Jazz Pharma Upgraded On Bullish Pipeline Forecast, Earnings Growth Visibility, M&A Potential

Morgan Stanley named three reasons for its positive opinion on Irish pharma company Jazz Pharmaceuticals PLC JAZZ in a Monday report. 

The Analyst

Analyst David Risinger upgraded shares of Jazz Pharma from Equal-weight from Overweight and increased the price target from $167 to $183.

The Thesis 

Comments from Jazz Pharma on March 13 implied conviction in strong 2018 growth and M&A optionality, Risinger said.

A potential competitive threat from Avadel Pharmaceuticals PLC (ADR) AVDL to Jazz' No.1 drug Xyrem appears to be significantly delayed, the analyst said. 

Jazz's two new drug candidates — JZP-258, a version of Xyreum with 90 percent lower sodium Xyreum, and solriamfetol for wakefulness — are generating increasing enthusiasm, the analyst said. The analyst's increased confidence in JZP-258 succeeding in a Phase 3 trial in early 2019 stems from the likelihood that the company may choose not to file JZP-507, which is a 50-percent lower sodium Xyrem, in mid-2018.

"Additionally, we expect FDA to approve novel wakefulness drug solriamfetol, which appears to have a best-in-class profile, in December 2018," Risinger said. 

Morgan Stanley is confident that Jazz Pharma will be able to extend the durability of its Xyrem franchise and add future growth drivers. The markets will come around to this view over time, Risinger said. 

Jazz, which traded in the $130-$155 range for the past eight months, is likely to break above the range on strong earnings growth visibility; the potential for multiple expansion amid investor confidence in the extension of the Xyrem franchise durability; and potential M&A optionality, according to Morgan Stanley. 

The Price Action

Jazz Pharma shares are up over 14 percent over the past year.

The stock was up 3.1 percent after the open Monday at $158.86. 

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