Horizon Pharma (HZNP) Releases Response To Express Scripts (ESRX)

Horizon Pharma PLC (NASDAQ: HZNP) | Express Scripts Hldg (NASDAQ: ESRX)

Express Scripts recently cut ties with a pharmacy that it says was only dispensing Horizon Pharma medications. It has also brought a lawsuit against Horizon Pharma stating that the company had ties with what it called a “captive pharmacy”. However today, HZNP responded to the claims made by ESRX, stating that the allegations were false. Today, we’ll go over the full story.

What ESRX Is Alleging

Express Scripts believes that a pharmacy known as Linden Care was found to “predominantly dispense Horizon prescription drugs”. It also mentioned that the pharmacy failed to fulfill the Express Scripts pharmacy network agreement. However, Linden Care isn’t the only pharmacy that ESRX is accusing of this practice. In fact, it said that it is currently in the process of evaluating several pharmacies that it believes dispense predominantly Horizon Pharma medications.

ESRX has also filed a lawsuit against HZNP stating that the company failed to fulfill a contractual agreement to pay certain rebates to ESRX. In the lawsuit that was filed, Express Scripts is seeking about $140 million from Horizon Pharma in damages.

Horizon Pharma Responds To The Claims

Early this morning, HZNP issued a statement in response to the claims made by Express Scripts. It started by informing investors that less than 5% of net sales produced by the company are from prescriptions filled by Linden Care and processed by Express Scripts. Here’s a quote that seemed to sum their opinions of the allegations up pretty well:

The notion that Linden Care is a so-called “captive pharmacy” of Horizon Pharma is entirely false. At best Express Scripts is being reckless in its allegations and at worse it is intentionally attempting to mislead investors. As previously stated, all pharmacies that distribute Horizon branded medicines are fully independent. Horizon does not own or have an ownership stake in any pharmacy and does not possess an option to purchase any pharmacy. In addition, the relationship with these pharmacies is non-exclusive where each of these pharmacies may also fulfill prescriptions for other drug manufacturers.”

What I Believe?

I’m not sure what the benefit of HZNP declining would be for ESRX. However, I don’t believe that the allegations made by ESRX are based in truth. Essentially, Express Scripts is accusing Horizon Pharma of Enron- and Valeant-like activity; Activity for which there is no reasonable proof that it is happening.

What We Can Expect To See Moving Forward

Moving forward, I have a couple of opinions, depending on how far forward you would like to look. First and foremost, as sad as it may be, HZNP is likely to decline in the short run. The reality is that any bad news, true or false, can weigh heavy on a stock. However, in the long run, there’s no doubt in my mind that HZNP has the ability to prove no wrong doing. As a result, I’m expecting to see long term gains.

What Do You Think?

Where do you think HZNP is headed and why? Let us know your opinion in the comments below!

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