Horizon Pharma plc Reports Record Fourth-Quarter and Full-Year 2018 Net Sales Driven by Orphan and Rheumatology Segment; Announces Full-Year 2019 Guidance

DUBLIN--(BUSINESS WIRE)-- Horizon Pharma plc (Nasdaq: HZNP) today announced its fourth-quarter and full-year 2018 financial results and provided its full-year 2019 net sales and adjusted EBITDA guidance.

“2018 was a year of exceptional progress – in addition to generating total company net sales growth of 14 percent, we executed on our strategic objectives – advancing our pipeline and driving net sales growth of KRYSTEXXA, which increased 65 percent,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. “We enrolled the Phase 3 trial of our biologic candidate teprotumumab well ahead of schedule and are now expecting top-line data by the end of the first quarter.

“We are building on the momentum we established in 2018 and expect continued strong commercial execution across our operating segments,” continued Walbert. “We plan to submit our biologics license application for teprotumumab in mid-2019 if the clinical data is positive and expect to initiate two important clinical trials for KRYSTEXXA, with the MIRROR trial initiating in the second quarter and a new study in kidney transplant patients with uncontrolled gout beginning in the second half of 2019.”

Financial Highlights

(in millions except for per share amounts and percentages)			Q4 18				Q4 17					% Change			FY 18					FY 17					% Change
Net sales			$	355.5			$	274.2				30			$	1,207.6				$	1,056.2				14
Net income (loss)				87.6				(38.2	)			NM				(74.2	)				(401.6	)			82
Non-GAAP net income				116.8				48.4				141				314.7					194.8				62
Adjusted EBITDA				151.1				102.7				47				451.4					389.7				16
Earnings (loss) per share - diluted			$	0.50			$	(0.23	)			NM			$	(0.45	)			$	(2.46	)			82
Non-GAAP earnings per share - diluted				0.67				0.29				131				1.83					1.18				55

Fourth-Quarter and Recent Company Highlights

• Accelerated Teprotumumab Phase 3 Top-Line Data Read-Out Timeline: The Company announced in January that it expects top-line data results for its pivotal teprotumumab Phase 3 confirmatory trial, OPTIC (Treatment of Graves’ Orbitopathy (Thyroid Eye Disease) to Reduce Proptosis with Teprotumumab Infusions in a Randomized, Placebo-Controlled, Clinical Study), by the end of first quarter of 2019. This is accelerated from the initial second quarter of 2019 timeline, and the Company is tracking to a mid-2019 biologics license application (BLA) submission.
  
  Teprotumumab is a fully human monoclonal antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor in Phase 3 development for the treatment of thyroid eye disease (TED), in which the muscles and fatty tissue behind the eye expand and become inflamed, which can lead to proptosis (eye bulging) and diplopia (double vision) as well as quality-of-life issues.

• Phase 2 Teprotumumab Data Presented at American Thyroid Association (ATA) and American Academy of Ophthalmology (AAO) Meetings: Additional data for the pivotal Phase 2 teprotumumab trial presented at ATA and AAO demonstrated durability of the Phase 2 trial 48 weeks following the end of the treatment period (Week 24) and nearly a year off therapy. At Week 24, 71.4 percent (30 of 42) of patients responded with reductions of ≥2mm in proptosis and 61.9 percent of patients (26 of 42) responded with improvement of at least one grade in diplopia, both of which are considered a clinically meaningful change. At Week 72, 48 weeks following the study completion and nearly a year off therapy, 53.3 percent of the Week 24 proptosis responders maintained the reductions and 69.2 percent of patients with diplopia improvement maintained the benefit. These results demonstrate that teprotumumab has the potential to be the first and only disease-modifying therapy for thyroid eye disease.

• New KRYSTEXXA Study in Kidney Transplant Patients with Uncontrolled Gout: The Company is announcing today that it plans to initiate a clinical trial in the second half of 2019 evaluating the effect of KRYSTEXXA, the Company’s medicine for uncontrolled gout, on serum uric acid levels in kidney transplant patients with uncontrolled gout (uncontrolled gout is chronic gout that is refractory to conventional therapies). Kidney transplant patients have more than a tenfold increase in the prevalence of gout when compared to the general population, and literature suggests that high serum uric acid levels are associated with organ rejection. Managing uncontrolled gout is one of the most common and significant unmet needs of kidney transplant patients.
• New KRYSTEXXA Immunomodulation Data Presented at American College of Rheumatology/ Association of Rheumatology Health Professionals (ACR) Meeting: At the October 2018 ACR meeting, external investigators shared results from a case series of nine sequential patients with uncontrolled gout, evaluating the administration of KRYSTEXXA with the immunomodulator methotrexate to improve the durability of KRYSTEXXA response. The study stated that of the nine patients followed out to five months, all nine were responders as defined by >80 percent of serum uric acid levels being maintained at goal <6.0 mg/dL during the observation period.
• Expanded Indication for RAVICTI^®: The Company received U.S. Food and Drug Administration (FDA) approval in December to expand the age range for chronic management of urea cycle disorders to birth and older from the previous age range of two months of age and older.
• Recent Business Development Initiatives: On Dec. 28, 2018, the Company sold the rights to RAVICTI and AMMONAPS^® outside of North America and Japan to Medical Need Europe AB for $35 million. In addition, effective Jan. 1, 2019, the RAYOS^® and LODOTRA^® license and supply agreements were amended, including the transfer of LODOTRA to Vectura Group plc, the current third-party supplier. Beginning in 2019, the Company will no longer recognize revenue from RAVICTI and AMMONAPS sales outside of North America and Japan, or from sales of LODOTRA. AMMONAPS is known as BUPHENYL^® and LODOTRA is known as RAYOS in the United States.

Research and Development Programs

Orphan Candidate and Program:

• Teprotumumab: The pivotal Phase 3 confirmatory study, OPTIC, is evaluating teprotumumab for the treatment of TED, which has no FDA-approved treatments. OPTIC completed enrollment September of 2018, ahead of the year-end target, and top-line results are expected by the end of first-quarter 2019. OPTIC-X, a 48-week extension study in which participants may receive up to eight additional infusions of teprotumumab, continues to enroll patients. The objective of OPTIC-X is to evaluate the potential for retreatment as well as longer duration of treatment with teprotumumab.

Rheumatology Pipeline Candidates and Programs:

• KRYSTEXXA Study in Kidney Transplant Patients: The Company plans to initiate a clinical trial in the second half of 2019 evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout. Kidney transplant patients have more than a tenfold increase in the prevalence of gout when compared to the general population, and literature suggests that high serum uric acid levels are associated with organ rejection. Managing uncontrolled gout is one of the most common and significant unmet needs of kidney transplant patients.
• KRYSTEXXA Immunomodulation Study: The Company is evaluating the use of methotrexate to enhance the response rate to KRYSTEXXA through its MIRROR (Methotrexate to Increase Response Rates in Patients with Uncontrolled GOut Receiving KRYSTEXXA) open-label study. Methotrexate, the immunomodulator most commonly used by rheumatologists, has been shown to reduce anti-drug antibodies when combined with other biologics. The Company is adapting MIRROR’s trial design to support the potential for registration, with enrollment expected to begin in the second quarter of 2019.
• Next-generation Biologic Programs for Uncontrolled Gout: The Company is pursuing two development programs for next-generation biologics for uncontrolled gout, HZN-003 and PASylated uricase technology, to support and sustain the Company’s market leadership in uncontrolled gout. The programs are exploring the use of optimized uricase technology coupled with optimized PEGylation or PASylation technology, to improve the molecule’s half-life, with the potential for subcutaneous dosing.
• Augmented Rheumatology Pipeline with HemoShear Collaboration: The Company is collaborating with HemoShear Therapeutics, LLC, a privately held biotechnology company, to discover and develop novel therapeutics for gout.

Fourth-Quarter Financial Results

Note: For additional detail and reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, please refer to the tables at the end of this release.

• Net Sales: Fourth-quarter 2018 net sales were $355.5 million, an increase of 30 percent, driven by continued strong growth of the Company’s orphan and rheumatology segment.
• Gross Profit: Under U.S. GAAP, the fourth-quarter 2018 gross profit ratio was 69.2 percent compared to 47.8 percent in the fourth quarter of 2017. The non-GAAP gross profit ratio in the fourth quarter of 2018 was 89.1 percent compared to 89.3 percent in the fourth quarter of 2017.
• Operating Expenses: Research and development (R&D) expenses were 5.5 percent of net sales and selling, general and administrative (SG&A) expenses were 49.1 percent of net sales. Non-GAAP R&D expenses were 5.3 percent of net sales and non-GAAP SG&A expenses were 41.4 percent of net sales.
• Income Tax Rate: In the fourth quarter of 2018, the income tax benefit rate on a GAAP basis was 114.9 percent and the income tax expense rate on a non-GAAP basis was 8.2 percent.
• Net Income: On a GAAP basis in the fourth quarter of 2018, net income was $87.6 million. Fourth-quarter 2018 non-GAAP net income was $116.8 million.
• Adjusted EBITDA: Fourth-quarter 2018 adjusted EBITDA was $151.1 million.
• Earnings (Loss) per Share: On a GAAP basis in the fourth quarter of 2018, diluted earnings per share were $0.50 versus a diluted loss per share of $0.23 in the fourth quarter of 2017. Non-GAAP diluted earnings per share in the fourth quarter of 2018 and 2017 were $0.67 and $0.29, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the fourth quarter of 2018 were 174.2 million.

Fourth-Quarter Segment Results

Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments. While segment operating income contains certain adjustments to the directly comparable GAAP figures in the Company’s consolidated financial results, it is considered to be prepared in accordance with GAAP for purposes of presenting the Company’s segment operating results.

Orphan and Rheumatology Segment

(in millions except for percentages)				Q4 18				Q4 17				% Change				FY 18				FY 17				% Change
RAVICTI®					60.2				51.9			16					226.6				193.9			17
PROCYSBI®(1)					40.1				33.2			21					154.9				137.7			12
ACTIMMUNE®					27.5				26.8			3					105.6				111.0			(5	)
BUPHENYL®					6.4				4.6			41					21.8				20.8			5
QUINSAIRTM(1)					0.2				0.1			17					0.5				3.4			(85	)
Orphan				$	134.4			$	116.6			15				$	509.4			$	466.8			9
KRYSTEXXA®					83.3				43.8			90					258.9				156.5			65
RAYOS®					19.8				15.6			26					61.1				52.1			17
LODOTRA®					0.1				2.0			(97	)				2.1				5.4			(62	)
Rheumatology				$	103.2			$	61.4			68				$	322.1			$	214.0			50
Orphan and Rheumatology Net Sales				$	237.6			$	178.0			33				$	831.5			$	680.8			22
Orphan and Rheumatology Segment Operating Income				$	84.8			$	61.2			39				$	290.0			$	241.1			20

(1)		On Jun. 23, 2017, Horizon Pharma completed the divestiture of a European subsidiary that owned the marketing rights to PROCYSBI and QUINSAIR in Europe, the Middle East and Africa (EMEA) to Chiesi Farmaceutici S.p.A. Horizon Pharma retains marketing rights for the two medicines in the United States, Canada, Latin America and Asia. Horizon Pharma’s 2017 net sales of PROCYSBI and QUINSAIR in EMEA were $9.5 million.

• Fourth-quarter 2018 net sales of the orphan and rheumatology segment were $237.6 million, an increase of 33 percent over the prior year’s quarter, driven by continued strong KRYSTEXXA growth as well as growth of RAVICTI, PROCYSBI^® and RAYOS. Fourth-quarter 2018 orphan and rheumatology segment operating income was $84.8 million, an increase of 39 percent.
• For the full-year 2018, KRYSTEXXA net sales of $258.9 million represented a 65 percent year-over-year increase, in line with the Company’s expectation.
• On Dec. 28, 2018, the Company sold the rights to RAVICTI and AMMONAPS (AMMONAPS is known as BUPHENYL^® and LODOTRA is known as RAYOS in the United States) outside of North America and Japan to Medical Need Europe AB for $35.0 million. In addition, effective Jan. 1, 2019, the RAYOS and LODOTRA license and supply agreements were amended, including the transfer of LODOTRA to Vectura Group plc, the current third-party supplier. Beginning in 2019, the Company will no longer recognize revenue from RAVICTI and AMMONAPS sales outside of North America and Japan, or from sales of LODOTRA.

Primary Care Segment

(in millions except for percentages)			Q4 18				Q4 17				% Change				FY 18				FY 17				% Change
PENNSAID® 2%				64.3				50.0			29					190.2				191.0			-
DUEXIS®				34.0				28.2			21					114.7				121.2			(5	)
VIMOVO®				18.8				16.6			13					67.6				57.7			17
MIGERGOT®				0.8				1.4			(46	)				3.6				5.5			(35	)
Primary Care Net Sales			$	117.9			$	96.2			23				$	376.1			$	375.4			-
Primary Care Segment Operating Income			$	66.2			$	41.9			58				$	160.4			$	149.1			8

• Fourth-quarter 2018 net sales of the primary care segment were $117.9 million and operating income was $66.2 million.

Cash Flow Statement and Balance Sheet Highlights

• On a GAAP basis in the fourth quarter of 2018, operating cash flow was $108.7 million. Non-GAAP operating cash flow was $115.1 million.
• The Company had cash and cash equivalents of $958.7 million as of Dec. 31, 2018.
• As of Dec. 31, 2018, the total principal amount of debt outstanding was $1.993 billion, which consisted of $818 million in senior secured term loans due 2024; $300 million senior notes due 2024; $475 million senior notes due 2023 and $400 million exchangeable senior notes due 2022. As of Dec. 31, 2018, net debt was $1.034 billion and our net-debt-to-last-12-months adjusted EBITDA leverage ratio was 2.3 times.

2019 Guidance

The Company expects full‐year 2019 net sales to range between $1.23 billion and $1.25 billion and full‐year 2019 adjusted EBITDA is expected to range between $440 million and $455 million, reflecting investment in preparation for the potential U.S. launch of teprotumumab and continued R&D pipeline programs to drive long-term growth.

Webcast

At 8 a.m. EST / 1 p.m. IST today, the Company will host a live webcast to review its financial and operating results and provide a general business update. The live webcast and a replay may be accessed 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. A replay of the webcast will be available approximately two hours after the live webcast.

About Horizon Pharma plc

Horizon Pharma plc is focused on researching, developing and commercializing innovative medicines that address unmet treatment needs for rare and rheumatic diseases. By fostering a growing pipeline of medicines in development and exploring all potential uses for currently marketed medicines, we strive to make a powerful difference for patients, their caregivers and physicians. For us, it’s personal: by living up to our own potential, we are helping others live up to theirs. For more information, please visit www.horizonpharma.com, follow us @HZNPplc on Twitter, like us on Facebook or explore career opportunities on LinkedIn.

Note Regarding Use of Non-GAAP Financial Measures

EBITDA, or earnings before interest, taxes, depreciation and amortization, and adjusted EBITDA are used and provided by Horizon Pharma as non-GAAP financial measures. Horizon Pharma provides certain other financial measures such as non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP gross profit and gross profit ratio, non-GAAP operating expenses, non-GAAP operating income, non-GAAP tax rate, non-GAAP operating cash flow and net debt, each of which include adjustments to GAAP figures. These non-GAAP measures are intended to provide additional information on Horizon Pharma’s performance, operations, expenses, profitability and cash flows. Adjustments to Horizon Pharma's GAAP figures as well as EBITDA exclude acquisition and/or divestiture-related expenses, charges related to the discontinuation of ACTIMMUNE development for Friedreich’s ataxia, gain from divestiture, gain from sale of assets, an upfront fee for a license of a patent, litigation settlements, loss on debt extinguishment, costs of debt refinancing, drug manufacturing harmonization costs, restructuring and realignment costs, as well as non-cash items such as share-based compensation, depreciation and amortization, royalty accretion, non-cash interest expense, long-lived asset impairment charges, impacts of contingent royalty liability remeasurements and other non-cash adjustments. Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred. Horizon maintains an established non-GAAP cost policy that guides the determination of what costs will be excluded in non-GAAP measures. Horizon Pharma believes that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of Horizon Pharma's financial and operating performance. The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of the Company’s historical and expected 2019 financial results and trends and to facilitate comparisons between periods and with respect to projected information. In addition, these non-GAAP financial measures are among the indicators Horizon Pharma's management uses for planning and forecasting purposes and measuring the Company's performance. For example, adjusted EBITDA is used by Horizon Pharma as one measure of management performance under certain incentive compensation arrangements. 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. Horizon Pharma has not provided a reconciliation of its full-year 2019 adjusted EBITDA outlook to an expected net income (loss) outlook because certain items such as acquisition/divestiture-related expenses and share-based compensation that are a component of net income (loss) cannot be reasonably projected due to the significant impact of changes in Horizon Pharma's stock price, the variability associated with the size or timing of acquisitions/divestitures and other factors. These components of net income (loss) could significantly impact Horizon Pharma’s actual net income (loss).

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements related to Horizon Pharma's full-year 2019 net sales and adjusted EBITDA guidance; expected financial performance and operating results in future periods; expected timing of clinical trials and regulatory submissions and decisions, including related to the Phase 3 clinical trial of and potential BLA submission for teprotumumab; expected expansion of Horizon Pharma’s rare disease medicine pipeline and the impact thereof; potential market opportunity for Horizon Pharma’s medicines and medicine candidates; and business and other statements that are not historical facts. These forward-looking statements are based on Horizon Pharma's current expectations and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks that Horizon Pharma’s actual future financial and operating results may differ from its expectations or goals; Horizon Pharma’s ability to grow net sales from existing products; the availability of coverage and adequate reimbursement and pricing from government and third-party payers; risks relating to Horizon Pharma’s ability to successfully implement its business strategies; risks inherent in developing novel medicine candidates, such as teprotumumab, and existing medicines for new indications; risks related to acquisition integration and achieving projected benefits; risks associated with regulatory approvals; risks in the ability to recruit, train and retain qualified personnel; competition, including potential generic competition; the ability to protect intellectual property and defend patents; regulatory obligations and oversight, including any changes in the legal and regulatory environment in which Horizon Pharma operates and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in Horizon Pharma's filings and reports with the SEC. Horizon Pharma undertakes no duty or obligation to update any forward-looking statements contained in this press release as a result of new information.

Horizon Pharma plc
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
				Three Months Ended December 31,								Twelve Months Ended December 31,
				2018				2017				2018				2017
				(Unaudited)
Net sales				$	355,543			$	274,219			$	1,207,570			$	1,056,231
Cost of goods sold					109,520				143,269				422,317				537,334
Gross profit					246,023				130,950				785,253				518,897
OPERATING EXPENSES:
	Research and development				19,683				30,872				82,762				224,962
	Selling, general and administrative				174,628				167,423				692,485				655,093
	Impairment of long-lived assets				10,847				-				50,302				22,270
	Gain on sale of assets				(30,385	)			-				(42,688	)			-
		Total operating expenses			174,773				198,295				782,861				902,325
Operating income (loss)					71,250				(67,345	)			2,392				(383,428	)
OTHER EXPENSE, NET:
	Interest expense, net				(29,771	)			(31,226	)			(121,692	)			(126,523	)
	Foreign exchange loss				(111	)			(427	)			(192	)			(260	)
	Gain on divestiture				-				299				-				6,267
	Loss on debt extinguishment				-				(446	)			-				(978	)
	Other (expense) income, net				(632	)			309				346				588
		Total other expense, net			(30,514	)			(31,491	)			(121,538	)			(120,906	)
Income (loss) before benefit for income taxes					40,736				(98,836	)			(119,146	)			(504,334	)
Benefit for income taxes					(46,822	)			(60,611	)			(44,959	)			(102,749	)
Net income (loss)				$	87,558			$	(38,225	)		$	(74,187	)		$	(401,585	)
Earnings (loss) per ordinary share - basic				$	0.52			$	(0.23	)		$	(0.45	)		$	(2.46	)
Weighted average ordinary shares outstanding - basic					168,126,924				164,048,823				166,155,405				163,122,663
Earnings (loss) per ordinary share - diluted				$	0.50			$	(0.23	)		$	(0.45	)		$	(2.46	)
Weighted average ordinary shares outstanding - diluted					174,230,711				164,048,823				166,155,405				163,122,663

Note: In the fourth quarter of 2018, we identified an error in the measurement of the contingent royalty liability calculation pertaining to the royalty end date for one of our medicines. The revision resulted in certain adjustments to the consolidated financial statements as of and for the year ended December 31, 2017, and the revised amounts are presented herein. Refer to our Annual Report on Form 10-K for the year ended December 31, 2018, for a detailed discussion of the revision.

Horizon Pharma plc
Condensed Consolidated Balance Sheets
(in thousands, except share data)
						As of
						December 31, 2018				December 31, 2017
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents					$	958,712			$	751,368
	Restricted cash						3,405				6,529
	Accounts receivable, net						464,730				405,214
	Inventories, net						50,751				61,655
	Prepaid expenses and other current assets						70,828				43,402
			Total current assets				1,548,426				1,268,168
Property and equipment, net							20,101				20,405
Developed technology, net							2,120,596				2,442,292
Other intangible assets, net							4,630				5,441
Goodwill							426,441				426,441
Deferred tax assets, net							3,148				3,470
Other assets							23,029				36,081
			Total assets			$	4,146,371			$	4,202,298
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
	Long-term debt—current portion					$	-			$	10,625
	Accounts payable						30,284				34,681
	Accrued expenses						205,593				175,697
	Accrued trade discounts and rebates						457,763				501,753
	Accrued royalties—current portion						63,363				65,328
	Deferred revenues—current portion						4,901				6,885
			Total current liabilities				761,904				794,969
LONG-TERM LIABILITIES:
	Exchangeable notes, net						332,199				314,384
	Long-term debt, net of current						1,564,485				1,576,646
	Accrued royalties, net of current						285,374				279,316
	Deferred revenues, net of current						-				9,713
	Deferred tax liabilities, net						93,630				157,945
	Other long-term liabilities						54,622				68,015
			Total long-term liabilities				2,330,310				2,406,019
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
	Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized;
		169,244,520 and 164,785,083 shares issued at December 31, 2018 and
		December 31, 2017, respectively, and 168,860,154 and 164,400,717 shares
		outstanding at December 31, 2018 and December 31, 2017, respectively					17				16
	Treasury stock, 384,366 ordinary shares at December 31, 2018 and December 31, 2017						(4,585	)			(4,585	)
	Additional paid-in capital						2,374,966				2,248,979
	Accumulated other comprehensive loss						(1,523	)			(983	)
	Accumulated deficit						(1,314,718	)			(1,242,117	)
			Total shareholders' equity				1,054,157				1,001,310
Total liabilities and shareholders' equity						$	4,146,371			$	4,202,298

Horizon Pharma plc
Condensed Consolidated Statements of Cash Flows
(in thousands)
					Three Months Ended December 31,								Twelve Months Ended December 31,
					2018				2017				2018				2017
					(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)					$	87,558			$	(38,225	)		$	(74,187	)		$	(401,585	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization expense					69,161				70,217				275,729				283,244
	Equity-settled share-based compensation					27,878				33,628				114,860				125,019
	Royalty accretion					15,105				12,848				59,476				51,263
	Impairment of long-lived assets					10,847				-				50,302				22,270
	Amortization of debt discount and deferred financing costs					5,872				5,756				22,751				21,619
	Deferred income taxes					(66,136	)			(69,242	)			(64,491	)			(132,231	)
	Gain on sale of assets					(30,385	)			-				(42,688	)			-
	Royalty liability remeasurement					1,027				16,538				(3,383	)			13,004
	Gain on divestiture					-				(299	)			-				(2,934	)
	Acquired in-process research & development expense					-				10,402				-				159,171
	Loss on debt extinguishment					-				445				-				978
	Foreign exchange and other adjustments					92				54				332				(1,466	)
	Changes in operating assets and liabilities:
		Accounts receivable				(73,757	)			17,168				(59,697	)			(84,444	)
		Inventories				2,378				24,889				10,280				108,371
		Prepaid expenses and other current assets				10,213				9,545				(25,313	)			5,110
		Accounts payable				(34,712	)			1,893				(4,593	)			(16,521	)
		Accrued trade discounts and rebates				98,136				66,026				(44,028	)			205,487
		Accrued expenses and accrued royalties				(3,674	)			(39,361	)			(9,972	)			(82,203	)
		Deferred revenues				(1,858	)			698				(395	)			4,468
		Other non-current assets and liabilities				(9,038	)			20,279				(10,440	)			5,720
			Net cash provided by operating activities			108,707				143,259				194,543				284,340
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets						35,000				-				44,424				-
Payment related to license agreement						-				-				(12,000	)			-
Purchases of property and equipment						(3,890	)			(303	)			(4,771	)			(4,336	)
Payments for acquisitions, net of cash acquired						-				1,598				-				(167,220	)
Proceeds from divestiture, net of cash divested						-				299				-				69,371
			Net cash provided by (used in) investing activities			31,110				1,594				27,653				(102,185	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term loans						(818,026	)			(847,874	)			(845,749	)			(1,622,749	)
Net proceeds from term loans						818,026				845,744				818,026				1,693,512
Payment of contingent consideration						-				(20,000	)			-				(20,000	)
Proceeds from the issuance of ordinary shares in connection with warrant exercises						-				-				-				1,789
Proceeds from the issuance of ordinary shares through ESPP programs						3,900				3,226				8,610				7,082
Proceeds from the issuance of ordinary shares in connection with stock option exercises						7,219				405				16,972				2,167
Payment of employee withholding taxes relating to share-based awards						(1,573	)			(893	)			(14,455	)			(6,533	)
Repurchase of ordinary shares						-				-				-				(992	)
			Net cash provided by (used in) financing activities			9,546				(19,392	)			(16,596	)			54,276
Effect of foreign exchange rate changes on cash, cash equivalents and
restricted cash						(692	)			946				(1,380	)			5,316
Net increase in cash, cash equivalents and restricted cash						148,671				126,407				204,220				241,747
Cash, cash equivalents and restricted cash, beginning of the year (1)						813,446				631,490				757,897				516,150
Cash, cash equivalents and restricted cash, end of the year (1)					$	962,117			$	757,897			$	962,117			$	757,897

(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.

Horizon Pharma plc
Segment Net Sales and Operating Income – 2017 Historical Information (Unaudited)
(in millions)
		Q1 17				Q2 17				Q3 17				Q4 17				FY17
Segment Net Sales
Orphan and Rheumatology		$	155.2			$	172.1			$	175.5			$	178.0			$	680.8
Primary Care			65.6				117.4				96.1				96.2				375.3
Segment Operating Income
Orphan and Rheumatology		$	49.7			$	64.7			$	65.5			$	61.2			$	241.1
Primary Care			2.6				62.4				42.2				41.9				149.1

Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
Net Income and Earnings Per Share (Unaudited)
(in thousands, except share and per share data)
				Three Months Ended December 31,								Twelve Months Ended December 31,
				2018				2017				2018				2017
GAAP net income (loss)				$	87,558			$	(38,225	)		$	(74,187	)		$	(401,585	)
Non-GAAP adjustments:
	Depreciation				1,499				1,595				6,126				6,631
	Amortization, accretion and step-up:
		Intangible amortization expense			67,662				68,623				269,603				276,613
		Accretion of royalty liabilities			15,105				12,848				59,565				51,263
		Inventory step-up expense			99				23,492				17,312				119,151
		Amortization of debt discount and deferred financing costs			5,872				5,756				22,752				21,619
	Acquisition/divestiture-related costs				1,532				8,050				7,717				177,035
	Restructuring and realignment costs				461				(20	)			15,350				4,883
	Share-based compensation				27,878				33,618				114,860				121,553
	Impairment of long-lived assets				10,847				-				50,302				22,270
	Litigation settlements				-				-				5,750				-
	Drug substance harmonization costs				1,275				(47	)			2,855				10,651
	Fees related to term loan refinancings				854				1,106				937				5,220
	Upfront and milestone payments related to license agreements				-				12,186				(10	)			12,186
	Charges relating to discontinuation of Friedreich's ataxia program				(2,940	)			4,458				(1,464	)			239
	Remeasurement of royalties for medicines acquired through
	business combinations				1,027				16,538				(3,383	)			13,004
	Gain on sale of assets				(30,385	)			-				(42,688	)			-
	Royalties for medicines acquired through business combinations				(14,349	)			(12,033	)			(53,961	)			(47,003	)
	Gain on divestiture				-				(299	)			-				(6,267	)
	Loss on debt extinguishment				-				446				-				978
		Total of pre-tax non-GAAP adjustments			86,437				176,317				471,623				790,026
	Income tax effect of pre-tax non-GAAP adjustments				(55,729	)			(14,781	)			(45,393	)			(118,704	)
	Other non-GAAP income tax adjustments				(1,499	)			(74,939	)			(37,392	)			(74,939	)
		Total of non-GAAP adjustments			29,209				86,597				388,838				596,383
Non-GAAP Net Income				$	116,767			$	48,372			$	314,651			$	194,798
Non-GAAP Earnings Per Share:
Weighted average ordinary shares - Basic					168,126,924				164,048,823				166,155,405				163,122,663
Non-GAAP Earnings Per Share - Basic:
	GAAP earnings (loss) per share - Basic			$	0.52			$	(0.23	)		$	(0.45	)		$	(2.46	)
	Non-GAAP adjustments				0.17				0.52				2.34				3.65
	Non-GAAP earnings per share - Basic			$	0.69			$	0.29			$	1.89			$	1.19
Weighted average ordinary shares - Diluted
	Weighted average ordinary shares - Basic				168,126,924				164,048,823				166,155,405				163,122,663
	Ordinary share equivalents				6,103,787				2,807,459				5,393,514				2,582,576
	Weighted average shares - Diluted				174,230,711				166,856,282				171,548,919				165,705,239
Non-GAAP Earnings Per Share - Diluted
	GAAP earnings (loss) per share - Diluted			$	0.50			$	(0.23	)		$	(0.45	)		$	(2.46	)
	Non-GAAP adjustments				0.17				0.52				2.34				3.65
	Diluted earnings per share effect of ordinary share equivalents				-				-				(0.06	)			(0.01	)
	Non-GAAP earnings per share - Diluted			$	0.67			$	0.29			$	1.83			$	1.18

Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
EBITDA (Unaudited)
(in thousands)
					Three Months Ended December 31,																						Twelve Months Ended December 31,
					2018											2017											2018											2017
GAAP net income (loss)					$	87,558										$	(38,225	)									$	(74,187	)									$	(401,585	)
Depreciation						1,499											1,595											6,126											6,631
Amortization, accretion and step-up:
	Intangible amortization expense					67,662											68,623											269,603											276,613
	Accretion of royalty liabilities					15,105											12,848											59,565											51,263
	Amortization of deferred revenue					-											(224	)										-											(860	)
	Inventory step-up expense					99											23,492											17,312											119,151
Interest expense, net (including amortization of
	debt discount and deferred financing costs)					29,771											31,226											121,692											126,523
Benefit for income taxes						(46,822	)										(60,611	)										(44,959	)										(102,749	)
EBITDA					$	154,872										$	38,724										$	355,152										$	74,987
Other non-GAAP adjustments:
	Acquisition/divestiture-related costs					1,532											8,050											7,717											177,035
	Restructuring and realignment costs					461											(20	)										15,350											4,883
	Share-based compensation					27,878											33,618											114,860											121,553
	Impairment of long-lived assets					10,847											-											50,302											22,270
	Litigation settlements					-											-											5,750											-
	Drug substance harmonization costs					1,275											(47	)										2,855											10,651
	Fees related to term loan refinancings					854											1,106											937											5,220
	Upfront and milestone payments related to license agreements					-											12,186											(10	)										12,186
	Charges relating to discontinuation of Friedreich's ataxia program					(2,940	)										4,458											(1,464	)										239
	Remeasurement of royalties for medicines acquired through
	business combinations					1,027											16,538											(3,383	)										13,004
	Gain on sale of assets					(30,385	)										-											(42,688	)										-
	Royalties for medicines acquired through business combinations					(14,349	)										(12,033	)										(53,961	)										(47,003	)
	Gain on divestiture					-											(299	)										-											(6,267	)
	Loss on debt extinguishment					-											446											-											978
Total of other non-GAAP adjustments						(3,800	)										64,003											96,265											314,749
Adjusted EBITDA					$	151,072										$	102,727										$	451,417										$	389,736

Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
Operating Income (Unaudited)
(in thousands)
					Three Months Ended December 31,																						Twelve Months Ended December 31,
					2018											2017											2018											2017
GAAP operating income (loss)					$	71,250										$	(67,345	)									$	2,392										$	(383,428	)
Non-GAAP adjustments:
	Depreciation					1,499											1,595											6,126											6,631
	Amortization, accretion and step-up:
		Intangible amortization expense				67,662											68,623											269,603											276,613
		Accretion of royalty liabilities				15,105											12,848											59,565											51,263
		Inventory step-up expense				99											23,492											17,312											119,151
	Acquisition/divestiture-related costs					630											8,050											6,815											177,035
	Restructuring and realignment costs					461											(20	)										15,350											4,883
	Share-based compensation					27,878											33,618											114,860											121,553
	Impairment of long-lived assets					10,847											-											50,302											22,270
	Litigation settlements					-											-											5,750											-
	Drug substance harmonization costs					1,275											(47	)										2,855											10,651
	Fees related to term loan refinancings					854											1,106											937											5,220
	Upfront and milestone payments related to license agreements					-											12,186											90											12,186
	Charges relating to discontinuation of Friedreich's ataxia program					(2,940	)										4,458											(1,464	)										239
	Remeasurement of royalties for medicines acquired through
	business combinations					1,027											16,538											(3,383	)										13,004
	Gain on sale of assets					(30,385	)										-											(42,688	)										-
	Royalties for medicines acquired through business combinations					(14,349	)										(12,033	)										(53,961	)										(47,003	)
		Total of non-GAAP adjustments				79,663											170,414											448,069											773,696
Non-GAAP operating income					$	150,913										$	103,069										$	450,461										$	390,268
	Orphan and Rheumatology segment operating income					84,761											61,190											290,014											241,135
	Primary care segment operating income					66,152											41,879											160,447											149,133
Total segment operating income					$	150,913										$	103,069										$	450,461										$	390,268
	Amortization of deferred revenue					-											(224	)										-											(860	)
	Foreign exchange loss					(111	)										(427	)										(192	)										(260	)
	Other income, net					270											309											1,148											588
Adjusted EBITDA					$	151,072										$	102,727										$	451,417										$	389,736

Horizon Pharma plc
GAAP to Non-GAAP Reconciliations
Gross Profit and Operating Cash Flow (Unaudited)
(in thousands, except percentages)
					Three Months Ended December 31,								Twelve Months Ended December 31,
					2018				2017				2018				2017
Non-GAAP Gross Profit:
	GAAP gross profit				$	246,023			$	130,950			$	785,253			$	518,897
	Non-GAAP gross profit adjustments:
		Depreciation				171				181				700				729
		Intangible amortization expense				67,458				68,420				268,793				275,803
		Accretion of royalty liabilities				15,105				12,848				59,565				51,263
		Inventory step-up expense				99				23,492				17,312				119,151
		Acquisition/divestiture-related costs				-				19				52				147
		Share-based compensation				932				773				3,699				2,469
		Drug substance harmonization costs				1,275				(47	)			2,855				10,651
		Charges relating to discontinuation of Friedreich's ataxia
		program				(2,940	)			4,458				(1,551	)			1,744
		Remeasurement of royalties for medicines acquired through
		business combinations				2,900				15,859				(1,510	)			12,325
		Royalties for medicines acquired through business
		combinations				(14,349	)			(12,033	)			(53,961	)			(47,003	)
	Total of Non-GAAP adjustments					70,651				113,970				295,954				427,279
	Non-GAAP gross profit				$	316,674			$	244,920			$	1,081,207			$	946,176
	GAAP gross profit %					69.2	%			47.8	%			65.0	%			49.1	%
	Non-GAAP gross profit %					89.1	%			89.3	%			89.5	%			89.6	%
	GAAP cash provided by operating activities				$	108,707			$	143,259			$	194,543			$	284,340
		Cash payments for acquisition/divestiture-related costs				1,065				9,898				8,815				54,019
		Cash payments for restructuring and realignment costs				2,767				508				11,904				4,665
		Cash payments for litigation settlements				-				-				5,750				32,500
		Cash payments for upfront and milestone payments related to
		license agreement				-				-				175				-
		Cash payments drug substance harmonization costs				1,718				205				7,661				5,249
		Cash payments for discontinuation of Friedreich's
		ataxia program				-				3,038				3,399				7,208
		Cash payment for debt extinguishment				-				-				-				145
		Cash payments relating to term loan refinancings				883				1,065				941				9,079
	Non-GAAP operating cash flow				$	115,140			$	157,973			$	233,188			$	397,205

Horizon Pharma plc
Net Debt Reconciliation (Unaudited)
(in thousands)
		As of
		December 31, 2018			December 31, 2017
Long-term debt-current portion		$	-		$	10,625
Long-term debt, net of current			1,564,485			1,576,646
Exchangeable notes, net			332,199			314,384
Total Debt			1,896,684			1,901,655
Debt discount			87,038			108,054
Deferred financing fees			9,304			11,041
Total Principal Amount Debt			1,993,026			2,020,750
Less: cash and cash equivalents			958,712			751,368
Net Debt		$	1,034,314		$	1,269,382

Horizon Pharma plc
GAAP to Non-GAAP Tax Rate Reconciliation (Unaudited)
(in millions, except percentages and per share amounts)
		Q4 2018
		Pre-tax Net (Loss) Income					Income Tax (Benefit) Expense					Tax Rate				Net (Loss) Income					Diluted (Loss) Earnings Per Share
As reported - GAAP		$	40.8				$	(46.8	)			(114.9	)%			$	87.6				$	0.50
Non-GAAP adjustments			86.4					57.2									29.2
Non-GAAP		$	127.2				$	10.4				8.2	%			$	116.8				$	0.67
		Q4 2017
		Pre-tax Net (Loss) Income					Income Tax (Benefit) Expense					Tax Rate				Net (Loss) Income					Diluted (Loss) Earnings Per Share
As reported - GAAP		$	(98.8	)			$	(60.6	)			61.3	%			$	(38.2	)			$	(0.23	)
Non-GAAP adjustments			176.3					89.7									86.6
Non-GAAP		$	77.5				$	29.1				37.7	%			$	48.4				$	0.29
		YTD 2018
		Pre-tax Net (Loss) Income					Income Tax (Benefit) Expense					Tax Rate				Net (Loss) Income					Diluted (Loss) Earnings Per Share
As reported - GAAP		$	(119.1	)			$	(45.0	)			37.7	%			$	(74.1	)			$	(0.45	)
Non-GAAP adjustments			471.6					82.8									388.8
Non-GAAP		$	352.5				$	37.8				10.7	%			$	314.7				$	1.83
		YTD 2017
		Pre-tax Net (Loss) Income					Income Tax (Benefit) Expense					Tax Rate				Net (Loss) Income					Diluted (Loss) Earnings Per Share
As reported - GAAP		$	(504.3	)			$	(102.7	)			20.4	%			$	(401.6	)			$	(2.46	)
Non-GAAP adjustments			790.0					193.6									596.4
Non-GAAP		$	285.7				$	90.9				31.8	%			$	194.8				$	1.18

Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended Dec. 31, 2018
(Unaudited)
																																Income Tax
								Research &				Selling, General				Impairment of				Gain on				Interest				Other (Expense)				Benefit
				COGS				Development				& Administrative				Long-Lived Assets				Sale of Assets				Expense, Net				Income , Net				(Expense)
GAAP as reported				$	(109,520	)		$	(19,683	)		$	(174,628	)		$	(10,847	)		$	30,385			$	(29,771	)		$	(632	)		$	46,822
Non-GAAP Adjustments (in thousands):
	Depreciation(1)				171				-				1,328				-				-				-				-				-
	Amortization, accretion and step-up:
		Intangible amortization expense(2)			67,458				-				204				-				-				-				-				-
		Accretion of royalty liabilities(3)			15,105				-				-				-				-				-				-				-
		Inventory step-up expense(4)			99				-				-				-				-				-				-				-
		Amortization of debt discount and deferred financing costs(5)			-				-				-				-				-				5,872				-				-
	Acquisition/divestiture-related costs(6)				-				(171	)			801				-				-				-				902				-
	Restructuring and realignment costs(7)				-				(1,036	)			1,497				-				-				-				-				-
	Share-based compensation(8)				932				2,183				24,763				-				-				-				-				-
	Impairment of long-lived assets(9)				-				-				-				10,847				-				-				-				-
	Drug substance harmonization costs(11)				1,275				-				-				-				-				-				-				-
	Fees related to term loan refinancings(12)				-				-				854				-				-				-				-				-
	Charges relating to discontinuation of Friedreich's ataxia program(14)				(2,940	)			-				-				-				-				-				-				-
	Remeasurement of royalties for products acquired through business combinations(3)				2,900				-				(1,873	)			-				-				-				-				-
	Gain on sale of assets(15)				-				-				-				-				(30,385	)			-				-				-
	Royalties for medicines acquired through business combinations(3)				(14,349	)			-				-				-				-				-				-				-
	Income tax effect on pre-tax non-GAAP adjustments(18)				-				-				-				-				-				-				-				(55,729	)
	Other non-GAAP income tax adjustments(19)				-				-				-				-				-				-				-				(1,499	)
		Total of non-GAAP adjustments			70,651				976				27,574				10,847				(30,385	)			5,872				902				(57,228	)
Non-GAAP				$	(38,869	)		$	(18,707	)		$	(147,054	)		$	-			$	-			$	(23,899	)		$	270			$	(10,406	)
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Three Months Ended Dec. 31, 2017
(Unaudited)
																												Income Tax
								Research &				Selling, General				Interest				Gain on				Loss on Debt				Benefit
				COGS				Development				& Administrative				Expense, Net				Divestiture				Extinguishment				(Expense)
GAAP as reported				$	(143,269	)		$	(30,872	)		$	(167,423	)		$	(31,226	)		$	299			$	(446	)		$	60,611
Non-GAAP Adjustments (in thousands):
	Depreciation(1)				181				-				1,414				-				-				-				-
	Amortization, accretion and step-up:																								-
		Intangible amortization expense(2)			68,420				-				203				-				-				-				-
		Accretion of royalty liabilities(3)			12,848				-				-				-				-				-				-
		Inventory step-up expense(4)			23,492				-				-				-				-				-				-
		Amortization of debt discount and deferred financing costs(5)			-				-				-				5,756				-				-				-
	Acquisition/divestiture-related costs(6)				19				687				7,344				-				-				-				-
	Restructuring and realignment costs(7)				-				-				(20	)			-				-				-				-
	Share-based compensation(8)				773				2,650				30,195				-				-				-				-
	Drug substance harmonization costs(11)				(47	)			-				-				-				-				-				-
	Fees related to term loan refinancings(12)				-				-				1,106				-				-				-				-
	Upfront and milestone payments related to license agreements(13)				-				12,186				-				-				-				-				-
	Charges relating to discontinuation of Friedreich's ataxia program(14)				4,458				-				-				-				-				-				-
	Remeasurement of royalties for products acquired through business combinations(3)				15,859				-				679				-				-				-				-
	Royalties for medicines acquired through business combinations(3)				(12,033	)			-				-				-				-				-				-
	Gain on divestiture(16)				-				-				-				-				(299	)			-				-
	Loss on debt extinguishment(17)				-				-				-				-				-				446				-
	Income tax effect on pre-tax non-GAAP adjustments(18)				-				-				-				-				-				-				(14,781	)
	Other non-GAAP income tax adjustments(19)				-				-				-				-				-				-				(74,939	)
		Total of non-GAAP adjustments			113,970				15,523				40,921				5,756				(299	)			446				(89,720	)
Non-GAAP				$	(29,299	)		$	(15,349	)		$	(126,502	)		$	(25,470	)		$	-			$	-			$	(29,109	)

Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Twelve Months Ended December 31, 2018
(Unaudited)
																																Income Tax
								Research &				Selling, General				Impairment of				Gain on				Interest				Other (Expense)				Benefit
				COGS				Development				& Administrative				Long-Lived Assets				Sale of Assets				Expense, Net				Income, Net				(Expense)
GAAP as reported				$	(422,317	)		$	(82,762	)		$	(692,485	)		$	(50,302	)		$	42,688			$	(121,692	)		$	346			$	44,959
Non-GAAP Adjustments (in thousands):
	Depreciation(1)				700				-				5,426				-				-				-				-				-
	Amortization, accretion and step-up:
		Intangible amortization expense(2)			268,793				-				810				-				-				-				-				-
		Accretion of royalty liabilities(3)			59,565				-				-				-				-				-				-				-
		Inventory step-up expense(4)			17,312				-				-				-				-				-				-				-
		Amortization of debt discount and deferred financing costs(5)			-				-				-				-				-				22,752				-				-
	Acquisition/divestiture-related costs(6)				52				(237	)			7,000				-				-				-				902				-
	Restructuring and realignment costs(7)				-				696				14,654				-				-				-				-				-
	Share-based compensation(8)				3,699				8,880				102,281				-				-				-				-				-
	Impairment of long-lived assets(9)				-				-				-				50,302				-				-				-				-
	Litigation settlements(10)				-				-				5,750				-				-				-				-				-
	Drug substance harmonization costs(11)				2,855				-				-				-				-				-				-				-
	Fees related to term loan refinancings(12)				-				-				937				-				-				-				-				-
	Upfront and milestone payments related to license agreements(13)				-				90				-				-				-				-				(100	)			-
	Charges relating to discontinuation of Friedreich's ataxia program(14)				(1,551	)			87				-				-				-				-				-				-
	Remeasurement of royalties for products acquired through business combinations (3)				(1,510	)			-				(1,873	)			-				-				-				-				-
	Gain on sale of assets(15)				-				-				-				-				(42,688	)			-				-				-
	Royalties for medicines acquired through business combinations(3)				(53,961	)			-				-				-				-				-				-				-
	Income tax effect on pre-tax non-GAAP adjustments(18)				-				-				-				-				-				-				-				(45,393	)
	Other non-GAAP income tax adjustments(19)				-				-				-				-				-				-				-				(37,392	)
		Total of non-GAAP adjustments			295,954				9,516				134,985				50,302				(42,688	)			22,752				802				(82,785	)
Non-GAAP				$	(126,363	)		$	(73,246	)		$	(557,500	)		$	-			$	-			$	(98,940	)		$	1,148			$	(37,826	)
Horizon Pharma plc
Certain Income Statement Line Items - Non-GAAP Adjusted
For the Twelve Months Ended December 31, 2017
(Unaudited)
																																Income Tax
								Research &				Selling, General				Impairment of				Interest				Gain on				Loss on Debt				Benefit
				COGS				Development				& Administrative				Long-Lived Assets				Expense, Net				Divestiture				Extinguishment				(Expense)
GAAP as reported				$	(537,334	)		$	(224,962	)		$	(655,093	)		$	(22,270	)		$	(126,523	)		$	6,267			$	(978	)		$	102,749
Non-GAAP Adjustments (in thousands):
	Depreciation(1)				729				-				5,902				-				-				-				-				-
	Amortization, accretion and step-up:
		Intangible amortization expense(2)			275,803				-				810				-				-				-				-				-
		Accretion of royalty liabilities(3)			51,263				-				-				-				-				-				-				-
		Inventory step-up expense(4)			119,151				-				-				-				-				-				-				-
		Amortization of debt discount and deferred financing costs(5)			-				-				-				-				21,619				-				-				-
	Acquisition/divestiture-related costs(6)				147				149,112				27,776				-				-				-				-				-
	Restructuring and realignment costs(7)				-				-				4,883				-				-				-				-				-
	Share-based compensation(8)				2,469				9,263				109,821				-				-				-				-				-
	Impairment of long-lived assets(9)				-				-				-				22,270				-				-				-				-
	Drug substance harmonization costs(11)				10,651				-				-				-				-				-				-				-
	Fees related to term loan refinancings(12)				-				-				5,220				-				-				-				-				-
	Upfront and milestone payments related to license agreements(13)				-				12,186				-				-				-				-				-				-
	Charges relating to discontinuation of Friedreich's ataxia program(14)				1,744				(1,505	)			-				-				-				-				-				-
	Remeasurement of royalties for products acquired through business combinations (3)				12,325				-				679				-				-				-				-				-
	Royalties for medicines acquired through business combinations(3)				(47,003	)			-				-				-				-				-				-				-
	Gain on divestiture(16)				-				-				-				-				-				(6,267	)			-				-
	Loss on debt extinguishment(17)				-				-				-				-				-				-				978				-
	Income tax effect on pre-tax non-GAAP adjustments(18)				-				-				-				-				-				-				-				(118,704	)
	Other non-GAAP income tax adjustments(19)				-				-				-				-				-				-				-				(74,939	)
		Total of non-GAAP adjustments			427,279				169,056				155,091				22,270				21,619				(6,267	)			978				(193,643	)
Non-GAAP				$	(110,055	)		$	(55,906	)		$	(500,002	)		$	-			$	(104,904	)		$	-			$	-			$	(90,894	)

NOTES FOR CERTAIN INCOME STATEMENT LINE ITEMS - NON-GAAP
(1)		Represents depreciation expense related to our property, equipment, software and leasehold improvements.
(2)		Intangible amortization expenses are associated with our intellectual property rights, developed technology and customer relationships related to ACTIMMUNE, BUPHENYL, KRYSTEXXA, LODOTRA, MIGERGOT, PENNSAID 2%, PROCYSBI, RAVICTI, RAYOS and VIMOVO.
(3)		Our accrued contingent royalty liabilities consist of contingent third-party royalty obligations that we assume when we acquire the rights to medicines. At the time of each acquisition, we assign a fair value to the contingent liability for royalties. On a quarterly basis, we evaluate the carrying amount of the liability and we remeasure, or adjust, the liability when anticipated royalty payments materially change. Any remeasurements of the contingent royalty liabilities are recorded as an increase in or reduction to cost of goods sold during the period. In addition, accretion expense on the contingent royalty liability is recorded in cost of goods sold. When we prepare our non-GAAP financial measures, we exclude the ongoing impacts of acquisition-related contingent royalty liabilities. We do this by excluding the impact of any remeasurement of contingent royalty liabilities and the royalty accretion expense. However, since we recorded a liability for contingent royalties in purchase accounting, when we exclude the remeasurement and royalty accretion expense, our non-GAAP financial measures would not include any impact of the royalties we are obligated to pay based on our current period net sales. Therefore, we also add back in our non-GAAP financial measures the actual royalty amount incurred based on the periods’ net sales for each of our medicines acquired through business combinations.
(4)		During the year ended Dec. 31, 2018, we recognized in cost of goods sold $17.3 million for inventory step-up expense primarily related to KRYSTEXXA inventory sold.
		During the year ended Dec. 31, 2017, we recognized in cost of goods sold $78.3 million for inventory step-up expense related to KRYSTEXXA and MIGERGOT inventory sold and $40.8 million for inventory step-up expense related to PROCYSBI and QUINSAIR inventory sold.
(5)		Represents amortization of debt discount and deferred financing costs associated with our debt.
(6)		Represents expenses, including legal and consulting fees, incurred in connection with our acquisitions and divestitures.
(7)		Represents expenses, including severance costs and consulting fees, related to restructuring and realignment activities.
(8)		Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employees, our previous cash-settled long-term incentive plan and our employee stock purchase plan.
(9)		Impairment of long-lived assets during the year ended Dec. 31, 2018, primarily relates to the write-off of the book value of developed technology related to PROCYSBI in Canada and Latin America and LODOTRA.
		Impairment of long-lived assets during the year ended Dec. 31, 2017 of $22.3 million relates to an impairment recorded following payment to Boehringer Ingelheim International for the acquisition of certain rights to interferon gamma-1b. This was presented in the “charges relating to the discontinuation of the Friedreich’s ataxia program” line item in the reconciliation of GAAP to non-GAAP measures during the year ended Dec. 31, 2017.
(10)		We recorded $5.8 million of expense during the year ended Dec. 31, 2018, for litigation settlements related to PENNSAID 2% and RAVICTI.
(11)		During the year ended Dec. 31, 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, or 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 the FA discontinuation, 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.
(12)		Represents arrangement and other fees relating to the refinancing of our term loans.
(13)		During the year ended Dec. 31, 2017, we incurred $12.2 million of upfront and milestone payments related to license agreements, primarily related to our agreement to license HZN-003, a rheumatology pipeline program with the objective of enhancing our leadership position in the uncontrolled gout market, from MedImmune for an upfront cash payment of $12.0 million.
(14)		During the year ended Dec. 31, 2018, we recorded a reduction to previously incurred charges relating to the FA discontinuation of $1.5 million.
		During the year ended Dec. 31, 2017, we recorded charges relating to the FA discontinuation of $0.2 million.
(15)		During the year ended Dec. 31, 2018, we sold our rights to interferon gamma-1b in all territories outside the United States, Canada and Japan to Clinigen for cash proceeds of $9.5 million, with a potential additional contingent consideration payment, and we recorded a gain of $12.3 million. Additionally, during the year ended Dec. 31, 2018, we sold our rights to RAVICTI and AMMONAPS outside of North America and Japan to Medical Need Europe AB, and we recorded a gain of $30.4 million.
(16)		During the year ended Dec. 31, 2017, we completed the divestiture of a European subsidiary that owns the marketing rights to PROCYSBI and QUINSAIR in EMEA to Chiesi and in connection with this divestiture we recorded a gain of $6.3 million.
(17)		During the year ended Dec. 31, 2017, we entered into two refinancing amendments for our term loans. We accounted for a portion of the repayments under these refinancing amendments as a debt extinguishment and recorded a loss on debt extinguishment of $1.0 million in the consolidated statements of comprehensive loss, which reflected the write-off of the unamortized portion of debt discount and deferred financing costs previously incurred and a one percent prepayment penalty fee.
(18)		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.
(19)		Other non-GAAP income tax adjustments during the year ended Dec. 31, 2017, reflect the provisional $74.9 million net benefit recorded following the enactment of the Tax Act, which net benefit included a $134.2 million tax benefit from the revaluation of our U.S. net deferred tax liability based on the revised U.S. federal tax rate of 21 percent, partially offset by the write-off of the $59.2 million deferred tax asset related to our U.S. interest expense carryforwards under Section 163(j) of the Code.
		Following the issuance of Notice 2018-28 by the U.S. Treasury Department and the U.S. Internal Revenue Service during the year ended Dec. 31, 2018, and in accordance with the measurement period provisions under SAB 118, we reinstated the deferred tax asset related to our U.S. interest expense carry forwards under Section 163(j) based on the revised U.S. federal tax rate of 21 percent. The impact of the deferred tax asset reinstatement in accordance with SAB 118 was a $37.4 million increase to our benefit for income taxes and a corresponding decrease to the U.S. group net deferred tax liability position.

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