Jazz Pharmaceuticals plc (NASDAQ:JAZZ) Q4 2023 Earnings Call Transcript
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) Q4 2023 Earnings Call Transcript February 28, 2024
Jazz Pharmaceuticals plc misses on earnings expectations. Reported EPS is $5.02 EPS, expectations were $5.26. Jazz Pharmaceuticals plc isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, ladies and gentlemen. My name is Abby and I'll be your conference operator today. At this time, I would like to welcome everyone to the Jazz Pharmaceuticals Fourth Quarter 2023 Earnings Conference Call. Today’s conference is being recorded and all lines have been placed on mute to prevent any background noise. [Operator Instructions]. Thank you. And I’ll now turn the conference over to Andrea Flynn, Head of Investor Relations. Ms. Flynn, you may begin.
Andrea Flynn: Thank you, operator, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its fourth quarter and fully year 2023 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 Cozadd, Chairman and Chief Executive Officer; Renee Gala, President and Chief Operating Officer; and Rob Iannone, Executive Vice President, Global Head of R&D; On Slide 2, 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 read on slide 3, we'll 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 Investors section of our website. I'll now turn the call over to Bruce.
Bruce Cozadd: Thanks, Andrea. Good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and full year 2023 results and our excitement about 2024. I'll start on slide 5. 2023 was a highly productive year for Jazz. Thanks to the passion and innovation of our talented employees around the world, we helped more patients generate more than $3.8 billion in revenues and advanced multiple pipeline programs. We believe these accomplishments position us well for success in 2024 as we focus on commercial execution and accelerating top line growth, delivering on key pipeline catalysts, and remaining active in assessing corporate development opportunities to drive growth and value creation. Before we move on, I want to highlight our announcement from last week that Philip Johnson is joining Jazz as our Chief Financial Officer effective March 1st.
Phil comes to Jazz from Eli Lilly, where over the course of almost three decades, he led several finance functions and was most recently Group Vice President of Finance and Treasurer. As we move into 2024, we are excited to add Phil's industry experience, leadership, and strategic approach to our executive team. Turning to slide 6, our performance in 2023 is reflective of the strong execution that's transformed our business over the past several years. Highlighting a few commercial accomplishments in 2023, combined revenue from our key growth drivers, Xywav, Epidiolex, and Rylaze increased 27% year-over-year. We drove more than $1.9 billion in revenue from our sleep therapeutic area, reinforcing our confidence in its durability. Epidiolex continues to grow, reflecting strong underlying demand and the execution by our commercial team.
Epidiolex is now annualizing at more than $900 million and on track to deliver on its blockbuster potential. Our oncology therapeutic area surpassed $1 billion in revenue for the year, with Rylaze leading the way with 40% year-over-year. Moving to our R&D and pipeline efforts, we have multiple near-term, late-stage catalysts targeting significant market opportunities. Given the strength of clinical data to date across multiple indications. We've used any data map as our most derisk asset with more than a $2 billion peak potential. On the operational front, our discipline capital allocation provides the financial strength to invest in our continued growth and diversification while generating healthy operating cash flow and margins. We have a strong track record of successful corporate development and remain focused on evaluating additional transactions.
Turning to slide 7, we made progress toward Vision 2025 based on our strong performance in 2023. On the commercial side, we've executed successful launches with leading therapies in narcolepsy and epilepsy and a growing oncology portfolio. Our investments in R&D have expanded our capabilities and the breadth and depth of our pipeline. And on operational excellence, discipline capital allocation has put us in a strong financial position. and we continue to be mindful of making investments with the most impact to drive meaningful shareholder value. I'll now turn the call over to Renee to review our commercial performance, after which Rob will share an update on our R&D progress. I'll provide a financial overview, and then we'll open the call to Q &A.
Renee?
Renee Gala : Thanks, Bruce. We had a strong fourth quarter, generating quarterly revenue of more than a $1 billion for the first time. This capped off a successful 2023, in which we achieved year-over-year double-digit growth across each of our key products, Xywav, Epidiolex, and Rylaze. I'll start on slide 9 with our sleep therapeutic area. Total revenue from sleep, which includes Xywav and Xyrem sales, plus royalties from high-sodium oxybate authorized generics, or AGs, was $483 million in the fourth quarter of 2023, and exceeded $1.9 billion for the full year. We believe we are well positioned to achieve our Vision 2025 goal of $2 billion in sleep revenue. Xywav revenue was $337 million for the fourth quarter of 2023, and approximately $1.3 billion for the full year 2023, which represented year-over-year annual growth of 33%.
We have increasing visibility into oxybate market dynamics since the entry of branded and AG high-sodium oxybate in 2023. We remain confident in the durability of our sleep therapeutic area, and Xywav in particular as the only low-sodium oxybate and the only therapy approved to treat idiopathic hypersomnia, or IH, we expect Xywav to remain the oxybate choice, including the number-one treatment for narcolepsy. Exiting 2023, there were approximately 9, 525 narcolepsy patients taking Xywav. Our focus is on educating patients and prescribers around the lifelong burden of high sodium intake for narcolepsy patients. Based on positive feedback from the field about the benefits of reducing sodium intake, we believe that the majority of patients and healthcare providers will continue to prioritize long-term health when evaluating oxybate therapy.
Looking at IH, annual revenue from this indication doubled from 2022 to 2023, and we continue to view IH as a source of sustained growth for Xywav. Exiting 2023, there were approximately 2, 775 active IH patients on Xywav. Given our confidence that the IH indication represents a durable growth opportunity for Xywav, we are continuing to invest in further building this market. We have expanded our salesforce, adding field personnel who are focused on IH with the primary directive to increase the depth and breadth of IH prescribers. Turning to slide 10, we drove another quarter of Epidiolex growth with net product sales of approximately $241 million in the fourth quarter, representing a 16% increase compared to the same quarter in 2022. For the full year 2023, Epidiolex revenue was $845.5 million, up 15% year-over-year, driven by underlying demand and geographic expansion.
We remain confident in the long-term growth prospects and blockbuster potential of Epidiolex which is now annualizing at more than $900 million in revenue. Key drivers of this demand growth in the U.S. include positive responses to data on the benefits of Epidiolex beyond seizure control, such as language and communication, cognition, executive function, and emotional and social function, as well as increased penetration in the adult patient setting. Further opportunities for growth include continued education to support optimal dosing, focused data generation, and geographic expansion beyond the more than 35 countries where Epidiolex is approved, with additional launches and market reimbursement expected in 2024. Moving to oncology, slide 11 highlights the strong performance of Rylaze in 2023, which contributed to our total oncology business exceeding a $1 billion in annual revenue for the first time.
Rylaze delivered net product sales of approximately $102 million for the fourth quarter of 2023 and approximately $394 million for the full year representing 26% and 40% year-over-year increases in those periods, respectively. A number of factors are contributing to continued strong demand for Rylaze. Rylaze has been almost universally adopted in pediatric asparaginase-based oncology protocols in the U.S., and we continue to see strong adoption of the new Monday, Wednesday, Friday dosing regimen. We are also seeing increased usage of Rylaze in ALL patients due to some of the benefits of its short-acting profile relative to current first -line asparaginase therapies, including switches from these first-line therapies due to tolerability concerns and side effects.
In addition, we have an opportunity for continued growth with increasing use of Rylaze in the treatment of adolescents and young adults, or the AYA market. Turning to slide 12 in Zepzelca, Net product sales for the fourth quarter increased 3% year-over-year to $74 million. For the full year 2023, net product sales were $289.5 million, up 7% year-over-year. We have established Zepzelca as the number one treatment for second-line small cell lung cancer patients, and we continue to hear positive feedback from healthcare providers on its clinical benefit and ease of use and administration for patients and their healthcare practices. Since its launch, Zepzelca has generated almost $900 million in revenue, and is proving to be a highly accretive and well-executed corporate development transaction.
In addition to the second-line setting, there remains an unmet need for patients in earlier lines of therapy. The ongoing Phase III trial in first-line small cell lung cancer provides a further opportunity to improve patient lives and outcomes, as well as drive future growth. With that, I'll turn it over to Rob for an update on our pipeline and upcoming milestones.
Rob Iannone : Thanks, Renee. 2024 represents an exciting time for us on the R&D front. And we anticipate multiple and meaningful catalysts across oncology and neuroscience. On slide 14, we've provided an overview of the key clinical programs in our diversified pipeline. And I'll highlight several milestones we expect to reach in the near term. Starting with oncology and zanidatamab, we anticipate completing our rolling BLA submission for accelerated approval of zanidatamab in second line biliary tract cancer, or BTC, in the first half of this year. And I'm excited to report that we recently initiated our first line BTC trial. Additionally, we are targeting late this year to report top line data from the ongoing Phase III first line gastroesophageal adenocarcinoma, or GEA trial.
If positive, we expect this trial would support a registration. I'll speak more to our zanidatamab development plan in just a moment. We're also pleased with the progress of the Zepzelca first line trial, which completed enrollment in January of this year. Top line progression-free survival data for Zepzelca in combination with Tecentriq and first line extensive stage small cell lung cancer is expected at the end of 2024 or early 2025. If approved, this indication would enable more patients with small cell lung cancer to potentially benefit from longer duration of therapy with Zepzelca. Turning to neuroscience, we expect top line data from our Phase three III trial of Epidyolex in Japan in the second half of 2024. We also have ongoing trials for Suvecaltamide or JZP385 to both essential tremor and Parkinson's disease tremor with top line data from the ET trial expected late in the first half of 2024.
If trial findings are positive, we believe this trial could serve as part of a pivotal regulatory package. Slide 15 provides more detail on our development plan for zanidatamab. We have meaningfully progressed zanidatamab development across indications since bringing it to Jazz last year. And based on the totality of the data, we are highly confident in this molecule as a differentiated therapy for HER2-Expressing Cancers. I'll note that we are hosting an R&D day on March 19th that will focus exclusively on zanidatamab, including perspectives from GEA and breast cancer KOLs. Zanidatamab has shown compelling activity across a broad range of HER2-positive tumors, and our development plan represents a robust investigation of this molecule in multiple tumor types, as outlined on this slide.
In addition to our BTC and GEA programs, we see meaningful opportunity for zanidatamab to improve care for early and late-stage breast cancer patients. Slide 16 highlights one of the most critical factors contributing to our enthusiasm around zanidatamab. Specifically, the data generated to date has demonstrated zanidatamab activity as monotherapy, in combination with other agents, in patients previously treated with other HER2 agents, and results in durable responses with encouraging progression-free survival and overall survival data. Our development strategy for zanidatamab starts with BTC, an area of high unmet patient needs where there are currently no approved HER2 therapies. We believe coming to market in BTC will enable a fast-to-market strategy where we can leverage supplemental BLA findings and other indications.
GEA is the next potential indication to follow BTC, and we believe a prior approval in BTC may accelerate adoption into GEA treatment guidelines and protocols. Following discussions with FDA, we have elected to increase the enrollment target for the GEA trial to improve statistical power for the overall survival endpoint. This will not impact the timeline to potential approval, which is still based on PFS from the original patient enrollment target. We remain committed to rapidly advancing and expanding our development for a molecule that has the potential to transform the current standard of care in multiple HER2-positive cancers. Now I will turn the call over to Bruce for a financial update. Bruce?
Bruce Cozadd: Thanks, Rob. I'll start with our top line results on slide 18. As a reminder, our full financial results are available in our press release and 10-K. In the fourth quarter of 2023, we achieved more than $1 billion in total revenues. And for full year 2023, we recorded more than $3.8 billion in total revenues, representing 5% growth over full year 2022. We were pleased to deliver growth, despite headwinds from the introduction of both branded and AG high sodium oxybate competition, with our full year results driven by continued growth in both neuroscience and oncology, including double digit growth from each of our three key growth drivers. Turning to slide 19, our full year 2023 non-GAAP adjusted net income was approximately $1.3 billion and we reported non-GAAP adjusted EPS of $18.29.
We continue to generate significant cash from our business, demonstrating the strength and diversity of our global portfolio. We recorded approximately $1.1 billion of cash from operations for the full year 2023 and ended the year with $1.6 billion in cash on hand. Our strong overall financial position and operating cash flows mean we have significant flexibility to invest in priority commercial and R&D programs, as well as corporate development opportunities. We are pleased to share our full year financial guidance for 2024, beginning on slide 20. Our 2024 total revenue guidance range of $4 billion to $4.2 billion represents 7% year-over-year top line growth at the midpoint. We expect double digit percentage revenue growth of Xywav, Epidiolex and Rylaze combined to drive total revenue growth this year.
Our 2024 neuroscience revenue guidance of $2.8 billion to $2.95 billion reflects the expected growth of Xywav and IH and Epidiolex offset by the expected decline in Xyrem. I'll note this guidance is inclusive of AG royalties, which we expect to exceed $200 million in 2024. Our 2024 oncology revenue guidance range of $1.12 billion to $1.22 billion reflects expectations of continued double-digit growth for this therapeutic area. I'd like to draw your attention to several items on slide 21. With regard to operating expenses, our SG&A guidance range is $1.17 billion to $1.23 billion. The expected increase in SG&A in 2024 over 2023 will largely be a result of continued investments and our key growth drivers, including Xywav IH initiatives, commercial support for Epidiolex in the U.S., where we know the market is promotionally sensitive, geographic expansion of Epidiolex outside the U.S., and educational efforts for Rylaze in AYA.
Our R&D guidance range of $800 million to $850 million represents an increase of 5% at the midpoint compared to 2023, driven by planned continued investment in our robust zanidatamab development program. Both SG&A and R&D guidance at the midpoint represent the same percentages of total revenue compared to 2023. On the bottom line, we expect adjusted net income in 2024 to be in line with 2023 with a guidance range of $1.275 billion to $1.35 billion. This reflects anticipated investments in our commercial growth drivers and pipeline enabled by top line growth and disciplined and strategic capital allocation. I'll conclude our prepared remarks on slide 23. In 2023, we deliver on our neuroscience, oncology, and total revenue guidance. On the commercial side, our 2023 performance was driven by combined double-digit growth of key products, Xywav, Epidiolex, and Rylaze.
On a combined basis, we expect these to grow by double digits again in 2024. This is a very exciting time for Jazz on the R&D front as we continue to advance our pipeline and invest in long-term growth with multiple catalysts expected in the near term. As always, we remain focused on operational excellence and strategic capital allocation with corporate development remaining an opportunity for additional growth and diversification. In summary, we are poised to deliver top line growth and multiple pipeline catalysts in 2024 and longer term, with our expanding product portfolio, R&D progress, and focus on operational excellence, we believe we are well positioned to achieve Vision 2025 and deliver further diversification, sustainable growth, and enhanced value to patients and shareholders.
That concludes our prepared remarks. I would now like to turn the call over to the operator to open the line for Q&A.
Operator: [Operator Instructions] And we will take our first question from Jessica Fye with JP Morgan.
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