Jazz Pharmaceuticals plc Q1 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to the Q1 2023 Jazz Pharmaceuticals Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrea Flynn, Vice President and Head of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its first quarter 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, Executive Vice President and Chief Financial Officer; Dan Swisher, President and Chief Operating Officer; and Rob Iannone, Executive President, Global Head of R&D; Kim Sablich, Executive Vice President and General Manager of the United States, will join the team for Q&A. 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 urge you to review the statements contained in today's press release, in our slide deck and in our latest SEC disclosure documents, which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in these forward-looking statements made on today's webcast. We undertake no obligation to update our forward-looking statements. Turning to Slide 3. On this webcast, we'll discuss non-GAAP financial measures. Descriptions of these non-GAAP financial measures and reconciliation 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.

Thanks, Andrea. Good afternoon, everyone, and thank you for joining us today. I'll start on Slide 5. In the first quarter of 2023, we once again delivered strong commercial results, continued to advance our pipeline and built on our record operational excellence. Our results this quarter underscore the durability and growth of our core commercial products and our enhanced R&D capabilities. On the commercial front, our focus on execution continues to drive key product sales, headlined by the strong performance of low-sodium Xywav. We're especially pleased that physicians and patients continued to choose Xywav, even as a high sodium oxybate authorized generic, or AG, entered the market. We continue to expect that Xywav will both grow and remain the oxybate of choice in 2023, even with the availability of high sodium oxybate AG and branded fixed dose high sodium oxybate. Xywav-active patients grew in both narcolepsy and idiopathic hypersomnia, or IH, in the first quarter. And our efforts to educate prescribers and patients about the benefits of Xywav remain effective and are resonating in the market. Xywav is now annualizing at more than $1 billion in net product sales, making it our largest product by net sales. As outlined in Vision 2025, we anticipate our oxybate franchise will generate $2 billion in revenue in 2025. We saw significant year-over-year growth in product sales for Epidiolex. Importantly, outside the U.S., we have now launched in all 5 key European markets. Demand for Rylaze remains strong in the U.S. with potential European approval later this year. Zepzelca remains the treatment of choice in second-line small cell lung cancer. And longer term, our ongoing effort to explore Zepzelca in several new patient populations, including first-line small cell lung cancer, may open up opportunities for meaningful growth. Moving to R&D, we continue to advance multiple investigational therapies in our pipeline and expect to have at least 3 late-stage readouts by the end of '24, including JZP150 in post-traumatic stress disorder, suvecaltamide in essential tremor and Zanidatamab in first-line gastroesophageal adenocarcinoma, or GEA. On the operational side, our strong execution drove significant top and bottom line growth in the first quarter compared to the prior year. We have a business that continues to generate meaningful cash flow. In line with our disciplined capital allocation, we continue to invest in areas of our business that we believe will drive the most benefit for patients and value for shareholders, including a robust pipeline with more than 20 novel candidates across neuroscience, oncology and cannabinoids. We are reaffirming our 2023 guidance, which Renee will discuss in more detail. Turning to Slide 6. Vision 2025 remains our strategic North Star, which we believe will deliver sustainable growth and enhanced value. We have made meaningful progress in all 3 areas of Vision 2025 and believe we are well positioned to achieve these important milestones, each of which is critical to our transformation into a high-growth global biopharma leader. I'll now turn the call over to Dan to review our commercial performance, after which Rob will share an update on our R&D progress. Renee will provide a financial overview, and then we'll open the call to Q&A.

Thanks, Bruce. I'm excited to share the continued progress across our commercial portfolio. I'll begin on Slide 8 with neuroscience and our oxybate franchise. We remain confident in the durability of our oxybate franchise and have established low sodium Xywav as the oxybate treatment of choice. Xywav became our largest product by net product sales as of the fourth quarter of 2022 and is annualizing at more than $1 billion as a result of continued adoption of both narcolepsy and IH. In the first quarter, average active Jazz oxybate patients increased to approximately 17,400, representing growth of approximately 5%, and total oxybate revenues, including royalties from high sodium oxybate AG, grew by approximately 6% compared to the year prior. In narcolepsy, we continue to focus on educating patients and prescribers on the benefits of reducing sodium intake, and this message is resonating. We were very pleased with performance in the first quarter and exited 1Q '23 with approximately 9,050 patients taking Xywav, an increase of approximately 500 patients from the fourth quarter of 2022. In IH, we see continued growth of new prescribers. And exiting the first quarter, there were approximately 2,000 IH patients taking Xywav. IH is a 24-hour sleep disorder, and Xywav is the first and only treatment approved by the FDA to treat the full condition of IH. Importantly, it has been studied across the multiple symptoms of IH. Our field force remains focused on educating prescribers on the importance of proper diagnosis and identifying appropriate patients for Xywav therapy. A recent Jazz survey of sleep specialists indicates that approximately 70% anticipate increasing their prescribing over the next 6 months. Slide 9 highlights the compelling low sodium health benefits we are sharing with healthcare professionals and patients. Narcolepsy is a debilitating chronic condition, and we have focused on education around the lifelong burden of high sodium intake for narcolepsy patients who live with an increased risk of cardiovascular comorbidities. Xywav is the only approved low sodium oxybate and has 92% less sodium than high sodium oxybates. The American Heart Association recommends a maximum of 1,500 milligrams of sodium per day; Xywav has 100 to 140 milligrams, a reduction of 1,000 to 1,500 milligrams of sodium per day compared to high sodium oxybate. This has significant potential health benefits, including lower blood pressure and improved cardiovascular health. To add to the literature on sodium impact, we presented data at this year's American Academy of Neurology meeting that showed narcolepsy patients treated with high sodium oxybate had a higher risk of new onset hypertension diagnosis and antihypertensive medication initiation within 180 days of starting therapy when compared to a mass control group of narcolepsy patients not being treated with high sodium oxybate. The risk of those taking high sodium oxybate was approximately twice that of the control group. With regard to oxybate competition, our high sodium oxybate AG was launched in January, and we anticipate additional AG and branded fixed-dose high sodium oxybate competition in the coming months. With competition now in the marketplace, I'll share a few key takeaways based on our experience in the first quarter. First, we continue to build on the successful launch of Xywav. It remains the only low sodium oxybate available to patients, and we expect it to be the only oxybate indicated for IH for the foreseeable future. Second, we expect that Xywav will both grow and remain the oxybate of choice in 2023, even with the availability of high sodium oxybates. I will highlight that the large majority of narcolepsy patients beginning oxybate therapy in the first quarter chose Xywav over high sodium oxybate. We expect to continue to see patients transition from both Xyrem and high sodium oxybate AG to Xywav. Third, we believe that the majority of patients and healthcare providers will continue to prioritize long-term health when evaluating oxybate therapy. The FDA continues to recognize 7 years of orphan drug exclusivity in July 2027 for Xywav in narcolepsy. FDA has also recognized the difference in sodium content between Xywav and Lumeris, a fixed dose high sodium oxybate, likely to be clinically meaningful in all patients with narcolepsy and that Xywav is safer than LUMRYZ in all such patients. I'll also note that branded fixed dose high sodium oxybate has the same sodium content as Xyrem and the high sodium oxybate AG. Xywav is the only approved oxybate therapy that does not carry a warning and precaution related to high sodium intake. All of these factors give us confidence that Xywav is a durable product that we believe will continue to be a core growth driver for Jazz. Moving to Slide 10, we are pleased with the continued growth of Epidiolex, with net product sales in the first quarter '23 growing by 20% year-over-year to $189 million. Growth was driven by underlying demand in the U.S. and expansion to new markets outside the U.S., and we are seeing increasing use of Epidiolex earlier in the treatment algorithm. We continue to see seasonality in ordering patterns in the U.S. with a combination of a more gradual build in inventory over the second half of the year and insurance plan resets with payers impacting the first quarter, not dissimilar to what we've seen historically with oxybate.

Thanks, Rob. I'll start with our top and bottom line results on '23. As a reminder, our full financial results are available in our press release and 10-Q. In the first quarter of 2023, we recorded impressive year-over-year revenue growth of 10%, achieving $893 million in total revenues. This was driven by growth of our key products in both neuroscience and oncology, including year-over-year double-digit growth of Xywav, Epidiolex, and Rylaze. Our disciplined capital allocation and focus on operational excellence drove adjusted net income of $285 million, growing broadly in line with our revenues compared to the same period in 2022. We continue to generate significant cash from our business, recording more than $300 million of cash from operations in the first quarter of 2023, an increase of 53% compared to the first quarter of 2022. With healthy cash flows and a strong balance sheet, we have strategic flexibility to invest in growth drivers within our current business as well as corporate development opportunities. Corporate development is an important component of Vision 2025, and we are actively assessing opportunities that we believe will deliver innovation for patients and contribute to building a sustainable business that provides meaningful returns to shareholders. Turning to Slide 24. We are reiterating the 2023 revenue guidance we provided in March. We are executing in line with our expectations and are confident in meeting those targets. The guidance reflects our strong performance in the first quarter, our expectations around the durability of our oxybate franchise, and anticipated growth across our key products. Our total revenue guidance range for 2023 is $3.675 billion to $3.875 billion, positioning us for year-over-year total revenue growth. Our 2023 guidance for neuroscience of $2.675 billion to $2.825 billion incorporates expected growth for both Xywav and Epidiolex, as well as the continued decline in Xyrem due to robust Xywav adoption and the introduction of competitive high sodium oxybates. As a reminder, our neuroscience guidance also includes high sodium oxybate AG royalties, which are recognized within total revenues under royalties, not under neuroscience net product sales. Due to the royalty structure within our AG agreement with Hikma, we expect our royalties to be significantly higher in the second half of 2023 relative to the first half. As a reminder, in the first half of 2023, while Hikma maintains exclusive rights to distribute high sodium oxybate AG, the royalty rate paid to Jazz is tiered and wide-ranging, starting at 10% and going all the way to 90% based on the volume of AG units sold as a percentage of total oxybate units, with the total referring to Xywav, Xyrem, and high sodium oxybate AG. During the second half of 2023, the royalty rate to Jazz becomes fixed at a rate where we and Hikma both have substantial economics regardless of the AG volumes. Our oncology guidance reflects expectations of continued double-digit growth for this franchise with a revenue range of $950 million to $1.05 billion, resulting in a midpoint of $1 billion. Continuing on Slide 25, our SG&A guidance for 2023 is a reduction compared to 2022, and we are tracking through the first quarter as expected. As we noted in our last quarterly update, our R&D guidance of $700 million at the midpoint represents enhanced investment over 2022, reflecting the growth and maturation of our pipeline, as Rob noted earlier in the call. On the bottom line, we expect to continue to deliver strong adjusted net income with 37% growth at the midpoint and a guidance range of $1.24 billion to $1.31 billion. The midpoint of our financial guidance implies an adjusted operating margin of approximately 46% for the year. We'll continue to prioritize commercial, R&D, and corporate development efforts that we believe will deliver the most value, leveraging our cash generation to invest in our business, improve our bottom line, and deliver strong shareholder returns. With our strategic investments, 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 to shareholders. I'd now like to turn the call back to Bruce.

Thanks, Renee. I'll conclude our prepared remarks on Slide 27. We started 2023 with significant momentum, and I'm pleased to report that we've continued making strong progress in the first quarter of 2023. On the commercial front, we've successfully launched multiple products over the past several years, which are now demonstrating strong and durable performance. Our pipeline is more robust than it's ever been in the company's history. We have at least 3 anticipated late-stage data readouts through 2024 that have the potential to continue to diversify and transform our business. We also remain focused on strategic capital allocation. With our strong cash flow, balance sheet, and margins, we have the flexibility to make significant investments across commercial, pipeline and corporate development to drive sustainable growth and enhanced value. That concludes our prepared remarks. I'd now like to turn the call over to the operator to open the line for Q&A.

Our first question comes from Jessica Fye with JPMorgan.

Can you provide some insights on how the launch of the Xyrem AG is performing compared to your expectations? Additionally, what types of business development opportunities are catching your interest in the current environment?

All right. Well, let's start with the question about the authorized generic. And then Renee, maybe you can jump in to handle corporate development. The most important thing to say about our first quarter with an AG on the market is that it's played out very much the way we thought it would thus far. We have a new entrant in the high sodium category when we are obviously growing Xywav as the only low-sodium product, both in narcolepsy and in idiopathic hypersomnia, where it remains the only approved product without an AG generic. The ability to grow in both narcolepsy and idiopathic hypersomnia in the face of AG generic, I think, is consistent with what we had guided to, and you saw us reaffirm our overall guidance for the year based on that first quarter experience. Renee, you want to take corporate development?

Sure. Thanks, Bruce. So corporate development continues to be an important priority for us, as I mentioned in our prepared remarks. In terms of the assets we are interested in, we are squarely focused on commercial and near-commercial assets as part of our Vision 2025 revenue goals. We think that Zanidatamab can certainly contribute to that goal, but it will not fully cover it. We also are looking at pipeline assets. We have a rather robust pipeline right now that we're pushing forward. We think we can continue to look at bringing in assets that can complement that pipeline. We do believe there are some good opportunities for us to transact across both of those areas. With respect to commercial or near-commercial assets, to be clear, we're not going to overpay for assets, nor do we think that we need to in this environment. So sitting here today, there are multiple opportunities we're interested in, and we're quite busy within that team. And then just to get a bit more specific in terms of the types of assets, we really tend to focus on areas of great unmet need where we think we can have a really meaningful impact for patients, where there's an addressable commercial call point that enables us to leverage our expertise, our global footprint and then create a durable revenue stream for the company. We're largely focused on neuroscience areas where we currently operate already. But certainly, we're also exploring rare and orphan areas outside of those 2 therapeutic areas, given the vast majority of our current commercial products are currently serving rare or orphan disease populations, so there's certainly applicable expertise that we have developed there. So we're excited. We think there's a lot of opportunity. We're well positioned also from a financial perspective to be able to transact.

Could you give us a little more color on what's going on in the IH market? We know the number of patients that you moved from last quarter to this quarter, but just some color, anecdotal information. Anything you can help us with understand what's happening behind the scenes?

Yes, Marc, let me turn that question over to Kim.

Yes. So we are continuing to see the growth in idiopathic hypersomnia is quite compelling with 2,000 active patients exiting the first quarter. And when you look underneath that, we see that we're continuing to bring new prescribers on board and creating a larger prescriber base, which is great. What we see is that as prescribers get experience with the product, as Dan mentioned in a survey of sleep specialists, 70% of them are indicating that they're going to increase their prescribing of Xywav for IH over the next 6 months. So good indicators of both the experience that they're having to date as well as their intentions in the future. But do keep in mind that Xywav remains the only FDA-approved treatment option for adults with idiopathic hypersomnia, which is a rare multiple symptom sleep disorder and the only treatment studied across the multiple symptoms of IH. We're really still just building this kind of non-existing market. And as a result, we're executing a comprehensive disease education campaign both for healthcare providers as well as patients across multiple channels and platforms. Our emphasis really is on educating prescribers on the importance of a proper and solid diagnosis and identifying the patients that are appropriate for Xywav. It's really important at the core of that as well since they've been so focused on the daytime symptom of excessive daytime sleepiness is reminding them that idiopathic hypersomnia is actually a 24-hour condition. Xywav can address multiple symptoms of idiopathic hypersomnia. Patients so far have been reporting that they're quite pleased with the comprehensive and customized support that they're receiving from Jazz during the path to access. Overall, we're feeling really good and remaining very confident in our ability to maximize the potential of Xywav in this really underserved market.

Just a question on the step-up, the meaningful step-up in the Hikma royalty in the second half. Is that driven off of the assumption that the Hikma AG volumes will step up in a big way in their sales? Or is it more just that the royalty rate spikes up in the second half? Or is it just sort of an accounting convention where you're realizing revenue and it may not perfectly align with the period which is captured? And then also just on the once-nightly oxybate, would you expect that to have to be stepped through the AG generics, just payers showing reluctance to pay for convenience?

Yes. On the first part of the question, Jason, it's pretty straightforward. The emphasis we're trying to put there is really that the royalty rate is expected to be meaningfully higher in the second half of the year. It's not really a timing or accounting thing. Hikma has been adding patients over time, so they probably have more patients at the end of the period than at the beginning of the period. That will contribute, too. But the royalty rate is meaningfully different. On the payer side and sort of high oxybate space and how they might handle that, Kim, maybe I'll come to you.

Sure. So we started out the year and we can experience greater than 90% of patients, commercial patients having payer coverage, formulary coverage for Xywav. We anticipate that to continue. We've been educating payers for some time now about the importance of reducing sodium, and we do believe that payers are generally understanding the importance of that reduction. They're seeing the fact that Xywav is the oxybate market leader with more than half of all oxybate patients on Xywav, and the fact that we've continued to grow this leading position over the high sodium oxybate. We anticipate that as other high sodium oxybates, including the high sodium AG oxybate, are added to formularies that we expect Xywav to maintain broad commercial coverage.

Maybe one on the pipeline for JZP150 and PTSD since we're going to see those data this year. Maybe what sort of change in the cat scale do you think is clinically meaningful or would support additional investment in this program? And placebo response rates can be historically pretty variable in neuropsych indications. So is there anything that you can do in the context of the Phase II to try and minimize placebo response?

Sure. I'd be happy to take that. On the first part, we haven't said exactly what we think will be clinically meaningful, but we certainly had discussions with FDA and key experts. We feel that the study is well-powered with the 2 dose levels that we've included. To your point, it's a well-controlled design with placebo. We certainly think the severity of the patients that we're recruiting in the well-established endpoint will allow us to differentiate from any placebo effect that you might see in that particular population, which is pretty severe upon study entry.

Maybe just, following on from an earlier question about the IH market. Can you maybe just elaborate a little bit on the willingness you're seeing in the field of prescribers to use a sleep-promoting agent for the IH patients, especially those patients with heavy sleep inertia? Are you seeing prescribers initially try it with some patients with less intense morning sleep inertia? Just any color there on that education you called for prescribers.

Kim?

Sure. I think if there are physicians out there that are hesitant to use a sleep-promoting agent, that just highlights the education that we need to do in this marketplace. As I mentioned earlier, we're working to educate prescribers that IH is actually a 24-hour condition and that we can address both the daytime and nighttime symptoms of IH. Once they understand that the daytime symptoms, including sleep inertia, are the result of poor sleep quality at night - what we call non-restorative sleep - they understand why treating with Xywav at nighttime makes sense. We're making progress there, and education is key to changing their understanding and their beliefs.

I have one question and one follow-up. Regarding suvecaltamide, it appears that the endpoint you're examining is largely the same as what Praxis studied in their report earlier this year, where some of the performance with the PS scores was unclear. I'm curious about what you anticipate observing from your study and its endpoint that you plan to evaluate moving forward. As a follow-up regarding the dynamics in the oxybate market, is it accurate to say that there aren’t significant switches to the generic, and it primarily comes down to physician choice? In that situation, who is actually prescribing the generic Xyrem?

Yes. So thanks for the question. We feel as though we learned a lot from the T-CALM study, the Phase IIa study, in a number of respects, including not only the endpoints but how to measure the endpoints. We certainly noticed that it can be challenging to assess performance aspects of the TETRAS through a remote server. So in our trial, we're not doing that. Overall, the combined TETRAS endpoints having to do with activities of daily living and performance scale, is agreed upon with the FDA and is certainly something we were able to evaluate in our T-CALM study, and we have confidence around our drive. I would also highlight differences in trial lines potentially, but I would also highlight differences in drugs. Our agent is a state-dependent modulator, and that's critical because it allows us to potentially push the dose into higher efficacious ranges given the differential activity on pathologic calcium ion channels versus normal resting state channels. So we think we have a differentiated asset and we're able to push the doses and evaluate those 3 doses in a Phase II design that's supported by our prior data.

And Kim, on the AG uptake, you want to make a comment on that?

Yes, sure. I mean, so we don't have exact data on that. What I'll say is that we're continuing to see nice uptake, as Bruce said, of Xywav in the face of the AG. Switching dynamics can happen in a number of places. They can happen with the payer, which I don't think we're really seeing as the case right now. They can happen in the HCP or they can even happen at a pharmacy. We've talked about that Xywav, in particular, is not therapeutically equivalent or AB rated. So we don't anticipate for switching at the pharmacy with Xywav, but that is certainly a place where switching can happen from Xyrem to the AG.

Just two quick ones from me. Firstly, could you comment on the access that you have to the neurologists and physicians with regard to Epidiolex? And your thoughts around upside or commercial scope for the rest of the year from an access perspective? And secondly, a minor question, should we anticipate any further updates on your litigation with Avadel post the delisting direction that you received from the court?

I'll take the second part of the question first and just say that we're not going to comment on ongoing litigation. But Dan, why don't you talk about Epidiolex access sort of worldwide?

Yes. Just sort of thinking more broadly about Epidiolex, the 20% year-over-year growth is great, and we remain confident that we're near blockbuster status for that brand. In both markets, we've got strong HCP engagement, face-to-face engagement. We've got great access as we had some wins coming into the U.S. market. We've always had the quantity of access, but now we've got the quality of access. In Europe, France was the last of the 5 major countries to get access, and we're continuing to drive in the smaller markets, both reimbursement as well as TSC reimbursement for that indication. The stage is well set with the face-to-face interactions, the ability to talk to the HCPs not only about the clinical rationale, thanks to the seizure benefit in the combination of Clobazam but also some of the BECOME data from caregivers that was shared, which had behavioral and cognition outcome. The areas I mentioned in the presentation or the prepared remarks about additional areas of growth with enhanced focus, with adults. Adults were also getting to those physicians had been impacted by COVID. So we see that plus long-term care as an area to further double down on, as well as optimal dosing, etc. I think the stage is well set, and we're pleased with the year-over-year growth and where the brand is going for 2023.

Maybe on the corporate and business development front, how do you think about the boundary between commercial versus near-commercial assets as each quarter moves forward towards 2025? Is there a sense that like if you get to a certain point, it really shifts from commercial or near-commercial to really wanting to be commercial assets to kind of contribute meaningfully to Vision 2025?

Yes. Thanks for the question. I would say our primary focus is ensuring that we're targeting assets that we think can have a really meaningful benefit for patients, a meaningful impact. Therefore benefit our business and our shareholders. With respect to that on commercial or near-commercial, it really depends on the asset. It depends on the nature of the underlying business that it's an M&A type of opportunity, where you're gaining access to a significant amount of expertise that you're going to continue, or whether we're looking at something that we can drop right into our footprint. Our focus is essentially the long-term value generation, durability of the asset, how it fits into our overall portfolio. We do think there are opportunities to ensure that we're hitting our Vision 2025 goal, but we're not focused myopically just on that goal. We're focused on broader growth and the longer-term sustainability and enhanced value.

Bruce and team, congrats on the progress. Bruce, maybe just spinning back to Xywav and as you go to market with the low sodium messaging, which we acknowledge is rather intuitive. I'm just curious what barriers would you point to that you think are perhaps underappreciated by investors and others as that message to gain traction and pull-through with Xywav?

Kim, why don't I let you take this one?

Sure. We believe our low sodium messaging is connecting well with healthcare providers and many patients, as shown by the number of patients who have started using Xywav. However, as we have onboarded most subscribers and many have switched a significant portion of their patients, the primary barriers we encounter from prescribers include two main points. First, some patients do not want to switch because they feel that Xyrem has changed their lives. The loyalty patients have towards Xyrem should not be underestimated, and they are hesitant to take any risks despite assurances that the active ingredient is the same in both products. We are actively working on educating these patients about Xywav and making steady progress. The second common barrier is that smaller healthcare practices feel they lack the resources to transition patients. While these practices are beginning to start patients on Xywav and recognize the benefits of sodium reduction, transitioning patients requires effort. Larger offices have adequate staff to handle this, but smaller offices often feel they do not have enough manpower for the task.

This is Akash. Regarding the guidance, if the current trend in Q1 persists for the remainder of the year, with 250 new IH patients and 500 new Xywav narcolepsy patients, as well as over 1,000 new patients, and assuming the same year-over-year dollar growth rate as last year, your franchise appears to be leaning towards the lower end of fiscal year guidance. What do you think we might be overlooking? Additionally, I have a quick question about orexin.

Yes, I'll take the first part and then come to Rob and just say our guidance coming into the year was a couple of months ago and was at the franchise level, neuroscience and oncology, we didn't get into product level. As we're saying today, we're very pleased with the way the first quarter progressed. We think we're right in line with all our expectations to achieve that overall guidance. So we're not going to get more specific on that. Rob, maybe you could take the orexin part of the question?

Yes. The question I heard was, do we expect the dose to be different across patient populations? So correct me if I didn't hear that. I would say the dose, of course, depends on the drug itself and factors such as high availability and potency. Within any given drug, there is the possibility that different doses might be needed across different populations. We know that the relative level of orexin in the brain may differ between NT-1 and NT-2 or other sleepy populations because we're certainly interested in other populations as well. As you know, we have an ongoing program where we're evaluating and learning effects in healthy volunteers. Ultimately we use those data to transition to patients to understand best for 441, but the most appropriate dosing would be in different patient populations.

Just following up on the Xywav survey. Did the survey include physicians that haven't yet prescribed Xywav as well as current Xywav prescribers? And for those that plan to increase their prescribing of Xywav for IH, what were some of the key reasons behind the predictions? I'm curious to hear your thoughts about diagnosis rates growing, patient awareness growing, any additional color on the survey learnings would be helpful.

Sure. I'm happy to provide that information. I believe the survey targeted specialists in general, meaning the increase reflects both those who have tried the product and those who haven't. I don't have specific details on whether the survey asked about the reasons for this, but based on qualitative feedback from physicians, the main reason they continue to use more of it is that it is performing as expected from the Phase III clinical trial, which exceeded the healthcare community's anticipation. They were very enthusiastic about those results and pleased to see the product performing consistently with those expectations, receiving positive feedback from patients. Additionally, the payer coverage has been supportive, and the patient experience in accessing the product has been very positive. Many of these patients have had limited treatment options beyond off-label weight-promoting agents and stimulants over the years, and those taking those options still aren't achieving the desired clinical outcomes. That's the straightforward situation we've been observing in the marketplace.

You mentioned that 60% of U.S. providers are using Epidiolex earlier in the treatment algorithm. What do you think it will take to further drive this in a greater proportion of providers? And what kind of initiatives do you have to help accomplish this?

Kim, do you want to start on that one?

Yes, I can speak from the U.S. Again, we are quite pleased with how Epidiolex has been coming along not just this quarter, but the past year. The 20% year-over-year growth is very rewarding after years of being under COVID and not being able to interact with this community that's still quite new to Jazz. Key to that really is continuing to have a very high-level engagement with our customers that was absent there for a number of years in terms of access to treatment centers and physicians' offices. We're having some really great discussions and seeing the light bulb go off with quite a few of them, with more prescribers coming on board. In terms of driving growth moving forward, and that's very encouraging, is that we've got some really great clinical data, the data we've been out there with for about a year now showing the great impact that you can have in combining Clobazam with Epidiolex. We're really getting a lot of traction with that in the marketplace. It's getting HCPs really to reconsider why they're not using more of - or using it earlier in the treatment algorithm as that 60% shows. Earlier this year, we started to go out there and talk about more than just seizure control through this care-driver survey called BECOME, showing HCPs quantitatively what they've actually been hearing from caregivers since the launch of Epidiolex, that is that the caregiver sees improvements in behavior and cognition in the patients that they're caring for. The areas that I mentioned in the presentation or the prepared remarks about additional areas of growth with enhanced focus on adults, were also influenced by the fact that COVID impacted many institutions. We've been able more recently to get in there, and we're excited about more fully penetrating the adult market, particularly in the long-term care setting. Last thing in the U.S. I'll say is that HCPs are still underdosing this product. They're not achieving optimal dosing, which is not achieving the optimal outcome for the patients. We're continuing to deliver and putting out there some new programs to really educate them on what optimally dosing Epidiolex looks like, so they can have an even more positive experience with it moving forward. That's within the U.S., and we have a number of ex-U.S. launches expected this year.

I have two. So with respect to Avadel's LUMRYZ, I mean in your view, could payers push narcolepsy patients towards using a once-nightly product if Avadel comes in with a significant price discount? And then second, like do you think LUMRYZ can also be used off label for IH? As we understand, IH patients can particularly struggle with taking a second dose, at least based on our KOL feedback, they're getting to hear that up to 1/3 of IH patients can skip their Xywav dose. I don't know if you have any data that can elaborate on that point?

Yes. Kim, do you want to jump in on this?

Sure. We've talked a little while ago about payers in general. Our strategy there is not changing. We've been talking to payers for some time about the benefits of low sodium Xywav. We do believe that payers are understanding the importance of that, and they understand that HCPs are increasingly choosing Xywav and that greater than 50% of patients are on Xywav today. They're enjoying nice rebates on Xywav today. I do believe that as other high sodium oxybates come onto the market and they're ultimately added to formularies that Xywav is going to continue to maintain a broad commercial coverage. You asked about idiopathic hypersomnia. We don't expect the approval of FT218 will affect the IH market as it's not approved for idiopathic hypersomnia. Xywav is still the only FDA-approved therapy for this condition, and I think it's good to remind you that Xywav can be administered as either twice nightly or once-nightly regimen for IH in adult patients. That's what the label allows.

So wanted to get your thoughts on the potential impact of pitolisant or WAKIX on Xywav to the extent that, that product eventually gets approved? And then secondly on the Orexin. I think I've asked this before, but I wanted to take your reign on it. Any thoughts on why you're dosing it at night here? It seems a little counterintuitive. So I was wondering if there's any reason mechanistically or from a PK perspective that you're doing so?

Yes, I didn't fully understand it either, Bruce. The question is why would you be dosing orexin at night? I'm sorry, I didn't follow it.

If I understood that question, that was about orexin. Rob, do you want to take that one first?

I was just going to say on pitolisant, I mean we - it's all going to depend on the data, of course. But Xywav has got some very powerful efficacy across multiple endpoints to treat the full condition, and having a nighttime therapy is resulting in significant benefit through the day, whereas pitolisant, similar to the wake-promoting agents, will be used during the day, and it's always going to be a bit of a challenge for the long sleepers because you have to be awake to take the oral dose. We don't see it as a significant threat or a displacement. But again, more treatment options for these patients and more commercial noise and education around IH would be a benefit for us.

All right. Thanks, operator. So just to wrap, thanks for the wide-ranging questions. I think we hit pretty much all the key topics that we covered in our news release and in our script. I don't think we got many questions on oncology. I'll just reiterate, we're really excited for the growth of our oncology franchise led by Rylaze and Zepzelca. Didn't get many questions on Zanidatamab, but lots of news upcoming there with additional clinical data presentations. We're looking forward to the progress of that program rapidly. Most importantly, we're continuing to be focused on Vision 2025. Remember that we've got upcoming Phase IIb Zanidatamab BTC data at ASCO in June. That's the first time Zani findings are going to be featured during an oral session at a major oncology conference. Immediately after the presentation, we're hosting a webcast where Dr. Shubham Pant, who is presenting the data at ASCO, will review the findings. We're also presenting multiple data sets at this year's American Academy of Sleep Medicine Annual Meeting at ASCO or sleep, we may see you there. Also note, we're participating in the upcoming RBC Investor Conference on May 16. Let me close today's call by recognizing our Jazz colleagues for their work to deliver new therapeutic options to patients. I want to thank our partners and shareholders for their continued confidence and support. Thank you all for joining us today.

This concludes today's conference call. Thank you for your participation. You may now disconnect.