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Jazz Pharma (JAZZ) Q4 Earnings & Sales Beat, Stock Up 8%

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Jazz Pharmaceuticals plc JAZZ delivered adjusted earnings of $3.64 per share for fourth-quarter 2018, which handsomely 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.

Shares of the company were up 8% in after-hours trading on Tuesday following the better-than-expected fourth-quarter results. Moreover, the company announced better-than-expected outlook for earnings and sales in 2019. So far this year, the stock has increased 3.1%.

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 (cataplexy and excessive daytime sleepiness [“EDS”] in narcolepsy patients) 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. Jazz expects to fully launch Xyrem in the pediatric narcolepsy indication later this quarter following approval from FDA in October 2018.

Erwinaze/Erwinase (acute lymphoblastic leukemia [“ALL”]) revenues were $24.3 million, down 49% year over year. The decline was owing to significant supply constraints that were more extensive than previous yearsand 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 markets 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. The acute myeloid leukemia (“AML”) drug was launched in the United States in August 2017. In the EU, Jazz initiated a rolling launch in September 2018.

Vyxeos generated lower-than-expected sales in second as well as third quarter 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 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 management’s 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.

Pipeline Update

Solriamfetol (JZP-110) is under review in the United States for the treatment of excessive sleepiness (“ES”) in adult patients with narcolepsy or obstructive sleep apnea (“OSA”). A response from the FDA is awaited on March 20, delayed by three months from the earlier PDUFA date of Dec 20, 2018. Jazz expects to launch the candidate in the United States in mid-2019. In the EU, Jazz filed a regulatory application in November 2018.

Further, the company has completed a phase II study evaluating solriamfetol for the treatment of excessive sleepiness associated with Parkinson's disease.

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 with top-line data expected in the second quarter of 2019. JZP-258 is also being studied for idiopathic hypersomnia or IH in phase III study. In November, the company announced that the first patient was enrolled in the study.

2018 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.

Expectation for adjusted gross margin was 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.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the biotech sector are BioDelivery Sciences International, Inc. BDSI, Corbus Pharmaceuticals Holdings, Inc. CRBP and Celgene Corporation CELG. While Celgene and Corbus Pharmaceuticals sport a Zacks Rank #1 (Strong Buy), BioDelivery Sciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene has gained almost 40% this year so far. Its earnings estimates have risen 3.7% and 2.8% for 2019 and 2020, respectively, over the past 30 days.

Shares of Corbus Pharmaceuticals have risen 39% so far this year.

Shares of BioDelivery Sciences are up 31.6% this year so far. Its loss estimates for 2019 have narrowed from 24 cents to 22 cents over the past 30 days.

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