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May 8 (Reuters) - Shares of Horizon Pharma Plc plummeted by a third after the drugmaker reported disappointing first-quarter results and cut its full-year revenue forecast as its contract with a pharmacy benefit manager failed to pay off.
Horizon Pharma had signed a rebate agreement with Prime Therapeutics last year, securing formulary status for its primary care medicines Duexis, Pennsaid 2% as well as Vimovo.
Pharmacy benefit managers (PBMs) negotiate drug benefits for health plans and employers and maintain a formulary, or a list of drugs they covers. They extract discounts and after-market rebates from drugmakers in exchange for including their medicines on the formulary with low co-payments.
Horizon said on Monday that it had to pay higher-than-anticipated rebates to its PBM in the first quarter and that it also had higher patient assistance costs, which a drugmaker agrees to pay to boost the use of their drug.
The lower prices and higher costs hit Horizon's primary care services business, which accounted for about 30 percent of overall revenue, in the first quarter.
Morgan Stanley analysts said Horizon's disappointing PBM contracting strategy had resulted in the company's primary care unit revenue falling well below analysts' forecast.
The company's total first-quarter quarter revenue fell roughly 8 percent to about $221 million, missing analyst average estimates of $248 million, according to Thomson Reuters I/B/E/S.
Its adjusted profit of 21 cents per share also missed analysts' expectations of 23 cents.
Horizon Pharma also cut its full-year 2017 revenue forecast to $1.00-$1.04 billion from $1.24-$1.29 billion.
The Dublin, Ireland-based company's shares plunged as much as 33.5 percent to a roughly two-and-a-half year low of $10.35, with the company losing about $800 million of its market value.
The shares were last down about 31 percent, set for their worst day since July 2014. The trading volume was closing in on 18 million shares, making them the third most actively traded stock across U.S. exchanges. (Reporting by Divya Grover in Bengaluru; Editing by Savio D'Souza)