Good day, and welcome to the Fourth Quarter 2021 Jazz Pharmaceuticals Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, this call may be recorded. I would now like to turn the call over to Andrea Flynn, Head of Investor Relations. You may begin.

Thank you, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its fourth quarter and full year 2021 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, Executive Vice President and Chief Financial Officer; Dan Swisher, President; and Rob Iannone, Executive Vice President, Global Head of R&D. Kim Sablich, Executive Vice President and General Manager, North America, will join the team for Q&A. On Slide 2, I'll remind you that today's webcast includes forward-looking statements, such as those related to our future financial and operating results, including expectations related to Vision 2025 and our guidance for 2022, 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 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 the forward-looking statements made on today's webcast. We undertake no duty or obligation to update our forward-looking statements. Turning to Slide 3, on this webcast, we'll discuss non-GAAP financial measures. Reconciliations of GAAP to non-GAAP financial measures are included in today's press release and in 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. 2021 was a transformative year for Jazz with strong performance and consistent execution. In the fourth quarter and throughout 2021, we made substantial progress across commercial, R&D and corporate development continuing our evolution to a diversified, innovative global biopharmaceutical company. Beginning with our overall 2021 financial performance. For the first time, we exceeded $3 billion in annual revenue delivering top line performance at the upper end of our guidance range and recorded nearly $1 billion of adjusted net income on a non-GAAP basis. Renée will discuss our financial results in more detail later in the call. Our exceptional top line results were driven by strong commercial execution across our portfolio. We met our ambitious target of 5 key launches in 2020 and 2021. Two of those launches, Rylaze and Xywav in idiopathic hypersomnia, or IH, are therapies that Jazz advanced from concept to commercialization. Coupled with the addition of Epidiolex to our commercial portfolio, through the GW Pharmaceuticals acquisition, we have significantly diversified our revenue and are on track to meet our goal of at least 65% of net product sales in 2022 coming from newly approved or acquired products. On the regulatory side, we secured FDA approval for Rylaze for the treatment of ALL and Xywav in IH and in June and August 2021, respectively. We also received orphan drug exclusivity from FDA for Xywav for narcolepsy in June with FDA citing the clinical benefits of Xywav as a lower sodium oxybate therapy compared to Xyrem. Subsequently, we received orphan drug exclusivity for Xywav in IH. In addition, in January of this year, we submitted the sBLA for Rylaze to support an updated dosing regimen in the U.S. In concert with delivering…

Thanks, Bruce. Well, I'm excited to share the continued progress across our commercial portfolio. So starting with neuroscience, we continue to build momentum in our oxybate franchise as highlighted on Slide 9. This includes market-leading adoption of Xywav and narcolepsy and the commercial launch of Xywav in IH in November 2021, enabling us to deliver this important therapy to another patient population with significant need. Average active oxybate patients increased to approximately 16,200 in the fourth quarter, an approximate 6% increase compared to the same period last year. With the introduction of Xywav in narcolepsy in late 2020 and we meaningfully advance patient care with a lower sodium oxybate product and are pleased with its exceptional adoption. We remain focused on educating physicians in narcolepsy patients across a lifelong burden of high sodium intake in this patient population who live with an increased risk of cardiovascular comorbidities. The benefits of lowering sodium intake are resonating strongly with patients and prescribers, and we exited the year with approximately 6,650 active Xywav patients with narcolepsy. Our commercial launch of Xywav for adults with IH began in November 1, 2021, and we're excited to bring the first and only FDA-approved IH treatment to patients. We've been encouraged by the positive early launch momentum and feedback we've received from prescribers in the IH community. Based on the reports from the field, prescribers have been impressed with the profile of this medicine. Health care providers are excited to have a treatment option that addresses IH and not just its symptoms. Importantly, prescribers have also been pleased with the initial coverage and access of Xywav for their IH patients. Xywav and narcolepsy currently has approximately 90% of commercial lives covered. We anticipate that Xywav and IH will have similar coverage to narcolepsy and expect this to…

Thanks, Dan. On Slide 14, we've detailed the mid- and late-stage clinical programs in our pipeline. On today's call, I'm going to recap a few key accomplishments in 2021 and then focus on 2022 milestones. It was a very productive year for our R&D organization. We received 2 FDA approvals for Rylaze in ALL and Xywav in IH, both of which we brought from concept to approval. We initiated multiple clinical trials, including Phase 2 trials for Suvecaltamide or JZP385 in essential tremor and for JZP150 for post-traumatic stress disorder. Both of these compounds were acquired through corporate development efforts, and our team is excited to build upon the existing clinical data for these promising therapies. In addition, the acquisition of GW Pharmaceuticals has added a number of clinical and preclinical programs to our pipeline, the industry-leading GW cannabinoid platform and talented professionals with deep expertise in drug development in the cannabinoid space. The integration between Jazz and GW R&D organizations has progressed even better than we could have predicted. And our combined group has many exciting program milestones ahead of us in 2022 and beyond. We are also advancing a robust development effort for Zepzelca. Three separate trials were initiated in 2021: a Phase 3 trial supported by Jazz and our partner, Roche, to evaluate Zepzelca in combination with Tecentriq in first-line extensive-stage small cell lung cancer; a confirmatory Phase 3 trial in second-line small cell lung cancer being run by our partner, PharmaMar; and our own post-marketing observational trial in second-line small cell lung cancer that Dan noted earlier. In addition, earlier this year, we have initiated our Phase 2 basket trial evaluating Zepzelca as monotherapy in several solid tumor types. One area of particular focus for our team is the treatment of movement disorders where there is…

Thanks, Renée. I'll conclude our prepared remarks on Slide 20. 2021 was a year of transformation and execution. We achieved double-digit revenue growth expanded our pipeline and expertise and executed key transactions to grow our business and capabilities, most notably the acquisition of GW Pharmaceuticals. And with FDA approval of Rylaze and Xywav for IH, we achieved our ambitious goal of 5 key launches in 2 years. Our commercial teams demonstrated strong performance on the launches of Xywav for narcolepsy and Zepzelca. And we expect that successful execution will continue with the launches of Rylaze and Xywav for IH. The addition of Epidiolex to our commercial portfolio provides us with the opportunity to deliver an important therapy to patients with refractory epilepsies. Our R&D organization continues to deliver and is expanding its capabilities. Trials for multiple important products are underway, and we are planning to initiate additional mid- and late-stage clinical trials over the next 12 months. Looking forward, we have a clear road map with Vision 2025. We are optimistic about the year ahead, and we're focused on delivering across the business. We're excited about our future, and I look forward to updating you on our progress as we advance. That concludes our prepared remarks. I'd now like to turn the call over to the operator to open the line for Q&A.

[Operator Instructions]. Our first question comes from Ken Cacciatore with Cowen and Company.

Hey, Bruce and Kim, congratulations on all the progress. I just wanted to ask about Xywav in IH. Our recent clinical and survey work indicates that they believe Xywav in IH could be as big as Xyrem in narcolepsy. So wondering if you could share even a little bit more of your internal data. And your expectations, I know you categorized the markets at the same size, but wondering kind of your hopes for the eventual potential for Xywav. And then, Dan, you mentioned that Xywav in IH could look like an orphan launch. Can you put a little bit more granularity on that, if you could, as we try to frame out the next few years?

Yes, Ken, thanks for the questions. And maybe I'll just start and remind people that there are a couple of similarities as we think about Xywav for narcolepsy and Xywav for idiopathic hypersomnia. The first is to remember that both of these are really debilitating sleep disorders, right? These are very life-altering conditions, high level of disability and patients are really motivated to find effective treatments, right, that reduce their symptoms and improve their ability to function. So need is high in both cases. The second thing I'd remind you in terms of a similarity is we've seen excellent efficacy of the agent in both these conditions. Our Phase 3 data were very strong in terms of the benefit provided to patients. So we start with those similarities. As for the specific size of the opportunity in front of us and where we get that data, maybe I'll ask Kim to comment on that. Kim?

Sure. Yes. So I'll start by saying that since the launch that began back in November, we're very encouraged by the positive feedback from our prescribers and the IH community at large. And we really are seeing momentum continuing to build. Based on reports from the field prescribers have been very impressed with the profile of the medicine, especially excited to have a treatment option with a positive and compelling clinical trial results that address, as Dan said, the full IH condition and not just 1 or 2 of its symptoms. In terms of the opportunity, we've been communicating that we are at the outset focusing our launch on our existing sleep call universe of approximately 30,007 adult patients who have been diagnosed with IH and are actively seeking health care. But longer term, we do estimate that based on data -- claims data that the total diagnosed IH patient population is likely to be closer to the size of the diagnosed narcolepsy market, which is about 70,000 to 80,000 patients. So this approval for us is a significant milestone for Jazz. As our oxybate franchise continues to be a pillar of Jazz's value, we are feeling already that we're starting to see successful execution of a market-leading launch in valuated narcolepsy and that we're going to continue to build on it here with brand recognition as we launch IH in the marketplace throughout the rest of this year.

Dan?

And Ken, this is -- yes, sorry, Bruce. Yes, Ken, just to go on the orexin side, it's kind of similar to Xyrem coming into narcolepsy. We're building a new market. It's a first and only approved therapy in IH. And so while the patients are diagnosed, the cadence is to get them familiar with Xywav, get them into the REM system, dose them up to an efficacious dose. So there's not this pool of existing oxybate experience patients that we can immediately convert over. So we're encouraged by the high level of awareness as Kim is saying and the experiences we're seeing to date, and we look forward to build on that cadence in coming quarters.

Our next question comes from Jessica Fye with JPMorgan.

It looks like Rylaze came in well above our expectation this quarter. How should we think about the trajectory of that product off of the 4Q run rate?

Yes, Jess, thanks for the question. We were really pleased with how Rylaze has performed in its first full calendar year -- full calendar quarter on the market and sort of made good on our thesis that the docs who treat these pediatric ALL patients were desperate to have a reliable treatment option that would always be there when they ordered it. So maybe I can let Kim comment a little bit on the early launch trajectory and our thoughts on the fourth quarter results.

Sure. So 2021 revenues, I'll say, reflect both the strong demand that we saw for Rylaze in the marketplace and as well as some initial inventory build as part of the launch, which is typical for new products. But we believe our strong performance really reflects increased brand awareness among our customers and appreciation for the strong product profile and really recognition that Rylaze is the only therapy available following the depletion of Erwinaze supply. Feedback from clinicians has been quite positive and revolves around both the high quality and reliable supply of Rylaze. And we've received positive reports on the ease of ordering and dose preparation for Rylaze. So overall, we're very pleased with the launch to date. And I'll say that our commercial strategy does account for and is prepared for a competitive market. But overall, we believe Rylaze represents a clinically significant advance as the only recombinant erwinia asparaginase manufactured product that maintains a clinically meaningful level of asparaginase activity through the entire duration of treatment, and we think customers are really starting to recognize and appreciate that.

Yes, Rob, you just might want to comment on where we're going to because we're not done with our strategy on Rylaze.

Yes, happy to, Bruce. So as you know, our indication now, which was based on an ongoing trial is for every 48 hours of Rylaze. And so we also evaluated a regimen that allows for Monday, Wednesday, Friday IM dosing, where we give twice as much on Friday to ensure optimal coverage through that 3-day weekend with the 50 milligrams per meter squared on the Friday. We've submitted that as an sBLA to the FDA and we were granted real-time oncology review, which is underway. We'll follow that with IV data as a supplement in the U.S., but also in Europe and with IM and IV as well.

Our next question comes from Akash Tewari with Jefferies.

If we assume that Epidiolex contributes the same percent of sales for your neuro franchise as it did in 2022, as it did in 2021, we get implied sales of about $700 million or only about 5% growth year-over-year from a pro forma perspective. That said, for you to hit your 2025 guidance, it looks like neuro needs to grow at an 11% CAGR. So can you comment on what Epidiolex growth looks like post 2022? And what would drive an inflection in Epidiolex growth long term? Additionally, can you comment if GW ended up being accretive in 2022 as previously guided?

Yes. So let me start with the first piece of that. And then, Renée, maybe you can jump in on EPS accretion. We were really pleased with how Epidiolex performed in the fourth quarter, up even factoring out the higher inventories at the pharmacy level, up 10% sequentially fourth quarter over third quarter; and looking at annual growth on a pro forma basis as if we had reported a full year of Epidiolex sales, still up 29%. So we're excited about Epidiolex' continued growth, both in the U.S. market. But remember, we're also continuing to roll it out in more markets ex-U.S. And even where we have rolled it out, we're still early in that launch process with excellent pricing and reimbursement. So we haven't given a specific breakdown -- further breakdown of what we expect in each of the upcoming years, but we see a substantial continued growth opportunity with Epidiolex. Renée? Renée Galá : Yes. Thanks, Bruce. So yes, we did state that we expected the GW transaction to be accretive in the first full calendar year, so 2022 and substantially accretive thereafter. We do with our 2022 guidance continue to expect the GW transaction to be accretive in 2022. I'll also note, however, as I stated in the prepared remarks, that we do have an accounting change that increases our -- has the impact of increasing our underlying shares used in EPS in 2022 by approximately 9 million shares. And that's the shares that are underpinning our convertibles as I explained in the call.

Our next question comes from Marc Goodman with SVB Leerink.

Yes. Bruce, can you talk about this new Epidiolex patent how you think we should view this patent? And then just a follow-up on the Rylaze question. Should we be thinking that this is the new run rate? You said that there was some inventory build in the quarter. Can you help us understand how much inventory was in there, so we can understand what a real kind of underlying demand quarter was and how we should think about the run rate there.

Yes, Marc, thanks for the question. On the patent, this is a patent on composition of botanically derived CBD and its use in treating certain disorders, meaning those that are in our label and has a different expiration date from prior patents listed in the Orange Book. This one going out to 2039. I'll remind you, this is part of a significant IP estate established over time that we believe is relevant to thinking about the durability of Epidiolex. So very pleased that, that patent issued at the tail end of 2021 and was included in the Orange Book earlier this year. So one more piece of the puzzle around why we're confident that Epidiolex is a durable asset. And then on Rylaze, I'll just say that we don't really know what the true run rate for this erwinia-derived asparaginase can be because we've always been supply constrained in the past, right? Before the launch of Rylaze, we did not have access to stable supply of the agent and clinicians, in some cases, adjusted their practice to try to minimize use or save available product for patients most in need. Ideal use of the product would be at a higher level. And people are just adjusting to the fact that Rylaze is now available, that it's a more modern manufactured product with high quality, with substantial supply available. I'm not surprised to see that there's some buildup as people want to stock a Rylaze and have it immediately available. That's a luxury they've not had in the past couple of years. But we're also excited to expand use over time now as people get used to the fact that they can use it in all appropriate patients rather than trying to delay use by premedication or other means. And then Rob talked about obviously trying to get to more ideal dosing with Monday, Wednesday, Friday giving an IV option as well. And then also submitting in Europe. So we go back to having more of a worldwide product, which is just today, a U.S. opportunity for us. So lots of progress ahead of us. Could not be more pleased with the initial response, but we just don't have a basis Marc for a more accurate view of what that run rate will be.

Our next question comes from Jason Gerberry with Bank of America.

Bruce, just a request, if you could put that pick from a settlement structure in a slide in future earnings calls, that would be great. So we have the schematic updated. But so my questions are is oxybate growing in 2022? And then on Epidiolex, this IP update, I guess, your thoughts on whether we'll get a patent challenge this year just in terms of feet to the ground, whether someone has the capability of filing. And my understanding, is this the patent that includes compositions with trace amounts of TSC, which showed in monkeys, I think, a benefit versus synthetic or synthetical. I believe that, that might have some synergism with the FDA guidance requirements for generic expense.

Yes. So Jason, thanks for the suggestion on the royalty structure. On oxybate, we're continuing to grow oxybate use. We see it in narcolepsy. Obviously, IH is brand new, just weeks into that launch in terms of our fourth quarter results. So we do expect substantial growth during the year. As we said in our guidance, we've made room in our guidance for an assumed second half launch of an authorized generic. And while we do have economics in that, we don't have 100% economics in that as we do of the current Xyrem product. So it's growth in the whole market, but not with complete revenue pull-through to Jazz. And so that's what you're seeing and how we think about that going forward. In terms of Epidiolex, I think we gave the patent number. If we didn't, we can give it. So you can look up that patent and see everything that's included there, but we do believe there's relevance to the entire composition of that product, which is largely but not completely cannabidiol. And in terms of potential challenge, there's the opportunity for people to step in and submit as early as later this year. Whether that will happen, we don't know. It could. But of course, again, we feel confident that we've got good protection of that product.

Our next question comes from Ami Fadia with Needham.

I had 1 main and 1 follow-up. Just with regards to Xywav about the hypersomnia. We saw about 250 patients on that indication in the fourth quarter. Is that a precedent for the type of cadence you expect in terms of new patient adds in the upcoming quarters? How should we think about that? And then secondly, just with regards to Rylaze. Can you give us some color on whether you saw utilization beyond pediatric into teenagers or young adults?

Yes. So on Xywav IH, I'll just remind you, we're super early in that launch, right? This launch happened just in November. There's never been a drug marketed in idiopathic hypersomnia. So for us to predict exactly what the cadence of new patient adds quarter-by-quarter will be after only a couple of months is probably a little bit premature. Again, we're super excited about the size of the opportunity, the effectiveness of the drug, the early reaction we're hearing, the ability to get the drug paid for, which has been excellent. The fact that we're calling on the same -- largely the same prescribers for narcolepsy and idiopathic hypersomnia. So we've got our work to do to continue to educate physicians and patients about the availability of this new and effective treatment, but too early to be predicting a particular ramp. In terms of Rylaze and utilization beyond pediatric, let me ask Kim if she has any information she'd like to share there.

No, we don't have any data specifically by age or patient type, just really the overall positive feedback in the marketplace. And the notion that we are seeing some customers start to utilize second line of asparaginase and go to Rylaze faster than they had when the market was supply constrained.

Yes, I'll just remind people that one of the great things about the approval of Rylaze is we can get back to promoting the appropriate use of this product, which in our mind certainly includes all the pediatric patients who are experiencing hypersensitivity response to E. coli-derived asparaginase, but also include adolescent and young adult patients as well. We turned off our promotional efforts for several years because we didn't believe it would be ethical to try to create demand that we couldn't supply. So we have that opportunity now to go out and remind people of the data that you see when you do use an asparaginase containing regimen kind of a pediatric-inspired regimen for the AYA patients. We can also make sure people understand silent inactivation where you're creating an antibody response that may be inactivating the very enzyme you're counting on for efficacy. And then over time, as we pursue an ex-U.S. registration strategy, again, to broaden in the markets where Erwinaze was never commercialized because of lack of adequate supply. So we really do believe there's an opportunity going forward to increase that utilization. But as Kim says, we don't have specific data on what we saw in the fourth quarter.

Our next question comes from Ronny Gal with Bernstein.

Two if you don't mind. First, picking up with that 250 initial patient on idiopathic hypersomnia. I wonder if you could share with us kind of a couple of numbers around that first. How many of those 250 were actually in the clinical trial program? And on the other hand, given how long it takes for patients to get on the drug. Roughly, how many patients have you had at the end of the year in the pipeline of trying to get those patients on the drug just so we could get a better feel for the early adoption? And separately, oxybate and Epidiolex both saw price increases in the end of the year, kind of what percentage of that price increase do you expect to realize in that given the rebate structures?

Ronny, I was co-processing. Remind me which product you were talking about at the end of that question with the price increase?

Oxybate and Epidiolex?

Yes. Okay. So on the first, somebody from the team jump in, if we know how many patients came out of the clinical trial. I'm not sure I've heard that, that was a significant contributor to our early adoption. We're not going to give more data, Ronny, than we've already given in terms of patients on drug at the end of the year. We sometimes have patients starting the process of enrolling in the REMS. We don't sort of count those as patients until we know they actually get a shipment of drug. Not everyone that starts the process for the REMS ends up getting a shipment of drugs. So not sure that would be accurate information. And on realized price increase, our gross price increase does not flow all the way down in the net sales given that we've contracted, particularly in recent years around oxybate, but we do receive some bottom line benefit. I think historically, we said it's a meaningful percentage, but certainly don't assume that we realize all of the gross price increase.

Our next question comes from Balaji Prasad with Barclays.

Congratulations. A couple of questions from me. Firstly, on Epidiolex, could you -- you had called out the challenges with the patient visits in the previous quarter. Can you give an update on current planning dynamics as to what you're seeing with respect to visits in Q1 or acuity till now? And secondly, on Epidiolex, so there seems to be a decision from the Texas court with the Canopy versus GW litigation. And the court has tort Canopy's litigation. So does this settle all existing legal challenges? Is there anything else we're not aware of?

Dan, you want to talk about what we're seeing in terms of visits on the pediatric epilepsy side?

Yes, I don't have the exact numbers, and there's definitely been some continued impact on -- well, that was definitely our customer engagement side of things, but also certain offices as any of us saw with Omicron, folks were getting infected and were out of service and the offices were temporarily closed even in locations where they typically have been open. I think the good news is it does seem to be -- it peaks early and comes down rapidly. And so our expectation for the rest of the year is fairly optimistic in that patients will be flowing back into the offices at a more normal cadence. I think the one exception is, again, the vaccination rates for children under 5. And with our therapy, we have a number of patients who are under 5. Currently, the vaccines are not available. And for those that are between 5 and 11 they're getting vaccinated, but it's still at a slower percentage than -- or at a lower percentage than the regular population. But again, the trends are going in the right direction.

And then on the litigation side, we were pleased with where the court came out on the final judgment in the litigation with Canopy. They do have the right to appeal that, but we're certainly pleased with where we stand. And I'm not sure if there's some other litigation you're particularly interested in, but we have had other litigation. It's not been something we've been significantly concerned about, and that remains the case.

Our next question comes from Annabel Samimy with Stifel.

Just going back to Epidiolex and hoping to get a little bit more color there. So obviously, you cut some win this quarter, 10%, I guess, excluding the inventory. And I know that you mentioned that there's still some COVID headwinds, but can you maybe talk about where you're seeing the most penetration? Is it in primarily the new indications? Is it new patients? Or is it persistence of treatment? We have heard from KOLs that the persistence is not as high. So can you tell us what work you're doing there in terms of that persistence as well as where the new patients are coming from?

Yes. Annabel, that's the new information to me. We continue to be exceptionally pleased with what we're seeing in terms of up persistence, and we think it's one of the hallmarks of this drug when we talk to KOLs about how they use it, remembering that most of these patients are going to be treated with multiple agents in combination. And one of the things we've noted before, and we believe still remains the case is that you'll often see Epidiolex added into a treatment regimen. And that if they want to sub anything out later as they add new agents, they tend to hang on to the Epidiolex at the AEs meeting in Chicago in early December, there was data presented that really went out to multiple years of continued and in some cases, increasing efficacy over time of the agent. So I'd be surprised to hear data that goes in the other direction. Kim or Dan, does one of you want to jump in on where we're seeing growth in terms of indications?

Yes, sure. I'll basically say that the growth, we believe, is coming from everywhere. We're not sharing specific penetration numbers but we do continue to see room for growth across all of our indications, particularly the greatest growth opportunity in the 2 largest indications, LGS and TSC, which is still early in the launch phase. And this is a well-tolerated treatment with high persistency, as Bruce said, that can be added in a polypharmacy setting. It's important to remember that, on average, treatment-resistant patients are on 3 anti-seizure medication. So overall, we are seeing that our customer base is getting more and more comfortable with Epidiolex and as they're doing so and getting experience with it they're moving it up earlier in the treatment regimen. And we're pleased to see that, that prescriber base continues to grow and those new prescribers, again, we'll start to gain more comfort with the product and use it more broadly in earlier. So overall, we remain very confident that we can achieve blockbuster status and really become a standard of care in treatment-resistant epilepsy. Dan you want to talk about...

And just as a reminder -- Yes. Yes. Thanks, Kim. And just as a reminder, outside the U.S., we're earlier in sort of the launch cycle, but importantly, in the second half, we had additional launches going on in Spain, Italy, Switzerland, Ireland this quarter. And continued penetration now in 4 of the 5 major countries with France anticipated 2022. And with the value proposition that is in front of Epidiolex in those markets, we've achieved greater than 70% of the U.S. WAC in those reimbursed markets. So that's also adding growth in tailwind as we go into '22.

Rob, anything you'd like to add in terms of how treaters are looking at this drug based on what you're hearing?

You referred to AEs, Bruce and certainly...

Correct. Yes.

Yes, I mean we spend a lot of time with docs who are very familiar with this drug have been using it. And my impression was yours is that not only do they see it as highly effective, but as you say, well tolerated and very sticky patients are staying with it. So that's certainly what we continue to hear from a medical affairs perspective.

Our next question comes from Gary Nachman with BMO Capital Markets.

So Xywav was at about 43% conversion of the oxybate franchise in the fourth quarter, how much do you see that conversion accelerating over this year? And how much are you trying to manage that conversion if at all, when considering the trigger for the AG sometime in the second half of this year? And then specifically for IH, what initiatives are you taking to increase diagnosis and improve awareness? And will you be doing that as aggressive as you've been with narcolepsy?

Yes. Maybe I'll take the first part of that, Gary, and then ask Kim to talk about efforts around increasing diagnosis in IH and when it might be appropriate for us to invest significantly in that. On the first part of your question, you referred to conversion, and I'll just remind you that our growth in Xywav comes from multiple sources. It certainly does come largely from existing Xyrem or oxybate-experienced patients, moving over to this newer agent with a 92% reduction in sodium with the safety benefit that FDA highlighted in the orphan drug exclusivity decision. But we're also seeing brand-new patients, narcolepsy patients who may never have been on oxybate. We're seeing narcolepsy patients who may have not been on oxybate historically, even though they had a diagnosis because they were concerned about that high sodium load. And now on top of that, we're seeing IH patients as well. So I'd hesitate to just call it conversion because it's really multicomponent. To the second part of your question around that. We are not managing that at all. We would like as many patients to be benefiting from what we believe is a better, safer product in Xywav as possible. So we know that takes time. We've been very pleased with how the rollout in narcolepsy has progressed in just over a year on the market now to see how far we've come. But we want as many patients to get that benefit as soon as possible and in no way are holding back on that. Kim, you want to talk about how we're thinking about our efforts in IH?

Yes, sure. So to your question about whether we're focusing on increased diagnosis, the answer is right now, no, because as we talked about earlier, there's a substantial population of already diagnosed patients out there. Specifically, 37,000 patients that have a formal diagnosis of idiopathic hypersomnia and not only that, that we can see through claims data that in the last year, they've been actively engaging with the health care system. So the market is there. Many of these patients are currently taken or have tried products, traditional stimulants and wake-promoting agents or antidepressants off-label. And we hear back from the patients and the health care providers, that's just not meeting their needs and there's still a tremendous unmet need for greater relief for these patients. So the market is there. So we're out there really educating more about the product profile. And if anything, just trying to help HCPs become more confident in their diagnosis and to identify those patients that are diagnosed and that would benefit from a try with Xywav for idiopathic hypersomnia.

Our next question comes from David Amsellem with Piper Sandler.

So just a couple. On Epidiolex, can you talk about the extent of off-label usage in our KOL conversations, it's clearly happening. How much of that is a factor in the overall growth trajectory of the product in the United States? That's number one. And then number two is on IH. I apologize if I missed this. But can you talk to the kind of patients who are getting on therapy? I know it's early days. Are these patients mainly have been exposed to modafinil and/or stimulants or are they newly diagnosed, treatment-naive patients? Is there a mix? If you could talk to that, that would be helpful.

Yes. Maybe David, I'll have Rob take both of these. On the Epidiolex side, again, just talking about how the drug is being used based on our understanding. And then on the idiopathic hypersomnia side, super early in the launch, and I'm not sure we've got that granular data, but we can certainly refer back to what we saw in clinical trials in terms of what patients have tried other agents and how often we think they've already tried modafinil or other stimulants. So Rob?

Yes. So starting with Epidiolex the indications is across syndromes, but practitioners, neurologists treat seizure types and what is, I think, notable about Epidiolex as the activity across different seizure types within those syndromes. And so it's viewed as being broadly active across a number of different major types of seizures that occur. And so certainly, while we wouldn't promote off-label, that information is available for prescribers. With regard to IH in the clinical trial, the majority of patients came in on daytime wake-promoting agents. And despite that, had severity scores sufficient for trial enrollment. And whether or not they were on daytime alerting agents derive benefit from Xywav.

And I'll say even for patients who are not today on some of the stimulants or daytime wake-promoting agents, many of them have tried them in the past with limited success and so sometimes have stopped trying those agents.

Our next question comes from Navann Ty with Citi.

Just a clarification on Epidiolex outside of the U.S. Do you expect the launch in France in the second half? And do you expect to launch in other key European markets? And then a second one on BD from your comments, can we expect bolt-ons this year and potentially more substantial billing once you reached the 3.5 leverage target?

Yes. Dan, maybe you could start with Epidiolex ex-U.S. And then, Renée, if you could jump in on the second question.

Yes. On the -- on sort of launch in France, we're just saying in 2022, and we're in active dialogue with the French authorities, but it really depends on the cadence of how that goes through. And it's much more important for us to land the right price because you only have one chance to have a launch price there in France. So -- but we're confident that we will get to a price and get to a launch in 2022. Importantly, there's 34 countries where we have approval, only 13 launches to date. France would be the last major of the European countries, but there's plenty of smaller countries that can add up and provide meaningful growth. And we've got active development plans and thoughts towards Asia Pac like Japan that could provide meaningful growth in the future. Renée Galá: Yes. This is Renée. I'll chime in and just adding here to the second part of your question on corporate development. So as I had mentioned in our prepared remarks, we do expect to be active on the corporate and business development side across 2022. We're actively looking to augment the pipeline to continue to expand our opportunities there within neuroscience across sleep. Also now with essential tremor studies in PTSD and of course, a market-leading position in epilepsy piece. This is all of interest to us. And then also on the oncology side, looking at their asset oncology, additional opportunities in solid tumors and areas that would align with the future commercial activities and our R&D expertise are all areas of interest. So I would expect us to be active probably on this smaller side throughout 2022, you could think about size being anything along the lines of a SpringWorks or Redx type of transaction on the smaller side or even something slightly larger like what we executed for Zepzelca with PharmaMar, which was a couple of hundred million dollars upfront and a great way for us to convert cash into a revenue-generating asset and clearly an important product. We are focused from a capital allocation standpoint on deleveraging this year in addition to supporting our ongoing launches, expanding the pipeline. So we do expect and we're well positioned to meet our stated net leverage target of getting below 3.5x, but we would expect to also be active in [indiscernible]. And then beyond that, I think we have great optionality as we enter 2023 and beyond. Our business generates a significant amount of cash flow, and we demonstrated our ability to both lever up to be able to execute the GW transaction, but also we've demonstrated the ability to quickly delever following that transaction as well as integrate their operations rapidly and effectively.

And then our last question comes from Greg Fraser with Truist Securities.

On Xywav for IH, what has been the early trends in terms of the mix between once it and twice nightly dosing if you have data on that? And where would you expect the average dose per patient to normalize at over time?

Yes. I would say, Greg, in answer to that, we haven't seen anything since launch that would tell us anything different from what we saw in our clinical trials in terms of once-nightly and twice-nightly dosing or on what dose people end up with. So maybe I could ask Rob to jump in and just remind people what we did see on that. I'll steal the thunder on the second half, which is to say we saw essentially the same nightly dosing very slightly lower in idiopathic hypersomnia than we see in narcolepsy.

Yes. That's right, Bruce. So by and large, it's very similar overall total dosing to narcolepsy. And the great majority of patients on the clinical trial ended up on twice nightly. With idiopathic hypersomnia, which might be a little different than narcolepsy, some of the patients on the clinical trial were started once nightly, titrated up. And as they derive benefit from the drug, we're then in a better position to take that and benefit from that second dose. And so there -- even those who were started on once nightly tended to transition over to twice nightly.

At this time, I'd like to turn the call back over to Bruce Cozadd for any closing remarks.

All right. Thanks, operator, and thanks, everyone, for joining us. I couldn't be happier with our strong fourth quarter and year revenue up 31%, ANI up 41% year-over-year with guidance for this year that contemplates 15% midpoint revenue growth, ANI, about 17%, and I think really puts us right on track to achieve Vision 2025. So let me close today's call by recognizing all of our Jazz colleagues for their tenacity, dedication and creativity and successfully delivering these new therapeutic options to patients. And I also want to thank our partners and shareholders for their continued confidence and support. We look forward to updating you on our progress this year as we drive toward our 2022 guidance and Vision 2025. Thank you all for joining us and stay well.

This concludes the program. You may now disconnect.