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Horizon Pharma's (HZNP) Stock Up on Q4 Earnings & Sales Beat

Zacks Equity Research
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Horizon Pharma plc HZNP reported better-than-expected results for the fourth quarter of 2018.  Following the news, the company’s shares went up almost 5%. Horizon Pharma’s stock price has increased 8.2% in the past year.

The company reported fourth-quarter adjusted earnings of 67 cents per share, which beat the Zacks Consensus Estimate of 54 cents and were higher than 29 cents reported in the year-ago quarter.

The company reported record quarterly sales of $355.5 million, up 30% year over year. The top line also beat the Zacks Consensus Estimate of $333.8 million.

Quarter in Detail

The company realigned structure to operate its strategic growth business, orphan and rheumatology, separately, from its primary care business. Thus, with effect from the second quarter of 2018, the company is reporting financial results as two separate segments — the orphan and rheumatology segment, and the primary care segment. Horizon Pharma expects the new structure to help the company better allocate resources in developing products for unmet treatment needs of patients with rare diseases.

Sales of the orphan and rheumatology segment were $237.6 million, up 33% from the prior-year quarter’s figure, driven by continued strong growth of Krystexxa, Ravicti, Procysbi and Rayos. Krystexxa sales increased 90% year over year to $83.3 million. The company is making significant investments in the commercial expansion of Krystexxa, which is expected to drive future net sales growth and expand margins over time.

In December 2019, the company sold the rights to Ravicti and Ammonaps (Ammonaps is known as Buphenyl and Lodotra is known as Rayos in the United States) outside North America and Japan to Medical Need Europe AB for $35 million. Further, effective Jan 1, 2019, the Rayos and Lodotra license and supply agreements were amended, including the transfer of Lodotra to Vectura Group plc, the current third-party supplier. Beginning 2019, the company no longer recognizes revenues from Ravicti and Ammonaps sales outside North America and Japan, or sales from Lodotra.

Fourth-quarter 2018 net sales of the primary care segment were $117.9 million, up 23% year over year.

Adjusted research and development (R&D) expenses were 5.3% of net sales, and adjusted SG&A expenses were 41.4% of the same.

2018 Results

Earnings came in at $1.83 per share, up 55% year over year, surpassing the Zacks Consensus Estimate of $1.68

Sales increased 14% to $1.21 billion, beating the Zacks Consensus Estimate of $1.19 billion.

2019 Guidance

Horizon Pharma expects sales to be $1.23-$1.25 billion.

Other Updates

The company’s pipeline candidate teprotumumab is being developed for the treatment of thyroid eye disease (TED). The company announced positive top-line results from its phase III confirmatory study, OPTIC, evaluating teprotumumab for the treatment of active TED. The study met its primary endpoint of improving proptosis, or bulging of the eye compared to placebo, with 82.9% of patients showing improvement compared to 9.5% of placebo patients. The study also succeeded in meeting secondary endpoints and the safety profile was consistent with the phase II study of teprotumumab in TED. Share price of the compay rallied about 26% in pre-market trading on Feb 28 in response to the encouraging study results. The company is expecting to submit a biologics license application to the FDA in mid-2019.

The company plans to initiate a clinical trial in the second half of 2019, evaluating the effect of Krystexxa on serum uric acid levels in kidney transplant patients with uncontrolled gout.

In December 2018, the company received the FDA approval for Ravicti to expand the age range for chronic management of urea cycle disorders to new born or older from the previous age range of two months of age or older.

 Zacks Rank & Stocks to Consider

Horizon Pharma currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks are Celgene Corporation CELG, BieGene Ltd. BGNE and BioDelivery Sciences International, Inc. BDSI. While Celegne and BieGene carry a Zacks Rank #1 (Strong Buy), BioDelivery carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene’s earnings per share estimates have increased from $10.21 to $10.75 for 2019 and from $11.63 to $12.70 for 2020 in the past 60 days. The company delivered a positive earnings surprise in all the trailing four quarters, with average of 2.65%.

BieGene’s loss per share estimates has narrowed from $10.09 to $9.90 for 2019 and from $10.57 to $10.24 for 2010 in the past 60 days.

BioDelivery Sciences’ loss per share estimates has narrowed from 25 cents to 22 cents for 2019 in the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, with average of 8.57%.

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