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Horizon Pharma (HZNP) Down 3.9% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Horizon Pharma Public Limited Company HZNP. Shares have lost about 3.9% in that time frame.

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

Horizon Pharma Beats on Q4 Earnings, Provides 2018 View

Horizon reported better-than-expected results for the fourth quarter of 2017.

The company reported fourth-quarter earnings of 29 cents per share which beat the Zacks Consensus Estimate of 22 cents but were down from 64 cents in the year-ago quarter.

Sales in the fourth quarter were down 12% year over year to $274.2 million but beat the Zacks Consensus Estimate of $267.58 million.

Quarter in Detail

The Orphan unit recorded revenues of $116.6 million, up 32% from the year-ago period. This strong performance was backed by solid net sales of Ravicti, which generated $51.9 million in the quarter, up 57% 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. In April 2017, Ravicti’s label was expanded by including patients aging from two months to two years and older.

Additionally, Procysbi contributed to the performance with its net sales of $33.2 million, up 31% year over year. Actimmune sales in the reported quarter were $26.8 million, up 11% year over year.

The Rheumatology unit generated $61.4 million from sales, up 48% year over year. Also, Krystexxa sales in the quarter were strong and came in at $43.8 million, up 48% year over year, driven by strong and continued year-over-year vial demand.

Primary Care garnered revenues of $96.2 million, down 47% 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.

In the reported quarter, net sales of Pennsaid2%, Duexix and Vimovo were $50 million, $28.2 million and $16.6 million, respectively.

Research and development (R&D) expenses increased 28.8% to $15.3 million while selling, general and administrative expense was $126.5 million, down 16.6% year over year.

2017 Performance

Revenues for the full year were up 7.7% to $1.1 billion. However, the company reported earnings of $1.18 per share, down 45.4% year over year.

The Orphan unit recorded revenues of $116.6 million, up 32% from the year-ago period, driven by 445% growth in sales of Procysbi to $137.7 million. Procysbi was acquired in October 2016. The sales of Rheumatology unit also grew 50% mainly driven by sales of Krystexxa at $156.5 million, up 72% year over year. However, Primary Care unit sales were down 38% to $375.4 million.

The full year's R&D expense increased 270.6% to $225 million while selling, general and administrative expense was $677.4 million, 11.4% higher year over year.

2018 Guidance

Horizon Pharma provided its outlook for 2018. It expects sales in the range of $1.15-$1.18 billion, mainly driven by expected strong growth to continue in the company’s orphan and rheumatology business units.

The company continues to invest in the expansion of Krystexxa into nephrology indication and projects sales growth of more than 50% in 2018.  The guidance includes an assumption of lower net average and 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 July 2018.

Horizon Pharma is significantly increasing investments in one of its key growth drivers, Krystexxa, and expects net sales for it to grow more than 50%. The company expects higher R&D and SG&A expenses in the first half of 2018.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. Last month, the consensus estimate has shifted downward by 24.1% due to these changes.

Horizon Pharma Public Limited Company Price and Consensus

 

VGM Scores

Currently, HZNP has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

The company's stock is suitable solely for value based on our styles scores.

Outlook

HZNP has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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