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Jazz (JAZZ) Down 0.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

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

Jazz Pharmaceuticals Q4 Earnings & Sales Beat

Jazz Pharmaceuticals delivered adjusted earnings of $3.64 per share for fourth-quarter 2018, which beat the Zacks Consensus Estimate of $2.98. Earnings rose 23% from the year-ago figure driven by higher sales, lower tax rate and reduced share count.

Total revenues in the reported quarter rose 9% year over year to $476.5 million and also beat the Zacks Consensus Estimate of $459.7 million. This can be attributed to higher sales of Xyrem and Defitelio and improved sales of Vyxeos.

Quarter in Detail

Net product sales in the reported quarter increased 20% from the year-ago quarter to $467.3 million. Royalties and contract revenues rose 44.7% to $9.1 million in the fourth quarter.

Xyrem sales rose 20% year over year to $374.8 million in the quarter. Sales were driven by a rise of 10% in bottle volume growth. The average number of active Xyrem patients increased 6% in the quarter.

Erwinaze/Erwinaserevenues were $24.3 million, down 49% year over year. The decline was owing to significant supply constraints that were more extensive than previous years and hurt product availability. The company expects supply disruptions to continue in 2019.

Defitelio sales rose 4% year over year to $37.7 million in the quarter aided by the company’s commercial initiatives to boost sales of the drug. Please note that Defitelio product sales vary from quarter to quarter in both in the United States and EU because Defitelio treats an ultra-rare acute condition — hepatic veno-occlusive disease (“VOD”).

Vyxeos generated sales of $25.7 million compared with $21.0 million in the previous quarter..

Vyxeos generated lower-than-expected sales in second as well as the third quarter of 2018 as the drug faced challenges related to its adoption as a central therapy in eligible patients in a crowded AML market. However, sales improved sequentially in the fourth quarter as the company focused its resources to drive adoption of Vyxeos.

Other product sales rose 42.9% to $4.9 million.

Adjusted selling, general and administrative (SG&A) expenses rose 17% to $142.1 million owing to higher expenses related to business expansion, including costs to support the rolling launch of Vyxeos in the EU and the potential launch of solriamfetol (JZP-110), if approved in the United States.

Adjusted research and development (R&D) expenses increased 18.6% to $51.3 million, primarily due to escalating expenses related to the company’s pipeline and regulatory activities.

2018 Results

Full-year 2018 sales rose 17% to $1.89 billion, slightly beating the Zacks Consensus Estimate of $1.88 billion. Revenues were within the guided range of $1.86-$1.90 billion.

Adjusted earnings for 2018 were $13.70, which also surpassed the Zacks Consensus Estimate of $13.04 as well as the guided range of $12.75-$13.25 per share. Moreover, earnings rose 24% year over year.

2019 Guidance

Jazz expects earnings in the range of $14.30-$15.00 per share in 2019. Total revenues are expected in the range of $2.05-$2.13 billion. Both earnings and total revenue expectations are higher than the Zacks Consensus Estimate of $2.03 billion and $13.80, respectively.

Total product sales are predicted in the range of $2.04-$2.11 billion in 2018. Xyrem sales are estimated in the range of $1.53-$1.57 billion, representing expected growth of 10% over 2018 at the mid-point. Erwinaze/Erwinase sales are forecast in the range of $160-$195 million.

Defitelio’s net sales prediction for 2019 was in the band of $155-$180 million, which represents year-over-year growth of approximately 12% at the mid-point. Vyxeos net sales expectations are in the range of $120-$150 million, representing an increase of 34% over 2018 at the mid-point. This is likely to be driven by continued growth in the United States and an increasing contribution from EU.

Adjusted gross margin is expected to be 94%. While adjusted SG&A expenses are anticipated in the range of $620 million to $650 million, adjusted R&D expenses is expected to be in the band of $235 million to $265 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

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