HZNP saw a nice gain on Friday after positive Express Scripts move, and subsequent Mizuho upgrade.
"Horizon Pharma PLC (NASDAQ:HZNP) shares are ascending 7% currently in pre-market trading following the news that Express Scripts has made its formulary decision and removed rheumatoid arthritis and osteoarthritis pain relievers Duexis and Vimovo from its Exclusion List.
In reaction, Mizuho analyst Irina Rivkind Koffler leaves the sidelines and upgrades from a Neutral to a Buy rating on HZNP while boosting the price target from $14 to $25, which implies a 56% upside from current levels.
For Koffler, this was a real game changer, as she explains, “Express Scripts removed Duexis and Vimovo from its Exclusion List, thereby eliminating the risk that formed the basis of our prior Neutral thesis. Management has previously indicated Express represents approximately 30% of covered lives. As a result of this update, we think HZNP will trade closer to its fundamental valuation, and we are returning to our DCF valuation and raising our PT to $25 from $14, which supports our upgrade to Buy from Neutral. The near-term risks to our Buy thesis include lack of momentum from data catalysts and continued price pressure concerns on the stock ahead of 2017 guidance, but without the Express overhang we now feel that the stock makes a safer longer-term investment. Additionally, the company can de-lever and continue to diversify its portfolio away from its primary care assets.”
In fact, the analyst believes this decision begets new confidence in the staying power of Horizon’s primary care franchise, which was initially the root of investor worries, as it will be in a protective bubble through 2022 to 2023, when generic rivals for Duexis break through the market.
Ultimately, at least until the time frame competition becomes a factor to take into consideration, “We are directionally more comfortable that this franchise can remain relatively stable […]” Koffler surmises."
