Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of the French biopharma Flamel Technologies (FLML) shot higher by more than 16% today. The apparent catalyst driving this move is the decision by Jazz Pharmaceuticals (JAZZ -1.01%) and its research partner Concert Pharmaceuticals (CNCE) to halt the development of JZP-386, a deuterium-containing analog of sodium oxybate, following a small early stage study.
Flamel is the beneficiary of this news because it is developing a rival once-daily formulation of sodium oxybate delivered via its micropump technology. This delivery system reportedly doesn't disturb a patient's sleep---a problem that currently plagues users of Jazz's Xyrem at the moment.
Jazz was hoping that its experimental compound could help the company maintain its market-leading position in the narcolepsy drug space following the loss of exclusivity for Xyrem in 2020.
So what: Xyrem is an extremely important product for Jazz, meaning that the company is probably exploring every plausible avenue to maintain the drug's market position over the long-term. I therefore think that it's becoming increasingly likely that Jazz may decide to either sign a research agreement with Flamel, or simply buyout the tiny biopharma, to gain access to its micropump technology.
Now what: Based on the press release, I expect Jazz and Concert to explore other potential formulations in order to overcome whatever stumbling block they encountered during clinical testing. But with Flamel closing in on a pivotal late-stage test of its micropump approach, Jazz may have no other choice than to start negotiations sooner rather than later. At the end of the day, Jazz can block Flamel's entry into the market via legal challenges, but the wiser move might be to come to a mutually beneficially agreement. Stay tuned!
