SOURCE: Horizon Pharma plc

Horizon Pharma plc

August 07, 2015 07:00 ET

Horizon Pharma plc Announces Record Second Quarter 2015 Financial Results

Net Sales of $172.8 Million, up 161 Percent; Adjusted EBITDA of $76.1 Million, up 254 Percent; Adjusted Operating Cash Flow of $129.6 Million; GAAP Operating Cash Flow of $41.6 Million; Confirms Recently Raised Full-Year 2015 Sales and Adjusted EBITDA Guidance; Conference Call and Webcast at 8:00 a.m. EDT, August 7th

DUBLIN, IRELAND--(Marketwired - Aug 7, 2015) - 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 2015 financial results today.

Quarterly Financial Highlights

                             
(in millions except for per share amounts and percentages)   Q2 15   Q2 14     % Change   1H 15   1H 14     % Change
                                     
Net sales   $ 172.8   $ 66.1     161   $ 286.0   $ 118.0     142
Net income (loss)     31.8     (27.8 )   NM     12.3     (234.0 )   NM
Adjusted non-GAAP net income     61.9     19.8     213     86.4     26.8     222
Adjusted EBITDA     76.1     21.5     254     108.5     30.2     259
                                     
Earnings (loss) per share - basic   $ 0.21   $ (0.38 )   NM   $ 0.09   $ (3.34 )   NM
Adjusted non-GAAP earnings per share - basic     0.41     0.27     52     0.62     0.38     63
Earnings (loss) per share - diluted     0.20     (0.38 )   NM     0.08     (3.34 )   NM
Adjusted non-GAAP earnings per share - diluted     0.39     0.20     95     0.60     0.29     107
                                     

"We delivered exceptionally strong performance in the second quarter and through the first half of the year," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. "Our results significantly beat expectations on net sales, adjusted EBITDA and adjusted diluted earnings per share. In addition, we're generating strong adjusted operating cash flow and we're well positioned to deliver on our recently raised full-year 2015 net sales and adjusted EBITDA guidance."

Second-Quarter and First-Half 2015 Net Sales Results

                         
(in millions except for percentages)   Q2 15   Q2 14   % Change   1H 15   1H 14   % Change
Primary Care   $ 113.4   $ 60.2   88   $ 193.5   $ 108.1   79
  DUEXIS®     44.2     17.8   148     73.1     31.7   131
  VIMOVO®     39.8     42.4   -6     72.8     76.4   -5
  PENNSAID® 2% (1)     29.4     -   NM     47.6     -   NM
Orphan     48.7     -   NM     73.6     -   NM
  ACTIMMUNE® (2)     25.8     -   NM     50.7     -   NM
  RAVICTI® (3)     19.0     -   NM     19.0     -   NM
  BUPHENYL® (3)     3.9     -   NM     3.9     -   NM
Specialty     10.7     5.9   81     18.9     9.9   91
  RAYOS®/LODOTRA®     10.7     5.9   81     18.9     9.9   91
Total net sales   $ 172.8   $ 66.1   161   $ 286.0   $ 118.0   142
(1) PENNSAID 2% was acquired on October 17, 2014.                
(2) ACTIMMUNE was acquired on September 19, 2014.                
(3) RAVICTI and BUPHENYL were acquired on May 7, 2015.                
                                 
  • Second-quarter 2015 net sales of $172.8 million increased 161 percent. This was driven by strong growth in each of Horizon's business units: primary care, orphan and specialty, as well as the addition of new medicines to the primary care and orphan business units. 

  • Primary Care Business Unit: Second-quarter DUEXIS sales of $44.2 million increased 148 percent as compared to the second quarter of 2014, driven by accelerating prescription growth. In the second quarter, VIMOVO sales were $39.8 million and PENNSAID 2% sales were $29.4 million. Total prescriptions accelerated across all three medicines in the primary care business unit driven by their differentiated clinical benefits, strong sales and marketing execution and increased access to Horizon's Prescriptions-Made-Easy™, or PME, program. Total prescriptions for DUEXIS, VIMOVO and PENNSAID 2% increased 68 percent, 52 percent and 142 percent, respectively, as compared to the first quarter of 2015.

  • Orphan Business Unit: ACTIMMUNE sales were $25.8 million in the quarter, representing a 4 percent sequential increase versus the first quarter of 2015. The commercial organization continues to drive awareness of ACTIMMUNE with both patients and physicians as new patients continue to be steadily added to the therapy each quarter. The Hyperion acquisition was completed on May 7, 2015, and approximately two months of sales were recorded for RAVICTI and BUPHENYL in the second quarter, which were $19.0 million and $3.9 million, respectively.

  • Specialty Business Unit: RAYOS/LODOTRA sales in the second quarter were $10.7 million, increasing 81 percent versus the second quarter of 2014. In April, a comprehensive effort was initiated to provide more patients access to RAYOS through the PME program, which resulted in total prescription growth versus the first quarter of 2015 of nearly 90 percent.

Second-Quarter 2015 Financial Results
Note: For additional detail and reconciliation of these amounts and growth rates to the most directly comparable GAAP financial measures, please refer to the summary table below, as well as the detailed tables at the end of this release.

         
    Q2 2015   Q2 2014
(in millions, except per share amounts)   U.S. GAAP     Adjustments     Non-GAAP   U.S. GAAP     Adjustments     Non-GAAP
                                             
Net sales   $ 172.8     $ -     $ 172.8   $ 66.1     $ -     $ 66.1
Gross profit     111.0       46.5       157.5     41.3       18.8       60.1
Research and development     8.9       (2.2 )     6.7     3.5       (0.5 )     3.0
Sales and marketing     58.1       (5.9 )     52.2     27.1       (1.0 )     26.1
General and administrative     77.2       (54.9 )     22.3     17.7       (8.7 )     9.0
Total operating expenses     144.2       (63.0 )     81.2     48.3       (10.2 )     38.1
Interest expense, net     19.4       (5.6 )     13.8     4.2       (2.3 )     1.9
Loss on induced debt conversion and debt extinguishment     67.1       (67.1 )     -     -       -       -
Loss on derivative fair value     -       -       -     11.0       (11.0 )     -
Other expense, net     9.1       (9.0 )     0.1     4.3       (4.3 )     -
(Benefit) expense for income taxes     (160.7 )     161.1       0.4     0.9       (0.9 )     -
Net income (loss)     31.8       30.1       61.9     (27.8 )     47.6       19.8
EBITDA (1)     (69.8 )     145.9       76.1     (14.5 )     36.0       21.5
                                             
Earnings (loss) per share - basic   $ 0.21     $ 0.20     $ 0.41   $ (0.38 )   $ 0.65     $ 0.27
Earnings (loss) per share - diluted   $ 0.20     $ 0.19     $ 0.39   $ (0.38 )   $ 0.58     $ 0.20
(1) EBITDA is a non-GAAP measure.                      
 
  • Under U.S. generally accepted accounting principles (GAAP) in the second quarter of 2015, the gross profit ratio was 64.2 percent. The adjusted gross profit ratio in the second quarter of 2015 was 91.1 percent, compared to 90.9 percent in the second quarter of 2014.

  • On a GAAP basis in the second quarter of 2015, total operating expenses were 83.5 percent of sales, research & development (R&D) expenses were 5.2 percent of sales, sales & marketing (S&M) expenses were 33.6 percent of sales and general & administration (G&A) expenses were 44.7 percent of sales. Adjusted total operating expenses in the second quarter of 2015 were 47.0 percent of sales, adjusted R&D expenses were 3.9 percent of sales, adjusted S&M expenses were 30.2 percent of sales and adjusted G&A expenses were 12.9 percent of sales. Adjusted total operating expenses in the second quarter of 2014 were 57.6 percent of sales. 

  • On a GAAP basis in the second quarter of 2015, net income was $31.8 million. Adjusted net income in the second quarter of 2015 was $61.9 million, or 35.8 percent of sales, compared to $19.8 million, or 30.0 percent of sales, in the second quarter of 2014.

  • On an unadjusted basis in the second quarter of 2015, EBITDA was a $69.8 million loss. Adjusted EBITDA in the second quarter of 2015 was $76.1 million, or 44.0 percent of sales, compared to $21.5 million, or 32.5 percent of sales, in the second quarter of 2014.

  • On a GAAP basis in the second quarter of 2015, diluted earnings per share were $0.20. Adjusted diluted earnings per share in the second quarter of 2015 were $0.39, representing growth of 95.0 percent compared to the second quarter of 2014 diluted earnings per share of $0.20. Weighted average shares outstanding used for calculating earnings per share in the second quarter of 2015 were 150.8 million and 159.8 million for basic and diluted earnings per share, respectively.

Cash Flow Statement and Balance Sheet Highlights

  • On a GAAP basis in the second quarter of 2015, operating cash flow was $41.6 million. Adjusted operating cash flow in the second quarter of 2015 was $129.6 million, which excludes the payment of accrued excise taxes from the Vidara acquisition, debt extinguishment costs and Hyperion transaction costs.
  • The Company had cash and cash equivalents of $667.1 million as of June 30, 2015, an increase of $122.9 million from March 31, 2015. The net cash flows related to the Hyperion acquisition were $3.0 million. Please see the description of Hyperion acquisition-related cash flows in the tables at the end of this release. 
  • Total principal amount of debt outstanding was $1.275 billion as of June 30, 2015, compared to total principal amount of debt outstanding of $728 million as of March 31, 2015. The $1.275 billion is comprised of $475 million in 6.625 percent senior notes, $400 million in senior secured term loans, and $400 million of 2.5 percent exchangeable senior notes.

Update on Offer to Acquire Depomed, Inc.

  • On August 3, 2015, Horizon Pharma issued a news release announcing it submitted a written request to Depomed, Inc. to set a record date to determine shareholders eligible to request a special shareholders meeting. Additionally, Horizon Pharma filed a lawsuit challenging the legality of Depomed's poison pill and certain of the bylaw amendments announced by Depomed's board of directors on July 13, 2015. On July 20, the Company increased its offer to acquire Depomed, Inc. to $33.00 from $29.25 per share in an all-stock transaction.

Horizon Pharma Confirms 2015 Full-Year Guidance as Provided on July 20, 2015

     
    Guidance
Net sales   $660 to $680 million
Adjusted EBITDA   $265 to $280 million
     

Recent Major Events

  • On July 31, 2015, the U.S. Patent and Trademark Office (USPTO) issued a Notice of Allowance with claims covering PENNSAID 2%. Also, since April, the company received three additional Notices of Allowance from the USPTO with claims covering PENNSAID 2% and one Notice of Allowance each from the USPTO with claims covering RAVICTI and RAYOS.
  • On July 27, 2015, Horizon Pharma announced a collaboration with Fox Chase Cancer Center to study ACTIMMUNE (interferon gamma-1b) in combination with PD-1/PD-L1 inhibitors in various forms of cancer.
  • On July 6, 2015, Horizon Pharma filed patent infringement lawsuits against five companies for filing Abbreviated New Drug Applications for PENNSAID 2%.
  • On June 5, 2015, the company initiated a Phase 3 trial of ACTIMMUNE for the treatment of Friedreich's ataxia, a degenerative neuromuscular disorder, following the receipt of U.S. Food and Drug Administration Fast Track Designation in April. 
  • On May 8, 2015, the company announced the settlement of PENNSAID 2% patent litigation with Perrigo Company plc and its subsidiary Paddock Laboratories, LLC, collectively (Perrigo).
  • On May 7, 2015, Horizon Pharma completed the acquisition of Hyperion for $1.1 billion in cash and an enterprise value of $958 million.

Conference Call
At 8 a.m. EDT / 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: 87670328

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: 87670328

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 seven medicines through its orphan, primary care and specialty business units. Horizon's global headquarters are in Dublin, Ireland. 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 adjusted net income, adjusted net income per share, adjusted gross profit and gross profit ratio, adjusted operating and other expenses and adjusted cash from operations, each of which include adjustments to GAAP figures. Adjustments to Horizon's GAAP figures as well as EBITDA exclude acquisition transaction related expenses, loss on debt extinguishment, 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 believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon's financial 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 2015 financial results and trends. In addition, these non-GAAP financial measures are among the indicators Horizon's management uses for planning and forecasting purposes and measuring the Company's performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies. Horizon has not provided reconciliation of an expected adjusted EBITDA outlook to an expected net income (loss) outlook because certain items that are a component of net income (loss) cannot be reasonably projected, either due to the significant impact of changes in Horizon's stock price on share-based compensation, the variability associated with acquisition related expenses due to timing and other factors.

Forward-Looking Statements
This press release contains forward-looking statements, including, but not limited to, statements related to Horizon's expected full-year 2015 net sales and adjusted EBITDA guidance and other statements that are not historical facts. These forward-looking statements are based on Horizon's current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks that Horizon's actual full-year 2015 financial and operating results may differ from its expectations; Horizon Pharma's ability to grow sales and revenues 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's Prescriptions-Made-Easy or PME specialty pharmacy program; competition, including potential generic competition; the ability to protect intellectual property and defend patents; regulatory obligations and oversight; and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in Horizon's filings and reports with the U.S. Securities and Exchange Commission ("SEC"). Horizon Pharma undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information.

Additional Information
This press release does not constitute an offer to buy or solicitation of any offer to sell or vote securities. This press release contains certain information related to a solicitation by Horizon Pharma of Depomed's shareholders to call a special shareholders meeting to consider certain matters in connection with a proposal which Horizon Pharma has made for a business combination transaction with Depomed. Subject to future developments, Horizon Pharma and Depomed may file one or more solicitation statements, proxy statements or other documents with the SEC in connection with such special shareholders meeting, and Horizon Pharma (and, if a negotiated transaction is agreed upon, Depomed) may file one or more registration statements, prospectuses, proxy statements or other documents with the SEC in connection with the proposed transaction. This communication is not a substitute for any solicitation statement, proxy statement or other document filed with the SEC in connection with such special shareholders meeting or any registration statement, prospectus, proxy statement or other document Horizon Pharma and/or Depomed may file with the SEC in connection with the proposed transaction. Horizon Pharma has filed a preliminary proxy statement and accompanying WHITE proxy card with the SEC with respect to the solicitation of proxies to call a special meeting of shareholders. INVESTORS AND SECURITY HOLDERS OF HORIZON PHARMA AND DEPOMED ARE URGED TO READ CAREFULLY THE SOLICITATION STATEMENT, (INCLUDING ANY AMENDMENTS AND SUPPLEMENTS), THE ACCOMPANYING WHITE PROXY CARD AND OTHER PROXY STATEMENTS AND DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE SPECIAL SHAREHOLDERS MEETING AND ANY REGISTRATION STATEMENTS, PROSPECTUSES, PROXY STATEMENTS AND OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT HORIZON PHARMA, DEPOMED, THE SPECIAL SHAREHOLDERS MEETING AND THE PROPOSED TRANSACTION, AS APPLICABLE. Investors and security holders may obtain free copies of these documents (when they are available) and other related documents filed with the SEC at the SEC's web site at www.sec.gov  or by directing a request to Horizon Pharma's Investor Relations department at Horizon Pharma, Inc., Attention: Investor Relations, 520 Lake Cook Road, Suite 520, Deerfield, IL 60015 or to Horizon Pharma's Investor Relations department at 224-383-3400 or by email to investor-relations@horizonpharma.com. Investors and security holders may obtain free copies of the documents filed with the SEC on Horizon Pharma's website at www.horizonpharma.com  under the heading "Investors" and then under the heading "SEC Filings."

Certain Information Regarding Participants
Horizon Pharma and/or Depomed and their respective directors, executive officers and certain other employees may be deemed participants in a solicitation of proxies in connection with the request to call the special shareholders meeting and in connection with the proposed transaction. You can find information about Horizon Pharma's directors, executive officers and such certain other employees in Horizon Pharma's Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on February 27, 2015, Horizon Pharma's definitive proxy statement filed with the SEC on May 6, 2015, and in Horizon Pharma's Current Report on Form 8-K/A filed with the SEC on July 27, 2015, and in such solicitation statements, proxy statements or other documents that would be filed with the SEC in connection with the special shareholders meeting and the proposed transaction. You can find information about Depomed's directors, executive officers and its employees who are participants in such solicitation in Depomed's definitive proxy statement filed with the SEC on April 16, 2015, and in such solicitation statements, proxy statements or other documents that would be filed with the SEC in connection with the special shareholders meeting and the proposed transaction. These documents are available free of charge at the SEC's web site at www.sec.gov  and, with respect to Horizon Pharma, from Investor Relations at Horizon Pharma as described above. Additional information regarding the interests of such potential participants will be included in one or more registration statements, proxy statements or other documents filed with the SEC if and when they become available.

   
Horizon Pharma plc  
Consolidated Statements of Operations  
(in thousands, except share and per share data)  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2014     2015     2014  
REVENUES:                                
Net sales   $ 172,821     $ 66,062     $ 285,962     $ 117,988  
Cost of goods sold     61,826       24,810       90,679       32,429  
Gross profit     110,995       41,252       195,283       85,559  
                                 
OPERATING EXPENSES:                                
  Research and development     8,922       3,545       15,103       6,378  
  Sales and marketing     58,056       27,126       105,119       55,821  
  General and administrative     77,190       17,681       103,470       28,873  
    Total operating expenses     144,168       48,352       223,692       91,072  
Operating loss     (33,173 )     (7,100 )     (28,409 )     (5,513 )
                                 
OTHER EXPENSE, NET:                                
  Interest expense, net     (19,448 )     (4,207 )     (29,480 )     (8,414 )
  Foreign exchange loss     (87 )     (284 )     (924 )     (322 )
  Loss on derivative fair value     -       (10,965 )     -       (214,995 )
  Loss on induced conversion of debt and debt extinguishment     (67,080 )     -       (77,624 )     -  
  Other, net     (9,078 )     (4,333 )     (10,069 )     (5,000 )
    Total other expense, net     (95,693 )     (19,789 )     (118,097 )     (228,731 )
                                 
Loss before (benefit) expense for income taxes     (128,866 )     (26,889 )     (146,506 )     (234,244 )
(BENEFIT) EXPENSE FOR INCOME TAXES     (160,680 )     880       (158,767 )     (225 )
NET INCOME (LOSS)   $ 31,814     $ (27,769 )   $ 12,261     $ (234,019 )
                                 
Earnings (loss) per share - basic   $ 0.21     $ (0.38 )   $ 0.09     $ (3.34 )
                                 
Weighted average shares outstanding - basic     150,771,902       73,384,801       138,369,537       70,164,267  
                                 
Earnings (loss) per share - diluted   $ 0.20     $ (0.38 )   $ 0.08     $ (3.34 )
                                 
Weighted average shares outstanding - diluted     159,797,319       73,384,801       145,031,882       70,164,267  
                                 
   
Horizon Pharma plc  
Consolidated Balance Sheets  
(in thousands, except share data)  
   
             
    As of  
    June 30,     December 31,  
    2015     2014  
ASSETS        
CURRENT ASSETS:                
  Cash and cash equivalents   $ 667,057     $ 218,807  
  Restricted cash     600       738  
  Accounts receivable, net     182,868       73,915  
  Inventories, net     20,299       16,865  
  Prepaid expenses and other current assets     11,620       14,370  
  Deferred tax assets, net     15,767       1,530  
    Total current assets     898,211       326,225  
Property and equipment, net     9,773       7,241  
Developed technology, net     1,692,057       696,963  
In-process research and development     66,000       66,000  
Other intangible assets, net     7,466       7,870  
Goodwill     259,565       -  
Deferred tax assets, net, non-current     -       18,761  
Other assets     9,615       11,564  
TOTAL ASSETS   $ 2,942,687     $ 1,134,624  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY                
CURRENT LIABILITIES:                
  Convertible debt, net   $ -     $ 48,334  
  Long-term debt, current portion     4,000       -  
  Accounts payable     26,224       21,011  
  Accrued trade discounts and rebates     136,836       76,115  
  Accrued expenses     79,246       46,625  
  Accrued royalties, current portion     42,574       25,325  
  Deferred revenues, current portion     2,019       1,261  
  Deferred tax liabilities, net     -       721  
    Total current liabilities     290,899       219,392  
                 
LONG-TERM LIABILITIES:                
  Exchangeable notes, net     274,305       -  
  Long-term debt, net     858,593       297,169  
  Accrued royalties, net of current     128,913       48,887  
  Deferred revenues, net of current     10,004       8,144  
  Deferred tax liabilities, net, non-current     121,039       19,570  
  Other-long term liabilities     4,967       1,258  
    Total long-term liabilities     1,397,821       375,028  
                 
COMMITMENTS AND CONTINGENCIES                
                 
SHAREHOLDERS' EQUITY:                
  Ordinary shares, $0.0001 nominal value per share; 300,000,000 shares authorized; 158,732,528 and 124,425,853 issued at June 30, 2015 and December 31, 2014 respectively, and 158,348,162 and 124,041,487 outstanding at June 30, 2015 and December 31, 2014, respectively.    


16
     


13
 
  Treasury stock, 384,366 ordinary shares at March 31, 2015 and December 31, 2014     (4,585 )     (4,585 )
  Additional paid-in capital     1,969,750       1,269,858  
  Accumulated other comprehensive loss     (2,756 )     (4,363 )
  Accumulated deficit     (708,458 )     (720,719 )
    Total shareholders' equity     1,253,967       540,204  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 2,942,687     $ 1,134,624  
                 
   
Horizon Pharma plc  
Consolidated Statements of Cash Flows  
(in thousands)  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2014     2015     2014  
                         
CASH FLOWS FROM OPERATING ACTIVITIES:                                
  Net income (loss)   $ 31,814     $ (27,769 )   $ 12,261     $ (234,019 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                                
    Depreciation and intangible amortization expense     32,408       5,433       50,743       10,836  
    Share-based compensation     24,665       4,160       31,339       6,087  
    Royalty accretion     3,977       2,953       7,021       2,953  
    Royalty liability remeasurement     14,277       13,033       14,277       13,033  
    Loss on derivative revaluation     -       10,965       -       214,995  
    Loss on induced conversions of debt and debt extinguishment     16,733       -       21,581       -  
    Amortization of debt discount and deferred financing costs     5,622       2,333       7,828       4,666  
    Foreign exchange loss     87       284       924       322  
    Other     (3 )     -       99       -  
    Changes in operating assets and liabilities:                                
      Accounts receivable     (43,724 )     (11,693 )     (97,167 )     (35,835 )
      Inventories     7,467       219       10,555       (510 )
      Prepaid expenses and other current assets     38,904       2,007       4,597       (2,211 )
      Accounts payable     1,622       5,628       1,604       5,980  
      Accrued trade discounts and rebates     45,408       12,326       47,596       29,469  
      Accrued expenses and accrued royalties     22,514       (3,586 )     16,492       (27 )
      Deferred revenues     2,804       250       2,778       362  
      Deferred income taxes     (160,229 )     222       (158,873 )     (232 )
      Payment of original issue discount upon repayment of 2014 Term Loan Facility     (3,000 )     -       (3,000 )     -  
      Other non-current assets and liabilities     238       (4 )     190       135  
Net cash provided by (used in) operating activities     41,584       16,761       (29,155 )     16,004  
                                 
CASH FLOWS FROM INVESTING ACTIVITIES:                                
  Payments for acquisitions, net of cash acquired     (1,022,361 )     -       (1,022,361 )     -  
  Proceeds from liquidation of available-for-sale investments     64,623       -       64,623       -  
  Purchase of property and equipment     (704 )     (543 )     (2,281 )     (1,037 )
  Change in restricted cash     -       -       138       -  
Net cash used in investing activities     (958,442 )     (543 )     (959,881 )     (1,037 )
                                 
CASH FLOWS FROM FINANCING ACTIVITIES:                                
  Proceeds from the issuance of common stock in connection with stock option exercises     1,358       985       1,932       1,597  
  Net proceeds from the issuance of Exchangable Senior Notes     (819 )     -       387,181       -  
  Net proceeds from the issuance of 2023 Senior Notes     462,340       -       462,340       -  
  Net proceeds from the 2015 Term Loan Facility     391,719       -       391,719       -  
  Net proceeds from the issuance of ordinary shares     475,627       -       475,627       -  
  Proceeds from the issuance of common stock through warrant exercises     4,769       7,628       14,693       31,172  
  Proceeds from the issuance of common stock through ESPP programs     1,541       649       1,541       649  
  Repayment of the 2014 Term Loan Facility     (297,000 )     -       (297,000 )     -  
Net cash provided by financing activities     1,039,535       9,262       1,438,033       33,418  
                                 
Effect of foreign exchange rate changes on cash     169       (3 )     (747 )     (14 )
                                 
NET INCREASE IN CASH AND CASH EQUIVALENTS     122,846       25,477       448,250       48,371  
CASH AND CASH EQUIVALENTS, beginning of the year     544,211       103,374       218,807       80,480  
CASH AND CASH EQUIVALENTS, end of the period   $ 667,057     $ 128,851     $ 667,057     $ 128,851  
                                 
   
Horizon Pharma plc  
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income  
(in thousands, except share and per share data)  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2014     2015     2014  
    (Unaudited)     (Unaudited)  
Adjusted Non-GAAP Net Income:                                
                                 
  GAAP Net Income (Loss)   $ 31,814     $ (27,769 )   $ 12,261     $ (234,019 )
  Non-GAAP Adjustments:                                
    Remeasurement of royalties for products acquired through business combinations     14,277       13,033       14,277       13,033  
    Vidara acquisition costs     759       10,125       2,493       14,174  
    Hyperion acquisition costs     45,930       -       47,850       -  
    Loss on derivative revaluation     -       10,965       -       214,995  
    Loss on induced conversion of debt and debt extinguishment     67,080       -       77,624       -  
    Amortization and accretion:                                
      Intangible amortization expense     31,832       5,029       49,510       10,056  
      Amortization of debt discount and deferred financing costs     5,622       2,333       7,848       4,666  
      Accretion of royalty liabilities     3,977       2,953       7,020       2,953  
      Amortizaton of inventory step-up adjustment     3,341       -       6,495       -  
    Share-based compensation     24,665       4,160       31,339       6,087  
    Depreciation expense     576       404       1,230       780  
    Royalties for products acquired through business combinations (1)     (6,840 )     (2,347 )     (12,036 )     (5,696 )
      Total of pre-tax non-GAAP adjustments     191,219       46,655       233,650       261,048  
    Income tax adjustments (2)     (161,135 )     880       (159,506 )     (225 )
      Total of non-GAAP adjustments     30,084       47,535       74,144       260,823  
  Adjusted Non-GAAP Net Income   $ 61,898     $ 19,766     $ 86,405     $ 26,804  
                                 
                                 
Adjusted Non-GAAP Earnings Per Share:                                
                                 
  Weighted average shares - Basic     150,771,902       73,384,801       138,369,537       70,164,267  
                                 
  Adjusted Non-GAAP Earnings Per Share - Basic:                                
    GAAP earnings (loss) per share - Basic   $ 0.21     $ (0.38 )   $ 0.09     $ (3.34 )
    Non-GAAP adjustments     0.20       0.65       0.53       3.72  
    Adjusted Non-GAAP earnings per share - Basic   $ 0.41     $ 0.27     $ 0.62     $ 0.38  
                                 
                                 
  Weighted average shares - Diluted                                
    Weighted average shares - Basic     150,771,902       73,384,801       138,369,537       70,164,267  
    Ordinary stock equivalents     9,025,417       24,689,011       6,662,345       22,955,502  
    Weighted average shares - Diluted     159,797,319       98,073,812       145,031,882       93,119,769  
                                 
                                 
  Adjusted Non-GAAP Net Income - Diluted   $ 61,898     $ 19,766     $ 86,405     $ 26,804  
                                 
    GAAP earnings (loss) per share - Diluted   $ 0.20     $ (0.38 )   $ 0.08     $ (3.34 )
    Non-GAAP adjustments     0.19       0.65       0.52       3.72  
    Diluted earnings per share effect of ordinary share equivalents     -       (0.07 )     -       (0.09 )
    Adjusted Non-GAAP earnings per share - Diluted   $ 0.39     $ 0.20     $ 0.60     $ 0.29  
(1) Royalties for products acquired through business combinations relate to VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL.  
(2) Adjustments to convert the income tax benefit/expense to the estimated amount of taxes that are payable in cash.  
   
   
Horizon Pharma plc  
Additional GAAP to Non-GAAP Reconciliations  
EBITDA, Gross Profit and Operating Cash Flow  
(in thousands, except percentages)  
   
    Three Months Ended June 30,     Six Months Ended June 30,  
    2015     2014     2015     2014  
    (Unaudited)     (Unaudited)  
                 
EBITDA and Adjusted EBITDA:                                
                                 
  GAAP Net Income (Loss)   $ 31,814     $ (27,769 )   $ 12,261     $ (234,019 )
  Depreciation     576       404       1,230       780  
  Amortization and accretion:                                
    Intangible amortization expense     31,832       5,029       49,510       10,056  
    Accretion of royalty liabilities     3,977       2,953       7,020       2,953  
    Amortization of deferred revenue     (129 )     (161 )     (263 )     (322 )
    Amortizaton of inventory step-up adjustment     3,341       -       6,495       -  
  Interest expense, net (including amortization of debt discount and deferred financing costs)     19,448       4,207       29,480       8,414  
  (Benefit) expense for income taxes     (160,680 )     880       (158,767 )     (225 )
  EBITDA   $ (69,821 )   $ (14,457 )   $ (53,033 )   $ (212,363 )
  Non-GAAP adjustments:                                
    Remeasurement of royalties for products acquired through business combinations     14,277       13,033       14,277       13,033  
    Vidara acquisition costs     759       10,125       2,493       14,174  
    Hyperion acquisition costs     45,930       -       47,850       -  
    Loss on derivative revaluation     -       10,965       -       214,995  
    Loss on induced conversion and debt extinguishment     67,080       -       77,624       -  
    Share-based compensation     24,665       4,160       31,339       6,087  
    Royalties for products acquired through business combinations (1)     (6,840 )     (2,347 )     (12,036 )     (5,696 )
  Total of Non-GAAP adjustments   $ 145,871     $ 35,936     $ 161,547     $ 242,593  
  Adjusted EBITDA   $ 76,050     $ 21,479     $ 108,513     $ 30,230  
                                 
Non-GAAP Gross Profit:                                
  GAAP net sales   $ 172,821     $ 66,062     $ 285,962     $ 117,988  
  GAAP cost of goods sold     61,826       24,810       90,679       32,429  
  GAAP gross profit   $ 110,995     $ 41,252     $ 195,283     $ 85,559  
                                 
  GAAP gross profit %     64 %     62 %     68 %     73 %
                                 
  Non-GAAP Gross Profit:                                
    GAAP gross profit   $ 110,995     $ 41,252     $ 195,283     $ 85,559  
    Non-GAAP gross profit adjustments:                                
      Remeasurement of royalties for products acquired through business combinations     14,277       13,033       14,277       13,033  
      Intangible amortization expense (COGS only)     31,628       5,029       49,105       10,056  
      Accretion of royalty liabilities     3,977       2,953       7,020       2,953  
      Amortizaton of inventory step-up adjustment     3,341       -       6,495       -  
      Depreciation (COGS only)     74       148       203       180  
      Royalties for products acquired through business combinations (1)     (6,840 )     (2,347 )     (12,036 )     (5,696 )
    Total of Non-GAAP adjustments   $ 46,458     $ 18,816     $ 65,065     $ 20,526  
    Non-GAAP gross profit   $ 157,453     $ 60,068     $ 260,347     $ 106,085  
                                 
                                 
    Non-GAAP gross profit %     91 %     91 %     91 %     90 %
                                 
Non-GAAP Cash Provided By Operating Activities:                                
                                 
  GAAP cash (used in) provided by operating activities   $ 41,584     $ 16,761     $ (29,155 )   $ 16,004  
    Cash payments of Vidara acquistion costs     11,272       3,369       13,092       8,464  
    Cash payments for induced debt conversion     4,776       -       10,472       -  
    Cash payment for debt extinguishment     45,367       -       45,367       -  
    Payment of original issue discount on debt extinguishment     3,000       -       3,000       -  
    Cash payments of Hyperion acquistion costs     23,596       -       23,596       -  
  Non-GAAP cash provided by operating activities   $ 129,595     $ 20,130     $ 66,372     $ 24,468  
                                 
                                 
(1) Royalties for products acquired through business combinations relate to VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL.  
                                 
 
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended June 30, 2015
(Unaudited)
                                               
   


Sales
 


COGS
   

Research &
Development
 

Sales &
Marketing
 

General &
Administrative
 

Interest
Expense
  Loss on Induced
Debt Conversion
& Debt
Extinguishment
 

Other
(Income) Expense
 

Income Tax
(Benefit) Expense
   


Total
 
                                               
Non-GAAP Adjustments (in thousands):                                              
  Loss on induced conversion and debt extinguistment(1)   -   -     -   -   -   -   67,080   -   -     67,080  
  Vidara acquisition costs(2)   -   -     -   -   759   -   -   -   -     759  
  Hyperion acquisition costs(3)   -   -     -   -   36,930   -   -   9,000   -     45,930  
  Amortization and accretion:                                              
    Intangible amortization expense(4)   -   31,628     -   204   -   -   -   -   -     31,832  
    Amortization of debt discount and deferred financing costs(5)   -   -     -   -   -   5,622   -   -   -     5,622  
    Accretion of royalty liability(6)   -   3,977     -   -   -   -   -   -   -     3,977  
    Amortization of inventory step-up adjustment(7)   -   3,341     -   -   -   -   -   -   -     3,341  
  Remeasurement of royalties for products acquired through business combinations(8)  
-
 
14,277
   
-
 
-
 
-
 
-
 
-
 
-
 
-
   
14,277
 
  Stock-based compensation(9)   -   -     2,212   5,735   16,718   -   -   -   -     24,665  
  Depreciation expense(10)   -   74     -   -   502   -   -   -   -     576  
  Royalties for products acquired through business combinations(11)   -   (6,840 )   -   -   -   -   -   -   -     (6,840 )
  Income tax adjustments(12)   -   -     -   -   -   -   -   -   (161,135 )   (161,135 )
    Total of non-GAAP adjustments   -   46,458     2,212   5,939   54,909   5,622   67,080   9,000   (161,135 )   30,084  
                                               
 
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended June 30, 2014
(Unaudited)
                                             
   
Sales
 
COGS
    Research &
Development
  Sales &
Marketing
  General &
Administrative
  Interest
Expense
  Derivative
Loss
  Other
(Income) Expense
  Income Tax
(Benefit) Expense
 
Total
 
                                             
Non-GAAP Adjustments (in thousands):                                            
  Loss on derivative revaluation(13)   -   -     -   -   -   -   10,965   -   -   10,965  
  Vidara acquisition costs(2)   -   -     -   -   5,792   -   -   4,333   -   10,125  
  Amortization and accretion:                                            
    Intangible amortization expense(4)   -   5,029     -   -   -   -   -   -   -   5,029  
    Amortization of debt discount and deferred financing costs(5)   -   -     -   -   -   2,333   -   -   -   2,333  
    Accretion of royalty liability(6)   -   2,953     -   -   -   -   -   -   -   2,953  
  Remeasurement of royalties for products acquired through business combinations(8)  
-
 
13,033
   
-
 
-
 
-
 
-
 
-
 
-
 
-
 
13,033
 
  Stock-based compensation(9)   -   -     498   1,040   2,622   -   -   -   -   4,160  
  Depreciation expense(10)   -   148     -   -   256   -   -   -   -   404  
  Royalties for products acquired through business combinations(11)   -   (2,347 )   -   -   -   -   -   -   -   (2,347 )
  Income tax adjustments(12)   -   -     -   -   -   -   -   -   880   880  
    Total of non-GAAP adjustments   -   18,816     498   1,040   8,670   2,333   10,965   4,333   880   47,535  
                                             
 
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Six Months Ended June 30, 2015
(Unaudited)
                                               
   


Sales
 


COGS
   

Research &
Development
 

Sales &
Marketing
 

General &
Administrative
 

Interest
Expense
  Loss on Induced
Debt Conversion
& Debt
Extinguishment
 

Other
(Income) Expense
 

Income Tax
(Benefit) Expense
   


Total
 
                                               
Non-GAAP Adjustments (in thousands):                                              
  Loss on induced conversion and debt extinguistment(1)   -   -     -   -   -   -   77,624   -   -     77,624  
  Vidara acquisition costs(2)   -   23     94   -   2,376   -   -   -   -     2,493  
  Hyperion acquisition costs(3)   -   -     -   -   37,850   -   -   10,000   -     47,850  
  Amortization and accretion:                                              
    Intangible amortization expense(4)   -   49,104     -   406   -   -   -   -   -     49,510  
    Amortization of debt discount and deferred financing costs(5)   -   -     -   -   -   7,848   -   -   -     7,848  
    Accretion of royalty liability(6)   -   7,020     -   -   -   -   -   -   -     7,020  
    Amortization of inventory step-up adjustment(7)   -   6,495     -   -   -   -   -   -   -     6,495  
  Remeasurement of royalties for products acquired through business combinations(8)  
-
 
14,277
   
-
 
-
 
-
 
-
 
-
 
-
 
-
   
14,277
 
  Stock-based compensation(9)   -   -     2,670   8,536   20,133   -   -   -   -     31,339  
  Depreciation expense(10)   -   203     -   -   1,027   -   -   -   -     1,230  
  Royalties for products acquired through business combinations(11)   -   (12,036 )   -   -   -   -   -   -   -     (12,036 )
  Income tax adjustments(12)   -   -     -   -   -   -   -   -   (159,506 )   (159,506 )
    Total of non-GAAP adjustments   -   65,087     2,764   8,942   61,386   7,848   77,624   10,000   (159,506 )   74,144  
                                               
 
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Six Months Ended June 30, 2014
(Unaudited)
                                               
   
Sales
 
COGS
    Research &
Development
  Sales &
Marketing
  General &
Administrative
  Interest
Expense
  Derivative
Loss
  Other
(Income) Expense
  Income Tax
(Benefit) Expense
   
Total
 
                                               
Non-GAAP Adjustments (in thousands):                                              
  Loss on derivative revaluation(13)   -   -     -   -   -   -   214,995   -   -     214,995  
  Vidara acquisition costs(2)   -   -     -   -   9,174   -   -   5,000   -     14,174  
  Amortization and accretion:                                              
    Intangible amortization expense(4)   -   10,056     -   -   -   -   -   -   -     10,056  
    Amortization of debt discount and deferred financing costs(5)   -   -     -   -   -   4,666   -   -   -     4,666  
    Accretion of royalty liability(6)   -   2,953     -   -   -   -   -   -   -     2,953  
  Remeasurement of royalties for products acquired through business combinations(8)  
-
 
13,033
   
-
 
-
 
-
 
-
 
-
 
-
 
-
   
13,033
 
  Stock-based compensation(9)   -   -     798   1,624   3,665   -   -   -   -     6,087  
  Depreciation expense(10)   -   180     -   -   600   -   -   -   -     780  
  Royalties for products acquired through business combinations(11)   -   (5,696 )   -   -   -   -   -   -   -     (5,696 )
  Income tax adjustments(12)   -   -     -   -   -   -   -   -   (225 )   (225 )
    Total of non-GAAP adjustments   -   20,526     798   1,624   13,439   4,666   214,995   5,000   (225 )   260,823  
                                               
                                               
 
NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS - NON-GAAP ADJUSTED
(in thousands)
 
   
(1) During the three months ended June 30, 2015, the Company recorded a loss on induced debt conversions of $67,080, which represented an early redemption payment of $45,366, the write-down of $16,733 in debt discount and deferred financing costs, $4,635 in additional exchange consideration to debt holders and $346 in expenses incurred in connection with the induced debt conversions. During the six months ended June 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.
   
(2) On September 19, 2014, the Company acquired Vidara Therapeutics International Public Limited Company ("Vidara"), through a reverse merger for stock and cash ("Vidara Merger"). Expenses, including legal and consulting fees, incurred in connection with the Vidara Merger, have been excluded as non-recurring items.
   
(3) On May 7, 2015, the Company completed its acquisition of Hyperion Therapeutics, Inc. ("Hyperion") pursuant to which the Company acquired all of the issued and outstanding shares of Hyperion's common stock for cash. Expenses, including legal and consulting fees, incurred in connection with the Hyperion acquisition, have been excluded as non-recurring items.
   
(4) Intangible amortization expenses are associated with the Company's intellectual property rights, developed technology and customer relationships of VIMOVO, LODOTRA, RAYOS, ACTIMMUNE, RAVICTI and BUPHENYL.
   
(5) Represents amortization of debt discount and deferred financing costs associated with the Company's debt.
   
(6) Represents accretion expense associated with the ACTIMMUNE, VIMOVO, RAVICTI and BUPHENYL royalties.
   
(7) In connection with the Hyperion acquisition, the RAVICTI and BUPHENYL inventory was stepped up in value to $9,125 and during the three months ended June 30, 2015, the Company recognized in cost of goods sold $3,379 of step-up inventory costs related to RAVICTI and BUPHENYL inventory sold. In connection with the Vidara Merger, the ACTIMMUNE inventory was stepped up in value to $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.
   
(8) At the time of the Company's acquisition of the rights to VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL, 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 adjustments 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 second quarter of 2015, the Company recorded a charge of $14,277 to cost of goods sold to increase the amount of the contingent royalty liabilities relating to VIMOVO and ACTIMMUNE. During the second quarter of 2014, the Company recorded a charge of $13,033 to cost of goods sold to increase the amount of the contingent royalty liability relating to VIMOVO.
   
(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 and leasehold improvements.
   
(11) Royalties of $6,840 and $12,036 were incurred during the three and six months ended June 30, 2015, respectively, based on each period's net sales for VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL, as applicable. Royalties of $2,347 and $5,696 were incurred during the three and six months ended June 30, 2014, respectively, based on each period's net sales for VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL, as applicable.
   
(12) Represents adjustments to convert the income tax expense (benefit) to the estimated amount of taxes that are payable in cash.
   
(13) During the three and six months ended June 30, 2014, the Company recorded non-cash charges related to the increase in the fair value of the embedded derivative associated with its convertible senior notes. The loss on the derivative revaluation was primarily due to an increase in the market value of the Company's common stock. The loss on derivative revaluation was a permanent tax difference and was not deductible for income tax reporting purposes.
   
   
Horizon Pharma plc  
Description of Hyperion acquisition related cash flows  
For the three months ended June 30, 2015  
(in thousands)  
   
       
Financing cash flows:      
  Net proceeds from the issuance of 2023 Senior Notes $ 462,340  
  Net proceeds from the 2015 Term Loan Facility   391,719  
  Net proceeds from the issuance of ordinary shares   475,627  
  Repayment of the 2014 Term Loan Facility   (297,000 )
    Net financing cash inflow   1,032,686  
       
Operating cash flows:      
  Cash payment for debt extinguishment   (45,367 )
  Payment of original issue discount upon repayment of 2014 Term Loan Facility   (3,000 )
  Cash payments for Hyperion acquisition costs   (23,596 )
    Net operating cash outflow   (71,963 )
       
Investing cash flows:      
  Payments for acquisitions, net of cash acquired   (1,022,361 )
  Proceeds from liquidation of available-for-sale investments   64,623  
    Net Investing cash outflow (Hyperion enterprise value)   (957,738 )
       
Net cash flows related to Hyperion acquisition $ 2,985  
       

Contact Information

  • Investors:

    John B. Thomas
    Executive Vice President, Corporate Strategy and Investor Relations
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    Tina Ventura
    Vice President, Investor Relations
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    U.S. Media Contact:

    Geoff Curtis
    Group Vice President, Corporate Communications
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    Ireland Media Contact:

    Ray Gordon
    Gordon MRM
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