Horizon Pharma (HZNP) Q3 Earnings: A Disappointment in Store? (revised)

Horizon Pharma plc HZNP is scheduled to report third-quarter 2017 results before the opening bell on Nov 6.

Last quarter, the company missed expectations by 16%. Let’s see how things are shaping up for this quarter.

Horizon Pharma’s shares have declined 12% in the year so far, underperforming the industry’s gain of 0.9%.

Factors Likely to Impact This Quarter

Concurrent with the second-quarter earnings, the company raised its outlook for 2017 and now expects sales in the range of $1.010-$1.045 billion, compared to the earlier estimate of $985-$1.020 billion.

Horizon Pharma is significantly increasing investments in one of its key growth drivers, Krystexxa, and projects peak sales of around $400 million in 2017 driven by higher demand. The guidance includes assumption of lower net average net realized price from the U.S. Government's Health Resource and Services Administration's Final Rule on 340B drug ceiling price implementation scheduled for Oct 1.

The company expects continued double-digit net sales growth for Ravicti in 2017, with room for additional uptake due to the recent label expansion. The drug is also expected to be launched in Europe in the second half. However, sales of Procysbi will decline due to the divestiture of European rights. Sales of Actimmune are projected to grow in low single-digits driven by a year-over-year growth in the second half.

Meanwhile, Horizon Pharma’s primary care business is under pressure due to the implementation of a new commercial model, where the company is teaming up with pharmacy benefit managers and payers to help patients obtain access to its medicines.

During the third-quarter earnings call, focus will be on the performance of the business units, along with that of products like Actimmune and Krystexxa.

Earnings Whispers

Our proven model does not conclusively show that Horizon Pharma is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -8.48%. This is because both the Most Accurate estimate is 21 cents while the Zacks Consensus Estimate is currently pegged at 22 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter..

Zacks Rank: Horizon Pharma currently carries a Zacks Rank #4 (Sell). As it is, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Agenus Inc. AGEN has an Earnings ESP of +8.11% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACADIA Pharmaceuticals Inc. ACAD has an Earnings ESP of +3.2% and currently carries a Zacks Rank #3. The company is expected to release third-quarter results on Nov 7.

Mylan N.V. MYL has an Earnings ESP of +3.9% and currently carries a Zacks Rank #2. The company is expected to release third-quarter results on Nov 6.

(NOTE: We are republishing this article to correct a mistake. The original version, published earlier today, Thursday, November 2, 2017, should no longer be relied upon.)

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