July 20, 2015 | 8:00 AM by Fahad Khalid | fkhalid@jaguaranalytics.com

Horizon Pharma (HZNP) Big Guidance Raise

Last week on Thursday, July 16, we saw large buyers of 20,000 August 35 calls. Over $5.3 million bullish bet partially rolled out from August 31 calls. These calls are likely going to double this morning after a huge guidance raise this morning:

– Q2 Revenues $171M midpoint vs. $138M consensus
– Q2 Revenues +160% y/y and +50% sequentially
– FY2015 Revenues $670M midpoint vs. $611M consensus
– FY2015 EBITDA $272.5M, +151% y/y

We believe DEPO is now likely to come back to discussion table about merger with HZNP after this guidance. If that happens, lets put these numbers in perspective. Using a UBS model as an example, here is how HZNP looks in out years:

HZNP Guidance

And here is DEPO outlook using RBC Capital model:

DEPO Model

If a combination goes through, proforma combined adjusted EBITDA outlook looks like this:

FY2015: $330M
FY2016: $467M, +41.5% y/y
FY2017: $713M, +31.2% y/y
FY2018: $853M, +19.6% y/y

Add in the $165M cost synergies that HZNP has proposed in its offer, and the combination is likely to produce over $1 Billion in EBITDA three years out, which calculates to less than 9x proforma EV/EBITDA. HZNP is very attractive in our view.


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