Horizon Pharma (HZNP) Q1 Earnings & Sales Miss, Shares Fall

Horizon Pharma plcHZNP reported lower-than-expected results for the first quarter of 2018. Following the news, the company's shares went down 5.6%. Horizon Pharma's stock has declined 5.4% year to date compared with the industry 's fall of 12.3%.

The company reported first-quarter adjusted earnings of 3 cents per share, which missed the Zacks Consensus Estimate of 11 cents and were much lower than 21 cents reported in the year-ago quarter.

Sales in the first quarter were up 1.4% year over year to $223.9 million but missed the Zacks Consensus Estimate of $239.45 million.

Quarter in Detail

The Orphan unit recorded revenues of $114.7 million, up 2% from the year-ago period. Growth in net sales of Ravicti, which generated $49.1 million in the quarter, up 12% year over year, was partially offset by lower sales of Actimmune, Buphenyl and Quinsair.

Additionally, Procysbi contributed to the performance with net sales of $34.9 million, up 2% year over year. Actimmune sales in the reported quarter were $24.9 million, down 5% year over year.

Procysbi's lower sales growth and Quinsair declining sales was due to divesting of marketing rights in Europe, the Middle East and Africa ("EMEA") regions

The Rheumatology unit generated $57.5 million from sales, up 35% year over year. Also, Krystexxa sales in the quarter were strong and came in at $46.7 million, up 48% year over year, driven by a strong and continued year-over-year vial demand.

Primary Care garnered revenues of $51.7 million, down 21% year over year. The decline in net sales was due to greater-than-anticipated seasonality impact and accrual of inventory in sales channel.

In the reported quarter, net sales of Pennsaid2%, Duexix and Vimovo were $26.8 million, $15.7 million and $8.4 million, respectively.

Adjusted research and development (R&D) expenses were up 40.3% to $15.2 million while adjusted selling, general and administrative expense was $146.1 million, up 10.4% year over year.

2018 Guidance Increased

Horizon Pharma raised its outlook for 2018. It now expects sales in the range of $1.17-$1.2 billion (previously $1.15-$1.18 billion), mainly driven by expected strong growth in its orphan and rheumatology business units, especially Krystexxa.

The company expects Krystexxa sales to increase 65% year over year in 2018 due to a one-year delay in implementation of the U.S. Government's Health Resource and Services Administration's Final Rule on 340B drug ceiling price to Jul 1, 2019.

Other Updates

In February 2018, the company filed a supplemental New Drug Application to expand the age range in the label of Raviciti from two months of age and older to birth and older.

In January 2018, the company announced two programs for developing next-generation biologics - HZN-003 and PASylated uricase technology - for the treatment of uncontrolled gout.

Currently, Horizon Pharma is evaluating KRYSTEXXA in combination with commonly used two different immunomodulators in two investigator-initiated studies - RECIPE and TRIPLE - for enhancing the response rate of the drug in gout patients.

The company is progressing well with the phase III study for the evaluation of teprotumumab in moderate-to-severe active thyroid eye disease. The company expects to complete enrollment in the study by the end of 2018.

Meanwhile, the company is working on expanding Actimmune's label. An investigator-initiated study at the Moffitt Cancer Center is underway and enrolling patients. The study is evaluating Actimmune in combination with Roche Holdings' RHHBY Herceptin, Perjeta and Taxol in certain advanced breast cancer patients. A phase I study will evaluate Actimmune in combination with Bristol-Myers Squibb Company's BMY Opdivo in kidney and bladder cancer. Actimmune is also being evaluated in combination with Merck & Co's MRK Keytruda to treat cutaneous t-cell lymphoma patients in a phase II study.

New Operating Structure

In line with Horizon Pharma's long-term strategy, management announced that beginning second quarter, it will report its results under two operating segments. The company will separate its strategic growth business, orphan and rheumatology, from the primary care business.

The company expects the new structure to help it in better allocation of resources in developing products for unmet treatment needs of patients with rare diseases.

Our Take

Horizon Pharma's first-quarter results were not impressive as the company missed both the top- and bottom-line estimates. However, the sales guidance for 2018 was encouraging. We expect Krystexxa, Ravicti and Actimmune to drive further growth.

Although the company's focus on developing Krystexxa and Actimmune is beneficial for its future, we expect the studies to increase operating expenses.

Horizon Pharma Public Limited Company Price, Consensus and EPS Surprise

Horizon Pharma Public Limited Company Price, Consensus and EPS Surprise | Horizon Pharma Public Limited Company Quote

Zacks Rank

Horizon Pharma currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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