HORIZON THERAPEUTICS PUBLIC LTD CO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Form 10-Q)

HORIZON THERAPEUTICS PUBLIC LTD CO MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Form 10-Q)
The following discussion and analysis should be read in conjunction with our
condensed consolidated financial statements and the related notes that appear
elsewhere in this report. This discussion contains forward-looking statements
reflecting our current expectations that involve risks and uncertainties which
are subject to safe harbors under the Securities Act of 1933, as amended, or the
Securities Act, and the Securities Exchange Act of 1934, as amended, or the
Exchange Act. These forward-looking statements include, but are not limited to,
statements concerning our strategy and other aspects of our future operations,
future financial position, future revenues, projected costs, expectations
regarding demand and acceptance for our medicines, growth opportunities and
trends in the market in which we operate, prospects and plans and objectives of
management. The words "anticipates", "believes", "estimates", "expects",
"intends", "may", "plans", "projects", "will", "would" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. We may not actually
achieve the plans, intentions or expectations disclosed in our forward-looking
statements and you should not place undue reliance on our forward-looking
statements. These forward-looking statements involve risks and uncertainties
that could cause our actual results to differ materially from those in the
forward-looking statements, including, without limitation, the risks set forth
in Part II, Item 1A, "Risk Factors" in this report and in our other filings with
the Securities and Exchange Commission, or SEC. We do not assume any obligation
to update any forward-looking statements.

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

OUR BUSSINES


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. We have two reportable segments, the orphan segment
and the inflammation segment, and our commercial portfolio is currently composed
of 12 medicines in the areas of rare diseases, gout, ophthalmology and
inflammation.

From September 30, 2022Our commercial portfolio consisted of the following medicines:

Orphan

TEPEZZA® (teprotumumab-trbw), for intravenous infusion
KRYSTEXXA® (pegloticase injection), for intravenous infusion
RAVICTI® (glycerol phenylbutyrate) oral liquid
PROCYSBI® (cysteamine bitartrate) delayed-release capsules and granules, for
oral use
UPLIZNA® (inebilizumab-cdon) injection, for intravenous use
ACTIMMUNE® (interferon gamma-1b) injection, for subcutaneous use
BUPHENYL® (sodium phenylbutyrate) tablets and powder, for oral use
QUINSAIR™ (levofloxacin) solution for inhalation
Inflammation
RAYOS® (prednisone) delayed-release tablets, for oral use
PENNSAID® (diclofenac sodium topical solution) 2% w/w, or PENNSAID 2%, for
topical use
DUEXIS® (ibuprofen/famotidine) tablets, for oral use
VIMOVO® (naproxen/esomeprazole magnesium) delayed-release tablets, for oral use



Acquisitions and Divestitures

As January 1, 2021We completed the following acquisitions and divestitures:

In july 2021We completed the purchase of a drug biologics manufacturing plant from EirGen Pharma Limitedo EirGen, a subsidiary of OPKO Health, Inc., in Waterford, Ireland by $67.9 million.

In March 2021, we completed the acquisition of Viela Bio, Inc., or Viela, in
which we acquired all of the issued and outstanding shares of Viela's common
stock for $53.00 per share in cash. The total consideration for the acquisition
was approximately $3.0 billion, including cash acquired of $342.3 million.




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Impact of COVID-19


The COVID-19 pandemic has 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. In addition, our clinical trials have been and may in the
future be affected by the COVID-19 pandemic as referred to below.

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.

TEPEZZA, KRYSTEXXA and UPLIZNA


In the first half of 2022, demand for TEPEZZA, KRYSTEXXA and UPLIZNA was
negatively impacted by the omicron variant of COVID-19. 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 these
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.

Our other medicines


Patient motivation to continue treatment remains high for our other orphan
segment medicines, RAVICTI, PROCYSBI and ACTIMMUNE, and therefore net sales for
these three medicines were stable during 2020, 2021 and the nine months ended
September 30, 2022, with less impact from COVID-19 compared to our other
medicines.

clinical trials


Our clinical trials have been and may in the future be affected by COVID-19.We
experienced enrollment delays in our TEPEZZA clinical trial in chronic/low
clinical activity score, or CAS, thyroid eye disease, or TED, due to the impacts
of the omicron variant of COVID-19 and in our UPLIZNA clinical trial in
myasthenia gravis due to government ordered COVID-19 lockdowns in China,
combined with other negative impacts related to the conflict in Ukraine. As a
result, we expect data from our TEPEZZA clinical trial in chronic/low CAS TED in
the second quarter of 2023 and topline data for our clinical trial of UPLIZNA in
myasthenia gravis in 2024. In addition, clinical site initiation and patient
enrollment may be delayed due to staffing shortages or prioritization of
hospital and healthcare resources toward COVID-19. Current or potential patients
in our ongoing or planned clinical trials may also choose to not enroll, not
participate in follow-up clinical visits or drop out of the trial as a result
of, or a precaution against, contracting COVID-19. Further, some patients may
not be able or willing to comply with clinical trial protocols if healthcare
services are interrupted due to COVID-19. Some clinical sites in the United
States and other countries have slowed or stopped further enrollment of new
patients in clinical trials, denied access to site monitors or otherwise
curtailed certain operations. Similarly, our ability to recruit and retain
principal investigators and site staff who, as healthcare providers, may have
heightened exposure to COVID-19, may be adversely impacted. These events could
delay our clinical trials, increase the cost of completing our clinical trials
and negatively impact the integrity, reliability or robustness of the data from
our clinical trials.

We are continuing to actively monitor the possible impacts from the COVID-19
pandemic, including the emergence of new variants of the virus such as omicron
subvariants, and may take further actions to alter our business operations as
may be required by federal, state or local 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.


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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
are further expanding our commercial team and continuing to invest in our
direct-to-consumer marketing activities, as well as refining our marketing and
physician education strategies to address challenges we identified earlier this
year in driving adoption by ocular specialists and driving an urgency among
ophthalmologists and endocrinologists to diagnose and refer TED patients.

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. 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, and we have initiated enrollment in three
clinical trials since the start of the year.

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 this year; (ii) potential approvals and commercial
launches of UPLIZNA in other markets, including Brazil, in the coming years; and
(iii) potential approvals and 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.


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RESULTS OF OPERATIONS

Comparison of three months ended September 30, 2022 and 2021

Consolidated Results

Reference should be made to the following table in connection with a review of the following discussion of our results of operations for the three months ended
September 30, 2022compared to the three months ended September 30, 2021.

                                                 For the Three Months Ended
                                                        September 30,               Change       Change
                                                   2022              2021             $             %
                                                             (in thousands, except percentages)
Net sales                                       $  925,359       $  1,036,992     $ (111,633 )       (11 )%
Cost of goods sold                                 234,132            251,640        (17,508 )        (7 )%
Gross profit                                       691,227            785,352        (94,125 )       (12 %)
Operating expenses:
Research and development                           114,058             89,549         24,509          27 %
Acquired in-process research and development
and milestones                                      19,000              4,000         15,000         375 %
Selling, general and administrative                397,563            360,260         37,303          10 %
Total operating expenses                           530,621            453,809         76,812          17 %
Operating income                                   160,606            331,543       (170,937 )       (52 )%
Other expense, net:
Interest expense, net                              (22,480 )          (22,977 )          497           2 %
Foreign exchange loss                                 (768 )             (476 )         (292 )       (61 )%
Other expense, net                                  (2,277 )             (849 )       (1,428 )      (168 )%
Total other expense, net                           (25,525 )          (24,302 )       (1,223 )        (5 )%
Income before benefit for income taxes             135,081            307,241       (172,160 )       (56 )%
Benefit for income taxes                              (758 )          (19,302 )       18,544          96 %
Net income                                      $  135,839       $    326,543     $ (190,704 )       (58 )%




Beginning with the third quarter of 2022, we are separately presenting 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 for the
three and nine months ended September 30, 2022 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 condensed
consolidated statements of comprehensive income have been reclassified to
conform with the new classification.



Net sales. Net sales decreased $111.6 million, or 11%, to $925.4 million during
the three months ended September 30, 2022, from $1,037.0 million during the
three months ended September 30, 2021. The decrease in net sales during the
three months ended September 30, 2022 was primarily due to a decrease in net
sales in our inflammation segment of $65.3 million and a decrease in net sales
in our orphan segment of $46.3 million when compared to the three months ended
September 30, 2021. The decrease in our orphan segment was primarily due to a
decrease in TEPEZZA net sales of $125.5 million, partially offset by an increase
in KRYSTEXXA net sales of $33.5 million and an increase in UPLIZNA net sales of
$25.1 million.


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The following table reflects the net sales per drug for the three months ended
September 30, 2022 and 2021 (in thousands, except percentages):



                          For the Three Months Ended September
                                           30,                         Change            Change
                                2022                  2021               $                 %
TEPEZZA                   $         490,935       $     616,361     $   (125,426 )              (20 )%
KRYSTEXXA                           191,610             158,097           33,513                 21 %
RAVICTI                              84,202              76,323            7,879                 10 %
PROCYSBI                             57,784              49,346            8,438                 17 %
UPLIZNA                              43,780              18,677           25,103                134 %
ACTIMMUNE                            34,438              30,063            4,375                 15 %
BUPHENYL                              1,722               1,868             (146 )               (8 )%
QUINSAIR                                222                 302              (80 )              (26 )%
Orphan segment net
sales                     $         904,693       $     951,037     $    (46,344 )               (5 )%

RAYOS                                10,566              14,873           (4,307 )              (29 )%
PENNSAID 2%                           7,605              47,963          (40,358 )              (84 )%
DUEXIS                                2,017              20,915          (18,898 )              (90 )%
VIMOVO                                  478               2,204           (1,726 )              (78 )%
Inflammation segment
net sales                 $          20,666       $      85,955     $    (65,289 )              (76 )%

Total net sales           $         925,359       $   1,036,992     $   (111,633 )              (11 )%



Orphan Segment

TEPEZZA. Net sales decreased $125.5 million, or 20%, to $490.9 million during
the three months ended September 30, 2022, from $616.4 million during the three
months ended September 30, 2021. Net sales decreased by approximately $139.6
million due to lower sales volumes, which was partially offset by a $14.1
million increase due to higher net pricing. The decrease in sales volume growth
during the three months ended September 30, 2022 compared to the three months
ended September 30, 2021 was primarily a result of TEPEZZA net sales in the
third quarter of 2021 accounting for a larger share of full-year 2021 net sales
due to a supply disruption caused by the U.S. government-mandated COVID-19
vaccine orders and our subsequent resupply of TEPEZZA to the market in April
2021. We identified certain challenges, including the often-burdensome
reimbursement process, that we believe contributed to slower-than-expected
growth of TEPEZZA in the first half of 2022 which will continue to moderate
TEPEZZA net sales growth for the remainder of the year. We began executing on
several opportunities to accelerate growth, including significantly expanding
the size of our TEPEZZA sales force 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 more 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.
However, it will continue to take some time for these strategies to contribute
meaningfully to TEPEZZA net sales growth.

KRYSTEXXA. Net sales increased $33.5 million, or 21%, to $191.6 million during
the three months ended September 30, 2022, from $158.1 million during the three
months ended September 30, 2021. Net sales increased by approximately $27.7
million due to volume growth and $5.8 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 supplemental biologics license application, or sBLA, in July 2022, which
expanded KRYSTEXXA's labeling to include co-administration with methotrexate.

RAVICTI. Net sales increased $7.9 millionor 10%, to $84.2 million during the three months ended September 30, 2022of $76.3 million during the three months ended September 30, 2021. Net sales increased by approx. $4.7 million due to higher net prices and $3.2 million due to volume growth.


PROCYSBI. Net sales increased $8.5 million, or 17%, to $57.8 million during the
three months ended September 30, 2022, from $49.3 million during the three
months ended September 30, 2021. Net sales increased by approximately $10.6
million due to higher net pricing, partially offset by a decrease of $2.1
million due to lower sales volume. The $10.6 million impact from higher net
pricing was primarily driven by a benefit from a $7.5 million partial release in
the pricing review liability recorded during the three months ended September
30, 2022, as a result of a decision made by the Patented Medicine Prices Review
Board, or PMPRB, in September 2022 relating to PROCYSBI pricing in Canada.

UPLIZNA. Net sales increased $25.1 million, or 134%, to $43.8 million during the
three months ended September 30, 2022, from $18.7 million during the three
months ended September 30, 2021. Net sales in the United States increased by
$22.5 million, which was composed of an increase of $19.1 million due to higher
sales volume and $3.4 million due to higher net pricing. The remaining $2.6
million increase in net sales related primarily to revenue from our
international partners recognized during the three months ended September 30,
2022.


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inflammation segment


RAYOS. Net sales decreased $4.3 million, or 29%, to $10.6 million during the
three months ended September 30, 2022, from $14.9 million during the three
months ended September 30, 2021. Net sales decreased by approximately $3.5
million due to lower net pricing and by approximately of $0.8 million due to
lower sales volume.

We have an exclusive license to U.S. patents and patent applications from
Vectura Group plc covering RAYOS. 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, Teva may enter the market on December 23, 2022, or earlier under
certain circumstances. As a result, we expect our net sales for RAYOS to decline
in future periods.

PENNSAID 2%. Net sales decreased $40.4 million, or 84%, to $7.6 million during
the three months ended September 30, 2022, from $48.0 million during the three
months ended September 30, 2021. Net sales decreased by approximately $29.5
million resulting from lower net pricing and by approximately $10.9 million due
to lower sales volume.

In May 2022, Apotex Corp. and its affiliate, Apotex Inc., or collectively
Apotex, initiated an at-risk launch of a generic version of PENNSAID 2% in the
United States. We subsequently initiated patent infringement litigation against
Apotex and Apotex agreed to a voluntary injunction against further sales of the
generic product pending the outcome of a motion for summary judgment. The
injunction prevents further sales by Apotex but does not prevent wholesalers
from continuing to resell the initial generic product inventory Apotex sold to
them prior to the injunction. The generic competition reduced our PENNSAID 2%
sales, resulting in increased utilization of co-pay and other patient assistance
programs for PENNSAID 2%, which negatively impacted net pricing. We expect our
net sales for PENNSAID 2% to continue declining in future periods primarily due
to generic competition and the wind down of our inflammation segment, as
described below.

DUEXIS. net sales decreased $18.9 millionor 90%, to $2.0 million during the three months ended September 30, 2022of $20.9 million during the three months ended September 30, 2021. Net sales decreased by approx. $16.6 million as a result of lower sales volume, primarily due to the impact of generic competition, and for approximately $2.3 million due to lower net prices.


Due to the impact of the at-risk launch of generic PENNSAID 2%, we redeployed a
portion of our inflammation commercial team to support our TEPEZZA and KRYSTEXXA
expansion. We began winding down activities, including active promotion efforts
and associated HorizonCares support, for our inflammation segment, which we
expect to be substantially complete in the fourth quarter of 2022. As a result,
we expect that sales volumes for PENNSAID 2% and RAYOS will decline
significantly for the remainder of 2022.

The following table reconciles our gross to net sales for the three months ended
September 30, 2022 and 2021 (in millions, except percentages):


                               For the Three Months Ended September 30,         For the Three Months Ended September 30,
                                                 2022                                             2021
                                  Amount              % of Gross Sales             Amount              % of Gross Sales
Gross sales                    $     1,268.4                       100.0 %      $     1,444.4                       100.0 %
Adjustments to gross sales:
Prompt pay and other
discounts                               (1.1 )                      (0.1 )%             (11.5 )                      (0.8 )%
Medicine returns                        (6.1 )                      (0.5 )%              (4.4 )                      (0.3 )%
Co-pay and other patient
assistance                             (90.1 )                      (7.1 )%            (114.9 )                      (7.9 )%
Commercial rebates and
wholesaler fees                        (48.0 )                      (3.7 )%             (77.6 )                      (5.4 )%
Government rebates and
chargebacks                           (197.8 )                     (15.6 )%            (199.0 )                     (13.8 )%
Total adjustments                     (343.1 )                     (27.0 )%            (407.4 )                     (28.2 )%
Net sales                      $       925.3                        73.0 %      $     1,037.0                        71.8 %




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Cost of Goods Sold. Cost of goods sold decreased $17.5 million, or 7%, to $234.1
million during the three months ended September 30, 2022, from $251.6 million
during the three months ended September 30, 2021. The decrease in cost of goods
sold during the three months ended September 30, 2022 compared to the three
months ended September 30, 2021, was primarily due to a decrease in royalty and
earnout expense and a decrease in total cost of medicines sold, partially offset
by an increase in inventory step-up expense. Royalty and earnout expense
decreased by $13.8 million primarily due to royalties payable on net sales of
TEPEZZA, which decreased in the three months ended September 30, 2022 compared
to the three months ended September 30, 2021 due to lower net sales. Total cost
of medicines sold decreased by $12.4 million primarily due to lower net sales
volumes for TEPEZZA during the three months ended September 30, 2022 compared to
the three months ended September 30, 2021. Inventory step-up expense increased
by $12.9 million related to UPLIZNA based on the acquired units of inventory
sold during the three months ended September 30, 2022 compared to the three
months ended September 30, 2021. As a percentage of net sales, cost of goods
sold (excluding intangible amortization expense of $91.9 million during the
three months ended September 30, 2022 and $89.9 million during the three months
ended September 30, 2021) was 15% during the three months ended September 30,
2022, compared to 16% during the three months ended September 30, 2021. The
decrease in cost of goods sold as a percentage of net sales was primarily due to
a change in the mix of medicines sold, partially offset by an increase in
inventory step-up expense related to UPLIZNA as noted above.

Research and Development Expenses. R&D expenses increased $24.6 million, or 27%,
to $114.1 million during the three months ended September 30, 2022, from $89.5
million during the three months ended September 30, 2021. The increase was
primarily due to a $17.8 million increase in clinical trial costs reflecting
increased activity in our R&D pipeline during the three months ended September
30, 2022 compared to three months ended September 30, 2021.

We expect our R&D expenses to continue to increase significantly in future periods as a result of our ongoing and planned clinical trials for our portfolio, including drug candidates and development programs acquired in 2021.


Acquired In-Process Research and Development and Milestones Expenses. Acquired
IPR&D and milestones expenses increased $15.0 million, or 375%, to $19.0 million
during the three months ended September 30, 2022, from $4.0 million during the
three months ended September 30, 2021. The increase was due to the recognition
of the $15.0 million upfront payment made pursuant to the collaboration and
option agreement entered into with Q32 Bio Inc., or Q32, during the three months
ended September 30, 2022. Refer to Note 4, Acquisitions, Divestitures and other
Arrangements, of the Notes to Condensed Consolidated Financial Statements,
included in Item 1 of this Quarterly Report on Form 10-Q for further details.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $37.3 million, or 10%, to $397.6 million
during the three months ended September 30, 2022, from $360.3 million during the
three months ended September 30, 2021. The increase was primarily due to costs
associated with the commercialization of our medicines and global expansion
initiatives, including increases of $11.6 million in employee-related expenses,
$7.6 million in marketing program costs and $3.7 million for consultancy costs.
In addition, we incurred severance and consulting costs of $7.6 million during
the three months ended September 30, 2022, related to the winding down of our
inflammation segment.

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.

Benefit for Income Taxes. During the three months ended September 30, 2022, we
recorded benefit for income taxes of $0.8 million compared to a benefit for
income taxes of $19.3 million during the three months ended September 30, 2021.
The benefit for income taxes recorded during the three months ended September
30, 2022, resulted primarily from the release of a valuation allowance
previously recognized on certain state net operating losses, partially offset by
tax expense resulting from the mix of pre-tax income and losses incurred in
various tax jurisdictions.


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Information by Segment


Refer to Note 11, Segment and Other Information, of the Notes to Condensed
Consolidated Financial Statements, included in Item 1 of this Quarterly Report
on Form 10-Q for a reconciliation of our segment operating income (loss) to our
total income before benefit for income taxes for the three months ended
September 30, 2022 and 2021.

orphaned segment


The following table reflects our orphan segment net sales and segment operating
income for the three months ended September 30, 2022 and 2021 (in thousands,
except percentages).

                                For the Three Months Ended September 30,
                                   2022                     2021               Change         % Change
Net sales                       $   904,693         $            951,037     $   (46,344 )            (5 %)
Segment operating income            366,888                      476,225        (109,337 )           (23 %)


net sales. The decrease in net sales of the orphaned segment during the three months ended September 30, 2022 described in the Consolidated Results section above.


Segment operating income. Orphan segment operating income decreased $109.3
million to $366.9 million during the three months ended September 30, 2022, from
$476.2 million during the three months ended September 30, 2021. The decrease
was primarily attributable to an increase in selling, general and administrative
expenses of $53.1 million, a decrease in net sales of $46.3 million as described
above and an increase in R&D expenses of $34.1 million, partially offset by a
decrease in royalty expenses of $13.0 million primarily related to a decrease in
royalties payable on net sales of TEPEZZA.

inflammation segment

The following table reflects our inflammation segment net sales and segment operating income (loss) for the three months ended September 30, 2022 and 2021 (in thousands, except percentages).

                                   For the Three Months Ended September
                                                    30,
                                     2022                    2021               Change        % Change
Net sales                         $    20,666         $            85,955     $  (65,289 )          (76 %)
Segment operating (loss) income       (10,776 )                    34,129   

(44,905) (132%)

net sales. The decrease in net sales of the inflammation segment during the three months ended September 30, 2022 described in the Consolidated Results section above.


Segment operating (loss) income. Inflammation segment operating (loss) income
decreased $44.9 million to a $10.8 million operating loss during the three
months ended September 30, 2022, from $34.1 million in operating income during
the three months ended September 30, 2021. The decrease was primarily
attributable to a decrease in net sales of $65.3 million as described above,
partially offset by a decrease in selling, general and administrative expense of
$11.4 million.

                                       41

————————————————– ——————————

Nine Months Ended Comparison September 30, 2022 and 2021

Consolidated Results

Reference should be made to the following table in connection with a review of the following discussion of our results of operations for the nine months ended
September 30, 2022compared to the nine months ended September 30, 2021.

                                     For the Nine Months Ended
                                           September 30,                Change           Change
                                      2022               2021              $               %
                                                 (in thousands, except percentages)
Net sales                         $  2,687,015       $  2,211,946     $   475,069               21 %
Cost of goods sold                     679,410            553,003         126,407               23 %
Gross profit                         2,007,605          1,658,943         348,662               21 %
Operating expenses:
Research and development               320,436            244,076          76,360               31 %
Acquired in-process research
and development and milestones          19,000             47,000         (28,000 )            (60 )%
Selling, general and
administrative                       1,168,518          1,047,456         121,062               12 %
Impairment of goodwill                  56,171                  -          56,171              100 %
Impairment of long-lived asset               -             12,371         (12,371 )           (100 )%
Gain on sale of asset                        -             (2,000 )         2,000              100 %
Total operating expenses             1,564,125          1,348,903         215,222               16 %
Operating income                       443,480            310,040         133,440               43 %
Other expense, net:
Interest expense, net                  (65,145 )          (59,018 )        (6,127 )            (10 )%
Foreign exchange loss                     (320 )           (1,363 )         1,043               77 %
Other (expense) income, net             (5,408 )            2,113          (7,521 )           (356 )%
Total other expense, net               (70,873 )          (58,268 )       (12,605 )            (22 )%
Income before benefit for
income taxes                           372,607            251,772         120,835              (48 )%
Benefit for income taxes               (28,467 )         (109,537 )        81,070               74 %
Net income                        $    401,074       $    361,309     $    39,765               11 %


Beginning with the third quarter of 2022, we are separately presenting 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 for the
three and nine months ended September 30, 2022, 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 condensed consolidated statements of comprehensive income
have been reclassified to conform with the new classification.

Net sales. Net sales increased $475.1 million, or 21%, to $2,687.0 million
during the nine months ended September 30, 2022, from $2,211.9 million during
the nine months ended September 30, 2021. The increase in net sales during the
nine months ended September 30, 2022, was primarily due to an increase in net
sales in our orphan segment of $625.3 million. Growth was primarily due to an
increase in TEPEZZA net sales of $400.5 million, an increase in KRYSTEXXA net
sales of $104.9 million and an increase in UPLIZNA net sales of $77.9 million,
partially offset by a decrease in net sales in our inflammation segment of
$150.2 million when compared to the nine months ended September 30, 2021 which
was primarily driven by a decrease in net sales of PENNSAID 2% and DUEXIS due to
the impact of generic competition.

                                       42

————————————————– ——————————

The following table reflects the net sales per drug for the nine months ended
September 30, 2022 and 2021 (in thousands, except percentages):


                                     For the Nine Months Ended
                                           September 30,                  Change            Change
                                     2022                2021               $                 %
TEPEZZA                          $   1,472,200       $   1,071,681     $    400,519                 37 %
KRYSTEXXA                              500,069             395,171          104,898                 27 %
RAVICTI                                238,181             217,566           20,615                  9 %
PROCYSBI                               155,061             142,484           12,577                  9 %
UPLIZNA                                112,855              35,025           77,830                222 %
ACTIMMUNE                               95,862              86,603            9,259                 11 %
BUPHENYL                                 5,270               5,790             (520 )               (9 )%
QUINSAIR                                   853                 733              120                 16 %
Orphan segment net sales         $   2,580,351       $   1,955,053     $    625,298                 32 %

PENNSAID 2%                             66,559             142,721          (76,162 )              (53 )%
RAYOS                                   35,203              43,551           (8,348 )              (19 )%
DUEXIS                                   3,210              62,490          (59,280 )              (95 )%
VIMOVO                                   1,692               8,131           (6,439 )              (79 )%
Inflammation segment net sales   $     106,664       $     256,893     $   (150,229 )              (58 )%

Total net sales                  $   2,687,015       $   2,211,946     $    475,069                 21 %



Orphan Segment

TEPEZZA. Net sales increased $400.5 million, or 37%, to $1,472.2 million during
the nine months ended September 30, 2022, from $1,071.7 million during the nine
months ended September 30, 2021. Net sales increased by approximately $361.7
million due to volume growth and $38.8 million due to higher net pricing. Net
sales growth for TEPEZZA was negatively impacted by the omicron variant of
COVID-19 in the first half of 2022 and additional commercial challenges we
identified, as described above. We identified certain challenges, including the
often-burdensome reimbursement process, that we believe contributed to
slower-than-expected growth of TEPEZZA in the first half of 2022 which will
continue to moderate TEPEZZA net sales growth for the remainder of the year. We
began executing on several opportunities to accelerate growth, including
significantly expanding the size of our TEPEZZA sales force 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 more 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. However, it will continue to take some time for these
strategies to contribute meaningfully to TEPEZZA net sales growth.

KRYSTEXXA. Net sales increased $104.9 million, or 27%, to $500.1 million during
the nine months ended September 30, 2022, from $395.2 million during the nine
months ended September 30, 2021. Net sales increased by approximately $81.3
million due to volume growth and $23.6 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 $20.6 million, or 9%, to $238.2 million during the
nine months ended September 30, 2022, from $217.6 million during the nine months
ended September 30, 2021. Net sales increased by approximately $13.8 million due
to volume growth and $6.8 million due to higher net pricing.

PROCYSBI. Net sales increased $12.6 million, or 9%, to $155.1 million during the
nine months ended September 30, 2022, from $142.5 million during the nine months
ended September 30, 2021. Net sales increased by approximately $9.2 million due
to higher net pricing and $3.4 million due to volume growth. The $9.2 million
impact from higher net pricing was primarily driven by a benefit from a $7.5
million partial release in the pricing review liability recorded during the nine
months ended September 30, 2022, as a result of a decision made by the PMPRB in
September 2022 relating to PROCYSBI pricing in Canada.

UPLIZNA. Net sales increased $77.9 million, or 222%, to $112.9 million during
the nine months ended September 30, 2022, from $35.0 million during the nine
months ended September 30, 2021. Net sales in the United States increased by
$61.4 million, which was composed of an increase of $55.6 million due to higher
sales volume and $5.8 million due to higher net pricing. The remaining $16.5
million increase in net sales related primarily to revenue and milestone
payments from our international partners recognized during the nine months ended
September 30, 2022.



                                       43

————————————————– ——————————

inflammation segment


Our interim goodwill impairment test in the second quarter of 2022 indicated an
impairment of the inflammation reporting unit. As a result, we recognized an
impairment charge of $56.2 million in June 2022 representing the full amount of
goodwill for the inflammation reporting unit. Refer to Note 8, 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.

PENNSAID 2%. Net sales decreased $76.1 million, or 53%, to $66.6 million during
the nine months ended September 30, 2022, from $142.7 million during the nine
months ended September 30, 2021. Net sales decreased by approximately $57.6
million resulting from lower net pricing and by approximately $18.5 million due
to lower sales volume.

In May 2022, Apotex initiated an at-risk launch of a generic version of PENNSAID
2% in the United States. We subsequently initiated patent infringement
litigation against Apotex and Apotex agreed to a voluntary injunction against
further sales of the generic product pending the outcome of a motion for summary
judgment. The injunction prevents further sales by Apotex but does not prevent
wholesalers from continuing to resell the initial generic product inventory
Apotex sold to them prior to the injunction. The generic competition reduced our
PENNSAID 2% sales, resulting in increased utilization of co-pay and other
patient assistance programs for PENNSAID 2%, which negatively impacted net
pricing. We expect our net sales for PENNSAID 2% to continue declining in future
periods primarily due to generic competition and the wind down of our
inflammation segment, as described below.

RAYOS. Net sales decreased $8.4 million, or 19%, to $35.2 million during the
nine months ended September 30, 2022, from $43.6 million during the nine months
ended September 30, 2021. Net sales decreased by approximately $8.5 million due
to lower net pricing, partially offset by an increase of $0.1 million due to
higher sales volume.

We have an exclusive license to U.S Vectura Group plc patents and patent applications covering LIGHTNING. Under our settlement agreement with Teva, Teva may enter the market on December 23, 2022, or sooner under certain circumstances. As a result, we expect our net sales of RAYOS to decline in future periods.


DUEXIS. Net sales decreased $59.3 million, or 95%, to $3.2 million during the
nine months ended September 30, 2022, from $62.5 million during the nine months
ended September 30, 2021. Net sales decreased by approximately $54.0 million
resulting from lower sales volume, primarily due to the impact of generic
competition, and by approximately $5.3 million due to lower net pricing.

Due to the impact of the at-risk launch of generic PENNSAID 2%, we redeployed a
portion of our inflammation commercial team to support our TEPEZZA and KRYSTEXXA
expansion. We began winding down activities, including active promotion efforts
and associated HorizonCares support, for our inflammation segment, which we
expect to be substantially complete in the fourth quarter of 2022. As a result,
we expect that sales volumes for PENNSAID 2% and RAYOS will decline
significantly for the remainder of 2022.

The following table reconciles our gross to net sales for the nine months ended
September 30, 2022 and 2021 (in millions, except percentages):


                              For the Nine Months Ended September 30,       

For the Nine Months Finished September 30th,

                                               2022                                           2021
                                 Amount             % of Gross Sales            Amount             % of Gross Sales
Gross sales                   $     3,741.2                     100.0 %      $     3,529.1                     100.0 %
Adjustments to gross sales:
Prompt pay and other
discounts                             (21.3 )                    (0.6 )%             (37.0 )                    (1.0 )%
Medicine returns                      (18.3 )                    (0.5 )%             (12.0 )                    (0.3 )%
Co-pay and other patient
assistance                           (273.7 )                    (7.3 )%            (515.3 )                   (14.6 )%
Commercial rebates and
wholesaler fees                      (150.4 )                    (4.0 )%            (220.8 )                    (6.3 )%
Government rebates and
chargebacks                          (590.5 )                   (15.8 )%            (532.1 )                   (15.1 )%
Total adjustments                  (1,054.2 )                   (28.2 )%          (1,317.2 )                   (37.3 )%
Net sales                     $     2,687.0                      71.8 %      $     2,211.9                      62.7 %




During the nine months ended September 30, 2022, co-pay and other patient
assistance costs, as a percentage of gross sales, decreased to 7.3% from 14.6%
during the nine months ended September 30, 2021, primarily due to a decreased
proportion of inflammation segment medicines sold. Due to the impacts described
above with respect to the inflammation segment, we expect co-pay and other
patient assistance costs to continue to decrease as a percentage of total gross
sales.

                                       44
--------------------------------------------------------------------------------
Cost of Goods Sold. Cost of goods sold increased $126.4 million, or 23%, to
$679.4 million during the nine months ended September 30, 2022, from $553.0
million during the nine months ended September 30, 2021. The increase in cost of
goods sold was primarily due to an increase in royalty and earnout expense, an
increase in inventory step-up expense and an increase in amortization expense.
Royalty and earnout expense increased by $57.2 million primarily due to
royalties payable on net sales of TEPEZZA, which increased during the first nine
months of 2022 compared to the first nine months of 2021 due to higher net
sales. Inventory step-up expense increased by $49.4 million related to UPLIZNA
based on the acquired units of inventory sold during the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021.
Amortization expense increased $26.7 million primarily due to the acquisition of
the UPLIZNA developed technology intangible asset in March 2021. In addition, we
recorded a $10.3 million PENNSAID 2% inventory reserve due to the impact of
generic competition on PENNSAID 2% sales. As a percentage of net sales, cost of
goods sold (excluding amortization expense of $271.0 million during the first
nine months of 2022 and $244.4 million during first nine months of 2021) was 15%
during the nine months ended September 30, 2022, compared to 14% during the nine
months ended September 30, 2021. The increase in cost of goods sold as a
percentage of net sales was primarily due to a change in the mix of medicines
sold and increases in inventory step-up expense related to UPLIZNA as noted
above.

Research and Development Expenses. R&D expenses increased $76.3 million to
$320.4 million during the nine months ended September 30, 2022, from $244.1
million during the nine months ended September 30, 2021. The increase was
primarily attributable to a $45.5 million increase in clinical trial costs
reflecting increased activity in our R&D pipeline as well as the addition of
certain medicine candidates and development programs following the acquisition
of Viela in March 2021, and an increase of $18.1 million in consultant costs.

We expect our R&D expenses to continue to increase significantly in future periods as a result of our ongoing and planned clinical trials for our portfolio, including drug candidates and development programs acquired in 2021.


Acquired In-Process Research and Development and Milestones Expenses. Acquired
IPR&D and milestones expenses decreased $28.0 million to $19.0 million during
the nine months ended September 30, 2022, from $47.0 million during the nine
months ended September 30, 2021. The $19.0 million of acquired IPR&D and
milestones expenses during the nine months ended September 30, 2022, was
primarily related to $15.0 million recognized in relation to the collaboration
and option agreement entered into with Q32. During the nine months ended
September 30, 2021, we recognized a $40.0 million upfront payment in relation to
the global agreement with Arrowhead Pharmaceuticals, Inc., or Arrowhead. Refer
to Note 4, Acquisitions, Divestitures and other Arrangements, of the Notes to
Condensed Consolidated Financial Statements, included in Item 1 of this
Quarterly Report on Form 10-Q for further details.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $121.1 million to $1,168.5 million during the
nine months ended September 30, 2022, from $1,047.4 million during the nine
months ended September 30, 2021. The increase was primarily attributable to
costs associated with the commercialization of our medicines and global
expansion initiatives. These include an increase of $94.9 million in marketing
program costs and an increase of $21.7 million in employee-related costs,
partially offset by a decrease of $28.6 million in transaction costs which were
incurred during the nine months ended September 30, 2021 relating to the Viela
acquisition. In addition, we incurred severance and consulting costs of $7.6
million during the nine months ended September 30, 2022, related to the winding
down of our inflammation segment.

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 nine months ended September 30, 2022, we
recorded an impairment charge of $56.2 million in relation to our inflammation
reporting unit. Refer to Note 8, Goodwill and Intangible Assets, of the Notes to
the Condensed Consolidated Financial Statements, included in Item 1 of this
Quarterly Report on Form 10-Q for further details.

Impairment of long-lived asset. During the nine months ended September 30, 2021,
we recorded an impairment charge of $12.4 million as a result of vacating the
Lake Forest office. Refer to Note 15, Lease Obligations, of the Notes to
Condensed Consolidated Financial Statements, included in Item 1 of this
Quarterly Report on Form 10-Q for further details.


                                       45
--------------------------------------------------------------------------------
Gain on sale of asset. During the nine months ended September 30, 2021, gain on
sale of asset represents a $2.0 million contingent consideration payment related
to the sale of MIGERGOT in 2019. The contingent consideration was earned during
the second quarter of 2021 and it was received in July 2021.

Interest Expense, Net. Interest expense, net, increased $6.1 million to $65.1
million during the nine months ended September 30, 2022, from $59.0 million
during the nine months ended September 30, 2021. The increase was primarily due
to an increase in interest expense of $17.7 million, primarily related to
increases in interest rates on the portion of our variable interest debt,
partially offset by an increase in interest income of $11.6 million. Refer to
Note 13, Debt Agreements, of the Notes to Condensed Consolidated Financial
Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further
details.

Benefit for Income Taxes. During the nine months ended September 30, 2022, we
recorded a benefit for income taxes of $28.5 million compared to a benefit for
income taxes of $109.5 million during the nine months ended September 30, 2021.
The benefit for income taxes recorded during the nine months ended September 30,
2022, resulted primarily from tax benefits recognized on share-based
compensation and the release of a valuation allowance previously recognized on
certain state net operating losses, partially offset by tax expense resulting
from the mix of pre-tax income and losses incurred in various tax jurisdictions.




                                       46

————————————————– ——————————

Information by Segment


Refer to Note 11, Segment and Other Information, of the Notes to Condensed
Consolidated Financial Statements, included in Item 1 of this Quarterly Report
on Form 10-Q for a reconciliation of our segment operating income (loss) to our
total income before benefit for income taxes for the nine months ended September
30, 2022 and 2021.

Orphan Segment

The following table reflects our orphan segment net sales and segment operating
income for the nine months ended September 30, 2022 and 2021 (in thousands,
except percentages).

                                  For the Nine Months Ended
                                        September 30,
                                  2022                2021            Change          % Change
Net sales                     $   2,580,351       $   1,955,053     $   625,298               32 %
Segment operating income          1,033,477             798,514         234,963               29 %


net sales. The increase in net sales of the orphaned segment during the nine months ended
September 30, 2022 described in the Consolidated Results section above.


Segment operating income. Orphan segment operating income increased $235.0
million to $1,033.5 million during the nine months ended September 30, 2022,
from $798.5 million during the nine months ended September 30, 2021. The
increase was primarily attributable to an increase in net sales of $625.3
million as described above, partially offset by an increase in selling, general
and administrative expenses of $241.9 million, an increase of $91.4 million in
R&D expenses and an increase of $59.2 million in royalty expense primarily
related to an increase in royalties payable on net sales of TEPEZZA during the
nine months ended September 30, 2022 compared to the nine months ended September
30, 2021.

Inflammation Segment

The following table reflects our inflammation segment net sales and segment operating income (loss) for the nine months ended September 30, 2022 and 2021 (in thousands, except percentages).

                                   For the Nine Months Ended September
                                                   30,
                                       2022                   2021            Change        % Change
Net sales                         $      106,664         $      256,893     $ (150,229 )          (58 %)
Segment operating (loss) income           (1,979 )              123,576     

(125,555) (102%)

net sales. The decrease in net sales of the inflammation segment during the nine months ended September 30, 2022 described in the Consolidated Results section above.


Segment operating (loss) income. Inflammation segment operating (loss) income
decreased $125.6 million to a $2.0 million operating loss during the nine months
ended September 30, 2022, from $123.6 million in operating income during the
nine months ended September 30, 2021. The decrease was primarily attributable to
a decrease in net sales of $150.2 million as described above, partially offset
by a decrease in selling, general and administrative expenses of $19.3 million.


                                       47

————————————————– ——————————

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, manufacturing facility start-up costs and
restructuring and realignment costs, as well as non-cash items such as
share-based compensation, inventory step-up expense, depreciation and
amortization, non-cash interest expense, long-lived assets impairment charges,
loss on 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.

Beginning in the fourth quarter of 2021, following consultation with the staff
of the Division of Corporation Finance of the U.S. Securities and Exchange
Commission, we no longer exclude acquired IPR&D and milestones expenses from our
non-GAAP financial measures and its line item components. For purposes of
comparability, non-GAAP financial measures for the three and nine months ended
September 30, 2021 have been updated to reflect this change. Acquired IPR&D and
milestones expenses continue to be excluded from our segment operating income
(loss) and from certain measures contained in our credit agreement that are
relevant to, among other things, the calculation of the interest rate.

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


                                                                                       For the Nine Months Ended September
                                    For the Three Months Ended September 30,                           30,
                                        2022                         2021                 2022                   2021
GAAP net income                 $            135,839         $            326,543     $     401,074       $          361,309
Depreciation (1)                               6,130                        4,112            18,073                   11,956
Amortization and step-up:
Intangible amortization expense
(2)                                           92,951                       90,368           273,546                  245,260
Inventory step-up expense (3)                 21,779                        8,912            66,342                   16,914
Interest expense, net
(including amortization of debt
discount and deferred financing
costs)                                        22,480                       22,977            65,145                   59,018
Benefit for income taxes                        (758 )                    (19,302 )         (28,467 )               (109,537 )
EBITDA                                       278,421                      433,610           795,713                  584,920
Other non-GAAP adjustments:
Share-based compensation (4)                  45,066                       54,804           137,515                  170,394
Restructuring and realignment
costs (5)                                      7,731                          680             9,521                    7,703
Manufacturing facility start-up
costs (6)                                      2,024                        1,712             4,413                    1,712
Loss on equity security
investments (7)                                1,247                            -             6,331                        -

Related to acquisitions/divestments

costs (8)                                        825                        9,228             3,437                   88,166
Impairment of goodwill (9)                         -                            -            56,171                        -
Impairment of long-lived asset
(10)                                               -                            -                 -                   12,371
Litigation settlement (11)                         -                        5,000                 -                    5,000
Gain on sale of asset (12)                         -                            -                 -                   (2,000 )
Total of other non-GAAP
adjustments (16)                              56,893                       71,424           217,388                  283,346
Adjusted EBITDA (16)            $            335,314         $            505,034     $   1,013,101       $          868,266




                                       48
--------------------------------------------------------------------------------
                                             For the Three Months Ended          For the Nine Months Ended September
                                                    September 30,                                30,
                                              2022                 2021               2022                 2021
GAAP net income                          $      135,839       $      326,543     $      401,074       $      361,309
Non-GAAP adjustments:
Depreciation (1)                                  6,130                4,112             18,073               11,956
Amortization and step-up:
Intangible amortization expense (2)              92,951               90,368            273,546              245,260
Amortization of debt discount and
deferred financing costs (13)                     2,232                1,500              6,136                3,740
Inventory step-up expense (3)                    21,779                8,912             66,342               16,914
Share-based compensation (4)                     45,066               54,804            137,515              170,394
Restructuring and realignment costs
(5)                                               7,731                  680              9,521                7,703
Manufacturing facility start-up
costs (6)                                         2,024                1,712              4,413                1,712
Loss on equity security investments
(7)                                               1,247                    -              6,331                    -

Related to acquisitions/divestments

costs (8)                                           825                9,228              3,437               88,166
Impairment of goodwill (9)                            -                    -             56,171                    -
Impairment of long-lived asset (10)                   -                    -                  -               12,371
Litigation settlement (11)                            -                5,000                  -                5,000
Gain on sale of asset (12)                            -                    -                  -               (2,000 )
Total of pre-tax non-GAAP
adjustments (16)                                179,985              176,316            581,485              561,216
Income tax effect of pre-tax
non-GAAP adjustments (14)                       (24,623 )            (36,602 )         (121,754 )           (141,665 )
Other non-GAAP income tax
adjustments (15)                                  2,079              (56,007 )            2,079              (25,126 )
Total non-GAAP adjustments                      157,441               83,707            461,810              394,425
Non-GAAP net income (16)                 $      293,280       $      410,250     $      862,884       $      755,734

Non-GAAP Earnings Per Share:
Weighted average ordinary shares -
Basic                                       230,333,287          

226,096,747 229,820,406 225,053,704


Non-GAAP Earnings Per Share - Basic
GAAP earnings per share - Basic          $         0.59       $         1.44     $         1.75       $         1.61
Non-GAAP adjustments (16)                          0.68                 0.37               2.00                 1.75
Non-GAAP earnings per share - Basic
(16)                                     $         1.27       $         

$1.81 $3.75 $3.36


Weighted average ordinary shares -
Diluted
Weighted average ordinary shares -
Basic                                       230,333,287          

226,096,747 229,820,406 225,053,704 Equivalents of common shares

                    5,052,283           10,102,042          6,102,624           10,202,720
Weighted average ordinary shares -
Diluted                                     235,385,570          

236,198,789 235,923,030 235,256,424


Non-GAAP Earnings Per Share -
Diluted
GAAP earnings per share - Diluted        $         0.58       $         1.38     $         1.70       $         1.54
Non-GAAP adjustments (16)                          0.67       $         0.36               1.96       $         1.67
Non-GAAP earnings per share -
Diluted (16)                             $         1.25       $         1.74     $         3.66       $         3.21




(1)

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

(two)

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

(3)

During the three and nine months ended September 30, 2022, we recognized in cost
of goods sold $21.8 million and $66.3 million, respectively, for inventory
step-up expense related to UPLIZNA inventory revalued in connection with the
Viela acquisition. We recorded $8.9 million and $16.9 million, respectively, of
UPLIZNA inventory step-up expense in cost of goods sold during the three and
nine months ended September 30, 2021. Refer to Note 5, 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 our stock option,
restricted stock unit and performance stock unit grants to our employees and
non-employee directors, and our employee share purchase plan.

(5)

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



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(6)

During the three and nine months ended September 30, 2022, we recorded $2.0
million and $4.4 million, respectively, of manufacturing facility start-up costs
related to our drug product biologics manufacturing facility in Waterford,
Ireland. During the three and nine months ended September 30, 2021, we recorded
$1.7 million of manufacturing facility start-up costs related to the purchase of
our drug product biologics manufacturing facility in Waterford, Ireland from
EirGen in July 2021.

(7)

We held investments in equity securities with readily determinable fair values
of $6.9 million as of September 30, 2022, which are included in other long-term
assets in the condensed consolidated balance sheet. For the three and nine
months ended September 30, 2022, we recognized a net unrealized loss of $1.2
million and $6.3 million, respectively, due to the change in fair value of these
securities.

(8)

Primarily represents transaction and integration costs, including, advisory,
legal, consulting and certain employee-related costs, incurred in connection
with our acquisitions and divestitures. Costs recovered from subleases of
acquired facilities and reimbursed expenses incurred under transition
arrangements for divestitures are also reflected in this line item.

(9)

Our interim goodwill impairment test in the second quarter of 2022 indicated an
impairment which represented the difference between the estimated fair value of
the inflammation reporting unit and its carrying value. As a result, we
recognized an impairment charge of $56.2 million in June 2022 representing the
full amount of goodwill for the inflammation reporting unit. Refer to Note 8,
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.

(10)

During the nine months that ended September 30, 2021we recorded a charge for impairment of assets for the right of use of $12.4 million as a result of the vacancy of the tenant forest lake office.

(eleven)

we record $5.0 million of expenses during the three and nine months ended
September 30, 2021 for dispute settlement.

(12)

During the nine months that ended September 30, 2021the gain on the sale of the asset represents a $2.0 million payment of the contingent consideration related to the sale of MIGERGOT in 2019. The contingent consideration was activated during the second quarter of 2021 and received in july 2021.

(13)

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

(14)

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.

(fifteen)

During the three and nine months ended September 30, 2022We recognized a tax expense attributable to state tax legislation enacted during the period, resulting in a non-GAAP tax adjustment of $2.1 million.


During the three and nine months ended September 30, 2021, other non-GAAP income
tax adjustments resulted primarily from the recognition of a reduction in the
state tax rate expected to apply to the reversal of temporary differences
between the book values and tax bases of certain assets acquired through the
Viela acquisition. The reduction in state tax rate resulted in a reduction in
the deferred tax liability relating to these assets and a non-GAAP tax
adjustment of $51.3 million. In addition, during the nine months ended September
30, 2021, we recognized a U.S. federal and state tax liability on U.S. taxable
income generated from an intercompany transfer and license of intellectual
property from a U.S. subsidiary to an Irish subsidiary which was partially
offset by the recognition of a deferred tax asset in the Irish subsidiary,
resulting in a non-GAAP tax adjustment of $26.2 million.

(sixteen)

As discussed above, following consultation with the staff of the Division of
Corporation Finance of the U.S. Securities and Exchange Commission, we no longer
exclude acquired IPR&D and milestones expenses from our non-GAAP financial
measures and its line item components. Adjusted EBITDA and non-GAAP net income
for the three and nine months ended September 30, 2021, includes $4.0 million
and $47.0 million, respectively, of acquired IPR&D and milestones expenses.
These amounts continue to be excluded from our segment operating income (loss)
and from certain measures contained in our credit agreement that are relevant
to, among other things, the calculation of the interest rate.




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LIQUIDITY, FINANCIAL SITUATION AND CAPITAL RESOURCES


As of September 30, 2022, we had retained earnings of $606.3 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 acquired
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 September 30,
2022, 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 €68.1 million ($66.8 million
converted at a Euro-to-Dollar exchange rate as of September 30, 2022 of 0.9815),
to be delivered through September 2024.

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 in demand.

Under our license agreement with F. Hoffmann-La Roche Ltda. Y Hoffmann-LaRoche Inc.or collectively referred to as Roche, our remaining obligation to Roche in connection with TEPEZZA’s achievement of various regulatory and development milestones is 43.0 million Swiss francs ($43.6 million when converted using a CHF to dollar exchange rate in September 30, 2022 of 1.0147).


In July 2021, we completed the purchase of a drug product biologics
manufacturing facility from EirGen for $67.9 million. Refer to Note 4,
Acquisitions, Divestitures and other Arrangements, of the Notes to Condensed
Consolidated Financial Statements, included in Item 1 of this Quarterly Report
on Form 10-Q for further details. We expect to incur approximately $17.2 million
in capital expenditures during the fourth quarter of 2022 in order to complete
the drug product facility. 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. We
expect the facility will add approximately 320,000 square feet to the existing
drug product biologics manufacturing facility and will be used to manufacture a
portion of our on market rare disease biologics as well as development-stage
medicines. We expect to incur between €500 million and €600 million in total
construction costs during the next several years in order to build the drug
substance biologics manufacturing facility.

On August 12, 2022, we entered into a collaboration and option agreement with
Q32 related to its pipeline candidate ADX-914, a monoclonal antibody antagonist
of the interleukin-7 receptor for the treatment of autoimmune and inflammatory
diseases. An upfront payment of $15.0 million was paid in the third quarter of
2022 and recorded as acquired IPR&D and milestones expenses in the condensed
consolidated statement of comprehensive income. In addition, milestone-based
development funding of $17.5 million is expected to be paid in the fourth
quarter of 2022. We may also be obligated to pay up to $22.5 million in the form
of additional milestone-based development funding. If we exercise the option, we
may be obligated to make up to an additional $645.0 million in closing and
milestone payments, as well as tiered royalties on net sales from a high
single-digit to a low double-digit percentage, inclusive of certain amounts
payable to a third party under a pre-existing license agreement. Refer to Note
4, Acquisitions, Divestitures and other Arrangements, of the Notes to Condensed
Consolidated Financial Statements, included in Item 1 of this Quarterly Report
on Form 10-Q for further details.

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 September
30, 2022, the total carrying amount of our investments in these funds was $23.7
million, which is included in other long-term assets in the condensed
consolidated balance sheet, and our total future commitments to these funds are
$36.3 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 September 30, 2022, we had $2.1
billion in cash and cash equivalents and total debt with a book value of $2.5
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. 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,
global macro-economic issues or inflationary pressures.

                                       51
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We have a significant amount of debt outstanding on a consolidated basis. For a
description of our debt agreements, refer to Note 13, 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; 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 and our Credit Agreement impose various provisions that limit our ability and/or the ability of our restricted subsidiaries to, among other things, pay dividends or distributions, repurchase shares, prepay junior debt and make certain investments, incur additional debt and issue certain preferred shares, incur liens on assets, engage in certain asset sales or merger transactions, enter into transactions with affiliates, designate subsidiaries as unrestricted subsidiaries; and allow certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.


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 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 14, 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 nine months ended September 30, 2022, we issued an aggregate of
3,115,180 of our ordinary shares in connection with stock option exercises, the
vesting of restricted stock units and performance stock units, and employee
share purchase plan purchases. We received a total of $37.2 million in net
proceeds in connection with such issuances. During the nine months ended
September 30, 2022, we made payments of $123.9 million for employee withholding
taxes relating to vesting of share-based awards.

In September 2022, our board of directors authorized a share repurchase program
pursuant to which we may repurchase up to $500.0 million of our ordinary shares.
Under the program, we may repurchase ordinary shares from time to time on the
open market or through privately negotiated transactions or structured
repurchase transactions. In the third quarter of 2022, we executed open market
share repurchases of 1.8 million ordinary shares under this repurchase program
for total consideration of $113.4 million. As of October 31, 2022, we had
repurchased 3.9 million of our ordinary shares under this program for total
consideration of $250.0 million. All ordinary shares repurchased were
subsequently retired. The timing and amount of future repurchases, if any, will
depend on a variety of factors, including the price of our ordinary shares,
alternative investment opportunities, our cash resources, restrictions under our
debt agreements, corporate and regulatory requirements and market conditions. We
expect to continue to fund the repurchase of our ordinary shares, if any, under
the program with existing cash and cash equivalents. Refer to Note 18,
Shareholders' Equity, of the Notes to Condensed Consolidated Financial
Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further
details.

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
16, Commitments and Contingencies, of the Notes to Condensed Consolidated
Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.



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Sources and uses of cash

The following table provides a summary of our cash position and cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):


                                                For the Nine Months Ended 

September 30th,

                                                    2022                    

2021

Cash, cash equivalents and restricted cash $2,135,270 $

      1,072,386
Cash provided by (used in):
Operating activities                                     831,451                    496,714
Investing activities                                     (84,930 )               (2,957,267 )
Financing activities                                    (186,992 )                1,460,411



Operating Cash Flows

During the nine months ended September 30, 2022, net cash provided by operating
activities of $831.5 million was primarily attributable to cash collections from
gross sales, partially offset by payments made related to government rebates for
our orphan segment medicines and patient assistance costs for our inflammation
segment medicines, payments for inventory, payments related to selling, general
and administrative expenses and payments related to R&D expenses.

During the nine months ended September 30, 2021, net cash provided by operating
activities of $496.7 million was primarily attributable to cash collections from
gross sales, partially offset by payments made related to patient assistance
costs for our medicines and government rebates for our orphan segment medicines,
payments related to selling, general and administrative expenses, including
transaction costs related to the Viela acquisition, and payments related to R&D
expenses.

Investing Cash Flows

During the nine months ended September 30, 2022, net cash used in investing
activities of $84.9 million was primarily attributable to an upfront payment of
$25.0 million paid to Alpine Immune Sciences, Inc., or Alpine, in the first
quarter of 2022 relating to an exclusive license agreement entered into in
December 2021, an upfront payment of $15.0 million relating to a collaboration
and option agreement entered into with Q32 in the third quarter of 2022, and
payments related to purchases of property, plant and equipment of $39.2 million.
Refer to Note 4, Acquisitions, Divestitures and other Arrangements, of the Notes
to Condensed Consolidated Financial Statements, included in Item 1 of this
Quarterly Report on Form 10-Q, for further details on the Alpine license
agreement and collaboration and option agreement with Q32.

During the nine months ended September 30, 2021, net cash used in investing
activities of $2,957.3 million was primarily attributable to payments for
acquisitions, net of $2,843.3 million which was primarily attributable to $2.6
billion paid in relation to the Viela acquisition, net of acquired cash. In
addition, we made a milestone payment of CHF50.0 million ($56.1 million when
converted using a CHF-to-Dollar exchange rate at the date of payment of 1.1228)
under our license agreement with Roche and we made a milestone payment of $67.0
million to the former River Vision stockholders during the nine months ended
September 30, 2021. In the third quarter of 2021, we completed the purchase of a
drug product biologics manufacturing facility from EirGen for $67.9 million,
which included an upfront cash payment of $64.8 million and $3.1 million of
additional transaction costs, legal fees and liabilities assumed and we paid an
upfront cash payment of $40.0 million in relation to the global agreement with
Arrowhead in July 2021.

Financing Cash Flows

During the nine months ended September 30, 2022, net cash used in financing
activities of $187.0 million was primarily attributable to $123.9 million in
payments of employee withholding taxes relating to share-based awards, partially
offset by $37.2 million in proceeds from the issuance of ordinary shares in
connection with stock option exercises and employee share purchase plan
purchases. In addition, in the third quarter of 2022, we executed open market
share repurchases of 1.8 million of our ordinary shares for total consideration
of $113.4 million, of which $88.2 million was settled as of September 30, 2022.
Refer to Note 18, Shareholders' Equity, of the Notes to Condensed Consolidated
Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q,
for further details on our share repurchase program.

During the nine months ended September 30, 2021, net cash provided by financing
activities of $1,460.4 million was primarily attributable to an additional $1.6
billion aggregate principal amount of term loans borrowed pursuant to an
amendment to our Credit Agreement, the proceeds of which, in addition to a
portion of our existing cash on hand, was used to pay the consideration for the
Viela acquisition, partially offset by the payment of $158.1 million payment of
employee withholding taxes relating to share-based awards.


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Financial condition as of September 30, 2022 Compared to December 31, 2021


Prepaid expenses and other current assets. Prepaid expenses and other current
assets increased $83.0 million, from $357.1 million as of December 31, 2021 to
$440.1 million as of September 30, 2022. The increase was primarily due to an
increase of $83.0 million in deferred charges for taxes on intercompany profits
and an increase of $7.2 million in advance payments for inventory, partially
offset by a decrease in prepaid income taxes and an income tax receivable of
$24.4 million.

Developed technology and other intangible assets, net. Developed technology and
other intangible assets, net, decreased $202.4 million, from $2,960.1 million as
of December 31, 2021 to $2,757.7 million as of September 30, 2022, primarily
related to a decrease of $273.5 million related to amortization of developed
technology during the nine months ended September 30, 2022. This was partially
offset by $70.0 million of IPR&D reclassified to developed technology in the
second quarter of 2022 due to the European Commission issuing a legally binding
decision to grant a Centralized Marketing Authorization for UPLIZNA for the
treatment of adult patients with neuromyelitis optica spectrum disorder in the
European Union in April 2022. Refer to Note 8, 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.

In-process research and development. IPR&D decreased $70.0 million, from $880.0
million as of December 31, 2021 to $810.0 million as of September 30, 2022,
primarily related to the reclassification of $70.0 million of IPR&D relating to
UPLIZNA to developed technology in the second quarter of 2022. Refer to Note 8,
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.

Goodwill. Goodwill decreased $56.2 million, from $1,066.7 million as of December
31, 2021 to $1,010.5 million as of September 30, 2022. Our interim goodwill
impairment test in the second quarter of 2022 indicated an impairment which
represented the difference between the estimated fair value of the inflammation
reporting unit and its carrying value. As a result, we recognized an impairment
charge of $56.2 million in June 2022 representing the full amount of goodwill
for the inflammation reporting unit. Refer to Note 8, 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.

Accrued expenses and other current liabilities. Accrued expenses and other
current liabilities decreased $65.7 million, from $523.0 million as of December
31, 2021 to $457.3 million as of September 30, 2022. The decrease was primarily
due to a decrease in accrued payroll-related expenses of $35.5 million, a
decrease in accrued upfront and milestone payments of $31.1 million, a decrease
in accrued consulting and professional services of $17.0 million and a decrease
in accrued royalties of $14.4 million, partially offset by accrued expenses
related to our share repurchase program of $25.2 million. Refer to Note 18,
Shareholders' Equity, of the Notes to Condensed Consolidated Financial
Statements, included in Item 1 of this Quarterly Report on Form 10-Q for further
details.

Contractual Obligations

As of September 30, 2022, there were no material changes to our contractual
obligations as previously disclosed in Part II, Item 7 of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021, except as described in
Note 16, Commitments and Contingencies, of the Notes to Condensed Consolidated
Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.


CRITICAL ACCOUNTING POLICIES


The preparation of financial statements in accordance with U.S. GAAP principles
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities and the reported amounts of revenue and expenses.
Certain of these policies are considered critical as these most significantly
impact a company's financial condition and results of operations and require the
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain.
Actual results may vary from these estimates.

During the nine months ended September 30, 2022, there have been no significant
changes in our application of our critical accounting policies. A summary of our
critical accounting policies is included in Item 7 to our Annual Report on Form
10-K for the year ended December 31, 2021.



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