UPDATE: Citi Initiates Coverage on Jazz Pharmaceuticals

According to a research report published earlier today, Citi has initiated Jazz Pharmaceuticals JAZZ with a Buy rating and $60 PT. In the report, Citi commented, “We project 2011-14E earnings CAGR of 16%, which is 2x the growth of its specialty pharma peer group (+8%) & faster than the overall market (S&P 500: +11%). However, Jazz has traded at discount range of -5% to -43% over the last 2 years on a 12 month forward P/E basis. Our PT assumes JAZZ trades at ~13x our 2013E EPS of $4.58, above its 2-year median of 10.3x or at a 1% discount to its specialty pharma peer median. Our DCF analysis indicates ~$65 of intrinsic value per share, with our sensitivity analysis showing +$3 to +$4 in equity value (EV) from a +1% change in terminal growth & +$4 to +$5 in EV from a +1% change in WACC. We believe the stock overly expresses Xyrem patent risk & underestimates its earnings growth potential.” Jazz Pharmaceuticals closed yesterday at $49.47.