It has been about a month since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have added about 3% in that time frame, outperforming 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 drivers.
Jazz Pharmaceuticals Beats on Q3 Earnings, Lowers Sales View
Jazz Pharmaceuticals reported adjusted earnings of $3.58 per share for third-quarter 2018, which beat the Zacks Consensus Estimate of $3.33. Earnings rose 11% from the year-ago figure.
Total revenues in the quarter rose 14% year over year to $469.4 million due to higher sales of Xyrem and Defitelio. However, sales missed the Zacks Consensus Estimate of $482 million.
Quarter in Detail
Net product sales in the reported quarter increased 14% from the year-ago quarter to $465.2 million. Royalties and contract revenues rose 7.5% to $4.2 million in the third quarter.
Xyrem sales gained 17.6% year over year to $357.3 million in the quarter. Sales were driven by a 9% rise in bottle volume growth. The average number of active Xyrem patients increased 6% in the third quarter.
Erwinaze/Erwinase revenues were $41.1 million, down 16.3% year over year. The decline was due to the ongoing constrained manufacturing capacity at the company's manufacturing partner for the drug. The company expects supply disruptions to continue for the rest of 2018 as well as in 2019.
Prialt (non-opioid pain) revenues also fell almost 27% year over year to $5.8 million. In September, Jazz sold Prialt to small drugmaker, TerSera Therapeutics for $80 million in cash, of which Jazz received $50 million upon closing and the rest $30 million will be paid in two equal tranches over the next two years.
Defitelio sales rose 15.9% year over year to $36.2 million in the quarter. 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 $21.0 million compared with $28.0 million in the previous quarter. Vyxeos sales were lower than management's expectation as the drug continues to face challenges related to its adoption as a central therapy in eligible patients with acute myeloid leukemia ("AML").
Other product sales declined 37.3% to $3.8 million.
Adjusted selling, general and administrative (SG&A) expenses surged 32.1% to $136.9 million due to higher expenses related to business expansion, including costs to support the launch of Vyxeos and the potential launch of solriamfetol (JZP-110), if approved in the United States.
Adjusted research and development (R&D) expenses increased 9% to $46.7 million, mainly due to escalated expenses related to the company's pipeline and regulatory activities.
Following the sales miss in the third quarter, Jazz lowered guidance for 2018 sales. However, it maintained the adjusted earnings guidance. Though the guidance range for Xyrem's sales was slightly raised, the company lowered full-year expectations from its newest drug, Vyxeos, and Erwinaze.
Jazz expects earnings in the range of $12.75-$13.25 per share. Total revenues are expected in the range of $1.86-$1.90 billion (previously $1.88-$1.93 billion).
Total product sales are predicted in the range of $1.85-$1.88 billion in 2018 compared with $1.87-$1.91 billion expected previously. Xyrem sales are estimated in the range of $1.39-$1.40 billion, higher than $1.35-$1.38 billion expected previously. Further, Jazz raised 2018 volume growth guidance for Xyrem to high single-digits range from the previous guidance of mid to high-single digit range.
Erwinaze/Erwinase sales forecast was lowered to the range of $165-$175 million from $190-$220 million.
Defitelio's net sales prediction for 2018 was maintained in the band of $145-$165 million. Vyxeos net sales expectations were lowered from the previous range of $115-$135 million to $95-$110 million. The company reduced the drug's sales outlook for the second consecutive quarter due to challenging AML market.
Expectation for adjusted gross margin was maintained at 93%. The company raised the lower end of the expected range for adjusted SG&A expenses. However, it lowered estimates for adjusted R&D expenses. Adjusted SG&A is expected to be in the range of $540 million to $555 million (previously $525 million - $555 million) while adjusted R&D expenses is expected to be in the range of $195 million to $210 million (previously $205 million - $225 million).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -10.03% due to these changes.
Currently, Jazz has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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.