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Jazz Pharma to Acquire Gentium

Zacks Equity Research

Jazz Pharmaceuticals (JAZZ) has entered into a definitive agreement to acquire biopharma company Gentium (GENT) for $57.00 per share in cash or $1 billion.

The offer price of $57.00 per share represents a 2.4% premium to Gentium’s closing price of $55.65 per share on Dec 19, 2013. The transaction is expected to close in the first quarter of 2014. Jazz Pharma expects the acquisition to be slightly accretive to the bottom line in 2014 and significantly accretive in the following years.

The acquisition of the Italy-based Gentium will add the latter’s lead product, Defitelio, to Jazz Pharma’s portfolio. Defitelio is approved in the EU (Oct 2013) for the treatment of severe hepatic veno-occlusive disease (VOD) in patients undergoing hematopoietic stem cell transplantation. The company expects to start obtaining pricing approvals in EU countries in the first quarter of 2014, extending up to 2015.

A regulatory application for Defitelio is expected to be submitted in the first half of 2014 in the U.S. The FDA has granted Fast Track Designation to Defitelio for the VOD indication.

Defitelio enjoys Orphan Drug status in both the U.S. and EU for the treatment and prevention of VOD. In the EU, Defitelio was granted Orphan Drug designation for the prevention of graft versus host disease as well. Defitelio is also being evaluated for prevention of VOD (phase III).

Our Take

We are positive on the Gentium deal and expect investors to react positively to the news. Jazz Pharma plans to market Defitelio in the same centers as its oncology drug, Erwinaze. The promotion of Defitelio along with Erwinaze will create synergies. Thus, with only a small increase in the sales force, Jazz Pharma expects to add revenues in the range of $50 million to $60 million.

Jazz Pharma carries a Zacks Rank #1 (Strong Buy) while Gentium carries a Zacks Rank #3 (Hold). Other stocks which look attractive at current levels include Actelion Ltd. (ALIOF) and Vanda Pharmaceuticals Inc. (VNDA). Both carry the same Zacks Rank as Jazz Pharma.

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