8-K
Horizon Therapeutics Public Ltd Co 00-0000000 false 0001492426 0001492426 2019-11-06 2019-11-06

 

 

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): November 6, 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 November 6, 2019, Horizon Therapeutics plc (“the Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2019. A copy of this press release is attached hereto as Exhibit 99.1. 

The information in this Item 2.02 and the exhibit 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 November 6, 2019. 

         
 

104

   

Cover Page Interactive Data File (embedded within the Inline XBRL document).


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: November 6, 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

 

LOGO

Horizon Therapeutics plc Reports Strong Third-Quarter 2019 Results

— Third-Quarter 2019 Net Sales of $335.5 Million Increased 3 Percent;

Third-Quarter 2019 GAAP Net Income of $18.2 Million; Adjusted EBITDA of $130.4 Million —

— Record Quarterly Orphan and Rheumatology Segment Net Sales of $250.4 Million, an Increase

of 14 Percent; Segment Represents Approximately 75 Percent of Total Company Net Sales;

KRYSTEXXA® Third-Quarter 2019 Net Sales of $99.6 Million Increased 42 Percent —

— Maintaining Full-Year 2019 Net Sales Guidance Range of $1.28 to $1.30 Billion;

Raising Midpoint of Full-Year 2019 Adjusted EBITDA Guidance; Range is Now

$465 Million to $475 Million;

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

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

— Initiated PROTECT Trial Evaluating KRYSTEXXA to Improve Management of

Uncontrolled Gout for Adults with a Kidney Transplant —

— Presented Phase 3 Teprotumumab Secondary Endpoint Data Demonstrating Significantly Reduced

Double Vision and Improved Quality of Life for Active Thyroid Eye Disease (TED) Patients —

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

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

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

Financial Highlights

 

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

Net sales

   $  335.5      $  325.3        3     $  936.5     $ 852.0       10  

Net income (loss)

     18.2        33.4        (45     (19.7     (140.0     86  

Non-GAAP net income

     124.1        112.6        10       273.6       197.9       38  

Adjusted EBITDA

     130.4        149.9        (13     342.9       300.3       14  

Earnings (Loss) per share - diluted

     0.09        0.19        (53     (0.11     (0.84     87  

Non-GAAP earnings per share - diluted

     0.64        0.65        (2     1.44       1.16       24  

 

Horizon Therapeutics plc       1


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Third-Quarter and Recent Company Highlights

 

   

Granted Priority Review of Teprotumumab BLA: In September, the Company announced the U.S. Food and Drug Administration (FDA) accepted the Biologics License Application (BLA) for its investigational medicine teprotumumab for the treatment of active TED and granted it Priority Review designation, with a March 8, 2020, Prescription Drug User Fee Act (PDUFA) date. If approved, teprotumumab would be the first and only approved treatment for active TED.

 

   

Presented Additional Teprotumumab Phase 3 Data: The Company recently presented additional data from the Phase 3 OPTIC confirmatory clinical trial showing that teprotumumab provided significant benefit on several devastating effects of active TED compared with placebo, including diplopia (double vision), quality of life (QoL) and clinical activity score (CAS). At Week 24, 68 percent of teprotumumab patients had a change from baseline of at least 1 grade in diplopia, compared to 29 percent of placebo patients (p=0.001). On the Graves’ Ophthalmopathy Quality of Life (GO-QoL) scale, a change of 6 points is considered clinically significant, and teprotumumab patients had a mean change of 13.79 compared to 4.43 for placebo patients (p<0.001). At Week 24, 59 percent of teprotumumab patients achieved a CAS value of 0 or 1 compared to 21 percent of placebo patients (p<0.001). These data were presented during the American Society of Ophthalmic Plastic and Reconstructive Surgery (ASOPRS) 50th Anniversary 2019 Fall Scientific Symposium in San Francisco, and build upon data presented earlier in the year that demonstrated the significant benefit of teprotumumab on proptosis.

 

   

Announced Teprotumumab Expanded Access Program (EAP): In August, the Company announced an EAP for teprotumumab while the FDA reviews the BLA. The EAP provides access to teprotumumab for patients with active TED who meet protocol criteria, who may have otherwise progressed to the inactive stage of the debilitating disease before the BLA review process is completed.

 

   

Initiated PROTECT Trial Evaluating KRYSTEXXA to Improve Management of Uncontrolled Gout for Adults with a Kidney Transplant: In October, the Company initiated its open-label PROTECT clinical trial evaluating the use of KRYSTEXXA in adults with uncontrolled gout who have undergone a kidney transplant. The objective of the trial is to demonstrate that KRYSTEXXA provides effective disease control without burdening the kidneys. The randomized multicenter open-label trial is expected to enroll 20 adults with uncontrolled gout who have received a kidney transplant.

 

   

Further Improved the Companys Capital Structure: In July, the Company issued $600 million of 5.5 percent Senior Notes due 2027 and used the proceeds together with cash on hand to repay $625 million of its outstanding debt. These actions reduced interest expense and extended the maturity of the debt, furthering the Company’s strategy to improve its capital structure. The Company has reduced its gross debt by $575 million in the year-to-date period ended Sept. 30, 2019.

 

   

Intellectual Property Update: In October, the Federal Circuit Court of Appeals issued a decision in favor of the Company regarding an appeal of the 2017 decision by the United States District Court for the District of New Jersey upholding the validity of a PENNSAID® 2% patent that expires in 2027.

 

Horizon Therapeutics plc       2


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Gender and Ethnicity Pay Equity Demonstrated; Received Best Medium Workplace Award: A recent study conducted by Aon, a leading compensation consulting firm, showed that Horizon demonstrates both gender and ethnicity pay equity, ranking in the top five of the roughly 100 companies Aon has studied in this regard, and in line with the value the Company places on diversity. In addition, the Company was selected to FORTUNE Magazine’s 2019 “Best Medium Workplaces” list for the fourth consecutive year, ranking eighth out of 100 other medium sized companies.

 

   

Appointed Sue Mahony to the Board of Directors: In August, the Company appointed Sue Mahony, Ph.D., MBA, to its board of directors. Dr. Mahony brings more than 30 years of diverse industry experience to the board, including an 18-year tenure at Eli Lilly and Company, where she served in a variety of global and domestic leadership roles of increasing responsibility, including helping oversee the development of an innovative pipeline. Before Lilly, Dr. Mahony spent five years at Bristol-Myers Squibb Company.

 

   

Named Andy Pasternak Executive Vice President, Chief Business Officer: In August, the Company named Andy Pasternak executive vice president, chief business officer, effective Nov. 1. Pasternak leads business development, mergers and acquisitions, corporate strategy, commercial development and portfolio management.

Research and Development Programs

Orphan Disease Candidate and Program:

 

   

Teprotumumab: Teprotumumab is a fully human monoclonal antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor candidate for the treatment of active TED. TED is a serious, progressive, vision-threatening autoimmune disease in which the muscles and fatty tissue behind the eye become inflamed and expand, which can lead to proptosis (eye bulging) and diplopia (double vision) and impact activities of daily living and quality of life. The development program for teprotumumab in TED includes positive results from the confirmatory Phase 3 OPTIC clinical trial, announced in February 2019, as well as positive Phase 2 results published in The New England Journal of Medicine in May 2017. The OPTIC study met its primary endpoint of a 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 MIRROR Immunomodulation Trial: The Company is evaluating the use of methotrexate to increase the response rate with KRYSTEXXA. This evaluation was initiated through the small open-label MIRROR pilot study, followed by the larger MIRROR registrational clinical trial. Methotrexate is the immunomodulator most used by rheumatologists, and has been shown to reduce anti-drug antibody formation to biologic therapies when used in conjunction with these therapies. The MIRROR registrational trial commenced in June.

 

Horizon Therapeutics plc       3


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KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout: In October, the Company initiated PROTECT, its clinical trial evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout. Kidney transplant patients have more than a tenfold increase in the prevalence of gout when compared to the general population, and literature suggests that persistently high serum uric acid levels can be associated with organ rejection. Managing uncontrolled gout is one of the most common and significant unmet needs of kidney transplant patients.

 

   

Next-generation Programs for Uncontrolled Gout: The Company is pursuing early-stage development programs for next-generation biologics for uncontrolled gout to support and sustain the Company’s market leadership in this area. These include HZN-003 and HZN-007, as well as a collaboration with HemoShear Therapeutics, LLC (HemoShear) to discover new targets for gout.

Third-Quarter Financial Results

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

 

   

Net Sales: Third-quarter 2019 net sales were $335.5 million, an increase of 3 percent.

 

   

Gross Profit: Under U.S. GAAP, the third-quarter 2019 gross profit ratio was 73.2 percent compared to 72.0 percent in the third quarter of 2018. The non-GAAP gross profit ratio in the third quarter of 2019 was 90.7 percent compared to 91.2 percent in the third quarter of 2018.

 

   

Operating Expenses: Research and development (R&D) expenses were 7.3 percent of net sales and selling, general and administrative (SG&A) expenses were 51.4 percent of net sales. Non-GAAP R&D expenses were 5.8 percent of net sales, and non-GAAP SG&A expenses were 46.2 percent of net sales.

 

   

Income Tax Rate: In the third quarter of 2019, the income tax rates on a GAAP and non-GAAP basis were 247.9 percent and negative 7.5 percent, respectively.

 

   

Net Income: On a GAAP basis in the third quarter of 2019, net income was $18.2 million. Third-quarter 2019 non-GAAP net income was $124.1 million.

 

   

Adjusted EBITDA: Third-quarter 2019 adjusted EBITDA was $130.4 million.

 

   

Earnings per Share: On a GAAP basis, diluted earnings per share in the third quarter of 2019 and 2018 were $0.09 and $0.19, respectively. Non-GAAP diluted earnings per share in the third quarter of 2019 and 2018 were $0.64 and $0.65, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the third quarter of 2019 were 194.2 million.

 

Horizon Therapeutics plc       4


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Third-Quarter Segment Results

Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments. While segment operating income contains certain adjustments to the directly comparable GAAP figures in the Company’s consolidated financial results, it is considered to be prepared in accordance with GAAP for purposes of presenting the Company’s segment operating results.

Orphan and Rheumatology Segment

 

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

KRYSTEXXA

     99.6        70.2        42       231.6        175.6        32  

RAVICTI®(1)

     60.0        60.4        (1     160.3        166.5        (4

PROCYSBI®

     40.4        41.4        (2     121.1        114.7        6  

ACTIMMUNE®

     27.9        25.8        8       78.9        78.1        1  

RAYOS®

     19.3        17.2        13       59.1        41.3        43  

BUPHENYL®(1)

     3.0        4.4        (30     8.2        15.3        (47

QUINSAIRTM

     0.2        0.1        67       0.6        0.3        59  

LODOTRA®(1)

     —          0.4        NM       —          2.0        NM  
  

 

 

    

 

 

      

 

 

    

 

 

    

Orphan and Rheumatology Net Sales

   $  250.4      $  219.9        14     $  659.8      $  593.8        11  
  

 

 

    

 

 

      

 

 

    

 

 

    

Orphan and Rheumatology Segment Operating Income

   $ 89.8      $ 91.5        (2   $ 211.0      $ 205.3        3  

 

  (1)

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

 

 

   

Third-quarter 2019 net sales of the orphan and rheumatology segment, the Company’s strategic growth segment, were $250.4 million, an increase of 14 percent over the prior year’s quarter, driven by growth of KRYSTEXXA, ACTIMMUNE and RAYOS. The orphan and rheumatology segment represents approximately 75 percent of total Company net sales.

 

   

Third-quarter 2019 orphan and rheumatology segment operating income was $89.8 million, which includes the impact of investment in teprotumumab pre-launch activities.

Inflammation Segment

 

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

PENNSAID 2%

     42.1        51.5        (18     143.7        125.9        14  

DUEXIS®

     29.9        34.2        (13     89.4        80.6        11  

VIMOVO®

     13.1        18.6        (30     41.8        48.9        (15

MIGERGOT®(1)

     —          1.1        NM       1.8        2.8        (34
  

 

 

    

 

 

      

 

 

    

 

 

    

Inflammation Net Sales

   $  85.1      $  105.4        (19   $  276.7      $  258.2        7  
  

 

 

    

 

 

      

 

 

    

 

 

    

Inflammation Segment Operating Income

   $ 39.6      $ 58.0        (32   $ 130.8      $ 94.3        39  

 

  (1)

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

 

 

   

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

 

Horizon Therapeutics plc       5


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Cash Flow Statement and Balance Sheet Highlights

 

   

On a GAAP basis in the third quarter of 2019, operating cash flow was $87.5 million. Non-GAAP operating cash flow was $96.5 million.

 

   

The Company had cash and cash equivalents of $884.0 million as of Sept. 30, 2019.

 

   

In July, the Company issued $600 million of 5.5 percent Senior Notes due 2027 and used the proceeds along with cash on hand to repay $625 million of its outstanding debt.

As of Sept. 30, 2019, the total principal amount of debt outstanding was $1.418 billion, consisting of $418 million in senior secured term loans due 2026, $600 million of Senior Notes due 2027 and $400 million of Exchangeable Senior Notes due 2022. As of Sept. 30, 2019, net debt was $534.1 million and net-debt-to-last-12-months adjusted EBITDA leverage ratio was 1.1 times, compared to 2.9 times at Sept. 30, 2018.

2019 Guidance

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

Webcast

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

 

Horizon Therapeutics plc       6


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About Horizon

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

Note Regarding Use of Non-GAAP Financial Measures

EBITDA, or earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA are used and provided by Horizon as non-GAAP financial measures. Horizon provides certain other financial measures such as non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP gross profit and gross profit ratio, non-GAAP operating expenses, non-GAAP operating income, non-GAAP tax rate, non-GAAP operating cash flow, net leverage ratio and net debt, each of which include adjustments to GAAP figures. These non-GAAP measures are intended to provide additional information on Horizon’s performance, operations, expenses, profitability and cash flows. Adjustments to Horizon’s GAAP figures as well as EBITDA exclude acquisition and/or divestiture-related expenses, charges related to the discontinuation of ACTIMMUNE development for Friedreich’s ataxia, gain or loss from sale of assets, upfront, progress and milestone payments related to license and collaboration agreements, litigation settlements, loss on debt extinguishment, costs of debt refinancing, drug manufacturing harmonization costs, restructuring and realignment costs, as well as non-cash items such as share-based compensation, depreciation and amortization, non-cash interest expense, long-lived asset impairment charges and other non-cash adjustments. Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred. Horizon maintains an established non-GAAP cost policy that guides the determination of what costs will be excluded in non-GAAP measures. Horizon believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon’s financial and operating performance. The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of the Company’s historical and expected 2019 financial results and trends and to facilitate comparisons between periods and with respect to projected information. In addition, these non-GAAP financial measures are among the indicators Horizon’s management uses for planning and forecasting purposes and measuring the Company’s performance. For example, adjusted EBITDA is used by Horizon as one measure of management performance under certain incentive compensation arrangements. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies. Horizon has not provided a reconciliation of its full-year 2019 adjusted EBITDA outlook to an expected net income (loss) outlook because certain items such as acquisition/divestiture-related expenses and share-based compensation that are a component of net income (loss) cannot be reasonably projected due to the significant impact of changes in Horizon’s stock price, the variability associated with the size or timing of acquisitions/divestitures and other factors. These components of net income (loss) could significantly impact Horizon’s actual net income (loss).

 

Horizon Therapeutics plc       7


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Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s full-year 2019 net sales and adjusted EBITDA guidance; expected financial performance and operating results in future periods, including potential growth in net sales of certain of Horizon’s medicines; expected impact of refinancing transactions; expected timing of clinical trials and regulatory submissions and decisions, including related to the BLA for teprotumumab; potential market opportunity for and benefits of Horizon’s medicines and medicine candidates; and business and other statements that are not historical facts. These forward-looking statements are based on Horizon’s current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks that Horizon’s actual future financial and operating results may differ from its expectations or goals; Horizon’s ability to grow net sales from existing medicines; the availability of coverage and adequate reimbursement and pricing from government and third-party payers; risks relating to Horizon’s ability to successfully implement its business strategies; risks inherent in developing novel medicine candidates, such as teprotumumab, and existing medicines for new indications; risks associated with regulatory approvals; risks in the ability to recruit, train and retain qualified personnel; competition, including potential generic competition; the ability to protect intellectual property and defend patents; regulatory obligations and oversight, including any changes in the legal and regulatory environment in which Horizon operates and those risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in Horizon’s filings and reports with the SEC. Horizon undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information.

Contacts:

 

Investors:    U.S. Media:
Tina Ventura    Geoff Curtis
Senior Vice President,    Executive Vice President,
Investor Relations    Corporate Affairs & Chief Communications Officer
investor-relations@horizontherapeutics.com    media@horizontherapeutics.com
Ruth Venning    Ireland Media:
Executive Director,    Ray Gordon
Investor Relations    Gordon MRM
investor-relations@horizontherapeutics.com    ray@gordonmrm.ie

 

Horizon Therapeutics plc       8


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Horizon Therapeutics plc

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2019      2018      2019      2018  

Net sales

   $ 335,466      $ 325,311      $ 936,484      $ 852,027  

Cost of goods sold

     89,949        91,077        267,254        292,702  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     245,517        234,234        669,230        559,325  
  

 

 

    

 

 

    

 

 

    

 

 

 

OPERATING EXPENSES:

           

Research and development

     24,572        21,169        74,611        63,079  

Selling, general and administrative

     172,326        161,585        511,720        517,858  

(Gain)/Loss on sale of assets

     —          (12,303      10,963        (12,303

Impairment of long-lived assets

     —          1,603        —          35,249  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     196,898        172,054        597,294        603,883  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

     48,619        62,180        71,936        (44,558
  

 

 

    

 

 

    

 

 

    

 

 

 

OTHER EXPENSE, NET:

           

Interest expense, net

     (20,428      (30,437      (69,991      (91,921

Loss on debt extinguishment

     (41,371      —          (58,835      —    

Foreign exchange (loss) gain

     (40      35        (25      (81

Other income (expense), net

     890        337        (193      834  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other expense, net

     (60,949      (30,065      (129,044      (91,168
  

 

 

    

 

 

    

 

 

    

 

 

 

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

     (12,330      32,115        (57,108      (135,726

(Benefit) expense for income taxes

     (30,564      (1,266      (37,359      4,301  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 18,234      $ 33,381      $ (19,749    $ (140,027
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (Loss) per ordinary share - basic

   $ 0.10      $ 0.20      $ (0.11    $ (0.84
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average ordinary shares outstanding - basic

     186,470,141        167,047,104        181,949,838        166,018,603  
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (Loss) per ordinary share - diluted

   $ 0.09      $ 0.19      $ (0.11    $ (0.84
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average ordinary shares outstanding - diluted

     194,171,967        172,485,757        181,949,838        166,018,603  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Horizon Therapeutics plc       9


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Horizon Therapeutics plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

 

     As of  
     September 30,
2019
    December 31,
2018
 

ASSETS

  

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 883,964     $ 958,712  

Restricted cash

     3,746       3,405  

Accounts receivable, net

     396,626       464,730  

Inventories, net

     58,505       50,751  

Prepaid expenses and other current assets

     135,963       68,218  
  

 

 

   

 

 

 

Total current assets

     1,478,804       1,545,816  
  

 

 

   

 

 

 

Property and equipment, net

     26,202       20,101  

Developed technology, net

     1,756,493       1,945,639  

Other intangible assets, net

     4,024       4,630  

Goodwill

     413,669       413,669  

Deferred tax assets, net

     45       3,148  

Other assets

     42,185       8,959  
  

 

 

   

 

 

 

Total assets

   $ 3,721,422     $ 3,941,962  
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable

   $ 26,906     $ 30,284  

Accrued expenses

     204,164       215,739  

Accrued trade discounts and rebates

     404,544       457,763  

Deferred revenues, current portion

     —         4,901  
  

 

 

   

 

 

 

Total current liabilities

     635,614       708,687  
  

 

 

   

 

 

 

LONG-TERM LIABILITIES:

    

Exchangeable notes, net

     346,541       332,199  

Long-term debt, net

     1,000,819       1,564,485  

Deferred tax liabilities, net

     112,968       107,768  

Other long-term liabilities

     69,907       38,717  
  

 

 

   

 

 

 

Total long-term liabilities

     1,530,235       2,043,169  
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES

    

SHAREHOLDERS’ EQUITY:

    

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

     19       17  

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

     (4,585     (4,585

Additional paid-in capital

     2,761,068       2,374,966  

Accumulated other comprehensive loss

     (2,475     (1,523

Accumulated deficit

     (1,198,454     (1,178,769
  

 

 

   

 

 

 

Total shareholders’ equity

     1,555,573       1,190,106  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 3,721,422     $ 3,941,962  
  

 

 

   

 

 

 

 

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Horizon Therapeutics plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net income (loss)

   $ 18,234     $ 33,381     $ (19,749   $ (140,027

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation and amortization expense

     59,319       62,668       177,336       187,135  

Equity-settled share-based compensation

     18,151       28,428       67,066       86,981  

Impairment of long-lived assets

     —         1,603       —         35,249  

Loss on debt extinguishment

     41,371       —         58,835       —    

Amortization of debt discount and deferred financing costs

     5,447       5,694       17,069       16,879  

(Gain)/Loss on sale of assets

     —         (12,303     10,963       (12,303

Deferred income taxes

     9,559       3,398       8,302       1,645  

Foreign exchange and other adjustments

     77       (219     572       243  

Changes in operating assets and liabilities:

        

Accounts receivable

     (1,625     12,318       68,162       14,060  

Inventories

     (7,500     (3,647     (8,004     7,902  

Prepaid expenses and other current assets

     (54,358     (13,788     (72,055     (35,526

Accounts payable

     (14,892     33,711       (3,338     30,119  

Accrued trade discounts and rebates

     5,910       (90,026     (53,241     (142,164

Accrued expenses

     17,481       21,926       (10,591     35,581  

Deferred revenues

     (7,311     1,130       (4,901     1,462  

Other non-current assets and liabilities

     (2,347     586       (1,474     (1,401
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     87,516       84,860       234,952       85,835  
  

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

        

Payment related to license agreement

     —         —         —         (12,000

Proceeds from sale of assets

     —         9,424       6,000       9,424  

Purchases of property and equipment

     (4,467     (120     (11,325     (881
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (4,467     9,304       (5,325     (3,457
  

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

        

Net proceeds from issuance of senior notes

     590,057       —         590,057       —    

Repayment of senior notes

     (556,138     —         (814,420     —    

Net proceeds from the issuance of ordinary shares

     —         —         326,793       —    

Repayment of term loans

     (100,155     —         (918,181     (27,723

Net proceeds from term loans

     —         —         517,378       —    

Contingent consideration proceeds from divestiture

     3,297       —         3,297       —    

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

     3       (23     5,468       4,711  

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

     4,207       6,081       16,236       9,753  

Payment of employee withholding taxes relating to share-based awards

     (5,086     (3,697     (29,460     (12,882
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (63,815     2,361       (302,832     (26,141
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (1,260     316       (1,202     (688
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     17,974       96,841       (74,407     55,549  

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

     869,736       716,605       962,117       757,897  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 887,710     $  813,446     $ 887,710     $ 813,446  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

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

 

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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 September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

GAAP net income (loss)

   $ 18,234     $ 33,381     $ (19,749   $ (140,027

Non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     67       302       2,613       6,179  

Restructuring and realignment costs

     —         4,582       33       14,815  

Amortization and step-up:

        

Intangible amortization expense

     57,662       61,144       172,762       182,508  

Inventory step-up expense

     —         83       90       17,212  

Amortization of debt discount and deferred financing costs

     5,447       5,694       17,069       16,880  

Impairment of long-lived assets

     —         1,603       —         35,249  

(Gain)/Loss on sale of assets

     —         (12,303     10,963       (12,303

Share-based compensation

     18,151       28,428       67,066       86,981  

Depreciation

     1,658       1,523       4,574       4,627  

Litigation settlements

     —         1,500       1,000       5,750  

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

     3,073       (100     9,073       (10

Fees related to refinancing activities

     262       40       1,437       82  

Loss on debt extinguishment

     41,371       —         58,835       —    

Drug substance harmonization costs

     80       301       394       1,579  

Charges relating to discontinuation of Friedreich’s ataxia program

     —         254       1,221       1,476  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of pre-tax non-GAAP adjustments

     127,771       93,051       347,130       361,025  

Income tax effect of pre-tax non-GAAP adjustments

     (21,919     (13,865     (52,291     12,774  

Other non-GAAP income tax adjustments

     —         —         (1,452     (35,893
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

     105,852       79,186       293,387       337,906  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Net Income

   $ 124,086     $ 112,567     $ 273,638     $ 197,879  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share:

        

Weighted average ordinary shares - Basic

     186,470,141       167,047,104       181,949,838       166,018,603  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share - Basic:

        

GAAP earnings (loss) per share - Basic

   $ 0.10     $ 0.20     $ (0.11   $ (0.84

Non-GAAP adjustments

     0.57       0.47       1.61       2.03  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per share - Basic

   $ 0.67     $ 0.67     $ 1.50     $ 1.19  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average ordinary shares - Diluted

        

Weighted average ordinary shares - Basic

     186,470,141       167,047,104       181,949,838       166,018,603  

Ordinary share equivalents

     7,701,826       5,438,653       7,747,931       4,621,407  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares - Diluted

     194,171,967       172,485,757       189,697,769       170,640,010  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share - Diluted

        

GAAP earnings (loss) per share - Diluted

   $ 0.09     $ 0.19     $ (0.11   $ (0.84

Non-GAAP adjustments

     0.55       0.46       1.61       2.03  

Diluted earnings per share effect of ordinary share equivalents

     —         —         (0.06     (0.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per share - Diluted

   $ 0.64     $ 0.65     $ 1.44     $ 1.16  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited)

(in thousands)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2019     2018     2019     2018  

GAAP net income (loss)

   $ 18,234     $ 33,381     $  (19,749   $  (140,027

Depreciation

     1,658       1,523       4,574       4,627  

Amortization and step-up:

        

Intangible amortization expense

     57,662       61,144       172,762       182,508  

Inventory step-up expense

     —         83       90       17,212  

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

     20,428       30,437       69,991       91,921  

(Benefit) expense for income taxes

     (30,564     (1,266     (37,359     4,301  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 67,418     $ 125,302     $ 190,309     $ 160,542  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     67       302       2,613       6,179  

Restructuring and realignment costs

     —         4,582       33       14,815  

Impairment of long-lived assets

     —         1,603       —         35,249  

(Gain)/Loss on sale of assets

     —         (12,303     10,963       (12,303

Share-based compensation

     18,151       28,428       67,066       86,981  

Litigation settlements

     —         1,500       1,000       5,750  

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

     3,073       (100     9,073       (10

Fees related to refinancing activities

     262       40       1,437       82  

Loss on debt extinguishment

     41,371       —         58,835       —    

Drug substance harmonization costs

     80       301       394       1,579  

Charges relating to discontinuation of Friedreich’s ataxia program

     —         254       1,221       1,476  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of other non-GAAP adjustments

     63,004       24,607       152,635       139,798  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $  130,422     $  149,909     $  342,944     $ 300,340  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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 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 September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

GAAP operating income (loss)

   $ 48,619     $ 62,180     $ 71,936     $ (44,558

Non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     (44     186       1,231       6,035  

Restructuring and realignment costs

     —         4,582       33       14,815  

Amortization and step-up:

        

Intangible amortization expense

     57,662       61,144       172,762       182,508  

Inventory step-up expense

     —         83       90       17,212  

Impairment of long-lived assets

     —         1,603       —         35,249  

(Gain)/Loss on sale of assets

     —         (12,303     10,963       (12,303

Share-based compensation

     18,151       28,428       67,066       86,981  

Depreciation

     1,658       1,523       4,574       4,627  

Litigation settlements

     —         1,500       1,000       5,750  

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

     3,073       —         9,073       90  

Fees related to refinancing activities

     262       40       1,437       82  

Drug substance harmonization costs

     80       301       394       1,579  

Charges relating to discontinuation of Friedreich’s ataxia program

     —         254       1,221       1,476  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

     80,842       87,341       269,844       344,101  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

   $ 129,461     $  149,521     $  341,780     $  299,543  
  

 

 

   

 

 

   

 

 

   

 

 

 

Orphan and Rheumatology segment operating income

     89,823       91,537       211,003       205,249  

Inflammation segment operating income

     39,638       57,984       130,777       94,294  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income

   $  129,461     $ 149,521     $ 341,780     $ 299,543  

Foreign exchange (loss)/gain

     (40     35       (25     (81

Other income, net

     1,001       353       1,189       878  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 130,422     $ 149,909     $ 342,944     $ 300,340  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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 September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

Non-GAAP Gross Profit:

        

GAAP gross profit

   $  245,517     $  234,234     $  669,230     $  559,325  

Non-GAAP gross profit adjustments:

        

Acquisition/divestiture-related costs

     —         (239     1,114       (171

Intangible amortization expense

     57,458       60,940       172,156       181,902  

Inventory step-up expense

     —         83       90       17,212  

Share-based compensation

     901       874       2,891       2,767  

Depreciation

     158       176       475       529  

Drug substance harmonization costs

     80       301       394       1,579  

Charges relating to discontinuation of Friedreich’s ataxia program

     —         254       1,221       1,389  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of Non-GAAP adjustments

     58,597       62,389       178,341       205,207  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 304,114     $ 296,623     $ 847,571     $ 764,532  
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP gross profit %

     73.2     72.0     71.5     65.6

Non-GAAP gross profit %

     90.7     91.2     90.5     89.7

GAAP cash provided by operating activities

   $ 87,516     $ 84,860     $ 234,952     $ 85,835  

Cash payments for acquisition/divestiture-related costs

     88       2,299       583       7,854  

Cash payments for restructuring and realignment costs

     382       4,357       3,264       9,034  

Cash payments for litigation settlements

     1,000       4,250       1,000       5,750  

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

     7,073       (100     9,073       175  

Cash payments drug substance harmonization costs

     313       (16     985       5,943  

Cash payments for discontinuation of Friedreich’s ataxia program

     —         (108     2,589       3,399  

Cash payments relating to refinancing activities

     112       26       1,918       57  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating cash flow

   $ 96,484     $ 95,568     $ 254,364     $ 118,047  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Horizon Therapeutics plc       16


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Horizon Therapeutics plc

Net Debt Reconciliation (Unaudited)

(in thousands)

 

     As of  
     September 30,
2019
     December 31,
2018
     September 30,
2018
 

Long-term debt, net of current

   $  1,000,819      $  1,564,485      $  1,563,239  

Exchangeable notes, net

     346,541        332,199        327,573  
  

 

 

    

 

 

    

 

 

 

Total Debt

     1,347,360        1,896,684        1,890,812  

Debt discount

     65,234        87,038        92,473  

Deferred financing fees

     5,432        9,304        9,741  
  

 

 

    

 

 

    

 

 

 

Total Principal Amount of Debt

     1,418,026        1,993,026        1,993,026  

Less: cash and cash equivalents

     883,964        958,712        807,047  
  

 

 

    

 

 

    

 

 

 

Net Debt

   $ 534,062      $ 1,034,314      $ 1,185,979  
  

 

 

    

 

 

    

 

 

 

 

Horizon Therapeutics plc       17


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Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

 

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

As reported - GAAP

   $ (12.3   $ (30.6     247.9   $ 18.2     $  0.09  

Non-GAAP adjustments

     127.8       21.9         105.9    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

   $  115.5     $ (8.7     (7.5 )%    $ 124.1     $ 0.64  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

As reported - GAAP

   $ 32.1     $ (1.3     (3.9 )%    $ 33.4     $ 0.19  

Non-GAAP adjustments

     93.1       13.9         79.2    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

   $ 125.2     $ 12.6       10.1   $  112.6     $ 0.65  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

As reported - GAAP

   $ (57.1   $ (37.4     65.4   $ (19.7   $ (0.11

Non-GAAP adjustments

     347.1       53.7         293.4    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

   $ 290.0     $ 16.3       5.6   $ 273.7     $ 1.44  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

As reported - GAAP

   $ (135.7   $ 4.3       (3.2 )%    $ (140.0   $ (0.84

Non-GAAP adjustments

     361.0       23.1         337.9    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

   $ 225.3     $ 27.4       12.2   $ 197.9     $ 1.16  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Horizon Therapeutics plc       18


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Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended September 30, 2019

(Unaudited)

 

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

GAAP as reported

  $  (89,949   $  (24,572   $  (172,326   $  (41,371   $  (20,428   $ 890     $ 30,564  

Non-GAAP Adjustments (in thousands):

             

Acquisition/divestiture-related costs(1)

    —         —         (44     —         —         111       —    

Amortization and step-up:

             

Intangible amortization expense(3)

    57,458       —         204       —         —         —         —    

Amortization of debt discount and deferred financing costs(5)

    —         —         —         —         5,447       —         —    

Share-based compensation(8)

    901       1,953       15,297       —         —         —         —    

Depreciation(9)

    158       —         1,500       —         —         —         —    

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

    —         3,073       —         —         —         —          

Fees related to refinancing activities (12)

    —         —         262       —         —         —         —    

Loss on debt extinguishment(13)

    —         —         —         41,371       —         —         —    

Drug substance harmonization costs(14)

    80       —         —         —         —         —         —    

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

    —         —         —         —         —         —         (21,919
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

    58,597       5,026       17,219       41,371       5,447       111       (21,919
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

  $  (31,352   $  (19,546   $  (155,107   $ —       $  (14,981   $  1,001     $ 8,645  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended September 30, 2018

(Unaudited)

 

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

GAAP as reported

  $  (91,077   $  (21,169   $  (161,585   $  (1,603   $ 12,303     $  (30,437   $ 337     $ 1,266  

Non-GAAP Adjustments (in thousands):

               

Acquisition/divestiture-related costs(1)

    (239     —         541       —         —         —         —         —    

Restructuring and realignment costs(2)

    —         —         4,582       —         —         —         —         —    

Amortization and step-up:

               

Intangible amortization expense(3)

    60,940       —         204       —         —         —         —         —    

Inventory step-up expense(4)

    83       —         —         —         —         —         —         —    

Amortization of debt discount and deferred financing costs(5)

    —         —         —         —         —         5,694         —    

Impairment of long lived assets(6)

    —         —               1,603       —         —         —         —    

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

    —         —         —         —         (12,303     —         —         —    

Share-based compensation(8)

    874       2,049       25,505       —         —         —         —         —    

Depreciation(9)

    176       —         1,347       —         —         —         —         —    

Litigation settlements(10)

    —         —         1,500       —         —         —         —         —    

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

    —         —         —         —         —         —         (100     —    

Fees related to refinancing activities (12)

    —         —         40       —         —         —         —         —    

Drug substance harmonization costs(14)

    301       —         —         —         —         —         —         —    

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

    254       —         —         —         —         —         —          

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

    —         —         —         —         —         —         —         (13,865
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

    62,389       2,049       33,719       1,603       (12,303     5,694       (100     (13,865
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

  $  (28,688   $  (19,120   $  (127,866   $ —       $ —       $  (24,743   $ 237     $  (12,599
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Horizon Therapeutics plc       19


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Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Nine Months Ended September 30, 2019

(Unaudited)

 

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

GAAP as reported

  $  (267,254   $  (74,611   $  (511,720   $  (10,963   $  (69,991   $  (193   $  (58,835   $ 37,359  

Non-GAAP Adjustments (in thousands):

               

Acquisition/divestiture-related costs(1)

    1,114       —         119       —         —         1,380       —         —    

Restructuring and realignment costs(2)

    —         —         33       —         —         —         —         —    

Amortization and step-up:

               

Intangible amortization expense(3)

    172,156       —         606       —         —         —         —         —    

Inventory step-up expense(4)

    90       —         —         —         —         —         —         —    

Amortization of debt discount and deferred financing costs(5)

    —         —         —         —         17,069       —         —         —    

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

    —         —         —         10,963       —         —         —         —    

Share-based compensation(8)

    2,891       6,931       57,244       —         —         —         —         —    

Depreciation(9)

    475       —         4,099       —         —         —         —         —    

Litigation settlements(10)

    —         —         1,000       —         —         —         —         —    

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

    —         9,073       —         —         —         —         —         —    

Fees related to refinancing activities (12)

    —         —         1,437       —         —         —         —         —    

Loss on debt extinguishment(13)

    —         —         —         —         —         —         58,835       —    

Drug substance harmonization costs(14)

    394       —         —         —         —         —         —         —    

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

    1,221       —         —         —         —         —         —         —    

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

    —         —         —         —         —         —         —         (52,291

Other non-GAAP income tax
adjustments(17)

    —         —         —         —         —         —         —         (1,452
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

    178,341       16,004       64,538       10,963       17,069       1,380       58,835       (53,743
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

  $ (88,913   $  (58,607   $  (447,182   $ —         $  (52,922   $  1,186     $ —         $  (16,384)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Horizon Therapeutics plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Nine Months Ended September 30, 2018

(Unaudited)

 

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

GAAP as reported

  $  (292,702   $  (63,079   $  (517,858   $  (35,249   $ 12,303     $  (91,921     834     $  (4,301

Non-GAAP Adjustments (in thousands):

               

Acquisition/divestiture-related costs(1)

    (171     (67     6,417       —         —         —         —         —    

Restructuring and realignment costs(2)

    —         1,733       13,082       —         —         —         —         —    

Amortization and step-up:

               

Intangible amortization expense(3)

    181,902       —         606       —         —         —         —         —    

Inventory step-up expense(4)

    17,212       —         —         —         —         —         —         —    

Amortization of debt discount and deferred financing costs(5)

    —         —         —         —         —         16,880         —    

Impairment of long lived assets(6)

    —         —         —         35,249       —         —         —         —    

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

    —         —         —         —         (12,303     —         —         —    

Share-based compensation(8)

    2,767       6,697       77,517       —         —         —         —         —    

Depreciation(9)

    529       —         4,098       —         —         —         —         —    

Litigation settlements(10)

    —         —         5,750       —         —         —         —         —    

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

    —         90       —         —         —         —         (100     —    

Fees related to refinancing activities (12)

    —         —         82       —         —         —         —         —    

Drug substance harmonization costs(14)

    1,579       —         —         —         —         —         —         —    

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

    1,389       87       —         —         —         —         —         —    

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

    —         —         —         —         —         —         —         12,774  

Other non-GAAP income tax adjustments(17)

    —         —         —         —         —         —         —         (35,893
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

    205,207       8,540       107,552       35,249       (12,303     16,880       (100     (23,119
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

  $ (87,495   $  (54,539   $  (410,306   $ —         $ —         $  (75,041   $ 734     $  (27,420
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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 nine months ended Sept. 30, 2018, we recognized in cost of goods sold $17.2 million for inventory step-up expense primarily related to KRYSTEXXA inventory sold.

 

5.

Represents amortization of debt discount and deferred financing costs associated with our debt.

 

6.

Impairment of long-lived assets during the nine months ended Sept. 30, 2018, relates to the write-off of the book value of developed technology related to PROCYSBI in Canada and Latin America.

 

7.

During the nine months ended Sept. 30, 2019, we recorded a loss of $11.0 million on the sale of our rights to MIGERGOT.

During the nine months ended Sept. 30, 2018, we completed the IMUKIN sale for cash proceeds of $9.5 million, with a potential additional contingent consideration payment and we recorded a gain of $12.3 million on the sale. The contingent consideration payment of €3.0 million ($3.3 million when converted using a Euro-to-Dollar exchange rate at the date of receipt of 1.0991) was received in September 2019.

 

8.

Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employee directors and our employee share purchase plan.

 

9.

Represents depreciation expense related to our property, equipment, software and leasehold improvements.

 

10.

We recorded $1.0 million and $5.8 million of expense during the nine months ended Sept. 30, 2019 and 2018, respectively, for litigation settlements.

 

Horizon Therapeutics plc       21


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11.

During the nine months ended Sept. 30, 2019, we recorded upfront, progress and milestone payments related to license and collaboration agreements of $9.1 million which was composed of a $3.0 million milestone payment to F. Hoffmann-La Roche Ltd relating to the teprotumumab BLA submission to the FDA during the third quarter of 2019, an upfront cash payment of $2.0 million and a progress payment of $4.0 million in relation to the collaboration agreement with HemoShear.

 

12.

Represents arrangement and other fees relating to our refinancing activities.

 

13.

During the nine months ended Sept. 30, 2019, we recorded a loss on debt extinguishment of $58.8 million in the condensed consolidated statements of comprehensive loss, which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $775.0 million of our 2023 Senior Notes and 2024 Senior Notes and the write-off of the deferred financing fees and debt discount fees related to the $400.0 million of term loan repayments.

 

14.

During the year ended Dec. 31, 2016, we entered into a definitive agreement to acquire certain rights to interferon gamma-1b, marketed as IMUKIN in an estimated thirty countries primarily in Europe and the Middle East, or the IMUKIN purchase agreement. We already owned the rights to interferon gamma-1b marketed as ACTIMMUNE in the United States, Canada and Japan. In connection with the IMUKIN purchase agreement, we also committed to pay our contract manufacturer certain amounts related to the harmonization of the manufacturing processes for ACTIMMUNE and IMUKIN drug substance, or the harmonization program. At the time we entered into the IMUKIN purchase agreement and the harmonization program commitment was made, we had anticipated achieving certain benefits should the Phase 3 clinical trial evaluating ACTIMMUNE for the treatment of Friedreich’s ataxia, or FA, be successful. If the study had been successful and if U.S. marketing approval had subsequently been obtained, we had forecasted significant increases in demand for the medicine and the harmonization program would have resulted in significant benefits for us. Following our discontinuation of the FA program, we determined that certain assets, including an upfront payment related to the IMUKIN purchase agreement, were impaired, and the costs under the harmonization program would no longer have benefit to us and should be expensed as incurred.

 

15.

Represents expenses incurred relating to discontinuation of the FA program and a reduction to previous charges recorded.

 

16.

Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the statutory income tax rate of the applicable jurisdictions for each non-GAAP adjustment.

 

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17.

Following Notice 2018-28, issued by the U.S. Treasury Department and the U.S. Internal Revenue Service on April 2, 2018 and in accordance with the measurement period provisions under Staff Accounting Bulletin No. 118, or SAB 118, during the nine months ended Sept. 30, 2018 we reinstated the deferred tax asset previously written off during the year ended Dec. 31, 2017, related to our U.S. interest expense carry forwards under Section 163(j) of the Internal Revenue Code of 1986, as amended, based on the revised U.S. federal tax rate of 21 percent. The impact of the deferred tax asset reinstatement in accordance with SAB 118 was a $35.9 million increase to our benefit for income taxes and a corresponding decrease to the U.S. group net deferred tax liability position.

During the nine months ended Sept. 30, 2019 we released a reserve that was originally established and treated as a non-GAAP adjustment related to an uncertain tax position in connection with an acquisition resulting in a non-GAAP tax adjustment of $1.5 million.

 

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