— Record Second-Quarter 2020 Net Sales of $462.8 Million Increased 44 Percent;
Second-Quarter 2020 GAAP Net Loss of $80.0 Million; Adjusted EBITDA of $190.7 Million —
— Quarterly Orphan Segment Net Sales Increased 87 Percent to $379.3 Million;
Now Represents More Than 80 Percent of Total Company Net Sales —
— TEPEZZA (teprotumumab-trbw) Second-Quarter 2020 Net Sales of $165.9 Million
Driven by Strong Commercial Execution, Significantly Exceeding Expectations;
Increasing Full-Year 2020 Guidance to Greater Than $650 Million from Greater Than $200 Million —
— Increasing TEPEZZA Peak U.S. Annual Net Sales Estimate to Greater Than $3 Billion from Greater Than $1 Billion —
— Increasing Full-Year 2020 Net Sales Guidance to $1.85 Billion to $1.90 Billion Driven by Significantly Higher TEPEZZA Net Sales;
Increasing Full-Year 2020 Adjusted EBITDA Guidance to $725 Million to $775 Million —
— Announced Top-Line TEPEZZA Data that Underscore Its Efficacy in Longer Disease Duration, Long-Term Durability and Potential for Retreatment —
— Anticipate Initiating TEPEZZA Chronic (Inactive) Thyroid Eye Disease (TED) Trial by Year-End 2020 —
— Reached Target Enrollment in KRYSTEXXA® MIRROR Immunomodulation Randomized Controlled Trial (RCT) —
— Cash Position of $718.1 Million and Net Leverage of 0.9 Times as of June 30, 2020 —
DUBLIN–(BUSINESS WIRE)–Horizon Therapeutics plc (Nasdaq: HZNP) today announced record second-quarter 2020 financial results. The Company increased its full-year 2020 net sales and adjusted EBITDA guidance on continued strength of TEPEZZA. In addition to increasing TEPEZZA full-year 2020 net sales guidance, the Company also increased its peak U.S. annual net sales estimate for the medicine.
“Driving our record second-quarter performance was the continued tremendous patient and physician response to TEPEZZA, along with our outstanding commercial execution, making the TEPEZZA launch one of the most successful rare disease medicine launches ever, despite a challenging COVID-19 environment,” said Tim Walbert, chairman, president and chief executive officer, Horizon. “With TEPEZZA results having once again dramatically exceeded expectations, we increased both our TEPEZZA and Company full-year net sales guidance, as well as increased our TEPEZZA peak U.S. annual net sales estimate. We also continued to advance our clinical programs and improve our capital structure during the quarter. With our strong track record of strategic execution and driving value for patients and shareholders alike, Horizon is well positioned for long-term growth and success.”
Financial Highlights
|
|
|
|
|
% |
|
|
|
|
|
% |
|||||||||||
| (in millions except for per share amounts and percentages) |
Q2 20 |
|
Q2 19 |
|
Change |
|
YTD 20 |
|
YTD 19 |
|
Change |
||||||||||
| Net sales |
$ |
462.8 |
|
$ |
320.6 |
|
44 |
|
$ |
818.7 |
|
$ |
601.0 |
|
36 |
||||||
| Net loss |
|
(80.0 |
) |
|
(5.1 |
) |
NM |
|
|
(93.6 |
) |
|
(38.0 |
) |
146 |
||||||
| Non-GAAP net income |
|
83.8 |
|
|
95.6 |
|
(12 |
) |
|
167.0 |
|
|
149.6 |
|
12 |
||||||
| Adjusted EBITDA |
|
190.7 |
|
|
124.1 |
|
54 |
|
|
297.9 |
|
|
212.5 |
|
40 |
||||||
| Loss per share – diluted |
|
(0.42 |
) |
|
(0.03 |
) |
NM |
|
|
(0.49 |
) |
|
(0.21 |
) |
133 |
||||||
| Non-GAAP earnings per share – diluted |
|
0.40 |
|
|
0.49 |
|
(18 |
) |
|
0.80 |
|
|
0.80 |
|
– |
||||||
Second-Quarter and Recent Company Highlights
- Strong Commercial Launch Drives Increase of TEPEZZA Peak U.S. Annual Net Sales Estimate: Today, the Company increased its peak U.S. annual net sales estimate for TEPEZZA to greater than $3 billion from the previous estimate of greater than $1 billion, as well as increased full-year 2020 net sales guidance to greater than $650 million from greater than $200 million. Several factors have contributed to the increased expectations, including the severity of TED, which is a motivating factor for patients seeking treatment; the Company’s market education efforts to increase awareness of TED, develop the market and assist with patient access; and a high volume of patient and physician interest driven by the Company’s commercial execution.
- Announced Topline Data from TEPEZZA OPTIC-X Open-Label Extension Trial and OPTIC 48-Week Off-Treatment Follow-Up Period: In July 2020, the Company announced new topline results from its OPTIC-X open-label clinical trial, an extension trial of OPTIC, the TEPEZZA Phase 3 pivotal confirmatory clinical trial, as well as data from the OPTIC 48-week off-treatment follow-up period. OPTIC-X results demonstrate that 89 percent of patients who received placebo during OPTIC and then entered OPTIC-X and received TEPEZZA achieved the primary endpoint of 2 mm or more reduction in proptosis at Week 24. These patients had TED diagnosis for an average of one year compared with an average of six months in OPTIC. The results of the OPTIC 48-week off-treatment follow-up period demonstrated that the majority of TEPEZZA patients who were proptosis responders at Week 24 of OPTIC maintained their response at Week 72, nearly a year off treatment. For the small number of TEPEZZA patients who relapsed during the OPTIC follow-up period, the majority experienced improvements in proptosis with an additional course of TEPEZZA in OPTIC-X.
- Reached Target Enrollment for KRYSTEXXA MIRROR RCT: In July 2020, the Company announced that the MIRROR RCT, the first randomized trial to evaluate the efficacy and safety of the concomitant use of KRYSTEXXA with methotrexate to increase the duration of response of KRYSTEXXA, reached its target enrollment of 135 patients. Preliminary results are expected in the first half of 2021.
- New KRYSTEXXA Immunomodulation Data Presented: A series of data on KRYSTEXXA co-prescribed with commonly used immunomodulators, including methotrexate, leflunomide, mycophenolate mofetil and azathioprine, were presented virtually at the 2020 European League Against Rheumatism (EULAR) congress in June. The presentations showed response rates for KRYSTEXXA with immunomodulators ranging between 70 and 100 percent. The response rate of the KRYSTEXXA Phase 3 trials was 42 percent. The presentations added to the growing body of evidence supporting the immunomodulation treatment approach.
- Expanded the Company’s Pipeline with Acquisition of Development-Stage Candidate HZN-825: On April 1, 2020, the Company completed the acquisition of Curzion Pharmaceuticals, Inc. and its lysophosphatidic acid 1 receptor (LPAR1) antagonist candidate (renamed HZN-825) for the treatment of diffuse cutaneous systemic sclerosis (dcSSc).
- Permanent J-Code Issued for TEPEZZA: In July 2020, the Company announced that the U.S. Centers for Medicare and Medicaid Services (CMS) assigned a permanent, product-specific Healthcare Common Procedure Coding System (HCPCS) J-code (J3241) for TEPEZZA. The permanent J-code, which enables reimbursement in all outpatient treatment settings, is expected to go into effect on Oct. 1, 2020.
- Acquired Certain Rights to Proceeds from Future Milestones and Royalties Related to TEPEZZA: In April 2020, in two separate transactions, the Company acquired the rights to proceeds from certain contingent future milestones and royalties related to TEPEZZA net sales in exchange for an aggregate payment of $110 million. These transactions relate to the rights to approximately 71 percent of the $225 million in milestone payments due upon achievement of certain TEPEZZA annual worldwide net sales thresholds and approximately 71 percent of the 3 percent royalty tied to the portion of TEPEZZA annual worldwide net sales exceeding $300 million.
- Further Improved the Company’s Capital Structure: On Aug. 3, 2020, the Company completed the extinguishment of all $400 million of its 2.50 percent exchangeable senior notes due 2022. Since the beginning of 2019, the Company has reduced its gross debt by approximately $1 billion, while maintaining a strong cash balance. In part as a result of the extinguishment, S&P revised its outlook on the Company to positive from stable.
- Announced Expanded Commercial Leadership Structure: As Horizon continues to grow at a rapid pace, it is expanding its leadership structure to separate the geographic oversight of its commercial operations to prepare for long-term global expansion. Vikram Karnani will now oversee international operations as executive vice president and president, International and Daniel A. Camardo will now oversee U.S. operations as executive vice president and president, U.S.
- Received Best Workplace Awards: In April 2020, Great Place to Work® and Fortune selected Horizon as one of the 2020 “Best Workplaces in Health Care and Biopharma” for the third consecutive year. Great Place to Work also named Horizon as the No. 1 “Best Workplace in Chicago” in the small and medium category.
Key Research and Development Programs
- HZN-825 dcSSc Program: HZN-825 is the Company’s LPAR1 antagonist in development for the treatment of dcSSc, a rare, chronic autoimmune disease marked by fibrosis, or skin thickening, with no FDA-approved treatment options. The Company expects to begin a Phase 2b pivotal trial in the first half of 2021.
- TEPEZZA Trial in Chronic (Inactive) TED: The Company expects to initiate a trial of TEPEZZA in patients with chronic TED (previously referred to as inactive TED) by year-end 2020. In chronic TED, the disease is no longer progressive; however, significant disease manifestations such as proptosis (eye bulging) and diplopia (double vision) remain.
- Potential TEPEZZA Subcutaneous Administration Program: The Company is planning to initiate a pharmacokinetic trial later this year to explore subcutaneous dosing of TEPEZZA, which is currently administered by infusion. The objective of the trial is to inform the potential for additional administration options for TEPEZZA, which could provide greater flexibility for patients and physicians.
- TEPEZZA dcSSc Exploratory Trial: As part of its evaluation of additional indications for TEPEZZA, the Company is planning to initiate an exploratory trial in dcSSc by the end of 2020.
- KRYSTEXXA MIRROR RCT: The Company is currently evaluating the efficacy and safety of the concomitant use of KRYSTEXXA with methotrexate to increase the complete response rate of KRYSTEXXA in the MIRROR placebo-controlled RCT. In July 2020, MIRROR RCT reached its target enrollment of 135 patients, and additional patients in screening will also randomize if eligible. The registrational trial is designed to enable the potential submission of results to the FDA to update the prescribing information. The MIRROR RCT follows the MIRROR open-label trial completed in 2019 that demonstrated a 79 percent complete response rate for patients using KRYSTEXXA with methotrexate, nearly double the 42 percent response rate in the KRYSTEXXA Phase 3 clinical program, which evaluated KRYSTEXXA alone. Methotrexate is the immunomodulator most used by rheumatologists and has been shown to reduce anti-drug antibody formation to biologic therapies when used in conjunction with these therapies.
- KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout: The Company has achieved more than 50 percent enrollment in its PROTECT open-label clinical trial, and expects to complete enrollment by the end of 2020. The trial is evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout. Kidney transplant patients have more than a tenfold increase in the prevalence of gout when compared to the general population, and literature suggests that persistently high serum uric acid levels can be associated with organ rejection. Managing uncontrolled gout is one of the most common and significant unmet needs of kidney transplant patients.
- KRYSTEXXA Shorter-Infusion Duration Trial: The Company expects to initiate an open-label trial by the end of 2020 to evaluate the impact of administering KRYSTEXXA over a significantly shorter infusion duration. Currently, KRYSTEXXA is infused over a two-hour or longer timeframe. A shorter infusion duration could meaningfully improve the experience and convenience for patients, physicians and sites of care.
Second-Quarter Financial Results
Note: For additional detail and reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, please refer to the tables at the end of this release.
- Net Sales: Second-quarter 2020 net sales were $462.8 million, an increase of 44 percent.
- Gross Profit: Under U.S. GAAP, the second-quarter 2020 gross profit ratio was 73.7 percent compared to 72.2 percent in the second quarter of 2019. The non-GAAP gross profit ratio in the second quarter of 2020 was 88.4 percent compared to 90.9 percent in the second quarter of 2019.
- Operating Expenses: Research and development (R&D) expenses were 17.5 percent of net sales and selling, general and administrative (SG&A) expenses were 48.0 percent of net sales. Non-GAAP R&D expenses were 6.1 percent of net sales, and non-GAAP SG&A expenses were 41.4 percent of net sales.
- Income Tax Expense: In the second quarter of 2020, income tax expense on a GAAP and non-GAAP basis was $83.0 million and $93.6 million, respectively.
- Net (Loss) Income: On a GAAP basis in the second quarter of 2020, net loss was $80.0 million. Second-quarter 2020 non-GAAP net income was $83.8 million.
- Adjusted EBITDA: Second-quarter 2020 adjusted EBITDA was $190.7 million.
- (Loss) Earnings per Share: On a GAAP basis diluted loss per share in the second quarter of 2020 and 2019 was $0.42 and $0.03, respectively. Non-GAAP diluted earnings per share in the second quarter of 2020 and 2019 was $0.40 and $0.49, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the second quarter of 2020 were 192.7 million and 214.5 million, respectively.
Second-Quarter Segment Results
Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments, the orphan segment and the inflammation segment. While segment operating income contains certain adjustments to the directly comparable GAAP figures in the Company’s consolidated financial results, it is considered to be prepared in accordance with GAAP for purposes of presenting the Company’s segment operating results.
|
Orphan Segment |
||||||||||||||||||
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||||
| (in millions except for percentages) |
Q2 20 |
|
Q2 19 |
|
Change |
|
YTD 20 |
|
YTD 19 |
|
Change |
|||||||
| TEPEZZA® |
|
165.9 |
|
– |
NM |
|
|
189.4 |
|
– |
NM |
|
||||||
| KRYSTEXXA® |
|
75.2 |
|
79.8 |
(6 |
) |
|
168.5 |
|
132.1 |
28 |
|
||||||
| RAVICTI® |
|
65.6 |
|
50.4 |
30 |
|
|
126.7 |
|
100.3 |
26 |
|
||||||
| PROCYSBI® |
|
41.4 |
|
41.2 |
– |
|
|
79.7 |
|
80.7 |
(1 |
) |
||||||
| ACTIMMUNE® |
|
28.3 |
|
29.3 |
(3 |
) |
|
54.8 |
|
51.0 |
7 |
|
||||||
| BUPHENYL® |
|
2.8 |
|
2.3 |
20 |
|
|
5.2 |
|
5.2 |
– |
|
||||||
| QUINSAIRTM |
|
0.1 |
|
0.2 |
(65 |
) |
|
0.3 |
|
0.4 |
(1 |
) |
||||||
| Orphan Net Sales |
$ |
379.3 |
$ |
203.2 |
87 |
|
$ |
624.6 |
$ |
369.7 |
69 |
|
||||||
| Orphan Segment Operating Income |
$ |
151.5 |
$ |
63.7 |
138 |
|
$ |
205.9 |
$ |
100.4 |
105 |
|
||||||
- Second-quarter 2020 net sales of the orphan segment, the Company’s strategic growth segment, were $379.3 million, an increase of 87 percent over the prior year’s quarter, driven by the strong performance of TEPEZZA and RAVICTI. Second-quarter KRYSTEXXA net sales reflect the impact of COVID-19. The orphan segment represented 82 percent of total second-quarter net sales.
- Second-quarter 2020 orphan segment operating income was $151.5 million, which includes significant investment spend associated with the commercial launch of TEPEZZA.
|
Inflammation Segment |
||||||||||||||||||
| (in millions except for percentages) | Q2 20 | Q2 19 | % Change |
YTD 20 | YTD 19 | % Change |
||||||||||||
| PENNSAID 2%® |
|
35.0 |
|
51.5 |
(32 |
) |
|
76.6 |
|
101.7 |
(25 |
) |
||||||
| DUEXIS® |
|
27.8 |
|
30.0 |
(8 |
) |
|
59.1 |
|
59.5 |
(1 |
) |
||||||
| RAYOS® |
|
14.5 |
|
20.3 |
(29 |
) |
|
32.7 |
|
39.7 |
(18 |
) |
||||||
| VIMOVO®(1) |
|
6.2 |
|
14.6 |
(57 |
) |
|
25.7 |
|
28.6 |
(10 |
) |
||||||
| MIGERGOT®(2) |
|
– |
|
1.0 |
NM |
|
|
– |
|
1.8 |
NM |
|
||||||
| Inflammation Net Sales |
$ |
83.5 |
$ |
117.4 |
(29 |
) |
$ |
194.1 |
$ |
231.3 |
(16 |
) |
||||||
| Inflammation Segment Operating Income |
$ |
38.1 |
$ |
60.5 |
(37 |
) |
$ |
90.0 |
$ |
111.9 |
(20 |
) |
||||||
|
(1) |
On Feb. 27, 2020, Dr. Reddy’s Laboratory initiated an at-risk launch of generic VIMOVO in the United States. |
|
|
(2) |
In June 2019, the Company divested the rights to MIGERGOT. |
-
Second-quarter 2020 net sales of the inflammation segment were $83.5 million, which reflects the impact of COVID-19. Inflammation segment operating income was
$38.1 million.
Cash Flow Statement and Balance Sheet Highlights
- On a GAAP basis, operating cash flow in the second quarter of 2020 was $99.6 million. Non-GAAP operating cash flow was $100.0 million.
-
The Company had cash and cash equivalents of $718.1 million as of June 30, 2020. This reflects $157.1 million in payments in the quarter related to the acquisition of
HZN-825 and the two TEPEZZA royalty and milestone transactions.
- As of June 30, 2020, the total principal amount of debt outstanding was $1.211 billion, which reflects the exchange of $207.0 million of the total $400.0 million of the Company’s 2.50 percent exchangeable senior notes due 2022 into ordinary shares by holders during the second quarter. As of June 30, 2020, net debt was $492.9 million and net-debt-to-last-12-months adjusted EBITDA leverage ratio was 0.9 times, compared to 1.1 times as of June 30, 2019.
- As of Aug. 3, 2020, the Company’s $400 million of 2.50 percent exchangeable senior notes due 2022 were fully extinguished through $398.3 million of exchanges for ordinary shares and $1.7 million of cash redemptions. Following these extinguishments, the Company’s gross debt was $1.018 billion.
Revised 2020 Guidance
The Company now expects full-year 2020 net sales to range between $1.85 billion to $1.90 billion, an increase from the previous guidance range of $1.40 billion to $1.45 billion. The Company now expects TEPEZZA full-year 2020 net sales of greater than $650 million, compared to the previous guidance of greater than $200 million. Full-year 2020 adjusted EBITDA is now expected to range between $725 million and $775 million, an increase from the previous guidance range of $450 million to $500 million.
Webcast
At 8 a.m. EST / 1 p.m. IST today, the Company will host a live webcast to review its financial and operating results and provide a general business update. The live webcast and a replay may be accessed at http://ir.horizontherapeutics.com. Please connect to the Company’s website at least 15 minutes prior to the live webcast to ensure adequate time for any software download that may be needed to access the webcast. A replay of the webcast will be available approximately two hours after the live webcast.
About Horizon
Horizon is focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic diseases. Our pipeline is purposeful: we apply scientific expertise and courage to bring clinically meaningful therapies to patients. We believe science and compassion must work together to transform lives. For more information on how we go to incredible lengths to impact lives, please visit www.horizontherapeutics.com and follow us on Twitter, LinkedIn, Instagram and Facebook.
Note Regarding Use of Non-GAAP Financial Measures
EBITDA, or earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA are used and provided by Horizon as non-GAAP financial measures. Horizon provides certain other financial measures such as non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP gross profit and gross profit ratio, non-GAAP operating expenses, non-GAAP operating income, non-GAAP tax rate, non-GAAP operating cash flow, net leverage ratio and net debt, each of which include adjustments to GAAP figures. These non-GAAP measures are intended to provide additional information on Horizon’s performance, operations, expenses, profitability and cash flows. Adjustments to Horizon’s GAAP figures as well as EBITDA exclude acquisition and/or divestiture-related expenses, charges related to the discontinuation of ACTIMMUNE development for Friedreich’s ataxia, gain or loss from divestiture, gain or loss from sale of assets, upfront, progress and milestone payments related to license and collaboration agreements, litigation settlements, loss on debt extinguishment, costs of debt refinancing, drug manufacturing harmonization costs, restructuring and realignment costs, the income tax effect on pre-tax non-GAAP adjustments and other non-GAAP income tax adjustments, as well as non-cash items such as share-based compensation, depreciation and amortization, non-cash interest expense, long-lived 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 2020 financial results and trends and to facilitate comparisons between periods and with respect to projected information. In addition, these non-GAAP financial measures are among the indicators Horizon’s management uses for planning and forecasting purposes and measuring the Company’s performance. For example, adjusted EBITDA is used by Horizon as one measure of management performance under certain incentive compensation arrangements. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies. Horizon has not provided a reconciliation of its full-year 2020 adjusted EBITDA outlook to an expected net income (loss) outlook because certain items such as acquisition/divestiture-related expenses and share-based compensation that are a component of net income (loss) cannot be reasonably projected due to the significant impact of changes in Horizon’s stock price, the variability associated with the size or timing of acquisitions/divestitures and other factors. These components of net income (loss) could significantly impact Horizon’s actual net income (loss).
Forward-Looking Statements
This press release contains forward-looking statements, including, but not limited to, statements related to Horizon’s full-year 2020 net sales and adjusted EBITDA guidance; expected financial performance and operating results in future periods, including potential growth in net sales of certain of Horizon’s medicines; development plans; expected timing of clinical trials, studies and regulatory submissions; potential market opportunity for and benefits of Horizon’s medicines and medicine candidates; and business and other statements that are not historical facts. These forward-looking statements are based on Horizon’s current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks that Horizon’s actual future financial and operating results may differ from its expectations or goals; Horizon’s ability to grow net sales from existing medicines; impacts of the COVID-19 pandemic and actions taken to slow its spread, including impacts on net sales of Horizon’s medicines and potential delays in clinical trials; the availability of coverage and adequate reimbursement and pricing from government and third-party payers; risks relating to Horizon’s ability to successfully implement its business strategies; risks inherent in developing novel medicine candidates and existing medicines for new indications; risks associated with regulatory approvals; risks in the ability to recruit, train and retain qualified personnel; competition, including 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 operates and those risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in Horizon’s filings and reports with the SEC.
Contacts
Investors:
Tina Ventura
Senior Vice President,
Investor Relations
investor-relations@horizontherapeutics.com
Ruth Venning
Executive Director,
Investor Relations
investor-relations@horizontherapeutics.com
U.S. Media:
Geoff Curtis
Executive Vice President,
Corporate Affairs & Chief Communications Officer
media@horizontherapeutics.com
Ireland Media:
Ray Gordon
Gordon MRM
ray@gordonmrm.ie