The Emperor is Wearing No Clothes!
I've been following Jazz Pharmaceuticals (NASDAQ:JAZZ) for two years now, and it's almost comical to hear the sell-side questions at investor conferences and Jazz earnings conference calls. The main focus of the questions is on two key points - Jazz's interest in doing big pharma deals and the generic threat to its Xyrem franchise, its $1 billion orphan blockbuster for narcolepsy.
It's amusing to hear about the big generic patent threat, when it seems likely that there will be an eventual settlement between JAZZ and the generic companies that should fall somewhere in the early 2020s.[1] Most of the sell-side community, seemingly focused solely on the opportunity for investment banking fees on Jazz's next big acquisition, is pretending to hold up the Emperor's invisible clothes and praising the exquisite beauty of his invisible clothes.
While the patent situation is extremely complex and way above my pay grade, if I were an investor in JAZZ, I would be much more concerned with a potential branded entrant that could be on the market in a few years: Flamel Technologies' (FLML) once-nightly Micropump formulation of sodium oxybate
Xyrem is Jazz's Money Machine
Xyrem, which is Jazz's branded, twice-nightly sodium oxybate drug for treating narcolepsy, is critical to Jazz and comprises the overwhelming bulk of its sales and profits. Xyrem makes up nearly $1 billion of its $1.3 billion in total revenues. Xyrem also carries significantly higher margins than the rest of the Jazz business because it has no competition whatsoever. Jazz is able to conduct a limited sales effort to reach the 12-13,000 patients on Xyrem, and it charges a substantial premium for the drug, which is estimated at approximately $80,000 annually per patient.
Flamel's Single-Dose Micropump Could Completely Displace Twice-Nightly Xyrem
Flamel's Micropump could not just
