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Horizon Pharma (HZNP) Q2 Earnings & Sales Top, Raises View

Horizon Pharma plc HZNP topped both earnings and sales estimate in second-quarter 2017. The company also raised its sales guidance for 2017. The company’s shares moved up 4.72% on better-than-expected second-quarter results and increased guidance.

However, Horizon Pharma’s stock is down 17.8% year-to-date against the industry’s gain of 8.8%.

The company reported second-quarter 2017 earnings of 26 cents per share which beat the Zacks Consensus Estimate of 12 cents (including stock based compensation expense but excluding one-time items) but were down from 42 cents in the year-ago quarter. Excluding stock based compensation expense, the company reported EPS of 41 cents.

Sales in the second quarter were up 12% year over year to $289.5 million fueled by solid growth across its orphan and rheumatology business units. Reported sales also beat the Zacks Consensus Estimate of $235 million.

Horizon Pharma PLC Price, Consensus and EPS Surprise

 

Horizon Pharma PLC Price, Consensus and EPS Surprise | Horizon Pharma PLC Quote

Quarter in Detail

The Orphan unit recorded revenues of $120.4 million, up 64% from the year-ago period. The strong performance was backed by solid net sales of Ravicti, which generated sales of $47.2 million in the quarter, up 20% year over year driven by continued conversion from older-generation nitrogen-scavenger therapies, as well as the addition of treatment-naïve patients due to the recent label expansion. On Apr 28, the FDA approved a supplemental New Drug Application for Ravicti to expand the age range for chronic management of urea cycle disorders in patients to two months and older from two years and older.

Additionally, Procysbi contributed to the performance with its net sales of $36.7 million. Actimmune sales in the reported quarter were $28.8 million, down 4% year over year.

The Rheumatology unit generated sales of $51.7 million, up 56% year over year. Also, Krystexxa sales in the quarter were strong and came in at $38.3 million, up 93% year over year, driven by continued strong year-over-year vial demand.

Primary Care garnered revenues of $117.4 million, down 22% year over year. The decline in net sales was due to the implementation of a new contracting model, in order to secure broader inclusion of the company’s primary care medicines on formularies. Net sales of Pennsaid2%, Duexix and Vimovo were $51.2 million, $43.6 million and $21.1 million, respectively, in the reported quarter.

2017 Guidance

The company raised its outlook for 2017 and now expects sales in the range of $1.010–$1.045 billion, compared to the earlier estimate of $985–$1.020 billion.

Horizon Pharma is significantly increasing investments in one its key growth drivers, Krystexxa and expects net sales for Krystexxa around $400 million in 2017 driven by higher demand .The guidance includes assumption of lower net average net realized price beginning in the second half primarily resulting from the U.S. Government's Health Resource and Services Administration's Final Rule on 340B drug ceiling price implementation scheduled for Oct 1.  The company expects continued double-digit net sales growth for Ravicti in 2017, with room for additional uptake due to the recent label expansion. The drug is also expected to be launched in Europe in the second half. Sales of Procysbi will decline to the divestiture of European rights. Sales of Actimmune are projected to grow in low single-digits driven by a year-over-year growth in the second half. 

Other Updates

During the quarter, the company acquired River Vision thereby adding its biologic candidate teprotumumab in late stage development for Thyroid Eye Disease. A confirmatory phase III trial is slated to being by year end. The company expects that annual net sales for teprotumumab in the U.S. could exceed $250 million.

In Jun 2017, Horizon Pharma sold the marketing rights for Procysbi and Quinsair in the Europe, the Middle East and Africa regions to Chiesi Farmaceutici S.p.A. as the company focuses on higher-return businesses.

Meanwhile, the company is working on expanding Actimmune’s label. The company has collaborated with the Fox Chase Cancer Center to evaluate Actimmune in combination with a Bristol-Myers Squibb Company’s BMY Opdivo in a phase I dosing study for the treatment of kidney and bladder cancer.  The National Cancer Institute has plans to evaluate Actimmune in combination with Merck & Co MRK Keytruda to treat cutaneous t-cell lymphoma patients. This phase II study remains on track to begin later this year.

Our Take

Horizon Pharma’s second-quarter results were impressive with the company beating on both the top and bottom line estimates. Moreover, the increase in sales guidance for 2017 was encouraging as well. Net sales for rare diseases drug increased 70%. We expect Krystexxa, Ravicti and Actimmune to drive growth in the second half.

The acquisition of teprotumumab has further diversified the company’s portfolio. However, key drugs Duexis and Vimovo face competition from Pfizer Inc.’s PFE Celebrex and its generics, and other branded non-steroidal anti-inflammatory drugs (NSAIDs) and cheaper generic versions of NSAID.

Zacks Rank

Horizon Pharma currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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