Horizon Therapeutics plc Reports Strong Third-Quarter 2019 Results

Horizon Therapeutics plc Reports Strong Third-Quarter 2019 Results

11/06/19

-- Third-Quarter 2019 Net Sales of $335.5 Million Increased 3 Percent;
Third-Quarter 2019 GAAP Net Income of $18.2 Million; Adjusted EBITDA of $130.4 Million --

-- Record Quarterly Orphan and Rheumatology Segment Net Sales of $250.4 Million, an Increase
of 14 Percent;
Segment Represents Approximately 75 Percent of Total Company Net Sales;
KRYSTEXXA® Third-Quarter 2019 Net Sales of $99.6 Million Increased 42 Percent --

-- Maintaining Full-Year 2019 Net Sales Guidance Range of $1.28 to $1.30 Billion;
Raising Midpoint of Full-Year 2019 Adjusted EBITDA Guidance; Range is Now
$465 Million to $475 Million;

KRYSTEXXA Full-Year 2019 Net Sales Growth Expected to Be Greater Than 25 Percent --

-- Granted U.S. FDA Priority Review of Teprotumumab with March 8, 2020, PDUFA Date --

-- Initiated PROTECT Trial Evaluating KRYSTEXXA to Improve Management of
Uncontrolled Gout for Adults with a Kidney Transplant -- 

-- Presented Phase 3 Teprotumumab Secondary Endpoint Data Demonstrating Significantly Reduced
Double Vision and Improved Quality of Life for Active Thyroid Eye Disease (TED) Patients --

-- Cash Position of $884 Million; Net Leverage of 1.1 Times as of Sept. 30, 2019 --

DUBLIN--(BUSINESS WIRE)--Nov. 6, 2019-- Horizon Therapeutics plc (Nasdaq: HZNP) today announced its third-quarter 2019 financial results and raised the midpoint of its full-year 2019 adjusted EBITDA guidance.

“Our third-quarter performance underscores the strength of our commercial and R&D organizations,” said Timothy Walbert, chairman, president and chief executive officer, Horizon. “We generated record quarterly net sales in our orphan and rheumatology segment – including a record quarter for net sales of KRYSTEXXA, our medicine for uncontrolled gout – and the U.S. FDA also granted Priority Review of our BLA for teprotumumab, our biologic candidate for the treatment of active thyroid eye disease. We made great progress on all fronts during the quarter, including our market education activities related to teprotumumab, and remain excited about the prospect of being able to address the significant unmet need for patients living with active thyroid eye disease.”

Financial Highlights

(in millions except for per share amounts and percentages)   Q3 19   Q3 18   % Change   YTD 19   YTD 18   % Change
                         
Net sales  

$

335.5

 

$

325.3

 

3

 

 

$

936.5

 

 

$

852.0

 

 

10

Net income (loss)  

 

18.2

 

 

33.4

 

(45

)

 

 

(19.7

)

 

 

(140.0

)

 

86

Non-GAAP net income  

 

124.1

 

 

112.6

 

10

 

 

 

273.6

 

 

 

197.9

 

 

38

Adjusted EBITDA  

 

130.4

 

 

149.9

 

(13

)

 

 

342.9

 

 

 

300.3

 

 

14

                         
Earnings (Loss) per share - diluted  

 

0.09

 

 

0.19

 

(53

)

 

 

(0.11

)

 

 

(0.84

)

 

87

Non-GAAP earnings per share - diluted  

 

0.64

 

 

0.65

 

(2

)

 

 

1.44

 

 

 

1.16

 

 

24

                         

Third-Quarter and Recent Company Highlights

  • Granted Priority Review of Teprotumumab BLA: In September, the Company announced the U.S. Food and Drug Administration (FDA) accepted the Biologics License Application (BLA) for its investigational medicine teprotumumab for the treatment of active TED and granted it Priority Review designation, with a March 8, 2020, Prescription Drug User Fee Act (PDUFA) date. If approved, teprotumumab would be the first and only approved treatment for active TED.
  • Presented Additional Teprotumumab Phase 3 Data: The Company recently presented additional data from the Phase 3 OPTIC confirmatory clinical trial showing that teprotumumab provided significant benefit on several devastating effects of active TED compared with placebo, including diplopia (double vision), quality of life (QoL) and clinical activity score (CAS). At Week 24, 68 percent of teprotumumab patients had a change from baseline of at least 1 grade in diplopia, compared to 29 percent of placebo patients (p=0.001). On the Graves' Ophthalmopathy Quality of Life (GO-QoL) scale, a change of 6 points is considered clinically significant, and teprotumumab patients had a mean change of 13.79 compared to 4.43 for placebo patients (p<0.001). At Week 24, 59 percent of teprotumumab patients achieved a CAS value of 0 or 1 compared to 21 percent of placebo patients (p<0.001). These data were presented during the American Society of Ophthalmic Plastic and Reconstructive Surgery (ASOPRS) 50th Anniversary 2019 Fall Scientific Symposium in San Francisco, and build upon data presented earlier in the year that demonstrated the significant benefit of teprotumumab on proptosis.
  • Announced Teprotumumab Expanded Access Program (EAP): In August, the Company announced an EAP for teprotumumab while the FDA reviews the BLA. The EAP provides access to teprotumumab for patients with active TED who meet protocol criteria, who may have otherwise progressed to the inactive stage of the debilitating disease before the BLA review process is completed.
  • Initiated PROTECT Trial Evaluating KRYSTEXXA to Improve Management of Uncontrolled Gout for Adults with a Kidney Transplant: In October, 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 provides 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.
  • Further Improved the Company’s Capital Structure: In July, the Company issued $600 million of 5.5 percent Senior Notes due 2027 and used the proceeds together with cash on hand to repay $625 million of its outstanding debt. These actions reduced interest expense and extended the maturity of the debt, furthering the Company’s strategy to improve its capital structure. The Company has reduced its gross debt by $575 million in the year-to-date period ended Sept. 30, 2019.
  • Intellectual Property Update: In October, the Federal Circuit Court of Appeals issued a decision in favor of the Company regarding an appeal of the 2017 decision by the United States District Court for the District of New Jersey upholding the validity of a PENNSAID® 2% patent that expires in 2027.
  • Gender and Ethnicity Pay Equity Demonstrated; Received Best Medium Workplace Award: A recent study conducted by Aon, a leading compensation consulting firm, showed that Horizon demonstrates both gender and ethnicity pay equity, ranking in the top five of the roughly 100 companies Aon has studied in this regard, and in line with the value the Company places on diversity. In addition, the Company was selected to FORTUNE Magazine’s 2019 “Best Medium Workplaces” list for the fourth consecutive year, ranking eighth out of 100 other medium sized companies.
  • Appointed Sue Mahony to the Board of Directors: In August, the Company 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.
  • Named Andy Pasternak Executive Vice President, Chief Business Officer: In August, the Company named Andy Pasternak executive vice president, chief business officer, effective Nov. 1. Pasternak leads business development, mergers and acquisitions, corporate strategy, commercial development and portfolio management.

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. TED is a serious, progressive, vision-threatening autoimmune disease in which the muscles and fatty tissue behind the eye become inflamed and expand, which 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 results from the confirmatory Phase 3 OPTIC clinical trial, announced in February 2019, as well as positive Phase 2 results published in The New England Journal of Medicine in May 2017. 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 MIRROR Immunomodulation Trial: The Company is evaluating the use of methotrexate to increase the response rate with KRYSTEXXA. This evaluation was initiated through the small open-label MIRROR pilot study, followed by the larger MIRROR registrational clinical trial. 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. The MIRROR registrational trial commenced in June.
  • KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout: In October, the Company initiated PROTECT, its clinical trial 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 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 (HemoShear) to discover new targets for gout.

Third-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: Third-quarter 2019 net sales were $335.5 million, an increase of 3 percent.
  • Gross Profit: Under U.S. GAAP, the third-quarter 2019 gross profit ratio was 73.2 percent compared to 72.0 percent in the third quarter of 2018. The non-GAAP gross profit ratio in the third quarter of 2019 was 90.7 percent compared to 91.2 percent in the third quarter of 2018.
  • Operating Expenses: Research and development (R&D) expenses were 7.3 percent of net sales and selling, general and administrative (SG&A) expenses were 51.4 percent of net sales. Non-GAAP R&D expenses were 5.8 percent of net sales, and non-GAAP SG&A expenses were 46.2 percent of net sales.
  • Income Tax Rate: In the third quarter of 2019, the income tax rates on a GAAP and non-GAAP basis were 247.9 percent and negative 7.5 percent, respectively.
  • Net Income: On a GAAP basis in the third quarter of 2019, net income was $18.2 million. Third-quarter 2019 non-GAAP net income was $124.1 million.
  • Adjusted EBITDA: Third-quarter 2019 adjusted EBITDA was $130.4 million.
  • Earnings per Share: On a GAAP basis, diluted earnings per share in the third quarter of 2019 and 2018 were $0.09 and $0.19, respectively. Non-GAAP diluted earnings per share in the third quarter of 2019 and 2018 were $0.64 and $0.65, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the third quarter of 2019 were 194.2 million.

Third-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) Q3 19   Q3 18   % Change   YTD 19   YTD 18   % Change  
                           
KRYSTEXXA

 

99.6

 

 

70.2

 

42

 

 

 

231.6

 

 

175.6

 

32

 

 
RAVICTI®(1)

 

60.0

 

 

60.4

 

(1

)

 

 

160.3

 

 

166.5

 

(4

)

 
PROCYSBI®  

 

40.4

 

 

41.4

 

(2

)

 

 

121.1

 

 

114.7

 

6

 

 
ACTIMMUNE®

 

27.9

 

 

25.8

 

8

 

 

 

78.9

 

 

78.1

 

1

 

 
RAYOS®

 

19.3

 

 

17.2

 

13

 

 

 

59.1

 

 

41.3

 

43

 

 
BUPHENYL®(1)  

 

3.0

 

 

4.4

 

(30

)

 

 

8.2

 

 

15.3

 

(47

)

 
QUINSAIRTM

 

0.2

 

 

0.1

 

67

 

 

 

0.6

 

 

0.3

 

59

 

 
LODOTRA®(1)

 

-

 

 

0.4

 

NM

 

 

 

-

 

 

2.0

 

NM

 

 
Orphan and Rheumatology Net Sales

$

250.4

 

$

219.9

 

14

 

 

$

659.8

 

$

593.8

 

11

 

 
                           
Orphan and Rheumatology Segment Operating Income

$

89.8

 

$

91.5

 

(2

)

 

$

211.0

 

$

205.3

 

3

 

 

(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.

  • Third-quarter 2019 net sales of the orphan and rheumatology segment, the Company’s strategic growth segment, were $250.4 million, an increase of 14 percent over the prior year’s quarter, driven by growth of KRYSTEXXA, ACTIMMUNE and RAYOS. The orphan and rheumatology segment represents approximately 75 percent of total Company net sales.
  • Third-quarter 2019 orphan and rheumatology segment operating income was $89.8 million, which includes the impact of investment in teprotumumab pre-launch activities.

Inflammation Segment

(in millions except for percentages) Q3 19   Q3 18   % Change   YTD 19   YTD 18   % Change
                         
PENNSAID 2%

 

42.1

 

 

51.5

 

(18

)

 

 

143.7

 

 

125.9

 

14

 

DUEXIS®

 

29.9

 

 

34.2

 

(13

)

 

 

89.4

 

 

80.6

 

11

 

VIMOVO®

 

13.1

 

 

18.6

 

(30

)

 

 

41.8

 

 

48.9

 

(15

)

MIGERGOT®(1)

 

-

 

 

1.1

 

NM

 

 

 

1.8

 

 

2.8

 

(34

)

Inflammation Net Sales

$

85.1

 

$

105.4

 

(19

)

 

$

276.7

 

$

258.2

 

7

 

                         
Inflammation Segment Operating Income

$

39.6

 

$

58.0

 

(32

)

 

$

130.8

 

$

94.3

 

39

 

(1)

 

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

  • Third-quarter 2019 net sales of the inflammation segment were $85.1 million and segment operating income was $39.6 million.

Cash Flow Statement and Balance Sheet Highlights

  • On a GAAP basis in the third quarter of 2019, operating cash flow was $87.5 million. Non-GAAP operating cash flow was $96.5 million.
  • The Company had cash and cash equivalents of $884.0 million as of Sept. 30, 2019.
  • In July, the Company issued $600 million of 5.5 percent Senior Notes due 2027 and used the proceeds along with cash on hand to repay $625 million of its outstanding debt.

    As of Sept. 30, 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 Sept. 30, 2019, net debt was $534.1 million and net-debt-to-last-12-months adjusted EBITDA leverage ratio was 1.1 times, compared to 2.9 times at Sept. 30, 2018.

2019 Guidance

The Company continues to expect full-year 2019 net sales to range between $1.28 billion and $1.30 billion. The Company now expects full-year 2019 adjusted EBITDA to range between $465 million and $475 million, versus the previous guidance range of $460 million to $475 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 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, 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 for teprotumumab; 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, 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 September 30,   Nine Months Ended September 30,
           

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

                 
  Net sales      

$

335,466

 

 

$

325,311

 

 

$

936,484

 

 

$

852,027

 

  Cost of goods sold    

 

89,949

 

 

 

91,077

 

 

 

267,254

 

 

 

292,702

 

  Gross profit      

 

245,517

 

 

 

234,234

 

 

 

669,230

 

 

 

559,325

 

                         
  OPERATING EXPENSES:                  
  Research and development    

 

24,572

 

 

 

21,169

 

 

 

74,611

 

 

 

63,079

 

  Selling, general and administrative  

 

172,326

 

 

 

161,585

 

 

 

511,720

 

 

 

517,858

 

  (Gain)/Loss on sale of assets    

 

-

 

 

 

(12,303

)

 

 

10,963

 

 

 

(12,303

)

  Impairment of long-lived assets  

 

-

 

 

 

1,603

 

 

 

-

 

 

 

35,249

 

  Total operating expenses  

 

196,898

 

 

 

172,054

 

 

 

597,294

 

 

 

603,883

 

  Operating income (loss)    

 

48,619

 

 

 

62,180

 

 

 

71,936

 

 

 

(44,558

)

                         
  OTHER EXPENSE, NET:                  
  Interest expense, net    

 

(20,428

)

 

 

(30,437

)

 

 

(69,991

)

 

 

(91,921

)

  Loss on debt extinguishment    

 

(41,371

)

 

 

-

 

 

 

(58,835

)

 

 

-

 

  Foreign exchange (loss) gain    

 

(40

)

 

 

35

 

 

 

(25

)

 

 

(81

)

  Other income (expense), net    

 

890

 

 

 

337

 

 

 

(193

)

 

 

834

 

  Total other expense, net  

 

(60,949

)

 

 

(30,065

)

 

 

(129,044

)

 

 

(91,168

)

                         
  (Loss) Income before (benefit) expense for income taxes  

 

(12,330

)

 

 

32,115

 

 

 

(57,108

)

 

 

(135,726

)

  (Benefit) expense for income taxes  

 

(30,564

)

 

 

(1,266

)

 

 

(37,359

)

 

 

4,301

 

  Net income (loss)      

$

18,234

 

 

$

33,381

 

 

$

(19,749

)

 

$

(140,027

)

                         
  Earnings (Loss) per ordinary share - basic        

$

0.10

 

 

$

0.20

 

 

$

(0.11

)

 

$

(0.84

)

                         
  Weighted average ordinary shares outstanding - basic  

 

186,470,141

 

 

 

167,047,104

 

 

 

181,949,838

 

 

 

166,018,603

 

                         
  Earnings (Loss) per ordinary share - diluted  

$

0.09

 

 

$

0.19

 

 

$

(0.11

)

 

$

(0.84

)

                         
  Weighted average ordinary shares outstanding - diluted  

 

194,171,967

 

 

 

172,485,757

 

 

 

181,949,838

 

 

 

166,018,603

 

Horizon Therapeutics plc
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
                   
                   
              As of
              September 30,
2019
  December 31,
2018
  ASSETS    
  CURRENT ASSETS:        
    Cash and cash equivalents  

$

883,964

 

 

$

958,712

 

    Restricted cash  

 

3,746

 

 

 

3,405

 

    Accounts receivable, net  

 

396,626

 

 

 

464,730

 

    Inventories, net  

 

58,505

 

 

 

50,751

 

    Prepaid expenses and other current assets  

 

135,963

 

 

 

68,218

 

        Total current assets  

 

1,478,804

 

 

 

1,545,816

 

  Property and equipment, net  

 

26,202

 

 

 

20,101

 

  Developed technology, net  

 

1,756,493

 

 

 

1,945,639

 

  Other intangible assets, net  

 

4,024

 

 

 

4,630

 

  Goodwill    

 

413,669

 

 

 

413,669

 

  Deferred tax assets, net  

 

45

 

 

 

3,148

 

  Other assets  

 

42,185

 

 

 

8,959

 

  Total assets  

$

3,721,422

 

 

$

3,941,962

 

                   
  LIABILITIES AND SHAREHOLDERS' EQUITY        
  CURRENT LIABILITIES:        
    Accounts payable  

$

26,906

 

 

$

30,284

 

    Accrued expenses  

 

204,164

 

 

 

215,739

 

    Accrued trade discounts and rebates  

 

404,544

 

 

 

457,763

 

    Deferred revenues, current portion  

 

-

 

 

 

4,901

 

        Total current liabilities  

 

635,614

 

 

 

708,687

 

                   
  LONG-TERM LIABILITIES:        
    Exchangeable notes, net  

 

346,541

 

 

 

332,199

 

    Long-term debt, net  

 

1,000,819

 

 

 

1,564,485

 

    Deferred tax liabilities, net  

 

112,968

 

 

 

107,768

 

    Other long-term liabilities  

 

69,907

 

 

 

38,717

 

        Total long-term liabilities  

 

1,530,235

 

 

 

2,043,169

 

                   
  COMMITMENTS AND CONTINGENCIES        
  SHAREHOLDERS' EQUITY:        
    Ordinary shares, $0.0001 nominal value; 600,000,000 and 300,000,000 shares        
      authorized at September 30, 2019 and December 31, 2018, respectively;        
      187,174,795 and 169,244,520 shares issued at September 30, 2019 and        
      December 31, 2018, respectively, and 186,790,429 and 168,860,154 shares        
      outstanding at September 30, 2019 and December 31, 2018, respectively  

 

19

 

 

 

17

 

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

 

(4,585

)

 

 

(4,585

)

    Additional paid-in capital  

 

2,761,068

 

 

 

2,374,966

 

    Accumulated other comprehensive loss  

 

(2,475

)

 

 

(1,523

)

    Accumulated deficit  

 

(1,198,454

)

 

 

(1,178,769

)

        Total shareholders' equity  

 

1,555,573

 

 

 

1,190,106

 

  Total liabilities and shareholders' equity  

$

3,721,422

 

 

$

3,941,962

 

Horizon Therapeutics plc
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
                     
                 
        Three Months Ended September 30,   Nine Months Ended September 30,
       

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

             
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net income (loss)

$

18,234

 

 

$

33,381

 

 

$

(19,749

)

 

$

(140,027

)

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

 

59,319

 

 

 

62,668

 

 

 

177,336

 

 

 

187,135

 

Equity-settled share-based compensation

 

18,151

 

 

 

28,428

 

 

 

67,066

 

 

 

86,981

 

Impairment of long-lived assets

 

-

 

 

 

1,603

 

 

 

-

 

 

 

35,249

 

Loss on debt extinguishment

 

41,371

 

 

 

-

 

 

 

58,835

 

 

 

-

 

Amortization of debt discount and deferred financing costs

 

5,447

 

 

 

5,694

 

 

 

17,069

 

 

 

16,879

 

(Gain)/Loss on sale of assets

 

-

 

 

 

(12,303

)

 

 

10,963

 

 

 

(12,303

)

Deferred income taxes    

 

9,559

 

 

 

3,398

 

 

 

8,302

 

 

 

1,645

 

Foreign exchange and other adjustments

 

77

 

 

 

(219

)

 

 

572

 

 

 

243

 

Changes in operating assets and liabilities:              
Accounts receivable

 

(1,625

)

 

 

12,318

 

 

 

68,162

 

 

 

14,060

 

Inventories

 

(7,500

)

 

 

(3,647

)

 

 

(8,004

)

 

 

7,902

 

Prepaid expenses and other current assets

 

(54,358

)

 

 

(13,788

)

 

 

(72,055

)

 

 

(35,526

)

Accounts payable

 

(14,892

)

 

 

33,711

 

 

 

(3,338

)

 

 

30,119

 

Accrued trade discounts and rebates

 

5,910

 

 

 

(90,026

)

 

 

(53,241

)

 

 

(142,164

)

Accrued expenses

 

17,481

 

 

 

21,926

 

 

 

(10,591

)

 

 

35,581

 

Deferred revenues

 

(7,311

)

 

 

1,130

 

 

 

(4,901

)

 

 

1,462

 

Other non-current assets and liabilities

 

(2,347

)

 

 

586

 

 

 

(1,474

)

 

 

(1,401

)

Net cash provided by operating activities

 

87,516

 

 

 

84,860

 

 

 

234,952

 

 

 

85,835

 

CASH FLOWS FROM INVESTING ACTIVITIES:              
Payment related to license agreement

 

-

 

 

 

-

 

 

 

-

 

 

 

(12,000

)

Proceeds from sale of assets

 

-

 

 

 

9,424

 

 

 

6,000

 

 

 

9,424

 

Purchases of property and equipment

 

(4,467

)

 

 

(120

)

 

 

(11,325

)

 

 

(881

)

Net cash (used in) provided by investing activities

 

(4,467

)

 

 

9,304

 

 

 

(5,325

)

 

 

(3,457

)

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

 

590,057

 

 

 

-

 

 

 

590,057

 

 

 

-

 

Repayment of senior notes

 

(556,138

)

 

 

-

 

 

 

(814,420

)

 

 

-

 

Net proceeds from the issuance of ordinary shares

 

-

 

 

 

-

 

 

 

326,793

 

 

 

-

 

Repayment of term loans

 

(100,155

)

 

 

-

 

 

 

(918,181

)

 

 

(27,723

)

Net proceeds from term loans

 

-

 

 

 

-

 

 

 

517,378

 

 

 

-

 

Contingent consideration proceeds from divestiture

 

3,297

 

 

 

-

 

 

 

3,297

 

 

 

-

 

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

 

3

 

 

 

(23

)

 

 

5,468

 

 

 

4,711

 

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

 

4,207

 

 

 

6,081

 

 

 

16,236

 

 

 

9,753

 

Payment of employee withholding taxes relating to share-based awards

 

(5,086

)

 

 

(3,697

)

 

 

(29,460

)

 

 

(12,882

)

Net cash (used in) provided by financing activities

 

(63,815

)

 

 

2,361

 

 

 

(302,832

)

 

 

(26,141

)

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

 

(1,260

)

 

 

316

 

 

 

(1,202

)

 

 

(688

)

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

 

17,974

 

 

 

96,841

 

 

 

(74,407

)

 

 

55,549

 

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

 

869,736

 

 

 

716,605

 

 

 

962,117

 

 

 

757,897

 

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

$

887,710

 

 

$

813,446

 

 

$

887,710

 

 

$

813,446

 

                     
                     
                     
(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 September 30,   Nine Months Ended September 30,
       

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

                 
                     
  GAAP net income (loss)

$

18,234

 

 

$

33,381

 

 

$

(19,749

)

 

$

(140,027

)

  Non-GAAP adjustments:              
  Acquisition/divestiture-related costs

 

67

 

 

 

302

 

 

 

2,613

 

 

 

6,179

 

  Restructuring and realignment costs

 

-

 

 

 

4,582

 

 

 

33

 

 

 

14,815

 

  Amortization and step-up:              
  Intangible amortization expense

 

57,662

 

 

 

61,144

 

 

 

172,762

 

 

 

182,508

 

  Inventory step-up expense

 

-

 

 

 

83

 

 

 

90

 

 

 

17,212

 

  Amortization of debt discount and deferred financing costs

 

5,447

 

 

 

5,694

 

 

 

17,069

 

 

 

16,880

 

  Impairment of long-lived assets

 

-

 

 

 

1,603

 

 

 

-

 

 

 

35,249

 

  (Gain)/Loss on sale of assets  

 

-

 

 

 

(12,303

)

 

 

10,963

 

 

 

(12,303

)

  Share-based compensation  

 

18,151

 

 

 

28,428

 

 

 

67,066

 

 

 

86,981

 

  Depreciation

 

1,658

 

 

 

1,523

 

 

 

4,574

 

 

 

4,627

 

  Litigation settlements

 

-

 

 

 

1,500

 

 

 

1,000

 

 

 

5,750

 

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

 

3,073

 

 

 

(100

)

 

 

9,073

 

 

 

(10

)

  Fees related to refinancing activities

 

262

 

 

 

40

 

 

 

1,437

 

 

 

82

 

  Loss on debt extinguishment

 

41,371

 

 

 

-

 

 

 

58,835

 

 

 

-

 

  Drug substance harmonization costs

 

80

 

 

 

301

 

 

 

394

 

 

 

1,579

 

  Charges relating to discontinuation of Friedreich's ataxia program

 

-

 

 

 

254

 

 

 

1,221

 

 

 

1,476

 

  Total of pre-tax non-GAAP adjustments

 

127,771

 

 

 

93,051

 

 

 

347,130

 

 

 

361,025

 

  Income tax effect of pre-tax non-GAAP adjustments  

 

(21,919

)

 

 

(13,865

)

 

 

(52,291

)

 

 

12,774

 

  Other non-GAAP income tax adjustments

 

-

 

 

 

-

 

 

 

(1,452

)

 

 

(35,893

)

  Total of non-GAAP adjustments

 

105,852

 

 

 

79,186

 

 

 

293,387

 

 

 

337,906

 

  Non-GAAP Net Income    

$

124,086

 

 

$

112,567

 

 

$

273,638

 

 

$

197,879

 

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

 

186,470,141

 

 

 

167,047,104

 

 

 

181,949,838

 

 

 

166,018,603

 

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

$

0.10

 

 

$

0.20

 

 

$

(0.11

)

 

$

(0.84

)

  Non-GAAP adjustments  

 

0.57

 

 

 

0.47

 

 

 

1.61

 

 

 

2.03

 

  Non-GAAP earnings per share - Basic  

$

0.67

 

 

$

0.67

 

 

$

1.50

 

 

$

1.19

 

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

 

186,470,141

 

 

 

167,047,104

 

 

 

181,949,838

 

 

 

166,018,603

 

  Ordinary share equivalents

 

7,701,826

 

 

 

5,438,653

 

 

 

7,747,931

 

 

 

4,621,407

 

  Weighted average shares - Diluted

 

194,171,967

 

 

 

172,485,757

 

 

 

189,697,769

 

 

 

170,640,010

 

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

$

0.09

 

 

$

0.19

 

 

$

(0.11

)

 

$

(0.84

)

  Non-GAAP adjustments  

 

0.55

 

 

 

0.46

 

 

 

1.61

 

 

 

2.03

 

  Diluted earnings per share effect of ordinary share equivalents  

 

-

 

 

 

-

 

 

 

(0.06

)

 

 

(0.03

)

  Non-GAAP earnings per share - Diluted  

$

0.64

 

 

$

0.65

 

 

$

1.44

 

 

$

1.16

 

Horizon Therapeutics plc
GAAP to Non-GAAP Reconciliations
GAAP Net Income to Adjusted EBITDA (Unaudited)
(in thousands)
               
                     
       

Three Months Ended September 30,

 

Nine Months Ended September 30,

       

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

                 
                     
                     
  GAAP net income (loss)

$

18,234

 

 

$

33,381

 

 

$

(19,749

)

 

$

(140,027

)

  Depreciation

 

1,658

 

 

 

1,523

 

 

 

4,574

 

 

 

4,627

 

  Amortization and step-up:                  
  Intangible amortization expense

 

57,662

 

 

 

61,144

 

 

 

172,762

 

 

 

182,508

 

  Inventory step-up expense  

 

-

 

 

 

83

 

 

 

90

 

 

 

17,212

 

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

 

20,428

 

 

 

30,437

 

 

 

69,991

 

 

 

91,921

 

  (Benefit) expense for income taxes

 

(30,564

)

 

 

(1,266

)

 

 

(37,359

)

 

 

4,301

 

  EBITDA

$

67,418

 

 

$

125,302

 

 

$

190,309

 

 

$

160,542

 

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

 

67

 

 

 

302

 

 

 

2,613

 

 

 

6,179

 

  Restructuring and realignment costs

 

-

 

 

 

4,582

 

 

 

33

 

 

 

14,815

 

  Impairment of long-lived assets

 

-

 

 

 

1,603

 

 

 

-

 

 

 

35,249

 

  (Gain)/Loss on sale of assets

 

-

 

 

 

(12,303

)

 

 

10,963

 

 

 

(12,303

)

  Share-based compensation

 

18,151

 

 

 

28,428

 

 

 

67,066

 

 

 

86,981

 

  Litigation settlements

 

-

 

 

 

1,500

 

 

 

1,000

 

 

 

5,750

 

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

 

3,073

 

 

 

(100

)

 

 

9,073

 

 

 

(10

)

  Fees related to refinancing activities

 

262

 

 

 

40

 

 

 

1,437

 

 

 

82

 

  Loss on debt extinguishment  

 

41,371

 

 

 

-

 

 

 

58,835

 

 

 

-

 

  Drug substance harmonization costs

 

80

 

 

 

301

 

 

 

394

 

 

 

1,579

 

  Charges relating to discontinuation of Friedreich's ataxia program

 

-

 

 

 

254

 

 

 

1,221

 

 

 

1,476

 

  Total of other non-GAAP adjustments    

 

63,004

 

 

 

24,607

 

 

 

152,635

 

 

 

139,798

 

  Adjusted EBITDA    

$

130,422

 

 

$

149,909

 

 

$

342,944

 

 

$

300,340

 

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 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 September 30,   Nine Months Ended September 30,
       

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

                 
                     
  GAAP operating income (loss)

$

48,619

 

 

$

62,180

 

 

$

71,936

 

 

$

(44,558

)

  Non-GAAP adjustments:              
  Acquisition/divestiture-related costs

 

(44

)

 

 

186

 

 

 

1,231

 

 

 

6,035

 

  Restructuring and realignment costs

 

-

 

 

 

4,582

 

 

 

33

 

 

 

14,815

 

  Amortization and step-up:              
  Intangible amortization expense

 

57,662

 

 

 

61,144

 

 

 

172,762

 

 

 

182,508

 

  Inventory step-up expense

 

-

 

 

 

83

 

 

 

90

 

 

 

17,212

 

  Impairment of long-lived assets

 

-

 

 

 

1,603

 

 

 

-

 

 

 

35,249

 

  (Gain)/Loss on sale of assets

 

-

 

 

 

(12,303

)

 

 

10,963

 

 

 

(12,303

)

  Share-based compensation

 

18,151

 

 

 

28,428

 

 

 

67,066

 

 

 

86,981

 

  Depreciation

 

1,658

 

 

 

1,523

 

 

 

4,574

 

 

 

4,627

 

  Litigation settlements

 

-

 

 

 

1,500

 

 

 

1,000

 

 

 

5,750

 

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

 

3,073

 

 

 

-

 

 

 

9,073

 

 

 

90

 

  Fees related to refinancing activities

 

262

 

 

 

40

 

 

 

1,437

 

 

 

82

 

  Drug substance harmonization costs

 

80

 

 

 

301

 

 

 

394

 

 

 

1,579

 

  Charges relating to discontinuation of Friedreich's ataxia program

 

-

 

 

 

254

 

 

 

1,221

 

 

 

1,476

 

  Total of non-GAAP adjustments

 

80,842

 

 

 

87,341

 

 

 

269,844

 

 

 

344,101

 

  Non-GAAP operating income

$

129,461

 

 

$

149,521

 

 

$

341,780

 

 

$

299,543

 

                     
  Orphan and Rheumatology segment operating income

 

89,823

 

 

 

91,537

 

 

 

211,003

 

 

 

205,249

 

  Inflammation segment operating income

 

39,638

 

 

 

57,984

 

 

 

130,777

 

 

 

94,294

 

  Total segment operating income

$

129,461

 

 

$

149,521

 

 

$

341,780

 

 

$

299,543

 

                     
  Foreign exchange (loss)/gain  

 

(40

)

 

 

35

 

 

 

(25

)

 

 

(81

)

  Other income, net  

 

1,001

 

 

 

353

 

 

 

1,189

 

 

 

878

 

  Adjusted EBITDA  

$

130,422

 

 

$

149,909

 

 

$

342,944

 

 

$

300,340

 

Horizon Therapeutics plc
GAAP to Non-GAAP Reconciliations
Gross Profit and Operating Cash Flow (Unaudited)
(in thousands, except percentages)
                 
                   
      Three Months Ended
September 30,
  Nine Months Ended
September 30,
     

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

               
Non-GAAP Gross Profit:                  
                   
GAAP gross profit    

$

245,517

 

 

$

234,234

 

 

$

669,230

 

 

$

559,325

 

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

 

-

 

 

 

(239

)

 

 

1,114

 

 

 

(171

)

Intangible amortization expense  

 

57,458

 

 

 

60,940

 

 

 

172,156

 

 

 

181,902

 

Inventory step-up expense  

 

-

 

 

 

83

 

 

 

90

 

 

 

17,212

 

Share-based compensation  

 

901

 

 

 

874

 

 

 

2,891

 

 

 

2,767

 

Depreciation  

 

158

 

 

 

176

 

 

 

475

 

 

 

529

 

Drug substance harmonization costs  

 

80

 

 

 

301

 

 

 

394

 

 

 

1,579

 

Charges relating to discontinuation of Friedreich's ataxia program

 

-

 

 

 

254

 

 

 

1,221

 

 

 

1,389

 

Total of Non-GAAP adjustments    

 

58,597

 

 

 

62,389

 

 

 

178,341

 

 

 

205,207

 

Non-GAAP gross profit    

$

304,114

 

 

$

296,623

 

 

$

847,571

 

 

$

764,532

 

                   
GAAP gross profit %    

 

73.2

%

 

 

72.0

%

 

 

71.5

%

 

 

65.6

%

Non-GAAP gross profit %    

 

90.7

%

 

 

91.2

%

 

 

90.5

%

 

 

89.7

%

                   
                   
                   
GAAP cash provided by operating activities    

$

87,516

 

 

$

84,860

 

 

$

234,952

 

 

$

85,835

 

Cash payments for acquisition/divestiture-related costs  

 

88

 

 

 

2,299

 

 

 

583

 

 

 

7,854

 

Cash payments for restructuring and realignment costs  

 

382

 

 

 

4,357

 

 

 

3,264

 

 

 

9,034

 

Cash payments for litigation settlements

 

1,000

 

 

 

4,250

 

 

 

1,000

 

 

 

5,750

 

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

 

7,073

 

 

 

(100

)

 

 

9,073

 

 

 

175

 

Cash payments drug substance harmonization costs

 

313

 

 

 

(16

)

 

 

985

 

 

 

5,943

 

Cash payments for discontinuation of Friedreich's ataxia program

 

-

 

 

 

(108

)

 

 

2,589

 

 

 

3,399

 

Cash payments relating to refinancing activities

 

112

 

 

 

26

 

 

 

1,918

 

 

 

57

 

Non-GAAP operating cash flow    

$

96,484

 

 

$

95,568

 

 

$

254,364

 

 

$

118,047

 

Horizon Therapeutics plc

Net Debt Reconciliation (Unaudited)

(in thousands)

               
      As of
      September 30,
2019
  December 31,
2018
  September 30,
2018
               
Long-term debt, net of current    

$

1,000,819

 

$

1,564,485

 

$

1,563,239

Exchangeable notes, net    

 

346,541

 

 

332,199

 

 

327,573

Total Debt    

 

1,347,360

 

 

1,896,684

 

 

1,890,812

Debt discount    

 

65,234

 

 

87,038

 

 

92,473

Deferred financing fees    

 

5,432

 

 

9,304

 

 

9,741

Total Principal Amount of Debt    

 

1,418,026

 

 

1,993,026

 

 

1,993,026

               
Less: cash and cash equivalents    

 

883,964

 

 

958,712

 

 

807,047

Net Debt    

$

534,062

 

$

1,034,314

 

$

1,185,979

Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

           
           
  Q3 2019
  Pre-tax Net
(Loss) Income
Income Tax
(Benefit) Expense
Tax Rate Net Income
(Loss)
Diluted Earnings
(Loss) Per Share
As reported - GAAP

$

(12.3

)

$

(30.6

)

247.9

%

$

18.2

 

$

0.09

 

Non-GAAP adjustments

 

127.8

 

 

21.9

 

 

 

105.9

 

 
Non-GAAP

$

115.5

 

$

(8.7

)

(7.5

)%

$

124.1

 

$

0.64

 

           
           
  Q3 2018
  Pre-tax Net
(Loss) Income
Income Tax
(Benefit) Expense
Tax Rate Net Income
(Loss)
Diluted Earnings
(Loss) Per Share
As reported - GAAP

$

32.1

 

$

(1.3

)

(3.9

)%

$

33.4

 

$

0.19

 

Non-GAAP adjustments

 

93.1

 

 

13.9

 

 

 

79.2

 

 
Non-GAAP

$

125.2

 

$

12.6

 

10.1

%

$

112.6

 

$

0.65

 

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

$

(57.1

)

$

(37.4

)

65.4

%

$

(19.7

)

$

(0.11

)

Non-GAAP adjustments

 

347.1

 

 

53.7

 

 

 

293.4

 

 
Non-GAAP

$

290.0

 

$

16.3

 

5.6

%

$

273.7

 

$

1.44

 

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

$

(135.7

)

$

4.3

 

(3.2

)%

$

(140.0

)

$

(0.84

)

Non-GAAP adjustments

 

361.0

 

 

23.1

 

 

 

337.9

 

 
Non-GAAP

$

225.3

 

$

27.4

 

12.2

%

$

197.9

 

$

1.16

 

                     
      Horizon Therapeutics plc  
      Certain Income Statement Line Items - Non-GAAP Adjusted  
      For the Three Months Ended September 30, 2019  
      (Unaudited)  
                     
                     
     

 

 

 

 

 

 

Income Tax

 
     

 

Research &

Selling, General

Loss on Debt

Interest

Other

Benefit

 
     

COGS

Development

& Administrative

Extinguishment

Expense

Expense

(Expense)

 
                     
GAAP as reported

$

(89,949

)

$

(24,572

)

$

(172,326

)

$

(41,371

)

$

(20,428

)

$

890

 

$

30,564

 

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

 

-

 

 

-

 

 

(44

)

 

-

 

 

-

 

 

111

 

 

-

 

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

 

57,458

 

 

-

 

 

204

 

 

-

 

 

-

 

 

-

 

 

-

 

 
Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

5,447

 

 

-

 

 

-

 

 
Share-based compensation(8)

 

901

 

 

1,953

 

 

15,297

 

 

-

 

 

-

 

 

-

 

 

-

 

 
Depreciation(9)

 

158

 

 

-

 

 

1,500

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

3,073

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 
Fees related to refinancing activities (12)

 

-

 

 

-

 

 

262

 

 

-

 

 

-

 

 

-

 

 

-

 

 
Loss on debt extinguishment(13)

 

-

 

 

-

 

 

-

 

 

41,371

 

 

-

 

 

-

 

 

-

 

 
Drug substance harmonization costs(14)

 

80

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(21,919

)

 
Total of non-GAAP adjustments

 

58,597

 

 

5,026

 

 

17,219

 

 

41,371

 

 

5,447

 

 

111

 

 

(21,919

)

 
                     
Non-GAAP

$

(31,352

)

$

(19,546

)

$

(155,107

)

$

-

 

$

(14,981

)

$

1,001

 

$

8,645

 

 
                     
      Horizon Therapeutics plc  
      Certain Income Statement Line Items - Non-GAAP Adjusted  
      For the Three Months Ended September 30, 2018  
      (Unaudited)  
                     
                     
     

 

 

 

 

 

 

 

Income Tax

     

 

Research &

Selling, General

Impairment of

Loss/(Gain) on

Interest

Other

Benefit

     

COGS

Development

& Administrative

Long-Lived Assets

Sale of Assets

Expense

Income, net

(Expense)

                     
GAAP as reported    

$

(91,077

)

$

(21,169

)

$

(161,585

)

$

(1,603

)

$

12,303

 

$

(30,437

)

$

337

 

$

1,266

 

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

 

(239

)

 

-

 

 

541

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Restructuring and realignment costs(2)

 

-

 

 

-

 

 

4,582

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

60,940

 

 

-

 

 

204

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(4)

 

83

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

5,694

 

 

 

-

 

Impairment of long lived assets(6)

 

-

 

 

-

 

 

-

 

 

1,603

 

 

-

 

 

-

 

 

-

 

 

-

 

(Gain)/Loss on sale of assets(7)

 

-

 

 

-

 

 

-

 

 

-

 

 

(12,303

)

 

-

 

 

-

 

 

-

 

Share-based compensation(8)

 

874

 

 

2,049

 

 

25,505

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

176

 

 

-

 

 

1,347

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Litigation settlements(10)

 

-

 

 

-

 

 

1,500

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(100

)

 

-

 

Fees related to refinancing activities (12)

 

-

 

 

-

 

 

40

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Drug substance harmonization costs(14)

 

301

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

254

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(13,865

)

Total of non-GAAP adjustments

 

62,389

 

 

2,049

 

 

33,719

 

 

1,603

 

 

(12,303

)

 

5,694

 

 

(100

)

 

(13,865

)

                     
Non-GAAP

$

(28,688

)

$

(19,120

)

$

(127,866

)

$

-

 

$

-

 

$

(24,743

)

$

237

 

$

(12,599

)

      Horizon Therapeutics plc    
      Certain Income Statement Line Items - Non-GAAP Adjusted    
      For the Nine Months Ended September 30, 2019    
      (Unaudited)    
                     
                     
     

 

 

 

 

 

 

 

Income Tax

     

 

Research &

Selling, General

Loss/(Gain) on

Interest

Other

Loss on Debt

Benefit

     

COGS

Development

& Administrative

Sale of Assets

Expense

Expense

Extinguishment

(Expense)

                     
GAAP as reported

$

(267,254

)

$

(74,611

)

$

(511,720

)

$

(10,963

)

$

(69,991

)

$

(193

)

$

(58,835

)

$

37,359

 

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

 

1,114

 

 

-

 

 

119

 

 

-

 

 

-

 

 

1,380

 

 

-

 

 

-

 

Restructuring and realignment costs(2)

 

-

 

 

-

 

 

33

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

172,156

 

 

-

 

 

606

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(4)

 

90

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

17,069

 

 

-

 

 

-

 

 

-

 

(Gain)/Loss on sale of assets(7)

 

-

 

 

-

 

 

-

 

 

10,963

 

 

-

 

 

-

 

 

-

 

 

-

 

Share-based compensation(8)

 

2,891

 

 

6,931

 

 

57,244

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

475

 

 

-

 

 

4,099

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Litigation settlements(10)

 

-

 

 

-

 

 

1,000

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

9,073

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Fees related to refinancing activities (12)

 

-

 

 

-

 

 

1,437

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Loss on debt extinguishment(13)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

58,835

 

 

-

 

Drug substance harmonization costs(14)

 

394

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

1,221

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(52,291

)

Other non-GAAP income tax adjustments(17)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,452

)

Total of non-GAAP adjustments

 

178,341

 

 

16,004

 

 

64,538

 

 

10,963

 

 

17,069

 

 

1,380

 

 

58,835

 

 

(53,743

)

                     
Non-GAAP    

$

(88,913

)

$

(58,607

)

$

(447,182

)

$

-

 

$

(52,922

)

$

1,186

 

$

-

 

$

(16,384

)

                     
      Horizon Therapeutics plc    
      Certain Income Statement Line Items - Non-GAAP Adjusted    
      For the Nine Months Ended September 30, 2018    
      (Unaudited)    
                     
                     
     

 

 

 

 

 

 

 

Income Tax

     

 

Research &

Selling, General

Impairment of

Loss/(Gain) on

Interest

Other

Benefit

     

COGS

Development

& Administrative

Long-Lived Assets

Sale of Assets

Expense

Income

(Expense)

                     
GAAP as reported

$

(292,702

)

$

(63,079

)

$

(517,858

)

$

(35,249

)

$

12,303

 

$

(91,921

)

 

834

 

$

(4,301

)

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

 

(171

)

 

(67

)

 

6,417

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Restructuring and realignment costs(2)

 

-

 

 

1,733

 

 

13,082

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

181,902

 

 

-

 

 

606

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(4)

 

17,212

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(5)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

16,880

 

 

 

-

 

Impairment of long lived assets(6)

 

-

 

 

-

 

 

-

 

 

35,249

 

 

-

 

 

-

 

 

-

 

 

-

 

(Gain)/Loss on sale of assets(7)

 

-

 

 

-

 

 

-

 

 

-

 

 

(12,303

)

 

-

 

 

-

 

 

-

 

Share-based compensation(8)

 

2,767

 

 

6,697

 

 

77,517

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

529

 

 

-

 

 

4,098

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Litigation settlements(10)

 

-

 

 

-

 

 

5,750

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

90

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(100

)

 

-

 

Fees related to refinancing activities (12)

 

-

 

 

-

 

 

82

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Drug substance harmonization costs(14)

 

1,579

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

1,389

 

 

87

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

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

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

12,774

 

Other non-GAAP income tax adjustments(17)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(35,893

)

Total of non-GAAP adjustments

 

205,207

 

 

8,540

 

 

107,552

 

 

35,249

 

 

(12,303

)

 

16,880

 

 

(100

)

 

(23,119

)

                     
Non-GAAP

$

(87,495

)

$

(54,539

)

$

(410,306

)

$

-

 

$

-

 

$

(75,041

)

$

734

 

$

(27,420

)

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 nine months ended Sept. 30, 2018, we recognized in cost of goods sold $17.2 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 nine months ended Sept. 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 nine months ended Sept. 30, 2019, we recorded a loss of $11.0 million on the sale of our rights to MIGERGOT.

    During the nine months ended Sept. 30, 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.
     
  8. 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.
     
  9. Represents depreciation expense related to our property, equipment, software and leasehold improvements.
     
  10. We recorded $1.0 million and $5.8 million of expense during the nine months ended Sept. 30, 2019 and 2018, respectively, for litigation settlements.
     
  11. During the nine months ended Sept. 30, 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 F. Hoffmann-La Roche Ltd relating to the teprotumumab BLA submission to the FDA during the third quarter of 2019, an upfront cash payment of $2.0 million and a progress payment of $4.0 million in relation to the collaboration agreement with HemoShear.
     
  12. Represents arrangement and other fees relating to our refinancing activities.
     
  13. During the nine months ended Sept. 30, 2019, we recorded a loss on debt extinguishment of $58.8 million in the condensed consolidated statements of comprehensive 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.
     
  14. During the year ended Dec. 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 the FA 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 nine months ended Sept. 30, 2018 we reinstated the deferred tax asset previously written off during the year ended Dec. 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 nine months ended Sept. 30, 2019 we released a reserve that was originally established and treated as a non-GAAP adjustment 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