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Jazz Pharmaceuticals’ (JAZZ - Analyst Report) third-quarter 2013 adjusted (including stock-based compensation expense and depreciation) earnings of $1.61 per share were well above the Zacks Consensus Estimate of $1.52 and the year-ago adjusted earnings of $1.22 per share. Investors reacted positively to the news.

Quarterly revenues increased 32.3% year over year to $232.2 million driven by strong sales of Xyrem (narcolepsy) and Erwinaze (oncology). Revenues were above the Zacks Consensus Estimate of $228 million.

Quarter in Detail

In the reported quarter, Xyrem sales increased 50% to $153.7 million. Jazz Pharma stated that during the quarter approximately 11,000 patients were on Xyrem compared to 10,200 in the year-ago quarter.

Erwinaze generated revenues of $44.1 million, up 39% year over year. Prialt (for pain) revenues were $11 million compared with $5.4 million a year ago. Prialt’s third quarter 2013 sales included a $5.7 million sale to the European distributor, Eisai Co. (ESALY). Meanwhile, psychiatry products sales declined 49% to $10.7 million. The decline was due to generic competition.

Jazz Pharma’s selling, general and administrative (SG&A) expenses (on a reported basis) during the quarter increased 23.1% to $75 million. Research and development (R&D) expenses (on a reported basis) during the quarter shot up 85.2% to $12.8 million. The increase in SG&A and R&D expenses were due to a higher headcount and related expenses resulting from the EUSA Pharma acquisition in Jun 2012.

Pipeline Update

A study evaluating the intravenous formulation of Erwinaze met its primary endpoint. The company submitted an amendment to the biological license application (BLA) to the U.S. Food and Drug Administration (FDA) to allow intravenous administration of Erwinaze. Another study for the further use of Erwinaze in adolescents and young adults with acute lymphoblastic leukemia (ALL), who are hypersensitive to E. coli-derived asparaginase, is expected to commence the process of identifying and recruiting global study sites by year end.

In Jun 2013, the U.S. Food and Drug Administration (FDA) had granted fast track designation to Asparec (phase I), which is being evaluated for the treatment of ALL in patients who are hypersensitive to E. coli asparaginase. The company is working on evaluating Asparec in children.

Leukotac, an anti-CD25 monoclonal antibody, is in a phase III study in Europe for the treatment of steroid-refractory acute graft vs. host disease.

The company is planning to submit an investigational medicinal product dossier by the end of 2013 for JZP-386 and initiate a human trial in 2014.

2013 Guidance

For 2013, Jazz Pharma expects adjusted earnings in the range of $6.30 to $6.40 per share (previous guidance: $6.20 to $6.40). The Zacks Consensus Estimate currently stands at $5.67 per share.

Jazz Pharma tweaked its revenue guidance to $867–$877 million from $860–$880 million expected earlier. Xyrem net sales are now expected in the range of $565–$570 million (previous guidance: $560–$570 million). Erwinaze net sales are now expected in the range of $173–$178 million (previous guidance: $170–$180 million).

Jazz Pharma carries a Zacks Rank #3 (Hold). Companies like Actelion Ltd. (ALIOF) and Isis Pharmaceuticals, Inc. (ISIS - Analyst Report) appear to be well placed with a Zacks Rank #1 (Strong Buy).

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