Jazz Pharmaceuticals: Targeting The Low-Hanging Fruit In Oncology Might Pay Off

seekingalpha04-15

Jazz Pharmaceuticals is rated as a "Buy" due to its current financial health, multiple near-term catalysts, and projected growth for 2024 and 2025.The company's successful commercial products include ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2427602570?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1503721825/image_1503721825.jpg","is_english":true,"pubTime":"2024-04-15 16:31","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2427602570","market":"nz","top_or_hot":-1,"title":"Jazz Pharmaceuticals: Targeting The Low-Hanging Fruit In Oncology Might Pay Off","media":"seekingalpha","content":"<div>\n<p>Jazz Pharmaceuticals is rated as a \"Buy\" due to its current financial health, multiple near-term catalysts, and projected growth for 2024 and 2025.The company's successful commercial products include ...</p>\n\n<a href=\"https://seekingalpha.com/article/4683744-jazz-pharmaceuticals-targeting-low-hanging-fruit-in-oncology-might-pay-off\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Jazz Pharmaceuticals: Targeting The Low-Hanging Fruit In Oncology Might Pay Off</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nJazz Pharmaceuticals: Targeting The Low-Hanging Fruit In Oncology Might Pay Off\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-15 16:31 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4683744-jazz-pharmaceuticals-targeting-low-hanging-fruit-in-oncology-might-pay-off><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Jazz Pharmaceuticals is rated as a \"Buy\" due to its current financial health, multiple near-term catalysts, and projected growth for 2024 and 2025.The company's successful commercial products include ...</p>\n\n<a href=\"https://seekingalpha.com/article/4683744-jazz-pharmaceuticals-targeting-low-hanging-fruit-in-oncology-might-pay-off\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0320765992.SGD","symbol_name":"FTIF - Franklin Biotechnology Discovery A Acc SGD","start_time":0,"source_url":"https://seekingalpha.com/article/4683744-jazz-pharmaceuticals-targeting-low-hanging-fruit-in-oncology-might-pay-off","article_id":"2427602570","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1503721825/image_1503721825.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2427602570","pubTimestamp":1713169860,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Jazz Pharmaceuticals is rated as a \"Buy\" due to its current financial health, multiple near-term catalysts, and projected growth for 2024 and 2025.The company's successful commercial products include ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0320765992.SGD":"FTIF - Franklin Biotechnology Discovery A Acc SGD","JAZZ":"爵士制药","BK7116":"贵重金属与矿石","BTC.AU":"Btc Health Ltd","BK4533":"AQR资本管理(全球第二大对冲基金)","ODE.AU":"ODESSA MINERALS LTD","BTC":"ClearShares Piton Intermediate Fixed Income ETF","BK4007":"制药","LU0109394709.USD":"富兰克林生物科技新领域基金A (acc)","BK4532":"文艺复兴科技持仓","AVDL":"Avadel Pharmaceuticals plc","LU0889565916.HKD":"FRANKLIN BIOTECHNOLOGY DISCOVERY \"A\" (HKD) ACC"},"translate_title":"Jazz Pharmaceuticals：瞄准肿瘤学中唾手可得的果实可能会有回报","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AVDL":1,"BTC":1,"BTC.AU":1,"JAZZ":1,"ODE.AU":1,"BTCmain":0.9,"XBTmain":0.9},"content_text":"Jazz Pharmaceuticals is rated as a \"Buy\" due to its current financial health, multiple near-term catalysts, and projected growth for 2024 and 2025.The company's successful commercial products include Xywav, Epidiolex, and Rylaze, which have shown increasing adoption and sales revenues.JAZZ is targeting low-hanging fruit in oncology with its drug Zanidatamab, which has the potential to become a blockbuster drug with up to $2 billion/year in net sales.Thanakorn Lappattaranan/iStock via Getty Images Thesis I rate Jazz Pharmaceuticals (NASDAQ:JAZZ) as a \"Buy\", at this moment in time. My rating is based on its current financial health, the multiple near-term catalysts, its achievable projected growth for 2024 and 2025, and the management strategy targeting low-hanging fruit in oncology to accelerate regulatory approval. Overview Jazz Pharmaceuticals is a global pharmaceutical company headquartered in the Republic of Ireland. Currently, their most successful commercial products are Xywav (low sodium-based drug targeting narcolepsy), Epidiolex (cannabidiol-based drug against epilepsy) and Rylaze (for the treatment of acute lymphoblastic leukaemia and lymphoblastic lymphoma). Jazz Pharmaceuticals was founded in 2003, and it has been a publicly traded company since 2007. During the last ten years, Jazz's investors have been disappointed, observing an 18.14% decline in the share price. However, the company is finally giving signs of growth, beyond Xyrem. In their latest earnings call, the management was pretty excited about delivering good news in terms of growth, and more importantly, reporting on the multiple near-term catalysts. Among the most interesting drugs, with near-term potential, in their pipeline is Zanidatamab, for which the company is filing for FDA approval in the first half of 2024. JAZZ's management has publicly announced their expectations for Zanidatamab to become a blockbuster drug, with the potential to reach up to $2 billion/year in net sales. Their plan is to target biliary tract cancer; if successful, the drug will become the only approved treatment for biliary tract cancer (BTC). Once the approval has been achieved, the company will be seeking a label expansion, targeting applications on gastroesophageal adenocarcinoma (GEA), breast cancer, among others. Thus, JAZZ has cleverly chosen to target a low-hanging fruit in oncology (BTC) to fast track the approval and commercialization of the drug. Furthermore, from the leadership point of view, the company has recently appointed Mr. Philip Johnson as Executive Vice President and Chief Financial Officer. Prior to JAZZ, Mr. Johnson acted as Group Vice President of Finance and Treasurer at Eli Lilly. Given Mr. Johnson's successful trajectory in Eli Lilly, it makes him a perfect fit for JAZZ's vision to obtain \"operational excellence.\" Drug Portfolio Highlights Xywav This drug has an oxybate low-sodium formulation, 92% lower than Xyrem. The low sodium concentration has been described as a major benefit of Xywav, given that it decreases the risk of other complications associated with the condition, such as cardiovascular risks. In 2021, Xywav was given seven years of Orphan Drug Exclusivity (ODE) for the treatment of narcolepsy by the FDA. Since then, the company has reported increasing adoption of this formulation by physicians and patients. Moreover, in their Q42023 10-K report, Jazz showed net sales of Xywav amounting to $1.27 billion, or a 34% year-on-year increase. On the other hand, the company has been litigating against Avadel Pharmaceuticals (AVDL), due to the infringement of Xyrem's patent. AVDL's drug (Lumryz) has, in essence, the same high-sodium oxybate formulation as Xyrem. In this sense, last month the jury ruled Jazz's claims to be sustained, while establishing that AVDL should pay 3.5% of royalties to Jazz (far lower than Jazz's expectations). Jazz, as stated in the Q42023 report, has received the support of the FDA in relation to the advantages of Xywav against Lumryz and other high-sodium oxybate formulations: FDA has also recognized that the difference in sodium content between Xywav and Lumryz is likely to be clinically meaningful in all patients with narcolepsy and that Xywav is safer than Lumryz in all such patients. Lumryz has the same sodium content as Xyrem. Xywav is the only approved oxybate therapy that does not carry a warning and precaution related to high sodium intake. In total, Jazz's Sleep franchise has reported $483 million revenue just in Q42023 and overall $1.9 billion in 2023 (see image below). Thus, Xywav has not only become a blockbuster drug, but it is also leading Jazz's Sleep franchise, providing sustainability and revenue growth potential to the company in the near-term. Xywav's 2023 sales results (Q42023 earnings presentation) Epidiolex/Epidyolex This is a cannabidiol-based oral solution with FDA approval for the treatment of seizures related to severe forms of epilepsy. JAZZ received Epidiolex in 2021 as part of the GW Pharmaceuticals' acquisition, with a total transaction cost of $7.2 billion. Currently, the drug is commercialised in the U.S., United Kingdom, Germany, Italy, Spain and France, as well as other members of the European Union, Canada, Australia, and New Zealand. Epidiolex has observed growing adoption by physicians and patients, thus bringing revenues of nearly $2 billion since 2021. The drug has received an ODE designation valid until 2025, to treat seizures associated with Lennox-Gastaut syndrome (LGS) and Dravet syndrome (DS), both rare types of epilepsy. In addition, Epidiolex is also designated as ODE to treat seizures associated with tuberous sclerosis complex, which is due to expire in 2027. The Q42023 report, stated net sales for Epidiolex/Epidyolex (which includes U.S. and ex-U.S. markets) adding up to $845.5 million in 2023, observing a 15% growth year-on-year and representing 23% of JAZZ's total product sales last year (see image below). Jazz expects Epidiolex to continue its growth, guiding for $1 billion in net sales in 2025. Epidiolex's 2023 sales results (Q42023 earnings presentation) Rylaze It is part of the multi-agent chemotherapeutic standard regime utilised on the treatment of ALL and LBL in paediatric and adult patients. This drug is particularly recommended to those patients with hypersensitivity to E. coli asparaginase. The mechanism of action of asparaginase is relatively simple. In a nutshell, it is an enzyme able to break down asparagine. Given that tumour cells are unable to produce asparagine, the treatment with Rylaze starves them, reduces their growth and eventually kills them. Jazz has reported that Rylaze is: the only recombinant Erwinia asparaginase manufactured product that maintains a clinically meaningful level of serum asparaginase activity throughout the entire intended course of treatment. The efficiency and good results of Rylaze have been translated to $392 million in net sales in 2023 alone, which represented 11% of Jazz's total sales revenue last year and 40% year-on-year sales growth (see image below). Moreover, the company has received approval for commercialising the drug in Europe under the name of \"Enrylaze\" and has started its launch in Europe. JAZZ expects to see a boost in revenue driven by its Oncology franchise in 2024 and 2025, with a guidance of $1 billion in net sales per annum. Rylaze's sales 2023 results (Q42023 earnings presentation ) Zanidatamab Jazz Pharmaceuticals acquired the rights to commercialise Zanidatamab in 2022. In the transaction, the company paid $50 million upfront to Zymeworks, which allowed them to obtain exclusive commercialization rights in the U.S., Europe, Japan and Asia/Pacific territories where Zymeworks has not already licensed the drug. Both companies have also agreed a second one-time payment of $325 million, in addition to royalties and commercial milestone payments, should the drug obtain regulatory approval. Zanidatamab, is a chemotherapeutic drug that targets HER2-expressing tumour cells (see image below), and it is currently undergoing testing in different Phase 2 clinical trials, from which it is expecting results in Q42024. The company started the process to obtain accelerated FDA approval targeting BTC in Q42023, and it is expecting the resolution in 2024 in order to start commercialisation by 2025. Zanidatamab's mechanism of action (Zanidatamab's Virtual R&D day presentation ) During a recent conference call focused on Zanidatamab, JAZZ has explained its business strategy related to the drug. Following the potential approval in the BTC framework, JAZZ's plan is to follow up with other label expansions into several HER2-expressing cancers, such as GEA, breast cancer, bladder, colorectal, ovarian, among others (see image below). If approved, the company expects this drug to generate up to $2 billion in revenue per annum when it achieves its full commercialization potential. During the conference call, highly recognized oncologists gave their sign of approval to the drug, explaining its benefits in terms of efficacy in the treatment of HER2-expressing cancers and improved patients' responses. Zanidatamab's potential applications and rollout guidance (Zanidatamab Virtual R&D day presentation) It has been estimated that approximately 25-30% of breast cancers are HER2-positive. Likewise, HER2 is expressed in approximately 30% of colorectal cancers and about 20% of gastrointestinal cancers. However, it is very well known that the oncology market is very crowded, particularly in breast cancer, where there were nearly 90 FDA-approved drugs available to patients by 2023. Regarding biliary tract cancer, it is known as a hard-to-treat type of cancer with a low rate of survival (5-year survival rate of 2% approximately). Moreover, HER2-positive BTC has been associated with even lower survival rates (50% lower) than HER2-negative BTC. In this sense, Zanidatamab has shown large promise by binding specifically to HER2, thus disrupting its dimerisation, while \"training\" the immune cells to recognise the Zanidatamab-HER2 hexamers, thus promoting tumour cell death by multiple pathways. This mechanism of action may not sound as trendy as CAR-Ts or cell/gene therapy, but the preliminary results in clinical trials suggests its high efficacy in the treatment of difficult to treat HER2-expressing cancers. In addition, from the financial point of view, manufacturing and distributing this kind of \"classic\" chemotherapy drugs is easier and cheaper than CAR-Ts. Taking it altogether, in my opinion, JAZZ's business strategy targeting BTC at first is a clever move. This not only might benefit patients who have a very poor survival rate, but also may allow them to disrupt the market, providing an efficient drug for the treatment of several HER2-expressing cancers. Thus, if/when approved, Zanidatamab could easily become a blockbuster drug. Financial updates Jazz Pharmaceuticals, at the moment of writing, is trading at $112.10 per share, observing an 11.68% decline year to date. The company's market cap is $6.99 billion and its P/E ratio is 18.37. In the following table, I have listed some of the important figures for 2023 and 2022 as well as the year-on-year change, as reported by the company in its Q42023 report. Balance sheet highlights comparing 2023 vs 2022 (Data collected by Author from Jazz Pharmaceuticals Q42023 10-K report) On the other hand, when revising other important metrics, as reported by Seeking Alpha, you can observe that price/sales TTM ratio for JAZZ is 1.73, which is 52% lower than the sector median, thus pointing to a favourable ratio for JAZZ. Similarly, the forward PEG non-GAAP is 0.71 which is 63% lower than the sector median, again signing for a favourable PEG value for JAZZ. In general terms, JAZZ's Q42023 results revealed a healthy balance sheet with YoY revenue growth, positive net income, increasing cash and cash equivalents, decreasing net debt and lower cost of operation. In my opinion, the company is on a good track to achieve or even beat their guidance of total revenues of $4-4.2 billion in 2024. Epidiolex's adoption rate is increasing fast, in addition to Zanidatamab's opportunity to become the only treatment for biliary tract cancer, are signs of near term growth that, I believe, will translate into positive investment returns once it gets commercialised. Indeed, the consensus estimates a forward P/E ratio 5.98, and a forward EPS 18.98, in accordance with the growth expectations. Valuation The Wall Street's consensus for Jazz Pharmaceuticals is an average share price target of $188.64, with a \"Buy\" rating. On the other hand, Seeking Alpha's Quant rates the company as \"Hold.\" In order to calculate the intrinsic value of Jazz Pharmaceuticals I followed the DCF method used in my previous analyses of Takeda Pharmaceuticals, Voyager Therapeutics, Natera, Allogene and Boston Scientific. To do so, I took into account a 10% discount rate and their current $6.55 EPS. For the worst-case scenario, target share price was calculated estimating a 5-year growth of 8%, considering JAZZ to be able to meet the sector median 5-year EPS growth going forward, and a 10-year growth of 10% considering the company's expected 5-year EPS growth. Thus, the worst-case scenario target share price of $134.97 (20.40% undervalued). For the best-case scenario, I estimated a 15% 5-year growth, taking into account that JAZZ will achieve its target of $5 billion in revenue by 2025, and a 16% 10-year growth. Given that, in my opinion, the company doesn't have much long-term promise in their pipeline. Hence, the best-case scenario target share price is $211.01 (88.23% undervalued). Finally, the base case considered a 5-year growth of 13% given their historical CAGR. The 10-year growth of 16% assuming they will continue to grow at a similar rate than their current year-on-year growth, resulting in a base case scenario share price target of $156.18 (39.32% undervalued). Taking it altogether, my fair value for JAZZ resulted in a target share price of $162.90, or 45.31% undervalued (see image below), which supports my \"Buy\" rating. Intrinsic Value Projections for Jazz Pharmaceuticals (Price chart by Seeking Alpha, Author's projections) Risks JAZZ's largest revenue driver to date is Xywav. However, Xyrem has been facing competition from different companies commercialising authorised generic formulations as well as formulations such as AVDL's Lumryz. In this regard, the company has declared its efforts to inform physicians and patients of the benefits of Xywav over generics. However, once Xywav's ODE label expires, I would expect a decline in the Sleep franchise-driven revenues. On the other hand, Epidiolex/Epidyolex faces similar issues in terms of competition from several cannabidiol-based formulations, as well as the growing number of U.S. states and ex-U.S. territories legalising the use of marijuana for medical and/or recreational use. On the other hand, one thing in favour of JAZZ is that the majority of Epidiolex's users are paediatric patients, who are less likely to be treated with cannabidiol-based formulations with unknown quality controls and/or medical marijuana. However, the Epidiolex's ODE label has a very short runaway. Finally, Zanidatamab is a very promising drug targeting HER2-positive BTC, with large probabilities of obtaining FDA approval in 2024. However, the company's guidance in relation to this drug accounts with a label expansion and large adoption by oncologists in cancer types such as breast cancer, where the competition is fierce. Thus, the company will need to face several hurdles in order to achieve its guidance of $2 billion annual revenue for Zanidatamab. In this sense, the management seems to have the support of highly recognised oncologists specialising in BTC, GEA, and breast cancer, which, together with its marketing team, might help to secure a successful rollout of the treatment. Conclusions  In summary, Jazz Pharmaceuticals has shown a good performance in 2023, and holds several revenue catalysts for 2024 and 2025. The successful rollout of drugs like Xywav and Epidiolex, with increasing adoption and sales revenues, has helped the company become profitable. In addition, drugs such as Zanidatamab and Rylaze offer the potential for larger and more sustainable profit margins in JAZZ's oncology sector. Hence, in my opinion, the company is currently undervalued, offering an opportunity to new investors to obtain high returns in the near future. On the other hand, despite promising drugs, such as Suvecaltamide (which targets Parkinson's associated tremors), in my opinion, Jazz Pharmaceuticals is lacking long-term potential. Thus, I am unsure of JAZZ's capacity to sustain long-term growth and profitability.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2427602570"}