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Jazz Pharma (JAZZ) Q1 Earnings and Sales Beat Estimates

Zacks Equity Research

Jazz Pharmaceuticals plc JAZZ delivered adjusted earnings of $3.67 per share for the first quarter of 2019, which surpassed the Zacks Consensus Estimate of $3.16. Earnings rose 23% from the year-ago figure driven by higher sales and reduced share count.

Total revenues in the reported quarter rose 14% year over year to $508.2 million and also beat the Zacks Consensus Estimate of $471.0 million. This can be attributed to higher sales of Xyrem and Defitelio and improved sales of Vyxeos and Erwinaze.

Shares of the company were up almost 2% in after-hours trading on Tuesday following the better-than-expected first-quarter results. So far this year, the stock has increased 3.8%, underperforming the industry’s increase of 10.7%.

 

 

Quarter in Detail

Net product sales in the reported quarter increased 14.2% from the year-ago quarter to $503.3 million. Royalties and contract revenues rose 28.9% to $4.9 million in the quarter.

Xyrem (cataplexy and excessive daytime sleepiness [“EDS”] in narcolepsy patients) sales rose 16% year over year to $368.3 million in the quarter. Sales were driven by 5% rise in bottle volume growth. The average number of active Xyrem patients increased 6% in the quarter.

Volume trends for Xyrem have improved in the past few quarters supported by the company’s disease awareness education efforts, which led to increased diagnosis rate of new narcolepsy patients. Management seems confident of generating volume growth in 2019. Jazz fully launched Xyrem in the pediatric narcolepsy indication in March this year, following approval from the FDA in October 2018. This should boost sales of the drug in future quarters.

Erwinaze/Erwinase (acute lymphoblastic leukemia [“ALL”]) revenues were $60.9 million, up 20% year over year. Jazz has been facing challenges in building sufficient inventory levels for Erwinaze due to constrained manufacturing capacity. This resulted in supply disruptions and hurt sales of Erwinaze in 2017 as well as in 2018. Sales however improved in the first quarter of 2019 due to higher availability of products compared to prior periods. The company, however, expects significantly reduced product availability in the second quarter as well as further supply disruptions throughout 2019.

Defitelio sales rose 18% year over year to $41.5 million in the quarter aided by growth in use by transplant centers to treat both adult and pediatric patients. 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 $28.9 million higher than $25.7 million in the previous quarter primarily due to the rolling launch in the EU initiated in September 2018. The acute myeloid leukemia (“AML”) drug was launched in the United States in August 2017 and is now commercially available to patients in nine European countries. Vyxeos generated lower-than-expected sales in second as well as third quarters 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 past two quarters as the company focused resources to drive adoption of Vyxeos and due to increased contribution from sales in EU.

Other product sales declined 69.8% to $3.7 million.

Adjusted selling, general and administrative (SG&A) expenses rose 11.8% to $147.6 million owing to higher expenses related to business expansion and costs to support the launch of Sunosi in the United States and the rolling launch of Vyxeos in the EU.

Adjusted research and development (R&D) expenses increased 15.4% to $54.6 million, primarily due to escalating expenses related to the company’s pipeline and regulatory activities.

Pipeline Update

In March 2019, Jazz’s lead pipeline candidate, Sunosi (solriamfetol), received approval in the United States for excessive sleepiness in narcolepsy & obstructive sleep apnea (OSA). The company anticipates launching the candidate in mid-2019 following a Drug Enforcement Administration (DEA) scheduling decision. Meanwhile, a similar application is also under review in the EU with a decision expected by year end.

The company has completed a phase IIl study evaluating solriamfetol for the treatment of excessive sleepiness associated with Parkinson's disease. However, on the conference call, Jazz said that it does not plan to move forward with a phase III study in Parkinson's disease and instead plans a new phase III program for solriamfetol by mid-year.

Other than solriamfetol, 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. In March 2019, Jazz announced top-line data from the study, which demonstrated clinically meaningful maintenance of efficacy in patients. The company is looking to file a new drug application seeking approval for JZP-258 by the end of this year. JZP-258 is also being studied for idiopathic hypersomnia, or IH in a phase III study.

2019 Guidance

The company maintained its previously issued guidance for earnings and total revenues including the expected sales range from all its products.

It 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.

Total product sales are predicted in the range of $2.04-$2.11 billion in 2019. 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 is 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 increased growth in the United States in the second half and an increasing contribution from EU.

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.

Zacks Rank & Stocks to Consider

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

Jazz Pharmaceuticals PLC Price, Consensus and EPS Surprise

 

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

Some better-ranked stocks in the biotech/drugs sector are Hancock Jaffe Laboratories, Inc. HJLI, Odonate Therapeutics, Inc. ODT and RecroPharma, Inc. REPH, all with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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