Horizon Therapeutics Public Limited Company

Good morning, and thank you for standing by. Welcome to the Horizon Therapeutics Fourth Quarter and Full Year 2021 Earnings Conference Call. As a reminder, today's conference call is being recorded. I would now like to introduce Ms. Tina Ventura, Senior Vice President and Chief Investor Relations Officer.

Thank you, Livia. Good morning, everyone, and thank you for joining us. On the call with me today are Tim Walbert, Chairman, President, and Chief Executive Officer, Liz Thompson, Executive Vice President, Research and Development. Paul Holscher, Executive Vice President, Chief Financial Officer. Andy Pasternak, Executive Vice President, Chief Strategy Officer. And Aaron Cox, Executive Vice President, Finance. Aaron will be transitioning to CFO after our first quarter call. Tim will review the business, including our fourth quarter and full year performance. Liz will then review our R&D program, followed by Paul. We'll discuss our financial performance and guidance in more detail. After closing remarks from Tim, we'll take your questions. As a reminder, during today's call, we'll be making certain forward-looking statements, including statements about financial projections, development activities, our business strategy, and the expected timing and impact of future events. Our actual results could differ materially due to a number of factors, including the risk factors and other information outlined in our latest forms 10-K, 10-Q, and any 8-Ks filed with the Securities and Exchange Commission, and our earnings press release, which we issued this morning. Your caution not to place undue reliance on these forward-looking statements, and Horizon disclaims any obligation to update such statements. In addition, on today's conference call, non-GAAP financial measures will be used. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings press release, and other filings from today that are available on our investor website at www.horizontherapeutics.com. I will now turn the call over to Tim. Thank you, Tina.

At the same time, we once again delivered top-tier financial performance. Our full-year total net sales of $3.2 billion increased nearly 50%, and our full-year adjusted EBITDA of $1.3 increased 33%. We also generated more than $1 billion in operating cash flow. This morning, we issued our full-year 2022 financial guidance that again represents a very strong growth at the midpoint. Our full-year net sales guidance of $3.9 to $4 billion represents 22% growth. Our adjusted EBITDA guidance of $1.63 to $1.7 billion represents 30% growth and 230 basis points of margin expansion. Importantly, we expect our commercial performance to drive significant margin accretion, which would more than offset the increased investments we continue to make and are in date. As we look across profitable large-cap and biotech peers, Horizon's growth profile is one of the best in the industry. In 2021, we've made tremendous progress on our strategic goals, building our pipeline, maximizing our commercial medicines, and expanding globally. We acquired Viela, significantly expanding our pipeline and deepening our R&D scientific expertise. Our pipeline now includes more than 20 programs, with the majority added in 2021. We work to maximize the molecules in our portfolio. Notably, we identified four new indications for dexedilumab that we plan to initiate trials in this year, beginning with alopecia areata trial next quarter. We believe dexedilumab has the potential to be a true pipeline and product with a multibillion-dollar potential. Commercially, we more than doubled net sales to Tepeza in its second year post-launch and increased Cristexa net sales by nearly 40%, remarkable for a 12-year-old medicine. We also repositioned, rebranded, and relaunched Implizni in just six months after acquiring it from Viela. We continue to build our global presence, including the required infrastructure in Europe, to support the potential launch of Implizni in the second quarter, assuming European Commission approval. And last week, we announced the first patient enrolled in our clinical trial evaluating Tepeza in Japan. This is the first step in changing the treatment journey for people with TED outside the U.S. and puts us on a path for reaching our international peak Tepeza annual net sales expectations of more than $500 million. We also significantly expanded our global supply capacity to meet growing demand. We added a second deposit drug product manufacturer and acquired a new biologic drug product manufacturing facility in Waterford, Ireland. Behind all our efforts are the people of Horizon. Their dedication to executing on our strategy makes a difference in the lives of the patients we serve. Our employees continue to be highly engaged, as evidenced by the 15 workplace awards we received in 2021. including ranking as the number one biotech pharmaceutical company in Fortune's 100 best companies to work for. We're also a company that values diversity and equity. In 2021, a second study conducted by Aon confirmed once again that Horizon demonstrates gender and ethnicity pay equity. This was an especially meaningful accomplishment as it was achieved while our workforce nearly doubled in size. Moving on to our fourth quarter and full year results, Tepeza fourth quarter sales were $590 million, representing year-over-year growth of 72%. Full-year net sales were $1.66 billion, exceeding our full-year expectations. We achieved this incredibly strong performance despite the continued impact of COVID-19 and the government-mandated supply disruption that took Tepeza out of the market from the end of 2020 through April of last year. We executed a strong commercial relaunch following this disruption, resuming patients on therapy quickly, converting new patients and driving new patient enrollment forms. We also initiated a randomized placebo-controlled trial in chronic TED to help drive further uptake in this patient population. As we enter our third year on the market, we continue to drive strong PEP growth and adoption of TPEZA. We are focused on the next stage of our commercial strategy and see significant potential to help many more patients benefit from Tepeza. First, we plan to more deeply penetrate our high-priority TED physician targets for oculoplastic surgeons, strabismus specialists, and neuro-ophthalmologists. We've done an incredible job to date. With only a third of those physicians prescribing Tepeza today, we see significant opportunity to build on our success and capture a higher proportion of those physicians and their patients. We're improving our physician targeting and refining our messaging as we learn more about what resonates best with each specialty. For example, proptosis reduction is the main focus for oculoplastic surgeons, while neuro-ophthalmologists focus more on a broader set of signs and symptoms of TED, such as diplopia or double vision. Second, we're broadening our reach to general ophthalmologists and endocrinologists in a targeted way. Endocrinologists typically treat patients with underlying Graves' disease, and general ophthalmologists treat patients with the underlying symptoms of TED. But due to underdiagnosis and lack of awareness of TED, the majority of their patients do not find a way to pass a prescriber today. Remember, this was a market that just two years ago had no treatment options for patients, and therefore there was no well-defined patient journey. We're educating those physicians and working to improve the patient journey to both accelerate the referral process and activate certain physicians as TPEZA prescribers. This is a longer-term, multi-year strategy that should help thousands of TED patients benefit from TPEZA. Third, we're continuing our significant investment in DTC, which has proven success on reaching a broad spectrum of TED patients. We're evolving the focus of the campaign to expand the impact of TED symptoms, such as diplopia, and have launched a new unbranded awareness campaign as well. In addition to awareness creation, the main goal of our DTC campaign is to help patients find a TED treatment specialist. We've continued to generate strong results, and the use of our TED specialist finder more than doubled from when we launched the branded TB campaign in May of last year. Our primary commercial focus this year is to further penetrate the acute TED opportunity. Additionally, in the fourth quarter of last year, we began to educate physicians on the use of TPEZA in chronic patients. There are now seven published case series citing successful experiences with TPEZA in nearly 60 chronic TED patients. We expect the results from a randomized controlled clinical trial in chronic patients by year end. Those trial results and subsequent publication in peer-reviewed journals next year could help remove barriers with payers, as well as drive clinical conviction for many physicians who today only prescribe Tepesa for their acute patients or patients with high inflammation. We anticipate 2022 will be another year of outstanding growth for Tepesa, where we estimate full-year net sales percentage growth in the mid-30s. driving towards our peak global annual net sales estimate of more than $3.5 billion. With Cristexa, we reported fourth quarter net sales of $170 million, representing year-over-year growth of 32%, and full-year net sales of $566 million. 2021 was a significant year for Cristexa as we continued to advance our immunomodulation strategy. Top line data from our MERA randomized control trials showed that 71% of patients on Cristexa plus immunomodulator methotrexate showed a complete response. This is more than 30 percentage point improvement compared to patients on Cristexa plus placebo. In January of this year, we submitted a supplemental biologic license application to the US FDA to incorporate the MERA data into the Cristexa label. Approval would allow our commercial team to proactively promote Cristexa plus methotrexate to physicians. In the meantime, our medical affairs and clinical teams are working to present and publish the MIR trial results and additional analysis from the trial, including new safety data at medical congresses throughout this year. Immunomodulation is drawing higher clinical conviction among treating physicians. Use is now approaching 50% of new patients, which is up from more than 30% at the start of 2021. We continue to expand the prescriber base with significant growth in new prescribers as well as physicians who haven't prescribed Cristexin over a year. That is strong evidence that our immunomodulation strategy is working. Our nephrology segment has been growing rapidly with PEMS in 2021 nearly doubling compared to 2020. This reflects the continued growth we're seeing in nephrology prescribers, which increased 75% versus 2020. We attribute this successful progress to the dedicated nephrology sales team we put in place last year. As we look to 2022, we expect another strong year, projecting net sales growth of more than 20%. We're on track to achieve our peak annual net sales estimate of more than $1 billion, which is supported by our strategy to redefine crostexa plus immunomodulation as the standard of care, to expand utilization in our core specialty areas of rheumatology and nephrology, to elevate the urgency to treat uncontrolled gout patients, and to invest to improve the patient experience, including our monthly dosing and short infusion duration trials. Moving to APLISNA. We generated fourth quarter net sales with $26 million. Approximately $4 million of that was international revenue from our Japanese partner. Following our acquisition of Viola and Aplizna, we worked quickly to build a team and develop our strategy to conduct a full relaunch of the medicine, leveraging the patient-centric approach we used for Topeza, Cristexa, and our rare disease medicines. We put the right infrastructure and team in place with deep neuroimmunology experience, relationships, and market knowledge. We successfully relaunched APLIS in the fourth quarter, and we're beginning to see results. This is evidenced by our market research survey we conducted earlier this year, where awareness of APLIS among physicians and patients increased significantly compared to the period before our prelaunch. In addition, our physician call activity in the fourth quarter more than doubled from the third, indicative of the extended reach of our expanded sales force. We significantly expanded our peer-to-peer speaker programs and generated a 30% increase in total prescribers in the fourth quarter compared to the third, with more than half of patient enrollment forms coming from new prescribers. As a result of our efforts, we generate strong quarter-over-quarter PEP growth and new patient starts. Internationally, we made substantial progress in 2021, building the infrastructure and capabilities to support the potential launch of Implizna in Europe this year, beginning with Germany in the second quarter, assuming European Commission approval. We're increasingly confident in the prospects for this medicine and MOSD and other indications we are pursuing. We expect another year of very strong growth in 2022 as we progress towards our peak global internet sales expectations, more than $1 billion, across all indications for APLISNA. I'll now turn the call over to Liz for an update on our progress in R&D.