On May 6, 2020 Horizon Therapeutics plc (Nasdaq: HZNP) reported its first-quarter 2020 financial results (Press release, Horizon Pharma, MAY 6, 2020, View Source [SID1234557145]). The Company increased its full-year 2020 net sales guidance and revised its adjusted EBITDA guidance.
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"We had a very strong start to 2020, highlighted by the early approval and rapid uptake of TEPEZZA, which significantly exceeded expectations, excellent KRYSTEXXA growth and our recent acquisition of HZN-825," said Timothy Walbert, chairman, president and chief executive officer, Horizon. "We are increasing our full-year net sales guidance to account for significantly higher TEPEZZA net sales that more than offset the expected impact from COVID-19 this year, and we are widening both our net sales and adjusted EBITDA guidance ranges to account for future uncertainty. The fundamentals of our business are strong, including a robust cash position, and we continue to be very well positioned for the long term."
Walbert continued, "Given the current environment, our priority is to safeguard the health, safety and welfare of patients and our employees, as well as to support our communities in their COVID-19 response efforts. I would like to recognize and applaud the tireless efforts of our employees who are helping patients access and maintain therapy, as well as all the healthcare professionals showing such incredible dedication and effort during this challenging time."
Horizon is closely monitoring the COVID-19 pandemic and its impact on the patients who are treated with the Company’s medicines, the communities in which the Company operates and its business. Horizon is making every effort as a company to help minimize the spread of COVID-19 and at the same time working to ensure continued patient access to Horizon’s medicines. The Company is maintaining its business operations remotely to protect the health and safety of Horizon employees who are ensuring business continuity and providing support to patients, physicians and partners virtually. The Company continues to closely monitor its supply chain and expects no impact at this time on the supply of its medicines. Horizon has provided more than $1.5 million in financial support for COVID-19 response efforts in Illinois, Dublin, South San Francisco, Washington D.C. and Canada. Many Horizon employees are also contributing their personal time and financial support to response efforts in line with Horizon’s mission to go to incredible lengths to improve people’s lives.
TEPEZZA Launch Progress
On Jan. 21, 2020, the Company received U.S. Food and Drug Administration (FDA) approval for TEPEZZA for the treatment of thyroid eye disease (TED). TEPEZZA, a fully human monoclonal antibody insulin-like growth factor-1 receptor (IGF-1R) inhibitor, is the first and only FDA-approved medicine for the treatment of TED. The Company initiated the commercial launch of TEPEZZA shortly after obtaining FDA approval. The first-quarter results for TEPEZZA greatly exceeded the Company’s expectations, generating net sales of $23.5 million.
Several factors contributed to the strong TEPEZZA first-quarter results and the Company’s increased full-year expectations:
Severity of Disease: TED is a rare, serious, progressive and vision-threatening autoimmune disease, and is associated with proptosis (eye bulging), diplopia (double vision), blurred vision, pain and facial disfigurement that can significantly impact patients’ quality of life. The severity of the disease is a motivating factor for patients seeking therapy.
Pre-Launch Market Education Efforts: In early 2019, the Company initiated its pre-launch disease awareness, market development and market access efforts with the multi-functional field-based teams beginning to engage with key stakeholders in July of 2019. The pre-launch preparation included educating physicians, payors, sites of care and patients about the acute and debilitating nature of the disease and the urgency to treat. It also involved facilitating post-approval access to TEPEZZA by identifying an infusion site-of-care referral network and establishing a supportive patient services organization.
High Volume of Patient and Physician Interest Driven by Commercial Execution: The Company’s pre-launch efforts generated significant awareness and interest among physicians and TED patients, which resulted in a significantly higher number of patients beginning therapy than initially expected. Approximately 200 patients started TEPEZZA treatment in the first quarter.
"The tremendous success of the TEPEZZA launch reflects the potential of TEPEZZA and is a tribute to the strong execution and dedication of our TEPEZZA commercial team," said Walbert. "Since the beginning of last year, the team has paved the way for launch, establishing a pathway for treatment and driving awareness of TED, the urgency to treat it and its highly debilitating symptoms – symptoms with which patients previously had to live, often for years. This has allowed many more patients to seek and start treatment, which epitomizes Horizon’s commitment to patients and the strength of our commercial strategy and execution."
Walbert continued, "To maximize the future and long-term potential of TEPEZZA for TED patients, we announced today two new TEPEZZA development programs – one to evaluate TEPEZZA in the fibrotic phase of the disease and another to assess the potential for subcutaneous administration."
First-Quarter and Recent Company Highlights
Announced New TEPEZZA Pooled Efficacy Data: In March 2020, new pooled efficacy data from the Phase 2 and 3 clinical trials of TEPEZZA were presented at a virtual ENDO 2020 news conference in lieu of the ENDO 2020, the Endocrine Society’s annual meeting, which was cancelled due to COVID-19. The analysis was conducted to determine if there were any differences in proptosis response to TEPEZZA based on patient demographic characteristics. The results showed that the medicine effectively reduces proptosis in TED patients, regardless of age, gender and smoking status, which are among several risk factors of the disease.
Expanded the Company’s Pipeline with Acquisition of Development-Stage Candidate HZN-825: On April 1, 2020, the Company completed the acquisition of Curzion Pharmaceuticals, Inc. and its lysophosphatidic acid 1 receptor (LPAR1) antagonist candidate (renamed HZN-825) for the treatment of diffuse cutaneous systemic sclerosis (dcSSc). A positive signal was observed in the 8-week placebo-controlled Phase 2a trial and data from the subsequent 24-week open-label extension period suggests that longer duration of treatment may demonstrate a meaningful benefit.
Launched PROCYSBI Delayed-Release Oral Granules in Packets: In April 2020, the Company launched PROCYSBI Delayed-Release Oral Granules in Packets after receiving FDA approval in February 2020. The new dosage form provides another administration option in addition to the PROCYSBI capsules for adults and children one year of age and older living with nephropathic cystinosis. The tear-open packets offer a convenient option for cystinosis patients who may have difficulty swallowing or have to administer medication through a gastrostomy tube (G-tube). Additionally, being able to access PROCYSBI granules in tear-open packets may help reduce the burden of managing multiple daily medications often faced by families living with cystinosis.
Acquired Certain Rights to Proceeds from Future Milestones and Royalties Related to TEPEZZA: In April 2020, in two separate transactions, the Company acquired the rights to proceeds from the future milestones and royalties related to TEPEZZA net sales from each of S.R. One and Lundbeckfond in exchange for an aggregate of $110 million. These transactions relate to the rights to approximately 71 percent of the $225 million in milestone payments due upon achievement of certain TEPEZZA annual worldwide net sales thresholds and approximately 71 percent of the 3 percent royalty tied to the portion of TEPEZZA annual worldwide net sales exceeding $300 million.
Award: In April 2020, Great Place to Work and Fortune selected Horizon as one of the 2020 Best Workplaces in Health Care and Biopharma for the third consecutive year. The ranking is based on input from nearly 800,000 employees in the industry and evaluates multiple elements, including the extent to which employees trust leaders, the respect with which people are treated and the fairness of workplace decisions.
Research and Development Programs
HZN-825 dcSSc Program: HZN-825 is the Company’s LPAR1 antagonist in development for the treatment of dcSSc, a rare, chronic autoimmune disease marked by fibrosis, or skin thickening, in areas including hands, forearms, upper arms and thighs with no FDA-approved treatment options. The Company expects to begin a Phase 2b pivotal trial in the first half of 2021.
New TEPEZZA Trial in Fibrotic TED: The Company is planning to initiate a single-arm, open-label trial of TEPEZZA in patients with fibrotic TED (previously referred to as inactive TED). In fibrotic TED, the disease is no longer progressive or inflammatory; however, significant disease manifestations such as proptosis (eye bulging) and diplopia (double vision) remain.
New Potential TEPEZZA Subcutaneous Administration Program: The Company is planning to initiate a pharmacokinetic trial to explore subcutaneous dosing of TEPEZZA, which is currently administered by infusion. The objective of the trial is to inform the potential for additional administration options for TEPEZZA, which could provide greater flexibility for patients and physicians.
TEPEZZA dcSSc Exploratory Trial: As part of its evaluation of additional indications for TEPEZZA, the Company is planning to initiate an exploratory trial in dcSSc. The Company expects to initiate the trial by the end of 2020.
KRYSTEXXA MIRROR Randomized Clinical Trial: The Company is currently evaluating the coadministration of KRYSTEXXA with methotrexate to increase the complete response rate of KRYSTEXXA in the MIRROR placebo-controlled randomized clinical trial (RCT), initiated in June 2019. The registrational trial is designed to enable the potential submission of results to the FDA to update the prescribing information. The MIRROR RCT follows the initial MIRROR open-label trial completed in 2019 that demonstrated a 79 percent complete response rate for patients using KRYSTEXXA with methotrexate. The 79 percent response rate is nearly double the 42 percent response rate in the KRYSTEXXA Phase 3 clinical program, which evaluated KRYSTEXXA alone. The combination was also well tolerated in the MIRROR open-label trial. Methotrexate is the immunomodulator most used by rheumatologists and has been shown to reduce anti-drug antibody formation to biologic therapies when used in conjunction with these therapies. The MIRROR RCT is approximately 80 percent enrolled and the Company expects to complete enrollment in the second half of 2020 with data available in 2021.
KRYSTEXXA PROTECT Trial in Kidney Transplant Patients with Uncontrolled Gout:
The Company is evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout in its PROTECT open-label clinical trial, initiated in October 2019. Kidney transplant patients have more than a tenfold increase in the prevalence of gout when compared to the general population, and literature suggests that persistently high serum uric acid levels can be associated with organ rejection. Managing uncontrolled gout is one of the most common and significant unmet needs of kidney transplant patients.
KRYSTEXXA Shorter-Infusion Duration Trial: The Company is planning to initiate an open-label trial to evaluate the impact of administering KRYSTEXXA over a significantly shorter infusion duration. Currently, KRYSTEXXA is infused over a two-hour or longer timeframe. A shorter infusion duration could meaningfully improve the experience and convenience for patients, physicians and sites of care. The Company expects to initiate the trial by the end of 2020.
Next-Generation Programs for Uncontrolled Gout: The Company is pursuing early-stage development programs for next-generation biologics for uncontrolled gout to support and sustain the Company’s market leadership in this area. These include HZN-003 and HZN-007, as well as a collaboration with HemoShear Therapeutics, LLC, to discover new targets for gout.
First-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: First-quarter 2020 net sales were $355.9 million, an increase of 27 percent.
Gross Profit: Under U.S. GAAP, the first-quarter 2020 gross profit ratio was 72.6 percent compared to 68.6 percent in the first quarter of 2019. The first-quarter 2020 non-GAAP gross profit ratio was 90.0 percent compared to 89.8 percent in the first quarter of 2019.
Operating Expenses: First-quarter 2020 research and development (R&D) expenses were 7.6 percent of net sales and selling, general and administrative (SG&A) expenses were 69.6 percent of net sales. Non-GAAP R&D expenses were 5.8 percent of net sales, and non-GAAP SG&A expenses were 54.2 percent of net sales.
Income Tax Rate: The first-quarter 2020 income tax rate on a GAAP basis was 58.3 percent and the income tax expense rate on a non-GAAP basis was 12.8 percent.
Net Income (Loss): On a GAAP basis, first-quarter 2020 net loss was $13.6 million. First-quarter 2020 non-GAAP net income was $83.2 million.
Adjusted EBITDA: First-quarter 2020 adjusted EBITDA was $107.2 million.
Earnings (Loss) per Share: On a GAAP basis, diluted loss per share (EPS) in the first quarter of 2020 and 2019 were $0.07 and $0.19, respectively. Non-GAAP diluted earnings per share in the first quarter of 2020 and 2019 were $0.40 and $0.30, respectively. Weighted average shares outstanding used for calculating GAAP and non-GAAP diluted earnings per share in the first quarter of 2020 were 190.1 million and 213.1 million, respectively.
First-Quarter Segment Results
Management uses net sales and segment operating income to evaluate the performance of the Company’s two segments, the orphan segment and the inflammation segment. 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. Prior to the first quarter of 2020, the two operating segments were the orphan and rheumatology segment, which included RAYOS, and the inflammation segment. Beginning with the first quarter of 2020, RAYOS was moved to the inflammation segment and the orphan and rheumatology segment was renamed the orphan segment.
First-quarter 2020 net sales of the orphan segment, the Company’s strategic growth segment, were $245.4 million, an increase of 47 percent over the prior year’s quarter, driven by and strong continued growth of KRYSTEXXA and RAVICTI, as well as the launch of TEPEZZA.
First-quarter 2020 orphan segment operating income was $54.4 million, which includes significant investment spend associated with the commercial launch of TEPEZZA.
In June 2019, the Company divested the rights to MIGERGOT.
First-quarter 2020 net sales of the inflammation segment were $110.5 million and segment operating income was $51.9 million.
Cash Flow Statement and Balance Sheet Highlights
On a GAAP basis in the first quarter of 2020, cash used in operating activities was $62.6 million. On a non-GAAP basis, cash used in operating activities was $62.4 million.
The Company had cash and cash equivalents of $754.6 million as of March 31, 2020.
As of March 31, 2020, the total principal amount of debt outstanding was $1.418 billion, consisting of $418 million in senior secured term loans due 2026, $600 million of senior notes due 2027 and $400 million of exchangeable senior notes due 2022. As of March 31, 2020, net debt was $663.4 million and the net-debt-to-last-12-months adjusted EBITDA leverage (net leverage) ratio was 1.3 times. The Company has no maintenance covenants on its debt.
Revised 2020 Guidance
The Company now expects full-year 2020 net sales to range between $1.40 billion and $1.45 billion, an increase from the previous range of $1.40 billion to $1.42 billion, reflecting the significant increase in full-year TEPEZZA net sales guidance, offset by the current estimated impact of COVID-19 on its medicines. The Company now expects TEPEZZA full-year net sales of greater than $200 million, compared to the previous guidance of $30 million to $40 million. Full-year 2020 adjusted EBITDA is now expected to range between $450 million and $500 million, revised from the previous guidance range of $485 million to $500 million and reflects increased investment in TEPEZZA to support higher-than-expected demand, new TEPEZZA clinical programs and HZN-825. The updated guidance assumes that healthcare activity begins to return in the second half of 2020.
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 View Source 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.