Jazz Pharmaceuticals Public Ltd. Company JAZZ reported second-quarter 2015 earnings of $2.11 per share (including one-time items), lower than the Zacks Consensus Estimate of $2.16. However, the company’s earnings were up 6.6% year over year.
Total revenues in the reported quarter increased 14.6% year over year to $333.7 million, mainly driven by strong sales of Xyrem. Revenues, however, fell short of the Zacks Consensus Estimate of $336.9 million.
The Quarter in Detail
In the reported quarter, Xyrem sales increased 29.5% to $247.8 million. Jazz Pharma stated that during the quarter approximately 12,475 patients were on Xyrem, up 6.2% from the year-ago quarter. The company is on track to implement Xyrem’s risk evaluation and mitigation strategy (REMS). We note that Xyrem’s REMS was approved by the FDA this February.
Erwinaze generated revenues of $46.2 million, down 3.6% year over year, mainly due to increased chargebacks and rebates and an approximate $2 million negative impact from currency fluctuation. Prialt revenues were $7.1 million, an increase of 22.4% from the year-ago period. Meanwhile, psychiatry product sales decreased 20.1% to $9.4 million.
The company recorded Defitelio/defibrotide sales of $15.3 million in the second quarter of 2015, down 24.6% year over year reflecting about $4 million negative impact from currency movement and an approximate $1 million impact due to the Jul 2014 discontinuation of the cost recovery program.
Jazz Pharma's adjusted selling, general and administrative (SG&A) expenses during the quarter increased 8.3% to $88.5 million. The increase was primarily due to a higher headcount and expenses resulting from the expansion of the company's business.
Adjusted research and development (R&D) expenses during the quarter shot up 43.1% to almost $24 million, mainly due to the development of the company's product candidates and life cycle management activities related to its existing products, including expenses related to the completed rolling new drug application in the U.S. for defibrotide.
During the quarter, Jazz Pharma initiated enrollment in three phase III studies on JZP-110 to evaluate its safety and efficacy for the treatment of excessive daytime sleepiness in patients suffering from narcolepsy or obstructive sleep apnea. Enrolment is expected to complete in the second half of 2016. Positive data from the study would allow the company to file for its approval in 2017.
Guidance Maintained
Jazz Pharma reiterated its guidance for 2015. The company continues to expect earnings to be in the range of $9.45 to $9.75 per share. The Zacks Consensus Estimate currently stands at $8.68 per share.
Jazz Pharma continues to expect revenues to be in the range of $1,310–$1,370 million. The Zacks Consensus Estimate currently stands at $1,360 million, toward the higher end of the guidance range. Total net product sales are still expected in the range of $1,303–$1,363 million in 2015.
Xyrem net sales guidance is maintained in the range of $950–$970 million. Erwinaze net sales guidance is still in the range of $200–$215 million. Defitelio is still expected to generate revenues of $73–$83 million.
Meanwhile, the company continues to expect adjusted SG&A and R&D expenses in the range of $355–$365 million and $95–$105 million, respectively.
Our Take
Jazz Pharma’s second-quarter results were disappointing with earnings and revenues coming in below expectations. Although Xyrem performed well, other key products like Erwinaze and Defitelio performed poorly. Moreover, patent litigations related to Xyrem continue to be an overhang.
The company informed that it has received additional paragraph IV certifications from a couple of companies. However, we are encouraged by the company’s initiatives aimed at driving Xyrem’s sales further. We expect investor focus to remain on pipeline updates.
Jazz Pharma currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Actelion Ltd. ALIOF, Gilead Sciences Inc. GILD and Ligand Pharmaceuticals Inc. LGND. All three hold a Zacks Rank #1 (Strong Buy).
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