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Horizon Pharma's Rayos - A No-brainer Or Speculation?


Rheumatoid arthritis, which is a chronic inflammatory disease, is estimated to affect about 1.8 million Americans. A number of effective treatments have been approved by the FDA for treating rheumatoid arthritis and drugs like Orencia, Remicade, Enbrel, Humira and Actemra are just to name a few.

At the altar, awaiting the FDA decision is a new drug for rheumatoid arthritis - Rayos, a delayed-release formulation of low-dose prednisone, developed by Horizon Pharma Inc. (HZNP). This drug is approved for rheumatoid arthritis in 16 European countries under the brand name Lodotra and is marketed in Europe by the company's distribution partner, Mundipharma International Corp. Ltd.

For readers who are new to Horizon Pharma, here's a brief overview of its business and the upcoming events to watch out for...

Horizon Pharma is involved in developing medicines to treat arthritis, pain and inflammatory diseases. The company has two marketed drugs - Duexis, approved by the FDA last year for signs and symptoms of osteoarthritis and rheumatoid arthritis, and Lodotra approved in Europe in 2009 for rheumatoid arthritis.

Horizon Pharma has sought approval for Duexis in United Kingdom and a modified Marketing Authorization Application to this effect was submitted in February of this year. The company anticipates a decision on the updated application in the second half of 2012.

Late last month, Horizon Pharma filed a patent infringement lawsuit in the United States District Court for the District of Delaware seeking to block Par Pharmaceutical Inc. from marketing a generic version of Duexis. The patent on Duexis expires July 18, 2026, according to the FDA's Orange Book.

Lodotra, the company's lead product, is marketed in Europe for the treatment of moderate to severe, active rheumatoid arthritis in adults when accompanied by morning stiffness. This drug, known as Rayos in the U.S., is under FDA review.

Lodotra/Rayos was developed utilizing SkyePharma's proprietary GeoClock and GeoMatrix technologies, for which Horizon Pharma holds an exclusive worldwide license for the delivery of corticosteroids.

Horizon Pharma submitted the New Drug Application for Rayos last September based on results from a pivotal, 12-week, double-blind, placebo-controlled phase III trial involving 350 rheumatoid arthritis patients. The NDA for Rayos was accepted by the FDA last November with a decision date set for July 26, 2012.

Lodotra/Rayos is also being investigated as a potential treatment for polymyalgia rheumatica, or PMR, an inflammatory disorder involving aching and stiffness in patients over the age of 50 typically affecting the shoulders and arms, in a phase II study. Beginning in the second half of 2012, a separate clinical trial for Lodotra/Rayos for the potential treatment for PMR, mostly a phase III study, is expected to be conducted by Horizon Pharma's distribution partner Mundipharma.

The company also has a couple of preclinical drug candidates in its pipeline namely, TRUNOC for pain-related diseases and HZN-602 for mild to moderate pain and arthritis. However, Horizon Pharma currently has no plans to further develop these products on its own.

A quick look at the company's balance sheet...

Since inception in June 2005, the company has incurred significant operating losses, and as of December 31, 2011, had an accumulated deficit of $220.3 million. The company recognizes revenue from up-front license fees, milestone receipts and product deliveries.

Net loss for the year ended December 31, 2011, was $113.3 million or $12.56 per share compared to a net loss of $27.1 million or $21.16 per share in the prior year, hurt largely by a $69.6 million intangible impairment charge recorded during the fourth quarter of 2011. The annual revenue in 2011 increased to $6.9 million from $2.37 million in 2010.

The company ended the year 2011 with $18.0 million in cash. Subsequent to the end of the year, in February and March 2012, the company completed debt and equity offerings raising combined net proceeds of $81.7 million. As a result, Horizon Pharma had $82.5 million in cash on hand as of March 16, 2012.

Horizon Pharma went public in July 2011, offering its shares at $9 each. The stock has thus far hit a low of $3.05 and a high of $9.34. HZNP lost over 7.5% on Tuesday to close the day's trading at $3.55.

by RTTNews Staff Writer

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