It has been about a month since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have added about 4.8% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Jazz Pharmaceuticals Q1 Earnings and Sales Miss Estimates
Jazz Pharmaceuticals delivered adjusted earnings of 45 cents per share for the first quarter of 2020, which significantly missed the Zacks Consensus Estimate of 66 cents. Earnings were also much lower than the year-ago figure of $2.83 per share.
Total revenues in the reported quarter rose 5.2% year over year to $534.7 million. Total revenues, however, missed the Zacks Consensus Estimate of $538.0 million.
In the quarter, the company experienced limited impact of COVID-19. However, it lowered its sales and earnings guidance due to the anticipated business disruption from the pandemic.
Quarter in Detail
Net product sales increased 5% from the year-ago quarter to $530.2 million as double-digit growth in Xyrem, Defitelio and Vyxeos net sales was partially offset by a decrease in Erwinaze sales.
Royalties and contract revenues declined 6.9% to $4.5 million in the quarter.
Sales of Xyrem rose 11% year over year to $407.9 million. Sales were driven by 5% rise in bottle volume growth. The average number of active Xyrem patients increased 3%. Beginning mid-March, Jazz noticed a decline in new patient enrollments for Xyrem, following the coronavirus outbreak. However, it expects new patient diagnoses start to increase as sleep centers reopen and demand trends remain strong in 2020.
Erwinaze/Erwinase revenues were $37.7 million, down 38% year over year due to ongoing supply constraints.
Defitelio sales rose 14% year over year to $47.4 million in the quarter.
Vyxeos generated sales of $32.7 million, up 13% from the year-ago period, primarily due to strong performance in Europe. However, COVID-19 hurt Vyxeos’ demand in the United States.
Sunosi recorded sales of $1.9 million in the quarter, lower than $2.7 million in the previous quarter. Though Sunosi’s total prescriptions rose 41% sequentially, sales were hurt by higher gross-to-net deductions due to increased coupon utilization. Meanwhile, sales were also hurt by closure of physician offices and also due to the fact that pulmonologists refocused care on patients with COVID-19 related respiratory problems.
Other product sales declined 31.3% to $2.5 million.
Adjusted selling, general and administrative (SG&A) expenses rose 27.3% to $187.8 million due to higher expenses for business expansion and preparation for multiple product launches.
Adjusted research and development (R&D) expenses increased 46.1% to $79.7 million, primarily due to escalating expenses related to development of the company’s pipeline.
The company lowered its financial guidance for 2020. Jazz expects the maximum impact of the pandemic in the second quarter with a return to normal operations later in the year.
The guidance takes into account factors such as decline in visits of patients and sales representatives to doctors’ clinics due to the lockdowns, shifting of healthcare system to caring for COVID-19 patients, global economic slowdown and increasing unemployment rate and loss of healthcare coverage.
The company expects 2020 earnings in the range of $11.25 - $12.50 compared with the prior expectation of $12.50-$13.40. Total revenues are expected to be in the range of $2.12-$2.26 billion versus $2.32-$2.40 billion expected previously.
Total product sales are anticipated in the range of $2.11-$2.24 billion versus $2.31-$2.38 billion expected previously. Instead of providing separate guidance for individual products, Jazz provided revenue guidance for its two therapeutic areas, Sleep and Neuroscience, and Hematology/Oncology.
Sleep and Neuroscience sales are expected in the range of $1.65 billion to $1.74 billion versus the previous range of $1.74 billion to $1.81 billion. This franchise, which comprises Xyrem, Sunosi and JZP-258, is expected to be hurt by declines in diagnostic testing, which will decrease narcolepsy and OSA diagnoses.
The Hematology/Oncology franchise is expected to record sales of $420 million to $510 million compared with the previous range of $500 million to $580 million. This franchise, which comprises Erwinaze, Defitelio, Vyxeos and lurbinectedin, is expected to be hurt by delays in procedures such as hematopoietic stem cell transplantations and reduction in the number of cancer patients treated due to recommendations to shift care of cancer patients to an outpatient setting.
While adjusted SG&A expenses are anticipated in the range of $700 million to $750 million (previously $770 million to $810 million), adjusted R&D expenses are expected to be in the band of $250 million to $280 million (previously $285 million to $315 million).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -7.47% due to these changes.
Currently, Jazz has an average Growth Score of C, 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 quintile 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Jazz has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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