Horizon Therapeutics plc Reports Strong Second-Quarter 2019 Results; Increases Full‐Year 2019 Net Sales and Adjusted EBITDA Guidance

Horizon Therapeutics plc Reports Strong Second-Quarter 2019 Results; Increases Full‐Year 2019 Net Sales and Adjusted EBITDA Guidance

08/07/19

-- Second-Quarter 2019 Net Sales of $320.6 Million Increased 6 Percent;
Second-Quarter 2019 GAAP Net Loss of $5.1 Million; Adjusted EBITDA of $124.1 Million --

-- Quarterly Orphan and Rheumatology Segment Net Sales Increased 11 Percent to $223.5 Million;
KRYSTEXXA® Second-Quarter 2019 Net Sales Growth of 36 Percent --

-- Increasing Full-Year 2019 Net Sales Guidance Range to $1.28 Billion to $1.30 Billion and
Adjusted EBITDA Guidance Range to $460 Million to $475 Million;
KRYSTEXXA Full-Year 2019 Net Sales Growth Expected to Be Greater Than 20 Percent --

-- Submitted Teprotumumab U.S. Biologics License Application (BLA)
for the Treatment of Active Thyroid Eye Disease (TED) --

-- Initiated Registrational Clinical Trial MIRROR, Evaluating KRYSTEXXA in Combination with Methotrexate to Potentially Improve Patient Response --

-- Cash Position of $866 Million; Net Leverage of 1.1 Times as of June 30, 2019 --

DUBLIN--(BUSINESS WIRE)--Aug. 7, 2019-- Horizon Therapeutics plc (Nasdaq: HZNP) today announced its second-quarter 2019 financial results and increased its full-year 2019 net sales and adjusted EBITDA guidance.

“The second quarter was another quarter of outstanding execution and strategic progress,” said Timothy Walbert, chairman, president and chief executive officer, Horizon. “We generated double-digit net sales growth in our orphan and rheumatology segment, driven by continued momentum from KRYSTEXXA, our medicine for uncontrolled gout and our main growth driver. In addition, we recently submitted teprotumumab for U.S. FDA approval, another milestone toward delivering the first FDA-approved treatment to people living with active thyroid eye disease.”

Financial Highlights

(in millions except for per share amounts and percentages)     Q2 19     Q2 18     %
Change
    YTD 19     YTD 18     %
Change
                                     
Net sales    

$

320.6

 

   

$

302.8

 

   

6

   

$

601.0

 

   

$

526.7

 

   

14

Net loss    

 

(5.1

)

   

 

(24.8

)

   

79

   

 

(38.0

)

   

 

(173.4

)

   

78

Non-GAAP net income    

 

95.6

 

   

 

80.5

 

   

19

   

 

149.6

 

   

 

85.3

 

   

75

Adjusted EBITDA    

 

124.1

 

   

 

116.8

 

   

6

   

 

212.5

 

   

 

150.4

 

   

41

                                     
Loss per share - diluted    

 

(0.03

)

   

 

(0.15

)

   

80

   

 

(0.21

)

   

 

(1.05

)

   

80

Non-GAAP earnings per share - diluted    

 

0.49

 

   

 

0.48

 

   

2

   

 

0.80

 

   

 

0.51

 

   

57

Second-Quarter and Recent Company Highlights

  • Submitted BLA for Teprotumumab for Active TED: In early July, the Company submitted a BLA for its investigational medicine teprotumumab for the treatment of active TED to the U.S. Food and Drug Administration (FDA). The submission included results from the Phase 3 clinical trial, OPTIC (Treatment of Graves’ Orbitopathy (Thyroid Eye Disease) to Reduce Proptosis with Teprotumumab Infusions in a Randomized, Placebo-Controlled, Clinical Study), as well as the positive Phase 2 results.

    Teprotumumab has Breakthrough Therapy, Orphan Drug and Fast Track designations from the FDA. Horizon has requested Priority Review for the application, which, if granted, could result in a six-month review process. The FDA has a 60-day filing review period to determine whether the BLA is complete and acceptable for filing. If approved, teprotumumab would be the first and only approved treatment for active TED.

    In April, additional results from OPTIC were presented at the American Association of Clinical Endocrinologists (AACE) Scientific and Clinical Congress, which included measurements of improvement in proptosis, the major driver of morbidity in TED. These data showed that after the full course of treatment for 24 weeks, patients treated with teprotumumab demonstrated a mean proptosis reduction of 3.32 mm compared with 0.53 mm for patients on placebo (p<0.001).
     
  • Announced Teprotumumab Expanded Access Program (EAP): The Company recently announced the availability of an expanded access program for teprotumumab. The expanded access program will be available for people living with active TED while the FDA reviews the teprotumumab BLA.
     
  • Initiated KRYSTEXXA Immunomodulation Trial: In June,the Company initiated its registrational clinical trial MIRROR (Methotrexate to Increase Response Rates in Patients with Uncontrolled GOut Receiving KRYSTEXXA). The trial is evaluating administration of KRYSTEXXA in combination with methotrexate to determine the potential for dampening anti-drug antibody formation and increasing response rates with KRYSTEXXA, allowing more patients living with uncontrolled gout to fully benefit from treatment. The randomized placebo-controlled study is expected to enroll approximately 135 patients to receive either KRYSTEXXA and methotrexate or KRYSTEXXA and placebo. The primary endpoint will assess the proportion of serum uric acid (sUA) responders (sUA <6 mg/dL) at Month 6.
     
  • FDA Accepted New Drug Application (NDA) for PROCYSBI® Oral Granules: In July, the FDA accepted the NDA for PROCYSBI Delayed-Release Oral Granules in Packets. If approved, this new dosage form would provide another administration option for patients, in addition to the currently available PROCYSBI delayed-release capsules, which are FDA-approved for children one year of age and older and adults living with nephropathic cystinosis. The submission is part of the Company’s ongoing investment in the cystinosis community.
     
  • Appointed Sue Mahony to the Board of Directors: The Company recently appointed Sue Mahony, Ph.D., MBA, to its board of directors. Dr. Mahony brings more than 30 years of diverse industry experience to the Board, including an 18-year tenure at Eli Lilly and Company, where she served in a variety of global and domestic leadership roles of increasing responsibility, including helping oversee the development of an innovative pipeline. Before Lilly, Dr. Mahony spent five years at Bristol-Myers Squibb Company.
     
  • Changed Company Name to Horizon Therapeutics plc: In May, shareholders approved the change of the Company’s name to Horizon Therapeutics Public Limited Company at the Annual General Meeting. The new name captures the Company’s long-term strategy to develop and commercialize innovative new medicines that address rare and rheumatic diseases with very few effective treatment options. The Company believes the new name also better reflects its work with patients, caregivers, physicians and communities that goes well beyond its medicines.
     
  • Improved the Company’s Capital Structure: In May,the Company repaid $250 million of its outstanding debt, reducing it to $1.443 billion as of June 30, 2019. In May, the Company also refinanced its senior secured term loans, lowering the interest rate by 25 basis points and extending the final maturity date to May 22, 2026. Additionally, in July, the Company issued $600 million of 5.5 percent Senior Notes due 2027 and is using the proceeds along with cash on hand to repay $625 million of its outstanding debt. These actions serve to reduce interest expense and extend the maturity of the debt, furthering the Company’s strategy to improve its capital structure.

Research and Development Programs

Orphan Disease Candidate and Program:

  • Teprotumumab: Teprotumumab is a fully human monoclonal antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor candidate for the treatment of active TED, a serious, progressive, vision-threatening autoimmune disease in which the muscles and fatty tissue behind the eye become inflamed and expand. This can lead to proptosis (eye bulging) and diplopia (double vision) and impact activities of daily living and quality of life. The development program for teprotumumab in TED includes positive Phase 2 results published in The New England Journal of Medicine, as well as positive results from the confirmatory Phase 3 OPTIC clinical trial, announced in February 2019. The OPTIC study met its primary endpoint of a ≥2 mm reduction in proptosis (p<0.001), the main cause of morbidity in TED, with 82.9 percent of patients treated with teprotumumab demonstrating a significant improvement in proptosis compared to 9.5 percent of placebo patients. In addition, all secondary endpoints were met (p≤0.001), and the safety profile was consistent with the Phase 2 study.

Rheumatology Pipeline Candidates and Programs:

  • KRYSTEXXA Immunomodulation Trial: The Company is evaluating the use of methotrexate to increase the response rate with KRYSTEXXA through its MIRROR study. Methotrexate is the immunomodulator most used by rheumatologists, and has been shown to reduce anti-drug antibody formation to biologic therapies when combined with these therapies. The MIRROR trial is designed to support the potential for registration and commenced in June.
  • KRYSTEXXA Study in Kidney Transplant Patients with Uncontrolled Gout: The Company plans to initiate a clinical trial in the second half of 2019 evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout. 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.
  • Next-generation Biologic Programs for Uncontrolled Gout: The Company is pursuing several 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, HZN-007 and a discovery and development collaboration with HemoShear Therapeutics, LLC.

Second-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: Second-quarter 2019 net sales were $320.6 million, an increase of 6 percent.
     
  • Gross Profit: Under U.S. GAAP, the second-quarter 2019 gross profit ratio was 72.2 percent compared to 69.8 percent in the second quarter of 2018. The non-GAAP gross profit ratio in the second quarter of 2019 was 90.9 percent compared to 90.2 percent in the second quarter of 2018.
     
  • Operating Expenses: Research and development (R&D) expenses were 8.8 percent of net sales and selling, general and administrative (SG&A) expenses were 52.1 percent of net sales. Non-GAAP R&D expenses were 6.9 percent of net sales, and non-GAAP SG&A expenses were 45.4 percent of net sales.
     
  • Income Tax Rate: In the second quarter of 2019, the income tax benefit rate on a GAAP basis was 48.8 percent and the income tax expense rate on a non-GAAP basis was 11.3 percent.
     
  • Net Income (Loss): On a GAAP basis in the second quarter of 2019, net loss was $5.1 million. Second-quarter 2019 non-GAAP net income was $95.6 million.
     
  • Adjusted EBITDA: Second-quarter 2019 adjusted EBITDA was $124.1 million.
     
  • Earnings (Loss) per Share: On a GAAP basis diluted loss per share in the second quarter of 2019 and 2018 was $0.03 and $0.15, respectively. Non-GAAP diluted earnings per share in the second quarter of 2019 and 2018 was $0.49 and $0.48, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the second quarter of 2019 were 185.3 million and 193.2 million, respectively.

Second-Quarter Segment Results

Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments. 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.

Orphan and Rheumatology Segment

  (in millions except for percentages) Q2 19     Q2 18     %
Change
    YTD 19     YTD 18     %
Change
                                     
  KRYSTEXXA

 

79.8

   

 

58.6

   

36

 

   

 

132.1

   

 

105.3

   

25

 

  RAVICTI®(1)

 

50.4

   

 

57.0

   

(11

)

   

 

100.3

   

 

106.1

   

(5

)

  PROCYSBI  

 

41.2

   

 

38.4

   

7

 

   

 

80.7

   

 

73.4

   

10

 

  ACTIMMUNE®

 

29.3

   

 

27.4

   

7

 

   

 

51.0

   

 

52.2

   

(2

)

  RAYOS®

 

20.3

   

 

13.5

   

51

 

   

 

39.7

   

 

24.1

   

64

 

  BUPHENYL®(1)  

 

2.3

   

 

5.2

   

(55

)

   

 

5.2

   

 

11.0

   

(53

)

  QUINSAIRTM

 

0.2

   

 

0.1

   

75

 

   

 

0.4

   

 

0.2

   

55

 

  LODOTRA®(1)

 

-

   

 

1.5

   

NM

 

   

 

-

   

 

1.7

   

NM

 

  Orphan and Rheumatology Net Sales

$

223.5

   

$

201.7

   

11

 

   

$

409.4

   

$

374.0

   

9

 

                                     
  Orphan and Rheumatology Segment Operating Income

$

74.5

   

$

70.6

   

6

 

   

$

121.2

   

$

113.7

   

7

 

(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.

  • Second-quarter 2019 net sales of the orphan and rheumatology segment, the Company’s strategic growth segment, were $223.5 million, an increase of 11 percent over the prior year’s quarter, driven by growth of KRYSTEXXA, RAYOS, PROCYSBI and ACTIMMUNE.
  • Second-quarter 2019 orphan and rheumatology segment operating income was $74.5 million, which includes the impact of investment in teprotumumab pre-launch activities.

Inflammation Segment(1)

(in millions except for percentages) Q2 19   Q2 18   %
Change
  YTD 19   YTD 18   %
Change
                         
PENNSAID® 2%

 

51.5

 

 

47.6

 

8

 

 

 

101.7

 

 

74.4

 

37

 

DUEXIS®

 

30.0

 

 

30.7

 

(2

)

 

 

59.5

 

 

46.4

 

28

 

VIMOVO®

 

14.6

 

 

21.9

 

(33

)

 

 

28.6

 

 

30.2

 

(5

)

MIGERGOT®(2)

 

1.0

 

 

0.9

 

5

 

 

 

1.8

 

 

1.7

 

8

 

Inflammation Net Sales

$

97.1

 

$

101.1

 

(4

)

 

$

191.6

 

$

152.7

 

25

 

                         
Inflammation Segment Operating Income

$

49.7

 

$

45.9

 

8

 

 

$

91.1

 

$

36.3

 

151

 

(1)

 

Previously known as the primary care segment.

(2)

 

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

  • Second-quarter 2019 net sales of the inflammation segment were $97.1 million and segment operating income was $49.7 million.

Cash Flow Statement and Balance Sheet Highlights

  • On a GAAP basis in the second quarter of 2019, operating cash flow was $91.3 million. Non-GAAP operating cash flow was $95.7 million.
     
  • The Company had cash and cash equivalents of $866.0 million as of June 30, 2019.
     
  • As of June 30, 2019, the total principal amount of debt outstanding was $1.443 billion. As of June 30, 2019, net debt was $577 million and net-debt-to-last-12-months adjusted EBITDA leverage ratio was 1.1 times, compared to 3.6 times at June 30, 2018.

    In May,the Company repaid $250 million of its outstanding debt, reducing it to $1.443 billion as of June 30, 2019. In May, the Company also refinanced its senior secured term loans, lowering the interest rate by 25 basis points and extending the final maturity date to May 22, 2026. In July, the Company issued $600 million of 5.5 percent Senior Notes due 2027 and is using the proceeds along with cash on hand to repay $625 million of its outstanding debt. Following the refinancing transactions, the Company expects the total principal amount of debt outstanding to be $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.

New 2019 Guidance

The Company now expects full-year 2019 net sales to range between $1.28 billion to $1.30 billion, an increase from the previous guidance range of $1.26 billion to $1.28 billion. Full-year 2019 adjusted EBITDA is now expected to range between $460 million to $475 million, an increase from the previous guidance range of $450 million to $465 million.

Webcast

At 8 a.m. EDT / 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 https://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 divestiture, 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, 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 2019 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 2019 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 2019 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; expected impact of refinancing transactions; expected timing of clinical trials and regulatory submissions and decisions, including related to the BLA submission for teprotumumab and the NDA for PROCYSBI Delayed-Release Oral Granules in Packets; expected expansion of Horizon’s rare disease medicine pipeline and the impact thereof; potential market opportunity for 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, such as teprotumumab, 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 June 30,

 

Six Months Ended June 30,

           

2019

 

 

2018

 

 

2019

 

 

2018

 

                 
  Net sales      

$

320,647

 

 

$

302,835

 

 

$

601,018

 

 

$

526,716

 

  Cost of goods sold    

 

89,163

 

 

 

91,337

 

 

 

177,305

 

 

 

201,625

 

  Gross profit      

 

231,484

 

 

 

211,498

 

 

 

423,713

 

 

 

325,091

 

                         
  OPERATING EXPENSES:                  
  Research and development    

 

28,314

 

 

 

24,265

 

 

 

50,039

 

 

 

41,910

 

  Selling, general and administrative  

 

167,095

 

 

 

176,674

 

 

 

339,394

 

 

 

356,273

 

  Loss on sale of assets    

 

10,963

 

 

 

-

 

 

 

10,963

 

 

 

-

 

  Impairment of long-lived assets  

 

-

 

 

 

-

 

 

 

-

 

 

 

33,647

 

 

Total operating expenses

 

 

206,372

 

 

 

200,939

 

 

 

400,396

 

 

 

431,830

 

  Operating income (loss)    

 

25,112

 

 

 

10,559

 

 

 

23,317

 

 

 

(106,739

)

                         
  OTHER EXPENSE, NET:                  
  Interest expense, net    

 

(22,033

)

 

 

(31,030

)

 

 

(49,563

)

 

 

(61,484

)

  Loss on debt extinguishment    

 

(11,878

)

 

 

-

 

 

 

(17,464

)

 

 

-

 

  Foreign exchange gain (loss)    

 

76

 

 

 

(5

)

 

 

15

 

 

 

(115

)

  Other (expense) income, net    

 

(1,272

)

 

 

346

 

 

 

(1,083

)

 

 

497

 

  Total other expense, net  

 

(35,107

)

 

 

(30,689

)

 

 

(68,095

)

 

 

(61,102

)

                         
  Loss before (benefit) expense for income taxes  

 

(9,995

)

 

 

(20,130

)

 

 

(44,778

)

 

 

(167,841

)

  (Benefit) expense for income taxes  

 

(4,875

)

 

 

4,621

 

 

 

(6,795

)

 

 

5,566

 

  Net loss      

$

(5,120

)

 

$

(24,751

)

 

$

(37,983

)

 

$

(173,407

)

                         
  Loss per ordinary share - basic and diluted        

$

(0.03

)

 

$

(0.15

)

 

$

(0.21

)

 

$

(1.05

)

                         
  Weighted average ordinary shares outstanding - basic and diluted  

 

185,327,383

 

 

 

165,536,826

 

 

 

178,866,391

 

 

 

164,921,722

 

Horizon Therapeutics plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

                   
                   
             

As of

             

June 30,
2019

 

December 31,
2018

  ASSETS    
  CURRENT ASSETS:        
    Cash and cash equivalents  

$

865,997

 

 

$

958,712

 

    Restricted cash  

 

3,739

 

 

 

3,405

 

    Accounts receivable, net  

 

395,018

 

 

 

464,730

 

    Inventories, net  

 

51,019

 

 

 

50,751

 

    Prepaid expenses and other current assets  

 

85,728

 

 

 

68,218

 

        Total current assets  

 

1,401,501

 

 

 

1,545,816

 

  Property and equipment, net  

 

24,808

 

 

 

20,101

 

  Developed technology, net  

 

1,813,950

 

 

 

1,945,639

 

  Other intangible assets, net  

 

4,229

 

 

 

4,630

 

  Goodwill    

 

413,669

 

 

 

413,669

 

  Deferred tax assets, net  

 

6,080

 

 

 

3,148

 

  Other assets  

 

43,767

 

 

 

8,959

 

  Total assets  

$

3,708,004

 

 

$

3,941,962

 

                   
  LIABILITIES AND SHAREHOLDERS' EQUITY        
  CURRENT LIABILITIES:        
    Accounts payable  

$

42,672

 

 

$

30,284

 

    Accrued expenses  

 

188,192

 

 

 

215,739

 

    Accrued trade discounts and rebates  

 

398,657

 

 

 

457,763

 

    Deferred revenues, current portion  

 

7,311

 

 

 

4,901

 

        Total current liabilities  

 

636,832

 

 

 

708,687

 

                   
  LONG-TERM LIABILITIES:        
    Exchangeable notes, net  

 

341,682

 

 

 

332,199

 

    Long-term debt, net of current  

 

1,025,096

 

 

 

1,564,485

 

    Deferred tax liabilities, net  

 

109,443

 

 

 

107,768

 

    Other long-term liabilities  

 

74,078

 

 

 

38,717

 

        Total long-term liabilities  

 

1,550,299

 

 

 

2,043,169

 

                   
  COMMITMENTS AND CONTINGENCIES        
  SHAREHOLDERS' EQUITY:        
    Ordinary shares, $0.0001 nominal value; 600,000,000 and 300,000,000 shares        
      authorized at June 30, 2019 and December 31, 2018, repectively;        
      186,470,230 and 169,244,520 shares issued at June 30, 2019 and        
      December 31, 2018, respectively, and 186,085,864 and 168,860,154 shares        
      outstanding at June 30, 2019 and December 31, 2018, respectively  

 

19

 

 

 

17

 

    Treasury stock, 384,366 ordinary shares at June 30, 2019 and December 31, 2018  

 

(4,585

)

 

 

(4,585

)

    Additional paid-in capital  

 

2,743,793

 

 

 

2,374,966

 

    Accumulated other comprehensive loss  

 

(1,666

)

 

 

(1,523

)

    Accumulated deficit  

 

(1,216,688

)

 

 

(1,178,769

)

        Total shareholders' equity  

 

1,520,873

 

 

 

1,190,106

 

  Total liabilities and shareholders' equity  

$

3,708,004

 

 

$

3,941,962

 

Horizon Therapeutics plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

             
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net loss  

$

(5,120

)

 

$

(24,751

)

 

$

(37,983

)

 

$

(173,407

)

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

 

59,126

 

 

 

62,031

 

 

 

118,017

 

 

 

124,467

 

Equity-settled share-based compensation

 

21,367

 

 

 

30,721

 

 

 

48,915

 

 

 

58,554

 

Impairment of long-lived assets

 

-

 

 

 

-

 

 

 

-

 

 

 

33,647

 

Loss on debt extinguishment

 

11,878

 

 

 

-

 

 

 

17,464

 

 

 

-

 

Amortization of debt discount and deferred financing costs

 

5,771

 

 

 

5,690

 

 

 

11,622

 

 

 

11,185

 

Loss on sale of assets

 

10,963

 

 

 

-

 

 

 

10,963

 

 

 

-

 

Deferred income taxes

 

(2,759

)

 

 

(3,433

)

 

 

(1,257

)

 

 

(1,753

)

Foreign exchange and other adjustments

 

84

 

 

 

580

 

 

 

493

 

 

 

459

 

Changes in operating assets and liabilities:              
Accounts receivable

 

9,019

 

 

 

678

 

 

 

69,787

 

 

 

1,742

 

Inventories

 

343

 

 

 

(2,741

)

 

 

(504

)

 

 

11,549

 

Prepaid expenses and other current assets

 

(17,807

)

 

 

(11,934

)

 

 

(17,696

)

 

 

(21,738

)

Accounts payable

 

5,138

 

 

 

(10,120

)

 

 

11,554

 

 

 

(3,592

)

Accrued trade discounts and rebates

 

(8,247

)

 

 

19,982

 

 

 

(59,151

)

 

 

(52,138

)

Accrued expenses

 

(6,736

)

 

 

(5,371

)

 

 

(28,071

)

 

 

13,654

 

Deferred revenues

 

2,477

 

 

 

1,817

 

 

 

2,410

 

 

 

333

 

Other non-current assets and liabilities

 

5,770

 

 

 

(1,361

)

 

 

873

 

 

 

(1,988

)

Net cash provided by operating activities

 

91,267

 

 

 

61,788

 

 

 

147,436

 

 

 

974

 

CASH FLOWS FROM INVESTING ACTIVITIES:              
Payment related to license agreement

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,000

)

Proceeds from sale of assets

 

6,000

 

 

 

-

 

 

 

6,000

 

 

 

-

 

Purchases of property and equipment

 

(5,009

)

 

 

(96

)

 

 

(6,858

)

 

 

(762

)

Net cash provided by (used in) investing activities

 

991

 

 

 

(96

)

 

 

(858

)

 

 

(12,762

)

CASH FLOWS FROM FINANCING ACTIVITIES:                    
Net proceeds from the issuance of ordinary shares

 

(957

)

 

 

-

 

 

 

326,793

 

 

 

-

 

Repayment of term loans

 

(518,026

)

 

 

(25,598

)

 

 

(818,026

)

 

 

(27,722

)

Repayment of senior notes

 

(258,282

)

 

 

-

 

 

 

(258,282

)

 

 

-

 

Net proceeds from the term loans

 

517,378

 

 

 

-

 

 

 

517,378

 

 

 

-

 

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

 

5,465

 

 

 

4,720

 

 

 

5,465

 

 

 

4,734

 

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

 

1,987

 

 

 

2,727

 

 

 

12,029

 

 

 

3,672

 

Payment of employee withholding taxes relating to share-based awards

 

(7,203

)

 

 

(5,668

)

 

 

(24,374

)

 

 

(9,185

)

Net cash used in financing activities

 

(259,638

)

 

 

(23,819

)

 

 

(239,017

)

 

 

(28,501

)

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

 

576

 

 

 

(1,988

)

 

 

58

 

 

 

(1,003

)

                     
Net (decrease) increase in cash, cash equivalents and restricted cash

 

(166,804

)

 

 

35,885

 

 

 

(92,381

)

 

 

(41,292

)

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

 

1,036,540

 

 

 

680,720

 

 

 

962,117

 

 

 

757,897

 

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

$

869,736

 

 

$

716,605

 

 

$

869,736

 

 

$

716,605

 

                     
(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 June 30,

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

                 
                     
  GAAP net loss

$

(5,120

)

 

$

(24,751

)

 

$

(37,983

)

 

$

(173,407

)

  Non-GAAP adjustments:              
  Acquisition/divestiture-related costs

 

1,200

 

 

 

1,078

 

 

 

2,546

 

 

 

5,803

 

  Restructuring and realignment costs

 

13

 

 

 

7,039

 

 

 

33

 

 

 

10,307

 

  Amortization and step-up:              
  Intangible amortization expense

 

57,683

 

 

 

60,480

 

 

 

115,100

 

 

 

121,364

 

  Inventory step-up expense

 

(25

)

 

 

53

 

 

 

90

 

 

 

17,129

 

  Amortization of debt discount and deferred financing costs

 

5,710

 

 

 

5,691

 

 

 

11,622

 

 

 

11,187

 

  Impairment of long-lived assets

 

-

 

 

 

-

 

 

 

-

 

 

 

33,647

 

  Loss on sale of assets  

 

10,963

 

 

 

-

 

 

 

10,963

 

 

 

-

 

  Share-based compensation  

 

21,367

 

 

 

30,721

 

 

 

48,915

 

 

 

58,554

 

  Depreciation

 

1,443

 

 

 

1,551

 

 

 

2,916

 

 

 

3,104

 

  Litigation settlements

 

1,000

 

 

 

4,250

 

 

 

1,000

 

 

 

4,250

 

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

 

4,000

 

 

 

-

 

 

 

6,000

 

 

 

90

 

  Fees related to refinancing activities

 

1,033

 

 

 

15

 

 

 

1,175

 

 

 

42

 

  Loss on debt extinguishment

 

11,878

 

 

 

-

 

 

 

17,464

 

 

 

-

 

  Drug substance harmonization costs

 

234

 

 

 

475

 

 

 

314

 

 

 

1,279

 

  Charges relating to discontinuation of Friedreich's ataxia program

 

1,300

 

 

 

272

 

 

 

1,221

 

 

 

1,222

 

  Total of pre-tax non-GAAP adjustments

 

117,799

 

 

 

111,625

 

 

 

219,359

 

 

 

267,978

 

  Income tax effect of pre-tax non-GAAP adjustments  

 

(15,621

)

 

 

(6,356

)

 

 

(30,372

)

 

 

26,638

 

  Other non-GAAP income tax adjustments

 

(1,452

)

 

 

-

 

 

 

(1,452

)

 

 

(35,893

)

  Total of non-GAAP adjustments

 

100,726

 

 

 

105,269

 

 

 

187,535

 

 

 

258,723

 

  Non-GAAP Net Income    

$

95,606

 

 

$

80,518

 

 

$

149,552

 

 

$

85,316

 

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

 

185,327,383

 

 

 

165,536,826

 

 

 

178,866,391

 

 

 

164,921,722

 

                     
  Non-GAAP Earnings Per Share - Basic:                  
  GAAP loss per share - Basic  

$

(0.03

)

 

$

(0.15

)

 

$

(0.21

)

 

$

(1.05

)

  Non-GAAP adjustments  

 

0.55

 

 

 

0.64

 

 

 

1.05

 

 

 

1.57

 

  Non-GAAP earnings per share - Basic  

$

0.52

 

 

$

0.49

 

 

$

0.84

 

 

$

0.52

 

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

185,327,383

     

165,536,826

     

178,866,391

     

164,921,722

 
  Ordinary share equivalents

 

7,897,507

 

 

 

3,820,913

 

 

 

7,658,133

 

 

 

3,678,249

 

  Weighted average shares - Diluted

 

193,224,890

 

 

 

169,357,739

 

 

 

186,524,524

 

 

 

168,599,971

 

                     
                     
  Non-GAAP Earnings Per Share - Diluted                
 

GAAP loss per share - Diluted

 

$

(0.03

)

 

$

(0.15

)

 

$

(0.21

)

 

$

(1.05

)

  Non-GAAP adjustments  

 

0.55

 

 

 

0.64

 

 

 

1.05

 

 

 

1.57

 

  Diluted earnings per share effect of ordinary share equivalents  

 

(0.03

)

 

 

(0.01

)

 

 

(0.04

)

 

 

(0.01

)

  Non-GAAP earnings per share - Diluted  

$

0.49

 

 

$

0.48

 

 

$

0.80

 

 

$

0.51

 

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

GAAP Net Income to Adjusted EBITDA (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

                 
  GAAP net loss

$

(5,120

)

 

$

(24,751

)

 

$

(37,983

)

 

$

(173,407

)

  Depreciation

 

1,443

 

 

 

1,551

 

 

 

2,916

 

 

 

3,104

 

  Amortization, accretion and step-up:                  
  Intangible amortization expense

 

57,683

 

 

 

60,480

 

 

 

115,100

 

 

 

121,364

 

  Inventory step-up expense  

 

(25

)

 

 

53

 

 

 

90

 

 

 

17,129

 

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

 

22,033

 

 

 

31,030

 

 

 

49,563

 

 

 

61,484

 

  (Benefit) expense for income taxes

 

(4,875

)

 

 

4,621

 

 

 

(6,795

)

 

 

5,566

 

  EBITDA

$

71,139

 

 

$

72,984

 

 

$

122,891

 

 

$

35,240

 

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

 

1,200

 

 

 

1,078

 

 

 

2,546

 

 

 

5,803

 

  Restructuring and realignment costs

 

13

 

 

 

7,039

 

 

 

33

 

 

 

10,307

 

  Impairment of long-lived assets

 

-

 

 

 

-

 

 

 

-

 

 

 

33,647

 

  Loss on sale of assets

 

10,963

 

 

 

-

 

 

 

10,963

 

 

 

-

 

  Share-based compensation

 

21,367

 

 

 

30,721

 

 

 

48,915

 

 

 

58,554

 

  Litigation settlements

 

1,000

 

 

 

4,250

 

 

 

1,000

 

 

 

4,250

 

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

 

4,000

 

 

 

-

 

 

 

6,000

 

 

 

90

 

  Fees related to refinancing activities

 

1,033

 

 

 

15

 

 

 

1,175

 

 

 

42

 

  Loss on debt extinguishment  

 

11,878

 

 

 

-

 

 

 

17,464

 

 

 

-

 

  Drug substance harmonization costs

 

234

 

 

 

475

 

 

 

314

 

 

 

1,279

 

  Charges relating to discontinuation of Friedreich's ataxia program

 

1,300

 

 

 

272

 

 

 

1,221

 

 

 

1,222

 

  Total of other non-GAAP adjustments    

 

52,988

 

 

 

43,850

 

 

 

89,631

 

 

 

115,194

 

  Adjusted EBITDA    

$

124,127

 

 

$

116,834

 

 

$

212,522

 

 

$

150,434

 

 

Horizon Pharma plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited) - 2018

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months
Ended December 31,

 

 

 

 

 

 

2018

 

             
  GAAP net loss  

$

(38,380

)

 
  Depreciation  

 

6,126

 

 
  Amortization, accretion and step-up:          
  Intangible amortization expense  

 

243,634

 

 
  Inventory step-up expense    

 

17,312

 

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

 

121,692

 

 
  Benefit for income taxes  

 

(44,752

)

 
  EBITDA  

$

305,632

 

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

 

4,396

 

 
  Restructuring and realignment costs  

 

15,350

 

 
  Share-based compensation  

 

114,860

 

 
  Impairment of long-lived assets  

 

46,096

 

 
  Litigation settlements  

 

5,750

 

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

 

(10

)

 
  Fees related to refinancing activities  

 

937

 

 
  Drug substance harmonization costs  

 

2,855

 

 
  Charges relating to discontinuation of Friedreich's ataxia program  

 

(1,464

)

 
  Gain on sale of assets  

 

(42,985

)

 
  Total of other non-GAAP adjustments      

 

145,785

 

 
  Adjusted EBITDA      

$

451,417

 

 
 
Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Operating Income (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

 

2019

 

 

2018

 

 

2019

 

2018

 

                 
                     
  GAAP operating income (loss)

$

25,112

 

 

$

10,559

 

 

$

23,317

 

$

(106,739

)

  Non-GAAP adjustments:              
    Acquisition/divestiture-related costs

 

73

 

 

 

1,077

 

 

 

1,275

 

 

5,775

 

    Restructuring and realignment costs

 

13

 

 

 

7,039

 

 

 

33

 

 

10,307

 

    Amortization and step-up:              
    Intangible amortization expense

 

57,683

 

 

 

60,480

 

 

 

115,100

 

 

121,364

 

    Inventory step-up expense

 

(25

)

 

 

53

 

 

 

90

 

 

17,129

 

    Impairment of long-lived assets

 

-

 

 

 

-

 

 

 

-

 

 

33,647

 

    Loss on sale of assets

 

10,963

 

 

 

-

 

 

 

10,963

 

 

-

 

    Share-based compensation  

 

21,367

 

 

 

30,721

 

 

 

48,915

 

 

58,554

 

    Depreciation

 

1,443

 

 

 

1,551

 

 

 

2,916

 

 

3,104

 

    Litigation settlements

 

1,000

 

 

 

4,250

 

 

 

1,000

 

 

4,250

 

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

 

4,000

 

 

 

-

 

 

 

6,000

 

 

90

 

    Fees related to refinancing activities

 

1,033

 

 

 

15

 

 

 

1,175

 

 

42

 

    Drug substance harmonization costs

 

234

 

 

 

475

 

 

 

314

 

 

1,279

 

    Charges relating to discontinuation of Friedreich's ataxia program

 

1,300

 

 

 

272

 

 

 

1,221

 

 

1,222

 

    Total of non-GAAP adjustments

 

99,084

 

 

 

105,933

 

 

 

189,002

 

 

256,763

 

  Non-GAAP operating income

$

124,196

 

 

$

116,492

 

 

$

212,319

 

$

150,024

 

                     
    Orphan and Rheumatology segment operating income

 

74,502

 

 

 

70,609

 

 

 

121,180

 

 

113,713

 

    Inflammation segment operating income

 

49,694

 

 

 

45,883

 

 

 

91,139

 

 

36,311

 

  Total segment operating income

$

124,196

 

 

$

116,492

 

 

$

212,319

 

$

150,024

 

                     
    Foreign exchange gain (loss)  

 

76

 

 

 

(5

)

 

 

15

 

 

(115

)

    Other income, net  

 

(145

)

 

 

347

 

 

 

188

 

 

525

 

  Adjusted EBITDA  

$

124,127

 

 

$

116,834

 

 

$

212,522

 

$

150,434

 

 
Horizon Therapeutics plc
GAAP to Non-GAAP Reconciliations
Gross Profit and Operating Cash Flow (Unaudited)
(in thousands, except percentages)
               
                     
       

Three Months Ended June 30,

 

Six Months Ended June 30,

       

2019

 

 

2018

 

 

2019

 

 

2018

 

                 
  Non-GAAP Gross Profit:                  
                     
  GAAP gross profit  

$

231,484

 

 

$

211,498

 

 

$

423,713

 

 

$

325,091

 

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

 

-

 

 

 

(664

)

 

 

1,114

 

 

 

68

 

  Intangible amortization expense  

 

57,481

 

 

 

60,277

 

 

 

114,699

 

 

 

120,961

 

  Inventory step-up expense  

 

(25

)

 

 

53

 

 

 

90

 

 

 

17,129

 

  Share-based compensation  

 

951

 

 

 

1,110

 

 

 

1,990

 

 

 

1,893

 

  Depreciation  

 

158

 

 

 

176

 

 

 

317

 

 

 

353

 

  Drug substance harmonization costs  

 

234

 

 

 

475

 

 

 

314

 

 

 

1,279

 

  Charges relating to discontinuation of Friedreich's ataxia program

 

1,300

 

 

 

185

 

 

 

1,221

 

 

 

1,135

 

  Total of Non-GAAP adjustments  

 

60,099

 

 

 

61,612

 

 

 

119,745

 

 

 

142,818

 

  Non-GAAP gross profit  

$

291,583

 

 

$

273,110

 

 

$

543,458

 

 

$

467,909

 

                     
  GAAP gross profit %  

 

72.2

%

 

 

69.8

%

 

 

70.5

%

 

 

61.7

%

  Non-GAAP gross profit %  

 

90.9

%

 

 

90.2

%

 

 

90.4

%

 

 

88.8

%

                     
                     
                     
  GAAP cash provided by operating activities  

$

91,267

 

 

$

61,788

 

 

$

147,436

 

 

$

974

 

  Cash payments for acquisition/divestiture-related costs  

 

142

 

 

 

1,597

 

 

 

495

 

 

 

5,555

 

  Cash payments for restructuring and realignment costs  

 

839

 

 

 

4,230

 

 

 

2,882

 

 

 

4,677

 

  Cash payments for litigation settlements

 

-

 

 

 

1,500

 

 

 

-

 

 

 

1,500

 

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

 

-

 

 

 

-

 

 

 

2,000

 

 

 

275

 

  Cash payments drug substance harmonization costs

 

25

 

 

 

5,960

 

 

 

672

 

 

 

5,960

 

  Cash payments for discontinuation of Friedreich's              
  ataxia program

 

1,659

 

 

 

108

 

 

 

2,589

 

 

 

3,507

 

  Cash payments relating to refinancing activities

 

1,797

 

 

 

13

 

 

 

1,806

 

 

 

31

 

  Non-GAAP operating cash flow  

$

95,729

 

 

$

75,196

 

 

$

157,880

 

 

$

22,479

 

 

Horizon Therapeutics plc

Net Debt Reconciliation (Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

June 30,
2019

 

December 31,
2018

 

June 30,
2018

               
Long-term debt, net of current    

$

1,025,096

 

$

1,564,485

 

$

1,562,013

Exchangeable notes, net    

 

341,682

 

 

332,199

 

 

323,105

Total Debt    

 

1,366,778

 

 

1,896,684

 

 

1,885,118

Debt discount    

 

70,754

 

 

87,038

 

 

97,737

Deferred financing fees    

 

5,494

 

 

9,304

 

 

10,171

Total Principal Amount Debt    

 

1,443,026

 

 

1,993,026

 

 

1,993,026

               
Less: cash and cash equivalents    

 

865,997

 

 

958,712

 

 

710,211

Net Debt    

$

577,029

 

$

1,034,314

 

$

1,282,815

 

Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

           
           
  Q2 2019
  Pre-tax
Net (Loss)
Income
Income Tax
(Benefit)
Expense
Tax
Rate
Net
(Loss)
Income
Diluted (Loss)
Earnings
Per Share
As reported - GAAP

$

(10.0

)

$

(4.9

)

48.8

%

$

(5.1

)

$

(0.03

)

Non-GAAP adjustments

 

117.8

 

 

17.1

 

 

 

100.7

 

 
Non-GAAP

$

107.8

 

$

12.2

 

11.3

%

$

95.6

 

$

0.49

 

           
           
 

Q2 2018

 

Pre-tax
Net (Loss)
Income

Income Tax
(Benefit)
Expense

Tax
Rate

Net
(Loss)
Income

Diluted (Loss)
Earnings
Per Share

As reported - GAAP

$

(20.1

)

$

4.6

 

(23.0

)%

$

(24.8

)

$

(0.15

)

Non-GAAP adjustments

 

111.6

 

 

6.4

 

 

 

105.3

 

 
Non-GAAP

$

91.5

 

$

11.0

 

12.0

%

$

80.5

 

$

0.48

 

           
           
  YTD 2019
 

Pre-tax
Net (Loss)
Income

Income Tax
(Benefit)
Expense

Tax
Rate

Net
(Loss)
Income

Diluted (Loss)
Earnings
Per Share

As reported - GAAP

$

(44.8

)

$

(6.8

)

15.2

%

$

(38.0

)

$

(0.21

)

Non-GAAP adjustments

 

219.4

 

 

31.8

 

 

 

187.5

 

 
Non-GAAP

$

174.6

 

$

25.0

 

14.3

%

$

149.5

 

$

0.80

 

           
           
  YTD 2018
  Pre-tax
Net (Loss)
Income
Income Tax
(Benefit)
Expense
Tax
Rate
Net
(Loss)
Income
Diluted (Loss)
Earnings
Per Share
As reported - GAAP

$

(167.8

)

$

5.6

 

(3.3

)%

$

(173.4

)

$

(1.05

)

Non-GAAP adjustments

 

268.0

 

 

9.3

 

 

 

258.7

 

 
Non-GAAP

$

100.2

 

$

14.9

 

14.9

%

$

85.3

 

$

0.51

 

                     
 

Horizon Therapeutics plc

 

Certain Income Statement Line Items - Non-GAAP Adjusted

 

For the Three Months Ended June 30, 2019

 

(Unaudited)

                     
     

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

Income Tax

     

 

Research &

Selling, General

Loss on

Loss on Debt

Interest

Other

Benefit

     

COGS

Development

& Administrative

Sale of Assets

Extinguishment

Expense

Expense

(Expense)

                     
GAAP as reported

$

(89,163

)

$

(28,314

)

$

(167,095

)

$

(10,963

)

$

(11,878

)

$

(22,033

)

$

(1,272

)

$

4,875

 

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

 

-

 

 

-

 

 

73

 

 

-

 

 

-

 

 

-

 

 

1,127

 

 

-

 

  Restructuring and realignment costs(2)  

 

-

 

 

-

 

 

13

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

57,481

 

 

-

 

 

202

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Inventory step-up expense(4)

 

(25

)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,710

 

 

-

 

 

-

 

  Loss on sale of assets(7)  

 

-

 

 

-

 

 

-

 

 

10,963

 

 

-

 

 

-

 

 

-

 

 

-

 

  Share-based compensation(8)

 

951

 

 

2,343

 

 

18,073

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Depreciation(9)  

 

158

 

 

-

 

 

1,285

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Litigation settlements(10)  

 

-

 

 

-

 

 

1,000

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Upfront, progress and milestone payments related to license                
  and collaboration agreements(11)

 

-

 

 

4,000

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Fees related to refinancing activities (12)  

 

-

 

 

-

 

 

1,033

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Loss on debt extinguishment(13)

 

-

 

 

-

 

 

-

 

 

-

 

 

11,878

 

 

-

 

 

-

 

 

-

 

  Drug substance harmonization costs(14)  

 

234

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Charges relating to discontinuation of Friedreich's ataxia program(15)  

 

1,300

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

  Income tax effect on pre-tax non-GAAP adjustments(16)  

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(15,621

)

  Other non-GAAP income tax adjustments(17)  

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,452

)

  Total of non-GAAP adjustments

 

60,099

 

 

6,343

 

 

21,679

 

 

10,963

 

 

11,878

 

 

5,710

 

 

1,127

 

 

(17,073

)

                     
Non-GAAP

$

(29,064

)

$

(21,971

)

$

(145,416

)

$

-

 

$

-

 

$

(16,323

)

$

(145

)

$

(12,198

)

                   

Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended June 30, 2018

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax

 

 

 

 

 

 

Research &

Selling, General

Interest

Benefit

 

 

 

 

 

COGS

Development

& Administrative

Expense

(Expense)

 

 

                   
GAAP as reported    

$

(91,337

)

$

(24,265

)

$

(176,674

)

$

(31,030

)

$

(4,621

)

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

 

(664

)

 

18

 

 

1,724

 

 

-

 

 

-

 

   
Restructuring and realignment costs(2)  

 

-

 

 

1,733

 

 

5,306

 

 

-

 

 

-

 

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

 

60,277

 

 

-

 

 

202

 

 

-

 

 

-

 

   
Inventory step-up expense(4)

 

53

 

 

-

 

 

-

 

 

-

 

 

-

 

   
Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

5,691

 

 

-

 

   
Share-based compensation(8)

 

1,110

 

 

2,209

 

 

27,402

 

 

-

 

 

-

 

   
Depreciation(9)  

 

176

 

 

-

 

 

1,375

 

 

-

 

 

-

 

   
Litigation settlements(10)  

 

-

 

 

-

 

 

4,250

 

 

-

 

 

-

 

   
Fees related to refinancing activities (12)  

 

-

 

 

-

 

 

15

 

 

-

 

 

-

 

   
Drug substance harmonization costs(14)  

 

475

 

 

-

 

 

-

 

 

-

 

 

-

 

   
Charges relating to discontinuation of Friedreich's ataxia program(15)  

 

185

 

 

87

 

 

-

 

 

-

 

 

-

 

   
Income tax effect on pre-tax non-GAAP adjustments(16)  

 

-

 

 

-

 

 

-

 

 

-

 

 

(6,356

)

   
Total of non-GAAP adjustments

 

61,612

 

 

4,047

 

 

40,274

 

 

5,691

 

 

(6,356

)

   
                   
Non-GAAP

$

(29,725

)

$

(20,218

)

$

(136,400

)

$

(25,339

)

$

(10,977

)

   
                     

 

Horizon Therapeutics plc

 

 

Certain Income Statement Line Items - Non-GAAP Adjusted

 

 

For the Six Months Ended June 30, 2019

 

 

(Unaudited)

 

     

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

Income Tax

     

 

Research &

Selling, General

Loss on

Interest

Other

Loss on Debt

Benefit

     

COGS

Development

& Administrative

Sale of Assets

Expense

Expense

Extinguishment

(Expense)

                     
GAAP as reported

$

(177,305

)

$

(50,039

)

$

(339,394

)

$

(10,963

)

$

(49,563

)

$

(1,083

)

$

(17,464

)

$

6,795

 

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

 

1,114

 

 

-

 

 

164

 

 

-

 

 

-

 

 

1,268

 

 

-

 

 

-

 

Restructuring and realignment costs(2)

 

-

 

 

-

 

 

33

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

114,699

 

 

-

 

 

401

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(4)

 

90

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

11,622

 

 

-

 

 

-

 

 

-

 

Loss on sale of assets(7)

 

-

 

 

-

 

 

-

 

 

10,963

 

 

-

 

 

-

 

 

-

 

 

-

 

Share-based compensation(8)  

 

1,990

 

 

4,979

 

 

41,946

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

317

 

 

-

 

 

2,599

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Litigation settlements(10)

 

-

 

 

-

 

 

1,000

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Upfront, progress and milestone payments related to license                
and collaboration agreements(11)

 

-

 

 

6,000

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Fees related to refinancing activities (12)

 

-

 

 

-

 

 

1,175

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Loss on debt extinguishment(13)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

17,464

 

 

-

 

Drug substance harmonization costs(14)

 

314

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Charges relating to discontinuation of Friedreich's ataxia program(15)

 

1,221

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(16)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(30,372

)

Other non-GAAP income tax adjustments(17)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,452

)

Total of non-GAAP adjustments

 

119,745

 

 

10,979

 

 

47,318

 

 

10,963

 

 

11,622

 

 

1,268

 

 

17,464

 

 

(31,824

)

                     
Non-GAAP    

$

(57,560

)

$

(39,060

)

$

(292,076

)

$

-

 

$

(37,941

)

$

185

 

$

-

 

$

(25,029

)

                     
     

Horizon Therapeutics plc

   
     

Certain Income Statement Line Items - Non-GAAP Adjusted

   
     

For the Six Months Ended June 30, 2018

   
     

(Unaudited)

   
     

 

 

 

 

 

 

   
     

 

 

 

 

 

 

   
     

 

 

 

 

 

Income Tax

   
     

 

Research &

Selling, General

Impairment of

Interest

Benefit

   
     

COGS

Development

& Administrative

Long-Lived Assets

Expense

(Expense)

   
                     
GAAP as reported    

$

(201,625

)

$

(41,910

)

$

(356,273

)

$

(33,647

)

$

(61,484

)

$

(5,566

)

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

 

68

 

 

(67

)

 

5,800

 

 

-

 

 

-

 

 

-

 

   
Restructuring and realignment costs(2)

 

-

 

 

1,733

 

 

8,574

 

 

-

 

 

-

 

 

-

 

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

 

120,961

 

 

-

 

 

402

 

 

-

 

 

-

 

 

-

 

   
Inventory step-up expense(4)

 

17,129

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

   
Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

11,187

 

 

-

 

   
Impairment of long lived assets(6)

 

-

 

 

-

 

 

-

 

 

33,647

 

 

-

 

 

-

 

   
Share-based compensation(8)

 

1,893

 

 

4,649

 

 

52,012

 

 

-

 

 

-

 

 

-

 

   
Depreciation(9)

 

353

 

 

-

 

 

2,751

 

 

-

 

 

-

 

 

-

 

   
Litigation settlements(10)

 

-

 

 

-

 

 

4,250

 

 

-

 

 

-

 

 

-

 

   
Upfront, progress and milestone payments related to license                
and collaboration agreements(11)

 

-

 

 

90

 

 

-

 

 

-

 

 

-

 

 

-

 

   
Fees related to refinancing activities (12)

 

-

 

 

-

 

 

42

 

 

-

 

 

-

 

 

-

 

   
Drug substance harmonization costs(14)

 

1,279

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

   
Charges relating to discontinuation of Friedreich's ataxia program(15)

 

1,135

 

 

87

 

 

-

 

 

-

 

 

-

 

 

-

 

   
Income tax effect on pre-tax non-GAAP adjustments(16)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

26,638

 

   
Other non-GAAP income tax adjustments(17)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(35,893

)

   
Total of non-GAAP adjustments

 

142,818

 

 

6,492

 

 

73,831

 

 

33,647

 

 

11,187

 

 

(9,255

)

   
                     
Non-GAAP

$

(58,807

)

$

(35,418

)

$

(282,442

)

$

-

 

$

(50,297

)

$

(14,821

)

   

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.
     
  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 ACTIMMUNE, BUPHENYL, KRYSTEXXA, LODOTRA, MIGERGOT, PENNSAID 2%, PROCYSBI, RAVICTI, VIMOVO and RAYOS.
     
  4. During the six months ended June 30, 2018, we recognized in cost of goods sold $17.1 million for inventory step-up expense primarily related to KRYSTEXXA inventory sold.
     
  5. Represents amortization of debt discount and deferred financing costs associated with our debt.
     
  6. Impairment of long-lived assets during the six months ended June 30, 2018, relates to the write-off of the book value of developed technology related to PROCYSBI in Canada and Latin America.
     
  7. During the six months ended June 30, 2019, we recorded a loss of $10.9 million on the sale of our rights to MIGERGOT.
     
  8. Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employees and our employee share purchase plan.
     
  9. Represents depreciation expense related to our property, equipment, software and leasehold improvements.
     
  10. The company recorded $1.0 million and $4.3 million of expense during the three months ended June 30, 2019, and June 30, 2018, respectively, for litigation settlements.
     
  11. During the six months ended June 30, 2019, we recorded an upfront cash payment of $2.0 million and a $4.0 million progress payment in relation to the collaboration agreement with HemoShear.
     
  12. Represents arrangement and other fees relating to our refinancing activities.
     
  13. During the six months ended June 30, 2019, we recorded a loss on debt extinguishment of $17.5 million in the condensed consolidated statements of comprehensive loss, which reflected the write-off of the deferred financing fees and debt discount fees related to the prepayment of $225.0 million of 2023 Senior Notes and term loan repayments of $300.0 million.
     
  14. 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 study 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.
     
  15. Represents expenses incurred relating to discontinuation of Friedreich’s ataxia program and a reduction to previous charges recorded.
     
  16. 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.
     
  17. Following Notice 2018-28, issued by the U.S. Treasury Department and the U.S. Internal Revenue Service on April 2, 2018 and in accordance with the measurement period provisions under Staff Accounting Bulletin No. 118, or SAB 118, during the six months ended June 30, 2019 we reinstated the deferred tax asset previously written off during the year ended December 31, 2017, related to our U.S. interest expense carry forwards under Section 163(j) of the Internal Revenue Code of 1986, as amended, based on the revised U.S. federal tax rate of 21 percent. The impact of the deferred tax asset reinstatement in accordance with SAB 118 was a $35.9 million increase to our benefit for income taxes and a corresponding decrease to the U.S. group net deferred tax liability position.

    During the three months ended June 30, 2019 the Company released a reserve related to an uncertain tax position in connection with an acquisition resulting in a non-GAAP tax adjustment of $1.5 million.

 

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