Inside Jazz’s Net Profit Margin Expectations for 2017

For 2Q17, Jazz Pharmaceuticals (JAZZ) reported revenues close to $394 million, which represented a YoY (year-over-year) growth of ~3% and sequential growth ~5%. For 1H17, JAZZ reported revenues of ~$770 million, which is 7% higher on a YoY basis.

Despite its strong revenue performance, the company reported a YoY drop in its GAAP (generally accepted accounting principles) net income and adjusted net income, from $115 million in 2Q16 to $106 million in 2Q17 and $166 million in 2Q16 to $157 million in 2Q17, respectively.

The decline in income was mainly attributed to increased investments required for the expansion of its sales force to support the market penetration of Defitelio and the commercial launch of Vyxeos. JAZZ also had to bear higher interest expenses related to its acquisition of Celator, in addition to unfavorable foreign exchange fluctuations.

In 2Q17, JAZZ reported adjusted earnings per diluted share of $2.56—a small YoY decline from the $2.67 it reported for 2Q16.

Wall Street analysts have estimated JAZZ’s fiscal 2017 net profit margin to be ~25.5%, which would be a YoY fall of ~120 basis points.

By comparison, peers AbbVie (ABBV), Celgene (CELG), and Pfizer (PFE) are expected to report net profit margins of ~26.4%, ~33.3%, and ~21.7%, respectively.

For fiscal 2017, JAZZ has projected that its GAAP net income per diluted share will be in the range of $6.55–$7.55, while its non-GAAP adjusted net income per diluted share could fall in the range of $10.70–$11.30.

Notably, the Market Vectors Pharmaceutical ETF (PPH) has about 2.8% of its total portfolio holdings in JAZZ.

Continue to the next part of this series for a closer look at the growth prospects for JAZZ’s Xyrem.