Jazz Pharmaceuticals plc. (NASDAQ:JAZZ) Q2 2024 Earnings Conference Call July 31, 2024 4:30 PM ET

Company Participants

Andrea Flynn - Vice President and Head-Investor Relations
Bruce Cozadd - Chairman and Chief Executive Officer
Renée Galá - President and Chief Operating Officer
Rob Iannone - Executive Vice President and Global Head-R&D
Phil Johnson - Executive Vice President and Chief Financial Officer

Conference Call Participants

Jason Gerberry - Bank of America
Marc Goodman - Leerink
Jessica Fye - JPMorgan
Annabel Samimy - Stifel.
Gregory Renza - RBC Capital Markets
Joseph Thome - TD Cowen
Akash Tewari - Jefferies
Ami Fadia - Needham
Andrea Tan - Goldman Sachs
Jeff Hung - Morgan Stanley
David Amsellem - Piper Sandler
Gary Nachman - Raymond James
Mohit Bansal - Wells Fargo
Balaji Prasad - Barclays
Joon Lee - Truist Securities

Operator

Thank you for standing by. My name is Mandeep, and I’ll be your operator today. At this time, I would like to welcome everyone to the Jazz Pharmaceuticals 2024 Second Quarter Earnings Call. All lines have been placed on mute to prevent any background. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you.

I would now like to turn the conference over to Andrea Flynn, Vice President and Head of Investor Relations. You may begin.

Andrea Flynn

Thank you, operator, and good afternoon, everyone Today, Jazz Pharmaceuticals reported its second quarter 2024 financial results. The slide presentation accompanying this webcast is available on the Investors section of our website. Investors may also refer to the press release we issued earlier today, which is also posted to our website.

On the call today are Bruce Cozadd, Chairman and Chief Executive Officer; Renée Galá, President and Chief Operating Officer; Rob Iannone, Executive Vice President and Global Head of R&D; and Phil Johnson, Chief Financial Officer.

On Slide 2, I’d like to remind you that today’s webcast includes forward-looking statements, such as those related to our future financial and operating results, growth potential and anticipated development and commercialization milestones and goals, which involve risks and uncertainties that could cause actual events, performance and results to differ materially from those contained in these forward-looking statements. We encourage you to review the statements contained in today’s press release, in our slide deck and the risks and uncertainties described in our SEC filings, which identify certain factors that may cause the company’s actual events, performance and results to differ materially from those contained in the forward-looking statements made on today’s webcast. We undertake no duty or obligation to update our forward-looking statements.

As noted on Slide 3, we will discuss non-GAAP financial measures on this webcast. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today’s press release and the slide presentation available on the Investors section of our website.

I’ll now turn the call over to Bruce.

Bruce Cozadd

Thanks, Andrea. Good afternoon everyone and thank you for joining us today. I’ll open with a brief overview of the second quarter and then move to an update on our view of the business moving forward. Beginning with the results for the second quarter on slide 5, our strong commercial performance generated our largest revenue quarter ever, with more than $1 billion in total revenues across our growing and diversified portfolio of medicines.

Looking at our neuroscience therapeutic area Xywav remains the oxybate of choice and it’s durability is underscored by a 13% increase in net product sales compared to the same quarter in 2023. In narcolepsy we see strong patient demand and Xywav remains the number one treatment.

For Idiopathic hypersomnia or IH Xywav remains the first and only approved therapy for this condition and we are continuing to build the market. Closing in on its sixth year of availability, Epidiolex continues to grow with sales reaching approximately $247 million in the quarter reinforcing our belief in its blockbuster potential. Patient demand is being driven by multiple U.S. commercial initiatives which Renée will cover in more detail and we're pleased with our progress on market expansion outside the U.S.

Our oncology therapeutic area continues to perform well and I'll highlight that Zepzelca had a particularly strong quarter. With Rylaze, we continue to see high utilization in the pediatric population while adoption in the adolescent and young adult market is proceeding a bit more slowly than anticipated.

Moving to our R&D and pipeline efforts, we are expecting data readouts from late stage and de-risk programs within the next several quarters including for Zanidatamab and first line gastroesophageal cancer or GEA, Epidiolex in Japan and Zepzelca and first line small cell lung cancer each of which represents a potentially meaningful value inflection point.

On the operational front, we continue to generate strong top-line growth and cash flow during the second quarter. This ongoing financial and operational strength is a result of our focus on maintaining discipline capital allocation and investing in opportunities that we believe have a clear value proposition and return on investment. Later in the call, Phil will provide an overview of our updated guidance which was also outlined in today's press release.

Turning to slide 6, I want to comment on Vision 2025 why we rolled it out, the progress we've made, and how we'll handle 2025 going forward. In 2021, investors expressed significant concerns about the future of our business given looming oxybate competition. We saw a brighter future where we could drive substantial growth in our business while diversifying away from Xyrem.

In early 2022, we introduced Vision 2025 to communicate that. We expected our oxybate franchise to grow through the entry of generics as well as branded competition driven by Xywav and both narcolepsy and IH. We saw potential for Epidiolex to become a blockbuster product. We expected substantial growth in our oncology business. We would use corporate development to augment our pipeline and future growth prospects and we saw opportunities to increase operating margin as our business scale.

Turning to slide 7, how have we delivered against those priorities? Comparing our 2021 revenue to our 2024 revenue guidance our overall revenue is projected to grow from $3.1 billion in 2021 to $4 billion to $4.1 billion in 2024. We have grown our total oxybate revenue to approximately $1.9 billion over the past four quarters which is higher than it was in 2021 with Xywav having grown from $535 million to approximately $1.35 billion.

In the last four quarters Epidiolex revenue was approximately $920 million including approximately $247 million in the second quarter and we're confident in achieving blockbuster status and our oncology business has already achieved blockbuster status generating nearly $1.1 million in revenue in the last year up from roughly $734 million for the full year of 2021.

In terms of diversification, this quarter's Xyrem including AG royalties represented approximately 11% of our total revenue down from 41% in 2021. On the corporate development front, zanidatamab was not part of Jazz's pipeline when we rolled out Vision 2025.

While it won't contribute $500 million to revenue in 2025, over the long-term, we believe it has the potential to provide much more revenue and value than other corporate development deals we could have done that offered more near-term revenue but less peak revenue and durability.

In terms of operating margins, they will vary with where we are in the product life cycle across our portfolio. You should expect margins to be lower when we're investing in late stage clinical development of promising assets and when we're making early commercial investments to drive uptake. And you should expect them to move higher as revenues scale post-launch, as we experienced in 2022. We'll continue to use a mid-to-long-term framework to ensure we allocate capital to maximize benefit for patients and value for Jazz, not just maximize near-term margins.

Continuing to slide 8, Vision 2025 provided a useful roadmap externally and internally. However, it's become clear in our conversations with investors that is no longer the case and it is creating too much focus on one single year in our future, including whether or not we'll manage our business for long-term value or to achieve near-term metrics. So we are no longer providing the Vision 2025 metrics and will revert to how we manage and communicated with you about our guidance pre-Vision 2025. We will provide our 2025 guidance on our fourth quarter 2024 earnings call, which will reflect our expectations on key developments and advancements across our business.

Our commercial R&D, corporate development and operational excellence priorities remain unchanged. Specifically, achieving commercial excellence to drive growing and diversified revenues, reaching more patients and creating value for your role by making smart investments in our pipeline, including for development and being disciplined capital allocators, making trade-offs across our business to best invest for long-term sustainable growth and value. We are focused on executing on these priorities and continuing to make the changes to and investments in our company that we believe will drive success for Jazz. We also remain committed to being a great place to work and cultivating a high-performance organization that is focused on bringing innovative medicines to more patients and delivering shareholder value.

In terms of people, capabilities, assets and financial resources, we are as strong a company as we've ever been and I'm very confident in our future.

I'll now turn the call over to Renée to review our commercial performance, after which Rob will share an update on our R&D progress. Phil will provide a financial overview and then we'll open the call to Q&A. Renée?

Renée Galá

Thanks, Bruce. Starting on slide 10, I'm excited to provide an update on our commercial progress during the second quarter. Total revenue from Sleep, which includes Xywav and Xyrem net sales plus royalties from high sodium oxybate authorized generics, or AGs, was $485 million during the second quarter of 2024, compared to approximately $492 million during the same period in 2023.

In the second quarter, Xywav net product sales grew 13% year-over-year to approximately $368 million. We remain confident in the growth and durability of Xywav and expect it to continue to be the oxidative choice. Following the historical pattern, the seasonal inventory headwinds from payer reauthorizations and churn we experienced with Xywav during the first quarter returned to normalized levels during the second quarter. I'll also note that a large number of narcolepsy patients initiated Xywav therapy in the first quarter of this year as a result of Xyrem being removed from certain formularies, with a meaningful percentage of those patients initially utilizing bridging and support programs as they transitioned to Xywav.

In the second quarter, we've seen a normalization in the use of these programs as many of those patients who initiated in the first quarter resumed commercial coverage following the usual benefits review and authorization process.

Turning to our quarterly patient metrics, there were approximately 9,925 narcolepsy patients taking Xywav exiting the second quarter, an increase of approximately 25 patients from the prior quarter. I'll highlight that we are receiving promising early feedback from the field nurse educator program we launched earlier this year. This program enables new Xywav patients to interact in person with trained healthcare professionals as they begin oxybate therapy, providing an additional layer of support during the time when patients are titrating and optimizing their oxybate therapies and are most likely to have questions or discontinue treatment.

Moving to IH, we continue to view this indication as the strongest growth opportunity for Xywav. Exiting the second quarter, there were approximately 3,300 active IH patients on Xywav, an increase of approximately 250 from the prior quarter. Our expanded field force has been active in the market for a full quarter now, with a particular focus on increasing the depth and breadth of IH prescribers, which continues to drive demand.

Similar to narcolepsy, our field nurse educator program is active and helping patients navigate initiation of oxybate treatment. This is especially important in the IH community, which has less experience with oxybate compared to the narcolepsy community.

Outside of the brand of oxybate business, we recognized approximately $54 million in AG royalty revenue in the second quarter. We remain confident that high sodium AG royalty revenue will exceed $200 million in 2024.

Moving to slide 11, Epidiolex growth remains strong, with net product sales of approximately $247 million in the second quarter, representing a 22% increase compared to the same quarter in 2023. Given slightly different inventory build and burn patterns affecting the first two quarters of 2023 and 2024, I think it's helpful to look at Epidiolex growth over the first half of 2024, where net product sales increased approximately 14% compared to the same period last year.

Overall growth in the second quarter was driven by our U.S. commercial initiatives, as well as ex-U.S. geographic expansion. We remain confident in the long-term growth prospects and blockbuster potential of Epidiolex. Key drivers of increased demand in the U.S. included the positive response to data on the benefits of Epidiolex beyond seizure control, such as language and communication, cognition, executive function, and emotional and social function, as well as synergies from treatment with Epidiolex plus Clobazam [ph].

We're also continuing to see increased penetration in the adult patient setting, which is supported in part by data showing that many patients may reach adulthood without a specific LGS diagnosis, and by providing HCPs with clear diagnostic tools for adult patients. We also launched a virtual nurse navigator program during the quarter, providing Epidiolex patients and their families with a resource to discuss medication-related topics, such as optimized dosing. It's still early, but the initial response to this program has been exceptionally positive.

Further opportunities for growth include continued education to support optimal dosing, focused data generation and geographic expansion beyond the more than 35 countries where Epidiolex is currently approved, with additional launches and market reimbursement expected later this year.

Moving to slide 12 and our oncology business, total oncology revenue for the quarter was approximately $277 million. Rylaze’s net product sales of approximately $108 million represent a 6% increase from the second quarter of 2023. Rylaze demand continues to be driven by several factors, including its near-universal adoption in pediatric asparaginase-based oncology protocols in the U.S., and adoption of the Monday-Wednesday-Friday dosing regimen. We continue to see the most opportunity for growth in the adolescent and young adult, or AYA, market, and we are continuing to educate oncologists who treat these patients about the benefits of asparaginase therapy.

Turning to slide 13 and Zepzelca, we saw significant growth this quarter, with net product sales increasing 15% year-over-year to $81 million. Zepzelca remains the number one treatment for second-line small cell lung cancer patients, and the overall survival and real-world evidence data underscore the positive benefit-risk profile for this difficult to treat population. We also believe that physicians gained valuable experience with Zepzelca during the platinum chemotherapy shortage that has influenced their treatment decisions.

Healthcare providers continue to deliver positive feedback on the product's clinical benefits, as well as ease of use and administration for patients and their healthcare practices. Beyond Zepzelca’s use in second-line treatments, there is a clear unmet need for small cell lung cancer patients in first line treatment. If our ongoing Phase 3 trial of Zepzelca in first line small cell lung cancer is positive. We believe, we have an opportunity to drive significant growth. And most importantly, improve patient lives and outcomes.

With that, I will turn it over to Rob for an update on our pipeline and upcoming milestones. Rob?

Rob Iannone

Thanks, Renée. Slide 15 provides an overview of the key clinical programs in our diversified pipeline. We have catalysts across oncology and neuroscience in the near future, including anticipated data readouts from late stage e-risk programs. I'll begin with oncology and Zanidatamab, our highest priority pipeline program.

Since our last quarterly report, we have made significant progress toward advancing our regulatory strategy. During the second quarter, FDA accepted and granted priority review for our BLA for the treatment of previously treated, unresectable, locally advanced, or metastatic HER2-positive second line biliary tract cancer, or BTC, setting an action date of November 29, 2024.

Based on communication with the FDA to date, we do not expect the agency to hold an Oncology Drug Advisory Committee, or ODAC, meeting in connection with the review of our BLA. In addition, the EMA has validated our Zanidatamab marketing authorization application with potential approval as early as the second quarter of 2025. We are also progressing our Phase 3, first-line, gastroesophageal adenocarcinoma, or GEA, trial. Enrollment remains on track. As a reminder, this is an events-based trial, and the readout timing is not exact.

Based on an updated, blinded assessment of progression events relative to the initial protocol assumptions, we estimate top-line progression-free survival, or PFS, data will be available in the second quarter of 2025. If the trial is positive based on PFS and supported by a trend in the interim overall survival analysis, we expect it would support registration. I'll speak more to our Zanidatamab development plan in just a moment.

We are also pleased with the progress of the ongoing Zepzelca small cell lung cancer first-line trial. We expect top-line PFS data for Zepzelca in combination with the centric and first-line extensive-stage small cell lung cancer in late 2024. If approved, this new indication would enable more patients with small cell lung cancer to potentially benefit from longer duration of therapy with Zepzelca.

Turning to Epidiolex, we anticipate top-line data from our Phase 3 trial in Japan in the second half of 2024. We were disappointed that the Phase 2b trial of suvecaltamide for essential tremor was not positive. While we do not anticipate further substantial investment in the ET program, we are continuing to analyze the data to better characterize the treatment effect and larger-than-expected placebo response. Pending results from the ongoing Phase 2 trial in Parkinson's disease tremor, which are expected in the first quarter of 2025, we will determine next steps for the program if any.

I'd also like to provide an update on JZP441, our clinical stage orexin-2 receptor agonist. Based on further review of the Phase 1 data and pending feedback from the FDA, we are planning to initiate a small Phase 1b trial of JZP441, in NT1 patients. We expect data from this trial will further our understanding of JCP441 and orexin-2 agonism, providing key learnings that could have formed future development efforts.

Now, turning back to Zanidatamab, slide 16 provides more detail on our development plan. We have meaningfully progressed Zanidatamab development across multiple indications since bringing it into Jazz, and we remain excited about the potential of Zanidatamab to transform the current standard-of-care in multiple other HER2-expressing cancers, including in cases resistant to prior HER2 therapies. Our development plan represents a robust investigation of this molecule, including an ongoing trial in GEA that we believe would support registration in that indication and several trials in breast cancer. We are pleased to announce we have initiated the Phase 3 EmpowHER trial, which is designed to evaluate Zanidatamab in combination with chemotherapy after progression on in HER2, where we have the opportunity to be the first HER2 targeted therapy to demonstrate efficacy and safety in breast cancer patients post in HER2.

On slide 17, we continue to be impressed by the maturing data in BTC. At ASCO in June, we presented overall survival and longer-term follow-up data from the Horizon BTC-01 trial, evaluating Zanidatamab in patients with previously treated HER2 positive biliary tract cancer. For the trial's primary endpoint, results demonstrated that a confirmed objective response rate was maintained at 41.3%, and one additional patient achieved a complete response since initial findings were presented at the ASCO annual meeting in 2023. The median duration of response, one of the trial's key secondary endpoints, increased by approximately two months to 14.9 months.

Zanidatamab also demonstrated a median overall survival of 15.5 months in all patients with HER2 positive BTC and 18.1 months in patients with centrally confirmed immunohistochemistry 3-plus tumors. In our view, these results highlight the clinically meaningful benefits of sustained responses with continued treatment with Zanidatamab, also supporting its differentiation from other HER2 agents.

Overall, we're excited about delivering Zanidatamab to BTC patients in the near term, and we're executing on a robust development plan based on our conviction that Zanidatamab has significant potential to improve care for patients with multiple HER2 positive tumors.

Now I will turn the call over to Phil for a financial update. Phil?

Phil Johnson

Thanks, Ron. I'll start with our top and bottom line results on slide 19. As a reminder, our full financial results are available in our press release and 10-Q. In the second quarter of 2024, we achieved more than $1 billion in total revenues. This was driven by growth of our key products in both neuroscience and oncology, including 15% growth of Xywav, Epidiolex and Rylaze combined compared to the second quarter of 2023.

Our disciplined capital allocation, and focus on operational excellence drove a just net income of $365 million, which represents an increase of 12% compared to the same period in 2023. We continue to generate significant cash from our business, recording approximately $331 million of cash from operations in the second quarter. Our strong overall financial position means we have significant flexibility to invest in priority commercial and R&D programs, as well as corporate development opportunities.

Turning to slide 20, our guidance updates do not reflect substantially changed expectations for the year. Rather, they reflect the fact that with six months of actual results under our belt, we have greater visibility into the likely variability around our estimates, with two exceptions, our oncology revenue, where we do foresee modestly lower revenue, and our share count, which we expect to be substantially lower. The primary driver of our revised outlook for full year oncology revenue is that as previously noted, in the first half of the year, we have not seen the uptake in the adolescent and young adult market needed to support our initial expectations for second half Rylaze revenue. This was being partially offset by continued strong performance of Zepzelca.

On Rylaze, as we continue to see opportunity for growth in AYA, but it will take time to build that market. For neuroscience revenue, year-to-day performance gives us confidence we are tracking well to our expectations and points to less variability on both sides of our estimates, so we are narrowing the range accordingly. The net effect of these changes is to narrow our expectations for total revenue from a range of $4 billion to $4.2 billion to a range of $4 billion to $4.1 billion.

Moving on to the next slide and the rest of the income statement, gross margin percent guidance is unchanged at 93%. Expectations for operating expenses are largely unchanged as well, but we do think it's unlikely we'll achieve the lower end of our initial guidance range, so we've narrowed the ranges accordingly.

For SG&A, items we discussed on the first quarter call, like higher litigation expenses and the bad debt write-off, contribute to making the low end of our initial guidance range unlikely. And we're making targeted incremental investments to drive up the dialect sales and prepare for the Zanidatamab launch, funded in part by reduced investment in other areas.

On R&D, I would note that our Zanidatamab development program is progressing as expected, giving us greater visibility into our expected full year R&D spend. In addition, we've narrowed guidance for our effective tax rate to a range of 10% to 12%. Adjusted mid-income guidance remains unchanged at $1.275 billion to $1.35 billion, while our GAAP and non-GAAP EPS guidance range has been increased by approximately $1 per share to reflect lower shares outstanding, driven by the election to repay the principle of the 2026 convertible note in cash, and to a lesser extent, our second quarter 2024 share repurchases.

Earlier this month, we finalized a repricing of our term loan B, reducing the interest rate by 86 basis points. At the current amount outstanding under the term loan, this equates to anticipated annual interest savings of roughly $23 million. We've reflected the expected current year savings in our updated guidance.

I would note that the election we made to repay the principle of our 2026 convertible notes in cash is similar to the election we made last year on our 2024 convertible notes. The 2024 notes mature in mid-August, and we're evaluating whether to refinance the notes or to repay them with available cash.

As outlined in our earnings press release, in the second quarter, we effectively exhausted our prior share repurchase authorization, repurchasing just over $161 million in shares in June. To enable future share repurchases, our board has approved a new $500 million authorization with no expiration date. If you think about allocation of capital moving forward, note that in recent quarters, free cash flows primarily increased our cash and investment balance. As of June 30th, our cash investment balance stood at approximately $2 billion. We believe this balance provides sufficient cash to fund operations and positions us to act quickly should value-creating corporate development opportunities arise.

Going forward, we expect modest growth in our cash investment balance above this $2 billion level. So after we've made prudent investments to drive the future growth of our business, a significant portion of free cash flow is likely to go toward debt pay down, share repurchase, or some combination thereof.

With that, I'll turn the call back to Bruce for closing remarks.

Bruce Cozadd

I'll conclude our prepared remarks on slide 23. We remain focused on creating a high-growth global biopharma company with a diverse pipeline and healthy balance sheet that we can leverage for value creation. On the commercial side, we are seeing continued growth of our key growth drivers in 2024 and on the R&D front, we look forward to several near-term catalysts, including data readouts for Zanidatamab, Epidiolex, and Zepzelca. We're excited about the future of Jazz and believe we're well-positioned to deliver growth and shareholder 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.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Jason Gerberry with Bank of America. Please go ahead.

Jason Gerberry

Hey, guys. Thank you for taking my question. So, mine is just a follow-up on the Vision 2025 update. And I get why you decided to kind of remove that. I'm just curious if you would still agree with some of the general premises on the revenue side, which is basically stable, oxybate business, and then meaningful growth from some of your other non-oxybate product growth drivers. Is that still kind of a reasonable thing to be thinking about as we head into 2025?

Bruce Cozadd

Yes, thanks for the question, Jason. Short answer would be yes. While we've removed the specific numerical targets for 2025, we continue to be very pleased with the way our oxybate business is developing, particularly the growth of Xywav. You're seeing really nice growth in Epidiolex and the oncology business. So, the general trends that we're highlighting for the second quarter in our guidance for 2024 and moving forward remain the same.

Operator

Our next question comes from the line of Marc Goodman with Leerink. Please go ahead.

Marc Goodman

Yes, hi. Can we talk about Xywav just a little bit? And the number of patients, Marco [ph], has gone up quite a bit. If you just look at 2Q last year versus 2Q this year, and yet if you strip out the IH, it just seems like revenues are flattish. So what is going on behind the scenes with pricing and gross to nets? And just maybe you can just help us there. It seems something we're missing. I thought in the first quarter you had explained it where you went up in the patients, but you didn't book the revenue because of the programs. But if the programs went away in 2Q, why wouldn't revenues have been higher? Thanks.

Bruce Cozadd

Thanks, Mark. Renée, you want to jump in a little bit on the Xywav business?

Renée Galá

Sure. So thanks for the question, Marc. So certainly we did see a higher influx of patients in Q1 with some Xyrem formulary changes, which ended up causing a number of patients to choose Xywav. Now it's important to also remember the difference between narcolepsy and idiopathic hypersomnia. Our narcolepsy patients, when they come on through a shift, they're generally coming on at the same relatively similar dose. And when they transition, it is highly likely that they do access our support programs, which we did see in the first quarter. And of course, we also see payer reauthorizations for both narcolepsy and IH in the first quarter. And so that did have an impact.

The use of those programs, leveraging those programs, did largely normalize across the second quarter. So despite a higher volume from not just reauthorizations but also transitions, we did see more of that normalization. When it comes to IH, when those patients begin, they are typically not prior-oxybate patients. And so they do have to go through a full titration, which does take time.

With respect to gross to nets, we have not seen meaningful impacts in terms of our gross to nets. But as with any product area where you see greater competition coming into the market, there are impacts of that. So largely what you see is a change, positive change in terms of patient ads. Recall that we do give net patient ads on a quarterly basis. So that's what you're seeing for the second quarter. And we continue to have strong pricing near universal coverage, 90% on the commercial front, and then also good confidence in the future growth with idiopathic hypersomnia. But this is really not anything other than some seasonal impacts that we're seeing between the quarters on revenue.

Operator

Our next question comes from the line of Jessica Fye with JPMorgan. Please go ahead.

Jessica Fye

Great. Thank you for taking my question. Sticking with Xywav and narcolepsy, you're still growing that patient, albeit modestly. What's the right way to think about the outlook for Xywav net ads in narcolepsy from here?

Bruce Cozadd

Renée.

Renée Galá

Yes, great question. So with respect to narcolepsy, I would say that is not a market that is growing broadly in the same way that I would think about idiopathic hypersomnia. So we did have that larger patient ad in the first quarter that I mentioned just a few moments ago. And as we look at Q2 and the number of net ads there, I would say that's a little bit more in keeping with what we would expect going forward as compared to Q1.

I think what's remarkable about the Xywav narcolepsy ads is that despite having a market that is not growing immensely, we continue to see very strong performance of Xywav as the treatment of choice in narcolepsy, strong underlying business that equates to patients and physicians valuing long-term health and valuing the benefits of low sodium.

And then as we turn to idiopathic hypersomnia, I would say we continue to see that as more of a stronger growth driver for the Xywav brand and an area where we continue to invest in different programs to both increased diagnosis and support patients that are starting therapy through both, field nurse educator programs and other patient support services.

And then I'll just note, going back to Marc's question before, just as a reminder, we did see year-over-year growth from the second quarter of last year to the second quarter of this year of 13% for Xywav. So we are seeing some nice growth overall in the brand, very much in line with our expectations.

Operator

Our next question comes from the line of Annabel Samimy with Stifel. Please go ahead.

Annabel Samimy

Hi, thanks for taking my question. So I just wanted to go back to Vision 2025. When you said it from a revenue and margin perspective, I guess you had a certain idea about the prospects for your core portfolio, driving organic growth and the margins you could still attain to support that. And I guess after that, you made a number of other investments in your core portfolio as well as in zani.

So with these additional investments, whether it's for Xywav or Epidiolex or even international growth, is it a stretch to think that you could possibly bridge this gap that's been removed, but sort of drive more revenue out of the core than you initially anticipated, given some of the investments that you've made since you made that, that, that set that goal? And I guess the other question related is, should we just take the idea of corporate development out of our thinking? Thanks.

Bruce Cozadd

Yes, thanks, Annabel, for the question. With respect to the first part of your question, yes, we, we have more in our portfolio now than we did when we set the Vision, notably zanidatamab. And as we said in our comments earlier, while that's not going to contribute 500 million in revenue in 2025, we see that as a very sizable product opportunity. And so investing behind that, as opposed to, for example, a CorpDev deal that might have brought near-term revenues, but less growth over time, we see a better return profile for the zanidatamab asset.

So, that, that's with respect to the products we currently have on the market and currently have in the pipeline. And then maybe to the second part of your question, should you take CorpDev out? The short answer is no, but maybe I'll let Phil elaborate a little bit on how we continue to think about corporate development as a core part of our strategy.

Phil Johnson

Yes, happy to, Bruce. And thanks, Annabel. I definitely would keep CorpDev on the radar screen. This is the area where we see opportunities to continue to build our business, both in oncology as well as in neuroscience. We simply aren't focused on driving to get 500 million in revenue in calendar year 2025. We've been clear on that for the last couple of quarters. But CorpDev does remain a vital part of our strategy moving forward, continuing to be focused on looking for medicines that can significantly improve standard-of-care, would have a pretty efficient commercial call point, can leverage our U.S. and expanding global footprint and create a durable revenue stream for the company.

We do like the ability to have multiple TAs. There are times when either the opportunities simply are better in one versus the other or when prices can get out of whack and make it more difficult to cross on value. It's nice to be able to play not only in oncology, but also in neuroscience areas that we're looking at. And it'll be opportunistic looking at other opportunities that could build on the kinds of expertise and infrastructure that we've built looking at more rare and orphaned kinds of disease populations.

Operator

Our next question comes from the line of Gregory Renza with RBC Capital Markets. Please go ahead.

Gregory Renza

Great. Thanks, Bruce and team. I appreciate the time. Thanks for taking the question. Just in keeping with the Vision 2025 theme, Bruce, if you just had time to reflect a bit on certainly the rationale which you spelled out, which is certainly helpful. But how do you think about where investors and we should be judging Jazz when it comes to time horizon? Certainly sounds like you've mentioned the aspect of tradeoffs in the business in order to make investments. But what is the right time horizon do you believe that the investors should be looking at Jazz? Thanks so much.

Bruce Cozadd

Well, I think we're in a fortunate position right now as a company where our current performance is strong, right? We just reported record revenues. We're seeing double-digit growth in our key growth drivers, certainly led by Xywav and Epidiolex and Rylaze. And we've got some near-term data readouts coming that would make us excited about places we can add to growth from commercial or near commercial products. I mean, we're looking at a potential launch of zanidatamab later this year. But the investments we're making, whether those are in our pipeline or through corporate development, also have the potential to power us through the end of the decade and beyond.

So, it's that balance of wanting to ensure that we're continuing to have a healthy business, throwing off nearly $600 million in operating cash flow over the first six months of the year, but that we make the right capital allocation decisions and allocate capital to those things that are going to produce a return for our shareholders. So, we're in that fortunate position of having a strong business now, but also able to invest for the future. So I can't give you a particular number of years, Greg, to your question. It's exactly the right time horizon, but it's not about having a short-term success, right? It's positioning the company for continued success over a longer time horizon.

Operator

Our next question comes from the line of Joseph Thome with TD Cowen. Please go ahead.

Joseph Thome

Hi there. Good afternoon. And thank you for taking my question. Maybe one on Suvecaltamide and I know you have the ET data in hand. I guess, is there anything specific about the Parkinson's disease tremor population that you would know is particularly different or any differences in the trial design? I know that the PD study is looking a little bit later. That maybe gives you confidence that you might be successful in the PD study.

And then maybe secondarily related to that, did you see any signs of activity in some of the secondary endpoints in the ET trial? Thank you.

Bruce Cozadd

Rob, you want to jump in on this?

Rob Iannone

Yes, happy to. So just addressing Parkinson's disease tremor. So for one thing, it is a different disease setting. And while we are measuring some of the same tremor attributes, it's a different disease setting. So we just have to wait for those results. The trial design is a little bit different. It's a straight-up proof-of-concept trial. There are only two arms versus the essential tremor trial, which has three different dose levels. Hard to know if that will make a difference ultimately.

And with regard to additional secondary endpoints, we haven't gone into that or disclosed that level of detail yet. I would say we are digging in a little bit to understand why we might have seen the placebo effect that we saw. But we haven't gone into detail on some of the additional endpoints.

Operator

Our next question comes from a line of Akash Tewari with Jefferies. Please go ahead.

Akash Tewari

Hey, thanks so much. So, Bruce, if zanidatamab up being even a billion-dollar product, you'll have an oncology portfolio with a financial profile that would be kind of comparable to XOXs, [ph] which is currently trading where Jazz is right now. With that in mind, would you ever consider spinning off the oncology business to unlock shareholder value, given the stock is close to a 10-year low? And are there any parts of your product portfolio that you would consider core versus non-core? Thank you.

Bruce Cozadd

Yes, good question, Akash. First of all, over Jazz's couple decade history, we've been a buyer of assets. We've been a seller of assets. We've licensed. We've bought individual assets. We've bought whole companies. We've spun out businesses. So we will always look at what makes sense. The strength of our oncology business now, $1.1 billion in revenue, I believe, over the past four quarters and growing double digitally. With zanidatamab still on the horizon, certainly is an attractive business for us and one we look forward to continuing investing in.

In terms of what parts of our business are core, we've got a growing sleep business that we believe has good durability of revenue. We've got still a lot of growth in front of us in the epilepsy business, as well as what I just mentioned about oncology. There are individual products, of course, that are smaller and at a different place in their product lifecycle. And we vary our investments in those assets accordingly. Right. We're certainly putting most of our capital behind those things that we believe have the most growth potential.

So depending on what you mean by core, those may be less core assets where we're investing less, though there's still great products for patients, they're producing great cash flow for us, which we then can reinvest in in higher profile opportunities.

Operator

Our next question comes from a line of Ami Fadia with Needham. Please go ahead.

Ami Fadia

Hi, good evening. Thanks for taking my question. Perhaps on JVP441, can you shed some light on what drove the decision to continue evaluating it forward? And if you could give some details on what type of data we can expect to see in the second half of the year and whether, what type of future development that could inform going from there. Thank you.

Bruce Cozadd

Rob?

Rob Iannone

Yes, happy to take that one, Ami. So as you know, we've only studied JVP441 in healthy volunteers, and we've been able to assess the dose response characteristics in the healthy volunteer sleep deprivation model. We know from the field, from the biology of orexin2 and from the field of other agents being developed, that the dose and exposure that could result in meaningful effects in NT1 patients might be quite a bit lower.

And so we wanted to evaluate in-patients, in NT1 patients, to understand that relationship and better characterize the potential therapeutic index. We think that can be characterized in a very discrete, about 10-patient trial based on what we know for the field and felt that that would be, a valuable endeavor, even if ultimately 441 doesn't move forward. We obviously have a backup program that we've mentioned before, and we think we can learn to support that backup program as well.

Operator

Our next question comes from a line of Andrea Tan with Goldman Sachs. Please go ahead.

Andrea Tan

Good afternoon. Thanks for taking our question. Rob, maybe one for you here. How should we interpret the pushout of the PFS data for the frontline GEA trial? Maybe if you could speak to how you're thinking about the evolution of the profile relative to your prior expectations, and help us understand your level of confidence that you will be able to see a meaningful separation between the arms. Thanks so much.

Rob Iannone

Sure. So just as a little bit more context, the guidance that we have been giving previously were really based entirely on protocol assumptions. It is an events-driven trial. So as we accumulate PFS events, that will ultimately inform, when the top-line results would come out. And so now we've seen some blinded data, and we're making a reprojection, into 2Q.

I would highlight that this is expected for clinical trials, and it's not necessarily a bad thing that events are coming in more slowly than you might have initially predicted. We, of course, are blinded to the data overall. And I would just point you to some of the data that have been published outside of this trial, the zani plus chemo data that were first presented at ASCO GI in 2023. And you've probably seen the titles from ASMO. Those data will be updated in a few months, as well as the zani tislelizumab chemo data that were published last ASMO 2023, and data across the other indications where we think that zanidatamab is performing very, very well and gives us a reason to believe that the upcoming trials will read out positively.

Operator

Our next question comes from the line of Jeff Hung with Morgan Stanley. Please go ahead.

Jeff Hung

Thanks for taking my question. For Rylaze, you indicated that it will take time to build the AYA market. Are there specific reasons for the slower uptake that differed from your expectations, and what kinds of initiatives can you implement or levers can you pull?

Bruce Cozadd

Renée.

Renée Galá

Yes, thanks for the question. So, we do believe this is a market that is addressable. We do believe there's a growth opportunity within the AYA market. This is largely about the time that it takes to drive education and driving education with adult treaters that may not be as familiar with protocols that contain asparaginase and familiarity with Rylaze. I would also say that with respect to our pediatric business, that underlying base business remains quite strong, with Rylaze being the only therapy available and a reliable therapy. What we're seeing in that part of the business is switching at the first sign of a hypersensitivity reaction so really getting back to best practice. And that has been helpful for us. We're also getting a lot of positive feedback on the Monday, Wednesday, Friday regimens. So this is something that we have confidence in in terms of a continued growth driver for us. And it really is more of a time and education element with respect to the AYA population.

Operator

Our next question comes from a line of David Amsellem with Piper Sandler. Please go ahead.

David Amsellem

Thanks. A question on IH, your competitor started dosing in their Phase 3 for idiopathic hypersomnia. So with that in mind and with a potential, another oxybate product getting labeled for IH, how do you see the landscape evolving for Xywav in terms of patient growth and even the payer landscape. Thank you.

Bruce Cozadd

Renée, you want to take that?

Renée Galá

Sure. I'm happy to. Well, first of all, we don't know what's going to play out with respect to an actual approval for a competitor in idiopathic hypersomnia. But putting that aside, we do have a lot of confidence in the market that we're building for idiopathic hypersomnia with Xywav. There are some differentiators that are important to keep in mind with Xywav even beyond low sodium, we have once-nightly dosing in the label, there's flexibility for either twice or once nightly dosing.

We also have a suite of patient support services that go beyond what we talked about on the call in terms of some of the financial benefits, but full wraparound support from initial cares nurse that helps the patient from the time they get a prescription until the time they actually receive that prescription in the mail and then the field nurse educator program, which helps to educate patients through this process of titrating up to the right dose and then also in a position to help facilitate communication between patients and physicians.

I think the investments that we're making in increasing disease awareness to help HCPs better identify IH patients focusing specifically on sleep inertia. All of these things help to both build the market in idiopathic hypersomnia in general because we think it's well beyond the number of patients that are currently on therapy but also build a stronger brand as Xywav as a treatment of choice within idiopathic hypersomnia and Jazz with respect to the patient services that it provides.

Operator

Our next question comes from the line of Gary Nachman with Raymond James. Please go ahead.

Gary Nachman

Great, thanks. So on CorpDev, given some of your commentary there, I'm curious how much your philosophy may have changed if at all, on the types of assets you're now looking for maybe more earlier stage versus closer to commercial stage? And I know you're looking at both oncology and neuro, but is there more urgency to beef up the CNS pipeline given some recent misses there? Thank you.

Bruce Cozadd

Phil, do you want to jump in on this?

Philip Johnson

Yes. Happy to, thanks for the question, Gary. So in terms of CorpDev and interest by stage, we still look across the spectrum from market assets all the way to early preclinical collaborations. In terms of just number of assets that are available, and opportunities to transact. I think you tend to have more of those earlier you moved in that development paradigm, but we do look at opportunities across that full spectrum. Is that we aren't trying to focus specifically on trying to find revenue for next year as a priority in and of itself.

And in terms of the CNS urgency, it really does depend on the opportunities that come up. It will depend if we find something that could really materially improve upon standard-of-care for patients. That's for the first lens that we look at. And then it has those characteristics that I mentioned earlier that fit with Jazz and our capabilities. But I would say, while it's just a point, we had some of the readouts that we had, that doesn't change the opportunity set that's in front of us, and it really will be dictated by the science and what we can access. Bruce, anything you want to add?

Bruce Cozadd

No, I think that's a good answer, Phil. And again, Gary, to your question, it's not that we need one side of the business or the other to be added to at a particular rate. We really want to find the best opportunities to create value across the business. And as Phil said, there are advantages to looking across both neuroscience and oncology.

Operator

Our next question comes from the line of Mohit Bansal with Wells Fargo. Please go ahead.

Mohit Bansal

Great. Thank you very much for taking my questions and thanks for the transparency here. I just want to underscore a little bit more on longer-term dynamics for oxybate franchise. So -- but if you think about 2026 and beyond, how should we think about oxybate franchise, one from the authorized generic point of view because your agreements only go to 2025. And then also, the one was nicely our competitor also announced today the first patient dosing of -- in the IH trial as well. So do you think this could be a growing franchise in longer term with IH help? Or how do you think about that at?

Bruce Cozadd

Yes. Thanks for the question. There's a little bit of complexity to this. So I'll take a second to tenser it. The AG doesn't technically end at the end of 2025 or the beginning of 2026. Although if Hikma [ph] elects to launch their own generic, they can't also sell the authorized generic, but that's their option to continue the authorized generic for longer.

The important thing to remember is that we have the only low sodium product on the market, and we believe that patients and physicians are understanding the benefit of that lower sodium for a chronic therapy in this high-risk population. That high sodium part of our business, as we mentioned in the call, is down to 11% of revenues in the latest quarter if you combine Xyrem sales and AG royalties together. So it's becoming a smaller part of our business. The part we continue to invest in is obviously growing Xywav, both in narcolepsy and in idiopathic hypersomnia.

More competition on the high sodium side, whether it's branded or generics is not where our focus is. Our focus is squarely on that better safety product in these patients who are known to be at high cardiovascular risk, where we've whittled that sodium down by 92%.

Operator

Our next question comes from the line of Balaji Prasad with Barclays. Please go ahead.

Balaji Prasad

Hi, good evening and thanks for the question. Kind of an extension of the previous one, while I can understand why Vision 2025 to go. But from a signaling perspective growth, did management team debate installing and longer-term vision maybe on 2030. Asking this, especially as longer-term investors are focused on a couple of key inflection points in the years after, one, including a possible wave of additional generic desire runs in 2026 and what it means a word for Xywav and also the end of IP exclusivity, the year after for Epidiolex. Thank you.

Bruce Cozadd

Yes. Thanks for the question. We've always had long-term strategic goals at Jazz. And I can go back many years into the past and talk about how we've described our business and what we're trying to accomplish, both on the commercial side and the R&D side and how we've approached ongoing corporate development. So I don't think where we are now is a change from that. That's a little different from putting out specific financial targets that are multiyear. We've only done that once. And we did it in a particular time where there was uncertainty about that looming new oxybate competition.

I will say in response to the more specific parts of your question, we're very confident about the long-term durability of the Epidiolex business since you referred to that as well. I understand there are certain exclusivities that are going away, but we've got a strong IP protection on Epidiolex with multiple patent families going out to 2035 or in some cases, 2039. And so we continue to believe that is an asset with a lot of growth in front of it, but also great durability.

And I'm going to note here. I think we've got time for one more question. Operator?

Operator

Our next question comes from the line of Joon Lee with Truist Securities. Please go ahead.

Joon Lee

Hi, thanks for squeezing me in. Going back to the Orexin program, you alluded to the narcolepsy patients possibly require a lower dose than multi-volunteers. In other words, narcoleptics having maybe a better therapeutic window compared to patients. Did I hear that correctly? And if so, is that something that others also developing orexin agonists have shown or is that something that you observed in preclinical models? Thank you so much.

Robert Iannone

Yes. Thanks, Bruce. There is a biological rationale for that with loss of orexin neurons you may see upregulation of receptors. And so there may be sensitivity when you essentially replace attempt to replace the peptide with an agonist. So theoretically, it's possible. You do see in other development programs, a selection of a dose that's lower than was the dose that was required to kind of have a maximal effect in healthy volunteers by several fold. And so that's why we think it's worth testing.

Joon Lee

Great. Thank you.

Bruce Cozadd

All right. I think that concludes our questions. And as always, I'd like to close today's call by recognizing our Jazz colleagues for their efforts on behalf of patients and their families. And thank our partners and shareholders for their continued confidence and support. We do look forward to seeing many of you in person at the Wells Fargo Healthcare Conference in Boston and the Bank of America Global Healthcare Conference in London in September. Thank you all for joining us today.

Operator

This concludes today's call. You may now disconnect.