8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2019

 

 

Horizon Therapeutics Public Limited Company

(Exact name of registrant as specified in its charter)

 

 

 

Ireland   001-35238   Not Applicable

(State or other jurisdiction

of incorporation)

 

(Commission

File No.)

 

(IRS Employer

Identification No.)

Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland

(Address of principal executive offices)

Registrant’s telephone number, including area code: 011-353-1-772-2100

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Ordinary shares, nominal

value $0.0001 per share

  HZNP   The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition. 

On August 7, 2019, Horizon Therapeutics plc (“the Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2019.  A copy of this press release is attached hereto as Exhibit 99.1. 

As previously disclosed in its interim financial statements on Form 10-Q for the three months ended March 31, 2019, the Company changed its accounting for business combinations in respect of intangible assets acquired and their related third-party contingent royalties.  When accounting for business combinations under ASC Topic 805, Business Combinations, the Company previously separately identified and recorded at fair value intangible assets acquired and their related third-party contingent royalties at the date of acquisition.  Third-party contingent royalties are royalties payable to parties other than sellers of the businesses.  Effective January 1, 2019, the Company retrospectively changed its accounting for business combinations and is now recording acquired intangible assets and their related third-party contingent royalties on a net basis (“New Method”).  The Company changed its accounting principle on the basis that the use of the New Method is preferable, primarily due to improved comparability with the Company’s peers.  The “Adjusted Historical Financial Information” that is attached hereto as Exhibit 99.2 presents selected line items from the Company’s annual and quarterly consolidated financial statements for certain historical periods illustrating the effect of the change in accounting principle. 

The information in this Item 2.02 and Exhibits 99.1 and 99.2 hereto are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing. 

Item 9.01 Financial Statements and Exhibits. 

(d) Exhibits. 

 

Exhibit No.   

Description

99.1    Press Release of Horizon Therapeutics plc, dated August 7, 2019. 
99.2    Horizon Therapeutics plc Adjusted Historical Financial Information (Unaudited), dated August 7, 2019. 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: August 7, 2019    HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY
   By:   

/s/ Paul W. Hoelscher

      Paul W. Hoelscher
      Executive Vice President and Chief Financial Officer
EX-99.1

Exhibit 99.1

 

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Horizon Therapeutics plc Reports Strong Second-Quarter 2019 Results;

Increases Full-Year 2019 Net Sales and Adjusted EBITDA Guidance

— 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 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  

 

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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.

 

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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 Companys 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 ³2 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.

 

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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.

 

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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.

 

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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.

 

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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

 

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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

 

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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       9


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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       10


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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.

 

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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  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

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  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Horizon Therapeutics 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  
  

 

 

 

 

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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       15


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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       16


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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       17


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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       18


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Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended June 30, 2019

(Unaudited)

 

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

 

     COGS     Research &
Development
    Selling, General
& Administrative
    Interest
Expense
    Income Tax
Benefit
(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       19


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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
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Horizon Therapeutics plc       20


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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.

 

Horizon Therapeutics plc       21


LOGO

 

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.

 

Horizon Therapeutics plc       22
EX-99.2

Exhibit 99.2

HORIZON THERAPEUTICS PLC

ADJUSTED HISTORICAL FINANCIAL INFORMATION (UNAUDITED)

DATED AUGUST 7, 2019

Change in Accounting Principle

As previously disclosed in its interim financial statements on Form 10-Q for the three months ended March 31, 2019, Horizon Therapeutics plc (“the Company”) changed its accounting for business combinations in respect of intangible assets acquired and their related third-party contingent royalties.  When accounting for business combinations under ASC Topic 805, Business Combinations, the Company previously separately identified and recorded at fair value intangible assets acquired and their related third-party contingent royalties at the date of acquisition.  Third-party contingent royalties are payable to parties other than sellers of the businesses.  Effective January 1, 2019, the Company retrospectively changed its accounting for business combinations and is now recording acquired intangible assets and their related third-party contingent royalties on a net basis (“New Method”).  The Company changed its accounting principle on the basis that the use of the New Method is preferable, primarily due to improved comparability with the Company’s peers. 

The change in accounting principle resulted in the Company re-performing its purchase price allocations as of the respective acquisition dates for prior business combinations.  The adjustments to the purchase price allocations primarily resulted in a decrease in developed technology intangible assets and the elimination of liabilities for accrued contingent royalties due to recording these items on a net basis.  The re-performance of purchase price allocations also impacted goodwill and deferred tax liabilities.  In addition, the change in accounting principle resulted in the elimination of royalty reimbursement assets and accrued contingent royalty liabilities that were recorded in connection with divestitures, impacting prepaid expenses and other current assets, other assets, accrued expenses and other long-term liabilities captions as shown in the tables below.  In addition, under the New Method of accounting, the Company is presenting accrued royalties based on each period’s net sales as part of the accrued expenses line item on its consolidated balance sheets. 

Furthermore, the adjustments to the purchase price allocations primarily resulted in a net decrease in cost of goods sold reflecting lower intangible asset amortization and the elimination of royalty accretion and remeasurement expenses, partially offset by the royalty expense based on the periods’ net sales.  The re-performance of purchase price allocations also directly impacted impairments of long-lived assets and benefit/expense for income taxes, as shown in the tables below.  In addition, the elimination of royalty reimbursement assets and accrued contingent royalty liabilities that were recorded in connection with divestitures resulted in adjustments to gain on sale of assets, gain on divestiture and other income, net. 

Revision of Prior Period Financial Statements

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, during the course of preparing its consolidated financial statements for the year ended December 31, 2018, the Company identified an error in the measurement of the contingent royalty liability calculation pertaining to the royalty end date for one of its medicines.  The royalty end date for KRYSTEXXA is approximately two and one half years earlier than the date originally assumed in the calculations.  As a result of the error, accrued royalties, net of current, and cost of goods sold had been overstated and shareholders’ equity had been understated.  The Company concluded that the amounts were not material to any of its previously issued consolidated financial statements. 

The revision did not impact the consolidated balance sheet and consolidated statement of comprehensive loss as of and for the year ended December 31, 2018, as the error had been identified prior to the reporting of these consolidated financial statements.  The comparative amounts included in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 reflected the impact of the revision; therefore, the ‘As Previously Reported’ columns in the tables below for the consolidated balance sheet and consolidated statement of comprehensive loss as of and for the year ended December 31, 2017, and the consolidated statement of comprehensive loss for the year ended December 31, 2016, reflect the impact of the revision.  The revision did not impact the consolidated financial statements as of and for the years ended December 31, 2013, 2014 and 2015 as the error related to the accounting for a business combination that occurred in January 2016. 

The ‘As Previously Reported’ column in the table below for the consolidated statement of comprehensive loss for the three months ended December 31, 2018 was derived from Note 23 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which reflected the impact of the revision.  The ‘As Previously Reported’ columns in the tables below for the consolidated statements of comprehensive loss for the three-month periods ended September 30, 2018, June 30, 2018 and March 31, 2018, were derived from the previously reported interim financial statements on Form for 10-Q for each of the respective periods. 

Adjusted Financial Information

The impact of the change in accounting principle and the revision on the consolidated statements of cash flows consisted of adjustments to reconcile net (loss) income to net cash provided by operating activities and changes in operating assets and liabilities for all periods presented.  There was no impact on total operating, investing or financing cash flows for any prior period.  In addition, there was no impact from the change in accounting principle and the revision on the Company’s previously reported adjusted EBITDA, 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 and net debt for any prior period. 

 

1


The following tables present selected line items from the Company’s consolidated financial statements for the years ended December 31, 2018, 2017, 2016, 2015, 2014 and 2013 illustrating the effect of the change in accounting principle, in addition to the effect of the revision, where applicable:

 

     Consolidated Balance Sheet  
     As of December 31, 2018  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Prepaid expenses and other current assets

   $ 70,828      $ (2,610    $ 68,218  

Total current assets

     1,548,426        (2,610      1,545,816  

Developed technology, net

     2,120,596        (174,957      1,945,639  

Goodwill

     426,441        (12,772      413,669  

Other assets

     23,029        (14,070      8,959  

Total assets

     4,146,371        (204,409      3,941,962  

Accrued expenses

     205,593        10,146        215,739  

Accrued royalties - current portion

     63,363        (63,363      —    

Total current liabilities

     761,904        (53,217      708,687  

Accrued royalties - net of current

     285,374        (285,374      —    

Deferred tax liabilities, net

     93,630        14,138        107,768  

Other long-term liabilities

     54,622        (15,905      38,717  

Total long-term liabilities

     2,330,310        (287,141      2,043,169  

Accumulated deficit

     (1,314,718      135,949        (1,178,769

Total shareholders’ equity

     1,054,157        135,949        1,190,106  

Total liabilities and shareholders’ equity

     4,146,371        (204,409      3,941,962  

 

     Consolidated Statement of Comprehensive Loss  
     For the Twelve Months Ended December 31, 2018  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Cost of goods sold

   $ 422,317      $ (31,016    $ 391,301  

Gross profit

     785,253        31,016        816,269  

Impairment of long-lived assets

     50,302        (4,206      46,096  

Gain on sale of assets

     (42,688      (297      (42,985

Total operating expenses

     782,861        (4,503      778,358  

Operating income

     2,392        35,519        37,911  

Other income, net

     346        495        841  

Total other expenses, net

     (121,538      495        (121,043

Loss before benefit for income taxes

     (119,146      36,014        (83,132

Benefit for income taxes

     (44,959      207        (44,752

Net loss

     (74,187      35,807        (38,380

Net loss per ordinary share - basic and diluted

     (0.45      0.22        (0.23

Comprehensive loss

     (74,727      35,807        (38,920

 

2


     Consolidated Balance Sheet  
     As of December 31, 2017  
     As Previously
Reported
    Impact of
Accounting
Change
    As Adjusted  

Prepaid expenses and other current assets

   $ 43,402     $ (2,643   $ 40,759  

Total current assets

     1,268,168       (2,643     1,265,525  

Developed technology, net

     2,442,292       (205,426     2,236,866  

Goodwill

     426,441       (12,772     413,669  

Other assets

     36,081       (19,985     16,096  

Total assets

     4,202,298       (240,826     3,961,472  

Accrued expenses

     175,697       8,979       184,676  

Accrued royalties - current portion

     65,328       (65,328     —    

Total current liabilities

     794,969       (56,349     738,620  

Accrued royalties - net of current

     279,316       (279,316     —    

Deferred tax liabilities, net

     157,945       13,932       171,877  

Other long-term liabilities

     68,015       (19,235     48,780  

Total long-term liabilities

     2,406,019       (284,619     2,121,400  

Accumulated deficit

     (1,242,117     100,142       (1,141,975

Total shareholders’ equity

     1,001,310       100,142       1,101,452  

Total liabilities and shareholders’ equity

     4,202,298       (240,826     3,961,472  

 

     Consolidated Statement of Comprehensive
Loss
 
     For the Twelve Months Ended
December 31, 2017
 
     As Previously
Reported
    Impact of
Accounting
Change
    As Adjusted  

Cost of goods sold

   $ 537,334     $ (43,966   $ 493,368  

Gross profit

     518,897       43,966       562,863  

Operating loss

     (383,428     43,966       (339,462

Gain on divestiture

     6,267       1,698       7,965  

Other income, net

     588       (141     447  

Total other expenses, net

     (120,906     1,557       (119,349

Loss before benefit for income taxes

     (504,334     45,523       (458,811

Benefit for income taxes

     (102,749     (5,937     (108,686

Net loss

     (401,585     51,460       (350,125

Net loss per ordinary share - basic and diluted

     (2.46     0.31       (2.15

Comprehensive loss

     (399,482     51,460       (348,022

 

3


     Consolidated Balance Sheet  
     As of December 31, 2016  
     As Previously
Reported
    Revision     As Revised     Impact of
Accounting
Change
    As Adjusted  

Developed technology, net

   $ 2,767,184     $ (1,829   $ 2,765,355     $ (237,216   $ 2,528,139  

Goodwill

     445,579       —         445,579       (13,364     432,215  

Total assets

     4,307,306       (1,829     4,305,477       (250,580     4,054,897  

Accrued expenses

     198,012       —         198,012       10,698       208,710  

Accrued royalties - current portion

     61,981       —         61,981       (61,981     —    

Total current liabilities

     621,099       —         621,099       (51,283     569,816  

Accrued royalties - net of current

     272,293       (3,100     269,193       (269,193     —    

Deferred tax liabilities, net

     296,568       —         296,568       19,869       316,437  

Other long-term liabilities

     46,061       —         46,061       1,412       47,473  

Total long-term liabilities

     2,422,428       (3,100     2,419,328       (247,912     2,171,416  

Accumulated deficit

     (848,021     1,271       (846,750     48,615       (798,135

Total shareholders’ equity

     1,263,779       1,271       1,265,050       48,615       1,313,665  

Total liabilities and shareholders’ equity

     4,307,306       (1,829     4,305,477       (250,580     4,054,897  

 

     Consolidated Statement of Comprehensive
Loss
 
     For the Twelve Months Ended
December 31, 2016
 
     As Previously
Reported
    Impact of
Accounting
Change
    As Adjusted  

Cost of goods sold

   $ 392,001     $ (25,596   $ 366,405  

Gross profit

     589,119       25,596       614,715  

Impairment of long-lived assets

     66,000       (1,300     64,700  

Total operating expenses

     735,015       (1,300     733,715  

Operating loss

     (145,896     26,896       (119,000

Other income, net

     6,697       —         6,697  

Total other expenses, net

     (80,918     —         (80,918

Loss before benefit for income taxes

     (226,814     26,896       (199,918

Benefit for income taxes

     (61,251     8,425       (52,826

Net loss

     (165,563     18,471       (147,092

Net loss per ordinary share - basic and diluted

     (1.03     0.11       (0.92

Comprehensive loss

     (165,998     18,471       (147,527

 

4


     Consolidated Balance Sheet  
     As of December 31, 2015  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Developed technology, net

   $ 1,609,049      $ (130,353    $ 1,478,696  

In-process research and development

     66,000        (1,300      64,700  

Total assets

     3,073,060        (131,653      2,941,407  

Accrued expenses

     114,518        9,314        123,832  

Accrued royalties - current portion

     51,700        (51,700      —    

Total current liabilities

     372,024        (42,386      329,638  

Accrued royalties - net of current

     123,519        (123,519      —    

Deferred tax liabilities, net

     113,400        4,108        117,508  

Total long-term liabilities

     1,387,891        (119,411      1,268,480  

Accumulated deficit

     (681,187      30,144        (651,043

Total shareholders’ equity

     1,313,145        30,144        1,343,289  

Total liabilities and shareholders’ equity

     3,073,060        (131,653      2,941,407  

 

     Consolidated Statement of Comprehensive Income  
     For the Twelve Months Ended December 31, 2015  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Cost of goods sold

   $ 219,502      $ (24,986    $ 194,516  

Gross profit

     537,542        24,986        562,528  

Operating income

     55,372        24,986        80,358  

Loss before benefit for income taxes

     (132,712      24,986        (107,726

Benefit for income taxes

     (172,244      4,107        (168,137

Net income

     39,532        20,879        60,411  

Net income per ordinary share - basic

     0.27        0.14        0.41  

Net income per ordinary share - diluted

     0.25        0.14        0.39  

Comprehensive income

     41,244        20,879        62,123  

 

5


     Consolidated Balance Sheet  
     As of December 31, 2014  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Developed technology, net

   $ 696,963      $ (57,484    $ 639,479  

In-process research and development

     66,000        (1,300      64,700  

Deferred tax assets, net, non-current

     20,291        2,106        22,397  

Total assets

     1,126,302        (56,678      1,069,624  

Accrued expenses

     49,794        6,163        55,957  

Accrued royalties - current portion

     25,325        (25,325      —    

Total current liabilities

     221,840        (19,162      202,678  

Accrued royalties - net of current

     48,887        (48,887      —    

Deferred tax liabilities, net, non-current

     20,291        2,106        22,397  

Total long-term liabilities

     364,258        (46,781      317,477  

Accumulated deficit

     (720,719      9,265        (711,454

Total shareholders’ equity

     540,204        9,265        549,469  

Total liabilities and shareholders’ equity

     1,126,302        (56,678      1,069,624  

 

     Consolidated Statement of Comprehensive Loss  
     For the Twelve Months Ended December 31, 2014  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Cost of goods sold

   $ 78,753      $ (8,589    $ 70,164  

Gross profit

     218,202        8,589        226,791  

Operating loss

     (8,491      8,589        98  

Loss before benefit for income taxes

     (269,687      8,589        (261,098

Net loss

     (263,603      8,589        (255,014

Net loss per ordinary share - basic and diluted

     (3.15      0.11        (3.04

Comprehensive loss

     (265,563      8,589        (256,974

 

6


     Consolidated Balance Sheet  
     As of December 31, 2013  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Developed technology, net

   $ 131,094      $ (32,316    $ 98,778  

Deferred tax assets, net, non-current

     —          254        254  

Total assets

     246,328        (32,062      214,266  

Accrued royalties - current portion

     8,010        (8,010      —    

Total current liabilities

     43,310        (8,010      35,300  

Accrued royalties - net of current

     24,982        (24,982      —    

Deferred tax liabilities, net, non-current

     3,362        254        3,616  

Total long-term liabilities

     252,100        (24,728      227,372  

Accumulated deficit

     (457,116      676        (456,440

Total shareholders’ equity

     (49,082      676        (48,406

Total liabilities and shareholders’ equity

     246,328        (32,062      214,266  

 

     Consolidated Statement of Comprehensive Loss  
     For the Twelve Months Ended December 31, 2013  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Cost of goods sold

   $ 14,625      $ (676    $ 13,949  

Gross profit

     59,391        676        60,067  

Operating loss

     (42,854      676        (42,178

Loss before benefit for income taxes

     (150,126      676        (149,450

Net loss

     (149,005      676        (148,329

Net loss per ordinary share - basic and diluted

     (2.34      0.01        (2.33

Comprehensive loss

     (148,036      676        (147,360

 

7


The following tables present selected line items from the Company’s consolidated statement of comprehensive loss for the four quarters of 2018 illustrating the effect of the change in accounting principle, in addition to the effect of the revisions, where applicable:

 

     Consolidated Statement of Comprehensive Loss  
     For the Three Months Ended December 31, 2018  
     As Previously
Reported
     Impact of Accounting
Change
     As Adjusted  

Cost of goods sold

   $ 109,520      $ (10,921    $ 98,599  

Gross profit

     246,023        10,921        256,944  

Gain on sale of assets

     (30,385      (297      (30,682

Total operating expenses

     174,773        (297      174,476  

Operating income

     71,250        11,218        82,468  

Other income, net

     (632      640        8  

Total other expenses, net

     (30,514      640        (29,874

Income before benefit for income taxes

     40,736        11,858        52,594  

Benefit for income taxes

     (46,822      (2,232      (49,054

Net income

     87,558        14,090        101,648  

Net income per ordinary share - basic

     0.52        0.08        0.60  

Net income per ordinary share - diluted

     0.50        0.08        0.58  

Comprehensive income

     87,296        14,090        101,386  

 

     Consolidated Statement of Comprehensive Loss  
     For the Three Months Ended September 30, 2018  
     As Previously
Reported
    Revision     As Revised     Impact of
Accounting
Change
    As Adjusted  

Cost of goods sold

   $ 99,011     $ (840   $ 98,171     $ (7,094   $ 91,077  

Gross profit

     226,300       840       227,140       7,094       234,234  

Operating income

     54,246       840       55,086       7,094       62,180  

Other income, net

     453       —         453       (116     337  

Total other expenses, net

     (29,949     —         (29,949     (116     (30,065

Income before benefit for income taxes

     24,297       840       25,137       6,978       32,115  

Benefit for income taxes

     (1,733     —         (1,733     467       (1,266

Net income

     26,030       840       26,870       6,511       33,381  

Net income per ordinary share - basic

     0.16       —         0.16       0.04       0.20  

Net income per ordinary share - diluted

     0.15       0.01       0.16       0.03       0.19  

Comprehensive income

     25,897       840       26,737       6,511       33,248  

 

8


     Consolidated Statement of Comprehensive Loss  
     For the Three Months Ended June 30, 2018  
     As Previously
Reported
    Revision     As Revised     Impact of
Accounting
Change
    As Adjusted  

Cost of goods sold

   $ 100,082     $ (795   $ 99,287     $ (7,950   $ 91,337  

Gross profit

     202,753       795       203,548       7,950       211,498  

Operating income

     1,814       795       2,609       7,950       10,559  

Other income, net

     347       —         347       (1     346  

Total other expenses, net

     (30,688     —         (30,688     (1     (30,689

Loss before expense for income taxes

     (28,874     795       (28,079     7,949       (20,130

Expense for income taxes

     3,962       —         3,962       659       4,621  

Net loss

     (32,836     795       (32,041     7,290       (24,751

Net loss per ordinary share - basic and diluted

     (0.20     0.01       (0.19     0.04       (0.15

Comprehensive loss

     (33,444     795       (32,649     7,290       (25,359

 

     Consolidated Statement of Comprehensive Loss  
     For the Three Months Ended March 31, 2018  
     As Previously
Reported
    Revision     As Revised     Impact of
Accounting
Change
    As Adjusted  

Cost of goods sold

   $ 116,092     $ (753   $ 115,339     $ (5,051   $ 110,288  

Gross profit

     107,789       753       108,542       5,051       113,593  

Impairment of long-lived assets

     37,853       —         37,853       (4,206     33,647  

Total operating expenses

     235,097       —         235,097       (4,206     230,891  

Operating loss

     (127,308     753       (126,555     9,257       (117,298

Other income, net

     178       —         178       (27     151  

Total other expenses, net

     (30,386     —         (30,386     (27     (30,413

Loss before (benefit) expense for income taxes

     (157,694     753       (156,941     9,230       (147,711

(Benefit) expense for income taxes

     (367     —         (367     1,312       945  

Net loss

     (157,327     753       (156,574     7,918       (148,656

Net loss per ordinary share - basic and diluted

     (0.96     0.01       (0.95     0.05       (0.90

Comprehensive loss

     (156,864     753       (156,111     7,918       (148,193

 

9