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Inside Horizon Therapeutics’ Newly Added Risk Factors

Horizon Therapeutics (HZNP) is a global pharmaceutical company based in Ireland. It develops medicines for rare, autoimmune, and severe inflammatory diseases.

Horizon’s earnings report shows revenue increased 63% year-over-year to $1.04 billion in Q3 2021, surpassing the consensus estimate of $977.5 million. Adjusted EPS of $1.75 rose from $1.74 in the same quarter last year and beat the consensus estimate of $1.53. Horizon ended Q3 with $1.07 billion in cash.

For full-year 2021, the company raised its revenue expectations to a range of $3.16 billion to $3.21 billion, compared to the consensus estimate of $3.12 billion. It previously anticipated revenue in the band of $3.03 billion to $3.13 billion.

Horizon recently acquired a manufacturing facility in Waterford, Ireland. It plans to use the plant to support the growth of its approved drugs and drug candidates.

With this in mind, we used TipRanks to take a look at the newly added risk factors for Horizon.

Risk Factors

According to the new TipRanks Risk Factors tool, Horizon’s main risk category is Finance and Corporate, representing 32% of the total 71 risks identified for the stock. Legal and Regulatory; and Tech and Innovation are the next two major risk categories, accounting for 23% and 20% of the total risks, respectively. Horizon recently updated its profile with seven new risk factors.

The company cautions investors that although it has recently reported profits, it may not remain profitable in the future. It mentions that maintaining profitability will require generating sufficient revenue to cover operating expenses. However, Horizon says that it expects its operating expenses to increase significantly in the coming periods, which may negatively impact profitability. It cited the development of Viela’s pipeline as a likely major driver of expenses. Horizon acquired Viela in early 2021 to expand its portfolio of rare disease medicines.

Horizon informs investors that some of its drugs and drug candidates are based on patents licensed by third parties. For example, it mentions that it has patent licensing arrangements with Duke University and MedImmune. It cautions that failure by licensing partners to maintain patent protection could adversely affect its ability to develop and commercialize medicines covered by those patents.

The company tells investors that some of its medicines are based on intellectual property discovered through U.S. government-funded programs. Therefore, those intellectual property rights are subject to government regulations that may limit its manufacturing options. For example, products covered by government-funded intellectual property are required to be manufactured in the U.S. unless exemptions are granted under certain circumstances.

Although biologic medicines should enjoy 12 years of marketing exclusivity in the U.S., Horizon says the exclusivity law is complex and its interpretation continues to evolve. As a result, the company cautions that the FDA could decide to grant shorter exclusivity for its biologic medicines, which would expose it to early competition from biosimilar drugs.

The Finance and Corporate risk factor’s sector average is 29%, compared to Horizon’s 32%. Horizon’s stock has gained about 41% year-to-date.

Analysts’ Take

Wells Fargo analyst Derek Archila recently initiated coverage on Horizon Therapeutics stock with a Buy rating and a price target of $137. Archila’s price target suggests 29.18% upside potential.

Consensus among analysts is a Strong Buy based on 7 Buys. The average Horizon Therapeutics price target of $145.29 implies 37% upside potential to current levels.

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