Horizon Pharma (HZNP) grabbed an upgrade Friday despite a recent Department of Justice investigation into potential kickbacks. Horizon stock popped at the close.
The DOJ inquiry gouged more than 6% from Horizon stock on Wednesday. But shares rose 1.3% on Thursday and spiked 2.9%, to 26.56, on today’s stock market. Horizon stock is now about 17% extended from a buy point at 22.76 out of a cup-with-handle achieved last month.
Morgan Stanley analyst David Risinger says investors are undervaluing Horizon’s shift to therapies for rare diseases and rheumatology ailments. He upgraded Horizon stock to an overweight rating from equal weight, and kept his 32 price target.
The “transition to rare diseases is underappreciated,” he said in a note to clients. He estimates sales of rare disease and rheumatology treatments will account for 92% of total revenue in 2023, up from 72% in 2019. Those drugs will also account for 96% of profits in 2023, up from 70% in 2019, he said.
Horizon Stock Rises On Upgrade
The shift to rare disease and rheumatology treatments comes as Horizon faces price scrutiny for its primary care segment. But primary care is becoming less important for Horizon, Risinger said. He projects primary care sales declining to 8% of total revenue in 2023, down from 28% in 2019.
Drivers of the shift include gout treatment Krystexxa and the potential launch of teprotumumab to treat thyroid eye disease. If successful, teprotumumab will be the first approved treatment for thyroid eye disease, an ailment that causes the eyes to protrude from the socket.
Risinger expects Krystexxa to bring in $294 million in 2019 and grow to $579 million in 2023 sales. He also expects teprotumumab sales of $65 million in 2020, growing to $756 million in 2023. Primary care sales are expected to decline from $352 million in 2019 to $177 million in 2023.
The number of patients who could benefit from teprotumumab is low, Risinger said. But the price tag could be higher than expected. He notes his estimates for teprotumumab sales are more than double that of the consensus between 2021-23.
“Severe thyroid eye disease is a horrifying condition which causes eye and vision disablement, so we believe high orphan drug pricing is justified,” he said. “We project teprotumumab base case peak U.S. sales (in 2023) of $756 million based upon 4,200 patients treated at a net price of $180,000.”
