Horizon Pharma (HZNP) is a biopharmaceutical company that is developing and commercializing medicines for the treatment of arthritis, pain, and inflammatory diseases. The company offers Duexis for the relief of signs and symptoms of rheumatoid arthritis and osteoarthritis, and to decrease the risk of developing upper gastrointestinal ulcers in patients who are taking ibuprofen for these indications.
Duexis was launched in Decemeber 2011 in the U.S and the company anticipates a decision regarding the marketing authorization application for Duexis from the Medicines and Healthcare products Regulatory Agency (MHRA) in the UK in the second half of 2012. In addition, the company offers Lodotra (also known as Rayos in the U.S.) for the treatment of moderate to severe active rheumatoid arthritis in adults when accompanied by morning stiffness.
It also develops Lodotra, which is under Phase 2 clinical trial for the treatment of polymyalgia rheumatica. Lodotra is already approved in 16 European countries and is currently under FDA review (PDUFA) which the company anticipates an approval decision on July 26, 2012.
Last week I held an interview with Ms. Samimy, a senior analyst at Stifel Nicolaus. She has been recognized as the "Best on the Street 2009" by the Wall Street Journal for her coverage of Specialty Pharmaceuticals. Ms. Samimy has followed the healthcare industry for more than 10 years and previously was a Senior Research Analyst at UBS where she covered the branded Specialty Pharmaceuticals industry as well as Small/Mid-Cap Biotechnology. We discussed the primary challenges facing Horizon Pharma.
Ben Yoffe: Can you share with us your expectations regarding the upcoming PDUFA date of July 26, 2012 for Lodotra?
Samimy: We expect a 75% chance of approval for Lodotra/Rayos. For the time being, considering prednisone is a known steroid and the drug is designed more as a timed-release, we think generally their chances of approval are above average. Their data was also relatively non-controversial, meeting the clinical endpoints for both ACR 20 and ACR 50. It is also a very low dose of prednisone.
Yoffe: Do you think the company can handle the competition with other pharmaceuticals on the market to treat Rheumatoid Arthritis?
Samimy: Lodotra would be on top of other RA products. Competition is other steroids that are just standard delivery. Horizon's timed release technology implemented with Lodotra allows for a much lower dose of prednisone (making it safer) and times its release to match the spike in inflammatory markers in RA patients. In other words, the programmed release technology allows prednisone to be administered effectively in a very low dose and with a better release profile.
Yoffe: How many sales from Lodotra, if approved, you expect to see in the U.S.?
Samimy: We see peak of $80-100 million. We use a patient based model rather than a market model, given that prednisone is used broadly for various indications. Our penetration of the RA population is very small (2%), but of the eligible population (i.e. those eligible for steroid use - 50% of treated patients use steroids) 11% at peak.
Yoffe: Are you satisfied with the sales of Lodotra in Europe so far?
Samimy: Lodotra revenues from Europe has so far been greater than we had projected.
Yoffe: What do you think about the patent infringement lawsuit against Par Pharma (PRX) seeking to block a generic version of Duexis?
Samimy: This was not surprising; we had expected this given that both ingredients are broadly available. The company has patents that would protect them from both non-infringement (in terms of the barrier technology to protect ibuprofen from famotadine) and obviousness (using famotadine as a GI protectant was not typically accepted among the medical community nor the FDA, thus the combination was non-obvious).
Yoffe: What are your expectations regarding the ongoing commercial launch of Duexis in the U.S?
Samimy: It is certainly a product that makes sense for the market place given the prevalence of GI complications from use of high dose NSAIDS. We have a peak of just under $200 million.
Yoffe: In early march 2012, insiders bought almost 8 million shares of Horizon stock at $3.59 and $3.62 per share. Do you see it as a bullish sign?
Samimy: No opinion, but it's not a bearish sign.
Yoffe: What are your rate and your price target for HZNP?
Samimy: Buy, $10. We think the present share price reveal an opportunity to buy shares of Horizon.
My opinion on HZNP:
- It seems that Insiders believe Lodotra will be approved based on their huge buying on March this year. You can read more about it on Scott Matusow's article.
- The company has a solid cash position - As of March 16, 2012, the company had $82.5 million in cash and cash equivalents. This fact should reduce the fear from near dilution.
- Approval of Lodotra by the FDA will be a significant milestone for HZNP. The chances of approval are positive and we should see $5-$5.5 per share as we are getting closer to the PDUFA date of July 26.
Disclosure: I am long HZNP.