Horizon Pharma plc reported fourth-quarter 2016 earnings of 50 cents per share (including the impact of share-based compensation expense and tax adjustments), down from 55 cents in the year-ago quarter. Reported earnings also missed the Zacks Consensus Estimate of 52 cents.
Sales in the fourth quarter were up 27% to $310.3 million but missed the Zacks Consensus Estimate of $313.7 million. The year-over-year growth was driven by growth across all three of its business units – Primary Care, Orphan and Rheumatology.
Horizon’s shares lost 5.6% following the release of its fourth-quarter results.
Horizon’s share price movement in the last six months shows that the stock has underperformed the Zacks classified Medical-Biomedical/Genetics industry. Specifically, the stock has lost 12.6% while the industry lost 2.7%.
Quarter In Detail
Primary Care revenues increased approximately 11% year over year to $180.6 million, backed by robust performance of Pennsaid 2% (up 74% to $96.6 million). However, both Duexis and Vimovo decreased 16% and 33% to $50.9 million and $31.6 million, respectively. Migergot recorded sales of $1.5 million in the reported quarter.
The Orphan unit recorded revenues of $88.1 million, up 29% from the year-ago period. The unit comprises sales of Ravicti, Actimmune and Buphenyl.
Actimmune sales in the reported quarter were $24.2 million, down 14% year over year and relatively flat sequentially. Ravicti raked in sales of $32.9 million, down 4% from the year-ago period. Buphenyl contributed $4.7 million to the top line, down 16% from the year-ago quarter.
We note that both Ravicti and Buphenyl became part of company’s portfolio after the May 2015 Hyperion Therapeutics acquisition.
The Rheumatology unit, comprising Krystexxa and Rayos, generated sales of $41.6 million, up from $13.5 million in the year-ago quarter. Krystexxa sales in the fourth quarter came in at $29.5 million. Rayos garnered revenues of $11.3 million, up 1% year over year.
We note that both Migergot and Krystexxa became part of the company’s portfolio after its Jan 2016 Crealta Holdings acquisition.
Adjusted research & development expenses were up from $10.8 million to $17.4 million, while adjusted general and administrative expenses increased 30% to $44.7 million. Adjusted sales and marketing expenses were $85 million, up 53%.
We remind investors that Horizon acquired California-based biopharmaceutical company, Raptor Pharmaceutical Corp in Oct 2016 in a bid to expand its rare disease portfolio. With this acquisition, Horizon will be able to strengthen its U.S. orphan business, and expand into Europe and other key international markets. The acquisition has also added two orphan drugs – Procysbi and Quinsair – to its portfolio. Procysbi net sales for the fourth quarter were $25.3 million
2016 Results
Revenues came in at $981.1 million, up from $757 million in 2015 but missed the Zacks Consensus Estimate of $1.05 billion.
2017 Guidance
Horizon expects net sales to be approximately $1.24 billion–$1.29 billion in 2017. The company expects Actimmune sales to grow in 2017. The Zacks Consensus Estimate for revenues currently stands at $1.30 billion. The company expects adjusted EBITDA in the range of $525 million–$575 million.
The company expects a sequential decline in net sales in the first quarter due to annual managed care plan changes and higher patient deductibles at the beginning of the year. Sales in the first quarter are expected to be 18–20% of total sales in 2017. The company also expects the highest operating expenses as a percent of sales for the year in the first-quarter 2017.
Other Updates
In Sep 2016, Horizon Pharma agreed to pay $65 million to Express Scripts as part of a litigation settlement. We note that the company submitted its supplemental New Drug Application (sNDA) to the FDA in Jun 2016 for a label expansion of Ravicti to expand the age range for chronic management of urea cycle disorders (UCDs) in patients to two months of age and older from two years of age and older.
Moreover, Horizon is working on expanding its managed care organization to support the broader contracting strategy with PBMs and payers. In Dec 2016, the company secured formulary status with an additional PBM resulting in contracts with three leading pharmacy benefit managers to improve patient access.
Our Take
Horizon Pharma’s fourth quarter results were disappointing with the company missing on both top- and bottom line estimates. Moreover, the guidance for 2017 also fell short of expectations due to a conservative view on its primary care business. The company stated that some of the largest PBMs had previously placed Duexis and Vimovo on their formulary exclusion lists.
The company suffered a setback in Dec 2016 when it announced disappointing top-line data from the phase III study, STEADFAST, which evaluated Actimmune for the treatment of FA. Actimmune failed to meet the primary endpoint of a statistically significant change from baseline in neurological outcome, in comparison to placebo. The study did not meet the secondary endpoints of statistical significance either. Based on the unfavorable study results, the company decided to discontinue the FA development program.
Nevertheless, the company expects Krystexxa, Ravicti, Procysbi, Actimmune, Buphenyl and Quinsair to account for roughly 50% of total sales in 2017 and report a 50% year-over-year growth.
Zacks Rank & Stocks to Consider
Horizon is a Zacks Rank #3 (Hold) stock. A couple of better-ranked stocks in the health care sector include Celgene Corp. and Sunesis Pharmaceuticals, Inc. . Each of these stock carriy a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Celgene’s earnings estimates increased from $6.52 to $6.60 for 2017 and from $8.15 to $8.16 for 2018 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 5.08%.
Sunesis’ loss estimates narrowed from $2.57 to $2.44 for 2016 and from $2.16 to $1.97 for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 0.54%.
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Horizon (HZNP) Misses on Earnings in Q4, View Disappoints
Horizon Pharma plc reported fourth-quarter 2016 earnings of 50 cents per share (including the impact of share-based compensation expense and tax adjustments), down from 55 cents in the year-ago quarter. Reported earnings also missed the Zacks Consensus Estimate of 52 cents.
Sales in the fourth quarter were up 27% to $310.3 million but missed the Zacks Consensus Estimate of $313.7 million. The year-over-year growth was driven by growth across all three of its business units – Primary Care, Orphan and Rheumatology.
Horizon’s shares lost 5.6% following the release of its fourth-quarter results.
Quarter In Detail
Primary Care revenues increased approximately 11% year over year to $180.6 million, backed by robust performance of Pennsaid 2% (up 74% to $96.6 million). However, both Duexis and Vimovo decreased 16% and 33% to $50.9 million and $31.6 million, respectively. Migergot recorded sales of $1.5 million in the reported quarter.
The Orphan unit recorded revenues of $88.1 million, up 29% from the year-ago period. The unit comprises sales of Ravicti, Actimmune and Buphenyl.
Actimmune sales in the reported quarter were $24.2 million, down 14% year over year and relatively flat sequentially. Ravicti raked in sales of $32.9 million, down 4% from the year-ago period. Buphenyl contributed $4.7 million to the top line, down 16% from the year-ago quarter.
We note that both Ravicti and Buphenyl became part of company’s portfolio after the May 2015 Hyperion Therapeutics acquisition.
The Rheumatology unit, comprising Krystexxa and Rayos, generated sales of $41.6 million, up from $13.5 million in the year-ago quarter. Krystexxa sales in the fourth quarter came in at $29.5 million. Rayos garnered revenues of $11.3 million, up 1% year over year.
We note that both Migergot and Krystexxa became part of the company’s portfolio after its Jan 2016 Crealta Holdings acquisition.
Adjusted research & development expenses were up from $10.8 million to $17.4 million, while adjusted general and administrative expenses increased 30% to $44.7 million. Adjusted sales and marketing expenses were $85 million, up 53%.
We remind investors that Horizon acquired California-based biopharmaceutical company, Raptor Pharmaceutical Corp in Oct 2016 in a bid to expand its rare disease portfolio. With this acquisition, Horizon will be able to strengthen its U.S. orphan business, and expand into Europe and other key international markets. The acquisition has also added two orphan drugs – Procysbi and Quinsair – to its portfolio. Procysbi net sales for the fourth quarter were $25.3 million
2016 Results
Revenues came in at $981.1 million, up from $757 million in 2015 but missed the Zacks Consensus Estimate of $1.05 billion.
2017 Guidance
Horizon expects net sales to be approximately $1.24 billion–$1.29 billion in 2017. The company expects Actimmune sales to grow in 2017. The Zacks Consensus Estimate for revenues currently stands at $1.30 billion. The company expects adjusted EBITDA in the range of $525 million–$575 million.
The company expects a sequential decline in net sales in the first quarter due to annual managed care plan changes and higher patient deductibles at the beginning of the year. Sales in the first quarter are expected to be 18–20% of total sales in 2017. The company also expects the highest operating expenses as a percent of sales for the year in the first-quarter 2017.
Other Updates
In Sep 2016, Horizon Pharma agreed to pay $65 million to Express Scripts as part of a litigation settlement. We note that the company submitted its supplemental New Drug Application (sNDA) to the FDA in Jun 2016 for a label expansion of Ravicti to expand the age range for chronic management of urea cycle disorders (UCDs) in patients to two months of age and older from two years of age and older.
Moreover, Horizon is working on expanding its managed care organization to support the broader contracting strategy with PBMs and payers. In Dec 2016, the company secured formulary status with an additional PBM resulting in contracts with three leading pharmacy benefit managers to improve patient access.
Our Take
Horizon Pharma’s fourth quarter results were disappointing with the company missing on both top- and bottom line estimates. Moreover, the guidance for 2017 also fell short of expectations due to a conservative view on its primary care business. The company stated that some of the largest PBMs had previously placed Duexis and Vimovo on their formulary exclusion lists.
The company suffered a setback in Dec 2016 when it announced disappointing top-line data from the phase III study, STEADFAST, which evaluated Actimmune for the treatment of FA. Actimmune failed to meet the primary endpoint of a statistically significant change from baseline in neurological outcome, in comparison to placebo. The study did not meet the secondary endpoints of statistical significance either. Based on the unfavorable study results, the company decided to discontinue the FA development program.
Nevertheless, the company expects Krystexxa, Ravicti, Procysbi, Actimmune, Buphenyl and Quinsair to account for roughly 50% of total sales in 2017 and report a 50% year-over-year growth.
Horizon Pharma PLC Price and EPS Surprise
Horizon Pharma PLC Price and EPS Surprise | Horizon Pharma PLC Quote
Zacks Rank & Stocks to Consider
Horizon is a Zacks Rank #3 (Hold) stock. A couple of better-ranked stocks in the health care sector include Celgene Corp. and Sunesis Pharmaceuticals, Inc. . Each of these stock carriy a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Celgene’s earnings estimates increased from $6.52 to $6.60 for 2017 and from $8.15 to $8.16 for 2018 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 5.08%.
Sunesis’ loss estimates narrowed from $2.57 to $2.44 for 2016 and from $2.16 to $1.97 for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 0.54%.
A Full-Blown Technological Breakthrough in the Making
Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>