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Jazz Pharmaceuticals (JAZZ) Starts Late-Stage Study on Xyrem

Zacks Equity Research

Jazz Pharmaceuticals (JAZZ) initiated a phase III study on Xyrem to assess the safety and efficacy of the drug in children and adolescents (aged between 7 years and 17 years) who have narcolepsy with cataplexy.

The company’s phase III study is in response to the Pediatric Written Request sent by the FDA. The request was based on the company’s work with the regulatory body due to Jazz Pharma’s limited knowledge about the use of Xyrem in children or adolescents. Jazz Pharma will be enrolling 100 pediatric patients in the U.S. and EU for the 52-week randomized, double-blind, open-label, multicenter study.

We note that Xyrem is already approved for the treatment of narcolepsy with cataplexy in adults. The drug is also approved for the treatment of excessive daytime sleepiness (EDS).

Our Take

Xyrem is the largest contributor to Jazz Pharma’s net product sales. The drug contributed $556.1 million in the first nine months of 2014 to the company’s top line, up 37.3% year over year. Xyrem net sales are expected in the range of $765 million to $780 million for 2014.

The product being the only FDA approved drug for both the indications – cataplexy and EDS – has a huge commercial potential. Further label expansion of the drug will boost sales given that there are no approved products for treating cataplexy in patients under the age of 18.

Meanwhile, we remain concerned about patent litigation related to Xyrem. Sooner-than-expected entry of Xyrem generics would be a big blow for the company.

Jazz Pharma currently carries a Zacks Rank #2 (Buy). Some other stocks that are worth considering in the health care sector include Valeant Pharmaceuticals International, Inc. (VRX), Affymetrix Inc. (AFFX) and Biogen Idec Inc. (BIIB). All stocks hold a Zacks Rank #1 (Strong Buy).
 

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