Jazz Pharmaceuticals plc

Thank you for standing by. My name is Mandeep and I'll be your operator today. At this time, I'd like to welcome everyone to the Jazz Pharmaceuticals 2024 second quarter earnings call. All wants to be placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Andrea Flynn, Vice President and Head of Investor Relations. You may begin.

Thank you, Operator, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its second quarter 2024 financial results. The slide presentation accompanying this webcast is available on the Investors section of our website. Investors may also refer to the press release we issued earlier today which is also posted to our website. On the call today are Bruce Kozad, Chairman and Chief Executive Officer, Renee Galah, President and Chief Operating Officer, Rob Unone, Executive Vice President, Global Head of R&D, and Phil Johnson, Chief Financial Officer. On slide two, I'd like to remind you that today's webcast includes forward-looking statements, such as those related to our future financial and operating results, growth potential, and anticipated development and commercialization milestones and goals. which involve risks and uncertainties that could cause actual events, performance, and results to differ materially from those contained in these forward-looking statements. We encourage you to review the statements contained in today's press release in our slide deck and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company's actual events, performance, and results to differ materially from those contained in the forward-looking statements made on today's webcast. We undertake no duty or obligation to update our forward-looking statements. As noted on slide three, we will discuss non-GAAP financial measures on this webcast. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release and the slide presentation available on the investor section of our website. I'll now turn the call over to Bruce.

Thanks, Andrea. Good afternoon, everyone, and thank you for joining us today. I'll open with a brief overview of the second quarter and then move to an update on our view of the business moving forward. Beginning with the results for the second quarter on slide five, our strong commercial performance generated our largest revenue quarter ever, with more than $1 billion in total revenues across our growing and diversified portfolio of medicines. Looking at our neuroscience therapeutic area, ZyWave remains the oxidative choice. and its durability is underscored by a 13% increase in net product sales compared to the same quarter in 2023. In narcolepsy, we see strong patient demand, and ZyWave remains the number one treatment. For idiopathic hypersomnia, or IH, ZyWave remains the first and only approved therapy for this condition, and we are continuing to build the market. Closing in on its sixth year of availability, Epidiolex continues to grow. with sales reaching approximately $247 million in the quarter, reinforcing our belief in its blockbuster potential. Patient demand is being driven by multiple U.S. commercial initiatives, which Renee will cover in more detail, and we're pleased with our progress on market expansion outside the U.S. Our oncology therapeutic area continues to perform well, and I'll highlight that Zeb Zelka had a particularly strong quarter. With Rylase, we continue to see high utilization in the pediatric population, while adoption in the adolescent and young adult market is proceeding a bit more slowly than anticipated. Moving to our R&D and pipeline efforts, we are expecting data readouts from late-stage and de-risk programs within the next several quarters, including for Sanidatamab and first-line gastroesophageal cancer, or GEA, Epidiolex in Japan, and Zepzelka and Firstline small cell lung cancer, each of which represents a potentially meaningful value inflection point. On the operational front, we continue to generate strong top-line growth and cash flow during the second quarter. This ongoing financial and operational strength is a result of our focus on maintaining disciplined capital allocation and investing in opportunities that we believe have a clear value proposition and return on investment. Later in the call, Phil will provide an overview of our updated guidance, which was also outlined in today's press release. Turning to slide six, I want to comment on Vision 2025, why we rolled it out, the progress we've made, and how we'll handle 2025 going forward. In 2021, investors expressed significant concerns about the future of our business, given looming Oxibate competition. We saw a brighter future. where we could drive substantial growth in our business while diversifying away from Zyro. In early 22, we introduced Vision 2025 to communicate that. We expected our Oxivate franchise to grow through the entry of generics, as well as branded competition, driven by Zywave and both narcolepsy and IH. We saw potential for Epidiolex to become a blockbuster product. We expected substantial growth in our oncology business. We would use corporate development to augment our pipeline and future growth prospects, and we saw opportunities to increase operating margin as our business scaled. Turning to slide seven, how have we delivered against those priorities? Comparing our 2021 revenue to our 2024 revenue guidance, our overall revenue is projected to grow from $3.1 billion in 2021 to $4 to $4.1 billion in 2024. We have grown our total OXA Bay revenue to approximately $1.9 billion over the past four quarters, which is higher than it was in 2021, with ZyWave having grown from $535 million to approximately $1.35 billion. In the last four quarters, Epidiolex revenue was approximately $920 million, including approximately $247 million in the second quarter. and we're confident in achieving blockbuster status. And our oncology business has already achieved blockbuster status, generating nearly $1.1 million in revenue in the last year, up from roughly $734 million for the full year of 2021. In terms of diversification, this quarter's IRM, including AG royalties, represented approximately 11% of our total revenue. down from 41% in 2021. On the corporate development front, Zany Datamap was not part of Jazz's pipeline when we rolled out Vision 2025. While it won't contribute $500 million to revenue in 2025, over the long term, we believe it has the potential to provide much more revenue and value than other corporate development deals we could have done that offered more near-term revenue but less peak revenue and durability. In terms of operating margins, they will vary with where we are in the product lifecycle across our portfolio. You should expect margins to be lower when we're investing in late-stage clinical development of promising assets and when we're making early commercial investments to drive uptake. And you should expect them to move higher as revenues scale post-launch, as we experienced in 2022. We'll continue to use a mid- to long-term framework to ensure we allocate capital to maximize benefit for patients and value for JAS, not just maximize near-term margins. Continuing to slide eight, Vision 2025 provided a useful roadmap externally and internally. However, it's become clear in our conversations with investors that is no longer the case, and it is creating too much focus on one single year in our future including whether or not we'll manage our business for long-term value or to achieve near-term metrics. So, we are no longer providing the Vision 2025 metrics, and we'll revert to how we managed and communicated with you about our guidance pre-Vision 2025. We will provide our 2025 guidance on our fourth quarter 24 earnings call, which will reflect our expectations on key developments and advancements across our business. Our commercial, R&D, corporate development, and operational excellence priorities remain unchanged. Specifically, achieving commercial excellence to drive growing and diversified revenues, reaching more patients and creating value.