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12:00 AM
 | 
May 07, 2012
 |  BioCentury  |  Strategy

Jazz's big band sound

Jazz continues specialty acquisition strategy, but will shift focus to R&D buys

A 2008 decision to concentrate on its commercial business has paid off for Jazz Pharmaceuticals Inc. The company has quadrupled its revenues, reduced its debt and increased its number of marketed drugs tenfold with two recent acquisitions. Jazz now plans to use that track record to woo specialty pharmas with R&D stage assets.

Jazz was formed in 2003 to in-license or acquire assets close to market. By 2008, the company had a pipeline of Phase II and Phase III programs, but financial constraints and clinical setbacks caused it to essentially shut down development to focus on growing the revenues of narcolepsy drug Xyrem sodium oxybate.

Over the next four years, Jazz increased its product revenues to $272 million from $64.6 million. While part of the growth was due to steady price increases for Xyrem, the company also grew prescriptions by low double-digit rates each year.

Jazz credits its commercial success to clinical acceptance of Xyrem, outreach to patients and prescribers, and the addition of an experienced chief commercial officer.

After two years of strong revenue growth, Jazz used the money to pay down its debt and did two specialty acquisitions, including its purchase of Azur Pharma Ltd. for stock, which closed in January, and last month's proposed cash acquisition of cancer company EUSA Pharma Inc.

The two deals give the company a foothold in Europe and increase Jazz's marketed products from two to 22.

To accumulate more assets, Jazz will be competing with other specialty pharma buyers like Teva Pharmaceutical Industries Ltd. and Valeant Pharmaceuticals International Inc. Nonetheless, Jazz believes its revenue-generating track record will be enough to convince potential sellers.

Buckling down

Jazz has always been focused on in-licensing or acquiring assets rather than doing its own discovery.

In 2004, with only one undisclosed compound in development, Jazz raised $250 million in a series B round - one of the largest venture rounds in the last decade. The financing was driven by the founders' experience at drug delivery company Alza Corp., which was acquired by Johnson & Johnson for $12.3 billion in stock in 2001 (see BioCentury, March 29, 2004).

By 2005, Jazz had in-licensed six programs in clinical or preclinical development and had acquired Xyrem, its first marketed product, in a takeout of Orphan Medical Inc. for $122.9 million in cash (see BioCentury, April 25, 2005).

Xyrem was approved to treat cataplexy associated with narcolepsy, had $10.6 million in sales for 2004 and was expected to have 2005 sales of $20 million.

An sNDA for Xyrem to treat excessive daytime sleepiness (EDS) associated with narcolepsy was under review, and was added to the drug's label at the end of 2005.

By 2008,...

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