Horizon Therapeutics plc Reports Fourth-Quarter and Full-Year 2019 Financial Results; Announces Full-Year 2020 Guidance

Horizon Therapeutics plc Reports Fourth-Quarter and Full-Year 2019 Financial Results; Announces Full-Year 2020 Guidance

02/26/20

-- Record Fourth-Quarter 2019 Net Sales of $363.5 Million
Driven by 14 Percent Growth in the Orphan and Rheumatology Segment;
Fourth-Quarter 2019 GAAP Net Income of $592.8 Million; Adjusted EBITDA of $139.9 Million --

-- Record Full-Year 2019 Net Sales of $1.30 Billion Driven by 32 Percent Growth in KRYSTEXXA®;
Full-Year 2019 GAAP Net Income of $573.0 Million; Record Adjusted EBITDA of $482.8 Million --

-- Full-Year 2020 Net Sales Guidance of $1.40 Billion to $1.42 Billion;
Full-Year 2020 Adjusted EBITDA Guidance of $485 Million to $500 Million, Reflecting Significant
Investment in U.S. Launch of TEPEZZA™ and R&D Pipeline Programs to Drive Long-Term Growth --

-- TEPEZZA Approved for the Treatment of Thyroid Eye Disease (TED) on Jan. 21, 2020 --

-- Announced KRYSTEXXA Immunomodulation MIRROR Open-Label Trial Top-line Data;
79 Percent of Patients Achieved a Complete Response, Supporting KRYSTEXXA Immunomodulation
Strategy to Optimize Treatment Outcomes --

-- Increased Peak U.S. Annual Net Sales Expectations for Growth Drivers
KRYSTEXXA and TEPEZZA to More Than $1 Billion Each --

-- Cash Position of $1.076 Billion; Net Leverage of 0.7 Times as of Dec. 31, 2019 --

DUBLIN--(BUSINESS WIRE)--Feb. 26, 2020-- Horizon Therapeutics plc (Nasdaq: HZNP) today announced its fourth-quarter and full-year 2019 financial results and provided its full-year 2020 net sales and adjusted EBITDA guidance.

“The fourth quarter capped off another year of tremendous progress at Horizon, marked by the achievement of several important milestones,” said Timothy Walbert, chairman, president and chief executive officer, Horizon. “We are in our strongest position ever as a company, entering 2020 with FDA approval of TEPEZZA, the first and only medicine approved for the treatment of thyroid eye disease. We continue to see strong growth for KRYSTEXXA, the only approved medicine for uncontrolled gout, particularly following the significantly higher complete response rate demonstrated when used in combination with methotrexate. With the excellent growth potential we see for both TEPEZZA and KRYSTEXXA, we recently increased our peak U.S. net sales expectations to more than $1 billion for each medicine. We remain focused on optimizing the benefits our medicines provide patients and driving value for our shareholders.”

Financial Highlights

(in millions except for per share amounts and percentages)   Q4 19   Q4 18   %
Change
  FY 19   FY 18   %
Change
                         
Net sales  

$

363.5

 

$

355.5

 

2

 

 

$

1,300.0

 

$

1,207.6

 

 

8

Net income (loss)  

 

592.8

 

 

101.6

 

483

 

 

 

573.0

 

 

(38.4

)

 

NM

Non-GAAP net income  

 

116.6

 

 

116.8

 

-

 

 

 

390.2

 

 

314.7

 

 

24

Adjusted EBITDA  

 

139.9

 

 

151.1

 

(7

)

 

 

482.8

 

 

451.4

 

 

7

                         
Earnings (Loss) per share - diluted  

 

2.84

 

 

0.58

 

390

 

 

 

2.90

 

 

(0.23

)

 

NM

Non-GAAP earnings per share - diluted  

 

0.56

 

 

0.67

 

(16

)

 

 

1.94

 

 

1.83

 

 

6

Fourth-Quarter and Recent Company Highlights

  • TEPEZZA Approved by FDA for the Treatment of Thyroid Eye Disease (TED): On Jan. 21, 2020, the U.S. Food and Drug Administration (FDA) approved TEPEZZA (teprotumumab-trbw) for the treatment of TED, well in advance of the Prescription Drug User Fee Act (PDUFA) action date of March 8, 2020. TEPEZZA is the first and only FDA-approved medicine for the treatment of TED, a serious, progressive and vision-threatening rare autoimmune disease.
  • The New England Journal of Medicine Published TEPEZZA’s Phase 3 Clinical Trial Data: In January 2020, the Company announced that The New England Journal of Medicinehad published the comprehensive results of Phase 3 clinical trial evaluating TEPEZZA for the treatment of TED. The results from the clinical trial demonstrated that TEPEZZA provides significant improvements in proptosis (eye bulging) and diplopia (double vision) when compared to a placebo. This is one of the few clinical programs to have both its Phase 2 and Phase 3 clinical results published in The New England Journal of Medicine.
  • FDA Advisory Committee Voted Unanimously to Support the Use of TEPEZZA for TED: On Dec. 13, 2019, the Dermatologic and Ophthalmic Drug Advisory Committee (DODAC) of the FDA voted unanimously (12-0) that the potential benefits of TEPEZZA outweigh the potential risks for the treatment of TED.
  • KRYSTEXXA MIRROR Open-Label Immunomodulation Trial Demonstrated 79 Percent Complete Response Rate: In January 2020, the Company announced topline results from its MIRROR open-label trial, which evaluated the use of the immunomodulator methotrexate with KRYSTEXXA to increase the complete response rate of KRYSTEXXA. The results of the trial demonstrated that 79 percent, or 11 of 14 patients enrolled, achieved a complete response, defined as the proportion of serum uric acid (sUA) responders (sUA <6 mg/dL) at Month 6. The 79 percent response rate is nearly double the 42 percent response rate in the KRYSTEXXA Phase 3 clinical program, which evaluated KRYSTEXXA alone. The combination was also well tolerated.
  • Increased Peak U.S. Annual Net Sales Expectations for Key Growth Drivers: In January 2020, the Company announced that it increased both KRYSTEXXA and TEPEZZA peak U.S. annual net sales expectations to more than $1 billion each, from the previous expectation of more than $750 million each.
  • Initiated PROTECT Trial Evaluating KRYSTEXXA to Improve Management of Uncontrolled Gout for Adults with a Kidney Transplant: In October 2019, the Company initiated its open-label PROTECT clinical trial evaluating the use of KRYSTEXXA in adults with uncontrolled gout who have undergone a kidney transplant. The objective of the trial is to demonstrate that KRYSTEXXA can provide effective disease control without burdening the kidneys. The randomized multicenter open-label trial is expected to enroll 20 adults with uncontrolled gout who have received a kidney transplant.
  • FDA Approved New Drug Application (NDA) for PROCYSBI® Oral Granules: In February 2020, the FDA approved PROCYSBI Delayed-Release Oral Granules in Packets for adults and children one year of age and older living with nephropathic cystinosis. This new dosage form provides another administration option for patients, in addition to the currently available PROCYSBI capsules.
  • Two New Pipeline Programs Announced: In January 2020, the Company announced two new pipeline programs expected to begin in 2020: a TEPEZZA exploratory trial in diffuse cutaneous scleroderma and a proof of concept trial evaluating the impact of administering KRYSTEXXA over a shorter infusion duration.
  • Opened New Facility in South San Francisco: In November 2019, the Company opened a new office in South San Francisco. The 20,000 square-foot facility features laboratory space that will enable formulation and process development for manufacturing, as well as bioanalytical method development and other R&D functions. The Company expects to add new positions in bioanalysis, clinical research, pharmacology, manufacturing and business development in 2020.
  • Expanding the Company’s U.S. Operations: In February 2020, the Company closed the acquisition of its new U.S. headquarters in Deerfield, Ill. In line with the Company's significant growth over the past three years, the new location will provide the Company the flexibility to accommodate its current U.S. operations as well as its anticipated future growth.

Research and Development Programs

  • TEPEZZA Diffuse Cutaneous Scleroderma Exploratory Trial: TEPEZZA is a fully human monoclonal antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor approved by the FDA for the treatment of TED. The Company is evaluating additional indications for TEPEZZA and expects to begin an exploratory trial in 2020 in diffuse cutaneous scleroderma, a rare fibrotic disease with no treatment options.
  • KRYSTEXXA MIRROR Randomized Clinical Trial: The Company is currently evaluating the coadministration of KRYSTEXXA with methotrexate to increase the complete response rate of KRYSTEXXA in the MIRROR placebo-controlled randomized clinical trial (RCT). The trial commenced in June 2019, and enrollment of 135 randomized patients is on track to complete mid-2020. The registrational trial is designed to enable the potential submission of results to the FDA to update the prescribing information. The MIRROR RCT follows an initial MIRROR open-label trial completed in 2019 that demonstrated a 79 percent complete response rate for patients using KRYSTEXXA with methotrexate. Methotrexate is the immunomodulator most used by rheumatologists and has been shown to reduce anti-drug antibody formation to biologic therapies when used in conjunction with these therapies.
  • KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout: The Company is evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout in its PROTECT clinical trial, initiated in October 2019. Kidney transplant patients have more than a tenfold increase in the prevalence of gout when compared to the general population, and literature suggests that persistently high serum uric acid levels can be associated with organ rejection. Managing uncontrolled gout is one of the most common and significant unmet needs of kidney transplant patients.
  • KRYSTEXXA Shorter-Infusion Duration Trial: The Company is initiating an open-label trial in mid-2020 to evaluate the impact of administering KRYSTEXXA over a significantly shorter infusion duration. Currently, KRYSTEXXA is infused over a two-hour or longer timeframe. A shorter infusion duration could meaningfully improve the experience and convenience for patients, physicians and sites of care.
  • Next-Generation Programs for Uncontrolled Gout: The Company is pursuing early-stage development programs for next-generation biologics for uncontrolled gout to support and sustain the Company’s market leadership in this area. These include HZN-003 and HZN-007, as well as a collaboration with HemoShear Therapeutics, LLC to discover new targets for gout.

Fourth-Quarter Financial Results

Note: For additional detail and reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, please refer to the tables at the end of this release.

  • Net Sales: Fourth-quarter 2019 net sales were $363.5 million, an increase of 2.3 percent.
  • Gross Profit: Under U.S. GAAP, the fourth-quarter 2019 gross profit ratio was 73.9 percent compared to 72.3 percent in the fourth quarter of 2018. The non-GAAP gross profit ratio in the fourth quarter of 2019 was 90.0 percent compared to 89.1 percent in the fourth quarter of 2018.
  • Operating Expenses: In the fourth quarter of 2019, research and development (R&D) expenses were 7.9 percent of net sales and selling, general and administrative (SG&A) expenses were 51.0 percent of net sales. Non-GAAP R&D expenses were 7.3 percent of net sales, and non-GAAP SG&A expenses were 44.3 percent of net sales.
  • Income Tax Rate: In the fourth quarter of 2019, the Company recorded a benefit of $555.9 million primarily related to an intra-company transfer of intellectual property assets, resulting in a tax rate on a GAAP basis of negative 1,507.0 percent. On a non-GAAP basis, fourth-quarter 2019 income tax expense was $11.7 million, resulting in a non-GAAP tax rate of 9.1 percent.
  • Net Income: On a GAAP basis in the fourth quarter of 2019, net income was $592.8 million. Fourth-quarter 2019 non-GAAP net income was $116.6 million.
  • Adjusted EBITDA: Fourth-quarter 2019 adjusted EBITDA was $139.9 million.
  • Earnings per Share: On a GAAP basis, diluted earnings per share (EPS) in the fourth quarter of 2019 and 2018 were $2.84 and $0.58, respectively. Non-GAAP diluted earnings per share in the fourth quarter of 2019 and 2018 were $0.56 and $0.67, respectively. The weighted average shares outstanding used to calculate fourth-quarter 2019 and 2018 non-GAAP diluted earnings per share were 211 million shares and 174 million shares, respectively. Given the recent share price appreciation, the Company’s $400 million dollars of exchangeable notes are approaching the point at which the Company would be able to redeem them for cash, ordinary shares or a combination of cash and ordinary shares. Based on current expectations, the Company is incorporating the potential conversion of the exchangeable notes into its fourth-quarter and full-year 2019 GAAP and non-GAAP diluted EPS calculations.

Fourth-Quarter Segment Results

Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments, the orphan and rheumatology segment and the inflammation segment. While segment operating income contains certain adjustments to the directly comparable GAAP figures in the Company’s consolidated financial results, it is considered to be prepared in accordance with GAAP for purposes of presenting the Company’s segment operating results. Beginning with the first quarter of 2020, the Company is moving its medicine RAYOS®, which is not an orphan medicine, to the inflammation segment, and the orphan and rheumatology segment is being renamed the orphan segment.

 

Orphan and Rheumatology Segment

(in millions except for percentages)   Q4 19   Q4 18   %
Change
  FY 19   FY 18   %
Change
                         
KRYSTEXXA  

 

110.7

 

 

83.3

 

33

 

 

 

342.4

 

 

258.9

 

32

 

RAVICTI®(1)  

 

68.5

 

 

60.2

 

14

 

 

 

228.8

 

 

226.6

 

1

 

PROCYSBI®  

 

40.8

 

 

40.1

 

2

 

 

 

161.9

 

 

154.9

 

5

 

ACTIMMUNE®  

 

28.4

 

 

27.5

 

3

 

 

 

107.3

 

 

105.6

 

2

 

RAYOS®  

 

19.5

 

 

19.8

 

(1

)

 

 

78.6

 

 

61.1

 

29

 

BUPHENYL®(1)  

 

1.6

 

 

6.4

 

(75

)

 

 

9.8

 

 

21.8

 

(55

)

QUINSAIR  

 

0.3

 

 

0.2

 

68

 

 

 

0.8

 

 

0.5

 

62

 

LODOTRA®(1)  

 

-

 

 

0.1

 

NM

 

 

 

-

 

 

2.1

 

NM

 

Orphan and Rheumatology Net Sales  

$

269.8

 

$

237.6

 

14

 

 

$

929.6

 

$

831.5

 

12

 

                         
Orphan and Rheumatology Segment Operating Income  

$

95.4

 

$

84.8

 

13

 

 

$

306.3

 

$

290.0

 

6

 

(1)

 

Beginning in 2019, the Company no longer recognizes revenue from RAVICTI and AMMONAPS sales outside of North America and Japan, nor from sales of LODOTRA. On Dec. 28, 2018, the Company divested the rights to RAVICTI and AMMONAPS outside of North America and Japan. AMMONAPS is known as BUPHENYL in the United States. In addition, effective Jan. 1, 2019, the RAYOS and LODOTRA license and supply agreements were amended, including the transfer of LODOTRA to Vectura Group plc. LODOTRA is known as RAYOS in the United States.

  • Fourth-quarter 2019 net sales of the orphan and rheumatology segment, the Company’s strategic growth segment, were $269.8 million, an increase of 14 percent over the prior year’s quarter, driven by growth of KRYSTEXXA and RAVICTI.
  • Fourth-quarter 2019 orphan and rheumatology segment operating income was $95.4 million, which includes the impact of investment in TEPEZZA pre-launch activities.
  • For the full-year 2019, KRYSTEXXA net sales of $342.4 million represented a 32 percent year-over-year increase, exceeding expectations.

 

Inflammation Segment

(in millions except for percentages)   Q4 19   Q4 18   %
Change
  FY 19   FY 18   %
Change
                         
PENNSAID 2%  

57.0

 

64.3

 

(11)

 

200.8

 

190.2

 

6

DUEXIS®  

26.3

 

34.0

 

(23)

 

115.7

 

114.7

 

1

VIMOVO®  

10.4

 

18.8

 

(45)

 

52.1

 

67.6

 

(23)

MIGERGOT®(1)  

-

 

0.8

 

NM

 

1.8

 

3.6

 

(49)

Inflammation Net Sales  

$ 93.7

 

$ 117.9

 

(21)

 

$ 370.4

 

$ 376.1

 

(2)

                         
Inflammation Segment Operating Income  

$ 44.0

 

$ 66.2

 

(33)

 

$ 174.9

 

$ 160.4

 

9

(1)

 

In June 2019, the Company divested the rights to MIGERGOT.

  • Fourth-quarter 2019 net sales of the inflammation segment were $93.7 million and segment operating income was $44.0 million.

Cash Flow Statement and Balance Sheet Highlights

  • On a GAAP basis, operating cash flow was $191.4 million in the fourth quarter of 2019 and $426.3 million for the full year of 2019. Non-GAAP operating cash flow was $192.0 million in the fourth quarter of 2019 and $446.4 million for the full year of 2019.
  • The Company had cash and cash equivalents of $1.076 billion as of Dec. 31, 2019.
  • As of Dec. 31, 2019, the total principal amount of debt outstanding was $1.418 billion, consisting of $418 million in senior secured term loans due 2026, $600 million of senior notes due 2027 and $400 million of exchangeable senior notes due 2022. As of Dec. 31, 2019, net debt was $341.7 million and the net-debt-to-last-12-months adjusted EBITDA leverage (net leverage) ratio was 0.7 times, compared to 2.3 times at Dec. 31, 2018.

2020 Guidance

The Company expects full‐year 2020 net sales to range between $1.40 billion and $1.42 billion, reflecting KRYSTEXXA full-year net sales growth of more than 25 percent and TEPEZZA full-year net sales of $30 million to $40 million. Full-year 2020 adjusted EBITDA is expected to range between $485 million and $500 million, reflecting significant investment in the U.S. launch of TEPEZZA and R&D pipeline programs to drive long-term growth.

Webcast

At 8 a.m. EST / 1 p.m. IST today, the Company will host a live webcast to review its financial and operating results and provide a general business update. The live webcast and a replay may be accessed at http://ir.horizontherapeutics.com. Please connect to the Company's website at least 15 minutes prior to the live webcast to ensure adequate time for any software download that may be needed to access the webcast. A replay of the webcast will be available approximately two hours after the live webcast.

About Horizon

Horizon is focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic diseases. Our pipeline is purposeful: we apply scientific expertise and courage to bring clinically meaningful therapies to patients. We believe science and compassion must work together to transform lives. For more information on how we go to incredible lengths to impact lives, please visit www.horizontherapeutics.com, follow us @HorizonNews on Twitter, like us on Facebook or explore career opportunities on LinkedIn.

Note Regarding Use of Non-GAAP Financial Measures

EBITDA, or earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA are used and provided by Horizon as non-GAAP financial measures. Horizon provides certain other financial measures such as non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP gross profit and gross profit ratio, non-GAAP operating expenses, non-GAAP operating income, non-GAAP tax rate, non-GAAP operating cash flow, net leverage ratio and net debt, each of which include adjustments to GAAP figures. These non-GAAP measures are intended to provide additional information on Horizon’s performance, operations, expenses, profitability and cash flows. Adjustments to Horizon’s GAAP figures as well as EBITDA exclude acquisition and/or divestiture-related expenses, charges related to the discontinuation of ACTIMMUNE development for Friedreich’s ataxia, gain or loss from sale of assets, upfront, progress and milestone payments related to license and collaboration agreements, litigation settlements, loss on debt extinguishment, costs of debt refinancing, drug manufacturing harmonization costs, restructuring and realignment costs, the income tax effect on pre-tax non-GAAP adjustments and other non-GAAP income tax adjustments, as well as non-cash items such as share-based compensation, depreciation and amortization, non-cash interest expense, long-lived asset impairment charges and other non-cash adjustments. Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred. Horizon maintains an established non-GAAP cost policy that guides the determination of what costs will be excluded in non-GAAP measures. Horizon believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon’s financial and operating performance. The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of the Company’s historical and expected 2020 financial results and trends and to facilitate comparisons between periods and with respect to projected information. In addition, these non-GAAP financial measures are among the indicators Horizon’s management uses for planning and forecasting purposes and measuring the Company's performance. For example, adjusted EBITDA is used by Horizon as one measure of management performance under certain incentive compensation arrangements. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies. Horizon has not provided a reconciliation of its full-year 2020 adjusted EBITDA outlook to an expected net income (loss) outlook because certain items such as acquisition/divestiture-related expenses and share-based compensation that are a component of net income (loss) cannot be reasonably projected due to the significant impact of changes in Horizon’s stock price, the variability associated with the size or timing of acquisitions/divestitures and other factors. These components of net income (loss) could significantly impact Horizon’s actual net income (loss).

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s full-year 2020 net sales and adjusted EBITDA guidance; expected financial performance and operating results in future periods, including potential growth in net sales of certain of Horizon’s medicines; development plans; expected timing of clinical trials, studies and regulatory submissions; potential market opportunity for and benefits of Horizon’s medicines and medicine candidates; and business and other statements that are not historical facts. These forward-looking statements are based on Horizon’s current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks that Horizon’s actual future financial and operating results may differ from its expectations or goals; Horizon’s ability to grow net sales from existing medicines; the availability of coverage and adequate reimbursement and pricing from government and third-party payers; risks relating to Horizon’s ability to successfully implement its business strategies; risks inherent in developing novel medicine candidates and existing medicines for new indications; risks associated with regulatory approvals; risks in the ability to recruit, train and retain qualified personnel; competition, including potential generic competition; the ability to protect intellectual property and defend patents; regulatory obligations and oversight, including any changes in the legal and regulatory environment in which Horizon operates and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in Horizon’s filings and reports with the SEC. Horizon undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information.

Contacts:

     

Investors:

 

U.S. Media:

Tina Ventura

 

Geoff Curtis

Senior Vice President,

 

Executive Vice President,

Investor Relations

 

Corporate Affairs & Chief Communications Officer

investor-relations@horizontherapeutics.com

 

media@horizontherapeutics.com

 

 

 

Ruth Venning

 

Ireland Media:

Executive Director,

 

Ray Gordon

Investor Relations

 

Gordon MRM

investor-relations@horizontherapeutics.com

 

ray@gordonmrm.ie

Horizon Therapeutics plc

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

         
   

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2019

 

2018

 

2019

 

2018

    (Unaudited)    
Net sales  

$

363,545

 

 

$

355,543

 

 

$

1,300,029

 

 

$

1,207,570

 

Cost of goods sold  

 

94,921

 

 

 

98,599

 

 

 

362,175

 

 

 

391,301

 

Gross profit  

 

268,624

 

 

 

256,944

 

 

 

937,854

 

 

 

816,269

 

                 
OPERATING EXPENSES:                
Research and development  

 

28,558

 

 

 

19,683

 

 

 

103,169

 

 

 

82,762

 

Selling, general and administrative  

 

185,391

 

 

 

174,628

 

 

 

697,111

 

 

 

692,485

 

(Gain)/Loss on sale of assets  

 

-

 

 

 

(30,682

)

 

 

10,963

 

 

 

(42,985

)

Impairment of long-lived assets  

 

-

 

 

 

10,847

 

 

 

-

 

 

 

46,096

 

Total operating expenses  

 

213,949

 

 

 

174,476

 

 

 

811,243

 

 

 

778,358

 

Operating income  

 

54,675

 

 

 

82,468

 

 

 

126,611

 

 

 

37,911

 

                 
OTHER EXPENSE, NET:                
Interest expense, net  

 

(17,098

)

 

 

(29,771

)

 

 

(87,089

)

 

 

(121,692

)

Loss on debt extinguishment  

 

-

 

 

 

-

 

 

 

(58,835

)

 

 

-

 

Foreign exchange gain (loss)  

 

58

 

 

 

(111

)

 

 

33

 

 

 

(192

)

Other (expense) income , net  

 

(751

)

 

 

8

 

 

 

(944

)

 

 

841

 

Total other expense, net  

 

(17,791

)

 

 

(29,874

)

 

 

(146,835

)

 

 

(121,043

)

                 
Income (Loss) before benefit for income taxes  

 

36,884

 

 

 

52,594

 

 

 

(20,224

)

 

 

(83,132

)

Benefit for income taxes  

 

(555,885

)

 

 

(49,054

)

 

 

(593,244

)

 

 

(44,752

)

Net income (loss)  

$

592,769

 

 

$

101,648

 

 

$

573,020

 

 

$

(38,380

)

                 
Earnings (Loss) per ordinary share - basic  

$

3.16

 

 

$

0.60

 

 

$

3.13

 

 

$

(0.23

)

                 
Weighted average ordinary shares outstanding - basic  

 

187,421,561

 

 

 

168,126,924

 

 

 

182,930,109

 

 

 

166,155,405

 

                 
Earnings (Loss) per ordinary share - diluted  

$

2.84

 

 

$

0.58

 

 

$

2.90

 

 

$

(0.23

)

                 
Weighted average ordinary shares outstanding - diluted  

 

210,953,579

 

 

 

174,230,711

 

 

 

205,224,221

 

 

 

166,155,405

 

 

Horizon Therapeutics plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

    As of
    December 31,
2019
  December 31,
2018
ASSETS    
CURRENT ASSETS:        
Cash and cash equivalents  

$

1,076,287

 

 

$

958,712

 

Restricted cash  

 

3,752

 

 

 

3,405

 

Accounts receivable, net  

 

408,685

 

 

 

464,730

 

Inventories, net  

 

53,802

 

 

 

50,751

 

Prepaid expenses and other current assets  

 

143,577

 

 

 

68,218

 

Total current assets  

 

1,686,103

 

 

 

1,545,816

 

Property and equipment, net  

 

30,159

 

 

 

20,101

 

Developed technology, net  

 

1,698,808

 

 

 

1,945,639

 

Other intangible assets, net  

 

3,820

 

 

 

4,630

 

Goodwill  

 

413,669

 

 

 

413,669

 

Deferred tax assets, net  

 

555,165

 

 

 

3,148

 

Other assets  

 

48,310

 

 

 

8,959

 

Total assets  

$

4,436,034

 

 

$

3,941,962

 

         
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES:        
Accounts payable  

$

21,514

 

 

$

30,284

 

Accrued expenses  

 

235,234

 

 

 

215,739

 

Accrued trade discounts and rebates  

 

466,421

 

 

 

457,763

 

Deferred revenues, current portion  

 

-

 

 

 

4,901

 

Total current liabilities  

 

723,169

 

 

 

708,687

 

         
LONG-TERM LIABILITIES:        
Exchangeable notes, net  

 

351,533

 

 

 

332,199

 

Long-term debt, net of current  

 

1,001,308

 

 

 

1,564,485

 

Deferred tax liabilities, net  

 

94,247

 

 

 

107,768

 

Other long-term liabilities  

 

80,328

 

 

 

38,717

 

Total long-term liabilities  

 

1,527,416

 

 

 

2,043,169

 

         
COMMITMENTS AND CONTINGENCIES        
SHAREHOLDERS' EQUITY:        
Ordinary shares, $0.0001 nominal value; 600,000,000 and 300,000,000 shares        
authorized at December 31, 2019 and December 31, 2018, respectively        
188,402,040 and 169,244,520 shares issued at December 31, 2019 and        
December 31, 2018, respectively, and 188,017,674 and 168,860,154 shares        
outstanding at December 31, 2019 and December 31, 2018, respectively  

 

19

 

 

 

17

 

Treasury stock, 384,366 ordinary shares at December 31, 2019 and December 31, 2018  

 

(4,585

)

 

 

(4,585

)

Additional paid-in capital  

 

2,797,602

 

 

 

2,374,966

 

Accumulated other comprehensive loss  

 

(1,905

)

 

 

(1,523

)

Accumulated deficit  

 

(605,682

)

 

 

(1,178,769

)

Total shareholders' equity  

 

2,185,449

 

 

 

1,190,106

 

Total liabilities and shareholders' equity  

$

4,436,034

 

 

$

3,941,962

 

 

Horizon Therapeutics plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

         
   

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2019

 

2018

 

2019

 

2018

    (Unaudited)    
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income (loss)  

$

592,769

 

 

$

101,648

 

 

$

573,020

 

 

$

(38,380

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization expense  

 

59,821

 

 

 

62,624

 

 

 

237,157

 

 

 

249,759

 

Equity-settled share-based compensation  

 

24,149

 

 

 

27,878

 

 

 

91,215

 

 

 

114,860

 

Impairment of long-lived assets  

 

-

 

 

 

10,847

 

 

 

-

 

 

 

46,096

 

Loss on debt extinguishment  

 

-

 

 

 

-

 

 

 

58,835

 

 

 

-

 

Amortization of debt discount and deferred financing costs  

 

5,533

 

 

 

5,872

 

 

 

22,602

 

 

 

22,751

 

(Gain)/Loss on sale of assets  

 

-

 

 

 

(30,682

)

 

 

10,963

 

 

 

(42,985

)

Deferred income taxes  

 

(573,840

)

 

 

(66,136

)

 

 

(565,537

)

 

 

(64,491

)

Foreign exchange and other adjustments  

 

2

 

 

 

92

 

 

 

574

 

 

 

332

 

Changes in operating assets and liabilities:                
Accounts receivable  

 

(11,996

)

 

 

(73,757

)

 

 

56,166

 

 

 

(59,697

)

Inventories  

 

4,737

 

 

 

2,378

 

 

 

(3,268

)

 

 

10,280

 

Prepaid expenses and other current assets  

 

(708

)

 

 

10,213

 

 

 

(72,763

)

 

 

(25,313

)

Accounts payable  

 

(5,385

)

 

 

(34,712

)

 

 

(8,723

)

 

 

(4,593

)

Accrued trade discounts and rebates  

 

61,832

 

 

 

98,136

 

 

 

8,591

 

 

 

(44,028

)

Accrued expenses  

 

30,379

 

 

 

5,202

 

 

 

19,788

 

 

 

40,787

 

Deferred revenues  

 

-

 

 

 

(1,858

)

 

 

(4,901

)

 

 

(395

)

Other non-current assets and liabilities  

 

4,087

 

 

 

(9,038

)

 

 

2,613

 

 

 

(10,440

)

Net cash provided by operating activities  

 

191,380

 

 

 

108,707

 

 

 

426,332

 

 

 

194,543

 

CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of property and equipment  

 

(6,532

)

 

 

(3,890

)

 

 

(17,857

)

 

 

(4,771

)

Change in escrow deposit for property purchase  

 

(6,000

)

 

 

-

 

 

 

(6,000

)

 

 

-

 

Proceeds from sale of assets  

 

-

 

 

 

35,000

 

 

 

6,000

 

 

 

44,424

 

Payment related to license agreement  

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,000

)

Net cash (used in) provided by investing activities  

 

(12,532

)

 

 

31,110

 

 

 

(17,857

)

 

 

27,653

 

CASH FLOWS FROM FINANCING ACTIVITIES:                
Net proceeds from issuance of senior notes  

 

-

 

 

 

-

 

 

 

590,057

 

 

 

-

 

Repayment of senior notes  

 

-

 

 

 

-

 

 

 

(814,420

)

 

 

-

 

Net proceeds from the issuance of ordinary shares  

 

-

 

 

 

-

 

 

 

326,793

 

 

 

-

 

Repayment of term loans  

 

(418,026

)

 

 

(818,026

)

 

 

(1,336,207

)

 

 

(845,749

)

Net proceeds from term loans  

 

418,026

 

 

 

818,026

 

 

 

935,404

 

 

 

818,026

 

Contingent consideration proceeds from divestiture  

 

-

 

 

 

-

 

 

 

3,297

 

 

 

-

 

Proceeds from the issuance of ordinary shares in conjunction with ESPP program  

 

5,849

 

 

 

3,900

 

 

 

11,317

 

 

 

8,610

 

Proceeds from the issuance of ordinary shares in connection with stock option exercises  

 

8,646

 

 

 

7,219

 

 

 

24,882

 

 

 

16,972

 

Payment of employee withholding taxes relating to share-based awards  

 

(2,109

)

 

 

(1,573

)

 

 

(31,569

)

 

 

(14,455

)

Net cash provided by (used in) financing activities  

 

12,386

 

 

 

9,546

 

 

 

(290,446

)

 

 

(16,596

)

                 
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash  

 

1,095

 

 

 

(692

)

 

 

(107

)

 

 

(1,380

)

                 
Net increase in cash, cash equivalents and restricted cash  

 

192,329

 

 

 

148,671

 

 

 

117,922

 

 

 

204,220

 

Cash, cash equivalents and restricted cash, beginning of the period(1)  

 

887,710

 

 

 

813,446

 

 

 

962,117

 

 

 

757,897

 

Cash, cash equivalents and restricted cash, end of the period(1)  

$

1,080,039

 

 

$

962,117

 

 

$

1,080,039

 

 

$

962,117

 

                 
(1) Amounts include restricted cash balance in accordance with ASU No. 2016-18. Cash and cash equivalents excluding restricted cash are shown on the balance sheet.
 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Net Income and Earnings Per Share (Unaudited)

(in thousands, except share and per share data)

 
   

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2019

 

2018

 

2019

 

2018

                 
GAAP net income (loss)  

$

592,769

 

 

$

101,648

 

 

$

573,020

 

 

$

(38,380

)

Non-GAAP adjustments:                
Acquisition/divestiture-related costs  

 

942

 

 

 

(1,710

)

 

 

3,556

 

 

 

4,396

 

Restructuring and realignment costs  

 

204

 

 

 

462

 

 

 

237

 

 

 

15,350

 

Amortization and step-up:                
Intangible amortization expense  

 

57,662

 

 

 

61,125

 

 

 

230,424

 

 

 

243,634

 

Inventory step-up expense  

 

-

 

 

 

99

 

 

 

89

 

 

 

17,312

 

Amortization of debt discount and deferred financing costs  

 

5,533

 

 

 

5,872

 

 

 

22,602

 

 

 

22,752

 

Impairment of long-lived assets  

 

-

 

 

 

10,847

 

 

 

-

 

 

 

46,096

 

(Gain)/Loss on sale of assets  

 

-

 

 

 

(30,682

)

 

 

10,963

 

 

 

(42,985

)

Share-based compensation  

 

24,149

 

 

 

27,878

 

 

 

91,215

 

 

 

114,860

 

Depreciation  

 

2,159

 

 

 

1,499

 

 

 

6,733

 

 

 

6,126

 

Litigation settlements  

 

-

 

 

 

-

 

 

 

1,000

 

 

 

5,750

 

Upfront, progress and milestone payments related to                
license and collaboration agreements  

 

-

 

 

 

-

 

 

 

9,073

 

 

 

(10

)

Fees related to refinancing activities  

 

855

 

 

 

854

 

 

 

2,292

 

 

 

937

 

Loss on debt extinguishment  

 

-

 

 

 

-

 

 

 

58,835

 

 

 

-

 

Drug substance harmonization costs  

 

63

 

 

 

1,275

 

 

 

457

 

 

 

2,855

 

Charges relating to discontinuation of Friedreich's ataxia program  

 

(145

)

 

 

(2,940

)

 

 

1,076

 

 

 

(1,464

)

Total of pre-tax non-GAAP adjustments  

 

91,422

 

 

 

74,579

 

 

 

438,552

 

 

 

435,609

 

Income tax effect of pre-tax non-GAAP adjustments  

 

(14,277

)

 

 

(57,961

)

 

 

(66,568

)

 

 

(45,186

)

Other non-GAAP income tax adjustments  

 

(553,334

)

 

 

(1,499

)

 

 

(554,786

)

 

 

(37,392

)

Total of non-GAAP adjustments  

 

(476,189

)

 

 

15,119

 

 

 

(182,802

)

 

 

353,031

 

Non-GAAP Net Income  

$

116,580

 

 

$

116,767

 

 

$

390,218

 

 

$

314,651

 

                 
Non-GAAP Earnings Per Share:                
                 
Weighted average ordinary shares - Basic  

 

187,421,561

 

 

 

168,126,924

 

 

 

182,930,109

 

 

 

166,155,405

 

                 
Non-GAAP Earnings Per Share - Basic:                
GAAP earnings (loss) per share - Basic  

$

3.16

 

 

$

0.60

 

 

$

3.13

 

 

$

(0.23

)

Non-GAAP adjustments  

 

(2.54

)

 

 

0.09

 

 

 

(1.00

)

 

 

2.12

 

Non-GAAP earnings per share - Basic  

$

0.62

 

 

$

0.69

 

 

$

2.13

 

 

$

1.89

 

                 
Non-GAAP Net Income  

$

116,580

 

 

$

116,767

 

 

$

390,218

 

 

$

314,651

 

Effect of assumed conversion of Exchangeable Senior Notes, net of tax  

 

1,875

 

 

 

-

 

 

 

7,500

 

 

 

-

 

Numerator - non-GAAP Net Income  

$

118,455

 

 

$

116,767

 

 

$

397,718

 

 

$

314,651

 

                 
Weighted average ordinary shares - Diluted                
Weighted average ordinary shares - Basic  

 

187,421,561

 

 

 

168,126,924

 

 

 

182,930,109

 

 

 

166,155,405

 

Ordinary share equivalents  

 

23,532,018

 

 

 

6,103,787

 

 

 

22,294,112

 

 

 

5,393,514

 

Denominator - Weighted average ordinary shares - Diluted  

 

210,953,579

 

 

 

174,230,711

 

 

 

205,224,221

 

 

 

171,548,919

 

                 
Non-GAAP Earnings Per Share - Diluted                
GAAP earnings (loss) per share - Diluted  

$

2.84

 

 

$

0.58

 

 

$

2.90

 

 

$

(0.23

)

Non-GAAP adjustments  

 

(2.28

)

 

 

0.09

 

 

 

(0.96

)

 

 

2.12

 

Diluted earnings per share effect of ordinary share equivalents  

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.06

)

Non-GAAP earnings per share - Diluted  

$

0.56

 

 

$

0.67

 

 

$

1.94

 

 

$

1.83

 

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited)

(in thousands)

         
   

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2019

 

2018

 

2019

 

2018

                 
GAAP net income (loss)  

$

592,769

 

 

$

101,648

 

 

$

573,020

 

 

$

(38,380

)

Depreciation  

 

2,159

 

 

 

1,499

 

 

 

6,733

 

 

 

6,126

 

Amortization and step-up:                
Intangible amortization expense  

 

57,662

 

 

 

61,125

 

 

 

230,424

 

 

 

243,634

 

Amortization of deferred revenue  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Inventory step-up expense  

 

-

 

 

 

99

 

 

 

89

 

 

 

17,312

 

Interest expense, net (including amortization of                
debt discount and deferred financing costs)  

 

17,098

 

 

 

29,771

 

 

 

87,089

 

 

 

121,692

 

Benefit for income taxes  

 

(555,885

)

 

 

(49,054

)

 

 

(593,244

)

 

 

(44,752

)

EBITDA  

$

113,803

 

 

$

145,088

 

 

$

304,111

 

 

$

305,632

 

Other non-GAAP adjustments:                
Acquisition/divestiture-related costs  

 

942

 

 

 

(1,710

)

 

 

3,556

 

 

 

4,396

 

Restructuring and realignment costs  

 

204

 

 

 

462

 

 

 

237

 

 

 

15,350

 

Impairment of long-lived assets  

 

-

 

 

 

10,847

 

 

 

-

 

 

 

46,096

 

(Gain)/Loss on sale of assets  

 

-

 

 

 

(30,682

)

 

 

10,963

 

 

 

(42,985

)

Share-based compensation  

 

24,149

 

 

 

27,878

 

 

 

91,215

 

 

 

114,860

 

Litigation settlements  

 

-

 

 

 

-

 

 

 

1,000

 

 

 

5,750

 

Upfront, progress and milestone payments related to                
license and collaboration agreements  

 

-

 

 

 

-

 

 

 

9,073

 

 

 

(10

)

Fees related to refinancing activities  

 

855

 

 

 

854

 

 

 

2,292

 

 

 

937

 

Loss on debt extinguishment  

 

-

 

 

 

-

 

 

 

58,835

 

 

 

-

 

Drug substance harmonization costs  

 

63

 

 

 

1,275

 

 

 

457

 

 

 

2,855

 

Charges relating to discontinuation of Friedreich's ataxia program  

 

(145

)

 

 

(2,940

)

 

 

1,076

 

 

 

(1,464

)

Total of other non-GAAP adjustments  

 

26,068

 

 

 

5,984

 

 

 

178,704

 

 

 

145,785

 

Adjusted EBITDA  

$

139,871

 

 

$

151,072

 

 

$

482,815

 

 

$

451,417

 

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Operating Income (Unaudited)

(in thousands)

 
   

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2019

 

2018

 

2019

 

2018

             
                 
GAAP operating income  

$

54,675

 

 

$

82,468

 

 

$

126,611

 

$

37,911

 

Non-GAAP adjustments:                
Acquisition/divestiture-related costs  

 

(200

)

 

 

(1,972

)

 

 

1,032

 

 

3,989

 

Restructuring and realignment costs  

 

204

 

 

 

462

 

 

 

237

 

 

15,350

 

Amortization and step-up:                
Intangible amortization expense  

 

57,662

 

 

 

61,125

 

 

 

230,424

 

 

243,634

 

Inventory step-up expense  

 

-

 

 

 

99

 

 

 

89

 

 

17,312

 

Impairment of long-lived assets  

 

-

 

 

 

10,847

 

 

 

-

 

 

46,096

 

(Gain)/Loss on sale of assets  

 

-

 

 

 

(30,682

)

 

 

10,963

 

 

(42,985

)

Share-based compensation  

 

24,149

 

 

 

27,878

 

 

 

91,215

 

 

114,860

 

Depreciation  

 

2,159

 

 

 

1,499

 

 

 

6,733

 

 

6,126

 

Litigation settlements  

 

-

 

 

 

-

 

 

 

1,000

 

 

5,750

 

Upfront, progress and milestone payments related to                
license and collaboration agreements  

 

-

 

 

 

-

 

 

 

9,073

 

 

90

 

Fees related to refinancing activities  

 

855

 

 

 

854

 

 

 

2,292

 

 

937

 

Drug substance harmonization costs  

 

63

 

 

 

1,275

 

 

 

457

 

 

2,855

 

Charges relating to discontinuation of Friedreich's ataxia program  

 

(145

)

 

 

(2,940

)

 

 

1,076

 

 

(1,464

)

Total of non-GAAP adjustments  

 

84,747

 

 

 

68,445

 

 

 

354,591

 

 

412,550

 

Non-GAAP operating income  

$

139,422

 

 

$

150,913

 

 

$

481,202

 

$

450,461

 

                 
Orphan and Rheumatology segment operating income  

 

95,388

 

 

 

84,761

 

 

 

306,333

 

 

290,014

 

Inflammation segment operating income  

 

44,034

 

 

 

66,152

 

 

 

174,869

 

 

160,447

 

Total segment operating income  

$

139,422

 

 

$

150,913

 

 

$

481,202

 

$

450,461

 

                 
Foreign exchange (loss)/gain  

 

58

 

 

 

(111

)

 

 

33

 

 

(192

)

Other income, net  

 

391

 

 

 

270

 

 

 

1,580

 

 

1,148

 

Adjusted EBITDA  

$

139,871

 

 

$

151,072

 

 

$

482,815

 

$

451,417

 

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Gross Profit and Operating Cash Flow (Unaudited)

(in thousands, except percentages)

         
   

Three Months Ended December 31,

 

Twelve Months Ended December 31,

   

2019

 

2018

 

2019

 

2018

             
Non-GAAP Gross Profit:                
                 
GAAP gross profit  

$

268,624

 

 

$

256,944

 

 

$

937,854

 

 

$

816,269

 

Non-GAAP gross profit adjustments:                
Acquisition/divestiture-related costs  

 

-

 

 

 

(728

)

 

 

1,115

 

 

 

(900

)

Intangible amortization expense  

 

57,458

 

 

 

60,921

 

 

 

229,614

 

 

 

242,823

 

Inventory step-up expense  

 

-

 

 

 

99

 

 

 

89

 

 

 

17,312

 

Share-based compensation  

 

927

 

 

 

932

 

 

 

3,818

 

 

 

3,699

 

Depreciation  

 

155

 

 

 

171

 

 

 

630

 

 

 

700

 

Drug substance harmonization costs  

 

63

 

 

 

1,275

 

 

 

457

 

 

 

2,855

 

Charges relating to discontinuation of Friedreich's ataxia program  

 

(145

)

 

 

(2,940

)

 

 

1,076

 

 

 

(1,551

)

Total of Non-GAAP adjustments  

 

58,458

 

 

 

59,730

 

 

 

236,799

 

 

 

264,938

 

Non-GAAP gross profit  

$

327,082

 

 

$

316,674

 

 

$

1,174,653

 

 

$

1,081,207

 

                 
GAAP gross profit %  

 

73.9

%

 

 

72.3

%

 

 

72.1

%

 

 

67.6

%

Non-GAAP gross profit %  

 

90.0

%

 

 

89.1

%

 

 

90.4

%

 

 

89.5

%

                 
                 
                 
GAAP cash provided by operating activities  

$

191,380

 

 

$

108,707

 

 

$

426,332

 

 

$

194,543

 

Cash payments for acquisition/divestiture-related costs  

 

-

 

 

 

1,065

 

 

 

583

 

 

 

8,918

 

Cash payments for restructuring and realignment costs  

 

200

 

 

 

2,767

 

 

 

3,464

 

 

 

11,801

 

Cash payments for litigation settlements  

 

-

 

 

 

-

 

 

 

1,000

 

 

 

5,750

 

Cash payments for upfront, progress and milestone payments related to                
license and collaboration agreement  

 

-

 

 

 

-

 

 

 

9,073

 

 

 

175

 

Cash payments drug substance harmonization costs  

 

67

 

 

 

1,718

 

 

 

1,052

 

 

 

7,661

 

Cash payments for discontinuation of Friedreich's ataxia program  

 

-

 

 

 

-

 

 

 

2,589

 

 

 

3,399

 

Cash payments relating to refinancing activities  

 

369

 

 

 

883

 

 

 

2,287

 

 

 

941

 

Non-GAAP operating cash flow  

$

192,016

 

 

$

115,140

 

 

$

446,380

 

 

$

233,188

 

 

Horizon Therapeutics plc

Net Debt Reconciliation (Unaudited)

(in thousands)

 
    As of
    December 31,
2019
  December 31,
2018
         
Long-term debt, net of current  

$

1,001,308

 

$

1,564,485

Exchangeable notes, net  

 

351,533

 

 

332,199

Total Debt  

 

1,352,841

 

 

1,896,684

Debt discount  

 

59,922

 

 

87,038

Deferred financing fees  

 

5,263

 

 

9,304

Total Principal Amount of Debt  

 

1,418,026

 

 

1,993,026

         
Less: cash and cash equivalents  

 

1,076,287

 

 

958,712

Net Debt  

$

341,739

 

$

1,034,314

 

Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

     
    Q4 2019
   

Pre-tax Net
(Loss) Income

 

Income Tax
(Benefit) Expense

 

Tax Rate

 

Net Income
(Loss)

 

Diluted Earnings
(Loss) Per Share

As reported - GAAP  

$

36.9

 

 

$

(555.9

)

 

(1507.0

)%

 

$

592.8

 

 

$

2.84

 

Non-GAAP adjustments  

 

91.4

 

 

 

567.6

 

     

 

(476.2

)

   
Non-GAAP  

$

128.3

 

 

$

11.7

 

 

9.1

%

 

$

116.6

 

 

$

0.56

 

                     
                     
    Q4 2018
   

Pre-tax Net
(Loss) Income

 

Income Tax
(Benefit) Expense

 

Tax Rate

 

Net Income
(Loss)

 

Diluted Earnings
(Loss) Per Share

As reported - GAAP  

$

52.6

 

 

$

(49.1

)

 

(93.3

)%

 

$

101.7

 

 

$

0.58

 

Non-GAAP adjustments  

 

74.6

 

 

 

59.5

 

     

 

15.1

 

   
Non-GAAP  

$

127.2

 

 

$

10.4

 

 

8.2

%

 

$

116.8

 

 

$

0.67

 

                     
                     
    FY 2019
   

Pre-tax Net
(Loss) Income

 

Income Tax
(Benefit) Expense

 

Tax Rate

 

Net Income
(Loss)

 

Diluted Earnings
(Loss) Per Share

As reported - GAAP  

$

(20.2

)

 

$

(593.2

)

 

2933.0

%

 

$

573.0

 

 

$

2.90

 

Non-GAAP adjustments  

 

438.6

 

 

 

621.4

 

     

 

(182.8

)

   
Non-GAAP  

$

418.3

 

 

$

28.2

 

 

6.7

%

 

$

390.2

 

 

$

1.94

 

                     
                     
    FY 2018
   

Pre-tax Net
(Loss) Income

 

Income Tax
(Benefit) Expense

 

Tax Rate

 

Net Income
(Loss)

 

Diluted Earnings
(Loss) Per Share

As reported - GAAP  

$

(83.1

)

 

$

(44.8

)

 

53.8

%

 

$

(38.3

)

 

$

(0.23

)

Non-GAAP adjustments  

 

435.6

 

 

 

82.6

 

     

 

353.0

 

   
Non-GAAP  

$

352.5

 

 

$

37.8

 

 

10.7

%

 

$

314.7

 

 

$

1.83

 

 

Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended December 31, 2019

(Unaudited)

                                 
                                 
    COGS   Research &
Development
  Selling, General
& Administrative
  Loss on Debt
Extinguishment
  Interest
Expense
  Other
Expense
  Income Tax
Benefit
(Expense)
   
                                 
GAAP as reported  

$

(94,921

)

 

$

(28,558

)

 

$

(185,391

)

 

$

-

 

 

$

(17,098

)

 

$

(751

)

 

$

555,885

 

   
                                 
Non-GAAP Adjustments (in thousands):                                
                                 
Acquisition/divestiture-related costs(1)  

 

-

 

 

 

(184

)

 

 

(19

)

 

 

-

 

 

 

-

 

 

 

1,145

 

 

 

-

 

   
Restructuring and realignment costs(2)  

 

-

 

 

 

-

 

 

 

204

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Amortization and step-up:                                
Intangible amortization expense(3)  

 

57,458

 

 

 

-

 

 

 

204

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Amortization of debt discount and deferred financing costs(4)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,533

 

 

 

-

 

 

 

-

 

   
Share-based compensation(5)  

 

927

 

 

 

2,186

 

 

 

21,036

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Depreciation(6)  

 

155

 

 

 

13

 

 

 

1,991

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Fees related to refinancing activities (7)  

 

-

 

 

 

-

 

 

 

855

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Drug substance harmonization costs(8)  

 

63

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Charges relating to discontinuation of Friedreich's ataxia program(9)  

 

(145

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

   
Income tax effect on pre-tax non-GAAP adjustments(10)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,277

)

   
Other non-GAAP income tax adjustments(11)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(553,334

)

   

Total of non-GAAP adjustments

 

 

58,458

 

 

 

2,015

 

 

 

24,271

 

 

 

-

 

 

 

5,533

 

 

 

1,145

 

 

 

(567,611

)

   
                                 
Non-GAAP  

$

(36,463

)

 

$

(26,543

)

 

$

(161,120

)

 

$

-

 

 

$

(11,565

)

 

$

394

 

 

$

(11,726

)

   
                                 
    Horizon Therapeutics plc    
    Certain Income Statement Line Items - Non-GAAP Adjusted    
    For the Three Months Ended December 31, 2018    
    (Unaudited)    
                                 
                                 
    COGS

 

Research &
Development
  Selling, General
& Administrative
  Impairment of
Long-Lived Assets
  Loss/(Gain) on
Sale of Assets
  Interest
Expense
  Other
Income, net
  Income Tax
Benefit
(Expense)
                                 
GAAP as reported  

$

(98,599

)

 

$

(19,683

)

 

$

(174,628

)

 

$

(10,847

)

 

$

30,682

 

 

$

(29,771

)

 

$

8

 

 

$

49,054

 

                                 
Non-GAAP Adjustments (in thousands):                                
                                 
Acquisition/divestiture-related costs(1)  

 

(728

)

 

 

(1,206

)

 

 

(38

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

262

 

 

 

-

 

Restructuring and realignment costs(2)  

 

-

 

 

 

-

 

 

 

462

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization and step-up:                                
Intangible amortization expense(3)  

 

60,921

 

 

 

-

 

 

 

204

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Inventory step-up expense(12)  

 

99

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of debt discount and deferred financing costs(4)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,872

 

     

 

-

 

Impairment of long lived assets(13)  

 

-

 

 

 

-

 

 

 

-

 

 

 

10,847

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

(Gain)/Loss on sale of assets(14)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(30,682

)

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation(5)  

 

932

 

 

 

2,182

 

 

 

24,764

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Depreciation(6)  

 

171

 

 

 

-

 

 

 

1,328

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Fees related to refinancing activities (7)  

 

-

 

 

 

-

 

 

 

854

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Drug substance harmonization costs(8)  

 

1,275

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Charges relating to discontinuation of Friedreich's ataxia program(9)  

 

(2,940

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(57,961

)

Other non-GAAP income tax adjustments(11)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,499

)

Total of non-GAAP adjustments  

 

59,730

 

 

 

976

 

 

 

27,574

 

 

 

10,847

 

 

 

(30,682

)

 

 

5,872

 

 

 

262

 

 

 

(59,460

)

                                 
Non-GAAP  

$

(38,869

)

 

$

(18,707

)

 

$

(147,054

)

 

 

-

 

 

 

-

 

 

$

(23,899

)

 

$

270

 

 

$

(10,406

)

 

Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Twelve Months Ended December 31, 2019

(Unaudited)

                                 
                                 
    COGS   Research &
Development
  Selling, General
& Administrative
  Loss/(Gain) on
Sale of Assets
  Interest
Expense
  Other
Expense
  Loss on Debt
Extinguishment
  Income Tax
Benefit
(Expense)
                                 
GAAP as reported  

$

(362,175

)

 

$

(103,169

)

 

$

(697,111

)

 

$

(10,963

)

 

$

(87,089

)

 

$

(944

)

 

$

(58,835

)

 

$

593,244

 

                                 
Non-GAAP Adjustments (in thousands):                                
                                 
Acquisition/divestiture-related costs(1)  

 

1,115

 

 

 

(184

)

 

 

101

 

 

 

-

 

 

 

-

 

 

 

2,524

 

 

 

-

 

 

 

-

 

Restructuring and realignment costs(2)  

 

-

 

 

 

-

 

 

 

237

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization and step-up:                                
Intangible amortization expense(3)  

 

229,614

 

 

 

-

 

 

 

810

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Inventory step-up expense(12)  

 

89

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of debt discount and deferred financing costs(4)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,602

 

 

 

-

 

 

 

-

 

 

 

-

 

(Gain)/Loss on sale of assets(14)  

 

-

 

 

 

-

 

 

 

-

 

 

 

10,963

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation(5)  

 

3,818

 

 

 

9,117

 

 

 

78,280

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Depreciation(6)  

 

630

 

 

 

13

 

 

 

6,090

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Litigation settlements(15)  

 

-

 

 

 

-

 

 

 

1,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Upfront, progress and milestone payments related to license                                
and collaboration agreements(16)  

 

-

 

 

 

9,073

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Fees related to refinancing activities (7)  

 

-

 

 

 

-

 

 

 

2,292

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Loss on debt extinguishment(17)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

58,835

 

 

 

-

 

Drug substance harmonization costs(8)  

 

457

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Charges relating to discontinuation of Friedreich's ataxia program(9)  

 

1,076

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(66,568

)

Other non-GAAP income tax adjustments(11)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(554,786

)

Total of non-GAAP adjustments  

 

236,799

 

 

 

18,019

 

 

 

88,810

 

 

 

10,963

 

 

 

22,602

 

 

 

2,524

 

 

 

58,835

 

 

 

(621,354

)

                                 
Non-GAAP  

$

(125,376

)

 

$

(85,150

)

 

$

(608,301

)

 

$

-

 

 

$

(64,487

)

 

$

1,580

 

 

$

-

 

 

$

(28,110

)

                                 
    Horizon Therapeutics plc        
    Certain Income Statement Line Items - Non-GAAP Adjusted        
    For the Twelve Months Ended December 31, 2018        
    (Unaudited)        
                                 
                                 
    COGS   Research &
Development
  Selling, General
& Administrative
  Impairment of
Long-Lived Assets
  Loss/(Gain) on
Sale of Assets
  Interest
Expense
  Other
Income
  Income Tax
Benefit
(Expense)
                                 
GAAP as reported  

$

(391,301

)

 

$

(82,762

)

 

$

(692,485

)

 

$

(46,096

)

 

$

42,985

 

 

$

(121,692

)

 

 

841

 

 

$

44,752

 

                                 
Non-GAAP Adjustments (in thousands):                                
                                 
Acquisition/divestiture-related costs(1)  

 

(900

)

 

 

459

 

 

 

4,430

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

407

 

 

 

-

 

Restructuring and realignment costs(2)          

 

15,350

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization and step-up:                                
Intangible amortization expense(3)  

 

242,823

 

 

 

-

 

 

 

811

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Inventory step-up expense(12)  

 

17,312

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Amortization of debt discount and deferred financing costs(4)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

22,752

 

     

 

-

 

Impairment of long lived assets(13)  

 

-

 

 

 

-

 

 

 

-

 

 

 

46,096

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

(Gain)/Loss on sale of assets(14)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(42,985

)

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation(5)  

 

3,699

 

 

 

8,880

 

 

 

102,281

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Depreciation(6)  

 

700

 

 

 

-

 

 

 

5,426

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Litigation settlements(15)  

 

-

 

 

 

-

 

 

 

5,750

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Upfront, progress and milestone payments related to license                                
and collaboration agreements(16)  

 

-

 

 

 

90

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(100

)

 

 

-

 

Fees related to refinancing activities (7)  

 

-

 

 

 

-

 

 

 

937

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Drug substance harmonization costs(8)  

 

2,855

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Charges relating to discontinuation of Friedreich's ataxia program(9)  

 

(1,551

)

 

 

87

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(45,186

)

Other non-GAAP income tax adjustments(11)  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(37,392

)

Total of non-GAAP adjustments  

 

264,938

 

 

 

9,516

 

 

 

134,985

 

 

 

46,096

 

 

 

(42,985

)

 

 

22,752

 

 

 

307

 

 

 

(82,578

)

                                 
Non-GAAP  

$

(126,363

)

 

$

(73,246

)

 

$

(557,500

)

 

$

-

 

 

$

-

 

 

$

(98,940

)

 

$

1,148

 

 

$

(37,826

)

NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS - NON-GAAP

  1. Represents expenses, including legal and consulting fees, incurred in connection with our acquisitions and divestitures. Costs recovered from subleases of acquired facilities and reimbursed expenses incurred under transition arrangements for divestitures are also reflected in this line item.
     
  2. Represents expenses, including severance costs and consulting fees, related to restructuring and realignment activities.
     
  3. Intangible amortization expenses are associated with our intellectual property rights, developed technology and customer relationships related to KRYSTEXXA, RAVICTI, PROCYSBI, ACTIMMUNE, RAYOS, BUPHENYL, LODOTRA, PENNSAID 2%, VIMOVO and MIGERGOT.
     
  4. Represents amortization of debt discount and deferred financing costs associated with our debt.
     
  5. Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employee directors and our employee share purchase plan.
     
  6. Represents depreciation expense related to our property, equipment, software and leasehold improvements.
     
  7. Represents arrangement and other fees relating to our refinancing activities.
     
  8. During the year ended December 31, 2016, we entered into a definitive agreement to acquire certain rights to interferon gamma-1b, marketed as IMUKIN in an estimated thirty countries primarily in Europe and the Middle East, or the IMUKIN purchase agreement. We already owned the rights to interferon gamma-1b marketed as ACTIMMUNE in the United States, Canada and Japan. In connection with the IMUKIN purchase agreement, we also committed to pay our contract manufacturer certain amounts related to the harmonization of the manufacturing processes for ACTIMMUNE and IMUKIN drug substance, or the harmonization program. At the time we entered into the IMUKIN purchase agreement and the harmonization program commitment was made, we had anticipated achieving certain benefits should the Phase 3 clinical trial evaluating ACTIMMUNE for the treatment of Friedreich’s ataxia, or FA, be successful. If the trial had been successful and if U.S. marketing approval had subsequently been obtained, we had forecasted significant increases in demand for the medicine and the harmonization program would have resulted in significant benefits for us. Following our discontinuation of the FA program, we determined that certain assets, including an upfront payment related to the IMUKIN purchase agreement, were impaired, and the costs under the harmonization program would no longer have benefit to us and should be expensed as incurred.
     
  9. During the year ended December 31, 2019, we recorded charges related to the FA discontinuation of $1.1 million, primarily due to the remeasurement of an inventory purchase commitment liability. During the year ended December 31, 2018, we recorded a reduction to previously incurred charges relating to the FA discontinuation of $1.5 million reflecting lower costs to discontinue the clinical trial than previously anticipated.
     
  10. Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the statutory income tax rate of the applicable jurisdictions for each non-GAAP adjustment.
     
  11. Other non-GAAP income tax adjustments during the year ended December 31, 2019, primarily reflect a tax benefit of $553.3 million resulting from an intra-company transfer of intellectual property assets to an Irish subsidiary.

    Other non-GAAP income tax adjustments during the year ended December 31, 2018, reflect the impact of the deferred tax asset reinstatement in accordance with SAB 118, that was a $37.4 million increase to our benefit for income taxes and a corresponding decrease to the U.S. group net deferred tax liability position. Following Notice 2018-28 that was issued by the U.S. Treasury Department and the U.S. Internal Revenue Service during the year ended December 31, 2018 and in accordance with the measurement period provisions under SAB 118, we reinstated the deferred tax asset related to our U.S. interest expense carry forwards under Section 163(j) of the Internal Revenue Code based on the revised U.S. federal tax rate of 21 percent.
     
  12. During the year ended December 31, 2018, we recognized in cost of goods sold $17.3 million for inventory step-up expense primarily related to KRYSTEXXA inventory sold.
     
  13. Impairment of long-lived assets during the year ended December 31, 2018, primarily relates to the write-off of the book value of developed technology related to PROCYSBI in Canada and Latin America and LODOTRA.
     
  14. During the year ended December 31, 2019, we recorded a loss of $11.0 million on the sale of our rights to MIGERGOT.

    During the year ended December 31, 2018, we completed the IMUKIN sale for cash proceeds of $9.5 million, with a potential additional contingent consideration payment and we recorded a gain of $12.3 million on the sale. The contingent consideration payment of €3.0 million ($3.3 million when converted using a Euro-to-Dollar exchange rate at the date of receipt of 1.0991) was received in September 2019. Additionally, during the year ended December 31, 2018, we sold our rights to RAVICTI and AMMONAPS outside of North America and Japan to Medical Need Europe AB, and we recorded a gain of $30.7 million.
     
  15. We recorded $1.0 million and $5.8 million of expense during the years ended December 31, 2019 and 2018, respectively, for litigation settlements.
     
  16. During the year ended December 31, 2019, we recorded upfront, progress and milestone payments related to license and collaboration agreements of $9.1 million which was composed of a $3.0 million milestone payment to Roche relating to the TEPEZZA BLA submission to the FDA during the third quarter of 2019, and an upfront cash payment of $2.0 million and a progress payment of $4.0 million in relation to the collaboration agreement with HemoShear.
     
  17. During the year ended December 31, 2019, we recorded a loss on debt extinguishment of $58.8 million in the consolidated statements of comprehensive income (loss), which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $775.0 million of our 2023 Senior Notes and 2024 Senior Notes and the write-off of the deferred financing fees and debt discount fees related to the $400.0 million of term loan repayments.

 

Investors:
Tina Ventura
Senior Vice President,
Investor Relations
investor-relations@horizontherapeutics.com

Ruth Venning
Executive Director,
Investor Relations
investor-relations@horizontherapeutics.com

U.S. Media:
Geoff Curtis
Executive Vice President,
Corporate Affairs & Chief Communications Officer
media@horizontherapeutics.com

Ireland Media:
Ray Gordon
Gordon MRM
ray@gordonmrm.ie

Source: Horizon Therapeutics plc

Investors:
Tina Ventura
Senior Vice President,
Investor Relations
investor-relations@horizontherapeutics.com

Ruth Venning
Executive Director,
Investor Relations
investor-relations@horizontherapeutics.com

U.S. Media:
Geoff Curtis
Executive Vice President,
Corporate Affairs & Chief Communications Officer
media@horizontherapeutics.com

Ireland Media:
Ray Gordon
Gordon MRM
ray@gordonmrm.ie