Shares of Jazz Pharmaceuticals PLC slid Wednesday morning, a day after the Irish drugmaker said in a regulatory filing that the Food and Drug Administration could approve a competitor's generic version of its top-seller, narcolepsy treatment Xyrem.
THE SPARK: The Dublin-based company said in a quarterly report filed with the Securities and Exchange Commission that U.S. regulators could approve a generic version made by Roxane Laboratories Inc. Jazz filed a lawsuit in late 2010 against Roxane over that company's application for approval of the generic.
THE BIG PICTURE: Xyrem sales jumped 60 percent in the first quarter to $117.5 million, which helped Jazz report better-than-expected results for the quarter.
Overall, Jazz said Tuesday it earned $43.4 million, or 71 cents per share, in the three months that ended March 31. That compares to earnings of $27.7 million, or 48 cents per share, in last year's quarter. Adjusted earnings totaled $1.37 per share.
That topped average Wall Street expectations for $1.36 per share, according to FactSet.
Product revenue soared 92 percent to $194.6 million, above analyst expectations for $190.3 million.
Jazz also raised its 2013 adjusted earnings forecast to a range of $6.10 to $6.30 per share from $5.70 to $5.90 per share. Analysts expect $5.88 per share. It expects annual revenue between $830 million and $860 million, including product sales of $823 million to $853 million, versus the average analyst estimate of $827.5 million.
THE ANALYSIS: The Jazz report stoked investor fears of cheaper generic competition for Xyrem, analysts said.
Jefferies analyst Corey Davis said in a research note he expected weakness in the stock, but the analyst also said the possibility of a generic approval will only increase the odds of a settlement between Roxane and Jazz.
Cantor Fitzgerald analyst Irina Rivkind said in a separate note that Jazz reported a strong quarter, and she repeated a "Buy" rating on the shares in the face of stock weakness.
"The news does not imply that a generic launch is imminent and there is still ample time for Jazz to negotiate a settlement, in our view," the analyst wrote.
SHARE ACTION: Down 10 percent, or $5.96, to $53.55 in late morning while broader trading indexes climbed slightly. Jazz shares have traded between $40.38 and $60.79 over the past year, and the stock price had climbed nearly 12 percent in 2013 as of Tuesday's close.