Horizon Therapeutics Public Ltd Co - FORM 8-K - EX-99.1

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8-K - 8-K - Horizon Therapeutics Public Ltd Co	d583431d8k.htm

Exhibit 99.1

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Horizon Pharma plc Reports Record Quarterly Net Sales for Orphan and Rheumatology

Segment; Increases Full-Year 2018 Adjusted EBITDA Guidance; Implements New

Company Operating Structure to Enhance Focus on Rare Diseases

— Record Quarterly Orphan and Rheumatology Segment Net Sales of $201.7 Million

Increased 17 Percent; Represented 67 Percent of Total Company Net Sales —

— Second-Quarter 2018 KRYSTEXXA ^® Net Sales Growth of 53 Percent;

Continue to Expect Full-Year 2018 Net Sales Growth of More Than 65 Percent —

— Target Enrollment Reached in Teprotumumab Phase 3 Clinical Trial,

Significantly Ahead of Schedule —

— Second-Quarter 2018 Net Sales of $302.8 Million;

Second-Quarter 2018 GAAP Net Loss of $32.8 Million; Adjusted EBITDA of $116.8 Million —

— Confirming Full-Year 2018 Net Sales Guidance Range of $1.170 Billion to $1.200 Billion;

Increasing Full-Year Adjusted EBITDA Guidance Range to $400 Million to $420 Million —

DUBLIN, IRELAND – Aug. 8, 2018 – Horizon Pharma plc (NASDAQ: HZNP) announced its second-quarter 2018 financial results today. Effective with the second quarter of 2018, the Company has realigned its operating structure and is reporting financial results as two separate segments: the orphan and rheumatology segment, its strategic growth business, and the primary care segment. The new operating structure reflects the evolution of the Company’s strategy and vision of transitioning Horizon Pharma to a biopharmaceutical company focused on rare disease medicines.

“Our orphan and rheumatology segment generated record quarterly net sales, driven by accelerating KRYSTEXXA growth, reflecting the additional investments we are making this year,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. “Our clinical programs continue to advance, with target enrollment now complete in the teprotumumab Phase 3 trial, well ahead of schedule. Additionally, we plan on initiating a new study of KRYSTEXXA to continue exploring a broader clinical profile of this medicine, the only FDA-approved treatment for uncontrolled gout. These advancements support our transformation into a rare disease medicine focused company with a robust pipeline enabling sustainable growth.”

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Financial Highlights


(in millions except for per share amounts and percentages)	Q2 18			Q2 17			% Change			YTD 18			YTD 17			% Change
Net sales	$	302.8		$	289.5			5		$	526.7		$	510.4			3
Net loss		(32.8	)		(209.5	)		84			(190.2	)		(300.1	)		37
Non-GAAP net income		80.5			68.3			18			85.3			103.3			(17	)
Adjusted EBITDA		116.8			127.0			(8	)		150.4			178.9			(16	)
Net loss per share—diluted	$	(0.20	)	$	(1.29	)		84		$	(1.15	)	$	(1.85	)		38
Non-GAAP earnings per share—diluted		0.48			0.41			17			0.51			0.63			(19	)

Second-Quarter and Recent Company Highlights

•

Teprotumumab: OPTIC, the teprotumumab Phase 3 clinical trial, has reached its target enrollment of 76 patients, significantly ahead of schedule. The remaining few subjects in screening will be allowed to randomize over the next several weeks.

Teprotumumab is a fully human monoclonal antibody IGF-1R inhibitor being developed for the treatment of thyroid eye disease (TED), in which the muscles and fatty tissue behind the eye become inflamed, which can lead to proptosis, or bulging of the eye, and diplopia, or double vision, as well as quality-of-life issues. In October, data will be presented at the 2018 American Thyroid Association (ATA) meeting from the follow-up period of the Phase 2 clinical trial, during which the Company continued to collect data on study patients off therapy out to 48 weeks to assess durability of response.

•

New KRYSTEXXA Immunomodulation Study: The Company is planning on initiating a new study of KRYSTEXXA to continue to explore a broader clinical profile of this medicine, the only FDA-approved treatment for uncontrolled gout (chronic gout that is refractory to conventional therapies). The study will evaluate the impact of adding methotrexate to KRYSTEXXA to enhance the patient response rate. Methotrexate is the most common immunomodulator used by rheumatologists. Enrollment is expected to begin in the fourth quarter of 2018.

•

New Uncontrolled Gout and KRYSTEXXA Data Presented at EULAR: In June, the Company participated in the 2018 Annual European Congress of Rheumatology (EULAR) in Amsterdam, where new insights on both gout and KRYSTEXXA were presented. One presentation highlighted a 27 percent increase in U.S. emergency department visits between 2006 and 2014 for people living with gout, suggesting a sizeable and growing population of gout patients who are uncontrolled and not well managed. Several KRYSTEXXA data analyses underscored the complex nature of uncontrolled gout, the potential systemic effects of elevated serum uric acid (sUA) levels and the need to manage uncontrolled gout aggressively. These presentations support the Company’s continued efforts to increase awareness and understanding of uncontrolled gout and the benefits of KRYSTEXXA.

•

R&D Leadership: The Company made several important leadership additions to its research and development (R&D) organization to expand its capabilities, partner with the business development team in identifying and evaluating development-stage opportunities and lead the orphan and rheumatology therapeutic areas’ clinical development strategies.

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•

Intellectual Property Update: The Company received two new patents from the U.S. Patent and Trademark Office during the quarter that cover RAVICTI^®, with two additional patents scheduled to be issued in August, resulting in five new patents in an 18-month period. In addition, the Company settled litigation in June with Lupin relating to RAVICTI. Lupin’s license to enter the market with a generic version of RAVICTI would begin on July 1, 2026.

•

Best Workplace Awards: Great Place to Work^® and FORTUNE Magazine selected Horizon Pharma as the Number One place to work on FORTUNE’s “Best Workplaces in Health Care & Biopharma” list. The Company has also been awarded a 2018 “Best Places to Work in Chicago” designation by Crain’s Chicago Business, as well as named to its “10 Best Places to Work for Women” list. In addition, in July, the Company was recognized by PEOPLE and Great Place to Work^® as one of the 2018 “50 Companies That Care,” a list that spotlights companies with 1,000 or more employees that have succeeded in business while also demonstrating respect, compassion and concern for their communities, their employees and the environment.

Research and Development Programs

Orphan Candidates and Programs:

•

Teprotumumab: Teprotumumab is the Company’s fully human monoclonal antibody IGF-1R inhibitor in development for the treatment of TED. The pivotal Phase 3 confirmatory study is evaluating teprotumumab for the treatment of moderate-to-severe active TED, which has no FDA-approved treatments. The Company estimates peak annual U.S. net sales of more than $750 million for teprotumumab, assuming FDA approval.

Rheumatology Pipeline Candidates and Programs:

•

KRYSTEXXA Immunomodulation Studies: The evaluation of the use of immunomodulation therapies to enhance the response rate to KRYSTEXXA is being studied in two investigator-initiated trials, as well as a new trial being initiated by the Company. The three trials are evaluating different immunomodulators, all of which are used by rheumatologists.

Methotrexate to Increase Response Rates in Patients with Uncontrolled GOut Receiving KRYSTEXXA (MIRROR): a Horizon Pharma-sponsored multicenter, efficacy and safety study for methotrexate co-administered with KRYSTEXXA to evaluate the impact of methotrexate weekly for one month prior to dosing with KRYSTEXXA and then throughout the 24 weeks of treatment with KRYSTEXXA. Enrollment is expected to begin in the fourth quarter of 2018.

REduCing Immunogenicity to PegloticasE (RECIPE): a double-blind, placebo-controlled trial for mycophenolate mofetil (MMF) co-administered with KRYSTEXXA to evaluate the impact of MMF daily for two weeks prior to dosing with KRYSTEXXA, followed by a 12-week course of KRYSTEXXA every two weeks along with daily doses of MMF,followed by dosing of KRYSTEXXA alone every two weeks for 12 weeks.

Tolerization Reduces Intolerance to Pegloticase and Prolongs the Urate Lowering Effect (TRIPLE) is an exploratory, open-label adaptive trial with multiple patient cohorts, including one evaluating the impact of adding daily doses of azathioprine for a two-week run-in period, followed by KRYSTEXXA every two weeks for a total of 13 doses, along with daily doses of azathioprine.

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Next-generation Biologic Programs for Uncontrolled Gout: The Company is pursuing two development programs for next-generation biologics for uncontrolled gout, HZN-003 and PASylated uricase technology to support and sustain the Company’s market leadership in uncontrolled gout. The programs are exploring the use of optimized uricase technology as well as optimized PEGylation and PASylation technology.

Second-Quarter Financial Results

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

•

Net Sales: Second-quarter 2018 net sales were $302.8 million, an increase of 4.6 percent, driven by continued strong growth of the Company’s orphan and rheumatology medicines. Year-over-year growth would have been 6.3 percent, excluding second-quarter 2017 net sales of $4.5 million for PROCYSBI^® and QUINSAIR™ in the Europe, the Middle East and Africa (EMEA) regions, which were divested on June 23, 2017.

•

Gross Profit: Under U.S. GAAP in the second quarter of 2018, the gross profit ratio was 67.0 percent compared to 55.0 percent in the second quarter of 2017. The non-GAAP gross profit ratio in the second quarter of 2018 was 90.2 percent compared to 90.6 percent in the second quarter of 2017.

•

Operating Expenses: R&D expenses were 8.0 percent of net sales and selling, general and administrative (SG&A) expenses were 58.3 percent of net sales. Non-GAAP R&D expenses were 6.7 percent of net sales, and non-GAAP SG&A expenses were 45.0 percent of net sales.

•

Income Tax Rate: The income tax rate in the second quarter of 2018 on a GAAP basis was negative 13.7 percent and on a non-GAAP basis was 12.0 percent.

•

Net (Loss) Income: On a GAAP basis in the second quarter of 2018, net loss was $32.8 million.Second-quarter 2018 non-GAAP net income was $80.5 million.

•

Adjusted EBITDA: Second-quarter 2018 adjusted EBITDA was $116.8 million.

•

Earnings (Loss) per Share: On a GAAP basis in the second quarter of 2018, diluted loss per share was $0.20; in the second quarter of 2017, diluted loss per share was $1.29. Non-GAAP diluted earnings per share in the second quarter of 2018 and 2017 were $0.48 and $0.41, respectively. Weighted average shares outstanding used for calculating GAAP diluted loss per share and non-GAAP diluted earnings per share in the second quarter of 2018 were 165.5 million and 169.4 million, respectively.

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Second-Quarter Segment Results

The Company has realigned its structure to operate its strategic growth business, orphan and rheumatology, separately from its primary care business. The new structure allows the Company to more efficiently allocate its resources to address unmet treatment needs for patients with rare diseases. As a result of the realignment, effective with the second-quarter of 2018, the Company is reporting its financial results as two separate segments: the orphan and rheumatology segment and the primary care segment, reporting net sales and operating income for each segment. Historical segment net sales and operating income for 2017 are provided in the accompanying financial schedules.

Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments. While segment operating income contains certain adjustments to the directly comparable GAAP figures in the Company’s consolidated financial results, it is considered to be prepared in accordance with GAAP for purposes of presenting the Company’s segment operating results.

Orphan and Rheumatology Segment


(in millions except for percentages)	Q2 18		Q2 17		% Change			YTD 18		YTD 17		% Change
RAVICTI^®		57.0		47.2		21			106.1		91.1		16
PROCYSBI^®⁽¹⁾		38.4		36.7		5			73.4		71.0		3
ACTIMMUNE^®		27.4		28.8		(5	)		52.2		55.0		(5	)
BUPHENYL^®		5.2		6.3		(16	)		11.0		12.6		(12	)
QUINSAIR^TM(1)		0.1		1.4		(93	)		0.2		3.2		(94	)
Orphan	$	128.1	$	120.4		6		$	242.9	$	232.9		4
KRYSTEXXA^®		58.6		38.3		53			105.3		69.9		51
RAYOS^®		13.5		11.6		16			24.1		21.9		10
LODOTRA^®		1.5		1.8		(15	)		1.7		2.7		(38	)
Rheumatology	$	73.6	$	51.7		42		$	131.1	$	94.5		39

Orphan and Rheumatology Net Sales	$	201.7	$	172.1		17		$	374.0	$	327.3		14


Orphan and Rheumatology Segment Operating Income	$	70.6	$	64.7		9		$	113.7	$	114.4		(1	)

(1)

On June 23, 2017, Horizon Pharma completed the divestiture of a European subsidiary that owned the marketing rights to PROCYSBI and QUINSAIR in Europe, the Middle East and Africa (EMEA) to Chiesi Farmaceutici S.p.A. Horizon Pharma retains marketing rights for the two medicines in the United States, Canada, Latin America and Asia. Second-quarter and year-to-date 2017 net sales of PROCYSBI and QUINSAIR in EMEA were $4.5 million and $9.5 million, respectively.

•

Second-quarter 2018 net sales of the orphan and rheumatology segment were $201.7 million, an increase of 17.2 percent over the prior year’s quarter, driven by continued strong KRYSTEXXA growth, as well as growth of RAVICTI and PROCYSBI. Excluding the second-quarter 2017 EMEA net sales of $4.5 million for PROCYSBI and QUINSAIR that were divested in June 2017, orphan and rheumatology segment year-over-year net sales growth would have been 20.4 percent.

•

In line with the Company’s expectations, second-quarter 2018 orphan and rheumatology segment operating income was $70.6 million, or 35 percent of orphan and rheumatology net sales. The Company is investing significantly in the commercial expansion of KRYSTEXXA in 2018, which is expected to continue to drive future net sales growth and margin expansion over time.

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Primary Care Segment


(in millions except for percentages)	Q2 18		Q2 17		% Change			YTD 18		YTD 17		% Change
PENNSAID^® 2%		47.6		51.2		(7	)		74.4		92.8		(20	)
DUEXIS^®		30.7		43.6		(30	)		46.4		61.3		(24	)
VIMOVO^®		21.9		21.1		3			30.2		26.0		16
MIGERGOT^®		0.9		1.5		(35	)		1.7		2.9		(41	)

Primary Care Net Sales	$	101.1	$	117.4		(14	)	$	152.7	$	183.0		(17	)


Primary Care Segment Operating Income	$	45.9	$	62.4		(26	)	$	36.3	$	65.0		(44	)

•

Second-quarter 2018 net sales of the primary care segment were $101.1 million.

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In line with the Company’s expectations, second-quarter 2018 operating income for the primary care segment was $45.9 million, or 45 percent of primary care net sales.

Cash Flow Statement and Balance Sheet Highlights

•

On a GAAP basis in the second quarter of 2018, operating cash flow was $61.8 million. Non-GAAP operating cash flow was $75.2 million.

•

The Company had cash and cash equivalents of $710.2 million as of June 30, 2018.

•

As of June 30, 2018, the total principal amount of debt outstanding was $1.993 billion, which consists of $818 million in senior secured term loans due 2024; $300 million senior notes due 2024; $475 million senior notes due 2023; and $400 million exchangeable senior notes due 2022. As of June 30, 2018, net debt was $1.283 billion.

Full-Year 2018 Guidance

The Company continues to expect full-year 2018 net sales in a range of $1.170 billion to $1.200 billion. The Company increased its full-year 2018 adjusted EBITDA guidance to a range of $400 million to $420 million, from $390 million to $415 million. The Company continues to project full-year 2018 net sales growth for KRYSTEXXA of more than 65 percent.

Webcast

At 8 a.m. EDT / 1 p.m. IST today, the Company will host a live webcast to review its financial and operating results and provide a general business update. The live webcast and a replay may be accessed 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 webcast will be available approximately two hours after the live webcast.

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About Horizon Pharma plc

Horizon Pharma plc is focused on researching, developing and commercializing innovative medicines that address unmet treatment needs for rare and rheumatic diseases. By fostering a growing pipeline of medicines in development and exploring all potential uses for currently marketed medicines, we strive to make a powerful difference for patients, their caregivers and physicians. For us, it’s personal: by living up to our own potential, we are helping others live up to theirs. For more information, please visit www.horizonpharma.com, follow us @HZNPplc on Twitter or like us on Facebook.

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 Pharma as non-GAAP financial measures. Horizon Pharma provides certain other financial measures such as non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP gross profit and gross profit ratio, non-GAAP operating expenses, non-GAAP operating income, non-GAAP tax rate, non-GAAP operating cash flow and net debt, each of which include adjustments to GAAP figures. These non-GAAP measures are intended to provide additional information on Horizon Pharma’s performance, operations, expenses, profitability and cash flows. Adjustments to Horizon Pharma’s GAAP figures as well as EBITDA exclude acquisition and/or divestiture-related expenses, charges related to the discontinuation of ACTIMMUNE development for Friedreich’s ataxia, gain from divestiture, an upfront fee for a license of a patent, litigation settlements, loss on debt extinguishment, costs of debt refinancing, drug manufacturing harmonization costs, restructuring and realignment costs, as well as non-cash items such as share-based compensation, depreciation and amortization, royalty accretion, non-cash interest expense, long-lived asset impairment charges, impacts of contingent royalty liability remeasurements 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 maintains an established non-GAAP cost policy that guides the determination of what costs will be excluded in non-GAAP measures. Horizon Pharma believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon Pharma’s financial and operating 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 2018 financial results and trends and to facilitate comparisons between periods and with respect to projected information. In addition, these non-GAAP financial measures are among the indicators Horizon Pharma’s management uses for planning and forecasting purposes and measuring the Company’s performance. For example, adjusted EBITDA is used by Horizon Pharma as one measure of management performance under certain incentive compensation arrangements. 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 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 Pharma has not provided a reconciliation of its full-year 2018 adjusted EBITDA outlook to an expected net income (loss) outlook because certain items such as acquisition/divestiture-related expenses and share-based compensation that are a component of net income (loss) cannot be reasonably projected due to the significant impact of changes in Horizon Pharma’s stock price, the variability associated with the size or timing of acquisitions/divestitures and other factors. These components of net income (loss) could significantly impact Horizon Pharma’s actual net income (loss).

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Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon Pharma’s full-year 2018 net sales and adjusted EBITDA guidance, expected growth in net sales of certain medicines, estimated peak annual net sales of teprotumumab, if approved; expected financial performance in future periods; expected timing of clinical trials, including the Phase 3 clinical trial of teprotumumab; expected increases in investment in Horizon Pharma’s rare disease medicine pipeline and the impact thereof; potential market opportunity for Horizon Pharma’s medicines in approved and potential additional indications; and business and other statements that are not historical facts. These forward-looking statements are based on Horizon Pharma’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 Pharma’s actual future financial and operating results may differ from its expectations or goals; 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 payers; risks relating to Horizon Pharma’s ability to successfully implement its business strategies; risks inherent in developing novel medicine candidates, such as teprotumumab, and existing medicines for new indications; risks related to acquisition integration and achieving projected benefits; risks associated with regulatory approvals; risks in the ability to recruit, train and retain qualified personnel; 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 Pharma’s filings and reports with the SEC. Horizon Pharma undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information.


Contacts:
Investors:		U.S. Media:
Tina Ventura		Geoff Curtis
Senior Vice President,		Executive Vice President,
Investor Relations		Corporate Affairs & Chief Communications Officer
investor-relations@horizonpharma.com		media@horizonpharma.com

Ruth Venning		Ireland Media:
Executive Director,		Ray Gordon
Investor Relations		Gordon MRM
investor-relations@horizonpharma.com		ray@gordonmrm.ie

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Horizon Pharma plc

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net sales	$	302,835		$	289,507		$	526,716		$	510,366
Cost of goods sold		100,082			130,150			216,174			269,266

Gross profit		202,753			159,357			310,542			241,100

OPERATING EXPENSES:
Research and development		24,265			163,101			41,910			176,162
Selling, general and administrative		176,674			159,653			356,273			333,718
Impairment of long-lived assets		—			22,270			37,853			22,270

Total operating expenses		200,939			345,024			436,036			532,150

Operating income (loss)		1,814			(185,667	)		(125,494	)		(291,050	)

OTHER EXPENSE, NET:
Interest expense, net		(31,030	)		(31,608	)		(61,484	)		(63,591	)
Foreign exchange (loss) gain		(5	)		151			(115	)		(108	)
Gain on divestiture		—			5,856			—			5,856
Loss on debt extinguishment		—			—			—			(533	)
Other income (expense), net		347			(35	)		525			—

Total other expense, net		(30,688	)		(25,636	)		(61,074	)		(58,376	)

Loss before expense (benefit) for income taxes		(28,874	)		(211,303	)		(186,568	)		(349,426	)
Expense (benefit) for income taxes		3,962			(1,767	)		3,596			(49,320	)

Net loss	$	(32,836	)	$	(209,536	)	$	(190,164	)	$	(300,106	)

Net loss per ordinary share—basic and diluted	$	(0.20	)	$	(1.29	)	$	(1.15	)	$	(1.85	)

Weighted average ordinary shares outstanding—basic and diluted		165,536,826			162,931,930			164,921,722			162,486,946

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Horizon Pharma plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)


	As of
	June 30, 2018			December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	710,211		$	751,368
Restricted cash		6,394			6,529
Accounts receivable, net		403,671			405,214
Inventories, net		50,105			61,655
Prepaid expenses and other current assets		64,231			43,402

Total current assets		1,234,612			1,268,168

Property and equipment, net		18,070			20,405
Developed technology, net		2,272,154			2,443,949
Other intangible assets, net		5,039			5,441
Goodwill		426,441			426,441
Deferred tax assets, net		4,185			3,470
Other assets		29,224			36,081

Total assets	$	3,989,725		$	4,203,955

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Long-term debt—current portion	$	—		$	10,625
Accounts payable		31,110			34,681
Accrued expenses		173,619			175,697
Accrued trade discounts and rebates		449,683			501,753
Accrued royalties—current portion		65,604			65,328
Deferred revenues—current portion		5,629			6,885

Total current liabilities		725,645			794,969

LONG-TERM LIABILITIES:
Exchangeable notes, net		323,105			314,384
Long-term debt, net of current		1,562,013			1,576,646
Accrued royalties, net of current		293,626			291,185
Deferred revenues, net of current		—			9,713
Deferred tax liabilities, net		157,404			157,945
Other long-term liabilities		67,782			68,015

Total long-term liabilities		2,403,930			2,417,888

COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 166,974,870 and 164,785,083 shares issued at June 30, 2018 and December 31, 2017, respectively, and 166,590,504 and 164,400,717 shares outstanding at June 30, 2018 and December 31, 2017, respectively		17			16
Treasury stock, 384,366 ordinary shares at June 30, 2018 and December 31, 2017		(4,585	)		(4,585	)
Additional paid-in capital		2,306,754			2,248,979
Accumulated other comprehensive loss		(1,128	)		(983	)
Accumulated deficit		(1,440,908	)		(1,252,329	)

Total shareholders’ equity		860,150			991,098

Total liabilities and shareholders’ equity	$	3,989,725		$	4,203,955

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Horizon Pharma plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(32,836	)	$	(209,536	)	$	(190,164	)	$	(300,106	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		68,540			71,531			137,447			143,014
Equity-settled share-based compensation		30,721			29,123			58,554			57,960
Royalty accretion		14,758			12,735			29,475			25,694
Royalty liability remeasurement		—			—			(2,151	)		(2,944	)
Impairment of long-lived assets		—			22,270			37,853			22,270
Amortization of debt discount and deferred financing costs		5,690			5,206			11,185			10,629
Deferred income taxes		(3,433	)		(31,791	)		(1,753	)		(79,486	)
Acquired in-process research & development expense		—			148,609			—			148,609
Gain on divestiture		—			(2,635	)		—			(2,635	)
Loss on debt extinguishment		—			—			—			533
Foreign exchange and other adjustments		580			(174	)		459			613
Changes in operating assets and liabilities:
Accounts receivable		678			(6,209	)		1,742			(97,267	)
Inventories		(2,741	)		30,686			11,549			67,736
Prepaid expenses and other current assets		(11,934	)		4,879			(21,738	)		2,434
Accounts payable		(10,120	)		(6,255	)		(3,592	)		29,823
Accrued trade discounts and rebates		19,982			871			(52,138	)		116,950
Accrued expenses and accrued royalties		(18,553	)		(36,876	)		(14,099	)		(86,235	)
Deferred revenues		1,817			1,002			333			384
Other non-current assets and liabilities		(1,361	)		14,489			(1,988	)		14,755

Net cash provided by operating activities		61,788			47,925			974			72,731

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired		—			(167,850	)		—			(167,850	)
Proceeds from divestiture, net of cash divested		—			69,072			—			69,072
Payment related to license agreement		—			—			(12,000	)		—
Purchases of property and equipment		(96	)		(1,207	)		(762	)		(2,627	)

Net cash used in investing activities		(96	)		(99,985	)		(12,762	)		(101,405	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term loans		(25,598	)		(2,125	)		(27,722	)		(774,875	)
Net proceeds from term loans		—			—			—			847,768
Proceeds from the issuance of ordinary shares in connection with warrant exercises		—			11			—			11
Proceeds from the issuance of ordinary shares through ESPP programs		4,720			4,029			4,734			3,856
Proceeds from the issuance of ordinary shares in connection with stock option exercises		2,727			753			3,672			1,297
Payment of employee withholding taxes relating to share-based awards		(5,668	)		(925	)		(9,185	)		(5,202	)
Repurchase of ordinary shares		—			(992	)		—			(992	)

Net cash (used in) provided by financing activities		(23,819	)		751			(28,501	)		71,863

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(1,988	)		2,494			(1,003	)		2,196

Net increase (decrease) in cash, cash equivalents and restricted cash		35,885			(48,815	)		(41,292	)		45,385
Cash, cash equivalents and restricted cash, beginning of the period⁽¹⁾		680,720			610,350			757,897			516,150

Cash, cash equivalents and restricted cash, end of the period⁽¹⁾	$	716,605		$	561,535		$	716,605		$	561,535

(1)	Amounts include restricted cash balance in accordance with ASU No. 2016-18. Cash and cash equivalents excluding restricted cash are shown on the balance sheet.

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Horizon Pharma plc

Segment Operating Income – 2017 Historical Information (Unaudited)

(in millions)


	Q1 17		Q2 17		Q3 17		Q4 17		FY17
Segment Net Sales
Orphan & Rheumatology	$	155.2	$	172.1	$	175.6	$	178.0	$	680.9
Primary Care		65.6		117.4		96.1		96.2		375.3
Segment Operating Income
Orphan & Rheumatology	$	49.7	$	64.7	$	65.5	$	61.2	$	241.1
Primary Care		2.6		62.4		42.2		41.9		149.1

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Horizon Pharma plc

Net Debt Reconciliation (Unaudited)

(in thousands)


	As of
	June 30, 2018		December 31, 2017
Long-term debt-current portion	$	—	$	10,625
Long-term debt, net of current		1,562,013		1,576,646
Exchangeable notes, net		323,105		314,384

Total Debt		1,885,118		1,901,655
Debt discount		97,737		108,054
Deferred financing fees		10,171		11,041

Total Principal Amount Debt		1,993,026		2,020,750
Less: cash and cash equivalents		710,211		751,368

Net Debt	$	1,282,815	$	1,269,382

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Horizon Pharma plc

GAAP to Non-GAAP Reconciliations

Net Income and Earnings Per Share (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
GAAP net loss	$	(32,836	)	$	(209,536	)	$	(190,164	)	$	(300,106	)
Non-GAAP adjustments:
Acquisition/divestiture-related costs		1,775			153,385			5,686			163,424
Restructuring and realignment costs		7,039			5,193			10,381			5,193
Litigation settlements		4,250			—			4,250			—
Amortization, accretion and step-up:
Intangible amortization expense		66,989			69,776			134,344			139,453
Accretion of royalty liabilities		14,797			12,735			29,515			25,694
Amortization of debt discount and deferred financing costs		5,691			5,206			11,187			10,629
Inventory step-up expense		53			33,895			17,129			74,490
Impairment of long-lived assets		—			22,270			37,853			22,270
Remeasurement of royalties for medicines acquired through business combinations		—			—			(2,151	)		(2,944	)
Share-based compensation		30,721			27,768			58,554			56,237
Depreciation		1,551			1,755			3,104			3,561
Gain on divestiture		—			(5,856	)		—			(5,856	)
Charges relating to discontinuation of Friedreich’s ataxia program		272			(3,103	)		1,222			(3,103	)
Drug substance harmonization costs		475			745			1,279			5,044
Upfront and milestone payments related to license agreements		—			—			90			—
Fees related to term loan refinancings		15			(45	)		42			4,098
Loss on debt extinguishment		—			—			—			533
Royalties for medicines acquired through business combinations		(13,259	)		(11,622	)		(25,780	)		(22,939	)

Total of pre-tax non-GAAP adjustments		120,369			312,102			286,705			475,784
Income tax effect of pre-tax non-GAAP adjustments		(7,015	)		(34,272	)		24,668			(72,375	)
Other non-GAAP income tax adjustments		—			—			(35,893	)		—

Total of non-GAAP adjustments		113,354			277,830			275,480			403,409

Non-GAAP Net Income	$	80,518		$	68,294		$	85,316		$	103,303

Non-GAAP Earnings Per Share:
Weighted average ordinary shares—Basic		165,536,826			162,931,930			164,921,722			162,486,946

Non-GAAP Earnings Per Share—Basic:
GAAP loss per share—Basic	$	(0.20	)	$	(1.29	)	$	(1.15	)	$	(1.85	)
Non-GAAP adjustments		0.69			1.71			1.67			2.49

Non-GAAP earnings per share—Basic	$	0.49		$	0.42		$	0.52		$	0.64

Weighted average ordinary shares—Diluted
Weighted average ordinary shares—Basic		165,536,826			162,931,930			164,921,722			162,486,946
Ordinary share equivalents		3,820,913			2,033,141			3,678,249			2,499,409

Weighted average shares—Diluted		169,357,739			164,965,071			168,599,971			164,986,355

Non-GAAP Earnings Per Share—Diluted
GAAP loss per share—Diluted	$	(0.20	)	$	(1.29	)	$	(1.15	)	$	(1.85	)
Non-GAAP adjustments		0.69			1.71			1.67			2.49
Diluted earnings per share effect of ordinary share equivalents		(0.01	)		(0.01	)		(0.01	)		(0.01	)

Non-GAAP earnings per share—Diluted	$	0.48		$	0.41		$	0.51		$	0.63

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Horizon Pharma plc

GAAP to Non-GAAP Reconciliations

EBITDA (Unaudited)

(in thousands, except percentages)


	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
GAAP net loss	$	(32,836	)	$	(209,536	)	$	(190,164	)	$	(300,106	)
Depreciation		1,551			1,755			3,104			3,561
Amortization, accretion and step-up:
Intangible amortization expense		66,989			69,776			134,344			139,453
Accretion of royalty liabilities		14,797			12,735			29,515			25,694
Amortization of deferred revenue		—			(207	)		—			(411	)
Inventory step-up expense		53			33,895			17,129			74,490
Interest expense, net (including amortization of debt discount and deferred financing costs)		31,030			31,608			61,484			63,591
Expense (benefit) for income taxes		3,962			(1,767	)		3,596			(49,320	)

EBITDA	$	85,546		$	(61,741	)	$	59,008		$	(43,048	)

Other non-GAAP adjustments:
Acquisition/divestiture-related costs		1,775			153,385			5,686			163,424
Restructuring and realignment costs		7,039			5,193			10,381			5,193
Litigation settlements		4,250			—			4,250			—
Impairment of long-lived assets		—			22,270			37,853			22,270
Remeasurement of royalties for medicines acquired through business combinations		—			—			(2,151	)		(2,944	)
Share-based compensation		30,721			27,768			58,554			56,237
Charges relating to discontinuation of Friedreich’s ataxia program		272			(3,103	)		1,222			(3,103	)
Drug substance harmonization costs		475			745			1,279			5,044
Upfront and milestone payments related to license agreements		—			—			90			—
Fees related to term loan refinancings		15			(45	)		42			4,098
Loss on debt extinguishment		—			—			—			533
Gain on divestiture		—			(5,856	)		—			(5,856	)
Royalties for medicines acquired through business combinations		(13,259	)		(11,622	)		(25,780	)		(22,939	)

Total of other non-GAAP adjustments		31,288			188,735			91,426			221,957

Adjusted EBITDA	$	116,834		$	126,994		$	150,434		$	178,909

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Horizon Pharma plc

GAAP to Non-GAAP Reconciliations

Operating Income (Unaudited)

(in thousands, except percentages)


	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
GAAP Operating Income (Loss)	$	1,814		$	(185,667	)	$	(125,494	)	$	(291,050	)
Non-GAAP adjustments:
Acquisition/divestiture-related costs		1,775			153,385			5,686			163,424
Restructuring and realignment costs		7,039			5,193			10,381			5,193
Litigation settlements		4,250			—			4,250			—
Amortization, accretion and step-up:
Intangible amortization expense		66,989			69,776			134,344			139,453
Accretion of royalty liabilities		14,797			12,735			29,515			25,694
Inventory step-up expense		53			33,895			17,129			74,490
Impairment of long-lived assets		—			22,270			37,853			22,270
Remeasurement of royalties for medicines acquired through business combinations		—			—			(2,151	)		(2,944	)
Share-based compensation		30,721			27,768			58,554			56,237
Depreciation		1,551			1,755			3,104			3,561
Charges relating to discontinuation of Friedreich’s ataxia program		272			(3,103	)		1,222			(3,103	)
Drug substance harmonization costs		475			745			1,279			5,044
Upfront and milestone payments related to license agreements		—			—			90			—
Fees related to term loan refinancings		15			(45	)		42			4,098
Royalties for medicines acquired through business combinations		(13,259	)		(11,622	)		(25,780	)		(22,939	)

Total of non-GAAP adjustments		114,678			312,752			275,518			470,478

Non-GAAP Operating Income	$	116,492		$	127,085		$	150,024		$	179,428


Orphan and Rheumatology Segment Operating Income		70,609			64,662			113,713			114,386
Primary Care Segment Operating Income		45,883			62,423			36,311			65,042

Total Segment Operating Income	$	116,492		$	127,085		$	150,024		$	179,428

Amortization of deferred revenue		—			(207	)		—			(411	)
Foreign exchange (loss) gain		(5	)		151			(115	)		(108	)
Other income, net		347			(35	)		525			—

Adjusted EBITDA	$	116,834		$	126,994		$	150,434		$	178,909

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Horizon Pharma plc

GAAP to Non-GAAP Reconciliations

Gross Profit and Operating Cash Flow (Unaudited)

(in thousands, except percentages)


	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Non-GAAP Gross Profit:
GAAP gross profit	$	202,753		$	159,357		$	310,542		$	241,100
Non-GAAP gross profit adjustments:
Acquisition/divestiture-related costs		33			(48	)		52			32
Share-based compensation		1,110			573			1,893			1,001
Remeasurement of royalties for medicines acquired through business combinations		—			—			(2,151	)		(2,944	)
Intangible amortization expense		66,787			69,574			133,942			139,048
Accretion of royalty liabilities		14,797			12,735			29,515			25,694
Inventory step-up expense		53			33,895			17,129			74,490
Depreciation		176			183			353			366
Charges relating to discontinuation of Friedreich’s ataxia program		185			(3,103	)		1,135			(3,103	)
Drug substance harmonization costs		475			745			1,279			5,044
Royalties for medicines acquired through business combinations		(13,259	)		(11,622	)		(25,780	)		(22,939	)

Total of Non-GAAP adjustments		70,357			102,932			157,367			216,689

Non-GAAP gross profit	$	273,110		$	262,289		$	467,909		$	457,789

GAAP gross profit %		67.0	%		55.0	%		59.0	%		47.2	%
Non-GAAP gross profit %		90.2	%		90.6	%		88.8	%		89.7	%

GAAP cash provided by operating activities	$	61,788		$	47,925		$	974		$	72,731
Cash payments for acquisition/divestiture-related costs		1,597			12,620			5,555			33,012
Cash payments for restructuring and realignment costs		4,230			1,664			4,677			1,664
Cash payments for litigation settlements		1,500			16,250			1,500			32,500
Cash payments for upfront and milestone payments related to license agreement		—			—			275			—
Cash payments drug substance harmonization costs		5,960			5,006			5,960			5,006
Cash payments for discontinuation of Friedreich’s ataxia program		108			2,519			3,507			3,001
Cash payments relating to term loan refinancings		13			455			31			3,767

Non-GAAP operating cash flow	$	75,196		$	86,439		$	22,479		$	151,681

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Horizon Pharma plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages)


	Q2 2018
	Pre-tax Net (Loss) Income			Income Tax (Benefit) Expense			Tax Rate			Net (Loss) Income			Diluted (Loss) Earnings Per Share
As reported—GAAP	$	(28.9	)	$	3.9			(13.7	)%	$	(32.8	)	$	(0.20	)
Non-GAAP adjustments		120.4			7.1						113.3

Non-GAAP	$	91.5		$	11.0			12.0	%	$	80.5		$	0.48


	Q2 2017
	Pre-tax Net (Loss) Income			Income Tax (Benefit) Expense			Tax Rate			Net (Loss) Income			Diluted (Loss) Earnings Per Share
As reported—GAAP	$	(211.3	)	$	(1.8	)		0.8	%	$	(209.5	)	$	(1.29	)
Non-GAAP adjustments		312.1			34.3						277.8

Non-GAAP	$	100.8		$	32.5			32.2	%	$	68.3		$	0.41


	YTD 2018
	Pre-tax Net (Loss) Income			Income Tax (Benefit) Expense			Tax Rate			Net (Loss) Income			Diluted (Loss) Earnings Per Share
As reported—GAAP	$	(186.6	)	$	3.6			(1.9	)%	$	(190.2	)	$	(1.15	)
Non-GAAP adjustments		286.7			11.2						275.5

Non-GAAP	$	100.1		$	14.8			14.8	%	$	85.3		$	0.51


	YTD 2017
	Pre-tax Net (Loss) Income			Income Tax (Benefit) Expense			Tax Rate			Net (Loss) Income			Diluted (Loss) Earnings Per Share
As reported—GAAP	$	(349.4	)	$	(49.3	)		14.1	%	$	(300.1	)	$	(1.85	)
Non-GAAP adjustments		475.8			72.4						403.4

Non-GAAP	$	126.4		$	23.1			18.2	%	$	103.3		$	0.63

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Horizon Pharma plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended June 30, 2018

(Unaudited)


	COGS			Research & Development			Selling, General & Administrative			Interest Expense			Income Tax Benefit (Expense)
GAAP as reported	$	(100,082	)	$	(24,265	)	$	(176,674	)	$	(31,030	)	$	(3,962	)
Non-GAAP Adjustments (in thousands):
Acquisition/divestiture-related costs⁽¹⁾		33			18			1,724			—			—
Restructuring and realignment costs⁽²⁾		—			1,733			5,306			—			—
Litigation settlements⁽³⁾		—			—			4,250			—			—
Amortization, accretion and step-up:
Intangible amortization expense⁽⁴⁾		66,787			—			202			—			—
Accretion of royalty liability⁽⁵⁾		14,797			—			—			—			—
Amortization of debt discount and deferred financing costs⁽⁶⁾		—			—			—			5,691			—
Inventory step-up expense⁽⁷⁾		53			—			—			—			—
Share-based compensation⁽¹⁰⁾		1,110			2,209			27,402			—			—
Depreciation⁽¹¹⁾		176			—			1,375			—			—
Charges relating to discontinuation of Friedreich’s ataxia program⁽¹²⁾		185			87			—			—			—
Drug substance harmonization costs⁽¹³⁾		475			—			—			—			—
Fees related to term loan refinancings⁽¹⁵⁾		—			—			15			—			—
Royalties for medicines acquired through business combinations⁽¹⁶⁾		(13,259	)		—			—			—			—
Income tax effect on pre-tax non-GAAP adjustments⁽¹⁷⁾		—			—			—			—			(7,015	)

Total of non-GAAP adjustments		70,357			4,047			40,274			5,691			(7,015	)

Non-GAAP	$	(29,725	)	$	(20,218	)	$	(136,400	)	$	(25,339	)	$	(10,977	)

Horizon Pharma plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Three Months Ended June 30, 2017

(Unaudited)


	COGS			Research & Development			Selling, General & Administrative			Impairment of Long-Lived Assets			Interest Expense			Gain on Divestiture			Income Tax Benefit (Expense)
GAAP as reported	$	(130,150	)	$	(163,101	)	$	(159,653	)	$	(22,270	)	$	(31,608	)	$	5,856		$	1,767
Non-GAAP Adjustments (in thousands):
Acquisition/divestiture-related costs⁽¹⁾		(48	)		148,080			5,353			—			—			—			—
Restructuring and realignment costs⁽²⁾		—			—			5,193			—			—			—			—
Amortization, accretion and step-up:
Intangible amortization expense⁽⁴⁾		69,574			—			202			—			—			—			—
Accretion of royalty liability⁽⁵⁾		12,735			—			—			—			—			—			—
Amortization of debt discount and deferred financing costs⁽⁶⁾		—			—			—			—			5,206			—			—
Inventory step-up expense⁽⁷⁾		33,895			—			—			—			—			—			—
Impairment of long-lived assets⁽⁸⁾		—			—			—			22,270			—			—			—
Share-based compensation⁽¹⁰⁾		573			2,313			24,882			—			—			—			—
Depreciation⁽¹¹⁾		183			—			1,572			—			—			—			—
Charges relating to discontinuation of Friedreich’s ataxia program⁽¹²⁾		(3,103	)		—			—			—			—			—			—
Drug substance harmonization costs⁽¹³⁾		745			—			—			—			—			—			—
Fees related to term loan refinancings⁽¹⁵⁾		—			—			(45	)		—			—			—			—
Royalties for medicines acquired through business combinations⁽¹⁶⁾		(11,622	)		—			—			—			—			—			—
Gain on divestiture⁽²⁰⁾		—			—			—			—			—			(5,856	)		—
Income tax effect on pre-tax non-GAAP adjustments⁽¹⁷⁾		—			—			—			—			—			—			(34,272	)

Total of non-GAAP adjustments		102,932			150,393			37,157			22,270			5,206			(5,856	)		(34,272	)

Non-GAAP	$	(27,218	)	$	(12,708	)	$	(122,496	)	$	—		$	(26,402	)	$	—		$	(32,505	)

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Horizon Pharma plc

Certain Income Statement Line Items-Non - GAAP Adjusted

For the Six Months Ended June 30, 2018

(Unaudited)


																Income Tax
				Research &			Selling, General			Impairment of			Interest			Benefit
	COGS			Development			& Administrative			Long-Lived Assets			Expense			(Expense)
GAAP as reported	$	(216,174	)	$	(41,910	)	$	(356,273	)	$	(37,853	)	$	(61,484	)	$	(3,596	)
Non-GAAP Adjustments (in thousands):
Acquisition/divestiture-related costs⁽¹⁾		52			(67	)		5,701			—			—			—
Restructuring and realignment costs⁽²⁾		—			1,733			8,648			—			—			—
Litigation settlements⁽³⁾		—			—			4,250			—			—			—
Amortization, accretion and step-up:
Intangible amortization expense⁽⁴⁾		133,942			—			402			—			—			—
Accretion of royalty liability⁽⁵⁾		29,515			—			—			—			—			—
Amortization of debt discount and deferred financing costs⁽⁶⁾		—			—			—			—			11,187			—
Inventory step-up expense⁽⁷⁾		17,129			—			—			—			—			—
Impairment of long-lived assets⁽⁸⁾		—			—			—			37,853			—			—
Remeasurement of royalties for medicines acquired through business combinations⁽⁹⁾		(2,151	)		—			—			—			—			—
Share-based compensation⁽¹⁰⁾		1,893			4,649			52,012			—			—			—
Depreciation⁽¹¹⁾		353			—			2,751			—			—			—
Charges relating to discontinuation of Friedreich’s ataxia program⁽¹²⁾		1,135			87			—			—			—			—
Drug substance harmonization costs⁽¹³⁾		1,279			—			—			—			—			—
Upfront and milestone payments related to license agreements⁽¹⁴⁾		—			90			—			—			—			—
Fees related to term loan refinancings⁽¹⁵⁾		—			—			42			—			—			—
Royalties for medicines acquired through business combinations⁽¹⁶⁾		(25,780	)		—			—			—			—			—
Income tax effect on pre-tax non-GAAP adjustments⁽¹⁷⁾		—			—			—			—			—			24,668
Other non-GAAP income tax adjustments⁽¹⁸⁾		—			—			—			—			—			(35,893	)

Total of non-GAAP adjustments		157,367			6,492			73,806			37,853			11,187			(11,225	)

Non-GAAP	$	(58,807	)	$	(35,418	)	$	(282,467	)	$	—		$	(50,297	)	$	(14,821	)

Horizon Pharma plc

Certain Income Statement Line Items - Non-GAAP Adjusted

For the Six Months Ended June 30, 2017

(Unaudited)


																						Income Tax
				Research &			Selling, General			Impairment of			Interest			Gain on			Loss on Debt			Benefit
	COGS			Development			& Administrative			Long-Lived Assets			Expense			Divestiture			Extinguishment			(Expense)
GAAP as reported	$	(269,266	)	$	(176,162	)	$	(333,718	)	$	(22,270	)	$	(63,591	)	$	5,856		$	(533	)	$	49,320
Non-GAAP Adjustments (in thousands):
Acquisition/divestiture-related costs⁽¹⁾		32			148,257			15,135			—			—			—			—			—
Restructuring and realignment costs⁽²⁾		—			—			5,193			—			—			—			—			—
Amortization, accretion and step-up:
Intangible amortization expense⁽⁴⁾		139,048			—			405			—			—			—			—			—
Accretion of royalty liability⁽⁵⁾		25,694			—			—			—			—			—			—			—
Amortization of debt discount and deferred financing costs⁽⁶⁾		—			—			—			—			10,629			—			—			—
Inventory step-up expense⁽⁷⁾		74,490			—			—			—			—			—			—			—
Impairment of long lived assets⁽⁸⁾		—			—			—			22,270			—			—			—			—
Remeasurement of royalties for medicines acquired through business combinations⁽⁹⁾		(2,944	)		—			—			—			—			—			—			—
Share-based compensation⁽¹⁰⁾		1,001			4,362			50,874			—			—			—			—			—
Depreciation⁽¹¹⁾		366			—			3,195			—			—			—			—			—
Charges relating to discontinuation of Friedreich’s ataxia program⁽¹²⁾		(3,103	)		—			—			—			—			—			—			—
Drug substance harmonization costs⁽¹³⁾		5,044			—			—			—			—			—			—			—
Fees related to term loan refinancing⁽¹⁵⁾		—			—			4,098			—			—			—			—			—
Royalties for medicines acquired through business combinations⁽¹⁶⁾		(22,939	)		—			—			—			—			—			—			—
Loss on debt extinguishment⁽¹⁹⁾		—			—			—			—			—			—			533			—
Gain on divestiture⁽²⁰⁾		—			—			—			—			—			(5,856	)		—			—
Income tax effect on pre-tax non-GAAP adjustments⁽¹⁷⁾		—			—			—			—			—			—			—			(72,375	)

Total of non-GAAP adjustments		216,689			152,619			78,900			22,270			10,629			(5,856	)		533			(72,375	)

Non-GAAP	$	(52,577	)	$	(23,543	)	$	(254,818	)	$	—		$	(52,962	)	$	—		$	—		$	(23,055	)

LOGO

NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS—NON-GAAP

(1)	Expenses, including legal and consulting fees, incurred in connection with the Company’s acquisitions and divestitures.

(2)	Represents expenses, including severance costs and consulting fees, related to the restructuring and realignment activities.

(3)	During the three and six months ended June 30, 2018, the Company recorded $4.3 million of expense for litigation settlements related to RAVICTI and PENNSAID 2%.

(4)	Intangible amortization expenses are associated with the Company’s intellectual property rights, developed technology and customer relationships related to ACTIMMUNE, BUPHENYL, KRYSTEXXA, LODOTRA, MIGERGOT, PENNSAID 2%, PROCYSBI, RAVICTI, RAYOS and VIMOVO.

(5)	Represents accretion expense associated with ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, QUINSAIR, RAVICTI and VIMOVO contingent royalty liabilities.

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

(7)	During the three and six months ended June 30, 2018, the Company recognized in cost of goods sold nil and $17.1 million, respectively, for inventory step-up expense primarily related to KRYSTEXXA inventory sold.

During the three and six months ended June 30, 2017, the Company recognized in cost of goods sold $19.3 million and $33.7 million, respectively, for inventory step-up expense related to KRYSTEXXA inventory sold and $14.6 million and $40.8 million, respectively, for inventory step-up expense related to PROCYSBI and QUINSAIR inventory sold.

(8)	During the six months ended June 30, 2018, the Company recorded an impairment of $37.9 million to write off the book value of developed technology related to PROCYSBI in Canada and Latin America due to lower than anticipated future net sales.

Impairment of long-lived assets during the three and six months ended June 30, 2017 of $22.3 million relates to an impairment recorded following payment to Boehringer Ingelheim International for the acquisition of certain rights to interferon gamma-1b. This was presented in the “charges relating to the discontinuation of the Friedreich’s ataxia program” line item in the reconciliation of GAAP to non-GAAP measures during the year ended December 31, 2017.

(9)

At the time of the Company’s acquisition of the rights to ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, RAVICTI and VIMOVO, 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 overperforms 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 adjustment 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. The Company recorded net decreases of $2.2 million and $2.9 million to cost of goods sold to adjust the amount of the contingent royalty liabilities relating to PROCYSBI during the first quarter of 2018, and to KRYSTEXXA and VIMOVO during the first quarter of 2017, respectively.

(10)	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 previous cash-settled long-term incentive plan and its employee stock purchase plan.

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

LOGO

(12)	Charges relating to discontinuation of the Friedreich’s ataxia program include a $1.1 million increase and $3.1 million reduction during the six months ended June 30, 2018 and 2017, respectively, in cost of goods sold relating to the purchase of additional units of ACTIMMUNE.

(13)

During the year ended December 31, 2016, the Company committed to spend $14.9 million related to the harmonization of the manufacturing processes for ACTIMMUNE and IMUKIN drug substance. During the three and six months ended June 30, 2018, the Company incurred costs of $0.5 million and $1.3 million, respectively, related to these activities that qualify for exclusion in the Company’s non-GAAP financial measures under its non-GAAP cost policy.

(14)	Represents upfront and milestone payments related to license agreements.

(15)	Represents arrangement and other fees relating to the refinancing of the Company’s term loans.

(16)	Royalties of $13.3 million and $25.8 million were incurred during the three and six months ended June 30, 2018, respectively, based on the periods’ net sales for ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, QUINSAIR, RAVICTI and VIMOVO.

(17)	Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non- GAAP adjustment based on the statutory income tax rate of the applicable jurisdictions for each non-GAAP adjustment.

(18)

Other non-GAAP income tax adjustments during the six months ended June 30, 2018 reflect a measurement period adjustment relating to Notice 2018-28 that was issued by the U.S. Treasury Department and the U.S. Internal Revenue Service in April 2018 (“the notice”). In accordance with the measurement period provisions under SAB 118 and the guidance in the notice the Company reinstated the deferred tax asset related to its U.S. interest expense carry forwards under Section 163(j) based on the new U.S. federal tax rate of 21 percent. The impact of the deferred tax asset reinstatement in accordance with SAB 118 was a $35.9 million increase to the Company’s benefit for income taxes and a corresponding decrease to the U.S. group net deferred tax liability position.

(19)	During the six months ended June 30, 2017, the Company recorded a loss on debt extinguishment of $0.5 million which comprised a write-off of $0.4 million in debt discount and deferred financing costs and an early redemption payment of $0.1 million.

(20)

On June 23, 2017, the Company completed the divestiture of a European subsidiary that owns the marketing rights to PROCYSBI and QUINSAIR in Europe, the Middle East and Africa to Chiesi Farmaceutici S.p.A. In connection with this divestiture, the Company recorded a gain of $5.9 million in the three and six months ended June 30, 2017.

Horizon Therapeutics Public Ltd Co - FORM 8-K - EX-99.1 - August 8, 2018

Attached files

Horizon Therapeutics Public Ltd Co Reports