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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 ~~March~~June 3130, 2023


☐	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		98-1195602
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

70 St. Stephen’s Green Dublin 2, D02 E2X4, 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 ~~April~~August 272, 2023: 228,~~621~~994,~~802~~568.

HORIZON THERAPEUTICS PLC

INDEX

		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 and as of December 31, 2022 (Unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2023 and as of December 31, 2022 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2426
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3842
Item 4.	Controls and Procedures	3943
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4044
Item 1A.	Risk Factors	4044
Item 5.	Other Information	92
Item 6.	Exhibits	97
Item 6.	Exhibits	93
	Signatures	99
	Signatures	95

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except nominal value and share data)

	As of			As of
	March 31,			December 31,
	June 30,			December 31,
	2023			2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,~~311~~464,~~628~~623		$	2,352,833
Restricted cash		4,~~772~~791			4,755
Accounts receivable, net		~~624~~717,~~697~~417			676,347
Inventories, net		~~164~~170,~~496~~325			169,559
Prepaid expenses and other current assets		~~497~~564,~~254~~808			449,349
Total current assets		3,~~602~~921,~~847~~964			3,652,843
Property, plant and equipment, net		~~355~~362,~~872~~326			340,509
Developed technology and other intangible assets, net		2,~~576~~486,~~163~~565			2,664,777
In-process research and development		810,000			810,000
Goodwill		1,010,538			1,010,538
Deferred tax assets, net		~~450~~444,~~219~~306			431,814
Other long-term assets		~~187~~263,~~811~~042			204,135
Total assets	$	89,~~993~~298,~~450~~741		$	9,114,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	7685,~~619~~543		$	155,800
Accrued expenses and other current liabilities		~~482~~496,~~334~~669			457,557
Accrued trade discounts and rebates		~~309~~319,~~935~~469			319,780
Long-term debt—current portion		16,000			16,000
Total current liabilities		~~884~~917,~~888~~681			949,137
LONG-TERM LIABILITIES:
Long-term debt, net		2,~~544~~541,~~230~~458			2,546,837
Deferred tax liabilities, net		~~271~~264,~~550~~815			342,017
Other long-term liabilities		~~197~~263,~~222~~828			204,451
Total long-term liabilities		3,~~013~~070,~~002~~101			3,093,305
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at March 31, 2023 and December 31, 2022; 228,960,705 and 227,625,913 shares issued at March 31, 2023 and December 31, 2022, respectively; and 228,576,339 and 227,241,547 shares outstanding at March 31, 2023 and December 31, 2022, respectively		23			23
Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at June 30, 2023 and December 31, 2022; 229,323,393 and 227,625,913 shares issued at June 30, 2023 and December 31, 2022, respectively; and 228,939,027 and 227,241,547 shares outstanding at June 30, 2023 and December 31, 2022, respectively		23			23
Treasury stock, 384,366 ordinary shares at March 31, 2023 and December 31, 2022		(4,585	)		(4,585	)
Treasury stock, 384,366 ordinary shares at June 30, 2023 and December 31, 2022		(4,585	)		(4,585	)
Additional paid-in capital		4,~~448~~522,~~744~~145			4,474,199
Accumulated other comprehensive income		621,~~685~~612			12,528
Retained earnings		~~644~~771,~~693~~764			590,009
Total shareholders’ equity		5,~~095~~310,~~560~~959			5,072,174
Total liabilities and shareholders’ equity	$	89,~~993~~298,~~450~~741		$	9,114,616

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

HORIZON THERAPEUTICS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(In thousands, except share and per share data)

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Net sales	$	~~832~~944,~~059~~959		$	~~885~~876,~~245~~411		$	1,777,018		$	1,761,656
Cost of goods sold		~~208~~219,~~563~~958			~~215~~230,~~062~~216			428,521			445,278
Gross profit		~~623~~725,~~496~~001			~~670~~646,~~183~~195			1,348,497			1,316,378
OPERATING EXPENSES:
Research and development		~~134~~150,~~148~~035			103,~~132~~246			284,183			206,378
Selling, general and administrative		~~453~~434,~~354~~125			~~372~~398,~~734~~221			887,479			770,955
Total operating expenses		587,502			475,866
Impairment of goodwill		—			56,171			—			56,171
Operating income		35,994			194,317
Gain on sale of asset		(2,000	)		—			(2,000	)		—
OTHER EXPENSE, NET:
Total operating expenses		582,160			557,638			1,169,662			1,033,504
Interest expense, net		(15,540	)		(21,256	)
Operating income		142,841			88,557			178,835			282,874
Foreign exchange gain		91			420
OTHER EXPENSE, NET:
Other expense, net		(1,343	)		(742	)
Interest expense, net		(12,098	)		(21,409	)		(27,638	)		(42,665	)
Total other expense, net		(16,792	)		(21,578	)
Foreign exchange gain		326			28			417			448
Income before benefit for income taxes		19,202			172,739
Other income (expense), net		4,183			(2,389	)		2,840			(3,131	)
Benefit for income taxes		(35,482	)		(31,522	)
Total other expense, net		(7,589	)		(23,770	)		(24,381	)		(45,348	)
Net income	$	54,684		$	204,261
Income before expense (benefit) for income taxes		135,252			64,787			154,454			237,526
Net income per ordinary share—basic	$	0.24		$	0.89
Expense (benefit) for income taxes		8,181			3,813			(27,301	)		(27,709	)
Weighted average ordinary shares outstanding—basic		228,397,661			229,094,311
Net income	$	127,071		$	60,974		$	181,755		$	265,235
Net income per ordinary share—diluted	$	0.23		$	0.87
Net income per ordinary share—basic	$	0.56		$	0.27		$	0.80		$	1.16
Weighted average ordinary shares outstanding—diluted		233,788,366			235,953,318
Weighted average ordinary shares outstanding—basic		228,743,143			230,020,004			228,571,356			229,559,715
OTHER COMPREHENSIVE LOSS, NET OF TAX
Net income per ordinary share—diluted	$	0.54		$	0.26		$	0.78		$	1.12
Interest rate swap contracts designated as cash flow hedges	$	(7,052	)	$	—
Weighted average ordinary shares outstanding—diluted		233,935,591			236,166,384			233,938,149			236,077,147
Foreign currency translation adjustments		(615	)		(460	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Pension and other post-employment benefit plan remeasurements		1,824			325
Foreign currency translation adjustments	$	1,409		$	(1,433	)	$	794		$	(1,893	)
Other comprehensive loss		(5,843	)		(135	)
Pension and other post-employment benefit plan remeasurements		179			(547	)		2,003			(222	)
Comprehensive income	$	48,841		$	204,126
Interest rate swap contracts designated as cash flow hedges		13,339			2,011			6,287			2,011
Other comprehensive income (loss)		14,927			31			9,084			(104	)
Comprehensive income	$	141,998		$	61,005		$	190,839		$	265,131

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			Retained		Shareholders’
	Shares		Amount		Shares		Amount			Capital			Income			Earnings		Equity
Balances at December 31, 2022		227,625,913	$	23		384,366	$	(4,585	)	$	4,474,199		$	12,528		$	590,009	$	5,072,174
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		1,334,792		—		—		—			3,421			—			—		3,421
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(87,549	)		—			—		(87,549	)
Share-based compensation		—		—		—		—			58,673			—			—		58,673
Interest rate swap contracts designated as cash flow hedges		—		—		—		—			—			(7,052	)		—		(7,052	)
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			1,824			—		1,824
Foreign currency translation adjustments		—		—		—		—			—			(615	)		—		(615	)
Net income		—		—		—		—			—			—			54,684		54,684
Balances at March 31, 2023		228,960,705	$	23		384,366	$	(4,585	)	$	4,448,744		$	6,685		$	644,693	$	5,095,560
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		168,967		—		—		—			2,628			—			—		2,628
Issuance of ordinary shares in conjunction with the Employee Share Purchase Plan		193,721		—		—		—			14,912			—			—		14,912
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(4,506	)		—			—		(4,506	)
Share-based compensation		—		—		—		—			60,367			—			—		60,367
Interest rate swap contracts designated as cash flow hedges		—		—		—		—			—			13,339			—		13,339
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			179			—		179
Foreign currency translation adjustments		—		—		—		—			—			1,409			—		1,409
Net income		—		—		—		—			—			—			127,071		127,071
Balances at June 30, 2023		229,323,393	$	23		384,366	$	(4,585	)	$	4,522,145		$	21,612		$	771,764	$	5,310,959

										Additional			Accumulated Other					Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Retained		Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Earnings		Equity
Balances at December 31, 2021		227,760,936	$	23		384,366	$	(4,585	)	$	4,373,337		$	(14,987	)	$	318,605	$	4,672,393
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		2,112,964		—		—		—			9,071			—			—		9,071
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(115,108	)		—			—		(115,108	)
Share-based compensation		—		—		—		—			47,347			—			—		47,347
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			325			—		325
Foreign currency translation adjustments		—		—		—		—			—			(460	)		—		(460	)
Net income		—		—		—		—			—			—			204,261		204,261
Balances at March 31, 2022		229,873,900	$	23		384,366	$	(4,585	)	$	4,314,647		$	(15,122	)	$	522,866	$	4,817,829
Issuance of ordinary shares in conjunction with the exercise of stock options and the vesting of restricted stock units and performance stock units		660,784		—		—		—			12,951			—			—		12,951
Issuance of ordinary shares in conjunction with the Employee Share Purchase Plan		182,109		—		—		—			13,884			—			—		13,884
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(5,419	)		—			—		(5,419	)
Share-based compensation		—		—		—		—			45,281			—			—		45,281
Pension and other post-employment benefit plan remeasurements		—		—		—		—			—			(547	)		—		(547	)
Foreign currency translation adjustments		—		—		—		—			—			(1,433	)		—		(1,433	)
Interest rate swap contracts designated as cash flow hedges		—		—		—		—			—			2,011			—		2,011
Net income		—		—		—		—			—			—			60,974		60,974
Balances at June 30, 2022		230,716,793	$	23		384,366	$	(4,585	)	$	4,381,344		$	(15,091	)	$	583,840	$	4,945,531

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 Three Months Ended March 31,
	For the Six Months Ended June 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	54181,~~684~~755		$	~~204~~265,~~261~~235
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		94191,~~860~~145			95192,~~112~~538
Equity-settled share-based compensation		58118,~~120~~391			4792,~~300~~449
Amortization of debt discount and deferred financing costs		12,~~471~~779			13,~~577~~904
Deferred income taxes		(87,310	)		(33,896	)
Impairment of goodwill		—			56,171
Foreign exchange and other adjustments		(434	)		3,190
Gain on sale of asset		(2,000	)		—
Deferred income taxes		(91,952	)		(3,032	)
Foreign exchange and other adjustments		(6,143	)		10,566
Changes in operating assets and liabilities:
Accounts receivable		51(41,~~530~~140	)		(5140,~~665~~513	)
Inventories		~~5,067~~(766	)		~~(785~~22,033	)
Prepaid expenses and other current assets		(48108,~~625~~816	)		(3371,~~205~~578	)
Accounts payable		(7870,~~040~~233	)		36(11,~~067~~980	)
Accrued trade discounts and rebates		(~~9,938~~552	)		4720,~~279~~232
Accrued expenses and other current liabilities		4263,~~858~~390			(~~113~~76,~~775~~901	)
Other non-current assets and liabilities		211,~~080~~931			145,~~331~~863
Net cash provided by operating activities		86247,~~323~~789			~~215~~464,~~791~~987
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(42,594	)		(24,352	)
Payments related to license and collaboration agreements		(15,000	)		(25,000	)
Purchases of property, plant and equipment		(24,128	)		(14,198	)
Payments for long-term investments		(4,183	)		(4,847	)
Receipts from long-term investments		—			4,416
Payments for acquisitions, net of cash acquired		—			(3,122	)
Payments for long-term investments		(2,623	)		(1,464	)
Net cash used in investing activities		(61,777	)		(52,905	)
Receipts from long-term investments		—			3,060
Net cash used in investing activities		(41,751	)		(40,724	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of term loans		(48,000	)		(48,000	)
Proceeds from the issuance of ordinary shares in connection with stock option exercises		36,~~421~~049			922,~~071~~022
Payment of employee withholding taxes relating to share-based awards		(87,549	)		(115,108	)
Proceeds from the issuance of ordinary shares in connection with the Employee Share Purchase Plan		14,912			13,884
Net cash used in financing activities		(88,128	)		(110,037	)
Payment of employee withholding taxes relating to share-based awards		(92,055	)		(120,527	)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		2,368			(1,921	)
Net cash used in financing activities		(79,094	)		(92,621	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(41,188	)		63,109
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		4,908			(6,317	)
Net increase in cash, cash equivalents and restricted cash		111,826			313,144
Cash, cash equivalents and restricted cash, beginning of the period		2,357,588			1,584,156
Cash, cash equivalents and restricted cash, end of the period	$	2,~~316~~469,~~400~~414		$	1,~~647~~897,~~265~~300

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of interest swap payments	$	4374,~~572~~619	$	2841,~~095~~778
Cash refunds received for income taxes, net of payments		21,544		—
Cash paid for income taxes, net of refunds received		19,731		13,216
Cash paid for income taxes, net of refunds received		—		1,496
Cash paid for amounts included in the measurement of operating lease liabilities		6,545		4,312
Cash paid for amounts included in the measurement of operating lease liabilities		2,566		2,208
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Purchases of property, plant and equipment included in accounts payable and accrued expenses and other current liabilities	$	148,~~413~~955	$	36,~~627~~579
Lease liabilities arising from obtaining right-of-use assets		—47,844		2122,~~213~~521

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

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

Transaction Agreement with Amgen Inc.

On December 12, 2022, the Company announced that it had entered into a transaction agreement with Amgen Inc. (“Amgen”) and Pillartree Limited (“Pillartree”), a wholly owned subsidiary of Amgen. Subject to the terms of the transaction agreement, Pillartree will acquire the Company (the “Transaction”), pursuant to a scheme of arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of Ireland (the “Scheme”), or under certain circumstances, subject to the terms of the transaction agreement, a takeover offer (as such term is defined under the Irish Takeover Rules). As a result of the Scheme, the Company would become a wholly owned subsidiary of Amgen.

At the effective time of the Scheme (the “Effective Time”), holders of the Company’s ordinary shares will be entitled to receive $116.50 in cash per ordinary share (the “Consideration”). The Company’s equity awards will be treated as set forth in the transaction agreement, such that:

•

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

•

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

•

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

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

~~The~~On ~~Irish~~May ~~High~~16, ~~Court~~2023, ~~has~~the ~~set~~Federal Trade Commission (“FTC”) filed a ~~hearing~~complaint ~~date~~in the United States District Court for the Northern District of Illinois seeking a temporary restraining order and preliminary injunction enjoining the Transaction. On May 2223, 2023, tothe ~~consider~~district court scheduled an evidentiary hearing on the ~~Company~~FTC’s ~~application~~request tofor ~~sanction~~a ~~the~~preliminary ~~Scheme.~~injunction ~~The~~beginning ~~Company~~on ~~will~~September ~~inform~~11, ~~the~~2023. ~~Irish~~Based ~~High~~on ~~Court~~the indistrict ~~advance~~court’s ifschedule, the ~~hearing~~Company, ~~date~~Amgen ~~needs~~and tothe beFTC ~~adjourned~~then tosubmitted a ~~later~~stipulated ~~date~~proposed astemporary arestraining ~~result~~order ofto athe ~~condition~~district tocourt ~~closing,~~providing ~~including~~that ~~required~~the ~~regulatory~~Company ~~clearances,~~and Amgen would not ~~having~~close ~~been~~the ~~satisfied~~Transaction byuntil the ~~scheduled~~earlier ~~hearing~~of ~~date.~~October ~~The~~31, ~~Transaction~~2023 isor ~~expected~~the tosecond ~~close~~business ~~shortly~~day after the ~~Irish~~district ~~High~~court ~~Court~~rules ~~issues~~on anthe ~~order~~FTC’s ~~sanctioning~~request for a preliminary injunction (the ~~Scheme~~“Stipulated TRO”). On May 31, 2023, the district court entered a case management order, and on June 2, 2023, the ~~Company~~district ~~continues~~court toissued ~~expect~~an ~~that~~order granting the ~~closing~~Stipulated ofTRO. On June 22, 2023, the ~~Transaction~~FTC ~~will~~filed ~~occur~~a ~~during~~parallel complaint in its administrative court and an amended complaint was filed in the ~~first~~district ~~half~~court ofadding ~~2023~~several states as additional plaintiffs. ~~Additional~~On ~~information~~June ~~about~~29, 2023, the ~~transaction~~Company ~~agreement~~ and Amgen filed an answer to the ~~Transaction~~amended iscomplaint ~~set~~and ~~forth~~counterclaims inagainst ~~our~~the ~~filings~~FTC. The Company cannot predict with certainty the ~~SEC.~~outcome of the FTC litigation or whether or when the Company will be able to successfully consummate the pending Transaction.

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 six months ended ~~March~~June 3130, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The December 31, 2022 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

Business Overview

Horizon is a global biotechnology company focused on the discovery, development and commercialization of medicines that address critical needs for people impacted by rare, autoimmune and severe inflammatory diseases. 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’s commercial portfolio is currently composed of 12 medicines in the areas of rare diseases, gout, ophthalmology and inflammation.

As of ~~March~~June 3130, 2023, the Company’s commercial portfolio consisted of the following medicines:

TEPEZZA® (teprotumumab-trbw), for intravenous infusion

KRYSTEXXA® (pegloticase injection), for intravenous infusion

RAVICTI® (glycerol phenylbutyrate) oral liquid

UPLIZNA® (inebilizumab-cdon) injection, for intravenous use

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

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

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

RAYOS® (prednisone) delayed-release tablets, for oral use

BUPHENYL® (sodium phenylbutyrate) tablets and powder, for oral use

QUINSAIR™ (levofloxacin) solution for inhalation

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

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

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.

In March 2020, the FASB issued ~~Accounting~~a ~~Standards~~new ~~Update~~accounting ~~(“ASU”)~~standard ~~2020-04,~~to ~~Reference~~ease ~~Rate~~the ~~Reform~~financial ~~(Topic~~reporting ~~848),~~burdens ~~which~~caused ~~provides expedients and exceptions for accounting treatment of contracts which are affected~~ by the ~~anticipated~~expected ~~discontinuation~~market oftransition from the London Inter- Bank Offered Rate (“LIBOR”) and other interbank offered rates ~~resulting~~to ~~from~~alternative reference rates, commonly referred to as reference rate reform. ~~that~~The ~~are~~new ~~entered~~standard ~~into~~provides temporary optional expedients and exceptions to current GAAP guidance on orcontract ~~before~~modifications ~~December~~and ~~31,~~hedge ~~2022~~accounting. InSpecifically, ~~December~~a ~~2022,~~modification ~~the~~to ~~FASB~~transition ~~issued~~to ~~ASU~~an ~~2022-06~~alternative ~~which~~reference ~~defers~~rate ~~the~~is ~~sunset~~treated ~~date~~as ofan ~~the~~event ~~guidance~~that ~~included~~does innot ~~Topic~~require ~~848~~contract ~~from~~remeasurement ~~December~~or ~~31,~~reassessment ~~2022~~of toa ~~December~~previous ~~31,~~accounting ~~2024~~treatment. ~~The~~Moreover, ~~Company~~for ~~does~~all ~~not~~types ~~expect~~of ~~the~~hedging ~~planned~~relationships, ~~discontinuation~~an ofentity ~~LIBOR~~is permitted to ~~have~~change athe ~~material~~reference ~~impact~~rate onwithout ~~interest~~having ~~payments~~to ~~incurred~~dedesignate ~~under~~ the ~~Credit~~hedging ~~Agreement~~relationship. ~~(as~~In ~~defined~~January ~~below).~~2021, ~~Refer~~the toFASB ~~Note~~issued 12a ~~for~~new ~~further~~accounting ~~details.~~standard ~~The~~to ~~discontinuation~~expand the scope of ~~LIBOR~~the isoriginal ~~expected~~March 2020 standard to ~~occur~~include asderivative ofinstruments ~~June~~on ~~30,~~discounting ~~2023~~transactions. In the second quarter of 2022, the Company elected to apply the optional expedients for qualifying modifications to debt agreements under ASC 470 and for the assessment of hedge effectiveness for cash flow hedges affected by reference rate reform. LIBOR was discontinued as of June 30, 2023, and the discontinuation of LIBOR did not have a material impact on interest payments incurred under the Credit Agreement (as defined below). Refer to Note 12 for further details.

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 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

The Company’s significant accounting policies have not changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

NOTE 3 – NET INCOME PER SHARE

The following table presents basic and diluted net income per share for the three and six months ended ~~March~~June 3130, 2023 and 2022 (in thousands, except share and per share data):

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Basic net income per share calculation:
Numerator - net income	$	54127,~~684~~071	$	~~204~~60,~~261~~974	$	181,755	$	265,235
Denominator - weighted average of ordinary shares outstanding		228,~~397~~743,~~661~~143		~~229~~230,~~094~~020,~~311~~004		228,571,356		229,559,715
Basic net income per share	$	0.2456	$	0.8927	$	0.80	$	1.16

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Diluted net income per share calculation:
Numerator - net income	$	54127,~~684~~071	$	~~204~~60,~~261~~974	$	181,755	$	265,235
Denominator - weighted average of ordinary shares outstanding		233,~~788~~935,~~366~~591		~~235~~236,~~953~~166,~~318~~384		233,938,149		236,077,147
Diluted net income per share	$	0.2354	$	0.8726	$	0.78	$	1.12

Basic net income per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. Diluted net income 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 net income.

During the three and six months ended ~~March~~June 3130, 2023 and 2022, the difference between the basic and diluted weighted average ordinary shares outstanding primarily represents the effect of incremental shares from the Company’s share-based compensation programs.

The computation of diluted net income per share for the three and six months ended ~~March~~June 3130, 2023 excluded 0.4 million and 1.2 million shares subject to equity awards, respectively, because their inclusion would have had an anti-dilutive effect on diluted net income per share. The computation of diluted net income per share for the three and six months ended June 30, 2022 excluded 1.02 million and 3.06 million shares subject to equity awards, respectively, because their inclusion would have had an anti-dilutive effect on diluted net income per share.

NOTE 4 – 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, drug product 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 ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
	June 30, 2023		December 31, 2022
Raw materials	$	6884,~~813~~728	$	44,230
Work-in-process		2524,~~542~~291		25,232
Finished goods		7061,~~141~~306		100,097
Inventories, net	$	~~164~~170,~~496~~325	$	169,559

As part of the Viela Bio Inc. (“Viela”) acquisition, a step-up in the value of inventory of $151.6 million was recorded, which was composed of $10.1 million for raw materials, $120.9 million for work-in-process and $20.6 million for finished goods during the year ended December 31, 2021. Inventory step-up expense recorded in cost of goods sold relating to UPLIZNA was $291.76 million and $2717.24 million for the three months ended ~~March~~June 30, 2023 and 2022, respectively, and was $31.3 million and $44.6 million for the six months ended June 30, 2023 and 2022, respectively. As of ~~March~~June 3130, 2023, the total remaining balance of inventory step-up was $21.60 million.

Because inventory step-up expense is related to an acquisition, will not continue indefinitely and has a significant effect on the Company’s gross profit, gross margin percentage and net income for all affected periods, the Company discloses balance sheet and income statement amounts related to inventory step-up within the Notes to ~~the~~ Condensed Consolidated Financial Statements.

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
	June 30, 2023		December 31, 2022
Deferred charge for taxes on intercompany profit	$	~~182~~206,~~924~~232	$	164,771
Advance payments for inventory		~~163~~187,~~473~~002		156,824
Rabbi trust assets		2931,~~525~~890		28,227
Prepaid income taxes and income tax receivable		5,359		9,835
Interest rate swap contracts		20,050		15,520
Other prepaid expenses and other current assets		~~115~~119,~~973~~634		8984,~~692~~007
Prepaid expenses and other current assets	$	~~497~~564,~~254~~808	$	449,349

Advance payments for inventory as of ~~March~~June 3130, 2023 and December 31, 2022, primarily represented payments made to the contract manufacturer of TEPEZZA drug substance.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023			December 31, 2022
	June 30, 2023			December 31, 2022
Buildings	$	~~175~~178,~~580~~712		$	173,560
Construction in process		~~103~~105,~~636~~457			88,825
Land and land improvements		44,~~323~~346			44,323
Leasehold improvements		25,957			24,428
Machinery and equipment		30,728			22,865
Machinery and equipment		23,381			22,865
Leasehold improvements		26,177			24,428
Furniture and fixtures		21,~~692~~707			20,318
Software		13,~~253~~186			13,332
Other		12,~~303~~713			11,966
		420,125			399,617
		433,026			399,617
Less accumulated depreciation		(6470,~~253~~700	)		(59,108	)
Property, plant and equipment, net	$	~~355~~362,~~872~~326		$	340,509

Depreciation expense was $6.27 million and $56.91 million for the three months ended ~~March~~June 3130, 2023 and 2022, respectively, and was $12.9 million and $11.9 million for the six months ended June 30, 2023 and 2022, respectively.

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The gross carrying amount of goodwill as of ~~March~~June 3130, 2023 and December 31, 2022 was $1,010.5 million.

During the three months ended March 31, 2023 and 2022, there were no goodwill impairment losses.


		Total
Balance at December 31, 2021		$1,066,709
Goodwill impairment during the year		(56,171)
Balance at December 31, 2022		$1,010,538
Goodwill impairment during the period		—
Balance at June 30, 2023		$1,010,538

During the three and six months ended June 30, 2023, there were no goodwill impairment losses.

In May 2022, Apotex Corp. and its affiliate, Apotex Inc. (collectively, “Apotex”), initiated an at-risk launch of a generic version of PENNSAID 2% in the United States. The at-risk launch was expected to have an on-going negative impact on PENNSAID 2% net sales. As a result, the Company determined the generic product launch and the expected impact on PENNSAID 2% to be a triggering event to conduct an interim impairment analysis and an indicator it was more likely than not that the carrying amount of its former inflammation reporting unit exceeded its fair value as of June 30, 2022.

The Company determined the fair value of the former inflammation reporting unit as of June 30, 2022 using the income approach. The cash flow projections were based on a financial forecast developed by management that included net sales projections, which are updated annually, or more frequently based on events that may significantly impact forecasts.

The Company’s interim goodwill impairment test in the second quarter of 2022 indicated an impairment, which represented the difference between the estimated fair value of the former inflammation reporting unit and its carrying value. As a result, the Company recognized an impairment charge of $56.2 million in June 2022 representing the full amount of goodwill for the former inflammation reporting unit.

Intangible Assets

As of ~~March~~June 3130, 2023, the Company’s finite-lived intangible assets primarily consisted of developed technology related to ACTIMMUNE, KRYSTEXXA, PROCYSBI, RAVICTI, TEPEZZA and UPLIZNA.

Intangible assets as of ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023							December 31, 2022
	June 30, 2023							December 31, 2022
	Cost Basis		AccumulatedAmortization			Net BookValue		Cost Basis		AccumulatedAmortization			Net BookValue
Developed technology	$	4,650,292	$	(2,~~093~~182,~~605~~864	)	$	2,~~556~~467,~~687~~428	$	4,650,292	$	(2,005,327	)	$	2,644,965
In-process research and development		810,000		—			810,000		810,000		—			810,000
In-process research and development (1)		810,000		—			810,000		810,000		—			810,000
Other intangibles		29,894		(10,~~418~~757	)		19,~~476~~137		29,894		(10,082	)		19,812
Total intangible assets	$	5,490,186	$	(2,~~104~~193,~~023~~621	)	$	3,~~386~~296,~~163~~565	$	5,490,186	$	(2,015,409	)	$	3,474,777

(1)

~~Amortization~~In ~~expense~~July 2023, the Company received 48-week data for the ~~three~~Phase ~~months~~2 ~~ended~~clinical ~~March~~trial ~~31,~~evaluating ~~2023~~daxdilimab ~~and~~for ~~2022~~the ~~was~~treatment ~~$88~~of systemic lupus erythematous (“SLE”).6 ~~million~~The trial did not meet its primary endpoint and ~~$89.3~~as ~~million~~a result, ~~respectively.~~the ~~In-process~~Company ~~research~~will ~~and~~continue ~~development~~to iswork ~~not~~with ~~amortized~~investigators ~~until~~to ~~successful~~assess ~~regulatory~~the ~~approval~~data ofto adetermine ~~project~~the next steps for the SLE clinical program, if any. AsThe Company’s total in-process R&D assets of ~~March~~$810.0 31million as of June 30, 2023, ~~estimated~~and ~~future~~December ~~amortization~~31, ~~expense~~2022, ~~was~~included as$20.0 ~~follows~~million (in ~~thousands):~~relation to the SLE clinical program.

2023 (April to December)	$	270,765
2024		359,426
2025		359,426
2026		304,164
2027		253,506
Thereafter		1,028,876
Total	$	2,576,163

Amortization expense for the three months ended June 30, 2023 and 2022 was $89.6 million and $91.3 million, respectively, and was $178.2 million and $180.6 million for the six months ended June 30, 2023 and 2022, respectively. In-process research and development is not amortized until successful regulatory approval of a project. As of June 30, 2023, estimated future amortization expense was as follows (in thousands):


2023 (July to December)	$	181,164
2024		359,426
2025		359,426
2026		304,164
2027		253,507
Thereafter		1,028,878
Total	$	2,486,565

NOTE 8 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
	June 30, 2023		December 31, 2022
Income taxes payable	$	89,282	$	2,829
Payroll-related expenses	$	98,531	$	121,066
Payroll-related expenses		85,586		121,066
Accrued royalties		88,147		106,126
Accrued royalties		82,483		106,126
Income taxes payable		82,790		2,829
R&D and manufacturing programs		6982,~~417~~213		66,725
Advertising and marketing		26,643		12,030
Allowances for returns		25,367		28,347
Allowances for returns		25,740		28,347
Consulting and professional services		23,222		28,915
Consulting and professional services		25,365		28,915
Advertising and marketing		22,682		12,030
Refund liability (1)		16,534		12,218
Accrued interest		15,679		15,130
Accrued interest		8,420		15,130
Refund liability (1)		14,900		12,218
Accrued upfront and milestone payments		—		15,000
Accrued other		5243,~~864~~138		49,171
Accrued expenses and other current liabilities	$	~~482~~496,~~334~~669	$	457,557

(1)

The refund liability represents the amount of consideration that the Company may need to refund to Mitsubishi Tanabe Pharma Corporation (“MTPC”) if it does not sell the UPLIZNA drug product that was shipped to MTPC. The refund liability is remeasured at each reporting date to reflect changes in the estimate of variable consideration, with a corresponding adjustment to revenue. Amounts expected to be settled within the 12 months following the balance sheet date are classified as current liabilities in the accompanying balance sheets. Amounts not expected to be settled within the 12 months following the condensed consolidated balance sheet date are classified as long-term liabilities. The following represents the changes to the refund liability for the ~~three~~six months ended ~~March~~June 3130, 2023 (in thousands):

Refund liability at December 31, 2022	$	20,409
Shipments during the three months ended March 31, 2023		—
Shipments during the six months ended June 30, 2023		16,356
Remeasurement of refund liability recognized as revenue		(35,~~875~~509	)
Refund liability at March 31, 2023	$	16,534
Refund liability at June 30, 2023	$	31,256
Less: current portion		1614,~~534~~900
Refund liability, net of current portion	$	—16,356

NOTE 9 – ACCRUED TRADE DISCOUNTS AND REBATES

Accrued trade discounts and rebates as of ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023		December 31, 2022
	June 30, 2023		December 31, 2022
Accrued government rebates and chargebacks	$	~~260~~272,~~093~~144	$	235,216
Accrued commercial rebates and wholesaler fees		30,~~944~~835		39,965
Accrued co-pay and other patient assistance		1816,~~898~~490		44,599
Accrued trade discounts and rebates	$	~~309~~319,~~935~~469	$	319,780
Invoiced commercial rebates and wholesaler fees, co-pay and other patient assistance, and government rebates and chargebacks in accounts payable		93,~~241~~678		77,350
Total customer-related accruals and allowances	$	~~319~~323,~~176~~147	$	397,130

The following table summarizes changes in the Company’s customer-related accruals and allowances from December 31, 2022 to ~~March~~June 3130, 2023 (in thousands):

	Government Rebates and Chargebacks			CommercialRebates and Wholesaler Fees			Co-Pay and Other Patient Assistance			Total
Balance at December 31, 2022	$	295,558		$	46,159		$	55,413		$	397,130
Current provisions relating to sales during the three months ended March 31, 2023		200,302			38,731			38,061			277,094
Current provisions relating to sales during the six months ended June 30, 2023		439,339			80,535			51,588			571,462
Adjustments relating to prior-year sales		(920,~~507~~279	)		(~~593~~1,400	)		(57,~~495~~420	)		(1529,~~595~~099	)
Payments relating to sales during the three months ended March 31, 2023		(56,806	)		(8,429	)		(20,827	)		(86,062	)
Payments relating to sales during the six months ended June 30, 2023		(183,439	)		(47,291	)		(36,312	)		(267,042	)
Payments relating to prior-year sales		(~~169~~259,~~454~~035	)		(4143,~~654~~490	)		(4246,~~283~~779	)		(~~253~~349,~~391~~304	)
Balance at March 31, 2023	$	260,093		$	34,214		$	24,869		$	319,176
Balance at June 30, 2023	$	272,144		$	34,513		$	16,490		$	323,147

NOTE 10 – SEGMENT AND OTHER INFORMATION

The Company substantially completed the wind down of its former inflammation business in the fourth quarter of 2022. Effective in the fourth quarter of 2022, management realigned the Company’s reportable segments to reflect changes in the manner in which the chief operating decision maker (“CODM”) assesses financial information for decision-making purposes. The Company transitioned ~~the~~its ~~Company’s~~ two reportable segments, the inflammation segment and the orphan segment, to one reportable segment for the year ended December 31, 2022. All prior year amounts have been reclassified to conform to the Company’s current reporting structure.

The Company operates in one reportable segment, which focuses on the discovery, development and commercialization of medicines that address critical needs for people impacted by rare, autoimmune and severe inflammatory diseases. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the CODM. The Company’s chief executive officer has been identified as its CODM.

The following table reflects net sales by medicine for the Company’s reportable segment for the three and six months ended ~~March~~June 3130, 2023 and 2022 (in thousands):

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
TEPEZZA	$	~~405~~445,~~317~~528	$	~~501~~479,~~451~~814	$	850,845	$	981,265
KRYSTEXXA		~~186~~244,~~981~~296		~~140~~167,~~704~~755		431,277		308,459
RAVICTI		9088,~~321~~351		7875,~~257~~722		178,672		153,979
UPLIZNA (1)		5368,~~829~~084		3038,~~477~~598		121,913		69,075
PROCYSBI		5053,~~463~~145		4947,~~571~~706		103,608		97,277
ACTIMMUNE		29,~~121~~039		3129,~~435~~989		58,160		61,424
PENNSAID 2%		96,~~194~~913		3523,~~368~~586		16,107		58,954
RAYOS		48,~~977~~012		1311,~~487~~150		12,989		24,637
BUPHENYL		1,~~413~~246		21,~~161~~387		2,659		3,548
QUINSAIR		~~296~~345		~~296~~335		641		631
DUEXIS		~~139~~—		~~1,123~~70		139		1,193
VIMOVO		8—		~~915~~299		8		1,214
Total net sales	$	~~832~~944,~~059~~959	$	~~885~~876,~~245~~411	$	1,777,018	$	1,761,656

(1)

UPLIZNA revenue is affected each reporting period by the changes in the estimate of variable consideration included in the remeasurement of the refund liability for shipments to MTPC. During the three months ended ~~March~~June 3130, 2023 and 2022, the Company recognized $31.96 million and $18.6 million, respectively, and $5.5 million and $10.1 million for the six months ended June 30, 2023 and 2022, respectively, of revenue as a result of the change in this estimate. The amount of variable consideration recognized is dependent on MTPC’s sales over which the Company has no direct control.

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 reportable segment and all other customers as a group for the three months ended March 31, 2023 and 2022 (in thousands, except percentages):

	For the Three Months Ended March 31,
	2023					2022
	Amount		% of Gross			Amount		% of Gross
			Sales					Sales
Customer A	$	315,697		29	%	$	333,373		27	%
Customer B		277,822		25	%		301,211		25	%
Customer C		219,729		20	%		247,619		20	%
Customer D		200,050		18	%		234,126		19	%
Other customers		93,704		8	%		115,157		9	%
Gross sales	$	1,107,002		100	%	$	1,231,486		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 months ended March 31, 2023 and 2022 (in thousands, except percentages):

	For the Three Months Ended March 31, 2023			For the Three Months Ended March 31, 2022
	Amount		% of Total Net Sales	Amount		% of Total Net Sales
United States	$	820,931	99%	$	878,290	100%
Rest of world		11,128	1%		6,955	*
Net sales	$	832,059		$	885,245

*Less than 1%

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 reportable segment and all other customers as a group for the three and six months ended June 30, 2023 and 2022 (in thousands, except percentages):


	For the Three Months Ended June 30,
	2023					2022
	Amount		% of Gross			Amount		% of Gross
			Sales					Sales
Customer A	$	339,179		27	%	$	315,484		25	%
Customer B		242,564		20	%		275,528		22	%
Customer C		280,640		23	%		305,531		25	%
Customer D		282,486		23	%		226,459		18	%
Other customers		95,873		7	%		118,272		10	%
Gross sales	$	1,240,742		100	%	$	1,241,274		100	%


	For the Six Months Ended June 30,
	2023					2022
	Amount		% of Gross			Amount		% of Gross
			Sales					Sales
Customer A	$	654,877		28	%	$	648,857		26	%
Customer B		520,387		22	%		576,738		23	%
Customer C		500,369		21	%		553,150		22	%
Customer D		482,536		21	%		460,585		19	%
Other customers		189,575		8	%		233,429		10	%
Gross sales	$	2,347,744		100	%	$	2,472,759		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 six months ended June 30, 2023 and 2022 (in thousands, except percentages):


	For the Three Months Ended June 30, 2023			For the Three Months Ended June 30, 2022
	Amount		% of Total Net Sales	Amount		% of Total Net Sales
United States	$	922,833	98%	$	863,371	99%
Rest of world		22,126	2%		13,040	1%
Net sales	$	944,959		$	876,411


	For the Six Months Ended June 30, 2023			For the Six Months Ended June 30, 2022
	Amount		% of Total Net Sales	Amount		% of Total Net Sales
United States	$	1,743,763	98%	$	1,741,661	99%
Rest of world		33,255	2%		19,995	1%
Net sales	$	1,777,018		$	1,761,656

NOTE 11 – 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.

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 ~~March~~June 3130, 2023 and December 31, 2022 (in thousands):

	March 31, 2023
	June 30, 2023
	Level 1			Level 2		Level 3		Total
Assets:
Money market funds	$	2,~~158~~268,~~500~~900		$	—	$	—	$	2,~~158~~268,~~500~~900
Interest rate swap contracts		—			21,294		—		21,294
Bank time deposits		—			109,050		—		109,050
Equity securities (1)		7,349			—		—		7,349
Interest rate swap contracts		—			38,419		—		38,419
Foreign currency contracts		—			162		—		162
Equity securities (1)		9,786			—		—		9,786
Other current assets		29,525			—		—		29,525
Foreign currency contracts		—			226		—		226
Total assets at fair value	$	2,195,374		$	21,456	$	—	$	2,216,830
Other current assets		31,872			—		—		31,872
Total assets at fair value	$	2,310,558		$	147,695	$	—	$	2,458,253
Liabilities:
Other long-term liabilities		(2931,~~525~~872	)		—		—		(2931,~~525~~872	)
Total liabilities at fair value	$	(2931,~~525~~872	)	$	—	$	—	$	(2931,~~525~~872	)


	December 31, 2022
	Level 1			Level 2		Level 3		Total
Assets:
Money market funds	$	2,151,500		$	—	$	—	$	2,151,500
Interest rate swap contracts		—			30,348		—		30,348
Equity securities (1)		6,997			—		—		6,997
Foreign currency contracts		—			181		—		181
Other current assets		28,227			—		—		28,227
Total assets at fair value	$	2,186,724		$	30,529	$	—	$	2,217,253
Liabilities:
Other long-term liabilities		(28,227	)		—		—		(28,227	)
Total liabilities at fair value	$	(28,227	)	$	—	$	—	$	(28,227	)

(1)

The Company held investments in equity securities with readily determinable fair values of $79.48 million and $7.0 million as of ~~March~~June 3130, 2023 and December 31, 2022, respectively, which are included in other long-term assets in the condensed consolidated balance sheets. During the three and six months ended ~~March~~June 3130, 2023 ~~and 2022~~, the Company recognized a net unrealized ~~gain~~gains of $02.4 million and ~~a net unrealized loss of~~ $42.68 million, respectively, in the other income (expense), net line item of the Company’s condensed consolidated statement of comprehensive income, due to the change in fair value of these securities. There were no sales of equity securities for the three and six months ended ~~March~~June 3130, 2023 ~~and 2022~~.

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.

~~The~~As of June 30, 2023, the Company’s ~~derivative~~cash ~~assets~~ and ~~liabilities~~cash ~~include~~equivalents ~~interest~~included ~~rate~~bank ~~swaps,~~time deposits which ~~are~~were ~~carried~~measured at fair value. ~~Interest~~using ~~rate~~Level ~~swaps~~2 ~~entered~~inputs ~~into~~and bytheir ~~the~~carrying ~~Company~~values ~~are~~were ~~typically~~approximately ~~executed~~equal ~~over-the-counter~~to ~~and~~their ~~are~~fair ~~valued~~values. ~~using~~Level ~~discounted~~2 ~~cash~~inputs, ~~flows~~obtained ~~along~~from ~~with~~various ~~fair~~third-party ~~value~~data ~~models~~providers, ~~that~~represent ~~primarily~~quoted ~~use~~prices ~~observable~~for ~~market~~similar ~~inputs.~~assets ~~These~~in ~~models~~active ~~take~~markets, ~~into~~or ~~account~~these ainputs ~~variety~~were ofderived ~~factors~~from ~~including,~~observable ~~where~~market ~~applicable~~data, ~~maturity,~~or ~~interest~~if ~~rate~~not ~~yield~~directly ~~curves~~observable, ~~and~~were ~~counterparty~~derived ~~credit~~from ~~risks.~~or ~~Refer~~corroborated toby ~~Note~~other 13observable ~~for~~market ~~further details~~data.

1213

The Company’s derivative assets and liabilities include interest rate swaps, which are carried at fair value. Interest rate swaps entered into by the Company are executed over-the-counter and are valued using discounted cash flows along with fair value models that primarily use observable market inputs. These models take into account a variety of factors including, where applicable, maturity, interest rate yield curves, and counterparty credit risks. Refer to Note 13 for further details.

The Company’s derivative assets and liabilities also include foreign currency forward contracts, which all have maturities of one month or less. The Company estimates the fair values of these contracts by using observable market inputs including the forward and spot prices for foreign currencies. Refer to Note 13 for further details.

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.

NOTE 12 – DEBT AGREEMENTS

The Company’s outstanding debt balances as of ~~March~~June 3130, 2023 and December 31, 2022 consisted of the following (in thousands):

	March 31, 2023			December 31, 2022
	June 30, 2023			December 31, 2022
Term Loan Facility due 2028	$	1,~~568~~564,000		$	1,572,000
Term Loan Facility due 2026		418,026			418,026
Senior Notes due 2027		600,000			600,000
Total face value		2,~~586~~582,026			2,590,026
Debt discount		(98,~~123~~640	)		(9,627	)
Deferred financing fees		(1615,~~673~~928	)		(17,562	)
Total long-term debt		2,~~560~~557,~~230~~458			2,562,837
Less: current maturities		16,000			16,000
Long-term debt, net of current maturities	$	2,~~544~~541,~~230~~458		$	2,546,837

Term Loan Facility and Revolving Credit Facility

On March 15, 2021, Horizon Therapeutics USA, Inc. (the “Borrower” or “HTUSA”), a wholly-owned subsidiary of the Company, borrowed approximately $1.6 billion aggregate principal amount of loans (the “2028 Term Loans”) pursuant to an amendment (the “March 2021 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, Amendment No. 5, dated March 11, 2019, Amendment No. 6, dated May 22, 2019, Amendment No. 7, dated December 18, 2019, ~~and~~ the Incremental Amendment and Joinder Agreement, dated August 17, 2020, the March 2021 Amendment and Amendment No. 10, dated June 16, 2023 (the “Term Loan Facility”). Pursuant to Amendment No. 7, the Borrower borrowed approximately $418.0 million aggregate principal amount of loans (the “2026 Term Loans”). Pursuant to Amendment No. 5, the Borrower received $200.0 million aggregate principal amount of revolving commitments, which was increased to $275.0 million aggregate amount of revolving commitments (the “Incremental Revolving Commitments”) pursuant to the Incremental Amendment and Joinder Agreement. The Incremental Revolving Commitments were established pursuant to an incremental facility (the “Revolving Credit Facility”) and include 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 ~~March~~June 3130, 2023, 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~~Amendment ~~March~~No. ~~2021 Amendment~~10.

The 2028 Term Loans were incurred as a separate class of term loans under the Credit Agreement with substantially the same terms of the 2026 Term Loans. The Borrower used the proceeds of the 2028 Term Loans to fund a portion of the consideration payable in the acquisition of Viela. Pursuant to Amendment No. 10, the benchmark rate was amended to replace LIBOR with Secured Overnight Financing Rate (“SOFR”). The 2028 Term Loans bear interest at a rate, at Borrower’s option, equal to ~~LIBOR,~~SOFR ~~plus 2.00% per annum~~ (subject to a 0.5000% ~~LIBOR~~SOFR floor), plus the SOFR adjustment, plus 2.00% per annum or the adjusted base rate plus 1.00% per annum, with a step-down to ~~LIBOR~~SOFR, plus the SOFR adjustment, plus 1.75% per annum or the adjusted base rate plus 0.75% per annum at the time the Company’s leverage ratio is less than or equal to 2.00 to 1.00. The SOFR adjustment is an additional interest amount for either one-month, three-month or six-month interest periods, at our election: (a) 0.11% using a one-month interest period, (b) 0.26% using a three-month interest period, and (c) 0.43% using a six-month interest period. The adjusted base rate is defined as the greatest of (a) ~~LIBOR~~SOFR (using one-month interest period) plus 1.00%, (b) the prime rate, (c) the federal funds rate plus 0.50%, and (d) 1.00%.

The 2026 Term 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 May 22, 2019 (the “Refinanced Loans”) to effectuate a repricing of the Refinanced Loans. The Borrower used the proceeds of the 2026 Term Loans to repay the Refinanced Loans, which totaled approximately $418.0 million. The 2026 Term Loans bear interest at a rate, at the Borrower’s option, equal to LIBOR plus 2.25% per annum (subject to a 0.00% LIBOR floor) or the adjusted base rate plus 1.25% per annum, with a step-down to LIBOR plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time the Company’s leverage ratio is less than or equal to 2.00 to 1.00. 14

13The 2026 Term 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 May 22, 2019 (the “Refinanced Loans”) to effectuate a repricing of the Refinanced Loans. The Borrower used the proceeds of the 2026 Term Loans to repay the Refinanced Loans, which totaled approximately $418.0 million. The 2026 Term Loans bear interest at a rate, at the Borrower’s option, equal to SOFR (subject to a 0.00% SOFR floor), plus the SOFR adjustment, plus 2.25% per annum or the adjusted base rate plus 1.25% per annum, with a step-down to SOFR, plus the SOFR adjustment, plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time the Company’s leverage ratio is less than or equal to 2.00 to 1.00.

The loans under the Revolving Credit Facility bear interest, at the Borrower’s option, at a rate equal to either ~~LIBOR~~SOFR ~~plus~~(subject anto ~~applicable~~a ~~margin~~SOFR floor of 20.2500%), ~~per~~plus ~~annum~~the ~~(subject~~SOFR toadjustment, aplus ~~LIBOR~~an ~~floor~~applicable margin of 02.0025%) per annum, or the adjusted base rate plus 1.25% per annum, with a step-down to ~~LIBOR~~SOFR, plus the SOFR adjustment, plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time the Company’s leverage ratio is less than or equal to 2.00 to 1.00. The Credit Agreement provides for (i) the 2028 Term Loans, (ii) the 2026 Term Loans, (iii) the Revolving Credit Facility, (iv) one or more uncommitted additional incremental loan facilities subject to the satisfaction of certain financial and other conditions, and (v) 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 2028 Term Loans, 2026 Term 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 2028 Term Loans, 2026 Term 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 Borrower is permitted to make voluntary prepayments of the loans under the Credit Agreement at any time without payment of a premium. 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 a 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 2028 Term Loans will amortize in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount thereof, with any remaining balance payable on March 15, 2028, the final maturity date of the 2028 Term Loans. The principal amount of the 2026 Term Loans is due and payable on May 22, 2026, the final maturity date of the 2026 Term 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 2028 Term Loans is variable and, as of March 31, 2023, the interest rate on the 2028 Term Loans was 6.56% and the effective interest rate was 6.80%.~~15

The interest on the ~~2026~~2028 Term Loans is variable and, as of ~~March~~June 3130, 2023, the interest rate on the ~~2026~~2028 Term Loans was 6.6395% and the effective interest rate was 67.9119%.

AsThe ofinterest ~~March~~on ~~31,~~the ~~2023,~~2026 ~~the~~Term ~~fair~~Loans ~~value~~is ofvariable ~~the~~and, ~~amounts~~as ~~outstanding~~of ~~under~~June ~~the~~30, ~~2028~~2023, ~~Term~~the ~~Loans~~interest ~~and~~rate on the 2026 Term Loans was ~~approximately $1,566~~7.020% ~~million~~ and ~~$417.5~~the ~~million,~~effective ~~respectively,~~interest ~~categorized~~rate aswas ~~a Level 2 instrument, as defined in Note 11~~7.49%.

14As of June 30, 2023, the fair value of the amounts outstanding under the 2028 Term Loans and the 2026 Term Loans was approximately $1,560.1 million and $417.5 million, respectively, categorized as a Level 2 instrument, as defined in Note 11.

On April 25, 2022, the Company entered into two interest rate swap agreements with notional amounts totaling $800.0 million, effective June 24, 2022, to hedge or otherwise protect against interest rate fluctuations on a portion of its variable rate debt. Refer to Note 13 for further details.

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 6.625% Senior Notes due 2023, (ii) the outstanding $300.0 million principal amount of its 8.750% Senior Notes due 2024 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.

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. 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 March 31, 2023, the interest rate on the 2027 Senior Notes was 5.50% and the effective interest rate was 5.76%.~~16

As of ~~March~~June 3130, 2023, the ~~fair~~interest ~~value~~rate ofon the 2027 Senior Notes was ~~approximately $608~~5.350% ~~million,~~and ~~categorized~~the aseffective ainterest ~~Level~~rate 2was ~~instrument, as defined in Note 11~~5.76%.

OnAs ~~April~~of 18June 30, 2023, ~~in connection with~~ the ~~potential~~fair ~~closing~~value of the ~~Transaction,~~2027 ~~HTUSA~~Senior ~~directed~~Notes ~~U.S.~~was ~~Bank~~approximately ~~Trust~~$600.8 ~~Company~~million, ~~National~~categorized ~~Association (~~as ~~successor~~a toLevel ~~U.S.~~2 ~~Bank National Association)~~instrument, as ~~trustee,~~defined ~~to give a notice of HTUSA’s intent,~~ in ~~accordance~~Note ~~with the indenture governing the 2027 Senior Notes, to redeem in full the aggregate principal amount of the outstanding 2027 Senior Notes~~11. ~~The redemption is conditioned on, among other things, the consummation of the Transaction.~~

15On April 18, 2023, in connection with the potential closing of the Transaction, HTUSA directed U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee (the “Notes Trustee”), to give a notice (the “First Redemption Notice”) of HTUSA’s intent, in accordance with the indenture governing the 2027 Senior Notes (the “2027 Notes Indenture”), to redeem in full the aggregate principal amount of the outstanding 2027 Senior Notes. The redemption as set forth in the First Redemption Notice was conditioned on, among other things, the consummation of the Transaction by not later than June 26, 2023. On May 26, 2023, HTUSA revoked the First Redemption Notice and directed the Notes Trustee to give a notice (the “Second Redemption Notice”) of HTUSA’s intent, in accordance with the 2027 Notes Indenture, to redeem in full the aggregate principal amount of the outstanding 2027 Senior Notes. The redemption as set forth in the Second Redemption Notice was conditioned on, among other things, the consummation of the Transaction by not later than July 25, 2023. On July 21, 2023, HTUSA revoked the Second Redemption Notice and directed the Notes Trustee to give a notice (the “Third Redemption Notice”) of HTUSA’s intent, in accordance with the 2027 Notes Indenture, to redeem in full the aggregate principal amount of the outstanding 2027 Senior Notes. The redemption as set forth in the Third Redemption Notice is conditioned on, among other things, the consummation of the Transaction by not later than September 19, 2023.

NOTE 13 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Interest rate risk

The Company is a party to interest rate swap agreements designated as cash flow hedges with notional amounts totaling $800.0 million as of ~~March~~June 3130, 2023, which effectively fix ~~LIBOR~~SOFR at approximately 2.8% through December 24, 2026. These agreements were designated as cash flow hedges on the exposure of the variability of future cash flows subject to the variable monthly interest rates on $800.0 million of the Company’s 2028 Term Loans and the 2026 Term Loans. The change in fair value is recorded as part of other comprehensive income (loss). Interest expense, net is adjusted to include the payments made or received under the swap agreements.

Foreign currency risk

The Company also enters into foreign currency forward contracts with durations of one month or less to mitigate the foreign currency risk related to certain balance sheet positions. The Company has not elected hedge accounting for these transactions and they are recorded at fair value. As of ~~March~~June 3130, 2023, the Company had outstanding foreign currency forward contracts to sell $10.79 million and purchase €5.0 million and CHF5.0 million, and to ~~sell~~purchase ~~JPY260~~$1.08 million and ~~purchase~~sell ~~$1.9~~JPY250 million, all of which had settlement dates of less than one month.

No amounts are excluded from the assessment of effectiveness for cash flow hedges. Refer to Note 11 for further details on the valuation methodologies for the Company’s derivative instruments.

The following tables summarize the amounts and locations of the Company’s derivative instruments on the condensed consolidated balance sheet as of ~~March~~June 3130, 2023 and December 31, 2022 (in thousands):

Fair value - Derivatives in asset position

Fair value - Derivatives in liability position

Balance sheet location

~~March~~June 3130, 2023

Balance sheet location

~~March~~June 3130, 2023

Interest rate swap contracts

Designated as cash flow hedges

Prepaid expenses and other current assets

1420,~~886~~050

Accrued expenses and other current liabilities

—

Designated as cash flow hedges

Other long-term assets

618,~~408~~369

Other long-term liabilities

—

Foreign currency forward contracts

Not designated as hedges

Prepaid expenses and other current assets

~~162~~226

Accrued expenses and other current liabilities

—

Total derivatives

2138,~~456~~645

—


	Fair value - Derivatives in asset position			Fair value - Derivatives in liability position
	Balance sheet location	December 31, 2022		Balance sheet location	December 31, 2022
Interest rate swap contracts
Designated as cash flow hedges	Prepaid expenses and other current assets	$	15,520	Accrued expenses and other current liabilities	$	—
Designated as cash flow hedges	Other long-term assets		14,828	Other long-term liabilities		—
Foreign currency forward contracts
Not designated as hedges	Prepaid expenses and other current assets		181	Accrued expenses and other current liabilities		—
Total derivatives		$	30,529		$	—

While foreign currency forward contracts are subject to a master netting arrangement, the Company does not offset derivative assets and liabilities within the condensed consolidated balance sheet.

The following table summarizes the pre-tax amount and locations of derivative instrument net gains (losses) recognized in the condensed consolidated statement of comprehensive income (in thousands):

	Location	For the Three Months Ended March 31, 2023
		For the Three Months Ended June 30,
Interest rate swap contracts designated as cash flow hedges	Interest expense, net	$	3,438
	Location	2023			2022
Foreign currency forward contracts not designated as cash flow hedges	Foreign exchange gain		(52	)
Interest rate swap contracts designated as cash flow hedges	Interest expense, net	$	4,430		$	157
Foreign currency forward contracts not designated as cash flow hedges	Foreign exchange gain		523			(3,248	)

The following table presents the pre-tax amount of losses from derivative instruments recognized in other comprehensive loss (in thousands):


		For the Six Months Ended June 30,
	Location	2023		2022
Interest rate swap contracts designated as cash flow hedges	Interest expense, net	$	7,868	$	157
Foreign currency forward contracts not designated as cash flow hedges	Foreign exchange gain		471		(3,248	)

		For the Three Months Ended March 31, 2023
Interest rate swap contracts designated as cash flow hedges		$	9,054

The following table presents the pre-tax amount of gains from derivative instruments recognized in other comprehensive income (loss) (in thousands):

Assuming market rates remain constant through contract maturities, the Company expects to reclassify pre-tax net gains of $14.9 million into interest expense, net for interest rate swap cash flow hedges within the next 12 months.


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Interest rate swap contracts designated as cash flow hedges	$	17,125	$	2,615	$	8,071	$	2,615

Assuming market rates remain constant through contract maturities, the Company expects to reclassify pre-tax net gains of $20.1 million into interest expense, net for interest rate swap cash flow hedges within the next 12 months.

The cash flow effects of the Company’s derivative contracts in the condensed consolidated statement of cash flows are included in operating activities.

NOTE 14 – LEASE OBLIGATIONS

As of ~~March~~June 3130, 2023, the Company had the following office space lease agreements in place for real properties:

Location	Approximate Square Feet		Lease Expiry Date
Dublin, Ireland		80,000	July 1, 2032 to May 4, 2041
Rockville, Maryland (1)		242,000	August 31, 2024 to April 30, 2040
Lake Forest, Illinois		160,000	March 31, 2031
South San Francisco, California		40,000	December 31, 2031
Rockville, Maryland		42,000	August 31, 2024 to May 31, 2026
Chicago, Illinois		9,200	December 31, 2028
Washington, D.C.		6,000	September 30, 2024
Mannheim, Germany		4,800	December 31, 2023

(1)

~~The~~In ~~above~~November ~~table~~2021, ~~does~~the ~~not~~Company ~~include details of an agreement to lease~~ entered into ina ~~November~~lease ~~2021~~agreement relating to approximately 192,000 square feet of office and laboratory space under construction in Rockville, Maryland. ~~Lease~~During ~~commencement~~the ~~will~~second ~~begin~~quarter ~~when~~of 2023, the construction of the ~~building~~office iswas completed by the lessor and the ~~Company~~lease ~~has~~became ~~access~~effective. toAs ~~begin~~a result, the ~~construction~~Company ofrecognized ~~leasehold~~an ~~improvements~~initial $46.0 ~~The~~million ~~Company~~as ~~expects~~a toright-of-use ~~receive~~asset ~~access~~and toa $46.9 million lease liability on the ~~office~~condensed ~~and~~consolidated ~~laboratory~~balance ~~space~~sheet. ~~and~~The ~~commence~~lease ~~the~~is ~~related~~due ~~tenant~~to ~~improvements~~expire in ~~the~~April ~~second~~2040. ~~half~~The ofCompany ~~2023~~expects ~~and~~to incur leasehold improvement costs through 2024 and 2025 in order to prepare the building for occupancy.

As of ~~March~~June 3130, 2023 and December 31, 2022, the Company had right-of-use lease assets included in other long-term assets of $97141.69 million and $99.5 million, respectively; current lease liabilities included in accrued expenses and other current liabilities of $89.52 million and $7.8 million, respectively; and non-current lease liabilities included in other long-term liabilities of $~~113~~159.31 million and $114.3 million, respectively, in its condensed consolidated balance sheets.

The Company recognizes rent expense on a monthly basis over the lease term based on a straight-line method. Rent expense was $35.63 million and $3.01 million for the three months ended ~~March~~June 3130, 2023 and 2022, respectively, and was $8.9 million and $6.1 million for six months ended June 30, 2023 and 2022, respectively.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the lease liabilities recorded on the Company’s condensed consolidated balance sheet as of ~~March~~June 3130, 2023 (in thousands):

2023 (April to December)	$	10,469
2023 (July to December)	$	6,652
2024		14,~~524~~566
2025		1419,~~008~~958
2026		1321,~~406~~482
2027		1321,~~448~~745
Thereafter		91213,~~101~~155
Total lease payments		~~156~~297,~~956~~558
Imputed interest		(35129,~~135~~172	)
Total lease liabilities	$	~~121~~168,~~821~~386

The weighted-average discount rate and remaining lease term for leases as of ~~March~~June 3130, 2023 was 45.3775% and 13.3944 years, respectively.

1719

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Purchase Commitments

Under the Company’s supply 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 TEPEZZA drug substance. In addition, the Company must provide AGC Biologics with rolling forecasts of TEPEZZA drug substance requirements, with a portion of the forecast being a firm and binding order. As of ~~March~~June 3130, 2023, the Company had binding purchase commitments with AGC Biologics for TEPEZZA drug substance of €~~100~~89.23 million ($~~108~~97.4 million converted at a Euro-to-Dollar exchange rate as of ~~March~~June 3130, 2023 of 1.~~0820~~0905), to be delivered through ~~March~~June 2025. Under the Company’s supply agreement with Catalent Indiana, LLC (“Catalent”), the Company must provide Catalent with rolling forecasts of TEPEZZA drug product requirements, with a portion of the forecast being a firm and binding order. As of ~~March~~June 3130, 2023, the Company had binding purchase commitments with Catalent for TEPEZZA drug product of $56.72 million, to be delivered through ~~September~~December 2024. ~~The~~Under the Company’s ~~received~~supply ~~U.S.~~agreement ~~Food~~with ~~and Drug Administration (“FDA”) approval in December 2021 for a second TEPEZZA drug product manufacturer,~~ Patheon Pharmaceuticals Inc. (“Patheon”) (the contract development and manufacturing services organization of Thermo Fisher Scientific)~~. Under the Company’s supply agreement with Patheon~~, the Company must provide Patheon with rolling forecasts of TEPEZZA drug product requirements, with a portion of the forecast being a firm and binding order. As of ~~March~~June 3130, 2023, the Company had binding purchase commitments with Patheon for TEPEZZA drug product of €76.78 million ($87.34 million converted at a Euro-to-Dollar exchange rate as of ~~March~~June 3130, 2023 of 1.~~0820~~0905), to be delivered through ~~September~~December 2024.

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 80% of its annual worldwide bulk product requirements for KRYSTEXXA from BTG Israel. 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 each forecast is considered a binding firm order. As of ~~March~~June 3130, 2023, the Company had a total purchase commitment, including the minimum annual order quantities and binding firm orders, with BTG Israel for KRYSTEXXA of $2422.68 million, to be delivered through December 2026.

Under an agreement with Boehringer Ingelheim Biopharmaceuticals GmbH (“Boehringer Ingelheim Biopharmaceuticals”), Boehringer Ingelheim Biopharmaceuticals is required to manufacture and supply ACTIMMUNE to the Company. The Company is required to purchase minimum quantities of finished medicine during the term of the agreement, which term extends to at least September 30, 2024. As of ~~March~~June 3130, 2023, the minimum purchase commitment to Boehringer Ingelheim Biopharmaceuticals was €5.9 million ($6.45 million converted using a Euro-to-Dollar exchange rate of 1.~~0820~~0905 as of ~~March~~June 3130, 2023) through September 2024.

Excluding the above, additional purchase orders and other commitments relating to the manufacture of RAVICTI, PROCYSBI, KRYSTEXXA, BUPHENYL, ~~QUINSAIR~~UPLIZNA, ~~UPLIZNA~~RAYOS and ~~RAYOS~~QUINSAIR of $1815.36 million were outstanding as of ~~March~~June 3130, 2023.

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.

Disclosure of ongoing matters is considered at the time of each filing and matters may be removed if the statute of limitations has lapsed or circumstances have changed that reduce the risk of exposure.

On August 3, 2022, the Company received a civil investigative demand from the United States Department of Justice (“DOJ”) pursuant to the Federal False Claims Act regarding an investigation concerning potentially false information in prior authorization forms. A prior authorization form is a managed care practice whereby the payer (either a commercial insurer or a government health program) requires that the prescribing physician provide additional justification or information supporting the physician’s decision to prescribe a particular medicine. The civil investigative demand requests certain documents and information related to DUEXIS, PENNSAID 2%, VIMOVO and RAYOS. The Company is cooperating with the investigation and the DOJ has not indicated to the Company whether it believes the Company engaged in any wrongdoing or if the Company is the subject of the investigation. While the Company is not aware of any fraudulent scheme to provide false information in prior authorization forms for its medicines that resulted in improper payments from government healthcare programs, 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.

1820

Beginning in the third quarter of 2022, the Company has been served with ~~several~~multiple complaints from plaintiffs alleging to have taken TEPEZZA and suffered hearing ~~impairments~~impairment. Although hearing impairment, including deafness, was identified as a potential adverse event in the pivotal clinical trials for TEPEZZA, addressed at the U.S. Food and Drug Administration (“FDA”) advisory committee meeting that considered the safety and efficacy of TEPEZZA, and listed as a potential adverse event in the initial FDA-approved TEPEZZA product label, the plaintiffs allege that the Company failed to adequately inform them about the risk of hearing impairment before taking the medicine. In March 2023, one of the plaintiffs filed a motion with the United States Judicial Panel on Multidistrict Litigation (“MDL Panel”) to transfer current and future product liability cases involving TEPEZZA and hearing impairment to the United States District Court for the Northern District of California. On June 2, 2023, the MDL Panel ordered the centralization of current and future federal cases to the United States District Court for the Northern District of Illinois, Eastern Division. On June 28, 2023, the court vacated the prior deadlines in the individual cases and instructed the parties to confer on a consolidated procedure to resolve the Company’s motions to dismiss the cases on federal preemption grounds. The Company intends to vigorously defend itself in the lawsuits and maintains insurance coverage for product liability claims. Nevertheless, no assurance can be given as to the outcome of the litigation, whether additional similar lawsuits will be initiated or whether the Company’s insurance coverage will be adequate to cover the costs of the litigation or any resulting settlements or judgments.

Other Agreements

Arrowhead Pharmaceuticals, Inc.

On June 18, 2021, the Company entered into a global agreement with Arrowhead Pharmaceuticals, Inc. (“Arrowhead”) for HZN 457, a discovery-stage investigational RNAi therapeutic being developed by Arrowhead as a potential treatment for uncontrolled gout. Arrowhead granted the Company a worldwide exclusive license to develop, manufacture and commercialize medicines based on the RNAi therapeutic. Arrowhead is required to use commercially reasonable efforts to conduct research and preclinical development activities for the RNAi therapeutic products. The Company must use commercially reasonable efforts in, and will be responsible for, clinical development and commercialization of the RNAi therapeutic products. Under the terms of the agreement, the Company paid Arrowhead an upfront cash payment of $40.0 million in July 2021 and agreed to pay additional potential future milestone payments of up to $660.0 million contingent on the achievement of certain development, regulatory and commercial milestones, and low to mid-teens royalties on worldwide calendar year net sales of licensed medicines. In addition, a $15.0 million development milestone was recognized in the fourth quarter of 2022. The $15.0 million development milestone was subsequently paid in the first quarter of 2023.

Venture capital funds

The Company is committed to invest as a strategic limited partner in four venture capital funds: Forbion Growth Opportunities Fund I C.V., Forbion Capital Fund V C.V., Aisling Capital V, L.P. and RiverVest Venture Fund V, L.P. As of ~~March~~June 3130, 2023, the total carrying amount of the Company’s investments in these funds was $2731.29 million, which is included in other long-term assets in the condensed consolidated balance sheet and includes $24.62 million in net cash payments for investments made during the ~~three~~first ~~months~~half ~~ended~~of ~~March 31,~~ 2023. As of ~~March~~June 3130, 2023, the Company’s total future commitments to these funds were $3435.04 million. During the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022, the Company recorded a loss under the equity method of $10.56 million and investment income under the equity method of $42.04 million, respectively, in the other income (expense), net line item of the Company’s condensed consolidated statement of comprehensive income related to these funds.

Non-cancellable advertising commitments

As of ~~March~~June 3130, 2023, the Company had $6128.24 million of non-cancellable advertising commitments due within one year, primarily related to its U.S. commercial business.

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.

1921

The Company also has indemnification obligations to the former officers and directors of Viela for certain events or occurrences related to their former roles at Viela, subject to certain limits. Several individual directors and officers of Viela were named as defendants in a lawsuit, Sciannella v. Astrazeneca UK Limited et.al., Case No. 2023-0125, filed in the Court of Chancery of the State of Delaware, which alleges various breaches of fiduciary duties in connection with Viela’s decision to be acquired by the Company. The Company has a director and officer insurance policy that enables it to recover a portion of certain amounts that may be paid by (and for which the Company may be obligated to indemnity) the former Viela officers and directors as a result of the lawsuit.

NOTE 16 - LEGAL PROCEEDINGS

~~PENNSAID~~Transaction 2%Agreement with Amgen

On May 616, ~~2022~~2023, ~~Apotex Corp. and its affiliate, Apotex Inc. (collectively, “Apotex”), received FDA approval to market a generic diclofenac sodium topical solution 2% (“Apotex ANDA Product”), following~~ the ~~apparent~~FTC ~~forfeiture by Actavis Laboratories UT, Inc. (“Actavis”) of its first-filer exclusivity. On May 13, 2022, the Company~~ filed a complaint ~~against Apotex asserting that the manufacture, use, offer for sale, or sale of the Apotex ANDA Product would infringe U.S. Patent No. 9,066,913 (the “‘913 patent”)~~ in the United States District Court for the Northern District of ~~Delaware.~~Illinois ~~The~~seeking ~~Company~~a ~~previously~~temporary ~~successfully~~restraining ~~enforced~~order ~~the~~and ~~‘913~~preliminary ~~patent~~injunction ~~against~~enjoining ~~Actavis in~~ the ~~District~~Transaction. ofRefer ~~New~~to ~~Jersey~~Note ~~and~~1 ~~the~~for ~~Federal~~further ~~Circuit subsequently affirmed the District Court’s ruling~~details.

The Company purchased PENNSAID 2% from Nuvo Pharmaceuticals Inc. (“Nuvo”) in 2014. Apotex alleged that a settlement agreement entered into in January 2013 with Nuvo (“Nuvo Settlement”) provides it with a license to the ‘913 patent. The Company disputed the scope of Apotex’s settlement and license with Nuvo, contending that it does not provide Apotex with a license to the ‘913 patent, which was issued to the Company after the Company’s purchase of PENNSAID 2% from Nuvo.TEPEZZA

OnBeginning ~~May~~in ~~17,~~the third quarter of 2022, the Company ~~moved~~has ~~for~~been aserved ~~preliminary~~with ~~injunction~~multiple ~~enjoining~~complaints ~~Apotex~~ from ~~engaging~~plaintiffs inalleging ~~the commercial manufacture, use, offer~~ to ~~sell,~~have ortaken ~~sale~~TEPEZZA ofand ~~the~~suffered ~~Apotex~~hearing ~~ANDA Product~~impairment. OnAlthough ~~May~~hearing 27impairment, ~~2022~~including deafness, ~~the~~was ~~parties~~identified ~~filed~~as a ~~stipulated~~potential ~~preliminary~~adverse ~~injunction~~event ~~and~~in athe ~~proposed~~pivotal ~~expedited~~clinical ~~briefing~~trials ~~schedule~~for toTEPEZZA, ~~present~~addressed at the ~~underlying~~FDA ~~license~~advisory ~~dispute~~committee tomeeting ~~the~~that ~~District~~considered ~~Court~~the bysafety ~~way~~and efficacy of aTEPEZZA, ~~motion~~and ~~for~~listed ~~summary~~as ~~judgment,~~a ~~which~~potential ~~the~~adverse ~~District~~event ~~Court~~in ~~entered~~the oninitial ~~May~~FDA-approved ~~31,~~TEPEZZA ~~2022.~~product ~~On August 23~~label, ~~2022,~~ the ~~District~~plaintiffs ~~Court~~allege ~~held~~that athe ~~hearing~~Company onfailed ~~the~~to ~~motion~~adequately ~~for~~inform ~~summary~~them ~~judgment~~about ~~and~~ the ~~parties~~risk ~~subsequently~~of ~~provided~~hearing ~~supplemental~~impairment ~~briefing~~before ontaking ~~certain legal matters requested by~~ the ~~District Court~~medicine. OnIn ~~November~~these 7lawsuits, ~~2022,~~ the ~~District~~plaintiffs ~~Court~~are ~~ruled~~seeking inunspecified ~~Apotex’s~~monetary ~~favor,~~damages. ~~finding~~In ~~that~~March ~~the~~2023, ~~Nuvo~~one ~~Settlement~~of ~~provided~~the ~~Apotex~~plaintiffs filed a ~~license~~motion towith the ~~‘913~~MDL ~~patent~~Panel ~~and~~to ~~that~~transfer ~~Apotex’s~~current ~~ANDA~~and ~~Product~~future ~~consequently~~product ~~does~~liability ~~not~~cases ~~infringe~~involving ~~the~~TEPEZZA ~~‘913~~and ~~patent.~~hearing ~~Apotex~~impairment ~~subsequently~~to ~~alleged that~~ the ~~preliminary~~United ~~injunction~~States ~~was~~District ~~wrongfully~~Court ~~entered~~for ~~and~~the ~~caused~~Northern ~~Apotex~~District toof ~~suffer monetary losses~~California. ~~Apotex~~On ~~also~~June ~~sought~~2, an2023, ~~award~~the ofMDL ~~its~~Panel ~~attorney~~ordered ~~fees.~~the ~~The~~centralization ~~Company~~of ~~disputed~~current ~~Apotex’s~~and ~~allegations~~future ~~that~~federal itcases ~~incurred~~to ~~monetary~~the ~~losses~~United orStates ~~that~~District itCourt ~~was~~for ~~entitled~~the toNorthern anDistrict ~~award~~ of ~~attorney~~Illinois, ~~fees~~Eastern Division. On ~~April~~June 2528, 2023, the ~~parties~~court ~~entered~~vacated ~~into~~the aprior ~~confidential~~deadlines ~~settlement~~in ofthe ~~all~~individual ~~claims.~~cases Onand ~~April~~instructed ~~28,~~the ~~2023,~~parties to confer on a consolidated procedure to resolve the ~~District~~Company’s ~~Court~~motions ~~litigation~~to ~~was~~dismiss ~~dismissed~~the ~~with~~cases ~~prejudice~~on federal preemption grounds.

PROCYSBI

On February 2, 2022 and February 16, 2022, the Company received notice from Teva Pharmaceuticals, Inc. (“Teva”) that it had filed Abbreviated New Drug Applications (“ANDA”) with the FDA seeking approval of generic versions of PROCYSBI granules and capsules, respectively. The ANDAs contained Paragraph IV Patent Certifications alleging that the patents covering PROCYSBI granules and capsules are invalid and/or will not be infringed by Teva’s manufacture, use or sale of the medicines for which the ANDAs were submitted. On March 15, 2022, the Company filed suit against Teva in the United States District Court for the District of New Jersey for patent infringement, seeking to prevent Teva from selling its generic versions of PROCYSBI granules and capsules. On March 24, 2023, the parties stipulated to a stay of all proceedings.

~~RAVICTI~~PENNSAID 2%

On ~~June~~May 76, 2022, ~~the~~Apotex ~~Company~~ received ~~notice~~FDA ~~from~~approval ~~Taro~~to ~~Pharmaceuticals~~market ~~Industries,~~a ~~Ltd.~~generic ~~(“Taro”)~~diclofenac ~~that~~sodium ittopical ~~had~~solution ~~filed~~2% an(“Apotex ANDA ~~with~~Product”), following the ~~FDA~~apparent ~~seeking~~forfeiture ~~approval~~by ofActavis aLaboratories ~~generic~~UT, ~~version of RAVICTI~~Inc. ~~The~~(“Actavis”) ~~ANDA~~of ~~contained~~its ~~Paragraph~~first-filer IVexclusivity. ~~Patent~~On ~~Certification~~May ~~alleging~~13, ~~that~~2022, the ~~patents~~Company ~~covering~~filed ~~RAVICTI~~a ~~are~~complaint ~~invalid~~against ~~and/or~~Apotex ~~will~~asserting ~~not~~that bethe ~~infringed by Taro’s~~ manufacture, use, offer for sale, or sale of the ~~medicine~~Apotex ~~for~~ANDA ~~which~~Product ~~the~~would ~~ANDA~~infringe ~~was submitted~~U.S. OnPatent ~~July~~No. 209, ~~2022~~066,913 (the ~~Company~~“‘913 ~~filed~~patent”) ~~suit against Taro~~ in the United States District Court for the District of ~~New~~Delaware. ~~Jersey~~The ~~for~~Company ~~patent~~previously ~~infringement,~~successfully ~~seeking~~enforced tothe ~~prevent~~‘913 ~~Taro~~patent ~~from~~against ~~selling~~Actavis ~~its~~in ~~generic~~the ~~version~~District of ~~RAVICTI.~~New OnJersey ~~March~~and ~~17, 2023,~~ the ~~parties~~Federal ~~entered~~Circuit ~~into~~subsequently aaffirmed ~~confidential~~the ~~settlement~~district ofcourt’s ~~all claims~~ruling.

20The Company purchased PENNSAID 2% from Nuvo Pharmaceuticals Inc. (“Nuvo”) in 2014. Apotex alleged that a settlement agreement entered into in January 2013 with Nuvo (“Nuvo Settlement”) provides it with a license to the ‘913 patent. The Company disputed the scope of Apotex’s settlement and license with Nuvo, contending that it does not provide Apotex with a license to the ‘913 patent, which was issued to the Company after the Company’s purchase of PENNSAID 2% from Nuvo.

On May 17, 2022, the Company moved for a preliminary injunction enjoining Apotex from engaging in the commercial manufacture, use, offer to sell, or sale of the Apotex ANDA Product. On May 27, 2022, the parties filed a stipulated preliminary injunction and a proposed expedited briefing schedule to present the underlying license dispute to the district court by way of a motion for summary judgment, which the district court entered on May 31, 2022. On August 23, 2022, the district court held a hearing on the motion for summary judgment and the parties subsequently provided supplemental briefing on certain legal matters requested by the district court. On November 7, 2022, the district court ruled in Apotex’s favor, finding that the Nuvo Settlement provided Apotex a license to the ‘913 patent and that Apotex’s ANDA Product consequently does not infringe the ‘913 patent. Apotex subsequently alleged that the preliminary injunction was wrongfully entered and caused Apotex to suffer monetary losses. Apotex also sought an award of its attorney fees. The Company disputed Apotex’s allegations that it incurred monetary losses or that it was entitled to an award of attorney fees. On April 25, 2023, the parties entered into a confidential settlement of all claims. On April 28, 2023, the district court litigation was dismissed with prejudice.

NOTE 17 – SHARE-BASED AND LONG-TERM INCENTIVE PLANS

The Company’s equity incentive plans at ~~March~~June 3130, 2023 included its 2011 Equity Incentive Plan, as amended, Amended and Restated 2014 Equity Incentive Plan (“2014 EIP”), 2014 Non-Employee Equity Plan, as amended (“2014 Non-Employee Plan”), 2020 Employee Share Purchase Plan (“2020 ESPP”), Amended and Restated 2020 Equity Incentive Plan, as amended (“2020 EIP”), and Amended and Restated 2018 Equity Incentive Plan (“2018 EIP”).

As of ~~March~~June 3130, 2023, an aggregate of 21,~~046~~852,~~575~~854 ordinary shares were authorized and available for future issuance under the 2020 ESPP, an aggregate of 15,~~230~~303,~~763~~445 ordinary shares were authorized and available for future grants under the 2020 EIP, an aggregate of 483,069 ordinary shares were authorized and available for future grants under the 2014 Non-Employee Plan and an aggregate of 1,~~585~~547,~~533~~592 ordinary shares were authorized and available for future grants under the 2018 EIP.

Stock Options

The following table summarizes stock option activity during the ~~three~~six months ended ~~March~~June 3130, 2023:

	Options			WeightedAverageExercise Price		Weighted Average ContractualTermRemaining(in years)		AggregateIntrinsic Value(in thousands)
Outstanding as of December 31, 2022		4,830,232		$	24.04		2.91	$	433,552
Exercised		(~~156~~235,~~324~~970	)		2125.7967		—		—
Forfeited		(12,~~134~~627	)		4653.9646		—		—
Outstanding as of March 31, 2023		4,672,774		$	24.11		2.61	$	397,318
Outstanding as of June 30, 2023		4,591,635		$	23.94		2.36	$	362,319
Exercisable as of March 31, 2023		4,588,748		$	23.57		2.53	$	392,638
Exercisable as of June 30, 2023		4,535,201		$	23.53		2.31	$	359,716

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

Restricted Stock Units

The following table summarizes RSU activity for the ~~three~~six months ended ~~March~~June 3130, 2023:

	Number of Units			Weighted AverageGrant-Date FairValue Per Unit
Outstanding as of December 31, 2022		3,466,272		$	80.84
Granted		2,~~244~~299,~~484~~107			112.4933
Vested		(1,~~364~~496,~~839~~049	)		6668.8661
Forfeited		(84151,~~270~~375	)		98100.3762
Outstanding as of March 31, 2023		4,261,647		$	101.64
Outstanding as of June 30, 2023		4,117,955		$	102.14

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

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Performance Stock Unit Awards

The following table summarizes PSU activity for the ~~three~~six months ended ~~March~~June 3130, 2023:

	Number of Units			Weighted AverageGrant-Date Fair Value Per Unit		Average IlliquidityDiscount			RecordedWeightedAverage Fair Value Per Unit	~~RecordedWeightedAverage Fair Value Per Unit~~
Outstanding as of December 31, 2022		1,233,584
Granted		319,658		$	159.52		5.54	%	$	$150.68	~~150.68~~
Forfeited		(31,111	)		112.02		52.13	%		53.62	~~53.62~~
Vested		(587,075	)		57.22		8.72	%		52.23	~~52.23~~
Outstanding as of March 31, 2023		935,056
Outstanding as of June 30, 2023		935,056

On January 4, 2023, the Company awarded PSUs to key executive participants (“2023 PSUs”). The 2023 PSUs are subject to both performance-based and service-based vesting provisions. The 2023 PSUs utilize three long-term performance metrics, as follows:

•

50% of the 2023 PSUs that may vest (such portion of the PSU award, the “2023 Relative TSR PSUs”) are determined by reference to the Company’s total shareholder return (“TSR”) over the three-year period ending December 31, 2025, as measured relative to the TSR of each company included in the Nasdaq Biotechnology Index (“NBI”) during such three-year period (except with respect to the Company only, the period is measured from November 28, 2022, which is the last trading day prior to the public announcement that the Company was in preliminary discussions related to a possible acquisition transaction, through December 31, 2025). Generally, in order to vest in any portion of the 2023 Relative TSR PSUs, the participant must also remain in continuous service with the Company through the earlier of January 5, 2026 or the date immediately prior to a change in control.

•

25% of the 2023 PSUs that may vest (such portion of the PSU award, the “2023 Strategic PSUs”) are determined by reference to the Company’s achievement of certain performance objectives related to research and development and technical operations during the two-year period ending December 31, 2024. Generally, in order to vest in any portion of the 2023 Strategic PSUs, the participant must also remain in continuous service with the Company through the earlier of (i) January 5, 2025 (with respect to 2/3rds of the 2023 Strategic PSUs) and January 5, 2026 (with respect to 1/3rd of the 2023 Strategic PSUs) or (ii) the date immediately prior to a change in control.

•

25% of the 2023 PSUs that may vest (such portion of the PSU award, the “2023 Financial PSUs”) are determined by reference to the Company’s achievement of certain financial milestones. The 2023 Financial PSUs that may vest will be determined by reference to the Company’s combined net sales of TEPEZZA and KRYSTEXXA during the two-year period ending December 31, 2024. Generally, in order to vest in any portion of the 2023 Financial PSUs, the participant must also remain in continuous service with the Company through the earlier of (i) January 5, 2025 (with respect to 2/3rds of the 2023 Financial PSUs) and January 5, 2026 (with respect to 1/3rd of the 2023 Financial PSUs) or (ii) the date immediately prior to a change in control.

If a change in control occurs prior to the completion of the defined performance period, a portion of any PSUs for which performance has not previously been determined will vest as measured through the date of the change in control (with respect to PSUs based on TSR) or based on an estimated level of performance through the end of the performance period as if the change in control had not occurred, which will be determined by the Compensation Committee.

All PSUs outstanding on ~~March~~June 3130, 2023 may vest in a range of between 0% and 200%, with the exception of certain modified PSUs granted in 2020 and based on net sales which were capped at 150% and the 2023 PSUs, which will be capped at 100% to the extent the pending Transaction with Amgen closes prior to the defined performance period. The Company accounts for all PSUs as equity-settled awards in accordance with ASC 718, Compensation-Stock Compensation. Because the value of the 2023 Relative TSR PSUs is 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 on the grant date. As a result, the Monte Carlo model is applied and the most significant valuation assumptions used related to the 2023 Relative TSR PSUs during the ~~three~~six months ended ~~March~~June 3130, 2023, included:


Valuation date stock price	$	113.48
Expected volatility		47.55	%
Risk free rate		4.07	%

The value of outstanding PSUs based on strategic or financial goals that have not yet been determined are 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.

2224

Share-Based Compensation Expense

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022 (in thousands):

	For the Three Months Ended March 31,
	For the Six Months Ended June 30,
	2023		2022
Share-based compensation expense
Cost of goods sold	$	25,~~662~~803	$	24,~~177~~471
Research and development		918,~~165~~561		815,~~976~~720
Selling, general and administrative		4694,~~293~~027		3672,~~147~~258
Total share-based compensation expense	$	58118,~~120~~391	$	4792,~~300~~449

During the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022, the Company recognized $2324.5 million and $4553.29 million of tax benefit, respectively, related to share-based compensation resulting primarily from the fair value of equity awards at the time of the exercise of stock options and vesting of RSUs and PSUs. As of ~~March~~June 3130, 2023, the Company estimated that pre-tax unrecognized compensation expense of $~~481~~422.37 million for all unvested share-based awards, including stock options, RSUs and PSUs, will be recognized through the first quarter of 2026. The Company expects to satisfy the exercise of stock options and future distribution of shares for RSUs and PSUs by issuing new ordinary shares which have been reserved under the 2020 EIP, the 2018 EIP and 2014 Non-Employee Plan.

NOTE 18 – 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 expense (benefit) for income taxes for the three months ended ~~March~~June 3130, 2023 and 2022 (in thousands):

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Income before benefit for income taxes	$	19,202		$	172,739
Income before expense (benefit) for income taxes	$	135,252		$	64,787		$	154,454		$	237,526
Benefit for income taxes		(35,482	)		(31,522	)
Expense (benefit) for income taxes		8,181			3,813			(27,301	)		(27,709	)
Net income	$	54127,~~684~~071		$	~~204~~60,~~261~~974		$	181,755		$	265,235

During the three and six months ended ~~March~~June 3130, 2023, the Company recorded an expense for income taxes of $8.2 million and a benefit for income taxes of $27.3 million, respectively. During the three and six months ended June 30, 2022, the Company recorded aan ~~benefit~~expense for income taxes of $353.58 million and a benefit for income taxes of $3127.57 million, respectively. The ~~increase in~~ benefit for income taxes recorded during the ~~three~~six months ended ~~March~~June 3130, 2023 ~~compared~~is toprimarily ~~the~~attributable ~~three~~to ~~months~~tax ~~ended~~benefits ~~March~~recognized ~~31,~~on ~~2022~~share-based ~~resulted~~compensation ~~primarily~~and ~~from~~ the mix of pre-tax income and losses incurred in various tax jurisdictions~~, partially offset by a decrease in the tax benefits recognized on share-based compensation~~.

2325

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 the pending transaction with Amgen Inc., our strategy and other aspects of our future operations, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our medicines, growth opportunities and trends in the market in which we operate, prospects and plans and objectives of management. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this report and in our other filings with the Securities and Exchange Commission, or SEC. We do not assume any obligation to update any forward-looking statements.

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

OUR BUSINESS

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

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

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

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

•

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

•

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

2426

•

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

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

~~The~~On ~~Irish~~May ~~High~~16, 2023, the Federal Trade Commission, or FTC, filed a complaint in the United States District Court ~~has~~for ~~set~~the Northern District of Illinois seeking a temporary restraining order and preliminary injunction enjoining the Transaction. On May 23, 2023, the district court scheduled an evidentiary hearing ~~date~~on the FTC’s request for a preliminary injunction beginning on September 11, 2023. Based on the district court’s schedule, we, Amgen and the FTC then submitted a stipulated proposed temporary restraining order to the district court providing that we and Amgen would not close the Transaction until the earlier of October 31, 2023 or the second business day after the district court rules on the FTC’s request for a preliminary injunction, or the Stipulated TRO. On May 31, 2023, the district court entered a case management order, and on June 2, 2023, the district court issued an order granting the Stipulated TRO. On June 22, 2023, tothe ~~consider~~FTC ~~our~~filed ~~application~~a parallel complaint in its administrative court and an amended complaint was filed in the district court adding several states as additional plaintiffs. On June 29, 2023, we and Amgen filed an answer to ~~sanction~~the amended complaint and counterclaims against the ~~Scheme~~FTC. We ~~will~~expect ~~inform~~that the ~~Irish~~schedule ~~High~~set ~~Court~~by inthe ~~advance~~district court would allow the Transaction to close by mid-December 2023 if the ~~hearing~~district ~~date~~court ~~needs~~denies tothe request for a preliminary injunction. We cannot predict with certainty whether and when any of the required closing conditions, including the termination of the Stipulated TRO and absence of any other order preventing consummation of the Transaction, will be ~~adjourned~~satisfied or if additional uncertainties may arise and cannot guarantee that we will be able to asuccessfully ~~later~~consummate ~~date~~the pending Transaction as acurrently ~~result~~contemplated ofunder the transaction agreement or at all. In particular, there can be no guarantee that the district court will deny the FTC’s request for a ~~condition~~preliminary toinjunction ~~closing~~or when, ~~including~~if ~~required~~ever, ~~regulatory~~such ~~clearances~~a ruling would be issued. If the FTC’s request for a preliminary injunction is granted, ~~not~~it ~~having~~is ~~been~~highly ~~satisfied~~unlikely bythat the ~~scheduled~~Transaction ~~hearing~~could close before the December 12, 2023 end date specified in the transaction agreement. ~~The~~In ~~Transaction~~the isevent ~~expected~~that tothe Transaction does not close ~~shortly~~before ~~after~~the December 12, 2023 end date specified in the ~~Irish~~transaction ~~High~~agreement, ~~Court~~each ~~issues~~party anwould ~~order~~then ~~sanctioning~~have the ~~Scheme~~right, ~~and~~in weits ~~continue~~sole discretion, to ~~expect~~terminate ~~that~~ the ~~closing~~transaction ofagreement and abandon the Transaction, ~~will~~which ~~occur~~Amgen ~~during~~may determine to do, particularly if the ~~first~~FTC’s ~~half~~request offor ~~2023.~~a ~~Additional~~preliminary ~~information~~injunction ~~about~~is granted. If the transaction agreement is terminated and the Transaction is ~~set~~abandoned, ~~forth~~whether indue ~~our~~to ~~filings~~the ~~with~~failure to satisfy applicable closing conditions related to obtaining antitrust clearance for the ~~SEC~~Transaction or otherwise, our business, results of operations, financial condition and our share price would be materially and adversely affected.

As of ~~March~~June 3130, 2023, our commercial portfolio consisted of the following medicines:

TEPEZZA® (teprotumumab-trbw), for intravenous infusion

KRYSTEXXA® (pegloticase injection), for intravenous infusion

RAVICTI® (glycerol phenylbutyrate) oral liquid

UPLIZNA® (inebilizumab-cdon) injection, for intravenous use

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

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

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

RAYOS® (prednisone) delayed-release tablets, for oral use

BUPHENYL® (sodium phenylbutyrate) tablets and powder, for oral use

QUINSAIR™ (levofloxacin) solution for inhalation

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

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

2527

Strategy

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

Our commercialization strategy for our on-market rare disease medicines, including our key growth drivers TEPEZZA, KRYSTEXXA and UPLIZNA, includes initiatives to increase awareness of the conditions each medicine is designed to treat, enhancing efforts to identify target patients and in certain cases pursue opportunities for international commercialization and more effective uses through clinical trials. For TEPEZZA and KRYSTEXXA, initiatives include promoting earlier treatment by driving awareness of the benefits of the medicines, and for UPLIZNA, initiatives include increasing awareness of what differentiates our medicines from other available therapies. Additional strategies for our on-market rare disease medicines include optimizing timely access for patients to the medicines and maximizing the value of the medicines through investment in clinical trials. Specifically, with respect to TEPEZZA, we expanded our commercial team, continued to invest in our direct-to-consumer marketing activities, refined our marketing and physician education strategies, and conducted extensive market analysis to identify further opportunities to accelerate growth, which we are implementing. These growth opportunities involve ~~increasing~~our efforts to increase adoption by ocular specialists and driving an urgency among ophthalmologists and endocrinologists to diagnose and refer thyroid eye disease, or TED, patients. In April 2023, we announced positive topline results from the randomized, double-masked, placebo-controlled Phase 4 clinical trial evaluating TEPEZZA in patients with chronic/low clinical activity score, or CAS, TED. In addition, we received U.S. Food and Drug Administration, or FDA, approval to update the TEPEZZA label to specify its use for the treatment of TED “regardless of Thyroid Eye Disease activity or duration,” which we believe reinforces the importance of unrestricted access for all eligible patients across the full spectrum of TED and creates an opportunity to ease the access burden for patients and physicians with the goal of decreasing time to therapy for patients who may benefit from TEPEZZA. As part of our strategy to maximize the value of TEPEZZA, we ~~plan~~are toeducating ~~educate~~ key stakeholders, including physicians, patients and ~~payors~~payers on the trial results and updated label indication. ~~With~~As ~~respect~~a toresult ~~KRYSTEXXA~~of this process, ~~after~~large ~~receiving~~national and regional payers are beginning the process of updating their access requirements. To date, we have obtained favorable policy changes for greater than 20% of U.S. ~~Food~~covered ~~and~~lives, ~~Drug~~which ~~Administration~~are expected to take effect in the second half of 2023. With respect to KRYSTEXXA, after receiving FDA approval of our supplemental biologics license application, or sBLA, in July 2022 to expand the label to include co-treatment of KRYSTEXXA with the immunomodulator methotrexate, we launched a successful commercial campaign related to the use of KRYSTEXXA with methotrexate, expanded our commercial team and are focused on promoting the expanded label with physicians and patients. This campaign has helped drive an increase in the usage of an immunomodulator with KRYSTEXXA to more than 70 percent of new patient starts in the second quarter of 2023 from the initial low-single digits in 2018.

Our R&D strategy is to expand our pipeline of preclinical and clinical development programs to drive sustainable growth, as well as maximizing the benefit and value of our existing medicines through development programs. WeSubject to the terms of the transaction agreement with Amgen and Pillartree, we are (i) acquiring, licensing and developing medicines for indications that address unmet needs in rare, autoimmune and severe inflammatory diseases, particularly those in our therapeutic areas of focus; (ii) maximizing our pipeline candidates through internal R&D; (iii) expanding our early-stage pipeline through partnerships and collaborations; and (iv) continuing to build out our research capabilities to generate discovery-stage candidates internally. Our R&D pipeline includes more than 20 programs. We ~~announced~~expect ~~the~~to ~~initiation~~initiate ofseveral ~~five~~ clinical trials in ~~2022~~the ~~and~~second ~~expect~~half toof ~~initiate several more in~~ 2023, including a planned Phase 3 program for dazodalibep in Sjögren’s syndrome. This follows the announcement of our Phase 2 results where we achieved the primary endpoint in Sjögren’s syndrome patients with both moderate-to-severe systemic disease activity and moderate-to-severe symptomatology. This Phase 2 trial was the first to meet the primary endpoint in both patient populations. In ~~January~~the first half of 2023, we announced the initiation of ~~our~~two daxdilimab Phase 2 trials in discoid lupus erythematosus ~~Phase~~and 2lupus ~~trial~~nephritis. In May 2023, we announced ~~the~~ initiation of our TEPEZZA chronic/low CAS TED Phase 3 trial in Japan, aswhich ~~well~~follows asimpressive ~~our~~topline ~~daxdilimab~~results ~~lupus~~in ~~nephritis~~patients ~~Phase~~with 2high ~~trial~~CAS announced in June 2023.

The aim of our global expansion strategy is to build a global presence in targeted international markets to support the (i) continued launch of UPLIZNA in certain European markets and Brazil this year; (ii) potential approvals and commercial launches of UPLIZNA in additional markets in the coming years; and (iii) the pending commercial launch of TEPEZZA in Brazil; and (iv) potential approvals and ~~full-scale~~ commercial launches of TEPEZZA in Japan, ~~Brazil,~~ Europe and other international markets over the next several years. We plan to use a combination of direct marketing and partnerships for our global expansion efforts and are establishing the infrastructure needed to support these activities. In June 2023, we announced approval by the Brazilian Health Regulatory Agency for TEPEZZA for the treatment of TED, making Brazil the first country outside of the United States to approve TEPEZZA. In July 2023, we announced positive topline results from the randomized, double-masked, placebo-controlled Phase 3 clinical trial evaluating TEPEZZA for the treatment of TED in Japanese patients with high CAS. There are no other medicines approved for the treatment of TED in Brazil or Japan, representing a significant unmet need in both markets.

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Impact of COVID-19

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

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

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

RESULTS OF OPERATIONS

Comparison of Three Months Ended ~~March~~June 3130, 2023 and 2022

Consolidated Results

The table below should be referenced in connection with a review of the following discussion of our results of operations for the three months ended ~~March~~June 3130, 2023, compared to the three months ended ~~March~~June 3130, 2022.

	For the Three Months Ended March 31,						Change			Change
	For the Three Months Ended June 30,						Change			Change
	2023			2022			$			%
	(in thousands, except percentages)
Net sales	$	~~832~~944,~~059~~959		$	~~885~~876,~~245~~411		$	~~(53~~68,~~186~~548	)		(68	)%
Cost of goods sold		~~208~~219,~~563~~958			~~215~~230,~~062~~216			(610,~~499~~258	)		(34	)%
Gross profit		~~623~~725,~~496~~001			~~670~~646,~~183~~195			~~(46~~78,~~687~~806	)		(712	)%
Operating expenses:
Research and development		~~134~~150,~~148~~035			103,~~132~~246			3146,~~016~~789			3045	%
Selling, general and administrative		~~453~~434,~~354~~125			~~372~~398,~~734~~221			8035,~~620~~904			229	%
Total operating expenses		587,502			475,866			111,636			23	%
Impairment of goodwill		—			56,171			(56,171	)		(100	)%
Operating income		35,994			194,317			(158,323	)		(81	)%
Gain on sale of asset		(2,000	)		—			(2,000	)		(100	)%
Total operating expenses		582,160			557,638			24,522			4	%
Operating income		142,841			88,557			54,284			61	%
Other expense, net:
Interest expense, net		(1512,~~540~~098	)		(21,~~256~~409	)		59,~~716~~311			2743	%
Foreign exchange gain		91326			~~420~~28			~~(329~~298	)	NM	~~(78~~	)%
Other expense, net		(1,343	)		(742	)		(601	)		(81	)%
Other income (expense), net		4,183			(2,389	)		6,572			275	%
Total other expense, net		(167,~~792~~589	)		(2123,~~578~~770	)		416,~~786~~181			2268	%
Income before benefit for income taxes		19,202			172,739			(153,537	)		(89	)%
Income before expense for income taxes		135,252			64,787			70,465			109	%
Benefit for income taxes		(35,482	)		(31,522	)		(3,960	)		(13	)%
Expense for income taxes		8,181			3,813			4,368			(115	)%
Net income	$	54127,~~684~~071		$	~~204~~60,~~261~~974		$	~~(149~~66,~~577~~097	)		~~(73~~108	)%

Beginning with the third quarter of 2022, we separately present upfront, milestone, and similar payments pursuant to collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development and milestones” expenses in the condensed consolidated statement of comprehensive income. Amounts recorded in this line item would have historically been recorded to R&D expenses. We believe the new classification assists users of the financial statements in better understanding the payments incurred to acquire in-process research and development, or IPR&D. Prior period consolidated statements of comprehensive income have been reclassified to conform with the new classification. There were no acquired IPR&D and milestones expenses during the three months ended ~~March~~June 3130, 2023 and 2022.

Net sales. Net sales ~~decreased~~increased $5368.25 million, or 68%, to $~~832~~944.09 million during the three months ended ~~March~~June 3130, 2023, from $~~885~~876.24 million during the three months ended ~~March~~June 3130, 2022. The ~~decrease~~increase during the three months ended ~~March~~June 3130, 2023 was primarily due to aan ~~decrease~~increase in ~~TEPEZZA~~KRYSTEXXA net sales of $9676.15 million and aan ~~decrease~~increase in ~~PENNSAID~~UPLIZNA 2% net sales of $2629.25 million ~~due to the impact of generic competition~~, partially offset by ana ~~increase~~decrease in ~~KRYSTEXXA~~TEPEZZA net sales of $4634.3 million ~~and an increase in UPLIZNA net sales of $23~~.~~4 million.~~

The following table reflects net sales by medicine for the three months ended ~~March~~June 3130, 2023 and 2022 (in thousands, except percentages):

	Three Months EndedMarch 31,				Change			Change
	For the Three Months Ended June 30,				Change			Change
	2023		2022		$			%
TEPEZZA	$	~~405~~445,~~317~~528	$	~~501~~479,~~451~~814		(9634,~~134~~286	)		(197	)%
KRYSTEXXA		~~186~~244,~~981~~296		~~140~~167,~~704~~755		4676,~~277~~541			3346	%
RAVICTI		9088,~~321~~351		7875,~~257~~722		12,~~064~~629			1517	%
UPLIZNA		5368,~~829~~084		3038,~~477~~598		2329,~~352~~486			7776	%
PROCYSBI		5053,~~463~~145		4947,~~571~~706		~~892~~5,439			211	%
ACTIMMUNE		29,~~121~~039		3129,~~435~~989		(~~2,314~~950	)		(73	)%
PENNSAID 2%		9,194		35,368		(26,174	)		(74	)%
RAYOS		8,012		11,150		(3,138	)		(28	)%
RAYOS		4,977		13,487		(8,510	)		(63	)%
PENNSAID 2%		6,913		23,586		(16,673	)		(71	)%
BUPHENYL		1,~~413~~246		21,~~161~~387		(~~748~~141	)		(3510	)%
QUINSAIR		~~296~~345		~~296~~335		—10			03	%
DUEXIS		~~139~~—		~~1,123~~70		(~~984~~70	)		(88100	)%
VIMOVO		8—		~~915~~299		(~~907~~299	)		(99100	)%
Total net sales	$	~~832~~944,~~059~~959	$	~~885~~876,~~245~~411	$	~~(53~~68,~~186~~548	)		(68	)%

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

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

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

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

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

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

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

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

~~The~~TEPEZZA. ~~table~~Net ~~below~~sales ~~reconciles~~decreased ~~our~~$34.3 ~~gross~~million, or 7%, to ~~net~~$445.5 ~~sales~~million ~~for~~during the three months ended ~~March~~June 3130, 2023, from $479.8 million during the three months ended June 30, 2022. Net sales decreased by approximately $34.0 million due to lower sales volume and $0.3 million due to lower net pricing. In the second half of 2022, (we were impacted by certain challenges, including the often-burdensome reimbursement process, that we believe contributed to the decline in ~~millions~~TEPEZZA net sales in the first half of 2023, ~~except~~compared ~~percentages):~~to the 2022 period. These challenges, as well as challenges related to a lower rate of adherence to the full course of TEPEZZA therapy, have continued to moderate TEPEZZA net sales. We continue to execute on several opportunities designed to address these challenges and resume growth, including significantly expanding the size of our TEPEZZA sales force in late 2022 to allow our representatives more time with core TEPEZZA prescribers while educating other key physicians, including ophthalmologists and endocrinologists, about TED and TEPEZZA. As a result of the field-force expansion, through the first half of 2023, there was a 50% year-over-year increase in the number of ophthalmologists and endocrinologists prescribing TEPEZZA. In line with our expansion strategy, prescriber growth has largely come from ophthalmologists, with continued strong referral volume from endocrinologists. We are also spending additional time and focus on the reimbursement process to more effectively support the patient access journey, which includes beginning to obtain favorable policy changes to improve patient access following the update to the indication language on the TEPEZZA label and Phase 4 data release. We also continue to invest significantly in direct-to-consumer advertising based on the returns we have seen to date. In April 2023, we announced positive topline results from our Phase 4 clinical trial in chronic/low CAS TED and received FDA approval of an update to TEPEZZA’s label specifying the use of TEPEZZA regardless of TED disease activity or duration, which we believe reinforces the importance of unrestricted access for all eligible patients across the full spectrum of TED. As part of our strategy to maximize the value of TEPEZZA, we are educating key stakeholders, including physicians, patients and payers on the trial results and updated label indication. As a result of this process, large national and regional payers are beginning to update their access requirements. To date, we have obtained favorable policy changes for more than 20% of U.S. covered lives, which are expected to take effect in the second half of 2023. We have seen improving trends in patient enrollment forms and patient starts as a result of our strategies and our expansion; however, it is taking longer than initially anticipated for our strategies and our expansion to contribute meaningfully to TEPEZZA net sales growth.

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

KRYSTEXXA. Net sales increased $76.5 million, or 46%, to $244.3 million during the three months ended June 30, 2023, from $167.8 million during the three months ended June 30, 2022. Net sales increased by approximately $54.6 million due to volume growth and $21.9 million due to higher net pricing. We expect net sales for KRYSTEXXA to continue to increase in future periods primarily due to the use of KRYSTEXXA with an immunomodulator following the approval of our sBLA in July 2022, which expanded KRYSTEXXA’s labeling to include co-administration with methotrexate.

~~During~~RAVICTI. ~~the~~Net ~~three~~sales ~~months~~increased ~~ended~~$12.6 ~~March 31~~million, ~~2023,~~or ~~co-pay and other patient assistance costs~~17%, ~~as a percentage of gross sales, decreased~~ to 2$88.9%4 ~~from~~million ~~6.9%~~ during the three months ended ~~March~~June 3130, ~~2022~~2023, ~~primarily~~from ~~due~~$75.7 tomillion aduring ~~decreased~~the ~~proportion~~three ofmonths ~~PENNSAID~~ended 2%June ~~and~~30, ~~DUEXIS sold~~2022. WeNet ~~expect~~sales ~~co-pay~~increased ~~and~~by ~~other~~approximately ~~patient~~$8.4 ~~assistance~~million ~~costs~~due to ~~continue~~higher tonet ~~decrease~~pricing asand a$4.2 ~~percentage~~million ofdue ~~total~~to ~~gross~~volume ~~sales~~growth.

OnUPLIZNA. aNet ~~quarter-to-quarter basis, our net~~ sales ~~can~~increased be$29.5 ~~impacted~~million, ~~due~~or ~~to end customer buying patterns~~76%, ~~fluctuations~~to in$68.1 ~~wholesaler~~million ~~inventory~~during ~~levels,~~ the ~~impact~~three ofmonths ~~benefit~~ended ~~plan~~June ~~changes~~30, ~~insurance~~2023, ~~reverification~~from ~~and~~$38.6 ~~increased~~million ~~co-pay~~during ~~expenses~~the asthree ~~patients~~months ~~work~~ended ~~through~~June ~~deductibles. For example~~30, ~~our~~2022. ~~net~~Net sales in the ~~first~~United ~~quarter~~States ofincreased aby ~~year~~$22.7 ~~historically~~million, ~~represents~~which ~~the~~was ~~lowest~~composed ~~net~~of ~~sales~~an ~~quarter~~increase ~~as a result~~ of ~~some of these impacts, and we expect this trend to continue in 2023~~$22.9 ~~This~~million ~~is primarily~~ due to ~~annual~~higher ~~managed~~sales ~~care~~volume, ~~plan~~partially ~~changes~~offset ~~and~~by ~~the~~a ~~re-setting~~decrease of ~~patients’~~$0.2 ~~medical~~million ~~insurance~~due ~~deductibles~~to atlower ~~the~~net ~~beginning~~pricing. ofThe ~~each~~remaining ~~year,~~$6.8 ~~resulting~~million increase in ~~higher~~net ~~co-pay~~sales ~~and~~related ~~other~~to ~~patient assistance costs as patients meet their annual medical insurance deductibles during the first and second quarters, and~~ higher international net sales inrecognized ~~the~~during ~~second half of~~ the ~~year~~three ~~after~~months ~~patients~~ended ~~meet~~June ~~their~~30, ~~deductibles and healthcare plans reimburse a greater portion of the total cost of our medicines~~2023.

~~Cost~~PENNSAID ~~of Goods Sold~~2%. ~~Cost~~Net ofsales ~~goods sold~~ decreased $616.57 million, or 371%, to $~~208.~~6.9 million during the three months ended ~~March~~June 3130, 2023, from $~~215~~23.16 million during the three months ended ~~March~~June 3130, 2022. ~~The~~Net ~~decrease~~sales ~~in cost of goods sold was primarily due to a decrease in royalty and earnout expense, partially offset by an increase in inventory step-up expense. Royalty and earnout expense~~ decreased by approximately $715.13 million ~~primarily~~ due to ~~royalties and earnouts payable on net sales of TEPEZZA, which decreased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to~~ lower ~~net~~ sales. ~~Inventory~~volume ~~step-up~~and ~~expense increased~~ by approximately $21.54 million ~~related~~resulting tofrom ~~acquired~~lower ~~units~~net ~~of UPLIZNA inventory sold~~pricing, ~~which~~as ~~increased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022. As~~ a ~~percentage~~result of ~~net~~generic ~~sales, cost of goods sold (excluding intangible amortization expense of $88~~competition.~~3 million during the three months ended March 31, 2023 and $89.3 million during the three months ended March 31, 2022) was 14% during the three months ended March 31, 2023 and 2022.~~

~~Research~~Due ~~and~~to ~~Development~~the ~~Expenses.~~impact ~~R&D~~of ~~expenses~~the ~~increased~~at-risk ~~$31.0~~launch ~~million,~~of orgeneric 30PENNSAID 2%, ~~to $134.1 million~~ during the ~~three~~year ~~months~~ ended ~~March~~December 31, ~~2023~~2022, ~~from~~we ~~$103.1~~redeployed ~~million~~a ~~during~~portion ~~the~~of ~~three~~our ~~months~~inflammation ~~ended~~commercial ~~March~~team ~~31,~~to ~~2022.~~support ~~The~~our ~~increase~~TEPEZZA ~~was~~and ~~primarily~~KRYSTEXXA ~~due~~expansions. toIn athe ~~$23.8~~fourth ~~million~~quarter ~~increase~~of in2022, ~~clinical~~we ~~trial~~substantially ~~costs~~completed ~~and~~a anwind ~~increase~~down of ~~$7.0~~our ~~million~~former ininflammation ~~personnel~~business, including active promotion efforts and ~~related~~associated ~~costs~~HorizonCares ~~during~~support, ~~the~~for ~~three~~our ~~months~~inflammation ~~ended~~medicines. ~~March~~As 31a result, ~~2023~~sales ~~compared~~volumes tofor ~~three~~PENNSAID ~~months~~2%, ~~ended~~RAYOS ~~March~~and ~~31,~~DUEXIS declined significantly since the second quarter of 2022, ~~reflecting~~and ~~increased~~we ~~activity~~expect innet sales of our ~~R&D~~inflammation ~~pipeline~~medicines to be immaterial going forward.

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

~~Selling,~~The ~~General~~table ~~and~~below ~~Administrative~~reconciles ~~Expenses.~~our ~~Selling,~~gross ~~general and administrative expenses increased $80.6 million, or 22%,~~ to ~~$453.3~~net ~~million~~sales ~~during~~for the three months ended ~~March~~June 3130, 2023, ~~from~~and ~~$372.7 million during the three months ended March 31,~~ 2022. ~~The increase was primarily due to costs associated with the commercialization of our medicines and global expansion initiatives, including increases of $30.0 million~~ (in ~~employee-related expenses and $24.5 million in marketing program costs. In addition~~millions, ~~there~~except ~~was a $9.3 million increase in legal costs primarily relating to costs incurred in connection with the Transaction with Amgen, including responding to the FTC’s second request.~~percentages):


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	Amount			% of Gross Sales			Amount			% of Gross Sales
Gross sales	$	1,240.7			100.0	%	$	1,241.3			100.0	%
Adjustments to gross sales:
Prompt pay discounts		(6.4	)		(0.5	)%		(10.0	)		(0.8	)%
Medicine returns		(9.0	)		(0.7	)%		(7.8	)		(0.6	)%
Co-pay and other patient assistance		(11.6	)		(0.9	)%		(98.8	)		(8.0	)%
Commercial rebates and wholesaler fees		(41.0	)		(3.3	)%		(51.2	)		(4.1	)%
Government rebates and chargebacks		(227.7	)		(18.4	)%		(197.1	)		(15.9	)%
Total adjustments		(295.7	)		(23.8	)%		(364.9	)		(29.4	)%
Net sales	$	945.0			76.2	%	$	876.4			70.6	%

During the three months ended June 30, 2023, co-pay and other patient assistance costs, as a percentage of gross sales, decreased to 0.9% from 8.0% during the three months ended June 30, 2022, primarily due to a decreased proportion of PENNSAID 2% sold. We expect co-pay and other patient assistance costs to continue to decrease as a percentage of total gross sales.

Cost of Goods Sold. Cost of goods sold decreased $10.3 million, or 4%, to $219.9 million during the three months ended June 30, 2023, from $230.2 million during the three months ended June 30, 2022. The decrease during the three months ended June 30, 2023 was primarily due to a decrease in inventory step-up expense. Inventory step-up expense decreased by $15.8 million related to acquired units of UPLIZNA inventory sold during the three months ended June 30, 2023 compared to the three months ended June 30, 2022. As of June 30, 2023, the total remaining balance of inventory step-up was $1.0 million. As a percentage of net sales, cost of goods sold (excluding intangible amortization expense of $89.3 million during the three months ended June 30, 2023 and $90.4 million during the three months ended June 30, 2022) was 16% during each of the three months ended June 30, 2023 and 2022.

Research and Development Expenses. R&D expenses increased $46.8 million, or 45%, to $150.0 million during the three months ended June 30, 2023, from $103.2 million during the three months ended June 30, 2022. The increase during the three months ended June 30, 2023 was primarily due to a $29.7 million increase in clinical trial and manufacturing development costs and an increase of $14.9 million in employee-related expenses during the three months ended June 30, 2023 compared to the three months ended June 30, 2022, reflecting increased activity in our R&D pipeline.

We expect our R&D expenses to continue increasing significantly in future periods as a result of our on-going and planned clinical trials for our pipeline.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $35.9 million, or 9%, to $434.1 million during the three months ended June 30, 2023, from $398.2 million during the three months ended June 30, 2022. The increase during the three months ended June 30, 2023 was primarily due to costs associated with the commercialization of our medicines and global expansion initiatives, including an increase of $34.3 million in employee-related expenses. In addition, there was a $7.2 million increase in legal costs primarily relating to costs incurred in connection with the Transaction with Amgen, including responding to the FTC’s second request and subsequent lawsuit seeking to enjoin the Transaction. This was partially offset by a decrease of $12.1 million in marketing program costs.

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

~~Interest~~Impairment ~~expense,~~of ~~net~~goodwill. ~~Interest~~During ~~expense, net, decreased $5.7 million to $15.5 million during~~ the three months ended ~~March~~June 3130, ~~2023~~2022, ~~from~~we ~~$21.2~~recorded ~~million during the three months ended March 31, 2022. The decrease was primarily due to~~ an ~~increase~~impairment incharge ~~interest income~~ of $2556.82 million, ~~partially offset by an increase~~ in ~~interest~~relation ~~expense of $20.1 million primarily related~~ to ~~increases in interest rates on the portion of~~ our ~~variable~~former ~~interest~~inflammation ~~debt~~reporting unit. Refer to Note 127, ~~Debt~~Goodwill ~~Agreements~~and Intangible Assets, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further details.

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

RESULTS OF OPERATIONS

Comparison of Six Months Ended June 30, 2023 and 2022

Consolidated Results

The table below should be referenced in connection with a review of the following discussion of our results of operations for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.


	For the Six Months Ended June 30,						Change			Change
	2023			2022			$			%
	(in thousands, except percentages)
Net sales	$	1,777,018		$	1,761,656		$	15,362			1	%
Cost of goods sold		428,521			445,278			(16,757	)		(4	)%
Gross profit		1,348,497			1,316,378			32,119			2	%
Operating expenses:
Research and development		284,183			206,378			77,805			38	%
Selling, general and administrative		887,479			770,955			116,524			15	%
Impairment of goodwill		—			56,171			(56,171	)		(100	)%
Gain on sale of asset		(2,000	)		—			(2,000	)		(100	)%
Total operating expenses		1,169,662			1,033,504			136,158			13	%
Operating income		178,835			282,874			(104,039	)		(37	)%
Other expense, net:
Interest expense, net		(27,638	)		(42,665	)		15,027			35	%
Foreign exchange gain		417			448			(31	)		(7	)%
Other income (expense), net		2,840			(3,131	)		5,971			191	%
Total other expense, net		(24,381	)		(45,348	)		20,967			46	%
Income before benefit for income taxes		154,454			237,526			(83,072	)		(35	)%
Benefit for income taxes		(27,301	)		(27,709	)		408			1	%
Net income	$	181,755		$	265,235		$	(83,480	)		(31	)%

Beginning with the third quarter of 2022, we separately present upfront, milestone, and similar payments pursuant to collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development and milestones” expenses in the condensed consolidated statement of comprehensive income. Amounts recorded in this line item would have historically been recorded to R&D expenses. We believe the new classification assists users of the financial statements in better understanding the payments incurred to acquire IPR&D. Prior period consolidated statements of comprehensive income have been reclassified to conform with the new classification. There were no acquired IPR&D and milestones expenses during the six months ended June 30, 2023 and 2022.

Net sales. Net sales increased $15.4 million, or 1%, to $1,777.0 million during the six months ended June 30, 2023, from $1,761.6 million during the six months ended June 30, 2022. The increase during the six months ended June 30, 2023 was primarily due to an increase in KRYSTEXXA net sales of $122.8 million and an increase in UPLIZNA net sales of $52.8 million, partially offset by a decrease in TEPEZZA net sales of $130.4 million and a decrease in PENNSAID 2% net sales of $42.8 million.

The following table reflects net sales by medicine for the six months ended June 30, 2023 and 2022 (in thousands, except percentages):


	For the Six Months Ended June 30,				Change			Change
	2023		2022		$			%
TEPEZZA	$	850,845	$	981,265		(130,420	)		(13	)%
KRYSTEXXA		431,277		308,459		122,818			40	%
RAVICTI		178,672		153,979		24,693			16	%
UPLIZNA		121,913		69,075		52,838			76	%
PROCYSBI		103,608		97,277		6,331			7	%
ACTIMMUNE		58,160		61,424		(3,264	)		(5	)%
PENNSAID 2%		16,107		58,954		(42,847	)		(73	)%
RAYOS		12,989		24,637		(11,648	)		(47	)%
BUPHENYL		2,659		3,548		(889	)		(25	)%
QUINSAIR		641		631		10			2	%
DUEXIS		139		1,193		(1,054	)		(88	)%
VIMOVO		8		1,214		(1,206	)		(99	)%
Total net sales	$	1,777,018	$	1,761,656	$	15,362			1	%

TEPEZZA. Net sales decreased $130.4 million, or 13%, to $850.8 million during the six months ended June 30, 2023, from $981.2 million during the six months ended June 30, 2022. Net sales decreased by approximately $135.4 million due to lower sales volume, partially offset by an increase of $5.0 million due to higher net pricing. In the second half of 2022, we were impacted by certain challenges, including the often-burdensome reimbursement process, that we believe contributed to the decline in TEPEZZA net sales in the first half of 2023, compared to the 2022 period. These challenges, as well as challenges related to a lower rate of adherence to the full course of TEPEZZA therapy, have continued to moderate TEPEZZA net sales. We continue to execute on several opportunities designed to address these challenges and resume growth, including significantly expanding the size of our TEPEZZA sales force in late 2022 to allow our representatives more time with core TEPEZZA prescribers while educating other key physicians, including ophthalmologists and endocrinologists, about TED and TEPEZZA. As a result of the field-force expansion, through the first half of 2023, there was a 50% year-over-year increase in the number of ophthalmologists and endocrinologists prescribing TEPEZZA. In line with our expansion strategy, prescriber growth has largely come from ophthalmologists, with continued strong referral volume from endocrinologists. We are also spending additional time and focus on the reimbursement process to more effectively support the patient access journey, which includes beginning to obtain favorable policy changes to improve patient access following the update to the indication language on the TEPEZZA label and Phase 4 data release. We also continue to invest significantly in direct-to-consumer advertising based on the returns we have seen to date. In April 2023, we announced positive topline results from our Phase 4 clinical trial in chronic/low CAS TED and received FDA approval of an update to TEPEZZA’s label specifying the use of TEPEZZA regardless of TED disease activity or duration, which we believe reinforces the importance of unrestricted access for all eligible patients across the full spectrum of TED. As part of our strategy to maximize the value of TEPEZZA, we are educating key stakeholders, including physicians, patients and payers on the trial results and updated label indication. As a result of this process, large national and regional payers are beginning to update their access requirements. To date, we have obtained favorable policy changes for more than 20% of U.S. covered lives, which are expected to take effect in the second half of 2023. We have seen improving trends in patient enrollment forms and patient starts as a result of our strategies and our expansion; however, it is taking longer than initially anticipated for our strategies and our expansion to contribute meaningfully to TEPEZZA net sales growth.

KRYSTEXXA. Net sales increased $122.8 million, or 40%, to $431.3 million during the six months ended June 30, 2023, from $308.5 million during the six months ended June 30, 2022. Net sales increased by approximately $85.9 million due to volume growth and $36.9 million due to higher net pricing. We expect net sales for KRYSTEXXA to continue to increase in future periods primarily due to the use of KRYSTEXXA with an immunomodulator following the approval of our sBLA in July 2022, which expanded KRYSTEXXA’s labeling to include co-administration with methotrexate.

RAVICTI. Net sales increased $24.7 million, or 16%, to $178.7 million during the six months ended June 30, 2023, from $154.0 million during the six months ended June 30, 2022. Net sales increased by approximately $17.1 million due to higher net pricing and $7.6 million due to volume growth.

UPLIZNA. Net sales increased $52.8 million, or 76%, to $121.9 million during the six months ended June 30, 2023, from $69.1 million during the six months ended June 30, 2022. Net sales in the United States increased by $44.6 million, which was composed of an increase of $42.1 million due to higher sales volume and $2.5 million due to higher net pricing. The remaining $8.2 million increase in net sales related to higher international net sales recognized during the six months ended June 30, 2023.

PENNSAID 2%. Net sales decreased $42.8 million, or 73%, to $16.1 million during the six months ended June 30, 2023, from $58.9 million during the six months ended June 30, 2022. Net sales decreased by approximately $37.1 million due to lower sales volume and by approximately $5.7 million resulting from lower net pricing, as a result of generic competition.

RAYOS. Net sales decreased $11.6 million, or 47%, to $13.0 million during the six months ended June 30, 2023, from $24.6 million during the six months ended June 30, 2022. Net sales decreased by approximately $12.2 million due to lower sales volume, partially offset by an increase of approximately $0.6 million due to higher net pricing.

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

The table below reconciles our gross to net sales for the six months ended June 30, 2023 and 2022 (in millions, except percentages):


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	Amount			% of Gross Sales			Amount			% of Gross Sales
Gross sales	$	2,347.7			100.0	%	$	2,472.8			100.0	%
Adjustments to gross sales:
Prompt pay discounts		(13.1	)		(0.6	)%		(20.2	)		(0.8	)%
Medicine returns		(15.9	)		(0.7	)%		(12.2	)		(0.5	)%
Co-pay and other patient assistance		(44.2	)		(1.9	)%		(183.6	)		(7.4	)%
Commercial rebates and wholesaler fees		(79.1	)		(3.4	)%		(102.4	)		(4.2	)%
Government rebates and chargebacks		(418.4	)		(17.8	)%		(392.7	)		(15.9	)%
Total adjustments		(570.7	)		(24.4	)%		(711.1	)		(28.8	)%
Net sales	$	1,777.0			75.6	%	$	1,761.7			71.2	%

During the six months ended June 30, 2023, co-pay and other patient assistance costs, as a percentage of gross sales, decreased to 1.9% from 7.4% during the six months ended June 30, 2022, primarily due to a decreased proportion of PENNSAID 2% sold. We expect co-pay and other patient assistance costs to continue to decrease as a percentage of total gross sales.

Cost of Goods Sold. Cost of goods sold decreased $16.8 million, or 4%, to $428.5 million during the six months ended June 30, 2023, from $445.3 million during the six months ended June 30, 2022. The decrease during the six months ended June 30, 2023 was primarily due to a decrease in inventory step-up expense. Inventory step-up expense decreased by $13.2 million related to acquired units of UPLIZNA inventory sold during the six months ended June 30, 2023 compared to the six months ended June 30, 2022. As of June 30, 2023, the total remaining balance of inventory step-up was $1.0 million. As a percentage of net sales, cost of goods sold (excluding amortization expense of $177.5 million during the first half of 2023 and $179.2 million during first half of 2022) was 14% during the six months ended June 30, 2023, compared to 15% during the six months ended June 30, 2022. The decrease in cost of goods sold as a percentage of net sales was primarily due to a decrease in inventory step-up expense related to UPLIZNA as noted above.

Research and Development Expenses. R&D expenses increased $77.8 million, or 38%, to $284.2 million during the six months ended June 30, 2023, from $206.4 million during the six months ended June 30, 2022. The increase during the six months ended June 30, 2023 was primarily due to a $54.0 million increase in clinical trial and manufacturing development costs and an increase of $21.9 million in employee-related expenses during the six months ended June 30, 2023 compared to the six months ended June 30, 2022, reflecting increased activity in our R&D pipeline.

We expect our R&D expenses to continue increasing significantly in future periods as a result of our on-going and planned clinical trials for our pipeline.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $116.5 million, or 15%, to $887.5 million during the six months ended June 30, 2023, from $771.0 million during the six months ended June 30, 2022. The increase during the six months ended June 30, 2023 was primarily due to costs associated with the commercialization of our medicines and global expansion initiatives, including increases of $64.3 million in employee-related expenses and $12.5 million in marketing program costs. In addition, there was a $16.5 million increase in legal costs primarily relating to costs incurred in connection with the Transaction with Amgen, including responding to the FTC’s second request and subsequent lawsuit seeking to enjoin the Transaction.

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

Impairment of goodwill. During the six months ended June 30, 2022, we recorded an impairment charge of $56.2 million in relation to our former inflammation reporting unit. Refer to Note 7, Goodwill and Intangible Assets, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further details.

NON-GAAP FINANCIAL MEASURES

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

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

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
GAAP net income	$	54127,~~684~~071		$	~~204~~60,~~261~~974		$	181,755		$	265,235
Depreciation (1)		6,~~246~~687			56,~~852~~091			12,933			11,943
Amortization and step-up:
Intangible amortization expense (2)		8889,~~614~~598			8991,~~260~~335			178,212			180,595
Inventory step-up expense (3)		291,~~743~~572			2717,~~201~~362			31,315			44,563
Interest expense, net (including amortization of debt discount and deferred financing costs)		1512,~~540~~098			21,~~256~~409			27,638			42,665
Benefit for income taxes		(35,482	)		(31,522	)
Expense (benefit) for income taxes		8,181			3,813			(27,301	)		(27,709	)
EBITDA		~~159~~245,~~345~~207			~~316~~200,~~308~~984			404,552			517,292
Other non-GAAP adjustments:
Share-based compensation (4)		5860,~~120~~271			4745,~~300~~149			118,391			92,449
Transaction-related costs (5)		916,~~784~~539			—			26,323			—
Manufacturing facility start-up costs (6)		31,~~476~~896			~~807~~1,582			5,372			2,389
Restructuring and realignment costs (7)		~~1,822~~854			~~537~~1,253			2,676			1,790
Acquisition/divestiture-related costs (8)		~~681~~52			1,~~589~~023			733			2,612
(Gain) loss on equity security investments (9)		(352	)		4,646
Impairment of goodwill (9)		—			56,171			—			56,171
Total of other non-GAAP adjustments		73,531			54,879
Gain on sale of asset (10)		(2,000	)		—			(2,000	)		—
Adjusted EBITDA	$	232,876		$	371,187
(Gain) loss on equity security investments (11)		(2,437	)		438			(2,789	)		5,084
Total of other non-GAAP adjustments		75,175			105,616			148,706			160,495
Adjusted EBITDA	$	320,382		$	306,600		$	553,258		$	677,787

3235

	For the Three Months Ended March 31,
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
GAAP net income	$	54127,~~684~~071		$	~~204~~60,~~261~~974		$	181,755		$	265,235
Non-GAAP adjustments:
Depreciation (1)		6,~~246~~687			56,~~852~~091			12,933			11,943
Amortization and step-up:
Intangible amortization expense (2)		8889,~~614~~598			8991,~~260~~335			178,212			180,595
Amortization of debt discount and deferred financing costs (10)		1,471			1,577
Amortization of debt discount and deferred financing costs (12)		1,308			2,327			2,779			3,904
Inventory step-up expense (3)		291,~~743~~572			2717,~~201~~362			31,315			44,563
Share-based compensation (4)		5860,~~120~~271			4745,~~300~~149			118,391			92,449
Transaction-related costs (5)		916,~~784~~539			—			26,323			—
Manufacturing facility start-up costs (6)		31,~~476~~896			~~807~~1,582			5,372			2,389
Restructuring and realignment costs (7)		~~1,822~~854			~~537~~1,253			2,676			1,790
Acquisition/divestiture-related costs (8)		~~681~~52			1,~~589~~023			733			2,612
(Gain) loss on equity security investments (9)		(352	)		4,646
Impairment of goodwill (9)		—			56,171			—			56,171
Total of pre-tax non-GAAP adjustments		199,605			178,769
Gain on sale of asset (10)		(2,000	)		—			(2,000	)		—
Income tax effect of pre-tax non-GAAP adjustments (11)		(59,943	)		(67,212	)
(Gain) loss on equity security investments (11)		(2,437	)		438			(2,789	)		5,084
Total non-GAAP adjustments		139,662			111,557
Total of pre-tax non-GAAP adjustments		174,340			222,731			373,945			401,500
Non-GAAP net income	$	194,346		$	315,818
Income tax effect of pre-tax non-GAAP adjustments (13)		(21,354	)		(29,919	)		(81,297	)		(97,131	)
Non-GAAP Earnings Per Share:
Total non-GAAP adjustments		152,986			192,812			292,648			304,369
Weighted average ordinary shares – Basic		228,397,661			229,094,311
Non-GAAP net income	$	280,057		$	253,786		$	474,403		$	569,604
Non-GAAP Earnings Per Share – Basic
Non-GAAP Earnings Per Share:
GAAP earnings per share – Basic	$	0.24		$	0.89
Weighted average ordinary shares – Basic		228,743,143			230,020,004			228,571,356			229,559,715
Non-GAAP adjustments		0.61			0.49
Non-GAAP Earnings Per Share – Basic
Non-GAAP earnings per share – Basic	$	0.85		$	1.38
GAAP earnings per share – Basic	$	0.56		$	0.27		$	0.80		$	1.16
Weighted average ordinary shares – Diluted
Non-GAAP adjustments		0.66			0.83			1.28			1.32
Weighted average ordinary shares – Basic		228,397,661			229,094,311
Non-GAAP earnings per share – Basic	$	1.22		$	1.10		$	2.08		$	2.48
Ordinary share equivalents		5,390,705			6,859,007
Weighted average ordinary shares – Diluted
Weighted average ordinary shares – Diluted		233,788,366			235,953,318
Weighted average ordinary shares – Basic		228,743,143			230,020,004			228,571,356			229,559,715
Non-GAAP Earnings Per Share – Diluted
Ordinary share equivalents		5,192,448			6,146,380			5,366,793			6,517,432
GAAP earning per share – Diluted	$	0.23		$	0.87
Weighted average ordinary shares – Diluted		233,935,591			236,166,384			233,938,149			236,077,147
Non-GAAP adjustments		0.60			0.47
Non-GAAP Earnings Per Share – Diluted
Non-GAAP earnings per share – Diluted	$	0.83		$	1.34
GAAP earning per share – Diluted	$	0.54		$	0.26		$	0.78		$	1.12
Non-GAAP adjustments		0.66			0.81			1.25			1.29
Non-GAAP earnings per share – Diluted	$	1.20		$	1.07		$	2.03		$	2.41

(1)

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

(2)

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

(3)

During the three and six months ended ~~March~~June 3130, 2023 ~~and 2022~~, we recognized in cost of goods sold $291.76 million and $2731.23 million ~~in cost of goods sold~~, respectively, for inventory step-up expense related to UPLIZNA inventory revalued in connection with the Viela Bio, Inc. acquisition. We recorded $17.4 million and $44.6 million of UPLIZNA inventory step-up expense in cost of goods sold during the three and six months ended June 30, 2022, respectively. Refer to Note 4, Inventories, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further details.

(4)

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

(5)

Primarily represents transaction-related costs, including, advisory, legal, consulting and ~~consulting~~field-based employee retention costs, incurred in connection with the Transaction with Amgen,. ~~including~~The legal costs include costs incurred in responding to the FTC’s second request and subsequent lawsuit seeking to enjoin the Transaction.

(6)

During the three months ended ~~March~~June 3130, 2023 and 2022, we recorded $31.9 million and $1.6 million, respectively, and $5.4 million and $02.84 million for the six months ended June 30, 2023 and 2022, respectively, of manufacturing facility start-up costs related to our drug product biologics manufacturing facility in Waterford, Ireland.

(7)

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

(8)

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

(9)

WeOur ~~held~~interim ~~investments~~goodwill impairment test in ~~equity~~the ~~securities~~second ~~with~~quarter ~~readily~~of ~~determinable~~2022 ~~fair~~indicated ~~values~~an ofimpairment ~~$7.4~~which ~~million~~represented ~~and~~the ~~$8.5~~difference ~~million~~between asthe estimated fair value of ~~March~~the ~~31,~~former ~~2023~~inflammation reporting unit and ~~2022,~~its ~~respectively~~carrying value. As a result, ~~which~~we ~~are~~recognized ~~included~~an inimpairment ~~other~~charge ~~long-term~~of ~~assets~~$56.2 million in June 2022 representing the ~~condensed~~full ~~consolidated~~amount ~~balance~~of ~~sheet.~~goodwill ~~For~~for the ~~three~~former ~~months~~inflammation ~~ended~~reporting ~~March~~unit. ~~31,~~Refer ~~2023~~to ~~and~~Note ~~2022~~7, weGoodwill ~~recognized~~and aIntangible ~~net~~Assets, ~~unrealized gain~~ of ~~$0.4~~the ~~million~~Notes ~~and~~to aCondensed ~~net~~Consolidated ~~unrealized~~Financial ~~loss~~Statements, ofincluded ~~$4.6~~in ~~million,~~Item ~~respectively,~~1 ~~due~~of tothis ~~the~~Quarterly ~~change~~Report inon ~~fair~~Form ~~value~~10-Q, offor ~~these~~further ~~securities~~details.

(10)

During the six months ended June 30, 2023, gain on sale of asset represents a $2.0 million contingent consideration payment related to the sale of MIGERGOT in 2019. The contingent consideration payment was triggered during the second quarter of 2023 and it was received in July 2023.

(11)

We held investments in equity securities with readily determinable fair values of $9.8 million and $8.1 million as of June 30, 2023 and 2022, respectively, which are included in other long-term assets in the condensed consolidated balance sheet. For the three and six months ended June 30, 2023, we recognized net unrealized gains of $2.4 million and $2.8 million, respectively, due to the change in fair value of these securities.

(12)

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

(13)

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.

3337

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

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

As of ~~March~~June 3130, 2023, we had retained earnings of $~~644~~771.78 million. We expect that our sales and marketing expenses will continue to increase as a result of the commercialization of our medicines and global expansion initiatives, but we believe these cost increases will be offset by higher net sales and gross profits in future periods. Additionally, we expect that our R&D and IPR&D and milestones expenses will continue to increase as we ~~acquire or develop more development-stage medicine candidates and~~ advance our candidates through the clinical development and regulatory approval processes. In particular, we expect to incur substantial costs in connection with advancing our pipeline of medicine candidates and development programs in on-going and planned clinical trials.

We are in the process of expanding our production capacity to meet anticipated future demand for TEPEZZA, primarily for 2023 and beyond. As of ~~March~~June 3130, 2023, we had total purchase commitments, including the minimum annual order quantities and binding firm orders, with AGC Biologics A/S (formerly known as CMC Biologics A/S) for TEPEZZA drug substance of €~~100~~89.23 million ($~~108~~97.4 million converted at a Euro-to-Dollar exchange rate as of ~~March~~June 3130, 2023 of 1.~~0820~~0905)~~, to be delivered through March 2025~~.

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

Under our license agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or together referred to as Roche, our remaining obligation to Roche relating to the attainment of various TEPEZZA development and regulatory milestones is CHF43.0 million ($4647.89 million when converted using a CHF-to-Dollar exchange rate at ~~March~~June 3130, 2023 of 1.~~0893~~1150).

In July 2021, we completed the purchase of a drug product biologics manufacturing facility from EirGen Pharma Limited for $67.9 million. We expect to incur approximately $3015.0 million in capital expenditures during the second half of 2023 in order to prepare the drug product facility to manufacture the first medicine for commercial use, which, assuming the timely receipt of regulatory approvals, we anticipate to occur in the ~~second~~fourth ~~half~~quarter of 2023. In August 2022, we submitted a planning application to build a drug substance biologics manufacturing facility adjacent to our existing drug product biologics manufacturing facility in Waterford, Ireland. Based on our current operating plan, we do not anticipate making significant investments in building a drug substance biologics manufacturing facility during 2023.

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

We are committed to invest as a strategic limited partner in four venture capital funds: Forbion Growth Opportunities Fund I C.V., Forbion Capital Fund V C.V., Aisling Capital V, L.P. and RiverVest Venture Fund V, L.P. As of ~~March~~June 3130, 2023, the total carrying amount of our investments in these funds was $2731.29 million, which is included in other long-term assets in the condensed consolidated balance sheet, and our total future commitments to these funds are $3435.04 million.

We have financed our operations to date through equity financings, debt financings and the issuance of convertible notes, along with cash flows from operations during the last several years. As of ~~March~~June 3130, 2023, we had $2.35 billion in cash and cash equivalents and total debt with a book value of $2.6 billion and face value of $2.6 billion. We believe our existing cash and cash equivalents and our expected cash flows from our operations will be sufficient to fund our business needs for at least the next 12 months from the issuance of the financial statements in this Quarterly Report on Form 10-Q. Because of the short-term maturities of our cash equivalents, we do not believe that a change in interest rates or the risk relating to recent bank failures would have any material negative impact on the fair value of our cash equivalents. We do not have any financial covenants or non-financial covenants that we expect to be affected by the economic disruptions and negative effects of ~~the COVID-19 pandemic,~~ recent bank failures, global macro-economic issues or inflationary pressures.

3438

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

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

On April 18, 2023, in connection with the potential closing of the Transaction, Horizon Therapeutics USA, Inc., our wholly owned subsidiary, or the Issuer, directed U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee, or Notes Trustee, to give a notice, or First Redemption Notice, of the Issuer’s intent, in accordance with the indenture governing the 2027 Senior Notes, or 2027 Notes Indenture, to redeem in full the aggregate principal amount of our outstanding 2027 Senior Notes. The redemption as set forth in the First Redemption Notice was conditioned on, among other things, the consummation of the Transaction by not later than June 26, 2023. On May 26, 2023, HTUSA revoked the First Redemption Notice and directed the Notes Trustee to give a notice, or Second Redemption Notice, of HTUSA’s intent, in accordance with the 2027 Notes Indenture, to redeem in full the aggregate principal amount of the outstanding 2027 Senior Notes. The redemption as set forth in the Second Redemption Notice was conditioned on, among other things, the consummation of the Transaction by not later than July 25, 2023. On July 21, 2023, HTUSA revoked the Second Redemption Notice and directed the Notes Trustee to give a notice, or the Third Redemption Notice, of HTUSA’s intent, in accordance with the 2027 Notes Indenture, to redeem in full the aggregate principal amount of the outstanding 2027 Senior Notes. The redemption as set forth in the Third Redemption Notice is conditioned on, among other things, the consummation of the Transaction by not later than September 19, 2023.

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

During the ~~three~~six months ended ~~March~~June 3130, 2023, we issued an aggregate of 1.37 million of our ordinary shares in connection with stock option exercises, ~~and~~ the vesting of ~~restricted~~RSUs ~~stock~~and ~~units~~PSUs, and ~~performance~~employee ~~stock~~share ~~units~~purchase plan purchases. We received a total of $321.40 million in net proceeds in connection with such issuances. During the ~~three~~six months ended ~~March~~June 3130, 2023, we made payments of $8792.51 million for employee withholding taxes relating to vesting of share-based awards.

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

3539

Sources and Uses of Cash

The following table provides a summary of our cash position and cash flows for the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022 (in thousands):

	For the Three Months Ended March 31,
	For the Six Months Ended June 30,
	2023			2022
Cash, cash equivalents and restricted cash	$	2,~~316~~469,~~400~~414		$	1,~~647~~897,~~265~~300
Cash provided by (used in):
Operating activities		86247,~~323~~789			~~215~~464,~~791~~987
Investing activities		(4161,~~751~~777	)		(4052,~~724~~905	)
Financing activities		(8879,~~128~~094	)		(~~110~~92,~~037~~621	)

Operating Cash Flows

Net cash provided by operating activities during the ~~three~~six months ended ~~March~~June 3130, 2023 of $86247.38 million was primarily attributable to cash collections from gross sales, partially offset by payments made related to government rebates and patient assistance costs for our medicines, payments for inventory, payments related to selling, general and administrative expenses and payments related to R&D expenses.

During the ~~three~~six months ended ~~March~~June 3130, 2022, net cash provided by operating activities of $~~215~~465.80 million ~~were~~was ~~favorably~~primarily ~~impacted~~attributable byto ~~higher~~cash ~~net~~collections from gross sales, partially offset by ~~the~~payments ~~timing~~made ofrelated ~~working~~to ~~capital~~patient ~~cash~~assistance ~~flows~~costs for our former inflammation segment medicines and government rebates for our orphan segment medicines, payments related to selling, general and administrative expenses and payments related to R&D expenses.

Investing Cash Flows

Net cash used in investing activities during the ~~three~~six months ended ~~March~~June 3130, 2023 of $4161.8 million was primarily attributable to payments related to purchases of property, plant and equipment of $2442.16 million and milestone-based development funding of $15.0 million paid to Arrowhead in the first quarter of 2023. Refer to Note 15, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

During the ~~three~~six months ended ~~March~~June 3130, 2022, net cash used in investing activities of $4052.79 million was primarily attributable to an upfront payment of $25.0 million paid to Alpine Immune Sciences, Inc. in the first quarter of 2022 relating to an exclusive license agreement entered into in December 2021 and payments related to purchases of property, plant and equipment of $1424.24 million.

Financing Cash Flows

Net cash used in financing activities during the ~~three~~six months ended ~~March~~June 3130, 2023 of $8879.1 million was primarily attributable to $8792.51 million in payments of employee withholding taxes relating to share-based awards, partially offset by $321.40 million in proceeds from the issuance of ordinary shares in connection with stock option exercises and employee share purchase plan purchases.

During the ~~three~~six months ended ~~March~~June 3130, 2022, net cash used in financing activities of $~~110~~92.06 million was primarily attributable to $~~115~~120.15 million in payments of employee withholding taxes relating to share-based awards, partially offset by $935.19 million in proceeds from the issuance of ordinary shares in connection with stock option exercises and employee share purchase plan purchases.

3640

Financial Condition as of ~~March~~June 3130, 2023 Compared to December 31, 2022

~~Accounts~~Prepaid ~~receivable,~~expenses ~~net~~and other current assets. ~~Accounts~~Prepaid ~~receivable,~~expenses ~~net~~and ~~decreased~~other current assets increased $51115.65 million, from $~~676~~449.3 million as of December 31, 2022 to $~~624~~564.78 million as of ~~March~~June 3130, 2023. The ~~decrease~~increase was primarily due to ~~lower~~an ~~gross~~increase ~~sales~~ of ~~our~~$41.5 ~~medicines~~million ~~during~~in ~~the~~deferred ~~first~~charges ~~quarter~~for taxes on intercompany profits, an increase of ~~2023~~$30.2 ~~when~~million ~~compared~~in toadvance ~~the~~payments ~~fourth~~for ~~quarter~~inventory and an increase of ~~2022~~$14.9 million in prepaid clinical study costs.

Developed technology and other intangible assets, net. Developed technology and other intangible assets, net decreased $88178.62 million, from $2,664.8 million as of December 31, 2022 to $2,~~576~~486.26 million as of ~~March~~June 3130, 2023, primarily related to $88178.32 million of amortization of developed technology recorded during the ~~three~~six months ended ~~March~~June 3130, 2023.

~~Accounts~~Other ~~Payable~~long-term assets. ~~Accounts~~Other ~~payable~~long-term ~~decreased~~assets increased $7958.29 million, from $~~155~~204.81 million as of December 31, 2022 to $

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