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Horizon Pharma to Buy Hyperion Therapeutics for $1.1B - Analyst Blog

Zacks Equity Research

In order to diversify and strengthen its present product portfolio, Horizon Pharma HZNP has announced its intention to acquire Hyperion Therapeutics, Inc. HPTX for around $1.1 billion ($46.00 per share) in cash. Shares of both Horizon Pharma and Hyperion Therapeutics rallied 18.2% and 7.6%, respectively, following the announcement.

The transaction, approved by the board of both the companies, is expected to close in the second quarter of 2015.

Horizon Pharma to Expand Existing Portfolio

With the successful completion of the deal, Horizon Pharma will add two of Hyperion Therapeutics’ products to its portfolio – Ravicti and Buphenyl. Both the products are approved for the treatment of patients suffering from urea cycle disorders (UCDs). In 2014, the products jointly contributed $113.6 million to Hyperion Therapeutics’ revenues.

We note that Ravicti is under review in the EU for the UCD indication, with a final decision expected by year end. The addition of Ravicti and Buphenyl will also diversify Horizon Pharma’s current portfolio which currently has products in areas like rheumatoid arthritis, osteoarthritis, spondylitis, chronic granulomatous disease and severe, malignant osteopetrosis.

Horizon Pharma, which recorded total revenues of $297 million in 2014, is expected to get a significant boost from the addition of Ravicti and Buphenyl.
 
Guidance

The transaction is expected to be immediately accretive to the company’s adjusted earnings per share. Horizon Pharma expects that Ravicti and Buphenyl will add approximately $100 million to the company’s adjusted EBITDA in 2016. This includes cost synergies of more than $50 million.

During its fourth-quarter 2014 conference call, the company stated expectations of 2015 net sales in the range of $450–$475 million and adjusted EBITDA in the band of $170–$190 million. On the other hand, Hyperion Therapeutics projected 2015 Ravicti sales in the range of $107–$113 million and 2015 Buphenyl net sales in the $13–$15 million range.

Our Take

We are positive on Horizon Pharma’s decision to acquire Hyperion Therapeutics. The deal will not only diversify its current portfolio, but will also significantly boost its top line as well as bottom line. Also, the EU approval of the drug will boost sales further. However the question remains whether Horizon Pharma’s investment of $1.1 billion is worth for Ravicti and Buphenyl or not.

Currently, Horizon Pharma sports a Zacks Rank #1 (Strong Buy). Some other well-ranked stocks in the health care sector include Affymetrix Inc. AFFX and Cytokinetics, Incorporated CYTK, both carrying a comparable rank.


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