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Horizon Pharma’s Steep Fall in December: What Happened?

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The failed STEADFAST trial

On December 8, 2016, Horizon Pharma (HZNP) announced that STEADFAST,[1. Safety, Tolerability and Efficacy of Actimmune Dose Escalation in Friedreich’s Ataxia] its Phase 3 trial of Actimmune (interferon gamma-1b), an orphan drug, didn’t meet its primary endpoint. The failure of the study for treating FA (Friedreich’s ataxia) was taken negatively by the market, and Horizon fell ~22.5% that same day.

Horizon is also evaluating Actimmune for other indications such as osteoporosis as a combination with the PD-L1 (programmed death-ligand 1) drug Opdivo for cancer and next-generation formulations. To understand Actimmune’s approved indications and its importance for Horizon, please refer to Why Actimmune, Horizon’s Lead Orphan Product, Has Such Huge Potential.

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Why was an FA indication so important for Actimmune?

FA is a hereditary degenerative neuromuscular disorder caused by a genetic mutation in the FXN (frataxin) gene. It affects 4,000–6,000 people in the United States and currently doesn’t have any approved treatment. The failed trial meant the loss of an opportunity to increase sales by $500.0 million to $1.0 billion at its peak in FA indication.

Horizon Pharma operates in three business divisions: Primary Care, Orphan Drug, and Rheumatology. It’s targeting to become an orphan drug–focused company, so it’s gradually increasing its exposure to orphan drugs. BioMarin Pharmaceutical (BMRN), Alexion Pharmaceuticals (ALXN), and Sanofi’s (SNY) subsidiary Genzyme are major orphan drug manufacturers.

If you invest in the ProShares Ultra Nasdaq Biotechnology (BIB), you can gain exposure to inorganically growing Horizon Pharma. BIB has a 0.40% weight in Horizon.

Let’s move on now to look at the factors behind Horizon’s volatility.

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