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Can Jazz Pharma (JAZZ) Spring a Surprise in Q2 Earnings?

Jazz Pharmaceuticals plc JAZZ is scheduled to report second-quarter 2017 results on Aug 8, after the market closes.

Jazz’s shares have significantly outperformed the industry so far this year. The stock has surged 37.9% compared with the industry’s 1.7% increase during the period.



Jazz has quite an encouraging earnings track record. The company beat estimates in three of the last four quarters with an average positive earnings surprise of 14.48%. However, last quarter, the company missed expectations with a negative earnings surprise of 0.70%.

Let’s see how things have shaped up for this quarter:

Factors at Play

At the second-quarter conference call, investor focus will be on the performance of Jazz’s lead product, Xyrem, for cataplexy and excessive daytime sleepiness (EDS). Investors will also be looking out for the company’s pipeline progress. Defitelio’s sales ramp up in the U.S., while Xyrem face issues related to patent litigations. The company’s business development plans are also expected to draw attention.

Xyrem should deliver a strong performance in the second quarter. The company is also striving to expand Xyrem’s label and currently conducting a phase II/III EXPRESS study on children and adolescents, suffering from cataplexy with narcolepsy. In Apr 2017, the company announced positive top-line efficacy results from the study. It is also planning to submit an sNDA for Xyrem to include the pediatric phase III study results later in 2017.

Defitelio (veno-occlusive disease) was launched in the U.S. in early Apr 2016 and sales of the drug have picked up pace ever since. A phase III clinical trial on Defitelio for the potential prevention of veno-occlusive disease (VOD) on high-risk adults and pediatric patients is also currently underway.

However, Jazz has been facing challenges in building sufficient inventory levels for Erwinaze due to constrained manufacturing capacity. The company may further continue to experience supply disruptions in certain markets this quarter, including the U.S. and beyond.

On the other hand, in Apr 2017, the company announced positive efficacy results from a global multicenter, phase III TONES 2 study, evaluating its lead pipeline candidate JZP-110 on adult patients with excessive sleepiness associated with narcolepsy. In the trial, JZP-110 demonstrated a highly statistically significant improvement in the co-primary endpoints. The company plans to submit an NDA to the FDA for the given indication later this year.

In May, the FDA accepted an NDA for its second pipeline candidate, Vyxeos, on a priority review basis. We believe, Vyxeos has multi-million dollar potential. We expect the company to update on Vyxeos at the second-quarter conference call.

Earnings Whispers

Our proven model does not conclusively show that Jazz is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.85. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Jazz’s Zacks Rank #3 (Hold) increases the predictive power of ESP, its 0.00% Earnings ESP makes surprise prediction difficult.

We caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Per our model, here are some other health care stocks with the right combination of elements to come up with an earnings beat this quarter:

Syndax Pharmaceuticals, Inc. SNDX is scheduled to release results on Aug 10 with an Earnings ESP of +7.60% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arena Pharmaceuticals, Inc. ARNA is scheduled to release results on Aug 7. The company has an Earnings ESP of +5.88% and a Zacks Rank #2.

Puma Biotechnology, Inc. PBYI is expected to release results on Aug 8. The company has an Earnings ESP of +3.33% and a Zacks Rank #3.

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