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Why Jazz Pharmaceuticals Sang Off-Key in Q1

By Keith Speights - May 6, 2020 at 7:00AM

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The drugmaker missed Wall Street top- and bottom-line estimates in the first quarter.

Jazz Pharmaceuticals (JAZZ 0.25%) ended 2019 on a positive note, with shares up 20%. This year has been disastrous, though. Jazz stock is down more than 30%, wiping out all of the 2019 gains and then some. 

The drugmaker announced its first-quarter results after the market closed on Tuesday. Shares sank 6% in after-hours trading, providing a clue as to what investors thought about the company's update. Here's why Jazz sang off-key in Q1.

Person in lab coat, safety goggles, and face mask holding a pill in their gloved hand.

Image source: Getty Images.

By the numbers

Jazz reported first-quarter revenue of $534.7 million, up 5% year over year. However, that increase wasn't nearly enough to impress Wall Street analysts. The consensus analysts' estimate called for Q1 revenue of $544.6 million.

The drugmaker posted a net loss in the first quarter of $157.8 million, or $2.82 per share, based on generally accepted accounting principles (GAAP). This result was significantly worse than Jazz's GAAP net income of $85.2 million, or $1.47 per share, recorded in the prior-year period.

Jazz announced adjusted net income in the first quarter of $25.8 million, or $0.45 per share. This also reflected deterioration from the 2019 Q1 adjusted earnings of $164.2 million, or $2.83 per share. And it fell far short of the average analyst's adjusted earnings estimate of $0.67 per share.

Behind the numbers

There were some bright spots in Jazz's Q1 update. Net product sales for narcolepsy drug Xyrem increased 11% year over year to $408 million. Sales for Defitelio/defibrotide jumped 14% year over year. Sales for Vyxeos rose 1.3%, driven mainly by higher demand in Europe. In addition, prescription volume for sleep-disorder drug Sunosi in Q1 soared 41% from the fourth quarter of 2019.

However, sales of blood cancer drug Erwinaze/Erwinase plunged 38% from the prior-year period. Jazz attributed the decline to ongoing supply and manufacturing issues. Also, sales for Sunosi were negatively impacted by the COVID-19 pandemic and by increased coupon utilization by patients.

Jazz's poor bottom-line performance wasn't as bad as it looked at first glance. The company recorded a $200 million up-front payment in Q1 to Pharma Mar for U.S. rights to cancer drug lurbinectedin. Jazz also took a $136.1 million hit from an impairment charge related to its decision to stop enrollment of the late-stage clinical study of defibrotide in preventing veno-occlusive disease (VOD).

Looking ahead

Due to the impact of the COVID-19 pandemic, Jazz lowered its full-year 2020 guidance. The company now expects revenue of between $2.12 billion and $2.26 billion, down from its previous outlook of $2.32 billion to $2.4 billion.

There are several potential catalysts on the way for the biotech stock. Jazz hopes to win FDA approval by July 21, 2020, for JZP-458 in treating cataplexy or excessive daytime sleepiness (EDS) in patients 7 years of age and older with narcolepsy. It also anticipates an FDA approval decision for lurbinectedin in treating relapsed small cell lung cancer by Aug. 16, 2020.

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