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Why Is Horizon Therapeutics (HZNP) Up 7.5% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Horizon Therapeutics (HZNP). Shares have added about 7.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Horizon Therapeutics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Horizon Therapeutics' Q3 Earnings Beat Estimates

Horizon  reported third-quarter 2019 adjusted earnings of 64 cents per share, which beat the Zacks Consensus Estimate of 51 cents but declined from 65 cents reported in the year-ago quarter.

The company reported quarterly sales of $335.5 million, up 3% year over year. The top line also beat the Zacks Consensus Estimate of $333 million.

On May 2, the shareholders approved the change of the company’s name to Horizon Therapeutics. This move caters to the company’s long-term strategy to develop and commercialize innovative medicines addressing rare diseases, which currently have very few effective treatment options.

Quarter in Detail

The company realigned its structure to operate two separate businesses, effective the second quarter of 2018. The company reports financial results in two separate segments — the orphan and rheumatology segment, and the Inflammation (previously known as the primary care segment) segment. Sales of the orphan and rheumatology segment were $250.4 million, up 14% from the prior-year quarter’s figure, driven by continued growth of Krystexxa, Rayos and Actimmune. Krystexxa sales soared 42% year over year to $99.6 million. Beginning January 2019, the company no longer recognizes certain ex-U.S. sales of Ravicti, Buphenyl and Lodotra following the divestiture of those rights in 2018. 

Third-quarter 2019 net sales of the Inflammation segment were $85.1 million, down 19% year over year.

Adjusted R&D expenses and adjusted SG&A expenses were 5.8% and 46.2% of net sales, respectively.

2019 Guidance

The company expects full-year 2019 net sales to be $1.28-$1.30 billion. The net sales growth for Krystexxa is expected to be more than 25%.

Other Pipeline Updates

The company’s pipeline candidate teprotumumab is being developed for the treatment of thyroid eye disease (TED).

In September, the FDA accepted the biologics license application (BLA) for teprotumumab in active TED and granted it Priority Review designation, with an action date of Mar 8, 2020. If approved, teprotumumab would be the first and only treatment for active TED.

In October, the company initiated its open-label PROTECT study, evaluating the use of Krystexxa in adults with uncontrolled gout, who have undergone a kidney transplant. The objective of the trial is to demonstrate that the drug provides effective disease control without burdening the kidneys.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -21.34% due to these changes.

VGM Scores

At this time, Horizon Therapeutics has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Horizon Therapeutics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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