Quarterly Financial Highlights
|(in millions except for per share amounts and percentages)||Q2 15||Q2 14||% Change||1H 15||1H 14||% Change|
|Net income (loss)||31.8||(27.8||)||NM||12.3||(234.0||)||NM|
|Adjusted non-GAAP net income||61.9||19.8||213||86.4||26.8||222|
|Earnings (loss) per share – basic||$||0.21||$||(0.38||)||NM||$||0.09||$||(3.34||)||NM|
|Adjusted non-GAAP earnings per share – basic||0.41||0.27||52||0.62||0.38||63|
|Earnings (loss) per share – diluted||0.20||(0.38||)||NM||0.08||(3.34||)||NM|
|Adjusted non-GAAP earnings per share – diluted||0.39||0.20||95||0.60||0.29||107|
“We delivered exceptionally strong performance in the second quarter and through the first half of the year,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. “Our results significantly beat expectations on net sales, adjusted EBITDA and adjusted diluted earnings per share. In addition, we’re generating strong adjusted operating cash flow and we’re well positioned to deliver on our recently raised full-year 2015 net sales and adjusted EBITDA guidance.”
Second-Quarter and First-Half 2015 Net Sales Results
|(in millions except for percentages)||Q2 15||Q2 14||% Change||1H 15||1H 14||% Change|
|PENNSAID® 2% (1)||29.4||–||NM||47.6||–||NM|
|Total net sales||$||172.8||$||66.1||161||$||286.0||$||118.0||142|
|(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.|
- Second-quarter 2015 net sales of $172.8 million increased 161 percent. 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 primary care and orphan business units.
- Primary Care Business Unit: Second-quarter DUEXIS sales of $44.2 million increased 148 percent as compared to the second quarter of 2014, driven by accelerating prescription growth. In the second quarter, VIMOVO sales were $39.8 million and PENNSAID 2% sales were $29.4 million. Total prescriptions accelerated across all three medicines in the primary care business unit driven by their differentiated clinical benefits, strong sales and marketing execution and increased access to Horizon’s Prescriptions-Made-Easy™, or PME, program. Total prescriptions for DUEXIS, VIMOVO and PENNSAID 2% increased 68 percent, 52 percent and 142 percent, respectively, as compared to the first quarter of 2015.
- Orphan Business Unit: ACTIMMUNE sales were $25.8 million in the quarter, representing a 4 percent sequential increase versus the first quarter of 2015. The commercial organization continues to drive awareness of ACTIMMUNE with both patients and physicians as new patients continue to be steadily added to the therapy each quarter. The Hyperion acquisition was completed on May 7, 2015, and approximately two months of sales were recorded for RAVICTI and BUPHENYL in the second quarter, which were $19.0 million and $3.9 million, respectively.
- Specialty Business Unit: RAYOS/LODOTRA sales in the second quarter were $10.7 million, increasing 81 percent versus the second quarter of 2014. In April, a comprehensive effort was initiated to provide more patients access to RAYOS through the PME program, which resulted in total prescription growth versus the first quarter of 2015 of nearly 90 percent.
Second-Quarter 2015 Financial Results Note: For additional detail and reconciliation of these amounts and growth rates to the most directly comparable GAAP financial measures, please refer to the summary table below, as well as the detailed tables at the end of this release.
|Q2 2015||Q2 2014|
|(in millions, except per share amounts)||U.S. GAAP||Adjustments||Non-GAAP||U.S. GAAP||Adjustments||Non-GAAP|
|Research and development||8.9||(2.2||)||6.7||3.5||(0.5||)||3.0|
|Sales and marketing||58.1||(5.9||)||52.2||27.1||(1.0||)||26.1|
|General and administrative||77.2||(54.9||)||22.3||17.7||(8.7||)||9.0|
|Total operating expenses||144.2||(63.0||)||81.2||48.3||(10.2||)||38.1|
|Interest expense, net||19.4||(5.6||)||13.8||4.2||(2.3||)||1.9|
|Loss on induced debt conversion and debt extinguishment||67.1||(67.1||)||–||–||–||–|
|Loss on derivative fair value||–||–||–||11.0||(11.0||)||–|
|Other expense, net||9.1||(9.0||)||0.1||4.3||(4.3||)||–|
|(Benefit) expense for income taxes||(160.7||)||161.1||0.4||0.9||(0.9||)||–|
|Net income (loss)||31.8||30.1||61.9||(27.8||)||47.6||19.8|
|Earnings (loss) per share – basic||$||0.21||$||0.20||$||0.41||$||(0.38||)||$||0.65||$||0.27|
|Earnings (loss) per share – diluted||$||0.20||$||0.19||$||0.39||$||(0.38||)||$||0.58||$||0.20|
|(1) EBITDA is a non-GAAP measure.|
- Under U.S. generally accepted accounting principles (GAAP) in the second quarter of 2015, the gross profit ratio was 64.2 percent. The adjusted gross profit ratio in the second quarter of 2015 was 91.1 percent, compared to 90.9 percent in the second quarter of 2014.
- On a GAAP basis in the second quarter of 2015, total operating expenses were 83.5 percent of sales, research & development (R&D) expenses were 5.2 percent of sales, sales & marketing (S&M) expenses were 33.6 percent of sales and general & administration (G&A) expenses were 44.7 percent of sales. Adjusted total operating expenses in the second quarter of 2015 were 47.0 percent of sales, adjusted R&D expenses were 3.9 percent of sales, adjusted S&M expenses were 30.2 percent of sales and adjusted G&A expenses were 12.9 percent of sales. Adjusted total operating expenses in the second quarter of 2014 were 57.6 percent of sales.
- On a GAAP basis in the second quarter of 2015, net income was $31.8 million. Adjusted net income in the second quarter of 2015 was $61.9 million, or 35.8 percent of sales, compared to $19.8 million, or 30.0 percent of sales, in the second quarter of 2014.
- On an unadjusted basis in the second quarter of 2015, EBITDA was a $69.8 million loss. Adjusted EBITDA in the second quarter of 2015 was $76.1 million, or 44.0 percent of sales, compared to $21.5 million, or 32.5 percent of sales, in the second quarter of 2014.
- On a GAAP basis in the second quarter of 2015, diluted earnings per share were $0.20. Adjusted diluted earnings per share in the second quarter of 2015 were $0.39, representing growth of 95.0 percent compared to the second quarter of 2014 diluted earnings per share of $0.20. Weighted average shares outstanding used for calculating earnings per share in the second quarter of 2015 were 150.8 million and 159.8 million for basic and diluted earnings per share, respectively.
Cash Flow Statement and Balance Sheet Highlights
- On a GAAP basis in the second quarter of 2015, operating cash flow was $41.6 million. Adjusted operating cash flow in the second quarter of 2015 was $129.6 million, which excludes the payment of accrued excise taxes from the Vidara acquisition, debt extinguishment costs and Hyperion transaction costs.
- The Company had cash and cash equivalents of $667.1 million as of June 30, 2015, an increase of $122.9 million from March 31, 2015. The net cash flows related to the Hyperion acquisition were $3.0 million. Please see the description of Hyperion acquisition-related cash flows in the tables at the end of this release.
- Total principal amount of debt outstanding was $1.275 billion as of June 30, 2015, compared to total principal amount of debt outstanding of $728 million as of March 31, 2015. The $1.275 billion is comprised of $475 million in 6.625 percent senior notes, $400 million in senior secured term loans, and $400 million of 2.5 percent exchangeable senior notes.
Update on Offer to Acquire Depomed, Inc.
- On August 3, 2015, Horizon Pharma issued a news release announcing it submitted a written request to Depomed, Inc. to set a record date to determine shareholders eligible to request a special shareholders meeting. Additionally, Horizon Pharma filed a lawsuit challenging the legality of Depomed’s poison pill and certain of the bylaw amendments announced by Depomed’s board of directors on July 13, 2015. On July 20, the Company increased its offer to acquire Depomed, Inc. to $33.00 from $29.25 per share in an all-stock transaction.
Horizon Pharma Confirms 2015 Full-Year Guidance as Provided on July 20, 2015
|Net sales||$660 to $680 million|
|Adjusted EBITDA||$265 to $280 million|
Recent Major Events
- On July 31, 2015, the U.S. Patent and Trademark Office (USPTO) issued a Notice of Allowance with claims covering PENNSAID 2%. Also, since April, the company received three additional Notices of Allowance from the USPTO with claims covering PENNSAID 2% and one Notice of Allowance each from the USPTO with claims covering RAVICTI and RAYOS.
- On July 27, 2015, Horizon Pharma announced a collaboration with Fox Chase Cancer Center to study ACTIMMUNE (interferon gamma-1b) in combination with PD-1/PD-L1 inhibitors in various forms of cancer.
- On July 6, 2015, Horizon Pharma filed patent infringement lawsuits against five companies for filing Abbreviated New Drug Applications for PENNSAID 2%.
- On June 5, 2015, the company initiated a Phase 3 trial of ACTIMMUNE for the treatment of Friedreich’s ataxia, a degenerative neuromuscular disorder, following the receipt of U.S. Food and Drug Administration Fast Track Designation in April.
- On May 8, 2015, the company announced the settlement of PENNSAID 2% patent litigation with Perrigo Company plc and its subsidiary Paddock Laboratories, LLC, collectively (Perrigo).
- On May 7, 2015, Horizon Pharma completed the acquisition of Hyperion for $1.1 billion in cash and an enterprise value of $958 million.
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