Mid-Cap Stock Update: Horizon Tanks 21% on Earnings Concerns



Weekly mid-cap stock update

The mid-cap stocks of the SPDR S&P Biotech ETF (XBI) have outperformed the mid-cap stocks of other biotechnology ETFs for the third consecutive week since April 1, 2016. The mid-cap stocks of XBI rose by 2.9% for the week ended April 15, 2016, and outperformed the SPDR S&P 500 ETF (SPY), which returned 1.6% for the same period.

The above graph reflects the performance of mid-cap stocks of different biotechnology ETFs on a week-over-week basis.

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Horizon tanked 21% during the week

In the mid-cap space, Horizon Pharma (HZNP) was the worst hit, falling by 21% for the week ended April 15, 2016. In a presentation, Horizon Pharma announced that its 2016 net sales guidance is in the range of $1.0 billion–$1.1 billion, with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in the range of $505 million–$520 million. This disappointed investors and led to a sell-off. The stock closed at $14.78 and was trading below its 20-day moving average. Year-to-date, Horizon Pharma is down by 31.8%.

Peers Anacor Pharmaceuticals (ANAC), Ultragenyx Pharmaceutical (RARE), and Endo International (ENDP) have also fallen significantly in 2016, by 42.7%, 36.9%, and 57%, respectively, on a year-to-date basis. Horizon’s trading volume surged during the week, with ~15.4 million shares being traded per day. Horizon is trading at a 2016 forward price-to-earnings multiple of ~6.3x and a book value of $8.22 per share. With its current price, the stock is trading at a price-to-book value of ~1.8x. Horizon Pharma has a weight of 0.5% in the iShares Nasdaq Biotechnology ETF (IBB).


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