Horizon Pharma (HZNP) Stock Plummets as Express Scripts Severs Ties
NEW YORK (TheStreet) -- Horizon Pharma (HZNP) - Get Report stock is down 18.28% to $18.29 in early afternoon trading on Wednesday, as pharmacy benefit manager Express Scripts (ESRX)severs ties with Linden Care pharmacy after realizing it sells drugs from Horizon.
Horizon, Valeant (VRX) and similar pharmaceutical companies have faced heightened scrutiny in recent weeks about their drug pricing practices.
Last month, Express Scripts cut ties with specialty pharmacy Philidor as well, after reports that Valeant and Philidor collaborated to vastly inflate drug prices and create a network of "phantom" pharmacies.
Express Scripts is looking into other "captive pharmacies" that it claims are dispensing mostly Horizon medications, as well as pharmacies that generate most of their volume from one manufacturer or product, Reuters reports.
"The notion that Linden Care is a so-called 'captive pharmacy' of Horizon Pharma is entirely false," Horizon said in a statement. "At best Express Scripts is being reckless in its allegations and at worse it is intentionally attempting to mislead investors."
Additionally, Express Scripts has filed a lawsuit against Horizon "seeking to recover approximately $140 million" because Horizon allegedly failed to fulfill its contractual agreement, according to the Wall Street Journal.
Separately, TheStreet Ratings team rates HORIZON PHARMA PLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
We rate HORIZON PHARMA PLC (HZNP) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, HORIZON PHARMA PLC's return on equity significantly trails that of both the industry average and the S&P 500.
- HORIZON PHARMA PLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HORIZON PHARMA PLC reported poor results of -$3.70 versus -$2.29 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus -$3.70).
- HZNP's debt-to-equity ratio of 0.91 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.92 is very high and demonstrates very strong liquidity.
- The gross profit margin for HORIZON PHARMA PLC is currently very high, coming in at 93.17%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HZNP's net profit margin of 18.40% significantly trails the industry average.
- Net operating cash flow has significantly increased by 148.09% to $41.58 million when compared to the same quarter last year. In addition, HORIZON PHARMA PLC has also vastly surpassed the industry average cash flow growth rate of -17.22%.
- You can view the full analysis from the report here: HZNP
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.