What happened

Shares of Jazz Pharmaceuticals (JAZZ 0.57%), an orphan-drug maker, fell by as much as 14.8% today on heavy volume.

Jazz's stock is slumping in response to an overall disappointing third-quarter earnings report. The big-ticket item is a 2.75% miss on consensus revenue for the quarter. Specifically, Wall Street was expecting Jazz to generate $482.7 million in revenue for the quarter, but the company came up short by a healthy $13.3 million, according to FactSet.

Man in a suit staring down into a drop off with a red downward trending graph in the background.

Image source: Getty Images.

So what

Jazz's woes during the quarter primary stemmed from the slower-than-expected launch for its acute myeloid leukemia drug Vyxeos. Per a note by Mizuho Healthcare, Vyxeos was expected to rake in $32.1 million over the course of Q3. Jazz, though, reported that the drug only generated $21 million in sales for the three month period.

Adding fuel to the fire, Jazz saw a sizable 16% year-over-year decline in Erwinase sales due to a global supply disruption for the acute lymphoblastic leukemia treatment. The company said it expects Erwinase supply issues to persist into the fourth quarter and perhaps even into early 2019.

Taken together, these two headwinds helped to blunt the positive impact of Xyrem's strong quarterly performance. Jazz's flagship narcolepsy drug, for example, eclipsed consensus sales estimates for the quarter by a noteworthy 3%, thanks in large part to a spike in demand.

Now what

Is this double-digit drop in Jazz's share price warranted? With Jazz so far unable to solve Vyxeos' early stumbles, the answer is arguably, "Maybe." While Jazz has long been one of the more expensive names in biopharma, the company has seemingly justified its rich premium by continually generating top-notch levels of revenue growth over the past few years. This favorable situation isn't likely to change anytime soon -- even if Vyxeos' commercial trajectory fails to live up to expectations.

That said, Jazz's forward-looking price-to-sales ratio for 2019 of 4.2 remains on the high side within its immediate biopharma peer group. Bargain-hunters, therefore, may want to remain on the sidelines for the time being, despite today's double-digit move lower.