As investors fret about Xyrem durability, Jazz spends $52M+ upfront to swallow neuro-focused biotech
With investors getting jittery about the durability of Jazz Pharma’s cash-cow Xyrem, the specialty biopharmaceutical drugmaker is expanding its portfolio with the purchase of Cavion, a biotechnology company focused on rare, chronic neurological diseases.
Jazz $JAZZ paid $52.5 million upfront for the company, whose lead molecule — CX-8998 — is currently being evaluated in a mid-stage study in patients with essential tremor. The company’s portfolio includes a slate of T-type calcium channel modulators. Calcium and ion channels play a key role in neuronal signaling, and the company’s technology is engineered to restore the brain’s natural rhythms by modulating overactive T-type calcium channels.
Under the deal, the biotech is eligible to receive up to $260 million in milestone payments.
In March, after a short delay Jazz unveiled FDA approval for its wake-promoting drug, Sunosi, with a generic entry for its blockbuster narcolepsy drug Xyrem looming. In 2018, Xyrem sales registered at $1.4 billion, translating to over 70% of total revenue.
Last week, Jazz reported second-quarter revenue and earnings that beat analyst expectations.
In a post-earnings note, Cowen analysts asked whether Jazz would be able to either firmly convince Wall Street that the Xyrem franchise will be more durable, and/or provide a product that investors consider a meaningful diversification of the company’s P&L.
“We understand investors frustration with the essentially sideways stock performance and lack of what appears to be a credible diversification from Xyrem. But we do believe that Sunosi could in fact be the product that more noticeably moves the needle,” they wrote. “(I)n late 2020 the likely introduction of JZP-258 (the lower sodium formulation of Xyrem) should indeed convert and protect this critical franchise, providing more confidence in its durability.”
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