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8-K - FORM 8-K - Horizon Therapeutics Public Ltd Cod910447d8k.htm
EX-99.3 - EXHIBIT 99.3 - Horizon Therapeutics Public Ltd Cod910447dex993.htm
EX-23.1 - EXHIBIT 23.1 - Horizon Therapeutics Public Ltd Cod910447dex231.htm
EX-99.1 - EXHIBIT 99.1 - Horizon Therapeutics Public Ltd Cod910447dex991.htm

Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the following transactions (collectively, the “Transactions”): (i) this offering of 12 million ordinary shares (the “Offering”) by Horizon Pharma plc (“Horizon” or the “Company”), (ii) the March 2015 private placement of $400 million in aggregate principal amount of 2.5% Exchangeable Senior Notes due 2022 (the “Exchangeable Notes”), (iii) the acquisition of Hyperion Therapeutics (“Hyperion”) by the Company pursuant to a tender offer for all outstanding shares of Hyperion’s common stock for $46.00 per share (the “Offer Price”), which was announced on March 30, 2015 (the “Acquisition”) (iv) the assumed funding of $800 million principal amount of the term loans under a new senior secured term loan facility (the “Senior Secured Term Loans”), the proceeds of which would be used, in addition to a portion of Horizon’s existing cash and a portion of the proceeds of the Offering, to repay $300 million principal amount of outstanding term loans under Horizon’s existing senior secured credit facility (the “Existing Credit Facility”) and certain existing debt of Hyperion, fund a portion of the Offer Price and pay any prepayment premium, fees and expenses in connection with the foregoing, (v) the acquisition of Vidara Therapeutics International Public Limited (“Vidara”) by the Company which closed on September 19, 2014, (the “Merger”) and (vi) $300 million of loans borrowed under the Existing Credit Facility in connection with the Merger.

The historical pro forma combined balance sheet information as of December 31, 2014 is based upon and derived from the historical financial information of the Company and Hyperion and gives effect to the Transactions as if such transactions had occurred on December 31, 2014 except for the acquisition of Vidara and its related financings, which are already reflected in Horizon’s historical balance sheet as of December 31, 2014. The unaudited pro forma combined statement of operations for the year ended December 31, 2014 is based upon and derived from the historical financial information of the Company, Hyperion and Vidara and gives effect to the Transactions as if they occurred on January 1, 2014.

The Acquisition will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (“ASC”) 805, “Business Combinations,” (“ASC 805”). The Merger has been accounted for as a reverse acquisition under the acquisition method of accounting under the provisions of ASC 805. The unaudited pro forma combined financial information set forth below primarily give effect to the following:

 

    The application of the acquisition method of accounting in connection with the acquisitions referred to above;

 

    The Offering;

 

    The issuance of the Exchangeable Notes;

 

    The borrowing under the Senior Secured Term Loans; and

 

    Transaction costs in connection with the acquisitions and financings.

The pro forma adjustments are preliminary and are based upon available information and certain assumptions, as described in the accompanying notes to the unaudited pro forma combined financial information, that Horizon management believes are reasonable under the circumstances and which are described in the accompanying notes to the unaudited pro forma combined financial information. Actual results and valuations may differ materially from the assumptions within the accompanying unaudited pro forma combined financial information.

Under ASC 805, assets acquired and liabilities assumed are generally recorded at their acquisition date fair value. The fair value of identifiable tangible and intangible assets acquired and liabilities assumed from the Acquisition are based on a preliminary estimate of fair value as of December 31, 2014. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. Significant judgment is required in determining the estimated fair values of developed technology intangible assets and certain other assets and liabilities. Such a valuation requires estimates and assumptions including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. Horizon’s management believes the fair values recognized for the assets to be


acquired and the liabilities to be assumed are based on reasonable estimates and assumptions. After the closing of the Acquisition, we will complete the appraisals necessary to finalize the required purchase price allocation based upon the fair market values as of the actual closing date of the Acquisition, at which time the final allocation of the purchase price will be determined. The final purchase price allocation will be different than that reflected in the unaudited pro forma purchase price allocation, and those differences could be material.

The unaudited pro forma combined financial information has been prepared by Horizon management in accordance with SEC Regulation S-X Article 11 for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations that would have been realized had the transactions been completed as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that Horizon will experience after the Transactions are completed. In addition, the accompanying unaudited pro forma combined statement of operations do not include any pro forma adjustments to reflect expected cost savings or restructuring actions which may be achievable or the impact of any non-recurring activity and one-time transaction related costs.

Certain financial information of Hyperion and Vidara, as presented in their respective consolidated financial statements, has been reclassified to conform to the historical presentation in Horizon’s consolidated financial statements for purposes of preparation of the unaudited pro forma combined financial information. See Notes 4 and 5 for additional information on the reclassifications that were made to derive the “Historical Hyperion (after conforming reclassifications)” and “Historical Vidara (after conforming reclassifications)” columns in the unaudited pro forma combined financial statements.

The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the historical consolidated financial statements of Horizon included in its Annual Report on Form 10-K for the year ended December 31, 2014, the historical consolidated financial statements of the Hyperion included in its Annual Report on Form 10-K for the year ended December 31, 2014, and Vidara’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, all of which are incorporated by reference herein.

The pro forma financial information contained in this prospectus supplement is based upon certain assumptions with respect to our financing of the Acquisition. Whether the assumed financing sources are available and, if available, the terms of our future financings, will be subject to market conditions. The actual sources of financing and the terms on which it is obtained may not be as favorable as those reflected in the pro forma financial information. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting, as well as between the assumed and actual financing sources and terms, will occur and could have a material impact on the pro forma financial information and the combined company’s financial position and future results of operations.


Unaudited Pro Forma Combined Balance Sheet

As of December 31, 2014

(In thousands)

 

     Historical Horizon
Pharma plc
    Historical
Hyperion (after
conforming
reclassifications)
(see Note 4)
    Pro Forma
Adjustments
           Pro Forma
Combined
 

Assets

           

Current Assets:

           

Cash and cash equivalents

   $ 218,807      $ 102,796      $ (344,560     6(B)       $ 379,103   
         775,000        6(A)      
         387,328        6(C)      
         (1,071,938     6(D)      
         (38,800     6(E)      
         43,713        6(F)      
         (18,624     6(I)      
         325,381        6(H)      

Short-term investments

       34,487        (34,487     6(F)         —     

Restricted cash

     738               738   

Accounts receivables, net

     73,915        14,864             88,779   

Inventories, net

     16,865        4,621        11,806        6(G)         33,292   

Prepaid expenses and other current assets

     14,370        2,632        17,000        6(A)         34,674   
         672        6(C)      

Deferred tax asset

     1,530               1,530   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

$ 326,225    $ 159,400    $ 52,491    $ 538,116   

Long-term assets:

Long-term investments

  9,226      (9,226   6(F)      —     

Property, plant and equipment, net

  7,241      1,116      8,357   

Developed technology, net

  696,963      1,006,900      6(G)      1,703,863   

In process research and development

  66,000      66,000   

Other intangibles, net

  7,870      8,816      (8,816   6(G)      7,870   

Goodwill

  306,044      6(G)      306,044   

Deferred tax asset

  18,761      18,761   

Other assets

  11,564      1,858      (9,467   6(B)      3,955   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

$ 1,134,624    $ 180,416    $ 1,337,926    $ 2,652,966   
  

 

 

   

 

 

   

 

 

      

 

 

 

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

  21,011      4,669      25,680   

Accrued expenses

  46,625      13,287      59,912   

Accrued trade, discounts and rebates

  76,115      10,142      86,257   

Accrued royalties – current portion

  25,325      2,080      6,493      6(G)      33,898   

Deferred revenues - current portion

  1,261      224      1,485   

Notes payable - current portion

  48,334      48,334   

Deferred tax liabilities

  721      4,167      6(G)      4,888   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

$ 219,392    $ 30,402    $ 10,660    $ 260,454   

Long-Term liabilities:

Long-term debt, net

  297,169      18,124      (297,169   6(B)      1,060,920   
  792,000      6(A)   
  268,920      6(C)   
  (18,124   6(I)   

Accrued royalties, net of current

  48,887      75,707      6(G)      124,594   

Deferred revenues, net of current

  8,144      8,144   

Deferred tax liabilities, net

  19,570      289,181      6(G)      308,751   

Other long-term liabilities

  1,258      338      1,596   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Long-term liabilities

$ 375,028    $ 18,462    $ 1,110,515    $ 1,504,005   

Shareholders’ Equity

Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 124,425,853 shares issued and 124,041,487 shares outstanding at December 31, 2014; 136,425,853 shares issued and 136,041,487 shares outstanding at December 31,2014 pro forma

  13      2      (2   6(J)      13   

Treasury stock, 384,366 ordinary shares

  (4,585   (4,585

Additional paid-in capital

  1,269,858      260,225      119,080      6(C)      1,714,319   
  325,381      6(H)   
  (260,225   6(J)   

Accumulated other comprehensive loss

  (4,363   (50   50      6(J)      (4,363

Accumulated deficit

  (720,719   (128,625   128,625      6(J)      (816,877
  (96,158   6(K)   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total shareholders’ equity

$ 540,204    $ 131,552    $ 216,751    $ 888,507   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and shareholders’ equity

$ 1,134,624    $ 180,416    $ 1,337,926    $ 2,652,966   
  

 

 

   

 

 

   

 

 

      

 

 

 

See the accompanying notes to the unaudited pro forma combined financial information, which are an integral part of these pro forma financial statements.


Unaudited Pro Forma Combined Statement of Operations

For the Year December 31, 2014

(In thousands, except for share data)

 

    Historical Horizon
Plc
    Historical Vidara
(after conforming
reclassifications)
(see Note 5)
    Historical
Hyperion (after
conforming
reclassifications)
(see Note 4)
    Vidara Acquisition
Accounting
Adjustments
    Hyperion Acquisition
Accounting
Adjustments
    Pro Forma
Combined
 

Net sales

  $ 296,955      $ 50,565      $ 113,584              $ 461,104   

Cost of sales

    78,753        11,290        18,353        28,955        7 (A)      121,237        7 (I)      247,523   
          (11,065     7 (L)       
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Gross profit

$ 218,202    $ 39,275    $ 95,231    $ (17,890 $ (121,237 $ 213,581   

Operating Expenses:

Research and development

  17,460      2,799      20,715      (414   7 (M)    40,560   

Sales and marketing

  120,276      17,664      17,367      (8,600   7 (M)    146,707   

General and administrative

  88,957      8,253      31,155      (40,227   7 (C)    79,659   
  (5,102   7 (M) 
  (3,377   7 (B) 

Goodwill impairment

  30,201      30,201   

Depreciation and amortization

  487      (487   7 (E)    —     
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total operating expenses

$ 226,693    $ 29,203    $ 99,438    $ (58,207 $ —      $ 297,127   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating income (loss)

$ (8,491 $ 10,072    $ (4,207 $ 40,317    $ (121,237 $ (83,546
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

OTHER (EXPENSE) INCOME, NET:

Interest expense, net

  (23,826   (605   (1,046   (72,167   7 (F)    (98,199
  (555   7 (K) 

Loss on induced debt conversion and debt extinguishment

  (29,390   (29,390

Foreign exchange loss

  (3,905   11      (3,894

Loss on derivative fair value

  (214,995   (214,995

Other (expense) income, net

  (11,251   (298   (699   8,222      7 (D)    (4,026

Bargain purchase gain

  22,171      (22,171   7 (G)    —     
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total other expense, net

$ (261,196 $ (892 $ (1,745 $ (13,949 $ (72,722 $ (350,504
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

(Loss) income before income tax (benefit) expense

  (269,687   9,180      (5,952   26,368      (193,959   (434,050

INCOME TAX (BENEFIT) EXPENSE

  (6,084   881      303      (77   7 (H)    (73,704   7 (J)    (78,681
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

NET INCOME (LOSS)

$ (263,603 $ 8,299    $ (6,255 $ 26,445    $ (120,255 $ (355,369
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Weighted average shares

  83,751,129      95,751,129   

Basic & Diluted EPS

$ (3.15 $ (3.71

See the accompanying notes to the unaudited pro forma combined financial information, which are an integral part of these pro forma financial statements.


1. Description of transactions

The Acquisition: On March 29, 2015, Horizon Pharma, Inc. (“HPI”), a Delaware corporation and indirect wholly-owned subsidiary of Horizon Pharma plc, Ghrian Acquisition Inc., a Delaware corporation and a wholly owned subsidiary of HPI (“Purchaser”) and Hyperion entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which HPI, through Purchaser, has commenced an offer (the “Offer”) to acquire all of the outstanding shares of the Hyperion’s common stock, par value $0.0001 per share (the “Shares”), for $46.00 per share in cash, without interest, subject to any required withholding of taxes (the “Offer Price”).

The Company plans to pay for the Acquisition with its existing cash, which includes net proceeds from the completed offering of $400 million in aggregate principal amount of the Exchangeable Notes and the anticipated proceeds from this Offering and the Senior Secured Term Loans described below or other debt incurred in lieu thereof.

Exchangeable Notes. On March 13, 2015, Horizon Pharma Investment Limited, a wholly-owned subsidiary of Horizon Pharma plc, completed its private placement of $400 million aggregate principal amount of the Exchangeable Notes to several investment banks acting as initial purchasers who subsequently resold the Exchangeable Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act.

Senior Secured Term Loans: In connection with the Acquisition, on March 29, 2015, the Company entered into a commitment letter (the “Debt Commitment Letter”) with Citigroup Global Capital Markets Inc. (“Citi”) and Jefferies Finance LLC (“Jefferies”), pursuant to which Citi and Jefferies have committed to provide up to $900 million of senior secured term loans pursuant to a term loan facility, the proceeds of which, in addition to a portion of Horizon’s existing cash, would be used to (i) refinance the loans under Existing Credit Facility and certain outstanding debt of the Target (the “Refinancing”), (ii) pay the Offer Price, and (iii) pay any prepayment premiums, fees and expenses in connection with any of the foregoing. The commitment to provide the Senior Secured Term Loans is subject to certain conditions, including the negotiation of definitive documentation for the Senior Secured Term Loans and other customary closing conditions consistent with the Merger Agreement. HPI will pay customary fees and expenses in connection with obtaining the Debt Commitment Letter and the senior secured term loans and has agreed to indemnify the lenders if certain losses are incurred by the lenders in connection therewith. Proceeds the Company receives from the Offering will not reduce the total amount committed under the Debt Commitment Letter.

Merger: On September 19, 2014, the Company acquired Vidara for $601.4 million, comprised of $387.8 million market value of the 31,350,000 Horizon ordinary shares that were held by prior Vidara shareholders immediately following the closing of the Merger plus cash consideration of $213.6 million.

2. Basis of presentation

The historical consolidated financial information of the Company has been adjusted in the accompanying unaudited pro forma combined financial information to give effect to pro forma events that are (i) directly attributable to the Transactions, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined statements of operations, are expected to have a continuing impact on the results of operations.

The Acquisition will be accounted for as a business combination using the acquisition method of accounting under the provisions ASC 805. The unaudited pro forma combined financial information was prepared using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The adjustments to reflect the acquisition method of accounting are preliminary and are based upon available information and certain assumptions which management believes are reasonable under the circumstances.

The acquisition method of accounting uses the fair value concepts defined in ASC 820, “Fair Value Measurement,” (“ASC 820”) as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” This is an exit price concept for the valuation of an asset or liability. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.


Cash and cash equivalents, investments, and other tangible assets and liabilities: The carrying amounts of tangible assets and liabilities were assumed to approximate current fair value.

Inventories: Inventories acquired included raw materials and finished goods. Inventories are recorded at their current fair values. Fair value of finished goods has been determined based on the estimated selling price, net of selling costs and a margin on the selling costs. Fair value of raw materials has been estimated to equal the replacement cost.

Developed technology: Developed technology intangible assets reflect the estimated value of Hyperion’s rights to its currently marketed products. The fair value of developed technology was determined using an income approach. The income approach explicitly recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs for Hyperion’s product line. Indications of value are developed by discounting these benefits to their present worth at a discount rate that reflects the current return requirements of the market. The fair value of developed technology will be capitalized as of the acquisition date and subsequently amortized over the 8 years, which is the period in which over 90% of the estimated cash flows are expected to be realized.

Goodwill: Goodwill represents the excess of the preliminary acquisition consideration over the estimated fair values of net assets acquired.

Deferred tax assets and liabilities: Deferred tax assets and liabilities arise from acquisition accounting adjustments where book values of certain assets and liabilities differ from their tax bases. Deferred tax assets and liabilities are recorded at the currently enacted rates which will be in effect at the time when the temporary differences are expected to reverse in the country where the underlying assets and liabilities are located. Hyperion’s developed technology as of the acquisition date was located in the United States where a U.S. tax rate of 38% is being utilized and a deferred tax liability is recorded. Upon consummation of the Acquisition, Hyperion will be a member of the Company’s U.S. tax consolidation group. As such, its tax assets and liabilities need to be considered in determining the appropriate amount (if any) of valuation allowance that should be recognized in assessing the realizability of the group’s deferred tax assets. The Hyperion acquisition adjustments resulted in the recording of significant net deferred tax liabilities. Per ASC 740-10-130-18, future reversals of existing taxable temporary differences must be considered in determining the amount of valuation allowance to record. As of year end, the Company has a significant valuation allowance which must be reduced to reflect the addition of Hyperion’s deferred tax liabilities that will provide taxable temporary differences that will be realized within the carryforward period of the group’s available net operating losses and other deferred tax assets. Accordingly, the result will be to recognize the release of the existing Company’s U.S. valuation allowance.

Pre-existing contingencies: The Company has identified a contingent liability potentially payable under previously existing royalty and licensing agreements. The initial fair value of this liability was determined using a discounted cash flow analysis incorporating the estimated future cash flows of royalty payments based on future sales. The liability will be periodically assessed based on events and circumstances related to the underlying milestones, and any change will be recorded in the Company’s consolidated statement of operations.

The preliminary determination of the fair value of the acquired net assets, assuming the Acquisition had closed on December 31, 2014, is as follows (in thousands, except share and per share data):

 

Fully diluted equity value (24,369,000 shares at $46 per share)

$  1,120,974   

Proceeds from exercise of stock options, restricted stock and performance stock units (3.12 million stock options at a weighted average exercise price of $15.75 per share)

  (49,036
  

 

 

 

Consideration paid

$ 1,071,938   

Book value of assets acquired and liabilities assumed (excluding historical intangible assets of $8,816)

  122,736   

Step up adjustments:

Inventory step-up

  11,806   

Developed technology

  1,006,900   

Accrued royalties, current position

  (6,493

Accrued royalties, net of current

  (75,707

Short-term deferred tax liability

  4,167   

Long-term deferred tax liability

  (289,181

Goodwill

  306,044   
  

 

 

 
$ 1,071,938   


3. Accounting policies

Following the Acquisition, the Company will conduct a review of accounting policies of Hyperion in an effort to determine if differences in accounting policies require restatement or reclassification of results of operations or reclassification of assets or liabilities to conform to the Company’s accounting policies and classifications. As a result of that review, the Company may identify differences among the accounting policies of the Company and Hyperion that, when conformed, could have a material impact on this unaudited pro forma combined financial information. During the preparation of this unaudited pro forma combined financial information, the Company was not aware of any material differences between accounting policies of the Company and Hyperion, except for certain reclassifications necessary to conform to the Company’s financial presentation, and accordingly, this unaudited pro forma combined financial information does not assume any material differences in accounting policies among the Company and Hyperion.

4. Historical Hyperion

Financial information of Hyperion in the “Historical Hyperion (after conforming reclassifications)” column in the unaudited pro forma combined balance sheet represents the historical consolidated balance sheet of Hyperion as of December 31, 2014. Financial information presented in the “Historical Hyperion (after conforming reclassifications)” column in the unaudited pro forma combined statement of operations represents the historical consolidated statement of earnings of Hyperion for the year ended December 31, 2014, which includes the operations from Andromeda Biotech Ltd. (“Andromeda”) since June 12, 2014, the date of acquisition. The Company does not believe that the operating results for Andromeda prior to its acquisition by Hyperion on June 12, 2014 are material to the combined entity and as such have not been included in the unaudited pro forma combined statement of operations. Such financial information has been reclassified or classified to conform to the historical presentation in the Company’s consolidated financial statements as set forth below. Unless otherwise indicated, defined line items included in the footnotes have the meanings given to them in the historical financial statements of Hyperion.


Reclassifications in Hyperion’s unaudited pro forma combined balance sheet for the year ended December 31, 2014 are as follows (in thousands, except share data):

 

     Historical Hyperion
(before conforming
reclassifications)
     Reclassifications            Historical
Hyperion (after
conforming
reclassifications)
 

Assets

          

Current assets:

          

Cash and cash equivalents

   $ 102,796            $ 102,796   

Short-term investments

     34,487              34,487   

Accounts receivables, net

     14,864              14,864   

Inventories, net

     4,621              4,621   

Prepaid expenses and other current assets

     2,632              2,632   
  

 

 

    

 

 

      

 

 

 

Total current assets

$ 159,400    $ —      $ 159,400   

Long-term assets:

Long-term investments

  9,226      9,226   

Property, plant and equipment, net

  1,116      1,116   

Other intangibles, net

  8,816      8,816   

Other assets

  1,858      1,858   
  

 

 

    

 

 

      

 

 

 

Total assets

$ 180,416    $ —      $ 180,416   
  

 

 

    

 

 

      

 

 

 

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

  4,669      4,669   

Accrued expenses

  25,509      (12,222   4 (A)    13,287   

Accrued trade, discounts and rebates

  10,142      4 (A)    10,142   

Accrued royalties-current portion

  2,080      4 (A)    2,080   

Deferred revenues – current portion

  224      224   
  

 

 

    

 

 

      

 

 

 

Total current liabilities

$ 30,402    $ —      $ 30,402   

Long-term liabilities:

Long-term debt, net

  18,124      18,124   

Deferred rent

  338      (338   4 (B)    —     

Other long-term liabilities

  338      4 (B)    338   
  

 

 

    

 

 

      

 

 

 

Total long-term liabilities

$ 18,462    $ —      $ 18,462   

Stockholders’ equity:

Common stock, par value $0.0001 – 100,000,000 shares authorized at December 31, 2014; 20,747,013 shares issued and outstanding at December 31, 2014

  2      2   

Additional paid-in capital

  260,225      260,225   

Accumulated other comprehensive loss

  (50   (50

Accumulated deficit

  (128,625   (128,625
  

 

 

    

 

 

      

 

 

 

Total stockholders’ equity

$ 131,552    $ —      $ 131,552   
  

 

 

    

 

 

      

 

 

 

Total liabilities and stockholders’ equity

$ 180,416    $ —      $ 180,416   
  

 

 

    

 

 

      

 

 

 

 

(A) Accrued trade, discounts and rebates of $10,142 and accrued royalties of $2,080 have been reclassified out of accrued expenses and into separate financial statement line items to conform to the Company’s presentation.
(B) Represents the reclassification of $338 from deferred rent to other long-term liabilities to conform to the Company’s presentation.


Reclassifications in Hyperion’s unaudited pro forma combined statement of operations for the year ended December 31, 2014 are as follows (in thousands):

 

     Historical Hyperion
(before conforming
reclassifications)
     Reclassifications            Historical Hyperion
(after conforming
reclassifications)
 

Net sales

   $ 113,584       $ —           $ 113,584   

Cost of sales

     13,727         4,626         4 (C)      18,353   
  

 

 

    

 

 

      

 

 

 

Gross profit

$ 99,857    $ (4,626 $ 95,231   

Operating Expenses:

Research and development

  20,715      20,715   

Sales and marketing

  17,367      4 (D)    17,367   

General and administrative

  31,155      4 (D)    31,155   

Goodwill impairment

  30,201      30,201   

Depreciation and amortization

  4,626      (4,626   4 (C)    —     

Selling general and administrative

  48,522      (48,522   4 (D)    —     
  

 

 

    

 

 

      

 

 

 

Total operating expenses

$ 104,064    $ (4,626 $ 99,438   
  

 

 

    

 

 

      

 

 

 

Operating income (loss)

$ (4,207 $ —      $ (4,207
  

 

 

    

 

 

      

 

 

 

Other (Expense) Income, Net:

Interest expense, net

  (1,601   555      4 (E)    (1,046

Interest income

  555      (555   4 (E)    —     

Other (expense) income, net

  (699   (699
  

 

 

    

 

 

      

 

 

 

Total other expense, net

$ (1,745 $ —      $ (1,745
  

 

 

    

 

 

      

 

 

 

Loss before income tax expense

  (5,952   (5,952

Income Tax Expense

  303      303   
  

 

 

    

 

 

      

 

 

 

Net Loss

$ (6,255 $ —      $ (6,255
  

 

 

    

 

 

      

 

 

 

 

(C) Intangible amortization expense of $4,626 in Hyperion’s historical statement of operations has been reclassified to cost of sales to conform to the Company’s presentation.
(D) Selling, general and administrative expenses in Hyperion’s historical statement of earnings included $17,367 of sales and marketing expenses and $31,155 of general and administrative expenses that has been reclassified to conform to the Company’s presentation.
(E) Interest income of $555 in Hyperion’s’ historical statement of operations has been reclassified to interest expense, net to conform to the Company’s presentation.

5. Historical Vidara

Financial information presented in the “Historical Vidara (after conforming reclassifications)” column in the unaudited pro forma combined statement of operations for the year ended December 31, 2014 represents Vidara results of operations as a stand-alone entity for the period from January 1, 2014 to September 18, 2014, which were derived from its unaudited combined financial statements included in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 and the stub period from July 1, 2014 to September 18, 2014. Financial information of Vidara subsequent to September 18, 2014 is included in the statement of operations of the Company for the year ended December 31, 2014.

Reclassifications and classifications in Vidara’s unaudited pro forma combined statement of operations for the year ended December 31, 2014 are as follows (in thousands):

 

     Historical Vidara
(for the six
months ended
June 30, 2014)
    Historical
Vidara Stub
Period (July 1,

2014 to
September 18,
2014)
    Historical
Vidara (January 1,
2014 to
September 18,
2014)
    Reclassifications           Historical Vidara
(after conforming
reclassifications)
 

Net sales

   $ 35,746      $ 14,819      $ 50,565      $ —          $ 50,565   

Cost of sales

     1,660        630        2,290        2,497        5 (A)      11,290   
           6,503        5 (B)   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Gross profit

$ 34,086    $ 14,189    $ 48,275    $ (9,000 $ 39,275   

Operating Expenses:

Research and development

  2,799      5 (C)    2,799   

Sales and marketing

  17,664      5 (D)    17,664   

General and administrative

  6,134      4,760      10,894      (2,799   5 (C)    8,253   
  158      5 (E) 

Selling expenses

  3,792      13,872      17,664      (17,664   5 (D)    —     

Depreciation and amortization

  2,272      870      3,142      (2,497   5 (A)    487   
  (158   5 (E) 

Royalty expense

  4,935      1,568      6,503      (6,503   5 (B)    —     
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

$ 17,133    $ 21,070    $ 38,203    $ (9,000 $ 29,203   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating income (loss)

$ 16,953    $ (6,881 $ 10,072    $ —      $ 10,072   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Other (Expense) Income, Net:

Interest expense, net

  (516   (89   (605   (605

Foreign exchange gain

  11      11      11   

Other (expense) income

  (22   (276   (298   (298
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total other expense, net

$ (538 $ (354 $ (892 $ —      $ (892
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income tax (benefit) expense

  16,415      (7,235   9,180      9,180   

Income Tax (Benefit) Expense

  724      157      881      881   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net Income (Loss)

$ 15,691    $ (7,392 $ 8,299    $ —      $ 8,299   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

 

(A) Intangible amortization expense of $2,497 in Vidara’s historical statement of operations has been reclassified to cost of sales to conform to the Company’s presentation.


(B) Royalty expense of $6,503 in Vidara’s historical statement of operations has been reclassified from operating expenses to cost of sales to conform to the Company’s presentation.
(C) Represents $2,799 of general and administrative expenses in Vidara’s historical statement of operations that has been reclassified to research and development expenses to conform to Horizon’s presentation.
(D) Represents $17,664 of selling expenses in Vidara’s historical statement of operations that has been reclassified to sales and marketing to conform to the Company’s presentation
(E) Depreciation expense of $158 in Vidara’s historical statement of operations has been reclassified to general and administrative expense to conform to the Company’s presentation.

6. Unaudited Pro Forma Combined Balance Sheet Adjustments

 

A. Assumes that the Company will incur $800 million principal amount of debt in the form of the Senior Secured Term Loans (the terms of which are based on those set forth in Debt Commitment Letter), the proceeds of which would be used, in addition to a portion of the Company’s existing cash and a portion of the proceeds of the Offering, to repay the outstanding term loans under the Existing Credit Facility (see Note 6(B)) and certain existing debt of Hyperion, fund a portion of the Offer Price and pay any prepayment premium, fees and expenses in connection with the foregoing. Financing fees associated with the Senior Secured Term Loans are estimated to be $17 million.

For the Senior Secured Term Loans, the following adjustments are included:

 

Debt

$ 800,000   

Original Issue Discount (“OID”)

$ (8,000
  

 

 

 

Debt, net of OID

$ 792,000   

Deferred financing fees

$ (17,000
  

 

 

 

Cash proceeds

$ 775,000   

 

B. For the extinguishment of the $300 million principal amount of term loans under the Existing Credit Facility, the following adjustments are included:

 

Liability net of OID

$ 297,169   

OID (See Note 6(K))

$ 2,831   
  

 

 

 

Existing Credit Facility

$ 300,000   

Penalty for early payment (See Note 6(K))

$ 44,560   
  

 

 

 

Cash payment

$ 344,560   

Write-off of deferred financing fees (See Note 6(K))

$ 9,467   

As disclosed elsewhere, in lieu of borrowing the committed amounts under the Debt Commitment Letter and subsequent to the Offering, the Company may borrow up to an aggregate of $800 million pursuant to an offering of senior notes and the arrangement of term loans, the terms of which may deviate from those included in the Debt Commitment Letter.

 

C. Reflects the $400 million aggregate principal amount of Exchangeable Notes issued in March 2015 for general corporate purposes, including financing new acquisitions, which includes the following adjustments (in thousands):

 

Exchangeable Notes

$ 400,000   

OID (contra debt account)

$ (131,080
  

 

 

 

Long –term debt, net

$ 268,920   

APIC (conversion feature)

$ 119,080   

Deferred financing fees

$ (672
  

 

 

 

Cash proceeds

$ 387,328   


The foregoing adjustments reflect the application of ASC 470-20, “Debt with Conversion and Other Options, Cash Conversion”, which requires issuers to separately account for the debt and equity components of certain types of convertible debt instruments.

 

D. Represents the cash consideration to be paid for the Acquisition of $1,121 million, net of $49 million of cash proceeds related to the assumed exercise of Hyperion stock options (see Note 6(G)).

 

E. Represents the cash to be paid for the following estimated transaction fees associated with the Acquisition (in thousands):

 

Horizon advisory expenses

$  17,200   

Hyperion advisory expenses

$ 17,600   

Horizon and Hyperion legal expenses

$ 4,000   
  

 

 

 

(See Note 6(K))

$ 38,800   
  

 

 

 

 

F. Represents the liquidation of the short-term and long-term investments and conversion into cash to fund a portion of the Acquisition, payoff Hyperion’s existing debt and the net settlement of Hyperion stock options, restricted stock units and performance stock units.

 

G. Reflects the preliminary purchase price adjustments for the Acquisition based upon the following preliminary purchase price allocation (in thousands, except share and per share data):

 

Fully diluted equity value (24,369,000 shares at $46.00 per share)

$  1,120,974   

Proceeds from exercise of stock options, restricted stock and performance stock units (3.12 million stock options at a weighted average exercise price of $15.75 per share)

  (49,036
  

 

 

 

Consideration paid

$ 1,071,938   

Book value of assets acquired and liabilities assumed (excluding historical intangible assets of $8,816)

  122,736   

Step up adjustments:

Inventory step-up

  11,806   

Developed technology

  1,006,900   

Accrued royalties, current

  (6,493

Accrued royalties, net of current

  (75,707

Short-term deferred tax liability

  4,167   

Long-term deferred tax liability

  (289,181

Goodwill

  306,044   
  

 

 

 
$ 1,071,938   

 

H. Represents the estimated net proceeds of $325.4 million from the Offering (in thousands, except share data):

 

Number of ordinary shares

  12,000,000   

Offer price per share (as of 4/10/15)

$ 28.48   

Gross proceeds

$ 341,760   

Underwriter fees (4.5%)

$ (15,379

Other estimated expenses

$ (1,000
  

 

 

 

Net proceeds

$ 325,381   
  

 

 

 

A $1.00 increase (decrease) in the assumed public offering price of $28.48 per share would increase (decrease) the net proceeds to the Company from the Offering by approximately $11.5 million, assuming that the number of shares offered by the Company, as set forth on the cover page of this prospectus supplement, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by the Company.


Pro forma earnings per share gives effect to the issuance of 12 million ordinary shares from the Offering and the adjustments to the unaudited pro forma combined statement of operations described in Note 7.

 

I. Represents the cash used to retire the existing Hyperion debt of $18.1 million and $0.5 million (see Note 6(K)) of penalties for early payment.

 

J. Represents the elimination of Hyperion’s stockholders’ equity.

 

K. Represent the elimination of estimated future Acquisition costs and penalties for early payment of debts as follows (in thousands):

 

Estimated future Acquisition costs (See Note 6(E))

$  38,800   

Penalty for early payment of Existing Credit Facility (See Note 6(B))

$ 44,560   

Write-off of deferred financing fees for Existing Credit Facility (See Note 6(B))

$ 9,467   

OID of Existing Credit Facility (See Note 6(B))

$ 2,831   

Penalty fees for Hyperion Debt (See Note 6(I))

$ 500   
  

 

 

 
$ 96,158   
  

 

 

 

7. Unaudited Pro Forma Combined Statement of Operations

 

A. Reflects the amortization expense related to the fair value of identifiable intangible assets recognized related to the Merger, as follows (in thousands):

 

Type of Intangible

   Fair Value
Adjustment
     Useful Lives
(Years)
     For the Period
Ending
9/18/2014
 

Customer Relationship

   $ 8,100         10       $ 580   

Developed Technology

   $ 560,000         13       $ 30,872   
  

 

 

    

 

 

    

 

 

 
$ 568,100    $ 31,452   

Historical Amortization expense

  

$ (2,497
        

 

 

 

Increase to pro forma amortization expense

  

$ 28,955   
        

 

 

 

 

B. Reflects the elimination of Vidara transaction costs related to the Merger of $3.4 million. The impact of transaction costs already incurred has not been reflected in the unaudited pro forma combined statement of operations since these costs are expected to be nonrecurring in nature. These charges include financial advisory fees, legal, accounting, other professional fees incurred by Vidara directly related to the Merger.

 

C. Reflects the elimination of the Company’s transaction costs related to the Merger of $40.2 million. The impact of transaction costs already incurred has not been reflected in the unaudited pro forma combined statement of operations since these costs are expected to be nonrecurring in nature. These charges include financial advisory fees, legal, accounting, other professional fees incurred by the Company directly related to the Merger.

 

D. Reflects the $5.0 million of commitment fees incurred on a bridge loan commitment prior to executing the Existing Credit Facility and $3.2 million of commitment fees incurred on the Existing Credit Facility prior to its funding on September 19, 2014. The impact of these fees is not included in the unaudited pro forma combined statement of operations since this cost is expected to be nonrecurring in nature.

 

E. The pro forma adjustment reflects the elimination of $487 related to historical Vidara amortization of deferred financing fees.


F. This pro forma adjustment reflects the interest expense, amortization of OID and deferred financing fees on (a) $400 million principal amount of 2.5% Exchangeable Notes issued in March 2015 and (b) $800 million principal amount of Senior Secured Term Loans assumed to have been entered into to finance in part the Acquisition. The adjustment also reflects the elimination of any historical interest expense for debt that will be extinguished as part of the Acquisition (in thousands):

 

Description of Debt

   Principal
Amount
     Interest
Rate
    Interest
Payment
     Amortization of
OID
     Amortization
of Deferred
Financing
Fees
     Interest
Expense
 

Exchangeable Notes

   $ 400,000         2.50   $ 10,000       $ 17,477       $ 90       $ 27,567   

Senior Secured Term Loan

   $ 800,000         6.375   $ 51,000       $ 1,334       $ 2,833         55,167   
       

 

 

    

 

 

    

 

 

    

 

 

 

New interest expense

$ 61,000    $ 18,811    $ 2,923    $ 82,734   

Less historical interest expense of Existing Credit Facility to be prepaid

  

$ (8,460

Less historical Vidara interest expense

  

  (506

Less historical Hyperion interest expense

  

  (1,601
                

 

 

 

Increase to pro forma interest expense

  

$ 72,167   
                

 

 

 

Based on the Debt Commitment Letter, the interest rate on the Senior Secured Term Loans is assumed to be equal to the LIBOR rate, plus an applicable margin of 5.375% per annum (subject to a 1.00% LIBOR floor). This adjustment also includes the amortization of OID and deferred financing costs. Deferred financing costs include bank fees, financial advisory, legal, and other professional fees. These costs are deferred and recognized over the six-year term of the debt agreement using the straight-line method.

The interest rate used for purposes of preparing the accompanying unaudited pro forma combined statement of operations was 6.375%, which was derived by utilizing the 5.375% per annum applicable margin plus the 1.00% LIBOR floor rate. This rate may be considerably different from the actual interest rates incurred based fluctuations in the LIBOR rate.

In lieu of borrowing the committed amounts under the Debt Commitment Letter and subsequent to the Offering, the Company may borrow up to an aggregate of $800 million pursuant to an offering of senior notes and the arrangement of term loans, the terms of which may deviate from those included in the Debt Commitment Letter. As a result, actual interest rates on the Company’s debt may be considerably different. If the interest rate on the Company’s $800 million debt were to increase or decrease by 0.125%, the Company’s annual pro forma interest expense would increase or decrease by $1.0 million.

 

G. Reflects the elimination of the bargain purchase gain recorded as part of the Merger.

 

H. Represents the income tax benefit associated with the nonrecurring charges associated with the Merger removed from the pro forma statement of operations, using a combined federal and state statutory tax rate of 0%. The tax effect of the transaction related costs in the transition period was a blended rate of 0% due to the non-deductibility of certain costs. The tax effect of the incremental amortization expense of Vidara’s customer-related intangible assets and the amortization of the developed technology step up to estimated fair value was based on a blended statutory tax rate of approximately 1% based on jurisdictions where these assets reside. The Company has assumed a 0% tax rate when estimating the tax impacts of the additional expense on incremental debt to finance the Merger because the debt is an obligation of a U.S. entity and taxed at the estimated combined effective U.S. federal statutory and state rate; however, the entity has a full valuation allowance. The Company has assumed a 1.5% tax rate expense when estimating the tax impacts on the intercompany debt obligation due to Horizon Pharma Finance S.a.r.L from Horizon Pharma Holdings USA, Inc. The Company has assumed that any intercompany interest expense which is nondeductible under Code Section 163(j) would be a timing matter and would be deductible in future years based on future earnings.

 

I. Reflects amortization expense adjustments related to the fair value of identifiable intangible assets recognized related to the Acquisition, as follows (in thousands):

 

Type of Intangible

   Fair Value
Adjustment
     Useful
Lives
(Years)
     For the Year
Ending 12/31/2014
 

Developed technology

   $ 1,006,900         8       $ 125,863   
  

 

 

       

 

 

 

Historical Hyperion amortization expense

$ (4,626
        

 

 

 

Increase to pro forma amortization expense

$ 121,237   
        

 

 

 

 

J. Represents the income tax benefit associated with the non-recurring charges removed from the pro forma statement of income related to the Hyperion acquisition, using a combined federal and state statutory tax rate of 38%.


K. Reflects the elimination of Hyperion interest income as all short-term and long-term investments will be converted into cash and will be used to fund the a portion of the Acquisition, all of Hyperion’s existing debt will be repaid and Hyperion stock options, restricted stock units and performance stock units will be net settled.

 

L. Reflects the elimination of the $11.1 million charge to recognize additional cost of goods sold attributable to the stepped-up market value of Vidara inventory.

 

M. Represents a total of $14.1 million in option cancellation payments, one-time bonuses and severance payments incurred as a result of the Merger.