Jazz Pharmaceuticals (JAZZ) Up 16.9% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Jazz Pharmaceuticals PLC JAZZ. Shares have added about 16.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is JAZZ due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Jazz Pharmaceuticals Q1 Earnings, Sales Top Estimates

Jazz Pharmaceuticals reported adjusted earnings of $2.98 per share for first-quarter 2018, which beat the Zacks Consensus Estimate of $2.76. Earnings rose 29% from the year-ago figure.

Total revenues in the quarter rose 18% year over year to $444.6 million owing to higher sales of Xyrem and continued growth in demand for Vyxeos. Sales also beat the Zacks Consensus Estimate of $445 million.

Quarter in Detail

Net product sales in the quarter increased 18% from the year-ago quarter to $440.8 million. Royalties and contract revenues rose 58.5% to $3.8 billion in the first quarter.

Xyrem sales gained 16% year over year to $316.8 million in the quarter. Sales were driven by a 9% rise in bottle volume growth due to an increase in government-pay patient volume. The average number of active Xyrem patients increased 7% in the first quarter.

Xyrem, which accounted for 75% of sales in 2017, witnessed lower-than-expected growth in 2017. This was due to the negative impact of unfavorable payer mix, fewer shipping days and operational changes leading to delayed prescription fulfillment. However, volume trends improved in the first quarter supported by the company’s disease awareness education efforts, which led to increased diagnosis rate of new narcolepsy patients. Management sounded confident that it will continue to generate volume growth in 2018 and beyond.

Erwinaze/Erwinase revenues were $50.6 million, flat year over year.

Prialt revenues declined 20.6% year over year to $6.1 million. Defitelio sales were flat year over year at $35.1 million in the quarter. Defitelio product sales 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).

Vyxeos generated sales of $26.2 million in the United States compared with $24.7 million in the previous quarter.

Other product sales declined 5% to $6.0 million.

Adjusted selling, general and administrative (SG&A) expenses rose 11.4% to $131.9 million due to higher expenses related to business expansion including costs related to continued U.S. launch of Vyxeos and potential launch of Vyxeos in the EU and JZP-110 in the United States.

Adjusted research and development (R&D) expenses increased almost 16% to $47.3 million, mainly due to escalated expenses related to the company’s pipeline and regulatory activities.

Settlement with DoJ

In 2016 and 2017, Jazz received subpoenas from the U.S. Attorney's Office for the District of Massachusetts seeking information regarding its support of some charitable organizations that provide financial assistance to Medicare patients. In April, Jazz reached an agreement in principle with the U.S. Department of Justice for a potential payment of $57 million as part of a civil settlement.

2018 Guidance

Jazz raised the lower end of its earnings and sales guidance for 2018.

Jazz expects earnings in the range of $12.75-$13.25 per share compared with $12.65-$13.25 expected previously. Total revenues are expected in the range of $1.88-$1.93 billion compared with $1.86-$1.93 billion guided previously.

Total product sales are predicted in the range of $1.87-$1.91 billion in 2018 compared with $1.85-$1.91 billion expected previously.

Xyrem sales are estimated in the range of $1.32-$1.35 billion, higher than $1.31-$1.34 billion expected previously, indicating growth of 11% to 14% over 2017. Also, Jazz raised its 2018 volume growth guidance for Xyrem to a mid-single digit range from previous guidance of low- to mid-single digits.

Erwinaze/Erwinase sales forecast was maintained in the range of $190-$220 million.

While Defitelio net sales prediction for 2018 was maintained in the band of $145-$165 million, Vyxeos net sales are still expected to be within $130-$155 million.

Adjusted gross margin is expected to be 93%. Adjusted SG&A expenses are still expected to be in the range of $525 million - $555 million while adjusted R&D expenses are still expected to be in the range of $205 million - $225 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to five lower.

Jazz Pharmaceuticals PLC Price and Consensus

 

Jazz Pharmaceuticals PLC Price and Consensus | Jazz Pharmaceuticals PLC Quote

VGM Scores

At this time, JAZZ has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value and growth investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, JAZZ has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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