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Horizon Drops as Investors Doubt Company’s Marketing

Horizon Pharma Inc., a maker of pain therapies, fell the most ever in New York trading as investors doubted the company’s ability to market its newly approved Rayos rheumatoid arthritis treatment.

Horizon dropped 17 percent to $6.31 at the close in New York, its biggest decline since the stock started trading in July 2011. The shares of the Northbrook, Illinois-based company have risen 58 percent this year.

The Food and Drug Administration cleared the first delayed-release, low-dose prednisone in Horizon’s Rayos, the company said in a statement yesterday. Investors may be betting that Horizon won’t be successful enough when it starts to sell the medicine or that the company may raise more money to build out its sales force, said Charles Duncan, an analyst with JMP Securities who recommends buying the stock.

“I believe both concerns are overdone,” Duncan said in a telephone interview today. “It’s a ‘short the launch’ thesis.”

The approval may make Horizon a candidate for a deal with a larger drugmaker, either in the form of a partnership or acquisition, Duncan said. He named Takeda Pharmaceutical Co. and Covidien Plc, which collaborates with Horizon on another medicine, Duexis, as possibilities.

Covidien’s Mallinckrodt unit “is looking forward to working with Horizon on our recently-announced co-promotion of Duexis,” Lynn Phillips, a spokeswoman for the unit, said in an e-mail. “That said, our policy is not to comment on potential future plans for the business.”

Synthetic Steroid

Elissa Johnsen, a spokeswoman for Takeda, also said the company doesn’t comment on business development activity.

“Other franchises outside of rheumatology but with anti-inflammatory drugs you could see pick this up,” Duncan said.

While the synthetic steroid was studied as a treatment for rheumatoid arthritis, the FDA granted approval for the medicine to also help with psoriatic arthritis, asthma and chronic obstructive pulmonary disease.

Horizon said it will start selling the drug for rheumatoid arthritis in the fourth quarter and later plans to expand its commercial strategy to include the respiratory diseases. Prednisone is a type of corticosteroid, and about 50 percent of rheumatoid arthritis patients are prescribed a combination therapy that includes corticosteroids, Horizon said.

“We are extremely pleased the FDA has approved Rayos for a broad range of indications,” Timothy Walbert, president and chief executive officer of Horizon, said in the statement. “Our initial focus will be on the launch of Rayos in rheumatologic diseases such as rheumatoid arthritis and polymyalgia rheumatica in the fourth quarter.”

Revenue Projection

The company may have $97.6 million in revenue in 2013, the average of three analysts’ estimates compiled by Bloomberg.

Rayos is meant to be taken at bedtime and enables a delayed release of prednisone four hours after administration. The treatment also reduced morning stiffness of patients in a trial, according to a statement from Horizon.

Long-term use of high doses of corticosteroids can lead to osteoporosis, cardiovascular disease and weight gain, according to Horizon.

Rheumatoid arthritis causes painful and swollen joints, including in the hands, wrists, feet and knees. Other treatments include anti-inflammatory medications and immunosuppressants.

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