Form 8-K Horizon Therapeutics For: Aug 03

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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 and Great Place to Work also named Horizon as the No. 1 “Best Workplace in Chicago” in the small and medium category.

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.

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.

TEPEZZA^®

KRYSTEXXA^®

RAVICTI^®

PROCYSBI^®

ACTIMMUNE^®

BUPHENYL^®

QUINSAIR^TM

Orphan Net Sales

Orphan Segment Operating Income

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.

PENNSAID 2%^®

DUEXIS^®

RAYOS^®

VIMOVO^®(1)

MIGERGOT^®(2)

Inflammation Net Sales

Inflammation Segment Operating Income

On Feb. 27, 2020, Dr. Reddy’s Laboratory initiated an at-risk launch of generic VIMOVO in the United States.

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.

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.

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Treasury stock, 384,366 ordinary shares at June 30, 2020 and December 31, 2019

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