Horizon Pharma plc’s second-quarter 2016 earnings (under new methodology) of 56 cents per share increased 51.4% from the year-ago period. Under the prior methodology, the company reported second-quarter earnings of 62 cents per share, up almost 59% from the year-ago period.

Including the impact of share-based compensation expense, the company’s second-quarter earnings came in at 42 cents per share, up almost 60% from the year-ago period.

The Zacks Consensus Estimate was 53 cents per share.

Total revenues in the reported quarter surged 49% year over year to $257.4 million driven by strong growth across all three of its business units – Primary Care, Orphan and Rheumatology. Reported revenues were also above the Zacks Consensus Estimate of $238.1 million.

Horizon Pharma’s shares were up 4.3% following the release of second-quarter results.

Business Units Drive Revenues

Primary Care revenues increased 33% to $150.7 million, driven by an approximately 22% year-over-year improvement in total prescriptions due to strong performance of Pennsaid 2% (up a substantial 147% to $72.7 million). Both Duexis and Vimovo increased 53.7% and 23.1% sequentially to $45.5 million and $31.4 million, respectively.

Migergot recorded sales of $1.1 million in the reported quarter compared with $0.9 million in the first quarter of 2016.

The Orphan unit recorded revenues of $73.5 million, up 51% from the year-ago period. The unit includes sales of Ravicti, Actimmune and Buphenyl. Actimmune sales in the reported quarter were $30 million, up 16% year over year and 18% sequentially. While Ravicti generated sales of $39.4 million, up 6.2% sequentially, Buphenyl contributed $4.1 million to total revenues, up 10.8% sequentially. We note that both Ravicti and Buphenyl became a part of company’s portfolio as a result of the May 2015 Hyperion Therapeutics acquisition.

The Rheumatology unit, comprising Krystexxa, Rayos and Lodotra, generated sales of $33.2 million, up 211% from the year-ago period. Krystexxa sales in the second quarter came in at $19.9 million compared with $16.2 million in the first quarter of 2016. While Rayos revenues increased 18% to $12.1 million, Lodotra revenues shot up 211% to $1.2 million.

We note that both Migergot and Krystexxa became part of the company’s portfolio as a result of the Jan 2016 Crealta Holdings acquisition.

Adjusted research & development expenses increased 26.2% year over year to $8.5 million. Adjusted general and administrative expenses increased 55.8% to $34.7 million. Adjusted sales and marketing expenses increased almost 39% to $72.4 million.

2016 Guidance Maintained

Horizon Pharma reiterated its net sales and adjusted EBITDA expectations for 2016. The company continues to expect net sales in the range of $1.025 billion to $1.050 billion. It still expects adjusted EBITDA in the range of $495 million to $510 million. The Zacks Consensus Estimate for revenues is $1.02 billion.

Other Update

Patient enrolment in a phase III study (STEADFAST) on Actimmune for the treatment of Friedreich's ataxia was completed in May 2016. Data is anticipated by the end of 2016. Positive results from the study would allow the company to file a supplemental biologics license application in the first quarter of 2017.

Actimmune is also being evaluated in combination with a PD-1 checkpoint inhibitor in a phase I dosing study for the treatment of both kidney and bladder cancer. While the first six-patient cohort was completed in May, the second six-patient cohort is currently enrolling. Data from the phase I dosing study is anticipated in 2017.

We note that Horizon Pharma entered into an agreement in May 2016 under which it will acquire the global rights to Actimmune from Boehringer Ingelheim. Horizon Pharma currently owns the rights to Actimmune in the U.S., Canada and Japan. The transaction is expected to close by the end of 2016.

Meanwhile, the company filed a supplemental new drug application with the FDA for Ravicti in late Jun 2016. The company is looking to expand the age range for chronic management of urea cycle disorders in adult and pediatric patients from two years of age and older to two months of age and older.

Our Take

Horizon Pharma’s second-quarter results were encouraging with both earnings and revenues increasing year over year. Performance of the company’s business units was impressive during the quarter, which drove the top-line growth. Meanwhile, the company is working on label expansion of Actimmune and Ravicti, which is encouraging. Label expansion of both these drugs would further increase their commercial potential. Horizon Pharma has been actively pursuing acquisitions to expand and diversify its portfolio and, following management’s hints, we could see some merger & acquisition activities at the company.

Horizon Pharma is currently a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Corcept Therapeutics Inc. (CORT Quick QuoteCORT - Free Report) , ANI Pharmaceuticals, Inc. (ANIP Quick QuoteANIP - Free Report) and Geron Corp. (GERN Quick QuoteGERN - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy).

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