On November 7, 2018 Horizon Pharma plc (NASDAQ: HZNP) reported its third-quarter 2018 financial results, confirmed its full-year 2018 net sales guidance range and increased its adjusted EBITDA guidance range (Press release, Horizon Pharma, NOV 7, 2018, View Source [SID1234530843]).
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"We generated record quarterly net sales for the Company and for our orphan and rheumatology segment, driven by accelerating KRYSTEXXA growth and continued strong performance from our rare disease medicines," said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc.
"Our clinical programs continue to advance, with the recent presentation of new teprotumumab Phase 2 data that underscore the durable efficacy observed in thyroid eye disease," continued Walbert. "We are also working to maximize the role of KRYSTEXXA to help more patients, including adapting our MIRROR immunomodulation clinical trial based on promising recent data to support the potential for registration. These advancements, in addition to potential asset acquisition opportunities, support our strategy to build a robust pipeline enabling sustainable long-term growth."
Third-Quarter and Recent Company Highlights
New Phase 2 Teprotumumab Data Presented at American Thyroid Associationand American Academy of Ophthalmology: At Week 24, 71.4 percent (30 of 42) of patients responded with reductions in proptosis (eye bulging) of 2mm or more and 61.9 percent of patients (26 of 42) responded with improvement of at least one grade in diplopia (double vision), which is 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 a disease-modifying therapy.
Teprotumumab is a fully human monoclonal antibody 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 become inflamed, which can lead to proptosis and diplopia as well as quality-of-life issues.
New KRYSTEXXA Immunomodulation Data Presented at American College of Rheumatology/Association of Rheumatology Health Professionals (ACR): At the 2018 ACR meeting in October, investigators shared results from a case series of nine sequential patients with uncontrolled gout (chronic gout that is refractory to conventional therapies), evaluating the administration of KRYSTEXXA with the immunomodulator methotrexate to improve the durability of KRYSTEXXA response. The study states 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.
In its clinical trial MIRROR (Methotrexate to Increase Response Rates in Patients with UncontrolledGOut Receiving KRYSTEXXA), the Company is evaluating the administration of KRYSTEXXA with methotrexate to potentially improve the durability of response rate. Following the external case series data, the Company is adapting its MIRROR trial to support the potential for registration. Methotrexate has been shown to reduce anti-drug antibodies when combined with biologics and is the immunomodulator most commonly used by rheumatologists.
Uncontrolled Gout and KRYSTEXXA Data Presented at ACR and American Society of Nephrology (ASN): The Company participated in both the ACR and ASN medical meetings, all in October. At ACR, multiple studies were shared demonstrating the extensive burden of uncontrolled gout and its impact on patients. At ASN, multiple studies were shared demonstrating that people who have undergone a kidney transplant experience higher rates of uncontrolled gout compared to other renal disease patients and mortality rates were higher in kidney transplant recipients diagnosed with gout.
Intellectual Property Update:The Company settled litigation with Par Pharmaceutical (part of Endo International), the first generic filer on RAVICTI. Par’s license to enter the market with a generic version of RAVICTI would begin on July 1, 2025.
Research and Development Programs
Orphan Candidates and Programs:
Teprotumumab: The pivotal Phase 3 confirmatory study, OPTIC, is evaluating teprotumumab for the treatment of moderate-to-severe active TED, which has no FDA-approved treatments. OPTIC completed enrollment on Sept. 4, 2018, and topline results are expected in the second quarter of 2019. OPTIC-X, a 48-week open-label 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 and longer treatment with teprotumumab.
Rheumatology Pipeline Candidates and Programs:
KRYSTEXXA Immunomodulation Studies: The evaluation of the use of immunomodulation therapies to enhance the response rate to KRYSTEXXA is being studied in MIRROR, as well as two investigator-initiated trials. The three trials are evaluating different immunomodulators, each of which are used by rheumatologists.
MIRROR: a Horizon Pharma-sponsored multicenter, efficacy and safety study for KRYSTEXXA co-administered with methotrexate to evaluate the impact of methotrexate on response rate. Enrollment began in the fourth quarter of 2018. The Company is currently adapting the MIRROR clinical trial design to support the potential for registration and expects to begin enrolling patients into the adapted protocol in the second quarter of 2019
Two additional investigator-initiated trials co-administerKRYSTEXXA withmycophenolate mofetil (MMF) and with azathioprine.
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 as well as optimized PEGylation and PASylation technology.
Third-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: Third-quarter 2018 net sales were $325.3 million, an increase of 20 percent, driven by continued strong growth of the Company’s orphan and rheumatology medicines.
Gross Profit: Under U.S. GAAP in the third quarter of 2018, the gross profit ratio was 69.6 percent compared to 53.8 percent in the third quarter of 2017. The non-GAAP gross profit ratio in the third quarter of 2018 was 91.2 percent compared to 89.6 percent in the third quarter of 2017.
Operating Expenses: R&D expenses were 6.5 percent of net sales and selling, general and administrative (SG&A) expenses were 49.7 percent of net sales. Non-GAAP R&D expenses were 5.9 percent of net sales and non-GAAP SG&A expenses were 39.3 percent of net sales.
Income Tax Rate: In the third quarter of 2018, the income tax benefit rate on a GAAP basis was 7.0 percent and the income tax expense rate on a non-GAAP basis was 10.1 percent.
Net Income: On a GAAP basis in the third quarter of 2018, net income was $26.0 million. Third-quarter 2018 non-GAAP net income was $112.6 million.
Adjusted EBITDA: Third-quarter 2018 adjusted EBITDA was $149.9 million.
Earnings (Loss) per Share: On a GAAP basis in the third quarter of 2018, diluted earnings per share was $0.15; in the third quarter of 2017, diluted loss per share was $0.39. Non-GAAP diluted earnings per share in the third quarter of 2018 and 2017 were $0.65 and $0.26, respectively. Weighted average shares outstanding used for calculating GAAP diluted earnings per share and non-GAAP diluted earnings per share in the third quarter of 2018 were 167.0 million and 172.5 million, respectively.
Third-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.
(1) On June 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. Year-to-date 2017 net sales of PROCYSBI and QUINSAIR in EMEA were $9.5 million.
Third-quarter 2018 net sales of the orphan and rheumatology segment were $219.9 million, an increase of 25.3 percent over the prior year’s quarter, driven by continued strong KRYSTEXXA growth as well as growth of RAVICTI and PROCYSBI. Third-quarter 2018 orphan and rheumatology segment operating income was $91.5 million, an increase of 39.5 percent.
Third-quarter 2018 net sales of the primary care segment were $105.4 million and operating income was $58.0 million.
Cash Flow Statement and Balance Sheet Highlights
On a GAAP basis in the third quarter of 2018, operating cash flow was $84.9 million. Non-GAAP operating cash flow was $95.6 million.
The Company had cash and cash equivalents of $807.0 million as of Sept. 30, 2018.
As of Sept. 30, 2018, the total principal amount of debt outstanding was $1.993 billion, which consists 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 Sept. 30, 2018, net debt was $1.186 billion.
Full-Year 2018 Guidance
The Company confirmed its full-year 2018 net sales guidance of $1.170 billion to $1.200 billion and continues to project full-year 2018 net sales growth for KRYSTEXXA of more than 65 percent. The Company increased its full-year 2018 adjusted EBITDA guidance range to $420 million to $430 million, from $400 million to $420 million.
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.