Today’s recommendation had been in a slow, steady uptrend for years, though it got dented with everything else in March of this year.
Cabot Profit Booster 139
The Cabot Profit Booster portfolio remains in excellent shape as all of our stocks are performing well. At some point that will change, but for now I will continue to push forward with a diverse portfolio of strong stocks.
And in an effort to keep the portfolio diversified, this week we are adding a pharmaceutical stock that analysts, including Cabot Top Ten Trader’s chief analyst Mike Cintolo, are very high on.
The Stock – Horizon Therapeutics (HZNP)
We wrote about Horizon a few months ago, noting that its drugs treat inflammatory conditions, underserved diseases and a few others that target rare diseases.
The big new treatment is Tepezza, the first and only FDA-approved treatment for thyroid eye disease—a progressive and vision-threatening rare autoimmune disease, and it’s the main driver right now. Tepezza was launched during COVID-19 and has done stunningly well. Initial guidance was for 2020 sales of $30 to $40 million for this drug, but in the first quarter, the drug delivered $23.5 million in sales, and in the just-reported second quarter, sales were a whopping $166 million! Long-term, the company sees Tepezza’s peak sales growing to a whopping $3 billion, triple the original estimate! The company said that physicians are using Tepezza in both active and fibrotic (inactive) disease, a nice (and profitable) surprise.
In addition to Tepezza, Horizon also has KRYSTEXXA MIRROR RCT, an immunomodulator used by rheumatologists that has been shown to reduce anti-drug antibody formation to biologic therapies and is currently in a study for kidney transplant patients with uncontrolled gout.
And in April, Horizon also acquired Curzion Pharmaceuticals, Inc. and its drug candidate (renamed HZN-825) for the treatment of diffuse cutaneous systemic sclerosis (skin hardening and organ problems).
As for the results, Horizon’s Q2 EPS declined by 18%, though the figure topped estimates, and revenue rose 44%. Really, though, this is all about the future—analysts have tripped over themselves to raise their numbers, with Wall Street seeing Horizon’s earnings totaling $2.86 per share this year (up from an estimate of $1.80 two months ago) and $4.34 per share in 2021 (up from $2.69).
Technical Analysis
HZNP had been in a slow, steady uptrend for years, though it got dented with everything else in March of this year. But the long-term advance is back on, and in fact, it’s accelerated—shares lifted to new highs in early May (a sign of leadership), glided higher through July and then exploded after it crushed Q2 estimates. The tight, low-volume action since then is encouraging. Stop - 65
The Covered Call Trade
Buy Horizon Therapeutics (HZNP) Stock at 76, Sell to Open October 80 Strike Calls (exp.10/16) for $3, or a Net Price of 73 or less
Static Return: $300 per covered call (4.1%)
Breakeven: 73
Covered Call Return (if assigned): $700 per covered call (9.58%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, or 73 or less. (In this case 76 minus 3 = 73. Or another example is you could pay 76.25 for the stock and sell the call for 3.25, which also equals 73)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
