What happened

Shares of the orphan-drug maker Horizon Pharma (NASDAQ: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. 

A man shouting in excitement at an open laptop computer.

Image Source: Getty Images.

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.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.