Jazz Pharma (JAZZ) EPS Miss Overshadowed By Settlements - UBS

UBS analyst, Marc Goodman, raised his PT on Jazz Pharmaceuticals (NASDAQ: JAZZ) to $168 from $162 as high single digit revenue growth was basically in line with expectations but EPS of $2.26 fell short of consensus $2.30. The Street was a little low on spending but the analyst thinks investors will quickly look through the slight EPS miss because of the newly disclosed Xyrem patent settlements out to 2025, which is better than expected. The firm reiterated a Buy rating.

Jazz accelerated its share repo and bought back 1.1M shares, mostly with 1Q16 free cash flow. For 2016 mgt maintained its top line and spending guidance but raised EPS to $11.10-11.50 (up by $0.20) because of the lower share count.

Key Takeaways:

(1) Xyrem bottle volume growth was 4% (1Q15 was a tough comp +12%), as 12,775 (vs 12,375 in 1Q15) pts were on drug in 1Q16. Mgt is still pointing to high single digit volume growth for 2016. Mgt disclosed for the first time that it also settled with Ranbaxy and that both Wockhardt and Ranbaxy are allowed to launch generics after December 31, 2025. The trial with Roxanne has once again been pushed out to 3Q16 at the earliest

2) Erwinase was impacted by supply disruption (no US shipment for 5 days, which hit sales by ~$1M) and higher rebates from increased use of the 340B/Medicaid program. And mgt indicated there's potential for further disruption this year, which is not new

3) US Defitelio was stocked in the hospitals, and mgt even pointed to reordering from many, which is encouraging. (4) For JZP-110, after vetting with the FDA, mgt broadened the criteria for Phase 3 for faster enrollment as well as to be more reflective of ultimate end-users.

No change to Buy rating or PT of $168 (vs prior $162) based on 12.5x 2017 EPS of $13.40.

For an analyst ratings summary and ratings history on Jazz Pharmaceuticals click here. For more ratings news on Jazz Pharmaceuticals click here.

Shares of Jazz Pharmaceuticals closed at $147.82 yesterday.

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