Jazz Pharma (JAZZ) Q2 Earnings Coming Up: What's in Store?

We expect Jazz Pharmaceuticals plc JAZZ to beat expectations when it reports second-quarter results on Aug 7 after market close.

Shares of the company have outperformed the industry so far this year. The stock has rallied 30.7% compared with the industry’s 0.9% increase.

 

Jazz Pharma has a mixed earnings history. The company surpassed the Zacks Consensus Estimate twice in the last four quarters and missed the same in the other two, delivering an average beat of 3.21%. In the last reported quarter, the company delivered a positive surprise of 7.97%.

 

Jazz Pharmaceuticals PLC Price and EPS Surprise

 

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

Let’s see how things have shaped up for the upcoming announcement.

Factors at Play

After lower-than-expected sales in 2017, Jazz Pharma’s sleep disorder drug, Xyrem witnessed improved volume trends in the first quarter, supported by the company’s disease awareness efforts, which led to increased diagnosis rate of new narcolepsy patients. On the Q1 call, management seemed confident of generating volume growth in 2018 and beyond. We therefore expect Xyrem sales to show an improving trend in the second quarter. The Zacks Consensus Estimate for total sales of Xyrem is $334 million.

Notably, Jazz is also striving to expand Xyrem’s label and has filed a supplemental new drug application for Xyrem to include the pediatric indication. The FDA granted the sNDA a priority review designation in June with a decision expected on Oct 27.

Jazz has been facing supply constraints for leukemia drug, Erwinaze, due to constrained manufacturing capacity. These supply challenges are expected to hurt sales of the drug in the second quarter. The Zacks Consensus Estimate for total sales of Erwinaze is $51 million.

Meanwhile, newly launched acute myeloid leukemia (AML) drug, Vyxeos is witnessing growing demand trends in the United States since its launch in August last year. Jazz has set up dedicated AML sales team for reaching out to a wider physician community and also for the promotion of the recent inclusion in the guidelines of the National Comprehensive Cancer Network (NCCN). These aggressive commercialization efforts may increase sales of the drug in the second quarter from $26.2 million in the first quarter.

In the EU, Vyxeos is under an accelerated assessment for the same indication with a decision expected this year. In June, the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion recommending marketing authorization for Vyxeos.

Sales of Jazz’s another product, Defitelio vary from quarter to quarter in both the United States and EU because Defitelio treats an ultra-rare acute condition - hepatic veno-occlusive disease (VOD). In the last reported quarter, Defitelio sales were flat year over year. It remains to be seen if sales improve in the second quarter.

In June, Jazz said it had entered into a definitive agreement to sell its non-opioid pain drug Prialt to small drugmaker, TerSera Therapeutics for $80 million in cash upon closing. The deal is expected to be completed in the third quarter of 2018, subject to customary closing conditions. An update is expected on the call.

The company is also expected to shed light on its pipeline.

Also, Jazz’s lead pipeline candidate, JZP-110, is under review in the United States for the treatment of excessive sleepiness in narcolepsy & obstructive sleep apnea (OSA). A response from the FDA is awaited on Dec 20, 2018. 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.

Earnings Whispers

Our proven model shows that Jazz is likely to beat on earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($3.24 per share) and the Zacks Consensus Estimate ($3.22 per share) is +0.53%. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Jazz has a Zacks Rank #3. The combination of Jazz’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming release.

Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some drug/biotech stocks that also have the right combination of elements to beat on earnings this time around:

Madrigal Pharmaceuticals, Inc. MDGL has an Earnings ESP of +13.90% and a Zacks Rank #3. The company is expected to release results on Aug 9.

Sarepta Therapeutics SRPT has an Earnings ESP of +48.94% and a Zacks Rank of 3.  The company is scheduled to release second-quarter results on Aug 8.

BioDelivery Sciences BDSI has an Earnings ESP of +8.60% and a Zacks Rank #2. The company is scheduled to release results on Aug 9. You can see the complete list of today’s Zacks #1 Rank stocks here.

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