HZNP

Horizon Pharma PLC (NASDAQ:HZNP) announced its third-quarter 2016 financial results today and confirmed its full-year 2016 GAAP net sales, non-GAAP adjusted net sales and adjusted EBITDA guidance, as updated on October 25, 2016, following the completion of the acquisition of Raptor Pharmaceutical Corp.”We delivered strong results in the third quarter as we continued to execute on our long-term strategy of building a more-diversified, sustainable biopharmaceutical company anchored by a growing mix of orphan medicines,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc.  “We have made several strategic decisions this year to put Horizon Pharma on a strong path forward, including securing formulary status with two major PBMs for our primary care medicines and completing two significant acquisitions in rare diseases.”

Company Highlights

  • Third-quarter 2016 GAAP net sales, including the previously announced $65 million litigation settlement with Express Scripts as a one-time reduction, were $208.7 million, a decrease of 8 percent compared to the third quarter of 2015, primarily attributable to the settlement.  Non-GAAP adjusted net sales excluding the $65 millionsettlement were $273.7 million, an increase of 21 percent compared to the third quarter of 2015, driven by growth across each of the Company’s business units:  Orphan, Rheumatology and Primary Care.
  • Medicines for rare diseases, which include RAVICTI®, ACTIMMUNE®, KRYSTEXXA® and BUPHENYL®, represented 35 percent of total non-GAAP adjusted net sales in the third quarter of 2016, an increase from 29 percent of total net sales in the third quarter of 2015.
  • Third-quarter 2016 GAAP net loss was $5.9 million or a diluted loss per share of $0.04; and non-GAAP net income was $115.5 million or non-GAAP diluted earnings per share of $0.70.
  • On October 25, 2016, Horizon Pharma completed the acquisition of Raptor Pharmaceutical Corp., which was a significant step in advancing the Company’s strategy to expand its rare disease business with the addition of two orphan medicines, PROCYSBI® (cysteamine bitartrate) delayed-release capsules and QUINSAIR™ (aerosolized form of levofloxacin).  More than half of the Company’s medicines now treat patients with rare diseases.
  • To provide long-term durability for its primary care medicines, the Company has secured formulary status with two leading Pharmacy Benefit Managers (PBMs) that represent approximately 35 percent of covered lives in the United States.  The Company remains in active discussions and negotiations with other PBMs and payers with the goal of further increasing access to its medicines.  The Company is investing in the expansion of its managed care organization to support its broader contracting strategy with PBMs and payers.
  • The Company will present data on both KRYSTEXXA and RAYOS at the upcoming American College of Rheumatology meeting November 11-16, 2016, in Washington D.C.  This is the first medical meeting in three years where KRYSTEXXA will have a significant clinical and commercial presence, which will continue to expand the awareness of KRYSTEXXA as an important treatment option for refractory chronic gout patients.

Horizon Pharma Confirms 2016 Full-Year Guidance

  • Confirmed full-year 2016 net sales guidance on a GAAP basis of approximately $980 to $985 million, which includes the previously announced $65 million settlement with Express Scripts as a one-time reduction and includes the acquisition of Raptor Pharmaceutical Corp.  Confirmed net sales guidance on a non-GAAP adjusted basis of approximately $1.045 to $1.050 billion, which excludes the $65 million settlement with Express Scripts.
  • Confirmed full-year 2016 adjusted EBITDA guidance of $450 to $460 million, which includes the acquisition of Raptor Pharmaceutical Corp.
  • Orphan Business Unit:  RAVICTI sales in the third quarter of 2016 were $42.2 million, an increase of 26 percent compared to the third quarter of 2015.  RAVICTI was launched in Canada in the fourth quarter of 2016.  ACTIMMUNE sales in the third quarter of 2016 were $24.9 million.  Following the acquisition of Raptor Pharmaceutical Corp. on October 25, 2016, the Company added to its Orphan Business Unit PROCYSBI for the treatment of nephropathic cystinosis, a rare metabolic disorder, and QUINSAIR for the management of chronic pulmonary infections for patients with cystic fibrosis.  QUINSAIR is not approved in the United States.ACTIMMUNE Phase 3 Trial in Friedreich’s ataxia and Phase 1 Trial in Oncology
    In its pipeline, the Company continues to expect topline data in late December from the Safety, Tolerability and Efficacy of ACTIMMUNE Dose Escalation in FA (STEADFAST) Phase 3 clinical trial.  There are an estimated 3,700 diagnosed patients in the United States with Friedreich’s ataxia (FA) and the Company believes an indication for ACTIMMUNE in FA, if approved, could represent a $500 million to $1 billion peak annual net sales opportunity.  In the Phase 1 dosing trial evaluating ACTIMMUNE as a combination therapy for certain cancers, the first six-patient cohort was completed in May, the second six-patient cohort was completed in September, and the third six-patient cohort is now enrolling.
  • Rheumatology Business Unit:  KRYSTEXXA sales in the third quarter of 2016 were $25.6 million, an increase of 29 percent sequentially compared to the second quarter of 2016.  KRYSTEXXA patient infusions and benefit investigations, which are the leading indicator of new patient starts, continue to increase and the Company is investing in additional commercial support, education and outreach efforts to accelerate growth.  RAYOS sales in the third quarter of 2016 were $13.4 million, an increase of 15 percent compared to the third quarter of 2015.
  • Primary Care Business Unit:  Total sales growth for the primary care business unit increased approximately 10 percent compared to the third quarter of 2015, driven by strong performance of PENNSAID 2%.  Sales of PENNSAID 2% in the third quarter of 2016 were $80.2 million, an increase of 83 percent compared to the third quarter of 2015.  DUEXIS and VIMOVO sales in the third quarter of 2016 were $47.6 million and $32.8 million, respectively.

Third-Quarter 2016 Financial Results
Note:  For additional detail and reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, please refer to the tables at the end of this release.

  • Gross Profit:  Under U.S. GAAP in the third quarter of 2016, the gross profit ratio was 59.2 percent compared to 73.0 percent in the third quarter of 2015.  The non-GAAP gross profit ratio in the third quarter of 2016 was 91.6 percent compared to 92.1 percent in the third quarter of 2015.
  • Operating Expenses:  On a GAAP basis in the third quarter of 2016, total operating expenses were 69.4 percent of GAAP net sales.  Research & development (R&D) expenses were 6.1 percent of GAAP net sales, sales & marketing (S&M) expenses were 34.8 percent of GAAP net sales and general & administrative (G&A) expenses were 28.5 percent of GAAP net sales.  Non-GAAP total operating expenses in the third quarter of 2016 were 39.9 percent of non-GAAP adjusted net sales.  Non-GAAP R&D expenses were 3.8 percent of non-GAAP adjusted net sales, non-GAAP S&M expenses were 24.0 percent of non-GAAP adjusted net sales, and non-GAAP G&A expenses were 12.1 percent of non-GAAP adjusted net sales.
  • Income Tax Rate:  The income tax rate in the third quarter of 2016 on a GAAP basis was 82.5 percent and on a non-GAAP basis was 9.0 percent.  The income tax rate for the first nine months of 2016 on a GAAP basis was 46.8 percent and on a non-GAAP basis was 14.6 percent.
  • Net (Loss) Income:  On a GAAP basis in the third quarter of 2016, net loss was $5.9 million and non-GAAP adjusted net income was $115.5 million.
  • EBITDA:  In the third quarter of 2016, EBITDA was $58.2 million, or 27.9 percent of GAAP net sales.  Adjusted EBITDA in the third quarter of 2016 was $141.2 million, or 51.6 percent of non-GAAP adjusted net sales, compared to $131.1 million, or 57.9 percent of net sales in the third quarter of 2015.
  • (Loss) Earnings per Share:  On a GAAP basis in the third quarter of 2016, diluted loss per share was $0.04 and in the third quarter of 2015, diluted earnings per share was $0.02.  Non-GAAP diluted earnings per share in the third quarter of 2016 and 2015 were $0.70 and $0.42, respectively, representing growth of 66.7 percent.  Weighted average shares outstanding used for calculating GAAP diluted loss per share and non-GAAP diluted earnings per share in the third quarter of 2016 were 161.0 million and 164.9 million, respectively.

Cash Flow Statement and Balance Sheet Highlights

  • On a GAAP basis in the third quarter of 2016, operating cash flow was $128.8 million.  Non-GAAP operating cash flow was $133.8 million in the third quarter of 2016.  On a GAAP basis, operating cash flow in the first nine months of 2016 was $230.3 million compared to operating cash flow in the first nine months of 2015 of $59.2 million.  On a non-GAAP basis, operating cash flow in the first nine months of 2016 was $259.8 million compared to operating cash flow in the first nine months of 2015 of $167.2 million.
  • The Company had cash and cash equivalents of $549.3 million as of September 30, 2016.  Cash and cash equivalents as of June 30, 2016 were $424.5 million.
  • Total principal amount of debt outstanding was $1.270 billion as of September 30, 2016, which was composed of $395 million in senior secured term loans due 2021,$475 million in 6.625 percent senior notes due 2023, and $400 million of 2.5 percent exchangeable senior notes due 2022.  Net debt at September 30, 2016 was $721 million.On October 25, 2016, the Company completed a private offering of senior notes and borrowed incremental term loans under its existing senior secured credit facility to partially fund the acquisition of Raptor Pharmaceutical Corp., repay Raptor’s debt and pay related fees and expenses.  Following the issuance of this new debt, the new total principal amount of debt outstanding is $1.945 billion, which is composed of $770 million in senior secured term loans due 2021; $475 million in 6.625 percent senior notes due 2023, $300 million in 8.75 percent senior notes due 2024, and $400 million of 2.5 percent exchangeable senior notes due 2022. (Original Source)

Shares of Horizon Pharma are up nearly 4% to $15.60 in pre-market trading Monday. HZNP has a 1-year high of $23.70 and a 1-year low of $13.05. The stock’s 50-day moving average is $18.58 and its 200-day moving average is $18.09.

On the ratings front, HZNP stock has been the subject of a number of recent research reports. In a report issued on November 2, Jefferies analyst David Steinberg reiterated a Buy rating on HZNP, with a price target of $26, which implies an upside of 73% from current levels. Separately, on October 31, Mizuho’s Irina Rivkind Koffler reiterated a Buy rating on the stock and has a price target of $29.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Steinberg and Irina Rivkind Koffler have a yearly average loss of 11% and a return of 13.8% respectively. Steinberg has a success rate of 27% and is ranked #3947 out of 4162 analysts, while Koffler has a success rate of 44% and is ranked #99.

Overall, 2 research analysts have assigned a Hold rating and 9 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $30.67 which is 103.8% above where the stock closed last Friday.

Horizon Pharma Plc engages in the research, development, and market of pharmaceutical products. Its medicines intend to treat arthritis, inflammation, and orphan diseases. It distributes under the following brands: Actimmune, Buphenyl, Duexis, Krystexxa, Migergot, Pennsaid, Ravicti, Rayos, and Vimovo.