Why Horizon shares rose with the announcement of the Raptor acquisition
On September 12, 2016, Horizon Pharma (HZNP) announced that it will acquire Raptor Pharmaceuticals. For detailed information on HZNP’s inorganic growth, you can refer to How Horizon Became a Growth Stock.
Raptor Pharmaceuticals was valued based on its two products in the ex-US market: Procysbi and Quinsair. Quinsair’s approval in the United States, which will be an added advantage to Horizon, wasn’t considered in the deal. As noted by Horizon, Procysbi’s peak sales potential is $300 million. So a deal that values Raptor Pharmaceuticals at $800 million seems to be a bargain for Horizon’s shareholders.
The market was pleased with the transaction, and HZNP shares rose to $18.89 on September 12 from the earlier closing price of $17.26 on September 9. Since then, Horizon’s bull run has continued. The closing share price on September 16 was $19.28.
What are the benefits of the Horizon-Raptor deal?
Horizon’s acquisition of Raptor Pharmaceuticals is in line with Horizon’s strategy to grow further in the rare disease space. In this transaction, Horizon will also gain Raptor’s commercial infrastructure and expertise in Europe and the rest of the world.
Horizon’s portfolio will be diversified to 11 products, an increase from nine products earlier. Of these 11 products, six are rare disease medicines. Other companies that operate in the orphan disease space include BioMarin Pharmaceutical (BMRN), Alexion Pharmaceuticals (ALXN), and Shire (SHPG).
It’s worth noting that if you want to enjoy Horizon Pharma’s upside but avoid excessive company-specific risk, you can invest in ETFs such as the SPDR S&P Pharmaceuticals ETF (XPH). XPH has 4.9% of its total holdings in Horizon.
In the next part, we’ll look at detailed information on Horizon’s rare disease portfolio and its contribution after the Raptor acquisition.