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Jazz Pharma (JAZZ) Q3 Earnings Beat, Xyrem Drives Sales

Zacks Equity Research

Jazz Pharmaceuticals plc JAZZ 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.

Shares were up 1.4% in after-hours trading on Tuesday on better-than-expected results. So far this year, Jazz’s shares have increased 3.1% compared with the industry’s increase of 4.2%.

 

 

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, the only available FDA-approved treatment for both cataplexy and excessive daytime sleepiness [“EDS”] in children and adults with narcolepsy, rose 19% year over year to $425.6 million. Sales were driven by 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.  Jazz fully launched Xyrem in the pediatric narcolepsy indication in March this year, following approval from the FDA in October 2018.

Erwinaze/Erwinase (for acute lymphoblastic leukemia [“ALL”]) revenues were $34.0 million, down 17% year over year due to ongoing supply and manufacturing issues at its sole manufacturer, PDL. Jazz is facing challenges in building sufficient inventory levels for Erwinaze due to constrained manufacturing capacity. This has resulted in supply disruptions and hurt sales since 2017. The company expects the supply disruptions to continue in the fourth quarter of 2019 and in 2020.

Defitelio sales rose 4% year over year to $37.6 million in the quarter. However, Defitelio’s sales declined sequentially. 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.

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.  

Jazz’ newest drug Sunosi (solriamfetol) recorded sales of $1 million in the quarter. Sunosi was approved for excessive sleepiness in narcolepsy & obstructive sleep apnea in March and launched in July. Meanwhile, a similar application is also under review in the EU with a decision expected by early 2020, delayed from the prior expectation of year-end 2019.

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.

Pipeline Update

Jazz is developing JZP-258, a low sodium formulation and a Xyrem follow-on product, in a phase III study for EDS and cataplexy in narcolepsy patients. Along with the earnings release, Jazz said that it will file a new drug application for JZP-258 in January 2020, slightly delayed from the prior expectation of year-end 2019. JZP-258 is also being studied for idiopathic hypersomnia or IH in a phase III study.

Apart from JZP-258, the company is also developing JZP-458 for the treatment of acute lymphoblastic leukemia and lymphoblastic lymphoma (LBL). A pivotal phase II/III study in ALL/LBL is expected by the end of the year. Jazz is working toward recruiting first patient in the study this quarter and targets completion next year.

In August, Jazz acquired Cavion and its lead product candidate, CX-8998, now JZP-385, broadening the company's neuroscience therapeutic focus into movement disorders.  JZP-385 is being evaluated in a phase II study as a potential treatment for essential tremor.

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).

Zacks Rank & Other Stocks to Consider

Jazz currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the biotech/drugs sector are Dermira DERM, FibroGen FGEN and Ironwood Pharmaceuticals IRWD, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dermira’s loss estimates have narrowed from $4.51 to $4.42 per share for 2019 and from $4.75 to $4.60 for 2020 over the past 60 days. Its shares have gained 10.9% in the past month.

Estimates for FibroGen have improved from a loss of 19 cents to 18 cents for 2020 over the past 60 days. The stock has rallied 8.3% in the past month.

Ironwood’s earnings estimates have increased from 51 cents to 58 cents for 2020 over the past 60 days. The stock has risen 27.6% in the past month.

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