What happened

As of 2:00 p.m. EDT, shares of Horizon Pharma (HZNP) are down by a hefty 34% on higher-than-normal volume. The culprit behind this move southward is a disappointing first-quarter earnings report, which featured a sizable downward revision to its 2017 annual guidance.

Specifically, Horizon is now expecting its 2017 revenue to range from $1 billion to $1.035 billion -- down from its prior forecast of $1.24 billon to 1.29 billion -- due to plummeting sales across its primary care business.  

Man holding forehead with sinking stock chart in front of him

Image source: Getty Images.

So what

Horizon's primary care business is suffering for one simple reason: Its sky-high prices for specialty medicines such as Duexis and Vimovo have drawn the ire of pharmacy benefits managers. In a nutshell, Horizon is experiencing significant pushback from payers over these particular medicines, resulting in higher rebates and rising costs associated with the company's patient assistance program. 

Now what

The silver lining is that Horizon has taken a number of critical steps to lower the impact of this negative headwind. Horizon has slowly but steadily transformed itself into an orphan drug company through key acquisitions such as privately held River Vision Development Corp. and Raptor Pharmaceutical Corp., and shifted away from the controversial specialty medicine space. In the first quarter of 2017, for example, drugs for rare diseases made up an impressive 65% of the company's revenue. 

Unfortunately, Horizon's having a hard time shedding the impression that it's headed down the same path as its high-profile peer Valeant Pharmaceuticals, and this downward revision to its guidance certainly doesn't help in that regard. As a reminder, Valeant's stock lost over 90% of its value due to a painful mix of poor internal controls, untenable amounts of debt, and of course, questions about the prices of some of its specialty medicines. 

Whether Horizon will turn out like its high-profile peer remains to be seen, but this pharma stock is getting to be almost absurdly cheap -- even with the headwinds facing its primary care unit. After today's pullback, for instance, Horizon's shares are now trading at a price-to-sales ratio of 1.59. Bargain hunters may want to check out shares this beaten-down drugmaker today.