On November 9, 2022 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the third quarter of 2022, and raised the mid-point of 2022 total revenue guidance (Press release, Jazz Pharmaceuticals, NOV 9, 2022, View Source [SID1234623552]).
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"Our execution across our business continues to chart a clear path to delivering on Vision 2025. We have further strengthened our operations, and our business is performing well as we’ve diversified our revenue streams and rapidly deleveraged, while delivering meaningful top- and bottom-line growth. We have also achieved another important milestone — exiting October 2022, there are now more narcolepsy patients taking Xywav than Xyrem," said Bruce Cozadd, chairman and CEO of Jazz Pharmaceuticals. "We’re pleased with the performance across our key products: compelling Xywav adoption across both narcolepsy and idiopathic hypersomnia (IH) continues to drive oxybate durability, Epidiolex delivered significant year-over-year growth driven by underlying demand, strong demand for Rylaze underscores the substantial unmet need and Zepzelca remains the treatment of choice in second-line small cell lung cancer (SCLC). Based on this performance, we are raising the mid-point for our 2022 full year revenue guidance and continue to focus on long-term sustainable growth."
"We have prioritized and invested in key programs leading to significant progress across our pipeline. I’m pleased to announce we have enrolled the first patients in both our Phase 1 clinical trial of JZP815, a pan-RAF inhibitor, and our Phase 3 trial of Epidyolex in Japan," said Rob Iannone, M.D., M.S.C.E., executive vice president, global head of research and development of Jazz Pharmaceuticals. "Upon close of the transaction, we are excited to further expand our pipeline with zanidatamab, a novel HER2-targeted bispecific antibody in late-stage trials with the potential to transform the current standard of care in multiple HER2-expressing cancers, and also through the initiation of a Phase 2 clinical trial evaluating suvecaltamide (JZP385) in Parkinson’s disease tremor. We also continue to advance the JZP441 orexin-2 receptor agonist program. Together, this pipeline progress underscores an exciting time for R&D at Jazz as we look to deliver innovative therapies for patients in critical need."
Key Highlights
Business and Execution
Compelling adoption of Xywav in narcolepsy and IH driving oxybate durability.
Achieved a significant milestone exiting October 2022, with more narcolepsy patients taking Xywav than Xyrem.
Expect Epidyolex to be launched in all five key European markets by year end, following recent successful completion of pricing and reimbursement in France.
Expanded oncology portfolio with zanidatamab, a novel, late-stage asset, currently being studied in two pivotal trials: first-line HER2-positive gastroesophageal adenocarcinoma (GEA) and second-line HER-2 positive biliary tract cancer (BTC)1.
Enrolled the first patient in a Phase 1 clinical trial evaluating JZP815 in patients with advanced or metastatic solid tumors with MAPK pathway alterations.
Enrolled the first patient in a Phase 3 pivotal trial of Epidyolex in Japan for Dravet Syndrome (DS), Lennox-Gastaut Syndrome (LGS) and Tuberous Sclerosis Complex (TSC).
Initiated a Phase 3 pivotal trial of Epidiolex for Epilepsy with Myoclonic-Atonic Seizures (EMAS), the fourth target indication for Epidiolex.
Initiated a Phase 2 trial for suvecaltamide (JZP385) in Parkinson’s disease tremor.
Financial
Raising the mid-point of 2022 total revenue guidance to $3.65 billion driven by increases in the guidance mid-point for both our Neuroscience and Oncology therapeutic areas.
Growing and durable commercial franchises drove 3Q22 total revenues of $940.7 million; 12% increase compared to the same period in 2021.
Continued progress in demonstrating operational excellence and ability to leverage our selling, general and administrative (SG&A) expenses, with SG&A expense as a percentage of sales decreasing in 3Q22 and year-to-date, relative to the same periods in 2021.
Strong operating cash flow year-to-date of $930.0 million, with a cash balance of $899.4 million as of September 30, 2022, and net leverage ratio of 2.9×2.
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Pending transaction close.
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On a pro forma non-GAAP adjusted basis. Non-GAAP net leverage ratio is a non-GAAP financial measure. For further information, see "Non-GAAP Financial Measures."
Business Updates
Key Commercial Products
Oxybate (Xywav and Xyrem):
Net product sales for the combined oxybate business increased 11% to $512.0 million in 3Q22 compared to the same period in 2021.
Average active oxybate patients on therapy was approximately 17,600 in 3Q22, an increase of approximately 10% compared to the same period in 2021.
Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution:
Xywav net product sales increased 67% to $255.9 million in 3Q22 compared to the same period in 2021.
There were approximately 9,500 active Xywav patients exiting 3Q22.
Xywav has broad patent protection to 2033.
Xywav for Narcolepsy:
There were approximately 8,050 narcolepsy patients taking Xywav exiting 3Q22.
Achieved another significant milestone exiting October 2022, with more narcolepsy patients taking Xywav than Xyrem.
The benefits of lowering sodium intake continue to resonate with patients and prescribers. In June 2021, the U.S. Food and Drug Administration (FDA) recognized seven years of Orphan Drug Exclusivity (ODE), through July 2027, for Xywav and published its summary of clinical superiority findings.
Xywav for Idiopathic Hypersomnia (IH):
Compelling growth with approximately 1,450 IH patients taking Xywav exiting 3Q22.
The Company has achieved its goal of obtaining similar payer coverage to narcolepsy, with coverage now at approximately 90% of commercial lives for IH.
The Company launched Xywav, the first and only treatment approved by FDA for IH, in November 2021. Initial launch efforts have focused on the approximately 37,000 currently diagnosed patients in the U.S. who are actively seeking healthcare. Healthcare providers are excited to have a treatment option with positive and compelling clinical trial results that addresses IH and not just its symptoms.
FDA recognized ODE for IH in January 2022, extending regulatory exclusivity to August 2028.
Xyrem (sodium oxybate) oral solution:
Xyrem net product sales decreased 17% to $256.0 million in 3Q22 compared to the same period in 2021, reflecting the continued adoption of Xywav by patients with narcolepsy.
Epidiolex/Epidyolex (cannabidiol):
Epidiolex/Epidyolex net product sales increased 22% to $196.2 million in 3Q22 compared to the same period in 2021.
The Company successfully completed the pricing and reimbursement process for Epidyolex in France and expects commercial launch by the end of 2022, which would make Epidyolex commercially available and reimbursed in all five key European markets: United Kingdom, Germany, Italy, Spain and France.
The Company enrolled the first patient in a pivotal Phase 3 trial of Epidyolex for DS, LGS and TSC in Japan.
The Company initiated a Phase 3 pivotal trial of Epidiolex for EMAS, the fourth target indication for Epidiolex.
Zepzelca (lurbinectedin):
Zepzelca net product sales decreased 2% to $70.3 million in 3Q22 compared to the same period in 2021. As previously noted, 3Q21 net product sales were favorably impacted by approximately $10 million, relating to a reduction in the returns accrual rate, due to lower than estimated actual returns. Excluding this impact, net product sales increased by approximately 14% in 3Q22 compared to the same period in 2021.
The Company is pleased Zepzelca continues to be the treatment of choice in the second-line SCLC setting, a position established after only eighteen months on the market.
Zepzelca development program highlights:
The EMERGE-201 Phase 2 basket trial evaluating Zepzelca as monotherapy in select relapsed/refractory solid tumors is ongoing.
Phase 3 trial in partnership with F. Hoffmann-La Roche Ltd (Roche) to evaluate first-line use of Zepzelca in combination with Tecentriq (atezolizumab), compared to Tecentriq alone, as maintenance therapy in patients with extensive-stage SCLC after induction chemotherapy is ongoing.
The Company’s partner, PharmaMar, is conducting the Phase 3 confirmatory trial, LAGOON, in second-line SCLC. If positive, this trial could confirm the benefit of Zepzelca in the treatment of SCLC when patients progress following first-line treatment with a platinum-based regimen.
Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn):
Rylaze net product sales were $73.5 million in 3Q22.
The continued strong launch of Rylaze reflects the significant unmet patient need for a high-quality, reliable supply of Erwinia asparaginase for patients with acute lymphoblastic leukemia.
In May 2022, the Company completed the Marketing Authorization Application (MAA) submission to European Medicines Agency (EMA) for a Monday/Wednesday/Friday (MWF) dosing schedule and intramuscular (IM) and intravenous (IV) administration for JZP458 (approved as Rylaze in the U.S.) with potential for approval in 2023. The Company is also advancing the program for potential submission, approval and launch in Japan.
In January 2022, the Company completed the submission of a supplemental Biologics Licensing Application (sBLA) to FDA seeking approval for a MWF IM dosing schedule for Rylaze. In April 2022, the Company completed the submission of an sBLA to FDA seeking approval for IV administration of Rylaze. Both submissions are being reviewed under the Real-time Oncology Review Program (RTOR).
Corporate Development
Zanidatamab Agreement1:
On October 19, 2022, the Company and Zymeworks Inc. announced an exclusive licensing agreement under which Jazz will acquire development and commercialization rights to zanidatamab, a novel HER2-targeted bispecific antibody, which can simultaneously bind two non-overlapping epitopes of HER2, known as biparatopic binding.
The Company believes zanidatamab has the potential to deliver significant long-term value and meaningfully contribute to Vision 2025.
The late-stage program for zanidatamab is aligned strategically with Jazz’s focus on opportunities where there is significant unmet patient need, and where we can apply our unique insights and leverage existing integrated capabilities and global infrastructure to commercialize efficiently.
Zanidatamab has multiple novel mechanisms of action applicable in several HER2-positive tumors where it has demonstrated compelling anti-tumor activity, both as a monotherapy and in combination with chemotherapy.
Top-line clinical data for zanidatamab in BTC (HERIZON-BTC-01) is expected by the end of 2022 and has the potential to support global regulatory filings.
Zymeworks is eligible to receive a $50 million upfront payment, following the clearance relating to the U.S. Hart-Scott Rodino Antitrust Improvements Act of 1976, or HSR Clearance. Should Jazz decide to continue the collaboration following readout of the top-line clinical data from HERIZON-BTC-01, Zymeworks is eligible to receive a second payment of $325 million.
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Subject to closing conditions, Jazz to obtain exclusive development and commercialization rights to zanidatamab across all indications in the United States, Europe, Japan and all other territories except for those Asia/Pacific territories previously licensed by Zymeworks.
Key Pipeline Highlights
Nabiximols:
On June 28, 2022, the Company announced the Phase 3 RELEASE MSS1 trial (NCT04657666) in multiple sclerosis (MS)-related spasticity did not meet the primary endpoint of change in Lower Limb Muscle Tone-6 (LLMT-6) between baseline and Day 21, as measured by the Modified Ashworth Scale (MAS).
The analysis of the nabiximols MSS1 trial has been completed. The Company has assessed the nabiximols program’s potential to support regulatory approval in the U.S., as well as in the context of its broader pipeline opportunities, and has made the decision to discontinue the program.
Sativex (nabiximols) was approved outside the U.S. based on a comprehensive clinical trial program, including three positive Phase 3 randomized controlled trials completed in Europe. The Company continues to believe Sativex confers benefit to patients with MS-related spasticity and continues to support the availability of Sativex in the 29 markets outside the U.S., where it is approved.
RELEASE MSS1 trial results will be presented at a future medical meeting.
The Company remains committed to the GW Cannabinoid Platform and is working to advance multiple early-stage cannabinoid programs with the potential to address critical unmet patient needs.
Suvecaltamide (JZP385):
Suvecaltamide, a highly selective modulator of T-type calcium channels, is in clinical development for the treatment of essential tremor (ET) and Parkinson’s disease tremor.
Patient enrollment is ongoing in the Phase 2b ET trial and top-line data read-out is anticipated in 1H24.
The Company initiated a Phase 2 trial in patients with Parkinson’s disease tremor and expects the first patient to be enrolled by year end.
JZP150:
JZP150, a selective fatty acid amide hydrolase, or FAAH, inhibitor, is in clinical development for the potential treatment of post-traumatic stress disorder (PTSD).
Patient enrollment is ongoing and top-line data read-out is anticipated in late 2023.
The Company received Fast Track Designation for JZP150 development in PTSD from FDA in 4Q21, underscoring the significant unmet medical needs of patients.
JZP815:
The Company enrolled the first patient in a Phase 1 trial evaluating JZP815 in patients with advanced or metastatic solid tumors with MAPK pathway alterations.
The pan-RAF inhibitor program is part of a novel class of next-generation precision oncology therapies that has the potential to benefit cancer patients with high unmet needs in multiple different solid tumors.
JZP441:
JZP441, a potent, highly selective oral orexin-2 receptor agonist designed to activate orexin signaling, is in clinical development in Japan in a Phase 1 trial to evaluate safety, tolerability and pharmacokinetics in healthy volunteers.
The Company continues to advance the JZP441 program.
GAAP net loss in 3Q22 was $(19.6) million, or $(0.31) per diluted share, compared to $(52.8) million, or $(0.86) per diluted share, for 3Q21. Non-GAAP adjusted net income in 3Q22 was $370.4 million, or $5.17 per diluted share, compared to $261.4 million, or $4.20 per diluted share, for 3Q21. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
Total revenues increased 12% in 3Q22 compared to the same period in 2021.
Neuroscience net product sales in 3Q22 increased 10% to $711.4 million compared to the same period in 2021 primarily driven by oxybate net product sales which increased 11% to $512.0 million in 3Q22 compared to the same period in 2021 and Epidiolex/Epidyolex net product sales which increased 22% to $196.2 million compared to the same period in 2021.
Oncology net product sales in 3Q22 increased 21% to $223.4 million compared to the same period in 2021 primarily driven by Rylaze net product sales which increased to $73.5 million in 3Q22 compared to the same period in 2021 following product launch in July 2021.
Changes in operating expenses in 3Q22 over the prior year period are primarily due to the following:
Cost of product sales decreased in 3Q22 compared to the same period in 2021, on a GAAP basis, primarily due to a lower acquisition accounting inventory fair value step-up expense in 3Q22, compared to 3Q21 and, on a non-GAAP adjusted basis, primarily due to product mix.
SG&A expenses decreased in 3Q22 compared to the same period in 2021, on a GAAP basis, primarily due to lower GW acquisition related transaction and integration expenses, offset by restructuring costs and costs related to program terminations. SG&A expenses in 3Q22, on a GAAP and non-GAAP adjusted basis, included lower marketing related expenses compared to 3Q21.
Research and development (R&D) expenses increased in 3Q22 compared to the same period in 2021, on a GAAP basis, primarily due to restructuring costs. R&D expenses in 3Q22, on a GAAP and non-GAAP adjusted basis, included lower clinical program expenses related to JZP458 (Rylaze) and solriamfetol related programs compared to 3Q21.
The impairment charge in 3Q22, on a GAAP basis, related to an acquired IPR&D asset impairment relating to the discontinuation of our nabiximols program.
Cash Flow and Balance Sheet
As of September 30, 2022, cash, cash equivalents and investments were $899.4 million, and the outstanding principal balance of the Company’s long-term debt was $5.8 billion compared to $6.4 billion as of December 31, 2021. In addition, the Company had undrawn borrowing capacity under a revolving credit facility of $500 million. For the nine months ended September 30, 2022, the Company generated $930.0 million of cash from operations. In 3Q22 the Company made a voluntary payment of $300.0 million on the Dollar Term Loan and in 1Q22 the Company repaid in full the $251.0 million remaining aggregate principal amount of the Euro Term Loan B.
2022 Financial Guidance
The Company has raised the mid-point of 2022 total revenue guidance to $3.65 billion driven by increases in the guidance mid-point for both our Neuroscience and Oncology therapeutic areas.
Conference Call Details
Jazz Pharmaceuticals will host an investor conference call and live audio webcast today at 4:30 p.m. ET (9:30 p.m. GMT) to provide a business and financial update and discuss its 2022 third quarter results.
Interested parties may register for the call in advance here or via the Investors section of the Jazz Pharmaceuticals website at www.jazzpharmaceuticals.com. To ensure a timely connection, it is recommended that participants register at least 15 minutes prior to the scheduled webcast.
A replay of the webcast will be available via the Investors section of the Jazz Pharmaceuticals website at www.jazzpharmaceuticals.com.