BOSTON ( TheStreet) -- This week's Biotech Stock Mailbag opens with an email from Samuel E.: "Adam, Jazz Pharmaceuticals ( JAZZ) is holding up really well after the negative vote at the advisory panel meeting. Why is that and do you still like the stock?" I'm a bit surprised, pleasantly, with Jazz's resiliency, too. As I write this column on Thursday, Jazz shares are trading around $9.45, just a buck or so below where the stock was trading before the FDA's advisory panel voted not to recommend approval for the company's fibromyalgia drug on Aug. 20.
Jazz shares dipped into the $7 range immediately following the FDA panel vote, which was a buying opportunity for some investors because Jazz's base business (selling the same drug, Xyrem, for narcolepsy/cataplexy) supports a higher valuation. Jazz's revenue and profits give it an important cushion to deal with regulatory setbacks, unlike many drug companies in similar situations that have little or no safety nets. Forget about fibromyalgia for a moment; Jazz can earn $1 a share next year easy on $200 million in revenue in the base business. (Current consensus calls for Jazz to earn $1.19 on $196 million in revenue.) That's worth at least $9 a share. To move appreciably higher, Jazz needs to get Xyrem (or JZP-6 or Rekinla, whatever the company chooses to call the drug) approved for fibromyalgia. Obviously, that goal became more muddled after the disappointing FDA advisory panel vote -- a 20-2 lashing against approval. The optics of the vote look bad and were not what I was expecting, but approval is attainable if the FDA has a clear head and looks beyond the hysterics and misstatements made by some of the more vocal experts on the panel. An approval of Xyrem for fibromyalgia is not going to lead to 55-gallon drums of the "date rape" drug GHB flowing through the streets of Middle America, as one of the panel members claimed. Jazz miscalculated by proposing a separate and somewhat more liberal risk management plan and a different brand name for the fibromyalgia indication. That was a mistake and the FDA clearly wants changes, which Jazz should readily agree to. Use a single brand name for both the narcolepsy and fibromyalgia indications. Consolidate the risk management plans and if necessary, limit the number of specialty pharmacies that can distribute the drug.