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Why Is Jazz (JAZZ) Down 6.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Jazz Pharmaceuticals (JAZZ). Shares have lost about 6.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Q1 Earnings and Sales Miss Estimates

Jazz Pharmaceuticals reported adjusted earnings of $3.95 per share in first-quarter 2023, missing the Zacks Consensus Estimate of $4.26. However, earnings rose 6% year over year.

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Total revenues in the reported quarter rose 10% year over year to $892.8 million. The upside was driven by sales of new drugs and drugs added from the acquisition of GW Pharmaceuticals. Total revenues missed the Zacks Consensus Estimate of $898.1 million.

Net product sales increased 9% from the year-ago quarter’s levels to $884.2 million. During the quarter, Jazz recorded $2.1 million as royalty revenues from high-sodium oxybate authorized generic (AG). Other royalties and contract revenues surged 67% to $6.5 million in the quarter.

Neuroscience Products

Sales of Jazz’s neuroscience products increased 7.0% to $651.9 million.

Net product sales for the combined oxybate business (Xyrem + Xywav) increased 5% to $455.9 million in the quarter. During the quarter, average active oxybate patients rose 5% year over year to approximately 17,400.

Sales of Xyrem declined 28% year over year to $178.1 million due to patients switching to Xywav. In January, an authorized generic version of Xyrem was launched and management expects more generic launches later this year.

Xywav recorded sales of $277.8 million in the quarter, up 49% year over year. The upside can be attributed to the encouraging uptake of the drug in narcolepsy and idiopathic hypersomnia (IH) indications. The drug is currently Jazz’s largest product by net sales.

Sales of Epidiolex/Epidyolex rose 20% to $188.9 million.

Sativex recorded sales of $7.1 million in the quarter, up 50% year over year.

Oncology Products

Oncology product sales increased 16% to $228.9 million.

Rylaze recorded sales of $85.9 million in the quarter, up 58% year over year. Jazz stated that demand remained strong during the quarter.

Zepzelca recorded sales worth $67.2 million in the quarter, up 13% year over year. Per management, the drug continued as the treatment of choice in the second-line SCLC setting.

Vyxeos generated sales of $36.7 million, up 9% from the year-ago period’s levels.

Defitelio sales were down 21% year over year at $39.1 million in the quarter.

Cost Discussion

Adjusted selling, general and administrative (SG&A) expenses were flat year-over-year at $260.5 million.

Adjusted research and development (R&D) expenses rose 49% to $173.9 million, mainly due to increased costs for developing pipeline candidates.

2023 Guidance

Jazz reiterated its financial guidance for full year 2023.

Management expects 2023 adjusted earnings in the range of $16.90 - $17.85 per share.

Total revenues are expected to be in the range of $3.68-$3.88 billion, suggesting approximately 3% year-over-year growth at the midpoint compared with 2022 levels. In 2023, Jazz expects continued growth in net sales of Xywav, Epidiolex and its oncology portfolio.

Neuroscience sales are expected in the range of $2.68-$2.83 billion, implying flat year-over-year growth at the midpoint compared to 2022. The Oncology franchise is expected to record sales in the range of $0.95-$1.05 billion, indicating growth of 14.4% at the midpoint compared to 2022.

While adjusted SG&A expenses are anticipated between $1.05 billion and $1.11 billion, adjusted R&D expenses are expected to be in the band of $675 million to $725 million.

Based on the royalty structures within the AG agreements, the company expects to record significantly higher royalty revenue from high-sodium oxybate AG in second-half 2023 when compared to the first half.

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 great Growth Score of A, though it is lagging a bit on the Momentum Score front 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 quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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.

Performance of an Industry Player

Jazz belongs to the Zacks Medical - Drugs industry. Another stock from the same industry, Corcept Therapeutics (CORT), has gained 0.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.

Corcept reported revenues of $105.65 million in the last reported quarter, representing a year-over-year change of +12.8%. EPS of $0.14 for the same period compares with $0.20 a year ago.

Corcept is expected to post earnings of $0.16 per share for the current quarter, representing a year-over-year change of -33.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -14.3%.

Corcept has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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