Jazz Pharmaceuticals Reports In-Line Q4 Results

Jazz Pharmaceuticals JAZZ reported solid fourth-quarter results and ended 2022 with total revenue of $3.7 billion, representing an 18% increase over 2021. Continued strong performance from Xywav (for excessive daytime sleepiness), Epidiolex (for childhood epilepsy), and Rylaze (for leukemia) has been Jazz’s primary growth driver. We maintain our fair value estimate of $187 per share, and we believe shares are currently trading at an attractive entry point, about 21% below our fair value estimate.

We maintain our no-moat rating and negative trend ratings. Jazz’s no moat is attributed to its reliance on Xyrem, which accounted for 28% of 2022 net product sales. Hikma Pharmaceuticals launched a generic version of Xyrem in January 2023 that will negatively impact Xyrem’s sales throughout our 10-year explicit forecast period. We also expect returns will be diluted due to Jazz’s $7.2 billion acquisition of GW in 2021 and patent losses over the next several years for some of Jazz’s other drugs. We continue to forecast that growth from Jazz’s other products—such as Xywav, Rylaze, Epidiolex, and Zepzelca (for small cell lung cancer)—will somewhat offset the negative impact from the GW acquisition, but we believe the intangible assets in Jazz’s portfolio will weaken over the next five years as its patents expire.

We appreciate that management has been focused on diversifying its portfolio, and it has received three drug approvals since June 2020: Xywav, Rylaze, and Zepzelca. Revenue from GW’s products, Epidiolex and Sativex, contributed over $750 million in revenue in 2022. Epidiolex is a cannabidiol for the treatment of severe, rare forms of epilepsy. We believe Jazz’s acquisition of GW Pharmaceuticals will prove beneficial as we forecast Epidiolex has blockbuster potential thanks to its strong efficacy and robust launches in the U.S. and Europe.