SEC Filing | Horizon Therapeutics plc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended March 31, 2022

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

For the transition period from to

Commission File Number 001-35238

HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

Ireland		98-1195602
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

70 St. Stephen’s Green Dublin 2, D02 E2X4, Ireland		Not Applicable
(Address of principal executive offices)		(Zip Code)

011 353 1 772 2100

(Registrant’s telephone number, including area code)

Not applicable

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

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


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

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

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

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

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

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

Number of registrant’s ordinary shares, nominal value $0.0001, outstanding as of April 28, 2022: 229,884,077.

HORIZON THERAPEUTICS PLC

INDEX

		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2022 and as of December 31, 2021 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II. OTHER INFORMATION		45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 6.	Exhibits	94
	Signatures	96

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except nominal value and share data)

	As of			As of
	March 31,			December 31,
	2022			2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,643,129		$	1,580,317
Restricted cash		4,136			3,839
Accounts receivable, net		684,507			632,775
Inventories, net		226,524			225,730
Prepaid expenses and other current assets		389,435			357,106
Total current assets		2,947,731			2,799,767
Property, plant and equipment, net		295,147			292,298
Developed technology and other intangible assets, net		2,871,979			2,960,118
In-process research and development		880,000			880,000
Goodwill		1,066,709			1,066,709
Deferred tax assets, net		516,317			538,098
Other assets		162,455			140,738
Total assets	$	8,740,338		$	8,677,728
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	67,014		$	30,125
Accrued expenses and other current liabilities		377,433			523,015
Accrued trade discounts and rebates		364,732			317,431
Long-term debt—current portion		16,000			16,000
Total current liabilities		825,179			886,571
LONG-TERM LIABILITIES:
Long-term debt, net		2,552,741			2,555,233
Deferred tax liabilities, net		334,778			390,455
Other long-term liabilities		209,811			173,076
Total long-term liabilities		3,097,330			3,118,764
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at March 31, 2022 and December 31, 2021; 229,873,900 and 227,760,936 shares issued at March 31, 2022 and December 31, 2021, respectively; and 229,489,534 and 227,376,570 shares outstanding at March 31, 2022 and December 31, 2021, respectively		23			23
Treasury stock, 384,366 ordinary shares at March 31, 2022 and December 31, 2021		(4,585	)		(4,585	)
Additional paid-in capital		4,314,647			4,373,337
Accumulated other comprehensive loss		(15,122	)		(14,987	)
Retained earnings		522,866			318,605
Total shareholders’ equity		4,817,829			4,672,393
Total liabilities and shareholders' equity	$	8,740,338		$	8,677,728

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except share and per share data)

	For the Three Months Ended March 31,
	2022			2021
Net sales	$	885,245		$	342,406
Cost of goods sold		215,062			100,368
Gross profit		670,183			242,038
OPERATING EXPENSES:
Research and development		103,132			57,693
Selling, general and administrative		372,734			331,992
Impairment of long-lived asset		—			12,371
Total operating expenses		475,866			402,056
Operating income (loss)		194,317			(160,018	)
OTHER EXPENSE, NET:
Interest expense, net		(21,256	)		(13,460	)
Foreign exchange gain (loss)		420			(848	)
Other (expense) income, net		(742	)		3,224
Total other expense, net		(21,578	)		(11,084	)
Income (loss) before benefit for income taxes		172,739			(171,102	)
Benefit for income taxes		(31,522	)		(47,751	)
Net income (loss)	$	204,261		$	(123,351	)
Net income (loss) per ordinary share—basic	$	0.89		$	(0.55	)
Weighted average ordinary shares outstanding—basic		229,094,311			223,920,768
Net income (loss) per ordinary share—diluted	$	0.87		$	(0.55	)
Weighted average ordinary shares outstanding—diluted		235,953,318			223,920,768
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments	$	(460	)	$	(821	)
Pension and other post-employment benefit plan remeasurements		325			(287	)
Other comprehensive loss		(135	)		(1,108	)
Comprehensive income (loss)	$	204,126		$	(124,459	)

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)

										Additional			Accumulated Other					Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive					Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Retained Earnings		Equity
Balances at December 31, 2021		227,760,936	$	23		384,366	$	(4,585	)	$	4,373,337		$	(14,987	)	$	318,605	$	4,672,393
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		2,112,964		—		—		—			9,071			—			—		9,071
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(115,108	)		—			—		(115,108	)
Share-based compensation		—		—		—		—			47,347			—			—		47,347
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			325			—		325
Foreign currency translation adjustments		—		—		—		—			—			(460	)		—		(460	)
Net income		—		—		—		—			—			—			204,261		204,261
Balances at March 31, 2022		229,873,900	$	23		384,366	$	(4,585	)	$	4,314,647		$	(15,122	)	$	522,866	$	4,817,829

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2020		221,721,674	$	22		384,366	$	(4,585	)	$	4,245,945		$	(145	)	$	(215,886	)	$	4,025,351
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		3,305,947		—		—		—			19,843			—			—			19,843
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(128,261	)		—			—			(128,261	)
Share-based compensation		—		—		—		—			62,296			—			—			62,296
Foreign currency translation adjustments		—		—		—		—			—			(821	)		—			(821	)
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			(287	)		—			(287	)
Net loss		—		—		—		—			—			—			(123,351	)		(123,351	)
Balances at March 31, 2021		225,027,621	$	22		384,366	$	(4,585	)	$	4,199,823		$	(1,253	)	$	(339,237	)	$	3,854,770

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	For the Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	204,261		$	(123,351	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		95,112			70,820
Equity-settled share-based compensation		47,300			61,166
Acquired in-process research and development expense		2,000			—
Amortization of debt discount and deferred financing costs		1,577			773
Impairment of long-lived asset		—			12,371
Deferred income taxes		(33,896	)		(28,771	)
Foreign exchange and other adjustments		1,190			(5,440	)
Changes in operating assets and liabilities:
Accounts receivable		(51,665	)		224,575
Inventories		(785	)		(13,660	)
Prepaid expenses and other current assets		(33,205	)		(65,575	)
Accounts payable		36,067			993
Accrued trade discounts and rebates		47,279			(28,736	)
Accrued expenses and other current liabilities		(113,775	)		(111,963	)
Other non-current assets and liabilities		14,331			3,070
Net cash provided by (used in) operating activities		215,791			(3,728	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment related to license agreement		(25,000	)		—
Purchases of property, plant and equipment		(14,198	)		(18,333	)
Payments for acquisitions, net of cash acquired		(3,122	)		(2,707,358	)
Receipts (payments) for long-term investments, net		1,596			(3,808	)
Net cash used in investing activities		(40,724	)		(2,729,499	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from term loans		—			1,577,612
Repayment of term loans		(4,000	)		—
Proceeds from the issuance of ordinary shares in connection with stock option exercises		9,071			19,843
Payment of employee withholding taxes relating to share-based awards		(115,108	)		(128,261	)
Net cash (used in) provided by financing activities		(110,037	)		1,469,194
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(1,921	)		(3,998	)
Net increase (decrease) in cash, cash equivalents and restricted cash		63,109			(1,268,031	)
Cash, cash equivalents and restricted cash, beginning of the period		1,584,156			2,083,479
Cash, cash equivalents and restricted cash, end of the period	$	1,647,265		$	815,448

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	28,095	$	18,988
Cash paid for income taxes, net of refunds received		1,496		1,201
Cash paid for amounts included in the measurement of operating lease liabilities		2,208		2,084
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Purchases of property, plant and equipment included in accounts payable and accrued expenses and other current liabilities	$	3,627	$	10,523
Milestone payments for TEPEZZA intangible asset included in accrued expenses and other current liabilities		—		69,962

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

HORIZON THERAPEUTICS PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND BUSINESS OVERVIEW

Basis of Presentation

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

On March 15, 2021, the Company completed its acquisition of Viela Bio, Inc. (“Viela”) and acquired all of the issued and outstanding shares of Viela’s common stock for $53.00 per share. The total consideration for the acquisition was approximately $3.0 billion, including cash acquired of $342.3 million. Following the completion of the acquisition, Viela became a wholly-owned subsidiary of the Company. The unaudited condensed consolidated financial statements presented herein include the results of operations of the acquired business from the date of acquisition.

The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The December 31, 2021 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

Business Overview

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. The Company’s pipeline is purposeful: it applies scientific expertise and courage to bring clinically meaningful therapies to patients. Horizon believes science and compassion must work together to transform lives. The Company has two reportable segments, the orphan segment and the inflammation segment, and its commercial portfolio is currently composed of 12 medicines in the areas of rare diseases, gout, ophthalmology and inflammation.

As of March 31, 2022, the Company’s commercial portfolio consisted of the following medicines:

Orphan

TEPEZZA^® (teprotumumab-trbw), for intravenous infusion

KRYSTEXXA^® (pegloticase injection), for intravenous infusion

RAVICTI^® (glycerol phenylbutyrate) oral liquid

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

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

UPLIZNA^® (inebilizumab-cdon) injection, for intravenous use

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

QUINSAIR^™ (levofloxacin) solution for inhalation

Inflammation

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

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

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

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

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

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

Significant Accounting Policies

The Company’s significant accounting policies have not changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 3 – NET INCOME (LOSS) PER SHARE

The following table presents basic and diluted net income (loss) per share for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share data):

	For the Three Months Ended March 31,
	2022		2021
Basic net income (loss) per share calculation:
Numerator - net income (loss)	$	204,261	$	(123,351	)
Denominator - weighted average of ordinary shares outstanding		229,094,311		223,920,768
Basic net income (loss) per share	$	0.89	$	(