EUR 850.00 For Business Accounts Only

Morningstar | Jazz's 3Q Hit by Slow Vyxeos Uptake, but Xyrem Sales Stay Strong; Maintaining $153 FVE

Jazz Pharmaceuticals' total third-quarter revenue of $469 million represents a 14% increase from last year, driven by Xyrem sales and the launch of Vyxeos. However, Vyxeos uptake has been slower than we anticipated, and the firm reported continued supply shortages with Erwinaze. After adjusting our near-term expectations for lower revenue and lower research and development spending, we don’t anticipate a material change to our fair value estimate of $153 per share. However, while strong Xyrem sales of $357 million, up 18% from last year, are carrying Jazz this year, we anticipate generic entry in the next five years and are wary of such missteps as the struggling Vyxeos launch and the Erwinaze supply outage. We are reaffirming our no-moat rating as we do not believe that the firm has sufficiently built out its pipeline to mitigate the effects of Xyrem patent expirations at this point.

Management indicated that supply issues with Erwinaze, which is licensed from and manufactured by Porton Biopharma, would continue into fiscal 2019. We model flat growth for Erwinaze through 2019 and slightly decreased our 2018 and 2019 expectations as a result of the outage.

In October, the firm received Food and Drug Administration approval of Xyrem for pediatric narcolepsy, which should bolster Xyrem sales after the launch in the first half of 2019. Defitelio sales were in line with our expectations this quarter and are on track to reach our estimates of over $155 million this year. The nearest catalyst we expect for Jazz is the Dec. 20 PDUFA for solriamfetol (formerly JZP-110) for excessive sleepiness in patients with narcolepsy or obstructive sleep apnea. In the first half of 2019, we expect top-line results from the phase 2 study of solriamfetol in excessive daytime sleepiness in Parkinson's disease as well as top-line results from the phase 3 study of JZP-258 in narcolepsy.