Horizon Therapeutics plc Reports Strong First-Quarter 2019 Results; Increases Full‐Year 2019 Net Sales and Adjusted EBITDA Guidance

May 8, 2019 Off By BusinessWire

— First-Quarter 2019 Net Sales of $280.4 Million Increased 25
Percent;

First-Quarter 2019 GAAP Net Loss of $32.9 Million;
Adjusted EBITDA of $88.4 Million —

— Quarterly Orphan and Rheumatology Segment Net Sales Increased 8
Percent to $185.9 Million —

— Increasing Full-Year 2019 Net Sales Guidance Range to $1.26
Billion to $1.28 Billion and

Adjusted EBITDA Guidance Range
to $450 Million to $465 Million,

Including the Impact of
Incremental Investment in Teprotumumab–

— Announced Phase 3 Teprotumumab Results That Demonstrate a
Dramatic
Reduction in Proptosis in Patients with Active Thyroid Eye Disease
(TED);

Continue to Expect Mid-2019 U.S. Biologics License
Application (BLA) Submission —

— Reduced Gross Debt by $550 Million as of May 1, 2019;
Net
Leverage of 1.3 Times as of March 31, 2019 —

— Changed Name of Company to Horizon Therapeutics plc Reflecting the
Company’s Focus on

Developing and Commercializing Medicines
to Treat Patients with Rare Diseases —

DUBLIN–(BUSINESS WIRE)–Horizon Therapeutics plc (Nasdaq: HZNP) today announced its
first-quarter 2019 financial results and increased its full-year 2019
net sales and adjusted EBITDA guidance.

We are off to a strong start this year, achieving double-digit net
sales growth in the first quarter and raising our full-year outlook,
indicative of our continued strong commercial execution,” said Timothy
P. Walbert, chairman, president and chief executive officer, Horizon.
In addition, during the quarter we announced dramatic teprotumumab
Phase 3 trial results that support a mid-year U.S. regulatory
submission, a key milestone in our evolution to a development-focused
rare disease biopharma company. We are one step closer to delivering the
first FDA-approved treatment to people living with active thyroid eye
disease.”

Walbert continued, “Last week our shareholders approved changing the
name of the Company to Horizon Therapeutics plc. Our new name more
clearly reflects both our long-term strategy to develop and
commercialize innovative new medicines addressing rare diseases with
very few effective options as well as the fact that our work with
patients, caregivers, physicians and communities goes well beyond our
medicines.”

 

           
Financial Highlights
%
(in millions except for per share amounts and percentages) Q1 19 Q1 18 Change
 
Net sales $ 280.4 $ 223.9 25
Net loss (32.9 ) (148.7 ) 78
Non-GAAP net income 53.9 4.8 NM
Adjusted EBITDA 88.4 33.6 163
 
Loss per share – diluted (0.19 ) (0.90 ) 79
Non-GAAP earnings per share – diluted 0.30 0.03 NM
 

First-Quarter and Recent Company Highlights

  • Changed Company Name: On May 2, 2019, shareholders of the
    Company approved the change of the Company’s name to Horizon
    Therapeutics Public Limited Company, which captures the Company’s
    long-term strategy to develop and commercialize innovative new
    medicines addressing rare diseases with very few effective options.
    The Company believes the new name better reflects its work with
    patients, caregivers, physicians and communities that goes well beyond
    its medicines.
  • Phase 3 Confirmatory Trial Evaluating Teprotumumab for Active TED
    Met Primary and All Secondary Endpoints:
    In February, the Company
    announced topline results from its Phase 3 confirmatory trial OPTIC
    (Treatment of Graves’ Orbitopathy (Thyroid Eye Disease) to
    Reduce Proptosis with Teprotumumab Infusions in a
    Randomized, Placebo-Controlled, Clinical Study), which
    evaluated teprotumumab for the treatment of active TED. The study met
    its primary endpoint, showing a dramatic improvement in proptosis, or
    bulging of the eye: 82.9 percent of teprotumumab patients compared to
    9.5 percent of placebo patients achieved the primary endpoint of a ≥2
    mm reduction in proptosis (p<0.001). Proptosis is the main cause of
    morbidity in TED. All secondary endpoints were also met and the safety
    profile was consistent with the Phase 2 study of teprotumumab in
    active TED.

    Additional Phase 3 results were presented at
    the American Association of Clinical Endocrinologists (AACE)
    Scientific and Clinical Congress on April 26, 2019. One of the most
    clinically meaningful measures presented was the improvement in
    proptosis seen after a full course of treatment (through Week 24). At
    Week 24, patients treated with teprotumumab had a proptosis reduction
    of 3.32 mm compared with 0.53 mm among those who received placebo
    (p<0.001).

    Teprotumumab is a fully human monoclonal
    antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor in
    development for the treatment of active TED, in which the muscles and
    fatty tissue behind the eye expand and become inflamed, which can lead
    to proptosis and diplopia (double vision) as well as quality-of-life
    issues.

  • KRYSTEXXA Immunomodulation Registrational Trial Expected to Begin
    in June:
    The Company has finalized the design of its
    registrational clinical trial MIRROR (Methotrexate to Increase
    Response Rates in Patients with Uncontrolled GOut Receiving
    KRYSTEXXA). The trial will evaluate the administration of KRYSTEXXA
    with methotrexate to potentially improve the durability of the
    response rate. The randomized placebo-controlled study is expected to
    begin in June and to enroll approximately 135 patients to receive
    either KRYSTEXXA and methotrexate or KRYSTEXXA and placebo. The
    primary endpoint is the proportion of responders defined as having
    levels of serum uric acid <6 mg/dL at six months between treatment
    arms. Methotrexate has been shown to reduce anti‐drug antibodies when
    combined with biologics and is the immunomodulator most commonly used
    by rheumatologists.
  • Lead Candidate Selected in Next-Generation Biologic Program for
    Uncontrolled Gout:
    The Company is pursuing two development
    programs for next-generation biologics to support and sustain the
    Company’s market leadership in uncontrolled gout. This includes the
    recently selected candidate, HZN-007, from its PASylated uricase
    technology program and HZN-003, the candidate from its optimized
    uricase technology program. The Company is exploring the use of these
    technologies to potentially improve the half-life of the uricase and
    enhance response rates. The Company is also targeting subcutaneous
    formulations.
  • Collaboration with HemoShear: On Jan. 3, 2019, the Company and
    HemoShear Therapeutics, LLC, a privately-held biotechnology company,
    entered into a collaboration to discover and develop novel
    therapeutics for gout.
  • Gross Debt Reduction: The Company used the net proceeds from an
    underwritten public equity offering in March, together with cash on
    hand, to repay $550 million of its $1.993 billion total principal
    amount of debt outstanding as of Dec. 31, 2018, reducing it to $1.443
    billion as of May 1, 2019. The Company’s net debt to last twelve
    months adjusted EBITDA leverage ratio was 1.3 times at March 31, 2019,
    compared to 2.3 times at Dec. 31, 2018.

Research and Development Programs

Orphan Candidate and Program:

  • Teprotumumab: The pivotal Phase 3 confirmatory study, OPTIC,
    evaluated teprotumumab for the treatment of active TED, which has no
    FDA-approved treatments. The study met its primary endpoint of a ≥2 mm
    reduction in proptosis, which is the main cause of morbidity in TED.
    82.9 percent of patients treated with teprotumumab had a dramatic
    improvement in proptosis compared to 9.5 percent of placebo patients.
    In addition, all secondary endpoints were met, and the safety profile
    was consistent with the Phase 2 study of teprotumumab in active TED.

    The
    Company expects to submit a BLA to the U.S. Food and Drug
    Administration (FDA) in mid-2019. Teprotumumab has received
    Breakthrough Therapy, Orphan Drug and Fast Track designations from the
    FDA. If approved, teprotumumab would be the first and only approved
    treatment for active TED.

Rheumatology Pipeline Candidates and Programs:

  • KRYSTEXXA Immunomodulation Study: The Company is evaluating the
    use of methotrexate to enhance the response rate to KRYSTEXXA through
    its MIRROR study. Methotrexate, the immunomodulator most
    commonly used by rheumatologists, has been shown to reduce anti-drug
    antibodies when combined with other biologics. The MIRROR trial is
    designed to support the potential for registration, and is expected to
    begin in June.
  • KRYSTEXXA Study in Kidney Transplant Patients with Uncontrolled
    Gout:
    The Company plans to initiate a clinical trial in the second
    half of 2019 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 high serum uric acid levels are associated
    with organ rejection. Managing uncontrolled gout is one of the most
    common and significant unmet needs of kidney transplant patients.
  • Next-generation Biologic Programs for Uncontrolled Gout: The
    Company is pursuing several development programs for next-generation
    biologics for uncontrolled gout to support and sustain the Company’s
    market leadership. This includes HZN-007, HZN-003 and a discovery and
    development collaboration with HemoShear Therapeutics, LLC.

First-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: First-quarter 2019 net sales were $280.4 million, an
    increase of 25 percent.
  • Gross Profit: Under U.S. GAAP, the first-quarter 2019 gross
    profit ratio was 68.6 percent compared to 50.7 percent in the first
    quarter of 2018. The non-GAAP gross profit ratio in the first quarter
    of 2019 was 89.8 percent compared to 87.0 percent in the first quarter
    of 2018.
  • Operating Expenses: Research and development (R&D) expenses
    were 7.7 percent of net sales and selling, general and administrative
    (SG&A) expenses were 61.5 percent of net sales. Non-GAAP R&D expenses
    were 6.1 percent of net sales and non-GAAP SG&A expenses were 52.3
    percent of net sales.
  • Income Tax Rate: In the first quarter of 2019, the income tax
    benefit rate on a GAAP basis was 5.5 percent and the income tax
    expense rate on a non-GAAP basis was 19.2 percent.
  • Net Income: On a GAAP basis in the first quarter of 2019, net
    loss was $32.9 million. First-quarter 2019 non-GAAP net income was
    $53.9 million.
  • Adjusted EBITDA: First-quarter 2019 adjusted EBITDA was $88.4
    million.
  • Earnings (Loss) per Share: On a GAAP basis in the first quarter
    of 2019, diluted loss per share was $0.19 versus a diluted loss per
    share of $0.90 in the first quarter of 2018. Non-GAAP diluted earnings
    per share in the first quarter of 2019 and 2018 were $0.30 and $0.03,
    respectively. Weighted average shares outstanding used for calculating
    GAAP and non-GAAP diluted earnings per share in the first quarter of
    2019 were 172.8 million and 180.3 million, respectively.

First-Quarter Segment Results

Management uses net sales and segment operating income to evaluate the
performance of the Company’s two segments. 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 and Rheumatology Segment

 
            %
(in millions except for percentages) Q1 19 Q1 18 Change
 
RAVICTI®(1) 49.9 49.1 2
PROCYSBI® 39.6 34.9 13
ACTIMMUNE® 21.7 24.9 (13 )
BUPHENYL®(1) 2.8 5.7 (52 )
QUINSAIRTM 0.2 0.1 39
Orphan $ 114.2 $ 114.7 (1 )
KRYSTEXXA® 52.3 46.7 12
RAYOS® 19.4 10.7 82
LODOTRA®(1) 0.1 NM
Rheumatology $ 71.7 $ 57.5 25
Orphan and Rheumatology Net Sales $ 185.9 $ 172.2 8
 
Orphan and Rheumatology Segment Operating Income $ 46.7 $ 43.1 8
(1)   On Dec. 28, 2018, the Company sold the rights to RAVICTI and
AMMONAPS (AMMONAPS is known as BUPHENYL in the United States)
outside of North America and Japan to Medical Need Europe AB. In
addition, effective Jan. 1, 2019, the RAYOS and LODOTRA license and
supply agreements were amended, including the transfer of LODOTRA to
Vectura Group plc (LODOTRA is known as RAYOS in the United States).
Beginning in 2019, the Company no longer recognizes revenue from
RAVICTI and AMMONAPS sales outside of North America and Japan, or
from sales of LODOTRA.
 
  • First-quarter 2019 net sales of the orphan and rheumatology segment
    were $185.9 million, an increase of 8 percent over the prior year’s
    quarter, driven by continued growth of KRYSTEXXA, RAVICTI, PROCYSBI
    and RAYOS. Beginning Jan. 2019, the Company no longer recognizes
    certain ex-U.S. sales of RAVICTI, BUPHENYL and LODOTRA following the
    divestiture of those rights in 2018. Excluding the first-quarter 2018
    divested net sales, first-quarter 2019 RAVICTI net sales increased 5
    percent and the orphan and rheumatology segment net sales increased 10
    percent.
  • First-quarter 2019 orphan and rheumatology segment operating income
    was $46.7 million, an increase of 8 percent.
 

Primary Care Segment

 
            %
(in millions except for percentages) Q1 19 Q1 18 Change
 
PENNSAID® 2% 50.2 26.8 87
DUEXIS® 29.5 15.7 88
VIMOVO® 14.0 8.4 68
MIGERGOT®   0.8   0.8   12
Primary Care Net Sales $ 94.5 $ 51.7   83
 
Primary Care Segment Operating Income $ 41.4 $ (9.6 ) NM
 
  • First-quarter 2019 net sales of the primary care segment were $94.5
    million and operating income was $41.4 million.

Cash Flow Statement and Balance Sheet Highlights

  • On a GAAP basis in the first quarter of 2019, operating cash flow was
    $56.2 million. Non-GAAP operating cash flow was $62.2 million.
  • The Company had cash and cash equivalents of $1.033 billion as of
    March 31, 2019.
  • As of March 31, 2019, the total principal amount of debt outstanding
    was $1.693 billion, which consisted of $518 million in senior secured
    term loans due 2024; $300 million senior notes due 2024; $475 million
    senior notes due 2023 and $400 million exchangeable senior notes due
    2022. As of March 31, 2019, net debt was $660 million and
    net-debt-to-last-12-months adjusted EBITDA leverage ratio was 1.3
    times. On May 1, 2019, the Company repaid $250 million of its senior
    notes due 2023. Following this repayment, the total aggregate
    principal amount of debt outstanding is $1.443 billion.

New 2019 Guidance

The Company now expects full-year 2019 net sales of $1.26 billion to
$1.28 billion, an increase from the previous guidance range of $1.23
billion to $1.25 billion. Full-year 2019 adjusted EBITDA is now expected
to be $450 million to $465 million, an increase from the previous
guidance range of $440 million to $455 million, while also increasing
investment in the potential U.S. launch of teprotumumab following
dramatic Phase 3 trial results.

Webcast

At 8 a.m. EDT / 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 https://www.horizontherapeutics.com/,
follow us @HorizonNews on
Twitter, like us on Facebook or
explore career opportunities on LinkedIn.

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 and net debt, each of which include
adjustments to GAAP figures.
These non-GAAP measures are intended
to provide additional information on Horizon 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 from divestiture,
gain from sale of assets, upfront 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, 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 2019 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 2019 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 2019 net
sales and adjusted EBITDA guidance; expected financial performance and
operating results in future periods; expected timing of clinical trials
and regulatory submissions and decisions, including related to the
potential BLA submission for teprotumumab; expected expansion of Horizon
rare disease medicine pipeline and the impact thereof; potential market
opportunity for 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 products; 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, such
as teprotumumab, 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.
Horizon undertakes no duty or obligation to update any
forward-looking statements contained in this press release as a result
of new information.

 
Horizon Therapeutics plc
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
 
    Three Months Ended March 31,
2019     2018
 
Net sales $ 280,371 $ 223,881
Cost of goods sold   88,142     110,288  
Gross profit   192,229     113,593  
 
OPERATING EXPENSES:
Research and development 21,725 17,645
Selling, general and administrative 172,299 179,599
Impairment of long-lived assets       33,647  
Total operating expenses   194,024     230,891  
Operating loss   (1,795 )   (117,298 )
 
OTHER EXPENSE, NET:
Interest expense, net (27,530 ) (30,454 )
Loss on debt extinguishment (5,586 )
Foreign exchange loss (61 ) (110 )
Other income, net   189     151  
Total other expense, net   (32,988 )   (30,413 )
 
Loss before (benefit) expense for income taxes (34,783 ) (147,711 )
(Benefit) expense for income taxes   (1,920 )   945  

Net loss

$ (32,863 ) $ (148,656 )
 

Net loss per ordinary share – basic and diluted

$ (0.19 ) $ (0.90 )
 
Weighted average ordinary shares outstanding – basic and diluted   172,789,209     164,549,502  

Note: On Jan. 1, 2019, the Company changed the accounting principle
related to the application of the acquisition method of accounting under
Accounting Standards Codification (ASC) Topic 805, Business
Combinations. The change resulted in certain adjustments to the
Company’s U.S. GAAP consolidated financial statements, including changes
to the method of accounting for royalties that will result in improved
comparability with the Company’s peers. The change did not result in any
changes to the Company’s non-GAAP financial measures for any prior
period.

 
Horizon Therapeutics plc
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
     
      As of
March 31,

December 31,

2019

2018

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,032,808 $ 958,712
Restricted cash 3,731 3,405
Accounts receivable, net 403,862 464,730
Inventories, net 51,598 50,751
Prepaid expenses and other current assets   67,741     68,218  
Total current assets   1,559,740     1,545,816  
Property and equipment, net 22,135 20,101
Developed technology, net 1,888,431 1,945,639
Other intangible assets, net 4,431 4,630
Goodwill 413,669 413,669
Deferred tax assets, net 2,546 3,148
Other assets   44,757     8,959  
Total assets $ 3,935,709   $ 3,941,962  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Long-term debt—current portion $ 250,000 $
Accounts payable 36,459 30,284
Accrued expenses 197,242 215,739
Accrued trade discounts and rebates 406,868 457,763
Deferred revenues—current portion   4,834     4,901  
Total current liabilities   895,403     708,687  
 
LONG-TERM LIABILITIES:
Exchangeable notes, net 336,858 332,199
Long-term debt, net of current 1,021,263 1,564,485
Deferred tax liabilities, net 108,668 107,768
Other long-term liabilities   69,429     38,717  
Total long-term liabilities   1,536,218     2,043,169  
 
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 300,000,000 shares
authorized;
185,130,348 and 169,244,520 shares issued at March 31, 2019 and
December 31, 2018, respectively, and 184,745,982 and 168,860,154
shares
outstanding at March 31, 2019 and December 31, 2018, respectively 18 17
Treasury stock, 384,366 ordinary shares at March 31, 2019 and
December 31, 2018
(4,585 ) (4,585 )
Additional paid-in capital 2,722,233 2,374,966
Accumulated other comprehensive loss (2,010 ) (1,523 )
Accumulated deficit   (1,211,568 )   (1,178,769 )
Total shareholders’ equity   1,504,088     1,190,106  
Total liabilities and shareholders’ equity $ 3,935,709   $ 3,941,962  

Contacts

Investors:
Tina Ventura
Senior Vice President,
Investor
Relations
[email protected]

Ruth Venning
Executive Director,
Investor Relations
[email protected]

U.S. Media:
Geoff Curtis
Executive Vice President,
Corporate
Affairs & Chief Communications Officer
[email protected]

Ireland Media:
Ray Gordon
Gordon MRM
[email protected]

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