Horizon Pharma plc Announces Exceptional Third-Quarter 2015 Financial Results and Significantly Raises Full-Year 2015 Sales and Adjusted EBITDA Guidance
DUBLIN, IRELAND -- (Marketwired) -- 11/06/15 -- 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 third-quarter 2015 financial results today.
Quarterly Financial Highlights
(in millions except
for per share
amounts and % %
percentages) Q3 15 Q3 14 Change 9M 15 9M 14 Change
--------- --------- ------- --------- --------- -------
Net sales $ 226.5 $ 75.1 202 $ 512.5 $ 193.1 165
Net income (loss) 3.3 2.1 57 15.5 (232.0) NM
Adjusted non-GAAP
net income 117.0 19.4 503 203.4 46.2 340
Adjusted EBITDA 131.1 22.1 493 239.7 52.3 358
Earnings (loss) per
share - basic $ 0.02 $ 0.03 -33 $ 0.11 $ (3.17) NM
Adjusted non-GAAP
earnings per share
- basic 0.74 0.25 196 1.40 0.63 122
Earnings (loss) per
share - diluted 0.02 0.02 - 0.10 (3.17) NM
Adjusted non-GAAP
earnings per share
- diluted 0.70 0.19 268 1.32 0.48 175
"Our business fundamentals have never been better, we significantly exceeded expectations on net sales, adjusted EBITDA and adjusted diluted earnings per share and our cash flow generation continues to be very strong," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. "As a result, we are significantly raising our full-year 2015 net sales and adjusted EBITDA guidance. Additionally, our Phase 3 trial for ACTIMMUNE in Friedreich's ataxia is more than 30 percent enrolled, on track to complete enrollment in the second quarter of 2016 and we continue to expect results by the end of 2016."
Horizon Pharma Increases 2015 Full-Year Guidance
Prior Guidance New Guidance
-------------------- --------------------
Net sales $660 to $680 million $750 to $760 million
Adjusted EBITDA $265 to $280 million $350 to $360 million
Third-Quarter and Nine-Month 2015 Net Sales Results
(in millions
except for % %
percentages) Q3 15 Q3 14 Change 9M 15 9M 14 Change
--------- --------- ------- --------- --------- -------
Primary Care $ 147.6 $ 66.0 124 $ 341.2 $ 174.1 96
DUEXIS� 56.9 22.8 150 130.0 54.5 139
VIMOVO� 46.8 43.2 8 119.6 119.6 -
PENNSAID� 2%
(1) 43.9 - NM 91.6 - NM
Orphan 66.1 2.7 2343 139.6 2.7 NM
ACTIMMUNE� (2) 28.7 2.7 962 79.4 2.7 NM
RAVICTI� (3) 33.4 - NM 52.4 - NM
BUPHENYL� (3) 4.0 - NM 7.8 - NM
Specialty 12.8 6.4 98 31.7 16.3 94
RAYOS� 11.7 5.7 106 29.2 12.9 126
LODOTRA� 1.1 0.7 36 2.5 3.4 -27
--------- --------- ------- --------- --------- -------
Total net sales $ 226.5 $ 75.1 202 $ 512.5 $ 193.1 165
(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.
- Third-quarter 2015 net sales of $226.5 million increased 202 percent compared to the third quarter of 2014 and 31 percent sequentially compared to the second quarter of 2015. 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 orphan and primary care business units.
- Orphan Business Unit: ACTIMMUNE sales of $28.7 million increased 11 percent sequentially compared to the second quarter of 2015. RAVICTI and BUPHENYL sales in the third quarter were $33.4 million and $4.0 million, respectively. The European Medicines Agency (EMA) adopted a positive opinion in September recommending a centralized marketing authorization for RAVICTI for use as an adjunctive therapy for Urea Cycle Disorders (UCDs). Horizon expects European approval for RAVICTI by the end of 2015 with the commercial launch expected in 2017. The orphan commercial organization continues to drive awareness of ACTIMMUNE and RAVICTI with both patients and physicians, and new patients continue to be steadily added to each medicine. In addition, enrollment in the STEADFAST Phase 3 trial for ACTIMMUNE in Friedreich's ataxia is more than 30 percent completed, and trial results are expected by the end of 2016.
- Primary Care Business Unit: DUEXIS sales of $56.9 million increased 150 percent compared to the third quarter of 2014 and 29 percent sequentially compared to the second quarter of 2015. VIMOVO sales of $46.8 million increased 8 percent compared to the third quarter of 2014 and 18 percent sequentially compared to the second quarter of 2015. PENNSAID 2% sales of $43.9 million increased 49 percent sequentially compared to second quarter 2015. Total prescriptions for the primary care business unit increased double digits sequentially compared to the second quarter of 2015, driven by differentiated clinical benefits and strong sales and marketing execution.
- Specialty Business Unit: RAYOS sales of $11.7 million increased 106 percent compared to the third quarter of 2014 and 13 percent sequentially compared to the second quarter of 2015, as total prescriptions continue to accelerate. LODOTRA sales of $1.1 million increased 36 percent compared to the third quarter of 2014.
Third-Quarter 2015 Financial Results Note: For additional detail and reconciliation of these non-GAAP amounts to the most directly comparable GAAP financial measures, please refer to the detailed tables at the end of this release.
Q3 2015 Q3 2014
-------------------------- ---------------------------
(in millions, except U.S. Non- U.S. Non-
per share amounts) GAAP Adjustments GAAP GAAP Adjustments GAAP
------ ----------- ------ ------ ----------- ------
Net sales $226.5 $ - $226.5 $ 75.1 $ - $ 75.1
Gross profit 165.3 43.4 208.7 61.5 4.3 65.8
Research and
development 13.1 (4.2) 8.9 4.2 (0.4) 3.8
Sales and marketing 52.0 (7.2) 44.8 31.1 (1.7) 29.4
General and
administrative 54.5 (31.2) 23.3 38.1 (30.6) 7.5
Total operating
expenses 119.6 (42.6) 77.0 73.4 (32.7) 40.7
Interest expense, net 20.3 (5.5) 14.8 5.2 (2.4) 2.8
Bargain purchase gain - - - 22.2 (22.2) -
Other expense, net 0.1 - 0.1 3.2 (3.2) -
Expense (benefit) for
income taxes 22.0 (22.2) (0.2) (3.0) 3.0 -
Net income 3.3 113.7 117.0 2.1 17.3 19.4
EBITDA (1) 99.0 32.1 131.1 15.1 7.0 22.1
Earnings per share -
basic $ 0.02 $ 0.72 $ 0.74 $ 0.03 $ 0.22 $ 0.25
Earnings per share -
diluted $ 0.02 $ 0.68 $ 0.70 $ 0.02 $ 0.17 $ 0.19
(1) EBITDA is a non-GAAP measure.
- Under U.S. generally accepted accounting principles (GAAP) in the third quarter of 2015, the gross profit ratio was 73.0 percent compared to 81.8 percent in the third quarter of 2014. The adjusted gross profit ratio in the third quarter of 2015 was 92.1 percent compared to 87.6 percent in the third quarter of 2014.
- On a GAAP basis in the third quarter of 2015, total operating expenses were 52.8 percent of sales, research & development (R&D) expenses were 5.8 percent of sales, sales & marketing (S&M) expenses were 22.9 percent of sales and general & administration (G&A) expenses were 24.1 percent of sales. Adjusted total operating expenses in the third quarter of 2015 were 34.0 percent of sales, adjusted R&D expenses were 3.9 percent of sales, adjusted S&M expenses were 19.8 percent of sales and adjusted G&A expenses were 10.3 percent of sales. S&M expenses are expected to increase in the fourth quarter as the company further expands its sales and marketing efforts to support continued strong growth.
- On a GAAP basis in the third quarter of 2015, net income was $3.3 million compared to $2.1 million in the third quarter of 2014. Adjusted net income in the third quarter of 2015 was $117.0 million, or 51.7 percent of sales, compared to $19.4 million, or 25.8 percent of sales, in the third quarter of 2014.
- On an unadjusted basis in the third quarter of 2015, EBITDA was $99.0 million. Adjusted EBITDA in the third quarter of 2015 was $131.1 million, or 57.9 percent of sales, compared to $22.1 million, or 29.4 percent of sales, in the third quarter of 2014.
- On a GAAP basis in the third quarter of both 2015 and 2014, diluted earnings per share were $0.02. Adjusted diluted earnings per share in the third quarter of 2015 were $0.70, representing growth of 268 percent compared to the third quarter of 2014 diluted earnings per share of $0.19. Weighted average shares outstanding used for calculating earnings per share in the third quarter of 2015 were 159.0 million and 166.8 million for basic and diluted earnings per share, respectively.
Cash Flow Statement and Balance Sheet Highlights
- On a GAAP basis in the third quarter of 2015, operating cash flow was $88.4 million. Adjusted operating cash flow in the third quarter of 2015 was $100.8 million, which excludes cash payments for transaction-related costs.
- The company had cash and cash equivalents of $684.3 million as of September 30, 2015, an increase of $17.2 million from June 30, 2015. This increase in the cash balance is significantly less than the cash flow from operations during the third quarter primarily due to $71.8 million used to acquire shares of Depomed, Inc. during the quarter.
- Total principal amount of debt outstanding was $1.274 billion as of September 30, 2015, which is comprised of $475 million in 6.625 percent senior notes due 2023, $399 million in senior secured term loans due 2021, and $400 million of 2.5 percent exchangeable senior notes due 2022.
- As of September 30, 2015, the company had a total debt to last 12 months (LTM) adjusted EBITDA leverage ratio of 4.6x and a net debt to LTM adjusted EBITDA leverage ratio of 2.1x.
Conference Call
At 8 a.m. EST / 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: 62744788
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: 62744788
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, the status of Horizon's business fundamentals, expected financial performance in future periods, expected timing of clinical and regulatory events, 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 net sales from existing products; the availability of coverage and adequate reimbursement and pricing from government and third-party payors and risks relating to the success of Horizon's patient support program; risks associated with clinical development and regulatory approvals; 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 Pharma operates; 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.
Horizon Pharma plc
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
Three Months Ended Sept. Nine Months Ended Sept.
30, 30,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
REVENUES:
Net sales $ 226,544 $ 75,126 $ 512,506 $ 193,114
Cost of goods sold 61,250 13,644 151,929 46,073
------------ ------------ ------------ ------------
Gross profit 165,294 61,482 360,577 147,041
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Research and
development 13,073 4,223 28,176 10,601
Sales and marketing 51,973 31,111 157,092 86,932
General and
administrative 54,516 38,109 157,986 66,982
------------ ------------ ------------ ------------
Total operating
expenses 119,562 73,443 343,254 164,515
------------ ------------ ------------ ------------
Operating income
(loss) 45,732 (11,961) 17,323 (17,474)
------------ ------------ ------------ ------------
OTHER (EXPENSE)
INCOME, NET:
Interest expense,
net (20,300) (5,194) (49,780) (13,608)
Foreign exchange
loss (86) (2,754) (1,010) (3,076)
Bargain purchase
gain - 22,171 - 22,171
Loss on derivative
fair value - - - (214,995)
Loss on induced
conversion of debt
and debt
extinguishment - - (77,624) -
Other expense, net (90) (3,241) (10,159) (8,241)
------------ ------------ ------------ ------------
Total other
(expense)
income, net (20,476) 10,982 (138,573) (217,749)
------------ ------------ ------------ ------------
Profit (loss) before
expense (benefit)
for income taxes 25,256 (979) (121,250) (235,223)
EXPENSE (BENEFIT) FOR
INCOME TAXES 21,979 (3,042) (136,788) (3,267)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 3,277 $ 2,063 $ 15,538 $ (231,956)
============ ============ ============ ============
Earnings (loss) per
share - basic $ 0.02 $ 0.03 $ 0.11 $ (3.17)
============ ============ ============ ============
Weighted average
shares outstanding -
basic 159,035,580 78,392,971 145,208,252 73,109,603
============ ============ ============ ============
Earnings (loss) per
share - diluted $ 0.02 $ 0.02 $ 0.10 $ (3.17)
============ ============ ============ ============
Weighted average
shares outstanding -
diluted 166,830,800 85,687,267 154,005,671 73,109,603
============ ============ ============ ============
Horizon Pharma plc
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
As of
------------------------------
Sept. 30, 2015 Dec. 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 684,286 $ 218,807
Restricted cash 860 738
Accounts receivable, net 221,091 73,915
Inventories, net 17,729 16,865
Prepaid expenses and other current assets 16,466 14,370
Deferred tax assets, net 13,196 1,530
-------------- --------------
Total current assets 953,628 326,225
-------------- --------------
Property and equipment, net 10,380 7,241
Developed technology, net 1,650,553 696,963
In-process research and development 66,000 66,000
Other intangible assets, net 7,263 7,870
Goodwill 259,167 -
Long term investments 42,413 -
Deferred tax assets, net, non-current - 18,761
Other assets 9,514 11,564
-------------- --------------
TOTAL ASSETS $ 2,998,918 $ 1,134,624
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Convertible debt, net $ - $ 48,334
Long-term debt-current portion 4,000 -
Accounts payable 62,083 21,011
Accrued expenses 84,364 46,625
Accrued trade discounts and rebates 124,378 76,115
Accrued royalties-current portion 45,411 25,325
Deferred revenues-current portion 1,353 1,261
Deferred tax liabilities, net - 721
-------------- --------------
Total current liabilities 321,589 219,392
-------------- --------------
LONG-TERM LIABILITIES:
Exchangeable notes, net 278,990 -
Long-term debt, net, net of current 858,021 297,169
Accrued royalties, net of current 125,272 48,887
Deferred revenues, net of current 9,570 8,144
Deferred tax liabilities, net, non-current 142,702 19,570
Other-long term liabilities 4,436 1,258
-------------- --------------
Total long-term liabilities 1,418,991 375,028
-------------- --------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Ordinary shares, $0.0001 nominal value;
300,000,000 shares authorized; 159,651,736
and 124,425,853 issued at September 30,
2015 and December 31, 2014 respectively,
and 159,267,370 and 124,041,487
outstanding at September 30, 2015 and
December 31, 2014, respectively. 16 13
Treasury stock, 384,366 ordinary shares at
September 30, 2015 and December 31, 2014 (4,585) (4,585)
Additional paid-in capital 2,000,292 1,269,858
Accumulated other comprehensive loss (32,204) (4,363)
Accumulated deficit (705,181) (720,719)
-------------- --------------
Total shareholders' equity 1,258,338 540,204
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,998,918 $ 1,134,624
============== ==============
Horizon Pharma plc
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended Nine Months Ended Sept.
Sept. 30, 30,
---------------------- ------------------------
2015 2014 2015 2014
---------- ---------- ------------ ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 3,277 $ 2,063 $ 15,538 $ (231,956)
Adjustments to reconcile
net income (loss) to net
cash provided by operating
activities:
Depreciation and
intangible
amortization expense 43,285 6,826 94,025 17,662
Share-based
compensation 24,914 4,024 56,253 10,111
Royalty accretion 6,551 2,664 13,571 5,617
Royalty liability
remeasurement - - 14,277 13,033
Bargain purchase gain - (22,171) - (22,171)
Loss on derivative
revaluation - - - 214,995
Loss on induced
conversions of debt
and debt
extinguishment - - 21,581 -
Amortization of debt
discount and deferred
financing costs 5,480 2,421 13,328 7,087
Foreign exchange loss 86 2,754 1,010 3,076
Other 44 11 127 11
Changes in operating
assets and
liabilities:
Accounts receivable (38,203) (16,198) (135,370) (52,033)
Inventories 2,264 639 12,819 129
Prepaid expenses
and other current
assets (4,180) 120 417 (2,091)
Accounts payable 36,609 4,575 38,213 10,555
Accrued trade
discounts and
rebates (12,460) 16,644 35,136 46,113
Accrued expenses
and accrued
royalties (5,440) 823 11,052 796
Deferred revenues (635) (686) 2,143 (324)
Deferred income
taxes 24,859 (3,046) (134,014) (3,278)
Payment of original
issue discount
upon repayment of
2014 Term Loan
Facility - - (3,000) -
Other non-current
assets and
liabilities 1,932 3 2,122 138
---------- ---------- ------------ ----------
Net cash provided by
operating activities 88,383 1,466 59,228 17,470
---------- ---------- ------------ ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Payments for
acquisitions, net of
cash acquired - (179,220) (1,022,361) (179,220)
Proceeds from liquidation
of available-for-sale
investments - - 64,623 -
Purchases of long-term
investments (71,813) - (71,813) -
Purchases of property and
equipment (2,233) (800) (4,514) (1,837)
Change in restricted cash (260) - (122) -
---------- ---------- ------------ ----------
Net cash used in investing
activities (74,306) (180,020) (1,034,187) (181,057)
---------- ---------- ------------ ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds from the
issuance of Exchangable
Senior Notes - - 387,181 -
Net proceeds from the
issuance of 2023 Senior
Notes - - 462,340 -
Net proceeds from the
2015 Term Loan Facility (213) - 391,506 -
Net proceeds from the
2014 Term Loan Facility - 286,966 - 286,966
Repayment of the 2015
Term Loan Facility (1,000) - (1,000) -
Repayment of the 2014
Term Loan Facility - - (297,000) -
Net proceeds from the
issuance of ordinary
shares - - 475,627 -
Proceeds from the
issuance of common stock
in connection with
warrant exercises 3,431 2,090 18,124 33,262
Proceeds from the
issuance of common stock
through ESPP programs - - 1,541 649
Proceeds from the
issuance of common stock
in connection with stock
option exercises 714 107 4,602 1,704
Payment of employee
withholding taxes
relating to share-based
awards (378) - (2,334) -
Proceeds from the
settlement of capped
call transactions - 9,385 - 9,385
---------- ---------- ------------ ----------
Net cash provided by
financing activities 2,554 298,548 1,440,587 331,966
---------- ---------- ------------ ----------
---------- ---------- ------------ ----------
Effect of foreign exchange
rate changes on cash 598 (64) (149) (78)
---------- ---------- ------------ ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 17,229 119,930 465,479 168,301
CASH AND CASH EQUIVALENTS,
beginning of the period 667,057 128,851 218,807 80,480
---------- ---------- ------------ ----------
CASH AND CASH EQUIVALENTS,
end of the period $ 684,286 $ 248,781 $ 684,286 $ 248,781
========== ========== ============ ==========
Horizon Pharma plc
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Unaudited)
(in thousands, except share and per share data)
Three Months Ended Sept. Nine Months Ended Sept.
30, 30,
-------------------------- --------------------------
2015 2014 2015 2014
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Adjusted Non-GAAP Net
Income:
GAAP Net Income
(Loss) $ 3,277 $ 2,063 $ 15,538 $ (231,956)
Non-GAAP
Adjustments:
Remeasurement of
royalties for
products
acquired through
business
combinations - - 14,277 13,033
Acquisition
related costs 14,498 31,477 64,841 45,651
Loss on
derivative
revaluation - - - 214,995
Loss on induced
conversion of
debt and debt
extinguishment - - 77,624 -
Bargain purchase
gain - (22,171) - (22,171)
Amortization and
accretion:
Intangible
amortization
expense 41,707 6,413 91,217 16,469
Amortization
of debt
discount and
deferred
financing
costs 5,480 2,421 13,328 7,087
Accretion of
royalty
liabilities 6,551 2,664 13,571 5,617
Amortizaton
of inventory
step-up
adjustment 4,140 1,540 10,635 1,540
Share-based
compensation 26,457 4,024 57,796 10,111
Depreciation
expense 1,578 413 2,808 1,193
Royalties for
products
acquired through
business
combinations (1) (8,854) (6,366) (20,890) (12,062)
------------ ------------ ------------ ------------
Total of pre-
tax non-GAAP
adjustments 91,557 20,415 325,207 281,463
------------ ------------ ------------ ------------
Income tax
adjustments (2) 22,178 (3,042) (137,328) (3,267)
------------ ------------ ------------ ------------
Total of non-
GAAP
adjustments 113,735 17,373 187,879 278,196
------------ ------------ ------------ ------------
Adjusted Non-GAAP
Net Income $ 117,012 $ 19,436 $ 203,417 $ 46,240
============ ============ ============ ============
Adjusted Non-GAAP
Earnings Per Share:
Weighted average
shares - Basic 159,035,580 78,392,971 145,208,252 73,109,603
============ ============ ============ ============
Adjusted Non-GAAP
Earnings Per Share
- Basic:
GAAP earnings
(loss) per share
- Basic $ 0.02 $ 0.03 $ 0.11 $ (3.17)
Non-GAAP
adjustments 0.72 0.22 1.29 3.80
------------ ------------ ------------ ------------
Adjusted Non-GAAP
earnings per
share - Basic $ 0.74 $ 0.25 $ 1.40 $ 0.63
============ ============ ============ ============
Weighted average
shares - Diluted
Weighted average
shares - Basic 159,035,580 78,392,971 145,208,252 73,109,603
Ordinary share
equivalents 7,795,220 35,258,496 8,797,419 35,577,854
------------ ------------ ------------ ------------
Weighted average
shares - Diluted 166,830,800 113,651,467 154,005,671 108,687,457
============ ============ ============ ============
Adjusted Non-GAAP
Net Income -
Diluted
Adjusted Non-GAAP
Net Income $ 117,012 $ 19,436 $ 203,417 $ 46,240
Add: Convertible
debt interest
expense, net of
taxes - 1,875 - 5,625
------------ ------------ ------------ ------------
Adjusted Non-GAAP
Net Income -
Diluted $ 117,012 $ 21,311 $ 203,417 $ 51,865
============ ============ ============ ============
GAAP earnings
(loss) per share
- Diluted $ 0.02 $ 0.02 $ 0.10 $ (3.17)
Non-GAAP
adjustments 0.68 0.20 1.22 3.81
Diluted earnings
per share effect
of ordinary
share
equivalents - (0.03) - (0.16)
------------ ------------ ------------ ------------
Adjusted Non-GAAP
earnings per
share - Diluted $ 0.70 $ 0.19 $ 1.32 $ 0.48
============ ============ ============ ============
(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 (Unaudited)
(in thousands, except percentages)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
EBITDA and Adjusted EBITDA:
GAAP Net Income (Loss) $ 3,277 $ 2,063 $ 15,538 $ (231,956)
Depreciation 1,578 413 2,808 1,193
Amortization and accretion:
Intangible amortization
expense 41,707 6,413 91,217 16,469
Accretion of royalty
liabilities 6,551 2,664 13,571 5,617
Amortization of deferred
revenue (490) (156) (753) (478)
Amortizaton of inventory
step-up adjustment 4,140 1,540 10,635 1,540
Interest expense, net
(including amortization of
debt discount and deferred
financing costs) 20,300 5,194 49,780 13,608
Expense (benefit) for
income taxes 21,979 (3,042) (136,788) (3,267)
---------- ---------- ---------- ----------
EBITDA $ 99,042 $ 15,089 $ 46,008 $ (197,274)
---------- ---------- ---------- ----------
Non-GAAP adjustments:
Remeasurement of
royalties for products
acquired through
business combinations - - 14,277 13,033
Acquisition related costs 14,498 31,477 64,841 45,651
Loss on derivative
revaluation - - - 214,995
Loss on induced
conversion and debt
extinguishment - - 77,624 -
Bargain purchase gain - (22,171) - (22,171)
Share-based compensation 26,457 4,024 57,796 10,111
Royalties for products
acquired through
business combinations
(1) (8,854) (6,366) (20,890) (12,062)
---------- ---------- ---------- ----------
Total of Non-GAAP
adjustments $ 32,101 $ 6,964 $ 193,648 $ 249,557
---------- ---------- ---------- ----------
Adjusted EBITDA $ 131,143 $ 22,053 $ 239,656 $ 52,283
========== ========== ========== ==========
Non-GAAP Gross Profit:
GAAP net sales $ 226,544 $ 75,126 $ 512,506 $ 193,114
GAAP cost of goods sold 61,250 13,644 151,929 46,073
---------- ---------- ---------- ----------
GAAP gross profit $ 165,294 $ 61,482 $ 360,577 $ 147,041
========== ========== ========== ==========
GAAP gross profit % 73.0% 81.8% 70.4% 76.1%
Non-GAAP Gross Profit:
GAAP gross profit $ 165,294 $ 61,482 $ 360,577 $ 147,041
Non-GAAP gross profit
adjustments:
Remeasurement of
royalties for products
acquired through
business combinations - - 14,277 13,033
Intangible amortization
expense (COGS only) 41,506 6,386 90,610 16,442
Accretion of royalty
liabilities 6,551 2,664 13,571 5,617
Amortizaton of
inventory step-up
adjustment 4,140 1,540 10,635 1,540
Depreciation (COGS
only) 65 90 268 264
Royalties for products
acquired through
business combinations
(1) (8,854) (6,366) (20,890) (12,062)
---------- ---------- ---------- ----------
Total of Non-GAAP
adjustments $ 43,408 $ 4,314 $ 108,471 $ 24,834
---------- ---------- ---------- ----------
Non-GAAP gross profit $ 208,702 $ 65,796 $ 469,047 $ 171,875
========== ========== ========== ==========
Non-GAAP gross profit % 92.1% 87.6% 91.5% 89.0%
Adjusted Operating Cash Flow:
GAAP cash provided by
operating activities $ 88,383 $ 1,466 $ 59,228 $ 17,470
Cash payments of
acquistion related costs 12,464 34,142 49,152 43,150
Cash payments for induced
debt conversion - - 10,472 -
Cash payment for debt
extinguishment - - 45,367 -
Payment of original issue
discount on debt
extinguishment - - 3,000 -
---------- ---------- ---------- ----------
Adjusted operating cash
flow $ 100,847 $ 35,608 $ 167,219 $ 60,620
========== ========== ========== ==========
(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 September 30, 2015
(Unaudited)
Research & Sales & General &
Sales COGS Development Marketing Administrative
-------- -------- ----------- --------- --------------
Non-GAAP Adjustments
(in thousands):
Acquisition
related costs(1) - - 2,158 - 12,340
Amortization and
accretion:
Intangible
amortization
expense(2) - 41,505 - 202 -
Amortization of
debt discount
and deferred
financing
costs(3) - - - - -
Accretion of
royalty
liability(4) - 6,551 - - -
Amortization of
inventory step-
up
adjustment(5) - 4,140 - - -
Stock-based
compensation(6) - - 2,042 7,035 17,380
Depreciation
expense(7) - 65 - - 1,513
Royalties for
products acquired
through business
combinations(8) - (8,854) - - -
Income tax
adjustments(9) - - - - -
-------- -------- ----------- --------- --------------
Total of non-
GAAP
adjustments - 43,407 4,200 7,237 31,233
======== ======== =========== ========= ==============
Loss on
Induced Debt Income
Conversion & Other Tax
Interest Debt (Income) (Benefit)
Expense Extinguishment Expense Expense Total
--------- -------------- --------- --------- --------
Non-GAAP Adjustments
(in thousands):
Acquisition
related costs(1) - - - - 14,498
Amortization and
accretion:
Intangible
amortization
expense(2) - - - - 41,707
Amortization of
debt discount
and deferred
financing
costs(3) 5,480 - - - 5,480
Accretion of
royalty
liability(4) - - - - 6,551
Amortization of
inventory step-
up
adjustment(5) - - - - 4,140
Stock-based
compensation(6) - - - - 26,457
Depreciation
expense(7) - - - - 1,578
Royalties for
products acquired
through business
combinations(8) - - - - (8,854)
Income tax
adjustments(9) - - - 22,178 22,178
--------- -------------- --------- --------- --------
Total of non-
GAAP
adjustments 5,480 - - 22,178 113,735
========= ============== ========= ========= ========
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended September 30, 2014
(Unaudited)
Research & Sales & General &
Sales COGS Development Marketing Administrative
-------- -------- ----------- --------- --------------
Non-GAAP
Adjustments (in
thousands):
Bargain purchase
gain(10) - - - - -
Acquisition
related costs(1) - - - - 28,255
Amortization and
accretion:
Intangible
amortization
expense(2) - 6,386 - 27 -
Amortization of
debt discount
and deferred
financing
costs(3) - - - - -
Accretion of
royalty
liability(4) - 2,664 - - -
Amortization of
inventory
step-up
adjustment(5) - 1,540 - - -
Stock-based
compensation(6) - - 354 1,654 2,016
Depreciation
expense(7) - 90 - - 323
Royalties for
products
acquired through
business
combinations(8) - (6,366) - - -
Income tax
adjustments(9) - - - - -
-------- -------- ----------- --------- --------------
Total of non-
GAAP
adjustments - 4,314 354 1,681 30,594
======== ======== =========== ========= ==============
Income
Other Tax
Interest Derivative (Income) (Benefit)
Expense Loss Expense Expense Total
--------- -------------- --------- --------- --------
Non-GAAP
Adjustments (in
thousands):
Bargain purchase
gain(10) - - (22,171) - (22,171)
Acquisition
related costs(1) - - 3,222 - 31,477
Amortization and
accretion:
Intangible
amortization
expense(2) - - - - 6,413
Amortization of
debt discount
and deferred
financing
costs(3) 2,421 - - - 2,421
Accretion of
royalty
liability(4) - - - - 2,664
Amortization of
inventory
step-up
adjustment(5) - - - - 1,540
Stock-based
compensation(6) - - - - 4,024
Depreciation
expense(7) - - - - 413
Royalties for
products
acquired through
business
combinations(8) - - - - (6,366)
Income tax
adjustments(9) - - - (3,042) (3,042)
--------- -------------- --------- --------- --------
Total of non-
GAAP
adjustments 2,421 - (18,949) (3,042) 17,373
========= ============== ========= ========= ========
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Nine Months Ended September 30, 2015
(Unaudited)
Research & Sales & General &
Sales COGS Development Marketing Administrative
-------- -------- ----------- --------- --------------
Non-GAAP Adjustments
(in thousands):
Loss on induced
conversion and
debt
extinguistment(11) - - - - -
Acquisition related
costs(1) - 23 2,252 - 52,566
Amortization and
accretion:
Intangible
amortization
expense(2) - 90,609 - 608 -
Amortization of
debt discount and
deferred
financing
costs(3) - - - - -
Accretion of
royalty
liability(4) - 13,571 - - -
Amortization of
inventory step-up
adjustment(5) - 10,635 - - -
Remeasurement of
royalties for
products acquired
through business
combinations(12) - 14,277 - - -
Stock-based
compensation(6) - - 4,712 15,571 37,513
Depreciation
expense(7) - 268 - - 2,540
Royalties for
products acquired
through business
combinations(8) - (20,890) - - -
Income tax
adjustments(9) - - - - -
-------- -------- ----------- --------- --------------
Total of non-GAAP
adjustments - 108,493 6,964 16,179 92,619
======== ======== =========== ========= ==============
Loss on
Induced Debt Income
Conversion & Other Tax
Interest Debt (Income) (Benefit)
Expense Extinguishment Expense Expense Total
--------- -------------- --------- --------- --------
Non-GAAP Adjustments
(in thousands):
Loss on induced
conversion and
debt
extinguistment(11) - 77,624 - - 77,624
Acquisition related
costs(1) - - 10,000 - 64,841
Amortization and
accretion:
Intangible
amortization
expense(2) - - - - 91,217
Amortization of
debt discount and
deferred
financing
costs(3) 13,328 - - - 13,328
Accretion of
royalty
liability(4) - - - - 13,571
Amortization of
inventory step-up
adjustment(5) - - - - 10,635
Remeasurement of
royalties for
products acquired
through business
combinations(12) - - - - 14,277
Stock-based
compensation(6) - - - - 57,796
Depreciation
expense(7) - - - - 2,808
Royalties for
products acquired
through business
combinations(8) - - - - (20,890)
Income tax
adjustments(9) - - - (137,328) (137,328)
--------- -------------- --------- --------- --------
Total of non-GAAP
adjustments 13,328 77,624 10,000 (137,328) 187,879
========= ============== ========= ========= ========
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Nine Months Ended September 30, 2014
(Unaudited)
Research & Sales & General &
Sales COGS Development Marketing Administrative
-------- -------- ----------- --------- --------------
Non-GAAP
Adjustments (in
thousands):
Bargain purchase
gain(10) - - - - -
Loss on derivative
revaluation(13) - - - - -
Acquisition
related costs(1) - - - - 37,429
Amortization and
accretion:
Intangible
amortization
expense(2) - 16,442 - 27 -
Amortization of
debt discount
and deferred
financing
costs(3) - - - - -
Accretion of
royalty
liability(4) - 5,617 - - -
Amortization of
inventory step-
up adjustment(5) - 1,540 - - -
Remeasurement of
royalties for
products acquired
through business
combinations(12) - 13,033 - - -
Stock-based
compensation(6) - - 1,152 3,278 5,681
Depreciation
expense(7) - 270 - - 923
Royalties for
products acquired
through business
combinations(8) - (12,062) - - -
Income tax
adjustments(9) - - - - -
-------- -------- ----------- --------- --------------
Total of non-GAAP
adjustments - 24,840 1,152 3,305 44,033
======== ======== =========== ========= ==============
Income
Other Tax
Interest Derivative (Income) (Benefit)
Expense Loss Expense Expense Total
--------- -------------- --------- --------- --------
Non-GAAP
Adjustments (in
thousands):
Bargain purchase
gain(10) - - (22,171) - (22,171)
Loss on derivative
revaluation(13) - 214,995 - - 214,995
Acquisition
related costs(1) - - 8,222 - 45,651
Amortization and
accretion:
Intangible
amortization
expense(2) - - - - 16,469
Amortization of
debt discount
and deferred
financing
costs(3) 7,087 - - - 7,087
Accretion of
royalty
liability(4) - - - - 5,617
Amortization of
inventory step-
up adjustment(5) - - - - 1,540
Remeasurement of
royalties for
products acquired
through business
combinations(12) - - - - 13,033
Stock-based
compensation(6) - - - - 10,111
Depreciation
expense(7) - - - - 1,193
Royalties for
products acquired
through business
combinations(8) - - - - (12,062)
Income tax
adjustments(9) - - - (3,267) (3,267)
--------- -------------- --------- --------- --------
Total of non-GAAP
adjustments 7,087 214,995 (13,949) (3,267) 278,196
========= ============== ========= ========= ========
NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS - NON-GAAP ADJUSTED
(in thousands)
(1) Expenses, including legal and consulting fees, incurred in connection
with the Company's acquisitions of Vidara Therapeutics International
Public Limited Company ("Vidara") and Hyperion Therapeutics, Inc.
("Hyperion"), and its proposed acquisition of Depomed Inc. ("Depomed"),
have been excluded as non-recurring items.
(2) 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.
(3) Represents amortization of debt discount and deferred financing costs
associated with the Company's debt.
(4) Represents accretion expense associated with the ACTIMMUNE, VIMOVO,
RAVICTI and BUPHENYL royalties for the three and nine months ended
September 30, 2015, and represents accretion expense associated with
the ACTIMMUNE and VIMOVO royalties for the three and nine months ended
September 30, 2014.
(5) In connection with the Hyperion acquisition, the RAVICTI and BUPHENYL
inventory was stepped up in value to $8,682 and during the three and
nine months ended September 30, 2015, the Company recognized in cost of
goods sold $4,140 and $7,481, respectively, of step-up inventory costs
related to RAVICTI and BUPHENYL inventory sold. In connection with the
Vidara acquisition, the ACTIMMUNE inventory was stepped up in value to
$14,218 and during the third quarter of 2014, the Company recognized in
cost of goods sold $1,540 of step-up inventory costs related to
ACTIMMUNE. 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.
(6) 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.
(7) Represents depreciation expense related to the Company's property,
equipment and leasehold improvements.
(8) Royalties of $8,854 and $20,890 were incurred during the three and nine
months ended September 30, 2015, respectively, based on each period's
net sales for VIMOVO, ACTIMMUNE, RAVICTI and BUPHENYL. Royalties of
$6,366 and $12,062 were incurred during the three and nine months ended
September 30, 2014, respectively, based on each period's net sales for
VIMOVO and ACTIMMUNE.
(9) Represents adjustments to convert the income tax expense (benefit) to
the estimated amount of taxes that are payable in cash.
(10) The bargain purchase gain of $22,171 was the result of the Vidara
acquisition. Identifiable assets and liabilities of Vidara, including
identifiable intangible assets, were recorded based on their estimated
fair values as of the date of the closing of the acquisition. The
excess of the fair value of the net assets acquired over the value of
consideration was recorded as a bargain purchase gain.
(11) 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. Following these induced
debt conversions in the six months ended June 30, 2015, there were no
convertible senior notes remaining outstanding.
(12) 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.
(13) During the six months ended June 30, 2014, the Company recorded non-
cash charges of $214,995 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. On June 27, 2014, the
derivative liability was re-measured to a final fair value and the
entire fair value of the derivative liability of $324,405 was
reclassified to additional paid-in capital. As such, there was no
derivative revaluation subsequent to June 2014.
Investors: John B. Thomas Executive Vice President, Corporate Strategy and Investor Relations [email protected] Tina Ventura Vice President, Investor Relations [email protected] U.S. Media Contact: Geoff Curtis Group Vice President, Corporate Communications [email protected] Ireland Media Contact: Ray Gordon Gordon MRM [email protected]
Source: Horizon Pharma plc