Horizon Pharma Public Limited Company
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`Horizon Pharma plc
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`2014 Irish Statutory Accounts
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`Horizon Pharma Public Limited Company
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`CONTENTS
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`DIRECTORS AND OTHER INFORMATION 2
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`DIRECTORS' REPORT 3 - 52
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`INDEPENDENT AUDITORS' REPORT 53 - 54
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`CONSOLIDATED PROFIT AND LOSS ACCOUNT 55
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`CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 56
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`CONSOLIDATED BALANCE SHEET 57 - 58
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`CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY 59
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`CONSOLIDATED STATEMENT OF CASH FLOWS 60
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`NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 61 - 104
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`PARENT COMPANY BALANCE SHEET 105
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`NOTES TO THE PARENT COMPANY BALANCE SHEET
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` 106 - 111
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`2
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`Horizon Pharma Public Limited Company
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`DIRECTORS AND OTHER INFORMATION
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`Board of Directors at December 31, 2014
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`Timothy P. Walbert
`Michael Grey
`William F. Daniel
`Jeff Himawan, Ph.D.
`Virinder Nohria, M.D., Ph.D.
`Ronald Pauli
`Gino Santini
`H. Thomas Watkins
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`Secretary and Registered Office
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`David G. Kelly
`Connaught House
`1st Floor
`1 Burlington Road
`Dublin 4
`Ireland
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`Registered Number: 507678
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`Auditors
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`PricewaterhouseCoopers
`Chartered Accountants and Registered Auditors
`One Spencer Dock
`North Wall Quay
`Dublin 1
`Ireland
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`Horizon Pharma Public Limited Company
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`DIRECTORS’ REPORT
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`The directors present their report and the audited financial statements of the Company (as defined below) for the year ended
`December 31, 2014.
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`Basis of Presentation
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`The accompanying consolidated financial statements reflect the consolidated operations of Horizon Pharma Public Limited
`Company (“Horizon Pharma plc”) and its subsidiaries.
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`On September 19, 2014, the businesses of Horizon Pharma, Inc. (“HPI”) and Vidara Therapeutics International Public Limited
`Company (“Vidara”) were combined in a merger transaction (the “Merger”), accounted for as a reverse acquisition under the
`acquisition method of accounting for business combinations, with HPI treated as the acquiring company in the Merger for accounting
`purposes. As part of the Merger, a wholly-owned subsidiary of Vidara merged with and into HPI, with HPI surviving the Merger as a
`wholly-owned subsidiary of Vidara and Vidara changed its name to Horizon Pharma plc (“New Horizon” or the “Company”).
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`Unless otherwise indicated or the context otherwise requires, references to the “Company”, the “Group”, “New Horizon”, “we”,
`“us” and “our” refer to Horizon Pharma plc and its consolidated subsidiaries, including its predecessor, HPI. All references to
`“Vidara” are references to Horizon Pharma plc (formerly known as Vidara Therapeutics International Public Limited Company) and
`its consolidated subsidiaries prior to the effective time of the Merger on September 19, 2014. The disclosures in this report relating to
`the pre-Merger business of Horizon Pharma plc, unless noted as being the business of Vidara prior to the Merger, pertain to the
`business of HPI prior to the Merger.
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`Upon the consummation of the Merger, the historical financial statements of HPI became the Group’s historical financial
`statements. Accordingly, the historical financial statements of HPI are included in the comparative prior periods in the consolidated
`financial statements.
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`The directors have elected to prepare the consolidated financial statements in accordance with section 1 of the Companies
`(Miscellaneous Provisions) Act, 2009, which provides that a true and fair view of the state of affairs and profit or loss may be given by
`preparing the financial statements in accordance with accounting principles generally accepted in the United States of America (“US
`GAAP”), as defined in Section 1 (1) of the Companies (Miscellaneous Provisions) Act, 2009, to the extent that the use of those
`principles in the preparation of the financial statements does not contravene any provision of the Irish Companies Acts (collectively,
`the “Companies Act”) or of any regulations made thereunder.
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`Reorganization
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`On March 18, 2014, the Company, Vidara Therapeutics Holdings LLC, a Delaware limited liability company (“Vidara
`Holdings”), Vidara, Hamilton Holdings (USA), Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Vidara
`(“U.S. HoldCo”), and Hamilton Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of U.S. HoldCo (“Merger
`Sub”), entered into a Transaction Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provided for the
`merger of Merger Sub with and into HPI, with HPI continuing as the surviving corporation and as a wholly-owned, indirect subsidiary
`of Vidara, with Vidara converting to a public limited company and changing its name to Horizon Pharma plc.
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`At the effective time of the Merger on September 19, 2014 (the “Effective Time”), (i) each share of HPI’s common stock issued
`and outstanding was converted into one ordinary share of New Horizon; (ii) each equity plan of HPI was assumed by New Horizon
`and each outstanding option under HPI’s equity plans was converted into an option to acquire the number of ordinary shares of New
`Horizon equal to the number of common stock underlying such option immediately prior to the Effective Time at the same exercise
`price per share as such option of HPI, and each other stock award that was outstanding under HPI’s equity plans was converted into a
`right to receive, on substantially the same terms and conditions as were applicable to such equity award before the Effective Time, the
`number of ordinary shares of New Horizon equal to the number of shares of HPI’s common stock subject to such stock award
`immediately prior to the Effective Time; (iii) each warrant to acquire HPI’s common stock outstanding immediately prior to the
`Effective Time and not terminated as of the Effective Time was converted into a warrant to acquire, on substantially the same terms
`and conditions as were applicable under such warrant before the Effective Time, the number of ordinary shares of New Horizon equal
`to the number of shares of HPI’s common stock underlying such warrant immediately prior to the Effective Time; and (iv) the
`Convertible Senior Notes of HPI remained outstanding and, pursuant to a supplemental indenture entered into effective as of the
`Effective Time, have become convertible into the same number of ordinary shares of New Horizon at the same conversion rate in
`effect immediately prior to the Effective Time. Vidara Holdings retained ownership of 31,350,000 ordinary shares of New Horizon at
`the Effective Time. Upon consummation of the Merger (the “Closing”), the security holders of HPI (excluding the holders of HPI’s
`Convertible Senior Notes) owned approximately 74% of New Horizon and Vidara Holdings owned approximately 26% of New
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`Horizon Pharma Public Limited Company
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`Horizon. At the Closing, New Horizon made a cash payment of $210.9 million to Vidara Holdings and $2.7 million to Citibank N.A.
`as escrow agent under an escrow agreement associated with the Merger.
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`Principal Activities
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`Horizon Pharma plc is the ultimate parent company of a specialty biopharmaceutical group that is focused on improving
`patients’ lives by identifying, developing, acquiring or in-licensing and commercializing differentiated products that address unmet
`medical needs. We market a portfolio of products in arthritis, inflammation and orphan diseases. Our U.S. marketed products are
`ACTIMMUNE ® (interferon gamma-1b), DUEXIS ® (ibuprofen/famotidine), PENNSAID® (diclofenac sodium topical solution) 2%
`w/w (“PENNSAID 2%”), RAYOS® (prednisone) delayed-release tablets and VIMOVO® (naproxen/esomeprazole magnesium). We
`developed DUEXIS and RAYOS/LODOTRA®, acquired the U.S. rights to VIMOVO from AstraZeneca AB (“AstraZeneca”) in
`November 2013, acquired the U.S. rights to ACTIMMUNE as a result of the Merger, and acquired the U.S. rights to PENNSAID 2%
`from Nuvo Research Inc. (“Nuvo”) in October 2014. We market our products in the United States through a combined field sales
`force of approximately 375 representatives consisting of approximately 325 primary care sales representatives and 50 sales
`representatives in our specialty and orphan diseases business areas.
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`Business Results and Review
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`2014 and 2013 Strategic Transactions
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`During 2014, we announced the following strategic transactions that impacted our results of operations and will continue to have an
`impact on our future operations.
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`Merger with Vidara/ACTIMMUNE
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`On September 19, 2014, as a result of the Merger, we began marketing ACTIMMUNE, a bioengineered form of interferon
`gamma-1b, a protein that acts as a biologic response modifier. In the United States ACTIMMUNE is approved by the U.S. Food and
`Drug Administration (“FDA”) for use in children and adults with chronic granulomatous disease (“CGD”) and severe, malignant
`osteopetrosis (“SMO”). ACTIMMUNE is indicated for reducing the frequency and severity of serious infections associated with CGD
`and for delaying time to disease progression in patients with SMO. We also plan to study ACTIMMUNE for potential additional
`indications, and the FDA has agreed to the primary endpoint for a Phase 3 study that will evaluate ACTIMMUNE in the treatment of
`Friedreich’s Ataxia (“FA”). In February 2015, we submitted an Investigational New Drug (“IND”) application and anticipate the
`Phase 3 clinical study related to FA will begin enrolling patients in the second quarter of 2015.
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`Acquisition of PENNSAID 2%
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`On October 17, 2014, we acquired the U.S. rights to PENNSAID 2% from Nuvo for $45.0 million in cash. PENNSAID 2% is
`approved in the United States for the treatment of the pain of osteoarthritis (“OA”) of the knee(s). As part of the acquisition, we
`entered into an exclusive eight-year supply agreement with Nuvo under which Nuvo will supply us product. We began marketing
`PENNSAID 2% in January 2015. In connection with our PENNSAID 2% acquisition, we expanded our primary care sales force by
`75 additional representatives. Our primary care representatives are now marketing DUEXIS, PENNSAID 2% and VIMOVO.
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`Acquisition of VIMOVO
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`On November 18, 2013, we entered into agreements with AstraZeneca pursuant to which we acquired from AstraZeneca and its
`affiliates certain intellectual property and other assets, and assumed from AstraZeneca and its affiliates certain liabilities, each with
`respect to VIMOVO, and obtained rights to develop other pharmaceutical products that contain gastroprotective agents in a single
`fixed combination oral solid dosage form with nonsteroidal anti-inflammatory drugs (“NSAIDs”) in the United States. VIMOVO is a
`proprietary, fixed-dose, multi-layer, delayed-release tablet combining an enteric-coated naproxen, an NSAID, core and an immediate-
`release esomeprazole, a proton pump inhibitor (“PPI”) layer surrounding the core. VIMOVO was originally developed by Pozen Inc.,
`(“Pozen”), together with AstraZeneca pursuant to an exclusive global collaboration and license agreement. On April 30, 2010, the
`FDA approved VIMOVO for the relief of the signs and symptoms of OA, rheumatoid arthritis (“RA”) and ankylosing spondylitis
`(“AS”) and to decrease the risk of developing gastric ulcers in patients at risk of developing NSAID associated gastric ulcers.
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`We announced the availability of Horizon-labeled VIMOVO on January 2, 2014, at which time we also began marketing
`VIMOVO with our primary care sales force.
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`Horizon Pharma Public Limited Company
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`Other Key Activities
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`Prescription-Made-Easy Program
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`Another key part of our commercial strategy is to encourage physicians to have their patients agree to fill prescriptions through
`our Prescriptions-Made-Easy (“PME”) specialty pharmacy program, which enables uninsured or commercially insured patients’
`enhanced access to our products by providing financial assistance to reduce eligible patients’ out of pocket costs for prescriptions
`filled via a PME-participating mail order pharmacy. Through PME, prescriptions for our products are filled by designated mail order
`specialty pharamacies, with the product shipped directly to the patient. Because the patient out of pocket cost for our products when
`dispensed through the PME program may be significantly lower than such costs when our products are dispensed outside of the PME
`program, prescriptions filled through our PME program are therefore less likely to be subject to the efforts of traditional pharmacies to
`switch a physician’s intended prescription of our products to a generic or over the counter brand. We expect that continued adoption of
`our PME program by physicians will be important to our ability to gain market share for our products as pressure from healthcare
`payors and pharmacy benefit managers (“PBMs”), to use less expensive generic or over the counter brands instead of branded
`products increases. We believe the continued expansion of our PME program will allow us to largely mitigate the potential impact of
`our products being placed on the exclusion lists implemented by PBMs.
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`Key Performance Indicators
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`Our consolidated results of operations for the years ended December 31, 2014 and 2013 were as follows:
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`Increase /
`(Decrease)
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`For the Years
`Ended December 31,
`2014
`2013
`(in thousands)
`Revenue ............................................................................................................................... $
`222,939
`296,955 $
`74,016 $
`Cost of sales .........................................................................................................................
`64,128
`78,753
`14,625
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`Gross profit ..........................................................................................................................
`158,811
`218,202
`59,391
`Research and development ..................................................................................................
`7,376
`17,460
`10,084
`Sales and marketing .............................................................................................................
`51,681
`120,276
`68,595
`General and administrative ..................................................................................................
`65,391
`88,957
`23,566
`Operating loss ......................................................................................................................
`34,363
`(8,491)
`(42,854)
`Interest expense(1) ...............................................................................................................
`11,049
`(23,830)
`(12,781)
`Interest income(1) ................................................................................................................
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`Foreign exchange (loss) gain(1) ...........................................................................................
`5,111
`(3,905)
`1,206
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`Loss on derivative fair value(1) ...........................................................................................
`145,695
`(214,995)
`(69,300)
`Loss on induced conversion and debt extinguishment(1) ....................................................
`2,986
`(29,390)
`(26,404)
`Bargain purchase gain(1) .....................................................................................................
`(22,171)
`22,171
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`Other expense(1) ..................................................................................................................
`11,251
`(11,251)
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`Loss before benefit for income taxes ...................................................................................
`(119,561)
`(269,687)
`(150,126)
`Benefit for income taxes ......................................................................................................
`4,963
`(6,084)
`(1,121)
`Loss for the year .................................................................................................................. $ (263,603) $ (149,005) $ (114,598)
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`(1)
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`These items are grouped under the required Irish Companies Acts format in the consolidated profit and loss account.
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`Revenue. Revenue increased $222.9 million, or 301%, to $297.0 million during the year ended December 31, 2014, from $74.0
`million during the year ended December 31, 2013.
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`Horizon Pharma Public Limited Company
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`The following table reflects the components of revenue for the years ended December 31, 2014 and 2013:
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`VIMOVO ........................................................................................................ $
`DUEXIS ..........................................................................................................
`ACTIMMUNE ................................................................................................
`RAYOS ...........................................................................................................
`LODOTRA .....................................................................................................
`Total Revenue ................................................................................................. $
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`Change
`$
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`Year Ended December 31,
` 2014
` 2013
`(in thousands)
`966 $ 161,988
`58,972
`24,271
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`—
`25,251
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`5,841
`13,179
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`8,237
`(1,750)
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`74,016 $ 222,939
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`162,954 $
`83,243
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`25,251
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`19,020
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`6,487
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`296,955 $
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`Change
`%
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`*
`41%
`*
`226%
`(21%)
`301%
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` Percentage change is not meaningful.
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` *
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`The increase in revenue during the year ended December 31, 2014 was primarily due to growth in net sales of DUEXIS, our
`initiation of VIMOVO sales in January 2014 and our recognition of ACTIMMUNE sales following the acquisition of Vidara in
`September 2014.
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`VIMOVO. Revenue increased $162.0 million to $163.0 million during the year ended December 31, 2014, from $1.0 million
`during the year ended December 31, 2013. We began marketing of VIMOVO with our sales force in November 2013 and began
`selling Horizon-labeled VIMOVO in January 2014.
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`DUEXIS. Revenue increased $24.3 million, or 41%, to $83.2 million during the year ended December 31, 2014, from $59.0
`million during the year ended December 31, 2013. In 2014, DUEXIS revenue increased approximately $39.2 million as the result
`of prescription volume growth driven by the expansion of our field sales force and the continued rollout of our PME program, partially
`offset by $15.1 million due to lower net pricing. Although DUEXIS selling prices increased, the higher selling prices were offset by
`increased rebates and patient co-pay reimbursements as a result of our PME program.
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`ACTIMMUNE. Revenue was $25.3 million during the year ended December 31, 2014 compared to no revenue during the year
`ended December 31, 2013. Our 2014 revenue represents sales during the period following the Merger on September 19, 2014.
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`RAYOS. Revenue increased $13.2 million, or 226%, to $19.0 million during the year ended December 31, 2014, from $5.8
`million during the year ended December 31, 2013. Approximately $9.0 million of the increase in RAYOS revenues was the result of
`net price increases and $4.2 million was due to prescription volume growth driven by the expansion of our sales force and the
`continued rollout of our PME program.
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`LODOTRA. Revenue decreased $1.7 million, or 21%, to $6.5 million during the year ended December 31, 2014, from $8.2
`million during the year ended December 31, 2013. The decrease was the result of $1.5 million from reduced product shipments to our
`European distribution partner, Mundipharma, and $0.2 million in lower amortization of milestone payments. LODOTRA shipments to
`Mundipharma International Corporation Limited (“Mundipharma”) are not linear or directly tied to Mundipharma’s in-market sales
`and can therefore fluctuate significantly from quarter to quarter.
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`We currently expect our revenue to increase in 2015 and future periods as a result of both price and volume increases. Effective
`January 1, 2015, we have increased the price for both DUEXIS and VIMOVO by 35.8%, for RAYOS by 28.0% and for
`ACTIMMUNE by 9.0%. While we believe these price increases should favorably impact revenue during 2015, they will be offset in
`part by additional sales allowances related to rebates and patient co-pay reimbursements. We may affect further price increases for
`these products and/or other products in 2015 and future periods in response to future market conditions.
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`Effective January 1, 2015, two significant PBMs, placed DUEXIS and VIMOVO on their exclusion lists, which will result in a
`loss of reimbursement for patient’s whose healthcare plans have adopted these PBM exclusion lists. As a result, DUEXIS and
`VIMOVO may face negative pressure on prescription volume. We expect that continued adoption of our PME program by physicians
`will be important to our ability to counter this action by the two PBMs and to offset pressure from healthcare payors and PBMs to use
`less expensive generic or over the counter brands instead of our branded products.
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`We have expanded and may continue to expand our sales force to support existing and newly acquired products, such as
`PENNSAID 2%, which we acquired in October 2014 and began marketing in January 2015. As result of the Merger and our
`acquisition of PENNSAID 2%, we expanded our sales force to approximately 375 sales representatives, consisting of 325 primary
`care sales representatives and 50 sales representatives in specialty and orphan diseases business areas.
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`Horizon Pharma Public Limited Company
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`Cost of Sales. Cost of sales increased $64.1 million to $78.8 million during the year ended December 31, 2014, from $14.6
`million during the year ended December 31, 2013. As a percentage of revenue, cost of sales was 26.5% in 2014 compared to 19.8% in
`2013. The increase in cost of sales was primarily attributable to a $9.1 million increase in product costs due to higher DUEXIS and
`VIMOVO sales, an increase in intangible amortization expense of $24.2 million, an $11.1 million charge to recognize additional cost
`of sales on the stepped up market value of ACTIMMUNE inventory as of the date of the Merger, a $10.7 million net charge associated
`with the contingent VIMOVO and ACTIMMUNE royalty liabilities and higher royalty accretion costs of $9.0 million during the year
`ended December 31, 2014.
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`During the second quarter of 2014, based on higher sales of VIMOVO during the six months ended June 30, 2014 versus our
`original expectations and our adjusted expectations for future VIMOVO sales, we recorded a charge of $13.0 million to cost of sales
`to increase the amount of the estimated contingent royalty liability to reflect the updated projections. During the fourth quarter of
`2014, after our most recent five year plan was approved, we performed an assessment of the carrying value of the contingent royalty
`liability, which resulted in a $3.6 million adjustment to cost of sales to reduce the amount of the contingent royalty liability to reflect
`our updated estimates. As a result, for the year ended December 31, 2014 we recorded a net charge of $9.4 million to cost of sales and
`a corresponding increase to the contingent royalty liability to reflect the estimated fair value of the future contingent royalties payable
`to Pozen.
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`During the fourth quarter of 2014, as the result of a price increase for ACTIMMUNE approved to take effect on January 1,
`2015, we reassessed the value of our estimated royalty liability and recorded a charge of $1.3 million to cost of sales to increase the
`carrying value of the contingent royalties to reflect the updated projections.
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`Intangible amortization increased $24.2 million during the year ended December 31, 2014 compared to the prior year period as a
`result of an increase of $11.8 million of which was attributable to a full year of intangible amortization expense related to VIMOVO
`developed technology and $12.2 million of which was related to amortization of developed technology for ACTIMMUNE as a result
`of the Merger. We expect $43.1 million of amortization expense for ACTIMMUNE in 2015.
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`Research and Development Expenses. Research and development expenses increased $7.4 million to $17.5 million during the
`year ended December 31, 2014, from $10.1 million during the year ended December 31, 2013. The increase in research and
`development expenses during the year ended December 31, 2014 was primarily associated with $2.3 million in research and
`development expenses for ACTIMMUNE, $2.1 million in higher salaries and benefits expense, $1.7 million in increased clinical
`expenses and $1.2 million in higher consulting fees.
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`Sales and Marketing Expenses. Sales and marketing expenses increased $51.7 million to $120.3 million during the year ended
`December 31, 2014, from $68.6 million during the year ended December 31, 2013. The increase in sales and marketing expenses was
`primarily attributable to an increase of $34.5 million in salaries and benefits expenses associated with increased staffing of our field
`sales force, $13.2 million in higher marketing and commercialization expenses primarily related to ACTIMUNE and VIMOVO, $2.5
`million in higher facility expenses and $1.1 million in higher consulting fees.
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`General and Administrative Expenses. General and administrative expenses increased $65.4 million to $89.0 million during the
`year ended December 31, 2014, from $23.6 million during the year ended December 31, 2013. The increase in general and
`administrative expenses was primarily attributable to a $40.2 million increase in legal, consulting and investment advisory fees and
`other costs associated with the Merger and related financing transactions, a $20.3 million increase in salaries and benefits expense as a
`result of increased staffing of our administrative and finance functions and a $2.9 million increase in related facilities expenses.
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`Interest Expense. Interest expense increased $11.0 million to $23.8 million during the year ended December 31, 2014, from
`$12.8 during the year ended December 31, 2013. The increased interest expense was primarily due to higher borrowings under our
`Convertible Senior Notes and Senior Secured Credit Facility during the year ended December 31, 2014, as compared to our prior
`borrowings under our Senior Secured Loan.
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`Foreign Exchange (Loss) Gain. During the year ended December 31, 2014, we reported a foreign exchange loss of $3.9 million
`compared to a foreign exchange gain of $1.2 million during the year ended December 31, 2013. The foreign exchange loss during the
`year ended December 31, 2014 was primarily attributable to a weakening of the Euro against the U.S. dollar which impacted our
`Swiss subsidiary, Horizon Pharma AG, whose functional currency is in Euros, yet has intercompany balances and intercompany
`transactions as well as third-party transactions that are denominated in U.S. dollars.
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`Loss on Derivative Revaluation. During the year ended December 31, 2014, we recorded a $215.0 million non-cash charge
`compared to $69.3 million non-cash charge recorded during the year ended December 31, 2013. The increase in non-cash charges
`during the year ended December 31, 2014 was a result of the increase in the fair value of the embedded derivative associated with our
`Convertible Senior Notes. The increase in loss on the derivative revaluation was primarily due to an increase in the market value of
`HPI’s common stock during the period from January 1, 2014 through June 27, 2014, the date HPI’s stockholders approved the
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`Horizon Pharma Public Limited Company
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`issuance of common equity in excess of 13,164,951 shares upon conversion of the Convertible Senior Notes. The non-cash loss on
`derivative revaluation was a permanent tax difference and was not deductible for income tax reporting purposes.
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`Loss on Induced Conversion and Debt Extinguishment. The loss on induced conversion and debt extinguishment during the year
`ended December 31, 2014 of $29.4 million was a result of the Convertible Senior Notes induced conversions in the fourth quarter of
`2014, which consisted of $16.7 million of loss on induced conversion for cash inducement payments, a $11.7 million charge for the
`extinguishment of debt and $1.0 million of expenses related to the induced debt conversions. The loss on induced conversion and debt
`extinguishment during the year ended December 31, 2013 of $26.4 million was related to the extinguishment of our Senior Secured
`Loan in November 2013.
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`Bargain Purchase Gain. During the year ended December 31, 2014, we recorded a bargain purchase gain of $22.2 million in
`connection with the Merger, representing the excess of the estimated fair values of net assets acquired over the acquisition
`consideration paid.
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`Other Expense. Other expense during the year ended December 31, 2014 totaled $11.3 million, which represented $5.0 million
`of commitment fees incurred on a bridge loan commitment prior to executing the Senior Secured Credit Facility in June 2014, $3.2
`million of commitment fees incurred on the Senior Secured Credit Facility prior to its funding on September 19, 2014 and $2.9 million
`of secondary offering expense fees incurred in the November 2014 underwritten public offering.
`
`Income Tax Benefit. During the years ended December 31, 2014 and 2013, we recorded a benefit for income taxes of $6.1
`million and $1.1 million, respectively. The increase in income tax benefit during the year ended December 31, 2014 was primarily
`attributable to a deferred tax asset valuation adjustment of $3.0 million recorded during the third quarter of 2014. The inclusion of
`additional deferred tax liabilities as a result of the Merger resulted in our ability to reduce our existing deferred tax valuation
`allowance, which correspondingly resulted in our ability to record an additional income tax benefit of $3.0 million. Net loss. Net loss
`increased $114.6 million to $263.6 million during the year ended December 31, 2014, from $149.0 million during the year ended
`December 31, 2013, primarily as a result of the loss on derivative revaluation during the year ended December 31, 2014.
`
`Loss For The Year. Loss for the year increased $114.6 million to $263.6 million during the year ended December 31, 2014, from
`$149.0 million during the year ended December 31, 2013, primarily as a result of the loss on derivative revaluation during the year
`ended December 31, 2014.
`
`Principal Risks and Uncertainties
`
`This report contains “forward-looking statements,” — that is, statements related to future, not past, events — as defined in
`Section 21E of the U.S. Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future
`growth, results of operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by, and
`information currently available to, our management. Forward-looking statements include any statement that does not directly relate to
`a current or historical fact.