Horizon Pharma PLC (NASDAQ:HZNP) investors scurried sending shares crashing 35% yesterday once the biotech firm released disappointing first quarter earnings for the year that fell short of expectations on both top and bottom ends. In reaction to the news, top analyst Irina Rivkind Koffler at Mizuho takes a sharp left, downgrading Horizon from a Buy to a Neutral rating on shares of HZNP while chopping the price target from $22 over in half to $10, which represents a just under 2% downside from current levels.

For the first quarter of 2017, Horizon posted $220.9 million in revenue, underwhelming when considering FactSet consensus called for $248.1 million, and non-GAAP EPS of $0.21, coming up short of FactSet consensus of $0.23. For the analyst, rising skepticism surrounds Horizon’s primary care business, considering inflated rebates, dipping product volumes, and a bad combo of elevated rebate coupled with subsided rebate plans all make for a not ideal blend.

Another blow to investor sentiment stems from HZNP’s management lowering is prior guidance of $1.24 to $1.29 billion in revenue to $1.0 to $1.035 billion, and adjusted EBITDA of $525 to $575 million down to $315 to $350 million. Meanwhile, with consensus projecting $1.8 billion in revenue and $516.6 million in adjusted EBITDA, Horizon is massively coming up short. To the analyst, this does not give much hope for the rest of 2017 for HZNP to improve and further supports the bearish camp, sounding the alarm predominantly on the firm’s primary care business.

Koffler concludes breaking down her rationale for stepping to the sidelines in three parts: “We highlight several reasons for the downgrade: (1) We believe there is ongoing uncertainty about the primary care business as script volumes continue to decline and mgmt. cuts promotional resources to improve profitability. We significantly lowered our 2017 estimate to $315.6M from $618.5M and we also increased our quarterly OpEx and tax rate in line with mgmt. guidance. (2) We lack conviction in the raised $400M guidance on Krystexxa based on addition of new headcount targeting nephrologists (mgmt. would not provide timing on this peak sales number). (3) We struggle to understand how mgmt. expects a 25% 5-year CAGR on its Orphan/ Rheumatology business and are not modeling this growth rate. We note that prior guidance about the primary care business ($800M peak sales) and the $2B revenue target for 2020 now seems unlikely. […] The only potential upside to the stock, in our view, would be a sale of the company as discussed below, but we lack conviction in this transaction for now.”

Irina Rivkind Koffler has a very good TipRanks score with a success rate of 52% and a high ranking of #117 out of 4,567 analysts. Koffler earns 18.8% in her annual returns. However, when recommending HZNP, Koffler loses 17.3% in average profits on the stock.

TipRanks analytics indicate HZNP as a Buy. Out of 3 analysts polled by TipRanks in the last 3 months, 2 are bullish on Horizon stock while 1 remains sidelined. With a return potential of nearly 83%, the stock’s consensus target price stands at $18.50.

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