Horizon Pharma plc
Feb 27, 2017

Horizon Pharma plc Announces Fourth-Quarter and Full-Year 2016 Financial Results and Provides Full-Year 2017 Net Sales and Adjusted EBITDA Guidance

-- Fourth-Quarter 2016 Net Sales of $310.3 Million; Up 27 Percent --
-- Fourth-Quarter 2016
Net Loss of $130.5 Million(1); Adjusted EBITDA of $136.4 Million --

-- Fourth-Quarter 2016 Operating Cash Flow of $139.2 Million;
Fourth-Quarter 2016 Non-GAAP Operating Cash Flow of $193.1 Million --

-- Full-Year 2016 Net Sales of $981.1 Million(2);
Full-Year 2016 Non-GAAP Adjusted Net Sales of $1,046.1 Million(2) --

-- Full-Year 2016 Net Loss of $166.8 Million(1); Adjusted EBITDA of $470.7 Million -

-- Full-Year 2016 Operating Cash Flow of $369.5 Million;
Full-Year 2016 Non-GAAP Operating Cash Flow of $452.9 Million;
Year-End 2016 Cash Balance of $509.1 Million --

-- Full-Year 2017 Net Sales Guidance of $1.24 Billion to $1.29 Billion;
Full-Year 2017 Adjusted EBITDA Guidance of $525 Million to $575 Million --

DUBLIN, Ireland, Feb. 27, 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 fourth-quarter and full-year 2016 financial results today and provided its full-year 2017 net sales and adjusted EBITDA guidance.

"We delivered a strong fourth quarter and another exceptional year of performance driven by continued commercial execution and the completion of two transformative acquisitions that bolster our rapidly expanding rare disease business," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc.  "Our performance and continued strategic acquisitions have strengthened and diversified the Company and positioned us well to deliver on our growth objectives over the long term."   

Financial Highlights

             
             
             
             
(in millions except for per share amounts and percentages) Q4 16 Q4 15 %
Change
 FY 16 FY 15 %
Change
             
Net sales(2) $  310.3  $  244.5   27 $  981.1  $  757.0   30
Non-GAAP adjusted net sales(2)    310.3     244.5    27    1,046.1     757.0   38
             
Net (loss) income(1)    (130.5)    24.0  NM    (166.8)    39.5  NM
Non-GAAP net income    106.4     105.5   1    354.4     256.9   38
Adjusted EBITDA    136.4     122.5   11    470.7     362.1   30
             
Net (loss) earnings per share - diluted    (0.81)     0.15  NM    (1.04)    0.25   NM
Non-GAAP earnings per share - diluted    0.64     0.64 -    2.16     1.65   31

(1)  The fourth-quarter and full-year 2016 net losses were primarily impacted by the impairment of in-process research and development and other wind- down costs and charges related to the discontinuation of ACTIMMUNE development for Friedreich's ataxia and acquisition-related costs primarily related to the acquisition of Raptor Pharmaceutical Corp.
(2)  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 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 year-to-date 2016 non-GAAP adjusted net sales.

Company Highlights

Fourth-Quarter and Full-Year 2016 Business Unit Net Sales Results

             
            
               
               
  (in millions except for percentages)Q4 16 Q4 15 %
Change
 FY 16  FY 15 %
Change
  Orphan$  88.1  $  68.2  29   $  299.3   $  207.8  44  
    RAVICTI®(1)   32.9    34.5  (4)    151.5     86.9 74  
    ACTIMMUNE®   24.2    28.1 (14)    104.6     107.4 (3)
     BUPHENYL®(1)   4.7    5.6 (16)    16.9     13.5 25 
    PROCYSBI®(3)    25.3    - NM     25.3     - NM 
    QUINSAIR™(3)   1.0    - NM     1.0     - NM 
  Rheumatology   41.6     13.5  208      142.7      45.2  215  
    KRYSTEXXA®(2)   29.5    -  NM     91.1     -  NM 
    RAYOS®   11.3    11.1 1     47.4     40.3 17 
    LODOTRA®   0.8    2.4 (67)    4.2     4.9 (14)
  Primary Care   180.6     162.8  11      604.1      504.0  20  
    PENNSAID® 2%   96.6    55.4 74     304.4     147.0 107 
    DUEXIS®   50.9    60.4 (16)    173.7     190.4 (9)
    VIMOVO®   31.6    47.0 (33)    121.3     166.6 (27)
    MIGERGOT®(2)   1.5    -  NM     4.7     -  NM 
   Litigation settlement(4)   -    -  -      (65.0)    -  - 
  Total GAAP net sales(4) $  310.3  $  244.5  27   $  981.1   $  757.0  30  
  Total non-GAAP adjusted net sales(4)$  310.3  $  244.5  27   $  1,046.1   $  757.0  38  
               
  (1) RAVICTI and BUPHENYL were acquired on May 7, 2015
  (2) KRYSTEXXA and MIGERGOT were acquired on January 13, 2016
  (3) PROCYSBI and QUINSAIR were acquired on October 25, 2016
  (4) 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 twelve months ended December 31, 2016, in accordance with U.S. GAAP.  The exclusion of the $65 million settlement from GAAP net sales is the only adjustment reflected in year-to-date non-GAAP adjusted net sales.
   

Fourth-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

Horizon Pharma Provides Full-Year and First-Half 2017 Guidance

Percent of Full-Year Net Sales Contribution
 Q1Q22H
201417.5%22.2% 60.3%
201514.9%22.8%62.2%
201619.6%24.6%55.8%
2017 estimate*18-20%22-24%56-60%

                   

Percent of Full-Year Adjusted EBITDA Contribution
 Q1Q22H
201410.0%24.7%65.2%
2015  9.0% 21.0%70.0%
2016  15.3%25.7%59.0%
2017 estimate*12-14%22-24%62-66%

*2017 percentages based on midpoint of full-year 2017 guidance range.

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:  57707260

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:  57707260

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 adjusted net sales and net income, non-GAAP diluted earnings per share, non-GAAP gross profit and gross profit ratio, non-GAAP operating expenses, non-GAAP tax rate, non-GAAP operating cash flow and PROCYSBI and QUINSAIR net sales on a combined and adjusted basis, 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, 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, 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 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 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'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 Pharma has not provided a reconciliation of its full-year or quarterly 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 and quarterly 2017 net sales and adjusted EBITDA guidance, expected financial performance in future periods, expected timing of clinical, regulatory and commercial events, the expected launch of RAVICTI in Europe, anticipated additional clinical trials of ACTIMMUNE in cancer indications, 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'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 the success of Horizon Pharma's business strategies; whether Horizon Pharma is unable to enter into additional business arrangements with pharmacy benefit managers and payers on favorable terms or at all or unable to realize the expected benefits from such arrangements; 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
(in thousands, except share and per share data)
             
      Three Months Ended December 31,  Twelve Months Ended December 31,
       2016   2015   2016   2015 
                     
        (Unaudited)    
 Net sales   $  310,349  $  244,538   $  981,120  $  757,044 
 Cost of goods sold     149,751     67,573     393,272     219,502 
 Gross profit      160,598     176,965      587,848     537,542 
             
 OPERATING EXPENSES:         
  Research and development     23,961      13,689     60,707     41,865 
  Sales and marketing     92,669     63,352     320,366     220,444 
   General and administrative     108,076     61,875     287,942     219,861 
  Impairment of in-process research and development    66,000   -     66,000   - 
  Total operating expenses    290,706     138,916     735,015     482,170 
 Operating (loss) income     (130,108)    38,049     (147,167)    55,372 
             
 OTHER INCOME (EXPENSE), NET:         
  Interest expense, net     (28,858)    (20,120)    (86,610)    (69,900)
  Foreign exchange loss     (739)    (227)    (1,005)    (1,237)
  Loss on induced conversion of debt and debt extinguishment  -   -   -     (77,624)
  Loss on sale of long-term investments  -     (29,032)  -     (29,032)
  Other (expense) income, net     (142)    (132)    6,697     (10,291)
  Total other income (expense), net    (29,739)    (49,511)    (80,918)     (188,084)
             
 Loss before benefit for income taxes    (159,847)    (11,462)    (228,085)    (132,712)
 BENEFIT FOR INCOME TAXES     (29,305)    (35,456)    (61,251)    (172,244)
 NET (LOSS) INCOME   $  (130,542) $  23,994  $  (166,834) $  39,532 
             
 Net (loss) income per ordinary share - basic    $  (0.81) $  0.15  $  (1.04) $  0.27 
             
 Weighted average ordinary shares outstanding - basic    161,375,647     159,410,594     160,699,543     148,788,020 
             
 Net (loss) income per ordinary share - diluted    $  (0.81) $  0.15  $  (1.04) $  0.25 
             
 Weighted average ordinary shares outstanding - diluted    161,375,647     163,834,135      160,699,543     155,923,251 


 

Horizon Pharma plc
Condensed Consolidated Balance Sheets
(in thousands, except share data)
          
          
       As of
       December 31,
2016
 December 31,
2015
 ASSETS        
 CURRENT ASSETS:    
  Cash and cash equivalents  $  509,055  $  859,616 
  Restricted cash    7,095     1,860 
  Accounts receivable, net    305,725     210,437 
  Inventories, net    174,788     18,376 
  Prepaid expenses and other current assets    49,619     15,858 
    Total current assets    1,046,282     1,106,147 
 Property and equipment, net    23,484     14,020 
 Developed technology, net    2,767,184     1,609,049 
  In-process research and development  -     66,000 
 Other intangible assets, net    6,251     7,061 
 Goodwill     445,579     253,811 
 Deferred tax assets, net    911     2,278 
 Other assets     2,368     222 
 TOTAL ASSETS  $  4,292,059  $  3,058,588 
          
 LIABILITIES AND SHAREHOLDERS' EQUITY    
 CURRENT LIABILITIES:    
  Long-term debt—current portion $  7,750   $  4,000 
  Accounts payable    52,479     16,590 
  Accrued expenses    182,765     100,046 
  Accrued trade discounts and rebates    297,556     183,769 
  Accrued royalties—current portion    61,981     51,700 
  Deferred revenues—current portion    3,321     1,447 
    Total current liabilities     605,852     357,552 
          
 LONG-TERM LIABILITIES:    
  Exchangeable notes, net    298,002     282,889 
  Long-term debt, net, net of current    1,501,741     849,867 
  Accrued royalties, net of current    272,293     123,519 
  Deferred revenues, net of current    7,763     8,785 
  Deferred tax liabilities, net    296,568     113,400 
  Other long-term liabilities    46,061     9,431 
    Total long-term liabilities    2,422,428     1,387,891 
          
 COMMITMENTS AND CONTINGENCIES    
 SHAREHOLDERS' EQUITY:    
  Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized;    
   162,004,956 and 160,069,067 issued at December 31, 2016 and December 31, 2015,    
   respectively, and 161,620,590 and 159,684,701 outstanding at December 31, 2016 and    
   December 31, 2015, respectively.    16     16 
  Treasury stock, 384,366 ordinary shares at December 31, 2016 and December 31, 2015    (4,585)    (4,585)
  Additional paid-in capital    2,119,455     2,001,552 
  Accumulated other comprehensive loss    (3,086)    (2,651)
  Accumulated deficit    (848,021)    (681,187)
    Total shareholders' equity    1,263,779     1,313,145 
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $  4,292,059  $  3,058,588 

  

 


 Horizon Pharma plc
 Condensed Consolidated Statements of Cash Flows
 (in thousands)
              
           
      Three Months Ended December 31,  Twelve Months Ended December 31,
       2016   2015   2016   2015 
                      
       (Unaudited)   
 CASH FLOWS FROM OPERATING ACTIVITIES:        
 Net (loss) income $  (130,542) $  23,994   $  (166,834) $  39,532 
 Adjustments to reconcile net (loss) income to net cash provided by operating activities        
 Depreciation and amortization expense    67,372     44,318     221,837     138,343 
 Equity-settled share-based compensation    29,008     27,300     113,019     83,553 
 Royalty accretion    11,854     6,517     40,616     20,088 
 Royalty liability remeasurement    386     6,874     386      21,151 
 Impairment of in-process research and development    66,000   -     66,000   - 
 Impairment of non-current asset    5,260   -     5,260   - 
 Loss on induced conversions of debt and debt extinguishment  -   -   -     21,581 
 Amortization of debt discount and deferred financing costs    5,077     5,482     18,546     18,810 
 Loss on sale of long-term investments  -     29,032   -     29,032 
 Deferred income taxes      (30,402)    (46,535)     (65,561)    (180,549)
 Foreign exchange loss and other adjustments    152     358     420     1,495 
 Changes in operating assets and liabilities:        
 Accounts receivable    74,952     10,604     (67,496)    (124,766)
 Inventories    43,791     (603)    67,633     12,216 
 Prepaid expenses and other current assets    (7,401)    597     (28,239)    1,014 
 Accounts payable    (17,630)    (46,575)    32,065     (8,362)
 Accrued trade discounts and rebates    29,372     58,910     112,381     94,046 
 Accrued expenses and accrued royalties    (15,728)    9,117     13,854     20,169 
 Deferred revenues    1,557     (450)    1,114     1,693 
 Payment of original issue discount upon repayment of 2014 Term Loan Facility  -   -   -     (3,000)
 Other non-current assets and liabilities    6,107     5,998     4,455     8,120 
 Net cash provided by operating activities    139,185     134,938     369,456     194,166 
 CASH FLOWS FROM INVESTING ACTIVITIES:        
 Payments for acquisitions, net of cash acquired    (835,866)  -     (1,356,271)    (1,022,361)
 Proceeds from liquidation of available-for-sale investments  -   -   -     64,623 
 Purchases of long-term investments  -   -   -     (71,813)
 Proceeds from sale of long-term investments  -     42,781   -     42,781 
 Change in restricted cash    (468)    (1,000)    (3,879)    (1,122)
 Purchases of property and equipment    (1,115)    (2,642)    (15,731)    (7,156)
 Net cash (used in) provided by investing activities    (837,449)    39,139      (1,375,881)    (995,048)
 CASH FLOWS FROM FINANCING ACTIVITIES:           
 Net proceeds from the issuance of Exchangeable Senior Notes  -   -   -     387,181 
 Net Proceeds from the issuance of 2024 Senior Notes    291,893   -     291,893   - 
 Net proceeds from the 2016 Incremental Loan Facility    364,297   -     364,297      391,506 
 Net proceeds from the issuance of 2023 Senior Notes  -   -   -     462,340 
 Repayment of the 2015 Term Loan Facility    (1,000)    (1,000)    (4,000)    (2,000)
 Repayment of the 2014 Term Loan Facility  -   -   -     (297,000)
 Net proceeds from the issuance of ordinary shares  -     58   -     475,685 
 Proceeds from the issuance of ordinary shares in connection with warrant exercises    8   -     8     18,124 
 Proceeds from the issuance of ordinary shares through ESPP programs    3,305     2,911     6,540     4,452 
 Proceeds from the issuance of ordinary shares in connection with stock option exercises    491     615     3,875     5,217 
 Payment of employee withholding taxes relating to share-based awards    (230)    (690)    (5,539)    (3,024)
 Net cash provided by financing activities    658,764     1,894     657,074     1,442,481 
              
 Effect of foreign exchange rate changes on cash and cash equivalents    (748)    (641)    (1,210)    (790)
             
 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS    (40,248)    175,330     (350,561)    640,809 
 CASH AND CASH EQUIVALENTS, beginning of the period    549,303     684,286     859,616     218,807 
 CASH AND CASH EQUIVALENTS, end of the period $  509,055  $  859,616  $  509,055  $  859,616 


 


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 December 31,  Twelve Months Ended December 31,  
     2016   2015  2016  2015  
              
            
 GAAP net (loss) income   (130,542 )   23,994     (166,834)   39,532   
 Non-GAAP adjustments:        
  Remeasurement of royalties for medicines acquired through business combinations   386    6,874    386    21,151  
  Acquisition-related costs   36,418    7,380    52,874    72,221  
  Upfront fee for license of global patent -  -    2,000  -  
  Loss on sale of long-term investments -    29,032  -    29,032   
  Loss on induced conversion of debt and debt extinguishment -  -  -    77,624  
  Amortization, accretion and step-up:        
   Intangible amortization expense   65,676    41,706     216,875    132,923  
   Amortization of debt discount and deferred financing costs   5,077    5,482    18,546    18,810  
   Accretion of royalty liabilities   11,854    6,517    40,616    20,088  
   Inventory step-up expense   43,284    860    71,137    11,495  
  Share-based compensation   29,223    27,990    114,144    85,786  
  Depreciation expense   1,696    2,612    4,962    5,420  
  Litigation settlement -  -    65,000  -  
  Reversal of pre-acquisition reserve upon signing of contract -  -    (6,900) -  
  Impairment of in-process research and development   66,000  -    66,000  -  
  Charges relating to discontinuation of Friedreich's ataxia program   23,513  -    23,513  -  
  Royalties for medicines acquired through business combinations (1)   (10,434)   (8,944)   (37,593)   (29,834) 
   Total of pre-tax non-GAAP adjustments   272,693    119,509    631,560     444,716  
  Income tax effect of pre-tax non-GAAP adjustments   (35,772)   (37,996)    (110,290)   (122,214) 
  Other non-GAAP income tax adjustments  -  -  -    (105,133) 
   Total of non-GAAP adjustments   236,921    81,513    521,270    217,369  
 Non-GAAP Net Income   106,379     105,507     354,436     256,901   
            
            
Non-GAAP Earnings Per Share:        
            
 Weighted average shares - Basic    161,375,647     159,410,594     160,699,543     148,788,020   
            
 Non-GAAP Earnings Per Share - Basic:        
  GAAP (loss) earnings per share - Basic    (0.81)   0.15     (1.04)   0.27   
  Non-GAAP adjustments   1.47    0.51    3.25    1.46  
  Non-GAAP earnings per share - Basic   0.66     0.66     2.21     1.73   
            
            
 Weighted average shares - Diluted        
  Weighted average shares - Basic   161,375,647    159,410,594    160,699,543    148,788,020  
  Ordinary share equivalents   3,692,325    4,423,541    3,626,570    7,135,231  
  Weighted average shares - Diluted   165,067,972     163,834,135     164,326,113     155,923,251   
            
            
 Non-GAAP Earnings Per Share - Diluted        
  GAAP (loss) earnings per share - Diluted    (0.81)   0.15     (1.04)   0.25   
   Non-GAAP adjustments   1.47    0.49    3.25    1.40   
  Diluted earnings per share effect of ordinary share equivalents   (0.02) -    (0.05) -  
  Non-GAAP earnings per share - Diluted   0.64     0.64     2.16     1.65   
            
 (1) Royalties for medicines acquired through business combinations relate to ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, 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 December 31,  Twelve Months Ended December 31,
       2016   2015    2016   2015 
                 
 EBITDA and Non-GAAP EBITDA:        
            
 GAAP net (loss) income
$  (130,542) $  23,994   $  (166,834) $  39,532  
 Depreciation   1,696     2,612     4,962     5,420 
 Amortization, accretion and step-up:        
 Intangible amortization expense   65,676     41,706     216,875     132,923 
 Accretion of royalty liabilities    11,854     6,517     40,616     20,088 
 Amortization of deferred revenue    (205)    (208)    (836)     (962)
 Inventory step-up expense    43,284     860     71,137     11,495 
 Interest expense, net (including amortization of        
 debt discount and deferred financing costs)    28,858     20,120     86,610     69,900 
 (Benefit) expense for income taxes    (29,305)    (35,456)    (61,251)    (172,244)
 EBITDA $  (8,684) $  60,145   $  191,279   $  106,152  
 Non-GAAP adjustments:        
 Remeasurement of royalties for medicines acquired through business combinations   386     6,874     386     21,151 
 Acquisition-related costs    36,418     7,380     52,874     72,221 
 Upfront fee for license of global patent   -   -     2,000   - 
 Loss on sale of long-term investments  -     29,032   -      29,032 
 Loss on induced conversion of debt and debt extinguishment  -   -   -     77,624 
 Share-based compensation    29,223     27,990     114,144     85,786 
 Litigation settlement  -   -     65,000   - 
 Reversal of pre-acquisition reserve upon signing of contract  -    -     (6,900)  - 
 Impairment of in-process research and development    66,000    -     66,000   - 
 Charges relating to discontinuation of Friedreich's ataxia program    23,513   -      23,513   - 
 Royalties for medicines acquired through business combinations (1)   (10,434)    (8,944)    (37,593)    (29,834)
 Total of Non-GAAP adjustments    145,106     62,332     279,424     255,980 
 Adjusted EBITDA $  136,422   $  122,477   $  470,703   $    362,132  
            
 Non-GAAP Gross Profit:
        
 GAAP net sales $  310,349   $  244,538   $  981,120   $  757,044  
 Litigation settlement    -    -     65,000    - 
 Non-GAAP adjusted net sales
 $  310,349   $  244,538    $  1,046,120   $  757,044  
                  
 GAAP gross profit
 $  160,598   $  176,965   $  587,848   $  537,542  
 Non-GAAP gross profit adjustments:        
 Acquisition-related costs    (464)  -     (10)    23 
 Share-based compensation    26   -     26   - 
 Remeasurement of royalties for medicines acquired through business combinations    386     6,874     386     21,151 
 Intangible amortization expense (COGS only)    65,473     41,504     216,065     132,113 
 Accretion of royalty liabilities    11,854     6,517     40,616     20,088 
 Inventory step-up expense    43,284     860     71,137     11,495 
 Depreciation (COGS only)    166     189     486     457 
 Litigation settlement  -   -     65,000   - 
 Charges relating to discontinuation of Friedreich's ataxia program    14,287   -     14,287   - 
 Royalties for medicines acquired through business combinations (1)    (10,434)    (8,944)    (37,593)    (29,834)
 Total of Non-GAAP adjustments    124,578     47,000     370,400     155,493 
 Non-GAAP gross profit
 $  285,176    $  223,965   $  958,248   $  693,035  
            
 GAAP gross profit %
  51.7%  72.4%  59.9%  71.0%
  Non-GAAP gross profit %
  91.9%  91.6%  91.6%  91.5%
            
 Non-GAAP operating cash flow:          
            
  GAAP cash provided by operating activities
 $  139,185   $  134,938   $  369,456   $  194,166  
 Cash payments for acquisition-related costs    21,372     19,033     48,915     68,185 
 Cash payment for litigation settlement    32,500   -     32,500   - 
 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
 $  193,057   $  153,971   $  452,871   $  321,190  
            
 (1) Royalties for medicines acquired through business combinations relate to ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, RAVICTI and VIMOVO.

    

 

Horizon Pharma plc
PROCYSBI and QUINSAIR Net Revenue (Unaudited)
(in millions)

The Company acquired Raptor Pharmaceutical Corp. on October 25, 2016, including PROCYSBI and QUINSAIR.  PROCYSBI and QUINSAIR net sales for the partial fourth quarter of 2016 were $25.3 million and $1.0 million, respectively.  The following tables reflect sales for full-year 2015, first, second and third quarter under Raptor Pharmaceutical Corp. ownership and partial fourth-quarter 2016 net sales of Raptor and Horizon on a combined basis.

            
            
   Q1 16 Q2 16 Q3 16 Q4 16 FY 16
   PROCYSBI    27.5    31.4    35.1    34.6    128.6
   QUINSAIR  -    0.7    1.7    1.5    3.9
 Total net sales $  27.5  $  32.1  $  36.8  $  36.1  $  132.5
            
            
   Q1 15 Q2 15 Q3 15 Q4 15 FY 15
   PROCYSBI    20.5    23.3    25.7    24.7    94.2
   QUINSAIR  -  -  -  -  -
 Total net sales $  20.5  $  23.3  $  25.7  $  24.7  $  94.2

     

      

Horizon Pharma plc 
GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited) 
(in millions, except percentages)
       
       
  Q4 16
  Pre-tax Net
(Loss) Income
 Income Tax
(Benefit) Expense
Tax RateNet (Loss)
Income
Diluted (Loss)
Earnings Per Share
As reported - GAAP $  (159.8)$  (29.3)18.3%$  (130.5)$  (0.81)
Non-GAAP adjustments     272.7    35.8     236.9  
Non-GAAP $  112.9 $  6.5 5.7%$  106.4 $  0.64 
       
       
  FY16
  Pre-tax Net
(Loss) Income
 Income Tax
(Benefit) Expense
Tax RateNet (Loss)
Income
Diluted (Loss)
Earnings Per Share
As reported - GAAP $  (228.1)$  (61.3)26.9%$  (166.8)$  (1.04)
Non-GAAP adjustments    631.6    110.4     521.2  
Non-GAAP $  403.5 $  49.1 12.2%$  354.4 $  2.16 
       
       
  Q4 15
  Pre-tax Net
(Loss) Income
 Income Tax
(Benefit) Expense
Tax RateNet IncomeDiluted Earnings
Per Share
As reported - GAAP $  (11.4)$  (35.4)309.3%$  24.0 $  0.15 
Non-GAAP adjustments    119.5    38.0     81.5  
Non-GAAP $  108.1 $  2.6 2.4%$  105.5 $  0.64 
        
       
  FY15
  Pre-tax Net
(Loss) Income
 Income Tax
(Benefit) Expense
Tax RateNet Income
(Loss)
Diluted Earnings
Per Share
As reported - GAAP $  (132.7)$  (172.2)129.8% $  39.5 $  0.25 
Non-GAAP adjustments    444.7    122.2     322.5  
Other Non-GAAP tax adjustment   -    105.1     (105.1) 
Non-GAAP $  312.0 $  55.1 17.7%$  256.9 $  1.65 

 


   Horizon Pharma plc
   Certain Income Statement Line Items - Non-GAAP Adjusted
   For the Three Months Ended December 31, 2016
   (Unaudited)
          
          
          Income Tax
     Research & Sales & General &  Impairment of Interest Benefit
    COGS Development Marketing Administrative In-Process R&D Expense (Expense)
          
GAAP as reported$  (149,751)$  (23,961)$  (92,669)$  (108,076)$  (66,000)$  (28,858)$  29,305 
          
Non-GAAP Adjustments (in thousands):       
 Acquisition-related costs(1)   (464)   17  -  36,865  -   -  - 
 Amortization, accretion and step-up:       
 Intangible amortization expense(2) 65,473  -  203  -  -   -  - 
 Amortization of debt discount and deferred financing costs(3) -  -  -  -  -  5,077  - 
 Accretion of royalty liability(4) 11,854  -   -  -  -  -  - 
 Inventory step-up expense(5) 43,284  -  -  -  -  -  - 
 Remeasurement of royalties for products acquired through business combinations(6) 386  -  -  -  -   -  - 
 Share-based compensation(7) 26  2,568  6,909  19,720  -  -  - 
 Depreciation expense(8) 166  -  14  1,516  -   -  - 
 Impairment of in-process research and development (9) -  -  -  -   66,000  -  - 
 Charges relating to discontinuation of Friedreich's ataxia program(10)    14,287    3,966   -  5,260  -  -  - 
 Royalties for medicines acquired through business combinations(11)    (10,434) -  -  -  -  -  - 
 Income tax effect on pre-tax non-GAAP adjustments(12) -  -  -  -  -  -  (35,772)
 Total of non-GAAP adjustments 124,578    6,551    7,126    63,361    66,000    5,077    (35,772)
          
Non-GAAP$  (25,173)$  (17,410)$  (85,543)$  (44,715)$- $  (23,781)$  (6,467)
          
   Horizon Pharma plc
   Certain Income Statement Line Items - Non-GAAP Adjusted
   For the Three Months Ended December 31, 2015
   (Unaudited)
          
          
         Loss on sale of Income Tax
     Research & Sales & General &  Interest Long-Term Benefit
    COGS Development Marketing Administrative Expense Investments (Expense)
          
GAAP as reported$  (67,573)$  (13,689)$  (63,352)$  (61,875)$  (20,120)$  (29,032)$  35,456 
          
Non-GAAP Adjustments (in thousands):       
 Loss on sale of long-term investments(13) -  -  -  -   -  29,032  - 
 Acquisition-related costs(1) -  967  -  6,413  -   -  - 
 Amortization, accretion and step-up:       
 Intangible amortization expense(2)   41,504  -  202  -  -   -  - 
 Amortization of debt discount and deferred financing costs(3) -  -  -  -  5,482  -  - 
 Accretion of royalty liability(4) 6,517  -  -  -  -  -  - 
 Inventory step-up expense(5) 860  -  -  -  -  -  - 
 Remeasurement of royalties for products acquired through business combinations(6) 6,874  -  -  -  -  -  - 
 Share-based compensation(7) -  1,878  7,491  18,621  -  -  - 
 Depreciation expense(8) 189  -  -  2,423  -  -  - 
 Royalties for medicines acquired through business combinations(11)  (8,944) -  -  -  -   -  - 
 Income tax effect on pre-tax non-GAAP adjustments(12) -  -  -   -  -  -  (37,996)
 Total of non-GAAP adjustments   47,000    2,845    7,693    27,457    5,482    29,032    (37,996)
          
Non-GAAP$  (20,573)$  (10,844)$  (55,659)$  (34,418)$  (14,638)$- $  (2,540)

         

      

   Horizon Pharma plc
   Certain Income Statement Line Items - Non-GAAP Adjusted
   For the Twelve Months Ended December 31, 2016
   (Unaudited)
            
            
            Income Tax
    Net  Research & Sales & General &  Impairment
of
Interest Benefit
    Sales COGS Development Marketing Administrative In-Process R&DExpenseOther (Expense)
            
GAAP as reported$  981,120 $  (393,272) $  (60,707)$  (320,366)$  (287,942)$  (66,000)$  (86,610)$  6,697 $  61,251 
              
Non-GAAP Adjustments (in thousands):         
 Acquisition-related costs (1) -  (10) 534  -  52,350  -  -  -  - 
 Upfront fee for license of global patent(14) -  -  2,000  -  -  -  -  -  - 
 Amortization, accretion and step-up:         
Intangible amortization expense(2) -  216,065  -  810  -  -  -  -  - 
Amortization of debt discount and deferred financing costs(3) -  -  -  -  -  -   18,546  -  - 
Accretion of royalty liability(4)  -  40,616  -  -  -  -  -  -  -  
Inventory step-up expense(5)  -  71,137  -  -  -   -  -  -  - 
 Remeasurement of royalties for products acquired through business combinations(6) -  386  -  -  -  -  -  -   - 
 Share-based compensation(7) -  26  9,413  26,215  78,490  -  -  -  - 
 Depreciation expense(8) -   486  -  54  4,422  -  -  -  - 
 Litigation settlement(15) 65,000  -  -  -  -  -  -  -  - 
 Reversal of pre-acquisition reserve upon signing of contract(16) -  -  -  -   -  -  -  (6,900) - 
 Impairment of in-process research and development(9)  -  -  -  -  -  66,000  -  -  - 
 Charges relating to discontinuation of Friedreich's ataxia program(10)  -  14,287  3,966   -  5,260  -  -  -  - 
 Royalties for medicines acquired through business combinations(11)  -  (37,593 -  -  -  -  -  -  - 
 Income tax effect on pre-tax non-GAAP adjustments(12) -  -  -  -  -  -  -  -  (110,290)
Total of non-GAAP adjustments  65,000  305,400  15,913  27,079   140,522  66,000  18,546  (6,900) (110,290)
             
Non-GAAP$  1,046,120  $  (87,872)$  (44,794)$  (293,287)$  (147,420)$  -  $  (68,064)$  (203)$  (49,039)
             
    Horizon Pharma plc
    Certain Income Statement Line Items - Non-GAAP Adjusted
    For  the Twelve Months Ended December 31, 2015
    (Unaudited)
             
           Loss on Induced  
          Loss on sale of  Debt Conversion  Income Tax
      Research & Sales & General &  Interest Long-Term  & Debt   Benefit
     COGS Development Marketing Administrative Expense Investments Extinguishment Other (Expense)
             
GAAP as reported$  (219,502)$  (41,865)$  (220,444)$  (219,861)$  (69,900)$  (29,032)$  (77,624)$  (10,291)$  172,244 
             
Non-GAAP Adjustments (in thousands):          
 Loss on induced conversion of debt and debt extinguishment(17) -  -  -  -  -  -  77,624  -  - 
 Loss on sale of long-term investments(13) -  -  -  -  -  29,032  -  -  - 
 Acquisition-related costs(1) 23  3,219  -  58,979  -  -  -  10,000  - 
 Amortization, accretion and step-up:         
Intangible amortization expense(2)  132,113  -  810  -  -  -  -  -  - 
Amortization of debt discount and deferred financing costs(3)  -  -  -  -  18,810  -   -  -  - 
Accretion of royalty liability(4)  20,088  -  -  -  -  -  -  -  -  
Inventory step-up expense(5)  11,495  -  -  -  -   -  -  -  - 
 Remeasurement of royalties for products acquired through business combinations(6) 21,151  -  -  -  -  -  -  -  - 
 Share-based compensation(7) -  6,590  23,062  56,134  -  -  -  -  - 
 Depreciation expense(8) 457  -  -  4,963  -  -  -   -  - 
 Royalties for medicines acquired through business combinations(11)   (29,834) -  -  -  -  -  -  -  - 
 Income tax effect on pre-tax non-GAAP adjustments(12) -  -  -  -   -  -  -  -  (122,214)
 Other non-GAAP income tax adjustments(18) -  -  -  -  -  -  -  -  (105,133)
Total of non-GAAP adjustments  155,493  9,809  23,872  120,076  18,810  29,032  77,624  10,000  (227,347)
             
Non-GAAP$(64,009)$(32,056)$(196,572)$(99,785)$(51,090)$- $- $(291)$(55,103)

 
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 Vidara Therapeutics International Public Limited Company ("Vidara"), Hyperion Therapeutics, Inc. ("Hyperion"), Crealta Holdings LLC ("Crealta"), 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 ACTIMMUNE, BUPHENYL, KRYSTEXXA, LODOTRA, MIGERGOT, PENNSAID 2%, PROCYSBI, RAVICTI, RAYOS and VIMOVO.

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

(4) Represents accretion expense associated with the ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, RAVICTI and VIMOVO royalties for the three and twelve months ended December 31, 2016, and represents accretion expense associated with the ACTIMMUNE, BUPHENYL, RAVICTI and VIMOVO royalties for the three and twelve months ended December 31, 2015.

(5) In connection with the Crealta acquisition, the KRYSTEXXA and MIGERGOT inventory was stepped up in value by $144,289 and during the three months ended December 31, 2016, the Company recognized in cost of goods sold, $20,889 for step-up inventory costs related to KRYSTEXXA and MIGERGOT inventory sold.  During the twelve months ended December 31, 2016, the Company recognized in cost of goods sold, $48,758 for step-up inventory costs 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 months ended December 31, 2016, the Company recognized in cost of goods sold $22,379 of step-up inventory costs related to PROCYSBI and QUINSAIR inventory sold.

In connection with the Hyperion acquisition, the BUPHENYL and RAVICTI inventory was stepped up in value by $8,682 and during the three months and twelve months ended December 31, 2015, the Company recognized in cost of goods sold $860 and $8,341, respectively, of step-up inventory costs related to BUPHENYL and RAVICTI inventory sold.  In connection with the Vidara acquisition, the ACTIMMUNE inventory was stepped up in value by $14,218 and during the first quarter of 2015, the Company recognized in cost of goods sold the remaining $3,154 of step-up inventory costs related to ACTIMMUNE.

(6) 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 over-performs 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 three and twelve months ended December 31, 2016, the Company recorded a net charge of $386, to cost of goods sold to adjust the amount of the contingent royalty liabilities relating to ACTIMMUNE, KRYSTEXXA, RAVICTI and VIMOVO.  During the three and twelve months ended December 31, 2015, the Company recorded a net charge of $6,874 and $21,151, respectively, to cost of goods sold to adjust the amount of the contingent royalty liabilities relating to ACTIMMUNE, RAVICTI and VIMOVO.

(7) 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.

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

(9) Represents a charge for the impairment of in-process R&D related to the discontinuation of ACTIMMUNE development for Friedreich's ataxia. 

(10) Represents charges for wind-down costs related to the discontinuation of ACTIMMUNE development for Friedreich's ataxia. 

(11) Royalties of $10,434 and $37,593 were incurred during the three and twelve months ended December 31, 2016, respectively, based on the periods' net sales for ACTIMMUNE, BUPHENYL, KRYSTEXXA, MIGERGOT, PROCYSBI, RAVICTI and VIMOVO.  Royalties of $8,944 and $29,834 were incurred during the three and twelve months ended December 31, 2015, respectively, based on the periods' net sales for ACTIMMUNE, BUPHENYL, RAVICTI and VIMOVO.

(12) 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. 

(13) During the three months ended September 30, 2015, the Company purchased 2,250,000 shares of common stock of Depomed, Inc. ("Depomed") representing 3.75 percent of Depomed's then outstanding common stock. The shares were acquired at a cost of $71,813.  During the three months ended December 31, 2015, following the Company's decision to withdraw its offer to acquire Depomed, the Company sold all of its shares in Depomed, receiving sales proceeds of $42,781. Following this sale, the Company recognized a loss of $29,032 in the consolidated statement of comprehensive income (loss).

(14) Represents an upfront fee paid for a license of a global patent. 

(15) 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 twelve months ended December 31, 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 twelve months ended December 31, 2016

(16) 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. 

(17) During the twelve months ended December 31, 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. 

(18) Other non-GAAP income tax adjustments in the twelve months ended December 31, 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

Source: Horizon Pharma plc

News Provided by Acquire Media