Up 25% in 2 Months, This Healthcare Stock Could Climb Even Higher
For a pharmaceutical company that relies heavily on one product to generate revenue, the challenge from generic rival drugs can be devastating. That is the situation Jazz Pharmaceuticals (NASDAQ: JAZZ) might encounter in a few years' time. The company's top-selling product, the sleep disorder drug Xyrem, will face generic competition from Hikma Pharmaceuticals, a company whose subsidiary -- West-Ward Pharmaceuticals -- was granted the right to sell a generic version of Xyrem starting in 2023. During the third quarter, sales of Xyrem were a little over $425 million and accounted for 79% of Jazz's total revenue, which means unless the company can find a way to decrease its top line exposure to Xyrem, its revenue could decrease significantly once this generic rival hits the market.
Still, 2023 isn't exactly around the corner, and as far as the current year is concerned, Jazz has been performing relatively well on the stock market, especially over the past two months. The company's shares are up by 25% since mid-October. The main reason behind this performance is that Xyrem keeps on generating double-digit percentage sales growth: During the third quarter, sales of Xyrem were up by 19% year over year, which led to the company's top line growing by 15% year over year. During Jazz's second quarter, sales of Xyrem climbed by 16% compared to the year-ago period, and its total revenue increased by 14% year over year.
Jazz's attempts to diversify its revenue stream are also noteworthy. And with that in mind, here are three reasons why, despite the stiff competition Jazz's current top-selling product will eventually face, the stock is worth a second look.
Source Fool.com
