SEC Filing | Horizon Therapeutics plc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended September 30, 2020

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

For the transition period from to

Commission File Number 001-35238

HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

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

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

011 353 1 772 2100

(Registrant’s telephone number, including area code)

Not applicable

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per share	HZNP	The Nasdaq Global Select Market

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

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

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

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

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

Number of registrant’s ordinary shares, nominal value $0.0001, outstanding as of October 28, 2020: 220,710,086.

HORIZON THERAPEUTICS PLC

INDEX

		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2020 and as of December 31, 2019 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	55
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 6.	Exhibits	104
	Signatures	106

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except share data)

	As of			As of
	September 30,			December 31,
	2020			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

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except share and per share data)

	For the Three Months Ended September 30,						For the 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
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustments	$	858		$	(809	)	$	877		$	(952	)
Other comprehensive income (loss)		858			(809	)		877			(952	)
Comprehensive income (loss)	$	293,698		$	17,425		$	200,116		$	(20,701	)

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2019		188,402,040	$	19		384,366	$	(4,585	)	$	2,797,602		$	(1,905	)	$	(605,682	)	$	2,185,449
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock and performance stock units		2,560,573		—		—		—			7,049			—			—			7,049
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(46,664	)		—			—			(46,664	)
Share-based compensation		—		—		—		—			56,421			—			—			56,421
Currency translation adjustment		—		—		—		—			—			(325	)		—			(325	)
Net loss		—		—		—		—			—			—			(13,591	)		(13,591	)
Balances at March 31, 2020		190,962,613	$	19		384,366	$	(4,585	)	$	2,814,408		$	(2,230	)	$	(619,273	)	$	2,188,339
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock and performance stock units		1,427,108		—		—		—			18,838			—			—			18,838
Issuance of ordinary shares in conjunction with ESPP program		376,718		—		—		—			7,979			—			—			7,979
Issuance of ordinary shares in conjunction with Exchangeable Senior Notes		7,225,368		1		—		—			205,649			—			—			205,650
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(6,345	)		—			—			(6,345	)
Share-based compensation		—		—		—		—			27,057			—			—			27,057
Currency translation adjustment		—		—		—		—			—			344			—			344
Net loss		—		—		—		—			—			—			(80,010	)		(80,010	)
Balances at June 30, 2020		199,991,807	$	20		384,366	$	(4,585	)	$	3,067,586		$	(1,886	)	$	(699,283	)	$	2,361,852
Issuance of ordinary shares - public offering		13,570,000		1		—		—			919,513			—			—			919,514
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock and performance stock units		760,255		—		—		—			8,111			—			—			8,111
Issuance of ordinary shares in conjunction with Exchangeable Senior Notes		6,673,046		1		—		—			190,022			—			—			190,023
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(6,743	)		—			—			(6,743	)
Share-based compensation		—		—		—		—			30,356			—			—			30,356
Currency translation adjustment		—		—		—		—			—			858			—			858
Net income		—		—