SEC Filing | Horizon Therapeutics plc

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10-Q

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, 2023


☐	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 27, 2023: 228,621,802.

HORIZON THERAPEUTICS PLC

INDEX


		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 and as of December 31, 2022 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 5.	Other Information	92
Item 6.	Exhibits	93
	Signatures	95

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,
	2023			2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,311,628		$	2,352,833
Restricted cash		4,772			4,755
Accounts receivable, net		624,697			676,347
Inventories, net		164,496			169,559
Prepaid expenses and other current assets		497,254			449,349
Total current assets		3,602,847			3,652,843
Property, plant and equipment, net		355,872			340,509
Developed technology and other intangible assets, net		2,576,163			2,664,777
In-process research and development		810,000			810,000
Goodwill		1,010,538			1,010,538
Deferred tax assets, net		450,219			431,814
Other long-term assets		187,811			204,135
Total assets	$	8,993,450		$	9,114,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	76,619		$	155,800
Accrued expenses and other current liabilities		482,334			457,557
Accrued trade discounts and rebates		309,935			319,780
Long-term debt—current portion		16,000			16,000
Total current liabilities		884,888			949,137
LONG-TERM LIABILITIES:
Long-term debt, net		2,544,230			2,546,837
Deferred tax liabilities, net		271,550			342,017
Other long-term liabilities		197,222			204,451
Total long-term liabilities		3,013,002			3,093,305
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at March 31, 2023 and December 31, 2022; 228,960,705 and 227,625,913 shares issued at March 31, 2023 and December 31, 2022, respectively; and 228,576,339 and 227,241,547 shares outstanding at March 31, 2023 and December 31, 2022, respectively		23			23
Treasury stock, 384,366 ordinary shares at March 31, 2023 and December 31, 2022		(4,585	)		(4,585	)
Additional paid-in capital		4,448,744			4,474,199
Accumulated other comprehensive income		6,685			12,528
Retained earnings		644,693			590,009
Total shareholders’ equity		5,095,560			5,072,174
Total liabilities and shareholders’ equity	$	8,993,450		$	9,114,616

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands, except share and per share data)


	For the Three Months Ended March 31,
	2023			2022
Net sales	$	832,059		$	885,245
Cost of goods sold		208,563			215,062
Gross profit		623,496			670,183
OPERATING EXPENSES:
Research and development		134,148			103,132
Selling, general and administrative		453,354			372,734
Total operating expenses		587,502			475,866
Operating income		35,994			194,317
OTHER EXPENSE, NET:
Interest expense, net		(15,540	)		(21,256	)
Foreign exchange gain		91			420
Other expense, net		(1,343	)		(742	)
Total other expense, net		(16,792	)		(21,578	)
Income before benefit for income taxes		19,202			172,739
Benefit for income taxes		(35,482	)		(31,522	)
Net income	$	54,684		$	204,261
Net income per ordinary share—basic	$	0.24		$	0.89
Weighted average ordinary shares outstanding—basic		228,397,661			229,094,311
Net income per ordinary share—diluted	$	0.23		$	0.87
Weighted average ordinary shares outstanding—diluted		233,788,366			235,953,318
OTHER COMPREHENSIVE LOSS, NET OF TAX
Interest rate swap contracts designated as cash flow hedges	$	(7,052	)	$	—
Foreign currency translation adjustments		(615	)		(460	)
Pension and other post-employment benefit plan remeasurements		1,824			325
Other comprehensive loss		(5,843	)		(135	)
Comprehensive income	$	48,841		$	204,126

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			Retained		Shareholders’
	Shares		Amount		Shares		Amount			Capital			Income			Earnings		Equity
Balances at December 31, 2022		227,625,913	$	23		384,366	$	(4,585	)	$	4,474,199		$	12,528		$	590,009	$	5,072,174
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		1,334,792		—		—		—			3,421			—			—		3,421
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(87,549	)		—			—		(87,549	)
Share-based compensation		—		—		—		—			58,673			—			—		58,673
Interest rate swap contracts designated as cash flow hedges		—		—		—		—			—			(7,052	)		—		(7,052	)
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			1,824			—		1,824
Foreign currency translation adjustments		—		—		—		—			—			(615	)		—		(615	)
Net income		—		—		—		—			—			—			54,684		54,684
Balances at March 31, 2023		228,960,705	$	23		384,366	$	(4,585	)	$	4,448,744		$	6,685		$	644,693	$	5,095,560


										Additional			Accumulated Other					Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Retained		Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			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

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,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	54,684		$	204,261
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		94,860			95,112
Equity-settled share-based compensation		58,120			47,300
Amortization of debt discount and deferred financing costs		1,471			1,577
Deferred income taxes		(87,310	)		(33,896	)
Foreign exchange and other adjustments		(434	)		3,190
Changes in operating assets and liabilities:
Accounts receivable		51,530			(51,665	)
Inventories		5,067			(785	)
Prepaid expenses and other current assets		(48,625	)		(33,205	)
Accounts payable		(78,040	)		36,067
Accrued trade discounts and rebates		(9,938	)		47,279
Accrued expenses and other current liabilities		42,858			(113,775	)
Other non-current assets and liabilities		2,080			14,331
Net cash provided by operating activities		86,323			215,791
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments related to license and collaboration agreements		(15,000	)		(25,000	)
Purchases of property, plant and equipment		(24,128	)		(14,198	)
Payments for acquisitions, net of cash acquired		—			(3,122	)
Payments for long-term investments		(2,623	)		(1,464	)
Receipts from long-term investments		—			3,060
Net cash used in investing activities		(41,751	)		(40,724	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term loans		(4,000	)		(4,000	)
Proceeds from the issuance of ordinary shares in connection with stock option exercises		3,421			9,071
Payment of employee withholding taxes relating to share-based awards		(87,549	)		(115,108	)
Net cash used in financing activities		(88,128	)		(110,037	)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		2,368			(1,921	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(41,188	)		63,109
Cash, cash equivalents and restricted cash, beginning of the period		2,357,588			1,584,156
Cash, cash equivalents and restricted cash, end of the period	$	2,316,400		$	1,647,265


SUPPLEMENTAL CASH FLOW INFORMATION: