Horizon Pharma's (NASDAQ:HZNP) stock dropped by more than 22% on Thursday after its phase 3 Steadfast trial of Actimmune in Friedreich's Ataxia failed to meet its primary endpoint of improvement on the modified Friedreich's Ataxia Rating Scale (FARS-mNEURO) at 26 weeks, compared to patients receiving placebo. Friedreich's Ataxia is an inherited disorder that causes progressive damage to the nervous system, often resulting in diminished motor skills, impaired vision, scoliosis, and various heart problems.
Horizon has been working diligently to move away from its specialty pharma business and pivot more toward drugs for rare diseases. Unfortunately, Actimmune's label expansion into Friedreich's Ataxia was a key piece of this puzzle that is now off the table following this late-stage clinical failure.
Horizon seems destined to continue its plight as a battleground stock for at least a little while longer. The world's largest pharmacy benefits manager (PBM) Express Scripts, after all, has yet to agree to cover Horizon's Duexis and Vimovo again after removing these drugs from their coverage list last year.
Long story short, Horizon may have trouble meeting the Street's lofty top-line growth estimate of 24.9% next year due to both this pivotal clinical failure and the uncertainty arising from its tenuous relationship with Express Scripts.
Adding fuel to the fire, President-elect Donald Trump's somewhat surprising pronouncement yesterday that he will in fact work to lower the costs of prescription drugs doesn't bode well for companies like Horizon, which depend heavily on steady price increases to drive growth.
So, despite Horizon's compelling forward price-to-earnings ratio of 6.17, investors may want to stick to the sidelines with this pharma stock right now in light of all these headwinds.