Jazz Pharmaceuticals plc ($JAZZ)

Hello, everyone. My name is Etzer Darout, senior biotech analyst at Barclays. My pleasure to have Jazz Pharmaceuticals with us today. On stage with me, I have Phil Johnson, Chief Financial Officer; and John Bluth, Head of Investor Relations. Thank you so much for joining us today. Phil, I'm sure folks are relatively familiar with Jazz, but maybe just to kick us off, just provide some introductory remarks, and then we'll go into our Q&A.

Yes, I'd be happy to. Thanks, Etzer, for hosting us here. And this is a great location to be in and a great time of year to be done here in Miami Beach. Just a disclaimer, please do as we're going through the discussion. If there's things you're interested in learning more about, including risks that can affect our business, please refer to our recently filed 10-K if we do refer to guidance during the discussion today, that will be the guidance we provided on our recent Q4 earnings call. So 2025 was a great year for the company and really sets us up extremely well for 2026. And I think had important advancements in commercial, the pipeline as well as in corporate and development. I'll touch just briefly on each of those. So on the commercial side, in 2025, we had record revenue for the company growing 5%, driven by 12% growth in Xywav, 9% in Epidiolex and initial uptake of Modeyso that was quite strong. That was our 21st consecutive year of growth. This is a pretty outstanding achievement for any company. We're really proud of that accomplishment. On the pipeline side, had a couple of really incredible pieces of data come out, practice-changing data in first-line maintenance, small cell lung cancer with our products, Zepzelca in combination with atezolizumab. And then probably most importantly, for the company, the first-line GEA readout as any data map, where we should unprecedented overall survival results extending beyond 2 years. On the corp dev side, had a really interesting acquisition, both from a patient perspective, acquiring Chimerix with their drug dordaviprone shortly after the acquisition, we're able to get that approved and launched off to a great start. And also from a financial perspective, I think it's shaping to be a phenomenal return for Jazz and Jazz shareholders as we acquired deferred tax assets that will reduce our cash taxes over time by over $200 million. We also received a priority review voucher with the approval of Modeyso and sold that, I think, for at least a 10-year high of $200 million. So really pleased with that deployment of capital. As we come into 2026, we provided guidance that was $4.25 billion to $4.5 billion in revenue for the year that would be 2.5% growth at the midpoint, meaning we are aiming for our 22nd consecutive year of revenue growth as a company as well. On the pipeline side, one of the biggest events people are looking for is approval and launch for zanidatamab in that first-line GEA setting. Initially, we've been targeting a submission to the FDA in the first half of 2026. On our fourth quarter earnings call, we said that would be in the first quarter. And then at the recent conference, I won't mention the name. We had confirmed we actually already have submitted to the FDA. Post the data being available, the FDA had included us in the RTOR program, the real-time oncology review program and then more recently assigned breakthrough designation for zanidatamab in first-line GEA as well. So we're optimistic that we'll receive a priority review and look forward to approval and the launch of the product later this year. And on corporate development side, we're really well positioned, I think, understanding the substrate that's out there in rare diseases of interest to us and with great financial resources to be able to act $2.5 billion roughly in cash investments, strong ability to leverage if we need it for attractive opportunities and additional focus that we place on corporate development with the hiring of a Chief Business Officer, Tom Riga, dedicating additional management time and focus to those efforts. So confident we'll be able to find really good opportunities for us to deploy capital, improve outcomes for patients and drive greater returns for shareholders as well.

Great. And maybe just internally, when you think about investments in the business, obviously, new franchise, epilepsy franchise, huge components of the company today, but then you have this growing oncology business with Ziihera hopefully coming -- continuing to grow as we get more and more clinical updates. How are you thinking about sort of resourcing CNS relative to oncology just internally and how you kind of think about that business over the next couple of years?

Yes. So we've got great opportunities sort of in that nonsleep portion of our business. As part of the guidance, we did say that revenue, which is over half of the company's total revenue in 2025, we expect to grow double digits here in 2026, continued growth of Epidiolex and then obviously ramping for Modeyso and growth in Ziihera as well. So we are extremely focused in terms of capital allocation on investing behind the existing marketed products and making sure that we're getting those to patients who can benefit from them in driving revenue there. That is what pays the bills and gives us the resources to invest. Secondarily, really making sure that we're investing behind the existing pipeline. It's in-house now. We've got some great opportunities, first and foremost, probably to build out indications for Ziihera and then certainly, high priorities as I mentioned earlier, for us to go ahead and increase the company's future growth profile through additional corp dev. As we think about the areas where we're currently operating in, sleep, epilepsy and oncology, as you look at the substrate there, there is the most interesting innovative science, probably in the epilepsy space in the oncology space in sleep, which I'm sure we'll talk about going forward. Orexins are currently the only sort of real innovation coming forward. That may change over time, and we'll continue to look for opportunities to grow that franchise as well. But then definitely beyond the areas that we're currently in, we see some really good opportunities in rare disease to go ahead and expand our presence, use our capabilities to drive great outcomes for patients as well as for investors there as well. We haven't yet done that. So I know we've been saying this for a few years, but I wouldn't be surprised if in the coming quarters or years you're seeing us expand into one or more new rare disease areas beyond those that we're currently in.

And people which tend to have short memories. So we think about the Modeyso transaction is sort of being a recent one. And just maybe looking forward, is that maybe a framework in terms of what we could see from Jazz and just in terms of sort of the deal type deal size?

Definitely love if we could find some more Chimerix is to acquire. I would say that if you think about where we'll be investing in the areas we've got existing deep expertise knowledge and relationships, we'll invest across that full spectrum from marketed products all the way to preclinical. So the Saniona licensing deal that we did last year in the epilepsy space is an example of that. If we're going into new areas of rare disease, which I mentioned, I expect that we will do going forward, those initial investments would likely be targeted to things that are post proof of concept or at least proof of mechanism with an improved compound going after that mechanism. And as we build that expertise, knowledge and relationships begin to invest earlier in clinical or even preclinical development.

Great. And maybe on to the sleep franchise, obviously, on Xywav, a great performance the last couple of years. But we have Lumryz other generic oxybate potentially coming online as well. Orexin agonists being talked about sort of your view on the durability, if you will, of the sleep franchise.

Yes. So we're really pleased over the years with how Xywav has performed not only in building out the idiopathic hypersomnia indication where we're the only approved drug, and I think we've been quite successful in building awareness of the utility of an oxybate for patients with idiopathic hypersomnia, but honestly, also in narcolepsy as well, where I think many on the street, potentially even some internally expected something different to happen than what really happened. So we've been continuing to build quarter after quarter the number of patients on Xywav with narcolepsy, even with the emergence of a branded competitor and the AG. We had, I think, even more net patient adds in the fourth quarter than the branded competitor did. I think it speaks to the unique benefit that Xywav offers, which is a safety benefit of having low sodium using the patient population, whether that's those with narcolepsy or idiopathic hypersomnia that have a 2x to 3x higher incidence of a risk for cardiovascular events. We've got data that shows, for example, if you go from a high sodium oxybate to a low sodium oxybate, you see clinically meaningful reductions in blood pressure. This kind of benefit, we think, is resonating with physicians and patients. It's part of the reason why we're not only building the market in idiopathic hypersomnia but having probably more durability in narcolepsy than many would have thought. I mentioned on our fourth quarter call, there were some accounts last year that had a step through the AG before you can get to one of the branded options and we still have the highest share there. So this benefit, which is a safety benefit does resonate with physicians, with patients, and we'd expect to resonate with many payers as well.

Great. And we've had conversations with different KOLs and their views on orexin agonist in general seems to be varied. In your conversations with key opinion leaders around the potential impact of orexin agonist. What are you hearing from them about what that impact could be on?

There's great excitement for the orexins, not only hypersomnias where we're operating potentially in patients with ADHD or Alzheimer's, Parkinson's, et cetera. We don't follow that portion of as much. So I'll limit my comments maybe to talking about the role in hypersomnias. Certainly, orexins appear to be the most potent weight-promoting agents that we've seen today, particularly in narcolepsy type 1 patients, which is where we'd expect to see the first application and approval of Takeda's product especially getting approved and launched yet this year. I think the role in NT2, the role in IH is still to be played out, and still uncertain. Jazz for quite a number of years, has been saying that we view orexins and oxybate as being complementary and expected there to be concomitant use, not that orexin would actually cure patients and obviate the need for oxybate. I think for many years, people looked at that as a maybe Jazz self-serving comment. There is hope, I think that these orexin products might go ahead and be the cure, if you will, functional cure for patients with narcolepsy, particularly narcolepsy type 1. That does not seem from our view to be the way the data is playing out and I think other whether it's KOLs or other corporates, I think, are also adopting the view that these will be complementary therapies. My expectation is that if the company is going to spend a couple of billion dollars to get a company that has an oxybate and they already have an orexin, they're probably not viewing them as being competitive, either of being complementary. So hopefully, good news for patients with narcolepsy that this could be a more effective daytime treatment to use alongside an oxybate to help treat their symptoms and get better outcomes.

Great. And maybe a couple of questions on epilepsy. Epidiolex settlement looks to have a really nice IP runway. But when you think about sort of maybe the growth profile or the growth outlook for Epidiolex, how are you thinking about that?

Yes. So really pleased to have the ANDA settlement with the 10 ANDA filers that we announced last year in the early part of the year, giving us runway out to the very late 2030s. And the product last year grew nicely, past that $1 billion mark. And we see opportunities for continued growth of Epidiolex going forward. A number of places where we're focused. One I would highlight is in the adult patient population. Many of these are in long-term care settings. We've been expanding our outreach efforts there. Many of these patients also have LGS, a condition that takes over a dozen years often to be diagnosed. So we've helped with the rest LGS tool to help physicians identify these patients at times, there can be difficulties as someone goes on to therapy of getting up to and titrating to an efficacious dose and then staying on therapy. We have a really effective nurse navigator program that's been rolled out to a minority of patients so far that we're looking to expand because we do see better experiences on products, including greater persistency when they're having that additional support. We're also looking for ways to improve the product profile for those adult patients. We haven't been specific about the exact formulation, but we have some working on a formulation that could make the product more attractive to adult patients and looking for additional ways that we can generate data to inform clinicians on uses of Epidiolex, including the Phase I study that we recently mentioned, we're starting in focal onset seizures as well. And then beyond Epidiolex itself, with that long runway to the very late 2030s, this certainly is a franchise we'd like to build out with additional products to have in the bag and build on our existing relationships to benefit patients.

Yes. And how much of the safety tolerability observed with Epidiolex? How much of a differentiator is that in epilepsy?

Most of these patients are on polypharmacy. They're typically taking 3 or more antiseizure medications. And Epidiolex seems to combine very well and is often one of those medications that they're on. You even see this as some of the newer products coming through clinical development or in a number of these cases, you've had probably 1/3 or more of patients that have been on Epidiolex in those studies as well. So we do expect going forward, there will be additional innovative therapies that will help improve patients' reductions in seizures, but there will be a continued need for additional add-on therapies and Epidiolex is well positioned to be one of those.

Great. And maybe a few questions on the oncology franchise. Let me first, maybe Modeyso sort of encouraging a launch maybe you can kind of speak to that, what's sort of driving that? And maybe how you see that evolving in the next few years?

Yes. So we've been really pleased with the uptake of Modeyso -- really been nothing for these patients since the advent of radiotherapy 0 years ago. We saw strong initial conversion of patients that were on the expanded access program over. But of the 360-plus patients treated in 2025, the vast majority of those were new patients. So really pleased with that adoption and uptake, including in those new patients, not just the conversion from the EAP program. This is a product we said we see having $500 million peak sales potential just here in the U.S. This early uptake is very encouraging. We're still reserving judgment on whether that $500 million should change or not. We're monitoring 2 things over time to understand if that should be moved up. One is do we get the Epi right, roughly 2,000 patients? Are there actually more out there that can benefit from Modeyso. And then secondarily, duration of treatment. We've been in the market since mid-August. So it's still early to know how long patients will stay on. Our first patients will get out to a year, obviously, therefore, are going to be those that would have been out in August of this year. So by end of this year, I think we have a much better view on average duration of treatment, that is median and be able to understand does that also influence the peak sales potential.

And maybe you could comment on how much -- how important is that front line update on sort of that $500 million peak number in the U.S.? And I guess, maybe how we should think about -- could it be potentially more if that...

No, great question. The first-line use was included in that $500 million estimate when we had provided it. When we acquired Chimerix, we did make some adjustments to the ACTION study. We increased the number of patients by about 100. We changed the primary endpoint to the overall survival that we think is more appropriate and that readout is expected in late this year or early in 2027. So look forward to that readout as well. We are approved in that recurrent setting. That's where we promote to, but we do know that given the unmet need there and the physicians see this as a very well-tolerated drug, some of that early uptake is occurring and physicians using this in earlier line patients in first-line patients.

Great. And with -- we talked about the Horizon update in gastric cancer, obviously, great results. How are you preparing for that launch in that frontline population and again, extending that beyond? And I guess you also have to kind of think ahead and potentially breast coming on in a couple of years. So how are you thinking about that initial launch? And then how are you setting up hopefully for success beyond gastric?

Yes. So really excited to be bringing this to market in the not-too-distant future given the kind of practice-changing results that we generated. The current indication is in second-line biliary tract cancer, and these are effectively the same physicians, probably just 90-plus percent overlap of the prescribing physicians for first-line GEA. So these physicians are getting initial experience with the drug in those BTC patients. We think that initial experience will be very helpful as we come to market later this year in first-line GEA. And then yes, the next thing sort of up would be breast cancer. There, we're studying in metastatic breast cancer, basically in patients who have progressed after Enhertu therapy or intolerant to Enhertu therapy. We're really the first one into generating data in that space, which right now is sort of a third line plus but with Enhertu moving into the first line, that would become more of a second line plus kind of indication. And we're almost going quite well. We currently expect enrollment to complete in the first half of 2027 and then trying to use our best estimate of what we're seeing in event rates currently, that would be late '27 or late '28 for the initial readout there, that would be the final PFS and then the first interim OS.

Great. And again, beyond this initial data set, with this profile, there are various ways you can go. You can go into earlier line breast cancer. There's also the tumor-agnostic approach around HER2 therapies. How are you thinking about that beyond the initial indications that you're currently executing on?

So we do feel like the data that we generated in that first-line GEA study are pretty definitive proof that at least in that setting, we have a vastly superior targeted HER2 agent compared to Herceptin. So clearly, we're looking where Herceptin was approved and successful, which is breast cancer and gastric cancer, looking for ways to expand there. That could be both early breast cancer, like you mentioned, adjuvant, neoadjuvant, also early gastric. And then we're looking at some places where maybe Herceptin didn't get approved, didn't quite meet the bar, but with a much more potent HER2 agent, we could have success. So we're looking in non-small cell lung cancer. We have some really outstanding early results in colorectal as well that we're looking at. And then even within the existing areas that we're in, trying to figure out what are ways we can go ahead and improve the data that's available for physicians over time to inform use. So striking up partnerships with companies that have novel could be best-in-class for 2 targeted TKIs, for example, in breast cancer. So we've got a recently announced collaboration with Boehringer Ingelheim, zongertinib, and then you'll probably expect to see more of that from us over time as we build out zani. There's the ongoing pan-tumor trial that you had mentioned that could also lead to an additional indications. That's a registrational quality and size of the study as well.

And within oncology, there's other areas as well, you mentioned the frontline maintenance, small cell lung cancer study. When you think about, again, optionality around the oncology portfolio and in the pipeline. How should we think about sort of the rest of the oncology business for Jazz?

Yes. So with Zepzelca in that first-line maintenance setting in combination with atezolizumab really excited about those results, strong overall survival benefit and very clinically meaningful benefit there. We would expect to see that become standard of care in that first-line maintenance setting. As far as how the overall product revenue progresses, that will depend on the dynamics in the current second line, which is the majority of use, where there is a competitor that has overall survival benefit that we would expect to become standard of care over time, and our use in second line decline. And also, there's not data that we would point to that would indicate that we expect if you're getting Zepzelca in that first-line maintenance setting, that you'd be rechallenged in second line. So again, really pleased with the benefit we can bring for patients in that first-line maintenance setting. That's where we've been focused for quite some time. We'll continue to be focused there, but recognize that, that second line business will decline overtime.

Great. And then early on in the pipeline, you have, again, a few different assets across different therapeutic areas of interest, one of which is the KRAS and G12D and pan-RAS programs. Just how are you looking at that space as it evolves and where you think ultimately Jazz could play a role in that space, again, given how much interest there is overall in the RAS space?

Yes. So we've got a couple of Phase I assets ongoing and RAS that you mentioned, the sort of in expansion cohorts now. So pleased we're moving into that. We've got the conditionally activated interferon alpha is moving into some cohort expansions as well. So pleased that we're sort of passing some of those initial Phase 1 hurdles moving into those either dose escalation, dose expansion or cohort expansion studies that have strong interest in solid tumors for each of those assets. We also -- as Jazz has been transitioning over the last 6, 7 years, into a more fully integrated biopharma company, including not just early development, but actually preclinical development, our own research. We're pleased to have moved our first Jazz generated asset into the clinic. This is in the epilepsy space, still holding off on disclosing mechanism of action. We expect to see more assets coming from those efforts as well. While [ corp dev ] will continue to be the primary source for us of getting new innovation into the company, assets like as I hear, like Modeyso, we're really pleased we're beginning to see sort of the fruits of the labor over many years to build the research capability that can generate interesting assets as well.

Great. And we mentioned focal onset seizures as a potential long-term opportunity for Epidiolex. Maybe the basis, if you will, for a bit, for that is maybe some preliminary data that you've seen internally maybe preclinically physician feedback on maybe anecdotal evidence. What's driving that?

That as well just clinical data you've seen. So we're basically in specific diseases, if you will, as opposed to the seizure type, and we've seen benefits in focal onset. I do think we want to make sure that we're thinking about how to best direct that development to be consistent with our focus on rare disease and also the kind of pricing profile at Epidiolex has as well. So trying to find a patient population where you've got a significant benefit that you can feel good about both the incremental outcomes that you're driving for patients as well as then the kind of pricing that you have for the product.

Great. Bill, John, thank you so much for your time. Enjoy the rest of the conference. Thank you for our listeners, and we'll be back to our next session shortly.

Thanks, appreciate it.