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Pending Acquisition of Viela Bio, Inc.: On Jan. 31, 2021, the Company entered into a definitive agreement to acquire Viela, a biotechnology company with a deep, mid-stage biologics pipeline for autoimmune and severe inflammatory diseases, an experienced R&D team and UPLIZNA, a recently approved biologic medicine for a rare disease. The acquisition represents a significant step forward in advancing the Company’s strategy to expand its pipeline to accelerate long-term sustainable growth by adding four pipeline candidates currently in nine development programs. Per the agreement, the Company will acquire all of Viela’s common stock for $53.00 per share in cash, which represents a fully diluted equity value of approximately $2.67 billion, net of Viela’s cash and cash equivalents. The transaction is expected to close by the end of the first quarter of 2021.

TEPEZZA Supply Update: In January 2021, the Company submitted a prior approval supplement to the U.S. Food and Drug Administration (FDA) to support increased scale production of TEPEZZA drug product for the treatment of Thyroid Eye Disease (TED). The submission includes data to support more drug product output with each manufacturing slot than is currently approved by the FDA. The Company will continue to discuss potential additional data requirements and the approval timeline with the FDA. The Company continues to expect that the disruption could last through the first quarter of 2021. As previously announced on Dec. 17, 2020, this increased production scale became necessary due to government-mandated COVID-19 vaccine production orders pursuant to the Defense Production Act of 1950 (DPA) that dramatically reduced the number of drug product production slots available to Horizon at the Company’s drug product contract manufacturer of TEPEZZA.

Entered into Agreement with Halozyme to Develop a TEPEZZA Subcutaneous Formulation: On Nov. 21, 2020, the Company and Halozyme Therapeutics, Inc. entered into a global collaboration and license agreement for exclusive access to Halozyme’s ENHANZE^® drug delivery technology for subcutaneous (SC) formulation of medicines targeting IGF-1R. The Company intends to use ENHANZE to develop a SC formulation of TEPEZZA, potentially shortening drug administration time, reducing healthcare practitioner time and offering additional flexibility and convenience for patients.

Completed Enrollment in KRYSTEXXA PROTECT Trial: In January 2021, the Company completed enrollment in the PROTECT open-label trial. The trial, which is evaluating KRYSTEXXA to improve the management of uncontrolled gout for adults with a kidney transplant, had a total enrollment of 20 patients. Results are expected in the fourth quarter of 2021. In October 2020, the Company announced interim data from the PROTECT trial that were encouraging with respect to the ability of KRYSTEXXA to treat uncontrolled gout in this very sensitive transplant population without compromising kidney function.

Announced Two New KRYSTEXXA Trials to Impact the Patient Experience and Broaden the Patient Population: The Company recently announced it is planning to initiate two new KRYSTEXXA trials in the first half of 2021. The KRYSTEXXA monthly dosing open-label trial is evaluating a monthly dosing regimen of KRYSTEXXA with methotrexate to treat people with uncontrolled gout. The current dosing schedule for KRYSTEXXA is every other week. The KRYSTEXXA retreatment open-label trial is evaluating KRYSTEXXA with methotrexate in patients who have previously failed on KRYSTEXXA. In addition, in October, the Company enrolled the first patient in its open-label shorter infusion duration trial, which is evaluating a shorter infusion duration of KRYSTEXXA with methotrexate. The current infusion time is two hours or longer.

New TEPEZZA Clinical Data Presented at Medical Meetings: New TEPEZZA data were presented at the virtual American Academy of Ophthalmology (AAO) Annual Meeting in November, including data from the OPTIC 48-week follow-up study and OPTIC-X clinical trial that demonstrated a durable response. In addition, case studies of 21 chronic TED patients who showed benefit after treatment with TEPEZZA were presented at the virtual Fall Symposium of the American Society of Ophthalmic Plastic and Reconstructive Surgery (ASOPRS) in November. This adds to the growing body of evidence supporting the use of TEPEZZA in chronic TED patients, with approximately 30 chronic TED patients across multiple case reports who have consistently demonstrated benefit.

KRYSTEXXA Immunomodulation RECIPE Trial Achieved 86 Percent Response Rate: In November, data were presented from the investigator-initiated RECIPE randomized controlled trial (RCT), evaluating the effect of co-administration of KRYSTEXXA with mycophenolate mofetil (MMF) to increase the complete response rate of KRYSTEXXA, with 86 percent of patients receiving KRYSTEXXA co-administered with MMF achieving the primary endpoint of serum uric acid (sUA) less than or equal to 6 mg/dL at 12 weeks, 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.

Established Scholarship Endowments to Foster Equity in Education: In December, the Company announced that it provided $1 million to endow scholarships to be awarded to economically disadvantaged students and students of color at Howard University and in a joint health professionals program at Lake Forest College and Rosalind Franklin University. This adds to the Company’s efforts to combat racism and foster inclusion, which includes a $500,000 donation to community organizations that are addressing racial inequality and racism, as well as internal efforts within the Company to further embed inclusion, diversity, equity and allyship at all levels of the organization.

Received Continued Recognition as a Best Workplace: In 2020, the Company received 13 workplace-related recognitions, including six in the fourth quarter, reflecting the high level of engagement of its employees. Horizon was named to the following lists in the fourth quarter:

Fortune Best Small & Medium Workplaces^™;

Great Place to Work’s 2020 Best Workplaces for Parents^™;

National Association for Business Resources’ 2020 Best and Brightest Companies to Work For in the Nation^®;

Chicago Tribune Top Workplaces 2020;

San Francisco Bay Area’s 2020 Best and Brightest Companies to Work For^®; and

Dave Thomas Foundation for Adoption Best Adoption-Friendly Workplace^™ list.

HZN-825 Diffuse Cutaneous Systemic Sclerosis Program: HZN-825 is an LPAR₁ antagonist in development for the treatment of diffuse cutaneous systemic sclerosis (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 with the primary endpoint of forced vital capacity after 52 weeks of treatment.

HZN-825 Interstitial Lung Disease Program: As part of its strategy to further explore the potential fibrosis-mediating benefits of LPAR₁ antagonism, in mid-2021, the Company expects to begin a Phase 2b pivotal trial with HZN-825 in idiopathic pulmonary fibrosis (IPF), the most common form of interstitial lung disease. IPF is a rare progressive lung disease with a median survival of less than five years with significant unmet need.

TEPEZZA Trial in Chronic TED: The Company expects to initiate a randomized, placebo-controlled trial of TEPEZZA in patients with chronic TED in the second quarter of 2021, assuming normalized supply of TEPEZZA. In chronic TED, the disease is no longer progressive; however, significant disease manifestations such as proptosis (eye bulging) and diplopia (double vision) remain. Although the prescribing information for TEPEZZA includes chronic TED patients, the Company is conducting the trial to generate clinical data to better inform payers and physicians about the use of TEPEZZA in chronic TED.

TEPEZZA Subcutaneous (SC) Administration Program: The Company has initiated a pharmacokinetic trial to explore SC 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. The TEPEZZA SC administration program includes evaluating Halozyme’s ENHANZE drug delivery technology for a SC formulation of TEPEZZA, with initial early clinical work expected to begin in 2021.

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 mid-2021, assuming normalized supply of TEPEZZA.

KRYSTEXXA MIRROR Randomized Controlled Trial: 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 RCT. The primary endpoint of the trial is the proportion of 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 submission of results to the FDA to potentially 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.

KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout: In January 2021, the Company completed enrollment of 20 patients in the PROTECT open-label trial, evaluating KRYSTEXXA to improve management of uncontrolled gout for adults with a kidney transplant. 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 sUA 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: In October 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.

KRYSTEXXA Monthly Dosing Trial: The Company is planning to initiate an open-label trial evaluating a monthly dosing regimen of KRYSTEXXA with methotrexate to treat people with uncontrolled gout. The current dosing schedule for KRYSTEXXA is every other week. The goal of the trial is to explore whether a monthly dosing regimen can provide similar outcomes as the current dosing schedule. The trial is expected to initiate in the first half of 2021.

KRYSTEXXA Retreatment Trial: The Company is planning to initiate an open-label trial evaluating KRYSTEXXA with methotrexate in patients who have previously failed KRYSTEXXA. The goal of the trial is to evaluate whether patients can benefit from KRYSTEXXA with methotrexate after developing an immune response to KRYSTEXXA when taken alone. Patients who have previously failed on KRYSTEXXA have limited options available to address their uncontrolled gout. The trial is expected to initiate in the first half of 2021.

Net Sales: Fourth-quarter 2020 net sales were $745.3 million, an increase of 105 percent compared to the fourth quarter of 2019.

Gross Profit: Under U.S. GAAP, the fourth-quarter 2020 gross profit ratio was 78.2 percent compared to 73.9 percent in the fourth quarter of 2019. The non-GAAP gross profit ratio in the fourth quarter of 2020 was 87.1 percent compared to 90.0 percent in the fourth quarter of 2019.

Operating Expenses: Research and development (R&D) expenses were 9.5 percent of net sales and selling, general and administrative (SG&A) expenses were 37.2 percent of net sales. Non-GAAP R&D expenses were 5.2 percent of net sales, and non-GAAP SG&A expenses were 32.3 percent of net sales.

Income Tax Expense: In the fourth quarter of 2020, income tax expense on a GAAP and non-GAAP basis was $39.0 million and $61.6 million, respectively.

Net Income: On a GAAP basis in the fourth quarter of 2020, net income was $190.6 million. Fourth-quarter 2020 non-GAAP net income was $298.5 million.

Adjusted EBITDA: Fourth-quarter 2020 adjusted EBITDA was $371.0 million.

Earnings per Share: On a GAAP basis diluted earnings per share in the fourth quarter of 2020 and 2019 was $0.82 and $2.84, respectively. Non-GAAP diluted earnings per share in the fourth quarter of 2020 and 2019 was $1.28 and $0.56, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the fourth quarter of 2020 were 232.9 million.

TEPEZZA^®

KRYSTEXXA^®

RAVICTI^®(1)

PROCYSBI^®

ACTIMMUNE^®

BUPHENYL^®(1)

QUINSAIR^TM

Orphan Net Sales

Orphan Segment Operating Income

On Oct. 27, 2020, the Company sold its rights to develop and commercialize RAVICTI^® and BUPHENYL^® in Japan to Medical Need Europe AB, part of the Immedica Group. The Company has retained the rights to RAVICTI and BUPHENYL in North America.

Fourth-quarter 2020 net sales of the orphan segment, the Company’s strategic growth segment, were $628.2 million, an increase of 151 percent over the prior year’s quarter, driven by the strong performance of TEPEZZA, KRYSTEXXA, PROCYSBI and ACTIMMUNE. The orphan segment represented 84 percent of total fourth-quarter net sales.

Fourth-quarter 2020 orphan segment operating income was $303.0 million, which includes significant investment spend associated with the commercial launch of TEPEZZA.

PENNSAID 2%^®

DUEXIS^®

RAYOS^®

VIMOVO^®(1)

MIGERGOT^®(2)

Inflammation Net Sales

Inflammation Segment Operating Income

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

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

Fourth-quarter 2020 net sales of the inflammation segment were $117.1 million, and segment operating income was $66.9 million.

On a GAAP basis, operating cash flow in the fourth quarter of 2020 was $409.8 million. Non-GAAP operating cash flow was $411.2 million.

As of Dec. 31, 2020, the Company had cash and cash equivalents of $2.080 billion.

As of Dec. 31, 2020, the total principal amount of debt outstanding was $1.018 billion. As of Dec. 31, 2020, the gross-debt-to-last-12-months adjusted EBITDA leverage ratio was 1.0 times, compared to 2.9 times as of Dec. 31, 2019.

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COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:

Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at December 31, 2020 and December 31, 2019; 221,721,674 and 188,402,040 shares issued at December 31, 2020 and December 31, 2019, respectively, and 221,337,308 and 188,017,674 shares outstanding at December 31, 2020 and December 31, 2019, respectively

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

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

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