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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Q&A Session

Jessica Fye: Hey there. Good afternoon. Thanks for taking my question. We’re seeing worries about Xywav’s position in narcolepsy, despite what looks like sleep neuro guidance, slightly ahead of consensus. Can you talk about what you’re seeing competitively in narcolepsy right now, and maybe set expectations for what you think the outlook is for Xywav in that setting? Thank you.

Bruce Cozadd: Yes, hi, Jess. Thanks for the question. Renee, maybe I’ll turn that one over to you.

Renee Gala : Sure, yes, happy to comment. Thanks, Jess. So at a high level, as we look at Xywav for 2024, as we noted on the call, we do expect it to be an important growth driver, one of three, as we look at where we expect growth on the top line across the year. We do see Xywav continuing to resonate as a differentiated therapy, as the only low. sodium oxybate, the number one treatment of narcolepsy, and then, of course, the only drug approved for IH. What we’re seeing in terms of the market is we are seeing the majority of new to oxybate patients starting on Xywav. We do believe it will remain the oxybate of choice. And that said, as we’re looking at Q4, as we’ve said, we do expect some patients to try Lumryz given there are now many more patients on Xywav than Xyrem, naturally, we would expect some impact there.

So, as we look at exiting the fourth quarter, we had more than 9, 500 narcolepsy patients ending the year. Keep in mind also that our patient number is a net number, so it reflects the adds from the quarter less in a discontinuation that we had. Also, in the fourth quarter, we did see an increase in our non-revenue bottles as we continue to refine our patient support services program. We are seeing an increase in programs that essentially seek to take advantage of our affordability programs, this increase with seasonal, and we don’t expect it to continue given how we’re refining those programs. And then finally, keep in mind within the fourth quarter, as we continue to add new patients in both IH and narcolepsy, those patients need to titrate, so the revenue is lower upon starting, meaning that a patient that is starting therapy may not be as valuable upon starting therapy as a patient that’s discontinuing.

And then I’ll just say that as we look forward, we do believe that every high sodium patient is a potential Xywav patient. In particular, as we see decreasing commercial coverage for Xyrem, we expect those patients to shift therapy, either to authorize generics, which of course we receive a significant royalty on, or to fix that high sodium branded therapy, or importantly to Xywav, which will be an additional driver of growth in 2024 for narcolepsy, with probably more of our growth coming from an idiopathic hypersomnia.

Operator: And we will take our next question from Marc Goodman with Leerink Partners.

Marc Goodman: Yes, can you give us a little color just on the oncology portfolio? I mean, you have products, Defitelio, Vyxeos, Zepzelca, Erwinia I’m sorry, Rylaze, I still say that, Bruce, I apologize. Any color you can give us just on the quarters, I mean, Defitelio and Vyxeos is obviously much higher than expected. The other two products flattish quarter-to-quarter, so anything you can provide would be helpful. Thanks.

Bruce Cozadd: Yes, Marc, you’re not the only one that occasionally refers to a prior product name. I’ll say for some of our products, we do see significant quarter-to-quarter variability, particularly in the sort of very rare diseases. This has been true of Defitelio for years, so I wouldn’t read too much in on the Defitelio, Vyxeos side. We’ve been more focused on the growth in Zepzelca, but particularly on our strong performance with Rylaze, and maybe I’ll turn it over to Renee to comment a little bit on Rylaze.

Renee Gala : Yes, thanks, Bruce, and thanks for the question, Marc. I would say certainly echoing the variability with respect to Rylaze in particular, we did see some seasonality at the end of the fourth quarter going into the holidays. This is a relatively small market in terms of the rare population here with respect to the use that we see in Rylaze. Importantly, we do see Rylaze as a growth driver in 2024. Just a reminder, due to supply constraints with Erwinia, we were never really able to fully understand the market potential for that product, but we’re continuing to see strong demand overall in the fourth quarter, and we also began a rolling launch in Europe late in the year. That is not an area, as we think about Europe, that we expect to see a strong contributor to growth in 2024, but we’re pleased we were able to get that underway.

And then with respect to Zepzelca, we’ve established this as the number one treatment for second line small cell lung cancer, and we do see future growth opportunity in first line as we look at reading out that study either late this year or early the next year. We continue to hear positive feedback from HCPs on the clinical benefit, the ease of use as I mentioned and seeing additional use there but we do as Bruce said have some variability quarter- to-quarter in that area as well.

Operator: And we will take our next question from Jason Gerberry with Bank of America.

Jason Gerberry: Hi, good evening. Thanks for taking my question. My question just how you foresee with zani the frontline GEA differentiating in the PD-1 negative subpopulation if you aren’t stratifying patients on the basis of PD -1 status. So is the thought here that as long as that subpopulation doesn’t produce a discordant result versus the all comer group that that should facilitate a broader label than Merck secured with this KEYNOTE-811 regimen. Just kind of wondering how you can kind of paint that picture. Thanks.

Bruce Cozadd: Thanks, Jason for the question. Rob, you want to weigh in on that?

Rob Iannone : Yes, the PD -1 biomarker wouldn’t have any predictive value for zanidatamab or any other HER2 therapies. But we think we can clearly define a benefit in the PD -1 positive or negative subgroups. Of course, we have two experimental arms. Part one where zani is combined with standard of care chemo. And we also have an arm where we add PD-1 antagonists to that atezolizumab from BeiGene. And so we have an opportunity to address both the PD-1 negative group where the standard of care continues to be Herceptin chemo and the PD-1 positive group where PD-1s have been shown to benefit patients. And we think in that segment we have the superior HER2 drug. We don’t think that there will be a differential based on which PD-1 is used.

Operator: And we will take our next question from Ami Fadia with Needham & Company.

Ami Fadia: Hi, good afternoon. Thanks for taking my question. Going back to the Oxybate market, can you talk about the market dynamics here, particularly with the entry of Lumryz? How has that impacted the total number of patients on oxybate? Do you believe that they are expanding the market or predominantly taking share? And how do you envision that evolving in 2024 in your guidance? And maybe just related to that, in IH, can you elaborate on where the increased salesforce will focus on to drive additional prescribing debt? Thanks.

Bruce Cozadd: Thanks Ami, for those questions. Renee, I’ll turn that one over to you.

Renee Gala : Sure, yes, and thank you, Ami. With respect to what we’re seeing in narcolepsy, as I’d mentioned, new to oxybate patients today, we see the vast majority of those starting on Xywav. Now based on as we look at 2024 for example, we expect to see a continued decline of Xyrem. We said we expect AG royalties to exceed $200 million and we expect to see Xywav as an important growth driver. But that growth will likely be greater in IH versus narcolepsy as I mentioned before, but the narcolepsy business is very important to us. As we think about what’s happening in terms of narcolepsy, given that there are fewer patients that are on Xyrem today versus what are on Xywav, it would be natural to expect some impact to Xywav from patients starting on branded fixed-dose high sodium Lumryz.

We do continue though, to see as we look forward this opportunity for some growth within narcolepsy related to some market expansion. I think there’s very little of that that we’re seeing right now and just given if you are looking at on market opportunity it would be much easier to go after patients that are already experienced on oxybate. Now with respect to IH, as we look at what’s happening with that market, we continue to see an opportunity to continue to educate on the entire condition of IH and the benefit of restorative sleep in terms of the improvement on that overall condition. We are looking at opportunities where we have both experienced oxybate prescribers but those who are not currently doing it a lot of prescribing for IH as well as broader opportunities to focus on prescribers that are less familiar with oxybate in general but have a number of patients within their practice on IH.

Operator: And we will take our next question from Ashish Verma with UBS.

Ashish Verma: Hi, thanks for taking my question. So I wanted to just like get your latest thoughts on what you’re thinking about bridging to 2025 vision of $5 billion in sales. Do you think you need the development to get there? And is it possible that you could reconsider the target metrics for 2025 at some point? And then second question, so for Zepzelca on competitive front, there is a drug from Amgen, Tarlatamab, if you can comment on how do you think the small cell lung cancer space might evolve? Thanks.

Bruce Cozadd: Thanks. Yes, Ash, thanks for the questions. On the Vision 2025 target for revenue specifically, we had identified that as we came into 2022 as coming about $2 billion from oxybate. And I’ll remind you that we had excellent progress with Xywav in particular in 2023, and we continue to expect additional growth in 2024. Last year, we had over $1.9 billion as we moved toward the $2 billion target. Epidiolex, we said, would be a blockbuster product north of $1 billion in revenue. We’re currently annualizing based on the last quarter at over $900 million and still showing this growth both in the US and outside the US with Epidiolex. So we believe we’re solidly on track for that. And we also said our oncology business would contribute north of a $1 billion in 2025, Epidiolex and oncology together contributing $2.5 billion.

And we’re very pleased obviously to see our oncology business grow to more than a $1 billion in 2023. And we’ve again, projected nice growth of that business, as you can see from our guidance for 2024. So for the organic piece, $4.5 billion, we feel that we are on track for Vision 2025. We of course did include a placeholder of $500 million in 2025 revenues that could come from corporate development transactions done after we announced Vision 2025. Of course, that could include some revenue contributions from zanidatamab where we said we’ll finish our rolling ELA submission in the first half of this year. And we’re projecting that launch come in 2025 or sooner. We’re not suggesting that would make up all of that $500 million in 2025. But we are in strong financial position with our cash and our cash flow to be active on the corporate development side.

And we continue to review targets that would make interesting additions to our business. I’ll point out we’re not going to do a deal just to do a deal. We’re going to do a deal if it’s a good use of our capital, it furthers our strategy as an additional growth driver and provides sustainability over not just 2025, but as we look through the period 2025 to 2030. So long answer asked to a short question, but we’re making excellent progress toward Vision 2025. And on the Zepzelca side, maybe Rob, I’ll turn that one over to you.

Rob Iannone : Happy to, Bruce. As Tarlatamab is a very different mechanism of action than Zepzelca. The data that will support, that have supported a BLA are in the third line versus Zepzelca in the second line. And the safety profile for Tarlatamab is really quite different with a high risk of CRS and serious CRS, even in including neurological effects. And that safety profile may well be a significant challenge, especially for community practitioners where many small cell lung cancer patients are treated. In contrast, Zepzelca has a very favorable safety profile, can be easily given as an infusion once every three weeks. And that really makes it an ideal candidate for add-on therapy in the frontline setting. And as in partner with Genentech, we are running a frontline trial in small cell lung cancer. We expect top line PFS results as early as the end of this year. And that will allow a greater proportion of patients to receive therapy for a longer time.

Renee Gala : And to build on that further, so as we look at that opportunity in first line, we also appreciate, as Rob had mentioned, the ease of use for Zepzelca currently in second line, just given the tolerability profile, the patient experience, the clinical activity, these patients that are coming in with second line small cell lung cancer generally have quite a poor health prognosis. So they’ve already relapsed at this point, and so having a drug that’s very easy to use is quite important in the treatment decision.

Operator: And we will take our next question from Joseph Thome with TB Cowen.

Joseph Thome: Hi there. Good evening. Congrats on the progress, and thank you for taking my question. Maybe just one on zanidatamab. How should we think about continued investment in the program overall, and you outlined the breast cancer opportunity and other HER2 expressing cancers. I guess, what’s sort of the decision point to make that additional investment to start additional studies, either in breast cancer or some of these other cancers? Is it the first kind of approval in BTC? Is it if it works in GEA, or are you looking more at the landscape overall in competition? How should we think about the appetite to expand that? Thank you.

Bruce Cozadd: Yes, I’ll start. And then, Renee or Rob, if you want to add anything in, you certainly can. While we don’t give R&D guidance by program, you saw our R&D guidance for the full year represents about the same percentage of total revenues as we reported for 2023. With zanidatamab having contributed a lot to the growth in R&D, 2023 over 2022, we have a little bit more of an apples-to -apples comparison between 2023 and 2024. I will say our guidance does assume activity in breast as well as BTC and GEA. And we’ll certainly, at our R&D day in March be explaining a little bit more about our specific plans. But Rob, let me know if you want to say more now.

Rob Iannone : Yes, only that we know, of course, we’re already working in areas outside of BTC and GEA. We’ve published data in the metastatic breast cancer setting, both HER2-positive and the combined HER2-ER-positive patients early in metastatic setting. So we already have data. And as Bruce mentioned, we are planning for additional work in breast cancer even now.

Operator: And we will take our next question from Gregory Renza from RBC Capital Markets.

Gregory Renza: Hey, good afternoon, good evening, Bruce and team. And congrats on the progress and thanks for taking my question. Maybe, Bruce, just adding on to some of the color that you’ve provided around Vision ‘25 and that $500 million potentially through corporate development. Just curious if you could comment a bit on where you see valuations for some of the areas in which you’re looking externally. Certainly, 2023, as you’ve noted, maybe put Jazz just based on where the markets were in a position of strength. I’m just curious how you see 2024 to date for competition, for attractiveness of assets that are in Jazz’s power alley. Thanks so much.

Bruce Cozadd: Greg, thanks for the question. We have quite a bit of experience on the corp dev side having done a number of these transactions over the years and feel like there’s a great set of opportunities out there across neuroscience and oncology, as well as some rare disease spaces that would build on capabilities we already have in-house based on a lot of our activities over recent years. Being active in all of those spaces, looking at on-market and near-market products, including some in late stage development, I think gives us the ability to find things at valuations that work for us. There can be pockets of areas where it seems like everyone’s looking at the same time, valuations may be a little high to earn a good return.

If that’s true, that’s why we look at other areas, as well, so with our team, with our strong financial position, we’re confident we’ll continue to find opportunities to put capital to work to drive that growth and sustainable growth over a longer period of time.

Operator: And we will take our next question from Annabel Samimy with Stifel.

Annabel Samimy: Hi, thanks for taking my question. On zani, I know that you’re still in the rolling BLA process, but can you talk about your launch plans there, how you might be preparing for it in terms of sales, which are type of investment you need to make in the launch of the infrastructure to appropriately target GEA cancers versus lung cancers, and could that potentially impact, say, Zepzelca? And then, I guess, sort of related, on the operating margin, Vision 2025, I guess, was supposed to be five points over where the guidance was set back in 2022. I think you’re still at 43%, and that would have been 48%, so are you backing off of that operating margin guidance, given the number of investments that you have to make here? Or just if you can give a little color there, that would be great. Thanks.

Bruce Cozadd: Yes. Annabel, maybe I’ll take the second part of your question first, and then we’ll come back to zanidatamab commercial launch thinking. When we set that target, it was coming off of 43% margin back in 2021. I’ll point out we essentially achieve that increase in margin as we moved through 2022, that’s given us great flexibility to make the kinds of investments we wanted to make in the R&D portfolio and behind our key growth drivers on the commercial side. So we’re glad to be making those investments today. We obviously haven’t given guidance for 2025 specifically yet, I will point out as we’ve pointed out before that whether or not we do a corporate development transaction and spread our expenses over a greater revenue base does impact our margins. So, we built that into our thinking as well but for now, we think the investments we’re making are investments that will lead to high return for our shareholders. Renee, you want to talk about zanidatamab?

Renee Gala : Sure, yes, thanks for the question. So with respect to how we’re thinking about BTC, we believe we have the ability to really effectively cover our BTC launch, which could happen as early as later this year, we’ll be ready certainly, but we’re looking at more than likely 2025. So the way we’re thinking about the launch is we should be able to leverage our current field force that is out in the field right now with Zepzelca with a relatively small augment to that field force. The key is to enter the market with BTC to help HCPs get important experience with zanidatamab. We do expect to have our GEA data as early as the end of this year, that’s what we’re targeting. And so by being in a position where we have our HCPs getting experience with zani, it’s a more seamless transition when you’re thinking about GEA.

Also, if we’re looking at an SBLA process for GEA, that’s of course a bit faster as well. So we think it’s a relatively small expansion to the footprint in the US. And we’re also looking at zani as a global brand, an important global brand for us. So after the US, we’re also looking at Europe as well as Japan. And while the BTC opportunity holistically from an epidemiology perspective is smaller, it’s a high unmet need in terms of the severity of the cancer. And so we’re looking at a build strategy. Start with BTC, where we have around 12, 000 patients worldwide, build into GEA with 63, 000. And when I say worldwide, I need the US, Europe, and Japanese markets. And then as we expand into breasts, we’re looking at a much larger population of more than 150, 000 patients.

So that’s how we’re looking at the broader opportunity.

Operator: And we will take our next question from David Amsellem with Piper Sandler.