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Horizon Pharma, Inc. (HZNP) Reports 2012 Financial Results and Provides Business Update


3/18/2013 9:25:50 AM

DEERFIELD, IL--(Marketwire - March 18, 2013) - Horizon Pharma, Inc. (NASDAQ: HZNP) today provided an update on the Company's business and announced financial results for the fourth quarter and year ended December 31, 2012.

Financial Highlights

  • Full year 2012 gross and net sales were $23.0 million and $19.6 million, respectively; increases of 231% and 183%, respectively, over full year 2011 gross and net sales.
  • Fourth quarter 2012 gross and net sales were $8.2 million and $6.7 million, respectively; increases of 130% and 91%, respectively, over fourth quarter 2011 gross and net sales.
  • Net loss for 2012 was $87.8 million, or $2.26 per share, compared to a net loss of $113.3 million, or $12.56 per share, in 2011.
  • Cash and cash equivalents balance at the end of 2012 was $104.1 million, which the Company believes will be sufficient to fund its operations through 2013.

DUEXIS® Highlights

  • New prescriptions for DUEXIS increased 57% in the fourth quarter of 2012 to 31,130 versus 19,874 in the third quarter of 2012.
  • Total prescriptions for DUEXIS increased 56% in the fourth quarter of 2012 to 39,060 versus 25,054 in the third quarter of 2012.
  • DUEXIS gross and net sales were $13.2 million and $11.0 million, respectively, in 2012, which was the first full year of sales following the launch of DUEXIS in December 2011.
  • DUEXIS fourth quarter 2012 gross and net sales were $7.1 million and $6.0 million, respectively; increases of 138% and 132%, respectively, over third quarter 2012 DUEXIS gross and net sales. Excluding a one-time increase in fourth quarter 2012 DUEXIS sales related to timing of revenue recognition, sequential growth from the third quarter of 2012 to the fourth quarter of 2012 in both gross and net sales was 76%.

RAYOS® Highlights

  • Initiated full commercial launch of RAYOS to rheumatologists and key primary care physicians through 150-person sales force in February 2013.
  • There have been 275 cumulative RAYOS prescribers since the launch.

"We saw strong momentum with DUEXIS in the fourth quarter of 2012 and early 2013, which along with the full commercial launch of RAYOS last month, positions us well moving forward," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma. "With two products commercialized in the U.S. market and $104.1 million in cash on the balance sheet, we are encouraged by our progress as we continue to build towards our objective of a profitable, sustainable business."

Fourth Quarter 2012 Financial Results

For the fourth quarter ended December 31, 2012, gross and net sales were $8.2 million and $6.7 million, respectively, compared to $3.5 million in both gross and net sales for the fourth quarter of 2011. DUEXIS gross sales were $7.1 million and net sales were $6.0 million after deducting trade discounts and allowances of $0.5 million and co-pay assistance costs of $0.6 million, and represented 87% of gross sales and 90% of net sales during the quarter ended December 31, 2012. During the fourth quarter, the Company changed from recognizing revenue upon product being dispensed through patient prescriptions to recognizing revenue when product is sold into the wholesale and pharmacy channel, resulting in a one-time increase to DUEXIS revenue of $1.8 million gross and $1.4 million net.

RAYOS gross sales in the fourth quarter, following its December U.S. launch, were $0.8 million and net sales were $0.4 million after deductions for discounts and allowances of $0.3 million and for co-pay assistance costs of $0.1 million. LODOTRA gross and net sales in the fourth quarter of 2012 were $0.3 million, compared to gross and net sales of $3.4 million in the fourth quarter of 2011. The Company recognizes a significant portion of its LODOTRA sales at the time of delivery to its distribution partner, Mundipharma, and those deliveries are not linear or related to end market sales in terms of timing. The $3.1 million decrease in LODOTRA gross and net sales during the fourth quarter of 2012 was primarily attributable to these timing differences of product deliveries to Mundipharma and to a reduction in deferred revenues recognized.

Research and development expenses increased $0.9 million, from $3.8 million during the three months ended December 31, 2011, to $4.7 million during the three months ended December 31, 2012. The increase in research and development expenses during the fourth quarter of 2012 was primarily associated with a $0.4 million increase in salaries and benefits expense primarily related to additional staffing of the Company's medical affairs group, along with increases in consulting fees and contract manufacturing expense.

Sales and marketing expenses increased $2.2 million, from $12.9 million during the three months ended December 31, 2011, to $15.1 million during the three months ended December 31, 2012. The increase in expense was primarily attributable to expanded sales and promotional efforts one year post DUEXIS' launch and initial launch activities for RAYOS, which contributed to a $2.6 million increase in salaries and benefits expense associated with additional staffing of the Company's sales and marketing functions, partially offset by a $1.0 million reduction in consulting expenses and outside service costs.

General and administrative expenses increased $0.6 million, from $4.4 million during the three months ended December 31, 2011, to $5.0 million during the three months ended December 31, 2012. The increase in general and administrative expenses was primarily due to a $0.3 million increase in salaries and benefits expense associated with additional finance and administrative personnel as the Company built out its corporate infrastructure and a $0.3 million increase in legal costs primarily associated with intellectual property related matters.

Interest expense net increased $2.6 million, from $0.8 million during the three months ended December 31, 2011, to $3.4 million during the three months ended December 31, 2012, primarily as a result of incremental interest expense associated with higher borrowing balances under the Company's $60.0 million senior secured loan, compared to an outstanding notes payable balance of $19.4 million in the prior year period.

During the three months ended December 31, 2011, the Company recorded an intangible impairment charge of $69.6 million to write down the value of its indefinite lived in process research and development, or IPR&D, asset to its fair value, with no corresponding IPR&D impairment charge in the three months ended December 31, 2012.

Income tax benefit decreased $13.8 million, from $14.1 million during the three months ended December 31, 2011, to $0.3 million during the three months ended December 31, 2012. The decrease in income tax benefit was primarily attributable to the Company's IPR&D asset impairment charge of $69.6 million recorded during the fourth quarter of 2011, which reduced the Company's deferred income tax liability and increased its income tax benefit.

Net loss for the quarter ended December 31, 2012, was $24.3 million, or $0.40 per share based on 61,574,187 weighted average shares outstanding, compared to a net loss of $76.7 million, or $3.92 per share based on 19,568,131 weighted average shares outstanding, in the quarter ended December 31, 2011.

Non-GAAP net loss for the quarter ended December 31, 2012, was $20.9 million, or $0.34 per share, compared to a non-GAAP net loss of $19.0 million, or $0.97 per share, in the fourth quarter of 2011. Horizon provides non-GAAP financial measures, which it believes can enhance an overall understanding of Horizon's financial performance when considered together with GAAP figures. Refer to the section of this press release below titled, "Note Regarding Use of Non-GAAP Financial Measures," for a full discussion on this subject.

Full Year 2012 Financial Results
For the year ended December 31, 2012, gross and net sales were $23.0 million and $19.6 million, respectively, compared to $6.9 million in gross and net sales in the prior year. DUEXIS gross sales were $13.2 million and net sales were $11.0 million after deducting trade discounts and allowances of $0.9 million and co-pay assistance costs of $1.3 million, and represented 58% of gross sales and 57% of net sales during the year ended December 31, 2012. DUEXIS was launched in December 2011.

LODOTRA gross sales were $9.0 million and net sales were $8.2 million after deducting trade discounts and allowances of $0.8 million during the year ended December 31, 2012, compared to gross and net sales of $6.8 million during the year ended December 31, 2011. The increase in LODOTRA sales was attributable to higher product shipments during 2012 in addition to the recognition of deferred revenues from the Company's distribution partner, Mundipharma. RAYOS gross sales following its U.S. launch in December 2012 were $0.8 million and net sales were $0.4 million after deductions for discounts and allowances, and for co-pay assistance costs.

Research and development expenses increased $1.5 million, from $15.3 million during the year ended December 31, 2011, to $16.8 million during the year ended December 31, 2012. The increase in research and development expenses was primarily associated with a $3.4 million increase in salaries and benefits expense as a result of additional staffing of the Company's regulatory and medical affairs group, which was partially offset by reductions in regulatory submission fees and clinical trial expenses of $1.8 million and legal expenses of $0.2 million.

Sales and marketing expenses increased $29.2 million, from $20.3 million during the year ended December 31, 2011, to $49.5 million during the year ended December 31, 2012. The increase in sales and marketing expenses was primarily attributable to salaries and related expenses for a full year for the Company's initial 80 field sales representatives hired during the second half of 2011, incremental salaries and related expenses associated with growing the Company's field sales organization to approximately 150 sales representatives during the course of 2012, salaries and related expenses associated with increased staffing for the related sales support function, and an increase in marketing expenses to launch and commercialize DUEXIS and RAYOS in the U.S. As a result of these factors, during the year ended December 31, 2012, sales and marketing personnel related costs increased $17.5 million and marketing costs for DUEXIS and RAYOS increased approximately $9.0 million compared with the year ended December 31, 2011.

General and administrative expenses increased $4.4 million, from $15.0 million during the year ended December 31, 2011, to $19.4 million during the year ended December 31, 2012. The increase in general and administrative expenses was primarily due to $2.2 million in additional salaries and related benefits expense associated with incremental finance and administrative staff added during the second half of 2011 and during 2012 as the Company built out its corporate infrastructure, $1.0 million in higher legal fees associated with intellectual property and regulatory related matters and $1.1 million in higher facilities and information technology infrastructure expenses.

Interest expense, net increased $8.2 million, from $6.3 million during the year ended December 31, 2011, to $14.5 million during the year ended December 31, 2012. The increase in interest expense was primarily attributable to higher borrowing balances, higher debt extinguishment costs and amortization to interest expense of deferred financing and debt discount expenses under the Company's Senior Secured Loan compared to the prior year. During the year ended December 31, 2012, the Company recorded a $2.5 million charge related to the extinguishment of its prior debt facilities, compared to a $1.9 million charge during the year ended December 31, 2011, related to the loss on extinguishment of the Company's prior debt facilities.

Income tax benefit decreased $9.5 million, from $14.7 million during the year ended December 31, 2011, to $5.2 million during the year ended December 31, 2012. The income tax benefit during the year ended December 31, 2012, was primarily associated with the reclassification of our IPR&D asset to developed technology following the July 26, 2012, FDA approval of RAYOS, resulting in a one-time income tax benefit of $4.3 million. The income tax benefit during the year ended December 31, 2011, was primarily attributable to our IPR&D intangible asset impairment charge of $69.6 million, which reduced our deferred income tax positions and increased our income tax benefit.

Net loss for the year ended December 31, 2012, was $87.8 million, or $2.26 per share based on 38,871,422 weighted average shares outstanding, compared to a net loss of $113.3 million, or $12.56 per share based on 9,014,968 weighted average shares outstanding, during the year ended December 31, 2011.

Non-GAAP net loss for the year ended December 31, 2012 was $76.0 million, or $1.96 per share, compared to non-GAAP net loss of $48.5 million, or $5.38 per share, during the year ended December 31, 2011. Refer to the section of this press release below titled, "Note Regarding Use of Non-GAAP Financial Measures."

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 11959520. 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 11959520.

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 approach in specific therapeutic areas while taking advantage of its commercial strengths and the infrastructure the Company has put in place.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding the period during which cash and cash equivalents is expected to fund the Company's operations, the on-going commercial launches of DUEXIS and RAYOS and the Company's progress in creating a profitable, sustainable business. 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, 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.                            
                        Consolidated Balance Sheets                         
              (in thousands, except share and per share data)               
                                                                            
                                                      As of December 31,    
                                                  ------------------------- 
                                                      2012         2011     
                                                  ------------ ------------ 
Assets                                                                      
Current assets                                                              
  Cash and cash equivalents                       $    104,087 $     17,966 
  Restricted cash                                          800          750 
  Accounts receivable, net                               3,463        2,372 
  Inventories, net                                       5,245        1,195 
  Prepaid expenses and other current assets              3,323        2,763 
                                                  ------------ ------------ 
    Total current assets                               116,918       25,046 
  Property and equipment, net                            3,725        3,245 
  Developed technology, net                             68,892       35,602 
  In-process research and development                        -       36,638 
  Other assets                                           4,449          547 
                                                  ------------ ------------ 
    Total assets                                  $    193,984 $    101,078 
                                                  ============ ============ 
                                                                            
Liabilities and Stockholders' Equity                                        
Current liabilities                                                         
  Accounts payable                                $      5,986 $      8,170 
  Accrued expenses                                      16,784        8,926 
  Deferred revenues - current portion                    2,230        3,281 
  Notes payable - current portion                       11,935        3,604 
                                                  ------------ ------------ 
    Total current liabilities                           36,935       23,981 
                                                                            
Long-term liabilities                                                       
  Notes payable, net of current                         36,866       15,834 
  Deferred revenues, net of current                      9,554        5,666 
  Deferred tax liabilities, net                          4,408        9,561 
  Other long term liabilities                              243          124 
                                                  ------------ ------------ 
    Total liabilities                                   88,006       55,166 
                                                  ------------ ------------ 
                                                                            
Commitments and Contingencies                                               
                                                                            
Stockholders' equity                                                        
  Common stock, $0.0001 par value per share;                                
   200,000,000 shares authorized; 61,722,247 and                            
   19,627,744 shares issued and outstanding at                              
   December 31, 2012 and 2011, respectively.                 6            2 
  Additional paid-in capital                           417,455      270,015 
  Accumulated other comprehensive loss                  (3,372)      (3,788)
  Accumulated deficit                                 (308,111)    (220,317)
                                                  ------------ ------------ 
    Total stockholders' equity                         105,978       45,912 
                                                  ------------ ------------ 
    Total liabilities and stockholders' equity    $    193,984 $    101,078 
                                                  ============ ============ 
                                                                            
                                                                            
                                                                            
                            Horizon Pharma, Inc.                            
                   Consolidated Statements of Operations                    
              (in thousands, except share and per share data)               
                                                                            
                             Three Months Ended       Twelve Months Ended   
                                December 31,              December 31,      
                          ------------------------  ----------------------- 
                              2012         2011         2012        2011    
                          -----------  -----------  -----------  ---------- 
Revenues                                                                    
Sales of goods            $     8,091  $     3,483  $    22,761  $    6,773 
Contract revenue                   61           55          217         166 
                          -----------  -----------  -----------  ---------- 
    Gross sales                 8,152        3,538       22,978       6,939 
Sales discounts and                                                         
 allowances                    (1,405)         (12)      (3,346)        (12)
                                                                            
                          -----------  -----------  -----------  ---------- 
    Net sales                   6,747        3,526       19,632       6,927 
                          -----------  -----------  -----------  ---------- 
                                                                            
Cost of goods sold              3,931        2,075       12,663       7,267 
                          -----------  -----------  -----------  ---------- 
Gross profit (loss)             2,816        1,451        6,969        (340)
Operating Expenses                                                          
  Research and                                                              
   development                  4,739        3,822       16,837      15,358 
  Sales and marketing          15,095       12,888       49,561      20,314 
  General and                                                               
   administrative               5,008        4,368       19,444      15,008 
  Intangible impairment                                                     
   charge                           -       69,621            -      69,621 
                          -----------  -----------  -----------  ---------- 
    Total operating                                                         
     expenses                  24,842       90,699       85,842     120,301 
                          -----------  -----------  -----------  ---------- 
Operating loss                (22,026)     (89,248)     (78,873)   (120,641)
                                                                            
Interest expense, net          (3,444)        (819)     (14,525)     (6,284)
Foreign exchange gain                                                       
 (loss)                           801         (798)         489      (1,023)
Other expense                       -            -          (56)          - 
                          -----------  -----------  -----------  ---------- 
Loss before benefit for                                                     
 income taxes                 (24,669)     (90,865)     (92,965)   (127,948)
Income tax benefit               (336)     (14,138)      (5,171)    (14,683)
                          -----------  -----------  -----------  ---------- 
Net loss                  $   (24,333) $   (76,727) $   (87,794) $ (113,265)
                          ===========  ===========  ===========  ========== 
                                                                            
Net loss per share- basic                                                   
 and diluted              $     (0.40) $     (3.92) $     (2.26) $   (12.56)
                          -----------  -----------  -----------  ---------- 
                                                                            
Weighted average shares                                                     
 outstanding used in                                                        
 calculating net loss per                                                   
 share - basic and                                                          
 diluted                   61,574,187   19,568,131   38,871,422   9,014,968 
                          -----------  -----------  -----------  ---------- 
                                                                            
                                                                            
                                                                            
                            Horizon Pharma, Inc.                            
            Reconciliation of GAAP Net Loss to Non-GAAP Net Loss            
             (in thousands, except share and per share amounts)             
                                (Unaudited)                                 
                                                                            
                             Three Months Ended       Twelve Months Ended   
                                December 31,              December 31,      
                          ------------------------  ----------------------- 
                              2012         2011         2012        2011    
                          -----------  -----------  -----------  ---------- 
                                                                            
GAAP Net Loss             $   (24,333) $   (76,727) $   (87,794) $ (113,265)
Non-GAAP Adjustments (net                                                   
 of tax effect):                                                            
    Intangible impairment                                                   
     charge                         -       56,199            -      56,199 
    Amortization of                                                         
     developed technology       1,313          730        3,782       3,012 
    Stock-based                                                             
     compensation                 999          703        4,661       2,530 
    Non-cash interest                                                       
     expense                      913           55        2,740       2,738 
    Depreciation expense          247          141          806         446 
    Amortization of                                                         
     deferred revenue             (61)         (55)        (217)       (166)
                          -----------  -----------  -----------  ---------- 
        Total of non-GAAP                                                   
         adjustments            3,411       57,773       11,772      64,759 
                          -----------  -----------  -----------  ---------- 
Non-GAAP Net Loss         $   (20,922) $   (18,954) $   (76,022) $  (48,506)
                          ===========  ===========  ===========  ========== 
                                                                            
Weighted average shares -                                                   
 basic and diluted         61,574,187   19,568,131   38,871,422   9,014,968 
                                                                            
GAAP net loss per common                                                    
 share-basic and diluted  $     (0.40) $     (3.92) $     (2.26) $   (12.56)
    Non-GAAP adjustments                                                    
     detailed above              0.06         2.95         0.30        7.18 
                          -----------  -----------  -----------  ---------- 
Non-GAAP net loss per                                                       
 common share-basic and                                                     
 diluted                  $     (0.34) $     (0.97) $     (1.96) $    (5.38)
                          ===========  ===========  ===========  ========== 
                                                                            
                                                                            
                                                                            
                            Horizon Pharma, Inc.                            
                   Consolidated Statements of Cash Flows                    
                               (in thousands)                               
                                                                            
                                                     Twelve Months Ended    
                                                        December 31,        
                                                 -------------------------- 
                                                     2012          2011     
                                                 ------------  ------------ 
Cash flows from operating activities                                        
Net loss                                        

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