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

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

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

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

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

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

Number of registrant’s ordinary shares, nominal value $0.0001, outstanding as of ~~October 27, 2017: 163,885,803.~~

	As of			As of			As of			As of
	September 30,			December 31,			March 31,			December 31,
	2017			2016			2020			2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	624,960		$	509,055		$	754,638		$	1,076,287
Restricted cash		6,530			7,095			3,624			3,752
Accounts receivable, net		390,683			305,725			425,405			408,685
Inventories, net		86,527			174,788			68,170			53,802
Prepaid expenses and other current assets		52,925			49,619			161,903			143,577
Total current assets		1,161,625			1,046,282			1,413,740			1,686,103
Property and equipment, net		21,700			23,484			142,420			30,159
Developed technology, net		2,512,412			2,767,184			1,745,625			1,698,808
Other intangible assets, net		5,643			6,251			3,619			3,820
Goodwill		426,441			445,579			413,669			413,669
Deferred tax assets, net		5,399			911			552,722			555,165
Other assets		36,234			2,368			42,925			48,310
Total assets	$	4,169,454		$	4,292,059		$	4,314,720		$	4,436,034
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Long-term debt—current portion	$	8,500		$	7,750
Accounts payable		32,825			52,479		$	50,124		$	21,514
Accrued expenses		162,701			182,765			205,988			235,234
Accrued trade discounts and rebates		435,714			297,556			336,320			466,421
Accrued royalties—current portion		62,273			61,981
Deferred revenues—current portion		5,938			3,321
Total current liabilities		707,951			605,852			592,432			723,169
LONG-TERM LIABILITIES:
Exchangeable notes, net		310,130			298,002			356,551			351,533
Long-term debt, net, net of current		1,578,947			1,501,741
Accrued royalties, net of current		268,672			272,293
Deferred revenues, net of current		9,842			7,763
Long-term debt, net								1,001,809			1,001,308
Deferred tax liabilities, net		226,113			296,568			89,721			94,247
Other long-term liabilities		67,976			46,061			85,868			80,328
Total long-term liabilities		2,461,680			2,422,428			1,533,949			1,527,416
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 164,242,005 and 162,004,956 shares issued at September 30, 2017 and December 31, 2016, respectively, and 163,857,639 and 161,620,590 shares outstanding at September 30, 2017 and December 31, 2016, respectively		16			16
Treasury stock, 384,366 ordinary shares at September 30, 2017 and December 31, 2016		(4,585	)		(4,585	)
Ordinary shares, $0.0001 nominal value; 600,000,000 shares authorized at March 31, 2020 and December 31, 2019; 190,962,613 and 188,402,040 shares issued at March 31, 2020 and December 31, 2019, respectively, and 190,578,247 and 188,017,674 shares outstanding at March 31, 2020 and December 31, 2019, respectively								19			19
Treasury stock, 384,366 ordinary shares at March 31, 2020 and December 31, 2019								(4,585	)		(4,585	)
Additional paid-in capital		2,212,613			2,119,455			2,814,408			2,797,602
Accumulated other comprehensive loss		(2,341	)		(3,086	)		(2,230	)		(1,905	)
Accumulated deficit		(1,205,880	)		(848,021	)		(619,273	)		(605,682	)
Total shareholders’ equity		999,823			1,263,779			2,188,339			2,185,449
Total liabilities and shareholders' equity	$	4,169,454		$	4,292,059		$	4,314,720		$	4,436,034

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Net sales	$	271,646		$	208,702		$	782,012		$	670,770		$	355,909		$	280,371
Cost of goods sold		125,517			85,161			394,783			243,520			97,416			88,142
Gross profit		146,129			123,541			387,229			427,250			258,493			192,229
OPERATING EXPENSES:
Research and development		17,928			12,814			194,090			36,746			27,209			21,725
Selling, general and administrative		153,952			132,049			509,940			407,563			247,775			172,299
Total operating expenses		171,880			144,863			704,030			444,309			274,984			194,024
Operating loss		(25,751	)		(21,322	)		(316,801	)		(17,059	)		(16,491	)		(1,795	)
OTHER EXPENSE, NET:
Interest expense, net		(31,706	)		(19,066	)		(95,297	)		(57,752	)		(17,344	)		(27,530	)
Loss on debt extinguishment														—			(5,586	)
Foreign exchange gain (loss)		275			(108	)		167			(266	)		776			(61	)
Gain on divestiture		112			—			5,968			—
Loss on debt extinguishment		—			—			(533	)		—
Other income, net		280			6,879			280			6,839			442			189
Total other expense, net		(31,039	)		(12,295	)		(89,415	)		(51,179	)		(16,126	)		(32,988	)
Loss before expense (benefit) for income taxes		(56,790	)		(33,617	)		(406,216	)		(68,238	)
Expense (benefit) for income taxes		7,181			(27,747	)		(42,138	)		(31,946	)
Loss before benefit for income taxes														(32,617	)		(34,783	)
Benefit for income taxes														(19,026	)		(1,920	)
Net loss	$	(63,971	)	$	(5,870	)	$	(364,078	)	$	(36,292	)	$	(13,591	)	$	(32,863	)
Net loss per ordinary share—basic and diluted	$	(0.39	)	$	(0.04	)	$	(2.24	)	$	(0.23	)	$	(0.07	)	$	(0.19	)
Weighted average shares outstanding—basic and diluted		163,447,208			161,038,827			162,810,551			160,472,530
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
Weighted average ordinary shares outstanding—basic and diluted														190,072,112			172,789,209
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments		(209	)		(110	)		745			(196	)	$	(325	)	$	(487	)
Other comprehensive (loss) income		(209	)		(110	)		745			(196	)
Other comprehensive loss														(325	)		(487	)
Comprehensive loss	$	(64,180	)	$	(5,980	)	$	(363,333	)	$	(36,488	)	$	(13,916	)	$	(33,350	)

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

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2019		188,402,040	$	19		384,366	$	(4,585	)	$	2,797,602		$	(1,905	)	$	(605,682	)	$	2,185,449
Issuance of ordinary shares in conjunction with vesting of restricted stock units, performance stock units and stock option exercises		2,560,573		—		—		—			7,049			—			—			7,049
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(46,664	)		—			—			(46,664	)
Share-based compensation		—		—		—		—			56,421			—			—			56,421
Currency translation adjustment		—		—		—		—			—			(325	)		—			(325	)
Net loss		—		—		—		—			—			—			(13,591	)		(13,591	)
Balances at March 31, 2020		190,962,613	$	19		384,366	$	(4,585	)	$	2,814,408		$	(2,230	)	$	(619,273	)	$	2,188,339

										Additional			Accumulated Other						Total
	Ordinary Shares				Treasury Stock					Paid-in			Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount			Capital			Loss			Deficit			Equity
Balances at December 31, 2018		169,244,520	$	17		384,366	$	(4,585	)	$	2,374,966		$	(1,523	)	$	(1,178,769	)	$	1,190,106
Cumulative effect adjustments from adoption of ASU 2016-02		—		—		—		—			—			—			64			64
Issuance of ordinary shares - public offering		14,081,632		1		—		—			326,848			—			—			326,849
Issuance of ordinary shares in conjunction with vesting of restricted stock units and stock option exercises		1,804,196		—		—		—			10,042			—			—			10,042
Ordinary shares withheld for payment of employees’ withholding tax liability		—		—		—		—			(17,171	)		—			—			(17,171	)
Share-based compensation		—		—		—		—			27,548			—			—			27,548
Currency translation adjustment		—		—		—		—			—			(487	)		—			(487	)
Net loss		—		—		—		—			—			—			(32,863	)		(32,863	)
Balances at March 31, 2019		185,130,348	$	18		384,366	$	(4,585	)	$	2,722,233		$	(2,010	)	$	(1,211,568	)	$	1,504,088

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

	For the Three Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(13,591	)	$	(32,863	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense		65,741			58,891
Equity-settled share-based compensation		56,421			27,548
Amortization of debt discount and deferred financing costs		5,569			5,851
Loss on debt extinguishment		—			5,586
Deferred income taxes		(2,082	)		1,502
Foreign exchange and other adjustments		(190	)		404
Changes in operating assets and liabilities:
Accounts receivable		(16,869	)		60,769
Inventories		(14,444	)		(847	)
Prepaid expenses and other current assets		(24,953	)		111
Accounts payable		28,551			6,416
Accrued trade discounts and rebates		(129,940	)		(50,904	)
Accrued expenses		(28,087	)		(21,336	)
Deferred revenues		—			(67	)
Other non-current assets and liabilities		11,281			(4,893	)
Net cash (used in) provided by operating activities		(62,593	)		56,168
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisition		(105,200	)		—
Purchases of property and equipment		(119,004	)		(1,849	)
Change in escrow deposit for property purchase		6,000			—
Net cash used in investing activities		(218,204	)		(1,849	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares in connection with stock option exercises		7,050			10,042
Payment of employee withholding taxes relating to share-based awards		(46,664	)		(17,171	)
Net proceeds from the issuance of ordinary shares		—			327,750
Repayment of term loans		—			(300,000	)
Net cash (used in) provided by financing activities		(39,614	)		20,621
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash		(1,366	)		(518	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(321,777	)		74,422
Cash, cash equivalents and restricted cash, beginning of the period		1,080,039			962,117
Cash, cash equivalents and restricted cash, end of the period	$	758,262		$	1,036,539

For the Nine Months Ended September 30,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$
(364,078
)

$
(36,292
)
Adjustments to reconcile net loss to net cash provided by
operating activities:

Depreciation and amortization expense

213,155

154,465

Equity-settled share-based compensation

91,391

84,011

Royalty accretion

38,415

28,762

Royalty liability remeasurement

(2,944
)

—

Acquired in-process research and development expense

148,769

—

Impairment of non-current asset

22,270

—

Loss on debt extinguishment

388

—

Payments related to term loan refinancing

(3,940
)

—

Amortization of debt discount and deferred financing costs

15,863

13,469

Gain on divestiture

(2,635
)

—

Deferred income taxes

(62,989
)

(35,158
)
Foreign exchange and other adjustments

(1,521
)

268

Changes in operating assets and liabilities:

Accounts receivable

(85,161
)

(142,448
)
Inventories

83,482

23,842

Prepaid expenses and other current assets

(4,435
)

(20,838
)
Accounts payable

(18,414
)

49,695

Accrued trade discounts and rebates

139,461

83,009

Accrued expenses and accrued royalties

(59,293
)

29,582

Deferred revenues

3,770

(443
)
Other non-current assets and liabilities

(14,559
)

(1,653
)
Net cash provided by operating activities

136,995

230,271

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for acquisitions, net of cash acquired

(168,818
)

(520,405
)
Proceeds from divestiture, net of cash divested

69,072

—

Change in restricted cash

568

(3,411
)
Purchases of property and equipment

(4,031
)

(14,616
)
Net cash used in investing activities

(103,209
)

(538,432
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from term loans

847,768

—

Repayment of term loans

(770,790
)

(3,000
)
Proceeds from the issuance of ordinary shares in connection with warrant exercises

1,789

—

Proceeds from the issuance of ordinary shares through an employee stock purchase plan

3,856

3,235

Proceeds from the issuance of ordinary shares in connection with stock option exercises

1,762

3,384

Payment of employee withholding taxes related to share-based awards

(5,640
)

(5,309
)
Repurchase of ordinary shares

(992
)

—

Net cash provided by (used in) financing activities

77,753

(1,690
)
Effect of foreign exchange rate changes on cash and cash equivalents

4,366

(462
)
Net increase (decrease) in cash and cash equivalents

115,905

(310,313
)
Cash and cash equivalents, beginning of the period

509,055

859,616

Cash and cash equivalents, end of the period

$
624,960

$
549,303

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

The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2020. The December 31, ~~2016~~2019 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

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

During the three months ended March 31, 2020, the Company recorded out of period adjustments that decreased income tax benefit by $3.2 million and increased share-based compensation expense by $1.9 million to correct for expenses that should have been recorded in the year ended December 31, 2019. The ~~unaudited condensed consolidated~~Company evaluated the materiality of the adjustments on prior period financial statements ~~presented herein include~~and making the ~~accounts~~adjustments in the current period, and concluded the effect of the adjustments were immaterial to both the current and prior period financial statements.

Horizon is focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic diseases. The Company’s pipeline is purposeful: it applies scientific expertise and courage to bring clinically meaningful therapies to patients. Horizon believes science and compassion must work together to transform lives. The Company ~~and its wholly owned subsidiaries. All inter-company transactions and balances have been eliminated.~~

On ~~January 13, 2016~~,has 2 reportable segments, the ~~Company~~ ~~completed its acquisition of~~ Crealta Holdings LLC (“Crealta”) for approximately $539.7 million, including $24.9 million of cash acquired and $70.9 million paid to settle Crealta’s outstanding debt. Following completion of the acquisition, Crealta became a wholly owned subsidiary of the Company and was renamed as Horizon Pharma Rheumatology LLC.

~~On October 25, 2016, the Company completed its acquisition of Raptor Pharmaceutical Corp. (“Raptor”) in which the Company acquired~~ all of the issued and outstanding shares of Raptor’s common stock for $9.00 per share in cash. The total consideration was $860.8 million, including $24.9 million of cash acquired and $56.0 million paid to settle Raptor’s outstanding debt. Following completion of the acquisition, Raptor became a wholly owned subsidiary of the Company and converted to a limited liability company, changing its name to Horizon Pharmaceutical LLC.

On May 8, 2017, the Company acquired River Vision Development Corp. (“River Vision”) for upfront cash payments totaling $151.9 million, including $6.3 million of cash acquired, and subject to other customary purchase price adjustments for working capital, and potential future milestone and royalty payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. Following completion of the acquisition, River Vision became a wholly owned subsidiary of the Company and was renamed as Horizon Pharma Tepro, Inc.

~~On June 23, 2017, the Company sold its European subsidiary that owned the marketing rights to PROCYSBI~~^® (cysteamine bitartrate) delayed-release capsules and QUINSAIR™ (levofloxacin inhalation solution) in Europe, the Middle East and Africa (“EMEA”) regions (the “Chiesi divestiture”) to Chiesi Farmaceutici S.p.A. (“Chiesi”) for an upfront payment of $72.2 million, which reflects $3.1 million of cash divested, and subject to other customary purchase price adjustments for working capital, with additional potential milestone payments based on sales thresholds.

On June 30, 2017, the Company completed its acquisition of certain rights to interferon gamma-1b from Boehringer Ingelheim International GmbH (“Boehringer Ingelheim International”) in all territories outside of the United States, Canada and Japan, as the Company previously held marketing rights to interferon gamma-1b in these territories. Boehringer Ingelheim International commercialized interferon gamma-1b under the trade names IMUKIN^®~~, IMUKINE~~^®~~, IMMUKIN~~^® ~~and IMMUKINE~~^® ~~(“IMUKIN”) in an estimated thirty countries, primarily in Europe~~orphan segment and the Middle East. In May 2016, the Company paid Boehringer Ingelheim International €5.0 million ($5.6 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1132) for such rightsinflammation segment, and upon closing in June 2017, the Company paid Boehringer Ingelheim International an additional €19.5 million ($22.3 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1406). The Companycurrently markets ~~interferon gamma-1b as ACTIMMUNE~~^®eleven medicines in the ~~United States.~~areas of rare diseases, gout, ophthalmopathy and inflammation.

The unaudited condensed consolidated financial statements presented herein include the results of operations of the acquired Crealta and Raptor businesses from the applicable dates of acquisition. See Note 3 for further details of acquisitions and divestitures.

~~Beginning~~Effective in the first quarter of ~~2017,~~2020, the Company ~~modified~~(i) reorganized its ~~presentation~~commercial operations and moved responsibility for and reporting of ~~certain operating expenses. Previously,~~RAYOS® to the ~~Company presented “general~~inflammation segment and ~~administrative” expenses~~(ii) renamed the orphan and rheumatology segment the orphan segment. Net sales generated by TEPEZZA™, which was approved on January 21, 2020, are reported as ~~one line item in its condensed consolidated statement~~part of ~~comprehensive loss, and “selling and marketing” expenses as another. For current-period presentation and prior-period comparisons,~~ the ~~Company now combines these two line items into one line item, titled “selling, general and administrative” expenses.~~ renamed orphan segment.

~~The Company is a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring~~ ~~and commercializing differentiated and accessible medicines that address unmet medical needs. The Company markets eleven medicines through its orphan, rheumatology and primary care~~ ~~business units.~~

~~The~~As of March 31, 2020, the Company’s marketed medicines ~~are:~~consisted of the following:

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

~~Effective~~In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments and became effective for the Company as of January 1, ~~2017,~~ ~~the Company elected to early adopt~~2020. The adoption of ASU ~~No.~~ ~~2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business~~ ~~(“ASU No. 2017-01”). The amendments in~~ ~~ASU No.~~ 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ~~The adoption~~2016-13 did not have a material impact ~~on the Company’s condensed consolidated financial statements and related disclosures.~~

~~Effective January 1, 2017, the Company adopted ASU No. 2016-09,~~ ~~Improvements~~ to ~~Employee Share-Based Payment Accounting~~ (“ASU No. 2016-09”). The update requires excess tax benefits and tax deficiencies, which arise due to differences between the measure of compensation expense and the amount deductible for tax purposes, to be recorded directly through earnings as a component of income tax expense. Previously, these differences were generally recorded in additional paid-in capital and thus had no impact on net income. The change in treatment of excess tax benefits and tax deficiencies also impacts the computation of diluted earnings per share, and the cash flows associated with those items are classified as operating activities on the condensed consolidated statements of cash flows. Additionally, ASU No. 2016-09 permits entities to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as allowed under previous standards, or recognized when they occur. As a result of the adoption, $7.2 million of excess tax benefits that had not previously been recognized, as the related tax deduction had not reduced current taxes payable, were recorded on a modified retrospective basis through a cumulative effect adjustment to its accumulated deficit as of January 1, 2017. During the three and nine months ended September 30, 2017, the Company recognized an excess tax deficiency of $0.5 million and $0.9 million, respectively. The Company elected not to change its policy on accounting for forfeitures and continues to estimate a requisite forfeiture rate. Additional amendments to the accounting for income taxes and minimum statutory withholding requirements had no impact on the Company’s results of operations and related disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting~~ (“ASU No. 2017-09”). The amendment amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company does not expect the adoption of ASU No. 2017-09 to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

~~In February 2017, the FASB issued ASU No. 2017-05, (“Subtopic 610-20~~”),~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets~~ (“ASU No. 2017-05”) which provides clarification regarding the scope of the asset derecognition guidance and accounting for partial sales of nonfinancial assets. The update defines an in-substance nonfinancial asset and clarifies that an entity should identify each distinct nonfinancial asset or in-substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. All businesses and nonprofit activities within the scope of Subtopic 610-20 are excluded from the amendments in this update. This guidance will be effective for annual and interim periods beginning after December 15, 2017 and is required to be applied at the same time as ASU No. 2014-09 (described below) is applied. The guidance can be applied using one of two methods: retrospectively to each prior reporting period presented or modified retrospectively with the cumulative effect of initially applying the guidance recognized against retained earnings as of the beginning of the fiscal year of adoption. ~~The Company does not expect the adoption of ASU No. 2017-05 to have a material impact~~ ~~on the Company’s~~ ~~condensed~~ ~~consolidated financial statements and related disclosures.~~

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ (“ASU No. 2017-04”), to eliminate the second step of the goodwill impairment test. ASU No. 2017-04 requires an entity to measure a goodwill impairment loss as the amount by which the carrying value of a reporting unit exceeds its fair value. Additionally, an entity should include the income tax effects from any tax deductible goodwill on the carrying value of the reporting unit when measuring a goodwill impairment loss, if applicable. ASU No. 2017-04 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of ASU No. 2017-04 to have a material impact ~~on the Company’s~~ ~~condensed~~ ~~consolidated financial statements and related disclosures.~~

~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ (“ASU No. 2016-18”), which addresses diversity in practice related to the classification and presentation of changes in restricted cash on the statement of cash flows. ASU No. 2016-18 will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU No. 2016-18 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. ~~The Company does not expect the adoption of~~ ~~ASU No. 2016-18~~ ~~to have a material impact on the Company’s condensed consolidated financial statements and related disclosures~~.

~~In October 2016,~~ ~~the FASB issued ASU No.~~ ~~2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~ (“ASU No. 2016-16”). ASU No. 2016-16 was issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. ASU No. 2016-16 would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and does not require new disclosures. ASU No. 2016-16 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted and the adoption of ASU No. 2016-16 should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently in the process of evaluating the impact of adoption of ASU No. 2016-16 on its condensed consolidated financial statements and related disclosures.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (“ASU No. 2016-15”). The amendments in this ASU provide guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. The amendments in ASU No. 2016-15 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of ASU No. 2016-15 to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In ~~February 2016,~~December 2019, the FASB issued ~~ASU~~Accounting Standards Update No. ~~2016-02,~~ ~~Leases~~2019-12, Income Taxes (Topic ~~842)~~740): Simplification and reduce the cost of accounting for income taxes (“ASU ~~No. 2016-02”~~2019-12”). Under ASU No. 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. ASU No. 2016-02, which is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early adoption permitted. At adoption, this update will be applied using a modified retrospective approach.the Company as of January 1, 2021. The Company is currently ~~in the process of~~ evaluating the impact of ~~adoption of~~ ASU ~~No. 2016-02 on its condensed consolidated financial statements and related disclosures.~~

~~In May 2014, the~~ ~~FASB issued ASU~~ ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (“ASU No. 2014-09”). The new standard aims to achieve a consistent application of revenue recognition within the United States, resulting in a single revenue model to be applied by reporting companies under GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. In March 2016, April 2016, December 2016 and September 2017, the FASB issued ASU No. 2016-08, ~~Revenue From Contracts with Customers (Topic 606): Principal Versus Agent Considerations, ASU No. 2016-10,~~ ~~Revenue From Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,~~ ~~ASU No. 2016-20, Technical Corrections and Improvements to Topic 606,Revenue From Contracts with Customers, and ASU No. 2017-13,~~ ~~Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840) and Leases (Topic 842),~~ respectively, which further clarify the implementation guidance on principal versus agent considerations contained in ASU No. 2014-09. In May 2016, the FASB issued ASU No. 2016-12, narrow-scope improvements and practical expedients which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition. These standards will be effective for the Company beginning in the first quarter of 2018. The Company expects to elect the modified retrospective method and expects to identify similar performance obligations under ASU No. 2014-09 as compared with deliverables and separate units of account previously identified. The Company has made substantial progress in its review of the new standard and will complete its assessment by December 31, 2017. Based on its review of current customer contracts, the Company does not expect the implementation of this guidance to have a material impact on its consolidated financial statements as the timing of revenue recognition for product sales is not expected to significantly change, which is the Company’s primary revenue stream. Certain of the Company’s contracts for sales outside the United States include contingent amounts of variable consideration that the Company was precluded from recognizing because of the requirement for amounts to be “fixed or determinable”. The company expects that the new standard will require a cumulative-effect adjustment of certain deferred revenues that were originally expected to be recognized in the future. Under the new standard, on January 1, 2018 the Company currently expects to reclassify approximately $10.0 million of deferred revenue directly to retained earnings, resulting in a decrease to the Company’s accumulated deficit. 2019-12.

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

The Company's significant accounting policies have not changed from those previously described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, with the exception of the change to the accounting policy related to property and equipment due to the purchase of land and buildings as described below.

Land is stated at cost. Property and equipment, other than land, are stated at cost less accumulated depreciation. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets for financial reporting purposes and an accelerated method for income tax reporting purposes. Upon retirement or sale of an asset, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Repair and maintenance costs are charged to expenses as incurred and improvements are capitalized.

Leasehold improvements are amortized on a straight-line basis over the term of the applicable lease, or the useful life of the assets, whichever is shorter.

Depreciation and amortization periods for the Company’s property and equipment are as follows:

The Company capitalizes software development costs associated with internal use software, including external direct costs of materials and services and payroll costs for employees devoting time to a software project. Costs incurred during the preliminary project stage, as well as costs for maintenance and training, are expensed as incurred.

Software includes internal-use software acquired and modified to meet the Company’s internal requirements. Amortization commences when the software is ready for its intended use.

The following table presents basic and diluted net loss per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in thousands, except share and per share data):

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

The computation of diluted net loss per share for the three months ended March 31, 2020 excluded ~~18.7 million and 18.2~~9.3 million shares subject to equity awards and ~~warrants for the three and nine months ended September 30, 2017, respectively, and 11.6 million and 14.2~~14.0 million shares ~~subject~~(based on the if-converted method) related to ~~equity awards for the three and nine months ended September 30, 2016, respectively,~~its 2.50% Exchangeable Senior Notes due 2022 (the “Exchangeable Senior Notes”) because their inclusion would have had an anti-dilutive effect on diluted net loss per share.

The computation of diluted net loss per share for the three months ended March 31, 2019, excluded 8.2 million shares subject to equity awards because their inclusion would have had an anti-dilutive effect on diluted net loss per share.

~~The~~During the three months ended March 31, 2019, the potentially dilutive impact of the ~~March 2015 private placement of $400.0 million aggregate principal amount of 2.50%~~ Exchangeable Senior Notes ~~due 2022 (the “Exchangeable Senior Notes”) by Horizon Pharma Investment Limited (“Horizon Investment”), a wholly owned subsidiary of the Company, is~~was determined using a method similar to the treasury stock method. Under this method, no numerator or denominator adjustments ~~arise~~arose from the principal and interest components of the Exchangeable Senior Notes because the Company ~~has~~had the intent, at that time, and ability to settle the Exchangeable Senior Notes’ principal and interest in cash. Instead, the Company iswas required to increase the diluted net ~~(loss) income~~loss per share denominator by the variable number of shares that would be issued upon conversion if it settled the conversion spread obligation with shares. For diluted net ~~(loss) income~~loss per share purposes, the conversion spread obligation iswas calculated based on whether the average market price of the Company’s ordinary shares over the reporting period iswas in excess of the exchange price of the Exchangeable Senior Notes. There was no calculated spread added to the denominator for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019. Beginning in the fourth quarter of 2019, with the ordinary share price significantly above the $28.66 exchange price, the Company decided that it no longer had the intent to settle the notes for cash and, ~~2016.~~as a result, began to prospectively apply the if-converted method to the Exchangeable Senior Notes when determining the diluted net income (loss) per share.

NOTE ~~3 –DIVESTITURES,~~4 – ACQUISITIONS, DIVESTITURES AND OTHER ARRANGEMENTS

~~Divestiture~~Sale of ~~PROCYSBI and QUINSAIR~~MIGERGOT rights ~~in EMEA Regions~~

On June ~~23, 2017,~~28, 2019, the Company ~~completed the Chiesi divestiture~~sold its rights to MIGERGOT to Cosette Pharmaceuticals, Inc., for ~~an upfront payment~~$6.0 million and total potential contingent consideration payments of ~~$72.2~~$4.0 million ~~which reflects $3.1 million of cash divested, and subject to other customary purchase price adjustments for working capital, with additional potential milestone payments based on sales thresholds.~~(the “MIGERGOT transaction”).

Pursuant to ASC 805 (as amended by ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”)), the Company accounted for the ~~Chiesi divestiture~~MIGERGOT transaction as a sale of assets, specifically a ~~business. The Company determined that the~~ sale of ~~the business~~intellectual property rights, and ~~its assets in connection with the Chiesi divestiture did not constitute~~ a strategic shift and that it did not and will not have a major effect on its operations and financial results. Accordingly, the operations associated with the Chiesi divestiture are not reported in discontinued operations.sale of inventory.

The ~~gain~~loss on ~~divestiture~~sale of assets recorded to the consolidated statement of comprehensive income (loss) during the year ended December 31, 2019, was determined as follows (in thousands):

Under the terms of its agreement with Chiesi, the Company will continue to pay third parties for the royalties on sales of PROCYSBI and QUINSAIR in EMEA, and Chiesi will reimburse the Company for those royalties. At the date of divestiture, the Company recorded an asset of $27.1 million to “other assets”, which represented the estimated amounts that are expected to be reimbursed from Chiesi for the PROCYSBI and QUINSAIR royalties. These estimated royalties are accrued in “accrued expenses” and “other long-term liabilities”.

~~Transaction and other costs primarily relate to professional and license fees attributable to the divestiture.~~

On May 8, 2017, the Company acquired 100% of the equity interests in River Vision Development Corp. (“River Vision”) for upfront cash payments totaling ~~$151.9~~approximately $150.3 million, including cash acquired of $6.3 million, ~~of cash acquired, and subject to other customary purchase price adjustments for working capital,~~with additional potential future milestone and royalty payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. Pursuant to ~~ASC 805 (as amended by~~ ASU No. ~~2017-01),~~2017-01, the Company accounted for the River Vision acquisition as the purchase of an ~~in-process~~in-process research and development ~~(“IPR&D”)~~ asset (teprotumumab, now known as TEPEZZA) and, pursuant to ASC Topic 730, Research and Development, recorded the purchase price as research and development expense during the ~~nine months~~year ended ~~September 30,~~December 31, 2017. Further, the Company recognized approximately ~~$13.1~~$32.4 million of federal net operating losses, ~~$2.8~~$2.2 million of state net operating losses and ~~$5.8~~$9.5 million of federal tax credits. The acquired tax attributes were set up as deferred tax assets which were further netted within the net deferred tax liabilities of the U.S. group, offset by a deferred credit recorded in long-term liabilities.

~~Acquisition~~Under the agreement for the acquisition of ~~Additional Rights to Interferon Gamma-1b~~

~~On June 30, 2017,~~River Vision, the Company ~~completed its acquisition~~agreed to pay up to $325.0 million upon the attainment of ~~certain rights~~various milestones, composed of $100.0 million related to ~~interferon gamma-1b from Boehringer Ingelheim International in all territories outside~~U.S. Food and Drug Administration (“FDA”) approval and $225.0 million related to net sales thresholds for TEPEZZA. The agreement also includes a royalty payment of 3 percent of the ~~United States, Canada~~portion of annual worldwide net sales exceeding $300.0 million (if any). The Company made the milestone payment of $100.0 million related to FDA approval during the first quarter of 2020 which is now capitalized as a finite-lived intangible asset representing the developed technology for TEPEZZA.

Additionally, under the Company’s license agreement with F. Hoffmann-La Roche Ltd and ~~Japan,~~Hoffmann-La Roche Inc. (together referred to as the Company previously held marketing rights to interferon gamma-1b in these territories. Boehringer Ingelheim International commercialized interferon gamma-1b as IMUKIN in an estimated thirty countries, ~~primarily in Europe and the Middle East. In May 2016~~“Roche”), the Company ~~paid Boehringer Ingelheim International €5.0~~made a milestone payment of CHF5.0 million ($~~5.6~~5.2 million when converted using a ~~Euro-to-Dollar~~CHF-to-Dollar exchange rate at the date of payment of 1.1132) for such rights and upon closing in June 2017, the Company paid Boehringer Ingelheim International an additional €19.5 million ($22.3 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1406). The Company currently markets interferon gamma-1b as ACTIMMUNE in the United States. The €5.0 million upfront amount paid in May 2016 had initially been included in “other assets” in the Company’s condensed consolidated balance sheet. Following the discontinuation of the development of ACTIMMUNE in Friedreich’s ataxia (“FA”) in December 2016, the Company recorded an impairment charge of €5.0 million ($5.3 million when converted using a Euro-to-Dollar exchange rate at date of impairment of 1.052) to fully write off the asset in its condensed consolidated statements of comprehensive loss1.0382), during the ~~year ended December 31, 2016 as projections for future net sales~~first quarter of IMUKIN in these territories did not exceed the related costs. Upon closing, during the nine months ended September 30, 2017, the Company recorded the additional €19.5 million payment ($22.3 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1406) as a “selling, general and administrative” expense in its condensed consolidated statement of comprehensive loss.

~~On October 25, 2016, the Company completed its acquisition of Raptor in~~2020 which the Company acquired all of the issued and outstanding shares of Raptor’s common stock for $9.00 per share. The acquisition added two medicines, PROCYSBI and QUINSAIR, to the Company’s medicine portfolio. Through the acquisition, the Company leveraged and expanded the infrastructure of its orphan disease business. Following completion of the acquisition, Raptor became a wholly owned subsidiary of the Company and converted to a limited liability company, changing its name to Horizon Pharmaceutical LLC. The Company financed the transaction through $300.0 million of aggregate principal amount of 8.75% Senior Notes due 2024 (the “2024 Senior Notes”), $375.0 million aggregate principal amount of loans pursuant to an amendment to the Company’s existing credit agreement, as described in Note 14, and cash on hand. The total consideration for the acquisition was approximately $860.8 million, including $24.9 million of cash acquired and $56.0 million paid to settle Raptor’s outstanding debt, and was composed of the following (in thousands):

During the three and nine months ended September 30, 2017, the Company incurred $3.1 million and $14.6 million, respectively, in Raptor acquisition-related costs including advisory, legal, accounting, severance, retention bonuses and other professional and consulting fees. During the three and nine months ended September 30, 2017, $3.0 million and $13.8 million, respectively, were accounted for as “selling, general and administrative” expenses, $0.1 million and $0.7 million, respectively, were accounted for as “research and development” expenses, and zero and $0.1 million, were accounted for as “cost of goods sold”, respectively, in the condensed consolidated statements of comprehensive loss. During the three and nine months ended September 30, 2016, the Company incurred $4.2 million in Raptor acquisition-related costs including advisory, legal and other professional and consulting costs which were accounted for as “selling, general and administrative” expenses in the condensed consolidated statements of comprehensive loss.

~~Pursuant to ASC 805, the Company accounted for the Raptor acquisition~~also capitalized as a ~~business combination using the acquisition method of accounting. Identifiable assets and liabilities of Raptor, including identifiable~~finite-lived intangible assets, were recorded based on their estimated fair values as of the date of the closing of the acquisition. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. Significant judgment was required in determining the estimated fair values of developed technology intangible assets, inventories and certain other assets and liabilities. Such preliminary valuation required estimates and assumptions including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. The Company’s management believes the fair values recognized for the assets acquired and the liabilities assumed are based on reasonable estimates and assumptions. The Company is currently completing its evaluation of information, assumptions and valuation methodologies it used in its preliminary fair value of the purchase price consideration. The purchase price allocation is preliminary pending final determination of the fair values of certain assets and liabilities. During the nine months ended September 30, 2017, the Company recorded measurement period adjustments related to accrued expenses, accrued trade discounts and rebates and deferred tax liabilities as a result of new information regarding facts existing at the acquisition date, which resulted in a net decrease to goodwill of $2.9 million. As of September 30, 2017, certain items related to current and deferred taxes have not been finalized and may be subject to change as additional information is received. The finalization of these matters and any additional information received that existed as of the acquisition date may result in changes to the underlying assets, liabilities and goodwill. These changes may be material. The final determination of these fair values will be completed no later than during the fourth quarter of 2017.

The following table summarizes the preliminary fair values assigned to the assets acquired and the liabilities assumed by the Company, along with the resulting goodwill before and after the measurement period adjustment (in thousands):

Inventories acquired included raw materials, work-in-process and finished goods for PROCYSBI and QUINSAIR. Inventories were recorded at their preliminary estimated fair values. The fair value of finished goods has been determined based on the estimated selling price, net of selling costs and a margin on the selling costs. The fair value of work-in-process has been determined based on estimated selling price, net of selling costs and costs to complete the manufacturing, and a margin on the selling and manufacturing costs. The fair value of raw materials was estimated to equal the replacement cost. A step-up in the value of inventory of $67.0 million was recorded in connection with the acquisition. During the three and nine months ended September 30, 2017, the Company recorded inventory step-up expense of zero and $44.0 million, respectively, related to PROCYSBI and QUINSAIR, of which $3.2 million was recorded to “gain on divestiture” in the condensed consolidated statement of comprehensive loss during the nine months ended September 30, 2017.

~~Other tangible assets and liabilities were valued at their respective carrying amounts as management believes that these amounts approximated their acquisition date fair values.~~

Other non-current liability of $25.5 million represents the fair value of an assumed contingent liability, arising from contingent payments associated with development, regulatory and commercial milestones following Raptor’s acquisition of QUINSAIR.

~~Identifiable intangible assets and liabilities acquired include developed technology and contingent royalties. The preliminary estimated fair values of~~asset representing the developed technology ~~and contingent royalties represent preliminary valuations performed with the assistance of an independent appraisal firm based~~for TEPEZZA.

Refer to Note 15 for further detail on ~~management’s estimates, forecasted financial information and reasonable and supportable assumptions.~~TEPEZZA milestone payments.

Developed technology intangible assets reflect the estimated fair value of Raptor’s rights to PROCYSBI. The preliminary fair value of developed technology was determined using an income approach. The income approach explicitly recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs for Raptor’s medicines. Indications of value were developed by discounting these benefits to their acquisition-date worth at a discount rate of 12.5%. The fair value of the PROCYSBI developed technology was capitalized as of the Raptor acquisition date and is subsequently being amortized over approximately thirteen years and nine years for the U.S. rights and ex-U.S. rights, respectively, which are the periods in which over 90% of the estimated cash flows are expected to be realized. The Company assigned no preliminary fair value to QUINSAIR developed technology as projections of future net sales do not exceed the related costs. See Note 7 for details of developed technology sold in the Chiesi divestiture.

The Company has assigned a preliminary fair value of $102.0 million to a contingent liability for royalties potentially payable under previously existing agreements related to PROCYSBI. The royalties for PROCYSBI are payable under the terms of an amended and restated license agreement with The Regents of the University of California, San Diego (“UCSD”). See Note 16 for details of the percentages of royalties payable under this agreement. The initial fair value of this liability was determined using a discounted cash flow analysis incorporating the estimated future cash flows of royalty payments resulting from future sales. The discount rate used was the same as for the fair value of the developed technology.

Deferred tax assets and liabilities arise from acquisition accounting adjustments where book values of certain assets and liabilities differ from their tax bases. Deferred tax assets and liabilities are recorded at the currently enacted rates which will be in effect at the time when the temporary differences are expected to reverse in the country where the underlying assets and liabilities are located. Raptor’s developed technology as of the acquisition date was located primarily in the United States where an estimated U.S. tax rate of 36.6% is being utilized and a significant deferred tax liability is recorded. Goodwill represents the excess of the preliminary acquisition consideration over the estimated fair value of net assets acquired and was recorded in the condensed consolidated balance sheet as of the acquisition date. The Company does not expect any portion of this goodwill to be deductible for tax purposes.

On January 13, 2016, the Company completed its acquisition of all the membership interests of Crealta. The acquisition added two medicines, KRYSTEXXA and MIGERGOT, to the Company’s medicine portfolio. The Crealta acquisition further diversified the Company’s portfolio of medicines and aligned with its focus of acquiring value-enhancing, clinically differentiated, long-life medicines that treat orphan diseases. The total consideration for the acquisition was approximately $539.7 million, including $24.9 million of cash acquired and $70.9 million paid to settle Crealta’s outstanding debt, and was composed of the following (in thousands):

During the three and nine months ended September 30, 2017, the Company incurred $0.1 million and $0.6 million, respectively, in Crealta acquisition-related costs including legal, retention bonuses and other professional and consulting fees, which were accounted for as “selling, general and administrative” expenses. During the three and nine months ended September 30, 2016, the Company incurred $0.4 million and $12.1 million, respectively, in Crealta acquisition-related costs including advisory, legal, accounting, valuation, severance, retention bonuses and other professional and consulting fees, of which $0.5 million and $11.5 million were accounted for as “selling, general and administrative”, respectively, a net expense reduction of $0.1 million and a net expense of $0.2 million were accounted for as “research and development”, respectively, and zero and $0.4 million were accounted for as “costs of goods sold”, respectively, in the condensed consolidated statements of comprehensive loss.

Pursuant to ASC 805, the Company accounted for the Crealta acquisition as a business combination using the acquisition method of accounting. Identifiable assets and liabilities of Crealta, including identifiable intangible assets, were recorded based on their estimated fair values as of the date of the closing of the acquisition. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. Significant judgment was required in determining the estimated fair values of developed technology intangible assets, inventories and certain other assets and liabilities. Such valuation required estimates and assumptions including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. The Company’s management believes the fair values recognized for the assets acquired and the liabilities assumed were based on reasonable estimates and assumptions.

~~The following table summarizes the final fair values assigned to the assets acquired and the liabilities assumed by the Company (in thousands):~~

Inventories acquired included raw materials, work-in-process and finished goods for KRYSTEXXA and MIGERGOT. Inventories were recorded at their estimated fair values. The fair value of finished goods has been determined based on the estimated selling price, net of selling costs and a margin on the selling costs. The fair value of work-in-process has been determined based on estimated selling price, net of selling costs and costs to complete the manufacturing, and a margin on the selling and manufacturing costs. The fair value of raw materials was estimated to equal the replacement cost. A step-up in the value of inventory of $144.3 million was recorded in connection with the acquisition. During the three and nine months ended September 30, 2017, the Company recorded inventory step-up expense of $21.2 million and $54.9 million, respectively, related to KRYSTEXXA.

~~Other tangible assets and liabilities were valued at their respective carrying amounts as management believes that these amounts approximated their acquisition date fair values.~~

Other non-current liabilities represented an assumed $6.9 million probable contingent liability which was released to “other income (expense)” in the condensed consolidated statement of comprehensive loss during the year ended December 31, 2016.

Identifiable intangible assets and liabilities acquired include developed technology and contingent royalties. The estimated fair values of the developed technology and contingent royalties represent valuations performed with the assistance of an independent appraisal firm based on management’s estimates, forecasted financial information and reasonable and supportable assumptions.

Developed technology intangible assets reflect the estimated fair value of Crealta’s rights to KRYSTEXXA and MIGERGOT. The fair value of developed technology was determined using an income approach. The income approach explicitly recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs for Crealta’s medicines. Indications of value were developed by discounting these benefits to their acquisition-date worth at a discount rate of 27% for KRYSTEXXA and 23% for MIGERGOT. The fair value of the KRYSTEXXA and MIGERGOT developed technologies were capitalized as of the Crealta acquisition date and are subsequently being amortized over approximately twelve and ten years, respectively, which are the periods in which over 90% of the estimated cash flows are expected to be realized.

The Company has assigned a fair value of $51.3 million to a contingent liability for royalties potentially payable under previously existing agreements related to KRYSTEXXA and MIGERGOT. The royalties for KRYSTEXXA are payable under the terms of a license agreement with Duke University (“Duke”) and Mountain View Pharmaceuticals (“MVP”). See Note 16 for details of the percentages of royalties payable under such agreements. The initial fair value of this liability was determined using a discounted cash flow analysis incorporating the estimated future cash flows of royalty payments resulting from future sales. The discount rate used was the same as for the fair value of the developed technology.

~~The deferred tax liability recorded represents deferred tax liabilities assumed as part of the acquisition, net of deferred tax assets, related to net operating tax loss carryforwards of Crealta.~~

Goodwill represents the excess of the acquisition consideration over the estimated fair value of net assets acquired and was recorded in the condensed consolidated balance sheet as of the acquisition date. The Company does not expect any portion of this goodwill to be deductible for tax purposes.

~~On November 8, 2016,~~3, 2019, the Company entered into a collaboration ~~and option~~ agreement with HemoShear Therapeutics, LLC (“HemoShear”), a ~~privately held life-science entity.~~ biotechnology company, to discover novel therapeutic targets for gout. The collaboration provides the Company with an opportunity to address unmet treatment needs for people with gout by evaluating new targets for the control of serum uric acid levels. Under the terms of the agreement, the ~~privately held life-science entity will conduct certain research and pre-clinical and clinical~~Company paid HemoShear an upfront cash payment of $2.0 million with additional potential future milestone payments upon commencement of new stages of development, ~~activities. Upon execution of~~contingent on the ~~agreement,~~Company’s approval at each stage. In June 2019, the Company ~~paid $0.1~~incurred a $4.0 million ~~for the option to acquire certain assets of the privately held life-science entity for $25.0 million,~~progress payment, which is exercisable on specified key dates. Under the collaboration and option agreement, the Company is required to pay up to $9.8 million upon the attainment of various milestones, primarily to fund clinical development costs for the medicine candidate. The Company paid $0.2 million in the fourth quarter of 2016, $0.9 million in the first quarter of 2017 and $1.5 million in the third quarter of 2017 related to milestones. The initial upfront amount paid of $0.1 million has been included in “other assets” in the Company’s condensed consolidated balance sheet as of December 31, 2016 and September 30, 2017. The aggregate $1.1 million amountwas subsequently paid in the fourth quarter of 2016 and the first quarter of 2017 were recorded as “research and development” expenses in the condensed consolidated statement of comprehensive loss during the year ended December 31, 2016, and the $1.5 million paid in the third quarter of 2017 was recorded as “research and development expense” during the three months ended September 30, 2017. The Company has determined that the privately held life-science entity is a variable interest entity (“VIE”) as it does not have enough equity to finance its activities without additional financial support. As the Company does not have the power to direct the activities of the VIE that most significantly affect its economic performance, it is not the primary beneficiary of, and does not consolidate the financial results of the VIE. The Company will reassess the appropriate accounting treatment for this arrangement throughout the life of the agreement and modify these accounting conclusions accordingly.

The table below represents the condensed consolidated financial information for the Company for the nine months ended September 30, 2016 on a pro forma basis, assuming that the Crealta and Raptor acquisitions occurred as of January 1, 2016. The historical financial information has been adjusted to give effect to pro forma items that are directly attributable to the Crealta and Raptor acquisitions, and are expected to have a continuing impact on the consolidated results. These items include, among others, adjustments to record the amortization of definite-lived intangible assets, interest expense, debt discount and deferred financing costs associated with the debt in connection with the acquisitions.

Additionally, the following table sets forth financial information and has been compiled from historical financial statements and other information, but is not necessarily indicative of the results that actually would have been achieved had the transactions occurred on the dates indicated or that may be achieved in the future (in thousands):

The Company’s condensed consolidated statements of comprehensive loss for the nine months ended September 30, 2016 include KRYSTEXXA and MIGERGOT net sales as a result of the acquisition of Crealta of $61.6 million and $3.2 million, respectively.

Crealta and Raptor have been integrated into the Company’s business and as a result of these integration efforts, the Company cannot distinguish between these operations and those of the Company’s legacy business.July 2019.

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

The components of inventories as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

Because inventory step-up expense is acquisition-related, will not continue indefinitely and has a significant effect on the Company’s gross profit, gross margin percentage and net income (loss) for all affected periods, the Company discloses balance sheet and income statement amounts related to inventory step-up within the notes to the condensed consolidated financial statements.

Finished goods at September 30, 2017 included $40.4 million of stepped-up KRYSTEXXA inventory. Finished goods at December 31, 2016 included $27.7 million of stepped-up KRYSTEXXA inventory. Work-in-process at December 31, 2016 included $67.6 million of stepped-up KRYSTEXXA inventory.

During the three and nine months ended September 30, 2017 the Company recorded $21.2 million and $54.9 million, respectively, of KRYSTEXXA inventory step-up expense. During the three and nine months ended September 30, 2016, the Company recorded $11.3 million and $27.9 million, respectively, of KRYSTEXXA and MIGERGOT inventory step-up expense.

The Company expects that the KRYSTEXXA inventory step-up will be fully expensed by the end of the first quarter of 2018. Following that period, the Company expects the costs of goods sold related to KRYSTEXXA to decrease significantly to levels consistent with the historical cost of goods sold of Crealta.

During the three and nine months ended September 30, 2017, the Company recorded zero and $40.8 million, respectively, of PROCYSBI and QUINSAIR inventory step-up expense. In addition, during the nine months ended September 30, 2017, the Company recorded $3.2 million of inventory step-up expense to “gain on divestiture” relating to PROCYSBI and QUINSAIR in connection with the Chiesi divestiture in June 2017. Finished goods at December 31, 2016 included $38.1 million of stepped-up PROCYSBI and QUINSAIR inventory. Work-in-process at December 31, 2016 included $5.9 million of stepped-up PROCYSBI and QUINSAIR inventory.

Prepaid expenses and other current assets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

Prepaid income taxes and income tax receivable as of March 31, 2020, includes a benefit for income taxes recognized during the three months ended March 31, 2020. This benefit primarily arises due to the mix of pre-tax income and losses incurred in various tax jurisdictions.

Advance payments for inventory as of March 31, 2020 and December 31, 2019, primarily represented payments made to the manufacturer of TEPEZZA drug substance.

Property and equipment as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

The Company capitalizes development costs associated with internal use software, including external direct costs of materials and services and payroll costs for employees devoting time to a software project. Costs incurred during the preliminary project stage, as well as costs for maintenance and training, are expensed as incurred.

Software implementation in process as of December 31, 2016 was related to new enterprise resource planning software being implemented by the Company. The software was being implemented on a phased basis starting January 2016 and depreciation was not recorded on capitalized costs relating to a phase which had not yet entered service. Once a particular phase of the project entered service, associated capitalized costs were moved from “software implementation in process” to “software” in the table above, and depreciation commenced.

Depreciation expense was ~~$1.5~~$7.2 million and ~~$1.2~~$1.5 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively,~~2019, respectively. The increase in depreciation expense primarily relates to the reduction in the useful lives of leasehold improvements relating to the Company’s Lake Forest office.

In February 2020, the Company purchased a 3-building campus in Deerfield, Illinois for total consideration and ~~was $5.0 million~~directly attributable transaction costs of $118.5 million. The Deerfield campus totals 70 acres and ~~$3.3 million~~consists of approximately 650,000 square feet of office space. The Company expects to move to the Deerfield campus in the second half of 2020 and market its Lake Forest office for ~~the nine months ended September 30, 2017 and 2016, respectively.~~ sub-lease.

The gross carrying amount of goodwill as of ~~September 30, 2017~~March 31, 2020 and December 31, 2019 was ~~as follows (in thousands):~~$413.7 million.

~~During~~Effective in the ~~nine months ended September 30, 2017, in connection with the Chiesi divestiture,~~first quarter of 2020, the Company ~~recorded~~(i) reorganized its commercial operations and moved responsibility for and reporting of RAYOS to the inflammation segment and (ii) renamed the orphan and rheumatology segment the orphan segment. As of March 31, 2020, this resulted in a ~~reduction~~$3.2 million increase in the Company’s allocation of goodwill to its inflammation segment and a corresponding decrease in the goodwill ~~of $16.3 million.~~allocated to the orphan segment. The Company allocated goodwill to its new reporting units using a relative fair value approach. In addition, the Company ~~recorded measurement period adjustments to~~completed an assessment of any potential goodwill ~~of $2.9 million related~~impairment for all reporting units immediately prior to the ~~Raptor acquisition during~~allocation and determined that no impairment existed.

The table below presents goodwill for the ~~nine months ended September 30, 2017.~~Company’s reportable segments as of March 31, 2020 (in thousands):

~~During the year ended December 31, 2016, the Company recognized goodwill of $9.9 million and $189.1 million in connection with the Crealta and Raptor acquisitions, respectively.~~

As of ~~September 30, 2017,~~March 31, 2020, there were no0 accumulated goodwill impairment losses. ~~See Note 3 for further details of goodwill acquired and disposed of in business acquisitions and divestitures.~~

As of ~~September 30, 2017,~~March 31, 2020, the Company’s finite-lived intangible assets consisted of developed technology related to ACTIMMUNE, BUPHENYL, KRYSTEXXA, ~~MIGERGOT,~~ PENNSAID 2%, PROCYSBI, RAVICTI, RAYOS and ~~VIMOVO in the United States, and AMMONAPS, BUPHENYL, LODOTRA and PROCYSBI outside the United States,~~TEPEZZA as well as customer relationships for ACTIMMUNE. The intangible asset related to VIMOVO developed technology was fully amortized as of December 31, 2019.

During the three months ended March 31, 2020, in connection with the acquisition of River Vision, the Company capitalized payments of $105.2 million related to TEPEZZA developed technology. See Note 4 for further details.

During the year ended December 31, ~~2016,~~2019, in connection with the ~~acquisition of Crealta,~~MIGERGOT transaction, the Company ~~capitalized $402.2 million of developed technology related to KRYSTEXXA and $26.0 million of developed technology related to MIGERGOT.~~

~~During~~wrote off the ~~year ended December 31, 2016, in connection with the acquisition of Raptor, the Company capitalized $946.0 million of developed technology related to PROCYSBI.~~

~~During the nine months ended September 30, 2017, in connection with the Chiesi divestiture, the Company recorded a reduction in the~~remaining net book value of developed technology related to ~~PROCYSBI~~MIGERGOT of ~~$47.3~~$17.0 million.

See Note 34 for further ~~details of intangible assets acquired in business acquisitions and disposed of in business divestitures.~~details.

Prior to the fourth quarter of 2016, the Company had IPR&D of $66.0 million related to one research and development project to evaluate ACTIMMUNE in the treatment of FA. The fair value of the IPR&D was recorded as an indefinite-lived intangible asset and was being tested for impairment at least annually until completion or abandonment of the research and development efforts associated with the project. On December 8, 2016, the Company announced that the Phase 3 trial, STEADFAST, evaluating ACTIMMUNE for the treatment of FA did not meet its primary endpoint of a statistically significant change from baseline in the modified Friedreich’s Ataxia Rating Scale at twenty-six weeks versus treatment with placebo. In addition, the secondary endpoints did not meet statistical significance. No new safety findings were identified on initial review of data other than those already noted in the ACTIMMUNE prescribing information for approved indications. The Company, in conjunction with the independent Data Safety Monitoring Board, the principal investigator and the Friedreich’s Ataxia Research Alliance Collaborative Clinical Research Network in FA, determined that, based on the trial results, the STEADFAST program would be discontinued, including the twenty-six week extension study and the long-term safety study. The IPR&D had no alternative use or economic value as a result of the cancellation of the project, and the Company recorded an impairment charge of $66.0 million to “impairment of in-process research and development” in its condensed consolidated statements of comprehensive loss during the year ended December 31, 2016 to fully write off the value of the asset on its condensed consolidated balance sheet.

The Company tests its intangible assets for impairment when events or circumstances may indicate that the carrying value of these assets exceeds their fair value. The Company does not believe there have been any circumstances or events that would indicate that the carrying value of any of its intangible assets, except for IPR&D as described above, was impaired at September 30, 2017 or December 31, 2016.

Intangible assets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

Amortization expense for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was ~~$68.7~~$58.6 million and ~~$50.8~~$57.4 million, ~~respectively, and was $208.1 million and $151.2 million for the nine months ended September 2017 and 2016,~~ respectively. As of ~~September 30, 2017~~March 31, 2020, estimated future amortization expense was as follows (in thousands):

Included in other assets at September 30, 2017 is $24.8 million which represents the long-term portion of the estimated amounts that are expected to be reimbursed from Chiesi for PROCYSBI and QUINSAIR royalties.

Accrued expenses as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

Accrued payroll-related expenses at September 30, 2017 and December 31, 2016 included $2.3 million and $15.0 million, respectively, of severance and employee costs as a result of the Raptor acquisition. The Company anticipates that a significant amount of the Raptor acquisition-related cash payments will be complete by the fourth quarter of 2017.

Accrued litigation settlement at December 31, 2016 included $32.5 million in relation to a litigation settlement with Express Scripts, Inc., which was paid in two equal installments in January 2017 and April 2017.

The contingent consideration liability as of September 30, 2017 relates to an assumed contingent liability, arising from contingent payments associated with development, regulatory and commercial milestones following Raptor’s acquisition of QUINSAIR. This liability was presented in other long-term liabilities as of December 31, 2016 and was reclassified to accrued expenses as of September 30, 2017 to reflect the revised expectation that the payment would be made during the fourth quarter of 2017. The Company subsequently made this payment in November 2017.

Accrued other as of September 30, 2017 and December 31, 2016 included $8.5 million and $9.5 million, respectively, related to a loss on inventory purchase commitments. During the year ended December 31, 2016, the Company committed to purchase additional units of ACTIMMUNE from Boehringer Ingelheim RCV GmbH & Co KG (“Boehringer Ingelheim”). These additional units of ACTIMMUNE were intended to cover anticipated demand if the results of the STEADFAST study of ACTIMMUNE for the treatment of FA had been successful. Following the discontinuation of the STEADFAST program during the year ended December 31, 2016, the Company recorded a loss of $14.3 million in “cost of goods sold” in the condensed consolidated statement of comprehensive loss for firm, non-cancellable and unconditional purchase commitments for quantities in excess of the Company’s current forecasts for future demand. During the nine months ended September 30, 2017, the Company renegotiated its purchase commitments with Boehringer Ingelheim and recorded a reduction of $2.7 million to the loss on inventory purchase commitments in “cost of goods sold”. “Other long-term liabilities” as of September 30, 2017 and December 31, 2016 included $2.7 million and $4.8 million, respectively, related to this loss on inventory purchase commitments. During the year ended December 31, 2016, the Company recorded $4.0 million related to costs to be incurred to discontinue the clinical trial. Accrued other as of September 30, 2017 and December 31, 2016 included $0.2 million and $4.0 million, respectively, related to these costs. During the three and nine months ended September 30, 2017, the Company recorded a reduction of $1.5 million to “research and development” expenses reflecting lower costs to discontinue the clinical trial than previously estimated.

Accrued trade discounts and rebates as of ~~September 30, 2017~~ March 31, 2020 and December 31, ~~2016~~ 2019 consisted of the following (in thousands):

The following table summarizes changes in the Company’s customer-related accruals and allowances from December 31, ~~2016~~2019 to ~~September 30, 2017~~March 31, 2020 (in thousands):

Wholesaler Fees

Co-Pay and

Government

and Commercial

Other Patient

Rebates and

Rebates

Assistance

Chargebacks

Total

Balance at December 31, 2016

$
47,651

$
205,143

$
61,592

$
314,386

Measurement period adjustment

—

—

(1,350
)

(1,350
)
Current provisions relating to sales during the nine
months ended September 30, 2017

472,118

1,406,614

245,547

2,124,279

Adjustments relating to prior-year sales

5,580

(59
)

(4,904
)

617

Payments relating to sales during the nine months
ended September 30, 2017

(288,749
)

(1,230,603
)

(156,118
)

(1,675,470
)
Payments relating to prior-year sales

(53,043
)

(205,084
)

(55,338
)

(313,465
)
Balance at September 30, 2017

$
183,557

$
176,011

$
89,429

$
448,997

	Wholesaler Fees			Co-Pay and			Government
	and Commercial			Other Patient			Rebates and
	Rebates			Assistance			Chargebacks			Total
Balance at December 31, 2019	$	138,761		$	163,641		$	164,508		$	466,910
Current provisions relating to sales during the three months ended March 31, 2020		73,581			230,094			137,840			441,515
Adjustments relating to prior-year sales		(14,103	)		—			(1,648	)		(15,751	)
Payments relating to sales during the three months ended March 31, 2020		(5,911	)		(143,570	)		(30,807	)		(180,288	)
Payments relating to prior-year sales		(101,990	)		(157,988	)		(101,884	)		(361,862	)
Balance at March 31, 2020	$	90,338		$	92,177		$	168,009		$	350,524

~~During the nine months ended September 30, 2017, changes to the liability for royalties for medicines acquired through business combinations consisted of the following (in thousands):~~

The reclassification to other long-term liabilities in the table above relates to the reclassification of a contingent royalty liability for PROCYSBI to other long-term liabilities as a result of the Chiesi divestiture.

The Company has 2 reportable segments, the orphan segment and the inflammation segment, and the Company reports net sales and segment operating income for each segment.

Effective in the first quarter of 2020, the Company (i) reorganized its commercial operations and moved responsibility for and reporting of RAYOS to the inflammation segment and (ii) renamed the orphan and rheumatology segment the orphan segment. Net sales generated by TEPEZZA, which was approved in the first quarter of 2020, are reported as part of the renamed orphan segment.

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

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

The following table reflects net sales by medicine for the Company’s reportable segments for the three months ended March 31, 2020 and 2019 (in thousands):

The table below provides reconciliations of the Company’s segment operating income to the Company’s total loss before benefit for income taxes for the three months ended March 31, 2020 and 2019 (in thousands):

The following table presents the amount and percentage of gross sales ~~from~~to customers that represented more than 10% of the Company’s gross sales included in its ~~single operating segment,~~two reportable segments and all other customers as a group for the three months ended March 31, 2020 and 2019 (in thousands, except percentages):

Geographic revenues are determined based on the country in which the Company’s customers are located. The following table presents a summary of net sales attributed to geographic sources for the three months ended March 31, 2020 and 2019 (in thousands, except percentages):

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

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

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

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

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

As of September 30, 2017, the Company’s restricted cash included bank time deposits which were measured at fair value using Level 2 inputs and their carrying values were approximately equal to their fair values. Level 2 inputs, obtained from various third-party data providers, represent quoted prices for similar assets in active markets, or these inputs were derived from observable market data, or if not directly observable, were derived from or corroborated by other observable market data.

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

The Company transfers its financial assets and liabilities between the fair value hierarchies at the end of each reporting period. There were no transfers between the different levels of the fair value hierarchy during the three and nine months ended September 30, 2017 and 2016.

The following tables set forth the Company’s financial assets and liabilities at fair value on a recurring basis as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 (in thousands):

The Company’s outstanding debt balances as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of the following (in thousands):

On ~~March 29, 2017, HPI and~~December 18, 2019, Horizon Therapeutics USA, Inc. (formerly known as Horizon Pharma USA, Inc. ~~(“HPUSA” and, together with HPI, in such capacity, the “Borrowers”~~) (the “Borrower”), ~~wholly-owned subsidiaries~~a wholly owned subsidiary of the Company, borrowed ~~$850.0~~approximately $418.0 million aggregate principal amount of loans (the ~~“March 2017~~“December 2019 Refinancing Loans”) pursuant to an amendment (the ~~“March 2017~~“December 2019 Refinancing Amendment”) to the credit agreement, dated as of May 7, 2015, ~~(as amended by the 2016 Amendment described below, the “2016 Credit Agreement” and, the 2016~~ ~~Credit Agreement as amended by the March 2017 Refinancing Amendment, the “March 2017 Credit Agreement”),~~ by and among the ~~Borrowers,~~Borrower, the Company and certain of its subsidiaries as guarantors, the lenders party thereto from time to time and Citibank, N.A., as administrative agent and collateral agent, as amended by Amendment No. 1, dated as of October 25, 2016, Amendment No. 2, dated March 29, 2017, Amendment No. 3, dated October 23, 2017, Amendment No. 4, dated October 19, 2018, Amendment No. 5, dated March 11, 2019 and Amendment No. 6, dated May 22, 2019 (the ~~“2017 Term~~“Term Loan Facility”). Pursuant to Amendment No. 5, the Borrower received $200.0 million aggregate principal amount of revolving commitments (the “Incremental Revolving Commitments”). The Incremental Revolving Commitments were established pursuant to an incremental facility (the “Revolving Credit Facility”) and provide the Borrower with $200.0 million of additional borrowing capacity, which includes a $50.0 million letter of credit sub-facility. The Incremental Revolving Commitments will terminate in March ~~2017~~2024. Borrowings under the Revolving Credit Facility are available for general corporate purposes. As of March 31, 2020, the Revolving Credit Facility was undrawn. As used herein, all references to the “Credit Agreement” are references to the original credit agreement, dated as of May 7, 2015, as amended through the December 2019 Refinancing Amendment.

The December 2019 Refinancing Loans were incurred as a separate new class of term loans under the Credit Agreement ~~provided~~with substantially the same terms as the previously outstanding senior secured term loans incurred on May 22, 2019 (the “Refinanced Loans”) to effectuate a repricing of the Refinanced Loans. The Borrower used the proceeds of the December 2019 Refinancing Loans to repay the Refinanced Loans, which totaled approximately $418.0 million. The December 2019 Refinancing Loans bear interest at a rate, at the Borrower’s option, equal to the London Inter-Bank Offered Rate (“LIBOR”), plus 2.25% per annum (subject to a 0.00% LIBOR floor) or the adjusted base rate plus 1.25% per annum, with a step-down to LIBOR plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time the Company’s leverage ratio is less than or equal to 2.00 to 1.00. The adjusted base rate is defined as the greatest of (a) LIBOR (using one-month interest period) plus 1.00%, (b) the prime rate, (c) the federal funds rate plus 0.50%, and (d) 1.00%.

The loans under the Revolving Credit Facility bear interest, at the Borrower’s option, at a rate equal to either LIBOR plus an applicable margin of 2.25% per annum (subject to a LIBOR floor of 0.00%), or the adjusted base rate plus 1.25% per annum, with a step-down to LIBOR plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time the Company’s leverage ratio is less than or equal to 2.00 to 1.00. The Credit Agreement provides for (i) the ~~March 2017~~December 2019 Refinancing Loans, (ii) the Revolving Credit Facility, (iii) one or more uncommitted additional incremental loan facilities subject to the satisfaction of certain financial and other conditions, and ~~(iii)~~(iv) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The ~~March 2017~~ Credit Agreement ~~allowed~~allows for the Company and certain of its subsidiaries to become additional borrowers under incremental or refinancing facilities. The March 2017 Credit Agreement was amended pursuant to the October 2017 Refinancing Amendment described in Note 21 below (the March 2017 Credit Agreement as amended by the October 2017 Refinancing Amendment , the “Credit Agreement”).

The March 2017 Refinancing Loans were incurred as a separate new class of term loans under the March 2017 Credit Agreement with substantially the same terms as the previously outstanding senior secured term loans incurred on May 7, 2015 (the “2015 Loans”) and the outstanding senior secured term loans incurred on October 25, 2016 (the “2016 Loans” and, together with the 2015 Loans, the “~~March 2017 Refinanced Loans”), except as described below. The~~ March 2017 Refinancing Loans bore interest, at the Borrowers’ option, at a rate equal to either the London Inter-Bank Offer Rate (“LIBOR”), plus an applicable margin of 3.75% per year (subject to a LIBOR floor of 1.00%), or the adjusted base rate plus 2.75%. The adjusted base rate was defined as the greater of (a) LIBOR (using one-month interest period) plus 1.00%, (b) prime rate, (c) fed funds plus 0.5%, and (d) ~~2.00%. The Borrowers used a portion of the~~ ~~proceeds of the March 2017 Refinancing Loans to repay the March 2017~~ ~~Refinanced Loans, which totaled $769.0~~ ~~million.~~

The Company elected to exercise its reinvestment rights under the mandatory prepayment provisions of the March 2017 Credit Agreement with respect to the net proceeds from the Chiesi divestiture. To the extent the Company did not apply such net proceeds to permitted acquisitions (including the acquisition of rights to products and products lines) and/or the acquisition of capital assets within 365 days of the receipt thereof (or commit to so apply and then apply within 180 days after the end of such 365-day period), the Borrowers under the March 2017 Credit Agreement would have had to make a mandatory prepayment under the March 2017 Credit Agreement in an amount equal to the unapplied net proceeds. Until such time, the net proceeds were not legally restricted for use. As of September 30, 2017, the Company had applied a portion of such net proceeds to the acquisition of additional rights to interferon gamma-1b. See Note 3 for further details of this acquisition.

The obligations under the ~~March 2017~~ Credit Agreement (including obligations in respect of the ~~March 2017~~December 2019 Refinancing ~~Loans)~~Loans and the Revolving Credit Facility) and any swap obligations and cash management obligations owing to a lender (or an affiliate of a lender) ~~thereunder were~~are guaranteed by the Company and each of the Company’s existing and subsequently acquired or formed direct and indirect subsidiaries (other than certain immaterial subsidiaries, subsidiaries whose guarantee would result in material adverse tax consequences and subsidiaries whose guarantee is prohibited by applicable law). The obligations under the ~~March 2017~~ Credit Agreement (including obligations in respect of the ~~March 2017~~December 2019 Refinancing ~~Loans)~~Loans and the Revolving Credit Facility) and any ~~such~~related swap and cash management obligations ~~were~~are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (i) all tangible and intangible assets of the ~~Borrowers~~Borrower and the guarantors, except for certain customary excluded assets, and (ii) all of the capital stock owned by the ~~Borrowers~~Borrower and guarantors thereunder (limited, in the case of the stock of certain non-U.S. subsidiaries of the ~~Borrowers,~~Borrower, to 65% of the capital stock of such subsidiaries). The ~~Borrowers~~Borrower and the guarantors under the ~~March 2017~~ Credit Agreement ~~and/or Credit Agreement, as applicable,~~ are individually and collectively referred to herein as a “Loan Party” and the “Loan Parties,” as applicable.

~~Borrowers~~The Company elected to exercise its reinvestment rights under the ~~March 2017~~mandatory prepayment provisions of the Credit Agreement ~~were~~with respect to the net proceeds from the Company’s sale of its rights to PROCYSBI and QUINSAIR in the Europe, Middle East and Africa regions to Chiesi Farmaceutici S.p.A. To the extent the Company had not applied such net proceeds to permitted acquisitions (including the acquisition of rights to products and products lines) and/or the acquisition of capital assets within 365 days of the receipt thereof (or committed to so apply and then applied within 180 days after the end of such 365-day period), the Company was required to make a mandatory prepayment under the Credit Agreement in an amount equal to the unapplied net proceeds. In June 2018, the Company repaid $23.5 million under the mandatory prepayment provisions of the Credit Agreement.

On March 18, 2019, the Company completed the repayment of $300.0 million of the outstanding principal amount of term loans under the Credit Agreement following the closing of its underwritten public equity offering on March 11, 2019. In July 2019, the Company repaid an additional $100.0 million of term loans under the Credit Agreement following the private placement of the Company’s 5.500% Senior Notes due 2027 (the “2027 Senior Notes”). Following these repayments, the outstanding principal balance of term loans under the Credit Agreement was $418.0 million.

Additionally, the Company elected to exercise its reinvestment rights under the mandatory prepayment provisions of the Credit Agreement with respect to the net proceeds from the Company’s sale of its rights to RAVICTI and AMMONAPS (known as BUPHENYL in the United States) outside of North America and Japan to Medical Need Europe AB, part of the Immedica Group (the “Immedica transaction”). To the extent the Company had not applied such net proceeds to permitted acquisitions (including the acquisition of rights to products and products lines) and/or the acquisition of capital assets within 365 days of the receipt of proceeds from the Immedica transaction (or commit to so apply and then apply within 180 days after the end of such 365-day period), the Company was required to make a mandatory prepayment under the Credit Agreement in an amount equal to the unapplied net proceeds. In March 2019, the Company repaid $35.0 million under the mandatory prepayment provisions of the Credit Agreement which was included in the $300.0 million repayment referred to above.

The Borrower is permitted to make voluntary prepayments of the loans under the ~~March 2017~~ Credit Agreement at any time without payment of a premium, except that with respect to the ~~March 2017~~December 2019 Refinancing Loans, a ~~1.00%~~1% premium ~~would have applied~~will apply to a repayment of the ~~March 2017~~December 2019 Refinancing Loans in connection with a repricing of, or any amendment to the ~~March 2017~~ Credit Agreement in a repricing of, such loans effected on or prior to the date that is six months following ~~March 29, 2017.~~December 18, 2019. The ~~Borrowers were~~Borrower is required to make mandatory prepayments of loans under the ~~March 2017~~ Credit Agreement (without payment of a premium) with (a) net cash proceeds from certain non-ordinary course asset sales (subject to reinvestment rights and other exceptions), (b) casualty proceeds and condemnation awards (subject to reinvestment rights and other exceptions), (c) net cash proceeds from issuances of debt (other than certain permitted debt), and (d) 50% of the Company’s excess cash flow (subject to decrease to 25% or 0% if the Company’s first lien leverage ratio is less than 2.25:1 or 1.75:1, respectively). The ~~March 2017~~principal amount of the December 2019 Refinancing Loans ~~amortized in equal quarterly installments beginning on June 30, 2017 in an aggregate annual amount equal to 1.00% of the original principal amount thereof, with any remaining balance~~ are due and payable on ~~March 29, 2024,~~May 22, 2026, the final maturity date of the ~~March 2017~~December 2019 Refinancing Loans.

The ~~March 2017~~ Credit Agreement ~~contained~~contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions. The Credit Agreement also contains a springing financial maintenance covenant, which requires that the Company maintain a specified leverage ratio at the end of each fiscal quarter. The covenant is tested if both the outstanding loans and letters of credit under the Revolving Credit Facility, subject to certain exceptions, exceed 25% of the total commitments under the Revolving Credit Facility as of the last day of any fiscal quarter. If the Company fails to meet this covenant, the commitments under the Revolving Credit Facility could be terminated and any outstanding borrowings, together with accrued interest, under the Revolving Credit Facility could be declared immediately due and payable.

Other events of default under the ~~March 2017~~ Credit Agreement ~~included:~~include: (i) the failure by ~~any~~the Borrower to timely make payments due under the ~~March 2017~~ Credit Agreement; (ii) material misrepresentations or misstatements in any representation or warranty by any Loan Party when made; (iii) failure by any Loan Party to comply with the covenants under the ~~March 2017~~ Credit Agreement and other related agreements; (iv) certain defaults under a specified amount of other indebtedness of the Company or its subsidiaries; (v) insolvency or bankruptcy-related events with respect to the Company or any of its material subsidiaries; (vi) certain undischarged judgments against the Company or any of its restricted subsidiaries; (vii) certain ERISA-related events reasonably expected to have a material adverse effect on the Company and its restricted subsidiaries taken as a whole; (viii) certain security interests or liens under the loan documents ceasing to be, or being asserted by the Company or its restricted subsidiaries not to be, in full force and effect; (ix) any loan document or material provision thereof ceasing to be, or any challenge or assertion by any Loan Party that such loan document or material provision is not, in full force and effect; and (x) the occurrence of a change of control. If one or more events of default ~~occurred~~occurs and ~~continued~~continues beyond any applicable cure period, the administrative agent ~~would have been able to,~~may, with the consent of the lenders holding a majority of the loans and commitments under the facilities, or ~~would have been able to,~~will, at the request of such lenders, terminate the commitments of the lenders to make further loans and declare all of the obligations of the Loan Parties under the ~~March 2017~~ Credit Agreement to be immediately due and payable.

The ~~Company was,~~interest on the Term Loan Facility is variable and as of ~~September 30, 2017, in compliance with~~March 31, 2020 the ~~March 2017 Credit Agreement~~interest rate on the Term Loan Facility was 3.94% and ~~is currently in compliance with~~ the ~~Credit Agreement.~~effective interest rate was 4.25%.

As of ~~September 30, 2017,~~March 31, 2020, the fair value of the ~~2017~~amounts outstanding under the Term Loan Facility was approximately ~~$847.9~~$390.9 million, categorized as a Level 2 instrument, as defined in Note ~~13.~~12.

~~On May 7, 2015, HPI, as borrower, and the Company and certain of its subsidiaries, as guarantors, entered into a credit agreement (the “2015 Credit Agreement”) with Citibank, N.A., as administrative and collateral agent, and the lenders from time to time party thereto providing for (i) a six-year $400.0 million~~ ~~term loan facility (the~~ “2015 Term Loan Facility”); (ii) an uncommitted accordion facility subject to the satisfaction of certain financial and other conditions; and (iii) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The 2015 ~~Loans under the 2015 Term Loan Facility bore interest, at each borrower’s option, at a rate equal to either the LIBOR, plus~~ ~~an applicable margin of 3.50% per year (subject to a 1.00% LIBOR floor), or the adjusted base rate plus 2.50%. The adjusted base rate was defined as the greater of (a) LIBOR (using one-month interest period) plus 1.00%, (b) prime rate, (c) fed funds plus 0.5%,~~ ~~and (d) 2.00%.~~ ~~HPI borrowed the full $400.0 million available on the 2015 Term Loan Facility on May 7, 2015 as a LIBOR-based borrowing.~~

~~On October 25, 2016 and in connection with the financing for the acquisition of Raptor,~~ ~~HPI and HPUSA (together, in such capacity, the~~ ~~“Incremental Borrowers”) entered into an amendment to the~~ 2015 Credit Agreement (the “2016 Amendment”) with Citibank, N.A., as administrative and collateral agent, and Bank of America, N.A., as the incremental B-1 lender thereunder, pursuant to which the Incremental Borrowers borrowed $375.0 million aggregate principal amount of loans (the “2016 Incremental Loan Facility”). The 2016 Incremental Loan Facility was incurred a ~~s a separate class of term loans under the 2015 Credit Agreement with the same terms as the loans under the 2015 Term Loan Facility, except as described below.~~

~~The 2016 Loans under the 2016 Incremental Loan Facility~~ ~~bore interest, at the Incremental Borrowers’ option, at a rate equal to either LIBOR plus an applicable margin of 4.50% per year (subject to a LIBOR floor of~~ ~~1.00%), or the adjusted base rate plus 3.50%. The terms of the 2015 Loans provided for an amendment such that the effective yield of the 2015 Loans would not be less than the effective yield of the 2016 Loans~~ ~~minus 0.50%. Consequently, the issuance of the 2016 Loans resulted in an increase of the interest rate applicable to the 2015 Loans, as of October 25, 2016, to LIBOR plus 4.00%, subject~~ ~~to a LIBOR floor of 1.00% (an initial interest rate of 5.00%).~~

On ~~March 29, 2017,~~ ~~the Borrowers used the proceeds of the March 2017 Refinancing Loans under the 2017 Term Loan Facility to repay~~ ~~the~~ ~~2015 Loans and 2016 Loans, which collectively totaled $769.0 million.~~

The 2015 Loans and the 2016 Loans were repaid, and a portion of the repayment was accounted for as a debt modification and a portion was accounted for as a debt extinguishment. Under debt extinguishment accounting, the Company recorded a charge of $0.5 million to “loss on debt extinguishment” in the condensed consolidated statements of comprehensive loss, which reflected the write-off of the unamortized portion of debt discount and deferred financing costs previously incurred and a one percent prepayment penalty fee. Under debt modification accounting, the Company capitalized an incremental $5.8 million of debt discount and deferred financing fees.

On ~~October 25, 2016, HPI and HPUSA~~ ~~(together, in such capacity,~~July 16, 2019, Horizon Therapeutics USA, Inc. (formerly known as Horizon Pharma USA, Inc.), the ~~“2024 Issuers”~~Company’s wholly owned subsidiary (“HTUSA”), completed a private placement of ~~$300.0~~$600.0 million aggregate principal amount of ~~the 2024~~2027 Senior Notes to ~~certain~~several investment banks acting as initial purchasers, who subsequently resold the ~~2024~~2027 Senior Notes to persons reasonably believed to be qualified institutional ~~buyers as defined in Rule 144A under the Securities Act.~~ ~~The net proceeds from the offering of the 2024 Senior Notes were approximately $291.9 million, after deducting the initial purchasers’ discount and offering expenses payable by the 2024 Issuers.~~buyers.

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

The Company used the net proceeds from the offering of the ~~2024~~2027 Senior Notes, ~~as well as $375.0~~together with approximately $65.0 million in cash on hand, to redeem or prepay $625.0 million of its outstanding debt, consisting of (i) the outstanding $225.0 million principal amount of ~~2016 Loans~~its 6.625% Senior Notes due 2023, (ii) the outstanding $300.0 million principal amount of its 8.750% Senior Notes due 2024 and (iii) $100.0 million of the outstanding principal amount of senior secured term loans under the ~~2016 Incremental Loan Facility~~Credit Agreement, as well as to ~~fund a portion of~~pay the ~~acquisition of Raptor, repay Raptor’s outstanding debt,~~related premiums and ~~pay any prepayment premiums,~~ fees and expenses, excluding accrued interest, associated with such redemption and prepayment.

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

The ~~2024~~2027 Senior Notes are unconditionally guaranteed on a senior basis by the Company and all of the Company’s restricted subsidiaries, other than HTUSA and certain immaterial subsidiaries, that guarantee the Credit Agreement. The guarantees are each guarantor’s senior unsecured obligations and rank equally in right of payment with such guarantor’s existing and future senior debt and senior in right of payment to any existing and future subordinated debt of such guarantor. The guarantees are effectively subordinated to all of the existing and future secured debt of each guarantor, including such guarantor’s guarantee under the Credit Agreement, to the extent of the value of the collateral securing such debt. The guarantees of a guarantor may be released under certain circumstances. The 2027 Senior Notes are structurally subordinated to all of the liabilities of the Company’s subsidiaries that do not guarantee the 2027 Senior Notes.

The 2027 Senior Notes accrue interest at an annual rate of ~~8.750%~~5.5% payable semiannually in arrears on ~~May~~February 1 and ~~November~~August 1 of each year, beginning on ~~May~~February 1, ~~2017.~~2020. The ~~2024~~2027 Senior Notes will mature on ~~November~~August 1, ~~2024,~~2027, unless earlier exchanged, repurchased or redeemed.

Except as described below, the ~~2024~~2027 Senior Notes may not be redeemed before ~~November~~August 1, ~~2019.~~2022. Thereafter, some or all of the ~~2024~~2027 Senior Notes may be redeemed at any time at specified redemption prices, plus accrued and unpaid interest to the redemption date. At any time prior to ~~November~~August 1, ~~2019,~~2022, some or all of the ~~2024~~2027 Senior Notes may be redeemed at a price equal to 100% of the aggregate principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the redemption date. Also prior to ~~November~~August 1, ~~2019,~~2022, up to ~~35%~~40% of the aggregate principal amount of the ~~2024~~2027 Senior Notes may be redeemed at a redemption price of ~~108.75%~~105.5% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net proceeds of certain equity offerings. In addition, the ~~2024~~2027 Senior Notes may be redeemed in whole but not in part at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date, if on the next date on which any amount would be payable in respect of the ~~2024~~2027 Senior Notes, ~~the 2024 Issuers~~HTUSA or any guarantor is or would be required to pay additional amounts as a result of certain ~~tax-related~~tax related events.

If the Company undergoes a change of control, ~~the 2024 Issuers~~HTUSA will be required to make an offer to purchase all of the ~~2024~~2027 Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to, but not including, the repurchase ~~date.~~date, subject to certain exceptions. If the Company or certain of its subsidiaries engages in certain asset sales, ~~the 2024 Issuers~~HTUSA will be required under certain circumstances to make an offer to purchase the ~~2024~~2027 Senior Notes at 100% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date.

The indenture governing the ~~2024~~2027 Senior Notes contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments, incur additional debt and issue certain preferred stock, incur liens on assets, engage in certain asset sales, merge, consolidate with or merge or sell all or substantially all of their assets, enter into transactions with affiliates, designate subsidiaries as unrestricted subsidiaries, and allow to exist certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to the Company. Certain of the covenants will be suspended during any period in which the ~~notes~~2027 Senior Notes receive investment grade ratings. The indenture governing the 2027 Senior Notesalso includes customary events of default.

~~The Company was, as of~~ ~~September 30, 2017, and is currently in compliance with the indenture governing the 2024 Senior Notes.~~

As of ~~September 30, 2017,~~March 31, 2020 the interest rate on the 2027 Senior Notes was 5.50% and the effective interest rate was 5.76%.

As of March 31, 2020 the fair value of the ~~2024~~2027 Senior Notes was approximately ~~$313.5~~$582.0 million, categorized as a Level 2 instrument, as defined in Note ~~13.~~

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

In connection with the closing of the Hyperion acquisition on May 7, 2015, Horizon Financing merged with and into HPI and, as a result, the 2023 Senior Notes became HPI’s general unsecured senior obligations ~~. The obligations under the 2023 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by~~ ~~the Company and all of the Company’s direct and indirect subsidiaries that are guarantors from time to time under the Credit Agreement.~~

The 2023 Senior Notes accrue interest at an annual rate of 6.625% payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2015. The 2023 Senior Notes will mature on May 1, 2023, unless earlier repurchased or redeemed.

Except as described below, the 2023 Senior Notes may not be redeemed before May 1, 2018. Thereafter, some or all of the 2023 Senior Notes may be redeemed at any time at specified redemption prices, plus accrued and unpaid interest to the redemption date. At any time prior to May 1, 2018, some or all of the 2023 Senior Notes may be redeemed at a price equal to 100% of the aggregate principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the redemption date. Also prior to May 1, 2018, up to 35% of the aggregate principal amount of the 2023 Senior Notes may be redeemed at a redemption price of 106.625% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net proceeds of certain equity offerings. In addition, the 2023 Senior Notes may be redeemed in whole but not in part at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date, if on the next date on which any amount would be payable in respect of the 2023 Senior Notes, HPI or any guarantor is or would be required to pay additional amounts as a result of certain tax-related events.

If the Company undergoes a change of control, HPI will be required to make an offer to purchase all of the 2023 Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to, but not including, the repurchase date. If the Company or certain of its subsidiaries engages in certain asset sales, HPI will be required under certain circumstances to make an offer to purchase the 2023 Senior Notes at 100% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date.

The indenture governing the 2023 Senior Notes contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments, incur additional debt and issue certain preferred stock, incur liens on assets, engage in certain asset sales, merge, consolidate with or merge or sell all or substantially all of their assets, enter into transactions with affiliates, designate subsidiaries as unrestricted subsidiaries, and allow to exist certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to the Company. Certain of the covenants will be suspended during any period in which the notes receive investment grade ratings. The indenture ~~governing the 2023 Senior Notes~~ ~~also includes customary events of default.~~

~~The Company was, as of~~ ~~September 30, 2017, and is currently in compliance with the indenture governing the 2023 Senior Notes.~~

~~As of September 30, 2017, the fair value of the 2023 Senior Notes was approximately $464.3 million, categorized as a Level 2 instrument, as defined in Note 13.~~12.

On March 13, 2015, Horizon TherapeuticsInvestmentLimited (formerly known as Horizon Pharma Investment Limited) (“Horizon Investment”), a wholly owned subsidiary of the Company, completed a private placement of $400.0 million aggregate principal amount of Exchangeable Senior Notes to certain investment banks acting as initial purchasers who subsequently resold the Exchangeable Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities ~~Act.~~Act of 1933, as amended. The net proceeds from the offering of the Exchangeable Senior Notes were approximately $387.2 million, after deducting the initial purchasers’ discount and offering expenses payable by Horizon Investment.

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

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

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

Provisional Redemption ~~on or After March 20, 2019~~: ~~On or after March 20, 2019,~~ Horizon Investment may redeem for cash all or a portion of the Exchangeable Senior Notes if the last reported sale price of ordinary shares of the Company has been at least 130% of the exchange price then in effect for at least ~~twenty~~20 trading days whether or not consecutive) during any ~~thirty~~30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Horizon Investment provide written notice of redemption. The redemption price will be equal to 100% of the principal amount of the Exchangeable Senior Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date; provided that if the redemption date occurs after a regular record date and on or prior to the corresponding interest payment date, Horizon Investment will pay the full amount of accrued and unpaid interest due on such interest payment date to the record holder of the Exchangeable Senior Notes on the regular record date corresponding to such interest payment date, and the redemption price payable to the holder who presents an Exchangeable Senior Note for redemption will be equal to 100% of the principal amount of such Exchangeable Senior Note.

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

As of ~~September 30, 2017,~~March 31, 2020, none of the above conditions had been satisfied and no exchange of Exchangeable Senior Notes had been triggered.

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

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

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

As of ~~September 30, 2017,~~March 31, 2020, the interest rate on the Exchangeable Senior Notes was 2.50% and the effective interest rate was 8.88%.

As of March 31, 2020, the fair value of the Exchangeable Senior Notes was approximately ~~$361.0~~$460.0 million, categorized as a Level 2 instrument, as defined in Note ~~13.~~12.

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

The above table does not include details of an agreement for lease entered into on October 14, 2019, relating to approximately 63,000 square feet of office space under construction in Dublin, Ireland. Lease commencement will begin when construction of the offices is completed by the lessor and the Company has access to begin the construction of leasehold improvements. The Company expects to incur leasehold improvement costs during 2020 and 2021 in order to prepare the building for occupancy.

As of March 31, 2020 and December 31, 2019, the Company had right-of-use lease assets included in other assets of $38.9 million and $39.8 million, respectively; current lease liabilities included in accrued expenses of $4.6 million and $4.4 million, respectively; and non-current lease liabilities included in other long-term liabilities ~~at September 30, 2017 and December 31, 2016, is $26.6~~of $45.2 million and ~~$25.5~~$46.5 million, respectively, ~~representing~~in its condensed consolidated balance sheets.

The Company recognizes rent expense on a monthly basis over the ~~fair value~~lease term based on a straight-line method. Rent expense was $1.6 million for the three months ended March 31, 2020 and 2019.

The table below reconciles the undiscounted cash flows for each of the ~~long-term portion~~first five years and total of the ~~contingent liability~~remaining years to the operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of March 31, 2020 (in thousands):

The weighted-average discount rate and remaining lease term for ~~royalties potentially payable under agreements related to PROCYSBI~~operating leases as of March 31, 2020 was 7.11% and ~~QUINSAIR.~~10.28 years, respectively.

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

~~Following the Chiesi divestiture in June 2017, the Company ceased to hold a lease obligation in Utrecht in the Netherlands.~~

~~In August 2007,~~Under the ~~Company entered into a manufacturing and~~Company’s supply agreement with ~~Jagotec AG~~AGC Biologics A/S (formerly known as CMC Biologics A/S) (“~~Jagotec”~~AGC Biologics”), ~~which was amended in March 2011~~the Company has agreed to purchase certain minimum annual order quantities of TEPEZZA drug substance. In addition, the Company must provide AGC Biologics with rolling forecasts of TEPEZZA drug substance requirements, with a portion of the forecast being a firm and ~~in January 2017.~~binding order. Under the agreement, Jagotec or its affiliates are required to manufacture and supply RAYOS/LODOTRA exclusively to the Company in bulk. The earliest the agreement can expire is December 31, 2023, and the minimum purchase commitment is in force until December 2023. At September 30, 2017, the minimum purchase commitment based on tablet pricing in effect under the agreement was $6.7 million through December 2023. Additionally, purchase orders relating to the manufacture of RAYOS/LODOTRA of $1.2 million were outstanding at September 30, 2017.

~~In May 2011, the Company entered into a manufacturing and~~Company’s supply agreement with ~~Sanofi-Aventis U.S.~~Catalent Indiana, LLC (“~~Sanofi-Aventis U.S.”~~Catalent”), the Company must provide Catalent with rolling forecasts of TEPEZZA drug product requirements, with a portion of the forecast being a firm and ~~amended~~binding order. At March 31, 2020, the ~~agreement effective~~Company had binding purchase commitments with AGC Biologics for TEPEZZA drug substance of €58.3 million ($64.3 million converted at an exchange rate as of ~~September 25, 2013. Pursuant~~March 31, 2020 of 1.1034), to be delivered through March 2022. In addition, the ~~agreement, as amended, Sanofi-Aventis U.S.~~Company had binding purchase commitments with Catalent for TEPEZZA drug product of $8.4 million, to be delivered through March 2021.

Patheon Pharmaceuticals Inc. (“Patheon”) is obligated to manufacture ~~and supply DUEXIS to~~PROCYSBI for the Company ~~in final, packaged form, and~~through December 31, 2021. The Company must provide Patheon with rolling, non-binding forecasts of PROCYSBI, with a portion of the ~~Company~~forecast being a firm written order. Cambrex Profarmaco Milano (“Cambrex”) is obligated to ~~purchase DUEXIS exclusively from Sanofi-Aventis U.S.~~manufacture PROCYSBI active pharmaceutical ingredient (“API”) for the ~~commercial requirements~~Company through November 2, 2020. The Company must provide Cambrex with rolling, non-binding forecasts, with a portion of ~~DUEXIS in North America, South America and certain countries and territories in Europe, including~~ the European Union (“EU”) member states and Scandinavia. The agreement term extends until May 2019, and automatically renews for successive two-year terms unless terminated by either party upon two years prior written notice.forecast being the minimum floor of the firm order that must be placed. At ~~September 30, 2017,~~March 31, 2020, the Company had a binding purchase commitment ~~to Sanofi-Aventis U.S.~~with Patheon for ~~DUEXIS~~PROCYSBI of ~~$6.3~~$1.4 million, ~~which is~~ to be delivered through ~~March 2018.~~April 2020 and with Cambrex for PROCYSBI API of $0.7 million, to be delivered through October 2020.

~~In July 2013, Vidara Therapeutics International Public Limited Company (“Vidara”) and Boehringer Ingelheim entered into~~Under an ~~exclusive supply~~ agreement ~~which the Company assumed in September 2014 and amended effective as of September 5, 2014 and June 1, 2015. That supply agreement was replaced~~ with ~~an exclusive global supply agreement between the Company and~~ Boehringer Ingelheim Biopharmaceuticals GmbH (“Boehringer Ingelheim Biopharmaceuticals”) ~~effective June 30, 2017. Under the agreement,~~, Boehringer Ingelheim Biopharmaceuticals is required to manufacture and supply ACTIMMUNE and IMUKIN to the Company. Following the Company’s sale of the rights to IMUKIN in all territories outside of the United States, Canada and Japan to Clinigen Group plc (“Clinigen”), purchases of IMUKIN inventory are expected to be resold to Clinigen. The Company is required to purchase minimum quantities of finished medicine ~~per annum through July 2024. During~~during the year ended December 31, 2016, the Company committed to purchase additional amounts of ACTIMMUNE from Boehringer Ingelheim. These additional amounts were intended to cover anticipated demand if the resultsterm of the ~~STEADFAST study of ACTIMMUNE for the treatment of FA had been successful.~~agreement, which term extends to at least June 30, 2024. As of ~~September 30, 2017,~~March 31, 2020, the minimum binding purchase commitment to Boehringer Ingelheim Biopharmaceuticals was ~~$22.5~~$15.4 million (converted using a Dollar-to-Euro exchange rate of ~~1.1814)~~1.1034 as of March 31, 2020) through ~~July~~June 2024. ~~Following the discontinuation~~As of ~~the STEADFAST program, the Company recorded a loss of $14.3 million in “cost of goods sold” in the condensed consolidated statement of comprehensive loss during the year ended December~~March 31, 2016 for a portion of this commitment which represented firm, non-cancellable and unconditional purchase commitments for quantities in excess of the Company’s current forecasts for future demand. During the nine months ended September 30, 2017, the Company renegotiated the purchase commitment due to Boehringer Ingelheim and recorded $2.7 million as a reduction to “cost of goods sold”. During the year ended December 31, 2016,2020, the Company also committed to incur an additional ~~$14.9~~$0.4 million for the harmonization of the drug substance manufacturing process with Boehringer ~~Ingelheim. These additional costs will be incurred during~~Ingelheim Biopharmaceuticals.

Under the ~~years 2017 through 2021. During the three and nine months ended September 30, 2017,~~Company’s agreement with Bio-Technology General (Israel) Ltd (“BTG Israel”), the Company ~~recorded $5.7 million~~has agreed to purchase certain minimum annual order quantities and ~~$12.2 million, respectively, in its condensed consolidated statement of comprehensive loss related to the harmonization of the drug substance manufacturing process.~~

~~In November 2013, the Company entered into a long-term master manufacturing services and product agreement with Patheon Pharmaceuticals Inc. (“Patheon”) pursuant to which Patheon~~ is obligated to purchase at least 80 percent of its annual world-wide bulk product requirements for KRYSTEXXA from BTG Israel. The term of the agreement runs until December 31, 2030, and will automatically renew for successive three-year periods unless earlier terminated by either party upon three years’ prior written notice. The agreement may be terminated earlier by either party in the event of a force majeure, liquidation, dissolution, bankruptcy or insolvency of the other party, uncured material breach by the other party or after January 1, 2024, upon three years’ prior written notice. Under the agreement, if the manufacture ~~VIMOVO for~~of the bulk product is moved out of Israel, the Company ~~through December 31, 2019. The Company agreed~~may be required to ~~purchase~~obtain the approval of the Israel Innovation Authority (formerly known as Israeli Office of the Chief Scientist) (“IIA”) because certain KRYSTEXXA intellectual property was initially developed with a ~~specified percentage of VIMOVO requirements for~~grant funded by the United States from Patheon. The Company must pay an agreed price for final, packaged VIMOVO supplied by Patheon as set forth in the Patheon manufacturing agreement, subject to adjustments, including certain unilateral adjustments by Patheon, such as annual adjustments for inflation and adjustments to account for certain increases in the cost of components of VIMOVO other than active materials. IIA. The Company issues ~~twelve-month~~eighteen-month forecasts of the volume of ~~VIMOVO~~KRYSTEXXA that the Company expects to order. The first ~~six~~nine months of the forecast are considered binding firm orders. At ~~September 30, 2017,~~March 31, 2020, the Company had a binding purchase commitment with ~~Patheon~~BTG Israel for ~~VIMOVO~~KRYSTEXXA of ~~$1.5~~$38.0 million, ~~which is~~ to be delivered through December ~~2017.~~2026. Additionally, there were other purchase orders relating to the manufacture of KRYSTEXXA of $1.2 million outstanding at March 31, 2020.

~~In October 2014, in connection with the acquisition of the U.S. rights to PENNSAID 2% from~~Nuvo Pharmaceuticals Inc. (formerly known as Nuvo Research Inc.,) (“Nuvo”)~~, the Company and Nuvo entered into an exclusive supply agreement. Under the supply agreement, which was amended in February 2016, Nuvo~~ is obligated to manufacture and supply PENNSAID 2% to the Company. The term of the supply agreement is through December 31, 2029, but the agreement may be terminated earlier by either party for any uncured material breach by the other party of its obligations under the supply agreement or upon the bankruptcy or similar proceeding of the other party. At least ninety days prior to the first day of each calendar month during the term of the supply agreement, the Company submits a binding written purchase order to Nuvo for PENNSAID 2% in minimum batch quantities. At ~~September 30, 2017,~~March 31, 2020, the Company had a binding purchase commitment with Nuvo for PENNSAID 2% of ~~$4.3~~$3.8 million, to be delivered through ~~January 2018.~~August 2020.

In November 2010, Raptor and Patheon entered into a manufacturing services agreement, which the Company assumed as a result of its acquisition of Raptor. Under the agreement, which was amended in April 2012 and June 2013, PatheonSanofi-Aventis U.S. LLC (“Sanofi-Aventis U.S.”) is obligated to manufacture ~~PROCYSBI for~~and supply DUEXIS to the Company ~~through December 31, 2019. The Company must provide Patheon with rolling, non-binding forecasts of PROCYSBI, with a portion of the forecast being a firm written order. In November 2010, Raptor~~in final, packaged form and ~~Cambrex Profarmaco Milano (“Cambrex”) entered into an active pharmaceutical ingredient (“API”) supply agreement, which~~ the Company ~~assumed as a result of its acquisition of Raptor. Under the agreement, which was amended in April 2013 and August 2016, Cambrex~~ is obligated to ~~manufacture PROCYSBI API~~purchase DUEXIS exclusively from Sanofi-Aventis U.S. for the ~~Company through November 30, 2020.~~commercial requirements of DUEXIS in North America, South America and certain countries and territories in Europe, including the European Union (“EU”) member states and Scandinavia. The ~~Company must provide Cambrex with rolling, non-binding forecasts, with a portion of the forecast being the minimum floor of the firm order that must be placed.~~agreement term extends until May 2021 and automatically renews for successive two-year terms unless terminated by either party upon two years’ prior written notice. At ~~September 30, 2017,~~March 31, 2020, the Company had a binding purchase commitment ~~with Patheon~~to Sanofi-Aventis U.S. for ~~PROCYSBI~~DUEXIS of ~~$1.4~~$9.0 million, to be delivered through ~~January 2018 and with Cambrex for PROCYSBI API of $2.8 million through December~~October 2020.

In March 2007, Savient Pharmaceuticals, Inc. (as predecessor in interest to Crealta), entered into a commercial supply agreement with Bio-Technology General (Israel) Ltd (“BTG Israel”) for the production of the bulk KRYSTEXXA medicine (“bulk product”). The Company assumed this agreement as part of the Crealta acquisition and amended the agreement in September 2016. Under this agreement, the Company has agreed to purchase certain minimum annual order quantities and is obligated to purchase at least eighty percent of its annual world-wide bulk product requirements from BTG Israel. The term of the agreement runs until December 31, 2030, and will automatically renew for successive three year periods unless earlier terminated by either party upon three years prior written notice. The agreement may be terminated earlier by either party in the event of a force majeure, liquidation, dissolution, bankruptcy or insolvency of the other party, uncured material breach by the other party or after January 1, 2024, upon three years prior written notice. Under the agreement i~~f the manufacture of the~~ ~~bulk product~~ is moved out of Israel, the Company may be required to obtain the approval of the Israeli Office of the Chief Scientist (“OCS”) because certain KRYSTEXXA intellectual property was initially developed with a grant funded by the OCS. The Company issues eighteen-month forecasts of the volume of KRYSTEXXA that the Company expects to order. The first six months of the forecast are considered binding firm orders. At September 30, 2017, the Company had a binding purchase commitment with BTG Israel for KRYSTEXXA of $52.0 million through December 31, 2026. Additionally, other binding commitments relating to the manufacture of KRYSTEXXA of $1.8 million were outstanding at September 30, 2017.

Excluding the above, additional purchase orders and other commitments relating to the manufacture of RAVICTI, BUPHENYL, ~~MIGERGOT,~~RAYOS and QUINSAIR ~~and RAVICTI and VIMOVO~~ of ~~$9.6~~$8.8 million were outstanding at ~~September 30, 2017.~~March 31, 2020.

In connection with an August 2004 development and license agreement with SkyePharma AG, who subsequently entered into a business combination with Vectura Group plc (“Vectura”), and Jagotec, a wholly owned subsidiary of Vectura, regarding certain proprietary technology and know-how owned by Vectura, Jagotec is entitled to receive a single digit percentage royalty on net sales of RAYOS/LODOTRA and on any sub-licensing income, which includes any payments not calculated based on the net sales of RAYOS/LODOTRA, such as license fees, lump sums and milestone payments.

The Company entered into a license agreement with Pozen Inc. who subsequently entered into a business combination with Tribute Pharmaceuticals Canada Inc. to become known as Aralez Pharmaceuticals Inc. (“Aralez”). Under this agreement, the Company is required to pay Aralez a flat 10% royalty on net sales of VIMOVO and other medicines sold by the Company, its affiliates or sublicensees during the royalty term that contain gastroprotective agents in a single fixed combination oral solid dosage form with nonsteroidal anti-inflammatory drugs, subject to minimum annual royalty obligations of $7.5 million. These minimum royalty obligations will continue for each year during which one of Aralez’s patents covers such medicines in the United States and there are no competing medicines in the United States. The royalty rate may be reduced to a mid-single digit royalty rate as a result of loss of market share to competing medicines. The Company’s obligation to pay royalties to Aralez will expire upon the later of (a) expiration of the last-to-expire of certain patents covering such medicines in the United States, and (b) ten years after the first commercial sale of such medicines in the United States.

In November 2013, the Company, AstraZeneca AB (“AstraZeneca”) and Aralez entered into a letter agreement. Under the letter agreement, the Company and AstraZeneca agreed to pay Aralez milestone payments upon the achievement by the Company and AstraZeneca, collectively, of certain annual aggregate global net sales thresholds ranging from $550.0 million to $1.25 billion with respect to VIMOVO. The aggregate milestone payment amount that may be owed by AstraZeneca and the Company, collectively, under the letter agreement is $260.0 million, with the amount payable by each of the Company and AstraZeneca with respect to each milestone to be based upon the proportional sales achieved by each of the Company and AstraZeneca, respectively, in the applicable year.

Under a license agreement, as amended, with Genentech Inc. (“Genentech”), who was the original developer of ACTIMMUNE, the Company is or was obligated to pay royalties to Genentech on its net sales of ACTIMMUNE as follows:

Under the terms of an assignment and option agreement with Connetics Corporation (which was the predecessor parent company to InterMune Pharmaceuticals Inc. and is now part of GlaxoSmithKline), (“Connetics”), the Company is obligated to pay low single-digit royalties to Connetics on the Company’s net sales of ACTIMMUNE in the United States.

Under the terms of an asset purchase agreement with Ucyclyd Pharma, Inc. (“Ucyclyd”), the Company is obligated to pay to Ucyclyd tiered mid to high single-digit royalties on its global net sales of RAVICTI. Under the terms of a license agreement with~~Brusilow,~~ ~~the Company is obligated~~ ~~to pay low single-digit royalties to Brusilow on net sales of RAVICTI that are covered by a valid claim of a licensed patent.~~

Under the terms of an amended and restated collaboration agreement with Ucyclyd, the Company is obligated to pay to Ucyclyd tiered mid to high single-digit royalties on its net sales in the United States of BUPHENYL to urea cycle disorder patients outside of the U.S. Food and Drug Administration (“FDA”) approved labeled age range for RAVICTI.

Under the terms of a license agreement with Duke and MVP, the Company is obligated to pay Duke a mid single-digit royalty on its global net sales of KRYSTEXXA and a royalty of between 5% and 15% on any global sublicense revenue. The Company is also obligated to pay MVP a mid single-digit royalty on its net sales of KRYSTEXXA outside of the United States and a royalty of between 5% and 15% on any sublicense revenue outside of the United States.

~~Under the terms of an amended and restated license agreement with UCSD, the Company is obligated to pay to UCSD tiered low to mid single-digit royalties on its net sales of PROCYSBI.~~

~~The royalty obligations described above are included in accrued royalties on the Company’s condensed consolidated balance sheets.~~

For all of the royalty agreements entered into by the Company, a total expense of $15.0 million and $42.1 million was recorded during the three and nine months ended September 30, 2017, respectively, of which $14.9 million and $42.0 million was recorded in cost of goods sold, respectively, and $0.1 million and $0.1 million was recorded in selling, general and administrative expenses, respectively, in the condensed consolidated statements of comprehensive loss. During the three and nine months ended September 30, 2016, $11.2 million and $32.6 million was recorded in cost of goods sold, respectively, in the condensed consolidated statements of comprehensive loss.

On November 8, 2016, the Company entered into a collaboration and option agreement with a privately held life-science entity. Under the terms of the agreement, the privately held life-science entity will conduct certain research and pre-clinical and clinical development activities. Upon execution of the agreement, the Company paid $0.1 million for the option to acquire certain of the privately held life-science entity’s assets for $25.0 million, which is exercisable on specified key dates. Under the collaboration and option agreement, the Company is required to pay up to $9.8 million upon the attainment of various milestones, primarily to fund clinical development costs for the medicine candidate. The Company paid $0.2 million in the fourth quarter of 2016, $0.9 million during the first quarter of 2017 and $1.5 million in the third quarter of 2017 related to milestones.

On May 8, 2017, the Company acquired River Vision for upfront cash payments totaling $151.9 million, including $6.3 million of cash acquired, and subject to other customary purchase price adjustments for working capital, and potential future milestone and royalty payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. Under the agreement, the Company is required to pay up to $325.0 million upon the attainment of various milestones related to FDA approval and net sales thresholds. The agreement also includes a royalty payment of three percent of the portion of annual worldwide net sales exceeding $300.0 million (if any). Under a separate agreement, the Company is also required to pay up to CHF103.0 million upon the attainment of various milestones related to approval, filing and net sales thresholds. The agreement also includes a royalty payment of between nine percent and twelve percent of the portion of annual worldwide net sales.

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

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

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

Under the agreement for the acquisition of River Vision, the Company agreed to pay up to $325.0 million upon the attainment of various milestones, composed of $100.0 million related to FDA approval and $225.0 million related to net sales thresholds for TEPEZZA. The Company made the $100.0 million milestone payment related to FDA approval during the first quarter of 2020.

The remaining aggregate potential milestone payments of $225.0 million are payable based on certain TEPEZZA worldwide net sales thresholds being achieved as noted in the following table:

The agreement also includes a royalty payment of 3 percent of the portion of annual worldwide net sales exceeding $300.0 million (if any).

In April, 2020, a subsidiary of the Company entered into an agreement with S.R. One, Limited (“S.R. One”) and an agreement with Lundbeckfond Invest A/S (“Lundbeckfond”) pursuant to which the Company acquired all of S.R. One’s and Lundbeckfond’s beneficial rights to proceeds from certain contingent future TEPEZZA milestone and royalty payments in exchange for a one-time payment of $55.0 million to each of the respective parties. The total payments of $110.0 million will be recorded as TEPEZZA developed technology intangible assets in the second quarter of 2020.

S.R. One and Lundbeckfond, as two of the former River Vision stockholders, both held rights to receive approximately 35.66% of any future TEPEZZA payments. As a result of the transactions with S.R. One and Lundbeckfond, the Company’s remaining net obligations to make TEPEZZA payments to the former stockholders of River Vision will be reduced by approximately 71.32%.

Under the Company’s license agreement with Roche, the Company is required to pay Roche up to CHF103.0 million ($107.2 million when converted using a CHF-to-Dollar exchange rate at March 31, 2020 of 1.0406) upon the attainment of various development, regulatory and sales milestones for TEPEZZA. During the years ended December 31, 2019 and 2017, CHF3.0 million ($3.0 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0023) and CHF2.0 million ($2.0 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0169), respectively, was paid in relation to these milestones. The Company made a milestone payment of CHF5.0 million ($5.2 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0382) during the first quarter of 2020. The agreement with Roche also includes tiered royalties on annual worldwide net sales between 9 and 12 percent.

Under the Company’s license agreement with Lundquist Institute (formerly known as Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center) (“Lundquist”), the Company is required to pay Lundquist a royalty payment of less than 1 percent of TEPEZZA net sales.

Under the Company’s license agreement with Boehringer Ingelheim Biopharmaceuticals, the Company is required to pay Boehringer Ingelheim Biopharmaceuticals milestone payments totaling low-single-digit million Euros upon the achievement of certain TEPEZZA sales milestones.

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. In connection with the federal securities class action litigation (described in Note 17 below), the Company has received notice from the Underwriter Defendants (as defined below) of their intention to seek indemnification and has received and paid several invoices from the Underwriter Defendants. The Company may record charges in the future as a result of these indemnification obligations.

In accordance with its memorandum and articles of association, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. Additionally, the Company has entered into, and intends to continue to enter into, separate indemnification agreements with its directors and executive officers. These agreements, among other things, require the Company to indemnify its directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers, or any of the Company’s subsidiaries or any other company or enterprise to which the person provides services at the Company’s request. In connection with the federal securities class action litigation (described in Note 17 below), the Company has paid legal fees and costs on behalf of itself and the current and former officers and directors of the Company who are named as defendants in that litigation. The Company also has a director and officer insurance policy that enables it to recover a portion of any amounts paid for current and future potential claims. All of the Company’s officers and directors have also entered into separate indemnification agreements with ~~Horizon Pharma, Inc. (“HPI”).~~HTUSA.

On July 15, 2013, the Company received a Paragraph IV Patent Certification from Watson Laboratories, Inc.—Florida, known as Actavis Laboratories FL, Inc. (“Actavis FL”), advising that Actavis FL had filed an Abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of RAYOS, containing up to 5 mg of prednisone. On August 26, 2013, the Company, together with Jagotec, filed suit in the United States District Court for the District of New Jersey against Actavis FL, Actavis Pharma, Inc., Andrx Corp., and Actavis, Inc. seeking an injunction to prevent the approval of the ANDA.

On October 1, 2015, the Company’s subsidiary Horizon Pharma Switzerland GmbH, as well as Jagotec, entered into a license and settlement agreement (the “Actavis settlement agreement”) with Actavis FL relating to the Company’s and Jagotec’s patent infringement litigation against Actavis FL. The court entered the stipulation of dismissal and closed the case on December 4, 2015. The Actavis settlement agreement provides for a full settlement and release by each party of all claims that relate to the litigation or under the patents with respect to Actavis FL’s generic version of RAYOS tablets.

Under the Actavis settlement agreement, the Company and Jagotec granted Actavis FL a non-exclusive license to manufacture and commercialize Actavis FL’s generic version of RAYOS tablets in the United States after the generic entry date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Actavis FL’s generic version of RAYOS tablets during certain limited periods prior to the generic entry date. The Company and Jagotec also agreed that during the 180 days after the generic entry date, the license granted to Actavis FL would be exclusive with respect to any third-party generic version of RAYOS tablets.

Under the Actavis settlement agreement, the generic entry date is December 23, 2022; however, Actavis FL may be able to enter the market earlier under certain circumstances. Such events relate to the resolution of any other third-party RAYOS patent litigation, the entry of other generic versions of RAYOS tablets or certain substantial reductions in RAYOS prescriptions over specified periods of time.

On November 13, 2014, the Company received a Paragraph IV Patent Certification from Watson Laboratories, Inc., now known as Actavis Laboratories UT, Inc. (“~~Watson Laboratories”~~Actavis UT”), advising that ~~Watson Laboratories~~Actavis UT had filed an ~~ANDA~~Abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of PENNSAID 2%. On December 23, 2014, June 30, 2015, August 11, 2015 and September 17, 2015, the Company filed ~~suit~~four separate suits against Actavis UT and Actavis plc (collectively “Actavis”), in the United States District Court for the District of New Jersey, ~~against Actavis Laboratories UT, Inc., and Actavis plc (collectively “Actavis”)~~with each of the suits seeking an injunction to prevent ~~the~~ approval of the ANDA. ~~Since then, Watson Laboratories, Inc. changed its name to Actavis Laboratories UT, Inc., and is the current owner of the ANDA.~~ The ~~lawsuit~~lawsuits alleged that Actavis has infringed ~~U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,871,809~~nine of the Company’s patents covering PENNSAID 2% by filing an ANDA seeking approval from the FDA to market a generic version of PENNSAID 2% prior to the expiration of certain of the Company’s patents listed in the FDA’s Orange Book ~~(“Orange~~(the “Orange Book”).

These 4 suits were consolidated into a single suit. On ~~June 30,~~October 27, 2015 and on February 5, 2016, the Company filed ~~suit~~2 additional suits against Actavis, in the United States District Court for the District of New Jersey, ~~against Actavis~~ for patent infringement of ~~U.S. Patent 9,066,913. On August 11, 2015, the~~3 additional Company filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of U.S. Patent 9,101,591. On September 17, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of U.S. Patent 9,132,110. All three patents ~~U.S. Patents 9,066,913, 9,101,591 and 9,132,110 are listed in the Orange Book and have claims that cover~~covering PENNSAID 2%. ~~These three cases were consolidated with the case filed against Actavis on December 23, 2014.~~

On August 17, 2016, the ~~district court~~District Court issued a Markman opinion holding certain of the asserted claims of ~~U.S. Patents 8,252,838, 8,563,613, 9,066,913 and 9,101,591~~seven of the Company’s patents covering PENNSAID 2% invalid as indefinite. On March 16, 2017, the ~~court~~Court granted Actavis’ motion for summary judgment of non-infringement of the asserted claims of ~~U.S. Patents 8,546,450, 8,217,078 and 9,132,110.~~three of the Company’s patents covering PENNSAID 2%. In view of the Markman and summary judgment decisions, a bench trial was held onfrom March ~~21-30,~~21, 2017 through March 30, 2017, regarding a claim 12 of ~~U.S. Patent 9,066,913.~~one of the Company’s patents covering PENNSAID 2%. On May 14, 2017, the ~~court~~Court issued its opinion upholding the validity of claim 12 of the ~~‘913~~ patent, which Actavis had previously admitted its proposed generic diclofenac sodium topical solution product would infringe. Actavis filed its Notice of Appeal on June 16, 2017. The Company also filed its Notice of Appeal of the ~~district court’s~~District Court’s rulings on certain claims of the ~~‘450, ‘078, ‘838, ‘613, ‘591, ‘304, ‘784, ‘913,~~Company’s patents covering PENNSAID 2%. On October 10, 2019, the Federal Circuit Court affirmed the District Court’s judgment of validity of U.S Patent No. 9,066,913 (the “‘913 patent”), and ~~‘110 patents on June 9, 2017. The Company’s opening brief was filed on August 14, 2017. Actavis’s opening brief, challenging~~its finding that the ~~district court’s judgment on~~Actavis generic product would infringe the ‘913 ~~patent, was filed on October 10, 2017.~~ patent. ��The ~~Company’s brief defending~~Federal Circuit also affirmed the District Court’s summary judgment ~~on the ‘913 patent is due on November 20, 2017.~~

~~On October 27, 2015, the~~finding that certain patents are invalid for indefiniteness and would not be infringed. The Company filed ~~suit in the United States District Court~~a Petition for the District of New Jersey against Actavis for patent infringement of U.S. Patents 9,168,304 and 9,168,305. On February 5, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of U.S. Patent No. 9,220,784. All three patents, U.S. Patent Nos. 9,168,304, 9,168,305, and 9,220,784, are listed in the Orange Book and have claims that cover PENNSAID 2%. All claims from U.S. Patents 9,168,304, 9,168,305 and 9,220,784 asserted against Actavis were held invalid as indefinite by way of the court’s August 17, 2016 Markman opinion. The court’s rulings are currently on appeal toRehearing, asking the Federal ~~Circuit.~~Circuit to reconsider the latter order invalidating certain patents.

On August 18, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of ~~U.S. Patents 9,339,551, 9,339,552, 9,370,501 and 9,375,412.~~four of the Company’s newly issued patents covering PENNSAID 2%. All four of such patents ~~U.S. Patents 9,339,551, 9,339,552, 9,370,501 and 9,375,412,~~ are listed in the Orange ~~Book and have claims that cover PENNSAID 2%.~~

Book. This litigation is currently stayed by agreement of the parties. The Company received from Actavis a Paragraph IV Patent Certification ~~Notice Letter~~notice, dated September 27, 2016, against ~~Orange Book listed U.S. Patent No. 9,415,029,~~an additional newly issued patent covering PENNSAID 2%, advising that Actavis had filed an ANDA with the FDA for a generic version of PENNSAID 2%. The subject patent is listed in the Orange Book.

On ~~December 2, 2014,~~May 29, 2018, the Company received ~~a Paragraph IV Patent Certification against Orange Book listed U.S. Patents. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164 and 8,741,956~~notice from ~~Paddock~~Alkem Laboratories, ~~LLC~~Inc. (“~~Paddock”~~Alkem”) ~~advising~~ that ~~Paddock~~it had filed an ANDA with the FDA ~~for~~seeking approval of a generic version of PENNSAID 2%. On January 9, 2015, the Company received from Paddock another Paragraph IV Patent Certification against newly Orange Book listed U.S. Patent No. 8,871,809. On January 13, 2015 and January 14, 2015, the Company filed suits in the United States District Court for the District of New Jersey and the United States District Court for the District of Delaware, respectively, against Paddock seeking an injunction to prevent the approval of the ANDA.DUEXIS. The ~~lawsuits alleged that Paddock has infringed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164 and 8,871,809 by filing an~~ ANDA ~~seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of certain of the Company’s patents listed in the Orange Book.~~

On May 6, 2015, the Company entered into a settlement and license agreement (the “Perrigo settlement agreement”) with Perrigo Company plc and its subsidiary Paddock (collectively, “Perrigo”), relating to the Company’s patent infringement litigation against Perrigo. The Perrigo settlement agreement provides for a full settlement and release by both the Company and Perrigo of all claims that were or could have been asserted in the litigation and that arise out of the issues that were the subject of the litigation or Perrigo’s generic version of PENNSAID 2%. A stipulation of dismissal was entered by the district court on May 13, 2015.

Under the Perrigo settlement agreement, the license effective date is January 10, 2029; however, Perrigo may be able to enter the market earlier under certain circumstances. Such events relate to the resolution of any other third-party PENNSAID 2% patent litigation, the entry of other third-party generic versions of PENNSAID 2% or certain substantial reductions in the Company’s PENNSAID 2% shipments over specified periods of time.

Under the Perrigo settlement agreement, the Company also agreed not to sue or assert any claim against Perrigo for infringement of any patent or patent application owned or controlled by the Company during the term of the license granted in the Perrigo settlement agreement based on the manufacture, use, sale, offer for sale, or importation of Perrigo’s generic version of PENNSAID 2% in the United States.

In certain circumstances following the entry of other third-party generic versions of PENNSAID 2%, the Company may be required to supply Perrigo PENNSAID 2% as its authorized distributor of generic PENNSAID 2%, with the Company receiving specified percentages of any net sales by Perrigo.

~~On February 2, 2015, the Company received~~contained a Paragraph IV Patent Certification against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956 and 8,871,809 from Taro Pharmaceuticals USA, Inc. and Taro Pharmaceutical Industries, Ltd. (collectively, “Taro”) advisingalleging that ~~Taro had filed an~~the patents covering DUEXIS are invalid and/or will not be infringed by Alkem’s manufacture, use or sale of the medicine for which the ANDA ~~with the FDA for a generic version of PENNSAID 2%. On March 13, 2015, the~~was submitted. The Company filed suit in the United States District Court ~~for the District~~ of ~~New Jersey~~Delaware against ~~Taro~~Alkem on July 9, 2018, seeking an injunction to prevent the approval of ~~the ANDA.~~

On September 9, 2015, certain subsidiaries of the Company (the “Horizon Subsidiaries”) entered into a settlement and license agreement with Taro (the “Taro settlement agreement”) relating to the Horizon Subsidiaries’ patent infringement litigation against Taro. The Taro settlement agreement provides for a full settlement and release by the Horizon Subsidiaries and Taro of all claims that were or could have been asserted in the litigation and that arise out of the issues that were subject of the litigation or Taro’s generic version of PENNSAID 2%. A stipulation of dismissal was entered by the district court on November 3, 2015.

Under the Taro settlement agreement, the Horizon Subsidiaries granted Taro a non-exclusive license to manufacture and commercialize Taro’s generic version of PENNSAID 2% in the United States after the license effective date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Taro’s generic version of PENNSAID 2% during certain limited periods prior to the license effective date.

Under the Taro settlement agreement, the license effective date is January 10, 2029; however, Taro may be able to enter the market earlier under certain circumstances. Such events relate to the resolution of any other third-party PENNSAID 2% patent litigation, the entry of other third-party generic versions of PENNSAID 2% or certain substantial reductions in the Company’s PENNSAID 2% shipments over specified periods of time.

On March 18, 2015, the Company received a Paragraph IV Patent Certification against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956 and 8,871,809 from Lupin Limited advising that Lupin Limited had filed anAlkem’s ANDA with the FDA for generic version of PENNSAID 2%. On April 30, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Lupin Limited and Lupin Pharmaceuticals Inc. (collectively, “Lupin”), seeking an injunctionand/or to prevent ~~the approval of the ANDA. The lawsuit alleges that Lupin has infringed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164 and 8,871,809 by filing an ANDA seeking approval~~Alkem from the FDA to market generic versions of PENNSAID 2% prior to the expiration of certain of the Company’s patents listed in the Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Lupin’s ANDA for 30 months or until an earlier district court decision which finds that the subject patents are not infringed or are invalid.

On June 30, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patent No. 9,066,913. On August 11, 2015, the Company filed an amended complaint in the United States District Court for the District of New Jersey against Lupin that added U.S. Patent No. 9,101,591 to the litigation concerning U.S. Patent 9,066,913. On September 17, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patent 9,132,110. All three patents, U.S. Patents 9,066,913, 9,101,591 and 9,132,110 are listed in the Orange Book and have claims that cover PENNSAID 2%.

On October 27, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patents 9,168,304 and 9,168,305. On February 5, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patent No. 9,220,784. On August 18, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patents 9,339,551, 9,339,552, 9,370,501 and 9,375,412. All seven patents, U.S. Patents 9,168,304, 9,168,305, 9,220,784, 9,339,551, 9,339,552, 9,370,501 and 9,375,412, are listed in the Orange Book and have claims that cover PENNSAID 2%. All of the infringement actions brought against Lupin remain pending, with certain claims of the ’809, ’913, ’450, ’110, ’551, ’552, ’412 and ’501 patents being asserted. The decisions reached by the court in the related Actavis actions regarding the ‘809, ‘913, ‘450, ‘110, ‘551, ‘552, ‘412 and ‘501 patents as described above, are expected to apply to the same claims asserted against Lupin in these actions. The court has not yet set a trial date for the Lupin actions.

The Company received from Teligent, Inc., formerly known as IGI Laboratories, Inc. (“Teligent”), a Paragraph IV Patent Certification dated March 24, 2015 against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956 and 8,871,809 advising that Teligent had filed an ANDA with the FDA forselling a generic version of ~~PENNSAID 2%. On May 21, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Teligent seeking an injunction to prevent the approval of the ANDA.~~DUEXIS. The lawsuit alleged that Teligent has infringed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164 and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of certain of the Company’s patents listed in the Orange Book.

On June 30, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Teligent for patent infringement of U.S. Patent 9,066,913. On August 11, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Teligent for patent infringement of U.S. Patent 9,101,591. On September 17, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Teligent for patent infringement of U.S. Patent No. 9,132,110. All three patents, U.S. Patents 9,066,913, 9,101,591 and 9,132,110 are listed in the Orange Book and have claims that cover PENNSAID 2%.

On October 27, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Teligent for patent infringement of U.S. Patents 9,168,304 and 9,168,305. On February 5, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Teligent for patent infringement of U.S. Patent 9,220,784. All three patents, U.S. Patents 9,168,304, 9,168,305 and 9,220,784 are listed in the Orange Book and have claims that cover PENNSAID 2%.

~~The Company entered into a settlement and license agreement with Teligent (the “Teligent settlement agreement”), effective May 9, 2016, relating to the patent infringement~~ litigation ~~against Teligent. The Teligent settlement agreement provides~~is scheduled for a full settlement and release by both the Company and Teligent of all claims that were or could have been asserted in the litigation and that arise out of the issues that were subject of the litigation or Teligent’s generic version of PENNSAID 2%. A stipulation of dismissal was entered by the district courtbench trial beginning on ~~May 2, 2016.~~

Under the Teligent settlement agreement, the Company granted Teligent a non-exclusive license to manufacture and commercialize Teligent’s generic version of PENNSAID 2% in the United States after the license effective date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Teligent’s generic version of PENNSAID 2% during certain limited periods prior to the license effective date.

Under the Teligent settlement agreement, the license effective date is January 10, 2029; however, Teligent may be able to enter the market earlier under certain circumstances. Such events relate to the resolution of any other third-party PENNSAID 2% patent litigation, the entry of other third-party generic versions of PENNSAID 2% or certain substantial reductions in the Company’s PENNSAID 2% shipments over specified periods of time. In certain circumstances following the entry of other third-party generic versions of PENNSAID 2%, the Company may be required to supply Teligent PENNSAID 2% as an authorized distributor of generic PENNSAID 2%, with the Company receiving specified percentages of any net sales by Teligent.

The Company received from Amneal Pharmaceuticals LLC (“Amneal”) a Paragraph IV Patent Certification dated April 2, 2015 against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956 and 8,871,809 advising that Amneal had filed an ANDA with the FDA for a generic version of PENNSAID 2%. On May 15, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Amneal seeking an injunction to prevent the approval of the ANDA. The lawsuit alleged that Amneal has infringed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164 and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of certain of the Company’s patents listed in the Orange Book.

On June 30, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Amneal for patent infringement of U.S. Patent 9,066,913. On August 11, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Amneal for patent infringement of U.S. Patent 9,101,591. On September 17, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Amneal for patent infringement of U.S. Patent 9,132,110. All three patents, U.S. Patents 9,066,913, 9,101,591 and 9,132,110, are listed in the Orange Book and have claims that cover PENNSAID 2%.

On October 27, 2015, the Company filed suit in the United States District Court for the District of New Jersey against Amneal for patent infringement of U.S. Patents 9,168,304 and 9,168,305. On February 5, 2016, the Company filed suit in the United States District Court for the District of New Jersey against Amneal for patent infringement of U.S. Patent 9,220,784. All three patents, U.S. Patents 9,168,304, 9,168,305, and 9,220,784, are listed in the Orange Book and have claims that cover PENNSAID 2%.

On April 18, 2016, the Company entered into a settlement and license agreement (the “Amneal settlement agreement”) with Amneal relating to the Company’s patent infringement litigation against Amneal. The Amneal settlement agreement provides for a full settlement and release by both the Company and Amneal of all claims that were or could have been asserted in the litigation and that arise out of the issues that were the subject of the litigation or Amneal’s generic version of PENNSAID 2%. A stipulation of dismissal was entered by the district court.

Under the Amneal settlement agreement, the Company granted Amneal a non-exclusive license to manufacture and commercialize Amneal’s generic version of PENNSAID 2% in the United States after the license effective date (as defined below) and to take steps necessary to develop inventory of, and prepare to commercialize, Amneal’s generic version of PENNSAID 2% during certain limited periods prior to the license effective date.

Under the Amneal settlement agreement, the license effective date is January 10, 2029; however, Amneal may be able to enter the market earlier under certain circumstances. Such events relate to the resolution of any other third-party PENNSAID 2% patent litigation or the entry of other third-party generic versions of PENNSAID 2%.

In certain circumstances following the entry of other third-party generic versions of PENNSAID 2%, the Company may be required to supply Amneal with PENNSAID 2% as a non-exclusive, authorized distributor of generic PENNSAID 2%, with the Company receiving specified percentages of any net sales by Amneal.

The Company received from Apotex Inc. (“Apotex”) a Paragraph IV Patent Certification Notice Letter dated April 1, 2016, against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, 8,871,809, 9,066,913, 9,101,591, 9,132,110, 9,168,304, 9,168,305 and 9,220,784 advising that Apotex had filed an ANDA with the FDA for a generic version of PENNSAID 2%. The Company also received from Apotex a second Paragraph IV Patent Certification Notice Letter dated June 30, 2016, against Orange Book listed U.S. Patents 9,339,551 and 9,339,552, advising that Apotex had filed an ANDA with the FDA for a generic version of PENNSAID 2%. The Company also received from Apotex a third Paragraph IV Patent Certification Notice Letter dated September 21, 2016, against Orange Book listed U.S. Patent 9,415,029, advising that Apotex had filed an ANDA with the FDA for a generic version of PENNSAID 2%. The Company also received from Apotex additional Paragraph IV Patent Certification Notice Letters dated April 20, 2017 and April 27, 2017 against Orange Book listed U.S. Patent 9,539,335 and 9,370,501.14, 2020.

Currently, patent litigation is pending in the United States District Court for the District of New Jersey and the Court of Appeals for the Federal Circuit against ~~three generic companies intending~~Dr. Reddy’s Laboratories Inc. and Dr. Reddy’s Laboratories Ltd. (collectively, “Dr. Reddy’s”) which seeks to market VIMOVO prior to the expiration of certain of the Company’s patents listed in the Orange Book. ~~These cases are in the United States District Court for the District of New Jersey. They are collectively~~Settlements have been reached with four other generic companies: (i) Teva Pharmaceuticals Industries Limited (formerly known as ~~the VIMOVO cases, and involve the following sets of defendants: (i) Dr. Reddy’s~~Actavis Laboratories FL, Inc., which itself was formerly known as Watson Laboratories, Inc. – Florida) and ~~Dr. Reddy’s Laboratories Ltd.~~Actavis Pharma, Inc. (collectively, ~~“Dr. Reddy’s”~~“Actavis Pharma”);, (ii) Lupin ~~Ltd.~~Limited and Lupin Pharmaceuticals, Inc. ~~(collectively, “Lupin”); and~~, (iii) Mylan Pharmaceuticals Inc., Mylan Laboratories Limited, and Mylan Inc. (collectively, “Mylan”)~~. Patent litigation in the United States District Court for the District of New Jersey against a fourth generic company, Actavis Laboratories FL.~~, ~~Inc.~~ and ~~Actavis~~(iv) Ajanta Pharma Ltd. and Ajanta Pharma USA Inc. (collectively, ~~“Actavis Pharma”~~“Ajanta”),. Under the settlement agreements, the license entry date was ~~dismissed on January 10, 2017 after~~August 1, 2024; however, the ~~court granted Actavis’ motion to compel enforcement of a settlement agreement. On February 3, 2017,~~entry date under all four licenses was accelerated and the Company appealed this dismissal decision to the Court of Appeals for the Federal Circuit. Patent litigation in the United States District Court for the District of New Jersey against a fifth generic company, Anchen Pharmaceuticals Inc. (“Anchen”), was dismissed on June 9, 2014 after Anchen recertified under Paragraph III. The Company understands thatlicenses became effective upon Dr. Reddy’s ~~has entered into a settlement with AstraZeneca with respect to patent rights directed to Nexium for the commercialization~~launch of ~~VIMOVO. The settlement agreement, however, has no effect~~its generic version of VIMOVO on the Aralez VIMOVO patents, which are still the subject of patent litigations. As part of the Company’s acquisition of the U.S. rights to VIMOVO, the Company has taken over and is responsible for the patent litigation that includes the Aralez patents licensed to the Company under the amended and restated collaboration and license agreement for the United States with Aralez.February 27, 2020, as described below.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4, 2013, May 10, 2013, June 28, 2013, October 23, 2013, May 13, 2015 and November 24, 2015 and collectively include allegations of infringement of ~~U.S. Patent Nos. 6,926,907, 8,557,285, 8,852,636, and 8,858,996 (the “’996 patent”). On June 18, 2015,~~certain of the Company amended the complaints to add a charge of infringement of U.S. Patent No. 8,865,190 (the “’190 patent”). On January 7, 2016, Actavis Pharma asserted a counterclaim for declaratory judgment of invalidity and non-infringement of U.S. Patent No. 8,945,621 (the “’621 patent”). On January 25, 2016, the Company filed a new case against Actavis Pharma including allegations of infringement of U.S. Patent Nos. 9,161,920 and 9,198,888. This case was subsequentlyCompany’s patents covering VIMOVO.

The District Court consolidated with the Actavis Pharma case involving the ’996 patent, the ’190 patent and U.S. Patent No. 8,852,636. On February 10, 2016, the Company amended the complaints against Dr. Reddy’s, Lupin, and Mylan to add charges of infringement of U.S. Patent Nos. 9,161,920 and 9,198,888. On February 19, 2016, Mylan asserted a counterclaim for declaratory judgment of invalidity and non-infringement of U.S. Patent No. 9,220,698. On August 11, 2016, the Company filed new complaints asserting the ’621 patent and U.S. Patent Nos. 9,220,698, and 9,345,695 against the defendants. On December 6, 2016, the Company asserted U.S. Patent No. 9,393,208 (the “’208 patent”) against Lupin, Mylan, and Actavis in amended complaints, and against Dr. Reddy’s in a new complaint.

~~“Case I” consists~~all of the cases ~~asserting U.S. Patent Nos. 8,557,285 and 6,926,907. “Case II” consists~~pending against the generic companies into two separate cases for purposes of discovery. The District Court entered final judgment for one of the consolidated cases ~~asserting~~on July 21, 2017, upholding the ’996 patent, the ’190 patent and U.S. Patent Nos. 8,852,636, 9,161,920, and 9,198,888. “Case III” consists of the cases asserting U.S. Patent Nos. 8,945,621, 9,220,698, 9,345,695, and the ’208 patent against Lupin and Mylan, and the case asserting U.S. Patent Nos. 8,945,621, 9,220,698, and 9,345,695 against Dr. Reddy’s. “Case IV” consisted of the case asserting the ’208 patent against Dr. Reddy’s, but has been consolidated with Case III.

The Case I cases were consolidated for discovery. The court issued a claim construction order for Case I and conducted trial beginning on January 12, 2017. On May 12, 2016, the court granted Dr. Reddy’s motion for summary judgment of non-infringementvalidity of U.S. Patent No. 6,926,907 ~~with respect to one of Dr. Reddy’s two ANDAs.~~

~~On December 19, 2016, defendant Actavis filed a motion to compel enforcement of settlement agreement related to Cases I, II,~~(the “‘907 patent”) and III. On December 22, 2016, Magistrate Judge Arpert entered a report and recommendation that Actavis’ motion to compel the enforcement of settlement be granted. On December 30, 2016, the Honorable Judge Mary Cooper ordered the adoption of the report and recommendation. On January 10, 2017, an order of dismissal was entered for all claims in Cases I, II and III. The Company appealed the district court’s order enforcing the settlement with Actavis to the Court of Appeals for the Federal Circuit. Briefing before the Federal Circuit has been completed.

On January 12, 2017, a six-day bench trial commenced against defendants Dr. Reddy’s and Mylan before Honorable Judge Mary Cooper in the District of New Jersey for Case I. The patents at issue in this trial included two Orange Book listed patents: U.S. Patent Nos. 6,926,907 and 8,557,285. Defendant Lupin formerly entered into a stay pending the entry of judgment in Case I. On June 26, 2017, the court issued its opinion upholding the validity of the ‘285 and ‘907 patentsNo. 8,557,285 (the “‘285 patent”), and finding ~~that Dr. Reddy’s, Mylan’s, and Lupin’s proposed~~the generic ~~naproxen/esomeprazole magnesium~~ products would ~~all~~ infringe ~~at least~~ one or both of the two patents. ~~The court entered the final judgment on July 21, 2017. Dr. Reddy’s, Mylan and Lupin have~~Both sides appealed the District Court’s judgment to the Court of Appeals for the Federal Circuit.

~~The Case II and Case III cases have been consolidated for discovery.~~ On ~~January 19, 2017,~~May 15, 2019, the ~~court entered a scheduling order for Case II and Case III, which was subsequently updated. The court’s scheduling order requires,~~ ~~inter alia, filing and serving~~Federal Circuit reversed the District Court’s judgment in favor of the ~~opening claim construction submissions by May 26, 2017. The court has not issued~~Company, and entered judgment that the ‘285 and ‘907 patents are invalid for lack of a ~~claim construction order in Case II. A trial date for Cases II and III has not yet been set.~~sufficient written description. On ~~December 20, 2016, Mylan filed a motion to dismiss~~July 30, 2019, the Federal Circuit Court of Appeals denied the Company’s ~~first amended complaint~~request for ~~patent~~a rehearing of the Court’s invalidity ruling against the ‘285 and ‘907 patents for VIMOVO coordinated-release tablets. As a result, the District Court entered judgment invalidating the ‘285 and ‘907 patents in September 2019. On February 18, 2020, the FDA granted final approval for Dr. Reddy’s generic version of VIMOVO. On February 27, 2020, Dr. Reddy’s launched its generic version of VIMOVO in the United States, and the Company now faces generic competition with respect to VIMOVO. The Company continues to assert claims of infringement against Dr. Reddy’s based on U.S. Patent No. 8,858,996 (the “‘996 patent”) and U.S. Patent No. 9,161,920 (the “‘920 patent”) in ~~Case III.~~ the District Court.

On ~~August 18, 2017,~~November 19, 2018, the District Court granted Dr. Reddy’s and Mylan’s ~~motions to dismiss~~summary judgment ruling that U.S Patent Numbers 9,220,698 and 9,393,208 are invalid, and on January 21, 2019, it entered final judgment against the ~~Company’s claims relating~~‘698, ‘208, and U.S. Patent Number 8,945,621. On February 21, 2019, the Company appealed the adverse judgments on the ‘208 and ‘698 patents to the ~~‘621 patent.~~

~~The Company understands the cases arise from Paragraph IV Patent Certification notice letters providing notice~~Federal Circuit Court of the filing of ANDAs with the FDA seeking regulatory approval to market generic versions of VIMOVO before the expiration of the patents-in-suit. The Company understands the Dr. Reddy’s notice letters were dated March 11, 2011, November 20, 2012 and April 20, 2015; the Lupin notice letters were dated June 10, 2011, March 12, 2014 and July 26, 2016; the Mylan notice letters were dated May 16, 2013, February 9, 2015, January 26, 2016, February 26, 2016, July 19, 2016 and September 22, 2016; the Actavis Pharma notice letters were dated March 29, 2013, November 5, 2013, May 29, 2015, October 9, 2015, December 10, 2015, March 1, 2016, April 6, 2016, July 22, 2016 and September 8, 2016; and the Anchen notice letter was dated September 16, 2011.Appeals.

On ~~June 5, 2015, the Coalition for Affordable Drugs VII LLC (“Coalition for Affordable Drugs”)~~December 4, 2017, Mylan filed a Petition for inter partes review (“IPR”) against the ‘208 patent. The Patent Trial and Appeals Board (“PTAB”) instituted an IPR proceeding on Mylan’s Petition on June 14, 2018. On July 2, 2018, Dr. Reddy’s filed a motion seeking to join Mylan’s ‘208 IPR. On April 1, 2019, the PTAB granted Dr. Reddy’s request to join the Mylan ‘208 IPR. On September 6, 2019, the PTAB issued a Final Written Decision invalidating the ‘208 patent on the basis of obviousness. On November 18, 2019, the ~~’996 patent, one~~Company filed an appeal with the Federal Circuit Court of Appeals to review the ~~patents in litigation in~~PTAB’s ruling invalidating the ~~above referenced VIMOVO cases. On December 17, 2015, the United States Patent and Trademark Office (the “U.S. PTO”) denied such Petition for IPR.~~‘208 patent.

On August ~~7, 2015,~~20, 2019, the Coalition for Affordable Drugs filed another Petition for IPR of U.S. Patent No. 8,852,636, one of the patents in litigation in the above referenced VIMOVO cases. On February 11, 2016, the U.S. PTO denied such Petition for IPR.

On August 12, 2015, the Coalition for Affordable Drugs filed another Petition for IPR of the ’621 patent, one of the patents in litigation in the above referenced VIMOVO cases. On February 22, 2016, the Patent Trial and Appeal Board (the “PTAB”) issued a decision to institute the IPR. The PTAB hearing for the ‘621 patent was held on November 16, 2016. The PTAB issued a final written decision finding the ’621 patent valid on February 21, 2017.

On August 19, 2015, Lupin filed Petitions for IPR of the ’996 patent, the ’190 patent and U.S. Patent No. 8,852,636, all patents in litigation in the above referenced VIMOVO cases. On March 1, 2016, the PTAB issued decisions to institute the IPRs for the ’996 patent” and the ’190 patent. On March 1, 2016, the PTAB denied the Petition for IPR for U.S. Patent No. 8,852,636. The PTAB hearings for the ‘996 patent and ‘190 patent were both held on November 29, 2016. On February 28, 2017, the PTAB issued final written decisions on the IPRs of the ‘996 and ‘190 patents, upholding the validity of both patents.

~~On March 17, 2014, Hyperion Therapeutics, Inc. (“Hyperion”)~~Company received notice from ~~Par Pharmaceutical, Inc. (“Par Pharmaceutical”)~~Ajanta that it had filed an ANDA with the FDA seeking approval ~~for~~of a generic version of ~~the Company’s medicine RAVICTI.~~VIMOVO. The ANDA contained a Paragraph IV Patent Certification alleging that ~~two of~~ the patents covering RAVICTI, U.S. Patent No. 8,404,215, titled “Methods of therapeutic monitoring of nitrogen scavenging drugs,” which expires in March 2032 (the “’215 patent”), and U.S. Patent No. 8,642,012, titled “Methods of treatment using ammonia scavenging drugs,” which expires in September 2030 (the “’012 patent”),VIMOVO are invalid and/or will not be infringed by Par Pharmaceutical’s manufacture, use or sale of the medicine for which the ANDA was submitted. Par Pharmaceutical did not challenge the validity, enforceability, or infringement of the Company’s primary composition of matter patent for RAVICTI, U.S. Patent No. 5,968,979 titled “Triglycerides and ethyl esters of phenylalkanoic acid and phenylalkanoic acid useful in treatment of various disorders,” which would have expired on February 7, 2015, but as to which Hyperion was granted an interim term of extension until February 7, 2016 and to which the U.S. PTO has granted a final term extension of 1,267 days, which extends the expiration date to July 28, 2018. Hyperion filed suit in the United States District Court for the Eastern District of Texas, Marshall Division, against Par Pharmaceutical on April 23, 2014 seeking an injunction to prevent the approval of Par Pharmaceutical’s ANDA and/or to prevent Par Pharmaceutical from selling a generic version of RAVICTI, and the Company has taken over and is responsible for this patent litigation. On September 15, 2015, the Company received notice from Par Pharmaceutical that it had filed a Paragraph IV Patent Certification alleging that U.S. Patent No. 9,095,559 (the “’559 patent”) is invalid and/or will not be infringed by Par Pharmaceutical’s manufacture, use or sale of the medicine for which the ANDA was submitted. On March 14, 2016, the Company received notice from Par Pharmaceutical that it had filed a Paragraph IV Patent Certification alleging that U.S. Patent No. 9,254,278 (the “’278 patent”) is invalid and/or will not be infringed by Par Pharmaceutical’s manufacture, use or sale of the medicine for which the ANDA was submitted. On June 3, 2016, the Company received notice from Par Pharmaceutical that it had filed a Paragraph IV Patent Certification alleging that U.S. Patent No. 9,326,966 (the “’966 patent”) is invalid and/or will not be infringed by Par Pharmaceutical’sAjanta’s manufacture, use or sale of the medicine for which the ANDA was submitted. The Company filed suit in the United States District Court ~~for the District~~ of New Jersey against ~~Par Pharmaceutical~~Ajanta on ~~June~~September 30, ~~2016 (the “Par New Jersey action”),~~2019, seeking an injunction to prevent the approval of ~~Par Pharmaceutical’s~~Ajanta’s ANDA and/or to prevent ~~Par Pharmaceutical~~Ajanta from selling a generic version of ~~RAVICTI. The lawsuit alleges that Par Pharmaceutical has infringed the ’559 patent, the ’278 patent~~VIMOVO. Ajanta and the ~~’966 patent by filing an ANDA seeking approval from~~Company settled and dismissed the FDA to market generic versions of RAVICTI prior to the expiration of the patents. The subject patents are listed in the Orange Book. The Par New Jersey action has been stayed pending the resolution of the PTAB’s IPR of the ’559 patent.litigation on March 9, 2020.

On April 29, 2015, Par Pharmaceutical filed Petitions for IPR of U.S. Patent 8,404,215 and U.S. Patent 8,642,012, two of the patents involved in the above mentioned RAVICTI cases. On November 4, 2015, the PTAB issued decisions instituting such IPRs. On September 29, 2016, the PTAB found all of the claims in U.S. Patent 8,404,215 to be unpatentable. The Company did not appeal the PTAB’s final written decision with respect to U.S. Patent 8,404,215. On November 3, 2016, the PTAB issued a final written decision holding all of the claims of U.S. Patent 8,642,012 patentable. ~~On December 29, 2016, Par Pharmaceutical filed a notice of appeal with the Federal Circuit to appeal the final written decision of the PTAB concerning the patentability of~~ ~~U.S. Patent 8,642,012.~~ On September 4, 2015, the Company received notice from Lupin of Lupin’s Paragraph IV Patent Certification against the ’215 patent and the ’012 patent, advising that Lupin had filed an ANDA with the FDA for a generic version of RAVICTI. On November 6, 2015, the Company also received Notice of Lupin’s Paragraph IV Patent Certification against the ’559 patent. Lupin has not advised the Company as to the timing or status of the FDA’s review of its filing. On October 19, 2015 the Company filed suit in the United States District Court for the District of New Jersey against Lupin seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that Lupin has infringed the ’215 patent, the ’012 patent and the ’559 patent by filing an ANDA seeking approval from the FDA to market generic versions of RAVICTI prior to the expiration of the patents. The subject patents are listed in the Orange Book. On April 6, 2016, the Company filed an amended complaint in the United States District Court for the District of New Jersey against Lupin alleging that Lupin has infringed the ’559 patent by filing an ANDA seeking approval from the FDA to market generic versions of RAVICTI prior to expiration of the ’559 patent. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Lupin’s ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. On April 18, 2016, the Company received notice from Lupin of Lupin’s Paragraph IV Patent Certification against the ’278 patent. On July 6, 2016, the Company received notice from Lupin of Lupin’s Paragraph IV Patent Certification against the ’966 patent. The Company filed suit in the United States District Court for the District of New Jersey against Lupin on July 21, 2016, seeking an injunction to prevent the approval of Lupin’s ANDA and/or to prevent Lupin from selling a generic version of RAVICTI. The lawsuit alleges that Lupin has infringed the ’278 patent and the ’966 patent by filing an ANDA seeking approval from the FDA to market generic versions of RAVICTI prior to the expiration of the patents. The subject patents are listed in the Orange Book. The Lupin New Jersey actions have been stayed pending the resolution of the PTAB’s IPR of the ’559 patent.

On April 1, 2016, Lupin filed a Petition for IPR of U.S. Patent 9,095,559, a patent currently at issue in the Lupin RAVICTI case. On September 30, 2016, the PTAB issued a decision instituting the IPR. On September 26, 2017, the PTAB issued its final written decision, ruling that the challenged claims of the ‘559 patent are unpatentable. The Company’s ~~Notice of Appeal is due by November 28, 2017.~~ Onequity incentive plans at March ~~27, 2017, Lupin filed a Petition to request an IPR of the ‘278 patent and a Petition to request an IPR of the ‘966 patent. The Company filed~~31, 2020 included its response on the ‘966 patent on July 6, 2017. The Company’s preliminary patent owner response for the ‘278 patent was filed on July 24, 2017. On September 28, 2017, the PTAB issued its orders granting Lupin’s petitions to institute an IPR of the ‘278 and the ‘966 patents. The PTAB must issue a final written decision on the IPRs no later than September 28, 2018.

On July 13, 2017, Par Pharmaceutical filed Petitions for IPR of the ‘559, ‘278, and ‘966 patents. The Company’s opposition to Par Pharmaceutical’s requested IPRs is due by November 6, 2017.

On August 8, 2017, the Company filed suit against Par Pharmaceutical and Lupin in the United States District Court for New Jersey. Par Pharmaceutical and Lupin have answered and counterclaimed. The district court has not yet issued a scheduling order for either action.

Beginning on March 8, 2016, two federal securities class action lawsuits (captioned Schaffer v. Horizon Pharma plc, et al., Case No. 16-cv-01763-JMF and Banie v. Horizon Pharma plc, et al., Case No. 16-cv-01789-JMF) were filed in the United States District Court for the Southern District of New York against the Company and certain of the Company’s current and former officers (the “Officer Defendants”). On March 24, 2016, the court consolidated the two actions under Schaffer v. Horizon Pharma plc, et al. On June 3, 2016, the court appointed Locals 302 and 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Trust and the Carpenters Pension Trust Fund for Northern California as lead plaintiffs and Labaton Sucharow LLP as lead counsel. On July 25, 2016, lead plaintiffs and additional named plaintiff Automotive Industries Pension Trust Fund filed their consolidated complaint, which they subsequently amended on October 7, 2016, including additional current and former officers, the Company’s Board of Directors (the “Director Defendants”), and underwriters involved with the Company’s April 2015 public offering (the “Underwriter Defendants”) as defendants. The plaintiffs allege that certain of the Company and the Officer Defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934,2005 Stock Plan, 2011 Equity Incentive Plan, as amended, by making false and/or misleading statements about, among other things: (a) the Company’s financial performance, (b) the Company’s business prospects and drug-pricing practices, (c) the Company’s sales and promotional practices, and (d) the Company’s design, implementation, performance, and risks associated with the Company’s Prescriptions-Made-Easy program. The plaintiffs allege that certain of the Company, the Director Defendants and the Underwriter Defendants violated sections 11, 12(a)(2) and 15 of the Securities Act of 1933,2014 Employee Share Purchase Plan, as amended ~~(the “Securities Act”~~(“2014 ESPP”), ~~in connection with the Company’s April 2015 public offering. The plaintiffs seek, among other things, an award~~Amended and Restated 2014 Equity Incentive Plan (“2014 EIP”) and 2014 Non-Employee Equity Plan, as amended (“2014 Non-Employee Plan”). As of damages allegedly sustained by plaintiffs and the putative class, including a reasonable allowance for costs and attorneys’ fees. On November 14, 2016, all defendants moved to dismiss the plaintiffs’ amended complaint. Plaintiffs’ filed their opposition to the motion to dismiss on December 21, 2016. Briefing on the motion to dismiss was completed on January 27, 2017 and the parties are awaiting the court’s ruling.

~~During the nine months ended September 30, 2017, the Company issued an aggregate of:~~

~~During the nine months ended September 30, 2017, warrants to purchase~~March 31, 2020, an aggregate of 391,500 ordinary shares of the Company were exercised and proceeds of $1.8 million were received. In addition, warrants to purchase an aggregate of 704,285 ordinary shares of the Company were exercised in cashless exercises, resulting in the issuance of 523,520 ordinary shares. As of September 30, 2017, there were no outstanding warrants to purchase ordinary shares of the Company.

~~During the nine months ended~~ ~~September 30, 2017, the Company made payments of $5.6~~ ~~million for employee withholding taxes relating to share-based awards.~~

On January 1, 2017, the Company adopted ASU No. 2016-09. As a result of the adoption, $7.2 million of excess tax benefits that had not previously been recognized, as the related tax deduction had not reduced current taxes payable, were recorded on a modified retrospective basis through a cumulative effect adjustment to its accumulated deficit as of January 1, 2017.

In May 2016, the Company’s board of directors authorized a share repurchase program pursuant to which the Company may repurchase up to 5,000,000 of its ordinary shares. In May 2017, the Company’s board of directors reauthorized a share repurchase program pursuant to which the Company may repurchase up to 16,000,000 of its ordinary shares. As of September 30, 2017, the Company had repurchased 100,000 of its ordinary shares under this repurchase program, for total consideration of $1.0 million. The timing and amount of future repurchases, if any, will depend on a variety of factors, including the price of the Company’s ordinary shares, alternative investment opportunities, the Company’s cash resources, restrictions under the Credit Agreement and market conditions.

~~2014 Employee Stock Purchase Plan~~. On May 17, 2014, HPI’s board of directors adopted the 2014 Employee Stock Purchase Plan (the “2014 ESPP”). On September 18, 2014, at a special meeting of the stockholders of HPI (the “Special Meeting”), HPI’s stockholders approved the 2014 ESPP. Upon consummation of the Company’s merger transaction with Vidara (the “Vidara Merger”), the Company assumed the 2014 ESPP. As described below, effective as of May 3, 2016, the number of ordinary shares authorized for issuance under the 2014 ESPP was reduced by 5,000,000 shares.

~~As of September 30, 2017, an aggregate of 3,361,928~~1,236,775 ordinary shares were authorized and available for future issuance under the 2014 ~~ESPP.~~

~~2005 Stock Plan. In October 2005, HPI adopted the 2005 Stock Plan (the “2005 Plan”). Upon the signing~~ESPP, an aggregate of the underwriting agreement related to HPI’s initial public offering, on July 28, 2011, no further option grants were made under the 2005 Plan. All stock awards granted under the 2005 Plan prior to July 28, 2011 continue to be governed by the terms of the 2005 Plan. Upon consummation of the Vidara Merger, the Company assumed the 2005 Plan.

~~2011 Equity Incentive Plan~~. In July 2010, HPI’s board of directors adopted the 2011 Equity Incentive Plan (the “2011 EIP”). In June 2011, HPI’s stockholders approved the 2011 EIP, and it became effective upon the signing of the underwriting agreement related to HPI’s initial public offering on July 28, 2011. Upon consummation of the Vidara Merger, the Company assumed the 2011 EIP, and upon the effectiveness of the Horizon Pharma Public Limited Company 2014 Equity Incentive Plan (the “2014 EIP”), no additional stock awards were or will be made under the 2011 Plan, although all outstanding stock awards granted under the 2011 Plan continue to be governed by the terms of the 2011 Plan.

~~2014 Equity Incentive Plan and 2014 Non-Employee Equity Plan~~. On May 17, 2014, HPI’s board of directors adopted the 2014 EIP and the Horizon Pharma Public Limited Company 2014 Non-Employee Equity Plan (the “2014 Non-Employee Equity Plan”). At the Special Meeting, HPI’s stockholders approved the 2014 EIP and 2014 Non-Employee Equity Plan. Upon consummation of the Vidara Merger, the Company assumed the 2014 EIP and 2014 Non-Employee Equity Plan, which serve as successors to the 2011 EIP.

The 2014 EIP provides for the grant of incentive and nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other stock awards that may be settled in cash, shares or other property to the employees of the Company (or a subsidiary company). The number of5,612,651 ordinary shares ~~of the Company that~~ were ~~initially~~ authorized and available for ~~issuance~~future grants under the 2014 EIP ~~was no more than 22,052,130,~~(of which ~~number consisted of (i) 15,500,000 ordinary~~532,737 shares of the Company; plus (ii) the number of shares available for issuance pursuant to the grant of future awards under the 2011 EIP; plus (iii) any shares subject to outstanding stock awards granted under the 2011 EIP and the 2005 Plan that expire or terminate for any reason prior to exercise or settlement or are forfeited, redeemed or repurchased because of the failure to meet a contingency or condition required to vest such shares; less (iv) 10,000,000 shares, which is the additional number of shares which were previously approved as an increase to the share reserve of the 2011 EIP. On March 23, 2015, the compensation committee of the Company’s board of directors approved amending the 2014 EIP subject to shareholder approval to, among other things, increase the aggregate number of shares authorized for issuance under the 2014 EIP by an additional 14,000,000 shares. On May 6, 2015, the shareholders of the Company approved such amendment to the 2014 EIP. On February 25, 2016, the compensation committee of the Company’s board of directors approved, subject to shareholder approval, amending the 2014 EIP to, among other things, increase the aggregate number of shares authorized for issuance under the 2014 EIP beyond those remaining available for future grant under the 2014 EIP by an additional 6,000,000 shares and also approved a reduction in the number of shares authorized under our 2014 Non-Employee Equity Plan and 2014 ESPP by 1,000,000 shares and 5,000,000 shares, respectively, contingent on shareholder approval of the amendment to the 2014 EIP. On May 3, 2016, the shareholders of the Company approved the amendment to the 2014 EIP. ~~On August 29, 2017, the compensation committee of the Company’s board of directors approved an amendment to the 2014 EIP, to reserve an additional 1,200,000 shares~~ to be used exclusively for grants of awards to individuals who were not previously employees or non-employee directors of the Company (or following a bona fide period of non-employment with the Company) ~~(the “2017 Inducement Pool”~~), as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules, (“Rule 5635(c)(4)”). The 2014 EIP was amended by the compensation committee of the Company’s board of directors without shareholder approval pursuant to Rule 5635(c)(4).

~~The 2014 Non-Employee Equity Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards~~ and other forms of stock awards that may be settled in cash, shares or other property to the non-employee directors and consultants of the Company (or a subsidiary company). The total number of ordinary shares of the Company that were initially authorized for issuance under the 2014 Non-Employee Equity Plan wa~~s 2,500,000.~~ As described above, effective as of May 3, 2016, the number of ordinary shares authorized for issuance under the 2014 Non-Employee Equity Plan was reduced by 1,000,000 shares. The Company’s board of directors has authority to suspend or terminate the 2014 Non-Employee Equity Plan at any time.

~~As of September 30, 2017,~~ an aggregate of ~~3,819,449 ordinary shares were authorized and available for future grants under the 2014 EIP, of which 726,041 shares relate to the 2017 Inducement Pool. As of September 30, 2017, 499,913~~698,491 ordinary shares were authorized and available for future grants under the 2014 Non-Employee Plan.

On February 19, 2020, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) adopted, subject to shareholder approval, the Company’s 2020 Equity ~~Plan.~~Incentive Plan (“2020 EIP”), as successor to and continuation of the 2014 EIP, including increasing the number of ordinary shares available for the grant of equity awards to the Company’s employees by an additional 6,900,000 shares. On April 30, 2020, the shareholders of the Company approved the 2020 EIP.

On February 19, 2020, the Compensation Committee adopted, subject to shareholder approval, the Company’s 2020 Employee Share Purchase Plan (“2020 ESPP”), as successor to and continuation of the 2014 ESPP, increasing the number of ordinary shares available for issuance to the Company’s employees pursuant to the exercise of purchase rights by an additional 2,500,000 shares. On April 30, 2020, the shareholders of the Company approved the 2020 ESPP.

The following table summarizes stock option activity during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2020:

Options

Weighted
Average
Exercise Price

Weighted
Average
Contractual
Term
Remaining
(in years)

Aggregate
Intrinsic Value
(in thousands)

Outstanding as of December 31, 2016

13,627,519

$
18.17

7.60

$
35,157

Granted

2,020,017

16.46

Exercised

(270,427
)

6.35

Forfeited

(550,871
)

18.54

Expired

(255,653
)

20.70

Outstanding as of September 30, 2017

14,570,585

18.10

7.14

18,333

Exercisable as of September 30, 2017

8,885,001

$
16.84

6.39

$
17,699

	Options			Weighted Average Exercise Price		Weighted Average Contractual Term Remaining (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2019		9,564,202		$	19.85		5.43	$	156,270
Exercised		(498,753	)		14.66		—		—
Forfeited		(54,098	)		15.96		—		—
Expired		(20,442	)		23.32		—		—
Outstanding as of March 31, 2020		8,990,909			20.16		5.15		85,351
Exercisable as of March 31, 2020		8,616,016		$	20.22		5.05	$	81,226

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The determination of the fair value of each stock option is affected by the Company’s share price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected share price volatility over the expected life of the awards and actual and projected stock option exercise behavior. The weighted average fair value per share of stock option awards granted during the nine months ended September 30, 2017 and 2016, and assumptions used to value stock options, are as follows:

The Company has never paid dividends and does not anticipate paying any dividends in the near future. Additionally, the Credit Agreement (described in Note 14 above and Note 21 below), as well as the indentures governing the 2024 Senior Notes and the 2023 Senior Notes (each as described in Note 14 above), contain covenants that restrict the Company from issuing dividends.

~~The Company determined the risk-free interest rate by using a weighted average assumption equivalent to the expected term based on the U.S. Treasury constant maturity rate as of the date of grant.~~

~~The Company used an average historical share price volatility of comparable companies to be representative of future share price volatility.~~

Given the Company’s limited historical exercise behavior, the expected term of options granted was determined using the “simplified” method since the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. Under this approach, the expected term is presumed to be the average of the vesting term and the contractual life of the option.

As share-based compensation expense recognized in the condensed consolidated statements of comprehensive loss is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures based on actual forfeiture experience, analysis of employee turnover and other factors. The Company adopted ASU No. 2016-09 on January 1, 2017 and has elected to retain a forfeiture rate after adoption.

The following table summarizes restricted stock unit activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2020:

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

The following table summarizes performance stock unit awards (“PSUs”) activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2020:

~~All outstanding~~On January 4, 2019, the Company awarded PSUs ~~were granted in 2015~~to key executive participants (“2019 PSUs”). The 2019 PSUs utilize two performance metrics, a short-term component tied to business performance and ~~2016 and may vest if the Company’s total~~a long-term component tied to relative compounded annual shareholder rate of return (“TSR”) ~~over three performance measurement periods summarized below equals or exceeds a minimum of 15%.~~, as follows:

~~These~~On January 3, 2020, the Company awarded PSUs to key executive participants (“2020 PSUs”). The 2020 PSUs utilize two performance metrics, a short-term component tied to business performance and a long-term component tied to relative compounded annual TSR, as follows:

All PSUs outstanding ~~PSUs granted in 2015 and 2016 will~~at March 31, 2020 may vest in ~~amounts ranging from 25% to 100%~~a range of between 0% and 200%, based on the ~~achievement of the following TSR over the three~~ performance ~~periods:~~

The TSR will be based on the volume weighted average trading price (“VWAP”) of the Company’s ordinary shares over the 20 trading days ending on the last day of each of the three performance measurement periods versus the VWAP of the Company’s ordinary shares over the twenty trading days ended March 23, 2015 of $21.50. These PSUs are subject to a post vesting holding period of one year for 50% of the PSUs and two years for 50% of the PSUs for those who were members of the executive committee at the date of grant, and one year for 50% of the PSUs for all others who were not executive committee members at the date of grant.

metrics described above. The Company accounts for the 2019 PSUs and 2020 PSUs as equity-settled awards in accordance with ASC 718. Because the value of the ~~outstanding~~2019 Relative TSR PSUs ~~granted in 2015~~ and ~~2016 is~~2020 Relative TSR PSUs are dependent upon the attainment of a level of TSR, it requires the impact of the market condition to be considered when estimating the fair value of the 2019 Relative TSR PSUs and 2020 Relative TSR PSUs. As a result, the Monte Carlo model is applied and the most significant valuation assumptions used related to the 2020 PSUs during the three months ended March 31, 2020, include:

The ~~average estimated fair~~ value of the 2020 Net Sales PSUs is calculated at the end of each ~~outstanding PSU is as follows (allocated between groupings~~quarter based on ~~grant-date classification):~~the expected payout percentage based on estimated full-period performance against targets, and the Company adjusts the expense quarterly.

~~During~~On January 4, 2019, the ~~nine months ended~~Company awarded a company-wide grant of PSUs (the “TEPEZZA PSUs”). Vesting of the TEPEZZA PSUs was contingent upon receiving shareholder approval of amendments to the 2014 EIP, which approval was received on May 2, 2019. The TEPEZZA PSUs were generally eligible to vest contingent upon receiving approval of the TEPEZZA biologics license application from the FDA no later than September 30, ~~2017~~2020 and ~~2016,~~the employee’s continued service with the Company. In January 2020, the Company ~~recorded an~~received TEPEZZA approval from the FDA and the Company started recognizing the expense ~~of $37.0 million and $36.1 million, respectively,~~ related to ~~PSUs.~~

~~On November 5, 2014,~~ the ~~compensation committee~~TEPEZZA PSUs on that date. As of ~~the Company’s board of directors approved a performance cash long-term incentive program for the~~March 31, 2020, there were 724,490 TEPEZZA PSUs outstanding. For members of the ~~Company’s~~ executive committee, ~~and executive leadership team, including its executive officers (the “Cash Bonus Program”). Participants in~~one-third of the ~~Cash Bonus Program were eligible for a specified cash bonus. The Cash Bonus Program pool funding of approximately $15.8 million was determined based~~TEPEZZA PSUs vested on the ~~Company’s actual TSR over the period from November 5, 2014 to May 6, 2015,~~FDA approval date and ~~the bonus could be earned and payable only if the TSR for the period from November 5, 2014 to November 4, 2017 was greater than 15%. The portion~~one-third will vest on each of the total bonus pool payable to individual participants was based on allocations established by the Company’s compensation committee. Participants must have remained employed by the Company through November 4, 2017 unless a participant’s earlier departure from employment was due to death, disability, termination without cause or a change in control transaction. Bonus payments under the Cash Bonus Program, if any, were to be made after November 4, 2017. Subsequent to September 30, 2017, the TSR did not exceed the minimum target requirement of 15% and the Cash Bonus Program expired without payment.

~~The Company accounted for the Cash Bonus Program under the liability method in accordance with ASC 718. Because vesting~~first two anniversaries of the ~~bonus pool was dependent upon the attainment of a VWAP of $18.37 or higher over the twenty trading days ending November 4, 2017, the Cash Bonus Program was considered to be~~FDA approval date, subject to ~~a “market condition” for~~ the ~~purposes of ASC 718. ASC 718 required~~employee’s continued service through the ~~impact~~applicable vesting dates. For all other participants, one-half of the ~~market condition to be considered when estimating~~TEPEZZA PSUs vested on the ~~fair value~~FDA approval date and one-half will vest on the one-year anniversary of the bonus pool. As a result, the Monte Carlo simulation model was applied and the fair value was revalued at each reporting period. As of September 30, 2017 and December 31, 2016, the estimated fair value was zero and $4.8 million, respectively. For the nine months ended September 30, 2017, the Company recorded a reduction in the expense of $3.5 millionFDA approval date, subject to the ~~condensed consolidated statement of comprehensive loss as a result of~~employee’s continued service through the ~~valuation of the Cash Bonus Program. The most significant valuation assumptions used as of September 30, 2017 include:~~vesting date. ��

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in thousands):

During the ~~year~~three months ended ~~December~~March 31, ~~2016, no material income~~2020 and 2019, the Company recognized $14.1 million and $2.5 million of tax benefit, was recognized relating to share-based compensation expense and no tax benefits were realized from exercised stock options and vested restricted stock units, due to the Company’s net loss position prior to the adoption of ASU No. 2016-09. After the adoption of ASU No. 2016-09, during the three and nine months ended September 30, 2017, no material income tax benefit or detriment was recognizedrespectively, related to share-based compensation resulting primarily from the ~~current share prices in effect~~fair value of equity awards at the time of the exercise of stock options and vesting of restricted stock ~~units.~~units and PSUs. As of ~~September 30, 2017,~~March 31, 2020, the Company estimates that pre-tax unrecognized compensation expense of ~~$156.5~~$178.1 million for all unvested share-based awards, including stock options, restricted stock units and PSUs, will be recognized through the third quarter of ~~2021.~~2022. The Company expects to satisfy the exercise of stock options and future distribution of shares for restricted stock units and PSUs by issuing new ordinary shares which have been reserved under the 2014 EIP.

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

The Company accounted for the Cash Incentive Program as a deferred compensation plan under ASC 710 and is recognizing the payout expense using straight-line recognition through the end of the 36-month vesting period. During the three months ended March 31, 2020 and 2019, the Company recorded an expense of $1.0 million and $1.2 million, respectively, to the condensed consolidated statement of comprehensive loss related to the Cash Incentive Program.

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

~~The following table presents the expense (benefit) for income taxes for the three and nine months ended September 30, 2017 and 2016 (in thousands):~~

During the three and nine months ended September 30, 2017, the Company recorded an expense of $7.2 million and a benefit for income taxes of $42.1 million, respectively, compared to a benefit of $27.7 million and $31.9 million during the three and nine months ended September 30, 2016, respectively. The expense for income taxes during the three months ended September 30, 2017 resulted from a change in the mix of pre-tax losses being incurred between high and low tax rate jurisdictions, which decreased the Company’s expected benefit for the full-year 2017, and resulted in a tax expense being recorded during the three months ended September 30, 2017. The increase in benefit for income taxes for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 resulted from an increase in pre-tax losses.

~~Deferred tax assets and liabilities arise from acquisition accounting adjustments where book values of certain assets and liabilities differ from their tax bases.~~ Deferred tax assets and liabilities are recorded at the currently enacted rates which will be in effect at the time when the temporary differences are expected to reverse in the country where the underlying assets and liabilities are located. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the period in which the change is enacted.

43The following table presents the benefit for income taxes for the three months ended March 31, 2020 and 2019 (in thousands):

During the three months ended March 31, 2020, the Company recorded a benefit for income taxes of $19.0 million. During the three months ended March 31, 2019, the Company recorded a benefit for income taxes of $1.9 million. The increase in benefit for income taxes recorded during the three months ended March 31, 2020 compared to the three months ended March 31, 2019, resulted primarily from the increase in the tax benefits recognized on share-based compensation and the mix of pre-tax income and losses incurred in various tax jurisdictions.

On April 1, 2020, the Company acquired Curzion Pharmaceuticals, Inc. (“Curzion”), a privately held development-stage biopharma company, and its development-stage oral selective lysophosphatidic acid 1 receptor (LPAR1) antagonist, CZN001 (renamed HZN-825).

Under terms of the agreement, the Company acquired Curzion for a $45.0 million upfront cash payment with additional payments contingent on the achievement of development and regulatory milestones. The $45.0 million payment will be recorded as an in-process research and development expense in the second quarter of 2020. HZN-825 was originally discovered and developed by Sanofi, which is eligible to ~~March 2017 Credit Agreement~~receive contingent payments upon the achievement of development and commercialization milestones and royalties based on revenue thresholds. A member of the Company’s board of directors was also a member of the board of directors of, and held a beneficial interest in Curzion. This related party transaction was conducted in the normal course of business on an arm’s length basis.

In April 2020, a subsidiary of the ~~Borrowers borrowed approximately $845.8 million aggregate principal amount of loans (the “October 2017 Refinancing Loans”)~~Company entered into an agreement with S.R. One and an agreement with Lundbeckfond pursuant to ~~an amendment (the “October 2017 Refinancing Amendment”)~~which the Company acquired all of S.R. One’s and Lundbeckfond’s beneficial rights to ~~the March 2017 Credit Agreement. The Credit Agreement provides~~proceeds from certain contingent future TEPEZZA milestone and royalty payments in exchange for ~~(i) the October 2017 Refinancing Loans, (ii) one or more uncommitted additional incremental loan facilities subject~~a one-time payment of $55.0 million to the satisfaction of certain financial and other conditions, and (iii) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The Credit Agreement allows for the Company and certain of its subsidiaries to become borrowers under incremental or refinancing facilities.

The October 2017 Refinancing Loans were incurred as a separate new class of term loans under the Credit Agreement with substantially the same terms as the March 2017 Refinancing Loans to effectuate a repricing of the March 2017 Refinancing Loans. The October 2017 Refinancing Loans bear interest, at the Borrowers’ option, at a rate equal to either LIBOR plus an applicable margin of 3.25% per year (subject to a LIBOR floor of 1.00%), or the adjusted base rate plus 2.25%. The adjusted base rate is defined as the greater of (a) LIBOR (using one-month interest period) plus 1.00%, (b) prime rate, (c) fed funds plus 0.5%, and (d) 2.00%. The Borrowers used the proceeds of the October 2017 Refinancing Loans to repay the March 2017 Refinancing Loans, which totaled approximately $845.8 million.

The obligations under the Credit Agreement (including obligations in respect of the October 2017 Refinancing Loans) and any swap obligations and cash management obligations owing to a lender (or an affiliate of a lender) thereunder are guaranteed by the Company and each of the ~~Company’s existing~~respective parties. The total payments of $110.0 million will be recorded as TEPEZZA developed technology intangible assets in the second quarter of 2020. Refer to Note 15 for further detail of the contingent future milestone and ~~subsequently acquired or formed direct~~royalty payments related to TEPEZZA and ~~indirect subsidiaries (other than certain immaterial subsidiaries, subsidiaries whose guarantee would result~~the agreements with S.R. One and Lundbeckfond.

Final Regulations for Section 267A (commonly referred to as the “Anti-Hybrid Rules”)

On April 8, 2020, the U.S. Treasury published in ~~material adverse tax consequences and subsidiaries whose guarantee is prohibited by applicable law)~~the Federal Register the Final Regulations for Section 267A of the Internal Revenue Code of 1986, as amended (commonly referred to as the “Anti-Hybrid Rules”). The ~~obligations~~Final Regulations for Section 267A provide several rules expanding the reach and scope of Section 267A particularly involving the payment of interest and royalties to certain branches, reverse hybrid entities, and other hybrid mismatch arrangements. The Company is in the process of assessing the impact, if any, of the provisions of the Final Regulations for Section 267A on the Company’s financial statements. If the Anti-Hybrid Rules under the ~~Credit Agreement (including obligations in respect of the October 2017 Refinancing Loans) and any such swap and cash management obligations~~Final Regulations for Section 267A are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (i) all tangible and intangible assets of the Borrowers and the guarantors, except for certain customary excluded assets, and (ii) all of the capital stock owned by the Borrowers and guarantors thereunder (limited, in the case of the stock of certain non-U.S. subsidiaries of the Borrowers, to 65% of the capital stock of such subsidiaries).

Borrowers under the Credit Agreement are permitted to make voluntary prepayments of the loans under the Credit Agreement at any time without payment of a premium, except that with respect to the October 2017 Refinancing Loans, a 1.00% premium will apply to a repayment of the October 2017 Refinancing Loans in connection with a repricing of, or any amendment to the Credit Agreement in a repricing of, such loans effected on or prior to the date that is six months following October 23, 2017. The Borrowers are required to make mandatory prepayments of loans under the Credit Agreement (without payment of a premium) with (a) net cash proceeds from certain non-ordinary course asset sales (subject to reinvestment rights and other exceptions), (b) casualty proceeds and condemnation awards (subject to reinvestment rights and other exceptions), (c) net cash proceeds from issuances of debt (other than certain permitted debt), and (d) 50% of the Company’s excess cash flow (subject to decrease to 25% or 0% if the Company’s first lien leverage ratio is less than 2.25:1 or 1.75:1, respectively). The October 2017 Refinancing Loans will amortize in equal quarterly installments beginning on December 31, 2017 in an aggregate annual amount equal to 1.00% of the original principal amount of the March 2017 Refinancing Loans (i.e. $850.0 million), with any remaining balance payable on March 29, 2024, the final maturity date of the October 2017 Refinancing Loans.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.

Events of default under the Credit Agreement include: (i) the failure by any Borrower to timely make payments due under the Credit Agreement; (ii) material misrepresentations or misstatements in any representation or warranty by any Loan Party when made; (iii) failure by any Loan Party to comply with the covenants under the Credit Agreement and other related agreements; (iv) certain defaults under a specified amount of other indebtedness of the Company or its subsidiaries; (v) insolvency or bankruptcy-related events with respectapplicable to the Company, ~~or any of its material subsidiaries; (vi) certain undischarged judgments against~~ the Company ~~or any~~will recognize a one-time tax provision of ~~its restricted subsidiaries; (vii) certain ERISA-related events reasonably expected to have a material adverse effect on~~$15.2 million during the Company and its restricted subsidiaries taken as a whole; (viii) certain security interests or liens under the loan documents ceasing to be, or being asserted by the Company or its restricted subsidiaries not to be, in full force and effect; (ix) any loan document or material provision thereof ceasing to be, or any challenge or assertion by any Loan Party that such loan document or material provision is not, in full force and effect; and (x) the occurrence of a change of control. If one or more events of default occurs and continues beyond any applicable cure period, the administrative agent may, with the consent of the lenders holding a majority of the loans and commitments under the facilities, or will, at the request of such lenders, terminate the commitments of the lenders to make further loans and declare all of the obligations of the Loan Parties under the Credit Agreement to be immediately due and payable.three months ended June 30, 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

We are focused on researching, developing and commercializing medicines that address critical needs for people impacted by rare and rheumatic diseases. Our pipeline is purposeful: we apply scientific expertise and courage to bring clinically meaningful therapies to patients. We believe science and compassion must work together to transform lives.

On January 21, 2020, the U.S. Food and Drug Administration, or FDA, approved TEPEZZA™ (teprotumumab-trbw), for the treatment of thyroid eye disease, or TED, a serious, progressive and vision-threatening rare autoimmune condition.

We have two reportable segments, (i) the orphan segment (previously the orphan and rheumatology segment), our strategic growth business, and (ii) the inflammation segment, and we report net sales and segment operating income for each segment. Effective in the first quarter of ~~2017,~~2020, we ~~modified~~(i) reorganized our ~~presentation~~commercial operations and moved responsibility for and reporting of ~~certain operating expenses. Previously, we presented “general~~RAYOS^® to the inflammation segment and ~~administrative” expenses~~(ii) renamed the orphan and rheumatology segment the orphan segment. Net sales generated by TEPEZZA, which was approved in the first quarter of 2020, are reported as ~~one line item in~~part of the renamed orphan segment.

As of March 31, 2020, our ~~condensed consolidated statement~~marketed medicine portfolio consisted of comprehensive loss, and “selling and marketing” expenses as another. For current-period presentation and prior-period comparisons, we now combine these two line items into one line item, titled “selling, general and administrative” expenses.

We are a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. We market eleven medicines through our orphan, rheumatology and primary care business units.

On ~~January 13, 2016, we~~ ~~completed our acquisition of~~ Crealta Holdings LLC, or Crealta, for approximately $539.7 million, including $24.9 million of cash acquired and $70.9 million paid to settle Crealta’s outstanding debt. Following completion of the acquisition, Crealta became our wholly owned subsidiary and was renamed as Horizon Pharma Rheumatology LLC.

On October 25, 2016, we completed our acquisition of Raptor Pharmaceutical Corp., or Raptor, in which we acquired all of the issued and outstanding shares of Raptor’s common stock for $9.00 per share in cash. The total consideration was $860.8 million, including $24.9 million of cash acquired and $56.0 million paid to settle Raptor’s outstanding debt. Following completion of the acquisition, Raptor became our wholly owned subsidiary and converted to a limited liability company, changing its name to Horizon Pharmaceutical LLC.

~~On May 8, 2017, we acquired River Vision Development Corp., or River Vision, for upfront cash payments totaling $151.9 million, including $6.3 million of cash acquired,~~Acquisitions and subject to other customary purchase price adjustments for working capital, and potential future milestone and royalty payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. Following completion of the acquisition, River Vision became our wholly owned subsidiary and was renamed as Horizon Pharma Tepro, Inc.Divestitures

On June 23, 2017, we sold our European subsidiary which owned the marketing rights to PROCYSBI and QUINSAIR in Europe, the Middle East and Africa, or EMEA, regions, or the Chiesi divestiture, to Chiesi Farmaceutici S.p.A., or Chiesi, for an upfront payment of $72.2 million, which reflects $3.1 million of cash divested, and subject to other customary purchase price adjustments for working capital, with additional potential milestone payments based on sales thresholds.

~~On June 30, 2017,~~Since January 1, 2019, we completed the ~~acquisition~~following acquisitions and divestitures:

Impact of ~~certain rights to interferon gamma-1b from Boehringer Ingelheim International GmbH, or Boehringer Ingelheim International,~~ ~~in all territories outside~~COVID-19

On March 11, 2020, the World Health Organization made the assessment that a novel strain of coronavirus, which causes the COVID-19 disease, can be characterized as a pandemic. The President of the United States ~~Canada~~declared the COVID-19 pandemic a national emergency and ~~Japan, as~~many states and municipalities in the Unites States have announced aggressive actions to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders which direct individuals to shelter at their places of residence (subject to limited exceptions). Similarly, the Irish government has limited gatherings of people and encouraged employees to work from their homes, and may implement more aggressive policies in the future. In addition, in mid-March 2020 we ~~previously held marketing rights~~implemented work-from-home policies for all employees and have moved to ~~interferon gamma-1b in these territories. Boehringer Ingelheim International commercialized interferon gamma-1b under~~a “virtual” model with respect to our physician, patient and partner support activities. While our financial results during the ~~trade names IMUKIN~~^®~~, IMUKINE~~^®~~, IMMUKIN~~^®three months ended March 31, 2020 were strong and ~~IMMUKINE~~^®~~, or IMUKIN, in an estimated thirty countries, primarily in Europe~~we continue to have a significant amount of available liquidity, we anticipate the COVID-19 pandemic to have a negative impact on net sales during the remaining quarters of 2020.

Economic and ~~the Middle East. In May 2016, we paid Boehringer Ingelheim International €5.0 million ($5.6 million when converted using a Euro-to-Dollar exchange rate at date of payment~~ of 1.1132) for such rights and upon closing in June 2017, we paid Boehringer Ingelheim International an additional €19.5 million ($22.3 million when converted using a Euro-to-Dollar exchange rate at date of payment of 1.1406). We market interferon gamma-1b as ACTIMMUNE^®health conditions in the United ~~States.~~States and across most of the world are continuing to change rapidly because of the COVID-19 pandemic. Although COVID-19 is a global issue that is altering business and consumer activity, the pharmaceutical industry is considered a critical and essential industry in the United States and many other countries and, therefore, we do not currently expect any significant extended shut downs of suppliers or distribution channels. We believe we have sufficient inventory of raw materials and finished goods for all of our medicines. We expect patients to be able to continue to receive their medicines from their current pharmacies, alternative pharmacies or, if necessary, by direct shipment from our third-party providers that have such capability.

~~On December 8, 2016,~~In regard to our orphan segment, the first-quarter launch of our new infused medicine for TED, TEPEZZA, has significantly exceeded our expectations. In early 2019, we ~~announced~~initiated our pre-launch disease awareness, market development and market access efforts with the multi-functional field-based teams beginning to engage with key stakeholders in July of 2019. These pre-launch efforts, the severity and acute nature of TED, and a highly motivated patient population have generated significant demand for the medicine that was well in excess of our initial expectations. While we anticipate a much higher number of new patients in 2020 than our prior estimates, the ~~Phase 3~~impact from COVID-19 has slowed the generation of patient enrollment forms for TEPEZZA, which drive new patient starts. KRYSTEXXA is an infused medicine for uncontrolled gout and was also achieving rapid growth prior to the COVID-19 pandemic. While the vast majority of patients on therapy have maintained therapy, due to shelter-in-place guidelines, many new patients have delayed infusions. Patient visits to physicians have substantially declined, which has resulted in a reduction of new patient generation. We expect this deferred demand to begin to return with the return of healthcare activity. Our other rare disease medicines, RAVICTI, PROCYSBI and ACTIMMUNE, treat serious, chronic diseases with serious consequences if left untreated. It is therefore critical for patients to maintain therapy. Patient motivation to continue treatment is high, and therefore we expect these three medicines to be relatively stable, with the least impact from COVID-19 of all of our medicines.

In regard to the inflammation segment, we are experiencing reduced demand given the absence of in-person engagement by our sales representatives with health care providers and reduced levels of non-essential patient visits to physicians. This impact is somewhat mitigated by the virtual engagement efforts of our sales representatives, as well as the use of telemedicine by many physicians, which allow them to continue to see patients and prescribe medicines. In addition, with our HorizonCares program, most patients do not need to physically visit a pharmacy to obtain a prescription because the vast majority of these medicines are delivered to a patient’s home through mail or local courier, depending on the participating pharmacy.

In addition, our clinical trials may be affected by COVID-19. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital 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 ~~Safety, Tolerability~~as a precaution against contracting COVID-19. Further, some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Some clinical sites in the United States have started to slow or stop further enrollment of new patients in clinical trials, denied access to site monitors or otherwise curtailed certain operations. Similarly, our ability to recruit and ~~Efficacy~~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.

It is too early to determine the ultimate impact of the COVID-19 pandemic on any of our medicines. We are continuing to actively monitor the possible impacts from the COVID-19 pandemic 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. 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 is a best estimate based on the information available as of today’s date.

Horizon today is a leading biopharma company focused on rare diseases, delivering innovative therapies to patients and generating value for our shareholders. Our strategy is to maximize the benefit and value of our key growth drivers KRYSTEXXA and TEPEZZA, both rare disease medicines, and expand our pipeline for sustainable growth. We believe our strategy allows more patients to benefit from our on-market medicines, as well as from medicines we develop as part of our pipeline. Our vision is to build healthier communities, urgently and responsibly, which in turn, we believe, generates value to our many stakeholders, including our shareholders.

As of March 31, 2020, our orphan segment consisted of our medicines KRYSTEXXA, RAVICTI, PROCYSBI, ACTIMMUNE, ~~Dose Escalation~~TEPEZZA, BUPHENYL and QUINSAIR. Effective in ~~Friedreich’s Ataxia study, or STEADFAST, evaluating ACTIMMUNE~~the first quarter of 2020, we (i) reorganized our commercial operations and moved responsibility for and reporting of RAYOS to the inflammation segment and (ii) renamed the orphan and rheumatology segment the orphan segment.

TEPEZZA is the first and only FDA-approved medicine for the treatment of ~~Friedreich’s ataxia, or FA, did not meet~~TED, a serious, progressive and vision-threatening rare autoimmune condition. TEPEZZA was launched commercially shortly after receiving FDA approval for the treatment of TED on January 21, 2020. The FDA approval was obtained well in advance of the TEPEZZA Prescription User Fee Act (PDUFA) action date of March 8, 2020, after an accelerated review of the medicine and its ~~primary endpoint~~statistically significant Phase 3 data. We believe TEPEZZA represents a significant driver of growth for Horizon.

Our commercialization strategy for TEPEZZA has four components: (i) driving early uptake by continuing to define the role of TEPEZZA in the treatment of TED and getting uptake from treating physicians; (ii) continuing to develop the TED market by driving awareness of the disease severity and benefits of treatment, educating the appropriate treating physicians on the urgency to diagnose and treat TED and continuing to drive patients’ awareness of TED; (iii) supporting TEPEZZA with our comprehensive approach that includes a high-touch, patient-centric model; and (iv) facilitating patient and physician access to TEPEZZA. Our launch followed our significant investment in TEPEZZA in 2019 to prepare for the then potential U.S. approval, driving awareness about TED in the medical and patient community and establishing a potential pathway for treatment.

Our clinical strategy for TEPEZZA is to maximize the potential of TED for patients. We have announced three new TEPEZZA development programs in the first quarter of 2020 in this respect: the evaluation of TEPEZZA in the later fibrotic phase of the disease to support the expanded indication received upon approval; the assessment of a ~~statistically significant change from baseline~~subcutaneous route of administration; and an exploratory trial for TEPEZZA in the ~~modified Friedreich’s Ataxia Rating Scale at twenty-six weeks versus~~ treatment ~~with placebo and~~of diffuse cutaneous systemic sclerosis (dcSSc), a rare, autoimmune rheumatic disease, given that scientific literature suggests that the ~~secondary endpoints did not meet statistical significance. No~~mechanism of action of TEPEZZA could have an impact on fibrotic processes.

KRYSTEXXA is the only approved medicine indicated for the treatment of uncontrolled gout, or gout that is refractory (unresponsive) to conventional therapies. We are focused on optimizing and maximizing the peak sales potential of KRYSTEXXA through our patient-centric commercialization efforts, through the clinical evaluation of the use of immunomodulation with KRYSTEXXA and investing in education, patient and physician outreach that demonstrates the benefits KRYSTEXXA offers in treating uncontrolled gout. We believe KRYSTEXXA represents a significant driver of growth for Horizon.

Three areas are driving growth for KRYSTEXXA: an increase in new ~~safety findings were identified on initial review of data other than those already noted~~and existing accounts; accelerating uptake by nephrologists; and growth in the ~~ACTIMMUNE prescribing information~~adoption of the use of KRYSTEXXA with immunomodulators such as methotrexate to improve the KRYSTEXXA response rate in patients with uncontrolled gout.

Immunomodulation is one of the clinical development programs we are investing in to evaluate ways to increase the number of patients who can benefit from KRYSTEXXA. Our registrational MIRROR randomized controlled trial, or RCT, is evaluating the co-administration of KRYSTEXXA with methotrexate, the immunomodulator most often used by rheumatologists, to increase the durability of response for ~~approved indications. We,~~uncontrolled gout patients. The MIRROR RCT, which we initiated in ~~conjunction with~~mid-2019, was preceded by the ~~independent Data Safety Monitoring Board,~~MIRROR open-label study, which was initiated in 2018 and completed in 2019. The positive topline results of the ~~principal investigator and~~MIRROR open-label trial, announced in January 2020, signify to us the ~~Friedreich’s Ataxia Research Alliance Collaborative Clinical Research Network in FA, determined that, based on~~value of continuing our research into the ~~trial results, the STEADFAST program would be discontinued, including the twenty-six week extension study and the long-term safety study.~~

~~Our strategy is to continue the transformation~~benefits of ~~Horizon Pharma plc into a balanced, diversified, sustainable-growth biopharmaceutical company predominantly focused on rare disease medicines.~~this immunomodulation approach. We are ~~executing on~~also investing to expand the use of KRYSTEXXA among nephrologists by providing additional data about the effectiveness of KRYSTEXXA in treating uncontrolled gout with its kidney-friendly mechanism of action. In October 2019, we initiated our ~~strategy by accelerating~~PROTECT open-label trial to evaluate the ~~growth~~use of our rare disease medicine portfolio through differentiated commercial strategies, business development efforts, and the expansion of our pipeline with post-marketing and development-stage programs. We are strongly committed to helping ensure patient access to their medicines and support services, and by investingKRYSTEXXA in adult uncontrolled gout patients who have undergone a kidney transplant, a population that was not originally studied in the ~~further development~~KRYSTEXXA pivotal trials. We have also announced plans to initiate a proof of ~~medicines~~concept trial to evaluate the impact of administering KRYSTEXXA over a shorter infusion time, which could improve the experience and convenience for patients. We currently expect to initiate the KRYSTEXXA shorter-infusion trial in 2020.

The RECIPE trial, an investigator-initiated study partially supported by Horizon, recently completed. The trial was a randomized, double-blind, placebo-controlled study to assess preliminary efficacy and safety of administering the immunomodulator mycophenolate mofetil, or MMF, with KRYSTEXXA to enhance the KRYSTEXXA response rate. Thirty-two patients with ~~rare~~chronic refractory gout were randomized 3:1 in the study design to receive MMF versus placebo in addition to all patients receiving KRYSTEXXA. The primary efficacy endpoint was the proportion of participants achieving and maintaining serum uric acid levels less than or ~~underserved diseases.~~ equal to 6 mg/dL through 12 weeks. The trial also assessed the incidence and types of adverse events and infusion reactions. After 12 weeks of co-administration, all participants continued on KRYSTEXXA alone for an additional 12 weeks without combination MMF therapy to evaluate the longer-term efficacy and safety of this approach. The results are consistent with previously reported open label studies of KRYSTEXXA with methotrexate in which response rates were greater than the rates observed for KRYSTEXXA alone in the Phase 3 program, further supporting the KRYSTEXXA immunomodulation strategy. We anticipate that the full results and data set will be released at a future scientific meeting.

~~Our marketed rare disease medicines in our orphan business unit are ACTIMMUNE, BUPHENYL, PROCYSBI, QUINSAIR and RAVICTI.~~ Our strategy for RAVICTI, our medicine for the treatment of urea cycle disorders, is to drive growth through increased awareness and diagnosis of urea cycle ~~disorders and~~disorders; to drive conversion to RAVICTI from older-generation nitrogen scavengers, ~~to RAVICTI,~~such as generic forms of sodium phenylbutyrate based on the medicine’s differentiated ~~benefits. With respect~~benefits; to position RAVICTI as the first line of therapy; and to increase compliance rates.

Our strategy for PROCYSBI, our ~~strategy~~medicine for the treatment of nephropathic cystinosis, is to drive conversion of patients from older-generation immediate-release capsules of cysteamine ~~bitartrate,~~bitartrate; to increase the ~~uptake~~use of the medicine by diagnosed but untreated ~~patients and~~patients; to identify previously undiagnosed patients who are suitable for ~~treatment. Although we no longer have EMEA marketing rights~~treatment; to position PROCYSBI as a first line of therapy; and ~~QUINSAIR after~~to increase compliance rates.

In February 2020, the ~~Chiesi divestiture, we retain marketing rights~~FDA approved PROCYSBI Delayed-Release Oral Granules in Packets for ~~both medicines~~adults and children one year of age and older living with nephropathic cystinosis. The PROCYSBI Delayed-Release Oral Granules in Packets product is the ~~United States, Canada, Latin America and Asia.~~ same as the currently available PROCYSBI capsules product except in respect of the packaging format. This new dosage form provides another administration option for patients, in addition to the PROCYSBI capsules. PROCYSBI Delayed-Release Oral Granules in Packets became commercially available in April 2020.

Our strategy with respect to ACTIMMUNE, our medicine for the treatment of chronic granulomatous disease, includes ~~driving growth by~~ increasing awareness and diagnosis of chronic granulomatous disease and increasing ~~the length~~compliance rates.

As of ~~treatment, establishing ACTIMMUNE as a cornerstone for treatment for a broader range~~March 31, 2020, our inflammation segment consisted of ~~patients~~our medicines PENNSAID 2%, DUEXIS, RAYOS and ~~evaluating opportunities for combination therapy with PD-1 and PD-L1 inhibitors in treatment of certain cancers through investigator-initiated studies.~~

With our May 2017 acquisition of River Vision, we added the late-stage rare disease biologic medicine candidate teprotumumab to our pipeline. Teprotumumab, which successfully completed a Phase 2 clinical trial, targets the treatment of moderate-to-severe thyroid eye disease, a debilitating autoimmune condition that presents in patients with Graves’ disease.VIMOVO. Our strategy for ~~teprotumumab is to support its continued clinical development and pursue regulatory approval. The River Vision acquisition further demonstrates~~ our ~~commitment to rare disease~~inflammation segment medicines and expands and diversifies our rare disease medicine pipeline to support sustainable longer-term growth. Our Phase 3 clinical trial evaluating teprotumumab for the treatment of moderate-to-severe active thyroid eye disease was initiated during the fourth quarter of 2017.

Our marketed rare disease rheumatology medicine is KRYSTEXXA. We are focused on optimizing and maximizing KRYSTEXXA’s peak sales potential by expanding our commercialization efforts, as well as investing in education, patient and physician outreach, and investigation programs that demonstrate KRYSTEXXA as an effective treatment of refractory chronic gout. In May 2017, we announced increased investment in KRYSTEXXA as part of the program to optimize its sales potential, with the goal of nearly doubling the commercial organization by the end of 2017. We believe that KRYSTEXXA represents a significant opportunity and potential ~~growth driver for our rheumatology business unit. The rheumatology business unit also includes RAYOS.~~

~~Our strategy for the primary care business unit, which includes DUEXIS, VIMOVO and PENNSAID 2%,~~ is to educate physicians about these clinically differentiated medicines and the benefits they offer. Patients are able to fill prescriptions for these medicines through pharmacies participating in our HorizonCares patient ~~access~~assistance program, as well as other pharmacies. We offer discount card and other programs to patients under which the patient receives a discount on his or her prescription. In certain circumstances when a patient’s prescription is rejected by a managed care vendor, we will pay for the full cost of the prescription. In addition, we have ~~evolved our commercial strategy to enter~~entered into business arrangements with pharmacy benefit managers, or PBMs, and other payers to secure formulary status and reimbursement of our inflammation segment medicines. The business arrangements with the PBMs generally require us to pay administrative fees and rebates to the PBMs and other payers for qualifying prescriptions. ~~The primary care business unit also includes MIGERGOT.~~ Effective in the first quarter of 2020, we reorganized our commercial operations and moved responsibility for and reporting of RAYOS to the inflammation segment.

On February 18, 2020, the FDA granted final approval for Dr. Reddy’s Laboratories Inc. and Dr. Reddy’s Laboratories Ltd., or collectively Dr. Reddy’s, generic version of VIMOVO. On February 27, 2020, Dr. Reddy’s launched its generic version of VIMOVO in the United States, and we now face generic competition with respect to VIMOVO. Patent litigation against Dr. Reddy’s for infringement continues with respect to certain patents in the New Jersey District Court. We have repositioned our promotional efforts previously made on VIMOVO to the other inflammation segment medicines and expect that our VIMOVO net sales will decrease in future periods.

We market all of our medicines in the United States through our field sales ~~force,~~forces, which numbered approximately ~~420~~455 representatives ~~across our three business units~~ as of ~~September 30, 2017.~~March 31, 2020.

Comparison of Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

The table below should be referenced in connection with a review of the following discussion of our results of operations for the three months ended ~~September 30, 2017,~~March 31, 2020, compared to the three months ended ~~September 30, 2016.~~March 31, 2019.

	For the Three Months Ended September 30,									For the Three Months Ended March 31,
	2017			2016			Change			2020			2019			Change
	(in thousands)									(in thousands)
Net sales	$	271,646		$	208,702		$	62,944		$	355,909		$	280,371		$	75,538
Cost of goods sold		125,517			85,161			40,356			97,416			88,142			9,274
Gross profit		146,129			123,541			22,588			258,493			192,229			66,264
Operating expenses:
Research and development		17,928			12,814			5,114			27,209			21,725			5,484
Selling, general and administrative		153,952			132,049			21,903			247,775			172,299			75,476
Total operating expenses		171,880			144,863			27,017			274,984			194,024			80,960
Operating loss		(25,751	)		(21,322	)		(4,429	)		(16,491	)		(1,795	)		(14,696	)
Other expense, net:
Interest expense, net		(31,706	)		(19,066	)		(12,640	)		(17,344	)		(27,530	)		10,186
Loss on debt extinguishment											—			(5,586	)		5,586
Foreign exchange gain (loss)		275			(108	)		383			776			(61	)		837
Gain on divestiture		112			—			112
Other income, net		280			6,879			(6,599	)		442			189			253
Total other expense, net		(31,039	)		(12,295	)		(18,744	)		(16,126	)		(32,988	)		16,862
Loss before expense (benefit) for income taxes		(56,790	)		(33,617	)		(23,173	)
Expense (benefit) for income taxes		7,181			(27,747	)		34,928
Loss before benefit for income taxes											(32,617	)		(34,783	)		2,166
Benefit for income taxes											(19,026	)		(1,920	)		(17,106	)
Net loss	$	(63,971	)	$	(5,870	)	$	(58,101	)	$	(13,591	)	$	(32,863	)	$	19,272

Net sales. Net sales increased ~~$62.9~~$75.5 million, or ~~30%~~26.9%, to ~~$271.6~~$355.9 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$208.7~~$280.4 million during the three months ended ~~September 30, 2016.~~

March 31, 2019. The ~~following table presents a summary of~~increase in net sales ~~attributed to geographic sources for~~during the three months ended ~~September 30, 2017~~March 31, 2020 was due to an increase in net sales in our orphan segment of $78.9 million primarily due to post-launch sales of TEPEZZA of $23.5 million and ~~2016 (in thousands):~~higher net sales of KRYSTEXXA and RAVICTI when compared to the three months ended March 31,2019, partially offset by a decrease in net sales in our inflammation segment of $3.4 million.

The following table reflects net sales by medicine for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~2019 (in thousands, except percentages):

	Three Months Ended September 30,					Change			Change			Three Months Ended March 31,				Change			Change
	2017		2016			$			%			2020		2019		$			%
KRYSTEXXA												$	93,248	$	52,257	$	40,991			78	%
RAVICTI													61,189		49,903		11,286			23	%
PROCYSBI													38,343		39,571		(1,228	)		(3	)%
ACTIMMUNE													26,541		21,746		4,795			22	%
TEPEZZA													23,452		—		23,452			100	%
BUPHENYL													2,313		2,770		(457	)		(16	)%
QUINSAIR													277		168		109			65	%
Orphan segment net sales												$	245,363	$	166,415	$	78,948			47	%
	(in thousands)
RAVICTI	$	50,972	$	42,176		$	8,796			21	%
PENNSAID 2%		48,262		80,199			(31,937	)		(40	%)		41,563		50,189		(8,626	)		(17	)%
KRYSTEXXA		42,752		25,542			17,210			67	%
PROCYSBI		33,574		—			33,574		*
DUEXIS		31,619		47,615			(15,996	)		(34	%)		31,346		29,457		1,889			6	%
ACTIMMUNE		29,175		24,915			4,260			17	%
VIMOVO		15,056		32,839			(17,783	)		(54	%)		19,428		14,043		5,385			38	%
RAYOS		14,591		13,419			1,172			9	%		18,209		19,424		(1,215	)		(6	)%
BUPHENYL		3,650		4,341			(691	)		(16	%)
MIGERGOT		1,142		1,154			(12	)		(1	%)		—		843		(843	)		(100	)%
LODOTRA		744		1,502			(758	)		(50	%)
QUINSAIR		109		—			109		*
Litigation settlement		—		(65,000	)		65,000		*
Net sales	$	271,646	$	208,702		$	62,944			30	%
Inflammation segment net sales												$	110,546	$	113,956	$	(3,410	)		(3	)%

Total net sales												$	355,909	$	280,371	$	75,538			27	%

Net sales were higher during the three months ended September 30, 2017 compared to the three months ended September 30, 2016, primarily due to the $65.0 million litigation settlement with Express Scripts, Inc., or Express Scripts, recorded during the three months ended September 30, 2016, the recognition of PROCYSBI sales following the acquisition of Raptor in October 2016 and higher net sales of KRYSTEXXA and RAVICTI, offset by lower net sales of PENNSAID 2%, VIMOVO and DUEXIS.Orphan

~~RAVICTI~~KRYSTEXXA. Net sales increased ~~$8.8~~$41.0 million, or ~~21%~~78%, to ~~$51.0~~$93.2 million during the three months ended ~~September 30, 2017,~~March 31, 2020 from ~~$42.2~~$52.2 million during the three months ended ~~September 30, 2016.~~March 31, 2019. Net sales increased by approximately $23.6 million due to volume growth and $17.4 million due to higher net pricing.

RAVICTI. Net sales increased $11.3 million, or 23%, to $61.2 million during the three months ended March 31, 2020, from $49.9 million during the three months ended March 31, 2019. Net sales in the United States increased by approximately ~~$7.8~~$10.9 million, which was composed of ~~$5.0~~an increase of approximately $7.4 million resulting from ~~prescription volume growth~~higher net pricing and ~~$2.8~~an increase of approximately $3.5 million due to higher ~~net pricing.~~sales volume. Net sales outside the United States increased by approximately ~~$1.0~~$0.4 million ~~primarily~~ due to higher sales volume.

~~PENNSAID 2%~~PROCYSBI. Net sales decreased ~~$31.9~~$1.2 million, or ~~40%~~3%, to ~~$48.3~~$38.3 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$80.2~~$39.5 million during the three months ended ~~September 30, 2016. Net~~March 31, 2019. The decrease in net sales ~~decreased by~~was composed of a decrease of approximately ~~$27.5~~$0.8 million due to lower ~~net pricing~~sales volume and ~~approximately $4.4~~a decrease of $0.4 million resulting from lower ~~prescription volume.~~net pricing.

~~KRYSTEXXA~~ACTIMMUNE. Net sales increased ~~$17.2~~$4.8 million, or ~~67%~~22%, to ~~$42.8~~$26.5 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$25.6~~$21.7 million during the three months ended ~~September 30, 2016.~~March 31, 2019. Net sales increased by approximately ~~$11.3 million resulting from prescription volume growth and approximately $5.9 million due to higher net pricing.~~

~~PROCYSBI. Net sales were $33.6 million during the three months ended September 30, 2017. We began recognizing PROCYSBI sales following our acquisition of Raptor in October 2016.~~

~~DUEXIS~~. Net sales decreased $16.0 million, or 34%, to $31.6 million during the three months ended September 30, 2017, from $47.6 million during the three months ended September 30, 2016. Net sales decreased by approximately $14.8 million due to lower net pricing and approximately $1.2 million resulting from lower prescription volume.

~~ACTIMMUNE~~. Net sales increased $4.3 million, or 17%, to $29.2 million during the three months ended September 30, 2017, from $24.9 million during the three months ended September 30, 2016. Net sales increased by approximately $3.7$2.7 million due to higher net pricing and by approximately ~~$0.6~~$2.1 million resulting from ~~prescription volume growth.~~ higher sales volume.

~~VIMOVO~~TEPEZZA. On January 21, 2020, the FDA approved TEPEZZA for the treatment of TED. Net sales generated for TEPEZZA during the three months ended March 31, 2020 were $23.5 million.

BUPHENYL. Net sales decreased ~~$17.8~~$0.5 million, or ~~54%~~16%, to ~~$15.1~~$2.3 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$32.9~~$2.8 million during the three months ended ~~September 30, 2016.~~March 31, 2019. Net sales decreased by approximately ~~$11.9~~$2.1 million due to lower net pricing, ~~and~~partially offset by an increase of approximately ~~$5.9~~$1.6 million resulting from ~~lower prescription~~higher sales volume.

PENNSAID 2%. Net sales ~~increased $1.2~~decreased $8.6 million, or 9%17%, to ~~$14.6~~$41.6 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$13.4~~$50.2 million during the three months ended ~~September 30, 2016.~~March 31, 2019. Net sales decreased by approximately $15.3 million due to lower sales volume, partially offset by an increase of approximately $6.7 million resulting from higher net pricing primarily due to lower utilization of our patient assistance programs.

DUEXIS. Net sales increased $1.8 million, or 6%, to $31.3 million during the three months ended March 31, 2020, from $29.5 million during the three months ended March 31, 2019. Net sales increased by approximately ~~$3.4~~$11.1 million resulting from ~~prescription volume growth,~~higher net pricing primarily due to lower utilization of our patient assistance programs, partially offset by a decrease of approximately ~~$2.2~~$9.3 million ~~due to~~resulting from lower ~~net pricing.~~sales volume.

On February 18, 2020, the FDA granted final approval for Dr. Reddy’s generic version of ~~$0.7 million due~~VIMOVO. On February 27, 2020, Dr. Reddy’s launched its generic version of VIMOVO in the United States, and we now face generic competition with respect to ~~higher~~VIMOVO. Patent litigation against Dr. Reddy’s for infringement continues with respect to certain patents in the New Jersey District Court. We have repositioned our promotional efforts previously made on VIMOVO to the other inflammation segment medicines and expect that our VIMOVO net ~~pricing.~~sales will decrease in future periods.

~~MIGERGOT~~RAYOS. Net sales ~~were $1.1~~decreased $1.2 million, or 6%, to $18.2 million during the three months ended ~~September 30, 2017 and during the three months ended September 30, 2016. Net sales decreased by approximately $0.1 million resulting~~March 31, 2020, from ~~lower prescription volume, offset by an increase of approximately $0.1 million due to higher net pricing.~~

~~LODOTRA. Net sales decreased $0.8 million, or 50%, to $0.7~~$19.4 million during the three months ended September 30, 2017, from $1.5 million during the three months ended September 30, 2016. The decrease was the result of decreased medicine shipments to our European distribution partner, Mundipharma International Corporation Limited, or Mundipharma. LODOTRA shipments to Mundipharma are not linear or directly tied to Mundipharma’s in-market sales and can therefore fluctuate significantly from quarter to quarter.

~~QUINSAIR~~.March 31, 2019. Net sales ~~were $0.1~~decreased by approximately $7.5 million ~~during the three months ended September 30, 2017. We began recognizing QUINSAIR~~due to lower sales ~~following~~volume, partially offset by an increase of $6.3 million resulting from higher net pricing primarily due to lower utilization of our ~~acquisition of Raptor in October 2016. Net sales during the three months ended September 30, 2017 relate~~patient assistance programs.

MIGERGOT. On June 28, 2019, we sold our rights to ~~sales in Canada and Latin America, as our QUINSAIR sales in EMEA ceased following the Chiesi divestiture in June 2017.~~MIGERGOT.

In September 2016, we entered into a settlement agreement and mutual release with Express Scripts pursuant to which we and Express Scripts were released from any and all claims relating to our then ongoing litigation without admitting any fault or wrongdoing and we agreed to pay Express Scripts $65.0 million. This settlement was accounted for as a reduction of net sales in the condensed consolidated statement of comprehensive loss for the three months ended September 30, 2016.

The table below reconciles our gross to net sales for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in ~~millions)~~millions, except percentages):

	Three Months Ended September 30, 2017						Three Months Ended September 30, 2016						Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
	Amount			% of Gross Sales			Amount			% of Gross Sales			Amount			% of Gross Sales			Amount			% of Gross Sales
Gross sales	$	1,002.1			100.0	%	$	865.9			100.0	%	$	803.5			100.0	%	$	945.2			100.0	%
Adjustments to gross sales:
Prompt pay discounts		(19.9	)		(2.0	)%		(16.7	)		(1.9	)%		(13.0	)		(1.6	)%		(17.8	)		(1.9	)%
Medicine returns		(10.0	)		(1.0	)%		(9.1	)		(1.1	)%		(8.8	)		(1.1	)%		(5.1	)		(0.5	)%
Co-pay and other patient assistance		(449.2	)		(44.8	)%		(458.4	)		(52.9	)%		(230.1	)		(28.6	)%		(417.8	)		(44.2	)%
Wholesaler fees and commercial rebates		(168.4	)		(16.8	)%		(30.2	)		(3.5	)%
Commercial rebates and wholesaler fees														(59.5	)		(7.4	)%		(110.4	)		(11.7	)%
Government rebates and chargebacks		(83.0	)		(8.3	)%		(77.8	)		(9.0	)%		(136.2	)		(17.0	)%		(113.7	)		(12.0	)%
Litigation settlement		—			—			(65.0	)		(7.5	)%
Total adjustments		(730.5	)		(72.9	)%		(657.2	)		(75.9	)%		(447.6	)		(55.7	)%		(664.8	)		(70.3	)%
Net sales	$	271.6			27.1	%	$	208.7			24.1	%	$	355.9			44.3	%	$	280.4			29.7	%

During the three months ended September 30, 2017, wholesaler fees and commercial rebates, as a percentage of gross sales, increased to 16.8% from 3.5% during the three months ended September 30, 2016, and co-pay and other patient assistance, as a percentage of gross sales, decreased to 44.8% from 52.9% during the three months ended September 30, 2016. During the second half of 2016, we entered into business arrangements with PBMs and other payers in an effort to secure formulary status and reimbursement of our medicines, such as our arrangements with Express Scripts, CVS Caremark and Prime Therapeutics LLC, which resulted in lowerMarch 31, 2020, co-pay and other patient assistance costs, as a percentage of gross sales, decreased to 28.6% from 44.2% during the three months ended ~~September 30, 2017. The mix~~March 31, 2019, primarily due to lower utilization of ~~PBM healthcare plans that adopted~~ our ~~primary care medicines onto their formulary during 2017 was more heavily weighted towards those plans for which we pay~~patient assistance programs and the impact of generic competition on VIMOVO sales.

During the three months ended March 31, 2020, commercial rebates and wholesaler fees, as a ~~higher commercial rebate. In addition, we also experienced a higher rate~~percentage of ~~managed care control in our non-contracted business, which resulted in significantly lower net pricing~~gross sales, decreased to 7.4% from 11.7% during the three months ended ~~September 30, 2017 when compared to~~March 31, 2019, primarily as a result of an increased proportion of orphan segment medicines sold and the impact of generic competition on VIMOVO sales.

During the three months ended ~~September 30, 2016.~~March 31, 2020, government rebates and chargebacks, as a percentage of gross sales, increased to 17.0% from 12.0% during the three months ended March 31, 2019, primarily as a result of an increased proportion of orphan segment medicines sold. Government rebates and chargebacks as a percentage of gross sales are typically higher for medicines in the orphan segment compared to medicines in the inflammation segment.

Cost of Goods Sold.Cost of goods sold increased ~~$40.4~~$9.2 million to ~~$125.5~~$97.4 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$85.1~~$88.2 million during the three months ended ~~September 30, 2016.~~March 31, 2019. The increase in cost of goods sold during the three months ended March 31, 2020 compared to three months ended March 31, 2019, was primarily due to a $4.5 million increase in royalty expense, a $2.4 million increase in employee-related costs and a $1.3 million increase in depreciation and amortization expense. As a percentage of net sales, cost of goods sold was ~~46.2%~~27.4% during the three months ended ~~September 30, 2017,~~March 31, 2020, compared to ~~40.8%~~31.4% during the three months ended ~~September 30, 2016.~~March 31, 2019. The ~~increase~~decrease in cost of goods sold as a percentage of net sales was primarily ~~attributable~~due to ~~a $17.9~~change in the mix of medicines sold.

Research and Development Expenses. Research and development expenses increased $5.5 million increase in intangible amortization expense, a $9.9 million increase in inventory step-up expense, a $5.7 million increase in drug substance harmonization costs, a $2.9 million increase in royalty accretion and a $2.6 million increase in employee costs.

~~The increase in intangible amortization of $17.9~~to $27.2 million during the three months ended ~~September 30, 2017 compared to the prior year period was primarily due to the amortization of developed technology of $17.7~~March 31, 2020, from $21.7 million ~~related to PROCYSBI, which was acquired in October 2016.~~

Because inventory step-up expense is acquisition-related, will not continue indefinitely and has a significant effect on our gross profit, gross margin percentage and net income (loss) for all affected periods, we disclose balance sheet and income statement amounts related to inventory step-up within the notes to the condensed consolidated financial statements. The increase in inventory step-up expense of $9.9 million recorded to cost of goods sold during the three months ended ~~September 30, 2017~~March 31, 2019. The increase was primarily attributable to a $3.7 million increase in share-based compensation primarily due to company-wide grant of performance stock unit awards related to TEPEZZA, or TEPEZZA PSUs, that vested in January 2020 upon FDA approval for TEPEZZA, a $2.1 million increase in clinical trial costs and a $1.6 million increase in employee-related costs, partially offset by an upfront payment of $2.0 million made under our collaboration agreement with HemoShear Therapeutics, LLC, or HemoShear, during the three months ended March 31, 2019.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $75.5 million to $247.8 million during the three months ended March 31, 2020, from $172.3 million during the three months ended March 31, 2019. The increase was primarily attributable to an increase of $47.9 million in employee costs of which $23.5 million relates to an increase in share-based compensation primarily due to the TEPEZZA PSUs and an increase of $14.6 million related to marketing program costs.

Interest Expense, Net. Interest expense, net, decreased $10.2 million to $17.3 million during the three months ended March 31, 2020, from $27.5 million during the three months ended March 31, 2019. The decrease was primarily due to a decrease in debt interest expense of $12.6 million, primarily related to the decrease in the principal amount of our term loans in March 2019 and July 2019, repayment of our 6.625% Senior Notes due 2023 in May 2019 and in August 2019, repayment of our 8.750% Senior Notes due 2024 in August 2019, and an increase in interest income of $2.8 million.

Benefit for Income Taxes. During the three months ended March 31, 2020, we recorded a benefit for income taxes of $19.0 million compared to a benefit for income taxes of $1.9 million during the ~~prior year period was due to KRYSTEXXA inventory step-up expense of $21.2 million (acquired in January 2016)~~three months ended March 31, 2019. The benefit for income taxes recorded during the three months ended ~~September 30, 2017, compared~~March 31, 2020 resulted primarily from tax benefits recognized on share-based compensation and the mix of pre-tax income and losses incurred in various tax jurisdictions.

See Note 11, Segment and Other Information, of the Notes to ~~KRYSTEXXA~~Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q for a reconciliation of our segment operating income to our total loss before benefit for income taxes for the three months ended March 31, 2020 and ~~MIGERGOT inventory step-up expense of $11.3 million, recorded~~2019.

The following table reflects our orphan net sales and segment operating income for the three months ended March 31, 2020 and 2019 (in thousands, except percentages).

The increase in orphan net sales during the three months ended ~~September 30, 2016.~~March 31, 2020 is described in the Consolidated Results section above.

~~Research and Development Expenses. Research and development expenses~~Segment operating income. Orphan segment operating income increased ~~$5.1~~$17.6 million to ~~$17.9~~$54.3 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$12.8~~$36.7 million during the three months ended ~~September 30, 2016.~~March 31, 2019. The increase was primarily attributable to an increase in ~~costs relating to our research and development projects, including teprotumumab which we acquired with River Vision during the second quarter~~net sales of ~~2017. We expect our research and development expenses to~~$78.9 million as described above, partially offset by an increase in future periods as we execute our business strategy of building a pipeline of rare disease medicine candidates and develop those medicine candidates, including the recent initiation of our Phase 3 clinical trial evaluating teprotumumab for the treatment of moderate-to-severe active thyroid eye disease.

~~Selling, General and Administrative Expenses. Selling,~~selling, general and administrative expenses of $49.9 million. The increase in selling, general and administrative expenses was mainly due to an increase in costs to prepare for the U.S. launch of TEPEZZA.

The following table reflects our inflammation net sales and segment operating income for the three months ended March 31, 2020 and 2019 (in thousands, except percentages).

The decrease in inflammation net sales during the three months ended March 31, 2020 is described in the Consolidated Results section above.

Segment operating income. Inflammation segment operating income increased ~~$21.9~~$0.5 million to ~~$154.0~~$51.9 million during the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$132.1~~$51.4 million during the three months ended ~~September 30, 2016.~~March 31, 2019. The increase was primarily attributable to a ~~$14.8~~decrease in selling, general and administrative expenses of $3.5 million ~~increase in employee costs related to our growth in headcount and costs following the Raptor acquisition during October 2016, a $5.3 million increase in marketing program costs~~ and a ~~$2.5~~decrease in research and development expense of $0.2 million, ~~increase in consulting expense.~~

~~Interest Expense, Net~~. Interest expense, net, increased $12.6 million to $31.7 million during the three months ended September 30, 2017, from $19.1 million during the three months ended September 30, 2016. The increase was primarily due to higher borrowings, including our $300.0 million aggregate principal amount of 8.75% Senior Notes due 2024, or the 2024 Senior Notes, in connection with our acquisition of Raptor, and our $850.0 million principal amount of secured loans under our 2017 term loan facility, of which $375.0 million was in connection with our acquisition of Raptor, compared to the $397.0 million principal amount of secured loans from previous borrowings under our senior secured loan facility.

~~Expense (Benefit) for Income Taxes~~. During the three months ended September 30, 2017, we recorded an expense for income taxes of $7.2 million compared to a benefit of $27.7 million during the three months ended September 30, 2016. The expense for income taxes during the three months ended September 30, 2017 resulted from a change in the mix of pre-tax losses being incurred between high and low tax rate jurisdictions, which decreased our expected benefit for the full-year 2017 and resulted in a tax expense being recorded during the three months ended September 30, 2017.

In relation to all outstanding performance stock unit awards, or PSUs, if our share price is lower than $31.58, $32.70 and $33.86 for the twenty trading days ending December 23, 2017, March 22, 2018 and June 22, 2018, respectively, approximately $16.4 million, $14.9 million and $13.4 million, respectively, of deferred tax assets related to previously recognized share-based compensation expense related to these PSUs will be charged to income tax expense.

The table below should be referenced in connection with a review of the following discussion of our results of operations for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.

For the Nine Months Ended
September 30,

2017

2016

Change

(in thousands)

Net sales

$
782,012

$
670,770

$
111,242

Cost of goods sold

394,783

243,520

151,263

Gross profit

387,229

427,250

(40,021
)
Operating expenses:

Research and development

194,090

36,746

157,344

Selling, general and administrative

509,940

407,563

102,377

Total operating expenses

704,030

444,309

259,721

Operating loss

(316,801
)

(17,059
)

(299,742
)
Other expense, net:

Interest expense, net

(95,297
)

(57,752
)

(37,545
)
Foreign exchange gain (loss)

167

(266
)

433

Gain on divestiture

5,968

—

5,968

Loss on debt extinguishment

(533
)

—

(533
)
Other income, net

280

6,839

(6,559
)
Total other expense, net

(89,415
)

(51,179
)

(38,236
)
Loss before benefit for income taxes

(406,216
)

(68,238
)

(337,978
)
Benefit for income taxes

(42,138
)

(31,946
)

(10,192
)
Net loss

$
(364,078
)

$
(36,292
)

$
(327,786
)

~~Net sales. Net sales increased $111.2 million, or 17%, to $782.0 million during the nine months ended September 30, 2017, from $670.8 million during the nine months ended September 30, 2016.~~

~~The following table presents a summary of net sales attributed to geographic sources for nine months ended September 30, 2017 and 2016 (in thousands):~~

~~The following table reflects the components of net sales for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended
September 30,

Change

Change

2017

2016

$

%

(in thousands)

RAVICTI

$
142,086

$
118,599

$
23,487

20
%
PENNSAID 2%

141,094

207,857

(66,763
)

(32
%)
KRYSTEXXA

112,667

61,570

51,097

83
%
PROCYSBI

104,533

—

104,533

*

DUEXIS

92,951

122,780

(29,829
)

(24
%)
ACTIMMUNE

84,196

80,465

3,731

5
%
VIMOVO

41,069

89,710

(48,641
)

(54
%)
RAYOS

36,492

36,062

430

1
%
BUPHENYL

16,205

12,134

4,071

34
%
MIGERGOT

3,995

3,196

799

25
%
LODOTRA

3,417

3,397

20

1
%
QUINSAIR

3,307

—

3,307

*

Litigation settlement

—

(65,000
)

65,000

*

Total Net Sales

$
782,012

$
670,770

$
111,242

17
%

Net sales were higher during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily due to the $65.0 million litigation settlement with Express Scripts recorded during the nine months ended September 30, 2016, the recognition of PROCYSBI sales following the acquisition of Raptor in October 2016 and higher net sales of KRYSTEXXA and RAVICTI, offset by lower net sales of PENNSAID 2%, VIMOVO and DUEXIS.

~~RAVICTI~~. Net sales increased $23.5 million, or 20%, to $142.1 million during the nine months ended September 30, 2017, from $118.6 million during the nine months ended September 30, 2016. Net sales in the United States increased by approximately $21.3 million, which was composed of $16.6 million resulting from prescription volume growth and $4.7 million due to higher net pricing. Net sales outside the United States increased by approximately $2.2 million primarily due to higher sales volume.

~~PENNSAID 2%~~. Net sales decreased $66.8 million, or 32%, to $141.1 million during the nine months ended September 30, 2017, from $207.9 million during the nine months ended September 30, 2016. Net sales decreased by approximately $54.3 million due to lower net pricing and approximately $12.5 million resulting from lower prescription volume.

~~KRYSTEXXA~~. Net sales increased $51.1 million, or 83%, to $112.7 million during the nine months ended September 30, 2017, from $61.6 million during the nine months ended September 30, 2016. Net sales increased by approximately $28.0 million due to prescription volume growth and approximately $23.1 million due to higher net pricing.

~~PROCYSBI. Net sales were $104.5 million during the nine months ended September 30, 2017. We began recognizing PROCYSBI sales following our acquisition of Raptor in October 2016.~~

~~DUEXIS~~. Net sales decreased $29.8 million, or 24%, to $93.0 million during the nine months ended September 30, 2017, from $122.8 million during the nine months ended September 30, 2016. Net sales decreased by approximately $29.3 million due to lower net pricing and approximately $0.5 million resulting from lower prescription volume.

~~ACTIMMUNE~~. Net sales increased $3.7 million, or 5%, to $84.2 million during the nine months ended September 30, 2017, from $80.5 million during the nine months ended September 30, 2016. Net sales increased by approximately $7.9 million due to higher net pricing,partially offset by a decrease ~~of approximately $4.2 million resulting from lower prescription volume.~~

~~VIMOVO. Net~~in net sales decreased $48.6 million, or 54%, to $41.1 million during the nine months ended September 30, 2017, from $89.7 million during the nine months ended September 30, 2016. Net sales decreased by approximately $32.4 million due to lower net pricing and approximately $16.2 million resulting from lower prescription volume.

~~RAYOS~~. Net sales increased $0.4 million, or 1%, to $36.5 million during the nine months ended September 30, 2017, from $36.1 million during the nine months ended September 30, 2016. Net sales increased by approximately $11.3 million resulting from prescription volume growth, offset by a decrease of ~~approximately $10.9 million due to lower net pricing.~~

~~BUPHENYL~~. Net sales increased $4.1 million, or 34%, to $16.2 million during the nine months ended September 30, 2017, from $12.1 million during the nine months ended September 30, 2016. Net sales increased by approximately $6.1 million due to higher net pricing, offset by a decrease of approximately $2.0 million resulting from lower prescription volume.

~~MIGERGOT~~. Net sales increased $0.8 million, or 25%, to $4.0 million during the nine months ended September 30, 2017, from $3.2 million during the nine months ended September 30, 2016. Net sales increased by approximately $1.0 million due to higher net pricing, offset by a decrease of approximately $0.2 million resulting from lower prescription volume.

~~LODOTRA. Net sales were~~ $3.4 million ~~during each of the nine months ended September 30, 2017 and 2016.~~

~~QUINSAIR. Net sales were $3.3 million during the nine months ended September 30, 2017. We began recognizing QUINSAIR sales following our acquisition of Raptor in October 2016.Our sales of QUINSAIR in EMEA ceased following the Chiesi divestiture in June 2017.~~

In September 2016, we entered into a settlement agreement and mutual release with Express Scripts pursuant to which we and Express Scripts were released from any and all claims relating to our then ongoing litigation without admitting any fault or wrongdoing and we agreed to pay Express Scripts $65.0 million. This settlement was accounted for as ~~a reduction of net sales in the condensed consolidated statement of comprehensive loss for the nine months ended September 30, 2016.~~

~~The table below reconciles our gross to net sales for the nine months ended September 30, 2017 and 2016 (in millions):~~

During the nine months ended September 30, 2017, wholesaler fees and commercial rebates, as a percentage of gross sales, increased to 15.9% from 3.6% during the nine months ended September 30, 2016, and co-pay and other patient assistance, as a percentage of gross sales, decreased to 46.9% from 54.3% during the nine months ended September 30, 2016. During the second half of 2016, we entered into business arrangements with PBMs and other payers in an effort to secure formulary status and reimbursement of our medicines, such as our arrangements with Express Scripts, CVS Caremark and Prime Therapeutics LLC, which resulted in lower co-pay and other patient assistance costs as a percentage of gross sales during the nine months ended September 30, 2017. The mix of PBM healthcare plans that adopted our primary care medicines onto their formulary during 2017 was more heavily weighted towards those plans for which we pay a higher commercial rebate. In addition, we also experienced a higher rate of managed care control in our non-contracted business, which resulted in significantly lower net pricing during the nine months ended September 30, 2017 when compared to the nine months ended September 30, 2016.

~~Cost of Goods Sold~~. Cost of goods sold increased $151.3 million to $394.8 million during the nine months ended September 30, 2017, from $243.5 million during the nine months ended September 30, 2016. As a percentage of net sales, cost of goods sold was 50.5% during the nine months ended September 30, 2017 compared to 36.3% during the nine months ended September 30, 2016. The increase in cost of goods sold was primarily attributable to a $67.8 million increase in inventory step-up expense, an increase in intangible amortization expense of $56.9 million, a $10.7 million increase in drug substance harmonization costs, a higher royalty accretion expense of $9.6 million and a $7.0 million increase in employee costs, partially offset by a reduction of $2.7 million in cost of goods sold following a reduction in our excess inventory purchase commitments with Boehringer Ingelheim.

Because inventory step-up expense is acquisition-related, will not continue indefinitely and has a significant effect on our gross profit, gross margin percentage and net income (loss) for all affected periods, we disclose balance sheet and income statement amounts related to inventory step-up within the notes to the condensed consolidated financial statements. The increase in inventory step-up expense of $67.8 million recorded to cost of goods sold during the nine months ended September 30, 2017 compared to the prior year period was due to KRYSTEXXA inventory step-up expense of $54.9 million (acquired in January 2016) and PROCYSBI and QUINSAIR inventory step-up expense of $40.8 million (acquired in October 2016) recorded during the nine months ended September 30, 2017 compared to KRYSTEXXA and MIGERGOT inventory step-up expense of $27.9 million recorded during the nine months ended September 30, 2016.

The increase in intangible amortization of $56.9 million during the nine months ended September 30, 2017 compared to the prior year period was primarily due to the amortization of developed technology of $55.3 million related to PROCYSBI (acquired in October 2016).

~~Research and Development Expenses~~. Research and development expenses increased $157.3 million to $194.1 million during the nine months ended September 30, 2017, from $36.8 million during the nine months ended September 30, 2016. The increase was primarily attributable to $147.7 million related to the acquisition of River Vision during the nine months ended September 30, 2017. Pursuant to ASC 805 (as amended by ASU No. 2017-01), we accounted for the River Vision acquisition as the purchase of an in-process research and development asset and, pursuant to ASC 730, recorded the purchase price as a research and development expense during the nine months ended September 30, 2017.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses increased $102.4 million to $509.9 million during the nine months ended September 30, 2017, from $407.5 million during the nine months ended September 30, 2016. The increase was primarily attributable to an increase of $30.2 million in employee costs related to our growth in headcount and costs following the Raptor acquisition during October 2016, an increase of $24.0 million in marketing program costs, $22.3 million paid to Boehringer Ingelheim ~~International~~ ~~upon closing of the acquisition of certain rights to interferon gamma-1b during the nine months ended September 30, 2017 and an increase of $15.2 million in consulting costs.~~

~~Interest Expense, Net~~. Interest expense, net, increased $37.5 million to $95.3 million during the nine months ended September 30, 2017, from $57.8 million during the nine months ended September 30, 2016. The increase was primarily due to higher borrowings, including our $300.0 million aggregate principal amount of 2024 Senior Notes, in connection with our acquisition of Raptor, and our $850.0 million principal amount of secured loans under our 2017 term loan facility, of which $375.0 million was in connection with our acquisition of Raptor, compared to the $397.0 million principal amount of secured loans from previous borrowings under our senior secured loan facility.

~~Gain on divestiture~~. During the nine months ended September 30, 2017, we completed the Chiesi divestiture for an upfront payment of $72.2 million, which reflects $3.1 million of cash divested, and subject to other customary purchase price adjustments for working capital, with additional potential milestone payments based on sales thresholds, and we recorded a gain of $6.0 million on the divestiture.

~~Loss on Debt Extinguishment~~. During the nine months ended September 30, 2017, we entered into a refinancing amendment for our term loans. We accounted for a portion of the repayment as a debt extinguishment and recorded a loss on debt extinguishment of $0.5 million in the condensed consolidated statements of comprehensive loss, which reflected the write-off of the unamortized portion of debt discount and deferred financing costs previously incurred and a one percent prepayment penalty fee.

~~Benefit for Income Taxes~~. During the nine months ended September 30, 2017, we recorded a benefit for income taxes of $42.1 million compared to $31.9 million during the nine months ended September 30, 2016. The increase in benefit for income taxes during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily resulted from an increase in pre-tax losses.

In relation to all outstanding PSUs, if our share price is lower than $31.58, $32.70 and $33.86 for the twenty trading days ending December 23, 2017, March 22, 2018 and June 22, 2018, respectively, approximately $16.4 million, $14.9 million and $13.4 million, respectively, of deferred tax assets related to previously recognized share-based compensation expense related to these PSUs will be charged to income tax expense. described above.

~~Non-GAAP adjusted net sales,~~ EBITDA, or earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, non-GAAP net income and non-GAAP earnings per share are used and provided by us as non-GAAP financial measures. These non-GAAP financial measures are intended to provide additional information on our performance, operations and profitability. Adjustments to our GAAP figures as well as EBITDA exclude acquisition/divestiture-related costs, an upfront, ~~fee for a~~progress and milestone payments related to license ~~of a patent,~~and collaboration agreements, drug substance harmonization costs, fees related to ~~term loan~~ refinancing ~~Primary Care business unit~~activities, restructuring and realignment costs, litigation settlements and charges related to discontinuation of the ~~Express Scripts litigation settlement amount,~~Friedreich’s ataxia program, as well as non-cash items such as share-based compensation, inventory step-up expense, depreciation and amortization, ~~remeasurement of royalties for medicines acquired through business combinations, royalty accretion,~~ non-cash interest expense, ~~non-current asset~~long-lived assets impairment charges, ~~gain~~loss on ~~divestiture~~debt extinguishments, (gain) loss on sale of assets and other non-cash adjustments. Certain other special items or substantive events may also be included in the non-GAAP adjustments periodically when their magnitude is significant within the periods incurred. We maintain an established non-GAAP cost policy that guides the determination of what costs will be excluded in non-GAAP measures. We believe that these non-GAAP financial measures, when considered together with the GAAP figures, can enhance an overall understanding of our financial and operating performance. The non-GAAP financial measures are included with the intent of providing investors with a more complete understanding of our historical ~~and expected 2017~~ financial results and trends and to facilitate comparisons between ~~periods and with respect to projected information.~~periods. In addition, these non-GAAP financial measures are among the indicators our management uses for planning and forecasting purposes and measuring our performance. For example, adjusted EBITDA is used by us as one measure of management performance under certain incentive compensation arrangements. These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

GAAP Net Loss

$
(63,971
)

$
(5,870
)

$
(364,078
)

$
(36,292
)
Depreciation

1,476

1,183

5,037

3,266

Amortization, accretion and step-up:

Intangible amortization expense

68,666

50,757

208,118

151,199

Accretion of royalty liabilities

12,720

9,734

38,415

28,762

Amortization of deferred revenue

(225
)

(212
)

(636
)

(631
)
Inventory step-up expense

21,170

11,305

95,659

27,853

Interest expense, net (including amortization of debt discount and deferred financing costs)

31,706

19,066

95,297

57,752

Expense (benefit) for income taxes

7,181

(27,747
)

(42,138
)

(31,946
)
EBITDA

78,723

58,216

35,674

199,963

Other non-GAAP adjustments:

Remeasurement of royalties for medicines acquired through business combinations

—

—

(2,944
)

—

Acquisition/divestiture-related costs

5,561

5,159

168,985

16,456

Upfront fee for license of global patent

—

—

—

2,000

Primary Care business unit realignment costs

(290
)

—

4,903

—

Gain on divestiture

(112
)

—

(5,968
)

—

Loss on debt extinguishment

—

—

533

—

Fees related to term loan refinancing

16

—

4,114

—

Share-based compensation

31,698

29,312

87,935

84,921

Charges relating to discontinuation of Friedreich's ataxia program (1)

(1,116
)

—

18,051

—

Drug substance harmonization costs (2)

5,654

—

10,698

—

Royalties for medicines acquired through business combinations

(12,031
)

(9,564
)

(34,970
)

(27,159
)
Reversal of pre-acquisition reserve upon signing of contract

—

(6,900
)

—

(6,900
)
Litigation settlement

—

65,000

—

65,000

Total of other non-GAAP adjustments

29,380

83,007

251,337

134,318

Adjusted EBITDA

$
108,103

$
141,223

$
287,011

$
334,281

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

GAAP Net Loss

$
(63,971
)

$
(5,870
)

$
(364,078
)

$
(36,292
)
Non-GAAP Adjustments:

Remeasurement of royalties for medicines acquired through business combinations

—

—

(2,944
)

—

Acquisition/divestiture-related costs

5,561

5,159

168,985

16,456

Upfront fee for license of global patent

—

—

—

2,000

Fees related to term loan refinancing

16

—

4,114

—

Primary Care business unit realignment costs

(290
)

—

4,903

—

Gain on divestiture

(112
)

—

(5,968
)

—

Loss on debt extinguishment

—

—

533

—

Amortization, accretion and step-up:

Intangible amortization expense

68,666

50,757

208,118

151,199

Amortization of debt discount and deferred financing costs

5,234

4,537

15,863

13,469

Accretion of royalty liabilities

12,720

9,734

38,415

28,762

Inventory step-up expense

21,170

11,305

95,659

27,853

Share-based compensation

31,698

29,312

87,935

84,921

Depreciation expense

1,476

1,183

5,037

3,266

Charges relating to discontinuation of Friedreich's ataxia program (1)

(1,116
)

—

18,051

—

Drug substance harmonization costs (2)

5,654

—

10,698

—

Litigation settlement

—

65,000

—

65,000

Royalties for medicines acquired through business combinations

(12,031
)

(9,564
)

(34,970
)

(27,159
)
Reversal of pre-acquisition reserve upon signing of contract

—

(6,900
)

—

(6,900
)
Total pre-tax non-GAAP adjustments

138,646

160,523

614,429

358,867

Income tax effect of pre-tax non-GAAP adjustments (3)

(31,548
)

(39,180
)

(103,923
)

(74,518
)
Total non-GAAP adjustments

107,098

121,343

510,506

284,349

Non-GAAP Net Income

$
43,127

$
115,473

$
146,428

$
248,057

Non-GAAP Earnings Per Share:

Weighted average ordinary shares – Basic

163,447,208

161,038,827

162,810,551

160,472,530

Non-GAAP Earnings Per Share – Basic

GAAP loss per share – Basic

$
(0.39
)

$
(0.04
)

$
(2.24
)

$
(0.23
)
Non-GAAP adjustments

0.65

0.76

3.14

1.78

Non-GAAP earnings per share – Basic

$
0.26

$
0.72

$
0.90

$
1.55

Weighted average ordinary shares – Diluted

Weighted average ordinary shares – Basic

163,447,208

161,038,827

162,810,551

160,472,530

Ordinary share equivalents

2,346,684

3,868,212

2,510,909

3,763,984

Weighted average ordinary shares – Diluted

165,793,892

164,907,039

165,321,460

164,236,514

Non-GAAP Earnings Per Share – Diluted

GAAP loss per share – Diluted

$
(0.39
)

$
(0.04
)

$
(2.24
)

$
(0.23
)
Non-GAAP adjustments

0.65

0.75

3.14

1.77

Diluted earnings per share effect of ordinary share equivalents

—

(0.01
)

(0.01
)

(0.03
)
Non-GAAP earnings per share – Diluted

$
0.26

$
0.70

$
0.89

$
1.51

	For the Three Months Ended March 31,
	2020			2019
GAAP net loss	$	(13,591	)	$	(32,863	)
Non-GAAP adjustments:
Depreciation ⁽¹⁾		7,165			1,473
Amortization and step-up:
Intangible amortization expense ⁽²⁾		58,575			57,417
Amortization of debt discount and deferred financing costs ⁽¹¹⁾		5,569			5,912
Inventory step-up expense		—			115
Share-based compensation ⁽³⁾		56,421			27,548
Drug substance harmonization costs ⁽⁴⁾		290			80
Fees related to refinancing activities ⁽⁵⁾		54			142
Acquisition/divestiture-related costs ⁽⁶⁾		(6	)		1,345
Restructuring and realignment costs ⁽⁷⁾		—			20
Loss on debt extinguishment ⁽⁸⁾		—			5,586
Charges relating to discontinuation of Friedreich's ataxia program⁽⁹⁾		—			(79	)
Upfront and milestone payments related to license and collaboration agreements ⁽¹⁰⁾		—			2,000
Total of pre-tax non-GAAP adjustments		128,068			101,559
Income tax effect of pre-tax non-GAAP adjustments ⁽¹²⁾		(31,262	)		(14,751	)
Total non-GAAP adjustments		96,806			86,808
Non-GAAP Net Income	$	83,215		$	53,945

Non-GAAP Earnings Per Share:
Weighted average ordinary shares – Basic		190,072,112			172,789,209

Non-GAAP Earnings Per Share – Basic
GAAP loss per share – Basic	$	(0.07	)	$	(0.19	)
Non-GAAP adjustments		0.51			0.50
Non-GAAP earnings per share – Basic	$	0.44		$	0.31

Non-GAAP Net Income	$	83,215		$	53,945
Effect of assumed conversion of Exchangeable Senior Notes, net of tax		1,875			—
Numerator - non-GAAP Net Income	$	85,090		$	53,945

Weighted average ordinary shares – Diluted
Weighted average ordinary shares – Basic		190,072,112			172,789,209
Ordinary share equivalents		22,984,847			7,496,024
Denominator - weighted average ordinary shares – Diluted		213,056,959			180,285,233

Non-GAAP Earnings Per Share – Diluted
GAAP loss per share – Diluted	$	(0.07	)	$	(0.19	)
Non-GAAP adjustments		0.51			0.50
Diluted earnings per share effect of ordinary share equivalents		(0.04	)		(0.01	)
Non-GAAP earnings per share – Diluted	$	0.40		$	0.30

We have incurred losses on a GAAP basis in most fiscal years since our inception in June 2005 and, as of ~~September 30, 2017,~~March 31, 2020, we had an accumulated deficit of ~~$1,205.9~~$619.3 million. We ~~do not~~ expect that our ~~current operations~~sales and marketing expenses will continue to ~~achieve operating profitability in 2017 and expect to fund~~increase as a result of the commercialization of our ~~operations for~~medicines, including as a result of the ~~remainder~~commercial launch of ~~2017 primarily through~~TEPEZZA, but we believe these cost increases will be more than offset by higher net sales and ~~available~~gross profits in future periods. Additionally, we expect that our research and development costs will increase as we acquire or develop more development-stage medicine candidates and advance our candidates through the clinical development and regulatory approval processes.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any additional debt or equity financing more difficult, more costly or more dilutive.

In February 2020, we purchased a three-building campus in Deerfield, Illinois, for total consideration and directly attributable transaction costs of $118.5 million. The Deerfield campus totals 70 acres and consists of approximately 650,000 square feet of office space. We expect to move to the Deerfield campus in the second half of 2020 and market our Lake Forest office for sub-lease. We expect to make significant capital expenditures during 2020 in order to prepare the Deerfield campus for occupancy. In addition, if we are unable to sub-lease our existing Lake Forest office at rental rates similar to the rates under our existing lease or at all, we would be obligated to continue paying substantial rental payments through the end of the lease term in 2031.

As a result of the FDA approval of TEPEZZA in January 2020, we made a milestone payment of $100.0 million under the agreement for the acquisition of River Vision Development Corp, or River Vision, during the first quarter of 2020.

On April 1, 2020, we acquired Curzion, a privately held development-stage biopharma company, for a $45.0 million upfront cash ~~resources.~~payment and are obligated to make additional payments contingent on the achievement of development and regulatory milestones. The $45.0 million will be recorded as an in-process research and development expense in the second quarter of 2020.

In April 2020, we entered into an agreement with S.R. One, Limited, or S.R. One, and an agreement with Lundbeckfond Invest A/S, or Lundbeckfond pursuant to which we acquired all of S.R. One’s and Lundbeckfond’s beneficial rights to proceeds from certain contingent future TEPEZZA milestone and royalty payments in exchange for a one-time payment of $55.0 million to each of the respective parties. The total payments of $110.0 million will be recorded as TEPEZZA developed technology intangible assets in the second quarter of 2020.

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 ~~quarters.~~years. As of ~~September 30, 2017,~~March 31, 2020, we had ~~$625.0~~$754.6 million in cash and cash equivalents and total debt with a book value of ~~$1,897.6~~$1,358.4 million and face value of ~~$2,022.9~~$1,418.0 million. Cash at September 30, 2017 reflects our use of cash on hand of approximately $145.6 million, net of $6.3 million of cash acquired, to fund our acquisition of River Vision on May 8, 2017 and $32.5 million paid during the nine months ended September 30, 2017 in relation to the litigation settlement with Express Scripts, and includes $69.1 million received following the Chiesi divestiture in June 2017, net of cash divested. We believe our existing cash and cash equivalents and our expected cash flows from our operations will be sufficient to fund our business needs for at least the next twelve months from the issuance of ~~these~~the financial statements. Part of our strategy is to expand and leverage our commercial capabilities and to develop a pipeline of rare disease medicine candidates by identifying, developing, acquiring and commercializing differentiated and accessible medicinesstatements in this Quarterly Report on Form 10-Q. We do not have any financial covenants or non-financial covenants that address unmet medical needs. To the extent we enter into transactions to acquire medicines or businesses in the future, we will most likely need to finance a significant portion of those acquisitions through additional debt, equity or convertible debt financings.

On October 23, 2017, Horizon Pharma, Inc., or HPI, our wholly owned subsidiary, and Horizon Pharma USA, Inc., our wholly owned subsidiary, or HPUSA, and together with HPI in such capacity, the Borrowers, borrowed approximately $845.8 million aggregate principal amount of loans, or the October 2017 Ref inancing Loans, pursuant to an amendment, or the October 2017 Refinancing Amendment, to the Credit Agreement, dated as of May 7, 2015, by and among the Borrowers, us and certain of our subsidiaries as guarantors, the lenders party thereto from time to time and Citibank, N.A., as administrative agent and collateral agent , as amended by Amendment No. 1, dated as of October 25, 2016 , or the 2016 Credit Agreement, and Amendment No. 2, dated March 29, 2017, or the March 2017 Credit Agreement. As used herein, all references to the “Credit Agreement” are references to the March 2017 Credit Agreement, as amendedcould be affected by the ~~October 2017 Refinancing Amendment.~~

The October 2017 Refinancing Loans were incurred as a separate new class of term loans under the Credit Agreement with substantially the same terms as the previously outstanding senior secured term loans incurred on March 29 ~~, 2017 under the March 2017 Credit Agreement, or the October 2017 Refinanced Loans, to effectuate a repricing~~economic disruptions and negative effects of the ~~October 2017 Refinanced Loans. The~~ ~~Borrowers used the proceeds of the October 2017~~ Refinancing Loans to repay the October 2017 Refinanced Loans, which totaled approximately $845.8 million. The October 2017 Refinancing Loans bear interest, at the Borrowers’ option, at a rate equal to either the London Inter-Bank Offer Rate, or LIBOR, plus an applicable margin of 3.25% per year (subject to a LIBOR floor of 1.0%), or the adjusted base rate plus 2.25%. The adjusted base rate is defined as the greater of (a) LIBOR (using one-month interest period) plus 1%, (b) prime rate, (c) fed funds plus 0.5%, and (d) 2%. The Credit Agreement provides for (i) the October 2017 Refinancing Loans, (ii) one or more uncommitted additional incremental loan facilities subject to the satisfaction of certain financial and other conditions, and (iii) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The Credit Agreement allows for us and certain of our subsidiaries to become borrowers under incremental or refinancing facilities.

The obligations under the Credit Agreement (including obligations in respect of the October 2017 Refinancing Loans) and any swap obligations and cash management obligations owing to a lender (or an affiliate of a lender) thereunder are guaranteed by us and each of our existing and subsequently acquired or formed direct and indirect subsidiaries (other than certain immaterial subsidiaries, subsidiaries whose guarantee would result in material adverse tax consequences and subsidiaries whose guarantee is prohibited by applicable law). The obligations under the Credit Agreement (including obligations in respect of the October 2017 Refinancing Loans) and any such swap and cash management obligations are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (i) all tangible and intangible assets of the Borrowers and the guarantors, except for certain customary excluded assets, and (ii) all of the capital stock owned by the Borrowers and guarantors thereunder (limited, in the case of the stock of certain non-U.S. subsidiaries of the Borrowers, to 65% of the capital stock of such subsidiaries). The Borrowers and the guarantors under the Credit Agreement are individually and collectively referred to herein as a “Loan Party” and the “Loan Parties,” as applicable.

Borrowers under the Credit Agreement are permitted to make voluntary prepayments of the loans under the Credit Agreement at any time without payment of a premium, except that with respect to the October 2017 Refinancing Loans, a 1% premium will apply to a ~~repayment of the~~ ~~October 2017~~ ~~Refinancing Loans in connection with a repricing of, or any amendment to the Credit Agreement in a repricing of, such loans effected on or prior to the date that is six months following~~ October 23, 2017. The Borrowers are required to make mandatory prepayments of loans under the Credit Agreement (without payment of a premium) with (a) net cash proceeds from certain non-ordinary course asset sales (subject to reinvestment rights and other exceptions), (b) casualty proceeds and condemnation awards (subject to reinvestment rights and other exceptions), (c) net cash proceeds from issuances of debt (other than certain permitted debt), and (d) 50% of our excess cash flow (subject to decrease to 25% or 0% if our first lien leverage ratio is less than 2.25:1 or 1.75:1, respectively). The October 2017 Refinancing Loans will amortize in equal quarterly installments beginning on December 31, 2017 in an aggregate annual amount equal to 1% of the original principal amount of the October 2017 ~~Refinanced Loans (i.e. $850.0 million), with any remaining balance payable on March 29, 2024, the final maturity date of the~~ ~~October 2017 Refinancing Loans.~~

We elected to exercise our reinvestment rights under the mandatory prepayment provisions of the March 2017 Credit Agreement with respect to the net proceeds from the Chiesi divestiture. To the extent we do not apply such net proceeds to permitted acquisitions (including the acquisition of rights to products and products lines) and/or the acquisition of capital assets within 365 days of the receipt thereof (or commit to so apply and then apply within 180 days after the end of such 365-day period), we would be required to make a mandatory prepayment under the March 2017 Credit Agreement in an amount equal to the unapplied net proceeds. Until such time, the net proceeds are not legally restricted for use. As of September 30, 2017, we had applied a portion of such net proceeds to the acquisition of additional rights to interferon gamma-1b.

On October 25, 2016, HPI and HPUSA, or the 2024 Issuers, completed a private placement of $300.0 million aggregate principal amount of 2024 Senior Notes to certain investment banks acting as initial purchasers who subsequently resold the 2024 Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act.

~~The obligations under the 2024 Senior Notes are the 2024 Issuers’ general unsecured senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis by us and all of our direct and indirect subsidiaries that are guarantors from time to time under the Credit Agreement.~~

We used the net proceeds from the offering of the 2024 Senior Notes as well as $375.0 million principal amount of senior secured term loans incurred in October 2016 under the 2016 Credit Agreement to fund a portion of the acquisition of Raptor, repay Raptor’s outstanding debt, and pay any prepayment premiums, fees and expenses in connection with the foregoing.

The 2024 Senior Notes accrue interest at an annual rate of 8.75% payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2017. The 2024 Senior Notes will mature on November 1, 2024, unless earlier repurchased or redeemed.

Except as described below, the 2024 Senior Notes may not be redeemed before November 1, 2019. Thereafter, some or all of the 2024 Senior Notes may be redeemed at any time at specified redemption prices, plus accrued and unpaid interest to the redemption date. At any time prior to November 1, 2019, some or all of the 2024 Senior Notes may be redeemed at a price equal to 100% of the aggregate principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the redemption date. Also prior to November 1, 2019, up to 35% of the aggregate principal amount of the 2024 Senior Notes may be redeemed at a redemption price of 108.75% of the aggregate principal amount thereof, plus accrued and unpaid interest, with the net proceeds of certain equity offerings. In addition, the 2024 Senior Notes may be redeemed in whole but not in part at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date, ifCOVID-19 pandemic on the next date on which any amount would be payable in respect of the 2024 Senior Notes, the 2024 Issuers or any guarantor is or would be required to pay additional amounts as a result of certain tax-related events.

If we undergo a change of control, the 2024 Issuers will be required to make an offer to purchase all of the 2024 Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to, but not including, the repurchase date. If we or certain of our subsidiaries engage in certain asset sales, the 2024 Issuers will be required under certain circumstances to make an offer to purchase the 2024 Senior Notes at 100% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date.

On April 29, 2015, Horizon Pharma Financing Inc., our wholly owned subsidiary, or Horizon Financing, completed a private placement of $475.0 million aggregate principal amount of 6.625% Senior Notes due 2023, or the 2023 Senior Notes, to certain investment banks acting as initial purchasers who subsequently resold the 2023 Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act, and in offshore transactions to non-U.S. persons in reliance on Regulation S under the Securities Act.

In connection with the closing of the Hyperion acquisition on May 7, 2015, Horizon Financing merged with and into HPI and, as a result, the 2023 Senior Notes became HPI’s general unsecured senior obligations. The obligations under the 2023 Senior Notes are fully and unconditionally guaranteed by on a senior unsecured basis us and all of our direct and indirect subsidiaries that are guarantors from time to time under the Credit Agreement.

If we undergo a change of control, HPI will be required to make an offer to purchase all of the 2023 Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to, but not including, the repurchase date. If we or certain of our subsidiaries engage in certain asset sales, HPI will be required under certain circumstances to make an offer to purchase the 2023 Senior Notes at 100% of the principal amount thereof, plus accrued and unpaid interest to the repurchase date.

On March 13, 2015, Horizon Pharma Investment Limited, our wholly owned subsidiary, or Horizon Investment, completed a private placement of $400.0 million aggregate principal amount of 2.50% Exchangeable Senior Notes due 2022, or the Exchangeable Senior Notes, to several investment banks acting as initial purchasers who subsequently resold the Exchangeable Senior Notes to qualified institutional buyers as defined in Rule 144A under the Securities Act. The net proceeds from the offering of the Exchangeable Senior Notes were approximately $387.2 million, after deducting the initial purchasers’ discount and offering expenses payable by Horizon Investment.

We have fully and unconditionally guaranteed the Exchangeable Senior Notes on a senior unsecured basis, or the Guarantee. The Exchangeable Senior Notes and the Guarantee are Horizon Investment’s and our senior unsecured obligations. The Exchangeable Senior Notes accrue interest at an annual rate of 2.50% payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2015. The Exchangeable Senior Notes will mature on March 15, 2022, unless earlier exchanged, repurchased or redeemed. The initial exchange rate is 34.8979 of our ordinary shares per $1,000 principal amount of the Exchangeable Senior Notes (equivalent to an initial exchange price of approximately $28.66 per ordinary share).financial environment.

We have a significant amount of debt outstanding on a consolidated basis. For a description of our debt agreements, see Note 13, Debt Agreements of the Notes to Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.This substantial level of debt could have important consequences to our business, including, but not limited to: making it more difficult for us to satisfy our obligations; requiring a substantial portion of our cash flows from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flows to fund acquisitions, capital expenditures, and future business opportunities; limiting our ability to obtain additional financing, including borrowing additional funds; increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions; limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and placing us at a disadvantage as compared to our competitors, to the extent that they are not as highly leveraged. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness.

In addition, the ~~indentures~~indenture governing ~~the 2024~~our 5.500% Senior Notes due 2027, or 2027 Senior Notes, and ~~2023 Senior Notes and the~~our Credit Agreement impose various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things, pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments, incur additional debt and issue certain preferred stock, incur liens on assets, engage in certain asset sales or merger transactions, enter into transactions with affiliates, designate subsidiaries as unrestricted subsidiaries; and allow to exist certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, we issued an aggregate ~~of:~~

During the nine months ended September 30, 2017, warrants to purchase an aggregate of 391,500 ordinary shares were exercised and proceeds of $1.8 million were received. In addition, warrants to purchase an aggregate of 704,285 ordinary shares were exercised in cashless exercises, resulting in the issuance of 523,520 ordinary shares. As of September 30, 2017, there were no outstanding warrants to purchase ordinary shares.

~~During the nine months ended~~ ~~September 30, 2017, we made payments of $5.6~~ ~~million for employee withholding taxes relating to share-based awards.~~

In May 2016, our board of directors authorized a share repurchase program pursuant to which we may repurchase up to 5,000,000 of our ordinary shares. In May 2017, our board of directors reauthorized a share repurchase program pursuant to which we may repurchase up to 16,000,000 of our ordinary shares. As of September ~~30, 2017, we had repurchased 100,000 of our~~ ordinary shares under this repurchase program for total consideration of $1.0 million. 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 the Credit Agreement and market conditions.~~

The following table provides a summary of our cash position and cash flows ~~as of and~~ for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (in thousands):

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, net cash used in operating activities of $62.6 million was primarily attributable to payments made during the first quarter of 2020 related to patient assistance costs for our inflammation segment medicines, government rebates for our orphan segment medicines and an increase in gross sales and the timing of receipts of accounts receivable for our orphan segment medicines.

During the three months ended March 31, 2019, net cash provided by operating activities ~~was $137.0~~of $56.2 million ~~compared to $230.3 million during the nine months ended September 30, 2016. The decrease in net cash provided by operating activities~~ was primarily attributable to cash collections from net sales, partially offset by payments ~~of $74.4 million for interest~~made during the ~~nine months ended September 30, 2017 compared~~first quarter of 2019 related to ~~$39.5 million during the nine months ended September 30, 2016,~~patient assistance costs and ~~$32.5 million paid during the nine months ended September 30, 2017 in relation to the litigation settlement with Express Scripts.~~commercial rebates for our inflammation segment medicines.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, net cash used in investing activities of $218.2 million was ~~$103.2~~primarily attributable to $112.5 million ~~compared to $538.4 million~~paid during the ~~nine~~first quarter of 2020 in relation to the purchase of a three-building campus in Deerfield, Illinois and contingent consideration and milestone payments for an acquisition set forth below.

Under the agreement for the acquisition of River Vision,we made a milestone payment of $100.0 million related to FDA approval, during the first quarter of 2020.

Under our license agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or together referred to as Roche, we made a milestone payment of CHF5.0 million ($5.2 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0382), during the first quarter of 2020.

During the three months ended ~~September 30, 2016. The~~March 31, 2019, net cash used in investing activities ~~during the nine months ended September 30, 2017~~of $1.8 million was primarily ~~associated with $146.5 million of payments for the acquisition of River Vision, net of cash acquired, and $22.3 million relating~~attributable to the ~~payment for certain rights for interferon gamma-1b. This was partially offset by $69.1 million of proceeds received from the Chiesi divestiture, net of cash divested.~~

Net cash used in investing activities during the nine months ended September 30, 2016 was primarily associated with $514.8 million of payments for the acquisition of Crealta, net of cash acquired, a $5.6 million (€5.0 million) initial payment for rights to interferon gamma-1b and $14.6 million of payments for purchases of property and equipment.

During the ~~nine~~three months ended ~~September 30, 2017, net cash provided by financing activities was $77.8 million compared to~~March 31, 2020, net cash used in financing activities of ~~$1.7~~$39.6 million ~~during~~was primarily attributable to payment of employee withholding taxes relating to share-based awards of $46.7 million, partially offset by the ~~nine~~proceeds from the issuance of ordinary shares in connection with stock option exercises of $7.1 million.

During the three months ended ~~September 30, 2016. Net~~March 31, 2019, net cash provided by financing activities ~~during the nine months ended September 30, 2017~~of $20.6 million was primarily attributable to ~~the~~ net proceeds from the issuance of ~~$847.8~~ordinary shares of $327.8 million, ~~from term loans,~~partially offset ~~in part~~ by the repayment of term loans of ~~$770.8~~$300.0 million.

Financial Condition as of ~~September 30, 2017~~March 31, 2020 compared to December 31, ~~2016~~2019

Accounts receivable, net. Accounts receivable, net, increased ~~$85.0~~$16.7 million, from ~~$305.7~~$408.7 million as of December 31, ~~2016~~2019 to ~~$390.7~~$425.4 million as of ~~September 30, 2017.~~March 31, 2020. The increase was due to ~~growth in gross sales~~the timing of ~~our medicines.~~receipts of accounts receivable.

Inventories, net. Inventories, net, ~~decreased $88.3~~increased $14.4 million, from ~~$174.8~~$53.8 million as of December 31, ~~2016~~2019 to ~~$86.5~~$68.2 million as of ~~September 30, 2017.~~March 31, 2020. The ~~decrease~~increase was primarily ~~due to $95.7 million of inventory step-up expense recorded during the nine months ended September 30, 2017 ($54.9 million~~ related to ~~KRYSTEXXA~~the increase in production of TEPEZZA.

Prepaid expenses and ~~$40.8 million related to PROCYSBI~~other current assets. Prepaid expenses and QUINSAIR). Additionally, during the nine months ended September 30, 2017, we recorded $3.2 million of inventory step-up expense to gain on divestiture following the sale of inventory to Chiesi in connection with the Chiesi divestiture.

~~Developed technology, net.~~ ~~Developed technology, net, decreased $254.8~~other current assets increased $18.3 million, from ~~$2,767.2~~$143.6 million as of December 31, ~~2016~~2019 to ~~$2,512.4~~$161.9 million as of September 30, 2017. The decrease was due to the amortization of developed technology of $207.5 million during the nine months ended September 30, 2017 and developed technology with a net book value of $47.3 million disposed of in the Chiesi divestiture.

~~Goodwill.~~ ~~Goodwill decreased $19.2 million from $445.6 million as of December~~March 31, 2016 to $426.4 million as of September 30, 2017. The decrease was due to $16.3 million written off in connection with the Chiesi divestiture and $2.9 million in measurement period adjustments related to the Raptor acquisition, which were recorded during the nine months ended September 30, 2017.

~~Other assets.~~ ~~Other assets increased $33.9 million from $2.4 million as of December 31, 2016 to $36.2 million as of September 30, 2017.~~2020. The increase was primarily due to a ~~royalty reimbursement asset recorded in connection with the Chiesi divestiture~~benefit for income taxes recognized during the ~~nine~~three months ended ~~September 30, 2017, which represents the future estimated amount receivable from Chiesi in respect of PROCYSBI~~March 31, 2020.

~~In relation to all outstanding PSUs, if our share price is lower than $31.58, $32.70~~equipment, net. Property and $33.86 for the twenty trading days ending December 23, 2017, March 22, 2018 and June 22, 2018, respectively, approximately $16.4 million, $14.9 million and $13.4 million, respectively, of deferred tax assets related to previously recognized share-based compensation expense related to these PSUs will be charged to income tax expense.

~~Accounts payable.~~ ~~Accounts payable decreased $19.7~~equipment, net, increased $112.3 million, from ~~$52.5~~$30.1 million as of December 31, ~~2016~~2019 to ~~$32.8~~$142.4 million as of ~~September 30, 2017. This decrease was primarily due to timing~~March 31, 2020. In February 2020, we purchased a three-building campus in Deerfield, Illinois, for total consideration and directly attributable transaction costs of ~~invoices.~~$118.5 million.

~~Accrued expenses.~~ ~~Accrued expenses decreased $20.1~~Developed technology, net. Developed technology, net, increased $46.8 million, from ~~$182.8~~$1,698.8 million as of December 31, ~~2016~~2019 to ~~$162.7~~$1,745.6 million as of ~~September 30, 2017.~~March 31, 2020. During the three months ended March 31, 2020, in connection with the acquisition of River Vision and our license agreement with Roche, we capitalized $105.2 million of developed technology related to TEPEZZA. This was partially offset by amortization of developed technology of $58.6 million during the three months ended March 31, 2020.

Accounts payable. Accounts payable increased $28.6 million, from $21.5 million as of December 31, 2019 to $50.1 million as of March 31, 2020. This increase was primarily due to the timing of invoices received including an increase of $11.5 million in accounts payable related to government rebates.

Accrued expenses. Accrued expenses decreased $29.2 million, from $235.2 million as of December 31, 2019 to $206.0 million as of March 31, 2020. This was primarily due to ~~the payment of $32.5 million during the nine months ended September 30, 2017 pursuant to our settlement agreement with Express Scripts and~~ a decrease ~~of $18.7 million~~ in payroll-related accrued expenses of $28.6 million primarily due to payments under compensation plans and lower accrued interest of $11.8 million, partially offset by an increase of ~~$20.0~~$4.0 million ~~relating to a contingent consideration liability that was reclassified from other long-term liabilities~~in allowance for returns and ~~an increase of $7.6~~$3.4 million in accrued ~~interest.~~consulting and professional service fees.

Accrued trade discounts and rebates. Accrued trade discounts and rebates ~~increased $138.2~~decreased $130.1 million, from ~~$297.5~~$466.4 million as of December 31, ~~2016~~2019 to ~~$435.7~~$336.3 million as of ~~September 30, 2017.~~March 31, 2020. This was primarily due to a ~~$135.7~~decrease of $73.2 million ~~increase~~ in accrued ~~wholesaler fees~~co-pay and other patient assistance costs primarily due lower utilization of our patient assistance programs, the impact of generic competition on VIMOVO sales and the timing of co-pay payments, a $48.9 million decrease in accrued commercial rebates and ~~a $15.0~~wholesaler fees primarily due to an increased proportion of orphan segment medicines sold and the impact of generic competition on VIMOVO sales and $8.0 million ~~increase~~decrease in accrued government rebates and ~~chargebacks, partially offset by a $12.5 million decrease in co-pay and other patient assistance costs.~~chargebacks.

~~Deferred tax liabilities, net.~~ Deferred tax liabilities, net, decreased $70.5 million, from $296.6 million as of December 31, 2016 to $226.1 million as of September 30, 2017. This was primarily due to the benefit for income taxes of $42.1 million recorded during the nine months ended September 30, 2017 and deferred tax assets of $21.6 million acquired in the River Vision acquisition. Additionally, we prospectively adopted ASU No. 2016-09 on January 1, 2017 and recorded a decrease of $7.2 million in net deferred tax liabilities and a corresponding decrease in accumulated deficit during the nine months ended September 30, 2017.

~~Other long-term liabilities.~~ Other long-term liabilities increased $21.9 million, from $46.1 million as of December 31, 2016 to $68.0 million as of September 30, 2017. This was primarily due to $26.6 million recorded during the nine months ended September 30, 2017 which represents the fair value of the long-term portion of the contingent liability for royalties potentially payable under previously existing agreements related to PROCYSBI and QUINSAIR on EMEA sales and $21.6 million recorded during the nine months ended September 30, 2017 which represents a deferred credit offsetting the deferred tax assets recorded following the River Vision acquisition, partially offset by a decrease of $20.0 million in relation to a contingent consideration liability that was reclassified to accrued expenses during the nine months ended September 30, 2017.

~~Long-term debt, net, net of current.~~ Long-term debt, net, net of current increased $77.2 million from $1,501.7 million as of December 31, 2016 to $1,578.9 million as of September 30, 2017. The increase was primarily related to the $850.0 million ~~aggregate principal amount of refinancing loans incurred in March 2017, which replaced the $394.0 million 2015 term loan facility and the $375.0 million 2016 incremental loan facility, resulting in an increase of $81.0 million of principal amount of our outstanding debt. This increase was offset in part by certain charges related to the refinancing loans and amortization of debt discount and deferred financing fees and a repayment of $2.1 million during the nine months ended September 30, 2017.~~

During the three months ended ~~September 30, 2017,~~March 31, 2020, there were no material changes outside of the ordinary course of business to our contractual obligations as previously disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2019, except ~~as disclosed below.~~

~~On October 23, 2017, the Borrowers borrowed approximately $845.8~~ ~~million aggregate principal amount of loans pursuant to the October 2017 Refinancing Amendment. The October 2017 Refinancing Loans were incurred as a separate new class of term loans under the Credit Agreement with substantially the same terms as the October 2017 Refinanced Loans to effectuate a repricing~~for our obligations described in Note 19, Subsequent Events, of the ~~October 2017 Refinanced Loans. The~~ ~~Borrowers used the proceeds~~Notes to Condensed Consolidated Financial Statements, included in Item 1 of ~~the October 2017~~ Refinancing Loans to repay the October 2017 Refinanced Loans, which totaled approximately $845.8 million. The October 2017 Refinancing Loans bear interest, at the Borrowers’ option, at a rate equal to either LIBOR plus an applicable margin of 3.25% per year (subject to a LIBOR floor of 1.0%), or the adjusted base rate plus 2.25%. The adjusted base rate is defined as the greater of (a) LIBOR (using one-month interest period) plus 1%, (b) prime rate, (c) fed funds plus 0.5%, and (d) 2%. The Credit Agreement provides for (i) the October 2017 Refinancing Loans, (ii) one or more uncommitted additional incremental loan facilities subject to the satisfaction of certain financial and other conditions, and (iii) one or more uncommitted refinancing loan facilities with respect to loans thereunder. The Credit Agreement allows for us and certain of our subsidiaries to become borrowers under incremental or refinancing facilities.

The obligations under the Credit Agreement (including obligations in respect of the October 2017 Refinancing Loans) and any swap obligations and cash management obligations owing to a lender (or an affiliate of a lender) thereunder are guaranteed by us and each of our existing and subsequently acquired or formed direct and indirect subsidiaries (other than certain immaterial subsidiaries, subsidiaries whose guarantee would result in material adverse tax consequences and subsidiaries whose guarantee is prohibited by applicable law). The obligations under the Credit Agreement (including obligations in respect of the October 2017 Refinancing Loans) and any such swap and cash management obligations are secured, subject to customary permitted liens and other agreed upon exceptions, by a perfected security interest in (i) all tangible and intangible assets of the Borrowers and the guarantors, except for certain customary excluded assets, and (ii) all of the capital stock owned by the Borrowers and guarantors thereunder (limited, in the case of the stock of certain non-U.S. subsidiaries of the Borrowers, to 65% of the capital stock of such subsidiaries).

Borrowers under the Credit Agreement are permitted to make voluntary prepayments of the loans under the Credit Agreement at any time without payment of a premium, except that with respect to the October 2017 Refinancing Loans, a 1% premium will apply to a repayment of the October 2017 Refinancing Loans in connection with a repricing of, or any amendment to the Credit Agreement in a repricing of, such loans effe ~~cted~~this Quarterly Report on or prior to the date that is six months following October 23, 2017. The Borrowers are required to make mandatory prepayments of loans under the Credit Agreement (without payment of a premium) with (a) net cash proceeds from certain non-ordinary course asset sales (subject to reinvestment rights and other exceptions), (b) casualty proceeds and condemnation awards (subject to reinvestment rights and other exceptions), (c) net cash proceeds from issuances of debt (other than certain permitted debt), and (d) 50% of our excess cash flow (subject to decrease to 25% or 0% if our first lien leverage ratio is less than 2.25:1 or 1.75:1, respectively). The October 2017 Refinancing Loans will amortize in equal quarterly installments beginning on December 31, 2017 in an aggregate annual amount equal to 1% of the original principal amount of the October 2017 Refinanced Loans (i.e. $850.0 million), with any remaining balance payable on March 29, 2024, the final maturity date of the October 2017 Refinancing Loans.Form 10-Q.

The preparation of financial statements in accordance with U.S. GAAP principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses. Certain of these policies are considered critical as these most significantly impact a company’s financial condition and results of operations and require the most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Actual results may vary from these estimates. A summary of our significant accounting policies is included in Note 2 to our Annual Report on Form 10-K for the year ended December 31, ~~2016. There~~2019.

During the three months ended March 31, 2020, there have been no significant changes in our application of our critical accounting ~~policies during the nine months ended September 30, 2017.~~policies.

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~~15, Commitments and ~~Contingencies” in~~Contingencies, of the ~~notes~~Notes to ~~our condensed consolidated financial statements~~Condensed Consolidated Financial Statements, included in Item 1 of this ~~report.~~Quarterly Report on Form 10-Q.

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

Interest Rate Risk.We are subject to interest rate fluctuation exposure through our borrowings under ~~the~~our Credit Agreement and our investment in money market accounts which bear a variable interest rate. ~~Loans~~Term loans under ~~the~~our Credit Agreement bear interest, at our option, at a rate equal to ~~either~~ the London Inter-Bank Offered Rate, or LIBOR, ~~rate,~~ plus ~~an applicable margin of 3.25%~~2.25% per annum (subject to a ~~1.00%~~0.00% LIBOR floor), or the adjusted base rate plus ~~2.25%.~~1.25% per annum with a step-down to LIBOR plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time our leverage ratio is less than or equal to 2.00 to 1.00. The adjusted base rate is defined as the ~~greater~~greatest of (a) LIBOR (using one-month interest period) plus 1%1.00%, (b) the prime rate, (c) ~~fed~~the federal funds rate plus ~~0.5%~~ 0.50%, and (d) 2%1.00%. The loans under our incremental revolving credit facility (the “Revolving Credit Facility”) bear interest, at our option, at a rate equal to either LIBOR plus an applicable margin of 2.25% per annum (subject to a LIBOR floor of 0.00%), or the adjusted base rate plus 1.25% per annum with a step-down to LIBOR plus 2.00% per annum or the adjusted base rate plus 1.00% per annum at the time our leverage ratio is less than or equal to 2.00 to 1.00. Our approximately ~~$845.8~~ $418.0 million of ~~October 2017 Refinancing Loans are~~senior secured term loans under the Credit Agreement is based on LIBOR. As of March 31, 2020, the Revolving Credit Facility was undrawn. The ~~current~~one-month LIBOR rate ~~is 1.25%~~as of April 6, 2020, which was the most recent date the interest rate on the term loan was fixed, was 1.00%, and as a result, the interest rate on our borrowings ~~are~~is currently ~~4.50%~~3.25% per annum. Because the United Kingdom Financial Conduct Authority, which regulates LIBOR, intends to phase out the use of LIBOR by the end of 2021, future borrowings under our Credit Agreement could be subject to reference rates other than LIBOR.

An increase in the LIBOR of 100 basis points above the current LIBOR rate would increase our interest expense related to the Credit Agreement by ~~$8.5~~$4.2 million per year.

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

Foreign Currency Risk. Our purchase ~~cost~~costs of TEPEZZA drug substance and ACTIMMUNE ~~under our contract with Boehringer Ingelheim Biopharmaceuticals GmbH and our sales contracts relating to LODOTRA~~inventory are principally denominated in Euros and are subject to foreign currency risk. We have contracts relating to RAVICTI, QUINSAIR and PROCYSBI for sales in Canada which sales are subject to foreign currency risk. We also incur certain operating expenses in currencies other than the U.S. dollar in relation to our Irish operations and foreign ~~subsidiaries, including Horizon Pharma Switzerland GmbH; therefore,~~subsidiaries. Therefore, we are subject to volatility in cash flows due to fluctuations in foreign currency exchange rates, particularly changes in the ~~Euro.~~Euro and the Canadian dollar.

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

Credit Risk.Historically, our accounts receivable balances have been highly concentrated with a select number of customers, consisting primarily of large wholesale pharmaceutical distributors who, in turn, sell the medicines to pharmacies, hospitals and other customers. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, our top ~~three~~four customers accounted for approximately ~~79%~~88% and ~~78%~~84%, respectively, of our total outstanding accounts receivable balances.

Evaluation of Disclosure Controls and Procedures.As required by paragraph (b) of Rules 13a-15 and 15d-15 promulgated under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017,~~March 31, 2020, the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting.During the ~~three months~~quarter ended ~~September 30, 2017, as part of the ongoing implementation of our new enterprise resource planning software, we implemented the order-to-cash function~~. As the implementation occurs, we are changing certain processes and procedures which result in material changes to our internal controls over financial reporting. While we expect the order-to-cash function and these changes to strengthen our internal controls, management will continue to evaluate and monitor our internal controls as processes and procedures in the affected areas evolve.

~~During the three months ended September 30, 2017, other than continuing changes to our new enterprise resource planning software, as discussed above,~~March 31, 2020, there have been no material changes to our internal control over financial reporting, as defined in ~~Exchange Act~~ Rules 13a-15(f) and 15d-15(f), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For a description of our legal proceedings, see Note ~~17,~~ 16, Legal Proceedings, of the Notes to Unaudited Condensed Consolidated Financial Statements, included in Item 1 of this Quarterly Report on Form 10-Q.

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

The risk factors set forth below with an asterisk (*) next to the title are new risk factors or risk factors containing changes, including any material changes, from the risk factors previously disclosed in Item 1A of our ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, as filed with the SEC.

The COVID-19 global pandemic could adversely impact our business, including the commercialization of our medicines, our supply chain, our clinical trials, our liquidity and access to capital markets and our business development activities.*

On March 11, 2020, the World Health Organization made the assessment that a novel strain of coronavirus, which causes the COVID-19 disease, can be characterized as a pandemic. The President of the United States declared the COVID-19 pandemic a national emergency and many states and municipalities in the Unites States have announced aggressive actions to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders which direct individuals to shelter at their places of residence (subject to limited exceptions). Similarly, the Irish government has limited gatherings of people and encouraged employees to work from their homes, and may implement more aggressive policies in the future. In addition, in mid-March 2020 we have implemented work-from-home policies for all employees and have moved to a “virtual” model with respect to our physician, patient and partner support activities. The effects of government actions and our policies and those of third parties to reduce the spread of COVID-19 may negatively impact productivity and our ability to market and sell our medicines, cause disruptions to our supply chain and ongoing and future clinical trials and impair our ability to execute our business development strategy. These and other disruptions in our operations and the global economy could negatively impact our business, operating results and financial condition.

The commercialization of our medicines may be adversely impacted by COVID-19 and actions taken to slow its spread. For example, patients may postpone visits to healthcare provider facilities, certain healthcare providers have temporarily closed their offices or are restricting patient visits, healthcare provider employees may become generally unavailable and there could be disruptions in the operations of payors, distributors, logistics providers and other third parties that are necessary for our medicines to be prescribed, reimbursed and administered to patients. We also cannot predict how effective our virtual patient, physician and partner support initiatives will be with respect to marketing and supporting the administration and reimbursement of our medicines, or when we will be able to resume in-person sales and marketing activities.

Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities upon which we rely, or the availability or cost of materials, which could disrupt the supply chain for our medicines. In particular, some of our suppliers of certain materials used in the production of our drug products are located in regions that have been subject to COVID-19-related actions and policies that limit the conduct of normal business operations. To the extent our suppliers and service providers are unable to comply with their obligations under our agreements with them or they are otherwise unable to deliver or are delayed in delivering goods and services to us due to COVID-19, our ability to continue meeting commercial demand for our medicines in the United States or advancing development of our medicine candidates may become impaired. At this time, we consider our inventories on hand to be sufficient to meet our commercial requirements.

In addition, our clinical trials may be affected by COVID-19. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital 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 precaution against contracting COVID-19. Further, some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Some clinical sites in the United States have started to slow or stop 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.

The spread of COVID-19 and actions taken to reduce its spread may also materially affect us economically. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any additional debt or equity financing more difficult, more costly or more dilutive. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, there could be a significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position or our business development activities.

COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact the commercialization of our medicines, our supply chain, our clinical trials, our access to capital and our business development activities, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the pandemic, the duration of the pandemic and the efforts by governments and business to contain it, business closures or business disruptions and the impact on the economy and capital markets.

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

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

payers. With respect to DUEXIS, ~~and VIMOVO,~~ studies indicate that physicians do not commonly co-prescribe gastrointestinal, or GI, protective agents to high-risk patients taking nonsteroidal anti-inflammatory drugs, or NSAIDs. We believe this is due in part to a lack of awareness among physicians prescribing NSAIDs regarding the risk of NSAID-induced upper GI ulcers, in addition to the inconvenience of prescribing two separate medications and patient compliance issues associated with multiple prescriptions. If physicians remain unaware of, or do not otherwise believe in, the benefits of combining GI protective agents with NSAIDs, our market opportunity for DUEXIS ~~and VIMOVO~~ will be limited. Some physicians may also be reluctant to prescribe DUEXIS ~~or VIMOVO~~ due to the inability to vary the dose of ibuprofen and naproxen, respectively, or if they believe treatment with NSAIDs or GI protective agents other than those contained in DUEXIS, ~~and VIMOVO,~~ including those of its competitors, would be more effective for their patients. With respect to each of DUEXIS, PENNSAID 2% w/w, or PENNSAID 2%, RAYOS/LODOTRA, VIMOVO and BUPHENYL, their higher cost compared to the generic or branded forms of their active ingredients alone may limit adoption by physicians, patients and healthcare payers. With respect to ACTIMMUNE, while it is the only FDA-approved treatment for chronic granulomatous disease, or CGD, and severe, malignant osteopetrosis, or SMO, they are very rare conditions and, as a result, our ability to grow ACTIMMUNE sales will depend on our ability to further penetrate this limited market, obtain marketing approval for additional indications and encourage patients and physicians to continue treatment once initiated. With respect to RAVICTI, which is also approved to treat a very limited patient population, our ability to grow sales will depend in large part on our ability to transition urea cycle disorder, or UCD, patients from BUPHENYL or generic equivalents, which are comparatively much less expensive, to RAVICTI and to encourage patients and physicians to continue RAVICTI therapy once initiated. With respect to KRYSTEXXA, our ability to grow sales will be affected by the success of our sales and marketing strategies and life cycle management, including studies designed to test reduction of immunogenicity in KRYSTEXXA, our proposed label update submission to the FDA relating to additional data based on post-marketing studies and our investigator-initiated trial evaluating new approaches to the clinical use of KRYSTEXXA that is expected to begin enrolling patients by the end of 2017, which could expand the patient population and usage of KRYSTEXXA. With respect to MIGERGOT, our ability to sustain sales will depend on the management of inventory levels and the continued awareness of its benefits among physicians. With respect to PROCYSBI, which is approved to treat a very limited patient population, our ability to grow sales will depend in large part on our ability to transition patients from the first-generation immediate-release cysteamine therapy to PROCYSBI, to identify additional patients with nephropathic cystinosis and to encourage patients and physicians to continue therapy once initiated. Unless QUINSAIR is approved for marketing in additional countries, our ability to drive growth of this medicine will largely depend on expanding its use in Canada. If our current medicines or any other medicine that we may seek approval for, or acquire, fail to attain market acceptance, we may not be able to generate significant revenue to achieve or sustain profitability, which would have a material adverse effect on our business, results of operations, financial condition and prospects (including, possibly, the value of our ordinary shares).

The COVID-19 pandemic and actions taken to slow its spread has had and will continue to have a negative impact on sales of our medicines. For example, in March 2020 we transitioned our sales force to a virtual model such that they no longer have in-person interactions with healthcare professionals. While we have attempted to maintain the effectiveness of our sales and marketing efforts in this virtual model, it may not be as effective as in-person interactions in terms of conveying key information about our medicines or aiding physicians and their staff in prescribing and helping their patients obtain reimbursement for our medicines. Many physicians, in particular in primary care practices that prescribe our inflammation segment medicines, have reduced their operations in light of COVID-19, including delaying patient visits and writing new prescriptions, and we expect this to negatively impact sales in our inflammation segment. Similarly, many patients have deferred non-essential visits to healthcare providers, which has had a negative impact on prescriptions being written and filled. For example, due to reduced willingness of patients to visit physician offices and infusion centers, we expect that sales of KRYSTEXXA will be negatively impacted in future quarters. It is also possible that a prolonged period of “shelter-in-place” orders and social distancing behaviors and the associated reduction of physician office visits could force various healthcare practices to permanently close or to consolidate with larger practices or healthcare groups, which could cause us to lose previously-established physician relationships. We cannot predict how long the COVID-19 pandemic will continue to negatively impact sales of our medicines and we expect that even after government-mandated restrictions are lifted, our sales force activities, healthcare provider operations and patients’ willingness to visit healthcare facilities will continue to be limited.

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

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

With respect to our ~~orphan business unit~~rare disease medicines, ~~ACTIMMUNE, BUPHENYL,~~KRYSTEXXA, TEPEZZA, RAVICTI, PROCYSBI ~~QUINSAIR~~ and ~~RAVICTI, and with respect to our rheumatology business unit medicine, KRYSTEXXA,~~ACTIMMUNE, our commercialization strategy includes efforts to increase awareness of the rare conditions that each medicine is designed to treat, enhancing efforts to identify target patients and in certain cases pursue opportunities for label expansion and more effective use through clinical trials. ~~In addition, our~~Our strategy with respect to ~~ACTIMMUNE~~KRYSTEXXA includes ~~pursuing label expansion for additional indications, such~~existing rheumatology account growth, new rheumatology account growth and accelerating nephrology growth, as ~~for~~ ~~advanced urothelial carcinoma~~well as development efforts to enhance response rates through combination treatment with methotrexate and ~~renal cell carcinoma, and price increases but we cannot be certain that our pricing strategy will not result in downward pressure on sales or that we or others will be able~~ to ~~successfully complete clinical trials and obtain regulatory approvals in additional indications.~~shorten the infusion time. With respect to ~~PROCYSBI~~RAVICTI and ~~RAVICTI,~~PROCYSBI, our strategy includes accelerating the transition of patients from first-generation therapies, ~~and~~ increasing the diagnosis of the associated rare conditions through patient and physician ~~outreach.~~outreach; and increasing compliance rates. Our commercialization strategy ~~with respect~~for TEPEZZA has four components: (i) driving early uptake by continuing to ~~KRYSTEXXA includes~~define the ~~continued enhancement~~role of TEPEZZA in the treatment of thyroid eye disease, or TED, and getting uptake from treating physicians; (ii) continuing to develop the TED market by driving awareness of the ~~marketing campaign~~disease severity and benefits of treatment, educating the appropriate treating physicians on the urgency to diagnose and treat TED and continuing to drive patients’ awareness of TED; (iii) supporting TEPEZZA with ~~improved immunogenicity data, continued volume growth~~our comprehensive approach that includes a high-touch, patient-centric model; and (iv) facilitating patient and physician access to TEPEZZA.

We are focusing a significant portion of our commercial activities and resources on TEPEZZA, and we believe our ability to grow our long-term revenues, and a significant portion of the value of our company, relates to our ability to successfully commercialize TEPEZZA in the United States. As a newly-launched medicine for a disease that had no previously-approved treatments, successful commercialization of TEPEZZA is subject to many risks. There are numerous examples of unsuccessful product launches and failures to meet high expectations of market potential, including by pharmaceutical companies with more experience and resources than us. While we have established our commercial team and U.S. sales force, we will need to further train and develop the team in order to successfully commercialize TEPEZZA. There are many factors that could cause the launch and commercialization of TEPEZZA to be unsuccessful, including a number of factors that are outside our control. Because no medicine has previously been approved by the FDA for the treatment of TED, it is especially difficult to estimate TEPEZZA’s market potential or the time it will take to increase patient and physician awareness of TED and change current treatment paradigms. For example, shortly after the launch of TEPEZZA, we transitioned our sales force to a virtual model in light of the COVID-19 pandemic, which, combined with physicians generally reducing their own availability, has made it more challenging to execute on our strategy to educate physicians about TEPEZZA and the treatment of TED. In addition, some physicians that are potential prescribers of TEPEZZA do not have the necessary infusion capabilities to administer the medicine and may not otherwise be able or willing to refer their patients to third-party infusion centers, which may discourage them from treating their patients with TEPEZZA. The commercial success of TEPEZZA depends on the extent to which patients and physicians accept and adopt TEPEZZA as a treatment for TED. For example, if the patient population suffering from TED is smaller than we estimate, if it proves difficult to identify TED patients or educate physicians as to the availability and potential benefits of TEPEZZA, or if physicians are unwilling to prescribe or patients are unwilling to take TEPEZZA, the commercial potential of TEPEZZA will be limited. We also do not know how physicians, patients and payers will respond to the pricing ~~optimization.~~of TEPEZZA. Physicians may not prescribe TEPEZZA and patients may be unwilling to use TEPEZZA if coverage is not provided or reimbursement is inadequate to cover a significant portion of the cost. Further, the status of reimbursement codes for TEPEZZA could also affect reimbursement. J codes, Q codes and C codes are reimbursement codes maintained by the Centers for Medicare & Medicaid Services, or CMS, that are typically used to report injectable drugs that ordinarily cannot be self-administered. Initially, TEPEZZA will be reimbursed through a non-specific miscellaneous J code. The non-specific miscellaneous J code is used for a wide variety of products and health plans may have more difficulty determining the actual product used and billed for the patient. As a result, these claims must often be submitted with additional information and manually processed, which can create delays in claims processing times as well as increasing the likelihood for claim errors. These delays and claims errors may in turn slow adoption of TEPEZZA until a product-specific reimbursement code is issued by the CMS. Thus, significant uncertainty remains regarding the commercial potential of TEPEZZA. If the launch or commercialization of TEPEZZA is unsuccessful or perceived as disappointing, the price of our ordinary shares could decline significantly and long-term success of the medicine and our company could be harmed.

With respect to our ~~primary care~~inflammation segment medicines, ~~DUEXIS,~~ PENNSAID 2% and ~~VIMOVO,~~DUEXIS, our strategy has ~~more recently~~ included entering into rebate agreements with pharmacy benefit managers, or PBMs, for certain of our ~~primary care~~inflammation segment medicines where we believe the rebates and costs justify expanded formulary access for ~~patients.~~patients and ensuring patient assistance to these drugs when prescribed through our HorizonCares program. However, we cannot guarantee that we will be able to secure additional rebate agreements on commercially reasonable terms, or that expected volume growth will sufficiently offset the rebates and fees paid to PBMs or that our existing agreements with PBMs will have the intended impact on formulary access. ~~Net pricing for DUEXIS, VIMOVO and PENNSAID 2% was significantly below expectations during~~In addition, as the ~~nine months ended September 30, 2017 as a result of higher patient assistance costs, which were due to lower-than-anticipated adoption rates~~terms of our ~~primary care medicines onto certain healthcare plan formularies, and higher commercial rebate levels compared to our expectations.~~ In addition, the mix of PBM healthcare plans that adopted our primary care medicines onto their formulary was more heavily weighted towards those plans for which we pay a higher commercial rebate, which resulted in higher commercial rebate costs to us than we anticipated~~. If we are unable to realize the expected benefits of our contractual arrangements~~existing agreements with ~~the~~ PBMs expire, we may ~~continue~~not be able to ~~experience reductions in net sales from our primary care business unit. Also, we experienced a higher rate of managed care control in our non-contracted business during~~renew the ~~nine months ended September 30, 2017, which resulted in significantly lower net pricing.~~agreements on commercially favorable terms, or at all. For each of our ~~primary care~~inflammation segment medicines, we expect that our commercial success will depend on our sales and marketing efforts in the United ~~States.~~States, reimbursement decisions by commercial payers, the expense we incur through our patient assistance program for fully bought down contracts and the rebates we pay to PBMs, as well as the impact of numerous efforts at federal, state and local levels to further reduce reimbursement and net pricing of inflammation segment medicines.

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

Our overall commercialization strategy also includes plans to expand sales in Europe and other countries outside the United States directly or through distributors for certain of our orphan and rheumatology medicines. In November 2015, we received approval of the Committee for Medicinal Products for Human Use of the European Medicines Agency, or EMA, for RAVICTI for use as an adjunctive therapy for chronic management of adult and pediatric UCD patients greater than two months of age. This authorizes us to market RAVICTI in all 28 Member States of the European Union, or EU, and will form the basis for recognition by the Member States of the European Economic Area, or EEA, namely Norway, Iceland and Liechtenstein, for the medicine to be placed on the market. While we expect RAVICTI to be available in Europe in the fourth quarter of 2017 through an exclusive distribution agreement with Swedish Orphan Biovitrum AB, or SOBI, we cannot guarantee we will be able to successfully implement our commercial plans for RAVICTI in Europe. Although LODOTRA is approved for marketing in countries outside the United States, to date it has only been marketed in a limited number of countries.47

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

We are dependent on wholesale distributors for distribution of our products in the United States and, accordingly, our results of operations could be adversely affected if they encounter financial difficulties*

In 2019, four wholesale distributors accounted for substantially all of our sales in the United States. If one of our significant wholesale distributors encounters financial or other difficulties, such distributor may decrease the amount of business that it does with us, and we may be unable to collect all the amounts that the distributor owes on a timely basis or at all, which could negatively impact our business and results of operations.

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

Part of our strategy is to continue to build a ~~biopharmaceutical~~biopharma company to successfully execute the commercialization of our medicines in the U.S. market, and in selected markets outside the United States where we have commercial rights. We may not be able to successfully commercialize our medicines in the United States or in any other territories where we have commercial rights. In order to commercialize any approved medicines, we must continue to build our sales, marketing, distribution, managerial and other non-technical capabilities. ~~During the second quarter of 2017, we effected a workforce reduction in the primary care business unit.~~ As of ~~September 30, 2017,~~March 31, 2020, we had approximately ~~420~~455 sales representatives in the field, consisting of approximately 25200 orphan disease sales representatives ~~135 rheumatology~~(including approximately 50 TEPEZZA sales ~~specialists~~representatives) and ~~260 primary care~~255 inflammation sales representatives. We cannot be certain that we will be able to adequately market our primary care medicines following the reduction in our sales force or that we will be able to continue retaining the current members of our primary care sales force. We currently have limited resources compared to some of our competitors, and the continued development of our own commercial organization to market our medicines and any additional medicines we may acquire will be expensive and time-consuming. We also cannot be certain that we will be able to continue to successfully develop this capability.

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

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

As we continue to ~~acquire additional~~add medicines through development efforts and acquisition transactions, the members of our sales force may have limited experience promoting certain of our medicines. To the extent we employ an acquired entity’s ~~original~~ sales forces to promote acquired medicines, we may not be successful in continuing to retain these employees and we otherwise will have limited experience marketing these medicines under our commercial organization. ~~As a result, we~~In addition, none of the members of our sales force have promoted TEPEZZA or any other medicine for the treatment of TED prior to the launch of TEPEZZA. We are required to expend significant time and resources to train our sales force to be credible and persuasive in convincing physicians to prescribe and pharmacists to dispense our medicines. In addition, we must train our sales force to ensure that a consistent and appropriate message about our medicines is being delivered to our potential customers. Our sales representatives may also experience challenges promoting multiple medicines when we call on physicians and their office staff. We have experienced, and may continue to experience, turnover of the sales representatives that we hired or will hire, requiring us to train new sales representatives. If we are unable to effectively train our sales force and equip them with effective materials, including medical and sales literature to help them inform and educate physicians about the benefits of our medicines and their proper administration and label indication, as well as our patient ~~access~~assistance programs, our efforts to successfully commercialize our medicines could be put in jeopardy, which could have a material adverse effect on our financial condition, share price and operations. For example, we have had to train our sales force to operate in a virtual environment due to the COVID-19 pandemic and are continuing to learn and implement new strategies and techniques to promote our medicines without the benefit of in-person interactions with healthcare providers and their staff. We may not be successful in finding effective ways to promote our medicines remotely or our competitors may be more successful than we are at adapting to virtual marketing.

IfAs a result of the evolving role of various constituents in the prescription decision making process, we ~~cannot successfully implement our patient access programs or increase formulary access and reimbursement~~focus on hiring sales representatives for our inflammation segment medicines ~~in the face of increasing pressure~~and RAYOS with successful business to reduce the price of medications, the adoption of our medicines by physicians, patients and payers may decline.*

~~There continues to be immense pressure from healthcare payers and PBMs to use less expensive generics or over-the-counter brands instead of branded medicines.~~business experience. For example, ~~some of the largest PBMs previously placed~~we have faced challenges due to pharmacists switching a patient’s intended prescription from DUEXIS ~~and VIMOVO on their formulary exclusion lists. Additional healthcare plans, including those that contract with these PBMs but use different formularies, may also choose~~ to ~~exclude our medicines from their formularies or restrict coverage to situations where~~ a generic or over-the-counter ~~medicine has been tried first. Many payers and PBMs also require patients to make co-payments for branded medicines, including many~~brand of our medicines, in order to incentivize the use of generic or other lower-priced alternatives instead. Legislation enacted in most states in the United States allows, or in some instances mandates, that a pharmacist dispenses an available generic equivalent when filling a prescription for a branded medicine, in the absence of specific instructions from the prescribing physician. Because our medicines (other than BUPHENYL) do not currently have FDA-approved generic equivalents in the United States, we do not believe our medicines should be subject to mandatory generic substitution laws. However, we understand that some pharmacies may attempt to obtain physician authorization to switch prescriptions for DUEXIS or VIMOVO to prescriptions for multiple generic medicines with similartheir active ~~pharmaceutical~~ ingredients, ~~or APIs, to ensure payment for the medicine if the physician’s prescription for the branded medicine is not immediately covered by the payer,~~ despite such substitution being off-label in the case of DUEXIS. We have faced similar challenges for PENNSAID 2% and RAYOS with respect to generic brands. While we believe the profile of our representatives is suited for this environment, we cannot be certain that our representatives will be able to successfully protect our market for PENNSAID 2%, DUEXIS and ~~VIMOVO. If these limitations in coverage and other incentives result in patients refusing to fill prescriptions~~RAYOS or being dissatisfied with the out-of-pocket costs of their medications, or if pharmacies otherwise seek and receive physician authorization to switch prescriptions, not only would we lose sales on prescriptions that are ultimately not filled, but physicians may be dissuaded from writing prescriptions for our medicines in the first place in order to avoid potential patient non-compliance or dissatisfaction over medication costs, or to avoid spending the time and effort of responding to pharmacy requests to switch prescriptions.

Part of our commercial strategy to increase adoption and access to our medicines in the face of these incentives to use generic alternatives is to offer physicians the opportunity to have patients fill prescriptions through independent pharmacies participating in our HorizonCares patient access program. Through HorizonCares, financial assistance may be available to reduce eligible patients’ out-of-pocket costs for prescriptions filled. Because of this assistance, eligible patients’ out-of-pocket cost for our medicines when dispensed through HorizonCares may be significantly lower than such costs when our medicines are dispensed outside of the HorizonCares program. However, to the extent physicians do not direct prescriptions currently filled through traditional pharmacies, including those associated with or controlled by PBMs, to pharmacies participating in our HorizonCares program, we may experience a significant decline in DUEXIS, VIMOVO and PENNSAID 2% prescriptions as a result of formulary exclusions, co-payment requirements or other incentives to use lower-priced alternatives to our medicines. Our ability to increase utilization of our patient access programs will depend on physician and patient awareness and comfort with the programs, and we have limited ability to influence whether physicians use our patient access programs to prescribe our medicines or whether patients will agree to receive our medicines through our HorizonCares program. In addition, the HorizonCares program is not available to federal health care program (such as Medicare and Medicaid) beneficiaries. We have also contracted with certain PBMs and other payers to secure formulary status and reimbursement for certain of our primary care medicines, which generally require us to pay administrative fees and rebates to the PBMs and other payers for qualifying prescriptions. While we have business relationships with two of the largest PBMs, Express Scripts and CVS Caremark, that have resulted in DUEXIS and VIMOVO being removed from the Express Scripts and CVS Caremark 2017 exclusion lists, as well as a rebate agreement with another PBM, Prime Therapeutics LLC, and we believe these agreements will secure formulary status for certain of our medicines, we cannot guarantee that we will be able to ~~agree~~continue attracting and retaining sales representatives with our desired profile and skills. We will also have to ~~terms~~compete with other ~~PBMs~~pharmaceutical and ~~other payers, or that such terms will be commercially reasonable~~biotechnology companies to ~~us. Despite our agreements with PBMs,~~recruit, hire, train and retain commercial personnel. To the extent ~~of formulary status and reimbursement will ultimately depend~~we rely on additional third parties to a large extent upon individual healthcare plan formulary decisions. If healthcare plans that contract with PBMs with which we have agreements do not adopt formulary changes recommended by the PBMs with respect to ourcommercialize any approved medicines, we may ~~not realize the expected access and reimbursement benefits from~~receive less revenue than if we commercialized these ~~agreements.~~medicines ourselves. In addition, we ~~generally pay higher rebates for prescriptions covered under plans that adopt a PBM-chosen formulary than for plans that adopt custom formularies. Consequently,~~may have little or no control over the ~~success~~sales efforts of any third parties involved in our ~~PBM contracting strategy will depend not only on our ability to expand formulary adoption among healthcare plans, but also upon~~commercialization efforts. In the relative mix of healthcare plans that have PBM-chosen formularies versus custom formularies. During the nine months ended September 30, 2017, the adoption rates of our primary care medicines onto certain healthcare plan formularies were lower than we had anticipated and as a result, we incurred higher patient assistance costs than we expected, and the mix of healthcare plans adopting our primary care medicines onto their formularies was more heavily weighted towards plans that use PBM-chosen formularies, which resulted in higher rebate costs than we expected. Ifevent we are unable to ~~realize the expected benefits of~~successfully develop and maintain our ~~contractual arrangements~~own commercial organization or collaborate with ~~the PBMs~~a third-party sales and marketing organization, we may ~~continue~~not be able to ~~experience reductions in net~~commercialize our medicines and medicine candidates and execute on our business plan.

Coverage and reimbursement may not be available, or reimbursement may be available at only limited levels, for our

medicines, which could make it difficult for us to sell our medicines profitably or to successfully execute planned medicine price increases.*

Market acceptance and sales ~~from our primary care business unit. If we are unable to increase adoption of HorizonCares for filling prescriptions~~ of our medicines ~~or to secure formulary status~~will depend in large part on global coverage and reimbursement ~~through arrangements with PBMs~~policies and may be affected by future healthcare reform measures, both in the United States and other key international markets. Successful commercialization of our medicines will depend in part on the availability of governmental and third-party payer reimbursement for the cost of our medicines. Government health administration authorities, private health insurers and other organizations generally provide reimbursement for healthcare. In particular, in the United States, private health insurers and other third-party payers ~~particularly with healthcare plans that use custom formularies, our ability to achieve net sales growth~~often provide reimbursement for medicines and services based on the level at which the government (through the Medicare or Medicaid programs) provides reimbursement for such treatments. In the United States, the European Union, or EU, and other significant or potentially significant markets for our ~~primary care business unit would be impaired.~~

~~There has been negative publicity~~medicines and ~~inquiries from Congress~~medicine candidates, government authorities and ~~enforcement authorities regarding~~third-party payers are increasingly attempting to limit or regulate the ~~use of specialty pharmacies and drug pricing. Our patient access programs are not involved in the prescribing~~price of medicines and ~~are solely~~services, particularly for new and innovative medicines and therapies, which has resulted in lower average selling prices. Further, the increased scrutiny of prescription drug pricing practices and emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the EU will put additional pressure on medicine pricing, reimbursement and usage, which may adversely affect our medicine sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to ~~assist~~Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in ~~ensuring that when a physician determines one~~general. These pressures may create negative reactions to any medicine price increases, or limit the amount by which we may be able to increase our medicine prices, which may adversely affect our medicine sales and results of operations.

We expect to experience pricing pressures in connection with the sale of our medicines ~~offers~~due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative proposals relating to outcomes and quality. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, increased the mandated Medicaid rebate from 15.1% to 23.1%, expanded the rebate to Medicaid managed care utilization and increased the types of entities eligible for the federal 340B drug discount program. As concerns continue to grow over the need for tighter oversight, there remains the possibility that the Health Resources and Services Administration or another agency under the U.S. Department of Health and Human Services, or HHS, will propose a ~~potential clinical benefit~~similar regulation or that Congress will explore changes to the 340B program through legislation. For example, a bill was introduced in 2018 that would require hospitals to report their low-income utilization of the program. Further, the Centers for Medicare & Medicaid Services issued a final rule in 2018 that implemented civil monetary penalties for manufacturers who exceeded the ceiling price methodology for a covered outpatient drug when selling to a 340B covered entity. Pursuant to the final rule, after January 1, 2019, manufacturers must calculate 340B program ceiling prices on a quarterly basis. Moreover, manufacturers could be subject to a $5,000 penalty for each instance where they knowingly and intentionally overcharge a covered entity under the 340B program. With respect to KRYSTEXXA, the “additional rebate” scheme of the 340B pricing rules, as applied to the historical pricing of KRYSTEXXA both before and after we acquired the medicine, have resulted in a 340B ceiling price of one penny. A material portion of KRYSTEXXA prescriptions (approximately 20 percent) are written by healthcare providers that are eligible for 340B drug pricing and therefore the reduction in 340B pricing to a penny has negatively impacted our net sales of KRYSTEXXA. The Centers for Medicare & Medicaid Services had also finalized a proposal in calendar years 2018, 2019 and 2020 that would revise the Medicare hospital outpatient prospective payment system by creating a new, significantly reduced reimbursement methodology for drugs purchased under the 340B program for Medicare patients at hospital and other settings. That policy is currently undergoing litigation.

Patients are unlikely to use our medicines unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our medicines. Third-party payers may limit coverage to specific medicines on an approved list, also known as a formulary, which might not include all of the FDA-approved medicines for a particular indication. Moreover, a third-party payer’s decision to provide coverage for a medicine does not imply that an adequate reimbursement rate will be approved. Additionally, one third-party payer’s decision to cover a particular medicine does not ensure that other payers will also provide coverage for the medicine, or will provide coverage at an adequate reimbursement rate. Even though we have contracts with some PBMs in the United States, that does not guarantee that they will perform in accordance with the contracts, nor does that preclude them from taking adverse actions against us, which could materially adversely affect our operating results. In addition, the existence of such PBM contracts does not guarantee coverage by such PBM’s contracted health plans or adequate reimbursement to their respective providers for our medicines. For example, some PBMs have placed some of our medicines on their exclusion lists from time to time, which has resulted in a loss of coverage for patients ~~and they prescribe one~~whose healthcare plans have adopted these PBM lists. Additional healthcare plan formularies may also exclude our medicines from coverage due to the actions of certain PBMs, future price increases we may implement, our use of the HorizonCares program or other free medicine programs whereby we assist qualified patients with certain out-of-pocket expenditures for ~~an eligible~~our medicine, including donations to patient ~~financial~~ assistance programs offered by charitable foundations, or any other co-pay programs, or other reasons. If our strategies to mitigate formulary exclusions are not effective, these events may ~~be available to~~ reduce the ~~patient’s out-of-pocket costs. In addition, all pharmacies~~likelihood that ~~fill~~physicians prescribe our medicines and increase the likelihood that prescriptions for our medicines are ~~fully independent, including those~~not filled.

There may be additional pressure by payers, healthcare providers, state governments, federal regulators and Congress, to use generic drugs that contain the active ingredients found in our medicines or any other medicine candidates that we may develop or acquire. If we fail to successfully secure and ~~our relationship with each pharmacy is non-exclusive~~maintain coverage and arm’s length. All of our sales are processed through pharmacies independent of us. Despite this, the negative publicity and interest from Congress and enforcement authorities regarding specialty pharmacies may result in physicians being less willing to participate in our patient access programs and thereby limit our ability to increase patient access and adoption of our medicines.

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

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

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

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

We ~~are solely dependent on third parties to commercialize~~may also experience pressure from payers as well as state and federal government authorities concerning certain ofpromotional approaches that we may implement such as our ~~medicines outside the United States. Failure of these third parties~~HorizonCares program or any other ~~third parties to successfully commercialize~~co-pay programs. Certain state and federal enforcement authorities and members of Congress have initiated inquiries about co-pay assistance programs. Some state legislatures have been considering proposals that would restrict or ban co-pay coupons for branded drugs. For example, legislation was signed into law in California that would limit the use of co-pay coupons in cases where a lower cost generic drug is available and if individual ingredients in combination therapies are available over the counter at a lower cost. It is possible that similar legislation could be proposed and enacted in additional states. If we are unsuccessful with our medicines and medicine candidates in the applicable jurisdictions could have a material adverse effect on our business.*

Mundipharma International Corporation Limited, or Mundipharma, is our exclusive distributor for LODOTRA in Europe, Asia and Latin America. Innomar Strategies Inc., or Innomar, is our exclusive distributor for PROCYSBI and QUINSAIR in Canada. We rely on other third-party distributors for commercialization of BUPHENYL (known as AMMONAPS in certain European countries) in certain territories outside the United States for which we currently have rights. We expect RAVICTI to be available in Europe in the fourth quarter of 2017 through an exclusive distribution agreement with SOBI. We have limited contractual rights to force these third parties to invest significantly in commercialization of these medicines in our markets. In the event that Mundipharma, Innomar, our current ex-U.S. distributors for BUPHENYL, SOBIHorizonCares program or any other ~~third-party~~co-pay programs, or we alternatively are unable to secure expanded formulary access through additional arrangements with ~~any future commercialization rights to any of our medicines or medicine candidates fail to adequately commercialize those medicines or medicine candidates because they lack adequate financial~~PBMs or other ~~resources, decide to focus on other initiatives or otherwise, our ability to successfully commercialize our medicines or medicine candidates~~payers, we would be at a competitive disadvantage in terms of pricing versus preferred branded and generic competitors. We may also experience financial pressure in the ~~applicable jurisdictions would be limited,~~future which would ~~adversely affect our business, financial condition, results of operations~~make it difficult to support investment levels in areas such as managed care contract rebates, HorizonCares and prospects. We have had disagreements with Mundipharma under our European agreements and may continue to have disagreements, which could harm commercialization of LODOTRA in Europe or result in the termination of our agreements with Mundipharma. In addition, our agreements with Mundipharma, Innomar, our current ex-U.S. distributors for BUPHENYL and SOBI may be terminated by either party in the event of a bankruptcy of the other party or upon an uncured material breach by the other party. If these third parties terminated their agreements, we may not be able to secure an alternative distributor in the applicable territory on a timely basis or at all, in which case our ability to generate revenues from the sale of LODOTRA, PROCYSBI, BUPHENYL, QUINSAIR or RAVICTI outside the United States would be materially harmed.access tools.

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

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

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

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

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

If we are unable to obtain any further approvals for RAVICTI outside the United States, Canada and Europe, or determine that commercializing RAVICTI outside the United States, Canada and Europe is not economically viable, the market potential of RAVICTI may be limited.

On June 19, 2017, we received a notice of compliance, from Health Canada, or HC, for PROCYSBI for the treatment of nephropathic cystinosis in adults and children two years of age and older. PROCYSBI is the only cystine-depleting agent approved in Canada for the treatment of nephropathic cystinosis.

~~If we are unable to obtain any further approvals for~~ ~~PROCYSBI~~ ~~in the United States, Canada, Latin America and Asia-Pacific region, or determine that commercializing~~ ~~PROCYSBI~~ ~~outside the United States, Canada, Latin America and Asia-Pacific region is not economically viable, the market potential of~~ ~~PROCYSBI~~ ~~may be limited.~~

With respect to QUINSAIR, the FDA has indicated in previous written and verbal communications with Raptor Pharmaceutical Corp., or Raptor, and with the drug’s previous sponsor that it believes the data submitted in connection with EMA’s subsequent approval of QUINSAIR for the management of chronic pulmonary infections due to Pseudomonas aeruginosa in adults with cystic fibrosis does not provide substantial evidence of efficacy and safety to support FDA approval of QUINSAIR for treatment of patients with cystic fibrosis. On October 27, 2016, the FDA expressed its recommendation that an additional clinical trial should be conducted, and noted that if Raptor submits a new drug application, or NDA, without conducting an additional clinical trial, the FDA will review the submission to determine whether it is acceptable for filing. ~~Based upon the FDA’s feedback, we have made the decision not to pursue an NDA for U.S. approval of QUINSAIR as a treatment of Pseudomonas aeruginosa in adults with cystic fibrosis at this time.~~

Prior to our acquisition of Raptor, Raptor planned to pursue the development of QUINSAIR for use in the indication of bronchiectasis, or BE, not associated with cystic fibrosis. Raptor submitted a protocol to FDA on August 18, 2016 for a Phase 2, placebo-controlled study of QUINSAIR in adults with BE. Feedback from FDA was received on October 17, 2016 requesting additional information and changes to the proposed study protocol. Raptor was also exploring further clinical development of QUINSAIR for the treatment of pulmonary nontuberculous mycobacteria, or NTM infection, based on third-party data generated pertaining to the susceptibility of certain pathogens to treatment with levofloxacin and other fluoroquinolone molecules. No clinical data has been generated with QUINSAIR in patients with BE or with NTM infections, either by Raptor, subsequently by Horizon or by other parties. This creates uncertainty regarding the potential efficacy of QUINSAIR in these indications.

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

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

The amount of our medicine sales in the EEA is dependent in part upon the pricing and reimbursement decisions adopted in each of the EEA countries, which may not be at acceptable levels to us.*

One or more EEA countries may not support pricing within our target pricing and reimbursement range for our medicines due to budgetary decisions made by regional, national and local health authorities and third-party payers in the EEA, which would negatively affect our revenues. The pricing and reimbursement process in EEA countries can be lengthy, involved and difficult to predict. Failure to timely complete the pricing and reimbursement process in the EEA countries will delay our ability to market our medicines in the EEA and to derive revenues from those countries.

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

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

Moreover, existing regulatory approvals and any future regulatory approvals that we obtain will be subject to limitations on the approved indicated uses and patient populations for which our medicines may be marketed, the conditions of approval, requirements for potentially costly, post-market testing and requirements for surveillance to monitor the safety and efficacy of the medicines. In the EEA, the advertising and promotion of pharmaceuticals is strictly regulated. The direct-to-consumer promotion of prescription pharmaceuticals is not permitted, and some countries in the EEA require the notification and/or prior authorization of promotional or advertising materials directed at healthcare professionals. The FDA, EMA and other authorities in the EEA countries strictly regulate the promotional claims that may be made about prescription ~~medicines, and our~~ ~~medicine~~ ~~labeling, advertising and promotion are subject to continuing regulatory review.~~ Physicians nevertheless may prescribe our medicines to their patients in a manner that is inconsistent with the approved label or that is off-label. Positive clinical trial results in any of our medicine development programs increase the risk that approved pharmaceutical forms of the same active pharmaceutical ingredients, or APIs, may be used off-label in those indications. ~~Our investigational medicine candidate RP103 is comprised of the same API as PROCYSBI.~~ If we are found to have improperly promoted off-label uses of approved medicines, we may be subject to significant sanctions, civil and criminal fines and injunctions prohibiting us from engaging in specified promotional conduct.

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

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

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

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

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

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

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

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

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

If any of our third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the applicable regulatory authorities’ strict regulatory requirements, or pass regulatory inspection, they will not be able to secure or maintain regulatory approval for the manufacturing facilities. For example, ~~Pharmaceutics International, Inc.,~~BASF Corporation, or ~~Pii,~~BASF, our manufacturer of ~~BUPHENYL,~~one of the APIs in DUEXIS, ibuprofen in a direct compression blend called DC85, previously notified us that it was ~~found~~not able to supply DC85 due to a technical issue at its manufacturing facility in Bishop, Texas during 2018. During 2019, BASF has supplied us with a limited amount of DC85 and informed us of their intention to return to full supply. We consider our DUEXIS inventory on hand to be ~~non-compliant~~sufficient to meet current and future commercial requirements. However, we cannot guarantee that BASF’s manufacturing facility will return to full operations or that we will be able to enter into a new supply agreement with BASF for ~~cGMPs by the Medicines and Healthcare Products Regulatory Agency, or the MHRA, which could restrict Pii from supplying BUPHENYL in the EU.~~ ~~However, BUPHENYL was considered to be critical to public health and as a result, the MHRA issued a certificate of cGMP compliance for Pii, which is valid until June 30, 2018.~~DC85. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or any other applicable regulatory authorities do not approve these facilities for the manufacture of our medicines or if they withdraw any such approval in the future, or if our suppliers or third-party manufacturers decide they no longer want to supply our primary active ingredients or manufacture our medicines, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our medicines. To the extent any third-party manufacturers that we engage with respect to our medicines are different from those currently being used for commercial supply in the United States, the FDA will need to approve the facilities of those third-party manufacturers used in the manufacture of our medicines prior to our sale of any medicine using these facilities.

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

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

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

Failures or difficulties faced at any level of our supply chain, including any disruption caused by the COVID-19 pandemic, could materially adversely affect our business and delay or impede the development and commercialization of any of our medicines or medicine candidates and could have a material adverse effect on our business, results of operations, financial condition and prospects.

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

As of December 31, 2010 and prior to the commercial launch of DUEXIS, we employed approximately 40 full-time employees as a consolidated entity. As of September 30, 2017, we employed approximately 980 full-time employees, including approximately 420 sales representatives, representing a substantial change to the size of our organization. We have also experienced, and may continue to experience, turnover of the sales representatives that we hired or will hire in connection with the commercialization of our medicines, requiring us to hire and train new sales representatives. Our management, personnel, systems and facilities currently in place may not be adequate to support this recent and anticipated growth, and we may not be able to retain or recruit qualified personnel in the future due to competition for personnel among pharmaceutical businesses.

As our commercialization plans and strategies continue to develop, we will need to continue to recruit and train sales and marketing personnel and expect to need to expand the size of our employee base for managerial, operational, financial and other resources as a result of our recent acquisitions. Our ability to manage any future growth effectively may require us to, among other things:

Our recent acquisitions have resulted in many changes, including significant changes in the corporate business and legal entity structure, the integration of other companies and their personnel with us, and changes in systems. We are currently undertaking numerous complex transition activities associated with our recent acquisitions, and we may encounter unexpected difficulties or incur unexpected costs, including:

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

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

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

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

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

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

~~DUEXIS~~While KRYSTEXXA faces limited direct competition, a number of competitors have medicines in Phase 1 or Phase 2 trials, including Selecta Biosciences Inc. which has presented Phase 2 clinical data and ~~VIMOVO~~is conducting a six-month trial comparing their candidate that uses an immunomodulator to KRYSTEXXA alone. RAVICTI could face competition from ~~other NSAIDs,~~a few medicine candidates that are in early-stage development, including ~~Celebrex~~^®a gene-therapy candidate by Ultragenyx Pharmaceutical Inc., ~~which was marketed~~a generic taste-masked formulation option of BUPHENYL by ~~Pfizer~~ACER Therapeutics Inc., and an enzyme replacement for a specific UCD subtype (ARG) by Aeglea Bio Therapeutics Inc. PROCYSBI faces competition from Cystagon (immediate-release cysteamine bitartrate capsules) for the treatment of cystinosis and Cystaran (cysteamine ophthalmic solution) for treatment of corneal crystal accumulation in patients with cystinosis. Additionally, we are also aware that AVROBIO, Inc. has an early-stage gene therapy candidate in development for the treatment of cystinosis. Although TEPEZZA does not face direct competition, other therapies, such as corticosteroids, have been used on an off-label basis to alleviate some of the symptoms of TED. While these therapies have not proved effective in treating the underlying disease, and carry with them significant side effects, their off-label use could reduce or delay treatment in the addressable patient population for TEPEZZA. Immunovant Inc. is also conducting Phase 2 clinical studies of a ~~generic~~ medicine ~~known~~candidate for the treatment of active TED, also referred to as celecoxib and marketed by other pharmaceutical companies. DUEXIS and VIMOVO also face significant competition from the separate use of NSAIDs for pain relief and GI protective medications to reduce the risk of NSAID-induced upper GI ulcers. Both NSAIDs and GI protective medications are available in generic form and may be less expensive to use separately than DUEXIS or VIMOVO.Graves’ ophthalmopathy. PENNSAID 2% faces competition from generic versions of diclofenac sodium topical solutions that are priced significantly less than the price we charge for PENNSAID 2%~~, and~~. The generic version of Voltaren Gel ~~marketed by Endo Pharmaceuticals Solutions Inc., which~~ is the market leader in the topical NSAID category. Legislation enacted in most states in the United States allows, or in some instances mandates, that a pharmacist dispense an available generic equivalent when filling a prescription for a branded medicine, in the absence of specific instructions from the prescribing physician. DUEXIS faces competition from other NSAIDs, including Celebrex®, marketed by Pfizer Inc., and celecoxib, a generic form of the medicine marketed by other pharmaceutical companies. DUEXIS also faces significant competition from the separate use of NSAIDs for pain relief and GI protective medications to reduce the risk of NSAID-induced upper GI ulcers. Both NSAIDs and GI protective medications are available in generic form and may be less expensive to use separately than DUEXIS, despite such substitution being off-label in the case of DUEXIS. Because pharmacists often have economic and other incentives to prescribe lower-cost generics, if physicians prescribe ~~DUEXIS,~~ PENNSAID 2% or ~~VIMOVO,~~DUEXIS, those prescriptions may not result in sales. If physicians do not complete prescriptions through our HorizonCares program or otherwise provide prescribing instructions prohibiting generic diclofenac sodium topical solutions as a substitute for PENNSAID 2%, the substitution of generic ibuprofen and famotidine separately as a substitution for DUEXIS, ~~or generic naproxen and branded Nexium~~^® ~~(esomeprazole) as a substitute for VIMOVO or generic diclofenac sodium topical solutions as a substitute for PENNSAID 2%,~~ sales of ~~DUEXIS,~~ PENNSAID 2% and ~~VIMOVO~~DUEXIS may suffer despite any success we may have in promoting ~~DUEXIS,~~ PENNSAID 2% or ~~VIMOVO~~DUEXIS to physicians. In addition, other medicine candidates that contain ibuprofen and famotidine in combination or naproxen and esomeprazole in combination, while not currently known or FDA approved, may be developed and compete with DUEXIS ~~or VIMOVO, respectively,~~ in the future. While KRYSTEXXA faces limited direct competition, a number of competitors have drugs in Phase 1 or Phase 2 trials. On December 22, 2015, AstraZeneca secured approval from the FDA for ZURAMPIC (lesinurad) 200mg tablets in combination with a xanthine oxidase inhibitor, or XOI, for the treatment of hyperuricemia associated with gout in patients who have not achieved target serum uric acid (sUA) levels with an XOI alone. In April 2016, the U.S. rights to ZURAMPIC were licensed to Ironwood Pharmaceuticals Inc. Although ZURAMPIC is not a direct competitor because it has not been approved for refractory gout, this therapy could be used prior to use of KRYSTEXXA and if effective, could reduce the target patient population for KRYSTEXXA. PROCYSBI faces competition from Cystagon (immediate-release cysteamine bitartrate capsules) for the treatment of cystinosis and Cystaran (cysteamine ophthalmic solution) for treatment of corneal crystal accumulation in patients with cystinosis. QUINSAIR faces competition from Tobramycin solution, which is available as a generic medicine for treatment of chronic Pseudomonas aeruginosa lung infections in patients with cystic fibrosis, TOBI Podhaler, Cayston and colistimethate.

We have also entered into settlement and license agreements that may allow certain of our competitors to sell generic versions of certain of our medicines in the United States, subject to the terms of such agreements. We granted (i) a non-exclusive license (that is only royalty-bearing in some circumstances), to manufacture and commercialize a generic version of DUEXIS in the United States after January 1, 2023, ~~or earlier under certain circumstances. We granted~~(ii) non-exclusive licenses to manufacture and commercialize generic versions of PENNSAID 2% in the United States after ~~January 10, 2029, or earlier under certain circumstances. We granted~~October 17, 2027, (iii) a non-exclusive license to manufacture and commercialize a generic version of RAYOS tablets in the United States after December 23, 2022, and (iv) non-exclusive licenses to manufacture and commercialize generic versions of RAVICTI in the United States after July 1, 2025, or earlier under certain circumstances.

Patent litigation is currently pending in the United States District Court for the District of New Jersey against ~~several companies intending~~ Actavis Laboratories UT, Inc., formerly known as Watson Laboratories, Inc., Actavis, Inc. and Actavis plc, or collectively Actavis, who intend to market a generic version of PENNSAID 2% prior to the expiration of certain of our patents listed in the FDA’s Orange Book, or the Orange Book. These cases are collectively known as the PENNSAID 2% cases, and involve the following sets of defendants: (i) Actavis Laboratories UT, Inc., formerly known as Watson Laboratories, Inc., Actavis, Inc. and Actavis plc, or collectively Actavis; and (ii) Lupin Limited and Lupin Pharmaceuticals, Inc., or collectively Lupin. These cases arise from Paragraph IV Patent Certification notice letters from ~~each of~~ Actavis ~~and Lupin~~ advising ~~each~~it had filed an Abbreviated New Drug Application, or ANDA, with the FDA seeking approval to market a generic version of PENNSAID 2% before the expiration of the patents-in-suit.

On February 27, 2020, following a judgment in federal court invalidating certain patents covering VIMOVO, Dr. Reddy’s launched a generic version of VIMOVO in the United States. While patent litigation against Dr. Reddy’s for infringement continues on additional patents in the New Jersey District Court, we now face generic competition for VIMOVO. As a result, we have repositioned our promotional efforts previously made on VIMOVO to the other inflammation segment medicines and expect that our VIMOVO net sales will decrease in future periods.

Patent litigation is currently pending in the United States District Court for the District of ~~New Jersey and the Court of Appeals for the Federal Circuit~~Delaware against ~~several companies intending~~Alkem Laboratories, Inc., or Alkem, who intends to market a generic version of VIMOVO before the expiration of certain of our patents listed in the Orange Book. These cases are collectively known as the VIMOVO cases, and involve the following sets of defendants: (i) Dr. Reddy’s Laboratories Inc. and Dr. Reddy’s Laboratories Ltd., or collectively Dr. Reddy’s; (ii) Lupin; and (iii) Mylan Pharmaceuticals Inc., Mylan Laboratories Limited, and Mylan Inc., or collectively Mylan. Patent litigation is currently pending before the Court of Appeals for the Federal Circuit against a fourth generic company, Actavis Laboratories FL., Inc. and Actavis Pharma, Inc., or collectively Actavis Pharma. The cases arise from Paragraph IV Patent Certification notice letters from each of Dr. Reddy’s, Lupin, Mylan and Actavis Pharma advising each had filed an ANDA with the FDA seeking approval to market generic versions of VIMOVO before the expiration of the patents-in-suit.

Patent litigation is currently pending in the United States District Court for the Eastern District of Texas against Par Pharmaceutical, Inc., or Par Pharmaceutical, and in the United States District Court for the District of New Jersey against Par Pharmaceutical and against Lupin, who are each intending to market generic versions of RAVICTIDUEXIS prior to the expiration of certain of our patents listed in the Orange Book. ~~These cases are collectively known as the RAVICTI cases and arise~~This case arises from Paragraph IV Patent Certification notice letters from ~~each of Par Pharmaceutical and Lupin~~Alkem advising ~~each~~it had filed an ANDA with the FDA seeking approval to market a generic version of ~~RAVICTI~~DUEXIS before the expiration of the patents-in-suit.

If we are unsuccessful in any of the ~~VIMOVO~~PENNSAID 2% cases or ~~PENNSAID 2% cases,~~DUEXIS case, we will likely face generic competition with respect to ~~VIMOVO~~PENNSAID 2% and/or ~~PENNSAID 2%~~DUEXIS and sales of ~~VIMOVO~~PENNSAID 2% and/or ~~PENNSAID 2%~~DUEXIS will be substantially harmed. If we are unsuccessful in any of the RAVICTI cases, RAVICTI would likely face generic competition in the United States when its orphan exclusivity expires (currently scheduled to occur in February 2020), and its sales would likely materially decline.

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

BUPHENYL’s composition of matter patent protection and orphan drug exclusivity have expired. Because BUPHENYL has no regulatory exclusivity or listed patents, there is nothing to prevent a competitor from submitting an ANDA for a generic version of BUPHENYL and receiving FDA approval. In November 2011, Ampolgen Pharmaceuticals, LLC received FDA approval for a generic version of NaPBA tablets, which may compete with RAVICTI and BUPHENYL in treating UCD. In March 2013, SigmaPharm Laboratories, LLC received FDA approval for a generic version of NaPBA powder, which competes with BUPHENYL and may compete with RAVICTI in treating UCD. In July 2013, Lucane Pharma, or Lucane, received marketing approval from the EMA for taste-masked NaPBA and has announced a distribution partnership in Canada. In January 2015, Lucane announced it had received marketing approval for its taste-masked NaPBA in Canada. We believe Lucane is also seeking approval via an ANDA in the United States. If this ANDA is approved, this formulation may compete with RAVICTI and BUPHENYL in treating UCD in the United States. Generic versions of BUPHENYL to date have been priced at a discount relative to ~~BUPHENYL or~~ RAVICTI, and physicians, patients, or payers may decide that this less expensive alternative is preferable to ~~BUPHENYL and~~ RAVICTI. If this occurs, sales of ~~BUPHENYL and/or~~ RAVICTI could be materially reduced, but we would nevertheless be required to make royalty payments to Bausch Health Companies Inc. (formerly Ucyclyd Pharma, Inc.), or ~~Ucyclyd,~~Bausch, and another external party, at the same royalty rates. While ~~Ucyclyd~~Bausch and its affiliates are generally contractually prohibited from developing or commercializing new medicines, anywhere in the world, for the treatment of UCD or hepatic encephalopathy, or HE, which are chemically similar to RAVICTI, they may still develop and commercialize medicines that compete with RAVICTI. For example, medicines approved for indications other than UCD and HE may still compete with RAVICTI if physicians prescribe such medicines off-label for UCD or HE. We are also aware that Recordati S.p.A (formerly known as Orphan Europe ~~SARL,~~SARL), or ~~Orphan Europe,~~Recordati, is conducting a clinical ~~trial~~trials of carglumic acid to ~~treat~~assess the efficacy for acute hyperammonemia in some of the UCD enzyme deficiencies for which RAVICTI ~~was approved. Promethera Biosciences SA has successfully completed Phase I/II trials of its cell-based therapy~~is approved for ~~the treatment of UCD and plans to conduct a Phase IIb/III clinical trial.~~chronic treatment. Carglumic acid is approved for maintenance therapy for chronic hyperammonemia and to treat ~~hyperammonenic~~hyperammonemic crises in ~~Nacetylglutamate~~N-acetylglutamate synthase deficiency, a rare UCD subtype, and is sold under the name Carbaglu. If the results of this trial are successful and ~~Orphan Europe~~Recordati is able to complete development and obtain approval of Carbaglu to treat additional UCD enzyme deficiencies, RAVICTI ~~would~~may face additional competition from this compound.

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

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

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

Under the Orphan Drug Act of 1983, the FDA may designate a medicine as an orphan drug if it is a drug intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States. A company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years from the date of its approval. ~~RAVICTI and~~ PROCYSBI ~~have~~has been granted orphan drug exclusivity by the FDA, which we expect will provide orphan drug marketing exclusivity in the United States until ~~February 2020 and~~ December 2020, ~~respectively,~~ with exclusivity for PROCYSBI extending to 2022 for patients ages ~~two~~one to six years. In addition, TEPEZZA has been granted orphan drug exclusivity for treatment of active (dynamic) phase Graves’ ophthalmopathy, which we expect will provide orphan drug marketing exclusivity in the United States until January 2027. However, despite orphan drug exclusivity, the FDA can still approve another drug containing the same active ingredient and used for the same orphan indication if it determines that a subsequent drug is safer, more effective or makes a major contribution to patient care, and orphan exclusivity can be lost if the orphan drug manufacturer is unable to ensure that a sufficient quantity of the orphan drug is available to meet the needs of patients with the rare disease or condition. Orphan drug exclusivity may also be lost if the FDA later determines that the initial request for designation was materially defective. In addition, orphan drug exclusivity does not prevent the FDA from approving competing drugs for the same or similar indication containing a different active ingredient. If orphan drug exclusivity is lost and we were unable to successfully enforce any remaining patents covering ~~RAVICTI or PROCYSBI,~~the applicable medicine, we could be subject to generic competition and revenues from ~~RAVICTI or PROCYSBI~~the medicine could decrease materially. In addition, if a subsequent drug is approved for marketing for the same or a similar indication as ~~RAVICTI or PROCYSBI~~our medicines despite orphan drug exclusivity, we may face increased competition and lose market share with respect to these medicines. ~~RAVICTI will benefit from a period of 10 years of orphan market exclusivity~~

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

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

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

78There has been negative publicity and inquiries from Congress and enforcement authorities regarding the use of specialty pharmacies and drug pricing. Our patient assistance programs are not involved in the prescribing of medicines and are solely to assist in ensuring that when a physician determines one of our medicines offers a potential clinical benefit to their patients and they prescribe one for an eligible patient, financial assistance may be available to reduce the patient’s out-of-pocket costs. In addition, all pharmacies that fill prescriptions for our medicines are fully independent, including those that participate in HorizonCares. We do not own or possess any option to purchase an ownership stake in any pharmacy that distributes our medicines, and our relationship with each pharmacy is non-exclusive and arm’s length. All of our sales are processed through pharmacies independent of us. Despite this, the negative publicity and interest from Congress and enforcement authorities regarding specialty pharmacies may result in physicians being less willing to participate in our patient assistance programs and thereby limit our ability to increase patient assistance and adoption of our medicines.

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

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

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

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

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

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

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

Similarly, from time to time we are involved in disputes with distributors, PBMs and licensing partners regarding our rights and performance of obligations under contractual arrangements. For example, we were previously in litigation with Express Scripts related to alleged breach of contract claims and in which Express Scripts was seeking payment for rebates relating to DUEXIS, RAYOS and VIMOVO. We counterclaimed against Express Scripts, contesting the amount owed and contending Express Scripts had breached the rebate agreement. In September 2016, we entered into a settlement agreement and mutual release with Express Scripts pursuant to which we and Express Scripts were released from any and all claims relating to the litigation without admitting any fault or wrongdoing and we paid Express Scripts $65.0 million.claims.

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

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

In addition to our U.S. operations, we have operations in Ireland, Bermuda, the Grand Duchy of Luxembourg, or Luxembourg, Switzerland, Germany ~~Canada, the Grand Cayman Islands~~ and in Israel (through Andromeda Biotech Ltd). Moreover, Grünenthal S.A. is continuing with the registration process for the commercialization of DUEXIS in Latin America. BUPHENYL is currently marketed in various territories outside the United States by third-party distributors. RAVICTI received marketing authorization from HC in March 2016 and marketing approval in the EU in November 2015. We launched RAVICTI in Canada in November 2016 and expect RAVICTI to be available in Europe in the fourth quarter of 2017 through our partnership with SOBI. QUINSAIR received marketing authorizatio~~n from HC in June 2015 and we launched QUINSAIR in Canada in December 2016. PROCYSBI received marketing authorization from HC in June 2017 and we launched PROCYSBI in Canada in October 2017.~~Canada. We face risks associated with our international operations, including possible unfavorable ~~regulatory, pricing and reimbursement,~~ political, tax and labor conditions, which could harm our business. We are subject to numerous risks associated with international business activities, including:

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

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

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

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

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

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

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

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

As of December 31, 2013, we employed approximately 300 full-time employees as a consolidated entity. As of March 31, 2020, we employed approximately 1,185 full-time employees, including approximately 455 sales representatives, representing a substantial change to the size of our organization. We have also experienced, and may continue to experience, turnover of the sales representatives that we hired or will hire in connection with the commercialization of our medicines, requiring us to hire and train new sales representatives. Our management, personnel, systems and facilities currently in place may not be adequate to support anticipated growth, and we may not be able to retain or recruit qualified personnel in the future due to competition for personnel among pharmaceutical businesses.

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

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

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

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

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

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

We have ~~recently~~ completed multiple medicine and company acquisitions and our strategy is to engage in additional strategic transactions with third parties, such as acquisitions of companies or divisions of companies and asset purchases of medicines, medicine candidates or technologies that we believe will complement or augment our existing business. We may also consider a variety of other business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and other investments. Any such transaction may require us to incur non-recurring and other charges, increase our near and long-term expenditures, pose significant integration challenges, create additional tax, legal, accounting and operational complexities in our business, require additional expertise, result in dilution to our existing shareholders and disrupt our management and business, which could harm our operations and financial results. For example, ~~in connection with our acquisition of the U.S. rights to VIMOVO,~~ we assumed primary responsibility for the existing patent infringement litigation with respect to VIMOVO, and have also agreed to reimburse certain legal expenses of Pozen Inc., who subsequently entered into a business combination with Tribute Pharmaceuticals Canada Inc. to become known as Aralez Pharmaceuticals Inc., or Aralez, with respect to its continued involvement in such litigation. We also assumed responsibility for the ~~existing~~ patent infringement litigation with respect to RAVICTI upon the closing of our acquisition of Hyperion Therapeutics, Inc., or Hyperion, and we have assumed responsibility for completing post-marketing clinical trials of RAVICTI that are required by the FDA, ~~and are~~one of which is ongoing. ~~We expect that the RAVICTI litigation will result in substantial on-going expenses and potential distractions to our management team.~~

In connection with our acquisition of Raptor, we assumed contractual obligations under agreements with Tripex Pharmaceuticals, LLC, or Tripex, and PARI Pharma GmbH, or PARI, related to QUINSAIR. Under the agreement with Tripex, we are required to pursue commercially reasonable efforts to initiate, and subsequently to complete, an additional clinical trial of QUINSAIR in a non-cystic fibrosis patient population within a specified period of time and an obligation to progress toward submitting an NDA for approval of QUINSAIR in the United States for use in all or part of the cystic fibrosis patient population. These obligations are subject to certain exceptions due to, for example, manufacturing delays not under our control, or delays caused by the FDA. If we fail to properly exercise such efforts to initiate and complete an appropriate clinical trial, or fail to submit an NDA for U.S. approval in the cystic fibrosis patient population, during the time periods specified in the agreement, we may be subject to various claims by Tripex and parties affiliated with Tripex. In addition, if we do not spend a minimum amount on QUINSAIR development in each of the three years following our acquisition of Raptor, we may also be obligated to pre-pay a milestone payment related to initiating a clinical trial for QUINSAIR in a non-cystic fibrosis indication. During October 2017, we triggered a milestone payment under this agreement, and we paid Tripex $20.0 million in November 2017. Under the license agreement with PARI, we are required to comply with diligence milestones related to development and commercialization of QUINSAIR in the United States and to spend a specified minimum amount per year on development activities in the United States until submission of the NDA for QUINSAIR in the United States. If we do not comply with these obligations, our licenses to certain intellectual property related to QUINSAIR may become non-exclusive in the United States or could be terminated. We are ~~also~~ subject to contractual obligations under an amended and restated license agreement with the Regents of the University of California, San Diego, or UCSD, as amended, with respect to PROCYSBI, including obligations to consider engaging in the development of PROCYSBI for the treatment of non-alcoholic steatohepatitis, or NASH, and related diligence obligations if we undertake such development. Under the amended and restated license agreement with USCD, we also are subject to diligence obligations to identify a third party to undertake development of PROCYSBI for the treatment of Huntington’s disease.PROCYSBI. To the extent that we fail to perform ~~the diligence~~our obligations under the agreement, UCSD may, with respect to ~~such indication,~~applicable indications, terminate the license or otherwise cause the license to become non-exclusive. If ~~one or more of these licenses~~this license was terminated, we would have no further right to use or exploit the related intellectual property, which would limit our ability to develop PROCYSBI ~~or QUINSAIR~~ in other indications, and could impact our ability to continue commercializing PROCYSBI ~~or QUINSAIR~~ in ~~their~~its approved indications.

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

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

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

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

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

~~Under~~In July 2018, the IRS issued regulations under Section 7874 of the Code, a foreign corporation will be treated as a U.S. corporation for U.S. federal tax purposes if, due to an acquisition of a U.S. corporation, at least 80 percent of its stock (by vote or value) is held by former stockholders of the acquired U.S. corporation.7874. We do not believe that we should be treated as a foreign corporation because the former stockholders of HPI owned (within the meaning of Section 7874 of the Code) less than 80 percent (by both vote and value) of the combined entity’s stock immediately after the Vidara Merger. However, there can be no assurance that there will not exist in the future a subsequent change in the facts or in law which might cause our ~~parent company to be treated as a domestic corporation for U.S. federal income tax purposes, including with retroactive effect.~~

~~Further, there can be no assurance that the IRS will agree with the position that the ownership test was satisfied. If our parent company were unable to be treated~~classification as a foreign corporation for U.S. federal income tax purposes ~~one of our significant strategic reasons for completing~~is affected by Section 7874 or the ~~Vidara Merger would be nullified~~regulations thereunder, though the IRS may disagree.

Recent and ~~we may not be able to recoup the significant investment in completing the transaction.~~

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

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

On April 4, 2016, the U.S. Treasury and the IRS issued temporary regulations and in January 2017 issued final regulations that expand the scope of transactions subject to the rules designed to eliminate the U.S. tax benefits of so-called inversion transactions. Under the temporary regulations, the former stockholders of U.S. corporations acquired by a foreign corporation within 36 months of the signing date of the last such acquisition are aggregated for the purpose of determining whether the foreign corporation will be treated as a domestic corporation for U.S. federal tax purposes because at least 80 percent of the stock of the foreign corporation is held by former stockholders of a U.S. corporation. The requirement to aggregate the stockholders in such acquisitions for the purpose of determining whether the 80 percent threshold is met may limit our ability to use our stock to acquire U.S. corporations or their assets in the future. The Secretary of the United States Treasury recently announced that the U.S. Treasury will review every significant regulation issued over the past year and a half, including certain inversion regulations, but, at present, it is unclear what the outcome of Treasury’s review will be or what impact it may have on us.

The U.S. Treasury and the IRS also issued proposed regulations on April 4, 2016 as well as final and temporary regulations in October 2016 that address whether an interest in a related corporation is debt or equity for United States federal income tax purposes. These regulations could result in recharacterization of inter-company debt to equity for certain of our inter-company debt and such a recharacterization could result in more of our future income being taxed by the United States and thereby increase our effective tax rate. We are continuing to evaluate the impact that these regulations may have and will reflect such impact on our financial statements as required.

In July 2015, the International Tax Bipartisan Tax Working Group of the United States Senate Committee on Finance, or the Finance Committee, issued its report on international tax reform. The Finance Committee’s co-chairs concluded that it will be necessary to limit earnings stripping by foreign multinationals through interest deductions on inter-company debt in order to eliminate a competitive advantage that foreign multinationals would otherwise have over domestic multinational companies. The status of the recommendations from the International Tax Bipartisan Tax Working Group, including regulations aimed at curbing earnings stripping, as well as the status of United States tax reform in general, is subject to significant uncertainty as President Trump and both houses of Congress are considering several material tax reform proposals. These proposals include, among other items, a significant reduction to the U.S. corporate tax rate and a possible “border adjustment tax” that would effectively increase the economic cost of imports. Consideration of various tax reform proposals continues to evolve. In July 2017, the Speaker of the House, Majority Leader of the Senate, Chairmen of the House of Representatives Committee on Ways and Means, Finance Committee, Secretary of the Treasury and Director of the National Economic Council issued a joint statement setting aside the idea of a border adjustment tax and called for tax reform legislation that “reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas. On September 22, 2017, the Administration and Chairman of the House Committee on Ways and Means and Senate Finance Committee released the “Unified Framework” tax reform which among other items discussed “ending incentives to ship jobs, capital and tax revenue overseas.” At this point in time it is not possible to determine all of the possible consequences to us of the various tax reform proposals that are under consideration. However, any tax reform could significantly impact our U.S. and worldwide tax liabilities.

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

The ~~U.S. federal government has called for substantial~~Irish Finance Act 2019, or Finance Act 2019, which was signed into law on December 22, 2019, introduced changes to ~~U.S.~~Ireland’s transfer pricing rules, which came into force with effect from January 1, 2020. The changes introduce the 2017 version of the OECD Transfer Pricing Guidelines, or 2017 OECD Guidelines, as the reference guidelines for Ireland’s domestic transfer pricing regime. The 2017 OECD Guidelines were already applicable under Ireland’s international tax ~~policy~~treaties and ~~laws. Congress~~therefore the introduction of these guidelines should only affect transactions with non-tax treaty countries. In addition to updating Irish tax law for the 2017 OECD Guidelines, these changes also extend the transfer pricing rules to certain non-trading transactions and ~~President Trump~~to certain capital transactions. We have ~~released~~restructured certain intercompany arrangements, such that we do not expect there to be a material impact on our effective tax rate as a result of the ~~frameworks~~introduction of ~~proposed tax plans~~these provisions.

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

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

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

On March 27, 2020, H.R.748, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted in the United States, which provides temporary relief from certain aspects of the Tax Act that had imposed limitations on the utilization of certain losses, interest expense deductions, and the timing of refunds of alternative minimum tax credits.

On April 8, 2020, the U.S. Treasury published in the Federal Register the Final Regulations for Section 267A (commonly referred to as the “Anti-Hybrid Rules”). The Final Regulations for Section 267A provide several rules expanding the reach and scope of Section 267A of the Code particularly involving the payment of interest and royalties to certain branches, reverse hybrid entities, and other hybrid mismatch arrangements. We are in the process of assessing the impact, if any, of the provisions of the Final Regulations for Section 267A on our financial statements. If the Anti-Hybrid Rules under the Final Regulations for Section 267A are applicable to us, we will recognize a one-time tax provision of $15.2 million during the three months ended June 30, 2020. On April 8, 2020, the U.S. Treasury also published in the Federal Register further Proposed Regulations relating to Section 267A, conduit financing rules and the treatment of certain payments under the GILTI provisions. We are currently in the process of assessing these Proposed Regulations and the potential impact on us. We do not expect these Proposed Regulations to have ~~sufficient information that would allow us~~a material impact on our effective tax rate.

We are unable to predict what ~~U.S.~~ tax ~~reform, if any,~~laws may be proposed or enacted in the future or what ~~impact any~~effect such changes would have on our business. ~~Changes to U.S.~~To the extent new tax laws are enacted, or new guidance released, this could ~~significantly impact~~have an adverse effect on our ~~business, financial condition, results~~future effective tax rate. It could also lead to an increase in the complexity and cost of ~~operations,~~tax compliance. We urge our shareholders to consult with their legal and tax advisors with respect to the potential tax consequences of investing in or ~~cash flows.~~holding our ordinary shares.

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

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

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

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

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

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

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

Any regulatory approvals that we obtain for our medicine candidates may also be subject to limitations on the approved indicated uses for which the medicine may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the medicine candidate. In addition, with respect to our current FDA-approved medicines (and with respect to our medicine candidates, if approved), the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the medicine are subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs, GCPs, ~~international conference on harmonization regulations,~~International Council for Harmonisation, or ICH, ~~regulations,~~guidelines and GLPs, which are regulations and guidelines enforced by the FDA for all of our medicines in clinical development, for any clinical trials that we conduct post-approval. With respect to RAVICTI, the FDA imposed several post-marketing requirements and a post-marketing commitment, which include remaining obligations to conduct studies in UCD patients during the first two months of life and from two months to two years of age, including a study of the pharmacokinetics in both age groups, and a randomized study to determine the safety and efficacy in UCD patients who are treatment naïve to phenylbutyrate treatment. Although we are committed to carrying out these commitments, there are challenges in conducting studies in pediatric patients including availability of study sites, patients, and obtaining parental informed consent. In May 2017, the FDA approved our supplemental new drug application, or sNDA, for RAVICTI to expand the age range for chronic management of UCDs from two years of age and older to two months of age and older. Subject to positive data from on-going studies, we have targeted an sNDA submission in the first quarter of 2018 in relation to UCD patients during the first two months of life. In connection with our acquisition of Crealta Holdings LLC, or Crealta, in January 2016, we assumed responsibility for an observational study related to KRYSTEXXA, which requirement was fulfilled in May 2017. We are in the process of closing out the study and drafting the final report.

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

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

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

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

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

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

~~Outside of the United States, the success of our medicines, including~~ ~~BUPHENYL, LODOTRA~~, PROCYSBI, QUINSAIR, RAVICTI and IMUKIN, will depend largely on obtaining and maintaining government coverage, because in many countries patients are unlikely to use prescription drugs that are not covered by their government healthcare programs. The majority of LODOTRA sales are in Germany and Italy where reimbursement has been approved. BUPHENYL is marketed in select countries throughout Europe, the Middle East and the Asia-Pacific region. We launched RAVICTI in Canada in November 2016 and we expect RAVICTI to be available in Europe in the fourth quarter of 2017 through our partnership with SOBI. QUINSAIR was launched in Canada in December 2016 and PROCYSBI was launched in Canada in October 2017. We cannot be certain that existing reimbursement in such countries will be maintained or that we will be able to secure reimbursement in additional countries. Negotiating coverage and reimbursement with governmental authorities can delay commercialization by 12 months or more. Coverage and reimbursement policies may adversely affect our ability to sell our medicines on a profitable basis. In many international markets, governments control the prices of prescription pharmaceuticals, including through the implementation of reference pricing, price cuts, rebates, revenue-related taxes and profit control, and we expect prices of prescription pharmaceuticals to decline over the life of the medicine or as volumes increase. Many countries in the EU have increased the amount of discounts required on medicines, and we expect these discounts to continue as countries attempt to manage healthcare expenditures, especially in light of current economic conditions. As a result of these pricing practices, it may become difficult to achieve or sustain profitability or expected rates of growth in revenue or results of operations. Any shortfalls in revenue could adversely affect our business, financial condition and results of operations.

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

We expect to experience pricing pressures in connection with the sale of our medicines due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative proposals relating to outcomes and quality. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, increased the mandated Medicaid rebate from 15.1% to 23.1%, expanded the rebate to Medicaid managed care utilization and increased the types of entities eligible for the federal 340B drug discount program. On January 30, 2017, the White House Office of Management and Budget withdrew the draft August 2015 Omnibus Guidance document that was issued by the Department of Health and Human Services, or HHS, Health Resources and Services Administration, or HRSA, that addressed a broad range of topics including, among other items, the definition of a patient’s eligibility for 340B drug pricing. However, as concerns continue to grow over the need for tighter oversight, there remains the possibility that HRSA or other agency under the HHS will propose a similar regulation or that Congress will explore changes to the 340B program through legislation. For example, the Centers for Medicare & Medicaid Services has issued a final rule that would revise the Medicare hospital outpatient prospective payment system for calendar year 2018, including a new reimbursement methodology for drugs purchased under the 340B program for Medicare patients. In addition, HHS has currently set July 1, 2018 for implementation of the final rule setting forth the calculation of the ceiling price and application of civil monetary penalties under the 340B program. A material portion of KRYSEXXA prescriptions are written by healthcare providers that are eligible for 340B drug pricing and therefore any reduction in 340B pricing, whether in the form of the final rule or otherwise, or an expansion of healthcare providers eligible for 340B drug pricing, would likely have a negative impact on our net sales from KRYSTEXXA.

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

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

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

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

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

~~In January 2017,~~There remain judicial and Congressional challenges to certain aspects of the ~~United States House of Representatives and Senate passed legislation,~~ACA, as well as recent efforts by the ~~concurrent budget resolution for fiscal year 2017, which initiates actions that would~~Trump administration to repeal or replace certain aspects of the ACA. ~~Further, on~~Since January ~~20,~~ 2017, President Trump has signed antwo Executive ~~Order directing federal agencies with authorities~~Orders and ~~responsibilities under the ACA,~~other directives designed to ~~waive, defer, grant exemptions from, or~~ delay the implementation of ~~any provision~~certain provisions of the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the ACA’s individual mandate to carry health insurance, and eliminating the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that ~~would impose~~is owed by pharmaceutical manufacturers who participate in Medicare Part D. In particular, the Tax Act included a ~~fiscal~~provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or ~~regulatory burden~~part of a year that is commonly referred to as the “individual mandate”. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on ~~states, individuals, healthcare providers,~~high-cost employer-sponsored health ~~insurers, or manufacturers of pharmaceuticals or~~coverage and medical ~~devices. In May 2017, following~~device tax and, effective January 1, 2021, also eliminates the ~~passage~~health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the ~~budget resolution for fiscal year 2017,~~Tax Act. Additionally, on December 18, 2019, the U.S. ~~House~~Court of ~~Representatives passed legislation known as~~Appeals for the ~~American Health Care Act, which, if enacted, would have amended~~5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and ~~repealed significant portions of~~remanded the ~~ACA. The U.S. Senate considered but did not adopt other legislation~~case back to ~~amend and/or replace elements~~the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and ~~authority~~has allotted one hour for oral arguments, which are expected to ~~act under~~occur in the ~~fiscal year 2017 budget resolution expired on September 30, 2017. However, on October 12, 2017, President Trump signed another Executive Order directing certain federal agencies~~fall. It is unclear how such litigation and other efforts to ~~propose regulations or guidelines to permit small businesses to form association health plans, expand the availability of short-term, limited duration insurance,~~repeal and expand the use of health reimbursement arrangements, which may circumvent some of the requirements for health insurance mandated by the ACA. In addition, citing legal guidance from the U.S. Department of Justice and the HHS, the Trump administration has concluded that cost-sharing reduction, or CSR, payments to insurance companies required underreplace the ACA ~~have not received necessary appropriations from Congress and announced that it~~ will discontinue these payments immediately until such appropriations are made. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. We continue to evaluate the effect thatimpact the ACA and ~~its possible repeal and replacement has on~~ our business.

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

In addition, drug pricing by pharmaceutical companies has ~~recently~~ come under increased scrutiny. Specifically, there have been several recent state and U.S. Congressional inquiries, ~~and~~ proposed federal and state legislation and state laws enacted designed to, among other things, bring more transparency to drug pricing by requiring drug companies to notify insurers and government regulators of price increases and provide an explanation of the reasons for the increase, reduce the out-of-pocket cost of prescription drugs, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies. ~~Legislation was recently~~This scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. For example, legislation signed into law in 2017 in California ~~that~~ requires drug manufactures to provide advance notice and explanation to state regulators, health plans and insurers and PBMs for price increases of more than 16% over two years. ~~Moreover, President~~At the federal level, the President’s budget proposal for the fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. These principles build upon the Trump administration’s previously released “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs”, or Blueprint. The Blueprint contained several potential regulatory actions and legislative recommendations aimed at lowering prescription drug prices including measures to promote innovation and competition for biologics, changes to Medicare Part D to give plan sponsors more leverage when negotiating prices with manufacturers and updating the Medicare drug-pricing dashboard to make price increases and generic competition more transparent. HHS has ~~discussed~~solicited feedback on some of these measures and, at the ~~need~~same, has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for ~~federal legislation, regulation or Executive Order~~Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. In addition, certain governmental initiatives, if enacted by Congress and HHS, could lead to ~~regulate~~changes to Medicare Parts B and D. Further, the ~~prices~~Bipartisan Budget Act of ~~medicines.~~2018, among other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. The majority of our medicines are purchased by private payers, and much of the focus of pending legislation is on government program reimbursement. ~~However, we cannot know what form any such~~In December 2019, the Further Consolidated Appropriations Act was signed into law which included the Creating and Restoring Equal Access to Equivalent Samples Act, or CREATES Act. The CREATES Act allows generic drug manufacturers to bring suit against a brand name manufacturer to compel the provision of brand samples if the generic manufacturer has made a request for samples and the brand manufacturer fails to deliver sufficient quantities of the sample on commercially reasonable, market-based terms within 31 days of receipt of the request. Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Additionally, it is possible that additional governmental action ~~may take,~~is taken to address the likelihood it would be executed, enacted, effectuated or implemented or the market’s perception of how such legislation would affect us. Any reduction in reimbursement from government programs may result in a similar reduction in payments from private payers.COVID-19 pandemic. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our current medicines and/or those for which we may receive regulatory approval in the future.

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

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

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

There has also been a trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The ACA, among other things, imposed reporting requirements on drug manufacturers for payments made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. In November 2019, HHS published a final 2020 Physician Fee Schedule rule which for calendar year 2021, expands the definition of “covered recipients” for which reporting of payments and transfers is required to be submitted beginning in 2022, to include physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives. Failure to submit required information may result in significant civil monetary penalties.

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

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

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

Undesirable side effects caused by any medicine candidate that we develop could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, or cause us to evaluate the future of our development programs. With respect to KRYSTEXXA, the most commonly reported serious adverse reactions in the pivotal trial were gout flares, infusion reactions, nausea, contusion or ecchymosis, nasopharyngitis, constipation, chest pain, anaphylaxis, exacerbation of pre-existing congestive heart failure and vomiting. With respect to RAVICTI, the most common side effects are diarrhea, nausea, decreased appetite, gas, vomiting, high blood levels of ammonia, headache, tiredness and dizziness. The most common adverse events reported in a Phase 2 clinical trial of PENNSAID 2% were application site reactions, such as dryness, exfoliation, erythema, pruritus, pain, induration, rash and scabbing. With respect to PROCYSBI, the most common side effects include vomiting, nausea, abdominal pain, breath odor, diarrhea, skin odor, fatigue, rash and headache. In our two Phase 3 clinical trials with DUEXIS, the most commonly reported treatment-emergent adverse events were nausea, dyspepsia, diarrhea, constipation and upper respiratory tract infection. In Phase 3 endoscopic registration clinical trials with VIMOVO, the most commonly reported treatment-emergent adverse events were erosive gastritis, dyspepsia, gastritis, diarrhea, gastric ulcer, upper abdominal pain, nausea and upper respiratory tract infection. The most common side effects observed in pivotal trials for ACTIMMUNE were “flu-like” or constitutional symptoms such as fever, headache, chills, myalgia and fatigue. The most commonly reported treatment-emergent adverse events in the Phase 3 clinical trials with ~~RAYOS/LODOTRA~~RAYOS included flare in rheumatoid arthritis related symptoms, abdominal pain, nasopharyngitis, headache, flushing, upper respiratory tract infection, back pain and weight gain. ~~The most common adverse events reported in a~~In our Phase 23 clinical trial evaluating TEPEZZA for the treatment of PENNSAID 2% were application site reactions, such as dryness, exfoliation, erythema, pruritus, pain, induration, rash and scabbing. With respect to BUPHENYL, the most common side effects are change in the frequency of breathing, lack of or irregular menstruation, lower back, side, or stomach pain, mood or mental changes, muscle pain or twitching, nausea or vomiting, nervousness or restlessness, swelling of the feet or lower legs, unpleasant taste and unusual tiredness or weakness. With respect to RAVICTI, the most common side effects are diarrhea, nausea, decreased appetite, gas, vomiting, high blood levels of ammonia, headache, tiredness and dizziness. With respect to KRYSTEXXA,active TED, the most commonly reported ~~serious~~treatment-emergent adverse ~~reactions in the pivotal trial~~events were ~~gout flares, infusion reactions,~~muscle spasms, nausea, ~~contusion or ecchymosis, nasopharyngitis, constipation, chest pain, anaphylaxis, exacerbation of pre-existing congestive heart failure~~alopecia, diarrhea, fatigue, hyperglycemia, hearing impairment, dysgeusia, headache and vomiting. With respect to MIGERGOT, the most commonly reported adverse reactions are ischemia, cyanosis, absence of pulse, cold extremities, gangrene, precordial distress and pain, electrocardiogram change, muscle pain, nausea and vomiting, rectal or anal ulcer, parathesias, numbness weakness, vertigo, localized edemas and itching. With respect to PROCYSBI, the most common side effects include vomiting, nausea, abdominal pain, breath odor, diarrhea, skin odor, fatigue, rash and headache. With respect to QUINSAIR, the most common side effects include itching, wheezing, hives, rash, swelling, pale skin color, fast heartbeat and faintness.dry skin.

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

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

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

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

We have agreements with third-party contract research organizations, or CROs, to conduct our clinical programs, including those required for post-marketing commitments, and we expect to continue to rely on CROs for the completion of on-going and planned clinical trials. We may also have the need to enter into other such agreements in the future if we were to develop other medicine candidates or conduct clinical trials in additional indications for our existing medicines. In connection with the investigator-initiated study to evaluate ACTIMMUNE in combination with PD-1/PD-L1 inhibitors in various forms of cancer including advanced urothelial carcinoma (bladder cancer) and renal cell carcinoma, we are collaborating with Fox Chase Cancer Center. In connection with our ongoing study to evaluate RAYOS/LODOTRA on the fatigue experienced by SLE patients, we are collaborating with the ALR. We also rely heavily on these parties for the execution of our clinical studies and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol. We, our CROs and our academic research organizations are required to comply with current GCP or ICH regulations. The FDA enforces these GCP or ICH regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs or collaborators fail to comply with applicable GCP or ICH regulations, the data generated in our clinical trials may be deemed unreliable and our submission of marketing applications may be delayed or the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot assure ~~you~~ that, upon inspection, the FDA will determine that any of our clinical trials comply or complied with GCP or ICH regulations. In addition, our clinical trials must be conducted with medicine produced under cGMP regulations, and may require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if any of our CROs or collaborators violates federal or state fraud and abuse or false claims laws and regulations or ~~healthcare~~ privacy and security laws. We must also obtain certain third-party institutional review board, or IRB, and ethics committee approvals in order to conduct our clinical trials. Delays by IRBs and ethics committees in providing such approvals may delay our clinical trials.

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

Switching or adding additional CROs or collaborators can involve substantial cost and require extensive management time and focus. In addition, there is a natural transition period when a new CRO or collaborator commences work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs and collaborators, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition or prospects. In particular, the ability of our CROs to conduct certain of their operations, including monitoring of clinical sites, has been limited by the COVID-19 pandemic, and to the extent that our CROs are unable to fulfil their contractual obligations as a result of the COVID-19 pandemic or government orders in response to the pandemic, we may have limited or no recourse under the terms of our contractual agreements with our CROs.

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

Clinical testing is expensive and can take many years to complete, and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of ~~preclinical~~pre-clinical studies and early clinical trials of potential medicine candidates may not be predictive of the results of later-stage clinical trials. Medicine candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through ~~preclinical~~pre-clinical studies and initial clinical testing. For example, ~~Raptor announced~~ in September 2015, based on information then available, that it would not advance its program for the treatment of pediatric NASH with PROCYSBI after a Phase 2b trial failed achieve its primary endpoints. Also, on December 8, 2016, we announced that the Phase 3 trial, Safety, Tolerability and Efficacy of ACTIMMUNE Dose Escalation in Friedreich’s ~~Ataxia study~~ataxia, evaluating ACTIMMUNEfor the treatment of Friedreich’s ataxia ~~or FA,~~ did not meet its primary ~~endpoint of a statistically significant change from baseline~~endpoint. Additionally, we discontinued our ACTIMMUNE investigator-initiated trials in the modified Friedreich’s Ataxia Rating Scale at twenty-six weeks versus treatment with placebo. In addition, the secondary endpoints did not meet statistical significance. We, in conjunction with the independent Data Safety Monitoring Board, the principal investigatoroncology to focus on our strategic pipeline where we see more promise and the Friedreich’s Ataxia Research Alliance Collaborative Clinical Research Network in FA, determined that, based on the trial results, the STEADFAST program would be discontinued, including the twenty-six week extension study and the long-term ~~safety study.~~intellectual property.

~~With respect to the investigator-initiated study to evaluate ACTIMMUNE in combination with OPDIVO~~^® ~~(nivolumab) in advanced solid tumors and the Phase 3 pivotal clinical trial of teprotumumab in~~ ~~thyroid eye disease that we commenced in the fourth quarter of 2017,~~ and to the extent that we are required to conduct additional clinical development of any of our existing or later acquired medicines or we conduct clinical development of earlier stage medicine candidates or for other additional indications for RAYOS/LODOTRA, weWe may experience delays in ~~these~~ clinical trials or investigator-initiated studies. We do not know whether any additional clinical trials will be initiated in the future, begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the medicine candidate being studied in relation to other available therapies, including any new drugs or biologics that may be approved for the indications we are investigating. ~~Furthermore, we rely and expect to rely on CROs and clinical trial sites to ensure the proper and timely conduct~~In addition, if patients drop out of our ~~future clinical~~ trials, ~~and while we have and intend~~miss scheduled doses or follow-up visits or otherwise fail to ~~have agreements governing their committed activities, we will have limited influence over their actual performance.~~follow trial protocols, or if our trials are otherwise disputed due to COVID-19 or actions taken to slow its spread, the integrity of data from our trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.

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

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

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

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

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics or health pandemics, such as the current COVID-19 pandemic, and other natural or man-made disasters or business interruptions. While we carry insurance for certain of these events and have implemented disaster management plans and contingencies, the occurrence of any of these business interruptions could seriously harm our business and financial condition and increase our costs and expenses. We conduct significant management operations at both our global headquarters located in Dublin, Ireland and our U.S. office located in Lake Forest, Illinois. If our Dublin or Lake Forest offices were affected by a natural or man-made disaster or other business interruption, our ability to manage our domestic and foreign operations could be impaired, which could materially and adversely affect our results of operations and financial condition. We currently rely, and intend to rely in the future, on third-party manufacturers and suppliers to produce our medicines and third-party logistics partners to ship our medicines. Our ability to obtain commercial supplies of our medicines could be disrupted and our results of operations and financial condition could be materially and adversely affected if the operations of these third-party suppliers or logistics partners were affected by a man-made or natural disaster or other business interruption. The ultimate impact of such events on us, our significant suppliers and our general infrastructure is unknown.

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

We are dependent upon our own or third-party information technology systems, infrastructure and data, including mobile technologies, to operate our business. The multitude and complexity of our computer systems may make them vulnerable to service interruption or destruction, disruption of data integrity, malicious intrusion, or random ~~attack.~~attacks. Likewise, data privacy or security incidents or breaches by employees or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, customers or other business partners may be exposed to unauthorized persons or to the public. ~~Cyber-attacks~~Cyberattacks are increasing in their frequency, sophistication and intensity. ~~Cyber-attacks~~Cyberattacks could include the deployment of harmful malware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our business partners face similar risks and any security breach of their systems could adversely affect our security posture. A security breach or privacy violation that leads to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to litigation or other liability under laws and regulations that protect personal data, any of which could disrupt our business and/or result in increased costs or loss of revenue. Moreover, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information, trade secrets or other intellectual property.

Despite significant efforts to create security barriers to the above described threats, it is impossible for us to entirely mitigate these risks. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to compromise our systems because they change frequently and are generally not detected until after an incident has occurred. In addition, a cybersecurity event could result in significant increases in costs, including costs for remediating the effects of such an event, fines imposed by regulators, lost revenues due to decrease in customer trust and network downtime, increases in insurance premiums due to cybersecurity incidents and damages to our reputation because of any such incident. While we have invested, and continue to invest, in the protection of our data and information technology infrastructure, there can be no assurance that our efforts will prevent service interruptions, or identify vulnerabilities or breaches in our systems, that could adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in financial, legal, business or reputational harm to us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, ~~cyber-attacks~~cyberattacks and other related breaches.

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

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

Additionally, the California Consumer Privacy Act, or CCPA, went into effect on January 1, 2020. The CCPA has been dubbed the first “GDPR-like” law in the United States since it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to provide new disclosures to California consumers (as that word is broadly defined in the CCPA), provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches. Despite amendments and multiple revisions of draft regulations, it remains unclear how the CCPA will be interpreted, but as currently written, it will likely impact our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data and protected health information. As we expand our operations and trials (both preclinical or clinical), the CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Other states are beginning to pass similar laws.

Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations. Furthermore, the laws are not consistent, and compliance in the event of a widespread data breach is costly.

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

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

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of medicines we develop. We currently carry product liability insurance covering our clinical studies and commercial medicine sales in the amount of ~~$125~~$125.0 million in the aggregate. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. If we determine that it is prudent to increase our product liability coverage due to the on-going commercialization of our current medicines in the United States, and/or the potential commercial launches of any of our medicines in additional markets or for additional indications, we may be unable to obtain such increased coverage on acceptable terms or at all. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

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

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

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

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

~~We have a limited operating history and even less history operating as a combined organization following the acquisitions of Vidara, Hyperion, Crealta and Raptor.~~ We have financed our operations primarily through equity and debt financings and have incurred significant operating ~~losses in the past.~~losses. We ~~had~~recorded an operating loss of ~~$316.8~~$16.5 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, and an operating ~~loss~~income of ~~$147.2~~$126.6 million and $37.9 million for the ~~year~~years ended December 31, ~~2016,~~ ~~operating~~2019 and 2018, respectively. We recorded a net loss of $13.6 million for the three months ended March 31, 2020, a net income of ~~$55.4 million for~~ ~~the~~ ~~year ended December 31, 2015 and an operating loss of $8.5~~$573.0 million for the year ended December 31, ~~2014. We had~~2019, and a net loss of ~~$364.1 million for the nine months ended September 30, 2017, a net loss of $166.8~~$38.4 million for the year ended December 31, ~~2016, net income of $39.5 million for the~~ ~~year ended~~ ~~December 31, 2015 and a net loss of $263.6 million for the year ended December 31, 2014.~~2018. As of ~~September 30, 2017,~~March 31, 2020, we had an accumulated deficit of ~~$1,205.9~~$619.3 million. Our prior losses have resulted principally from costs incurred in our development activities for our medicines and medicine candidates, commercialization activities related to our medicines, costs associated with our acquisition transactions and costs associated with derivative liability accounting. Our prior losses, combined with possible future losses, have had and will continue to have an adverse effect on our shareholders’ ~~deficit~~equity and working capital. While we anticipate that we will generate operating profits in the future, whether we can ~~sustain~~accomplish this will depend on the revenues we generate from the sale of our medicines being sufficient to cover our operating expenses.

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

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

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

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

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

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

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

We cannot be certain that additional funding will be available on acceptable terms, or at all. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any additional debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our medicines or medicine candidates or one or more of our other research and development initiatives, or delay, cut back or abandon our plans to grow the business through ~~acquisition.~~acquisitions. We also could be required to:

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

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

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

As of ~~September 30, 2017,~~March 31, 2020, we had ~~$1,897.6~~$1,358.4 million book value, or ~~$2,022.9~~$1,418.0 million aggregate principal amount of indebtedness, including ~~$847.9~~ $418.0 million in secured indebtedness. In March 2017, we borrowed $850.0 million in aggregate principal amount of secured loans pursuant to our credit agreement. In connection with the acquisition of Hyperion, we issued $475.0 million aggregate principal amou ~~nt of 6.625% Senior Notes due 2023, or the 2023 Senior Notes,~~ ~~in April 2015. In connection with the acquisition of Raptor, we issued $300.0 million aggregate principal amount of 8.75% Senior Notes due 2024, or the 2024 Senior Notes, in October 2016. In Mar~~ch 2015, we issued $400.0 million aggregate principal amount of 2.50% Exchangeable Senior Notes due 2022, or the Exchangeable Senior Notes. On October 23, 2017, we borrowed approximately $845.8 million aggregate principal amount of loans under our credit agreement pursuant to an amendment to our credit agreement to refinance the then outstanding senior secured term loans incurred in March 2017 under our credit agreement, which totaled approximately $845.8 million. Accordingly, we have a significant amount of debt outstanding on a consolidated basis.

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

The credit agreement and the ~~indentures~~indenture governing ~~the 2024~~our 5.500% Senior Notes ~~and the 2023~~due 2027, or 2027 Senior Notes, impose, and the terms of any future indebtedness may impose, various covenants that limit our ability and/or the ability of our restricted subsidiaries’ (as designated under such agreements) to, among other things, pay dividends or distributions, repurchase equity, prepay junior debt and make certain investments, incur additional debt and issue certain preferred stock, incur liens on assets, engage in certain asset sales, consolidate with or merge or sell all or substantially all of our assets, enter into transactions with affiliates, designate subsidiaries as unrestricted subsidiaries, and allow to exist certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.

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

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.*

Our ability to make scheduled payments under or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business and other factors beyond our control. For example, we expect that the COVID-19 pandemic and actions taken to slow its spread will continue to have a negative impact on net sales of our medicines, which will in turn negatively impact our cash flows. Our ability to generate cash flow to meet our payment obligations under our debt may also depend on the successful ~~implementation~~implementation of our operating and growth strategies. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We cannot assure ~~you~~ that we will maintain a level of cash flows from operating activities sufficient to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or business operations, seek additional capital or restructure or refinance our indebtedness. We cannot ensure that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of existing or future debt agreements, including the ~~indentures~~indenture that ~~govern~~governs the ~~2024 Senior Notes and the 2023~~2027 Senior Notes and the credit agreement. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness.

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

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

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

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

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percent change (by value) in its equity ownership over a three-year period), the corporation’s ability to use pre-change net operating loss carryforwards and other pre-change tax attributes to offset post-change income may be limited. We continue to carry forward our annual limitation resulting from an ownership change date of August 2, 2012. The limitation on pre-change net operating losses incurred prior to the ~~August~~August 2, 2012 change date is approximately ~~$14.7 million for 2017 and~~ $7.7 million for ~~2018~~2020 through 2028. ~~During the third quarter of 2016,~~In addition, we ~~also~~ recognized ~~additional net operating losses and federal and state tax credits as a result of our acquisition of Raptor on October 25, 2016 in the amount of approximately $97.3~~$32.2 million of federal net operating losses, ~~state operating losses of approximately $177.5 million and approximately $22.4 million of federal and state tax credits. We continue to carry forward~~ the annual limitation related to Hyperion of $50 million resulting from the last ownership change date in 2014. In addition, in the second quarter of 2017, we recognized $37.4 million of federal net operating losses, $43.2$2.2 million of state net operating losses and ~~$5.8~~$9.5 million of federal tax credits following our acquisition of River Vision Development Corp. These acquired federal net operating losses and tax credits are subject to an annual limitation of ~~$8.1 million for the 2017 year and $12.5 million from 2018 through 2021.~~$2.6 million. The net operating loss carryforward ~~limitation is~~and tax credit carryforward limitations are cumulative such that any use of the carryforwards below the limitations in one year will result in a corresponding increase in the limitations for the subsequent tax year. Under the Tax Act, as modified by the CARES Act, U.S. federal net operating losses incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal net operating losses generated in taxable years beginning after December 31, 2017, to the extent such net operating losses are carried forward into taxable years beginning after December 31, 2020, is limited to 80 percent of the then current year’s taxable income. Under the CARES Act, U.S. federal net operating losses arising in a tax year beginning after December 31, 2017, and before January 1, 2021, can be carried back five years. It remains uncertain if and to what extent various U.S. states will conform to the Tax Act and the CARES Act.

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

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

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

From time to time, including recently as a result of the COVID-19 pandemic and actions taken to slow its spread, global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment and continued unpredictable and unstable market conditions. If the equity and credit markets continue to deteriorate, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share price and could require us to delay or abandon commercialization or development plans. There is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic down-turn, which could directly affect our ability to attain our operating goals on schedule and on budget.

The ~~U.K.’s~~United Kingdom’s referendum to leave the EU and the United Kingdom’s exit from the EU on January 31, 2020, or “Brexit,” has caused and may continue to cause disruptions to capital and currency markets worldwide. The full impact of ~~the~~ Brexit, ~~decision,~~ however, remains uncertain. ~~A process of negotiation~~Pursuant to the formal withdrawal arrangements agreed to between the United Kingdom and the EU, the United Kingdom will ~~determine~~be subject to a transition period, or Transition Period, until December 31, 2020, during which EU rules will continue to apply. Negotiations between the ~~future terms~~United Kingdom and the EU are expected to continue in relation to the customs and trading relationship between the United Kingdom and the EU following the expiry of the ~~U.K.’s relationship with the EU.~~Transition Period. During this period of negotiation and afterwards, our results of operations and access to capital may be negatively affected by interest rate, exchange rate and other market and economic volatility, as well as ~~regulatory and~~ political uncertainty. ~~The tax consequences of the U.K.’s withdrawal from the EU are uncertain as well.~~ Brexit may also have a detrimental effect on our customers, distributors and suppliers, which would, in turn, adversely affect our revenues and financial condition.

At ~~September 30, 2017,~~March 31, 2020, we had ~~$625.0~~$754.6 million of cash and cash equivalents consisting of cash and money market funds. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since ~~September 30, 2017,~~March 31, 2020, no assurance can be given that deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives. Dislocations in the credit market may adversely impact the value and/or liquidity of marketable securities owned by us.

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

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

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

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

Covenants under the ~~indentures~~indenture governing our ~~2024 Senior Notes and 2023~~2027 Senior Notes and our c~~redit~~credit agreement may restrict our business and operations in many ways, and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected.

The ~~indentures~~indenture governing the ~~2024 Senior Notes and the 2023~~2027 Senior Notes and the credit agreement impose various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

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

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

Our failure to comply with any of the covenants could result in a default under the credit agreement or the ~~indentures~~indenture governing the ~~2024 Senior Notes or the 2023~~2027 Senior Notes, which could permit the administrative agent or the trustee, as applicable, or permit the lenders or the holders of the ~~2024 Senior Notes or the 2023~~2027 Senior Notes to cause the administrative agent or the trustee, as applicable, to declare all or part of any outstanding senior secured term loans ~~the 2023 Senior Notes~~or revolving loans, or the ~~2024~~2027 Senior Notes to be immediately due and payable or to exercise any remedies provided to the administrative agent or the trustee, including, in the case of the credit agreement proceeding against the collateral granted to secure our obligations under the credit agreement. An event of default under the credit agreement or the ~~indentures~~indenture governing the ~~2024 Senior Notes or the 2023~~2027 Senior Notes could also lead to an event of default under the terms of the other agreements and the indenture governing our 2.50% Exchangeable Senior Notes due 2022, or Exchangeable Senior Notes. Any such event of default or any exercise of rights and remedies by our creditors could seriously harm our business.

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

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

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

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

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

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

Patent litigation is currently pending in the United States District Court for the District of New Jersey and the Court of Appeals for the Federal Circuit against ~~several companies intending to market~~Dr. Reddy’s for marketing a generic version of VIMOVO before the expiration of certain of our patents listed in the Orange Book. These cases are collectively known as the VIMOVO cases, and involve the following sets of defendants: (i) Dr. Reddy’s; (ii) Lupin; and (iii) Mylan. Patent litigation against a fourth generic company, Actavis, is currently pending in the Court of Appeals for the Federal Circuit. The cases arise from Paragraph IV Patent Certification notice letters from ~~each of~~ Dr. Reddy’s, ~~Lupin, Mylan and Actavis~~ advising ~~each~~that it had filed an ANDA with the FDA seeking approval to market generic versions of VIMOVO before the expiration of the patents-in-suit.

On ~~January 12, 2017, a six-day bench trial for~~July 30, 2019, the cases asserting U.S. Patent Nos. 8,557,285 and 6,926,907, or Case I, commenced against defendants Dr. Reddy’s and Mylan before Honorable Judge Mary Cooper in the District of New Jersey. Defendant Lupin formerly entered into a stay pending the entry of judgment in Case I. On June 26, 2017, the court issued its opinion upholding the validity of the ‘285 and ‘907 patents and finding that Dr. Reddy’s, Mylan’s and Lupin’s proposed generic naproxen/esomeprazole magnesium products would all infringe at least one of the two patents. The court entered the final judgment on July 21, 2017. Dr. Reddy’s, Mylan and Lupin have appealed the District Court’s judgment to theFederal Circuit Court of Appeals denied our request for a rehearing of the ~~Federal Circuit.~~

Court’s invalidity ruling against the 6,926,907 and 8,557,285 patents for VIMOVO coordinated-release tablets. As a result, the District Court entered judgment in September 2019 invalidating the ‘907 and ‘285 patents, which ended any restriction against the FDA from granting final approval to Dr. Reddy’s generic version of VIMOVO. On ~~January 19, 2017,~~February 18, 2020, the ~~court entered a scheduling order~~FDA granted final approval for Dr. Reddy’s generic version of VIMOVO. On February 27, 2020, Dr. Reddy’s launched its generic version of VIMOVO in the ~~cases asserting U.S.~~United States. Patent Nos. 8,858,996, 8,865,190, 8,852,636, 9,161,920, and 9,198,888, or Case II, and the cases asserting U.S. Patent Nos. 8,945,621, 9,220,698 and 9,345,695, the case asserting U.S. Patent No. 9,393,208 against Lupin and Mylan, and the case asserting U.S. Patent Nos. 8,945,621, 9,220,698 and 9,345,695litigation against Dr. Reddy’s ~~or collectively Case III, which was subsequently updated. The court’s scheduling order requires,~~ ~~inter alia, filing~~for infringement continues with respect to certain patents in the New Jersey District Court. We have repositioned our promotional efforts previously made on VIMOVO to the other inflammation segment medicines and ~~serving~~expect that our VIMOVO net sales will decrease in future periods. For a more detailed description of the opening claim construction submissions by May 26, 2017. The court has not issued a claim construction order in Case II. A trial date for Cases II and III has not yet been set. On December 20, 2016, Mylan filed a motion to dismiss our first amended complaint for patent infringement in Case III. On April 28, 2017, Dr. Reddy’s filed a motion to dismiss for lack of jurisdiction in Case II. On August 18, 2017, the District Court granted Dr. Reddy’s and Mylan’s motions to dismiss our claims relating to the ‘621 patent.

On August 19, 2015, Lupin filed Petitions for inter partes review, or IPR, of U.S. Patent No. 8,858,996, or the ’996 patent, and U.S. Patent Nos. 8,852,636 and 8,865,190, or the ’190 patent, all patents inVIMOVO litigation, in the above referenced VIMOVO cases. On March 1, 2016, the Patent Trial and Appeal Board, or the PTAB, issued decisions to institute the IPRs for the ‘996 patent and the ’190 patent. On March 1, 2017, the PTAB denied the Petition for IPR for U.S. Patent No. 8,852,636. The PTAB hearings for the ’996 and ’190 patents were both held on November 29, 2016. On February 28, 2017, the PTAB issued final written decisions on the IPRssee Note 16, Legal Proceedings, of the ~~‘996 and ‘190 patents, upholding the validity~~Notes to Unaudited Condensed Consolidated Financial Statements, included in Item 1 of ~~both patents.~~this Quarterly Report on Form 10-Q.

Patent litigation is currently pending in the United States District Court for the District of ~~New Jersey~~Delaware against ~~two companies intending~~Alkem, who intends to market a generic version of ~~PENNSAID 2%~~DUEXIS prior to the expiration of certain of our patents listed in the Orange Book. ~~These cases are collectively known as the PENNSAID 2% cases, and involve the following sets of defendants: (i) Actavis and (ii) Lupin. These cases arise~~This case arises from Paragraph IV Patent Certification notice letters from ~~each of Actavis and Lupin~~Alkem advising ~~each~~it had filed an ANDA with the FDA seeking approval to market a generic version of PENNSAID 2% before the expiration of Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, 8,871,809, 9,066,913, 9,101,591, 9,132,110, 9,168,304, 9,168,305, 9,220,784, 9,339,551 and 9,339,552.

~~On August 17, 2016, the district court issued a~~ ~~Markman~~ ~~opinion holding certain of the asserted claims of U.S. Patents 8,252,838, 8,563,613, 9,066,913 and 9,101,591 invalid as indefinite. On August 30, 2016,~~ ~~we filed a motion for reconsideration of the court’s August 17, 2016, opinion. On January 6, 2017, the court denied~~ our motion for reconsideration. On March 16, 2017, the court granted Actavis’ motion for summary judgment of non-infringement of the asserted claims of U.S. Patents 8,546,450, 8,217,078 and 9,132,110. In view of the ~~Markman~~ and summary judgment decisions, a bench trial was held on March 21-30, 2017, regarding claim 12 of U.S. Patent 9,066,913. On May 14, 2017, the court issued its opinion upholding the validity of claim ~~12 of the ‘913 patent, which Actavis had previously admitted its proposed generic diclofenac sodium topical solution product would infringe. Actavis filed its Notice of Appeal on June 16, 2017.~~ We ~~filed~~ our Notice of Appeal of the district court’s rulings on certain claims of the ‘450, ‘078, ‘838, ‘613, ‘591 ‘304, ‘305, ‘784, ‘913, and ‘110 patents on June 9, 2017. Our opening brief was filed on August 14, 2017. Actavis’s opening brief, challenging the district court’s judgment on the ‘913 patent, was filed on October 10, 2017. Our brief defending the judgment on the ‘913 patent is due on November 20, 2017.

On October 27, 2015, we filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of U.S. Patents 9,168,304 and 9,168,305. On February 5, 2016, we filed suit in the United States District Court for the District of New Jersey against Actavis for patent infringement of U.S. Patent No. 9,220,784. All three patents, U.S. Patent Nos. 9,168,304, 9,168,305, and 9,220,784, are listed in the Orange Book and have claims that cover PENNSAID 2%. All claims from U.S. Patents 9,168,304, 9,168,305 and 9,220,784 asserted against Actavis were held invalid as indefinite by way of the court’s August 17, 2016, ~~Markman~~ ~~opinion and the court’s January 6, 2017, order denying our motion for reconsideration. The court’s rulings are currently on appeal to the Federal Circuit.~~

We received from Actavis a Paragraph IV Patent Certification Notice Letter dated September 27, 2016, against Orange Book listed U.S. Patent 9,415,029, advising that Actavis had filed an ANDA with the FDA for a generic version of PENNSAID 2%.

On March 18, 2015, we received a Paragraph IV Patent Certification against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, and 8,871,809 from Lupin Limited advising that Lupin Limited had filed an ANDA with the FDA for generic version of PENNSAID 2%. On April 30, 2015, we filed suit in the United States District Court for the District of New Jersey against Lupin Limited and Lupin Pharmaceuticals Inc., collectively referred to as Lupin, seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that Lupin has infringed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,871,809 by filing an ANDA seeking approval from the FDA to market generic versions of PENNSAID 2% prior to the expiration of certain of our patents listed in the Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Lupin’s ANDA for 30 months or until an earlier district court decision which finds that the subject patents are not infringed or are invalid.

On June 30, 2015, we filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patent 9,066,913. On August 11, 2015, we filed an amended complaint in the United States District Court for the District of New Jersey against Lupin that added U.S. Patent 9,101,591 to the litigation pending on U.S. Patent 9,066,913. On September 17, 2015, we filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patent 9,132,110. All three patents, U.S. Patents 9,066,913, 9,101,591, and 9,132,110, are listed in the Orange Book and have claims that cover PENNSAID 2%.

On October 27, 2015, we filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patents 9,168,304 and 9,168,305. On February 5, 2016, we filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patent 9,220,784. On August 18, 2016, we filed suit in the United States District Court for the District of New Jersey against Lupin for patent infringement of U.S. Patents 9,339,551, 9,339,552, 9,370,501 and 9,375,412. All seven patents, U.S. Patents 9,168,304, 9,168,305, 9,220,784, 9,339,551, 9,339,552, 9,370,501 and 9,375,412, are listed in the Orange Book and have claims that cover PENNSAID 2%. All of the infringement actions brought against Lupin remain pending, with certain claims of the ’809, ’913, ’450, ’110, ’551, ’552, ’412 and ’501 patents being asserted. The decisions reached by the court in the related Actavis actions regarding the ’809, ’450, ’110, ’551, ’552, ’412 and ’501 patents as described above, are expected to apply to the same claims asserted against Lupin in these actions. The court has not yet set a trial date for the Lupin actions.

We have received from Apotex Paragraph IV Patent Certification Notice Letters dated April 1, 2016, June 30, 2016, September 21, 2016, April 20, 2017 and April 27, 2017 against Orange Book listed U.S. Patents 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, 8,871,809, 9,066,913, 9,101,591, 9,132,110, 9,168,304, 9,168,305, 9,220,784, 9,339,551, 9,339,552 9,415,029, 9,539,335 and 9,370,501 advising that Apotex had filed an ANDA with the FDA for a generic version of PENNSAID 2%.

Patent litigation is currently pending in the United States District Court for the Eastern District of Texas against Par Pharmaceutical and in the United States District Court for the District of New Jersey against Lupin and against Par Pharmaceutical, who are each intending to market generic versions of RAVICTI prior to the expiration of certain of our patents listed in the Orange Book. These cases are collectively known as the RAVICTI cases, and arise from Paragraph IV Patent Certification notice letters from each of Par Pharmaceutical and Lupin advising each had filed an ANDA with the FDA seeking approval to market a generic version of RAVICTIDUEXIS before the expiration of the patents-in-suit.

~~On April 29, 2015, Par Pharmaceutical filed Petitions for IPR of U.S. Patents 8,404,215 and 8,642,012, two~~ For a more detailed description of the ~~patents involved in the above mentioned RAVICTI cases. On November 4, 2015, the PTAB issued decisions instituting such IPRs. On September 29,~~ ~~2016, the PTAB~~ ~~found~~ ~~all~~DUEXIS litigation, see Note 16, Legal Proceedings, of the ~~claims~~ Notes to Unaudited Condensed Consolidated Financial Statements, included in U.S. Patent 8,404,215 to be unpatentable. We did not appeal the PTAB’s final written decision with respect to U.S. Patent 8,404,215. On November 3, 2016, the PTAB issued a final written decision holding allItem 1 of ~~the~~ ~~claims of U.S.~~ P~~atent~~ ~~8,642,012 patentable.~~ ~~On December 29, 2016, Par~~ ~~Pharmaceutical~~ ~~filed a notice of appeal with the Federal Circuit to appeal the final written decision of the PTAB concerning the patentability of~~ ~~U.S. Patent 8,642,012.~~

On September 4, 2015, we received notice from Lupin of Lupin’s Paragraph IV Patent Certification against the ’215 patent and the ’012 patent, advising that Lupin had filed an ANDA with the FDA for a generic version of RAVICTI. On November 6, 2015, we also received notice of Lupin’s Paragraph IV Patent Certification against the ’559 patent. Lupin has not advised us as to the timing or status of the FDA’s review of its filing. On October 19, 2015 we filed suit in the United States District Court for the District of New Jersey against Lupin seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges that Lupin has infringed the ’215 patent, the ’012 patent and the ’559 patent by filing an ANDA seeking approval from the FDA to market generic versions of RAVICTI prior to the expiration of the patents. The subject patents are listed in the Orange Book. On April 6, 2016, we filed an amended complaint in the United States District Court for the District of New Jersey against Lupin alleging that Lupin has infringed the ’559 patent by filing an ANDA seeking approval from the FDA to market generic versions of RAVICTI prior to expiration of the ’559 patent. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Lupin’s ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. On April 18, 2016, we received notice from Lupin of Lupin’s Paragraph IV Patent Certification against the ’278 patent. On July 6, 2016, we received notice from Lupin of Lupin’s Paragraph IV Patent Certification against the ’966 patent. We filed suit in the United States District Court for the District of New Jersey against Lupinthis Quarterly Report on July 21, 2016, seeking an injunction to prevent the approval of Lupin’s ANDA and/or to prevent Lupin from selling a generic version of RAVICTI. The lawsuit alleges that Lupin has infringed the ’278 patent and the ’966 patent by filing an ANDA seeking approval from the FDA to market generic versions of RAVICTI prior to the expiration of the patents. The subject patents are listed in the Orange Book. The Lupin New Jersey actions have been stayed pending the resolution of the PTAB’s IPR of the ’559 patent.

~~On April 1, 2016, Lupin filed a Petition for IPR of U.S. Patent 9,095,559, a patent currently at issue in the Lupin~~ RAVICTI case. On September 30, 2016, the PTAB issued a decision instituting the IPR. On September 26, 2017, the PTAB issued its final written decision, ruling that the challenged claims of the ‘559 patent are unpatentable. Our Notice of Appeal is due by November 28, 2017. On March 27, 2017, Lupin filed a Petition to request an IPR of the ‘278 patent and a Petition to request an IPR of the ‘966 patent. We filed our response on the ‘966 patent on July 6, 2017. Our preliminary patent owner response for the ‘278 patent was filed on July 24, 2017. On September 28, 2017, the PTAB issued its orders granting Lupin’s petitions to institute an IPR of the ‘278 and the ‘966 patents. The PTAB must issue a final written decision on the IPRs no later than September 28, 2018.

~~On July 13, 2017, Par~~ ~~Pharmaceutical~~ ~~filed Petitions for IPR of the ‘559, ‘278, and ‘966 patents. Our opposition to Par~~ ~~Pharmaceutical’s requested IPRs is due by November 6, 2017.~~

~~On August 8, 2017, we filed suit against Par Pharmaceutical and Lupin in the United States District Court for New Jersey. Par~~ ~~Pharmaceutical~~ ~~and Lupin have answered and counterclaimed. The district court has not yet issued a scheduling order for either action.~~Form 10-Q.

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

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

With respect to RAVICTI, the composition of matter patent we hold would have expired in the United States in February 2015 without term extension. However, Hyperion applied for a term extension for this patent under the Drug Price Competition and Patent Term Restoration Act and received notice that the United States Patent and Trademark Office, or the U.S. PTO, extended the expiration date of the patent to July 28, 2018. We cannot guarantee that pending patent applications related to RAVICTI will result in additional patents or that other existing and future patents related to RAVICTI will be held valid and enforceable or will be sufficient to deter generic competition in the United States. Therefore, it is possible that upon expiration of the RAVICTI composition of matter patent, we would need to rely on forms of regulatory exclusivity, to the extent available, to protect against generic competition.

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

Our ability to obtain patents is highly uncertain because, to date, some legal principles remain unresolved, there has not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the United States and the specific content of patents and patent applications that are necessary to support and interpret patent claims is highly uncertain due to the complex nature of the relevant legal, scientific and factual issues. Changes in either patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. For example, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The U.S. PTO has developed new and untested regulations and procedures to govern the full implementation of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in March 2013. The Leahy-Smith Act has also introduced procedures making it easier for third-parties to challenge issued patents, as well as to intervene in the prosecution of patent applications. Finally, the Leahy-Smith Act contains new statutory provisions that still require the U.S. PTO to issue new regulations for their implementation and it may take the courts years to interpret the provisions of the new statute. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. In addition, the ACA allows applicants seeking approval of biosimilar or interchangeable versions of biological products such as ACTIMMUNE to initiate a process for challenging some or all of the patents covering the innovator biological product used as the reference product. This process is complicated and could result in the limitation or loss of certain patent rights. An inability to obtain, enforce and defend patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition.

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

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

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

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

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

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

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

In connection with our November 2013 acquisition of the U.S. rights to VIMOVO, we (i) received the benefit of a covenant not to sue under AstraZeneca’s patent portfolio with respect to Nexium (which shall automatically become a license under such patent portfolio if and when AstraZeneca reacquires control of such patent portfolio from Merck Sharp & Dohme Corp. and certain of its affiliates), (ii) were assigned AstraZeneca’s amended and restated collaboration and license agreement for the United States with Aralez, under which AstraZeneca has in-licensed exclusive rights under certain of Aralez’s patents with respect to VIMOVO, and (iii) acquired AstraZeneca’s co-ownership rights with Aralez with respect to certain joint patents covering VIMOVO, all for the commercialization of VIMOVO in the United States. If we fail to comply with our obligations under our agreements with AstraZeneca or if we fail to comply with our obligations under our agreements with Aralez, our rights to commercialize VIMOVO in the United States may be adversely affected or terminated by AstraZeneca or Aralez.

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

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

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

We are subject to contractual obligations under our amended and restated license agreement with UCSD, as amended, with respect to PROCYSBI. If one or more of these licenses was terminated, we would have no further right to use or exploit the related intellectual property, which would limit our ability to develop PROCYSBI in other indications, and could impact our ability to continue commercializing PROCYSBI in its approved indications.

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

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

We hold an exclusive, worldwide license from F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or Roche, to patents and know-how for TEPEZZA. We also have exclusive sub-licenses for rights licensed to Roche for TEPEZZA by certain third-party licensors. Roche may have the right to terminate the license upon our breach, if not cured within a specified period of time. Roche may also terminate the license in the event of our bankruptcy or insolvency, or if we challenge the validity of Roche’s patents. If the license is terminated for our breach or based on our challenging the validity of Roche’s patents,then all rights and licenses granted to us by Roche would also terminate, and we may be required to assign and transfer to Roche certain filings and approvals, trademarks, and data in our possession necessary for the development and commercialization of TEPEZZA, and assign clinical trial agreements to the extent permitted. We may also be required to grant Roche an exclusive license under our ~~agreements with Tripex~~patents and ~~PARI related~~know-how for TEPEZZA, and to ~~QUINSAIR. Under the~~manufacture and supply TEPEZZA to Roche for a transitional period. We also have a license of patent rights to TEPEZZA under a license agreement with ~~Tripex, we are required~~Lundquist Institute (formerly known as Los Angeles Biomedical Research Institute at Harbor-UCLA Medical Center), or Lundquist. Lundquist has the right to ~~pursue commercially reasonable efforts to initiate, and subsequently to complete, an additional clinical trial of QUINSAIR in a non-cystic fibrosis patient population~~terminate the license agreement upon our material breach, if not cured within a specified period of time, ~~and an obligation to progress toward submitting an NDA for approval of QUINSAIR~~or in the ~~United States for use in all~~event of our bankruptcy or part of the cystic fibrosis patient population. These obligations are subject to certain exceptions due to, for example, manufacturing delays not under our control, or delays caused by the FDA. If we fail to properly exercise such efforts to initiate and complete an appropriate clinical trial, or fail to submit an NDA for U.S. approval in the cystic fibrosis patient population, during the time periods specified in the agreement, we may be subject to various claims by Tripex and parties affiliated with Tripex. In addition, if we do not spend a minimum amount on QUINSAIR development in each of the three years following our acquisition of Raptor, we may also be obligated to pre-pay a milestone payment related to initiating a clinical trial for QUINSAIR in a non-cystic fibrosis indication. During October 2017, we triggered a milestone payment under this agreement, and we paid Tripex $20.0 million in November 2017. Under the license agreement with PARI, we are required to comply with diligence milestones related to development and commercialization of QUINSAIR in the United States and to spend a specified minimum amount per year on development activities in the United States until submission of the NDA for QUINSAIR in the United States. If we do not comply with these obligations, our licenses to certain intellectual property related to QUINSAIR may become non-exclusive in the United States or could be terminated. We are also subject to contractual obligations under our amended and restated license agreement with U ~~CSD, with respect to PROCYSBI, including obligations to consider engaging in the~~ ~~development of~~ PROCYSBI for the treatment of NASH and related diligence obligations if we undertake such development. Under the amended and restated license agreement with USCD, we also are subject to diligence obligations to identify a third party to undertake development of PROCYSBI for the treatment of Huntington’s disease. To the extent that we fail to perform the diligence obligations under the agreement, UCSD may, with respect to such indication, terminate the license or otherwise cause the license to become non-exclusive.insolvency. If one or more of these licenses ~~was~~is terminated, weit may be impossible for us to continue to commercialize TEPEZZA, which would have ~~no further right to use or exploit the related intellectual property, which would limit~~a material adverse effect on our ~~ability to develop PROCYSBI or QUINSAIR in other indications,~~business, financial condition and ~~could impact our ability to continue commercializing PROCYSBI or QUINSAIR in their approved indications.~~results of operations.

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

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

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

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

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

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

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

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

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

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

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

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

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

We have never declared or paid any cash dividends on our ordinary shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future, including due to limitations that are currently imposed by our credit agreement and the ~~indentures~~indenture governing the ~~2024 Senior Notes and the 2023~~2027 Senior Notes. Any return to shareholders will therefore be limited to the increase, if any, of our ordinary share price.

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

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

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

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

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

If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our ordinary shares in the public market, the trading price of such ordinary shares could decline. In addition, our ordinary shares that are either subject to outstanding options and restricted stock units or reserved for future issuance under our employee benefit plans are or may become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and ~~Rule 144 and Rule 701 under~~ the Securities Act of 1933, as amended, or the Securities Act. If these additional ordinary shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our ordinary shares could decline.

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

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

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

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

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

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

Provisions of our articles of association, and Irish law could delay or prevent a takeover of us by a ~~third-party.~~third party.

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

In addition, several mandatory provisions of Irish law could prevent or delay an acquisition of us. For example, Irish law does not permit shareholders of an Irish public limited company to take action by written consent with less than unanimous consent. We are also subject to various provisions of Irish law relating to mandatory bids, voluntary bids, requirements to make a cash offer and minimum price requirements, as well as substantial acquisition rules and rules requiring the disclosure of interests in our ordinary shares in certain circumstances.

These provisions may discourage potential takeover attempts, discourage bids for our ordinary shares at a premium over the market price or adversely affect the market price of, and the voting and other rights of the holders of, our ordinary shares. These provisions could also discourage proxy contests and make it more difficult for you and our other shareholders to elect directors other than the candidates nominated by our board of directors, and could depress the market price of our ordinary shares.

Any attempts to take us over will be subject to Irish Takeover Rules and subject to review by the Irish Takeover Panel.

We are subject to the Irish Takeover Rules, under which our board of directors will not be permitted to take any action which might frustrate an offer for our ordinary shares once it has received an approach which may lead to an offer or has reason to believe an offer is imminent.

In certain circumstances, the transfer of shares in an Irish incorporated company will be subject to Irish stamp duty, which is a legal obligation of the buyer. This duty is currently charged at the rate of 1.0 percent of the price paid or the market value of the shares acquired, if higher. Because our ordinary shares are traded on a recognized stock exchange in the United States, an exemption from this stamp duty is available to transfers by shareholders who hold ordinary shares beneficially through brokers, which in turn hold those shares through the Depositary Trust Company, or DTC, to holders who also hold through DTC. However, a transfer by or to a record holder who holds ordinary shares directly in his, her or its own name could be subject to this stamp duty. We, in our absolute discretion and insofar as the Irish Companies ~~Acts~~Act 2014 (as amended) or any other applicable law permit, may, or may provide that one of our subsidiaries will pay Irish stamp duty arising on a transfer of our ordinary shares on behalf of the transferee of such ordinary shares. If stamp duty resulting from the transfer of ordinary shares which would otherwise be payable by the transferee is paid by us or any of our subsidiaries on behalf of the transferee, then in those circumstances, we will, on our behalf or on behalf of such subsidiary (as the case may be), be entitled to (i) seek reimbursement of the stamp duty from the transferee, (ii) set-off the stamp duty against any dividends payable to the transferee of those ordinary shares and (iii) claim a first and permanent lien on the ordinary shares on which stamp duty has been paid by us or such subsidiary for the amount of stamp duty paid. Our lien shall extend to all dividends paid on those ordinary shares.

In certain circumstances, as an Irish tax resident company, we will be required to deduct Irish dividend withholding tax (currently at the rate of ~~20%~~25%) from dividends paid to our shareholders. Shareholders that are resident in the United States, EU countries (other than Ireland) or other countries with which Ireland has signed a tax treaty (whether the treaty has been ratified or not) generally should not be subject to Irish withholding tax so long as the shareholder has provided its broker, for onward transmission to our qualifying intermediary or other designated agent (in the case of shares held beneficially), or our or its transfer agent (in the case of shares held directly), with all the necessary documentation by the appropriate due date prior to payment of the dividend. However, some shareholders may be subject to withholding tax, which could adversely affect the price of our ordinary shares.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our rating or publish inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts cease coverage of our company or fail to publish reports on our company regularly, demand for our ordinary shares could decrease, which might cause our share price and trading volume to decline.

Securities class action litigation could divert our management’s attention and harm our business and could subject us to significant liabilities.

The stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for the equity securities of pharmaceutical companies. These broad market fluctuations may cause the market price of our ordinary shares to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and ~~biopharmaceutical~~biopharma companies have experienced significant stock price volatility in recent years. For example, following declines in our stock ~~price,~~price, two federal securities class action lawsuits were filed in March 2016 against us and certain of our current and former officers alleging violations of the Securities Exchange Act of 1934, as ~~amended. Subsequently, the two actions~~amended, which lawsuits were ~~consolidated, and~~ ~~plaintiff added claims under the Securities Act and named~~ additional defendants. This consolidated class action (captioned Schaffer v. Horizon Pharma plc, et al., Case No. 1:16-cv-01763) is currently pending in the United States District Court for the Southern District of New York. In November 2016, defendants filed motions to dismiss plaintiffs’ consolidated amended complaint, which are fully briefed but have not yet been decideddismissed by the ~~court.~~plaintiffs in June 2018. Even if we are successful in defending ~~against this action or~~ any similar claims that may be brought in the future, such litigation could result in substantial costs and may be a distraction to our management, and may lead to an unfavorable outcome that could adversely impact our financial condition and prospects.

~~We completed the following issuances of unregistered securities during the three months ended September 30, 2017:~~

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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

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


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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company	☐

		Page
		No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2020 and as of December 31, 2019 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	3
	~~Condensed Consolidated Balance Sheets as of September 30, 2017 and as of December 31, 2016 (Unaudited)~~	3
	Condensed Consolidated Statements of ~~Comprehensive Loss~~Cash Flows for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements ~~of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 (Unaudited)~~	5
	~~Notes to Unaudited Condensed Consolidated Financial Statements~~	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4529
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6343
Item 4.	Controls and Procedures	6443
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6544
Item 1A.	Risk Factors	65
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	~~108~~44
Item 6.	Exhibits	~~109~~88
	Signatures	~~111~~90

	For the Nine Months Ended September 30,
	2017		2016
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	74,378	$	39,542	$	26,636	$	15,842
Net cash payments for income taxes		2,054		18,538
Cash paid for debt extinguishment		145		—
Cash paid for income taxes, net of refunds received						266		856
Cash paid for amounts included in the measurement of lease liabilities						1,812		1,611
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Purchases of property and equipment included in accounts payable and accrued expenses		45		1,101		539		2,759
Transaction costs related to issuance of ordinary shares included in accrued expenses						—		902

Buildings		40 years
Machinery and equipment		5 to 7 years
Furniture and fixtures		3 to 5 years
Computer equipment		3 years
Software		3 years
Trade show equipment		3 years

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2017		September 30, 2017
Cash proceeds	$	—	$	72,163
Add reimbursement of royalties		—		27,101
Less net assets sold:
Developed technology		—		(47,261	)
Goodwill	—			(16,285	)
Other		—		(24,482	)
Transaction and other costs		112		(5,268	)
Gain on divestiture	$	112	$	5,968

Cash	$	841,494
Net settlements on the exercise of stock options and restricted stock units		19,268
Total consideration	$	860,762

(Liabilities assumed) and assets acquired:	Before			Adjustment			After
Accounts payable	$	(4,572	)	$	—		$	(4,572	)
Accrued expenses		(23,773	)		(240	)		(24,013	)
Accrued trade discounts and rebates		(6,377	)		1,350			(5,027	)
Deferred tax liabilities		(237,166	)		1,743			(235,423	)
Contingent royalty liability		(102,000	)		—			(102,000	)
Accrued royalties		(2,705	)		—			(2,705	)
Other non-current liability		(25,500	)		—			(25,500	)
Cash and cash equivalents		24,897			—			24,897
Restricted cash		1,350			—			1,350
Accounts receivable, net		17,767			—			17,767
Inventories		74,463			—			74,463
Prepaid expenses and other current assets		4,194			—			4,194
Property and equipment		3,373			—			3,373
Developed technology		946,000			—			946,000
Other non-current assets		1,765			—			1,765
Goodwill		189,046			(2,853	)		186,193
Fair value of consideration paid	$	860,762		$	—		$	860,762

Cash	$	536,206
Net settlements on the exercise of stock options and restricted stock units		3,526
Total consideration	$	539,732

(Liabilities assumed) and assets acquired:	Allocation
Accounts payable and accrued expenses	$	(4,543	)
Accrued trade discounts and rebates		(1,424	)
Deferred tax liabilities		(20,141	)
Other non-current liabilities		(6,900	)
Contingent royalty liabilities		(51,300	)
Cash and cash equivalents		24,893
Accounts receivable		10,014
Inventories		149,363
Prepaid expenses and other current assets		1,382
Developed technology		428,200
Other non-current assets		275
Goodwill		9,913
Fair value of consideration paid	$	539,732

	For the Nine Months Ended September 30, 2016
	As reported			Pro forma			Pro forma
				adjustments
Net sales	$	670,770		$	99,571		$	770,341
Net loss		(36,292	)		(112,274	)		(148,566	)

	September 30, 2017		December 31, 2016		March 31, 2020		December 31, 2019
Raw materials	$	17,412	$	10,233	$	16,557	$	6,750
Work-in-process		16,230		85,022		27,839		22,465
Finished goods		52,885		79,533		23,774		24,587
Inventories, net	$	86,527	$	174,788	$	68,170	$	53,802

Balance at December 31, 2016	$	445,579
Divestiture during the period		(16,285	)
Measurement period adjustments		(2,853	)
Balance at September 30, 2017	$	426,441

	September 30, 2017							December 31, 2016							March 31, 2020							December 31, 2019
	Cost Basis		Accumulated Amortization			Net Book Value		Cost Basis		Accumulated Amortization			Net Book Value		Cost Basis		Accumulated Amortization			Net Book Value		Cost Basis		Accumulated Amortization			Net Book Value
Developed technology	$	3,115,695	$	(603,283	)	$	2,512,412	$	3,166,695	$	(399,511	)	$	2,767,184	$	2,863,593	$	(1,117,968	)	$	1,745,625	$	2,758,403	$	(1,059,595	)	$	1,698,808
Customer relationships		8,100		(2,457	)		5,643		8,100		(1,849	)		6,251		8,100		(4,481	)		3,619		8,100		(4,280	)		3,820
Total intangible assets	$	3,123,795	$	(605,740	)	$	2,518,055	$	3,174,795	$	(401,360	)	$	2,773,435	$	2,871,693	$	(1,122,449	)	$	1,749,244	$	2,766,503	$	(1,063,875	)	$	1,702,628

2017 (October to December)	$	68,666
2018		274,084
2019		261,092
2020		261,068
2021		253,373
Thereafter		1,399,772
Total	$	2,518,055

2020 (April to December)	$	178,217
2021		230,012
2022		228,839
2023		228,222
2024		226,790
Thereafter		657,164
Total	$	1,749,244

	September 30, 2017		December 31, 2016		March 31, 2020		December 31, 2019
Accrued wholesaler fees and commercial rebates	$	183,133	$	47,460
Accrued government rebates and chargebacks					$	156,492	$	164,508
Accrued co-pay and other patient assistance		175,991		188,504		90,465		163,641
Accrued government rebates and chargebacks		76,590		61,592
Accrued commercial rebates and wholesaler fees						89,363		138,272
Accrued trade discounts and rebates		435,714		297,556	$	336,320	$	466,421
Invoiced wholesaler fees and commercial rebates, co-pay and other patient assistance, and government rebates and chargebacks in accounts payable		13,283		16,830
Invoiced commercial rebates and wholesaler fees, co-pay and other patient assistance costs, and government rebates and chargebacks in accounts payable						14,204		489
Total customer-related accruals and allowances	$	448,997	$	314,386	$	350,524	$	466,910

Balance as of December 31, 2016	$	334,274
Reclassification to other long-term liabilities		(5,233	)
Remeasurement of royalty liabilities		(2,944	)
Royalty payments		(33,796	)
Accretion expense		38,347
Other royalty expense		297
Balance as of September 30, 2017		330,945
Accrued royalties - current portion as of September 30, 2017		62,273
Accrued royalties, net of current as of September 30, 2017	$	268,672

	Three Months Ended March 31
	2020		2019
KRYSTEXXA	$	93,248	$	52,257
RAVICTI		61,189		49,903
PROCYSBI		38,343		39,571
ACTIMMUNE		26,541		21,746
TEPEZZA		23,452		—
BUPHENYL		2,313		2,770
QUINSAIR		277		168
Orphan segment net sales	$	245,363	$	166,415

PENNSAID 2%		41,563		50,189
DUEXIS		31,346		29,457
VIMOVO		19,428		14,043
RAYOS		18,209		19,424
MIGERGOT		—		843
Inflammation segment net sales	$	110,546	$	113,956

Total net sales	$	355,909	$	280,371

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	Amount		% of Total Net Sales	Amount		% of Total Net Sales
United States	$	354,016	100%	$	279,209	100%
Rest of world		1,893	*		1,162	*
Net sales	$	355,909		$	280,371
*Less than 1%

	September 30, 2017										March 31, 2020
	Level 1			Level 2		Level 3		Total			Level 1			Level 2		Level 3		Total
Assets:
Bank time deposits	$	—		$	3,000	$	—	$	3,000
Money market funds		552,000			—		—		552,000		$	641,225		$	—	$	—	$	641,225
Other current assets		5,717			—		—		5,717			12,638			—		—		12,638
Total assets at fair value	$	557,717		$	3,000	$	—	$	560,717		$	653,863		$	—	$	—	$	653,863
Liabilities:
Other long-term liabilities		(5,717	)		—		—		(5,717	)		(12,638	)		—		—		(12,638	)
Total liabilities at fair value	$	(5,717	)	$	—	$	—	$	(5,717	)	$	(12,638	)	$	—	$	—	$	(12,638	)

	September 30, 2017			December 31, 2016
2017 Term Loan Facility	$	847,875			—
2015 Term Loan Facility		—			394,000
2016 Incremental Loan Facility		—			375,000
2023 Senior Notes		475,000			475,000
2024 Senior Notes		300,000			300,000
Exchangeable Senior Notes		400,000			400,000
Total face value		2,022,875			1,944,000
Debt discount		(113,508	)		(126,352	)
Deferred financing fees		(11,790	)		(10,155	)
Total long-term debt		1,897,577			1,807,493
Less: current maturities		8,500			7,750
Long-term debt, net of current maturities	$	1,889,077		$	1,799,743

	March 31, 2020			December 31, 2019
Term Loan Facility due 2026	$	418,026		$	418,026
Senior Notes due 2027		600,000			600,000
Exchangeable Senior Notes due 2022		400,000			400,000
Total face value		1,418,026			1,418,026
Debt discount		(54,567	)		(59,922	)
Deferred financing fees		(5,099	)		(5,263	)
Total long-term debt and exchangeable notes		1,358,360			1,352,841
Less: long-term debt—current portion		—			—
Long-term debt and exchangeable notes, net	$	1,358,360		$	1,352,841

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

2020 (April to December)	$	5,972
2021		7,097
2022		5,922
2023		5,849
2024		6,466
Thereafter		39,522
Total lease payments		70,828
Imputed interest		(21,001	)
Total operating lease liabilities	$	49,827

~~Location~~	~~Approximate Square Feet~~		~~Lease Expiry Date~~
~~Dublin, Ireland~~		~~18,900~~	~~November 3, 2029~~
~~Lake Forest, Illinois (1)~~		~~160,000~~	~~March 31, 2024~~
~~Novato, California (2)~~		~~61,000~~	~~August 31, 2021~~
~~Deerfield, Illinois (3)~~		~~32,300~~	~~June 30, 2018~~
~~Brisbane, California~~		~~20,100~~	~~November 30, 2019~~
~~Mannheim, Germany~~		~~14,300~~	~~December 31, 2018~~
~~Chicago, Illinois~~		~~6,500~~	~~December 31, 2018~~
~~Reinach, Switzerland~~		~~3,500~~	~~May 31, 2020~~
~~Washington, D.C.~~		~~1,000~~	~~December 31, 2018~~


TEPEZZA Worldwide Net Sales Threshold	Milestone Payment
>$250 million	$50 million
>$375 million	$75 million
>$500 million	$100 million

	Number of Units			Weighted Average Grant-Date Fair Value Per Unit		Number of Units			Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2016		3,367,871		$	18.45
Outstanding as of December 31, 2019							6,541,224		$	18.77
Granted		3,454,579			12.34		2,298,993			35.44
Vested		(1,040,529	)		16.86		(1,963,611	)		17.91
Forfeited		(440,874	)		17.46		(265,953	)		23.85
Outstanding as of September 30, 2017		5,341,047		$	14.89
Outstanding as of March 31, 2020							6,610,653		$	24.62

	Number of Units			Weighted Average Grant-Date Fair Value Per Unit		Average Illiquidity Discount			Recorded Weighted Average Fair Value Per Unit		Number of Units			Weighted Average Grant-Date Fair Value Per Unit		Average Illiquidity Discount			Recorded Weighted Average Fair Value Per Unit
Outstanding as of December 31, 2016		12,045,656
Outstanding as of December 31, 2019												3,558,900
Granted												587,802		$	42.38		8.1	%	$	38.94
Forfeited												(201,645	)		25.73		4.3	%		24.62
Vested		(25,000	)	$	12.36	0.0%			$	13.30		(1,380,312	)		20.85		0.0	%		20.85
Forfeited		(238,336	)		10.86		7.5	%		10.04
Outstanding as of September 30, 2017		11,782,320
Performance Based Adjustment⁽¹⁾												89,941			20.24		0.0	%		20.24
Outstanding as of March 31, 2020												2,654,686

	Number of Units		Weighted Average Fair Value Per Unit		Average Illiquidity Discount			Recorded Weighted Average Fair Value Per Unit
Executive committee members		8,889,656	$	15.15		18.9	%	$	12.29
Non-executive committee members		2,892,664	13.78			7.3	%		12.77
		11,782,320	$	14.82		16.3	%	$	12.41

	Three Months Ended September 30, 2017					Three Months Ended September 30, 2016
	Amount		% of Total Net Sales			Amount		% of Total Net Sales
United States	$	267,906		99	%	$	204,302		98	%
Rest of world		3,740		1	%		4,400		2	%
Net sales	$	271,646				$	208,702

	For the Nine Months Ended September 30,
	2017			2016			Change
	(in thousands)
Net sales	$	782,012		$	670,770		$	111,242
Cost of goods sold		394,783			243,520			151,263
Gross profit		387,229			427,250			(40,021	)
Operating expenses:
Research and development		194,090			36,746			157,344
Selling, general and administrative		509,940			407,563			102,377
Total operating expenses		704,030			444,309			259,721
Operating loss		(316,801	)		(17,059	)		(299,742	)
Other expense, net:
Interest expense, net		(95,297	)		(57,752	)		(37,545	)
Foreign exchange gain (loss)		167			(266	)		433
Gain on divestiture		5,968			—			5,968
Loss on debt extinguishment		(533	)		—			(533	)
Other income, net		280			6,839			(6,559	)
Total other expense, net		(89,415	)		(51,179	)		(38,236	)
Loss before benefit for income taxes		(406,216	)		(68,238	)		(337,978	)
Benefit for income taxes		(42,138	)		(31,946	)		(10,192	)
Net loss	$	(364,078	)	$	(36,292	)	$	(327,786	)

	Nine Months Ended September 30, 2017					Nine Months Ended September 30, 2016
	Amount		% of Total Net Sales			Amount		% of Total Net Sales
United States	$	757,805		97	%	$	660,608		98	%
Rest of world		24,207		3	%		10,162		2	%
Total Net Sales	$	782,012				$	670,770

	Nine Months Ended September 30,					Change			Change
	2017		2016			$			%
	(in thousands)
RAVICTI	$	142,086	$	118,599		$	23,487			20	%
PENNSAID 2%		141,094		207,857			(66,763	)		(32	%)
KRYSTEXXA		112,667		61,570			51,097			83	%
PROCYSBI		104,533		—			104,533		*
DUEXIS		92,951		122,780			(29,829	)		(24	%)
ACTIMMUNE		84,196		80,465			3,731			5	%
VIMOVO		41,069		89,710			(48,641	)		(54	%)
RAYOS		36,492		36,062			430			1	%
BUPHENYL		16,205		12,134			4,071			34	%
MIGERGOT		3,995		3,196			799			25	%
LODOTRA		3,417		3,397			20			1	%
QUINSAIR		3,307		—			3,307		*
Litigation settlement		—		(65,000	)		65,000		*
Total Net Sales	$	782,012	$	670,770		$	111,242			17	%

Exhibit Number		Description of Document

~~2.1~~⁽¹⁾3.1		~~Transaction Agreement~~Memorandum and ~~Plan~~Articles of ~~Merger, dated March 18, 2014, by and among~~Association of Horizon ~~Pharma, Inc., Vidara~~ Therapeutics ~~Holdings LLC, Vidara Therapeutics International Ltd. (now known as Horizon Pharma~~ Public Limited ~~Company), Hamilton Holdings (USA), Inc. and Hamilton Merger Sub, Inc~~.^†

~~2.2~~⁽²⁾		~~First Amendment~~Company, as amended (incorporated by reference to ~~Transaction Agreement and Plan of Merger, dated June 12, 2014, by and between~~Exhibit 3.1 to Horizon ~~Pharma, Inc. and Vidara~~ Therapeutics ~~Holdings LLC~~Public Limited Company’s Quarterly Report on Form 10-Q, filed on May 8, 2019).

~~2.3~~⁽³⁾4.1		~~Agreement and Plan of Merger,~~Indenture, dated March ~~29,~~13, 2015, by and among Horizon ~~Pharma, Inc., Ghrian Acquisition Inc.~~Therapeutics Public Limited Company, Horizon Therapeutics Investment Limited and ~~Hyperion~~U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Horizon Therapeutics ~~Inc~~.^†

~~2.4~~⁽⁴⁾^*		~~Agreement and Plan of Merger, dated December 10, 2015, by and among Horizon Pharma USA, Inc., HZNP~~Public Limited ~~Criostail LLC, Crealta Holdings LLC and the other parties thereto~~Company’s Current Report on Form 8-K, filed on March 13, 2015).^††

~~2.5~~⁽⁵⁾4.2		~~Agreement and Plan~~Form of ~~Merger, dated September 12, 2016,~~2.50% Exchangeable Senior Note due 2022 (incorporated by ~~and among~~reference to Exhibit 4.1 to Horizon ~~Pharma~~Therapeutics Public Limited ~~Company, Misneach Corporation and Raptor Pharmaceutical Corp~~Company’s Current Report on Form 8-K, filed on March 13, 2015).^†

~~3.1~~⁽⁶⁾4.3		~~Memorandum~~Indenture dated as of July 16, 2019 by and ~~Articles of~~between Horizon Therapeutics USA, Inc., the guarantors party thereto and U.S. Bank National Association, ofas trustee (incorporated by reference to Exhibit 4.1 to Horizon ~~Pharma~~Therapeutics Public Limited ~~Company, as amended~~Company’s Current Report on Form 8-K, filed on July 16, 2019).

~~4.1~~⁽⁷⁾ 4.4		~~Indenture, dated March 13, 2015,~~Form of 5.500% Senior Note due 2027 (incorporated by ~~and among~~reference to Exhibit 4.1 to Horizon ~~Pharma~~Therapeutics Public Limited ~~Company, Horizon Pharma Investment Limited and U.S. Bank National Association~~Company’s Current Report on Form 8-K, filed on July 16, 2019).

~~4.2~~⁽⁷⁾ 4.5		~~Form of 2.50% Exchangeable Senior Note due 2022 (included in Exhibit 4.1).~~First Supplemental Indenture, dated November 19, 2019, by and between HZNP Finance Limited and U.S. Bank National Association.

~~4.3~~⁽⁸⁾ 4.6		Second Supplemental Indenture, dated April ~~29, 2015,~~23, 2020, by and ~~between~~among Horizon ~~Pharma Financing~~Properties Holding LLC, Curzion Pharmaceuticals, Inc. and U.S. Bank National ~~Association~~.

~~4.4~~⁽⁸⁾		~~Form of 6.625% Senior Note due 2023 (included in Exhibit 4.3).~~Association.

~~4.5~~⁽⁹⁾ 10.1+		~~First Supplemental Indenture,~~Separation Agreement, dated ~~May 7, 2015,~~January 23, 2020, by and ~~among~~between Horizon ~~Pharma~~Therapeutics USA, Inc. and Shao-Lee Lin, M.D., Ph.D. (incorporated by reference to Exhibit 10.45 to Horizon Therapeutics Public Limited Company’s Annual Report on Form 10-K, filed on February 26, 2020).

10.2+		Horizon Therapeutics Public Limited Company ~~certain subsidiaries of~~2020 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to Horizon ~~Pharma~~Therapeutics Public Limited ~~Company and U.S. Bank National Association.~~Company’s Current Report on Form 8-K, filed on May 1, 2020).

~~4.6~~⁽¹⁰⁾		~~Indenture, dated October 25, 2016, by and among Horizon Pharma, Inc., Horizon Pharma USA, Inc. and U.S. Bank National Association, as trustee~~.

~~4.7~~⁽¹⁰⁾		~~Form of 8.75% Senior Note due 2024 (included in Exhibit 4.6).~~

~~10.1~~⁽¹¹⁾		Horizon Pharma Public Limited Company 2014 Equity Incentive Plan, as amended, and Form of Option Agreement, Form of Stock Option Grant Notice, Form of Restricted Stock Unit Agreement and Form of Restricted Stock Unit Grant Notice thereunder.

~~10.2+~~		~~Executive Employment Agreement, effective as of September 11, 2017, by and among Horizon Pharma, Inc., Horizon Pharma USA, Inc. and Irina Konstantinovsky.~~

10.3+		~~Executive Employment Agreement, effective as of August 21, 2017, by and among~~ Horizon ~~Pharma, Inc., Horizon Pharma USA, Inc. and Eric Mosbrooker.~~

~~10.4~~⁽¹²⁾		Amendment No. 3, dated October 23, 2017, to Credit Agreement, dated May 7, 2015 (as amended by Amendment No. 1, dated October 25, 2016, and Amendment No. 2, dated March 29, 2017), by and among Horizon Pharma, Inc., as Borrower, Horizon Pharma USA, Inc., as an Additional Borrower, Horizon PharmaTherapeutics Public Limited Company ~~as Irish Holdco and a guarantor, the subsidiary guarantors party thereto, as subsidiary guarantors, the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent.~~2020 Employee Share Purchase Plan (incorporated by reference to Exhibit 99.2 to Horizon Therapeutics Public Limited Company’s Current Report on Form 8-K, filed on May 1, 2020).

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act.

32.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.

32.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.

~~101.INS~~

Exhibit Number		Description of Document

101. INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)