Good day, and welcome to the Jazz Pharmaceuticals Fourth Quarter and Full Year 2022 Financial Results Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. Instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Darren Fox, Executive Director of Investor Relations. You may begin.

Thank you, operator, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its fourth quarter and full year 2022 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 on our website. On the call today are Bruce Cozadd, Chairman and Chief Executive Officer; Renee Gala, Executive Vice President and Chief Financial Officer; Dan Swisher, President and Chief Operating Officer; and Rob Iannone, Executive Vice President, Global Head of R&D. Kim Sablich, Executive Vice President and General Manager, United States, will join the team for Q&A. On Slide 2, I'd like to remind you that today's webcast includes forward-looking statements, such as those related to our future financial and operating results, growth potential and anticipated developments 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 will discuss non-GAAP financial measures. 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.

Thanks, Darren. Good afternoon, everyone, and thank you for joining us today. I'm excited to share our strong fourth quarter and full year results, capping off an outstanding year of performance and execution for Jazz, providing us with significant momentum as we enter 2023 and continue to drive towards Vision 2025. I'll start on Slide 5. This year, Jazz is celebrating its 20th anniversary. Over those 20 years, we remained focused on our purpose of improving the lives of patients and our commitment to being a great place to work, while delivering consistent top-line growth. In 2022, we've built on that foundation of strong execution, achieving record revenue, advancing multiple therapies in our pipeline and adding several exciting molecules through corporate development, all while remaining focused on disciplined capital allocation and operational excellence. All of these accomplishments, contributed to the ongoing transformation of our business to a high-growth global biopharma leader and position us well to achieve Vision 2025. Vision 2025 includes three components central to driving sustainable growth and enhanced value as we transform our company: commercial, pipeline and operational excellence. I'll now highlight several of our accomplishments in each of those areas in 2022, starting with commercial. Based on our strong commercial performance, we continued to deliver significant revenue growth. In 2022, we recorded $3.7 billion in revenue, which represented an 18% increase compared to 2021. Our top-line growth was driven by the continued success of three recently launched products, Xywav, Zepzelca, and Rylaze, along with strong growth for Epidiolex. Xywav is now our largest product by revenue, annualizing at more than $1 billion. Based on our outstanding commercial execution, we achieved our 2022 total revenue guidance as well as guidance for each of our Neuroscience and Oncology franchises. Moving to the pipeline, we continue to advance our…

Thanks, Bruce. I'm excited to share the continued progress across our commercial portfolio. I'll start on Slide 8, with Neuroscience and oxybate. As a leader in sleep medicine, we believe the approval of Xywav in mid-2020 marked a meaningful advance in patient care. As the lower-sodium oxybate, Xywav has offered patients with narcolepsy and IH, who are taking a lifelong therapy to address their sleep disorders, a way to reduce sodium intake which is a known risk factor for cardiovascular disease. In the fourth quarter, average active oxybate patients increased to approximately 18,000, representing growth of approximately 11% compared to the same period last year. There were approximately 10,300 active Xywav patients exiting the quarter, resulting from strong adoption in both narcolepsy and IH. Over the course of 2022, this compelling adoption continued to reinforce our confidence in the durability of Xywav, and we expect Xywav to grow and remain the oxybate of choice in 2023. As Bruce noted, Xywav became our largest product in net sales in the fourth quarter '22, annualizing at more than $1 billion and on track to achieve blockbuster status in 2023. We continue to see robust uptake of Xywav for narcolepsy in the fourth quarter and we exited the quarter with approximately 8,550 narcolepsy patients taking Xywav. There are now more narcolepsy patients on Xywav than Xyrem, indicating our sodium messaging is resonating with healthcare providers and patients. In addition to adoption of Xywav among current Xyrem patients, the large majority of new to oxybate narcolepsy patients are being prescribed Xywav. Xywav is the first and only FDA-approved therapy for IH, and we're continuing to see increased enthusiasm among physicians for identifying appropriate patients and initiating therapy. Exiting the fourth quarter, there were approximately 1,750 IH patients taking Xywav. We remain focused on educating…

Thanks, Dan. In recent years, we have enhanced the breadth and depth of our pipeline, as well as our R&D capabilities. Our acquisition of GW in 2021 accelerated that process and, in 2022, we added three promising candidates to our pipeline: zanidatamab, a novel late-stage oncology asset; JZP441, an orexin-2 receptor agonist for which we initiated a Phase 1 clinical program in 2022; and JZP898, a differentiated conditionally-activated interferon alpha INDUKINE molecule that will be entering the clinic later this year. Starting on Slide 13, I'll highlight the most recent addition to our pipeline, zanidatamab, a novel HER2-targeted bispecific antibody with biparatopic binding and the potential to transform the current standard of care in multiple HER2 expressing cancers. As an oncologist, I'm impressed to see monotherapy activity with zanidatamab across multiple HER2 expressing tumor types, including cases resistant to prior HER2 therapies. Based on its potential to benefit patients across multiple tumor types, we are committed to advancing this program as rapidly as possible. The most advanced clinical work with zanidatamab is in biliary tract cancer, or BTC, and metastatic gastroesophageal adenocarcinoma, or GEA. These are cancers with significant unmet need and poor outcomes with current standards of care. Our confidence in zanidatamab has only grown based on positive data in both of these settings. Continuing on to Slide 14, we were very encouraged by the positive top-line results from the recent pivotal trials of zanidatamab in BTC and the first overall survival data for zanidatamab from the Phase 2 first line GEA study. In December, our partners Zymeworks announced positive top-line results from a pivotal Phase 2b open-label single-ARM clinical trial called HERIZON-BTC-01, evaluating zanidatamab as monotherapy in patients with previously-treated HER2 amplified and expressing BTC. In the trial, 41% of these patients with HER2 amplified and expressing disease…

Thanks, Rob. I'll start with our top-line results on Slide 17. As a reminder, our full financial results are available in our press release and 10-K. In 2022, we recorded significant year-over-year revenue growth of 18%, driven by our key products in both Neuroscience and Oncology. We achieved $3.66 billion in revenues for the year and almost $1 billion in revenues in the fourth quarter. Launching multiple products over the past three years, coupled with the acquisition of GW Pharmaceuticals, has enabled us to successfully diversify our revenue, meeting our 2022 diversification target of 60% to 65% of net product sales coming from products launched or acquired since 2019. Given our expectations regarding the durability and growth potential of these products, along with our continued focus on adding new products through corporate development, we believe we are well-positioned to achieve our Vision 2025 goal of $5 billion in revenue. Turning to Slide 18. Our disciplined capital allocation and focus on operational excellence drove adjusted net income of $934 million, which includes $444 million of IPR&D expense related to corporate development. Contributing to IPR&D were upfront payments for key pipeline additions such as zanidatamab and JZP441, which have the potential to create sustainable long-term value for our company. Our efforts to improve adjusted operating margins to 48% in 2022 have given us additional flexibility to invest in our business and contributed to our significantly enhanced cash generation. In 2022, we generated almost $1.3 billion in cash from operations, an increase of $493 million, or 63%, compared to 2021. On Slide 19, we've highlighted our success in rapidly delevering our balance sheet following the GW transaction. By delevering two full turns since the deal closed in May of 2021, which we accomplished through both debt reduction and enhancing our adjusted EBITDA, we…

Thanks, Renee. I'll conclude our prepared remarks on Slide 23. 2022 was a transformative year for us. We achieved strong double-digit revenue growth and improved our operating margin significantly. Our commercial teams demonstrated strong performance across our portfolio. We're confident that Xywav will remain the oxybate of choice in 2023, entering the year with blockbuster status. We expect growth for Epidiolex, and that our Oncology franchise will continue to deliver. Our R&D organization has reached new levels of productivity and expanded its capabilities. We added three new molecules in 2022 and have trials for multiple products underway ranging from potentially pivotal trials to early-stage studies. We are employing greater discipline in our capital allocation strategy, which is aimed at the highest priority areas, including R&D programs and corporate development. With our strong cash flow, balance sheet and adjusted operating margins, we have the flexibility to make significant investments across commercial, R&D, and corporate development to drive sustainable growth and enhanced value. We're excited about building on our current momentum in 2023 and expect growth across our key products. Vision 2025 provides a clear perspective on what we expect to achieve in the coming years. We're excited about the future and what we can deliver to patients and shareholders. 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.

Thank you. [Operator Instructions] Our first question comes from Jessica Fye with J.P. Morgan. Your line is open.

Great. Thanks so much for taking the questions. Ideally two if you can. First, can you talk about how Xyrem dynamics are playing out relative to your expectations since the authorized generic entered? And second, understanding you're no longer guiding by product franchise here, can you speak a bit to your expectations for Epidiolex growth? Is it possible that growth for that business accelerates in 2023 relative to '22 with just increasing ability to be in the office, et cetera? Thank you.

Thanks, Jess. On your question about Xyrem, let me first just put this in context. Our major focus for 2023 and going forward is growing Xywav, both in narcolepsy and idiopathic hypersomnia. That's been our focus. We've had competition for Xyrem for the past couple of years, it's been us with Xywav, and we've seen Xyrem sales coming down. As to what we're seeing with the AG, maybe I'll ask Kim to give a couple of thoughts on our experienced thus far in '23, although we're obviously not reporting first quarter results right here. And then, maybe Kim, you could just transition right into Epidyolex growth in dynamics there.

Sure, Bruce. Happy to do that. As Bruce said, it's really too early here in the early stages, it's a comment on the overall impact of the AG on Xyrem, and as he said, our focus does remain on Xywav. And we're feeling that we're going to continue to expect in 2023 continued strong uptake of Xywav in both narcolepsy and IH with continuing transition of narcolepsy patients from high-sodium oxybate, either that being Xyrem or later on from the AG over to Xywav based on its differentiation as the only lower-sodium oxybate product. So as a result, we also continue to expect that Xywav will both grow and remain the oxybate of choice in 2023 even with one or more authorized generics on the market and potentially branded competition entering later on in the year. So overall, our guidance includes continued decline in Xyrem, both due to strong Xywav adoption and the AG entry and potential competition, and we feel very optimistic about the ability of Xywav to continue to grow through 2023. In terms of Epidiolex and the question about whether or not it can accelerate, what I'll basically say is that we're continuing to be very pleased with the Epidiolex net product sales and that it increased 12% on a pro forma basis in 2022 compared to 2021, and that we're very pleased that this has been driven primarily by demand. We're continuing to add new prescribers still to our active prescriber base, and our overall engagement, as Dan said, of HCPs continues to grow, which is really positive for this product at very promotionally sensitive market. Dan also mentioned the driver of 60% of prescribers now indicating to us that they're using Epidiolex even earlier in the treatment algorithm. Heading into 2023, we are -- we've got a new push in terms of payer coverage. We've talked for several years about the payer coverage being quite strong from a quantitative standpoint for patients, but we're really pleased that our contract-attracting efforts of last year really has paid off and that we're entering 2023 in an even stronger position with payers. We've seen several plans reduce at the start of 2023, their utilization management criteria, ultimately making it a bit easier for HCPs and patients to get access to Epidiolex. And then, we're going to continue to promote the synergistic effect of using Epidiolex in combination with clobazam. We've been out there doing that for a year, but HCPs are continuing to have a very impressed reaction to these data that has shown that we can reduce seizures [Technical Difficulty] by around 60% in LGS and Dravet and nearly 50% in TSC. So, overall, we're very excited about the future potential of Epidiolex as a significant contributor to our top-line and to Vision 2025.

Thank you. [Operator Instructions] Our next question comes from Marc Goodman with SVB Leerink. Your line is open.

Yes. Can you give us a flavor for the persistence of these patients, the IH patients, and how that's going? We know what the number is at the end of the quarter. I'm just kind of curious if there are a lot of patients that are already dropping off and you're getting a lot of new patients, so that's the net effect. So, just trying to get a sense of that. Maybe on an absolute basis, you can give us a sense, or even on a relative basis, relative to how the drug is used for narcolepsy and the persistence there? Just maybe give us a sense there. And then, just one quick question, just on the R&D guidance. Is there included any major milestones in there or is that just increased because of the clinical studies that you've already mentioned?

So, maybe Kim will come to you on what we're seeing in terms of patient staying on IH thus far in launch, although we're still pretty early. And then, Rene, maybe you can take the question on R&D guidance. Kim?

Got it. Had to come back off of mute. Yes, so we're 14 months into the launch, and we continue to be really pleased with the uptake and we're still seeing from the marketplace a lot of excitement about having the first, only-approved product for IH. We have had compelling growth continue into this quarter with 1,750 active patients exiting the quarter and we're expecting to have -- continue to have a strong growth here. In terms of persistence, I basically just say it's pretty consistent in terms of what we see in narcolepsy. So, the number we do report around active patients is that net number that includes both those coming on and as well as those coming off. Our focus in IH remains on educating prescribers on how to better diagnosed IH and identify patients who would benefit from Xywav. We're reminding them that IH is a 24-hour condition and that Xywav is approved to treat the full condition, and can address multiple symptoms of IH, not just the daytime symptom of excessive daytime sleepiness. And keep in mind, I think we caution for some while that we're building the market here. This is the first and only FDA-approved treatment for IH in adults. Overall, in the long-term, we feel as we build this market, we're really confident in our ability to ultimately maximize Xywav's potential in this very underserved marketplace.

Yes. And then I'll just chime in Marc with respect to the R&D milestones. So, our increased R&D guidance is really a reflection of an expanded more robust pipeline. Clearly, you saw the expenses in Q4 come up a reflection of taking on the zanidatamab program, which we want to invest fully behind across 2023. So, it's a combination of zani and the clinical programs to support that, the later-stage studies for suvecaltamide, of course, JZP150, we expect to read out at the end of this year, and then the broader expansion altogether. I had mentioned on the call that we have a pipeline today that's four times the size of the one that we had not that long ago in 2015. So, the focus we've had on disciplined capital allocation has enabled us to be able to lean more into R&D as part of our spending in 2023.

Thank you. Our next question comes from Jason Gerberry of Bank of America. Your line is open.

Hey, guys. Thanks for taking my question. My question pertains to your sales guidance for 2023. It looks pretty conservative, especially in the context of Vision 2025, which ex-corp development, I think is $4.5 billion, which would imply like basically off your 2023 midpoint, you have to gain $350 million in sales in '24 and '25, respectively. But you're only modeling about plus $100 million in revs in 2023. So, just wondering if you could shed a little bit more light on that dynamic, that'd be helpful. Thanks.

Yes. Thanks, Jason. I'll start and then invite Renee to jump in. What you're seeing in '23 and I think Renee did a nice job of this in laying out the guidance is real growth in all of our core products, offset by continuing significant decline in Xyrem. And I just think as you get out to later years, you're going to continue to see growth in our key products, but you've already suffered a lot of the loss in Xyrem and so the net gain becomes a little clear. And I think one of the rationales of rolling out Vision 2025 to give people a little more context to the growth curve over time was to make sure people understood that we would be going through this transition in 2023.

So, maybe just to build on that further, Bruce. So, as Bruce described, we had -- we have these multiple dynamics at play, right? We have this dynamic of growth within Xywav, Epidiolex, Rylaze and Zepzelca, but that is offset by the continued decline in Xyrem. In large part due to the strong uptake of Xywav, but also through the introduction of AG, which, of course, we earn royalties on. And then, as we move forward, we also expect, as Bruce has mentioned, to see continued growth in '24 and '25. So, what does it mean based on our '23 guidance, which does have more muted growth on a consolidated basis based on the dynamics that we've shared here today, what does it mean in terms of '24 and '25? Well, that means you're delivering low-double-digit growth from your existing business and continuing to be active on the BD front, which we expect to be. And we've also stated that we do expect zani to contribute to our 2025 revenue. We also expect we'll need to continue to be active as we have done over the last several years, each year closing a transaction that has resulted quite quickly in revenue generation. So, that's how we're thinking about the overall guidance and feeling good about where we are.

Thank you. Our next question comes from Annabel Samimy with Stifel. Your line is open.

Hi. Thanks for taking my question. I'm going to be different and ask something about your new product, this pipeline product, zani. So, regarding the Phase 2 open-label data in first-line GEA in combination with chemo, I guess, could you put this into context with the current Phase 3 data that -- or Phase 2 trial that's ongoing? And how comfortable are you that -- I guess, some of this data can be indicative of potential success in the Phase 3 study. How similar are the different arms? And is there something that can draw from it, or is the population too small at this point? And when might we be able to see this data? And then, just as a quick follow on, you clearly have a number, a tremendous number of opportunities here with anti-HER2 agent. How will you be making the decisions on the new tumor types? And when might we be able to hear about some of these programs that you're going to be moving forward? What gets you excited? Thanks.

Annabel, Rob loves it when you say what gets him excited about our pipeline. So, on zani, we're in a really fortunate position of having had a couple of data readouts even since we signed the initial transaction that give us confidence, but I'll let Rob jump in on specific answers to your questions.

Yes. Thanks for the question. Thanks, Bruce. You have it, you have it right, I described the very strong data from the single arm Phase 2 trial that's front-line zanidatamab in combination with standard of care. And that was meant to provide data in support of the ongoing pivotal program. And I think the results give us a lot of reassurance about what we can expect in that Phase 3 pivotal program and confidence that it's likely to be the standard of care. So, you're thinking about that in the right way. In terms of where else to go with this, if you look at all the data published now, BTC, gastric, breast cancer data, other data from the Phase 1 trial, it's very clear that this is highly-active anti-HER2 therapy and just about any tumor type that is overexpressing HER2. In fact, we see activity in patients progressed on other anti-HER2 therapies, which is very important, as you think about where to position this next, different lines of therapy. And so, we're actively looking at different opportunities beyond our current strategy. As you know, we're planning a fast-to-market strategy with BTC and then our next pivotal trial in gastric, but looking at other opportunities.

Thank you. Our next question comes from David Amsellem with Piper Sandler. Your line is open.

Hey, thanks. So, I wanted to switch gears to one of your pipeline products. This is the orexin agonist 441. So, in the study, if I'm not mistaken, you're dosing it at night time. And I'm just trying to get a better sense as to the rationale here given that this is ostensibly a wakefulness or alertness drug. And do you think that there is something there that could set you apart from the other vaccines that are in development, be it the Takeda ones or the one from Alcami's or potentially others? Thank you.

Yes...

Rob, you want to jump in on that?

Yes, happy to, Bruce. I'll answer the second part first, which is we looked at this molecule carefully before we did the deal preclinical data, emerging clinical data, and we do have a lot of confidence around it being differentiated potentially to other products that are in development. In terms of our approach to the study design, you asked specifically about dosing healthy volunteers at night, this is really a way for us to quickly in healthy volunteers establish the proof-of-concept around wake promotion. So, in healthy volunteers, when they are sleep deprived, you can then measure alerting effects in that population that would be harder to measure during the daytime in otherwise healthy population. So, as we do that comprising single dose study, evaluating increasingly higher doses, we then have an opportunity to interrogate the relative wake-promoting effects across those doses, which then sets us up for the necessary downstream study. So, clearly, then we need multiple dose safety and that will help to select the dose for the study that we just posted on clinicaltrials.gov, and then ultimately together help us to select the dose for the first patient studies.

Thank you. Our next question comes from Gary Nachman with BMO. Your line is open.

Thanks. So, my question is on Rylaze, which has been growing pretty nicely. So, how much will the Monday/Wednesday/Friday dosing help further uptake of that product? And then, what's the cadence for expanding Rylaze geographically, including the EU and Japan? And how much will those ex-U.S. markets ultimately contribute? And then, with the CRL for the IV, how important is that ultimately to the franchise? So, would there be a long-term impact if you don't move forward with it? I know, there won't be an impact in the near term, but what about the long term? Thank you.

Thanks, Gary. I'm going to reorder your questions a little bit maybe have Kim take Monday/Wednesday/Friday dosing and then comment on any impact of not having IV. And then, Dan, maybe you can take the ex-U.S. piece of this. So, Kim?

Great. Thanks for asking about Rylaze. We're really pleased that the sales for Rylaze have exceeded the prior U.S. peak sales with Erwinaze and we believe this is a really strong signal that the unmet needs of the market had never truly been satisfied. In terms of Monday/Wednesday/Friday dosing, we really believe when we put this out there that our costumers were utilizing Rylaze and not denying any patients access to it because we had a label with every 48-hour dosing. So, we really were not expecting a lift in sales from the Monday/Wednesday/Friday dosing, but instead probably a lift in customer satisfaction in terms of customers who used to and this is the preferred route of -- way of dosing the product would be able to administer it in a way that was closer to what they're historically used to and prefer.

And then, just following up on Kim. This is Dan. So -- and very quickly on the CRL question. We don't see that as a limitation to the uptake in the U.S. market. We're just looking to get that additional data in the hands of the HCPs ideally through the label, but it's also been published and presented at ASH. So, the IM uptake has gone very well. Outside the U.S., we filed with the EMA last year, and we do anticipate a approval come in sometime. I can't remember, you guys can let me know if you've given a specific timing. And then, the -- on the Japan side, we are going to be engaging with the health authorities and trying to bring this program differentiated from Erwinase to the marketplace. There's still no non-E. coli-based Erwinia in the Japanese market. In terms of overall growth, it really depends a little bit on pricing. Europe and the U.S. and Japan likely would be more tied to a lower pricing. And so, historically we saw 80% of Erwinase revenue coming from the U.S. versus Europe, while there is still a lot of patients over there, but ultimately, it depends on how we can differentiate the product. And near-term focus, of course, is getting the product approved. And the EU potential for approval is later this year.

Thank you. Our next question comes from Balaji Prasad with Barclays. Your line is open.

Thanks for the questions. Just two from me. Firstly, with Vision 2025, including around $2 billion of oxybate, would you discuss the relative role or contribution between narcolepsy and IH towards this vision? Secondly, with Epidiolex, I wanted to address the point where we're getting significant investor questions, which is the generic challenges to Epidiolex with 10 to 11 filers. Is there any confidence that can provide the market around the durability of Epidiolex? Just want to see that -- ensure that this is not an overhang on the stock for the longer run. Thanks.

Yes. So, maybe I'll take that second question first, and then we can have maybe Renee jump in a little bit on what we've said in terms of the oxybate revenue piece of Vision 2025. On Epidiolex, there's no new information out there on durability. We've said from the time we first announced the GW transaction that we did have a lot of confidence in the durability of this asset. We had predicted correctly the likely timing of first ANDA submissions, and of course, that's public now with our announcement of the Hatch-Waxman litigation. Since the time of the deal, we did have additional IP issue, including some with longer duration patents. That's not a surprise. We again predicted that at the time of the transaction. But I don't have new information to share other than all the things we've shared historically that give us confidence that this is not a short-duration product.

Yes. And then, Balaji on your other question...

Kim or Renee?

Yes, I was just going to ask Kim to jump in there.

Yes, sure. I think your question was about what we see the long-term mix being between narcolepsy and IH for Xywav. Overall, we see it as a very durable franchise, and we do expect Xywav to provide substantial value in both the near and the long term. And we expect that Xywav will both grow and remain the oxybate of choice in 2023. And that in addition to this, IH is a very meaningful growth opportunity as the only FDA-approved treatment for IH. So, it's really a combination of the two contributing very meaningfully moving forward.

And maybe I'll just jump in quickly then on the royalties. I think that may have been an aspect of your question as well. So, I'd mentioned during the prepared remarks that with respect to the royalties on authorized generics of Xyrem, you should think about those being higher in the second half versus the first half of the year. And recall, the way that the royalties work, the first six months we just have Hikma on the market, and we have tiered wide-ranging royalties, which are essentially low, where they are selling a low percentage of the overall oxybate volumes, and then, those increase as those volumes increase. That royalty rate ranges from 10% all the way up to 90%. Now, the second -- and recall, they're exclusive. The second six months of this year, we expect the royalties to be higher because the royalty rate with Hikma increases to a fixed rate where both we and Hikma have substantial economics. And then, we have the expectation of three other extremely volume limited AGs coming in with low fixed-rate volumes and royalties to Jazz. As we go forward, recall that after the first year, then the royalties with Hikma exceed -- sorry accelerate to a much higher double-digit rate to Jazz and remain at that through the duration of the royalty period.

Thank you. Our next question comes from Gregory Renza with RBC. Your line is open.

Great. Thanks. Hey, Bruce and team. Thanks for taking my question. Maybe, Bruce, just one for me. How is the current commercial performance across your products and segments really feeding back to the early pipeline selection that you, Rob, and the team are doing, the no-go decisions there and the risk tolerance? And just maybe thinking about the commercial products, how that actually is affecting or influencing what you see as diversification of the portfolio? Of course, as Renee mentioned that with the pipeline being four times the size, now are there particular areas where you'd like to see greater pipeline output from? Thanks so much.

Yes, love the question. I would say that we keep learning the same lesson over and over, which is if you have great products that really meet an unmet patient need that are differentiated from other products, those continue to have high value in the marketplace and get preferentially adopted. And I think the ways in which Xywav and Epidiolex and Rylaze and Zepzelca have all filled unique needs and are differentiated from other products has made a big difference in their success thus far and their future success. And I would say the same thing about the programs we have in the pipeline. We think the ones we're investing most heavily in, particularly in later stage where we have more data, fall into that category of meet significant unmet patient need and are differentiated from other currently available or expected to be available therapies. In the earlier part of the pipeline, we're taking some bigger risks and shooting for some big targets. And some of those will work and some of those won't. We don't know which ones or which yet, but we're going to ride the winners, and the winners are going to be those ones that are highly differentiated. Dan, I want to give you a chance to weigh in here, too, if you'd like to add anything in particular about the translation of our commercial experience back to R&D choices.

Yes. Thanks, Bruce. So, I mean, one thing to take in mind is some of our pipeline is also evidence generation, new indications, new formulations of our existing brands, so we want to continue to unlock the full potential of those brands, including broadly Epidiolex and oxybate, and even on the oncology side. I mean, zani is a pipeline within a product, of course. And so, how we kind of think that through and where we can get the most differentiation and PTRS', et cetera. So, it's a great set of challenges that we've got with the pipeline and the commercial portfolio. And clearly remaining and enhancing our category leadership, and now epilepsy, sleep medicine, and increasingly, some of these areas in both solid and liquid tumors is also a incentive for the way we think about building out the pipeline. And we have, under Rob's leadership, really created much more internal capability all the way from filing our own INDs through development to also a corporate development muscle, which I'd say is second to none, where we can really look at external innovation. And folks are knocking on our door because of the success we've done in some of these partnerships, whether late-stage our early pipeline. So, it's a good place to be, but we will move into some new areas, as Bruce referenced, where there's significant unmet need and we think we can get to some smart go-no-go decision points.

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

Hi, thanks for taking my question. Maybe just one on Zepzelca. Any updates on the enrollment and timeline expectations for LAGOON and IMforte? Any chance of getting the potential first-line move complete before or during 2025, just as you think about Vision 2025? Thank you.

Rob, do you want to talk about Zepzelca clinical trial expectations?

And I would maybe ask just for a reminder from our group in terms of what's been communicated previously, but I would just say that, that trial is on track relative to expectations, and we really are quite excited about the potential that Zepzelca move up into the front-line where we're pre-emptively treating patients before they progress, accessing more patients, treating patients for a longer duration of time. And -- thank you. I am seeing now that we had said previously that we're expecting a complete enrollment this year.

In the first-line trial.

Yes.

Thank you. Our next question comes from Ash Verma with UBS. Your line is open.

Hi. Thanks for taking question -- my question. I have two. So, first one on the suvecaltamide. So, what's the level of confidence here in the essential tremor mechanism, the T-type calcium channel pathway? And we've seen that Neurocrine failed with the same mechanism and Praxis data is expected shortly. Is your molecule in any way different versus some of these competitors? And then, second, I wanted to see if you can provide any kind of a color on what you're observing in the marketplace for the Xyrem AG. Are stable patients getting switched to AG whenever they're going back to the physicians for their regular checkup? Or are the insurance clients driving the AG uptake without patients seeing the doctor? I'm trying to just get a sense of how quickly Hikma can take a share here.

So, let's go first to Rob on the 385 question, on the suvecaltamide question.

Yes. I would start just by saying that we had the benefit of a Phase 2a proof-of-concept study before initiating our current trial, which enabled us to see the fact there was the response that we expect to see based on the mechanism and consistent with our preclinical data. It also allowed us to identify what would ultimately be the right patient selection criteria and the right endpoints, of course, in agreement with the FDA for that trial. And so, we think the prior data that we had in our Phase 2 with our molecule gives us confidence about the outcome of the ongoing Phase 2b, which, as you know, is three doses with a once-daily formulation.

Yes. And I'll just add on the second part of your question. Probably too early for us to comment on payer dynamics. We saw obviously where Hikma put their WAC pricing at the time of launch. We're aware that there is some uptake of the AG as we would expect and as was built into our expectations coming into the year, and this is built into the guidance we've given you, but I don't think we've got enough data yet to get more specific.

Thank you. Our next question comes from Ami Fadia with Needham & Company. Your line is open.

Great. Thanks for taking my question. Maybe firstly, just on the IH market, since you've been in the market for some time now, any sort of updated thoughts around the size of the market and [Technical Difficulty] the value of Xywav, are you seeing more patients being diagnosed and treated in the market? And then, just a follow-up on JZP385. Can you remind us how you're thinking about the essential tremor patient population as opposed to the Parkinson's disease? Are there similarities or differences that we should be thinking about as we consider -- if we see positive data in essential tremor, do we -- does that give us greater confidence that in the Parkinson's disease drug would also work? Thank you.

So, Kim, maybe you could start on just how you're thinking about the IH opportunity overall.

Yes, sure. I'll start by reiterating that we feel like we have compelling growth in IH, already was 1,750 patients coming out of the end of the year and do expect it to grow nicely moving forward. But as we said, we are building a market here. There's quite a bit of education to do. So, we're still trying to estimate ultimately how big this will be. We feel very optimistic, but we know we need to still educate prescribers on how to better diagnose IH. There are 37,000 patients out there we've been talking about that are diagnosed and actively seeking treatment. But the HCPs have kind of shown us that they tend to think fairly narrowly about the condition. It's being all that excessive daytime sleepiness. And we're reminding them that this is a 24-hour condition and that we're approved with Xywav to treat the full condition and address multiple symptoms of IH, not just EDS. So, again, this is the first and only approved treatment that prescribers really haven't had to think much more beyond EDS so far to date, but we really feel good about the way that they are coming along and starting patients and we're confident in our ability to ultimately maximize the opportunity of the product in this really underserved market.

Dan, do you want to jump in on the 385's two different market opportunities? Dan, are you on mute?

I was on mute, Bruce. Thank you. Yes. So, sorry. On the sort of ET and Parkinson's, I mean what's similar to it is significant unmet need and, ET, there has been no new approved therapies and the therapies that are there have very little limitations, so no approved therapy in 50 years. Nothing approved for Parkinson's tremor. We do think there's overlapping pathophysiology between the tremor types. So -- and there is some preclinical opportunity for us to as well, think the T-type calcium channel blockers should work there. In terms of the market opportunity, it's -- a couple of million have diagnosed across the Western markets. We think the actual market opportunity for essential tremor is up to 11 million, so it's that classic. With the right drug, you can really uncover a lot of market growth and opportunity. And then on Parkinson's, that's a more defined patient population and very addressable in terms of Parkinson's treating physicians. And it's about 1 million patients per year of which 75% have tremors, for which there is no approved therapy. So, exactly how we would configure the sales force if we're lucky enough to get both indications is something we'll be figuring out, but we do think from a price value as well as market coverage and interest from both HCPs and patients, it could be quite a large market.

Thank you. Our next question comes from Madhu Kumar with Goldman Sachs. Your line is open.

Good afternoon. This is Omari on for Madhu. So, our first question is how should we think about the ex-U.S. launch of Epidiolex in Europe as a like for future growth? And then, how should we think about potential opportunities for corporate development? So, you mentioned you all be open to seeking new areas. Would this be still within the core of Oncology and Neuroscience, or could you expand outside of that?

Okay. Let's -- I mean, in a minute, going to come to Dan on ex-U.S. Epidiolex opportunity, and then Renee on corporate development. But before that, I think there might have been a dangling part of the last question we didn't get, which was really how to think about the two clinical trial populations and whether there's any relationship, and how to think about potential results in essential tremor as they might apply to Parkinson's tremors. So, Rob, maybe you could jump in on that first.

Yes. Thanks, Bruce, and I do think Dan covered it with respect to, yes, these are two distinct clinical entities, but we have strong pre-clinical rationale that the mechanism of T-type calcium channel inhibitors could help block the tremor associated with each of these conditions. So, while certainly if we see a positive readout in either of these indications, it's going to give us increasing confidence around this molecule and working the way we think it should work. But I wouldn't have a direct readthrough to say if it doesn't work in one, it won't work in the other.

And then, on the ex-U.S. growth for Epidiolex, we do see strong continued growth for 2023 and contributing towards 2025. Importantly, we had some headwinds that we don't think we'll face as directly in terms of FX rates. And importantly, now, we've got approval towards the end of last year in France with full reimbursement, so we're now fully launched in all five major European countries and we've still got some smaller markets to add over time. So, we're approved in 15 of 30 -- we're launched in 15 of 35 approved markets. And then, more from a medium-term perspective, we see significant opportunity in the Asia Pac region, and in particular Japan, where we've got a Phase 3 study ongoing and we look forward to thinking through our commercialization strategies there for the Neuroscience portfolio.

And then, maybe just jumping in on corporate development, in terms of areas we're interested in, clearly, we're definitely focusing on neuro and oncology, but we're also looking more broadly at rare and orphan in general. This is a space that we're very comfortable in currently within our neuroscience and oncology therapeutic areas. But as we're looking at corporate development opportunities, we've tended to be technology-agnostic, meaning between small molecule, large molecule, botanicals. And as we continue to build and enhance our commercial capabilities, Bruce had mentioned earlier, the strong focus on patient need, when you can have a meaningful impact for patients to be able to apply our insights, it gives us confidence in looking at multiple types of molecules and potentially extending beyond neuro and oncology. But the primary focus is still in our neuroscience and oncology therapeutic areas. In terms of the stage of compounds, we're looking at commercial, near commercial, but also pipeline deals. You've heard us talk about our guidance today. We're investing heavily there, and we do think our increased capabilities that we've developed both organically but also with the acquisition of GW has set us up really well.

Thank you. Our last question comes from Greg Fraser with Truist. Your line is open.

Great. Thanks for squeezing me in. On Xywav, you're clearly confident in continued strong growth for both indications. On narcolepsy, do you expect the pace of new patient adds to potentially slow a bit this year, given the oxybate market dynamics? Last year, I think you added about 500 new patients each quarter. Curious whether you think that pace can continue with the various moving parts in the oxybate market this year. Thank you so much.

Kim, anything you want to add on narcolepsy adds in '23?

Yes. Just that we're still confident here that we've got clear differentiation based on the reduced sodium and that we're going to continue at a nice pace, both in terms of patient conversions as well as new patient starts where we're already seeing the vast majority of patients being started on Xywav versus Xyrem. So, overall, we feel really good about that momentum continuing throughout the year.

Thank you. There are no further questions. I'd like to turn the call back over to Bruce for any closing remarks.

All right. Thank you, Operator. And I just -- I want to close by recognizing the passion and innovation of our 2,800 talented employees around the globe who come to work each day, dedicating to improving the lives of more patients than before. And I also want to thank our partners and our shareholders for their continued confidence and support. Thanks, everyone, for joining us today and stay well.

Thank you for your participation. You may now disconnect. Everyone, have a great day.