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Hawk’s Nest

Large Biotech Buyout Scores 750% Options Trade Gain

by | Jan 19, 2023

Horizon Therapeutics (HZNP) was a large M&A deal to close 2022 and one that really capped off a great year hitting buyout, and once again our options signals saw it coming. We wrote the name 11/4 and the February call spreads highlighted remain in open interest and will capture more than a 750% gain.

Horizon Therapeutics (HZNP) on 11/2 saw 2500 February $85/$100 call spreads bought for $1.75 and nearly $500k in upside premium bought looking for continuation higher. This follows recent opening put sales for 1000 November $65 puts sold at $4.30 and 500 January $75 calls at $3.40. HZNP also still has over 1000 January $80 ITM short puts in open interest from opening sellers on 8/16 at $20.20 expecting a longer-term floor at these levels. Shares are breaking out of a 3 month range this week as earnings beat to the upside and the stock clear 68 which had been resistance and now has clear space into a open gap that closes up near 80 and the YTD VWAP just above that. The stock has yearly value area low resistance at 75.75 as well but weekly MACD crossing bullish, and momentum is strong so could see a year end run higher towards 91 which is 2021 yearly VPOC. The $16.1B company trades at 13.7x earnings, 4.3x sales while revenue is expected to grow +12% in FY22 and +10% growth estimated in FY23. The Company is focused on the discovery, development and commercialization of medicines that address critical needs for people impacted by rare, autoimmune, and severe inflammatory diseases. The Company’s portfolio is composed of approximately 12 medicines in the areas of rare diseases, gout, ophthalmology, and inflammation. HZNP beat earnings and revenues this week and guided above FY22 consensus. The Company continues to expect TEPEZZA full-year 2022 net sales percentage growth in the high teens and is increasing KRYSTEXXA full-year 2022 net sales growth to approximately 25% compared to the previous guidance of more than 20%. Last month HZNP reported new real-world analysis of TEPEZZA use indicates a small percentage of people receive a second course of treatment. In September the company also announced a $500M share buyback plan. Average analyst target is $104. SVB Lerrink boosted its target to $88 and keeps an Outperform this week while Piper lowered their target to $88 and ha an Overweight. Goldman is a large bull on the stock and has a Buy rating but lowered their target to $144 in August. Wainwright initiated with a Neutral and $74 target this week but stated their cautious stance would be wrong if the company can drive much better performance from that franchise. Indeed, we see > $20/share upside to shares from our price target if Horizon can approach its long-term target of $3.5B in sales for Tepezza. Short interest is at 3.6%. Hedge fund ownership rose 1%.”