PFS in both our doublet and triplet compared to the 10 months on KEYNOTE-811. Again, cross-trial comparisons, all the caveats that you're well aware of. When you get to overall survival, it was 20 months in KEYNOTE-811, 24.4 on our doublet, 26.4 on our triplet. And if you missed it, we did specify that, that 26.4 months was effectively the same whether those patients on the triplet were PD-L1 positive or negative. So any way you slice it, these results, we definitely view as practice changing to get to past 2 years of overall survival and to have that benefit, for example, with the PD-1 be independent of PD-L1 status. This sort of speaks to the mechanism of action that Rob Iannone, our Chief Scientific Officer, can speak to much more eloquently than I can on why it is we think that effectively, this mechanism of zani is unique and is turning cold tumors hot and allow them to benefit -- these patients to benefit from the treatment.

And then obviously, you mentioned you finished the submission for GEA, so that's great. Can you kind of walk us through outside of that, when could we start seeing some revenues flow through? Obviously, the NCCN guideline updates could also be important, where do you stand on that process?

Do you have anything on NCCN?

Yes. So we've submitted the data to the NCCN right at the time that we presented the ASCO GI data. What we're going to follow that with is as well a publication that hopefully should be upcoming in a top-tier journal. And typically, the NCCN would be meeting around the summer time frame. But since -- because of the data and how compelling they are, we are hoping that there could be an off-cycle decision.

Great. And when you think about a combination partner in the triplet regimen, obviously, KEYTRUDA is used pretty heavily in the U.S. I guess, do you think you're going to get sort of an agnostic combination partner label and you'll be able to use zanidatamab with KEYTRUDA or any PD-1 that's available? Yes or no? And maybe why is that maybe not important if it's not?

Yes. I mean I can't comment on the label because that's negotiation. But in practice, those anti-PD-1s are viewed as equivalent and interchangeable. So we potentially expect that based on physician preference, what they have on formulary that they could potentially use it with any other anti-PD-1 if they so choose to do so.

And how large of an opportunity do you think GEA is for Jazz?

So it's definitely a larger opportunity than BTC. We have not given specific revenue numbers by indication. We've given a broad view of what peak revenue could be based on the 4 indications that we had ongoing at that point in time, which were our pan-tumor trial, first and second line for BTC, GEA and then breast cancer. And that was the $2 billion-plus peak revenue potential and that we have given patient numbers. So in the geographies that we have access to, effective was about 12,000 for second-line BTC patients, about 3,000 of those here in the U.S. There were about 63,000 GEA patients, about 8,000 of those here in the U.S. and then about 150,000 breast cancer patients. So I think it's safe to assume that the revenue potential probably does scale by those larger patient populations. We haven't been specific on the exact numbers for each.

And then once the drug hopefully does get approved, how are you thinking about providing metrics to the Street on how each of the individual components of the launch are going? Are you going to be able -- obviously, with narcolepsy, you can see narcolepsy in IAH, is it going to be as clear with zanidatamab to show how the patients are growing between BTC and GEA as well or how are you thinking about splitting that up?

Great question and one that we surely have interest in. It can be difficult at times to really understand what's the indication that a patient is getting a drug for and you have multiple indications. Right now, it's easy for us to say the number of patients that got Modeyso because they're just a number that got the drug. When we get into then zani and having to break it out by indication, we have to figure out how we can help the Street understand where we're seeing utilization. But you're right, it's not as clean a data set to be able to opine definitively.

And maybe jumping over to breast cancer because it is going to be the next expansion opportunity for zanidatamab. Maybe what have you seen so far in the data that gave you excitement that zanidatamab could potentially be differentiated here? And that supported moving into the EmpowHER study?

Yes. I mean it's accumulation of data over the years. A lot of it is preclinical as well, where we've shown that zanidatamab is a superior anti-HER2 agent compared to Herceptin. We've also seen data from our studies that are open label that we can do some cross-trial comparison versus Herceptin where zanidatamab is superior. And now we have a definite experiment, a randomized trial is showing that zanidatamab is superior to Herceptin. So definitely bolstering that confidence in our ability to win for the 303 trial. Again, in that trial, we are again comparing to Herceptin. Herceptin -- the patients could have been exposed to Herceptin in the past, either in neoadjuvant, adjuvant setting, even metastatic setting. So we also have a bit of a leg up there. So yes, really excited hopefully when those trial results come out.

And can you remind us on timing for the trial results, what we'll see and what's fileable based off the EmpowHER data? I think maybe the reason was they could come as early as maybe the end of 2027, but can you kind of walk us through what we're looking for there?

Yes. So what we've seen is robust enrollment ahead of what we've projected. We anticipate to complete enrollment in the first half of 2027, hopefully earlier. And then it will be a matter of when the events come. What we are projecting so far is that they could come out late 2027, early 2028, but again, it's an event-driven trial, so we'll have to see.

And then outside of these 3 indications, I guess, where else are you excited for zanidatamab? I know you have a basket study ongoing as well and potentially that's towards sort of more tumor-agnostic label expansion opportunity. But what are the other opportunities that we should be paying attention to?

Yes, we're looking at several opportunities. So first, the expansion of what we can combine zanidatamab with. So we've recently disclosed partnership with BI to study zanidatamab in combination with their TKI that's directed towards HER2. Definitely -- so definitely exploring other combinations where we can use zanidatamab. And data that we have from before from studies that were done in the Phase I where zanidatamab showed real potential, such as in colorectal cancer and non-small cell lung cancer, where we're looking for expanding. For colorectal cancer, we've also disclosed at ESMO some really compelling frontline data with zanidatamab plus chemotherapy where we've seen 100% response rate. So lots of exciting potential for zanidatamab.

Great. And maybe jumping over to Modeyso. You mentioned, obviously, we loved Chimerix and dordaviprone. The launch is going really, really well. So far, I guess, is it surpassing your expectations? And when we look into the next year, I guess, how much of that Q4 great early launch do you expect to kind of persist and expand this year?

So it's definitely off to a phenomenal start, probably is exceeding our high expectations for the product. And that speaks to both the unmet need in this tumor type as well as the strong advocacy work that had been done by our Chimerix colleagues prior really giving great visibility to the physician community of this potential new treatment. One of the things we've been focused on is increasing testing rates. Really pleased with the direction we're seeing there. I think prelaunch, we're estimating that to be maybe in the 60% range. Now seeing that getting north of 70%, 75%. So that would be a continued focus for us as well. It's unclear right now if what we're seeing in the strong uptake reflects a greater peak sales potential, which we said is over $500 million here in the U.S. or if we're something maybe getting to that peak sales potential more quickly. I would say the 2 main variables probably and whether that peak sales potential is confirmed or revised moving forward is going to be on the epi. I mean we've made estimates of how many patients are out there. It's really tough when you have these small patient populations to nail that. 500 patients more or less can make a meaningful difference there. And then also, it's early yet to know on duration of therapy in the real world relative to what we would have seen in clinical trials. So again, still very pleased with the way those things are trending. But I'd say, really pleased with the progress, but it is early to know if that $500 million is still valid if we might need to move that up.

And how important is the frontline study maybe in the overall expansion of Modeyso? And do you feel that study is pretty reasonably de-risked?

We did announce earlier that we were going to increase the trial size and change the primary endpoint to have it focused on OS. So we had another 100 patients or so. We do expect that study probably to read out late this year, early next year. And I would view that as important. It's going to be helpful if that does show a benefit, confirms the benefit we've seen so far. We've gotten questions at times, hey, if you don't show a benefit if you narrowly missed, is that the end of the world? I don't know if that's necessarily the case either. I think the existing data and unmet need here, there's probably a role for dordaviprone even if that were to occur. But again, our base case and expectation is we show a benefit in the first line, formally expand the indication into that and continue to get even more use in that setting.

Great. And maybe last question, just going back to the BD component because that has come up quite frequently. Any additional details on where you think you want to expand the business? And obviously, with the GW acquisition, you levered up quite highly and you've been able to delever pretty efficiently. What's the appetite to do sort of a larger deal versus maybe a smaller licensing kind of transaction?

I would say we're looking to build each of our existing verticals and as Renee, I think, really well laid out at JPMorgan, we're going to look to get into other areas of rare disease, where we can apply some of our same skills and expertise. In those areas, we have existing deep expertise. You should expect to see us transact preclinical all the way through to market assets. In the areas that we're going to be stepping into that are new, we will do that probably with a derisked asset post proof of concept or at least the mechanism has already had proof of concept. In terms of leverage, GW went up roughly to 5x. We could certainly get up to that again. If we did that, we'd want to have a really clear plan for how we quickly delever, not only to, I think, assuage any fears that our debt and equity holders might have, but also from a practical perspective so that we could be back in the position again to do more corporate development to add to the growth profile of the company going forward.

Awesome. Thank you very much for the great discussion.

Thanks for having us. Appreciate it.