Horizon Pharma plc Announces First-Quarter 2016 Financial Results
First-Quarter 2016 Net Sales of $204.7 Million, Up 81 Percent; First-Quarter 2016 Adjusted Operating Cash Flow of $67.9 Million; GAAP Operating Cash Flow of $54.2 Million; Confirms Full-Year 2016 Net Sales Guidance of $1.025 to $1.050 Billion and Full-Year 2016 Adjusted EBITDA Guidance of $505 to $520 Million; Completes Enrollment of ACTIMMUNE Phase 3 Clinical Trial in Friedreich's Ataxia; Board of Directors Authorizes Share Repurchase Program
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DUBLIN, IRELAND -- (Marketwired) -- 05/09/16 -- 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 first-quarter 2016 financial results today and confirmed its full-year 2016 net sales and adjusted EBITDA guidance.
"We achieved first-quarter net sales growth of 81 percent and we expect net sales, adjusted EBITDA and operating cash flows to increase sequentially as we progress through the year," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. "With the completion of enrollment in our Phase 3 clinical trial for ACTIMMUNE in Friedreich's ataxia, a life-shortening, ultra-orphan, neurologic disease that currently has no FDA-approved treatment options, we are on track to receive data in December of this year, and assuming positive results, target a first-quarter 2017 sBLA regulatory submission."
Company Highlights
- First-quarter 2016 year-over-year sales growth of 81 percent was driven by each of the Company's business units: Orphan, Rheumatology and Primary Care. The Company's orphan medicines, which include RAVICTI, ACTIMMUNE, KRYSTEXXA and BUPHENYL, represented 40 percent of total net sales in the first quarter of 2016 compared to 22 percent of total net sales in the first quarter of 2015.
- First-quarter 2016 adjusted EBITDA of $72.0 million increased 122 percent. This represented 35.2 percent of first-quarter 2016 net sales, an increase of 650 basis points compared to the first quarter of 2015. First-quarter 2016 GAAP net loss was $(45.4) million, compared to a net loss of $(19.6) million in the first quarter of 2015, primarily reflecting higher intangible amortization and other expenses associated with acquisitions.
- On May 5, 2016, patient enrollment was completed in the STEADFAST Phase 3 trial for ACTIMMUNE in Friedreich's ataxia (FA), a life-shortening, ultra-orphan, neurologic disease with no FDA-approved treatment options. The Company expects to have data by the end of 2016.
- On January 13, 2016, the Company acquired Crealta Holdings LLC and the orphan biologic medicine KRYSTEXXA indicated for chronic refractory gout.
- In the U.S., the Company is pursuing an expanded RAVICTI indication for children with urea cycle disorders, or UCDs, who are two months to two years of age and expects to submit a supplemental new drug application to the FDA in the second quarter of 2016. The Company received approval for RAVICTI in Canada on March 21, 2016, and plans to launch mid-2016.
- On May 4, 2016, the Company's Board of Directors authorized a new share repurchase program to purchase up to 5 million ordinary shares in the open market.
First-Quarter Business Unit Net Sales Results
(in millions except for percentages) Q1 16 Q1 15 % Change
--------- --------- --------
Orphan $ 66.3 $ 24.8 167
RAVICTI®(1) 37.1 - NM
ACTIMMUNE® 25.5 24.8 3
BUPHENYL®(1) 3.7 - NM
Rheumatology 27.4 8.2 232
KRYSTEXXA®(2) 16.2 - NM
RAYOS® 10.5 7.2 46
LODOTRA® 0.7 1.0 -33
Primary Care 111.0 80.1 39
PENNSAID® 2% 55.0 18.2 201
DUEXIS® 29.6 28.9 3
VIMOVO® 25.5 33.0 -23
MIGERGOT®(2) 0.9 - NM
--------- --------- --------
Total net sales $ 204.7 $ 113.1 81
(1) RAVICTI and BUPHENYL were acquired on May 7, 2015.
(2) KRYSTEXXA and MIGERGOT were acquired on January 13, 2016.
- Orphan Business Unit: The orphan commercial organization continues to drive awareness of RAVICTI and ACTIMMUNE among both patients and physicians. RAVICTI and BUPHENYL sales in the first quarter of 2016 were $37.1 million and $3.7 million, respectively. ACTIMMUNE sales in the first quarter of 2016 were $25.5 million and increased 3 percent compared to the first quarter of 2015. The Company has completed enrollment in the STEADFAST Phase 3 clinical trial for ACTIMMUNE in FA, and currently six patients are enrolled in a Phase 1 dosing trial evaluating ACTIMMUNE as a combination therapy for certain cancers. With an estimated 3,700 patients in the United States with FA, the Company believes an approved indication for ACTIMMUNE in FA could represent a $500 million to $1 billion peak annual net sales opportunity.
- Rheumatology Business Unit: KRYSTEXXA sales in the first quarter of 2016 were $16.2 million, representing a partial quarter of sales following the close of the Crealta acquisition on January 13, 2016. Patients continue to enroll in the TRIPLE trial, which is evaluating a reduction in immunogenicity by increasing the frequency of dosing of KRYSTEXXA from every other week to every week for the first three weeks of treatment. In the first quarter, the Company completed the addition of new sales representatives and has approximately 85 in total supporting KRYSTEXXA, RAYOS and PENNSAID 2%. RAYOS sales in the first quarter of 2016 were $10.5 million and increased 46 percent compared to the first quarter of 2015.
- Primary Care Business Unit: PENNSAID 2% sales in the first quarter of 2016 were $55.0 million and increased 201 percent compared to the first quarter of 2015. DUEXIS and VIMOVO sales in the first quarter of 2016 were $29.6 million and $25.5 million, respectively, and sequentially declined compared to the fourth quarter of 2015, as expected, due to seasonality and increased control by certain pharmacy benefit managers and payors. Total prescriptions for the primary care business unit increased 94 percent compared to the first quarter of 2015, driven primarily by strong performance of PENNSAID 2%.
First-Quarter 2016 Financial Results Note: For additional detail and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please refer to the detailed tables at the end of this release.
Q1 2016 Q1 2015
(Unaudited) (Unaudited)
--------------------------- ---------------------------
(in millions,
except per share U.S. Non- U.S. Non-
amounts) GAAP Adjustments GAAP GAAP Adjustments GAAP
------ ----------- ------ ------ ----------- ------
Net sales $204.7 $ - $204.7 $113.1 $ - $113.1
Gross profit 127.5 57.9 185.4 84.3 18.6 102.9
Research and
development 12.7 (4.1) 8.6 6.2 (0.6) 5.6
Sales and
marketing 75.5 (5.8) 69.7 47.1 (3.0) 44.1
General and
administrative 66.4 (31.5) 34.9 26.3 (6.5) 19.8
Total operating
expenses 154.7 (41.4) 113.2 79.5 (10.1) 69.5
Interest expense,
net (19.5) 4.5 (15.0) (10.0) 2.2 (7.8)
Foreign exchange
loss (0.2) - (0.2) (0.8) - (0.8)
Loss on induced
conversion of
debt and debt
extinguishment - - - (10.5) 10.5 -
Other expense, net - - - (1.0) 1.0 -
(Benefit) expense
for income taxes (1.4) 3.2 1.8 1.9 (1.6) 0.3
Net (loss) income (45.4) 100.8 55.4 (19.6) 44.1 24.5
EBITDA (1) 39.8 32.2 72.0 16.8 15.7 32.5
Earnings per share
- basic $(0.28) $ 0.63 $ 0.35 $(0.16) $ 0.35 $ 0.19
Earnings per share
- diluted $(0.28) $ 0.62 $ 0.34 $(0.16) $ 0.33 $ 0.18
(1) EBITDA is a non-GAAP measure.
- Under U.S. generally accepted accounting principles (GAAP) in the first quarter of 2016, the gross profit ratio was 62.3 percent compared to 74.5 percent in the first quarter of 2015. The adjusted gross profit ratio in the first quarter of 2016 was 90.6 percent compared to 90.9 percent in the first quarter of 2015.
- On a GAAP basis in the first quarter of 2016, total operating expenses were 75.6 percent of sales, research & development (R&D) expenses were 6.2 percent of sales, sales & marketing (S&M) expenses were 36.9 percent of sales and general & administrative (G&A) expenses were 32.4 percent of sales. Adjusted total operating expenses in the first quarter of 2016 were 55.3 percent of sales, adjusted R&D expenses were 4.2 percent of sales, adjusted S&M expenses were 34.0 percent of sales and adjusted G&A expenses were 17.0 percent of sales.
- On a GAAP basis in the first quarter of 2016, net loss was $(45.4) million compared to a net loss of ($19.6) million in the first quarter of 2015, primarily reflecting higher intangible amortization and other expenses associated with acquisitions. Adjusted net income in the first quarter of 2016 increased 126 percent to $55.4 million compared to $24.5 million in the first quarter of 2015.
- On an unadjusted basis in the first quarter of 2016, EBITDA was $39.8 million, or 19.5 percent of sales. Adjusted EBITDA in the first quarter of 2016 was $72.0 million, or 35.2 percent of sales, compared to $32.5 million, or 28.7 percent of sales, in the first quarter of 2015.
- On a GAAP basis in the first quarter of 2016 and 2015, diluted loss per share was $(0.28) and ($0.16), respectively. Adjusted diluted earnings per share in the first quarter of 2016 and 2015 were $0.34 and $0.18, respectively, representing growth of 89 percent. Weighted average shares outstanding used for calculating diluted earnings per share in the first quarter of 2016 were 159.9 million and 163.7 million for GAAP and adjusted diluted earnings per share, respectively.
Cash Flow Statement and Balance Sheet Highlights
- On a GAAP basis in the first quarter of 2016, operating cash flow was $54.2 million. Adjusted operating cash flow, which primarily excludes cash payments for acquisition-related costs, was $67.9 million in the first quarter of 2016.
- The Company had cash and cash equivalents of $385.9 million as of March 31, 2016. In January 2016, the Company used approximately $515 million for the acquisition of Crealta Holdings LLC in an all-cash transaction.
- Total principal amount of debt outstanding was $1.272 billion as of March 31, 2016, which was comprised of $397 million in senior secured term loans due 2021, $475 million in 6.625 percent senior notes due 2023 and $400 million of 2.5 percent exchangeable senior notes due 2022.
- As of March 31, 2016, the Company had a total debt to last 12 months (LTM) adjusted EBITDA leverage ratio of 3.2 and a net debt to LTM adjusted EBITDA leverage ratio of 2.2.
Horizon Pharma Confirms 2016 Full-Year Guidance
The Company confirms its full-year and second-quarter net sales and adjusted EBITDA guidance.
----------------------------------------------------------------------------
FY 2016E Guidance Q2 2016E(1) 2H 2016E(1)
------------------ ------------------ ------------------
22% to 23% of 57% to 59% of
2016 Net sales $1.025 to $1.050 full-year net full-year net
Billion sales sales
----------------------------------------------------------------------------
21% to 22% of 64% to 66% of
2016 Adjusted $505 to $520 full-year adjusted full-year adjusted
EBITDA Million EBITDA EBITDA
----------------------------------------------------------------------------
(1) Estimated percentages for Q2 and 2H 2016 based on midpoint of full-year 2016 guidance range.
Conference Call
At 8 a.m. EDT / 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: 87519901
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: 87519901
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 nine medicines through its orphan, rheumatology and primary care business units. Horizon Pharma'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-related expenses, an upfront fee for a license of a patent, loss on debt extinguishment and loss on sale of long-term investments, 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 2016 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 reconciliations of its 2016 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, 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 Pharma's expected full-year, second-quarter and second-half 2016 net sales and adjusted EBITDA guidance, expected financial performance in future periods, expected timing of clinical, regulatory and commercial events, expected product launches, potential growth of Horizon Pharma's business and other statements that are not historical facts. These forward-looking statements are based on Horizon Pharma'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, second-quarter and second-half 2016 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 and costs of Horizon's patient support program; risks associated with clinical development and 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 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 March 31,
----------------------------
2016 2015
------------- -------------
Net sales $ 204,690 $ 113,141
Cost of goods sold 77,233 28,853
------------- -------------
Gross profit 127,457 84,288
------------- -------------
OPERATING EXPENSES:
Research and development 12,722 6,181
Sales and marketing 75,544 47,063
General and administrative 66,395 26,280
------------- -------------
Total operating expenses 154,661 79,524
------------- -------------
Operating (loss) income (27,204) 4,764
------------- -------------
OTHER EXPENSE, NET:
Interest expense, net (19,458) (10,032)
Foreign exchange loss (173) (837)
Loss on induced conversion of debt and debt
extinguishment - (10,544)
Other expense, net (14) (991)
------------- -------------
Total other expense, net (19,645) (22,404)
------------- -------------
Loss before (benefit) expense for income taxes (46,849) (17,640)
(BENEFIT) EXPENSE FOR INCOME TAXES (1,443) 1,913
------------- -------------
NET LOSS $ (45,406) $ (19,553)
============= =============
Loss per share - basic and diluted $ (0.28) $ (0.16)
============= =============
Weighted average shares outstanding - basic
and diluted 159,904,416 125,650,593
============= =============
Horizon Pharma plc
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
As of
----------------------------
Mar. 31, 2016 Dec. 31, 2015
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 385,853 $ 859,616
Restricted cash 2,778 1,860
Accounts receivable, net 290,289 210,437
Inventories, net 180,202 18,376
Prepaid expenses and other current assets 17,482 15,858
------------- -------------
Total current assets 876,604 1,106,147
------------- -------------
Property and equipment, net 18,581 14,020
Developed technology, net 1,976,902 1,609,049
In-process research and development 66,000 66,000
Other intangible assets, net 6,858 7,061
Goodwill 255,602 253,811
Deferred tax assets, net 4,347 2,278
Other assets 600 222
------------- -------------
TOTAL ASSETS $ 3,205,494 $ 3,058,588
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt--current portion $ 4,000 $ 4,000
Accounts payable 69,671 16,590
Accrued expenses 89,140 100,046
Accrued trade discounts and rebates 224,370 183,769
Accrued royalties--current portion 54,588 51,700
Deferred revenues--current portion 1,155 1,447
------------- -------------
Total current liabilities 442,924 357,552
------------- -------------
LONG-TERM LIABILITIES:
Exchangeable notes, net 286,558 282,889
Long-term debt, net, net of current 849,622 849,867
Accrued royalties, net of current 172,445 123,519
Deferred revenues, net of current 8,579 8,785
Deferred tax liabilities, net 133,648 113,400
Other long-term liabilities 19,749 9,431
------------- -------------
Total long-term liabilities 1,470,601 1,387,891
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Ordinary shares, $0.0001 nominal value;
300,000,000 shares authorized; 160,634,955
and 160,069,067 issued at March 31, 2016
and December 31, 2015 respectively, and
160,250,589 and 159,684,701 outstanding at
March 31, 2016 and December 31, 2015,
respectively. 16 16
Treasury stock, 384,366 ordinary shares at
March 31, 2016 and December 31, 2015 (4,585) (4,585)
Additional paid-in capital 2,026,029 2,001,552
Accumulated other comprehensive loss (2,898) (2,651)
Accumulated deficit (726,593) (681,187)
------------- -------------
Total shareholders' equity 1,291,969 1,313,145
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,205,494 $ 3,058,588
============= =============
Horizon Pharma plc
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Three Months Ended March 31,
----------------------------
2016 2015
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (45,406) $ (19,553)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization expense 50,642 18,335
Share-based compensation 27,745 6,674
Royalty accretion 9,359 3,044
Loss on induced conversions of debt and
debt extinguishment - 4,848
Amortization of debt discount and deferred
financing costs 4,425 2,206
Foreign exchange loss 173 837
Other - 102
Changes in operating assets and
liabilities:
Accounts receivable (69,838) (53,443)
Inventories 7,317 3,088
Prepaid expenses and other current
assets (242) (34,307)
Accounts payable 52,856 (18)
Accrued trade discounts and rebates 40,601 2,188
Accrued expenses and accrued royalties (23,521) (6,022)
Deferred revenues (498) (26)
Deferred income taxes (2,657) 1,356
Other non-current assets and liabilities 3,225 (48)
------------- -------------
Net cash provided by (used in) operating
activities 54,181 (70,739)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash
acquired (514,814) -
Purchases of property and equipment (7,525) (1,577)
Change in restricted cash (918) 138
------------- -------------
Net cash used in investing activities (523,257) (1,439)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of
Exchangeable Senior Notes - 388,000
Repayment of the 2015 Term Loan Facility (1,000) -
Proceeds from the issuance of ordinary
shares in connection with warrant exercises - 9,924
Proceeds from the issuance of ordinary
shares in connection with stock option
exercises 919 1,789
Payment of employee withholding taxes
relating to share-based awards (4,185) (1,215)
------------- -------------
Net cash (used in) provided by financing
activities (4,266) 398,498
------------- -------------
------------- -------------
Effect of foreign exchange rate changes on
cash (421) (916)
------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (473,763) 325,404
CASH AND CASH EQUIVALENTS, beginning of the
period 859,616 218,807
------------- -------------
CASH AND CASH EQUIVALENTS, end of the period $ 385,853 $ 544,211
============= =============
Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
Net Income and Earnings Per Share (Unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31,
----------------------------
2016 2015
------------- -------------
GAAP Net Loss $ (45,406) $ (19,553)
Non-GAAP Adjustments:
Acquisition-related costs 11,016 3,654
Upfront fee for license of patent 2,000 -
Loss on induced conversion of debt and
debt extinguishment - 10,544
Amortization and accretion:
Intangible amortization expense 49,650 17,681
Amortization of debt discount and
deferred financing costs 4,425 2,206
Accretion of royalty liabilities 9,359 3,044
Amortizaton of inventory step-up
adjustment 7,446 3,154
Share-based compensation 27,612 6,674
Depreciation expense 992 654
Royalties for medicines acquired through
business combinations (1) (8,500) (5,196)
------------- -------------
Total of pre-tax non-GAAP adjustments 104,000 42,415
------------- -------------
Income tax adjustments (2) (3,152) 1,629
------------- -------------
Total of non-GAAP adjustments 100,848 44,044
------------- -------------
Adjusted Non-GAAP Net Income $ 55,442 $ 24,491
============= =============
Adjusted Non-GAAP Earnings Per Share:
Weighted average shares - Basic 159,904,416 125,650,593
============= =============
Adjusted Non-GAAP Earnings Per Share -
Basic:
GAAP loss per share - Basic $ (0.28) $ (0.16)
Non-GAAP adjustments 0.63 0.35
------------- -------------
Adjusted Non-GAAP earnings per share -
Basic $ 0.35 $ 0.19
============= =============
Weighted average shares - Diluted
Weighted average shares - Basic 159,904,416 125,650,593
Ordinary share equivalents 3,756,579 12,524,900
------------- -------------
Weighted average shares - Diluted 163,660,995 138,175,493
============= =============
Adjusted Non-GAAP Net Income - Diluted
Adjusted Non-GAAP Net Income $ 55,442 $ 24,491
Add: Convertible debt interest expense,
net of taxes - 714
------------- -------------
Adjusted Non-GAAP Net Income - Diluted $ 55,442 $ 25,205
============= =============
GAAP loss per share - Diluted $ (0.28) $ (0.16)
Non-GAAP adjustments 0.63 0.35
Diluted earnings per share effect of
ordinary share equivalents (0.01) (0.01)
------------- -------------
Adjusted Non-GAAP earnings per share -
Diluted $ 0.34 $ 0.18
============= =============
(1) Royalties for medicines acquired through business combinations relate
to VIMOVO, ACTIMMUNE, RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT.
(2) Represents adjustments to convert the income tax benefit/expense to
the estimated amount of taxes that are payable in cash.
Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
EBITDA and Operating Cash Flow (Unaudited)
(in thousands, except share and per share data)
Three Months Ended March 31,
----------------------------
2016 2015
------------- -------------
EBITDA and Adjusted EBITDA:
GAAP Net Loss $ (45,406) $ (19,553)
Depreciation 992 654
Amortization and accretion:
Intangible amortization expense 49,650 17,681
Accretion of royalty liabilities 9,359 3,044
Amortization of deferred revenue (206) (134)
Amortizaton of inventory step-up
adjustment 7,446 3,154
Interest expense, net (including
amortization of debt discount and deferred
financing costs) 19,458 10,032
(Benefit) expense for income taxes (1,443) 1,913
------------- -------------
EBITDA $ 39,850 $ 16,791
------------- -------------
Non-GAAP adjustments:
Acquisition-related costs 11,016 3,654
Upfront fee for license of patent 2,000 -
Loss on induced conversion of debt and
debt extinguishment - 10,544
Share-based compensation 27,612 6,674
Royalties for medicines acquired through
business combinations (1) (8,500) (5,196)
------------- -------------
Total of Non-GAAP adjustments $ 32,128 $ 15,676
------------- -------------
Adjusted EBITDA $ 71,978 $ 32,467
============= =============
Adjusted Operating Cash Flow:
GAAP cash provided by (used in) operating
activities $ 54,181 $ (70,739)
Cash payments of acquistion-related costs 11,694 1,820
Cash payments for upfront fee for license
of patent 2,000 -
Cash payments for induced debt conversion - 5,696
------------- -------------
Adjusted operating cash flow $ 67,875 $ (63,223)
============= =============
(1) Royalties for medicines acquired through business combinations relate
to VIMOVO, ACTIMMUNE, RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT.
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended March 31, 2016
(Unaudited)
-------------------------------------
Sales COGS Gross Profit
-------------------------------------
GAAP as
reported 204,690 (77,233) 127,457
Non-GAAP
Adjustmen
ts (in
thousands
):
Acquisit
ion-
related
costs(1
) - 115 115
Upfront
fee for
license
of
patent(
2) - - -
Amortiza
tion
and
accreti
on:
Intang
ible
amort
izati
on
expen
se(3) - 49,447 49,447
Amorti
zatio
n of
debt
disco
unt
and
defer
red
finan
cing
costs
(4) - - -
Accret
ion
of
royal
ty
liabi
lity(
5) - 9,359 9,359
Amorti
zatio
n of
inven
tory
step-
up
adjus
tment
(6) - 7,446 7,446
Share-
based
compens
ation(7
) - - -
Deprecia
tion
expense
(8) - 120 120
Royaltie
s for
medicin
es
acquire
d
through
busines
s
combina
tions(9
) - (8,500) (8,500)
Income
tax
adjustm
ents(10
) - - -
-------------------------------------
Total
of
non-
GAAP
adjus
tment
s - 57,987 57,987
-------------------------------------
-------------------------------------
Adjusted
Non-GAAP 204,690 (19,246) 185,444
=====================================
-------------------------------------------------
Research & Sales & General & Interest
Development Marketing Administrative Expense
-------------------------------------------------
GAAP as
reported (12,722) (75,544) (66,395) (19,458)
Non-GAAP
Adjustmen
ts (in
thousands
):
Acquisit
ion-
related
costs(1
) 32 - 10,869 -
Upfront
fee for
license
of
patent(
2) 2,000 - - -
Amortiza
tion
and
accreti
on:
Intang
ible
amort
izati
on
expen
se(3) - 203 - -
Amorti
zatio
n of
debt
disco
unt
and
defer
red
finan
cing
costs
(4) - - - 4,425
Accret
ion
of
royal
ty
liabi
lity(
5) - - - -
Amorti
zatio
n of
inven
tory
step-
up
adjus
tment
(6) - - - -
Share-
based
compens
ation(7
) 2,125 5,678 19,809 -
Deprecia
tion
expense
(8) - 11 861 -
Royaltie
s for
medicin
es
acquire
d
through
busines
s
combina
tions(9
) - - - -
Income
tax
adjustm
ents(10
) - - - -
-------------------------------------------------
Total
of
non-
GAAP
adjus
tment
s 4,157 5,892 31,539 4,425
-------------------------------------------------
-------------------------------------------------
Adjusted
Non-GAAP (8,565) (69,652) (34,856) (15,033)
=================================================
---------------------------------------------------------- -------
(Loss)
Loss on IncomeBefo
Induced Debt Foreign re Income
Conversion & Exchange Tax Income Tax
Debt Gain Benefit Benefit(Ex
Extinguishment (Loss) Other (Expense) pense) Total
---------------------------------------------------------- -------
GAAP as
reported - (173) (14) (46,849) 1,443 (45,406
Non-GAAP
Adjustmen
ts (in
thousands
):
Acquisit
ion-
related
costs(1
) - - - 11,016 - 11,016
Upfront
fee for
license
of
patent(
2) - - - 2,000 - 2,000
Amortiza
tion
and
accreti
on:
Intang
ible
amort
izati
on
expen
se(3) - - - 49,650 - 49,650
Amorti
zatio
n of
debt
disco
unt
and
defer
red
finan
cing
costs
(4) - - - 4,425 - 4,425
Accret
ion
of
royal
ty
liabi
lity(
5) - - - 9,359 - 9,359
Amorti
zatio
n of
inven
tory
step-
up
adjus
tment
(6) - - - 7,446 - 7,446
Share-
based
compens
ation(7
) - - - 27,612 - 27,612
Deprecia
tion
expense
(8) - - - 992 - 992
Royaltie
s for
medicin
es
acquire
d
through
busines
s
combina
tions(9
) - - - (8,500) - (8,500)
Income
tax
adjustm
ents(10
) - - - - (3,152) (3,152)
---------------------------------------------------------- -------
Total
of
non-
GAAP
adjus
tment
s - - - 104,000 (3,152) 100,848
---------------------------------------------------------- -------
---------------------------------------------------------- -------
Adjusted
Non-GAAP - (173) (14) 57,151 (1,709) 55,442
========================================================== =======
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended March 31, 2015
(Unaudited)
---------------------------------------
Sales COGS Gross Profit
---------------------------------------
GAAP as
report
ed 113,141 (28,853) 84,288
Non-
GAAP
Adjust
ments
(in
thousa
nds):
Loss
on
indu
ced
conv
ersi
on
of
debt
and
debt
exti
ngui
shme
nt(1
1) - - -
Acqui
siti
on-
rela
ted
cost
s(1) - - -
Amort
izat
ion
and
accr
etio
n: -
Int
an
gi
bl
e
am
or
ti
za
ti
on
ex
pe
ns
e(
3) - 17,479 17,479
Amo
rt
iz
at
io
n
of
de
bt
di
sc
ou
nt
an
d
de
fe
rr
ed
fi
na
nc
in
g
co
st
s(
4) - - -
Acc
re
ti
on
of
ro
ya
lt
y
li
ab
il
it
y(
5) - 3,044 3,044
Amo
rt
iz
at
io
n
of
in
ve
nt
or
y
st
ep
-u
p
ad
ju
st
me
nt
(6
) - 3,154 3,154
Share
-bas
ed
comp
ensa
tion
(7) - - -
Depre
ciat
ion
expe
nse(
8) - 129 129
Royal
ties
for
medi
cine
s
acqu
ired
thro
ugh
busi
ness
comb
inat
ions
(9) - (5,196) (5,196)
Incom
e
tax
adju
stme
nts(
10) - - -
---------------------------------------
Tot
al
of
no
n-
GA
AP
ad
ju
st
me
nt
s - 18,610 18,610
---------------------------------------
------------ ------------ -------------
Adjuste
d Non-
GAAP 113,141 (10,243) 102,898
=======================================
--------------------------------------------------
Research & Sales & General & Interest
Development Marketing Administrative Expense
--------------------------------------------------
GAAP as
report
ed (6,181) (47,063) (26,280) (10,032)
Non-
GAAP
Adjust
ments
(in
thousa
nds):
Loss
on
indu
ced
conv
ersi
on
of
debt
and
debt
exti
ngui
shme
nt(1
1) - - - -
Acqui
siti
on-
rela
ted
cost
s(1) 117 - 2,537 -
Amort
izat
ion
and
accr
etio
n:
Int
an
gi
bl
e
am
or
ti
za
ti
on
ex
pe
ns
e(
3) - 202 - -
Amo
rt
iz
at
io
n
of
de
bt
di
sc
ou
nt
an
d
de
fe
rr
ed
fi
na
nc
in
g
co
st
s(
4) - - - 2,206
Acc
re
ti
on
of
ro
ya
lt
y
li
ab
il
it
y(
5) - - - -
Amo
rt
iz
at
io
n
of
in
ve
nt
or
y
st
ep
-u
p
ad
ju
st
me
nt
(6
) - - - -
Share
-bas
ed
comp
ensa
tion
(7) 458 2,801 3,415 -
Depre
ciat
ion
expe
nse(
8) - - 525 -
Royal
ties
for
medi
cine
s
acqu
ired
thro
ugh
busi
ness
comb
inat
ions
(9) - - - -
Incom
e
tax
adju
stme
nts(
10) - - - -
--------------------------------------------------
Tot
al
of
no
n-
GA
AP
ad
ju
st
me
nt
s 575 3,003 6,477 2,206
--------------------------------------------------
------------ -------------------------------------
Adjuste
d Non-
GAAP (5,606) (44,060) (19,803) (7,826)
==================================================
---------------------------------------------------------- ----------
(Loss)
Loss on Induced Income
Before
Debt Conversion Income Income Tax
Foreign Tax
& Debt Exchange Benefit Benefit
Gain
Extinguishment (Loss) Other (Expense) (Expense) Total
---------------------------------------------------------- ----------
GAAP as
report
ed (10,544) (837) (991) (17,640) (1,913) (19,553)
Non-
GAAP
Adjust
ments
(in
thousa
nds):
Loss
on
indu
ced
conv
ersi
on
of
debt
and
debt
exti
ngui
shme
nt(1
1) 10,544 - - 10,544 - 10,544
Acqui
siti
on-
rela
ted
cost
s(1) - - 1,000 3,654 - 3,654
Amort
izat
ion
and
accr
etio
n:
Int
an
gi
bl
e
am
or
ti
za
ti
on
ex
pe
ns
e(
3) - - - 17,681 - 17,681
Amo
rt
iz
at
io
n
of
de
bt
di
sc
ou
nt
an
d
de
fe
rr
ed
fi
na
nc
in
g
co
st
s(
4) - - - 2,206 - 2,206
Acc
re
ti
on
of
ro
ya
lt
y
li
ab
il
it
y(
5) - - - 3,044 - 3,044
Amo
rt
iz
at
io
n
of
in
ve
nt
or
y
st
ep
-u
p
ad
ju
st
me
nt
(6
) - - - 3,154 - 3,154
Share
-bas
ed
comp
ensa
tion
(7) - - - 6,674 - 6,674
Depre
ciat
ion
expe
nse(
8) - - - 654 - 654
Royal
ties
for
medi
cine
s
acqu
ired
thro
ugh
busi
ness
comb
inat
ions
(9) - - - (5,196) - (5,196)
Incom
e
tax
adju
stme
nts(
10) - - - - 1,629 1,629
---------------------------------------------------------- ----------
Tot
al
of
no
n-
GA
AP
ad
ju
st
me
nt
s 10,544 - 1,000 42,415 1,629 44,044
---------------------------------------------------------- ----------
---------------------------------------------------------- ----------
Adjuste
d Non-
GAAP - (837) 9 24,775 (284) 24,491
========================================================== ==========
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"), Hyperion Therapeutics, Inc.
("Hyperion") and Crealta Holdings LLC ("Crealta"), and its withdrawn
offer to acquire Depomed Inc. have been excluded as non-recurring
items.
(2) Represents an upfront fee paid for a license of a patent.
(3) Intangible amortization expenses are associated with the Company's
intellectual property rights, developed technology and customer
relationships of VIMOVO, LODOTRA, RAYOS, ACTIMMUNE, PENNSAID 2%,
RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT.
(4) Represents amortization of debt discount and deferred financing costs
associated with the Company's debt.
(5) Represents accretion expense associated with the ACTIMMUNE, VIMOVO,
RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT royalties for the three
months ended March 31, 2016 and represents accretion expense associated
with the ACTIMMUNE and VIMOVO royalties for the three months ended
March 31, 2015.
(6) In connection with the Crealta acquisition, the KRYSTEXXA and MIGERGOT
inventory was stepped up in value by $163,601 and during the three
months ended March 31, 2016, the Company recognized in cost of goods
sold $7,446 of step-up inventory costs related to KRYSTEXXA and
MIGERGOT inventory sold. In connection with the Vidara acquisition, the
ACTIMMUNE inventory was stepped up in value by $14,218 and during the
first quarter of 2015, the Company recognized in cost of goods sold
$3,154 of step-up inventory costs related to ACTIMMUNE.
(7) 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.
(8) Represents depreciation expense related to the Company's property,
equipment and leasehold improvements.
(9) Royalties of $8,500 were incurred during the three months ended March
31, 2016, based on the period's net sales for VIMOVO, ACTIMMUNE,
RAVICTI, BUPHENYL, KRYSTEXXA and MIGERGOT. Royalties of $5,196 were
incurred during the three months ended March 31, 2015, based on the
period's net sales for VIMOVO and ACTIMMUNE.
(10) Represents adjustments to convert the income tax (expense) benefit to
the estimated amount of taxes that are payable in cash.
(11) During the three months ended March 31, 2015, the Company recorded a
loss on induced debt conversion of $10,544, which represented the
write-down of $4,848 in debt discount and deferred financing costs,
$5,370 in additional exchange consideration to debt holders and $326 in
expenses incurred in connection with the induced debt conversion.
Contacts: Investors: John Thomas Executive Vice President, Strategy & Investor Relations [email protected] U.S. Media: Geoff Curtis Senior Vice President, Corporate Communications [email protected] Tina Ventura Vice President, Investor Relations [email protected] Ireland Media: Ray Gordon Gordon MRM [email protected]
Source: Horizon Pharma plc
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