Jazz Pharmaceuticals' (JAZZ) third-quarter 2014 adjusted (including stock-based compensation expense and depreciation) earnings of $2.07 per share were above the year-ago adjusted earnings of $1.61 per share. Earnings as per the Zacks Consensus Estimate were at $1.98 per share.
Quarterly revenues increased 32% year over year to $306.6 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 $303 million.
Quarter in Detail
In the reported quarter, Xyrem sales increased 33% to $204.3 million. Jazz Pharma stated that during the quarter approximately 12,050 patients were on Xyrem, up approximately 2.6% from 11,750 in the year-ago quarter. The company expects to deliver high-single to low-double digit volume growth for the product in 2014.
Erwinaze generated revenues of $52.1 million, up 18% year over year. Prialt (for pain) revenues were $6.3 million, a decrease of 42.7% from the year-ago period primarily due to the timing of shipments to Eisai Co. (ESALY), the European distributor of Prialt. Meanwhile, psychiatry products sales remained flat at $10.8 million.
The company launched Defitelio (defibrotide) in four additional EU countries during the third quarter 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 $18.9 million in the third quarter of 2014.
Jazz Pharma's selling, general and administrative (SG&A) expenses (including stock-based compensation expense and depreciation) during the quarter increased 33.8% to $93.5 million. Research and development (R&D) expenses (including stock-based compensation expense and depreciation) during the quarter shot up 82.2% to $21.5 million.
Pipeline Update
The company has some interesting candidates including JZP-110. It plans to initiate a phase III study on JZP-110 for the treatment of excessive daytime sleepiness (EDS) in patients suffering from narcolepsy in the first half of 2015. Jazz Pharma also plans to start two phase III studies on the candidate for the treatment of EDS and obstructive sleep apnea in the first half of next year.
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 initiated a phase III pediatric narcolepsy study on Xyrem in the third quarter of 2014.
2014 Guidance Raised
For 2014, Jazz Pharma raised its adjusted earnings guidance to the range of $8.20 to $8.35 per share from the previous range of $8.00 to $8.25. The guidance excludes share-based compensation expense and depreciation expense. 2014 earnings, as per the Zacks Consensus Estimate, stand at $7.40 per share.
Jazz Pharma increased its revenue guidance to $1,150–$1,170 million from the previous guidance of $1,125–$1,165 million. The Zacks Consensus Estimate of $1,159 million is within the guidance range. Xyrem net sales are still expected in the range of $765–$780 million. Erwinaze net sales guidance was narrowed to the range of $190–$200 million (previous: $185–$200 million). Defitelio is now expected to generate revenues of approximately $65–$70 million (previous guidance: $60–$65 million).
Our Take
Jazz Pharma's 2014 guidance looks promising. Xyrem has yet again put in an encouraging performance. Jazz Pharma has also progressed well with its pipeline. 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 currently carries a Zacks Rank #2 (Buy). Some other stocks that are worth considering in the health care sector include AMAG Pharmaceuticals, Inc. (AMAG) and Biogen Idec Inc. (BIIB). Both stocks hold a Zacks Rank #1 (Strong Buy).
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