Horizon Therapeutics Public Ltd Co (Form: 10-Q, Received: 11/06/2019 07:18:58)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35238

HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

Ireland		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Connaught House, 1st Floor 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland		Not Applicable
(Address of principal executive offices)		(Zip Code)

011 353 1 772 2100

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary shares, nominal value $0.0001 per share	HZNP	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant’s ordinary shares, nominal value $0.0001, outstanding as of November 1, 2019: 187,302,229.

HORIZON THERAPEUTICS PLC

INDEX

		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2019 and as of December 31, 2018 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	53
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 6.	Exhibits	98
	Signatures	100

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except share data)

	As of			As of
	September 30,			December 31,
	2019			2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	883,964		$	958,712
Restricted cash		3,746			3,405
Accounts receivable, net		396,626			464,730
Inventories, net		58,505			50,751
Prepaid expenses and other current assets		135,963			68,218
Total current assets		1,478,804			1,545,816
Property and equipment, net		26,202			20,101
Developed technology, net		1,756,493			1,945,639
Other intangible assets, net		4,024			4,630
Goodwill		413,669			413,669
Deferred tax assets, net		45			3,148
Other assets		42,185			8,959
Total assets	$	3,721,422		$	3,941,962
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Long-term debt, current portion	$	—		$	—
Accounts payable		26,906			30,284
Accrued expenses		204,164			215,739
Accrued trade discounts and rebates		404,544			457,763
Deferred revenues, current portion		—			4,901
Total current liabilities		635,614			708,687
LONG-TERM LIABILITIES:
Exchangeable notes, net		346,541			332,199
Long-term debt, net of current		1,000,819			1,564,485
Deferred tax liabilities, net		112,968			107,768
Other long-term liabilities		69,907			38,717
Total long-term liabilities		1,530,235			2,043,169
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 600,000,000 and 300,000,000 shares authorized at September 30, 2019 and December 31, 2018, respectively; 187,174,795 and 169,244,520 shares issued at September 30, 2019 and December 31, 2018, respectively, and 186,790,429 and 168,860,154 shares outstanding at September 30, 2019 and December 31, 2018, respectively		19			17
Treasury stock, 384,366 ordinary shares at September 30, 2019 and December 31, 2018		(4,585	)		(4,585	)
Additional paid-in capital		2,761,068			2,374,966
Accumulated other comprehensive loss		(2,475	)		(1,523	)
Accumulated deficit		(1,198,454	)		(1,178,769	)
Total shareholders’ equity		1,555,573			1,190,106
Total liabilities and shareholders' equity	$	3,721,422		$	3,941,962

The accompanying notes are an integral part of these condensed consolidated financial statements.

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except share and per share data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net sales	$	335,466		$	325,311		$	936,484		$	852,027
Cost of goods sold		89,949			91,077			267,254			292,702
Gross profit		245,517			234,234			669,230			559,325
OPERATING EXPENSES:
Research and development		24,572			21,169			74,611			63,079
Selling, general and administrative		172,326			161,585			511,720			517,858
(Gain) loss on sale of assets		—			(12,303	)		10,963			(12,303	)
Impairment of long-lived assets		—			1,603			—			35,249
Total operating expenses		196,898			172,054			597,294			603,883
Operating income (loss)		48,619			62,180			71,936			(44,558	)
OTHER EXPENSE, NET:
Interest expense, net		(20,428	)		(30,437	)		(69,991	)		(91,921	)
Loss on debt extinguishment		(41,371	)		—			(58,835	)		—
Foreign exchange (loss) gain		(40	)		35			(25	)		(81	)
Other income (expense), net		890			337			(193	)		834
Total other expense, net		(60,949	)		(30,065	)		(129,044	)		(91,168	)
(Loss) income before (benefit) expense for income taxes		(12,330	)		32,115			(57,108	)		(135,726	)
(Benefit) expense for income taxes		(30,564	)		(1,266	)		(37,359	)		4,301
Net income (loss)	$	18,234		$	33,381		$	(19,749	)	$	(140,027	)
Net income (loss) per ordinary share—basic	$	0.10		$	0.20		$	(0.11	)	$	(0.84	)
Weighted average ordinary shares outstanding—basic		186,470,141			167,047,104			181,949,838			166,018,603
Net income (loss) per ordinary share— diluted	$	0.09		$	0.19		$	(0.11	)	$	(0.84	)
Weighted average ordinary shares outstanding—diluted		194,171,967			172,485,757			181,949,838			166,018,603
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments	$	(809	)	$	(133	)	$	(952	)	$	(567	)
Pension remeasurements		—			—			—			289
Other comprehensive loss		(809	)		(133	)		(952	)		(278	)
Comprehensive income (loss)	$	17,425		$	33,248		$	(20,701	)	$	(140,305	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share data)

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2018		169,244,520	$	17		384,366	$	(4,585	)	$	2,374,966		$	(1,523	)	$	(1,178,769	)	$	1,190,106
Cumulative effect adjustments from adoption of ASU 2016-02		—		—		—		—			—			—			64			64
Issuance of ordinary shares - public offering		14,081,632		1		—		—			326,848			—			—			326,849
Issuance of ordinary shares in conjunction with vesting of restricted stock units, performance stock units and stock option exercises		1,804,196		—		—		—			10,042			—			—			10,042
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(17,171	)		—			—			(17,171	)
Share-based compensation		—		—		—		—			27,548			—			—			27,548
Currency translation adjustment		—		—		—		—			—			(487	)		—			(487	)
Net loss		—		—		—		—			—			—			(32,863	)		(32,863	)
Balances at March 31, 2019		185,130,348	$	18		384,366	$	(4,585	)	$	2,722,233		$	(2,010	)	$	(1,211,568	)	$	1,504,088
Issuance of ordinary shares - public offering		—		—		—		—			(55	)		—			—			(55	)
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		781,026		1		—		—			1,986			—			—			1,987
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(7,203	)		—			—			(7,203	)
Issuance of ordinary shares in conjunction with ESPP program		558,856		—		—		—			5,465			—			—			5,465
Share-based compensation		—		—		—		—			21,367			—			—			21,367
Currency translation adjustment		—		—		—		—			—			344			—			344
Net loss		—		—		—		—			—			—			(5,120	)		(5,120	)
Balances at June 30, 2019		186,470,230	$	19		384,366	$	(4,585	)	$	2,743,793		$	(1,666	)	$	(1,216,688	)	$	1,520,873
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		704,189		—		—		—			4,207			—			—			4,207
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(5,086	)		—			—			(5,086	)
Issuance of ordinary shares in conjunction with ESPP program		376		—		—		—			3			—			—			3
Share-based compensation		—		—		—		—			18,151			—			—			18,151
Currency translation adjustment		—		—		—		—			—			(809	)		—			(809	)
Net income		—		—		—		—			—			—			18,234			18,234
Balances at September 30, 2019		187,174,795	$	19		384,366	$	(4,585	)	$	2,761,068		$	(2,475	)	$	(1,198,454	)	$	1,555,573

The accompanying notes are an integral part of these condensed consolidated financial statements.

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)

(UNAUDITED)

(In thousands, except share data)

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2017		164,785,083	$	16		384,366	$	(4,585	)	$	2,248,979		$	(983	)	$	(1,141,975	)	$	1,101,452
Cumulative effect adjustments from adoption of ASUs 2014-09 and 2016-16		—		—		—		—			—			—			1,586			1,586
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		574,810		1		—		—			945			—			—			946
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(3,517	)		—			—			(3,517	)
Issuance of ordinary shares in conjunction with ESPP program		—		—		—		—			14			—			—			14
Share-based compensation		—		—		—		—			27,833			—			—			27,833
Currency translation adjustment		—		—		—		—			—			463			—			463
Net loss		—		—		—		—			—			—			(148,656	)		(148,656	)
Balances at March 31, 2018		165,359,893	$	17		384,366	$	(4,585	)	$	2,274,254		$	(520	)	$	(1,289,045	)	$	980,121
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		1,103,716		—		—		—			2,727			—			—			2,727
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(5,668	)		—			—			(5,668	)
Issuance of ordinary shares in conjunction with ESPP program		511,261		—		—		—			4,720			—			—			4,720
Share-based compensation		—		—		—		—			30,721			—			—			30,721
Currency translation adjustment		—		—		—		—			—			(897	)		—			(897	)
Pension remeasurement		—		—		—		—			—			289			—			289
Net loss		—		—		—		—			—			—			(24,751	)		(24,751	)
Balances at June 30, 2018		166,974,870	$	17		384,366	$	(4,585	)	$	2,306,754		$	(1,128	)	$	(1,313,796	)	$	987,262
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		932,247		—		—		—			6,081			—			—			6,081
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(3,697	)		—			—			(3,697	)
Share-based compensation		—		—		—		—			28,427			—			—			28,427
Currency translation adjustment		—		—		—		—			—			(133	)		—			(133	)
Net income		—		—		—		—			—			—			33,381			33,381
Balances at September 30, 2018		167,907,117	$	17		384,366	$	(4,585	)	$	2,337,565		$	(1,261	)	$	(1,280,415	)	$	1,051,321

The accompanying notes are an integral part of these condensed consolidated financial statements.

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	For the Nine Months Ended September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(19,749	)	$	(140,027	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense		177,336			187,135
Equity-settled share-based compensation		67,066			86,981
Impairment of long-lived assets		—			35,249
Loss on debt extinguishment		58,835			—
Amortization of debt discount and deferred financing costs		17,069			16,879
Loss (gain) on sale of assets		10,963			(12,303	)
Deferred income taxes		8,302			1,645
Foreign exchange and other adjustments		572			243
Changes in operating assets and liabilities:
Accounts receivable		68,162			14,060
Inventories		(8,004	)		7,902
Prepaid expenses and other current assets		(72,055	)		(35,526	)
Accounts payable		(3,338	)		30,119
Accrued trade discounts and rebates		(53,241	)		(142,164	)
Accrued expenses		(10,591	)		35,581
Deferred revenues		(4,901	)		1,462
Other non-current assets and liabilities		(1,474	)		(1,401	)
Net cash provided by operating activities		234,952			85,835
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment related to license agreement		—			(12,000	)
Proceeds from sale of assets		6,000			9,424
Purchases of property and equipment		(11,325	)		(881	)
Net cash used in investing activities		(5,325	)		(3,457	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of senior notes		590,057			—
Net proceeds from the issuance of ordinary shares		326,793			—
Repayment of term loans		(918,181	)		(27,723	)
Repayment of senior notes		(814,420	)		—
Contingent consideration proceeds from divestiture		3,297			—
Net proceeds from term loans		517,378			—
Proceeds from the issuance of ordinary shares in conjunction with ESPP program		5,468			4,711
Proceeds from the issuance of ordinary shares in connection with stock option exercises		16,236			9,753
Payment of employee withholding taxes relating to share-based awards		(29,460	)		(12,882	)
Net cash used in financing activities		(302,832	)		(26,141	)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(1,202	)		(688	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(74,407	)		55,549
Cash, cash equivalents and restricted cash, beginning of the period		962,117			757,897
Cash, cash equivalents and restricted cash, end of the period	$	887,710		$	813,446

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	71,867	$	67,118
Net cash paid for income taxes		9,034		40,409
Cash paid for amounts included in the measurement of lease liabilities		4,525		—
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Purchases of property and equipment included in accounts payable and accrued expenses		526		34

The accompanying notes are an integral part of these condensed consolidated financial statements

HORIZON THERAPEUTICS PLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND BUSINESS OVERVIEW

Basis of Presentation

The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The December 31, 2018 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

Unless otherwise indicated or the context otherwise requires, references to “Horizon”, the “Company”, “we”, “us” and “our” refer to Horizon Therapeutics plc (formerly known as Horizon Pharma plc) and its consolidated subsidiaries. The unaudited condensed consolidated financial statements presented herein include the accounts of the Company and its wholly owned subsidiaries. All intra-company transactions and balances have been eliminated.

On May 2, 2019, the shareholders of the Company approved changing the name of the Company from “Horizon Pharma Public Limited Company” to “Horizon Therapeutics Public Limited Company” to better reflect the Company’s long-term strategy to develop and commercialize innovative new medicines to address rare diseases with very few effective options.

Business Overview

Horizon is focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic diseases. The Company’s pipeline is purposeful: it applies scientific expertise and courage to bring clinically meaningful therapies to patients. Horizon believes science and compassion must work together to transform lives. The Company has two reportable segments, the orphan and rheumatology segment and the inflammation segment (previously named the primary care segment), and currently markets ten medicines in the areas of orphan diseases, rheumatology and inflammation.

The Company’s currently marketed medicines are:

Orphan and Rheumatology

KRYSTEXXA® (pegloticase injection), for intravenous infusion

RAVICTI® (glycerol phenylbutyrate) oral liquid

PROCYSBI® (cysteamine bitartrate) delayed-release capsules, for oral use

ACTIMMUNE® (interferon gamma-1b) injection, for subcutaneous use

RAYOS® (prednisone) delayed-release tablets

BUPHENYL® (sodium phenylbutyrate) tablets and powder

QUINSAIR™ (levofloxacin) solution for inhalation

Inflammation

PENNSAID® (diclofenac sodium topical solution) 2% w/w (“PENNSAID 2%”), for topical use

DUEXIS® (ibuprofen/famotidine) tablets, for oral use

VIMOVO® (naproxen/esomeprazole magnesium) delayed-release tablets, for oral use

Change in Accounting Method

When accounting for business combinations under ASC Topic 805, Business Combinations, the Company previously separately identified and recorded at fair value intangible assets acquired and their related third-party contingent royalties at the date of acquisition. Third-party contingent royalties are royalties payable to parties other than sellers of the businesses. Effective January 1, 2019, the Company retrospectively changed its accounting for business combinations and now records acquired intangible assets and their related third-party contingent royalties on a net basis (“New Method”). The Company changed its accounting principle on the basis that the use of the New Method is preferable primarily due to improved comparability with the Company’s peers. The Company has adjusted the accompanying condensed consolidated balance sheet as at December 31, 2018, condensed consolidated statement of comprehensive income (loss) for the three and nine months ended September 30, 2018 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2018 to reflect this change in accounting. Total shareholders’ equity at December 31, 2018 was adjusted by $135.9 million to reflect the cumulative impact of the change to the earliest year presented. The impact on the condensed consolidated statement of cash flows consisted of adjustments to reconcile net loss to net cash provided by operating activities and changes in operating assets and liabilities for all periods presented. There was no impact on total operating, investing or financing cash flows for any prior period. The following are selected line items from the Company’s condensed consolidated financial statements illustrating the effect of the change in accounting method (in thousands, except per share data):

	Consolidated Balance Sheet as of
	December 31, 2018
	As Previously Reported			Impact of Accounting Change (1)			As Adjusted
Prepaid expenses and other current assets	$	70,828		$	(2,610	)	$	68,218
Total current assets		1,548,426			(2,610	)		1,545,816
Developed technology, net		2,120,596			(174,957	)		1,945,639
Goodwill		426,441			(12,772	)		413,669
Other assets		23,029			(14,070	)		8,959
Total assets		4,146,371			(204,409	)		3,941,962
Accrued expenses		205,593			10,146			215,739
Accrued royalties - current portion		63,363			(63,363	)		—
Total current liabilities		761,904			(53,217	)		708,687
Accrued royalties - net of current		285,374			(285,374	)		—
Deferred tax liabilities, net		93,630			14,138			107,768
Other long-term liabilities		54,622			(15,905	)		38,717
Total long-term liabilities		2,330,310			(287,141	)		2,043,169
Accumulated deficit		(1,314,718	)		135,949			(1,178,769	)
Total shareholders' equity		1,054,157			135,949			1,190,106
Total liabilities and shareholders' equity		4,146,371			(204,409	)		3,941,962

(1)

The change in accounting principle resulted in the Company re-performing its purchase price allocations as of the respective acquisition dates for prior business combinations. The adjustments to the purchase price allocations primarily resulted in a decrease in developed technology intangible assets and the elimination of liabilities for accrued contingent royalties due to recording these items on a net basis. The re-performance of purchase price allocations also impacted goodwill and deferred tax liabilities. In addition, the change in accounting principle resulted in the elimination of royalty reimbursement assets and accrued contingent royalty liabilities that were recorded in connection with divestitures, impacting prepaid expenses and other current assets, other assets, accrued expenses and other long-term liabilities captions as shown in the table above. In addition, under the New Method of accounting, the Company is presenting accrued royalties based on each periods’ net sales as part of the accrued expenses line item on its condensed consolidated balance sheets.

	Consolidated Statement of Comprehensive Income (Loss)
	Three Months Ended September 30, 2018
	As Previously Reported			Revision (1)			As Revised			Impact of Accounting Change (2)			As Adjusted
Cost of goods sold	$	99,011		$	(840	)	$	98,171		$	(7,094	)	$	91,077
Gross profit		226,300			840			227,140			7,094			234,234
Operating income		54,246			840			55,086			7,094			62,180
Other income, net		453			—			453			(116	)		337
Total other expenses, net		(29,949	)		—			(29,949	)		(116	)		(30,065	)
Income before benefit for income taxes		24,297			840			25,137			6,978			32,115
Benefit for income taxes		(1,733	)		—			(1,733	)		467			(1,266	)
Net income		26,030			840			26,870			6,511			33,381
Net income per ordinary share - basic		0.16			—			0.16			0.04			0.20
Net income per ordinary share - diluted		0.15			0.01			0.16			0.03			0.19
Comprehensive income		25,897			840			26,737			6,511			33,248

	Consolidated Statement of Comprehensive Income (Loss)
	Nine Months Ended September 30, 2018
	As Previously Reported			Revision (1)			As Revised			Impact of Accounting Change (2)			As Adjusted
Cost of goods sold	$	315,185		$	(2,388	)	$	312,797		$	(20,095	)	$	292,702
Gross profit		536,842			2,388			539,230			20,095			559,325
Impairment of long-lived assets		39,455			—			39,455			(4,206	)		35,249
Total operating expenses		608,089			—			608,089			(4,206	)		603,883
Operating loss		(71,247	)		2,388			(68,859	)		24,301			(44,558	)
Other income, net		978			—			978			(144	)		834
Total other expenses, net		(91,024	)		—			(91,024	)		(144	)		(91,168	)
Loss before expense for income taxes		(162,271	)		2,388			(159,883	)		24,157			(135,726	)
Expense for income taxes		1,863			—			1,863			2,438			4,301
Net loss		(164,134	)		2,388			(161,746	)		21,719			(140,027	)
Net loss per ordinary share - basic and diluted		(0.99	)		0.02			(0.97	)		0.13			(0.84	)
Comprehensive loss		(164,412	)		2,388			(162,024	)		21,719			(140,305	)

(1)

During the course of preparing the Company’s consolidated financial statements for the year ended December 31, 2018, the Company identified an error in the measurement of the contingent royalty liability calculation pertaining to the royalty end date for one of its medicines. The amounts in this column reflect the revisions to the Company’s previously reported consolidated statement of comprehensive income (loss) on Form 10-Q for the three and nine months ended September 30, 2018. The Company concluded that the amounts were not material to any of its previously issued consolidated financial statements. Refer to Note 1 and Note 23 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for further detail regarding this revision. The impact on the consolidated statements of cash flows consisted of adjustments to reconcile net loss to net cash provided by operating activities and changes in operating assets and liabilities. There was no impact on total operating, investing or financing cash flows for the nine months ended September 30, 2018.

(2)

The change in accounting principle resulted in the Company re-performing its purchase price allocations as of the respective acquisition dates for prior business combinations. The adjustments to the purchase price allocations primarily resulted in a net decrease in cost of goods sold reflecting lower intangible asset amortization and the elimination of royalty accretion and remeasurement expenses, partially offset by the royalty expense based on the periods’ net sales. The re-performance of purchase price allocations also directly impacted impairments of long-lived assets and benefit/expense for income taxes, as shown in the tables above. In addition, the elimination of royalty reimbursement assets and accrued contingent royalty liabilities that were recorded in connection with divestitures resulted in adjustments to other income, net.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

From time to time, the Company adopts new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies.

Effective January 1, 2019, the Company adopted Accounting Standards Updated (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). Under ASU No. 2016-02, an entity is required to recognize right-of-use lease assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. The Company adopted this standard on January 1, 2019, using a modified retrospective approach at the adoption date through a cumulative-effect adjustment to retained earnings. The Company elected the package of transition provisions available for expired or existing contracts, which allowed the Company to carry forward its historical assessments of (i) whether contracts are or contain leases, (ii) lease classification and (iii) initial direct costs. In addition, the Company elected the hindsight practical expedient to determine the lease term for existing leases. The Company applied the new guidance to all operating leases within the scope of the standard that were in effect on January 1, 2019, or entered into after, the adoption date. Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption did not have a material impact on the Company’s condensed consolidated statement of comprehensive income (loss). However, the new standard established $37.1 million of liabilities and corresponding right-of-use assets of $34.9 million on the Company’s condensed consolidated balance sheet for leases, primarily related to operating leases on rented office properties, that existed as of the January 1, 2019, adoption date.

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU No. 2018-07”). ASU No. 2018-07 largely aligns the accounting for share-based payment awards issued to employees and non-employees. The Company adopted ASU No. 2018-07 in the first quarter of 2019, and the adoption of ASU No. 2018-07 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Effective January 1, 2019, the Company adopted ASU No. 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made (“ASU No. 2018-08”). The new guidance applies to all entities that receive or make contributions, including business entities. The Company adopted the standard in the first quarter of 2019, using prospective application to any new agreements entered into after the effective date. The adoption of ASU No. 2018-08 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Other recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards Codification (“ASC”)), the American Institute of Certified Public Accountants and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Significant Accounting Policies

As described in Note 1, effective January 1, 2019, the Company modified its accounting policy related to intangible assets and contingent royalty liabilities acquired through business combinations following a change in accounting principle, and the Company’s updated policy in respect of all royalties is described below.

In addition, as described above, the Company adopted ASU No. 2016-02 effective January 1, 2019. The Company modified its accounting policy related to leases following the adoption of ASU No. 2016-02, and the Company’s updated policy is described below.

Royalties

The Company records royalty expense based on each periods’ net sales as part of cost of goods sold.

Leases

The Company’s leases primarily relate to operating leases of rented office properties. For contracts entered into on or after January 1, 2019, at the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. At inception of a lease, the Company allocates the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. The right-of-use lease asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.

The right-of-use lease asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred. All right-of-use lease assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s secured incremental borrowing rate for the same term as the underlying lease.

The Company identified and assessed the following significant assumptions in recognizing the right-of-use lease assets and corresponding liabilities.

Expected lease term – The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Incremental borrowing rate – As the Company’s leases do not provide an implicit rate, the Company obtained the incremental borrowing rate (“IBR”) based on the remaining term of each lease. The IBR is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The Company has elected not to recognize right-of-use lease assets and lease liabilities for short-term leases that have a term of 12 months or less.

The Company reports right-of-use lease assets within non-current “Other assets” in its condensed consolidated balance sheet. The Company reports the current portion of lease liabilities within “Accrued expenses” and long-term lease liabilities within “Other long-term liabilities” in its condensed consolidated balance sheet. As of September 30, 2019, the Company had $32.5 million of right-of-use lease assets, $1.2 million of the current portion of lease liabilities and $36.3 million of long-term lease liabilities.

Pre-launch Inventories

The Company capitalizes inventory costs associated with its medicine candidates prior to regulatory approval when, based on management judgment, future commercialization is considered probable and future economic benefit is expected to be realized. A number of factors are taken into consideration by management, including the current status of the regulatory approval process and any potential impediments to the approval process such as safety or efficacy. If future commercialization and future economic benefit is no longer considered probable, the capitalized pre-launch inventory would be expensed. At September 30, 2019, the Company had approximately $3.6 million of work-in-process inventory and $5.0 million of raw material inventory related to the manufacturing of teprotumumab drug substance.

NOTE 3 – NET INCOME (LOSS) PER SHARE

The following table presents basic and diluted net income (loss) per share for the three and nine months ended September 30, 2019 and 2018 (in thousands, except share and per share data):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019			2018
Basic net income (loss) per share calculation:
Net income (loss)	$	18,234	$	33,381	$	(19,749	)	$	(140,027	)
Weighted average ordinary shares outstanding		186,470,141		167,047,104		181,949,838			166,018,603
Basic net income (loss) per share	$	0.10	$	0.20	$	(0.11	)	$	(0.84	)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019			2018
Diluted net income (loss) per share calculation:
Net income (loss)	$	18,234	$	33,381	$	(19,749	)	$	(140,027	)
Weighted average ordinary shares outstanding		194,171,967		172,485,757		181,949,838			166,018,603
Diluted net income (loss) per share	$	0.09	$	0.19	$	(0.11	)	$	(0.84	)

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of ordinary shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised, converted into ordinary shares or resulted in the issuance of ordinary shares that would have shared in the Company’s earnings.

The computation of diluted net income (loss) per share excluded 0.3 million and 8.8 million shares subject to equity awards for the three and nine months ended September 30, 2019, respectively, and 3.1 million and 10.6 million shares subject to equity awards for the three and nine months ended September 30, 2018, respectively, because their inclusion would have had an anti-dilutive effect on diluted net income (loss) per share.

The potentially dilutive impact of the March 2015 private placement of $400.0 million aggregate principal amount of 2.50% Exchangeable Senior Notes due 2022 (the “Exchangeable Senior Notes”) by Horizon Therapeutics Investment Limited (formerly known as Horizon Pharma Investment Limited) (“Horizon Investment”), a wholly owned subsidiary of the Company, is determined using a method similar to the treasury stock method. Under this method, no numerator or denominator adjustments arise from the principal and interest components of the Exchangeable Senior Notes because the Company has the intent and ability to settle the Exchangeable Senior Notes’ principal and interest in cash. Instead, the Company is required to increase the diluted net income (loss) per share denominator by the variable number of shares that would be issued upon conversion if it settled the conversion spread obligation with shares. For diluted net income (loss) per share purposes, the conversion spread obligation is calculated based on whether the average market price of the Company’s ordinary shares over the reporting period is in excess of the exchange price of the Exchangeable Senior Notes. There was no calculated spread added to the denominator for the three and nine months ended September 30, 2019 and 2018.

NOTE 4 – ACQUISITIONS, DIVESTITURES AND OTHER ARRANGEMENTS

Sale of MIGERGOT rights

On June 28, 2019, the Company sold its rights to MIGERGOT to Cosette Pharmaceuticals, Inc., for $6.0 million and total potential contingent consideration payments of $4.0 million (the “MIGERGOT transaction”).

Pursuant to ASC 805 (as amended by ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”)), the Company accounted for the MIGERGOT transaction as a sale of assets, specifically a sale of intellectual property rights, and a sale of inventory.

The loss on sale of assets recorded to the condensed consolidated statement of comprehensive income (loss) during the nine months ended September 30, 2019, was determined as follows (in thousands):

Cash proceeds	$	6,000
Less net assets sold:
Developed technology		(16,999	)
Inventory		(236	)
Release of contingent consideration liability	272
Loss on sale of assets	$	(10,963	)

Sale of RAVICTI and AMMONAPS Rights outside of North America and Japan

On December 28, 2018, the Company sold its rights to RAVICTI and AMMONAPS (known as BUPHENYL in the United States) outside of North America and Japan to Medical Need Europe AB, part of the Immedica Group, for $35.0 million (the “Immedica transaction”). The Company previously distributed RAVICTI and AMMONAPS through a commercial partner in Europe and other non-U.S. markets. The Company has retained the rights to RAVICTI and BUPHENYL in North America and Japan.

Pursuant to ASC 805 (as amended by ASU No. 2017-01), the Company accounted for the Immedica transaction as a sale of assets, specifically a sale of intellectual property rights.

The gain on sale of assets recorded to the consolidated statement of comprehensive loss during the three months ended December 31, 2018, was determined as follows (in thousands):

Cash proceeds	$	35,000
Less net assets sold:
Developed technology		(4,146	)
Transaction costs		(197	)
Gain on sale of assets	$	30,657

Acquisition and Subsequent Sale of Additional Rights to Interferon Gamma-1b

On June 30, 2017, the Company completed its acquisition of certain rights to interferon gamma-1b from Boehringer Ingelheim International GmbH (“Boehringer Ingelheim International”) in all territories outside of the United States, Canada and Japan and in connection therewith, paid Boehringer Ingelheim International €19.5 million ($22.3 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1406). Boehringer Ingelheim International commercialized interferon gamma-1b as IMUKIN in an estimated thirty countries, primarily in Europe and the Middle East. Upon closing, during the year ended December 31, 2017, the Company accounted for the payment as the acquisition of an asset which was immediately impaired as projections for future net sales of IMUKIN in these territories did not exceed the related costs, and included the payment in the “impairment of long-lived assets” line item in its condensed consolidated statement of comprehensive loss.

On July 24, 2018, the Company sold its rights to interferon gamma-1b in all territories outside the United States, Canada and Japan to Clinigen Group plc (“Clinigen”) for an upfront payment of €7.5 million ($8.8 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1683) and a potential additional contingent consideration payment of €3.0 million ($3.5 million when converted using a Euro-to-Dollar exchange rate of 1.1673) (the “IMUKIN sale”). The contingent consideration payment of €3.0 million ($3.3 million when converted using a Euro-to-Dollar exchange rate at the date of receipt of 1.0991) was received in September 2019. The Company continues to market interferon gamma-1b as ACTIMMUNE in the United States.

Pursuant to ASC 805 (as amended by ASU No. 2017-01), the Company accounted for the IMUKIN sale as a sale of assets, specifically a sale of intellectual property rights, and a sale of inventory.

The gain on sale of assets recorded to the consolidated statement of comprehensive income (loss) during the three and nine months ended September 30, 2018, was determined as follows (in thousands):

Cash proceeds including $715 for inventory	$	9,477
Contingent consideration receivable		3,502
Less net assets sold:
Inventory		(623	)
Transaction costs		(53	)
Gain on sale of assets	$	12,303

Other Arrangements

On January 3, 2019, the Company entered into a collaboration agreement with HemoShear Therapeutics, LLC (“HemoShear”), a biotechnology company, to discover novel therapeutic targets for gout. The collaboration provides the Company with an opportunity to address unmet treatment needs for people with gout by evaluating new targets for the control of serum uric acid levels as well as new targets to address the inflammation associated with acute flares of gout. Under the terms of the agreement, the Company paid HemoShear an upfront cash payment of $2.0 million with additional potential future milestone payments upon commencement of new stages of development, contingent on the Company’s approval at each stage. In June 2019, the Company incurred a $4.0 million progress payment, which was subsequently paid in July 2019.

NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Inventories consist of raw materials, work-in-process and finished goods. The Company has entered into manufacturing and supply agreements for the manufacture of drug substance and finished goods inventories, and the purchase of raw materials and production supplies. The Company’s inventories include the direct purchase cost of materials and supplies and manufacturing overhead costs.

The components of inventories as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
Raw materials	$	11,098	$	5,092
Work-in-process		26,202		27,068
Finished goods		21,205		18,591
Inventories, net	$	58,505	$	50,751

NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
Prepaid income taxes and income tax receivable	$	45,544	$	5,899
Deferred charge for taxes on intra-company profit		29,841		21,734
Advance payments for inventory		17,472		1,449
Rabbi trust assets		11,474		8,203
Medicine samples inventory		2,702		4,539
Other prepaid expenses and other current assets		28,930		26,394
Prepaid expenses and other current assets	$	135,963	$	68,218

Prepaid income taxes and income tax receivable as of September 30, 2019, includes a benefit for income taxes recognized during the nine months ended September 30, 2019. This benefit arises due to the mix of pre-tax income and losses incurred in various tax jurisdictions.

Advance payments for inventory as of September 30, 2019, includes $17.5 million related to payments made to the manufacturer of teprotumumab drug substance.

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019			December 31, 2018
Leasehold improvements	$	19,925		$	9,982
Software		14,898			14,843
Machinery and equipment		4,800			4,800
Computer equipment		2,767			2,485
Other		5,865			2,501
		48,255			34,611
Less accumulated depreciation		(23,727	)		(19,197	)
Construction in process		1,674			4,687
Property and equipment, net	$	26,202		$	20,101

Depreciation expense was $1.7 million and $1.5 million for the three months ended September 30, 2019 and 2018, respectively, and was $4.6 million for each of the nine months ended September 30, 2019 and 2018.

NOTE 8 – GOODWILL AND INTANGIBLE ASSETS

Effective January 1, 2019, the Company retrospectively changed its accounting for business combinations, which impacted the carrying amounts of its goodwill and intangible assets. Refer to Note 1 for further detail.

Goodwill

The gross carrying amount of goodwill as of September 30, 2019 and December 31, 2018 was $413.7 million.

The table below presents goodwill for the Company’s reportable segments as of September 30, 2019 (in thousands):

		Orphan and Rheumatology			Inflammation			Total
Goodwill		$	360,745		$	52,924		$	413,669

As of September 30, 2019, there were no accumulated goodwill impairment losses.

Intangible Assets

As of September 30, 2019, the Company’s finite-lived intangible assets consisted of developed technology related to ACTIMMUNE, BUPHENYL, KRYSTEXXA, PENNSAID 2%, PROCYSBI, RAVICTI and RAYOS, as well as customer relationships for ACTIMMUNE.

During the nine months ended September 30, 2019, in connection with the MIGERGOT transaction, the Company wrote off the remaining net book value of developed technology related to MIGERGOT of $17.0 million. See Note 4 for further details.

During the year ended December 31, 2018, in connection with the Immedica transaction, the Company recorded a reduction in the net book value of developed technology related to RAVICTI and AMMONAPS of $4.1 million. See Note 4 for further details.

The Company tests its intangible assets for impairment when events or circumstances may indicate that the carrying value of these assets exceeds their fair value. During the nine months ended September 30, 2018, the Company recorded an impairment of $33.6 million to fully write off the book value of developed technology related to PROCYSBI in Canada and Latin America due primarily to lower anticipated future net sales based on a Patented Medicine Prices Review Board review. The fair value of developed technology was determined using an income approach.

The Company also recorded an impairment of $10.6 million during the three months ended December 31, 2018 to fully write off the book value of developed technology related to LODOTRA as result of amendments to its license and supply agreements with Jagotec AG (“Jagotec”) and Skyepharma AG, which are affiliates of Vectura Group plc (“Vectura”). Under these amendments, effective January 1, 2019, the Company agreed to transfer all economic benefits of LODOTRA in Europe to Vectura during an initial transition period, with full rights transferring to Vectura when certain transfer activities have been completed. The Company no longer recorded LODOTRA net sales beginning January 1, 2019. The fair value of developed technology was determined using an income approach.

Intangible assets as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019							December 31, 2018
	Cost Basis		Accumulated Amortization			Net Book Value		Cost Basis		Impairment			Accumulated Amortization			Net Book Value
Developed technology	$	2,758,403	$	(1,001,910	)	$	1,756,493	$	2,828,648	$	(44,245	)	$	(838,764	)	$	1,945,639
Customer relationships		8,100		(4,076	)		4,024		8,100		—			(3,470	)		4,630
Total intangible assets	$	2,766,503	$	(1,005,986	)	$	1,760,517	$	2,836,748	$	(44,245	)	$	(842,234	)	$	1,950,269

Amortization expense for the three months ended September 30, 2019 and 2018 was $57.7 million and $61.1 million, respectively, and was $172.8 million and $182.5 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, estimated future amortization expense was as follows (in thousands):

2019 (October to December)	$	57,658
2020		228,766
2021		221,262
2022		220,090
2023		219,470
Thereafter		813,271
Total	$	1,760,517

NOTE 9 – ACCRUED EXPENSES

Accrued expenses as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
Payroll-related expenses	$	73,166	$	78,555
Allowances for returns		41,442		39,041
Consulting and professional services		31,576		35,799
Accrued royalties		18,955		15,746
Accrued interest		8,823		13,196
Pricing review liability		8,294		9,091
Accrued other		21,908		24,311
Accrued expenses	$	204,164	$	215,739

NOTE 10 – ACCRUED TRADE DISCOUNTS AND REBATES

Accrued trade discounts and rebates as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019		December 31, 2018
Accrued commercial rebates and wholesaler fees	$	120,861	$	153,083
Accrued co-pay and other patient assistance		120,256		179,463
Accrued government rebates and chargebacks		163,427		125,217
Accrued trade discounts and rebates	$	404,544	$	457,763
Invoiced commercial rebates and wholesaler fees, co-pay and other patient assistance costs, and government rebates and chargebacks in accounts payable		4,448		3,666
Total customer-related accruals and allowances	$	408,992	$	461,429

The following table summarizes changes in the Company’s customer-related accruals and allowances from December 31, 2018 to September 30, 2019 (in thousands):

	Wholesaler Fees			Co-Pay and			Government
	and Commercial			Other Patient			Rebates and
	Rebates			Assistance			Chargebacks			Total
Balance at December 31, 2018	$	153,445		$	179,462		$	128,522		$	461,429
Current provisions relating to sales during the nine months ended September 30, 2019		348,243			1,171,242			355,670			1,875,155
Adjustments relating to prior-year sales		(5,763	)		—			11,073			5,310
Payments relating to sales during the nine months ended September 30, 2019		(226,697	)		(1,050,986	)		(189,014	)		(1,466,697	)
Payments relating to prior-year sales		(147,682	)		(179,462	)		(139,061	)		(466,205	)
Balance at September 30, 2019	$	121,546		$	120,256		$	167,190		$	408,992

NOTE 11 – SEGMENT AND OTHER INFORMATION

The Company has two reportable segments, the orphan and rheumatology segment and the inflammation segment, and the Company reports net sales and segment operating income for each segment.

The orphan and rheumatology segment includes the marketed medicines ACTIMMUNE, BUPHENYL, KRYSTEXXA, PROCYSBI, QUINSAIR, RAVICTI and RAYOS. The inflammation segment includes the marketed medicines DUEXIS, PENNSAID 2% and VIMOVO and previously included MIGERGOT prior to the MIGERGOT transaction.

The Company’s chief operating decision maker (“CODM”) evaluates the financial performance of the Company’s segments based upon segment operating income. Segment operating income is defined as (loss) income before (benefit) expense for income taxes adjusted for the items set forth in the reconciliation below. Items below income from operations are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s CODM. Additionally, certain expenses are not allocated to a segment. The Company does not report balance sheet information by segment as no balance sheet by segment is reviewed by the Company’s CODM.

The following table reflects net sales by medicine for the Company’s reportable segments for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
KRYSTEXXA	$	99,576	$	70,246	$	231,634	$	175,572
RAVICTI		59,954		60,444		160,299		166,495
PROCYSBI		40,397		41,374		121,142		114,740
ACTIMMUNE		27,861		25,831		78,883		78,071
RAYOS		19,359		17,171		59,067		41,313
BUPHENYL		3,036		4,351		8,173		15,337
QUINSAIR		211		127		550		346
LODOTRA		—		355		—		2,005
Orphan and Rheumatology segment net sales	$	250,394	$	219,899	$	659,748	$	593,879

PENNSAID 2%		42,091		51,487		143,751		125,900
DUEXIS		29,889		34,196		89,412		80,601
VIMOVO		13,092		18,638		41,751		48,873
MIGERGOT		—		1,091		1,822		2,774
Inflammation segment net sales	$	85,072	$	105,412	$	276,736	$	258,148

Total net sales	$	335,466	$	325,311	$	936,484	$	852,027

The table below provides reconciliations of the Company’s segment operating income to the Company’s total (loss) income before (benefit) expense for income taxes for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Segment operating income:
Orphan and Rheumatology	$	89,823		$	91,537		$	211,003		$	205,249
Inflammation		39,638			57,984			130,777			94,294
Reconciling items:
Amortization and step-up:
Intangible amortization expense		(57,662	)		(61,144	)		(172,762	)		(182,508	)
Inventory step-up expense		—			(83	)		(90	)		(17,212	)
Loss on debt extinguishment		(41,371	)		—			(58,835	)		—
Interest expense, net		(20,428	)		(30,437	)		(69,991	)		(91,921	)
Share-based compensation		(18,151	)		(28,428	)		(67,066	)		(86,981	)
Upfront, progress and milestone payments related to license and collaboration agreements		(3,073	)		—			(9,073	)		(90	)
Depreciation		(1,658	)		(1,523	)		(4,574	)		(4,627	)
Fees related to refinancing activities		(262	)		(40	)		(1,437	)		(82	)
Drug substance harmonization costs		(80	)		(301	)		(394	)		(1,579	)
Acquisition/divestiture-related costs		44			(186	)		(1,231	)		(6,035	)
Foreign exchange (loss) gain		(40	)		35			(25	)		(81	)
(Gain) loss on sale of assets		—			12,303			(10,963	)		12,303
Litigation settlements		—			(1,500	)		(1,000	)		(5,750	)
Charges relating to discontinuation of Friedreich's ataxia program		—			(254	)		(1,221	)		(1,476	)
Restructuring and realignment costs		—			(4,582	)		(33	)		(14,815	)
Impairment of long-lived assets		—			(1,603	)		—			(35,249	)
Other income (expense), net		890			337			(193	)		834
(Loss) income before (benefit) expense for income taxes	$	(12,330	)	$	32,115		$	(57,108	)	$	(135,726	)

The following table presents the amount and percentage of gross sales to customers that represented more than 10% of the Company’s gross sales included in its two reportable segments and all other customers as a group for the three and nine months ended September 30, 2019 and 2018 (in thousands, except percentages):

	For the Three Months Ended September 30,
	2019					2018
	Amount		% of Gross			Amount		% of Gross
			Sales					Sales
Customer A	$	344,516		36	%	$	347,144		34	%
Customer B		202,410		21	%		236,104		23	%
Customer C		160,486		17	%		147,187		14	%
Customer D		81,259		9	%		115,083		11	%
Other Customers		164,739		17	%		183,641		18	%
Gross Sales	$	953,410		100	%	$	1,029,159		100	%

	For the Nine Months Ended September 30,
	2019					2018
	Amount		% of Gross			Amount		% of Gross
			Sales					Sales
Customer A	$	1,056,439		36	%	$	1,143,111		37	%
Customer B		513,687		18	%		752,559		24	%
Customer C		497,413		17	%		306,707		10	%
Customer D		307,444		11	%		377,556		12	%
Other Customers		514,917		18	%		531,461		17	%
Gross Sales	$	2,889,900		100	%	$	3,111,394		100	%

Geographic revenues are determined based on the country in which the Company’s customers are located. The following table presents a summary of net sales attributed to geographic sources for the three and nine months ended September 30, 2019 and 2018 (in thousands, except percentages):

	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018
	Amount		% of Total Net Sales	Amount		% of Total Net Sales
United States	$	333,011	99%	$	321,951	99%
Rest of world		2,455	1%		3,360	1%
Net sales	$	335,466		$	325,311

	Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018
	Amount		% of Total Net Sales	Amount		% of Total Net Sales
United States	$	931,623	99%	$	837,261	98%
Rest of world		4,861	1%		14,766	2%
Net sales	$	936,484		$	852,027

NOTE 12 – FAIR VALUE MEASUREMENTS

The following tables and paragraphs set forth the Company’s financial instruments that are measured at fair value on a recurring basis within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The following describes three levels of inputs that may be used to measure fair value:

Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company utilizes the market approach to measure fair value for its money market funds. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

As of December 31, 2018, the Company’s cash and cash equivalents included bank time deposits which were measured at fair value using Level 2 inputs and their carrying values were approximately equal to their fair values. Level 2 inputs, obtained from various third-party data providers, represent quoted prices for similar assets in active markets, or these inputs were derived from observable market data, or if not directly observable, were derived from or corroborated by other observable market data.

Other current assets and other long-term liabilities recorded at fair value on a recurring basis are composed of investments held in a rabbi trust and the related deferred liability for deferred compensation arrangements. Quoted prices for this investment, primarily in mutual funds, are available in active markets. Thus, the Company’s investments related to deferred compensation arrangements and the related long-term liability are classified as Level 1 measurements in the fair value hierarchy.

Assets and liabilities measured at fair value on a recurring basis

The following tables set forth the Company’s financial assets and liabilities at fair value on a recurring basis as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019
	Level 1			Level 2		Level 3		Total
Assets:
Money market funds	$	858,375		$	—	$	—	$	858,375
Other current assets		11,474			—		—		11,474
Total assets at fair value	$	869,849		$	—	$	—	$	869,849
Liabilities:
Other long-term liabilities		(11,474	)		—		—		(11,474	)
Total liabilities at fair value	$	(11,474	)	$	—	$	—	$	(11,474	)

	December 31, 2018
	Level 1			Level 2		Level 3		Total
Assets:
Bank time deposits	$	—		$	6,500	$	—	$	6,500
Money market funds		915,800			—		—		915,800
Other current assets		8,203			—		—		8,203
Total assets at fair value	$	924,003		$	6,500	$	—	$	930,503
Liabilities:
Other long-term liabilities		(8,203	)		—		—		(8,203	)
Total liabilities at fair value	$	(8,203	)	$	—	$	—	$	(8,203	)

NOTE 13 – DEBT AGREEMENTS

The Company’s outstanding debt balances as of September 30, 2019 and December 31, 2018 consisted of the following (in thousands):

	September 30, 2019			December 31, 2018
Term Loan Facility	$	418,026		$	818,026
2027 Senior Notes		600,000			—
2023 Senior Notes		—			475,000
2024 Senior Notes		—			300,000
Exchangeable Senior Notes		400,000			400,000
Total face value		1,418,026			1,993,026
Debt discount		(65,234	)		(87,038	)
Deferred financing fees		(5,432	)		(9,304	)
Total long-term debt and exchangeable notes		1,347,360			1,896,684
Less: long-term debt—current portion		—			—
Long-term debt and exchangeable notes, net of current portion	$	1,347,360		$	1,896,684

Term Loan Facility and Revolving Credit Facility

On May 22, 2019, Horizon Therapeutics USA, Inc. (formerly known as Horizon Pharma USA, Inc.) (the “Borrower”), a wholly owned subsidiary of the Company, borrowed approximately $518.0 million aggregate principal amount of loans (the “May 2019 Refinancing Loans”) pursuant to an amendment (the “May 2019 Refinancing Amendment”) to the credit agreement, dated as of May 7, 2015, by and among the Borrower, the Company and certain of its subsidiaries as guarantors, the lenders party thereto from time to time and Citibank, N.A., as administrative agent and collateral agent, as amended by Amendment No. 1, dated as of October 25, 2016, Amendment No. 2, dated March 29, 2017, Amendment No. 3, dated October 23, 2017, Amendment No. 4, dated October 19, 2018 and Amendment No. 5, dated March 11, 2019 (the “Term Loan Facility”). Pursuant to Amendment No. 5, the Borrower received $200.0 million aggregate principal amount of revolving commitments (the “Incremental Revolving Commitments”). The Incremental Revolving Commitments were established pursuant to an incremental facility (the “Revolving Credit Facility”) and provide the Borrower with $200.0 million of additional borrowing capacity, which includes a $50.0 million letter of credit sub-facility. The Incremental Revolving Commitments will terminate in March 2024. Borrowings under the Revolving Credit Facility are available for general corporate purposes. As of September 30, 2019, the Revolving Credit Facility was undrawn. As used herein, all references to the “Credit Agreement” are references to the original credit agreement, dated as of May 7, 2015, as amended through the May 2019 Refinancing Amendment.

The May 2019 Refinancing Loans were incurred as a separate new class of term loans under the Credit Agreement with substantially the same terms as the previously outstanding senior secured term loans incurred on October 19, 2018 (the “Refinanced Loans”) to effectuate a repricing of the Refinanced Loans, including lowering the interest rate by 0.25% and extending the final maturity date to May 22, 2026. The Borrower used the proceeds of the May 2019 Refinancing Loans to repay the Refinanced Loans, which totaled approximately $518.0 million. The May 2019 Refinancing Loans bear interest, at the Borrower’s option, at a rate equal to either the London Inter-Bank Offered Rate (“LIBOR”) plus an applicable margin of 2.50% per year (subject to a LIBOR floor of 0.00%), or the alternate base rate (the “Base Rate”) plus 1.50% per year. The Base Rate is defined as the greatest of (a) LIBOR (using one-month interest period) plus 1.00%, (b) the prime rate, (c) the federal funds rate plus 0.50%, and (d) 2.00%. The loans under the Revolving Credit Facility bear interest, at the Borrower’s option, at a rate equal to either LIBOR plus an applicable margin of 3.00% per year (subject to a LIBOR floor of 0.00%), or the Base Rate plus 2.00% per year. The applicable margins for loans under the Revolving Credit Facility will be reduced by 0.25% if the Company’s ratio of consolidated total indebtedness to consolidated EBITDA, or total leverage ratio, is less than or equal to 3.50 to 1.00. The Credit Agreement provides for (i) the May 2019 Refinancing Loans, (ii) the Revolving Credit Facility, (iii) one or more uncommitted additional incremental loan facilities subject to the satisfaction of certain financial and other conditions, and (iv) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The Credit Agreement allows for the Company and certain of its subsidiaries to become additional borrowers under incremental or refinancing facilities.

The obligations under the Credit Agreement (including obligations in respect of the May 2019 Refinancing Loans and the Revolving Credit Facility) and any swap obligations and cash management obligations owing to a lender (or an affiliate of a lender) are guaranteed by the Company and each of the Company’s existing and subsequently acquired or formed direct and indirect subsidiaries (other than certain immaterial subsidiaries, subsidiaries whose guarantee would result in material adverse tax consequences and subsidiaries whose guarantee is prohibited by applicable law). The obligations under the Credit Agreement (including obligations in respect of the May 2019 Refinancing Loans and the Revolving Credit Facility) and any related swap and cash management obligations are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (i) all tangible and intangible assets of the Borrower and the guarantors, except for certain customary excluded assets, and (ii) all of the capital stock owned by the Borrower and guarantors thereunder (limited, in the case of the stock of certain non-U.S. subsidiaries of the Borrower, to 65% of the capital stock of such subsidiaries). The Borrower and the guarantors under the Credit Agreement are individually and collectively referred to herein as a “Loan Party” and the “Loan Parties,” as applicable.

The Company elected to exercise its reinvestment rights under the mandatory prepayment provisions of the Credit Agreement with respect to the net proceeds from the Company’s sale of its rights to PROCYSBI and QUINSAIR in the Europe, Middle East and Africa regions to Chiesi Farmaceutici S.p.A. To the extent the Company had not applied such net proceeds to permitted acquisitions (including the acquisition of rights to products and products lines) and/or the acquisition of capital assets within 365 days of the receipt thereof (or committed to so apply and then applied within 180 days after the end of such 365-day period), the Company was required to make a mandatory prepayment under the Credit Agreement in an amount equal to the unapplied net proceeds. In June 2018, the Company repaid $23.5 million under the mandatory prepayment provisions of the Credit Agreement.

On March 18, 2019, the Company completed the repayment of $300.0 million of the outstanding principal amount of term loans under the Credit Agreement following the closing of its underwritten public equity offering on March 11, 2019. In July 2019, the Company repaid an additional $100.0 million of term loans under the Credit Agreement. Following these repayments, the outstanding principal balance of term loans under the Credit Agreement was $418.0 million.

Additionally, the Company elected to exercise its reinvestment rights under the mandatory prepayment provisions of the Credit Agreement with respect to the net proceeds from the Immedica transaction. To the extent the Company had not applied such net proceeds to permitted acquisitions (including the acquisition of rights to products and products lines) and/or the acquisition of capital assets within 365 days of the receipt of proceeds from the Immedica transaction (or commit to so apply and then apply within 180 days after the end of such 365-day period), the Company was required to make a mandatory prepayment under the Credit Agreement in an amount equal to the unapplied net proceeds. In March 2019, the Company repaid $35.0 million under the mandatory prepayment provisions of the Credit Agreement which was included in the $300.0 million repayment referred to above.

The Borrower is permitted to make voluntary prepayments of the loans under the Credit Agreement at any time without payment of a premium, except that with respect to the May 2019 Refinancing Loans, a 1% premium will apply to a repayment of the May 2019 Refinancing Loans in connection with a repricing of, or any amendment to the Credit Agreement in a repricing of, such loans effected on or prior to the date that is six months following May 22, 2019. The Borrower is required to make mandatory prepayments of loans under the Credit Agreement (without payment of a premium) with (a) net cash proceeds from certain non-ordinary course asset sales (subject to reinvestment rights and other exceptions), (b) casualty proceeds and condemnation awards (subject to reinvestment rights and other exceptions), (c) net cash proceeds from issuances of debt (other than certain permitted debt), and (d) 50% of the Company’s excess cash flow (subject to decrease to 25% or 0% if the Company’s first lien leverage ratio is less than 2.25:1 or 1.75:1, respectively). The May 2019 Refinancing Loans will amortize in equal quarterly installments beginning on March 31, 2025, in an aggregate annual amount equal to 1.00% of the original principal amount of the loans under the Credit Agreement (i.e. $850.0 million), as the same may be reduced from time to time pursuant to the Credit Agreement (including by prepayments made prior to or after the date of the May 2019 Refinancing Amendment), with any remaining balance payable on May 22, 2026, the final maturity date of the May 2019 Refinancing Loans.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The Credit Agreement also contains a springing financial maintenance covenant, which requires that the Company maintain a specified leverage ratio at the end of each fiscal quarter. The covenant is tested if both the outstanding loans and letters of credit under the Revolving Credit Facility, subject to certain exceptions, exceed 25% of the total commitments under the Revolving Credit Facility as of the last day of any fiscal quarter. If the Company fails to meet this covenant, the commitments under the Revolving Credit Facility could be terminated and any outstanding borrowings, together with accrued interest, under the Revolving Credit Facility could be declared immediately due and payable.

Other events of default under the Credit Agreement include: (i) the failure by the Borrower to timely make payments due under the Credit Agreement; (ii) material misrepresentations or misstatements in any representation or warranty by any Loan Party when made; (iii) failure by any Loan Party to comply with the covenants under the Credit Agreement and other related agreements; (iv) certain defaults under a specified amount of other indebtedness of the Company or its subsidiaries; (v) insolvency or bankruptcy-related events with respect to the Company or any of its material subsidiaries; (vi) certain undischarged judgments against the Company or any of its restricted subsidiaries; (vii) certain ERISA-related events reasonably expected to have a material adverse effect on the Company and its restricted subsidiaries taken as a whole; (viii) certain security interests or liens under the loan documents ceasing to be, or being asserted by the Company or its restricted subsidiaries not to be, in full force and effect; (ix) any loan document or material provision thereof ceasing to be, or any challenge or assertion by any Loan Party that such loan document or material provision is not, in full force and effect; and (x) the occurrence of a change of control. If one or more events of default occurs and continues beyond any applicable cure period, the administrative agent may, with the consent of the lenders holding a majority of the loans and commitments under the facilities, or will, at the request of such lenders, terminate the commitments of the lenders to make further loans and declare all of the obligations of the Loan Parties under the Credit Agreement to be immediately due and payable.

The interest on the Company’s Term Loan Facility is variable and as of September 30, 2019, the interest rate on the Term Loan Facility was 4.63% and the effective interest rate was 4.87%.

As of September 30, 2019, the fair value of the amounts outstanding under the Term Loan Facility was approximately $419.6 million, categorized as a Level 2 instrument, as defined in Note 12.

2027 Senior Notes

On July 16, 2019, HTUSA completed a private placement of $600.0 million aggregate principal amount of 5.5% Senior Notes due 2027 (the “2027 Senior Notes”) to several investment banks acting as initial purchasers, who subsequently resold the 2027 Senior Notes to persons reasonably believed to be qualified institutional buyers.

The Company used the net proceeds from the offering of the 2027 Senior Notes, together with approximately $65.0 million in cash on hand, to redeem or prepay $625.0 million of its outstanding debt, consisting of (i) the outstanding $225.0 million principal amount of its 2023 Senior Notes, (ii) the outstanding $300.0 million principal amount of its 2024 Senior Notes and (iii) $100.0 million of the outstanding principal amount of senior secured term loans under the Credit Agreement, as well as to pay the related premiums and fees and expenses, excluding accrued interest, associated with such redemption and prepayment.

The 2027 Senior Notes are HTUSA’s general unsecured senior obligations, rank equally in right of payment with all existing and future senior debt of HTUSA and rank senior in right of payment to any existing and future subordinated debt of HTUSA. The 2027 Senior Notes are effectively subordinate to all of the existing and future secured debt of HTUSA to the extent of the value of the collateral securing such debt.

The 2027 Senior Notes are unconditionally guaranteed on a senior basis by the Company and all of the Company’s restricted subsidiaries, other than HTUSA and certain immaterial subsidiaries, that guarantee the Credit Agreement. The guarantees are each guarantor’s senior unsecured obligations and rank equally in right of payment with such guarantor’s existing and future senior debt and senior in right of payment to any existing and future subordinated debt of such guarantor. The guarantees are effectively subordinated to all of the existing and future secured debt of each guarantor, including such guarantor’s guarantee under the Credit Agreement, to the extent of the value of the collateral securing such debt. The guarantees of a guarantor may be released under certain circumstances. The 2027 Senior Notes are structurally subordinated to all of the liabilities of the Company’s subsidiaries that do not guarantee the 2027 Senior Notes.

The 2027 Senior Notes accrue interest at an annual rate of 5.5% payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2020. The 2027 Senior Notes will mature on August 1, 2027, unless earlier exchanged, repurchased or redeemed.

Except as described below, the 2027 Senior Notes may not be redeemed before August 1, 2022. Thereafter, some or all of the 2027 Senior Notes may be redeemed at any time at specified redemption prices, plus accrued and unpaid interest to the redemption date. At any time prior to August 1, 2022, some or all of the 2027 Senior Notes may be redeemed at a price equal to 100% of the aggregate principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the redemption date. Also prior to August 1, 2022, up to 40% of the aggregate principal amount of the 2027 Senior Notes may be redeemed at a redemption price of 105.5% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net proceeds of certain equity offerings. In addition, the 2027 Senior Notes may be redeemed in whole but not in part at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date, if on the next date on which any amount would be payable in respect of the 2027 Senior Notes, HTUSA or any guarantor is or would be required to pay additional amounts as a result of certain tax related events.

If the Company undergoes a change of control, HTUSA will be required to make an offer to purchase all of the 2027 Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to, but not including, the repurchase date, subject to certain exceptions. If the Company or certain of its subsidiaries engages in certain asset sales, HTUSA will be required under certain circumstances to make an offer to purchase the 2027 Senior Notes at 100% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date.

The indenture governing the 2027 Senior Notes contains covenants that limit the ability of the Company and its restricted subsidiaries 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, merge, consolidate with or merge or sell all or substantially all of their assets, 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 the Company. Certain of the covenants will be suspended during any period in which the 2027 Senior Notes receive investment grade ratings. The indenture governing the 2027 Senior Notes also includes customary events of default.

As of September 30, 2019, the interest rate on the 2027 Senior Notes was 5.50% and the effective interest rate was 5.76%.

As of September 30, 2019, the fair value of the 2027 Senior Notes was approximately $625.5 million, categorized as a Level 2 instrument, as defined in Note 12.

2023 Senior Notes

On April 29, 2015, Horizon Pharma Financing Inc. (“Horizon Financing”), a wholly owned subsidiary of the Company, completed a private placement of $475.0 million aggregate principal amount of 6.625% Senior Notes due 2023 (the “2023 Senior Notes”) to certain investment banks acting as initial purchasers who subsequently resold the 2023 Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act. The net proceeds from the offering of the 2023 Senior Notes were approximately $462.3 million, after deducting the initial purchasers’ discount and offering expenses payable by Horizon Financing.

In connection with the closing of the acquisition of Hyperion Therapeutics, Inc. (“Hyperion”) on May 7, 2015, Horizon Financing merged with and into Horizon Pharma, Inc. (“HPI”) and on October 31, 2018, HPI merged with and into Horizon Therapeutics USA, Inc. (formerly known as Horizon Pharma USA, Inc.) (“HTUSA”). As a result, the 2023 Senior Notes became the general unsecured senior obligations of HTUSA, which was previously a guarantor under the 2023 Senior Notes. The obligations under the 2023 Senior Notes were fully and unconditionally guaranteed on a senior unsecured basis by the Company and all of the Company’s direct and indirect subsidiaries that were guarantors from time to time under the Credit Agreement.

The Company redeemed $250.0 million of 2023 Senior Notes on May 1, 2019. In connection with this early redemption, the Company paid a premium of $8.3 million on May 1, 2019. Following this redemption, $225.0 million of the 2023 Senior Notes remained outstanding.

On August 9, 2019, the Company redeemed the remaining $225.0 million of 2023 Senior Notes. In connection with this early redemption, the Company paid a premium of $7.5 million on August 9, 2019.

2024 Senior Notes

On October 25, 2016, HPI and HTUSA (together, in such capacity, the “2024 Issuers”), completed a private placement of $300.0 million aggregate principal amount of 8.750% Senior Notes due 2024 (the “2024 Senior Notes”) to certain investment banks acting as initial purchasers who subsequently resold the 2024 Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act. The net proceeds from the offering of the 2024 Senior Notes were approximately $291.9 million, after deducting the initial purchasers’ discount and offering expenses payable by the 2024 Issuers. On October 31, 2018, HPI merged with and into HTUSA, and as a result, HPI’s obligations as co-issuer under the 2024 Senior Notes became HTUSA’s general unsecured senior obligations.

The obligations under the 2024 Senior Notes were HTUSA’s general unsecured senior obligations and were fully and unconditionally guaranteed on a senior unsecured basis by the Company and all of the Company’s direct and indirect subsidiaries that were guarantors from time to time under the Credit Agreement.

On August 9, 2019, the Company redeemed all $300.0 million of 2024 Senior Notes. In connection with this early redemption, the Company paid a premium of $23.7 million on August 9, 2019.

Exchangeable Senior Notes

On March 13, 2015, Horizon Investment completed a private placement of $400.0 million aggregate principal amount of Exchangeable Senior Notes to certain investment banks acting as initial purchasers who subsequently resold the Exchangeable Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act. The net proceeds from the offering of the Exchangeable Senior Notes were approximately $387.2 million, after deducting the initial purchasers’ discount and offering expenses payable by Horizon Investment.

The Exchangeable Senior Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company (the “Guarantee”). The Exchangeable Senior Notes and the Guarantee are Horizon Investment’s and the Company’s senior unsecured obligations. The Exchangeable Senior Notes accrue interest at an annual rate of 2.50% payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2015. The Exchangeable Senior Notes will mature on March 15, 2022, unless earlier exchanged, repurchased or redeemed. The initial exchange rate is 34.8979 ordinary shares of the Company per $1,000 principal amount of the Exchangeable Senior Notes (equivalent to an initial exchange price of approximately $28.66 per ordinary share). The exchange rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or upon a tax redemption, Horizon Investment will increase the exchange rate for a holder who elects to exchange its Exchangeable Senior Notes in connection with such a corporate event or a tax redemption in certain circumstances.

Other than as described below, the Exchangeable Senior Notes may not be redeemed by the Company.

Issuer Redemptions:

Optional Redemption for Changes in the Tax Laws of a Relevant Taxing Jurisdiction: Horizon Investment may redeem the Exchangeable Senior Notes at its option, prior to March 15, 2022, in whole but not in part, in connection with certain tax-related events.

Provisional Redemption on or After March 20, 2019: On or after March 20, 2019, Horizon Investment may redeem for cash all or a portion of the Exchangeable Senior Notes if the last reported sale price of ordinary shares of the Company has been at least 130% of the exchange price then in effect for at least twenty trading days whether or not consecutive) during any thirty consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Horizon Investment provide written notice of redemption. The redemption price will be equal to 100% of the principal amount of the Exchangeable Senior Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date; provided that if the redemption date occurs after a regular record date and on or prior to the corresponding interest payment date, Horizon Investment will pay the full amount of accrued and unpaid interest due on such interest payment date to the record holder of the Exchangeable Senior Notes on the regular record date corresponding to such interest payment date, and the redemption price payable to the holder who presents an Exchangeable Senior Note for redemption will be equal to 100% of the principal amount of such Exchangeable Senior Note.

Holder Exchange Rights:

Holders may exchange all or any portion of their Exchangeable Senior Notes at their option at any time prior to the close of business on the business day immediately preceding December 15, 2021 only upon satisfaction of one or more of the following conditions:

Exchange upon Satisfaction of Sale Price Condition – During any calendar quarter commencing after the calendar quarter ended June 30, 2015 (and only during such calendar quarter), if the last reported sale price of ordinary shares of the Company for at least twenty trading days (whether or not consecutive) during the period of thirty consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable exchange price on each applicable trading day.

Exchange upon Satisfaction of Trading Price Condition – During the five business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of Exchangeable Senior Notes for each trading day of such period was less than 98% of the product of the last reported sale price of ordinary shares of the Company and the applicable exchange rate on such trading day.

Exchange upon Notice of Redemption – Prior to the close of business on the business day immediately preceding December 15, 2021, if Horizon Investment provides a notice of redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date.

As of September 30, 2019, none of the above conditions had been satisfied and no exchange of Exchangeable Senior Notes had been triggered.

On or after December 15, 2021, a holder may exchange all or any portion of its Exchangeable Senior Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of the foregoing conditions.

Upon exchange, Horizon Investment will settle exchanges of the Exchangeable Senior Notes by paying or causing to be delivered, as the case may be, cash, ordinary shares or a combination of cash and ordinary shares, at its election.

The Company recorded the Exchangeable Senior Notes under the guidance in ASC Topic 470-20, Debt with Conversion and Other Options, and separated them into a liability component and equity component. The carrying amount of the liability component of $268.9 million was determined by measuring the fair value of a similar liability that does not have an associated equity component. The carrying amount of the equity component of $119.1 million represented by the embedded conversion option was determined by deducting the fair value of the liability component of $268.9 million from the initial proceeds of $387.2 million ascribed to the convertible debt instrument as a whole. The initial debt discount of $131.1 million is being charged to interest expense over the life of the Exchangeable Senior Notes using the effective interest rate method.

As of September 30, 2019, the interest rate on the Exchangeable Senior Notes was 2.50% and the effective interest rate was 8.88%.

As of September 30, 2019, the fair value of the Exchangeable Senior Notes was approximately $465.5 million, categorized as a Level 2 instrument, as defined in Note 12.

During the three months ended September 30, 2019, the Company recorded a loss on debt extinguishment of $41.4 million in the condensed consolidated statement of comprehensive income (loss), which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $525.0 million of the 2023 Senior Notes and 2024 Senior Notes and the write-off of the deferred financing fees and debt discount fees related to the $100.0 million term loan repayment.

During the nine months ended September 30, 2019, the Company recorded a loss on debt extinguishment of $58.8 million in the condensed consolidated statement of comprehensive income (loss), which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $775.0 million of the 2023 Senior Notes and 2024 Senior Notes and the write-off of the deferred financing fees and debt discount fees related to the $400.0 million of term loan repayments.

NOTE 14 – LEASE OBLIGATIONS

As discussed in Note 2, the Company elected the Topic 842 transition provision that allows entities to continue to apply the legacy guidance in Topic 840, Leases, including its disclosure requirements, in the comparative periods presented in the year of adoption. Accordingly, the Topic 842 disclosures below are presented as of and for the three and nine-month period ended September 30, 2019 only.

The Company has the following office space lease agreements in place for real properties:

Location	Approximate Square Feet		Lease Expiry Date
Dublin, Ireland		18,900	November 4, 2029
Lake Forest, Illinois		160,000	March 31, 2031
Novato, California		61,000	August 31, 2021
Brisbane, California (1)		20,100	November 19, 2019
South San Francisco, California (2)		20,000	January 31, 2030
Chicago, Illinois		9,200	December 31, 2028
Mannheim, Germany		4,800	December 31, 2020
Other	12,400			May 31, 2020 to September 15, 2022

(1)

The remaining lease term on the Brisbane, California office space is less than twelve months as of the ASU No. 2016-02 adoption date of January 1, 2019. The Company elected not to recognize lease assets and liabilities for leases with a term of twelve months or less.

(2)

In March 2019, the Company entered into an office lease agreement for approximately 20,000 square feet of office space in South San Francisco, California. The initial term of the lease is expected to commence during the fourth quarter of 2019 and will expire on January 31, 2030.

The above table does not include details of an agreement for lease entered into on October 14, 2019, relating to approximately 63,000 square feet of office space under construction in Dublin, Ireland. Under the terms of the agreement for lease, when construction has been completed in accordance with the agreement for lease, the Company will be automatically granted a lease of the office. The agreement for lease provides for significant involvement by the Company in the design of the office space. The Company expects to incur leasehold improvement costs during 2020 and 2021 in order to prepare the building for occupancy.

The Company recognizes rent expense on a monthly basis over the lease term based on a straight-line method. Rent expense was $1.6 million and $1.3 million for the three months ended September 30, 2019 and 2018, respectively, and $4.6 million and $4.3 million for the nine months ended September 30, 2019 and 2018, respectively.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of September 30, 2019 (in thousands):

2019 (October to December)	$	(3,335	)
2020		6,618
2021		5,730
2022		4,507
2023		4,384
Thereafter		36,081
Total lease payments (1)		53,985
Imputed interest		(18,866	)
Total operating lease liabilities	$	35,119

(1)

Total lease payments in the above table do not include approximately $12.0 million related to a lease that had not yet commenced at September 30, 2019. The Company expects this lease to commence in the fourth quarter of 2019 and the Company will recognize the related right-of-use asset and lease liability upon commencement.

The Company has certain leases that provide for lease incentives payable to the Company for construction of leasehold improvements. The cash inflows for these incentives are expected to be received in the fourth quarter of 2019 and are in excess of the Company’s expected lease payments resulting in a net cash inflow, as shown in the above table.

The weighted-average discount rate and remaining lease term for operating leases as of September 30, 2019 was 7.56% and 10.43 years, respectively.

The following table, which was included in the Company’s 2018 Annual Report on Form 10-K, depicts the minimum future cash payments due under lease obligations at December 31, 2018 (in thousands):

2019	$	6,228
2020		6,680
2021		5,788
2022		4,565
2023		4,442
Thereafter		36,696
Total	$	64,399

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Purchase Commitments

Under the Company’s agreement with AGC Biologics A/S (formerly known as CMC Biologics A/S) (“AGC Biologics”), the Company has agreed to purchase certain minimum annual order quantities of teprotumumab drug substance. In addition, the Company must provide AGC Biologics with rolling forecasts of teprotumumab drug substance requirements, with a portion of the forecast being a firm and binding order. Under the Company’s agreement with Catalent Indiana, LLC (“Catalent”), the Company must provide Catalent with rolling forecasts of teprotumumab drug product requirements, with a portion of the forecast being a firm and binding order. At September 30, 2019, the Company had binding purchase commitments with AGC Biologics for teprotumumab drug substance of €64.4 million ($70.2 million converted at an exchange rate as of September 30, 2019 of 1.0901), to be delivered through the first half of 2021. In addition, the Company had binding purchase commitments with Catalent for teprotumumab drug product of $5.8 million, to be delivered through June 2020.

Patheon Pharmaceuticals Inc. (“Patheon”) is obligated to manufacture PROCYSBI for the Company through December 31, 2021. The Company must provide Patheon with rolling, non-binding forecasts of PROCYSBI, with a portion of the forecast being a firm written order. Cambrex Profarmaco Milano (“Cambrex”) is obligated to manufacture PROCYSBI active pharmaceutical ingredient (“API”) for the Company through November 2, 2020. The Company must provide Cambrex with rolling, non-binding forecasts, with a portion of the forecast being the minimum floor of the firm order that must be placed. At September 30, 2019, the Company had a binding purchase commitment with Patheon for PROCYSBI of $5.3 million, to be delivered through December 2019, and with Cambrex for PROCYSBI API of $1.4 million, to be delivered through December 2020.

Under an agreement with Boehringer Ingelheim Biopharmaceuticals GmbH (“Boehringer Ingelheim Biopharmaceuticals”), Boehringer Ingelheim Biopharmaceuticals is required to manufacture and supply ACTIMMUNE and IMUKIN to the Company. Following the IMUKIN sale, purchases by the Company of IMUKIN inventory are expected to be sold to Clinigen. The Company is required to purchase minimum quantities of finished medicine during the term of the agreement, which term extends to at least June 30, 2024. As of September 30, 2019, the minimum binding purchase commitment to Boehringer Ingelheim Biopharmaceuticals was $18.1 million (converted using a Dollar-to-Euro exchange rate of 1.0901) through July 2024. As of September 30, 2019, the Company also committed to incur an additional $0.7 million for the harmonization of the drug substance manufacturing process with Boehringer Ingelheim Biopharmaceuticals.

Under the Company’s agreement with Bio-Technology General (Israel) Ltd (“BTG Israel”), the Company has agreed to purchase certain minimum annual order quantities and is obligated to purchase at least eighty percent of its annual world-wide bulk product requirements for KRYSTEXXA from BTG Israel. The term of the agreement runs until December 31, 2030, and will automatically renew for successive three-year periods unless earlier terminated by either party upon three years’ prior written notice. The agreement may be terminated earlier by either party in the event of a force majeure, liquidation, dissolution, bankruptcy or insolvency of the other party, uncured material breach by the other party or after January 1, 2024, upon three years’ prior written notice. Under the agreement, if the manufacture of the bulk product is moved out of Israel, the Company may be required to obtain the approval of the Israel Innovation Authority (formerly known as Israeli Office of the Chief Scientist) (“IIA”) because certain KRYSTEXXA intellectual property was initially developed with a grant funded by the IIA. The Company issues eighteen-month forecasts of the volume of KRYSTEXXA that the Company expects to order. The first nine months of the forecast are considered binding firm orders. At September 30, 2019, the Company had a binding purchase commitment with BTG Israel for KRYSTEXXA of $41.1 million, to be delivered through December 31, 2026. Additionally, there were other purchase orders relating to the manufacture of KRYSTEXXA of $1.0 million outstanding at September 30, 2019.

Jagotec or its affiliates are required to manufacture and supply RAYOS exclusively to the Company in bulk. The earliest the agreement can expire is December 31, 2023, and the minimum purchase commitment is in force until December 2023. At September 30, 2019, the minimum purchase commitment based on tablet pricing in effect under the agreement was $4.6 million through December 2023. Additionally, purchase orders relating to the manufacture of RAYOS of $0.8 million were outstanding at September 30, 2019. Effective January 1, 2019, the Company amended its license and supply agreements with Jagotec AG and Skyepharma AG, which are affiliates of Vectura. Under these amendments, from the earlier of the completion of certain transfer activities related to the transfer of the Company’s rights to LODOTRA in Europe, or January 1, 2020, the Company will no longer be subject to a minimum purchase commitment in respect of the supply agreement with Jagotec AG.

Nuvo Pharmaceuticals Inc. (formerly known as Nuvo Research Inc.) (“Nuvo”) is obligated to manufacture and supply PENNSAID 2% to the Company. The term of the supply agreement is through December 31, 2029, but the agreement may be terminated earlier by either party for any uncured material breach by the other party of its obligations under the supply agreement or upon the bankruptcy or similar proceeding of the other party. At least ninety days prior to the first day of each calendar month during the term of the supply agreement, the Company submits a binding written purchase order to Nuvo for PENNSAID 2% in minimum batch quantities. At September 30, 2019, the Company had a binding purchase commitment with Nuvo for PENNSAID 2% of $4.7 million, to be delivered through December 2019.

Sanofi-Aventis U.S. LLC (“Sanofi-Aventis U.S.”) is obligated to manufacture and supply DUEXIS to the Company in final, packaged form and the Company is obligated to purchase DUEXIS exclusively from Sanofi-Aventis U.S. for the commercial requirements of DUEXIS in North America, South America and certain countries and territories in Europe, including the European Union (“EU”) member states and Scandinavia. The agreement term extends until May 2021 and automatically renews for successive two-year terms unless terminated by either party upon two years’ prior written notice. At September 30, 2019, the Company had a binding purchase commitment to Sanofi-Aventis U.S. for DUEXIS of $6.1 million, to be delivered through December 2019.

Excluding the above, additional purchase orders and other commitments relating to the manufacture of RAVICTI, BUPHENYL, QUINSAIR and VIMOVO of $7.5 million were outstanding at September 30, 2019.

Contingencies

The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows. In addition, the Company from time to time has billing disputes with vendors in which amounts invoiced are not in accordance with the terms of their contracts.

In November 2015, the Company received a subpoena from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information related to its patient access programs and other aspects of its marketing and commercialization activities. The Company is unable to predict how long this investigation will continue or its outcome, but it anticipates that it may continue to incur significant costs in connection with the investigation, regardless of the outcome. The Company may also become subject to similar investigations by other governmental agencies. The investigation by the U.S. Attorney’s Office and any additional investigations of the Company’s patient access programs and sales and marketing activities may result in damages, fines, penalties or other administrative sanctions against the Company.

On March 5, 2019, the Company received a civil investigative demand (“CID”) from the United States Department of Justice (“DOJ”) pursuant to the Federal False Claims Act regarding assertions that certain of the Company’s payments to pharmacy benefit managers (“PBMs”) were potentially in violation of the Anti-Kickback Statute. The CID requests certain documents and information related to the Company’s payments to PBMs, pricing and the Company’s patient assistance program regarding DUEXIS, VIMOVO and PENNSAID 2%. The Company is cooperating with the investigation. While the Company believes that its payments and programs are compliant with the Anti-Kickback Statute, no assurance can be given as to the timing or outcome of the DOJ’s investigation, or that it will not result in a material adverse effect on the Company’s business.

Other Agreements

Under the agreement for the acquisition of River Vision Development Corp., the Company is required to pay up to $325.0 million upon the attainment of various milestones, composed of $100.0 million related to U.S. Food and Drug Administration (“FDA”) approval and $225.0 million related to net sales thresholds for teprotumumab. The agreement also includes a royalty payment of three percent of the portion of annual worldwide net sales exceeding $300.0 million (if any). Under a separate agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (together referred to as “Roche”), the Company is required to pay Roche up to CHF103.0 million ($103.2 million when converted using a CHF-to-Dollar exchange rate at September 30, 2019 of 1.0023) upon the attainment of various milestones related to filing, approval and net sales thresholds for teprotumumab. In connection with submission of the teprotumumab biologics license application (“BLA”), the Company incurred a milestone of CHF3.0 million ($3.0 million when converted using a CHF-to-Dollar exchange rate at September 30, 2019 of 1.0023) payable to Roche which was recorded and paid during the third quarter of 2019. During the year ended December 31, 2017, CHF2.0 million ($2.0 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0169) was paid in relation to these milestones. The agreement with Roche also includes a royalty payment of between nine percent and twelve percent of annual worldwide net sales. Under a separate agreement with Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center (“LA BioMed”), the Company is required to pay LA BioMed a royalty payment of less than one percent of net sales.

Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. The Company may record charges in the future as a result of these indemnification obligations.

In accordance with its memorandum and articles of association, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. Additionally, the Company has entered into, and intends to continue to enter into, separate indemnification agreements with its directors and executive officers. These agreements, among other things, require the Company to indemnify its directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers, or any of the Company’s subsidiaries or any other company or enterprise to which the person provides services at the Company’s request. The Company also has a director and officer insurance policy that enables it to recover a portion of any amounts paid for current and future potential claims. All of the Company’s officers and directors have also entered into separate indemnification agreements with HTUSA.

NOTE 16 - LEGAL PROCEEDINGS

RAVICTI

On March 17, 2014, Hyperion received notice from Par Pharmaceutical, Inc. (“Par Pharmaceutical”) that it had filed an Abbreviated New Drug Application (an “ANDA”) with the FDA seeking approval of a generic version of the Company’s medicine RAVICTI. On September 4, 2015 and November 6, 2015, the Company received notices from Lupin Limited of Lupin Limited’s Paragraph IV Patent Certification against the Company’s patents covering RAVICTI, advising that Lupin Limited had filed an ANDA with the FDA for a generic version of RAVICTI. The Company subsequently filed suits against Par Pharmaceutical and Lupin Limited, and engaged in ANDA litigation with both in multiple venues. All litigation with Par Pharmaceutical and Lupin Limited, relating to RAVICTI, is now settled.

The Company sought an appeal before the Federal Circuit Court of Appeals over U.S. Patent No. 9,095,559 (the “‘559 patent”) against the United States Patent Office, seeking to overturn the Patent Trial and Appeal Board’s invalidity finding in an inter partes review (“IPR”) initiated by Lupin Limited. On October 10, 2019, the Federal Circuit affirmed the Patent Trial and Appeals Board’s (the “PTAB”) invalidity ruling against the ‘559 patent.

PENNSAID 2%

On November 13, 2014, the Company received a Paragraph IV Patent Certification from Watson Laboratories, Inc., now known as Actavis Laboratories UT, Inc. (“Actavis UT”), advising that Actavis UT had filed an ANDA with the FDA for a generic version of PENNSAID 2%. On December 23, 2014, June 30, 2015, August 11, 2015 and September 17, 2015, the Company filed four separate suits against Actavis UT and Actavis plc (collectively “Actavis”), in the United States District Court for the District of New Jersey, with each of the suits seeking an injunction to prevent approval of the ANDA. The lawsuits alleged that Actavis has infringed nine of the Company’s patents covering PENNSAID 2% by filing an ANDA seeking approval from the FDA to market a generic version of PENNSAID 2% prior to the expiration of certain of the Company’s patents listed in the FDA’s Orange Book (the “Orange Book”). These four suits were consolidated into a single suit. On October 27, 2015 and on February 5, 2016, the Company filed two additional suits against Actavis, in the United States District Court for the District of New Jersey, for patent infringement of three additional Company patents covering PENNSAID 2%.

On August 17, 2016, the District Court issued a Markman opinion holding certain of the asserted claims of seven of the Company’s patents covering PENNSAID 2% invalid as indefinite. On March 16, 2017, the Court granted Actavis’ motion for summary judgment of non-infringement of the asserted claims of three of the Company’s patents covering PENNSAID 2%. In view of the Markman and summary judgment decisions, a bench trial was held from March 21, 2017 through March 30, 2017, regarding a claim of one of the Company’s patents covering PENNSAID 2%. On May 14, 2017, the Court issued its opinion upholding the validity of claim of the patent, which Actavis had previously admitted its proposed generic diclofenac sodium topical solution product would infringe. Actavis filed its Notice of Appeal on June 16, 2017. The Company also filed its Notice of Appeal of the District Court’s rulings on certain claims of the Company’s patents covering PENNSAID 2%. On October 10, 2019, the Federal Circuit Court affirmed the District Court’s judgment of validity of U.S Patent No. 9,066,913 (the “‘913 patent”), and its finding that the Actavis generic product would infringe the ‘913 patent. The Federal Circuit also affirmed the District Court’s summary judgment finding that certain patents are invalid for indefiniteness and would not be infringed.

On August 18, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of four of the Company’s newly issued patents covering PENNSAID 2%. All four of such patents are listed in the Orange Book. This litigation is currently stayed by agreement of the parties. The Company received from Actavis a Paragraph IV Patent Certification notice, dated September 27, 2016, against an additional newly issued patent covering PENNSAID 2%, advising that Actavis had filed an ANDA with the FDA for a generic version of PENNSAID 2%. The subject patent is listed in the Orange Book.

On March 29, 2019, the Company received notice from Aurolife Pharma, Inc. (“Aurolife”) that it had filed an ANDA with the FDA seeking approval of a generic version of PENNSAID 2%. The ANDA contained a Paragraph IV Patent Certification alleging that the patents covering PENNSAID 2% are invalid and/or will not be infringed by Aurolife’s manufacture, use or sale of its generic version of PENNSAID 2%.

DUEXIS

On May 29, 2018, the Company received notice from Alkem Laboratories, Inc. (“Alkem”) that it had filed an ANDA with the FDA seeking approval of a generic version of DUEXIS. The ANDA contained a Paragraph IV Patent Certification alleging that the patents covering DUEXIS are invalid and/or will not be infringed by Alkem’s manufacture, use or sale of the medicine for which the ANDA was submitted. The Company filed suit in the United States District Court of Delaware against Alkem on July 9, 2018, seeking an injunction to prevent the approval of Alkem’s ANDA and/or to prevent Alkem from selling a generic version of DUEXIS. The litigation is scheduled for a bench trial beginning on September 14, 2020.

On September 27, 2018, the Company received notice from Teva Pharmaceuticals USA, Inc. (“Teva”) that it had filed an ANDA with the FDA seeking approval of a generic version of DUEXIS. The ANDA contained a Paragraph IV Patent Certification alleging that the patents covering DUEXIS are invalid and/or will not be infringed by Teva’s manufacture, use or sale of its generic version of DUEXIS.

VIMOVO

Currently, patent litigation is pending in the United States District Court for the District of New Jersey and the Court of Appeals for the Federal Circuit against Dr. Reddy’s Laboratories Inc. and Dr. Reddy’s Laboratories Ltd. (collectively, “Dr. Reddy’s”) which seeks to market VIMOVO prior to the expiration of certain of the Company’s patents listed in the Orange Book. Settlements have been reached with three other generic companies: (i) Teva Pharmaceuticals Industries Limited (formerly known as Actavis Laboratories FL, Inc., which itself was formerly known as Watson Laboratories, Inc. – Florida) and Actavis Pharma, Inc. (collectively, “Actavis Pharma”) (ii) Lupin; and (iii) Mylan Pharmaceuticals Inc., Mylan Laboratories Limited, and Mylan Inc. (collectively, “Mylan”). Under the Settlement Agreements, the license entry date is now August 1, 2024; however, all three may be able to enter the market earlier in certain circumstances.

The Company understands that Dr. Reddy’s has entered into a settlement with AstraZeneca with respect to patent rights directed to Nexium^® (esomeprazole) for the commercialization of VIMOVO. The settlement agreement, however, has no effect on the Nuvo VIMOVO patents, which are still the subject of patent litigations. As part of the Company’s acquisition of the U.S. rights to VIMOVO, the Company has taken over and is responsible for the patent litigation that includes the Nuvo patents licensed to the Company under the amended and restated collaboration and license agreement for the United States with Nuvo.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4, 2013, May 10, 2013, June 28, 2013, October 23, 2013, May 13, 2015 and November 24, 2015 and collectively include allegations of infringement of certain of the Company’s patents covering VIMOVO.

The District Court consolidated all of the cases pending against the generic companies into two separate cases for purposes of discovery. The District Court entered final judgment for one of the consolidated cases on July 21, 2017, upholding the validity of U.S. Patent No. 6,926,907 (the “‘907 patent”) and U.S. Patent No. 8,557,285 (the “‘285 patent”), and finding the generic products would infringe one or both of the two patents. Both sides appealed the District Court’s judgment to the Court of Appeals for the Federal Circuit. On May 15, 2019, the Federal Circuit reversed the District Court’s judgment in favor of the Company, and entered judgment that the ‘285 and ‘907 patents are invalid for lack of a sufficient written description. On July 30, 2019, the Federal Circuit Court of Appeals denied the Company’s request for a rehearing of the Court’s invalidity ruling against the ‘285 and ‘907 patents for VIMOVO coordinated-release tablets. As a result, the District Court entered judgment invalidating the ‘285 and ‘907 patents, which could subsequently result in Dr. Reddy’s initiating an at-risk launch of a generic version of VIMOVO. The Company continues to assert claims of infringement against Dr. Reddy’s based on U.S. Patent No. 8,858,996 (the “‘996 patent”) and U.S. Patent No. 9,161,920 (the “‘920 patent”) in the District Court.

On November 19, 2018, the District Court granted Dr. Reddy’s and Mylan’s summary judgment ruling that U.S Patent Numbers 9,220,698 and 9,393,208 are invalid, and on January 21, 2019, it entered final judgment against the ‘698, ‘208, and U.S. Patent Number 8,945,621. On February 21, 2019, the Company appealed the adverse judgments on the ‘208 and ‘698 patents to the Federal Circuit Court of Appeals.

On December 4, 2017, Mylan filed a Petition for IPR against the ‘208 patent. The PTAB instituted an IPR proceeding on Mylan’s Petition on June 14, 2018. On July 2, 2018, Dr. Reddy’s filed a motion seeking to join Mylan’s ‘208 IPR. On April 1, 2019, the PTAB granted Dr. Reddy’s request to join the Mylan ‘208 IPR. On September 6, 2019, the PTAB issued a Final Written Decision invalidating the ‘208 patent on the basis of obviousness.

On August 20, 2019, the Company received notice from Ajanta Pharma LTD (“Ajanta”) that it had filed an ANDA with the FDA seeking approval of a generic version of VIMOVO. The ANDA contained a Paragraph IV Patent Certification alleging that the patents covering VIMOVO are invalid and/or will not be infringed by Ajanta’s manufacture, use or sale of the medicine for which the ANDA was submitted. The Company filed suit in the United States District Court of Delaware against Ajanta on September 27, 2019, seeking an injunction to prevent the approval of Ajanta’s ANDA and/or to prevent Ajanta from selling a generic version of VIMOVO.

NOTE 17 – SHAREHOLDERS’ EQUITY

On February 28, 2019, the Company entered into a Rights Agreement (the “Rights Agreement”), with Computershare Trust Company, N.A., as rights agent. The Board of Directors of the Company (the “Board”) has authorized the issuance of one ordinary share purchase right (a “Right”) for each outstanding ordinary share of the Company. Each Right represents the right to purchase one-fifth of an ordinary share of the Company, upon the terms and subject to the conditions of the Rights Agreement. The Rights were issued to the shareholders of record on March 11, 2019 and will expire on February 28, 2020.

The Board has adopted the Rights Agreement to enable all shareholders of the Company to realize the long-term value of their investment in the Company and to guard against attempts to acquire control of the Company at an inadequate price. In general terms, the Rights Agreement works by causing significant dilution to any person or group that acquires 10% (or 15% in the case of an existing “13G Investor” as defined in the Rights Agreement) or more of the outstanding ordinary shares of the Company without the prior approval of the Board. The Rights Agreement is not intended to prevent an acquisition of the Company on terms that the Board considers favorable to, and in the best interests of, all shareholders. Rather, the Rights Agreement aims to provide the Board with adequate time to fully assess any takeover proposal and therefore comply with its fiduciary duties and to encourage anyone seeking to acquire the Company to negotiate with the Board prior to attempting a takeover. The Rights Agreement was adopted in response to the takeover environment in general, particularly in light of the Company’s evolution into a biopharma company focused on rare diseases and rheumatology, the Phase 3 clinical trial results of its rare disease drug candidate teprotumumab announced on February 28, 2019 and the market opportunity for KRYSTEXXA and teprotumumab and was not in response to any specific approach to the Company or perceived imminent takeover proposal for the Company. The issuance of Rights is not taxable to the Company or to shareholders and does not affect reported earnings per share.

During the nine months ended September 30, 2019, the Company issued an aggregate of 14.1 million of ordinary shares in connection with the closing of its underwritten public equity offering on March 11, 2019. The Company received a total of approximately $326.8 million after deducting underwriting discounts and other estimated offering expenses payable by the Company in connection with such offering.

During the nine months ended September 30, 2019, the Company issued an aggregate of 3.8 million of ordinary shares in connection with stock option exercises, the vesting of restricted stock units and performance stock units, and employee share purchase plan purchases. The Company received a total of $21.7 million in net proceeds in connection with such issuances.

During the nine months ended September 30, 2019, the Company made payments of $29.5 million for employee withholding taxes relating to share-based awards.

On May 2, 2019, the shareholders of the Company approved an increase in the Company’s authorized share capital of an additional 300,000,000 ordinary shares of nominal value $0.0001 per share.

On May 2, 2019, the shareholders of the Company approved the renewal of the Board’s existing authority to allot and issue ordinary shares for cash and non-cash considerations under Irish law for a five-year period to expire on May 2, 2024. Additionally, on May 2, 2019, the shareholders of the Company approved the renewal of the Board’s existing authority to allot and issue ordinary shares for cash without first offering those ordinary shares to existing shareholders pursuant to the statutory pre-emption right that would otherwise apply under Irish law for a five-year period to expire on May 2, 2024.

NOTE 18 – SHARE-BASED AND LONG-TERM INCENTIVE PLANS

The Company’s equity incentive plans at September 30, 2019, include its 2005 Stock Plan, 2011 Equity Incentive Plan, as amended, 2014 Employee Share Purchase Plan, as amended (“2014 ESPP”), Amended and Restated 2014 Equity Incentive Plan (“2014 EIP”) and 2014 Non-Employee Equity Plan, as amended (“2014 Non-Employee Plan”). As of September 30, 2019, an aggregate of 1,525,433 ordinary shares were authorized and available for future issuance under the 2014 ESPP, an aggregate of 9,181,495 ordinary shares were authorized and available for future grants under the 2014 EIP (of which 409,172 shares are to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors of the Company (or following a bona fide period of non-employment with the Company)) and an aggregate of 698,491 ordinary shares were authorized and available for future grants under the 2014 Non-Employee Plan.

On February 20, 2019, the Compensation Committee of the Board (the “Compensation Committee”) approved, subject to shareholder approval, an amendment to the 2014 EIP, increasing the number of ordinary shares that may be issued under the 2014 EIP by 9,000,000 ordinary shares, subject to adjustment for certain changes in our capitalization. On May 2, 2019, the shareholders of the Company approved such amendment to the 2014 EIP.

On February 20, 2019, the Compensation Committee approved, subject to shareholder approval, an amendment to the 2014 Non-Employee Plan, increasing the number of ordinary shares that may be issued under the 2014 Non-Employee Equity Plan by 750,000 ordinary shares, subject to adjustment for certain changes in our capitalization. On May 2, 2019, the shareholders of the Company approved such amendment to the 2014 Non-Employee Plan.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2019:

	Options			Weighted Average Exercise Price		Weighted Average Contractual Term Remaining (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2018		11,827,765		$	19.06		6.24	$	37,257
Exercised		(1,082,766	)		15.22		—		—
Forfeited		(114,282	)		22.52		—		—
Expired		(340,605	)		29.46		—		—
Outstanding as of September 30, 2019		10,290,112			19.08		5.47		87,227
Exercisable as of September 30, 2019		9,636,802		$	19.27		5.34	$	80,099

Stock options typically have a contractual term of ten years from grant date.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2019:

	Number of Units			Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2018		6,772,818		$	15.56
Granted		3,429,453			21.36
Vested		(2,966,137	)		15.24
Forfeited		(511,322	)		18.05
Outstanding as of September 30, 2019		6,724,812		$	18.47

The grant-date fair value of restricted stock units is the closing price of the Company’s ordinary shares on the date of grant.

Performance Stock Unit Awards

The following table summarizes performance stock unit awards (“PSUs”) activity for the nine months ended September 30, 2019:

	Number of Units			Weighted Average Grant-Date Fair Value Per Unit		Average Illiquidity Discount			Recorded Weighted Average Fair Value Per Unit
Outstanding as of December 31, 2018		1,393,943
Granted		2,290,632		$	25.31		0.8	%		25.12
Forfeited		(146,314	)		23.11		0.3	%		23.05
Vested		(515,629	)		13.87		0.0	%		13.87
Performance Based Adjustment (1)		560,746			13.87		0.0	%		13.87
Outstanding as of September 30, 2019		3,583,378

(1)

Represents adjustment based on the net sales performance criteria meeting 157.4% of target as of December 31, 2018 for the 2018 PSUs (as defined below).

On January 5, 2018, the Company awarded PSUs to key executive participants (“2018 PSUs”). Vesting of the 2018 PSUs was contingent upon receiving shareholder approval of amendments to the 2014 EIP, which were approved on May 3, 2018. The 2018 PSUs utilize two performance metrics, a short-term component tied to business performance and a long-term component tied to total compounded annual shareholder rate of return (“TSR”), as follows:

•

30% of the granted 2018 PSUs that may vest (such portion of the PSU award, the “2018 Relative TSR PSUs”) are determined by reference to the level of the Company’s relative TSR over the three-year period ending December 31, 2020, as measured against the TSR of each company included in the Nasdaq Biotechnology Index (NBI) during such three-year period. Generally, in order to earn any portion of the 2018 Relative TSR PSUs, the participant must also remain in continuous service with the Company through the earlier of January 1, 2021 or the date immediately prior to a change in control. If a change in control occurs prior to December 31, 2020, the level of the Company’s relative TSR will be measured through the date of the change in control.

•

70% of the granted 2018 PSUs that may vest (such portion of the PSU award, the “2018 Net Sales PSUs”), are determined by reference to the Company’s net sales for its segments during 2018 (being the orphan and rheumatology segment and inflammation segment), weighted with the orphan and rheumatology segment comprising the majority of the target sales (with respect to the total PSU award). During the year ended December 31, 2018, the net sales performance criteria was met at 157.4% of target. Accordingly, the first third of the 2018 Net Sales PSUs earned portion have vested and the remaining two thirds will vest in equal installments in January 2020 and January 2021, subject to the participant’s continued service with the Company through the applicable vesting dates.

On January 4, 2019, the Company awarded PSUs to key executive participants (“2019 PSUs”). The 2019 PSUs utilize two performance metrics, a short-term component tied to business performance and a long-term component tied to relative compounded annual TSR, as follows:

•

30% of the granted 2019 PSUs that may vest (such portion of the PSU award, the “2019 Relative TSR PSUs”) are determined by reference to the level of the Company’s relative TSR over the three-year period ending December 31, 2021, as measured against the TSR of each company included in the Nasdaq Biotechnology Index (NBI) during such three-year period. Generally, in order to earn any portion of the 2019 Relative TSR PSUs, the participant must also remain in continuous service with the Company through the earlier of January 1, 2022 or the date immediately prior to a change in control. If a change in control occurs prior to December 31, 2021, the level of the Company’s relative TSR will be measured through the date of the change in control.

•

70% of the granted 2019 PSUs that may vest (such portion of the PSU award, the “2019 Net Sales PSUs”), are determined by reference to the Company’s net sales for its orphan and rheumatology segment. If performance criteria are met, one-third of the 2019 PSUs will vest upon the certification of financial results by the Board in February 2020 and the remaining two-thirds will vest in equal installments on January 5, 2021 and January 5, 2022.

All PSUs outstanding at September 30, 2019, may vest in a range of between 0% and 200%, based on the performance metrics described above. The Company accounts for the 2018 PSUs and 2019 PSUs as equity-settled awards in accordance with ASC 718. Because the value of the 2018 Relative TSR PSUs and 2019 Relative TSR PSUs are dependent upon the attainment of a level of TSR, it requires the impact of the market condition to be considered when estimating the fair value of the 2018 Relative TSR PSUs and 2019 Relative TSR PSUs. As a result, the Monte Carlo model is applied and the most significant valuation assumptions used related to the 2019 PSUs during the nine months ended September 30, 2019, include:

Valuation date stock price	$	20.39
Expected volatility		38.9	%
Risk free rate		2.6	%

The value of the 2018 Net Sales PSUs and 2019 Net Sales PSUs is calculated at the end of each quarter based on the expected payout percentage based on estimated full-period performance against targets, and the Company adjusts the expense quarterly.

On January 4, 2019, the Company awarded a company-wide grant of PSUs (the “Teprotumumab PSUs”). Vesting of the Teprotumumab PSUs was contingent upon receiving shareholder approval of amendments to the 2014 EIP, which approval was received on May 2, 2019. The Teprotumumab PSUs are generally eligible to vest contingent upon receiving approval of the teprotumumab BLA from the FDA no later than September 30, 2020 and the employee’s continued service with the Company. At September 30, 2019, there were 1,497,439 Teprotumumab PSUs outstanding.

Share-Based Compensation Expense

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2019 and 2018 (in thousands):

	For the Nine Months Ended September 30,
	2019		2018
Share-based compensation expense
Cost of goods sold	$	2,892	$	2,767
Research and development		6,931		6,697
Selling, general and administrative		57,243		77,517
Total share-based compensation expense	$	67,066	$	86,981

During the nine months ended September 30, 2019 and 2018, the Company recognized $5.9 million and $1.5 million of tax benefit, respectively, related to share-based compensation resulting primarily from the current share prices in effect at the time of the exercise of stock options and vesting of restricted stock units. As of September 30, 2019, the Company estimates that pre-tax unrecognized compensation expense of $121.8 million for all unvested share-based awards, including stock options, restricted stock units and PSUs, will be recognized through the third quarter of 2022. The Company expects to satisfy the exercise of stock options and future distribution of shares for restricted stock units and PSUs by issuing new ordinary shares which have been reserved under the 2014 EIP.

The above table does not include expense related to the Teprotumumab PSUs as the recognition of expense related to these awards will commence when approval of the teprotumumab BLA from the FDA is considered probable.

Cash Incentive Program

On January 5, 2018, the Compensation Committee approved a performance cash incentive program for the Company’s executive leadership team, including its executive officers (the “Cash Incentive Program”). Participants receiving awards under the Cash Incentive Program are eligible to earn a cash bonus based upon the achievement of specified Company goals, which both performance criteria were met on or before December 31, 2018. The Company determined that the cash bonus award under the Cash Incentive Program is to be paid out at the maximum 150% target level of $14.1 million. The first installment was paid in January 2019, and the remaining installments will vest and become payable in January 2020 and 2021, subject to the participant’s continued services with the Company through the applicable vesting dates, the date of any earlier change in control, or a termination due to death or disability.

The Company accounted for the Cash Incentive Program as a deferred compensation plan under ASC 710 and is recognizing the payout expense using straight-line recognition through the end of the 36-month vesting period. During the three and nine months ended September 30, 2019, the Company recorded an expense of $0.8 million and $3.1 million, respectively, to the condensed consolidated statement of comprehensive income (loss) related to the Cash Incentive Program.

NOTE 19 – INCOME TAXES

The Company accounts for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by valuation allowances when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are recorded at the currently enacted rates which will be in effect at the time when the temporary differences are expected to reverse in the country where the underlying assets and liabilities are located. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the period in which the change is enacted.

The following table presents the (benefit) expense for income taxes for the three and nine months ended September 30, 2019 and 2018 (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
(Loss) income before (benefit) expense for income taxes	$	(12,330	)	$	32,115		$	(57,108	)	$	(135,726	)
(Benefit) expense for income taxes		(30,564	)		(1,266	)		(37,359	)		4,301
Net income (loss)	$	18,234		$	33,381		$	(19,749	)	$	(140,027	)

During the three and nine months ended September 30, 2019, the Company recorded a benefit for income taxes of $30.6 million and $37.4 million, respectively. During the three and nine months ended September 30, 2018, the Company recorded a benefit for income taxes of $1.3 million and an expense for income taxes of $4.3 million, respectively. The benefit for income taxes recorded during the three and nine months ended September 30, 2019 resulted primarily from the mix of pre-tax income and losses incurred in various tax jurisdictions and the net excess tax benefits recognized on share-based compensation.

ITEM 2. 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 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 (formerly known as Horizon Pharma plc) and its consolidated subsidiaries.

When accounting for business combinations under ASC Topic 805, Business Combinations, we previously separately identified and recorded at fair value intangible assets acquired and their related third-party contingent royalties at the date of acquisition. Third-party contingent royalties are royalties payable to parties other than sellers of the businesses. Effective January 1, 2019, we retrospectively changed our accounting for business combinations and we now record acquired intangible assets and their related third-party contingent royalties on a net basis, or the New Method. We changed our accounting principle on the basis that the use of the New Method is preferable primarily due to improved comparability with our peers. We adjusted the accompanying condensed consolidated balance sheet as at December 31, 2018, the condensed consolidated statement of comprehensive income (loss) for the three and nine months ended September 30, 2018 and the condensed consolidated statement of cash flows for the nine months ended September 30, 2018, and the adjusted amounts are presented herein. There was no impact on total operating, investing or financing cash flows for any period. In addition, there was no impact from the change in accounting principle on our previously reported adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share for any prior period.

OUR BUSINESS

Horizon is focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic 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.

We have two reportable segments, (i) the orphan and rheumatology segment, our strategic growth business, and (ii) the inflammation segment (previously the primary care segment), and we report net sales and segment operating income for each segment.

Our marketed medicines are:

Orphan and Rheumatology

KRYSTEXXA® (pegloticase injection), for intravenous infusion

RAVICTI® (glycerol phenylbutyrate) oral liquid

PROCYSBI® (cysteamine bitartrate) delayed-release capsules, for oral use

ACTIMMUNE® (interferon gamma-1b) injection, for subcutaneous use

RAYOS® (prednisone) delayed-release tablets

BUPHENYL® (sodium phenylbutyrate) tablets and powder

QUINSAIR™ (levofloxacin) solution for inhalation

Inflammation

PENNSAID® (diclofenac sodium topical solution) 2% w/w, or PENNSAID 2%, for topical use

DUEXIS® (ibuprofen/famotidine) tablets, for oral use

VIMOVO® (naproxen/esomeprazole magnesium) delayed-release tablets, for oral use

Acquisitions and Divestitures

Since January 1, 2018, we completed the following acquisitions and divestitures:

•

On June 28, 2019, we sold our rights to MIGERGOT to Cosette Pharmaceuticals, Inc., for an upfront payment and potential additional contingent consideration payments, or the MIGERGOT transaction.

•

Effective January 1, 2019, we amended our license and supply agreements with Jagotec AG and Skyepharma AG, which are affiliates of Vectura Group plc, or Vectura. Under these amendments, we agreed to transfer all economic benefits of LODOTRA^®in Europe to Vectura during an initial transition period, with full rights transferring to Vectura when certain transfer activities have been completed. We no longer recorded LODOTRA net sales beginning January 1, 2019.

•

On December 28, 2018 we sold our rights to RAVICTI and AMMONAPS (known as BUPHENYL in the United States) outside of North America and Japan to Medical Need Europe AB, part of the Immedica Group, or the Immedica transaction. We previously distributed RAVICTI and AMMONAPS through a commercial partner in Europe and other non-U.S. markets. We have retained the rights to RAVICTI and BUPHENYL in North America and Japan.

•

On July 24, 2018, we sold the rights to interferon gamma-1b (known as IMUKIN outside the United States) in all territories outside of the United States, Canada and Japan to Clinigen Group plc, or Clinigen, for an upfront payment and an additional contingent consideration payment, that was subsequently received in September 2019, or the IMUKIN sale.

Strategy

We aspire to be a leading rare disease biopharma company that delivers innovative therapies to patients and generates high returns for our shareholders. Our strategy is to build a robust and differentiated rare disease pipeline and to maximize the growth of our marketed rare disease medicines, in particular, KRYSTEXXA, our medicine for uncontrolled gout. We are executing on our strategy by accelerating the growth of our rare disease medicine portfolio through differentiated commercial strategies, business development efforts, and the expansion of our pipeline. We are strongly committed to helping ensure patients have access to medicines and support services and to investing in the further development of medicines for patients with rare or underserved diseases.

On May 2, 2019, our shareholders approved changing our name from “Horizon Pharma Public Limited Company” to “Horizon Therapeutics Public Limited Company”. We believe the name “Horizon Therapeutics Public Limited Company” better reflects our long-term strategy to develop and commercialize innovative new medicines to address rare diseases with very few effective treatment options.

Orphan and Rheumatology

RAVICTI, PROCYSBI, ACTIMMUNE, BUPHENYL and QUINSAIR are our marketed orphan medicines – all for rare diseases. Our strategy for RAVICTI is to drive growth through increased awareness and diagnosis of urea cycle disorders; to drive conversion to RAVICTI from older-generation nitrogen scavengers, such as generic forms of sodium phenylbutyrate based on the medicine’s differentiated benefits; to increase awareness of label expansion of RAVICTI to position the medicine as first line of therapy, and increase compliance rates. With respect to PROCYSBI, our strategy is to drive conversion of patients to PROCYSBI from older-generation immediate-release capsules of cysteamine bitartrate; increase the uptake of diagnosed but untreated patients; identify previously undiagnosed patients who are suitable for treatment; increase awareness of the expanded label to position PROCYSBI as a first line of therapy; and increase compliance rates. Our strategy with respect to ACTIMMUNE includes increasing awareness and diagnosis of chronic granulomatous disease and increasing compliance rates.

With our May 2017 acquisition of River Vision Development Corp., or River Vision, we added the late-stage rare disease biologic medicine candidate teprotumumab to our pipeline. Teprotumumab targets the treatment of active thyroid eye disease, or TED, a debilitating autoimmune condition for which there is no approved treatment. Our strategy for teprotumumab is to support its continued clinical development, to pursue regulatory approval, to drive awareness in the medical and patient community about TED and to establish a potential pathway for treatment.

On February 28, 2019, we reported statistically significant topline results from our Phase 3 confirmatory trial evaluating teprotumumab for the treatment of active TED. The study met its primary endpoint of the percentage of study participants with a 2 mm or more reduction in proptosis, or bulging of the eye, which is the main cause of morbidity in TED, at 24 weeks of treatment. The percent of patients treated with teprotumumab who had a meaningful improvement in proptosis was 82.9 percent compared to 9.5 percent of placebo patients. The primary endpoint data were presented on April 26, 2019, at the Annual Scientific and Clinical Congress of the American Association of Clinical Endocrinologists (AACE). In addition, all secondary endpoints were met, and additional data on three secondary endpoints from the Phase 3 trial were presented on October 11, 2019, at the American Society of Ophthalmic Plastic and Reconstructive Surgery (ASOPRS) Fall Scientific Symposium. The safety profile of teprotumumab in the Phase 3 study was consistent with the Phase 2 study, which also met its primary endpoint and secondary endpoints, with the results published in The New England Journal of Medicine.

In July 2019, we submitted a biologics license application, or BLA, to the U.S. Food and Drug Administration, or FDA, seeking approval for teprotumumab for the treatment of active TED. On September 9, 2019, we announced that the BLA was accepted by the FDA and granted Priority Review designation, with the potential for approval in the first quarter of 2020. The Priority Review designation, which the FDA grants to applications for medicines that have the potential to provide significant improvements in the treatment of serious conditions, is associated with an accelerated six-month review period compared to the standard ten-month review period. If approved, teprotumumab would be the first FDA-approved medicine for the treatment of active TED. The FDA also indicated that it is planning to hold an Advisory Committee meeting to discuss the application. This is in line with the Agency’s guidelines for new molecular entities. In connection with submission of the BLA, we incurred a milestone payment of CHF3.0 million ($3.0 million when converted using a CHF-to-Dollar exchange rate at September 30, 2019 of 1.0023) payable to F. Hoffmann-La Roche Ltd, or Roche, which was recorded and paid during the third quarter of 2019. Furthermore, we are currently investing in initiatives to prepare for the potential U.S. commercial launch of teprotumumab.

Should we obtain FDA approval, we anticipate incurring significant additional costs related to the launch of the medicine and will also incur additional milestone payments, including $100.0 million payable to River Vision and CHF5.0 million ($5.0 million when converted using a CHF-to-Dollar exchange rate at September 30, 2019 of 1.0023) payable to Roche.

If we do not obtain FDA approval, we expect to incur additional expenses, including the write-off of advance payments for inventory of $17.5 million, work-in-progress inventory of $3.6 million, raw material inventory of $5.0 million related to the manufacturing of teprotumumab drug substance, other non-current assets of $4.3 million as of September 30, 2019, and payments related to purchase commitments of approximately $76.0 million. For further detail regarding purchase commitments, see 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.

The rare disease medicine KRYSTEXXA is our primary marketed rheumatology medicine, the only approved medicine indicated for the treatment of uncontrolled gout, or gout that is refractory (unresponsive) to conventional therapies. We are focused on optimizing and maximizing the peak sales potential of KRYSTEXXA by expanding our commercialization efforts as well as investing in education, patient and physician outreach that demonstrates the benefits KRYSTEXXA offers in treating uncontrolled gout. In addition, we are investing in clinical development programs to increase the number of patients who can benefit from KRYSTEXXA by evaluating ways to improve its response rate. For example, our registrational MIRROR randomized controlled trial, or RCT, is evaluating the co-administration of KRYSTEXXA with methotrexate, the immunomodulator most often used by rheumatologists, to increase the durability of response for uncontrolled patients. The MIRROR RCT follows the MIRROR open-label evaluation that was initiated in the third quarter of 2018 and has fully enrolled. We are also investing to expand the use of KRYSTEXXA among nephrologists by providing additional data about the effectiveness of KRYSTEXXA in treating uncontrolled gout and its kidney-friendly mechanism of action. In October 2019, we initiated our PROTECT open-label trial to evaluate the use of KRYSTEXXA in adult uncontrolled gout patients who have undergone a kidney transplant, a population that was not originally studied in the KRYSTEXXA pivotal trials. We believe that KRYSTEXXA represents a significant opportunity as a growth driver within our orphan and rheumatology segment.

We also market the rheumatology medicine RAYOS.

Inflammation

Our strategy with respect to our inflammation medicines, which consist of PENNSAID 2%, DUEXIS and VIMOVO, is to educate physicians about these clinically differentiated medicines and the benefits they offer. Patients are able to fill prescriptions for these medicines through pharmacies participating in our HorizonCares patient access program, as well as other pharmacies. In addition, we have entered into business arrangements with pharmacy benefit managers, or PBMs, and other payers to secure formulary status and reimbursement of our inflammation medicines. The business arrangements with the PBMs generally require us to pay administrative fees and rebates to the PBMs and other payers for qualifying prescriptions.

We market all of our medicines in the United States through our field sales force, which numbered approximately 440 representatives as of September 30, 2019.

RESULTS OF OPERATIONS

Comparison of Three Months Ended September 30, 2019 and 2018

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 September 30, 2019, compared to the three months ended September 30, 2018.

	For the Three Months Ended September 30,
	2019			2018			Change
	(in thousands)
Net sales	$	335,466		$	325,311		$	10,155
Cost of goods sold		89,949			91,077			(1,128	)
Gross profit		245,517			234,234			11,283
Operating expenses:
Research and development		24,572			21,169			3,403
Selling, general and administrative		172,326			161,585			10,741
Gain on sale of assets		—			(12,303	)		12,303
Impairment of long-lived assets		—			1,603			(1,603	)
Total operating expenses		196,898			172,054			24,844
Operating income		48,619			62,180			(13,561	)
Other expense, net:
Interest expense, net		(20,428	)		(30,437	)		10,009
Loss on debt extinguishment		(41,371	)		—			(41,371	)
Foreign exchange (loss) gain		(40	)		35			(75	)
Other income, net		890			337			553
Total other expense, net		(60,949	)		(30,065	)		(30,884	)
(Loss) income before (benefit) expense for income taxes		(12,330	)		32,115			(44,445	)
(Benefit) expense for income taxes		(30,564	)		(1,266	)		(29,298	)
Net income	$	18,234		$	33,381		$	(15,147	)

Net sales. Net sales increased $10.2 million, or 3.1%, to $335.5 million during the three months ended September 30, 2019, from $325.3 million during the three months ended September 30, 2018. The increase in net sales during the three months ended September 30, 2019 was due to an increase in net sales in our orphan and rheumatology segment of $30.5 million, partially offset by a decrease in net sales in our inflammation segment of $20.3 million.

The following table reflects net sales by medicine for the three months ended September 30, 2019 and 2018 (in thousands, except percentages):

	Three Months Ended September 30,				Change			Change
	2019		2018		$			%
KRYSTEXXA	$	99,576	$	70,246	$	29,330			42	%
RAVICTI		59,954		60,444		(490	)		(1	)%
PROCYSBI		40,397		41,374		(977	)		(2	)%
ACTIMMUNE		27,861		25,831		2,030			8	%
RAYOS		19,359		17,171		2,188			13	%
BUPHENYL		3,036		4,351		(1,315	)		(30	)%
QUINSAIR		211		127		84			66	%
LODOTRA		—		355		(355	)		(100	)%
Orphan and Rheumatology segment net sales	$	250,394	$	219,899	$	30,495			14	%

PENNSAID 2%		42,091		51,487		(9,396	)		(18	)%
DUEXIS		29,889		34,196		(4,307	)		(13	)%
VIMOVO		13,092		18,638		(5,546	)		(30	)%
MIGERGOT		—		1,091		(1,091	)		(100	)%
Inflammation segment net sales	$	85,072	$	105,412	$	(20,340	)		(19	)%

Total net sales	$	335,466	$	325,311	$	10,155			3	%

Orphan and Rheumatology

KRYSTEXXA. Net sales increased $29.3 million, or 42%, to $99.6 million during the three months ended September 30, 2019, from $70.3 million during the three months ended September 30, 2018. Net sales increased by approximately $22.6 million due to volume growth and by approximately $6.7 million due to higher net pricing.

RAVICTI. Net sales decreased $0.5 million, or 1%, to $60.0 million during the three months ended September 30, 2019, from $60.5 million during the three months ended September 30, 2018. Net sales in the United States decreased by approximately $1.2 million, which was composed of a decrease of approximately $1.5 million due to lower sales volume, partially offset by an increase of approximately $0.3 million resulting from higher net pricing. Net sales outside the United States increased by approximately $0.7 million primarily due to higher sales volume in Canada.

PROCYSBI. Net sales decreased $1.0 million, or 2%, to $40.4 million during the three months ended September 30, 2019, from $41.4 million during the three months ended September 30, 2018. Net sales decreased by approximately $3.9 million resulting from lower net pricing, partially offset by an increase of approximately $2.9 million due to higher sales volume.

ACTIMMUNE. Net sales increased $2.1 million, or 8%, to $27.9 million during the three months ended September 30, 2019, from $25.8 million during the three months ended September 30, 2018. Net sales increased by approximately $1.9 million resulting from higher net pricing and by approximately $0.2 million due to volume growth.

RAYOS. Net sales increased $2.2 million, or 13%, to $19.4 million during the three months ended September 30, 2019, from $17.2 million during the three months ended September 30, 2018. Net sales increased by approximately $5.7 million resulting from higher net pricing primarily due to lower utilization of our patient assistance programs, partially offset by a decrease of approximately $3.5 million due to lower sales volume.

BUPHENYL. Net sales decreased $1.3 million, or 30%, to $3.0 million during the three months ended September 30, 2019, from $4.3 million during the three months ended September 30, 2018. Net sales decreased primarily as a result of the Immedica transaction in December 2018.

LODOTRA. Effective January 1, 2019, we amended our license and supply agreements with Jagotec AG and Skyepharma AG, which are affiliates of Vectura. Under these amendments, we agreed to transfer all economic benefits of LODOTRA in Europe to Vectura during an initial transition period, with full rights transferring to Vectura when certain transfer activities have been completed. Effective January 1, 2019, we no longer record LODOTRA net sales.

Inflammation

PENNSAID 2%. Net sales decreased $9.4 million, or 18%, to $42.1 million during the three months ended September 30, 2019, from $51.5 million during the three months ended September 30, 2018. Net sales decreased by approximately $10.2 million due to lower sales volume, partially offset by an increase of approximately $0.8 million resulting from higher net pricing primarily due to lower utilization of our patient assistance programs.

DUEXIS. Net sales decreased $4.3 million, or 13%, to $29.9 million during the three months ended September 30, 2019, from $34.2 million during the three months ended September 30, 2018. Net sales decreased by approximately $4.7 million due to lower sales volume, partially offset by an increase of approximately $0.4 million due to higher net pricing.

VIMOVO. Net sales decreased $5.5 million, or 30%, to $13.1 million during the three months ended September 30, 2019, from $18.6 million during the three months ended September 30, 2018. Net sales decreased by approximately $5.0 million due to lower sales volume and by approximately $0.5 million resulting from lower net pricing.

MIGERGOT. On June 28, 2019, we sold our rights to MIGERGOT.

The table below reconciles our gross to net sales for the three months ended September 30, 2019 and 2018 (in millions, except percentages):

	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
	Amount			% of Gross Sales			Amount			% of Gross Sales
Gross sales	$	953.4			100.0	%	$	1,029.2			100.0	%
Adjustments to gross sales:
Prompt pay discounts		(17.4	)		(1.8	)%		(17.5	)		(1.7	)%
Medicine returns		(9.1	)		(1.0	)%		(6.8	)		(0.7	)%
Co-pay and other patient assistance costs		(346.2	)		(36.3	)%		(443.6	)		(43.1	)%
Commercial rebates and wholesaler fees		(112.6	)		(11.8	)%		(132.5	)		(12.9	)%
Government rebates and chargebacks		(132.6	)		(13.9	)%		(103.5	)		(10.0	)%
Total adjustments		(617.9	)		(64.8	)%		(703.9	)		(68.4	)%
Net sales	$	335.5			35.2	%	$	325.3			31.6	%

During the three months ended September 30, 2019, co-pay and other patient assistance costs, as a percentage of gross sales, decreased to 36.3% from 43.1% during the three months ended September 30, 2018, primarily due to lower utilization of our patient assistance programs.

During the three months ended September 30, 2019, government rebates and chargebacks, as a percentage of gross sales, increased to 13.9% from 10.0% during the three months ended September 30, 2018, primarily as a result of an increased proportion of orphan and rheumatology medicines sold.

Additionally, on January 1, 2019, the 340B ceiling price rule became effective. With respect to KRYSTEXXA, the “additional rebate” scheme of the 340B pricing program has resulted in a 340B ceiling price of one penny. A material portion of KRYSTEXXA infusions (approximately twenty percent) are performed at institutions that are eligible for 340B drug pricing and therefore the reduction in 340B pricing to a penny has negatively impacted our net sales of KRYSTEXXA.

Cost of Goods Sold. Cost of goods sold decreased $1.1 million to $90.0 million during the three months ended September 30, 2019, from $91.1 million during the three months ended September 30, 2018. As a percentage of net sales, cost of goods sold was 27% during the three months ended September 30, 2019, compared to 28% during the three months ended September 30, 2018. The decrease in cost of goods sold during the three months ended September 30, 2019 compared to three months ended September 30, 2018, was primarily attributable to lower gross sales.

Research and Development Expenses. Research and development expenses increased $3.4 million to $24.6 million during the three months ended September 30, 2019, from $21.2 million during the three months ended September 30, 2018. The increase was primarily attributable to a milestone payment of $3.0 million to Roche related to the teprotumumab BLA submission to the FDA during the third quarter of 2019.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $10.7 million to $172.3 million during the three months ended September 30, 2019, from $161.6 million during the three months ended September 30, 2018. The increase was primarily attributable to an increase of $5.9 million in employee costs and an increase of $2.9 million related to marketing program costs.

Gain on Sale of Assets. During the three months ended September 30, 2018, we completed the IMUKIN sale for cash proceeds of $9.5 million, with a potential additional contingent consideration payment and we recorded a gain of $12.3 million on the sale. The contingent consideration payment of €3.0 million ($3.3 million when converted using a Euro-to-Dollar exchange rate at the date of receipt of 1.0991) was received in September 2019.

Interest Expense, Net. Interest expense, net, decreased $10.0 million to $20.4 million during the three months ended September 30, 2019, from $30.4 million during the three months ended September 30, 2018. The decrease was due to a decrease in debt interest expense of $8.9 million, primarily related to the decrease in the principal amount of our term loans, the partial repayment of our 6.625% Senior Notes due 2023, or the 2023 Senior Notes, in May 2019 and an increase in interest income of $0.9 million.

Loss on Debt Extinguishment. During the three months ended September 30, 2019, we recorded a loss on debt extinguishment of $41.4 million in the condensed consolidated statements of comprehensive income (loss), which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $525.0 million of our 2023 Senior Notes, and our 8.750% Senior Notes due 2024, or the 2024 Senior Notes, and the write-off of the deferred financing fees and debt discount fees related to the $100.0 million term loan repayment.

(Benefit) Expense for Income Taxes. During the three months ended September 30, 2019, we recorded a benefit for income taxes of $30.6 million compared to a benefit for income taxes of $1.3 million during the three months ended September 30, 2018. The benefit for income taxes recorded during the three months ended September 30, 2019, resulted primarily from the mix of pre-tax income and losses incurred in various tax jurisdictions and the net excess tax benefits recognized on share-based compensation.

Information by Segment

See Note 11, Segment and Other Information, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of our segment operating income to our total loss before (benefit) expense for income taxes for the three months ended September 30, 2019 and 2018.

Orphan and Rheumatology

The following table reflects our orphan and rheumatology net sales and segment operating income for the three months ended September 30, 2019 and 2018 (in thousands, except percentages).

	For the Three Months Ended September 30,
	2019		2018		Change			% Change
Net sales	$	250,394	$	219,899	$	30,495			14	%
Segment operating income		89,823		91,537		(1,714	)		(2	%)

The increase in orphan and rheumatology net sales during the three months ended September 30, 2019 is described in the Consolidated Results section above.

Segment operating income. Orphan and rheumatology segment operating income decreased $1.7 million to $89.8 million during the three months ended September 30, 2019, from $91.5 million during the three months ended September 30, 2018. The decrease was primarily attributable to an increase in selling, general and administrative expenses of $28.1 million primarily due to an increase in sales and marketing costs related to KRYSTEXXA and costs to prepare for the potential U.S. launch of teprotumumab, partially offset by an increase in net sales of $30.5 million as described above.

Inflammation

The following table reflects our inflammation net sales and segment operating income for the three months ended September 30, 2019 and 2018 (in thousands, except percentages).

	For the Three Months Ended September 30,
	2019		2018		Change			% Change
Net sales	$	85,072	$	105,412	$	(20,340	)		(19	%)
Segment operating income		39,638		57,984		(18,346	)		(32	%)

The increase in inflammation net sales during the three months ended September 30, 2019 is described in the Consolidated Results section above.

Segment operating income. Inflammation segment operating income decreased $18.4 million to $39.6 million during the three months ended September 30, 2019, from $58.0 million during the three months ended September 30, 2018. The decrease was primarily attributable to a decrease in net sales of $20.3 million as described above.

Comparison of Nine Months Ended September 30, 2019 and 2018

Consolidated Results

The table below should be referenced in connection with a review of the following discussion of our results of operations for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018.

	For the Nine Months Ended September 30,
	2019			2018			Change
	(in thousands)
Net sales	$	936,484		$	852,027		$	84,457
Cost of goods sold		267,254			292,702			(25,448	)
Gross profit		669,230			559,325			109,905
Operating expenses:
Research and development		74,611			63,079			11,532
Selling, general and administrative		511,720			517,858			(6,138	)
Loss (gain) on sale of assets		10,963			(12,303	)		23,266
Impairment of long-lived assets		—			35,249			(35,249	)
Total operating expenses		597,294			603,883			(6,589	)
Operating income (loss)		71,936			(44,558	)		116,494
Other expense, net:
Interest expense, net		(69,991	)		(91,921	)		21,930
Loss on debt extinguishment		(58,835	)		—			(58,835	)
Foreign exchange loss		(25	)		(81	)		56
Other (expense) income, net		(193	)		834			(1,027	)
Total other expense, net		(129,044	)		(91,168	)		(37,876	)
Loss before (benefit) expense for income taxes		(57,108	)		(135,726	)		78,618
(Benefit) expense for income taxes		(37,359	)		4,301			(41,660	)
Net loss	$	(19,749	)	$	(140,027	)	$	120,278

Net sales. Net sales increased $84.5 million, or 10%, to $936.5 million during the nine months ended September 30, 2019, from $852.0 million during the nine months ended September 30, 2018. The increase in net sales during the nine months ended September 30, 2019 was due to an increase in net sales in our orphan and rheumatology segment of $65.9 million and an increase in net sales in our inflammation segment of $18.6 million

The following table reflects net sales by medicine for the nine months ended September 30, 2019 and 2018 (in thousands, except percentages):

	Nine Months Ended September 30,				Change			Change
	2019		2018		$			%
KRYSTEXXA	$	231,634	$	175,572	$	56,062			32	%
RAVICTI		160,299		166,495		(6,196	)		(4	%)
PROCYSBI		121,142		114,740		6,402			6	%
ACTIMMUNE		78,883		78,071		812			1	%
RAYOS		59,067		41,313		17,754			43	%
BUPHENYL		8,173		15,337		(7,164	)		(47	%)
QUINSAIR		550		346		204			59	%
LODOTRA		—		2,005		(2,005	)		(100	%)
Orphan and Rheumatology segment net sales	$	659,748	$	593,879	$	65,869			11	%

PENNSAID 2%		143,751		125,900		17,851			14	%
DUEXIS		89,412		80,601		8,811			11	%
VIMOVO		41,751		48,873		(7,122	)		(15	%)
MIGERGOT		1,822		2,774		(952	)		(34	%)
Inflammation segment net sales	$	276,736	$	258,148	$	18,588			7	%

Total net sales	$	936,484	$	852,027	$	84,457			10	%

Orphan and Rheumatology

KRYSTEXXA. Net sales increased $56.0 million, or 32%, to $231.6 million during the nine months ended September 30, 2019, from $175.6 million during the nine months ended September 30, 2018. Net sales increased by approximately $53.5 million due to volume growth and approximately $2.5 due to higher net pricing.

RAVICTI. Net sales decreased $6.2 million, or 4%, to $160.3 million during the nine months ended September 30, 2019, from $166.5 million during the nine months ended September 30, 2018. Net sales in the United States decreased by approximately $4.6 million, which was composed of a decrease of approximately $15.6 million due to lower net pricing, partially offset by an increase of approximately $11.0 million resulting from higher sales volume. Net sales outside the United States decreased by approximately $1.6 million primarily as a result of the Immedica transaction in December 2018.

PROCYSBI. Net sales increased $6.4 million, or 6%, to $121.1 million during the nine months ended September 30, 2019, from $114.7 million during the nine months ended September 30, 2018. Net sales in the United States increased by approximately $7.1 million, which was composed of an increase of approximately $8.9 million resulting from volume growth, partially offset by a decrease of $1.8 million due to lower net pricing. Net sales outside the United States decreased by approximately $0.7 million primarily due to a decrease of $2.7 million due to lower net pricing, partially offset by an increase of $2.0 million due to volume growth.

ACTIMMUNE. Net sales increased $0.8 million, or 1%, to $78.9 million during the nine months ended September 30, 2019, from $78.1 million during the nine months ended September 30, 2018. Net sales increased by approximately $1.9 million due to higher net pricing, partially offset by a decrease of $1.1 million resulting from lower sales volume.

RAYOS. Net sales increased $17.8 million, or 43%, to $59.1 million during the nine months ended September 30, 2019, from $41.3 million during the nine months ended September 30, 2018. Net sales increased by approximately $26.5 million resulting from higher net pricing primarily due to lower utilization of our patient assistance programs, partially offset by a decrease of approximately $8.7 million due to lower sales volume.

BUPHENYL. Net sales decreased $7.1 million, or 47%, to $8.2 million during the nine months ended September 30, 2019, from $15.3 million during the nine months ended September 30, 2018. Net sales decreased primarily as a result of the Immedica transaction in December 2018.

Inflammation

PENNSAID 2%. Net sales increased $17.9 million, or 14%, to $143.8 million during the nine months ended September 30, 2019, from $125.9 million during the nine months ended September 30, 2018. Net sales increased by approximately $40.9 million resulting from higher net pricing primarily due to lower utilization of our patient assistance programs, partially offset by a decrease of approximately $23.0 million resulting from lower sales volume.

DUEXIS. Net sales increased $8.8 million, or 11%, to $89.4 million during the nine months ended September 30, 2019, from $80.6 million during the nine months ended September 30, 2018. Net sales increased by approximately $18.5 million resulting from higher net pricing primarily due to lower utilization of our patient assistance programs, partially offset by a decrease of approximately $9.7 million resulting from lower sales volume.

VIMOVO. Net sales decreased $7.1 million, or 15%, to $41.8 million during the nine months ended September 30, 2019, from $48.9 million during the nine months ended September 30, 2018. Net sales decreased by approximately $11.5 million due to lower sales volume, partially offset by an increase of approximately $4.4 million resulting from higher net pricing.

MIGERGOT. Net sales decreased $1.0 million, or 34%, to $1.8 million during the nine months ended September 30, 2019, from $2.8 million during the nine months ended September 30, 2018. On June 28, 2019, we sold our rights to MIGERGOT.

The table below reconciles our gross to net sales for the nine months ended September 30, 2019 and 2018 (in millions, except percentages):

	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	Amount			% of Gross Sales			Amount			% of Gross Sales
Gross sales	$	2,889.9			100.0	%	$	3,111.4			100.0	%
Adjustments to gross sales:
Prompt pay discounts		(53.0	)		(1.8	)%		(55.3	)		(1.8	)%
Medicine returns		(19.9	)		(0.7	)%		(22.1	)		(0.7	)%
Co-pay and other patient assistance costs		(1,171.2	)		(40.5	)%		(1,470.4	)		(47.3	)%
Commercial rebates and wholesaler fees		(342.6	)		(11.9	)%		(433.1	)		(13.9	)%
Government rebates and chargebacks		(366.7	)		(12.7	)%		(278.5	)		(8.9	)%
Total adjustments		(1,953.4	)		(67.6	)%		(2,259.4	)		(72.6	)%
Net sales	$	936.5			32.4	%	$	852.0			27.4	%

During the nine months ended September 30, 2019, co-pay and other patient assistance costs, as a percentage of gross sales, decreased to 40.5% from 47.3% during the nine months ended September 30, 2018, primarily due to lower utilization of our patient assistance programs.

During the nine months ended September 30, 2019, government rebates and chargebacks, as a percentage of gross sales, increased to 12.7% from 8.9% during the nine months ended September 30, 2018, primarily as a result of an increased proportion of orphan and rheumatology medicines sold.

Cost of Goods Sold. Cost of goods sold decreased $25.4 million to $267.3 million during the nine months ended September 30, 2019, from $292.7 million during the nine months ended September 30, 2018. As a percentage of net sales, cost of goods sold was 29% during the nine months ended September 30, 2019, compared to 34% during the nine months ended September 30, 2018. The decrease in cost of goods sold was primarily attributable to a $17.0 million decrease in inventory step-up expense.

Because inventory step-up expense is acquisition-related, will not continue indefinitely and has a significant effect on our gross profit, gross margin percentage and net income (loss) for all affected periods, we disclose balance sheet and income statement amounts related to inventory step-up within the notes to the condensed consolidated financial statements. The decrease in inventory step-up expense of $17.0 million recorded to cost of goods sold during the nine months ended September 30, 2019, compared to the prior year period was due to KRYSTEXXA inventory step-up being fully expensed by March 31, 2018, resulting in no significant inventory step-up expense being recorded during the nine months ended September 30, 2019, compared to KRYSTEXXA inventory step-up expense of $17.0 million recorded during the nine months ended September 30, 2018.

Research and Development Expenses. Research and development expenses increased $11.5 million to $74.6 million during the nine months ended September 30, 2019, from $63.1 million during the nine months ended September 30, 2018. The increase was primarily attributable to total upfront and progress payments of $6.0 million incurred under our collaboration agreement with HemoShear Therapeutics, LLC, or HemoShear. In addition, a milestone payment of $3.0 million was paid to Roche relating to the teprotumumab BLA submission to the FDA during the third quarter of 2019.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $6.1 million to $511.7 million during the nine months ended September 30, 2019, from $517.8 million during the nine months ended September 30, 2018. The decrease was primarily attributable to a decrease in legal fees and litigation settlements of $12.2 million and employee costs of $8.7 million, partially offset by an increase of $6.1 million related to marketing program costs.

(Loss) Gain on Sale of Assets. During the nine months ended September 30, 2019, we sold our rights to MIGERGOT for cash proceeds of $6.0 million, and we recorded a loss of $11.0 million on the sale.

During the nine months ended September 30, 2018, we completed the IMUKIN sale for cash proceeds of $9.5 million, with a potential additional contingent consideration payment and we recorded a gain of $12.3 million on the sale. The contingent consideration payment of €3.0 million ($3.3 million when converted using a Euro-to-Dollar exchange rate at the date of receipt of 1.0991) was received in September 2019.

Impairment of Long-Lived Assets. During the nine months ended September 30, 2018, we recorded an impairment of $35.2 million to fully write off the book value of developed technology related to PROCYSBI in Canada and Latin America due primarily to lower anticipated future net sales based on a Patented Medicine Prices Review Board review.

Interest Expense, Net. Interest expense, net, decreased $21.9 million to $70.0 million during the nine months ended September 30, 2019, from $91.9 million during the nine months ended September 30, 2018. The decrease was primarily due to a decrease in debt interest expense of $15.3 million, primarily related to the decrease in the principal amount of our term loans, partial repayment of our 2023 Senior Notes in May 2019 and an increase in interest income of $6.9 million.

Loss on Debt Extinguishment. During the nine months ended September 30, 2019, we recorded a loss on debt extinguishment of $58.8 million in the condensed consolidated statements of comprehensive income (loss), which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $775.0 million of our 2023 Senior Notes and 2024 Senior Notes and the write-off of the deferred financing fees and debt discount fees related to the $400.0 million of term loan repayments.

(Benefit) Expense for Income Taxes. During the nine months ended September 30, 2019, we recorded a benefit for income taxes of $37.4 million compared to an expense for income taxes of $4.3 million during the nine months ended September 30, 2018. The benefit for income taxes recorded during the nine months ended September 30, 2019, resulted primarily from the mix of pre-tax income and losses incurred in various tax jurisdictions and the net excess tax benefits recognized on share-based compensation.

Information by Segment

Orphan and Rheumatology

The following table reflects our orphan and rheumatology net sales and segment operating income for the nine months ended September 30, 2019 and 2018 (in thousands, except percentages).

	For the Nine Months Ended September 30,
	2019		2018		Change		% Change
Net sales	$	659,748	$	593,879	$	65,869		11	%
Segment operating income		211,003		205,249		5,754		3	%

The increase in orphan and rheumatology net sales during the nine months ended September 30, 2019 is described in the Consolidated Results section above.

Segment operating income. Orphan and rheumatology segment operating income increased $5.8 million to $211.0 million during the nine months ended September 30, 2019, from $205.2 million during the nine months ended September 30, 2018. The increase was primarily attributable to an increase in net sales of $65.9 million as described above, partially offset by an increase in selling, general and administrative expenses of $52.8 million primarily due to an increase in sales and marketing costs related to KRYSTEXXA and costs to prepare for the potential U.S. launch of teprotumumab.

Inflammation

The following table reflects our inflammation net sales and segment operating income for the nine months ended September 30, 2019 and 2018 (in thousands, except percentages).

	For the Nine Months Ended September 30,
	2019		2018		Change		% Change
Net sales	$	276,736	$	258,148	$	18,588		7	%
Segment operating income		130,777		94,294		36,483		39	%

The decrease in inflammation net sales during the nine months ended September 30, 2019 is described in the Consolidated Results section above.

Segment operating income. Inflammation segment operating income increased $36.4 million to $130.7 million during the nine months ended September 30, 2019, from $94.3 million during the nine months ended September 30, 2018. The increase was primarily attributable to an increase in net sales of $18.6 million as described above and a decrease in sales and marketing costs of $15.5 million mainly related to lower sample and patient assistant program administration expenses.

NON-GAAP FINANCIAL MEASURES

EBITDA, or earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share are used and provided by us as non-GAAP financial measures. 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, upfront, progress and milestone payments related to license and collaboration agreements, drug substance harmonization costs, fees related to refinancing activities, restructuring and realignment costs, litigation settlements and charges related to discontinuation of the Friedreich’s ataxia program, as well as non-cash items such as share-based compensation, inventory step-up expense, depreciation and amortization, non-cash interest expense, long-lived assets impairment charges, loss on debt extinguishments, (gain) loss on sale of assets 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. For example, adjusted EBITDA is used by us 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 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 (loss) 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 September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
GAAP net income (loss)	$	18,234		$	33,381		$	(19,749	)	$	(140,027	)
Depreciation (1)		1,658			1,523			4,574			4,627
Amortization and step-up:
Intangible amortization expense (2)		57,662			61,144			172,762			182,508
Inventory step-up expense (3)		—			83			90			17,212
Interest expense, net (including amortization of debt discount and deferred financing costs)		20,428			30,437			69,991			91,921
(Benefit) expense for income taxes		(30,564	)		(1,266	)		(37,359	)		4,301
EBITDA		67,418			125,302			190,309			160,542
Other non-GAAP adjustments:
Loss on debt extinguishment (4)		41,371			—			58,835			—
Share-based compensation (5)		18,151			28,428			67,066			86,981
Upfront, progress and milestones payments related to license and collaboration agreements (6)		3,073			(100	)		9,073			(10	)
Fees related to refinancing activities (7)		262			40			1,437			82
Drug substance harmonization costs (8)		80			301			394			1,579
Acquisition/divestiture-related costs (9)		67			302			2,613			6,179
(Gain) loss on sale of assets (10)		—			(12,303	)		10,963			(12,303	)
Litigation settlements (11)		—			1,500			1,000			5,750
Charges related to discontinuation of Friedreich’s ataxia program (12)		—			254			1,221			1,476
Restructuring and realignment costs (13)		—			4,582			33			14,815
Impairment of long-lived assets (14)		—			1,603			—			35,249
Total of other non-GAAP adjustments		63,004			24,607			152,635			139,798
Adjusted EBITDA	$	130,422		$	149,909		$	342,944		$	300,340

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
GAAP net income (loss)	$	18,234		$	33,381		$	(19,749	)	$	(140,027	)
Non-GAAP adjustments:
Amortization and step-up:
Intangible amortization expense (2)		57,662			61,144			172,762			182,508
Inventory step-up expense (3)		—			83			90			17,212
Amortization of debt discount and deferred financing costs (15)		5,447			5,694			17,069			16,880
Loss on debt extinguishment (4)		41,371			—			58,835			—
Share-based compensation (5)		18,151			28,428			67,066			86,981
Upfront, progress and milestone payments related to license and collaboration agreements (6)		3,073			(100	)		9,073			(10	)
Depreciation (1)		1,658			1,523			4,574			4,627
Fees related to refinancing activities (7)		262			40			1,437			82
Drug substance harmonization costs (8)		80			301			394			1,579
Acquisition/divestiture-related costs (9)		67			302			2,613			6,179
(Gain) loss on sale of assets (10)		—			(12,303	)		10,963			(12,303	)
Litigation settlements (11)		—			1,500			1,000			5,750
Charges relating to discontinuation of Friedreich's ataxia program (12)		—			254			1,221			1,476
Restructuring and realignment costs (13)		—			4,582			33			14,815
Impairment of long-lived assets (14)		—			1,603			—			35,249
Total of pre-tax non-GAAP adjustments		127,771			93,051			347,130			361,025
Income tax effect of pre-tax non-GAAP adjustments (16)		(21,919	)		(13,865	)		(52,291	)		12,774
Other non-GAAP income tax adjustments (17)		—			—			(1,452	)		(35,893	)
Total non-GAAP adjustments		105,852			79,186			293,387			337,906
Non-GAAP Net Income	$	124,086		$	112,567		$	273,638		$	197,879
Non-GAAP Earnings Per Share:
Weighted average ordinary shares – Basic		186,470,141			167,047,104			181,949,838			166,018,603

Non-GAAP Earnings Per Share – Basic
GAAP income (loss) per share – Basic	$	0.10		$	0.20		$	(0.11	)	$	(0.84	)
Non-GAAP adjustments		0.57			0.47			1.61			2.03
Non-GAAP earnings per share – Basic	$	0.67		$	0.67		$	1.50		$	1.19

Weighted average ordinary shares – Diluted
Weighted average ordinary shares – Basic		186,470,141			167,047,104			181,949,838			166,018,603
Ordinary share equivalents		7,701,826			5,438,653			7,747,931			4,621,407
Weighted average ordinary shares – Diluted		194,171,967			172,485,757			189,697,769			170,640,010

Non-GAAP Earnings Per Share – Diluted
GAAP income (loss) per share – Diluted	$	0.09		$	0.19		$	(0.11	)	$	(0.84	)
Non-GAAP adjustments		0.55			0.46			1.61			2.03
Diluted earnings per share effect of ordinary share equivalents		—			—			(0.06	)		(0.03	)
Non-GAAP earnings per share – Diluted	$	0.64		$	0.65		$	1.44		$	1.16

(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, VIMOVO and RAYOS.

(3)

During the nine months ended September 30, 2018, we recognized in cost of goods sold $17.2 million for inventory step-up expense primarily related to KRYSTEXXA inventory sold.

(4)

During the nine months ended September 30, 2019, we recorded a loss on debt extinguishment of $58.8 million in the condensed consolidated statements of comprehensive income (loss), which reflected the early redemption premiums and the write-off of the deferred financing fees and debt discount fees related to the prepayment of $775.0 million of our 2023 Senior Notes and 2024 Senior Notes and the write-off of the deferred financing fees and debt discount fees related to the $400.0 million of term loan repayments.

(5)

Represents share-based compensation expense associated with our stock option, restricted stock unit and performance stock unit grants to our employees and non-employee directors and our employee share purchase plan.

(6)

During the nine months ended September 30, 2019, we recorded an upfront, progress and milestone payments related to license and collaboration agreements of $9.1 million which was composed of a $3.0 million milestone payment to Roche relating to the teprotumumab BLA submission to the FDA during the third quarter of 2019, an upfront cash payment of $2.0 million and a progress payment of $4.0 million in relation to the collaboration agreement with HemoShear.

(7)

Represents arrangement and other fees relating to our refinancing activities.

(8)

During the year ended December 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 our discontinuation of the FA program, 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.

(9)

Represents expenses, including legal and consulting fees, incurred in connection with our acquisitions and divestitures.

(10)

During the nine months ended September 30, 2019, we recorded a loss of $11.0 million on the sale of our rights to MIGERGOT.

(11)

We recorded $1.0 million and $5.8 million of expense during the nine months ended September 30, 2019 and 2018, respectively, for litigation settlements.

(12)

Represents expenses incurred relating to discontinuation of FA program and a reduction to previous charges recorded.

(13)

Represents expenses, including severance costs and consulting fees, related to restructuring and realignment activities.

(14)

Impairment of long-lived assets during the nine months ended September 30, 2018, relates to the write-off of the book value of developed technology related to PROCYSBI in Canada and Latin America.

(15)

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

(16)

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.

(17)

Following Notice 2018-28, issued by the U.S. Treasury Department and the U.S. Internal Revenue Service on April 2, 2018 and in accordance with the measurement period provisions under Staff Accounting Bulletin No. 118, or SAB 118, during the nine months ended September 30, 2018 we reinstated the deferred tax asset previously written off during the year ended December 31, 2017, related to our U.S. interest expense carry forwards under Section 163(j) of the Internal Revenue Code of 1986, as amended, 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 $35.9 million increase to our benefit for income taxes and a corresponding decrease to the U.S. group net deferred tax liability position.

During the nine months ended September 30, 2019, we released a reserve that was originally established and treated as a non-GAAP adjustment related to an uncertain tax position in connection with an acquisition resulting in a non-GAAP tax adjustment of $1.5 million.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

We have incurred losses since our inception in June 2005 and, as of September 30, 2019, we had an accumulated deficit of $1,198.5 million. We expect that our sales and marketing expenses will continue to increase as a result of the commercialization of our medicines but we believe these cost increases will be more than offset by higher net sales and gross profits. Additionally, we expect that our research and development costs will increase as we acquire or license more development-stage medicine candidates and advance our candidates through the clinical development and regulatory approval processes.

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 September 30, 2019, we had $884.0 million in cash and cash equivalents and total debt with a book value of $1,347.4 million and face value of $1,418.0 million. 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 twelve months from the issuance of the financial statements in this Quarterly Report on Form 10-Q. Part of our strategy is to expand and leverage our commercial capabilities and to develop a pipeline of rare disease medicine candidates by researching, developing and commercializing innovative medicines that address unmet treatment needs for rare and rheumatic diseases. To the extent we enter into transactions to acquire medicines or businesses in the future, we will most likely need to finance a significant portion of those acquisitions through additional debt, equity or convertible debt financings, or through the use of cash on hand.

Equity Issuances

On March 11, 2019, we closed an underwritten public equity offering of 14.1 million ordinary shares at a price to the public of $24.50 per share, resulting in net proceeds of approximately $326.8 million after deducting underwriting discounts and other estimated offering expenses payable by us. This included the exercise in full by the underwriters of their option to purchase up to 1.8 million additional ordinary shares.

During the nine months ended September 30, 2019, we issued an aggregate of 3.8 million of our ordinary shares in connection with stock option exercises, the vesting of restricted stock units and performance stock units, and employee share purchase plan purchases. We received a total of $21.7 million in proceeds in connection with such issuances.

Amendments to Credit Agreement, Debt Repayments and 2027 Senior Notes

On March 11, 2019, Horizon Therapeutics USA, Inc. (formerly known as Horizon Pharma USA, Inc.), our wholly owned subsidiary, or HTUSA, received $200.0 million aggregate principal amount of revolving commitments, or the Incremental Revolving Commitments, pursuant to an amendment to our Credit Agreement. The Incremental Revolving Commitments were established pursuant to an incremental facility, or the Revolving Credit Facility, and will provide HTUSA with $200.0 million of additional borrowing capacity, which includes a $50.0 million letter of credit sub-facility. The Incremental Revolving Commitments will terminate in March 2024. Borrowings under the Revolving Credit Facility are available for general corporate purposes. As of September 30, 2019, the Revolving Credit Facility was undrawn.

On March 18, 2019, HTUSA completed the repayment of $300.0 million of the outstanding principal amount of term loans under our Credit Agreement.

On April 1, 2019, we delivered a notice of partial optional redemption of $250.0 million of the 2023 Senior Notes to the trustee under the indenture governing the 2023 Senior Notes and the holders of the 2023 Senior Notes, which were redeemed on May 1, 2019. In connection with this early redemption, we paid a premium of $8.3 million on May 1, 2019.

On May 22, 2019, HTUSA borrowed approximately $518.0 million aggregate principal amount of loans, or the May 2019 Refinancing Loans, pursuant to an amendment to our Credit Agreement. HTUSA used the proceeds of the May 2019 Refinancing Loans to repay the outstanding amounts under our prior term loans, which totaled approximately $518.0 million.

On July 16, 2019, HTUSA completed a private placement of $600.0 million aggregate principal amount of 5.5% Senior Notes due 2027, or the 2027 Senior Notes, to several investment banks acting as initial purchasers, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, who subsequently resold the 2027 Senior Notes to persons reasonably believed to be qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and in offshore transactions to certain non-U.S. persons in reliance on Regulation S under the Securities Act.

We used the net proceeds from the offering of the 2027 Senior Notes, together with approximately $65.0 million in cash on hand, to redeem or prepay $625.0 million of our outstanding debt, consisting of (i) the outstanding $225.0 million principal amount of our 2023 Senior Notes, (ii) the outstanding $300.0 million principal amount of our 2024 Senior Notes and (iii) $100.0 million of the outstanding principal amount of senior secured term loans under the Credit Agreement, as well as to pay the related premiums and fees and expenses, excluding accrued interest, associated with such redemption and prepayment.

Following these transactions, our total aggregate outstanding principal amount of indebtedness was $1,418.0 million.

For a more detailed description of our debt agreements, see Note 13, Debt Agreements, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

We have a significant amount of debt outstanding on a consolidated basis. 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, 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; 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 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.

Sources and Uses of Cash

The following table provides a summary of our cash position and cash flows for the nine months ended September 30, 2019 and 2018 (in thousands):

	For the Nine Months Ended September 30,
	2019			2018
Cash, cash equivalents and restricted cash	$	887,710		$	813,446
Cash provided by (used in):
Operating activities		234,952			85,835
Investing activities		(5,325	)		(3,457	)
Financing activities		(302,832	)		(26,141	)

Operating Cash Flows

During the nine months ended September 30, 2019, net cash provided by operating activities of $234.9 million was primarily attributable to cash collections from gross sales, partially offset by payments made related to patient assistance costs and commercial rebates for our inflammation segment medicines, and payments related to selling, general and administrative expenses and research and development expenses.

During the nine months ended September 30, 2018, net cash provided by operating activities of $85.8 million was primarily attributable to cash collections from gross sales, partially offset by payments made related to patient assistance costs and commercial rebates for our inflammation segment medicines, and payments related to selling, general and administrative expenses and research and development expenses. Cash provided by operating activities was negatively impacted during the nine months ended September 30, 2018, by significant payments made related to patient assistance costs and commercial rebates for our inflammation medicines during the first quarter of 2018, cash payments of $67.1 million for interest on outstanding debt and $40.4 million for income taxes.

Investing Cash Flows

During the nine months ended September 30, 2019, net cash used in investing activities of $5.3 million was primarily attributable to the purchases of property and equipment of $11.3 million, partially offset by proceeds from the MIGERGOT transaction of $6.0 million.

During the nine months ended September 30, 2018, net cash used in investing activities of $3.5 million was primarily attributable to the $12.0 million upfront amount paid to MedImmune LLC to license HZN-003 (formerly MEDI4945), partially offset by $9.4 million in cash proceeds received from the IMUKIN sale.

Financing Cash Flows

During the nine months ended September 30, 2019, net cash used in financing activities of $302.8 million was primarily attributable to the repayment of $400.0 million of the outstanding principal amount of term loans under our Credit Agreement, the repayment of the outstanding principal amount of our 2023 Senior Notes and 2024 Senior Notes of $775.0 million and related early redemption premiums of $39.5 million, partially offset by net proceeds from the issuance of our 2027 Senior Notes of $590.1 million and net proceeds from the issuance of ordinary shares of $326.8 million.

During the nine months ended September 30, 2018, net cash used in financing activities of $26.1 million was primarily attributable to the repayment of term loans of $27.7 million.

Financial Condition as of September 30, 2019 compared to December 31, 2018

Accounts receivable, net. Accounts receivable, net, decreased $68.1 million, from $464.7 million as of December 31, 2018 to $396.6 million as of September 30, 2019. The decrease was due to lower gross sales of our medicines during the third quarter of 2019 when compared to the fourth quarter of 2018.

Prepaid expenses and other current assets. Prepaid expenses and other current assets increased by $67.7 million, from $68.2 million as of December 31, 2018 to $135.9 million as of September 30, 2019. The increase was primarily due to a benefit for income taxes recognized during nine months ended September 30, 2019 and an increase in advance payments for inventory of $16.0 million. The tax benefit arose due to the mix of pre-tax income and losses incurred in various tax jurisdictions.

Developed technology, net. Developed technology, net, decreased $189.1 million, from $1,945.6 million as of December 31, 2018 to $1,756.5 million as of September 30, 2019. The decrease was due to the amortization of developed technology of $172.8 million during the nine months ended September 30, 2019 and the recording of a reduction in the net book value of $17.0 million related to the MIGERGOT transaction.

Other assets. Other assets increased $33.2 million, from $9.0 million as of December 31, 2018 to $42.2 million as of September 30, 2019. Upon adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), or ASU No. 2016-02, on January 1, 2019, we established $37.1 million of liabilities and corresponding lease assets of $34.9 million on the condensed consolidated balance sheet for leases, primarily related to operating leases on rented office properties, that existed as of the January 1, 2019, adoption date.

Accrued expenses. Accrued expenses decreased $11.5 million, from $215.7 million as of December 31, 2018 to $204.2 million as of September 30, 2019. This was primarily due to a decrease in payroll-related expenses of $5.4 million, a decrease in accrued interest of $4.4 million, a decrease in consulting and professional service fees of $4.2 million, partially offset by an increase in accrued royalties of $3.2 million.

Accrued trade discounts and rebates. Accrued trade discounts and rebates decreased $53.2 million, from $457.7 million as of December 31, 2018 to $404.5 million as of September 30, 2019. This was primarily due to a $59.2 million decrease in accrued co-pay and other patient assistance costs and a $32.2 million decrease in accrued commercial rebates and wholesaler fees, partially offset by a $38.2 million increase in accrued government rebates and chargebacks.

Long-term debt, net of current. Long-term debt, net of current, decreased $563.7 million, from $1,564.5 million as of December 31, 2018 to $1,000.8 million as of September 30, 2019. The decrease was primarily related to the repayment of $400.0 million of the outstanding principal amount of our term loans and the repayment of our 2023 Senior Notes and 2024 Senior Notes. See Note 13, Debt Agreements, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further detail.

Other long-term liabilities. Other long-term liabilities increased $31.2 million, from $38.7 million as of December 31, 2018 to $69.9 million as of September 30, 2019. This was primarily due to $36.3 million related to long-term lease liabilities as of September 30, 2019. Upon adoption of ASU No. 2016-02 on January 1, 2019, we established $37.1 million of liabilities and corresponding lease assets of $34.9 million on the condensed consolidated balance sheet for leases, primarily related to operating leases on rented office properties, that existed as of the January 1, 2019, adoption date.

Contractual Obligations

During the nine months ended September 30, 2019, there were no material changes outside of the ordinary course of business 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, 2018, except for our entry into the following commitments described below.

On March 18, 2019, HTUSA completed the repayment of $300.0 million of the outstanding principal amount of term loans under our Credit Agreement. In July 2019, we repaid an additional $100.0 million of term loans under our Credit Agreement. Following this repayment, the outstanding principal balance of term loans under our Credit Agreement was $418.0 million.

On May 1, 2019, we redeemed $250.0 million of the 2023 Senior Notes under the indenture governing the 2023 Senior Notes. On August 9, 2019, we redeemed the remaining $225.0 million of the 2023 Senior Notes and redeemed all $300.0 million of the 2024 Senior Notes. Following this repayment, our total aggregate outstanding principal amount of indebtedness was $1,418.0 million.

See Note 13, Debt Agreements, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for details of our 2027 Senior Notes and related debt repayments.

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. A summary of our significant accounting policies is included in Note 2 to our Annual Report on Form 10-K for the year ended December 31, 2018.

Effective January 1, 2019, we retrospectively changed our accounting for business combinations under ASC Topic 805, Business Combinations and now record acquired intangible assets and their related third-party contingent royalties on a net basis. Refer to Note 2, Summary of Significant Accounting Policies, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for our updated policy.

During the nine months ended September 30, 2019, other than the changes to our accounting policy for contingent royalties and intangible assets as a result of our change in accounting for business combinations under ASC Topic 805, Business Combinations, there have been no significant changes in our application of our critical accounting policies.

OFF-BALANCE SHEET ARRANGEMENTS

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, which include potential losses arising from adverse changes in market rates and prices, such as interest rates and foreign exchange fluctuations. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest Rate Risk. We are subject to interest rate fluctuation exposure through our borrowings under the Credit Agreement and our investment in money market accounts which bear a variable interest rate. Loans under the Credit Agreement bear interest, at our option, at a rate equal to either the London Inter-Bank Offered Rate, or LIBOR, plus an applicable margin of 2.50% per annum (subject to a LIBOR floor of 0.0%), or the adjusted base rate plus 1.50% per annum. The adjusted base rate is defined as the greatest of (a) LIBOR (using one-month interest period) plus 1.00%, (b) the prime rate, (c) the federal funds rate plus 0.50%, and (d) 2.00%. Our approximately $418.0 million of senior secured term loans under the Credit Agreement are based on LIBOR. The loans under the Revolving Credit Facility bear interest, at our option, at a rate equal to either LIBOR plus an applicable margin of 3.00% per year (subject to a LIBOR floor of 0.00%), or the adjusted base rate plus 2.00% per annum. As of September 30, 2019, the Revolving Credit Facility was undrawn. The one month LIBOR rate as of November 4, 2019, which was the most recent date the interest rate on the term loan was fixed, was 1.81%, and as a result, the interest rate on our borrowings is currently 4.31% per annum. Because the United Kingdom Financial Conduct Authority, which regulates LIBOR, intends to phase out the use of LIBOR by the end of 2021, future borrowings under our Credit Agreement could be subject to reference rates other than LIBOR.

An increase in the LIBOR of 100 basis points above the current LIBOR rate would increase our interest expense related to the Credit Agreement by $4.2 million per year.

The goals of our investment policy are to preserve capital, fulfill liquidity needs and maintain fiduciary control of cash. To achieve our goal of maximizing income without assuming significant market risk, we maintain our excess cash and cash equivalents in money market funds. Because of the short-term maturities of our cash equivalents, we do not believe that a decrease in interest rates would have any material negative impact on the fair value of our cash equivalents.

Foreign Currency Risk. Our purchase costs of teprotumumab and ACTIMMUNE inventory are principally denominated in Euros and are subject to foreign currency risk. We have contracts relating to RAVICTI, QUINSAIR and PROCYSBI for sales in Canada which sales are subject to foreign currency risk. We also incur certain operating expenses in currencies other than the U.S. dollar in relation to our Irish operations and foreign subsidiaries. Therefore, we are subject to volatility in cash flows due to fluctuations in foreign currency exchange rates, particularly changes in the Euro and the Canadian dollar.

Inflation Risk. We do not believe that inflation has had a material impact on our business or results of operations during the periods for which the condensed consolidated financial statements are presented in this report.

Credit Risk. Historically, our accounts receivable balances have been highly concentrated with a select number of customers consisting primarily of large wholesale pharmaceutical distributors who, in turn, sell the medicines to pharmacies, hospitals and other customers. As of September 30, 2019, and December 31, 2018, our top four customers accounted for approximately 85% of our total outstanding accounts receivable balances.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. As required by paragraph (b) of Rules 13a-15 and 15d-15 promulgated under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2019, the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting. During the quarter ended September 30, 2019, there have been no material changes to our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our legal proceedings, see Note 16, Legal Proceedings, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A: RISK FACTORS

You should consider carefully the risks described below, together with all of the other information included in this report, and in our other filings with the Securities and Exchange Commission, or SEC, before deciding whether to invest in or continue to hold our ordinary shares. The risks described below are all material risks currently known, expected or reasonably foreseeable by us. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be seriously harmed. This could cause the trading price of our ordinary shares to decline, resulting in a loss of all or part of your investment.

The risk factors set forth below with an asterisk (*) next to the title are new risk factors or risk factors containing changes, including any material changes, from the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC.

Risks Related to Our Business and Industry

Our ability to generate revenues from our medicines is subject to attaining significant market acceptance among physicians, patients and healthcare payers.*

Our current medicines, and other medicines or medicine candidates that we may develop or acquire, may not attain market acceptance among physicians, patients, healthcare payers or the medical community. We have a limited history of commercializing medicines and most of our medicines have not been on the market for an extensive period of time, which subjects us to numerous risks as we attempt to increase our market share. We believe that the degree of market acceptance and our ability to generate revenues from our medicines will depend on a number of factors, including:

•

timing of market introduction of our medicines as well as competitive medicines;

•

efficacy and safety of our medicines;

•

continued projected growth of the markets in which our medicines compete;

•

prevalence and severity of any side effects;

•

if and when we are able to obtain regulatory approvals for additional indications for our medicines;

•

acceptance by patients, inflammation physicians and key specialists;

•

availability of coverage and adequate reimbursement and pricing from government and other third-party payers;

•

potential or perceived advantages or disadvantages of our medicines over alternative treatments, including cost of treatment and relative convenience and ease of administration;

•

strength of sales, marketing and distribution support;

•

the price of our medicines, both in absolute terms and relative to alternative treatments;

•

impact of past and limitation of future medicine price increases;

•

our ability to maintain a continuous supply of medicine for commercial sale;

•

the effect of current and future healthcare laws;

•

the performance of third-party distribution partners, over which we have limited control; and

•

medicine labeling or medicine insert requirements of the U.S. Food and Drug Administration, or FDA, or other regulatory authorities.

With respect to RAVICTI, which is approved to treat a very limited patient population, our ability to grow sales will depend in large part on our ability to transition urea cycle disorder, or UCD, patients from BUPHENYL or generic equivalents, which are comparatively much less expensive, to RAVICTI and to encourage patients and physicians to continue RAVICTI therapy once initiated. With respect to PROCYSBI, which is also approved to treat a very limited patient population, our ability to grow sales will depend in large part on our ability to transition patients from the first-generation immediate-release cysteamine therapy to PROCYSBI, to identify additional patients with nephropathic cystinosis and to encourage patients and physicians to continue therapy once initiated. With respect to ACTIMMUNE, while it is the only FDA-approved treatment for chronic granulomatous disease, or CGD, and severe, malignant osteopetrosis, or SMO, they are very rare conditions and, as a result, our ability to grow ACTIMMUNE sales will depend on our ability to access a wider patient population and encourage patients and physicians to continue treatment once initiated. Unless QUINSAIR is approved for marketing in additional countries, our ability to drive growth of this medicine will largely depend on expanding its use in Canada. With respect to KRYSTEXXA, our ability to grow sales will be affected by the success of our sales, marketing and clinical strategies, which could expand the patient population and usage of KRYSTEXXA. This includes our marketing efforts in nephrology and our studies designed to improve the response rate to KRYSTEXXA and to evaluate the use of KRYSTEXXA in kidney transplant patients. With respect to each of BUPHENYL, RAYOS, PENNSAID 2% w/w, or PENNSAID 2%, DUEXIS and VIMOVO, their higher cost compared to the generic or branded forms of their active ingredients alone may limit adoption by physicians, patients and healthcare payers. With respect to DUEXIS and VIMOVO, studies indicate that physicians do not commonly co-prescribe gastrointestinal, or GI, protective agents to high-risk patients taking nonsteroidal anti-inflammatory drugs, or NSAIDs. We believe this is due in part to a lack of awareness among physicians prescribing NSAIDs regarding the risk of NSAID-induced upper GI ulcers, in addition to the inconvenience of prescribing two separate medications and patient compliance issues associated with multiple prescriptions. If physicians remain unaware of, or do not otherwise believe in, the benefits of combining GI protective agents with NSAIDs, our market opportunity for DUEXIS and VIMOVO will be limited. Some physicians may also be reluctant to prescribe DUEXIS or VIMOVO due to the inability to vary the dose of ibuprofen and naproxen, respectively, or if they believe treatment with NSAIDs or GI protective agents other than those contained in DUEXIS and VIMOVO, including those of its competitors, would be more effective for their patients. If our current medicines or any other medicine that we may seek approval for, or acquire, fail to attain market acceptance, we may not be able to generate significant revenue to achieve or sustain profitability, which would have a material adverse effect on our business, results of operations, financial condition and prospects (including, possibly, the value of our ordinary shares).

Our future prospects are highly dependent on our ability to successfully formulate and execute commercialization strategies for each of our medicines. Failure to do so would adversely impact our financial condition and prospects.*

A substantial majority of our resources are focused on the commercialization of our current medicines. Our ability to generate significant medicine revenues and to achieve commercial success in the near-term will initially depend almost entirely on our ability to successfully commercialize these medicines in the United States.

With respect to our rare disease medicines, RAVICTI, PROCYSBI, ACTIMMUNE, BUPHENYL, QUINSAIR and KRYSTEXXA, our commercialization strategy includes efforts to increase awareness of the rare conditions that each medicine is designed to treat, enhancing efforts to identify target patients and in certain cases pursue opportunities for label expansion and more effective use through clinical trials. With respect to RAVICTI and PROCYSBI, our strategy includes accelerating the transition of patients from first-generation therapies, increasing the diagnosis of the associated rare conditions through patient and physician outreach; and increasing compliance rates. Our strategy with respect to KRYSTEXXA includes supporting three pillars of growth: existing rheumatology account growth, new rheumatology account growth and accelerating nephrology growth.

With respect to our inflammation medicines, PENNSAID 2%, DUEXIS, and VIMOVO, our strategy has included entering into rebate agreements with pharmacy benefit managers, or PBMs, for certain of our inflammation medicines where we believe the rebates and costs justify expanded formulary access for patients and ensuring patient access to these drugs when prescribed through our HorizonCares program. However, we cannot guarantee that we will be able to secure additional rebate agreements on commercially reasonable terms, that expected volume growth will sufficiently offset the rebates and fees paid to PBMs or that our existing agreements with PBMs will have the intended impact on formulary access. In addition, as the terms of our existing agreements with PBMs expire, we may not be able to renew the agreements on commercially favorable terms, or at all. For each of our inflammation medicines, we expect that our commercial success will depend on our sales and marketing efforts in the United States, reimbursement decisions by commercial payers, the expense we incur through our patient access program for fully bought down contracts and the rebates we pay to PBMs, as well as the impact of numerous efforts at federal, state and local levels to further reduce reimbursement and net pricing of inflammation medicines.

Our strategy for RAYOS in the United States is to focus on the rheumatology indications approved for RAYOS, including our collaboration with the Alliance for Lupus Research, to study the effect of RAYOS on the fatigue experienced by systemic lupus erythematosus, or SLE, patients.

If any of our commercial strategies are unsuccessful or we fail to successfully modify our strategies over time due to changing market conditions, our ability to increase market share for our medicines, grow revenues and to achieve and sustain profitability will be harmed.

In order to increase adoption and sales of our medicines, we will need to continue developing our commercial organization as well as recruit and retain qualified sales representatives.*

Part of our strategy is to continue to build a biopharma company to successfully execute the commercialization of our medicines in the U.S. market, and in selected markets outside the United States where we have commercial rights. We may not be able to successfully commercialize our medicines in the United States or in any other territories where we have commercial rights. In order to commercialize any approved medicines, we must continue to build our sales, marketing, distribution, managerial and other non-technical capabilities. As of September 30, 2019, we had approximately 440 sales representatives in the field, consisting of approximately 25 orphan disease sales representatives, 170 rheumatology sales specialists and 245 inflammation sales representatives. We currently have limited resources compared to some of our competitors, and the continued development of our own commercial organization to market our medicines and any additional medicines we may acquire will be expensive and time-consuming. We also cannot be certain that we will be able to continue to successfully develop this capability.

As a result of the evolving role of various constituents in the prescription decision making process, we focus on hiring sales representatives for our inflammation medicines and RAYOS with successful business to business experience. For example, we have faced challenges due to pharmacists increasingly switching a patient’s intended prescription from DUEXIS and VIMOVO to a generic or over-the-counter brand of their active ingredients, despite such substitution being off-label in the case of DUEXIS and VIMOVO. We have faced similar challenges for BUPHENYL, RAYOS and PENNSAID 2% with respect to generic brands. While we believe the profile of our representatives is better suited for this evolving environment, we cannot be certain that our representatives will be able to successfully protect our market for BUPHENYL, RAYOS, PENNSAID 2%, DUEXIS and VIMOVO or that we will be able to continue attracting and retaining sales representatives with our desired profile and skills. We will also have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain commercial personnel. To the extent we rely on additional third parties to commercialize any approved medicines, we may receive less revenue than if we commercialized these medicines ourselves. In addition, we may have little or no control over the sales efforts of any third parties involved in our commercialization efforts. In the event we are unable to successfully develop and maintain our own commercial organization or collaborate with a third-party sales and marketing organization, we may not be able to commercialize our medicines and medicine candidates and execute on our business plan.

If we are unable to effectively train and equip our sales force, our ability to successfully commercialize our medicines will be harmed.

As we continue to acquire additional medicines through acquisition transactions, the members of our sales force may have limited experience promoting certain of our medicines. To the extent we employ an acquired entity’s original sales forces to promote acquired medicines, we may not be successful in continuing to retain these employees and we otherwise will have limited experience marketing these medicines under our commercial organization. As a result, we are required to expend significant time and resources to train our sales force to be credible and persuasive in convincing physicians to prescribe and pharmacists to dispense our medicines. In addition, we must train our sales force to ensure that a consistent and appropriate message about our medicines is being delivered to our potential customers. Our sales representatives may also experience challenges promoting multiple medicines when we call on physicians and their office staff. We have experienced, and may continue to experience, turnover of the sales representatives that we hired or will hire, requiring us to train new sales representatives. If we are unable to effectively train our sales force and equip them with effective materials, including medical and sales literature to help them inform and educate physicians about the benefits of our medicines and their proper administration and label indication, as well as our patient access programs, our efforts to successfully commercialize our medicines could be put in jeopardy, which could have a material adverse effect on our financial condition, share price and operations.

If we cannot successfully implement our patient access programs or increase formulary access and reimbursement for our medicines in the face of increasing pressure to reduce the price of medications, the adoption of our medicines by physicians, patients and payers may decline.*

There continues to be immense pressure from healthcare payers, PBMs and others to use less expensive or generic medicines or over-the-counter brands instead of certain branded medicines. For example, some of the largest PBMs previously placed DUEXIS and VIMOVO on their formulary exclusion lists. Additional healthcare plans, including those that contract with these PBMs but use different formularies, may also choose to exclude our medicines from their formularies or restrict coverage to situations where a generic or over-the-counter medicine has been tried first. Many payers and PBMs also require patients to make co-payments for branded medicines, including many of our medicines, in order to incentivize the use of generic or other lower-priced alternatives instead. Legislation enacted in most states in the United States allows, or in some instances mandates, that a pharmacist dispenses an available generic equivalent when filling a prescription for a branded medicine, in the absence of specific instructions from the prescribing physician. Because our medicines (other than BUPHENYL) do not currently have FDA-approved generic equivalents in the United States, we do not believe our medicines should be subject to mandatory generic substitution laws. However, we understand that some pharmacies may attempt to obtain physician authorization to switch prescriptions for DUEXIS or VIMOVO to prescriptions for multiple generic medicines with similar active pharmaceutical ingredients, or APIs, to ensure payment for the medicine if the physician’s prescription for the branded medicine is not immediately covered by the payer, despite such substitution being off-label in the case of DUEXIS and VIMOVO. If these limitations in coverage and other incentives result in patients refusing to fill prescriptions or being dissatisfied with the out-of-pocket costs of their medications, or if pharmacies otherwise seek and receive physician authorization to switch prescriptions, not only would we lose sales on prescriptions that are ultimately not filled, but physicians may be dissuaded from writing prescriptions for our medicines in the first place in order to avoid potential patient non-compliance or dissatisfaction over medication costs, or to avoid spending the time and effort of responding to pharmacy requests to switch prescriptions.

Part of our commercial strategy to increase adoption and access to our medicines in the face of these incentives to use generic alternatives is to offer physicians the opportunity to have patients fill prescriptions through independent pharmacies participating in our HorizonCares patient access program, including shipment of prescriptions to patients. We also have contracted with a third-party prescription clearinghouse that offers physicians a single point of contact for processing prescriptions through these independent pharmacies, reducing physician administrative costs, increasing the fill rates for prescriptions and enabling physicians to monitor refill activity. Through HorizonCares, financial assistance may be available to reduce eligible patients’ out-of-pocket costs for prescriptions filled. Because of this assistance, eligible patients’ out-of-pocket cost for our medicines when dispensed through HorizonCares may be significantly lower than such costs when our medicines are dispensed outside of the HorizonCares program. However, to the extent physicians do not direct prescriptions currently filled through traditional pharmacies, including those associated with or controlled by PBMs, to pharmacies participating in our HorizonCares program, we may experience a significant decline in PENNSAID 2%, DUEXIS and VIMOVO prescriptions. Our ability to increase utilization of our patient access programs will depend on physician and patient awareness and comfort with the programs, and we have limited ability to influence whether physicians use our patient access programs to prescribe our medicines or whether patients will agree to receive our medicines through our HorizonCares program. In addition, the HorizonCares program is not available to federal health care program (such as Medicare and Medicaid) beneficiaries. We have also contracted with certain PBMs and other payers to secure formulary status and reimbursement for certain of our inflammation medicines, which generally require us to pay administrative fees and rebates to the PBMs and other payers for qualifying prescriptions. While we have business relationships with two of the largest PBMs, Express Scripts, Inc., or Express Scripts, and CVS Caremark, that have resulted in DUEXIS and VIMOVO being removed from the Express Scripts and CVS Caremark exclusion lists starting in 2017, as well as a rebate agreement with another PBM, Prime Therapeutics LLC, and we believe these agreements will secure formulary status for certain of our medicines, we cannot guarantee that we will be able to agree to terms with other PBMs and other payers, or that such terms will be commercially reasonable to us. Despite our agreements with PBMs, the extent of formulary status and reimbursement will ultimately depend to a large extent upon individual healthcare plan formulary decisions. If healthcare plans that contract with PBMs with which we have agreements do not adopt formulary changes recommended by the PBMs with respect to our medicines, we may not realize the expected access and reimbursement benefits from these agreements. In addition, we generally pay higher rebates for prescriptions covered under plans that adopt a PBM-chosen formulary than for plans that adopt custom formularies. Consequently, the success of our PBM contracting strategy will depend not only on our ability to expand formulary adoption among healthcare plans, but also upon the relative mix of healthcare plans that have PBM-chosen formularies versus custom formularies. If we are unable to realize the expected benefits of our contractual arrangements with the PBMs we may continue to experience reductions in net sales from our inflammation medicines and/or reductions in net pricing for our inflammation medicines due to increasing patient assistance costs. If we are unable to increase adoption of HorizonCares for filling prescriptions of our medicines and to secure formulary status and reimbursement through arrangements with PBMs and other payers, particularly with healthcare plans that use custom formularies, our ability to achieve net sales growth for our inflammation medicines would be impaired.

There has been negative publicity and inquiries from Congress and enforcement authorities regarding the use of specialty pharmacies and drug pricing. Our patient access programs are not involved in the prescribing of medicines and are solely to assist in ensuring that when a physician determines one of our medicines offers a potential clinical benefit to their patients and they prescribe one for an eligible patient, financial assistance may be available to reduce the patient’s out-of-pocket costs. In addition, all pharmacies that fill prescriptions for our medicines are fully independent, including those that participate in HorizonCares. We do not own or possess any option to purchase an ownership stake in any pharmacy that distributes our medicines, and our relationship with each pharmacy is non-exclusive and arm’s length. All of our sales are processed through pharmacies independent of us. Despite this, the negative publicity and interest from Congress and enforcement authorities regarding specialty pharmacies may result in physicians being less willing to participate in our patient access programs and thereby limit our ability to increase patient access and adoption of our medicines.

We may also encounter difficulty in forming and maintaining relationships with pharmacies that participate in our patient access programs. We currently depend on a limited number of pharmacies participating in HorizonCares to fulfill patient prescriptions under the HorizonCares program. If these HorizonCares participating pharmacies are unable to process and fulfill the volume of patient prescriptions directed to them under the HorizonCares program, our ability to maintain or increase prescriptions for our medicines will be impaired. The commercialization of our medicines and our operating results could be affected should any of the HorizonCares participating pharmacies choose not to continue participation in our HorizonCares program or by any adverse events at any of those HorizonCares participating pharmacies. For example, pharmacies that dispense our medicines could lose contracts that they currently maintain with managed care organizations, or MCOs, including PBMs. Pharmacies often enter into agreements with MCOs. They may be required to abide by certain terms and conditions to maintain access to MCO networks, including terms and conditions that could limit their ability to participate in patient access programs like ours. Failure to comply with the terms of their agreements with MCOs could result in a variety of penalties, including termination of their agreement, which could negatively impact the ability of those pharmacies to dispense our medicines and collect reimbursement from MCOs for such medicines.

The HorizonCares program may implicate certain federal and state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud. We have a comprehensive compliance program in place to address adherence with various laws and regulations relating to the selling, marketing and manufacturing of our medicines, as well as certain third-party relationships, including pharmacies. Specifically with respect to pharmacies, the compliance program utilizes a variety of methods and tools to monitor and audit pharmacies, including those that participate in the HorizonCares program, to confirm their activities, adjudication and practices are consistent with our compliance policies and guidance. Despite our compliance efforts, to the extent the HorizonCares program is found to be inconsistent with applicable laws or the pharmacies that participate in our patient access programs do not comply with applicable laws, we may be required to restructure or discontinue such programs, terminate our relationship with certain pharmacies, or be subject to other significant penalties. In November 2015, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York requesting documents and information related to our patient access programs and other aspects of our marketing and commercialization activities. We are unable to predict how long this investigation will continue or its outcome, but we have incurred and anticipate that we may continue to incur significant costs in connection with the investigation, regardless of the outcome. We may also become subject to similar investigations by other governmental agencies or Congress. The investigation by the U.S. Attorney’s Office and any additional investigations of our patient access programs and sales and marketing activities may result in damages, fines, penalties, exclusion, additional reporting requirements and/or oversight or other administrative sanctions against us.

If the cost of maintaining our patient access programs increases relative to our sales revenues, we could be forced to reduce the amount of patient financial assistance that we offer or otherwise scale back or eliminate such programs, which could in turn have a negative impact on physicians’ willingness to prescribe and patients’ willingness to fill prescriptions of our medicines. While we believe that our arrangements with PBMs will result in broader inclusion of certain of our inflammation medicines on healthcare plan formularies, and therefore increase payer reimbursement and lower our cost of providing patient access programs, these arrangements generally require us to pay administrative and rebate payments to the PBMs and/or other payers and their effectiveness will ultimately depend to a large extent upon individual healthcare plan formulary decisions that are beyond the control of the PBMs. If our arrangements with PBMs and other payers do not result in increased prescriptions and reductions in our costs to provide our patient access programs that are sufficient to offset the administrative fees and rebate payments to the PBMs and/or other payers, our financial results may continue to be harmed.

If we are unable to successfully implement our commercial plans and facilitate adoption by patients and physicians of any approved medicines through our sales, marketing and commercialization efforts, then we will not be able to generate sustainable revenues from medicine sales which will have a material adverse effect on our business and prospects.

Coverage and reimbursement may not be available, or reimbursement may be available at only limited levels, for our medicines, which could make it difficult for us to sell our medicines profitably or to successfully execute planned medicine price increases.*

Market acceptance and sales of our medicines will depend in large part on global coverage and reimbursement policies and may be affected by future healthcare reform measures, both in the United States and other key international markets. Successful commercialization of our medicines will depend in part on the availability of governmental and third-party payer reimbursement for the cost of our medicines. Government health administration authorities, private health insurers and other organizations generally provide reimbursement for healthcare. In particular, in the United States, private health insurers and other third-party payers often provide reimbursement for medicines and services based on the level at which the government (through the Medicare or Medicaid programs) provides reimbursement for such treatments. In the United States, the European Union, or EU, and other significant or potentially significant markets for our medicines and medicine candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medicines and services, particularly for new and innovative medicines and therapies, which has resulted in lower average selling prices. Further, the increased scrutiny of prescription drug pricing practices and emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the EU will put additional pressure on medicine pricing, reimbursement and usage, which may adversely affect our medicine sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general. These pressures may create negative reactions to any medicine price increases, or limit the amount by which we may be able to increase our medicine prices, which may adversely affect our medicine sales and results of operations.

Patients are unlikely to use our medicines unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our medicines. Third-party payers may limit coverage to specific medicines on an approved list, also known as a formulary, which might not include all of the FDA-approved medicines for a particular indication. Moreover, a third-party payer’s decision to provide coverage for a medicine does not imply that an adequate reimbursement rate will be approved. Additionally, one third-party payer’s decision to cover a particular medicine does not ensure that other payers will also provide coverage for the medicine, or will provide coverage at an adequate reimbursement rate. Even though we have contracts with some PBMs in the United States, that does not guarantee that they will perform in accordance with the contracts, nor does that preclude them from taking adverse actions against us, which could materially adversely affect our operating results. In addition, the existence of such PBM contracts does not guarantee coverage by such PBM’s contracted health plans or adequate reimbursement to their respective providers for our medicines. For example, two significant PBMs placed DUEXIS and VIMOVO on their exclusion lists beginning in 2015, which has resulted in a loss of coverage for patients whose healthcare plans have adopted these PBM lists. While DUEXIS and VIMOVO were removed from the Express Scripts and CVS Caremark exclusion lists starting in 2017, we cannot guarantee that Express Scripts or CVS Caremark will not later add these medicines back to their exclusion lists or that we will be able to otherwise expand formulary access for DUEXIS and VIMOVO under health plans that contract with Express Scripts and/or CVS Caremark. Additional healthcare plan formularies may also exclude our medicines from coverage due to the actions of certain PBMs, future price increases we may implement, our use of the HorizonCares program or any other co-pay programs, or other reasons. If our strategies to mitigate formulary exclusions are not effective, these events may reduce the likelihood that physicians prescribe our medicines and increase the likelihood that prescriptions for our medicines are not filled.

Outside of the United States, the success of our medicines and medicine candidates will depend largely on obtaining and maintaining government coverage, because in many countries patients are unlikely to use prescription drugs that are not covered by their government healthcare programs. We market RAVICTI, PROCYSBI and QUINSAIR in Canada. Further, we cannot be certain that existing reimbursement in Canada will be maintained or that we will be able to secure reimbursement in additional countries. Negotiating coverage and reimbursement with governmental authorities can delay commercialization by twelve months or more. Coverage and reimbursement policies may adversely affect our ability to sell our medicines on a profitable basis. In many international markets, governments control the prices of prescription pharmaceuticals, including through the implementation of reference pricing, price cuts, rebates, revenue-related taxes and profit control, and we expect prices of prescription pharmaceuticals to decline over the life of the medicine or as volumes increase. As a result of these pricing practices, it may become difficult to achieve or sustain profitability or expected rates of growth in revenue or results of operations. Any shortfalls in revenue could adversely affect our business, financial condition and results of operations.

In light of such policies and the uncertainty surrounding proposed regulations and changes in the coverage and reimbursement policies of governments and third-party payers, we cannot be sure that coverage and reimbursement will be available for any of our medicines in any additional markets or for any other medicine candidates that we may develop. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our medicines. If coverage and reimbursement are not available or are available only at limited levels, we may not be able to successfully commercialize our medicines.

We expect to experience pricing pressures in connection with the sale of our medicines due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative proposals relating to outcomes and quality. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, increased the mandated Medicaid rebate from 15.1% to 23.1%, expanded the rebate to Medicaid managed care utilization and increased the types of entities eligible for the federal 340B drug discount program. As concerns continue to grow over the need for tighter oversight, there remains the possibility that the Health Resources and Services Administration or another agency under the U.S. Department of Health and Human Services, or HHS, will propose a similar regulation or that Congress will explore changes to the 340B program through legislation. For example, a bill was introduced in 2018 that would require hospitals to report their low-income utilization of the program. Further, the Centers for Medicare & Medicaid Services issued a final rule that would revise the Medicare hospital outpatient prospective payment system for calendar year 2019, including a new reimbursement methodology for drugs purchased under the 340B program for Medicare patients at the hospital setting and recently announced the same change for physician-based practices under 340B in 2019. Pursuant to the final rule, after January 1, 2019, manufacturers must calculate 340B program ceiling prices on a quarterly basis. Moreover, manufacturers could be subject to a $5,000 penalty for each instance where they knowingly and intentionally overcharge a covered entity under the 340B program. With respect to KRYSTEXXA, the “additional rebate” scheme of the 340B pricing rules, as applied to the historical pricing of KRYSTEXXA both before and after we acquired the medicine, have resulted in a 340B ceiling price of one penny. A material portion of KRYSTEXXA prescriptions (approximately twenty percent) are written by healthcare providers that are eligible for 340B drug pricing and therefore the reduction in 340B pricing to a penny has negatively impacted our net sales of KRYSTEXXA.

There may be additional pressure by payers, healthcare providers, state governments, federal regulators and Congress, to use generic drugs that contain the active ingredients found in our medicines or any other medicine candidates that we may develop or acquire. If we fail to successfully secure and maintain coverage and adequate reimbursement for our medicines or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our medicines and expected revenue and profitability which would have a material adverse effect on our business, results of operations, financial condition and prospects.

We may also experience pressure from payers as well as state and federal government authorities concerning certain promotional approaches that we may implement such as our HorizonCares program or any other co-pay or free medicine programs whereby we assist qualified patients with certain out-of-pocket expenditures for our medicine, including donations to patient assistance programs offered by charitable foundations. Certain state and federal enforcement authorities and members of Congress have initiated inquiries about co-pay assistance programs. Some state legislatures have been considering proposals that would restrict or ban co-pay coupons. For example, legislation was recently signed into law in California that would limit the use of co-pay coupons in cases where a lower cost generic drug is available and if individual ingredients in combination therapies are available over the counter at a lower cost. It is possible that similar legislation could be proposed and enacted in additional states. If we are unsuccessful with our HorizonCares program or any other co-pay initiatives or free medicine programs, or we alternatively are unable to secure expanded formulary access through additional arrangements with PBMs or other payers, we would be at a competitive disadvantage in terms of pricing versus preferred branded and generic competitors. We may also experience financial pressure in the future which would make it difficult to support investment levels in areas such as managed care contract rebates, HorizonCares and other access tools.

We are solely dependent on third parties to commercialize certain of our medicines outside the United States. Failure of these third parties or any other third parties to successfully commercialize our medicines and medicine candidates in the applicable jurisdictions could have an adverse effect on our business.

Innomar Strategies Inc., or Innomar, is our exclusive distributor for RAVICTI, PROCYSBI and QUINSAIR in Canada. We rely on Orphan Pacific, Inc., or Orphan Pacific, for commercialization of BUPHENYL in Japan for which we currently have rights. We have limited contractual rights to force these third parties to invest significantly in commercialization of these medicines in our markets. In the event that Innomar, Orphan Pacific or any other third-party with any future commercialization rights to any of our medicines or medicine candidates fail to adequately commercialize those medicines or medicine candidates because they lack adequate financial or other resources, decide to focus on other initiatives or otherwise, our ability to successfully commercialize our medicines or medicine candidates in the applicable jurisdictions would be limited, which would adversely affect our business, financial condition, results of operations and prospects. In addition, our agreements with Innomar and Orphan Pacific, may be terminated by either party in the event of a bankruptcy of the other party or upon an uncured material breach by the other party. If these third parties terminated their agreements, we may not be able to secure an alternative distributor in the applicable territory on a timely basis or at all, in which case our ability to generate revenues from the sale of RAVICTI, PROCYSBI, BUPHENYL or QUINSAIR, outside the United States would be harmed.

Our medicines are subject to extensive regulation, and we may not obtain additional regulatory approvals for our medicines.*

The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, marketing and distribution and other possible activities relating to our medicines and our medicine candidates are, and will be, subject to extensive regulation by the FDA and other regulatory agencies. Failure to comply with FDA and other applicable regulatory requirements may, either before or after medicine approval, subject us to administrative or judicially imposed sanctions.

To market any drugs or biologics outside of the United States, we and current or future collaborators must comply with numerous and varying regulatory and compliance related requirements of other countries. Approval procedures vary among countries and can involve additional medicine testing and additional administrative review periods, including obtaining reimbursement and pricing approval in select markets. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks associated with FDA approval as well as additional, presently unanticipated, risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

Applications for regulatory approval, including a marketing authorization application, or MAA, for marketing new drugs in Europe, must be supported by extensive clinical and pre-clinical data, as well as extensive information regarding chemistry, manufacturing and controls, or CMC, to demonstrate the safety and effectiveness of the applicable medicine candidate. The number and types of pre-clinical studies and clinical trials that will be required for regulatory approval varies depending on the medicine candidate, the disease or the condition that the medicine candidate is designed to target and the regulations applicable to any particular medicine candidate. Despite the time and expense associated with pre-clinical and clinical studies, failure can occur at any stage, and we could encounter problems that cause us to repeat or perform additional pre-clinical studies, CMC studies or clinical trials. Regulatory authorities could delay, limit or deny approval of a medicine candidate for many reasons, including because they:

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may not deem a medicine candidate to be adequately safe and effective;

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may not find the data from pre-clinical studies, CMC studies and clinical trials to be sufficient to support a claim of safety and efficacy;

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may interpret data from pre-clinical studies, CMC studies and clinical trials significantly differently than we do;

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may not approve the manufacturing processes or facilities associated with our medicine candidates;

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may conclude that we have not sufficiently demonstrated long-term stability of the formulation for which we are seeking marketing approval;

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may change approval policies (including with respect to our medicine candidates’ class of drugs) or adopt new regulations; or

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may not accept a submission due to, among other reasons, the content or formatting of the submission.

Even if we believe that data collected from our pre-clinical studies, CMC studies and clinical trials of our medicine candidates are promising and that our information and procedures regarding CMC are sufficient, our data may not be sufficient to support marketing approval by regulatory authorities, or regulatory interpretation of these data and procedures may be unfavorable. For example, our biologics license application for teprotumumab for the treatment of active thyroid eye disease, or TED, may not be approved by FDA. Even if approved, medicine candidates may not be approved for all indications requested and such approval may be subject to limitations on the indicated uses for which the medicine may be marketed, restricted distribution methods or other limitations. Our business and reputation may be harmed by any failure or significant delay in obtaining regulatory approval for the sale of any of our medicine candidates. We cannot predict when or whether regulatory approval will be obtained for any medicine candidate we develop.

We will evaluate all development opportunities, including all obligations to use commercial reasonable efforts to further develop QUINSAIR. However, we may determine not to pursue such further development.

The ultimate approval and commercial marketing of any of our medicines in additional indications or geographies is subject to substantial uncertainty. Failure to gain additional regulatory approvals would limit the potential revenues and value of our medicines and could cause our share price to decline.

We may be subject to penalties and litigation and large incremental expenses if we fail to comply with regulatory requirements or experience problems with our medicines.

Even after we achieve regulatory approvals, we are subject to ongoing obligations and continued regulatory review with respect to many operational aspects including our manufacturing processes, labeling, packaging, distribution, storage, adverse event monitoring and reporting, dispensation, advertising, promotion and recordkeeping. These requirements include submissions of safety and other post-marketing information and reports, ongoing maintenance of medicine registration and continued compliance with current good manufacturing practices, or cGMPs, good clinical practices, or GCPs, good pharmacovigilance practice, good distribution practices and good laboratory practices, or GLPs. If we, our medicines or medicine candidates, or the third-party manufacturing facilities for our medicines or medicine candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

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impose injunctions or restrictions on the marketing, manufacturing or distribution of a medicine, suspend or withdraw medicine approvals, revoke necessary licenses or suspend medicine reimbursement;

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issue warning letters, show cause notices or untitled letters describing alleged violations, which may be publicly available;

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suspend any ongoing clinical trials or delay or prevent the initiation of clinical trials;

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delay or refuse to approve pending applications or supplements to approved applications we have filed;

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refuse to permit drugs or precursor or intermediary chemicals to be imported or exported to or from the United States;

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suspend or impose restrictions or additional requirements on operations, including costly new manufacturing quality or pharmacovigilance requirements;

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seize or detain medicines or require us to initiate a medicine recall; and/or

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commence criminal investigations and prosecutions.

Moreover, existing regulatory approvals and any future regulatory approvals that we obtain will be subject to limitations on the approved indicated uses and patient populations for which our medicines may be marketed, the conditions of approval, requirements for potentially costly, post-market testing and requirements for surveillance to monitor the safety and efficacy of the medicines. In the European Economic Area, or EEA, the advertising and promotion of pharmaceuticals is strictly regulated. The direct-to-consumer promotion of prescription pharmaceuticals is not permitted, and some countries in the EEA require the notification and/or prior authorization of promotional or advertising materials directed at healthcare professionals. The FDA, European Medicines Agency, or EMA, and other authorities in the EEA countries strictly regulate the promotional claims that may be made about prescription medicines, and our medicine labeling, advertising and promotion are subject to continuing regulatory review. Physicians nevertheless may prescribe our medicines to their patients in a manner that is inconsistent with the approved label or that is off-label. Positive clinical trial results in any of our medicine development programs increase the risk that approved pharmaceutical forms of the same APIs may be used off-label in those indications. If we are found to have improperly promoted off-label uses of approved medicines, we may be subject to significant sanctions, civil and criminal fines and injunctions prohibiting us from engaging in specified promotional conduct.

In addition, engaging in improper promotion of our medicines for off-label uses in the United States can subject us to false claims litigation under federal and state statutes. These false claims statutes in the United States include the federal False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims or causing to present such false or fraudulent claims for payment by a federal program such as Medicare or Medicaid. Growth in false claims litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay civil money penalties, settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations and be excluded from Medicare, Medicaid and other federal and state healthcare programs.

The regulations, policies or guidance of regulatory agencies may change and new or additional statutes or government regulations may be enacted that could prevent or delay regulatory approval of our medicine candidates or further restrict or regulate post-approval activities. For example, in January 2014, the FDA released draft guidance on how drug companies can fulfill their regulatory requirements for post-marketing submission of interactive promotional media, and though the guidance provided insight into how the FDA views a company’s responsibility for certain types of social media promotion, there remains a substantial amount of uncertainty regarding internet and social media promotion of regulated medical products. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from pending or future legislation or administrative action, either in the United States or abroad. If we are unable to achieve and maintain regulatory compliance, we will not be permitted to market our drugs, which would materially adversely affect our business, results of operations and financial condition.

Our limited history of commercial operations makes evaluating our business and future prospects difficult and may increase the risk of any investment in our ordinary shares.

We face considerable risks and difficulties as a company with limited commercial operating history, particularly as a global consolidated entity with operating subsidiaries that also have limited operating histories. If we do not successfully address these risks, our business, prospects, operating results and financial condition will be materially and adversely harmed. Our limited commercial operating history, including our limited history commercializing our current medicines, makes it particularly difficult for us to predict our future operating results and appropriately budget for our expenses. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected. For example, we may underestimate the resources we will require to successfully integrate recent or future medicine or company acquisitions, or to commercialize our medicines, or not realize the benefits we expect to derive from our recent or future acquisitions. In addition, we have a limited history implementing our commercialization strategy focused on patient access, and we cannot guarantee that we will be able to successfully implement this strategy or that it will represent a viable strategy over the long term.

We have rights to medicines in certain jurisdictions but have no control over third parties that have rights to commercialize those medicines in other jurisdictions, which could adversely affect our commercialization of these medicines.

Following our sale of the rights to RAVICTI and AMMONAPS (known as BUPHENYL in the United States) outside of North America and Japan to Medical Need Europe AB, part of the Immedica Group, or Immedica, in December 2018, Immedica has marketing and distribution rights to RAVICTI and AMMONAPS in those regions. Following our sale of the rights to interferon gamma 1b, known as IMUKIN, outside of the United States, Canada and Japan to Clinigen Group plc, or Clinigen, in July 2018, Clinigen has marketing and distribution rights to IMUKIN in those regions. Following our sale of the rights to PROCYSBI and QUINSAIR in the Europe, Middle East and Africa, or EMEA, regions to Chiesi Farmaceutici S.p.A., or Chiesi, in June 2017, or the Chiesi divestiture, Chiesi has marketing and distribution rights to PROCYSBI and QUINSAIR in the EMEA regions. Nuvo Pharmaceuticals Inc. (formerly known as Nuvo Research Inc.), or Nuvo, has retained its rights to PENNSAID 2% in territories outside of the United States. In March 2017, Nuvo announced that it had entered into an exclusive license agreement with Sayre Therapeutics PVT Ltd. to distribute, market and sell PENNSAID 2% in India, Sri Lanka, Bangladesh and Nepal, and in December 2017 Nuvo announced that it had entered into a license and distribution agreement with Gebro Pharma AG for the exclusive right to register, distribute, market and sell PENNSAID 2% in Switzerland and Liechtenstein. Grünenthal GmbH, or Grünenthal, acquired the rights to VIMOVO in territories outside of the United States, including the right to use the VIMOVO name and related trademark from AstraZeneca AB, or AstraZeneca, in October 2018. We have little or no control over Immedica’s activities with respect to RAVICTI and AMMONAPS outside of North America and Japan, over Clinigen’s activities with respect to IMUKIN outside the United States, Canada and Japan, over Chiesi’s activities with respect to PROCYSBI and QUINSAIR in the EMEA, over Nuvo’s or its existing and future commercial partners’ activities with respect to PENNSAID 2% outside of the United States, or over Grünenthal’s activities with respect to VIMOVO outside the United States even though those activities could impact our ability to successfully commercialize these medicines. For example, Immedica or its assignees, Clinigen or its assignees, Chiesi or its assignees, Nuvo or its assignees or Grünenthal or its assignees can make statements or use promotional materials with respect to RAVICTI and AMMONAPS, IMUKIN, PROCYSBI and QUINSAIR, PENNSAID 2% or VIMOVO, respectively, outside of the United States that are inconsistent with our positioning of the medicines in the United States, and could sell RAVICTI and AMMONAPS, IMUKIN, PROCYSBI and QUINSAIR, PENNSAID 2% or VIMOVO, respectively, in foreign countries at prices that are dramatically lower than the prices we charge in the United States. These activities and decisions, while occurring outside of the United States, could harm our commercialization strategy in the United States, in particular because Grünenthal is continuing to market VIMOVO outside the United States under the same VIMOVO brand name that we are using in the United States. In addition, medicine recalls or safety issues with these medicines outside the United States, even if not related to the commercial medicine we sell in the United States, could result in serious damage to the brand in the United States and impair our ability to successfully market them. We also rely on Immedica, Clinigen, Chiesi, Nuvo and Grünenthal or their assignees to provide us with timely and accurate safety information regarding the use of these medicines outside of the United States, as we have or will have limited access to this information ourselves.

We rely on third parties to manufacture commercial supplies of all of our medicines, and we currently intend to rely on third parties to manufacture commercial supplies of any other approved medicines. The commercialization of any of our medicines could be stopped, delayed or made less profitable if those third parties fail to provide us with sufficient quantities of medicine or fail to do so at acceptable quality levels or prices or fail to maintain or achieve satisfactory regulatory compliance.*

The facilities used by our third-party manufacturers to manufacture our medicines and medicine candidates must be approved by the applicable regulatory authorities. We do not control the manufacturing processes of third-party manufacturers and are currently completely dependent on our third-party manufacturing partners. In addition, we are required to obtain Grünenthal’s (formerly AstraZeneca) consent prior to engaging any third-party manufacturers for esomeprazole, one of the APIs in VIMOVO, other than the third-party manufacturer(s) used by Grünenthal or its affiliates or licensees. To the extent such manufacturers are unwilling or unable to manufacture esomeprazole for us on commercially acceptable terms, we cannot guarantee that Grünenthal would consent to our use of alternate sources of supply.

We rely on an exclusive supply agreement with Boehringer Ingelheim Biopharmaceuticals GmbH, or Boehringer Ingelheim Biopharmaceuticals, for manufacturing and supply of ACTIMMUNE. ACTIMMUNE is manufactured by starting with cells from working cell bank samples which are derived from a master cell bank. We and Boehringer Ingelheim Biopharmaceuticals separately store multiple vials of the master cell bank. In the event of catastrophic loss at our or Boehringer Ingelheim Biopharmaceuticals’ storage facility, it is possible that we could lose multiple cell banks and have the manufacturing capacity of ACTIMMUNE severely impacted by the need to substitute or replace the cell banks. We rely on NOF Corporation, or NOF, as our exclusive supplier of the PEGylation agent that is a critical raw material in the manufacture of KRYSTEXXA. If NOF failed to supply such PEGylation agent, it may lead to KRYSTEXXA supply constraints. In addition, a key excipient used in PENNSAID 2% as a penetration enhancer is dimethyl sulfoxide, or DMSO. We and Nuvo, our exclusive supplier of PENNSAID 2%, rely on a sole proprietary form of DMSO for which we maintain a substantial safety stock. However, should this supply become inadequate, damaged, destroyed or unusable, we and Nuvo may not be able to qualify a second source.

If any of our third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the applicable regulatory authorities’ strict regulatory requirements, or pass regulatory inspection, they will not be able to secure or maintain regulatory approval for the manufacturing facilities. For example, BASF Corporation, or BASF, our manufacturer of one of the APIs in DUEXIS, ibuprofen in a direct compression blend called DC85, previously notified us that it was not able to supply DC85 due to a technical issue at its manufacturing facility in Bishop, Texas. BASF has recently supplied us with a limited amount of DC85 and informed us of their intention to return to full supply. While we consider our DUEXIS inventory on hand to be sufficient to meet current and future commercial requirements, we cannot guarantee that BASF’s manufacturing facility will return to full operations or that we will be able to enter into a new supply agreement with BASF for DC85. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or any other applicable regulatory authorities do not approve these facilities for the manufacture of our medicines or if they withdraw any such approval in the future, or if our suppliers or third-party manufacturers decide they no longer want to supply our primary active ingredients or manufacture our medicines, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our medicines. To the extent any third-party manufacturers that we engage with respect to our medicines are different from those currently being used for commercial supply in the United States, the FDA will need to approve the facilities of those third-party manufacturers used in the manufacture of our medicines prior to our sale of any medicine using these facilities.

Although we have entered into supply agreements for the manufacture and packaging of our medicines, our manufacturers may not perform as agreed or may terminate their agreements with us. We currently rely on single source suppliers for certain of our medicines. If our manufacturers terminate their agreements with us, we may have to qualify new back-up manufacturers. We rely on safety stock to mitigate the risk of our current suppliers electing to cease producing bulk drug medicine or ceasing to do so at acceptable prices and quality. However, we can provide no assurance that such safety stocks would be sufficient to avoid supply shortfalls in the event we have to identify and qualify new contract manufacturers.

The manufacture of medicines requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of medicines often encounter difficulties in production, particularly in scaling up and validating initial production. These problems include difficulties with production costs and yields, quality control, including stability of the medicine, quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if microbial, viral or other contaminations are discovered in the medicines or in the manufacturing facilities in which our medicines are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure that issues relating to the manufacture of any of our medicines will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to commercialize our medicines or provide any medicine candidates to patients in clinical trials would be jeopardized.

Any delay or interruption in our ability to meet commercial demand for our medicines will result in the loss of potential revenues and could adversely affect our ability to gain market acceptance for these medicines. In addition, any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.

Failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay or impede the development and commercialization of any of our medicines or medicine candidates and could have a material adverse effect on our business, results of operations, financial condition and prospects.

We have experienced growth and expanded the size of our organization substantially in connection with our acquisition transactions, and we may experience difficulties in managing this growth as well as potential additional growth in connection with future medicine, development program or company acquisitions.*

As of December 31, 2013, we employed approximately 300 full-time employees as a consolidated entity. As of September 30, 2019, we employed approximately 1,175 full-time employees, including approximately 440 sales representatives, representing a substantial change to the size of our organization. We have also experienced, and may continue to experience, turnover of the sales representatives that we hired or will hire in connection with the commercialization of our medicines, requiring us to hire and train new sales representatives. Our management, personnel, systems and facilities currently in place may not be adequate to support anticipated growth, and we may not be able to retain or recruit qualified personnel in the future due to competition for personnel among pharmaceutical businesses.

As our commercialization plans and strategies continue to develop, we will need to continue to recruit and train sales and marketing personnel. Our ability to manage any future growth effectively may require us to, among other things:

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continue to manage and expand the sales and marketing efforts for our existing medicines;

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enhance our operational, financial and management controls, reporting systems and procedures;

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expand our international resources;

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successfully identify, recruit, hire, train, maintain, motivate and integrate additional employees;

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establish and increase our access to commercial supplies of our medicines and medicine candidates;

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expand our facilities and equipment; and

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manage our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors, collaborators, distributors and other third parties.

Our acquisitions have resulted in many changes, including significant changes in the corporate business and legal entity structure, the integration of other companies and their personnel with us, and changes in systems. We may encounter unexpected difficulties or incur unexpected costs, including:

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difficulties in achieving growth prospects from combining third-party businesses with our business;

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difficulties in the integration of operations and systems;

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difficulties in the assimilation of employees and corporate cultures;

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challenges in preparing financial statements and reporting timely results at both a statutory level for multiple entities and jurisdictions and at a consolidated level for public reporting;

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challenges in keeping existing physician prescribers and patients and increasing adoption of acquired medicines;

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difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the combination;

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potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the transaction; and

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challenges in attracting and retaining key personnel.

If any of these factors impair our ability to continue to integrate our operations with those of any companies or businesses we acquire, we may not be able to realize the business opportunities, growth prospects and anticipated tax synergies from combining the businesses. In addition, we may be required to spend additional time or money on integration that otherwise would be spent on the development and expansion of our business.

We may not be successful in growing our commercial operations outside the United States, and could encounter other challenges in growing our commercial presence, including due to risks associated with political and economic instability, operating under different legal requirements and tax complexities. If we are unable to manage our commercial growth outside of the United States, our opportunities to expand sales in other countries will be limited or we may experience greater costs with respect to our ex-U.S. commercial operations.

We are also broadening our acquisition strategy to include development-stage assets or programs, which entails additional risk to us. For example, if we are unable to identify programs that ultimately result in approved medicines, we may spend material amounts of our capital and other resources evaluating, acquiring and developing medicines that ultimately do not provide a return on our investment. We have less experience evaluating development-stage assets and may be at a disadvantage compared to other entities pursuing similar opportunities. Regardless, development-stage programs generally have a high rate of failure and we cannot guarantee that any such programs will ultimately be successful. We will also need to enhance our clinical development and regulatory functions to properly evaluate and develop earlier-stage opportunities, which may include recruiting personnel that are knowledgeable in therapeutic areas we have not yet pursued. If we are unable to acquire promising development-stage assets or eventually obtain marketing approval for them, we may not be able to create a meaningful pipeline of new medicines and eventually realize a return on our investments.

Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities and toward managing these growth and integration activities. Our future financial performance and our ability to execute on our business plan will depend, in part, on our ability to effectively manage any future growth and our failure to effectively manage growth could have a material adverse effect on our business, results of operations, financial condition and prospects.

We face significant competition from other biotechnology and pharmaceutical companies, including those marketing generic medicines and our operating results will suffer if we fail to compete effectively.*

The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and international markets, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, experienced marketing and manufacturing organizations and well-established sales forces. Additional consolidations in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors and we will have to find new ways to compete and may have to potentially merge with or acquire other businesses to stay competitive. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or in-licensing on an exclusive basis, medicines that are more effective and/or less costly than our medicines.

RAVICTI and BUPHENYL face competition from generic NaPBA tablets and powder in treating UCD. Lucane Pharma, or Lucane, is seeking approval via an Abbreviated New Drug Application, or ANDA, in the United States for taste-masked NaPBA. If this ANDA is approved, this formulation may also compete with RAVICTI and BUPHENYL in treating UCD in the United States. PROCYSBI faces competition from Cystagon (immediate-release cysteamine bitartrate capsules) for the treatment of cystinosis and Cystaran (cysteamine ophthalmic solution) for treatment of corneal crystal accumulation in patients with cystinosis. While KRYSTEXXA faces limited direct competition, a number of competitors have drugs in Phase 1 or Phase 2 trials, including Selecta Biosciences Inc. which has presented clinical data from its Phase 2 study and initiated a six-month head-to-head trial comparing their candidate to KRYSTEXXA in March 2019. PENNSAID 2% faces competition from generic versions of diclofenac sodium topical solutions that are priced significantly less than the price we charge for PENNSAID 2%. The generic version of Voltaren Gel is the market leader in the topical NSAID category. Legislation enacted in most states in the United States allows, or in some instances mandates, that a pharmacist dispense an available generic equivalent when filling a prescription for a branded medicine, in the absence of specific instructions from the prescribing physician. DUEXIS and VIMOVO face competition from other NSAIDs, including Celebrex^®, marketed by Pfizer Inc., and celecoxib, a generic form of the medicine marketed by other pharmaceutical companies. DUEXIS and VIMOVO also face significant competition from the separate use of NSAIDs for pain relief and GI protective medications to reduce the risk of NSAID-induced upper GI ulcers. Both NSAIDs and GI protective medications are available in generic form and may be less expensive to use separately than DUEXIS or VIMOVO, despite such substitution being off-label in the case of DUEXIS and VIMOVO. Because pharmacists often have economic and other incentives to prescribe lower-cost generics, if physicians prescribe PENNSAID 2%, DUEXIS, or VIMOVO, those prescriptions may not result in sales. If physicians do not complete prescriptions through our HorizonCares program or otherwise provide prescribing instructions prohibiting generic diclofenac sodium topical solutions as a substitute for PENNSAID 2%, the substitution of generic ibuprofen and famotidine separately as a substitution for DUEXIS or generic naproxen and branded Nexium^® (esomeprazole) as a substitute for VIMOVO, sales of PENNSAID 2%, DUEXIS and VIMOVO may suffer despite any success we may have in promoting PENNSAID 2%, DUEXIS or VIMOVO to physicians. In addition, other medicine candidates that contain ibuprofen and famotidine in combination or naproxen and esomeprazole in combination, while not currently known or FDA approved, may be developed and compete with DUEXIS or VIMOVO, respectively, in the future.

We have also entered into settlement and license agreements that may allow certain of our competitors to sell generic versions of certain of our medicines in the United States, subject to the terms of such agreements. We granted (i) a non-exclusive license (that is only royalty-bearing in some circumstances) to manufacture and commercialize a generic version of DUEXIS in the United States after January 1, 2023, (ii) non-exclusive licenses to manufacture and commercialize generic versions of PENNSAID 2% in the United States after October 17, 2027, (iii) a non-exclusive license to manufacture and commercialize a generic version of RAYOS tablets in the United States after December 23, 2022, (iv) a non-exclusive license to manufacture and commercialize a generic version of VIMOVO in the United States after August 1, 2024, and (v) non-exclusive licenses to manufacture and commercialize generic versions of RAVICTI in the United States after July 1, 2025, or earlier under certain circumstances.

Patent litigation is currently pending in the United States District Court for the District of New Jersey against Actavis Laboratories UT, Inc., formerly known as Watson Laboratories, Inc., Actavis, Inc. and Actavis plc, or collectively Actavis, who intend to market a generic version of PENNSAID 2% prior to the expiration of certain of our patents listed in the FDA’s Orange Book, or the Orange Book. These cases arise from Paragraph IV Patent Certification notice letters from Actavis advising it had filed an ANDA with the FDA seeking approval to market a generic version of PENNSAID 2% before the expiration of the patents-in-suit.

Patent litigation is currently pending in the United States District Court for the District of New Jersey and the Court of Appeals for the Federal Circuit against Dr. Reddy’s Laboratories Inc. and Dr. Reddy’s Laboratories Ltd., or collectively Dr. Reddy’s, who intends to market a generic version of VIMOVO before the expiration of certain of our patents listed in the Orange Book. The cases arise from Paragraph IV Patent Certification notice letters from Dr. Reddy’s advising that it had filed an ANDA with the FDA seeking approval to market generic versions of VIMOVO before the expiration of the patents-in-suit. On July 30, 2019, the Federal Circuit Court of Appeals denied our request for a rehearing of the Court’s invalidity ruling against the 6,926,907 and 8,557,285 patents for VIMOVO coordinated-release tablets. As a result, the District Court will enter judgment invalidating the ‘907 and ‘285 patents, which could subsequently result in Dr. Reddy’s initiating an at-risk launch of a generic version of VIMOVO. Patent litigation is currently pending in the United States District Court for the District of Delaware against Ajanta Pharma LTD, or Ajanta, intending to market a generic version of VIMOVO before the expiration of certain of our patents listed in the Orange Book.

Patent litigation is currently pending in the United States District Court for the District of Delaware against Alkem Laboratories, Inc., or Alkem, who intends to market a generic version of DUEXIS prior to the expiration of certain of our patents listed in the Orange Book. This case arises from Paragraph IV Patent Certification notice letters from Alkem advising it had filed an ANDA with the FDA seeking approval to market a generic version of DUEXIS before the expiration of the patents-in-suit.

If we are unsuccessful in any of the VIMOVO cases, PENNSAID 2% cases or DUEXIS case, we will likely face generic competition with respect to VIMOVO, PENNSAID 2% and/or DUEXIS and sales of VIMOVO, PENNSAID 2% and/or DUEXIS will be substantially harmed.

ACTIMMUNE is the only medicine currently approved by the FDA specifically for the treatment of CGD and SMO. While there are additional or alternative approaches used to treat patients with CGD and SMO, there are currently no medicines on the market that compete directly with ACTIMMUNE. A widely accepted protocol to treat CGD in the United States is the use of concomitant “triple prophylactic therapy” comprising ACTIMMUNE, an oral antibiotic agent and an oral antifungal agent. However, the FDA-approved labeling for ACTIMMUNE does not discuss this “triple prophylactic therapy,” and physicians may choose to prescribe one or both of the other modalities in the absence of ACTIMMUNE. Because of the immediate and life-threatening nature of SMO, the preferred treatment option for SMO is often to have the patient undergo a bone marrow transplant which, if successful, will likely obviate the need for further use of ACTIMMUNE in that patient. Likewise, the use of bone marrow transplants in the treatment of patients with CGD is becoming more prevalent, which could have a material adverse effect on sales of ACTIMMUNE and its profitability. We are aware of a number of research programs investigating the potential of gene therapy as a possible cure for CGD. Additionally, other companies may be pursuing the development of medicines and treatments that target the same diseases and conditions which ACTIMMUNE is currently approved to treat. As a result, it is possible that our competitors may develop new medicines that manage CGD or SMO more effectively, cost less or possibly even cure CGD or SMO. In addition, U.S. healthcare legislation passed in March 2010 authorized the FDA to approve biological products, known as biosimilars, that are similar to or interchangeable with previously approved biological products, like ACTIMMUNE, based upon potentially abbreviated data packages. Biosimilars are likely to be sold at substantially lower prices than branded medicines because the biosimilar manufacturer would not have to recoup the research and development and marketing costs associated with the branded medicine. Though we are not currently aware of any biosimilar under development, the development and commercialization of any competing medicines or the discovery of any new alternative treatment for CGD or SMO could have a material adverse effect on sales of ACTIMMUNE and its profitability.

BUPHENYL’s composition of matter patent protection and orphan drug exclusivity have expired. Because BUPHENYL has no regulatory exclusivity or listed patents, there is nothing to prevent a competitor from submitting an ANDA for a generic version of BUPHENYL and receiving FDA approval. Generic versions of BUPHENYL to date have been priced at a discount relative to BUPHENYL or RAVICTI, and physicians, patients, or payers may decide that this less expensive alternative is preferable to BUPHENYL and RAVICTI. If this occurs, sales of BUPHENYL and/or RAVICTI could be materially reduced, but we would nevertheless be required to make royalty payments to Bausch Health Companies Inc. (formerly Ucyclyd Pharma, Inc.), or Bausch, and another external party, at the same royalty rates. While Bausch and its affiliates are generally contractually prohibited from developing or commercializing new medicines, anywhere in the world, for the treatment of UCD or hepatic encephalopathy, or HE, which are chemically similar to RAVICTI, they may still develop and commercialize medicines that compete with RAVICTI. For example, medicines approved for indications other than UCD and HE may still compete with RAVICTI if physicians prescribe such medicines off-label for UCD or HE. We are also aware that Recordati S.p.A (formerly known as Orphan Europe SARL), or Recordati, is conducting clinical trials of carglumic acid to assess the short-term efficacy for hyperammonemia in some of the UCD enzyme deficiencies for which RAVICTI is approved for chronic treatment. Carglumic acid is approved for maintenance therapy for chronic hyperammonemia and to treat hyperammonemic crises in N-acetylglutamate synthase deficiency, a rare UCD subtype, and is sold under the name Carbaglu. If the results of this trial are successful and Recordati is able to complete development and obtain approval of Carbaglu to treat additional UCD enzyme deficiencies, RAVICTI would face additional competition from this compound.

The availability and price of our competitors’ medicines could limit the demand, and the price we are able to charge, for our medicines. We will not successfully execute on our business objectives if the market acceptance of our medicines is inhibited by price competition, if physicians are reluctant to switch from existing medicines to our medicines, or if physicians switch to other new medicines or choose to reserve our medicines for use in limited patient populations.

In addition, established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to acquire novel compounds that could make our medicines obsolete. Our ability to compete successfully with these companies and other potential competitors will depend largely on our ability to leverage our experience in clinical, regulatory and commercial development to:

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develop and acquire medicines that are superior to other medicines in the market;

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attract qualified clinical, regulatory, and sales and marketing personnel;

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obtain patent and/or other proprietary protection for our medicines and technologies;

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obtain required regulatory approvals; and

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successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new medicine candidates.

If we are unable to maintain or realize the benefits of orphan drug exclusivity, we may face increased competition with respect to certain of our medicines.*

Under the Orphan Drug Act of 1983, the FDA may designate a medicine as an orphan drug if it is a drug intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States. A company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years from the date of its approval. RAVICTI and PROCYSBI have been granted orphan drug exclusivity by the FDA, which we expect will provide orphan drug marketing exclusivity in the United States until February 2020 and December 2020, respectively, with exclusivity for PROCYSBI extending to 2022 for patients ages one to six years. In addition, teprotumumab has been granted orphan drug designation for treatment of active (dynamic) phase Graves’ orbitopathy and, if approved by the FDA for that indication, would be eligible for seven years of marketing exclusivity in the United States following such approval. However, despite orphan drug exclusivity, the FDA can still approve another drug containing the same active ingredient and used for the same orphan indication if it determines that a subsequent drug is safer, more effective or makes a major contribution to patient care, and orphan exclusivity can be lost if the orphan drug manufacturer is unable to ensure that a sufficient quantity of the orphan drug is available to meet the needs of patients with the rare disease or condition. Orphan drug exclusivity may also be lost if the FDA later determines that the initial request for designation was materially defective. In addition, orphan drug exclusivity does not prevent the FDA from approving competing drugs for the same or similar indication containing a different active ingredient. If orphan drug exclusivity is lost and we were unable to successfully enforce any remaining patents covering the applicable medicine, we could be subject to generic competition and revenues from the medicine could decrease materially. In addition, if a subsequent drug is approved for marketing for the same or a similar indication as our medicines despite orphan drug exclusivity, we may face increased competition and lose market share with respect to these medicines.

Our business operations may subject us to numerous commercial disputes, claims and/or lawsuits and such litigation may be costly and time-consuming and could materially and adversely impact our financial position and results of operations.

Operating in the pharmaceutical industry, particularly the commercialization of medicines, involves numerous commercial relationships, complex contractual arrangements, uncertain intellectual property rights, potential product liability and other aspects that create heightened risks of disputes, claims and lawsuits. In particular, we may face claims related to the safety of our medicines, intellectual property matters, employment matters, tax matters, commercial disputes, competition, sales and marketing practices, environmental matters, personal injury, insurance coverage and acquisition or divestiture-related matters. Any commercial dispute, claim or lawsuit may divert management’s attention away from our business, we may incur significant expenses in addressing or defending any commercial dispute, claim or lawsuit, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results.

We are currently in litigation with multiple generic drug manufacturers regarding intellectual property infringement. For example, we are currently involved in Hatch Waxman litigation with generic drug manufacturers related to DUEXIS, PENNSAID 2% and VIMOVO.

Similarly, from time to time we are involved in disputes with distributors, PBMs and licensing partners regarding our rights and performance of obligations under contractual arrangements. For example, we were previously in litigation with Express Scripts related to alleged breach of contract claims.

Litigation related to these disputes may be costly and time-consuming and could materially and adversely impact our financial position and results of operations if resolved against us.

A variety of risks associated with operating our business and marketing our medicines internationally could adversely affect our business.

In addition to our U.S. operations, we have operations in Ireland, Bermuda, the Grand Duchy of Luxembourg, or Luxembourg, Switzerland, Germany, Canada and in Israel (through Andromeda Biotech Ltd). RAVICTI received marketing authorization from Health Canada, or HC, in March 2016 and we launched RAVICTI in Canada in November 2016. PROCYSBI received marketing authorization from HC in June 2017 and we launched PROCYSBI in Canada in October 2017. BUPHENYL is currently marketed in Japan by Orphan Pacific. QUINSAIR received marketing authorization from HC in June 2015 and we launched QUINSAIR in Canada in December 2016. We face risks associated with our international operations, including possible unfavorable regulatory, pricing and reimbursement, political, tax and labor conditions, which could harm our business. We are subject to numerous risks associated with international business activities, including:

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compliance with differing or unexpected regulatory requirements for our medicines;

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compliance with Irish laws and the maintenance of our Irish tax residency with respect to our overall corporate structure and administrative operations, including the need to generally hold meetings of our board of directors and make decisions in Ireland, which may make certain corporate actions more cumbersome, costly and time-consuming;

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difficulties in staffing and managing foreign operations;

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in certain circumstances, including with respect to the commercialization of DUEXIS in Mexico and Chile, increased dependence on the commercialization efforts and regulatory compliance of third-party distributors or strategic partners;

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foreign government taxes, regulations and permit requirements;

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U.S. and foreign government tariffs, trade restrictions, price and exchange controls and other regulatory requirements;

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anti-corruption laws, including the Foreign Corrupt Practices Act, or the FCPA;

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economic weakness, including inflation, natural disasters, war, events of terrorism or political instability in particular foreign countries;

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fluctuations in currency exchange rates, which could result in increased operating expenses and reduced revenues, and other obligations related to doing business in another country;

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compliance with tax, employment, immigration and labor laws, regulations and restrictions for employees living or traveling abroad;

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workforce uncertainty in countries where labor unrest is more common than in the United States;

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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

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changes in diplomatic and trade relationships; and

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challenges in enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States.

Our business activities outside of the United States are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate, including the United Kingdom’s Bribery Act 2010, or the U.K. Bribery Act. The FCPA and similar anti-corruption laws generally prohibit offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to non-U.S. government officials in order to improperly influence any act or decision, secure any other improper advantage, or obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the company and to devise and maintain an adequate system of internal accounting controls. The U.K. Bribery Act prohibits giving, offering, or promising bribes to any person, including non-United Kingdom, or U.K., government officials and private persons, as well as requesting, agreeing to receive, or accepting bribes from any person. In addition, under the U.K. Bribery Act, companies which carry on a business or part of a business in the U.K. may be held liable for bribes given, offered or promised to any person, including non-U.K. government officials and private persons, by employees and persons associated with the company in order to obtain or retain business or a business advantage for the company. Liability is strict, with no element of a corrupt state of mind, but a defense of having in place adequate procedures designed to prevent bribery is available. Furthermore, under the U.K. Bribery Act there is no exception for facilitation payments. As described above, our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities; therefore, any dealings with these prescribers and purchasers may be subject to regulation under the FCPA. Recently the SEC and the U.S. Department of Justice, or DOJ, have increased their FCPA enforcement activities with respect to pharmaceutical companies. In addition, under the Dodd–Frank Wall Street Reform and Consumer Protection Act, private individuals who report to the SEC original information that leads to successful enforcement actions may be eligible for a monetary award. We are engaged in ongoing efforts that are designed to ensure our compliance with these laws, including due diligence, training, policies, procedures and internal controls. However, there is no certainty that all employees and third-party business partners (including our distributors, wholesalers, agents, contractors, and other partners) will comply with anti-bribery laws. In particular, we do not control the actions of manufacturers and other third-party agents, although we may be liable for their actions. Violation of these laws may result in civil or criminal sanctions, which could include monetary fines, criminal penalties, and disgorgement of past profits, which could have a material adverse impact on our business and financial condition.

We are subject to tax audits around the world, and such jurisdictions may assess additional income tax against us. Although we believe our tax positions are reasonable, the final determination of tax audits could be materially different from our recorded income tax provisions and accruals. The ultimate results of an audit could have a material adverse effect on our operating results or cash flows in the period or periods for which that determination is made and could result in increases to our overall tax expense in subsequent periods.

These and other risks associated with our international operations may materially adversely affect our business, financial condition and results of operations.

If we fail to develop or acquire other medicine candidates or medicines, our business and prospects would be limited.

A key element of our strategy is to develop or acquire and commercialize a portfolio of other medicines or medicine candidates in addition to our current medicines, through business or medicine acquisitions. Because we do not engage in proprietary drug discovery, the success of this strategy depends in large part upon the combination of our regulatory, development and commercial capabilities and expertise and our ability to identify, select and acquire approved or clinically enabled medicine candidates for therapeutic indications that complement or augment our current medicines, or that otherwise fit into our development or strategic plans on terms that are acceptable to us. Identifying, selecting and acquiring promising medicines or medicine candidates requires substantial technical, financial and human resources expertise. Efforts to do so may not result in the actual acquisition or license of a particular medicine or medicine candidate, potentially resulting in a diversion of our management’s time and the expenditure of our resources with no resulting benefit. If we are unable to identify, select and acquire suitable medicines or medicine candidates from third parties or acquire businesses at valuations and on other terms acceptable to us, or if we are unable to raise capital required to acquire businesses or new medicines, our business and prospects will be limited.

Moreover, any medicine candidate we acquire may require additional, time-consuming development or regulatory efforts prior to commercial sale or prior to expansion into other indications, including pre-clinical studies if applicable, and extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All medicine candidates are prone to the risk of failure that is inherent in pharmaceutical medicine development, including the possibility that the medicine candidate will not be shown to be sufficiently safe and/or effective for approval by regulatory authorities. In addition, we cannot assure that any such medicines that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace or be more effective or desired than other commercially available alternatives.

In addition, if we fail to successfully commercialize and further develop our medicines, there is a greater likelihood that we will fail to successfully develop a pipeline of other medicine candidates to follow our existing medicines or be able to acquire other medicines to expand our existing portfolio, and our business and prospects would be harmed.

Our prior medicine and company acquisitions and any other strategic transactions that we may pursue in the future could have a variety of negative consequences, and we may not realize the benefits of such transactions or attempts to engage in such transactions.*

We have completed multiple medicine and company acquisitions and our strategy is to engage in additional strategic transactions with third parties, such as acquisitions of companies or divisions of companies and asset purchases of medicines, medicine candidates or technologies that we believe will complement or augment our existing business. We may also consider a variety of other business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and other investments. Any such transaction may require us to incur non-recurring and other charges, increase our near and long-term expenditures, pose significant integration challenges, create additional tax, legal, accounting and operational complexities in our business, require additional expertise, result in dilution to our existing shareholders and disrupt our management and business, which could harm our operations and financial results. For example, we assumed responsibility for the patent infringement litigation with respect to RAVICTI upon the closing of our acquisition of Hyperion Therapeutics, Inc., or Hyperion, and we have assumed responsibility for completing post-marketing clinical trials of RAVICTI that are required by the FDA, one of which is ongoing.

In connection with our acquisition of Raptor Pharmaceutical Corp., or Raptor, we assumed contractual obligations under agreements with Tripex Pharmaceuticals, LLC, or Tripex, and PARI Pharma GmbH, or PARI, related to QUINSAIR. Under the agreement with Tripex, as amended, if we do not spend a specified amount on the development of QUINSAIR for non-cystic fibrosis indications between January 1, 2018 and December 31, 2021 and if regulatory approval by the FDA for QUINSAIR for the CF indication is obtained prior to December 31, 2021, we may be obligated to pre-pay a milestone payment related to commercial sales of QUINSAIR for non-CF indications. This obligation is subject to certain exceptions due to, for example, manufacturing delays not under our control, or clinical trial suspension or delay ordered by the FDA. In October 2017, we triggered a milestone payment under this agreement and we paid Tripex $20.0 million in November 2017. Under the license agreement with PARI, we are required to comply with diligence milestones related to development and commercialization of QUINSAIR in the United States and to spend a specified minimum amount per year on development and/or commercialization activities in the United States until submission of the new drug application, or NDA, for QUINSAIR in the United States. If we do not comply with these obligations, our licenses to certain intellectual property related to QUINSAIR may become non-exclusive in the United States. We are also subject to contractual obligations under an amended and restated license agreement with the Regents of the University of California, San Diego, or UCSD, as amended, with respect to PROCYSBI. To the extent that we fail to perform our obligations under the agreement, UCSD may, with respect to such indication, terminate the license or otherwise cause the license to become non-exclusive. If one or more of these licenses was terminated, we would have no further right to use or exploit the related intellectual property, which would limit our ability to develop PROCYSBI or QUINSAIR in other indications, and could impact our ability to continue commercializing PROCYSBI or QUINSAIR in their approved indications. In connection with our acquisition of the U.S. rights to VIMOVO, we assumed primary responsibility for the existing patent infringement litigation with respect to VIMOVO, and have also agreed to reimburse certain legal expenses of Nuvo (formerly Aralez Pharmaceuticals Inc.) with respect to its continued involvement in such litigation.

We face significant competition in seeking appropriate strategic transaction opportunities and the negotiation process for any strategic transaction can be time-consuming and complex. In addition, we may not be successful in our efforts to engage in certain strategic transactions because our financial resources may be insufficient and/or third parties may not view our commercial and development capabilities as being adequate. We may not be able to expand our business or realize our strategic goals if we do not have sufficient funding or cannot borrow or raise additional capital. There is no assurance that following any of our recent acquisition transactions or any other strategic transaction, we will achieve the anticipated revenues, net income or other benefits that we believe justify such transactions. In addition, any failures or delays in entering into strategic transactions anticipated by analysts or the investment community could seriously harm our consolidated business, financial condition, results of operations or cash flow.

We may not be able to successfully maintain our current advantageous tax status and resulting tax rates, which could adversely affect our business and financial condition, results of operations and growth prospects.*

Our parent company is incorporated in Ireland and has subsidiaries maintained in multiple jurisdictions, including Ireland, the United States, Switzerland, Luxembourg, Germany, Canada, Bermuda and Israel (through Andromeda Biotech Ltd). Prior to our merger transaction in September 2014 with Vidara Therapeutics International Public Limited Company, or Vidara, and such transaction, the Vidara Merger, Vidara was able to achieve a favorable tax rate through the performance of certain functions and ownership of certain assets in tax-efficient jurisdictions, including Ireland and Bermuda, together with intra-company service and transfer pricing agreements, each on an arm’s length basis. We are continuing a substantially similar structure and arrangements. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, changes to the tax laws of jurisdictions that we operate in (including for example, the enactment of new tax treaties or changes to existing tax treaties), changes in the mix of our profitability from jurisdiction to jurisdiction, the implementation of the EU Anti-Tax Avoidance Directive (see further discussion below), the implementation of the Bermuda Economic Substance Act 2018 (effective December 31, 2018) and our inability to secure or sustain acceptable agreements with tax authorities (if applicable). Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations. Taxing authorities, such as the U.S. Internal Revenue Service, or IRS, actively audit and otherwise challenge these types of arrangements, and have done so in the pharmaceutical industry. We expect that these challenges will continue as a result of the recent increase in scrutiny and political attention on corporate tax structures. The IRS and/or the Irish tax authorities may challenge our structure and transfer pricing arrangements through an audit or lawsuit. Responding to or defending such a challenge could be expensive and consume time and other resources, and divert management’s time and focus from operating our business. We cannot predict whether taxing authorities will conduct an audit or file a lawsuit challenging this structure, the cost involved in responding to any such audit or lawsuit, or the outcome. If we are unsuccessful in defending such a challenge, we may be required to pay taxes for prior periods, interest, fines or penalties, and may be obligated to pay increased taxes in the future, any of which could require us to reduce our operating expenses, decrease efforts in support of our medicines or seek to raise additional funds, all of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The IRS may not agree with our conclusion that our parent company should be treated as a foreign corporation for U.S. federal income tax purposes following the combination of the businesses of Horizon Pharma, Inc., or HPI, and Vidara.

Although our parent company is incorporated in Ireland, the IRS may assert that it should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the Internal Revenue Code of 1986, as amended, or the Code. A corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation for U.S. federal income tax purposes. Because our parent company is an Irish incorporated entity, it would generally be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) under these general rules. Section 7874 of the Code provides an exception pursuant to which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes.

In July 2018, the IRS issued regulations under Section 7874 that finalized, with few changes, guidance that the IRS had previously issued in temporary form in 2016. We do not believe that our classification as a foreign corporation for U.S. federal income tax purposes is affected by Section 7874 or the regulations thereunder, though the IRS may disagree.

Recent and future changes to U.S. and non-U.S. tax laws could materially adversely affect our company.*

Under current law, we expect our parent company to be treated as a foreign corporation for U.S. federal income tax purposes. However, changes to the rules in Section 7874 of the Code or regulations promulgated thereunder or other guidance issued by the U.S. Department of the Treasury, or the U.S. Treasury, or the IRS could adversely affect our parent company’s status as a foreign corporation for U.S. federal income tax purposes or the taxation of transactions between members of our group, and any such changes could have prospective or retroactive application. If our parent company is treated as a domestic corporation, more of our income will be taxed by the United States which may substantially increase our effective tax rate.

In January 2017, the U.S. Treasury and the IRS issued final regulations that expand the scope of transactions subject to the rules designed to eliminate the U.S. tax benefits of so-called inversion transactions. Under the regulations, the former stockholders of U.S. corporations acquired by a foreign corporation within thirty-six months of the signing date of the last such acquisition are aggregated for the purpose of determining whether the foreign corporation will be treated as a domestic corporation for U.S. federal tax purposes because at least 80 percent of the stock of the foreign corporation is held by former stockholders of a U.S. corporation. The requirement to aggregate the stockholders in such acquisitions for the purpose of determining whether the 80 percent threshold is met may limit our ability to use our stock to acquire U.S. corporations or their assets in the future.

In addition, the Organization for Economic Co-operation and Development, or the OECD, released its Base Erosion and Profit Shifting project final report on October 5, 2015. This report provides the basis for international standards for corporate taxation that are designed to prevent, among other things, the artificial shifting of income to tax havens and low-tax jurisdictions, the erosion of the tax base through interest deductions on intra-company debt and the artificial avoidance of permanent establishments (i.e., tax nexus with a jurisdiction). Legislation to adopt these standards has been enacted or is currently under consideration in a number of jurisdictions. On June 7, 2017, several countries, including many countries that we operate and have subsidiaries in, participated in the signing ceremony adopting the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, commonly referred to as the MLI. The MLI came into effect on July 1, 2018. In January 2019, Ireland deposited the instrument of ratification of Ireland’s MLI choices with the OECD. Ireland’s MLI came into force on May 1, 2019, however the provisions in respect of withholding taxes and other taxes levied by Ireland will not come into effect for us until January 1, 2020 (with application also depending on whether the MLI has been ratified in other jurisdictions whose tax treaties with Ireland are affected). The MLI may modify affected tax treaties making it more difficult for us to obtain advantageous tax-treaty benefits. The number of affected tax treaties could eventually be in the thousands. As a result, our income may be taxed in jurisdictions where it is not currently taxed and at higher rates of tax than it is currently taxed, which may increase our effective tax rate.

The Irish Finance Bill which was published on October 17, 2019 introduced changes to Ireland’s transfer pricing rules, which are due to come into force with effect from January 1, 2020. The changes introduce the 2017 version of the OECD Transfer Pricing Guidelines, or 2017 OECD Guidelines, as the reference guidelines for Ireland’s domestic transfer pricing regime. The 2017 OECD Guidelines are already applicable under Ireland’s international tax treaties and therefore the introduction of these guidelines should only affect transactions with non-tax treaty countries. In addition to updating Irish tax law for the 2017 OECD Guidelines, these changes will also extend the transfer pricing rules to certain non-trading transactions and to certain capital transactions. We are currently in the process of assessing these provisions, and actions to be taken by us. Absent certain actions taken by us to restructure our intercompany arrangements, the application of these provisions could have a material impact on our effective tax rate.

On July 12, 2016, the Anti-Tax Avoidance Directive, or ATAD, was formally adopted by the Economic and Financial Affairs Council of the EU. The stated objective of the ATAD is to provide for the effective and swift coordinated implementation of anti-base erosion and profit shifting measures at EU level. Like all directives, the ATAD is binding as to the results it aims to achieve though EU Member States are free to choose the form and method of achieving those results. In addition, the ATAD contains a number of optional provisions that present an element of choice as to how it will be implemented into law. On December 25, 2018, the Finance Act 2018 was signed into Irish law, which introduced certain elements of the ATAD, such as the Controlled Foreign Company, or CFC, regime, into Irish law. The CFC regime became effective as of January 1, 2019. The ATAD also set out a high-level framework for the introduction of Anti-hybrid provisions that are intended to be introduced into Irish tax law with effect from January 1, 2020. The Irish Finance Bill, which was published on October 17, 2019, introduced draft Anti-hybrid legislation. These legislative changes are not expected to have a material impact on our effective tax rate. The timing of the introduction into Irish tax law of further ATAD measures, such as the interest limitation rules, is unclear. Although it is difficult at this stage to determine with precision the impact that these remaining provisions will have, their implementation could materially increase our effective tax rate.

On December 22, 2017, U.S. federal income tax legislation was signed into law (H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”, informally titled the Tax Cuts and Jobs Act, or the Tax Act) that significantly revises the Code in the United States. The Tax Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), implementation of a “base erosion anti-abuse tax” which requires U.S. corporations to make an alternative determination of taxable income without regard to tax deductions for certain payments to affiliates, taxation of certain non-U.S. corporations’ earnings considered to be “global intangible low taxed income”, or GILTI, repeal of the alternative minimum tax, or AMT, for corporations and changes to a taxpayer’s ability to either utilize or refund the AMT credits previously generated, changes to the limitation on deductions for certain executive compensation particularly with respect to the removal of the previously allowed performance based compensation exception, changes in the attribution rules relating to shareholders of certain “controlled foreign corporations”, limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. For example, U.S. federal income tax law resulting in additional taxes owed by U.S. shareholders under the GILTI rules, together with the Tax Act’s change to the attribution rules related to “controlled foreign corporations” may discourage U.S. investors from owning or acquiring 10% or greater of our outstanding ordinary shares, which other shareholders may have viewed as beneficial or may otherwise negatively impact the trading price of our ordinary shares. We are unable to predict what federal tax law may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our effective tax rates in the future in countries where we have operations and have an adverse effect on our overall tax rate in the future, along with increasing the complexity, burden and cost of tax compliance. We urge our shareholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our ordinary shares.

On December 20, 2018, the U.S. Treasury issued Proposed Regulations under Section 267A of the Code, or Section 267A Proposed Regulations, to clarify certain aspects of Section 267A of the Code, or Section 267A (commonly referred to as the “Anti-Hybrid Rules”; rules enacted as part of the Tax Act). The Section 267A Proposed Regulations were the first administrative guidance on Section 267A and provided several rules which expanded the reach and scope of the Anti-Hybrid Rules particularly involving the payment of interest and royalties by certain branches, reverse hybrid entities, and other hybrid mismatch arrangements. While Section 267A, as enacted under the Tax Act, does not appear to apply to the Company, the guidance and scope of the Section 267A Proposed Regulations with respect to Anti-Hybrid Rules may apply to the Company. We are currently in the process of assessing the provisions set forth in the Section 267A Proposed Regulations and their potential impact on the Company. To the extent that the Anti-Hybrid Rules are applicable to the Company, absent certain actions taken by the Company to restructure its intercompany financing arrangements, such application would have a material impact on our effective tax rate if and when the Section 267A Proposed Regulations become final as currently drafted.

On March 4, 2019, the U.S. Treasury issued Proposed Regulations under Section 250 of the Code, which provide guidance on both the computation of the deductions for GILTI and “foreign-derived intangible income”, or FDII, and the determination of FDII. We do not expect the Company to be subject to the GILTI inclusion nor is it expected that the potential FDII deduction would have a material impact on our effective tax rate.

If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.

If a United States person is treated as owning (directly, indirectly, or constructively) at least 10% of the value or voting power of our ordinary shares, such person may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group (if any). Because our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations (regardless of whether or not we are treated as a controlled foreign corporation). A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income,” and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with these reporting and tax paying obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations from starting with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries is treated as a controlled foreign corporation or whether any investor is treated as a United States shareholder with respect to any such controlled foreign corporation or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our ordinary shares.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.*

Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, sales and marketing and scientific and medical personnel, including our executive officers composed of our Chairman, President and Chief Executive Officer, Timothy Walbert; our Executive Vice President, Chief Business Officer, Andy Pasternak; our Executive Vice President, Chief Financial Officer, Paul W. Hoelscher; our Executive Vice President, Chief Administrative Officer, Barry J. Moze; our Executive Vice President, Head of Research and Development and Chief Scientific Officer, Shao-Lee Lin, M.D., Ph.D; our Executive Vice President, Chief Commercial Officer, Vikram Karnani; our Executive Vice President, Chief Human Resources Officer, Irina P. Konstantinovsky; our Executive Vice President, General Counsel, Brian K. Beeler; our Executive Vice President, Technical Operations, Michael A. DesJardin and our Executive Vice President, Corporate Affairs, Chief Communications Officer, Geoffrey M. Curtis and Senior Vice President, Head of Medical Affairs and Outcomes Research, Jeffrey Kent, M.D., FACP, FACG. In order to retain valuable employees at our company, in addition to salary and annual cash incentives, we provide a mix of performance stock units, or PSUs, that vest subject to attainment of specified corporate performance goals and continued services, stock options and restricted stock units, or RSUs, that vest over time subject to continued services. The value to employees of PSUs, stock options and RSUs will be significantly affected by movements in our share price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies.

Despite our efforts to retain valuable employees, members of our management, sales and marketing, regulatory affairs, clinical development, medical affairs and development teams may terminate their employment with us on short notice. Although we have written employment arrangements with all of our employees, these employment arrangements generally provide for at-will employment, which means that our employees can leave our employment at any time, with or without notice. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, financial condition and prospects. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior sales and marketing and scientific and medical personnel.

Many of the other biotechnology and pharmaceutical companies with whom we compete for qualified personnel have greater financial and other resources, different risk profiles and longer histories in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than that which we have to offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can develop and commercialize medicines and medicine candidates will be limited.

We are, with respect to our current medicines, and will be, with respect to any other medicine or medicine candidate for which we obtain FDA or EMA approval or which we acquire, subject to ongoing FDA or EMA obligations and continued regulatory review, which may result in significant additional expense. Additionally, any other medicine candidate, if approved by the FDA or the EMA, could be subject to labeling and other restrictions and market withdrawal, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our medicines.

Any regulatory approvals that we obtain for our medicine candidates may also be subject to limitations on the approved indicated uses for which the medicine may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the medicine candidate. In addition, with respect to our current FDA-approved medicines (and with respect to our medicine candidates, if approved), the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the medicine are subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs, GCPs, International Council for Harmonisation, or ICH, guidelines and GLPs, which are regulations and guidelines enforced by the FDA for all of our medicines in clinical development, for any clinical trials that we conduct post-approval. With respect to RAVICTI, the FDA imposed several post-marketing requirements and a post-marketing commitment, which included obligations to conduct studies in UCD patients during the first two months of life, including a study of the pharmacokinetics in that age group and a randomized study to determine the safety and efficacy in UCD patients who are treatment naïve to phenylbutyrate treatment. In May 2017, the FDA approved our supplemental new drug application, or sNDA, for RAVICTI to expand the age range for chronic management of UCDs from two years of age and older to two months of age and older. In December 2018, we received FDA approval to expand the age range for the use of RAVICTI in the chronic management of UCDs in patients from birth to two months and as a result, we now have approval for patients of all ages. As part of these approvals to expand the age range for use of RAVICTI in the chronic management of UCDs in patients from birth, we have fulfilled, and subsequently received FDA confirmation of release from the requirement to conduct studies in UCD patients during the first two months of life. We are currently conducting a study to determine the effects of RAVICTI in patients with UCDs that are treatment naïve to phenylbutyrate.

In addition, the FDA closely regulates the marketing and promotion of drugs and biologics. The FDA does not regulate the behaviour of physicians in their choice of treatments. The FDA does, however, restrict manufacturers’ promotional communications. A significant number of pharmaceutical companies have been the target of inquiries and investigations by various U.S. federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of medicines for off-label uses and other sales practices. These investigations have alleged violations of various U.S. federal and state laws and regulations, including claims asserting antitrust violations, violations of the Food, Drug and Cosmetic Act, false claims laws, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of medicines for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. While Congress has recently considered legislation that would modify or eliminate restrictions for off-label promotion, we do not have sufficient information to anticipate if the current regulatory environment will change.

Later discovery of previously unknown problems with a medicine, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

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restrictions on the marketing or manufacturing of the medicine, withdrawal of the medicine from the market, or voluntary or mandatory medicine recalls;

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refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our strategic partners, or suspension or revocation of medicine license approvals;

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medicine seizure or detention, or refusal to permit the import or export of medicines; and

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injunctions, the imposition of civil or criminal penalties, or exclusion, debarment or suspension from government healthcare programs.

If we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would have a material adverse effect on our business, results of operations, financial condition and prospects.

We are subject to federal, state and foreign healthcare laws and regulations and implementation or changes to such healthcare laws and regulations could adversely affect our business and results of operations.*

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to regulate and to change the healthcare system in ways that could affect our ability to sell our medicines profitably. In the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs (including a number of proposals pertaining to prescription drugs, specifically), improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

If we are found to be in violation of any of these laws or any other federal or state regulations, we may be subject to civil and/or criminal penalties, damages, fines, exclusion, additional reporting requirements and/or oversight from federal health care programs and the restructuring of our operations. Any of these could have a material adverse effect on our business and financial results. Since many of these laws have not been fully interpreted by the courts, there is an increased risk that we may be found in violation of one or more of their provisions. Any action against us for violation of these laws, even if we ultimately are successful in our defense, will cause us to incur significant legal expenses and divert our management’s attention away from the operation of our business.

Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects of the ACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance, and delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.

Likewise, in the countries in the EU, legislators, policymakers and healthcare insurance funds continue to propose and implement cost-containing measures to keep healthcare costs down, due in part to the attention being paid to healthcare cost containment in the EU. Certain of these changes could impose limitations on the prices we will be able to charge for our products and any approved product candidates or the amounts of reimbursement available for these products from governmental agencies or third-party payers, may increase the tax obligations on pharmaceutical companies such as ours, or may facilitate the introduction of generic competition with respect to our products.

In addition, drug pricing by pharmaceutical companies has come under increased scrutiny. Specifically, there have been several recent state and U.S. Congressional inquiries, proposed federal and state legislation and state laws enacted designed to, among other things, bring more transparency to drug pricing by requiring drug companies to notify insurers and government regulators of price increases and provide an explanation of the reasons for the increase, reduce the out-of-pocket cost of prescription drugs, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies. For example, legislation was recently signed into law in California that requires drug manufactures to provide advance notice and explanation to state regulators, health plans and insurers and PBMs for price increases of more than 16% over two years. Moreover, in May 2018, the Trump administration released its “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs”, or Blueprint. The Blueprint contains several potential regulatory actions and legislative recommendations aimed at lowering prescription drug prices including measures to promote innovation and competition for biologics, changes to Medicare Part D to give plan sponsors more leverage when negotiating prices with manufacturers and updating the Medicare drug-pricing dashboard to make price increases and generic competition more transparent. The recommendations in the Blueprint if enacted by Congress and HHS, could lead to changes to Medicare Parts B and D. Further, the Bipartisan Budget Act of 2018, among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. The majority of our medicines are purchased by private payers, and much of the focus of pending legislation is on government program reimbursement. Most recently, the Office of Inspector General of HHS published a Proposed Rule in January 2019 that would, among other items, eliminate the current safe harbor protection under the Anti-Kickback Statute for pharmaceutical manufacturer rebates to Medicare Part D plans, Medicaid MCOs and the PBMs with which such entities contract. We cannot know what form any such action may take, the likelihood it would be executed, enacted, effectuated or implemented or the market’s perception of how such legislation or regulation would affect us. Any reduction in reimbursement from government programs may result in a similar reduction in payments from private payers. The Trump administration’s budget proposal for fiscal year 2020 contains further drug price control measures that could be enacted during the 2020 budget process, through regulation or other future legislation. In September 2019, Speaker of the House Nancy Pelosi introduced legislation that would in part, require the HHS Secretary to identify 250 drugs that “lack price competition” and therefore subject to government price negotiation. The proposal defines a drug that lacks price competition as a brand-name drug that does not have a generic or biosimilar competitor on the market. Under the proposal, the HHS Secretary would directly negotiate with drug manufacturers to establish a maximum fair price. The legislation establishes an upper limit for the price reached in any negotiation as no more than 120 percent of the volume-weighted average of the price of six countries (Australia, Canada, France, Germany, Japan and the United Kingdom), known as the Average International Market price. The United States Senate is also considering legislation that would, among other changes to Medicare reimbursement, require manufacturers to report to the HHS Secretary information to justify price increases. The HHS would make the price justification information available to the public. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our current medicines and/or those for which we may receive regulatory approval in the future.

We are subject, directly or indirectly, to federal and state healthcare fraud and abuse, transparency laws and false claims laws. Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.*

In the United States, we are subject directly, or indirectly or through our customers, to various state and federal fraud and abuse and transparency laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, civil monetary penalty statutes prohibiting beneficiary inducements, and similar state and local laws, federal and state privacy and security laws, sunshine laws, government price reporting laws, and other fraud laws. Some states, such as Massachusetts, make certain reported information public. In addition, there are state and local laws that require pharmaceutical representatives to be licensed and comply with codes of conduct, transparency reporting, and other obligations. Collectively, these laws may affect, among other things, our current and proposed sales, marketing and educational programs, as well as other possible relationships with customers, pharmacies, physicians, payers, and patients. We are subject to similar laws in the EU/EEA, including the EU General Data Protection Regulation (2016/679), or GDPR, under which fines of up to €20.0 million or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed for significant non-compliance.

Compliance with these laws, including the development of a comprehensive compliance program, is difficult, costly and time consuming. Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Moreover, state governmental agencies may propose or enact laws and regulations that extend or contradict federal requirements. These risks may be increased where there are evolving interpretations of applicable regulatory requirements, such as those applicable to manufacturer co-pay initiatives. Pharmaceutical manufacturer co-pay initiatives and free medicine programs, including pharmaceutical manufacturer donations to patient assistance programs offered by charitable foundations, are the subject of ongoing litigation (involving other manufacturers and to which we are not a party) and evolving interpretations of applicable regulatory requirements and certain state laws, and any change in the regulatory or enforcement environment regarding such programs could impact our ability to offer such programs. If we are unsuccessful with our HorizonCares programs, any other co-pay initiatives or free medicine programs, we would be at a competitive disadvantage in terms of pricing versus preferred branded and generic competitors, or be subject to significant penalties. We are engaged in various business arrangements with current and potential customers, and we can give no assurance that such arrangements would not be subject to scrutiny under such laws, despite our efforts to properly structure such arrangements. Even if we structure our programs with the intent of compliance with such laws, there can be no certainty that we would not need to defend our business activities against enforcement or litigation. Further, we cannot give any assurances that prior business activities or arrangements of other companies that we acquire will not be scrutinized or subject to enforcement or litigation.

There has also been a trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The ACA, among other things, imposed reporting requirements on drug manufacturers for payments made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in significant civil monetary penalties.

On March 5, 2019, we received a civil investigative demand, or CID, from the DOJ pursuant to the Federal False Claims Act regarding assertions that certain of our payments to PBMs were potentially in violation of the Anti-Kickback Statute. The CID requests certain documents and information related to our payments to PBMs, pricing and our patient assistance program regarding DUEXIS, VIMOVO and PENNSAID 2%. We are cooperating with the investigation. While we believe that our payments and programs are compliant with the Anti-Kickback Statute, no assurance can be given as to the timing or outcome of the DOJ’s investigation, or that it will not result in a material adverse effect on our business.

We are unable to predict whether we could be subject to other actions under any of these or other healthcare laws, or the impact of such actions. If we are found to be in violation of, or to encourage or assist the violation by third parties of any of the laws described above or other applicable state and federal fraud and abuse laws, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines, withdrawal of regulatory approval, imprisonment, exclusion from government healthcare reimbursement programs, contractual damages, reputational harm, diminished profits and future earnings, injunctions and other associated remedies, or private “qui tam” actions brought by individual whistleblowers in the name of the government, and the curtailment or restructuring of our operations, all of which could have a material adverse effect on our business and results of operations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

Our medicines or any other medicine candidate that we develop may cause undesirable side effects or have other properties that could delay or prevent regulatory approval or commercialization, result in medicine re-labeling or withdrawal from the market or have a significant impact on customer demand.*

Undesirable side effects caused by any medicine candidate that we develop could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, or cause us to evaluate the future of our development programs. With respect to RAVICTI, the most common side effects are diarrhea, nausea, decreased appetite, gas, vomiting, high blood levels of ammonia, headache, tiredness and dizziness. With respect to PROCYSBI, the most common side effects include vomiting, nausea, abdominal pain, breath odor, diarrhea, skin odor, fatigue, rash and headache. The most common side effects observed in pivotal trials for ACTIMMUNE were “flu-like” or constitutional symptoms such as fever, headache, chills, myalgia and fatigue. With respect to BUPHENYL, the most common side effects are change in the frequency of breathing, lack of or irregular menstruation, lower back, side, or stomach pain, mood or mental changes, muscle pain or twitching, nausea or vomiting, nervousness or restlessness, swelling of the feet or lower legs, unpleasant taste and unusual tiredness or weakness. With respect to QUINSAIR, the most common side effects include itching, wheezing, hives, rash, swelling, pale skin color, fast heartbeat and faintness. With respect to KRYSTEXXA, the most commonly reported serious adverse reactions in the pivotal trial were gout flares, infusion reactions, nausea, contusion or ecchymosis, nasopharyngitis, constipation, chest pain, anaphylaxis, exacerbation of pre-existing congestive heart failure and vomiting. The most commonly reported treatment-emergent adverse events in the Phase 3 clinical trials with RAYOS included flare in rheumatoid arthritis related symptoms, abdominal pain, nasopharyngitis, headache, flushing, upper respiratory tract infection, back pain and weight gain. The most common adverse events reported in a Phase 2 clinical trial of PENNSAID 2% were application site reactions, such as dryness, exfoliation, erythema, pruritus, pain, induration, rash and scabbing. In our two Phase 3 clinical trials with DUEXIS, the most commonly reported treatment-emergent adverse events were nausea, dyspepsia, diarrhea, constipation and upper respiratory tract infection. In Phase 3 endoscopic registration clinical trials with VIMOVO, the most commonly reported treatment-emergent adverse events were erosive gastritis, dyspepsia, gastritis, diarrhea, gastric ulcer, upper abdominal pain, nausea and upper respiratory tract infection. In our Phase 3 clinical trial evaluating teprotumumab for the treatment of active TED, the most commonly reported treatment-emergent adverse events were nausea, muscle spasms, diarrhea, alopecia, hyperglycemia, dry skin, dysgeusia, headache, paresthesia, hearing impairment and weight loss.

The FDA or other regulatory authorities may also require, or we may undertake, additional clinical trials to support the safety profile of our medicines or medicine candidates.

In addition, if we or others identify undesirable side effects caused by our medicines or any other medicine candidate that we may develop that receives marketing approval, or if there is a perception that the medicine is associated with undesirable side effects:

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regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

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regulatory authorities may withdraw their approval of the medicine or place restrictions on the way it is prescribed;

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we may be required to change the way the medicine is administered, conduct additional clinical trials or change the labeling of the medicine or implement a risk evaluation and mitigation strategy; and

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we may be subject to increased exposure to product liability and/or personal injury claims.

If any of these events occurred with respect to our medicines, our ability to generate significant revenues from the sale of these medicines would be significantly harmed.

We rely on third parties to conduct our pre-clinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines or if they experience regulatory compliance issues, we may not be able to obtain regulatory approval for or commercialize our medicine candidates and our business could be substantially harmed.*

We have agreements with third-party contract research organizations, or CROs, to conduct our clinical programs, including those required for post-marketing commitments, and we expect to continue to rely on CROs for the completion of on-going and planned clinical trials. We may also have the need to enter into other such agreements in the future if we were to develop other medicine candidates or conduct clinical trials in additional indications for our existing medicines. We have an agreement in place with Syneos Health, Inc. in connection with our Phase 3 extension trial to evaluate teprotumumab for the treatment of TED. We also rely heavily on these parties for the execution of our clinical studies and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol. We, our CROs and our academic research organizations are required to comply with current GCP or ICH regulations. The FDA enforces these GCP or ICH regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs or collaborators fail to comply with applicable GCP or ICH regulations, the data generated in our clinical trials may be deemed unreliable and our submission of marketing applications may be delayed or the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot assure that, upon inspection, the FDA will determine that any of our clinical trials comply or complied with GCP or ICH regulations. In addition, our clinical trials must be conducted with medicine produced under cGMP regulations, and may require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of our CROs or collaborators violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws. We must also obtain certain third-party institutional review board, or IRB, and ethics committee approvals in order to conduct our clinical trials. Delays by IRBs and ethics committees in providing such approvals may delay our clinical trials.

If any of our relationships with these third-party CROs or collaborators terminate, we may not be able to enter into similar arrangements on commercially reasonable terms, or at all. If CROs or collaborators do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our medicines and medicine candidates. As a result, our results of operations and the commercial prospects for our medicines and medicine candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

Switching or adding additional CROs or collaborators can involve substantial cost and require extensive management time and focus. In addition, there is a natural transition period when a new CRO or collaborator commences work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs and collaborators, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition or prospects.

Clinical development of drugs and biologics involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.*

Clinical testing is expensive and can take many years to complete, and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials of potential medicine candidates may not be predictive of the results of later-stage clinical trials. Medicine candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical testing. For example, in December 2016, we announced that the Phase 3 trial, Safety, Tolerability and Efficacy of ACTIMMUNE Dose Escalation in Friedreich’s ataxia, evaluating ACTIMMUNE for the treatment of Friedreich’s ataxia did not meet its primary endpoint. Additionally, we previously made a decision to discontinue our ACTIMMUNE investigator-initiated trials in oncology to focus on our strategic pipeline where we see more promise and long-term intellectual property.

We may experience delays in clinical trials or investigator-initiated studies. We do not know whether any additional clinical trials will be initiated in the future, begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

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obtaining regulatory approval to commence a trial;

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reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

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obtaining IRB or ethics committee approval at each site;

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recruiting suitable patients to participate in a trial;

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having patients complete a trial or return for post-treatment follow-up;

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clinical sites dropping out of a trial;

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adding new sites; or

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manufacturing sufficient quantities of medicine candidates for use in clinical trials.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the medicine candidate being studied in relation to other available therapies, including any new drugs or biologics that may be approved for the indications we are investigating. Furthermore, we rely and expect to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our future clinical trials and while we have and intend to have agreements governing their committed activities, we will have limited influence over their actual performance.

We could encounter delays if prescribing physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our medicine candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be suspended or terminated by us, our collaborators, the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a medicine candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience delays in the completion of, or if we terminate, any clinical trial of our medicine candidates, the commercial prospects of our medicine candidates will be harmed, and our ability to generate medicine revenues from any of these medicine candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our medicine development and approval process and jeopardize our ability to commence medicine sales and generate revenues.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA. The FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of one or more of our medicine candidates.

Any of these occurrences may harm our business, financial condition, results of operations and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our medicine candidates.

Business interruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions. While we carry insurance for certain of these events and have implemented disaster management plans and contingencies, the occurrence of any of these business interruptions could seriously harm our business and financial condition and increase our costs and expenses. We conduct significant management operations at both our global headquarters located in Dublin, Ireland and our U.S. office located in Lake Forest, Illinois. If our Dublin or Lake Forest offices were affected by a natural or man-made disaster or other business interruption, our ability to manage our domestic and foreign operations could be impaired, which could materially and adversely affect our results of operations and financial condition. We currently rely, and intend to rely in the future, on third-party manufacturers and suppliers to produce our medicines and third-party logistics partners to ship our medicines. Our ability to obtain commercial supplies of our medicines could be disrupted and our results of operations and financial condition could be materially and adversely affected if the operations of these third-party suppliers or logistics partners were affected by a man-made or natural disaster or other business interruption. The ultimate impact of such events on us, our significant suppliers and our general infrastructure is unknown.

We are dependent on information technology systems, infrastructure and data, which exposes us to data security risks.

We are dependent upon our own or third-party information technology systems, infrastructure and data, including mobile technologies, to operate our business. The multitude and complexity of our computer systems may make them vulnerable to service interruption or destruction, disruption of data integrity, malicious intrusion, or random attacks. Likewise, data privacy or security incidents or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, customers or other business partners may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity. Cyber-attacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our business partners face similar risks and any security breach of their systems could adversely affect our security posture. A security breach or privacy violation that leads to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to litigation or other liability under laws and regulations that protect personal data, any of which could disrupt our business and/or result in increased costs or loss of revenue. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property. While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches.

We are subject to extensive laws and regulations related to data privacy, and our failure to comply with these laws and regulations could harm our business.

We are subject to laws and regulations governing data privacy and the protection of personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data. There are foreign and state law versions of these laws and regulations to which we are currently and/or may in the future, be subject. For example, the collection and use of personal health data in the EU is governed by the GDPR. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the United States, provides an enforcement authority and imposes large monetary penalties for noncompliance. The GDPR requirements apply not only to third-party transactions, but also to transfers of information within our company, including employee information. The GDPR and similar data privacy laws of other jurisdictions place significant responsibilities on us and create potential liability in relation to personal data that we or our third-party service providers process, including in clinical trials conducted in the United States and EU. In addition, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States. Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. When it goes into effect on January 1, 2020, the CCPA will require covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. Legislators have stated that amendments will be proposed to the CCPA before it goes into effect, but it remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted. As currently written, the CCPA will likely impact our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data and protected health information.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our medicines.

We face an inherent risk of product liability claims as a result of the commercial sales of our medicines and the clinical testing of our medicine candidates. For example, we may be sued if any of our medicines or medicine candidates allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the medicine, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our medicines and medicine candidates. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

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decreased demand for our medicines or medicine candidates that we may develop;

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injury to our reputation;

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withdrawal of clinical trial participants;

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initiation of investigations by regulators;

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costs to defend the related litigation;

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a diversion of management’s time and resources;

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substantial monetary awards to trial participants or patients;

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medicine recalls, withdrawals or labeling, marketing or promotional restrictions;

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loss of revenue;

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exhaustion of any available insurance and our capital resources; and

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the inability to commercialize our medicines or medicine candidates.

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of medicines we develop. We currently carry product liability insurance covering our clinical studies and commercial medicine sales in the amount of $125.0 million in the aggregate. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. If we determine that it is prudent to increase our product liability coverage due to the on-going commercialization of our current medicines in the United States, and/or the potential commercial launches of any of our medicines in additional markets or for additional indications, we may be unable to obtain such increased coverage on acceptable terms or at all. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Our business involves the use of hazardous materials, and we and our third-party manufacturers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.*

Our third-party manufacturers’ activities involve the controlled storage, use and disposal of hazardous materials owned by us, including the components of our medicine candidates and other hazardous compounds. We and our manufacturers are subject to federal, state and local as well as foreign laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident, state, federal or foreign authorities may curtail the use of these materials and interrupt our business operations. We currently only maintain hazardous materials insurance coverage related to our South San Francisco facility. If we are subject to any liability as a result of our third-party manufacturers’ activities involving hazardous materials, our business and financial condition may be adversely affected. In the future we may seek to establish longer-term third-party manufacturing arrangements, pursuant to which we would seek to obtain contractual indemnification protection from such third-party manufacturers potentially limiting this liability exposure.

Our employees, independent contractors, principal investigators, consultants, vendors, distributors and CROs may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk that our employees, independent contractors, principal investigators, consultants, vendors, distributors and CROs may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or unauthorized activities that violate FDA regulations, including those laws that require the reporting of true, complete and accurate information to the FDA, manufacturing standards, federal and state healthcare fraud and abuse laws and regulations, and laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by our employees and other third parties may also include the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment.

Risks Related to our Financial Position and Capital Requirements

We have incurred significant operating losses.*

We have a limited operating history and even less history operating as a combined organization following the acquisitions of Vidara, Hyperion, Crealta Holdings LLC, Raptor and River Vision Development Corp., or River Vision. We have financed our operations primarily through equity and debt financings and have incurred significant operating losses. We recorded operating income of $71.9 million for the nine months ended September 30, 2019, operating income of $37.9 million for the year ended December 31, 2018, an operating loss of $339.4 million for the year ended December 31, 2017 and an operating loss of $119.0 million for the year ended December 31, 2016. We recorded a net loss of $19.7 million for the nine months ended September 30, 2019, a net loss of $38.4 million for the year ended December 31, 2018, a net loss of $350.1 million for the year ended December 31, 2017 and a net loss of $147.1 million for the year ended December 31, 2016. As of September 30, 2019, we had an accumulated deficit of $1,198.5 million. Our prior losses have resulted principally from costs incurred in our development activities for our medicines and medicine candidates, commercialization activities related to our medicines, costs associated with our acquisition transactions and costs associated with derivative liability accounting. Our prior losses, combined with possible future losses, have had and will continue to have an adverse effect on our shareholders’ equity and working capital. While we anticipate that we will generate operating profits in the future, whether we can accomplish this will depend on the revenues we generate from the sale of our medicines being sufficient to cover our operating expenses.

We have limited sources of revenues and significant expenses. We cannot be certain that we will achieve or sustain profitability, which would depress the market price of our ordinary shares and could cause our investors to lose all or a part of their investment.

Our ability to achieve and sustain profitability depends upon our ability to generate sales of our medicines. We have a limited history of commercializing our medicines as a company, and commercialization has been primarily in the United States. We may never be able to successfully commercialize our medicines or develop or commercialize other medicines in the United States, which we believe represents our most significant commercial opportunity. Our ability to generate future revenues depends heavily on our success in:

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continued commercialization of our existing medicines and any other medicine candidates for which we obtain approval;

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obtaining FDA approvals for teprotumumab;

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securing additional foreign regulatory approvals for our medicines in territories where we have commercial rights; and

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developing, acquiring and commercializing a portfolio of other medicines or medicine candidates in addition to our current medicines.

Even if we do generate additional medicine sales, we may not be able to achieve or sustain profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the market price of our ordinary shares and could impair our ability to raise capital, expand our business, diversify our medicine offerings or continue our operations.

We may need to obtain additional financing to fund additional acquisitions.*

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to:

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commercialize our existing medicines in the United States, including the substantial expansion of our sales force in recent years;

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complete the regulatory approval process, and any future required clinical development related thereto, for our medicines and medicine candidates;

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potentially acquire other businesses or additional complementary medicines or medicines that augment our current medicine portfolio, including costs associated with refinancing debt of acquired companies;

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satisfy progress and milestone payments under our existing and future license, collaboration and acquisition agreements; and

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conduct clinical trials with respect to potential additional indications, as well as conduct post-marketing requirements and commitments, with respect to our medicines and medicines we acquire.

While we believe that our existing cash and cash equivalents will be sufficient to fund our operations based on our current expectations of continued revenue growth, we may need to raise additional funds if we choose to expand our commercialization or development efforts more rapidly than presently anticipated, if we develop or acquire additional medicines or acquire companies, or if our revenue does not meet expectations.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our medicines or medicine candidates or one or more of our other research and development initiatives, or delay, cut back or abandon our plans to grow the business through acquisitions. We also could be required to:

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seek collaborators for one or more of our current or future medicine candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or

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relinquish or license on unfavorable terms our rights to technologies or medicine candidates that we would otherwise seek to develop or commercialize ourselves.

In addition, if we are unable to secure financing to support future acquisitions, our ability to execute on a key aspect of our overall growth strategy would be impaired.

Any of the above events could significantly harm our business, financial condition and prospects.

We have incurred a substantial amount of debt, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness, and prevent us from meeting our debt obligations.*

As of September 30, 2019, we had $1,347.4 million book value, or $1,418.0 million aggregate principal amount of indebtedness, including $418.0 million in secured indebtedness. In March 2019, we received $200.0 million of commitments under a new revolving credit facility under our credit agreement. In May 2019, we borrowed approximately $518.0 million aggregate principal amount of loans pursuant to an amendment to our credit agreement to refinance the then outstanding senior secured term loans outstanding under our credit agreement. In July 2019, we issued $600.0 million aggregate principal amount of 5.500% Senior Notes due 2027, or the 2027 Senior Notes. In March 2015, we issued $400.0 million aggregate principal amount of 2.50% Exchangeable Senior Notes due 2022, or the Exchangeable Senior Notes. Accordingly, we have a significant amount of debt outstanding on a consolidated basis.

This substantial level of debt could have important consequences to our business, including, but not limited to:

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reducing the benefits we expect to receive from our prior and any future acquisition transactions;

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making it more difficult for us to satisfy our obligations;

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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, and future business opportunities;

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exposing us to the risk of increased interest rates to the extent of any future borrowings, including borrowings under our credit agreement, at variable rates of interest;

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making it more difficult for us to satisfy our obligations with respect to our indebtedness, including our outstanding notes, our credit agreement, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing such indebtedness;

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increasing our vulnerability to, and reducing our flexibility to respond to, changes in our business or general adverse economic and industry conditions;

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limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions, and general corporate or other purposes and increasing the cost of any such financing;

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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 competitive disadvantage as compared to our competitors, to the extent they are not as highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage may prevent us from exploiting; and

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restricting us from pursuing certain business opportunities.

The credit agreement and the indenture governing the 2027 Senior Notes impose, and the terms of any future indebtedness may impose, various covenants that limit our ability and/or the ability of our restricted subsidiaries’ (as designated under such agreements) 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, consolidate with or merge or sell all or substantially all of our assets, 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.

Our ability to obtain future financing and engage in other transactions may be restricted by these covenants. In addition, any credit ratings will impact the cost and availability of future borrowings and our cost of capital. Our ratings at any time will reflect each rating organization’s then opinion of our financial strength, operating performance and ability to meet our debt obligations. There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future. A reduction in our credit ratings may limit our ability to borrow at acceptable interest rates. If our credit ratings were downgraded or put on watch for a potential downgrade, we may not be able to sell additional debt securities or borrow money in the amounts, at the times or interest rates or upon the more favorable terms and conditions that might otherwise be available. Any impairment of our ability to obtain future financing on favorable terms could have an adverse effect on our ability to refinance any of our then-existing debt and may severely restrict our ability to execute on our business strategy, which includes the continued acquisition of additional medicines or businesses.

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, which may not be successful.*

Our ability to make scheduled payments under or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business and other factors beyond our control. Our ability to generate cash flow to meet our payment obligations under our debt may also depend on the successful implementation of our operating and growth strategies. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We cannot assure that we will maintain a level of cash flows from operating activities sufficient to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or business operations, seek additional capital or restructure or refinance our indebtedness. We cannot ensure that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of existing or future debt agreements, including the indenture that govern the 2027 Senior Notes and the credit agreement. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.

If we cannot make scheduled payments on our debt, we will be in default and, as a result:

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our debt holders could declare all outstanding principal and interest to be due and payable;

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the administrative agent and/or the lenders under the credit agreement could foreclose against the assets securing the borrowings then outstanding; and

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we could be forced into bankruptcy or liquidation, which could result in you losing your investment.

We generally have broad discretion in the use of our cash and may not use it effectively.

Our management has broad discretion in the application of our cash, and investors will be relying on the judgment of our management regarding the use of our cash. Our management may not apply our cash in ways that ultimately increase the value of any investment in our securities. We expect to use our existing cash to fund commercialization activities for our medicines, to potentially fund additional medicine, medicine candidate or business acquisitions, to potentially fund additional regulatory approvals of certain of our medicines, to potentially fund development, life cycle management or manufacturing activities of our medicines and medicine candidates, to potentially fund share repurchases, and for working capital, milestone payments, capital expenditures and general corporate purposes. We may also invest our cash in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our shareholders. If we do not invest or apply our cash in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause the price of our ordinary shares to decline.

Our ability to use net operating loss carryforwards and certain other tax attributes to offset U.S. income taxes may be limited.*

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percent change (by value) in its equity ownership over a three-year period), the corporation’s ability to use pre-change net operating loss carryforwards and other pre-change tax attributes to offset post-change income may be limited. We continue to carry forward our annual limitation resulting from an ownership change date of August 2, 2012. The limitation on pre-change net operating losses incurred prior to the August 2, 2012 change date is approximately $7.7 million for 2019 through 2028. We continue to carry forward the annual limitation related to Hyperion of $50.0 million resulting from the last ownership change date in 2014 and the annual limitation related to Raptor of $0.2 million resulting from the last ownership change date in 2009. In addition, we recognized $32.2 million of federal net operating losses, $2.2 million of state net operating losses and $9.5 million of federal tax credits following our acquisition of River Vision. These acquired federal net operating losses and tax credits are subject to an annual limitation of $2.6 million. The net operating loss carryforward and tax credit carryforward limitations are cumulative such that any use of the carryforwards below the limitations in one year will result in a corresponding increase in the limitations for the subsequent tax year. Under the Tax Act, U.S. federal net operating losses incurred in taxable years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal net operating losses generated in taxable years beginning after December 31, 2017 is limited to 80 percent of the current year’s taxable income. It remains uncertain if and to what extent various U.S. states will conform to the Tax Act.

Following certain acquisitions of a U.S. corporation by a foreign corporation, Section 7874 of the Code limits the ability of the acquired U.S. corporation and its U.S. affiliates to utilize U.S. tax attributes such as net operating losses to offset U.S. taxable income resulting from certain transactions. Based on the limited guidance available, we expect this limitation is applicable for approximately ten years following the Vidara Merger with respect to certain intra-company transactions. As a result, we or our other U.S. affiliates may not be able to utilize U.S. tax attributes to offset U.S. taxable income or U.S. tax liability respectively, if any, resulting from certain intra-company taxable transactions during such period. Notwithstanding this limitation, we expect that we will be able to fully use our U.S. net operating losses and tax credits prior to their expiration. As a result of this limitation, however, it may take Horizon Therapeutics USA, Inc. (formerly known as Horizon Pharma USA, Inc. and as the successor to HPI) longer to use its net operating losses and tax credits. Moreover, contrary to these expectations, it is possible that the limitation under Section 7874 of the Code on the utilization of U.S. tax attributes could prevent us from fully utilizing our U.S. tax attributes prior to their expiration if we do not generate sufficient taxable income or tax obligations.

Any limitation on our ability to use our net operating loss and tax credit carryforwards, including the carryforwards of companies that we acquire, will likely increase the taxes we would otherwise pay in future years if we were not subject to such limitations.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.*

From time to time, global credit and financial markets have experienced extreme disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment and continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share price and could require us to delay or abandon commercialization or development plans. There is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic down-turn, which could directly affect our ability to attain our operating goals on schedule and on budget.

The United Kingdom’s referendum to leave the EU, or “Brexit,” has caused and may continue to cause disruptions to capital and currency markets worldwide. The full impact of the Brexit decision, however, remains uncertain. A process of negotiation will determine the future terms of the United Kingdom’s relationship with the EU and there is the potential that the United Kingdom and the EU may not agree to a withdrawal arrangement before the date the United Kingdom leaves the EU. During this period of negotiation and afterwards, our results of operations and access to capital may be negatively affected by interest rate, exchange rate and other market and economic volatility, as well as political uncertainty. In the short and medium term, there is a risk of disrupted import and export processes due to a lack of administrative processing capacity by the respective United Kingdom and EU customs agencies that may delay time-sensitive shipments and may negatively impact our product supply chain. Brexit may also have a detrimental effect on our customers, distributors and suppliers, which would, in turn, adversely affect our revenues and financial condition.

At September 30, 2019, we had $884.0 million of cash and cash equivalents consisting of cash and money market funds. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since September 30, 2019, no assurance can be given that deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives. Dislocations in the credit market may adversely impact the value and/or liquidity of marketable securities owned by us.

If the London Inter-Bank Offered Rate, or LIBOR, is discontinued, interest payments under our credit agreement may be calculated using another reference rate.

In July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, or FCA, which regulates LIBOR, announced that the FCA intends to phase out the use of LIBOR by the end of 2021. In addition, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities. Although there have been certain issuances utilizing SOFR, it is unknown whether this or any other alternative reference rate will attain market acceptance as a replacement for LIBOR. LIBOR is used as a benchmark rate throughout our credit agreement, and our credit agreement does not provide fallback language for all circumstances in which LIBOR ceases to be published. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate, and any potential effects of the transition away from LIBOR on us are not known. The transition process may involve, among other things, increased volatility and illiquidity in markets for instruments that currently rely on LIBOR and may result in increased borrowing costs, the effectiveness of related transactions such as hedges, uncertainty under applicable documentation, including the credit agreement, or difficult and costly processes to amend such documentation. As a result, our ability to refinance our credit agreement or other indebtedness or to hedge our exposure to floating rate instruments may be impaired, which would adversely affect the operations of our business.

Changes in accounting rules or policies may affect our financial position and results of operations.

Accounting principles generally accepted in the United States, or GAAP, and related implementation guidelines and interpretations can be highly complex and involve subjective judgments. Changes in these rules or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations. In addition, our operation as an Irish company with multiple subsidiaries in different jurisdictions adds additional complexity to the application of GAAP and this complexity will be exacerbated further if we complete additional strategic transactions. Changes in the application of existing rules or guidance applicable to us or our wholly owned subsidiaries could significantly affect our consolidated financial position and results of operations.

Covenants under the indenture governing our 2027 Senior Notes and our credit agreement may restrict our business and operations in many ways, and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected.*

The indenture governing the 2027 Senior Notes and the credit agreement impose various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

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pay dividends or distributions, repurchase equity, prepay, redeem or repurchase certain debt and make certain investments;

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incur additional debt and issue certain preferred stock;

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provide guarantees in respect of obligations of other persons;

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incur liens on assets;

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engage in certain asset sales;

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merge, consolidate with or sell all or substantially all of our assets to another person;

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enter into transactions with affiliates;

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sell assets and capital stock of our subsidiaries;

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enter into agreements that restrict distributions from our subsidiaries;

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designate subsidiaries as unrestricted subsidiaries; and

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allow to exist certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.

These covenants may:

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limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

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limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

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require us to use a substantial portion of our cash flow from operations to make debt service payments;

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limit our flexibility to plan for, or react to, changes in our business and industry;

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place us at a competitive disadvantage compared to less leveraged competitors; and

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increase our vulnerability to the impact of adverse economic and industry conditions.

If we are unable to successfully manage the limitations and decreased flexibility on our business due to our significant debt obligations, we may not be able to capitalize on strategic opportunities or grow our business to the extent we would be able to without these limitations.

Our failure to comply with any of the covenants could result in a default under the credit agreement or the indenture governing the 2027 Senior Notes, which could permit the administrative agent or the trustee, as applicable, or permit the lenders or the holders of the 2027 Senior Notes to cause the administrative agent or the trustee, as applicable, to declare all or part of any outstanding senior secured term loans or revolving loans, the revolving commitments, or the 2027 Senior Notes to be immediately due and payable or to exercise any remedies provided to the administrative agent or the trustee, including, in the case of the credit agreement proceeding against the collateral granted to secure our obligations under the credit agreement. An event of default under the credit agreement or the indenture governing the 2027 Senior Notes could also lead to an event of default under the terms of the other agreements and the indenture governing our Exchangeable Senior Notes. Any such event of default or any exercise of rights and remedies by our creditors could seriously harm our business.

If intangible assets that we have recorded in connection with our acquisition transactions become impaired, we could have to take significant charges against earnings.*

In connection with the accounting for our various acquisition transactions, we have recorded significant amounts of intangible assets. Under GAAP, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other indefinite-lived intangible assets has been impaired. Amortizing intangible assets will be assessed for impairment in the event of an impairment indicator. For example, during the year ended December 31, 2018, we recorded an impairment of $33.6 million to fully write off the book value of developed technology related to PROCYSBI in Canada and Latin America. Such impairment and any reduction or other impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’ equity in future periods.

Risks Related to Our Intellectual Property

If we are unable to obtain or protect intellectual property rights related to our medicines and medicine candidates, we may not be able to compete effectively in our markets.*

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our medicines and medicine candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own may fail to result in issued patents with claims that cover our medicines in the United States or in other foreign countries. If this were to occur, early generic competition could be expected against our current medicines and other medicine candidates in development. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which prior art can invalidate a patent or prevent a patent from issuing based on a pending patent application. In particular, because the APIs in RAYOS, DUEXIS, PENNSAID 2% and VIMOVO have been on the market as separate medicines for many years, it is possible that these medicines have previously been used off-label in such a manner that such prior usage would affect the validity of our patents or our ability to obtain patents based on our patent applications. In addition, claims directed to dosing and dose adjustment may be substantially less likely to issue in light of the Supreme Court decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., where the court held that claims directed to methods of determining whether to adjust drug dosing levels based on drug metabolite levels in the red blood cells were not patent eligible because they were directed to a law of nature. This decision may have wide-ranging implications on the validity and scope of pharmaceutical method claims.

Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated.

Patent litigation is currently pending in the United States District Court for the District of New Jersey against Actavis, who intend to market a generic version of PENNSAID 2% prior to the expiration of certain of our patents listed in the Orange Book. These cases arise from Paragraph IV Patent Certification notice letters from Actavis advising they had filed an ANDA with the FDA seeking approval to market a generic version of PENNSAID 2% before the expiration of the patents-in-suit. For a more detailed description of the PENNSAID 2% litigation, see Note 16, Legal Proceedings, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

Patent litigation is currently pending in the United States District Court for the District of New Jersey and the Court of Appeals for the Federal Circuit against Dr. Reddy’s intending to market a generic version of VIMOVO before the expiration of certain of our patents listed in the Orange Book. The cases arise from Paragraph IV Patent Certification notice letters from Dr. Reddy’s, advising that it had filed an ANDA with the FDA seeking approval to market generic versions of VIMOVO before the expiration of the patents-in-suit. On July 30, 2019, the Federal Circuit Court of Appeals denied our request for a rehearing of the Court’s invalidity ruling against the 6,926,907 and 8,557,285 patents for VIMOVO coordinated-release tablets. As a result, the District Court will enter judgment invalidating the ‘907 and ‘285 patents, which could subsequently result in Dr. Reddy’s initiating an at-risk launch of a generic version of VIMOVO. Patent litigation is currently pending in the United States District Court for the District of Delaware against Ajanta intending to market a generic version of VIMOVO before the expiration of certain of our patents listed in the Orange Book. For a more detailed description of the VIMOVO litigation, see Note 16, Legal Proceedings, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

Patent litigation is currently pending in the United States District Court for the District of Delaware against Alkem, who intends to market a generic version of DUEXIS prior to the expiration of certain of our patents listed in the Orange Book. This case arises from Paragraph IV Patent Certification notice letters from Alkem advising it had filed an ANDA with the FDA seeking approval to market a generic version of DUEXIS before the expiration of the patents-in-suit. For a more detailed description of the DUEXIS litigation, see Note 16, Legal Proceedings, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

We intend to vigorously defend our intellectual property rights relating to our medicines, but we cannot predict the outcome of the DUEXIS case, the PENNSAID 2% cases and the VIMOVO cases. Any adverse outcome in these matters or any new generic challenges that may arise could result in one or more generic versions of our medicines being launched before the expiration of the listed patents, which could adversely affect our ability to successfully execute our business strategy to increase sales of our medicines, and would negatively impact our financial condition and results of operations, including causing a significant decrease in our revenues and cash flows.

Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the patent applications we hold with respect to our medicines fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop them and threaten our ability to commercialize our medicines. We cannot offer any assurances about which, if any, patents will issue or whether any issued patents will be found not invalid and not unenforceable or will go unthreatened by third parties. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to our medicines or any other medicine candidates. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be provoked by a third-party or instituted by us to determine which party was the first to invent any of the subject matter covered by the patent claims of our applications.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our drug discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we expect all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. For example, if the issuance, in a given country, of a patent to us, covering an invention, is not followed by the issuance, in other countries, of patents covering the same invention, or if any judicial interpretation of the validity, enforceability, or scope of the claims in, or the written description or enablement in, a patent issued in one country is not similar to the interpretation given to the corresponding patent issued in another country, our ability to protect our intellectual property in those countries may be limited. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially diminish the value of our intellectual property or narrow the scope of our patent protection. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

Our commercial success depends in part on us avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter party reexamination proceedings before the United States Patent and Trademark Office, or the U.S. PTO. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which our collaborators are developing medicine candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our medicine candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our medicines and/or any other medicine candidates. Because patent applications can take many years to issue, there may be currently pending patent applications, which may later result in issued patents that our medicine candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our medicine candidates, any molecules formed during the manufacturing process or any final medicine itself, the holders of any such patents may be able to block our ability to commercialize such medicine candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable medicine candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our medicine candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing medicines, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our medicine candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our medicine candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our medicines, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.

If we fail to comply with our obligations in the agreements under which we license rights to technology from third parties, we could lose license rights that are important to our business.*

We are party to a number of technology licenses that are important to our business and expect to enter into additional licenses in the future. For example, we rely on a license from Bausch with respect to technology developed by Bausch in connection with the manufacturing of RAVICTI. The purchase agreement under which Hyperion purchased the rights to RAVICTI contains obligations to pay Bausch regulatory and sales milestone payments relating to RAVICTI, as well as royalties on the net sales of RAVICTI. On May 31, 2013, when Hyperion acquired BUPHENYL under a restated collaboration agreement with Bausch, Hyperion received a license to use some of the manufacturing technology developed by Bausch in connection with the manufacturing of BUPHENYL. The restated collaboration agreement also contains obligations to pay Bausch regulatory and sales milestone payments, as well as royalties on net sales of BUPHENYL. If we fail to make a required payment to Bausch and do not cure the failure within the required time period, Bausch may be able to terminate the license to use its manufacturing technology for RAVICTI and BUPHENYL. If we lose access to the Bausch manufacturing technology, we cannot guarantee that an acceptable alternative method of manufacture could be developed or acquired. Even if alternative technology could be developed or acquired, the loss of the Bausch technology could still result in substantial costs and potential periods where we would not be able to market and sell RAVICTI and/or BUPHENYL. We also license intellectual property necessary for commercialization of RAVICTI from an external party. This party may be entitled to terminate the license if we breach the agreement, including failure to pay required royalties on net sales of RAVICTI, or we do not meet specified diligence obligations in our development and commercialization of RAVICTI, and we do not cure the failure within the required time period. If the license is terminated, it may be difficult or impossible for us to continue to commercialize RAVICTI, which would have a material adverse effect on our business, financial condition and results of operations.

We also license rights to know-how and trademarks for ACTIMMUNE from Genentech Inc., or Genentech. Genentech may terminate the agreement upon our material default, if not cured within a specified period of time. Genentech may also terminate the agreement in the event of our bankruptcy or insolvency. Upon such a termination of the agreement, all intellectual property rights conveyed to us under the agreement, including the rights to the ACTIMMUNE trademark, revert to Genentech. If we fail to comply with our obligations under this agreement, we could lose the ability to market and distribute ACTIMMUNE, which would have a material adverse effect on our business, financial condition and results of operations.

In addition, we are subject to contractual obligations under our agreements with Tripex and PARI related to QUINSAIR. Under the agreement with Tripex, as amended, if we do not spend a specified amount on the development of QUINSAIR for non-CF indications between January 1, 2018 and December 31, 2021 and regulatory approval by the FDA for QUINSAIR for the CF indication is obtained prior to December 31, 2021, we may be obligated to pre-pay a milestone payment related to commercial sales of QUINSAIR for non-CF indications. This obligation is subject to certain exceptions due to, for example, manufacturing delays not under our control, or clinical trial suspension or delay ordered by the FDA. In October 2017, we triggered a milestone payment under this agreement and we paid Tripex $20.0 million in November 2017. Under the license agreement with PARI, we are required to comply with diligence milestones related to development and commercialization of QUINSAIR in the United States and to spend a specified minimum amount per year on development and/or commercialization activities in the United States until submission of the NDA for QUINSAIR in the United States. If we do not comply with these obligations, our licenses to certain intellectual property related to QUINSAIR may become non-exclusive in the United States. We are also subject to contractual obligations under our amended and restated license agreement with UCSD, as amended, with respect to PROCYSBI. If one or more of these licenses was terminated, we would have no further right to use or exploit the related intellectual property, which would limit our ability to develop PROCYSBI or QUINSAIR in other indications, and could impact our ability to continue commercializing PROCYSBI or QUINSAIR in their approved indications.

We also hold an exclusive license to patents and technology from Duke University, or Duke, and Mountain View Pharmaceuticals, Inc., or MVP, covering KRYSTEXXA. Duke and MVP may terminate the license if we commit fraud or for our willful misconduct or illegal conduct. Duke and MVP may also terminate the license upon our material breach of the agreement, if not cured within a specified period of time, or upon written notice if we have committed two or more material breaches under the agreement. Duke and MVP may also terminate the license in the event of our bankruptcy or insolvency. If the license is terminated, it may be impossible for us to continue to commercialize KRYSTEXXA, which would have a material adverse effect on our business, financial condition and results of operations.

We hold an exclusive license to Vectura Group plc’s, or Vectura, proprietary technology and know-how covering the delayed-release of corticosteroids relating to RAYOS. If we fail to comply with our obligations under our agreement with Vectura or our other license agreements, or if we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market medicines covered by the license, including RAYOS.

We hold an exclusive, worldwide license from Roche to patents and know-how for teprotumumab. We also have exclusive sub-licenses for rights licensed to Roche for teprotumumab by certain third-party licensors. Roche may have the right to terminate the license upon our breach, if not cured within a specified period of time. Roche may also terminate the license in the event of our bankruptcy or insolvency, or if we challenge the validity of Roche’s patents. If the license is terminated for our breach or based on our challenging the validity of Roche’s patents, then all rights and licenses granted to us by Roche would also terminate, and we may be required to assign and transfer to Roche certain filings and approvals, trademarks, and data in our possession necessary for the development and commercialization of teprotumumab, and assign clinical trial agreements to the extent permitted. We may also be required to grant Roche an exclusive license under our patents and know-how for teprotumumab, and to manufacture and supply teprotumumab to Roche for a transitional period. We also license patents for teprotumumab from Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center, or LA BioMed. LA BioMed may have the right to terminate the license upon our material breach, if not cured within a specified period of time, or in the event of our bankruptcy or insolvency. If one or more of these licenses is terminated, it may be impossible for us to commercialize teprotumumab, which would have a material adverse effect on our business, financial condition and results of operations.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one of our patents, or a patent of one of our licensors, is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

There are numerous post grant review proceedings available at the U.S. PTO (including inter partes review, post-grant review and ex-parte reexamination) and similar proceedings in other countries of the world that could be initiated by a third-party that could potentially negatively impact our issued patents.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our collaborators or licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ordinary shares.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and foreign patent agencies in several stages over the lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or licensors that control the prosecution and maintenance of our licensed patents fail to maintain the patents and patent applications covering our medicine candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

Risks Related to Ownership of Our Ordinary Shares

The market price of our ordinary shares historically has been volatile and is likely to continue to be volatile, and you could lose all or part of any investment in our ordinary shares.

The trading price of our ordinary shares has been volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:

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our failure to successfully execute our commercialization strategy with respect to our approved medicines, particularly our commercialization of our medicines in the United States;

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actions or announcements by third-party or government payers with respect to coverage and reimbursement of our medicines;

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disputes or other developments relating to intellectual property and other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our medicines and medicine candidates;

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unanticipated serious safety concerns related to the use of our medicines;

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adverse regulatory decisions;

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changes in laws or regulations applicable to our business, medicines or medicine candidates, including but not limited to clinical trial requirements for approvals or tax laws;

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inability to comply with our debt covenants and to make payments as they become due;

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inability to obtain adequate commercial supply for any approved medicine or inability to do so at acceptable prices;

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developments concerning our commercial partners, including but not limited to those with our sources of manufacturing supply;

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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

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adverse results or delays in clinical trials;

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our failure to successfully develop and/or acquire additional medicine candidates or obtain approvals for additional indications for our existing medicine candidates;

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introduction of new medicines or services offered by us or our competitors;

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overall performance of the equity markets, including the pharmaceutical sector, and general political and economic conditions;

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failure to meet or exceed revenue and financial projections that we may provide to the public;

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actual or anticipated variations in quarterly operating results;

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failure to meet or exceed the estimates and projections of the investment community;

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inaccurate or significant adverse media coverage;

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publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

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our inability to successfully enter new markets;

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the termination of a collaboration or the inability to establish additional collaborations;

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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

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our inability to maintain an adequate rate of growth;

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ineffectiveness of our internal controls or our inability to otherwise comply with financial reporting requirements;

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adverse U.S. and foreign tax exposure;

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additions or departures of key management, commercial or regulatory personnel;

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issuances of debt or equity securities;

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significant lawsuits, including patent or shareholder litigation;

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changes in the market valuations of similar companies to us;

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sales of our ordinary shares by us or our shareholders in the future;

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trading volume of our ordinary shares;

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effects of natural or man-made catastrophic events or other business interruptions; and

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other events or factors, many of which are beyond our control.

In addition, the stock market in general, and The Nasdaq Global Select Market and the stock of biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may adversely affect the market price of our ordinary shares, regardless of our actual operating performance.

We have never declared or paid dividends on our share capital and we do not anticipate paying dividends in the foreseeable future.*

We have never declared or paid any cash dividends on our ordinary shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future, including due to limitations that are currently imposed by our credit agreement and the indentures governing the 2027 Senior Notes. Any return to shareholders will therefore be limited to the increase, if any, of our ordinary share price.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company and our management will be required to devote substantial time to compliance initiatives.

As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In particular, the Sarbanes-Oxley Act of 2000, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Stock Market, Inc., or Nasdaq, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. These rules and regulations have substantially increased our legal and financial compliance costs and have made some activities more time-consuming and costly. These effects are exacerbated by our transition to an Irish company and the integration of numerous acquired businesses and operations into our historical business and operating structure. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will continue to decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our medicines or services. For example, these rules and regulations make it more difficult and more expensive for us to obtain and maintain director and officer liability insurance. We cannot predict or estimate the amount or timing of additional costs that we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. If we fail to comply with the continued listing requirements of Nasdaq, our ordinary shares could be delisted from The Nasdaq Global Select Market, which would adversely affect the liquidity of our ordinary shares and our ability to obtain future financing.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we are required to perform annual system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, or Section 404. Our independent registered public accounting firm is also required to deliver a report on the effectiveness of our internal control over financial reporting. Our testing, or the testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 requires that we incur substantial expense and expend significant management efforts, particularly because of our Irish parent company structure and international operations. If we are not able to comply with the requirements of Section 404 or if we or our independent registered public accounting firm identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our ordinary shares could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.

New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act and rules adopted by the SEC and by Nasdaq, would likely result in increased costs as we respond to their requirements.

Sales of a substantial number of our ordinary shares in the public market could cause our share price to decline.

If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our ordinary shares in the public market, the trading price of such ordinary shares could decline. In addition, our ordinary shares that are either subject to outstanding options or reserved for future issuance under our employee benefit plans are or may become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. If these additional ordinary shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our ordinary shares could decline.

In addition, any conversion or exchange of our Exchangeable Senior Notes, whether pursuant to their terms or pursuant to privately negotiated transactions between the issuer and/or us and a holder of such securities, could depress the market price for our ordinary shares.

Future sales and issuances of our ordinary shares, securities convertible into our ordinary shares or rights to purchase ordinary shares or convertible securities could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to decline.*

Additional capital may be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities or securities convertible into or exchangeable for ordinary shares, our shareholders may experience substantial dilution. We may sell ordinary shares, and we may sell convertible or exchangeable securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell such ordinary shares, convertible or exchangeable securities or other equity securities in subsequent transactions, existing shareholders may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of ordinary shares. We also maintain equity incentive plans, including our Amended and Restated 2014 Equity Incentive Plan, 2014 Non-Employee Equity Plan, as amended, and 2014 Employee Share Purchase Plan, as amended, and intend to grant additional ordinary share awards under these and future plans, which will result in additional dilution to our existing shareholders.

Irish law differs from the laws in effect in the United States and may afford less protection to holders of our securities.

It may not be possible to enforce court judgments obtained in the United States against us in Ireland based on the civil liability provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have been advised that the United States currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically or necessarily be enforceable in Ireland.

As an Irish company, we are governed by the Irish Companies Act 2014 (as amended), which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the United States.

Provisions of our articles of association, shareholder rights agreement and Irish law could delay or prevent a takeover of us by a third party.*

Our articles of association could delay, defer or prevent a third-party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our ordinary shares. For example, our articles of association:

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impose advance notice requirements for shareholder proposals and nominations of directors to be considered at shareholder meetings;

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stagger the terms of our board of directors into three classes; and

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require the approval of a supermajority of the voting power of the shares of our share capital entitled to vote generally at a meeting of shareholders to amend or repeal our articles of association.

In February 2019, we adopted a shareholder rights agreement, or rights agreement, with a 12-month term under which shareholders have certain ordinary share purchase rights if a person or group acquires 10% (or 15% in the case of an existing “13G Investor” as defined in the rights agreement) or more of our outstanding ordinary shares without the prior approval of our board of directors. Until its expiration, the rights agreement could make it more difficult for a person or group to acquire a majority of our outstanding ordinary shares, and could otherwise prevent or delay an acquisition of us. The rights agreement could also reduce the price that investors might be willing to pay for our ordinary shares and result in the market price of our ordinary shares being lower than it would be without the rights agreement. In addition, the existence of the rights agreement itself may deter a potential acquiror from pursuing any acquisition of us at all. As a result, either by operation of the rights agreement or by its potential deterrent effect, acquisitions of us that our shareholders may consider in their best interests may not occur.

In addition, several mandatory provisions of Irish law could prevent or delay an acquisition of us. For example, Irish law does not permit shareholders of an Irish public limited company to take action by written consent with less than unanimous consent. We are also subject to various provisions of Irish law relating to mandatory bids, voluntary bids, requirements to make a cash offer and minimum price requirements, as well as substantial acquisition rules and rules requiring the disclosure of interests in our ordinary shares in certain circumstances.

These provisions may discourage potential takeover attempts, discourage bids for our ordinary shares at a premium over the market price or adversely affect the market price of, and the voting and other rights of the holders of, our ordinary shares. These provisions could also discourage proxy contests and make it more difficult for you and our other shareholders to elect directors other than the candidates nominated by our board of directors, and could depress the market price of our ordinary shares.

Any attempts to take us over will be subject to Irish Takeover Rules and subject to review by the Irish Takeover Panel.

We are subject to the Irish Takeover Rules, under which our board of directors will not be permitted to take any action which might frustrate an offer for our ordinary shares once it has received an approach which may lead to an offer or has reason to believe an offer is imminent.

A transfer of our ordinary shares may be subject to Irish stamp duty.

In certain circumstances, the transfer of shares in an Irish incorporated company will be subject to Irish stamp duty, which is a legal obligation of the buyer. This duty is currently charged at the rate of 1.0 percent of the price paid or the market value of the shares acquired, if higher. Because our ordinary shares are traded on a recognized stock exchange in the United States, an exemption from this stamp duty is available to transfers by shareholders who hold ordinary shares beneficially through brokers, which in turn hold those shares through the Depositary Trust Company, or DTC, to holders who also hold through DTC. However, a transfer by or to a record holder who holds ordinary shares directly in his, her or its own name could be subject to this stamp duty. We, in our absolute discretion and insofar as the Irish Companies Act 2014 (as amended) or any other applicable law permit, may, or may provide that one of our subsidiaries will pay Irish stamp duty arising on a transfer of our ordinary shares on behalf of the transferee of such ordinary shares. If stamp duty resulting from the transfer of ordinary shares which would otherwise be payable by the transferee is paid by us or any of our subsidiaries on behalf of the transferee, then in those circumstances, we will, on our behalf or on behalf of such subsidiary (as the case may be), be entitled to (i) seek reimbursement of the stamp duty from the transferee, (ii) set-off the stamp duty against any dividends payable to the transferee of those ordinary shares and (iii) claim a first and permanent lien on the ordinary shares on which stamp duty has been paid by us or such subsidiary for the amount of stamp duty paid. Our lien shall extend to all dividends paid on those ordinary shares.

Dividends paid by us may be subject to Irish dividend withholding tax.

In certain circumstances, as an Irish tax resident company, we will be required to deduct Irish dividend withholding tax (currently at the rate of 20%) from dividends paid to our shareholders. Shareholders that are resident in the United States, EU countries (other than Ireland) or other countries with which Ireland has signed a tax treaty (whether the treaty has been ratified or not) generally should not be subject to Irish withholding tax so long as the shareholder has provided its broker, for onward transmission to our qualifying intermediary or other designated agent (in the case of shares held beneficially), or our or its transfer agent (in the case of shares held directly), with all the necessary documentation by the appropriate due date prior to payment of the dividend. However, some shareholders may be subject to withholding tax, which could adversely affect the price of our ordinary shares.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our rating or publish inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts cease coverage of our company or fail to publish reports on our company regularly, demand for our ordinary shares could decrease, which might cause our share price and trading volume to decline.

Securities class action litigation could divert our management’s attention and harm our business and could subject us to significant liabilities.

The stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for the equity securities of pharmaceutical companies. These broad market fluctuations may cause the market price of our ordinary shares to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharma companies have experienced significant stock price volatility in recent years. For example, following declines in our stock price, two federal securities class action lawsuits were filed in March 2016 against us and certain of our current and former officers alleging violations of the Securities Exchange Act of 1934, as amended, which lawsuits were dismissed by the plaintiffs in June 2018. Even if we are successful in defending any similar claims that may be brought in the future, such litigation could result in substantial costs and may be a distraction to our management, and may lead to an unfavorable outcome that could adversely impact our financial condition and prospects.

ITEM 6. EXHIBITS

Exhibit Number		Description of Document

3.1		Memorandum and Articles of Association of Horizon Therapeutics Public Limited Company, as amended (incorporated by reference to Exhibit 3.1 to Horizon Therapeutics Public Limited Company’s Quarterly Report on Form 10-Q, filed on May 8, 2019).

4.1		Indenture, dated March 13, 2015, by and among Horizon Therapeutics Public Limited Company, Horizon Therapeutics Investment Limited and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Horizon Therapeutics Public Limited Company’s Current Report on Form 8-K, filed on March 13, 2015).

4.2		Form of 2.50% Exchangeable Senior Note due 2022 (incorporated by reference to Exhibit 4.1 to Horizon Therapeutics Public Limited Company’s Current Report on Form 8-K, filed on March 13, 2015).

4.3		Rights Agreement, dated as of February 28, 2019, by and between Horizon Therapeutics Public Limited Company and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to Horizon Therapeutics Public Limited Company’s Current Report on Form 8-K, filed on February 28, 2019).

4.4		Indenture dated as of July 16, 2019 by and between Horizon Therapeutics USA, Inc., the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to Horizon Therapeutics Public Limited Company’s Current Report on Form 8-K, filed on July 16, 2019).

4.5		Form of 5.500% Senior Note due 2027 (incorporated by reference to Exhibit 4.1 to Horizon Therapeutics Public Limited Company’s Current Report on Form 8-K, filed on July 16, 2019).

10.1*		Mutual Settlement, Release and Media License Agreement, effective as of December 21, 2016, by and between River Vision Development Corp. and Boehringer Ingelheim Biopharmaceuticals GmbH.

10.2+		Release and Waiver of Claims of Robert F. Carey, dated as of September 18, 2019.

10.3+		Executive Employment Agreement, effective as of November 1, 2019, by and among Horizon Therapeutics Public Limited Company, Horizon Therapeutics USA, Inc. and Andy Pasternak.

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act.

32.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
32.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.

Exhibit Number		Description of Document

101. INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+	Indicates management contract or compensatory plan.

*	Certain portions of this exhibit (indicated by “[***]”) have been omitted as the Registrant has determined (i) the omitted information is not material and (ii) the omitted information would likely cause harm to the Registrant if publicly disclosed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HORIZON THERAPEUTICS PLC

Date: November 6, 2019	By:	/s/ Timothy Walbert
		Timothy Walbert
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date: November 6, 2019	By:	/s/ Paul W. Hoelscher
		Paul W. Hoelscher
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)

100

Exhibit 10.1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN

THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED

BECAUSE HORIZON THERAPEUTICS PLC HAS

DETERMINED THE INFORMATION (I) IS NOT MATERIAL

AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO

HORIZON THERAPEUTICS PLC IF PUBLICLY DISCLOSED.


MSRA RVDC / BI		CONFIDENTIAL

MUTUAL SETTLEMENT, RELEASE AND MEDIA LICENSE AGREEMENT

THIS MUTUAL SETTLEMENT AND RELEASE AGREEMENT is made on December 21, 2016, (the “Effective Date”), by and between Boehringer Ingelheim Biopharmaceuticals GmbH, a German corporation, having its principal place of business at Binger Straße 173, 55216 Ingelheim am Rhein, Germany (“BI”), and River Vision Development Corp., having its principal place of business at One Rockefeller Plaza, Suite 1204, New York, NY 10020, USA (“RVDC”), (each Party hereinafter referred to as a “Party” and both Parties collectively referred to as the “Parties”).

WHEREAS, Boehringer Ingelheim Pharma GmbH & Co. KG, Birkendorfer Str. 65, 88397 Biberach an der Riss, Germany (“BIP”) and RVDC entered into a Tech Transfer and Clinical Supply Agreement for Teprotumumab effective as of as of April 26, 2013, (hereinafter, the “TT and CSA Agreement”); and

WHEREAS, with letter dated 3 December 2013 BIP notified RVDC that it would assign the TT and CSA Agreement as of 1 January 2014 to BI, and that BI would accept the transfer of this TT and CSA Agreement; and

WHEREAS, BI and RVDC agreed to transfer the current Teprotumumab manufacturing process from BI to another third party CMO for further process development and potential clinical/commercial manufacturing activities; and

WHEREAS, with letter dated 27 February 2015, BI authorized RVDC in order to (i) enable a potential third party CMO to evaluate RVDC’s request for further process development and manufacturing services and (ii) prepare a smooth transfer of the current Teprotumumab manufacturing process from BI to such third party CMO, BI allowed RVDC to disclose the BI Confidential Information and Know-How (as defined in the TT and CSA Agreement) contained in the IND Amendment (dated December 20, 2013) of RV001 / Temprotumumab initially submitted on November 18, 2011 (IND number: 112952) to any such third party CMO for the sole purpose as listed under (i) and (ii) above under a confidentiality and restricted use agreement between RVDC and any such third party CMO that meets the requirements regarding disclosure of Confidential Information and Know-How to third parties set forth in Section 9 of the TT and CSA Agreement; and

WHEREAS, Boehringer Ingelheim International GmbH (“BII”), BI’s Affiliated Company and RVDC entered into a Secrecy Agreement (“CDA”) effective March 14, 2012, amended several times, including by Addendum 3a effective as of February 27, 2015, which inter alia, extended the Confidentiality Period and added CMC Biologics (“CMC”) as a party to the CDA; and

WHEREAS, CMC, RVDC and BI entered into a Material Transfer Agreement effective as of August 26, 2015 (the “MTA”) for CMC to test BI’s proprietary Media (as defined in the MTA) in connection with the further process development and potential clinical/commercial manufacturing activities for RVDC’s biopharmaceutical product Teprotumumab and CMC receipt of Study Materials (as defined in the MTA) from BI in order to evaluate the potential use of such Media in the course of certain Study(ies) (as defined in the MTA); and

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WHEREAS, in order for CMC to manufacture RVDC Antibody for RVDC once the terms of such license are agreed upon, BI and CMC have entered into a Letter of Authorization for the sale and supply of Media dated March 3, 2016 which enables CMC to purchase Media at the third party manufacturer of Media [***] (such letter of authorization and any future amendments thereto, hereinafter the “LoA”).

WHEREAS, BI, CMC and RVDC entered into Amendment No. 1 to the MTA effective as of March 9, 2016 to extend the scope of the confidentiality section of the Agreement for BI to provide certain proprietary information of BI regarding components of the Media to CMC in connection with the purchase and sale of Media at [***] or any future third party manufacturer of Media (“Media Supplier”) under the LoA; and

WHEREAS, in accordance with this Mutual Settlement and Release Agreement, the Parties wish to terminate the TT and CSA Agreement and have agreed to settle any and all outstanding obligations to one another as of the Effective Date, including the grant by BI of a license to RVDC to use the Media to make and have made the Product for RVDC’s clinical and commercial use in accordance with the terms and conditions of this Agreement; and

NOW THEREFORE, in consideration of the mutual covenants and promises herein and therein, BI and RVDC agree as follows:

l. Definitions

(a)

“Affiliated Companies” shall: (a) with respect to BI, mean any company or business entity which controls, is controlled by, or is under common control with BI; (b) with respect to RVDC, means any company or business entity which controls, is controlled by, or is under common control with RVDC, but shall not include a company or business located and/or incorporated in the People’s Republic of China; (c) with respect to CMC, shall mean CMC Icos Biologics, Inc. with a place of business at 22021 20^th Ave. SE, Bothell, WA 98021, USA, and (d) with respect to a third party sublicensee, means any company or business entity which controls, is controlled by, or is under common control with such third party sublicensee, but shall not include a company or business located and/or incorporated in the People’s Republic of China. For purposes of this definition, “control” shall mean the possession, directly or indirectly of the power to direct or cause the direction of the management and policies of an entity ( other than a natural person), whether through the majority ownership of voting capital stock, by contract or otherwise.

(b)

“Confidential Information” shall mean (1) BIP Confidential Information and Know-How (as defined in 1.5 of the TT and CSA Agreement) and/or (2) RVDC Confidential Information and Know-How (as defined in Section 1.28 of the TT and CSA Agreement; and/or (3) Information (as defined in Section 1.3) of BI and/or its Affiliates and/or RVDC pursuant to the CDA; and/or (4) Study Materials (including Media and Information) and Results as defined in the MTA and/or (5) all information concerning the Licensed Technology.

(c)

“Media” means each and all of BI’s proprietary growth media, production media or feed media with BI’s internal coding “[***]”, whichever is the case.

(d)

“Licensed Technology” shall have the meaning set forth in Section 8.1.

(e)

“Product” shall mean Teprotumumab.

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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(f)

“Related Parties” shall have the meaning set forth in Section 3.

(g)

“Scope of Use” shall have the meaning set forth in Section 8.1.

(h)

“Territory” shall mean worldwide except the People’s Republic of China.

2. The TT and CSA Agreement shall be terminated on the Effective Date. In connection with such termination, the Parties agree to the following final settlement with respect to all outstanding financial issues and items arising from or relating to the TT and CSA Agreement:

(a)

BI shall provide the Services and shall invoice RVOC in accordance with the updated Project Plan (“Project Plan including Project Timeline and Payment Schedule”) attached hereto as Exhibit A.

(b)

In accordance with the Agreement, BI purchased Raw Materials including but not limited to resins for the scheduled manufacture of clinical batches. The Raw Materials specified in Exhibit B cannot be used by BI for other projects and accordingly BI shall destroy or provide such Raw Materials to RVOC (as specified in Exhibit B).

(c)

Within [***] days of the Effective Date BI will pay RVDC [***] by wire transfer to the following account:

[***]

(d)

Neither Party shall owe the other any further cash payments, refunds or other amounts under the TT and CSA Agreement except as expressly provided herein (including the Exhibits).

3. Except as otherwise expressly provided herein, RVDC, for itself and Affiliated Companies and its and their officers, agents, directors, shareholders, employees and their heirs, successors and assigns (“Related Parties”), hereby releases and discharges BI and its Related Parties, from any and all past, present and future actions, causes of action, demands, damages, costs, loss of service, judgments, liabilities, all expenses including legal fees, compensation, transaction fees, and any and all other liabilities and claims, whatsoever, arising out of, relating to or resulting from the TT and CSA Agreement.

4. Except as otherwise expressly provided herein, BI, for itself and its Related Parties, hereby releases and discharges RVDC and its Related Parties, from any and all past, present and future actions, causes of action, demands, damages, costs, loss of service, judgments, liabilities, all expenses including legal fees, compensation, transaction fees, and any and all other liabilities and claims whatsoever, arising out of, relating to or resulting from the TT and CSA Agreement.

5. Notwithstanding any provision of this Mutual Settlement and Release Agreement to the contrary, neither Party hereby releases the other from its obligations (i) under this Mutual Settlement, Release and License Agreement or (ii) under the TT and CSA Agreement (a) to indemnify and hold harmless the other and/or their respective Related Parties with respect to third Party claims, actions, demands, liabilities, losses, costs and expenses, including attorney fees arising from the Agreement, or (b) to hold in confidence the Confidential Information provided by the other Party or its agents or representatives in accordance with the terms of the TT and CSA Agreement and the CDA and the

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MTA. In addition, the Parties acknowledge and agree that the provisions of the TT and CSA Agreement relating to the ownership and use of intellectual property (Sections 5.2 and 8 of the TT and CSA Agreement) shall survive its termination and any obligations or liabilities related thereto are not released hereunder. For purposes of clarity the Adapted Process referred to in the TT and CSA does not include any right of RVDC to make, use, offer for sale, sell, import or export the Media, or any other right to the Media. RVDC acknowledges and agrees, however, that BI shall not indemnify and hold harmless RVDC and its Related Parties with respect to third Party claims, actions, demands, liabilities, losses, costs and expenses, including attorney fees, resulting from any use whatsoever after the Effective Date of Confidential Information provided by BI to RVDC.

6. Each Party shall promptly, but in any event no later than [***], return to the other Party or destroy (as instructed by the other Party) all Confidential Information (as defined in Section 1(b) above) and confidential and/or proprietary materials of the other Party, including but not limited to the RVDC Material including vials of [***] listed in Exhibit C, RVDC Confidential Information and Know-How and BI Confidential Information and Know-How (as defined in the TT and CSA Agreement) except the Confidential Information with regard to the Licensed Technology. Notwithstanding the foregoing, RVDC will not be required to return any information related to the Licensed Technology, which shall be subject to the provisions regarding confidentiality set forth in this Agreement. To accomplish the foregoing, each Party shall designate a person to coordinate the collection and documentation of the other Party’s Confidential Information and proprietary materials. For BI this person shall be [***], for RVDC this person shall be [***]. The Parties shall confirm in writing the delivery or destruction of such Confidential Information and Know-How and confidential and proprietary materials. With respect to RVDC Material, BI shall have complied with its obligations under this Section by destroying or returning to RVDC the RVDC Material listed in Exhibit C by making the same available at the BI Facility in Biberach, Germany “[***]” ( Incoterms 2010) for pickup by a carrier selected by RVDC.

7. Except as provided in Section 2(b) and 6, or as set forth in the Exhibit A, B or C with respect to samples to be retained by BI for purposes of retesting, or as set forth in Exhibit D, or as otherwise reasonably requested by RVDC, BI shall promptly and properly destroy or otherwise dispose of all Raw Materials, excipients, and any other substances or materials used or to be used in testing or manufacturing or otherwise providing Services under the TT and CSA Agreement in accordance with the Agreement and applicable law.

8. License Grant to RVDC to use Media to Produce Product

8.1 BI hereby grants to RVDC a non-exclusive, non-sublicensable (except as permitted in Section 8.2), [***] license to use the Media (“Licensed Technology”) for the sole purpose of cultivation of CHO cells to manufacture and have manufactured the Product in the Territory (“Scope of Use”). The foregoing license and Scope of Use includes the right to test the Media for [***] and identity and process samples from the manufacture of Product for maintaining quality (including cGMP) during the manufacturing of Product. For purposes of clarity, testing and/or analysis (i) of the Media, and/or (ii) of process samples that would identify components of the Media, is not permitted except to the extent specifically enumerated in the previous sentence.

8.2 RVDC shall have the right to grant sublicenses to its Affiliated Companies and, subject to the approval of BI, such approval not to be unreasonably withheld, to third party manufacturers of Product to use Licensed Technology for the Scope of Use in the Territory provided that:

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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8.2.1 such Affiliated Companies shall not be located in the People’s Republic of China; and

8.2.2 such sublicensees and/or third party manufacturers shall not be located in the People’s Republic of China and/or manufacture Product in the People’s Republic of China; and

8.2.3 Licensed Technology shall not be brought into and/or otherwise enter and/or be located in the People’s Republic of China; and

8.2.4 all such sublicenses are within the Scope of Use.

BI hereby grants approval for RVDC to grant a sublicense to Licensed Technology within the Scope of Use to [***] and any acquirer of RVDC, and any Affiliated Companies of the foregoing, provided that such license grant shall not extend to any Affiliated Company of such potential sublicensees, or any potential acquirer of RVDC or any of its Affiliated Companies, located in the People’s Republic of China.

8.3 For purposes of clarity, Licensed Technology shall be used only for the manufacture of Product using CHO cells, which express the Product. Any use of the Licensed Technology outside the Scope of Use including, without limitation, reverse engineering the Media, is not permitted.

8.4 RVDC shall be responsible for any use of the Licensed Technology outside the Scope of Use, and/or otherwise inconsistent with the terms of this Agreement, by itself, any Affiliated Company granted a sublicense and any other sublicensee.

8.5 RVDC shall, and shall obligate any sublicensee and/or any Affiliated Companies, to take reasonable measures (in particular, without limitation, technical and organizational measures) to ensure compliance with the obligations set forth in this Section 8, in particular without limitation with regard to the use of the Licensed Technology solely within the Scope of Use and the protection of the Licensed Technology against unauthorized access. Such measures shall be no less than the measures RVDC and/or such sublicensee uses to protect similar technology, but taking such measures shall not alone establish that RVDC and/or its Affiliates and/or its sublicensees have complied with this Section 8 and/or that such matters are adequate.

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8.6 Consideration, Fees and Payments

8.6.1

In consideration of the license granted to RVDC in Sections 8.1 and 8.2, RVDC shall pay BI the following [***] Milestone Payments as indicated in the table below:


Date		Milestone Payment
[***]		€ [*] ([*] Euros)
[***]		€ [*] ([*] Euros)

8.6.2

RVDC will inform BI promptly of the achievement of each milestone. The fees as described in this Section 8.6 will be paid by RVDC to BI (to a bank account designated by BI) within [***] days after receipt of an invoice detailing VAT, if applicable, separately. All amounts set forth in this Agreement (including any Appendices) are without VAT, which shall be added thereon, if applicable. In the event of a default in payment, default interest may be charged at a rate of [***] % above the London Interbank Offered Rate (LIBOR) starting from the occurrence of the default. The date of the payment order will be taken to be the day of payment. For clarity, the fees described above will not apply if RVDC uses a different media ( other than the Media) to commercially manufacture Product.

8.6.3

If laws or regulations require withholding (of a licensee) of any taxes imposed upon (by a licensor) on account of any royalties and payments, paid under this Agreement, such taxes shall be deducted (by licensee) as required by law from such remittable royalty and payment and shall be paid (by licensee) to the proper tax authorities. Official receipts of payment of any withholding tax shall be secured and sent to (licensor) as evidence of such payment. The Parties shall exercise their best efforts to ensure that any withholding taxes imposed are reduced as far as possible under the provisions of any relevant tax treaty.

8.7 Regulatory Assistance. BI will cooperate with RVDC and provide RVDC with such information, documentation and cooperation regarding the Media (internal coding “[***]”) used to manufacture Product as is reasonably requested by regulatory authorities for RVDC to submit, obtain, maintain and update BLA/MAA regulatory filings and to otherwise comply with applicable law with respect thereto. If a regulatory authority conducts an inspection or audit of BI with regard to such Media, BI will cooperate with such regulatory authority and provide RVDC the results of the inspection or audit provided by such regulatory authority, provided, however, that BI may redact such results provided to RVDC to protect sensitive information, including but not limited to information relating to the specific components of the Media or other third party customers of BI. Any request from RVDC for regulatory assistance needs to copy BI’s business development and key account management (BDKAM) using the following e-mail address: [***].

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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9. Representations and Warranties

9.1 BI represents and warrants that

(i)

to the best of its Knowledge at the Effective Date, there are no third party claims against BI asserting that the Licensed Technology infringes the Intellectual Property Rights of any third party; and BI will promptly notify RVDC in writing should it become aware of any claims asserting such infringement, and

(ii)

the execution, delivery and performance of this Agreement have been duly authorized by all appropriate corporate action; and

(iii)

this Agreement is a legal and valid obligation binding upon BI and enforceable in accordance with its terms, and

(iv)

the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding to which BI is a party or by which it is bound.

For the avoidance of doubt, except as set forth herein, no representation, warranty or undertaking is made by BI regarding the Licensed Technology.

APART FROM THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 9.1 THE LICENSE UNDER THIS AGREEMENT IS GRANTED “AS IS” WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED AND BI MAKES NO FURTHER REPRESENTATIONS OR WARRANTIES. IN PARTICLUAR, EXCEPT AS SET FORTH IN THIS SECTION 9.1, NOTHING IN THIS AGREEMENT IS OR WILL BE DEEMED TO BE A REPRESENTATION OR WARRANTY BY BI AND BI AND/OR ITS REPRESENTATIVES SHALL NOT BE LIABLE OR HAVE AN INDEMNIFICATION OBLIGATION TO RVDC AND/OR ITS REPRESENTATIVES AND/OR SUB-LICENSEES WITH REGARD TO THE ACCURACY, SAFETY, MERCHANTABILITY, FITNESS OR USEFULNESS OF THE LICENSED TECHNOLOGY FOR ANY PURPOSE, IN PARTICULAR WITHOUT LIMITATION FOR THE PURPOSE OF MANUFACTURING THE PRODUCT AND THE SUCCESS OF THE TRANSFER OF THE LICENSED TECHNOLOGY, INCLUDING WITHOUT LIMITATION MANUFACTURING PROCESS ESTABLISHMENT, METHOD ESTABLISHMENT AND PRODUCT COMPARABILITY.

9.2 RVDC represents and warrants that

(i)

it will use and obligate any sublicensee to use the Licensed Technology solely as permitted in this Agreement, in particular without limitation within the Scope of Use set forth in Section 8.1, and

(ii)

it will, and will obligate any sublicensee, to comply with the laws and regulations in all countries that are applicable to the manufacture of Product (such as the country in which the manufacture and supply of the

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Product will be performed), and

(iii)

it will, and will obligate any sublicensee, to promptly notify BI in writing should it receive written notice of any third party claim asserting that the Licensed Technology infringes the intellectual property rights of any third party, and

(iv)

the execution, delivery and performance of this Agreement have been duly authorized by all appropriate corporate action, and

(v)

this Agreement is a legal and valid obligation binding upon RVDC and enforceable in accordance with its terms, and

(vi)

the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding to which RVDC is a party or by which it is bound.

APART FROM THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 9.2, NOTHING IN THIS AGREEMENT IS OR WILL BE DEEMED TO BE A REPRESENTATION OR WARRANTY BY RVDC.

10. Liability, Indemnification and Limitations

10.1 Disclaimer of Consequential Damages

EXCEPT FOR CASES OF (i) WILFUL MISCONDUCT OF A PARTY AND/OR ITS REPRESENTATIVES, AND (ii) IN SUCH CASES WHERE A LIMITATION OF LIABILITY AND/OR A LIMITATION OF INDEMNIFICATION OBLIGATIONS IS NOT PERMITTED UNDER APPLICABLE LAW, FOR WHICH CASES THERE SHALL BE NO LIMITATION OF LIABILITY, IN NO EVENTSHALL EITHER PARTY AND/OR ITS REPRESENTATIVES BE LIABLE HEREUNDER FOR ANY INCIDENTAL, INDIRECT, EXEMPLARY, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, IRRESPECTIVE OF THE THEORY OF LIABILITY, WHETHER BREACH, TORT OR OTHER WISE, ARISING FROM OR RELATED TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION CLAIMS FOR DAMAGES BASED UPON LOST PROFITS FOR SALES TO THIRD PARTIES, LOSS OF REPUTATION OR LOSS OF GOOD WILL, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Notwithstanding the foregoing, the Parties agree that third party claims for which there is an indemnification obligations of a Party according to this Agreement shall not be deemed incidental, indirect, exemplary, special, punitive or consequential damages pursuant to the foregoing sentence. For the avoidance of doubt, BI’s indemnification obligation for such third party claims is always subject to the limitations of BI’s liability and indemnification obligations set forth in Section 10.3 below.

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10.2 Liability and Indemnification Obligations

Of BI

Subject to the limitations set forth in Section 10.1 and Section 10.3, BI shall

•

be liable for any losses, damages, costs or expenses including without limitation, reasonable attorney’s fees of any nature (“Losses”) incurred or suffered directly by RVDC; and

•

indemnify and hold harmless RVDC and its Representatives from and against any third party claims

to the extent such Losses and third party claims are arising from

(i)

BI’s negligent or willful breach of its representations and warranties given under Section 9.1 of this Agreement, or

(ii)

BI’s negligent or willful non-compliance with its obligations under this Agreement.

Notwithstanding the foregoing, BI shall not be liable or have an indemnification obligation hereunder to the extent such third party claims and Losses result from

aa.

RVDC’s negligent or willful breach of its representations and warranties given in this Agreement; and/or

bb.

RVDC’s negligent or willful non-compliance with its obligations under this Agreement; and/or

cc.

the transfer of the Licensed Technology to sublicensees; and/or

dd.

RVDC’s and/or its sublicensees’ use of the Licensed Technology; and/or

ee.

RVDC’s and/or its Affiliated Companies’ and/or any third parties’ use of the Product; and/or

ff.

any third party claim that the manufacture, use, sale, offer for sale and/or importation of Product infringes such party’s intellectual property rights (including but not limited to the [***] patent rights); and/or

gg.

any third party claim relating to the use of the Media.

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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Of RVDC

Subject to the limitations set forth in Section 10.1 and Section 10.3, RVDC shall

•

be liable for any Losses incurred or suffered directly by BI; and

•

indemnify and hold harmless BI and its Representatives from and against any third party claims (such third party claims including without limitation claims from any sublicensee)

to the extent such Losses and third party claims are arising from

(i)

RVDC’s negligent or willful breach of its representations and warranties given in this Agreement; and/or

(ii)

RVDC’s negligent or willful non-compliance with its obligations under this Agreement; and/or

(iii)

the transfer of the Licensed Technology to sublicensees; and/or

(iv)

RVDC’s and/or its sublicensees’ use of the Licensed Technology; and/or

(v)

RVDC’s and/or its Affiliated Companies’ and/or any other third parties’ use of the Product; and/or

(vi)

(vii)

any third party claim relating to the use of Media.

Notwithstanding the foregoing, RVDC shall not be liable or have an indemnification obligation hereunder to the extent such third party claims and Losses result from

aa.

BI’s negligent or willful breach of its representations and warranties given under Section 9.1 of this Agreement, and/or

bb.

BI’s negligent or willful non-compliance with its obligations under this Agreement.

To be eligible to be indemnified pursuant to Section 10.2, the Party having a right to be indemnified shall promptly notify the indemnifying Party in writing of the third party claim giving rise to the indemnification obligation pursuant to Section 10.2.

In the event that the Parties are held jointly liable for any third party claims, the Party which satisfies such third party may demand adjustment of advancements from the other Party according to the proportions each Party has contributed to the occurrence of such third party claim, provided, however, that (i) BI shall only be obligated to compensate RVDC within the limitations of BI’s liability and indemnification obligations set forth in Sections 10.1 and 10.3 of this Agreement and (ii) BI shall be entitled to demand adjustments that exceed the limits of BI’s

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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liability and indemnification obligations set forth in this Agreement.

In case of third party claims regarding patent infringements relating to the Licensed Technology (a “Patent Claim”), BI at its sole discretion has the right to defend its intellectual property (including, but not limited to the right to settle any such third party claims). To the extent that BI agrees to defend such Patent Claim, all costs for such defense by BI will be borne by BI. If use of all or any part of the Licensed Technology is, or in BI’s reasonable opinion is likely to become, the subject of a claim of infringement of any intellectual property or other right of any third party, then, BI shall have the right to: (a) procure the continuing right for RVDC to use the Licensed Technology; or (b) replace or modify the Licensed Technology in a functionally equivalent manner so that it no longer infringes; or (c) provided that BI, despite its commercially reasonable efforts, is not successful in resolving the issue according to (a) and/or (b) of this Section, RVDC shall be permitted a reasonable period of time, not to exceed [***] days to negotiate a license directly with the claimant. If RVDC is not successful in negotiating a license for continued use of the Licensed Technology, either Party may terminate this Agreement and BI will refund to RVDC an amount equal to the amounts paid by RVDC to BI under this Agreement, such remedies under (a) to (c) being the sole and exclusive remedies available to RVDC in the aforementioned case and subject always to the limitations of liability and indemnification obligations of BI set forth in Section 10.3 unless an officer or director of BI with authority to waive such limitations of liability and indemnification obligations of BI, provides such waiver in writing to RVDC.

10.3 Limitation of Liability and Indemnification Obligations of BI

WITH THE EXCEPTION OF (i) WILFUL MISCONDUCT OF BI AND/OR ITS REPRESENTATIVES, AND (ii) SUCH CASES WHERE A LIMITATION OF LIABILITY AND/OR A LIMITATION OF INDEMNIFICATION OBLIGATIONS IS NOT PERMITTED UNDER APPLICABLE LAW, FOR WHICH CASES THERE SHALL BE NO LIMITATION OF LIABILITY OR INDEMNIFICATON OBLIGATIONS, ANY AND ALL LIABILITY AND/OR INDEMNIFICATION OBLIGATIONS OF BI AND/OR ITS REPRESENTATIVES UNDER THIS AGREEMENT, IRRESPECTIVE OF THE THEORY OF LIABILITY SHALL BE:

(A)

LIMITED TO A COMBINED TOTAL OF [***] PERCENT ([***]%) OF THE AGGREGATED AMOUNT (MILESTONE PAYMENTS)LISTED IN SECTION 8.6.1 TO BE PAID BY RVDC TO BI FOR ANY AND ALL LIABILITY AND INDEMNIFICATION OBLIGATIONS ARISING FROM OR IN CONNECTION WITH EVENTS

(x)

IF THE EVENTS GIVING RISE TO SUCH LIABILITY AND/OR INDEMNIFICATION OBLIGATION OCCUR IN THE PERIOD FROM THE EFFECTIVE DATE UP TO (BUT EXCLUDING) THE [***]; OR

(y)

IF THE EVENT GIVING RISE TO SUCH LIABILITY AND/OR INDEMNIFICAITON OBLIGATION IS A BREACH OF THE CONFIDENTIALITY OBLIGATIONS OF SECTION 11.

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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(B)

[***] IF THE EVENT GIVING RISE TO SUCH LIABILITY AND/OR INDEMNIFICATION OBLIGATION OCCURS ON THE [***] UNLESS THE EVENT GIVING RISE TO SUCH LIABILITY AND/OR INDEMNIFICATION OBLIGATIONS IS A BREACH OF THE CONFIDENTIALITY OBLIGATIONS OF SECTION 11, IN WHICH CASE SECTION 10.3(A) SHALL APPLY.

11. Confidentiality

11.1 During the term hereof and thereafter for a period of [***] years, the Receiving Party agrees to hold all Confidential Information disclosed to it or its Affiliated Companies by the Disclosing Party or its Affiliated Companies under this Agreement in strict confidence and to use such Confidential Information only in connection with the performance of its obligations under this Agreement or as permitted under this Agreement. The Receiving Party shall not use the Disclosing Party’s Confidential Information for any purpose other than as permitted in the preceding sentence, reproduce such Confidential Information, or disclose such Confidential Information to any third party, without the prior approval of the Disclosing Party. The Receiving Party agrees to protect the Disclosing Party’s Confidential Information with at least the same degree of care as it normally exercises to protect its own proprietary information of a similar nature, but in any case using no less than a reasonable degree of care. The Receiving Party shall ensure that all of its or its Affiliated Companies’ officers, directors, employees and consultants, attorneys, accountants and professional advisors·receive the Disclosing [***] Party’s Confidential Information only on a need to know basis, within the scope of this Agreement, and then, only if such persons are/is bound by obligations of confidentiality and non-use substantially consistent with and no less than those under this Agreement. In addition, RVDC shall obligate its sublicensees to ensure that its or its Affiliated Companies’ employees and consultants receive the Confidential Information of BI only on a need to know basis, within the scope of this Agreement, and then, only if such persons are bound by obligations of confidentiality and non-use substantially consistent with and no less than those under this Agreement.

11.2 The restrictions of this Agreement regarding Confidential Information of the other Party shall not apply to such Confidential Information which: (a) was known, in the possession of, or otherwise owned by the Receiving Party or its Affiliated Companies prior to receipt hereunder as evidenced by written records (however, this shall not relieve RVDC of its obligations set forth in this Section 11 with regard to any sublicensee and shall not apply to such Confidential Information of BI which is subject to the license granted to RVDC hereunder, such Confidential Information to be solely used by RVDC and/or any sublicensee within the Scope of Use); (b) at the time of disclosure by the Disclosing Party was generally available to the public, or which after disclosure hereunder becomes generally available to the public through no fault attributable to Receiving Party or its Affiliated Companies; (c) is hereafter made available to Receiving Party or its Affiliated Companies for use or disclosure by the Receiving Party or its Affiliated Companies from any third party having a right do so; or (d) is independently developed by the Receiving Party or its Affiliated Companies without the use of the Disclosing Party’s Confidential Information as evidenced by written records. Further,

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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subject to the Receiving Party providing the Disclosing Party with reasonable advance notice (to the extent possible and permitted by law) and the opportunity to challenge, limit or seek a protective order for such disclosure, the Receiving Party and/or its Affiliated Companies may make such limited disclosure as is required by mandatory law. The Receiving Party shall provide the Disclosing Party with reasonable assistance in any challenge undertaken by the Disclosing Party.

11.3 Upon termination or expiration of this Agreement and the Disclosing Party’s written request, the Receiving Party agrees to (and RVDC shall obligate any sublicensee to do so), at the Receiving Party’s discretion, either deliver to the Disclosing Party or destroy all Confidential Information of the Disclosing Party and all written and electronic materials embodying the Confidential Information of the Disclosing Party and/or its Affiliated Companies and all materials that constitute such Confidential Information, which are in the possession or under the control of the Receiving Party or its Affiliated Companies, in each case subject to the last sentence of this Section. In the event that the Receiving Party elects to destroy the materials, upon destruction of such materials, the Receiving Party will issue to the Disclosing Party a certificate of destruction as proof of compliance with the Disclosing Party’s request. Receiving Party further agrees and, in case of RVDC, in addition to obligate its sublicensees, not to retain any copies, notes or compilations of any written materials pertaining to the Confidential Information received from the Disclosing Party or its Affiliated Companies, save that the Receiving Party may retain one (1) copy of documentary Confidential Information for the sole purpose of monitoring its compliance with this Agreement.

11.4 In the event that either Party is required to file this Agreement with health authorities or other government agencies (e.g. under SEC rules), that Party shall seek confidential treatment of sensitive information of the respective other Party (in particular, but not limited to trade secrets, confidential commercial or financial information). The Party required to make the submission will give reasonable advance notice to the other Party of such disclosure requirement in order to enable the other Party to comment on such submission, and shall use reasonable efforts to incorporate the other Party’s comments in order to secure a protective order or confidential treatment of any Confidential Information required to be disclosed.

12. Term and Termination

12.1 This Agreement shall come into force and effect as of the Effective Date and shall, unless terminated earlier by either Party pursuant to this Agreement or unless extended by mutual written agreement of the Parties, last until the end of commercialization of the Product.

12.2 If either Party materially breaches or fails to observe or perform any material term or condition of this Agreement, and such material breach or default is not cured within forty (40) days (in case of non-payment twenty (20) days) after written notice thereof is given to the Party at fault, then the other Party may terminate this Agreement with immediate effect without further notice upon expiration of such forty (40) days (in case of non-payment twenty (20) days) notice period.

12.3 This Agreement may be terminated with immediate effect by BI if RVDC, or one or more of its Affiliated Companies, challenges the validity of any patent right comprised by the Licensed Technology. However, if a sublicensee of RVDC challenges the validity

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of any patent right comprised by the Licensed Technology, (i) RVDC shall be notified by BI of such challenge; and (ii) RVDC shall terminate the respective sublicense to such sublicensee within ten (10) calendar days; and (iii) this Agreement shall remain in effect without a right to terminate by BI according to this Section 12.3. In addition, this right to terminate will not apply if a sublicensee withdraws any such challenge within ten (10) days after receipt of written notice thereof from BI demanding such withdrawal in reference to this Agreement. The following will not constitute challenges for purposes hereof: (i) responding to discovery, subpoenas or other requests for information in a judicial or arbitration proceeding or (ii) complying with any applicable law or a court order.

12.4 Notice of termination must in all cases be given by written letter.

12.5 In the event of expiration or termination of this Agreement by BI pursuant to Section 12.2 or 12.3, the license granted to RVDC under this Agreement as well as any sub-license granted by RVDC to any sublicensee with respect to the Licensed Technology shall terminate automatically and with immediate effect and RVDC shall, and shall obligate any sublicensee, to refrain from using the Licensed Technology and either return to BI or destroy the Licensed Technology at the expense of RVDC. Delivery by RVDC shall be made [***] BI’s Affiliated Company BIP’s premises at Birkendorfer Straße 65, 88397 Biberach an der Riss, Germany (Incoterms 2010) or any other address specified by BI. For clarity, nothing herein restricts RVDC’s ability to use media similar to the Licensed Technology developed by it or obtained from third parties, provided that all provisions of this Agreement, including all provisions surviving termination of this Agreement and all other agreements, including the MTA entered into between RVDC and BI effective as of August 26, 2015, are complied with.

13. Miscellaneous

13.1 Neither Party shall be liable for delay or failure to perform hereunder due to any contingency beyond its control, including, but not limited to acts of God, fires, floods, wars, civil wars, sabotage, strikes, governmental laws, ordinances, rules or regulations or failure of third party delivery, provided, such Party promptly gives to the other Party written notice claiming force majeure and uses its commercially reasonable efforts to avoid or remove the force majeure, insofar as it is able to do so. If the period of delay or failure should extend for more than [***] months then either Party shall have the right to terminate this Agreement forthwith upon written notice at any time after expiration of said [***] month period.

13.2 This Agreement constitutes the entire understanding of the Parties with respect to the subject matters contained herein, superseding all prior oral or written understandings or communications between the Parties with respect to the subject matters contained herein. This Agreement may be modified only by a written agreement signed by the Parties. The general terms and conditions of the Parties shall not apply, even if reference to them is made by either Party.

13.3 No press release or other form of publicity regarding this Agreement shall be permitted by either Party to be published unless both Parties have indicated their consent to the form of the release in writing.

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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13.4 No waiver of any term, provision or condition of this Agreement whether by conduct or otherwise in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision or condition or of any other term, provision or condition of this Agreement.

13.5 In the performance of this Agreement, each Party shall be an independent contractor, and therefore, no Party shall be entitled to any benefits applicable to any employee of the other Party. No Party is authorised to act as an agent for the other Party for any purpose, and no Party shall enter into any contract, warranty or representation as to any matter on behalf of the other Party.

13.6 If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction all other provisions shall continue in full force and effect. The Parties hereby agree to attempt to substitute for any invalid or unenforceable provision a valid and enforceable provision which achieves to the greatest extent possible the economic legal and commercial objectives of the invalid or unenforceable provision.

13.7 This Agreement shall be binding upon the successors and assigns of the Parties and the name of a Party appearing herein shall be deemed to include the names of its successors and assigns, provided always that nothing herein shall permit any assignment by either Party. However, (i) BI may, without RVDC’s consent assign its rights and obligations under this Agreement to any of its Affiliated Companies, or (ii) either Party may, without the other Party’s consent assign this Agreement in its entirety to its successor to all or substantially all of its business or assets to which this Agreement relates, unless such successor does not have the financial resources to perform such Party’s obligations under this Agreement in the reasonable judgment of the other Party. In case of an assignment, the assigning party shall immediately notify the other Party about the intended or executed assignment, as applicable, and the assignee. Any assignment of this Agreement that is not in conformance with this Section shall be null, void and of no legal effect.

13.8 This Mutual Settlement, Release and License Agreement (which includes all exhibits hereto) constitutes the entire agreement between the Parties regarding the subject matter hereof and supersedes all prior representation and communications, whether oral or written, between the Parties relating thereto, with the exception of the CDA, and Sections 5.2, 6, 7, 8 and 9 of the TT and CSA Agreement, which shall all remain in full force and effect. The expiration or termination of this Agreement shall not affect any provisions designed to have effect even after expiration or termination of this Agreement which shall continue in full force and effect even after expiration or termination of this Agreement, in particular but not limited to Sections 1, 2, 3, 4, 5, 8.6.3, 10, 11, 12 and 13.

13.9 This Agreement shall be exclusively governed by and construed in accordance with the laws of the State of New York, USA, without regard to its conflict of laws provisions. The application of the [***].

The Parties agree that all disputes, claims or controversies arising out of, relating to, or in connection with this Agreement, including any question regarding its formation, existence, validity, enforceability, performance, interpretation, breach or termination, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce (“ICC”) by one arbitrator appointed in accordance with said rules. The

[***] = CERTAIN CONFIDENTIAL INFORMATION OMITTED

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exclusive place of arbitration shall be New York, State of New York, USA, and the proceedings shall be conducted in English language.

The award for arbitration shall be final and binding and may be enforced in any court of competent jurisdiction against BI or RVDC. Nothing in this Section 13.9 shall prevent any Party, before an arbitration has commenced hereunder or any time thereafter during such arbitration proceedings, from seeking conservatory and interim measures, including, but not limited to temporary restraining orders or preliminary injunctions, or their equivalent, from any court of competent jurisdiction.

The Parties further agree that

except as may be otherwise required by law, neither Party, its witnesses, or the arbitrator may disclose the existence, content, results of the arbitration hereunder without prior written consent of both Parties; and

neither Party shall be required to give general discovery of documents, but may be required only to produce specific, identified documents, or narrow and specific categories of documents, which are relevant to the case and material to its outcome and reasonably believed to be in the custody, possession or control of the other Party; and

decisions ex aequo et bono or in equity are not permissible.

The costs of the arbitration (including reasonable attorney’s fees and associated costs and expenses) shall be borne by the Parties in proportion to the outcome of the arbitration (taking into account the relative success of the claims and defenses of the Parties), as ordered by the arbitrator(s).

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IN WITNESS WHEREOF, BI and RVDC have executed this Mutual Settlement, Release and License Agreement on the Effective Date.

Boehringer lngelheim Biopharmaceuticals GmbH

Biberach, January 17, 2017


ppa.				ppa.

/s/ Alois Konrad Alois Konrad Vice President Business and Contract				/s/ Dr. Kathrin Knebusch Dr. Kathrin Knebusch Head of Global Legal Solutions

River Vision Development Corp.

New York, January 27, 2017

/s/ D Madden

D Madden

(name of signatory)

CEO

(title)

List of Exhibits:

Exhibit A: Project Plan including Project Timeline and Payment Schedule (version of Nov 15, 2016)

Exhibit B: Project-specific raw Materials (including resins)

Exhibit C: RVDC Confidential and/or Proprietary Material

Exhibit D: Project-specific samples (including legal retains)

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Exhibit 10.2

RELEASE AND WAIVER OF CLAIMS

In consideration of the payments and other benefits set forth in Section 4.4 of the Executive Employment Agreement dated March 5, 2014 including the First Amendment dated May 4, 2017, (the “Employment Agreement”), to which this form is attached, and the payments and other benefits set forth in Exhibit A, attached hereto, I, Robert F. Carey (“Carey”). hereby furnish Horizon Therapeutics, PLC and Horizon Pharma USA, Inc. (together the -Company”), with the following release and waiver (“Release and Waiver”).

In exchange for the consideration provided to me by the Employment Agreement and Exhibit A that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, Affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring relating to my employment or the termination thereof prior to my signing this Release and Waiver. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including, but not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including, but not limited to, claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including, but not limited to, claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the Illinois Human Rights Act, the Illinois Equal Pay Act, the Illinois Religious Freedom Restoration Act, and the Illinois Genetic Information Privacy Act. Notwithstanding the foregoing, this Release and Waiver, shall not release or waive my rights: to indemnification under the articles and bylaws of the Company or applicable law; to payments under Sections 4.4.3(i) and 4.4.4(ii) of the Employment Agreement; under any provision of the Employment Agreement that survives the termination of that agreement; under any applicable workers’ compensation statute; under any option, restricted share or other agreement concerning any equity interest in the Company; as a shareholder of the Company; any payments described in Exhibit A attached to this Release and Waiver; or any other right that is not waivable under applicable law.

I acknowledge that, among other rights, I am waiving and releasing any rights I may have under ADEA, that this Release and Waiver is knowing and voluntary, and that the consideration given for this Release and Waiver is in addition to anything of value to which I was already entitled as an executive of the Company. If I am 40 years of age or older upon execution of this Release and Waiver, I further acknowledge that I have been advised, as required by the Older Workers Benefit Protection Act, that: (a) the release and waiver granted herein does not relate to claims under the ADEA which may arise after this Release and Waiver is executed; (b) I should consult with an attorney prior to executing this Release and Waiver; and (c) I have twenty-one (21) days from the date of termination of my employment with the Company in which to consider this

Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier); (d) I have seven (7) days following the execution of this Release and Waiver to revoke my consent to this Release and Waiver; and (e) this Release and Waiver shall not be effective until the seven (7) day revocation period has expired unexercised. If I am less than 40 years of age upon execution of this Release and Waiver, I acknowledge that I have the right to consult with an attorney prior to executing this Release and Waiver (although I may choose voluntarily not to do so); and (c) I have five (5) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier).

I acknowledge my continuing obligations under my Confidential Information and Inventions Agreement dated March 11, 2014. Pursuant to the Confidential Information and Inventions Agreement I understand that among other things, I must not use or disclose any confidential or proprietary information of the Company and I must immediately return all Company property and documents (including all embodiments of proprietary information) and all copies thereof in my possession or control. I understand and agree that my right to the payments and other benefits I am receiving in exchange for my agreement to the terms of this Release and Waiver is contingent upon my continued compliance with my Confidential Information and Inventions Agreement.

This Release and Waiver (including Exhibit A), the Employment Agreement and my Confidential Information and Inventions Agreement dated March 11, 2014, constitute the complete, final and exclusive embodiment of the entire agreement between the Company and me, with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein. This Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.



Date:		9/18/19



By:		/s/ Robert F. Carey
		Robert F. Carey

Exhibit A - Severance Terms — Bob Carey

•

61-years old + 5 years of service

•

Last Date of Service: 10/1/2019

•

The Company will pay Carey a severance payment in the amount of $702,846.00, representing Carey’s base pay for 15 months following the Last Date of Service, to be paid in equal installments. Payments will commence on the first regular payroll date following the Last Date of Service and the Company shall continue to pay Carey through December 31, 2020 in accordance with the Company’s regular payroll practices and shall be less applicable withholdings and deductions.

•

Provided Carey timely elects to participate in continued medical benefits under COBRA, and consistent with the terms of COBRA and the Company’s health insurance plan, the Company will continue to pay the same portion of Carey’s COBRA health insurance premiums, including any amounts that the Company paid for benefits to the qualifying family members of Carey, for 15 months following the Last Date of Service that it paid during Carey’s employment.

•

Carey shall be paid his 2019 bonus, which shall be calculated in the same manner and paid at the same time as Horizon’s named executive officers and in accordance with the terms described in the Company’s Form 14A filed with the SEC on April 8, 2019 (the “Proxy”).

•

Carey has the option of continuing to use the services of JMG paid by the company until December 31, 2020.

•

Long-Term Incentive Grants:

^○

Carey’s long-term incentive grants as of 10/1/19 will remain in place as if Carey continued to be employed by the Company

^○

Stock option grants will be exercisable through the option expiration date disclosed in the Proxy.

^○

The Time-Based Restricted Stock Units granted in January 2018 and 2019 will vest according to the original schedule.

^○

The Performance Share Units (“PSUs”) granted in 2018 and 2019 will be earned in accordance with the terms of the PSUs, calculated in the same manner as the named executive officers of the Company and vest according to the original schedule.

^○

The 2018 Cash Long-Term Incentive Program will vest and be paid according to the original schedule with $480.000 payable on 1/5/20 and $480,000 payable on 1/5/21.

•

These severance terms have been approved by the Company’s Compensation Committee, including the continued vesting. These severance terms shall remain confidential and shall not be disclosed by Carey at any time to any person other than Carey’s attorney or accountant, financial advisor, a governmental agency, or Carey’s immediate family, without the prior consent of an officer of Company. Additionally, the Parties acknowledge that nothing in this Release and Waiver shall prohibit Company from using or disclosing this, or any other information, for its legitimate business purposes, including, but not limited to, compliance with its legal obligations or to maintain its listing on the NASDAQ or any obtaining or maintaining a similar future

listing on any stock exchange.

Exhibit 10.3

EXECUTIVE EMPLOYMENT

AGREEMENT BY AND BETWEEN

HORIZON THERPEUTIC PUBLIC PLC AND HORIZON PHARMA USA, INC.

AND

ANDREW PASTERNAK

This Executive Employment Agreement (hereinafter referred to as the “Agreement”), is entered into by and between Horizon Therapeutics PLC., an Irish Public Limited Company, and its wholly owned subsidiary, Horizon Pharma USA, Inc., a Delaware corporation, each having a principal place of business at 150 S. Saunders Rd, Lake Forest IL 60045, (hereinafter referred to together as the “Company”) and Andrew Pasternak (hereinafter referred as to the “Executive”). The terms of this Agreement shall be effective commencing November 1, 2019 (the “Effective Date”).

RECITALS

WHEREAS, the Company desires assurance of association and services of the Executive in order to retain the Executive’s experience, skills, abilities, background and knowledge, and is willing to engage the Executive’s services on the terms and conditions set forth in this Agreement; and

WHEREAS, Executive desires to be in the employ of the Company, and is willing to accept such employment on the terms and conditions set forth in this Agreement.

AGREEMENT

1.	Employment.

1.1 Term. The Company hereby agrees to employ the Executive, and the Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement. Executive’s employment shall be governed under the terms set forth in this Agreement beginning on November 1, 2019 and shall continue until it is terminated pursuant to Section 4 herein (hereinafter referred to as the “Term”).

1.2 Title. From and after the Effective Date the Executive will have the title of Executive Vice President, Chief Business Officer (such position held by Executive during such period is hereinafter referred to as “EVP CBO”) and Executive shall serve in such other capacity or capacities commensurate with his position as EVP CBO as the President and CEO of the Company may from time to time prescribe.

1.3 Duties. The Executive shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and shall have the authority and responsibilities which are generally associated with the position of Executive Vice President, Chief Business Officer, including business development, mergers and acquisitions, corporate strategy, commercial development and portfolio management. The Executive shall report to the President and CEO.

1.4 Policies and Practices. The employment relationship between the Parties shall be governed by this Agreement and the policies and practices established by the Company and the Board of Directors (hereinafter referred to as the “Board”). In the event that the terms of this Agreement differ from or are in conflict with the Company’s policies or practices or the Company’s Employee Handbook, this Agreement shall control.

1.5 Location. The Executive shall perform the services the Executive is required to perform pursuant to this Agreement in at the Company’s U.S. Headquarters in Lake Forest Illinois. The Company may from time to time require the Executive to travel temporarily to other locations outside of Lake Forest, Illinois area in connection with the Company’s business.

2.	Loyalty of Executive.

2.1 Loyalty. During the Executive’s employment by the Company, the Executive shall devote the Executive’s business energies, interest, abilities and productive time to the proper and efficient performance of Executive’s duties under this Agreement. Subject to the prior written consent of the President and CEO, the Executive is permitted to serve on the board of directors of one other company, so long as the other company does not compete with the Company.

2.2 Exclusive Employment. Except with the prior written consent of the Chief Executive Officer, Executive shall not, during the term of this Agreement, undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in any civic and not-for-profit activities so long as such activities do not materially interfere with the performance of his duties hereunder or present a conflict of interest with the Company.

2.3 Agreement not to Participate in Company’s Competitors. During the Term of this Agreement, the Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise or in any company, person or entity that is, directly or indirectly, in competition with the business of the Company or any of its affiliates. Notwithstanding the foregoing, Executive may invest and/or maintain investments in any public or private entity up to an amount of 2% of an entity’s fully diluted shares and on a passive basis.

3.	Compensation to Executive.

3.1 Base Salary. The Company shall pay the Executive a base salary at the initial annualized rate of six hundred fifty thousand dollars ($650,000.00) per year, subject to standard deductions and withholdings, or such higher rate as may be determined from time to time by the Board or the compensation committee thereof (hereinafter referred to as the “Base Salary”). Such Base Salary shall be paid in accordance with the Company’s standard payroll practice. Payments of salary installments shall be made no less frequently than once per month. Executive’s Base Salary will be reviewed annually each December and Executive shall be eligible to receive a salary increase (but not decrease) annually in

an amount to be determined by the Board or the compensation committee thereof in its sole and exclusive discretion. Once increased, the new salary shall become the Base Salary for purposes of this Agreement and shall not be reduced without the Executive’s written consent. Any material reduction in the Base Salary of the Executive, without his written consent, may be deemed Good Reason as set forth in and subject to Section 4.5.2 of this Agreement.

3.2 Sign-On Bonus. Executive shall be entitled to a one time sign on bonus equal to seven hundred fifty thousand dollars ($750,000) (hereinafter referred to as the “Sign On Bonus”), subject to standard deductions and withholdings. The Sign On Bonus shall be paid to Executive as follows: (1) five hundred thousand dollars ($500,000) paid on or before November 15, 2019, which shall be reimbursed to Company by Executive if his employment is terminated on or before November 15, 2021 by Company for “Cause,” as defined in section 4.5.3 of this Agreement, or by Executive Without Good Reason, as described in section 4.2.2 of this Agreement, within 15 days of any such termination; and (2) two hundred fifty thousand dollars ($250,000) paid on or before November 15, 2020, provided that if his employment is terminated on or before November 15, 2022 by Company for “Cause,” as defined in section 4.5.3 of this Agreement, or by Executive Without Good Reason, as described in section 4.2.2 of this Agreement, Executive shall reimburse such two hundred fifty thousand dollars ($250,000) to Company, within 15 days of any such termination. In the event that Executive is terminated Without Cause or terminates for Good Reason, or is unable to perform his duties as the result of death or disability, the entire amount of the Sign On Bonus, minus any amounts already paid, shall be paid to Executive pursuant to the schedule herein described.

3.3 Discretionary Bonus. Provided the Executive meets the conditions stated in this Section 3.2, the Executive shall be eligible for an annual discretionary bonus (hereinafter referred to as the “Bonus”) with a target amount of sixty percent (60%) of the Executive’s Base Salary, subject to standard deductions and withholdings, based on the Board’s determination, in good faith, and based upon the Executive’s individual achievement and company performance objectives as set by the Board or the compensation committee thereof, of whether the Executive has met such performance milestones as are established for the Executive by the Board or the compensation committee thereof, in good faith, in consultation with the Executive (hereinafter referred to as the “Performance Milestones”). The Performance Milestones will be based on certain factors including, but not limited to, the Executive’s performance and the Company’s financial performance. The Executive’s Bonus target will be reviewed annually and may be adjusted by the Board or the compensation committee thereof in its discretion, provided however, that the Bonus target may only be materially reduced upon Executive’s written consent. The Executive must be employed on the date the Bonus is awarded to be eligible for the Bonus, subject to the termination provisions thereof. The Bonus shall be paid during the calendar year following the performance calendar year.

3.4 Equity Awards. As an inducement to the Executive’s commencement of employment with the Company, and subject to approval by the Compensation Committee, the Executive will be granted the following equity awards pursuant to and subject to the terms of the Horizon Pharma Public Limited Company 2014 Equity Incentive Plan (“2014

Equity Incentive Plan”) and its form of stock option and restricted stock unit award agreements, in the forms to be provided to Executive (collectively the “Equity Plan Documents”) and compliance with applicable securities laws:

3.4.1 Options.

Stock options to purchase ordinary shares of Horizon Pharma plc with a fair value of $1,100,000 as of November 1, 2019 (the “Option Award”). The number of ordinary shares subject to the Option Award will be calculated based on the fair value of the Option Award determined under the Black-Scholes Method as of November 1, 2019. The stock options associated with the Option Award will have an exercise price equal to the closing price of Horizon Therapeutics plc’s ordinary shares on the applicable date of grant, which will be November 1, 2019 (the “Vesting Commencement Date”). A portion of the Option Award consisting of 100,000 ordinary shares (or such lesser amount capable of qualifying for incentive stock option treatment) will comprise incentive stock options, with the remainder of the Option Award issued as nonstatutory stock options. Subject to Executive’s continued provision of services to the Company through the applicable vesting dates, the Option Award shall vest as follows: 1/3rd of the total number of options subject to the Option Award shall vest on the first anniversary of the Vesting Commencement Date, and thereafter 1/3rd of the total number of units subject to the Option Award shall vest on each anniversary thereafter, so that the Option Award would fully vest on the third anniversary of the Vesting Commencement Date, subject to Executive’s continued services with the Company through such date. All such vesting will be effected ratably across incentive stock options and nonstatutory stock options.

3.4.2 RSUs. A restricted stock unit award in respect of a number of ordinary shares of Horizon Therapeutics plc having a fair value of $1,100,000 as of November 1, 2019, which will be the applicable date of grant (the “RSU Award”). Subject to Executive’s continued provision of services to the Company through the applicable vesting dates, the RSU Award shall vest as follows: 1/3rd of the total number of units subject to the RSU Award shall vest on the first anniversary of the Vesting Commencement Date, and thereafter 1/3rd of the total number of units subject to the RSU Award shall vest on each anniversary thereafter, so that the RSU Award would fully vest on the third anniversary of the Vesting Commencement Date, subject to Executive’s continued services with the Company through such date.

3.4.3 Annual Long Term Incentive Plan. Executive will participate in the Annual Long-Term Incentive Plan (“ALTIP”) adopted by the Board of Directors for executives, and all applicable terms which may apply. The annual grant for the Executive shall be at the discretion of the Board of Directors and may be in a mix of RSUs and PSUs. The final target amount, vesting schedule and other terms and criteria for the ALTIP are to be determined at the sole discretion of the Board of Directors and may be subject to shareholder approval.

3.4.4 Legal Review. Upon the Executive’s submission of appropriate itemized proof and verification of reasonable and customary legal fees incurred by the

Executive in obtaining legal advice associated with the review, preparation, approval, and execution of this Agreement, the Company shall pay for up to $10,000.00 of such legal fees subject to receipt of appropriate proof and verification of such legal fees no later than sixty (60) days of receipt of an invoice for legal services from the Executive and/or his attorneys. To be eligible for reimbursement, the invoice must be submitted no later than ninety (90) days after the legal fees are incurred.

3.5 Changes to Compensation. The Executive’s compensation may be changed from time to time by mutual agreement of the Executive and the Company. In the event that the Executive’s base salary is materially decreased without his written consent, said decrease will be Good Reason for the Executive to terminate the Agreement as set forth in and subject to Section 4.5.2 of this Agreement.

3.6 Taxes. All amounts paid under this Agreement to the Executive by the Company will be paid less applicable tax withholdings and any other withholdings required by law or authorized by the Executive.

3.7 Benefits. The Executive shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible to participate in benefits under any executive benefit plan or arrangement which may be in effect from time to time and made available to the Company’s executives or key management employees, provided, however, that the Executive shall be entitled to at least four (4) weeks of paid vacation annually.

4.	Termination.

4.1 Termination by the Company. The Executive’s employment with the Company may be terminated only under the following conditions:

4.1.1 Termination for Death or Disability. The Executive’s employment with the Company shall terminate effective upon the date of the Executive’s death or “Complete Disability” (as defined in Section 4.5.1), provided, however, that this Section 4.1.1 shall in no way limit the Company’s obligations to provide such reasonable accommodations to the Executive and/or his heirs as may be required by law.

4.1.2 Termination by the Company For Cause. The Company may terminate the Executive’s employment under this Agreement for “Cause” (as defined in Section 4.5.3) by delivery of written notice to the Executive specifying the Cause or Causes relied upon for such termination, provided that such notice is delivered within two (2) months following the occurrence or discovery of any event or events constituting “Cause”. Any notice of termination given pursuant to this Section 4.1.2 shall effect termination as of the date of the notice or such date as specified in the notice. The Executive shall have the right to appear before the CEO before any termination for Cause becomes effective and binding upon the Executive.

4.1.3 Termination by the Company Without Cause. The Company may terminate the Executive’s employment under this Agreement at any time and for any reason or no reason subject to the requirements set out in Section 4.4 of this Agreement. Such termination shall be effective on the date the Executive is so informed or as otherwise

specified by the Company, pursuant to notice requirements set forth in Section 6 of this Agreement.

4.2 Termination By The Executive. The Executive may terminate his employment with the Company at any time and for any reason or no reason, including, but not limited, to the following conditions:

4.2.1 Good Reason. The Executive may terminate his employment under this Agreement for “Good Reason” (as defined below in Section 4.5.2) by delivery of written notice to the Company specifying the Good Reason relied upon by the Executive for such termination in accordance with the requirements of such section.

4.2.2 Without Good Reason. The Executive may terminate the Executive’s employment hereunder for other than Good Reason upon thirty (30) days written notice to the Company.

4.3 Termination by Mutual Agreement of the Parties. The Executive’s employment pursuant to this Agreement may be terminated at any time upon a mutual agreement in writing of the Parties. Any such termination of employment shall have the consequences specified in such mutual agreement.

4.4 Compensation to Executive Upon Termination. In connection with any termination of the Executive’s employment for any reason, the Executive or the Executive’s estate, as applicable, shall be entitled to any amounts payable to the Executive or the Executive’s beneficiaries subject to and accordance with the terms of the Company’s employee welfare benefit plans or policies (excluding any severance pay).

4.4.1 Death or Complete Disability. If the Executive’s employment shall be terminated by death or Complete Disability as provided in Section 4.1.1, the Company shall pay to Executive, and/or Executive’s heirs, all earned but unpaid Base Salary, any earned but unpaid discretionary bonuses for any prior period at such time as bonuses would have been paid if the Executive remained employed, all accrued but unpaid business expenses, and all accrued but unused vacation time earned through the date of termination at the rate in effect at the time of termination (hereinafter referred to as the “Accrued Amounts”), less standard deductions and withholdings. The Executive shall also be eligible to receive a pro-rated bonus for the year of termination, as determined by the Board or the Compensation Committee of the Board based on actual performance and the period of the year he was employed (hereinafter referred to as the “Pro-rata Bonus”), less standard deductions and withholdings, to be paid as a lump sum within thirty (30) days after the date of termination.

4.4.2 With Cause or Without Good Reason. If the Executive’s employment shall be terminated by the Company for Cause, or if the Executive terminates employment hereunder without Good Reason, the Company shall pay the Executive’s Base Salary, accrued but unpaid business expenses and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of termination, less standard deductions and withholdings.

4.4.3 Without Cause or For Good Reason.

(i) Not in Connection With a Change in Control. If the Company terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason, and Section 4.4.3(ii) below does not apply, the Company shall pay the Accrued Amounts subject to standard deductions and withholdings, to be paid as a lump sum no later than thirty (30) days after the date of termination. In addition, subject to the limitations stated in this Agreement and upon the Executive’s furnishing to the Company an executed waiver and release of claims (the form of which is attached hereto as Exhibit A) (the “Release”) within the applicable time period set forth therein, but in no event later than forty-five days following termination of employment and permitting such Release to become effective in accordance with its terms (the “Release Effective Date”), and subject to Executive entering into no later than the Release Effective Date a non-competition agreement to be effective during the Severance Period (as defined below), substantially similar to Section 2.3, and continuing to abide by its terms during the Severance Period, the Executive shall be entitled to:

(a) the equivalent of the Executive’s Base Salary in effect at the time of termination will continue to be paid for a period of twelve (12) months following the date of termination (hereinafter referred to as the “Non Change in Control Severance Period”), less standard deductions and withholdings, to be paid during the Non Change in Control Severance Period according to the Company’s regular payroll practices, subject to any delay in payment required by Section 4.6 in connection with the Release Effective Date; and

(b) in the event the Executive timely elects continued coverage under COBRA, the Company will continue to pay the same portion of Executive’s COBRA health insurance premium as the percentage of health insurance premiums that it paid during the Executive’s employment, including any amounts that Company paid for benefits to the qualifying family members of the Executive, following the date of termination up until the earlier of either (i) the last day of the Non Change in Control Severance Period or, (ii) the date on which the Executive begins full-time employment with another company or business entity which offers comparable health insurance coverage to the Executive (such period, the “Non Change in Control COBRA Payment Period”). Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay Executive a taxable cash amount, which payment shall be made regardless of whether the Executive or his qualifying family members elect COBRA continuation coverage (the “Health Care Benefit Payment”). The Health Care Benefit Payment shall be paid in monthly or bi-weekly installments on the same schedule that the COBRA premiums would otherwise have been paid to the insurer. The Health Care Benefit Payment shall be equal to the amount that the Company otherwise would have paid for COBRA insurance premiums (which amount shall be calculated based on the

premium for the first month of coverage), and shall be paid until the expiration of the Non Change in Control COBRA Payment Period.

(ii) In Connection With a Change in Control. If the Company (or its successor) terminates the Executive’s employment without Cause or the Executive terminates his employment for Good Reason within the period commencing three (3) months immediately prior to a Change in Control of the Company and ending eighteen (18) months immediately following a Change in Control of the Company (as defined in Section 4.5.4 of this Agreement), the Executive shall receive the Accrued Amounts subject to standard deductions and withholdings, to be paid as a lump sum no later than thirty (30) days after the date of termination. In addition, subject to the limitations stated in this Agreement and upon the Executive’s furnishing to the Company (or its successor) an executed Release within the applicable time period set forth therein, but in no event later than forty-five days following termination of employment and permitting such Release to become effective in accordance with its terms, and subject to Executive entering into no later than the Release Effective Date a non-competition agreement to be effective during the Severance Period, substantially similar to Section 2.3, and continuing to abide by its terms during the Severance Period, then in lieu of (and not additional to) the benefits provided pursuant to Section 4.4.3(i) above, the Executive shall be entitled to:

(a) the equivalent of the Executive’s Base Salary in effect at the time of termination will continue to be paid for a period of eighteen (18) months following the date of termination (hereinafter referred to as the “Change in Control Severance Period”), less standard deductions and withholdings, to be paid during the Change in Control Severance Period according to the Company’s regular payroll practices, subject to any delay in payment required by Section 4.6 in connection with the Release Effective Date;

(b) one and half (1.5) times Executive’s target Bonus in effect at the time of termination, or if none, one and half (1.5) times the last target Bonus in effect for Executive, less standard deductions and withholdings, to be paid in a lump sum within ten (10) days following the later of (i) the Release Effective Date, or (ii) the effective date of the Change in Control; and

(c) in the event the Executive timely elects continued coverage under COBRA, the Company will continue to pay the same portion of Executive’s COBRA health insurance premium as the percentage of health insurance premiums that it paid during the Executive’s employment, including any amounts that Company paid for benefits to the qualifying family members of the Executive, following the date of termination until the expiration of the Change in Control Severance Period. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay Executive the Health Care Benefit Payment, which payment shall be made regardless of whether the Executive or his qualifying family members elect COBRA continuation coverage. The Health Care Benefit

Payment shall be paid in monthly or bi-weekly installments on the same schedule that the COBRA premiums would otherwise have been paid to the insurer. The Health Care Benefit Payment shall be equal to the amount that the Company otherwise would have paid for COBRA insurance premiums (which amount shall be calculated based on the premium for the first month of coverage), and shall be paid until the expiration of the Change in Control Severance Period.

(iii) No Duplication of Benefits. For the avoidance of doubt, in no event will Executive be entitled to benefits under Section 4.4.3(i) and Section 4.4.3(4 If Executive commences to receive benefits under Section 4.4.3(i) due to a qualifying termination prior to a Change in Control and thereafter becomes entitled to benefits under Section 4.4.3(4), any benefits provided to Executive under Section 4.4.3(i) shall offset the benefits to be provided to Executive under Section 4.4.3(4) and shall be deemed to have been provided to Executive pursuant to Section 4.4.3(4).

4.4.4 Equity Award Acceleration.

(i) Not in Connection With a Change in Control. In the event that the Executive’s employment is terminated without Cause or for Good Reason and Section 4.4.4 (ii) below does not apply, the vesting of any equity awards granted to Executive that vest solely subject to Executive’s continued services to the Company (the “Time-Based Vesting Equity Awards”) shall be deemed vested and immediately exercisable (if applicable) by the Executive with respect to such number of shares as determined in accordance with their applicable vesting schedules as if Executive had provided an additional twelve (12) months of services as of the date of termination. Treatment of any performance based vesting equity awards will be governed solely by the terms of the agreements under which such awards were granted and will not be eligible to accelerate vesting pursuant to the foregoing provision.

(ii) In Connection With a Change in Control. In the event that the Executive’s employment is terminated without Cause or for Good Reason within the three (3) months immediately preceding or during the eighteen (18) months immediately following a Change in Control of the Company (as defined in Section 4.5.4 of this Agreement), the vesting of any Time-Based Vesting Equity Awards granted to Executive shall be fully accelerated such that on the effective date of such termination (or if later, the date of the Change in Control) one hundred percent (100%) of any Time-Based Vesting Equity Awards granted to Executive prior to such termination shall be fully vested and immediately exercisable, if applicable, by the Executive. Treatment of any performance based vesting equity awards will be governed solely by the terms of the agreements under which such awards were granted and will not be eligible to accelerate vesting pursuant to the foregoing provision.

(i) Release and Waiver. Any equity vesting acceleration pursuant to this Section 4.4.4 shall be conditioned upon and subject to the Executive’s delivery to the Company of a fully effective Release in accordance with the terms specified by Section 4.4.3 hereof and such vesting acceleration benefit shall be in addition to the benefits provided by Section 4.4.3 hereof.

4.5 Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

4.5.1 Complete Disability. “Complete Disability” shall mean the inability of the Executive to perform the Executive’s duties under this Agreement, whether with or without reasonable accommodation, because the Executive has become permanently disabled within the meaning of any policy of disability income insurance covering employees of the Company then in force. In the event the Company has no policy of disability income insurance covering employees of the Company in force when the Executive becomes disabled, the term “Complete Disability” shall mean the inability of the Executive to perform the Executive’s duties under this Agreement, whether with or without reasonable accommodation, by reason of any incapacity, physical or mental, which the Board, based upon medical advice or an opinion provided by a licensed physician, determines to have incapacitated the Executive from satisfactorily performing all of the Executive’s usual services for the Company, with or without reasonable accommodation, for a period of at least one hundred eighty (180) days during any twelve (12) month period that need not be consecutive.

4.5.2 Good Reason. “Good Reason” for the Executive to terminate the Executive’s employment hereunder shall mean the occurrence of any of the following events without the Executive’s consent:

(i) a material reduction in the Executive’s duties, authority, or responsibilities relative to the duties, authority, or responsibilities in effect immediately prior to such reduction, including by way of example, having the same title, duties, authority and responsibilities at a subsidiary level following a Change in Control;

(ii) the relocation of the Executive’s primary work location to a point more than fifty (50) miles from the Executive’s current work location set forth in Section 1.5 that requires a material increase in Executive’s one-way driving distance;

(iii) a material reduction by the Company of the Executive’s base salary or annual target Bonus opportunity, without the written consent of the Executive, as initially set forth herein or as the same may be increased from time to time pursuant to this Agreement; and

(iv) a material breach by the Company of Section 1.2 of this Agreement.

Provided, however that, such termination by the Executive shall only be deemed for Good Reason pursuant to the foregoing definition if (i) the Company is given written notice from the Executive within sixty (60) days following the first occurrence of the condition that he considers to constitute Good Reason describing the condition and the Company fails to satisfactorily remedy such condition within thirty (30) days following such written notice, and (ii) the Executive terminates employment within thirty (30) days following the end of the period within which the Company was entitled to remedy the condition constituting Good Reason but failed to do so.

4.5.3 Cause. “Cause” for the Company to terminate Executive’s employment hereunder shall mean the occurrence of any of the following events, as determined reasonably and in good faith by the Board or a committee designated by the Board:

(i) the Executive’s gross negligence or willful failure to substantially perform his duties and responsibilities to the Company or willful and deliberate violation of a Company policy;

(ii) the Executive’s conviction of a felony or the Executive’s commission of any act of fraud, embezzlement or dishonesty against the Company or involving moral turpitude that is likely to inflict or has inflicted material injury on the business of the Company, to be determined by the sole discretion of the Company;

(iii) the Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party that the Executive owes an obligation of nondisclosure as a result of the Executive’s relationship with the Company; and

(iv) the Executive’s willful and deliberate breach of the obligations under this Agreement that causes material injury to the business of the Company.

4.5.4 Change in Control. For purposes of this Agreement, “Change in Control” means: (i) a sale of all or substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving entity and in which the holders of the Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the entity surviving such transaction or, where the surviving entity is a wholly-owned subsidiary of another entity, the surviving entity’s parent; (iii) a reverse merger in which the Company is the surviving entity but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities of the surviving entity’s parent, cash or otherwise, and in which the holders of the Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the Company or, where the Company is a wholly-owned subsidiary of another entity, the Company’s parent; or (iv) an acquisition by any person, entity or group (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or subsidiary of the Company or other entity controlled by the Company) of the beneficial ownership of securities of the Company representing at least seventy-five percent (75%) of the combined voting power entitled to vote in the election of Directors; provided, however, that nothing in this paragraph shall apply to a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

4.6 Application of Internal Revenue Code Section 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this

Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A.

It is intended that each installment of the Severance Benefits payments provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and Executive is, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after Executive’s Separation From Service, or (ii) the date of Executive’s death (such applicable date, the “Specified Employee Initial Payment Date”), the Company (or the successor entity thereto, as applicable) shall (A) pay to Executive a lump sum amount equal to the sum of the Severance Benefit payments that Executive would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of the Severance Benefits had not been so delayed pursuant to this Section and (B) commence paying the balance of the Severance Benefits in accordance with the applicable payment schedules set forth in this Agreement.

Notwithstanding anything to the contrary set forth herein, Executive shall receive the Severance Benefits described above, if and only if Executive duly executes and returns to the Company within the applicable time period set forth therein, but in no event more than forty-five days following Separation From Service, the Company’s standard form of release of claims in favor of the Company (attached to this Agreement as Exhibit A) (the “Release”) and permits the release of claims contained therein to become effective in accordance with its terms (such latest permitted date, the “Release Deadline”). If the severance benefits are not covered by one or more exemptions from the application of Section 409A and the Release could become effective in the calendar year following the calendar year in which Executive separates from service, the Release will not be deemed effective any earlier than the Release Deadline. Notwithstanding any other payment schedule set forth in this Agreement, none of the Severance Benefits will be paid or otherwise delivered prior to the effective date (or deemed effective date) of the Release. Except to the extent that payments may be delayed until the Specified Employee Initial Payment Date pursuant to the preceding paragraph, on the first regular payroll pay day

following the effective date of the Release, the Company will pay Executive the Severance Benefits Executive would otherwise have received under the Agreement on or prior to such date but for the delay in payment related to the effectiveness of the Release, with the balance of the Severance Benefits being paid as originally scheduled.

The severance benefits are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.

4.7 Application of Internal Revenue Code Section 280G. If any payment or benefit Executive would receive pursuant to a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the manner that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata.

In the event it is subsequently determined by the Internal Revenue Service that some portion of the Reduced Amount as determined pursuant to clause (x) in the preceding paragraph is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment so that no portion of the Reduced Amount is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount is determined pursuant to clause (y) in the preceding paragraph, Executive will have no obligation to return any portion of the Payment pursuant to the preceding sentence.

Unless Executive and the Company agree on an alternative accounting firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.

The Company shall use commercially reasonable efforts to cause the accounting firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the Company within fifteen (15)

calendar days after the date on which Executive’s right to a Payment is triggered (if requested at that time by Executive or the Company) or such other time as requested by Executive or the Company.

4.8 Indemnification Agreements. Concurrently with the execution of this Agreement, the Company and the Executive shall enter into indemnification agreements, copies of which are attached hereto as Exhibit B-1 and Exhibit B-2.

4.9 Confidential Information and Invention Assignment Agreement. The Executive shall execute the Company’s Confidential Information and Invention Assignment Agreement the terms of which shall govern the terms of Executive’s employment following the Effective Date, and a copy of which is attached as Exhibit C.

4.10 No Mitigation or Offset. The Executive shall not be required to seek or accept other employment, or otherwise to mitigate damages, as a condition to receipt of the Severance Benefits, and the Severance Benefits shall not he offset by any amounts received by the Executive from any other source, except to the extent that the Executive’s rights to the benefits described in Sections 4.4.3(i)(b) or 4.4.3(ii)(c), as applicable, are terminated by reason of the Executive obtaining full-time employment with another company or business entity which offers comparable health insurance coverage.

5.	Assignment and Binding Effect.

This Agreement shall be binding upon the Executive and the Company and inure to the benefit of the Executive and the Executive’s heirs, executors, personal representatives, assigns, administrators and legal representatives. Because of the unique and personal nature of the Executive’s duties under this Agreement, neither this Agreement nor obligations under this Agreement shall be assignable by the Executive. This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives, provided that the Agreement may only be assigned to an acquirer of all or substantially all of the Company’s assets. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.

6.	Notice.

For the purposes of this Agreement, notices, demands, and all other forms of communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or (unless otherwise specified) mailed by registered mail, return receipt requested, postage prepaid, or by confirmed facsimile, addressed as set forth below, or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of address shall be effective only upon receipt, as follows:

If to the Company:

Horizon Therapeutics plc

Horizon Pharma USA, Inc.

150 S. Saunders Rd.

Lake Forest, IL 60045

Attention: Timothy P. Walbert, Chairman, President & CEO

Fax: 847-572-1372

If to the Executive:

Andrew Pasternak

410 Marshman Ave.

Highland Park, IL 60035

Any such written notice shall be deemed given on the earlier of the date on which such notice is personally delivered or five (5) days after its deposit in the United States mail as specified above. Either Party may change its address for notices by giving written notice to the other Party in the manner specified in this section.

7.	Choice of Law.

This Agreement shall be governed by the laws of the State of Illinois, without regard to any conflicts of law principals thereof that would call for the application of the laws of any other jurisdiction. The Parties consent to the exclusive jurisdiction and venue of the federal court in the Northern District of Illinois, and state courts located in the state of Illinois, county of Cook. Nothing in this Section 7 limits the rights of the Parties to seek appeal of a decision of an Illinois court outside of Illinois that has proper jurisdiction over the decision of a court sitting in Illinois.

8.	Integration.

This Agreement, including Exhibit A, Exhibit B, Exhibit C, the 2014 Equity Incentive Plan and the Equity Plan Documents, contains the complete, final and exclusive agreement of the Parties relating to the terms and conditions of the Executive’s employment and the termination of Executive’s employment, and supersedes all prior and contemporaneous oral and written employment agreements or arrangements between the Parties.

9.	Amendment.

This Agreement cannot be amended or modified except by a written agreement signed by the Executive and the Company.

10.

Waiver.

No term, covenant or condition of this Agreement or any breach thereof shall be deemed waived, except with the written consent of the Party against whom the wavier is claimed, and any waiver or any such term, covenant, condition or breach shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term, covenant, condition or breach.

11.

Severability.

The finding by a court of competent jurisdiction of the unenforceability, invalidity or illegality of any provision of this Agreement shall not render any other provision of this Agreement unenforceable, invalid or illegal. Such court shall have the authority to modify or replace the invalid or unenforceable term or provision with a valid and enforceable term or provision, which most accurately represents the Parties’ intention with respect to the invalid, unenforceable, or illegal term or provision.

12.

Interpretation; Construction.

The headings set forth in this Agreement are for convenience of reference only and shall not be used in interpreting this Agreement. This Agreement has been drafted and negotiated by legal counsel representing the Company and the Executive. The Parties acknowledge that each Party and its counsel has reviewed and revised, or had an opportunity to review and revise, this Agreement, and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

13.

Execution by Facsimile Signatures and in Counterparts.

The parties agree that facsimile signatures shall have the same force and effect as original signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

14.

Survival.

The provisions of this Agreement, and of all other agreements referenced herein, shall survive the termination of this Agreement, and of the Executive’s employment by the Company for any reason, to the extent necessary to enable the parties to enforce their respective rights hereunder.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREFORE, the parties have signed this Agreement on the date first written above.

COMPANY:

HORIZON THERAPEUTICS PLC and HORIZON PHARMA USA, INC.

By:

Title: Chairman, President & CEO

Print Name: Timothy P. Walbert

/s/ Timothy P. Walbert

Signature:

As authorized agent of the Company

EXECUTIVE:

ANDREW PASTERNAK

/s/ Andrew Pasternak

Andrew Pasternak, individually

EXHIBIT A

RELEASE AND WAIVER OF CLAIMS

In consideration of the payments and other benefits set forth in Section 4.4 of the Executive Employment Agreement dated (the “Employment Agreement”), to which this form is attached, I, Andrew Pasternak, hereby furnish Horizon Pharma, Inc. and Horizon Pharma USA, Inc. (together the “Company”), with the following release and waiver (“Release and Waiver”).

In exchange for the consideration provided to me by the Employment Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, Affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring relating to my employment or the termination thereof prior to my signing this Release and Waiver. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including, but not limited to, salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including, but not limited to, claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including, but not limited to, claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the Illinois Human Rights Act, the Illinois Equal Pay Act, the Illinois Religious Freedom Restoration Act, and the Illinois Genetic Information Privacy Act. Notwithstanding the foregoing, this Release and Waiver, shall not release or waive my rights: to indemnification under the articles and bylaws of the Company or applicable law; to payments under Sections of the Employment Agreement; under any provision of the Employment Agreement that survives the termination of that agreement; under any applicable workers’ compensation statute; under any option, restricted share or other agreement concerning any equity interest in the Company; as a shareholder of the Company or any other right that is not waivable under applicable law.

Release and Waiver is executed; (b) I should consult with an attorney prior to executing this Release and Waiver; and (c) I have twenty-one (21) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier); (d) I have seven (7) days following the execution of this Release and Waiver to revoke my consent to this Release and Waiver; and (e) this Release and Waiver shall not be effective until the seven (7) day revocation period has expired unexercised. If I am less than 40 years of age upon execution of this Release and Waiver, I acknowledge that I have the right to consult with an attorney prior to executing this Release and Waiver (although I may choose voluntarily not to do so); and (c) I have five (5) days from the date of termination of my employment with the Company in which to consider this Release and Waiver (although I may choose voluntarily to execute this Release and Waiver earlier).

I acknowledge my continuing obligations under my Confidential Information and Inventions Agreement dated , . Pursuant to the Confidential Information and Inventions Agreement I understand that among other things, I must not use or disclose any confidential or proprietary information of the Company and I must immediately return all Company property and documents (including all embodiments of proprietary information) and all copies thereof in my possession or control. I understand and agree that my right to the payments and other benefits I am receiving in exchange for my agreement to the terms of this Release and Waiver is contingent upon my continued compliance with my Confidential Information and Inventions Agreement.

This Release and Waiver, including my Confidential Information and Inventions Agreement dated , constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and me with regard to the subject matter hereof. I am not relying on any promise or representation by the Company that is not expressly stated herein. This Release and Waiver may only be modified by a writing signed by both me and a duly authorized officer of the Company.

Date:

By:

Andrew Pasternak

Exhibit 31.1

Certification of Principal Executive Officer

I, Timothy Walbert, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Horizon Therapeutics PLC (the “registrant”);

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2019

/s/ Timothy Walbert

Timothy Walbert

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

Certification of Principal Financial Officer

I, Paul W. Hoelscher, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Horizon Therapeutics PLC (the “registrant”);

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2019

/s/ Paul W. Hoelscher

Paul W. Hoelscher

Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350), I, Timothy Walbert, President, Chief Executive Officer and Chairman of the Board of Horizon Therapeutics PLC (the “Company”), certify to the best of my knowledge that:

the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2019 (the “Report”), to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2019		/s/ Timothy Walbert
		Timothy Walbert
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Exhibit 32.2

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. Section 1350, I, Paul W. Hoelscher, Executive Vice President and Chief Financial Officer of Horizon Therapeutics PLC (the “Company”), certify to the best of my knowledge that:

the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2019 (the “Report”), to which this Certification is attached as Exhibit 32.2, fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2019		/s/ Paul W. Hoelscher
		Paul W. Hoelscher
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)