Why Is Jazz (JAZZ) Up 2.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Jazz due for a pullback? 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 drivers.
Lags Q3 Earnings, Beats Sales
Jazz Pharmaceuticals reported adjusted earnings of $4.84 per share in third-quarter 2023, missing the Zacks Consensus Estimate of $4.90. The reported figure declined 6% year over year due to increased R&D expenditures during the quarter.
Total revenues in the reported quarter rose 3% year over year to $972.1 million. Sales of Xywav, Epidiolex and Rylaze drove the upside. Total revenues beat the Zacks Consensus Estimate of $969.5 million.
Quarter in Detail
Net product sales increased by 0.3% from the year-ago quarter’s levels to $938.4 million. The reported figure missed the Zacks Consensus Estimate and our model estimates of $946.9 million and $952.7 million, respectively.
During the quarter, Jazz recorded $28.9 million as royalty revenues earned from the sale of high-sodium oxybate authorized generic (AG).
Other royalties and contract revenues dropped 1% to $4.8 million in the quarter.
Neuroscience Products
Sales of Jazz’s neuroscience products dropped 5% to $675.1 million.
Net product sales for the combined oxybate business (Xyrem + Xywav) fell 11% to $456.7 million in the quarter. This combined revenue figure beat the Zacks Consensus Estimate and our model estimates of $465 million and $472 million, respectively.
Sales of Xyrem plunged 51% year over year to $125.1 million due to patients switching to Xywav and the launch of AGs in 2023.
Xywav recorded sales of $331.6 million in the quarter, up 30% year over year. The upside can be attributed to the encouraging uptake of the drug in narcolepsy and IH indications. The drug is currently Jazz’s most extensive product by net sales.
Sales of Epidiolex/Epidyolex rose 9% to $213.7 million. However, the drug’s sales missed the Zacks Consensus Estimate and our model estimates of $219 million and $221 million, respectively.
Sativex recorded sales of $4.6 million in the quarter, up 44% year over year.
Oncology Products
Oncology product sales increased 17% to $260.4 million.
Rylaze recorded sales of $104.9 million in the quarter, up 43% year over year. Jazz stated that demand remained strong during the quarter.Rylaze sales beat the Zacks Consensus Estimate and our model estimates of $102 million and $100 million, respectively.
Zepzelca recorded sales worth $78 million in the quarter, up 11% year over year, driven by an increase in underlying demand.
Vyxeos generated sales of $29.8 million, down 1% from the year-ago period’s levels.
Defitelio sales were down 4% year over year at $47.7 million in the quarter.
Cost Discussion
Adjusted selling, general and administrative (SG&A) expenses were down 1% year over year at $273 million.
Adjusted research and development (R&D) expenses rose 80% to $217.8 million, mainly due to the support for the increased costs of developing pipeline candidates.
2023 Guidance
Jazz revised its financial guidance for the full year 2023.
Total revenues are now expected to be in the range of $3.75-$3.88 billion, a $25 million raise in the lower limit of the previously provided guidance range of $3.73-$3.88 billion. The revised guidance suggests a 4% year-over-year growth at the midpoint compared with 2022 levels. In 2023, Jazz expects continued growth in net sales of Xywav, Epidiolex and its oncology portfolio.
Neuroscience sales are expected to be $2.72-$2.83 billion (unchanged), suggesting flat year-over-year growth at the midpoint compared to 2022. The Oncology franchise is expected to record sales in the range of $0.98-$1.05 billion (previous guidance: $0.95-$1.05 billion), indicating growth of 16% at the midpoint compared with 2022 levels.
While adjusted SG&A expenses are anticipated between $1.07 billion and $1.11 billion (previous guidance: $1.05-$1.11 billion), adjusted R&D expenses are now expected to be in the band of $780-$820 million (previous guidance: $675-$725 million).
Management reiterated its 2023 adjusted earnings in the range of $18.15-$19.00 per share.
Based on the royalty structures within the AG agreements, the company expects to record higher royalty revenues from high-sodium oxybate AG in second-half 2023 compared with the first half’s levels.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, Jazz has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jazz has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Jazz belongs to the Zacks Medical - Drugs industry. Another stock from the same industry, Nektar Therapeutics (NKTR), has gained 6.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Nektar reported revenues of $24.14 million in the last reported quarter, representing a year-over-year change of +2.2%. EPS of -$0.19 for the same period compares with -$0.24 a year ago.
For the current quarter, Nektar is expected to post a loss of $0.19 per share, indicating a change of +40.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -26.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Nektar. Also, the stock has a VGM Score of D.
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