0001564590-20-049438 | 10-Q | XBRL Viewer | Horizon Therapeutics Public LTD Co

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2020	Oct. 28, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Title of 12(b) Security	Ordinary shares, nominal value $0.0001 per share
Trading Symbol	HZNP
Security Exchange Name	NASDAQ
Entity Registrant Name	HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY
Entity Central Index Key	0001492426
Entity Tax Identification Number	00-0000000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		220,710,086
Entity Shell Company	false
Entity File Number	001-35238
Entity Incorporation, State or Country Code	L2
Entity Address, Address Line One	Connaught House, 1st Floor
Entity Address, Address Line Two	1 Burlington Road
Entity Address, City or Town	Dublin 4
Entity Address, Postal Zip Code	D04 C5Y6
Entity Address, Country	IE
City Area Code	011
Local Phone Number	353 1 772 2100
Document Quarterly Report	true
Document Transition Report	false

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
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
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

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Ordinary shares, nominal value	$ 0.0001	$ 0.0001
Ordinary shares, shares authorized	600,000,000	600,000,000
Ordinary shares, shares issued	220,995,108	188,402,040
Ordinary shares, shares outstanding	220,610,742	188,017,674
Treasury stock, ordinary shares	384,366	384,366

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
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)

Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Ordinary Shares [Member]	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]
Beginning balance at Dec. 31, 2018	$ 1,190,106	$ 17	$ (4,585)	$ 2,374,966	$ (1,523)	$ (1,178,769)
Beginning balance, shares at Dec. 31, 2018		169,244,520	384,366
Cumulative effect adjustments from adoption of ASU No. 2016-02, Leases (Topic 842)	64					64
Issuance of ordinary shares - public offering	326,849	$ 1		326,848
Issuance of ordinary shares - public offering, shares		14,081,632
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises	10,042			10,042
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises, shares		1,804,196
Ordinary shares withheld for payment of employees’ withholding tax liability	(17,171)			(17,171)
Share-based compensation	27,548			27,548
Currency translation adjustment	(487)				(487)
Net loss	(32,863)					(32,863)
Ending balance at Mar. 31, 2019	1,504,088	$ 18	$ (4,585)	2,722,233	(2,010)	(1,211,568)
Ending balance, shares at Mar. 31, 2019		185,130,348	384,366
Beginning balance at Dec. 31, 2018	1,190,106	$ 17	$ (4,585)	2,374,966	(1,523)	(1,178,769)
Beginning balance, shares at Dec. 31, 2018		169,244,520	384,366
Currency translation adjustment	(952)
Net loss	(19,749)
Ending balance at Sep. 30, 2019	1,555,573	$ 19	$ (4,585)	2,761,068	(2,475)	1,198,454
Ending balance, shares at Sep. 30, 2019		187,174,795	384,366
Beginning balance at Mar. 31, 2019	1,504,088	$ 18	$ (4,585)	2,722,233	(2,010)	(1,211,568)
Beginning balance, shares at Mar. 31, 2019		185,130,348	384,366
Issuance of ordinary shares - public offering	(55)			(55)
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises	1,987	$ 1		1,986
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises, shares		781,026
Issuance of ordinary shares in conjunction with ESPP program	5,465			5,465
Issuance of ordinary shares in conjunction with ESPP programs, shares		558,856
Ordinary shares withheld for payment of employees’ withholding tax liability	(7,203)			(7,203)
Share-based compensation	21,367			21,367
Currency translation adjustment	344				344
Net loss	(5,120)					(5,120)
Ending balance at Jun. 30, 2019	1,520,873	$ 19	$ (4,585)	2,743,793	(1,666)	(1,216,688)
Ending balance, shares at Jun. 30, 2019		186,470,230	384,366
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises	4,207			4,207
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises, shares		704,189
Issuance of ordinary shares in conjunction with ESPP program	3			3
Issuance of ordinary shares in conjunction with ESPP programs, shares		376
Ordinary shares withheld for payment of employees’ withholding tax liability	(5,086)			(5,086)
Share-based compensation	18,151			18,151
Currency translation adjustment	(809)				(809)
Net loss	18,234					18,234
Ending balance at Sep. 30, 2019	1,555,573	$ 19	$ (4,585)	2,761,068	(2,475)	1,198,454
Ending balance, shares at Sep. 30, 2019		187,174,795	384,366
Beginning balance at Dec. 31, 2019	2,185,449	$ 19	$ (4,585)	2,797,602	(1,905)	(605,682)
Beginning balance, shares at Dec. 31, 2019		188,402,040	384,366
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock and performance stock units	7,049			7,049
Issuance of ordinary shares in conjunction with warrant exercises, shares		2,560,573
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)
Ending balance at Mar. 31, 2020	2,188,339	$ 19	$ (4,585)	2,814,408	(2,230)	(619,273)
Ending balance, shares at Mar. 31, 2020		190,962,613	384,366
Beginning balance at Dec. 31, 2019	2,185,449	$ 19	$ (4,585)	2,797,602	(1,905)	(605,682)
Beginning balance, shares at Dec. 31, 2019		188,402,040	384,366
Currency translation adjustment	877
Net loss	199,239
Ending balance at Sep. 30, 2020	3,796,811	$ 22	$ (4,585)	4,208,845	(1,028)	(406,443)
Ending balance, shares at Sep. 30, 2020		220,995,108,000	384,366
Beginning balance at Mar. 31, 2020	2,188,339	$ 19	$ (4,585)	2,814,408	(2,230)	(619,273)
Beginning balance, shares at Mar. 31, 2020		190,962,613	384,366
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock and performance stock units	18,838			18,838
Issuance of ordinary shares in conjunction with warrant exercises, shares		1,427,108
Issuance of ordinary shares in conjunction with ESPP program	7,979			7,979
Issuance of ordinary shares in conjunction with ESPP programs, shares		376,718
Issuance of ordinary shares in conjunction with Exchangeable Senior Notes	205,650	$ 1		205,649
Issuance of ordinary shares in conjunction with Exchangeable Senior Notes, shares		7,225,368
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)
Ending balance at Jun. 30, 2020	2,361,852	$ 20	$ (4,585)	3,067,586	(1,886)	(699,283)
Ending balance, shares at Jun. 30, 2020		199,991,807	384,366
Issuance of ordinary shares - public offering	919,514	$ 1		919,513
Issuance of ordinary shares - public offering, shares		13,570,000
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock and performance stock units	8,111			8,111
Issuance of ordinary shares in conjunction with warrant exercises, shares		760,255
Issuance of ordinary shares in conjunction with Exchangeable Senior Notes	190,023	$ 1		190,022
Issuance of ordinary shares in conjunction with Exchangeable Senior Notes, shares		6,673,046
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 loss	292,840					292,840
Ending balance at Sep. 30, 2020	$ 3,796,811	$ 22	$ (4,585)	$ 4,208,845	$ (1,028)	$ (406,443)
Ending balance, shares at Sep. 30, 2020		220,995,108,000	384,366

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 199,239	$ (19,749)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	209,906	177,336
Equity-settled share-based compensation	113,834	67,066
Acquired in-process research and development expense	47,517
Loss on debt extinguishment	31,856	58,835
Amortization of debt discount and deferred financing costs	12,025	17,069
Loss on sale of assets		10,963
Deferred income taxes	(8,041)	8,302
Foreign exchange and other adjustments	1,084	572
Changes in operating assets and liabilities:
Accounts receivable	(297,392)	68,162
Inventories	(23,329)	(8,004)
Prepaid expenses and other current assets	(83,226)	(72,055)
Accounts payable	17,709	(3,338)
Accrued trade discounts and rebates	(143,551)	(53,241)
Accrued expenses	56,830	(10,591)
Deferred revenues		(4,901)
Other non-current assets and liabilities	11,410	(1,474)
Net cash provided by operating activities	145,871	234,952
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions	(262,305)
Purchases of property and equipment	(133,399)	(11,325)
Payments for long-term investments	(8,937)
Change in escrow deposit for property purchase	6,000
Proceeds from sale of assets		6,000
Net cash used in investing activities	(398,641)	(5,325)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of ordinary shares	919,995	326,793
Net proceeds from the issuance of senior notes		590,057
Repayment of senior notes	(1,739)	(814,420)
Net proceeds from term loans		517,378
Repayment of term loans		(918,181)
Contingent consideration proceeds from divestiture		3,297
Proceeds from the issuance of ordinary shares in conjunction with ESPP program	7,979	5,468
Proceeds from the issuance of ordinary shares in connection with stock option exercises	33,999	16,236
Payment of employee withholding taxes relating to share-based awards	(59,752)	(29,460)
Net cash provided by (used in) financing activities	900,482	(302,832)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	1,225	(1,202)
Net increase (decrease) in cash, cash equivalents and restricted cash	648,937	(74,407)
Cash, cash equivalents and restricted cash, beginning of the period	1,080,039	962,117	$ 962,117
Cash, cash equivalents and restricted cash, end of the period	1,728,976	887,710	$ 1,080,039
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	49,275	71,867
Cash paid for income taxes, net of refunds received	3,461	9,034
Cash paid for amounts included in the measurement of lease liabilities	5,802	4,525
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Principal amount of Exchangeable Senior Notes converted into ordinary shares	398,261
Purchases of property and equipment included in accounts payable and accrued expenses	12,126	$ 526
TEPEZA [Member]
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Milestone payments for TEPEZZA intangible asset included in accrued expenses	$ 121,232

Basis of Presentation and Business Overview

9 Months Ended

Sep. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation and Business Overview

NOTE 1 – BASIS OF PRESENTATION AND BUSINESS OVERVIEW

Basis of Presentation

The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The December 31, 2019 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

Unless otherwise indicated or the context otherwise requires, references to “Horizon”, the “Company”, “we”, “us” and “our” refer to Horizon Therapeutics plc and its consolidated subsidiaries.

During the nine months ended September 30, 2020, the Company recorded out of period adjustments that decreased income tax benefit by $3.2 million and increased share-based compensation expense by $1.9 million to correct for expenses that should have been recorded in the year ended December 31, 2019. In addition, the Company recorded an out of period adjustment that increased employee benefit plan expense by $2.3 million to correct for expenses that should have been recorded in the years ended 2017, 2018 and 2019. The Company evaluated the materiality of the adjustments to prior-period financial statements and the current period, and concluded the effect of the adjustments were immaterial to both the current and prior-period financial statements.

Business Overview

Horizon is focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic diseases. The Company’s pipeline is purposeful: it applies scientific expertise and courage to bring clinically meaningful therapies to patients. Horizon believes science and compassion must work together to transform lives. The Company has two reportable segments, the orphan segment and the inflammation segment, and its portfolio is currently composed of eleven medicines in the areas of rare diseases, gout, ophthalmology and inflammation.

Effective in the first quarter of 2020, the Company (i) reorganized its commercial operations and moved responsibility for and reporting of RAYOS® to the inflammation segment and (ii) renamed the orphan and rheumatology segment the orphan segment. Net sales generated by TEPEZZA®, which was approved by the U.S. Food and Drug Administration (“FDA”) on January 21, 2020, are reported as part of the renamed orphan segment.

As of September 30, 2020, the Company’s medicine portfolio consisted of the following:

Orphan

TEPEZZA (teprotumumab-trbw), for intravenous infusion

KRYSTEXXA® (pegloticase injection), for intravenous infusion

RAVICTI® (glycerol phenylbutyrate) oral liquid

PROCYSBI® (cysteamine bitartrate) delayed-release capsules and granules, for oral use

ACTIMMUNE® (interferon gamma-1b) injection, for subcutaneous use

BUPHENYL® (sodium phenylbutyrate) tablets and powder, for oral use

QUINSAIR™ (levofloxacin) solution for inhalation

Inflammation

PENNSAID® (diclofenac sodium topical solution) 2% w/w (“PENNSAID 2%”), for topical use

DUEXIS® (ibuprofen/famotidine) tablets, for oral use

RAYOS (prednisone) delayed-release tablets, for oral use

VIMOVO® (naproxen/esomeprazole magnesium) delayed-release tablets, for oral use

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

From time to time, the Company adopts new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments and became effective for the Company as of January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplification and reduce the cost of accounting for income taxes (“ASU 2019-12”), which is effective for the Company as of January 1, 2021. The Company does not expect the adoption of ASU 2019-12 to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Other recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards Codification (“ASC”)), the American Institute of Certified Public Accountants and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Significant Accounting Policies

The Company's significant accounting policies have not changed from those previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of the change to the accounting policy related to property and equipment due to the purchase of land and buildings as described below.

Property and Equipment

Land is stated at cost. Property and equipment, other than land, are stated at cost less accumulated depreciation. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets for financial reporting purposes and an accelerated method for income tax reporting purposes. Upon retirement or sale of an asset, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Repair and maintenance costs are charged to expenses as incurred and improvements are capitalized.

Leasehold improvements are amortized on a straight-line basis over the term of the applicable lease, or the useful life of the assets, whichever is shorter.

Depreciation and amortization periods for the Company’s property and equipment are as follows:

Buildings		40 years
Land improvements		10 years
Machinery and equipment		5 to 7 years
Furniture and fixtures		3 to 5 years
Computer equipment		3 years
Software		3 years
Trade show equipment		3 years

The Company capitalizes software development costs associated with internal use software, including external direct costs of materials and services and payroll costs for employees devoting time to a software project. Costs incurred during the preliminary project stage, as well as costs for maintenance and training, are expensed as incurred.

Software includes internal-use software acquired and modified to meet the Company’s internal requirements. Amortization commences when the software is ready for its intended use.

Net Income (Loss) per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

NOTE 3 – NET INCOME (LOSS) PER SHARE

The following table presents basic and diluted net income (loss) per share for the three and nine months ended September 30, 2020 and 2019 (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
Basic net income (loss) per share calculation:
Numerator - net income (loss)	$	292,840	$	18,234	$	199,239	$	(19,749	)
Denominator - weighted average ordinary shares outstanding		212,320,219		186,470,141		198,413,779		181,949,838
Basic net income (loss) per share	$	1.38	$	0.10	$	1.00	$	(0.11	)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Diluted net income (loss) per share calculation:
Numerator - net income (loss)	$	292,840	$	18,234	$	199,239	$	(19,749	)
Denominator - weighted average ordinary shares outstanding		223,743,903		194,171,967		208,678,460		181,949,838
Diluted net income (loss) per share	$	1.31	$	0.09	$	0.95	$	(0.11	)

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of ordinary shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised, converted into ordinary shares or resulted in the issuance of ordinary shares that would have shared in the Company’s earnings.

The computation of diluted net income (loss) per share excluded 0.2 million and 3.4 million shares subject to equity awards for the three and nine months ended September 30, 2020, respectively, and 1.5 million and 9.2 million shares (based on the if-converted method) related to the Company’s 2.5% Exchangeable Senior Notes due 2022 (the “Exchangeable Senior Notes”) for the three and nine months ended September 30, 2020, respectively, because their inclusion would have had an anti-dilutive effect on diluted net income (loss) per share.

The computation of diluted net income (loss) per share excluded 0.3 million and 8.8 million shares subject to equity awards for each of the three and nine months ended September 30, 2019, respectively, because their inclusion would have had an anti-dilutive effect on diluted net income (loss) per share.

During the three and nine months ended September 30, 2019, the potentially dilutive impact of the Exchangeable Senior Notes was determined using a method similar to the treasury stock method. Under this method, no numerator or denominator adjustments arose from the principal and interest components of the Exchangeable Senior Notes because the Company had the intent, at that time, and ability to settle the Exchangeable Senior Notes’ principal and interest in cash. Instead, the Company was required to increase the diluted net income (loss) per share denominator by the variable number of shares that would be issued upon conversion if it settled the conversion spread obligation with shares. For diluted net income (loss) per share purposes, the conversion spread obligation was calculated based on whether the average market price of the Company’s ordinary shares over the reporting period was in excess of the exchange price of the Exchangeable Senior Notes. There was no calculated spread added to the denominator for the three and nine months ended September 30, 2019. Beginning in the fourth quarter of 2019, with the ordinary share price significantly above the $28.66 exchange price, the Company decided that it no longer had the intent to settle the notes for cash and, as a result, began to prospectively apply the if-converted method to the Exchangeable Senior Notes when determining the diluted net income (loss) per share. By August 3, 2020, the Exchangeable Senior Notes were fully extinguished through exchanges for ordinary shares or cash redemption. Refer to Note 13 for further detail.

Acquisitions, Divestitures and Other Arrangements

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Acquisitions, Divestitures and Other Arrangements

NOTE 4 – ACQUISITIONS, DIVESTITURES AND OTHER ARRANGEMENTS

Acquisition of Curzion Pharmaceuticals, Inc.

On April 1, 2020, the Company acquired Curzion Pharmaceuticals, Inc. (“Curzion”), a privately held development-stage biopharma company, and its development-stage oral selective lysophosphatidic acid 1 receptor (LPAR₁) antagonist, CZN001 (renamed HZN-825).

Under the terms of the acquisition agreement, the Company acquired Curzion for a $45.0 million upfront cash payment with additional payments contingent on the achievement of development and regulatory milestones. Pursuant to ASC 805 (as amended by ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”)), the Company accounted for the Curzion acquisition as the purchase of an in-process research and development asset and, pursuant to ASC Topic 730, Research and Development (“ASC 730”), recorded the purchase price as research and development expense during the nine months ended September 30, 2020. HZN-825 was originally discovered and developed by Sanofi-Aventis U.S. LLC (“Sanofi-Aventis U.S.”), which is eligible to receive contingent payments upon the achievement of development and commercialization milestones and royalties based on revenue thresholds. A member of the Company’s board of directors was also a member of the board of directors of, and held a beneficial interest in, Curzion. This related party transaction was conducted in the normal course of business on an arm’s length basis.

Refer to Note 15 for further detail on HZN-825 milestone payments.

Sale of MIGERGOT rights

On June 28, 2019, the Company sold its rights to MIGERGOT to Cosette Pharmaceuticals, Inc., for $6.0 million and total potential contingent consideration payments of $4.0 million (the “MIGERGOT transaction”).

Pursuant to ASU No. 2017-01, the Company accounted for the MIGERGOT transaction as a sale of assets, specifically a sale of intellectual property rights, and a sale of inventory.

The loss on sale of assets recorded to the consolidated statement of comprehensive income (loss) during the year ended December 31, 2019, was determined as follows (in thousands):

Cash proceeds	$	6,000
Less net assets sold:
Developed technology		(16,999	)
Inventory		(236	)
Release of contingent consideration liability	272
Loss on sale of assets	$	(10,963	)

Acquisition of River Vision

On May 8, 2017, the Company acquired 100% of the equity interests in River Vision Development Corp. (“River Vision”) for upfront cash payments totaling approximately $150.3 million, including cash acquired of $6.3 million, with additional potential future milestone and royalty payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. Pursuant to ASU No. 2017-01, the Company accounted for the River Vision acquisition as the purchase of an in-process research and development asset (teprotumumab, now known as TEPEZZA) and, pursuant to ASC 730 recorded the purchase price as research and development expense during the year ended December 31, 2017. Further, the Company recognized approximately $32.4 million of federal net operating losses, $2.2 million of state net operating losses and $9.5 million of federal tax credits. The acquired tax attributes were set up as deferred tax assets which were further netted within the net deferred tax liabilities of the U.S. group, offset by a deferred credit recorded in long-term liabilities.

Under the acquisition agreement for River Vision, the Company agreed to pay up to $325.0 million upon the attainment of various milestones, composed of $100.0 million related to FDA approval and $225.0 million related to net sales thresholds for TEPEZZA. The agreement also includes a royalty payment of 3 percent of the portion of annual worldwide net sales exceeding $300.0 million (if any). The Company made the milestone payment of $100.0 million related to FDA approval during the first quarter of 2020 which is now capitalized as a finite-lived intangible asset representing the developed technology for TEPEZZA.

Additionally, under the Company’s license agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (together referred to as “Roche”), the Company made a milestone payment of CHF5.0 million ($5.2 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0382), during the first quarter of 2020 which the Company also capitalized as a finite-lived intangible asset representing the developed technology for TEPEZZA.

In April 2020, a subsidiary of the Company entered into an agreement with S.R. One, Limited (“S.R. One”) and an agreement with Lundbeckfond Invest A/S (“Lundbeckfond”) pursuant to which the Company acquired all of S.R. One’s and Lundbeckfond’s beneficial rights to proceeds from certain contingent future TEPEZZA milestone and royalty payments in exchange for a one-time payment of $55.0 million to each of the respective parties. The total payments of $110.0 million were capitalized as a finite-lived intangible asset representing the developed technology for TEPEZZA during the second quarter of 2020.

During the second quarter of 2020, the Company recorded $98.7 million as a finite-lived intangible asset representing the developed technology for TEPEZZA, composed of $67.0 million in relation to the expected future attainment of various net sales milestones payable under the acquisition agreement for River Vision and CHF30.0 million ($31.7 million when converted using a CHF-to-Dollar exchange rate as of the date the intangible asset was recorded of 1.0556) in relation to the expected future attainment of various net sales milestones payable to Roche. During the third quarter of 2020, the Company recorded an additional $22.1 million as a finite-lived intangible asset representing the developed technology for TEPEZZA, composed of CHF20.0 million ($22.1 million when converted using a CHF-to-Dollar exchange rate as of the date the intangible asset was recorded of 1.1066) in relation to the expected future attainment of various net sales milestones payable to Roche. The liabilities relating to these net sales milestones have been recorded in accrued expenses on the condensed consolidated balance sheet as of September 30, 2020 and the timing of the payments is dependent on when the applicable milestone thresholds are attained.

Refer to Note 15 for further detail on TEPEZZA milestone payments.

Other Arrangements

On January 3, 2019, the Company entered into a collaboration agreement with HemoShear Therapeutics, LLC (“HemoShear”), a biotechnology company, to discover novel therapeutic targets for gout. The collaboration provides the Company with an opportunity to address unmet treatment needs for people with gout by evaluating new targets for the control of serum uric acid levels. Under the terms of the agreement, the Company paid HemoShear an upfront cash payment of $2.0 million with additional potential future milestone payments upon commencement of new stages of development, contingent on the Company’s approval at each stage. In June 2019, a $4.0 million progress payment became due, which the Company subsequently paid in July 2019. In June 2020, a $3.0 million progress payment became due, which the Company subsequently paid in July 2020.

Inventories

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Inventories

NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventories consist of raw materials, work-in-process and finished goods. The Company has entered into manufacturing and supply agreements for the manufacture of drug substance and finished goods inventories, and the purchase of raw materials and production supplies. The Company’s inventories include the direct purchase cost of materials and supplies and manufacturing overhead costs.

The components of inventories as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Raw materials	$	24,768	$	6,750
Work-in-process		22,398		22,465
Finished goods		29,938		24,587
Inventories, net	$	77,104	$	53,802

Prepaid Expenses and Other Current Assets

9 Months Ended

Sep. 30, 2020

Deferred Costs Capitalized Prepaid And Other Assets Disclosure [Abstract]

Prepaid Expenses and Other Current Assets

NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Advance payments for inventory	$	74,978	$	31,203
Deferred charge for taxes on intra-company profit		50,934		46,388
Prepaid income taxes and income tax receivable		35,076		12,583
Rabbi trust assets		16,526		12,704
Other prepaid expenses and other current assets		42,827		40,699
Prepaid expenses and other current assets	$	220,341	$	143,577

Advance payments for inventory as of September 30, 2020 and December 31, 2019, primarily represented payments made to the contract manufacturer of TEPEZZA drug substance.

Property and Equipment

9 Months Ended

Sep. 30, 2020

Property Plant And Equipment [Abstract]

Property and Equipment

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020			December 31, 2019
Buildings	$	80,341		$	—
Land		38,076			—
Leasehold improvements		26,300			25,985
Construction in process		26,025			265
Software		15,138			14,890
Machinery and equipment		4,508			5,217
Computer equipment		3,685			3,316
Other		6,262			6,334
		200,335			56,007
Less accumulated depreciation		(44,048	)		(25,848	)
Property and equipment, net	$	156,287		$	30,159

Depreciation expense was $5.2 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively, and was $19.2 million and $4.6 million for the nine months ended September 30, 2020 and 2019, respectively. The increase in depreciation expense in both periods primarily relates to the reduction in the useful lives of leasehold improvements relating to the Company’s Lake Forest office.

In February 2020, the Company purchased a three-building campus in Deerfield, Illinois for total consideration and directly attributable transaction costs of $118.5 million. The Deerfield campus totals 70 acres and consists of approximately 650,000 square feet of office space.

Construction in process as of September 30, 2020, primarily represents renovation costs of $25.2 million associated with the Deerfield campus.

Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

NOTE 8 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The gross carrying amount of goodwill as of September 30, 2020 and December 31, 2019 was $413.7 million.

Effective in the first quarter of 2020, the Company (i) reorganized its commercial operations and moved responsibility for and reporting of RAYOS to the inflammation segment and (ii) renamed the orphan and rheumatology segment the orphan segment. This resulted in a $3.2 million increase in the Company’s allocation of goodwill to its inflammation segment and a corresponding decrease in the goodwill allocated to the orphan segment in the first quarter of 2020. The Company allocated goodwill to its new reporting units using a relative fair value approach. In addition, the Company completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the allocation and determined that no impairment existed.

The table below presents goodwill for the Company’s reportable segments as of September 30, 2020 (in thousands):

		Orphan			Inflammation			Total
Goodwill		$	357,498		$	56,171		$	413,669

As of September 30, 2020, there were no accumulated goodwill impairment losses.

Intangible Assets

As of September 30, 2020, the Company’s finite-lived intangible assets consisted of developed technology related to ACTIMMUNE, BUPHENYL, KRYSTEXXA, PENNSAID 2%, PROCYSBI, RAVICTI, RAYOS and TEPEZZA as well as customer relationships for ACTIMMUNE. The intangible asset related to VIMOVO developed technology was fully amortized as of December 31, 2019.

In connection with the acquisition of River Vision, the Company capitalized payments of $336.0 million related to TEPEZZA developed technology during the nine months ended September 30, 2020. See Note 4 for further details on the River Vision acquisition.

During the year ended December 31, 2019, in connection with the MIGERGOT transaction, the Company wrote off the remaining net book value of developed technology related to MIGERGOT of $17.0 million. See Note 4 for further details.

Intangible assets as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020							December 31, 2019
	Cost Basis		Accumulated Amortization			Net Book Value		Cost Basis		Accumulated Amortization			Net Book Value
Developed technology	$	3,094,331	$	(1,249,666	)	$	1,844,665	$	2,758,403	$	(1,059,595	)	$	1,698,808
Customer relationships		8,100		(4,885	)		3,215		8,100		(4,280	)		3,820
Total intangible assets	$	3,102,431	$	(1,254,551	)	$	1,847,880	$	2,766,503	$	(1,063,875	)	$	1,702,628

Amortization expense for the three months ended September 30, 2020 and 2019 was $65.4 million and $57.7 million, respectively, and was $190.7 million and $172.8 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, estimated future amortization expense was as follows (in thousands):

2020 (October to December)	$	64,289
2021		249,245
2022		248,072
2023		247,455
2024		246,024
Thereafter		792,795
Total	$	1,847,880

Accrued Expenses

9 Months Ended

Sep. 30, 2020

Payables And Accruals [Abstract]

Accrued Liabilities / Expenses

NOTE 9 – ACCRUED EXPENSES

Accrued expenses as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Accrued milestone payments	$	121,232	$	—
Payroll-related expenses		105,987		84,516
Accrued royalties		50,623		19,985
Consulting and professional services		41,205		32,423
Allowances for returns		41,191		45,082
Pricing review liability		14,433		9,831
Accrued interest		6,033		18,709
Accrued other		41,123		24,688
Accrued expenses	$	421,827	$	235,234

As of September 30, 2020, accrued milestone payments represented the expected attainment in 2020 of various TEPEZZA net sales milestones payable under the acquisition agreement for River Vision and license agreement with Roche. Refer to Note 4 for further detail.

Accrued Trade Discounts and Rebates

9 Months Ended

Sep. 30, 2020

Valuation And Qualifying Accounts Disclosure [Line Items]

Accrued Liabilities / Expenses

NOTE 9 – ACCRUED EXPENSES

Accrued expenses as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Accrued milestone payments	$	121,232	$	—
Payroll-related expenses		105,987		84,516
Accrued royalties		50,623		19,985
Consulting and professional services		41,205		32,423
Allowances for returns		41,191		45,082
Pricing review liability		14,433		9,831
Accrued interest		6,033		18,709
Accrued other		41,123		24,688
Accrued expenses	$	421,827	$	235,234

Accrued Trade Discounts and Rebates [Member]

Valuation And Qualifying Accounts Disclosure [Line Items]

Accrued Liabilities / Expenses

NOTE 10 – ACCRUED TRADE DISCOUNTS AND REBATES

Accrued trade discounts and rebates as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Accrued government rebates and chargebacks	$	162,170	$	164,508
Accrued commercial rebates and wholesaler fees		82,908		138,272
Accrued co-pay and other patient assistance		77,720		163,641
Accrued trade discounts and rebates	$	322,798	$	466,421
Invoiced commercial rebates and wholesaler fees, co-pay and other patient assistance costs, and government rebates and chargebacks in accounts payable		5,083		489
Total customer-related accruals and allowances	$	327,881	$	466,910

The following table summarizes changes in the Company’s customer-related accruals and allowances from December 31, 2019 to September 30, 2020 (in thousands):

	Wholesaler Fees			Co-Pay and			Government
	and Commercial			Other Patient			Rebates and
	Rebates			Assistance			Chargebacks			Total
Balance at December 31, 2019	$	138,761		$	163,641		$	164,508		$	466,910
Current provisions relating to sales during the nine months ended September 30, 2020		239,788			665,575			432,755			1,338,118
Adjustments relating to prior-year sales		(16,279	)		(3,059	)		(7,796	)		(27,134	)
Payments relating to sales during the nine months ended September 30, 2020		(158,996	)		(587,936	)		(268,302	)		(1,015,234	)
Payments relating to prior-year sales		(118,302	)		(160,501	)		(155,976	)		(434,779	)
Balance at September 30, 2020	$	84,972		$	77,720		$	165,189		$	327,881

Segment and Other Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment and Other Information

NOTE 11 – SEGMENT AND OTHER INFORMATION

The Company has two reportable segments, the orphan segment and the inflammation segment, and the Company reports net sales and segment operating income for each segment.

Effective in the first quarter of 2020, the Company (i) reorganized its commercial operations and moved responsibility for and reporting of RAYOS to the inflammation segment and (ii) renamed the orphan and rheumatology segment the orphan segment. Net sales generated by TEPEZZA, which was approved in the first quarter of 2020, are reported as part of the renamed orphan segment.

The orphan segment includes the medicines TEPEZZA, KRYSTEXXA, RAVICTI, PROCYSBI, ACTIMMUNE, BUPHENYL and QUINSAIR. The inflammation segment includes the medicines PENNSAID 2%, DUEXIS, RAYOS and VIMOVO and previously included MIGERGOT prior to the MIGERGOT transaction.

The Company’s chief operating decision maker (“CODM”) evaluates the financial performance of the Company’s segments based upon segment operating income. Segment operating income is defined as income (loss) before benefit for income taxes adjusted for the items set forth in the reconciliation below. Items below income from operations are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s CODM. Additionally, certain expenses are not allocated to a segment. The Company does not report balance sheet information by segment as no balance sheet by segment is reviewed by the Company’s CODM.

The following table reflects net sales by medicine for the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
TEPEZZA	$	286,870	$	—	$	476,257	$	—
KRYSTEXXA		108,470		99,576		276,920		231,634
RAVICTI		64,648		59,954		191,386		160,299
PROCYSBI		43,112		40,397		122,812		121,142
ACTIMMUNE		28,312		27,861		83,152		78,883
BUPHENYL		3,229		3,036		8,389		8,173
QUINSAIR		163		211		499		550
Orphan segment net sales	$	534,804	$	231,035	$	1,159,415	$	600,681

PENNSAID 2%		50,314		42,091		126,925		143,751
DUEXIS		27,899		29,889		87,044		89,412
RAYOS		18,132		19,359		50,800		59,067
VIMOVO		5,278		13,092