HORIZON THERAPEUTICS PUBLIC LTD CO – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our
condensed consolidated financial statements and the related notes that appear
elsewhere in this report. This discussion contains forward-looking statements
reflecting our current expectations that involve risks and uncertainties which
are subject to safe harbors under the Securities Act of 1933, as amended, or the
Securities Act, and the Securities Exchange Act of 1934, as amended, or the
Exchange Act. These forward-looking statements include, but are not limited to,
statements concerning the pending transaction with Amgen Inc., our strategy and
other aspects of our future operations, future financial position, future
revenues, projected costs, expectations regarding demand and acceptance for our
medicines, growth opportunities and trends in the market in which we operate,
prospects and plans and objectives of management. The words "anticipates",
"believes", "estimates", "expects", "intends", "may", "plans", "projects",
"will", "would" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. These forward-looking
statements involve risks and uncertainties that could cause our actual results
to differ materially from those in the forward-looking statements, including,
without limitation, the risks set forth in Part II, Item 1A, "Risk Factors" in
this report and in our other filings with the Securities and Exchange
Commission, or SEC. We do not assume any obligation to update any
forward-looking statements.

Unless otherwise indicated or the context otherwise requires, references to
"Horizon", "we", "us" and "our" refer to Horizon Therapeutics plc and its
consolidated subsidiaries.

OUR BUSINESS

We are a global biotechnology company focused on the discovery, development and
commercialization of medicines that address critical needs for people impacted
by rare, autoimmune and severe inflammatory diseases. Our pipeline is
purposeful: we apply scientific expertise and courage to bring clinically
meaningful therapies to patients. We believe science and compassion must work
together to transform lives.

Effective in the fourth quarter of 2022, management realigned our reportable
segments to reflect changes in the manner in which the chief operating decision
maker, or CODM, assesses financial information for decision-making purposes. We
transitioned our two reportable segments, the inflammation segment and the
orphan segment, to one reportable segment for the year ended December 31, 2022.
All prior year amounts have been reclassified to conform to our current
reporting structure. Our commercial portfolio is currently composed of 12
medicines in the areas of rare diseases, gout, ophthalmology and inflammation.

On December 12, 2022, we announced we had entered into a transaction agreement
with Amgen Inc., or Amgen, and Pillartree Limited, or Pillartree, a wholly owned
subsidiary of Amgen. Subject to the terms of the transaction agreement,
Pillartree will acquire our company, or the Transaction, pursuant to a scheme of
arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of Ireland, or
the Scheme. As a result of the Scheme, we would become a wholly owned subsidiary
of Amgen.

At the effective time of the Scheme, or the Effective Time, holders of our
ordinary shares will be entitled to receive $116.50 in cash per ordinary share,
or the Consideration. Our equity awards will be treated as set forth in the
transaction agreement, such that:

•

each option to purchase our ordinary shares that is outstanding as of
immediately prior to the Effective Time (whether or not vested) will, contingent
upon and effective as of the Effective Time, be canceled and converted into the
right to receive cash, without interest, in an amount equal to (a) the total
number of our ordinary shares subject to such option immediately prior to the
Effective Time, multiplied by (b) the excess of (i) the Consideration over (ii)
the exercise price payable per share under such option;

•

each of our restricted stock unit, or RSU, awards, excluding PSUs (as defined
below), that is outstanding as of immediately prior to the Effective Time
(whether or not vested) will, contingent upon and effective as of the Effective
Time, (a) if granted to a non-employee member of our board of directors, or held
by a person who, as of the date of the completion of the Transaction, is a
former service-provider of our company, be canceled and converted into the right
to receive a cash amount equal to (i) the total number of our ordinary shares
subject to such RSU immediately prior to the Effective Time multiplied by (ii)
the Consideration, and (b) if not granted to an individual described in clause
(a) above, be canceled and converted into a restricted stock unit, or an Amgen
RSU, denominated in shares of Amgen's common stock. The number of shares of
Amgen common stock subject to each such Amgen RSU will be equal to the product
(rounded down to the nearest whole number) of (a) the total number of our
ordinary shares subject to such RSU immediately prior to the Effective Time
multiplied by (b) the quotient of (i) the Consideration divided by (ii) the
volume weighted average of the per share closing price of Amgen's common stock
on the Nasdaq Global Select Market for five trading days ending on the second
business day prior to the completion of the Transaction. Following the Effective
Time, each Amgen RSU will continue to be governed by the same terms and
conditions (including vesting terms) as were applicable to the applicable RSU
immediately prior to the Effective Time; and

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•

each of our RSU awards with performance-based vesting or delivery requirements,
or a PSU, that is outstanding as of immediately prior to the Effective Time
(whether or not vested) will, contingent upon and effective as of the Effective
Time, be canceled and converted into the right to receive cash, without
interest, in an amount equal to (i) the total number of our ordinary shares
issuable in settlement of such PSU as determined, in accordance with the terms
of such PSU, by the compensation committee of our board of directors prior to
the Effective Time multiplied by (ii) the Consideration.

On February 24, 2023, our shareholders approved the Scheme and certain scheme
approval resolutions and amendments to the memorandum and articles of
association of Horizon to enable the Scheme to be effected. The closing of the
Transaction remains subject to customary closing conditions, including, among
other things, (a) the sanction by the Irish High Court of the Scheme and
delivery of the court order to the Irish Registrar of Companies, (b) the receipt
of required antitrust clearance in the United States, and the absence of an
order or law that prevents consummation of the Transaction or imposes a
burdensome condition (as defined in the transaction agreement), (c) absence of
any Material Adverse Effect (as defined in the transaction agreement) from
December 12, 2022 to the Sanction Date (as defined in the transaction agreement)
that is continuing as of the Sanction Date, (d) the accuracy of the other
party's representations and warranties subject to certain materiality and
material adverse effect exceptions and (e) the performance by each party of all
of its covenants and agreements under the transaction agreement in all material
respects. In connection with the Transaction, we and Amgen have received
clearances or confirmation of non-applicability related to foreign direct
investment in Denmark, Italy, Germany and France and clearances related to
antitrust in Germany and Austria. On January 30, 2023, we and Amgen received a
request for additional information and documentary materials, or a second
request, from the Federal Trade Commission, or FTC, in connection with the FTC's
review of the Transaction. We and Amgen have been working cooperatively with the
FTC in its review and will continue to do so.

The Irish High Court has set a hearing date of May 22, 2023 to consider our
application to sanction the Scheme. We will inform the Irish High Court in
advance if the hearing date needs to be adjourned to a later date as a result of
a condition to closing, including required regulatory clearances, not having
been satisfied by the scheduled hearing date. The Transaction is expected to
close shortly after the Irish High Court issues an order sanctioning the Scheme
and we continue to expect that the closing of the Transaction will occur during
the first half of 2023. Additional information about the transaction agreement
and the Transaction is set forth in our filings with the SEC.

As of March 31, 2023, our commercial portfolio consisted of the following
medicines:

TEPEZZA® (teprotumumab-trbw), for intravenous infusion
KRYSTEXXA® (pegloticase injection), for intravenous infusion
RAVICTI® (glycerol phenylbutyrate) oral liquid
UPLIZNA® (inebilizumab-cdon) injection, for intravenous use
PROCYSBI® (cysteamine bitartrate) delayed-release capsules and granules, for
oral use
ACTIMMUNE® (interferon gamma-1b) injection, for subcutaneous use
PENNSAID® (diclofenac sodium topical solution) 2% w/w, or PENNSAID 2%, for
topical use
RAYOS® (prednisone) delayed-release tablets, for oral use
BUPHENYL® (sodium phenylbutyrate) tablets and powder, for oral use
QUINSAIR™ (levofloxacin) solution for inhalation
DUEXIS® (ibuprofen/famotidine) tablets, for oral use
VIMOVO® (naproxen/esomeprazole magnesium) delayed-release tablets, for oral use






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Strategy

Horizon is a leading high-growth, innovation-driven, profitable global
biotechnology company. We are focused on the discovery, development and
commercialization of medicines that address critical needs for people impacted
by rare, autoimmune and severe inflammatory diseases. Our three strategic goals
are to: (i) maximize the value of our on-market rare disease medicines through
commercial execution and clinical investment; (ii) expand our research and
development, or R&D, pipeline through significant internal investment and
external business development; and (iii) build a global presence in targeted
international markets. Our vision is to build healthier communities, urgently
and responsibly, supported by our philosophy to make a meaningful difference for
patients and communities in need. We believe this generates value for our
multiple stakeholders, including our shareholders.

Our commercialization strategy for our on-market rare disease medicines,
including our key growth drivers TEPEZZA, KRYSTEXXA and UPLIZNA, includes
initiatives to increase awareness of the conditions each medicine is designed to
treat, enhancing efforts to identify target patients and in certain cases pursue
opportunities for international commercialization and more effective uses
through clinical trials. For TEPEZZA and KRYSTEXXA, initiatives include
promoting earlier treatment by driving awareness of the benefits of the
medicines, and for UPLIZNA, initiatives include increasing awareness of what
differentiates our medicines from other available therapies. Additional
strategies for our on-market rare disease medicines include optimizing timely
access for patients to the medicines and maximizing the value of the medicines
through investment in clinical trials. Specifically, with respect to TEPEZZA, we
expanded our commercial team, continued to invest in our direct-to-consumer
marketing activities, refined our marketing and physician education strategies,
and conducted extensive market analysis to identify further opportunities to
accelerate growth, which we are implementing. These growth opportunities involve
increasing adoption by ocular specialists and driving an urgency among
ophthalmologists and endocrinologists to diagnose and refer thyroid eye disease,
or TED, patients. In April 2023, we announced positive topline results from the
randomized, double-masked, placebo-controlled Phase 4 clinical trial evaluating
TEPEZZA in patients with chronic/low clinical activity score, or CAS, TED. In
addition, we received U.S. Food and Drug Administration, or FDA, approval to
update the TEPEZZA label to specify its use for the treatment of TED "regardless
of Thyroid Eye Disease activity or duration," which we believe reinforces the
importance of unrestricted access for all eligible patients across the full
spectrum of TED and creates an opportunity to ease the access burden for
patients and physicians with the goal of decreasing time to therapy for patients
who may benefit from TEPEZZA. As part of our strategy to maximize the value of
TEPEZZA, we plan to educate key stakeholders, including physicians, patients and
payors on the trial results and updated label indication. With respect to
KRYSTEXXA, after receiving U.S. Food and Drug Administration approval of our
supplemental biologics license application, or sBLA, in July 2022 to expand the
label to include co-treatment of KRYSTEXXA with the immunomodulator
methotrexate, we launched a successful commercial campaign, expanded our
commercial team and are focused on promoting the expanded label with physicians
and patients.

Our R&D strategy is to expand our pipeline of preclinical and clinical
development programs to drive sustainable growth, as well as maximizing the
benefit and value of our existing medicines through development programs. We are
(i) acquiring, licensing and developing medicines for indications that address
unmet needs in rare, autoimmune and severe inflammatory diseases, particularly
those in our therapeutic areas of focus; (ii) maximizing our pipeline candidates
through internal R&D; (iii) expanding our early-stage pipeline through
partnerships and collaborations; and (iv) continuing to build out our research
capabilities to generate discovery-stage candidates internally. Our R&D pipeline
includes more than 20 programs. We announced the initiation of five clinical
trials in 2022 and expect to initiate several more in 2023, including a planned
Phase 3 program for dazodalibep in Sjögren's syndrome. In January 2023, we
announced the initiation of our daxdilimab discoid lupus erythematosus Phase 2
trial. In May 2023, we announced the initiation of our TEPEZZA chronic/low CAS
TED Phase 3 trial in Japan as well as our daxdilimab lupus nephritis Phase 2
trial.

The aim of our global expansion strategy is to build a global presence in
targeted international markets to support the (i) continued launch of UPLIZNA in
certain European markets and Brazil this year; (ii) potential approvals and
commercial launches of UPLIZNA in additional markets in the coming years; and
(iii) potential approvals and full-scale commercial launches of TEPEZZA in
Japan, Brazil, Europe and other international markets over the next several
years. We plan to use a combination of direct marketing and partnerships for our
global expansion efforts and are establishing the infrastructure needed to
support these activities.


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Impact of COVID-19

The COVID-19 pandemic had a negative impact on our operations and net sales
during 2022, including due to the emergence of new variants of the virus and
resulting disruptions in healthcare operations and employee absences among our
commercial team. During the first half of 2022, the omicron variant resulted in
significant employee absences in our commercial organization due to illness and
also impacted operations at sites of care that infuse our medicines and patient
access to and willingness to visit healthcare providers. These events resulted
in lower new patient enrollment forms, delays in new patients starting infusions
and disruptions in therapy. In addition, our clinical trials have been and may
in the future be affected by the COVID-19 pandemic.

Economic and health conditions in the United States and across most of the world
are continuing to change because of the COVID-19 pandemic. Although COVID-19 is
a global issue that has altered business and consumer activity, the
biopharmaceutical industry is considered a critical and essential industry in
the United States and many other countries and, therefore, we do not currently
expect any government-imposed extended shutdowns of suppliers or distribution
channels, although our suppliers and other third parties on which we rely could
be impacted by employee absences due to COVID-19 illnesses. While certain of our
contract manufacturers are involved in manufacturing vaccines for COVID-19, we
do not currently expect these activities to impact the future supply of our
medicines. In respect of our medicines, we believe we have sufficient inventory
of raw materials and finished goods and we expect patients to be able to
continue to receive their medicines at a site of care, for our infused
medicines, and from their current pharmacies, alternative pharmacies or, if
necessary, by direct shipment from our third-party providers that have such
capability, for our other medicines.

We are continuing to actively monitor the possible impacts from the COVID-19
pandemic, including the emergence of new variants of the virus, and may take
further actions to alter our business operations as may be required by federal,
state, local or foreign authorities or that we determine are in the best
interests of patients, healthcare providers and our employees. There is
significant uncertainty about the duration and potential impact of the COVID-19
pandemic. This means that our results could change at any time and the
contemplated impact of the COVID-19 pandemic on our business results and outlook
represents our estimate based on the information available as of the date of
this Quarterly Report on Form 10-Q. For further information on the impact of
COVID-19 pandemic, refer to "Risk Factors", included in Item 1A of this
Quarterly Report on Form 10-Q.



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RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 2023 and 2022

Consolidated Results

The table below should be referenced in connection with a review of the
following discussion of our results of operations for the three months ended
March 31, 2023, compared to the three months ended March 31, 2022.

                                            For the Three Months Ended
                                                     March 31,                Change         Change
                                               2023             2022            $              %
                                                       (in thousands, except percentages)
Net sales                                   $  832,059       $  885,245     $  (53,186 )           (6 )%
Cost of goods sold                             208,563          215,062         (6,499 )           (3 )%
Gross profit                                   623,496          670,183        (46,687 )           (7 )%
Operating expenses:
Research and development                       134,148          103,132         31,016             30 %
Selling, general and administrative            453,354          372,734         80,620             22 %
Total operating expenses                       587,502          475,866        111,636             23 %
Operating income                                35,994          194,317       (158,323 )          (81 )%
Other expense, net:
Interest expense, net                          (15,540 )        (21,256 )        5,716             27 %
Foreign exchange gain                               91              420           (329 )          (78 )%
Other expense, net                              (1,343 )           (742 )         (601 )          (81 )%
Total other expense, net                       (16,792 )        (21,578 )        4,786             22 %

Income before benefit for income taxes 19,202 172,739

  (153,537 )          (89 )%
Benefit for income taxes                       (35,482 )        (31,522 )       (3,960 )          (13 )%
Net income                                  $   54,684       $  204,261     $ (149,577 )          (73 )%


Beginning with the third quarter of 2022, we separately present upfront,
milestone, and similar payments pursuant to collaborations, licenses of
third-party technologies, and asset acquisitions as "Acquired in-process
research and development and milestones" expenses in the condensed consolidated
statement of comprehensive income. Amounts recorded in this line item would have
historically been recorded to R&D expenses. We believe the new classification
assists users of the financial statements in better understanding the payments
incurred to acquire in-process research and development, or IPR&D. Prior period
consolidated statements of comprehensive income have been reclassified to
conform with the new classification. There were no acquired IPR&D and milestones
expenses during the three months ended March 31, 2023 and 2022.

Net sales. Net sales decreased $53.2 million, or 6%, to $832.0 million during
the three months ended March 31, 2023, from $885.2 million during the three
months ended March 31, 2022. The decrease during the three months ended March
31, 2023 was primarily due to a decrease in TEPEZZA net sales of $96.1 million
and a decrease in PENNSAID 2% net sales of $26.2 million due to the impact of
generic competition, partially offset by an increase in KRYSTEXXA net sales of
$46.3 million and an increase in UPLIZNA net sales of $23.4 million.

The following table reflects net sales by medicine for the three months ended
March 31, 2023 and 2022 (in thousands, except percentages):

                    Three Months Ended
                         March 31,             Change        Change
                    2023          2022            $            %
TEPEZZA           $ 405,317     $ 501,451       (96,134 )        (19 )%
KRYSTEXXA           186,981       140,704        46,277           33 %
RAVICTI              90,321        78,257        12,064           15 %
UPLIZNA              53,829        30,477        23,352           77 %
PROCYSBI             50,463        49,571           892            2 %
ACTIMMUNE            29,121        31,435        (2,314 )         (7 )%
PENNSAID 2%           9,194        35,368       (26,174 )        (74 )%
RAYOS                 4,977        13,487        (8,510 )        (63 )%
BUPHENYL              1,413         2,161          (748 )        (35 )%
QUINSAIR                296           296             -            0 %
DUEXIS                  139         1,123          (984 )        (88 )%
VIMOVO                    8           915          (907 )        (99 )%
Total net sales   $ 832,059     $ 885,245     $ (53,186 )         (6 )%




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TEPEZZA. Net sales decreased $96.1 million, or 19%, to $405.3 million during the
three months ended March 31, 2023, from $501.4 million during the three months
ended March 31, 2022. Net sales decreased by approximately $101.4 million due to
lower sales volume, partially offset by an increase of $5.3 million due to
higher net pricing. In the second half of 2022, we identified certain
challenges, including the often-burdensome reimbursement process, that we
believe have contributed to slower-than-expected growth of TEPEZZA. These
challenges, as well as challenges related to a lower rate of adherence to the
full course of TEPEZZA therapy, have continued to moderate TEPEZZA net sales
growth. We continue to execute on several opportunities to address these
challenges and accelerate growth, including significantly expanding the size of
our TEPEZZA sales force in late 2022 to allow our representatives more time with
core TEPEZZA prescribers while educating other key physicians, including
ophthalmologists and endocrinologists, about TED and TEPEZZA. We are also
spending additional time and focus on the reimbursement process to more
effectively support the patient access journey. We also continue to invest
significantly in direct-to-consumer advertising based on the returns we have
seen to date. In April 2023, we announced positive topline results from our
Phase 4 clinical trial in chronic/low CAS TED and received FDA approval of an
update to TEPEZZA's label specifying the use of TEPEZZA regardless of TED
disease activity or duration, which we believe reinforces the importance of
unrestricted access for all eligible patients across the full spectrum of TED.
We have seen improving trends in patient enrollment forms and patient starts as
a result of our strategies and our expansion; however, it is taking longer than
initially anticipated for our strategies and our expansion to contribute
meaningfully to TEPEZZA net sales growth.

KRYSTEXXA. Net sales increased $46.3 million, or 33%, to $187.0 million during
the three months ended March 31, 2023, from $140.7 million during the three
months ended March 31, 2022. Net sales increased by approximately $31.2 million
due to volume growth and $15.1 million due to higher net pricing. We expect net
sales for KRYSTEXXA to continue to increase in future periods primarily due to
the use of KRYSTEXXA with methotrexate following the approval of our sBLA in
July 2022, which expanded KRYSTEXXA's labeling to include co-administration with
methotrexate.

RAVICTI. Net sales increased $12.1 million, or 15%, to $90.3 million during the
three months ended March 31, 2023, from $78.2 million during the three months
ended March 31, 2022. Net sales increased by approximately $8.8 million due to
higher net pricing and $3.3 million due to volume growth.

UPLIZNA. Net sales increased $23.4 million, or 77%, to $53.8 million during the
three months ended March 31, 2023, from $30.4 million during the three months
ended March 31, 2022. Net sales in the United States increased by $22.0 million,
which was composed of an increase of $19.2 million due to higher sales volume
and $2.8 million due to higher net pricing. The remaining $1.4 million increase
in net sales related primarily to revenue and milestone payments from our
international partners recognized during the three months ended March 31, 2023.

PENNSAID 2%. Net sales decreased $26.2 million, or 74%, to $9.2 million during
the three months ended March 31, 2023, from $35.4 million during the three
months ended March 31, 2022. Net sales decreased by approximately $21.9 million
due to lower sales volume and by approximately $4.3 million resulting from lower
net pricing, as a result of generic competition.

RAYOS. Net sales decreased $8.5 million, or 63%, to $5.0 million during the
three months ended March 31, 2023, from $13.5 million during the three months
ended March 31, 2022. Net sales decreased by approximately $5.8 million due to
lower sales volume and by approximately $2.7 million due to lower net pricing.

Under our settlement agreement with Teva Pharmaceuticals Industries Limited
(formerly known as Actavis Laboratories FL, Inc., which itself was formerly
known as Watson Laboratories, Inc. - Florida), or Teva, we expect Teva to enter
the market with a generic version of RAYOS in 2023. As a result, we expect our
net sales for RAYOS to continue declining in future periods.

Due to the impact of the at-risk launch of generic PENNSAID 2% during the year
ended December 31, 2022, we redeployed a portion of our inflammation commercial
team to support our TEPEZZA and KRYSTEXXA expansions. In the fourth quarter of
2022, we substantially completed a wind down of our former inflammation
business, including active promotion efforts and associated HorizonCares
support, for our inflammation medicines. As a result, sales volumes for PENNSAID
2%, RAYOS and DUEXIS declined significantly since the second quarter of 2022 and
we expect net sales of our inflammation medicines to be immaterial going
forward.


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The table below reconciles our gross to net sales for the three months ended
March 31, 2023 and 2022 (in millions, except percentages):

                                              Three Months Ended                 Three Months Ended
                                                March 31, 2023                     March 31, 2022
                                                          % of Gross                         % of Gross
                                           Amount           Sales             Amount           Sales
Gross sales                              $   1,107.0            100.0 %     $   1,231.5            100.0 %
Adjustments to gross sales:
Prompt pay discounts                            (6.6 )           (0.6 )%          (10.2 )           (0.8 )%
Medicine returns                                (6.9 )           (0.6 )%           (4.4 )           (0.3 )%
Co-pay and other patient assistance            (32.6 )           (2.9 )%          (84.8 )           (6.9 )%
Commercial rebates and wholesaler fees         (38.1 )           (3.5 )%          (51.3 )           (4.2 )%
Government rebates and chargebacks            (190.7 )          (17.2 )%         (195.6 )          (15.9 )%
Total adjustments                             (274.9 )          (24.8 )%         (346.3 )          (28.1 )%
Net sales                                $     832.1             75.2 %     $     885.2             71.9 %


During the three months ended March 31, 2023, co-pay and other patient
assistance costs, as a percentage of gross sales, decreased to 2.9% from 6.9%
during the three months ended March 31, 2022, primarily due to a decreased
proportion of PENNSAID 2% and DUEXIS sold. We expect co-pay and other patient
assistance costs to continue to decrease as a percentage of total gross sales.

On a quarter-to-quarter basis, our net sales can be impacted due to end customer
buying patterns, fluctuations in wholesaler inventory levels, the impact of
benefit plan changes, insurance reverification and increased co-pay expenses as
patients work through deductibles. For example, our net sales in the first
quarter of a year historically represents the lowest net sales quarter as a
result of some of these impacts, and we expect this trend to continue in 2023.
This is primarily due to annual managed care plan changes and the re-setting of
patients' medical insurance deductibles at the beginning of each year, resulting
in higher co-pay and other patient assistance costs as patients meet their
annual medical insurance deductibles during the first and second quarters, and
higher net sales in the second half of the year after patients meet their
deductibles and healthcare plans reimburse a greater portion of the total cost
of our medicines.

Cost of Goods Sold. Cost of goods sold decreased $6.5 million, or 3%, to $208.6
million during the three months ended March 31, 2023, from $215.1 million during
the three months ended March 31, 2022. The decrease in cost of goods sold was
primarily due to a decrease in royalty and earnout expense, partially offset by
an increase in inventory step-up expense. Royalty and earnout expense decreased
by $7.1 million primarily due to royalties and earnouts payable on net sales of
TEPEZZA, which decreased during the three months ended March 31, 2023 compared
to the three months ended March 31, 2022 due to lower net sales. Inventory
step-up expense increased by $2.5 million related to acquired units of UPLIZNA
inventory sold, which increased during the three months ended March 31, 2023
compared to the three months ended March 31, 2022. As a percentage of net sales,
cost of goods sold (excluding intangible amortization expense of $88.3 million
during the three months ended March 31, 2023 and $89.3 million during the three
months ended March 31, 2022) was 14% during the three months ended March 31,
2023 and 2022.

Research and Development Expenses. R&D expenses increased $31.0 million, or 30%,
to $134.1 million during the three months ended March 31, 2023, from $103.1
million during the three months ended March 31, 2022. The increase was primarily
due to a $23.8 million increase in clinical trial costs and an increase of $7.0
million in personnel and related costs during the three months ended March 31,
2023 compared to three months ended March 31, 2022, reflecting increased
activity in our R&D pipeline.

We expect our R&D expenses to continue increasing significantly in future
periods as a result of our on-going and planned clinical trials for our
pipeline, including medicine candidates and development programs acquired in
2021.

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Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $80.6 million, or 22%, to $453.3 million
during the three months ended March 31, 2023, from $372.7 million during the
three months ended March 31, 2022. The increase was primarily due to costs
associated with the commercialization of our medicines and global expansion
initiatives, including increases of $30.0 million in employee-related expenses
and $24.5 million in marketing program costs. In addition, there was a $9.3
million increase in legal costs primarily relating to costs incurred in
connection with the Transaction with Amgen, including responding to the FTC's
second request.

We expect our selling, general and administrative expenses to increase in future
periods primarily due to continued support for our U.S. commercial and global
expansion activities.

Interest expense, net. Interest expense, net, decreased $5.7 million to $15.5
million during the three months ended March 31, 2023, from $21.2 million during
the three months ended March 31, 2022. The decrease was primarily due to an
increase in interest income of $25.8 million, partially offset by an increase in
interest expense of $20.1 million primarily related to increases in interest
rates on the portion of our variable interest debt. Refer to Note 12, Debt
Agreements, of the Notes to Condensed Consolidated Financial Statements,
included in Item 1 of this Quarterly Report on Form 10-Q for further details.

Benefit for Income Taxes. During the three months ended March 31, 2023, we
recorded a benefit for income taxes of $35.5 million compared to a benefit for
income taxes of $31.5 million during the three months ended March 31, 2022. The
increase in benefit for income taxes recorded during the three months ended
March 31, 2023 compared to the three months ended March 31, 2022 resulted
primarily from the mix of pre-tax income and losses incurred in various tax
jurisdictions, partially offset by a decrease in the tax benefits recognized on
share-based compensation.


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NON-GAAP FINANCIAL MEASURES

We provide certain non-GAAP financial measures, including EBITDA, or earnings
before interest, taxes, depreciation and amortization, adjusted EBITDA, non-GAAP
net income and non-GAAP earnings per share. These non-GAAP financial measures
are intended to provide additional information on our performance, operations
and profitability. Adjustments to our GAAP figures as well as EBITDA exclude
acquisition/divestiture-related costs, transaction-related costs, manufacturing
facility start-up costs and restructuring and realignment costs, as well as
non-cash items such as share-based compensation, inventory step-up expense,
depreciation and amortization, non-cash interest expense, (gain) loss on equity
security investments 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. We
maintain an established non-GAAP cost policy that guides the determination of
what costs will be excluded in non-GAAP measures. We believe that these non-GAAP
financial measures, when considered together with the GAAP figures, can enhance
an overall understanding of our financial and operating performance. The
non-GAAP financial measures are included with the intent of providing investors
with a more complete understanding of our historical financial results and
trends and to facilitate comparisons between periods. In addition, these
non-GAAP financial measures are among the indicators our management uses for
planning and forecasting purposes and measuring our 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 us may be calculated differently from, and
therefore may not be comparable to, non-GAAP financial measures used by other
companies.

Reconciliations of reported GAAP net income to EBITDA, adjusted EBITDA and
non-GAAP net income, and the related per share amounts, were as follows (in
thousands, except share and per share amounts):

                                                          For the Three Months Ended March 31,
                                                              2023                    2022
GAAP net income                                         $          54,684       $         204,261
Depreciation (1)                                                    6,246                   5,852
Amortization and step-up:
Intangible amortization expense (2)                                88,614                  89,260
Inventory step-up expense (3)                                      29,743                  27,201

Interest expense, net (including amortization of debt
discount and deferred financing costs)

                             15,540                  21,256
Benefit for income taxes                                          (35,482 )               (31,522 )
EBITDA                                                            159,345                 316,308
Other non-GAAP adjustments:
Share-based compensation (4)                                       58,120                  47,300
Transaction-related costs (5)                                       9,784                       -
Manufacturing facility start-up costs (6)                           3,476                     807
Restructuring and realignment costs (7)                             1,822                     537
Acquisition/divestiture-related costs (8)                             681                   1,589
(Gain) loss on equity security investments (9)                       (352 )                 4,646
Total of other non-GAAP adjustments                                73,531                  54,879
Adjusted EBITDA                                         $         232,876       $         371,187




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                                                            For the Three Months Ended March 31,
                                                               2023                      2022
GAAP net income                                         $            54,684       $           204,261
Non-GAAP adjustments:
Depreciation (1)                                                      6,246                     5,852
Amortization and step-up:
Intangible amortization expense (2)                                  88,614                    89,260

Amortization of debt discount and deferred financing
costs (10)

                                                            1,471                     1,577
Inventory step-up expense (3)                                        29,743                    27,201
Share-based compensation (4)                                         58,120                    47,300
Transaction-related costs (5)                                         9,784                         -
Manufacturing facility start-up costs (6)                             3,476                       807
Restructuring and realignment costs (7)                               1,822                       537
Acquisition/divestiture-related costs (8)                               681                     1,589
(Gain) loss on equity security investments (9)                         (352 )                   4,646
Total of pre-tax non-GAAP adjustments                               199,605                   178,769
Income tax effect of pre-tax non-GAAP adjustments
(11)                                                                (59,943 )                 (67,212 )
Total non-GAAP adjustments                                          139,662                   111,557
Non-GAAP net income                                     $           194,346       $           315,818

Non-GAAP Earnings Per Share:
Weighted average ordinary shares - Basic                        228,397,661               229,094,311

Non-GAAP Earnings Per Share - Basic
GAAP earnings per share - Basic                         $              0.24       $              0.89
Non-GAAP adjustments                                                   0.61                      0.49
Non-GAAP earnings per share - Basic                     $              0.85       $              1.38

Weighted average ordinary shares - Diluted
Weighted average ordinary shares - Basic                        228,397,661               229,094,311
Ordinary share equivalents                                        5,390,705                 6,859,007
Weighted average ordinary shares - Diluted                      233,788,366               235,953,318

Non-GAAP Earnings Per Share - Diluted
GAAP earning per share - Diluted                        $              0.23       $              0.87
Non-GAAP adjustments                                                   0.60                      0.47
Non-GAAP earnings per share - Diluted                   $              0.83       $              1.34

(1)

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

(2)

Intangible amortization expenses are primarily associated with our developed
technology related to TEPEZZA, KRYSTEXXA, RAVICTI, UPLIZNA, PROCYSBI, ACTIMMUNE,
RAYOS and BUPHENYL.

(3)

During the three months ended March 31, 2023 and 2022, we recognized $29.7
million and $27.2 million in cost of goods sold, respectively, for inventory
step-up expense related to UPLIZNA inventory revalued in connection with the
Viela Bio, Inc. acquisition. Refer to Note 4, Inventories, of the Notes to
Condensed Consolidated Financial Statements, included in Item 1 of this
Quarterly Report on Form 10-Q for further details.

(4)

Represents share-based compensation expense associated with RSU and PSU grants
to our employees and non-employee directors, and our employee share purchase
plan.

(5)

Primarily represents transaction-related costs, including, advisory, legal and
consulting costs, incurred in connection with the Transaction with Amgen,
including responding to the FTC's second request.

(6)

During the three months ended March 31, 2023 and 2022, we recorded $3.5 million
and $0.8 million, respectively, of manufacturing facility start-up costs related
to our drug product biologics manufacturing facility in Waterford, Ireland.

(7)

Primarily represents severance and consulting costs related to the wind down of
our former inflammation business during 2022 and rent and maintenance charges as
a result of vacating the leased Lake Forest office in the first quarter of 2021.

(8)

Primarily represents transaction and integration costs, including, advisory,
legal, consulting and certain employee-related costs, incurred in connection
with our acquisitions and divestitures.

(9)

We held investments in equity securities with readily determinable fair values
of $7.4 million and $8.5 million as of March 31, 2023 and 2022, respectively,
which are included in other long-term assets in the condensed consolidated
balance sheet. For the three months ended March 31, 2023 and 2022, we recognized
a net unrealized gain of $0.4 million and a net unrealized loss of $4.6 million,
respectively, due to the change in fair value of these securities.

(10)

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

(11)

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.


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LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

On December 12, 2022, we announced that we had entered into a transaction
agreement with Amgen and Pillartree. We have agreed to various covenants and
agreements, including, among others, agreements to conduct our business in the
ordinary course during the period between the execution of the transaction
agreement and the Effective Time. Outside of certain limited exceptions, we may
not take, authorize, commit, resolve, or agree to do certain actions without
Amgen's consent, including: (i) acquiring businesses and disposing of
significant assets; (ii) incurring capital expenditures above specified
thresholds; (iii) issuing equity; (iv) incurring indebtedness; and (v)
repurchasing outstanding ordinary shares. We do not believe these restrictions
will prevent us from being able to fund our operations, working capital needs or
capital expenditure requirements. The following discussion assumes that the
Transaction is not consummated and we continue to operate as an independent
entity.

As of March 31, 2023, we had retained earnings of $644.7 million. We expect that
our sales and marketing expenses will continue to increase as a result of the
commercialization of our medicines and global expansion initiatives, but we
believe these cost increases will be offset by higher net sales and gross
profits in future periods. Additionally, we expect that our R&D and IPR&D and
milestones expenses will continue to increase as we acquire or develop more
development-stage medicine candidates and advance our candidates through the
clinical development and regulatory approval processes. In particular, we expect
to incur substantial costs in connection with advancing our pipeline of medicine
candidates and development programs in on-going and planned clinical trials.

We are in the process of expanding our production capacity to meet anticipated
future demand for TEPEZZA, primarily for 2023 and beyond. As of March 31, 2023,
we had total purchase commitments, including the minimum annual order quantities
and binding firm orders, with AGC Biologics A/S (formerly known as CMC Biologics
A/S) for TEPEZZA drug substance of €100.2 million ($108.4 million converted at a
Euro-to-Dollar exchange rate as of March 31, 2023 of 1.0820), to be delivered
through March 2025.

We also expect to incur additional costs and to enter into additional purchase
commitments in connection with our efforts to expand TEPEZZA production capacity
in order to meet anticipated increases in demand.

Under our license agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche
Inc., or together referred to as Roche, our remaining obligation to Roche
relating to the attainment of various TEPEZZA development and regulatory
milestones is CHF43.0 million ($46.8 million when converted using a
CHF-to-Dollar exchange rate at March 31, 2023 of 1.0893).

In July 2021, we completed the purchase of a drug product biologics
manufacturing facility from EirGen Pharma Limited for $67.9 million. We expect
to incur approximately $30.0 million in capital expenditures during 2023 in
order to prepare the drug product facility to manufacture the first medicine for
commercial use, which, assuming the timely receipt of regulatory approvals, we
anticipate to occur in the second half of 2023. In August 2022, we submitted a
planning application to build a drug substance biologics manufacturing facility
adjacent to our existing drug product biologics manufacturing facility in
Waterford, Ireland. Based on our current operating plan, we do not anticipate
making significant investments in building a drug substance biologics
manufacturing facility during 2023.

On June 18, 2021, we entered into a global agreement with Arrowhead
Pharmaceuticals, Inc., or Arrowhead, for HZN-457, a discovery-stage
investigational RNA interference therapeutic being developed by Arrowhead as a
potential treatment for uncontrolled gout. Under the terms of the agreement, we
paid Arrowhead an upfront cash payment of $40.0 million in July 2021 and agreed
to pay additional potential future milestone payments of up to $660.0 million
contingent on the achievement of certain development, regulatory and commercial
milestones, and low to mid-teens royalties on worldwide calendar year net sales
of licensed medicines. In addition, we recognized a $15.0 million development
milestone in the fourth quarter of 2022. The $15.0 million development milestone
was subsequently paid in the first quarter of 2023.

We are committed to invest as a strategic limited partner in four venture
capital funds: Forbion Growth Opportunities Fund I C.V., Forbion Capital Fund V
C.V., Aisling Capital V, L.P. and RiverVest Venture Fund V, L.P. As of March 31,
2023, the total carrying amount of our investments in these funds was $27.2
million, which is included in other long-term assets in the condensed
consolidated balance sheet, and our total future commitments to these funds are
$34.0 million.

We have financed our operations to date through equity financings, debt
financings and the issuance of convertible notes, along with cash flows from
operations during the last several years. As of March 31, 2023, we had $2.3
billion in cash and cash equivalents and total debt with a book value of $2.6
billion and face value of $2.6 billion. We believe our existing cash and cash
equivalents and our expected cash flows from our operations will be sufficient
to fund our business needs for at least the next 12 months from the issuance of
the financial statements in this Quarterly Report on Form 10-Q. Because of the
short-term maturities of our cash equivalents, we do not believe that a change
in interest rates or the risk relating to recent bank failures would have any
material negative impact on the fair value of our cash equivalents. We do not
have any financial covenants or non-financial covenants that we expect to be
affected by the economic disruptions and negative effects of the COVID-19
pandemic, recent bank failures, global macro-economic issues or inflationary
pressures.

                                       34
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We have a significant amount of debt outstanding on a consolidated basis. For a
description of our debt agreements, refer to Note 12, Debt Agreements, of the
Notes to Condensed Consolidated Financial Statements, included in Item 1 of this
Quarterly Report on Form 10-Q. This substantial level of debt could have
important consequences to our business, including, but not limited to: making it
more difficult for us to satisfy our obligations; requiring a substantial
portion of our cash flows from operations to be dedicated to the payment of
principal and interest on our indebtedness, therefore reducing our ability to
use our cash flows to fund acquisitions, capital expenditures, R&D and future
business opportunities; limiting our ability to obtain additional financing,
including borrowing additional funds; increasing our vulnerability to, and
reducing our flexibility to respond to, general adverse economic and industry
conditions, including rising interest rates and recent bank failures; limiting
our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate; and placing us at a disadvantage as compared to
our competitors, to the extent that they are not as highly leveraged. We may not
be able to generate sufficient cash to service all of our indebtedness and may
be forced to take other actions to satisfy our obligations under our
indebtedness.

In addition, the indenture governing our 5.5% Senior Notes due 2027, or 2027
Senior Notes, and our Credit Agreement impose various covenants that limit our
ability and/or our restricted subsidiaries' ability to, among other things, pay
dividends or distributions, repurchase equity, prepay junior debt and make
certain investments, incur additional debt and issue certain preferred stock,
incur liens on assets, engage in certain asset sales or merger transactions,
enter into transactions with affiliates, designate subsidiaries as unrestricted
subsidiaries; and allow to exist certain restrictions on the ability of
restricted subsidiaries to pay dividends or make other payments to us.

On April 18, 2023, in connection with the potential closing of the Transaction,
Horizon Therapeutics USA, Inc., our wholly owned subsidiary, or the Issuer,
directed U.S. Bank Trust Company, National Association (as successor to U.S.
Bank National Association), as trustee, to give a notice of the Issuer's intent,
in accordance with the indenture governing the 2027 Senior Notes, to redeem in
full the aggregate principal amount of our outstanding 2027 Senior Notes. The
redemption is conditioned on, among other things, the consummation of the
Transaction.

On April 25, 2022, we entered into two interest rate swap agreements with
notional amounts totaling $800.0 million, effective June 24, 2022, to hedge or
otherwise protect against interest rate fluctuations on a portion of our
variable rate debt. The agreements effectively fix LIBOR at approximately 2.8%
through December 24, 2026. These agreements were designated as cash flow hedges
of the variability of future cash flows subject to the variable monthly interest
rates on $800.0 million of our senior secured term loans borrowed under our
Credit Agreement in December 2019 and March 2021. Refer to Note 13, Derivative
Instruments and Hedging Activities, of the Notes to Condensed Consolidated
Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q
for further details.

During the three months ended March 31, 2023, we issued an aggregate of 1.3
million of our ordinary shares in connection with stock option exercises and the
vesting of restricted stock units and performance stock units. We received a
total of $3.4 million in net proceeds in connection with such issuances. During
the three months ended March 31, 2023, we made payments of $87.5 million for
employee withholding taxes relating to vesting of share-based awards.

Since our inception, we have not engaged in any off-balance sheet arrangements,
including the use of structured finance, special purpose entities or variable
interest entities, other than the indemnification agreements discussed in Note
15, Commitments and Contingencies, of the Notes to Condensed Consolidated
Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.


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Sources and Uses of Cash

The following table provides a summary of our cash position and cash flows for
the three months ended March 31, 2023 and 2022 (in thousands):

                                                 For the Three Months Ended 

March 31,

                                                    2023                    

2022

Cash, cash equivalents and restricted cash $ 2,316,400 $

     1,647,265
Cash provided by (used in):
Operating activities                                      86,323                   215,791
Investing activities                                     (41,751 )                 (40,724 )
Financing activities                                     (88,128 )                (110,037 )


Operating Cash Flows

Net cash provided by operating activities during the three months ended March
31, 2023 of $86.3 million was primarily attributable to cash collections from
gross sales, partially offset by payments made related to government rebates and
patient assistance costs for our medicines, payments for inventory, payments
related to selling, general and administrative expenses and payments related to
R&D expenses.

During the three months ended March 31, 2022, net cash provided by operating
activities of $215.8 million were favorably impacted by higher net sales offset
by the timing of working capital cash flows.

Investing Cash Flows

Net cash used in investing activities during the three months ended March 31,
2023 of $41.8 million was primarily attributable to payments related to
purchases of property, plant and equipment of $24.1 million and milestone-based
development funding of $15.0 million paid to Arrowhead in the first quarter of
2023. Refer to Note 15, Commitments and Contingencies, of the Notes to Condensed
Consolidated Financial Statements, included in Item 1 of this Quarterly Report
on Form 10-Q.

During the three months ended March 31, 2022, net cash used in investing
activities of $40.7 million was primarily attributable to an upfront payment of
$25.0 million paid to Alpine Immune Sciences, Inc. in the first quarter of 2022
relating to an exclusive license agreement entered into in December 2021 and
payments related to purchases of property, plant and equipment of $14.2 million.

Financing Cash Flows

Net cash used in financing activities during the three months ended March 31,
2023 of $88.1 million was primarily attributable to $87.5 million in payments of
employee withholding taxes relating to share-based awards, partially offset by
$3.4 million in proceeds from the issuance of ordinary shares in connection with
stock option exercises.

During the three months ended March 31, 2022, net cash used in financing
activities of $110.0 million was primarily attributable to $115.1 million in
payments of employee withholding taxes relating to share-based awards, partially
offset by $9.1 million in proceeds from the issuance of ordinary shares in
connection with stock option exercises.


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Financial Condition as of March 31, 2023 Compared to December 31, 2022

Accounts receivable, net. Accounts receivable, net decreased $51.6 million, from
$676.3 million as of December 31, 2022 to $624.7 million as of March 31, 2023.
The decrease was primarily due to lower gross sales of our medicines during the
first quarter of 2023 when compared to the fourth quarter of 2022.

Developed technology and other intangible assets, net. Developed technology and
other intangible assets, net decreased $88.6 million, from $2,664.8 million as
of December 31, 2022 to $2,576.2 million as of March 31, 2023, primarily related
to $88.3 million of amortization of developed technology recorded during the
three months ended March 31, 2023.

Accounts Payable. Accounts payable decreased $79.2 million, from $155.8 million
as of December 31, 2022 to $76.6 million as of March 31, 2023. The decrease was
primarily due to the timing of payments, including a decrease of $68.1 million
in accounts payable related to government rebates, co-pay and patient assistance
costs and commercial rebates and wholesaler fees.

Deferred tax liabilities, net. Deferred tax liabilities, net, decreased $70.4
million from $342.0 million as of December 31, 2022 to $271.6 million as of
March 31, 2023, primarily due to a benefit for income taxes recognized during
the three months ended March 31, 2023.

Contractual Obligations

As of March 31, 2023, there were no material changes to our contractual
obligations as previously disclosed in Part II, Item 7 of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2022, except as described in
Note 15, Commitments and Contingencies, of the Notes to Condensed Consolidated
Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with U.S. GAAP principles
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities and the reported amounts of revenue and expenses.
Certain of these policies are considered critical as these most significantly
impact a company's financial condition and results of operations and require the
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain.
Actual results may vary from these estimates.

During the three months ended March 31, 2023, there were no significant changes
in our application of our critical accounting policies. A summary of our
critical accounting policies is included in Item 7 to our Annual Report on Form
10-K for the year ended December 31, 2022.



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