Jazz Pharmaceuticals (NSDQ: JAZZ) is hitting the dance floor with the development of new drugs that are orchestrating strong earnings. This rare combination of profitability and growth is hard to find in the pharmaceutical world. Most large pharma companies are too big for newly approved drugs to move the needle much on growth, and most young biotechs are losing money.

The company’s primary drug, Xyrem, treats narcolepsy and excessive daytime sleepiness. Xyrem sales have grown from $39 million in 2007 to almost $1.5 billion in the past year. Xyrem makes up 75% of Jazz’s sales, but new drugs are coming.

Additional sales from a newly approved drug used to treat a deadly side effect from stem cell transplants, as well as a leukemia drug awaiting the Food and Drug Administration’s approval, should drive the stock price higher. Continued trials for new uses of its sleep disorder drug should help protect Xyrem from generic competition.

Revenue and profit growth has been slow but steady. Jazz’s earnings are expected to grow 11% in 2017 and 21% in 2018, as it reaps the fruits of its drug development. My $175 target is reached by multiplying 2018 estimates with a price-to-earnings ratio of 13.

Target: $175

Buy Jazz Pharmaceuticals up to $130.

Jazz has been a public company since 2007 but has flown under the radar as it quietly accumulated a strong portfolio of drug candidates. For example, Xyrem came via the acquisition of a smaller drug company in 2005. Other drugs have been developed internally or bought from small biotechs.

Additional sales from newly approved drug Defitelio, which treats a deadly side effect for patients undergoing stem cell transplants, will help boost revenue this year, and Vyxeos, which Jazz bought in May 2016, may become a promising drug for leukemia. Vyxeos delivered strong results in its phase III trial. A phase III trial is the last one before the data is submitted to the FDA for the all-important approval.

Fears of generic competition for Xyrem, slated to hit this year, sent the stock down 15% in 2016. However, the company’s progress in trials using Xyrem for additional sleep disorders has restored confidence in sales targets. FDA approval for a new use helps insulate a drug against price cutting from generic drug manufacturers.

Jazz’s robust cash flow, which amounts to more than $500 million per year, allows it to pay down the debt accumulated from acquisitions while giving it plenty of room to invest in new drugs.