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Jazz Pharmaceuticals (NASDAQ:JAZZ)
Q1 2020 Earnings Call
May 05, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to the Jazz Pharmaceuticals plc first-quarter 2020 earnings conference call. Following an introduction from the company, we will open the call for questions. I will now turn the call over to Kathy Littrell, head of investor relations at Jazz Pharmaceuticals.

Kathy Littrell -- Head of Investor Relations

Thank you, Valerie, and thanks to those of you joining our investor call. Today, we reported our first-quarter 2020 financial results and updated our financial guidance for 2020. The press release and the slide presentation accompanying this call are available in the investors section of our website. On the call today are Bruce Cozadd, CEO; Dan Swisher, president; Renée Galá, CFO; Rob Iannone, executive vice president, R&D.

And then joining for questions, our Q&A session, will include Mike Miller, executive vice president, U.S. Commercial; Phil Jochelson, sleep and neuroscience therapeutic head; Anne Borgman, hematology and oncology therapeutic head; Jed Black, our sleep neuroscience fellow; and Shawn Mindus, senior vice president, strategy and finance. I'd like to remind you that today's call includes forward-looking statements, such as those related to our future financial and operating results. And which involve risks and uncertainties that could cause actual events, performance and results to differ materially.

We encourage you to review the statements contained in today's press release and our latest SEC disclosure docs, which identify certain factors that may cause the company's actual results to differ materially from those projected. In particular, there is significant uncertainty about the duration and severity of the COVID-19 pandemic and its impact on Jazz's business and operations. The updated guidance reflects management's current expectations of the impact of these factors on our business. We undertake no duty or obligation to update our forward-looking statements.

On this call, we discuss non-GAAP financial measures. Reconciliations of GAAP to non-GAAP financial measures discussed on the call are included in today's press release and slide presentation available on our website. I'll now turn the call over to Bruce.

Bruce Cozadd -- Chief Executive Officer

Thank you, Kathy. And I'm not sure whether you mentioned audio-visual risk factors in your precursor, but we apologize in advance if you hear dogs barking or children playing in the background. Good afternoon, everyone, and thank you for joining us. I'll begin by sharing how proud I am of Jazz employees and their commitment to support continued delivery of our essential medicines to patients around the world during this unprecedented time.

I would like to thank them for their dedication and ingenuity. In the first quarter, we generated total net revenues of $535 million, and made significant progress toward our key 2020 objectives. We are actively preparing for the U.S. launches of lurbinectedin and JZP-258, and are excited by the opportunity to bring these two important treatment options to patients later this year.

Although we experienced limited financial impact of COVID-19 in the first quarter, given the global economic slowdown, the increasing unemployment rate and the overall disruption to global healthcare systems, we have updated our financial guidance, including proactively reducing operating expenses to reflect the potential impact on our business for the remainder of 2020. We are excited about the opportunities ahead for Jazz and remain focused on diversifying our portfolio of essential medicines to provide innovative and life-changing options for patients through both our internal efforts and corporate development transactions. Building off the four transactions we entered into last year, we will continue to pursue opportunities that align with our strategy. Our strong balance sheet, with cash investments and undrawn revolver totaling $2.6 billion, position us well to manage through the impact of the pandemic.

And that's my phone in the background. Every one, sorry about that. With the ongoing global impact of COVID-19, we are focused on ensuring the continuity of patient care and our business operations. Our key priorities are: maintaining sufficient supply of our medicines and ensuring patient access, including through comprehensive support of patients' assistance programs for those impacted by changed economic circumstances; protecting the safety and welfare of patients in our clinical studies; minimizing delays in enrollment and maintaining the integrity of our clinical studies; engaging with healthcare providers through digital platforms and other remote access activities to continue to support and educate them as they care for patients; ensuring the safety of Jazz employees by creating optimal remote work environments and seeking growth opportunities through our internal efforts and corporate development activities.

I want to take a moment to thank and share our admiration and gratitude for the many healthcare workers, first responders and others on the front lines caring for COVID-19 patients and our communities. Now I'll review our sleep neuroscience portfolio. Xyrem delivered strong growth in the first quarter with bottle volume growth of 5% compared to the same period in 2019. The central pharmacy successfully navigated through the typical first-quarter industrywide payer churn.

We observed an increase in the number of patients on therapy, with the average number of active Xyrem patients at 15,025, up 3% compared to the same period last year. While the company observed a decline in daily new patient enrollments beginning in mid-March due to COVID-19, recent patient enrollment trends are strengthening, and we expect new patient diagnoses to start to increase as sleep centers reopen. Given the importance of managing narcolepsy, a serious and chronic disease, we believe that the demand for Xyrem in 2020 will remain strong. Turning to JZP-258.

We submitted our NDA early in the first quarter and received priority review. At this time, we have not been notified by FDA of any delay to the July 21 PDUFA action date. Bringing JZP-258 to patients as early as the fourth quarter, following approval and REMS implementation, is a top priority. JZP-258 is a novel oxybate formulation with 92% less sodium than Xyrem, which equates to between 1,000 milligrams and 1,500 milligrams less sodium a day depending on dose.

We are aware that narcolepsy is associated with an increased risk of cardiovascular disease and metabolic disorders, and believe that JZP-258 will be an important treatment advance for people with narcolepsy. Our prelaunch activities include disease education programs to improve the understanding of the relationship between reducing sodium and improving cardiovascular health. Following FDA approval, we will begin discussion with payers regarding the important value that JZP-258 can provide to narcolepsy patients. Moving to Sunosi.

In the first quarter, we were encouraged by the positive feedback received from patients and healthcare providers, as well as a 41% growth in prescriptions versus fourth-quarter 2019. Sunosi refill rates during the quarter were strong, indicating patient satisfaction and minimal out-of-pocket cost concerns. From launch through March 31, there have been more than 3,400 unique prescribers and more than 27,000 cumulative prescriptions, representing our continued progress in expanding relationships with OSA physicians. We are pleased that more than 80% of commercially insured patients have access to coverage for Sunosi.

During the quarter, we experienced high coupon utilization, which is common with typical first-quarter patient churn -- payer churn due to insurance plan changes and the resetting of patient deductibles. This resulted in high gross to net deduction. At this time, we believe Sunosi gross to nets will trend lower for the remainder of the year. While we have implemented plans to mitigate the challenges of COVID-19, we anticipate our efforts to continue to reach new OSA treating physicians will be impacted by the extent and duration of the disruption.

With the pandemic, many physician offices have closed and pulmonologists, one of our target physician audiences, have been focusing their attention on patients who present with respiratory complications of COVID-19. Our mitigation plans include remote sales force engagement with healthcare providers to the extent possible, with a shift to virtual speaker programs, satellite disease awareness programs and implementation of online sample and voucher programs.In Europe, we are actively preparing for the rolling launch of Sunosi, beginning in Germany this month, with an initial focus on EDS in narcolepsy and then expanding to EDS in OSA early next year. Recruitment of our German neuroscience sales force is largely complete, and they are concluding product training in preparation for launch. To ensure we are supporting customers appropriately, we have plans to conduct a targeted virtual launch until we are able to progress to in-person interactions with healthcare providers.

As we navigate through the COVID-19 pandemic, we anticipate there will be delays by some European regulatory authorities in their pricing and reimbursement reviews. We will monitor the impact and plan sales force recruitment appropriately. I'll now turn the call over to Dan to update you on key hematology and oncology activities. Then Rob will provide an update on our development programs, and Renée will follow with an update on our financial performance.

Dan Swisher -- President

Thanks, Bruce. I hope all of you can hear me? All right. So we saw strong growth in global Defitelio and Vyxeos sales in the first-quarter versus the same period in 2019. However, Erwinaze sales in the first quarter were negatively impacted due to an extended and ongoing supply disruption.

So starting with Vyxeos. In the first quarter, sales performance was driven by strong performance in Europe. In the U.S., our focus has been on reinforcing our efficacy profile in frontline secondary AML, while reaching to new physicians and broadening adoption among community accounts. While we made some progress in this quarter -- in the first quarter, this has been challenging due to the impact of COVID-19.

Recent recommendations for managing cancer patients are focused on avoiding hospitalization to limit exposure risk, including the use of oral oncolytics and less intensive treatment. This has had a negative impact on Vyxeos' demand, primarily in the U.S. And until this disruption resolves, we expect challenges to remain. But as we do look to support future growth opportunities for Vyxeos, this quarter, we did make progress in launching an expanded distribution footprint by putting in place contracts with group purchasing organizations, or GPOs, which will help improve access in community accounts.

Additionally, we look forward to the presentation of five-year overall survival data from our pivotal 301 study later this month at the virtual ASCO meeting, which will add to the strength of evidence for Vyxeos for the treatment of newly diagnosed secondary AML patients. Now on to Defitelio. We are pleased with the strong global performance in the first-quarter compared to the same period in 2019. However, the COVID-19 pandemic is having an impact on recent Defitelio use.

At present, hospitals have reduced deferred or applied temporary stricter eligibility criteria for hematopoietic stem cell transplantations to prioritize intensive care beds for patients with coronavirus who may require ventilator support. For Erwinaze, quality and manufacturing issues at PBL continue to result in supply disruptions during the first quarter, and they're continuing into the second quarter, unrelated to COVID-19. The broad range of our 2020 hematology/oncology guidance reflects ongoing and potential future supply disruptions. Last month, PBL announced it entered into a new agreement with a different partner to commercialize and distribute Erwinaze after December 31, 2020.

Our current agreement will expire at the end of this year, and we have the right to sell certain Erwinaze inventory in 2021. We currently hold the U.S. BLA and marketing authorizations in other countries for Erwinaze, as well as rights to certain clinical data. We plan to work with PBL toward a transition of commercialization rights post termination to ensure continuity of patient care.

So turning to lurbinectedin. Launch planning is well under way. Our launch efforts will initially focus on driving awareness and understanding of the data among top small cell lung cancer prescribers and developing strong relationships with lung cancer KOLs. We continue to recruit for key positions across the U.S., including sales representatives, medical science liaisons and reimbursement managers.

We expect to hire 28 additional representatives to augment the current Vyxeos sales force for a total of 72 adult oncology sales representatives promoting both lurbinectedin and Vyxeos. In late March, the Phase II basket trial in small cell lung cancer was published online in Lancet Oncology. We submitted this data to the NCCN small cell lung cancer panel. And after product approval, we will submit the final label to NCCN for review and potential inclusion in the guidelines.

We will also be working early in the launch to leverage our relationships recently established on behalf of Vyxeos to contract with key distributors and GPOs to ensure broad access to lurbinectedin in community centers where it can be used in the outpatient setting. Recent market research indicates that oncologists continue to prescribe and administer the best treatments available for their small cell lung cancer patients, given the aggressive nature of the disease and the risk of delaying or deferring treatment even in the face of this pandemic. We look forward to launching lurbinectedin to bring this important new treatment option to patients with relapsed small cell lung cancer, a disease where there is a significant unmet medical need. I'll now turn the call over to Rob for an update on our development programs.

Rob?

Rob Iannone

Thank you, Dan. During the first quarter, our R&D priorities were directed toward advancing our key development programs and making progress on key regulatory submissions. We implemented our continuity plans to mitigate the impact of COVID-19 on our R&D programs. However, we are starting to see some impact to patient enrollment and delays in initiation of new clinical trials.

Our priorities remain focused on ensuring the safety of patients enrolled in our clinical trials, while maintaining the integrity of our studies, so that we can advance important treatment options for patients. We are working closely with our investigators and study sites to mitigate delays in initiating and progressing clinical trials. I'll begin with our development activities in sleep and neuroscience. Our study of JZP-258 in idiopathic hypersomnia completed enrollment ahead of schedule in the first quarter.

We implemented the use of remote monitoring and are working with our contract research organization to enable enrolled patients to remain in the study. Our goals are to ensure that the study investigators continue to monitor patient safety, provide access to study drug and maintain patient continuity. We have implemented mitigation plans that enable us to maintain the integrity of this important Phase III study. Moving to Sunosi.

We continue to believe that EDS in major depressive disorder, or MDD, is an important unmet medical need and an important market opportunity, given the data generated in patients who had a history of depression in the Phase III narcolepsy and OSA studies. We had an objective to initiate a Phase III study evaluating Sunosi for EDS related to MDD later this year. However, given the challenge to initiating and enrolling studies in the current COVID-19 environment and our prioritization activities, we are no longer planning to initiate an indication-enabling study. We will continue to investigate ways to explore Sunosi for EDS through MDD.

Turning to JZP-385 for essential tremor. A Phase I healthy volunteer study evaluating the modified release formulation has been suspended due to challenges in conducting such a study in healthy volunteers in the midst of the COVID-19 pandemic. We anticipate reinitiating the Phase I study as soon as it is considered safe and feasible to proceed. The timing of the Phase IIb study initiation is dependent upon the completion of the Phase I study.

At this time, we believe the Phase IIb study may initiate in the first half of 2021. Turning to hematology/oncology, starting with Vyxeos. Our development program is advancing as we continue to evaluate Vyxeos as the treatment for upfront intermediate risk AML in both fit and unfit populations through multiple cooperative group, investigator-sponsored and Jazz-sponsored studies, as well as academic collaborations. We are looking forward to the five-year overall survival data from the 301 study and believe this will be an important dataset for physicians.

We continue to believe we may see some early Vyxeos and targeted agent combination data from our ongoing V-FAST and MD Anderson collaboration studies later this year. Moving to defibrotide. Last week, we announced that we are stopping enrollment in the Phase III study in prevention of veno-occlusive disease, or VOD, after a predefined interim analysis by an independent data monitoring committee. As a reminder, we designed this study -- designed the Phase III study to fulfill a post-marketing commitment to assess safety and explore the possibility of an expanded label in the prevention of VOD setting.

We do anticipate submitting the safety data to regulatory authorities to satisfy this obligation and expect to analyze the full dataset for presentation at a future medical meeting. Given its unique mechanism of action, we are receiving considerable inbound interest in evaluating defibrotide in patients with coronavirus and acute respiratory distress syndrome, or ARDS. We are providing defibrotide to multiple investigator-sponsored studies for this use. Defibrotide, which has anti-thrombotic protective effects on the vascular endothelium and immune modulating properties, has been evaluated in idiopathic pneumonia syndrome after hematopoietic stem cell transplant.

And we are looking to understand the potential risk-benefit in coronavirus patients with ARDS. Turning to our recombinant Erwinia asparaginase program. Enrollment in our single-arm pivotal Phase II/III study of JZP-458 conducted in collaboration with the Children's Oncology Group is ongoing. And we are continuing to work toward our goal of a BLA submission as early as fourth quarter.

We're highly focused on mitigating potential delays and are continuing to activate sites remotely, enroll patients and utilize remote monitoring where feasible. As enrollment in this study continues with the ongoing support of investigators, we are advancing toward the important goal of providing a reliable and consistent supply of non-E. coli-derived asparaginase to patients with ALL and LBL. I will now turn the call over to Renée for the financial update.

Renee Gala -- Chief Financial Officer

Thanks, Rob. First, I'd like to take a moment to share how excited I am to join Jazz during such a catalyst-rich time for the company and be able to contribute to our important mission of providing essential medicines to patients around the world. Turning to the financial update. In the first quarter, our net revenues were $535 million, an increase of 5% from the first quarter last year.

This was primarily driven by the double-digit growth of Xyrem, Defitelio and Vyxeos, which grew 11, 14 and 13%, respectively. Total net product sales increased 11%, excluding Erwinaze, which was significantly impacted by reduced product availability. Now I'll turn it to operating expenses. During the first quarter, our adjusted SG&A expenses increased 27% to $188 million and adjusted R&D expenses increased 46% to $80 million over the same period last year.

This was in line with our expectations and reflects our intentional and disciplined investment in key value drivers, including preparing for multiple product launches, diversifying our commercial portfolio and growing our R&D pipeline. Our first-quarter adjusted net income and EPS included acquired IP R&D expense for the $200 million upfront payment we made to PharmaMar for the exclusive U.S. rights to lurbinectedin. Our adjusted net income for the quarter was $26 million or $0.45 per share compared to $164 million or $2.83 per share for the same period last year.

Turning to guidance. We recognize the uncertainty associated with the impact of COVID-19, and we assume that the majority of the negative financial impact on our business related to the pandemic will be in the second quarter with a return to normalized operations later in the year. Our guidance takes into account the impact of multiple factors, including declines in medical visits with fewer patients accessing treatment, reduced sales representative interactions with healthcare providers, government-imposed stay-at-home orders, closure of physician offices, prioritization of COVID-19 patients, increased unemployment and loss of healthcare coverage. We are providing revenue guidance for our two therapeutic areas: sleep and neuroscience; and hematology/oncology.

With the current level of uncertainty, we believe that this provides a more meaningful guidance range rather than at the individual product sales level. In the sleep and neuroscience therapeutic area, which includes Xyrem, Sunosi and JZP-258, our guidance includes the impact of declines in diagnostic testing leading to decreased narcolepsy and OSA diagnoses. Our 2020 net sales guidance for this area is in the range of 1.65 to $1.74 billion versus the previous range of 1.74 to $1.81 billion. I'll remind you that this guidance includes limited contribution from JZP-258, given the expected launch late in the year.

In the hematology/oncology therapeutic area, which includes Erwinaze, Defitelio, Vyxeos and lurbinectedin, our guidance includes the impact of delays in procedures such as HSCTs, recommendations shifting the care of cancer patients to the outpatient setting, reducing the number of treated patients and for Erwinaze, expected continued supply disruptions. Our 2020 net sales guidance is in the range of 420 to $510 million compared to the previous range of 500 to $580 million. As a result of these changes, we have lowered our total revenue guidance for 2020 to a range of 2.12 to $2.26 billion from the previous range of 2.32 to $2.4 billion, which at the midpoint represents a 7% decrease in our total revenue guidance. Turning to operating expenses.

We plan to closely manage operating expenses in 2020 as we prioritize investments in our key current and future revenue drivers, including preparing for our lurbinectedin and JZP-258 launches and advancing our key development programs, such as JZP-458. These prioritization efforts will reduce our adjusted SG&A and R&D combined expenses by approximately $100 million at the midpoint of our guidance from the previous range. Our adjusted SG&A guidance range is 700 to $750 million or 31 to 35% of total revenues, and adjusted R&D guidance range is 250 to $280 million or 11 to 13% of total revenues. Our adjusted effective tax rate guidance for 2020 has increased to 20 to 23% of our previous guidance -- from our previous guidance of 18 to 20% due to the recent release of the final U.S.

anti-hybrid regulations and some change in product mix due to the anticipated impact of COVID-19. Taking our revenue and operating expense guidance changes into account, we are reducing our 2020 guidance for non-GAAP adjusted net income to a range of 630 to $700 million, and adjusted EPS to a range of $11.25 to $12.50. I'll also remind you that beginning this year, following consultation with the SEC, our non-GAAP measures include expenses associated with upfront payments. And as a result, the $200 million upfront payment made to PharmaMar impacted our non-GAAP financial measures.

During the first quarter, we generated cash from operations of $273 million, used $139 million to repurchase 1.1 million shares and ended the quarter with a strong cash and investment balance of $1 billion. Additionally, in light of the current uncertainties and disruption to the global financial markets resulting from COVID-19 and in an abundance of caution, last month, we proactively drew down $500 million under the revolving credit facility. This increases our cash position and preserve financial flexibility for corporate development and other investment opportunities. We continue to have confidence in our business, and we expect to generate meaningful operating cash flow for the remainder of 2020.

An essential component of our strategy and key priority for the company is further diversification of our portfolio of essential medicines to provide innovative and life-changing options for patients. We strive to achieve this through both our internal efforts and corporate development transactions. Jazz strives to be a partner of choice in our industry, and we will continue to aggressively evaluate opportunities to acquire external innovation through productive partnerships and transactions that align with our important mission and strategy. COVID-19 has presented extraordinary challenges for the global economy, the healthcare system and the lives of individuals around the world, and the full scope and timing of the effects of the pandemic remain uncertain.

However, with a dedicated team, strong financials and a solid underlying business, we are well positioned to execute on our key objectives while supporting our employees, patients and healthcare providers during this difficult time. I am excited about the significant opportunities ahead for Jazz Pharmaceuticals as we prepare for new product launches, advance and expand our portfolio, and bring multiple new and differentiated treatment options to patients. Thank you for joining us on the call today. I'll now turn the call over to Kathy.

Kathy Littrell -- Head of Investor Relations

Thanks, Renée. [Operator instructions] With that said, operator, please open the line for questions.

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Brandon Folkes of Cantor Fitzgerald. Your line is open.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Hi, thank you so much for taking my question and thank you very much for the detailed guidance amid so much uncertainty. With regards to JZP-258, I know we've asked it a few times, but as we get closer, can you just elaborate on how we should think about the switch playing out? Should we think of 258 initially targeting new patient start and maybe some of the high-risk Xyrem patients? Or should we expect to see a strong push to switch well-controlled Xyrem patients out of the gate?

Bruce Cozadd -- Chief Executive Officer

Yes. Thanks for the question. We've given some indication of where we're going with the 258 launch, but we'll be obviously providing more detail as we come up to approval, implementation on our REMS and the final launch. But Dan, why don't I hand it over to you to give some color on how we're thinking about the appropriate patients for 258 and how we might go about that.

Dan Swisher -- President

Yes. Thanks, Bruce. Well, as you guys know, we've been at this for quite some time in terms of looking for a new formulation because we had heard from our existing patients and physicians that this was a real concern of having this level of sodium, albeit the risk-benefit was positive for Xyrem, given the severe nature of narcoleptic disease. So we actually see this as the preferred product for all patients.

Clearly, there's going to be new patients who may have had concern about the sodium load and were not getting access, but all sort of new patients coming in with good access should be put on to 258 given the efficacy profilers were shown to be very comparable in the switch or in the conversion study we did in our Phase III. But we also think existing patients, both patients themselves as they become aware of another treatment option that retains efficacy, but really gives a long-term safety benefit, as well as physicians. And as we've started to do the research there for lifelong therapy with patients that have significant comorbidities, we see this as the preferred long-term treatment option.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Great, thank you very much.

Operator

Our next question comes from Gary Nachman of BMO Capital Markets. Your line is open.

Gary Nachman -- BMO Capital Markets -- Analyst

Hi, good afternoon. Just regarding the impact from COVID-19. Patients are already well maintained on Xyrem. Is it easy enough for them to get products from SDS and continue with their treatment? So no major hiccups there.

So is it really more new patients in the treatment that are being impacted. I just want to confirm that that's the dynamic that's been playing out so far in the second quarter and how you see that for the rest of the year?

Bruce Cozadd -- Chief Executive Officer

Yes. Mike, maybe I can send that one over to you.

Mike Miller -- Executive Vice President, U.S. Commercial

Yes. Thanks, Bruce. Yes. The overall pharmacy operations are very good in Q1.

Remember that Q1 tends to be the tougher quarter from a payer perspective for all specialty drugs, not just Xyrem. And I think we navigated extremely well. I think earlier, we had stated that we saw PEs in the second half of March slowing down. We do, in more recent data, have seen an improvement in that trend.

And we feel good about our full-year guidance for Xyrem.

Bruce Cozadd -- Chief Executive Officer

Yes. And PEs is patient enrollments. And we just saw a break as people were sheltering in place where people were not going in to visit their doctors. And so we anticipate some slowdown in new diagnosis and people initiating therapy for the first time.

Gary Nachman -- BMO Capital Markets -- Analyst

OK, thank you.

Operator

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

David Amsellem -- Piper Sandler -- Analyst

Thanks. So on Sunosi, just putting aside COVID-19 for a moment, are you at all troubled and -- at how the product is gaining traction, given that you have fairly good payer access? It looks like the footprint of the product is fairly limited, given the payer access. So I was wondering if you could help us understand how you're thinking about the launch, the trajectory? What you are doing right? And what you need to do differently?

Bruce Cozadd -- Chief Executive Officer

Yes. Well, I'll start and then maybe ask Mike to join in. I would say, we're very happy with our patient access. Although I'll also remind you, that's only a couple of months ago now that we got there.

Our key strategic emphasis for 2020 has been to broaden the set of prescribers, particularly into the OSA audience. And our sales force, I think, was out accomplishing exactly that objective when COVID-19 hit and access became limited to physician audiences. We sent our field force home for their own safety and to protect the communities in which they live. And that's obviously made it harder for us to achieve that objective.

As I mentioned, we saw some really good things during the first quarter, and maybe I'll ask Mike to elaborate on that a bit.

Mike Miller -- Executive Vice President, U.S. Commercial

Yes. Thanks, Bruce. And as Bruce touched on, three out of the four major payers that we have secured for Sunosi only began in this quarter. So we began with very much a pull-through focus this quarter for our sales force.

OSA has now -- accounts for about 60% of our scripts and was moving in a very good trend. And COVID-19 has not only hurt our access, but has really preoccupied the pulmonology community, and they are the major drivers of OSA. So we continue to be encouraged with the refill rates. We hear good things from physicians and clearly, through them, from patients.

And we feel very good and excited to get back to it after COVID-19 subsides.

Operator

Thank you. Our next question comes from Greg Gilbert of SunTrust. Your line is open.

Greg Gilbert -- SunTrust Robinson Humphrey -- Analyst

Yes, hi, I was wondering if you'd weigh in on the comments that Avadel made about its regulatory legal strategy, as well as the data itself, the top line? And also, Rob on lurbi, do you think it could come early in light of the blistering pace that we've seen for some other recent oncology approvals by the FDA?

Bruce Cozadd -- Chief Executive Officer

Thanks, Greg, for that sophisticated one question. On Avadel's comments, I'm not sure we're going to respond specifically to everything they've said. What we've said is that we've got a meaningful intellectual property protection around Xyrem with our Orange Book listed patents that go to drug-drug interaction with valproate and the method of safe distribution embodied in our REMS that we think is truly important to patients and the public in terms of the way to safely distribute an oxybate product. Our belief is that Avadel should certify to both families of our patents.

Those patents, as a reminder, go out to 2033 and 2023, and we have a long history of obtaining and defending intellectual property as necessary. Part of this does come down to what regulators do. And we think regulators share a commitment to safe use of the product with respect to the drug-drug interaction and how it's distributed. Rob, maybe I can turn it over to you for the lurbinectedin piece.

Rob Iannone

Yes. I mean, it's one that I wouldn't speculate on. Obviously, this is a priority review program. It's a fairly discrete package and is a fairly straightforward review.

Things are going as expected. But it's hard to speculate on whether it comes in early or not.

Greg Gilbert -- SunTrust Robinson Humphrey -- Analyst

Thanks, gentlemen.

Operator

Thank you. Our next question comes from Jacob Hughes of Wells Fargo Securities. Your line is open.

Jacob Hughes -- Wells Fargo Securities -- Analyst

Hi, thanks for taking my question. With respect to COVID-19, does that potentially slow down your appetite or ability to do deals? And any color on the pipeline now versus, say, pre-COVID?

Bruce Cozadd -- Chief Executive Officer

Maybe I can ask Renée to weigh in a little bit about how we're thinking about corporate development.

Renee Gala -- Chief Financial Officer

Sure. Absolutely. So as I stated, corporate development continues to be an important strategic objective for us. Clearly, there are complications to undertaking certain due diligence activities and whatnot during a COVID-19 environment.

But I don't think that's going to have an impact on deals getting done this year. And as we think about what's most important to Jazz, we'll continue to look at both late-stage opportunities, as well as early stage opportunities to be able to fill in the pipeline.

Jacob Hughes -- Wells Fargo Securities -- Analyst

OK, thank you.

Operator

Thank you. Our next question comes from Akash Tewari of Wolfe Research.

Akash Tewari -- Wolfe Research -- Analyst

Hey, thanks so much. So I just wanted to clear something up. Your labeling language for Xyrem and valproic sodium recommends an initial Xyrem dose reduction of at least 20% for patients who take both drugs concomitantly, which sounds to me like your first dose on Xyrem is reduced, the second dose is kind of the same. So given the Avadel product, it's physically kind of like a single satchel product, how would a patient who is on the Avadel product be able to incorporate the concomitant dosing language that you put on the current Xyrem label?

Bruce Cozadd -- Chief Executive Officer

Yes. I would say our language in our label is designed to ensure that patients and physicians understand that concomitant use of oxybate and valproate results in higher levels of oxybate than would be predicted otherwise, and that dose modification of a significant magnitude as warranted, and we've got specific instructions for that in our label on dosing and administration. And that's whether you're stable on oxybate and then you're adding valproate or whether you're stable on valproate and then adding oxybate, in either case, you need to be careful. Again, we don't know what Avadel is proposing to put in their label, and that will be between them and the regulators.

But it is important that, again, treaters and patients understand that interaction to make sure you don't get an inadvertent overdose of oxybate.

Akash Tewari -- Wolfe Research -- Analyst

Thanks a lot, appreciate it.

Operator

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

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Hey, good evening and thanks for taking my questions. Maybe just on the Erwinaze update. From the outside looking in, it looks like the assumption is Jazz must have been better off going at -- alone with 458 as a wholly owned asset versus conceding perhaps lesser economics and trying to negotiate or extend with PBL. So can you maybe address this? And whether you feel you can be in an equal or better place in terms of gross profit derived from JZP-458 in a couple of years post launch from, say, where you are with Erwinaze in the past one or two years?

Bruce Cozadd -- Chief Executive Officer

Yes, I'll sort of flip that around and answer the narrow part of your question first, which is around gross margin. Obviously, from a gross margin perspective, Erwinaze was not one of our higher gross margin products. We think with a more modern manufacturing process, with a recombinant product, we'll actually have an improvement in terms of lower cost of goods. There are also some advantages from a tax rate perspective to having developed this product with that in mind.

But I think much more important than the gross margin aspect is coming back to why we developed this product in the first place, which is to ensure that ALL patients have access to a reliable, high-quality product where we're not limited by supply in meeting current demand and thinking about growing demand to meet the needs of all patients, including patients in the adolescent young adult group who would benefit from a pediatric-inspired regimen that contains an asparaginase where we see better survival, and to allow for broadening use of our product into more geographic markets as well. As a reminder, the existing product is approved in Japan and still not launched there. So the most important driver for our development was really bringing that high-quality, reliable agent to market with the ability to meet current demand and grow demand beyond that. So it's also true we think it will be a higher gross margin product for us, but that was not the driving force.

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you.

Operator

Thank you. Next question comes from Ami Fadia of SVB Leerink. Your line is open.

Ami Fadia -- SVB Leerink -- Analyst

Good afternoon. Thanks for taking my question. Maybe in light of the Avadel data and the successful trial, could you talk to us about your program for the once-nightly low sodium product, and when do we think that it could reach a Phase III or a pivotal trial stage? And what are your development plans there?

Bruce Cozadd -- Chief Executive Officer

Yes. I mean we haven't really said much about our plans for that. We've been pretty quiet. The most important thing for people to remember about our once-nightly program is it's once-nightly low sodium development.

We clearly feel that reducing that sodium load is critically important to the long-term health of patients, existing and new patients. And so we've incorporated that into our development plan. But we haven't given any more specifics yet on that. I will remind you, we've got a good track record of moving quickly through development with our agents.

I think, certainly, we did a nice job of getting 258 through a pivotal trial and into the regulators, and certainly happy with how we're doing that with 458 as we speak. So more to come, but that's all we've said to date.

Ami Fadia -- SVB Leerink -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Jessica Fye of J.P. Morgan. Your line is open.

Jessica Fye -- J.P. Morgan -- Analyst

Good afternoon, thanks for taking my question. Within the updated Hem/Onc guidance, can you elaborate a little bit on which products are harder hit within that, just with the overall range coming down by 14% at the midpoint? Was that largely Vyxeos? In particular, I'm also curious if a worse-than-expected interruption for Erwinaze factors into that at all, which would obviously not be COVID related?

Bruce Cozadd -- Chief Executive Officer

Yes. Maybe I'll ask Dan to address that question.

Dan Swisher -- President

Yes, I think near term, they've all been somewhat affected, but I would say, Vyxeos, a little more so in the U.S., where there's kind of a push for outpatient and finding the oral oncolytics or other approaches. I think as the capacity comes back with the inpatient and people can manage, obviously, non-COVID cases, as well as COVID, the five-year survival data that's coming through at ASCO reinforces the efficacy profile for Vyxeos. So we continue to show nice growth in Europe. I think that's going to be relatively uninterrupted.

But in the U.S., getting the data and getting back into physicians and enabling more intensive therapy options for patients will be something we anticipate in the second half. Erwinaze is non-COVID related. And unfortunately, some of the shortfall in guidance is related to worse than forecast disruption in supply.

Bruce Cozadd -- Chief Executive Officer

And Jess, I'll just add that in addition to being significantly supply constrained in the first quarter of 2020, of course, we happen to be comparing back to a first quarter in 2019 where we had unusually positive supply, and that's I think why Renée highlighted that if you back out that swing in Erwinaze first quarter to first quarter, I think you get a better sense for how the rest of our business is doing.

Jessica Fye -- J.P. Morgan -- Analyst

Got it.

Operator

Thank you. Our next question comes from Ken Cacciatore of Cowen and Company. Your line is open.

Ken Cacciatore -- Cowen and Company -- Analyst

Follow up on the Avadel questions and a question of my own. On Avadel, Bruce, is there any FTC impediments to you buying Avadel, if you could comment on that? And then in the after hours, if we look at your shares, they're trading at less than five times 2021 EBITDA. It's practically begging for you all to maybe take this company private. Can you give any thoughts as to where would be a compelling reason for you all to maybe think about taking a more aggressive strategy, either share buyback or actually going all the way in trying to take the company private?

Bruce Cozadd -- Chief Executive Officer

So Ken, no comment on your first question for obvious reasons. On your second question, I don't think you need to look at after hours trading today. You can just look at, in general, where we're trading to say that the company has excellent cash flow relative to its current value. We continue to pursue a strategy that we think adds significant diversification to our revenue growth drivers.

We think this is, as Renée said, a catalyst-rich year in terms of making that much more visible, whether that's progress on a Sunosi launch, launch of lurbinectedin, launch of 258, moving Sunosi into Europe, continued growth of Vyxeos in Europe, moving 458 closer to the market and the potential for additional corporate development transactions. So we've got work to do, but we're excited about making progress on that and making it clear to investors what that longer-term more diversified revenue stream looks like. You raised a good question, which is the use of cash to buy back shares. And in fact, we've been an aggressive purchaser of our own shares over the last few years.

We continued that in the first quarter. I will admit we hit pause a little bit as we came into COVID-19, just to make sure we understood a little bit about how initial efforts to contain viral spread, to flatten the curve, to eventually get people back toward normalcy in terms of resuming customer interactions, ability to advance clinical trials and the like. So we did hit pause a little bit, but we remain convinced that our shares are a good investment for us so long as we don't constrain our ability to be aggressive on the corporate development side, which continues to be a significant priority for us.

Ken Cacciatore -- Cowen and Company -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Randall Stanicky of RBC Capital Markets. Your line is open.

Randall Stanicky -- RBC Capital Markets -- Analyst

Great, thanks. Bruce, can you talk about 258 and specifically, how should we think about the promo and an ad spend there? And do you need to expand the rep base? I'm trying to understand how much incremental spend we could see from the launch of 258? And then specifically, does that fall into 2020 or 2021?

Bruce Cozadd -- Chief Executive Officer

Yes. So Randall, some of that spend will absolutely fall into this year. Our goal is to gain approval in July, implement our REMS and be ready to launch in the fourth quarter. So some of that spend will happen this year.

In terms of promotion, we are going to do what we can to make this a very successful launch. We want patients to have access to what we believe is a better lifelong therapy, and you can expect that our focus will be on 258 and less on Xyrem once we make that switch. In terms of field force, I think that's a broader question. We want to make sure we're doing right by Xyrem this year, certainly preparing for a successful launch of 258, but continuing our progress on Sunosi.

And so as we think about having the right field force for that, we're really thinking holistically about sleep and neuroscience now and into the future. Dan, anything you want to add to that?

Dan Swisher -- President

No. I think you covered it well. Thanks, Bruce.

Randall Stanicky -- RBC Capital Markets -- Analyst

Thanks.

Operator

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

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Hi, thanks for taking my question. Just a question on 458. If everything continues with enrollment in the trial and you're able to file by fourth quarter, can you confirm whether you're going to be having to refer to the PBL BLA filing? And whether you have to refer to anything that might block you from an IP perspective to launch immediately on approval if it's available to you?

Bruce Cozadd -- Chief Executive Officer

So Annabel, we're really excited about the progress we're making with 458 and want to make sure we continue to do everything we can in combination with COG and FDA to make sure we make this therapy available, particularly, as we continue to have periods where we're out of stock with Erwinaze. I think this is essential. We're confident we have everything we need to move through the regulatory process. Just as a reminder, we have a relatively straightforward endpoint in our trial.

So we think we're in a good shape to move quickly to the market.

Operator

Thank you. Our next question comes from Ronny Gal of Bernstein. Your line is open.

Ronny Gal -- Bernstein -- Analyst

Hi. Just kind of clearly, I guess, I got one and a half. Just reiterating Annabel's question, is there a legal barriers for you to get that to market? I hear you got approved, but is there IP that you have to contend with? And then my question here, if we think about the U.S. going from unemployment from somewhat under 5% to something like 11%, which is the CBO prediction for next year, have you begun to think about what that would mean in terms of headwinds to Xyrem? The expectation is that most of those unemployed will shift to Medicaid toward the end of the year as opposed to now.

And I kind of wonder if you kind of think year over year as you begin to think about the impact there?

Bruce Cozadd -- Chief Executive Officer

So Ronny, I'll give you the one and a half questions because I wasn't trying to duck the end of the prior question. We think what -- we have we need to move forward, we developed a new drug product and don't see a barrier to bringing that to market. So maybe, Mike, I could turn it over to you to reflect a little bit on what any change in employment status, for example, would mean to payer mix and to how we think about Xyrem revenues in 2020 and beyond?

Mike Miller -- Executive Vice President, U.S. Commercial

Yes, Bruce. As you know, Ronny, the primary payer for Xyrem is commercial overwhelmingly. And we have not seen a significant shift in the payer mix on Xyrem so far. We continue to provide patient support programs that enable patients to get drug if they financially qualify.

We will continue to do that. Again, we feel very good about where we are in our guidance and our gross to net and where we're heading at.

Bruce Cozadd -- Chief Executive Officer

But to be clear, our guidance for the rest of the year does contemplate that we would see a shift in payer mix that would actually result in higher gross to net overall for Xyrem.

Ronny Gal -- Bernstein -- Analyst

Thank you.

Operator

Our next question comes from Balaji Prasad of Barclays. Your line is open.

Balaji Prasad -- Barclays -- Analyst

Hi, good afternoon thanks for taking the question. So my one question is on lurbinectedin. So we last spoke about your thoughts in exploring this for front-line therapy. Has there been any progress on that front in identifying the form lurbinectedin could play a role in first-line lung cancer?

Bruce Cozadd -- Chief Executive Officer

So Rob, maybe I can ask you or Anne to weigh in on that?

Rob Iannone

Sure, happy to. So we know, based on the data that are probably available that lurbinectedin is highly active and even more active in patients who are sensitive to platinum, which is the greatest majority of small cell lung cancer patients. And so we do see an opportunity to move into first-line small cell lung cancer. As you know, despite recent advances there with the addition of immuno-oncology PD-L1 inhibitors, the prognosis is still extremely poor.

The median survival is about 12 to 13 months, depending on whether you look at the SCs or density data. And so given the tolerability profile of lurbinectedin, we do think that there's an opportunity ultimately to move into the front-line setting.

Operator

Thank you. Our next question comes from David Risinger of Morgan Stanley. Your line is open.

David Risinger -- Morgan Stanley -- Analyst

Yes, thanks very much. I just wanted to ask a quick question. Most of my questions have been answered. With respect to Erwinaze in 2021, could you just talk about how we should think about that curve over the course of 2021?

Bruce Cozadd -- Chief Executive Officer

Yes. So David, as we publicly said, our contract will conclude at the end of 2020, but with a contractual right to sell-through inventory in production as we hit the end of the year. We think that will take us partway through 2021, depending on the level of that inventory. And of course, we're doing everything we can to make sure that patients will have access to therapy even beyond current supply by bringing 458 to market as rapidly as we can.

You know we've got a goal of getting that BLA in as early as the end of this year. We think FDA is motivated to, if the data is what we hope the data will be, move quickly through the regulatory process as well. And our focus for this year is keeping that time line as short as possible. We're starting to explore a path for ex U.S.

approval in EU and other markets as well.

David Risinger -- Morgan Stanley -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Esther Rajavelu of Oppenheimer. Your line is open.

Esther Rajavelu -- Oppenheimer -- Analyst

Hey, thanks for squeezing me in. Curious to see if you are seeing any impact of telemedicine, especially, obviously, franchise? So do you anticipate that maybe contributing to uptake, especially for the new launches over the course of the year?

Bruce Cozadd -- Chief Executive Officer

Yes, it's a good question, and maybe I'll broaden my answer a little bit to say, we're not far into this, right? We are coming up on two months into a pretty radical change in how patients and physicians interact. And I think we're still at the early end of figuring out the art of the possible in terms of diagnosing, treating, monitoring patients with a variety of disorders remotely or requiring less in-person visits. I think that willingness to find new ways to get things done has long-lasting implications on how companies like ours and healthcare professionals may interact in a way that could be more efficient and more impactful than the focus we've had historically, which has been largely on in-person, not entirely, but largely on in-person promotion. So I will say we're seeing things now, but I just also want to stress, I think we're still early on in figuring out the art of the possible, and that may require changes in how people go about doing diagnostics, what diagnostics can be done in a less intensive setting, as well as regular visits.

Dan or Mike, anything you guys want to add to that?

Dan Swisher -- President

I'd just sort of add that I think Jazz is in a particularly strong position both because of the medicines we're currently providing for significant whether life-threatening or life-changing therapy, say, in narcolepsy or in cancer. And we are pretty flexible, innovative company. So we are trying a number of things to continue that engagement, both within the company, but obviously, with our customers and healthcare practitioners. A good example is COVID hit, and we have hired the entire neuroscience field force in Germany, remotely trained them, and they're ready for a virtual launch in mid-May.

And there's a number of -- there's a high degree of customer interest and engagement. And so they look forward to getting face-to-face. I don't think you can never negate the importance of that, but there's ways to really leverage those relationships more broadly with digital means. And so we're experimenting with a number of different brands and regions and look forward to continuing to get that leverage post COVID.

And then as I said, with new product launches, there's obviously a lot of customer interest regardless of the situation. So we're looking forward to the second half of 2020.

Bruce Cozadd -- Chief Executive Officer

And I will just piggyback on what Dan said specifically with respect to the upcoming launch of lurbinectedin. We've reached out to treaters of small cell lung cancer to see how their -- treatment of their patients has changed. And there's certainly an awareness of mitigating risks of COVID-19. But clearly, for these patients, the most important treatment objective is to, in fact, continue their treatment first-line and then with progression to second-line, and we're not hearing that from their perspective there'll be a significant impact.

Kathy Littrell -- Head of Investor Relations

And operator, this will be -- the upcoming question will be our last question.

Operator

Thank you. Our final question comes from Umer Raffat of Evercore ISI. Your line is open.

Umer Raffat -- Evercore ISI -- Analyst

Hi. Thanks so much for taking my question. Bruce, I wanted to touch up on Avadel, and specifically, two parts. No.

1, I'm curious how you thought about your cataplexy attack reduction relative to the trial experience we've seen with Xyrem? And also as it relates to the carve out point, I recall, and one of the ANDA filers, Par, was trying to carve out valproate and FDA obviously didn't allow that. But what if Avadel attempts a contraindication? How do you think about that in the context of what your patent claims are?

Bruce Cozadd -- Chief Executive Officer

Yes. So Umer, on that latter point, again, I think we said what we're going to say about their carve-out strategy in terms of what we think is important for patients and physicians to understand about safe and effective use of oxybate. They may have a different point of view, but I think we're clear as to what our point of view is. On the cataplexy data, I'll say with Xyrem and with 258, we've put our data out.

Many of you may remember, our 258 data in the spring last year led to a much fuller discussion of that data at World Sleep in Vancouver in September, and we look forward to seeing more data from Avadel over time in an appropriate setting. I think it's too early with the amount of data they provided, which by the way is perfectly understandable as you're just releasing top line data, I wouldn't have expected a lot of detail at this point. But given the trial designs were different, I think it will take a while to understand what the data do and don't mean on safety and efficacy. We do know, in the case of Xyrem, the product has a long use of -- as a mainstay of narcolepsy therapy.

And then more recently, we've got good 258 data, which we think addresses the most important liability of Xyrem from a patient and physician standpoint, which is of a high sodium content that leads to the type of sodium warnings we see in the Xyrem label. So more to come as we see more data from Avadel, but probably too early to make any significant conclusions on that front. And maybe since Kathee said that was the last question, I'll just end by, again, thanking you all for joining us and reiterating our enthusiasm about the business. I have to say our team on Xyrem is doing an excellent job under the circumstances and making sure patients continue to have access to their therapy through this time.

We look forward to resuming our growth of Xyrem and then quickly bringing lurbinectedin and JZP-258 to market and continuing our clinical development plans with heavy emphasis on 458 this year, and then continuing our efforts to broaden our portfolio through internal development and corporate development. So with that, thank you all for joining us.

Operator

Thank you. I'd like to turn the call back over to Kathy Littrell for any closing remarks.

Kathy Littrell -- Head of Investor Relations

Thank you again for joining us today. I'll echo what Bruce said. But we will be participating in the upcoming virtual Bank of America, RBC and Goldman Sachs healthcare conferences, and hope to speak with many of you during those events. This now ends our call.

Operator

[Operator signoff]

Duration: 72 minutes

Call participants:

Kathy Littrell -- Head of Investor Relations

Bruce Cozadd -- Chief Executive Officer

Dan Swisher -- President

Rob Iannone

Renee Gala -- Chief Financial Officer

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Gary Nachman -- BMO Capital Markets -- Analyst

Mike Miller -- Executive Vice President, U.S. Commercial

David Amsellem -- Piper Sandler -- Analyst

Greg Gilbert -- SunTrust Robinson Humphrey -- Analyst

Jacob Hughes -- Wells Fargo Securities -- Analyst

Rene Gal -- Chief Financial Officer

Akash Tewari -- Wolfe Research -- Analyst

Jason Gerberry -- Bank of America Merrill Lynch -- Analyst

Ami Fadia -- SVB Leerink -- Analyst

Jessica Fye -- J.P. Morgan -- Analyst

Ken Cacciatore -- Cowen and Company -- Analyst

Randall Stanicky -- RBC Capital Markets -- Analyst

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Ronny Gal -- Bernstein -- Analyst

Balaji Prasad -- Barclays -- Analyst

David Risinger -- Morgan Stanley -- Analyst

Esther Rajavelu -- Oppenheimer -- Analyst

Umer Raffat -- Evercore ISI -- Analyst

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