What Investors Can Learn from Jazz Pharmaceuticals’ Newly Added Risk Factors

Ireland-based Jazz Pharmaceuticals (JAZZ) develops drugs targeting various medical conditions. It recently acquired Cannabis-based drug company GW Pharmaceuticals. Let’s take a look at Jazz’s latest financial performance and risk factors.

Jazz’s Q2 Financial Results and 2021 Guidance

The company reported second-quarter revenue of $751.8 million, representing a 34% year-over-year increase and topping the consensus estimate of $735.62 million. The company revealed that recently added products contributed 41% to the net product revenue in Q2, keeping it on track to meet its revenue diversification targets. Additionally, adjusted EPS rose to $3.90 from $3.71 a year ago and beat the consensus estimate of $3.42.

For full-year 2021, Jazz anticipates revenue in the range of $3.02 billion – $3.18 billion. It expects adjusted EPS to come in the band of $13.40 – $14.70.

The company ended Q2 with $891.4 million in cash and $500 million in a revolving credit facility. It has $7.1 billion in long-term debt. (See Jazz Pharmaceuticals stock charts on TipRanks).

Jazz Pharmaceuticals’ Risk Factors

The new TipRanks Risk Factors tool shows 46 risk factors for Jazz Pharmaceuticals. Since June 2021, the company has amended its risk profile to introduce five new risk factors, all under the Legal and Regulatory category.

In a newly added risk factor, Jazz tells investors that it relies on regulatory marketing exclusivity for many of its products. It states that while the FDA usually allows seven years of market exclusivity for products with Orphan Drug Designation, the exclusivity period can be cut short under certain circumstances and could expose it to early competition.

Another newly added risk factor cautions that Jazz’s cannabis-based product candidates may be subject to controlled substance laws in the U.S. If that happens, the clinical development and marketing of those products may be adversely affected.

Furthermore, Jazz cautions that its cannabis-derived drugs may generate public controversy, which may adversely affect the marketing of such products and harm its reputation.

Legal and Regulatory is Jazz Pharmaceuticals’ top risk category, accounting for 33% of the total risks. That is above the sector average of 21%. The company’s next major risk category is Finance and Corporate at 24%, versus 30% for the sector. JAZZ shares have declined about 12% since the beginning of 2021.

Analysts’ Take

Following Jazz Pharmaceuticals’ Q2 report, Bank of America Securities analyst Jason Gerberry reiterated a Buy rating on JAZZ stock but reduced the price target to $224 from $230. The analyst’s new price target suggests 54.47% upside potential.

Consensus among analysts is a Strong Buy based on 11 Buys and 1 Hold. The average Jazz Pharmaceuticals price target of $215.36 implies 48.51% upside potential to current levels.