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Jazz (JAZZ) Down 14.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Jazz Pharmaceuticals (JAZZ - Free Report) . Shares have lost about 14.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Jazz due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Jazz Pharmaceuticals Q1 Earnings and Sales Beat Estimates

Jazz Pharmaceuticals delivered adjusted earnings of $3.90 per share for the second quarter of 2021, beating the Zacks Consensus Estimate of $3.55. The company had reported earnings of $3.71 in the year-ago quarter.

Total revenues in the reported quarter rose 33.7% year over year to $751.8 million, beating the Zacks Consensus Estimate of $743.2 million. The increase was driven by sales of new drugs and drugs added after the recently completed acquisition of GW Pharmaceuticals. This growth was partially offset by decline in sales of its key drug, Xyrem.

Net product sales increased 34.1% from the year-ago quarter to $748.3 million. Product sales included sales of drugs added with GW Pharmaceuticals acquisition since May 5. Please note that 41% of Jazz’s net product sales in the quarter came from newly launched and acquired products.

Royalties and contract revenues declined 18% to $3.5 million in the quarter.

Neuroscience Products

Sales of neuroscience products increased 27.8% to $581.9 million, driven by the launch of Xywav in November 2020.

Net product sales for the combined oxybate business (Xyrem + Xywav) increased 2.6% to $458.3 million in the second quarter of 2021. Strong growth in Xywav was partially offset by a decline in sales of Xyrem.

Sales of Xyrem declined 25.2% year over year to $334.2 million due to patient switching to Xywav.

Xywav recorded sales of $124.2 million in the quarter compared with $75.4 million in the previous quarter.

Sunosi recorded sales of $12.1 million in the quarter, higher than $11.6 million in the previous quarter and the year-ago sales of $8.6 million. The growth was driven by strong demand for the drug.

Sales of Epidiolex and Sativex recorded by Jazz during the quarter were $109.5 million and $2 million, respectively. Full-quarter sales of Epidiolex and Sativex were $155.9 million and $3.5 million, reflecting growth of 32.4% and 1.7%, respectively.

Oncology Products

Oncology product sales increased 60.6% to $163.8 million driven by strong Zepzelca sales and higher Defitelio and Vyxeos sales.

Vyxeos generated sales of $31.5 million, up 18.4% from the year-ago period driven by ongoing commercial activities and expansion into new international markets.

Newly launched Zepzelca (lurbinectedin) recorded sales of $55.9 million in the second quarter compared with $54.3 million in the previous quarter.

Erwinaze/Erwinase revenues were $28.3 million, down 13.4% year over year.

Defitelio sales increased 12.6% to $48.1 million in the quarter.

Other product sales were $2.6 million compared with $0.9 million in the year-ago quarter.

Cost Discussion

Adjusted selling, general and administrative (SG&A) expenses surged 58.1% to $269.4 million due to higher expenses for multiple product launches and inclusion of GW Pharmaceuticals’ business.

Adjusted research and development (R&D) expenses increased 66.3% to $118.5 million mainly to support ongoing clinical activities of pipeline candidates of GW Pharmaceuticals.

2021 Guidance

The company maintained its financial guidance for 2021 provided in June to include the impact of the GW Pharmaceuticals acquisition.

The company expects 2021 adjusted earnings in the range of $13.40-$14.70 per share.

Total revenues are expected to be in the range of $3.02-$3.18 billion, which indicates 31.1% increase at the midpoint over 2020 total revenues. Total product sales are anticipated in the range of $3.01-$3.17 billion.

Neuroscience sales are expected in the range of $2.26 billion to $2.36 billion. The Oncology franchise is expected to record sales of $715 million to $835 million.

While adjusted SG&A expenses are anticipated in the range of $1.12 billion to $1.18 billion, adjusted R&D expenses are expected to be in the band of $500 million to $540 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Jazz has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jazz has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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