8-K
Horizon Therapeutics Public Ltd Co IE 00-0000000 false 0001492426 0001492426 2020-11-02 2020-11-02

 

 

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 2, 2020

 

 

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 2, 2020, Horizon Therapeutics plc issued a press release announcing its financial results for the third quarter ended September 30, 2020. 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 2, 2020. 
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 2, 2020     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 Record Third-Quarter 2020 Results;

Increases TEPEZZA® Full-Year Net Sales Guidance to Greater Than $800 Million;

Increases Full-Year 2020 Net Sales and Adjusted EBITDA Guidance

— Record Third-Quarter 2020 Net Sales of $636.4 Million Increased 90 Percent;

Third-Quarter 2020 GAAP Net Income of $292.8 Million; Adjusted EBITDA of $329.8 Million —

— Quarterly Orphan Segment Net Sales Increased 131 Percent to $534.8 Million,

Representing Nearly 85 Percent of Total Company Net Sales —

— TEPEZZA (teprotumumab-trbw) Third-Quarter 2020 Net Sales of $286.9 Million;

Increasing Full-Year 2020 Guidance to Greater Than $800 Million from Greater Than $650 Million;

Significantly Increasing Investment in TEPEZZA to Support Continued Strong Growth —

— KRYSTEXXA® (pegloticase injection) Third-Quarter 2020 Net Sales of $108.5 Million;

Increasing Full-Year 2020 Net Sales Guidance to Low Double-Digit Growth —

— Increasing Full-Year 2020 Net Sales Guidance to $2.12 Billion to $2.14 Billion and

Full-Year 2020 Adjusted EBITDA Guidance to $920 Million to $940 Million —

— Pursuing TEPEZZA Expansion Outside the United States —

— Karin Rosén, M.D., Ph.D., Named Executive Vice President,

Research and Development and Chief Scientific Officer —

— Topline Data Announced for RECIPE Randomized Controlled Trial Evaluating

Co-Administration of KRYSTEXXA with an Immunomodulator; Response Rate of 86 Percent;

KRYSTEXXA Use with Immunomodulation Now at More Than 25 Percent —

— Expanding HZN-825 Development Program to Include Interstitial Lung Diseases —

— Completed Equity Offering and Extinguishment of Exchangeable Senior Notes;

Cash Position of $1.7 Billion at Sept. 30, 2020 —

DUBLIN Nov. 2, 2020 – Horizon Therapeutics plc (Nasdaq: HZNP) today announced record third-quarter 2020 financial results and increased both its full-year 2020 net sales and adjusted EBITDA guidance.

“We are proud of the fact that in just eight months TEPEZZA has made such a dramatic difference in the lives of so many patients, resulting in one of the most successful rare disease medicine launches ever,” said Tim Walbert, chairman, president and chief executive officer, Horizon. “We are now pursuing our global strategy to provide TEPEZZA to patients with Thyroid Eye Disease in other parts of the world. Furthermore, we are significantly increasing our investment in TEPEZZA to drive additional awareness of Thyroid Eye Disease and support the continued strong demand for this important medicine.”

Walbert continued, “During the third quarter we also saw a return to growth for KRYSTEXXA, our biologic for the treatment of uncontrolled gout and a key growth driver for the Company. With our substantial progress this year, including the improvements we have made to our capital structure and investments in our clinical programs, we are well positioned for continued growth.”

 

1


LOGO

 

Financial Highlights

 

(in millions except for per share amounts and percentages)    Q3 20      Q3 19      %Change      YTD 20      YTD
19
    %Change  

Net sales

   $  636.4      $  335.5        90      $  1,455.1      $  936.5       55  

Net income (loss)

     292.8        18.2        NM        199.2        (19.7     NM  

Non-GAAP net income

     392.2        124.1        216        559.2        273.6       104  

Adjusted EBITDA

     329.8        130.4        153        627.7        342.9       83  

Earnings (Loss) per share—diluted

     1.31        0.09        NM        0.95        (0.11     NM  

Non-GAAP earnings per share—diluted

     1.74        0.64        172        2.58        1.44       79  

Third-Quarter and Recent Company Highlights

 

 

Increasing TEPEZZA Investment to Support Continued Strong Growth: Today, the Company increased full-year 2020 net sales guidance for TEPEZZA to greater than $800 million from greater than $650 million. In addition, to support the Company’s outlook for continued strong TEPEZZA growth, as well as to increase awareness of Thyroid Eye Disease (TED), the Company is significantly expanding its commercial and field-based organization for TEPEZZA and increasing its investment in marketing initiatives, including its direct-to-consumer campaign. The Company is also increasing its investment in TEPEZZA long-term supply. These initiatives are intended to support TEPEZZA peak U.S. annual net sales guidance of greater than $3 billion.

 

 

Pursuing TEPEZZA Expansion Outside the United States: With the U.S. launch of TEPEZZA earlier this year and the demonstrated benefit it has provided U.S. patients with TED, the Company is pursuing its global expansion strategy to bring TEPEZZA to patients with TED in other parts of the world. Based on its preliminary analysis, the Company projects the initial opportunity to be greater than $500 million in annual net sales, which covers multiple geographies but does not yet incorporate any potential revenue in Europe. Japan is one of the countries the Company is pursuing, and the Company will be engaging with Japanese regulatory authorities and the Pharmaceutical and Medical Devices Agency, as well as with the Japanese medical community, to better understand the current dynamics of TED in Japan and the regulatory requirements for approval of TEPEZZA.

 

 

New Executive Vice President, Research & Development and Chief Scientific Officer: The Company announced today that Karin Rosén, M.D., Ph.D., has joined Horizon as executive vice president, research and development and chief scientific officer. Dr. Rosén is an accomplished life sciences executive and physician with nearly three decades of experience, which includes biologic clinical research and development, as well as building, leading and successfully launching multiple novel medicines in the United States and globally. Dr. Rosén will contribute to solidifying the Company’s position as a leading rare disease biopharmaceutical company.

 

2


LOGO

 

 

Expanding HZN-825 Development Program: As part of its strategy to further explore the potential fibrosis-mediating benefits of LPAR1 antagonism, the Company is planning a clinical development program for its pipeline candidate HZN-825 in interstitial lung diseases. The most common interstitial lung disease (ILD) is idiopathic pulmonary fibrosis (IPF), a rare progressive lung disease with a median survival of less than five years. The Company anticipates initiating its first trial in an ILD, a Phase 2b pivotal trial in the IPF indication, in mid-2021.

 

 

KRYSTEXXA Immunomodulation RECIPE Trial Achieved 86 Percent Response Rate: Data from the investigator-initiated trial RECIPE will be presented at the 2020 American College of Rheumatology annual meeting on Nov. 7, 2020. This trial was the first randomized controlled trial (RCT) evaluating the effect of co-administration of KRYSTEXXA with an immunomodulator to increase the complete response rate of KRYSTEXXA. The primary endpoint was the proportion of patients with serum uric acid (sUA) less than or equal to 6 mg/dL at 12 weeks: 86 percent of patients receiving KRYSTEXXA co-administered with the immunomodulator mycophenolate mofetil (MMF) achieved this outcome, compared to 40 percent of placebo patients on KRYSTEXXA monotherapy (p-value 0.01). After 12 weeks off of MMF therapy but continuing on KRYSTEXXA therapy, 68 percent of patients achieved a sustained response, compared to 30 percent of placebo patients. The combination was well tolerated with no new safety signals. This trial adds to the growing body of evidence supporting the immunomodulation treatment approach where complete response rates have ranged between 70 and 100 percent.

 

 

Initiated Enrollment in KRYSTEXXA Shorter Infusion Duration Trial: On Oct. 29, 2020, the Company announced that the first patient was enrolled in an open-label clinical trial to evaluate a shorter infusion duration for KRYSTEXXA co-prescribed with methotrexate to treat patients with uncontrolled gout. Currently, KRYSTEXXA is infused over a two-hour or longer timeframe. A shorter infusion duration administration could meaningfully impact the experience for patients, physicians and sites of care.

 

 

Announced Interim Data in KRYSTEXXA PROTECT Trial: On Oct. 22, 2020, the Company announced interim data from its PROTECT open-label trial evaluating KRYSTEXXA to improve management of uncontrolled gout for adults with a kidney transplant. These data were presented as part of the 2020 American Society of Nephrology Kidney Week. Early data of this ongoing clinical trial are encouraging with respect to the ability of KRYSTEXXA to treat uncontrolled gout in this very sensitive transplant population without compromising kidney function.

 

 

Completed Enrollment for KRYSTEXXA MIRROR RCT: In August 2020, the Company completed enrollment of its MIRROR RCT, with a total of 145 patients, exceeding its target enrollment of 135 patients. MIRROR RCT is the first randomized trial to evaluate the efficacy and safety of the concomitant use of KRYSTEXXA with methotrexate to increase the complete response rate of KRYSTEXXA. Preliminary six-month results are expected in the first half of 2021 with the full 12-month dataset available after the trial is completed in the second half of 2021.

 

3


LOGO

 

 

Announced Topline Data from TEPEZZA OPTIC-X Open-Label Extension Trial and OPTIC 48-Week Off-Treatment Follow-Up Period: In July 2020, the Company announced topline results from its OPTIC-X open-label clinical trial, an extension trial of OPTIC, the TEPEZZA Phase 3 pivotal confirmatory clinical trial, as well as data from the OPTIC 48-week off-treatment follow-up period. OPTIC-X results demonstrated that 89 percent of patients who received placebo during OPTIC and then entered OPTIC-X and received TEPEZZA achieved the primary endpoint of 2 mm or more reduction in proptosis at Week 24. These patients had a TED diagnosis for an average of one year prior to initiating treatment with TEPEZZA compared with an average of six months for patients in OPTIC. The results of the OPTIC 48-week off-treatment follow-up period demonstrated that the majority of TEPEZZA patients who were proptosis responders at Week 24 of OPTIC maintained their response at Week 72, nearly a year off treatment. For the small number of TEPEZZA patients who relapsed during the OPTIC follow-up period, the majority experienced improvements in proptosis with an additional course of TEPEZZA in OPTIC-X. The OPTIC-X and OPTIC 48-week follow-up data underscore the long-term durability of TEPEZZA, the potential for retreatment and the efficacy of TEPEZZA in patients with longer duration of TED.

 

 

Permanent J-Code Issued for TEPEZZA: On Oct. 1, 2020, the Company’s permanent, product-specific Healthcare Common Procedure Coding System (HCPCS) J-code (J3241) became effective for TEPEZZA. The permanent J-code enables reimbursement in all outpatient treatment settings.

 

 

Additional Clinical Trial Data on TEPEZZA at Upcoming Medical Meetings: Several TEPEZZA-related events will take place at the Nov. 13-15, 2020, virtual American Academy of Ophthalmology (AAO) 2020 annual meeting, including additional details on OPTIC 48-week off-treatment durability of response as well as OPTIC-X treatment results. The Nov. 20-22, 2020, virtual American Society of Ophthalmic Plastic and Reconstructive Surgery (ASOPRS) Fall Scientific Symposium will include a presentation on the recent case report published in the American Journal of Ophthalmology on the treatment of a patient with chronic TED. Additionally, case reports of improvement of dysthyroid optic neuropathy after treatment with TEPEZZA will be presented at both meetings.

 

 

Completed Equity Offering and Improved Companys Capital Structure: On Aug. 11, 2020, the Company completed a public offering of ordinary shares and raised approximately $920 million in net proceeds. On Aug. 3, 2020, the Company completed the extinguishment of all $400 million of its 2.50 percent exchangeable senior notes due 2022.

 

 

Received Best Workplace Awards: During the third quarter, the Company received three workplace recognitions. In August 2020, Crain’s Chicago Business selected Horizon as one of the “Best Places to Work in Chicago” and Fortune and Great Place to Work® named Horizon to the “Fortune Best Workplaces for Millennials” list. In September 2020, Horizon ranked 15th out of 50 U.S. companies on the “PEOPLE Companies That Care®” list. More recently, in October 2020, Horizon was named to the “Fortune Best Small & Medium Workplaces” list, the Chicago Tribune Top Workplaces 2020 list, the “San Francisco Bay Area’s Best and Brightest Companies to Work For” list, the Dave Thomas Foundation for Adoption “Best Adoption-Friendly Workplaces” list and the Crain’s Chicago Business “Most Innovative Companies” List. To date in 2020, the Company has received 11 workplace-related recognitions, reflecting the high level of engagement of its employees.

 

4


LOGO

 

Key Research and Development Programs

 

 

HZN-825 Diffuse Cutaneous Systemic Sclerosis (dcSSc) Program: HZN-825 is the Company’s LPAR1 antagonist in development for the treatment of dcSSc, a rare, chronic autoimmune disease marked by fibrosis, or skin thickening, with no FDA-approved treatment options. The Company expects to begin a Phase 2b pivotal trial in the first half of 2021.

 

 

HZN-825 ILD Program: As part of its strategy to further explore the potential fibrosis-mediating benefits of LPAR1 antagonism, the Company is planning a clinical development program for its pipeline candidate HZN-825 in ILD, starting with IPF, which is a rare progressive lung disease with a median survival of less than five years. The Company anticipates initiating a Phase 2b pivotal trial in the IPF indication in mid-2021.

 

 

TEPEZZA Trial in Chronic TED: The Company expects to initiate a randomized, placebo-controlled trial of TEPEZZA in patients with chronic TED by year-end 2020. In chronic TED, the disease is no longer progressive; however, significant disease manifestations such as proptosis (eye bulging) and diplopia (double vision) remain.

 

 

TEPEZZA Subcutaneous Administration Program: The Company has initiated a pharmacokinetic trial to explore subcutaneous dosing of TEPEZZA, which is currently administered by infusion. The objective of the trial is to inform the potential for additional administration options for TEPEZZA, which could provide greater flexibility for patients and physicians.

 

 

TEPEZZA dcSSc Exploratory Trial: As part of its evaluation of additional potential indications for TEPEZZA, the Company is planning to initiate an exploratory trial in dcSSc by year-end 2020.

 

 

KRYSTEXXA MIRROR RCT: The Company is currently evaluating the efficacy and safety of the concomitant use of KRYSTEXXA with methotrexate to increase the complete response rate of KRYSTEXXA in the MIRROR placebo-controlled RCT. The trial has completed enrollment, with 145 patients. The primary endpoint of the trial is the proportion of serum uric acid (sUA) responders (sUA of less than 6 mg/dL) at six months, with secondary endpoints out to 12 months. The registrational trial is designed to enable the potential submission of results to the FDA to update the prescribing information. The MIRROR RCT follows the MIRROR open-label trial completed in 2019 that demonstrated a 79 percent complete response rate for patients using KRYSTEXXA with methotrexate, nearly double the 42 percent response rate in the KRYSTEXXA Phase 3 clinical program, which evaluated KRYSTEXXA alone. 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.

 

5


LOGO

 

 

KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout: The Company has achieved more than 75 percent enrollment in its PROTECT open-label clinical trial, and expects to complete enrollment by the end of 2020. The trial is 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.

 

 

KRYSTEXXA Shorter Infusion Duration Trial: On Oct. 29, 2020, the Company enrolled the first patient in its shorter infusion duration trial to evaluate the impact of administering KRYSTEXXA over a significantly shorter infusion duration. Currently, KRYSTEXXA is infused over a two-hour or longer timeframe. A shorter infusion duration administration could meaningfully impact the experience for patients, physicians and sites of care.

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 2020 net sales were $636.4 million, an increase of 90 percent compared to the third quarter of 2019.

 

 

Gross Profit: Under U.S. GAAP, the third-quarter 2020 gross profit ratio was 76.2 percent compared to 73.2 percent in the third quarter of 2019. The non-GAAP gross profit ratio in the third quarter of 2020 was 86.7 percent compared to 90.7 percent in the third quarter of 2019.

 

 

Operating Expenses: Research and development (R&D) expenses were 4.7 percent of net sales and selling, general and administrative (SG&A) expenses were 35.5 percent of net sales. Non-GAAP R&D expenses were 4.4 percent of net sales, and non-GAAP SG&A expenses were 30.5 percent of net sales.

 

 

Income Tax Benefit: In the third quarter of 2020, income tax benefit on a GAAP and non-GAAP basis was $91.1 million and $73.3 million, respectively.

 

 

Net Income: On a GAAP basis in the third quarter of 2020, net income was $292.8 million. Third-quarter 2020 non-GAAP net income was $392.2 million.

 

 

Adjusted EBITDA: Third-quarter 2020 adjusted EBITDA was $329.8 million.

 

 

Earnings per Share: On a GAAP basis diluted earnings per share in the third quarter of 2020 and 2019 was $1.31 and $0.09, respectively. Non-GAAP diluted earnings per share in the third quarter of 2020 and 2019 was $1.74 and $0.64, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the third quarter of 2020 were 223.7 million and 225.3 million, respectively.

 

6


LOGO

 

Third-Quarter Segment Results

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

 

(in millions except for percentages)    Q3 20      Q3 19      %Change     YTD 20      YTD 19      %Change  

TEPEZZA®

     286.9        —          NM       476.3        —          NM  

KRYSTEXXA®

     108.5        99.6        9       276.9        231.6        20  

RAVICTI®

     64.6        60.0        8       191.4        160.3        19  

PROCYSBI®

     43.1        40.4        7       122.8        121.1        1  

ACTIMMUNE®

     28.3        27.9        2       83.1        78.9        5  

BUPHENYL®

     3.2        3.0        6       8.4        8.2        3  

QUINSAIRTM

     0.2        0.2        (23     0.5        0.6        (9
  

 

 

    

 

 

      

 

 

    

 

 

    

Orphan Net Sales

   $  534.8      $  231.1        131     $  1,159.4      $  600.7        93  
  

 

 

    

 

 

      

 

 

    

 

 

    

Orphan Segment Operating Income

   $  274.7      $ 79.7        245     $ 480.6      $  180.1        167  

 

 

Third-quarter 2020 net sales of the orphan segment, the Company’s strategic growth segment, were $534.8 million, an increase of 131 percent over the prior year’s quarter, driven by the strong performance of TEPEZZA, KRYSTEXXA, RAVICTI and PROCYSBI. The orphan segment represented 84 percent of total third-quarter net sales.

 

   

Third-quarter 2020 orphan segment operating income was $274.7 million, which includes significant investment spend associated with the commercial launch of TEPEZZA.

Inflammation Segment

 

(in millions except for percentages)    Q3 20      Q3 19      %Change     YTD
20
     YTD 19      %Change  

PENNSAID 2%®

     50.3        42.1        20       126.9        143.7        (12

DUEXIS®

     27.9        29.9        (7     87.1        89.4        (3

RAYOS®

     18.1        19.3        (6     50.8        59.1        (14

VIMOVO®(1)

     5.3        13.1        (60     30.9        41.8        (26

MIGERGOT®(2)

     —          —          NM       —          1.8        NM  
  

 

 

    

 

 

      

 

 

    

 

 

    

Inflammation Net Sales

   $  101.6      $  104.4        (3   $  295.7      $  335.8        (12
  

 

 

    

 

 

      

 

 

    

 

 

    

Inflammation Segment Operating Income

   $ 55.1      $ 49.8        11     $  145.1      $  161.7        (10

 

  (1)

On Feb. 27, 2020, Dr. Reddy’s Laboratory initiated an at-risk launch of generic VIMOVO in the United States.

 

  (2)

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

 

 

Third-quarter 2020 net sales of the inflammation segment were $101.6 million and segment operating income was $55.1 million.

 

7


LOGO

 

Cash Flow Statement and Balance Sheet Highlights

 

 

On a GAAP basis, operating cash flow in the third quarter of 2020 was $108.9 million. Non-GAAP operating cash flow was $109.0 million.

 

 

The Company had cash and cash equivalents of $1.725 billion as of Sept. 30, 2020.

 

 

As of Sept. 30, 2020, the total principal amount of debt outstanding was $1.018 billion, which reflects the extinguishment by holders in the third quarter of the remaining $193.0 million of the total $400.0 million of the Company’s 2.50 percent exchangeable senior notes due 2022 through $191.3 million of exchanges for ordinary shares and $1.7 million of cash redemptions. As of Sept. 30, 2020, the gross-debt-to-last-12-months adjusted EBITDA leverage ratio was 1.3 times, compared to 2.9 times as of Sept. 30, 2019.

Revised 2020 Guidance

The Company now expects full-year 2020 net sales to range between $2.12 billion and $2.14 billion, an increase from the previous guidance range of $1.85 billion to $1.90 billion. The Company now expects TEPEZZA full-year 2020 net sales of greater than $800 million, compared to the previous guidance of greater than $650 million, and low double-digit KRYSTEXXA full-year 2020 net sales growth. Full-year 2020 adjusted EBITDA is now expected to range between $920 million and $940 million, an increase from the previous guidance range of $725 million to $775 million.

Webcast

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

About Horizon

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

 

8


LOGO

 

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 and non-GAAP operating cash flow, 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, the income tax effect on pre-tax non-GAAP adjustments and other non-GAAP income tax adjustments, 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 2020 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 2020 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).

 

9


LOGO

 

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s full-year 2020 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; development and commercialization plans; expected timing of clinical trials, studies and regulatory submissions; 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; impacts of the COVID-19 pandemic and actions taken to slow its spread, including impacts on net sales of Horizon’s medicines and potential delays in clinical trials; 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 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

 

10


LOGO

 

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,  
     2020     2019     2020     2019  

Net sales

   $ 636,427     $ 335,466     $ 1,455,115     $ 936,484  

Cost of goods sold

     151,475       89,949       370,406       267,254  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     484,952       245,517       1,084,709       669,230  
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

        

Research and development

     30,206       24,572       138,483       74,611  

Selling, general and administrative

     226,164       172,326       696,271       511,720  

Loss on sale of assets

     —         —         —         10,963  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     256,370       196,898       834,754       597,294  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     228,582       48,619       249,955       71,936  
  

 

 

   

 

 

   

 

 

   

 

 

 

OTHER EXPENSE, NET:

        

Loss on debt extinguishment

     (14,602     (41,371     (31,856     (58,835

Interest expense, net

     (12,185     (20,428     (48,100     (69,991

Foreign exchange (loss) gain

     (753     (40     306       (25

Other income (expense), net

     717       890       1,791       (193
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     (26,823     (60,949     (77,859     (129,044
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) before benefit for income taxes

     201,759       (12,330     172,096       (57,108

Benefit for income taxes

     (91,081     (30,564     (27,143     (37,359
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 292,840     $ 18,234     $ 199,239     $ (19,749
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per ordinary share - basic

   $ 1.38     $ 0.10     $ 1.00     $ (0.11
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average ordinary shares outstanding - basic

     212,320,219       186,470,141       198,413,779       181,949,838  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per ordinary share - diluted

   $ 1.31     $ 0.09     $ 0.95     $ (0.11
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average ordinary shares outstanding - diluted

     223,743,903       194,171,967       208,678,460       181,949,838  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

11


LOGO

 

Horizon Therapeutics plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

 

     As of  
     September 30,
2020
    December 31,
2019
 

ASSETS

  

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 1,725,403     $ 1,076,287  

Restricted cash

     3,573       3,752  

Accounts receivable, net

     705,898       408,685  

Inventories, net

     77,104       53,802  

Prepaid expenses and other current assets

     220,341       143,577  
  

 

 

   

 

 

 

Total current assets

     2,732,319       1,686,103  
  

 

 

   

 

 

 

Property and equipment, net

     156,287       30,159  

Developed technology and other intangible assets, net

     1,847,880       1,702,628  

Goodwill

     413,669       413,669  

Deferred tax assets, net

     566,605       555,165  

Other assets

     50,115       48,310  
  

 

 

   

 

 

 

Total assets

   $ 5,766,875     $ 4,436,034  
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable

   $ 38,978     $ 21,514  

Accrued expenses

     421,827       235,234  

Accrued trade discounts and rebates

     322,798       466,421  
  

 

 

   

 

 

 

Total current liabilities

     783,603       723,169  
  

 

 

   

 

 

 

LONG-TERM LIABILITIES:

    

Exchangeable Senior Notes, net

     —         351,533  

Long-term debt, net

     1,002,846       1,001,308  

Deferred tax liabilities, net

     97,647       94,247  

Other long-term liabilities

     85,968       80,328  
  

 

 

   

 

 

 

Total long-term liabilities

     1,186,461       1,527,416  
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES

    

SHAREHOLDERS’ EQUITY:

    

Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at September 30, 2020 and December 31, 2019; 220,995,108 and 188,402,040 shares issued at September 30, 2020 and December 31, 2019, respectively, and 220,610,742 and 188,017,674 shares outstanding at September 30, 2020 and December 31, 2019, respectively

     22       19  

Treasury stock, 384,366 ordinary shares at September 30, 2020 and December 31, 2019

     (4,585     (4,585

Additional paid-in capital

     4,208,845       2,797,602  

Accumulated other comprehensive loss

     (1,028     (1,905

Accumulated deficit

     (406,443     (605,682
  

 

 

   

 

 

 

Total shareholders’ equity

     3,796,811       2,185,449  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 5,766,875     $ 4,436,034  
  

 

 

   

 

 

 

 

12


LOGO

 

Horizon Therapeutics plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2020     2019     2020     2019  

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net income (loss)

  $ 292,840     $ 18,234     $ 199,239     $ (19,749

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

       

Depreciation and amortization expense

    70,510       59,319       209,906       177,336  

Equity-settled share-based compensation

    30,356       18,151       113,834       67,066  

Acquired in-process research and development expense

    —         —         47,517       —    

Loss on debt extinguishment

    14,602       41,371       31,856       58,835  

Amortization of debt discount and deferred financing costs

    1,208       5,447       12,025       17,069  

Loss on sale of assets

    —         —         —         10,963  

Deferred income taxes

    (3,480     9,559       (8,041     8,302  

Foreign exchange and other adjustments

    423       77       1,084       572  

Changes in operating assets and liabilities:

       

Accounts receivable

    (162,267     (1,625     (297,392     68,162  

Inventories

    (10,986     (7,500     (23,329     (8,004

Prepaid expenses and other current assets

    (62,816     (54,358     (83,226     (72,055

Accounts payable

    (65,846     (14,892     17,709       (3,338

Accrued trade discounts and rebates

    34,170       5,910       (143,551     (53,241

Accrued expenses

    (24,675     17,481       56,830       (10,591

Deferred revenues

    —         (7,311     —         (4,901

Other non-current assets and liabilities

    (5,176     (2,347     11,410       (1,474
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

    108,863       87,516       145,871       234,952  
 

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Purchases of property and equipment

    (13,429     (4,467     (133,399     (11,325

Payments for long-term investments

    (8,937     —         (8,937     —    

Proceeds from sale of assets

    —         —         —         6,000  

Payments for acquisitions

    —         —         (262,305     —    

Change in escrow deposit for property purchase

    —         —         6,000       —    
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activites

    (22,366     (4,467     (398,641     (5,325
 

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Net proceeds from issuance of senior notes

    —         590,057       —         590,057  

Repayment of senior notes

    (1,739     (556,138     (1,739     (814,420

Net proceeds from the issuance of ordinary shares

    919,995       —         919,995       326,793  

Repayment of term loans

    —         (100,155     —         (918,181

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       7,979       5,468  

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

    8,112       4,207       33,999       16,236  

Payment of employee withholding taxes relating to share-based awards

    (6,743     (5,086     (59,752     (29,460
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

    919,625       (63,815     900,482       (302,832
 

 

 

   

 

 

   

 

 

   

 

 

 

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

    1,166       (1,260     1,225       (1,202
 

 

 

   

 

 

   

 

 

   

 

 

 

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

    1,007,288       17,974       648,937       (74,407

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

    721,688       869,736       1,080,039       962,117  
 

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 1,728,976     $ 887,710     $ 1,728,976     $ 887,710  
 

 

 

   

 

 

   

 

 

   

 

 

 
(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.

 

13


LOGO

 

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,  
     2020     2019     2020     2019  

GAAP net income (loss)

   $ 292,840     $ 18,234     $ 199,239     $ (19,749

Non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     199       67       47,296       2,613  

Restructuring and realignment costs

     —         —         —         33  

Amortization and step-up:

        

Intangible amortization expense

     65,353       57,662       190,677       172,762  

Inventory step-up expense

     —         —         —         90  

Amortization of debt discount and deferred financing costs

     1,208       5,447       12,025       17,069  

Impairment of long-lived assets

     —         —         1,072       —    

Loss on sale of assets

     —         —         —         10,963  

Share-based compensation

     30,356       18,151       113,834       67,066  

Depreciation

     5,157       1,658       19,229       4,574  

Litigation settlements

     —         —         —         1,000  

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

     —         3,073       3,000       9,073  

Fees related to refinancing activities

     —         262       54       1,437  

Loss on debt extinguishment

     14,602       41,371       31,856       58,835  

Drug substance harmonization costs

     193       80       483       394  

Charges relating to discontinuation of Friedreich’s ataxia program

     —         —         —         1,221  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of pre-tax non-GAAP adjustments

     117,068       127,771       419,526       347,130  

Income tax effect of pre-tax non-GAAP adjustments

     (23,063     (21,919     (80,122     (52,291

Other non-GAAP income tax adjustments

     5,331       —         20,541       (1,452
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

     99,336       105,852       359,945       293,387  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Net Income

   $ 392,176     $ 124,086     $ 559,184     $ 273,638  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share:

        

Weighted average ordinary shares—Basic

     212,320,219       186,470,141       198,413,779       181,949,838  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share—Basic:

        

GAAP loss per share—Basic

   $ 1.38     $ 0.10     $ 1.00     $ (0.11

Non-GAAP adjustments

     0.47       0.57       1.82       1.61  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per share—Basic

   $ 1.85     $ 0.67     $ 2.82     $ 1.50  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Non-GAAP Net Income

   $ 392,176     $ 124,086     $ 559,184     $ 273,638  

Effect of assumed exchange of Exchangeable Senior Notes, net of tax

     223       —         3,789       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Numerator—non-GAAP Net Income

   $ 392,399     $ 124,086     $ 562,973     $ 273,638  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted averagex ordinary shares—Diluted

        

Weighted average ordinary shares—Basic

     212,320,219       186,470,141       198,413,779       181,949,838  

Ordinary share equivalents

     12,959,618       7,701,826       19,431,212       7,747,931  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator—weighted average ordinary shares – Diluted

     225,279,837       194,171,967       217,844,991       189,697,769  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share—Diluted

        

GAAP loss per share—Diluted

   $ 1.31     $ 0.09     $ 0.95     $ (0.11

Non-GAAP adjustments

     0.43       0.55       1.63       1.61  

Diluted earnings per share effect of ordinary share equivalents

     —         —         —         (0.06
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per share—Diluted

   $ 1.74     $ 0.64     $ 2.58     $ 1.44  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

14


LOGO

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited)

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2020     2019     2020     2019  

GAAP net income (loss)

   $ 292,840     $ 18,234     $ 199,239     $ (19,749

Depreciation

     5,157       1,658       19,229       4,574  

Amortization and step-up:

        

Intangible amortization expense

     65,353       57,662       190,677       172,762  

Inventory step-up expense

     —         —         —         90  

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

     12,185       20,428       48,100       69,991  

Benefit for income taxes

     (91,081     (30,564     (27,143     (37,359
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 284,454     $ 67,418     $ 430,102     $ 190,309  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     199       67       47,296       2,613  

Restructuring and realignment costs

     —         —         —         33  

Impairment of long-lived assets

     —         —         1,072       —    

Loss on sale of assets

     —         —         —         10,963  

Share-based compensation

     30,356       18,151       113,834       67,066  

Litigation settlements

     —         —         —         1,000  

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

     —         3,073       3,000       9,073  

Fees related to refinancing activities

     —         262       54       1,437  

Loss on debt extinguishment

     14,602       41,371       31,856       58,835  

Drug substance harmonization costs

     193       80       483       394  

Charges relating to discontinuation of Friedreich’s ataxia program

     —         —         —         1,221  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of other non-GAAP adjustments

     45,350       63,004       197,595       152,635  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 329,804     $ 130,422     $ 627,697     $ 342,944  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

15


LOGO

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Operating Income (Unaudited)

(in thousands)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2020      2019      2020      2019  

GAAP operating income

   $ 228,582      $ 48,619      $ 249,955      $ 71,936  

Non-GAAP adjustments:

 

        

Acquisition/divestiture-related costs

     144        (44      47,416        1,231  

Restructuring and realignment costs

     —          —          —          33  

Amortization and step-up:

 

        

Intangible amortization expense

     65,353        57,662        190,677        172,762  

Inventory step-up expense

     —          —          —          90  

Impairment of long-lived assets

     —          —          1,072        —    

Loss on sale of assets

     —          —          —          10,963  

Share-based compensation

     30,356        18,151        113,834        67,066  

Depreciation

     5,157        1,658        19,229        4,574  

Litigation settlements

     —          —          —          1,000  

Upfront, progress and milestone payments related to

 

        

license and collaboration agreements

     —          3,073        3,000        9,073  

Fees related to refinancing activities

     —          262        54        1,437  

Drug substance harmonization costs

     193        80        483        394  

Charges relating to discontinuation of Friedreich’s ataxia program

     —          —          —          1,221  
  

 

 

    

 

 

    

 

 

 

Total of non-GAAP adjustments

     101,203        80,842        375,765        269,844  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP operating income

   $ 329,785      $ 129,461      $ 625,720      $ 341,780  
  

 

 

    

 

 

    

 

 

    

 

 

 

Orphan segment operating income

     274,687        79,695        480,584        180,095  

Inflammation segment operating income

     55,098        49,766        145,136        161,685  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total segment operating income

   $ 329,785      $ 129,461      $ 625,720      $ 341,780  

Foreign exchange (loss)/gain

     (753      (40      306        (25

Other income, net

     772        1,001        1,671        1,189  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 329,804      $ 130,422      $ 627,697      $ 342,944  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

16


LOGO

 

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,  
     2020      2019      2020      2019  

Non-GAAP Gross Profit:

           

GAAP gross profit

   $ 484,952      $ 245,517      $ 1,084,709      $ 669,230  

Non-GAAP gross profit adjustments:

 

        

Acquisition/divestiture-related costs

     —          —          —          1,114  

Intangible amortization expense

     65,149        57,458        190,070        172,156  

Inventory step-up expense

     —          —          —          90  

Share-based compensation

     1,566        901        5,543        2,891  

Depreciation

     17        158        435        475  

Drug substance harmonization costs

     193        80        483        394  

Charges relating to discontinuation of Friedreich’s ataxia program

     —          —          —          1,221  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total of Non-GAAP adjustments

     66,925        58,597        196,531        178,341  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP gross profit

   $ 551,877      $ 304,114      $ 1,281,240      $ 847,571  
  

 

 

    

 

 

    

 

 

    

 

 

 

GAAP gross profit %

     76.2      73.2      74.5      71.5

Non-GAAP gross profit %

     86.7      90.7      88.1      90.5

GAAP cash provided by operating activities

   $ 108,863      $ 87,516      $ 145,871      $ 234,952  

Cash payments for acquisition/divestiture-related costs

     97        88        80        583  

Cash payments for restructuring and realignment costs

     —          382        189        3,264  

Cash payments for litigation settlements

     —          1,000        —          1,000  

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

     —          7,073        —          9,073  

Cash payments drug substance harmonization costs

     —          313        290        985  

Cash payments for discontinuation of Friedreich’s ataxia program

     —          —          —          2,589  

Cash payments relating to refinancing activities

     —          112        73        1,918  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP operating cash flow

   $ 108,960      $ 96,484      $ 146,503      $ 254,364  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

17


LOGO

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited)—2019

(in thousands)

 

     Twelve Months
Ended December 31,
 
     2019  

GAAP net income

   $ 573,020  

Depreciation

     6,733  

Amortization and step-up:

  

Intangible amortization expense

     230,424  

Inventory step-up expense

     89  

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

     87,089  

Benefit for income taxes

     (593,244
  

 

 

 

EBITDA

   $ 304,111  
  

 

 

 

Other non-GAAP adjustments:

  

Acquisition/divestiture-related costs

     3,556  

Restructuring and realignment costs

     237  

Share-based compensation

     91,215  

Litigation settlements

     1,000  

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

     9,073  

Fees related to refinancing activities

     2,292  

Loss on debt extinguishment

     58,835  

Drug substance harmonization costs

     457  

Charges relating to discontinuation of Friedreich’s ataxia program

     1,076  

Gain on sale of assets

     10,963  
  

 

 

 

Total of other non-GAAP adjustments

     178,704  
  

 

 

 

Adjusted EBITDA

   $ 482,815  
  

 

 

 

 

18


LOGO

 

Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

 

     Q3 2020  
     Pre-tax Net
(Loss) Income
     Income Tax
(Benefit) Expense
     Tax Rate      Net Income
(Loss)
     Diluted Earnings
(Loss) Per Share
 

As reported—GAAP

     $ 201.8        $ (91.1)        (45.1)%        $ 292.8        $ 1.31  

Non-GAAP adjustments

     117.1        17.7           99.3     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP

     $ 318.8        $ (73.3)        (23.0)%        $ 392.2        $ 1.74  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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

     $ 115.4        $ (8.7)        (7.5)%        $ 124.1        $ 0.64  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     YTD 2020  
     Pre-tax Net
(Loss) Income
     Income Tax
(Benefit) Expense
     Tax Rate      Net Income
(Loss)
     Diluted Earnings
(Loss) Per Share
 

As reported—GAAP

     $ 172.1        $ (27.1)        (15.8)%        $ 199.2        $ 0.95  

Non-GAAP adjustments

     419.5        59.6           359.9     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP

     $ 591.6        $ 32.4        5.5%        $ 559.2        $ 2.58  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

19


LOGO

 

Horizon Therapeutics plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Three Months Ended September 30, 2020

(Unaudited)

 

 

 

 

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

GAAP as reported

     $ (151,475)        $ (30,206)        $ (226,164)       $ (14,602)        $ (12,185)        $ 717        $ 91,081  

Non-GAAP Adjustments (in thousands):

                   

Acquisition/divestiture-related costs(1)

     —          36        108       —          —          55        —    

Amortization and step-up:

                   

Intangible amortization expense(2)

     65,149        —          204       —          —          —          —    

Amortization of debt discount and deferred financing costs(3)

     —          —          —         —          1,208        —          —    

Share-based compensation(4)

     1,566        2,453        26,337       —          —          —          —    

Depreciation(5)

     17        29        5,111       —          —          —          —    

Loss on debt extinguishment(6)

     —          —          —         14,602        —          —          —    

Drug substance harmonization costs(7)

     193        —          —         —          —          —          —    

Income tax effect on pre-tax non-GAAP adjustments(8)

     —          —          —         —          —          —          (23,063

Other non-GAAP income tax adjustments(9)

     —          —          —         —          —          —          5,331  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total of non-GAAP adjustments

     66,925        2,518        31,760       14,602        1,208        55        (17,732
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP

     $ (84,550)        $ (27,688)        $ (194,404)       $—          $ (10,977)        $ 772        $ 73,349  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

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
Income,
net
     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(2)

     57,458        —          204       —          —          —          —    

Amortization of debt discount and deferred financing costs(3)

     —          —          —         —          5,447        —          —    

Share-based compensation(4)

     901        1,953        15,297       —          —          —          —    

Depreciation(5)

     158        —          1,500       —          —          —          —    

Upfront, progress and milestone payments related to license

                   

and collaboration agreements(10)

     —          3,073        —         —          —          —          —    

Loss on debt extinguishment(6)

     —          —          —         41,371        —          —          —    

Fees related to refinancing activities (11)

     —          —          262       —          —          —          —    

Drug substance harmonization costs(7)

     80        —          —         —          —          —          —    

Income tax effect on pre-tax non-GAAP adjustments(8)

     —          —          —         —          —          —          (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  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

20


LOGO

 

Horizon Therapeutics plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Nine Months Ended September 30, 2020

(Unaudited)

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

GAAP as reported

    $ (370,406)       $ (138,483)       $ (696,271)       $ (48,100)       $ 1,791       $ (31,856)       $ 27,143    

Non-GAAP Adjustments (in thousands):

               

Acquisition/divestiture-related costs(1)

    —         47,365       51       —         (120     —         —      

Amortization and step-up:

               

Intangible amortization expense(2)

    190,070       —         607       —         —         —         —      

Amortization of debt discount and deferred financing costs(3)

    —         —         —         12,025       —         —         —      

Impairment of long lived assets(12)

    —         —         1,072       —         —         —         —      

Share-based compensation(4)

    5,543       11,381       96,910       —         —         —         —      

Depreciation(5)

    435       72       18,722       —         —         —         —      

Loss on debt extinguishment(6)

    —         —         —         —         —         31,856       —      

Upfront, progress and milestone payments related to license

               

and collaboration agreements(10)

    —         3,000       —         —         —         —         —      

Fees related to refinancing activities (11)

    —         —         54       —         —         —         —      

Drug substance harmonization costs(7)

    483       —         —         —         —         —         —      

Income tax effect on pre-tax non-GAAP adjustments(8)

    —         —         —         —         —         —         (80,122  

Other non-GAAP income tax adjustments(9)

    —         —         —         —         —         —         20,541    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total of non-GAAP adjustments

    196,531       61,818       117,416       12,025       (120     31,856       (59,581  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Non-GAAP

    $ (173,875)       $ (76,665)       $ (578,855)       $ (36,075)       $ 1,671       $—         $ (32,438)    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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 on Debt
Extinguishment
    Loss/(Gain)
on Sale of
Assets
    Interest
Expense
    Other
Income
    Income Tax
Benefit
(Expense)
 

GAAP as reported

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

Non-GAAP Adjustments (in thousands):

               

Acquisition/divestiture-related costs(1)

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

Restructuring and realignment costs(13)

    —         —         33       —         —         —         —         —    

Amortization and step-up:

               

Intangible amortization expense(2)

    172,156       —         606       —         —         —         —         —    

Inventory step-up expense

    90       —         —         —         —         —               —    

Amortization of debt discount and deferred financing costs(3)

    —         —         —         —         —         17,069       —         —    

Impairment of long lived assets(12)

    —         —         —         —         —         —         —         —    

Loss on sale of assets(14)

    —         —         —         —         10,963       —         —         —    

Share-based compensation(4)

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

Depreciation(5)

    475       —         4,099       —         —         —           —    

Litigation settlements(15)

    —         —         1,000       —         —         —         —         —    

Upfront, progress and milestone payments related to license

               

and collaboration agreements(9)

    —         9,073       —         —         —         —         —         —    

Fees related to refinancing activities (11)

    —         —         1,437       —         —         —         —         —    

Loss on debt extinguishment(6)

    —         —         —         58,835       —         —         —         —    

Drug substance harmonization costs(7)

    394       —         —         —         —         —         —         —    

Charges relating to discontinuation of Friedreich’s ataxia program(16)

    1,221       —         —         —         —         —         —         ——    

Income tax effect on pre-tax non-GAAP adjustments(8)

    —         —         —         —         —         —         —         (52,291

Other non-GAAP income tax adjustments(9)

    —         —         —         —         —         —         —         (1,452
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

21


LOGO

 

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. Costs recovered from subleases of acquired facilities and reimbursed expenses incurred under transition arrangements for divestitures are also reflected in this line item. In addition, the nine months ended September 30, 2020 amounts include the Curzion acquisition payment of $45.0 million, which was recorded as a research and development expense.

 

2.

Intangible amortization expenses are associated with our intellectual property rights, developed technology and customer relationships related to TEPEZZA, KRYSTEXXA, RAVICTI, PROCYSBI, ACTIMMUNE, BUPHENYL, RAYOS, PENNSAID 2%, VIMOVO and MIGERGOT.

 

3.

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

 

4.

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.

 

5.

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

 

6.

During the nine months ended September 30, 2020, we recorded a loss on debt extinguishment of $31.9 million in the condensed consolidated statements of comprehensive income (loss), which reflects the exchange of our Exchangeable Senior Notes.

During the nine months ended September 30, 2019, we recorded a loss on debt extinguishment of $58.8 million in the condensed consolidated statements of comprehensive income (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.

 

7.

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, 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.

 

22


LOGO

 

8.

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.

 

9.

During the nine months ended September 30, 2020, following the publication of the Anti-Hybrid Rules on April 8, 2020, we recorded a write off of a deferred tax asset related to certain interest expense accrued to a foreign related party during the year ended December 31, 2019 and recognized a corresponding one-time tax provision, resulting in a non-GAAP tax adjustment of $15.2 million. We also recognized a U.S. federal tax liability on U.S. taxable income generated from an intra-company transfer of intellectual property from a U.S. subsidiary to an Irish subsidiary, which was partially offset by the recognition of a deferred tax asset in the Irish subsidiary, resulting in a non-GAAP tax adjustment of $5.3 million.

During the nine months ended September 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.

 

10.

During the nine months ended September 30, 2020, we recognized a $3.0 million progress payment in relation to the collaboration agreement with HemoShear Therapeutics, LLC, or HemoShear, which was paid in July 2020.

During the nine months ended September 30, 2019, we recorded an 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 Roche 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.

 

11.

Represents arrangement and other fees relating to our refinancing activities.

 

12.

During the nine months ended September 30, 2020, we recorded an impairment charge of $1.1 million related to the Novato, California office lease, which was obtained through an acquisition.

 

13.

Represents expenses, including severance costs and consulting fees, related to restructuring and realignment activities.

 

14.

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

 

15.

We recorded $1.0 million of expense during the nine months ended September 30, 2019 for litigation settlements.

 

16.

Represents expenses incurred relating to discontinuation of Friedreich’s ataxia program and a reduction to previous charges recorded.

 

23