Business Overview and History

Jazz Pharmaceuticals was founded in 2003 with a focus on developing and commercializing meaningful pharmaceutical products to address unmet medical needs, particularly in the areas of neuroscience and oncology. In 2005, the company made a significant move by acquiring Orphan Medical, Inc., which brought its lead product Xyrem (sodium oxybate) into the portfolio. Xyrem, approved by the FDA in 2002 and 2005 for the treatment of cataplexy and excessive daytime sleepiness in patients with narcolepsy, helped establish Jazz as a leader in oxybate therapies for sleep disorders.

The company continued to expand its neuroscience portfolio, receiving FDA approval for Xywav in 2020, a lower-sodium version of Xyrem, for the treatment of cataplexy or excessive daytime sleepiness in patients with narcolepsy. This provided patients with a lower-sodium treatment option, although the company faced challenges with competition from authorized generic versions of high-sodium oxybate products entering the market in 2023.

A major strategic move came in 2021 with the acquisition of GW Pharmaceuticals plc, which significantly expanded Jazz's presence in the neuroscience area. This acquisition added the global, high-growth childhood-onset epilepsy franchise led by Epidiolex, which was approved in the U.S. in 2018 and in Europe shortly after for the treatment of seizures associated with Lennox-Gastaut syndrome, Dravet syndrome, and tuberous sclerosis complex.

Jazz has also built a growing oncology portfolio over the years. In 2020, the company acquired the rights to Zepzelca for the treatment of small cell lung cancer. This was followed by the launch of Rylaze in 2021 for the treatment of acute lymphoblastic leukemia or lymphoblastic lymphoma, further diversifying Jazz's commercial offerings in the oncology space.

Financial Overview

Jazz Pharmaceuticals has a strong financial profile, with a diversified revenue stream and disciplined expense management. In 2024, the company reported total revenues of $4.1 billion, representing a 6% year-over-year increase. This marked the company's 20th consecutive year of top-line growth, underscoring the durability and resilience of its business model.

The company's non-GAAP adjusted net income for the full year 2024 was $1.37 billion, with non-GAAP adjusted earnings per share of $20.90. Jazz's robust cash flow generation, with $1.4 billion in cash from operations for the year, provides the company with the financial flexibility to invest in its commercial portfolio, pipeline, and strategic corporate development initiatives.

In the most recent quarter, Jazz reported revenue of $1,088,173,000, representing a 9% increase year-over-year. Net income for the quarter was $191,115,000, a 30% increase compared to the same period in the previous year. This growth was primarily driven by continued strong performance of Xywav, Epidiolex, and the oncology portfolio. Operating cash flow (OCF) for the quarter was $398,580,000, while free cash flow (FCF) was $385,293,000, both showing year-over-year increases.

Jazz Pharmaceuticals operates globally, with approximately 20% of total revenues coming from international markets in the most recent quarter. The company continues to see strong demand for its products, including Epidiolex, in Europe and other international regions.

Liquidity

As of the end of 2024, Jazz had a strong balance sheet, with $3 billion in cash, cash equivalents, and investments. The company has been actively managing its debt, making voluntary repayments to reduce the principal amount of its term loan. This financial discipline and prudent capital allocation have strengthened Jazz's overall financial position and positioned the company to navigate the evolving industry landscape.

Jazz's liquidity profile is robust, with a debt-to-equity ratio of 0.017, cash and cash equivalents of $2.22 billion, and an available credit line of $500 million under a 5-year revolving credit facility. The company's current ratio stands at 4.46, while its quick ratio is 3.99, indicating strong short-term liquidity.

Diversified and Resilient Product Portfolio

Jazz's product portfolio spans both neuroscience and oncology, providing the company with a diversified revenue stream and reducing its reliance on any single product. The company's flagship sleep disorder treatments, Xywav and Xyrem, continue to be the market leaders in their respective indications, with Xywav demonstrating strong growth in both the narcolepsy and idiopathic hypersomnia (IH) markets.

In the epilepsy space, Epidiolex has become a key growth driver for Jazz, with the company expecting the product to reach blockbuster status in 2025. The recent settlements with all 10 current ANDA filers for Epidiolex have provided long-term clarity on the product's patent protection, with generic entry not expected until the very late 2030s or earlier under certain circumstances.

Jazz's oncology portfolio has also been a significant contributor to the company's success, with products like Rylaze, Zepzelca, and the newly approved Ziihera driving strong revenue growth. The company's strategic focus on developing differentiated oncology assets, such as the HER2-targeted bispecific antibody zanidatamab, has bolstered its pipeline and positioned Jazz for continued expansion in this therapeutic area.

Neuroscience Segment

Jazz Pharmaceuticals' Neuroscience segment is anchored by its leading sleep disorder therapies, Xywav and Xyrem. Xywav, an oxybate therapy that contains 92% less sodium than Xyrem, is Jazz's key growth driver in this segment. In the third quarter of 2024, Xywav product sales increased 17% year-over-year to $388.47 million, driven by continued adoption in both the narcolepsy and idiopathic hypersomnia (IH) markets. Exiting the third quarter, there were 10,070 patients taking Xywav for narcolepsy and 3,550 taking it for IH, representing increases of 6% and 39% respectively compared to the same period in 2023.

Xyrem, the original high-sodium oxybate therapy, saw a 54% decline in product sales to $58.11 million in the third quarter, due to the impact of high-sodium oxybate competition and continued adoption of the lower-sodium Xywav. The company expects Xyrem sales to continue declining as patients migrate to Xywav.

In addition to the oxybate franchise, Jazz's Neuroscience portfolio includes Epidiolex/Epidyolex, a cannabidiol oral solution approved for the treatment of seizures associated with Lennox-Gastaut syndrome, Dravet syndrome, and tuberous sclerosis complex. Epidiolex/Epidyolex product sales increased 18% year-over-year in the third quarter to $251.56 million, driven by growing demand and geographic expansion.

Overall, the Neuroscience segment accounted for $702.72 million, or 67%, of Jazz's total product sales in the third quarter of 2024, representing a 4% increase compared to the same period in 2023. The continued strong performance of Xywav and Epidiolex/Epidyolex is expected to be the primary growth drivers for this segment going forward.

Oncology Segment

Jazz's Oncology segment includes several key products, led by Rylaze, Zepzelca, Defitelio, and Vyxeos. Rylaze, a recombinant erwinia asparaginase product approved for the treatment of acute lymphoblastic leukemia and lymphoblastic lymphoma, saw a 6% decrease in product sales to $98.78 million in the third quarter. This was primarily due to a recent update to the Childrens Oncology Group pediatric treatment protocols, which temporarily impacted the timing of Rylaze administration, though the company expects demand to normalize by early 2025.

Zepzelca, a treatment for small cell lung cancer, generated $85.84 million in product sales in the third quarter, an increase of 10% year-over-year, driven by higher sales volumes and pricing. Defitelio, approved for the treatment of severe veno-occlusive disease, had a 38% increase in product sales to $65.82 million. Vyxeos, for the treatment of acute myeloid leukemia, also saw a 15% increase in product sales to $34.31 million.

In total, the Oncology segment accounted for $284.75 million, or 29%, of Jazz's total product sales in the third quarter of 2024, representing a 9% increase compared to the same period in 2023. The company expects continued growth in this segment driven by increased demand and geographic expansion for its key oncology products.

Other Segment

Jazz's Other segment, which includes its Sativex nabiximols oral solution, generated $2.23 million in product sales in the third quarter of 2024, a 23% decrease from the prior year period.

Robust Pipeline and Strategic Corporate Development

In addition to its strong commercial portfolio, Jazz maintains a robust pipeline of promising product candidates across both neuroscience and oncology. The company's R&D efforts are primarily focused on advancing its late-stage assets, including the ongoing Phase III trials for zanidatamab in first-line gastroesophageal adenocarcinoma and the Phase III trial evaluating Zepzelca in combination with atezolizumab as a first-line maintenance therapy for small cell lung cancer.

Jazz's strategic approach to corporate development has also been a key driver of its growth. In 2025, the company completed the acquisition of Chimerix, adding the investigational drug dordaviprone to its pipeline. This transaction aligned with Jazz's focus on building out its oncology portfolio and addressing unmet patient needs.

Looking ahead, Jazz remains committed to pursuing value-enhancing corporate development opportunities that complement its existing capabilities and product portfolio. The company's strong financial position and disciplined capital allocation strategy provide it with the flexibility to identify and act on strategic acquisitions or in-licensing deals that can further diversify its business and drive long-term shareholder value.

Navigating Industry Challenges

Like any biopharmaceutical company, Jazz faces a range of industry challenges, including pricing pressures, regulatory hurdles, and competition from generic and branded products. The company has demonstrated its ability to navigate these challenges, as evidenced by its strong commercial execution and the resilience of its product portfolio.

The entry of authorized generic versions of high-sodium oxybate products, as well as the launch of the branded Lumryz product, have presented dynamics in the narcolepsy market that Jazz has successfully navigated. The company's focus on the differentiation of Xywav, its low-sodium oxybate therapy, has been critical in maintaining its leadership position in this therapeutic area.

Additionally, Jazz has proactively addressed potential patent cliff risks, as demonstrated by the recent settlements for Epidiolex that have extended the product's exclusivity well into the late 2030s. This strategic approach to managing its intellectual property and navigating the evolving regulatory landscape has been a hallmark of Jazz's success.

Guidance and Future Outlook

Jazz Pharmaceuticals achieved its 2024 guidance, delivering top-line growth at the upper end of their range and $1.37 billion in adjusted net income on a non-GAAP basis. For 2025, the company has provided guidance that reflects continued growth and strategic focus:

• Total revenue is expected to range between $4.15 billion and $4.4 billion, representing 5% year-over-year top-line growth at the midpoint.

• Non-GAAP adjusted SG&A expenses are projected to be between $1.25 billion and $1.31 billion.
• Non-GAAP adjusted R&D expenses are expected to range from $720 million to $770 million, representing an 8% decrease from 2024.
• Adjusted net income is forecasted to be between $1.4 billion and $1.5 billion.

The key drivers of the 2025 guidance include:

• Continued growth of Xywav, which is expected to remain the number one branded narcolepsy treatment.
• Epidiolex reaching blockbuster status in 2025.
• Continued high sodium oxybate AG royalty revenue throughout 2025, with potential for rapid erosion if true generics enter the market.
• Modest revenues expected from Ziihera given the small biliary tract cancer patient population, though a successful launch is seen as key to providing healthcare providers experience with the product ahead of a potential launch in gastroesophageal adenocarcinoma.
• Potential weakness in Zepzelca sales as Imdelltra may gain share in the second-line plus setting, until the first-line maintenance indication is approved.

Industry Trends

The biopharmaceutical industry has seen steady growth, with a compound annual growth rate (CAGR) of approximately 5-7% over the past 5 years. Jazz Pharmaceuticals' diversified portfolio and focus on high-value therapeutic areas have allowed the company to outperform the industry average.

Conclusion

Jazz Pharmaceuticals has transformed itself into a diversified global biopharmaceutical leader, with a strong commercial portfolio, a robust pipeline, and a strategic focus on corporate development. The company's ability to successfully navigate industry challenges, coupled with its financial discipline and operational excellence, positions it well for continued growth and value creation. As Jazz continues to execute on its strategic priorities, the company is poised to deliver sustainable returns for its shareholders while making a meaningful impact on the lives of patients in need.