Horizon (HZNP) Stock Down On Dull Q3 View; Cuts '16 Outlook

Horizon Pharma plc’s (NASDAQ:HZNP) shares fell 6.5% after the company revealed sales and EBITDA results for the third quarter of 2016 through an 8-K filing. It also provided a weak sales and EBITDA outlook for 2016.

Including the impact of the $65 million settlement with Express Scripts Holding Company (NASDAQ:ESRX) that was announced late last month, Horizon expects to record third-quarter 2016 net sales in the range of $207 to $209 million. Excluding the impact of the settlement, the company projects net sales in the range of $272 to $274 million. The Zacks Consensus Estimate for revenues is currently pegged at $276.8 million.

As far as EBITDA is concerned, the company anticipates third-quarter 2016 EBITDA in the range of $139 to $141 million, representing an EBITDA margin of around 51% and sequential growth of about 15%.

For 2016, Horizon expects net sales to be approximately $960 million, including the impact of the settlement. Excluding the impact of the settlement, the company now anticipates net sales at the low end of its previously guided range of $1.025 billion to $1.050 billion, or approximately $1.025 billion. The Zacks Consensus Estimate for revenues currently stands at $1.04 billion.

With Horizon anticipating 2016 net sales at the low end of its previously guided range and higher investment spending in the fourth quarter of 2016, the company now expects EBITDA in the range of $450 to $460 million (previous guidance: $495 to $510 million).

The company expects an increase in operating expenses to support future growth opportunities.

HORIZON PHARMA Price

Horizon is working on expanding the company’s managed care organization, accounting for a broader contracting strategy with pharmacy benefit managers (PBMs) and payers, including the addition of national and regional account managers, which are expected to provide long-term durability to its primary care medicines, including Duexis, Vimovo and Pennsaid 2%.

We note that Horizon has secured formulary status with a couple of PBMs representing about 35% of covered lives in the U.S., and is currently in discussions and negotiations with other PBMs and payers to increase access to its medicines.

Further, the company intends to make investments related to marketing, medical education and commercial infrastructure to support long-term growth of Krystexxa.

Meanwhile, the company is working on expanding Actimmune’s label. It expects additional investments in the form of clinical development, regulatory and commercial functions for a potential launch of Actimmune for the treatment Friedreich’s ataxia (FA). The company anticipates top-line data from a phase III study (STEADFAST) on the same for FA in late Dec 2016.

Horizon noted that its 2016 guidance does not include the impact of the company’s upcoming acquisition of Raptor Pharmaceutical Corp. (NASDAQ:RPTP) .

We remind investors that Horizon is looking to acquire Raptor in a deal worth about $800 million. With this acquisition, Horizon is looking to strengthen its U.S. orphan business, and expand the same in Europe and other important markets. The acquisition is slated to close in the current quarter.

Horizon will report third-quarter 2016 results on Nov 7, before the opening bell.

The company currently carries a Zacks Rank #3 (Hold).

A Stock to Consider

A better-ranked stock in the health care sector is Incyte Corporation (NASDAQ:INCY) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Incyte’s earnings estimates for 2016 and 2017 were up a respective 29.5% and 11.5% over the last 60 days. The company has beaten earnings estimates thrice in the last four quarters with an average surprise of 335.16%.

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