8-K
Horizon Therapeutics Public Ltd Co 00-0000000 Ordinary shares, nominal value $0.0001 per share false 0001492426 0001492426 2021-11-03 2021-11-03 0001492426 dei:FormerAddressMember 2021-11-03 2021-11-03

 

 

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 3, 2021

 

 

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.)

70 Saint Stephen’s Green, Dublin, D02 E2X4, Ireland

(Address of principal executive offices)

Registrant’s telephone number, including area code: 011-353-1-772-2100

Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland

(Former name or former address, if changed since last report.)

 

 

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 3, 2021, Horizon Therapeutics plc issued a press release announcing its financial results for the third quarter ended September 30, 2021. 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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) On October 28, 2021, Paul W. Hoelscher notified Horizon Therapeutics plc (the “Company”) of his intention to retire from his position as the Company’s Executive Vice President, Chief Financial Officer, effective as of May 16, 2022, and continue as an advisor to the Company through May 2023.

(c) Also on October 28, 2021, in connection with the announcement of Mr. Hoelscher’s retirement, the Board of Directors of the Company appointed Aaron Cox (i) as the Company’s Executive Vice President, Finance, effective immediately, and (ii) as the Company’s Executive Vice President, Chief Financial Officer, and principal financial officer, effective as of Mr. Hoelscher’s retirement on May 16, 2022.

Mr. Cox, age 39, joined the Company in 2016 and has served in various roles across business development and corporate development, including most recently as senior vice president, corporate development and chief of staff to Tim Walbert, where he had responsibilities spanning financial planning, corporate strategy, mergers and acquisitions, acquisition integration and corporate project management. Additionally, he leads capital markets activities and oversees the Company’s global real estate, security and facilities functions. From 2016 to June 2017, Mr. Cox was part of the Company’s business development team, where he supported multiple acquisitions, financings and licensing transactions. Before joining Horizon, Mr. Cox was vice president, capital markets at BMO Capital Markets and held investment banking roles at JMP Securities and Stout.

Mr. Cox earned a Master of Business Administration with concentrations in accounting, finance and economics from the University of Chicago Booth School of Business and a Bachelor of Business Administration in finance from the University of Notre Dame.

Mr. Cox has no family relationship with any of the officers or directors of the Company and has not been party to any transactions with the Company during the past fiscal year to the present that would require reporting pursuant to Item 404(a) of Regulation S-K. There is no arrangement or understanding between Mr. Cox and any third party pursuant to which he was selected as Executive Vice President, Finance or Chief Financial Officer.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.   

Description

99.1    Press Release of Horizon Therapeutics plc, dated November 3, 2021. 
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 3, 2021     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

 

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Horizon Therapeutics plc Reports Record Third-Quarter 2021 Financial Results;

Increasing Full-Year 2021 Net Sales and Adjusted EBITDA Guidance

— Record Third-Quarter 2021 Net Sales of $1.037 Billion Increased 63 Percent; Third-Quarter

2021 GAAP Net Income of $326.5 Million; Record Adjusted EBITDA of $509.0 Million —

— Record TEPEZZA® (teprotumumab-trbw) Third-Quarter 2021 Net Sales of $616.4 Million;

Increasing Full-Year 2021 Net Sales Guidance to Greater Than $1.625 Billion,

Representing Year-Over-Year Growth of More Than 98 Percent —

— Record KRYSTEXXA® (pegloticase injection) Third-Quarter 2021 Net Sales of $158.1 Million;

KRYSTEXXA Plus Immunomodulation Now at More Than 45 Percent; Increasing Full-Year 2021 Net Sales

Guidance to Greater Than $550 Million, Representing Year-Over-Year Growth of More Than 35 Percent —

— Increasing Full-Year 2021 Net Sales Guidance to $3.16 Billion to $3.21 Billion, Representing

45 Percent Growth at the Midpoint; Increasing Full-Year 2021 Adjusted EBITDA Guidance to

$1.315 Billion to $1.345 Billion, Representing 33 Percent Growth at the Midpoint —

— Announced Five New Programs for Development-Stage Candidates

Daxdilimab (HZN-7734) and Dazodalibep (HZN-4920)

— Announced Positive Topline Data from MIRROR Trial Evaluating the Use of KRYSTEXXA Plus

Methotrexate; 71 Percent of Patients Achieved a Complete Response Rate at Month 6; Expect to Submit

a Supplemental Biologics License Application (sBLA) to the U.S. FDA in the First Quarter of 2022 —

— Initiated Enrollment in TEPEZZA Chronic Thyroid Eye Disease (TED) Trial;

Results Expected in Second Half of 2022 —

— Cash Position of $1.07 Billion; Achieved Gross Leverage Target of

2.0 Times at Sept. 30, 2021, Ahead of Year-End 2021 Goal —

DUBLIN Nov. 3, 2021 – Horizon Therapeutics plc (Nasdaq: HZNP) today announced record third-quarter 2021 financial results and increased both its full-year 2021 net sales and adjusted EBITDA guidance.

“We generated record results in the third quarter and made significant progress executing our R&D strategy, further expanding our pipeline with five new programs,” said Tim Walbert, chairman, president and chief executive officer, Horizon. “In addition to our strong commercial execution with TEPEZZA and KRYSTEXXA, our expanded pipeline positions us to drive future growth and diversification, as well as address the unmet medical needs of many people living with rare, autoimmune and severe inflammatory diseases around the world.”

 

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Financial Highlights

 

(in millions except for per share amounts and percentages)    Q3 21      Q3 20      %
Change
     YTD 21      YTD 20      %
Change
 

Net sales

   $  1,037.0      $  636.4        63    $  2,211.9      $  1,455.1        52  

Net income

     326.5        292.8        12      361.3        199.2        81  

Non-GAAP net income

     413.8        392.2        6      802.5        559.2        44  

Adjusted EBITDA

     509.0        329.8        54      921.8        627.7        47  

Earnings per share - diluted

     1.38        1.31        5      1.54        0.95        62  

Non-GAAP earnings per share  - diluted

     1.75        1.74        1      3.41        2.58        32  

Third Quarter and Recent Company Highlights

 

   

Announced Five New R&D Programs and Highlighted Expanded Pipeline at Inaugural R&D Day: In September, the Company announced four new programs for its development-stage candidate daxdilimab (HZN-7734) in alopecia areata, discoid lupus erythematosus, dermatomyositis and lupus nephritis and one new program for its development-stage candidate dazodalibep (HZN-4920) in focal segmental glomerulosclerosis. The Company expects to initiate Phase 2 trials in each of these indications in 2022. The new programs, in addition to the Company’s R&D strategy and other key programs, were highlighted at the Company’s inaugural R&D Day in September.

 

   

Announced Positive Topline Data from KRYSTEXXA MIRROR Trial: In October, the Company announced positive topline results from the MIRROR Phase 4 randomized, placebo-controlled trial evaluating the use of KRYSTEXXA plus methotrexate. The MIRROR trial results demonstrated that 71 percent of patients who were randomized to receive KRYSTEXXA plus methotrexate achieved a complete response rate at Month 6 (p<0.001), a significant improvement from the 40 percent response rate in patients who were randomized to receive KRYSTEXXA plus placebo. In the Phase 3 clinical program, which evaluated KRYSTEXXA alone compared to placebo, 42 percent of patients receiving KRYSTEXXA achieved a complete response. The Company plans to submit a sBLA to the U.S. FDA in the first quarter of 2022. Full data from the trial is expected to be presented at future medical meetings. KRYSTEXXA plus immunomodulation is a core element of the Company’s strategy to maximize the value of KRYSTEXXA and enable more patients with uncontrolled gout to benefit from the medicine.

 

   

Initiated Enrollment in TEPEZZA Chronic TED Trial: In September, the first patient was enrolled in a Phase 4 randomized, placebo-controlled clinical trial to evaluate the safety and efficacy of TEPEZZA for the treatment of chronic TED. TED is a serious, progressive and potentially vision-threatening rare autoimmune disease. It begins with an acute phase where inflammatory signs and symptoms, such as eye pain, swelling, proptosis (eye bulging) and diplopia (double vision), progress over time. The acute stage is followed by a chronic phase in which inflammation is no longer present or has markedly diminished; however, significant signs and symptoms may remain and continue to impact the quality of life. The objective of the trial is to generate clinical data to better inform physicians and payers about the safety and efficacy of TEPEZZA in patients with chronic TED. Results are expected in the second half of 2022.

 

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Presented New UPLIZNA® (inebilizumab-cdon) Data at Key Medical Meetings: New UPLIZNA data were presented at the 15th World Congress on Controversies in Neurology (CONy Virtual), including end-of-study data from the open-label extension period of the Phase 3 trial in patients with neuromyelitis optica spectrum disorder (NMOSD). The data indicated that UPLIZNA may provide durable efficacy and a favorable safety profile for African Americans with NMOSD. Multiple new data were also presented at the virtual 37th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) in October. Additionally, a new analysis of data from the Phase 3 trial was published in the Multiple Sclerosis Journal that highlighted a sustained effect on attack risk in people with NMOSD who were treated with UPLIZNA for four or more years.

 

   

Acquired Biologics Manufacturing Facility in Waterford, Ireland: In July, the Company completed the acquisition of a biologics drug product manufacturing facility in Waterford, Ireland. The Company intends to use the manufacturing facility to support the growth of the Company’s on-market medicines, including TEPEZZA, KRYSTEXXA and UPLIZNA, as well as development-stage biologics.

 

   

Continued to Demonstrate Gender and Ethnicity Pay Equity: A second study conducted by Aon, a leading compensation consulting firm, showed that Horizon continues to demonstrate both gender and ethnicity pay equity. This study was a follow-on study to the gender and pay ethnicity study Aon conducted in 2019. The Company maintained its gender and ethnicity pay equity despite having grown significantly in the two years since the first study, as well as having completed the acquisition of Viela Bio, which included the addition of a significant number of employees.

 

   

Multiple Additional Recognitions as a Best Workplace: In September, the Company was named one of the “2021 Best Workplaces for Women” by Fortune and Great Place to Work® for the first time. In addition, the Company was also recognized as one of PEOPLE’s “100 Companies That Care®” for the third year. In July, Fortune and Great Place to Work named the Company to the “Best Workplaces for Millennials” list for the second consecutive year and the Company was the highest ranked biotechnology company on the list. In addition, in October the Company was named one of the Top 100 Adoption-Friendly Workplaces by the Dave Thomas Foundation for Adoption for the third consecutive year. Most recently, Horizon was named to Newsweek’s inaugural “Most Loved Workplaces” list, ranking among the top 100 companies recognized for employee happiness and satisfaction at work and was the highest-ranked company in the biotechnology and pharmaceutical category. To date in 2021, the Company has received 11 workplace-related recognitions, reflecting the high level of engagement of its employees.

Key Clinical Development Programs

 

   

Daxdilimab (HZN-7734), an anti-ILT7 human monoclonal antibody that depletes certain dendritic cells. Depleting these cells may interrupt the cycle of inflammation that causes tissue damage in diseases such as lupus, and a variety of other autoimmune conditions.

 

   

Systemic Lupus Erythematosus (SLE) Trial: Phase 2 randomized, placebo-controlled trial underway to evaluate daxdilimab in patients with SLE, a disease in which the body’s immune system attacks its own tissues and organs.

 

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Alopecia Areata Trial: Phase 2 trial to evaluate daxdilimab in patients with alopecia areata, an autoimmune disorder characterized by nonscarring hair loss, expected to initiate in the first half of 2022.

 

   

Discoid Lupus Erythematosus (DLE) Trial: Phase 2 trial to evaluate daxdilimab in patients with DLE, a rare, chronic, inflammatory skin condition characterized by lesions that result in scarring, expected to initiate in the first half of 2022.

 

   

Lupus Nephritis Trial: Phase 2 trial to evaluate daxdilimab in patients with lupus nephritis, a rare, autoimmune disorder characterized by rashes, debilitating muscle weakness and interstitial lung disease, expected to initiate in the second half of 2022.

 

   

Dermatomyositis Trial: Phase 2 trial to evaluate daxdilimab in patients with dermatomyositis, a rare, autoimmune and inflammatory condition of the kidney, expected to initiate in the second half of 2022.

 

   

Dazodalibep (HZN-4920), a CD40 ligand antagonist that blocks T cell interaction with the CD40-expressing B cells, disrupting the overactivation of the CD40 ligand co-stimulatory pathway. Several autoimmune diseases are associated with the overactivation of this pathway.

 

   

Sjögren’s Syndrome Trial: Phase 2b randomized, placebo-controlled trial underway to evaluate dazodalibep in patients with Sjögren’s syndrome, a chronic, systemic autoimmune condition that impacts exocrine glands, including the salivary and tear glands.

 

   

Rheumatoid Arthritis Trial: Phase 2 randomized, placebo-controlled trial underway to evaluate dazodalibep in patients with rheumatoid arthritis.

 

   

Kidney Transplant Rejection Trial: Phase 2 open-label trial underway to evaluate dazodalibep in kidney transplant rejection patients.

 

   

Focal Segmental Glomerulosclerosis (FSGS) Trial: Phase 2 trial to evaluate dazodalibep in patients with FSGS, a rare kidney disorder characterized by scarring of glomeruli, expected to initiate in the second half of 2022.

 

   

HZN-825, an oral lysophosphatidic acid receptor 1 (LPAR1) antagonist that prevents gene activation.

 

   

Diffuse Cutaneous Systemic Sclerosis Trial: Pivotal Phase 2b trial to evaluate HZN-825 in diffuse cutaneous systemic sclerosis, expected to initiate in the fourth quarter of 2021.

 

   

Interstitial Lung Disease Trial: Pivotal Phase 2b trial to evaluate HZN-825 in idiopathic pulmonary fibrosis, the most common form of interstitial lung disease, expected to initiate in the fourth quarter of 2021.

 

   

UPLIZNA, an anti-CD19 humanized monoclonal antibody that depletes B cells, including the pathogenic cells that produce autoantibodies.

 

   

Myasthenia Gravis Trial: Phase 3 randomized, placebo-controlled trial underway to evaluate UPLIZNA in patients with myasthenia gravis, a chronic, rare, autoimmune neuromuscular disease that affects voluntary muscles, especially those that control the eyes, mouth, throat and limbs.

 

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IgG4-Related Disease Trial: Phase 3 randomized, placebo-controlled trial underway to evaluate UPLIZNA in patients with IgG4-related disease, which is a group of disorders marked by tumor-like swelling and fibrosis of affected organs, such as the pancreas, salivary glands and kidneys.

 

   

Kidney Transplant Desensitization Trial: Phase 2 open-label trial underway to evaluate UPLIZNA, dazodalibep or both in highly sensitized patients waiting for a kidney transplant.

 

   

TEPEZZA, an insulin-like growth factor type 1 receptor (IGF-1R) antagonist monoclonal antibody.

 

   

Chronic TED Trial: Phase 4 randomized, placebo-controlled trial initiated in September 2021 to evaluate TEPEZZA in chronic TED.

 

   

Subcutaneous (SC) Administration Trial: Phase 1 pharmacokinetic trial underway to explore SC administration of TEPEZZA.

 

   

Diffuse Cutaneous Systemic Sclerosis Exploratory Trial: Phase 1 exploratory trial to evaluate TEPEZZA in diffuse cutaneous systemic sclerosis expected to initiate in the fourth quarter of 2021.

 

   

KRYSTEXXA, a recombinant uricase enzyme that converts urate into a water-soluble liquid, allantoin, that can be easily excreted from the body.

 

   

MIRROR Trial: Phase 4 randomized, placebo-controlled trial to evaluate KRYSTEXXA plus methotrexate to increase the complete response rate in patients with uncontrolled gout. Topline results were announced on Oct. 25, 2021. The results demonstrated that 71 percent of patients who were randomized to receive KRYSTEXXA plus methotrexate achieved a complete response rate at Month 6 (p<0.001), a significant improvement from the 40 percent response rate in patients who were randomized to receive KRYSTEXXA plus placebo.

 

   

PROTECT Trial: Phase 4 open-label trial to evaluate KRYSTEXXA to improve management of uncontrolled gout in kidney transplant patients. This trial is completed, and final results will be presented at American Society of Nephrology (ASN) Kidney Week 2021 later this week.

 

   

Shorter Infusion Duration Trial: Phase 4 open-label trial underway to evaluate the impact of administering KRYSTEXXA plus methotrexate over a shorter infusion duration in patients with uncontrolled gout.

 

   

Monthly Dosing Trial: Phase 4 open-label trial underway to evaluate monthly dosing of KRYSTEXXA plus methotrexate in patients with uncontrolled gout.

 

   

Retreatment Trial: Phase 4 open-label trial underway to evaluate KRYSTEXXA plus methotrexate in patients who were not complete responders to KRYSTEXXA monotherapy.

 

   

HZN-1116 Autoimmune Disease Trial: Phase 1 trial initiated in July 2021 to evaluate HZN-1116, a monoclonal antibody, in patients with autoimmune diseases.

 

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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 2021 net sales were $1.037 billion, an increase of 63 percent compared to the third quarter of 2020.

 

 

Gross Profit: Under U.S. GAAP, the third-quarter 2021 gross profit ratio was 75.7 percent compared to 76.2 percent in the third quarter of 2020. The non-GAAP gross profit ratio in the third quarter of 2021 was 85.4 percent compared to 86.7 percent in the third quarter of 2020.

 

 

Operating Expenses: R&D expenses were 9.0 percent of net sales and SG&A expenses were 34.7 percent of net sales. Non-GAAP R&D expenses were 7.2 percent of net sales and non-GAAP SG&A expenses were 29.0 percent of net sales.

 

 

Income Tax Expense (Benefit): On a GAAP basis in the third quarter of 2021, income tax benefit was $19.3 million. Third-quarter non-GAAP income tax expense was $73.8 million.

 

 

Net Income: In the third-quarter of 2021, net income on a GAAP and non-GAAP basis was $326.5 million and $413.8 million, respectively.

 

 

Adjusted EBITDA: Third-quarter 2021 adjusted EBITDA was $509.0 million.

 

 

Earnings per Share: On a GAAP basis, diluted earnings per share in the third quarter of 2021 and 2020 were $1.38 and $1.31, respectively. Non-GAAP diluted earnings per share in the third quarter of 2021 and 2020 were $1.75 and $1.74, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the third quarter of 2021 were 236.2 million.

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.

 

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Orphan Segment

 

                   %                   %  
(in millions except for percentages)    Q3 21      Q3 20      Change     YTD 21      YTD 20      Change  

TEPEZZA®

   $  616.4      $  286.9        115     $  1,071.7      $  476.3        125  

KRYSTEXXA®

     158.1        108.5        46       395.2        276.9        43  

RAVICTI®(1)

     76.2        64.6        18       217.6        191.4        14  

PROCYSBI®

     49.3        43.1        14     142.5        122.8        16

ACTIMMUNE®

     30.1        28.3        6       86.6        83.1        4  

UPLIZNA®(2)

     18.7        —        NM       35.0        —        NM  

BUPHENYL®(1)

     1.9        3.2        (42     5.8        8.4        (31

QUINSAIRTM

     0.3        0.2        84       0.7        0.5        47  
  

 

 

    

 

 

      

 

 

    

 

 

    

Orphan Net Sales

   $  951.0      $  534.8        78     $  1,955.1      $  1,159.4        69  
  

 

 

    

 

 

      

 

 

    

 

 

    

Orphan Segment Operating Income

   $  476.2      $  274.7        73     $  798.5      $  480.6        66  

 

  (1)

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.

  (2)

UPLIZNA was acquired on March 15, 2021.

 

 

Third-quarter 2021 net sales of the orphan segment, the Company’s strategic growth segment, were $951.0 million, an increase of 78 percent over the prior year’s quarter, driven by the strong performance of TEPEZZA, KRYSTEXXA, RAVICTI, PROCYSBI and ACTIMMUNE. The orphan segment represented 92 percent of total company third-quarter net sales.

 

 

KRYSTEXXA third-quarter 2021 net sales increased 46 percent year-over-year driven by increased adoption of KRYSTEXXA plus immunomodulation, which now exceeds 45 percent. In addition, the Company continues to see strong uptake of KRYSTEXXA from both rheumatologists and nephrologists.

 

 

Third-quarter 2021 orphan segment operating income was $476.2 million, which includes additional investment associated with TEPEZZA, UPLIZNA and the Company’s pipeline programs.

Inflammation Segment

 

                   %                   %  
(in millions except for percentages)    Q3 21      Q3 20      Change     YTD 21      YTD 20      Change  

PENNSAID 2%®

   $  48.0      $  50.3        (5   $  142.7      $  126.9        12  

DUEXIS®(1)

     20.9        27.9        (25     62.5        87.1        (28

RAYOS®

     14.9        18.1        (18     43.6        50.8        (14

VIMOVO®(2)

     2.2        5.3        (58     8.1        30.9        (74
  

 

 

    

 

 

      

 

 

    

 

 

    

Inflammation Net Sales

   $  86.0      $  101.6        (15   $  256.9      $  295.7        (13
  

 

 

    

 

 

      

 

 

    

 

 

    

Inflammation Segment Operating Income

   $ 34.1      $  55.1        (38   $  123.6      $  145.1        (15

 

  (1)

On Aug. 4, 2021, Alkem Laboratories, Inc. initiated an at-risk launch of generic DUEXIS in the United States.

  (2)

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

 

 

Third-quarter 2021 net sales of the inflammation segment were $86.0 million, and segment operating income was $34.1 million.

 

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Cash Flow Statement and Balance Sheet Highlights

 

 

On a GAAP basis, operating cash flow in the third quarter of 2021 was $411.0 million. Non-GAAP operating cash flow was $432.3 million.

 

 

As of Sept. 30, 2021, the Company had cash and cash equivalents of $1.069 billion.

 

 

As of Sept. 30, 2021, the total principal amount of debt outstanding was $2.610 billion, and the gross-debt-to-last-12-months adjusted EBITDA leverage ratio was 2.0 times.

2021 Guidance

The Company now expects full-year 2021 net sales to range between $3.16 billion and $3.21 billion, representing 45 percent growth at the midpoint and an increase from the previous range of $3.025 billion to $3.125 billion. The company now expects TEPEZZA full-year 2021 net sales of greater than $1.625 billion with year-over-year growth of more than 60 percent in the fourth quarter, compared to the previous guidance of greater than $1.550 billion with year-over-year growth of more than 50 percent in the fourth quarter. The Company now expects KRYSTEXXA full-year 2021 net sales of greater than $550 million, compared to the previous guidance of greater than $500 million. Full-year 2021 adjusted EBITDA is now expected to range between $1.315 billion and $1.345 billion, representing 33 percent growth at the midpoint and an increase from the previous guidance range of $1.26 billion to $1.30 billion.

Webcast

At 8 a.m. EST / 12 p.m. GMT 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 the discovery, development and commercialization of medicines that address critical needs for people impacted by rare, autoimmune and severe inflammatory 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.

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 (benefit) and 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

 

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as well as EBITDA exclude acquisition and/or divestiture-related expenses, 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 2021 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 2021 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).

 

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Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s full-year 2021 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, manufacturing and commercialization plans; expected timing of clinical trials, availability of clinical data 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 supplies and net sales of Horizon’s medicines and potential delays in clinical trials; the fact that Horizon’s full-year 2021 net sales, adjusted EBITDA and TEPEZZA net sales guidance and the expected timing of certain TEPEZZA clinical trials assume that future committed manufacturing slots for TEPEZZA are not cancelled and are run successfully, which could be impacted by additional government-mandated COVID-19 vaccine production orders and other risks associated with the manufacture of biologic medicines; risks associated with acquisitions, such as the risk that the businesses will not be integrated successfully, that such integration may be more difficult, time-consuming or costly than expected or that the expected benefits of the transaction will not occur; 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, including its manufacturing and global expansion strategy; 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

 

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Horizon Therapeutics plc

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2021      2020      2021      2020  

Net sales

   $  1,036,992      $  636,427      $  2,211,946      $  1,455,115  

Cost of goods sold

     251,640      151,475      553,003      370,406
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     785,352      484,952      1,658,943      1,084,709
  

 

 

    

 

 

    

 

 

    

 

 

 

OPERATING EXPENSES:

           

Research and development

     93,549      30,206      291,076      138,483

Selling, general and administrative

     360,260      226,164      1,047,456      696,271

Impairment of long-lived asset

     —        —        12,371      —    

Gain on sale of asset

     —        —        (2,000      —  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     453,809      256,370      1,348,903      834,754
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     331,543      228,582      310,040      249,955
  

 

 

    

 

 

    

 

 

    

 

 

 

OTHER EXPENSE, NET:

           

Interest expense, net

     (22,977      (12,185      (59,018      (48,100

Loss on debt extinguishment

     —        (14,602      —        (31,856

Foreign exchange (loss) gain

     (476      (753      (1,363      306

Other (expense) income, net

     (849      717      2,113      1,791
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other expense, net

     (24,302      (26,823      (58,268      (77,859
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before benefit for income taxes

     307,241      201,759      251,772      172,096

Benefit for income taxes

     (19,302      (91,081      (109,537      (27,143
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $  326,543      $  292,840      $  361,309      $  199,239  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per ordinary share—basic

   $  1.44      $  1.38      $  1.61      $  1.00  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average ordinary shares outstanding—basic

     226,096,747      212,320,219      225,053,704      198,413,779  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per ordinary share—diluted

   $  1.38      $  1.31      $  1.54      $  0.95  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average ordinary shares outstanding—diluted

     236,198,789      223,743,903      235,256,424      208,678,460  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Horizon Therapeutics plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

 

     As of  
     September 30,
2021
    December 31,
2020
 

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $  1,068,547     $  2,079,906  

Restricted cash

     3,839     3,573

Accounts receivable, net

     775,371     659,701

Inventories, net

     237,434     75,283

Prepaid expenses and other current assets

     328,730     251,945
  

 

 

   

 

 

 

Total current assets

     2,413,921     3,070,408
  

 

 

   

 

 

 

Property, plant and equipment, net

     285,837     189,037

Developed technology and other intangible assets, net

     3,051,135     1,782,962

In-process research and development

     880,000     —  

Goodwill

     1,069,031     413,669

Deferred tax assets, net

     782,852     560,841

Other assets

     125,912     55,699
  

 

 

   

 

 

 

Total assets

   $  8,608,688     $  6,072,616  
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable

   $  50,724     $  37,710  

Accrued expenses and other current liabilities

     483,833     485,567

Accrued trade discounts and rebates

     303,486     352,463

Long-term debt—current portion

     16,000     —  
  

 

 

   

 

 

 

Total current liabilities

     854,043     875,740
  

 

 

   

 

 

 

LONG-TERM LIABILITIES:

    

Long-term debt, net

     2,557,864     1,003,379

Deferred tax liabilities, net

     591,552     66,474

Other long-term liabilities

     155,015     101,672
  

 

 

   

 

 

 

Total long-term liabilities

     3,304,431     1,171,525
  

 

 

   

 

 

 

COMMITMENTS AND CONTINGENCIES

    

SHAREHOLDERS’ EQUITY:

    

Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at September 30, 2021 and December 31, 2020; 227,026,047 and 221,721,674 shares issued at September 30, 2021 and December 31, 2020, respectively; and 226,641,681 and 221,337,308 shares outstanding at September 30, 2021 and December 31, 2020, respectively

     22       22  

Treasury stock, 384,366 ordinary shares at September 30, 2021 and December 31, 2020

     (4,585     (4,585

Additional paid-in capital

     4,310,886     4,245,945

Accumulated other comprehensive loss

     (1,532     (145

Retained earnings (accumulated deficit)

     145,423     (215,886
  

 

 

   

 

 

 

Total shareholders’ equity

     4,450,214     4,025,351
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $  8,608,688     $  6,072,616  
  

 

 

   

 

 

 

 

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Horizon Therapeutics plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net income

  $ 326,543     $ 292,840     $ 361,309     $ 199,239  

Adjustments to reconcile net income to net cash provided by operating activities:

       

Depreciation and amortization expense

    94,480       70,510       257,216       209,906  

Equity-settled share-based compensation

    54,804       30,356       170,394       113,834  

Acquired in-process research and development expense

    —         —         46,500       47,517  

Loss on debt extinguishment

    —         14,602       —         31,856  

Impairment of long-lived asset

    —         —         12,371       —    

Amortization of debt discount and deferred financing costs

    1,500       1,208       3,740       12,025  

Gain on sale of asset

    —         —         (2,000     —    

Deferred income taxes

    (129,819     (3,480     (147,934     (8,041

Foreign exchange and other adjustments

    1,958       423       (1,494     1,084  

Changes in operating assets and liabilities:

       

Accounts receivable

    (39,762     (162,267     (107,776     (297,392

Inventories

    21,219       (10,986     (10,494     (23,329

Prepaid expenses and other current assets

    34,333       (62,816     (60,790     (83,226

Accounts payable

    (2,666     (65,846     7,640       17,709  

Accrued trade discounts and rebates

    (2,825     34,170       (50,838     (143,551

Accrued expenses and other current liabilities

    59,021       (24,675     34,380       56,830  

Other non-current assets and liabilities

    (7,746     (5,176     (15,510     11,410  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

    411,040       108,863       496,714       145,871  
 

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Purchases of property, plant and equipment

    (27,440     (13,429     (59,695     (133,399

Payments for long-term investments, net

    (2,219     (8,937     (9,797     (8,937

Payments for acquisitions, net of cash acquired

    (67,945     —         (2,843,275     (262,305

Change in escrow deposit for property purchase

    —         —         —         6,000  

Proceeds from sale of asset

    2,000       —         2,000       —    

Payments related to license agreements

    (46,500     —         (46,500     —    
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

    (142,104     (22,366     (2,957,267     (398,641
 

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Repayment of senior notes

    —         (1,739     —         (1,739

Net proceeds from the issuance of ordinary shares

    —         919,995       —         919,995  

Net proceeds from term loans

    —         —         1,574,993       —    

Repayment of term loans

    (4,000     —         (8,000     —    

Proceeds from the issuance of ordinary shares in conjunction with ESPPprogram

    —         —         11,482       7,979  

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

    12,174       8,112       40,013       33,999  

Payment of employee withholding taxes relating to share- based awards

    (16,429     (6,743     (158,077     (59,752
 

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (used in) provided by financing activities

    (8,255     919,625       1,460,411       900,482  
 

 

 

   

 

 

   

 

 

   

 

 

 

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

    (4,452     1,166       (10,951     1,225  
 

 

 

   

 

 

   

 

 

   

 

 

 

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

    256,229       1,007,288       (1,011,093     648,937  

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

    816,157       721,688       2,083,479       1,080,039  
 

 

 

   

 

 

   

 

 

   

 

 

 

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

  $ 1,072,386     $ 1,728,976     $ 1,072,386     $ 1,728,976  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

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

 

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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Net Income and Earnings Per Share (Unaudited)

(in thousands, except share and per share data)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  

GAAP net income

  $ 326,543     $ 292,840     $ 361,309     $ 199,239  

Non-GAAP adjustments:

       

Acquisition/divestiture-related costs

    9,228       199       88,166       47,296  

Restructuring and realignment costs

    680       —         7,703       —    

Manufacturing plant start-up costs

    1,712       —         1,712       —    

Amortization and step-up:

       

Intangible amortization expense

    90,368       65,353       245,260       190,677  

Inventory step-up expense

    8,912       —         16,914       —    

Amortization of debt discount and deferred financing costs

    1,500       1,208       3,740       12,025  

Impairment of long-lived assets

    —         —         12,371       1,072  

Gain on sale of asset

    —         —         (2,000     —    

Share-based compensation

    54,804       30,356       170,394       113,834  

Depreciation

    4,112       5,157       11,956       19,229  

Litigation settlement

    5,000       —         5,000       —    

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

    4,000       —         53,500       3,000  

Fees related to refinancing activities

    —         —         —         54  

Loss on debt extinguishment

    —         14,602       —         31,856  

Drug substance harmonization costs

    —         193       —         483  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total of pre-tax non-GAAP adjustments

    180,316       117,068       614,716       419,526  

Income tax effect of pre-tax non-GAAP adjustments

    (37,102     (23,063     (148,353     (80,122

Other non-GAAP income tax adjustments

    (56,007     5,331       (25,126     20,541  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

    87,207       99,336       441,237       359,945  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

  $ 413,750     $ 392,176     $ 802,546     $ 559,184  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share:

       

Weighted average ordinary shares—Basic

    226,096,747       212,320,219       225,053,704       198,413,779  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share—Basic:

       

GAAP earnings per share—Basic

  $ 1.44     $ 1.38     $ 1.61     $ 1.00  

Non-GAAP adjustments

    0.39       0.47       1.96       1.82  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per share—Basic

  $ 1.83     $ 1.85     $ 3.57     $ 2.82  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

  $ 413,750     $ 392,176     $ 802,546     $ 559,184  

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

    —         223       —         3,789  
 

 

 

   

 

 

   

 

 

   

 

 

 

Numerator—non-GAAP net income

  $ 413,750     $ 392,399     $ 802,546     $ 562,973  
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average ordinary shares—Diluted

       

Weighted average ordinary shares—Basic

    226,096,747       212,320,219       225,053,704       198,413,779  

Ordinary share equivalents

    10,102,042       12,959,618       10,202,720       19,431,212  
 

 

 

   

 

 

   

 

 

   

 

 

 

Denominator—weighted average ordinary shares—Diluted

    236,198,789       225,279,837       235,256,424       217,844,991  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Earnings Per Share—Diluted

       

GAAP earnings per share—Diluted

  $ 1.38     $ 1.31     $ 1.54     $ 0.95  

Non-GAAP adjustments

    0.37       0.43       1.87       1.63  
 

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP earnings per share—Diluted

  $ 1.75     $ 1.74     $ 3.41     $ 2.58  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA and Adjusted EBITDA (Unaudited)

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2021     2020     2021     2020  

GAAP net income

   $ 326,543     $ 292,840     $ 361,309     $ 199,239  

Depreciation

     4,112       5,157       11,956       19,229  

Amortization and step-up:

        

Intangible amortization expense

     90,368       65,353       245,260       190,677  

Inventory step-up expense

     8,912       —         16,914       —    

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

     22,977       12,185       59,018       48,100  

Benefit for income taxes

     (19,302     (91,081     (109,537     (27,143
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 433,610     $ 284,454     $ 584,920     $ 430,102  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     9,228       199       88,166       47,296  

Restructuring and realignment costs

     680       —         7,703       —    

Manufacturing plant start-up costs

     1,712       —         1,712       —    

Impairment of long-lived assets

     —         —         12,371       1,072  

Gain on sale of asset

     —         —         (2,000     —    

Share-based compensation

     54,804       30,356       170,394       113,834  

Litigation settlement

     5,000       —         5,000       —    

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

     4,000       —         53,500       3,000  

Fees related to refinancing activities

     —         —         —         54  

Loss on debt extinguishment

     —         14,602       —         31,856  

Drug substance harmonization costs

     —         193       —         483  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of other non-GAAP adjustments

     75,424       45,350       336,846       197,595  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 509,034     $ 329,804     $ 921,766     $ 627,697  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

15


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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Operating Income (Unaudited)

(in thousands)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2021     2020     2021     2020  

GAAP operating income

   $ 331,543     $ 228,582     $ 310,040     $ 249,955  

Non-GAAP adjustments:

        

Acquisition/divestiture-related costs

     9,224       144       89,241       47,416  

Restructuring and realignment costs

     680       —         7,703       —    

Manufacturing plant start-up costs

     1,712       —         1,712       —    

Amortization and step-up:

        

Intangible amortization expense

     90,368       65,353       245,260       190,677  

Inventory step-up expense

     8,912       —         16,914       —    

Impairment of long-lived assets

     —         —         12,371       1,072  

Gain on sale of asset

     —         —         (2,000     —    

Share-based compensation

     54,804       30,356       170,394       113,834  

Depreciation

     4,111       5,157       11,955       19,229  

Litigation settlement

     5,000       —         5,000       —    

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

     4,000       —         53,500       3,000  

Fees related to refinancing activities

     —         —         —         54  

Drug substance harmonization costs

     —         193       —         483  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

     178,811       101,203       612,050       375,765  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating income

   $ 510,354     $ 329,785     $ 922,090     $ 625,720  
  

 

 

   

 

 

   

 

 

   

 

 

 

Orphan segment operating income

     476,225       274,687       798,514       480,584  

Inflammation segment operating income

     34,129       55,098       123,576       145,136  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income

   $ 510,354     $ 329,785     $ 922,090     $ 625,720  

Foreign exchange (loss) gain

     (476     (753     (1,363     306  

Other (expense) income, net

     (844     772       1,039       1,671  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 509,034     $ 329,804     $ 921,766     $ 627,697  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

16


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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Gross Profit and Operating Cash Flow (Unaudited)

(in thousands, except percentages)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2021     2020     2021     2020  

Non-GAAP Gross Profit:

        

GAAP gross profit

   $  785,352     $  484,952     $  1,658,943     $  1,084,709  

Non-GAAP gross profit adjustments:

        

Acquisition/divestiture-related costs

     (204     —         (75     —    

Intangible amortization expense

     89,892       65,149       244,382       190,070  

Inventory step-up expense

     8,912       —         16,914       —    

Share-based compensation

     1,795       1,566       6,875       5,543  

Depreciation

     55       17       227       435  

Drug substance harmonization costs

     —         193       —         483  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total of Non-GAAP adjustments

     100,450       66,925       268,323       196,531  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 885,802     $ 551,877     $ 1,927,266     $ 1,281,240  
  

 

 

   

 

 

   

 

 

   

 

 

 

GAAP gross profit %

     75.7     76.2     75.0     74.5

Non-GAAP gross profit %

     85.4     86.7     87.1     88.1

GAAP cash provided by operating activities

   $ 411,040     $ 108,863     $ 496,714     $ 145,871  

Cash payments for acquisition/divestiture-related costs

     15,839       97       136,073       80  

Cash payments for restructuring and realignment costs

     583       —         1,803       189  

Cash payments for manufacturing start-up costs

     869       —         869       —    

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

     4,000       —         7,000       —    

Cash payments drug substance harmonization costs

     —         —         —         290  

Cash payments relating to refinancing activities

     —         —         —         73  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating cash flow

   $ 432,331     $ 108,960     $ 642,459     $ 146,503  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

17


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Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited)—2020

(in thousands)

 

     Twelve Months
Ended December 31,
 
     2020  

GAAP net income

   $  389,796  

Depreciation

     24,303

Amortization and step-up:

  

Intangible amortization expense

     255,148

Inventory step-up expense

     —  

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

     59,616

Expense for income taxes

     11,849
  

 

 

 

EBITDA

   $  740,712  
  

 

 

 

Other non-GAAP adjustments:

  

Acquisition/divestiture-related costs

     49,196

Restructuring and realignment costs

     (141

Impairment of long-lived assets

     1,713

Gain on sale of assets

     (4,883

Share-based compensation

     146,627

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

     33,000

Fees related to refinancing activities

     54

Loss on debt extinguishment

     31,856

Drug substance harmonization costs

     542
  

 

 

 

Total of other non-GAAP adjustments

     257,964
  

 

 

 

Adjusted EBITDA

   $  998,676  
  

 

 

 

 

18


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Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

 

     Q3 2021  
     Pre-tax Net
(Loss) Income
     Income Tax
(Benefit) Expense
    Tax Rate     Net Income
(Loss)
     Diluted Earnings
(Loss) Per Share
 

As reported—GAAP

   $  307.2      $ (19.3     (6.3 )%    $ 326.5      $  1.38  

Non-GAAP adjustments

     180.3        93.1         87.2     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Non-GAAP

   $  487.6      $  73.8       15.1   $  413.8      $  1.75  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     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  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     YTD 2021  
     Pre-tax Net
(Loss) Income
     Income Tax
(Benefit) Expense
    Tax Rate     Net Income
(Loss)
     Diluted Earnings
(Loss) Per Share
 

As reported—GAAP

   $  251.8      $ (109.5     (43.5 )%   $ 361.3      $  1.54  

Non-GAAP adjustments

     614.7        173.5         441.2     
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Non-GAAP

   $  866.5      $  64.0       7.4   $  802.5      $  3.41  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
     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  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

19


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Horizon Therapeutics plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Three Months Ended September 30, 2021

(Unaudited)

 

     COGS     Research &
Development
    Selling, General
& Administrative
    Interest
Expense
    Other
Expense, net
    Income Tax
Benefit
(Expense)
 

GAAP as reported

   $ (251,640   $ (93,549   $ (360,260   $ (22,977   $ (849   $ 19,302  

Non-GAAP Adjustments (in thousands):

            

Acquisition/divestiture-related costs(1)

     (204     15       9,415       —         2       —    

Restructuring and realignment costs(2)

     —         —         680       —         —         —    

Manufacturing plant start-up costs(3)

     —         —         1,712       —         —         —    

Amortization and step-up:

            

Intangible amortization expense(4)

     89,892       —         476       —         —         —    

Inventory step-up expense(5)

     8,912       —         —         —         —         —    

Amortization of debt discount and deferred financing costs(6)

     —         —         —         1,500       —         —    

Share-based compensation(7)

     1,795       15,075       37,934       —         —         —    

Depreciation(8)

     55       125       3,932       —         —         —    

Litigation settlement(9)

     —         —         5,000       —         —         —    

Upfront, progress and milestone payments related to license and collaboration agreements(10)

     —         4,000       —         —         —         —    

Income tax effect on pre-tax non-GAAP adjustments(11)

     —         —         —         —         —         (37,102

Other non-GAAP income tax adjustments(12)

     —         —         —         —         —         (56,007
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

     100,450       19,215       59,149       1,500       2       (93,109
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

   $ (151,190   $ (74,334   $ (301,111   $ (21,477   $ (847   $ (73,807
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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
Income, net
     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(4)

     65,149       —         204       —         —         —          —    

Amortization of debt discount and deferred financing costs(6)

     —         —         —         —         1,208       —          —    

Share-based compensation(7)

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

Depreciation(8)

     17       29       5,111       —         —         —          —    

Loss on debt extinguishment(13)

     —         —         —         14,602       —         —          —    

Drug substance harmonization costs(14)

     193       —         —         —         —         —          —    

Income tax effect on pre-tax non-GAAP adjustments(11)

     —         —         —         —         —         —          (23,063

Other non-GAAP income tax adjustments(12)

     —         —         —         —         —         —          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   $ 722      $ 73,349  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

20


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Horizon Therapeutics plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Nine Months Ended September. 30, 2021

(Unaudited)

 

     COGS     Research &
Development
    Selling, General
& Administrative
    Gain on
Sale of
Asset
    Impairment of
Long-lived assets
    Interest
Expense
    Other Income
(Expense), net
    Income Tax
Benefit
(Expense)
 

GAAP as reported

   $ (553,003   $ (291,076   $  (1,047,456)     $ 2,000     $ (12,371   $ (59,018   $ 2,113     $ 109,537  

Non-GAAP Adjustments (in thousands):

                

Acquisition/divestiture-related costs(1)

     (75     18       89,300       —         —         —         (1,077     —    

Restructuring and realignment costs(2)

     —         —         7,703       —         —         —         —         —    

Manufacturing plant start-up costs(3)

     —         —         1,712       —         —         —         —         —    

Amortization and step-up:

                

Intangible amortization expense(4)

     244,382       —         878       —         —         —         —         —    

Inventory step-up expense(5)

     16,914       —         —         —         —         —         —         —    

Amortization of debt discount and deferred financing costs(6)

     —         —         —         —         —         3,740       —         —    

Impairment of long lived assets(15)

     —         —         —         —         12,371       —         —         —    

Gain on sale of asset(16)

     —         —         —         (2,000     —         —         —         —    

Share-based compensation(7)

     6,875       32,851       130,668       —         —         —         —         —    

Depreciation(8)

     227       291       11,438       —         —         —         —         —    

Litigation settlement(9)

     —         —         5,000       —         —         —         —         —    

Upfront, progress and milestone payments related to license and collaboration agreements(10)

     —         53,500       —         —         —         —         —         —    

Income tax effect on pre-tax non-GAAP adjustments(11)

     —         —         —         —         —         —         —         (148,353

Other non-GAAP income tax adjustments(12)

     —         —         —         —         —         —         —         (25,126
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of non-GAAP adjustments

     268,323       86,660       246,699       (2,000     12,371       3,740       (1,077     (173,479
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

   $ (284,680   $ (204,416   $ (800,757   $ —       $ —       $ (55,278   $ 1,036     $ (63,942
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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
    Loss on Debt
Extinguishment
     Interest
Expense
     Other Income
(Expense), net
     Income Tax
Benefit
(Expense)
 

GAAP as reported

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

Non-GAAP Adjustments (in thousands):

                   

Acquisition/divestiture-related costs(1)

     —          47,365        51       —          —          (120)        —    

Amortization and step-up:

                   

Intangible amortization expense(4)

     190,070        —          607       —          —          —          —    

Amortization of debt discount and deferred financing costs(6)

     —          —          —         —          12,025           —    

Impairment of long lived assets(15)

     —          —          1,072       —          —          —          —    

Share-based compensation(7)

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

Depreciation(8)

     435        72        18,722       —          —          —          —    

Upfront, progress and milestone payments related to license and collaboration agreements(10)

     —          3,000        —         —          —          —          —    

Fees related to refinancing activities(17)

     —          —          54       —          —          —          —    

Loss on debt extinguishment(13)

     —          —          —         31,856        —          —          —    

Drug substance harmonization costs(14)

     483        —          —         —          —          —          —    

Income tax effect on pre-tax non-GAAP adjustments(11)

     —          —          —         —          —          —          (80,122)  

Other non-GAAP income tax adjustments(12)

     —          —          —         —          —          —          20,541  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total of non-GAAP adjustments

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

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP

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

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

21


 

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NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS—NON-GAAP

 

1.

Represents transaction and integration costs, including, advisory, legal, consulting and certain employee-related costs, 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.

Represents rent and maintenance charges for the leased Lake Forest office that we vacated in the first quarter of 2021.

 

3.

During the nine months ended September 30, 2021, we recorded $1.7 million of manufacturing plant start-up costs related to the purchase of a drug product manufacturing facility from EirGen in July 2021.

 

4.

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

 

5.

During the three and nine months ended September 30, 2021, we recognized in cost of goods sold $8.9 million and $16.9 million, respectively, for inventory step-up expense related to UPLIZNA inventory revalued in connection with the Viela acquisition. Because inventory step-up expense is related to an acquisition, will not continue indefinitely and has a significant effect on our gross profit, gross margin percentage and net income for all affected periods, the Company excludes inventory step-up expense from its non-GAAP financial measures.

 

6.

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

 

7.

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.

 

8.

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

 

9.

We recorded $5.0 million of expense during the three and nine months ended September 30, 2021 for litigation settlements.

 

10.

During the nine months ended September 30, 2021, we recognized a $40.0 million upfront payment in relation to the agreement with Arrowhead, which was subsequently paid in July 2021. In addition, we recognized $6.5 million of milestone payments in relation to daxdilimab (HZN-7734) and $7.0 million of progress payments with HemoShear Therapeutics, LLC, or HemoShear.

 

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

 

11.

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.

 

12.

During the nine months ended September 30, 2021, we recognized a U.S. federal and state tax liability on U.S. taxable income generated from an intercompany transfer and license 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 $26.2 million. We also recognized $51.3 million of tax benefit due to a reduction in the state tax rate expected to apply to the reversal of temporary differences between the book values and tax bases of certain assets acquired through the Viela acquisition. The reduction in state tax rate resulted in a reduction in the deferred tax liability relating to these assets and a non-GAAP tax adjustment of $51.3 million.

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 intercompany 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.

 

13.

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, which reflects the extinguishment of our Exchangeable Senior Notes.

 

14.

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 Friedreich’s ataxia 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.

 

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15.

During the nine months ended September 30, 2021, we recorded a right-of-use asset impairment charge of $12.4 million as a result of vacating the leased Lake Forest office.

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.

 

16.

During the nine months ended September 30, 2021, gain on sale of asset represents a $2.0 million contingent consideration payment related to the sale of MIGERGOT in 2019. The contingent consideration was triggered during the second quarter of 2021 and it was received in July 2021.

 

17.

Represents arrangement and other fees relating to our refinancing activities.

 

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