Net sales

Net loss

Non-GAAP net income

Adjusted EBITDA

Loss per share - diluted

Non-GAAP earnings per share - diluted

Severity of Disease: TED is a rare, serious, progressive and vision-threatening autoimmune disease, and is associated with proptosis (eye bulging), diplopia (double vision), blurred vision, pain and facial disfigurement that can significantly impact patients’ quality of life. The severity of the disease is a motivating factor for patients seeking therapy.

Pre-Launch Market Education Efforts: In early 2019, the Company initiated its pre-launch disease awareness, market development and market access efforts with the multi-functional field-based teams beginning to engage with key stakeholders in July of 2019. The pre-launch preparation included educating physicians, payors, sites of care and patients about the acute and debilitating nature of the disease and the urgency to treat. It also involved facilitating post-approval access to TEPEZZA by identifying an infusion site-of-care referral network and establishing a supportive patient services organization.

High Volume of Patient and Physician Interest Driven by Commercial Execution: The Company’s pre-launch efforts generated significant awareness and interest among physicians and TED patients, which resulted in a significantly higher number of patients beginning therapy than initially expected. Approximately 200 patients started TEPEZZA treatment in the first quarter.

Announced New TEPEZZA Pooled Efficacy Data: In March 2020, new pooled efficacy data from the Phase 2 and 3 clinical trials of TEPEZZA were presented at a virtual ENDO 2020 news conference in lieu of the ENDO 2020, the Endocrine Society’s annual meeting, which was cancelled due to COVID-19. The analysis was conducted to determine if there were any differences in proptosis response to TEPEZZA based on patient demographic characteristics. The results showed that the medicine effectively reduces proptosis in TED patients, regardless of age, gender and smoking status, which are among several risk factors of the disease.

Expanded the Company’s Pipeline with Acquisition of Development-Stage Candidate HZN-825: On April 1, 2020, the Company completed the acquisition of Curzion Pharmaceuticals, Inc. and its lysophosphatidic acid 1 receptor (LPAR₁) antagonist candidate (renamed HZN-825) for the treatment of diffuse cutaneous systemic sclerosis (dcSSc). A positive signal was observed in the 8-week placebo-controlled Phase 2a trial and data from the subsequent 24-week open-label extension period suggests that longer duration of treatment may demonstrate a meaningful benefit.

Launched PROCYSBI^® Delayed-Release Oral Granules in Packets: In April 2020, the Company launched PROCYSBI Delayed-Release Oral Granules in Packets after receiving FDA approval in February 2020. The new dosage form provides another administration option in addition to the PROCYSBI capsules for adults and children one year of age and older living with nephropathic cystinosis. The tear-open packets offer a convenient option for cystinosis patients who may have difficulty swallowing or have to administer medication through a gastrostomy tube (G-tube). Additionally, being able to access PROCYSBI granules in tear-open packets may help reduce the burden of managing multiple daily medications often faced by families living with cystinosis.

Acquired Certain Rights to Proceeds from Future Milestones and Royalties Related to TEPEZZA: In April 2020, in two separate transactions, the Company acquired the rights to proceeds from the future milestones and royalties related to TEPEZZA net sales from each of S.R. One and Lundbeckfond in exchange for an aggregate of $110 million. These transactions relate to the rights to approximately 71 percent of the $225 million in milestone payments due upon achievement of certain TEPEZZA annual worldwide net sales thresholds and approximately 71 percent of the 3 percent royalty tied to the portion of TEPEZZA annual worldwide net sales exceeding $300 million.

Best Workplace Award: In April 2020, Great Place to Work^® and Fortune selected Horizon as one of the 2020 Best Workplaces in Health Care and Biopharma for the third consecutive year. The ranking is based on input from nearly 800,000 employees in the industry and evaluates multiple elements, including the extent to which employees trust leaders, the respect with which people are treated and the fairness of workplace decisions.

HZN-825 dcSSc Program: HZN-825 is the Company’s LPAR₁ antagonist in development for the treatment of dcSSc, a rare, chronic autoimmune disease marked by fibrosis, or skin thickening, in areas including hands, forearms, upper arms and thighs with no FDA-approved treatment options. The Company expects to begin a Phase 2b pivotal trial in the first half of 2021.

New TEPEZZA Trial in Fibrotic TED: The Company is planning to initiate a single-arm, open-label trial of TEPEZZA in patients with fibrotic TED (previously referred to as inactive TED). In fibrotic TED, the disease is no longer progressive or inflammatory; however, significant disease manifestations such as proptosis (eye bulging) and diplopia (double vision) remain.

New Potential TEPEZZA Subcutaneous Administration Program: The Company is planning to initiate a pharmacokinetic trial to explore subcutaneous dosing of TEPEZZA, which is currently administered by infusion. The objective of the trial is to inform the potential for additional administration options for TEPEZZA, which could provide greater flexibility for patients and physicians.

TEPEZZA dcSSc Exploratory Trial: As part of its evaluation of additional indications for TEPEZZA, the Company is planning to initiate an exploratory trial in dcSSc. The Company expects to initiate the trial by the end of 2020.

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), initiated in June 2019. The registrational trial is designed to enable the potential submission of results to the FDA to update the prescribing information. The MIRROR RCT follows the initial MIRROR open-label trial completed in 2019 that demonstrated a 79 percent complete response rate for patients using KRYSTEXXA with methotrexate. 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 in the MIRROR open-label trial. 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. The MIRROR RCT is approximately 80 percent enrolled and the Company expects to complete enrollment in the second half of 2020 with data available in 2021.

KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout:

KRYSTEXXA Shorter-Infusion Duration Trial: The Company is planning to initiate an open-label trial 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. The Company expects to initiate the trial by the end of 2020.

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: First-quarter 2020 net sales were $355.9 million, an increase of 27 percent.

Gross Profit: Under U.S. GAAP, the first-quarter 2020 gross profit ratio was 72.6 percent compared to 68.6 percent in the first quarter of 2019. The first-quarter 2020 non-GAAP gross profit ratio was 90.0 percent compared to 89.8 percent in the first quarter of 2019.

Operating Expenses: First-quarter 2020 research and development (R&D) expenses were 7.6 percent of net sales and selling, general and administrative (SG&A) expenses were 69.6 percent of net sales. Non-GAAP R&D expenses were 5.8 percent of net sales, and non-GAAP SG&A expenses were 54.2 percent of net sales.

Income Tax Rate: The first-quarter 2020 income tax rate on a GAAP basis was 58.3 percent and the income tax expense rate on a non-GAAP basis was 12.8 percent.

Net Income (Loss): On a GAAP basis, first-quarter 2020 net loss was $13.6 million. First-quarter 2020 non-GAAP net income was $83.2 million.

Adjusted EBITDA: First-quarter 2020 adjusted EBITDA was $107.2 million.

Earnings (Loss) per Share: On a GAAP basis, diluted loss per share (EPS) in the first quarter of 2020 and 2019 were $0.07 and $0.19, respectively. Non-GAAP diluted earnings per share in the first quarter of 2020 and 2019 were $0.40 and $0.30, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the first quarter of 2020 were 190.1 million and 213.1 million, respectively.

KRYSTEXXA^®

RAVICTI^®

PROCYSBI^®

ACTIMMUNE^®

TEPEZZA^TM

BUPHENYL^®

QUINSAIR^TM

Orphan Net Sales

Orphan Segment Operating Income

First-quarter 2020 net sales of the orphan segment, the Company’s strategic growth segment, were $245.4 million, an increase of 47 percent over the prior year’s quarter, driven by and strong continued growth of KRYSTEXXA and RAVICTI, as well as the launch of TEPEZZA.

First-quarter 2020 orphan segment operating income was $54.4 million, which includes significant investment spend associated with the commercial launch of TEPEZZA.

PENNSAID 2%^®

DUEXIS^®

VIMOVO^®(1)

RAYOS^®

MIGERGOT^®(2)

Inflammation Net Sales

Inflammation Segment Operating Income

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

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

First-quarter 2020 net sales of the inflammation segment were $110.5 million and segment operating income was $51.9 million.

On a GAAP basis in the first quarter of 2020, cash used in operating activities was $62.6 million. On a non-GAAP basis, cash used in operating activities was $62.4 million.

The Company had cash and cash equivalents of $754.6 million as of March 31, 2020.

As of March 31, 2020, 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 March 31, 2020, net debt was $663.4 million and the net-debt-to-last-12-months adjusted EBITDA leverage (net leverage) ratio was 1.3 times. The Company has no maintenance covenants on its debt.

Net sales

Cost of goods sold

Gross profit

OPERATING EXPENSES:

Research and development

Selling, general and administrative

Total operating expenses

Operating loss

OTHER EXPENSE, NET:

Interest expense, net

Loss on debt extinguishment

Foreign exchange gain (loss)

Other income, net

Total other expense, net

Loss before benefit for income taxes

Benefit for income taxes

Net loss

Net loss per ordinary share - basic and diluted

Weighted average ordinary shares outstanding - basic and 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

Total current liabilities

LONG-TERM LIABILITIES:

Exchangeable notes, net

Long-term debt, net

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 shares authorized at March 31, 2020 and December 31, 2019, 190,962,613 and 188,402,040 shares issued at March 31, 2020 and December 31, 2019, respectively, and 190,578,247 and 188,017,674 shares outstanding at March 31, 2020 and December 31, 2019, respectively

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

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

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

Depreciation and amortization expense

Equity-settled share-based compensation

Loss on debt extinguishment

Amortization of debt discount and deferred financing costs

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 (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for acquisition

Change in escrow deposit for property purchase

Purchases of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from the issuance of ordinary shares

Repayment of term loans

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 (used in) provided by financing activities

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

Net (decrease) 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 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

Share-based compensation

Depreciation

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

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 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 loss per share - Diluted

Non-GAAP adjustments

Diluted earnings per share effect of ordinary share equivalents

Non-GAAP earnings per share - Diluted

GAAP net loss

Depreciation

Amortization and step-up:

Intangible amortization expense

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

Share-based compensation

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 loss

Non-GAAP adjustments:

Acquisition/divestiture-related costs

Restructuring and realignment costs

Amortization and step-up:

Intangible amortization expense

Inventory step-up expense

Share-based compensation

Depreciation

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 segment operating income

Inflammation segment operating income

Total segment operating income

Foreign exchange gain/(loss)

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

Non-GAAP gross profit

GAAP gross profit %

Non-GAAP gross profit %

GAAP cash (used in) provided by operating activities

Cash payments for acquisition/divestiture-related costs

Cash payments for restructuring and realignment costs

Cash payments for upfront, progress and milestone payments related to license and collaboration agreement

Cash payments drug substance harmonization costs

Cash payments for discontinuation of Friedreich’s ataxia program

Cash payments relating to refinancing activities

Non-GAAP operating cash flow

GAAP net income

Depreciation

Amortization and step-up:

Intangible amortization expense

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

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

Gain on sale of assets

Total of other non-GAAP adjustments

Adjusted EBITDA

Long-term debt, net of current

Exchangeable notes, net

Total Debt

Debt discount

Deferred financing fees

Total Principal Amount of Debt

Less: cash and cash equivalents

Net Debt

As reported - GAAP

Non-GAAP adjustments

Non-GAAP

As reported - GAAP

Non-GAAP adjustments

Non-GAAP

GAAP as reported

Non-GAAP Adjustments (in thousands):

Acquisition/divestiture-related costs⁽¹⁾

Amortization and step-up:

Intangible amortization expense⁽²⁾

Amortization of debt discount and deferred financing costs⁽³⁾

Share-based compensation⁽⁴⁾

Depreciation⁽⁵⁾

Fees related to refinancing activities ⁽⁶⁾

Drug substance harmonization costs⁽⁷⁾

Income tax effect on pre-tax non-GAAP adjustments⁽⁸⁾

Total of non-GAAP adjustments

Non-GAAP

GAAP as reported

Non-GAAP Adjustments (in thousands):

Acquisition/divestiture-related costs⁽¹⁾

Restructuring and realignment costs⁽⁹⁾

Amortization and step-up:

Intangible amortization expense⁽²⁾

Inventory step-up expense

Amortization of debt discount and deferred financing costs⁽³⁾

Share-based compensation⁽⁴⁾

Depreciation⁽⁵⁾

Upfront, progress and milestone payments related to license and collaboration agreements⁽¹⁰⁾

Loss on debt extinguishment⁽¹¹⁾

Fees related to refinancing activities ⁽⁶⁾

Drug substance harmonization costs⁽⁷⁾

Charges relating to discontinuation of Friedreich’s ataxia program⁽¹²⁾

Income tax effect on pre-tax non-GAAP adjustments⁽⁸⁾

Total of non-GAAP adjustments

Non-GAAP

Represents expenses, including legal and consulting fees, incurred in connection with our acquisitions and divestitures. Costs recovered from subleases of acquired facilities and reimbursed expenses incurred under transition arrangements for divestitures are also reflected in this line item.

Intangible amortization expenses are associated with our intellectual property rights, developed technology and customer relationships related to KRYSTEXXA, RAVICTI, PROCYSBI, ACTIMMUNE, BUPHENYL, TEPEZZA, RAYOS, PENNSAID 2%, VIMOVO and MIGERGOT.

Represents amortization of debt discount and deferred financing costs associated with our debt.

Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employee directors, and our employee share purchase plan.

Represents depreciation expense related to our property, equipment, software and leasehold improvements.

Represents arrangement and other fees relating to our refinancing activities.

During the year ended Dec., 2016, we entered into a definitive agreement to acquire certain rights to interferon gamma-1b, marketed as IMUKIN in an estimated thirty countries primarily in Europe and the Middle East, or the IMUKIN purchase agreement. We already owned the rights to interferon gamma-1b marketed as ACTIMMUNE in the United States, Canada and Japan. In connection with the IMUKIN purchase agreement, we also committed to pay our contract manufacturer certain amounts related to the harmonization of the manufacturing processes for ACTIMMUNE and IMUKIN drug substance, or the harmonization program. At the time we entered into the IMUKIN purchase agreement and the harmonization program commitment was made, we had anticipated achieving certain benefits should the Phase 3 clinical trial evaluating ACTIMMUNE for the treatment of Friedreich’s ataxia (FA), be successful. If the study had been successful and if U.S. marketing approval had subsequently been obtained, we had forecasted significant increases in demand for the medicine and the harmonization program would have resulted in significant benefits for us. Following our discontinuation of the FA program, we determined that certain assets, including an upfront payment related to the IMUKIN purchase agreement, were impaired, and the costs under the harmonization program would no longer have benefit to us and should be expensed as incurred.

Income tax adjustments on pre-tax non-GAAP adjustments represent the estimated income tax impact of each pre-tax non-GAAP adjustment based on the statutory income tax rate of the applicable jurisdictions for each non-GAAP adjustment.

Represents expenses, including severance costs and consulting fees, related to restructuring and realignment activities.

During the three months ended March 31, 2019, we recorded an upfront cash payment of $2.0 million in relation to the collaboration agreement with HemoShear.

During the three months ended March 31, 2019, we recorded a loss on debt extinguishment of $5.6 million in the condensed consolidated statement of comprehensive loss, which reflects the write-off of the deferred financing and debt discount fees related to the $300.0 million term loan repayment.

Represents expenses incurred relating to discontinuation of FA program and a reduction to previous charges recorded.