Welcome to the Jazz Pharmaceuticals Second Quarter 2020 Earnings Conference Call. Following an introduction from the company, we will open up the call to your questions. I will now turn the call over to Kathy Littrell, Head of Investor Relations at Jazz Pharmaceuticals.

Thank you, Chris, and thanks to those of you joining our investor call. Today, we reported our second quarter 2020 financial results and updated our financial guidance for 2020. The press release and the slide presentation accompanying this call are available in the Investors section of our website. On the call today are Bruce Cozadd, CEO; Dan Swisher, President; Renee Gala, CFO; and Rob Iannone, Executive Vice President, R&D. Joining for our Q&A session are Kim Sablich, Executive Vice President, General Manager of North America; Phil Jockelson, Sweep and Neuroscience Therapeutic Head; Ann Borgman, Hematology and Oncology Therapeutic Head; Sam Pearce, Senior Vice President, Europe and International; Shawn Mindus, Senior Vice President of Strategy and Finance; and Jed Black, our Senior Vice President of Neuroscience. I'd like to remind you that today's call includes forward-looking statements, such as those related to our future financial and operating results and which involve risks and uncertainties that could cause actual events, performance, and results to differ materially. We encourage you to review the statements contained in today's press release and our latest SEC disclosure documents, which identify certain factors that may cause the company's actual results to differ materially from those projected. We undertake no duty or obligation to update our forward-looking statements. On this call, we discuss non-GAAP financial measures. Reconciliations of GAAP to non-GAAP financial measures discussed on this call are included in today's press release and slide presentation available on our website. I'll now turn the call over to Bruce.

Thank you, Kathy. Good afternoon everyone, and thank you for joining us. I’ll start by providing an update on the significant progress made this quarter demonstrating the strength and value of our underlying business. Renee will then provide a financial update, Dan will provide an overview of our commercial performance in neuroscience and oncology, and finally Rob will provide an update on our R&D programs. I'm proud of the strong financial and operational results we delivered in the second quarter. While COVID-19 brought continued challenges, our employees never lost focus, and we've continued to advance our strategy, including two product launches in May and July. Our successes in the quarter align nicely with the important goals and milestones we set for the company at the start of the year, aimed at further transforming our business. Despite COVID-19, we made substantial progress across our regulatory, commercial, and R&D operations positioning us to demonstrate commercialization excellence and agility with the execution of up to five product launches in 2020 and 2021. With FDA approval of Xywav, for the treatment of cataplexy and EDS in narcolepsy, we continue to demonstrate the durability of our oxybate franchise. We have been working for nearly a decade to develop this novel formulation, which has a 92% reduction in sodium compared to Xyrem. The Xywav label, unlike Xyrem, carries no sodium content warning, and offers a significant benefit for narcolepsy patients who would otherwise shoulder the burden of lifelong exposure to high sodium intake. Xywav is the first treatment exclusively developed from concept through clinical research to production by Jazz, and underscores the transformation of the company's research and development capabilities. Xyrem is an important scientific advance in the treatment of narcolepsy and reflects our deep commitment to improving the lives of people living with sleep disorders. We expect to launch Xywav in the U.S. during the fourth quarter. In addition, we expect top line data from our Phase 3 pivotal study of Xywav in idiopathic hypersomnia or IH in the fourth quarter of this year, and are targeting a U.S. launch of Xywav in this new indication in late 2021 following a supplemental NDA submission and approval. Our oncology franchise is poised to generate substantial near and long-term value. We delivered a significant achievement for patients and shareholders with the U.S. approval and launch of Zepzelca, the first new treatment for relapse small cell lung cancer in decades, adding another important and differentiated therapy to our oncology portfolio. Zepzelca received FDA approval in June, two months ahead of its PDUFA date, and was launched last month. This was made possible through the tremendous efforts of our oncology team, quickly making this vital new treatment option available to patients and educating the medical community about Zepzelca's profile. Zepzelca is an important new growth driver in our expanding oncology business, and we are focused on fully realizing its significant value potential. The approval of Xywav and the launch of Zepzelca are the most recent examples of our proven development and commercialization capabilities, which since 2014 have resulted in nine major product approvals and commercial launches, as well as a tripling of development pipeline projects. We continue to expand our portfolio of assets and remain focused on our purpose as an organization. We innovate to transform the lives of patients. At the same time, we continue to focus on maintaining operational efficiency, strong margins, and thoughtful capital allocation. We have driven significant and sustainable profitability and robust cash flow with cash from operations of over $450 million in the first six months of the year. Together with our strong balance sheet and significant liquidity, this focus on efficiency and cash generation has allowed Jazz to make value-enhancing investments, while effectively managing expenses and continuing to evaluate internal and external opportunities to expand our portfolio and broaden our revenue base. Over the past year, we've continued to enhance our leadership team, adding a number of executives with a broad range of expertise and industry experience to strengthen our capabilities to innovate and execute on our corporate strategy. Most recently, we welcomed Kim Sablich, who joined us on June 1, as Executive Vice President, General Manager of North America. Kim joins Jazz with a track record in leading successful commercialization teams, most recently at Myovant Sciences, and previously at GlaxoSmithKline and Merck. With this experienced executive leadership team, we’re well-positioned to grow our business and deliver significant value to our shareholders. This is an important year for the transformation of Jazz with five product launches on track through 2021, and multiple initiatives at key inflection points, the team is aligned and focused on execution with strength on our business. I'll now turn the call over to Renee for a financial update.

Thank you, Bruce. Our strong operational and financial performance in the second quarter reflects the resilience of our business despite COVID-19 and dedicated efforts towards our most important value drivers. In the second quarter, our total revenues were $562 million, an increase of 5% over the same period last year, and led by our neuroscience products, which contributed double-digit growth of 10%. Our oncology portfolio experienced a low single digit decline due primarily to lower demand related to the impact of COVID-19, a trend that reversed towards the end of the second quarter. Turning to operating expenses, during the second quarter, our adjusted SG&A expenses increased 10% to $170 million and adjusted R&D expenses increased 26% to $71 million over the same period last year, reflecting increased spending towards both our commercial launch activities, as well as advancing our pipeline. It's important to note that our second quarter combined adjusted SG&A and R&D expenses decreased by 10% relative to the first quarter as we further prioritized our investments in response to the pandemic. Adjusted net income for the quarter was $207 million, or 26 million lower than the same period last year, primarily impacted by certain tax-related expenses recognized in the current quarter. Our adjusted net income for the first six months of the year was $233 million, reflecting a decrease of $164 million compared to the prior year. I'll remind you that we incurred a $200 million upfront payment related to Zepzelca in the first quarter, and that starting this year, we no longer exclude upfront and milestone payments from our adjusted net income. Turning to guidance, we are increasing our total 2020 revenue guidance to a range of $2.225 billion to $2.325 billion, which represents an increase from our prior guidance of $85 million at the midpoint. The top line increases driven by the strength of the underlying business, lower than anticipated COVID-19 impact to date, and the early approval and launch of Zepzelca. Our guidance includes the expectation that healthcare systems continue to better manage patient care through COVID-19. However, there is continued uncertainty about the scope and duration of the pandemic. In the neuroscience area, we are increasing our 2020 net sales guidance to a range of $1.725 billion to $1.8 billion, considering factors such as the reopening of sleep centers, leading to increased diagnoses and patient enrollment, lower than anticipated impact on our government and patient assistance programs, and the gradual return of in-person salesforce interactions. With the addition of Xywav, we continue to believe that our oxybate business, including future royalties from authorized generics and potential upside from an IH indication will remain a key revenue contributor for many years. In the oncology area, we are increasing our 2020 net sales guidance to a range of $445 million to $525 million, reflecting early approval and launch of Zepzelca and improved trends for Defitelio and Vyxeos. We are maintaining our adjusted SG&A guidance and will continue to make disciplined investments to ensure successful product launches. Based on our improved top line expectations and our focus on advancing our research and development pipeline, we are increasing our adjusted R&D guidance range by $25 million at the midpoint to accelerate our investment in certain activities such as our planned JZP-385 Phase 2b study for essential tremor. Additionally, due to the strength of our operations, combined with our outlook for the rest of the year, we are increasing our 2020 guidance for non-GAAP adjusted net income to a range of $670 million to $730 million, or $11.90 to $13 per share, which equates to an increase of $35 million or $0.57 per share at the midpoint. Within the quarter, we took the opportunity to further improve our financial flexibility by issuing a billion dollars of exchangeable senior notes due 2026, with a portion of those proceeds going towards repurchases of our 2021 notes. Between our financing activities and strong cash flow generation, we ended the quarter with cash and investments of $1.7 billion and borrowing capacity under our revolver of $1.6 billion, increasing our capacity for a broader set of corporate development opportunities and positioning us well to execute on our near and long-term strategy. As we move forward, we are focused on disciplined deployment of capital to enhance our portfolio with targeted and durable assets through both internal and external innovation along with corporate development activities. Doing this well should enable us to strengthen and diversify our long-term revenue base, which we expect to grow in 2021 and in 2022. In addition, with our current portfolio, we anticipate nearly 50% of our 2022 revenues to be derived from products launched since 2019. As we progress through the remainder of 2020, with a healthy balance sheet, a clear set of objectives and a strong team to execute, we are well-positioned to generate value for patients and for our shareholders. I'll now turn the call over to Dan.

Thanks, Renee. Recently we achieved multiple key objectives across our commercial, regulatory, and R&D organizations, including two FDA approvals and product launches, as well as the advancement of our key clinical programs. We're pleased with the agility of the team, as they quickly pivoted to virtual engagements with physicians and payers, mitigated challenges with conducting clinical studies and regulatory reviews, and successfully implemented a fully virtual commercial product launch in Germany. Our strong operational performance this quarter reflects the innovation of our team and the durability and resilience of our products. In the second quarter, Xyrem volume increased 5% compared to the same period in 2019, reflecting strong patient persistence, compliance, and continued patient growth, with the average number of active Xyrem patients increasing 3% to 15,075. While the average number of patients on therapy increased, new patient diagnoses and enrollments were impacted by COVID-19. New patient enrollments began to decline late in the first quarter of 2020, but they trended upward in the latter half of the second quarter. There were no meaningful shifts in the payer mix during the second quarter. However, we did observe an increase in demand for patient assistance programs. We believe new patient enrollment levels may continue to be impacted by COVID-19 during the second half of the year, but will gradually improve as more sleep centers reopen and learn to accommodate patient flow. We're very pleased with the timely approval of Xywav and we look forward to launching this important new low sodium treatment option for the management of narcolepsy patients in the fourth quarter, following the joint Xywav, Xyrem brands implementation. We believe that Xywav represents a significant advance for patients and will become the oxybate treatment of choice. Launch activities will initially focus on reaching the top 1,500 Xyrem prescribers, accounting for approximately 80% of existing oxybate use. Our approach will be aimed at ensuring narcolepsy treaters understand the data in the Xywav label, the benefits of a significantly lower sodium oxybate product for their patients, the availability of flexible dosing and the ability to seamlessly transition existing Xyrem patients to Xywav. Our goal is to have the majority of oxybate patients on Xywav by 2023. And for Xywav to become the oxybate treatment of choice for all patients, including current Xyrem patients, patients who previously were not prescribed Xyrem based on sodium concerns, and newly diagnosed narcolepsy patients. We also expect to be able to meaningfully broaden the treated patient population with an idiopathic hypersomnia indication. Our efforts to ensure a successful launch include obtaining strong payer coverage, providing robust patient access programs, and educating patients and prescribers on the benefits of a low sodium product. To ensure broad patient access, we carefully considered the pricing of Xywav and made the decision to price at parity to Xyrem. Our managed care team is already working with all major payers to contract for Xywav with the intention to obtain broad and timely coverage. We will be hosting Xywav investor update webcasts in the fourth quarter as we approach launch, and this will include information on the treatment of narcolepsy, commercial initiatives, and educational efforts. Turning now to Sunosi. Against the backdrop of COVID-19 and its impact at this stage of the launch, we were pleased that physicians continue to start new patients on Sunosi despite a reduction in patient office visits, and new diagnoses. We did observe a 12% increase in U.S. prescriptions, compared to the first quarter of 2020, including strong patient refills. First half 2020 net sales were 11 million, and these included inter-quarter variability in gross-to-net. We expect the second half 2020 sales growth over the first half 2020 to more closely track TRX growth and expect the GTNs in the second half of the year to fall within the 40% to 60% analog range. Additionally, we're pleased with the initial uptake and positive feedback from narcolepsy prescribers following our launch in Germany in May, and we look forward to continuing the rolling launch in other European countries over the next 18 months. As part of our launch efforts, we're driving awareness through digital campaigns as the use of digital media has increased during COVID-19. We're also commencing a pilot campaign through telemedicine portals, where we have seen an increasing number of prescriptions, and we have restarted face-to-face interactions with target prescribers. Turning to the oncology portfolio, I'm very pleased to give you an update on the launch of Zepzelca. As you know, Zepzelca was approved by the FDA in June for the treatment of patients with relapsed small cell lung cancer. Zepzelca became commercially available to all distributors on July 7, and we received orders that same day. I want to acknowledge the excellent collaborative and cross-functional approach of our sales, medical, marketing, market access teams, and everyone involved that prepared us for a robust Zepzelca launch within six months of licensing this product. During the initial phase of Zepzelca’s launch, we’re focused on engaging with the top 1,500 small cell lung cancer prescribers and we're seeing strong interest from physicians and a new treatment option with its efficacy and safety monotherapy profile. The initial demand for Zepzelca across more than 250 academic and community centers to date is very promising. The importance of this new indication has been reflected in the fact that NCCN quickly added Zepzelca to their guideline in early July following our scientific affairs team submitting the data and the approval dossier on the same day of product approval. Zepzelca is a recommended treatment for relapse small cell lung cancer patients and a preferred treatment for patients who relapse up to six months following prior systemic therapy. We believe that this expedited addition to the guidelines reflects the compelling clinical profile of Zepzelca along with the need for additional treatment options for relapse small cell lung cancer patients. Now, turning to Erwinaze PBL, the owner and sole manufacturer continues to have quality and manufacturing issues. Given this product availability in the U.S. market was limited to less than one week in the second quarter. We expect significant global supply disruptions to continue for the remainder of the year, unrelated to COVID-19. Although the shortage manifests itself in our financials, the impact to patients and their families is significantly more important and this drives our focus on bringing JCP-458, a high-quality recombinant asparaginase to the market, as quickly as possible. In summary, we are on track to deliver significant near and long-term revenue as we execute on up to five key launches through 2020 and 2021 to bring multiple innovative new products or indications to market. I will now turn call over to Rob for an update on our development programs.

Thank you, Dan. Over the past few years, we've transformed our R&D capabilities by adding depth to our research and development expertise, partnering with external collaborators on innovative approaches to drug development, building clinical development expertise in our key therapeutic areas, enhancing our regulatory affairs function, and supporting robust evidence generation plans for our key brands with our global medical affairs team. Our goal is to continue to advance new and highly differentiated treatment options to patients in a productive and timely manner. During the quarter, we made progress against our pipeline as we continue to focus on our key priorities and mitigating the impact of COVID-19 on our R&D programs. Our progress is building towards multiple pipeline catalysts in the second half and demonstrates our R&D productivity as we deliver key clinical data from our studies of Xywav and idiopathic hypersomnia, Defitelio for the prevention of acute graft-versus-host disease, and our planned BLA submission of JCP-458 as early as year-end based on our pivotal Phase 2/3 study. I’ll begin our neuroscience development activities with Xywav. We achieved a major milestone last month, with FDA approval of Xywav for patients seven years of age and older, for the treatment of cataplexy and EDS in narcolepsy. We are pleased with the data included in the label, which we believe provides physicians with important information for initiating treatment for newly diagnosed narcolepsy patients, as well as for patients transitioning from existing narcolepsy therapies, including Xyrem. Xywav treatment is initiated at the same dose and regimen as sodium oxybate, and the label allows for flexible dosing, including using separate first and second doses. Importantly, unlike Xyrem, the Xywav label does not include a warning to prescribers to monitor patients sensitive to sodium intake, including patients with heart failure, hypertension, or renal impairment. We look forward to bringing this innovative and therapeutically advanced oxybate option to patients later this year. During the second quarter, our efforts were focused on ensuring patient safety and continuity in our Phase 3 study evaluating Xywav in idiopathic hypersomnia. As a reminder, this study completed enrollment of patients in the first quarter, ahead of schedule. The study design is similar to the one we conducted in narcolepsy patients, and we've included a slide in the earnings deck with more detail for your reference. Both idiopathic hypersomnia and narcolepsy are hypersomnolence disorders that share similar disease characteristics and symptoms such as excessive sleepiness. A series of retrospective case studies by published literature in sleep medicine in 2016 demonstrated that patients with idiopathic hypersomnia who were treated with Xyrem experienced improved wakefulness, similar to that seen in Xyrem treated patients with narcolepsy. Additionally, improvements in sleep inertia, falling asleep, and sleep duration were also noted in idiopathic hypersomnia patients receiving Xyrem. Insurance claims data suggests the diagnostic prevalence of idiopathic hypersomnia is approximately 37,000 patients in the U.S. However, given the significant underdiagnosis of IH, in addition to the lack of FDA approved therapies, we believe the unmet need may be much greater. Given our successful efforts to ensure continuity in this study through the COVID-19 pandemic, we expect top line data in the fourth quarter. Data from our ongoing sleep medicine research for Xywav and Sunosi will be featured at the upcoming Virtual Annual Sleep Meeting later this month. We've provided a list of abstracts in the earnings slide deck for your reference. Turning to JZP-385, our highly selective modulator T-Type calcium channels for essential tremor; we will begin initiating a new healthy volunteer study this month to evaluate our modified release formulation. We’re excited to get this study underway with an approach to generate data necessary to support the planned Phase 2b study while also protecting the safety of our Phase 1 volunteers during this pandemic. This is an important program and we're working to make progress on study startup activities this year to enable initiation of a Phase 2b study in early 2021. Turning to oncology, and starting with Vyxeos, we continue to evaluate Vyxeos through a broad development program in multiple AML and MDS populations and settings. The Children's Oncology Group initiated a Phase 3 study last month comparing Vyxeos to standard chemotherapy for children and young adults up to the age of 22 with de novo, non-FLT3-mutant AML. And importantly, we entered into a cooperative research and development agreement with the National Cancer Institute to collaborate on the non-clinical and clinical development of Vyxeos. Turning to Zepzelca. We're actively working on the development program for Zepzelca in collaboration with our partner PharmaMar. Areas of interest include evaluating Zepzelca in small cell lung cancer in combination with other therapies in both the first line and in the post-Platinum setting, as well as in other tumor types. In the relapse, small cell lung cancer setting, in combination with immunotherapy, two investigator-initiated Phase 1/2 studies are underway. We’re looking forward to the Phase 3 results of the Atlantis trial in the second half of 2020 evaluating Zepzelca in combination with doxorubicin. Turning to JZP-458, a recombinant Erwinia asparaginase, enrollment in our single-arm pivotal Phase 2/3 study in patients with acute lymphoblastic leukemia or lymphoblastic lymphoma, following hypersensitivity to e.coli derived asparaginase is ongoing. Despite the COVID-19 environment, we have activated nearly all the planned clinical trial sites. JZP-458 remains a priority development program for us. Given the inconsistent availability of Erwinaze, a reliable non-e.coli derived asparaginase is urgently needed. We are focused on bringing JZP-458 to patients as quickly as possible with an objective of launching in the U.S. in mid-2021. I will now turn the call over to Bruce for closing remarks.

Thanks, Rob. In closing, I'm proud of our team's exceptional efforts, which produce strong financial and operational results this year despite the unprecedented global health crisis. With three major regulatory approvals, two product launches, and continued advancements in our development pipeline, we have made significant progress toward our 2020 objectives and are well-positioned for the future. Importantly, as we look to our next phase of growth, we view our emerging portfolio of Sunosi, Zepzelca, Xywav, and JZP-458 as representing billions of dollars of revenue potential for the company and a meaningful opportunity to improve and transform the lives of patients. Thank you for joining us on the call today. I'll now turn the call back over to Kathy for Q&A.

Thanks, Bruce. We kindly request that you limit yourself to one question during this call. We're going to be looking and listening to everyone, so that everyone has an opportunity to ask questions today. So, we will gladly address any additional questions after the call or you can always re-enter the queue. So with that said, operator, please open the line for questions.

Thank you. Our first question comes from Brandon Folkes with Cantor Fitzgerald. Your line is now open.

Hi, thanks for taking my question and congratulations on all the progress this year and in the quarter. I'm going to ask on Zepzelca. Can you talk about your expectations for the Atlantis trial? And what are your range of thresholds for successful outcomes there? I know in the past, you've talked about this serving as a confirmatory trial, even if it's not that big. Can you just elaborate a little bit more around that scenario? And then if Atlantis is not confirmatory, how soon should we expect you to begin a true confirmatory trial of the monotherapy? Thank you.

Okay, maybe Rob, I'll ask you to comment on this from a regulatory perspective, and then Kim, if you want to jump in with any implications for commercial that would be great. Rob?

Yes. Thank you, Bruce. As I've said in the past, the Atlantis trial actually predated the decision to move forward with a single-arm monotherapy Zepzelca approval and second line. It was designed based on some preliminary Phase 1/2 data in combination with doc showing promising results. And that Phase 3 was initiated on its own. Once our partner PharmaMar engaged the FDA about the possibility of accelerated approval based on single-arm monotherapy data, there was a discussion about whether Atlantis could serve as a confirmatory trial, even though it wasn't designed such. And the guidance we've gotten is that it potentially could and ultimately depends on what we observed there. We maintain that it doesn't necessarily need to be a statistically significant result, but just needs to be confirming of what we observed in the monotherapy trial. If somehow that's not ultimately confirmatory then we would plan to initiate a confirmatory trial. The exact timing and details of that will be subject to regulatory interaction.

Thanks, Rob. And I'll just say to people, our excitement about Zepzelca and the launch, and our early uptake is really revolving around its strong profile as a monotherapy, and Kim maybe you can talk a little bit about why we're excited about that.

Sure, great. So early weeks here, we're seeing very positive customer responses and very encouraging sales. We're seeing strong sales, both in academic and community settings. And another very positive signal that is over 40% of accounts that ordered in the first two weeks have already placed a second order. While we're certainly facing challenges getting face-to-face access with our customers due to COVID, the news about Zepzelca’s availability and the inclusion in the NCCN guidelines is generating a lot of physician and account interest. And we're very confident that access and effectiveness of our outreach to customers is going to increase with our full sales team, including our existing representatives, and a new group of sale hires just completing training, most of whom have prior experience in the small cell lung cancer space and bring with them existing customer relationships. So, while it's too early to know the real-world experience our customers are seeing with Zepzelca, it is clear to us that physicians and patients are both very eager for a new treatment option, and particularly one with the type of clinical profile demonstrated in our clinical study.

Thank you. And our next question comes from the line of Umer Raffat with Evercore. Your line is now open.

Hi, thanks so much for taking my question. I actually wanted to continue on the topic of Atlantis for a second. Bruce, it seems like this trial has been wrapped up for a few months now. So, just trying to understand the pushes and pulls behind the data disclosure, why it's not out. And not only is it the Quinn trials that suggest it's been wrapped up, it's also in the FDA review where someone submitted documents that yes, the trial was done by February. So, I'm trying to understand just the timing because it sounds odd that it’s been done, but it's not out. And on that same note, there were also provisions in the Jazz-PharmaMar agreement whereby, for FDA approval, certain analyses on Atlantis have to be done, could you walk us through what that specifically was and where there components of Atlantis that were already used for the FDA approval that came early? Thank you.

Yeah, so, an opening comment, remember that we're partnered with this product with PharmaMar, who was overseeing the prosecution of the NDA and the Atlantis trial, so I'm not going to say much more than PharmaMar has said, but Rob, do you want to generally address the timing of completion of Atlantis? And I'm not sure we're going to say anything about the impact on the monotherapy approval since that approval did come through early. Rob?

Yeah. So, we'll just reiterate that this trial is being run by PharmaMar, our collaborators. It's an event-driven trial. And so the overall survival events needed to accumulate and then the trial went into a phase of cleaning data and ultimately top line results. And we understand that that should be expected in the second half of this year.

Thank you. And our next question comes from the line of Gary Nachman with BMO Capital Markets. Your line is now open.

Hi, good afternoon. On Xywav, and congratulations on that approval. How do you expect payers will handle the two products with pricing at parity? Have you been preparing payers for this transition from Xyrem? And what pre-launch activities are you planning on doing on the low sodium benefits to help facilitate uptake and to try and get to the majority of that switch by 2023 that Dan talked about? Thank you.

So maybe I'll ask Kim to start and then Dan, if you want to jump in feel free.

Sure. So, as Dan mentioned earlier, we are very focused on ensuring broad and timely coverage with our commercial payers. We want to remove product access as an issue and allow prescribers to switch to Xywav for either their existing or new narcolepsy patients and we're out there today already engaging with payers in preparation for the launch, and we've been out there prior to that in terms of educating on disease-wise to set ourselves up for the launch. So, again, we've launched Xywav at parity pricing to Xyrem, and we're feeling very confident that that's going to help us achieve our access goals pretty rapidly.

Thanks. This is Dan. Just adding on to that, as many of you may remember, as we were launching Sunosi, we started to engage with payers and establish contracts in relationships with them, both for Sunosi and for Xyrem, and so it's a very natural transition for us to initiate Xywav, which we believe is the treatment of choice, and at parity access should be readily taken up in a timely way.

Okay, and other pre-launch activities, and if you could comment on that in terms of low sodium benefits.

Yeah, we're going to get into more detail obviously in our webcast in October, but you know, we're turning our field medical market access teams fully over to focused efforts on Xywav and we've obviously been presenting and publishing a lot of data on Xywav and sort of the background as comorbidities and the burden of disease for narcolepsy patients. So, it's really just pushing on those efforts. And as we get closer to Q4 with the REMS implementation, you'll see much more and we'll go into that detail in Q4.

I'll just add on, Gary that, you know, as Dan pointed out, the couple of months it takes to get to a full REMS implementation gives us an unusual period of time where we have an approved label, and we know exactly what we can educate around. So, we're going to do our best to do that, including through some partnerships we have with other organizations that care about the long-term cardiovascular metabolic health of narcolepsy patients and other populations. So, more to come over the upcoming months.

Thank you. And our next question comes from the line of David Amsellem with Piper Sandler. Your line is now open.

Thanks. So on Xywav, I just wanted to get more of a window into your thought process regarding pricing with the market over the long-term becoming more varied and do have, you know, authorized generics coming. There's the Avadel product, there's Wakix, there's Sunosi. I was just wondering, wouldn't it have made sense to price Xywav at something of a discount to Xyrem, but I wanted to get your thought process as to why you chose parity pricing and why you think that's going to be a winning strategy? Thanks.

Dan, do you want to take that?

Yeah, sure. Yeah, no, our overall objective is, of course, we're delivering value in a significant advance and treatment options relative to what's on the market today, particularly relative to Xyrem and other agents. And so, we believe this strategy will get us broad and timely coverage and then really establish the low sodium benefit for patients, and we get the physician education to support both the adoption of Xyrem patients over to Xywav, patients who could have been candidates for oxybate therapy but because of the sodium concern didn't go on to Xyrem now available for Xywav, and then really to be, you know, top of mind for treatment of choice on newly diagnosed patients. We believe the parody pricing at launch gets us there.

Thank you. And our next question comes from the line of Ami Fadia with SVB Leerink. Your line is now open.

Hi, good evening. Congrats on the nice quarter. My question is on Xywav, but on idiopathic hypersomnia; the primary endpoint in the study that you have ongoing is excessive sleepiness score, and I think that the baseline score for those patients was about above 11. What level of change do you believe would be clinically meaningful for those patients? And if you can share with us any details around powering of the study, that would be helpful. And just as a follow-up to the earlier questions on Xywav, maybe if you can just give us a sense of do you expect the gross to net for Xywav to be higher than that for Xyrem? And if you can quantify the number of patients that couldn't get Xyrem because of the high sodium involved? Thank you.

Well Ami, you get credit for a multi-part question. So, let's first go to IH. Jed, do you want to comment a little bit on the trial?

Sure. The IH trial was run similar through the most recent Xywav trial in narcolepsy, that is to say, following the screening period, patients were in an open-label fashion titrated up to efficacy and tolerability, and then had a stable dose period and then went through randomized withdrawal period, active versus placebo drug for a two-week period. And you're correct in the primary assessment in the IH study, as the Epworth Sleepiness Scale. Studies with respect to clinical relevance suggest that a change somewhere between 2.2 to 2.75 points on the ESS is clinically meaningful. With respect to what we've been anticipating with IH, given the data that we have so far in the K-series and the single cases, as well as clinical experience we’ve anticipated change well within or beyond that range, and with respect to your question about powering the study, the study was powered for a 90% powering. And so we do, we are excited about the opportunity for using Xywav in this patient population and anticipate good solid efficacy.

Dan maybe over to you on the gross to net and then the additional opportunity for patients who felt the existing salt load of Xyrem might be too high.

Yeah, no, good question. So, on the gross net, obviously we're early in the discussions with the payers, but given where we landed with Xyrem and the advance we feel we've got with Xywav and where we are starting, we would expect to be roughly in the same ballpark and will have more detail as those contracts actually get finalized. With regard to patients who could be candidates for oxybate therapy, but because of the sodium concern, or not going on sodium oxybate, and what could be available for us to access over time, for Xywav we continued to triangulate on about 20% of the narcolepsy patients. And that's both market research we've been conducting as well as doing some close examination of claims data on patients who have cardiovascular risk. What that looks like in the general narcolepsy population, and what we see with Xyrem patients today.

And I'm just going to edit Dan a little bit. We weren't saying 20% of all narcolepsy patients. 20% of patients that doctors would have considered for oxybate don't get it because of this cause alone. So slightly different statistic.

That's very helpful. Thank you.

Thank you. And our next question comes from the line of Akash Tewari with Wolfe Research. Your line is now open.

Hi. This is Andrew Newton on for Akash. You guys have published data in the past showing that in one year over 50% of patients discontinue their Xyrem regimen, how do you think this kind of high discontinuation rate is going to affect the Xywav launch and which proportion of these discontinuations are real versus just patients cycling on and off? And then secondly, you guys noted that new products are going to represent about half of 2022 revenue and that's not in consensus models right now, which products is consensus most under appreciating? Thanks.

Hi Andrew, good questions. On discontinuation, you know we do see discontinuation often when people are starting oxybate therapy, particularly over that titration period over the first few months. Remember, here we're talking about the potential for patients to move from Xyrem directly to Xywav. These are oxybate-experienced patients, and we certainly saw that in some of the data we released at the World Sleep Congress in September of last year, in terms of the part of our trial that had patients move over dose for dose easily. I think it is a very different prospect there. For naïve patients, who maybe have never been on Xyrem, I would expect some discontinuation rate over that early period. We found that over time, it's important that doctors set the right expectations for patients in terms of what they'll experience at titration both in terms of outcomes and side effects. You're right to point out that we do get cycling of some patients back onto their formulations from time to time. And in terms of our confidence in the revenue potential for our new product launches, you know, our market forecasts that we see published, vary considerably about how they take into account, not only Xywav, but whether they credit for idiopathic hypersomnia, JZP-458 is in everyone's model. So, you know, these are all significant opportunities like Xywav, Zepzelca for this year's launches and idiopathic hypersomnia and 458 or potential 2021 launches. And then of course, we're excited about Sunosi’s potential as well.

Thank you. And our next question comes from the line of Greg Gilbert with SunTrust. Your line is now open.

Thank you. Bruce, at this point, looks like Xywav kicks us off to a decent start, congratulations on that. I'm curious if you or your teammates had any updated thoughts on where or how that product is being used, and do you see the potential addition of cataplexy to its label should that occur as a meaningful change to the competitive profile? Thank you.

Yeah, Greg, and I was going to point out the name change, congratulations on that. And we'll get that right from now on. Dan, over to you.

Yeah, no, as all of you know, oxybate therapies, Xyrem in particular spent standard of care and really for a certain type of patient that's gone through a number of other therapies, you know, the only approved therapy for both EDS and cataplexy. Despite the competition, it's been on the market. And you know, they've said in their own S-1, 70% payer coverage and definitely a strong promotional push. Yeah, we haven't seen any impact on our business and you know, up through COVID. So, we take COVID out of the equation. We really were on the same baseline of prescriptions and refills in the base business. And of course, we've got broad and good coverage with payers. So yeah, we think the products really exist in different continuum for patient care, and we're very confident with both what we've got to offer for EDS with Sunosi for narcolepsy, which has done very well, and we've had really nice refills through COVID because the product is working well for those patients. And then for those who need strong cataplexy therapy in addition to EDS benefit, now transitioning over to Xywav, so we feel good about the product offering.

Thank you. And our next question comes from the line of Balaji Prasad with Barclays. Your line is now open.

Thanks for taking the questions. So, Bruce just going back to something we touched on briefly, free cash flow generation continues to be very strong, it's a great problem to have, which will also beget the question on what you will be planning to do with it and still ensure that returns profile is healthy, and just as an addition to that, are there any acquisitions built into this strategy? Thanks.

Yeah, maybe I'll hand that one over to Renee.

Sure, yeah. And if I could ask you to repeat the second part of your question, I didn't hear the second part. You cut out after the free cash flow generation part.

Got it. Just to clarify the outlook for 2022 revenues being generated from new launches versus products that, you know, aren't launched, there are no actions built into this product.

So with respect to 2022 and looking at our projected revenue, that is based on our current profile of products. Our current portfolio with the products launched from 2019 forward making up approximately 50% of that. So that would be Sunosi, Xywav, and 458 as well as Zepzelca. And then in terms of corporate development, and how we leverage our cash flow, you know, clearly as we look at broadening and enhancing our portfolio, we look at both our internal innovation in terms of programs we can invest in, but also importantly, external opportunities. With the cash balance and leverage capacity we have, we do have the opportunity to do more meaningful corporate development transactions. We have the opportunity to think about leveraging up quite a bit given our current leverage profile for the right transaction. Of course, transactions that have the opportunity to be more transformational in nature are fewer and far between, but that's certainly an important part of our strategy, which is leveraging that cash flow, investing in the internal portfolio, looking for great opportunities for external innovation, such as Zepzelca, which was not an acquisition, but a great opportunity to bring in a late-stage near market asset to be able to put that into our portfolio and very quickly be ready to launch.

Thank you. And our next question comes from the line of Ronny Gal with Bernstein. Your line is now open.

Good afternoon, everybody and congratulations on a nice quarter. Question on 385, now that you seem to have kind of got your heads around the next trial, can you just give us a little bit of feel for what that trial would look like in terms of science endpoints and more importantly, timing to completion? And will it be a trial you could potentially submit on?

Let me hand that over to Rob.

Yeah, thank you. So, we have had the opportunity to get feedback from the FDA and we do believe that this Phase 2b trial will contribute to the registration package along with additional data on safety. As you know, we are developing a new formulation for once daily administration. And that's any testing as of this month in healthy volunteers. And we haven't shared any details yet about the exact design of the trial as to this point. We're still finalizing some of that.

Thank you. And our next question comes from Annabel Samimy with Stifel. Your line is now open.

Hi, thanks for taking my question. Congratulations on a good quarter. Just in the oncology area, I might have a couple questions there on Zepzelca. There was clearly a lot of excitement among KOLs so we've spoken to, to get their hands on the drug, and admittedly, you know, one thing they did say that it was not as well known in the community setting. So, can you just talk about some of the educational efforts you might have for the community setting? And is that already starting to be taken care of with NCCN guidelines? And then quickly on 458, can you just remind us the timing of the interim analysis for that program? And is there any kind of potential for halting the trial early and filing that? Thanks.

Yeah, sure. So it's all hands on deck right now. Given that we're in the COVID environment, our team has been very active in both the digital space outreaching through email have had some good responses back in terms of appointments. We're getting out face-to-face in areas that we can due to COVID where we’re welcomed in and we had a nice launch cast last week. So, really happy with the progress there. As I said before, both in the community setting and in the academic we're seeing sales come in, in the proportion that we expected.

Rob, on 458?

As we mentioned in the opening remarks, we've been able to open nearly all the sites for 458 despite the COVID-19 pandemic and the trial is enrolling well. Based on that, we have the objective of submitting the BLA as early as the end of this year.

Thank you. And our next question comes from a line of Randall Stanicky with RBC Capital Markets. Your line is now open.

Great, thanks. Bruce, on the assumption that your goal is to maximize the uptake of Xywav, how do we think about the timing and impact of the triggered generics that would likely occur? And then just looking at this, why wouldn't this be a case for a hard switch? You're going to be selling two products that are effectively the same, one safer than the other. It just seems to me that there's probably not a need for Xyrem if this is the case. Is that something you guys have considered? I know you've been asked that.

Yeah, thanks, Randall for the good questions. On the first one, you know, our goal is to make Xywav a big success. We think this is a great product for patients currently on Xyrem. We think it's a great product for patients who may not have been on Xyrem historically, great product for patients newly diagnosed with narcolepsy. I am pending the results of our idiopathic hypersomnia trial, you know, a great new product for patients who’ve not had an approved agent before. So, we're really excited about making it a success. We are not going to hold off on that to avoid any possibility of triggering a market decline, which I'll remind you, would be a very, very substantial drop in Xyrem sales. You know, my view is, if we've hit that, we've probably been more successful than most of you have modeled in your models. You know, in terms of how we think about Xywav and Xyrem, you know, we need to continue supporting our existing Xyrem patients. That transition is not going to happen on the same day for all patients for lots of different reasons, but we are going to be focusing our efforts on making sure people understand the benefits of Xywav, particularly in light of a chronic, lifelong therapy for these patients in a group that's known to have higher cardiovascular risk than the general population.

Thank you. And our next question comes from the line of David Risinger with Morgan Stanley. Your line is now open.

Yes, thanks very much, and congrats on all of the updates on the call. So, with respect to the idiopathic hypersomnia trial, given the overlap of IH with severe daytime sleepiness, aren't physicians already prescribing Xyrem for such patients? It would seem that it would be obvious to them as a patient presented with idiopathic hypersomnia that they would be aware of Xyrem and its efficacy in severe daytime sleepiness and thus prescribe it to such patients? Thanks so much.

Yeah, let me take the first part of that, which is, you know, there's been no approved treatment for idiopathic hypersomnia, and you know, we think the ability to get out and educate about the diagnosis of IH, and the potential treatment of IH could go a long way in helping to uncover IH, maybe beyond what's currently recognized and treated. I think, you know, before we talk about what's happening with existing patients, you know, I think it's more than that in terms of the market opportunity, but maybe I'll let Dan handle what happens today if a doctor wants to treat an IH patient with Xyrem?

Yeah, and I’d just add to what Bruce is saying is that, you know, no one's been focused on this market, and it's been hard for us to triangulate down to what the prevalence is in the U.S., and we continue to think that's well underrepresented for what the true opportunity could be. You know, I always feel encouraged when I see a clinical study with a fairly tight inclusion exclusion criteria enrolled ahead of schedule. So, we know there's a market need out there that we want to address. You know, in terms of Xyrem working in this patient population, you know, we do have historical case series, including in the U.S., you know, we're anecdotally on a patient-by-patient basis in some of the published case series that Rob mentioned, but unfortunately, PBMs were more and more concerned about specialty pricing and putting further payer restrictions and authorization, you know, we only get market reimbursement at this point for true bona fide narcolepsy patients. And so that's why it's so critical to get this on-label indication for Xywav.

Thank you. And our next question comes from the line of Graig Suvannavejh with Goldman Sachs. Your line is now open.

Great, thanks so much for taking my questions. My question just has to do with the revised guidance, and in terms of what your outlook is, with respect to how COVID is evolving, can you just remind us, and you might have said it in the beginning part of the call, your assumptions on the Jazz business for the second half in-light of the uncertainty with COVID-19, and whether not only is there a risk for upward revisions in guidance based on that, but also downward revisions? Thanks.

Yeah, Renee, do you want to take that one?

Sure, yeah, I'd be happy to. So, as we mentioned in the script, clearly through our second quarter results, our organization was able to navigate COVID-19 quite well in terms of using innovative approaches to ensure that we switched very quickly from in-person to virtual digital ways to connect with physicians and healthcare providers. So, part of our outlook in terms of thinking about the second half is driven by our ability to pivot well in the second quarter, and to be able to then actually see some of those trends reversing. The other thing that we saw within our oncology area, of course, we saw in the second quarter a change with respect to delays in the stem cell transplants, a switch for some period of time to oral oncolytics, as we've mentioned in the script, that trend tended to reverse towards the end of the second quarter. So that underlying assumption then drives forward with respect to health care providers, finding ways to continue to provide health care to patients that are non-COVID patients to be able to navigate the pandemic through the rest of the year. With respect to our medicines in general, we've talked about the durability of the products given the chronic life-saving and/or life-changing nature of the treatments. So, while we do expect to continue to have to navigate through the pandemic in different ways, including and how we launched Zepzelca and how we launched Xywav at the end of the year, we do anticipate being able to continue to work that through our commercial organizations to be able to feel confident in raising the guidance across neuroscience, oncology, and then also down to the bottom line in EPS. Now with that being said, of course, there's uncertainty. We don't expect life to go back to normal. We're more focused on the assumption that the ability to treat patients and provide health care throughout the pandemic will continue.

Thank you. And our next question comes from the line of Ashwani Verma with Bank of America. Your line is now open.

Hey guys, this is Jason, actually. Quick question, I just want to make clear on the topic of COVID. So, we've heard anecdotally, I guess, the second line small cell lung, the volume of patients is down, they're older, they're more compromised, they’re pretty fragile. Are you saying that you took the – that's returned to normal, the flow patient from what you're seeing in terms of some of the more near-term metrics? And then on corp dev, I just wanted to come back to this. So, you know you play in oncology. It seems the main area, both among all solid tumors for potential M&A transaction get valuations have really stepped up and there's been a strong IPO cycle for private. So, I'm just curious, is there a willingness to step outside your core therapeutic area focus? Thanks.

I can start with that Bruce. This is Rob. I would just say that before Zepzelca’s approval, there was very little in the way of therapeutic options for patients in the second line, so often patients weren't offered anything or they were offered just supportive care or first line therapy with continued, you know, longer than you'd expect, and so now with a more effective therapy that's better tolerated we expect, you know, patients to be treated, you know, potentially even earlier or a greater proportion of patients to be treated. With that greater efficacy, I think ultimately there’ll be better uptake, especially given the tolerability profile.

And Rob, I'll just add to that, while we've seen the impact of COVID vary across our business, certainly launches in the industry are at risk, in small cell lung cancer given the very serious nature of it, we really have seen that patient treatment rates have been minimally affected and therefore we see rapid embracing of our therapy, and can expect that to continue through the pandemic.

And then maybe I'll hop in with respect to corporate development and how we think about that. I mean, clearly to be able to leverage our commercial organization, looking at potential opportunities with neuroscience and oncology makes a lot of sense for us. With respect to commercial, with respect to growing and expanding expertise, not only in hematology but now with the collaboration and development in solid tumors, we have of course looked at opportunities outside our therapeutic area. And if we were to look at something more closely in that area and consider it more seriously, I would think it would need to be something that would be, you know, late to near on-market, to be able to leverage commercial capabilities that were already in place so that we would have the opportunity to build. Our primary focus however is leveraging our two existing therapeutic areas. Our expertise, as well as our current infrastructure, and then importantly, ensuring that whatever products we're adding to the portfolio, that we're interested in that those are durable products that can have a meaningful impact for patients that can have a meaningful impact to expanding our revenue base over time, ensuring that we're able to achieve good returns for our shareholders.

Thank you. And our last question comes from the line of Ken Cacciatore with Cowen & Company. Your line is open.

Thanks, guys. Bruce, I was wondering if I had asked about business development a little bit differently. We're often used to you buying single product assets, I was wondering, would you at all be interested or think of a company that has a portfolio of products instead of a single asset, and maybe a company that you will view as mismanaged spending, so you can take your operating excellence and kind of put it to a company like that. So, as we look into the future, could we be thinking about business development a little bit differently or could we expect business development a little bit differently than the past? Thank you.

Yeah, Ken, really great insightful question. You know, it does so happen that a number of deals over the last few years have been primarily focused around a one asset, in some cases entirely focused around one asset, but we clearly are interested in collaborations and potential acquisitions that would be more portfolio-based. You've seen some of our development-oriented transactions be around a basket of targets for that reason, but I think you're asking a different question, which is, you know, up to and including a commercial business with multiple assets, and absolutely, that is of interest to us as well.

Thank you. And our last question comes from the line of Jacob Hughes with Wells Fargo Securities. Your line is now open.

Hey, thanks for fitting me in. On Xywav, I think you said you're supposed to launch in the fourth quarter following REMS implementation, is that REMS implementation taking longer than you would have thought? And what's causing the delay there if there is one? And also, if you could just give to what percent enrollment you're at currently on the 458 trial? Thanks.

Yeah, Jacob, Bruce, I’ll take those questions. We're not going to give specific enrollment percentage other than I'll reiterate Rob's comments from earlier that our trial is enrolling well. On Xyrem, the REMS implementation, actually we have a goal of doing it faster than we've done it before. You know, last time we needed to implement a REMS, you know, updated REMS was for the pediatric launch. We think we can do it a little bit faster this time, but we want to make sure we're ready to go and the patients will get the right treatment, they'll get the right counseling, they'll understand how to use the medication safely, they'll understand, you know, how the system works, that there will be different forms for the two products. So, we do have some work to do there, but we're right on track to launch on the timeline we had laid out. And maybe I can just end, since I think that was our last question before I turn it back over to Kathy to say, you know, we're excited that we reported good results and to raise guidance on both the top and bottom line, but I think we're even more excited about the future with Xywav launch upcoming, our progress on JZP-458, our upcoming data in a potential launch next year on idiopathic hypersomnia, and our opportunities on the corporate development side, and I want to end by thanking our employees for their continued focus during this unprecedented time on making sure we take good care of patients. So, Kathy, with that, back over to you.

Thank you, Bruce, and thanks, Chris, for your help today. Thanks to all of you for joining us today. We will be participating in the upcoming Morgan Stanley, Cantor, and BofA Healthcare Conferences, and hope to speak with many of you during these events. This now ends our call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.