Jazz Pharma (JAZZ) Beats on Q3 Earnings, Lowers Sales View

Jazz Pharmaceuticals plc JAZZ reported adjusted earnings of $3.58 per share for third-quarter 2018, which beat the Zacks Consensus Estimate of $3.33. Earnings rose 11% from the year-ago figure.

Total revenues in the quarter rose 14% year over year to $469.4 million owing to higher sales of Xyrem and Defitelio. However, sales missed the Zacks Consensus Estimate of $482 million.

Shares of the company were down around 14.6% on Nov 7 as the company lowered its sales guidance for the year. However, so far this year, the stock has increased 4.2% against the industry’s 2.7% decrease.

Quarter in Detail

Net product sales in the quarter increased 14% from the year-ago quarter to $465.2 million. Royalties and contract revenues has risen 7.5% to $4.2 million in the third quarter.

Xyrem (cataplexy and excessive daytime sleepiness [“EDS”] in narcolepsy patients) sales gained 17.6% year over year to $357.3 million in the quarter. Sales were driven by a 9% rise in bottle volume growth. The average number of active Xyrem patients increased 6% in the third quarter.

Erwinaze/Erwinase (acute lymphoblastic leukemia [“ALL”]) revenues were $41.1 million, down 16.3% year over year. The decline was due to the ongoing constrained manufacturing capacity at the company’s manufacturing partner for the drug. The company expects supply disruptions to continue for the rest of 2018 as well as in 2019.

Prialt (non-opioid pain) revenues also fell almost 27% year over year to $5.8 million. In September, Jazz sold Prialt to small drugmaker, TerSera Therapeutics for $80 million in cash, of which Jazz received $50 million upon closing and the rest $30 million will be paid in two equal tranches over the next two years.

Defitelio sales rose 15.9% year over year to $36.2 million in the quarter. Please note that Defitelio product sales vary from quarter to quarter in both in the United States and EU markets because Defitelio treats an ultra-rare acute condition —hepatic veno-occlusive disease (“VOD”).

Vyxeos generated sales of $21.0 million compared with $28.0 million in the previous quarter. Vyxeos sales were lower than management’s expectation as the drug continues to face challenges related to its adoption as a central therapy in eligible patients with acute myeloid leukemia (“AML”).

The acute myeloid leukemia drug was launched in the United States in August last year. In August 2018, the drug received approval in the EU for the same indication and the company initiated a rolling launch.

Other product sales declined 37.3% to $3.8 million.

Adjusted selling, general and administrative (SG&A) expenses rose 32.1% to $136.9 million due to higher expenses related to business expansion, including costs to support the launch of Vyxeos and the potential launch of solriamfetol (JZP-110), if approved in the United States.

Adjusted research and development (R&D) expenses increased 9% to $46.7 million, mainly due to escalated expenses related to the company’s pipeline and regulatory activities.

Pipeline Update

Jazz is striving to expand Xyrem’s label. In October, the company announced FDA approval of a supplemental new drug application (sNDA) for the same to include the pediatric indication. In the same month, the company also settled a patent litigation, related to a marketing application for the generic version of Xyrem with Amneal Pharmaceuticals AMRX. Following this settlement, there is no pending patent litigation related to Xyrem.

Solriamfetol (JZP-110) is under review in the United States for the treatment of excessive sleepiness (“ES”) in adult patients with narcolepsy or obstructive sleep apnea (“OSA”). A response from the FDA is awaited on Dec 20. Jazz expects to launch the candidate in early 2019. In the EU, Jazz expects to file a regulatory application by the end of this year.

Also, the company is conducting a phase II clinical study evaluating JZP-110 for the treatment of excessive sleepiness associated with Parkinson's disease. Top-line results from the study are expected in early 2019.

The company remains focus on developing its new drug, Vyxeos, in combination therapies for treating AML and other indications.

Other than JZP-110, Jazz is also studying JZP-258 (a low sodium formulation and a Xyrem follow-on product) in phase III studies for EDS and cataplexy in narcolepsy patients with top-line data expected by mid-2019. JZP-258 is also being studied for idiopathic hypersomnia, or IH, for which a phase III study is expected to begin by 2018 end.

2018 Guidance

Following the sales miss in the third quarter, Jazz lowered its guidance for 2018 sales. However, it maintained its adjusted earnings guidance. Though the guidance range for Xyrem’s sales was slightly raised, the company lowered its full-year expectations from its newest drug, Vyxeos, as well as Erwinaze.

Jazz expects earnings in the range of $12.75-$13.25 per share. Total revenues are expected in the range of $1.86-$1.90 billion (previously $1.88-$1.93 billion).

Total product sales are predicted in the range of $1.85-$1.88 billion in 2018 compared with $1.87-$1.91 billion expected previously. Xyrem sales are estimated in the range of $1.39-$1.40 billion, higher than $1.35-$1.38 billion expected previously. Also, Jazz raised its 2018 volume growth guidance for Xyrem to high single-digits range from the previous guidance of mid to high single digit range.

Erwinaze/Erwinase sales forecast was lowered to the range of $165-$175 million from $190-$220 million.

Defitelio’s net sales prediction for 2018 was maintained in the band of $145-$165 million. Vyxeos net sales expectations were lowered from the previous range of $115-$135 million to $95-$110 million. The company reduced the drug’s sales outlook for the second consecutive quarter due to challenging AML market.

Expectation for adjusted gross margin was maintained at 93%. The company raised the lower end of the expected range for adjusted SG&A expenses. However, it lowered estimates for adjusted R&D expenses. Adjusted SG&A is expected to be in the range of $540 million - $555 million (previously $525 million - $555 million) while adjusted R&D expenses is expected to be in the range of $195 million - $210 million (previously $205 million - $225 million).

Jazz Pharmaceuticals PLC Price, Consensus and EPS Surprise

 

Jazz Pharmaceuticals PLC Price, Consensus and EPS Surprise | Jazz Pharmaceuticals PLC Quote

Zacks Rank & Stocks to Consider

Jazz currently carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the drugs/biotech sector are Vertex Pharmaceuticals VRTX and Alkermes plc ALKS. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vertex’s earnings per share estimates have moved up from $3.75 to $3.83 for 2018 in the past 30 days. The company delivered a positive surprise in all the trailing four quarters with the average beat being 18.94%. Share price of the company has increased 22.7% this year so far.

Alkermes’ 2018 earnings estimates have increased from 8 cents to 22 cents per share and from 49 cents to 52 cents per share for 2018 and 2019, respectively, in the past 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with the average beat being 110.45%.

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