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.”

So­cial im­age: Shut­ter­stock

 

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Biogen head of R&D Al Sandrock, Sangamo CEO Sandy Macrae

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Kathy Reape

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