Jazz Pharma (JAZZ) Misses on Q1 Earnings & Sales, Cuts View

Jazz Pharmaceuticals JAZZ 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.

Following the disappointing results and the guidance cut, shares were down 6.3% in after-hours trading on Tuesday. This year so far, Jazz’s shares have declined 26% compared with the industry’s decrease of 11.6%.

 

 

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, approved to treat cataplexy and excessive daytime sleepiness (“EDS”) in children and adults with narcolepsy, 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 to remain strong in 2020.

Erwinaze/Erwinase (for acute lymphoblastic leukemia [“ALL”]) 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. Please note that Defitelio product sales vary from quarter to quarter in both the United States and EU markets because Defitelio treats an ultra-rare acute condition — hepatic veno-occlusive disease.

Acute myeloid leukemia drug, 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.

Jazz’s newest drug Sunosi recorded sales of $1.9million 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 to patients with COVID-19 related respiratory problems.

Sunosi was approved for excessive sleepiness in narcolepsy & obstructive sleep apnea in the United States in March 2019 and launched in July. It was approved in Europe in January this year. Jazz expects to begin a rolling launch in Germany in May though it expects delays by some European regulatory authorities in their pricing and reimbursement reviews

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.

2020 Guidance

The company lowered its financial guidance for 2020. Like all other larger drugmakers, Jazz also 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 focus 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).

Pipeline Update

Jazz developed JZP-258, a low sodium formulation and a Xyrem follow-on product, to treat EDS and cataplexy in narcolepsy patients. Jazz filed a new drug application for JZP-258 in January 2020, which was accepted and granted priority review by the FDA in March. The FDA’s decision is expected by Jul 21. JZP-258 is also being studied for Idiopathic hypersomnia or IH in a phase III study. Enrollment in the study was completed in the first quarter.

Apart from JZP-258, the company is also developing JZP-458 in a pivotal phase II/III study for the treatment ALL and lymphoblastic lymphoma. Jazz plans to submit a biologics license application to FDA for JZP-458 in the fourth quarter of 2020.

In December 2019, Jazz announced that it has entered into an agreement with Pharma Mar S.A. to in-license rights to lurbinectedin, a late-stage product candidate for relapsed small cell lung cancer. The transaction closed in January this year and in February, the FDA granted priority review to a new drug application for lurbinectedin. The FDA’s decision is expected on Aug 16.

Jazz targets to launch lurbinectedin and JZP-258 by the second half of this year following approval.

Last week, Jazz announced its decision to stop enrollment in its phase III study evaluating Defitelio for the prevention of VOD in high-risk patients. The decision was based on the recommendation of an Independent Data Monitoring Committee, which said that it is highly unlikely that the study will reach its primary endpoint. Accordingly, Jazz discontinued the study.

Zacks Rank & Stocks to Consider

Jazz currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the drugs sector are Eli Lilly LLY, Pfizer PFE and Bristol-Myers BMY. While Lilly sports a Zacks Rank #1 (Strong Buy), Pfizer and Bristol-Myers have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lilly’s earnings estimates have gone up by 0.6% for 2020 and by 1% for 2021 over the past 30 days. Lilly’s stock is up 20.1% this year so far.

Pfizer’s earnings estimates for 2020 have risen 0.4% over the past 30 days

Estimates for Bristol-Myers 2021 earnings have risen 0.4% over the past 30 days.

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