On May 10, 2023 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the first quarter of 2023, affirmed 2023 financial guidance and provided business updates (Press release, Jazz Pharmaceuticals, MAY 10, 2023, View Source [SID1234631380]).
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"This quarter, we once again delivered strong commercial results, advanced our efforts to unlock the tremendous potential of our pipeline and built on our record of driving operational excellence. On the commercial front, key products launched over the past several years are demonstrating impressive and durable performance with Xywav annualizing at more than $1 billion and our oncology therapeutic area approaching $1 billion in annual revenue, driven by Rylaze and Zepzelca. Adoption of low-sodium Xywav continues to grow across both narcolepsy and idiopathic hypersomnia (IH), and we expect Xywav to remain the oxybate of choice in 2023. We remain confident in the blockbuster potential of Epidiolex/Epidyolex and its significant additional growth opportunities, and we look forward to continued strong in-person engagement with customers globally," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "Our strong execution and robust pipeline position us well to achieve Vision 2025 and create meaningful value for our shareholders."
"Our enhanced pipeline is positioned to deliver at least three late-stage data readouts by the end of 2024, including JZP150 in post-traumatic stress disorder (PTSD), suvecaltamide in essential tremor (ET) and zanidatamab in first-line gastroesophageal adenocarcinoma (1L GEA)," said Rob Iannone, M.D., M.S.C.E., executive vice president, global head of research and development of Jazz Pharmaceuticals. "These late-stage trials are exploring new therapies with the potential to transform the lives of patients affected by diseases where substantial unmet medical need remains."
Key Highlights
•Continued confidence that low-sodium Xywav will remain the oxybate of choice in 2023; already annualizing at more than $1 billion.
•Epidiolex/Epidyolex continues to grow year-over-year with an expanding global prescriber base.
•Strong Rylaze demand drove net product sales of $85.9 million in 1Q23.
•Pipeline positioned to deliver at least three late-stage data readouts by the end of 2024, including JZP150 in PTSD, suvecaltamide in ET and zanidatamab in 1L GEA.
•The Company will host a KOL investor webcast to review the HERIZON-BTC-01 trial data, which will be presented at the 2023 ASCO (Free ASCO Whitepaper) Annual Meeting.
•1Q23 total revenues increased 10% to $892.8 million compared to 1Q22.
•On track to achieve full year revenue expectations; full year financial guidance affirmed.
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Business Updates
Key Commercial Products
Oxybate (Xywav and Xyrem):
•Total revenues for the combined oxybate business, including royalties from a high-sodium oxybate authorized generic (AG) in 1Q23, increased 6% to $458.0 million in 1Q23 compared to the same period in 2022.
•Average active Jazz oxybate patients on therapy was approximately 17,400 in 1Q23, an increase of 5% compared to the same period in 2022.
Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution:
•Xywav net product sales increased 49% to $277.8 million in 1Q23 compared to the same period in 2022.
•Xywav is the Company’s largest product by net product sales, annualizing at more than $1 billion, as a result of continued adoption in both narcolepsy and IH.
•There were approximately 11,050 active Xywav patients exiting 1Q23.
Xywav for Narcolepsy:
•There were approximately 9,050 narcolepsy patients taking Xywav exiting 1Q23.
•The benefits of reducing sodium intake resonate with patients and prescribers as the large majority of new-to-oxybate narcolepsy patients continue to be prescribed Xywav.
•FDA continues to recognize seven years of Orphan Drug Exclusivity (ODE), through July 2027, for Xywav in narcolepsy. FDA published its summary of clinical superiority findings stating that "Xywav is clinically superior to Xyrem by means of greater safety because Xywav provides a greatly reduced chronic sodium burden compared to Xyrem." Further, FDA stated that "the differences in the sodium content of the two products at the recommended doses will be clinically meaningful in reducing cardiovascular morbidity in a substantial proportion of patients for whom the drug is indicated." For clarity, the authorized generics of Xyrem contain the exact same drug product as branded Xyrem.
•FDA has also recognized that the difference in sodium content between Xywav and Lumryz is likely to be clinically meaningful in all patients with narcolepsy and that Xywav is safer than Lumryz in all such patients. Lumryz is a branded, fixed-dose, high-sodium oxybate that has the same sodium content as Xyrem.
•Xywav is the only approved oxybate therapy that does not carry a warning and precaution related to high sodium intake.
Xywav for Idiopathic Hypersomnia (IH):
•There were approximately 2,000 IH patients taking Xywav exiting 1Q23.
•Recent Jazz survey of sleep specialists indicates 70% anticipate increasing their prescribing of Xywav for IH over the next six months.
•Xywav is the first and only treatment approved by FDA to treat the full condition of IH.
•FDA recognized ODE for IH extending regulatory exclusivity to August 2028.
Xyrem (sodium oxybate) oral solution:
•Xyrem net product sales decreased 28% to $178.1 million in 1Q23 compared to the same period in 2022, reflecting the continued adoption of Xywav by patients with narcolepsy and the launch of a high-sodium oxybate AG in January 2023.
•Royalties from high-sodium oxybate AG were $2.1 million in 1Q23. Due to the royalty structures within the AG agreements, we expect the royalties from AG to be significantly higher in the second half of 2023 relative to the first half.
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Epidiolex/Epidyolex (cannabidiol):
•Epidiolex/Epidyolex net product sales increased 20% to $188.9 million in 1Q23 compared to the same period in 2022.
•A pivotal Phase 3 trial of Epidyolex for Dravet syndrome, Lennox-Gastaut syndrome and tuberous sclerosis complex in Japan is enrolling patients.
•Epidiolex/Epidyolex global prescriber base is increasing with multiple launches expected outside of the U.S. this year.
•Additional Epidiolex growth opportunities underscored by BECOME survey’s caregiver reported outcomes beyond seizure control, and compelling data for use of Epidiolex in combination with clobazam.
•Epidyolex is launched and reimbursed in all five key European markets: United Kingdom, Germany, Italy, Spain and France.
Rylaze (asparaginase erwinia chrysanthemi (recombinant)-rywn):
•Rylaze net product sales increased 58% to $85.9 million in 1Q23 compared to the same period in 2022.
•Continued strong demand for 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 submission to European Medicines Agency for a Monday/Wednesday/Friday dosing schedule and intramuscular and intravenous administration for JZP458 (approved as Rylaze in the U.S.) with potential for approval in 2023.
•The Company is also continuing to evaluate patient need in other geographies.
Zepzelca (lurbinectedin):
•Zepzelca net product sales increased 13% to $67.2 million in 1Q23 compared to the same period in 2022.
•Zepzelca is the treatment of choice in second-line (2L) small cell lung cancer (SCLC) setting.
•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 1L 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 expects complete enrollment in the trial by the end of 2023.
◦The Company’s partner, PharmaMar, is conducting the Phase 3 confirmatory trial, LAGOON, in 2L SCLC. If positive, this trial could confirm the benefit of Zepzelca in the treatment of SCLC when patients progress following 1L treatment with a platinum-based regimen.
Key Pipeline Highlights
Zanidatamab:
•Zanidatamab is a bispecific antibody that can simultaneously bind two non-overlapping epitopes of HER2, known as biparatopic binding. This unique design results in multiple mechanisms of action including dual HER2 signal blockade, increased binding and removal of HER2 protein from the cell surface, and potent effector function leading to encouraging antitumor activity in patients.
•Initial focus is in biliary tract cancers (BTC) and GEA with potential to transform the current standard of care in multiple HER2-expressing cancers.
•Positive top-line data from the pivotal HERIZON-BTC-01 clinical trial has the potential to support regulatory submissions for zanidatamab as a monotherapy in patients with previously treated HER2-amplifed and expressing BTC.
•Data from the HERIZON-BTC-01 clinical trial will be presented at the 2023 ASCO (Free ASCO Whitepaper) Annual Meeting on Friday, June 2, 2023; the Company will host an investor webcast with Dr. Shubham Pant, M.D.,
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MBBS, Professor in the Department of Gastrointestinal Medical Oncology with a joint appointment in the Department of the Investigational Cancer Therapeutics at The University of Texas MD Anderson Cancer Center, to review the BTC data.
•In January 2023, the Company and Zymeworks announced the first overall survival data of 84% at 18 months from a Phase 2 trial of zanidatamab in combination with chemotherapy in 1L patients with HER2-expressing metastatic GEA.
•The pivotal trial, HERIZON-GEA-01, evaluating zanidatamab in 1L GEA is ongoing and top-line data are expected in 2024.
JZP150:
•JZP150, a selective fatty acid amide hydrolase, or FAAH, inhibitor, is in clinical development for the potential treatment of PTSD.
•Patient enrollment is ongoing in a Phase 2 trial and top-line data readout is anticipated in late 2023.
•The Company received Fast Track Designation for JZP150 development in PTSD from FDA, underscoring the significant unmet medical needs of patients.
Suvecaltamide (JZP385):
•Suvecaltamide, a highly selective and state dependent modulator of T-type calcium channels, is in clinical development for the treatment of ET and Parkinson’s disease tremor.
•Patient enrollment is ongoing in the Phase 2b ET trial and top-line data readout is anticipated in 1H24.
•A Phase 2 trial in patients with Parkinson’s disease tremor is ongoing.
JZP441:
•JZP441, is a potent, highly selective oral orexin-2 receptor agonist designed to activate orexin signaling with the potential to be applicable in the treatment of narcolepsy, IH and other sleep disorders.
•A Phase 1 development program to evaluate safety, tolerability, pharmacokinetics and pharmacodynamics of JZP441 in sleep-deprived healthy volunteers is ongoing.
•The Company expects initial proof of concept in healthy volunteers in 2023.
JZP815:
•A Phase 1 trial evaluating JZP815 in patients with advanced or metastatic solid tumors with MAPK pathway alterations is ongoing.
•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.
JZP898:
•JZP898 is an engineered IFNα cytokine pro-drug that is activated specifically within the tumor microenvironment where it can stimulate IFNα receptors on cancer-fighting immune effector cells.
•The Company expects to file an Investigational New Drug (IND) application for JZP898 in the U.S. this year.
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Financial Highlights
Three Months Ended
March 31,
(In thousands, except per share amounts) 2023 2022
Total revenues $ 892,812 $ 813,721
GAAP net income $ 69,420 $ 1,647
Non-GAAP adjusted net income $ 285,261 $ 261,934
GAAP earnings per share $ 1.04 $ 0.03
Non-GAAP adjusted EPS $ 3.95 $ 3.73
GAAP net income for 1Q23 was $69.4 million, or $1.04 per diluted share, compared to $1.6 million, or $0.03 per diluted share, for 1Q22.
Non-GAAP adjusted net income for 1Q23 was $285.3 million, or $3.95 per diluted share, compared to $261.9 million, or $3.73 per diluted share, for 1Q22.
Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.
Total Revenues
Three Months Ended
March 31,
(In thousands) 2023 2022
Xywav $ 277,761 $ 186,080
Xyrem 178,130 247,497
Total Oxybate 455,891 433,577
Epidiolex/Epidyolex 188,909 157,893
Sativex 7,098 4,742
Sunosi1
— 15,878
Total Neuroscience 651,898 612,090
Rylaze 85,927 54,220
Zepzelca
67,181 59,338
Defitelio/defibrotide 39,079 49,489
Vyxeos 36,700 33,757
Total Oncology 228,887 196,804
Other 3,434 943
Product sales, net 884,219 809,837
High-sodium oxybate AG royalty revenue 2,096 —
Other royalty and contract revenues 6,497 3,884
Total revenues $ 892,812 $ 813,721
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(1)Divestiture of Sunosi U.S. was completed in May 2022.
Total revenues increased 10% in 1Q23 compared to the same period in 2022.
•Total neuroscience revenue, including high-sodium oxybate AG royalty revenue, was $654.0 million in 1Q23 compared to $612.1 million in 1Q22. Neuroscience net product sales in 1Q23 increased 7% to $651.9 million compared to the same period in 2022 primarily driven by increased Xywav and Epidiolex/Epidyolex net product sales, partially offset by the decline in Xyrem revenues, reflecting the continued strong adoption of Xywav by patients with narcolepsy and the launch of a high-sodium oxybate AG in January 2023. High-sodium oxybate AG royalty
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revenue relates to royalty revenue received from Hikma Pharmaceuticals plc on net sales of a high-sodium oxybate AG product.
•Oncology net product sales in 1Q23 increased 16% to $228.9 million compared to the same period in 2022 primarily driven by the continued growth in Rylaze product sales, which increased 58% to $86.0 million.
Operating Expenses and Effective Tax Rate
Three Months Ended
March 31,
(In thousands, except percentages) 2023 2022
GAAP:
Cost of product sales $ 128,644 $ 115,284
Gross margin 85.5% 85.8%
Selling, general and administrative $ 297,917 $ 308,813
% of total revenues 33.4% 38.0%
Research and development $ 189,410 $ 129,981
% of total revenues 21.2% 16.0%
Income tax expense (benefit)1
$ (15,324) $ 536
Effective tax rate 1
(27.8)% 8.5%
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1. The GAAP income tax benefit for 1Q23 increased as a result of the mix of pre-tax income and losses across tax jurisdictions, and increases in our patent box and foreign derived intangible income benefits.
Three Months Ended
March 31,
(In thousands, except percentages) 2023 2022
Non-GAAP adjusted:
Cost of product sales $ 64,728 $ 48,206
Gross margin 92.7% 94.0%
Selling, general and administrative $ 260,515 $ 258,701
% of total revenues 29.2% 31.8%
Research and development $ 173,918 $ 116,459
% of total revenues 19.5% 14.3%
Income tax expense $ 40,197 $ 55,223
Effective tax rate 12.3% 17.2%
Changes in operating expenses in 1Q23 over the prior year period are primarily due to the following:
•Cost of product sales increased in 1Q23 compared to the same period in 2022, on a GAAP and on a non-GAAP adjusted basis, primarily due to changes in product mix.
•Selling, general and administrative (SG&A) expenses, on a GAAP basis, decreased in 1Q23 compared to the same period in 2022 primarily due to transaction and integration expenses related to the acquisition of GW Pharmaceuticals plc (GW) and Sunosi (solriamfetol) related spend incurred in 1Q22, partially offset by increased investment in our priority programs. SG&A expenses, on a non-GAAP adjusted basis, were in line with the same period in 2022.
•Research and development (R&D) expenses increased in 1Q23 compared to the same period in 2022, on a GAAP and on a non-GAAP adjusted basis, primarily due to the inclusion of costs related to clinical programs for zanidatamab, as well as JZP815, JZP898 and JZP441, offset by a decrease in costs related to JZP458.
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Cash Flow and Balance Sheet
As of March 31, 2023, cash and cash equivalents were $1.2 billion, and the outstanding principal balance of the Company’s long-term debt was $5.8 billion. In addition, the Company had undrawn borrowing capacity under a revolving credit facility of $500 million. For the three months ended March 31, 2023, the Company generated $320.7 million of cash from operations which is an increase of $111.7 million as compared to the same period in 2022, reflecting strong business performance and continued financial discipline.
2023 Financial Guidance
The Company is affirming its full year 2023 financial guidance as follows:
(In millions) Guidance
Revenues $3,675 – $3,875
–Neuroscience (includes royalties from high-sodium oxybate AG)
$2,675 – $2,825
–Oncology $950 – $1,050
(In millions, except per share amounts and percentages) GAAP Non-GAAP
Gross margin % 89%
93%1,6
SG&A expenses $1,197 – $1,277
$1,045 – $1,1052,6
SG&A expenses as % of total revenues 31% – 35% 27% – 30%
R&D expenses $739 – $797
$675 – $7253,6
R&D expenses as % of total revenues 19% – 22% 17% – 20%
Effective tax rate (32)% – (8)%
9% – 11%4,6
Net income $410 – $560
$1,240 – $1,3106
Net income per diluted share5
$5.90 – $7.90
$16.90 – $17.856
Weighted-average ordinary shares used in per share calculations5
75 75
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1.Excludes $135-$155 million of amortization of acquisition-related inventory fair value step-up and $14-$16 million of share-based compensation expense.
2.Excludes $152-$172 million of share-based compensation expense.
3.Excludes $64-$72 million of share-based compensation expense.
4.Excludes 41%-19% from the GAAP effective tax rate of (32%)-(8%) relating to the income tax effect of adjustments between GAAP net income and non-GAAP adjusted net income, resulting in a non-GAAP adjusted effective tax rate of 9%-11%.
5.Diluted EPS calculations for 2023 include 9 million shares related to the assumed conversion of the Exchangeable Senior Notes and the associated interest expense add-back to net income of $28 million and $25 million, on a GAAP and on a non-GAAP adjusted basis, respectively, under the "if converted" method.
6.See "Non-GAAP Financial Measures" below. Reconciliations of non-GAAP adjusted guidance measures are included above and, in the table titled "Reconciliation of GAAP to non-GAAP Adjusted 2023 Net Income Guidance" at the end of this press release.
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. IST) to provide a business and financial update and discuss its 2023 first 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.