Jazz Pharmaceuticals (NASD:JAZZ) acquired worldwide development, manufacturing and commercial rights to ADX-N05 from Aerial BioPharma. ADX-N05 is being developed for the treatment of excessive daytime sleepiness (EDS) in patients suffering from narcolepsy.

Terms of the Deal

Jazz Pharma will have rights to ADX-N05 across the globe except certain Asian countries (Korea, Japan, China, Taiwan, Singapore, Indonesia, India, the Philippines, Thailand, Malaysia, Vietnam and Hong Kong) where SK Biopharmaceuticals Co., Ltd. has rights.

In exchange, Jazz Pharma will make an upfront payment of $125 million to Aerial BioPharma. Aerial BioPharma and SK will also receive development, regulatory and sales-based milestone payments and tiered royalties based on net sales of ADX-N05.

Why Acquire ADX-N05?

ADX-N05 complements Jazz Pharma’s portfolio which includes Xyrem indicated for cataplexy and EDS in narcolepsy patients. The company already possesses a robust development and commercial expertise in this disease area. The addition of ADX-N05 to Jazz Pharma’s portfolio will create synergies, once commercialized.

Data generated on ADX-N05 looks good so far and Jazz Pharma intends to initiate phase III studies. The company also plans to evaluate ADX-N05 for the treatment of patients with EDS in obstructive sleep apnea.

ADX-N05 has patent protection till 2027, which may extend post approval. We are positive on the deal.

Update at the J.P. Morgan Healthcare Conference

Meanwhile Jazz Pharma attended the J.P. Morgan Healthcare Conference and provided an insight into its 2013 results and pipeline.

The company expects to report strong top- and bottom-line growth for 2013. The company expects adjusted earnings in the range of $6.30 to $6.40 per share, up 30% –35% year over year. The Zacks Consensus Estimate currently stands at $5.77 per share, well below the company’s projected range.

Jazz Pharma is targeting 50% revenue growth in 2013 (from $586 million in 2012) driven by strong sales of Xyrem, Erwinaze (oncology) and Prialt (pain). The Zacks Consensus Estimate currently stands at $875 million for 2013.

The company expects to meet its 2013 revenue guidance for Xyrem ($565–$570 million), up approximately 50% over the year-ago period. For the fourth quarter of 2013 and full year 2013, the product has witnessed volume growth of 10% and 12%, respectively.

The company is working on strengthening Xyrem’s patents. Currently issued patents are set to expire in the 2019–2024 period. Jazz Pharma is entangled in litigation with several generic drug makers for Xyrem.

Erwinaze also exhibited strong growth and the company expects to meet its 2013 revenue guidance for the product ($173–$178 million), a 30–35% increase from 2012.

Prialt revenues should benefit from initiatives like the rollout of NAVIGATOR hub and the Reimbursement Assistance system.

Meanwhile, Jazz Pharma will add Defitelio to its portfolio following its upcoming acquisition of biopharma company Gentium (NASD:GENT).

Pipeline Update

A study evaluating the intravenous formulation of Erwinaze met its primary endpoint. The company expects to submit a supplemental biological license application (:BLA) to the U.S. Food and Drug Administration (:FDA) for Erwinaze shortly. The company submitted an investigational medicinal product dossier in Dec 2013 for JZP-386.

2014 Outlook

Jazz Pharma is looking to cross the $1 billion revenue mark in 2014, driven by continued growth of existing products and new product launches. The Zacks Consensus Estimate currently stands at $1.1 billion for 2014. The company has expanded its sales force by 25% and Xyrem sales should remain strong. Erwinaze should continue growing in 2014. The company expects to submit a supplemental biological license application (sBLA) to the U.S. Food and Drug Administration (:FDA) for an intravenous formulation of Erwinaze shortly.

The company also expects to remain active on the acquisition front.

Jazz Pharma’s guidance is in line with our expectations. We believe that 2014 will be another strong year for the company.

Jazz Pharma shares went up 6% after the company announced the ADX-N05 deal and presented an update at the JPM conference. The price also reached a 52-week high of $148.14 per share.

Jazz Pharma, a biopharma company, carries a Zacks Rank #1 (Strong Buy). Other stocks which look attractive at current levels in the biopharma space include Actelion Ltd. (OTC:ALIOF) and Medivation, Inc. (NASD:MDVN). Both carry the same Zacks Rank as Jazz Pharma.

Read the Full Research Report on ALIOF
Read the Full Research Report on MDVN
Read the Full Research Report on JAZZ
Read the Full Research Report on GENT


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