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Horizon (HZNP) Stock Sinks, Friedreich's Ataxia Study Fails

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Horizon Pharma plc announced disappointing top-line data from the phase III study, STEADFAST, on Actimmune (interferon gamma-1b) for the treatment of Friedreich's ataxia (FA), a degenerative neuro-muscular disorder. Shares of the company plunged 22.5% on the news.

Horizon’s year-to-date share price movement shows that the stock has outperformed the Zacks classified Medical-Biomedical/Genetics industry. Specifically, the stock has lost 10.5% so far this year, while the industry tumbled 26.9%.

The randomized, multi-center, double-blind, placebo-controlled study, which was conducted in partnership with the Friedrich's Ataxia Research Alliance (FARA), evaluated the safety and efficacy as well as the pharmacokinetic characteristics of Actimmune for the treatment of patients with FA.

Results showed that Actimmune failed to achieve the primary endpoint of a statistically significant change from baseline in neurological outcome as measured by the modified Friedreich's Ataxia Rating Scale, in comparison to placebo, at 26 weeks. The study did not meet the secondary endpoints of statistical significance either.

Based on the unfavorable study results, Horizon, in conjunction with an independent Data Safety Monitoring Board, the principal investigator and the FARA Collaborative Clinical Research Network, has decided to discontinue the FA development program, including the 26-week extension study and the long-term safety study.

However, the company will continue to work with the FARA and the principal investigator to further analyze the data to facilitate research efforts and data presentation or publication in the future.

Actimmune is currently approved in the U.S. for the reduction of frequency and severity of serious infections associated with chronic granulomatous disease. It is also indicated for delaying the time to disease progression in patients with severe and malignant osteopetrosis. In the first nine months of 2016, Actimmune recorded sales of $80.5 million and contributed 12% to the company’s net sales.

Horizon was looking to drive sales by expanding Actimmune’s label into additional indications. Per the company’ press release, FA affects about 4,000 to 6,000 people in the U.S.

Considering that there is no currently approved treatment for FA, successful development of Actimmune would have given a much-needed boost to the drug’s sales. Horizon had projected Actimmune peak U.S. sales of $500 million to $1 billion annually, upon approval.

We note that Horizon is collaborating with the Fox Chase Cancer Center to study Actimmune as combination therapy for certain cancers including kidney and bladder cancer.

HORIZON PHARMA Price and Consensus

 

Meanwhile, Horizon confirmed that the setback will not impact the company’s net sales or EBITDA in 2016 and that it is well positioned for growth in 2017 and beyond, based on its existing portfolio of medicines.

Note that Horizon has been on acquisition spree over the last several years in its efforts to build a rare disease portfolio. This October, it acquired California-based biopharmaceutical company, Raptor Pharmaceutical Corp. The transaction added two orphan drugs – Procysbi and Quinsair – to Horizon’s portfolio.

Zacks Rank & Key Picks

Horizon carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the health care sector include Sucampo Pharmaceuticals, Inc. , MannKind Corporation (MNKD - Free Report) and Vanda Pharmaceuticals, Inc. (VNDA - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vanda’s loss estimates narrowed from 62 cents to 52 cents for 2016, while its earnings estimates increased from 13 cents to 22 cents 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 56.65%. Its share price has surged approximately 71% year to date.

Sucampo’s earnings estimates increased from $1.03 to $1.22 for 2016 and from $1.30 to $1.58 for 2017 over the last 60 days. The company posted a positive surprise in all of the four trailing quarters with an average beat of 35.55%.

MannKind’s estimates narrowed from loss of 24 cents to earnings of 12 cents for 2016 over the last 60 days. For 2017, loss estimates narrowed from 14 cents to 9 cents over the last 60 days. The company posted a positive surprise in two of the four trailing quarters with an average beat of 103.33%.

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