Specialty Pharmacy Ties Claim Next Victim In Horizon Pharma
Shares of Horizon Pharma (HZNP) - Get Report are sharply lower this morning after pharmacy benefit manager Express Scripts (ESRX) cut ties with a specialty pharmacy called Linden Care, which is used by Horizon. The trouble for Horizon is reminiscent of the recent issues suffered by fellow drugmaker Valeant (VRX) due to its own association with a specialty pharmacy.
WHAT'S NEW: Express Scripts, the nation's largest pharmacy benefit manager, has stopped doing business with Linden Care, accusing it of being a "captive" pharmacy that dispenses mostly products made by Horizon Pharma. In turn, Horizon called the idea that Linden Care is a captive pharmacy "entirely false," stating that "at best Express Scripts is being reckless in its allegations and at worse it is intentionally attempting to mislead investors." Horizon repeated its previous assertions that it does not own or have an ownership stake in any pharmacy, does not possess an option to purchase any pharmacy and that all pharmacies that distribute Horizon branded medicines are fully independent.
WHAT'S NOTABLE: The fight between Express Scripts and Horizon over Linden Care comes amid the ongoing saga playing out between Valeant and its prior specialty pharmacy partner, Philidor Rx Services. Following claims that Philidor urged its employees to modify prescriptions to ensure more orders of Valeant-branded drugs rather than generics, as well as other allegations of wrongdoing, Express Scripts and peer CVS Health (CVS) - Get Report terminated Philidor from their networks. The day after those termination announcements, Valeant said that it was severing all ties with Philidor and that the pharmacy had informed the drugmaker that it will shut down operations as soon as possible, consistent with applicable laws. Valeant has subsequently said that Philidor has committed to cease operations by January 30, 2016, at the latest.
DEPOMED PURSUIT: In September, Horizon commenced an exchange offer for all of the outstanding shares of common stock of Depomed (DEPO) . Under the terms of the offer, tendering Depomed shareholders would be able to exchange each share of Depomed common stock for 0.95 Horizon Pharma ordinary shares. Depomed's board has unanimously rejected Horizon's unsolicited exchange offer, highlighting reservations about Horizon's business model and strategy, while observing that the nature of Horizon's business model "had the potential to lead to significant volatility in the price of Horizon stock." This morning, WallachBeth analyst Brian Jeep upgraded Depomed to Buy, citing valuation and the potential of the Nucynta franchise following the company's better than expected Q3 results. Jeep keeps a $33 price target for Depomed shares.
PRICE ACTION: In pre-market trading, Horizon Pharma fell over 17% to $18.50 per share, while Depomed slid nearly 6% to $20 per share.
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