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Jazz Pharmaceuticals (JAZZ) Q3 Earnings: A Beat in Store?

We expect Jazz Pharmaceuticals plc JAZZ to beat expectations when it reports third-quarter 2017 results on Nov 7, after the market closes.

Jazz’s shares have outperformed the industry so far this year. The stock has rallied 25.1% compared with the industry’s 1.3% decrease during the period.

Jazz’s earnings history has been disappointing. The company missed estimates in three of the last four quarters and surpassed in one with an average negative earnings surprise of 1.53%. Last quarter, the company lagged expectations with a negative earnings surprise of 5.54%.

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

Factors at Play

At the third-quarter conference call, investors’ 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. Its business development plans are also expected to draw attention.

Xyrem should deliver a strong performance in the third quarter, given a continuous increase in active Xyrem patients. The company is striving to expand Xyrem’s label and currently conducting a phase II/III EXPRESS study on children and adolescents, suffering from cataplexy with narcolepsy. It is planning to submit an sNDA for Xyrem to include the pediatric phase III study results, later in 2017. The Zacks Consensus Estimate for Xyrem is $313 million for the third quarter.

The company’s another drug Defitelio (veno-occlusive disease) was launched in the United States in early April 2016. Though the drug witnessed a sequential decline in sales in second-quarter 2017, the company’s commercialization efforts are expected to boost its sales in the to-be-reported quarter. The Zacks Consensus Estimate for Defitelio is $38.3 million for the third quarter.

Presently, the company is enrolling patients for a phase III clinical trial on Defitelio for the potential prevention of veno-occlusive disease (“VOD”) on high-risk adults and pediatric patients. Also, the company is working to initiate a phase II proof-of-concept study for the prevention of acute graft versus host disease, later this year.

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

Notably, the company drug Vyxeos received an FDA approval earlier in August for treatment of adults with acute myeloid leukemia (“AML”) and was launched in the market soon after the approval. The company is expected to recognize revenues for the first time from Vyxeos in the to-be-reported quarter. We expect management to update on commercialization/launch plans of Vyxeos at the third-quarter conference call. The company is also planning to submit regulatory applications in the EU later this year.

Earnings Whispers

Our proven model shows that Jazz is likely to beat on earnings this quarter because it has the right combination of the two key ingredients — a positive Earnings ESP and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Jazz has an Earnings ESP of +0.73%, representing the difference between the Most Accurate estimate ($2.91 per share) and the Zacks Consensus Estimate ($2.89 per share). A positive ESP indicates a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Jazz has a Zacks Rank #3, which increases the predictive power of ESP.

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

Here are some other health care stocks worth considering as per our model, these have the right combination of elements to beat estimates this quarter:

Clovis Oncology, Inc. CLVS is scheduled to release results on Nov 1. The company has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agenus Inc. AGEN is scheduled to release results on Nov 7. The company has an Earnings ESP of +8.11% and carries a Zacks Rank of 2 as well.

ACADIA Pharmaceuticals Inc. ACAD is expected to release results on Nov 6. The company has an Earnings ESP of +3.20% and also carries a Zacks Rank of 3.

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Agenus Inc. (AGEN): Free Stock Analysis Report
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Jazz Pharmaceuticals PLC (JAZZ): Free Stock Analysis Report
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