Horizon Pharma (HZNP) Could Buy Back All Shares Over 5 Years, Squeeze Shorts - Guggenheim

Guggenheim analyst, Louise Chen believes that Horizon Pharma (NASDAQ: HZNP) shares are range bound as the Street works through some overhangs (primary care business, generic competition for Vimovo, headline risks in healthcare). But the stock could be $40+ by year-end if the company successfully executes on its business objectives and the data for Actimmune FA is positive (4Q16). No change to Buy rating or $40 PT.

The analyst said solid execution and good data could squeeze the bears out of short positions.

There are 3 reasons for the analyst's thesis:

1) a sum-of-the-parts analysis arrives at a value of ~$50 per share — even if the Primary Care franchise is worth 0, the stock should still have 69% upside

2) one turn in P/E could drive shares up 16%

3) HZNP could buy back its entire market cap in 4-5 years

HZNP currently trades at 8x ’16E consensus EPS of $2.44. If the P/E multiple expands to 9x, the stock could be worth $22 per share and this equates to 16% upside potential. This could happen if HZNP’s execution were to just meet its stated objectives since Street expectations are modest to negative.

Potential Catalysts:

1) Pipeline advancements for Actimmune (FA, PD-1/PDL1 combo, less severe SMO)

2) M&A, '16+

3) Share gains for Duexis, Vimovo, Pennsaid, Actimmune, Ravicti, '16+

For an analyst ratings summary and ratings history on Horizon Pharma click here. For more ratings news on Horizon Pharma click here.

Shares of Horizon Pharma closed at $18.91 yesterday.

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