Jazz Pharmaceuticals plc (JAZZ) Q4 2025 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Jazz Pharmaceuticals Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, John Bluth, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its Fourth Quarter and Full Year 2025 Financial Results. The slide presentation accompanying this webcast is available on the Investors section of our website, along with the press release and annual report on Form 10-K for the fiscal year ended December 31, 2025. On the call today are Renee Gala, President and Chief Executive Officer; Sam Pearce, Chief Commercial Officer; Rob Iannone, Global Head of R&D and Chief Medical Officer; 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, regulatory and commercial milestones 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 these risks and uncertainties described in today's press release and under the caption of Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2025, and our subsequent filings with the SEC. 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 Renee. Renée Galá: Thanks, John. Good afternoon, everyone, and thank you for joining us to discuss Jazz's Fourth Quarter and Full Year 2025 results, as well as our outlook for 2026. I'll begin on Slide 5. Jazz had an exceptional year in 2025, representing our 21st consecutive year of topline revenue growth and underscoring our commitment to operational excellence as we deliver meaningful innovation for patients. We achieved record total revenue in 2025 of $4.3 billion. This included fourth quarter revenue of $1.2 billion, reflecting 10% year-over-year growth and our highest revenue quarter ever. We expanded our portfolio through multiple approvals and launches. Following our acquisition of Chimerix in April, we rapidly received approval of and launched Modeyso, bringing this new therapy to patients who previously had no approved drug options. From its launch in August, Modeyso generated $48 million in 2025 revenue. In October, we received approval of Zepzelca in combination with atezolizumab in the first-line maintenance setting following the strong overall survival data presented at ASCO in June. Our most significant R&D progress came with the presentation of practice-changing data from our first randomized Phase III clinical trial of zanidatamab supporting the opportunity for Zani to become the HER2-targeted agent of choice across a number of tumor types. Zanidatamab in combination with atezolizumab in chemotherapy demonstrated more than 2 years of median overall survival in first-line HER2-positive metastatic GEA, an unprecedented survival benefit for these patients whose 5-year survival rates remain below 10%. In addition to our outstanding execution on the commercial and regulatory front, we resolved nearly all major litigation for the company. We settled outstanding ANDA litigation for Epidiolex, increasing the runway into the very late 2030s, and we resolved the majority of litigation in our rare sleep franchise. These achievements are all underpinned by our strong financial position and performance, which Phil will cover later in the call. As we look ahead to the next decade and beyond, we are sharpening our strategic focus on rare disease. Our rare disease strategy is centered on strengthening our current franchises and expanding into new areas of rare disease, supported by multiple dynamics that make this space attractive for Jazz as outlined on Slide 6. Built on the capabilities we have developed over many years and our long-standing commitment to delivering life-changing medicines we believe Jazz is particularly well suited to have a meaningful impact for patients with rare disease. We look forward to announcing future pipeline advancements and new business development transactions. Our proven track record in corporate development, as outlined on Slide 7 includes a number of successful value-creating transactions in rare disease. For example, we acquired zanidatamab through a licensing agreement with a modest upfront payment. Since then, we've made significant progress with an approval in second-line BTC, practice-changing data in GEA and what is now an extensive development program across breast and other HER2-expressing cancers. With the Chimerix acquisition, in addition to securing Modeyso, we generated significant financial value by recognizing a deferred tax asset that will reduce our future cash taxes by over $200 million. And as announced in January, we sold our priority review voucher for $200 million in gross proceeds, half of which will flow to Jazz. In fact, each of the deals outlined here has added new areas of strength and expertise, which we intend to leverage to continue building a more valuable company. 2025 was an outstanding year for Jazz. One that we're proud of and one that provides us with immense confidence in the future. We are building upon this momentum in 2026 as we prepare for the potential launch of Zanidatamab in GEA and sustain the launch execution for Modeyso and Zepzelca. We also remain focused on reinforcing the differentiated profiles of Epidiolex and Xywav as the leading branded treatments for epilepsy and narcolepsy, respectively. In parallel, we continue to advance our R&D pipeline and pursue a business development strategy that is aligned with our rare disease focus, aiming to deliver durable growth and long-term value creation for patients and shareholders. I'll now turn the call over to Sam to discuss our commercial performance.

Thanks, Renee. I'm pleased to share the strong commercial execution we delivered across our diversified portfolio in 2025. Starting on Slide 9 with our rare sleep therapeutic area, which includes Xywav, Xyrem and High-Sodium Oxybate Authorized Generic royalties, we delivered more than $2 billion in total revenue in 2025, including $559 million in the fourth quarter. Xywav revenue grew 12% to approximately $1.7 billion for the year. In the fourth quarter, Xywav generated $465 million representing 16% growth compared to the same period in 2024. Our sleep team delivered exceptional performance in 2025, and we remain committed to providing a safer, low-sodium option for patients with Narcolepsy and IH? As estimated by the FDA, Xywav is superior for High-Sodium Oxybate based on the greater safety provided by a low sodium medicine. These benefits continue to resonate with physicians and patients, driving approximately 500 net patient adds in the fourth quarter and more than 2,000 net patient adds in 2025, including a 34% increase in net active IH patients. Xywav remains the #1 branded treatment for Narcolepsy and the only FDA-approved treatment for IH. Field execution continues to be supported by our disease awareness digital campaigns across both Narcolepsy and IH. These efforts are increasing awareness of these distinct disease states, the availability of Xywav and encouraging patients to engage in treatment discussions with their health care providers. We enter 2026 in a position of strength with more than 16,000 patients taking Xywav. Two generic versions of High-Sodium Xyrem are entering the market and are expected to negatively impact High-Sodium Xyrem revenues. There is also a modest step down in the royalty base from 2025 to 2026 with the Hikma authorized generic or AG with significant economics still flowing to Jazz. Given that Xywav is not AG rated to High-Sodium Oxybate, we do not anticipate a material impact on low-sodium Xywav revenue in the first half of 2026. Whilst we expect the competitive sleep landscape will evolve in the second half of the year, it's important to note in an increasingly competitive environment, Xywav remains clearly differentiated offering a safer, low-sodium profile and continues to be the only FDA-approved treatment for IH. As a separate and unique indications to Xywav, we see the most opportunity for patient growth coming from IH. Moving to Slide 10 and Epidiolex. Epidiolex reached a significant milestone in 2025, achieving blockbuster status, $1.1 billion in revenue, up 9% year-over-year with strong underlying demand, driving 7% volume growth in 2025. Fourth quarter 2025 revenue was $287 million, representing 4% growth compared to the fourth quarter of 2024. I'll note that year-on-year growth was negatively impacted by higher-than-normal inventory levels at the end of fourth quarter '24. Looking ahead, we see our greatest growth opportunity in the adult patient population, particularly through expanded reaching long-term care settings. In addition, our Navigator program, continues to meaningfully improve patient persistency, and we're focused on increasing utilization of this resource in 2026. Given the long runway for Epidiolex, we will continue to invest in additional development opportunities, including new formulations with a clear focus on driving growth in adult patients. We believe Epidiolex is well positioned to remain an important antiseizure medicine for patients over the long term. Moving to our Rare Oncology portfolio. I'll start with Ziihera on Slide 11. Ziihera is a highly differentiated HER2-targeted therapy that represents a key pillar of Jazz's future growth. We are focused on maximizing Ziihera's potential across HER2-positive cancers, supported by the strong Phase III Horizon GEA results, which exceeded existing standards of care. Beyond GEA, zanidatamab had demonstrated an encouraging activity across additional [ HER2-breast ] tumor positioning it as a meaningful multi-indication commercial opportunity. Our largest near-term opportunity is in first-line metastatic GEA, where we have the potential to launch zanidatamab in this indication in the second half of 2026. Awareness and experience in Ziihera continue to build particularly across academic centers and large community networks with additional opportunity to expand familiarity as we move into GEA and other tumor fronts. From an access standpoint, Ziihera benefits from an established permanent J-code through its FDA approval in second-line HER2-positive Biliary Tract Cancers, simplifying reimbursement and reducing administrative burden. This is complemented by our comprehensive Jazz care support services, along with flexible ordering and fulfillment options. Our existing commercial footprint, capabilities and experienced teams position us well to execute effectively in GEA and to support broader development across additional HER2-expressing achievements. Turning to Slide 12 and Modeyso. Product launched in August to the end of 2025, Modeyso generated $48 million in revenue. This strong early performance reflects the significant unmet need, high awareness driven by advocacy groups and the value physician see for patients with H3K27 mutant diffuse midline glioma. Early uptake has been driven by new patient start, largely within academic centers of excellence. As the launch progresses, we are focused on expanding use in the community setting and gaining further insights into real-world treatment patterns, including duration of treatment. Based on what we see today, we believe Modeyso recommends a compelling [ pre-serve ] opportunity of greater than $500 million in the U.S. In 2025, more than 360 patients received Modeyso, offering new hope for patients and their families facing this devastating disease which has a median survival of approximately one year from diagnosis and less than 6 months following progression from frontline radiotherapy. The launch is supported by highly experienced uro-oncology focused filed sales, medical and access teams appropriately tied to deliver targeted engagement to both personal and nonpersonal channels. In addition, our exclusive distribution partnership with Onco360, provides robust patient-centric support services, and we are encouraged by strong payer coverage and continued positive launch for Modeyso. Moving to Slide 13 and Zepzelca. In October, we received FDA approval for the combination of Zepzelca and Tecentriq, expanding Zepzelca into the first-line maintenance setting for extensive stage small cell lung cancer. This approval broadens Zepzelca's addressable market and represents an important milestone for the brand. In 2025, Zepzelca generated $307 million in revenue. In the fourth quarter, revenue was approximately $90 million, representing a 15% year-over-year growth compared to the fourth quarter '24. We believe the growth in the fourth quarter was primarily driven by initial demand in the front-line segment. Given the strength of the clinical data and the opportunity to improve outcomes for patients with extensive stage small cell lung cancer, we are prioritizing our commercial efforts on the first-line maintenance setting going forward. As we look to 2026, we expect a shift in utilization with declining second line [ move ] and increased adoption in the first-line maintenance setting. I'll now turn the call over to Rob to review the development program that is underway to zanidatamab and provide an update on our pipeline. Rob?

Thank you, Sam. 2025 was a transformative year across our R&D pipeline, and we look to build on this momentum in 2026. Starting with the practice-changing data we presented at ASCO GI on Slide 15. The zanidatamab plus atezolizumab and chemotherapy arm demonstrated a clinically meaningful and statistically significant improvement in OS with more than 7 months improvement and a 28% reduction in the risk of death versus the trastuzumab control arm. The benefit was observed in PD-L1 positive and PD-L1 negative patient subgroups. Zanidatamab plus chemotherapy showed a clinically meaningful survival benefit with the median OS of over 2 years with a strong trend to our statistical significance at the time of this first interim analysis for OS. An additional planned interim OS analysis for this comparison is currently expected mid this year. For PFS, there was a clinically meaningful and statistically significant benefit in the zani plus chemo arm compared to the control arm as represented by a greater than 4-month median difference. We are moving quickly to bring zanidatamab to HER2-positive first-line metastatic GEA patients. As we previously noted, we submitted the Horizon GEA data to NCCN for inclusion in the oncology guidelines. On the regulatory front, we expect to complete the submission for our supplemental biologics license application for zanidatamab under real-time oncology review in the first quarter of this year. I'm also pleased to share that the FDA has granted breakthrough designation for zanidatamab in GEA. We expect these designations will allow us an even closer interaction with FDA and potentially greater speed to approval. Based on this, there is the potential to launch zanidatamab in GEA in the second half of this year. Our data firmly positions zanidatamab as the HER2-targeted agent of choice in first-line GEA replacing trastuzumab as the standard of care, offering unprecedented durability and survival benefits. We believe zanidatamab's role as the new standard of care will extend across multiple tumor types. And on Slide 16, you can see the robust development program that is underway for zanidatamab, which we believe has been meaningfully derisked by the strength of the GEA data. The next pivotal Phase III trial for zanidatamab is in metastatic breast cancer patients who have progressed on or are intolerant to in HER2. The treatment landscape is evolving as we anticipated, within HER2 moving into frontline metastatic breast cancer, laying the groundwork for zanidatamab potential move into the second-line plus metastatic breast cancer setting. Our EmpowHER trial represents the first clinical trial to evaluate a HER2-targeted agent after treatment within HER2. Based on early data generated to date, zanidatamab has shown clinical activity after trastuzumab-based regimens, including HER2, which is an antibody drug conjugate of the monoclonal antibody trastuzumab. We believe zanidatamab will be able to fill an unmet need in the breast cancer space and believe the compelling first-line GEA data helped to derisk the ongoing metastatic breast cancer trial. We are incredibly excited about this opportunity in breast cancer, and we are also hearing similar excitement from physicians and sites that continue to enroll patients to this trial. We expect to complete enrollment in the EmpowHER trial in the first half of 2027 with top line data anticipated in late 2027 or early 2028. As we continue to evaluate the potential for zanidatamab to be used in multiple HER2-expressing solid tumors, we're pursuing collaborations with partners to combine zani with novel therapies. For example, a Phase I trial in combination with Boehringer Ingelheim's zongertinib was recently initiated to explore the combination in metastatic HER2-positive breast cancer, along with other potential tumor types. Other earlier-stage trials continue to progress across new indications, including a potentially registrational PAN-tumor basket trial and a neoadjuvant, adjuvant breast cancer trial. We're also exploring other areas like non-small cell lung cancer and colorectal cancer. We have great confidence in zanidatamab and intend to fully maximize the value it may offer to HER2-positive cancer patients. Beyond zanidatamab, we have a number of promising development opportunities across our diversified pipeline, which are outlined on Slide 17. We have strengthened our early-stage pipeline with two recently initiated clinical trials. As we refine our strategy to focus on rare disease, in areas where we have deep expertise, we will continue to build on our research and early development capabilities. A great example of this is JZP047 which was developed in-house at Jazz, and I'm pleased to share was cleared to proceed into a Phase I study under a new IND. We initiated a Phase I healthy volunteer trial in January to evaluate JZP047 for the treatment of absence epilepsy. Building on our expertise in epilepsy and as we explore areas of growth for Epidiolex, we also initiated a Phase Ib trial of Epidiolex in focal onset seizures. Looking ahead to later this year or early 2027, we anticipate the ongoing Phase III ACTION trial will have an interim overall survival readout. This trial is designed to confirm the benefit of Modeyso and support regulatory approval as frontline therapy directly following radiation instead of waiting for signs of tumor progression before treating with Modeyso. Before I turn over the call, I will share an update on JZP441 and orexin we brought into the clinic with our partner, Sumitomo. Based on our continued assessment of this molecule, we have made the decision to stop the development of JZP441 and end the partnership with Sumitomo. As leaders in sleep, we see promise in the orexin receptor agonist mechanism of action as complementary to oxybate and Xywav as the only low sodium oxybate, and we are continuing to investigate our backup orexin program. Overall, we have a number of exciting clinical trials that are advancing across our pipeline from early stage to registrational trials, and we're looking forward to sharing further updates this year. Now I will turn the call over to Phil for a financial update. Phil?

Thanks, Rob. I'll start with our top line results on Slide 19. Please note that our full financial results are available in today's press release and 10-K. In the fourth quarter of 2025, we achieved a record total revenues of $1.2 billion, with Xywav, Zepzelca, and Rylaze all posting their highest ever revenue quarter. Total revenue growth of 10% was driven primarily by 16% growth in Xywav and strong initial uptake of Modeyso. For the full year of 2025, we recorded $4.3 billion in total revenues, also a record, representing 5% growth over 2024. Full year revenue growth was driven by Xywav, Epidiolex and Modeyso partially offset by Xyrem. Turning to Slide 20. Our full year 2025 non-GAAP adjusted net income was approximately $522 million, and we reported non-GAAP adjusted EPS of $8.38. Moving to Slide 21. We're pleased to share our full year financial guidance for 2026. Our 2026 total revenue guidance range of $4.25 billion to $4.50 billion equates to growth of about 2.5% at the midpoint compared to 2025. We have strong momentum in our rare oncology and epilepsy revenues. Sales of these products totaled $2.2 billion in 2025 and in 2026, we expect double-digit growth in this part of our business, driven primarily by Epidiolex, Modeyso and Ziihera. Revenue from our rare sleep franchise on the other hand, which totaled $2.01 billion in 2025 may decline due to the evolving sleep market that Sam mentioned, including the introduction of multiple generic high sodium oxybate products. We expect total Rare Sleep revenue of $1.8 billion to $1.9 billion, which represents a modest decrease in 2025, primarily driven by Xyrem and Hikma AG revenue. Specifically with two generic high sodium oxybate products on the market, we expect a further reduction in sales of Xyrem, which generated $146 million in revenue in 2025. For the Hikma AG, there is a modest step down in the royalty rate from 2025 to 2026 with significant economics still flowing to Jazz. For branded low sodium, Xywav, we expect revenue to be flat to up mid-single digits. Moving to the rest of our guidance line items. Our non-GAAP adjusted gross margin percent guidance is 90% to 91%. This is a slight decline from 2025, primarily due to higher sales of products like Modeyso and Ziihera, driving higher royalties and to a lesser extent, the potential for higher tariffs on products imported into the U.S. Our non-GAAP adjusted SG&A guidance range is $1.26 billion to $1.32 billion. Excluding the Xyrem and Avadel litigation settlement expenses from 2025, this means we expect SG&A expenses to be relatively unchanged in 2026 as increased launch expenses from Modeyso and Ziihera in the first-line GEA setting as well as increased investment in key commercial capabilities and AI are offset by productivity efforts across our global commercial organization, lower facilities expenses and lower legal fees. Our non-GAAP adjusted R&D guidance range is $725 million to $775 million. This represents an increase over 2025, driven by increased spend for zanidatamab, both for ongoing and new studies across multiple potential indications, including breast cancer, higher expenses for [indiscernible] as we recognize a full year's worth of activity, higher spend on preclinical and early clinical programs, including JZP898, JZP815, JZP3507, formerly ONC206 and JZP053, the Saniona molecule and higher spend on advanced analytics and AI. We expect our non-GAAP adjusted effective tax rate to be between 11.5% and 13.5%. Finally, our guidance range for fully diluted shares outstanding of 65 million to 66 million. The increase from 2025 is driven by normal factors like shares issued for employee compensation and those purchased by employees via our stock purchase program as well as by accounting for our 2026 and 2030 convertible notes now that our stock price exceeds the conversion price of those notes. We've included an Excel worksheet in the Investors section of our website to help you model this impact. You'll note that we're not guiding to adjusted net income or EPS this year. This reflects both a review of questions we've received and not received from investors and analysts as well as a review of peer guidance practices. Moving to Slide 22. Our balance sheet remains strong. We continue to generate significant cash from our business, recording approximately $1.4 billion of cash from operations for the full year 2025 and we ended the year with $2.4 billion in cash and investments. Our overall financial position and robust operating cash flows provide significant flexibility to invest in value driving commercial and R&D programs as well as in promising corporate development opportunities to support our refined strategy on rare disease. I'll now turn the call back to Renee for closing remarks. Renée Galá: Thank you, Phil. I'll conclude our prepared remarks on Slide 24. 2025 represented a truly transformational year for Jazz. We delivered record financial performance, achieved multiple regulatory approvals successfully launched innovative therapies and generated practice-changing clinical data that positions us for significant future growth. Our refined strategic focus on rare disease leverages our proven capabilities and positions us to compete and win in areas where we can make the greatest impact for patients. We have the opportunity to invest in our pipeline, the growth of our commercial products and also in corporate development where we think there is a solid foundation for us to transact in our existing areas of sleep, epilepsy and oncology, as well as in other areas of rare disease. With our strong financial position, diversified commercial portfolio and robust pipeline, we are well positioned to drive durable growth and create long-term 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.

[Operator Instructions] Our first question comes from the line of Jason Gerberry with Bank of America.

I just wanted to follow up, Phil, on just, I guess, the guidance around Xywav for 2026. So I believe it's flat, potentially growing mid-single digit. So is the right way to think about the dynamics there that in a flat scenario, IH is growing and maybe the conservatism to a guidance of flat is just payer contracting concessions that may need to occur? And there was some commentary about limited generic impact in the first half, but second half, I'm just wondering, I know there was like not total clarity earlier in the year on when you'd have a full line of sight on what the generic Xyrem impact is. So is there something that you're kind of reserving in the guidance conservatism wise in terms of like what the second half impact could be?

Yes, Jason, thank you for the question. So as we think about the evolution over 2026 of Xywav, we come into the year really well positioned, both from a contracting perspective, the kind of net patient adds we had throughout the year, including in the fourth quarter and the recognition that patients and physicians have for the unique safety benefit that's offered by Xywav as the only low sodium oxybate. We also now have better line of sight into the timing of entry for generic high sodium oxybate products where it appears that now we've got two as we speak, that are in the process of having their launch that could have occurred as early as December 31 of last year, but is occurring now. It will probably just given the dynamics in this marketplace with the need to register physicians and patients into the REMS program take some time for those generics to build their volumes over time. That's one of the dynamics that could lead to maybe different effect on branded Xywav in the first half versus the second half. And we also have an evolving landscape more broadly in sleep where there is the potential for a couple of wake-promoting agents to be entering the market in the second half of the year. And often, we do see with new patients in narcolepsy, for example, they'll typically go on to wake-promoting agent first. They may even go through one or more of those before they would then progress on to sodium oxybate to give them some of the nighttime benefits that oxybate can offer that the daytime waking agents cannot. So those some of the dynamics that are factoring into our thinking. We're really pleased with where we're at and the outlook we have for the year. Maybe I'll just ask Sam, is there anything that she would want to complement to my answer from her commercial perspective.

I think it was a great answer, Phil. Yes, I think you mentioned we're carrying really fabulous momentum into 2026, and we have payer contracts in place for this year. We're very happy with the patient adds that we saw in 2026, 2,000 additional patients at the end of the year. And most of that is coming from IH. We actually had 34% growth in the numbers of active IH patients by the end of the year. So you mentioned around that, and we do feel as though the IH business is probably going to be the major driver of continued growth for Xywav being the only approved medication in that space. So yes, we entered the year with some confidence. We also know that what we've seen through the course of 2025 is really significant support from health care physicians and also from patients. We know patients with narcolepsy and IH, the vast majority of them have some kind of cardiovascular or cardio metabolic issue. And therefore, the low sodium option is one that is -- resonates extremely well for this particular patient type. And even with any payer action that may be taken, we do believe a strong commitment from HCPs to ensure that those patients can access a low sodium option.

Our next question comes from the line of Sean Laaman with Morgan Stanley.

This is Mike Riad on for Sean. Are you able to provide any more color on the level of that modest step down on the Hikma royalty rate in '26 relative to last year? And then any commentary on the overall impact to the AG volume with two more generics coming on market?

Yes, Mike, this is Phil. Maybe I'll handle that, the first part. We're not able to disclose the specific royalty percentages. We had said in the past that the prior royalty rate that we had for the latter part of '24 and through '25 was quite high. So I think that sort of links that there is a step down coming into 2026, but we do still have significant economics flowing to Jazz, but I can't be more specific than that. Sam, do you want to comment maybe on the AG?

Nothing too much more to add, Phil. We've -- the AG has obviously been in the market for some time. And we -- nothing much more to add to what you said, Phil, in terms of our expectations there.

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

Rob, can you talk a little bit more about JZP047, the background of the asset? Is this cannabidiol from GW deal? Or what kind of preclinical data do you have? I mean, what's the proof of concept, the mechanism, why absent seizures? Anything you're willing to give us?

Yes. Thanks for the question, Marc. So we haven't yet disclosed the specific mechanism of action for competitive reasons. But I can say that it's not in the cannabinoid space. It's a novel chemical entity that we developed -- discovered and developed at Jazz. We have strong preclinical data, we believe in absence epilepsy and that will be our initial focus of development. The development starts in healthy volunteers where we think we'll get meaningful information around safety and exposures that we expect would be efficacious to derisk the asset before going into a patient population.

Our next question comes from the line of Akash Tewari with Jefferies.

This is Anastasia on for Akash. Can you give us a little more context on that post-in HER2 breast cancer population, potential uptake? Like how big is the population what kind of treatments to patients typically take positive HER2? Any kind of context on like potential penetration, whether you consider dropping price to enhance access and the like?

So I can -- Renee, would you like me to start with regard to the clinical treatment landscape there and how we're viewing that? Renée Galá: Yes. Why don't you go ahead and start with that, Rob?

Yes. So we see this landscape, I think, is evolving just as we had predicted within HER2 moving to front line potentially with pertuzumab. And HER2 being an ADC that is developed on top of herceptin and possibly given with pertuzumab, it really disrupts the subsequent therapies. And so it becomes unclear what therapies to use after in HER2 after patients have had in HER2. That's the opportunity for zanidatamab where we have prior data showing activity. So we're positioning this positive HER2. We said there are about 150,000 patients with HER2-positive breast cancer in the markets that we serve. And we think it would be the first to have data in this positive HER2 setting. The study is being conducted essentially in third line plus because currently, patients get the CLEOPATRA regimen, which is chemo, Herceptin and Perjeta in HER2 is approved in the second line. But if that moves forward, you can imagine use in the second line [indiscernible].

Just to wrap up the second part of that question. Yes, we're obviously very excited about the opportunity to bring Ziihera into the breast cancer setting. Too early for us to comment at the moment on the pricing strategy there. Renée Galá: And just to add there that, that study currently is expected to read out at the end of next year or early the following year. So we should complete enrollment next year, and we will have some time to continue to consider price, as Sam mentioned.

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

Congrats on all the progress. Just wanted to double click on your Xywav comments regarding first half being mostly unaffected versus second half. Can you just talk a little bit more about that? So what are you expecting the competitive pressure on Xywav to be like in the second half in your guidance? And then as you get into like next year, like how do you see this franchise evolving in the face of low sodium competition?

Yes. We're obviously very pleased with the momentum that we've generated through 2025 Xywav of delivering $1.7 billion, 12% growth year-over-year, and that momentum was carried into the fourth quarter with 16% growth in the fourth quarter. I've already mentioned the numbers of patient adds that we saw throughout the year. So the messages that we've been conveying to the market are really resonating. Xywav is highly differentiated in the market, the only low sodium option, the only oxybate with an IH indication. So that gives us enormous confidence. We have good payer contracts in place as we go into the year. But of course, the landscape -- the sleep landscape is evolving. From where we sit today, knowing what we know, we know that there are two generics coming into the market to multisource generics plus we have Hikma in the market as well. We don't expect significant -- we really expect minimal impact on the Xywav business in the first half of 2026. In the second half of the year, obviously, we've got that increasing competitive dynamics. Phil mentioned that generics are likely to build their volumes throughout the year. We could see also the entry of at least one new wake-promoting agent in the market as well. So given all of those things, we may see more a different dynamic emerging in the second half of the year. But we will continue to focus on conveying the significant differentiation of Xywav, which is clearly resonating with prescribers and patients. And we'll be continuing to convey those messages to those customers. And we expect to continue to see the product being highly appreciated in the market.

Our next question comes from the line of David Hoang with Deutsche Bank.

Congrats on the quarter. So maybe a follow-up to some of the questions here on the Sleep-Wake franchise. Just in terms of your payer contracts, you mentioned that you feel confident about the ones you have in place. Is there any possibility for the payers to ask you to come back to the table to maybe negotiate over the course of the year? And could you envision any step edits or other restrictions being put into place by payers that might favor the multisource generics?

Yes. Whilst we do have good contracts in place as we enter the year, there's always the possibility that the payers may want to approach us if there's a significant event in the market with multisource generics. But one thing that is worth considering is that the rebates that the payers have for products as significant as Xywav are quite material and very significant. So of course, they'll be wanting to consider coming back to us to renegotiate and walking away from those rebates. So in order for them to have confidence to do that, of course, they want to be confident that the generics are built enough volume and support in the market. And also another consideration there is that even if the step edits were put in place, and certainly, that is an option. We know that physicians and patients really value the low sodium option. I mentioned before that well over half, about 70% of patients with narcolepsy and IH have a cardiovascular or a cardio metabolic comorbidity. And so really, the last thing is one to be giving those patients is a heavy salt dose every single day for a chronic condition. So even with a step edit, we believe that there will be a strong commitment from health care providers to move through those step edits to get to low sodium Xywav. So all of these things are possible. But I think the strength of our differentiation, it doesn't change. We're still the only low sodium option in the market and that will, I believe, will resonate with some prescribers and patients.

Davis, I'll add something really quickly. We have had a small number of accounts, for example, in 2025, where the AG was put in more privileged position and basically had to step through that to get to Xywav. And we saw physicians very motivated to do that for their patients given the unique safety advantage as Xywav conveys, as Sam has mentioned, and we had leading share effectively in that account. So -- we've seen this happen at least on a small scale already. And again, it reinforces our belief that Xywav has a unique value proposition in the marketplace that neither the AG in the past or the emergence of the high sodium generics can replace.

Our next question comes from the line of Brian Skorney with Baird.

Congrats on the quarter. Maybe for Sam, the Modeyso launch looks really off to a much better start than I think a lot of us expected. I'm just wondering -- how do you think about these initial launch metrics? And I understand that they're early and contextualizing the greater than $500 million U.S. sales guidance, and how the ACTION study may come into play there? Do you think you need to hit in that study to achieve that guidance? Or can you get there given the current label and if ACTION were to hit, do you envision that would change the peak guidance?

Yes. Thanks for the question. Yes, we're clearly delighted with the early phase of the launch of Modeyso at $48 million in 2025, which was just 4.5 months of launch is really terrific. We -- obviously, this market is a market which has seen very little development over the last 60 years. So the launch of Modeyso was one that was highly anticipated by physicians and by patients. We had very high awareness and really strong advocacy support from patient organizations, and obviously, a very high unmet need for this treatment. So we've seen really strong uptake. I think in relation to the peak sales opportunity, we obviously, as we see the uptake and the way this product has been accepted into the market, we're increasingly confident about the $500 million peak sales opportunity. That does assume that we hit on the first-line action study to achieve that because what that means is that the product will get used earlier, immediately after radiotherapy as opposed to waiting for progression, which is the label that we currently have. There's still quite a lot that we need to understand about this market. For example, what really is the real-world duration of treatment. That's going to be quite an important factor in the overall size of the opportunity. And also, what is the true epidemiology in this market as well. We've used the best available data to do that. But obviously, the longer we're on market, the more confidence we're going to get around these areas. Testing rates is also something that we've been working on. We've seen that steadily increasing as well. So all the launch metrics are very positive, and we are increasingly confident about that $500 million sales opportunity.

Our next question comes from the line of David Amsellem with Piper Sandler.

So maybe a bigger picture question about the sleep-wake franchise. So obviously, you mentioned 441. You are looking at other orexin agonist. But absent that, would you consider making a significant acquisition, in other words, an inorganic way of trying to extend the life of your sleep-wake franchise bearing in mind that eventually Xywav will go off patent? And maybe taking a step back, strategically, do you just simply toggle over to oncology and neuroscience and neurology more completely and look at sleep-wake as sort of a more mature franchise that you manage for cash. How are you thinking about that? Renée Galá: Yes, I'll jump in on that one. So as we look at our strategy going forward and where we're investing, we are investing in the growth of each of these current franchises, sleep and epilepsy and oncology. And we think there are multiple opportunities there, both within our current portfolio and opportunities to invest in licensing and M&A to augment those opportunities. With being specific on particular opportunities we're interested in probably isn't that helpful. I would say from a medical perspective, we're excited to see the new innovations coming from orexins. And as Rob mentioned, we continue to be active in this area in terms of early programs, but we also see there's still opportunity there in terms of really understanding is there a benefit for nighttime disrupted sleep. We seem to see right now data that points to orexins being complementary with oxybate, and we have yet to see any PSG data or otherwise on orexins that will tell us that we'll have therapies that can be fully treated without being augmented with a therapy like an oxybate that can address the nighttime symptoms, but if we just step back and look at our business and the growth drivers, we believe we have a highly differentiated product in Xywav, as Sam has described, we're in a strong position as we go into this year. We have a highly differentiated franchise in Epidiolex with multiple early-stage programs that we're advancing. A lot of opportunity across oncology whether that's Modeyso or the Zepzelca first-line approval and a really meaningful growth driver with zanidatamab that we're investing in heavily. So that's how we're thinking more broadly about our investments and where we're headed and how we think about investing across the franchises.

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

Maybe one on the -- it looks like another trial from the Chimerix acquisition was launched in PCPG. Can you just talk a little bit about the size of that market maybe as it relates to the market for [indiscernible] for H3K27M? And then maybe a bit of a follow-on to the last question. Obviously, with Epidiolex, you levered up the balance sheet and you work to kind of delever that over the years. You just mentioned BD several times through the call. I guess how comfortable are you to lever up the balance sheet again? Is that something that you're considering and kind of the size of the transactions, that would be helpful. Renée Galá: Rob, can you cover PCPG in terms of what we're aiming to achieve there with that study? And then maybe, Phil, do you want to jump in on the balance sheet?

Sure. Happy to. So just to remind the group that 206 asset is a follow-on to Modeyso hitting the same [indiscernible] and dopamine receptors but potentially with greater potency. And we have an opportunity based on preclinical data that we have to evaluate that in pheochromocytomas and paragangliomas which are rare neuroendocrine tumors. And so this will serve as a proof of concept, at least in that tumor type, which we prioritized to demonstrate the activity of that next-generation molecule.

And John, your question regarding leverage, we certainly have deleveraged substantially on a net basis, down to about 1.5 turns of EBITDA at the end of 2025. And we do have the ability to go ahead and lever up for a transaction or a series of transactions. If we find ones that are particularly compelling in terms of benefit they can bring to patients and our conviction that we can create significant value for Jazz shareholders as well. I would say over a longer arc of time, I think the expectation is that you will see debt to be less and less of the capitalization of the company over time, but I would encourage you to think of that as probably a sawtooth with some peaks as we do transactions, particularly if they're M&A, but over the long term, we'd expect that overall capitalization be more weighted towards equity and less towards debt as we move forward.

Our next question comes from the line of Leonid Timashev with RBC.

I wanted to ask on Epidiolex. You mentioned both the fact that patent settlements extending the cliff out to the late 2030s, and interesting continuing to grow that franchise. So I guess I'm curious how you're seeing or what you need to do to continue to grow the adult side of that business? And maybe what you're seeing currently with adult uptick, maybe where education -- additional education is needed and sort of how you think about the size of that opportunity relative to the pediatric side?

Yes. Thanks for the question. Yes, we were delighted in 2025 to achieve $1.1 billion blockbuster status for Epidiolex, delivering 9% growth year-over-year. I think we've continued to drive really strong momentum behind this brand. With our current license indications, there still remains significant opportunity for us to make an impact. We've identified the adult segment has been a key source of future growth. We have invested that in long-term care, teams that are going to those long-term care facilities because what we do know is that there are a significant number of patients particularly LGS patients who reside in long-term care settings that have not had a definitive diagnosis of LGS. So we've invested with that team in particular tool, the rest LGS tool to help physicians diagnose those patients so that they can have the opportunity to benefit from Epidiolex. So that's a key source of growth. In addition to that, we know that persistence is the key hallmark of Epidiolex. Patients do very, very well in Epidiolex and they can stay on treatment for a long time. But if the patients have access to our JazzCares, with the nurse team that we have supporting those patients, then they stay on treatment even longer. So we're investing a lot in making sure that more patients can benefit from our JazzCares program. In addition to that, we've generated data that become data that really reinforces the benefit of Epidiolex in seizure and nonseizure -- seizure and non-seizure benefits. So there's a number of things within our existing label indication sources of growth which we're very confident in that we're going to be making investments in. And in addition to that, given the very late 2030s durability of the brand. We're also investing in other areas as well. So for example, new formulations of Epidiolex that will be particularly beneficial for adults as well as a Phase Ib trial in focal onset seizures as well. So we're excited about the potential of Epidiolex to continue to grow and bringing it to more patients.

Our next question comes from the line of Ami Fadia with Needham & Company.

Just on the zani breast cancer study, can you remind us if you've shared any details around the powering of the study. And ahead of the final readout, is there opportunity to see any interim data? And also maybe just remind us of the regulatory end points that we would be -- that -- all the regulatory requirements in terms of the endpoint?

Sure. Thanks for the question. It's a two-arm trial, where patients are assigned their chemotherapy backbone by the treating physician and then randomized to receive either herceptin versus zanidatamab. So a head-to-head comparison of zani versus herceptin again, but in a different setting. It's 550 patients, which is listed on clinicaltrials.gov, and we have an opportunity to look at progression-free survival along with an interim analysis of overall survival before the final readout on overall survival.

This concludes the question-and-answer session. I would now like to hand the call back over to Renee Gala for closing remarks. Renée Galá: Great. Thank you, operator. And just a quick reminder to our listeners. Thank you for joining in the call today. To give you a quick overview of some of our upcoming catalysts. As we've mentioned, we're really excited about zanidatamab in the breast cancer study that Rob was just describing. We also have the opportunity, as we mentioned on the call, for an approval and a launch in the second half of this year. We do plan to get our FDA submission complete this quarter, and expect an upcoming publication in a premier peer-reviewed journal with our second interim OS readout for our zani plus chemo arm B anticipated to occur mid-year. In addition to the broader development program, as I mentioned earlier, we have readout planned at the end of next year for metastatic breast cancer study or early in 2028, and we're excited about the opportunity there. Given the underlying backbone comparison is again zani versus herceptin. This year, we have the opportunity for our first full year of sales in dordaviprone and expect the ACTION trial supporting that Sam described to read out at the end of this year or the beginning of next year, and that will be our first OS readout of that study. So strong momentum coming into this year from 2025, and we do expect to announce one or more deals in 2026 on the corporate development front. So I'd like to close today's call by thanking all of our Jazz colleagues for their efforts, our partners and stakeholders for their continued confidence and support. 2025 was quite an impactful year for Jazz, and I look forward to continuing our work together in 2026. So thank you all for joining.

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