JAZZ Awaits Impending FDA Approval For Narcolepsy With $3B Market Value
Seeking Alpha Analyst Since 2018
Summary
- FDA will announce the approval status of JZP-258 for EDS and cataplexy by July 21st.
- JZP-258 significantly decreases daytime sleepiness and cataplexy episodes.
- Narcolepsy is a sleeping giant with a $3 billion market value.
By July 21st, Jazz Pharmaceuticals (JAZZ) is expected to receive approval of JZP-258 for treatment of cataplexy and excessive daytime sleepiness [EDS] patients above the age of 7 years old with narcolepsy. Jazz Pharmaceuticals is based in Dublin, Ireland and focuses on developing therapeutics for neurological, hematology and oncology. Jazz has a good pipeline of therapeutics, including Solriamfetol, Xyrem and a few others that are already marketed in the US and EU. This 17 year old company has high confidence for JZP-258 as they look to commercialize another homegrown therapeutic.
Narcolepsy and JZP-258
Narcolepsy is a chronic disease characterized by excessive sleepiness affecting roughly 400,000 people in the US. Narcolepsy has 5 main symptoms: EDS, cataplexy, disrupted nighttime sleep, sleep-related hallucinations and sleep paralysis. EDS and cataplexy occurs in 100% and 70% of narcoleptic patients, respectively. Cataplexy is brief and sudden loss of muscle control, and sometimes leads to complete paralysis. Xyrem (sodium oxybate) is currently the only approved drug to treat both cataplexy and EDS. Xyrem is effective in reducing the frequency and intensity of cataplexy episodes, as well as improving nighttime sleep. JZP-258, newly developed by Jazz Pharmaceuticals, is an oxybate form of gamma hydroxybutyric acid (GHB). It has a similar chemical make-up to Xyrem but has 70% less sodium. Jazz Pharmaceuticals believes JXP-258 is a safer option than Xyrem due to its low sodium content, which will lower the risk of high blood pressure and cardiovascular disease commonly seen in narcoleptic patients.
In 2016, Jazz Pharmaceuticals initiated a phase III trial (NCT03030599) evaluating the efficacy of JZP-258 in the US and EU for adult narcoleptic patients with EDS or cataplexy (n=201). In this study, patient responses to therapy were evaluated by three scoring methods: ESS score (measures your daytime sleepiness), PGIc score (the patient evaluates their own progression) and the CGIc score (medical professional evaluates patients progression). In 2019, the company reported that patients who received JZP-258 had statistically lower ESS scores than those who received placebo (p<0.0001). Additionally, Patients receiving JZP-258 saw significant improvements in their PGIc and CGIc scores (p<0.0001). Only mild cases of adverse effects such as headaches, nausea and dizziness were reported. Due to this positive phase III data, the company filed a new drug application in January 2020, and was granted priority review by the FDA in the following month. The FDA is now set to decide by July 21st whether JZP-258 is suitable for cataplexy and EDS in Narcoleptic patients.
Financials
In 2019, the company generated just over $700 million and used about half to buy back shares. They had reported an increase in revenue of 14.39% and an increase of 17% in net income that same year. They continued to grow their profit margins by another 2.41% in 2019. Additionally, they just launched a new product in 2019 that posted $3.9 million in sales from July to December alone. If JZP-258 is approved, the company is forecasted to achieve over $1 billion in sales in the next 6 years.
Discussion
FDA is currently reviewing JZP-258 as a treatment therapeutic for EDS and cataplexy in Narcoleptic patients and will announce their decision by July 21st. JZP-258 is clearly effective in treating these patients much like its predecessor, Xyrem. However, because of the similar chemical make-up, it might share some of the same flaws. Like Xyrem, JZP-258 has a short half-life and will need to be taken twice nightly. This limitation would present a window for other therapies currently in testing for the treatment of EDS and cataplexy if they can provide longer half-life time. Additionally, analysts predict that JZP-258 will receive a black box label, just like Xyrem, because of the depression and suicidal thoughts it can cause. Another potential setback is that JAZZ has been facing some issues with their capacity for supply and manufacturing, which has already shown some effects on sales in the first quarter of 2020. Currently, Jazz Pharmaceuticals markets six different products, Xyrem accounts for the majority of the revenue produced by the company. The launch of JZP-258 will be in direct competition with Xyrem, which will not grow the company's overall sales.
Despite these points of weakness, Jazz Pharmaceuticals have a rosy outlook. The patent for Xyrem expired in 2019, which would result in generics capturing the market. In a timely response to this, the company has positioned themselves to maintain their market moat on the narcolepsy treatment with their new drug JZP-258, which has patent exclusivity until 2033. Once approved, JZP-258 will likely become the standard of care for EDS and cataplexy patients- a $3 billion market. The competition and black box label is worrisome, however this has not stopped the sale of Xyrem, which posted $1.6 billion in sales for the year 2019. Additionally, it just received orphan status in idiopathic hypersomnia, which currently has no approved therapeutic. The orphan status increases its chance of approval and increases its pricing. Jazz Pharmaceuticals has a good history of successfully marketing several of their products and has a very promising pipeline of 17 drugs in development. For instance, In June of this year, the company received accelerated approval for Lurbinectedin, a new therapy for the treatment of small-cell lung cancer. Jazz Pharmaceuticals is positioning themselves to become even more favorable in the near future and the stock buyback is a good example of the confidence the executives have.
Written by: Josiah M. Flaming
Edited by: Seon Hye E. Park
Analyst's Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I am consultant with BioHealth Consultants, this report encompasses my personal views and were preformed independently of my professional obligations. I have not, nor plan to use this article to supplement my reports written for my profession as a consultant. I do not work with or represent any of the companies mentioned in the article.
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