Jazz Pharmaceuticals PLC shares surged as much as 6.6% in premarket trade on Thursday after the company said it had reached a settlement with Hikma Pharmaceuticals PLC over Hikma's plans for a generic version of Jazz Pharma's narcolepsy drug Xyrem. The agreement allows Hikma to sell an authorized generic of Xyrem starting in 2023 but also grants Jazz a royalty on net sales. Hikma can sell the authorized generic for six months to five years total, and Jazz receives a "substantial" increase in its royalty rate if Hika sells the drug for more than a year. Hikma will also pay Jazz to supply the authorized generic drug, and reimburse Jazz for some distribution costs and part of the cost of marketing the authorized generic drug, which will happen through Jazz's program. After the end of the authorized generic period, Hikma can sell its generic drug on its own. Janney upgraded Jazz on the settlement to buy, saying "while this comes about three years earlier than previous settlements with other generic filers, it eliminates the risk of an earlier launch." Jazz is also receiving royalties, has the option to launch its own authorized generic and can allow other authorized generics after Hikma's 180-day exclusivity period, Janney analyst Ken Trbovich said. Jazz shares were valued at $140.65 as of Wednesday's close. Shares have surged 22.1% over the last three months, compared with a 3.3% rise in the S&P 500 .
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