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Coverage Initiation: Jazz Pharmaceuticals PLC
Value Line recently initiated coverage of Jazz Pharmaceuticals PLC (JAZZ) in its flagship product, The Value Line Investment Survey. The biopharmaceutical company is a public limited company formed in Ireland. Its products predominantly focus on addressing the unmet medical needs of patients suffering from a variety of afflictions. Jazz was first traded publicly in 2009 and currently employs just under 700 full-time employees.
The company, as it is currently structured, is largely a result of a 2011 merger with Azur Pharma, a privately held Irish entity. The all-stock transaction saw Jazz taking ownership of 80% of the newly arranged corporation, which has experienced outsized top-line growth as a result of the move. The two companies were a sensible strategic fit. Their marriage ensured a better opportunity to compete in the highly competitive specialty pharmaceutical sector through a more diversified revenue base and increased exposure to the international markets.
Jazz occupies a unique market space, developing treatments for those suffering from undertreated conditions. From narcolepsy to pain, oncology to psychiatric disorders, the company’s suite of products is geared to several fast-growing segments in the pharmaceutical market. The prescription drug Xyrem designed to treat both cataplexy and narcolepsy, generated an all-time high of $154 million in revenues during the most recently reported fiscal quarter. Also during the earnings release, it was revealed that the sales volumes of the oral solution increased a better-than-expected 13%. Xyrem is the only product approved by the FDA to treat both afflictions.
The company’s Erwinaze product, a drug designed to treat lymphocytic lymphoma, has added new accounts while simultaneously raising awareness for the medicine’s side effects. Erwinaze contains the enzyme asparaginases, which can trigger adverse reactions in some patients. This transparency, management reported, has actually improved sales of the drug. True, the marketing has improved the comfort level of doctors and patients alike, exemplified by core volume expansion in recent quarters.
Jazz’s growth story seems to just be heating up. In addition to Xyrem and Erwinaze, the company has a pipeline of burgeoning products set to contribute meaningfully to the company’s top line over the next few years. Among these, the most notable is probably Prialt, an intrathecal treatment for severe chronic pain. The ziconotide-based application is infused into a patient’s spine, and is approved for use across a wide array of programmable implantable pumps. Like the company did with its aforementioned products, Jazz established a support network of sales representatives and enlisted a third party to handle around-the-clock customer service inquiries. The NAVIGATOR program provides a centralized distribution for physicians and patients alike to consult and better understand the drug.
The company’s balance sheet is in great shape. Its cash total has expanded about 52% since the year began, allowing it some leeway as it rolls out its next generation of products. Indeed, Versacloz, Jazz’s schizophrenia drug, is set to be released during the first quarter of 2014. In keeping with the company’s modus operandi of helping those patients whose specific needs are unmet by current medical treatments, Verascloz is meant to decrease the risks of suicidal behavior in treatment-resistant cases of the mental illness. The abundance of cash at the time of its release will allow Jazz to implement a NAVIGATOR-like support system for customers to refer to.
Still, so much of the optimism surrounding the company’s growth story seems to already be priced into these shares. The stock has been on nothing short of a tear since the beginning of the 2013, having more-than doubled in value since January 1st. This ascendance has limited the equity’s three- to five-year prospect.
Subscribers interested in owning large-cap biopharmaceutical company are advised to consult Value Line’s quarterly reports for Jazz Pharmaceuticals PLC, as well as any supplemental reports and relevant articles as important news items arise on www.valueline.com.
At the time this article was written, the author did not have positions in any of the companies mentioned.