Should You Buy Jazz Pharmaceuticals Stock After Its Actio Acquisition?

Jazz Pharmaceuticals (NASDAQ: JAZZ) just spent $820 million to acquire Actio Biosciences, giving the company control of a potential first-in-class treatment for a devastating form of childhood epilepsy. The deal closed on Sept. 15.

That $820 million was paid up front, but Actio shareholders are eligible for another $500 million in approval and sales milestone payments if ABS-1230, its experimental oral drug for KCNT1-related epilepsy, performs as hoped. That's potentially more than $1.3 billion for a drug that isn't approved yet. But Jazz didn't buy a random early-stage biotech. It bought one with a drug candidate that fits directly into one of its strongest existing businesses.

Building on Epidiolex

Jazz already has a major presence in the rare epilepsy space through Epidiolex (a medication used to treat severe types of epilepsy), which generated $292 million in sales in Q2, up 16% year over year. ABS-1230 could expand that franchise into an area where there are virtually no treatment options yet.

KCNT1-related epilepsy is an extremely rare genetic disorder affecting roughly 2,500 patients in the U.S. Most patients develop the disease during infancy and can experience dozens or even hundreds of seizures every day. Existing antiseizure medications often provide limited benefits to those patients, and there are currently no FDA-approved treatments specifically for the disease.

Early clinical trial results for ABS-1230 are encouraging, though. Children treated with ABS-1230 in a proof-of-concept study experienced what Jazz described as meaningful reductions in seizures. The drug has also received FDA Fast Track, Rare Pediatric Disease, and Orphan Drug designations, and has been accepted into the agency's Rare Disease Evidence Principles program.

Image source: Getty Images.

Jazz believes its ongoing Phase 1b/2a study could potentially serve as a registrational trial supporting a new drug application submission to the Food and Drug Administration. That could shorten the path between this acquisition and the commercialization of ABS-1230, if the clinical data holds up.

Jazz can afford the bet

A payout of $820 million up front for an early-stage drug candidate isn't cheap, particularly when the potential patient population is so small. Fortunately, Jazz isn't depending on ABS-1230 to keep its business growing.

In the second quarter, its revenue grew 16% year over year to a record $1.2 billion. Sales of Xywav (a treatment for serious sleep disorders) increased 13% to $471 million, while sales of Epidiolex increased 16% to $292 million. Management subsequently raised its 2026 revenue guidance range to $4.6 billion to $4.75 billion.

The company also generated $824 million in operating cash flow during the first six months of 2026. That cash generation gives Jazz room to keep acquiring pipeline assets while funding its existing clinical programs.

Worth noting: The Actio deal came after Jazz spent $944 million up front in 2025 to acquire Chimerix, a biopharmaceutical company with some pretty promising oncology assets. Indeed, Jazz is increasingly using acquisitions to build growth beyond its established sleep and epilepsy franchises.

There are still risks

Early data from the seizure studies may look promising, but a small proof-of-concept study is very different from demonstrating efficacy across a larger patient population. Clinical trial setbacks could turn that $820 million investment into an expensive mistake.

Jazz has already been reminded of that risk, too. In June, a phase 3 trial evaluating chemotherapy medication Zepzelca as a treatment for second-line small-cell lung cancer failed to meet its primary overall-survival endpoint.

There's also the price Jazz is paying for Actio. KCNT1-related epilepsy affects only about 2,500 U.S. patients. Jazz may eventually study ABS-1230's potential as a treatment for other types of genetic epilepsies. Successes in those indications could substantially increase its commercial opportunity, but in those indications, it's even further from generating revenue. Although given what Jazz paid, I suspect it believes this particular treatment has the potential to reach far beyond KCNT1-related epilepsy.

Should you buy Jazz Pharmaceuticals?

The Actio acquisition alone isn't enough to justify investing in Jazz Pharmaceuticals. There's just too much clinical work remaining for ABS-1230. But it does make the company's long-term epilepsy pipeline more interesting. And to be fair, you're not buying a biotech whose future depends solely on one experimental drug. Jazz already generates billions of dollars in annual revenue, has growing products in Xywav and Epidiolex, and expects $4.6 billion to $4.75 billion in revenue this year.

At roughly $243 per share, Jazz trades at about 9.5 times forward earnings. That's a reasonable valuation for a profitable biotech growing its top line at a double-digit percentage pace, particularly if its newer assets eventually contribute meaningful sales.

Overall, if you're comfortable with the level of risk inherent to investing in biotechs, Jazz looks increasingly attractive as a long-term growth stock, and the Actio acquisition adds another potential catalyst.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.