Jazz gambles up to $250M on a long-delayed rare-disease drug

When Jazz Pharmaceuticals ($JAZZ) bought out the rare-disease drug developer Gentium ($GENT) for a billion dollars late last year, the company picked up a new therapy for severe veno-occlusive disease that it went on to launch in Europe last April. Now it's buying back the remaining U.S. rights to the drug--defibrotide, which Gentium had bargained away to Sigma-Tau--for $75 million in cash and up to $175 million in milestones. And that extra cash will be staked entirely on its ability to shove the long-delayed drug through the FDA approval process.

Defibrotide has traveled a long and rocky road. Back in early 2013 Gentium's shares went into a nosedive after the company revealed that regulators in the EU had raised a host of issues on the antithrombotic drug. The Italian company had already been stiff-armed by the FDA way back in 2011, when regulators raised some thorny questions about the "completeness of the datasets for both the treatment and prevention studies. The FDA requested that the company conduct additional quality reviews of the original datasets and databases. The FDA also requested additional details regarding the conduct and monitoring of the trials by the independent review committee."

As a result, Gentium yanked its application and said it would regroup.

Jazz is now betting that they can get the FDA to approve the therapy, and Sigma-Tau's milestones are pegged against the timing of that approval. Jazz will be building its case around trial data that demonstrated an improved survival rate for patients on the drug, though 18% of the patients in the drug arm were forced out of the study due to toxicity.

"While the low valuation ($75m upfront + milestones) will likely come as a surprise to investors, it is important to remember that JAZZ already owned 40% of the economics on US defibrotide," noted Leerink's Jason Gerberry. "The deal looks relatively break-even assuming ~$210m in peak sales (1.5K pts at $140k per patient/yr), which assumes modest off-label use." 

There are no approved therapies for severe veno-occlusive disease in the U.S., in which the small veins in the liver are blocked. The absence of therapies prompted the EU's CHMP to reverse its stand on approval a year ago, even though regulators noted that they didn't fully understand the mechanism of action and fretted that the therapy carries some dangerous side effects.

"The benefits with Defitelio (its trade name) are its effects of defibrotide which increase the breakdown of clots in the blood," the CHMP concluded. "In addition there is experimental evidence that Defibrotide may protect the cells lining blood vessels. The most common side effects are hemorrhage (including but not limited to gastrointestinal hemorrhage, pulmonary hemorrhage and epistaxis), hypotension and coagulopathy."

"This transaction would not only strengthen our global presence, but also demonstrate our commitment to diversify and expand our U.S. commercial portfolio with meaningful new therapies," said Russell Cox, executive vice president and chief operating officer of Jazz Pharmaceuticals, in a statement. "We look forward to ongoing discussions with the FDA as we continue our efforts toward submission of an NDA for defibrotide in the U.S. Patients in the U.S. with severe VOD have a critical unmet medical need, and we believe that defibrotide has the potential to become an important treatment option for these patients."

- here's the release

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