Jazz Pharma’s JZP-6 Faces Setback

Jazz Pharmaceuticals Inc. (JAZZ) recently announced that the US Food and Drug Administration’s (FDA) joint advisory committee voted against the approval of the company’s fibromyalgia treatment, JZP-6. The agency’s Arthritis Advisory Committee and the Drug Safety and Risk Management Advisory Committee voted 20-2 against the drug, saying that the risks of JZP-6 outweighed its benefits.

The FDA advisory committee also asked Jazz Pharma to review the Risk Evaluation Mitigation Strategy for JZP-6. Although the agency is not required to do so, it usually follows the advice of its advisory panels. Given the negative feedback from the FDA’s advisory committees, we believe the FDA will most likely delay approval of the product. A response from the agency is due by October 11. Jazz Pharma intends to work closely with the FDA during the review process.

The company has an agreement with UCB Pharmaceuticals (UCBJF) under which UCB Pharma has the right to market JZP-6 as a fibromyalgia treatment in 54 countries outside the United States.

We currently have a Neutral recommendation on Jazz Pharma, which is supported by a Zacks #3 Rank (short-term Hold rating). Jazz Pharma has two products on the market, Xyrem for the treatment of excessive daytime sleepiness and cataplexy in patients with narcolepsy and Luvox CR for the treatment of obsessive compulsive disorder and social anxiety disorder. Xyrem, the sales of which have been accelerating since the last few quarter, is the main revenue generator for Jazz Pharma with fiscal 2009 sales of $31.6 million, accounting for 83% of total revenue.

The company also has several other candidates in its pipeline, which are being developed for indications as diverse as restless leg syndrome, seizures, epilepsy and bipolar disorder. However, we note that these candidates are still several years away from commercialization.

A delay in the approval of JZP-6 would be a disappointment for the company and even if the drug is approved, we believe it will face stiff competition from players such as Pfizer Inc.’s (PFE) Lyrica, Eli Lilly and Co.’s (LLY) Cymbalta and Forest Laboratories Inc.’s (FRX) Savella, for the treatment of fibromyalgia.

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