Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

“Horizon Pharma” means Horizon Pharma plc and its consolidated subsidiaries, including Horizon Pharma, Inc.,

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the following transactions (collectively the “Pro Forma Transactions”):

 

(i)

the proposed acquisition of Raptor Pharmaceutical Corp. (“Raptor”) by Misneach Corporation (the “Purchaser”), a Delaware corporation and an indirect wholly owned subsidiary of Horizon Pharma plc (the “Parent”) (the “Raptor Acquisition”), pursuant to a tender offer of all outstanding shares of Raptor’s common stock for $9.00 per share (the “Offer”);

 

(ii)

the borrowing of up to $375 million principal amount of incremental term loans (the “Incremental Term Loans”) pursuant to Horizon Pharma, Inc.’s (the “Company”) existing senior secured credit facility (the “Senior Secured Credit Facility”) governed by a credit agreement entered into among the Company, the Parent and certain of its subsidiaries on May 7, 2015 (the “Credit Agreement”) and the issuance of $300 million in principal amount of senior notes due 2024 (the “notes”, and collectively, the “Debt Financings”);

 

(iii)

Horizon Pharma’s acquisition of Crealta Holdings LLC (“Crealta”) on January 13, 2016 (the “Crealta Acquisition”);

 

(iv)

Horizon Pharma’s acquisition of Hyperion Therapeutics, Inc. (“Hyperion”) on May 7, 2015, (the “Hyperion Acquisition”);

 

(v)

the issuance of the 2.50% exchangeable senior notes due 2022 (the “2022 notes”) on March 13, 2015;

 

(vi)

the issuance of the 6.625% senior notes due 2023 (the “2023 notes”) on April 29, 2015; and

 

(vii)

the Company’s borrowing of outstanding senior secured term loans (the “2015 Term Loans”) on May 7, 2015 under the Senior Secured Credit Facility.

Transactions (iv) to (vii) (inclusive) relate to the Hyperion Acquisition.

The unaudited pro forma combined balance sheet information as of June 30, 2016 is based upon and derived from the historical financial information of Horizon Pharma and Raptor and gives effect to the Pro Forma Transactions as if such transactions had occurred on June 30, 2016 except for the Crealta Acquisition, Hyperion Acquisition, the 2022 notes, the 2023 notes and the 2015 Term Loans, which are already reflected in Horizon Pharma’s historical balance sheet as of June 30, 2016. The unaudited pro forma combined statements of operations for the year ended December 31, 2015 and the six months ended June 30, 2016 are based upon and derived from the historical financial information of Horizon Pharma, Crealta, Hyperion and Raptor and give effect to the Pro Forma Transactions as if they occurred on January 1, 2015.

The Raptor Acquisition will be, and the Crealta Acquisition and Hyperion Acquisition were, 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 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 and that Horizon Pharma’s management believes are reasonable under the circumstances. Actual results and valuations may differ materially from the assumptions within the accompanying unaudited pro forma combined financial information.

 

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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 Raptor Acquisition are based on a preliminary estimate of fair value as of June 30, 2016. 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 Pharma’s management believes the preliminary fair values recognized for the assets to be acquired and the liabilities to be assumed in the Raptor Acquisition are based on reasonable estimates and assumptions. After the closing of the Raptor Acquisition, Horizon Pharma 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 Raptor 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 Pharma’s management 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 Pro Forma 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 Pharma will experience after certain of the Pro Forma Transactions are completed. In addition, the accompanying unaudited pro forma combined statements 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 historical financial information of Hyperion and Raptor, as presented in their respective consolidated financial statements, has been reclassified to conform to the presentation in Horizon Pharma’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 Raptor (after conforming reclassifications)” and “Historical Hyperion (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 (1) the historical unaudited consolidated financial statements of Horizon Pharma for the quarter ended June 30, 2016, (2) the historical consolidated financial statements of Horizon Pharma for the year ended December 31, 2015, (3) the historical unaudited consolidated financial statements of Raptor for the quarter ended June 30, 2016, (4) the historical consolidated financial statements of Raptor for the year ended December 31, 2015, and (5) the historical unaudited consolidated financial statements of Hyperion for the quarter ended March 31, 2015.

The unaudited pro forma financial information is based upon certain assumptions with respect to Horizon Pharma’s financing of the Raptor Acquisition. Whether the assumed financing sources are available and, if available, the terms of Horizon Pharma’s 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 unaudited pro forma financial information. Differences between preliminary estimates in the unaudited 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 unaudited pro forma financial information and the combined company’s financial position and future results of operations.

 

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Unaudited Pro Forma Combined Balance Sheet

As of June 30, 2016

(In thousands, except for share data)

 

		Historical Horizon Pharma plc				Historical Raptor (after conforming reclassifications) (see Note 4)				Raptor Acquisition Adjustments								Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents		$	424,525			$	124,239			$	654,300				6A			$	227,619
											(800,745	)			6B
											(41,000	)			6C
											(61,700	)			6D
											(72,000	)			6E
Restricted cash			3,169				1,367												4,536
Accounts receivable, net			304,382				15,079												319,461
Inventories, net			172,102				12,031				142,869				6F				327,002
Prepaid expenses and other current assets			33,866				3,422				—								37,288
Total current assets			938,044				156,138				(178,276	)							915,906
Property and equipment, net			21,971				7,471												29,442
Developed technology, net			1,927,713				3,200				815,800				6F				2,746,713
In-process research and development			66,000				171,000				(171,000	)			6F				66,000
Other intangible assets, net			6,655				2,398				(2,398	)			6F				6,655
Goodwill			255,927				12,223				172,017				6F				427,944
											(12,223	)			6F
Deferred tax assets, net			4,992																4,992
Other assets			6,156				1,861												8,017
Total assets		$	3,227,458			$	354,291			$	623,920							$	4,205,669
Liabilities and Shareholders’ Equity
Current liabilities:
Long-term debt—current portion		$	4,000			$	11,559			$	3,750				6A			$	7,750
											(11,559	)			6D
Accounts payable			58,970				2,914												61,884
Accrued expenses			75,709				20,412												96,121
Accrued trade discounts and rebates			220,674				4,681												225,355
Accrued royalties—current portion			58,008				3,709				8,600				6F				70,317
Deferred revenues—current portion			1,448				—												1,448
Total current liabilities			418,809				43,275				791								462,875
Long-term liabilities:
Exchangeable notes, net			290,310				57,958				(57,958	)			6E				290,310
Long-term debt, net, net of current			849,377				32,212				650,550				6A				1,499,927
											(32,212	)			6D
Accrued royalties, net of current			170,160				—				84,900				6F				255,060
Contingent consideration liability			—				152,070				(126,570	)			6F				25,500
Deferred revenues, net of current			8,366				—												8,366
Deferred tax liabilities, net, non-current			131,587				1,086				245,080				6F				377,753
Other long-term liabilities			20,636				—				—								20,636
Total Long-term liabilities			1,470,436				243,326				763,790								2,477,552
Shareholders’ Equity
Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 161,126,363 shares issued and 160,741,997 shares outstanding at June 30, 2016; 161,126,363 shares issued and 160,741,997 shares outstanding at June 30, 2016 pro forma			16				86				(86	)			6G				16
Treasury stock, 384,366 ordinary shares			(4,585	)			—				—								(4,585	)
Additional paid-in capital			2,057,128				447,666				(447,666	)			6G				2,057,128
Accumulated other comprehensive loss			(2,737	)			(1,341	)			1,341				6G				(2,737	)
Accumulated deficit			(711,609	)			(378,721	)			378,721				6G				(784,580	)
											(41,000	)			6C
											(17,929	)			6D
											(14,042	)			6E
Total shareholders’ equity			1,338,213				67,690				(140,661	)							1,265,242
Total liabilities and shareholders’ equity		$	3,227,458			$	354,291			$	623,920							$	4,205,669

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

 

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Unaudited Pro Forma Combined Statement of Operations

For the Six Months Ended June 30, 2016

(In thousands, except for share and per share data)

 

		Historical Horizon plc				Historical Crealta (January 1 to January 12, 2016)				Crealta Acquisition Accounting Adjustments								Horizon Subtotal (after Crealta Acquisition Adjustments)				Historical Raptor (after conforming reclassifications) (see Note 4)				Raptor Acquisition Accounting Adjustments								Pro Forma Combined
Net sales		$	462,068			$	2,190			$	—							$	464,258			$	59,515			$	—							$	523,773
Cost of goods sold			158,359				563				872				7A				159,794				9,544				31,235				7F				200,573
Gross profit			303,709				1,627				(872	)							304,464				49,971				(31,235	)							323,200
Operating Expenses:
Research and development			23,932				97												24,029				29,439												53,468
Sales and marketing			155,133				258												155,391				22,890												178,281
General and administrative			120,381				16,561				(9,364	)			7B				116,198				18,362												134,560
											(11,380	)			7C
Impairment of IPR&D			—																—				39,600												39,600
Change in fair value of contingent consideration related to QUINSAIR acquisition			—																—				(14,730	)											(14,730	)
Total operating expenses			299,446				16,916				(20,744	)							295,618				95,561				—								391,179
Operating income (loss)			4,263				(15,289	)			19,872								8,846				(45,590	)			(31,235	)							(67,979	)
Other (Expense) Income, Net:
Interest expense, net			(38,686	)			(2,532	)			2,532				7D				(38,686	)			(9,082	)			(12,273	)			7G				(60,041	)
Foreign exchange loss			(158	)															(158	)			(34	)											(192	)
Other expense, net			(40	)			(6	)											(46	)			—												(46	)
Total other expense, net			(38,884	)			(2,538	)			2,532								(38,890	)			(9,116	)			(12,273	)							(60,279	)
(Loss) income before (benefit) expense for income taxes			(34,621	)			(17,827	)			22,404								(30,044	)			(54,706	)			(43,508	)							(128,258	)
(Benefit) expense for income taxes			(4,199	)			—				2,076				7E				(2,123	)			898				(16,968	)			7H				(18,193	)
Net (Loss) Income		$	(30,422	)		$	(17,827	)		$	20,328							$	(27,921	)		$	(55,604	)		$	(26,540	)						$	(110,065	)
Loss per ordinary share—basic and diluted		$	(0.19	)																														$	(0.69	)
Weighted average ordinary shares outstanding—basic and diluted			160,186,270																																160,186,270

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

 

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Unaudited Pro Forma Combined Statement of Operations

For the Year December 31, 2015

(In thousands, except for share and per share data)

 

		Historical Horizon plc				Historical Hyperion (after conforming reclassifications) Period Ended May 6, 2015 (see Note 5)				Historical Crealta				Hyperion and Crealta Acquisition Accounting Adjustments								Horizon Subtotal (Hyperion and Crealta Acquisitions)				Historical Raptor (after conforming reclassifications) (see Note 4)				Raptor Acquisition Accounting Adjustments								Pro Forma Combined
Net sales		$	757,044			$	39,473			$	66,898			$	—							$	863,415			$	94,240			$	—							$	957,655
Cost of goods sold			219,502				5,636				26,900				59,371				8A				338,637				12,767				62,689				8H				414,093
															(8,341	)			8B
															35,569				8C
Gross profit			537,542				33,837				39,998			$	(86,599	)							524,778				81,473				(62,689	)							543,562
Operating Expenses:
Research and development			41,865				13,419				4,018												59,302				58,488												117,790
Sales and marketing			220,444				6,052				10,093												236,589				34,019												270,608
General and administrative			219,861				30,663				12,091				(52,492	)			8D				210,123				37,424												247,547
Total operating expenses			482,170				50,134				26,202				(52,492	)							506,014				129,931				—								635,945
Operating income (loss)			55,372				(16,297	)			13,796				(34,107	)							18,764				(48,458	)			(62,689	)							(92,383	)
Other (Expense) Income, Net:
Interest expense, net			(69,900	)			(427	)			(5,804	)		$	(7,823	)			8E				(83,954	)			(15,538	)			(27,431	)			8I				(126,923	)
Foreign exchange loss			(1,237	)			—				—				—								(1,237	)			(287	)											(1,524	)
Loss on induced conversion of debt and debt extinguishment			(77,624	)			(1,460	)			—				56,808				8F				(20,816	)			—												(20,816	)
															1,460				8F
Loss on sale of long-term investments			(29,032	)			—				—				—								(29,032	)			—												(29,032	)
Adjustment to fair value of common stock warrants			—				—				—												—				(495	)											(495	)
Other (expense) income, net			(10,291	)			4,449				31												(5,811	)			—												(5,811	)
Total other (expense) income, net			(188,084	)			2,562				(5,773	)			50,445								(140,850	)			(16,320	)			(27,431	)							(184,601	)
(Loss) income before (benefit) expense for income taxes			(132,712	)			(13,735	)			8,023				16,338								(122,086	)			(64,778	)			(90,120	)							(276,984	)
(Benefit) expense for income taxes			(172,244	)			1,609				1				5,596				8G				(165,038	)			444				(35,147	)			8J				(199,741	)
Net Income (Loss)		$	39,532			$	(15,344	)		$	8,022			$	10,742							$	42,952			$	(65,222	)		$	(54,973	)						$	(77,243	)
Earnings (loss) per ordinary share—basic		$	0.27																																			$	(0.52	)
Weighted average ordinary shares outstanding—basic			148,788,020																																				148,788,020
Earnings (loss) per ordinary share—diluted		$	0.25																																			$	(0.52	)
Weighted average ordinary shares outstanding diluted			155,923,251																																				148,788,020

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

 

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1.	Description of transactions

The Raptor Acquisition: On September 12, 2016, the Parent, the Purchaser and Raptor, entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which the Parent, through the Purchaser, commenced the Offer to acquire all of the outstanding shares of Raptor’s common stock, par value $0.001 per share, for $9.00 per share in cash, without interest thereon (less any required withholding taxes) (the “Offer Price”), upon the terms and subject to the conditions set forth in the Merger Agreement. As soon as practicable following the time Purchaser accepts, for the first time, for payment Shares validly tendered and not validly withdrawn pursuant to the Offer and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Purchaser will merge with and into Raptor, with Raptor continuing as the surviving corporation in the Merger and as an indirect wholly owned subsidiary of the Parent, pursuant to the procedure provided for under Section 251(h) of the General Corporation Law of the State of Delaware without further stockholder approval.

Horizon Pharma plans to pay for the Raptor Acquisition with a portion of its and Raptor’s existing cash on hand, and the proceeds of the Debt Financings.

Incremental Term Loans: In connection with the Merger Agreement, the Company entered into an amended and restated commitment letter (the “Debt Commitment Letter”) with Bank of America, N.A. (“Bank of America”), JPMorgan Chase Bank, N.A. (“JPMorgan”), Jefferies Finance LLC (“Jefferies”), Citigroup Global Markets Inc. (“Citi”), Cowen and Company, LLC (“Cowen”) and Cowen Structured Holdings, Inc. (together with Bank of America, JPMorgan, Jefferies, Citi and Cowen, the “Commitment Parties”) on September 16, 2016, pursuant to which the Commitment Parties have committed to provide up to $675.0 million principal amount of incremental term loans pursuant to the Senior Secured Credit Facility, the proceeds of which, in addition to a portion of its and Raptor’s existing cash on hand would be available to (i) pay the Offer Price, (ii) repay approximately $133.7 million of Raptor’s existing indebtedness (based on Raptor’s June 30, 2016 debt balances and including prepayment premiums), and (iii) pay any other fees and expenses in connection with the foregoing (collectively, the “Transactions” calculated on a pro forma basis as of June 30, 2016). The commitment to provide such incremental term loans is subject to certain conditions, including the negotiation of definitive documentation for the term loans and other customary closing conditions consistent with the Merger Agreement. The Company has agreed to pay customary fees and expenses in connection with borrowings pursuant to the Debt Commitment Letter.

In lieu of borrowing the entire amount committed pursuant to the Debt Commitment Letter, the Company and Horizon Pharma USA, Inc. (the “Co-Issuer” and together with the Company, the “Issuers”) expect to borrow up to $375.0 million principal amount of Incremental Term Loans and issue $300.0 million principal amount of notes.

Crealta Acquisition: On January 13, 2016, a subsidiary of the Parent completed its acquisition of Crealta for approximately $539.7 million, including cash acquired of $24.9 million. Following the completion of the acquisition, Crealta became an indirect wholly owned subsidiary of the Company and was renamed as Horizon Pharma Rheumatology LLC.

Hyperion Acquisition: On May 7, 2015, a subsidiary of the Parent completed its acquisition of Hyperion in which the subsidiary of the Parent acquired all of the issued and outstanding shares of Hyperion’s common stock for $46.00 per share in cash or approximately $1.1 billion on a fully-diluted basis, including cash acquired of $53.0 million. Following the completion of the acquisition, Hyperion became a wholly owned subsidiary of Horizon Pharma and was renamed as Horizon Therapeutics, Inc.

2022 Notes: On March 13, 2015, Horizon Limited, a wholly owned subsidiary of the Parent, completed its private placement of $400 million in aggregate principal amount of 2022 notes to several investment banks acting as initial purchasers who subsequently resold the 2022 notes to qualified institutional buyers as defined in Rule 144A under the Securities Act.

 

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2023 Notes: On April 29, 2015, Horizon Pharma Financing Inc., a wholly owned subsidiary of the Parent, completed a private placement of $475 million in aggregate principal amount of the 2023 notes to certain investment banks acting as initial purchasers who subsequently resold the 2023 notes to qualified institutional buyers as defined in Rule 144A under the Securities Act and in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act. Following completion of the Hyperion Acquisition, the Company assumed the obligations under the 2023 notes.

2015 Term Loans: On May 7, 2015, the Company, the Parent and certain of its subsidiaries entered into the Credit Agreement with Citibank, N.A., as administrative and collateral agent, and the lenders from time to time party thereto providing for (i) $400 million principal amount of the six-year 2015 Term Loans; (ii) one or more uncommitted incremental loan facilities subject to the satisfaction of certain financial and other conditions; and (iii) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The Credit Agreement allows for Horizon and certain other subsidiaries of Horizon to become borrowers under the accordion or refinancing facilities. Loans under the 2015 Term Loans bear interest, at the Company’s option, at a rate equal to either the London Inter-Bank Offer Rate (“LIBOR”), plus an applicable margin of 3.5% per year (subject to a 1.0% LIBOR floor), or the adjusted base rate plus 2.5%. The adjusted base rate is defined as the greater of (a) LIBOR (using one-month interest period) plus 1%, (b) prime rate, (c) fed funds plus 1/2 of 1%, and (d) 2%. The Company borrowed the full $400 million available under the 2015 Term Loans on May 7, 2015 as a LIBOR-based borrowing. As of June 30, 2016, the principal balance of the 2015 Term Loans was $396.0 million.

2. Basis of presentation

The historical consolidated financial information of Horizon Pharma 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 Pro Forma 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 Raptor 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 Horizon Pharma’s 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, work in process 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 estimated selling costs and a margin on the estimated selling costs. Fair value of work in process has been determined based on estimated selling price, net of estimated selling costs and

 

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estimated costs to complete the manufacturing, and a margin on the estimated selling and manufacturing 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 Raptor’s rights to its currently marketed medicines. 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 Raptor’s medicines. 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 13 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 preliminary 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. Horizon Pharma understands that Raptor’s developed technology as of the acquisition date was located in the United States where a U.S. tax rate of 39% is being utilized and a net deferred tax liability is recorded. Upon acquisition, Raptor will be a member of the Parent’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 Raptor acquisition adjustments will result 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.

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

Pre-existing contingent consideration liability: Horizon Pharma has identified a contingent consideration liability, which is payable upon the achievement of specified development, regulatory and sales-based milestone events or financial results. The model used in valuing this contingent consideration liability requires the use of significant estimates and assumptions. The liability will be periodically assessed based on events and circumstances related to the underlying milestones, and any change will be recorded in Horizon Pharma’s consolidated statement of operations.

 

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The preliminary determination of the fair value of the acquired net assets, assuming the Raptor Acquisition had closed on June 30, 2016, is as follows (in thousands, except share and per share data):

 

Fully diluted equity value (92,185,001 shares at September 7, 2016 at $9.00 per share)		$	829,665
Proceeds from exercise of in-the-money stock options (5,850,833 shares at a weighted-average exercise price of $4.94).			(28,920	)
Total purchase consideration to be paid		$	800,745
Book value of assets acquired and liabilities assumed(1)			67,690
Valuation adjustments:
Inventory step-up			142,869
Developed technology(2)			815,800
IPR&D(3)			(171,000	)
Other intangible assets(3)			(2,398	)
Goodwill(3)			(12,223	)
Accrued royalties, current portion			(8,600	)
Deferred tax liabilities, net			(245,080	)
Accrued royalties, net of current			(84,900	)
Contingent consideration liability			126,570
Goodwill			172,017
		$	800,745

 

(1)	Consists primarily of Raptor’s cash, accounts receivable, inventories, fixed assets, prepaid assets, net of accounts payable and accrued liabilities.

(2)	Net of $3,200 of Raptor’s developed technology as of June 30, 2016.

(3)	Represents assets on Raptor’s balance sheet as of June 30, 2016. The Goodwill adjustment represents the write-off of Raptor’s historical goodwill.

3. Accounting policies

Following the Raptor Acquisition, Horizon Pharma will conduct a review of accounting policies of Raptor 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 Horizon Pharma’s accounting policies and classifications. As a result of that review, Horizon Pharma may identify differences among the accounting policies of Horizon Pharma and Raptor 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, Horizon Pharma was not aware of any material differences between accounting policies of Horizon Pharma and Raptor, except for certain reclassifications necessary to conform to Horizon Pharma’s financial presentation, and accordingly, this unaudited pro forma combined financial information does not assume any material differences in accounting policies among Horizon Pharma and Raptor.

4. Historical Raptor

Financial information of Raptor in the “Historical Raptor (after conforming reclassifications)” column in the unaudited pro forma combined balance sheet represents the historical consolidated balance sheet of Raptor as of June 30, 2016. Financial information presented in the “Historical Raptor (after conforming reclassifications)” column in the unaudited pro forma combined statements of operations represents the historical consolidated statement of earnings of Raptor for the six months ended June 30, 2016 and the year ended December 31, 2015. Such financial information has been reclassified or classified to conform to the historical presentation in Horizon Pharma’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 Raptor.

 

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Reclassifications in Raptor’s unaudited pro forma combined balance sheet for June 30, 2016 are as follows (in thousands):

 

		Historical Raptor (before conforming reclassifications)				Reclassifications								Historical Raptor (after conforming reclassifications)
Assets
Current assets:
Cash and cash equivalents			124,239			$	—							$	124,239
Restricted cash			1,367				—								1,367
Accounts receivable, net			15,727				(648	)			4B				15,079
Inventories, net			12,031				—								12,031
Prepaid expenses and other current assets			3,422				—								3,422
Total current assets		$	156,786			$	(648	)						$	156,138
Long-term assets:
Property, plant and equipment, net			7,471				—								7,471
Goodwill			12,223												12,223
Developed technology, net							3,200				4A				3,200
In-process research and development							171,000				4A				171,000
Other intangible assets, net			176,598				(174,200	)			4A				2,398
Other assets			1,861				—								1,861
Total assets		$	354,939			$	(648	)						$	354,291
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable			2,914												2,914
Accrued liabilities			29,450				(9,038	)			4B				20,412
Note payable, current portion			11,559												11,559
Accrued trade discounts and rebates							4,681				4B				4,681
Accrued royalties—current portion							3,709				4B				3,709
Total current liabilities		$	43,923			$	(648	)						$	43,275
Long-term liabilities:
Contingent consideration liability			152,070				—								152,070
Deferred tax liabilities			1,086												1,086
Note payable, net of current portion			32,212				—								32,212
Convertible notes			57,958				—								57,958
Total long-term liabilities		$	243,326			$	—							$	243,326
Stockholders’ equity:
Common stock			86				—								86
Additional paid-in capital			447,666				—								447,666
Accumulated other comprehensive loss, net of tax			(1,341	)			—								(1,341	)
Accumulated deficit			(378,721	)			—								(378,721	)
Total stockholders’ equity		$	67,690			$	—							$	67,690
Total liabilities and shareholders’ equity		$	354,939			$	(648	)						$	354,291

 

(A)	Represents the reclassification of $174,200 of intangible assets related to QUINSAIR to developed technology of $3,200 and IPR&D of $171,000 to conform to Horizon Pharma’s presentation.

(B)	Represents the reclassification of $9,038 of accrued liabilities to accrued trade discounts and rebates of $4,681, accrued royalties of $3,709 and accounts receivable, net related to reserves for product returns of $296 and cash discounts of $352 to conform to Horizon Pharma’s presentation.

 

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Reclassifications in Raptor’s unaudited pro forma combined statement of operations for the six months ended June 30, 2016 are as follows (in thousands):

 

		Historical Raptor (before conforming reclassifications)				Reclassifications								Historical Raptor (after conforming reclassifications)
Product revenue		$	59,515			$	—							$	59,515
Cost of sales			9,279				265				4C				9,544
Gross profit			50,236				(265	)							49,971
Operating Expenses:
Research and development expense			29,704				(265	)			4C				29,439
Selling, general and administrative expense			41,252				(41,252	)			4D				—
Sales and marketing			—				22,890				4D				22,890
General and administrative			—				18,362				4D				18,362
Impairment of IPR&D			39,600												39,600
Change in fair value of contingent consideration related to QUINSAIR acquisition			(14,730	)											(14,730	)
Total operating expenses			95,826				(265	)							95,561
Operating loss			(45,590	)			—								(45,590	)
Other (Expense) Income, Net:
Interest income			258				(258	)			4E				—
Interest expense			(9,340	)			258				4E				(9,082	)
Foreign currency transaction loss			(34	)											(34	)
Adjustment to fair value of common stock warrants			—												—
Total other expense, net			(9,116	)			—								(9,116	)
Net loss before benefit for income taxes			(54,706	)			—								(54,706	)
Benefit for income taxes			898				—								898
Net Loss		$	(55,604	)		$	—							$	(55,604	)

 

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Reclassifications in Raptor’s unaudited pro forma combined statement of operations for the year ended December 31, 2015 are as follows (in thousands):

 

		Historical Raptor (before conforming reclassifications)				Reclassifications								Historical Raptor (after conforming reclassifications)
Product revenue		$	94,190			$	50				4F			$	94,240
Collaborative revenue			50				(50	)			4F				—
Total revenue			94,240				—								94,240
Cost of sales			12,621				146				4C				12,767
Gross profit			81,619				(146	)							81,473
Operating Expenses:
Research and development expense			58,634				(146	)			4C				58,488
Selling, general and administrative expense			71,443				(71,443	)			4D				—
Sales and marketing			—				34,019				4D				34,019
General and administrative			—				37,424				4D				37,424
Total operating expenses			130,077				(146	)							129,931
Operating loss			(48,458	)			—								(48,458	)
Other (Expense) Income, Net:
Interest income			255				(255	)			4E				—
Interest expense			(15,793	)			255				4E				(15,538	)
Foreign currency transaction loss			(287	)											(287	)
Adjustment to fair value of common stock warrants			(495	)											(495	)
Total other expense, net			(16,320	)			—								(16,320	)
Net loss before expense for income taxes			(64,778	)			—								(64,778	)
Expense for income taxes			444				—								444
Net Loss		$	(65,222	)		$	—							$	(65,222	)

 

(C)	Amortization of intangible assets in Raptor’s historical statement of operations has been reclassified to cost of goods sold to conform to Horizon Pharma’s presentation.

(D)	Selling, general and administrative expenses in Raptor’s historical statements of operations have been reclassified to selling and marketing expenses and general and administrative expenses to conform to Horizon Pharma’s presentation.

(E)	Interest income in Raptor’s historical statement of operations has been reclassified to interest expense, net to conform to Horizon Pharma’s presentation.

(F)	Collaborative revenue in Raptor’s historical statement of operations has been reclassified to product revenue.

5. Historical Hyperion

Financial information presented in the “Historical Hyperion (after conforming reclassifications)” column in the unaudited pro forma combined statement of operations for the year ended December 31, 2015 represents Hyperion results of operations as a stand-alone entity for the period from January 1, 2015 to May 6, 2015, which were derived from its unaudited combined financial statements for the quarterly period ended March 31, 2015 and the stub period from April 1, 2015 to May 6, 2015. Financial information of Hyperion subsequent to May 6, 2015 is included in the historical statement of operations of Horizon Pharma for the year ended December 31, 2015.

 

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Reclassifications and classifications in Hyperion’s unaudited pro forma combined statement of operations for the period ended May 6, 2015 are as follows (in thousands):

 

		Historical Hyperion for the period January 1, 2015 to March 31, 2015				Reclassifications								Historical Hyperion for the period January 1, 2015  to March 31, 2015 (after conforming reclassifications)				Historical Hyperion for the period April 1, 2015 to May 6, 2015				Historical Hyperion for the period ended May 6, 2015 (after conforming reclassifications)
Net sales		$	31,193			$	—							$	31,193			$	8,280			$	39,473
Cost of goods sold			3,833				893				5A				4,726				910				5,636
Gross profit			27,360				(893	)							26,467				7,370				33,837
Operating Expenses:
Research and development			6,799				—								6,799				6,620				13,419
Selling, general and administrative			14,976				(14,976	)			5B				—				—				—
Amortization of intangible asset			893				(893	)			5A				—				—				—
Sales and marketing			—				4,570				5B				4,570				1,482				6,052
General and administrative			—				10,406				5B				10,406				20,257				30,663
Total operating expenses			22,668				(893	)							21,775				28,359				50,134
Operating income (loss)			4,692				—								4,692				(20,989	)			(16,297	)
Other (Expense) Income, Net:
Interest expense, net			(245	)			160				5C				(85	)			(342	)			(427	)
Interest income			160				(160	)			5C				—				—				—
Loss on debt extinguishment			—				—								—				(1,460	)			(1,460	)
Other income, net			4,164				—								4,164				285				4,449
Total other expense, net			4,079				—								4,079				(1,517	)			2,562
Income (loss) before expense for income taxes			8,771				—								8,771				(22,506	)			(13,735	)
Expense for income taxes			1,555				—								1,555				54				1,609
Net Income (Loss)		$	7,216			$	—							$	7,216			$	(22,560	)		$	(15,344	)

 

(A)	Intangible amortization expense of $893 in Hyperion’s historical statement of operations for the three months ended March 31, 2015 has been reclassified to cost of goods sold to conform to Horizon Pharma’s presentation.

(B)

Selling, general and administrative expenses of $14,976 in Hyperion’s historical statement of operations for the three months ended March 31, 2015 included $10,406 of general and administrative expenses and $4,570 of sales and marketing expenses has been reclassified to conform to Horizon Pharma’s presentation.

(C)	Interest income of $160 in Hyperion’s historical statement of operations for the three months ended March 31, 2015 has been reclassified to interest expense, net to conform to Horizon Pharma’s presentation.

 

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6. Unaudited Pro Forma Combined Balance Sheet Adjustments

 

(A)

In connection with the Raptor Acquisition, the Company and the Co-Issuer expect to borrow $375.0 million of Incremental Term Loans and issue $300.0 million of senior notes, the proceeds of which, together with a portion of the Horizon Pharma’s and Raptor’s existing cash on hand, would be available to finance the Transactions. The pro forma adjustment reflects the following estimated amounts (in thousands):

The Incremental Term Loans and the notes include the following components of the Debt Financings:

 

		Incremental Term Loans				Notes				Total New Debt Financings
Principal		$	375,000			$	300,000			$	675,000
Original Issue Discount (“OID”)			(3,750	)			—				(3,750	)
Deferred financing fees			(9,231	)			(7,719	)			(16,950	)
Cash proceeds		$	362,019			$	292,281			$	654,300
Current portion		$	3,750			$	—			$	3,750
Non-current portion			358,269				292,281				650,550
Total		$	362,019			$	292,281			$	654,300

 

(B)	Represents the cash consideration to be paid for the Raptor Acquisition of $800.7 million (in thousands, except share and per share amounts):

 

Fully diluted equity value (92,185,001 shares at September 7, 2016 at $9.00 per share)		$	829,665
Proceeds from exercise of in-the-money stock options (5,850,833 shares at a weighted-average exercise price of $4.94)			(28,920	)
Total purchase consideration to be paid		$	800,745

 

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

 

Estimated Horizon advisory expenses		$	12,200
Estimated Horizon legal, accounting and other expenses			7,000
Estimated Raptor advisory expenses			16,015
Estimated Raptor legal, accounting and other expenses			5,785
Total		$	41,000

 

(D)	Represents the cash to be used to repay Raptor’s existing notes payable of $45.0 million and $16.7 million of prepayment premiums (in thousands):

 

Note payable, current portion		$	11,559
Note payable, net of current portion			32,212
Unamortized debt discount and debt issuance costs			1,229
Principal amount			45,000
Prepayment premiums under notes payable			16,700
Total cash payment to settle Raptor notes payable		$	61,700

 

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(E)	Represents the cash to be used to repay Raptor’s convertible notes of $60.0 million and redemption premiums of $12.0 million (in thousands):

 

Raptor convertible notes, net of debt discount		$	57,958
Unamortized debt discount and debt issuances costs			2,042
Principal amount of convertible notes			60,000
Redemption premiums			12,000
Total cash payment to settle convertible notes		$	72,000

 

(F)

The pro forma adjustments reflect the preliminary estimate of (i) the fair value of the consideration paid with respect to the Raptor Acquisition and (ii) the preliminary estimate of the fair value of identifiable assets acquired and liabilities assumed as of June 30, 2016. The assignment of the purchase price is preliminary. The final determination of the purchase price allocation will be based on the fair values of the assets acquired, including the fair values of the acquired intangible assets, and the liabilities assumed as of the closing of the Raptor Acquisition. As such, the following preliminary purchase price allocation is subject to adjustments and such adjustments may be material (in thousands):

 

Total purchase consideration		$	800,745
Book value of assets acquired and liabilities assumed (1)			67,690
Valuation adjustments:
Inventory step-up			142,869
Developed technology(2)			815,800
IPR&D(3)			(171,000	)
Other intangible assets(3)			(2,398	)
Goodwill(3)			(12,223	)
Current royalty liability			(8,600	)
Deferred tax liabilities, net			(245,080	)
Non-current royalty liability			(84,900	)
Contingent consideration liability			126,570
Goodwill			172,017
		$	800,745

 

(1)

Consists primarily of Raptor’s cash, accounts receivable, inventories, fixed assets, prepaid assets, net of accounts payable and accrued liabilities.

(2)

Net of $3,200 of Raptor’s developed technology as of June 30, 2016.

(3)

Represents assets on Raptor’s balance sheet as of June 30, 2016. The Goodwill adjustment represents the write-off of Raptor’s historical goodwill.

 

(G)	Represents the elimination of Raptor’s stockholders’ equity.

 

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7. Unaudited Pro Forma Combined Statement of Operations—For the Six Months Ended June 30, 2016

 

(A)	Reflects the amortization expense adjustments related to the fair value of identifiable intangible assets recognized in connection with the Crealta Acquisition, as follows (in thousands, except years):

 

Developed Technology		Fair Value Adjustment				Useful Lives (Years)				Amortization Expense from January 1 to January 12, 2016
KRYSTEXXA		$	392,700				12			$	1,076
MIGERGOT			26,000				10				85
		$	418,700								1,161
Historical Crealta amortization expense											(289	)
Increase to pro forma amortization expense										$	872

 

(B)

Reflects the elimination of acquisition-related costs attributable to the Crealta Acquisition. 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 costs include financial advisory fees, legal, accounting and other professional fees incurred by Horizon Pharma and Crealta and directly related to the Crealta Acquisition.

 

(C)	Represents the elimination of the one-time stock compensation expense for Crealta that was accelerated as a result of the Crealta Acquisition and recorded in Crealta’s historical statement of operations.

 

(D)	Represents the elimination of Crealta’s historical interest expense, which includes amortization of loan origination fees of $1.9 million, associated with the debt that was extinguished as a result of the Crealta Acquisition.

 

(E)	Represents the income tax expense associated with the additional intangible amortization and non-recurring charges related to transaction costs removed from the pro forma statement of income resulting from the Crealta Acquisition, using a combined U.S. federal and state statutory tax rate of 39%.

 

(F)	Reflects the fair value of developed technology assets and related amortization expense adjustments related to the Raptor Acquisition, as follows (in thousands, except years):

 

Type of Intangible		Fair Value				Useful Life (Years)				For the Six Months Ended June 30, 2016
Developed Raptor technology		$	819,000				13			$	31,500
Historical Raptor amortization expense											(265	)
Increase to pro forma amortization expense										$	31,235

 

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(G)

Reflects the interest expense, amortization of OID and deferred financing fees related to the anticipated Debt Financings in connection with the Raptor Acquisition. The adjustment also reflects the elimination of historical interest expense for Raptor debt that will be extinguished as part of the Raptor Acquisition (in thousands):

 

		Amount				Assumed Weighted Average Blended Interest Rate				Interest Payment				Amortization of OID				Amortization of Deferred Financing Fees				Total Interest Expense
Incremental Term Loans		$	375,000				5.833	%		$	10,938			$	417			$	1,026			$	12,381
New Senior Notes			300,000				5.833	%			8,750				—				482				9,232
New interest expense										$	19,688			$	417			$	1,508			$	21,613
Less historical Raptor interest expense																							(9,340	)
Increase to pro forma interest expense																						$	12,273

Deferred financing fees include bank fees, financial advisory, legal, and other professional fees. Deferred financing fees and OID are recognized over 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 5.833%, which was derived from utilizing an assumed weighted-average blended interest rate on the Incremental Term Loans and the notes. This rate may be considerably different from the actual interest rates incurred based on fluctuations in the LIBOR rate.

If the weighted-average blended interest rate were to increase by 0.125%, the Company’s pro forma interest expense for the six months ended June 30, 2016 would increase by $0.4 million. In addition, the effective yield of the 2015 Term Loans may be increased (to the extent necessary) such that the effective yield of the 2015 Term Loans is not less than the effective yield of the Incremental Term Loans minus 0.50%.

 

(H)	Represents the income tax benefit associated with the additional intangible amortization and interest expense removed from the pro forma statement of income resulting from the Raptor Acquisition, using a combined U.S. federal and state statutory tax rate of 39%.

8. Unaudited Pro Forma Combined Statement of Operations—For the Year Ended December 31, 2015

 

(A)	Reflects the amortization expense adjustments related to the fair value of identifiable intangible assets recognized in connection with the Hyperion Acquisition and the Crealta Acquisition, as follows (in thousands except years):

 

Developed Technology		Fair Value				Useful Lives (Years)				Total Amortization Expense(1)
RAVICTI		$	1,021,600				11			$	32,060
BUPHENYL			22,600				7				1,115
KRYSTEXXA			392,700				12				32,725
MIGERGOT			26,000				10				2,600
		$	1,462,900							$	68,500
Historical Hyperion amortization expense											(1,248	)
Historical Crealta amortization expense											(7,881	)
Increase to pro forma amortization expense										$	59,371

 

(1)	Amortization expense for RAVICTI and BUPHENYL is for the period from January 1, 2015 to May 6, 2015 (acquisition date of Hyperion).

 

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(B)

Reflects the elimination of the $8.3 million charge to recognize additional cost of goods sold on the stepped up market value of Hyperion inventories. The impact of the costs of goods sold has not been reflected in the unaudited pro forma combined statement of operations since the costs are expected to be nonrecurring in nature.

 

(C)

Reflects the estimated $35.6 million charge to recognize additional cost of goods sold on the stepped up market value of KRYSTEXXA inventory of $161.9 million, which is estimated to be turned over in 2.5 years. As the KRYSTEXXA inventory will turn over in a period of more than one year, this adjustment is considered to have continuing impact to Horizon Pharma’s statement of operations.

 

(D)

Reflects the elimination of acquisition-related costs attributable to the Hyperion Acquisition and the Crealta Acquisition. 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 a debt commitment fee, financial advisory fees, legal, accounting, other professional fees, incurred by Horizon Pharma, Hyperion and Crealta directly related to the Hyperion Acquisition and Crealta Acquisition.

 

(E)

Reflects the additional interest expense, amortization of OID and deferred financing fees for the year ended December 31, 2015 related to the 2022 notes, the 2015 Term Loans and the 2023 notes assuming they were incurred on January 1, 2015. The adjustment also reflects the elimination of any historical interest expense for debt that was extinguished as part of the Hyperion Acquisition and the Crealta Acquisition (in thousands):

 

		Amount				Interest Rate				Interest Payment				Amortization of OID				Amortization of Deferred Financing Fees				Total Interest Expense
2022 notes		$	400,000				2.500	%		$	2,465			$	4,619			$	29			$	7,113
2015 Term Loans			400,000				4.500	%			6,263				116				377				6,756
2023 notes			475,000				6.625	%			10,260				436				80				10,776
New interest expense										$	18,988			$	5,171			$	486			$	24,645
Less historical interest expense of Horizon Pharma’s Prior Credit Facility																							(10,431	)
Less historical Hyperion interest expense																							(587	)
Less historical Crealta interest expense																							(5,804	)
Increase to pro forma interest expense																						$	7,823

The interest rates for the 2022 notes and the 2023 notes are fixed and the interest rate for the 2015 Term Loans is LIBOR plus 3.5% subject to a LIBOR floor of 1.0%. If the interest rate on the 2015 Term Loans were to increase by 0.125%, the Company’s pro forma interest expense would increase by $0.5 million.

 

(F)

Reflects the elimination of the loss of $56.8 million related to the early repayment of the $300.0 million borrowing under a credit facility (the “Prior Credit Facility”), and the loss of $1.5 million on the extinguishment of Hyperion’s debt prior to the Hyperion Acquisition. The impact of these losses on debt extinguishment has not been reflected in the unaudited pro forma combined statement of operations since the losses are expected to be nonrecurring in nature.

 

(G)

Represents the income tax expense associated with the additional intangible amortization, cost of goods sold related to KRYSTEXXA, interest expense and non-recurring charges removed from the pro forma statement of income resulting from the Hyperion Acquisition and the Crealta Acquisition, using a combined federal and state statutory tax rate of 39%.

 

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(H)	Reflects the fair value of identifiable intangible assets and related amortization expense adjustments related to the Raptor Acquisition, as follows (in thousands, except years):

 

Type of Intangible		Fair Value				Useful Life (Years)				For the Year Ended December 31, 2015
Developed technology		$	819,000				13			$	63,000
Historical Raptor amortization expense											(311	)
Increase to pro forma amortization expense										$	62,689

 

(I)

Reflects the interest expense, amortization of OID and deferred financing fees related to the anticipated Debt Financings in connection with the Raptor Acquisition. The adjustment also reflects the elimination of any historical interest expense for Raptor debt that will be extinguished as part of the Raptor Acquisition (in thousands):

 

		Amount				Assumed Weighted- Average Blended Interest Rate				Interest Payment				Amortization of OID				Amortization of Deferred Financing Fees				Total Interest Expense
Incremental Term Loans		$	375,000				5.833	%		$	21,875			$	833			$	2,051			$	24,759
Notes			300,000				5.833	%			17,500				—				965				18,465
New interest expense										$	39,375			$	833			$	3,016			$	43,224
Less historical Raptor interest expense																							(15,793	)
Increase to pro forma interest expense																						$	27,431

Deferred financing fees include bank fees, financial advisory, legal, and other professional fees. Deferred financing fees and OID are recognized over 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 5.833%, which was derived from utilizing an assumed weighted-average blended interest rate on the Incremental Term Loans and the notes. This rate may be considerably different from the actual interest rates incurred based on fluctuations in the LIBOR rate.

If the weighted-average blended interest rate were to increase by 0.125%, the Company’s pro forma interest expense for the year ended December 31, 2015 would increase by $0.8 million. In addition, the effective yield of the 2015 Terms Loans may be increased (to the extent necessary) such that the effective yield of the 2015 Term Loans is not less than the effective yield of the Incremental Term Loans minus 0.50%.

 

(J)	Represents the income tax benefit associated with the additional intangible amortization and interest expense removed from the pro forma statement of income resulting from the Raptor Acquisition, using a combined federal and state statutory tax rate of 39%.

 

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