No-Moat Jazz’s Acquisition of GW Helps Diversify Portfolio; FVE of $140, Shares Fairly Valued

After taking a fresh look at Jazz Pharmaceuticals, we’ve relaunched coverage with a fair value estimate of $140 per share, a no-moat rating, and a negative moat trend. Jazz is currently trading in 3-star territory about 11% below our fair value estimate. In 2005 Jazz added its leading drug, Xyrem (for narcolepsy), into its portfolio with the acquisition of Orphan Medical for about $123 million, which was a great price for the then newly approved drug that became a blockbuster. We do not believe Jazz possesses an economic moat given its reliance on Xyrem, which accounted for 74% of Jazz’s 2020 revenue. Generic entry of Xyrem is now on the horizon, leaving a cloud of uncertainty for the company.