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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-35238

 

HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

 

 

Ireland

 

98-1195602

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

70 St. Stephen’s Green

Dublin 2, D02 E2X4, Ireland

 

Not Applicable

(Address of principal executive offices)

 

(Zip Code)

011 353 1 772 2100

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Ordinary shares, nominal value $0.0001 per share

HZNP

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of registrant’s ordinary shares, nominal value $0.0001, outstanding as of April 28, 2022: 229,884,077

 

 

 


 

HORIZON THERAPEUTICS PLC

INDEX

 

 

 

 

 

Page

 

 

 

No.

PART I. FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

1

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and as of December 31, 2021 (Unaudited)

 

1

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

2

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

3

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

 

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

43

Item 4.

Controls and Procedures

 

44

PART II. OTHER INFORMATION

 

45

Item 1.

Legal Proceedings

 

45

Item 1A.

Risk Factors

 

45

Item 6.

Exhibits

 

94

 

Signatures

 

96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except nominal value and share data)

 

 

As of

 

As of

 

 

March 31,

 

December 31,

 

 

2022

 

2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

$

1,643,129

 

$

1,580,317

 

Restricted cash

 

4,136

 

 

3,839

 

Accounts receivable, net

 

684,507

 

 

632,775

 

Inventories, net

 

226,524

 

 

225,730

 

Prepaid expenses and other current assets

 

389,435

 

 

357,106

 

Total current assets

 

2,947,731

 

 

2,799,767

 

Property, plant and equipment, net

 

295,147

 

 

292,298

 

Developed technology and other intangible assets, net

 

2,871,979

 

 

2,960,118

 

In-process research and development

 

880,000

 

 

880,000

 

Goodwill

 

1,066,709

 

 

1,066,709

 

Deferred tax assets, net

 

516,317

 

 

538,098

 

Other assets

 

162,455

 

 

140,738

 

Total assets

$

8,740,338

 

$

8,677,728

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

$

67,014

 

$

30,125

 

Accrued expenses and other current liabilities

 

377,433

 

 

523,015

 

Accrued trade discounts and rebates

 

364,732

 

 

317,431

 

Long-term debt—current portion

 

16,000

 

 

16,000

 

Total current liabilities

 

825,179

 

 

886,571

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

Long-term debt, net

 

2,552,741

 

 

2,555,233

 

Deferred tax liabilities, net

 

334,778

 

 

390,455

 

Other long-term liabilities

 

209,811

 

 

173,076

 

Total long-term liabilities

 

3,097,330

 

 

3,118,764

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at March 31, 2022 and December 31, 2021; 229,873,900 and 227,760,936 shares issued at March 31, 2022 and December 31, 2021, respectively; and 229,489,534 and 227,376,570 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

23

 

 

23

 

Treasury stock, 384,366 ordinary shares at March 31, 2022 and December 31, 2021

 

(4,585

)

 

(4,585

)

Additional paid-in capital

 

4,314,647

 

 

4,373,337

 

Accumulated other comprehensive loss

 

(15,122

)

 

(14,987

)

Retained earnings

 

522,866

 

 

318,605

 

Total shareholders’ equity

 

4,817,829

 

 

4,672,393

 

Total liabilities and shareholders' equity

$

8,740,338

 

$

8,677,728

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except share and per share data)

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

Net sales

$

885,245

 

 

$

342,406

 

 

Cost of goods sold

 

215,062

 

 

 

100,368

 

 

Gross profit

 

670,183

 

 

 

242,038

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Research and development

 

103,132

 

 

 

57,693

 

 

Selling, general and administrative

 

372,734

 

 

 

331,992

 

 

Impairment of long-lived asset

 

 

 

 

12,371

 

 

Total operating expenses

 

475,866

 

 

 

402,056

 

 

Operating income (loss)

 

194,317

 

 

 

(160,018

)

 

OTHER EXPENSE, NET:

 

 

 

 

 

 

 

 

Interest expense, net

 

(21,256

)

 

 

(13,460

)

 

Foreign exchange gain (loss)

 

420

 

 

 

(848

)

 

Other (expense) income, net

 

(742

)

 

 

3,224

 

 

Total other expense, net

 

(21,578

)

 

 

(11,084

)

 

Income (loss) before benefit for income taxes

 

172,739

 

 

 

(171,102

)

 

Benefit for income taxes

 

(31,522

)

 

 

(47,751

)

 

Net income (loss)

$

204,261

 

 

$

(123,351

)

 

Net income (loss) per ordinary share—basic

$

0.89

 

 

$

(0.55

)

 

Weighted average ordinary shares outstanding—basic

 

229,094,311

 

 

 

223,920,768

 

 

Net income (loss) per ordinary share—diluted

$

0.87

 

 

$

(0.55

)

 

Weighted average ordinary shares outstanding—diluted

 

235,953,318

 

 

 

223,920,768

 

 

OTHER COMPREHENSIVE LOSS, NET OF TAX

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

$

(460

)

 

$

(821

)

 

Pension and other post-employment benefit plan remeasurements

 

325

 

 

 

(287

)

 

Other comprehensive loss

 

(135

)

 

 

(1,108

)

 

Comprehensive income (loss)

$

204,126

 

 

$

(124,459

)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

2


 

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

 

Total

 

 

 

Ordinary Shares

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

 

 

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Retained Earnings

 

 

Equity

 

Balances at December 31, 2021

 

 

227,760,936

 

 

$

23

 

 

 

384,366

 

 

$

(4,585

)

 

$

4,373,337

 

 

$

(14,987

)

 

$

318,605

 

 

$

4,672,393

 

Issuance of ordinary shares in conjunction with the exercise of stock options

and the vesting of restricted stock units and performance stock units

 

 

2,112,964

 

 

 

 

 

 

 

 

 

 

 

 

9,071

 

 

 

 

 

 

 

 

 

9,071

 

Ordinary shares withheld for payment of employees’ withholding tax liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(115,108

)

 

 

 

 

 

 

 

 

(115,108

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,347

 

 

 

 

 

 

 

 

 

47,347

 

Pension and other post-employment benefit plan remeasurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

325

 

 

 

 

 

 

325

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(460

)

 

 

 

 

 

(460

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

204,261

 

 

 

204,261

 

Balances at March 31, 2022

 

 

229,873,900

 

 

$

23

 

 

 

384,366

 

 

$

(4,585

)

 

$

4,314,647

 

 

$

(15,122

)

 

$

522,866

 

 

$

4,817,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

 

 

 

 

Total

 

 

 

Ordinary Shares

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

221,721,674

 

 

$

22

 

 

 

384,366

 

 

$

(4,585

)

 

$

4,245,945

 

 

$

(145

)

 

$

(215,886

)

 

$

4,025,351

 

Issuance of ordinary shares in conjunction with the exercise of stock options

and the vesting of restricted stock units and performance stock units

 

 

3,305,947

 

 

 

 

 

 

 

 

 

 

 

 

19,843

 

 

 

 

 

 

 

 

 

19,843

 

Ordinary shares withheld for payment of employees’ withholding tax liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(128,261

)

 

 

 

 

 

 

 

 

(128,261

)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,296

 

 

 

 

 

 

 

 

 

62,296

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(821

)

 

 

 

 

 

(821

)

Pension and other post-employment benefit plan remeasurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(287

)

 

 

 

 

 

(287

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(123,351

)

 

 

(123,351

)

Balances at March 31, 2021

 

 

225,027,621

 

 

$

22

 

 

 

384,366

 

 

$

(4,585

)

 

$

4,199,823

 

 

$

(1,253

)

 

$

(339,237

)

 

$

3,854,770

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

3


 

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

 

For the Three Months Ended March 31,

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income (loss)

$

204,261

 

 

$

(123,351

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization expense

 

95,112

 

 

 

70,820

 

Equity-settled share-based compensation

 

47,300

 

 

 

61,166

 

Acquired in-process research and development expense

 

2,000

 

 

 

 

Amortization of debt discount and deferred financing costs

 

1,577

 

 

 

773

 

Impairment of long-lived asset

 

 

 

 

12,371

 

Deferred income taxes

 

(33,896

)

 

 

(28,771

)

Foreign exchange and other adjustments

 

1,190

 

 

 

(5,440

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(51,665

)

 

 

224,575

 

Inventories

 

(785

)

 

 

(13,660

)

Prepaid expenses and other current assets

 

(33,205

)

 

 

(65,575

)

Accounts payable

 

36,067

 

 

 

993

 

Accrued trade discounts and rebates

 

47,279

 

 

 

(28,736

)

Accrued expenses and other current liabilities

 

(113,775

)

 

 

(111,963

)

Other non-current assets and liabilities

 

14,331

 

 

 

3,070

 

Net cash provided by (used in) operating activities

 

215,791

 

 

 

(3,728

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Payment related to license agreement

 

(25,000

)

 

 

 

Purchases of property, plant and equipment

 

(14,198

)

 

 

(18,333

)

Payments for acquisitions, net of cash acquired

 

(3,122

)

 

 

(2,707,358

)

Receipts (payments) for long-term investments, net

 

1,596

 

 

 

(3,808

)

Net cash used in investing activities

 

(40,724

)

 

 

(2,729,499

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Net proceeds from term loans

 

 

 

 

1,577,612

 

Repayment of term loans

 

(4,000

)

 

 

 

Proceeds from the issuance of ordinary shares in connection with stock option exercises

 

9,071

 

 

 

19,843

 

Payment of employee withholding taxes relating to share-based awards

 

(115,108

)

 

 

(128,261

)

Net cash (used in) provided by financing activities

 

(110,037

)

 

 

1,469,194

 

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

 

(1,921

)

 

 

(3,998

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

63,109

 

 

 

(1,268,031

)

Cash, cash equivalents and restricted cash, beginning of the period

 

1,584,156

 

 

 

2,083,479

 

Cash, cash equivalents and restricted cash, end of the period

$

1,647,265

 

 

$

815,448

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Cash paid for interest

$

28,095

 

 

$

18,988

 

Cash paid for income taxes, net of refunds received

 

1,496

 

 

 

1,201

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

2,208

 

 

 

2,084

 

SUPPLEMENTAL NON-CASH FLOW INFORMATION:

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable and accrued expenses and other current liabilities

$

3,627

 

 

$

10,523

 

Milestone payments for TEPEZZA intangible asset included in accrued expenses and other current liabilities

 

 

 

 

69,962

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


HORIZON THERAPEUTICS PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – BASIS OF PRESENTATION AND BUSINESS OVERVIEW

Basis of Presentation

Unless otherwise indicated or the context otherwise requires, references to “Horizon”, the “Company”, “we”, “us” and “our” refer to Horizon Therapeutics plc and its consolidated subsidiaries.

On March 15, 2021, the Company completed its acquisition of Viela Bio, Inc. (“Viela”) and acquired all of the issued and outstanding shares of Viela’s common stock for $53.00 per share. The total consideration for the acquisition was approximately $3.0 billion, including cash acquired of $342.3 million. Following the completion of the acquisition, Viela became a wholly-owned subsidiary of the Company. The unaudited condensed consolidated financial statements presented herein include the results of operations of the acquired business from the date of acquisition.

The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The December 31, 2021 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

Business Overview

Horizon is focused on the discovery, development and commercialization of medicines that address critical needs for people impacted by rare, autoimmune and severe inflammatory diseases. The Company’s pipeline is purposeful: it applies scientific expertise and courage to bring clinically meaningful therapies to patients. Horizon believes science and compassion must work together to transform lives. The Company has two reportable segments, the orphan segment and the inflammation segment, and its commercial portfolio is currently composed of 12 medicines in the areas of rare diseases, gout, ophthalmology and inflammation.

As of March 31, 2022, the Company’s commercial portfolio consisted of the following medicines:

 

Orphan

TEPEZZA® (teprotumumab-trbw), for intravenous infusion

KRYSTEXXA® (pegloticase injection), for intravenous infusion

RAVICTI® (glycerol phenylbutyrate) oral liquid

PROCYSBI® (cysteamine bitartrate) delayed-release capsules and granules, for oral use

ACTIMMUNE® (interferon gamma-1b) injection, for subcutaneous use

UPLIZNA® (inebilizumab-cdon) injection, for intravenous use

BUPHENYL® (sodium phenylbutyrate) tablets and powder, for oral use

QUINSAIR (levofloxacin) solution for inhalation

Inflammation

PENNSAID® (diclofenac sodium topical solution) 2% w/w (“PENNSAID 2%”), for topical use

RAYOS® (prednisone) delayed-release tablets, for oral use

DUEXIS® (ibuprofen/famotidine) tablets, for oral use

VIMOVO® (naproxen/esomeprazole magnesium) delayed-release tablets, for oral use

 

 


5


 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

From time to time, the Company adopts new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies.

Recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards Codification (“ASC”)), the American Institute of Certified Public Accountants and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

 

Significant Accounting Policies

The Company’s significant accounting policies have not changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

 

NOTE 3 – NET INCOME (LOSS) PER SHARE

The following table presents basic and diluted net income (loss) per share for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share data):

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Basic net income (loss) per share calculation:

 

 

 

 

 

 

 

 

Numerator - net income (loss)

 

$

204,261

 

 

$

(123,351

)

Denominator - weighted average of ordinary shares outstanding

 

 

229,094,311

 

 

 

223,920,768

 

Basic net income (loss) per share

 

$

0.89

 

 

$

(0.55

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Diluted net income (loss) per share calculation:

 

 

 

 

 

 

 

 

Numerator - net income (loss)