Jazz Pharmaceuticals (NASDAQ: JAZZ) is leaning more toward generating growth from its group of oncology drugs to expand the company’s portfolio.
Several drugs were approved recently, including two treatments in 2025 – Zepzelca to treat metastatic small cell lung cancer and Modeyso to treat a rare brain tumor.
Diversifying its portfolio with acquisitions has proven to be a good strategy for the company to produce more profit. Jazz Pharmaceuticals generated revenue of $1.2 billion in the fourth quarter, which represents 10% year-over-year growth and $4.3 billion in revenue in 2025, up 5% from the prior year.
Shares of the $11.4 billion market capitalization company rose by 35% over the past year.
The company has focused on diversifying from its “core sleep franchise with seizure drug Epidiolex reaching blockbuster status at nearly $1.1 billion in annual sales,” wrote Rachel Elfman, an equity analyst for Morningstar.
More deals to diversify profit
Jazz Pharmaceuticals needs to grow the number of drugs in its pipeline since it has relied too heavily on its rare sleep franchise, led by Xywav, to increase its profit margin. The rare sleep franchise that treats narcolepsy and excessive daytime sleepiness in patients is projected to reach $1.8 billion in sales in 2026, she added.
But during the next decade, revenue from the drug will decline from 39% of total sales of the company to 19% due to pressure from competitors, she added.
“We forecast a five-year compound annual growth rate of about 7%, supported by strong uptake and commercial success for Jazz’s newly launched assets,” Elfman said.
In the past, Jazz Pharmaceuticals has relied on acquiring larger companies that have drugs that were recently approved and launched to boost the number of drugs in its portfolio.
In May 2021, Jazz bought GW Pharmaceuticals for $7.2 billion to acquire its leading product, Epidiolex, a cannabidiol to treat rare and very severe forms of epilepsy.
The expensive acquisition has proven to be a good decision since the deal contributed $1.075 billion to Jazz’s 2025 revenue, “largely driven by Epidiolex,” she wrote.
Since the deal closed in 2021, the management team of the pharmaceutical company has been working on lowering its net leverage ratio, which was 4.9 times. By the end of 2025, Jazz’s net leverage ratio was down to 1.5 times, Elfman said.
While Jazz Pharmaceuticals has targeted the purchase of larger companies with blockbuster drugs, the company could shift its focus now, and the management team could pursue smaller deals.
“Jazz is in a decent financial position thanks to historically strong cash flow generation from its core sleep franchise,” she said. “We believe Jazz should prioritize expanding its portfolio to ensure its future growth, given its reliance on its core sleep franchise.”
At least two drugs, Ziihera to treat HER2‑positive advanced gastroesophageal adenocarcinoma, and Xywav to treat rare sleep disorders, will generate several billion dollars in revenue in the next few years. In 2021, the company received approval for Rylaze for acute lymphoblastic leukemia.
The company is planning to complete U.S. filings for Ziihera in the first quarter, which was approved in November 2024 for previously treated advanced HER2‑positive biliary tract cancer. Sales of Ziihera are estimated to reach over $1 billion by 2031and could contribute 30% of Jazz’s total revenue by 2034.
“Ziihera’s positive phase 3 data could establish it as the new gastroesophageal adenocarcinoma (GEA) standard of care,” Elfman said.
Jazz Pharmaceuticals is relying less on its sleep disorder drugs to contribute to sales growth, with only one of them, Xywav, in the mix now. Xywav, Epidiolex, and Rylaze are three drugs that have “continued to be Jazz’s primary growth drivers thanks to their robust commercial success that has seen strong prescriber and patient adoption,” she said.
As the number of drugs in Jazz Pharmaceuticals’ portfolio rises, the company’s diversification strategy could generate more growth and higher profits.
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