Home » Business News » 2012 » July » July 20, 2012

Horizon Pharma Moving Ahead of FDA Decision

July 20, 2012 -

By Brian Wilson, Contributor

Shares of the pain drug developer Horizon Pharma (NASDAQ:HZNP) have recently seen some huge moves to the upside as the FDA's decision looms for the company's rheumatoid arthritis treatment RAYOS gets closer. Even after a virtual doubling of the shares since June, the company is valued at modest $265 million.
The two major firms that cover the stock (Stifel Nicolaus and JMP Securities) have price targets that exceed the current price of $7.12/share by significant margins. According to an article by Bret Jensen of Seeking Alpha, Stifel Nicolaus has a target of $10/share while JMP sees $16/share. These price targets imply 40% and 125% upsides respectively.
In addition to bullishness from analysts, insider buying has warranted some investor attention to the stock as well. Although it wasn't recent, we saw a huge round of buying in early March by directors Jeffery Bird, Jeff Himawan (of Essex Woodlands), and Jean Francois (of Atlas Venture). The buying spree brought 4.4 million shares out of the market, which is quite enormous given the small number of shares floated (at 33.7 million).
Despite steep operating losses, investors are noting the huge potential value of the rheumatoid arthritis RAYOS in the ~$11 billion market for prescription pain medication and the huge revenue growth potential for the osteoarthritis and rheumatoid arthritis drug DUEXIS. DUEXIS only brought in $1.1 of revenue in Q1 2012 but this is expected to explode higher in coming years (the real question is whether or not it would be enough to offset the operating losses). There are also two preclinical-stage compounds that the market will largely ignore until they move on to clinical trials.
Some are saying that RAYOS lacks blockbuster potential since it's merely a reformulation of low dose prednisone that can only satisfy a niche market. In addition, Horizon lacks the marketing rights for this drug in Europe which cuts its peak revenue potential quite drastically. The question of market potential can be asked of DUEXIS, (ibuprofen/famotidine), which is another reformulation compound that will struggle against drugs that already dominate the osteoarthritis/rheumatoid arthritis market.
Until July 26, 2012 I expect that both sides of the market will induce some volatility as the players (primarily institutions) place their last bets on the table before the FDA decision. The question of whether or not RAYOS and DUEXIS will be able to penetrate the market sufficiently to meet analyst expectations will surely return later on.
To recap, HZNP is a purely speculative trade until the PDUFA action date of July 26th. After the approval (or rejection), it will be a matter of evaluating DUEXIS (and potentially RAYOS) for their rate of sales growth and peak potential. Remember that Horizon is operating at steep losses, and needs to market DUEXIS effectively to justify its current market capitalization. Insider buying and analyst targets suggest huge under appreciation of RAYOS/DUEXIS, although these ought to be taken with a grain of salt.

The complete report on Horizon Pharma is available at:
Healthcare investors and Biotech traders interested in accessing BioMedReports' new complete database of clinical trials and upcoming FDA and world-wide regulatory decisions which can be used to make more profitable trades and see upcoming catalysts can go to:
Follow Us

News developments and live healthcare sector updates are available constantly via twitter at:
About BioMedReports.Com
BioMedReports is a news and research portal covering financial biomedical news and the entire Healthcare Sector of the market. BioMedReports is not paid or compensated to report the news and developments of publicly traded companies. BioMedReports sells a premium product for subscribers and full disclosures and information about the stocks and news mentioned in this news release is available at BioMedReports.Com

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: BioMedReports via Thomson Reuters ONE


Copyright 2012 ACN Newswire. All rights reserved. A division of Asia Corporate News Network.

ACN Newswire

Comment on this story