By: Ryan Witt, AIM Student at Marquette University
Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.
• Horizon Therapeutics Public Limited Company (NYSE: HZNP) is a biopharmaceutical company that is focused on the development, manufacturing and commercialization of pharmaceutical drugs. HZNP operates through two main segments: Orphan and Rheumatology (81.2%) and Inflammation (18.8%).
• HZNP has almost doubled its target price of $49.96 since being added to the International Fund in January of 2020.
• HZNP has seen its EPS decrease from 2.90 in FY19 to 1.81 in FY20.
• Over 99% of HZNP’s revenue comes from the US and they have seen their revenues grow by 69.3% from FY19 to FY20 (fiscal year ends in December) despite Covid.
• HZNP has recently acquired Viela Bio, Inc. for $2.5 billion at an EV/EBITDA ratio of -16.8. This acquisition has added products to their inflammation segment and adds 4 candidates that are currently in 9 developmental programs.
Key points: Despite the Covid-19 pandemic, HZNP has continued to grow and expand their product line through their own pipeline and recent acquisitions. In 2020 the company saw the release of their drug Tepezza, the only treatment for thyroid eye disease which effects over 70,000 people. In 2020, Tepezza brought in $820 million in revenue and at its peak it is expected to bring in possibly more than $3.5 billion. At the moment HZNP is focusing on expanding commercial organization and marketing initiatives. As well, in order to capitalize on the potential of Tepezza, Horizon is expanding supply capacity and pursuing global expansion for Tepezza.
The focus on expanding their pipeline led HZNP to acquire Viela Bio in early February of 2021. This acquisition brings even greater potential to HZNP and its growing pipeline. One approved product, Uplinza, has been added to HZNP drug portfolio. This drug is an infused biologic medicine for the rare disease NMOSD and saw $11.7 million in sales for 2020. The expected market for NMOSD is expected to grow as awareness increases. Additionally, the acquisition added two drugs in Phase 1 trials, five in Phase 2 trials, and two in phase 3 trials. The R&D capabilities and staff of Viela look to boost the potential of bringing treatments to people with unmet needs.
While many companies were strongly affected by the pandemic, HZNP was able to have a record 2020. A revenue growth of 69.3% was strongly influenced by the launch of Tepezza and an increase in the amount of sales of Krystexxa. In 2020, Krystexxa saw sales of $406 million and is expected to reach a peak of over $1 billion in sales in the coming years. HZNP is growing the existing account of Krystexxa and is hoping to add new versions of it in the coming months. The usage of Krystexxa is expected to grow by 35% as it continues to be the only medicine for uncontrolled gout.
With the tremendous growth that HZNP has had in the past year they remain keen to continue on their path of success. HZNP has increased their liquidity to over $2.08 billion in 2020 from $1.08 billion in 2019. Not only has the acquisition given HZNP the opportunity to grow, but the increase in the company’s liquidity enables them to invest into future growth.
What has the stock done lately?
As of recently HZNP has been doing very well since the turn of the year. It has gone from $72.54 on the open of the new year (Jan.4) to $90.39 on March 11 which shows an increase of 24.61%. HZNP hit its 52-week high of $95.60 in late February, but has decreased slightly back down to $90.39 as of today. Furthermore, the stock had an increase of 6.29% from Feb. 1st to Feb 2nd and an increase of 9.67% from Feb 2nd to Feb 3rd following the announcement of the Velia acquisition on Feb 1st. Finally, HZNP saw a dip of -4.91% on Feb 25th following the release of earnings on Feb 24th. Still, HZNP remains near its 52-week high with a great opportunity to hit it again.
Past Year Performance
HZNP has increased by 196.26% over the past year compared to the S&P 500 which has increased 44.72% over the past year. Although it was affected by the pandemic initially, HZNP has been on an upward trend with continuing growth despite the effects of the pandemic on the economy. The 52-week average for HZNP has been $23.81-$96.54. Currently, HZNP is trading near its 52-week high at $90.39.
HZNP has continued to far exceed expectations and return great value to the International Fund since being added to the portfolio in January of 2020. It does not look to be slowing down and is capitalizing on its recent success by expanding its products and pipeline through the Viela acquisition. HZNP has also had great success in the past year with the release of Tepezza and continued growth of Krystexxa. Both of these drugs have yet to hit their full potential which could see HZNP grow along with these two drugs. Demand for their products will continue to grow and management has set a clear path in investing into R&D to ensure future success. HZNP has delivered tremendous growth over the past year and looks to continue on its current track into the near future. For these reasons my recommendation is that HZNP is a buy and would be beneficial for the portfolio to add more as it offers a great opportunity to deliver more value.