Sunday, March 21, 2021

An International Equity holding: Horizon Therapeutics (HZNP, $94.49): “Look to the Horizon” by: Andrew Duwa, AIM Student at Marquette University

 Horizon Therapeutics (HZNP, $94.49): “Look to the Horizon”

By: Andrew Duwa, 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 PLC. (NYSE:HZNP) is a specialty pharmaceutical company that engages in the research, manufacturing, and commercialization of products that address patients with rare and rheumatic diseases. Horizon aims to cut out a piece of the market by developing and offering specialty products and through mergers and acquisitions. The company is comprised of two main business segments composing of an Orphan segment representing 81% of sales in 2020 and contains many of the major products. The second division is the Inflammation segment, representing about 18% of sales. Horizon was founded in 2008 as a startup and is headquartered in Dublin, Ireland.   

•Horizon was added to the AIM International Fund in September of 2016 at a price of $19.16 and a price target of $27.36. The stock currently trades at $94.49 as of March 2nd, 2021.  

• On January 31st, 2021, Horizon announced that they will acquire Viela Bio, a manufacturer of precision therapies targeting novel pathways in autoimmune diseases 

• In January of 2020, the U.S. FDA approved Tepezza for the treatment of thyroid eye disease, providing a new drug for Horizon to capitalize on markets. 

Key points: 

Horizon has substantially grown since their first profitable quarter in 2016 through a combination of organic growth and mergers and acquisitions. Like many other pharmaceutical companies in FY 2020, Horizon has been impacted by the Global Pandemic. At first glance, Horizon’s sales increased substantially but can mainly be attributed to the addition of Tepezza into their approved product line. Sales for Tepezza were $820 million, representing around 37% of the total sales for the company. Even with this outstanding performance from this new product, Tepezza’s sales are expected to increase even more in the coming years due to reduced willingness of patients to visit doctors’ offices and hospitals where much of the diagnosis for this product occur. When analyzing the sales for 2020, existing product sales only grew about 6% over the entire company, which is concerning and needs to be monitored in the future. 

Horizon announced on January 31st, 2021 that they will be acquiring Viela Bio for a price of $53.00 per share in cash for an estimated value of $3.05 Billion, with the deal finalizing at the end of Q1, 2021. Viela Bio specializes in the production and sale of therapeutics targeting novel pathways in autoimmune diseases. This acquisition is intended to expand Horizon’s current pipeline by adding 4 new drugs in 9 different clinical stages ranging from Phase III to Phase I treating rare, chronic, autoimmune disorders. With this acquisition, Horizon continues to build on their current plan for long term growth of constructing a robust pipeline and currently have 14 pipeline programs with an additional 6 trials expected to begin by year end 2021. 

What has the stock done lately?

Within the past month, Horizon’s stock has risen from $80.70 to $94.49 with a general positive trend, but a relative correction from $95.50 to $90.62, representing a drop of 5.11%. However the stock has quickly recovered from this and is approaching its monthly and 52-week high.  Horizon has moved in the opposite direction of the S&P 500 index 

Since Icahn released its restructuring proposal on October 28, 2015, American International Group's stock is up ~5%. That may not sound like much, but AIG has consolidated in the high $50/low $60s for the better part of the last six months, and not gone anywhere really. A positive catalyst is needed to breathe some new life into AIG's shares, and Icahn's presence might just do that.

Past Year Performance:

Horizon saw the typical market wide correction that occurred in Mid-March, with Horizon dipping to $24.87. Since the dip, the stock has recovered swiftly, being up 171.07% in the past year. The 52-week high is $96.54 and the low was $22.81. With this insane volatility, Horizon has been greatly outperforming the S&P 500 since May. 

Source: FactSet

My Takeaway

Horizon has continued to improve its positioning in the pharmaceuticals industry through organic and inorganic growth, namely with the recent release of the highly successful Tezeppa and acquisition of Viela Bio. Even with doubts of being able to be successful as a relatively recent start-up, Horizon is continuing to build out its pipeline and has shifted its business philosophy from short term survival to long term sustainable growth. However, even with all of these positives This company has seen exceptional growth in its price per share, growth that in the past year has exceed the initial target price by 3.36x. Because of this, it is recommended that the AIM International fund holds the position in the short run, and determine a suitable exit price in the mid-term. 

Source: FactSet