It’s a stock market darling, delivering recurring double-digit revenue growth, a growing pipeline, regularly listed among prime M&A targets in the specialty pharma sector . . . and it’s Irish.
Jazz Pharmaceuticals is one hot property. Twelve years after it was founded, it has bounced back from a funding crisis that threatened its existence during the financial crash to a position where the stock was trading at a new high earlier this week.
The first thing you notice about the company is its name. Where pharma companies often resort to obscure derivations of product names for their corporate branding, Jazz is concise, non-medical and presents easily understood connotations.
That suits co-founder, chairman and chief executive Bruce Cozadd just fine.
Cozadd is a music fan himself. Back in 2003, he and his co-founders felt their ambitions for the company mirrored the dynamics of jazz performance.
“We liked that ‘jazz’ is a combination of individual excellence but plays well as a group,” he says. “Jazz music requires you to pay a lot of attention to the other musicians . . . You actually have to listen to what the other person does and respond to it.
“So individual excellence and plays well as a group were metaphors. The other was improvisation – or what we call innovation in business – amidst structure. Jazz musicians do improvise, but they do so over a known structure of the music, which is why they can do it together.”
Jazz, the company, specialises in specialty pharma for what are known as “orphan disease areas”.
“We tend to specialise in diseases where there is a relatively small group of patients, a relatively small group of physicians, and a devastating disease where therapy really does make a difference,” says Cozadd.
In 2011 Jazz acquired Dublin's Azur Pharma in a $500 million (€452.5 million) all-share deal that saw the company move its corporate HQ to Ireland. Then its focus was on sleep, especially narcolepsy (the condition where people fall asleep in the middle of the day) and psychological conditions, including schizophrenia. Azur was also involved in therapies for psychological conditions alongside pain treatment.
It was a landmark deal for both companies. While Jazz’s subsequent M&A activity has been ever more ambitious in scale financially, Cozadd says the Irish deal remains a game-changer, not least for the fact that it turned a largely one-product business focused solely on the US market into a group with a broader portfolio and an international outlook.
In 2012, a few months after completing the Azur deal, Jazz acquired Eusa Pharmaceuticals for $700 million, followed by Italian group Gentium in a $1 billion move in late 2013. With each successive purchase, Jazz – has added a key product to its portfolio.
The Eusa deal marked a move into haematology/oncology. It also brought on board Erwinaze, a treatment for acute lymphoblastic leukaemia.
“Acute lymphoblastic leukaemia is the most common childhood cancer,” says Cozadd. “It’s 90 to 95 per cent curable with the right therapies. One of those therapies sometimes produces an allergy in these kids. If that happens, we have the drug you can take if you are allergic to the first one that allows you to complete that curative course of therapy.”
Securing US permission
The pursuit of haematology drugs was also behind the Gentium deal. Defitelio was the Italian company’s lead product. It is currently on the market in Europe and Jazz is in the process of securing permission to sell it in the US.
“It treats a complication of stem cell transplants,” Cozadd says. “If you are undergoing intensive therapy and ultimately go in for a transplant, the hope is that it is curative. But in a meaningful percentage of patients, they get a life threatening complication, called veno-occlusive disease.
“If they get that complication, there is about an 80 per cent mortality rate and we have the only drug that’s been shown to meaningfully improve survival in that patient group.”
Despite the acquisitions, Xyrem (a narcolepsy drug, acquired in 2005 that reduces daytime sleepiness) remains the main revenue driver in the group and its fastest growing product, accounting for nearly 70 per cent of sales and 30 per cent year- on-year growth.
Its dominant contribution doesn’t faze Cozadd one bit.
“The goal in my mind is not to bring Xyrem down to a certain percentage of revenues,” he says. “I would like Xyrem to be as successful as it can be. I would just like to have other growth drivers, too.”
He points to the recent success of Erwinaze and Defitelio as well as prospects for JZP-110 – a late-stage pipeline drug in the sleep space, looking to address obstructive sleep apnea, which analysts suggest could hit peak sales of $500 million, assuming it makes it to market.
“And we would like to add even more to the company over time,” says Cozadd. “That really is the goal – diversified growth drivers.”
Cozadd was first fired up with the idea of working in the biotech industry thanks to an inspirational biology teacher and an accident of timing. That was in the late 1970s and early 1980s, when the biotech revolution was just kicking off.
“There were best-selling books [on biotech] and it was in the popular press,” he says. “The combination of a great teacher and an exciting new field captured my attention.”
The right balance
Before starting college, he had the good fortune to meet the chief executives of two early biotech companies. From each he heard the same message: companies in this young industry were being run either by people who understood business but knew nothing about managing R&D, or by brilliant scientists who knew nothing about business.
“Some day we are going to have people who can do both, they said, and I thought I want to be that person,” Cozadd recalls.
As a first step, he chose Yale to major in molecular biology, biochemistry and economics, a balance of business and science that he continued in later post-grad studies at Stanford.
After college, it was to Wall Street, not the lab, that Cozadd went. He worked in the financing of mergers and acquisitions – but all for life science companies
In 1991 he joined Alzo, a pharma company that was much like the Jazz of today in many respects. He eventually served as chief financial officer and then chief operating officer. Then, after Johnson & Johnson acquired the business, he decided to go his own way in 2001.
He used Alzo as a model when it came to setting up Jazz,
“The story of the founding of this company is different from the founding of other companies,” Cozadd says. “Most are founded around a disease, a molecule, a patent, a technology. I don’t know of many companies that were really founded around this idea of ‘I know what I want the corporate culture to be, I can tell you what it is going to feel like to work for this company, before I can tell you what products we are going to have.’”
The success of that, in Cozadd’s eyes – as much as the development and marketing of novel therapies – is the rehiring of many people who had to be let go in 2008, when a funding crisis and frozen capital markets threatened to collapse the then unprofitable business. “I am very proud of that,” he says.
Top takeover target
Jazz now employs 850 people and for the past few years has been consistently named as a top takeover target in the sector during the latest cycle of industry consolidation. The thought doesn’t alarm Cozadd, nor is he resigned to it.
“We want to be seen as a company that is desirable. If desirable means you have good products, good employees, good prospects, good pipeline, of course you want to be on that list.
“But you also want to have your own strategy, which should make your shareholders comfortable that, if you continue to operate according to your plan, you will create value. Then your shareholders are not dependent on selling as the only way to realise value.”
Jazz’s relocation to Ireland is an example of corporate inversion, a practice that has attracted significant negative comment at the highest levels of US government. But the company has managed to stay clear of the debate.
In part, that was due to its size but also, Cozadd argues, Jazz has gone much further than simply using Ireland as a convenient tax base.
"When we merged with Azur, it had 20 staff working in Ireland," he says. "We now have approaching 100. We also have the manufacturing plant in Athlone.
“If tax were the only thing we wanted, we would not be increasing headcount here or locating facilities here. This has become an important hub for us for what we do both in Europe as well as the US. It has fit into our overall growth in a very strategic way.”
Cozadd is comfortable with the integration of the substantial acquisitions over the past three and a half years, and he has no intention of limiting the company’s ambitions at this stage.
“We have two core business units right now: sleep and haematology/oncology,” he says. “We are looking at the possibility of adding yet another area of therapeutic focus. We’d like to do that in another area that meets the same criteria that we have for our first two. Meaning that there are great commercial products that we can bring to the market today, but also an area where we can continue to develop new products.
“And if it fits our business model, then I think there are some of our strengths that we can share across therapeutic categories.”
Working in the specialty pharma space, pricing and cost are recurring issues. Developing a drug for a smaller patient population costs just as much as for a larger group – and getting that money back means the price of treatment is high.
“The reason we are in business is to help patients,” says Cozadd. “And if they do not have access to our products, we are not achieving what we want to achieve, so price and access is always a concern.
“I focus on two things. Is it clear the products we have deliver real value to patients, that the problem we are helping to address is a serious problem, and that our drug really does address it – not that it makes a some very small difference, but that it really does change things for the better?”
His experience is that, in general, most healthcare systems want to pay for those kind of drugs. But he argues also that pricing and reimbursement schemes must reward innovation.
Risking billions
“We are seeing breakthroughs in a number of areas of medicine right now, unprecedented cure rates. That has happened because people have been willing to risk billions of dollars to develop those therapies.
“And part of what they assume is, if they do that, there is the prospect, assuming success in development and a good commercial launch, that you can recoup the investment, adjusted for risk, and provide a return to the people who risk capital to do that.
“I think people should complain a little less about prices and be thankful these new therapies have come to market and then, yes, after a period of time, competition and generics should brings prices back down.”
For now, though, pricing is not an issue. The success of its therapies mean Jazz has recently been able to increase the price of Xyrem even as it grows its reach.
"We're in the fortunate position that our core products are growing and we have a pipeline that we are excited about," says Cozadd. "The combination of organic growth, our pipeline, and what we can do in deals makes us confident that we have a strategy that will deliver continued growth, which is good for our shareholders, our employees and our patients." CV Name: Bruce Cozadd
Position: Co-founder, chairman and chief executive of Jazz Pharmaceuticals
Age: 51
Family: Father to three children
Interests: Music, not surprisingly, and travel. Something you might expect: as founder of a company named Jazz, Cozadd has a passion for music of all sorts, especially musical theatre
Something that might surprise you: Before Cozadd entered the world of biopharmaceutical development and production, he worked on Wall Street.
