Before we discuss Jazz Pharmaceuticals (Nasdaq: JAZZ), we want to give you a quick update on the latest changes in our reference funds’ holdings of Brain Trust Portfolio stocks. The latest Form 13Fs have just been filed.

The most notable change is that Shapiro Capital Management its slashed his position in Lindsay Corporation (NYSE: LNN) by nearly 40 percent, signaling that it no longer holds LNN in high regard as it did. Yesterday, via Trade Alert, we removed the stock from our portfolio.

We expect to have a new stock recommendation early next week. Stay tuned.

The other move of note is that Cadian Capital Management has reduced its position in JAZZ by 15 percent. This isn’t enough for us to get out of JAZZ, but it is enough to get our attention. Helping JAZZ’s case, however, is that Cadian actually pared down six of it top-ten positions (including JAZZ), so it appears Cadian is merely re-balancing its portfolio a bit rather than souring on JAZZ. After all, JAZZ still constitutes 8 percent of Cadian’s portfolio.

Other than those two moves, there were no remarkable changes. Marcato increased its position in AAR Corp. (NYSE: AIR) slightly, as did BlackRock (NYSE: BLK) in AngioDynamics (Nasdaq: ANGO). Meanwhile, the aforementioned Shapiro bought 62,800 additional shares in ChannelAdvisor (NYSE: ECOM) and now owns 3.84 million shares. Elsewhere, Third Point sold a little over 2,000 shares of Sotheby’s (NYSE: BID), out of its 6.66 million shares—a drop in the bucket. Lastly, neither Tiger Global nor Baupost changed their sizeable holdings in, respectively, TAL Education (NYSE: TAL) and Synchrony Financial (NYSE: SYF), at all.

******

JAZZ has been a portfolio laggard so far since joining our portfolio. This week we examine its quarterly report and see whether we should be concerned or whether there’s reason to expect a turnaround.

Jazz’s third-quarter revenue missed expectations ($411.9 million vs. $420.2 million) but adjusted earnings per share beat ($3.22 vs. 2.87). The earnings beat was largely attributable to a one-time benefit release of tax reserves.

Sales of Xyrem, Jazz’s flagship drug, increased 6 percent year over year. Volume-wise, Xyrem growth was negative 1 percent compared to a year ago. However, the slight decline appears to be related to non-fundamental reasons. For example, there was one fewer shipping day this year, which caused an estimated 2 percent impact. Additionally, there was a problem with an automated outbound phone system that reminds patients of refills that caused delays; this had another estimated 1 or 2 percent impact. The number of patients on Xyrem grew about 4 percent year over year and narcolepsy diagnosis has grown in consecutive quarters, a good trend for Jazz.

These temporary issues caused Jazz to revise downward its 2017 Xyrem sales guidance to a range of $1.18 billion to $1.20 billion—previous guidance was $1.20 billion to $1.23 billion. At the midpoints, this represents a 2 percent downward revision. Note that the revision reflects the revenue being pushed into the future, and the revenue isn’t lost.

Moreover, Jazz’s new drug Vyxeos, launched in August, had sales of $10 million in essentially half a quarter, which is much better than expected—The Street had expected $3.9 million. The strong start out of the gates caused Jazz to upgrade its 2017 Vyxeos sales guidance to $20 million to $30 million from the prior guidance of $10 million to $20 million.

As Jazz currently leans on Xyrem for roughly 75 percent of revenues, a strong Vyxeos launch bodes well for the new product diversifying the company’s sales. Current estimates project peak Vyxeos sales between $200 million and $400 million, more if the label expands in the future. The company is now awaiting EU regulatory approval to sell the drug there.

The company is currently trying to raise narcolepsy awareness, with the goal of increasing prescription of Xyrem. The temporary issues caused sluggish sales in the third quarter but sales should pick up by early next year.

Jazz is no high-flyer. It’s trading at only 11-times estimated forward 12-month earnings. The market’s down on it right now, and its main product Xyrem needs to show a little faster growth. But we expect the stock price to rebound from its current level. If there was a fundamental reason, such as fewer scripts written or imminent generic threat, we would be far more concerned. But as we noted above, Xyrem volume sold is growing. Additionally, as we noted when we originally added JAZZ to our portfolio, the settlement with Hikma Pharmaceuticals (OTCMKTS: HKMPF) greatly reduced imminent threat from generic competition.

Due to the stock’s recent move and Cadian’s move, we lower the suggested buy-up-to price to $145 for the time being.