What happened
Shares of the orphan-drug maker Horizon Pharma (HZNP) gained 15.9% on Wednesday on nearly five times the normal daily volume. What caused investors to pile into this mid-cap biopharma stock?
Horizon's stock perked up yesterday thanks to an exceptionally strong third-quarter earnings report. The key highlight was Horizon's surging top line during the three-month period.
According to Horizon's press release, its third-quarter sales came in at $325.3 million, handily beating Wall Street's consensus estimate by $13.5 million, according to FactSet consensus. Horizon attributed its outstanding quarter to rising sales for both its primary care portfolio of medicines, as well as the chronic gout treatment Krystexxa.
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So what
Horizon's shares have been slowly edging higher over the back half of 2018. Even so, the drugmaker's stock was still trading well below average valuation levels for a company of its size and operational capacity prior to yesterday's breakout. After Wednesday's double-digit surge, though, Horizon's price-to-sales ratio rose to 3.49, which is right about the norm for a mid-cap biopharma stock.
Now what
Can Horizon's stock keep churning higher? Although Horizon's current portfolio of primary care medicines and orphan drug products are exceeding expectations, Wall Street's near-term focus is likely to revolve around the upcoming late-stage data readout for the drugmaker's thyroid eye disease treatment teprotumumab.
Teprotumumab's pivotal stage study fully enrolled in early September, setting the stage for a top-line data readout during the second quarter of next year. This experimental drug is key to Horizon's near-term growth prospects because it is projected to generate peak sales of $250 million, if approved, in the United States alone. Without a positive readout for teprotumumab, Horizon's shares may struggle due to the company's heavy debt load and concerns about the commercial longevity of some of its most valuable primary care brands.
