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Could JZP-110 Offset Xyrem’s Probable Sales Decline?

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JZP-110

Jazz Pharmaceuticals (JAZZ) acquired the rights to develop, manufacture, and market JZP-110 from Aerial BioPharma in January 2014. The drug is being developed for the treatment of excessive daytime sleepiness in narcolepsy and in obstructive sleep apnea. Jazz is exploring further label expansion for the drug.

JZP-110 has orphan drug designation in the United States for narcolepsy. Narcolepsy and obstructive sleep apnea are diseases with significant unmet need.

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Update on clinical development of JZP-110

The company is conducting three phase 3 trials for the drug. During the phase 2 results, the drug proved to be significantly linked to maintaining wakefulness. Upon positive outcome of the phase 3 trial, Jazz plans to submit a new drug application.

If a generic version of Xyrem becomes available, there would be a major drag on Jazz’s top line, as Xyrem earns ~72% of the company’s total revenue. Jazz plans to offset Xyrem’s revenue decline with JZP-110.

Earlier companies that have brought in next-generation drugs to offset declining flagship product sales are Roche (RHHBY), Sanofi (SNY), and Novo Nordisk (NVO). Roche brought in Gazyva to replace falling sales of MabThera, and its Perjeta and Kadcyla launches were meant to replace the declining sales of its blockbuster drug Herceptin. Novo and Sanofi have adopted similar strategies.

With changing market dynamics, the share price of a pharmaceutical or biotechnology company fluctuates. As a result, it is often risky to directly invest in them. To remain safer, investors could opt for the ProShares Ultra NASDAQ Biotechnology ETF (BIB). 1.3% of its total holdings are invested in Jazz Pharmaceuticals.

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