- Jazz Pharmaceuticals has received notice from partner Porton Biopharma terminating its exclusive marketing agreement for Erwinaze when the current deal expires on Dec. 31, 2020.
- Porton is "pursuing better value for money" with a new partnership, and the end of the deal with Jazz shouldn't affect any patients currently taking the blood cancer drug, the company said in a Feb. 12 statement on its website.
- The two companies had been engaged in negotiations on a replacement agreement, but talks have proved unsuccessful so far, Jazz said in a Feb. 12 filing with the SEC. Under the terms of the original deal, Porton had to issue a notice of termination to avoid an automatic 5-year extension.
The loss of a $200 million-a-year drug may not end up hurting Jazz as much as it would appear. Despite the apparent negative implications, there's much more beneath the surface of the failed renewal, analysts said.
Porton has struggled with manufacturing issues, forcing Jazz last year to scale back its promotional and education efforts for Erwinaze (asparaginase Erwinia chrysanthemi). But Jazz has licensed a early-stage recombinant version of the medicine from Pfenex, which is unlikely to have the same supply issues, Evercore ISI analyst Umer Raffat wrote in a Feb. 12 note to investors.
"The [Porton] agreement likely didn't have major utility to Jazz post-2020," Raffat wrote.
And that might be true for Porton, as well, he said. The company may have been weighing the possibility that Jazz might focus on the recombinant version, hurting Porton's cash flow if it had gone ahead with a five-year renewal of their marketing agreement.
The FDA seems "well aware" of the science of these medicines, which may offer a rapid path to approval of a recombinant version of Erwinaze, Cowen analyst Ken Cacciatore wrote in an investor note.
Still, Cowen thinks a deal on Erwinaze will eventually be reached between the two companies. Jazz has done well selling the medicine, and demand might be 30% to 50% higher if the supply problems could be fixed, he wrote.
Porton said it's got a significant new infusion of cash for initiatives to better supply the market. "We look forward to continuing our positive working relationship with Jazz for the next two years while we seek via a competitive process to secure a new partnership," the company said.
In Cowen's models, the loss of Erwinaze in 2021 would remove $15 per share from discounted cash flow. But an agreement that would offer "a more consistent source" for the medicine could add $10 per share to the company's discounted cash flow, Cacciatore wrote.
"We believe that Jazz is taking the appropriate measures," he wrote. Investors seem to agree, as shares in the company rebounded Wednesday from a drop on Tuesday.