Jazz Pharmaceuticals' (JAZZ) second-quarter 2014 adjusted (including stock-based compensation expense and depreciation) earnings of $1.78 per share were above the year-ago adjusted earnings of $1.27 per share.
Quarterly revenues increased 40% year over year to $291.2 million driven by strong sales of Xyrem (narcolepsy), Erwinaze (oncology) and Defitelio (severe hepatic veno-occlusive disease). Revenues were above the Zacks Consensus Estimate of $275 million.
Quarter in Detail
In the reported quarter, Xyrem sales increased 43% to $191.4 million. Jazz Pharma stated that during the quarter approximately 11,750 patients were on Xyrem, up approximately 10% from 10,700 in the year-ago quarter. The company expects to deliver single digit to low double-digit volume growth for the product in 2014.
Erwinaze generated revenues of $47.9 million, up 7% year over year. Prialt (for pain) revenues were $5.8 million, an increase of 24% from the year-ago period. Meanwhile, psychiatry products sales declined 0.3% to $11.7 million.
The company launched Defitelio (defibrotide) in some EU countries (including Germany, Austria and the UK) with launches expected to continue over the rest of this year and the next. We note that the product was added to Jazz Pharma's portfolio following its acquisition of Gentium. Jazz Pharma has acquired rights to defibrotide in all countries in the Americas including the U.S. from Sigma-Tau.
The company recorded Defitelio sales of $12.2 million in the second quarter of 2014. Jazz Pharma plans to continue to roll out the product in other European countries in 2014 and 2015.
Jazz Pharma's selling, general and administrative (SG&A) expenses (including stock-based compensation expense and depreciation) during the quarter increased 31.2% to $95.8 million. Research and development (R&D) expenses (including stock-based compensation expense and depreciation) during the quarter shot up 117.3% to $20 million.
Pipeline Update
The company has some interesting candidates including JZP-110. JZP-110 is being developed for the treatment of excessive daytime sleepiness (EDS) in patients suffering from narcolepsy (planning to initiate phase III studies).
Meanwhile, Jazz Pharma is also working on expanding the label of its existing products. The company is looking to get an intravenous administration of Erwinaze approved in the U.S. The FDA is expected to render a decision by Dec 28, 2014.
Additionally, the company is also planning to initiate a pediatric narcolepsy study on Xyrem in the second half of 2014.
2014 Guidance
For 2014, Jazz Pharma continues to expect adjusted earnings in the range of $8.00 to $8.25 per share. The guidance excludes share-based compensation expense.
Jazz Pharma increased its revenue guidance to $1,125–$1,165 million from the previous guidance of $1,100–$1,160 million. The Zacks Consensus Estimate of $1,134 million is within the guidance range. Xyrem net sales are expected in the range of $765–$780 million (previous guidance: $755–$775 million). Jazz Pharma increased its Xyrem guidance based on strong volume growth in the second quarter and an 8% price increase effective from Aug 2014. Erwinaze net sales are still expected in the range of $185–$200 million, while Defitelio is now expected to generate revenues of approximately $60–$65 million (previous guidance: $42–$52 million).
Our Take
Jazz Pharma's 2014 guidance looks promising. We are positive on its Sigma-Tau deal. We expect the company to remain active on the acquisition front. However, Xyrem patent litigation remains an overhang on the stock. Sooner-than-expected entry of Xyrem generics would be a huge setback for the company.
Jazz Pharma, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector include Salix Pharmaceuticals (SLXP), Endo International (ENDP) and Ironwood Pharmaceuticals (IRWD). While Salix Pharma and Endo carry a Zacks Rank #1 (Strong Buy), Irownood Pharma is a Zacks Rank #2 (Buy) stock.
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