Exhibit 99.1

 

Horizon Pharma plc Announces Exceptional Third-Quarter 2015 Financial Results and

Significantly Raises Full-Year 2015 Sales and Adjusted EBITDA Guidance

— Net Sales of $226.5 Million, Up 202 Percent —

— Adjusted EBITDA of $131.1 Million; GAAP Net Income of $3.3 Million —

— Adjusted Operating Cash Flow of $100.8 Million; GAAP Operating Cash Flow of $88.4 Million —

—$684.3 Million of Cash; Net Debt/LTM Adjusted EBITDA Leverage Ratio of 2.1x—

— Raises Full-Year 2015 Net Sales Guidance to $750 to $760 Million —

— Raises Full-Year Adjusted EBITDA Guidance to $350 to $360 Million —

DUBLIN, IRELAND – November 6, 2015 – Horizon Pharma plc (NASDAQ: HZNP), a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs, announced its third-quarter 2015 financial results today.

Quarterly Financial Highlights

 

(in millions except for per share amounts and percentages)		Q3 15				Q3 14				% Change				9M 15				9M 14				% Change
Net sales		$	226.5			$	75.1				202			$	512.5			$	193.1				165
Net income (loss)			3.3				2.1				57				15.5				(232.0	)			NM
Adjusted non-GAAP net income			117.0				19.4				503				203.4				46.2				340
Adjusted EBITDA			131.1				22.1				493				239.7				52.3				358
Earnings (loss) per share—basic		$	0.02			$	0.03				-33			$	0.11			$	(3.17	)			NM
Adjusted non-GAAP earnings per share—basic			0.74				0.25				196				1.40				0.63				122
Earnings (loss) per share—diluted			0.02				0.02				—				0.10				(3.17	)			NM
Adjusted non-GAAP earnings per share—diluted			0.70				0.19				268				1.32				0.48				175

“Our business fundamentals have never been better, we significantly exceeded expectations on net sales, adjusted EBITDA and adjusted diluted earnings per share and our cash flow generation continues to be very strong,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. “As a result, we are significantly raising our full-year 2015 net sales and adjusted EBITDA guidance. Additionally, our Phase 3 trial for ACTIMMUNE in Friedreich’s ataxia is more than 30 percent enrolled, on track to complete enrollment in the second quarter of 2016 and we continue to expect results by the end of 2016.”

Horizon Pharma Increases 2015 Full-Year Guidance

 

		Prior Guidance				New Guidance
Net sales		$	660 to $680 million			$	750 to $760 million
Adjusted EBITDA		$	265 to $280 million			$	350 to $360 million

 

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Third-Quarter and Nine-Month 2015 Net Sales Results

 

(in millions except for percentages)		Q3 15				Q3 14				% Change				9M 15				9M 14				% Change
Primary Care		$	147.6			$	66.0				124			$	341.2			$	174.1				96
DUEXIS®			56.9				22.8				150				130.0				54.5				139
VIMOVO®			46.8				43.2				8				119.6				119.6				0
PENNSAID® 2% (1)			43.9				—				NM				91.6				—				NM
Orphan			66.1				2.7				2343				139.6				2.7				NM
ACTIMMUNE® (2)			28.7				2.7				962				79.4				2.7				NM
RAVICTI® (3)			33.4				—				NM				52.4				—				NM
BUPHENYL® (3)			4.0				—				NM				7.8				—				NM
Specialty			12.8				6.4				98				31.7				16.3				94
RAYOS®			11.7				5.7				106				29.2				12.9				126
LODOTRA®			1.1				0.7				36				2.5				3.4				-27
Total net sales		$	226.5			$	75.1				202			$	512.5			$	193.1				165

 

(1)	PENNSAID 2% was acquired on October 17, 2014. (2) ACTIMMUNE was acquired on September 19, 2014. (3) RAVICTI and BUPHENYL were acquired on May 7, 2015.

 

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Third-quarter 2015 net sales of $226.5 million increased 202 percent compared to the third quarter of 2014 and 31 percent sequentially compared to the second quarter of 2015. This was driven by strong growth in each of Horizon’s business units: primary care, orphan and specialty, as well as the addition of new medicines to the orphan and primary care business units.

 

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Orphan Business Unit: ACTIMMUNE sales of $28.7 million increased 11 percent sequentially compared to the second quarter of 2015. RAVICTI and BUPHENYL sales in the third quarter were $33.4 million and $4.0 million, respectively. The European Medicines Agency (EMA) adopted a positive opinion in September recommending a centralized marketing authorization for RAVICTI for use as an adjunctive therapy for Urea Cycle Disorders (UCDs). Horizon expects European approval for RAVICTI by the end of 2015 with the commercial launch expected in 2017. The orphan commercial organization continues to drive awareness of ACTIMMUNE and RAVICTI with both patients and physicians, and new patients continue to be steadily added to each medicine. In addition, enrollment in the STEADFAST Phase 3 trial for ACTIMMUNE in Friedreich’s ataxia is more than 30 percent completed, and trial results are expected by the end of 2016.

 

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Primary Care Business Unit: DUEXIS sales of $56.9 million increased 150 percent compared to the third quarter of 2014 and 29 percent sequentially compared to the second quarter of 2015. VIMOVO sales of $46.8 million increased 8 percent compared to the third quarter of 2014 and 18 percent sequentially compared to the second quarter of 2015. PENNSAID 2% sales of $43.9 million increased 49 percent sequentially compared to second quarter 2015. Total prescriptions for the primary care business unit increased double digits sequentially compared to the second quarter of 2015, driven by differentiated clinical benefits and strong sales and marketing execution.

 

•

Specialty Business Unit: RAYOS sales of $11.7 million increased 106 percent compared to the third quarter of 2014 and 13 percent sequentially compared to the second quarter of 2015, as total prescriptions continue to accelerate. LODOTRA sales of $1.1 million increased 36 percent compared to the third quarter of 2014.

Third-Quarter 2015 Financial Results

Note: For additional detail and reconciliation of these non-GAAP amounts to the most directly comparable GAAP financial measures, please refer to the detailed tables at the end of this release.

 

		Q3 2015												Q3 2014
(in millions, except per share amounts)		U.S. GAAP				Adjustments				Non-GAAP				U.S. GAAP				Adjustments				Non-GAAP
Net sales		$	226.5			$	—			$	226.5			$	75.1			$	—			$	75.1
Gross profit			165.3				43.4				208.7				61.5				4.3				65.8
Research and development			13.1				(4.2	)			8.9				4.2				(0.4	)			3.8
Sales and marketing			52.0				(7.2	)			44.8				31.1				(1.7	)			29.4
General and administrative			54.5				(31.2	)			23.3				38.1				(30.6	)			7.5
Total operating expenses			119.6				(42.6	)			77.0				73.4				(32.7	)			40.7
Interest expense, net			20.3				(5.5	)			14.8				5.2				(2.4	)			2.8
Bargain purchase gain			—				—				—				22.2				(22.2	)			—
Other expense, net			0.1				—				0.1				3.2				(3.2	)			—
Expense (benefit) for income taxes			22.0				(22.2	)			(0.2	)			(3.0	)			3.0				—
Net income			3.3				113.7				117.0				2.1				17.3				19.4
EBITDA (1)			99.0				32.1				131.1				15.1				7.0				22.1
Earnings per share—basic		$	0.02			$	0.72			$	0.74			$	0.03			$	0.22			$	0.25
Earnings per share—diluted		$	0.02			$	0.68			$	0.70			$	0.02			$	0.17			$	0.19

 

(1)	EBITDA is a non-GAAP measure.

 

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Under U.S. generally accepted accounting principles (GAAP) in the third quarter of 2015, the gross profit ratio was 73.0 percent compared to 81.8 percent in the third quarter of 2014. The adjusted gross profit ratio in the third quarter of 2015 was 92.1 percent compared to 87.6 percent in the third quarter of 2014.

 

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On a GAAP basis in the third quarter of 2015, total operating expenses were 52.8 percent of sales, research & development (R&D) expenses were 5.8 percent of sales, sales & marketing (S&M) expenses were 22.9 percent of sales and general & administration (G&A) expenses were 24.1 percent of sales. Adjusted total operating expenses in the third quarter of 2015 were 34.0 percent of sales, adjusted R&D expenses were 3.9 percent of sales, adjusted S&M expenses were 19.8 percent of sales and adjusted G&A expenses were 10.3 percent of sales. S&M expenses are expected to increase in the fourth quarter as the company further expands its sales and marketing efforts to support continued strong growth.

 

•

On a GAAP basis in the third quarter of 2015, net income was $3.3 million compared to $2.1 million in the third quarter of 2014. Adjusted net income in the third quarter of 2015 was $117.0 million, or 51.7 percent of sales, compared to $19.4 million, or 25.8 percent of sales, in the third quarter of 2014.

 

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On an unadjusted basis in the third quarter of 2015, EBITDA was $99.0 million. Adjusted EBITDA in the third quarter of 2015 was $131.1 million, or 57.9 percent of sales, compared to $22.1 million, or 29.4 percent of sales, in the third quarter of 2014.

 

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On a GAAP basis in the third quarter of both 2015 and 2014, diluted earnings per share were $0.02. Adjusted diluted earnings per share in the third quarter of 2015 were $0.70, representing growth of 268 percent compared to the third quarter of 2014 diluted earnings per share of $0.19. Weighted average shares outstanding used for calculating earnings per share in the third quarter of 2015 were 159.0 million and 166.8 million for basic and diluted earnings per share, respectively.

Cash Flow Statement and Balance Sheet Highlights

 

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On a GAAP basis in the third quarter of 2015, operating cash flow was $88.4 million. Adjusted operating cash flow in the third quarter of 2015 was $100.8 million, which excludes cash payments for transaction-related costs.

 

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The company had cash and cash equivalents of $684.3 million as of September 30, 2015, an increase of $17.2 million from June 30, 2015. This increase in the cash balance is significantly less than the cash flow from operations during the third quarter primarily due to $71.8 million used to acquire shares of Depomed, Inc. during the quarter.

 

•

Total principal amount of debt outstanding was $1.274 billion as of September 30, 2015, which is comprised of $475 million in 6.625 percent senior notes due 2023, $399 million in senior secured term loans due 2021, and $400 million of 2.5 percent exchangeable senior notes due 2022.

 

•

As of September 30, 2015, the company had a total debt to last 12 months (LTM) adjusted EBITDA leverage ratio of 4.6x and a net debt to LTM adjusted EBITDA leverage ratio of 2.1x.

 

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Conference Call

At 8 a.m. EST / 1 p.m. IST today, the Company will host a live conference call and webcast to review its financial and operating results and provide a general business update.

U.S. Dial-In Number: +1 888.338.8373

International Dial-In Number: +1 973.872.3000

Passcode: 62744788

The live webcast and a replay may be accessed by visiting Horizon’s website at http://ir.horizon-pharma.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 conference call will be available approximately two hours after the call and accessible through one of the following telephone numbers, using the passcode below:

Replay U.S. Dial-In Number: +1 855.859.2056

Replay International Dial-In Number: +1 404.537.3406

Passcode: 62744788

About Horizon Pharma plc

Horizon Pharma plc is a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. The Company markets seven medicines through its orphan, primary care and specialty business units. Horizon’s global headquarters are in Dublin, Ireland. For more information, please visit www.horizonpharma.com. Follow @HZNPplc on Twitter or view careers on our LinkedIn page.

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 adjusted net income, adjusted net income per share, adjusted gross profit and gross profit ratio, adjusted operating and other expenses and adjusted cash from operations, each of which include adjustments to GAAP figures. Adjustments to Horizon’s GAAP figures as well as EBITDA exclude acquisition transaction related expenses, loss on debt extinguishment, as well as non-cash items such as share-based compensation, depreciation and amortization, royalty accretion, non-cash interest expense, 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 believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon’s financial 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 2015 financial results and trends. 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. 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

 

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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 reconciliation of an expected adjusted EBITDA outlook to an expected net income (loss) outlook because certain items that are a component of net income (loss) cannot be reasonably projected, either due to the significant impact of changes in Horizon’s stock price on share-based compensation, the variability associated with acquisition-related expenses due to timing and other factors.

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s expected full-year 2015 net sales and adjusted EBITDA guidance, the status of Horizon’s business fundamentals, expected financial performance in future periods, expected timing of clinical and regulatory events; 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 full-year 2015 financial and operating results may differ from its expectations; Horizon Pharma’s ability to grow net sales from existing products; the availability of coverage and adequate reimbursement and pricing from government and third-party payors and risks relating to the success of Horizon’s patient support program; risks associated with clinical development and regulatory approvals; 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 Pharma operates; and those risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in Horizon’s filings and reports with the U.S. Securities and Exchange Commission (“SEC”). Horizon Pharma undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information.

Investors:

John B. Thomas

Executive Vice President, Corporate Strategy and Investor Relations

jthomas@horizonpharma.com

Tina Ventura

Vice President, Investor Relations

tventura@horizonpharma.com

U.S. Media Contact:

Geoff Curtis

Group Vice President, Corporate Communications

gcurtis@horizonpharma.com

Ireland Media Contact:

Ray Gordon

Gordon MRM

ray@gordonmrm.ie

 

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Horizon Pharma plc

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 

		Three Months Ended Sept. 30,								Nine Months Ended Sept. 30,
		2015				2014				2015				2014
REVENUES:
Net sales		$	226,544			$	75,126			$	512,506			$	193,114
Cost of goods sold			61,250				13,644				151,929				46,073
Gross profit			165,294				61,482				360,577				147,041
OPERATING EXPENSES:
Research and development			13,073				4,223				28,176				10,601
Sales and marketing			51,973				31,111				157,092				86,932
General and administrative			54,516				38,109				157,986				66,982
Total operating expenses			119,562				73,443				343,254				164,515
Operating income (loss)			45,732				(11,961	)			17,323				(17,474	)
OTHER (EXPENSE) INCOME, NET:
Interest expense, net			(20,300	)			(5,194	)			(49,780	)			(13,608	)
Foreign exchange loss			(86	)			(2,754	)			(1,010	)			(3,076	)
Bargain purchase gain			—				22,171				—				22,171
Loss on derivative fair value			—				—				—				(214,995	)
Loss on induced conversion of debt and debt extinguishment			—				—				(77,624	)			—
Other expense, net			(90	)			(3,241	)			(10,159	)			(8,241	)
Total other (expense) income, net			(20,476	)			10,982				(138,573	)			(217,749	)
Profit (loss) before expense (benefit) for income taxes			25,256				(979	)			(121,250	)			(235,223	)
EXPENSE (BENEFIT) FOR INCOME TAXES			21,979				(3,042	)			(136,788	)			(3,267	)
NET INCOME (LOSS)		$	3,277			$	2,063			$	15,538			$	(231,956	)
Earnings (loss) per share—basic		$	0.02			$	0.03			$	0.11			$	(3.17	)
Weighted average shares outstanding—basic			159,035,580				78,392,971				145,208,252				73,109,603
Earnings (loss) per share—diluted		$	0.02			$	0.02			$	0.10			$	(3.17	)
Weighted average shares outstanding—diluted			166,830,800				85,687,267				154,005,671				73,109,603

 

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Horizon Pharma plc

Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

 

		As of
		Sept. 30, 2015				Dec. 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	684,286			$	218,807
Restricted cash			860				738
Accounts receivable, net			221,091				73,915
Inventories, net			17,729				16,865
Prepaid expenses and other current assets			16,466				14,370
Deferred tax assets, net			13,196				1,530
Total current assets			953,628				326,225
Property and equipment, net			10,380				7,241
Developed technology, net			1,650,553				696,963
In-process research and development			66,000				66,000
Other intangible assets, net			7,263				7,870
Goodwill			259,167				—
Long term investments			42,413				—
Deferred tax assets, net, non-current			—				18,761
Other assets			9,514				11,564
TOTAL ASSETS		$	2,998,918			$	1,134,624
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Convertible debt, net		$	—			$	48,334
Long-term debt—current portion			4,000				—
Accounts payable			62,083				21,011
Accrued expenses			84,364				46,625
Accrued trade discounts and rebates			124,378				76,115
Accrued royalties—current portion			45,411				25,325
Deferred revenues—current portion			1,353				1,261
Deferred tax liabilities, net			—				721
Total current liabilities			321,589				219,392
LONG-TERM LIABILITIES:
Exchangeable notes, net			278,990				—
Long-term debt, net, net of current			858,021				297,169
Accrued royalties, net of current			125,272				48,887
Deferred revenues, net of current			9,570				8,144
Deferred tax liabilities, net, non-current			142,702				19,570
Other-long term liabilities			4,436				1,258
Total long-term liabilities			1,418,991				375,028
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 159,651,736 and 124,425,853 issued at September 30, 2015 and December 31, 2014 respectively, and 159,267,370 and 124,041,487 outstanding at September 30, 2015 and December 31, 2014, respectively.			16				13
Treasury stock, 384,366 ordinary shares at September 30, 2015 and December 31, 2014			(4,585	)			(4,585	)
Additional paid-in capital			2,000,292				1,269,858
Accumulated other comprehensive loss			(32,204	)			(4,363	)
Accumulated deficit			(705,181	)			(720,719	)
Total shareholders’ equity			1,258,338				540,204
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	2,998,918			$	1,134,624

 

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Horizon Pharma plc

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

		Three Months Ended Sept. 30,								Nine Months Ended Sept. 30,
		2015				2014				2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	3,277			$	2,063			$	15,538			$	(231,956	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and intangible amortization expense			43,285				6,826				94,025				17,662
Share-based compensation			24,914				4,024				56,253				10,111
Royalty accretion			6,551				2,664				13,571				5,617
Royalty liability remeasurement			—				—				14,277				13,033
Bargain purchase gain			—				(22,171	)			—				(22,171	)
Loss on derivative revaluation			—				—				—				214,995
Loss on induced conversions of debt and debt extinguishment			—				—				21,581				—
Amortization of debt discount and deferred financing costs			5,480				2,421				13,328				7,087
Foreign exchange loss			86				2,754				1,010				3,076
Other			44				11				127				11
Changes in operating assets and liabilities:
Accounts receivable			(38,203	)			(16,198	)			(135,370	)			(52,033	)
Inventories			2,264				639				12,819				129
Prepaid expenses and other current assets			(4,180	)			120				417				(2,091	)
Accounts payable			36,609				4,575				38,213				10,555
Accrued trade discounts and rebates			(12,460	)			16,644				35,136				46,113
Accrued expenses and accrued royalties			(5,440	)			823				11,052				796
Deferred revenues			(635	)			(686	)			2,143				(324	)
Deferred income taxes			24,859				(3,046	)			(134,014	)			(3,278	)
Payment of original issue discount upon repayment of 2014 Term Loan Facility			—				—				(3,000	)			—
Other non-current assets and liabilities			1,932				3				2,122				138
Net cash provided by operating activities			88,383				1,466				59,228				17,470
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired			—				(179,220	)			(1,022,361	)			(179,220	)
Proceeds from liquidation of available-for-sale investments			—				—				64,623				—
Purchases of long-term investments			(71,813	)			—				(71,813	)			—
Purchases of property and equipment			(2,233	)			(800	)			(4,514	)			(1,837	)
Change in restricted cash			(260	)			—				(122	)			—
Net cash used in investing activities			(74,306	)			(180,020	)			(1,034,187	)			(181,057	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of Exchangable Senior Notes			—				—				387,181				—
Net proceeds from the issuance of 2023 Senior Notes			—				—				462,340				—
Net proceeds from the 2015 Term Loan Facility			(213	)			—				391,506				—
Net proceeds from the 2014 Term Loan Facility			—				286,966				—				286,966
Repayment of the 2015 Term Loan Facility			(1,000	)			—				(1,000	)			—
Repayment of the 2014 Term Loan Facility			—				—				(297,000	)			—
Net proceeds from the issuance of ordinary shares			—				—				475,627				—
Proceeds from the issuance of common stock in connection with warrant exercises			3,431				2,090				18,124				33,262
Proceeds from the issuance of common stock through ESPP programs			—				—				1,541				649
Proceeds from the issuance of common stock in connection with stock option exercises			714				107				4,602				1,704
Payment of employee withholding taxes relating to share-based awards			(378	)			—				(2,334	)			—
Proceeds from the settlement of capped call transactions			—				9,385				—				9,385
Net cash provided by financing activities			2,554				298,548				1,440,587				331,966
Effect of foreign exchange rate changes on cash			598				(64	)			(149	)			(78	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			17,229				119,930				465,479				168,301
CASH AND CASH EQUIVALENTS, beginning of the period			667,057				128,851				218,807				80,480
CASH AND CASH EQUIVALENTS, end of the period		$	684,286			$	248,781			$	684,286			$	248,781

 

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Horizon Pharma plc

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Unaudited)

(in thousands, except share and per share data)

 

		Three Months Ended Sept. 30,								Nine Months Ended Sept. 30,
		2015				2014				2015				2014
		(Unaudited)								(Unaudited)
Adjusted Non-GAAP Net Income:
GAAP Net Income (Loss)		$	3,277			$	2,063			$	15,538			$	(231,956	)
Non-GAAP Adjustments:
Remeasurement of royalties for products acquired through business combinations			—				—				14,277				13,033
Acquisition related costs			14,498				31,477				64,841				45,651
Loss on derivative revaluation			—				—				—				214,995
Loss on induced conversion of debt and debt extinguishment			—				—				77,624				—
Bargain purchase gain			—				(22,171	)			—				(22,171	)
Amortization and accretion:
Intangible amortization expense			41,707				6,413				91,217				16,469
Amortization of debt discount and deferred financing costs			5,480				2,421				13,328				7,087
Accretion of royalty liabilities			6,551				2,664				13,571				5,617
Amortizaton of inventory step-up adjustment			4,140				1,540				10,635				1,540
Share-based compensation			26,457				4,024				57,796				10,111
Depreciation expense			1,578				413				2,808				1,193
Royalties for products acquired through business combinations (1)			(8,854	)			(6,366	)			(20,890	)			(12,062	)
Total of pre-tax non-GAAP adjustments			91,557				20,415				325,207				281,463
Income tax adjustments (2)			22,178				(3,042	)			(137,328	)			(3,267	)
Total of non-GAAP adjustments			113,735				17,373				187,879				278,196
Adjusted Non-GAAP Net Income		$	117,012			$	19,436			$	203,417			$	46,240
Adjusted Non-GAAP Earnings Per Share:
Weighted average shares—Basic			159,035,580				78,392,971				145,208,252				73,109,603
Adjusted Non-GAAP Earnings Per Share—Basic:
GAAP earnings (loss) per share—Basic		$	0.02			$	0.03			$	0.11			$	(3.17	)
Non-GAAP adjustments			0.72				0.22				1.29				3.80
Adjusted Non-GAAP earnings per share—Basic		$	0.74			$	0.25			$	1.40			$	0.63
Weighted average shares—Diluted
Weighted average shares—Basic			159,035,580				78,392,971				145,208,252				73,109,603
Ordinary share equivalents			7,795,220				35,258,496				8,797,419				35,577,854
Weighted average shares—Diluted			166,830,800				113,651,467				154,005,671				108,687,457
Adjusted Non-GAAP Net Income—Diluted
Adjusted Non-GAAP Net Income		$	117,012			$	19,436			$	203,417			$	46,240
Add: Convertible debt interest expense, net of taxes			—				1,875				—				5,625
Adjusted Non-GAAP Net Income—Diluted		$	117,012			$	21,311			$	203,417			$	51,865
GAAP earnings (loss) per share—Diluted		$	0.02			$	0.02			$	0.10			$	(3.17	)
Non-GAAP adjustments			0.68				0.20				1.22				3.81
Diluted earnings per share effect of ordinary share equivalents			—				(0.03	)			—				(0.16	)
Adjusted Non-GAAP earnings per share—Diluted		$	0.70			$	0.19			$	1.32			$	0.48

 

(1)	Royalties for products acquired through business combinations relate to VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL.

(2)	Adjustments to convert the income tax benefit/expense to the estimated amount of taxes that are payable in cash.

 

 

10

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Horizon Pharma plc

Additional GAAP to Non-GAAP Reconciliations

EBITDA, Gross Profit and Operating Cash Flow (Unaudited)

(in thousands, except percentages)

 

		Three Months Ended Sept. 30,								Nine Months Ended Sept. 30,
		2015				2014				2015				2014
		(Unaudited)								(Unaudited)
EBITDA and Adjusted EBITDA:
GAAP Net Income (Loss)		$	3,277			$	2,063			$	15,538			$	(231,956	)
Depreciation			1,578				413				2,808				1,193
Amortization and accretion:
Intangible amortization expense			41,707				6,413				91,217				16,469
Accretion of royalty liabilities			6,551				2,664				13,571				5,617
Amortization of deferred revenue			(490	)			(156	)			(753	)			(478	)
Amortizaton of inventory step-up adjustment			4,140				1,540				10,635				1,540
Interest expense, net (including amortization of debt discount and deferred financing costs)			20,300				5,194				49,780				13,608
Expense (benefit) for income taxes			21,979				(3,042	)			(136,788	)			(3,267	)
EBITDA		$	99,042			$	15,089			$	46,008			$	(197,274	)
Non-GAAP adjustments:
Remeasurement of royalties for products acquired through business combinations			—				—				14,277				13,033
Acquisition related costs			14,498				31,477				64,841				45,651
Loss on derivative revaluation			—				—				—				214,995
Loss on induced conversion and debt extinguishment			—				—				77,624				—
Bargain purchase gain			—				(22,171	)			—				(22,171	)
Share-based compensation			26,457				4,024				57,796				10,111
Royalties for products acquired through business combinations (1)			(8,854	)			(6,366	)			(20,890	)			(12,062	)
Total of Non-GAAP adjustments		$	32,101			$	6,964			$	193,648			$	249,557
Adjusted EBITDA		$	131,143			$	22,053			$	239,656			$	52,283
Non-GAAP Gross Profit:
GAAP net sales		$	226,544			$	75,126			$	512,506			$	193,114
GAAP cost of goods sold			61,250				13,644				151,929				46,073
GAAP gross profit		$	165,294			$	61,482			$	360,577			$	147,041
GAAP gross profit %			73.0	%			81.8	%			70.4	%			76.1	%
Non-GAAP Gross Profit:
GAAP gross profit		$	165,294			$	61,482			$	360,577			$	147,041
Non-GAAP gross profit adjustments:
Remeasurement of royalties for products acquired through business combinations			—				—				14,277				13,033
Intangible amortization expense (COGS only)			41,506				6,386				90,610				16,442
Accretion of royalty liabilities			6,551				2,664				13,571				5,617
Amortizaton of inventory step-up adjustment			4,140				1,540				10,635				1,540
Depreciation (COGS only)			65				90				268				264
Royalties for products acquired through business combinations (1)			(8,854	)			(6,366	)			(20,890	)			(12,062	)
Total of Non-GAAP adjustments		$	43,408			$	4,314			$	108,471			$	24,834
Non-GAAP gross profit		$	208,702			$	65,796			$	469,047			$	171,875
Non-GAAP gross profit %			92.1	%			87.6	%			91.5	%			89.0	%
Adjusted Operating Cash Flow:
GAAP cash provided by operating activities		$	88,383			$	1,466			$	59,228			$	17,470
Cash payments of acquistion related costs			12,464				34,142				49,152				43,150
Cash payments for induced debt conversion			—				—				10,472				—
Cash payment for debt extinguishment			—				—				45,367				—
Payment of original issue discount on debt extinguishment			—				—				3,000				—
Adjusted operating cash flow		$	100,847			$	35,608			$	167,219			$	60,620

 

(1)	Royalties for products acquired through business combinations relate to VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL.

 

 

11

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Horizon Pharma plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Three Months Ended September 30, 2015

(Unaudited)

 

		Sales				COGS				Research & Development				Sales & Marketing				General & Administrative				Interest Expense				Loss on Induced Debt Conversion & Debt Extinguishment				Other (Income) Expense				Income Tax (Benefit) Expense				Total
Non-GAAP Adjustments (in thousands):
Acquisition related costs(1)			—				—				2,158				—				12,340				—				—				—				—				14,498
Amortization and accretion:
Intangible amortization expense(2)			—				41,505				—				202				—				—				—				—				—				41,707
Amortization of debt discount and deferred financing costs(3)			—				—				—				—				—				5,480				—				—				—				5,480
Accretion of royalty liability(4)			—				6,551				—				—				—				—				—				—				—				6,551
Amortization of inventory step-up adjustment(5)			—				4,140				—				—				—				—				—				—				—				4,140
Stock-based compensation(6)			—				—				2,042				7,035				17,380				—				—				—				—				26,457
Depreciation expense(7)			—				65				—				—				1,513				—				—				—				—				1,578
Royalties for products acquired through business combinations(8)			—				(8,854	)			—				—				—				—				—				—				—				(8,854	)
Income tax adjustments(9)			—				—				—				—				—				—				—				—				22,178				22,178
Total of non-GAAP adjustments			—				43,407				4,200				7,237				31,233				5,480				—				—				22,178				113,735

Horizon Pharma plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Three Months Ended September 30, 2014

(Unaudited)

 

		Sales				COGS				Research & Development				Sales & Marketing				General & Administrative				Interest Expense				Derivative Loss				Other (Income) Expense				Income Tax (Benefit) Expense				Total
Non-GAAP Adjustments (in thousands):
Bargain purchase gain(10)			—				—				—				—				—				—				—				(22,171	)			—				(22,171	)
Acquisition related costs(1)			—				—				—				—				28,255				—				—				3,222				—				31,477
Amortization and accretion:
Intangible amortization expense(2)			—				6,386				—				27				—				—				—				—				—				6,413
Amortization of debt discount and deferred financing costs(3)			—				—				—				—				—				2,421				—				—				—				2,421
Accretion of royalty liability(4)			—				2,664				—				—				—				—				—				—				—				2,664
Amortization of inventory step-up adjustment(5)			—				1,540				—				—				—				—				—				—				—				1,540
Stock-based compensation(6)			—				—				354				1,654				2,016				—				—				—				—				4,024
Depreciation expense(7)			—				90				—				—				323				—				—				—				—				413
Royalties for products acquired through business combinations(8)			—				(6,366	)			—				—				—				—				—				—				—				(6,366	)
Income tax adjustments(9)			—				—				—				—				—				—				—				—				(3,042	)			(3,042	)
Total of non-GAAP adjustments			—				4,314				354				1,681				30,594				2,421				—				(18,949	)			(3,042	)			17,373

 

12

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Horizon Pharma plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Nine Months Ended September 30, 2015

(Unaudited)

 

		Sales				COGS				Research & Development				Sales & Marketing				General & Administrative				Interest Expense				Loss on Induced Debt Conversion & Debt Extinguishment				Other (Income) Expense				Income Tax (Benefit) Expense				Total
Non-GAAP Adjustments (in thousands):
Loss on induced conversion and debt extinguistment(11)			—				—				—				—				—				—				77,624				—				—				77,624
Acquisition related costs(1)			—				23				2,252				—				52,566				—				—				10,000				—				64,841
Amortization and accretion:
Intangible amortization expense(2)			—				90,609				—				608				—				—				—				—				—				91,217
Amortization of debt discount and deferred financing costs(3)			—				—				—				—				—				13,328				—				—				—				13,328
Accretion of royalty liability(4)			—				13,571				—				—				—				—				—				—				—				13,571
Amortization of inventory step-up adjustment(5)			—				10,635				—				—				—				—				—				—				—				10,635
Remeasurement of royalties for products acquired through business combinations(12)			—				14,277				—				—				—				—				—				—				—				14,277
Stock-based compensation(6)			—				—				4,712				15,571				37,513				—				—				—				—				57,796
Depreciation expense(7)			—				268				—				—				2,540				—				—				—				—				2,808
Royalties for products acquired through business combinations(8)			—				(20,890	)			—				—				—				—				—				—				—				(20,890	)
Income tax adjustments(9)			—				—				—				—				—				—				—				—				(137,328	)			(137,328	)
Total of non-GAAP adjustments			—				108,493				6,964				16,179				92,619				13,328				77,624				10,000				(137,328	)			187,879

Horizon Pharma plc

Certain Income Statement Line Items—Non-GAAP Adjusted

For the Nine Months Ended September 30, 2014

(Unaudited)

 

		Sales				COGS				Research & Development				Sales & Marketing				General & Administrative				Interest Expense				Derivative Loss				Other (Income) Expense				Income Tax (Benefit) Expense				Total
Non-GAAP Adjustments (in thousands):
Bargain purchase gain(10)			—				—				—				—				—				—				—				(22,171	)			—				(22,171	)
Loss on derivative revaluation(13)			—				—				—				—				—				—				214,995				—				—				214,995
Acquisition related costs(1)			—				—				—				—				37,429				—				—				8,222				—				45,651
Amortization and accretion:
Intangible amortization expense(2)			—				16,442				—				27				—				—				—				—				—				16,469
Amortization of debt discount and deferred financing costs(3)			—				—				—				—				—				7,087				—				—				—				7,087
Accretion of royalty liability(4)			—				5,617				—				—				—				—				—				—				—				5,617
Amortization of inventory step-up adjustment(5)			—				1,540				—				—				—				—				—				—				—				1,540
Remeasurement of royalties for products acquired through business combinations(12)			—				13,033				—				—				—				—				—				—				—				13,033
Stock-based compensation(6)			—				—				1,152				3,278				5,681				—				—				—				—				10,111
Depreciation expense(7)			—				270				—				—				923				—				—				—				—				1,193
Royalties for products acquired through business combinations(8)			—				(12,062	)			—				—				—				—				—				—				—				(12,062	)
Income tax adjustments(9)			—				—				—				—				—				—				—				—				(3,267	)			(3,267	)
Total of non-GAAP adjustments			—				24,840				1,152				3,305				44,033				7,087				214,995				(13,949	)			(3,267	)			278,196

 

13

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NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS—NON-GAAP ADJUSTED

(in thousands)

 

(1)

Expenses, including legal and consulting fees, incurred in connection with the Company’s acquisitions of Vidara Therapeutics International Public Limited Company (“Vidara”) and Hyperion Therapeutics, Inc. (“Hyperion”), and its proposed acquisition of Depomed Inc. (“Depomed”), have been excluded as non-recurring items.

 

(2)	Intangible amortization expenses are associated with the Company’s intellectual property rights, developed technology and customer relationships of VIMOVO, LODOTRA, RAYOS, ACTIMMUNE, RAVICTI and BUPHENYL.

 

(3)	Represents amortization of debt discount and deferred financing costs associated with the Company’s debt.

 

(4)	Represents accretion expense associated with the ACTIMMUNE, VIMOVO, RAVICTI and BUPHENYL royalties for the three and nine months ended September 30, 2015, and represents accretion expense associated with the ACTIMMUNE and VIMOVO royalties for the three and nine months ended September 30, 2014.

 

(5)

In connection with the Hyperion acquisition, the RAVICTI and BUPHENYL inventory was stepped up in value to $8,682 and during the three and nine months ended September 30, 2015, the Company recognized in cost of goods sold $4,140 and $7,481, respectively, of step-up inventory costs related to RAVICTI and BUPHENYL inventory sold. In connection with the Vidara acquisition, the ACTIMMUNE inventory was stepped up in value to $14,218 and during the third quarter of 2014, the Company recognized in cost of goods sold $1,540 of step-up inventory costs related to ACTIMMUNE. During the first quarter of 2015, the Company recognized in cost of goods sold the remaining $3,154 of step-up inventory costs related to ACTIMMUNE.

 

(6)	Represents share-based compensation expense associated with the Company’s stock option, restricted stock unit, and performance stock unit grants to its employees and non-employees, its cash-settled long-term incentive program, and its employee stock purchase plan.

 

(7)	Represents depreciation expense related to the Company’s property, equipment and leasehold improvements.

 

(8)

Royalties of $8,854 and $20,890 were incurred during the three and nine months ended September 30, 2015, respectively, based on each period’s net sales for VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL. Royalties of $6,366 and $12,062 were incurred during the three and nine months ended September 30, 2014, respectively, based on each period’s net sales for VIMOVO and ACTIMMUNE.

 

(9)	Represents adjustments to convert the income tax expense (benefit) to the estimated amount of taxes that are payable in cash.

 

(10)

The bargain purchase gain of $22,171 was the result of the Vidara acquisition. Identifiable assets and liabilities of Vidara, including identifiable intangible assets, were recorded based on their estimated fair values as of the date of the closing of the acquisition. The excess of the fair value of the net assets acquired over the value of consideration was recorded as a bargain purchase gain.

 

(11)

During the six months ended June 30, 2015, the Company recorded a loss on induced debt conversions of $77,624, which represented an early redemption payment of $45,366, the write-down of $21,581 in debt discount and deferred financing costs, $10,005 in additional exchange consideration to debt holders and $672 in expenses incurred in connection with the induced debt conversions. Following these induced debt conversions in the six months ended June 30, 2015, there were no convertible senior notes remaining outstanding.

 

14

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(12)

At the time of the Company’s acquisition of the rights to VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL, the Company estimated the fair value of contingent royalties payable to third parties using an income approach under the discounted cash flow method, which included revenue projections and other assumptions the Company made to determine the fair value. If the Company significantly over performs or underperforms against its original revenue projections or it becomes necessary to make changes to assumptions as a result of a triggering event, the Company is required to reassess the fair value of the contingent royalties payable. Any subsequent adjustments to fair value is recorded in the period such adjustment is made as either an increase or decrease to royalties payable, with a corresponding increase or decrease in cost of goods sold, in accordance with established accounting policies.

During the second quarter of 2015, the Company recorded a charge of $14,277 to cost of goods sold to increase the amount of the contingent royalty liabilities relating to VIMOVO and ACTIMMUNE. During the second quarter of 2014, the Company recorded a charge of $13,033 to cost of goods sold to increase the amount of the contingent royalty liability relating to VIMOVO.

 

(13)

During the six months ended June 30, 2014, the Company recorded non-cash charges of $214,995 related to the increase in the fair value of the embedded derivative associated with its convertible senior notes. The loss on the derivative revaluation was primarily due to an increase in the market value of the Company’s common stock. The loss on derivative revaluation was a permanent tax difference and was not deductible for income tax reporting purposes. On June 27, 2014, the derivative liability was re-measured to a final fair value and the entire fair value of the derivative liability of $324,405 was reclassified to additional paid-in capital. As such, there was no derivative revaluation subsequent to June 2014.

 

15