What happened

Horizon Pharma (NASDAQ:HZNP), an orphan drug company, saw its shares gain as much as 29% in early-morning trading today. The spark?

Horizon's shares are surging higher in response to the news that the company's thyroid eye disease (TED) treatment, teprotumumab, hit the mark in a late-stage trial. Specifically, the company reported that a whopping 82.9% of patients receiving teprotumumab exhibited a significant reduction in eye bulging -- the main cause of morbidity in TED. Horizon also noted that all of the study's secondary endpoints were met, and the drug's safety profile was consistent with its mid-stage trial results.

Drawing of a rocket taking flight from a person's cupped hand, set against a stormy background.

Image Source: Getty Images.

So what

Teprotumumab, if approved, is projected to generate peak annual sales of around $750 million. That's a sizable commercial opportunity for a company with a market cap of only $4.71 billion. Teprotumumab's approval would also give Horizon two major orphan drugs going forward, with the other being the chronic gout medicine Krystexxa.

Now what

With these strong late-stage results in hand, Horizon plans on filing for teprotumumab's approval in the U.S. by midyear. If that time line holds, the drug could be on the market by early next year. That's key, because Horizon's white-hot revenue growth is expected to start to cool off this year. Teprotumumab should thus provide a timely boost to the company's top line if everything goes according to plan on the regulatory front.

Is Horizon a buy on this positive clinical news? Even after this latest jump, the drugmaker's shares are still trading at less than 4 times next year's projected revenue haul (assuming teprotumumab's commercial launch gets underway in the first half of 2020). That's not an unreasonable valuation for an orphan drug specialist by any stretch. Bargain hunters may want to consider picking up some shares today in the wake of this news.