SEC Filing | Horizon Therapeutics plc

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hznp-10q_20190630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35238

HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

Ireland		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Connaught House, 1st Floor 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland		Not Applicable
(Address of principal executive offices)		(Zip Code)

011 353 1 772 2100

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol	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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant’s ordinary shares, nominal value $0.0001, outstanding as of August 1, 2019: 186,447,820.

HORIZON THERAPEUTICS PLC

INDEX

		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2019 and as of December 31, 2018 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 6.	Exhibits	96
	Signatures	99

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except share data)

	As of			As of
	June 30,			December 31,
	2019			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:
Long-term debt—current portion	$	—		$	—
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, respectively; 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

The accompanying notes are an integral part of these condensed consolidated financial statements.

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

(In thousands, except share and per share data)

	For the Three Months Ended June 30,						For the 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	)
Net 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
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustments	$	344		$	(897	)	$	(143	)	$	(434	)
Pension remeasurements		—			289			—			289
Other comprehensive income (loss)		344			(608	)		(143	)		(145	)
Comprehensive loss	$	(4,776	)	$	(25,359	)	$	(38,126	)	$	(173,552	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2018		169,244,520	$	17		384,366	$	(4,585	)	$	2,374,966		$	(1,523	)	$	(1,178,769	)	$	1,190,106
Cumulative effect adjustments from adoption of ASU 2016-02		—		—		—		—			—			—			64			64
Issuance of ordinary shares - public offering		14,081,632		1		—		—			326,848			—			—			326,849
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		1,804,196		—		—		—			10,042			—			—			10,042
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(17,171	)		—			—			(17,171	)
Share-based compensation		—		—		—		—			27,548			—			—			27,548
Currency translation adjustment		—		—		—		—			—			(487	)		—			(487	)
Net loss		—		—		—		—			—			—			(32,863	)		(32,863	)
Balances at March 31, 2019		185,130,348	$	18		384,366	$	(4,585	)	$	2,722,233		$	(2,010	)	$	(1,211,568	)	$	1,504,088
Issuance of ordinary shares - public offering		—		—		—		—			(55	)		—			—			(55	)
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		781,026		1		—		—			1,986			—			—			1,987
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(7,203	)		—			—			(7,203	)
Issuance of ordinary shares in conjunction with ESPP program		558,856		—		—		—			5,465			—			—			5,465
Share-based compensation		—		—		—		—			21,367			—			—			21,367
Currency translation adjustment		—		—		—		—			—			344			—			344
Net loss		—		—		—		—			—			—			(5,120	)		(5,120	)
Balances at June 30, 2019		186,470,230	$	19		384,366	$	(4,585	)	$	2,743,793		$	(1,666	)	$	(1,216,688	)	$	1,520,873
										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2017		164,785,083	$	16		384,366	$	(4,585	)