Net sales

Net income (loss)

Non-GAAP net income

Adjusted EBITDA

Earnings (Loss) per share - diluted

Non-GAAP earnings per share - diluted

TEPEZZA Approved by FDA for the Treatment of Thyroid Eye Disease (TED): On Jan. 21, 2020, the U.S. Food and Drug Administration (FDA) approved TEPEZZA (teprotumumab-trbw) for the treatment of TED, well in advance of the Prescription Drug User Fee Act (PDUFA) action date of March 8, 2020. TEPEZZA is the first and only FDA-approved medicine for the treatment of TED, a serious, progressive and vision-threatening rare autoimmune disease.

The New England Journal of Medicine Published TEPEZZA’s Phase 3 Clinical Trial Data: In January 2020, the Company announced that The New England Journal of Medicine had published the comprehensive results of Phase 3 clinical trial evaluating TEPEZZA for the treatment of TED. The results from the clinical trial demonstrated that TEPEZZA provides significant improvements in proptosis (eye bulging) and diplopia (double vision) when compared to a placebo. This is one of the few clinical programs to have both its Phase 2 and Phase 3 clinical results published in The New England Journal of Medicine.

FDA Advisory Committee Voted Unanimously to Support the Use of TEPEZZA for TED: On Dec. 13, 2019, the Dermatologic and Ophthalmic Drug Advisory Committee (DODAC) of the FDA voted unanimously (12-0) that the potential benefits of TEPEZZA outweigh the potential risks for the treatment of TED.

KRYSTEXXA MIRROR Open-Label Immunomodulation Trial Demonstrated 79 Percent Complete Response Rate: In January 2020, the Company announced topline results from its MIRROR open-label trial, which evaluated the use of the immunomodulator methotrexate with KRYSTEXXA to increase the complete response rate of KRYSTEXXA. The results of the trial demonstrated that 79 percent, or 11 of 14 patients enrolled, achieved a complete response, defined as the proportion of serum uric acid (sUA) responders (sUA <6 mg/dL) at Month 6. The 79 percent response rate is nearly double the 42 percent response rate in the KRYSTEXXA Phase 3 clinical program, which evaluated KRYSTEXXA alone. The combination was also well tolerated.

Increased Peak U.S. Annual Net Sales Expectations for Key Growth Drivers: In January 2020, the Company announced that it increased both KRYSTEXXA and TEPEZZA peak U.S. annual net sales expectations to more than $1 billion each, from the previous expectation of more than $750 million each.

Initiated PROTECT Trial Evaluating KRYSTEXXA to Improve Management of Uncontrolled Gout for Adults with a Kidney Transplant: In October 2019, the Company initiated its open-label PROTECT clinical trial evaluating the use of KRYSTEXXA in adults with uncontrolled gout who have undergone a kidney transplant. The objective of the trial is to demonstrate that KRYSTEXXA can provide effective disease control without burdening the kidneys. The randomized multicenter open-label trial is expected to enroll 20 adults with uncontrolled gout who have received a kidney transplant.

FDA Approved New Drug Application (NDA) for PROCYSBI^® Oral Granules: In February 2020, the FDA approved PROCYSBI Delayed-Release Oral Granules in Packets for adults and children one year of age and older living with nephropathic cystinosis. This new dosage form provides another administration option for patients, in addition to the currently available PROCYSBI capsules.

Two New Pipeline Programs Announced: In January 2020, the Company announced two new pipeline programs expected to begin in 2020: a TEPEZZA exploratory trial in diffuse cutaneous scleroderma and a proof of concept trial evaluating the impact of administering KRYSTEXXA over a shorter infusion duration.

Opened New Facility in South San Francisco: In November 2019, the Company opened a new office in South San Francisco. The 20,000 square-foot facility features laboratory space that will enable formulation and process development for manufacturing, as well as bioanalytical method development and other R&D functions. The Company expects to add new positions in bioanalysis, clinical research, pharmacology, manufacturing and business development in 2020.

Expanding the Company’s U.S. Operations: In February 2020, the Company closed the acquisition of its new U.S. headquarters in Deerfield, Ill. In line with the Company’s significant growth over the past three years, the new location will provide the Company the flexibility to accommodate its current U.S. operations as well as its anticipated future growth.

TEPEZZA Diffuse Cutaneous Scleroderma Exploratory Trial: TEPEZZA is a fully human monoclonal antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor approved by the FDA for the treatment of TED. The Company is evaluating additional indications for TEPEZZA and expects to begin an exploratory trial in 2020 in diffuse cutaneous scleroderma, a rare fibrotic disease with no treatment options.

KRYSTEXXA MIRROR Randomized Clinical Trial: The Company is currently evaluating the coadministration of KRYSTEXXA with methotrexate to increase the complete response rate of KRYSTEXXA in the MIRROR placebo-controlled randomized clinical trial (RCT). The trial commenced in June 2019, and enrollment of 135 randomized patients is on track to complete mid-2020. The registrational trial is designed to enable the potential submission of results to the FDA to update the prescribing information. The MIRROR RCT follows an initial MIRROR open-label trial completed in 2019 that demonstrated a 79 percent complete response rate for patients using KRYSTEXXA with methotrexate. 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 is evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout in its PROTECT clinical trial, initiated in October 2019. 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 is initiating an open-label trial in mid-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.

Next-Generation Programs for Uncontrolled Gout: The Company is pursuing early-stage development programs for next-generation biologics for uncontrolled gout to support and sustain the Company’s market leadership in this area. These include HZN-003 and HZN-007, as well as a collaboration with HemoShear Therapeutics, LLC to discover new targets for gout.

Net Sales: Fourth-quarter 2019 net sales were $363.5 million, an increase of 2.3 percent.

Gross Profit: Under U.S. GAAP, the fourth-quarter 2019 gross profit ratio was 73.9 percent compared to 72.3 percent in the fourth quarter of 2018. The non-GAAP gross profit ratio in the fourth quarter of 2019 was 90.0 percent compared to 89.1 percent in the fourth quarter of 2018.

Operating Expenses: In the fourth quarter of 2019, research and development (R&D) expenses were 7.9 percent of net sales and selling, general and administrative (SG&A) expenses were 51.0 percent of net sales. Non-GAAP R&D expenses were 7.3 percent of net sales, and non-GAAP SG&A expenses were 44.3 percent of net sales.

Income Tax Rate: In the fourth quarter of 2019, the Company recorded a benefit of $555.9 million primarily related to an intra-company transfer of intellectual property assets, resulting in a tax rate on a GAAP basis of negative 1,507.0 percent. On a non-GAAP basis, fourth-quarter 2019 income tax expense was $11.7 million, resulting in a non-GAAP tax rate of 9.1 percent.

Net Income: On a GAAP basis in the fourth quarter of 2019, net income was $592.8 million. Fourth-quarter 2019 non-GAAP net income was $116.6 million.

Adjusted EBITDA: Fourth-quarter 2019 adjusted EBITDA was $139.9 million.

Earnings per Share: On a GAAP basis, diluted earnings per share (EPS) in the fourth quarter of 2019 and 2018 were $2.84 and $0.58, respectively. Non-GAAP diluted earnings per share in the fourth quarter of 2019 and 2018 were $0.56 and $0.67, respectively. The weighted average shares outstanding used to calculate fourth-quarter 2019 and 2018 non-GAAP diluted earnings per share were 211 million shares and 174 million shares, respectively. Given the recent share price appreciation, the Company’s $400 million dollars of exchangeable notes are approaching the point at which the Company would be able to redeem them for cash, ordinary shares or a combination of cash and ordinary shares. Based on current expectations, the Company is incorporating the potential conversion of the exchangeable notes into its fourth-quarter and full-year 2019 GAAP and non-GAAP diluted EPS calculations.

KRYSTEXXA^®

RAVICTI^®(1)

PROCYSBI^®

ACTIMMUNE^®

RAYOS^®

BUPHENYL^®(1)

QUINSAIR^TM

LODOTRA^®(1)

Orphan and Rheumatology Net Sales

Orphan and Rheumatology Segment Operating Income

Beginning in 2019, the Company no longer recognizes revenue from RAVICTI and AMMONAPS sales outside of North America and Japan, nor from sales of LODOTRA. On Dec. 28, 2018, the Company divested the rights to RAVICTI and AMMONAPS outside of North America and Japan. AMMONAPS is known as BUPHENYL in the United States. In addition, effective Jan. 1, 2019, the RAYOS and LODOTRA license and supply agreements were amended, including the transfer of LODOTRA to Vectura Group plc. LODOTRA is known as RAYOS in the United States.

Fourth-quarter 2019 net sales of the orphan and rheumatology segment, the Company’s strategic growth segment, were $269.8 million, an increase of 14 percent over the prior year’s quarter, driven by growth of KRYSTEXXA and RAVICTI.

Fourth-quarter 2019 orphan and rheumatology segment operating income was $95.4 million, which includes the impact of investment in TEPEZZA pre-launch activities.

For the full-year 2019, KRYSTEXXA net sales of $342.4 million represented a 32 percent year-over-year increase, exceeding expectations.

PENNSAID^® 2%

DUEXIS^®

VIMOVO^®

MIGERGOT^®(1)

Inflammation Net Sales

Inflammation Segment Operating Income

In June 2019, the Company divested the rights to MIGERGOT.

Fourth-quarter 2019 net sales of the inflammation segment were $93.7 million and segment operating income was $44.0 million.

On a GAAP basis, operating cash flow was $191.4 million in the fourth quarter of 2019 and $426.3 million for the full year of 2019. Non-GAAP operating cash flow was $192.0 million in the fourth quarter of 2019 and $446.4 million for the full year of 2019.

The Company had cash and cash equivalents of $1.076 billion as of Dec. 31, 2019.

As of Dec. 31, 2019, the total principal amount of debt outstanding was $1.418 billion, consisting of $418 million in senior secured term loans due 2026, $600 million of senior notes due 2027 and $400 million of exchangeable senior notes due 2022. As of Dec. 31, 2019, net debt was $341.7 million and the net-debt-to-last-12-months adjusted EBITDA leverage (net leverage) ratio was 0.7 times, compared to 2.3 times at Dec. 31, 2018.

Net sales

Cost of goods sold

Gross profit

OPERATING EXPENSES:

Research and development

Selling, general and administrative

(Gain)/Loss on sale of assets

Impairment of long-lived assets

Total operating expenses

Operating income

OTHER EXPENSE, NET:

Interest expense, net

Loss on debt extinguishment

Foreign exchange gain (loss)

Other (expense) income , net

Total other expense, net

Income (Loss) before benefit for income taxes

Benefit for income taxes

Net income (loss)

Earnings (Loss) per ordinary share - basic

Weighted average ordinary shares outstanding - basic

Earnings (Loss) per ordinary share - diluted

Weighted average ordinary shares outstanding - diluted

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Developed technology, net

Other intangible assets, net

Goodwill

Deferred tax assets, net

Other assets

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

Accrued expenses

Accrued trade discounts and rebates

Deferred revenues, current portion

Total current liabilities

LONG-TERM LIABILITIES:

Exchangeable notes, net

Long-term debt, net of current

Deferred tax liabilities, net

Other long-term liabilities

Total long-term liabilities

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY:

Ordinary shares, $0.0001 nominal value; 600,000,000 and 300,000,000 shares authorized at December 31, 2019 and December 31, 2018, respectively 188,402,040 and 169,244,520 shares issued at December 31, 2019 and December 31, 2018, respectively, and 188,017,674 and 168,860,154 shares outstanding at December 31, 2019 and December 31, 2018, respectively

Treasury stock, 384,366 ordinary shares at December 31, 2019 and December 31, 2018

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

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

Depreciation and amortization expense

Equity-settled share-based compensation

Impairment of long-lived assets

Loss on debt extinguishment

Amortization of debt discount and deferred financing costs

(Gain)/Loss on sale of assets

Deferred income taxes

Foreign exchange and other adjustments

Changes in operating assets and liabilities:

Accounts receivable

Inventories

Prepaid expenses and other current assets

Accounts payable

Accrued trade discounts and rebates

Accrued expenses

Deferred revenues

Other non-current assets and liabilities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

Change in escrow deposit for property purchase

Proceeds from sale of assets

Payment related to license agreement

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from issuance of senior notes

Repayment of senior notes

Net proceeds from the issuance of ordinary shares

Repayment of term loans

Net proceeds from term loans

Contingent consideration proceeds from divestiture

Proceeds from the issuance of ordinary shares in conjunction with ESPP program

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

Payment of employee withholding taxes relating to share-based awards

Net cash provided by (used in) financing activities

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

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of the period⁽¹⁾

Cash, cash equivalents and restricted cash, end of the period⁽¹⁾

Amounts include restricted cash balance in accordance with ASU No. 2016-18. Cash and cash equivalents excluding restricted cash are shown on the balance sheet.

GAAP net income (loss)

Non-GAAP adjustments:

Acquisition/divestiture-related costs

Restructuring and realignment costs

Amortization and step-up:

Intangible amortization expense

Inventory step-up expense

Amortization of debt discount and deferred financing costs

Impairment of long-lived assets

(Gain)/Loss on sale of assets

Share-based compensation

Depreciation

Litigation settlements

Upfront, progress and milestone payments related to license and collaboration agreements

Fees related to refinancing activities

Loss on debt extinguishment

Drug substance harmonization costs

Charges relating to discontinuation of Friedreich’s ataxia program

Total of pre-tax non-GAAP adjustments

Income tax effect of pre-tax non-GAAP adjustments

Other non-GAAP income tax adjustments

Total of non-GAAP adjustments

Non-GAAP Net Income

Non-GAAP Earnings Per Share:

Weighted average ordinary shares - Basic

Non-GAAP Earnings Per Share - Basic:

GAAP earnings (loss) per share - Basic

Non-GAAP adjustments

Non-GAAP earnings per share - Basic

Non-GAAP Net Income

Effect of assumed conversion of Exchangeable Senior Notes, net of tax

Numerator - non-GAAP Net Income

Weighted average ordinary shares - Diluted

Weighted average ordinary shares - Basic

Ordinary share equivalents

Denominator - Weighted average ordinary shares - Diluted

Non-GAAP Earnings Per Share - Diluted

GAAP earnings (loss) per share - Diluted

Non-GAAP adjustments

Diluted earnings per share effect of ordinary share equivalents

Non-GAAP earnings per share - Diluted

GAAP net income (loss)

Depreciation

Amortization and step-up:

Intangible amortization expense

Amortization of deferred revenue

Inventory step-up expense

Interest expense, net (including amortization of debt discount and deferred financing costs)

Benefit for income taxes

EBITDA

Other non-GAAP adjustments:

Acquisition/divestiture-related costs

Restructuring and realignment costs

Impairment of long-lived assets

(Gain)/Loss on sale of assets

Share-based compensation

Litigation settlements

Upfront, progress and milestone payments related to license and collaboration agreements

Fees related to refinancing activities

Loss on debt extinguishment

Drug substance harmonization costs

Charges relating to discontinuation of Friedreich’s ataxia program

Total of other non-GAAP adjustments

Adjusted EBITDA

GAAP operating income

Non-GAAP adjustments:

Acquisition/divestiture-related costs

Restructuring and realignment costs

Amortization and step-up:

Intangible amortization expense

Inventory step-up expense

Impairment of long-lived assets

(Gain)/Loss on sale of assets

Share-based compensation

Depreciation

Litigation settlements

Upfront, progress and milestone payments related to license and collaboration agreements

Fees related to refinancing activities

Drug substance harmonization costs

Charges relating to discontinuation of Friedreich’s ataxia program

Total of non-GAAP adjustments

Non-GAAP operating income

Orphan and Rheumatology segment operating income

Inflammation segment operating income

Total segment operating income

Foreign exchange (loss)/gain

Other income, net

Adjusted EBITDA

Non-GAAP Gross Profit:

GAAP gross profit

Non-GAAP gross profit adjustments:

Acquisition/divestiture-related costs

Intangible amortization expense

Inventory step-up expense

Share-based compensation

Depreciation

Drug substance harmonization costs

Charges relating to discontinuation of Friedreich’s ataxia program

Total of Non-GAAP adjustments