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Horizon Therapeutics plc Reports Third-Quarter 2022 Financial Results; Increases Full-Year 2022 Net Sales and Adjusted EBITDA Guidance; Increases TEPEZZA and KRYSTEXXA Peak Annual Net Sales Expectations

Third-Quarter 2022 Results:

-- Net Sales of $925.4 Million --

-- GAAP Net Income of $135.8 Million; Adjusted EBITDA of $335.3 Million, Which Includes $19.0 Million of Acquired IPR&D and Milestones Expenses --

-- TEPEZZA® (teprotumumab-trbw) Net Sales of $490.9 Million --

-- KRYSTEXXA® (pegloticase injection) Net Sales of $191.6 Million --

-- Cash Position of $2.13 Billion as of Sept. 30, 2022 --

Full-Year 2022 Guidance and Peak Annual Net Sales Expectations:

-- Increasing Full-Year 2022 Net Sales Guidance to $3.59 Billion to $3.61 Billion --

-- Increasing Full-Year 2022 Adjusted EBITDA Guidance to $1.32 Billion to $1.34 Billion, Which Includes $52.5 Million of Acquired IPR&D and Milestones Expenses --

-- Continue to Expect Full-Year 2022 TEPEZZA Net Sales Percentage Growth in the High Teens --

-- Increasing Full-Year 2022 KRYSTEXXA Net Sales Growth Expectations to Approximately 25% --

-- Increasing TEPEZZA Ex-U.S. Peak Annual Net Sales Expectations to Greater than $1 Billion, Bringing Global Peak Annual Net Sales Expectations to Greater than $4 Billion --

-- Increasing KRYSTEXXA U.S. Peak Annual Net Sales Expectations to Greater than $1.5 Billion --

Recent Company Highlights:

-- Completed Enrollment in TEPEZZA Chronic/Low Clinical Activity Score (CAS) Thyroid Eye Disease (TED) Trial; Topline Results Expected in the Second Quarter of 2023 --

-- Announced Positive Topline Data from Phase 2 Dazodalibep Sjögren’s Syndrome Trial; Planning to Initiate a Phase 3 Clinical Program in 2023 --

-- First Patient Enrolled in ADX-914 Phase 2 Trial in Collaboration with Q32 Bio --

Horizon Therapeutics plc (Nasdaq: HZNP) today announced third-quarter 2022 financial results and increased its full-year 2022 net sales and adjusted EBITDA guidance.

“Our third-quarter focus on clinical, commercial and operational execution drove continued progress across our portfolio,” said Tim Walbert, chairman, president and chief executive officer, Horizon. “We advanced our pipeline, achieving several important R&D milestones, including completing enrollment in our TEPEZZA trial for chronic/low CAS thyroid eye disease and announcing positive Phase 2 topline results from our dazodalibep trial in Sjögren’s syndrome. These achievements reflect our commitment to bring innovative medicines to more patients in need.”

“Our successful launch of the KRYSTEXXA expanded label has driven increased use of KRYSTEXXA with immunomodulation. Encouraged by the momentum we are seeing, we increased our KRYSTEXXA U.S. peak annual net sales expectations to greater than $1.5 billion. We also see a significantly greater opportunity for TEPEZZA in various international markets and are increasing our ex-U.S. peak annual net sales expectations for TEPEZZA to greater than $1 billion.”

Financial Highlights
 
(in millions except for per share amounts and percentages) Q3 22 Q3 21 %

Change
YTD 22 YTD 21 %

Change
 
Net sales

$

925.4

$

1,037.0

(11

)

$

2,687.0

$

2,211.9

21

Net income

 

135.8

 

326.5

(58

)

 

401.1

 

361.3

11

Non-GAAP net income

 

293.3

 

410.3

(29

)

 

862.9

 

755.7

14

Adjusted EBITDA(1)

 

335.3

 

505.0

(34

)

 

1,013.1

 

868.3

17

 
Earnings per share - diluted

 

0.58

 

1.38

(58

)

 

1.70

 

1.54

10

Non-GAAP earnings per share - diluted

 

1.25

 

1.74

(28

)

 

3.66

 

3.21

14

(1)

Third-quarter 2022 and 2021 adjusted EBITDA includes $19.0 million and $4.0 million, respectively, in acquired IPR&D and milestones expenses. Year-to-date 2022 and 2021 adjusted EBITDA includes $19.0 million and $47.0 million, respectively, in acquired IPR&D and milestones expenses.

Third Quarter and Recent Company Highlights

Key Clinical Development Programs

  • Daxdilimab, an anti-ILT7 human monoclonal antibody that depletes certain dendritic cells. Depleting these cells may interrupt the cycle of inflammation that causes tissue damage in diseases such as lupus, and a variety of other autoimmune conditions.



    • Systemic Lupus Erythematosus (SLE) Trial: Phase 2 randomized placebo-controlled trial underway to evaluate daxdilimab in patients with SLE, a disease in which the body's immune system attacks its own tissues and organs. Trial enrollment was completed in the second quarter of 2022.



    • Alopecia Areata Trial: Phase 2 open-label trial underway to evaluate daxdilimab in patients with alopecia areata, an autoimmune disorder characterized by nonscarring hair loss.



    • Discoid Lupus Erythematosus (DLE) Trial: Planned Phase 2 randomized placebo-controlled trial to evaluate daxdilimab in patients with DLE, a rare, chronic, inflammatory skin condition characterized by lesions that result in scarring.



    • Lupus Nephritis Trial: Planned Phase 2 trial to evaluate daxdilimab in patients with lupus nephritis, a rare, autoimmune and inflammatory condition of the kidney.



    • Dermatomyositis Trial: Planned Phase 2 trial to evaluate daxdilimab in patients with dermatomyositis, a rare autoimmune disorder characterized by rashes, debilitating muscle weakness and interstitial lung disease.



  • Dazodalibep, a CD40 ligand antagonist that blocks T-cell interaction with CD40-expressing B-cells, disrupting the overactivation of the CD40 ligand co-stimulatory pathway. Several autoimmune diseases are associated with the overactivation of this pathway.



    • Sjögren's Syndrome Trial: Phase 2 randomized placebo-controlled trial underway to evaluate dazodalibep in patients with Sjögren's syndrome, a chronic, systemic autoimmune condition that impacts exocrine glands, including the salivary and tear glands. Topline data in Sjögren’s syndrome patients with moderate-to-severe systemic disease activity, as defined by an ESSDAI score of ≥ 5, were announced in September. The trial met the primary endpoint and showed numerical improvements in key secondary and exploratory endpoints. The Phase 2 trial in a second population of Sjögren’s syndrome patients with moderate-to-severe localized symptoms, as defined by an ESSPRI score of ≥ 5, is fully enrolled and continues to progress.



    • Rheumatoid Arthritis Trial: Phase 2 randomized placebo-controlled trial to evaluate dazodalibep in patients with RA. Topline results were announced in May 2022. The trial met the primary endpoint and dazodalibep was well tolerated. The trial results may inform the dosing regimen for other studies with dazodalibep. Data from the trial will be presented at an upcoming medical meeting.



    • Kidney Transplant Rejection Trial: Phase 2 open-label trial underway to evaluate dazodalibep in kidney transplant rejection patients.



    • Focal Segmental Glomerulosclerosis (FSGS) Trial: Planned Phase 2 trial to evaluate dazodalibep in patients with FSGS, a rare kidney disorder characterized by scarring of glomeruli.



  • HZN-825, an oral lysophosphatidic acid receptor 1 (LPAR1) antagonist designed to prevent gene activation.



    • Diffuse Cutaneous Systemic Sclerosis Trial: Pivotal Phase 2b trial underway to evaluate HZN-825 in diffuse cutaneous systemic sclerosis.



    • Idiopathic Pulmonary Fibrosis Trial: Pivotal Phase 2b trial underway to evaluate HZN-825 in idiopathic pulmonary fibrosis, the most common form of interstitial lung disease.



  • UPLIZNA, an anti-CD19 humanized monoclonal antibody that depletes B-cells, including the pathogenic cells that produce autoantibodies.



    • Myasthenia Gravis Trial: Phase 3 randomized placebo-controlled trial underway to evaluate UPLIZNA in patients with myasthenia gravis, a chronic, rare, autoimmune neuromuscular disease that affects voluntary muscles, especially those that control the eyes, mouth, throat and limbs.



    • IgG4-Related Disease Trial: Phase 3 randomized placebo-controlled trial underway to evaluate UPLIZNA in patients with IgG4-related disease, which is a group of disorders marked by tumor-like swelling and fibrosis of affected organs, such as the pancreas, salivary glands and kidneys.



  • TEPEZZA, an insulin-like growth factor type 1 receptor (IGF-1R) antagonist monoclonal antibody.



    • Chronic/Low CAS TED Trial: Phase 4 randomized placebo-controlled trial underway to evaluate TEPEZZA in chronic/low CAS TED. The trial completed enrollment in September 2022.



    • TED in Japan (OPTIC-J) Trial: Phase 3 randomized placebo-controlled trial in Japan underway to evaluate TEPEZZA in patients with moderate-to-severe active TED.



    • Subcutaneous (SC) Administration Trial: Phase 1b trial initiated in July 2022 to explore the pharmacokinetics, safety, tolerability, efficacy and immunogenicity of subcutaneous administration of TEPEZZA in patients with TED.



    • Diffuse Cutaneous Systemic Sclerosis Exploratory Trial: Phase 1 exploratory trial underway to evaluate TEPEZZA in diffuse cutaneous systemic sclerosis.



  • ADX-914 (collaboration with Q32 Bio), a fully human anti-IL-7Rα antibody that re-regulates adaptive immune function by blocking signaling mediated by both IL-7 and TSLP. The Company has an option to acquire ADX-914 on pre-negotiated terms with Q32 Bio.



    • Atopic Dermatitis Trial: Phase 2 trial initiated in October 2022 to evaluate ADX-914 in atopic dermatitis, a chronic, autoimmune disorder that causes inflammation, redness and irritation of the skin.



    • Autoimmune Disease Trial: Planned Phase 2 trial to evaluate ADX-914 in a second autoimmune disease.



  • KRYSTEXXA, a recombinant uricase enzyme that converts urate into a water-soluble liquid, allantoin, that can be easily excreted from the body.



    • Shorter Infusion Duration Trial: Phase 4 open-label trial underway to evaluate the impact of administering KRYSTEXXA with methotrexate over a shorter infusion duration in patients with uncontrolled gout.



    • Monthly Dosing Trial: Phase 4 open-label trial underway to evaluate monthly dosing of KRYSTEXXA with methotrexate in patients with uncontrolled gout.



  • HZN-1116, a fully human monoclonal antibody designed to bind and neutralize the function of the FLT3-ligand, thereby reducing both conventional and plasmacytoid dendritic cells.



    • Autoimmune Disease Trial: Phase 1 trial underway to evaluate HZN-1116 in patients with autoimmune diseases.



Third-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. Beginning with the third quarter of 2022, the Company is separately presenting upfront, milestone, and similar payments pursuant to collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development and milestones” expenses in the condensed consolidated statement of comprehensive income. Amounts recorded in this line item for the three and nine months ended September 30, 2022, would have historically been recorded to research and development (“R&D”) expenses. The Company believes the new classification assists users of the financial statements in better understanding the payments incurred to acquire in-process research and development (“IPR&D”). Prior period condensed consolidated statements of comprehensive income have been reclassified to conform with the new classification.

  • Net Sales: Third-quarter 2022 net sales were $925.4 million. Third-quarter 2021 net sales were $1.037 billion.



  • Gross Profit: Under U.S. GAAP, the third-quarter 2022 gross profit ratio was 74.7% compared to 75.7% in the third quarter of 2021. The non-GAAP gross profit ratio in the third quarter of 2022 was 87.2% compared to 85.4% in the third quarter of 2021.



  • Operating Expenses: Under U.S. GAAP, third-quarter 2022 R&D expenses were 12.3% of net sales and non-GAAP R&D expenses were 11.7% of net sales. Third-quarter 2022 acquired IPR&D and milestones expenses were 2.1% of net sales. Under U.S. GAAP, third-quarter 2022 SG&A expenses were 43.0% of net sales and non-GAAP SG&A expenses were 37.0% of net sales.



  • Income Tax (Benefit) Expense: On a GAAP basis in the third quarter of 2022, income tax benefit was $0.8 million. Third-quarter non-GAAP income tax expense was $21.8 million.



  • Net Income: In the third quarter of 2022, net income on a GAAP and non-GAAP basis was $135.8 million and $293.3 million, respectively.



  • Adjusted EBITDA: Third-quarter 2022 adjusted EBITDA was $335.3 million and includes $19.0 million of acquired IPR&D and milestones expenses.



  • Earnings per Share: On a GAAP basis, diluted earnings per share in the third quarter of 2022 and 2021 were $0.58 and $1.38, respectively. Non-GAAP diluted earnings per share in the third quarter of 2022 and 2021 were $1.25 and $1.74, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the third quarter of 2022 were 235.4 million. These reported results for the third quarter of 2022 and 2021 include an unfavorable impact of $0.08 and $0.02, respectively, to both GAAP diluted earnings per share and non-GAAP diluted earnings per share, related to acquired IPR&D and milestones expenses.

Third-Quarter Segment Results

Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments, the orphan segment and the inflammation segment. While segment operating income contains certain adjustments to the directly comparable GAAP figures in the Company’s consolidated financial results, such as the exclusion of acquired IPR&D and milestones expenses, it is considered to be prepared in accordance with GAAP for purposes of presenting the Company’s segment operating results.

Orphan Segment
 
(in millions except for percentages) Q3 22 Q3 21 %

Change
YTD 22 YTD 21 %

Change
 
 
TEPEZZA®(1)

$

490.9

$

616.4

(20

)

$

1,472.2

$

1,071.7

37

 

KRYSTEXXA®

 

191.6

 

158.1

21

 

 

500.1

 

395.2

27

 

RAVICTI®

 

84.3

 

76.2

10

 

 

238.1

 

217.6

9

 

PROCYSBI®(2)

 

57.8

 

49.3

17

 

 

155.1

 

142.5

9

 

UPLIZNA®(3)

 

43.8

 

18.7

134

 

 

112.9

 

35.0

222

 

ACTIMMUNE®

 

34.4

 

30.1

15

 

 

95.8

 

86.6

11

 

BUPHENYL®

 

1.7

 

1.9

(8

)

 

5.3

 

5.8

(9

)

QUINSAIRTM

 

0.2

 

0.3

(26

)

 

0.9

 

0.7

16

 

Orphan Net Sales

$

904.7

$

951.0

(5

)

$

2,580.4

$

1,955.1

32

 

 
Orphan Segment Operating Income

$

366.9

$

476.2

(23

)

$

1,033.5

$

798.5

29

 

(1)

TEPEZZA net sales in the third quarter of 2021 accounted for a larger share of full-year 2021 net sales due to a supply disruption caused by the U.S. government-mandated COVID-19 vaccine orders.

(2)

PROCYSBI net sales in the third quarter of 2022 benefitted from a $7.5 million partial release in the pricing review liability recorded during the three months ended September 30, 2022, as a result of a decision made by the Patented Medicines Prices Review Board (PMPRB) in September relating to PROCYSBI pricing in Canada.

(3)

Third-quarter and year-to-date 2022 UPLIZNA net sales included $3.2 million and $17.0 million, respectively, in international net sales, related primarily to revenue and milestone payments from the Company’s international partners.

  • Third-quarter 2022 net sales of the orphan segment, the Company’s strategic growth segment, were $904.7 million, with strong contributions from TEPEZZA, KRYSTEXXA, UPLIZNA, RAVICTI, PROCYSBI and ACTIMMUNE. Third-quarter 2022 orphan segment operating income was $366.9 million.



  • TEPEZZA third-quarter 2022 net sales were $490.9 million. TEPEZZA third-quarter 2021 net sales were $616.4 million and accounted for a larger share of full-year 2021 net sales due to a supply disruption caused by the U.S. government-mandated COVID-19 vaccine orders.



  • KRYSTEXXA third-quarter 2022 net sales increased 21% year-over-year driven by higher adoption of KRYSTEXXA with immunomodulation, which now exceeds 60% of new patient starts. In addition, the Company continues to see strong uptake of KRYSTEXXA from both rheumatologists and nephrologists.

Inflammation Segment

 
(in millions except for percentages) Q3 22 Q3 21 %

Change
YTD 22 YTD 21 %

Change
 
RAYOS®

$

10.6

 

$

14.9

(29

)

$

35.1

 

$

43.6

(19

)

PENNSAID 2%®(1)

 

7.6

 

 

48.0

(84

)

 

66.6

 

 

142.7

(53

)

DUEXIS®(2)

 

2.0

 

 

20.9

(90

)

 

3.2

 

 

62.5

(95

)

VIMOVO®

 

0.5

 

 

2.2

(78

)

 

1.7

 

 

8.1

(79

)

Inflammation Net Sales

$

20.7

 

$

86.0

(76

)

$

106.6

 

$

256.9

(59

)

 
Inflammation Segment Operating (Loss) Income

$

(10.8

)

$

34.1

NM

 

$

(2.0

)

$

123.6

NM

 

(1)

On May 6, 2022, Apotex Inc. initiated an at-risk launch of generic PENNSAID 2% in the United States.

(2)

On Aug. 4, 2021, Alkem Laboratories, Inc. initiated an at-risk launch of generic DUEXIS in the United States.

  • Third-quarter 2022 net sales of the inflammation segment were $20.7 million and segment operating loss was $10.8 million. The Company expects the wind down of the inflammation segment to be substantially complete in the fourth quarter of 2022.

Cash Flow Statement and Balance Sheet Highlights

  • Third-quarter 2022 operating cash flow on a GAAP and non-GAAP basis was $366.5 million and $368.4 million, respectively.



  • As of Sept. 30, 2022, the Company had cash and cash equivalents of $2.13 billion.



  • As of Sept. 30, 2022, the total principal amount of debt outstanding was $2.59 billion.

Revised 2022 Guidance

The Company increased its full-year 2022 net sales guidance to range between $3.59 billion and $3.61 billion, compared to the previous guidance range of $3.53 billion to $3.60 billion. The Company continues to expect TEPEZZA full-year 2022 net sales percentage growth in the high teens and is increasing KRYSTEXXA full-year 2022 net sales growth to approximately 25% compared to the previous guidance of more than 20%. The Company increased its full-year 2022 adjusted EBITDA guidance to range between $1.32 billion to $1.34 billion, compared to the previous guidance range of $1.268 billion to $1.318 billion, which includes $52.5 million of expected full-year 2022 acquired IPR&D and milestones expenses.

Webcast

At 8 a.m. EDT / 12 p.m. GMT 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.horizontherapeutics.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.

About Horizon

Horizon is a global biotechnology company focused on the discovery, development and commercialization of medicines that address critical needs for people impacted by rare, autoimmune and severe inflammatory diseases. Our pipeline is purposeful: We apply scientific expertise and courage to bring clinically meaningful therapies to patients. We believe science and compassion must work together to transform lives. For more information on how we go to incredible lengths to impact lives, visit www.horizontherapeutics.com and follow us on Twitter, LinkedIn, Instagram and Facebook.

Note Regarding Use of Non-GAAP Financial Measures

Horizon provides certain non-GAAP financial measures, including EBITDA, or earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, 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 benefit (expense) and tax rate, non-GAAP operating cash flow and certain other non-GAAP income statement line items, each of which include adjustments to GAAP figures. These non-GAAP measures are intended to provide additional information on Horizon’s performance, operations, expenses, profitability and cash flows. Adjustments to Horizon’s GAAP figures exclude, as applicable, acquisition and/or divestiture-related costs, manufacturing facility start-up costs, restructuring and realignment costs, as well as non-cash items such as share-based compensation, inventory step-up expense, depreciation and amortization, non-cash interest expense, goodwill and long-lived assets impairment charges, gain (loss) on equity security investments and sales of assets, 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 believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon’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 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’s management uses for planning and forecasting purposes and measuring the Company's performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies. Horizon has not provided a reconciliation of its full-year 2022 adjusted EBITDA guidance to expected GAAP net income (loss) guidance because certain items such as acquisition/divestiture-related expenses and share-based compensation that are components of net income (loss) cannot be reasonably projected due to the significant impact of changes in Horizon’s share price, the variability associated with the size and/or timing of acquisitions/divestitures, and other factors. These components of net income (loss) could significantly impact Horizon’s GAAP net income (loss).

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s full-year 2022 net sales and adjusted EBITDA guidance; expected financial performance and operating results in future periods, including projected growth in net sales of certain of Horizon’s medicines; estimates of peak annual net sales; development, manufacturing and commercialization plans; expected timing of clinical trials and, availability of clinical data; expected future milestones, pipeline expansions and regulatory approvals; potential market opportunities for, and benefits of, Horizon’s medicines and medicine candidates and business and other statements that are not historical facts. These forward-looking statements are based on Horizon’s current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks that Horizon’s actual future financial and operating results may differ from its expectations or goals; Horizon’s ability to grow net sales from existing medicines; impacts of the COVID-19 pandemic and actions taken to slow its spread, including impacts on supplies and net sales of Horizon’s medicines and potential delays in clinical trials; impacts of the on-going war between Russia and Ukraine; changes in inflation, interest rates and general economic conditions; acquisitions, such as the risk that acquired businesses or products will not be integrated successfully, that such integration may be more difficult, time-consuming or costly than expected or that the expected benefits of the related transactions will not occur; the availability of coverage and adequate reimbursement and pricing from government and third-party payers; Horizon’s ability to successfully implement its business strategies, including the risks that its TEPEZZA growth and global expansion initiatives and strategies may not be successful and that new challenges to TEPEZZA growth may arise in the future; risks inherent in developing novel medicine candidates and existing medicines for new indications; risks associated with regulatory approvals; risks in the ability to recruit, train and retain qualified personnel; competition, including 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 operates, and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in Horizon’s filings and reports with the SEC. Horizon undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information.

Horizon Therapeutics plc

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 
Three Months Ended

September 30,
Nine Months Ended

September 30,

2022

2021

2022

2021

 
Net sales

$

925,359

 

$

1,036,992

 

$

2,687,015

 

$

2,211,946

 

Cost of goods sold

 

234,132

 

 

251,640

 

 

679,410

 

 

553,003

 

Gross profit

 

691,227

 

 

785,352

 

 

2,007,605

 

 

1,658,943

 

 
OPERATING EXPENSES:
Research and development (1)

 

114,058

 

 

89,549

 

 

320,436

 

 

244,076

 

Acquired in-process research and development and milestones (1)

 

19,000

 

 

4,000

 

 

19,000

 

 

47,000

 

Selling, general and administrative

 

397,563

 

 

360,260

 

 

1,168,518

 

 

1,047,456

 

Impairment of goodwill

 

-

 

 

-

 

 

56,171

 

 

-

 

Impairment of long-lived asset

 

-

 

 

-

 

 

-

 

 

12,371

 

Gain on sale of asset

 

-

 

 

-

 

 

-

 

 

(2,000

)

Total operating expenses

 

530,621

 

 

453,809

 

 

1,564,125

 

 

1,348,903

 

Operating income

 

160,606

 

 

331,543

 

 

443,480

 

 

310,040

 

 
OTHER EXPENSE, NET:
Interest expense, net

 

(22,480

)

 

(22,977

)

 

(65,145

)

 

(59,018

)

Foreign exchange loss

 

(768

)

 

(476

)

 

(320

)

 

(1,363

)

Other (expense) income, net

 

(2,277

)

 

(849

)

 

(5,408

)

 

2,113

 

Total other expense, net

 

(25,525

)

 

(24,302

)

 

(70,873

)

 

(58,268

)

 
Income before benefit for income taxes

 

135,081

 

 

307,241

 

 

372,607

 

 

251,772

 

Benefit for income taxes

 

(758

)

 

(19,302

)

 

(28,467

)

 

(109,537

)

Net income

$

135,839

 

$

326,543

 

$

401,074

 

$

361,309

 

 
Net income per ordinary share - basic

$

0.59

 

$

1.44

 

$

1.75

 

$

1.61

 

 
Weighted average ordinary shares outstanding - basic

 

230,333,287

 

 

226,096,747

 

 

229,820,406

 

 

225,053,704

 

 
Net income per ordinary share - diluted

$

0.58

 

$

1.38

 

$

1.70

 

$

1.54

 

 
Weighted average ordinary shares outstanding - diluted

 

235,385,570

 

 

236,198,789

 

 

235,923,030

 

 

235,256,424

 

 

(1)

Beginning with the third quarter of 2022, the Company is separately presenting upfront, milestone, and similar payments pursuant to collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development and milestones” expenses in the condensed consolidated statement of comprehensive income. Amounts recorded in this line item for the three and nine months ended September 30, 2022, would have historically been recorded to research and development (“R&D”) expenses. The Company believes the new classification assists users of the financial statements in better understanding the payments incurred to acquire in-process research and development (“IPR&D”). Prior period condensed consolidated statements of comprehensive income have been reclassified to conform with the new classification.

Horizon Therapeutics plc

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)

 
As of
September 30,

2022
December 31,

2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

2,130,527

 

$

1,580,317

 

Restricted cash

 

4,743

 

 

3,839

 

Accounts receivable, net

 

646,386

 

 

632,775

 

Inventories, net

 

190,258

 

 

225,730

 

Prepaid expenses and other current assets

 

440,095

 

 

357,106

 

Total current assets

 

3,412,009

 

 

2,799,767

 

Property, plant and equipment, net

 

317,692

 

 

292,298

 

Developed technology and other intangible assets, net

 

2,757,694

 

 

2,960,118

 

In-process research and development

 

810,000

 

 

880,000

 

Goodwill

 

1,010,538

 

 

1,066,709

 

Deferred tax assets, net

 

516,317

 

 

538,098

 

Other long-term assets

 

203,612

 

 

140,738

 

Total assets

$

9,027,862

 

$

8,677,728

 

 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable

$

32,113

 

$

30,125

 

Accrued expenses and other current liabilities

 

457,288

 

 

523,015

 

Accrued trade discounts and rebates

 

355,213

 

 

317,431

 

Long-term debt—current portion

 

16,000

 

 

16,000

 

Total current liabilities

 

860,614

 

 

886,571

 

 
LONG-TERM LIABILITIES:
Long-term debt, net

 

2,549,140

 

 

2,555,233

 

Deferred tax liabilities, net

 

385,121

 

 

390,455

 

Other long-term liabilities

 

199,300

 

 

173,076

 

Total long-term liabilities

 

3,133,561

 

 

3,118,764

 

 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Ordinary shares, $0.0001 nominal value; 600,000,000 shares
authorized at September 30, 2022 and December 31, 2021;
229,076,182 and 227,760,936 shares issued at September 30, 2022
and December 31, 2021, respectively; and 228,691,816 and 227,376,570 shares
outstanding at September 30, 2022 and December 31, 2021, respectively

 

23

 

 

23

 

Treasury stock, 384,366 ordinary shares at September 30, 2022 and December 31, 2021

 

(4,585

)

 

(4,585

)

Additional paid-in capital

 

4,424,509

 

 

4,373,337

 

Accumulated other comprehensive income (loss)

 

7,460

 

 

(14,987

)

Retained earnings

 

606,280

 

 

318,605

 

Total shareholders' equity

 

5,033,687

 

 

4,672,393

 

Total liabilities and shareholders' equity

$

9,027,862

 

$

8,677,728

 

 
Horizon Therapeutics plc
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
 
Three Months Ended

September 30,
Nine Months Ended

September 30,

2022

2021

2022

2021

 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

135,839

 

$

326,543

 

$

401,074

 

$

361,309

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense

 

99,081

 

 

94,480

 

 

291,619

 

 

257,216

 

Equity-settled share-based compensation

 

45,066

 

 

54,804

 

 

137,515

 

 

170,394

 

Acquired IPR&D and milestones

 

15,000

 

 

-

 

 

15,000

 

 

40,000

 

Impairment of goodwill

 

-

 

 

-

 

 

56,171

 

 

-

 

Impairment of long-lived asset

 

-

 

 

-

 

 

-

 

 

12,371

 

Amortization of debt discount and deferred financing costs

 

2,232

 

 

1,500

 

 

6,136

 

 

3,740

 

Gain on sale of asset

 

-

 

 

-

 

 

-

 

 

(2,000

)

Deferred income taxes

 

11,686

 

 

(129,819

)

 

8,654

 

 

(147,934

)

Foreign exchange and other adjustments

 

(2,870

)

 

1,958

 

 

7,696

 

 

5,006

 

Changes in operating assets and liabilities:
Accounts receivable

 

26,832

 

 

(39,762

)

 

(13,681

)

 

(107,776

)

Inventories

 

13,376

 

 

21,219

 

 

35,409

 

 

(10,494

)

Prepaid expenses and other current assets

 

(3,079

)

 

34,333

 

 

(74,657

)

 

(60,790

)

Accounts payable

 

11,125

 

 

(2,666

)

 

(855

)

 

7,640

 

Accrued trade discounts and rebates

 

18,057

 

 

(2,825

)

 

38,289

 

 

(50,838

)

Accrued expenses and other current liabilities

 

11,913

 

 

59,021

 

 

(64,988

)

 

34,380

 

Other non-current assets and liabilities

 

(17,794

)

 

(7,746

)

 

(11,931

)

 

(15,510

)

Net cash provided by operating activities

 

366,464

 

 

411,040

 

 

831,451

 

 

496,714

 

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired

 

-

 

 

(67,945

)

 

(3,122

)

 

(2,843,275

)

Purchases of property, plant and equipment

 

(14,816

)

 

(27,440

)

 

(39,168

)

 

(59,695

)

Payments for long-term investments

 

(2,209

)

 

(2,219

)

 

(7,056

)

 

(13,385

)

Receipts from long-term investments

 

-

 

 

-

 

 

4,416

 

 

3,588

 

Proceeds from sale of asset

 

-

 

 

2,000

 

 

-

 

 

2,000

 

Payments related to license and collaboration agreements

 

(15,000

)

 

(46,500

)

 

(40,000

)

 

(46,500

)

Net cash used in investing activities

 

(32,025

)

 

(142,104

)

 

(84,930

)

 

(2,957,267

)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from term loans

 

-

 

 

-

 

 

-

 

 

1,574,993

 

Repayment of term loans

 

(4,000

)

 

(4,000

)

 

(12,000

)

 

(8,000

)

Proceeds from the issuance of ordinary shares in conjunction with ESPP program

 

-

 

 

-

 

 

13,884

 

 

11,482

 

Proceeds from the issuance of ordinary shares in connection with stock option exercises

 

1,258

 

 

12,174

 

 

23,280

 

 

40,013

 

Payment of employee withholding taxes relating to share-based awards

 

(3,420

)

 

(16,429

)

 

(123,947

)

 

(158,077

)

Repurchase of ordinary shares

 

(88,209

)

 

-

 

 

(88,209

)

 

-

 

Net cash (used in) provided by financing activities

 

(94,371

)

 

(8,255

)

 

(186,992

)

 

1,460,411

 

 
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

 

(2,098

)

 

(4,452

)

 

(8,415

)

 

(10,951

)

 
Net increase (decrease) in cash, cash equivalents and restricted cash

 

237,970

 

 

256,229

 

 

551,114

 

 

(1,011,093

)

Cash, cash equivalents and restricted cash, beginning of the period(1)

 

1,897,300

 

 

816,157

 

 

1,584,156

 

 

2,083,479

 

Cash, cash equivalents and restricted cash, end of the period(1)

$

2,135,270

 

$

1,072,386

 

$

2,135,270

 

$

1,072,386

 

(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.

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Net Income and Earnings Per Share (Unaudited)

(in thousands, except share and per share data)

 
Three Months Ended

September 30,
Nine Months Ended

September 30,

2022

2021

2022

2021

 
GAAP net income

$

135,839

 

$

326,543

 

$

401,074

 

$

361,309

 

Non-GAAP adjustments:
Acquisition/divestiture-related costs

 

825

 

 

9,228

 

 

3,437

 

 

88,166

 

Loss on equity security investments

 

1,247

 

 

-

 

 

6,331

 

 

-

 

Restructuring and realignment costs

 

7,731

 

 

680

 

 

9,521

 

 

7,703

 

Manufacturing facility start-up costs

 

2,024

 

 

1,712

 

 

4,413

 

 

1,712

 

Amortization and step-up:
Intangible amortization expense

 

92,951

 

 

90,368

 

 

273,546

 

 

245,260

 

Inventory step-up expense

 

21,779

 

 

8,912

 

 

66,342

 

 

16,914

 

Amortization of debt discount and deferred financing costs

 

2,232

 

 

1,500

 

 

6,136

 

 

3,740

 

Impairment of long-lived asset

 

-

 

 

-

 

 

-

 

 

12,371

 

Impairment of goodwill

 

-

 

 

-

 

 

56,171

 

 

-

 

Gain on sale of asset

 

-

 

 

-

 

 

-

 

 

(2,000

)

Share-based compensation

 

45,066

 

 

54,804

 

 

137,515

 

 

170,394

 

Depreciation

 

6,130

 

 

4,112

 

 

18,073

 

 

11,956

 

Litigation settlement

 

-

 

 

5,000

 

 

-

 

 

5,000

 

Total of pre-tax non-GAAP adjustments

 

179,985

 

 

176,316

 

 

581,485

 

 

561,216

 

Income tax effect of pre-tax non-GAAP adjustments

 

(24,623

)

 

(36,602

)

 

(121,754

)

 

(141,665

)

Other non-GAAP income tax adjustments

 

2,079

 

 

(56,007

)

 

2,079

 

 

(25,126

)

Total of non-GAAP adjustments

 

157,441

 

 

83,707

 

 

461,810

 

 

394,425

 

Non-GAAP net income

$

293,280

 

$

410,250

 

$

862,884

 

$

755,734

 

 
 
Non-GAAP Earnings Per Share:
 
Weighted average ordinary shares - Basic

 

230,333,287

 

 

226,096,747

 

 

229,820,406

 

 

225,053,704

 

 
Non-GAAP Earnings Per Share - Basic:
GAAP earnings per share - Basic

$

0.59

 

$

1.44

 

$

1.75

 

$

1.61

 

Non-GAAP adjustments

 

0.68

 

 

0.37

 

 

2.00

 

 

1.75

 

Non-GAAP earnings per share - Basic

$

1.27

 

$

1.81

 

$

3.75

 

$

3.36

 

 
Weighted average ordinary shares - Diluted
Weighted average ordinary shares - Basic

 

230,333,287

 

 

226,096,747

 

 

229,820,406

 

 

225,053,704

 

Ordinary share equivalents

 

5,052,283

 

 

10,102,042

 

 

6,102,624

 

 

10,202,720

 

Weighted average ordinary shares - Diluted

 

235,385,570

 

 

236,198,789

 

 

235,923,030

 

 

235,256,424

 

 
Non-GAAP Earnings Per Share - Diluted
GAAP earnings per share - Diluted

$

0.58

 

$

1.38

 

$

1.70

 

$

1.54

 

Non-GAAP adjustments

 

0.67

 

 

0.36

 

 

1.96

 

 

1.67

 

Non-GAAP earnings per share - Diluted

$

1.25

 

$

1.74

 

$

3.66

 

$

3.21

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

EBITDA and Adjusted EBITDA (Unaudited)

(in thousands)

 
Three Months Ended

September 30,
Nine Months Ended

September 30,

2022

2021

2022

2021

 
GAAP net income

$

135,839

 

$

326,543

 

$

401,074

 

$

361,309

 

Depreciation

 

6,130

 

 

4,112

 

 

18,073

 

 

11,956

 

Amortization and step-up:
Intangible amortization expense

 

92,951

 

 

90,368

 

 

273,546

 

 

245,260

 

Inventory step-up expense

 

21,779

 

 

8,912

 

 

66,342

 

 

16,914

 

Interest expense, net (including amortization of
debt discount and deferred financing costs)

 

22,480

 

 

22,977

 

 

65,145

 

 

59,018

 

Benefit for income taxes

 

(758

)

 

(19,302

)

 

(28,467

)

 

(109,537

)

EBITDA

$

278,421

 

$

433,610

 

$

795,713

 

$

584,920

 

Other non-GAAP adjustments:
Share-based compensation

 

45,066

 

 

54,804

 

 

137,515

 

 

170,394

 

Loss on equity security investments

 

1,247

 

 

-

 

 

6,331

 

 

-

 

Acquisition/divestiture-related costs

 

825

 

 

9,228

 

 

3,437

 

 

88,166

 

Manufacturing facility start-up costs

 

2,024

 

 

1,712

 

 

4,413

 

 

1,712

 

Restructuring and realignment costs

 

7,731

 

 

680

 

 

9,521

 

 

7,703

 

Impairment of goodwill

 

-

 

 

-

 

 

56,171

 

 

-

 

Impairment of long-lived asset

 

-

 

 

-

 

 

-

 

 

12,371

 

Gain on sale of asset

 

-

 

 

-

 

 

-

 

 

(2,000

)

Litigation settlement

 

-

 

 

5,000

 

 

-

 

 

5,000

 

Total of other non-GAAP adjustments

 

56,893

 

 

71,424

 

 

217,388

 

 

283,346

 

Adjusted EBITDA

$

335,314

 

$

505,034

 

$

1,013,101

 

$

868,266

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Operating Income (Unaudited)

(in thousands)

 
Three Months Ended

September 30,
Nine Months Ended

September 30,

2022

2021

2022

2021

 
 
GAAP operating income

$

160,606

 

$

331,543

 

$

443,480

 

$

310,040

 

Non-GAAP adjustments:
Acquisition/divestiture-related costs

 

825

 

 

9,224

 

 

3,437

 

 

89,241

 

Restructuring and realignment costs

 

7,731

 

 

680

 

 

9,521

 

 

7,703

 

Manufacturing facility start-up costs

 

2,024

 

 

1,712

 

 

4,413

 

 

1,712

 

Amortization and step-up:
Intangible amortization expense

 

92,951

 

 

90,368

 

 

273,546

 

 

245,260

 

Inventory step-up expense

 

21,779

 

 

8,912

 

 

66,342

 

 

16,914

 

Impairment of long-lived asset

 

-

 

 

-

 

 

-

 

 

12,371

 

Impairment of goodwill

 

-

 

 

-

 

 

56,171

 

 

-

 

Gain on sale of asset

 

-

 

 

-

 

 

-

 

 

(2,000

)

Share-based compensation

 

45,066

 

 

54,804

 

 

137,515

 

 

170,394

 

Depreciation

 

6,130

 

 

4,111

 

 

18,073

 

 

11,955

 

Litigation settlement

 

-

 

 

5,000

 

 

-

 

 

5,000

 

Total of non-GAAP adjustments

 

176,506

 

 

174,811

 

 

569,018

 

 

558,550

 

Non-GAAP operating income

$

337,112

 

$

506,354

 

$

1,012,498

 

$

868,590

 

 
Foreign exchange loss

 

(768

)

 

(476

)

 

(320

)

 

(1,363

)

Other (expense) income, net

 

(1,030

)

 

(844

)

 

923

 

 

1,039

 

Adjusted EBITDA

$

335,314

 

$

505,034

 

$

1,013,101

 

$

868,266

 

Horizon Therapeutics plc

GAAP to Non-GAAP Reconciliations

Gross Profit and Operating Cash Flow (Unaudited)

(in thousands, except percentages)

 
Three Months Ended

September 30,
Nine Months Ended

September 30,

2022

2021

2022

2021

 
Non-GAAP Gross Profit:
 
GAAP gross profit

$

691,227

 

$

785,352

 

$

2,007,605

 

$

1,658,943

 

Non-GAAP gross profit adjustments:
Acquisition/divestiture-related costs

 

273

 

 

(204

)

 

(1,150

)

 

(75

)

Intangible amortization expense

 

91,868

 

 

89,892

 

 

271,032

 

 

244,382

 

Inventory step-up expense

 

21,779

 

 

8,912

 

 

66,342

 

 

16,914

 

Share-based compensation

 

2,167

 

 

1,795

 

 

6,638

 

 

6,875

 

Depreciation

 

56

 

 

55

 

 

167

 

 

227

 

Total of Non-GAAP adjustments

 

116,143

 

 

100,450

 

 

343,029

 

 

268,323

 

Non-GAAP gross profit

$

807,370

 

$

885,802

 

$

2,350,634

 

$

1,927,266

 

 
GAAP gross profit %

 

74.7

%

 

75.7

%

 

74.7

%

 

75.0

%

Non-GAAP gross profit %

 

87.2

%

 

85.4

%

 

87.5

%

 

87.1

%

 
 
 
GAAP cash provided by operating activities

$

366,464

 

$

411,040

 

$

831,451

 

$

496,714

 

Cash payments for acquisition/divestiture-related costs

 

167

 

 

15,839

 

 

5,363

 

 

136,073

 

Cash payments for restructuring and realignment costs

 

1,635

 

 

583

 

 

2,779

 

 

1,803

 

Cash payments for manufacturing facility start-up costs

 

114

 

 

869

 

 

2,777

 

 

869

 

Non-GAAP operating cash flow

$

368,380

 

$

428,331

 

$

842,370

 

$

635,459

 

Horizon Therapeutics plc

GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)

(in millions, except percentages and per share amounts)

 
Q3 2022
Pre-tax Net

Income
Income Tax

(Benefit) Expense
Tax Rate Net Income Diluted Earnings

Per Share
As reported - GAAP

$

135.1

$

(0.8

)

(0.6

)%

$

135.8

$

0.58

Non-GAAP adjustments

 

180.0

 

22.5

 

 

157.4

Non-GAAP

$

315.1

$

21.8

 

6.9

%

$

293.3

$

1.25

 
Q3 2021
Pre-tax Net

Income
Income Tax

(Benefit) Expense
Tax Rate Net Income Diluted Earnings

Per Share
As reported - GAAP

$

307.2

$

(19.3

)

(6.3

)%

$

326.5

$

1.38

Non-GAAP adjustments

 

176.3

 

92.6

 

 

83.7

Non-GAAP

$

483.6

$

73.3

 

15.2

%

$

410.3

$

1.74

 
YTD 2022
Pre-tax Net

Income
Income Tax

(Benefit) Expense
Tax Rate Net Income Diluted Earnings

Per Share
As reported - GAAP

$

372.6

$

(28.5

)

(7.6

)%

$

401.1

$

1.70

Non-GAAP adjustments

 

581.5

 

119.7

 

 

461.8

Non-GAAP

$

954.1

$

91.2

 

9.6

%

$

862.9

$

3.66

 
YTD 2021
Pre-tax Net

Income
Income Tax

(Benefit) Expense
Tax Rate Net Income Diluted Earnings

Per Share
As reported - GAAP

$

251.8

$

(109.5

)

(43.5

)%

$

361.3

$

1.54

Non-GAAP adjustments

 

561.2

 

166.8

 

 

394.4

Non-GAAP

$

813.0

$

57.3

 

7.0

%

$

755.7

$

3.21

Horizon Therapeutics plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended September 30, 2022 (Unaudited)
(in thousands)
 
 
Income Tax
Research &

Acquired IPR&D

Selling, General Interest Other Income Benefit
COGS Development (16) and milestones (16) & Administrative Expense (Expense), net (Expense)
 
GAAP as reported

$

(234,132

)

$

(114,058

)

$

(19,000

)

$

(397,563

)

$

(22,480

)

$

(2,277

)

$

758

 

 
Non-GAAP Adjustments:
 
Acquisition/divestiture-related costs(1)

 

273

 

 

(803

)

 

-

 

 

1,355

 

 

-

 

 

-

 

 

-

 

Loss on equity security investments(2)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

1,247

 

 

-

 

Restructuring and realignment costs(3)

 

-

 

 

538

 

 

-

 

 

7,193

 

 

-

 

 

-

 

 

-

 

Manufacturing facility start-up costs(4)

 

-

 

 

-

 

 

-

 

 

2,024

 

 

-

 

 

-

 

 

-

 

Amortization and step-up:
Intangible amortization expense(5)

 

91,868

 

 

-

 

 

-

 

 

1,083

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(6)

 

21,779

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(7)

 

-

 

 

-

 

 

-

 

 

-

 

 

2,232

 

 

-

 

 

-

 

Share-based compensation(8)

 

2,167

 

 

5,590

 

 

-

 

 

37,309

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

56

 

 

309

 

 

-

 

 

5,765

 

 

-

 

 

-

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(24,623

)

Other non-GAAP income tax adjustments(11)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2,079

 

Total of non-GAAP adjustments (17)

 

116,143

 

 

5,634

 

 

-

 

 

54,729

 

 

2,232

 

 

1,247

 

 

(22,544

)

 
Non-GAAP (17)

$

(117,989

)

$

(108,424

)

$

(19,000

)

$

(342,834

)

$

(20,248

)

$

(1,030

)

$

(21,786

)

 
Horizon Therapeutics plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended September 30, 2021 (Unaudited)
(in thousands)
 
 
Income Tax
Research &

Acquired IPR&D

Selling, General Interest Other Income Benefit
COGS Development (16) and milestones (16) & Administrative Expense (Expense), net (Expense)
 
GAAP as reported

$

(251,640

)

$

(89,549

)

$

(4,000

)

$

(360,260

)

$

(22,977

)

$

(849

)

$

19,302

 

 
Non-GAAP Adjustments:
 
Acquisition/divestiture-related costs(1)

 

(204

)

 

15

 

 

-

 

 

9,415

 

 

-

 

 

2

 

 

-

 

Restructuring and realignment costs(3)

 

-

 

 

-

 

 

-

 

 

680

 

 

-

 

 

-

 

 

-

 

Manufacturing facility start-up costs(4)

 

-

 

 

-

 

 

-

 

 

1,712

 

 

-

 

 

-

 

 

-

 

Amortization and step-up:
Intangible amortization expense(5)

 

89,892

 

 

-

 

 

-

 

 

476

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(6)

 

8,912

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(7)

 

-

 

 

-

 

 

-

 

 

-

 

 

1,500

 

 

-

 

 

-

 

Share-based compensation(8)

 

1,795

 

 

15,075

 

 

-

 

 

37,934

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

55

 

 

125

 

 

-

 

 

3,932

 

 

-

 

 

-

 

 

-

 

Litigation settlement(12)

 

-

 

 

-

 

 

-

 

 

5,000

 

 

-

 

 

-

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(36,602

)

Other non-GAAP income tax adjustments(11)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(56,007

)

Total of non-GAAP adjustments (17)

 

100,450

 

 

15,215

 

 

-

 

 

59,149

 

 

1,500

 

 

2

 

 

(92,609

)

 
Non-GAAP (17)

$

(151,190

)

$

(74,334

)

$

(4,000

)

$

(301,111

)

$

(21,477

)

$

(847

)

$

(73,307

)

 

-

 

 
Horizon Therapeutics plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Nine Months Ended September 30, 2022 (Unaudited)
(in thousands)
 
 
Income Tax
Research &

Acquired IPR&D

Selling, General Impairment of Interest Other Income Benefit
COGS Development (16) and milestones (16) & Administrative goodwill Expense (Expense), net (Expense)
 
GAAP as reported

$

(679,410

)

$

(320,436

)

$

(19,000

)

$

(1,168,518

)

$

(56,171

)

$

(65,145

)

$

(5,408

)

$

28,467

 

 
Non-GAAP Adjustments:
 
Acquisition/divestiture-related costs(1)

 

(1,150

)

 

2,000

 

 

-

 

 

2,587

 

 

-

 

 

-

 

 

-

 

 

-

 

Loss on equity security investments(2)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

6,331

 

 

-

 

Restructuring and realignment costs(3)

 

-

 

 

538

 

 

-

 

 

8,983

 

 

-

 

 

-

 

 

-

 

 

-

 

Manufacturing facility start-up costs(4)

 

-

 

 

-

 

 

-

 

 

4,413

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization and step-up:
Intangible amortization expense(5)

 

271,032

 

 

-

 

 

-

 

 

2,514

 

 

-

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(6)

 

66,342

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(7)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

6,136

 

 

-

 

 

-

 

Share-based compensation(8)

 

6,638

 

 

21,308

 

 

-

 

 

109,569

 

 

-

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

167

 

 

802

 

 

-

 

 

17,104

 

 

-

 

 

-

 

 

-

 

 

-

 

Impairment of goodwill(13)

 

-

 

 

-

 

 

-

 

 

-

 

 

56,171

 

 

-

 

 

-

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(121,754

)

Other non-GAAP income tax adjustments(11)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2,079

 

Total of non-GAAP adjustments (17)

 

343,029

 

 

24,648

 

 

-

 

 

145,170

 

 

56,171

 

 

6,136

 

 

6,331

 

 

(119,675

)

 
Non-GAAP (17)

$

(336,381

)

$

(295,788

)

$

(19,000

)

$

(1,023,348

)

$

-

 

$

(59,009

)

$

923

 

$

(91,208

)

 
Horizon Therapeutics plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Nine Months Ended September 30, 2021 (Unaudited)
(in thousands)
 
 
Income Tax
Research &

Acquired IPR&D

Selling, General Impairment of Gain on Interest Other Income Benefit
COGS Development (16) and milestones (16) & Administrative Long-lived asset Sale of Asset Expense (Expense), net (Expense)
 
GAAP as reported

$

(553,003

)

$

(244,076

)

$

(47,000

)

$

(1,047,456

)

$

(12,371

)

$

2,000

 

$

(59,018

)

 

2,113

 

$

109,537

 

 
Non-GAAP Adjustments:
 
Acquisition/divestiture-related costs(1)

 

(75

)

 

18

 

 

-

 

 

89,300

 

 

-

 

 

-

 

 

-

 

 

(1,077

)

 

-

 

Restructuring and realignment costs(3)

 

-

 

 

-

 

 

-

 

 

7,703

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Manufacturing facility start-up costs(4)

 

-

 

 

-

 

 

-

 

 

1,712

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization and step-up:

 

-

 

Intangible amortization expense(5)

 

244,382

 

 

-

 

 

-

 

 

878

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Inventory step-up expense(6)

 

16,914

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Amortization of debt discount and deferred financing costs(7)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

3,740

 

 

-

 

 

-

 

Impairment of long lived asset(14)

 

-

 

 

-

 

 

-

 

 

-

 

 

12,371

 

 

-

 

 

-

 

 

-

 

 

-

 

Gain on sale of asset(15)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(2,000

)

 

-

 

 

-

 

 

-

 

Share-based compensation(8)

 

6,875

 

 

32,851

 

 

-

 

 

130,668

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Depreciation(9)

 

227

 

 

291

 

 

-

 

 

11,438

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Litigation settlement(12)

 

-

 

 

-

 

 

-

 

 

5,000

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Income tax effect on pre-tax non-GAAP adjustments(10)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(141,665

)

Other non-GAAP income tax adjustments(11)

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(25,126

)

Total of non-GAAP adjustments (17)

 

268,323

 

 

33,160

 

 

-

 

 

246,699

 

 

12,371

 

 

(2,000

)

 

3,740

 

 

(1,077

)

 

(166,791

)

 
Non-GAAP (17)

$

(284,680

)

$

(210,916

)

$

(47,000

)

$

(800,757

)

$

-

 

$

-

 

$

(55,278

)

$

1,036

 

$

(57,254

)

 
 

NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS - NON-GAAP

 

1.

Primarily represents transaction and integration costs, including, advisory, legal, consulting and certain employee-related costs, incurred in connection with our acquisitions and divestitures. Costs recovered from subleases of acquired facilities and reimbursed expenses incurred under transition arrangements for divestitures are also reflected in this line item.

 

2.

We held investments in equity securities with readily determinable fair values of $6.9 million as of September 30, 2022, which are included in other long-term assets in the condensed consolidated balance sheet. For the three and nine months ended September 30, 2022, we recognized a net unrealized loss of $1.2 million and $6.3 million, respectively, due to the change in fair value of these securities.

 

3.

Primarily represents severance and consulting costs related to the winding down of our inflammation segment in the third quarter of 2022 and rent and maintenance charges as a result of vacating the leased Lake Forest office in the first quarter of 2021.

 

4.

During the three and nine months ended September 30, 2022, we recorded $2.0 million and $4.4 million, respectively, of manufacturing facility start-up costs related to our drug product biologics manufacturing facility in Waterford, Ireland. During the three and nine months ended September 30, 2021, we recorded $1.7 million of manufacturing facility start-up costs related to the purchase of our drug product biologics manufacturing facility in Waterford, Ireland from EirGen in July 2021.

 

5.

Intangible amortization expenses are primarily associated with our developed technology related to TEPEZZA, KRYSTEXXA, RAVICTI, PROCYSBI, UPLIZNA, ACTIMMUNE, BUPHENYL and RAYOS.

 

6.

During the three and nine months ended September 30, 2022, we recognized in cost of goods sold $21.8 million and $66.3 million, respectively, for inventory step-up expense related to UPLIZNA inventory revalued in connection with the Viela acquisition. We recorded $8.9 million and $16.9 million, respectively, of UPLIZNA inventory step-up expense in cost of goods sold during the three and nine months ended September 30, 2021. Because inventory step-up expense is related to an acquisition, will not continue indefinitely and has a significant effect on our gross profit, gross margin percentage and net income for all affected periods, we exclude inventory step-up expense from our non-GAAP financial measures.

 

7.

Represents amortization of debt discount and deferred financing costs associated with our debt.

 

8.

Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employee directors, and our employee share purchase plan.

 

9.

Represents depreciation expense related to our property, plant, equipment, software and leasehold improvements.

 

10.

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.

 

11.

During the three and nine months ended September 30, 2022, we recognized tax expense attributable to state tax legislation enacted during the period, resulting in a non-GAAP tax adjustment of $2.1 million.

 

During the three and nine months ended September 30, 2021, other non-GAAP income tax adjustments resulted primarily from the recognition of a reduction in the state tax rate expected to apply to the reversal of temporary differences between the book values and tax bases of certain assets acquired through the Viela acquisition. The reduction in state tax rate resulted in a reduction in the deferred tax liability relating to these assets and a non-GAAP tax adjustment of $51.3 million. In addition, during the nine months ended September 30, 2021, we recognized a U.S. federal and state tax liability on U.S. taxable income generated from an intercompany transfer and license of intellectual property from a U.S. subsidiary to an Irish subsidiary which was partially offset by the recognition of a deferred tax asset in the Irish subsidiary, resulting in a non-GAAP tax adjustment of $26.2 million.

 

12.

We recorded $5.0 million of expense during the three and nine months ended September 30, 2021 for litigation settlements.

 

13.

Our interim goodwill impairment test in the second quarter of 2022 indicated an impairment which represented the difference between the estimated fair value of the inflammation reporting unit and its carrying value. As a result, we recognized an impairment charge of $56.2 million in June 2022 representing the full amount of goodwill for the inflammation reporting unit.

 

14.

During the nine months ended September 30, 2021, we recorded a right-of-use asset impairment charge of $12.4 million as a result of vacating the leased Lake Forest office.

 

15.

During the nine months ended September 30, 2021, gain on sale of asset represents a $2.0 million contingent consideration payment related to the sale of MIGERGOT in 2019. The contingent consideration was triggered during the second quarter of 2021 and it was received in July 2021.

 

16.

Beginning with the third quarter of 2022, the Company is separately presenting upfront, milestone, and similar payments pursuant to collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development and milestones” expenses in the condensed consolidated statement of comprehensive income. Amounts recorded in this line item for the three and nine months ended September 30, 2022, would have historically been recorded to research and development (“R&D”) expenses. The Company believes the new classification assists users of the financial statements in better understanding the payments incurred to acquire in-process research and development (“IPR&D”). Prior period condensed consolidated statements of comprehensive income have been reclassified to conform with the new classification. No non-GAAP adjustments to IPR&D and milestones expenses for the three and nine months ended September 30, 2022, and September 30, 2021.

 
17.

Following consultation with the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, we no longer exclude acquired IPR&D and milestones expenses from our non-GAAP financial measures and its line item components. Adjusted EBITDA and non-GAAP net income for the three and nine months ended September 30, 2021, includes $4.0 million and $47.0 million, respectively, of acquired IPR&D and milestones expenses. These amounts continue to be excluded from our segment operating income (loss) and from certain measures contained in our credit agreement that are relevant to, among other things, the calculation of the interest rate.

 

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