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Horizon Pharma, Inc. (HZNP) Announces First Quarter 2013 Financial Results and Provides Business Update


5/10/2013 10:48:23 AM

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DEERFIELD, IL--(Marketwired - May 10, 2013) - Horizon Pharma, Inc. (NASDAQ: HZNP) today provided an update on the Company's business and announced financial results for the first quarter ended March 31, 2013.

Financial Results

  • Gross and net sales for the first quarter of 2013 were $10.7 million and $9.2 million, respectively, increases of 70% and 73%, respectively, versus the fourth quarter of 2012, excluding the benefit of a one-time change in the timing of DUEXIS revenue recognition in the fourth quarter of 2012.
  • Net loss for the first quarter of 2013 was $22.2 million, or $0.36 per share, on a U.S. GAAP basis, and $18.7 million, or $0.30 per share, on a non-U.S. GAAP basis.
  • The Company had cash and cash equivalents at March 31, 2013 of $81.1 million.

DUEXIS® Highlights

  • Gross and net sales of DUEXIS in the first quarter of 2013 were $6.7 million and $5.3 million, respectively, increases of 29% and 18%, respectively, versus the fourth quarter of 2012, excluding the benefit of a one-time change in the timing of DUEXIS revenue recognition in the fourth quarter of 2012.
  • DUEXIS gross sales, recorded in accordance with U.S. GAAP, in January, February and March of 2013 were $1.5 million, $1.9 million, and $3.3 million, respectively, with March sales partially reflecting the benefit of the price increase on March 15, 2013.
  • According to monthly data from Source Healthcare Analytics (SHA), total prescriptions were 45,879 for the first quarter of 2013, compared to 39,060 total prescriptions for the fourth quarter of 2012, an increase of 17%. According to data from SHA, total prescription dollar value, which reflects the dollar value of prescriptions at the time they are reported and is not a U.S. GAAP measure, was $8.5 million for the first quarter of 2013 compared to $4.9 million for the fourth quarter of 2012, a 73% increase. The Company provides SHA total prescription dollar value only for trend purposes and it is not reflective of what the Company would or will record as sales on a U.S. GAAP basis, which is based on product sold to its wholesale distributors.
  • According to weekly data from SHA, total prescription dollar value for the four week period ended April 26, 2013, was $6.0 million, compared to total prescription dollar value of $4.2 million for the four week period ended March 29, 2013, an increase of 43%. The Company provides total prescription dollar value only for trend purposes and it is not reflective of what the Company would or will record as sales on a U.S. GAAP basis, which is based on product sold to its wholesale distributors.
  • In March 2013 the Company announced that the United Kingdom Medicines and Healthcare products Regulatory Agency granted a National Marketing Authorization (MA) for DUEXIS in the UK.

RAYOS® / LODOTRA® Highlights

  • The Company initiated the full commercial launch of RAYOS in the U.S. to rheumatologists and key primary care physicians through its 150-person sales force in late January 2013.
  • RAYOS gross and net sales in the first quarter of 2013 were approximately $0.4 million each.
  • Through March 2013, there have been 371 cumulative prescribers of RAYOS who wrote 1,243 total prescriptions in the first quarter.
  • LODOTRA (known as RAYOS in the U.S.) was approved for marketing in five additional countries in April 2013 bringing total approvals to 25 countries outside the U.S.

"We had a solid first quarter," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma. "We continued to drive DUEXIS prescription and revenue growth, launched RAYOS and finished the quarter with a strong cash balance. Looking ahead, we believe our key products -- DUEXIS and RAYOS -- have strong momentum. We are off to a robust start in the second quarter with significant acceleration in DUEXIS revenue as a result of increasing the value captured per prescription in March of this year."

First Quarter 2013 Financial Results

For the first quarter ended March 31, 2013, gross and net sales were $10.7 million and $9.2 million, respectively, compared to gross and net sales of $2.9 million and $2.5 million, respectively, for the first quarter of 2012. DUEXIS gross sales were $6.7 million and net sales were $5.3 million after deducting trade discounts and allowances of $0.6 million and co-pay assistance costs of $0.8 million, compared to gross and net sales of $1.1 million and $0.9 million, respectively, during the first quarter of 2012. The increase in DUEXIS sales was primarily due to increased product shipments as a result of the Company's expanded sales force compared to the first quarter of 2012, as well as product price increases. DUEXIS represented 63% of gross sales and 58% of net sales during the quarter ended March 31, 2013.

RAYOS gross sales and net sales for the first quarter of 2013 were approximately $0.4 million each. LODOTRA gross and net sales in the first quarter of 2013 were $3.6 million and $3.5 million, respectively, compared to gross and net sales of $1.8 million and $1.6 million, respectively, in the first quarter of 2012. The $1.8 million increase in LODOTRA gross sales during the first quarter of 2013 was primarily attributable to higher product shipments and the recognition of deferred revenues from the Company's European distribution partner, Mundipharma, compared to the prior year period.

Net loss for the quarter ended March 31, 2013, was $22.2 million, or $0.36 per share based on 61,939,822 weighted average shares outstanding, compared to a net loss of $23.7 million, or $0.98 per share based on 24,116,490 weighted average shares outstanding, for the quarter ended March 31, 2012.

Non-GAAP net loss for the quarter ended March 31, 2013, was $18.7 million, or $0.30 per share, compared to a non-GAAP net loss of $20.5 million, or $0.85 per share, for the first quarter of 2012. Horizon provides non-GAAP financial measures, which it believes can enhance an overall understanding of its financial performance when considered together with GAAP figures. Refer to the section of this press release below entitled "Note Regarding Use of Non-GAAP Financial Measures" for a full discussion on this subject. The Company had cash and cash equivalents of $81.1 million at March 31, 2013.

Research and development expenses decreased $1.9 million, from $4.1 million during the three months ended March 31, 2012, to $2.2 million during the three months ended March 31, 2013. The decrease in research and development expenses during the first quarter of 2013 was primarily associated with the classification of $1.4 million in medical affairs expenses to selling and marketing expenses in addition to a $0.6 million reduction in consulting expenses. During the first quarter of 2013, in connection with the full commercial launch of RAYOS, the Company began to classify its medical affairs expenses, which consist of expenses related to scientific publications, health outcomes, biostatistics, medical education and information and medical communications as selling and marketing expenses in accordance with U.S. GAAP. Prior to the full commercial launch of RAYOS in late January 2013, these medical affairs expenses were classified as part of research and development.

Sales and marketing expenses increased $5.1 million, from $11.0 million during the three months ended March 31, 2012, to $16.1 million during the three months ended March 31, 2013. The increase was primarily attributable to $4.0 million in salaries and benefits expenses due to the increase in staffing of the Company's field sales force, the classification of $1.4 million of medical affairs expenses to selling and marketing expenses during the first quarter of 2013, and a $0.2 million increase in consulting expenses, which were partially offset by a $0.5 million decrease in launch-related marketing and commercialization expenses.

General and administrative expenses during the three months ended March 31, 2013 were $5.2 million and remained unchanged compared to the comparable prior year quarter. Increases in facilities costs of $0.1 million and $0.2 million in legal fees associated with intellectual property related matters during the first quarter of 2013 were primarily offset by a $0.3 million reduction in audit fees compared to the prior year.

Interest expense decreased $0.9 million, from $4.5 million during the three months ended March 31, 2012 to $3.6 million during the three months ended March 31, 2013. The decrease in interest expense was primarily attributable to the absence in the current year quarter of debt extinguishment costs on prior debt facilities, partially offset by higher borrowing balances in the current year. In February 2012, the Company incurred approximately $2.5 million in pre-payment and end of loan payments associated with the extinguishment of prior debt facilities.

Income tax benefit increased $0.7 million, from $0.2 million during the three months ended March 31, 2012 to $0.9 million during the three months ended March 31, 2013. The increase in income tax benefit during the first quarter of 2013 was primarily due to a reduction in the Company's deferred tax valuation allowance resulting from a determination that a portion of deferred tax assets associated with deferred revenues from milestone payments would be realized in future years.

Note Regarding Use of Non-GAAP Financial Measures

Horizon provides non-GAAP net income (loss) and net income (loss) per share financial measures that include adjustments to GAAP figures. These adjustments to GAAP exclude non-cash items such as stock compensation and depreciation and amortization, non-cash interest expense, and other non-cash charges. 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 operational 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. Please refer to the financial statements portion of this press release for a reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures.

Conference Call

At 8:00am Eastern Time today, Horizon's management will host a live conference call and webcast to review the Company's financial and operating results and provide a general business update.

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. Alternatively, please call 1-888-338-8373 (U.S.) or 973-872-3000 (international) to listen to the conference call. The conference ID number for the live call is 35984880. Telephone replay will be available approximately two hours after the call. To access the replay, please call 1-855-859-2056 (U.S.) or 404-537-3406 (international). The conference ID number for the replay is 35984880.

About Horizon Pharma

Horizon Pharma, Inc. is a specialty pharmaceutical company that has developed and is commercializing DUEXIS and RAYOS/LODOTRA, both of which target unmet therapeutic needs in arthritis, pain and inflammatory diseases. The Company's strategy is to develop, acquire, in-license and/or co-promote additional innovative medicines where it can execute a targeted commercial strategy in specific therapeutic areas while taking advantage of its commercial strengths and the infrastructure the Company has put in place. For more information, please visit www.horizonpharma.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding the on-going commercial launches of DUEXIS and RAYOS, trends with respect to total prescription dollar value of DUEXIS, the momentum for DUEXIS and RAYOS, and the effect in the second quarter of acceleration in DUEXIS revenue as a result of increasing the value captured per prescription in March of this year. These forward-looking statements are based on management's expectations and assumptions as of the date of this press release, and actual results may differ materially from those in these forward-looking statements as a result of various factors. These factors include, but are not limited to risks regarding Horizon's ability to commercialize products successfully, whether commercial data regarding DUEXIS and RAYOS in the United States for any historic periods are indicative of future results, the impact of pricing decisions on product revenues, Horizon's ability to successfully manage contract sales and marketing personnel, Horizon's ability to comply with post-approval regulatory requirements and the need to potentially obtain additional financing to successfully commercialize or further develop DUEXIS and RAYOS/LODOTRA. For a further description of these and other risks facing the Company, please see the risk factors described in the Company's filings with the United States Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in those filings. Forward-looking statements speak only as of the date of this press release and the Company undertakes no obligation to update or revise these statements, except as may be required by law.

                                                                            
                                                                            
                            HORIZON PHARMA, INC.                            
                   CONDENSED CONSOLIDATED BALANCE SHEETS                    
              (in thousands, except share and per share data)               
                                                                            
                                                            As of           
                                                 -------------------------- 
                                                   March 31,   December 31, 
                                                     2013          2012     
                                                 ------------  ------------ 
Assets                                                   (Unaudited)        
 Current assets                                                             
  Cash and cash equivalents                      $     81,076  $    104,087 
  Restricted cash                                         800           800 
  Accounts receivable, net                              7,650         3,463 
  Inventories, net                                      4,367         5,245 
  Prepaid expenses and other current assets             2,918         3,323 
                                                 ------------  ------------ 
    Total current assets                               96,811       116,918 
                                                                            
  Property and equipment, net                           3,668         3,725 
  Developed technology, net                            65,208        68,892 
  Other assets                                          4,173         4,449 
                                                 ------------  ------------ 
    Total assets                                 $    169,860  $    193,984 
                                                 ============  ============ 
Liabilities and Stockholders' Equity                                        
 Current liabilities                                                        
  Accounts payable                               $      4,942  $      5,986 
  Accrued expenses                                     15,019        16,784 
  Deferred revenues - current portion                   2,087         2,230 
  Notes payable - current portion                      15,913        11,935 
                                                 ------------  ------------ 
    Total current liabilities                          37,961        36,935 
Long-term liabilities                                                       
  Notes payable, net of debt discount                  34,403        36,866 
  Deferred revenues, net of current                     9,731         9,554 
  Deferred tax liabilities, net                         3,437         4,408 
  Other long term liabilities                             238           243 
                                                 ------------  ------------ 
    Total liabilities                                  85,770        88,006 
                                                 ------------  ------------ 
                                                                            
Commitments and Contingencies                                               
                                                                            
Stockholders' equity                                                        
  Common stock, $0.0001 par value per share;                                
   200,000,000 shares authorized; 61,947,247 and                            
   61,722,247 shares issued and outstanding at                              
   March 31, 2013 and December 31, 2012,                                    
   respectively.                                            6             6 
  Additional paid-in capital                          418,535       417,455 
  Accumulated other comprehensive loss                 (4,169)       (3,372)
  Accumulated deficit                                (330,282)     (308,111)
                                                 ------------  ------------ 
    Total stockholders' equity                         84,090       105,978 
                                                 ------------  ------------ 
    Total liabilities and stockholders' equity   $    169,860  $    193,984 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                            HORIZON PHARMA, INC.                            
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
              (in thousands, except share and per share data)               
                                                                            
                                                 For the Three Months Ended 
                                                          March 31,         
                                                 -------------------------- 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                         (Unaudited)        
Revenues                                                                    
Sales of goods                                   $     10,630  $      2,854 
Contract revenue                                           68            53 
                                                 ------------  ------------ 
    Gross sales                                        10,698         2,907 
Sales discounts and allowances                         (1,527)         (384)
                                                 ------------  ------------ 
    Net sales                                           9,171         2,523 
                                                 ------------  ------------ 
                                                                            
Cost of goods sold                                      4,247         2,067 
                                                 ------------  ------------ 
Gross profit                                            4,924           456 
Operating Expenses                                                          
  Research and development                              2,198         4,069 
  Sales and marketing                                  16,070        10,972 
  General and administrative                            5,200         5,203 
                                                 ------------  ------------ 
    Total operating expenses                           23,468        20,244 
                                                 ------------  ------------ 
Operating loss                                        (18,544)      (19,788)
                                                                            
Interest expense, net                                  (3,603)       (4,551)
Foreign exchange (loss) gain                             (905)          501 
Other expense                                               -           (52)
                                                 ------------  ------------ 
Loss before benefit for income taxes                  (23,052)      (23,890)
Income tax benefit                                       (881)         (164)
                                                 ------------  ------------ 
Net loss                                         $    (22,171) $    (23,726)
                                                 ============  ============ 
                                                                            
Net loss per share- basic and diluted            $      (0.36) $      (0.98)
                                                 ------------  ------------ 
                                                                            
Weighted average shares outstanding used in                                 
 calculating net loss per share - basic and                                 
 diluted                                           61,939,822    24,116,490 
                                                 ------------  ------------ 
                                                                            
                                                                            
                                                                            
                            HORIZON PHARMA, INC.                            
            RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS            
             (in thousands, except share and per share amounts)             
                                                                            
                                                     Three Months Ended     
                                                          March 31,         
                                                 -------------------------- 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                         (Unaudited)        
GAAP Net Loss                                    $    (22,171) $    (23,726)
Non-GAAP Adjustments (net of tax effect):                                   
  Amortization of developed technology                  1,324           713 
  Stock-based compensation                              1,079         1,759 
  Non-cash interest expense                               910           593 
  Depreciation expense                                    259           184 
  Amortization of deferred revenue                        (68)          (53)
                                                 ------------  ------------ 
    Total of non-GAAP adjustments                       3,504         3,195 
                                                 ------------  ------------ 
Non-GAAP Net Loss                                $    (18,667) $    (20,531)
                                                 ============  ============ 
                                                                            
Weighted average shares - basic and diluted        61,939,822    24,116,490 
                                                                            
GAAP net loss per common share-basic and diluted $      (0.36) $      (0.98)
  Non-GAAP adjustments detailed above                    0.06          0.13 
                                                 ------------  ------------ 
Non-GAAP net loss per common share-basic and                                
 diluted                                         $      (0.30) $      (0.85)
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                            HORIZON PHARMA, INC.                            
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                               (in thousands)                               
                                                                            
                                                  Three Months Ended March  
                                                             31,            
                                                 -------------------------- 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                         (Unaudited)        
Cash flows from operating activities                                        
Net loss                                         $    (22,171) $    (23,726)
Adjustments to reconcile net loss to net cash                               
 used in operating activities                                               
  Depreciation and amortization                         1,922         1,076 
  Stock-based compensation                              1,079         1,759 
  Non-cash interest expense                               910           593 
  Paid in kind interest expense                           783             - 
  Loss on disposal of asset                                 -            65 
  Foreign exchange (loss) gain                            905          (501)
  Changes in operating assets and liabilities:                              
    Accounts receivable                                (4,300)        1,595 
    Inventories                                           866        (1,243)
    Prepaid expenses and other current assets             379        (1,582)
    Accounts payable                                   (1,026)          560 
    Accrued expenses                                   (1,682)           45 
    Deferred revenues                                     349           746 
    Deferred tax liabilities                             (864)         (177)
    Other non-current assets and liabilities               81             - 
                                                 ------------  ------------ 
      Net cash used in operating activities           (22,769)      (20,790)
                                                 ------------  ------------ 
Cash flows from investing activities                                        
Purchase of property and equipment                       (225)         (133)
                                                 ------------  ------------ 
      Net cash used in investing activities              (225)         (133)
                                                 ------------  ------------ 
Cash flows from financing activities                                        
Proceeds from issuance of notes payable, net of                             
 issuance costs                                             -        55,578 
Proceeds from private equity offering, net of                               
 issuance costs                                             -        47,581 
Repayment of notes payable                                  -       (19,814)
                                                 ------------  ------------ 
      Net cash provided by financing activities             -        83,345 
                                                 ------------  ------------ 
Effect of foreign exchange rate changes on cash                             
 and cash equivalents                                     (17)          (37)
      Net (decrease) increase in cash and cash                              
       equivalents                                    (23,011)       62,385 
Cash and cash equivalents                                                   
Beginning of period                                   104,087        17,966 
                                                 ------------  ------------ 
End of period                                    $     81,076  $     80,351 
                                                 ============  ============ 
                                                                            

Contacts
Robert J. De Vaere
Executive Vice President and Chief Financial Officer
Email Contact

Investors
Kathy Galante
Burns McClellan, Inc.
212-213-0006
Email Contact



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