Press Releases

Horizon Pharma plc Announces Second-Quarter and Year-to-Date 2017 Results and Increases Full-Year 2017 Net Sales and Adjusted EBITDA Guidance

08/07/17

-- Second-Quarter 2017 Net Sales of $289.5 Million; Up 12 Percent, Above Expectations --
-- Second-Quarter 2017 Net Loss of $209.5 Million; Adjusted EBITDA of $127.0 MillionAbove Expectations --
-- Second-Quarter 2017 GAAP Operating Cash Flow of $47.9 MillionNon-GAAP Operating Cash Flow of $86.4 Million --
-- Second-Quarter 2017 Net Sales of Rare Disease Medicines Increased 70 Percent --
-- Completed Acquisition of River Vision Development Corp., Adding Late-Stage Development Biologic Teprotumumab --
-- Completed Sale of EMEA Marketing Rights for PROCYSBI® and QUINSAIRTM --
-- Increasing Full-Year 2017 Net Sales Guidance Range to $1.010 Billion to $1.045 BillionIncreasing Full-Year 2017 Adjusted EBITDA Guidance Range to $340 Million to $375 Million --

DUBLIN, Ireland, Aug. 07, 2017 (GLOBE NEWSWIRE) -- Horizon Pharma plc (NASDAQ:HZNP), a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs, announced its second-quarter and year-to-date 2017 financial results today and increased its
full-year 2017 net sales and adjusted EBITDA guidance. 

“Our rare disease medicines generated another quarter of strong performance, increasing 70 percent versus a year ago,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc.  “As a result of strong second-quarter performance across our business units, we are raising our full-year sales and adjusted EBITDA guidance.”

Mr. Walbert added, “We also made multiple advancements during the quarter, positioning Horizon Pharma as a sustainable biopharmaceutical company focused on rare disease medicines, including the addition of teprotumumab, a biologic in late-stage development for thyroid eye disease, a rare eye disease, which represents an important step in building our development pipeline to drive long-term growth.”   

Financial Highlights

(in millions except for per share amounts and percentages)   Q2 17   Q2 16   %
Change
  YTD 17   YTD 16   %
Change
 
                           
Net sales   $289.5   $257.4   12   $510.4   $462.1   10  
Net (loss) income   (209.5)   15.0    NM    (300.1)   (30.4)   886  
Non-GAAP net income   68.3   91.3   (25)   103.3   132.6   (22)  
Adjusted EBITDA   127.0   121.1   5    178.9   193.1   (7)  
                           
Net (loss) earnings per share - diluted     (1.29)    0.09    NM    (1.85)   (0.19)   874  
Non-GAAP earnings per share - diluted   0.41   0.56   (27)   0.63   0.81   (22)  
                           

Company Highlights

  • Second-quarter net sales were $289.5 million, an increase of 12 percent compared to the second quarter of 2016, driven by continued strong growth from the Company’s orphan and rheumatology business units.
     
  • Second-quarter net sales of Horizon Pharma’s medicines for rare diseases, which include RAVICTI®, PROCYSBI®, KRYSTEXXA®, ACTIMMUNE®, BUPHENYL® and QUINSAIR™, increased 70 percent compared to the second quarter of 2016.  Net sales of the Company’s rare disease medicines represented 55 percent of total net sales compared to 36 percent in the second quarter of 2016. 
     
  • The Company completed the acquisition of River Vision and its biologic, teprotumumab, on May 8, 2017.  Teprotumumab is in late-stage development to treat thyroid eye disease (TED), a rare, debilitating and painful condition with no FDA-approved therapy.  With a significant unmet treatment need for TED, the Company anticipates a potential peak annual net sales opportunity for teprotumumab, if approved, of more than $250 million in the United States.  The acquisition marks an important first step toward assembling a portfolio of development-stage, rare disease medicines.
     
  • The Company completed the sale of the marketing rights for PROCYSBI and QUINSAIR in the Europe, the Middle East and Africa (EMEA) regions to Chiesi Farmaceutici S.p.A. on June 23, 2017.
     
  • Health Canada approved PROCYSBI for use in Canada on June 19, 2017.  PROCYSBI is the only cystine-depleting agent approved in Canada for the treatment of nephropathic cystinosis and is expected to launch by the end of the year.
  • Four new KRYSTEXXA data analyses were presented at the 2017 Annual European Congress of Rheumatology (EULAR) in evaluating the use of KRYSTEXXA in patients with refractory chronic gout.  A new study underscoring the burden of gout on patients and the healthcare system was also presented at EULAR.  The study findings showed that U.S. gout-related hospitalizations have increased 410 percent since 1993, and that hospitalizations in patients with gout resulted in costs in 2014 of more than $42.6 billion.  These presentations support the Company’s continued efforts to address the lack of awareness and understanding regarding refractory chronic gout and the benefits of KRYSTEXXA.
     
  • The Company received approval from the U.S. Food and Drug Administration (FDA) for a supplemental New Drug Application (sNDA) for RAVICTI on April 28, 2017.  The sNDA expands the age range for chronic management of urea cycle disorders (UCDs) in patients to two months of age and older, from the previous age range of two years of age and older.
     
  • Two intellectual property-related developments of note occurred during the second quarter. In May, the U.S. District Court for the District of New Jersey upheld the validity of a patent covering PENNSAID® 2% that expires in 2027.  In June, the U.S. District Court for the District of New Jersey upheld the validity of two Horizon Pharma patents covering VIMOVO® that expire in 2022 and 2023.  Both medicines have numerous Orange Book-listed patents that extend out to 2030 and beyond.

Second-Quarter and Year-to-Date 2017 Business Unit Net Sales Results

(in millions except for percentages) Q2 17   Q2 16   %
Change
  YTD 17   YTD 16   %
Change
   
Orphan $    120.4   $    73.5   64     $    232.9   $    139.8   67      
RAVICTI®     47.2       39.4   20         91.1       76.4   19      
PROCYSBI®(1)(2)       36.7       -    NM         71.0       -    NM      
ACTIMMUNE®     28.8       30.0   (4 )       55.0       55.6   (1 )    
BUPHENYL®       6.3       4.1   54         12.6       7.8   61      
QUINSAIRTM(1)(2)       1.4       -    NM         3.2       -    NM      
Rheumatology     51.7       33.2   56         94.5       60.6   56      
KRYSTEXXA®     38.3       19.9   93         69.9       36.0     94      
RAYOS®     11.6       12.1   (4 )       21.9       22.7   (3 )    
LODOTRA®     1.8       1.2   51         2.7       1.9   41      
Primary Care     117.4       150.7   (22 )       183.0       261.7   (30 )    
PENNSAID® 2%      51.2       72.7   (30 )       92.8       127.6   (27 )    
DUEXIS®     43.6       45.5   (4 )       61.3       75.2   (18 )    
VIMOVO®      21.1       31.4   (33 )       26.0       56.9   (54 )    
MIGERGOT®     1.5       1.1   26         2.9       2.0     40      
Total net sales $    289.5   $    257.4   12     $    510.4   $    462.1   10      
                             
(1)PROCYSBI and QUINSAIR were acquired on Oct. 25, 2016.  Q2 16 pre-acquisition net sales of PROCYSBI and QUINSAIR were $31.4 million and $0.7 million respectively.    
(2)On June 23, 2017, Horizon Pharma completed the divestiture of a European subsidiary that owns the marketing rights to PROCSYBI and QUINSAIR in Europe, the Middle East and Africa to Chiesi Farmaceutici S.p.A.  Horizon Pharma retains marketing rights for the two medicines in the U.S., Canada, Latin America and Asia.    
                             
  • Orphan Business Unit:  Second-quarter net sales for the orphan business unit increased 64 percent compared to the second quarter of 2016.  Driving the results were strong net sales performance of RAVICTI and PROCYSBI.  
     
    RAVICTI net sales in the second quarter of 2017 were $47.2 million, an increase of 20 percent compared to the second quarter of 2016, driven by continued conversion from older-generation nitrogen-scavenger therapies, as well as the addition of treatment-naïve patients, in part resulting from the FDA approval of the sNDA for RAVICTI on April 28, 2017.  The Company continues to expect RAVICTI to be launched in Europe in the second half of 2017 in partnership with Swedish Orphan Biovitrum AB (SOBI).  
     
    PROCYSBI net sales in the second quarter of 2017 were $36.7 million, an increase of 17 percent compared to pre-acquisition net sales of $31.4 million in the second quarter of 2016, driven by demand from both patients converting from older-generation therapy as well as from treatment-naïve patients.  The differentiated profile of PROCYSBI was highlighted in July at the Cystinosis Research Network 2017 Family Conference in a presentation that demonstrated that patients receiving PROCYSBI had a 26 percent reduction in a metabolite associated with halitosis (i.e., bad breath) compared to those receiving immediate-release cysteamine.  This is an important consideration for people living with cystinosis.  
     
    ACTIMMUNE net sales in the second quarter of 2017 were $28.8 million, a decrease of 4 percent versus the second quarter of 2016 and an increase of 10 percent sequentially from the first quarter of 2017.  This increase was in part due to the Company’s evolved strategy to establish the role of ACTIMMUNE in a broader range of chronic granulomatous disease patients.
     
    The investigator-initiated Fox Chase Cancer Center Phase 1 dose-escalation trial, which is evaluating ACTIMMUNE as part of a combination therapy in solid tumors for certain cancers, continues to advance.  In addition, a National Cancer Institute Phase 2 study evaluating a different cancer combination therapy using ACTIMMUNE remains on track to begin later in 2017.  A third cancer combination study is also underway with the Moffitt Cancer and Research Institute evaluating ACTIMMUNE and other cancer therapies in certain advanced breast cancer patients.
     
    The second-quarter acquisition of teprotumumab expands and diversifies the Company’s rare disease medicine pipeline.  The recently completed Phase 2 clinical trial of teprotumumab demonstrated unprecedented clinical efficacy in the treatment of TED.  The results of the multicenter, double-blind, randomized placebo-controlled trial, which lasted 24 weeks and involved 88 patients, were published in TheNew England Journal of Medicine in May.  In the intention-to-treat population, 29 of 42 patients who received teprotumumab (69 percent), as compared with 9 of 45 patients who received placebo (20 percent), had a response at week 24 (p<0.001).  The primary end point was the response in the study eye; this response was defined as a reduction of 2 points or more in the Clinical Activity Score (scores range from 0 to 7, with a score of ≥3 indicating active thyroid eye disease) and a reduction of 2 mm or more in proptosis at week 24.  The Company remains on track to begin the confirmatory Phase 3 trial by year end.   
     
  • Rheumatology Business Unit:  Second-quarter net sales for the rheumatology business unit were $51.7 million, an increase of 56 percent compared to the second quarter of 2016, driven by KRYSTEXXA.  KRYSTEXXA net sales in the second quarter of 2017 were $38.3 million, an increase of 93 percent compared to the second quarter of 2016, driven in part by continued strong year-over-year vial demand.
       
    The Company announced during the second quarter that, based on the continued increase in uptake of KRYSTEXXA and the clear unmet need for thousands of refractory chronic gout sufferers, the Company is significantly increasing its commercial infrastructure and investment in the medicine.  This is in support of the Company’s expectation for annual peak net sales for KRYSTEXXA of more than $400 million versus the previous estimate of more than $250 million.  During the second quarter, the Company began its initiative to expand its rheumatology business unit’s commercial organization to nearly 200 employees from more than 100, with the objective of reaching more physicians and increasing awareness of refractory chronic gout among physicians and patients.  The expansion is expected to be complete by the end of the year.
     
  • Primary Care Business Unit:  Total second-quarter net sales for the primary care business unit were $117.4 million, a decrease of 22 percent compared to the second quarter of 2016, due to the implementation of the new contracting model with pharmacy benefit managers.  Second-quarter 2017 net sales improved sequentially over first-quarter 2017 net sales as a result of higher average net realized price (ANRP) and improved prescription demand.

Second-Quarter 2017 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.       

  • Gross Profit:  Under U.S. GAAP in the second quarter of 2017, the gross profit ratio was 55.0 percent compared to 68.5 percent in the second quarter of 2016.  The non-GAAP gross profit ratio in the second quarter of 2017 was 90.6 percent compared to 92.0 percent in the second quarter of 2016.
     
  • Operating Expenses:  On a GAAP basis in the second quarter of 2017, total operating expenses, which included $148.6 million related to the River Vision acquisition, were 119.2 percent of net sales.  Non-GAAP total operating expenses in the second quarter of 2017 were 46.7 percent of net sales.  Research and development (R&D) expenses were 56.3 percent of net sales; and selling, general and administrative (SG&A) expenses were 62.8 percent of net sales.  Non-GAAP R&D expenses were 4.4 percent of net sales, and non-GAAP SG&A expenses were 42.3 percent of net sales. 
     
  • Income Tax Rate:  The income tax rate in the second quarter of 2017 on a GAAP basis was 0.8 percent and on a non-GAAP basis was 32.2 percent. 
     
  • Net (Loss) Income:  On a GAAP basis in the second quarter of 2017, net loss was $209.5 million.  Non-GAAP net income was $68.3 million for the second quarter. 
      
  • Adjusted EBITDA:  Adjusted EBITDA in the second quarter of 2017 was $127.0 million.
        
  • Earnings (Loss) per Share:  On a GAAP basis in the second quarter of 2017, diluted loss per share was $1.29, compared with diluted earnings per share of $0.09 in the second quarter of 2016. Non-GAAP diluted earnings per share in the second quarter of 2017 and 2016 were $0.41 and $0.56, 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 2017 were 162.9 million and 165.0 million, respectively.

Cash Flow Statement and Balance Sheet Highlights             

  • On a GAAP basis in the second quarter of 2017, operating cash flow was $47.9 million.  Non-GAAP operating cash flow was $86.4 million in the second quarter of 2017.
     
  • The Company had cash and cash equivalents of $554.3 million as of June 30, 2017.  
     
  • Total principal amount of debt outstanding as of June 30, 2017, was $2.023 billion, which was composed of $848 million in senior secured term loans due 2024; $475 million senior notes due 2023; $300 million senior notes due 2024; and $400 million exchangeable senior notes due 2022.  As of June 30, 2017, net debt was $1.469 billion.  

Full-Year 2017 Guidance

The Company increased its full-year 2017 net sales guidance range to $1.010 billion to $1.045 billion from $985 million to $1.020 billion and increased its full-year 2017 adjusted EBITDA guidance to $340 million to $375 million from $315 million to $350 million.

Conference Call

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

U.S. Dial-In Number:  +1 888.338.8373
International Dial-In Number:  +1 973.872.3000
Passcode:  45942068

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 conference call will be available approximately two hours after the call and accessible through one of the following telephone numbers, using the passcode below:

Replay U.S. Dial-In Number:  +1 855.859.2056
Replay International Dial-In Number:  +1 404.537.3406
Passcode:  45942068

About Horizon Pharma plc
Horizon Pharma plc is a biopharmaceutical company focused on improving patients' lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs.  The Company markets 11 medicines through its orphan, rheumatology and primary care business units.  For more information, please visit www.horizonpharma.com.  Follow @HZNPplc on Twitter or view careers on our LinkedIn page.

Note Regarding Use of Non-GAAP Financial Measures
EBITDA, or earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA are used and provided by Horizon 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 tax rate and non-GAAP operating cash flow, 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-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, a litigation settlement, loss on debt extinguishment, loss on sale of long-term investments, costs of debt refinancing, drug manufacturing harmonization costs, as well as non-cash items such as share-based compensation, depreciation and amortization, royalty accretion, non-cash interest expense, intangible and other non-current asset impairment charges, 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 2017 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 2017 adjusted EBITDA outlook to an expected net income (loss) outlook because certain items such as acquisition-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 and other factors.  These components of net income (loss) could significantly impact Horizon Pharma’s actual net income (loss).    

Forward-Looking Statements
This press release contains forward-looking statements, including, but not limited to, statements related to Horizon Pharma's full-year 2017 net sales and adjusted EBITDA guidance, expected peak annual sales of KRYSEXXA and teprotumumab, expected financial performance in future periods, expected timing of clinical, regulatory and commercial events, including the planned Phase 3 clinical trial of teprotumumab and anticipated additional clinical trials of ACTIMMUNE in cancer indications, the potential benefits of Horizon Pharma’s acquisition of River Vision, increases in R&D investment and KRYSTEXXA commercialization spending, the impact of Horizon Pharma’s primary care business unit PBM contracting commercial model, the expected launch of RAVICTI in Europe and PROCYSBI in Canada, potential market opportunity for Horizon Pharma’s medicines in approved and potential additional indications, potential growth of Horizon Pharma’s medicines 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 and risks relating to Horizon Pharma’s ability to successfully implement its business strategies; whether Horizon Pharma is able to realize expected benefits from arrangements with PBMs; risks related to acquisition integration and achieving projected benefits; risks associated with clinical development and 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 presentation as a result of new information. 

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,   
            2017     2016     2017     2016  
                                 
Net sales       $ 289,507   $ 257,378   $ 510,366   $ 462,068  
Cost of goods sold       130,150     81,126     269,266     158,359  
Gross profit         159,357     176,252     241,100     303,709  
                                 
OPERATING EXPENSES:                            
 Research and development       163,101     11,210     176,162     23,932  
 Selling, general and administrative     181,923     133,575     355,988     275,514  
 Total operating expenses     345,024     144,785     532,150     299,446  
Operating (loss) income       (185,667)     31,467     (291,050)     4,263  
                                 
OTHER EXPENSE, NET:                            
 Interest expense, net       (31,608)     (19,228)     (63,591)     (38,686)  
 Foreign exchange gain (loss)       151     15     (108)     (158)  
 Gain on divestiture       5,856       -      5,856     -  
 Loss on debt extinguishment       -     -     (533)     -  
 Other expense, net       (35)     (26)     -     (40)  
 Total other expense, net     (25,636)     (19,239)     (58,376)     (38,884)  
                                 
(Loss) income before benefit for income taxes     (211,303)     12,228     (349,426)     (34,621)  
BENEFIT FOR INCOME TAXES       (1,767)     (2,756)     (49,320)     (4,199)  
NET (LOSS) INCOME     $ (209,536)   $ 14,984   $ (300,106)   $ (30,422)  
                                 
Net (loss) earnings per ordinary share - basic         $ (1.29)   $ 0.09   $ (1.85)   $ (0.19)  
                                 
Weighted average ordinary shares outstanding - basic     162,931,930     160,468,146     162,486,946     160,186,270  
                                 
Net (loss) earnings per ordinary share - diluted   $ (1.29)   $ 0.09   $ (1.85)   $ (0.19)  
                                 
Weighted average ordinary shares outstanding - diluted     162,931,930     163,920,581     162,486,946     160,186,270  

 

Horizon Pharma plc  
Condensed Consolidated Balance Sheets (Unaudited)  
(in thousands, except share data)  
                   
                   
            As of  
            June 30,
2017
  December 31,
2016
 
ASSETS      
CURRENT ASSETS:          
  Cash and cash equivalents   $   554,269     $   509,055    
  Restricted cash       7,266         7,095    
  Accounts receivable, net       390,844         305,725    
  Inventories, net       102,244         174,788    
  Prepaid expenses and other current assets       45,988         49,619    
     Total current assets     1,100,611       1,046,282    
Property and equipment, net       22,657         23,484    
Developed technology, net     2,580,875        2,767,184    
Other intangible assets, net       5,846         6,251    
Goodwill         427,944         445,579    
Deferred tax assets, net       2,163         911    
Other assets       29,845         2,368    
TOTAL ASSETS   $  4,169,941     $  4,292,059    
                   
LIABILITIES AND SHAREHOLDERS' EQUITY          
CURRENT LIABILITIES:          
  Long-term debt—current portion   $   8,500     $   7,750    
  Accounts payable       81,884         52,479    
  Accrued expenses       112,452         182,765    
  Accrued trade discounts and rebates       413,201         297,556    
  Accrued royalties—current portion       61,575         61,981    
  Deferred revenues—current portion       4,254         3,321    
     Total current liabilities       681,866         605,852    
                   
LONG-TERM LIABILITIES:          
  Exchangeable notes, net       306,022         298,002    
  Long-term debt, net, net of current     1,577,822       1,501,741    
  Accrued royalties, net of current       268,144         272,293    
  Deferred revenues, net of current       7,856         7,763    
  Deferred tax liabilities, net       210,821         296,568    
  Other long-term liabilities       88,642         46,061    
     Total long-term liabilities     2,459,307       2,422,428    
                   
COMMITMENTS AND CONTINGENCIES          
SHAREHOLDERS' EQUITY:          
  Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 
      163,698,457 and 162,004,956 issued at June 30, 2017 and December 31, 2016, 
       respectively, and 163,314,091 and 161,620,590  outstanding at June 30, 2017 and 
       December 31, 2016, respectively
      16         16    
  Treasury stock, 384,366 ordinary shares at June 30, 2017 and December 31, 2016       (4,585 )       (4,585 )  
  Additional paid-in capital     2,177,377        2,119,455    
  Accumulated other comprehensive loss       (2,132 )       (3,086 )  
  Accumulated deficit      (1,141,908 )      (848,021 )  
     Total shareholders' equity      1,028,768        1,263,779    
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $  4,169,941     $  4,292,059    
                   

 

Horizon Pharma plc  
Condensed Consolidated Statements of Cash Flows (Unaudited)  
(in thousands)  
                         
                     
          Three Months Ended June 30,    Six Months Ended June 30,   
            2017       2016       2017       2016    
           (Unaudited)     (Unaudited)   
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net (loss) income   $ (209,536 )   $ 14,984     $ (300,106 )   $ (30,422 )  
Adjustments to reconcile net loss to net cash provided by operating activities                  
Depreciation and amortization expense     71,531       51,883       143,014       102,525    
Equity-settled share-based compensation       29,123         27,673         57,960         55,418    
Royalty accretion       12,735         9,669         25,694         19,028    
Royalty liability remeasurement       -          -          (2,944 )       -     
Acquired in-process research and development expense       148,609         -          148,609         -     
Impairment of non-current asset           22,270         -          22,270         -     
Loss on debt extinguishment       -          -          388         -     
Payments related to term loan refinancing           -          -          (3,940 )       -     
Amortization of debt discount and deferred financing costs       5,206         4,507         10,629         8,932    
Gain on divestiture       (2,635 )       -          (2,635 )       -     
Deferred income taxes           (31,791 )       (2,705 )       (79,486 )       (5,362 )  
Foreign exchange and other adjustments       (174 )       (14 )       613         159    
Changes in operating assets and liabilities:                  
Accounts receivable       5,735       (14,094 )       (85,323 )       (83,932 )  
Inventories       30,686         6,460         67,736         13,777    
Prepaid expenses and other current assets       4,879        (16,384 )       2,434         (16,626 )  
Accounts payable        (6,255 )      (10,578 )       29,823         42,278    
Accrued trade discounts and rebates     871       (5,121 )     116,950         35,480    
Accrued expenses and accrued royalties      (48,820 )     (20,006 )       (98,179 )       (43,527 )  
Deferred revenues       1,002         80         384         (418 )  
Other non-current assets and liabilities       14,489         949         14,755         4,174    
   Net cash provided by operating activities     47,925       47,303       68,646       101,484    
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Payments for acquisitions, net of cash acquired     (167,850 )      (5,591 )     (167,850 )     (520,405 )  
Proceeds from divestiture, net of cash divested       69,072         -          69,072         -     
Change in restricted cash       (274 )       (391 )       (170 )       (1,309 )  
Purchases of property and equipment       (1,207 )       (5,251 )       (2,628 )       (12,776 )  
   Net cash used in investing activities     (100,259 )     (11,233 )     (101,576 )     (534,490 )  
CASH FLOWS FROM FINANCING ACTIVITIES:                        
Net proceeds from term loans      -          -        847,768         -     
Repayment of term loans      (2,125 )       (1,000 )     (770,790 )       (2,000 )  
Proceeds from the issuance of ordinary shares in connection with warrant exercises       11         -          11         -     
Proceeds from the issuance of ordinary shares through ESPP programs       4,029         3,235         3,856         3,235    
Proceeds from the issuance of ordinary shares in connection with stock option exercises       753         739         1,297         1,658    
Payment of employee withholding taxes relating to share-based awards       (925 )       (549 )       (5,202 )       (4,734 )  
Repurchase of ordinary shares       (992 )       -          (992 )       -     
   Net cash provided by (used in) financing activities       751         2,425         75,948         (1,841 )  
                         
Effect of foreign exchange rate changes on cash and cash equivalents       2,494         177         2,196         (244 )  
                         
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (49,089 )     38,672       45,214       (435,091 )  
CASH AND CASH EQUIVALENTS, beginning of the period       603,358         385,853         509,055         859,616    
CASH AND CASH EQUIVALENTS, end of the period   $ 554,269     $ 424,525     $ 554,269     $ 424,525    
                         

 

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, 
          2017       2016       2017       2016  
                 
                     
  GAAP net (loss) income $ (209,536 )   $ 14,984     $ (300,106 )   $ (30,422 )
  Non-GAAP adjustments:              
   Remeasurement of royalties for medicines acquired through business combinations     -          -          (2,944 )       -   
   Acquisition-related costs     153,385         281         163,424         11,297  
   Upfront fee for license of global patent     -          -          -          2,000  
   Fees related to term loan refinancing     (45 )       -          4,098         -   
   Primary Care business unit realignment costs     5,193         -          5,193         -   
   Gain on divestiture   (5,856 )       -        (5,856 )       -   
   Loss on debt extinguishment      -          -          533         -   
    Amortization, accretion and step-up:              
   Intangible amortization expense     69,776         50,792         139,453         100,442  
   Amortization of debt discount and deferred financing costs     5,206         4,507         10,629         8,932  
   Accretion of royalty liabilities     12,735         9,669         25,694         19,028  
   Inventory step-up expense     33,895         9,102         74,490         16,548  
   Share-based compensation       27,768         27,997         56,237         55,609  
   Depreciation expense       1,755         1,091         3,561         2,083  
   Charges relating to discontinuation of Friedreich's ataxia program     19,167         -          19,167         -   
   Drug substance harmonization costs     745         -          5,044         -   
   Royalties for medicines acquired through business combinations       (11,622 )       (9,095 )       (22,939 )       (17,595 )
   Total of pre-tax non-GAAP adjustments   312,102         94,344       475,784         198,344  
   Income tax effect of pre-tax non-GAAP adjustments       (34,272 )       (18,064 )       (72,375 )       (35,338 )
   Total of non-GAAP adjustments   277,830         76,280       403,409         163,006  
  Non-GAAP Net Income     $ 68,294     $ 91,264     $ 103,303     $ 132,584  
                     
                     
Non-GAAP Earnings Per Share:                  
                     
  Weighted average shares - Basic        162,931,930        160,468,146        162,486,946       160,186,270  
                     
  Non-GAAP Earnings Per Share - Basic:                  
   GAAP (loss) earnings per share - Basic      (1.29 )     0.09        (1.85     (0.19
   Non-GAAP adjustments      1.71       0.48       2.49       1.02  
   Non-GAAP earnings per share - Basic     0.42       0.57       0.64       0.83  
                     
                     
  Weighted average shares - Diluted                    
   Weighted average shares - Basic      162,931,930       160,468,146       162,486,946       160,186,270  
   Ordinary share equivalents     2,033,141       3,452,435       2,499,409       3,630,429  
   Weighted average shares - Diluted     164,965,071       163,920,581       164,986,355       163,816,699  
                     
                     
  Non-GAAP Earnings Per Share - Diluted                
   GAAP (loss) earnings per share - Diluted      (1.29     0.09       (1.85     (0.19
   Non-GAAP adjustments     1.71       0.47       2.49       1.02  
   Diluted earnings per share effect of ordinary share equivalents     (0.01 )     -       (0.01 )     (0.02 )
   Non-GAAP earnings per share - Diluted     0.41       0.56       0.63       0.81  
                     

 

Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
EBITDA, Gross Profit and Operating Cash Flow (Unaudited)
(in thousands, except percentages)
               
                     
        Three Months Ended June 30,    Six Months Ended June 30, 
          2017       2016       2017       2016  
                 
EBITDA and Adjusted EBITDA:              
                     
GAAP net (loss) income $ (209,536 )   $ 14,984     $ (300,106 )    $ (30,422 )
Depreciation     1,755         1,091         3,561         2,083  
Amortization, accretion and step-up:                  
 Intangible amortization expense      69,776         50,792       139,453        100,442  
 Accretion of royalty liabilities       12,735         9,669         25,694         19,028  
 Amortization of deferred revenue       (207 )       (213 )       (411 )       (419 )
 Inventory step-up expense       33,895         9,102         74,490         16,548  
Interest expense, net (including amortization of                  
debt discount and deferred financing costs)     31,608       19,228       63,591       38,686  
Benefit for income taxes       (1,767 )     (2,756 )     (49,320 )     (4,199 )
EBITDA     $ (61,741 )   101,897     $ (43,048 )    $ 141,747  
Non-GAAP adjustments:                  
Remeasurement of royalties for medicines acquired through business combinations     -          -          (2,944 )       -   
Acquisition-related costs     153,385        281       163,424         11,297  
Upfront fee for license of global patent       -          -          -          2,000  
Primary Care business unit realignment costs       5,193         -          5,193         -   
Gain on divestiture   (5,856 )       -        (5,856 )       -   
Loss on debt extinguishment        -          -          533         -   
Fees related to term loan refinancing       (45 )       -          4,098         -   
Share-based compensation       27,768         27,997         56,237         55,609  
Charges relating to discontinuation of Friedreich's ataxia program     19,167         -          19,167         -   
Drug substance harmonization costs       745         -          5,044         -   
Royalties for medicines acquired through business combinations     (11,622 )       (9,095 )       (22,939 )       (17,595 )
Total of Non-GAAP adjustments       188,735         19,183       221,957         51,311  
Adjusted EBITDA     $ 126,994      $ 121,080     $ 178,909      $ 193,058  
                     
                     
Non-GAAP Gross Profit:                  
                     
 GAAP gross profit   159,357     176,252     241,100      $ 303,709  
 Non-GAAP gross profit adjustments:                
 Acquisition-related costs       (48 )       296         32         411  
 Share-based compensation       573         -          1,001         -   
 Remeasurement of royalties for medicines acquired through business combinations       -          -          (2,944 )       -   
 Intangible amortization expense (COGS only)     69,574       50,590       139,048        100,037  
 Accretion of royalty liabilities       12,735         9,669         25,694         19,028  
 Inventory step-up expense       33,895         9,102         74,490         16,548  
  Depreciation (COGS only)       183         100         366         220  
  Charges relating to discontinuation of Friedreich's ataxia program     (3,103 )       -          (3,103 )       -   
  Drug substance harmonization costs       745             5,044         -   
  Royalties for medicines acquired through business combinations       (11,622 )       (9,095 )       (22,939 )       (17,595 )
Total of Non-GAAP adjustments     102,932        60,662       216,689       118,649  
 Non-GAAP gross profit    262,289     236,914     457,789     422,358  
                     
 GAAP gross profit %     55.0 %     68.5 %     47.2 %     65.7 %
 Non-GAAP gross profit %     90.6 %     92.0 %     89.7 %     91.4 %
                     
Non-GAAP operating cash flow:                    
                     
GAAP cash provided by operating activities   47,925     $  47,303     68,646     $  101,484  
 Cash payments for acquisition-related costs       12,620         10,883         33,012         22,577  
 Cash payment for litigation settlement       16,250         -          32,500         -   
 Upfront fee for license of global patent       -          -          -          2,000  
 Drug substance harmonization costs     5,006         -          5,006         -   
 Cash payments for clinical trial wind-down costs       718         -          1,200         -   
 Cash payments for charges relating to discontinuation of Friedreich's ataxia program       1,801         -          1,801         -   
 Cash payment for debt extinguishment       -          -          145         -   
 Cash payments relating to term loan refinancing       455         -          7,707         -   
 Cash payments for Primary Care business unit realignment       1,664         -          1,664         -   
 Non-GAAP operating cash flow   86,439     $   58,186     151,681     $    126,061  
                     

 

Horizon Pharma plc       
GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)     
(in millions, except percentages)     
                   
  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 32.5% $ 68.3 $ 0.41  
                   
                   
  Q2 2016  
    Pre-tax Net
Income
   Income Tax
(Benefit) Expense
 
Tax Rate   Net Income Diluted
Earnings Per Share
 
As reported - GAAP $ 12.2 $ (2.8) -22.5% $ 15.0 $ 0.09   
Non-GAAP adjustments     94.3     18.1       76.2    
Non-GAAP $ 106.5 $ 15.3 14.4% $ 91.2 $ 0.56  
                   
                   
  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  
                   
                   
  YTD 2016  
    Pre-tax Net
(Loss)Income
   Income Tax
(Benefit) Expense
 
Tax Rate   Net (Loss)
Income
Diluted (Loss)
Earnings Per Share
 
As reported - GAAP $ (34.6) $ (4.2) 12.1% $ (30.4) $ (0.19)  
Non-GAAP adjustments     198.3     35.3       163.0    
Non-GAAP $ 163.7 $ 31.1 19.0% $ 132.6 $ 0.81  
                   

 

        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   Interest 
Expense 
   Gain on 
Divestiture 
 Income Tax Benefit
(Expense) 
 
                             
  GAAP as reported $ (130,150 )  $ (163,101 ) $ (181,923 ) $ (31,608 ) $ 5,856   $ 1,767    
                             
  Non-GAAP Adjustments (in thousands):                      
    Acquisition-related costs(1)     (48 )     148,080       5,353       -        -        -     
    Fees related to term loan refinancing(2)       -        -        (45 )     -        -        -     
    Primary Care business unit realignment costs(3)       -        -        5,193       -        -        -     
    Gain on divestiture(4)       -        -        -        -      (5,856 )     -     
    Amortization, accretion and step-up:                      
     Intangible amortization expense(5)     69,574       -        202       -        -        -     
     Amortization of debt discount and deferred financing costs(6)     -        -        -        5,206       -        -     
     Accretion of royalty liability(7)     12,735       -        -        -        -        -     
     Inventory step-up expense(8)     33,895       -        -        -        -        -     
    Share-based compensation(9)     573       2,313       24,882       -        -        -     
    Depreciation expense(10)     183       -        1,572       -        -        -     
    Charges relating to discontinuation of Friedreich's ataxia program(11)       (3,103 )     -        22,270       -        -        -     
    Drug substance harmonization costs(12)       745       -        -        -        -        -     
    Royalties for medicines acquired through business combinations(13)     (11,622 )     -        -        -        -        -     
    Income tax effect on pre-tax non-GAAP adjustments(14)     -        -        -        -        -        (34,272 )  
    Total of non-GAAP adjustments   102,932       150,393       59,427       5,206     (5,856 )     (34,272 )  
                             
  Non-GAAP $ (27,218 ) $ (12,708 ) $ (122,496 ) $ (26,402 ) $ -   $ (32,505 )  
                             
        Horizon Pharma plc  
        Certain Income Statement Line Items - Non-GAAP Adjusted  
        For the Three Months Ended June 30, 2016   
        (Unaudited)  
                             
         COGS     Research & Development     Selling, General & Administrative   Interest 
Expense 
  Income Tax Benefit (Expense)     
                             
  GAAP as reported $ (81,126 ) $ (11,210 ) $ (133,575 ) $ (19,228 ) $ 2,756      
                             
  Non-GAAP Adjustments (in thousands):                      
    Acquisition-related costs(1)     296       506       (521 )     -        -       
    Amortization, accretion and step-up:                      
     Intangible amortization expense(5)     50,590       -        202       -        -       
     Amortization of debt discount and deferred financing costs(6)     -        -        -        4,507       -       
     Accretion of royalty liability(7)     9,669       -        -        -        -       
     Inventory step-up expense(8)     9,102       -        -        -        -       
    Share-based compensation(9)     -        2,238       25,759       -        -       
    Depreciation expense(10)     100       -        991       -        -       
    Royalties for medicines acquired through business combinations(13)     (9,095 )     -        -        -        -       
    Income tax effect on pre-tax non-GAAP adjustments(14)     -        -        -        -        (18,064 )    
     Total of non-GAAP adjustments     60,662       2,744       26,431       4,507       (18,064 )    
                             
  Non-GAAP $ (20,464 ) $ (8,466 ) $ (107,144 ) $ (14,721 ) $ (15,308 )    
                             

 

        Horizon Pharma plc
        Certain Income Statement Line Items - Non-GAAP Adjusted
        For the Six Months Ended June 30, 2017 
        (Unaudited)
                                     
         COGS     Research & Development     Selling, General & Administrative  Interest 
Expense 
Gain on
 Divestiture 
 Loss on Debt 
Extinguishment 
 Income Tax Benefit (Expense)   
                                     
  GAAP as reported $ (269,266 ) $ (176,162 )  $ (355,988 )  $ (63,591 )  $ 5,856   $ (533)  $ 49,320    
                                     
  Non-GAAP Adjustments (in thousands):                              
    Acquisition-related costs(1)     32       148,257       15,135       -        -        -      -     
    Fees related to term loan refinancing(2)      -        -        4,098       -        -        -      -     
    Loss on debt extinguishment(15)     -        -        -        -        -        533     -     
    Primary Care business unit realignment costs(3)      -        -        5,193       -        -        -      -     
    Gain on divestiture(4)     -        -        -        -      (5,856 )     -      -     
    Amortization, accretion and step-up:                              
    Intangible amortization expense(5)   139,048       -        405       -        -        -      -     
     Amortization of debt discount and deferred financing costs(6)     -        -        -        10,629       -        -      -     
     Accretion of royalty liability(7)     25,694       -        -        -        -        -      -     
     Inventory step-up expense(8)     74,490       -        -        -        -        -      -     
    Remeasurement of royalties for products acquired through business combinations(16)     (2,944 )     -        -        -        -        -      -     
    Share-based compensation(9)     1,001       4,362       50,874       -        -        -      -     
    Depreciation expense(10)     366       -        3,195       -        -        -      -     
    Charges relating to discontinuation of Friedreich's ataxia program(11)      (3,103 )     -        22,270       -        -        -      -     
    Drug substance harmonization costs(12)      5,044       -        -        -        -        -      -     
    Royalties for medicines acquired through business combinations(13)     (22,939 )     -        -        -        -        -      -     
    Income tax effect on pre-tax non-GAAP adjustments(14)     -        -        -        -        -        -      (72,375 )  
     Total of non-GAAP adjustments   216,689       152,619       101,170       10,629     (5,856 )     533     (72,375 )  
                                     
  Non-GAAP $ (52,577 )  $ (23,543 ) $ (254,818 ) $ (52,962 ) $ -   $ - $ (23,055 )  
                                     
        Horizon Pharma plc
        Certain Income Statement Line Items - Non-GAAP Adjusted
        For the Six Months Ended June 30, 2016 
        (Unaudited)
                                     
         COGS  Research &
 Development 
 Selling, General & Administrative   Interest 
Expense 
 Income Tax Benefit (Expense)         
                                     
  GAAP as reported $ (158,359 ) $ (23,932 ) $ (275,514 ) $ (38,686 ) $ 4,199          
                                     
  Non-GAAP Adjustments (in thousands):                              
    Acquisition-related costs(1)     411       538       10,348       -        -           
    Upfront fee for license of global patent(17)     -        2,000       -        -        -           
    Amortization, accretion and step-up:                              
      Intangible amortization expense(5)     100,037       -        405       -        -           
      Amortization of debt discount and deferred financing costs(6)     -        -        -        8,932       -           
      Accretion of royalty liability(7)     19,028       -        -        -        -           
      Inventory step-up expense(8)     16,548       -        -        -        -           
    Share-based compensation(9)     -        4,363       51,246       -        -           
    Depreciation expense(10)     220       -        1,863       -        -           
    Royalties for medicines acquired through business combinations(13)     (17,595 )     -        -        -        -           
    Income tax effect on pre-tax non-GAAP adjustments(14)     -        -        -        -        (35,338 )        
      Total of non-GAAP adjustments     118,649       6,901       63,862       8,932       (35,338 )        
                                     
  Non-GAAP $ (39,710 ) $ (17,031 ) $ (211,652 ) $ (29,754 ) $ (31,139 )        
                                     

 

NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS - NON-GAAP 
(in thousands)
 
  (1 )   Expenses, including legal and consulting fees, incurred in connection with the Company’s acquisitions of River Vision Development Corp. (“River Vision”), Raptor Pharmaceutical Corp. (“Raptor”) , Crealta Holdings LLC (“Crealta”), Hyperion Therapeutics, Inc. (“Hyperion”), Vidara Therapeutics International Public Limited Company (“Vidara”), its agreement to acquire the worldwide rights to interferon gamma-1b, and its withdrawn offer to acquire Depomed Inc. have been excluded.
       
  (2 )   Represents arrangement and other fees relating to the refinancing of the Company’s term loans during the first quarter of 2017.
       
  (3 )   Represents expenses, including severance costs and consulting fees, related to the realignment of the Company’s Primary Care business unit.
       
  (4 )   On June 23, 2017, the Company completed the divestiture of a European subsidiary that owns the marketing rights to PROCSYBI 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 $5,856 in the three and six months ended June 30, 2017.
       
  (5 )   Intangible amortization expenses are associated with the Company’s intellectual property rights, developed technology and customer relationships of ACTIMMUNE, BUPHENYL, KRYSTEXXA, LODOTRA, MIGERGOT, PENNSAID 2%, PROCYSBI, RAVICTI, RAYOS and VIMOVO.
       
  (6 )   Represents amortization of debt discount and deferred financing costs associated with the Company's debt.
       
  (7 )   Represents accretion expense associated with the ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, RAVICTI and VIMOVO royalties for the three and six months ended June 30, 2017 and represents accretion expense associated with the ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, RAVICTI and VIMOVO royalties for the three and six months ended June 30, 2016.
       
  (8 )   In connection with the Crealta acquisition, the KRYSTEXXA and MIGERGOT inventory was stepped up in value by $144,289 and during the three and six months ended June 30, 2017, the Company recognized in cost of goods sold, $19,366 and $33,723 respectively, for step-up inventory expenses related to KRYSTEXXA and MIGERGOT inventory sold. 
       
      During the three and six months ended June 30, 2016, the Company recognized in cost of goods sold, $9,102 and $16,548 respectively, for step-up inventory expenses related to KRYSTEXXA and MIGERGOT inventory sold.
       
      In connection with the Raptor acquisition, the PROCYSBI and QUINSAIR inventory was stepped up in value by $66,950 and during the three and six months ended June 30, 2017, the Company recognized in cost of goods sold $14,528 and $40,767 respectively, of step-up inventory expenses related to PROCYSBI and QUINSAIR inventory sold. 
       
  (9 )   Represents share-based compensation expense associated with the Company's stock option, restricted stock unit, and performance stock unit grants to its employees and non-employees, its cash-settled long-term incentive program and its employee stock purchase plan.
       
 (10 )   Represents depreciation expense related to the Company’s property, equipment, software and leasehold improvements.
       
 (11 )   Charges relating to discontinuation of Friedreich’s ataxia program include $22,270 relating to the impairment of a non-current asset recorded following payment to Boehringer Ingelheim International for the acquisition of certain rights to interferon gamma-1b, and a $3,103 reduction in cost of goods sold relating to the renegotiation of a contract with Boehringer Ingelheim related to the purchase of additional units of ACTIMMUNE.
       
 (12 )   During the year ended December 31, 2016, the Company committed to spend $14,900 related to the harmonization of the manufacturing processes for ACTIMMUNE and IMUKIN drug substance.  During the six months ended June 30, 2017, the Company incurred $6,519 of this spend, including costs of $5,044 that qualify for exclusion in the Company’s non-GAAP financial measures under its non-GAAP cost policy.
       
 (13 )   Royalties of $11,622 and $22,939 were incurred during the three and six months ended June 30, 2017, respectively, based on the periods’ net sales for ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, QUINSAIR, RAVICTI and VIMOVO.  Royalties of $9,095 and $17,595 were incurred during the three and six months ended June 30, 2016, respectively, based on the periods’ net sales for ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, RAVICTI and VIMOVO.
       
 (14 )   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.
       
 (15 )   During the first quarter of 2017, the Company recorded a loss on debt extinguishment of $533, which was comprised of the write-off of $388 in debt discount and deferred financing costs, and an early redemption payment of $145.
       
 (16 )   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.  During the first quarter of 2017, the Company recorded a net reduction of $2,944 to cost of goods sold to adjust the amount of the contingent royalty liabilities relating to VIMOVO and KRYSTEXXA.
       
(17  )   Represents an upfront fee paid for a license of a global patent.
   
Contacts:

Investors:
Tina Ventura
Senior Vice President,
Investor Relations
investor-relations@horizonpharma.comRuth Venning
Executive Director,
Investor Relations
investor-relations@horizonpharma.com

 U.S. Media:
 Geoff Curtis
 Senior Vice President,
 Corporate Affairs & Chief Communications Officer
 media@horizonpharma.com

Ireland Media:
Ray Gordon
Gordon MRM
ray@gordonmrm.ie

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Horizon Pharma plc