Is Horizon Pharma (HZNP) Poised For A Beat In Q1 Earnings?

Horizon Pharma plc (NASDAQ:HZNP) is scheduled to report first-quarter 2017 results before the opening bell on May 8.

Horizon’s performance has been dismal with the company missing earnings estimates in the four trailing quarters. Overall, the company has an average negative earnings surprise of 11.6%.

Last quarter, the company missed expectations by 3.8%. Let’s see how things are shaping up for this quarter.

Horizon’s shares declined 10.9% in the last six months, underperforming the Zacks classified Medical-Biomedical/Genetics industry’s gain of 5.7%.

Why A Likely Positive Surprise?

Our proven model shows that Horizon is likely to beat earnings estimates this quarter because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.00%. This is because the Most Accurate estimate is 26 cents while the Zacks Consensus Estimate is pegged lower at 25 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Horizon currently carries a Zacks Rank #3. The combination of Zacks Rank #3 and a positive ESP makes us confident of an earnings beat in the upcoming release.

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.

Factors Likely to Impact This Quarter

The company expects a sequential decline in net sales in the first quarter due to annual managed care plan changes and higher patient deductibles in the beginning of the year. Sales in the first quarter are expected to be 18–20% of total sales in 2017. Horizon expects net sales to be approximately $1.24–$1.29 billion in 2017. The company expects Actimmune sales to grow in 2017. The company expects adjusted EBITDA in the range of $525–$575 million.

The company also expects the highest operating expenses as a percent of sales in first-quarter 2017.

Horizon completed the acquisition of California-based biopharmaceutical company, Raptor Pharmaceutical Corp in Oct 2016. With this acquisition, Horizon strengthened its U.S. orphan business, and has been expanding in European and other key international markets.

As far as the company’s business units are concerned, Orphan, Primary Care and Rheumatology should continue to perform well. The company expects Krystexxa, Ravicti, Procysbi, Actimmune, Buphenyl and Quinsair to account for roughly 50% of total sales in 2017 and report 50% year-over-year growth. Ravicti is expected to witness strong growth in 2017. Actimmune is also expected to experience modest growth in 2017.

In addition, the company is continuing discussions and negotiations with PBMs and payers to augment patients’ access to Primary Care medicines. Horizon is also constantly expanding its sales and marketing efforts across its business units, which should keep driving prescription growth of existing and newly acquired medicines.

On the earnings call, focus will be on the performance of the business units, along with that of products like Actimmune and Krystexxa.

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.

FibroGen, Inc. (NASDAQ:FGEN) has an Earnings ESP of +23.81% and a Zacks Rank #3. The company is expected to release results on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Editas Medicine, Inc. (NASDAQ:EDIT) has an Earnings ESP of +33.33% and a Zacks Rank #3. The company is likely to release results on May 15.

Immune Design Corporation (NASDAQ:IMDZ) has an Earnings ESP of 11.3% and a Zacks Rank #3. The company is expected to release results on May 9.

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