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Can Horizon Pharma (HZNP) Spring a Surprise in Q2 Earnings?

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Horizon Pharma plc (HZNP - Free Report) is scheduled to report second-quarter 2017 results before the opening bell on Aug 7.

Last quarter, the company missed expectations by 16%. Let’s see how things are shaping up for this quarter.

Horizon’s shares have declined 24.9% in the year so far, underperforming the Zacks classified industry’s gain of 10.5%.

Horizon Pharma PLC Price and EPS Surprise


Horizon Pharma PLC Price and EPS Surprise | Horizon Pharma PLC Quote

Factors Likely to Impact This Quarter

Concurrent with the first-quarter earnings, the company trimmed its annual guidance and projected sales in the range of $1.0–$1.035 billion, down from its prior expectation of $1.240–$1.290 billion.  However, due to the divestiture of Procysbi, the company further reduced its earnings guidance and now expects sales in 2017 be in the range of $985–$1.020 billion.  During the quarter, Horizon sold off the marketing rights to Procysbi delayed-release capsules and Quinsair in Europe, the Middle East and Africa (EMEA) regions for an upfront payment of $72.2 million, with additional potential milestone payments based on sales targets.

Meanwhile, Horizon Pharma’s primary care business unit results were significantly below expectations due to the implementation of a new commercial model, where the company is teaming up with pharmacy benefit managers and payers to help patients obtain access to its medicines. The company plans to overcome this underperformance by reducing costs in the primary care business unit in order to align its cost structure with the lower- than-expected sales. In this context, the company reduced its outlook for 2017.

During the second-quarter earnings call, focus will be on the performance of the business units, along with that of products like Actimmune and Krystexxa. Both orphan and rheumatology businesses are expected to report solid growth, driven primarily by strong patient growth in Krystexxa and Ravicti.  Furthermore, Horizon Pharma is significantly increasing investments in one its key growth drivers, Krystexxa. Thus, the company raised its estimate of net sales for Krystexxa to more than $400 million from $250 million for the full year.

On Apr 28, the company received approval for its supplemental New Drug Application from the FDA for Ravicti. The approval allowed to expand the age range for chronic management of urea cycle disorders in patients to two months and older from two years and older. We expect management to throw further light on its pipeline development activities.

Earnings Whispers

Our proven model does not conclusively show that Horizon Pharma is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are currently pegged at 12 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Horizon Pharma currently carries a Zacks Rank #3 which is favorable. However, the company’s 0.00% ESP makes surprise prediction difficult. Note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some other health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Intercept Pharmaceuticals, Inc. (ICPT - Free Report) has an Earnings ESP of +9.39% and a Zacks Rank #3.  The company is expected to release second-quarter results on Aug 3.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Impax Laboratories has an Earnings ESP of +7.14% and a Zacks Rank #3. The company is expected to release second-quarter results on Aug 9.

BioMarin Pharmaceuticals (BMRN - Free Report) has an Earnings ESP of +4.55% and currently carries a Zacks Rank #3. The company is expected to release second-quarter results on Aug 2.

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