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Jazz Pharmaceuticals (NASDAQ:JAZZ) has been a homerun for investors in the past 3 years, with shares climbing from under $1 to over $45. It's not everyday you find a stock which happens to be a 5,000% gainer (in under 36 months), and remains an excellent investment candidate today.

But Jazz has continued to defy these norms, below is an outline of what makes it such an attractive investment.

Xryem

Revenue has exploded from $129 million in 2009, to $272 million 2011, and is on pace for $613 million in 2012. This has mainly been due to Jazz's blockbuster Xryem drug, which accounts for ~70% of sales.

Here is a snapshot from Jazz's website about Xryem.

(click to enlarge)

Xyrem is by far the leading treatment of narcolepsy and has dominated this fast growing market. Sales are projected jump to $375-$380 million in 2012, a 63% increase from $233 million in 2011.

Narcolepsy has historically been seriously under diagnosed (only 10,000 patients using Xyrem, despite US market size of 125,000-200,000), but that is rapidly changing (read Jazz's Investor Overview for more info).

Because of this huge treatment opportunity, Jazz has competitors seriously threatening to jump in this niche market.

European biotech Roxane Laboratories tried to gain FDA approval for a generic version of Xyrem in 2010 and failed. Ongoing litigation's insinuate a possible mid 2013 drug launch for Roxane, but that is yet to be confirmed.

For the next 1-2 years it appears Xyrem will continue its rapid market penetration uncontested.

Pipeline

If you think Xyrem sales are growing fast, then fasten your seat-belt. Jazz's new drug Erwinaze, which gained FDA approval in November 2011, is projected grow sales 193% this year.

(click to enlarge)

This chemotherapy-supplement has been met with exceptional success, and has even led Jazz to consider "label expansion" for Erwinaze (getting FDA approval for different uses). If Xyrem's marketing success is any indicator to how Erwinaze will fair, then investors should be very excited.

Besides Erwinaze, Jazz has 15 other products in its pipeline, with a very diverse set of treatments. Jazz's management has a clear plan to diversify its pipeline across a variety of fields (Narcolepsy, Oncology, Psychiatry, Pain, Women's Health).

Valuation

Despite torrid revenue growth (125% in 2012), Jazz is trading at just 8.4x projected 2013 earnings. Jazz recently crushed Q2 estimates (as its done for 4 quarters in a row), and significantly raised guidance.

In terms of growth and valuation, you'd be hard pressed to find a more attractive stock than Jazz. With a PEG of 0.31 and such an extensive/diversified product pipeline, Jazz presents limited risk at $47 per share.

Conclusion

Jazz's revenue and EPS growth has been off the charts in the past several years. For some reason the market has left shares trading at a steep discount to peers (see [[GILD]], QCOR).

EPS estimates for 2013 continue to climb, and even with just a 15x multiple on those earnings (still cheap for 40%+ top-line growth), shares would trade at $86.

Jazz's upside at current levels presents a very compelling risk/reward profile. If revenues continue their exponential march upwards then Jazz shares are destined to appreciate in the near future.

Source: Jazz Pharmaceuticals Looking Like An Easy Double On Revenue Explosion