U.S. Markets open in 2 hrs 53 mins

Jazz (JAZZ) Up 16.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have added about 16.4% in that time frame, outperforming the S&P 500.

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 Q3 Earnings and Sales Beat Estimates

Jazz Pharmaceuticals delivered adjusted earnings of $4.10 per share for the third quarter of 2019, which surpassed the Zacks Consensus Estimate of $3.59. Earnings rose 15% from the year-ago figure driven by higher sales, which made up for higher operating expense.

Total revenues in the reported quarter rose 15% year over year to $537.7 million and also beat the Zacks Consensus Estimate of $523.0 million. This can be attributed to higher sales of Xyrem.

Quarter in Detail

Net product sales in the reported quarter increased 14.4% from the year-ago quarter to $532.3 million. Royalties and contract revenues rose 28.9% to $5.38 million in the quarter.

Sales of Xyrem rose 19% year over year to $425.6 million. Sales were driven by a 6.5% rise in bottle volume growth. The average number of active Xyrem patients increased 5% in the quarter.

Volume trends for Xyrem improved supported by the company’s disease awareness education efforts, which led to increased diagnosis rate of new narcolepsy patients.

Erwinaze/Erwinase revenues were $34.0 million, down 17% year over year due to ongoing supply and manufacturing issues at its sole manufacturer, PDL. Defitelio sales rose 4% year over year to $37.6 million in the quarter. However, Defitelio’s sales declined sequentially. 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.

Acute myeloid leukemia drug,Vyxeos generated sales of $29.6 million, up 41% from the year-ago period, primarily due to the ongoing launch in EU. However, Vyxeos’ sales declined sequentially.

Sunosi recorded sales of $1 million in the quarter. Other product sales declined 53.3% to $4.5 million.

Adjusted selling, general and administrative (SG&A) expenses rose 12.8% to $158.4 million driven by higher expenses for business expansion and costs to support the launch of Sunosi in the United States.

Adjusted research and development (R&D) expenses increased 57.6% to $73.4 million, primarily due to escalating expenses related to development of the company’s pipeline and partnered programs.

2019 Guidance

The company raised its previously issued guidance for total revenues as well as earnings. However, the guidance includes only minimal net sales contribution from Sunosi in the United States.

It expects earnings in the range of $15.50 - $16.15 in 2019 versus the prior expectation of $14.30-$15.00 per share. Total revenues are expected to be higher in the range of $2.10-$2.18 billion compared with the previous range of $2.07-$2.15 billion. The 2019 sales and earnings ranges represent growth of 11-15% and 13-18%, respectively over 2018 levels.

Total product sales are predicted in the range of $2.08-$2.16 billion (previously $2.055-$2.125 billion) for 2019. The company raised the guidance for Xyrem sales to the range of $1.60-$1.64 billion from $1.55-$1.59 billion. Erwinaze/Erwinase sales forecast was maintained in the band of $160-$195 million.

Jazz raised the lower end of its guidance range for Defitelio from $155-$180 million to $160 -$180 million. It lowered the higher end of its guidance range for Vyxeos from $120-$150 million to $120-$135 million.

While adjusted SG&A expenses are anticipated in the range of $630 million to $650 million (previously $620 million to $650 million), adjusted R&D expenses are expected to be in the band of $245 million to $265 million (previously $235 million to $265 million).

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 8.28% due to these changes.

VGM Scores

Currently, Jazz has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Jazz has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Jazz Pharmaceuticals PLC (JAZZ) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research