Jazz Pharmaceuticals plc (JAZZ) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary presents a mixed outlook. The company shows promise in product development and operational efficiency, but the narrowed revenue guidance and unclear responses in the Q&A section raise concerns. Upcoming FDA approvals and potential blockbuster status for Epidiolex are positives, yet uncertainties in pricing and competition, especially for Xywav, and lack of clear guidance on certain issues temper enthusiasm. Therefore, the overall sentiment is neutral, indicating limited immediate stock price movement.

Key Financial Performance

Total Revenue $1.126 billion in Q3 2025, a 7% increase year-over-year, driven by growth in Epidiolex (20% increase) and Xywav (11% increase).

Xywav Net Product Sales $431 million in Q3 2025, an 11% year-over-year increase, attributed to strong execution by field teams and increased patient adds.

Epidiolex Net Product Sales $303 million in Q3 2025, a 20% year-over-year increase, driven by 10% volume growth and a release of reserves following refinement of certain accrual rates in the U.S.

Rylaze Net Product Sales $100 million in Q3 2025, a 1% year-over-year increase, with stable use in pediatric treatment despite a decline in overall asparaginase use.

Zepzelca Net Product Sales $79 million in Q3 2025, an 8% year-over-year decrease, due to competitive dynamics in the second-line setting.

Modeyso Net Product Sales $11 million in Q3 2025, reflecting rapid uptake post-approval and inclusion in NCCN Guidelines.

Adjusted Net Income (ANI) $501 million in Q3 2025, influenced by deferred tax assets from the Chimerix acquisition, litigation settlements, and the Saniona licensing agreement.

Cash Flow Nearly $1 billion generated in the first 9 months of 2025, reflecting robust financial performance.

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Operating Highlights

FDA Approvals: Jazz Pharmaceuticals achieved two FDA approvals: Modeyso for recurrent H3 K27M-mutant diffuse midline glioma and Zepzelca in combination with atezolizumab for extensive stage small cell lung cancer.

New Product Launch: Modeyso was launched successfully, generating $11 million in net product sales within two weeks of approval.

Pipeline Development: Progress in the Phase III zanidatamab HERIZON trial for gastroesophageal adenocarcinoma and a licensing agreement with Saniona for SAN2355 to enhance the epilepsy pipeline.

Revenue Growth: Achieved record quarterly revenue of $1.1 billion, driven by products like Xywav, Epidiolex, and the launch of Modeyso.

Epidiolex Performance: Epidiolex sales grew 20% year-over-year, reaching $303 million, with strong demand and volume growth.

Litigation Settlements: Resolved Xyrem antitrust litigation and litigation with Avadel, allowing focus on strategic execution.

Financial Position: Narrowed 2025 revenue guidance to $4.175 billion to $4.275 billion, reflecting increased confidence in financial outlook.

Portfolio Expansion: Acquisition of Chimerix and licensing agreement with Saniona to strengthen oncology and epilepsy portfolios.

Board Appointment: Welcomed Dr. Ted Love to the Board of Directors, enhancing leadership in biopharmaceutical innovation.

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Risk or Challenges

Generic competition for Xyrem: The potential entry of one or more generic versions of high-sodium Xyrem in 2026 could disrupt Xywav revenue. The impact depends on the number of competitors, their pricing strategies, and payer actions, which may affect patient access to Xywav.

Regulatory and trial uncertainties: The company is in active dialogue with the FDA regarding updates to the Phase III ACTION trial for dordaviprone, which may delay interim analysis to late 2026 or early 2027. Additionally, changes to the zanidatamab HERIZON-GEA-01 trial's patient population and progression event accruals could impact timelines and outcomes.

Competitive pressures in oncology: Zepzelca sales decreased by 8% year-over-year due to competitive dynamics in the second-line setting for small cell lung cancer. This highlights challenges in maintaining market share amidst competition.

Supply chain and operational risks: The company’s reliance on exclusive distribution partnerships, such as with Onco360 for Modeyso, could pose risks if operational issues arise, potentially affecting patient access and treatment delivery.

Economic and payer dynamics: Economic uncertainties and payer actions, especially with the introduction of generics, could influence pricing, reimbursement, and patient access to key products like Xywav and Epidiolex.

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Guidance & Outlook

Revenue Guidance: Jazz Pharmaceuticals narrowed its 2025 revenue guidance to a range of $4.175 billion to $4.275 billion, reflecting increased confidence in its outlook for the year.

Product Launch and Market Entry: The company anticipates the potential entry of generic versions of high-sodium Xyrem in 2026, which could impact revenue. Jazz plans to partner with payers to ensure continued access to its low-sodium Xywav, emphasizing its differentiated profile.

Pipeline Development: Jazz expects to share top-line results from the Phase III zanidatamab HERIZON-GEA-01 trial in gastroesophageal adenocarcinoma later this quarter. Additionally, the confirmatory Phase III ACTION trial for dordaviprone in glioma is expected to have an interim analysis of overall survival in late 2026 or early 2027.

Oncology Portfolio: The company is preparing for the launch of Zepzelca in its new indication as a first-line maintenance therapy for extensive-stage small cell lung cancer, following FDA approval. Jazz is also focused on the early launch phase of Modeyso, which has shown rapid uptake and strong payer access.

Epilepsy Portfolio: Jazz strengthened its early-stage epilepsy pipeline through a global licensing agreement with Saniona for SAN2355, a preclinical candidate targeting Kv7 channels.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Rob, you mentioned the Kv7 is potential best-in-class. Can you talk about how is that best-in-class?

A:The Kv7 is considered best-in-class due to its specificity for Kv7.2 and Kv7.3, which differentiates it from other molecules with broader activity. Broader activity often leads to off-target toxicity without adding efficacy. The specificity allows for targeting relevant areas harder while avoiding unwanted side effects.

Q:On the Epidiolex, can you guys just quantify what that benefit was to gross to net?

A:Epidiolex had $303 million in revenue this quarter, with 20% revenue growth and 10% volume growth. The remaining difference between volume and revenue growth was attributed to the refinement of certain accrual rates in the U.S., which had a one-time impact this quarter and is not expected to materially impact future quarters.

Q:You mentioned that 2026 brings the generic entry of one or more generic Xyrem. Can you elaborate on how you're thinking about the potential for other filers to enter in '26?

A:Generics are expected to enter the market in 2026, but the number of entrants, timing, and pricing are unknown. The availability of generics could lead to payer actions causing some disruption to Xywav revenue. Jazz plans to partner with payers to ensure patient access to low-sodium Xywav, which remains the only FDA-approved treatment for IH and the only low-sodium oxybate on the market.

Q:Can you walk through the potential benefits of using the ITT population for the PFS analysis in addition to OS in the HERIZON-GEA trial?

A:The ITT population was used because the PFS events came in more slowly than predicted, and the trial enrolled briskly, allowing for enough maturity on the full sample size. This approach ensures a more comprehensive analysis and was aligned with health authorities, including the FDA.

Q:Just as you think about potential generic entrants outside of maybe these negotiations with payers, are there any other strategies you might be willing to contemplate to defend against the competitive threat that might arise to the sleep franchise?

A:Jazz plans to continue its strong execution with field teams, emphasize the differentiation of Xywav as the only low-sodium oxybate, and leverage data like the AHA guidelines and XYLO study to highlight its benefits. Additionally, Jazz extended its agreement with Hikma by two years, allowing for royalties on authorized generics and better business management.

Q:How confident is your team that the FDA is okay with HERIZON-GEA having no U.S. patients in the trial?

A:Jazz is confident as the FDA focuses on whether the enrolled patient population is representative of U.S. patients in terms of disease characteristics, trial design, and conduct. The absence of U.S. patients was justified due to the approval of KEYTRUDA, which would have been a confounding factor.

Q:Just another follow-up on the oxybate generics next year. Would it be your base case that to get Xywav, you're going to have to step through a generic with most insurers?

A:There has been no material change in engagement with payers, and Jazz does not yet have a clear line of sight into how 2026 will play out. The impact on Xywav revenue will depend on the number of generics, their timing, and pricing conditions, which are yet to be determined.

Q:I'd love to get your thoughts just on emerging orexin data in narcolepsy type 2. How do you think about the value proposition of that as a potential competitive threat to Xywav?

A:Jazz believes that while orexin agonists are potent wake-promoting agents, they do not address the root cause of NT1, NT2, and IH, which is disrupted nighttime sleep. Xywav improves sleep parameters and addresses the underlying disease, making it complementary to orexin agonists rather than a direct competitor.

Q:How have your business development priorities between CNS and oncology evolved with some recent successes?

A:Jazz remains focused on areas where it can have a meaningful impact, including oncology, neuroscience, and neuro-oncology. Recent successes in oncology, such as approvals in small cell lung cancer and high-grade gliomas, are balanced with continued promise in CNS areas like epilepsy and the development of new pipeline agents.

Q:How should we think about the authorized generic royalties for next year?

A:Jazz assumes that Hikma will provide the authorized generic during 2026. Royalties will remain at current rates this year and then step down, continuing to be a meaningful revenue stream for Jazz.

Q:Should we take your comments about access to mean that you're going to be making some concessions on Xywav pricing in 2026?

A:Jazz is focused on ensuring strong access to Xywav and has not provided specific guidance for 2026. The impact of generics and market evolution will determine the pricing and access strategy.

Q:For Modeyso, is this a bolus? Does it include stocking? What can we expect for the cadence of uptake in the coming quarters?

A:Modeyso had little to no stocking and achieved $11 million in its first quarter post-approval. Over 60% of patients were new to Modeyso, and Jazz expects a steady uptick in new patients, reinforcing its belief in the product's potential.

Q:For the GEA readout, can you review the comparative analyses and how to think about powering across them?

A:The trial is well-powered for PFS and includes an interim analysis for OS. Comparisons will be made between experimental arms and the control arm. The trial's design allows for robust analysis of both PFS and OS.

Q:Can you help set expectations for the level of disclosure in the HERIZON-GEA top-line data?

A:Jazz aims to be transparent while balancing the need to preserve the ability to publish in high-impact journals and congresses. The primary question is whether zanidatamab is superior to Herceptin, with subgroup analyses like PD-L1 being secondary.

Q:For the Kv7 acquisition, where are you looking at developing these therapies?

A:Jazz has not disclosed full development plans but sees potential in focal onset seizures and other areas. The Kv7 molecule's specificity for Kv7.2 and 0.3 offers a best-in-class opportunity by maximizing efficacy and minimizing tolerability issues.

Q:Where are you exactly with your orexin agonist, JZP441?

A:Jazz is enrolling a small NT1 trial for JZP441 and has a backup program. The mechanism is seen as a meaningful daytime alerting agent and complementary to Xywav.

Q:Would you ever think about getting the results from DUET formally into the label?

A:Jazz believes the DUET results are important for prescribers and has published them. However, it has not commented on discussions with the FDA regarding label changes.

Q:Assuming a positive GEA readout, how would you be thinking about pricing relative to BTC?

A:Jazz does not expect a different price for GEA compared to BTC, as the broader opportunity was already considered when pricing zanidatamab for BTC.

Q:Review of Unclear Management Responses

A:Management avoided directly quantifying the benefit of Epidiolex's accrual rate refinement to gross-to-net, only stating it was the majority of the difference between volume and revenue growth. Additionally, they did not provide specific details on the statistics for the HERIZON-GEA trial or the exact development plans for Kv7 therapies. They also avoided commenting on potential pricing concessions for Xywav in 2026 and discussions with the FDA regarding DUET results in the label.

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