Horizon Therapeutics Public Limited Co (fka HZNP)

[MiamiGent]

HZNP UBS Notes Several Positive Takeaways Following Horizon Pharma (HZNP) April 19, 2016 8:41 AM EDT

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Price: $14.52 +0.35%

Rating Summary:
12 Buy, 1 Hold, 1 Sell

UBS analyst Marc Goodman reiterated a Buy rating and $24 price target on Horizon Pharma (NASDAQ: HZNP) and offered several takeaways following investor meetings with CBO, Bob Carey.

(1) Duexis\Vimovo saw a higher level of restrictive plans than expected (additional step edits) such that gross-to-nets in 1Q moved to the 78-79% range vs expectations of 70- 75%. Horizon has been managing the business to $450-500\Rx. It will be lower in 1Q, and mgt would go lower on ASPs in return for volumes. Usually mgt assumes about a mid-single digit increase in payer control each year, but in 2016, it is seeing a step-wise change and it will be in double digits.

(2) Mgt acknowledges that HorizonCares has worked well the past 3 years, but it is always evaluating the changes needed for the primary care b-model to be successful for the next 3 years. Mgt seems more open to change than we have heard before.

(3) Upside areas include (a) Pennsaid as vols are running better than expected, (b) Krystexxa (the $70-80M guidance was a conservative assumption that didn't include any growth off the current runrate) that will have increased support moving forward (15-20 people up to 95 reps\special account managers), and (c) mgt admits there was a cushion in the original guidance.

(4) Mgt has increased focus on Pennsaid and has now made it the #1 detail for the 375 (up from 325 last year) primary care sales reps, as Pennsaid is more profitable with lower GtNs and no royalties relative to Duexis/Vimovo.

(5) M&A focus is (a) already- commercialized orphan products; (b) development-stage orphan products - mgt sounds much more focused here than it was a year ago; (c) specialty assets; and then (d) primary care assets. Mgt is seeing more activity today than before, but there is still a disconnect on value by the mgt teams at other companies.

(6) Mgt acknowledges that investors' attitudes towards leverage have changed. A year ago mgt was comfortable with its gross leverage ratio above 5x; now it would like to stay <4x.

(7) On Ravicti, Horizon has just gotten going in Canada and hired 3 reps. However, it doesn't sound like it is as focused on building out a footprint in Europe, as the economics don't seem to make sense.

For an analyst ratings summary and ratings history on Horizon Pharma click here. For more ratings news on Horizon Pharma click here.

Shares of Horizon Pharma closed at $15.04 yesterday.