Why Is Jazz (JAZZ) Down 18% Since Last Earnings Report?

A month has gone by since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have lost about 18% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Jazz Pharmaceuticals Q4 Earnings and Sales Beat Estimates

Jazz Pharmaceuticals delivered adjusted earnings of $4.42 per share for the fourth quarter of 2019, which surpassed the Zacks Consensus Estimate of $4.16. Earnings rose 21% from the year-ago figure driven by higher sales, which made up for higher operating expense.

Total revenues in the reported quarter rose 22% year over year to $581.7 million and also beat the Zacks Consensus Estimate of $564.0 million. This can be attributed to higher product sales.

Quarter in Detail

Net product sales increased 23.4% from the year-ago quarter to $576.5 million. Royalties and contract revenues declined 42.8% to $5.21 million in the quarter.

Sales of Xyrem rose 16% year over year to $435.4 million. Sales were driven by 5% rise in bottle volume growth. The average number of active Xyrem patients increased 4.5%.

Erwinaze/Erwinase revenues were $54.9 million, up 126.3% year over year due to favorable timing of supply availability.

Defitelio sales rose 27% year over year to $47.8 million in the quarter. Vyxeos generated sales of $31.5 million, up 23% from the year-ago period, primarily due to the ongoing launch in EU.

Sunosi recorded sales of $2.7 million in the quarter compared with $1 million in the third quarter.

Other product sales declined 14% to $4.2 million.

Adjusted selling, general and administrative (SG&A) expenses rose 38.5% to $196.9 million driven by higher expenses for business expansion and costs to support the launch of Sunosi in the United States.

Adjusted research and development (R&D) expenses increased 75.6% to $90.0 million, primarily due to higher expenses related to development of the company’s pipeline and partnered programs.

2019 Results

Full-year 2019 sales rose 14% to $2.16 billion, slightly beating the Zacks Consensus Estimate of $2.15 billion. However, sales were within the guided range of 2.10-$2.18 billion.

Adjusted earnings of $16.23 per share beat Zacks Consensus Estimate of $15.95 and came ahead of the guided range of $15.50 - $16.15. Earnings rose 18% year over year.

2020 Guidance

The company issued its financial guidance for 2020.

It expects earnings in the range of $12.50 - $13.40 in 2020. Total revenues are expected to be in the range of $2.32-$2.40 billion.

The 2020 sales range indicates growth of 7-11% over 2019 levels. However, the earnings range indicates a significant decline from 2019 levels due to changes in Jazz’s reporting method for upfront and milestone payments. The company said that from 2020, it will not adjust upfront and milestone payments for the calculation of adjusted/non-GAAP earnings per share. It made an upfront payment of $200 million in January to PharmaMar, which hurt its after-tax 2020 adjusted EPS guidance by around $3.13 per share.

Total product sales are predicted in the range of $2.31-$2.38 billion. The oxybate franchise (Xyrem and JZP-258) sales are expected in the range of $1.71-$1.76 billion. Erwinaze/Erwinase sales are forecast in the band of $185-$215 million. Defitelio sales are expected in the range of $180-$200 million. Vyxeos sales guidance is in the range of $135-$165 million. Jazz’s guidance for Sunosi net sales is $30 million - $50 million.

While adjusted SG&A expenses are anticipated in the range of $770 million to $810 million, adjusted R&D expenses are expected to be in the band of $285 million to $315 million.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.