Horizon Pharma plc
Nov 7, 2016

Horizon Pharma plc Announces Third-Quarter 2016 Financial Results

-- Third-Quarter 2016 GAAP Net Sales of $208.7 Million(1);
Non-GAAP Adjusted Net Sales of $273.7 Million --
-- Third-Quarter 2016 GAAP Net Loss of $5.9 Million; Adjusted EBITDA of $141.2 Million --
-- Third-Quarter 2016 GAAP Operating Cash Flow of $128.8 Million;
Non-GAAP Operating Cash Flow of $133.8 Million --
-- Completed Acquisition of Raptor Pharmaceutical Corp., Adding Two Rare Disease Medicines and Further Diversifying Company Portfolio to 11 Medicines --
-- Secured Formulary Status with Two Major PBMs to Broaden Contracting Strategy and Provide Greater Durability to Primary Care Medicines --
-- Confirming Full-Year 2016 GAAP Net Sales, Non-GAAP Adjusted Net Sales and Adjusted EBITDA Guidance --

DUBLIN, Ireland, Nov. 07, 2016 (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 third-quarter 2016 financial results today and confirmed its full-year 2016 GAAP net sales, non-GAAP adjusted net sales and adjusted EBITDA guidance, as updated on October 25, 2016, following the completion of the acquisition of Raptor Pharmaceutical Corp.

"We delivered strong results in the third quarter as we continued to execute on our long-term strategy of building a more-diversified, sustainable biopharmaceutical company anchored by a growing mix of orphan medicines," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc.  "We have made several strategic decisions this year to put Horizon Pharma on a strong path forward, including securing formulary status with two major PBMs for our primary care medicines and completing two significant acquisitions in rare diseases."   

Financial Highlights
             
(in millions except for per share amounts and percentages) Q3 16 Q3 15 %
Change
 YTD 16 YTD 15 %
Change
              
Net sales (1) $208.7  $226.5  (8) $670.8  $512.5  31 
Non-GAAP adjusted net sales (1)  273.7   226.5  21   735.8   512.5  44 
             
Net (loss) income  (5.9)  3.3  NM   (36.3)  15.5  NM 
Non-GAAP net income  115.5   69.8  65   248.1   151.4  64 
Adjusted EBITDA  141.2    131.1  8   334.3   239.7  39 
             
Loss (earnings) per share - diluted  (0.04)  0.02  NM   (0.23 )  0.10  NM 
Non-GAAP earnings per share - diluted  0.70   0.42  67   1.51   0.98  54 
             
(1) On Sept. 26, 2016, Horizon Pharma agreed to pay Express Scripts $65 million as part of a litigation settlement, which was recorded as a one-time
  reduction to GAAP net sales for the three and nine months ended Sept. 30, 2016, in accordance with U.S. Generally Accepted Accounting  
  Principles (GAAP).  The exclusion of the $65 million settlement from GAAP net sales is the only adjustment reflected in third-quarter and year-to-date  
  non-GAAP adjusted net sales.

Company Highlights

Horizon Pharma Confirms 2016 Full-Year Guidance

 
Third-Quarter Business Unit Net Sales Results
(in millions except for percentages)Q3 16 Q3 15 %
Change
 YTD 16 YTD 15 %
Change
 
Orphan$   71.4   $   66.1   8   $    211.2   $   139.6   51   
RAVICTI®(1) 42.2   33.4  26   118.6   52.4  126  
ACTIMMUNE® 24.9   28.7   (13)  80.5   79.4  1  
BUPHENYL®(1) 4.3   4.0  10   12.1   7.8  55  
Rheumatology   40.5      12.8   217      101.0      31.7   219   
KRYSTEXXA®(2) 25.6   -  NM   61.6   -  NM   
RAYOS® 13.4   11.7  15   36.0   29.2  24  
LODOTRA® 1.5   1.1  37   3.4   2.5  35  
Primary Care   161.8      147.6   10      423.6      341.2   24   
PENNSAID® 2% 80.2   43.9  83   207.9   91.6  127  
DUEXIS® 47.6   56.9  (16)  122.8   130.0  (6) 
VIMOVO® 32.8   46.8  (30)  89.7   119.6  (25) 
MIGERGOT®(2) 1.2   -  NM   3.2    -  NM  
Litigation settlement(3)   (65.0)    -     NM      (65.0)    -    NM   
Total GAAP net sales(3)$   208.7   $   226.5   (8) $   670.8   $   512.5   31   
Total non-GAAP adjusted net sales(3)$   273.7   $   226.5   21   $   735.8   $    512.5   44   
             
(1) RAVICTI and BUPHENYL were acquired on May 7, 2015
(2) KRYSTEXXA and MIGERGOT were acquired on January 13, 2016
(3) On Sept. 26, 2016, Horizon Pharma agreed to pay Express Scripts $65 million as part of a litigation settlement, which was recorded as a one-time reduction to GAAP net sales for the three and nine months ended Sept. 30, 2016, in accordance with U.S. GAAP.  The exclusion of the $65 million settlement from GAAP net sales is the only adjustment reflected in third-quarter and year-to-date non-GAAP adjusted net sales. 

Third-Quarter 2016 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.

Cash Flow Statement and Balance Sheet Highlights

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:  98231038

The live webcast and a replay may be accessed by visiting Horizon's website at http://ir.horizon-pharma.com.  Please connect to the Company's website at least 15 minutes prior to the live webcast to ensure adequate time for any software download that may be needed to access the webcast.

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

Replay U.S. Dial-In Number:  +1 855.859.2056
Replay International Dial-In Number:  +1 404.537.3406
Passcode:  98231038

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 as non-GAAP financial measures.  Horizon provides certain other financial measures such as non-GAAP adjusted net sales, non-GAAP, non-GAAP gross profit and gross profit ratio, 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's performance, operations, profitability and cash flows.  Adjustments to Horizon's GAAP figures as well as EBITDA exclude acquisition-related expenses, an upfront fee for a license of a patent, a litigation settlement, loss on debt extinguishment and loss on sale of long-term investments, as well as non-cash items such as share-based compensation, depreciation and amortization, royalty accretion, non-cash interest expense, and other non-cash adjustments.  Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred.  Horizon 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 2016 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.  For example, adjusted EBITDA is used by Horizon 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 has not provided a reconciliation of its full-year 2016 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'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'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 expected full-year 2016 net sales, non-GAAP adjusted net sales and adjusted EBITDA guidance, expected financial performance in future periods, expected timing of clinical, regulatory and commercial events, expected benefits of agreements with PBMs, potential market opportunity for Horizon Pharma's medicines in approved and potential additional indications, potential growth of Horizon Pharma's business, expected benefits from the acquisition of Raptor Pharmaceutical Corp. 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's actual full-year 2016 financial and operating results may differ from its expectations; Horizon Pharma's ability to grow net sales from existing products; the availability of coverage and adequate reimbursement and pricing from government and third-party payers and risks relating to the success and costs of Horizon's patient support programs; whether Horizon Pharma is unable to enter into additional business arrangements with pharmacy benefit managers and payers on favorable terms or at all; risks related to acquisition integration and achieving projected cost savings and 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 September 30,  Nine Months Ended September 30, 
   2016   2015   2016   2015 
       
Net sales $208,702  $226,544  $670,770  $512,506 
Cost of goods sold  85,161    61,250   243,520   151,929 
Gross profit  123,541   165,294   427,250   360,577 
         
OPERATING EXPENSES:        
Research and development   12,814   13,073   36,746   28,176 
Sales and marketing  72,564   51,973   227,697   157,092 
General and administrative  59,485   54,516    179,866   157,986 
Total operating expenses  144,863   119,562   444,309   343,254 
Operating (loss) income  (21,322)  45,732   (17,059)  17,323 
          
OTHER INCOME (EXPENSE), NET:        
Interest expense, net   (19,066)  (20,300)  (57,752)  (49,780)
Foreign exchange loss  (108)  (86)  (266)   (1,010)
Loss on induced conversion of debt and debt extinguishment  -   -   -   (77,624)
Other income (expense), net   6,879   (90)  6,839   (10,159)
Total other income (expense), net  (12,295)  (20,476)  (51,179)  (138,573)
         
(Loss) income before (benefit) expense for income taxes  (33,617)  25,256   (68,238)  (121,250)
(BENEFIT) EXPENSE FOR INCOME TAXES  (27,747)  21,979   (31,946)  (136,788)
NET (LOSS) INCOME  $(5,870) $3,277  $(36,292) $15,538 
         
Net (loss) income per ordinary share - basic  $(0.04) $0.02  $(0.23) $0.11 
         
Weighted average ordinary shares outstanding - basic  161,038,827   159,035,580 160,472,530  145,208,252 
         
Net (loss) income per ordinary share - diluted $(0.04 ) $0.02  $(0.23) $0.10 
          
Weighted average ordinary shares outstanding - diluted  161,038,827   166,380,800 160,472,530  154,005,671 
         

 

Horizon Pharma plc 
Condensed Consolidated Balance Sheets (Unaudited) 
(in thousands, except share data) 
      
      
  As of 
  September 30,
2016
 December 31,
2015
 
ASSETS   
CURRENT ASSETS:     
Cash and cash equivalents  $549,303  $859,616  
Restricted cash  5,271   1,860  
Accounts receivable, net  362,899   210,437  
Inventories, net   162,155   18,376  
Prepaid expenses and other current assets  38,078   15,858  
Total current assets  1,117,706   1,106,147  
Property and equipment, net  21,442   14,020  
Developed technology, net  1,877,158   1,609,049  
In-process research and development  66,000   66,000  
Other intangible assets, net  6,453    7,061  
Goodwill  248,736   253,811  
Deferred tax assets, net  5,975   2,278  
Other assets  6,201   222  
TOTAL ASSETS
 $3,349,671  $3,058,588  
      
LIABILITIES AND SHAREHOLDERS' EQUITY     
CURRENT LIABILITIES:     
Long-term debt—current portion $4,000  $4,000  
Accounts payable  65,684   16,590  
Accrued expenses  157,534   100,046  
Accrued trade discounts and rebates  268,202   183,769  
Accrued royalties—current portion  59,176   51,700  
Deferred revenues—current portion  1,635   1,447  
Total current liabilities  556,231   357,552  
      
LONG-TERM LIABILITIES:     
Exchangeable notes, net  294,089    282,889  
Long-term debt, net, net of current  849,135   849,867  
Accrued royalties, net of current  169,618   123,519  
Deferred revenues, net of current  8,154   8,785  
Deferred tax liabilities, net  95,583   113,400  
Other long-term liabilities  14,883   9,431  
Total long-term liabilities  1,431,462   1,387,891  
      
COMMITMENTS AND CONTINGENCIES     
SHAREHOLDERS' EQUITY:     
Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized;      
161,618,473 and 160,069,067 issued at September 30, 2016 and December 31, 2015,     
respectively, and 161,234,107 and 159,684,701 outstanding at September 30, 2016 and     
December 31, 2015, respectively.  16   16  
Treasury stock, 384,366 ordinary shares at September 30, 2016 and December 31, 2015  (4,585)  (4,585) 
Additional paid-in capital  2,086,873   2,001,552  
Accumulated other comprehensive loss  (2,847)  (2,651) 
Accumulated deficit  (717,479)  (681,187) 
Total shareholders' equity  1,361,978   1,313,145  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,349,671  $3,058,588  
      

 

Horizon Pharma plc 
Condensed Consolidated Statements of Cash Flows (Unaudited) 
(in thousands) 
                    
          
    Three Months Ended September 30,  Nine Months Ended September 30,  
     2016   2015   2016   2015  
    (Unaudited) (Unaudited) 
CASH FLOWS FROM OPERATING ACTIVITIES:         
Net (loss) income   $(5,870) $ 3,277  $(36,292) $15,538  
Adjustments to reconcile net (loss) income to net cash provided by operating activities         
Depreciation and amortization expense 51,940   43,285   154,465   94,025  
Equity-settled share-based compensation 28,593   24,914   84,011   56,253  
Royalty accretion   9,734   6,551   28,762   13,571  
Royalty liability remeasurement -   -   -   14,277  
Loss on induced conversions of debt and debt extinguishment -   -   -   21,581  
Amortization of debt discount and deferred financing costs 4,537   5,480   13,469   13,328  
Deferred income taxes    (29,796)  24,859   (35,158)  (134,014) 
Foreign exchange loss and other adjustments 109   130   268   1,137  
Changes in operating assets and liabilities:             
Accounts receivable (58,516)  (38,203)  (142,448)  (135,370) 
Inventories 10,065   2,264   23,842   12,819  
Prepaid expenses and other current assets  (4,212)  (4,180)  (20,838)  417  
Accounts payable 7,417   36,609   49,695   38,213  
Accrued trade discounts and rebates 47,529   (12,460)  83,009   35,136  
Accrued expenses and accrued royalties 73,109   (5,440)  29,582   11,052  
Deferred revenues (25)  (635)  (443)  2,143  
Payment of original issue discount upon repayment of 2014 Term Loan Facility -   -   -   (3,000) 
Other non-current assets and liabilities (5,827 )  1,932   (1,653)  2,122  
Net cash provided by operating activities 128,787   88,383   230,271   59,228  
CASH FLOWS FROM INVESTING ACTIVITIES:          
Payments for acquisitions, net of cash acquired -   -   (520,405)  (1,022,361) 
Proceeds from liquidation of available-for-sale investments -   -   -   64,623  
Purchases of long-term investments  -   (71,813)  -    (71,813) 
Change in restricted cash   (2,102)  (260)  (3,411)  (122) 
Purchases of property and equipment  (1,840)  (2,233)  (14,616)  (4,514) 
Net cash used in investing activities (3,942)  (74,306)  (538,432)  (1,034,187) 
CASH FLOWS FROM FINANCING ACTIVITIES:           
Net proceeds from the issuance of Exchangable Senior Notes -   -    -   387,181  
Net proceeds from the issuance of 2023 Senior Notes -   -   -   462,340  
Net proceeds from the 2015 Term Loan Facility -   (213)  -   391,506   
Repayment of the 2015 Term Loan Facility (1,000)  (1,000)  (3,000)  (1,000) 
Repayment of the 2014 Term Loan Facility -   -   -   (297,000) 
Net proceeds from the issuance of ordinary shares -   -   -   475,627  
Proceeds from the issuance of ordinary shares in connection with warrant exercises -   3,431   -   18,124  
Proceeds from the issuance of ordinary shares through ESPP programs -   -   3,235   1,541  
Proceeds from the issuance of ordinary shares in connection with stock option exercises 1,726   714   3,384   4,602  
Payment of employee withholding taxes relating to share-based awards (575)  (378)  (5,309)  (2,334) 
Net cash provided by (used in) financing activities 151    2,554   (1,690)  1,440,587  
            
Effect of foreign exchange rate changes on cash and cash equivalents (218)  598   (462)  (149) 
            
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 124,778   17,229   (310,313)  465,479  
CASH AND CASH EQUIVALENTS, beginning of the period 424,525   667,057   859,616   218,807  
CASH AND CASH EQUIVALENTS, end of the period$549,303  $684,286  $549,303  $684,286  
            

 

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 September 30,  Nine Months Ended September 30,  
   2016   2015   2016   2015  
               
          
GAAP Net (Loss) Income    (5,870)    3,277      (36,292)    15,538   
Non-GAAP Adjustments:         
Remeasurement of royalties for medicines acquired through business combinations  -   -   -   14,277  
Acquisition-related costs  5,159   14,498   16,456   64,841  
Upfront fee for license of global patent  -   -   2,000   -  
Loss on induced conversion of debt and debt extinguishment  -   -   -   77,624  
Amortization and accretion:         
Intangible amortization expense  50,757   41,707   151,199   91,217  
Amortization of debt discount and deferred financing costs  4,537   5,480   13,469   13,328  
Accretion of royalty liabilities  9,734   6,551   28,762   13,571  
Amortizaton of inventory step-up adjustment  11,305   4,140   27,853   10,635  
Share-based compensation  29,312   26,457   84,921   57,796  
Depreciation expense  1,183   1,578   3,266   2,808  
Litigation settlement  65,000   -   65,000   -  
Reversal of pre-acquisition reserve upon signing of contract  (6,900)  -   (6,900)  -  
Royalties for medicines acquired through business combinations (1)  (9,564)  (8,854)  (27,159)   (20,890) 
Total of pre-tax non-GAAP adjustments  160,523   91,557   358,867   325,207  
Income tax effect of pre-tax non-GAAP adjustments  (39,180)  (25,018)  (74,518)  (84,218) 
Other non-GAAP income tax adjustments  -   -   -   (105,133) 
Total of non-GAAP adjustments  121,343   66,539   284,349   135,856  
Non-GAAP Net Income     115,473      69,816      248,057      151,394   
          
          
Non-GAAP Earnings Per Share:         
          
Weighted average shares - Basic     161,038,827      159,035,580      160,472,530      145,208,252   
          
Non-GAAP Earnings Per Share - Basic:         
GAAP (loss) earnings per share - Basic     (0.04)    0.02      (0.23)    0.11   
Non-GAAP adjustments  0.76   0.42   1.78   0.93  
Non-GAAP earnings per share - Basic    0.72      0.44      1.55      1.04   
          
          
Weighted average shares - Diluted         
Weighted average shares - Basic  161,038,827   159,035,580   160,472,530   145,208,252  
Ordinary share equivalents  3,868,212   7,795,220   3,763,984   8,797,419  
Weighted average shares - Diluted    164,907,039      166,830,800       164,236,514      154,005,671   
          
          
Non-GAAP Earnings Per Share - Diluted         
GAAP (loss) earnings per share - Diluted     (0.04)    0.02       (0.23)    0.10   
Non-GAAP adjustments  0.75   0.40   1.77   0.88  
Diluted earnings per share effect of ordinary share equivalents  (0.01 )  -   (0.03)  -  
Non-GAAP earnings per share - Diluted    0.70      0.42      1.51      0.98   
          
(1) Royalties for medicines acquired through business combinations relate to ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, RAVICTI and VIMOVO.
 
          

 

Horizon Pharma plc  
GAAP to Non-GAAP Reconciliations  
EBITDA, Gross Profit and Operating Cash Flow (Unaudited)  
(in thousands, except percentages)  
           
            
   Three Months Ended September 30,  Nine Months Ended September 30,   
    2016   2015   2016   2015   
          
EBITDA and Non-GAAP EBITDA:          
            
GAAP Net (Loss) Income
 $   (5,870) $   3,277   $   (36,292)  $   15,538    
Depreciation  1,183   1,578   3,266   2,808   
Amortization and accretion:           
Intangible amortization expense  50,757   41,707    151,199   91,217   
Accretion of royalty liabilities   9,734   6,551   28,762   13,571   
Amortization of deferred revenue   (212)  (490)  (631)  (753)  
Amortizaton of inventory step-up adjustment   11,305   4,140   27,853    10,635   
Interest expense, net (including amortization of           
debt discount and deferred financing costs)   19,066   20,300   57,752   49,780   
(Benefit) expense for income taxes   (27,747)  21,979   (31,946)  (136,788)  
EBITDA  $   58,216   $   99,042   $   199,963   $   46,008    
Non-GAAP adjustments:           
Remeasurement of royalties for medicines acquired through business combinations  -   -   -   14,277   
Acquisition-related costs   5,159   14,498   16,456   64,841   
Upfront fee for license of global patent   -   -   2,000   -   
Loss on induced conversion of debt and debt extinguishment   -   -   -   77,624   
Share-based compensation   29,312   26,457   84,921   57,796   
Litigation settlement   65,000   -   65,000   -   
Reversal of pre-acquisition reserve upon signing of contract   (6,900)  -   (6,900)  -   
Royalties for medicines acquired through business combinations (1)  (9,564)  (8,854)  (27,159)  (20,890)   
Total of Non-GAAP adjustments   83,007   32,101   134,318   193,648   
Adjusted EBITDA  $   141,223   $   131,143   $   334,281   $   239,656    
            
Non-GAAP Gross Profit:
           
GAAP net sales  $   208,702   $   226,544   $   670,770   $   512,506    
Litigation settlement   65,000   -   65,000   -   
Non-GAAP adjusted net sales
  $   273,702   $   226,544   $   735,770   $   512,506    
             
GAAP gross profit
  $   123,541   $    165,294   $   427,250   $   360,577    
Non-GAAP gross profit adjustments:           
Acquisition-related costs   43   -   454   23   
Remeasurement of royalties for medicines acquired through business combinations   -   -   -   14,277   
Intangible amortization expense (COGS only)   50,555   41,505   150,592   90,609   
Accretion of royalty liabilities   9,734   6,551   28,762   13,571   
Amortizaton of inventory step-up adjustment   11,305   4,140   27,853   10,635   
Depreciation (COGS only)   100   65   320   268   
Litigation settlement   65,000   -   65,000   -   
Royalties for medicines acquired through business combinations (1)   (9,564)  (8,854)  (27,159)  (20,890)  
Total of Non-GAAP adjustments   127,173   43,407   245,822   108,493    
Non-GAAP gross profit 
  $   250,714   $   208,701   $   673,072   $   469,070    
            
GAAP gross profit %
   59.2%  73.0%  63.7%  70.4%  
Non-GAAP gross profit %
   91.6%  92.1%  91.5%  91.5%  
            
Non-GAAP operating cash flow:           
            
GAAP cash provided by operating activities  $   128,787   $   88,383   $   230,271   $   59,228    
Cash payments for acquisition-related costs   4,966   12,464   27,543    49,152   
Cash payments for upfront fee for license of global patent   -   -   2,000   -   
Cash payments for induced debt conversion   -    -   -   10,472   
Cash payment for debt extinguishment   -   -   -   45,367   
Payment of original issue discount on debt extinguishment   -   -   -   3,000   
Non-GAAP operating cash flow  $   133,753   $   100,847   $   259,814   $   167,219    
            
(1) Royalties for medicines acquired through business combinations relate to ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, RAVICTI and VIMOVO.    
             

 

Horizon Pharma plc
GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)
(in millions, except percentages)
      
      
 Q3 2016
 Pre-tax Net (Loss) Income Income Tax (Benefit) Expense Tax RateNet (Loss) Income Diluted (Loss) Earnings Per Share
As reported - GAAP$  (33.6)$  (27.7) 82.5%$  (5.9)$  (0.04)
Non-GAAP adjustments   160.5    39.1     121.4  
Non-GAAP$  126.9 $  11.4  9.0%$  115.5 $  0.70 
      
      
 Q3 2016 YTD
 Pre-tax Net (Loss) Income Income Tax (Benefit) Expense Tax RateNet (Loss) IncomeDiluted (Loss) Earnings Per Share
As reported - GAAP$  (68.2)$  (31.9) 46.8%$  (36.3)$  (0.23)
Non-GAAP adjustments   358.9     74.5     284.4  
Non-GAAP$  290.7 $  42.6  14.6%$  248.1 $  1.51 
      
      
 Q3 2015
 Pre-tax Net Income Income Tax Expense Tax RateNet IncomeDiluted Earnings Per Share
As reported - GAAP$  25.3 $  22.0  87.0%$  3.3 $  0.02 
Non-GAAP adjustments   91.5    25.0     66.5  
Non-GAAP$  116.8 $  47.0  40.2%$  69.8 $  0.42 
      
      
 Q3 2015 YTD
 Pre-tax Net (Loss) Income Income Tax (Benefit) Expense Tax RateNet Income (Loss)Diluted Earnings Per Share
As reported - GAAP$  (121.3)$  (136.8) 112.8%$  15.5 $  0.10 
Non-GAAP adjustments   325.2    84.2     241.0  
Other Non-GAAP tax adjustment   -     105.1     (105.1 ) 
Non-GAAP$  203.9 $  52.5  25.8%$  151.4 $  0.98 
      

 

Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended September 30, 2016 
(Unaudited)
         
         
        Income Tax
 Net Research &Sales &General &Interest Benefit
 SalesCOGSDevelopmentMarketingAdministrativeExpenseOther(Expense)
         
GAAP as reported$208,702 $(85,161)$(12,814)$(72,564)$(59,485)$(19,066)$6,879 $27,747 
         
Non-GAAP Adjustments (in thousands):        
Acquisition-related costs(1) -  43  (21)  -  5,137  -  -  - 
Amortization and accretion:        
Intangible amortization expense(2) -  50,555  -  202  -  -  -  - 
Amortization of debt discount and deferred financing costs(3) -  -  -  -  -  4,537   -  - 
Accretion of royalty liability(4) -  9,734  -  -  -  -  -  - 
Amortization of inventory step-up adjustment(5) -  11,305  -  -  -  -  -  -  
Share-based compensation(6) -  -  2,482  6,696  20,134  -  -  - 
Depreciation expense(7) -  100  -  14  1,069  -  -  - 
Litigation settlement(8) 65,000  -  -  -   -  -  -  - 
Reversal of pre-acquisition reserve upon signing of contract(9) -  -  -  -  -  -  (6,900) - 
Royalties for medicines acquired through business combinations(10) -  (9,564) -  -  -  -  -  - 
Income tax effect on pre-tax non-GAAP adjustments(11) -  -  -  -  -  -  -   (39,180)
Total of non-GAAP adjustments 65,000  62,173  2,461  6,912  26,340  4,537  (6,900) (39,180)
         
Non-GAAP$273,702 $(22,988)$(10,353)$(65,652) $(33,145)$(14,529)$(21)$(11,433)
         
         
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended September 30, 2015 
(Unaudited)
         
         
      Income Tax  
  Research &Sales &General &InterestBenefit  
 COGSDevelopmentMarketingAdministrativeExpense(Expense)  
         
GAAP as reported$(61,250)$(13,073)$(51,973)$(54,516)$(20,300)$(21,979)  
         
Non-GAAP Adjustments (in thousands):        
Acquisition-related costs(1) -  2,158  -  12,340  -  -   
Amortization and accretion:        
Intangible amortization expense(2) 41,505  -  202  -  -  -   
Amortization of debt discount and deferred financing costs(3) -  -   -  -  5,480  -   
Accretion of royalty liability(4) 6,551  -   -  -  -  -   
Amortization of inventory step-up adjustment(5) 4,140  -  -  -  -  -   
Share-based compensation(6) -  2,042  7,035  17,380  -  -   
Depreciation expense(7) 65  -  -  1,513  -  -   
Royalties for medicines acquired through business combinations(10) (8,854) -  -  -  -  -   
Income tax effect on pre-tax non-GAAP adjustments(11) -  -  -  -  -  (25,018)  
Total of non-GAAP adjustments 43,407  4,200  7,237  31,233  5,480  (25,018)  
         
Non-GAAP$(17,843)$(8,873)$(44,736)$ (23,283)$(14,820)$(46,997)  
         
         

 

Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Nine Months Ended September 30, 2016
(Unaudited)
         
         
        Income Tax
 Net Research &Sales &General &Interest Benefit
 SalesCOGSDevelopmentMarketingAdministrativeExpenseOther(Expense)
         
GAAP as reported$670,770 $(243,520)$(36,746)$(227,697)$(179,866)$(57,752)$6,839 $31,946 
         
Non-GAAP Adjustments (in thousands):        
Acquisition-related costs(1) -  454  517  -   15,485  -  -  - 
Upfront fee for license of global patent(12) -  -  2,000  -  -  -  -  - 
Amortization and accretion:        
Intangible amortization expense(2) -  150,592  -  607  -  -  -  - 
Amortization of debt discount and deferred financing costs(3) -  -  -  -  -  13,469  -  - 
Accretion of royalty liability(4) -  28,762  -  -  -  -  -  - 
Amortization of inventory step-up adjustment(5) -  27,853  -   -  -  -  -  - 
Share-based compensation(6) -  -  6,845  19,306  58,770  -  -  - 
Depreciation expense(7) -  320  -  40  2,906  -  -  - 
Litigation settlement(8) 65,000  -  -   -  -  -  -  - 
Reversal of pre-acquisition reserve upon signing of contract(9) -  -  -  -  -  -  (6,900) - 
Royalties for medicines acquired through business combinations(10) -  (27,159) -  -  -  -  -  - 
Income tax effect on pre-tax non-GAAP adjustments(11) -  -  -  -  -   -  -  (74,518)
Total of non-GAAP adjustments 65,000  180,822  9,362  19,953  77,161  13,469  (6,900) (74,518)
         
Non-GAAP$735,770  $(62,698)$(27,384)$(207,744)$(102,705)$(44,283)$(61)$(42,572)
         
         
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Nine Months Ended September 30, 2015 
(Unaudited)
         
      Loss on Induced  
      Debt Conversion Income Tax
  Research &Sales &General &Interest& Debt Benefit
 COGSDevelopmentMarketingAdministrativeExpenseExtinguishmentOther(Expense)
          
GAAP as reported$(151,929)$(28,176)$(157,092)$(157,986)$(49,780)$(77,624)$(10,159)$136,788 
         
Non-GAAP Adjustments (in thousands):        
Loss on induced conversion of debt and debt extinguishment(13) -  -  -  -  -   77,624  -  - 
Acquisition-related costs(1) 23  2,252  -  52,566  -  -  10,000  - 
Amortization and accretion:        
Intangible amortization expense(2) 90,609  -  608  -   -  -  -  - 
Amortization of debt discount and deferred financing costs(3) -  -  -  -  13,328  -  -  - 
Accretion of royalty liability(4) 13,571  -  -   -  -  -  -  - 
Amortization of inventory step-up adjustment(5) 10,635  -  -  -  -  -  -  - 
Remeasurement of royalties for products acquired through business combinations(14) 14,277  -  -  -  -  -  -  - 
Share-based compensation(6) -  4,712  15,571  37,513  -  -  -  - 
Depreciation expense(7) 268  -  -  2,540  -  -  -  - 
Royalties for medicines acquired through business combinations(10) (20,890) -  -  -  -  -  -  - 
Income tax effect on pre-tax non-GAAP adjustments(11) -  -  -  -  -  -  -  (84,218 )
Other non-GAAP income tax adjustments(15) -  -   -  -  -  -  -  (105,133)
Total of non-GAAP adjustments 108,493  6,964  16,179  92,619  13,328  77,624  10,000  (189,351)
         
Non-GAAP$(43,436)$(21,212)$(140,913) $(65,367)$(36,452)$- $(159)$(52,563)
 
  1. Expenses, including legal and consulting fees, incurred in connection with the Company's acquisitions of Vidara Therapeutics International Public Limited Company ("Vidara"), Hyperion Therapeutics, Inc. ("Hyperion"), Crealta Holdings LLC ("Crealta") and Raptor Pharmaceutical Corp. ("Raptor"), its agreement to acquire the worldwide rights to interferon gamma-1b and its withdrawn offer to acquire Depomed Inc. have been excluded.
     
  2. Intangible amortization expenses are associated with the Company's intellectual property rights, developed technology and customer relationships of VIMOVO, LODOTRA, RAYOS, ACTIMMUNE, PENNSAID 2%, RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT.
     
  3. Represents amortization of debt discount and deferred financing costs associated with the Company's debt.
     
  4. Represents accretion expense associated with the ACTIMMUNE, VIMOVO, RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT royalties for the three and nine months ended September 30, 2016 and represents accretion expense associated with the ACTIMMUNE, VIMOVO, RAVICTI and BUPHENYL royalties for the three and nine months ended September 30, 2015.
     
  5. In connection with the Crealta acquisition, the KRYSTEXXA and MIGERGOT inventory was stepped up in value by $161,901 and during the three months ended September 30, 2016, the Company recognized in cost of goods sold $11,305 of step-up inventory costs related to KRYSTEXXA and MIGERGOT inventory sold.  During the nine months ended September 30, 2016, the Company recognized in cost of goods sold $27,853 of step-up inventory costs related to KRYSTEXXA and MIGERGOT inventory sold.  In connection with the Hyperion acquisition, the RAVICTI and BUPHENYL inventory was stepped up in value by $8,682 and during the three months and nine months ended September 30, 2015, the Company recognized in cost of goods sold $4,140 and $7,481, respectively, of step-up inventory costs related to RAVICTI and BUPHENYL inventory sold.  In connection with the Vidara acquisition, the ACTIMMUNE inventory was stepped up in value by $14,218 and during the nine months ended September 30, 2015, the Company recognized in cost of goods sold the remaining $3,154 of step-up inventory costs related to ACTIMMUNE.
     
  6. Represents share-based compensation expense associated with the Company's stock option, restricted stock unit, and performance stock unit grants to its employees and non-employees, its cash-settled long-term incentive program and its employee stock purchase plan.
     
  7. Represents depreciation expense related to the Company's property, equipment, software and leasehold improvements.
     
  8. On September 26, 2016, the Company agreed to pay Express Scripts $65 million as part of a litigation settlement, which was recorded as a one-time reduction to GAAP net sales for the three and nine months ended September 30, 2016, in accordance with U.S. Generally Accepted Accounting Principles (GAAP).  The exclusion of the $65 million settlement from GAAP net sales is the only adjustment reflected in the non-GAAP adjusted net sales for the three and nine months ended September 30, 2016.
     
  9. During the third quarter of 2016, the Company released a contingent liability of $6.9 million that was recorded as part of acquisition accounting for Crealta.
     
  10. Royalties of $9,564 and $27,159 were incurred during the three and nine months ended September 30, 2016, respectively, based on the periods' net sales for ACTIMMUNE, VIMOVO, RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT.  Royalties of $8,854 and $20,890 were incurred during the three and nine months ended September 30, 2015, respectively, based on the periods' net sales for VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL.
     
  11. 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.
     
  12. Represents an upfront fee paid for a license of a global patent.
     
  13. During the nine months ended September 30, 2015, the Company recorded a loss on induced debt conversions of $77,624, which represented an early redemption payment of $45,366, the write-down of $21,581 in debt discount and deferred financing costs, $10,005 in additional exchange consideration to debt holders and $672 in expenses incurred in connection with the induced debt conversions.
     
  14. At the time of the Company's acquisition of the rights to ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, 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 nine months ended September 30, 2015, the Company recorded a charge of $14,277 to cost of goods sold to adjust the amount of the contingent royalty liabilities relating to ACTIMMUNE and VIMOVO.
     
  15. Other non-GAAP income tax adjustments in the nine months ended September 30, 2015 of $105,133 related to the release of certain valuation allowances in connection with the Hyperion acquisition.
Contacts:



Investors: 

Tina Ventura 

Senior Vice President,

Investor Relations 

investor-relations@horizonpharma.com



U.S. Media:

Geoff Curtis

Senior Vice President,

Corporate Communications

media@horizonpharma.com



Ireland Media:

Ray Gordon

Gordon MRM      

ray@gordonmrm.ie

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Source: Horizon Pharma plc

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