Jazz Pharmaceuticals PLC

NASDAQ:JAZZ

Earnings Call Transcript 2023-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Q1 2023 Jazz Pharmaceuticals Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrea Flynn, Vice President and Head of Investor Relations. Please go ahead.

[Andrea Flynn, VP & Head, IR]

Thank you, operator, and good afternoon, everyone. Today, Jazz Pharmaceuticals reported its first quarter 2023 financial results. The slide presentation accompanying this webcast is available on the Investors section of our website. Investors may also refer to the press release we issued earlier today, which is also posted to our website. On the call today are Bruce Cozadd, Chairman and Chief Executive Officer; Renee Gala, Executive Vice President and Chief Financial Officer; Dan Swisher, President and Chief Operating Officer; and Rob Iannone, Executive President, Global Head of R&D; Kim Sablich, Executive Vice President and General Manager of 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 development and commercialization milestones and goals, which involve risks and uncertainties that could cause actual events, performance and results to differ materially from those contained in these forward-looking statements.

We urge 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 these forward-looking statements made on today's webcast. We undertake no obligation to update our forward-looking statements.

Turning to Slide 3. On this webcast, we'll discuss non-GAAP financial measures. Descriptions of these non-GAAP financial measures and reconciliation 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.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Thanks, Andrea. Good afternoon, everyone, and thank you for joining us today. I'll start on Slide 5. In the first quarter of 2023, we once again delivered strong commercial results, continued to advance our pipeline and built on our record operational excellence. Our results quarter underscore the durability and growth of our core commercial products and our enhanced R&D capabilities.

On the commercial front, our focus on execution continues to drive key product sales, headlined by the strong performance of low-sodium Xywav. We're especially these that physicians and patients continued to choose Xywav, even as a high sodium oxybate authorized generic, or AG, entered the market. We continue to expect that Xywav will both grow and remain the oxybate of choice in 2023, even with the availability of high sodium oxybate AG and branded fixed dose high sodium oxybate.

Xywav-active patients grew in both narcolepsy and idiopathic hypersomnia, or IH, in the first quarter. And our efforts to educate prescribers and patients about the benefits of Xywav remain effective and are resonating in the market. Xywav is now annualizing at more than $1 billion in net product sales, making our largest product by net sales. And as outlined in Vision 2025, we anticipate our oxybate franchise will generate $2 billion in revenue in 2025.

We saw significant year-over-year growth in product sales for Epidiolex. Importantly, outside the U.S., we have now launched in all 5 key European markets. Demand for Rylaze remains strong in the U.S. with potential European approval later this year. Zepzelca remains the treatment of choice in second-line small cell lung cancer. And longer term, our ongoing effort to explore Zepzelca in several new patient populations, including first-line small cell lung cancer may open up opportunities for meaningful growth.

Moving to R&D. We continue to advance multiple investigational therapies in our pipeline and expect to have at least 3 late-stage readouts by the end of '24, including JZP150 in post-traumatic stress disorder, suvecaltamide in essential tremor and Zanidatamab in first-line gastroesophageal adenocarcinoma, or GEA. On the operational side, our strong execution drove significant top and bottom line growth in the first quarter compared to the prior year.

We have a business that continues to generate meaningful cash flow. In line with our disciplined capital allocation, we continue to invest in areas of our business that we believe will drive the most benefit for patients and value for shareholders, including a robust pipeline with more than 20 novel candidates across neuroscience, oncology and cannabinoids.

We are reaffirming our 2023 guidance, which Renee will discuss in more detail. Turning to Slide 6. Vision 2025 remains our strategic North Star, which we believe will deliver sustainable growth and enhanced value. We have made meaningful progress in all 3 areas of Vision 2025 and believe we are well positioned to achieve these important milestones, each of which are critical to our transformation into a high-growth global biopharma leader.

I'll now turn the call over to Dan to review our commercial performance, after which Rob will share an update on our R&D progress. Renee will provide a financial overview, and then we'll open the call to Q&A. Dan?

[Daniel Swisher, President & COO]

Thanks, Bruce. I'm excited to share the continued progress across our commercial portfolio. I'll begin on Slide 8 with neuroscience and our oxybate franchise. We remain confident in the durability of our oxybate franchise and have established low sodium Xywav as the oxybate treatment of choice. Xywav became our largest product by net product sales as of the fourth quarter of 2022 and is annualizing at more than $1 billion as a result of continued adoption of both narcolepsy and IH.

In the first quarter, average active Jazz oxybate patients increased to approximately 17,400 representing growth of approximately 5% and total oxybate revenues, including royalties from high sodium oxybate AG grew by approximately 6% compared to the year prior. In narcolepsy, we continue to focus on educating patients and prescribers on the benefits of reducing sodium intake, and this message is resonating.

We were very pleased with performance in the first quarter and exited 1Q '23 with approximately 9,050 patients taking Xywav, an increase of approximately 500 patients from the fourth quarter of 2022. In IH, we see continued growth of new prescribers. And exiting the first quarter, there were approximately 2,000 IH patients taking Xywav. IH is a 24-hour sleep disorder, and Xywav is the first and only treatment-approved by FDA to treat the full condition of IH.

Importantly, it has been studied across the multiple symptoms of IH. Our field force remains focused on educating prescribers on the importance of proper diagnosis and identifying appropriate patients for Xywav therapy. And a recent Jazz survey of sleep specialists indicates that approximately 70% anticipate increasing their prescribing over the next 6 months. Slide 9 highlights the compelling low sodium health benefits we are sharing with health care professionals and patients.

Narcolepsy is a debilitating chronic condition, and we have focused on education around the lifelong burden of high sodium intake for narcolepsy patients who live with an increased risk of cardiovascular comorbidities. Xywav is the only approved low sodium oxybate and has 92% less sodium than high sodium oxybates. The American Heart Association recommends a maximum of 1,500 milligrams of sodium per day, Xywav has 100 to 140 milligrams, a reduction of 1,000 to 1,500 milligrams of sodium per day compared to high sodium oxybate.

This has significant potential health benefits, including lower blood pressure and improved cardiovascular health. To add to the literature on sodium impact, we presented data at this year's American Academy of Neurology meeting that showed narcolepsy patients treated with high sodium oxybate had a higher risk of new onset hypertension diagnosis, antihypertensive medication initiation within 180 days of starting therapy when compared to a mass control group of narcolepsy patients not being treated with high sodium oxybate.

In fact, the risk of those taking high sodium oxybate was approximately twice that of the control group. With regard to oxybate competition, our high sodium oxybate AG was launched in January, and we anticipate additional AG and branded fixed dose high sodium oxybate competition in the coming months. With competition now in the marketplace, I'll share a few key takeaways based on our experience in the first quarter.

First, we continue to build on the successful launch of Xywav. It remains the only low sodium oxybate available to patients, and we expect it to be the only oxybate indicated for IH for the foreseeable future. Second, we expect that Xywav will both grow and remain the oxybate of choice in 2023, even with the availability of high sodium oxybates. I'll highlight that the large majority of narcolepsy patients beginning oxybate therapy in the first quarter chose Xywav over high sodium oxybate.

And we expect to continue to see patients transition from both Xyrem and high sodium oxybate AG to Xywav. Third, we believe that the majority of patients and health care providers will continue to prioritize long-term health when evaluating oxybate therapy. FDA continues to recognize 7 years of orphan drug exclusivity in July 2027 for Xywav in narcolepsy. FDA has also recognized the difference in sodium content between Xywav and Lumeris, a fixed dose high sodium oxybate, likely to be clinically meaningful in all patients with narcolepsy and that Xywav is safer than LUMRYZ in all such patients.

I'll also note that branded fixed dose high sodium oxybate has the same sodium content as Xyrem and the high-sodium oxybate AG. And Xywav is the only approved oxybate therapy that does not carry a warning and precaution related to high sodium intake. All of these factors give us confidence that Xywav is a durable product that we believe will continue to be a core growth driver for Jazz. Moving to Slide 10. We are pleased with the continued growth of Epidiolex with net product sales in first quarter '23 growing by 20% year-over-year to $189 million.

Growth was driven by underlying demand in the U.S. and expansion to new markets outside the U.S., and we are seeing increasing use of Epidiolex earlier in the treatment algorithm. We continue to see seasonality in ordering patterns in the U.S. with a combination of a more gradual build in inventory over the second half of the year and insurance plan resets with payers impacting the first quarter, not dissimilar to what we've seen historically with oxybate.

Turning to Slide 11. We are building on our solid foundation to capitalize on additional opportunities we see to drive Epidiolex's growth. We've recently launched a number of initiatives, including educational efforts focused on optimal dose and caregiver-reported outcomes of Epidiolex treatment, including seizure, behavior and cognition data from BECOME survey.

These new initiatives are complemented by the compelling data presented last year for use of Epidiolex in combination with Clobazam. Our commercial team also has an enhanced focus on further penetration into the adult setting. We remain focused on growing Epidiolex outside the U.S. We have now launched in all 5 key European markets. And while it's early, we are very encouraged to take in those markets, pricing and access remaining strong.

Moving to Slide 12. Net product sales for Rylaze were for the first quarter, a 58% increase year-over-year. Based on the availability of Rylaze, health care providers have indicated they are returning to best clinical practice and switching therapy at the first signs of hypersensitivity. The approval of Monday, Wednesday, Friday dosing allows for a dosing schedule that is more in line with preferred clinical practice.

Rylaze has maintained strong momentum in pediatric oncology protocols and has been almost universally adopted in this setting. We are also encouraged to see that there is an increasing use of Rylaze in the treatment of adolescent and young adults or the AYA market, which is an area of increased emphasis for us in 2023. Outside of the U.S., we submitted a marketing authorization application to the European Medicine Agency in May 2022.

We are also continuing to evaluate patient needs in other geographies. Slide 13 highlights that we have rapidly established Zepzelca as the treatment of choice in second-line small cell lung cancer. Zepzelca net product sales increased 13% to $67 million in first quarter '23 compared to the same period in 2022. Rob will discuss our development plans for Zepzelca, which also includes trials in first-line small cell lung cancer and other tumor types, providing the opportunity for meaningful future growth in new patient populations. Now I'll turn the call over to Rob for an update on our pipeline and upcoming milestones. Rob?

[Robert Iannone, EVP & Global Head, Research & Development]

Thanks, Dan. Starting on Slide 15, we've detailed key clinical programs in our pipeline. Our team is energized by the advances we've made, and we're looking forward to late-stage data readouts from at least 3 clinical stage programs in 2023 and 2024, JZP150 in PTSD; suvecaltamide in essential tremor; and Zanidatamab or Zani in GEA. I'll highlight several programs in more detail shortly.

First, I want to touch on a few key points as we look across the breadth of the pipeline. Starting with neuroscience, development is ongoing in our Phase II PTSD trial for JZP150, with top line data expected late this year. We are also advancing trials for suvacaltumide in both essential tremor or ET and Parkinson's disease tremor with top line data from the EP trial expected in the first half of 2024.

In our receptor agonist, or JZP441 Phase I program, we anticipate initial proof of concept in healthy volunteers this year. JZP441 has the potential to treat narcolepsy, high age as well as other sleep disorders. Moving to oncology. Zanidatamab is a priority program for us, and we are committed to bringing this novel therapy to patients. In late April, we amended our agreement remarks and are excited to welcome new colleagues who are focused on Zanidatamab work to Jazz.

This allows us to benefit from their wealth of knowledge and expertise as we look to bring Zanidatamab to the market as rapidly as possible and explore other opportunities beyond BTC and GEA. For Zepzelca, we expect complete enrollment this year for the ongoing Phase III trial to evaluate Zepzelca in combination with Tecentriq in first line extensive stage small cell lung cancer.

Turning to Slide 16, I'll discuss Zanidatamab in more detail. Zanidatamab is 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 the monotherapy activity with Zani across multiple HER2-expressing tumor types, including cases resistant to prior HER2 therapies.

The most advanced clinical work with Zani is in biliary tract cancers, or BTC, and gastroesophageal adenocarcinoma, or GEA. These are both cancers significant unmet need and poor outcomes with current standards of care. As a reminder, last year, we and our partner, Zymeworks reported positive top line results from a pivotal Phase IIb trial evaluating Zanidatamab as monotherapy in patients with previously treated HER2-amplified and expressing BTC.

In the trial, 41% of these patients with BTC achieved an objective response as assessed by blinded independent sensor review. By contrast, standard of care chemotherapy in second-line BTC would be expected to have an objective response rate of less than 10%. Currently, there are no HER2-targeted therapies approved for the treatment of BTC, and we are in dialogue with the FDA regarding the potential regulatory path forward for Zani in BTC.

We're pleased that data from this trial has been accepted as an oral presentation at ASCO this year. For those of you interested in more detail on those data, I hope you will join us for the KOL webcast we are hosting following that presentation. We are also progressing our program in GEA. At the January ASCO GI conference, the first Zanidatamab overall survival data were presented from a Phase II trial, evaluating Zanidatamab in combination with chemotherapy and first-line patients with HER2-expressing metastatic GEA.

The preliminary results show that the median overall survival had not yet been reached with an 18-month survival rate of 84%. The overall survival findings in this trial are compelling, given that the historically reported overall survival rate for the currently approved standard of care is a median of 14 months. These results show Zanidatamab's potential as a foundational treatment for patients with HER2-positive GEA.

And we look forward to additional data from the ongoing pivotal Phase III GEA trial expected to read out in 2024, which may support U.S. and global regulatory submissions. Since we acquired Zanidatamab, our confidence in this program has only grown based on positive data from both BTC and GEA. And while our initial focus is on those 2 tumor types, we believe Zanidatamab has the potential to transform the current standard of care in multiple HER2-expressing cancers.

To that end, we're excited that Zani was added to the high spine breast cancer platform this year. In addition, we have multiple early-stage trials assessing Zanidatamab's clinical potential in a range of tumor types and are actively evaluating opportunities to pursue additional label communications. Turning to Slide 17. I'd like to highlight suvecaltamide, which is a highly selective and state-dependent modulator of T-type calcium channels in clinical development for the treatment of essential tremor or ET and Parkinson's disease tremor.

Top line data readout for the ET trial is anticipated in the first half of 2024. So I'll focus my comments today on that indication. There is a high unmet need for ET treatment with no new medicines approved in over 50 years. ET can be highly debilitating with significant effects on patients' quality of life and activities of daily living, such as eating, drinking, dressing, shaving and writing and can lead to substantial impairment on physical function.

Some patients also experienced cognitive deficits, anxiety, social phobia, depression and sleep disturbances. In the U.S. and key European markets, there are approximately 2 million diagnosed patients with a prevalence estimated at 11 million. Slide 18 illustrates suvecaltamide's differentiated mechanism of action. Though the exact line pathophysiology of ET is not clear, there is strong evidence to support the role of T-type calcium channels.

T-type calcium channels regulate the balance of calcium ions, acting as a gatekeeper to help ions both enter and leave the cell membrane. In some pathologic states such as ET, increased activation of these channels leads to excessive rhythmic signaling and prompts tremor. The high selectivity of suvecaltamide for T-type calcium channels make it a promising candidate for the treatment of ET.

Importantly, suvecaltamide is differentiated from other T-type calcium channel blockers in development as an estate dependent, meaning that it targets channels under conditions of hyperexcitability, while sparing the form of the channel important for normal neuronal signaling. Slide 19 provides an overview of the suvecaltamide ET Phase IIb trial design.

Approximately 400 participants with moderate to severe ET will be treated with 1 of 3 dose levels of suvecaltamide or placebo for 12 weeks. Based on the results from our prior Phase IIa proof-of-concept trial known as T-CALM as well as FDA feedback, the primary endpoint being used in this trial is a change from baseline to week 12 on a composite of the Tremor Research Group Essential Tremor Rating Assessment scale known as TETRAS.

The 2 composite measure is composed of items from 2 scales. 11 items from the TETRAS activity of daily living, which includes measures such as feeding with a spoon, hygiene and using keys; and 2 items from the TETRAS performance scale, which represent handwriting and drawing and Archimedes' spiral, which was depicted on Slide 17. We conducted post-hoc analyses on T-CALM, which was a 4-week randomized, double-blind, placebo-controlled study to better understand the treatment effect with the TETRAS composite endpoint.

We believe that our ongoing Phase IIb trial has been optimally designed to use the Phase IIa learnings and that an appropriate patient population, primary endpoint and study duration have been selected to adequately evaluate the safety and efficacy of suvecaltamide across 3 dose levels. On Slide 20, we've highlighted several key aspects of our program exploring JZP150 for the treatment of PTSD, a psychiatric disorder that affects millions of people.

Patients frequently have uncontrolled symptoms that impact their ability to perform activities of daily living and social function. PTSD effects up to 8% of adults during their lifetime and is associated with significant morbidity and mortality. There haven't been any new medicines approved for the treatment of PTSD in over 2 decades. Current standard of care includes cognitive behavior therapy with SSRIs and SNRIs used as first-line pharmacotherapy treatments.

However, response rates to pharmacological treatments rarely exceed 60% and even fewer patients achieve clinical remission. JZP150 is potent, selective and irreversible inhibitor of fatty acid amide hydrolase or FAAH. This is a novel mechanism of action to potentially target the underlying pathophysiology and core symptoms of PTSD.

We expect top line data from this trial late this year. Slide 21 provides an overview of our Zepzelca first-line small cell lung cancer program. Small cell lung cancer patients have particularly poor outcomes with a 5-year overall survival rate of less than 10%. Currently, Zepzelca is indicated to treat patients in the second-line setting, but we see a clear mechanistic rationale for Zepzelca can potentially increase the duration of response in the first line setting as maintenance therapy in combination with the standard of care, which is chemotherapy plus a PD-L1 inhibitor.

We have an ongoing first-line trial being run in collaboration with Roche to evaluate Zepzelca in the setting with chemotherapy plus Tecentriq or atezolizumab. The trial design is outlined on the bottom portion of the slide, and we expect to complete enrollment by the end of the year. Now I will turn the call over to Renee for a financial update. Renee?

[Renee Gala, EVP & CFO]

Thanks, Rob. I'll start with our top and bottom line results on '23. As a reminder, our full financial results are available in our press release and 10-Q. In the first quarter of 2023, we recorded impressive year-over-year revenue of 10%, achieving $893 million in total revenues. This was driven by growth of our key products in both neuroscience and oncology, including year-over-year double-digit growth of Xywav, Epidiolex and Rylaze.

Our disciplined capital allocation and focus on operational excellence drove adjusted net income of $285 million, growing broadly in line with our revenues compared to the same period in 2022. We continue to generate significant cash from our business, recording more than $300 million of cash from operations in the first quarter of 2023, an increase of 53% compared to the first quarter of 2022.

With healthy cash flows and a strong balance sheet, we have strategic flexibility to invest in growth drivers within our current business as well as corporate development opportunities. Corporate development is an important component of Vision 2025, and we are actively assessing opportunities that we believe will deliver innovation for patients and contribute to building a sustainable business that provides meaningful returns to shareholders.

Turning to Slide 24. We are reiterating the 2023 revenue guidance we provided in March. We are executing in line with our expectations and are confident in meeting those targets. The guidance reflects our strong performance in the first quarter, our expectations around the durability of our oxybate franchise and anticipated growth across our key products. Our total revenue guidance range for 2023 is $3.675 billion to $3.875 billion, positioning us for year-over-year total revenue growth.

Our 2023 guidance for neuroscience of $2.675 billion to $2.825 billion incorporates expected growth for both Xywav and Epidiolex as well as the continued decline in Xyrem due to robust Xywav adoption and the introduction of competitive high sodium oxybates. As a reminder, our neuroscience guidance also includes high sodium oxybate AG royalties, which are recognized within total revenues under royalties, not under neuroscience net product sales.

Due to the royalty structure within our AG agreement with Hikma, we expect our royalties to be significantly higher in the second half of 2023 relative to the first half. As a reminder, in the first half of 2023, while Hikma maintains exclusive rights to distribute high sodium oxybate AG, the royalty rate paid to Jazz is tiered and wide ranging, starting at 10% and going all the way to 90% based on the volume of AG units sold as a percentage of total oxybate units, with the total referring to Xywav, Xyrem and high sodium oxybate AG.

During the second half of 2023, the royalty rate to Jazz becomes fixed at a rate where we and Hikma both have substantial economics regardless of the AG volumes. Our oncology guidance reflects expectations of continued double-digit growth for this franchise with a revenue range of $950 million to $1.05 billion, resulting in a midpoint of $1 billion.

Continuing on Slide 25, our SG&A guidance for 2023 is a reduction compared to 2022, and we are tracking through the first quarter as expected. As we noted in our last quarterly update, our R&D guidance of $700 million at the midpoint represents enhanced investment over 2022, reflecting the growth and maturation of our pipline, as Rob noted earlier in the call.

On the bottom line, we expect to continue to deliver strong adjusted net income with 37% growth at the midpoint and a guidance range of $1.24 billion to $1.31 billion. The midpoint of our financial guidance imply an adjusted operating margin of approximately 46% for the year. We'll continue to prioritize commercial, R&D and corporate development efforts that we believe will deliver the most value, leveraging our cash generation to invest in our business, improve our bottom line and deliver strong shareholder returns.

With our strategic investments, expanding product portfolio, R&D progress and focus on operational excellence, we believe we are well positioned to achieve Vision 2025. And deliver further diversification, sustainable growth and enhanced value to patients and to shareholders. I'd now like to turn the call back to Bruce.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Thanks, Renee. I'll conclude our prepared remarks on Slide 27. We started 2023 with significant momentum, and I'm pleased to report that we've continued making strong progress in the first quarter of 2023. On the commercial front, we've successfully launched multiple products over the past several years, which are now demonstrating strong and durable performance.

Our pipeline is more robust than it's ever been in the company's history. And we have at least 3 anticipated late-stage data readouts through 2024 that have the potential to continue to diversify and transform our business. We also remain focused on strategic capital allocation. With our strong cash flow, balance sheet and margins, we have the flexibility to make significant investments across commercial, pipeline and corporate development to drive sustainable growth and enhanced 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]

[Operator Instructions]. And our first question comes from the line of Jessica Fye with JPMorgan.

[Unidentified Analyst]

This is [indiscernible] on for Jessica Fye. Can you give us some color on how the introduction of the Xyrem AG is playing out versus what your expectations are? And then second, what kind of business development is most interesting to you in this current environment?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

All right. Well, let's start with the question about the authorized generic. And then Renee, maybe you can jump in to handle corporate development. The most important thing to say about our first quarter with an AG on the market is that it's played out very much the way we thought it would thus far. We have a new entrant in the high sodium category when we are obviously growing Xywav as the only low-sodium product, both in narcolepsy and in idiopathic hypersomnia, where it remains the only approved product without an AG generic.

The ability to grow in both narcolepsy and idiopathic hypersomnia in the face of AG generic, I think, is consistent with what we had guided to, and you saw us reaffirm our overall guidance for the year based on that first quarter experience. Renee, you want to take corporate [indiscernible]?

[Renee Gala, EVP & CFO]

Sure. Thanks, Bruce. So corporate development continues to be an important priority for us, as I mentioned in our prepared remarks. In terms of the assets we are interested in, we are squarely focused on commercial and near commercial assets as part of our Vision 2025 revenue goals. We think that Zanidatamab can certainly contribute to that goal, but it will not fully cover it.

We also are looking at pipeline assets. We have a rather robust pipeline right now that we're pushing forward. And we think we can continue to look at bringing in assets that can complement that pipeline. We do believe there are some good opportunities for us to transact across both of those areas. With respect to commercial or near commercial assets, to be clear, we're not going to overpay for assets, nor do we think that we need to in this environment.

So sitting here today, there are multiple opportunities we're interested in, and we're quite busy within that team. And then just to get a bit more specific in terms of the types of assets, we really tend to focus on areas of great unmet need where we think we can have a really meaningful impact for patients, where there's an addressable commercial call point that enables us to leverage our expertise, our global footprint and then create a durable revenue stream for the company.

We're largely focused on neurosynology areas where we currently operate already. But certainly, we're also exploring rare and orphan areas outside of those 2 therapeutic areas, given the vast majority of our current commercial products are currently serving rare or orphan disease population, so there's certainly applicable expertise that we have developed there. So we're excited. We think there's a lot of opportunity. We're well positioned also from a financial perspective to be able to transact.

[Operator]

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

[Marc Goodman, SVB Securities]

Could you give us a little more color on what's going on in the IH market? We know the number of patients that you moved from last quarter to this quarter, but just some color, anecdotal information. Anything you can help us with understand what's happening behind the scenes.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes, Marc, let me turn that question over [indiscernible]

[Kim Sablich, EVP & GM, US]

Yes. So we are continuing to see the growth in idiopathic hypersomnia is quite compelling with 2,000 active patients exiting the first quarter. And when you look underneath that, we see that we're continuing to bring new prescribers on board and creating a larger prescriber base, which is great. And what we see is that as prescribers get experience with the product, as Dan mentioned in a survey of sleep specialists, 70% of they're indicating that they're going to increase their prescribing of Xywav for IH over the next 6 months.

So good indicators of both the experience that they're having to date as well as their attentions in the future. But do keep in mind that Xywav remains the only FDA-approved treatment options for adults with idiopathic hypersomnia, which is a rare multiple symptom sleep disorder and the only treatment studied across the multiple symptoms of IH.

And we're really still just building this kind of nonexisting market. And as a result, we're executing a comprehensive disease education campaign both for health care providers as well as patients across multiple channels and platforms. And our emphasis really is on educating prescribers on the importance of a proper and solid diagnosis and identifying the patients that are appropriate for Xywav.

And really about the fact that Xywav is approved to treat the full condition of idiopathic hypersomnia, not just the excessive daytime sleepiness that they have been treating for a number of years with off-label some weight-promoting agents. And really important at the core of that as well, since they've been so focused on the daytime symptom of excessive daytime sleepiness is reminding them that idiopathic hypersomnia is actually a 24-hour condition.

And the Xywav can address multiple symptoms of idiopathic hypersomnia. So an important occasional effort there, and we're gaining traction. Patients so far have been reporting that they're quite pleased with the comprehensive and customized support that they're receiving from Jazz during the path to access. So overall, we're feeling really good, remaining very confident in our ability to maximize the potential of Xywav in this really underserved market.

[Operator]

Your next question comes from the line of Jason Gerberry with Bank of America.

[Jason Gerberry, Bank of America Merrill Lynch]

Just a question on the step-up, the meaningful step-up in the Hikma royalty in second half. Is that driven off of the assumption that the Hikma AG volumes will step up in a big way in their sales? Or is it more just that the royalty rate spikes up in the second half? Or is it just sort of an accounting convention where you're realizing revenue and it may not perfectly align with the period which is captured? And then also just on the once-nightly oxybate, would you expect that to have to be stepped through the AG generics, just payers [indiscernible] for reluctance to pay for convenience?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes. On the first part of the question, Jason, it's pretty straightforward. The emphasis we're trying to put there is really that the royalty rate is expected to be meaningfully higher in the second half of the year. It's not really a timing or accounting thing. Hikma has been adding patients over time, so they probably have more patients at the end of the period than at the beginning of the period. So that will contribute, too. But the royalty rate is meaningfully different. And on the payer side in sort of high oxybate space and how they might handle that, Kim, maybe I'll come to you.

[Kim Sablich, EVP & GM, US]

Sure. So we started out the year and we can experience greater than 90% of patients, commercial patients having payer coverage, formulary coverage for Xywav. And we anticipate that to continue. We've been educating payers for some time now about the importance of reducing sodium, and we do believe that payers are generally understanding the importance of that reduction.

And they're seeing the fact that oxybate -- Xywav is the oxybate market leader with more than half of all oxybate patients on Xywav and the fact that we've continued to grow this leading position over the high sodium oxybate. So we anticipate that as other high sodium oxybates, including the high sodium AG oxybate, are added to formularies that we expect Xywav to maintain broad commercial coverage.

[Operator]

And your next question Joseph Thome with Cowen.

[Joseph Thome, TD Cowen]

Maybe one on the pipeline for JZP150 and PTSD since we're going to see those data this year. Maybe what sort of change in the cat scale do you think is clinically meaningful or would support additional investment in this program? And placebo respense rates are -- they can be historically pretty variable in neuropsych indications. So is there anything that you can do in the context of the Phase II to try and minimize placebo response?

[Robert Iannone, EVP & Global Head, Research & Development]

Sure. I'd be happy to take that.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes. Rob, over to you on that one.

[Robert Iannone, EVP & Global Head, Research & Development]

Yes. Thanks, Bruce, happy to take the question. So on the first part, we haven't said exactly what we think will be clinically meaningful, but we certainly had discussions with FDA and key experts. And we feel that the study is well powered with the 2 dose levels that we've included And to your point, it's a well-controlled design with placebo.

We certainly think the level of severity in the patients that we're recruiting in the well-established endpoint will allow us to differentiate from any placebo effect that you might see in that particular population is pretty severe upon study entry.

[Operator]

Your next question comes from the line of Brandon Folkes with Cantor Fitzgerald.

[Brandon Folkes, Cantor Fitzgerald & Co.]

Maybe just. Following on from an earlier question about the IH market. Can you maybe just elaborate a little bit on the willingness you're seeing in the field of prescribers to use a sleep-promoting agent for the IH patients, especially those patients with heavy sleep inertia? Are you seeing prescribers initially try it with some patients with less intense morning sleep inertia? Just any color there on that education you called for prescribers.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Kim?

[Kim Sablich, EVP & GM, US]

Sure. So I think if there are physicians out there that are hesitant to use a sleep-promoting agent that just highlights the education that we need to do in this marketplace. Where, as I mentioned earlier, working to educate prescribers that IH is actually a 24-hour condition and that we can address the multiple both daytime and nighttime symptoms of IH.

And once they understand that the daytime symptoms, including sleep inertia that you mentioned are the result of port sleep quality at night or what we call nonrestorative sleep, they understand why treating with Xywav at nighttime makes sense. So it's -- we're making progress there, and education is key to changing their understanding and their beliefs.

[Operator]

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

[Ami Fadia, Needham & Company]

I have one question and one follow-up. Just on suvecaltamide, it looks like the endpoint that you're studying is basically the same as what Praxis studied for the study that they reported earlier this year, where some of the performance with the PS scores were [indiscernible]. And so I was just curious what you thought you might see from your study and its [indiscernible] point that you expect to continue to evaluate going forward?

And just as a follow-up to the dynamic in the oxybate market, is it fair to say that there aren't really influencing switches to the generic, and it really boils down to physician choice? So in that case, who is really taking the generic Xyrem?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

So Rob, let's come to you first on suvecaltamide.

[Robert Iannone, EVP & Global Head, Research & Development]

Yes. So thanks for the question. We feel as though we learned a lot from T-CALM study, that was the Phase IIa study, in a number of respects, including not only the endpoints, but how to measure the endpoints. And we certainly noticed that it can be challenging to assess performance aspects of the TETRAS through a remote server. So in our trial, we're not doing that.

But overall, the combined TETRAS endpoints having to do with activities of daily living and performance scale, is agreed upon with the FDA and is certainly something we were able to evaluate in our T-CALM study, and we have confidence around our drive. And I think you're highlighting differences in trial lines potentially, but I would also highlight differences in drugs.

Our agent is a state-dependent [indiscernible], and that's critical because it allows you potentially to push the dose into higher efficacious ranges given the differential activity on pathologic calcium ion channels versus normal resting state channels. So we think we have a differentiated asset. We think we're able to push the dose and evaluate those 3 doses in a Phase II design that's supported by our prior data.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

And Kim, on the AG uptake, you want to make a comment on that?

[Kim Sablich, EVP & GM, US]

Yes, sure. I mean, so we don't have exact data on that. What I'll say is that we're continuing to see nice uptake, as Bruce said, of Xywav in the face of the AG. Switching dynamics can happen in a number of places. They can happen with the payer, which I don't think we're really seeing is the case right now. They can happen in the HCP or they can even actually happen at a pharmacy.

We have talked about that Xywav in particular, is not therapeutically equivalent or AB rated. So we don't anticipate for switching at the pharmacy with Xywav, but that is certainly a place where switching can happen from Xyrem to the AG.

[Operator]

Your next question comes from the line of Balaji Prasad with Barclays.

[Balaji Prasad, Barclays Bank]

Just two quick ones from me. Firstly, could you comment on the access that you have to the neurologists and physicians with regard to Epidiolex? And your thoughts around upside or commercial scope for the rest of the year from an access perspective? And secondly, a minor question, should we anticipate any further updates on the -- on your litigation with Avadel post the delisting direction that you received from the court?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

I'll take the second part of the question first, Dan, and just say that we're not going to comment on ongoing litigation. But Dan, why don't you talk about Epidiolex access sort of worldwide?

[Daniel Swisher, President & COO]

Yes. Just sort of thinking more broadly about Epidiolex, the 20% year-over-year growth is great, and we remain confident that we're near blockbuster status in that brand. In both markets, we've got strong HCP engagement, face-to-face engagement. We've got great access as we had some wins coming into the U.S. market. And so it's -- we've always had the quantity of access, but now we've got the quality of access.

In Europe, France was the last of the 5 major countries to get access to, and we're continuing to drive in the smaller markets, both reimbursement as well as TSC reimbursement for that indication. So I think this stage is well set with the face-to-face interactions, the ability to talk to the HCPs not only about the clinical rationale, thanks to the seizure benefit in the combination of Clobazam but also some of the BECOME data from caregivers that was shared, which also had behavioral and cognition outcome.

And then there's the areas that I mentioned in the presentation or the prepared remarks about additional areas of growth with enhanced focus with adults. Adults were also getting to those physicians had been impacted by COVID. And we see that plus long-term care as an area to further double down on as well as optimal dosing, et cetera. So I think the stage is well set, and we're pleased with the year-over-year growth and where the brand is going for 2023.

[Operator]

And the next question comes from Madhu Kumar with Goldman Sachs.

[Madhu Kumar, Goldman Sachs Group]

Maybe on the corporate and business development front, how do you think about kind of the boundary between commercial versus near commercial assets as each quarter moves forward towards 2025. Is there a sense that like if you get to a certain point, it really shifts from commercial or near commercial to really wanting to be commercial assets to kind of contribute meaningfully to Vision 2025?

[Renee Gala, EVP & CFO]

Yes. Thanks for the question. I would say our primary focus is ensuring that we're targeting assets that we think can have a really meaningful benefit for patients, a meaningful impact. And therefore, benefit our business and our shareholders. With respect to that on commercial or near commercial, it really depends on the asset. It depends on the nature of the underlying business that it's an M&A type of opportunity, where you're gaining access to a significant amount of expertise that you're going to continue or whether we're looking at something that we can essentially lift and drop right into our footprint.

So our focus is essentially the long-term value generation, durability of the asset, how it fits into our overall portfolio. And we do think there are opportunities to ensure that we're hitting our Vision 2025 goal, but we're not focused myopically just on that goal. We're focused on broader growth and the longer-term sustainability and enhanced value.

[Operator]

Your next question comes from the line of Gregory Renza with RBC Capital Markets.

[Gregory Renza, RBC Capital Markets]

Bruce and team, congrats on the progress. Bruce, maybe just spinning back to Xywav and as you go to market with the low sodium messaging, which we acknowledge is rather intuitive. And with respect to just the simplicity of that messaging, I'm just curious what barriers would you point to that you think are perhaps underappreciated by investors and others as that message to gain traction and pull-through with Xywav?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Kim, why don't I let you take this one?

[Kim Sablich, EVP & GM, US]

Sure. So at this point, we do feel that our low sodium messaging is resonating with health care providers and with many patients as well, I think, as evidenced by the amount of patients that have been transitioned to or started on Xywav. That being said, as we've brought most subscribers onboard, and many of them have switched a good portion of their patients, the most common barrier that we really hear -- 2 barriers that we hear from a prescriber: either one, I've offered it to my patient and they don't want to switch because Xyrem has changed their lives.

We should never underestimate how much patients love their Xyrem and just don't want to take any chance no matter what you tell them about the product being the same active mode in terms of switching products. So we're continuing to work on that patient side of things and educating patients about Xywav and making nice progress over time.

The other reason that we hear most is that in the smaller health care practices, they feel they just don't have the means to do the transitioning of the patients. So we do see these offices starting patients on Xywav, and they believe in sodium reduction. But it does take some work to transition patients over. No problem for the larger offices with plenty of staff. But in some of these smaller offices, they just feel that they don't have the manpower to do that.

[Operator]

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

[Unidentified Analyst]

This is [indiscernible] on for Akash. So I guess ask for the guidance, if the current trend in Q1 continues for the rest of this year, I guess with 250 IH patients add, 500 Xywav narcolepsy patients add and over 1,000 [indiscernible] patients [indiscernible] and assume the same year-over-year [indiscernible] dollar growth rate as what you had for last year, your franchise continues to trend to the lower end of fiscal year guidance, I guess what do you think we are missing here?

And then just a quick one on orexin. So [indiscernible] said they will use different doses for narcolepsy type-1 and 2 patients for [indiscernible] drug and doses for type 2 patients will be several [indiscernible]. And also [indiscernible] dose. I guess what's your view on this comment? And what dosage range are you targeting at right now for [indiscernible]?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes, I'll take the first part and then come to Rob and just say our guidance coming into the year was a couple of months ago and was at the franchise level, neuroscience and oncology, we didn't get into product level. And as we're saying today, we're very pleased with the way the first quarter progressed. And we think we're right in line with all our expectations to achieve that overall guidance. So we're not going to get more specific on that. Rob, maybe you could take the orexin part of the question?

[Robert Iannone, EVP & Global Head, Research & Development]

Yes. And the question I heard was, do we expect the dose to be different across patient populations. So correct me if I didn't hear that. I would say the dose, of course, depends on the drug itself and factors such as high availability and potency, et cetera, et cetera. But within any given drug, there certainly is the possibility that different doses might be needed across different populations.

We know that relative level of orexin in the brain may differ between NT-1 and NT-2 or other sleepy populations because we're certainly interested in other populations as well. As you know, we have an ongoing program where we're evaluating and learning effects in healthy volunteers. And ultimately use those data to transition to patients to understand best for 441, but the most appropriate dosing would be in different patient populations.

[Operator]

Your next question comes from the line of Greg Fraser with Truist Securities.

[Gregory Fraser, Truist Securities]

Just following up on the Xywav survey. Did the survey include physicians that haven't yet prescribed Xywav as well as current Xywav prescribers? And for those that plan to increase their prescribing of Xywav for IH, what were some of the key reasons behind the predictions? I'm curious to hear your thoughts about diagnosis rates growing, patient awareness growing, any additional color on the survey learnings would be helpful.

[Kim Sablich, EVP & GM, US]

Sure. Happy to do that. Yes, I do believe the survey was of specialists in general. So that increase would mean both those who've tried it and those who have yet to try it. In terms of -- I don't have my fingertips whether in the survey, we ask the reasons why, but I can tell you based on more qualitative feedback that we've had from physicians -- that the main reason that they are going to continue to use more of it is that it's actually performing in line with what they expected from the Phase III clinical trial, which were better than health care provider community anticipated.

They were very excited about those results, and they're very happy to see that it's performing in line with those results, and they're getting positive feedback from their patients. And along with that the coverage from the payers has been there and the patient experience and getting on the product, all of that has been very positive.

In line with, they have lots of these patients, and they've had really very little to be able to treat with them than with other than off-label weight-promoting agents and stimulants over the years, and many of those patients taking those still are not where they want them to be clinically. So that's the simple story there that we're hearing out in the marketplace.

[Operator]

Your next question comes from the line of Jeff Hung with Mortgage Stanley.

[Jeff Hung, Morgan Stanley]

You mentioned that 60% of U.S. providers are using Epidiolex earlier in the treatment algorithm. What do you think it will take to further drive this in a greater proportion of providers? And what kind of initiatives do you have to help accomplish this?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Kim, do you want to start on that one?

[Kim Sablich, EVP & GM, US]

Yes. I can speak from the U.S. And again, we are quite pleased with how Epidiolex has been coming along not just this quarter, but the past year and 20% growth year-over-year is very rewarding after years of being under COVID and not being able to interact with this community that's still quite new to Jazz. And so key to that really is continuing to have a very high-level engagement with our customers that was absent there for a number of years in terms of access to treatment centers and physicians' offices.

We're having some really great discussions and seeing the light bulb go off with quite a few of them and more prescribers coming on board. But in terms of driving growth moving forward, and that's very encouraging is that we've got some really great clinical data, the data we've been out there with for about a year now in terms of showing the great impact that you can have in combining Clobazam with Epidiolex.

We're really getting a lot of traction with that in the marketplace. It's getting HCPs really to reconsider why they're not using more of -- or using it earlier in the treatment algorithm as that 60% shows. And then layer on top of that, earlier this year, we started to go out there and talk about more than just seizure control through this care-driver survey called BECOME.

And showing HCPs quantitatively what they've actually been hearing from caregivers since the launch of Epidiolex, and that is that the caregiver sees improvements in behavior and cognition in the patients that they're caring for. So that, combined with, I'd say the adult setting, particularly the long-term care setting in the U.S. was slower to open up as many institutions were post-COVID.

So we've been able more recently to get in there, and we're excited about more fully penetrating the adult market, particularly in the long-term care setting. And then last thing in the U.S., I'll say is that HCPs are still underdosing this product. They're not achieving optimal dosing, which is not achieving the optimal outcome for the patients. So we're continuing to deliver and putting out there some new programs to really educate them on what optimally dosing Epidiolex looks like, so they can have an even more positive experience with it moving forward. So that's within the U.S. And then obviously, we've a number of ex-U.S. launches expected this year.

[Daniel Swisher, President & COO]

And Kim, this is Dan. Just to add into it as we see Epidiolex as one of our core growth drivers going into Vision 2025 and beyond. We're really pleased with the real world performance and assisting physicians that are in a multi pharmacy setting to change their habits and appreciate peak profile of Epidiolex. So in addition to all the great work that Kim and her team are doing in the U.S. and Sam Pearce is doing in Europe, we're also trying to leverage our full ability from an evidence generation.

Some of that's going to be with new indications, such as we have with EMA in terms of exploring additional seizure types. Some of it is going to be observational studies. And some of it's going to be leveraging now an increasing number of medical records to show some of those trends that with higher and more optimal dosing, you can get to better efficacy sooner.

And then exploring what we saw in the caregiver survey, for example, of the beyond seizure benefit and seeing that in additional clinical data. So super excited for this evidence generation that we've got should support all regions in the long-term growth of the product.

[Operator]

Your next question comes from the line of Annabelle Simons with Stifel.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Annabelle, we're not hearing you.

[Operator]

Your next question from Ash Verma with UBS.

[Ashwani Verma, UBS]

I have two. So with respect to Avadel's LUMRYZ, I mean in your view, could payers push nacolepsy patients towards using a once-nightly product if Avadel comes in with a significant price discount? And then second, like do you think LUMRYZ can also be used off label for IH? As we understand, IH patients can particularly struggle with taking a second dose, at least like based on our KOL feedback, they're getting to hear that up to 1/3 of IH patients can skip their Xywav dose. I don't know if you have any data that can elaborate on that point?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes. Kim, do you want to jump in on this?

[Kim Sablich, EVP & GM, US]

Sure. I'd be happy to. And we talked a little while ago about payers in general. So really, our strategy there is not changing. Again, we've been talking to payers for some time about the benefits of low sodium Xywav. And we do believe that payers are understanding the importance of that, and they understand that HCPs are increasingly choosing Xywav and that greater than 50 patients are on Xywav today.

And they're enjoying nice rebates on Xywav today. So I really do believe that as other high sodium oxybate come on to the market and they're ultimately added to formularies that Xywav is going to continue to maintain a broad commercial coverage. You asked about idiopathic hypersomnia. And we don't expect the approval of FT218 will affect the IH market as it's not approved for idiopathic hypersomnia.

Xywav is still the only FDA-approved therapy for this condition. And I think it's good to remind you that the Xywav can be administered as either twice nightly or once-nightly regimen for IH in adult patients. That's what the label allows.

[Operator]

And your last question comes from David Amsellem with Piper Sandler.

[David Amsellem, Piper Sandler & Co.]

So wanted to get your thoughts on the potential impact of pitolisant or WAKIX on Xywav to the extent that, that product eventually gets approved? And then secondly on the Orexin. I think I've asked this before, but I wanted to take you reign on it. Any thoughts on why you're dosing it at night here? It seems a little counterintuitive. So I was wondering if there's any reason mechanistically or from a PK perspective that you're doing so?

[Bruce Cozadd, Co-Founder, Chairman & CEO]

If I understood that question, that was about orexin. Rob, do you want to take that one first?

[Robert Iannone, EVP & Global Head, Research & Development]

Yes. I just -- I didn't fully understand it either, Bruce. The question is why would you be dosing orexin at night, I'm sorry, I didn't follow it.

[David Amsellem, Piper Sandler & Co.]

That's all right. I mean your -- the others, I believe there -- [indiscernible] drug, so why are you adjusting it at night?

[Robert Iannone, EVP & Global Head, Research & Development]

Oh, in our Phase I. We're leveraging a model in healthy volunteers where you sleep-deprived healthies and then measure the wakefulness of the intervention when people are -- have a high, high propensity for sleep. That turns out to be a pretty good model for disorders of daytime sleepiness like narcolepsy. And so it just gives us an opportunity to learn more about the drug and ultimately select doses when we get into patients, who will then receive the drug during the day.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes. Maybe I'll start on...

[Daniel Swisher, President & COO]

And then on pitolisant -- go ahead, Bruce.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

Yes. Go ahead, Dan.

[Daniel Swisher, President & COO]

I was just going to say on pitolisant, I mean we -- it's all going to depend on the data, of course. But the Xywav has got some very powerful efficacy across multiple endpoints to treat the full condition and having a nighttime therapy is resulting in significant benefit through the day, whereas pitolisant similar to the wake-promoting agents will be used during the day, and it's always going to be a bit of a challenge for the long sleepers because you have to be a wait to take the oral dose.

So we don't see it as a significant threat or a displacement. But again, more treatment options for these patients, more commercial noise and education around IH would be a benefit for us.

[Operator]

And we have no further questions at this time. I will now turn the call back over to Bruce Cozadd.

[Bruce Cozadd, Co-Founder, Chairman & CEO]

All right. Thanks, operator. So just to wrap, thanks for the wide-ranging questions. I think we hit pretty much all the key topics that we covered in our news release, in our script. I don't think we got many questions on oncology. I'll just reiterate, we're really excited for the growth of our oncology franchise led by Rylaze and Zepzelca.

And didn't get many questions on Zanidatamab, but lots of news upcoming there with additional clinical data presentations. And we're looking forward to progress that program rapidly. Most important, we're continuing to be focused on Vision 2025. Remember that we've got upcoming Phase IIb Zanidatamab BTC data at ASCO in June. That's the first time Zani findings are going to be featured during an oral session at a major oncology conference.

And immediately after the presentation, we're hosting a webcast where Dr. Shubham Pant, who is presenting the data at ASCO will review findings. We're also presenting multiple data sets at this year's American Academy of Sleep Medicine Annual Meeting [indiscernible] at ASCO or sleep, we may see you there.

Also note, we're participating in the upcoming RBC Investor Conference on May 16. Let me close today's call by recognizing our Jazz colleagues for their work to deliver new therapeutic options to patients. And I want to thank our partners and shareholders for their continued confidence and support. Thank you all for joining us today.

[Operator]

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