Horizon Therapeutics Public Company Annual Report 2014

FY2014 Annual Report · Horizon Therapeutics Public Company

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Transforming lives, transformational growth 2014 Annual Report

To Our Shareholders:

2014 was a transformational year for Horizon Pharma. As we began the year,
we reiterated our strategy to become a proﬁtable specialty biopharmaceutical company
and add new commercial-stage products to our portfolio.

Our results far exceeded our expectations. First, with our base business, DUEXIS®
(ibuprofen/famotidine) net sales increased from $59.0 million to $83.2 million and RAYOS®
(prednisone) delayed-release tablets net sales increased from $5.8 million to $19.0 million.
Additionally, in the ﬁrst quarter 2014 we successfully launched VIMOVO® (naproxen/
esomeprazole magnesium), which we acquired in November 2013 and increased its net
sales from $20.0 million under AstraZeneca in 2013 to $163.0 million. In September,
we completed the acquisition of Vidara Therapeutics International plc (Vidara), providing us
with the multi-indication biologic ACTIMMUNE® (interferon gamma-1b), and in October, we
acquired PENNSAID® (diclofenac sodium topical solution) 2% w/w, a treatment for
osteoarthritis of the knee(s). Our performance with our base business, the successful
launch of VIMOVO and the addition of ACTIMMUNE and PENNSAID 2% enabled us to deliver
record net sales and our ﬁrst ever full year proﬁt (on a non-GAAP basis). Finally, we
increased total shareholders’ equity value to a new record high as represented by the
six-fold increase since December 2013 in our market capitalization, which in March 2015,
exceeded $3 billion for the ﬁrst time.

We are pleased to report the following speciﬁc progress we made during the year:

• Net sales increased 301 percent to $297.0 million versus $74.0 million in 2013
• Adjusted non-GAAP net income of $92.5 million or $0.95 per share on a fully diluted

basis (1)

• Adjusted EBITDA of $105.4 million (1)
• Ended the year with $218.8 million in cash and cash equivalents
• VIMOVO was successfully rolled out and generated $163.0 million in net sales
• Completed the acquisition of Vidara, which brought us ACTIMMUNE and resulted in
Horizon Pharma becoming an Irish public listed company with a global corporate
structure headquartered in Dublin, Ireland

• Acquired the U.S. rights to PENNSAID 2% from Nuvo Research
• Our sales organization grew to 373 people (325 primary care, 40 specialty and 8

orphan) and our total global staff grew to more than 500 people

(1) GAAP to Non-GAAP reconciliations are located at the end of the annual report.

Vidara Acquisition

We completed the Vidara acquisition on September 19, which resulted in gaining the U.S.
rights to ACTIMMUNE, a recombinant biologic approved in two orphan diseases, Chronic
Granulomatous Disease (CGD) and Severe Malignant Osteopetrosis (SMO) and the relocation
of our corporate headquarters to Dublin, Ireland. Re-domiciling our headquarters to Dublin
provides us with a global structure that supports our acquisition strategy and allows us to
compete with other ex-U.S. domiciled companies.

In addition to the approved indications of CGD and SMO for ACTIMMUNE, we ﬁled an Investi-
gational New Drug (IND) application with the U.S. FDA in February 2015 and expect to
begin a Phase 3 registration trial in the second quarter to study ACTIMMUNE in Friedreich’s
Ataxia (FA), a debilitating, life-shortening, degenerative, neuro-muscular disorder that affects
approximately 3,700 people in the United States. We estimate ACTIMMUNE, if approved,
could generate between $500 million and $1 billion in net sales in treating FA alone.

Commercial Organizational Structure

The Vidara acquisition also led to the reorganization of our commercial organization into
three business units: orphan diseases, primary care and specialty. Each of these
organizations are led by a general manager, all reporting to our executive vice president
and chief commercial ofﬁcer, John J. Kody, who joined us in November. By creating this
new structure, we improve our ability to grow sales of our existing products while allowing
seamless integration of acquisitions into each business unit.

Our orphan disease business currently consists of ACTIMMUNE, a bioengineered form
of interferon gamma-1b, a protein that acts as a biologic response modiﬁer through
stimulation of the human immune system. We operate the COMPASSTM program for
ACTIMMUNE, which assists patients in navigating the managed care approval process
and offers nurse support and educational support to patients. In addition, the program
allows patients to receive ACTIMMUNE at an affordable cost or provides treatment at no
cost for those patients who cannot afford it.

Our primary care business currently consists of DUEXIS, VIMOVO and PENNSAID 2%,
which we acquired in late 2014 and began marketing in January 2015. We have now
expanded our primary care organization to 325 representatives in the United States.
PENNSAID 2% is a metered dose, pump dispensed, topical NSAID, which complements
our oral NSAIDs, DUEXIS and VIMOVO. PENNSAID 2% has a user-friendly formulation
and dispensing system and is used twice per day in contrast to the leading competitive
topical NSAID, which is applied four times per day.

The early PENNSAID 2% launch results have been very encouraging with physicians
reporting positive patient experiences.

Our specialty business currently consists of RAYOS, a proprietary, delayed-release
formulation of low-dose prednisone approved for rheumatoid arthritis (RA) and a broad
range of other diseases. When taken at night (10 p.m. in clinical trials), the delayed-
release formulation helped improve RA symptoms and reduce morning stiffness.
RAYOS is sold primarily to rheumatologists by 40 sales representatives.

The chart below shows net sales contribution of our current products for 2014 and 2013:

Net sales (in millions)

FY 2014

FY 2013

% Change

ACTIMMUNE (1)
DUEXIS
LODOTRA
RAYOS
VIMOVO (2)

Total net sales

$ 25.3
83.2
6.5
19.0
163.0

$ 297.0

$ -
59.0
8.2
5.8
1.0

$ 74.0

*
41%
-21%
228%
*

301%

(1) ACTIMMUNE was acquired September 19, 2014.
(2) The Company began selling VIMOVO in January 2014 and 2013 sales were under a transition agreement with AstraZeneca.
* percentage change is not meaningful

Prescriptions Made Easy

We believe our Prescriptions Made Easy (PME) program is unique in today’s pharmaceutical
market. Over the last several years, we had been designing, developing, piloting and
reﬁning our PME program with select physicians and in select sales territories.
The objective of PME is to ensure access to our medications as physicians prescribe them
and to enable patients to receive our medications at a very low out-of-pocket cost.
PME also simpliﬁes and reduces numerous time-consuming steps doctors often encounter
in prescribing branded pharmaceutical products in today’s marketplace. Furthermore,
PME enables us to add new physicians to our customer base and continue to drive
prescription growth utilizing a network of specialty pharmacies across the country that
provide seamless service to both the prescribing physician and their patient.

In the fourth quarter last year, we created a dedicated PME organization of 10 people,
led by a general manager. Under the leadership of our PME team, we began rolling out
a territory-by-territory “PME-activation” program beginning in December 2014, which
will continue throughout 2015. We also initiated a retail-PME program, which enables many
patients ﬁlling their prescriptions through a retail pharmacy to potentially receive similar
beneﬁts to our traditional specialty pharmacy based PME program.

Our PME program also allows us to potentially mitigate the impact of speciﬁc managed
care plans or pharmacy beneﬁt managers’ (PBMs) attempts to deny patients access
to our medicines as their physicians have prescribed them. Two PBMs placed DUEXIS and
VIMOVO on exclusion lists beginning in January 2015. While we are disappointed these
PBMs have attempted to deny patients access to DUEXIS and VIMOVO, we believe our
PME program is well positioned to ensure continued access for patients who prescribe our
products by their physicians at a low out-of-pocket cost. With the continued acceleration of
our PME program throughout our sales territories, increased prescriptions and incremental
product price increases, we believe we can substantially offset the impact of being placed
on these exclusion lists and meet or exceed the net sales guidance we provided for 2015.

Intellectual Property

Protecting our intellectual property is core to our business success. In 2014, we continued
to aggressively ﬁle new patents, expand existing patents and maintain vigorous defense
of our patents against generic ﬁlers. During 2014, we made signiﬁcant progress on each
of these fronts. We were awarded multiple additional patents for VIMOVO and RAYOS, we
ﬁled a patent infringement suit against Watson Laboratories for ﬁling an ANDA against
PENNSAID 2% and made progress in court cases involving RAYOS and VIMOVO, including
a favorable Markman Ruling in our ongoing RAYOS litigation. We were especially pleased
to announce the Patent and Trademark Ofﬁce has issued a new patent for VIMOVO which
extends patent protection out to 2031, versus prior patents expiring in 2023.

Acquisitions

We plan to aggressively pursue near-term acquisitions of additional products and/or
companies. We view our ability to continuously identify, evaluate and acquire attractive
products and companies as a core strength of the Company and have put in place an
experienced business development organization to achieve our objectives. Our target
acquisition criteria currently include:

• U.S. commercially marketed products, or companies with marketed products, which
further leverage our core commercial strengths (orphan, primary care and specialty).

• Products with differentiated features and clinical beneﬁts.
• Products and companies with existing annual revenues of $20 million to $200 million

or more.

• Potential for attractive ﬁnancial returns – immediate/near-term accretion and

long-life assets.

Executive Management and Board of Directors

During 2014, we focused on expanding our executive leadership team with experienced
executives with speciﬁc industry and technical skills as our organization has grown to
more than 500 employees and our market value has grown to more than $3 billion for the
ﬁrst time in March 2015. Our current executive leadership team includes:

• Timothy P. Walbert, chairman, president and chief executive ofﬁcer.
• Robert F. Carey, executive vice president, chief business ofﬁcer, who joined us in

March 2014.

• Paul W. Hoelscher, executive vice president, chief ﬁnancial ofﬁcer, who joined us

as executive vice president, ﬁnance in June 2014 and became our CFO on October 1.

• Barry J. Moze, executive vice president, corporate development, who joined us

in May 2014.

• David G. Kelly, executive vice president, company secretary and managing director,

Ireland, who joined us from Vidara in September 2014.

• John J. Kody, executive vice president, chief commercial ofﬁcer, who joined us

in November 2014.

• Jeffrey W. Sherman, M.D., FACP, executive vice president, research and

development and chief medical ofﬁcer.

Each brings 25 plus years of experience to the Company and greatly enhance Horizon’s
executive leadership team.

I would also like to welcome our new board members. H. Thomas Watkins, formerly
director, president and chief executive ofﬁcer of Human Genome Sciences joined our
board in April 2014. Liam Daniel, formerly executive vice president and company
secretary of Elan Corporation plc, and Virinder Nohria, M.D., Ph.D., co-founder, president
and chief medical ofﬁcer of Vidara both joined our board in September 2014 when we
closed the Vidara acquisition.

Outlook and Financial Position

The acquisition of Vidara resulted in the issuance of 31.35 million ordinary shares.
In addition, during the fourth quarter 2014 we induced conversion of a portion of our 5%
Senior Convertible Notes for an aggregate principal amount of about $89 million, bringing
our aggregate principal amount outstanding down to $61 million. As of today, our total
outstanding share count is approximately 132 million and our fully diluted share count
is approximately 166 million.

Our ﬁ nancial guidance for 2015, which we increased on February 27, 2015, is $450 to
$475 million in net sales and $170 to $190 million in adjusted EBITDA. We have
a strong cash position and substantial ﬁ nancial leverage.

Closing

At Horizon Pharma, we operate with the following guiding principles and beliefs:

• We are committed to ensuring patients have access to our treatments through a

variety of support programs and services and to guaranteeing commercial patients
access with a low out-of-pocket cost.

• The protection of intellectual property and sustainable pricing are essential to our
ability to acquire, develop and market our medicines and bring them to patients

in need.

• The price of Horizon products is intended to cover the signiﬁ cant costs to develop,
manufacture and bring the products to the patients Horizon serves at the lowest
possible cost.

We are excited about our future opportunities and look forward to continuing to report our
progress to our shareholders throughout the year.

Best regards,

Timothy P. Walbert
Chairman, President and Chief Executive Ofﬁ cer

HORIZON PHARMA PLC
FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014
or
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the transition period from

Commission File Number 001-35238

HORIZON PHARMA PUBLIC LIMITED
COMPANY

(Exact name of Registrant as specified in its charter)

Ireland
(State or other jurisdiction of
incorporation or organization)
Connaught House, 1st Floor
1 Burlington Road, Dublin 4, Ireland
(Address of principal executive offices)

Not Applicable
(I.R.S. Employer
Identification No.)

Not Applicable
(zip code)

011 353 1 772 2100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Ordinary shares, nominal value $0.0001 per share

The NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È.
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 È No ‘

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer È
Non-accelerated filer ‘ (Do not check if a smaller reporting company)

‘
Accelerated filer
Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ‘ No È
The aggregate market value of the registrant’s voting ordinary shares held by non-affiliates of the registrant, based upon the $15.82 per share closing sale
price of the registrant’s ordinary shares on June 30, 2014 (the last business day of the registrant’s most recently completed second quarter), was approximately
$1.0 billion. Solely for purposes of this calculation, the registrant’s directors and executive officers and holders of 10% or more of the registrant’s outstanding
ordinary shares have been assumed to be affiliates and an aggregate of 9,164,811 shares of the registrant’s voting ordinary shares held by such persons on
June 30, 2014 are not included in this calculation.

As of February 20, 2015, the registrant had outstanding 125,100,210 ordinary shares.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the registrant’s 2015 Annual Meeting of Shareholders are incorporated by reference into

Part III of Annual Report on this Form 10-K.

HORIZON PHARMA PLC
FORM 10-K — ANNUAL REPORT
For the Fiscal Year Ended December 31, 2014

TABLE OF CONTENTS

PART I

Item 1. Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

PART IV

Item 15. Exhibits, Financial Statement Schedules

Page

113

114

115

116

117

THIS PAGE INTENTIONALLY LEFT BLANK

PART I

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains “forward-looking statements” — that is, statements related to
future, not past, events — as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that
reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows,
performance, business prospects, and opportunities, as well as assumptions made by, and information currently
available to, our management. Forward-looking statements include any statement that does not directly relate to a
current or historical fact. We have tried to identify forward-looking statements by using words such as “believe,”
“may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” or
“would.” Among the factors that could cause actual results to differ materially from those indicated in the
forward-looking statements are risks and uncertainties inherent in our business including, without limitation: our
ability to successfully execute our sales and marketing strategy, including continuing to successfully recruit and
retain sales and marketing personnel in the United States and to successfully build the market for our products in
the United States; whether we will be able to realize the expected benefits of strategic transactions, such as our
merger with Vidara Therapeutics International Public Limited Company and our acquisition of the U.S. rights to
PENNSAID 2%, including whether and when such transactions will be accretive to our net income; the rate and
degree of market acceptance of, and our ability and our distribution and marketing partners’ ability to obtain
coverage and adequate reimbursement for, any approved products; our ability to maintain regulatory approvals
for our products; our need for and ability to obtain additional financing; the accuracy of our estimates regarding
expenses, future revenues and time to profitability; our ability to successfully execute our strategy to develop,
acquire or in-license additional products or acquire companies; our ability to manage our anticipated future
growth; the ability of our products to compete with generic products, especially those representing the active
pharmaceutical ingredients in our products as well as new products that may be developed by our competitors;
our ability and our distribution and marketing partners’ ability to comply with regulatory requirements regarding
the sales, marketing and manufacturing of our products and product candidates; the performance of our third-
party distribution partners, licensees and manufacturers over which we have limited control; our ability to obtain
and maintain intellectual property protection for our products; our ability to defend our intellectual property
rights with respect to our products; our ability to operate our business without infringing the intellectual property
rights of others; the loss of key commercial or management personnel; regulatory developments in the United
States and other countries; and other risks detailed below in Part I — Item 1A. “Risk Factors.”

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we

cannot guarantee future results, events, levels of activity, performance or achievement. We undertake no
obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise, unless required by law.

Item 1. Business

Merger with Vidara

On September 19, 2014, the businesses of Horizon Pharma, Inc., or HPI, and Vidara Therapeutics

International Public Limited Company, or Vidara, were combined in a merger transaction, or the Merger,
accounted for as a reverse acquisition under the acquisition method of accounting for business combinations,
with HPI treated as the acquiring company in the Merger for accounting purposes. As part of the Merger, a
wholly-owned subsidiary of Vidara merged with and into HPI, with HPI surviving the Merger as a wholly-owned
subsidiary of Vidara and Vidara changed its name to Horizon Pharma plc, or New Horizon. Upon the
consummation of the Merger, the historical financial statements of HPI became our historical financial
statements. As a result of the Merger, we are organized under the laws of Ireland.

Unless otherwise indicated or the context otherwise requires, references to the “Company”, “New Horizon”,

“we”, “us” and “our” refer to Horizon Pharma plc and its consolidated subsidiaries, including its predecessor,

HPI. All references to “Vidara” are references to Horizon Pharma plc (formerly known as Vidara Therapeutics
International Public Limited Company) and its consolidated subsidiaries prior to the effective time of the Merger
on September 19, 2014. The disclosures in this report relating to the pre-Merger business of Horizon Pharma plc,
unless noted as being the business of Vidara prior to the Merger, pertain to the business of HPI prior to the
Merger.

Overview

We are a specialty biopharmaceutical company focused on improving patients’ lives by identifying,
developing, acquiring or in-licensing and commercializing differentiated products that address unmet medical
needs. We market a portfolio of products in arthritis, inflammation and orphan diseases. Our U.S. marketed
products are ACTIMMUNE® (interferon gamma-1b), DUEXIS® (ibuprofen/famotidine), PENNSAID®
(diclofenac sodium topical solution) 2% w/w, RAYOS® (prednisone) delayed-release tablets and VIMOVO®
(naproxen/esomeprazole magnesium). We developed DUEXIS and RAYOS, acquired the U.S. rights to
VIMOVO from AstraZeneca AB, or AstraZeneca, in November 2013, acquired the U.S. rights to ACTIMMUNE
as a result of the Merger and acquired the U.S. rights to PENNSAID 2% from Nuvo Research Inc., or Nuvo, in
October 2014. We market our products in the United States through our field sales force of approximately 375
representatives. Our strategy is to utilize the commercial strength and infrastructure we have established in
creating a fully-integrated U.S.-focused specialty biopharmaceutical company to continue the successful
commercialization of our existing product portfolio while also expanding and leveraging these capabilities
further.

On April 23, 2011, the U.S. Food and Drug Administration, or FDA, approved DUEXIS, a proprietary tablet

formulation containing a fixed-dose combination of ibuprofen and famotidine in a single pill. DUEXIS is
indicated for the relief of signs and symptoms of rheumatoid arthritis, or RA, osteoarthritis, or OA, and to
decrease the risk of developing upper gastrointestinal, or GI, ulcers in patients who are taking ibuprofen for these
indications. We began marketing DUEXIS to physicians in December 2011. In June 2012, we licensed DUEXIS
rights in Latin America to Grünenthal S.A., a private company focused on the marketing of pain products.

Our second approved product in the United States, RAYOS, known as LODOTRA® outside the United
States, is a proprietary delayed-release formulation of low-dose prednisone approved originally in Europe for the
treatment of moderate to severe, active RA in adults, particularly when accompanied by morning stiffness. On
July 26, 2012, the FDA approved RAYOS for the treatment of RA, polymyalgia rheumatica, or PMR, psoriatic
arthritis, or PsA, ankylosing spondylitis, or AS, asthma and chronic obstructive pulmonary disease, or COPD,
and a number of other conditions. We have been focusing our promotion of RAYOS in the United States on
rheumatology indications, including RA and PMR, and currently are broadening the marketing efforts for
RAYOS into multiple other indications. We began marketing RAYOS to a subset of U.S. rheumatologists in
December 2012 and began the full launch in late January 2013 to the majority of U.S. rheumatologists and key
primary care physicians. LODOTRA is currently marketed outside the United States, excluding Japan and
Canada, by our distribution partner, Mundipharma International Corporation Limited, or Mundipharma.

On November 18, 2013, we entered into agreements with AstraZeneca pursuant to which we acquired from

AstraZeneca and its affiliates certain intellectual property and other assets, and assumed from AstraZeneca and
its affiliates certain liabilities, each with respect to VIMOVO, and obtained rights to develop other
pharmaceutical products that contain gastroprotective agents in a single fixed combination oral solid dosage form
with nonsteroidal anti-inflammatory drugs, or NSAIDs, in the United States. VIMOVO is a proprietary, fixed-
dose, multi-layer, delayed-release tablet combining an enteric-coated naproxen, an NSAID, core and an
immediate-release esomeprazole, a proton pump inhibitor, or PPI, layer surrounding the core. VIMOVO was
originally developed by Pozen Inc., or Pozen, together with AstraZeneca pursuant to an exclusive global
collaboration and license agreement. On April 30, 2010, the FDA approved VIMOVO for the relief of the signs
and symptoms of OA, RA and AS and to decrease the risk of developing gastric ulcers in patients at risk of
developing NSAID associated gastric ulcers.

We announced the availability of Horizon-labeled VIMOVO on January 2, 2014, at which time we also

began marketing VIMOVO with our primary care sales force.

On September 19, 2014, as a result of the Merger, we began marketing ACTIMMUNE, a bioengineered

form of interferon gamma-1b, a protein that acts as a biologic response modifier. In the United States
ACTIMMUNE is approved by the FDA for use in children and adults with chronic granulomatous disease, or
CGD, and severe, malignant osteopetrosis, or SMO. ACTIMMUNE is indicated for reducing the frequency and
severity of serious infections associated with CGD and for delaying time to disease progression in patients with
SMO. We also plan to study ACTIMMUNE for potential additional indications, and the FDA has agreed to the
primary endpoint for a Phase 3 study that will evaluate ACTIMMUNE in the treatment of Friedreich’s Ataxia, or
FA. In February 2015, we submitted an IND application and anticipate the Phase 3 clinical study related to FA
will begin enrolling patients in the second quarter of 2015.

On October 17, 2014, we acquired the U.S. rights to PENNSAID 2% from Nuvo for $45.0 million in
cash. PENNSAID 2% is approved in the United States for the treatment of the pain of OA of the knee(s). As part
of the acquisition, we entered into an exclusive eight-year supply agreement with Nuvo under which Nuvo will
supply us product. We began marketing PENNSAID 2% in January 2015. In connection with our PENNSAID
2% acquisition, we expanded our primary care sales force by 75 additional representatives. Our primary care
representatives are now marketing DUEXIS, PENNSAID 2% and VIMOVO.

Another key part of our commercial strategy is to encourage physicians to have their patients agree to fill

prescriptions through our Prescriptions-Made-Easy, or PME, specialty pharmacy program, which enables
uninsured or commercially insured patients’ enhanced access to our products by providing financial assistance to
reduce eligible patients’ out of pocket costs for prescriptions filled via a PME-participating mail order pharmacy.
Through PME, prescriptions for our products are filled by designated mail order specialty pharamacies, with the
product shipped directly to the patient. Because the patient out of pocket cost for our products when dispensed
through the PME program may be significantly lower than such costs when our products are dispensed outside of
the PME program, prescriptions filled through our PME program are therefore less likely to be subject to the
efforts of traditional pharmacies to switch a physician’s intended prescription of our products to a generic or over
the counter brand. We expect that continued adoption of our PME program by physicians will be important to our
ability to gain market share for our products as pressure from healthcare payors and PBMs, to use less expensive
generic or over the counter brands instead of branded products increases. We believe the continued expansion of
our PME program will allow us to largely mitigate the potential impact of our products being placed on the
exclusion lists implemented by PBMs.

Our principal executive offices are located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4,
Ireland and our telephone number is +011 353 1 772 2100. Our website address is www.horizonpharma.com. The
information contained in or that can be accessed through our website is not part of this report.

“Horizon Pharma,” “Horizon Therapeutics,” a stylized letter “H,” “ACTIMMUNE,” “DUEXIS,”

“LODOTRA,” “PENNSAID 2%,” “RAYOS,” and “VIMOVO” are registered trademarks in the United States
and/or certain other countries. This report also includes references to trademarks and service marks of other
entities and those trademarks and service marks are the property of their respective owners.

Our Strategy

Our strategy is to utilize the commercial strength and infrastructure we have established in creating a
fully-integrated U.S.-focused specialty biopharmaceutical company to continue the successful commercialization
of our existing product portfolio while also expanding and leveraging these capabilities by identifying,
developing, acquiring or in-licensing and commercializing additional differentiated products that address unmet
medical needs. We have entered into licensing or additional distribution arrangements for the commercialization
of our products outside the United States, such as our relationship with Mundipharma for the commercialization

of LODOTRA outside of the United States, excluding Japan and Canada, and our relationship with Grünenthal
for the commercialization of DUEXIS in Latin America.

Our Products

We believe that our products address unmet therapeutic needs in arthritis, pain, inflammatory and/or orphan

diseases and provide significant advantages over existing therapies.

Our current product portfolio consists of the following:

Products

Disease

Phase of Development

Marketing Rights

Territory

ACTIMMUNE . . . . . . . . CGD and SMO

FDA approved CGD
on February 25,
1999 and SMO on
February 10, 2000

Phase 3

DUEXIS . . . . . . . . . . . . . Signs and

symptoms of OA
and RA

PENNSAID 2% . . . . . . . Pain of OA of

the knee(s)

RAYOS/LODOTRA . . . . RA, multiple

other indications

FDA approved on
April 23, 2011; UK
National Marketing
Authorization
approved on
March 6, 2013

FDA approved
January 16, 2014

FDA approved July
26, 2012, approved
and marketed in
Europe and certain
Asian and other
countries

Horizon
Pharma

Mundipharma

VIMOVO . . . . . . . . . . . . Signs and

symptoms of
OA, RA and AS

FDA approved
April 30, 2010

Horizon
Pharma

PAIN AND ARTHRITIS

Markets for Our Products

United States and
selected foreign
countries

United States

Worldwide excluding
Latin America

United States

Worldwide, excluding
Europe, certain Asian,
Latin American,
Middle East, North
African, and other
countries

Europe, certain Asian,
Latin American,
Middle East, North
African, and other
countries

United States

Pain is a serious and costly public health concern. In 2010, the U.S. National Center for Health Statistics

reported that approximately 30% of U.S. adults 18 years of age and over reported recent symptoms of pain,
aching or swelling around a joint within the past 30 days.

Some of the most common and debilitating chronic inflammation and pain-related diseases are OA, RA and

acute and chronic pain. According to National Health Interview Survey data analyzed by the U.S. Centers for
Disease Control and Prevention, from 2010-2012, 52.5 million U.S. adults 18 years of age and over had reported
being diagnosed with some form of arthritis. With the aging of the U.S. population, the prevalence of arthritis is

expected to rise by approximately 40% by 2030, impacting 67 million people in the United States. People with
these diseases may become increasingly debilitated as the disease progresses, experiencing not only significant
pain but also loss of mobility, independence and the ability to work, thereby potentially placing a significant
burden on family caregivers and healthcare and social services. In addition, patients suffering from chronic
inflammatory diseases tend to have shortened life expectancies as a direct result of these diseases. According to
the American Pain Foundation Fact Sheet and the U.S. Centers for Disease Control and Prevention:

•

the annual cost of chronic pain in the United States, including healthcare expenses, lost income and lost
productivity is estimated to be approximately $100 billion;

arthritis and related conditions, such as OA, cost the U.S. economy nearly $128 billion per year in
medical care and indirect expenses, including lost wages and productivity; and

pain is the second leading cause of medically related work absenteeism, resulting in more than
50 million lost workdays each year.

In addition, the Arthritis Foundation reports 992,100 hospitalizations and 44 million office visits in the

United States annually for arthritis alone.

Osteoarthritis

OA is a type of arthritis that is caused by the breakdown and eventual loss of the cartilage of one or more
joints. Cartilage is a protein substance that serves as a cushion between the bones of the joints. OA is also known
as degenerative arthritis. Among the over 100 different types of arthritis conditions, OA is the most common and
occurs more frequently with age. Before age 45, OA occurs more frequently in males. After age 50, it occurs
more frequently in females. OA commonly affects the hands, feet, spine and large weight-bearing joints, such as
the hips and knees. Symptomatic knee arthritis is the most common form of arthritis in the United States. Over
9 million adults report symptomatic OA of the knee. NSAIDs are prescribed over 100 million times per year in
the United States. Most cases of OA have no known cause and are referred to as primary OA.

Symptoms of OA manifest in patients as joint pain, tenderness, stiffness, limited joint movement, joint
cracking or creaking (crepitation), locking of joints and local inflammation. OA can also lead to joint deformity
in later stages of the disease. Many drugs are used to treat the inflammation and pain associated with OA,
including aspirin and other NSAIDs, such as ibuprofen, naproxen and diclofenac, that have a rapid analgesic and
anti-inflammatory response.

Rheumatoid Arthritis

RA is a chronic disease that causes pain, stiffness and swelling, primarily in the joints. According to a 2006
DataMonitor report, 2.9 million people in the United States suffer from RA, of which 1.8 million are diagnosed
and treated with various drugs. RA has no known cause, but unlike OA, RA is not associated with factors such as
aging. RA occurs when the body’s immune system malfunctions, attacking healthy tissue and causing
inflammation, which leads to pain and swelling in the joints and may eventually cause permanent joint damage
and painful disability. The primary symptoms of RA include progressive immobility and pain, especially in the
morning, with long-term sufferers experiencing continual joint destruction for the remainder of their lives. There
is no known cure for RA. Once the disease is diagnosed, treatment is prescribed for life to alleviate symptoms
and/or to slow or stop disease progression.

RA treatments include medications, physical therapy, exercise, education and sometimes surgery. Early,
aggressive treatment of RA can delay joint destruction. Treatment of RA usually includes multiple drug therapies
taken concurrently. Disease-modifying anti-rheumatic drugs, or DMARDs, are the current standard of care for
the treatment of RA, in addition to rest, exercise and anti-inflammatory drugs such as NSAIDs. Methotrexate is
the most commonly prescribed DMARD for the treatment of RA. Other common agents for the treatment of RA

include corticosteroids and biologic agents. Over the last decade, the advent of biologic agents has transformed
the treatment of RA. Tumor necrosis factor, or TNF, inhibitors are the primary biologic agents used today to treat
RA. Although effective for treatment of RA, these agents are costly and, because they are very potent
immunosuppressants, may increase the risk of infection. Corticosteroids, such as prednisone, effectively reduce
joint swelling and inflammation and, in low doses, have been shown to enhance DMARD therapy and slow the
progression of RA, but at high doses are associated with potential for significant long-term adverse side effects
such as osteoporosis, cardiovascular disease and weight gain. An additional limitation of RA treatment with
corticosteroids is related to the time at which patients’ pro-inflammatory cytokines are at peak levels. Increased
levels of pro-inflammatory cytokines during the early morning hours are a known cause of morning stiffness and
decreased mobility of RA. Interleukin 6, or IL-6, levels are substantially increased in patients with RA in general
and show a significant circadian variation in these levels. Timing a dose of medicine to coincide with the rise of
RA symptoms may be a good option for patients with RA.

Because RA has the potential to cause serious damage to joints and bones, physicians typically treat patients
aggressively, including with combination therapies to reduce pain and inflammation and to slow the progression
of the disease. Research sponsored by Mundipharma and conducted by Ipsos MORI involving 750 RA patients
from 11 European countries found that 60% of surveyed patients with RA indicated that pain and morning
stiffness control their lives. Additionally, 74% of people with pain and morning stiffness as a result of their RA
indicated that they are either unemployed, retired early or are on sick leave as a result of RA and 58% say they
are frustrated emotionally because they find it difficult to do everyday tasks due to morning stiffness caused by
their RA.

Polymyalgia Rheumatica

PMR is an inflammatory disorder that causes significant muscle pain and stiffness. The pain and stiffness

often occur in the shoulders, neck, upper arms and hip with pronounced morning stiffness lasting at least one
hour. Symptoms of PMR usually begin within two weeks. Most people who develop PMR are older than 65 years
of age. It rarely affects people younger than 50. There are approximately 1.1 million patients with PMR in the
United States and it afflicts one in every 133 people over the age of 50. Prednisone is the standard of care for
treating PMR and treatment is generally initiated at a relatively high dose (e.g., 10-20 mg per day) and reduced as
clinical improvement is seen. Treatment usually lasts 18-24 months. Similar to RA, PMR is associated with
circadian patterns of IL-6 elevation in early morning hours.

Ankylosing Spondylitis

AS is a type of arthritis that affects the spine. AS symptoms include pain and stiffness from the neck down

to the lower back. The spine’s bones (vertebrae) may grow or fuse together, resulting in a rigid spine. These
changes may be mild or severe, and may lead to a stooped-over posture. Early diagnosis and treatment helps
control pain and stiffness and may reduce or prevent significant deformity.

Market Opportunity and Limitations of Existing Treatments

NSAIDs are very effective at providing pain relief, including pain associated with OA and RA; however,

there are significant upper GI-associated adverse events that can result from the use of NSAIDs. As a result,
COX-2 inhibitor drugs (i.e., VioxxTM, Merck & Co., Inc.; Celebrex and BextraTM, Pfizer Inc.) were introduced to
the market in order to provide pain and arthritis relief with reduced risk of significant upper GI-associated
adverse events. The COX-2 drugs generated approximately $6.3 billion in sales at their peak in 2004. However,
safety concerns associated with COX-2 inhibitor drugs led to the withdrawal of Vioxx and Bextra from the
market in 2004 and a significant decline in the use of Celebrex. In the United States alone, over $3 billion in
sales of COX-2 inhibitor drugs were lost. As a result, demand for traditional prescription NSAIDs, such as
ibuprofen and meloxicam, has increased dramatically.

U.S. Total Prescriptions — Major NSAIDs and COX-2 Products

40,000,000

35,000,000

30,000,000

25,000,000

x
R
T

20,000,000

15,000,000

10,000,000

5,000,000

IBUPROFEN (RX)

MELOXICAM/MOBIC

NAPROXEN

CELEBREX

2002

2003

2004

2005

2006

2007

2008

Year

2009

2010

2011

2012

2013

2014

Source: IMS Health, National Prescription Audit 2002-2014 (IMS Health is a source of data only and does not
endorse the views, opinions and/or findings expressed or otherwise published by Horizon)

According to a 2004 article published in Alimentary Pharmacology & Therapeutics, significant GI side
effects, including serious ulcers, afflict up to approximately 25% of all chronic arthritis patients treated with
NSAIDs for three months, and OA and RA patients are two to five times more likely than the general population
to be hospitalized for NSAID-related GI complications. It is estimated that NSAID-induced GI toxicity causes
over 16,500 related deaths in OA and RA patients alone and over 107,000 hospitalizations for serious GI
complications each year. In more than 70% of patients with these serious GI complications, there are no prior
symptoms.

Despite the fact that GI ulcers are one of the most prevalent adverse events resulting from the use of
NSAIDs in the United States, according to a 2006 article published in BMC Muskoskeletal Disorders, eleven
observational studies indicated that physicians do not commonly co-prescribe GI protective agents to high-risk
patients. Physicians prescribe concomitant therapy to only 24% of NSAID users, and studies show sub-optimal
patient compliance with concomitant prophylaxis therapy. According to a 2003 article published in Alimentary
Pharmacology & Therapeutics, in a study of 784 patients, 37% of patients were non-compliant, a rate increasing
to 61% in patients treated with three or more drugs. This noncompliance results in a substantial unmet clinical
need, which we believe can be appropriately addressed with DUEXIS or VIMOVO, creating smarter solutions
for both patients and physicians.

According to a 2006 DataMonitor report, there were approximately 4.9 million RA patients in the
United States, Japan, France, Italy, Spain, Germany and the United Kingdom, or UK, of which approximately
3.1 million were diagnosed. Common agents for the treatment of RA include NSAIDs, DMARDs, biologic
agents and corticosteroids such as prednisone. Physicians are increasingly supportive of prescribing multiple
therapies as some RA patients are able to achieve a clinical remission with multiple treatments. A Medical
Marketing Economics May 2008 study of 150 RA patients in the United States, which we sponsored, showed that
despite the use of a combination of currently available treatments for RA, over 90% of the patients reported
suffering from morning stiffness, pain and immobility.

In addition, according to the 2006 DataMonitor report, approximately 50% of RA patients in the

United States, Japan, France, Italy, Spain, Germany and the UK are prescribed combination therapy which often
includes corticosteroids, with prednisone being one of the most common. Corticosteroids, including prednisone,
are used to suppress various autoimmune, inflammatory and allergic disorders by inhibiting the production of
various pro-inflammatory cytokines, such as IL-6 and TNF-alpha. Joint inflammation in RA is driven by
excessive production of inflammatory mediators and cytokines such as IL-6 and TNF-alpha. While
corticosteroids are potent and effective agents to treat patients with RA, they are often used at high doses to treat
RA flares or significant inflammation. High-dose oral corticosteroid treatment is not a viable long-term treatment
option due to adverse side effects such as osteoporosis, cardiovascular disease and weight gain. However, clinical
studies have shown that the long-term use of low-dose prednisone (<10 mg per day) does not dramatically
increase total adverse events. In addition, low-doses, typically less than 10 mg daily, of corticosteroids such as
prednisone have been shown to treat the symptoms of RA while slowing the overall progression of the disease.

An additional limitation of RA treatment with corticosteroids is related to the time at which patients’ pro-

inflammatory cytokines are at peak levels. Increased levels of pro-inflammatory cytokines during the early
morning hours are a known cause of morning stiffness and decreased mobility of RA. IL-6 levels are
substantially increased in patients with RA in general and show a significant circadian variation in these levels.
Peak IL-6 levels tend to occur in the early morning hours and low levels typically occur in the afternoon and
evening. Therefore, we believe an optimal treatment would reduce IL-6 levels in the early morning hours.

Our Solutions

DUEXIS

DUEXIS is a proprietary single tablet formulation containing a fixed-dose combination of ibuprofen, the

most widely prescribed NSAID, and famotidine, a well-established GI agent used to treat dyspepsia,
gastroesophageal reflux disease, or GERD, and active ulcers, in one pill. Ibuprofen has proven anti-inflammatory
and analgesic properties and famotidine reduces the stomach acid secretion that can cause upper GI ulcers. Both
ibuprofen and famotidine have well documented and excellent long-term safety profiles and both products have
been used for many years by millions of patients worldwide. Based on clinical study results, DUEXIS has been
proven to reduce the risk of NSAID-induced upper GI ulcers.

Ibuprofen: One of the World’s Most Widely Prescribed NSAIDs

Ibuprofen continues to be one of the most widely prescribed NSAIDs worldwide. According to

Intercontinental Marketing Services, or IMS, in the United States alone, there were over 38 million prescriptions
written for ibuprofen in 2014. In the United States, both the 600 mg and 800 mg doses together account for
approximately 88% of total ibuprofen prescriptions. In addition, ibuprofen’s flexible three times daily dosing
allows it to be used for both chronic conditions such as arthritis and chronic back pain, and acute conditions such
as sprains and strains.

Famotidine: A Safe and Effective GI Agent

Famotidine is the most potent marketed drug in the class of histamine-2 receptor antagonists, or H2RA.
H2RA’s are a class of drugs used to block the action of histamine on the cells in the stomach that secrete gastric
acid. Famotidine was chosen as the ideal GI protectant to be combined with ibuprofen as it is a well-studied
compound with an estimated 18.8 million patients treated worldwide that provides distinct advantages including:

•

rapid onset of action;

significant reduction in gastric acid levels in the GI tract for the treatment of dyspepsia, GERD and
NSAID-induced upper GI ulcers; and

• well tolerated with a low incidence of adverse drug reactions and a demonstrated safety margin of up to

eight times the approved prescription dose for an extended period of greater than 12 months.

Despite these advantages, famotidine had not yet been approved to reduce the incidence of NSAID-induced
upper GI ulcers in patients taking NSAIDs. We conducted two pivotal Phase 3 clinical trials demonstrating that
treatment with DUEXIS significantly reduced the incidence of NSAID-induced upper GI ulcers in patients with
mild to moderate pain or arthritis compared to ibuprofen alone. Based on the data from the Phase 3 clinical trials
of DUEXIS, we submitted an NDA requesting approval to market DUEXIS in the United States in March 2010.
On April 23, 2011, the FDA approved DUEXIS for the relief of signs and symptoms of RA and OA and to
decrease the risk of developing upper GI ulcers in patients who are taking ibuprofen for these indications.

Benefits of a Fixed-Dose Combination Therapy

Numerous studies have demonstrated that fixed-dose combination therapy provides significant advantages
over taking multiple pills. Specifically, fixed-dose combinations can reduce the number of pills, ensure that the
correct dosage of each component is taken at the correct time and improve compliance, often associated with
better treatment outcomes. DUEXIS has been formulated to provide an optimal dosing regimen of ibuprofen and
famotidine together in the convenience of a single pill.

DUEXIS Commercial Status

DUEXIS is indicated for the relief of signs and symptoms of RA and OA and to decrease the risk of
developing GI ulcers in patients who are taking ibuprofen for these indications. In the second half of 2011, we
hired our initial commercial organization, including approximately 80 sales representatives, completed sales
force training and began marketing DUEXIS to physicians in December 2011. Due to the continued prescription
growth of DUEXIS and VIMOVO, and the acquisition of PENNSAID 2% in October 2014, the primary care
commercial organization continues to grow. As of January 2015, we had approximately 325 primary care sales
representatives marketing DUEXIS, VIMOVO and PENNSAID 2% to physicians in the United States.

In June 2012, we licensed DUEXIS rights in Latin America to Grünenthal, a private company focused on

the promotion of pain products.

PENNSAID 2%

PENNSAID 2% is a topical NSAID that is applied directly to the knee and is indicated for the treatment of
pain of OA of the knee(s). PENNSAID 2% contains diclofenac sodium, a commonly prescribed NSAID, to treat
OA pain. PENNSAID 2% also includes DMSO, a powerful penetrating agent that helps ensure that diclofenac
sodium is absorbed through the skin to the site of inflammation and pain. Topical NSAIDs such as PENNSAID
2% are an alternative to oral NSAID treatment because they reduce systemic exposure to a fraction of that
provided by an oral NSAID. PENNSAID 2% is the only topical NSAID offered with the convenience of a
metered-dose pump, which ensures that the patient will get the correct amount of PENNSAID 2% solution each
time. PENNSAID 2% is easy to apply for patients because PENNSAID 2% is applied in two pumps, twice daily,
delivering relief right to the site of OA knee pain.

Benefits of Topical NSAIDs

Within the NSAID market exists a significant niche for topical NSAIDs, which are prescribed over 5 million
times per year. Topical NSAID treatment may be appropriate for some patients, such as patients who may benefit
from the lower systemic exposure in a topical NSAID, patients with OA in just one joint such as the knee,
patients who have trouble taking oral medications, or patients who are older.

PENNSAID 2% Commercial Status

On January 16, 2014, the FDA approved PENNSAID 2% for the treatment of the pain of OA of the knee(s).
We acquired the U.S. rights to PENNSAID 2% on October 16, 2014 and began marketing PENNSAID 2% with
our primary care sales force in early January 2015. As of January 2015, we had approximately 325 field sales
representatives marketing DUEXIS, PENNSAID 2% and VIMOVO to physicians in the United States.

RAYOS/LODOTRA

RAYOS, known as LODOTRA outside the United States, is a proprietary delayed-release formulation of
low-dose prednisone for the treatment of moderate to severe, active RA in adults particularly when accompanied
by morning stiffness.

RAYOS/LODOTRA Solution

The proprietary formulation technology of RAYOS/LODOTRA enables a delayed-release of prednisone

approximately four hours after administration. The RAYOS/LODOTRA proprietary delivery system
synchronizes the prednisone delivery time with the patient’s elevated cytokine levels, thereby taking effect at a
physiologically optimal point to inhibit cytokine production, and thus significantly reduces the signs and
symptoms of RA and PMR.

RAYOS/LODOTRA was developed utilizing SkyePharma’s proprietary GeoClock™ and GeoMatrix™
technologies, for which we hold an exclusive worldwide license for the delivery of corticosteroids. RAYOS/
LODOTRA is comprised of an active core containing prednisone, which is encapsulated by an inactive porous
shell. The inactive shell acts as a barrier between the product’s active core and a patient’s GI fluids. RAYOS/
LODOTRA is intended to be administered at bedtime. At approximately four hours following bedtime
administration of RAYOS/LODOTRA, water in the digestive tract diffuses through the shell, causing the active
core to expand, which leads to a weakening and breakage of the shell and allows the release of prednisone from
the active core. Our pharmacokinetic studies have shown that the blood concentration of prednisone from
RAYOS/LODOTRA is similar to immediate release prednisone except for the intended time delay of product
release after administration.

RAYOS/LODOTRA Commercial Status

On July 26, 2012, the FDA approved RAYOS for the treatment of RA, PMR, PsA, AS, asthma, COPD and a

number of other conditions. We focus our promotion of RAYOS in the United States on rheumatology
indications, including RA and PMR. We began marketing RAYOS to a subset of U.S. rheumatologists in
December 2012 and began the full launch in late January 2013 to the majority of rheumatologists and high-value
primary care physicians. LODOTRA received its first approval in Europe in March 2009 and is currently
approved for marketing in over 30 countries outside the United States where Mundipharma holds the commercial
rights.

RAYOS/LODOTRA in Other Indications

We also conducted a small Phase 2 clinical trial to evaluate the potential use of RAYOS/LODOTRA to treat
severe asthma compared to immediate-release prednisone. Severe asthma sufferers are frequently prescribed very
high doses of oral corticosteroids. However, high-dose oral corticosteroid treatment is limited by side effects
which include, among others, osteoporosis and its various negative effects. Data from seven patients who had

been treated with 5 mg to 45 mg of daily immediate release prednisone in accordance with the study protocol
showed improvements in nocturnal symptoms, asthma control and asthma-related quality of life when switched
to an equivalent dose of RAYOS/LODOTRA.

VIMOVO

VIMOVO is a proprietary, fixed-dose, delayed-release tablet. VIMOVO combines enteric-coated naproxen,

an NSAID, surrounded by a layer of immediate-release esomeprazole magnesium, a PPI, surrounding the core.
Naproxen has proven anti-inflammatory and analgesic properties and esomeprazole magnesium reduces the
stomach acid secretions that can cause upper GI ulcers. Both naproxen and esomeprazole magnesium have well-
documented and excellent long-term safety profiles and both products have been used by millions of patients
worldwide. Based on clinical trial results, VIMOVO has been shown to decrease the risk of developing gastric
ulcers in patients at risk of developing NSAID associated gastric ulcers.

Naproxen: One of the World’s Most Widely Prescribed NSAIDs

Naproxen is one of the most widely prescribed NSAIDs worldwide. According to IMS, in the United States

alone, there were over 17 million prescriptions written for naproxen in 2014. In the United States, the 375 mg
and 500 mg doses together account for approximately 96% of total naproxen prescriptions. In addition,
naproxen’s twice daily dosing allows it to be used for chronic conditions such as arthritis and AS.

Esomeprazole Magnesium: A Safe and Effective GI Agent

Esomeprazole magnesium, a gastroprotective agent, is a PPI that works by inhibiting the secretion of gastric

acid thus decreasing the amount of acid in the stomach. PPIs are considered to be very potent inhibitors of acid
secretion. Esomeprazole magnesium is indicated for reducing the risk of NSAID-induced gastric ulcers.

Benefits of a Fixed-Dose Combination Therapy

VIMOVO is specifically formulated to allow esomeprazole magnesium to achieve its gastroprotective
impact before naproxen is released into the system. VIMOVO’s design is intended to produce a sequential
delivery of gastroprotective esomeprazole before exposure to naproxen.

VIMOVO Commercial Status

On April 30, 2010, the FDA approved VIMOVO delayed release tablets, 375 mg/20 mg and 500 mg/20 mg

for relief of signs and symptoms of OA, RA and AS and to decrease the risk of developing gastric ulcers in
patients at risk of developing NSAID associated gastric ulcers. In December 2013, as a result of our acquisition
of U.S. rights to VIMOVO, we began the expansion of our sales force to approximately 250 primary care
representatives and 40 rheumatology sales specialists, all of which began marketing VIMOVO in early February
2014. Because of the continued prescription growth of VIMOVO and DUEXIS, and the addition of PENNSAID
2%, the Primary Care commercial organization continues to grow. As of January 2015, we had approximately
325 field sales representatives marketing DUEXIS, PENNSAID 2% and VIMOVO to physicians in the United
States.

ORPHAN DISORDERS

Market Opportunity

Chronic Granulomatous Disease

CGD is a genetic disorder of the immune system. It is described as a primary immunodeficiency disorder,
which means it is not caused by another disease or disorder. In people who have CGD, a type of white blood cell,
called a phagocyte, is defective. These defective phagocytes cannot generate superoxide, leading to an inability
to kill harmful microorganisms such as bacteria and fungi. As a result, the immune system is weakened. People
with CGD are more likely to have certain problems such as recurrent severe bacterial and fungal infections and

chronic inflammatory conditions. These patients are prone to developing masses called granulomas, which can
occur repeatedly in organs throughout the body and cause a variety of problems. CGD was first identified in the
1950s; since then CGD had changed from a disease of tragic and early complications to a disease of chronic
management and high survival. Today, CGD is considered to be a condition that patients can live with and
manage. Studies suggest overall survival has improved over the last decade with more patients living well into
adulthood. Approximately 1 out of every 200,000 babies in the United States is born with CGD.

Severe, Malignant Osteopetrosis

There are several different forms of osteopetrosis (not to be confused with the more common osteoporosis, a

very different condition), which are determined by their pattern of genetic inheritance and characteristics. All
forms of osteopetrosis are characterized by an abnormal increase in bone density. SMO is one form of
osteopetrosis and is sometimes referred to as marble bone disease or malignant infantile osteopetrosis because it
occurs in very young children. SMO is a more severe form of malignant osteopetrosis. While exact numbers are
not known, it has been estimated that 1 out of 250,000 children are born with SMO. Malignant in this instance
does not refer to cancer. During normal bone development, existing bone material is constantly being replaced by
new bone. Cells called osteoblasts cause new bone formation. Other cells called osteoclasts remove old bone
through a process called resorption. In people with osteopetrosis, this balance is not maintained because their
osteoclasts do not function properly. As a result, resorption of old bone material decreases while the formation of
new bone continues. This leads to an abnormal increase in bone mass, which can make the bones more brittle.
Because abnormal bone development affects many different systems in the body, osteopetrosis may cause
problems such as blood disorders, decreased ability to fight infection, bone fractures, problems with vision and
hearing, and abnormal appearance of the face and head.

Our Solution — ACTIMMUNE

ACTIMMUNE is a biologically manufactured protein called interferon gamma-1b that is similar to a protein

the human body makes naturally. In the body, interferon gamma is produced by cells of the immune system and
helps to prevent infection in patients with CGD and enhances osteoclast function in patients with SMO.
ACTIMMUNE is approved by the FDA to reduce the frequency and severity of serious infections associated
with CGD and for delaying time to disease progression in patients with SMO. The precise way that
ACTIMMUNE works to help prevent infection in patients with CGD is not fully understood, but ACTIMMUNE
is believed to work by modifying the cellular function of various cells, including those in the immune system.
The precise way that ACTIMMUNE works to slow the worsening of SMO is also not fully understood, but
ACTIMMUNE is believed to work by modifying the cellular function of various cells, including those that help
form bones.

ACTIMMUNE Efficacy in CGD

The International Chronic Granulomatous Disease Cooperative Study Group, or ICGDCSG, conducted a

controlled clinical trial in 128 patients (ages ranging from 1 to 44 years old) at 13 medical centers across 4
countries. The purpose of this clinical trial was to evaluate the safety and efficacy of ACTIMMUNE in reducing
the frequency and severity of serious infections in patients with CGD. Patients enrolled in the trial were
randomly selected to receive either ACTIMMUNE or placebo in addition to antibiotics. The number and timing
of serious infections were tracked in all patients for up to 1 year. ACTIMMUNE was administered 3 times
weekly using the same dosing regimen that is recommended today. The average duration of treatment was
8.9 months. The study was terminated early following demonstration of a highly statistically significant benefit
of ACTIMMUNE therapy compared to placebo with respect to time to serious infection (p=0.0036), the primary
endpoint of the investigation. The results of the trial were published in the New England Journal of Medicine.
Compared with patients given placebo (n=65), patients in the ACTIMMUNE (n=63) group experienced:

•

67% reduction in relative risk of serious infections

67% fewer inpatient hospital days

64% reduction in the total number and rate of serious infections

As demonstrated in the clinical trial, a treatment benefit included a two-fold (53%) reduction in the number

of CGD patients with at least one serious infection, defined as a clinical event requiring hospitalization and the
use of parenteral antibiotics (ACTIMMUNE: 14/63 vs. placebo: 30/65; p=0.002). The beneficial effect of
ACTIMMUNE was demonstrated throughout a 12 month study, in which 77% of patients with CGD receiving
ACTIMMUNE were free of serious infection during the study compared to 30% of patients who received
placebo (p=0.0006). The mean duration of therapy for these patients was 8.9 months

Investigators concluded that ACTIMMUNE is an effective and safe therapy for patients with CGD, since

the therapy statistically reduced the frequency of serious infections.

ACTIMMUNE Efficacy in SMO

In a controlled clinical trial, 16 patients were randomized to receive either ACTIMMUNE with calcitriol or

calcitriol alone. The age of patients ranged from 1 month to 8 years; with a mean age of 1.5 years. The median
time to progression in the ACTIMMUNE plus calcitriol arm was 165 days vs. a median of 65 days in the
calcitriol only arm. In a separate analysis that combined data from a second trial, 19 of 24 patients on
ACTIMMUNE therapy (+/- calcitriol) for at least 6 months had reduced trabecular bone volume compared to
baseline.

Safety of ACTIMMUNE

The safety of ACTIMMUNE was also evaluated during the CGD clinical trial. Investigators from
ICGDCSG concluded that there were no serious side effects directly attributed to the administration of
ACTIMMUNE in patients with CGD during the trial. The most common side effects observed in patients with
CGD given ACTIMMUNE were flu-like symptoms, such as fever, headache, and chills. The most common side
effects seen with ACTIMMUNE are “flu-like” symptoms such as fever, headache, chills, myalgia (muscle pain),
and fatigue, which may reduce in severity as treatment continues. Administering ACTIMMUNE at bedtime may
also help minimize some of these symptoms. Acetaminophen may be helpful in preventing fever and headache.

ACTIMMUNE can cause severe allergic reactions and/or rash; flu-like symptoms, which may worsen pre-

existing heart conditions; reversible changes to the nervous system (such as decreased mental status, walking
disturbances, and dizziness); reversible severe bone marrow toxicity; decreased production of important cells in
the body; and reversible changes to liver function (particularly in patients less than one year old).

ACTIMMUNE Commercial Status

ACTIMMUNE is the only drug currently approved by the FDA for the treatment for CGD and SMO and we
currently market and distribute ACTIMMUNE only in the United States. Our licenses allow us to market and sell
ACTIMMUNE in the United States, Canada and Japan. We also supply ACTIMMUNE to patients in Canada, if
so requested by way of a prescription from their treating physicians, through Health Canada’s Special Access
Program, which provides access to non-marketed drugs in Canada for practitioners treating patients with serious
or life-threatening conditions when conventional therapies have failed, are unsuitable or are unavailable. Sales in
Canada are not material. We have not otherwise registered or sold ACTIMMUNE in any other territories for
which it currently holds commercial rights.

Potential for ACTIMMUNE in Friedreich’s Ataxia

FA is a debilitating, life-shortening, degenerative, neuro-muscular disorder that affects approximately
3,700 individuals in the United States and 15,000 worldwide, according to the Friedreich’s Ataxia Research
Alliance, or FARA. On October 3, 2014, the FDA granted orphan-drug designation for ACTIMMUNE for the
treatment of FA. The FDA has agreed to the primary endpoint for a planned Phase 3 study that will evaluate
ACTIMMUNE in the treatment of FA. The study will be conducted in collaboration with the FARA, and the
investigators of FARA’s Collaborative Clinical Research Network in Friedreich’s Ataxia. The primary endpoint

for the Phase 3 study will be the change from baseline after 26 weeks in the Friedreich’s Ataxia Rating Scale-
modified neurological exam score (FARS-mNeuro) for patients treated with ACTIMMUNE compared to
placebo. The study is planned to be a randomized, double-blind, multicenter, placebo-controlled, 26-week study
evaluating ACTIMMUNE in children and young adults (10-25 years of age). It is anticipated that approximately
110 subjects will be screened at four U.S. centers for eligibility to randomize approximately 90 subjects 1:1 to
receive either ACTIMMUNE or placebo. We anticipate the study will take 18 months to complete. In February
2015, we submitted an IND application and anticipate the Phase 3 clinical study will begin enrolling patients in
the second quarter of 2015.

Commercial and Supply Agreements

ACTIMMUNE

Boehringer Ingelheim Manufacturing and Supply Agreement

In July 2013, Vidara and Boehringer Ingelheim entered into an exclusive supply agreement, which we

assumed as of result of the Merger. Pursuant to the agreement, Boehringer Ingelheim manufactures the
ACTIMMUNE active drug substance and commercial quantities of the ACTIMMUNE finished drug product.
Boehringer Ingelheim manufactures the active drug substance at its production facility in Vienna, Austria, and
the finished drug product at its facility in Biberach an der Riss, Germany. Boehringer Ingelheim is our sole
source supplier for ACTIMMUNE active drug substance and finished drug product. The processes used to
manufacture and test ACTIMMUNE are complex and subject to FDA inspection and approval. The
ACTIMMUNE active drug substance has a shelf life of 36 months from the date of manufacture and the
ACTIMMUNE finished drug product has a shelf life of 36 months from the date of filling of the single-use vial.
Boehringer Ingelheim also provides quality assurance testing for ACTIMMUNE. Under the terms of this
agreement, we are required to purchase minimum quantities of finished drug product of 75,000 vials per annum.
Boehringer Ingelheim manufactures our commercial requirements of ACTIMMUNE on an annual basis, and
based on our forecasts and the annual contractual minimum purchase quantity. The supply agreement has a term
that runs until July 31, 2020 and which can be further renewed by agreement between parties. Under this supply
agreement, either we or Boehringer Ingelheim may terminate the agreement for an uncured material breach by
the other party or upon the other party’s bankruptcy or insolvency.

Under a Development and Marketing Agreement with Boehringer Ingelheim, we are required to pay
royalties on net sales in certain applicable markets in Latin America, Asia, Africa and Eastern Europe if we elect
to commercialize ACTIMMUNE in those territories. To date, we have not pursued regulatory or other approvals
or commercialized ACTIMMUNE in those territories.

Genentech and Connetics License Agreements

Under a license agreement with Genentech Inc., or Genentech, which was the original developer of
ACTIMMUNE, we are or were obligated to pay royalties to Genentech on our net sales of ACTIMMUNE as
follows:

• Through November 25, 2014, a royalty of 45% of the first $3.7 million in net sales achieved in a

calendar year, and 10% on all additional net sales in that year;

•

For the period from November 26, 2014 through May 5, 2018, the royalty payments will be reduced to
a 20%-30% range for the first tier in net sales and in the 1%-9% range for the second tier; and

From May 6, 2018 and for so long as the Company continues to commercially sell ACTIMMUNE, an
annual royalty in the low single digits as a percentage of annual net sales.

Either Genentech or we may terminate the agreement if the other party becomes bankrupt or defaults,
however, in the case of a default, the defaulting party has 30 days to cure the default before the license agreement
may be terminated.

Under the terms of an agreement with Connetics Corporation (which was the predecessor parent company to
InterMune and is now part of GlaxoSmithKline), or Connetics, we are obligated to pay royalties to Connetics on
our net sales of ACTIMMUNE as follows:

•

0.25% of net sales of ACTIMMUNE, rising to 0.5% once cumulative net sales of ACTIMMUNE in the
United States surpass $1.0 billion; and in the event we develop and receive regulatory approval for
ACTIMMUNE in the indication of scleroderma, we will be obligated to pay a royalty of 4% on all net
sales of ACTIMMUNE recorded for use in that indication.

Either Connetics or we may terminate the agreement if the other party becomes bankrupt or defaults,

however, in the case of a default, the defaulting party has 30 days to cure the default before the license agreement
may be terminated.

DUEXIS

BASF Contract

In July 2010, we entered into a contract with BASF Corporation, or BASF, for the purchase of DC85, which
is ibuprofen in a direct compression blend and is the active ingredient in DUEXIS. Pursuant to the agreement, we
are obligated to purchase a significant majority of our commercial demand for DC85 from BASF. The contract
expires in December 2017. Thereafter, the agreement automatically renews for successive renewal terms of three
years each until terminated by either party giving specified prior written notice to the other party. Either party
may also terminate the agreement in the event of uncured breach by the other party. If the agreement terminates
for any reason before a specified date and we have not purchased requisite amounts of DC85, BASF has the right
to withhold from the pre-purchase credit an amount based upon the total amount of DC85 purchased throughout
the life of the agreement.

Manufacturing and Supply Agreement with sanofi-aventis U.S. LLC

In May 2011, we entered into a manufacturing and supply agreement with sanofi-aventis U.S. Pursuant to
the agreement, sanofi-aventis U.S. is obligated to manufacture and supply DUEXIS to us in final, packaged form,
and we are obligated to purchase DUEXIS exclusively from sanofi-aventis U.S. for our commercial requirements
of DUEXIS in North America and certain countries and territories in Europe, including the European Union
member states and Scandinavia, and South America. Sanofi-aventis U.S. is obligated to acquire the components
necessary to manufacture DUEXIS, including the active pharmaceutical ingredients, or APIs, DC85 and
famotidine, and is obligated to acquire all DC85 under the terms of any agreements we may have with suppliers
for the supply of DC85. We expect that sanofi-aventis U.S. will obtain DC85 from BASF Corporation through
our sales contract with BASF and famotidine through our supply agreement with Dr. Reddy’s Laboratories. In
order to allow sanofi-aventis U.S. to perform its obligations under the agreement, we granted sanofi-aventis U.S.
a non-exclusive license to our related intellectual property. In November 2011, the FDA approved the use of the
sanofi-aventis Canada Inc. manufacturing site in Laval, Quebec to manufacture DUEXIS. As a result of the FDA
approval of the sanofi-aventis Canada, Inc. manufacturing site in Laval, Quebec, sanofi-aventis U.S. is the
exclusive commercial manufacturer and supplier of DUEXIS. In December 2011, Valeant acquired Dermik, a
dermatology unit of sanofi-aventis U.S., which includes the Laval, Canada site. Although, Valeant has taken over
management and operations at the Laval, Canada facility, our manufacturing agreement remains with sanofi-
aventis U.S. The price for DUEXIS under the agreement varies depending on the configuration and volume of
DUEXIS we purchase and is subject to annual adjustments to reflect changes in costs as measured by the
Producer Price Index published by the U.S. Department of Labor, Bureau of Labor Statistics and certain other
changes and events set forth in the agreement. We have paid for the purchase and installation of equipment
necessary to manufacture DUEXIS tablets, and sanofi-aventis U.S. is obligated to pay the costs of routine
maintenance of the equipment. Upon expiration or termination of the agreement we may also be obligated to
reimburse sanofi-aventis U.S. for the depreciated net book value of any other equipment purchased by sanofi-
aventis U.S. in order to fulfill its obligations under the agreement.

The agreement term extends until the eighth anniversary of the first commercial sale of DUEXIS in any
country in the territory and automatically extends for successive two year terms unless terminated by either party
upon two years prior written notice. Either party may terminate the agreement upon 30 days’ prior written notice
to the other party in the event of breach by the other party that is not cured within 30 days of notice (which notice
period may be longer in certain, limited situations) or in the event we lose regulatory approval to market
DUEXIS in all countries within the territory, and either party may terminate the agreement without cause upon
two years prior written notice to the other party at any time after the third anniversary of the first commercial sale
of DUEXIS in any country in the territory.

Grünenthal Agreement

In June 2012, we entered into a collaboration, license and supply agreement with Grünenthal for the
potential commercialization of DUEXIS in certain Latin American and Caribbean countries. Under the terms of
the agreement, we will supply DUEXIS to Grünenthal exclusively in the territory at an agreed upon price and
they will have the exclusive right to distribute DUEXIS in the territory. Subject to early termination, the term of
the agreement is 10 years from launch with certain automatic 2-year renewal provisions.

PENNSAID 2%

Nuvo Supply Agreement

In October 2014, in connection with the acquisition of the U.S. rights to PENNSAID 2% from Nuvo, we
entered into an exclusive supply agreement with Nuvo. Under the supply agreement, Nuvo will manufacture and
supply PENNSAID 2% to us. We have committed to a binding purchase order to Nuvo for delivery of
PENNSAID 2%. In addition, at least 90 days prior to the first day of each calendar month during the term of the
supply agreement, we are required to submit a binding written purchase order to Nuvo for PENNSAID 2% in
minimum batch quantities. The initial term of our supply agreement is through December 31, 2022, 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.

RAYOS/LODOTRA

SkyePharma and Jagotec Agreements

Development and License Agreement

In August 2004, we entered into a development and license agreement with SkyePharma and Jagotec, a
wholly-owned subsidiary of SkyePharma, regarding certain proprietary technology and know-how owned by
SkyePharma for the delayed release of corticosteroids. The agreement replaced a similar agreement entered into
between Merck and SkyePharma in 1998, which Merck assigned to us.

Under the agreement, which was amended in August 2007, we received an exclusive, sub-licensable

worldwide license to the oral formulation of any corticosteroid, including prednisone, prednisolone,
methylprednisolone and/or cortisone, with delayed release technology covered by intellectual property rights and
know-how owned by SkyePharma. We were also granted an option to acquire a royalty-free, exclusive and sub-
licensable right to license and manufacture RAYOS/LODOTRA which we can exercise any time upon specified
prior written notice, expiring no earlier than five years after the first launch of RAYOS/LODOTRA. We have
exercised the option to acquire the manufacturing license, which became effective in April 2014.

In return for the grant of the license, Jagotec has the right to manufacture, package and supply RAYOS/
LODOTRA to us in accordance with terms and conditions of a separate manufacturing and supply agreement we
entered into with Jagotec. In addition, 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, and lump sum and milestone payments.

The agreement expires on a country by country basis, upon the expiration of the last patent rights for

RAYOS/LODOTRA, which will expire between 2024 and 2028. In the event of expiration, the licenses under the
agreement will be perpetual, fully paid-up and royalty-free. Either party may also terminate the agreement in the
event of a liquidation or bankruptcy of the other party or upon an uncured breach by the other party.

Manufacturing and Supply Agreement

In August 2007, we entered into a manufacturing and supply agreement with Jagotec for the purchase of

RAYOS/LODOTRA. Under the agreement, which was amended in March 2011, Jagotec or its affiliates
manufacture and supply RAYOS/LODOTRA to us in bulk. In August 2011, SkyePharma leased their entire
pharmaceutical manufacturing business to Aenova, a large contract manufacturing organization, and Aenova is
now a subcontractor for Jagotec for the manufacture of RAYOS/LODOTRA, with our consent. We were required
to purchase RAYOS/LODOTRA exclusively from Jagotec through April 2014, after which we are able to
purchase RAYOS/LODOTRA from other manufacturers if we choose. As of December 31, 2014 our total
remaining minimum purchase commitment was approximately $3.3 million based on tablet pricing under the
agreement as of that date, which amount is subject to volume and price adjustments due to, among other things,
inflation, order quantities and launch and approval in certain European Union countries. We also supply the API,
prednisone to Jagotec at our expense for use in the manufacture of RAYOS/LODOTRA.

We pay Jagotec, exclusive of any value added tax or similar governmental charges, a price for RAYOS/
LODOTRA representing a negotiated mark-up over manufacturing costs. After a short initial period, the price
will be adjusted annually to reflect changes in both manufacturing and materials costs as measured by the
Ensemble price index. If Jagotec makes a major capital expenditure during the contract term to fulfill increased
orders forecast by us, the price per unit will increase if the actual order falls short of the forecast.

The agreement term extends until the end of the fifth year after the first launch of RAYOS/LODOTRA and
automatically extends on a yearly basis unless terminated by either party upon prior written notice. Either party
may also terminate the agreement in the event of insolvency, liquidation or bankruptcy of the other party or upon
an uncured breach by the other party. We have the right to receive a continuing supply of RAYOS/LODOTRA
from Jagotec for a period of 24 months after termination by Jagotec, regardless of the reason for termination.

Pursuant to a letter agreement between Jagotec and us, Jagotec agreed to allow us to give Bayer Pharma

AG, or Bayer, the right to manufacture, test and release quantities of RAYOS/LODOTRA in order to establish
and maintain Bayer as a manufacturer of RAYOS/LODOTRA. Under certain circumstances, we may also
purchase shortfall quantities of RAYOS/LODOTRA from Bayer to the extent Jagotec is unable to supply us. In
March 2013, we entered into an agreement with Bayer to allow us to purchase quantities of RAYOS/LODOTRA
for these purposes. After our manufacturing license from Jagotec becomes effective, we may also purchase
quantities of RAYOS/LODOTRA from Bayer pursuant to our agreement with Bayer.

Merck Serono License Agreements (Assigned to Mundipharma Laboratories)

In December 2006 and March 2009, we entered into separate transfer, license and supply agreements with

Merck Serono and Merck GesmbH, an affiliate of Merck Serono, for the commercialization of LODOTRA in
Germany and Austria, respectively. The agreement covering Germany was amended in December 2008 to allow
co-promotion of LODOTRA in Germany. Under the agreements, we granted Merck Serono and Merck GesmbH
exclusive distribution and marketing rights pertaining to LODOTRA for each of Germany and Austria,
respectively, and an exclusive license to use the trademark for LODOTRA in Germany and Austria. The transfer,
license and supply agreements related to Germany and Austria were assigned to Mundipharma Laboratories from
Merck Serono and Merck GesmbH in April 2011 and September 2011, respectively, with our consent.
Mundipharma Laboratories is obligated to commercialize LODOTRA in Germany and Austria, as applicable,
exclusively under the LODOTRA trademark. Mundipharma Laboratories is obligated to use commercially
reasonable efforts to market LODOTRA in Germany and Austria, and is prohibited from launching other oral
corticosteroids for the treatment of RA for the first three years following the launch of LODOTRA. With respect

to the agreement covering Germany, if Mundipharma Laboratories does not meet specified minimum sales
targets over specified periods of time, the marketing rights to LODOTRA will become nonexclusive unless
Mundipharma Laboratories pays us the shortfall. With respect to the agreement covering Austria, if
Mundipharma Laboratories does not meet specified minimum sales targets over specified periods of time, after
good faith discussions to modify the agreement, we have the right to terminate the agreement.

Mundipharma Laboratories has agreed to purchase LODOTRA commercial product exclusively from us.
We supply LODOTRA to Mundipharma Laboratories at the price which is the higher of (1) a percentage of the
list price of LODOTRA sold to final purchasers of LODOTRA from Mundipharma Laboratories (excluding any
discounts) and (2) the costs we incur for the production and delivery of LODOTRA to a Mundipharma
Laboratories supply depot, as applicable, plus a profit mark-up.

Subject to early termination, the terms of the agreements are 15 years from the launch of LODOTRA in
Germany and 10 years from the launch of LODOTRA in Austria. Thereafter, the agreements automatically renew
until terminated by a party by giving specified prior written notice to the other party to the agreement. Under
both agreements a party may also terminate an agreement in the event of a bankruptcy of the other party, certain
events beyond the parties’ control that impair performance under an agreement, or upon material uncured breach
by a party.

Mundipharma Agreements

In March 2009, we entered into a distribution agreement with Mundipharma for the commercialization of

LODOTRA in Europe, excluding Germany and Austria, and a manufacturing and supply agreement with
Mundipharma Medical. The distribution agreement, which was amended in July 2009 and March 2011, provides
for an upfront payment of 5.0 million Euros, all of which has been paid by Mundipharma, and aggregate potential
milestone payments of up to an additional 11.0 million Euros, which includes a credit in the amount of
1.0 million Euros we agreed to provide to Mundipharma to be applied towards certain future milestone payments
in connection with the March 2011 amendment. As of December 31, 2014, we had received 4.9 million Euros in
milestone payments under the distribution agreement.

Under the distribution agreement, we granted Mundipharma the exclusive distribution and marketing rights

pertaining to LODOTRA for: Albania, Belgium, Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Greece, Hungary, Iceland, Ireland, Israel, Italy, Latvia,
Liechtenstein, Lithuania, Luxemburg, Macedonia, Malta, Montenegro, Netherlands, Norway, Poland, Portugal,
Romania, Serbia, former Soviet Union countries, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey and
the UK. We also granted Mundipharma an exclusive license to use our trademark for LODOTRA in these
countries, and Mundipharma is allowed to commercialize LODOTRA under the LODOTRA trademark.
Mundipharma is obligated to use commercially reasonable efforts to market LODOTRA in the territory and is
prohibited from launching other oral corticosteroids during the term of the distribution agreement. If
Mundipharma does not meet specified minimum sales targets, which range from single digit millions of Euros to
tens of millions of Euros on a country by country basis, over specified periods of time, the marketing rights
granted under the distribution agreement will become nonexclusive with respect to the applicable country unless
Mundipharma pays us the shortfall.

Under the manufacturing and supply agreement, which was subsequently amended in March 2011,
Mundipharma Medical agreed to purchase LODOTRA exclusively from us with respect to the territory. We
supply LODOTRA to Mundipharma Medical at the price which is a specified percentage of the average net
selling price for sales in a given country.

Subject to early termination, the terms of both of the March 2009 agreements extend to March 2024.
Thereafter, the agreements automatically renew until terminated by either party giving specified prior written
notice to other party. Either party may also terminate either of the agreements in the event of a bankruptcy of the
other party or upon an uncured material breach by the other party. In addition, Mundipharma has the right to

terminate the distribution agreement in the event of material risk of personal injury to third parties or
immediately by written notice with respect to any country if the market authorization for LODOTRA is cancelled
in such country.

In November 2010, we entered into a second distribution agreement with Mundipharma for the

commercialization of LODOTRA in several Asian countries, Australia, New Zealand and South Africa, and a
second manufacturing and supply agreement with Mundipharma Medical. Under the distribution agreement, we
received an upfront payment of $3.5 million and may be entitled to additional aggregate milestone payments of
up to $4.5 million. In March 2012, we amended the distribution agreement and the manufacturing and supply
agreement to include certain Latin American countries. Under the March 2012 amendment to the distribution
agreement, we may receive aggregate upfront and milestone payments of up to $2.0 million. In October 2013, we
amended the distribution agreement and the manufacturing and supply agreement to include an additional
55 countries in the Middle Eastern and African regions. In September 2014, we further amended the distribution
agreement and the manufacturing and supply agreement to include Cambodia, Myanmar, Laos and Brunei. As of
December 31, 2014, under our distribution agreement we had received $0.2 million in milestone payments and
$1.2 million associated with an upfront payment under the March 2012 amendment.

Under the distribution agreement, as amended, we granted Mundipharma the exclusive distribution and
marketing rights pertaining to LODOTRA for: Australia, China, Hong Kong, Indonesia, Korea, Malaysia, New
Zealand, the Philippines, Singapore, South Africa, Taiwan, Thailand, Vietnam, México, Brazil, Argentina,
Colombia, Venezuela, Peru, Chile, Ecuador, Dominican Republic, Guatemala, Costa Rica, Uruguay, Bolivia,
Panama, Nicaragua, El Salvador, Honduras and the Middle Eastern and African regions. Mundipharma will be
responsible for obtaining regulatory approvals in these countries. We also granted Mundipharma an exclusive
license to use our trademark for LODOTRA in these countries, and Mundipharma is allowed to commercialize
LODOTRA under the LODOTRA trademark. Mundipharma is obligated to use commercially reasonable efforts
to obtain regulatory approval for and market LODOTRA and is prohibited from launching other oral
corticosteroids in these countries during the term of the distribution agreement. If Mundipharma does not meet
specified minimum volume targets, which range from thousands of tablets of product to millions of tablets of
product on a country by country basis, over specified periods of time, the marketing rights granted under the
distribution agreement will become nonexclusive with respect to the applicable country unless Mundipharma
pays us the shortfall.

Under the manufacturing and supply agreement, as amended, Mundipharma Medical agreed to purchase

LODOTRA exclusively from us with respect to the territories. We supply bulk product of LODOTRA to
Mundipharma Medical at an adjustable price per tablet and Mundipharma is responsible for final packaging and
distribution in the territory.

Subject to early termination, the terms of both of the November 2010 agreements are 15 years from the first
product launch on a country by country basis. Thereafter, the agreements automatically renew until terminated by
either party by giving specified prior written notice to other party. Either party may terminate either of the
agreements early in the event of a change in control of the other party, bankruptcy of the other party, or upon an
uncured material breach by the other party. Either party has the right to terminate the distribution agreement with
respect to any country upon prior written notice if the volume target is not met in such country for reasons
beyond its control. In addition, Mundipharma has the right to terminate the distribution agreement in the event of
material risk of personal injury to third parties or immediately by written notice with respect to any country if the
market authorization for LODOTRA is cancelled, withdrawn or suspended in such country. We also have the
right, subject to certain conditions, to terminate the distribution agreement with respect to any country in the
territory if within a specified period of time, Mundipharma fails to submit appropriate filings to obtain marketing
authorization in the country or fails to initiate a clinical trial required for marketing authorization in the country.

Temmler Supply Agreement

We have entered into an agreement with Temmler Werke GmbH, or Temmler, for the packaging and
assembling of RAYOS/LODOTRA. Pursuant to the agreement, we may order RAYOS/LODOTRA according to

specified rolling forecasts. There are no minimum purchase requirements under the agreement and we may enter
into agreements with other third-party packagers for RAYOS/LODOTRA. Subject to early termination, the
agreement will remain in effect until December 21, 2015. Thereafter, the agreement automatically renews for
additional one year periods unless either party provides notice to the other party at least twelve months prior to
the expiration of the then-current period. Either party may also terminate the agreement at any time for an
uncured material breach. In December 2013, Temmler provided us notice of termination. Therefore, subject to
early termination, the agreement will terminate on December 21, 2015. In December 2012, Temmler was
acquired by Aenova Group.

VIMOVO

AstraZeneca Asset Purchase Agreement

In November 2013, we entered into an asset purchase agreement with AstraZeneca pursuant to which we

acquired from AstraZeneca and its affiliates certain intellectual property and other assets, and assumed from
AstraZeneca and its affiliates certain liabilities, each with respect to VIMOVO, and obtained rights to develop
other pharmaceutical products that contain gastroprotective agents in a single fixed combination oral solid dosage
form with NSAIDs in the United States. Pursuant to the transactions contemplated by the asset purchase
agreement, we acquired certain existing assets and rights necessary to commercialize VIMOVO in the
United States including, among other things, the IND and NDA for VIMOVO in the United States,
AstraZeneca’s interest in certain patents covering VIMOVO in the United States and certain promotional
materials and records related to VIMOVO in the United States. Under the asset purchase agreement, we are also
entitled to the benefit of a covenant not to sue granted by Merck Sharp & Dohme Corp. and certain of its
affiliates, or collectively Merck, to AstraZeneca, with respect to certain patents owned by AstraZeneca but
exclusively licensed to Merck, that cover the manufacture and commercialization of VIMOVO in the United
States. In addition, under the asset purchase agreement, AstraZeneca assigned to us its amended and restated
collaboration and license agreement for the United States with Pozen, pursuant to which AstraZeneca has in-
licensed from Pozen certain patents and know-how of Pozen covering VIMOVO in the United States. The terms
of the amended and restated collaboration and license agreement for the United States with Pozen, or the Pozen
license agreement, are described below.

In November 2013, in connection with the closing of the transactions contemplated by the asset purchase
agreement, we also entered into a license agreement with AstraZeneca, a supply agreement with AstraZeneca’s
affiliate, AstraZeneca LP, and certain other agreements that are described below. We also executed a transition
agreement with AstraZeneca pursuant to which AstraZeneca transitioned to us regulatory and commercial
responsibility for VIMOVO in the United States. From the closing of the transaction until December 31, 2013,
AstraZeneca continued to commercialize VIMOVO in the United States under AstraZeneca’s existing pricing
and paid to us the net profits recognized on sales of VIMOVO in the United States. Beginning January 1, 2014,
we commenced commercialization of VIMOVO in the United States on our own behalf and under new pricing
for VIMOVO.

In consideration for the U.S. rights to VIMOVO, we paid to AstraZeneca a one-time upfront cash payment

of $35.0 million.

Following the closing of the transactions contemplated by the asset purchase agreement, we became
responsible for and control matters relating to VIMOVO in the United States, including responsibility for
commercialization of VIMOVO in the United States, responsibility for ongoing developmental and regulatory
activities with respect to VIMOVO in the United States and responsibility for the current VIMOVO litigation
with respect to the patents we purchased under the asset purchase agreement and the patents we licensed from
Pozen under the Pozen license agreement. AstraZeneca continues to be responsible for and retains control of
VIMOVO outside the United States.

AstraZeneca License Agreement

In November 2013, in connection with the closing of the transactions contemplated by the asset purchase

agreement, we entered into a license agreement with AstraZeneca, or the AstraZeneca license agreement,
pursuant to which AstraZeneca granted us an exclusive license under certain intellectual property (including
patents, know-how, trademarks, copyrights and domain names) of AstraZeneca and its affiliates to develop,
manufacture and commercialize VIMOVO in the United States. AstraZeneca also granted us a non-exclusive
license under certain intellectual property of AstraZeneca and its affiliates to manufacture, import, export and
perform research and development activities with respect to VIMOVO outside the United States but solely for
purposes of commercializing VIMOVO in the United States. In addition, AstraZeneca granted us a non-exclusive
right of reference and use under certain regulatory documentation controlled by AstraZeneca and its affiliates to
develop, manufacture and commercialize VIMOVO in the United States and to manufacture, import, export and
perform research and development activities with respect to VIMOVO outside the United States but solely for
purposes of commercializing VIMOVO in the United States.

Under the AstraZeneca license agreement, we granted AstraZeneca a non-exclusive sublicense under such

licensed intellectual property and a non-exclusive right of reference under certain regulatory documentation
controlled by us to manufacture, import, export and perform research and development activities with respect to
VIMOVO in the United States but solely for purposes of commercializing VIMOVO outside the United States.

Under the AstraZeneca license agreement, we and our affiliates are subject to certain limitations and
restrictions on our ability to develop, commercialize and seek regulatory approval with respect to VIMOVO or
other products that contain gastroprotective agents in a single fixed combination oral solid dosage form with
NSAIDs (excluding DUEXIS). These limitations and restrictions include, among other things, restrictions on
indications for which we may commercialize VIMOVO or any such other products, restrictions on our ability to
develop or seek regulatory approval with respect to such other products that contain esomeprazole, restrictions on
our ability to develop or seek regulatory approval for VIMOVO for any indications other than the indications for
which NSAIDs are indicated, and restrictions on our marketing activities with respect to VIMOVO and any such
other products.

The AstraZeneca license agreement continues in full force and effect until terminated in accordance with its

terms. Under the AstraZeneca license agreement, the parties may terminate upon mutual written agreement by
the parties, or either party may terminate rights granted to us with respect to licensed trademarks and licensed
domain names under the AstraZeneca license agreement upon uncured material breach by the other party of
certain specified provisions of the AstraZeneca license agreement.

Amended and Restated Collaboration and License Agreement with Pozen; Letter Agreement with
AstraZeneca and Pozen

Under the Pozen license agreement, Pozen granted us an exclusive, royalty-bearing license under certain of

Pozen’s intellectual property in the United States to manufacture, develop and commercialize VIMOVO and
other products controlled by us that contain gastroprotective agents in a single fixed combination oral solid
dosage form with NSAIDs, excluding DUEXIS, in the United States.

Under the Pozen license agreement, we are required to pay Pozen a flat 10% royalty based on net sales of
VIMOVO and such other products sold by us, our affiliates or sublicensees during the royalty term, subject to
minimum annual royalty obligations of $5.0 million in 2014 and $7.5 million each year thereafter, which
minimum royalty obligations will continue for each year during which one of Pozen’s patents covers such
products in the United States and there are no competing products 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 products. Our obligation
to pay royalties to Pozen will expire upon the later of (a) expiration of the last-to-expire of certain patents
covering such products in the United States, and (b) ten years after the first commercial sale of such products in

the United States. In addition, we will be obligated to reimburse Pozen for costs, including attorneys’ fees,
incurred by Pozen in connection with VIMOVO patent litigation moving forward, subject to agreed caps.

We are responsible for, and are required to use diligent and reasonable efforts directed to commercializing
VIMOVO or another qualified product in the United States. We will also own and maintain all regulatory filings
and marketing approvals in the United States for any such products, including all INDs and NDAs for VIMOVO.
Pozen covenanted that it will not at any time prior to the expiration of the royalty term, and will ensure that its
affiliates do not, directly or indirectly, develop or commercialize or license any third party to develop or
commercialize certain competing products in the United States.

The Pozen license agreement, unless earlier terminated, will expire upon expiration of the royalty term for

all such products in the United States. Either party has the right to terminate the agreement upon uncured
material breach by the other party or upon the bankruptcy or similar proceeding of the other party. We also have
the right to terminate the Pozen license agreement for cause upon certain defined product failures.

In November 2013, in connection with the asset purchase agreement and the Pozen license agreement, we,

AstraZeneca and Pozen entered into a letter agreement in which Pozen consented to AstraZeneca’s assignment of
the Pozen license agreement to us and that addresses the rights and responsibilities of the parties in relation to the
Pozen license agreement and the amended and restated collaboration and license agreement between Pozen and
AstraZeneca for territories outside the United States, or the Pozen-AstraZeneca license agreement. Under the
letter agreement, we and AstraZeneca agreed to pay Pozen milestone payments upon the achievement by us and
AstraZeneca, collectively, of certain annual aggregate global net sales thresholds ranging from $550.0 million to
$1.25 billion with respect to products licensed by Pozen to us under the Pozen license agreement and to
AstraZeneca under the Pozen-AstraZeneca license agreement. The aggregate milestone payment amount that
may be owed by AstraZeneca and us, collectively, under the letter agreement is $260.0 million, with the amount
payable by each of us and AstraZeneca with respect to each milestone to be based upon the proportional sales
achieved by each of us and AstraZeneca, respectively, in the applicable year.

The letter agreement will terminate with respect to Pozen and us upon the termination of the Pozen license

agreement and will terminate with respect to Pozen and AstraZeneca upon the termination of the Pozen-
AstraZeneca license agreement.

AstraZeneca Supply Agreement

In November 2013, in connection with the asset purchase agreement, we entered into a supply agreement

with AstraZeneca pursuant to which AstraZeneca agreed to supply VIMOVO to us for commercialization in the
United States. Under the supply agreement, AstraZeneca supplied the quantity of VIMOVO that we ordered,
both for our own use and for use by our sublicensees, on a transitional basis through December 31, 2014. The
supply agreement expired on December 31, 2014 and we have transitioned to Patheon for the manufacturing and
supply of VIMOVO.

Patheon Agreement

In November 2013, we entered into a master manufacturing services agreement and product agreement, or,

collectively, the Patheon manufacturing agreement, with Patheon, who is AstraZeneca’s contract manufacturer of
VIMOVO, for the manufacture and supply of VIMOVO. Under the Patheon manufacturing agreement, we
agreed to purchase a specified percentage of our VIMOVO requirements for the United States from Patheon or
its affiliates. In addition, under the terms of the Patheon manufacturing agreement, we are able to enter into
individual product agreements with Patheon for the manufacture of specific products in addition to VIMOVO if
agreed by us and Patheon.

Pursuant to the Patheon manufacturing agreement, we are required to supply Patheon with any active
materials for VIMOVO. We 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.

The Patheon manufacturing agreement will be effective until December 31, 2019 and will automatically
renew for successive terms of three years each if there is any product agreement in effect, unless either party
gives written notice to the other party of its intention to terminate the agreement at least 24 months prior to the
end of the then current term. Either party may terminate the Patheon manufacturing agreement or any product
agreement early for uncured material breach by the other party or upon the other party’s bankruptcy or
insolvency. We may terminate any product agreement if any regulatory authority takes any action or raises any
objection that prevents us from commercializing the product. Additionally, Patheon may terminate the Patheon
manufacturing agreement or any product agreement early if we assign our rights or obligations under the Patheon
manufacturing agreement or such product agreement to a competitor of Patheon or to a party that, in the
reasonable opinion of Patheon, is not a credit worthy substitute for us, or in certain other circumstances where we
assign the Patheon manufacturing agreement or product agreement without Patheon’s consent.

Sales and Marketing

Our current sales force is approximately 375 sales representatives consisting of 325 primary care sales
representatives and 50 sales representatives in specialty and orphan diseases business areas. In June 2012, to
increase the number of called-on physicians for DUEXIS and in anticipation of the potential FDA approval of
RAYOS, we expanded of our sales force from 80 sales representatives to approximately 150 sales
representatives. In December 2013, as a result of the acquisition of U.S. rights to VIMOVO from AstraZeneca,
we further expanded our sales force to approximately 290, consisting of 250 primary care representatives and
40 rheumatology sales specialists and began marketing VIMOVO in early February 2014. As a result of the
Merger, following which we began marketing ACTIMMUNE, and our recent acquisition of PENNSAID 2%, our
sales force has increased to a total of approximately 375. Our primary care representatives are now marketing
DUEXIS, PENNSAID 2% and VIMOVO. Our orphan sales force focuses on marketing to a limited number of
healthcare practitioners who specialize in fields such as pediatric immunology, allergy, infectious diseases and
hematology/oncology to help them understand the potential benefits of ACTIMMUNE for their patients with
CGD and SMO. We announced the availability of Horizon-labeled PENNSAID 2% in the United States on
January 2, 2015. We have, and expect to continue to, entered into agreements with third parties for
commercialization of our products outside the United States.

In December 2014, we began execution of a comprehensive plan creating a new organization focused on the

acceleration of our PME program to ensure continued growth of our NSAID portfolio in 2015. Through this
program, physicians can have their patients’ prescriptions for our products shipped directly to the patient.
Because the patient out of pocket cost for our products when dispensed through the PME program may be
significantly lower than such costs when our products are dispensed outside of the PME program, prescriptions
filled through our PME program are therefore less likely to be subject to the efforts of traditional pharmacies to
switch a physician’s intended prescription of our products to a generic or over the counter brand. We expect that
continued adoption of our PME program by physicians will be important to our ability to gain market share for
our products as pressure from healthcare payors and pharmacy benefit managers, or PBMs, to use less expensive
generic or over the counter brands instead of branded products increases.

Intellectual Property

Our objective is to aggressively patent the technology, inventions and improvements that we consider

important to the development of our business. We have a portfolio of patents and applications based on clinical and
pharmacokinetic/pharmacodynamic modeling discoveries, and our novel formulations. In addition, we have an
exclusive license to pending U.S. and foreign patent applications from SkyePharma. We also have licenses to U.S.

patents and patent applications and trademarks covering VIMOVO from Pozen and AstraZeneca, and PENNSAID
2% from Nuvo. We intend to continue filing patent applications seeking intellectual property protection as we
generate anticipated formulation refinements, new methods of manufacturing and clinical trial results.

We will only be able to protect our technologies and products from unauthorized use by third parties to the

extent that valid and enforceable patents or trade secrets cover them. As such, our commercial success will
depend in part on receiving and maintaining patent protection and trade secret protection of our technologies and
products as well as successfully defending these patents against third-party challenges.

On July 15, 2013, we received a Paragraph IV Patent Certification from Watson Laboratories, Inc. —
Florida, known as Actavis Laboratories FL, Inc., or Watson, advising that Watson had filed an ANDA with the
FDA for a generic version of RAYOS, containing up to 5 mg of prednisone. Watson has not advised us as to the
timing or status of the FDA’s review of its filing. On August 26, 2013, we, together with Jagotec, filed suit in the
United States District Court for the District of New Jersey against WLF seeking an injunction to prevent the
approval of the ANDA. The lawsuit alleges that WLF has infringed U.S. Patent Nos. 6,488,960, 6,677,326,
8,168,218, 8,309,124, and 8,394,407 by filing an ANDA seeking approval from the FDA to market generic
versions of RAYOS containing 1 mg, 2 mg, and 5 mg of prednisone prior to the expiration of the patents. The
subject patents are listed in the FDA’s Orange Book. The commencement of the patent infringement lawsuit
stays, or bars, FDA approval of WLF’s ANDA for 30 months or until an earlier district court decision that the
subject patents are not infringed or are invalid. We, together with Jagotec have granted WLF a covenant not to
sue with respect to US Patent Nos. 6,677,326 and 8,168,218, respectively, and accordingly these patents have
been dismissed from the lawsuit. The Court held a claim construction hearing on October 16, 2014, and issued its
opinion and order on claim construction on November 10, 2014, adopting our proposed construction of both of
the disputed claim terms. The Court has scheduled expert discovery in the WLF action to be completed by
June 2, 2015, and has set the pretrial conference for September 10, 2015. The trial date will be set following the
pretrial conference.

On November 13, 2014, we received a Paragraph IV Patent Certification from Watson advising that Watson

had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Watson has not advised us as to the
timing or status of the FDA’s review of its filing. On December 23, 2014, we filed suit in the United States
District Court for the District of New Jersey against Watson seeking an injunction to prevent the approval of the
ANDA. The lawsuit alleges that Watson has infringed U.S. Patent Nos. 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 prior to the expiration of the patents. The subject patents are listed in the FDA’s Orange
Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Watson’s ANDA
for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid.
The Court has not yet set a trial date for the Watson action.

On December 2, 2014, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,741,956 from Paddock Laboratories,
LLC, or Paddock, advising that Paddock had filed an ANDA with the FDA for a generic version of PENNSAID
2%. On January 9, 2015, we received from Paddock another Paragraph IV Patent Certification against newly
Orange Book listed U.S. Patent No. 8,871,809. Paddock has not advised us as to the timing or status of the
FDA’s review of its filing. On January 13, 2015 and January 14, 2015, we filed suit 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. The lawsuits alleged
that Paddock has infringed U.S. Patent Nos. 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 the patents. The subject patents are listed in the FDA’s Orange Book. The
commencement of the patent infringement lawsuit stays, or bars, FDA approval of Paddock’s ANDA for 30
months or until an earlier district court decision that the subject patents are not infringed or are invalid. The
Courts have not yet set trial dates for the Paddock actions.

Currently, patent litigation is pending in the United States District Court for the District of New Jersey
against four generic companies intending to market VIMOVO before the expiration of patents listed in the
Orange Book. These cases are in the United States District Court for the District of New Jersey and have been
consolidated for discovery purposes. They are collectively known as the VIMOVO cases, and involve the
following sets of defendants: (i) Dr. Reddy’s; (ii) Lupin; (iii) Mylan; and (iv) Actavis. Patent litigation in the
United States District Court for the District of New Jersey against a fifth generic company, Anchen, was
dismissed on June 9, 2014 after Anchen recertified under Paragraph III. We understand that Dr. Reddy’s has
entered into a settlement with AstraZeneca with respect to patent rights directed to Nexium for the
commercialization of VIMOVO, and that according to the settlement agreement, Dr. Reddy’s is now able to
commercialize VIMOVO under AstraZeneca’s Nexium patent rights. The settlement agreement, however, has no
effect on the Pozen VIMOVO patents, which are still the subject of patent litigations. As part of our acquisition
of the U.S. rights to VIMOVO, we have taken over and are responsible for the patent litigations that include the
Pozen patents licensed to us under the Pozen license agreement.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4,

2013, May 10, 2013, June 28, 2013 and October 23, 2013 and collectively include allegations of infringement of
U.S. Patent Nos. 6,926,907 and 8,557,285. We understand the cases arise from Paragraph IV Notice Letters
providing notice of the filing of an ANDA with the FDA seeking regulatory approval to market a generic version
of VIMOVO before the expiration of the patents-in-suit. We understand the Dr. Reddy’s notice letters were dated
March 11, 2011 and November 20, 2012; the Lupin notice letter were dated June 10, 2011 and March 12, 2014;
the Mylan notice letter was dated May 16, 2013; the Actavis notice letters were dated March 29, 2013 and
November 5, 2013; and the Anchen notice letter was dated September 16, 2011. The court has issued a claims
construction order and has set a pretrial schedule but has not yet set a trial date.

On or about December 19, 2014, we filed a Notice of Opposition to a European patent, EP 2611457, to

Roberto Testi, et al., covering compositions and methods for treating FA with interferon gamma, e.g.,
ACTIMMUNE. In the European Union, the grant of a patent may be opposed by one or more private parties.

On February 2, 2015, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 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., or collectively Taro, advising that Taro had
filed an ANDA with the FDA for a generic version of PENNSAID 2%. Taro has not advised us as to the timing
or status of the FDA’s review of its filing. We are still in the process of evaluating the Paragraph IV Patent
Certification, and it is anticipated we will file suit against Taro within the statutorily prescribed 45 day time limit.

We intend to vigorously defend our intellectual property rights relating to ACTIMMUNE, DUEXIS,
PENNSAID 2%, RAYOS and VIMOVO, but we cannot predict the outcome of the WLF matter related to
RAYOS or the DRL cases, the Mylan cases or the Watson cases related to VIMOVO, or the Watson and
Paddock cases related to PENNSAID 2%. Any adverse outcome in these matters or any new generic challenges
that may arise could result in one or more generic versions of ACTIMMUNE, DUEXIS, PENNSAID 2%,
RAYOS and/or VIMOVO, 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 ACTIMMUNE, DUEXIS,
PENNSAID 2%, RAYOS and/or VIMOVO and would negatively impact our financial condition and results of
operations, including causing a significant decrease in our revenues and cash flows.

In the United States, in addition to any patent protection, DUEXIS, PENNSAID 2%, RAYOS and

VIMOVO, have been granted three years of marketing exclusivity as a Section 505(b)(2) NDA. This marketing
exclusivity period for each product began upon marketing approval of such product and runs in parallel with any
patents that have issued or we expect to be issued protecting such product. In the European Union, LODOTRA
has received 10 years of marketing exclusivity protection, beginning with its March 2009 marketing
authorization in Germany. We anticipate that DUEXIS will also receive 10 years of marketing exclusivity upon
European approval on a country by country basis.

The patent positions of life sciences companies can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain unresolved. No consistent policy regarding the
breadth of claims allowed in such companies’ patents has emerged to date in the United States. The patent
situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations
of patent laws in the United States or other countries may diminish the value of our intellectual property.
Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-
party patents. For example:

• we or our licensors might not have been the first to make the inventions covered by each of our pending

patent applications and issued patents;

• we or our licensors might not have been the first to file patent applications for these inventions;

• others may independently develop similar or alternative technologies or duplicate any of our

technologies;

• it is possible that none of our pending patent applications or the pending patent applications of our

licensors will result in issued patents;

• our issued patents and the issued patents of our licensors may not provide a basis for commercially viable
drugs, or may not provide us with any competitive advantages, or may be challenged and invalidated by
third parties;

• we may not be successful in any patent litigation to enforce our patent rights, including our pending

patent litigation regarding, PENNSAID 2%, RAYOS and/or VIMOVO;

• we may not develop additional proprietary technologies or product candidates that are patentable; or

• the patents of others may have an adverse effect on our business.

Competition

Our industry is highly competitive and subject to rapid and significant technological change. Our potential

competitors include large pharmaceutical and biotechnology companies, specialty pharmaceutical companies and
generic drug companies, although we are not currently aware of any other delayed release prednisone drug,
ibuprofen/famotidine combination drug or naproxen/esomeprazole magnesium combination drug in
development. We believe that the key competitive factors that will affect the commercial success of
ACTIMMUNE, DUEXIS, PENNSAID 2%, RAYOS/LODOTRA and/or VIMOVO, as well as future drug
candidates that we may develop, are efficacy, safety and tolerability profile, convenience in dosing, price and
reimbursement.

DUEXIS and VIMOVO

DUEXIS and VIMOVO compete with other branded NSAIDs, including Celebrex, marketed by Pfizer Inc.

Celebrex is an NSAID that selectively inhibits the COX-2 enzyme and is an effective anti-arthritic agent that
reduces the risk of ulceration compared to traditional NSAIDs such as ibuprofen.

In general, DUEXIS and VIMOVO also face competition from the separate use of NSAIDs for pain relief
and ulcer medications to address the risk of NSAID-induced ulcers. Use of these therapies separately in generic
form may be less expensive than DUEXIS and VIMOVO. In addition, physicians could begin to prescribe both
an NSAID and a GI protectant to be taken together but in separate pills. We expect to compete with the separate
use of NSAIDs and ulcer medications primarily through DUEXIS’ and VIMOVO’s advantages in dosing
convenience and patient compliance, and by educating physicians about such advantages, including through
funding we have provided for the American Gastroenterology Association to help physicians and patients better
understand and manage NSAID risks. We expect DUEXIS will be the only product containing a histamine-2
receptor antagonist with an indication to reduce the risk of NSAID-induced upper GI ulcers and that VIMOVO
will be the only product containing a PPI with an indication to reduce the risk of NSAID-induced ulcers.

ACTIMMUNE

ACTIMMUNE presently faces little competition. ACTIMMUNE is the only drug currently approved by the
FDA specifically for the treatment for CGD and SMO. While there are additional or alternative approaches used
to treat patients with CGD and SMO, there are currently no products on the market that compete directly with
ACTIMMUNE.

PENNSAID 2%

PENNSAID 2% faces competition from generic versions of PENNSAID 1.5% which are priced

significantly less than the price we charge for PENNSAID 2%. In addition, PENNSAID 2% competes with two
other branded topical NSAIDS, including Voltaren® Gel, marketed by Endo Pharmaceuticals, which is the
market leader in the topical NSAID category. We expect to compete with these other products primarily through
PENNSAID 2%’s dosing convenience and patient compliance. Unlike the other two products that are dosed four
times per day and require the patient to measure out the correct dose, only PENNSAID 2% is easy to apply with
the convenience of twice-daily dosing and a metered-dose pump, which ensures that the patient will get the
correct amount of PENNSAID 2% solution each time.

RAYOS/LODOTRA

RAYOS/LODOTRA competes in Europe and in the United States with a number of products on the market

to treat RA, including corticosteroids, such as prednisone, traditional DMARDs, such as methotrexate and
biologic agents, such as HUMIRA and Enbrel. The majority of RA patients, however, are treated with DMARDs.
DMARDs, such as methotrexate, are typically used as initial therapy in patients with RA whereas biologic agents
are typically added to DMARDs as combination therapy. It is common for an RA patient to take a combination
of a DMARD, an oral glucocorticoid, an NSAID and/or a biologic agent.

Manufacturing

All of our products are currently supplied by contract manufacturers. All manufacturing facilities contracted

by us are registered with the FDA, European Medicines Agency, or EMA, and other internationally recognized
regulatory authorities. In addition, these facilities have been audited by these agencies to confirm compliance.
We do not at this time plan to build manufacturing facilities and currently plan to continue to scale our operations
using contract manufacturers.

ACTIMMUNE

ACTIMMUNE, interferon gamma-1b, is a recombinant protein that is produced by fermentation of a
genetically engineered Escherichia coli bacterium containing the DNA which encodes for the human protein.
Purification of the active drug substance is achieved by conventional column chromatography. The resulting
active drug substance is then formulated as a highly purified sterile solution and filled in a single-use vial for
subcutaneous injection, which is the ACTIMMUNE finished drug product. In support of its manufacturing
process, we and Boehringer Ingelheim store multiple vials of the Escherichia coli bacterium master cell bank and
working cell bank in order to ensure that it will have adequate backup should any cell bank be lost in a
catastrophic event.

We have an exclusive supply agreement with Boehringer Ingelheim to manufacture the active drug

substance and commercial quantities of ACTIMMUNE finished drug product. Boehringer Ingelheim
manufactures the active drug substance at its production facility in Vienna, Austria, and the finished drug product
at its facility in Biberach an der Riss, Germany. Boehringer Ingelheim also provides us quality assurance testing
for ACTIMMUNE. The processes used to manufacture and test ACTIMMUNE are complex and subject to FDA
inspection and approval. The ACTIMMUNE active drug substance has a shelf life of 36 months from the date of
manufacture and the ACTIMMUNE finished drug product has a shelf life of 36 months from the date of filling of

the single-use vial. Under the terms of this agreement, we are required to purchase minimum quantities of
finished drug product of 75,000 vials per annum. Boehringer Ingelheim manufactures our commercial
requirements of ACTIMMUNE on an annual basis, and based on our forecasts and the annual contractual
minimum purchase quantity. The supply agreement has a term that runs until July 31, 2020 and which can be
further renewed by agreement between parties.

DUEXIS

The DUEXIS manufacturing process is well-established and we validated the process in accordance with
regulatory requirements prior to commercialization in the United States. We have contracted with internationally
recognized pharmaceutical companies with operations in North America and Europe for contract manufacturing
and packaging. In May 2011, we entered into a long-term supply and manufacturing agreement with sanofi-
aventis U.S. for the manufacture of DUEXIS. In November 2011, the FDA approved the use of the sanofi-aventis
Canada Inc. manufacturing site in Laval, Quebec to manufacture DUEXIS. In December 2011, Valeant acquired
Dermik, a dermatology unit of sanofi-aventis U.S., which includes the Laval, Canada site. Although Valeant has
taken over management and operations at the Laval, Canada facility, our manufacturing agreement remains with
sanofi-aventis U.S.

The first API in DUEXIS is ibuprofen in a direct compression blend called DC85, which is manufactured by

BASF in Bishop, Texas. DC85 is a proprietary blend of ibuprofen and manufacturing capacity and batch
quantities are currently sufficient to meet our forecasted commercial requirements. DC85 is manufactured in
compliance with the FDA’s current good manufacturing practices regulations for pharmaceuticals, or cGMPs.
The second API in DUEXIS is famotidine, which is available from a number of international suppliers. We
purchase famotidine manufactured by Dr. Reddy’s in India. Dr. Reddy’s has been audited by the FDA and found
to be compliant in all aspects of the product. Our personnel have also completed audits of each supplier location
and did not identify any critical cGMP deficiencies. We currently receive both APIs in powder form and each is
blended with a number of U.S. Pharmacopeia inactive ingredients. We purchase DUEXIS in final, packaged form
exclusively from sanofi-aventis U.S. for our commercial requirements for DUEXIS in North America and certain
countries and territories in Europe, including the European Union member states and Scandinavia, and South
America.

PENNSAID 2%

In October 2014, in connection with the acquisition of the U.S. rights to PENNSAID 2% from Nuvo, we
entered into an exclusive supply agreement with Nuvo. Under the supply agreement, Nuvo will manufacture and
supply PENNSAID 2% to us at its manufacturing site in Varennes Québec, Canada. We have committed to a
binding purchase order to Nuvo for delivery of PENNSAID 2%. In addition, at least 90 days prior to the first day
of each calendar month during the term of the supply agreement, we are required to submit a binding written
purchase order to Nuvo for PENNSAID 2% in minimum batch quantities. The initial term of our supply
agreement is through December 31, 2022, 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.

A key excipient used in PENNSAID as a penetration enhancer is dimethyl sulfoxide, or DMSO. Horizon

and Nuvo 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.

RAYOS/LODOTRA

We rely on well-established third-party manufacturers for the manufacture of RAYOS/LODOTRA. In
Europe, we retain quality responsibility for RAYOS/LODOTRA by controlling the final release of products. We
purchase the primary active ingredients for RAYOS/LODOTRA from Tianjin Tianyao Pharmaceuticals Co., Ltd.
in China and from Sanofi Chimie SA in France.

We have contracted with Jagotec for the production of RAYOS/LODOTRA tablets. Jagotec produces
RAYOS/LODOTRA operating through its affiliate SkyePharma. The SkyePharma production site in Lyon,
France, complies with cGMP requirements and has been audited by the FDA for the production of several
sustained release tablets employing SkyePharma’s GeoMatrix technology. In August 2011, SkyePharma leased
their entire pharmaceutical manufacturing business to Aenova, and Aenova is now a subcontractor for Jagotec for
the manufacture of RAYOS/LODOTRA, with our consent. We consider Aenova an experienced and reliable
contract manufacturer dedicated largely to advanced oral dosage forms. The commercial scale production of
RAYOS/LODOTRA tablets was implemented prior to the launch of LODOTRA in Europe in 2009. Under our
manufacturing and supply agreement, we were required to purchase RAYOS/LODOTRA exclusively from
Jagotec through April 2014, after which we are be able to purchase RAYOS/LODOTRA from other
manufacturers if we choose.

Pursuant to a letter agreement between Jagotec and us, Jagotec agreed to allow us to give Bayer the right to

manufacture, test and release quantities of RAYOS/LODOTRA in order to establish and maintain Bayer as a
manufacturer of RAYOS/LODOTRA. Under certain circumstances, we may also purchase shortfall quantities of
RAYOS/LODOTRA from Bayer to the extent Jagotec is unable to supply us. In March 2013, we entered into an
agreement with Bayer to allow us to purchase quantities of RAYOS/LODOTRA for these purposes. After our
manufacturing license from Jagotec becomes effective, we may also purchase quantities of RAYOS/LODOTRA
from Bayer pursuant to our agreement with Bayer.

Analytical testing of RAYOS/LODOTRA is conducted by PHAST GmbH, a German provider of contract

analytical services. The packaging of RAYOS/LODOTRA tablets is conducted by Temmler in Munich,
Germany. Temmler was acquired by the Aenova Group in December 2012. Catalent Pharma Solutions in
Schorndorf, Germany is registered as a second packaging site for Europe and U.S. supplies.

VIMOVO

In November 2013, in connection with our asset purchase agreement with AstraZeneca for VIMOVO, we

entered into a transitional supply agreement with AstraZeneca pursuant to which AstraZeneca supplied
VIMOVO to us for commercialization in the United States through December 31, 2014. We have completed
transitioning the supply chain to third parties (including the packaging).

As part of this transition, in November 2013, we entered into a manufacturing agreement with Patheon, who
was AstraZeneca’s contract bulk supply manufacturer of VIMOVO, pursuant to which Patheon will manufacture
and package VIMOVO for us through December 31, 2019. Naproxen and esomeprazole magnesium trihydrate,
the APIs in VIMOVO, are manufactured by Patheon into finished packaged tablets at its Cincinnati, Ohio
manufacturing site. In March 2014, we entered into a manufacturing and supply agreement with Divis
Laboratories Limited, or Divis, in India for the supply of naproxen. Also, in March 2014, we entered into a
manufacturing and supply agreement with Minakem Holding SAS, or Minakem, in France for the supply of
esomeprazole magnesium trihydrate.

Distribution

Finished tablets of DUEXIS, RAYOS and VIMOVO, vials of ACTIMMUNE, and bottles of PENNSAID
2% are shipped to central third-party logistics FDA-compliant warehouses for storage and distribution into the
supply chain. Our third-party logistics providers specialize in integrated operations that include warehousing and
transportation services that can be scaled and customized to our needs based on market conditions and the
demands and delivery service requirements for our products and materials. Their services eliminate the need to
build dedicated internal infrastructures that would be difficult to scale without significant capital investment. Our
third-party logistics provider warehouses all finished product in controlled FDA-registered facilities. Incoming
orders are prepared and shipped through an order entry system to ensure just in time delivery of the products.

Third-Party Coverage and Reimbursement

In both U.S. and foreign markets, our ability to commercialize our products successfully depends in
significant part on the availability of coverage and adequate reimbursement to healthcare providers from third-
party payers, including, in the United States, government payers such as the Medicare and Medicaid programs,
managed care organizations and private health insurers. Third-party payers are increasingly challenging the
prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. This
is especially true in markets where over the counter and generic options exist. Even if coverage is made available
by a third-party payer, the reimbursement rates paid for covered products might not be adequate. For example,
third-party payers may use tiered coverage and may adversely affect demand for our products by not covering
our products or by placing them in a more expensive formulary tier relative to competitive products (where
patients have to pay relatively more out of pocket than for products in a lower tier). We cannot be certain that our
products will be covered by third-party payers or that such coverage, where available, will be adequate, or that
our products will successfully be placed on the list of drugs covered by particular health plan formularies. Many
states have also created preferred drug lists and include drugs on those lists only when the manufacturers agree to
pay a supplemental rebate. The industry competition to be included on such formularies and preferred drug lists
often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payers may refuse to
include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when
a less costly generic equivalent or other therapeutic alternative is available. In addition, because each third-party
payer individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement
is a time-consuming and costly process. We may be required to provide scientific and clinical support for the use
of any product to each third-party payer separately with no assurance that approval would be obtained, and we
may need to conduct pharmacoeconomic studies to demonstrate the cost effectiveness of our products for
formulary coverage and reimbursement. Even with studies, our products may be considered less safe, less
effective or less cost-effective than competitive products, and third-party payers may not provide coverage and
adequate reimbursement for our products or our product candidates. These pricing and reimbursement pressures
may create negative perceptions to any product price increases, or limit the amount we may be able to increase
our product prices, which may adversely affect our product sales and results of operations. Where coverage and
reimbursement are not adequate, physicians may limit how much or under what circumstances they will prescribe
or administer such products, and patients may decline to purchase them. This, in turn, could affect our ability to
successfully commercialize our products and impact our profitability, results of operations, financial condition,
and future success.

The U.S. market has seen a trend in which retail pharmacies have become increasingly involved in
determining which prescriptions will be filled with the requested product or a substitute product, based on a
number of factors, including potentially perceived product costs and benefits, as well as payer substitution
policies. Many states have in place requirements for prescribers to indicate in writing on their prescriptions if
they do not want pharmacies to make substitutions; these requirements are varied and not consistent across states.
We may need to increasingly spend time and resources to ensure the prescriptions written for our products are
filled as written, where appropriate.

Coverage policies, third-party reimbursement rates and product pricing regulation may change at any time.
Even if favorable coverage and adequate reimbursement status is attained for one or more products that receive
regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Government Regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries
impose extensive requirements upon the clinical development, pre-market approval, manufacture, labeling,
marketing, promotion, pricing, import, export, storage and distribution of pharmaceutical products. These
agencies and other regulatory agencies regulate research and development activities and the testing, approval,
manufacture, quality control, safety, effectiveness, labeling, storage, recordkeeping, advertising and promotion of

drugs. Failure to comply with applicable FDA or foreign regulatory agency requirements may result in Warning
Letters, fines, civil or criminal penalties, suspension or delays in clinical development, recall or seizure of
products, partial or total suspension of production or withdrawal of a product from the market.

In the United States, the FDA regulates drug products under the Federal Food, Drug, and Cosmetic Act, or
FFDCA, and its implementing regulations and biologics additionally under the Public Health Service Act. The
process required by the FDA before product candidates may be marketed in the United States generally involves
the following:

• submission to the FDA of an IND, which must become effective before human clinical trials may begin

and must be updated annually;

• completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in

accordance with the FDA’s Good Laboratory Practice, or GLP, regulations;

• performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of

the product candidate for each proposed indication;

• submission to the FDA of an NDA or biologics license application, or BLA, as appropriate, after

completion of all pivotal clinical trials;

• a determination by the FDA within 60 days of its receipt of an NDA or BLA to file the application for

review;

• satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities to assess

compliance with cGMP regulations; and

• FDA review and approval of an NDA or BLA prior to any commercial marketing or sale of the product in

the United States.

The development and approval process requires substantial time, effort and financial resources, and we

cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

The results of preclinical tests (which include laboratory evaluation as well as GLP studies to evaluate
toxicity in animals) for a particular product candidate, together with related manufacturing information and
analytical data, are submitted as part of an IND to the FDA. The IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the
conduct of the proposed clinical trial, including concerns that human research subjects will be exposed to
unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns
before the clinical trial can begin. IND submissions may not result in FDA authorization to commence a clinical
trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted
during product development. Further, an independent institutional review board, or IRB, for each medical center
proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences
at that center and it must monitor the study until completed. The FDA, the IRB or the sponsor may suspend a
clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to
an unacceptable health risk. Clinical testing also must satisfy extensive good clinical practice regulations and
regulations for informed consent and privacy of individually identifiable information. Similar requirements to the
U.S. IND are required in the EEA and other jurisdictions in which we may conduct clinical trials. Investigator-
sponsored or investigator-initiated clinical trials are studies for which the investigator holds the IND, or
equivalent regulatory filing in foreign jurisdictions, and is responsible for compliance with both the investigator
and sponsor requirements under applicable law.

Clinical Trials. For purposes of NDA or BLA submission and approval, clinical trials are typically

conducted in the following sequential phases, which may overlap:

• Phase 1 Clinical Trials. Studies are initially conducted in a limited population to test the product

candidate for safety, dose tolerance, absorption, distribution, metabolism, and excretion, typically in
healthy humans, but in some cases in patients.

• Phase 2 Clinical Trials. Studies are generally conducted in a limited patient population to identify

possible adverse effects and safety risks, explore the initial efficacy of the product for specific targeted
indications and to determine dose range or pharmacodynamics. Multiple Phase 2 clinical trials may be
conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3
clinical trials.

• Phase 3 Clinical Trials. These are commonly referred to as pivotal studies. When Phase 2 evaluations
demonstrate that a dose range of the product is effective and has an acceptable safety profile, Phase 3
clinical trials are undertaken in large patient populations to further evaluate dosage, provide substantial
evidence of clinical efficacy and further test for safety in an expanded and diverse patient population at
multiple, geographically dispersed clinical trial centers.

• Phase 4 Clinical Trials. The FDA may approve an NDA for a product candidate, but require that the
sponsor conduct additional clinical trials to further assess the drug after NDA approval under a
postmarketing commitment. In addition, a sponsor may decide to conduct additional clinical trials after
the FDA has approved an NDA. Post-approval trials are typically referred to as Phase 4 clinical trials.

The results of drug development, preclinical studies and clinical trials are submitted to the FDA as part of an

NDA or BLA, as appropriate. Applications also must contain extensive chemistry, manufacturing and control
information. Applications must be accompanied by a significant user fee. Once the submission has been accepted
for filing, the FDA’s goal is to review applications within 12 months of submission or, if the application relates
to an unmet medical need in a serious or life-threatening indication, eight months from submission. The review
process is often significantly extended by FDA requests for additional information or clarification. The FDA will
typically conduct a pre-approval inspection of the manufacturer to ensure that the product can be reliably
produced in compliance with cGMPs. The FDA may refer the application to an advisory committee for review,
evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the
recommendation of an advisory committee, but it typically follows such recommendations. The FDA may deny
approval of an application by issuing a Complete Response Letter if the applicable regulatory criteria are not
satisfied. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3
clinical trial(s), and/or other significant, expensive and time- consuming requirements related to clinical trials,
preclinical studies or manufacturing. Data from clinical trials are not always conclusive and the FDA may
interpret data differently than we or our collaborators interpret data. Approval may occur with Risk Evaluation
and Mitigation Strategies, or REMS, which limit the labeling, distribution or promotion of a drug product. Once
issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety
problems occur after the product reaches the market. In addition, the FDA may require testing, including Phase 4
clinical trials, and surveillance programs to monitor the safety effects of approved products which have been
commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the
results of these post-marketing programs or other information.

The DUEXIS, PENNSAID 2%, RAYOS and VIMOVO NDAs were submitted under Section 505(b)(2) of
the FFDCA. Section 505(b)(2) was enacted as part of the Drug Price Competition and Patent Term Restoration
Act of 1984, also known as the Hatch-Waxman Act. This statutory provision permits the approval of an NDA
where at least some of the information required for approval comes from studies not conducted by or for the
applicant and for which the applicant has not obtained a right of reference. The Hatch-Waxman Act permits the
applicant to rely in part upon the FDA’s findings of safety and effectiveness for previously approved products,
such as ibuprofen, famotidine and prednisone.

DUEXIS, PENNSAID 2%, RAYOS and VIMOVO have obtained, and any other products of ours approved

by the FDA could obtain, three years of Hatch-Waxman marketing exclusivity, based upon our conducting or
sponsoring new clinical investigations that are essential to approval of the respective NDA. Under this form of
exclusivity, the FDA would be precluded from approving a generic drug application or, in some cases, another
505(b)(2) application for a drug product for the protected conditions of approval (for example, a product that
incorporates the change or innovation represented by our product) for a period of three years, although the FDA

may accept and commence review of such applications at any time. However, this form of exclusivity would not
prevent the FDA from approving an NDA that relies on its own clinical data to support the change or innovation.
Further, if another company obtains approval for either product candidate for the same indication we are studying
before we do, our approval could be blocked until the other company’s Hatch-Waxman marketing exclusivity
expires.

Other Regulatory Requirements. Products manufactured or distributed pursuant to FDA approvals are
subject to continuing regulation by the FDA, including recordkeeping, annual product quality review, payment of
product and manufacturing establishment fees and reporting requirements. Adverse event experience with the
product must be reported to the FDA in a timely fashion and pharmacovigilance programs to proactively look for
these adverse events are mandated by the FDA. Our products may be subject to REMS requirements that affect
labeling, distribution or post market reporting. Drug manufacturers and their subcontractors are required to
register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced
inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements,
including cGMPs, which impose certain procedural and documentation requirements upon us and our third-party
manufacturers. Following such inspections, the FDA may issue notices on Form 483 and Untitled Letters or
Warning Letters that could cause us or our third-party manufacturers to modify certain activities. A Form 483
notice, if issued at the conclusion of an FDA inspection, can list conditions the FDA investigators believe may
have violated cGMP or other FDA regulations or guidelines. In addition to Form 483 notices and Untitled Letters
or Warning Letters, failure to comply with the statutory and regulatory requirements can subject a manufacturer
to possible legal or regulatory action, such as suspension of manufacturing, seizure of product, injunctive action
or possible civil penalties. We cannot be certain that we or our present or future third-party manufacturers or
suppliers will be able to comply with the cGMP regulations and other ongoing FDA regulatory requirements. If
we or our present or future third-party manufacturers or suppliers are not able to comply with these requirements,
the FDA requires us to recall a drug from distribution or withdraw approval for that product.

The FDA closely regulates the post-approval marketing and promotion of pharmaceuticals, including
standards and regulations for direct-to-consumer advertising, dissemination of off-label information, industry-
sponsored scientific and educational activities and promotional activities involving the Internet, including certain
social media activities. Products may be marketed only for the approved indications and in accordance with the
provisions of the approved label. Further, if there are any modifications to the product, including changes in
indications, labeling, or manufacturing processes or facilities, we may be required to submit and obtain FDA
approval of a new or supplemental application, which may require us to develop additional data or conduct
additional preclinical studies and clinical trials. Failure to comply with these requirements can result in adverse
publicity, Warning Letters or “untitled letters”, corrective advertising and potential administrative, civil and
criminal penalties, as well as damages, fines, withdrawal of regulatory approval, the curtailment or restructuring
of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment,
any of which could adversely affect our ability to sell our products or operate our business and also adversely
affect our financial results.

Physicians may, in their independent medical judgment, prescribe legally available pharmaceuticals for uses
that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.
Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are
the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of
physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’
communications regarding off-label use. Additionally, 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 products 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 products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. If

our promotional activities, including any promotional activities that a contracted sales force may perform on our
behalf, fail to comply with these regulations or guidelines, we may be subject to warnings from, or enforcement
action by, these authorities. In addition, our failure to follow FDA rules and guidelines relating to promotion and
advertising may cause the FDA to issue warning letters or untitled letters, suspend or withdraw an approved
product from the market, require a recall or institute fines or civil fines, or could result in disgorgement of
money, operating restrictions, injunctions or criminal prosecution, any of which could harm our business. Thus,
we are only permitted to market ACTIMMUNE, DUEXIS, PENNSAID 2%, RAYOS and VIMOVO for their
approved indications and we could be subject to enforcement actions under various statutes if we engage in any
off-label marketing.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug

Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and
sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and
state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to
ensure accountability in distribution, including a drug pedigree which tracks the distribution of prescription
drugs. Further, under the recently enacted Drug Quality and Security Act, drug manufacturers are subject to a
number of requirements, including, product identification, tracing and verification, among others, that are
designed to improve the detection and removal of counterfeit, stolen, contaminated or otherwise potentially
harmful drugs from the U.S. drug supply chain. These requirements will be phased in over several years and
compliance with this new law will likely increase the costs of the manufacture and distribution of drug products,
which could have an adverse effect on our financial condition.

Outside the United States, our partners’ ability to market a product is contingent upon obtaining marketing
authorization from the appropriate regulatory authorities. The requirements governing marketing authorization,
pricing and reimbursement vary widely from country to country.

In the EMA (which is comprised of the 27 Member States of the European Union, plus Norway, Iceland and

Liechtenstein), medicinal products can only be commercialized after obtaining an MA. There are three types of
marketing authorizations:

•

the Community MA, which is issued by the European Commission through the Centralized Procedure,
based on the opinion of the Committee for Medicinal Products for Human Use (CHMP) of the EMA,
and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory
for certain types of products, such as biotechnology medicinal products, orphan medicinal products,
and medicinal products containing a new active substance indicated for the treatment of AIDS, cancer,
neurodegenerative disorders, diabetes, autoimmune and viral diseases. The Centralized Procedure is
optional for products containing a new active substance not yet authorized in the EEA, or for products
that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of
public health in the European Union.

• Decentralized Procedure (DCP) MAs are available for products not falling within the mandatory scope
of the Centralized Procedure. An identical dossier is submitted to the competent authorities of each of
the Member States in which the MA is sought, one of which is selected by the applicant as the RMS.
The competent authority of the RMS prepares a draft assessment report, a draft summary of the product
characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other
Member States (referred to as the Concerned Member States, or CMS, for their approval. If the CMS
raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling,
or packaging proposed by the RMS, the product is subsequently granted a national MA in all of the
selected Member States (i.e. in the RMS and the selected CMS). Where a product has already been
authorized for marketing in a Member State of the EEA, this DCP approval can be recognized in other
Member States through the Mutual Recognition Procedure, or MRP.

• National Procedure MAs, which are issued by a single competent authority of the Member States of the
EEA and only covers their respective territory, are also available for products not falling within the

mandatory scope of the Centralized Procedure. Once a product has been authorized for marketing in a
Member State of the EEA through the National Procedure, this National MA can also be recognized in
other Member States through the MRP.

Under the procedures described above, before granting the MA, the EMA or the competent authority(ies) of

the Member State(s) of the EEA make an assessment of the risk-benefit balance of the product on the basis of
scientific criteria concerning its quality, safety and efficacy.

Under Regulation (EC) No 726/2004/EC and Directive 2001/83/EC (each as amended), the European Union

has adopted a harmonized approach to data and marketing exclusivity (known as the 8 + 2 + 1 formula). The
approach permits eight years of data exclusivity and 10 years of marketing exclusivity. An additional non-
cumulative one-year period of marketing exclusivity is possible if during the data exclusivity period (the first
eight years of the 10-year marketing exclusivity period), the MA holder obtains an authorization for one or more
new therapeutic indications that are deemed to bring a significant clinical benefit compared to existing therapies.

The data exclusivity period begins on the date of the product’s first MA in the European Union and prevents

generics from relying on the marketing authorization holder’s pharmacological, toxicological, and clinical data
for a period of eight years. After eight years, a generic product application may be submitted and generic
companies may rely on the marketing authorization holder’s data. However, a generic cannot launch until two
years later (or a total of 10 years after the first marketing authorization in the European Union of the innovator
product), or three years later (or a total of 11 years after the first MA in the European Union of the innovator
product) if the MA holder obtains marketing authorization for a new indication with significant clinical benefit
within the eight-year data exclusivity period.

The 8 + 2 + 1 exclusivity scheme applies to products that have been authorized in the European Union by
either the EMA through the Centralized Procedure or the competent authorities of the Member States of the EEA
(under the Decentralized, or Mutual Recognition procedures).

The holder of a Community MA or National MA is subject to various obligations under applicable EEA

regulations, such as pharmacovigilance obligations, requiring it to, among other things, report and maintain
detailed records of adverse reactions, and to submit periodic safety update reports to the competent authorities.
The holder must also ensure that the manufacturing and batch release of its product is in compliance with the
applicable requirements. The MA holder is further obligated to ensure that the advertising and promotion of its
products complies with applicable laws, which can differ from Member State to Member State of the EEA.

Healthcare Fraud and Abuse Laws. As a pharmaceutical company, certain federal and state healthcare laws
and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We
may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. For
example, in the United States, there are federal and state anti-kickback laws that prohibit the payment or receipt
of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare
products and services or reward past purchases or recommendations. Violations of these laws can lead to civil
and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare
programs. These laws are potentially applicable to manufacturers of products regulated by the FDA, such as us,
and pharmacies, hospitals, physicians and other potential purchasers of such products.

The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving,

offering or paying remuneration, directly or indirectly, to induce either the referral of an individual, or the
furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal
healthcare program, such as the Medicare and Medicaid programs. The term “remuneration” is not defined in the
federal Anti-Kickback Statute and has been broadly interpreted to include anything of value, including for
example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash,
waivers of payment, ownership interests and providing anything at less than its fair market value. Several courts

have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving
remuneration is to induce referrals of federal healthcare covered business, the statute may have been violated,
and enforcement will depend on the relevant facts and circumstances. The Patient Protection and Affordable Care
Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA,
among other things, amended the intent requirement of the federal Anti-Kickback Statute to state that a person or
entity needs not have actual knowledge of this statute or specific intent to violate it in order to have committed a
violation. In addition, ACA provides that the government may assert that a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes
of the civil False Claims Act (discussed below) or the civil monetary penalties statute, which imposes penalties
against any person who is determined to have presented or caused to be presented a claim to a federal health
program that the person knows or should know is for an item or service that was not provided as claimed or is
false or fraudulent, or to have offered improper inducements to federal health care program beneficiaries to select
a particular provider or supplier. The federal Anti-Kickback Statute is broad, and despite a series of narrow safe
harbors, prohibits many arrangements and practices that are lawful in businesses outside of the healthcare
industry. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply
to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and
Medicaid programs, and do not contain identical safe harbors. In addition, where such activities involve foreign
government officials, they may also potentially be subject to the Foreign Corrupt Practices Act. Because of the
breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that
some of our business activities, including our activities with physician customers and pharmacies, as well as our
activities pursuant to partnerships with other companies and pursuant to contracts with contract research
organizations, could be subject to challenge under one or more of such laws.

The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a

false claim for payment to the federal government or knowingly making, using or causing to be made or used a
false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any
request or demand” for money or property presented to the U.S. government. In addition, the ACA specified that
a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a
false or fraudulent claim for purposes of the civil False Claims Act. The federal False Claims Act has been the
basis for numerous enforcement actions and settlements by pharmaceutical and other healthcare companies in
connection with various alleged financial relationships with customers. In addition, a number of pharmaceutical
manufacturers have reached substantial financial settlements in connection with allegedly causing false claims to
be submitted because of the companies’ marketing of products for unapproved, and thus non-reimbursable, uses.
Certain marketing practices, including off-label promotion, may also violate false claims laws, as might
violations of the federal physician self-referral laws, such as the Stark laws, which prohibit a physician from
making a referral to a provider of certain health services with which the physician or the physician’s family
member has a financial interest and prohibit submission of a claim for reimbursement pursuant to a prohibited
referral. The “qui tam” provisions of the False Claims Act allow a private individual to bring civil actions on
behalf of the federal government alleging that the defendant has submitted a false claim to the federal
government, and to share in any monetary recovery. In addition, various states have enacted similar fraud and
abuse statutes or regulations, including, without limitation, false claims laws analogous to the False Claims Act,
and laws analogous to the federal Anti-Kickback Statute, that apply to items and services reimbursed under
Medicaid and other state programs, or, in several states, apply regardless of the payer, and there are also federal
criminal false claims laws.

Separately, there are a number of other fraud and abuse laws that pharmaceutical manufacturers must be

mindful of, particularly after a product candidate has been approved for marketing in the United States. For
example, a federal criminal law enacted as part of, the Health Insurance Portability and Accountability Act of
1996, or HIPAA, prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit
program, including private third-party payers. The false statements statute prohibits knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. There are also
federal civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly

presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors
that are false or fraudulent, as well as federal and state consumer protection and unfair competition laws, which
broadly regulate marketplace activities and activities that potentially harm consumers.

Healthcare Privacy and Security Laws. We may be subject to, or our marketing activities may be limited by,

HIPAA, as amended by the Health Information Technology and Clinical Health Act and their respective
implementing regulations, which established uniform standards for certain “covered entities” (healthcare
providers, health plans and healthcare clearinghouses) governing the conduct of certain electronic healthcare
transactions and protecting the security and privacy of protected health information. Among other things,
HIPAA’s privacy and security standards are directly applicable to “business associates” — independent
contractors or agents of covered entities that create, receive, maintain or transmit protected health information in
connection with providing a service for or on behalf of a covered entity. In addition to possible civil and criminal
penalties for violations, state attorneys general are authorized to file civil actions for damages or injunctions in
federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions.
In addition, state laws govern the privacy and security of health information in certain circumstances, many of
which differ from each other in significant ways and may not have the same effect, thus complicating compliance
efforts.

“Sunshine” and Marketing Disclosure Laws. There are an increasing number of federal and state “sunshine”

laws that require pharmaceutical manufacturers to make reports to states on pricing and marketing information.
Several states have enacted legislation requiring pharmaceutical companies to, among other things, establish
marketing compliance programs, file periodic reports with the state, and make periodic public disclosures on
sales and marketing activities, and prohibiting certain other sales and marketing practices. In addition, a similar
recently implemented federal requirement requires manufacturers, including pharmaceutical manufacturers, to
track and report to the federal government certain payments and other transfers of value made to physicians and
other healthcare professionals and teaching hospitals and ownership or investment interests held by physicians
and their immediate family members. The federal government began disclosing the reported information on a
publicly available website in 2014. These laws may adversely affect our sales, marketing, and other activities
with respect to our products in the United States by imposing administrative and compliance burdens on us. If we
fail to track and report as required by these laws or otherwise comply with these laws, we could be subject to the
penalty provisions of the pertinent state and federal authorities.

Government Price Reporting. For those marketed products which are covered in the United States by the
Medicaid programs, we have various obligations, including government price reporting and rebate requirements,
which generally require products be offered at substantial rebates/discounts to Medicaid and certain purchasers
(including “covered entities” purchasing under the 340B Drug Discount Program). We are also required to
discount such products to authorized users of the Federal Supply Schedule of the General Services
Administration, under which additional laws and requirements apply. These programs require submission of
pricing data and calculation of discounts and rebates pursuant to complex statutory formulas, as well as the entry
into government procurement contracts governed by the Federal Acquisition Regulations, and the guidance
governing such calculations is not always clear. Compliance with such requirements can require significant
investment in personnel, systems and resources, but failure to properly calculate our prices, or offer required
discounts or rebates could subject us to substantial penalties.

In General. 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, in the United States, could be subject to challenge
under one or more of such laws. If we or our operations are found to be in violation of any of the laws described
above or any other governmental regulations that apply to us, we may be subject to penalties, including
significant civil and criminal penalties, damages, fines, imprisonment, exclusion from participation in U.S.
federal or state healthcare programs, and the curtailment or restructuring of our operations. To the extent that any
product we make is sold in a foreign country, we may be subject to similar foreign laws and regulations, which
may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and

abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of
value to healthcare professionals. Any penalties, damages, fines, curtailment or restructuring of our operations
could materially adversely affect our ability to operate our business and our financial results. Although
compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks
cannot be entirely eliminated. 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. Moreover, achieving and sustaining compliance with applicable federal and state
privacy, security, sunshine, government price reporting, and fraud laws may prove costly.

Impact of Healthcare Reform on Coverage, Reimbursement, and Pricing. In the United States and other

potentially significant markets for our products, government authorities and third-party payers are increasingly
attempting to limit or regulate the price of medical products and services, particularly for new and innovative
products and therapies, which has resulted in lower average selling prices. Further, the increased emphasis on
managed healthcare in the United States and on country-specific and regional pricing and reimbursement controls
in the European Union will put additional pressure on product pricing, reimbursement and usage, which may
adversely affect our future product 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.

The U.S. and some foreign jurisdictions are considering or have enacted a number of additional legislative

and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products
profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in
promoting changes in healthcare systems with the stated goals of containing healthcare costs, 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, including, most recently, the ACA. The
ACA, among other things, imposes a significant annual fee on companies that manufacture or import branded
prescription drug products. It also contains substantial provisions intended to broaden access to health insurance,
reduce or constrain the growth of healthcare spending, and impose additional health policy reforms, any or all of
which may affect our business. The ACA is likely to continue the downward pressure on pharmaceutical pricing,
especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Other
legislative changes have also been proposed and adopted since the ACA was enacted. For example, the Budget
Control Act of 2011 resulted in aggregate reductions in Medicare payments to providers of up to 2% per fiscal
year, starting in 2013, and the American Taxpayer Relief Act of 2012, among other things, reduced Medicare
payments to several types of providers and increased the statute of limitations period for the government to
recover overpayments to providers from three to five years. Such laws, and others that may affect our business
that have been recently enacted or may in the future be enacted, may result in additional reductions in Medicare
and other healthcare funding. In the future, there may continue to be additional proposals relating to the reform of
the U.S. healthcare system, some of which could further limit coverage and reimbursement of drug products,
including our product candidates. Any reduction in reimbursement from Medicare or other government programs
may result in a similar reduction in payments from private payers. The implementation of cost containment
measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or
commercialize our products.

Employees

As of December 31, 2014, we had approximately 535 full-time employees as a consolidated entity. Of our

employees as of December 31, 2014, approximately 30 were engaged in development, regulatory and
manufacturing activities, approximately 440 were engaged in sales and marketing and approximately 65 were
engaged in administration, including business development, finance, information systems, facilities and human
resources. None of our employees is subject to a collective bargaining agreement. We consider our employee
relations to be satisfactory.

Available Information

We make available free of charge on or through our internet website our Annual Reports on Form 10-K,

Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange
Commission. We also regularly post copies of our press releases as well as copies of presentations and other
updates about our business on our website. Our internet address is www.horizonpharma.com. The information
contained in or that can be accessed through our website is not part of this report. Information is also available
through the Securities and Exchange Commission’s website at www.sec.gov or is available at the Securities and
Exchange Commission’s Public Reference Room located at 100 F Street, NE, Washington DC, 20549.
Information on the operation of the Public Reference Room is available by calling the Securities and Exchange
Commission at 800-SEC-0330.

Item 1A. Risk Factors

Certain factors may have a material adverse effect on our business, financial condition and results of
operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you
to consider the following discussion of risk factors in its entirety, in addition to other information contained in
this report as well as our other public filings with the Securities and Exchange Commission.

Risks Related to Our Business and Industry

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

Our current products, and other product or product candidates that we may develop, acquire, or in-license,

such as PENNSAID 2% which we began commercializing in January 2015, may not attain market acceptance
among physicians, patients, healthcare payers or the medical community. In the U.S. market, we began marketing
DUEXIS in December 2011. We began commercial sales of RAYOS, which was approved by the U.S. Food and
Drug Administration, or FDA, in July 2012, to a subset of rheumatologists in the fourth quarter of 2012 with the
full launch to the majority of U.S. rheumatologists and key primary care physicians in late January 2013.
VIMOVO was launched in the U.S. market in the fourth quarter of 2010 by AstraZeneca AB, or AstraZeneca,
under its license from Pozen Inc., or Pozen. Following our acquisition of the U.S. rights to VIMOVO in
November 2013, we began marketing VIMOVO in the first quarter of 2014. ACTIMMUNE was originally
launched in the U.S. market in March 1991 by Genentech and in June 2012, Vidara Therapeutics International
plc, or Vidara, acquired the intellectual property rights and certain assets related to the ACTIMMUNE product
line. In September 2014, the businesses of Horizon Pharma, Inc. and Vidara were combined, and as a result we
assumed the commercialization of ACTIMMUNE. In October 2014 we entered into an asset purchase agreement
with Nuvo Research Inc. to acquire the U.S. rights to PENNSAID 2%, and we began commercializing
PENNSAID 2% in the United States in January 2015. Outside the United States, LODOTRA has been sold in a
limited number of countries and sales may not grow to expected levels, in part because we depend on our
distribution partner, Mundipharma International Corporation Limited, or Mundipharma, for commercialization
outside the United States. With respect to DUEXIS, we have only received marketing approval in the
United Kingdom, or UK, thus far, and even if it is approved in other European countries, we do not expect the
opportunity in Europe to be material to our business given the current state of the market in Europe for pain
products and the revenue being generated by existing branded non-steroidal anti-inflammatory drugs, or
NSAIDs, in Europe. There have been no sales of DUEXIS in the UK thus far. We believe that the degree of
market acceptance and our ability to generate revenues from our products will depend on a number of factors,
including:

•

timing of market introduction of our products as well as competitive drugs;

efficacy and safety of our products;

continued projected growth of the arthritis, pain and inflammation markets;

•

prevalence and severity of any side effects;

if and when we are able to obtain regulatory approvals for additional indications for our products;

acceptance by patients, primary care specialists and key specialists, including rheumatologists,
orthopedic surgeons, pain specialists and specialists in pediatric immunology, allergy, infectious
diseases and hematology/oncology;

availability of coverage and adequate reimbursement and pricing from government and other third-
party payers;

the performance of our distribution partners, over which we have limited control;

potential or perceived advantages or disadvantages of our products over alternative treatments,
including cost of treatment and relative convenience and ease of administration;

strength of sales, marketing and distribution support;

the price of our products, both in absolute terms and relative to alternative treatments;

impact of past and limitation of future product price increases;

our ability to maintain a continuous supply of product for commercial sale;

the effect of current and future healthcare laws; and

product labeling or product insert requirements of the FDA or other regulatory authorities.

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 NSAIDs. We believe this is due in part to a
lack of awareness among physicians prescribing NSAIDs of 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 our competitors, would be more
effective for their patients. With respect to each of DUEXIS, PENNSAID 2%, RAYOS/LODOTRA and
VIMOVO, 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 and obtain marketing approval for additional indications. If our current
products or any other product that we may seek approval for, acquire or in-license 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.

Our current business plan is highly dependent upon our ability to successfully execute on our sales and
marketing strategy for the commercialization of ACTIMMUNE, DUEXIS, PENNSAID 2%, RAYOS/
LODOTRA and VIMOVO. If we are unable to successfully execute on our sales and marketing strategy, we
may not be able to generate significant product revenues or execute on our business plan.

Our strategy is to build a fully-integrated U.S.-focused biopharmaceutical company to successfully execute

the commercialization of our products in the U.S. market. We may not be able to successfully commercialize
ACTIMMUNE, DUEXIS, PENNSAID 2%, RAYOS or VIMOVO in the United States. Prior to our commercial
launch of DUEXIS in the United States in December 2011, we did not have any experience commercializing
pharmaceutical products on our own. LODOTRA was commercially launched in Europe by our exclusive
distribution partners Merck Serono and Mundipharma. In order to commercialize any approved products, we

must continue to build our sales, marketing, distribution, managerial and other non-technical capabilities.
Although we have expanded our sales force to approximately 375 sales representatives, consisting of
325 primary care sales representatives and 50 sales representatives in specialty and orphan diseases business
areas, in connection with our recent acquisition of the U.S. rights to PENNSAID 2%, we currently have limited
resources compared to some of our competitors, and the continued development of our own commercial
organization to market these products and any additional products we may acquire or in-license 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

adjusted the profile of the sales representatives we hire from those with traditional pharmaceutical sales
experience to those 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 with respect
to generic brands and could face similar challenges with respect to PENNSAID 2% due to the availability of
generic versions of PENNSAID 1.5%. 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 DUEXIS,
PENNSAID 2%, RAYOS and VIMOVO prescriptions 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 products, we may receive less revenues than if we
commercialized these products 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 would not be able to commercialize our product candidates and execute on our business plan.

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 product, in the
absence of specific instructions from the prescribing physician. Because our products do not currently have FDA-
approved generic equivalents in the United States, we do not believe our products should be subject to mandatory
generic substitution laws. However we understand that some pharmacies and payors may attempt to reduce costs
by obtaining physician authorization to switch prescriptions for DUEXIS or VIMOVO to prescriptions for
multiple generic products with similar active pharmaceutical ingredients. Accordingly, a key part of our
commercial strategy is to encourage physicians to have their patients agree to prescriptions through PME.
Through PME, physicians can have their uninsured or commercially insured patients’ prescriptions for our
products shipped directly to the patient. Through the PME program, we provide financial assistance to reduce
eligible patient’s out of pocket costs for prescriptions filled via a participating mail order pharmacy. Because the
patient out of pocket cost for our products when dispensed through the PME program may be significantly lower
than such costs when our products are dispensed outside of the PME program, prescriptions that are filled
through our PME program are therefore less likely to be subject to the efforts of traditional pharmacies to switch
a physician’s intended prescription of our products to a generic or over the counter brand. We expect that
continued adoption of our PME program by physicians and patients will be important to our ability to gain
market share for our products as pressure from healthcare payors and PBMs to use less expensive generic or over
the counter brands instead of branded products increases. For example, two of the largest PBMs, which we
estimate to currently control approximately 20% to 30% of prescriptions for DUEXIS and VIMOVO, placed
DUEXIS and VIMOVO on their exclusion lists beginning in 2015. Additional healthcare plans, including those
that contract with these PBMs but use different formularies, may also choose to exclude our products from their
formularies or restrict coverage to situations where a generic or over-the-counter product has been tried first. To
the extent we are unable to successfully encourage physicians to direct prescriptions currently filled through
traditional pharmacies, including those associated with/controlled by these PBMs, to our PME program, we may
experience a significant decline in DUEXIS and VIMOVO prescriptions as a result of formulary exclusions. Our
ability to increase adoption of our PME program will depend on physician and patient awareness and comfort

with the program, and we have limited ability to influence whether physicians use our PME program to prescribe
our products or whether patients will agree to receive their products through the PME program. In addition, the
PME program is only available to patients with commercial insurance or who are uninsured, and is not available
to federal health care program (such as Medicare and Medicaid) beneficiaries. If we are unable to increase
adoption of our PME program for filling prescriptions of our products, our ability to maintain or increase
prescriptions for our products will be impaired. In addition, we depend on a limited number of PME pharmacies
to fulfill patient prescriptions under the PME program. If these PME pharmacies are unable to process and fulfill
the volume of patient prescriptions directed to them under the PME program, our ability to maintain or increase
prescriptions for our products will be impaired. The commercialization of our products and our operating results
could be affected should any of the PME pharmacies choose not to continue participation in our PME program or
by any adverse events at any of those PME pharmacies.

If we are unable to successfully implement our commercial plans and drive adoption by patients and
physicians of any approved products through our sales, marketing and commercialization efforts, or if our
partners fail to successfully commercialize our products, then we will not be able to generate sustainable
revenues from product sales which will have a material adverse effect on our business and prospects.

Our future prospects are highly dependent on the success of our current products, and we may not be able
to successfully commercialize these products. 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 products. Our

ability to generate significant product revenues and to achieve commercial success in the near-term will initially
depend almost entirely on our ability to successfully commercialize these products in the United States. DUEXIS
has been approved for marketing in the UK but is not yet approved in any other countries in Europe and
therefore, unless we obtain regulatory approval in other countries, DUEXIS may not be commercialized to any
significant extent outside of the United States. Even if DUEXIS is approved in other European countries, we do
not expect the opportunity in Europe to be material to our business given the current state of the market in
Europe for pain products and the revenue being generated by existing branded NSAIDs in Europe. Following our
acquisition of the U.S. rights to VIMOVO in November 2013 and PENNSAID 2% in October 2014, our strategy
has included bringing both products’ pricing in-line with DUEXIS, thereby significantly increasing the value we
realize per prescription, and also increasing sales and marketing support to drive growth in prescriptions. We
cannot guarantee that this strategy will continue to be effective generally, due to negative reactions to price
increases or otherwise. Our strategy for RAYOS is to solely focus on the rheumatology indications approved for
RAYOS where our Phase 3 clinical trial data supports our commercial plans. We initially launched RAYOS in
the United States to a subset of rheumatologists in the fourth quarter of 2012, and the full launch to the majority
of U.S. rheumatologists and key primary care physicians occurred in late January 2013. Our strategy with respect
to ACTIMMUNE includes pricing increases, pursuing label expansion for additional indications, such as
Friedreich’s ataxia, or FA, and possible expansions of our sales force, but we cannot be certain that our pricing
strategy will not result in downward pressure on sales or that we will be able to successfully complete clinical
trials and obtain regulatory approvals in additional indications. Although LODOTRA is approved for marketing
in more than 35 countries outside the United States, to date it has only been marketed in a limited number of
countries. While we anticipate that LODOTRA will be marketed in additional countries as our distribution
partner, Mundipharma, formulates its reimbursement strategy, the ability to market LODOTRA in additional
countries will depend on Mundipharma’s ability to obtain reimbursement approvals in these countries. Even if
we obtain additional marketing and reimbursement approvals, our product revenues in Europe are entirely
dependent upon the marketing efforts of our exclusive distribution partner, over which we have no control.
Before we can market and sell these products in a particular jurisdiction, we need to obtain necessary regulatory
approvals (from the FDA in the United States and from similar foreign regulatory agencies in other jurisdictions)
and in some jurisdictions, reimbursement authorization. There are no guarantees that we or our
commercialization partners will obtain any additional regulatory approvals for our products. Even if we or our

commercialization partners obtain additional regulatory approvals, we may never generate significant revenues
from any commercial sales of our products. If we fail to successfully commercialize our current and future
products, we may be unable to generate sufficient revenues to sustain and grow our business, and our business,
financial condition and results of operations will be adversely affected.

We are solely dependent on Mundipharma to commercialize LODOTRA in Europe and certain Asian, Latin
American, Middle Eastern, African and other countries. Failure of Mundipharma or any other third parties
to successfully commercialize our products and product candidates in the applicable jurisdictions could
have a material adverse effect on our business.

We rely on Mundipharma for commercialization of LODOTRA in various European countries and certain
Asian, Latin American, Middle Eastern, African and other countries. We have limited contractual rights to force
Mundipharma to invest significantly in commercialization of LODOTRA in its markets. In the event that
Mundipharma or any other third party with any future commercialization rights to any of our products or product
candidates fails to adequately commercialize those products or product candidates because it lacks adequate
financial or other resources, decides to focus on other initiatives or otherwise, our ability to successfully
commercialize our products or product candidates in the applicable jurisdictions would be limited, which would
adversely affect our business, financial condition, results of operations 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. We also rely on Mundipharma’s ability to obtain regulatory approval for LODOTRA in
certain Asian, Latin American, Middle Eastern, African and other countries. In addition, our agreements with
Mundipharma 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 Mundipharma terminated its agreements with us, 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 would be materially harmed.

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

The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising,

promotion, export, marketing and distribution and other possible activities relating to our products and our
product 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 product
approval, subject us to administrative or judicially imposed sanctions.

To market any drugs 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 product 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 for marketing new
drugs in Europe, must be supported by extensive clinical and preclinical data, as well as extensive information
regarding chemistry, manufacturing and controls, or CMC, to demonstrate the safety and effectiveness of the
applicable product candidate. The number and types of preclinical studies and clinical trials that will be required
for regulatory approval varies depending on the product candidate, the disease or the condition that the product
candidate is designed to target and the regulations applicable to any particular product candidate. Despite the

time and expense associated with preclinical and clinical studies, failure can occur at any stage, and we could
encounter problems that cause us to repeat or perform additional preclinical studies, CMC studies or clinical
trials. Regulatory authorities could delay, limit or deny approval of a product candidate for many reasons,
including because they:

• may not deem a product candidate to be adequately safe and effective;

• may not find the data from preclinical studies, CMC studies and clinical trials to be sufficient to

support a claim of safety and efficacy;

• may interpret data from preclinical studies, CMC studies and clinical trials significantly differently

than we do;

• may not approve the manufacturing processes or facilities associated with our product candidates;

• may conclude that we have not sufficiently demonstrated long-term stability of the formulation for

which we are seeking marketing approval;

• may change approval policies (including with respect to our product candidates’ class of drugs) or

adopt new regulations; or

• may not accept a submission due to, among other reasons, the content or formatting of the submission.

Even if we believe that data collected from our preclinical studies, CMC studies and clinical trials of our
product 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, product candidates may not be approved for all
indications requested and such approval may be subject to limitations on the indicated uses for which the drug
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 product
candidates. We cannot predict when or whether regulatory approval will be obtained for any product candidate
we develop.

While we anticipate that LODOTRA will be marketed in additional countries as Mundipharma formulates

its reimbursement strategy, the ability to market LODOTRA in additional countries will depend on
Mundipharma’s ability to obtain regulatory and reimbursement approvals in these countries. Similarly, our
ability to market DUEXIS outside of the United States will depend on obtaining regulatory and reimbursement
approval in any country where DUEXIS may be marketed. However, certain countries have a very difficult
reimbursement environment and we may not obtain reimbursement approval in all countries where DUEXIS may
be marketed, or we may obtain reimbursement approval at a level that would make marketing DUEXIS in certain
countries not viable.

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.

Following our acquisition of Vidara in September 2014 and our acquisition of the U.S. rights to PENNSAID

2% from Nuvo in October 2014, we have five products approved in the United States, one product with broad
approval for commercial sale in Europe, and another product approved only for commercial sale in the UK thus
far. RAYOS/LODOTRA has been approved in the United States and over 37 other countries, including Australia,
Columbia and select countries within Europe and Asia. However, we have a limited history of marketing
LODOTRA through our distribution partners, and LODOTRA is not yet marketed in all of the countries where it
has been approved. We began the commercial sale of DUEXIS in the United States in November 2011, the
commercial sale of RAYOS in the United States in the fourth quarter of 2012, the commercial sale of VIMOVO
in the United States in the first quarter of 2014 and the commercial sale of ACTIMMUNE as a combined
company with Vidara in September 2014. We began commercializing PENNSAID 2% in the United States in

January 2015. 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 PENNSAID 2% and VIMOVO and, as a combined company, ACTIMMUNE,
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 our commercial organization with Vidara’s or to
commercialize VIMOVO, ACTIMMUNE and PENNSAID 2% within our organization or not realize the benefits
we expect to derive from our recent acquisitions.

We have U.S. rights to ACTIMMUNE, PENNSAID 2% and VIMOVO but have no control over the activities
of Boehringer Ingelheim to commercialize ACTIMMUNE outside the United States, Canada and Japan,
AstraZeneca to commercialize VIMOVO outside of the United States or Nuvo or its licensees to
commercialize PENNSAID 2% outside the United States, which could adversely impact commercialization
of ACTIMMUNE, PENNSAID 2% and VIMOVO in the United States.

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, Nuvo has retained its rights to PENNSAID
2% in territories outside of the United States and has announced its intention to seek commercialization partners
outside the United States. We have little or no control over AstraZeneca’s activities with respect to VIMOVO
outside of the United States or over Nuvo’s or its 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 PENNSAID 2% and VIMOVO in the United States. For example, Nuvo or its assignees or
AstraZeneca or its assignees can make statements or use promotional materials with respect to PENNSAID 2%
or VIMOVO, respectively, outside of the United States that are inconsistent with our positioning of the products
in the United States, and could sell PENNSAID 2% or VIMOVO, 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, product recalls or safety issues
with r PENNSAID 2% or VIMOVO outside the United States, even if not related to the commercial product 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 PENNSAID 2% and VIMOVO. We also rely on Nuvo and AstraZeneca or its assignees to
provide us with timely and accurate safety information regarding the use of PENNSAID 2% or VIMOVO,
respectively, 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 products, and we currently intend
to rely on third parties to manufacture commercial supplies of any other approved products. The
commercialization of any of our products could be stopped, delayed or made less profitable if those third
parties fail to provide us with sufficient quantities of product 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 products and product 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
sanofi-aventis U.S. LLC, or sanofi-aventis U.S., operating through Valeant Pharmaceuticals International, Inc., or
Valeant, its manufacturing partner located in Laval, Canada for production of DUEXIS, and Jagotec AG, or
Jagotec, a wholly-owned subsidiary of SkyePharma PLC, located in Lyon, France, for production of RAYOS/
LODOTRA. In August 2011, SkyePharma leased their entire pharmaceutical manufacturing business to Aenova
France SAS, or Aenova. As such, Aenova is now a subcontractor for Jagotec for the manufacture of RAYOS/

LODOTRA, with our consent. Sanofi Winthrop Industrie in France has been qualified as a backup manufacturer
for DUEXIS. Bayer Pharma AG in Germany has been qualified as a backup manufacturer for RAYOS/
LODOTRA. In December 2011, Valeant acquired Dermik, a dermatology unit of sanofi-aventis U.S., which
includes the Laval, Canada site. Although, Valeant has taken over management and operations at the Laval,
Canada facility, our manufacturing agreement remains with sanofi-aventis U.S. We purchase the primary active
ingredients for DUEXIS from BASF Corporation in Bishop, Texas and Dr. Reddy’s in India, and the primary
active ingredient for RAYOS/LODOTRA from Tianjin Tianyao Pharmaceuticals Co., Ltd. in China and Sanofi
Chimie in France.

In connection with our acquisition of the U.S. rights to VIMOVO, we have entered into a long-term master
manufacturing services and product agreement with Patheon Pharmaceuticals Inc., or Patheon, for the supply of
finished VIMOVO product. We have entered into long-term supply agreements with Divis Laboratories Limited
and Minakem Holding SAS for the supply of the active pharmaceutical ingredients, or APIs, of VIMOVO. 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.

With respect to ACTIMMUNE, we rely on an exclusive supply agreement with Boehringer Ingelheim RCV
GmbH & Co KG, or Boehringer Ingelheim, for manufacturing and supply. However, Boehringer Ingelheim also
manufactures interferon gamma 1-b to supply its own commercial needs in its licensed territory, and this may
lead to capacity allocation issues and supply constraints to us. Furthermore, we do not have a substitute supplier
for ACTIMMUNE and the process of identifying a substitute supplier and getting that supplier approved by the
applicable regulatory authorities for manufacture and packaging of ACTIMMUNE can be a lengthy and costly
process. ACTIMMUNE is manufactured by starting with cells from working cell bank samples which are derived
from a master cell bank. We and Boehringer Ingelheim separately store multiple vials of the master cell bank. In
the event of catastrophic loss at our or Boehringer Ingelheim’s 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.

With respect to PENNSAID 2%, we rely on an exclusive supply agreement with Nuvo for manufacturing
and supply. If Nuvo licenses its rights to PENNSAID 2% to commercialization partners outside of the United
States, it is possible that Nuvo would also agree to manufacture and supply PENNSAID 2% for those partners. In
that case, we would have no guarantee that fulfilling demand for PENNSAID 2% in territories outside the United
States would impair Nuvo’s ability to supply us with our requested quantities of PENNSAID 2% in the Unites
States. In addition, while our supply agreement with Nuvo provides for the qualification of additional
manufacturing sites for PENNSAID 2%, we and Nuvo may not be successful in finding alternative
manufacturers to supply PENNSAID 2% or agreeing to commercially reasonable terms with alternate suppliers.
A key excipient used in PENNSAID as a penetration enhancer is dimethyl sulfoxide, or DMSO. Horizon and
Nuvo 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.

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. 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 products 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 products, we may need to find alternative manufacturing facilities, which would

significantly impact our ability to develop, obtain regulatory approval for or market our products. To the extent
any third-party manufacturers that we engage with respect to our products are different than 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 products prior to our sale of any product using these facilities.

Although we have entered into supply agreements for the manufacture of our products, our manufacturers

may not perform as agreed or may terminate their agreements with us. Under our manufacturing and supply
agreement with sanofi-aventis U.S., operating through Valeant, either we or sanofi-aventis U.S. may terminate
the agreement upon an uncured breach by the other party or without cause upon two years prior written notice, so
long as such notice is given after the third anniversary of the first commercial sale of DUEXIS. Under our master
manufacturing services and product agreement with Patheon for finished VIMOVO product, either we or Patheon
may terminate the agreement for uncured material breach by the other party or upon the other party’s bankruptcy
or insolvency, we may terminate the agreement if any regulatory authority takes any action or raises any
objection that prevents us from commercializing the VIMOVO product and Patheon may terminate the
agreement if we assign our rights or obligations under the agreement to a competitor of Patheon or to a party that,
in the reasonable opinion of Patheon, is not a credit worthy substitute for us, or in certain other circumstances
where we assign the agreement without Patheon’s consent. Our manufacturing agreement with Boehringer
Ingelheim has a term that runs until July 31, 2020, but the agreement may be terminated earlier by either us or
Boehringer Ingelheim for an uncured material breach by the other party or upon the other party’s bankruptcy or
insolvency. Under our manufacturing and supply agreement with Jagotec, either we or Jagotec may terminate the
agreement in the event of an insolvency, liquidation or bankruptcy of the other party or upon an uncured breach
by the other party. While we have the right to receive a continuing supply of RAYOS/LODOTRA from Jagotec
for a period of 24 months after termination, we would need to move our manufacturing to our alternate supplier
of RAYOS/LODOTRA, Bayer Pharma AG, in such an event and we would have to qualify a new back-up
manufacturer. The initial term of our supply agreement with Nuvo for PENNSAID 2% is through December 31,
2022, 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.

In addition, we do not have the capability to package any of our products for distribution. Consequently, we
have entered into an agreement with Temmler Werke GmbH, or Temmler, for packaging of RAYOS/LODOTRA
in certain European countries and in the United States, as well as any additional countries as may be agreed to by
the parties. At the end of 2012, Temmler was acquired by the Aenova Group. Valeant manufactures and supplies
DUEXIS to us in final, packaged form for the United States as well as any additional countries as may be agreed
to by the parties. Patheon supplies final, packaged VIMOVO product pursuant to the master manufacturing
services and product agreement we executed in connection with our acquisition of the U.S. rights to VIMOVO.
Boehringer Ingelheim supplies final, packaged ACTIMMUNE to us and Nuvo is obligated to supply final,
packaged PENNSAID 2% to us, in each case under exclusive supply agreements.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including

the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical
products 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
product, 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 drug products or in the manufacturing facilities in which its products 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 products 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
products in the United States or provide any product candidates to patients in clinical trials would be jeopardized.

Any delay or interruption in our ability to meet commercial demand for our products will result in the loss of
potential revenues and could adversely affect our ability to gain market acceptance for these products. 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 could materially adversely affect our business

and delay or impede the development and commercialization of any of our products or product candidates and
could have a material adverse effect on our business, results of operations, financial condition and prospects.

We have experienced recent growth and have expanded the size of our organization substantially in
connection with our acquisition of the U.S. rights to VIMOVO in November 2013, our acquisition of Vidara
in September 2014 and our acquisition of the U.S. rights to PENNSAID 2% in October 2014, and we may
experience difficulties in managing this growth as well as potential additional growth in connection with
future product acquisitions or company acquisitions.

As of December 31, 2010, we employed approximately 40 full-time employees as a consolidated entity. In
anticipation of the commercial launch of DUEXIS, we hired approximately 80 sales representatives during the
period from September 2011 through October 2011. Recently, we further increased the size of our sales force in
connection with our acquisition of PENNSAID 2% to a total of approximately 375 sales representatives. As of
December 31, 2014 and 2013, we employed approximately 535 and 463 full-time employees, respectively, as a
consolidated entity. 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 products, 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 of Vidara and PENNSAID 2%.
Our ability to manage any future growth effectively may require us to, among other things:

•

continue to manage and expand the sales and marketing efforts for our existing products;

enhance our operational, financial and management controls, reporting systems and procedures;

expand our international resources;

successfully identify, recruit, hire, train, maintain, motivate and integrate additional employees;

establish and increase our access to commercial supplies of our products and product candidates;

expand our facilities and equipment; and

• manage our internal development efforts effectively while complying with our contractual obligations

to licensors, licensees, contractors, collaborators, distributors and other third parties.

In particular, the merger of the businesses of Horizon Pharma, Inc. and Vidara Therapeutic International plc
is subject to numerous uncertainties and risks and will require significant efforts and expenditures. For example,
we have transitioned Horizon Pharma, Inc. from a standalone public Delaware corporation to being part of a
combined company organized in Ireland. This combination has resulted in many changes, including significant
changes in the corporate business and legal entity structure, the integration of Vidara and its personnel with those
of Horizon, and changes in systems. We are currently undertaking numerous complex transition activities, and
we may encounter unexpected difficulties or incur unexpected costs, including:

•

difficulties in achieving growth prospects from combining the business of Vidara with that of Horizon;

•

difficulties in the integration of operations and systems;

difficulties in the assimilation of employees and corporate cultures;

challenges in preparing financial statements and reporting timely results at both a statutory level for
multiple entities and jurisdictions and at a consolidated level for public reporting;

challenges in keeping existing customers and obtaining new customers; and

challenges in attracting and retaining key personnel.

If any of these factors impair our ability to integrate the operations of Horizon with those of Vidara

successfully or on a timely basis, 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.

Our management may also have to divert a disproportionate amount of its attention away from day-to-day
activities and towards 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.

If we are unable to effectively train and equip our sales force, our ability to successfully commercialize our
products in the United States will be harmed.

As DUEXIS and RAYOS were not fully commercially launched in the United States until January 2012 and
January 2013, respectively, and we did not begin commercializing VIMOVO and PENNSAID 2% in the United
States until the first quarter of 2014 and 2015, respectively, the members of our sales force have limited
experience promoting the products. In addition, while the members of our sales force promoting ACTIMMUNE
were previously promoting the product prior to the merger of the Horizon and Vidara businesses, we have limited
experience marketing ACTIMMUNE under Horizon’s commercial organization. As a result, 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 products. In addition, we must train our sales force to
ensure that a consistent and appropriate message about our products is being delivered to our potential customers.
Our sales representatives may also experience challenges promoting multiple products when they call on
physicians and their office staff. This is particularly true with respect to DUEXIS, since VIMOVO is approved
for similar indications and prescribed to similar patients, and prior to 2014 our sale representatives had
previously been incentivized to increase DUEXIS market share at the expense of VIMOVO. We have also
experienced, and may continue to experience, turnover of the sales representatives that we hired or will hire,
requiring us to train new sales representatives. As a result of the managed care environment and pharmacies
switching patient’s prescriptions to a generic or over the counter brand, we have had to adjust the profile of the
sales representatives we hire from the traditional pharmaceutical representative to a representative with business
to business experience that is focused on the total office call in order to protect the prescription the physician has
written and ensure the patient receives what their doctor ordered. 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 potential customers about the benefits of our products and their proper administration and label
indication, as well as our PME program, our efforts to successfully commercialize our products could be put in
jeopardy, which could have a material adverse effect on our financial condition, share price and operations.

We face significant competition from other biotechnology and pharmaceutical companies, including those
marketing generic products 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 mergers
and acquisitions 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,
products that are more effective and/or less costly than our products.

DUEXIS and VIMOVO face competition from Celebrex®, marketed by Pfizer, and several other branded
NSAIDs. 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. PENNSAID 2% faces competition from generic versions of PENNSAID 1.5% that are priced
significantly less than the price we charge for PENNSAID 2% and Voltaren Gel, marketed by Endo
Pharmaceuticals, 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 product, in the absence of specific instructions from the
prescribing physician. Because pharmacists often have economic and other incentives to prescribe lower-cost
generics, if physicians prescribe DUEXIS, PENNSAID 2% or VIMOVO, those prescriptions may not result in
sales. If we are unsuccessful in convincing physicians to complete prescriptions through our PME program or
otherwise provide prescribing instructions prohibiting 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 PENNSAID 1.5% as a substitute for PENNSAID 2%, sales of DUEXIS,
PENNSAID 2% and VIMOVO may suffer despite any success we may have in promoting DUEXIS, PENNSAID
2% or VIMOVO to physicians. In addition, other product candidates that contain ibuprofen and famotidine in
combination or naproxen and esomeprazole in combination, while not currently known to us, may be developed
and compete with DUEXIS or VIMOVO, respectively, in the future.

On February 15, 2012, we received a Paragraph IV Patent Certification from Par Pharmaceutical, Inc.
advising that Par Pharmaceutical, Inc. had filed an Abbreviated New Drug Application, or ANDA, with the FDA
for a generic version of DUEXIS, containing 800 mg of ibuprofen and 26.6 mg of famotidine. We subsequently
filed patent infringement lawsuits against Par Pharmaceutical, Inc. and Par Pharmaceutical Companies, Inc., or
collectively Par, relating to the ANDA and Par’s intention to market a generic version of DUEXIS. On
August 21, 2013, we entered into a settlement agreement, or the Par settlement agreement, and license
agreement, or the Par license agreement, with Par relating to its patent infringement litigation. The Par settlement
agreement provides for a full settlement and release by both us and Par of all claims that were or could have been
asserted in the litigation and that arise out of the specific patent issues that were the subject of the litigation,
including all resulting damages or other remedies.

Under the Par license agreement, we granted Par a non-exclusive license (that is only royalty-bearing in
some circumstances), or the License, to manufacture and commercialize Par’s generic version of DUEXIS in the
United States after the generic entry date and to take steps necessary to develop inventory of, and obtain
regulatory approval for, but not commercialize, Par’s generic version of DUEXIS prior to the generic entry date.
The License covers all patents owned or controlled by us during the term of the Par license agreement that
would, absent the License, be infringed by the manufacture, use, sale, offer for sale, or importation of Par’s
generic version of DUEXIS in the United States. Unless terminated sooner pursuant to the terms of the Par
license agreement, the License will continue until the last to expire of the licensed patents and/or applicable
periods of regulatory exclusivity.

party DUEXIS patent litigation, the entry of other third party generic versions of DUEXIS or certain specific
changes in DUEXIS market conditions. Only in the event that Par enters the DUEXIS market due to the specified
changes in DUEXIS market conditions will the License become royalty-bearing, with the royalty obligations
ceasing upon the occurrence of one of the other events that would have allowed Par to enter the DUEXIS market.

Under the Par license agreement, we also agreed not to sue or assert any claim against Par for infringement
of any patent or patent application owned or controlled by us during the term of the Par license agreement based
on the manufacture, use, sale, offer for sale, or importation of Par’s generic version of DUEXIS in the
United States.

The Par license agreement may be terminated by us if Par commits a material breach of the agreement that

is not cured or curable within 30 days after we provide notice of the breach. We may also terminate the Par
license agreement immediately if Par or any of its affiliates initiate certain challenges to the validity or
enforceability of any of the licensed patents or their foreign equivalents. In addition, the Par license agreement
will terminate automatically upon termination of the Par settlement agreement.

On July 15, 2013, we received a Paragraph IV Patent Certification from Watson Laboratories, Inc. —
Florida, known as Actavis Laboratories FL, Inc., or Watson, advising that Watson had filed an ANDA with the
FDA for a generic version of RAYOS, containing up to 5 mg of prednisone. Watson has not advised us as to the
timing or status of the FDA’s review of its filing. On August 26, 2013, we, together with Jagotec, filed suit in the
United States District Court for the District of New Jersey against Watson, Actavis Pharma, Inc., Andrx Corp.,
and Actavis, Inc., or collectively WLF, seeking an injunction to prevent the approval of the ANDA. The lawsuit
alleges that WLF has infringed U.S. Patent Nos. 6,488,960, 6,677,326, 8,168,218, 8,309,124 and 8,394,407 by
filing an ANDA seeking approval from the FDA to market generic versions of RAYOS containing 1 mg, 2 mg
and 5 mg of prednisone prior to the expiration of the patents. The subject patents are listed in the FDA’s
Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. The
commencement of the patent infringement lawsuit stays, or bars, FDA approval of WLF’s ANDA for 30 months
or until an earlier district court decision that the subject patents are not infringed or are invalid. We, together with
Jagotec have granted WLF a covenant not to sue with respect to US Patent Nos. 6,677,326 and 8,168,218,
respectively, and accordingly these patents have been dismissed from the lawsuit. The court held a claim
construction hearing on October 16, 2014, and issued its opinion and order on claim construction on
November 10, 2014, adopting our proposed construction of both of the disputed claim terms. The court has
scheduled expert discovery in the WLF action to be completed by June 2, 2015, and has set the pretrial
conference for September 10, 2015. The trial date will be set following the pretrial conference.

On September 12, 2013, we received a Paragraph IV Patent Certification from Par Pharmaceutical, Inc.

advising that Par Pharmaceutical, Inc. had filed an ANDA with the FDA for a generic version of RAYOS
containing up to 5 mg of prednisone. On October 22, 2013, we, together with Jagotec, filed suit in the
United States District Court for the District of New Jersey against Par seeking an injunction to prevent the
approval of the ANDA. The lawsuit alleged that Par had infringed U.S. Patent Nos. 6,488,960, 6,677,326,
8,168,218, 8,309,124 and 8,394,407 by filing an ANDA seeking approval from the FDA to market generic
versions of RAYOS prior to the expiration of the patents. The subject patents are listed in the FDA’s Orange
Book. On November 20, 2013, we were notified by counsel for Par that Par Pharmaceutical, Inc. had elected to
withdraw its ANDA with the FDA for a generic version of RAYOS containing 2 mg and 5 mg of prednisone. On
December 5, 2013, we entered into a Stipulation of Dismissal with Par Pharmaceutical, Inc. whereby Par
Pharmaceutical, Inc. agreed to withdraw its application to market a generic version of RAYOS.

On November 13, 2014, we received a Paragraph IV Patent Certification from Watson advising that Watson

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 the patents. The subject patents are listed in the FDA’s
Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Watson’s
ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are
invalid. The court has not yet set a trial date for the Watson action.

On December 2, 2014, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,741,956 from Paddock advising that
Paddock had filed an ANDA with the FDA for a generic version of PENNSAID 2%. On January 9, 2015, we
received from Paddock another Paragraph IV Patent Certification against newly Orange Book listed U.S. Patent
No. 8,871,809. Paddock has not advised us as to the timing or status of the FDA’s review of its filing. On
January 13, 2015 and January 14, 2015, we filed suit 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. The lawsuits alleged that Paddock has infringed U.S.
Patent Nos. 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 the patents. The
subject patents are listed in the FDA’s Orange Book. The commencement of the patent infringement lawsuit
stays, or bars, FDA approval of Paddock’s ANDA for 30 months or until an earlier district court decision that the
subject patents are not infringed or are invalid. The courts have not yet set trial dates for the Paddock actions.

Currently, patent litigation is pending in the United States District Court for the District of New Jersey
against four generic companies intending to market VIMOVO before the expiration of patents listed in the
Orange Book. These cases are in the United States District Court for the District of New Jersey and have been
consolidated for discovery purposes. They 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 Ltd. and Lupin Pharmaceuticals Inc., or collectively, Lupin; (iii) Mylan Pharmaceuticals
Inc., Mylan Laboratories Limited, and Mylan Inc., or collectively, Mylan; and (iv) Watson Laboratories, Inc. —
Florida, known as Actavis Laboratories FL, Inc. and Actavis Pharma, Inc., or collectively, Actavis. Patent
litigation in the United States District Court for the District of New Jersey against a fifth generic company,
Anchen Pharmaceuticals Inc., or Anchen, was dismissed on June 9, 2014 after Anchen recertified under
Paragraph III. We understand that Dr. Reddy’s has entered into a settlement with AstraZeneca with respect to
patent rights directed to Nexium for the commercialization of VIMOVO, and that according to the settlement
agreement, Dr. Reddy’s is now able to commercialize VIMOVO under AstraZeneca’s Nexium patent rights. The
settlement agreement, however, has no effect on the Pozen VIMOVO patents, which are still the subject of patent
litigations. As part of our acquisition of the U.S. rights to VIMOVO, we have taken over and are responsible for
the patent litigations that include the Pozen patents licensed to us under the Pozen license agreement.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4,

2013, May 10, 2013, June 28, 2013 and October 23, 2013 and collectively include allegations of infringement of
U.S. Patent Nos. 6,926,907 and 8,557,285. We understand the cases arise from Paragraph IV Notice Letters
providing notice of the filing of an ANDA with the FDA seeking regulatory approval to market a generic version
of VIMOVO before the expiration of the patents-in-suit. We understand the Dr. Reddy’s notice letters were dated
March 11, 2011 and November 20, 2012; the Lupin notice letters were dated June 10, 2011 and March 12, 2014;
the Mylan notice letter was dated May 16, 2013; and the Actavis notice letters were dated March 29, 2013 and
November 5, 2013; and the Anchen notice letter was dated September 16, 2011. The court has issued a claims
construction order and has set a pretrial schedule but has not yet set a trial date.

On or about December 19, 2014, we filed a Notice of Opposition to a European patent, EP 2611457, to

On February 2, 2015, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 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., or collectively Taro, advising that Taro had
filed an ANDA with the FDA for a generic version of PENNSAID 2%. Taro has not advised us as to the timing
or status of the FDA’s review of its filing. We are still in the process of evaluating the Paragraph IV Patent
Certification, and it is anticipated we will file suit against Taro within the statutorily prescribed 45 day time limit.

If we are unsuccessful in any of the on-going patent litigations, we will likely face generic competition with

respect to VIMOVO, PENNSAID 2% and/or RAYOS and our sales of VIMOVO, PENNSAID 2% and/or
RAYOS will be substantially harmed.

ACTIMMUNE is the only drug currently approved by the FDA specifically for the treatment for CGD and
SMO. While there are additional or alternative approaches used to treat patients with CGD and SMO, there are
currently no products on the market that compete directly with ACTIMMUNE. The current clinical standard of
care to treat CGD patients 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. 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 products 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 drugs 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 products because the biosimilar manufacturer would not
have to recoup the research and development and marketing costs associated with the branded product. The
development and commercialization of any competing drugs 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.

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

In addition, established pharmaceutical companies may invest heavily to accelerate discovery and

development of novel compounds or to in-license and develop novel compounds that could make our products
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:

•

develop, acquire or in-license medicines that are superior to other products in the market;

attract qualified clinical, regulatory, and sales and marketing personnel;

obtain patent and/or other proprietary protection for our products and technologies;

obtain required regulatory approvals; and

successfully collaborate with pharmaceutical companies in the discovery, development and
commercialization of new product candidates.

The inability to compete with existing products or subsequently introduced products would have a material

adverse impact on our business, financial condition and prospects.

Our business operations may subject us to numerous commercial disputes, claims and/or lawsuits.

Operating in the pharmaceutical industry, particularly the commercialization of pharmaceutical products,

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 products, 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. Any commercial dispute, claim
or lawsuit may divert our 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 RAYOS and VIMOVO. 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.

Similarly, from time to time we are involved in disputes with distributors, PBMs and licensing partners
regarding their and our rights and performance of obligations under contractual arrangements. For example, we
previously entered into a rebate agreement with a PBM, pursuant to which we were required to pay certain
rebates on certain of our products that were reimbursed by health plans contracting with the PBM with respect to
their formularies. In 2014, we sent a notice alerting the PBM of certain material breaches by the PBM under the
agreement and indicating that the agreement would automatically terminate if the material breaches were not
cured within 30 days. Among other things, the breaches by the PBM involved repeated invoices that included
claims for rebates which were not eligible for payment under the agreement. Following the 30-day period, during
which the PBM did not take action to cure the breaches or formally respond to the notice, we sent another notice
informing the PBM that the agreement was terminated as of the end of the 30-day period in accordance with its
terms and we ceased paying further rebates under the agreement. On November 6, 2014, we received a letter
from the PBM asserting that the breaches we alleged in our termination notice were not material breaches and
therefore the agreement was not terminated and remains in effect. In addition, the PBM claimed that we owe
$38.5 million in past price protection and utilization rebates related to VIMOVO and DUEXIS, in addition to
further rebates on sales of VIMOVO and DUEXIS continuing after the date we believe the agreement was
terminated. The substantial majority of these rebate claims relate to price protection rebates on VIMOVO which
we believe are precluded under the agreement, particularly because VIMOVO was not covered under the
agreement until after we had established an initial price for VIMOVO under a Horizon-owned National Drug
Code, or NDC. Based upon the terms of the agreement and the PBM’s actions, we believe that the PBM’s claims
in its November 6, 2014 letter are without merit and we intend to vigorously defend against them. However, we
cannot predict the outcome of this dispute, including whether it will result in litigation. If we are unsuccessful in
defending against the PBM’s claims, and in light of the significant number of health plans that contract with the
PBM, we could be forced to make substantial payments to the PBM for past and/or future rebates, at least
through 2014. While the stated term of the agreement was through 2015, even if the PBM successfully argued
that we did not validly terminate the contract due to material breach, we do not expect that we would owe further
rebates in 2015 based on certain actions of the PBM. We cannot guarantee, however, that the PBM would not
attempt to make arguments to the contrary. We also believe that we may have claims for damages that we could
assert against the PBM. In any event, resolving the dispute with the PBM or being subject to related litigation
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 products internationally could
materially adversely affect our business.

In addition to our U.S. operations, we have operations in Ireland, Bermuda, Luxembourg, Switzerland and

Germany. Moreover, LODOTRA is currently being marketed in a limited number of countries outside the
United States, and Mundipharma is in the process of obtaining pricing and reimbursement approval for, and
preparing to market, LODOTRA in other European countries, as well as in certain Asian, Latin American,
Middle Eastern and African countries. Also, Grünenthal S.A. is in the registration process for the
commercialization of DUEXIS in Latin America. 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:

•

compliance with differing or unexpected regulatory requirements for our products;

compliance with Irish laws and the maintenance of our Irish tax residency with respect to our overall
corporate structure and administrative operations, including the need to generally hold meetings of our
board of directors and make decisions in Ireland, which may make certain corporate actions more
cumbersome, costly and time-consuming;

compliance with Swiss laws with respect to our Horizon Pharma AG subsidiary, including laws
requiring maintenance of cash in the subsidiary to avoid overindebtedness, which requires Horizon
Pharma AG to maintain assets in excess of its liabilities;

difficulties in staffing and managing foreign operations;

in certain circumstances, including with respect to the commercialization of LODOTRA in Europe and
certain Asian, Latin American, Middle Eastern and African countries, and commercialization of
DUEXIS in Latin America, increased dependence on the commercialization efforts and regulatory
compliance of our distributors or strategic partners;

compliance with German laws with respect to our Horizon Pharma GmbH subsidiary through which
Horizon Pharma AG conducts most of its European operations;

foreign government taxes, regulations and permit requirements;

• U.S. and foreign government tariffs, trade restrictions, price and exchange controls and other regulatory

requirements;

anti-corruption laws, including the Foreign Corrupt Practices Act;

economic weakness, including inflation, natural disasters, war, events of terrorism or political
instability in particular foreign countries;

fluctuations in currency exchange rates, which could result in increased operating expenses and
reduced revenues, and other obligations related to doing business in another country;

compliance with tax, employment, immigration and labor laws, regulations and restrictions for
employees living or traveling abroad;

•

• workforce uncertainty in countries where labor unrest is more common than in the United States;

•

production shortages resulting from any events affecting raw material supply or manufacturing
capabilities abroad;

changes in diplomatic and trade relationships; and

challenges in enforcing our contractual and intellectual property rights, especially in those foreign
countries that do not respect and protect intellectual property rights to the same extent as the United
States.

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, acquire or in-license other product candidates or products, our business and prospects
would be limited.

A key element of our strategy is to develop, acquire or in-license and commercialize a portfolio of other
products or product candidates in addition to our current products. 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 or in-license approved or
clinically enabled product candidates for therapeutic indications that complement or augment our current
products, or that otherwise fit into our development or strategic plans on terms that are acceptable to us.
Identifying, selecting, acquiring or licensing promising products or product 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 product or product 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 or
license suitable products or product candidates from third parties on terms acceptable to us, or unable to raise
capital required to acquire or in-license new products, our business and prospects will be limited.

Moreover, any product candidate we identify, select and acquire or license may require additional, time-
consuming development or regulatory efforts prior to commercial sale, including preclinical studies if applicable,
and extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product
candidates are prone to the risk of failure that is inherent in pharmaceutical product development, including the
possibility that the product 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 products 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 products, there is a greater
likelihood that we will fail to successfully develop a pipeline of other product candidates to follow our existing
products or be able to acquire other products to expand our existing portfolio, and our business and prospects
would be harmed.

Our November 2013 acquisition of the U.S. rights to VIMOVO, the September 2014 merger with Vidara and
our October 2014 acquisition of the U.S. rights to PENNSAID 2%, 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 acquired the U.S. rights to VIMOVO in November 2013, merged the businesses of Horizon Pharma,
Inc. and Vidara in September 2014 and acquired the U.S. rights to PENNSAID 2% in October 2014, and from
time to time, we may seek to engage in additional strategic transactions with third parties, such as acquisitions of
companies or divisions of companies, asset purchases or in-licensing of products or product 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 with respect to its
continued involvement in such litigation, and we expect that this will result in substantial on-going expenses and

potential distractions to our management team. Moreover, 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 our acquisition of the U.S. rights to VIMOVO, the merger with Vidara, our
acquisition of the U.S. rights to PENNSAID 2% or any other strategic transaction, we will achieve the
anticipated revenues, net income or tax benefits that we believe to justify such transaction. In addition, any
failures or delays in entering into strategic transactions anticipated by analysts or the investment community
could result in a decline in our share price.

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

We are incorporated in Ireland and maintain subsidiaries in multiple jurisdictions, including Ireland, the

United States, Switzerland, Luxembourg, Germany and Bermuda. Prior to our Merger, Vidara was 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 service and transfer pricing
agreements, each on an arm’s length basis. We are continuing a substantially similar structure and arrangements.
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 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, we may be required to pay taxes for prior periods, 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 products 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 we should be treated as a foreign corporation for U.S.
federal income tax purposes following the combination of the businesses of Horizon Pharma, Inc. and
Vidara Therapeutics International plc.

Although Horizon Pharma plc is incorporated in Ireland, the IRS, may assert that we 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 Horizon Pharma plc, the parent company of our organization, is an Irish incorporated entity, it
would generally be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) under these rules.
Section 7874 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 Section 7874, and as a result of the fact that the former shareholders of Horizon owned (within the
meaning of Section 7874) less than 80% (by both vote and value) of the combined entity’s stock immediately
after the merger, we believe we qualify as a foreign corporation for U.S. federal income tax purposes following
the 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 us 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. There is limited guidance regarding the application of Section 7874 of the Code, including with respect
to the provisions regarding the application of the ownership test. If we were unable to be treated as a foreign
corporation for U.S. federal income tax purposes, one of our significant strategic reasons for completing the
Vidara merger would be nullified and we may not be able to recoup the significant investment in completing the
transaction.

Future changes to U.S. and non-U.S. tax laws could materially adversely affect us.

Under current law, we expect to be treated as a foreign corporation for U.S. federal income tax purposes

following the Vidara merger. However, changes to the rules in Section 7874 of the Code or regulations
promulgated thereunder or other guidance issued by the Treasury or the IRS could adversely affect our status as a
foreign corporation for U.S. federal income tax purposes, and any such changes could have prospective or
retroactive application to us or our shareholders. On May 20, 2014 Senator Carl Levin and Representative Sander
M. Levin introduced The Stop Corporate Inversions Act of 2014 (the “bill”) in the Senate and House of
Representatives, respectively. In its current form, the bill would treat us as a U.S. Corporation as a result of the
former shareholders of Horizon Pharma, Inc. owning 50% or more of the combined entity’s stock immediately
following the Vidara merger. If enacted, the bill would apply to taxable years ending after May 8, 2014 and does
not contain an exception for transactions subject to a binding commitment on that date. Additionally, in
September 2014, legislation was introduced in the U.S. Senate that seeks to address the practice of earnings
stripping by companies that move their domicile overseas. Furthermore, the Department of the Treasury and the
IRS provided notice in September 2014 that the agencies intend to issue regulations to reduce the tax benefits of
certain inversion transactions.

In addition, the U.S. Congress, the Organization for Economic Co-operation and Development, and other

government agencies in jurisdictions where we and our affiliates do business have had an extended focus on
issues related to the taxation of multinational corporations and there are several current legislative and
administrative proposals that, if enacted, would substantially change the U.S. federal income tax system as it
relates to the taxation of multinational corporations. One example is in the area of “base erosion and profit
shifting,” where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction
with lower tax rates. As a result, the tax laws in the United States and other countries in which we and our
affiliates do business could change on a prospective or retroactive basis, and any such changes could materially
and adversely affect us.

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 committee comprised of our Chairman, President and Chief Executive Officer, Timothy P. Walbert;
our Executive Vice President and Chief Business Officer, Robert F. Carey; our Executive Vice President and
Chief Financial Officer, Paul W. Hoelscher; our Executive Vice President, Corporate Secretary and Managing
Director, Ireland, David Kelly; our Executive Vice President and Chief Commercial Officer, John J. Kody; our
Executive Vice President, Corporate Development, Barry J. Moze; and our Executive Vice President, Research
and Development and Chief Medical Officer, Jeffrey W. Sherman, M.D. In order to retain valuable employees at
our company, in addition to salary and cash incentives, we provide incentive stock options and restricted stock
units that vest over time. The value to employees of stock options and restricted stock units that vest over time
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 affairs, 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 products and product candidates will be limited.

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

Any regulatory approvals that we obtain for our product candidates may also be subject to limitations on the

approved indicated uses for which the product 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 product candidate. In addition, with respect to our currently FDA-approved
products (and with respect to our product candidates, if approved), the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the
product 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
current good manufacturing practices, or cGMPs, good clinical practices, or GCPs, international conference on
harmonization regulations, or ICH regulations, and good laboratory practices, or GLPs, which are regulations and
guidelines enforced by the FDA for all of our products in clinical development, for any clinical trials that we
conduct post-approval. In connection with our November 2013 acquisition of the U.S. rights to VIMOVO, we
assumed responsibility for completing an ongoing Pediatric Research Equity Act post-marketing requirement
study in children 12 years to 16 years and 11 months of age with Juvenile RA for which the FDA recently
granted an extension with a final report due date of December 2015.

In addition, the FDA closely regulates the marketing and promotion of drugs. The FDA does not regulate

the behavior 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 products 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 products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. 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.

Later discovery of previously unknown problems with a product, 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:

•

restrictions on the marketing or manufacturing of the product, withdrawal of the product from the
market, or voluntary or mandatory product recalls;

fines, Warning Letters or holds on clinical trials;

refusal by the FDA to approve pending applications or supplements to approved applications filed by
us or our strategic partners, or suspension or revocation of product license approvals;

product seizure or detention, or refusal to permit the import or export of products; and

injunctions, the imposition of civil or criminal penalties, or exclusions.

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 products, which could make it difficult for us to sell our products profitably or to successfully
execute planned product price increases.

Market acceptance and sales of our products 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 products will depend in part on the
availability of governmental and third-party payer reimbursement for the cost of our products. 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 products 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 and other significant or potentially significant markets for our products and product candidates,
government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical
products and services, particularly for new and innovative products and therapies, which has resulted in lower
average selling prices. Further, the increased emphasis on managed healthcare in the United States and on
country and regional pricing and reimbursement controls in the European Union will put additional pressure on
product pricing, reimbursement and usage, which may adversely affect our product 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 product
price increases, or limit the amount by which we may be able to increase our product prices, which may
adversely affect our product sales and results of operations.

Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to

cover a significant portion of the cost of our products. Third-party payers may limit coverage to specific drug
products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs
for a particular indication. Moreover, a third-party payer’s decision to provide coverage for a drug product does
not imply that an adequate reimbursement rate will be approved. Additionally, one third-party payer’s decision to
cover a particular drug product does not ensure that other payors will also provide coverage for the drug product,
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 it
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 products. For example, two
significant PBMs placed DUEXIS and VIMOVO on their exclusion lists beginning in 2015, which will result in
a loss of reimbursement for patients’ whose healthcare plans have adopted these PBM lists. Also, as noted above,
we are currently in an ongoing contract and rebate dispute with a U.S. PBM involving VIMOVO and DUEXIS,
the outcome of which we cannot at this time determine, and which has the potential to negatively impact our
relationship with that PBM, which could affect their coverage and/or reimbursement treatment of our other
products. Additional healthcare plan formularies may also exclude our products from reimbursement due to the
actions of these PBMs, future price increases we may implement, our use of PME 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 products and increase the likelihood that prescriptions for our
products are not filled.

Outside of the United States, the success of our products, including LODOTRA and, if widely approved,
DUEXIS, 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. To
date, LODOTRA is approved in over 35 countries outside the United States, and reimbursement for LODOTRA
has been obtained in Germany, Italy, Sweden and Switzerland. Mundipharma is seeking coverage for
LODOTRA in a number of countries and currently sells LODOTRA without coverage in a limited number of
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 products
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
product or as volumes increase. Recently, many countries in the European Union have increased the amount of
discounts required on pharmaceutical products, which we believe has impacted the reimbursement rates and
timing to launch for LODOTRA to date, and we expect these discounts to continue as countries attempt to
manage healthcare expenditures, especially in light of current economic conditions. For example, legislation was
recently enacted in Germany that will increase the rebate on prescription pharmaceuticals and likely lower the
revenues from the sale of LODOTRA in Germany that we would otherwise receive. As a result of these pricing
practices, it may become difficult to achieve 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 DUEXIS or LODOTRA in any additional markets or for any other product
candidates that we may develop. Also, we cannot be sure that reimbursement amounts will not reduce the
demand for, or the price of, our products. If coverage and reimbursement is not available or is available only at
limited levels, we may not be able to successfully commercialize our products.

We expect to experience pricing pressures in connection with the sale of our products due to the trend

toward managed healthcare, the increasing influence of health maintenance organizations and additional
legislative proposals. There may be additional pressure by payers and healthcare providers to use generic drugs
that contain the active ingredients found in DUEXIS, PENNSAID 2%, RAYOS/LODOTRA and VIMOVO or
any other product candidates that we may develop, acquire or in-license. If we fail to successfully secure and
maintain coverage and adequate reimbursement for our products or are significantly delayed in doing so, we will
have difficulty achieving market acceptance of our products 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
PME program or any other co-pay programs whereby we assist qualified patients with certain out-of-pocket
expenditures for our product. In addition, pharmaceutical manufacturer co-pay initiatives are the subject of
evolving interpretations of applicable regulatory requirements, 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 PME program or any other co-pay initiatives, we would be at a competitive disadvantage in terms of
pricing versus preferred branded and generic competitors.

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 U.S. 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 products 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, 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 civil and/or criminal penalties, damages, fines, exclusion 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.

We expect that the Patient Protection and Affordable Care Act, as amended by the Health Care and
Education Affordability Reconciliation Act, or collectively, the ACA, as well as other healthcare reform
measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional
downward pressure on the price that we may receive for any approved product. An expansion in the
government’s role in the U.S. healthcare industry may cause general downward pressure on the prices of
prescription drug products, lower reimbursements for providers using our products, reduce product utilization
and adversely affect our business and results of operations. It is unclear whether and to what extent, if at all,
other potential developments resulting from the federal healthcare reform legislation, such as an increase in the
number of people with health insurance and an increased focus on preventive medicine, may provide us
additional revenue to offset the annual excise tax (on certain drug product sales) enacted under the ACA, subject
to limited exceptions. It is possible that the tax burden, if we are not excepted, would adversely affect our
financial performance, which in turn could cause the price of our share to decline. Any reduction in
reimbursement from government programs may result in a similar reduction in payments from private payers.
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 products 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 and false claims laws
and regulations. 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 through our customers, to various state and federal

fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims
Act, federal and state privacy and security laws, sunshine laws, government price reporting laws, and other fraud
laws, as described in greater detail in the Government Regulation Section of this report. These laws may impact,
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.

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. These risks may be increased where there are evolving interpretations
of applicable regulatory requirements, such as those applicable to manufacturer co-pay initiatives. 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.

We are unable to predict whether we could be subject to actions under any of these or other fraud and abuse
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 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 products or any other product candidate that we develop may cause undesirable side effects or have
other properties that could delay or prevent regulatory approval or commercialization, result in product re-
labeling or withdrawal from the market or have a significant impact on customer demand.

Undesirable side effects caused by any product 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. 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 included flare in RA-related symptoms, abdominal pain, nasopharyngitis,
headache, flushing, upper respiratory tract infection, back pain and weight gain. 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.

In addition, the FDA or other regulatory authorities may require, or we may undertake, additional clinical

trials to support the safety profile of our product candidates.

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

•

regulatory authorities may require the addition of labeling statements, such as a “black box” warning or
a contraindication;

regulatory authorities may withdraw their approval of the product or place restrictions on the way it is
prescribed;

• we may be required to change the way the product is administered, conduct additional clinical trials or

change the labeling of the product or implement a risk evaluation and mitigation strategy; and

• we may be subject to increased exposure to product liability and/or personal injury claims.

If any of these events occurred with respect to our products, our ability to generate significant revenues from

the sale of these products would be significantly harmed.

We rely on third parties to conduct our preclinical 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 product
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. We may also have the need to enter into
other such agreements in the future if we were to develop other product candidates or conduct clinical trials in
additional indications for our existing products. In connection with our planned Phase 3 study to evaluate
ACTIMMUNE in the treatment of FA, we are working with an academic research organization, who is the
Clinical Trials Coordination Center, part of the Center for Human Experimental Therapeutics, in the University
of Rochester to conduct the FA Phase 3 study as well as collaborating with the Friedreich’s Ataxia Research
Alliance, or FARA, and select investigators of FARA’s Collaborative Clinical Research Network in FA. We 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 and our CROs 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 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 product
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 violates federal or state fraud and abuse or false
claims laws and regulations or healthcare privacy and security laws.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into
arrangements with alternative CROs on commercially reasonable terms, or at all. If CROs 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 products
and product candidates. As a result, our results of operations and the commercial prospects for our products and
product candidates would be harmed, our costs could increase and our ability to generate revenues could be
delayed.

Switching or adding additional CROs can involve substantial cost and require extensive management time

and focus. In addition, there is a natural transition period when a new CRO 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, 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 addition, pursuant to a March 2011 letter agreement and in connection with our waiver of certain
milestone payments, Mundipharma initiated a separate Phase 3 clinical trial for LODOTRA for the potential
treatment of polymyalgia rheumatica, or PMR. We had limited control over the timing and implementation of the
planned clinical trial and in February 2014, Mundipharma informed us that they had terminated the clinical trial

primarily due to recruitment difficulties based on the inclusion criteria and as a result of the cessation of
production of the comparator product Decortin® 1mg.

In addition, in connection with our November 2013 acquisition of the U.S. rights to VIMOVO, we assumed

responsibility for completing an ongoing Pediatric Research Equity Act post-marketing requirement study in
children 12 years to 16 years and 11 months of age with Juvenile Idiopathic Arthritis for which the FDA recently
granted an extension with a final report due date of December 2015. 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.

Clinical drug development 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 studies and early clinical trials of
potential product candidates may not be predictive of the results of later-stage clinical trials. Product candidates
in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed
through preclinical studies and initial clinical testing.

With respect to our planned Phase 3 clinical trial to evaluate ACTIMMUTE for the treatment of FA, and to

the extent that we are required to conduct additional clinical development of ACTIMMUNE, DUEXIS,
PENNSAID 2%, RAYOS/LODOTRA or VIMOVO or we conduct clinical development of earlier stage product
candidates or for other additional indications for ACTIMMUNE or RAYOS/LODOTRA, we may experience
delays in these clinical trials. 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:

•

obtaining regulatory approval to commence a trial;

reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of
which can be subject to extensive negotiation and may vary significantly among different CROs and
trial sites;

obtaining institutional review board or ethics committee approval at each site;

recruiting suitable patients to participate in a trial;

having patients complete a trial or return for post-treatment follow-up;

clinical sites dropping out of a trial;

adding new sites; or

• manufacturing sufficient quantities of product candidates for use in clinical trials.

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 product candidate being studied in relation to other available therapies, including any
new drugs 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 of our future clinical trials and while we
have and intend to have agreements governing their committed activities, we will have limited influence over
their actual performance.

We could encounter delays if prescribing physicians encounter unresolved ethical issues associated with

enrolling patients in clinical trials of our product 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 drug, 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 product candidates, the
commercial prospects of our product candidates will be harmed, and our ability to generate product revenues
from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will
increase our costs, slow down our product development and approval process and jeopardize our ability to
commence product sales and generate revenues. 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 product 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 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. Following the
closing of our acquisition of Vidara, we conduct or plan to conduct significant management operations at both
our global headquarters located in Dublin, Ireland and our U.S. office located in Deerfield, Illinois. If our Dublin
or Deerfield 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 products and third-party logistics partners to ship our products. Our
ability to obtain commercial supplies of our products 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.

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

We face an inherent risk of product liability as a result of the commercial sales of our products and the

clinical testing of our product candidates. For example, we may be sued if any of our products or product
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 product, 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 product candidates. Even a successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome, liability claims may result in:

•

decreased demand for our products or product candidates that we may develop;

injury to our reputation;

• withdrawal of clinical trial participants;

•

initiation of investigations by regulators;

costs to defend the related litigation;

•

a diversion of management’s time and our resources;

substantial monetary awards to trial participants or patients;

product recalls, withdrawals or labeling, marketing or promotional restrictions;

loss of revenue;

exhaustion of any available insurance and our capital resources;

the inability to commercialize our products or product candidates; and

a decline in our share price.

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 products we develop.
We currently carry product liability insurance covering our clinical studies and commercial product sales in the
amount of $20 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 products in the
United States, and/or the potential commercial launches of DUEXIS and LODOTRA in additional markets, 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 product 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 maintain hazardous
materials insurance coverage. 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 may engage in misconduct or other improper activities, including noncompliance with
regulatory standards and requirements and insider trading.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include

intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with
manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and
regulations, report financial information or data accurately or disclose unauthorized activities to us. 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. Employee misconduct could
also involve 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 employee misconduct, 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 fines or other sanctions.

Risks Related to Our Financial Position and Capital Requirements

We have incurred significant operating losses since our inception, and have not yet achieved profitability.

We have a limited operating history and even less history operating as a combined organization following

the Vidara merger. We have financed our operations primarily through equity and debt financings, including the
issuance of convertible notes, and have incurred significant operating losses since our inception. We had net
losses of $263.6 million, $149.0 million and $87.8 million for the years ended December 31, 2014, 2013 and
2012, respectively. As of December 31, 2014, we had an accumulated deficit of $720.7 million. Our losses have
resulted principally from costs incurred in our development activities for our products and product candidates,
commercialization activities related to our product launches 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 and working capital. While we anticipate that we will become profitable in the
future, whether and when we achieve this will depend on the revenues we generate from the sale of our products
being sufficient to cover our operating expenses, and we have not achieved profitability to date.

We have limited product revenues and other sources of revenues. Even if we achieve profitability in the
future, we cannot be certain that we will 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 become profitable depends upon our ability to generate revenues from sales of our products.

DUEXIS was approved by the FDA on April 23, 2011, and we began generating revenues from sales of DUEXIS
in late 2011 following the commercial launch in the United States. LODOTRA is approved for marketing in over
35 countries outside the United States, and to date we have generated only limited revenues from sales of
LODOTRA. RAYOS was approved by the FDA on July 26, 2012, and we began marketing it in the United States
through our full field sales force in late January 2013. Following our November 2013 acquisition of the U.S.
rights to VIMOVO, we began commercialization efforts in the United States in the first quarter of 2014.
ACTIMMUNE was originally launched in the U.S. market in March 1991 by Genentech and in June 2012,
Vidara acquired the intellectual property rights and certain assets related to the ACTIMMUNE product line. In
September 2014, the businesses of Horizon Pharma plc and Vidara were combined, and as a result we assumed
the commercialization of ACTIMMUNE. In October 2014 we acquired the U.S. rights to PENNSAID 2% and
began commercializing PENNSAID 2% in the United States in January 2015. We may never be able to
successfully commercialize our products or develop or commercialize other products in the United States, 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 products and any other product candidates for which we
obtain approval;

obtaining FDA approvals for additional indications for ACTIMMUNE;

securing additional foreign regulatory approvals for LODOTRA and DUEXIS; and

developing, acquiring or in-licensing and commercializing a portfolio of other product candidates in
addition to our current products.

Even if we do generate additional product sales, we may not be able to 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 product offerings or continue our
operations.

We may need to obtain additional financing to further develop our existing products, or to develop, acquire
or in-license other products.

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

substantial amounts to:

•

commercialize our existing products in the United States, including due to the substantial expansion of
our sales force we completed in connection with our November 2013 acquisition of the U.S. rights to
VIMOVO and the additional expansion of our sales force in connection with our acquisition of U.S.
rights to PENNSAID 2%;

complete the regulatory approval process, and any future required clinical development related thereto,
for our products;

potentially acquire or in-license additional complementary products or products that augment our
current product portfolio; and

conduct clinical trials with respect to ACTIMMUNE for FA and any other potential indications beyond
GCD or SMO.

While we believe that our existing cash and cash equivalents at December 31, 2014 of $218.8 million will

be sufficient to fund our operations to the point of generating continuous positive cash flow 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 we presently anticipate, if we develop, acquire or in-
license additional products or acquire companies, or if our revenues do not meet expectations.

We cannot be certain that additional funding will be available on acceptable terms, or at all. 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 products or product
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 or in-licensing. We also could be required to:

•

seek collaborators for one or more of our current or future product candidates at an earlier stage than
otherwise would be desirable or on terms that are less favorable than might otherwise be available; or

relinquish or license on unfavorable terms our rights to technologies or product candidates that we
otherwise would seek to develop or commercialize ourselves.

On June 17, 2014, we entered into a credit agreement with a group of lenders to provide us with
$300.0 million in financing through a five-year senior secured credit facility, or the Senior Secured Credit
Facility. Funding of the Senior Secured Credit Facility occurred coincident with the closing of the merger with
Vidara. While the credit agreement provides for an uncommitted accordion facility from which we may
potentially finance future acquisitions, funding under the accordion facility is subject to the satisfaction of certain
financial and other conditions that we may not be able to meet at the times we may desire to fund an acquisition
opportunity. If we are otherwise unable to secure financing to support future acquisitions, our ability to execute
on a key aspect of our overall growth strategy would be impaired.

Our Swiss subsidiary, Horizon Pharma AG, is subject to Swiss laws regarding overindebtedness that require
Horizon Pharma AG to maintain assets in excess of its liabilities. As of December 31, 2014, Horizon Pharma AG
was not overindebted. However, Horizon Pharma AG has previously been overindebted, including at

December 31, 2013. We will continue to monitor and review Horizon Pharma AG’s financial position and, as
necessary, will address any overindebtedness, which could require us to have cash at Horizon Pharma AG in
excess of its near-term operating needs and could affect our ability to have sufficient cash at our other
subsidiaries to meet their near-term operating needs.

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

the price of our ordinary shares to decline.

Raising additional capital may cause dilution to our existing shareholders, restrict our operations or
require us to relinquish intellectual property rights to our product candidates.

We may seek additional capital through a combination of private and public equity offerings, debt

financings, receivables or royalty financings, strategic partnerships and alliances and licensing arrangements. To
the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership
interest of our existing shareholders will be diluted, and the terms may include liquidation or other preferences
that adversely affect the rights of our shareholders. Debt, receivables and royalty financings may be coupled with
an equity component, such as warrants to purchase shares, which could also result in dilution of our existing
shareholders’ ownership. The incurrence of additional indebtedness would result in increased fixed payment
obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur
additional debt, limitations on our ability to acquire or license intellectual property rights and other operating
restrictions that could adversely impact our ability to conduct our business. For example, our borrowings under
the Senior Secured Credit Facility subject us to significant fixed payment obligations in the future as we become
obligated to repay the debt, and the Senior Secured Credit Facility contains affirmative and negative covenants
that restrict our ability to incur additional indebtedness, grant liens, make investments, engage in mergers or
dispositions, prepay other indebtedness and issue dividends or other distributions. If we raise additional funds
through strategic partnerships and alliances and licensing arrangements with third parties, we may have to
relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us.

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
U.S. commercialization activities for our products, to potentially fund additional regulatory approvals of
DUEXIS, ACTIMMUNE and RAYOS/LODOTRA, to potentially fund development life cycle management or
manufacturing activities of ACTIMMUNE, RAYOS/LODOTRA and PENNSAID 2% for other indications and
for working capital, 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 utilize our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an

“ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three
year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change
tax attributes to offset its post-change income may be limited. In September 2014, the Merger transaction triggered
an “ownership change” limitation and, as a result, we will be subject to annual limits on our ability to utilize net
operating loss carryforwards of Horizon Pharma Holdings USA Inc. and its subsidiary. We estimate this will result
in annual limits of $91.1 million, $84.0 million and $84.0 million in 2015, 2016 and 2017, respectively. The net
operating loss carryforward limitation is cumulative such that any use of the carryforwards below the limitation in
one year will result in a corresponding increase in the limitation for the subsequent tax year.

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 following the Vidara merger. As a result, it is not currently
expected that Horizon Pharma, Inc. or our other U.S. affiliates will be able to utilize their U.S. tax attributes to
offset their U.S. taxable income, if any, resulting from certain taxable transactions following the Vidara merger.
Notwithstanding this limitation, we expect that Horizon Pharma, Inc. will be able to fully utilize its U.S. net
operating losses prior to their expiration. As a result of this limitation, however, it may take Horizon Pharma, Inc.
longer to use its net operating losses. 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 Horizon Pharma, Inc. from
fully utilizing its U.S. tax attributes prior to their expiration if Horizon Pharma plc does not generate taxable
income consistent with its expectations.

Any limitation on our ability to use our net operating loss carryforwards 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.

As widely reported, global credit and financial markets have experienced extreme disruptions in the past
several years, including severely diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. While
there has been some recent improvement in some of these financial metrics, there can be no assurance that
further deterioration in credit and financial markets and confidence in economic conditions will not occur. 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 current equity and credit markets
deteriorate again, or do not improve, 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. In addition, there is a
risk that one or more of our current service providers, manufacturers and other partners may not survive these
difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on
budget.

At December 31, 2014, we had $218.8 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 or marketable securities since December 31, 2014, no assurance can be given
that further deterioration in conditions of the global credit and financial markets would not negatively impact our
current portfolio of cash equivalents or marketable securities or our ability to meet our financing objectives.
Further dislocations in the credit market may adversely impact the value and/or liquidity of marketable securities
owned by us.

Changes in accounting rules or policies may affect our financial position and results of operations.

U.S. generally accepted accounting principles 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 U.S. generally accepted
accounting principles 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.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our
business to pay our substantial debt.

In November 2013, Horizon Pharma, Inc. issued $150.0 million aggregate principal amount of 5.00%
Convertible Senior Notes due 2018, or the Convertible Senior Notes, to investors pursuant to note purchase
agreements with such investors, and we subsequently guaranteed this debt at our parent entity. As of
December 31, 2014, $61.0 million of principal amount of the Convertible Senior Notes remained outstanding.
We also substantially increased our overall indebtedness to finance the Vidara merger. On June 17, 2014, we
entered into the Senior Secured Credit Facility and borrowed $300.0 million, which is due after a five-year
period. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our
indebtedness, including the Convertible Senior Notes and our borrowings under the Senior Secured Credit
Facility, depends on our future performance, which is subject to economic, financial, competitive and other
factors beyond our control. Our business may not continue to generate cash flow from operations in the future
sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash
flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining
additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our
indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to
engage in any of these activities or engage in these activities on desirable terms, which could result in a default
on our debt obligations.

Covenants imposed by the Senior Secured Credit Facility 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 Senior Secured Credit Facility provides for (i) a committed five-year $300.0 million term loan facility,
the proceeds of which were used primarily to effect the Vidara merger and pay fees and expenses in connection
therewith and are being used in part for general corporate purposes; (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 under the Senior Secured Credit Facility. The Senior Secured Credit Facility
imposes various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

•

incur or assume liens or additional debt or provide guarantees in respect of obligations of other
persons;

issue redeemable preferred shares;

pay dividends or distributions or redeem or repurchase capital stock;

prepay, redeem or repurchase certain debt;

• make loans, investments, acquisitions (including acquisitions of exclusive licenses) and capital

expenditures;

•

enter into agreements that restrict distributions from our subsidiaries;

sell assets and capital stock of our subsidiaries;

enter into certain transactions with affiliates; and

consolidate or merge with or into, or sell substantially all of our assets to, another person.

The covenants imposed by the Senior Secured Credit Facility and our obligations to service our outstanding

debt:

•

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or
other general business purposes;

limit our ability to use our cash flow or obtain additional financing for future working capital, capital
expenditures, acquisitions or other general business purposes;

• may require us to use a substantial portion of our cash flow from operations to make debt service

payments;

•

limit our flexibility to plan for, or react to, changes in our business and industry;

place us at a competitive disadvantage compared to our less leveraged competitors; and

increase our vulnerability to the impact of adverse economic and industry conditions.

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, which

could permit the administrative agent to, or permit the required lenders to cause the administrative agent to,
declare all or part of any outstanding loans to be immediately due and payable or to exercise any remedies
provided to the administrative agent, including proceeding against the collateral granted to secure our obligations
under the Senior Secured Credit Facility. An event of default under the Senior Secured Credit Facility could also
lead to an event of default under the terms of our Convertible 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 the acquisitions of the U.S. rights to VIMOVO
and PENNSAID 2% and the Vidara merger become impaired, we could have to take significant charges
against earnings.

In connection with the accounting for acquisitions of the U.S. rights to VIMOVO and PENNSAID 2% and

the Vidara merger, we have recorded significant amounts of intangible assets. Under U.S. 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 reduction or 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.

Risks Related to Our Intellectual Property

If we are unable to obtain or protect intellectual property rights related to our products and product
candidates, we may not be able to compete effectively in our market.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the
intellectual property related to our products and product 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 or in-license may fail to result in issued patents with claims that cover the products in
the United States or in other foreign countries. If this were to occur, early generic competition could be expected
against our current products and other product candidates in development. There is no assurance that the
potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a
patent or prevent a patent from issuing based on a pending patent application. In particular, because the APIs in
DUEXIS, VIMOVO and RAYOS/LODOTRA have been on the market as separate products for many years, it is
possible that these products 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.

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.

On February 15, 2012, we received a Paragraph IV Patent Certification from Par Pharmaceutical, Inc.
advising that Par Pharmaceutical, Inc. had filed an ANDA with the FDA for a generic version of DUEXIS,

containing 800 mg of ibuprofen and 26.6 mg of famotidine. In March 2012, we filed a patent infringement
lawsuit in the United States District Court for the District of Delaware against Par for filing an ANDA against
DUEXIS and seeking an injunction to prevent the approval of Par’s ANDA and/or prevent Par from selling a
generic version of DUEXIS. In January 2013, we filed a second suit against Par in the United States District
Court for the District of Delaware claiming patent infringement of additional patents that have been issued for
DUEXIS and seeking an injunction to prevent the approval of Par’s ANDA and/or prevent Par from selling a
generic version of DUEXIS.

On August 21, 2013, we entered into the Par settlement agreement and Par license agreement with Par
relating to its patent infringement litigation. The Par settlement agreement provides for a full settlement and
release by both us and Par of all claims that were or could have been asserted in the litigation and that arise out of
the specific patent issues that were the subject of the litigation, including all resulting damages or other remedies.

Under the Par license agreement, we granted Par a non-exclusive license (that is only royalty-bearing in

some circumstances) to manufacture and commercialize Par’s generic version of DUEXIS in the United States
after the generic entry date and to take steps necessary to develop inventory of, and obtain regulatory approval
for, but not commercialize, Par’s generic version of DUEXIS prior to the generic entry date or the License. The
License covers all patents owned or controlled by us during the term of the Par license agreement that would,
absent the License, be infringed by the manufacture, use, sale, offer for sale, or importation of Par’s generic
version of DUEXIS in the United States. Unless terminated sooner pursuant to the terms of the Par license
agreement, the License will continue until the last to expire of the licensed patents and/or applicable periods of
regulatory exclusivity.

Under the Par license agreement, the generic entry date is January 1, 2023; however, Par may be able to
enter the market earlier in certain circumstances. Such events relate to the resolution of potential future third
party DUEXIS patent litigation, the entry of other third party generic versions of DUEXIS or certain specific
changes in DUEXIS market conditions. Only in the event that Par enters the DUEXIS market due to the specified
changes in DUEXIS market conditions will the License become royalty-bearing, with the royalty obligations
ceasing upon the occurrence of one of the other events that would have allowed Par to enter the DUEXIS market.

The Par license agreement may be terminated by us if Par commits a material breach of the agreement that

On July 15, 2013, we received a Paragraph IV Patent Certification from Watson advising that Watson had

filed an ANDA with the FDA for a generic version of RAYOS, containing up to 5 mg of prednisone. Watson has
not advised us as to the timing or status of the FDA’s review of its filing. On August 26, 2013, we, together with
Jagotec, filed suit in the United States District Court for the District of New Jersey against WLF seeking an
injunction to prevent the approval of the ANDA. The lawsuit alleges that WLF has infringed U.S. Patent
Nos. 6,488,960, 6,677,326, 8,168,218, 8,309,124, and 8,394,407 by filing an ANDA seeking approval from the
FDA to market generic versions of RAYOS containing 1 mg, 2 mg, and 5 mg of prednisone prior to the
expiration of the patents. The subject patents are listed in the FDA’s Orange Book. The commencement of the
patent infringement lawsuit stays, or bars, FDA approval of WLF’s ANDA for 30 months or until an earlier
district court decision that the subject patents are not infringed or are invalid. We, together with Jagotec have
granted WLF a covenant not to sue with respect to US Patent Nos. 6,677,326 and 8,168,218, respectively, and

accordingly these patents have been dismissed from the lawsuit. The Court held a claim construction hearing on
October 16, 2014, and issued its opinion and order on claim construction on November 10, 2014, adopting our
proposed construction of both of the disputed claim terms. The court has scheduled expert discovery in the WLF
action to be completed by June 2, 2015, and has set the pretrial conference for September 10, 2015. The trial date
will be set following the pretrial conference.

On September 12, 2013, we received a Paragraph IV Patent Certification from Par Pharmaceutical, Inc.

advising that Par Pharmaceutical, Inc. had filed an ANDA with the FDA for a generic version of RAYOS,
containing up to 5 mg of prednisone. On October 22, 2013, we, together with Jagotec, filed suit in the
United States District Court for the District of New Jersey against Par seeking an injunction to prevent the
approval of the ANDA. The lawsuit alleged that Par had infringed U.S. Patent Nos. 6,488,960, 6,677,326,
8,168,218, 8,309,124 and 8,394,407 by filing an ANDA seeking approval from the FDA to market generic
versions of RAYOS prior to the expiration of the patents. The subject patents are listed in the FDA’s Orange
Book. On November 20, 2013, we were notified by counsel for Par that Par Pharmaceutical, Inc. had elected to
withdraw its ANDA with the FDA for a generic version of RAYOS containing 2 mg and 5 mg of prednisone. On
December 5, 2013, we entered into a Stipulation of Dismissal with Par Pharmaceutical, Inc. whereby Par
Pharmaceutical, Inc. agreed to withdraw its application to market a generic version of RAYOS.

On November 13, 2014, we received a Paragraph IV Patent Certification from Watson advising that Watson

had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Watson has not advised us as to the
timing or status of the FDA’s review of its filing. On December 23, 2014, we filed suit in the United States
District Court for the District of New Jersey against Watson seeking an injunction to prevent the approval of the
ANDA. The lawsuit alleges that Watson has infringed U.S. Patent Nos. 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 prior to the expiration of the patents. The subject patents are listed in the FDA’s Orange
Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Watson’s ANDA
for 30 months or until an earlier district court decision that the subject patents are not infringed or are invalid.
The court has not yet set a trial date for the Watson action.

On December 2, 2014, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,741,956 from Paddock advising that
Paddock had filed an ANDA with the FDA for a generic version of PENNSAID 2%. On January 9, 2015, we
received from Paddock another Paragraph IV Patent Certification against newly Orange Book listed U.S. Patent
No. 8,871,809. Paddock has not advised us as to the timing or status of the FDA’s review of its filing. On
January 13, 2015 and January 14, 2015, we 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. The lawsuits allege that Paddock has infringed U.S.
Patent Nos. 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 the patents. The
subject patents are listed in the FDA’s Orange Book. The commencement of the patent infringement lawsuit
stays, or bars, FDA approval of Paddock’s ANDA for 30 months or until an earlier district court decision that the
subject patents are not infringed or are invalid. The courts have not yet set trial dates for the Paddock actions.

commercialize VIMOVO under AstraZeneca’s Nexium patent rights. The settlement agreement, however, has no
effect on the Pozen VIMOVO patents, which are still the subject of patent litigations. As part of our acquisition
of the U.S. rights to VIMOVO, we have taken over and are responsible for the patent litigations that include the
Pozen patents licensed to us under the Pozen license agreement.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4,

On or about December 19, 2014, we filed a Notice of Opposition to a European patent, EP 2611457, to

On February 2, 2015, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, 8,741,956, and 8,871,809 from Taro,
advising that Taro had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Taro has not
advised us as to the timing or status of the FDA’s review of its filing. We are still in the process of evaluating the
Paragraph IV Patent Certification, and it is anticipated we will file suit against Taro within the statutorily
prescribed 45 day time limit.

We intend to vigorously defend our intellectual property rights relating to DUEXIS, VIMOVO,

ACTIMMUNE, PENNSAID 2% and RAYOS, but we cannot predict the outcome of the WLF matter related to
RAYOS or the DRL cases, the Mylan cases, or the Watson cases related to VIMOVO, or the Watson and
Paddock cases related to PENNSAID 2%. Any adverse outcome in these matters or any new generic challenges
that may arise could result in one or more generic versions of DUEXIS, VIMOVO, ACTIMMUNE, PENNSAID
2% and/or RAYOS 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 DUEXIS, VIMOVO, ACTIMMUNE,
PENNSAID 2% and/or RAYOS 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 DUEXIS, VIMOVO, ACTIMMUNE, RAYOS/LODOTRA or PENNSAID 2% 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 products. 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 products or any other product 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 who was the first to invent any of the subject matter covered by
the patent claims of our applications.

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 United States
Patent and Trademark Office, or 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. Accordingly, it is
too early to tell what, if any, impact the Leahy-Smith Act will have on the operation of our business and the
protection and enforcement of our intellectual property. 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 Patient Protection and Affordable Care Act 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 and Canada. 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 to us, in a given country, of a patent 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 our 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 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 we and our collaborators are developing product candidates. As the biotechnology and
pharmaceutical industries expand and more patents are issued, the risk increases that our product 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 products and/or any other product 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 product 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
product candidates, any molecules formed during the manufacturing process or any final product itself, the
holders of any such patents may be able to block our ability to commercialize such product 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 product 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 product 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 products, 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 product 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 product 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
products, 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 a 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 SkyePharma AG’s 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 SkyePharma or our other license agreements, or 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 products 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 Pozen under which
AstraZeneca has in-licensed exclusive rights under certain of Pozen’s patents with respect to VIMOVO, and
(iii) acquired AstraZeneca’s co-ownership rights with Pozen 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 Pozen as we take over AstraZeneca’s agreements with Pozen, our rights to commercialize
VIMOVO in the United States may be adversely affected or terminated by AstraZeneca or Pozen.

We also license rights to patents, know-how and trademarks for ACTIMMUNE from 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 or 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 a patent of ours or 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 US Patent Office (including 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 our licensors that control the prosecution and maintenance of our licensed patents fail
to maintain the patents and patent applications covering our product 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 if we are successful, litigation could result in substantial cost
and be a distraction to our management and other employees.

Risks Related to Ownership of our Ordinary Shares

We do not know whether an active, liquid and orderly trading market for our ordinary shares will be
sustained or what the market price of our ordinary shares will be and as a result it may be difficult for you
to sell your ordinary shares.

Although our ordinary shares are listed on The NASDAQ Global Market, an active trading market for our
shares may never be sustained. Further, an inactive market may impair our ability to raise capital by selling our
ordinary shares and may impair our ability to enter into strategic partnerships or acquire companies or products
by using our ordinary shares as consideration.

The market price of our ordinary shares historically has been volatile and is likely to be highly volatile, and
you could lose all or part of your investment.

The trading price of our ordinary shares has been highly volatile and could be subject to wide fluctuations in
response to various factors, some of which are beyond our control, including limited trading volume. In addition
to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:

•

our failure to successfully execute our commercialization strategy with respect to our approved
products, particularly our commercialization of our products in the United States;

actions or announcements by third party or government payors with respect to coverage and
reimbursement of our products;

disputes or other developments relating to intellectual property and other proprietary rights, including
patents, litigation matters and our ability to obtain patent protection for our products and product
candidates;

unanticipated serious safety concerns related to the use of our products;

adverse regulatory decisions;

changes in laws or regulations applicable to our business, products or product candidates, including but
not limited to clinical trial requirements for approvals or tax laws;

•

inability to comply with our debt covenants and to make payments as they become due;

inability to obtain adequate commercial supply for any approved product or inability to do so at
acceptable prices;

developments concerning our commercial partners, including but not limited to those with our sources
of manufacturing supply;

our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical
trial;

adverse results or delays in clinical trials;

our failure to successfully develop, acquire, and/or in-license additional product candidates or obtain
approvals for additional indications for our existing product candidates;

introduction of new products or services offered by us or our competitors;

our inability to effectively manage our growth;

overall performance of the equity markets and general political and economic conditions;

failure to meet or exceed revenue and financial projections we may provide to the public;

actual or anticipated variations in quarterly operating results;

failure to meet or exceed the estimates and projections of the investment community;

publication of research reports about us or our industry or positive or negative recommendations or
withdrawal of research coverage by securities analysts;

our inability to successfully enter new markets;

the termination of a collaboration or the inability to establish additional collaborations;

announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments
by us or our competitors;

our inability to maintain an adequate rate of growth;

ineffectiveness of our internal controls or our inability to otherwise comply with financial reporting
requirements;

adverse U.S. and foreign tax exposure;

additions or departures of key management, commercial or regulatory personnel;

issuances of debt or equity securities;

significant lawsuits, including patent or shareholder litigation;

changes in the market valuations of similar companies;

sales of our ordinary shares by us or our shareholders in the future;

trading volume of our ordinary shares;

effects of natural or man-made catastrophic events or other business interruptions; and

other events or factors, many of which are beyond our control.

In addition, the stock market in general, and The NASDAQ Global Market and the stocks 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 do not intend to pay dividends on our ordinary shares so any returns will be limited to the value of our
shares.

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 imposed by the
Senior Secured Credit Facility. Any return to shareholders will therefore be limited to the increase, if any, of our
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 new 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 2002, or the
Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the NASDAQ Stock Market,
Inc., or 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 Vidara’s business and operations into the historical business and operating structure of
Horizon Pharma, Inc. 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 products 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 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, our ordinary shares could be
delisted from The NASDAQ Global 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. In particular, prior to the Vidara merger, Vidara and its affiliate entities
were not subject to the requirements of the Sarbanes-Oxley Act. We intend to take appropriate measures to
establish or implement an internal control environment at the former Vidara entities aimed at successfully
adopting the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. However, it is possible that we
may experience delays in implementing or be unable to implement the required internal controls over financial
reporting and other disclosure controls and procedures. We currently do not have an internal audit group, and we
may need to hire additional accounting and financial staff with appropriate public company experience and
technical accounting knowledge, as well as retain and work with consultants with such knowledge. Moreover, 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, 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, would likely
result in increased costs to us 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 our ordinary shares could decline. In addition, our ordinary shares that
are either subject to outstanding options 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. 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.

Certain holders of our ordinary shares are entitled to rights with respect to the registration of their shares

under the Securities Act. Registration of these shares under the Securities Act would result in the shares
becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates.
For example, we are subject to a registration rights agreement with certain holders of our ordinary shares prior to
the Vidara merger. Pursuant to this agreement, we filed and are required to maintain a registration statement
covering the resale of our ordinary shares held by these shareholders and in certain circumstances, these holders
can require us to participate in an underwritten public offering of their ordinary shares. Any sales of securities by
these shareholders or a public announcement of such sales could have a material adverse effect on the trading
price of 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, our shareholders may experience substantial dilution. We may sell
ordinary shares, convertible 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 ordinary shares, convertible securities or other equity
securities in subsequent transactions, our existing shareholders may be materially diluted. New investors in such
subsequent transactions could gain rights, preferences and privileges senior to those of holders of our ordinary
shares. We also maintain equity incentive plans, including our 2014 Equity Incentive Plan, 2014 Non-Employee
Equity Plan and 2014 Employee Share Purchase Plan, and intend to grant additional ordinary share awards under
these and future plans, which will result in additional dilution to 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. 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 be enforceable in Ireland.

As an Irish company, we are governed by the Irish Companies Acts, which 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 could delay or prevent a takeover of us by a 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:

•

permit our board of directors to issue one or more series of preferred shares with rights and preferences
designated by our board;

impose advance notice requirements for shareholder proposals and nominations of directors to be
considered at shareholder meetings;

stagger the terms of our board of directors into three classes; and

require the approval of a supermajority of the voting power of the shares of our share capital entitled to
vote generally in the election of directors for shareholders to amend or repeal our articles of
association.

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 other shareholders to elect directors other than the candidates nominated by our board.

A transfer of our ordinary shares may be subject to Irish stamp duty.

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% 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 of this stamp duty is available to transfers by shareholders
who hold our 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 a record holder who
holds our 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 Companies Acts or any other applicable law permit, may, or may provide
that a subsidiary of ours 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 our 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 our 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 our subsidiary for the amount of stamp duty paid. Our lien shall
extend to all dividends paid on those 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
shares or publish inaccurate or unfavorable research about our business, our share price would likely decline. If
one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand
for our ordinary shares could decrease, which might cause our share price and trading volume to decline.

We may become involved in securities class action litigation that could divert 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 companies have experienced significant
stock price volatility in recent years. We may become involved in this type of litigation in the future. Even if we
are successful in defending against any such claims, litigation could result in substantial costs and may be a
distraction to management, and may result in unfavorable results that could adversely impact our financial
condition and prospects.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We occupy approximately 10,300 square feet of office space in our headquarters in Dublin, Ireland under a

lease that expires on November 4, 2029. We also occupy approximately 50,500 square feet of office space in
Deerfield, Illinois under lease agreements that expire on June 30, 2018, approximately 5,000 square feet of office
space in Mannheim, Germany under a lease that expires on December 31, 2016, approximately 3,200 square feet
of office space in Reinach, Switzerland under a lease that expires on May 31, 2015 and approximately
6,200 square feet of office space in Roswell, Georgia under a lease that expires on October 31, 2018. We believe
that our current facilities are adequate for our needs and that, should it be needed, suitable additional space will
be available to accommodate expansion of our operations on commercially reasonable terms.

Item 3. Legal Proceedings

On July 15, 2013, we received a Paragraph IV Patent Certification from Watson Laboratories, Inc.—Florida,
known as Actavis Laboratories FL, Inc., or Watson, advising that Watson had filed an ANDA with the FDA for a
generic version of RAYOS, containing up to 5 mg of prednisone. Watson has not advised us as to the timing or
status of the FDA’s review of its filing. On August 26, 2013, we, together with Jagotec, filed suit in the United
States District Court for the District of New Jersey against Watson, Actavis Pharma, Inc., Andrx Corp., and
Actavis, Inc., collectively WLF, seeking an injunction to prevent the approval of the ANDA. The lawsuit alleges
that WLF has infringed U.S. Patent Nos. 6,488,960, 6,677,326, 8,168,218, 8,309,124 and 8,394,407 by filing an
ANDA seeking approval from the FDA to market generic versions of RAYOS containing 1 mg, 2 mg and 5 mg
of prednisone prior to the expiration of the patents. The subject patents are listed in the FDA’s Approved Drug
Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. The commencement
of the patent infringement lawsuit stays, or bars, FDA approval of WLF’s ANDA for 30 months or until an
earlier district court decision that the subject patents are not infringed or are invalid. We, together with Jagotec
have granted WLF a covenant not to sue with respect to US Patent Nos. 6,677,326 and 8,168,218, respectively,
and accordingly these patents have been dismissed from the lawsuit. The court held a claim construction hearing
on October 16, 2014, and issued its opinion and order on claim construction on November 10, 2014, adopting our
proposed construction of both of the disputed claim terms. The court has scheduled expert discovery in the WLF

action to be completed by June 2, 2015, and has set the pretrial conference for September 10, 2015. The trial date
will be set following the pretrial conference.

On November 13, 2014, we received a Paragraph IV Patent Certification from Watson advising that Watson

had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Watson has not advised us as to the
timing or status of the FDA’s review of its filing. On December 23, 2014, we filed suit in the United States
District Court for the District of New Jersey against Watson seeking an injunction to prevent the approval of the
ANDA. The lawsuit alleges that Watson has infringed U.S. Patent Nos. 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 the patents. The subject patents are listed in the FDA’s
Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of Watson’s
ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed or are
invalid. The court has not yet set a trial date for the Watson action.

On December 2, 2014, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,741,956 from Paddock Laboratories,
LLC, or Paddock, advising that Paddock had filed an ANDA with the FDA for a generic version of PENNSAID
2%. On January 9, 2015, we received from Paddock another Paragraph IV Patent Certification against newly
Orange Book listed U.S. Patent No. 8,871,809. Paddock has not advised us as to the timing or status of the
FDA’s review of its filing. On January 13, 2015 and January 14, 2015, we filed suit 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. The lawsuits allege
that Paddock has infringed U.S. Patent Nos. 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 the patents. The subject patents are listed in the FDA’s Orange Book. The
commencement of the patent infringement lawsuit stays, or bars, FDA approval of Paddock’s ANDA for
30 months or until an earlier district court decision that the subject patents are not infringed or are invalid. The
courts have not yet set trial dates for the Paddock actions.

Currently, patent litigation is pending in the United States District Court for the District of New Jersey
against four generic companies intending to market VIMOVO before the expiration of patents listed in the
Orange Book. These cases are in the United States District Court for the District of New Jersey and have been
consolidated for discovery purposes. They 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. (collectively,
Dr. Reddy’s); (ii) Lupin Ltd. and Lupin Pharmaceuticals Inc. (collectively, Lupin); (iii) Mylan Pharmaceuticals
Inc., Mylan Laboratories Limited, and Mylan Inc. (collectively, Mylan); and (iv) Watson Laboratories, Inc.—
Florida, known as Actavis Laboratories FL, Inc. and Actavis Pharma, Inc. (collectively, Actavis). Patent
litigation in the United States District Court for the District of New Jersey against a fifth generic company,
Anchen Pharmaceuticals Inc., or Anchen, was dismissed on June 9, 2014 after Anchen recertified under
Paragraph III. We understand that Dr. Reddy’s has entered into a settlement with AstraZeneca with respect to
patent rights directed to Nexium for the commercialization of VIMOVO, and that according to the settlement
agreement, Dr. Reddy’s is now able to commercialize VIMOVO under AstraZeneca’s Nexium patent rights. The
settlement agreement, however, has no effect on the Pozen VIMOVO patents, which are still the subject of patent
litigations. As part of our acquisition of the U.S. rights to VIMOVO, we have taken over and are responsible for
the patent litigations that include the Pozen patents licensed to us under the Pozen license agreement.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4, 2013,
May 10, 2013, June 28, 2013 and October 23, 2013 and collectively include allegations of infringement of U.S.
Patent Nos. 6,926,907 and 8,557,285. We understand the cases arise from Paragraph IV Notice Letters providing
notice of the filing of an ANDA with the FDA seeking regulatory approval to market a generic version of
VIMOVO before the expiration of the patents-in-suit. We understand the Dr. Reddy’s notice letters were dated
March 11, 2011 and November 20, 2012; the Lupin notice letters were dated June 10, 2011 and March 12, 2014;
the Mylan notice letter was dated May 16, 2013; the Actavis notice letters were dated March 29, 2013 and

November 5, 2013; and the Anchen notice letter was dated September 16, 2011. The court has issued a claims
construction order and has set a pretrial schedule but has not yet set a trial date.

On or about December 19, 2014, we filed a Notice of Opposition to a European patent, EP 2611457, to

On February 2, 2015, we received a Paragraph IV Patent Certification against Orange Book listed U.S.

Item 4. Mine Safety Disclosures

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

Market Information

As a result of the Merger, all of the shares of Horizon Pharma, Inc. common stock issued and outstanding

immediately prior to the effective time of the Merger were canceled and automatically converted into and
became the right to receive our ordinary shares on a one-for-one basis and Horizon Pharma, Inc. became a
wholly-owned subsidiary of Horizon Pharma plc.

Our ordinary shares began trading on The NASDAQ Global Market under the trading symbol “HZNP” on

September 19, 2014. Previously, from July 28, 2011 until September 18, 2014, the common stock of Horizon
Pharma, Inc. was traded on The NASDAQ Global Market also under the trading symbol “HZNP”. The following
table sets forth the high and low sales prices per share of our ordinary shares (and for periods prior to
September 19, 2014, the common stock of Horizon Pharma, Inc.) as reported on The NASDAQ Global Market
for the periods indicated.

High

Low

2014

2013

First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$18.30
16.72
16.56
13.55

$ 7.40
11.50
7.85
10.15

High

Low

$ 2.95
2.75
3.55
7.80

$ 1.97
2.23
2.11
3.21

Holders of Record

The closing price of our ordinary shares on February 20, 2015 was $18.53. As of February 20, 2015, there

were approximately 17 holders of record of our ordinary shares.

Performance Graph

The following graph shows a comparison from July 28, 2011 (the date the common stock of Horizon

Pharma, Inc. commenced trading on The NASDAQ Global Market) through December 31, 2013 or
December 31, 2014, as applicable, of the cumulative total return for (i) our ordinary shares, (ii) the NASDAQ US
Index, (iii) the NASDAQ Pharmaceutical Index, (iv) the NASDAQ US Benchmark TR Index and (v) NASDAQ
Pharmaceuticals. As a result of a change in the total return data made available to us through our vendor
provider, our performance graphs going forward will no longer include the NASDAQ US Index or the NASDAQ
Pharmaceutical Index but instead will include the following comparable indexes provided by NASDAQ OMX
Global Indexes: the NASDAQ US Benchmark TR Index and NASDAQ Pharmaceuticals. Information for
NASDAQ US Index and NASDAQ Pharmaceutical Index is provided only through December 31, 2013, the last
day this data was available from our third party index provider.

Information set forth in the graph below represents the performance of the Horizon Pharma, Inc. common

stock from July 28, 2011 until September 18, 2014, the day before the consummation of the Merger, and the
performance of our ordinary shares from September 19, 2014 through December 31, 2014. Our ordinary shares
trade on the same exchange, the NASDAQ Global Market, and under the same trading symbol, “HZNP”, as the
Horizon Pharma, Inc. common stock prior to the Merger. The graph assumes an initial investment of $100 on
July 28, 2011. The comparisons in the graph are required by the Securities and Exchange Commission and are
not intended to forecast or be indicative of possible future performance of our ordinary shares.

$250

$200

$150

$100

$50

Horizon Pharma

NASDAQ US Index

NASDAQ Pharmaceu(cid:2)cal Index

NASDAQ US Benchmark TR Index

NASDAQ Pharmaceu(cid:2)cals

7/28/2011

12/31/2011

12/31/2012

12/31/2013

12/31/2014

The foregoing graph and table are furnished solely with this report, and are not filed with this report, and
shall not be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended,
or the Securities Act, or the Securities Exchange Act of 1934, as amended, whether made by us before or after
the date hereof, regardless of any general incorporation language in any such filing, except to the extent we
specifically incorporate this material by reference into any such filing.

Dividend Policy

No cash dividends have ever been declared or paid on the common equity to date by Horizon Pharma, Inc.
or us. We currently intend to retain all available funds and any future earnings to support operations and finance
the growth and development of our business and do not intend to pay cash dividends on our ordinary shares for
the foreseeable future. Under Irish law, dividends may only be paid, and share repurchases and redemptions must
generally be funded only out of, “distributable reserves.” In addition, our ability to pay cash dividends is
currently prohibited by the terms of our Senior Secured Credit Facility so long as we owe any amounts to the
lenders under the credit agreement, subject to customary exceptions. Any future determination as to the payment
of dividends will, subject to Irish legal requirements, be at the sole discretion of our board of directors and will
depend on our financial condition, results of operations, capital requirements and other factors our board of
directors deems relevant.

Securities Authorized for Issuance under Equity Compensation Plans

See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities

authorized for issuance under our equity compensation plans.

Recent Sales of Unregistered Securities

We completed the following issuances of unregistered securities during the year ended December 31, 2014

which were not previously reported in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K:

•

In November 2014, we issued 79,400 ordinary shares to BNY Mellon upon the cash exercise of a
warrant and we received proceeds of $362,858.00 representing the aggregate exercise price of such
warrant.

In November 2014, we issued 109,700 ordinary shares to Enginebolt & CO via State Street upon the
cash exercise of a warrant and we received proceeds of $501,329.00 representing the aggregate
exercise price of such warrant.

In November 2014, we issued 932,200 ordinary shares to Ball & CO FBO Fidelity Securities Fund
upon the cash exercise of a warrant and we received proceeds of $4,260,154.00 representing the
aggregate exercise price of such warrant.

In November 2014, we issued 17,259 ordinary shares to Iroquois Master Fund upon the cash exercise
of a warrant and we received proceeds of $74,351.77 representing the aggregate exercise price of such
warrant.

In December 2014, we issued 2,231 ordinary shares to Daniel Stauder upon the cashless exercise of a
warrant to purchase an aggregate of 3,451 ordinary shares.

The offers, sales and issuances of the securities described above were deemed to be exempt from

registration under the Securities Act of 1933, as amended, in reliance on Rule 506 of Regulation D in that each
issuance of securities was to an accredited investor under Rule 501 of Regulation D and did not involve a public
offering. The recipients of securities in each of these transactions acquired the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and where appropriate, legends were
affixed to the securities issued in these transactions.

Issuer Repurchases of Equity Securities

None.

Irish Law Matters

As a result of the Merger, the outstanding shares of the common stock of Horizon Pharma, Inc. were

canceled and automatically converted into the right to receive our ordinary shares. As we are an Irish
incorporated company, the following matters of Irish law are relevant to the holders of our ordinary shares.

Irish Restrictions on Import and Export of Capital. Except as indicated below, there are no restrictions

imposed specifically on non-residents of Ireland dealing in Irish domestic securities, which includes ordinary
shares of Irish companies. Dividends and redemption proceeds also continue to be freely transferable to non-
resident holders of such securities. The Financial Transfers Act 1992 gives power to the Minister for Finance of
Ireland to restrict financial transfers between Ireland and other countries and persons. Financial transfers are
broadly defined and include all transfers that would be movements of capital or payments within the meaning of
the treaties governing the member states of the European Union, or EU. The acquisition or disposal of interests in
shares issued by an Irish incorporated company and associated payments falls within this definition. In addition,
dividends or payments on redemption or purchase of shares and payments on a liquidation of an Irish
incorporated company would fall within this definition. The Criminal Justice (Terrorist Offences) Act 2005 also
gives the Minister of Finance of Ireland the power to take various measures, including the freezing or seizure of
assets, in order to combat terrorism. At present the Financial Transfers Act 1992 and the Criminal Justice
(Terrorist Offences) Act. prohibits financial transfers involving the late Slobodan Milosevic and associated
persons, Republic of Guinea-Bissau, Myanmar/Burma, Belarus, certain persons indicted by the International
Criminal Tribunal for the former Yugoslavia, the late Osama bin Laden, Al-Qaida, the Taliban of Afghanistan,
Democratic Republic of Congo, Democratic People’s Republic of Korea (North Korea), Iran, Iraq, Côte d’Ivoire,
Lebanon, Liberia, Zimbabwe, Sudan, Somalia, Republic of Guinea, Afghanistan, Egypt, Eritrea, Libya, Syria,
Tunisia, certain known terrorists and terrorist groups, and countries that harbor certain terrorist groups, without
the prior permission of the Central Bank of Ireland or the Minister of Finance (as applicable).

Any transfer of, or payment in respect of, a share or interest in a share involving the government of any
country that is currently the subject of United Nations sanctions, any person or body controlled by any of the
foregoing, or by any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such
sanctions as implemented into Irish law.

Irish Taxes Applicable to U.S. Holders

Withholding Tax on Dividends. While we have no current plans to pay dividends, dividends on our ordinary
shares would generally be subject to Irish Dividend Withholding Tax, or DWT, at the standard rate of income tax
(currently 20%), unless an exemption applies.

Dividends on our ordinary shares that are owned by residents of the United States and held beneficially
through the Depositary Trust Company, or DTC, will not be subject to DWT provided that the address of the
beneficial owner of the ordinary shares in the records of the broker is in the United States.

Dividends on our ordinary shares that are owned by residents of the United States and held directly (outside

of DTC) will not be subject to DWT provided that the shareholder has completed the appropriate Irish DWT
form and this form remains valid. Such shareholders must provide the appropriate Irish DWT form to our transfer
agent at least seven business days before the record date for the first dividend payment to which they are entitled.

If any shareholder who is resident in the United States receives a dividend subject to DWT, he or she should

generally be able to make an application for a refund from the Irish Revenue Commissioners on the prescribed
form.

While the U.S./Ireland Double Tax Treaty contains provisions regarding withholding, due to the wide scope

of the exemptions from DWT available under Irish domestic law, it would generally be unnecessary for a U.S.
resident shareholder to rely on the treaty provisions.

Income Tax on Dividends. A shareholder who is neither resident nor ordinarily resident in Ireland and who
is entitled to an exemption from DWT generally has no additional liability to Irish income tax or to the universal
social charge on a dividend from us unless that shareholder holds our ordinary shares through a branch or agency
in Ireland through which a trade is carried on.

A shareholder who is neither resident nor ordinarily resident in Ireland and who is not entitled to an

exemption from DWT generally has no additional liability to Irish income tax or to the universal social charge on
a dividend from us. The DWT deducted by us discharges the liability to Irish income tax and to the universal
social charge. This however is not the case where the shareholder holds the ordinary shares through a branch or
agency in Ireland through which a trade is carried on.

Irish Tax on Capital Gains. A shareholder who is neither resident nor ordinarily resident in Ireland and does

not hold our ordinary shares in connection with a trade or business carried on by such shareholder in Ireland
through a branch or agency should not be within the charge to Irish tax on capital gains on a disposal of our
ordinary shares.

Capital Acquisitions Tax. Irish capital acquisitions tax, or CAT, is comprised principally of gift tax and

inheritance tax. CAT could apply to a gift or inheritance of our ordinary shares irrespective of the place of
residence, ordinary residence or domicile of the parties. This is because our ordinary shares are regarded as
property situated in Ireland as our share register must be held in Ireland. The person who receives the gift or
inheritance has primary liability for CAT.

CAT is levied at a rate of 33% above certain tax-free thresholds. The appropriate tax-free threshold is

dependent upon (i) the relationship between the donor and the donee and (ii) the aggregation of the values of
previous gifts and inheritances received by the donee from persons within the same category of relationship for
CAT purposes. Gifts and inheritances passing between spouses are exempt from CAT. Our shareholders should
consult their own tax advisers as to whether CAT is creditable or deductible in computing any domestic tax
liabilities.

Stamp Duty. Irish stamp duty (if any) may become payable in respect of ordinary share transfers. However,
a transfer of our ordinary shares from a seller who holds shares through DTC to a buyer who holds the acquired
shares through DTC will not be subject to Irish stamp duty. A transfer of our ordinary shares (i) by a seller who
holds ordinary shares outside of DTC to any buyer, or (ii) by a seller who holds the ordinary shares through DTC
to a buyer who holds the acquired ordinary shares outside of DTC, may be subject to Irish stamp duty (currently
at the rate of 1% of the price paid or the market value of the ordinary shares acquired, if greater). The person
accountable for payment of stamp duty is the buyer or, in the case of a transfer by way of a gift or for less than
market value, all parties to the transfer.

A shareholder who holds ordinary shares outside of DTC may transfer those ordinary shares into DTC
without giving rise to Irish stamp duty provided that the shareholder would be the beneficial owner of the related
book-entry interest in those ordinary shares recorded in the systems of DTC (and in exactly the same
proportions) as a result of the transfer and at the time of the transfer into DTC there is no sale of those book-entry
interests to a third party being contemplated by the shareholder. Similarly, a shareholder who holds ordinary
shares through DTC may transfer those ordinary shares out of DTC without giving rise to Irish stamp duty
provided that the shareholder would be the beneficial owner of the ordinary shares (and in exactly the same
proportions) as a result of the transfer, and at the time of the transfer out of DTC there is no sale of those ordinary
shares to a third party being contemplated by the shareholder. In order for the share registrar to be satisfied as to
the application of this Irish stamp duty treatment where relevant, the shareholder must confirm to us that the
shareholder would be the beneficial owner of the related book-entry interest in those ordinary shares recorded in
the systems of DTC (and in exactly the same proportions) (or vice-versa) as a result of the transfer and there is no
agreement for the sale of the related book-entry interest or the ordinary shares or an interest in the ordinary
shares, as the case may be, by the shareholder to a third party being contemplated.

Item 6. Selected Financial Data

The selected statement of operations data for the years ended December 31, 2014, 2013 and 2012, and the
balance sheet data as of December 31, 2014 and 2013 have been derived from our audited financial statements
included elsewhere in this Annual Report on Form 10-K. The selected statement of operations data for the years
ended December 31, 2011 and 2010, and the balance sheet data as of December 31, 2012, 2011 and 2010 have
been derived from audited financial statements which are not included in this Annual Report on Form 10-K.

The following selected financial data also reflects the 1-for-2.374 reverse stock split of the outstanding

shares of common stock of Horizon Pharma, Inc. effected in July 2011.

Our historical results are not necessarily indicative of future results. The selected financial data should be

read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our financial statements and related notes included elsewhere in this Annual Report on
Form 10-K. The selected financial data for periods prior to the year ended December 31, 2014 is that of Horizon
Pharma, Inc., our predecessor, while the selected financial data for the year ended December 31, 2014 is that of
Horizon Pharma plc.

Selected Statement of Comprehensive Loss Data
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss before benefit for income taxes . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended December 31,

2014

2013

2012

2011

2010

(in thousands)

$ 296,955
78,753
218,202
(269,687)
(263,603)

$ 74,016
14,625
59,391
(150,126)
(149,005)

$ 18,844
11,875
6,969
(92,965)
(87,794)

6,927
7,267
(340)
(127,948)
(113,265)

$ 2,376
4,263
(1,887)
(27,725)
(27,065)

2014

2013

2012

2011

2010

As of December 31,

(in thousands)

Selected Balance Sheet Data
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 218,807 $ 80,480 $ 104,087 $ 17,966 $
Working capital (deficit) . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt, net of debt discount . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity (deficit) . . . . . . . . . . . .

106,833
1,134,624
345,503
(720,719)
540,204

67,455
252,596
110,762
(457,116)
(49,082)

79,983
193,984
48,801
(308,111)
105,978

1,065
101,078
19,438
(220,317)
45,912

5,384
(17,944)
161,685
24,615
(107,052)
97,056

For the Years Ended December 31,

2014

2013

2012

2011

2010

(in thousands)

Selected Statement of Cash Flows Data
Net cash provided by (used in) operating activities . . .
Net cash (used in) provided by investing activities . . .
Net cash provided by financing activities . . . . . . . . . .
Payments for acquisitions, net of cash acquired . . . . .
Net proceeds from the issuance of common stock . . . .
Net proceeds from the issuance of debt . . . . . . . . . . . .
Repayment of notes payable . . . . . . . . . . . . . . . . . . . .

$ 27,549
(227,720)
338,285
(224,220)
41,934
286,966
—

(1,386)
164,308

$ (54,287) $ (76,641) $(41,540) $(37,532)
5,575
29,760
—
—
21,960
10,981

(36,135)
66,716
(35,000)
6,637
143,598
64,844

(2,154)
55,152
—
44,678
23,417
13,067

128,518
55,578
19,788

—

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations

together with our consolidated financial statements and the related notes appearing at the end of this Annual
Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in
this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business
and related financing, includes forward-looking statements that involve risks and uncertainties. You should read
the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could
cause actual results to differ materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis.

The discussion below contains “forward-looking statements,” as defined in Section 21E of the Securities

Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of
operations, cash flows, performance and business prospects and opportunities, as well as assumptions made by,
and information currently available to, our management. We have tried to identify forward-looking statements by
using words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “will,” and similar expressions, but
these words are not the exclusive means of identifying forward-looking statements. These statements are based
on information currently available to us and are subject to various risks, uncertainties, and other factors,
including, but not limited to, those matters discussed in Item 1A. “Risk Factors” in Part I of this Annual Report
on Form 10-K, that could cause our actual growth, results of operations, cash flows, performance and business
prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except
as expressly required by the federal securities laws, we undertake no obligation to update such factors or to
publicly announce the results of any of the forward-looking statements contained herein to reflect future events,
developments, or changed circumstances, or for any other reason.

OVERVIEW

Merger with Vidara

On September 19, 2014, the businesses of Horizon Pharma Inc., or HPI, and Vidara Therapeutics
International Public Limited Company, or Vidara, were combined in a merger transaction, or the Merger,
accounted for as a reverse acquisition under the acquisition method of accounting for business combinations,
with HPI treated as the acquiring company in the Merger for accounting purposes. As part of the Merger, a
wholly-owned subsidiary of Vidara merged with and into HPI, with HPI surviving the Merger as a wholly-owned
subsidiary of Vidara and Vidara changed its name to Horizon Pharma plc, or New Horizon. Upon the
consummation of the Merger, the historical financial statements of HPI became our historical financial
statements. Accordingly, the historical financial statements of HPI are included in the comparative prior periods.

Unless otherwise indicated or the context otherwise requires, references to the “Company”, “New Horizon”,

“we”, “us” and “our” refer to Horizon Pharma plc and its consolidated subsidiaries, including its predecessor,
HPI. All references to “Vidara” are references to Horizon Pharma plc (formerly known as Vidara Therapeutics
International Public Limited Company) and its consolidated subsidiaries prior to the effective time of the Merger
on September 19, 2014. The disclosures in this report relating to the pre-Merger business of Horizon Pharma plc,
unless noted as being the business of Vidara prior to the Merger, pertain to the business of HPI prior to the
Merger

Our Business

(naproxen/esomeprazole magnesium). We developed DUEXIS and RAYOS, acquired the U.S. rights to
VIMOVO from AstraZeneca AB, or AstraZeneca, in November 2013, acquired the U.S. rights to ACTIMMUNE
as a result of the Merger and acquired the U.S. rights to PENNSAID 2% from Nuvo Research Inc., or Nuvo, in
October 2014, which we began marketing in the United States in January 2015. We market our products in the
United States through our field sales force of approximately 375 representatives, consisting of approximately
325 primary care sales representatives and 50 sales representatives in our specialty and orphan diseases business
areas. Our strategy is to utilize the commercial strength and infrastructure we have established in creating a fully-
integrated U.S.-focused specialty biopharmaceutical company to continue the successful commercialization of
our existing product portfolio while also expanding and leveraging these capabilities further.

On April 23, 2011, the U.S. Food and Drug Administration, or FDA, approved DUEXIS, a proprietary tablet

formulation containing a fixed-dose combination of ibuprofen and famotidine in a single pill. DUEXIS is
indicated for the relief of signs and symptoms of rheumatoid arthritis, or RA, osteoarthritis, or OA, and to
decrease the risk of developing upper gastrointestinal ulcers in patients who are taking ibuprofen for these
indications. We began marketing DUEXIS to physicians in December 2011. In June 2012, we licensed DUEXIS
rights in Latin America to Grünenthal S.A., a private company focused on the promotion of pain products.
Grünenthal S.A. is currently in the registration process for the commercialization of DUEXIS in Latin America.

Our second approved product in the United States, RAYOS, known as LODOTRA® outside the United

States, is a proprietary delayed-release formulation of low-dose prednisone, first approved in Europe in March
2009, for the treatment of moderate to severe, active RA in adults, particularly when accompanied by morning
stiffness. On July 26, 2012, the FDA approved RAYOS for the treatment of RA, polymyalgia rheumatica, or
PMR, psoriatic arthritis, ankylosing spondylitis, or AS, asthma and chronic obstructive pulmonary disease and a
number of other conditions. We are focusing our promotion of RAYOS in the United States on rheumatology
indications, including RA and PMR. We began marketing RAYOS to a subset of U.S. rheumatologists in
December 2012 and began the full launch in late January 2013 to the majority of U.S. rheumatologists and key
primary care physicians. LODOTRA is currently marketed outside the United States, excluding Japan and
Canada, by our distribution partner, Mundipharma International Corporation Limited, or Mundipharma.

On November 18, 2013, we entered into agreements with AstraZeneca pursuant to which we acquired from

AstraZeneca and its affiliates certain intellectual property and other assets, and assumed from AstraZeneca and
its affiliates certain liabilities, each with respect to VIMOVO, and obtained rights to develop other
pharmaceutical products that contain gastroprotective agents in a single fixed combination oral solid dosage form
with non-steroidal anti-inflammatory drugs, or NSAIDs, in the United States. VIMOVO (naproxen/esomeprazole
magnesium) is a proprietary fixed-dose multi-layer delayed-release tablet combining an enteric-coated naproxen,
an NSAID, core and an immediate-release esomeprazole, a proton pump inhibitor, layer surrounding the core.
VIMOVO was originally developed by Pozen Inc., or Pozen, together with AstraZeneca pursuant to an exclusive
global collaboration and license agreement. On April 30, 2010, the FDA approved VIMOVO for the relief of the
signs and symptoms of OA, RA, and AS and to decrease the risk of developing gastric ulcers in patients at risk of
developing NSAID associated gastric ulcers.

We announced the availability of Horizon-labeled VIMOVO on January 2, 2014, at which time we also

began marketing VIMOVO with our primary care sales force.

On March 18, 2014, HPI, Vidara Therapeutics Holdings LLC, a Delaware limited liability company, or
Vidara Holdings, Vidara, Hamilton Holdings (USA), Inc., a Delaware corporation and an indirect wholly-owned
subsidiary of Vidara, or U.S. HoldCo, and Hamilton Merger Sub, Inc., a Delaware corporation and a wholly-
owned subsidiary of U.S. HoldCo, or Merger Sub, entered into a Transaction Agreement and Plan of Merger, or
the Merger Agreement. The Merger Agreement provided for the merger of Merger Sub with and into HPI, with
HPI continuing as the surviving corporation and as a wholly-owned, indirect subsidiary of Vidara, with Vidara
converting to a public limited company and changing its name to Horizon Pharma plc. As a result of the Merger,
we are organized under the laws of Ireland. Upon consummation of the Merger, New Horizon made a cash

payment of $210.9 million to Vidara Holdings and $2.7 million to Citibank N.A. as escrow agent under an
escrow agreement associated with the Merger. The majority of the escrowed funds were released during January
2015 in accordance with the terms of the escrow agreement.

In connection with the Merger, on June 17, 2014, HPI entered into a $300.0 million five-year senior secured
credit facility, or Senior Secured Credit Facility, with certain lenders and Citibank, N.A., as administrative agent
and collateral agent. HPI used the proceeds of the Senior Secured Credit Facility to provide the cash payment of
$213.6 million for Vidara and to pay certain transaction related expenses, and we are using the balance for
general corporate purposes.

As a result of the Merger, we began marketing ACTIMMUNE, a bioengineered form of interferon gamma-

1b, a protein that acts as a biologic response modifier, in the United States. ACTIMMUNE is approved by the
FDA for use in children and adults with chronic granulomatous disease, or CGD, and severe, malignant
osteopetrosis, or SMO. ACTIMMUNE is indicated for reducing the frequency and severity of serious infections
associated with CGD and for delaying time to disease progression in patients with SMO. We also plan to study
ACTIMMUNE for potential additional indications, and the FDA has agreed to the primary endpoint for a Phase 3
study that will evaluate ACTIMMUNE in the treatment of Friedreich’s Ataxia, or FA. In February 2015, we
submitted an IND application and we anticipate the Phase 3 clinical study will begin enrolling patients in the
second quarter of 2015.

On October 17, 2014, we acquired the U.S. rights to PENNSAID 2% from Nuvo for $45.0 million in cash.

PENNSAID 2% is approved in the United States for the treatment of the pain of OA of the knee(s). As part of the
acquisition, we entered into an exclusive eight-year supply agreement under which Nuvo will supply us product.
We began marketing PENNSAID 2% in January 2015 and included PENNSAID 2% in our Prescriptions Made
Easy, or PME, specialty pharmacy program. In connection with our acquisition of PENNSAID 2%, we expanded
our primary care sales force by 75 additional representatives. Our primary care representatives are now
marketing DUEXIS, PENNSAID 2% and VIMOVO.

RESULTS OF OPERATIONS

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

For the Years
Ended December 31,

2014

2013

Increase /
(Decrease)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 296,955
78,753

(in thousands)
$ 74,016
14,625

$ 222,939
64,128

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

218,202

59,391

158,811

Operating expenses

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,460
120,276
88,957

10,084
68,595
23,566

7,376
51,681
65,391

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

226,693

102,245

124,448

Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net:

(8,491)

(42,854)

34,363

Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on derivative fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on induced conversion and debt extinguishment . . . . . . . . . . . . . .
Bargain purchaese gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23,826)
(3,905)
(214,995)
(29,390)
22,171
(11,251)

(12,774)
1,206
(69,300)
(26,404)
—
—

11,052
5,111
145,695
2,986
(22,171)
11,251

Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(261,196)

(107,272)

153,924

Loss before benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(269,687)
(6,084)

(150,126)
(1,121)

(119,561)
4,963

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(263,603) $(149,005) $(114,598)

Net sales. Net sales increased $222.9 million, or 301%, to $297.0 million during the year ended

December 31, 2014, from $74.0 million during the year ended December 31, 2013.

The following table reflects the components of net sales for the years ended December 31, 2014 and 2013:

Year Ended December 31,

2014

Change
$

Change
%

2013
(in thousands)

VIMOVO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DUEXIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACTIMMUNE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RAYOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LODOTRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$162,954
83,243
25,251
19,020
6,487

966
58,972
—
5,841
8,237

$161,988
24,271
25,251
13,179
(1,750)

*
41%
*
226%
(21%)

Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$296,955

$74,016

$222,939

301%

* Percentage change is not meaningful.

The increase in net sales during the year ended December 31, 2014 was primarily due to growth in net sales

of DUEXIS, our initiation of VIMOVO sales in January 2014 and our recognition of ACTIMMUNE sales
following the acquisition of Vidara in September 2014.

VIMOVO. Net sales increased $162.0 million to $163.0 million during the year ended December 31, 2014,
from $1.0 million during the year ended December 31, 2013. We began marketing of VIMOVO with our sales
force in November 2013 and began selling Horizon-labeled VIMOVO in January 2014.

DUEXIS. Net sales increased $24.3 million, or 41%, to $83.2 million during the year ended December 31,

2014, from $59.0 million during the year ended December 31, 2013. In 2014, DUEXIS net sales increased
approximately $39.2 million as the result of prescription volume growth driven by the expansion of our field
sales force and the continued rollout of our PME program, partially offset by $15.1 million due to lower net
pricing. Although DUEXIS selling prices increased, the higher selling prices were offset by increased rebates and
patient co-pay reimbursements as a result of our PME program.

ACTIMMUNE. Net sales were $25.3 million during the year ended December 31, 2014 compared to no net
sales during the year ended December 31, 2013. Our 2014 net sales represent sales during the period following
the Merger on September 19, 2014.

RAYOS. Net sales increased $13.2 million, or 226%, to $19.0 million during the year

ended December 31, 2014, from $5.8 million during the year ended December 31, 2013. Approximately
$9.0 million of the increase in RAYOS net sales was the result of net price increases and $4.2 million was due to
prescription volume growth driven by the expansion of our sales force and the continued rollout of our PME
program.

LODOTRA. Net sales decreased $1.7 million, or 21%, to $6.5 million during the year ended December 31,
2014, from $8.2 million during the year ended December 31, 2013. The decrease was the result of $1.5 million
from reduced product shipments to our European distribution partner, Mundipharma, and $0.2 million in lower
amortization of milestone payments. LODOTRA shipments to Mundipharma are not linear or directly tied to
Mundipharma’s in-market sales and can therefore fluctuate significantly from quarter to quarter.

We currently expect our net sales to increase in 2015 and future periods as a result of both price and volume
increases. Effective January 1, 2015, we have increased the price for both DUEXIS and VIMOVO by 35.8%, for
RAYOS by 28.0% and for ACTIMMUNE by 9.0%. While we believe these price increases should favorably
impact net sales during 2015, they will be offset in part by additional sales allowances related to rebates and
patient co-pay reimbursements. We may affect further price increases for these products and/or other products in
2015 and future periods in response to future market conditions.

Effective January 1, 2015, two significant pharmacy benefit managers, or PBMs, placed DUEXIS and

VIMOVO on their exclusion lists, which will result in a loss of reimbursement for patient’s whose healthcare
plans have adopted these PBM exclusion lists. As a result, DUEXIS and VIMOVO may face negative pressure
on prescription volume. We expect that continued adoption of our PME program by physicians will be important
to our ability to counter this action by the two PBMs and to offset pressure from healthcare payors and PBMs to
use less expensive generic or over the counter brands instead of our branded products.

We have expanded and may continue to expand our sales force to support existing and newly acquired
products, such as PENNSAID 2%, which we acquired in October 2014 and began marketing in January 2015. As
result of the Merger and our acquisition of PENNSAID 2%, we expanded our sales force to approximately
375 sales representatives, consisting of 325 primary care sales representatives and 50 sales representatives in
specialty and orphan diseases business areas.

Cost of Goods Sold. Cost of goods sold increased $64.1 million to $78.8 million during the year ended
December 31, 2014, from $14.6 million during the year ended December 31, 2013. As a percentage of net sales,
cost of goods sold was 26.5% in 2014 compared to 19.8% in 2013. The increase in cost of goods sold was
primarily attributable to a $9.1 million increase in product costs due to higher DUEXIS and VIMOVO sales, an
increase in intangible amortization expense of $24.2 million, an $11.1 million charge to recognize additional cost

of goods sold on the stepped up market value of ACTIMMUNE inventory as of the date of the Merger, a $10.7
million net charge associated with the contingent VIMOVO and ACTIMMUNE royalty liabilities and higher
royalty accretion costs of $9.0 million during the year ended December 31, 2014.

During the second quarter of 2014, based on higher sales of VIMOVO during the six months ended June 30,

2014 versus our original expectations and our adjusted expectations for future VIMOVO sales, we recorded a
charge of $13.0 million to cost of goods sold to increase the amount of the estimated contingent royalty liability
to reflect the updated projections. During the fourth quarter of 2014, after our most recent five year plan was
approved, we performed an assessment of the carrying value of the contingent royalty liability, which resulted in
a $3.6 million adjustment to cost of goods sold to reduce the amount of the contingent royalty liability to reflect
our updated estimates. As a result, for the year ended December 31, 2014 we recorded a net charge of $9.4
million to cost of goods sold and a corresponding increase to the contingent royalty liability to reflect the
estimated fair value of the future contingent royalties payable to Pozen.

During the fourth quarter of 2014, as the result of a price increase for ACTIMMUNE approved to take effect

on January 1, 2015, we reassessed the value of our estimated royalty liability and recorded a charge of
$1.3 million to cost of goods sold to increase the carrying value of the contingent royalties to reflect the updated
projections.

Intangible amortization increased $24.2 million during the year ended December 31, 2014 compared to the
prior year period as a result of an increase of $11.8 million of which was attributable to a full year of intangible
amortization expense related to VIMOVO developed technology and $12.2 million of which was related to
amortization of developed technology for ACTIMMUNE as a result of the Merger. We expect $43.1 million of
amortization expense for ACTIMMUNE in 2015.

Research and Development Expenses. Research and development expenses increased $7.4 million to

$17.5 million during the year ended December 31, 2014, from $10.1 million during the year ended December 31,
2013. The increase in research and development expenses during the year ended December 31, 2014 was
primarily associated with $2.3 million in research and development expenses for ACTIMMUNE, $2.1 million in
higher salaries and benefits expense, $1.7 million in increased clinical expenses and $1.2 million in higher
consulting fees.

Sales and Marketing Expenses. Sales and marketing expenses increased $51.7 million to $120.3 million
during the year ended December 31, 2014, from $68.6 million during the year ended December 31, 2013. The
increase in sales and marketing expenses was primarily attributable to an increase of $34.5 million in salaries and
benefits expenses associated with increased staffing of our field sales force, $13.2 million in higher marketing
and commercialization expenses primarily related to ACTIMUNE and VIMOVO, $2.5 million in higher facility
expenses and $1.1 million in higher consulting fees.

General and Administrative Expenses. General and administrative expenses increased $65.4 million to
$89.0 million during the year ended December 31, 2014, from $23.6 million during the year ended December 31,
2013. The increase in general and administrative expenses was primarily attributable to a $40.2 million increase
in legal, consulting and investment advisory fees and other costs associated with the Merger and related
financing transactions, a $20.3 million increase in salaries and benefits expense as a result of increased staffing
of our administrative and finance functions and a $2.9 million increase in related facilities expenses.

Interest Expense, Net. Interest expense, net increased $11.1 million to $23.8 million during the year ended
December 31, 2014, from $12.8 during the year ended December 31, 2013. The increased interest expense, net
was primarily due to higher borrowings under our Convertible Senior Notes and Senior Secured Credit Facility
during the year ended December 31, 2014, as compared to our prior borrowings under our Senior Secured Loan.

Foreign Exchange (Loss) Gain. During the year ended December 31, 2014, we reported a foreign exchange

loss of $3.9 million compared to a foreign exchange gain of $1.2 million during the year ended December 31,

2013. The foreign exchange loss during the year ended December 31, 2014 was primarily attributable to a
weakening of the Euro against the U.S. dollar which impacted our Swiss subsidiary, Horizon Pharma AG, whose
functional currency is in Euros, yet has intercompany balances and intercompany transactions as well as third-
party transactions that are denominated in U.S. dollars.

Loss on Derivative Revaluation. During the year ended December 31, 2014, we recorded a $215.0 million

non-cash charge compared to $69.3 million non-cash charge recorded during the year ended December 31, 2013.
The increase in non-cash charges during the year ended December 31, 2014 was a result of the increase in the fair
value of the embedded derivative associated with our Convertible Senior Notes. The increase in loss on the
derivative revaluation was primarily due to an increase in the market value of HPI’s common stock during the
period from January 1, 2014 through June 27, 2014, the date HPI’s stockholders approved the issuance of
common equity in excess of 13,164,951 shares upon conversion of the Convertible Senior Notes. The non-cash
loss on derivative revaluation was a permanent tax difference and was not deductible for income tax reporting
purposes.

Loss on Induced Conversion and Debt Extinguishment. The loss on induced conversion and debt

extinguishment during the year ended December 31, 2014 of $29.4 million was a result of the Convertible Senior
Notes induced conversions in the fourth quarter of 2014, which consisted of $16.7 million of loss on induced
conversion for cash inducement payments, a $11.7 million charge for the extinguishment of debt and
$1.0 million of expenses related to the induced debt conversions. The loss on induced conversion and debt
extinguishment during the year ended December 31, 2013 of $26.4 million was related to the extinguishment of
our Senior Secured Loan in November 2013.

Bargain Purchase Gain. During the year ended December 31, 2014, we recorded a bargain purchase gain of

$22.2 million in connection with the Merger, representing the excess of the estimated fair values of net assets
acquired over the acquisition consideration paid.

Other Expense. Other expense during the year ended December 31, 2014 totaled $11.3 million, which
represented $5.0 million of commitment fees incurred on a bridge loan commitment prior to executing the Senior
Secured Credit Facility in June 2014, $3.2 million of commitment fees incurred on the Senior Secured Credit
Facility prior to its funding on September 19, 2014 and $2.9 million of secondary offering expense fees incurred
in the November 2014 underwritten public offering.

Income Tax Benefit. During the years ended December 31, 2014 and 2013, we recorded a benefit for income

taxes of $6.1 million and $1.1 million, respectively. The increase in income tax benefit during the year ended
December 31, 2014 was primarily attributable to a deferred tax asset valuation adjustment of $3.0 million
recorded during the third quarter of 2014. The inclusion of additional deferred tax liabilities as a result of the
Merger resulted in our ability to reduce our existing deferred tax valuation allowance, which correspondingly
resulted in our ability to record an additional income tax benefit of $3.0 million.

Net Loss. Net loss increased $114.6 million to $263.6 million during the year ended December 31, 2014,
from $149.0 million during the year ended December 31, 2013, primarily as a result of the loss on derivative
revaluation during the year ended December 31, 2014.

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

For the Years Ended
December 31,

2013

2012

Increase /
(Decrease)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 74,016
14,625

(in thousands)
$ 18,844
11,875

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59,391

6,969

Operating expenses

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,084
68,595
23,566

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

102,245

16,837
49,561
19,444

85,842

55,172
2,750

52,422

(6,753)
19,034
4,122

16,403

Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net:

(42,854)

(78,873)

36,019

Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on derivative fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12,774)
1,206
(69,300)
(26,404)
—

(11,552)
489
—
(2,973)
(56)

1,222
(717)
69,300
23,431
(56)

Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(107,272)

(14,092)

93,180

Loss before benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(150,126)
(1,121)

(92,965)
(5,171)

(57,161)
(4,050)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(149,005) $(87,794) $(61,211)

Net Sales. Net sales increased 293% to $74.0 million for the year ended December 31, 2013 as compared

to $18.8 million for the year ended December 31, 2012.

The following table reflects the components of net sales for the years ended December 31, 2013 and 2012:

Year Ended
December 31,

2013

2012

Change
$

Change
%

(in thousands)

DUEXIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LODOTRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RAYOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIMOVO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$58,972
8,237
5,841
966

$10,302
8,166
376
—

$48,670
72
5,465
966

Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$74,016

$18,844

$55,173

472%
1%
1833%
*

293%

* Percentage change is not meaningful.

Net sales increased by $55.2 million, or 293%, to $74.0 million in 2013 compared to $18.8 million in 2012.

The net sales increase was primarily due to growth in net sales of DUEXIS and RAYOS.

DUEXIS. Net sales increased by $48.7 million, or 472%, to $59.0 million in 2013 compared to

$10.3 million in 2012. Approximately $40.1 million of the increase in DUEXIS net sales was the result of net
price increases and $8.6 million was due to volume growth driven by the expansion of our sales force.

100

LODOTRA. Net sales were $8.2 million in both 2013 and 2012. LODOTRA net sales increased $0.7 million
related to amortization of milestone payments offset by a $0.7 million decrease in net sales for product shipments
to our European distribution partner, 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.

RAYOS. Net sales increased by $5.5 million, or 1,833%, to $5.8 million in 2013 compared to

$0.3 million in 2012. Approximately $4.7 million of the increase in RAYOS net sales was the result of net price
increases and $0.8 million was due to volume growth driven by the expansion of our sales force.

VIMOVO. Net sales were $1.0 million in 2013. We began marketing of VIMOVO with our sales force on

November 26, 2013.

Cost of Goods Sold. Cost of goods sold increased $2.7 million to $14.6 million during the year ended
December 31, 2013, from $11.9 million during the year ended December 31, 2012. As a percentage of net sales,
cost of goods sold was 19.8% during the year ended December 31, 2013 compared to 63.0% during the year
ended December 31, 2012. The increase in cost of goods sold did not increase proportionately with the increase
in net sales primarily due to net price increases, which do not correspondingly increase cost of goods sold,
driving most of the net sales increase. As discussed above, DUEXIS and RAYOS net sales in 2013 increased by
$40.1 million and $4.7 million, respectively, as a result of net price increases.

The increase in cost of goods sold was primarily attributable to a $3.4 million increase in intangible
amortization expense. The increase in amortization expense was related to the FDA approval of RAYOS in July
2012, which resulted in the reclassification and subsequent amortization of an indefinite-lived intangible asset to
a finite-lived intangible asset, which resulted in additional intangible amortization expense of $2.0 million during
the year ended December 31, 2013 as a result of a full year of amortization as compared to 2012. Additionally, as
a result of our asset purchase agreement with AstraZeneca, we capitalized $67.7 million in intangible assets
related to the VIMOVO intellectual property rights. This intangible asset will be amortized using a straight-line
method over its estimated useful life of 61.5 months. During the year ended December 31, 2013, we recorded
$1.6 million in intangible amortization expense related to the intellectual property acquired in connection with
our acquisition of the U.S. rights to VIMOVO. For the years ended December 31, 2013 and 2012, intangible
amortization expense accounted for 56% and 40%, respectively, of total cost of goods sold.

Research and Development Expenses. Research and development expenses during the year ended
December 31, 2013 were $10.1 million, a decrease of $6.7 million compared to research and development
expenses of $16.8 million during the year ended December 31, 2012. The decrease in research and development
expenses during the year ended December 31, 2013 was primarily associated with the classification of
$5.0 million in medical affairs expenses to sales and marketing expenses, a $0.9 million reduction in consulting
fees and a $0.8 million decrease in regulatory and clinical trial expenses. During the first quarter of 2013, in
connection with the full commercial launch of RAYOS, we began to classify our medical affairs expenses, which
consist of expenses related to scientific publications, health outcomes, biostatistics, medical education and
information, and medical communications, as sales and marketing expenses. Prior to the full commercial launch
of RAYOS in late January 2013, medical affairs expenses were classified as part of research and development
expenses.

Sales and Marketing Expenses. Sales and marketing expenses during the year ended December 31, 2013
were $68.6 million, an increase of $19.0 million compared to sales and marketing expenses of $49.6 million
during the year ended December 31, 2012. The increase in sales and marketing expenses was primarily
attributable to an increase of $13.6 million in salaries and benefits expenses due to the increase in staffing of our
field sales force and the inclusion of $5.0 million of medical affairs expenses in sales and marketing expenses.

General and Administrative Expenses. General and administrative expenses during the year ended
December 31, 2013 were $23.6 million, an increase of $4.2 million compared to general and administrative

101

expenses of $19.4 million during the year ended December 31, 2012. The increase in general and administrative
expenses was primarily due to $1.9 million in additional salaries and related benefits expense associated with
incremental finance and administrative staff compared to the prior year, $1.8 million in higher legal expenses,
which consisted of a $1.1 million increase in legal fees incurred in connection with our VIMOVO asset
acquisition and a $0.7 million increase in legal fees associated with intellectual property related matters.
Additionally, facilities expense increased $0.7 million in the year ended December 31, 2013 as a result of
additional information technology infrastructure expenses related to the expansion of our field sales force.

Interest Expense, Net. Interest expense, net was $12.8 million during the year ended December 31, 2013, an

increase of $1.2 million compared to interest expense, net of $11.6 million during the year ended December 31,
2012. The increase in interest expense, net was primarily attributable to higher interest expense related to the
amortization of deferred financing and debt discount expenses.

Foreign Exchange Gain. During the years ended December 31, 2013 and 2012, we reported a foreign
exchange gain of $1.2 million and $0.5 million, respectively. The foreign exchange gain in each period was
primarily attributable to an increase in the value of the Euro against the U.S. dollar compared to the applicable
prior year, which resulted in a favorable currency impact for our Swiss subsidiary, Horizon Pharma AG.

Loss on Derivative Revaluation. During the year ended December 31, 2013, we recorded a $69.3 million
non-cash charge related to the increase in the fair value of the embedded derivatives in the Convertible Senior
Notes we issued in November 2013, principally due to an increase in the market value of HPI’s common stock
during the period from issuance to December 31, 2013.

Loss on Debt Extinguishment. During the year ended December 31, 2013, we recorded a $26.4 million

charge related to the extinguishment of our Senior Secured Loan in November 2013 compared to loss on debt
extinguishment of a prior debt facility of $3.0 million during the year ended December 31, 2012.

Income Tax Benefit. Income tax benefit was $1.1 million during the year ended December 31, 2013, a
decrease of $4.1 million compared to an income tax benefit of $5.2 million during the year ended December 31,
2012. The decrease in income benefit during the year ended December 31, 2013 was primarily attributable to the
absence of a one-time tax benefit which was recorded during the year ended December 31, 2012. On July 26,
2012, the FDA approved RAYOS, which resulted in the reclassification of the entire asset balance of
$35.5 million, from an indefinite-lived intangible asset to a finite-lived intangible asset. The reclassification from
an indefinite-lived intangible asset to a finite-lived intangible asset required us to amortize this asset over the
useful life of the asset, which resulted in a corresponding reduction to our net deferred tax liabilities and the
recognition of a one-time net income tax benefit of $4.3 million that was recorded during the third quarter of
2012.

Liquidity and Capital Resources

We have incurred losses since our inception in June 2005 and, as of December 31, 2014, we had an

accumulated deficit of $720.7 million. While we incurred a significant net loss in 2014, primarily due to the loss
from derivative revaluation, loss from induced debt conversion and costs associated with the Merger, we did
generate positive cash inflows from operating activities of $27.5 million. We expect that our sales and marketing
expenses will continue to increase as a result of our commercialization of ACTIMMUNE, DUEXIS, PENNSAID
2%, RAYOS/LODOTRA and VIMOVO, but we believe these costs will be more than offset by higher net sales
and gross profits and we expect our current operations to achieve profitability in 2015.

We have financed our operations to date through equity financings, debt financings and the issuance of
convertible notes. As of December 31, 2014, we had $218.8 million in cash and cash equivalents and total debt
with a book value of $345.5 million and face value of $361.0 million. We believe we will generate sufficient
cash flows from our operations to fund our business needs. As noted in Part I — Item 1. “Business — Overview”

102

above, part of our strategy is to expand and leverage our commercial capabilities by identifying, developing,
acquiring and commercializing additional differentiated products that address unmet medical needs. To the extent
we enter into transactions to acquire products 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 March 18, 2014, HPI, Vidara Holdings, Vidara, U.S. HoldCo and Merger Sub entered into the Merger
Agreement under which Merger Sub merged with and into HPI, with HPI continuing as the surviving corporation
and as a wholly-owned, indirect subsidiary of Vidara, and with Vidara converting to a public limited company
and changing its name to Horizon Pharma plc. Following the completion of the Merger, New Horizon is
organized under the laws of Ireland. In the Merger, HPI’s stockholders received one ordinary share of New
Horizon in exchange for each share of HPI common stock they owned as of the closing. Upon the closing of the
Merger, HPI’s security holders (excluding the holders of the Convertible Senior Notes) owned approximately
74% of New Horizon and Vidara Holdings owed approximately 26% of New Horizon on a fully-diluted basis. At
the closing, Vidara Holdings received a cash payment of $210.9 million and $2.7 million was paid into a
temporary escrow account. The majority of the escrowed funds were released during January 2015 in accordance
with the terms of the escrow agreement.

On June 17, 2014, HPI, as initial signatory, entered into a Credit Agreement with the lenders from time to
time party thereto, or the Lenders, and Citibank, as administrative agent and collateral agent, and effective as of
the closing of the Merger, U.S. Holdco and the other borrowers from time to time party thereto, or the Borrowers,
providing for (i) the Senior Secured Credit Facility, the proceeds of which were used in part to effect the Merger
and to pay fees and expenses in connection therewith and are being used in part for general corporate purposes,
(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 under the Credit Agreement. The
Credit Agreement allows us and our subsidiaries to become borrowers under the accordion facility. On
September 19, 2014, U.S. HoldCo borrowed the entire $300.0 million available under the Senior Secured Credit
Facility. Loans under the Senior Secured Credit Facility bear interest, at each our option, at a rate equal to either
the London Inter-Bank Offer Rate, or LIBOR, plus an applicable margin of 8.00% per annum (subject to a 1.00%
LIBOR floor), or the prime lending rate, plus an applicable margin equal to 7.00% per annum.

Our obligations under the Credit Agreement and any swap obligations entered into with a Lender are

guaranteed by us and each of our existing and subsequently acquired or organized direct and indirect subsidiaries,
subject to limited exceptions. As of December 31, 2014 we have not entered into any interest rate swap
obligations. Our obligations under the Credit Agreement are secured, subject to customary permitted liens and
other agreed upon exceptions, by a perfected security interest in (i) all of our tangible and intangible assets,
except for certain customary excluded assets, and (ii) all of the capital stock of our subsidiaries (limited, in the
case of the stock of certain non-U.S. subsidiaries of U.S. HoldCo, to 65% of the capital stock of such
subsidiaries).

We are permitted to make voluntary prepayments of loans under the Senior Secured Credit Facility, except
that (i) a specified make-whole amount would apply to any repayment or re-pricing prior to September 19, 2016,
(ii) a 4% premium would apply to any repayment or a re-pricing on or prior to September 19, 2017, and (iii) a
2% premium would apply to any repayment or a re-pricing on or prior to September 19, 2018. We are required to
make mandatory prepayments of loans under the Senior Secured Credit Facility (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), and (c) net cash proceeds from issuances of debt (other than certain permitted debt).

In connection with the signing the merger agreement with Vidara on March 18, 2014, HPI entered into a
commitment letter, or the Commitment Letter, with Deerfield Management Company, L.P., or Deerfield, and
certain funds managed by Deerfield, or the Deerfield Funds, pursuant to which the Deerfield Funds committed to
provide up to $250.0 million of senior secured loans to finance the Merger. HPI allowed the Commitment Letter
to expire on June 30, 2014 as a result of the execution of the Senior Secured Credit Facility.

103

On November 18, 2013, we entered into note purchase agreements with investors to issue $150.0 million

aggregate principal amount of Convertible Senior Notes. The Convertible Senior Notes were issued on
November 22, 2013. We received net proceeds of $124.9 million from the sale of the Convertible Senior Notes,
after deducting fees and expenses of $6.4 million and $18.7 million related to a capped call transaction. The
Convertible Senior Notes are governed by an Indenture, dated as of November 22, 2013, between HPI and U.S.
Bank National Association, as trustee. In connection with the Merger, HPI and Horizon Pharma plc executed a
supplemental Indenture dated as of September 19, 2014. Pursuant to the supplemental Indenture, HPI remains the
obligor of the Convertible Senior Notes and Horizon Pharma plc agreed to fully and unconditionally guaranty the
obligations of HPI under the Indenture. The supplemental Indenture also provides that the conversion value of
the Convertible Senior Notes will be calculated by reference to the ordinary shares of Horizon Pharma plc, rather
than the common stock of HPI, and any shares issuable upon conversion of the Convertible Senior Notes will be
settled in ordinary shares of Horizon Pharma plc, rather than shares of the common stock of HPI. In addition,
Horizon Pharma plc has assumed the disclosure obligations required by the Indenture.

The Convertible Senior Notes bear interest at a rate of 5.00% per year, payable in arrears on May 15 and

November 15 of each year, beginning on May 15, 2014. The Convertible Senior Notes will mature on
November 15, 2018, unless earlier repurchased or converted. The Convertible Senior Notes were sold at a price
equal to 100% of the principal amount thereof and are convertible at the option of the holders at any time prior to
the close of business on the business day immediately preceding August 15, 2018 only under certain conditions.
On or after August 15, 2018 until the close of business on the second scheduled trading day immediately
preceding the maturity date for the Convertible Senior Notes, holders will be able to convert their Convertible
Senior Notes at their option at the conversion rate then in effect at any time, regardless of these conditions.
Subject to certain limitations, HPI may settle conversions of the Convertible Senior Notes by paying or
delivering, as the case may be, cash, our ordinary shares or a combination of cash and our ordinary shares, at
HPI’s election. If we undergo a fundamental change prior to the maturity date of the Convertible Senior Notes,
the holders may require HPI to repurchase for cash all or any portion of their Convertible Senior Notes at a price
equal to 100% of the principal amount of the Convertible Senior Notes to be repurchased, plus accrued and
unpaid interest.

The conversion rate for the Convertible Senior Notes was initially 186.4280 ordinary shares per

On September 23, 2014, the counterparties to the certain capped call transactions we entered into in
connection with the Convertible Senior Notes exercised their right to terminate the capped call transactions
following the Merger because we became a non-U.S. based entity. In connection with such termination, we
received $14.0 million comprised of both $9.4 million in cash and 384,366 of our ordinary shares which were
valued at $4.6 million, based on the closing share price of September 22, 2014 of $11.93 per share. We recorded
the receipt of the ordinary shares as treasury shares. In addition, in connection with the termination of the capped
call transactions, one counterparty and/or their affiliates unwound various hedging transactions with respect to
the Company’s ordinary shares.

In the fourth quarter of 2014, we entered into separate, privately-negotiated conversion agreements with
certain holders of the Convertible Senior Notes. Under the conversion agreements, the holders agreed to convert
an aggregate principal amount of $89.0 million of Convertible Senior Notes held by them and we agreed to settle
such conversions by issuing 16,594,793 ordinary shares. In addition, pursuant to the conversion agreements, we
made an aggregate cash payment of $16.7 million to the holders for additional exchange consideration and
$1.7 million in accrued and unpaid interest, and recognized a non-cash charge of $11.7 million related to the
extinguishment of debt as a result of the note conversions. As of December 31, 2014, $61.0 million in aggregate
principal amount of the Convertible Senior Notes remained outstanding.

104

During the year ended December 31, 2014, we received proceeds of $38.5 million in connection with our

issuance of an aggregate of 8,990,120 of our ordinary shares upon the exercise of warrants. Additionally, we
issued an aggregate of 864,780 ordinary shares in connection with the exercise of stock options and vesting of
restricted stock units and received $1.6 million in proceeds in connection with the exercise of stock options, and
received proceeds of $1.7 million upon the issuance of 536,543 ordinary shares through our employee stock
purchase program.

We are required to maintain compliance with applicable Swiss laws with respect to our Swiss subsidiary,
Horizon Pharma AG, including laws requiring maintenance of equity in the subsidiary to avoid overindebtedness,
which requires Horizon Pharma AG to maintain assets in excess of its liabilities. We review on a regular basis
whether Horizon Pharma AG is overindebted. As of December 31, 2014, Horizon Pharma AG was not
overindebted. However, Horizon Pharma AG has previously been overindebted, including at December 31, 2013.
We will continue to monitor and review Horizon Pharma AG’s financial position and, as necessary, will address
any overindebtedness until such time as Horizon Pharma AG generates positive income at a statutory level,
which could require us to have cash at Horizon Pharma AG in excess of its near-term operating needs and could
affect our ability to have sufficient cash to meet the near-term operating needs of our other operating subsidiaries.
As of December 31, 2014 and 2013, Horizon Pharma AG had cash and cash equivalents of $3.0 million and
$3.7 million, respectively. Based upon the cash and cash equivalents held by Horizon Pharma AG as of
December 31, 2014 and 2013, we do not expect that our financial position or results of operations will be
materially affected by any need to address overindebtedness at Horizon Pharma AG. To date, the
overindebtedness of Horizon Pharma AG has not resulted in the need to divert material cash resources from our
other operating subsidiaries.

The following table provides a summary of our cash position and cash flows for the years ended

December 31, 2014, 2013 and 2012, as follows (in thousands):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .
Cash provided by (used in):

For the Years Ended December 31,

2014

2013

2012

$ 218,807

$ 80,480

$104,087

Operating activities . . . . . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . .

27,549
(227,720)
338,285

(54,287)
(36,135)
66,716

(76,641)
(1,386)
164,308

Net Cash Provided by (Used in) Operating Activities

During the years ended December 31, 2014, 2013 and 2012, net cash provided by (used in) operating
activities was $27.5 million, ($54.3 million) and ($76.6 million), respectively. The increase in net cash provided
by operating activities during 2014 compared to 2013 was primarily attributable to higher cash flow from net
product sales, partially offset by higher cash outlays for related expenses. Cash provided by operating activities
during 2014 was negatively impacted by $51.7 million in transaction costs related to the Merger, the PENNSAID
2% acquisition, and the secondary offering of ordinary shares by certain stockholders in November 2014, and
$16.7 million of cash payments related to induced debt conversions.

The decrease in net cash used in operating activities during 2013 compared to 2012 was primarily

attributable to an increase in cash flows associated with higher product sales and gross margins of DUEXIS and
RAYOS during the year ended December 31, 2013, which was partially offset by additional cash used in
operating activities related to increases in our working capital requirements, such as for accounts receivable and
inventories due to our increased product sales.

Net cash used in operating activities during 2012 was primarily attributable to staffing our sales and
marketing organization and expenses related to our product launches of DUEXIS and RAYOS. Additionally,
cash used in operating activities during 2012 was for interest payments made on our Secured Senior Loan,
additional staffing of support and administrative functions and for working capital purposes.

105

Net Cash Used in Investing Activities

During the years ended December 31, 2014, 2013 and 2012, net cash used in investing activities was
$227.7 million, $36.1 million and $1.4 million, respectively. The increase in net cash used in investing activities
during 2014 was primarily associated with the net cash paid for the acquisition of Vidara of $179.2 million and
the acquisition of PENNSAID 2% of $45.0 million.

Net cash used in investing activities during 2013 was primarily attributable to our asset purchase of U.S.
rights to VIMOVO for $35.0 million from AstraZeneca in November 2013. Additionally, $1.2 million of cash
used in investing activities in 2013 was used for capital expenditures related to computer hardware and
equipment purchases for the additional staffing of our sales function.

Net cash used in investing activities during 2012 was primarily attributable to capital expenditures for

computer hardware and equipment to support our sales and administrative functions.

Net Cash Provided by Financing Activities

During the years ended December 31, 2014, 2013 and 2012, net cash provided by financing activities was
$338.3 million, $66.7 million and $164.3 million, respectively. The increase in net cash provided by financing
activities during 2014 was primarily attributable to $300.0 million of proceeds received under the Senior Secured
Credit Facility in connection with the Merger in September 2014, net of $13.0 million of original issue discount
and deferred financing fees. In addition, during 2014, we received proceeds of $38.5 million in connection with
the exercise of warrants to purchase 8,990,120 ordinary shares, and received $9.4 million of cash proceeds from
the settlement of the capped call termination in September 2014.

Net cash provided by financing activities in 2013 was primarily attributable to proceeds from the

Convertible Senior Notes, net of issuance costs, partially offset by principal debt payments and the
extinguishment of our Senior Secured Loan. In connection with our acquisition of the U.S. rights to VIMOVO,
we issued $150.0 million aggregate principal amount of Convertible Senior Notes and received net proceeds of
$143.6 million from the sale of the Convertible Senior Notes, after deducting fees and expenses of approximately
$6.4 million. In addition, we used $18.7 million of the net proceeds to purchase capped calls and used
$64.8 million of the net proceeds to repay all obligations under our Senior Secured Loan.

During the year ended December 31, 2013, we sold 2,448,575 shares of HPI common stock through at-the-

market offerings for gross proceeds of $6.2 million and net proceeds of $6.0 million, after $0.2 million in
commissions and other issuance costs.

Net cash provided by financing activities in 2012 was primarily the result of our debt refinancing and the

equity offerings we completed. In February 2012, we entered into our $60.0 million Senior Secured Loan with a
group of institutional lenders. As part of the closing of the Senior Secured Loan, we repaid outstanding principal
under previous borrowings totaling $19.8 million. In March 2012, we received gross proceeds of $50.8 million
and net proceeds of $47.5 million, after deducting $3.3 million in issuance costs, from the sale of 14,033,829
shares of HPI common stock and warrants to purchase an aggregate of 3,508,448 shares of HPI common stock to
certain institutional and accredited investors in a private equity placement. In September 2012, we received gross
proceeds of $86.2 million and net proceeds of $80.6 million after deducting $5.6 million in issuance costs from
the sale of 24,638,750 shares of HPI common stock and warrants to purchase an aggregate of 12,319,375 shares
of HPI common stock in a public offering.

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Contractual Obligations

As of December 31, 2014, minimum future cash payments due under contractual obligations, including,
among others, our Convertible Senior Notes, minimum purchase agreements and non-cancelable operating lease
agreements, were as follows (in thousands):

2015

2016

2017

2018

2019

2020 &
Thereafter

Total

. . . . . . . . . . . .
Debt agreements(1)
Purchase commitments(2)
. . . . . . .
Operating lease obligations(3) . . . .

$30,403
13,578
1,581

$30,499
4,619
1,624

$30,424
4,619
1,538

$91,410
3,527
1,104

$320,550
3,527
558

$ — $503,287
33,397
3,527
11,889
5,484

Total contractual cash

obligations . . . . . . . . . . . . . . . . .

$45,562 $36,743

$36,581

$96,042

$324,635

$9,011

$548,573

(1) Represents the minimum contractual obligation due under the following debt agreements:

• Convertible Senior Notes, which includes quarterly interest payments and repayment of the Convertible
Senior Notes principal in November 2018. The principal balance of the Convertible Senior Notes at
December 31, 2014 was $61.0 million.

•

$300.0 million Senior Secured Credit Facility, which includes quarterly interest payments and
repayment of the principal in September 2019.

(2) These amounts reflect the following purchase commitments with our third party manufacturers:

• Minimum purchase commitment for RAYOS/LODOTRA tablets from Jagotec through December 31,

2017 (the end of the minimum term), which is the firm commitment term under the contract.

•

Purchase commitment for final packaged DUEXIS tablets from sanofi-aventis U.S. through March
2015.

• Minimum purchase commitment for VIMOVO tablets from Patheon through April 2015.

• Minimum annual order quantities required to be placed with Boehringer Ingelheim for final packaged

ACTIMMUNE through July 2020.

•

Purchase commitment for final packaged PENNSAID 2% from Nuvo through April 2015.

(3) These amounts reflect payments due under our operating leases, which are principally for our facilities. We

occupy approximately 10,300 square feet of office space in our headquarters in Dublin, Ireland under a lease
that expires on November 4, 2029. We also occupy approximately 50,500 square feet of office space in
Deerfield, Illinois under lease agreements that expire on June 30, 2018, approximately 5,000 square feet of
office space in Mannheim, Germany under a lease that expires on December 31, 2016, approximately
3,200 square feet of office space in Reinach, Switzerland under a lease that expires on May 31, 2015 and
approximately 6,200 square feet of office space in Roswell, Georgia under a lease that expires on
October 31, 2018.

In addition to the obligations set out in the above table, we have assumed material obligations to pay
royalties to certain third parties on net sales of VIMOVO as a result of the acquisition of the U.S. rights to
VIMOVO from AstraZeneca in November 2013 and ACTIMMUNE as result of the Merger.

Under the Pozen license agreement, we are required to pay Pozen a flat 10% royalty on net sales of
VIMOVO and such other products sold by us, our affiliates or sublicensees during the royalty term, subject to
minimum annual royalty obligations of $5.0 million in 2014 and $7.5 million each year thereafter, which
minimum royalty obligations will continue for each year during which one of Pozen’s patents covers such
products in the United States and there are no competing products 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 products. Our obligation

107

to pay royalties to Pozen will expire upon the later of (a) expiration of the last-to-expire of certain patents
covering such products in the United States, and (b) ten years after the first commercial sale of such products in
the United States. In addition, we are obligated to reimburse Pozen for costs, including attorneys’ fees, incurred
by Pozen in connection with VIMOVO patent litigation moving forward, subject to agreed caps.

Under the terms of the license agreement with Genentech Inc., or Genentech, which was the original

developer of ACTIMMUNE, we are or were obligated to pay royalties to Genentech on our net sales of
ACTIMMUNE as follows:

• Through November 25, 2014, we were obligated to pay a royalty of 45% of the first $3.7 million in net

sales achieved in a calendar year, and 10% on all additional net sales in that year;

•

For the period from November 26, 2014 through May 5, 2018, the royalty payments will be reduced to
a 20%-30% range for the first tier in net sales and in the 1-9% range for the second tier; and

From May 6, 2018 and for so long as we continue to commercially sell ACTIMMUNE, we will be
obligated to pay an annual royalty in the low single digits as a percentage of annual net sales.

Under the terms of an agreement with Connetics Corporation (which was the predecessor parent company to
InterMune and is now part of GlaxoSmithKline), or Connectics, we are obligated to pay royalties to Connetics on
our net sales of ACTIMMUNE as follows:

•

0.25% of net sales of ACTIMMUNE, rising to 0.5% once cumulative net sales of ACTIMMUNE in the
United States surpass $1.0 billion; and

In the event we develop and receive regulatory approval for ACTIMMUNE in the indication of
scleroderma, we will be obligated to pay a royalty of 4% on all net sales of ACTIMMUNE recorded for
use in that indication.

As of December 31, 2014, cumulative net sales of ACTIMMUNE in the United States were $25.3 million.

Off-Balance Sheet Arrangements

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 14, “Commitments and Contingencies” in the notes to our condensed consolidated financial
statements included in this report.

Critical Accounting Policies and Significant Judgments and Estimates

The methods, estimates and judgments that we use in applying our critical accounting policies have a
significant impact on the results that we report in our financial statements. Some of our accounting policies
require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding
matters that are inherently uncertain.

We have identified the accounting policies and estimates listed below as those that we believe require
management’s most subjective and complex judgments in estimating the effect of inherent uncertainties. This
section should also be read in conjunction with Note 2, “Summary of Significant Accounting Policies,” in the
notes to our condensed consolidated financial statements included in this report, which includes a discussion of
these and other significant accounting policies.

Revenue Recognition

108

is reasonably assured. Some of our agreements contain multiple elements and in accordance with these
agreements, we may be eligible for upfront license fees, marketing or commercial milestones and payment for
product deliveries.

Revenue from product deliveries

We recognize revenue from the delivery of our products when delivery has occurred, title has transferred,
the selling price is fixed or determinable, the right of return no longer exists (which is the earlier of product being
dispensed through patient prescriptions or the expiration of the right of return) or product returns can be
reasonably estimated, collectability is reasonably assured and we have no further performance obligations. Due
to our ability to reasonably estimate and determine allowances for product returns, rebates and discounts based
on our own internal data for DUEXIS and RAYOS or data relating to prior sales of VIMOVO and
ACTIMMUNE received in connection with the acquisition of those products, we recognize revenue at the point
of sale to wholesale pharmaceutical distributors and retail chains for all currently distributed products.

Revenue from upfront license fees

We recognize revenues from the receipt of non-refundable, upfront license fees. In situations where the
licensee is able to obtain stand-alone value from the license and no further performance obligations exist on our
part, revenues are recognized on the earlier of when payments are received or collection is assured. Where
continuing involvement by us is required in the form of technology transfer, product manufacturing or technical
support, revenues are deferred and recognized over the term of the agreement.

Revenue from milestone receipts

Milestone payments are recognized as revenue based on achievement of the associated milestones, as
defined in the relevant agreements. Revenue from a milestone achievement is recognized when earned, as
evidenced by acknowledgment from our partner, provided that (1) the milestone event is substantive and its
achievability was not reasonably assured at the inception of the agreement, (2) the milestone represents the
culmination of an earnings process and (3) the milestone payment is non-refundable. If any of these criteria are
not met, revenue from the milestone achievement is recognized over the remaining minimum period of our
performance obligations under the agreement.

Contractual Allowances

Product Sales Discounts and Allowances

We record allowances for product returns, rebates and discounts at the time of sale to wholesale
pharmaceutical distributors and national and regional retail chains. We are also required to make significant
judgments and estimates in determining some of these allowances. If actual results differ from our estimates, we
will be required to make adjustments to these allowances in the future.

Product Launch Discounts

We have offered additional discounts to wholesale distributors for product purchased at the time of product

launch. We have recorded these discounts as an allowance against accounts receivable and a reduction of revenue
when orders were placed.

Customer Rebates

We participate in certain commercial rebate programs. Under these rebate programs, we pay a rebate to the

commercial entity or third-party administrator of the program. We accrue estimated rebates based on contract
prices, estimated percentages of product sold to qualified patients and estimated levels of inventory in the
distribution channel and record the rebate as a reduction of revenue.

109

Distribution Service Fees

We include distribution service fees paid to our wholesalers for distribution and inventory management

services as a reduction to revenue. We accrue estimated fees based on contractually determined amounts,
typically as a percentage of revenue, as a reduction of revenue.

Co-Pay Assistance

We offer discount card and other programs such as our PME program 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. We reimburse pharmacies for this
discount through third-party vendors. We accrue estimated costs for co-pay assistance based on contract prices,
estimated percentages of product sold to qualified patients and estimated levels of inventory in the distribution
channel and record the rebate as a reduction of revenue. We record the total amount of estimated discounts for
sales recorded in the period as a reduction of revenue.

Sales Returns

Consistent with industry practice, we maintain a return policy that allows customers to return product within
a specified period prior to and subsequent to the product expiration date. Generally, product may be returned for
a period beginning six months prior to its expiration date and up to one year after its expiration date. The right of
return expires on the earlier of one year after the product expiration date or the time that the product is dispensed
to the patient. The majority of our product returns are the result of product dating, which falls within the range set
by our policy, and are settled through the issuance of a credit to the customer. Our estimate of the provision for
returns is based upon our historical experience with actual returns, which is applied to the level of sales for the
period that corresponds to the period during which our customer may return product. This period is known to us
based on the shelf lives of our products at the time of shipment. We record sales returns as an allowance against
accounts receivable and a reduction of revenue.

Prompt Pay Discounts

As an incentive for prompt payment, we offer a 2% cash discount to customers. We expect that all
customers will comply with the contractual terms to earn the discount. We record the discount as an allowance
against accounts receivable and a reduction of revenue.

Government Rebates and Chargebacks

Government Rebates

We participate in certain federal government rebate programs, such as Medicare and Medicaid. We accrue

estimated rebates based on estimated percentages of product sold to qualified patients, estimated rebate
percentages and estimated levels of inventory in the distribution channel that will be sold to qualified patients
and record the rebates as a reduction of revenue.

Government Chargebacks

We provide discounts to federal government qualified entities with whom we have contracted. These federal

entities purchase products from the wholesale pharmaceutical distributors at a discounted price, and the
wholesale pharmaceutical distributors then charge back to us the difference between the current retail price and
the contracted price that the federal entities paid for the product. We accrue estimated chargebacks based on
contract prices and sell-through sales data obtained from third party information and record the chargeback as a
reduction of revenue.

110

The following table summarizes our customer-related accruals and allowances as of December 31, 2014 and

2013 (in thousands):

Customer-Related Accruals and Allowances

Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . .
Current provisions relating to sales in current year . . . . . . .
Adjustments relating to prior year sales . . . . . . . . . . . . . . . .
Payments relating to sales in current year . . . . . . . . . . . . . .
Payments relating to sales in prior years . . . . . . . . . . . . . . .

Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
Current provisions relating to sales in current year . . . . . . .
Adjustments relating to prior year sales . . . . . . . . . . . . . . . .
Payments relating to sales in current year . . . . . . . . . . . . . .
Payments relating to sales in prior years . . . . . . . . . . . . . . .
Vidara Acquisition on September 18, 2014 . . . . . . . . . . . . .

Contractual
Allowances

2,234
21,799
—
(16,422)
(895)

6,716
242,091
(1,770)
(181,380)
(4,842)
472

Government
Rebates and
Chargebacks

321
3,909
—
(2,785)
(38)

$ 1,407
45,301
—
(38,880)
(1,307)
13,528

Total

2,555
25,708
—
(19,207)
(933)

8,123
287,392
(1,770)
(220,260)
(6,149)
14,000

Balance at December 31, 2014 (1) . . . . . . . . . . . . . . . . . . . .

$ 61,287

$ 20,049

$ 81,336

(1) The balance includes $5,221 of unpaid contractual allowance invoices recorded in accounts payable.

Cost of Goods Sold

We recognize cost of goods sold in connection with our sales of ACTIMMUNE, DUEXIS, LODOTRA,

RAYOS and VIMOVO.

Cost of goods sold for ACTIMMUNE includes all costs directly related to the acquisition of ACTIMMUNE from

our third-party manufacturer, Boehringer Ingelheim, including freight charges and other direct expenses such as
insurance and amortization of intellectual property, royalty accretion expense and any changes in estimate associated
with the contingent royalty liability as described in the accrued contingent royalty accounting policy below.

Cost of goods sold for DUEXIS includes all costs directly related to the purchase of product from our third-

party manufacturers, including freight charges and costs of distribution service fees.

Cost of goods sold for LODOTRA includes raw material costs, costs associated with third parties who
manufacture LODOTRA for us, supply chain costs, amortization of developed technology, royalty payments to
third parties for the use of certain licensed patents and applicable taxes.

Cost of goods sold for RAYOS includes all costs directly related to the purchase of product from our third-
party manufacturers, including freight charges and costs of distribution, amortization of developed technology,
royalty payments to third parties for the use of certain licensed patents and applicable taxes.

Cost of goods sold for VIMOVO includes all costs directly related to the acquisition of product from
AstraZeneca and/or a third-party manufacturer, amortization of intellectual property, royalty accretion expense
and any changes in estimate associated with the contingent royalty liability as described in the accrued contingent
royalty accounting policy below.

Intangible Assets

Definite-lived intangible assets are amortized over their estimated useful lives. We review our intangible
assets when events or circumstances may indicate that the carrying value of these assets exceeds their fair value.

111

We measure fair value based on the estimated future discounted cash flows associated with our assets in addition
to other assumptions and projections that we deem to be reasonable and supportable. The estimated useful lives
for all identified intangible assets that are subject to amortization were as follows as of December 31, 2014:

Intangible Asset

Estimated Useful Life

ACTIMMUNE developed technology . . . . . . . . . .
LODOTRA and RAYOS developed technology . . .
PENNSAID 2% developed technology . . . . . . . . . .
VIMOVO intellectual property . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . .

13 years
12 Years
6 Years
5 Years
10 years

Indefinite-lived intangible assets consist of capitalized in-process research and development, or IPR&D.

IPR&D assets represent capitalized incomplete research projects that we acquired through business
combinations. Such assets are initially measured at their acquisition date fair values and are tested for
impairment, until completion or abandonment of R&D efforts associated with the projects. An IPR&D asset is
considered abandoned when R&D efforts associated with the asset have ceased, and there are no plans to sell or
license the asset or derive value from the asset. At that point, the asset is considered to be disposed of and is
written off. Upon successful completion of each project, we will make a determination about the then remaining
useful life of the intangible asset and begin amortization. We test our indefinite-lived intangibles, including
IPR&D assets, for impairment annually and more frequently if events or changes in circumstances indicate that it
is more likely than not that the asset is impaired.

Fair Value of Financial Instruments

The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash,
accounts receivable, accounts payable and accrued expenses, approximate their fair values due to their short
maturities. At December 31, 2013 and at the final measurement on June 27, 2014, the estimated fair value of our
derivative liability related to the convertible portion of our 5.00% Convertible Senior Notes due 2018, or
Convertible Senior Notes, was derived utilizing the binomial lattice approach for the valuation of convertible
instruments. Assumptions used in the calculation included, among others, determining the appropriate credit
spread using benchmarking analysis and solving for the implied credit spread, calculating the fair value of the
stock component using a discounted risk free rate and borrowing cost and calculating the fair value of the note
component using a discounted credit adjusted discount rate. Based on the assumptions used to determine the fair
value of the derivative liability associated with the Convertible Senior Notes, we concluded that these inputs
were Level 3 inputs.

Business Combinations

We account for business combinations in accordance with the pronouncement guidance in ASC 805,
Business Combinations, in which acquired assets and liabilities are measured at their respective estimated fair
values as of the acquisition date. We may be required, as in the case of intangible assets or contingent royalties,
to determine the fair value associated with these amounts by estimating the fair value using an income approach
under the discounted cash flow method, which may include revenue projections and other assumptions made by
us to determine the fair value. During the year ended December 31, 2014, we recorded a bargain purchase gain of
$22.2 million in connection with the Merger, representing the excess of the estimated fair values of net assets
acquired over the acquisition consideration paid.

Provision for Income Taxes

We account 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

112

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 a valuation
allowance 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 year that the change is enacted. We also account for the uncertainty in income taxes by utilizing a
comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of
any uncertain tax positions that have been taken or are expected to be taken on an income tax return.

Stock-Based Compensation

We account for employee stock-based compensation by measuring and recognizing compensation expense

for all stock-based payments based on estimated grant date fair values. We use the straight-line method to
allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally
the vesting period. We estimate the fair value of our share-based awards to employees using the Black-Scholes
option pricing model. The Black-Scholes model requires the input of subjective assumptions, including the
expected stock price, volatility, risk-free interest rate, the calculation of expected term and the fair value of the
underlying ordinary shares on the date of grant, among other inputs.

We also account for stock options issued to non-employees based on the stock options’ estimated fair value

determined using the Black-Scholes option pricing model. The fair value of equity awards granted to non-
employees are re-measured at each reporting date, and the resulting change in the fair value associated with
awards, if any, is recognized as a corresponding increase or reduction to stock-based compensation during the
period.

Accrued Contingent Royalties

Our accrued contingent royalties consist of the contingent royalty obligations assumed by us related to our

acquisitions of the U.S. rights to VIMOVO and Vidara (related to ACTIMMUNE). At the time of each
acquisition, we assigned a fair value to the liability for royalties. The royalty liability was based on anticipated
revenue streams utilizing the income approach under the discounted cash flow method. The estimated liability for
royalties is increased over time to reflect the change in its present value, and accretion expense is recorded as part
of cost of goods sold. We evaluate the adequacy of the estimated contingent royalty liability at least annually, or
whenever events or changes in circumstances indicate that an evaluation of the estimate is necessary. As part of
any evaluation, we adjust the carrying value of the liability to the present value of the revised estimated cash
flows using the original discount rate.

Any decrease or increase to the liability is recorded as an increase or reduction in cost of goods sold. The

royalty liability is included in current and long-term accrued royalties on the consolidated balance sheets.

New Accounting Pronouncements Impacting Critical Accounting Policies

Refer to Note 2, “Summary of Significant Accounting Policies,” in the notes to our condensed consolidated
financial statements included in this report, which includes a discussion of the new accounting pronouncements
impacting critical accounting policies.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

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
Senior Secured Credit Facility and our investment in money market accounts which bear a variable interest rate.

113

Borrowings under the Senior Secured Credit Facility bear interest, at our option, at a rate equal to either the
London Inter-Bank Offer Rate, or LIBOR, plus an applicable margin of 8.0% per annum (subject to a 1.0%
LIBOR floor), or the prime lending rate, plus an applicable margin equal to 7.0% per annum. Since drawing the
full $300.0 million available in September 2014, our borrowings have been based on the LIBOR. Since current
LIBOR rates are below the 1.0% LIBOR floor, the interest rate on our borrowings has been 9.0% per annum. An
increase in the LIBOR of 100 basis points above the 1.0% LIBOR floor would increase our interest expense by
$3.0 million per year.

The goals of our investment policy are associated with the preservation of capital, fulfillment of liquidity
needs and 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 of ACTIMMUNE under our contract with Boehringer Ingelheim

as well as our sales contracts relating to LODOTRA are principally denominated in Euros and are subject to
significant foreign currency risk. We also incur certain operating expenses in currencies other than the U.S.
dollar in relation to our Ireland operations and foreign subsidiaries, including Horizon Pharma AG; therefore, we
are subject to volatility in cash flows due to fluctuations in foreign currency exchange rates, particularly changes
in the Euro. To date, we have not entered into any hedging contracts since exchange rate fluctuations have had
minimal impact on our results of operations and cash flows.

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
products to pharmacies, hospitals and other customers. For the year ended December 31, 2014, our top five
customers, American Specialty Pharmacy, Inc., AmerisourceBergen, Cardinal Health, Inc., McKesson
Corporation and Rochester Drug Company accounted for approximately 86% of total consolidated gross sales.
For the year ended December 31, 2013, our top five customers, AmerisourceBergen, Cardinal Health, Inc.,
McKesson Corporation, Mundipharma and Rochester Drug Company, accounted for approximately 89% of total
consolidated gross sales.

In addition, five customers, American Specialty Pharmacy, Inc., AmerisourceBergen, Cardinal Health, Inc.,

McKesson Corporation and Rochester Drug accounted for approximately 80% of the Company’s total
outstanding accounts receivable balances at December 31, 2014. As of December 31, 2013, AmerisourceBergen,
Cardinal Health, Inc., Halsted Pharmacy, McKesson Corporation and Rochester Drug Company, accounted for
approximately 85% of our total outstanding accounts receivable balances. Historically, we have not experienced
any losses related to our accounts receivable balances.

Item 8. Financial Statements and Supplementary Data

The financial information required by Item 8 is contained in Part IV, Item 15 of this Annual Report on

Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

114

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our

“disclosure controls and procedures” (as defined in Rule 13a-15(e) promulgated under the Securities Exchange
Act of 1934, as amended, or the Exchange Act), have concluded that, as of December 31, 2014, our disclosure
controls and procedures were effective to provide reasonable assurance that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the issuer’s management, including its principal executive officer or officers
and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.

Management Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control system was designed to provide reasonable assurance to management and our
board of directors regarding the preparation and fair presentation of published financial statements. All internal
control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation
and presentation.

Management assessed the effectiveness of our internal control over financial reporting as of December 31,

2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Management’s
assessment included an evaluation of the design of our internal control over financial reporting and testing of the
operational effectiveness of our internal control over financial reporting. Based on management’s assessment,
management believes that, as of December 31, 2014, our internal control over financial reporting was effective
based on those criteria.

Management’s assessment of internal control over financial reporting as of December 31, 2014, excluded

Vidara’s internal controls over financial reporting because Vidara was acquired by us in a reverse acquisition
under the acquisition method of accounting for business combination in September 2014. Vidara represented
approximately 4% and 9% of our total assets and total net sales, respectively, of the related consolidated financial
statement amounts, for the period ended December 31, 2014.

The effectiveness of our internal control over financial reporting as of December 31, 2014 has been audited

by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report
which appears herein.

Changes in Internal Control Over Financial Reporting

As discussed above, on September 19, 2014, a wholly-owned subsidiary of Horizon Pharma plc (formerly

known as Vidara Therapeutics International Public Limited Company) merged with and into HPI, with HPI
surviving the Merger and becoming a wholly-owned subsidiary of Horizon Pharma plc. HPI is treated as the
acquiring company in the Merger for accounting purposes, and the Merger was accounted for as a reverse
acquisition under the acquisition method of accounting for business combinations. As a result, the historical
financial statements of Horizon Pharma plc reflect the financial position, results of operations and cash flows of
HPI only. Following the Merger, the financial statements of the current period reflect the financial position,
results of operations and cash flows of Horizon Pharma plc. The results of operations of the acquired Vidara

115

business are included in the results of operations of Horizon Pharma plc beginning on September 19, 2014. Also,
as a result of the Merger, the internal control over financial reporting utilized by HPI prior to the Merger became
the internal control over financial reporting of our company, and we are currently in the process of evaluating
and integrating Vidara’s historical internal controls over financial reporting with ours.

During the year ended December 31, 2014, other than continuing changes to our internal control processes
resulting from the Merger as discussed above, there have been no material changes to our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

Item 9B. Other Information

Cash Long Term Incentive Program

As previously disclosed in our Current Report on Form 8-K filed on November 10, 2014, on November 5,
2014 we approved a performance cash bonus program for the members of our executive committee and executive
leadership team, including our executive officers. On February 23, 2014, the compensation committee of our
board of directors approved the written plan document for such performance cash bonus program, the Horizon
Pharma Public Limited Company Cash Long Term Incentive Program, or Cash Bonus Program.

Under the Cash Bonus Program, our executives are provided the opportunity to earn a cash bonus based on

our level of attainment of total shareholder return, or TSR, over the designated performance period of
November 5, 2014 through May 5, 2015. For such purposes, TSR means the percentage change in the price of
our ordinary shares on a compounded annualized basis plus the dollar value of dividends and distributions made
or declared divided by the closing price of our ordinary shares on the record date of the dividends and
distributions. The Cash Bonus Program also requires that the TSR for the period from November 5, 2014 to
November 4, 2017 must be greater than 15%, or the earlier occurrence of a change in control, as a general
condition to payment of any amounts under the Cash Bonus Program.

Participants must remain employed by us through November 4, 2017 unless the earlier departure from
employment is due to death, disability, termination without cause or a change in control transaction, as such
terms are defined in the Cash Bonus Program. Payments under the Cash Bonus Program, if any, will be made
after November 4, 2017 unless a change in control occurs prior to such date.

Under the Cash Bonus Program, actual potential payout levels for each of our executive officers under their

pre-determined allocations will be based on the applicable TSR level attained during the performance period of
November 5, 2014 through May 5, 2015 and are as follows:

Designated Participant

Walbert, Timothy P.
Sherman, Jeffrey W.
Carey, Robert F.
Moze, Barry J.
Kody, John J.
Hoelscher, Paul W.
Kelly, David

TSR Level (1)
≥ 15% and < 25% ≥ 25% and < 40% ≥ 40% and < 60% ≥ 60%

$1.202
$0.332
$0.414
$0.332
$0.414
$0.414
$0.249

$2.137
$0.589
$0.737
$0.589
$0.737
$0.737
$0.442

$3.205
$0.884
$1.105
$0.884
$1.105
$1.105
$0.663

$4.541
$1.253
$1.566
$1.253
$1.566
$1.566
$0.939

(1) All dollar amounts in the table above are in millions. The maximum award for each participant is reflected

under the ≥60% TSR Level column next to the participant’s name.

116

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

The information required by this item is incorporated herein by reference from our definitive Proxy
Statement to be filed in connection with our 2015 Annual General Meeting of Shareholders, or our 2015 Proxy
Statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31,
2014.

Item 11. Executive Compensation

The information required by this item is incorporated herein by reference from our 2015 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The information required by this item is incorporated herein by reference from our 2015 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated herein by reference from our 2015 Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference from our 2015 Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) Documents filed as part of this report.

Financial Statements

The financial statements listed on the Index to Financial Statements F-3 to F-52 are filed as part of this

Annual Report on Form 10-K.

Financial Statement Schedules

Schedule II – Valuation and Qualifying Accounts and Reserves for each of the three fiscal years ended
December 31, 2014, 2013 and 2012. Other financial statement schedules have been omitted because the required
information is included in the consolidated financial statements or notes thereto or because they are not
applicable or not required.

3. Exhibits

The exhibits listed on the Index to Exhibits are filed as part of this Annual Report on Form 10-K.

117

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Dated: February 27, 2015

HORIZON PHARMA PLC

By: /s/ TIMOTHY P. WALBERT

Timothy P. Walbert

President, Chief Executive Officer and
Chairman of the Board

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes

and appoints Timothy P. Walbert and Paul W. Hoelscher, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective amendments) to this report, and to
file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, or their or his substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE

TITLE

DATE

/s/ TIMOTHY P. WALBERT
Timothy P. Walbert

/s/ PAUL W. HOELSCHER
Paul W. Hoelscher

/s/ MICHAEL GREY
Michael Grey

/s/ LIAM DANIEL
Liam Daniel

/s/ JEFF HIMAWAN
Jeff Himawan, Ph.D.

/s/ VIRINDER NOHRIA
Virinder Nohria, M.D., Ph.D.

/s/ RONALD PAULI
Ronald Pauli

/s/ GINO SANTINI
Gino Santini

/s/ H. THOMAS WATKINS
H. Thomas Watkins

President, Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)

Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)

February 27, 2015

Director

118

February 27, 2015

HORIZON PHARMA PLC

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2014, 2013 and

Page

F-2
F-3

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-4

Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 2014, 2013

and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012 . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-5
F-6
F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Horizon Pharma plc

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present

fairly, in all material respects, the financial position of Horizon Pharma plc and its subsidiaries at December 31, 2014
and 2013, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents
fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated
financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in Management’s Report on Internal Control over Financial Reporting incorporated by
reference under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial
statement schedule and on the Company’s internal control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over financial reporting
was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit
of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has
excluded the internal controls over financial reporting of Vidara Therapeutics International Public Limited
Company and its subsidiaries prior to the effective time of the merger on September 19, 2014 (“Vidara”), from
its assessment of internal control over financial reporting as of December 31, 2014 because Vidara was acquired
by the Company in a reverse acquisition under the acquisition method of accounting for business combination on
September 19, 2014. We have also excluded Vidara from our audit of internal control over financial reporting.
Vidara’s total assets and total net sales represented approximately 4% and 9%, respectively, of the Company’s
related consolidated financial statement amounts as of and for the year ended December 31, 2014.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois
February 27, 2015

F-2

HORIZON PHARMA PLC

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

As of December 31,

2014

2013

CURRENT ASSETS:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, current

$ 218,807
738
73,915
16,865
14,370
1,530

$ 80,480
738
15,958
8,701
4,888
—

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development
Other intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

326,225

7,241
696,963
66,000
7,870
18,761
11,564

110,765

3,780
131,094
—
—
—
6,957

$1,134,624

$ 252,596

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Convertible debt, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued trade discounts and rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalties—current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues—current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,334
21,011
46,625
76,115
25,325
721
1,261

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

219,392

LONG-TERM LIABILITIES:

Convertible debt, net of current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, net
Derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalties, net of current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues, net of current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities, net, non-current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
297,169
—
48,887
8,144
19,570
1,258

375,028

—
9,921
15,926
8,123
8,010
—
1,330

43,310

110,762
—
109,410
24,982
9,686
3,362
166

258,368

COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:

Ordinary shares, $0.0001 nominal value; 300,000,000 shares authorized; 125,425,853
and 66,097,417 shares issued at December 31, 2014 and 2013, respectively, and
124,041,487 and 66,097,417 shares outstanding at December 31, 2014 and 2013,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, 384,366 ordinary shares at December 31, 2014 . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total shareholders’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . .

13
(4,585)
1,269,858
(4,363)
(720,719)

7
—
410,430
(2,403)
(457,116)

540,204

(49,082)

$1,134,624

$ 252,596

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

F-3

HORIZON PHARMA PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share data)

For the Years Ended December 31,

2014

2013

2012

REVENUES:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

296,955
78,753

218,202

74,016
14,625

59,391

OPERATING EXPENSES:

Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,460
120,276
88,957

226,693

10,084
68,595
23,566

102,245

18,844
11,875

6,969

16,837
49,561
19,444

85,842

Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8,491)

(42,854)

(78,873)

OTHER (EXPENSE) INCOME, NET:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net
Foreign exchange (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on derivative fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on induced conversion and debt extinguishment
. . . . . . . .
Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23,826)
(3,905)
(214,995)
(29,390)
22,171
(11,251)

(12,774)
1,206
(69,300)
(26,404)
—
—

Total other expense, net

. . . . . . . . . . . . . . . . . . . . . . . . . . .

(261,196)

(107,272)

Loss before benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
BENEFIT FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . .

(269,687)
(6,084)

(150,126)
(1,121)

(11,552)
489
—
(2,973)
—
(56)

(14,092)

(92,965)
(5,171)

NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (263,603) $ (149,005) $

(87,794)

NET LOSS PER ORDINARY SHARE - Basic and diluted . . . . .
WEIGHTED AVERAGE ORDINARY SHARES

OUTSTANDING - Basic and diluted . . . . . . . . . . . . . . . . . . . . .
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . .

Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . .

(3.15) $

(2.34) $

(2.26)

83,751,129

63,657,924

38,871,422

(1,960)

969

416

COMPREHENSIVE LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (265,563) $ (148,036) $

(87,378)

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

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T

HORIZON PHARMA PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the Years Ended December 31,

2014

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(263,603) $(149,005) $ (87,794)

Adjustments to reconcile net loss to net

cash used in (provided by) operating activities:

Remeasurement of VIMOVO and ACTIMMUNE royalty liabilities . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on derivative revaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid in kind interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued trade discounts and rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from the issuance of debt, net of underwriting fees and issuance costs . . . . . . . . .
Proceeds from the issuance of ordinary shares in connection with warrant exercises . . . . .
Proceeds from settlement of capped call transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the issuance of ordinary shares through ESPP programs and stock option

exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of capped calls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the issuance of ordinary shares under an ATM agreement, net of issuance costs . . .
Proceeds from equity finance offerings, net of offering costs . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . .
CASH AND CASH EQUIVALENTS, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . .
CASH AND CASH EQUIVALENTS, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,660
34,009
13,198
(22,171)
214,995
9,020
11,709
—
9,273
3,905
11

(46,183)
7,173
(9,208)
9,383
54,090
(1,270)
(562)
(7,516)
636
27,549

(224,220)
(3,500)
—

(227,720)

—
9,310
5,014
—
69,300
—
12,881
2,225
4,364
(1,206)
—

(12,491)
(3,426)
(1,240)
3,908
6,962
980
(1,145)
(1,186)
468
(54,287)

(35,000)
(1,198)
63
(36,135)

286,966
38,461
9,385

143,598
—
—

—
5,538
4,661
—
—
—
—
2,607
2,740
(489)
76

(1,087)
(4,022)
(543)
(2,209)
7,260
(208)
2,616
(5,206)
(581)
(76,641)

—
(1,336)
(50)
(1,386)

55,578
154
—

3,473
—
—
—
—
338,285
213
138,327
80,480
$ 218,807

639
(64,844)
(18,675)
5,998
—
66,716
99
(23,607)
104,087
$ 80,480

287
(19,788)
—
—
128,077
164,308
(160)
86,121
17,966
$104,087

Supplemental cash flow information:

Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for induced conversion and debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,109
37
$
$ 16,690

8,573
$
44
$
$ 12,152

$
$
$

7,554
57
2,124

Supplemental non-cash flow information:

Contingent liabilities assumed in acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangble assets acquired in acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of Convertible Senior Notes to ordinary shares . . . . . . . . . . . . . . . . . . . . . . . . .

$ 33,600
$ 679,100
$
1,463
$ 89,015

$ 32,992
$ 67,705
—
—

—
—
—
—

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

F-6

HORIZON PHARMA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2014, 2013 and 2012

NOTE 1 – BASIS OF PRESENTATION

On September 19, 2014, the businesses of Horizon Pharma, Inc. (“HPI”) and Vidara Therapeutics
International Public Limited Company (“Vidara”) were combined in a merger transaction (the “Merger”),
accounted for as a reverse acquisition under the acquisition method of accounting for business combinations,
with HPI treated as the acquiring company in the Merger for accounting purposes. As part of the Merger, a
wholly-owned subsidiary of Vidara merged with and into HPI, with HPI surviving the Merger as a wholly-owned
subsidiary of Vidara and Vidara changed its name to Horizon Pharma plc (“New Horizon” or the “Company”).
Upon the consummation of the Merger, the historical financial statements of HPI became the Company’s
historical financial statements. Accordingly, the historical financial statements of HPI are included in the
comparative prior periods.

Business Overview

The Company is a specialty biopharmaceutical company focused on improving patients’ lives by

identifying, developing, acquiring or in-licensing and commercializing differentiated products that address unmet
medical needs. The Company markets a portfolio of products in arthritis, inflammation and orphan diseases. The
Company’s U.S. marketed products are ACTIMMUNE ® (interferon gamma-1b), DUEXIS ® (ibuprofen/
famotidine), PENNSAID® (diclofenac sodium topical solution) 2% w/w (“PENNSAID 2%”), RAYOS®
(prednisone) delayed-release tablets and VIMOVO® (naproxen/esomeprazole magnesium). The Company
developed DUEXIS and RAYOS/LODOTRA®, acquired the U.S. rights to VIMOVO from AstraZeneca AB
(“AstraZeneca”) in November 2013, acquired the U.S. rights to ACTIMMUNE as a result of the Merger, and
acquired the U.S. rights to PENNSAID 2% from Nuvo Research Inc. (“Nuvo”) in October 2014. The Company
markets its products in the United States through a combined field sales force of approximately 375
representatives consisting of approximately 325 primary care sales representatives and 50 sales representatives in
its specialty and orphan diseases business areas. The Company’s strategy is to develop, acquire or in-license
additional innovative medicines or acquire companies, such as the addition of ACTIMMUNE through the
recently-completed Merger and the acquisition of the U.S. rights to PENNSAID 2% from Nuvo.

The Company is a public limited company formed under the laws of Ireland. As a result of the Merger, the
Company operates through a number of international and U.S. subsidiaries with principal business purposes to
either hold intellectual property assets, perform research and development or manufacturing operations, serve as
distributors of the Company’s products, or provide services and financial support to the Company. The
Company’s international operations are conducted primarily through HZNP Limited, which is responsible for
research and development for ACTIMMUNE and PENNSAID 2%, Horizon Pharma Ireland Limited, which is
responsible for manufacturing ACTIMMUNE and PENNSAID 2% and other products the Company may
potentially acquire, and Horizon Pharma AG, a company organized under the laws of Switzerland, along with its
wholly-owned subsidiary Horizon Pharma GmbH, a company organized under the laws of Germany, together
which are responsible for manufacturing RAYOS/LODTORA, and for international sales of LODOTRA. The
Company’s U.S. operations are conducted primarily through Horizon Pharma USA, Inc. which is responsible for
research and development and manufacturing of DUEXIS and VIMOVO, and distribution in the U.S. market of
DUEXIS, VIMOVO and RAYOS, and other products the Company may potentially acquire, such as the recently
acquired PENNSAID 2%, as well as through HZNP USA Inc. which is responsible for distribution of
ACTIMMUNE in the United States. Unless otherwise indicated or the context otherwise requires, references to
the “Company”, “New Horizon”, “we”, “us” and “our” refer to Horizon Pharma plc and its consolidated
subsidiaries, including its predecessor, HPI. All references to “Vidara” are references to Horizon Pharma plc
(formerly known as Vidara Therapeutics International Public Limited Company) and its consolidated subsidiaries

F-7

prior to the effective time of the Merger on September 19, 2014. The disclosures in this report relating to the pre-
Merger business of Horizon Pharma plc, unless noted as being the business of Vidara prior to the Merger, pertain
to the business of HPI prior to the Merger.

On April 23, 2011, the U.S. Food and Drug Administration (“FDA”) approved DUEXIS, a proprietary tablet

formulation containing a fixed-dose combination of ibuprofen and famotidine in a single pill. DUEXIS is
indicated for the relief of signs and symptoms of rheumatoid arthritis (“RA”), osteoarthritis (“OA”) and to
decrease the risk of developing upper gastrointestinal ulcers in patients who are taking ibuprofen for these
indications. The Company began marketing DUEXIS to physicians in December 2011. In June 2012, the
Company licensed DUEXIS rights in Latin America to Grünenthal S.A., a private company focused on the
promotion of pain products.

The Company’s second approved product in the United States, RAYOS, known as LODOTRA outside the
United States, is a proprietary delayed-release formulation of low-dose prednisone, first approved in Europe in
March 2009, for the treatment of moderate to severe, active RA in adults, particularly when accompanied by
morning stiffness. On July 26, 2012, the FDA approved RAYOS for the treatment of RA, polymyalgia
rheumatica (“PMR”), psoriatic arthritis, ankylosing spondylitis (“AS”), asthma and chronic obstructive
pulmonary disease and a number of other conditions. The Company is focusing its promotion of RAYOS in the
United States on rheumatology indications, including RA and PMR. The Company began marketing RAYOS to a
subset of U.S. rheumatologists in December 2012 and began the full launch in late January 2013 to the majority
of U.S. rheumatologists and key primary care physicians. LODOTRA is currently marketed outside the
United States, excluding Japan and Canada, by the Company’s distribution partner, Mundipharma International
Corporation Limited (“Mundipharma”).

On November 18, 2013, the Company entered into agreements with AstraZeneca pursuant to which the
Company acquired from AstraZeneca and its affiliates certain intellectual property and other assets, and assumed
from AstraZeneca and its affiliates certain liabilities, each with respect to VIMOVO, and obtained rights to
develop other pharmaceutical products that contain gastroprotective agents in a single fixed combination oral
solid dosage form with non-steroidal anti-inflammatory drugs (“NSAIDs”) in the United States. VIMOVO is a
proprietary fixed-dose multi-layer delayed-release tablet combining an enteric-coated naproxen, an NSAID, core
and an immediate-release esomeprazole, a proton pump inhibitor, layer surrounding the core. VIMOVO was
originally developed by Pozen Inc. (“Pozen”) together with AstraZeneca pursuant to an exclusive global
collaboration and license agreement under which AstraZeneca and Pozen agreed to co-develop VIMOVO and
AstraZeneca obtained exclusive rights to commercialize VIMOVO worldwide. On April 30, 2010, the FDA
approved VIMOVO for the relief of the signs and symptoms of OA, RA, and AS and to decrease the risk of
developing gastric ulcers in patients at risk of developing NSAID-associated gastric ulcers.

Under the asset purchase agreement with AstraZeneca, the Company acquired certain existing assets and

rights necessary to commercialize VIMOVO in the United States including, among other things, the
investigational new drug application (“IND”) and new drug application (“NDA”) for VIMOVO in the
United States, AstraZeneca’s interest in certain patents covering VIMOVO in the United States and certain
promotional materials and records related to VIMOVO in the United States. In addition, AstraZeneca assigned to
the Company its amended and restated collaboration and license agreement for the United States with Pozen,
pursuant to which AstraZeneca has in-licensed from Pozen certain patents and know-how of Pozen covering
VIMOVO in the United States. For accounting purposes, the acquisition of the U.S. rights to VIMOVO was
treated as a business combination. Collectively, these transactions are referred to as the “VIMOVO Acquisition.”

In December 2013, as a result of its acquisition of the U.S. rights to VIMOVO, the Company began

recognizing revenues under the transition agreement with AstraZeneca. The Company announced the availability
of Horizon-labeled VIMOVO on January 2, 2014, at which time it also began marketing with its primary care
sales force and began direct recording VIMOVO revenue.

F-8

On March 18, 2014, the Company, Vidara Therapeutics Holdings LLC, a Delaware limited liability
company (“Vidara Holdings”), Vidara, Hamilton Holdings (USA), Inc., a Delaware corporation and an indirect
wholly-owned subsidiary of Vidara (“U.S. HoldCo”), and Hamilton Merger Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of U.S. HoldCo (“Merger Sub”), entered into a Transaction Agreement and Plan
of Merger (the “Merger Agreement”). Upon consummation of the Merger on September 19, 2014 (the
“Closing”), the security holders of HPI (excluding the holders of HPI’s convertible notes) owned approximately
74% of the Company and Vidara Holdings owned approximately 26% of the Company. At the Closing, New
Horizon made a cash payment of $210.9 million to Vidara Holdings and $2.7 million to Citibank N.A. as escrow
agent under an escrow agreement associated with the Merger.

In connection with the Merger, on June 17, 2014, the Company entered into a senior secured credit facility
with certain lenders and Citibank, N.A., as administrative agent and collateral agent, that provided the Company
with $300.0 million in financing over a five-year period (the “Senior Secured Credit Facility”). The Company
borrowed the full $300.0 million available under the Senior Secured Credit Facility on September 19, 2014 and
used a portion of the proceeds to provide the cash payment of $213.6 million for the Merger and to pay certain
transaction related expenses, and is using the balance for general corporate purposes.

As a result of the Merger, the Company began marketing ACTIMMUNE, a bioengineered form of

interferon gamma-1b, a protein that acts as a biologic response modifier, in the United States. ACTIMMUNE is
approved by the FDA for use in children and adults with chronic granulomatous disease (“CGD”) and severe,
malignant osteopetrosis (“SMO”). ACTIMMUNE is indicated for reducing the frequency and severity of serious
infections associated with CGD and for delaying time to disease progression in patients with SMO. The FDA has
agreed to the primary endpoint for a Phase 3 study that will evaluate ACTIMMUNE in the treatment of
Friedreich’s Ataxia (“FA”). In February 2015, the Company submitted an IND application and anticipates the
Phase 3 clinical study related to FA will begin enrolling patients in the second quarter of 2015.

On October 17, 2014, the Company acquired the U.S. rights to PENNSAID 2% from Nuvo for $45.0 million

in cash. PENNSAID 2% is approved in the United States for the treatment of the pain of OA of the knee(s). As
part of the acquisition, the Company entered into an eight-year exclusive supply agreement with Nuvo. The
Company began marketing PENNSAID 2% in January 2015. In connection with the PENNSAID 2% acquisition,
the Company expanded its primary care sales force by 75 additional representatives. Effective January 1, 2015,
the Company’s primary care representatives are now marketing DUEXIS, PENNSAID 2% and VIMOVO.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the accounting
principles generally accepted in the United States of America (“GAAP”) and in accordance with the instructions
for Form 10-K and Article 3 of Regulation S-X. The consolidated financial statements include the accounts of the
Company and its wholly-owned consolidated subsidiaries.

Principles of Consolidation

The consolidated financial statements include the Company’s accounts and those of its wholly-owned

subsidiaries in the United States, Ireland, Bermuda, Luxembourg, Switzerland, Germany and the
United Kingdom. All intercompany accounts and transactions have been eliminated. Additionally, certain
reclassifications have been made to prior period financial statements to conform to the current period
presentation.

During the second quarter of 2014, the Company changed its income statement presentation to present net
sales rather than presenting gross sales minus sales discounts and allowances. The revised presentation has no

F-9

effect on net sales, gross margin dollars, net income, cash flows, working capital or shareholders’ equity amounts
previously reported, and will not affect such amounts in future periods.

During the first quarter of 2014, the Company recorded an out of period correction of $1.6 million resulting

in a reduction to its distribution service fees related to prior periods. This correction to distribution service fees
was recorded as an increase in net sales within the Company’s condensed consolidated statements of
comprehensive loss for the year ended December 31, 2014. The Company has evaluated the impact of the
reduction in distribution service fees to prior reporting periods and has determined it was immaterial.

Segment Information

The Company operates as one segment. Management uses one measure of profitability and does not

segment its business for internal reporting.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with
GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation and Transactions

The reporting currency of the Company and its subsidiaries is the U.S. dollar.

The U.S. dollar is the functional currency for the Company’s U.S. based businesses and its subsidiaries in

Ireland, Bermuda and Luxembourg. Other foreign subsidiaries have the following functional currencies:
Switzerland (Euro), Germany (Euro) and U.K. (British Pound). Foreign currency-denominated assets and
liabilities of these subsidiaries are translated into U.S. dollars based on exchange rates prevailing at the end of the
period, revenues and expenses are translated at average exchange rates prevailing during the corresponding
period, and shareholders’ equity (deficit) accounts are translated at historical exchange rates as of the date of any
equity transaction. The effects of foreign exchange gains and losses arising from the translation of assets and
liabilities of those entities where the functional currency is not the U.S. dollar are included as a component of
accumulated other comprehensive income (loss).

Gains and losses resulting from foreign currency translations are reflected within the Company’s results of

operations. During the year ended December 31, 2014, the Company recorded a loss from foreign currency
translations of $3.9 million, compared to a gain from foreign currency translations during the year ended
December 31, 2013 of $1.2 million. The Company does not currently utilize and has not in the past utilized any
foreign currency hedging strategies to mitigate the effect of its foreign currency exposure.

Revenue Recognition

Revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement
exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectability
is reasonably assured. Some of the Company’s agreements contain multiple elements and in accordance with
these agreements, the Company may be eligible for upfront license fees, marketing or commercial milestones and
payment for product deliveries.

Revenue from product deliveries

The Company recognizes revenue from the delivery of its products when delivery has occurred, title has

transferred, the selling price is fixed or determinable, collectability is reasonably assured and the Company has

F-10

no further performance obligations. In addition, revenue is only recognized when the right of return no longer
exists (which is the earlier of the product being dispensed through patient prescriptions or the expiration of the
right of return) or when product returns can be reasonably estimated. Due to the Company’s ability to reasonably
estimate and determine allowances for product returns, rebates and discounts based on its own internal data for
DUEXIS and RAYOS or data relating to prior sales of VIMOVO and ACTIMMUNE received in connection
with the acquisition of those products, the Company recognizes revenue at the point of sale to wholesale
pharmaceutical distributors and retail chains for all currently distributed products.

Revenue from upfront license fees

The Company recognizes revenues from the receipt of non-refundable, upfront license fees. In situations
where the licensee is able to obtain stand-alone value from the license and no further performance obligations
exist on the Company’s part, revenues are recognized on the earlier of when payments are received or collection
is reasonably assured. Where continuing involvement by the Company is required in the form of technology
transfer, product manufacturing or technical support, revenues are deferred and recognized over the term of the
agreement.

Revenue from milestone receipts

Milestone payments are recognized as revenue based on achievement of the associated milestones, as
defined in the relevant agreements. Revenue from a milestone achievement is recognized when earned, as
evidenced by acknowledgment from the Company’s partner, provided that (1) the milestone event is substantive
and its achievability was not reasonably assured at the inception of the agreement, (2) the milestone represents
the culmination of an earnings process and (3) the milestone payment is non-refundable. If any of these criteria
are not met, revenue from the milestone achievement is recognized over the remaining minimum period of the
Company’s performance obligations under the agreement.

The Company anticipates revenues will continue to result from distribution, marketing, manufacturing and

supply agreements with third parties in Europe and certain Asian, Latin American and other countries with
respect to LODOTRA.

Under the manufacturing and supply agreements with Mundipharma Medical Company (“Mundipharma

Medical”), Mundipharma Medical agreed to purchase LODOTRA exclusively from the Company at a price
based on a specified percentage of the average net selling price (“ANSP”) for sales in a given country, subject to
a minimum price. Mundipharma Medical has a nine-month period from purchase date to request an ANSP
adjustment. If the ANSP is lower than the actual purchase price, then Mundipharma Medical would receive a
price adjustment. Revenue for products sold to Mundipharma Medical is recognized upon delivery at the
minimum price, as no contractual right of return exists. The difference between the actual selling price and the
minimum price is recorded as deferred revenue until such time as adjustments for product returns, rebates and
discounts can be reliably estimated or the nine-month ANSP adjustment period passes, at which time any
previously deferred revenue would be recognized as revenue. As of December 31, 2014 and 2013, deferred
revenues related to the sale of LODOTRA were $0.7 million and $0.6 million, respectively. Additionally, as of
December 31, 2014 and 2013, deferred revenues related to milestone and upfront payments received under
existing agreements were $7.1 million and $8.7 million, respectively.

Contractual Allowances

Product Sales Discounts and Allowances

The Company records allowances for product returns, rebates and discounts at the time of sale to wholesale
pharmaceutical distributors and national and regional retail chains. The Company is required to make significant
judgments and estimates in determining some of these allowances. If actual results differ from its estimates, the
Company will be required to make adjustments to these allowances in the future.

F-11

Product Launch Discounts

The Company has offered additional discounts to wholesale distributors for product purchased at the time of

product launch. The Company has recorded these discounts as an allowance against accounts receivable and a
reduction of revenue when orders were placed.

Customer Rebates

The Company participates in certain commercial rebate programs. Under these rebate programs, the

Company pays a rebate to the commercial entity or third-party administrator of the program. The Company
accrues estimated rebates based on contract prices, estimated percentages of product sold to qualified patients
and estimated levels of inventory in the distribution channel and records the rebate as a reduction of revenue.

Distribution Service Fees

The Company includes distribution service fees paid to its wholesalers for distribution and inventory
management services as a reduction to revenue. The Company accrues estimated fees based on contractually
determined amounts, typically as a percentage of revenue, as a reduction of revenue.

Co-Pay Assistance

The Company offers discount card and other programs such as our PME program 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, the Company will pay for the full cost of the prescription. The Company
reimburses pharmacies for this discount through third-party vendors. The Company accrues estimated costs for
co-pay assistance based on contract prices, estimated percentages of product sold to qualified patients and
estimated levels of inventory in the distribution channel and records the rebate as a reduction of revenue. The
Company records the total amount of estimated costs for co-pay assistance for sales recorded in the period as a
reduction of revenue.

Sales Returns

Consistent with industry practice, the Company maintains a return policy that allows customers to return

product within a specified period prior to and subsequent to the product expiration date. Generally, product may
be returned for a period beginning six months prior to its expiration date and up to one year after its expiration
date. The right of return expires on the earlier of one year after the product expiration date or the time that the
product is dispensed to the patient. The majority of product returns result from product dating, which falls within
the range set by the Company’s policy, and are settled through the issuance of a credit to the customer. The
estimate of the provision for returns is based upon the Company’s historical experience with actual returns,
which is applied to the level of sales for the period that corresponds to the period during which the customer may
return product. This period is known to the Company based on the shelf life of products at the time of shipment.
The Company records sales returns as an allowance against accounts receivable and a reduction of revenue.

Prompt Pay Discounts

As an incentive for prompt payment, the Company offers a 2% cash discount to customers. The Company

expects that all customers will comply with the contractual terms to earn the discount. The Company records the
discount as an allowance against accounts receivable and a reduction of revenue.

F-12

Government Rebates and Chargebacks

Government Rebates

The Company participates in certain federal government rebate programs, such as Medicare and Medicaid.

The Company accrues estimated rebates based on percentages of product sold to qualified patients, estimated
rebate percentages and estimated levels of inventory in the distribution channel that will be sold to qualified
patients and records the rebates as a reduction of revenue.

Government Chargebacks

The Company provides discounts to federal government qualified entities with whom the Company has

contracted. These federal entities purchase products from the wholesale pharmaceutical distributors at a
discounted price, and the wholesale pharmaceutical distributors then charge back to the Company the difference
between the current retail price and the contracted price that the federal entities paid for the products. The
Company accrues estimated chargebacks based on contract prices and sell-through sales data obtained from third
party information and records the chargeback as a reduction of revenue.

Bad Debt Expense

The Company’s products are sold to wholesale pharmaceutical distributors and retail chains. The Company
monitors its accounts receivable balances to determine the impact, if any, of such factors as changes in customer
concentration, credit risk and the realizability of its accounts receivable, and records a bad debt reserve when
applicable. The Company had established an immaterial reserve for bad debt expense for the year ended
December 31, 2014. For the years ended December 31, 2013 and 2012, the Company did not record a bad debt
expense related to its accounts receivable balances.

Cost of Goods Sold

The Company recognizes cost of goods sold in connection with its sale of ACTIMMUNE, DUEXIS,

RAYOS/LODOTRA and VIMOVO.

Cost of goods sold for ACTIMMUNE includes all costs directly related to the acquisition of ACTIMMUNE

from the Company’s third party manufacturer, including freight charges and other direct expenses such as
insurance and amortization of intellectual property, royalty accretion expense and any changes in estimate
associated with the contingent royalty liability as described in the accrued contingent royalty accounting policy
below.

Cost of goods sold for DUEXIS includes all costs directly related to the purchase of product from the

Company’s third party manufacturers, including freight charges and costs of distribution service fees.

Cost of goods sold for LODOTRA includes raw material costs, costs associated with third parties who
manufacture LODOTRA for the Company, supply chain costs, manufacturing overhead costs, amortization of
developed technology, royalty payments to third parties for the use of certain licensed patents and applicable
taxes.

Cost of goods sold for RAYOS includes all costs directly related to the purchase of product from the

Company’s third party manufacturers, including freight charges, amortization of developed technology and
royalty payments to third parties for the use of certain licensed patents and applicable taxes.

F-13

Until the Company began recognizing revenue at the point of sale of DUEXIS to the wholesalers in the
fourth quarter of 2012, it also deferred the related DUEXIS cost of goods sold and recorded such amounts as
other current assets until revenue was recognized

Inventories

Inventories are stated at the lower of cost or market value, using the first-in, first-out convention.
Inventories consist of raw materials, work-in-process and finished goods. The Company has entered into
manufacturing and supply agreements for the manufacture or purchase of raw materials and production supplies.
The Company’s inventories include the direct purchase cost of materials and supplies and manufacturing
overhead costs. As of December 31, 2014 and 2013, the Company had inventories of $16.9 million and
$8.7 million, respectively.

Inventories exclude product sample inventory, which is included in other current assets and is expensed as a

component of sales and marketing expense when provided to physicians or healthcare providers. As of
December 31, 2014 and 2013, the Company had product sample inventory of $4.0 million and $1.3 million,
respectively.

Preclinical Studies and Clinical Trial Accruals

The Company’s preclinical studies and clinical trials have historically been conducted by third-party
contract research organizations and other vendors. Preclinical study and clinical trial expenses are based on the
services received from these contract research organizations and vendors. Payments depend on factors such as
the milestones accomplished, successful enrollment of certain numbers of patients and site initiation. In accruing
service fees, the Company estimates the time period over which services will be performed and the level of effort
to be expended in each period. If the actual timing of the performance of services or the level of effort varies
from the estimate, the Company adjusts the accrual accordingly. To date, the Company has had no significant
adjustments to accrued clinical expenses.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of ordinary shares
outstanding during the period. For the periods presented, the Company’s potential dilutive shares, which include
shares issuable upon the exercise of outstanding stock options, unvested restricted stock units, warrants to
purchase ordinary shares and ordinary shares associated with the potential conversion of the Company’s 5.00%
Convertible Senior Notes due 2018 (“Convertible Senior Notes”) have not been included in the computation of
diluted net loss per share for the periods presented in which there is a net loss as the result would be anti-dilutive.
Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share.

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of cash balances and money market funds. Cash and cash

equivalents were $218.8 million and $80.5 million as of December 31, 2014 and 2013, respectively. The
Company’s policy is to invest excess cash in money market funds, which are generally of a short-term duration
based upon operating requirements.

Restricted Cash

Restricted cash consists of balances included in interest-bearing money market accounts required by a
vendor for the Company’s sponsored employee credit card program and by the lessor for the Company’s office in
Deerfield, Illinois. As of each of December 31, 2014 and 2013, the Company had restricted cash of $0.7 million.

F-14

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents,

restricted cash, accounts receivable, accounts payable and accrued expenses, approximate their fair values due to
their short maturities.

At December 31, 2013 and at the final measurement date of June 27, 2014, the estimated fair value of the

Company’s derivative liability related to the convertible portion of the Convertible Senior Notes was derived
utilizing the binomial lattice approach for the valuation of convertible instruments. Assumptions used in the
calculation included, among others, determining the appropriate credit spread using benchmarking analysis and
solving for the implied credit spread, calculating the fair value of the stock component using a discounted risk
free rate and borrowing cost and calculating the fair value of the note component using a discounted credit
adjusted discount rate. Based on the assumptions used to determine the fair value of the derivative liability
associated with the Convertible Senior Notes, the Company concluded that these inputs were Level 3 inputs.

Business Combinations

The Company accounts for business combinations in accordance with the pronouncement guidance in
ASC 805, Business Combinations, in which acquired assets and liabilities are measured at their respective
estimated fair values as of the acquisition date. The Company may be required, as in the case of intangible assets,
contingent royalties or derivatives, to determine the fair value associated with these amounts by estimating the
fair value using an income approach under the discounted cash flow method, which may include revenue
projections and other assumptions made by the Company to determine the fair value.

Property and Equipment, Net

Property and equipment 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:

Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade show equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5-7 years
3-5 years
3 years
3 years
3 years

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.

Intangible Assets

Definite-lived intangible assets are amortized over their estimated useful lives. The Company reviews its

intangible assets when events or circumstances may indicate that the carrying value of these assets exceeds their
fair value. The Company measures fair value based on the estimated future discounted cash flows associated with

F-15

these assets in addition to other assumptions and projections that the Company deems to be reasonable and
supportable. The estimated useful lives for all identified intangible assets that are subject to amortization are as
follows:

Intangible Asset

Estimated Useful Life

ACTIMMUNE developed technology . . . . . . . . . . . . . . . . . .
LODOTRA and RAYOS developed technology . . . . . . . . . . .
PENNSAID 2% developed technology . . . . . . . . . . . . . . . . . .
VIMOVO intellectual property . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13 years
12 years
6 years
5 years
10 years

Indefinite-lived intangible assets consist of capitalized in-process research and development (“IPR&D”).
IPR&D assets represent capitalized incomplete research projects that the Company acquired through business
combinations. Such assets are initially measured at their acquisition date fair values and are tested for
impairment, until completion or abandonment of R&D efforts associated with the projects. An IPR&D asset is
considered abandoned when R&D efforts associated with the asset have ceased, and there are no plans to sell or
license the asset or derive value from the asset. At that point, the asset is considered to be disposed of and is
written off. Upon successful completion of each project, the Company will make a determination about the then-
remaining useful life of the intangible asset and begin amortization. The Company tests its indefinite-lived
intangibles, including IPR&D assets, for impairment annually and more frequently if events or changes in
circumstances indicate that it is more likely than not that the asset is impaired.

Research and Development Expenses

Research and development expenses include, but are not limited to, payroll and other personnel expenses,
consultant expenses, expenses incurred under agreements with contract research organizations to conduct clinical
trials and expenses incurred to manufacture clinical trial materials.

Sales and Marketing Expenses

Sales and marketing expenses consist principally of payroll of sales representatives and marketing and

support staff, travel and other personnel-related expenses, marketing materials and distributed sample
inventories. In addition, sales and marketing expenses include the Company’s medical affairs expenses, which
consist of expenses related to scientific publications, health outcomes, biostatistics, medical education and
information, and medical communications.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that may potentially subject the Company to significant concentrations of credit risk

consist of cash and cash equivalents. The Company’s cash and cash equivalents are invested in deposits with
various banks in the United States, Ireland, Bermuda, Switzerland and Germany that management believes are
creditworthy. At times, deposits in these banks may exceed the amount of insurance provided on such deposits.
To date, the Company has not experienced any losses on its deposits of cash and cash equivalents.

The purchase cost of ACTIMMUNE under a contract with Boehringer Ingelheim as well as sales contracts
relating to LODOTRA are principally denominated in Euros and are subject to significant foreign currency risk.
The Company also incurs certain operating expenses in currencies other than the U.S. dollar in relation to its
Ireland operations and other foreign subsidiaries, including Horizon Pharma AG; therefore, the Company is
subject to volatility in cash flows due to fluctuations in foreign currency exchange rates, particularly changes in
the Euro. To date, the Company has not entered into any hedging contracts since exchange rate fluctuations have
had minimal impact on its results of operations and cash flows.

F-16

To achieve profitable operations, the Company must successfully develop, obtain regulatory approval for,

manufacture and market its products and product candidates, and/or acquire or in-license products from third
parties. There can be no assurance that any additional products can be developed, will be approved for marketing
by the regulatory authorities, or can be manufactured at an acceptable cost and with appropriate performance
characteristics or that any new or existing products can be successfully marketed, acquired or in-licensed by the
Company. These factors could have a material adverse effect on the Company’s operations.

The Company relies on third parties to manufacture its commercial supplies of ACTIMMUNE, DUEXIS,
PENNSAID 2%, RAYOS/LODOTRA, and VIMOVO. The commercialization of any of its products or product
candidates could be stopped, delayed or made less profitable if those third parties fail to provide the Company
with sufficient quantities of product or fail to do so at acceptable quality levels or prices.

The Company is required to maintain compliance with applicable Swiss laws with respect to its Swiss
subsidiary, Horizon Pharma AG, including laws requiring maintenance of equity in the subsidiary to avoid
overindebtedness, which requires Horizon Pharma AG to maintain assets in excess of its liabilities. The
Company reviews on a regular basis whether its Swiss subsidiary is overindebted. As of December 31, 2014,
Horizon Pharma AG was not overindebted. However, Horizon Pharma AG has previously been overindebted,
including at December 31, 2013, primarily as a result of operating losses at the subsidiary. The Company will
continue to monitor and review Horizon Pharma AG’s financial position and, as necessary, will address any
overindebtedness until such time as Horizon Pharma AG generates positive income at a statutory level, which
could require the Company to have cash at Horizon Pharma AG in excess of its near-term operating needs and
could affect the Company’s ability to have sufficient cash at its other operating subsidiaries to meet its near-term
operating needs. As of December 31, 2014 and 2013, Horizon Pharma AG had cash and cash equivalents of
$3.0 million and $3.5 million, respectively. Based upon the cash and cash equivalents held by Horizon Pharma
AG as of December 31, 2014 and 2013, the Company does not expect that its financial position or results of
operations will be materially affected by any need to address overindebtedness at Horizon Pharma AG. To date,
the overindebtedness of Horizon Pharma AG has not resulted in the need to divert material cash resources from
the Company’s other operating subsidiaries.

Historically, the Company’s 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
products to pharmacies, hospitals and other customers. For the year ended December 31, 2014, the Company’s
top five customers, American Specialty Pharmacy, Inc., AmerisourceBergen, Cardinal Health, Inc., McKesson
Corporation and Rochester Drug Company accounted for approximately 86% of total consolidated gross sales.
For the year ended December 31, 2013, the Company’s top five customers, AmerisourceBergen, Cardinal Health,
Inc., McKesson Corporation, Mundipharma and Rochester Drug Company, accounted for approximately 89% of
total consolidated gross sales.

In addition, five customers, American Specialty Pharmacy, Inc., AmerisourceBergen, Cardinal Health, Inc.,

McKesson Corporation and Rochester Drug accounted for approximately 80% of the Company’s total
outstanding accounts receivable balances at December 31, 2014. As of December 31, 2013, AmerisourceBergen,
Cardinal Health, Inc., Halsted Pharmacy, McKesson Corporation and Rochester Drug Company, accounted for
approximately 85% of the Company’s total outstanding accounts receivable balances.

Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss)

(“OCI”). OCI includes certain changes in shareholders’ equity that are excluded from net income (loss), which
consist of foreign currency translation adjustments. In February 2013, the Company adopted on a prospective
basis Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2013-02, Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02
requires an entity to report the effect of significant reclassifications out of accumulated OCI on the respective

F-17

line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety
to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net
income in the same reporting period, an entity is required to cross-reference other disclosures required under
GAAP that provide additional detail about those amounts. As of December 31, 2014 and 2013, accumulated
other comprehensive loss was $4.4 million and $2.4 million, respectively.

Stock-Based Compensation

The Company accounts for stock-based compensation using the fair value method. The fair value of awards

granted is estimated at the date of grant and recognized as expense on a straight-line basis over the requisite
service period with the offsetting credit to additional paid-in capital. For awards with service and/or performance
conditions, the total amount of compensation expense to be recognized is based on the number of awards
expected to vest and is adjusted to reflect those awards that do ultimately vest. For awards with performance
conditions, the Company recognizes the compensation expense if and when the Company concludes that it is
probable that the performance condition will be achieved. The Company reassesses the probability of achieving
the performance condition at each reporting date.

The Company also accounts for stock options issued to non-employees based on the stock options’

estimated fair value. The fair value of equity awards granted to non-employees are re-measured at each reporting
date, and the resulting change in the fair value associated with such awards, if any, is recognized as a
corresponding increase or reduction to stock-based compensation during the period.

Accrued Contingent Royalties

The Company’s accrued contingent royalties consist of the contingent royalty obligations assumed by the
Company related to the Company’s acquisitions of the U.S. rights to VIMOVO and related to ACTIMMUNE. At
the time of each acquisition, the Company assigned an estimated fair value to its contingent liability for royalties.
The estimated royalty liability was based on anticipated revenue streams utilizing the income approach under the
discounted cash flow method. The estimated liability for royalties is increased over time to reflect the change in
its present value and accretion expense is recorded as part of cost of goods sold. The Company evaluates the
adequacy of the estimated contingent royalty liability at least annually, or whenever events or changes in
circumstances indicate that an evaluation of the estimate is necessary. As part of any evaluation, the Company
adjusts the carrying value of the liability to the present value of the revised estimated cash flows using the
original discount rate. Any decrease or increase to the liability is recorded as an increase or reduction in cost of
goods sold. The royalty liability is included in current and long-term accrued royalties on the consolidated
balance sheets.

New Accounting Pronouncements

From time to time, the Company adopts, as of the specified effective date, new accounting pronouncements
issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the
impact of recently issued standards that are not yet effective will not have a material impact on the Company’s
financial position or results of operations upon adoption.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going
Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern. ASU No. 2014-15 is intended to define management’s responsibility to evaluate whether there is
substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote
disclosures. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant
conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to
meet its obligations as they become due within one year after the date that the financial statements are issued (or
available to be issued). ASU No. 2014-15 provides guidance to an organization’s management, with principles
and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly

F-18

provided by organizations in the financial statement footnotes. ASU No. 2014-15 is effective for annual reporting
periods ending after December 15, 2016 and to annual and interim periods thereafter. Early adoption is
permitted. The Company is currently in the process of evaluating the impact of adoption of ASU No. 2014-15 to
its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606):

Revenue from Contracts with Customers, which supersedes all existing revenue recognition requirements,
including most industry-specific guidance. The new standard requires a company to recognize revenue when it
transfers goods or services to customers in an amount that reflects the consideration that the company expects to
receive for those goods or services. The new standard will be effective for the Company on January 1, 2017 and
early adoption is not permitted. The new standard permits the use of either the retrospective or cumulative effect
transition method on adoption. The Company is evaluating the effect that ASU 2014-09 will have on its
consolidated financial statements and related disclosures, including which transition method it will adopt.

In November 2014, the FASB issued ASU No. 2014-16, Derivatives and Hedging (Topic 815): Determining
Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt
or to Equity. ASU No. 2014-16 clarifies how current guidance should be interpreted in evaluating the economic
characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. In
addition, ASU No. 2014-16 clarifies that in evaluating the nature of a host contract, an entity should assess the
substance of the relevant terms and features (that is, the relative strength of the debt-like or equity-like terms and
features given the facts and circumstances) when considering how to weight those terms and features. The effects
of initially adopting ASU No. 2014-16 should be applied on a modified retrospective basis to existing hybrid
financial instruments issued in a form of a share as of the beginning of the fiscal year for which the amendments
are effective. Retrospective application is permitted to all relevant prior periods. ASU No. 2014-16 is effective
for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption
is permitted. The Company is evaluating the impact of adoption of ASU No. 2014-16 on our consolidated
financial statements and related disclosures.

NOTE 3 – EARNINGS (LOSS) PER SHARE

The following table presents basic and diluted loss per share for the years ended December 31, 2014, 2013

and 2012 as follows (in thousands, except share and per share data):

For the Years Ended December 31,

2014

2013

2012

Basic and diluted earnings per share calculation:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average of common shares outstanding . . . . . . . . . . . . . . .

$ (263,603) $ (149,005) $
83,751,129

63,657,924

(87,794)
38,871,422

Basic and diluted net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . .

(3.15) $

(2.34) $

(2.26)

The following outstanding securities in the table below were excluded from the computation of diluted loss

per share for the years ended December 31, 2014, 2013 and 2012 due to being potentially anti-dilutive:

For the Years Ended December 31,

2014

2013

2012

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units . . . . . . . . . . . . . . . . . . . . .
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible Senior Notes . . . . . . . . . . . . . . . . . .

7,027,683
1,618,502
6,683,811
11,369,398

4,411,080
934,005
16,114,746
13,164,951

2,746,918
457,158
17,480,243
—

F-19

NOTE 4 – BUSINESS ACQUISITIONS

PENNSAID 2% acquisition

On October 17, 2014, the Company acquired the U.S. rights to PENNSAID 2% from Nuvo for $45.0 million

in cash. PENNSAID 2% is approved in the United States for the treatment of the pain of OA of the knee(s). The
Company began marketing PENNSAID 2% in January 2015, and as such no sales or cost of goods sold were
recognized in 2014.

As part of the acquisition, the Company entered into an eight-year exclusive supply agreement with Nuvo to

manufacture and supply PENNSAID 2% to the Company. The initial term of the supply agreement is through
December 31, 2022, 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.

Pursuant to ASC Topic 805, Business Combinations, the Company accounted for the acquisition of the U.S.

rights to PENNSAID 2% under the acquisition method of accounting, in which the Company recognized and
accounted for the acquisition of the U.S. rights to PENNSAID 2% as a business combination. Using this
methodology, the Company allocated the entire purchase price of $45.0 million to a developed technology
intangible asset.

The valuation of the developed technology intangible asset was based on management’s estimates,

forecasted financial information and reasonable and supportable assumptions. The allocation was generally based
on the Company’s estimated fair value of the rights to payments with respect to U.S. revenue associated with
PENNSAID 2% which were acquired in the transaction. This estimated fair value was determined using the
income approach under the discounted cash flow method. Significant assumptions used in valuing the developed
technology intangible asset included revenue projections through 2021 based on assumptions relating to pricing
and reimbursement rates, market size and market penetration rates and cost of goods sold based on current
manufacturing experience, general and administrative expenses, sales and marketing expenses, and research and
development expenses for clinical and regulatory support. The calculated value of the PENNSAID 2% developed
technology intangible asset is amortized using the straight-line method over an estimated useful life of 6 years,
which is the period in which the majority of the benefits from such developed technology will be recognized.

Vidara acquisition

On March 18, 2014, the Company, Vidara Holdings, Vidara, U.S. HoldCo and Merger Sub, entered into the
Merger Agreement. The Merger Agreement provided for the merger of Merger Sub with and into HPI, with HPI
continuing as the surviving corporation and as a wholly-owned, indirect subsidiary of Vidara, with Vidara
converting to a public limited company and changing its name to Horizon Pharma plc.

At the effective time of the Merger on September 19, 2014 (the “Effective Time”), (i) each share of HPI’s
common stock issued and outstanding was converted into one ordinary share of New Horizon; (ii) each equity
plan of HPI was assumed by New Horizon and each outstanding option under HPI’s equity plans was converted
into an option to acquire the number of ordinary shares of New Horizon equal to the number of common stock
underlying such option immediately prior to the Effective Time at the same exercise price per share as such
option of HPI, and each other stock award that was outstanding under HPI’s equity plans was converted into a
right to receive, on substantially the same terms and conditions as were applicable to such equity award before
the Effective Time, the number of ordinary shares of New Horizon equal to the number of shares of HPI’s
common stock subject to such stock award immediately prior to the Effective Time; (iii) each warrant to acquire
HPI’s common stock outstanding immediately prior to the Effective Time and not terminated as of the Effective
Time was converted into a warrant to acquire, on substantially the same terms and conditions as were applicable
under such warrant before the Effective Time, the number of ordinary shares of New Horizon equal to the
number of shares of HPI’s common stock underlying such warrant immediately prior to the Effective Time; and

F-20

(iv) the Convertible Senior Notes of HPI remained outstanding and, pursuant to a supplemental indenture entered
into effective as of the Effective Time, have become convertible into the same number of ordinary shares of New
Horizon at the same conversion rate in effect immediately prior to the Effective Time. Vidara Holdings retained
ownership of 31,350,000 ordinary shares of New Horizon at the Effective Time. Upon consummation of the
Merger (the “Closing”), the security holders of HPI (excluding the holders of HPI’s Convertible Senior Notes)
owned approximately 74% of New Horizon and Vidara Holdings owned approximately 26% of New Horizon. At
the Closing, New Horizon made a cash payment of $210.9 million to Vidara Holdings and $2.7 million to
Citibank N.A. as escrow agent under an escrow agreement associated with the Merger.

The total consideration for the acquisition of Vidara was $601.4 million representing the $387.8 million

market value of the 31,350,000 New Horizon ordinary shares that were held by prior Vidara shareholders
immediately following the closing of the Merger plus the cash consideration of $213.6 million. The value of the
New Horizon ordinary shares of $387.8 million is based on the September 18, 2014 closing stock price of HPI
common stock of $12.37, the last closing price prior to the effective time of the Merger.

Pursuant to ASC Topic 805, Business Combinations, the Company accounted for the Merger as a reverse

acquisition, under the acquisition method of accounting, with HPI treated as the acquiring company for
accounting purposes. Identifiable assets and liabilities of Vidara, including identifiable intangible assets, were
recorded based on their estimated fair values as of the date of the closing of the Merger. The excess of the fair
value of the net assets acquired over the value of consideration was recorded as a bargain purchase gain. The
following table summarizes the preliminary fair values assigned to the assets acquired and the liabilities assumed
by the Company pursuant to the Merger, along with the resulting bargain purchase gain (in thousands):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivable—net working capital adjustment
. . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development
. . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . .
Contingent royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocation

$ 34,401
11,838
15,422
195
138
289
2,907
8,100
66,000
560,000
(1,781)
(32,372)
(33,600)
(775)
(7,170)
(22,171)

Fair value of consideration paid . . . . . . . . . . . . . . . . . . . . . . .

$601,421

The fair value of the developed technology, IPR&D, customer relationships and contingent royalties, along
with any associated deferred tax assets or liabilities, are pending final valuations being performed with assistance
by an independent appraisal firm.

Inventories acquired included raw materials and finished goods. 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. Fair value
of raw materials has been estimated to equal the replacement cost. A step up in the value of inventory of $14.2
million was recorded in connection with the Merger. As of December 31, 2014, the remaining balance of
ACTIMMUNE inventory step-up was $3.2 million.

F-21

Other tangible assets and liabilities were valued at their respective carrying amounts as management

believes that these amounts approximate their current fair values.

Identifiable intangible assets and liabilities acquired included developed technology, in-process research and
development and customer relationships. The fair value of intangible assets is based on management’s estimates,
forecasted financial information and reasonable and supportable assumptions. Estimated useful lives are based on
the time periods during which the intangibles are expected to result in incremental cash flows.

Developed technology intangible assets reflect the estimated value of Vidara’s rights to the marketed
ACTIMMUNE product as of the acquisition date. 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 sales projections and
estimated direct costs for ACTIMMUNE. Indications of value are developed by discounting these benefits to
their present value at a discount rate of 15% that reflects the return requirements of the market. The fair value of
developed technology was recorded as an intangible asset as of the acquisition date and subsequently amortized
over an estimated remaining life of 13 years.

IPR&D is related to one R&D project for the application of ACTIMMUNE in the treatment of FA, that was

incomplete at the time of the Merger. IPR&D is considered separable from the business as the project could be
sold to a third party. The fair value of IPR&D 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 sales projections and estimated direct costs. Indications of
value are developed by discounting these benefits to their present value at a discount rate of 33% that reflects the
return requirements of the market. The fair value of the IPR&D was recorded as an indefinite-lived intangible
asset and will be tested for impairment until completion or abandonment of R&D efforts associated with the
project. In February 2015, the Company submitted an IND application for a Phase 3 study that will evaluate
ACTIMMUNE in the treatment of FA and the Company plans to begin the Phase 3 study in the second quarter of
2015 in collaboration with the Friedreich’s Ataxia Research Alliance and the investigators and clinics of
Friedreich’s Ataxia Research Alliance’s Collaborative Clinical Research Network in FA.

Customer relationships intangible assets reflect the estimated value of Vidara’s customer base for

ACTIMMUNE. Vidara’s customers as of the acquisition date were predominantly a small group of retail
pharmacies with demand for ACTIMMUNE. As such, a significant portion of revenue growth is expected to be
generated from existing customers as of the acquisition date. Management assessed the historical customer trends
to identify the anticipated attrition. The fair value of customer relationships was recorded as an intangible asset as
of the acquisition date and subsequently amortized over an estimated remaining life of 10 years.

The Company has assigned a fair value to a contingent liability for royalties potentially payable under
previously existing royalty and licensing agreements related to ACTIMMUNE. The royalties are payable under
the terms of the license agreement with Genentech Inc., which was the original developer of ACTIMMUNE and
under the terms of its agreement with Connetics Corporation (which was the predecessor parent company to
InterMune and is now part of GlaxoSmithKline). See footnote 14 for details of the percentages payable under
both license agreements. The initial fair value of this liability of $33.6 million was determined using a discounted
cash flow analysis incorporating the estimated future cash flows of royalty payments resulting from future sales.
The discount rates used were the same as for the fair value of the intangible assets. The estimated liability for
royalties will be increased over time to reflect the change in its present value and accretion expense will be
recorded as part of cost of goods sold. The estimated liability will be periodically assessed based on events and
circumstances and any change will be recorded in New Horizon’s consolidated statement of operations. During
the fourth quarter of 2014, as the result of a price increase for ACTIMMUNE approved to take effect on
January 1, 2015, the Company reassessed the value of the estimated royalty liability and recorded a charge of
$1.3 million to cost of goods sold to increase the carrying value of the contingent royalties to reflect the updated
estimates.

F-22

Deferred tax assets and liabilities arise from acquisition accounting 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 (United States or Bermuda). Customer relationships intangible
assets are located in the United States where a U.S. tax rate of 39% is being utilized and a deferred tax liability is
recorded. Developed technology and IPR&D assets are located in Bermuda which does not levy corporate
income taxes; accordingly, no deferred tax liabilities were recorded related to these intangible assets.

The excess of the estimated fair values of net assets acquired over the acquisition consideration paid has
been recorded as a bargain purchase gain in the condensed consolidated statement of comprehensive income. As
previously stated, the total consideration included a fixed number of New Horizon ordinary shares. The bargain
purchase gain of $22.2 million is primarily the result of the decrease in the market value of our ordinary shares
from the time that the Merger Agreement was signed to the Effective Time of the Merger.

For the year ended December 31, 2014, the Company recognized $25.3 million of ACTIMMUNE net sales.

VIMOVO acquisition

On November 18, 2013, the Company entered into agreements with AstraZeneca and Pozen pursuant to

which the Company acquired from AstraZeneca and its affiliates certain intellectual property and other assets,
and assumed from AstraZeneca and its affiliates certain liabilities, each with respect to VIMOVO, and obtained
rights to develop other pharmaceutical products that contain gastroprotective agents in a single fixed combination
oral solid dosage form with NSAIDs, in the United States. VIMOVO, a proprietary fixed-dose multi-layer
delayed-release tablet combining an enteric-coated naproxen, an NSAID, core and an immediate-release
esomeprazole, a proton pump inhibitor, layer surrounding the core, was approved by the FDA in 2010 for the
relief of the signs and symptoms of OA, RA and AS, and to decrease the risk of developing gastric ulcers in
patients at risk of developing NSAID-associated gastric ulcers.

Pursuant to the transactions contemplated by the asset purchase agreement, the Company acquired certain

existing assets and rights necessary to commercialize VIMOVO in the United States including, among other
things, the IND and NDA for VIMOVO in the United States, AstraZeneca’s interest in certain patents covering
VIMOVO in the United States and certain promotional materials and records related to VIMOVO in the
United States. In consideration for the U.S. rights to VIMOVO, the Company paid to AstraZeneca a one-time
upfront cash payment of $35.0 million. The Company is also entitled to the benefit of a covenant not to sue
granted by Merck Sharp & Dohme Corp. and certain of its affiliates (collectively, “Merck”) to AstraZeneca, with
respect to certain patents owned by AstraZeneca but exclusively licensed to Merck, that cover the manufacture
and commercialization of VIMOVO in the United States. In addition, AstraZeneca assigned to the Company its
amended and restated collaboration and license agreement for the United States with Pozen pursuant to which
AstraZeneca has in-licensed from Pozen certain patents and know-how of Pozen covering VIMOVO in the
United States. The terms of the amended and restated collaboration and license agreement for the United States
with Pozen (the “Pozen license agreement”) are described below.

In November 2013, in connection with the closing of the transactions contemplated by the asset purchase

agreement, the Company also entered into a license agreement with AstraZeneca, a supply agreement with
AstraZeneca’s affiliate, AstraZeneca LP, and certain other agreements that are described below. The Company
also executed a transition agreement with AstraZeneca pursuant to which AstraZeneca transitioned to the
Company regulatory and commercial responsibility for VIMOVO in the United States. From the closing of the
transaction until December 31, 2013, AstraZeneca continued to commercialize VIMOVO in the United States
under AstraZeneca’s existing pricing and paid to the Company the net profits recognized on sales of VIMOVO in
the United States. Beginning January 2, 2014, the Company commenced commercialization of VIMOVO in the
United States on its own behalf and under new pricing for VIMOVO. The Company is responsible for and
controls matters relating to VIMOVO in the United States, including responsibility for commercialization of

F-23

VIMOVO in the United States, responsibility for ongoing developmental and regulatory activities with respect to
VIMOVO in the United States and responsibility for the current VIMOVO litigation with respect to the patents
the Company purchased under the asset purchase agreement and the patents the Company licensed from Pozen
under the Pozen license agreement. AstraZeneca is responsible for and retains control of VIMOVO outside the
United States.

In connection with the closing of the transactions contemplated by the asset purchase agreement, the
Company entered into a license agreement with AstraZeneca (the “AstraZeneca license agreement”), pursuant to
which AstraZeneca granted the Company an exclusive license under certain intellectual property (including
patents, know-how, trademarks, copyrights and domain names) of AstraZeneca and its affiliates to develop,
manufacture and commercialize VIMOVO in the United States. AstraZeneca also granted the Company a non-
exclusive license under certain intellectual property of AstraZeneca and its affiliates to manufacture, import,
export and perform research and development activities with respect to VIMOVO outside the United States but
solely for purposes of commercializing VIMOVO in the United States. In addition, AstraZeneca granted the
Company a non-exclusive right of reference and use under certain regulatory documentation controlled by
AstraZeneca and its affiliates to develop, manufacture and commercialize VIMOVO in the United States and to
manufacture, import, export and perform research and development activities with respect to VIMOVO outside
the United States but solely for purposes of commercializing VIMOVO in the United States.

Under the AstraZeneca license agreement, the Company granted AstraZeneca a non-exclusive sublicense

under such licensed intellectual property and a non-exclusive right of reference under certain regulatory
documentation controlled by the Company to manufacture, import, export and perform research and development
activities with respect to VIMOVO in the United States but solely for purposes of commercializing VIMOVO
outside the United States.

Under the AstraZeneca license agreement, the Company and its affiliates are subject to certain limitations
and restrictions on its ability to develop, commercialize and seek regulatory approval with respect to VIMOVO
or other products that contain gastroprotective agents in a single fixed combination oral solid dosage form with
NSAIDs (excluding DUEXIS). These limitations and restrictions include, among other things, restrictions on
indications for which the Company may commercialize VIMOVO or any such other products, restrictions on the
Company’s ability to develop or seek regulatory approval with respect to such other products that contain
esomeprazole, restrictions on the Company’s ability to develop or seek regulatory approval for VIMOVO for any
indications other than the indications for which NSAIDs are indicated, and restrictions on the Company’s
marketing activities with respect to VIMOVO and any such other products.

Under the Pozen license agreement, Pozen granted to the Company an exclusive, royalty-bearing license
under certain of Pozen’s intellectual property in the United States to manufacture, develop and commercialize
VIMOVO and other products controlled by the Company that contain gastroprotective agents in a single fixed
combination oral solid dosage form with NSAIDs (excluding DUEXIS) in the United States.

Under the Pozen license agreement, the Company is required to pay Pozen a flat 10% royalty on net sales of

VIMOVO and such other products sold by the Company, its affiliates or sublicensees during the royalty term,
subject to minimum annual royalty obligations of $5.0 million in 2014 and $7.5 million each year thereafter,
which minimum royalty obligations will continue for each year during which one of Pozen’s patents covers such
products in the United States and there are no competing products 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 products. The
Company’s obligation to pay royalties to Pozen will expire upon the later of (a) expiration of the last-to-expire of
certain patents covering such products in the United States, and (b) ten years after the first commercial sale of
such products in the United States. In addition, the Company is obligated to reimburse Pozen for costs, including
attorneys’ fees, incurred by Pozen in connection with VIMOVO patent litigation moving forward, subject to
agreed caps.

F-24

Under the Pozen license agreement, the Company is responsible for and is required to use diligent and
reasonable efforts to commercialize VIMOVO or another qualified product in the United States. The Company
also owns and maintains all regulatory filings and marketing approvals in the United States for any such
products, including all INDs and NDAs for VIMOVO. Pozen has covenanted that it will not at any time prior to
the expiration of the royalty term, and will ensure that its affiliates do not, directly or indirectly, develop or
commercialize or license any third party to develop or commercialize certain competing products in the
United States.

The Pozen license agreement, unless earlier terminated, will expire upon expiration of the royalty term for

all such products in the United States. Either party has the right to terminate the agreement upon any uncured
material breach by the other party or upon the bankruptcy or similar proceeding of the other party. The Company
also has the right to terminate the Pozen license agreement for cause upon certain defined product failures.

In November 2013, in connection with the asset purchase agreement, the Company, AstraZeneca and Pozen

entered into a letter agreement in which Pozen consented to AstraZeneca’s assignment of the Pozen license
agreement to the Company and that addresses the rights and responsibilities of the parties in relation to the Pozen
license agreement and the amended and restated collaboration and license agreement between Pozen and
AstraZeneca for territories outside the United States (the “Pozen-AstraZeneca license agreement”). Under the
letter agreement, the Company and AstraZeneca agreed to pay Pozen milestone payments upon the achievement
by the Company and AstraZeneca, collectively, of certain annual aggregate global sales thresholds ranging from
$550.0 million to $1.25 billion with respect to products licensed by Pozen to the Company under the Pozen
license agreement and to AstraZeneca under the Pozen-AstraZeneca license agreement. 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.

The letter agreement will terminate with respect to Pozen and the Company upon the termination of the
Pozen license agreement and will terminate with respect to Pozen and AstraZeneca upon the termination of the
Pozen-AstraZeneca license agreement.

In November 2013, in connection with the asset purchase agreement, the Company entered into a supply
agreement with AstraZeneca pursuant to which AstraZeneca agreed to supply VIMOVO to the Company for
commercialization in the United States through December 31, 2014. Under the supply agreement, AstraZeneca
supplied the quantity of VIMOVO that the Company ordered, both for the Company’s own use and for use by the
Company’s sublicensees, on a transitional basis through December 31, 2014. The Company agreed to pay a set
price agreed to by the Company and AstraZeneca for quantities of VIMOVO supplied by AstraZeneca under the
supply agreement.

The company accounted for the acquisition of the U.S. rights to VIMOVO under the acquisition method of
accounting, in which the Company recognized and accounted for the acquisition of the U.S. rights to VIMOVO
as a business combination. Net tangible and intangible assets acquired and royalty liabilities assumed were
recorded based upon their respective estimated fair values as of the acquisition date. The following table shows
the fair values assigned to the assets acquired and liabilities assumed by the Company as part of the asset
purchase agreement (in thousands):

Samples inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIMOVO intellectual property . . . . . . . . . . . . . . . . . . . . . . . .
Royalty liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Allocation

287
67,705
(32,992)

Total cash consideration paid . . . . . . . . . . . . . . . . . . . . . . . . .

$ 35,000

F-25

The valuation of the intellectual property acquired, an identifiable intangible asset, was based on management’s
estimates, forecasted financial information and reasonable and supportable assumptions. The allocation was
generally based on the Company’s estimated fair value of the rights to payments with respect to U.S. revenue
associated with VIMOVO which were acquired in the transaction. This estimated fair value was determined using
the income approach under the discounted cash flow method. Significant assumptions used in valuing the
intellectual property intangible asset included revenue projections through 2030 based on assumptions relating to
pricing and reimbursement rates and market size and market penetration rates, cost of goods sold based on current
manufacturing experience, general and administrative expenses, sales and marketing expenses, and research and
development expenses for clinical and regulatory support. The calculated value of the VIMOVO intellectual
property intangible asset is amortized using the straight-line method over an estimated useful life of 61.5 months.

Additionally, the Company assigned a fair value to its liability for royalties. The royalty liability was based

on anticipated revenue streams utilizing the income approach under the discounted cash flow method. As a result,
the Company recorded $33.0 million of fair value royalty payments due to Pozen, of which $24.5 million was
guaranteed during the years 2014 through 2018 and $8.5 million was contingent on meeting certain revenue
targets. The estimated liability for royalties is increased over time to reflect the change in its present value and
accretion expense is recorded as part of cost of goods sold. During the second quarter of 2014, based on higher
sales of VIMOVO during the six months June 30, 2014 versus the Company’s original expectations and the
Company’s adjusted expectations for future VIMOVO sales, the Company recorded a charge of $13.0 million to
cost of goods sold to increase the carrying value of the contingent royalties to reflect the updated estimates.
During the fourth quarter of 2014, after the Company’s most recent five year plan was approved, the Company
performed its annual assessment of the carrying value of the contingent royalty liability. The Company recorded
a $3.6 million credit to cost of goods sold to decrease the amount of the contingent royalty liability to reflect the
updated estimates. The effect of the reassessments during the second quarter and the fourth quarter of 2014 of the
fair value of the contingent royalty liability represented a net charge of $9.4 million during the year ended
December 31, 2014 to cost of goods sold to increase the amount of the contingent royalty liability.

Pro Forma Information

The following table represents the consolidated financial information for the Company on a pro forma basis,
assuming that both the Merger and the acquisition of the U.S. rights to VIMOVO occurred as of January 1, 2013.
The historical financial information has been adjusted to give effect to pro forma items that are directly
attributable to the Merger 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 unaudited 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, except per share data):

For the Years Ended December 31,

2014

Pro-forma
adjustments
(Unaudited)

As reported

Pro-forma
(Unaudited) As reported

2013

Pro-forma
adjustments
(Unaudited)

Pro-forma
(Unaudited)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . $ 296,955
(263,603)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Loss per ordinary share: Basic and

$50,565
(5,104)

$ 347,520 $ 74,016
(149,005)

(268,707)

$ 79,230
(23,647)

$ 153,246
(172,652)

diluted . . . . . . . . . . . . . . . . . . . . . . . . $

(3.15) $ (0.06) $

(3.21) $

(2.34) $

(0.37) $

(2.71)

F-26

The pro forma information excludes the PENNSAID 2% acquisition as it was impracticable to include
because it would require significant estimates of third-party sale amounts and would be impossible to distinguish
objectively the information in those estimates. In addition, prior to the Company’s acquisition, PENNSAID 2%
did not have a significant amount of sales because it was not on the market until 2014.

NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost or market value. Inventories consist of raw materials, work-in-

process and finished goods. The Company has entered into manufacturing and supply agreements for the
manufacture or purchase of raw materials and production supplies. The Company’s inventories include the direct
purchase cost of materials and supplies and manufacturing overhead costs.

In connection with the Merger, the ACTIMMUNE inventory was stepped up in value to $14.2 million as of
the Merger date. As of December 31, 2014, the remaining balance of ACTIMMUNE inventory step-up was $3.2
million.

The components of inventories as of December 31, 2014 and 2013 consisted of the following (in thousands):

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,184
389
15,292

91
522
8,088

Inventories, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16,865

$8,701

As of December 31,

2014

2013

NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets as of December 31, 2014 and 2013 consisted of the following (in

thousands):

Prepaid co-pay expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product samples inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid software license fees . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid FDA product and manufacturing fees . . . . . . . . . . . .
Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid clinical trial studies . . . . . . . . . . . . . . . . . . . . . . . . . .
Other prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2014

2013

$ 6,718
4,014
1,128
1,055
345
59
56
995

$ 621
1,323
855
312
379
381
688
329

Prepaid expenses and other current assets . . . . . . . . . . . . . . .

$14,370

$4,888

F-27

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2014 and 2013 consisted of the following (in thousands):

Machinery and equipment . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade show equipment . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . .

Less-accumulated depreciation . . . . . . . . . . . . . . .

As of December 31,

2014

2013

$ 3,288
576
2,040
1,481
392
3,412

$ 2,367
113
2,160
775
228
783

11,189
(3,948)

6,426
(2,646)

Property and equipment, net

. . . . . . . . . . . . . . . . .

$ 7,241

$ 3,780

Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $1.7 million, $1.2 million

and $0.8 million, respectively.

NOTE 8 – INTANGIBLE ASSETS

The Company’s intangible assets consist of developed technology related to the Company’s approved

products, ACTIMMUNE, PENNSAID 2% and RAYOS in the United States, LODOTRA in Europe and
VIMOVO intellectual property rights in the United States.

On November 18, 2013, in connection with the Company’s acquisition of the U.S. rights to VIMOVO, the

Company capitalized $67.7 million for the U.S. intellectual property rights of VIMOVO.

On September 19, 2014, in connection with the Merger, the Company capitalized $560.0 million of

developed technology, $66.0 million of IPR&D and $8.1 million of customer relationships related to
ACTIMMUNE.

On October 17, 2014, in connection with the Company’s acquisition of the U.S. rights to PENNSAID 2%,

the Company capitalized $45.0 million for the U.S. developed technology rights of PENNSAID 2%.

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 has been
impaired at December 31, 2014 or 2013.

As of December 31, 2014 and 2013, amortizable intangible assets consisted of the following (in thousands):

December 31, 2014

December 31, 2013

Cost
Basis

Accumulated
Amortization

Currency
Translation

Net Book
Value

Cost
Basis

Accumulated
Amortization

Currency
Translation

Net Book
Value

Developed technology . . . . . . . .
Customer relationships . . . . . . . .

$757,484
8,100

$(51,331)
(230)

$(9,190)
—

$696,963
7,870

$152,484

$(19,254)

—

$(2,136)
—

$131,094

—

Total amortizable intangible

assets . . . . . . . . . . . . . . . . . . .

$765,584

$(51,561)

$(9,190)

$704,833

$152,484

$(19,254)

$(2,136)

$131,094

F-28

Amortization expense for the years ended December 31, 2014, 2013 and 2012 was $32.3 million,

$8.1 million and $4.7 million, respectively. IPR&D is not amortized until successful completion of the project.
As of December 31, 2014, estimated future amortization expense was as follows (in thousands):

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 71,298
71,298
71,298
71,298
419,641

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$704,833

NOTE 9 – OTHER ASSETS

Other assets as of December 31, 2014 and 2013, consisted of the following (in thousands):

Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,491
73

$6,268
689

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,564

$6,957

As of December 31,
2013
2014

NOTE 10 – ACCRUED TRADE DISCOUNTS AND REBATES

Accrued trade discounts and rebates as of December 31, 2014 and 2013, consisted of the following (in

thousands):

Contractual allowances . . . . . . . . . . . . . . . . . . . . . . .
Government rebates and chargebacks . . . . . . . . . . . .

Accrued trade discounts and rebates . . . . . . . . . . . . .

$55,678
20,437

$76,115

$6,716
1,407

$8,123

December 31,
2014

December 31,
2013

NOTE 11 – ACCRUED EXPENSES

Accrued expenses as of December 31, 2014 and 2013, consisted of the following (in thousands):

As of December 31,

2014

2013

Payroll related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued excise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing expenses . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract manufacturing expenses . . . . . . . . . . . . . . . . . . . . .
Clinical and regulatory expenses . . . . . . . . . . . . . . . . . . . . .
Consulting services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$20,933
11,243
3,825
2,343
1,400
1,260
1,026
758
632
596
2,609

$ 9,491
—
350
1,761
—
810
755
301
488
283
1,687

Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$46,625

$15,926

F-29

In connection with the Merger, any individual who is or was an executive officer or director of HPI or New
Horizon and subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 at any
time during the period commencing six months before and ending six months after the closing of the Merger
(“Covered Individual”) is subject to an excise tax (15% in 2014) under Section 4985 of the Internal Revenue
Code of 1986 on the value of certain stock compensation held at any time during the same period by the covered
individual. The excise tax applies to all payments (or rights to payment) granted to the Covered Individuals by
HPI or New Horizon in connection with the performance of services if the value of such payment is based on (or
determined by reference to) the value of stock in HPI or New Horizon (excluding certain statutory incentive
stock options and holdings in tax qualified plans). This includes any outstanding (a) unexercised nonqualified
stock options, whether vested or unvested, (b) restricted stock awards that remain subject to forfeiture,
(c) unvested restricted stock unit awards and (d) vested but deferred shares, in each case which are held by the
Covered Individuals during this twelve month period.

After careful consideration, the New Horizon board of directors concluded that the Company would provide
the Covered Individuals with a payment with respect to the excise tax, so that, on a net after-tax basis, they would
be in the same position as if no such excise tax had applied to them. As a result, as of December 31, 2014, the
Company has estimated a liability of $11.2 million for the payments due to those who were Covered Individuals.
This amount was recorded by the Company as general and administrative expense on the consolidated statements
of comprehensive loss and is included in accrued expenses on the consolidated balance sheet as of December 31,
2014. These payments are expected to be made to the Covered Individuals when the excise tax becomes due and
payable in 2015. Should the Company grant stock compensation in connection with the hire of any new
executive officers or addition of any new board members who become Covered Individuals at any time during
the six month period following the closing of the Merger, an additional excise tax reimbursement payable for
such new Covered Individuals will be incurred by the Company and a corresponding liability will be recorded.

NOTE 12 – ACCRUED ROYALTIES

Changes in the liability for royalties during the year ended December 31, 2014 consisted of the following (in

thousands):

Balance as of December 31, 2013 . . . . . . . . . . . . . . . . . . . . . .
Assumed ACTIMMUNE accrued royalty . . . . . . . . . . . . . . .
Assumed ACTIMMUNE contingent royalty liabilities . . . . .
Remeasurement of royalty liabilities . . . . . . . . . . . . . . . . . . .
Royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance as of December 31, 2014 . . . . . . . . . . . . . . . . . . . . . .
Less: Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 32,992
3,429
33,600
10,660
(15,489)
9,020

74,212
25,325

Accrued royalties, net of current . . . . . . . . . . . . . . . . . . . . . . .

$ 48,887

During the second quarter of 2014, based on higher sales of VIMOVO during the six months ended June 30,
2014 versus the Company’s original expectations and the Company’s adjusted expectations for future VIMOVO
sales, the Company recorded a charge of $13.0 million to cost of goods sold to increase the amount of the
contingent royalty liability to reflect the updated estimates. During the fourth quarter of 2014, after the
Company’s most recent five year plan was approved, the Company performed its annual assessment of the
carrying value of the contingent royalty liability. The Company recorded a $3.6 million credit to cost of goods
sold to decrease the amount of the contingent royalty liability to reflect the updated estimates. The effect of the
reassessments during the second quarter and the fourth quarter of the fair value of the contingent royalty liability
represented a net charge of $9.4 million for the year ended December 31, 2014 to cost of goods sold to increase
the amount of the contingent royalty liability.

F-30

During the fourth quarter of 2014, as the result of a price increase for ACTIMMUNE approved to take effect

on January 1, 2015, the Company reassessed the value of the estimated royalty liability and recorded a charge of
$1.3 million to cost of goods sold to increase the carrying value of the contingent royalties to reflect the updated
estimates.

NOTE 13 – FAIR VALUE MEASUREMENTS

The following tables 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.

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.

Assets and liabilities measured at fair value on a recurring basis

The following table sets forth the Company’s financial assets and liabilities at fair value on a recurring basis

as of December 31, 2014 and 2013 (in thousands):

Level 1

Level 2

Level 3

Total

2014

Assets:

Money market funds . . . . . . . . . . . . . . . . . . . . . . .

$111,581

Total assets at fair value . . . . . . . . . . . . . . . . . . . .

$111,581

$—

$ —

$111,581

Level 1

Level 2

Level 3

Total

2013

Assets:

Money market funds . . . . . . . . . . . . . . . . . . . . . . .

$ 66,817

Total assets at fair value . . . . . . . . . . . . . . . . . . . .

$ 66,817

Liabilities:

Derivative liability . . . . . . . . . . . . . . . . . . . . . . . .

$ —

Total liabilities at fair value . . . . . . . . . . . . . . . . .

$ —

$—

$ —

$ 66,817

$109,410

In accordance with the pronouncement guidance in ASC 815 “Derivatives and Hedging”, the conversion

option included within the Convertible Senior Notes was deemed to include an embedded derivative, which
required the Company to bifurcate and separately account for the embedded derivative as a separate liability on

F-31

its consolidated balance sheets. The estimated fair value was derived utilizing the binomial lattice approach for
the valuation of convertible instruments. Assumptions used in the calculation included, among others,
determining the appropriate credit spread using benchmarking analysis and solving for the implied credit spread,
calculating the fair value of the stock component using a discounted risk free rate and borrowing cost and
calculating the fair value of the note component using a discounted credit adjusted discount rate. Based on the
assumptions used to determine the fair value of the derivative liability associated with the Convertible Senior
Notes, the Company concluded that these inputs were Level 3 inputs.

The following table presents the assumptions used by the Company to determine the fair value of the
conversion option embedded in the Convertible Senior Notes as of June 27, 2014, the date the Company’s
shareholders approved the issuance of shares of HPI’s common stock in excess of 13,164,951 shares upon
conversion of the Convertible Senior Notes, and December 31, 2013:

June 27,
2014

December 31,
2013

Stock price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowing cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equal weight
900
Credit spread (in basis points) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40.00%
Volatilty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Initial conversion price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining time to maturity (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5.36
4.4

$15.96

1.43%

3.80% 5.0% and 3.5%
Equal weight
930 and 1,170

$7.62
1.69%

40.00%
$5.36
4.9

On June 27, 2014, the Company’s shareholders approved the issuance of the Company’s ordinary shares in
excess of 13,164,951 shares upon conversion of the Convertible Senior Notes. As such, on the date of approval,
the derivative liability was re-measured to a final fair value and the entire fair value of the derivative liability of
$324.4 million was reclassified to additional paid-in capital. Total losses of $215.0 million from re-measurement
of the derivative liability were recorded in its results of operations for the year ended December 31, 2014.

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Lease Obligations

The Company occupies approximately 10,300 square feet of office space in its headquarters in Dublin,

Ireland under a lease that expires on November 4, 2029. The Company also occupies approximately
50,500 square feet of office space in Deerfield, Illinois under lease agreements that expire on June 30, 2018,
approximately 5,000 square feet of office space in Mannheim, Germany under a lease that expires on
December 31, 2016, approximately 3,200 square feet of office space in Reinach, Switzerland under a lease that
expires on May 31, 2015 and approximately 6,200 square feet of office space in Roswell, Georgia under a lease
that expires on October 31, 2018.

The Company recognizes rent expense on a monthly basis over the lease term based on a straight-line
method. Rent expense was $0.6 million, $0.5 million and $0.5 million for the years ended December 31, 2014,
2013 and 2012, respectively.

As of December 31, 2014, minimum future cash payments due under lease obligations were as follows (in

thousands):

2015

2016

2017

2018

2019

2020 &
Thereafter

Total

Operating Lease obligations . . . . . . . . . . . . . .

$1,581

$1,624

$1,538

$1,104

$558

$5,484

$11,889

F-32

Annual Purchase Commitments

In August 2007, the Company entered into a manufacturing and supply agreement with Jagotec AG

(“Jagotec”). Under the agreement, Jagotec or its affiliates are required to manufacture and supply RAYOS/
LODOTRA exclusively to the Company in bulk. The Company committed to a minimum purchase of RAYOS/
LODOTRA tablets from Jagotec for five years from the date of first launch of RAYOS/LODOTRA in a major
country, as defined in the agreement, which was in April 2009. Thereafter, the agreement automatically renews
on a yearly basis until either party provides two years advance written notice of termination. In April 2014, the
agreement automatically renewed, and, therefore, the earliest the agreement can expire according to this advance
notice procedure is April 15, 2017 and the minimum purchase commitment is in force until April 2017. At
December 31, 2014, the minimum purchase commitment based on tablet pricing in effect under the agreement
was $3.3 million through April 2017.

In May 2011, the Company entered into a manufacturing and supply agreement with sanofi-aventis U.S.,

and amended the agreement effective as of September 25, 2013. Pursuant to the agreement, as amended, sanofi-
aventis U.S. is obligated to manufacture and supply DUEXIS to the Company in final, packaged form, and the
Company is obligated to purchase DUEXIS exclusively from sanofi-aventis U.S. for the commercial
requirements of DUEXIS in North America, South America and certain countries and territories in Europe,
including the European Union member states and Scandinavia. At December 31, 2014, the Company had a
binding purchase commitment to sanofi-aventis U.S. for DUEXIS of $2.6 million, which is to be delivered
through March 2015.

In July 2013, Vidara and Boehringer Ingelheim entered into an exclusive supply agreement, which the

Company assumed as of result of the Merger. Under the agreement, Boehringer Ingelheim is required to
manufacture and supply interferon gamma 1-b (ACTIMMUNE) to the Company. The Company is required to
purchase minimum quantities of finished drug product per annum through July 2020. As of December 31, 2014,
the minimum binding purchase commitment to Boehringer Ingelheim was $21.2 million (converted using a
Dollar-to-Euro rate of 1.22).

In November 2013, the Company entered into a long-term master manufacturing services and product
agreement with Patheon pursuant to which Patheon will manufacture VIMOVO for the Company through
December 31, 2019. The Company agreed to purchase a specified percentage of VIMOVO requirements for 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. The Company will issue 12-month forecasts
of the volume of VIMOVO that the Company expects to order. The first three months of the forecast will be
considered binding firm orders. At December 31, 2014, the Company had a binding purchase commitment with
Patheon for VIMOVO of $3.6 million.

In October 2014, in connection with the acquisition of the U.S. rights to PENNSAID 2% from Nuvo, the

Company and Nuvo, entered into an exclusive supply agreement. Under the supply agreement, Nuvo will
manufacture and supply PENNSAID 2% to the Company. The initial term of our supply agreement is through
December 31, 2022, 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 90 days prior to the first day of each calendar month during the term of the supply
agreement, the Company will submit a binding written purchase order to Nuvo for PENNSAID 2% in minimum
batch quantities. The Company has committed to binding purchase orders to Nuvo for delivery of PENNSAID
2% on or before April 1, 2015 of $2.7 million.

F-33

Royalty Agreements

In connection with the August 2004 development and license agreement with SkyePharma AG
(“SkyePharma”) and Jagotec, a wholly-owned subsidiary of SkyePharma, regarding certain proprietary
technology and know-how owned by SkyePharma, 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 sum and milestone
payments. Royalty expense recognized in cost of goods sold for the years ended December 31, 2014, 2013 and
2012 was $1.7 million, $0.9 million and $0.5 million, respectively.

Under the Pozen license agreement, the Company is required to pay Pozen a flat 10% royalty on net sales of

Under the license agreement with Genentech Inc. (“Genentech”), which 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:

• Through November 25, 2014, a royalty of 45% of the first $3.7 million in net sales achieved in a

calendar year, and 10% on all additional net sales in that year;

•

For the period from November 26, 2014 through May 5, 2018, the royalty payments will be reduced to
a 20%-30% range for the first tier in net sales and in the 1%-9% range for the second tier; and

From May 6, 2018 and for so long as the Company continues to commercially sell ACTIMMUNE, an
annual royalty in the low single digits as a percentage of annual net sales.

Under the terms of the agreement with Connetics Corporation (which was the predecessor parent company
to InterMune and is now part of GlaxoSmithKline) (“Connectics”), the Company is obligated to pay royalties to
Connetics on the Company’s net sales of ACTIMMUNE as follows:

•

0.25% of net sales of ACTIMMUNE, rising to 0.5% once cumulative net sales of ACTIMMUNE in the
United States surpass $1.0 billion; and in the event the Company develops and receive regulatory
approval for ACTIMMUNE in the indication of scleroderma, the Company will be obligated to pay a
royalty of 4% on all net sales of ACTIMMUNE recorded for use in that indication.

The royalty obligations for VIMOVO and ACTIMMUNE are included in accrued royalties on the

Company’s consolidated balance sheets.

Excise Tax Gross Up

In connection with the Merger, the New Horizon board of directors concluded that the Company would

provide the Covered Individuals with a payment with respect to the excise tax on the value of certain stock
compensation, so that, on a net after-tax basis, they would be in the same position as if no such excise tax had
applied to them. As of December 31, 2014, the Company has estimated a liability of $11.2 million for the
payments due to those who were Covered Individuals. This amount was recorded by the Company as general and
administrative expense on the consolidated statements of comprehensive loss and is included in accrued expenses
on the consolidated balance sheet as of December 31, 2014. These payments are expected to be made to the
Covered Individuals when the excise tax becomes due and payable in 2015. Should the Company grant stock

F-34

compensation in connection with the hire of any new executive officers or addition of any new board members
who become Covered Individuals at any time during the six month period following the closing of the Merger, an
additional excise tax reimbursement payable for such new Covered Individuals will be incurred by the Company
and a corresponding liability will be recorded.

Contingencies

The Company is subject to claims and assessments from time to time in the ordinary course of business. The

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

The Company previously entered into a rebate agreement with a pharmacy benefit manager (“PBM”),

pursuant to which the Company was required to pay certain rebates on certain of its products that were
reimbursed by health plans contracting with the PBM with respect to their formularies. In 2014, the Company
sent a notice alerting the PBM of certain material breaches by the PBM under the agreement and indicating that
the agreement would automatically terminate if the material breaches were not cured within 30 days. Among
other things, the breaches by the PBM involved repeated invoices that included claims for rebates which were not
eligible for payment under the agreement. Following the 30-day period, during which the PBM did not take
action to cure the breaches or formally respond to the notice, the Company sent another notice informing the
PBM that the agreement was terminated as of the end of the 30-day period in accordance with its terms and the
Company ceased paying further rebates under the agreement. On November 6, 2014, the Company received a
letter from the PBM asserting that the breaches the Company alleged in its termination notice were not material
breaches and therefore the agreement was not terminated and remains in effect. In addition, the PBM claimed
that the Company owes $38.5 million in past price protection and utilization rebates related to VIMOVO and
DUEXIS, in addition to further rebates on sales of VIMOVO and DUEXIS continuing after the date the
Company believes the agreement was terminated. The substantial majority of these rebate claims relate to price
protection rebates on VIMOVO which the Company believes are precluded under the agreement, particularly
because VIMOVO was not covered under the agreement until after the Company had established an initial price
for VIMOVO under a Horizon-owned National Drug Code. Based upon the terms of the agreement and the
PBM’s actions, the Company believes that the PBM’s claims in its November 6, 2014 letter are without merit
and the Company intends to vigorously defend against them. The Company currently estimates the range of
potential disputes to be in the $0 to $4.7 million range and has not recorded a liability associated with any portion
of the disputed amounts as the Company does not believe payment of any such amounts is probable at this time.

Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of

representations and warranties and provide for general indemnifications. The Company’s exposure under these
agreements is unknown because it involves claims that may be made against the Company in the future, but have
not yet been made. To date, the Company has not paid any claims or been required to defend any action related to
its indemnification obligations. However, 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, 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

F-35

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. There have been no claims to date and the Company has a director
and officer insurance policy that enables it to recover a portion of any amounts paid for future potential claims.
Certain of the Company’s officers and directors have also entered into separate indemnification agreements with
HPI prior to the Merger.

NOTE 15 – LEGAL PROCEEDINGS

On July 15, 2013, the Company received a Paragraph IV Patent Certification from Watson

Laboratories, Inc.—Florida, known as Actavis Laboratories FL, Inc. (“Watson”), advising that Watson had filed
an ANDA with the FDA for a generic version of RAYOS, containing up to 5 mg of prednisone. Watson has not
advised the Company as to the timing or status of the FDA’s review of its filing. On August 26, 2013, the
Company, together with Jagotec, filed suit in the United States District Court for the District of New Jersey
against Watson, Actavis Pharma, Inc., Andrx Corp., and Actavis, Inc. (collectively “WLF”) seeking an injunction
to prevent the approval of the ANDA. The lawsuit alleges that WLF has infringed U.S. Patent Nos. 6,488,960,
6,677,326, 8,168,218, 8,309,124 and 8,394,407 by filing an ANDA seeking approval from the FDA to market
generic versions of RAYOS containing 1 mg, 2 mg and 5 mg of prednisone prior to the expiration of the patents.
The subject patents are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations,
commonly known as the Orange Book. The commencement of the patent infringement lawsuit stays, or bars,
FDA approval of WLF’s ANDA for 30 months or until an earlier district court decision that the subject patents
are not infringed or are invalid. The Company and Jagotec have granted WLF a covenant not to sue with respect
to US Patent Nos. 6,677,326 and 8,168,218, respectively, and accordingly these patents have been dismissed
from the lawsuit. The court held a claim construction hearing on October 16, 2014, and issued its opinion and
order on claim construction on November 10, 2014, adopting our proposed construction of both of the disputed
claim terms. The court has scheduled expert discovery in the WLF action to be completed by June 2, 2015, and
has set the pretrial conference for September 10, 2015. The trial date will be set following the pretrial conference.

On November 13, 2014, the Company received a Paragraph IV Patent Certification from Watson advising

that Watson had filed an ANDA with the FDA for a generic version of PENNSAID 2%. Watson has not advised
the Company as to the timing or status of the FDA’s review of its filing. On December 23, 2014, the Company
filed suit in the United States District Court for the District of New Jersey against Watson seeking an injunction
to prevent the approval of the ANDA. The lawsuit alleges that Watson has infringed U.S. Patent Nos. 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 prior to the expiration of the patents. The subject patents are listed in
the FDA’s Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of
Watson’s ANDA for 30 months or until an earlier district court decision that the subject patents are not infringed
or are invalid. The Court has not yet set a trial date for the Watson action.

On December 2, 2014, the Company received a Paragraph IV Patent Certification against Orange Book
listed U.S. Patent Nos. 8,217,078, 8,252,838, 8,546,450, 8,563,613, 8,618,164, and 8,741,956 from Paddock
Laboratories, LLC (“Paddock”) advising that Paddock had filed an ANDA with the FDA for 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. Paddock has not advised the
Company as to the timing or status of the FDA’s review of its filings. 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. The lawsuits allege that Paddock has infringed U.S. Patent Nos. 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 the patents. The subject patents are listed in the
FDA’s Orange Book. The commencement of the patent infringement lawsuit stays, or bars, FDA approval of
Paddock’s ANDA for 30 months or until an earlier district court decision that the subject patents are not
infringed or are invalid. The Courts have not yet set trial dates for the Paddock actions.

F-36

Currently, patent litigation is pending in the United States District Court for the District of New Jersey
against four generic companies intending to market VIMOVO before the expiration of patents listed in the
Orange Book. These cases are in the United States District Court for the District of New Jersey and have been
consolidated for discovery purposes. They 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. (collectively,
Dr. Reddy’s); (ii) Lupin Ltd. and Lupin Pharmaceuticals Inc. (collectively, Lupin); (iii) Mylan Pharmaceuticals
Inc., Mylan Laboratories Limited, and Mylan Inc. (collectively, Mylan); and (iv) Watson Laboratories, Inc.—
Florida, known as Actavis Laboratories FL, Inc. and Actavis Pharma, Inc. (collectively, Actavis). 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 that Dr. Reddy’s has entered into a settlement with AstraZeneca with
respect to patent rights directed to Nexium for the commercialization of VIMOVO, and that according to the
settlement agreement, Dr. Reddy’s is now able to commercialize VIMOVO under AstraZeneca’s Nexium patent
rights. The settlement agreement, however, has no effect on the Pozen 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 litigations that include the Pozen patents licensed to the Company
under the Pozen license agreement.

The VIMOVO cases were filed on April 21, 2011, July 25, 2011, October 28, 2011, January 4,

2013, May 10, 2013, June 28, 2013 and October 23, 2013 and collectively include allegations of infringement of
U.S. Patent Nos. 6,926,907 and 8,557,285. The Company understands the cases arise from Paragraph IV Notice
Letters providing notice of the filing of an ANDA with the FDA seeking regulatory approval to market a generic
version of VIMOVO before the expiration of the patents-in-suit. The Company understands the Dr. Reddy’s
notice letters were dated March 11, 2011 and November 20, 2012; the Lupin notice letters were dated June 10,
2011 and March 12, 2014; the Mylan notice letter was dated May 16, 2013; the Actavis notice letters were dated
March 29, 2013 and November 5, 2013; and the Anchen notice letter was dated September 16, 2011. The court
has issued a claims construction order and has set a pretrial schedule but has not yet set a trial date.

On or about December 19, 2014, the Company filed a Notice of Opposition to a European patent, EP
2611457, to Roberto Testi, et al., covering compositions and methods for treating FA with interferon gamma,
e.g., ACTIMMUNE. In the European Union, the grant of a patent may be opposed by one or more private parties.

On February 2, 2015, the Company received a Paragraph IV Patent Certification against Orange Book listed

U.S. Patent Nos. 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”) advising that Taro had
filed an ANDA with the FDA for a generic version of 2%. Taro has not advised the Company as to the timing or
status of the FDA’s review of its filing. The Company is still in the process of evaluating the Paragraph IV Patent
Certification, and it is anticipated the Company will file suit against Taro within the statutorily prescribed 45 day
time limit.

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NOTE 16 – DEBT AGREEMENTS

The Company’s outstanding debt balances as of December 31, 2014 and 2013, consisted of the following (in

thousands):

As of December 31,

2014

2013

Senior Secured Credit Facility . . . . . . . . . . . . . . . . . . . . .
Convertible Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . .
Debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$300,000
60,985
(15,482)

$ —
150,000
(39,238)

Total long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . .

345,503
48,334

110,762
—

Long-term debt, net of current maturities . . . . . . . . . . . . .

$297,169

$110,762

Convertible Senior Notes

On November 18, 2013, the Company entered into note purchase agreements with investors to issue
$150.0 million aggregate principal amount of Convertible Senior Notes. The note purchase agreements contain
customary representations, warranties, covenants and closing conditions. The Convertible Senior Notes were
issued on November 22, 2013. The Company received net proceeds of $143.6 million from the sale of the
Convertible Senior Notes, after deducting fees and expenses of $6.4 million. The Convertible Senior Notes are
governed by an Indenture, dated as of November 22, 2013, between HPI and U.S. Bank National Association, as
trustee (the “Indenture”). The Convertible Senior Notes bear interest at a rate of 5.00% per year, payable in
arrears on May 15 and November 15 of each year, which began on May 15, 2014. The Convertible Senior Notes
will mature on November 15, 2018, unless earlier repurchased or converted.

The Company used a portion of the proceeds from the Convertible Senior Notes to purchase $18.7 million
related to certain capped call transactions with Deutsche Bank AG, London Branch, and Société Générale (the
“counterparties”). The capped call transactions were comprised of a net settled purchased call option and a net
settled sold call option. The Company purchased the call option with an initial strike price of $5.364, which was
equal to the initial conversion price, and sold a call option with a strike price of $6.705, which is equal to the cap
price. The number of options underlying the capped calls was 150,000 or the equivalent to the number of
$1,000 Convertible Senior Notes initially issued by the Company. On September 23, 2014, the counterparties
exercised their rights to terminate the capped call transactions. In connection with such termination, the
Company received $14.0 million comprised of both $9.4 million in cash and 384,366 ordinary shares of the
Company which were valued at $4.6 million, based on the closing share price of September 22, 2014 of $11.93
per share. The Company recorded the receipt of the ordinary shares as treasury shares. In addition, in connection
with the termination of the capped call transactions, one counterparty and/or their affiliates unwound various
hedging transactions with respect to the Company’s ordinary shares.

The Convertible Senior Notes were sold at a price equal to 100% of the principal amount thereof and are
convertible, under certain conditions, at the option of the holders at any time prior to the close of business on the
business day immediately preceding August 15, 2018. Prior to August 15, 2018, the Convertible Senior Notes are
convertible, at the option of the holders thereof, only under the following circumstances:

1. Conversion upon Satisfaction of Sale Price Condition: If the closing price of the Company’s ordinary
shares for at least 20 trading days during the period of 30 consecutive trading days ending on the last
trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price on each applicable trading day.

2. Conversion upon Satisfaction of Trading Price Condition: The Convertible Senior Notes can be

surrendered for conversion during the five business day period after any five consecutive trading day

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period in which the trading price per $1,000 principal amount of Convertible Senior Notes was less
than 98% of the product of the last reported sale price of the Company’s ordinary shares and the
applicable conversion rate on such date.

3. Conversion upon Specified Distributions: If the Company elects to:

ii.

issue to all or substantially all holders of the Company’s ordinary shares any rights, options or
warrants (other than in connection with a shareholder rights plan) entitling them, for a period
of not more than 45 calendar days after the declaration date for such issuance, to subscribe for
or purchase the Company’s ordinary shares at a price per share that is less than the average of
the last reported sale prices of the Company’s ordinary shares for the 10 consecutive trading
day period ending on, and including, the trading day immediately preceding the declaration
date for such issuance; or

distribute to all or substantially all holders of the Company’s ordinary shares its assets,
securities or rights to purchase its securities, which distribution has a per share value, as
reasonably determined by the Company’s board of directors or a committee thereof, exceeding
10% of the last reported sale price of the Company’s ordinary shares on the trading day
preceding the date of announcement for such distribution.

4. Conversion upon Specified Corporate Events: If (i) a transaction or event that constitutes a

fundamental change or a make-whole fundamental change occurs or (ii) the Company is party to a
consolidation, merger, binding share exchange, or transfer or lease of all or substantially all of its
consolidated assets pursuant to which the Company’s ordinary shares would be converted into cash,
securities or other assets.

On or after August 15, 2018 until the close of business on the second scheduled trading day immediately
preceding the maturity date for the Convertible Senior Notes, holders will be able to convert their Convertible
Senior Notes at their option at the conversion rate then in effect at any time, regardless of these conditions.

Subject to certain limitations, HPI may settle conversions of the Convertible Senior Notes by paying or
delivering, as the case may be, cash, the Company’s ordinary shares or a combination of cash and the Company’s
ordinary shares at HPI’s election. If the Company undergoes a fundamental change prior to the maturity date of
the Convertible Senior Notes, the holders may require HPI to repurchase for cash all or any portion of their
Convertible Senior Notes at a price equal to 100% of the principal amount of the Convertible Senior Notes to be
repurchased, plus accrued and unpaid interest.

The conversion rate for the Convertible Senior Notes was initially 186.4280 ordinary shares per

$1,000 principal amount of Convertible Senior Notes (equivalent to an initial conversion price of approximately
$5.36 per ordinary share). The conversion rate of the Convertible Senior Notes, and the corresponding
conversion price, is subject to adjustment for certain events, but will not be adjusted for accrued and unpaid
interest. On June 27, 2014, the Company’s shareholders approved the issuance of ordinary shares in excess of
13,164,951 shares upon conversion of the Convertible Senior Notes. On June 30, 2014, the Company reclassified
the Convertible Senior Notes from long term to short term as conditions for conversion were met.

Pursuant to a number of factors outlined in ASC Topic 815, Derivatives and Hedging, the conversion option

in the Convertible Senior Notes was deemed to include an embedded derivative that required bifurcation and
separate accounting. As such, the Company ascertained the value of the conversion option as if separate from the
convertible issuance and appropriately recorded that value as a derivative liability. On November 22, 2013, a
derivative liability and a corresponding debt discount in the amount of $40.1 million were recorded. The debt
discount is being charged to interest expense ratably over the life of the convertible debt. The effective interest
rate computed on the Convertible Senior Notes was 11.22%.

The derivative liability was subject to revaluation on a quarterly basis to reflect the market value change of
the embedded conversion option. At December 31, 2013, the Company conducted a fair value assessment of the

F-39

embedded derivative. As a result of the fair value assessment, the Company recorded a $69.3 million expense in
its results of operations for the year ended December 31, 2013 to properly reflect the fair value of the embedded
derivative of $109.4 million as of December 31, 2013.

On June 27, 2014, the Company’s shareholders approved the issuance of the Company’s ordinary shares in
excess of 13,164,951 shares upon conversion of the Convertible Senior Notes. As such, on the date of approval,
the derivative liability was re- measured to a final fair value and the entire fair value of the derivative liability of
$324.4 million was reclassified to additional paid-in capital. Total losses of $215.0 million from re-measurement
of the derivative liability were recorded in its results of operations for the year ended December 31, 2014. As of
December 31, 2014, the fair value of the Convertible Senior Notes was approximately $57.0 million.

In connection with the Merger, HPI and New Horizon executed a supplemental indenture dated as of
September 19, 2014 (the “First Supplemental Indenture”) with U.S Bank National Association (the “Trustee”) to
the Indenture. Pursuant to the First Supplemental Indenture, HPI remained the obligor of the Convertible Senior
Notes and the Company agreed to fully and unconditionally guaranty the obligations of HPI under the Indenture
(the “Guaranty”). The First Supplemental Indenture also provides that the conversion value of the Convertible
Senior Notes will be calculated by reference to the Company’s ordinary shares, rather than the common stock of
HPI, and any shares issuable upon conversion of the Convertible Senior Notes will be settled in the Company’s
ordinary shares, rather than shares of the common stock of HPI. In addition, the Company assumed the disclosure
obligations required by the Indenture.

In the fourth quarter of 2014, the Company entered into separate, privately-negotiated conversion

agreements with certain holders of the Convertible Senior Notes. Under the conversion agreements, the holders
agreed to convert an aggregate principal amount of $89.0 million of Convertible Senior Notes held by them and
the Company agreed to settle such conversions by issuing 16,594,793 ordinary shares. In addition, pursuant to
the conversion agreements, the Company made an aggregate cash payment of $16.7 million to the holders for
additional exchange consideration and $1.7 million of accrued and unpaid interest, and recognized a non-cash
charge of $11.7 million related to the extinguishment of debt as a result of the note conversions. Immediately
following the conversions of the Convertible Senior Notes contemplated by the conversion agreements, $61.0 in
aggregate principal amount of the Convertible Senior Notes remained outstanding.

Senior Secured Credit Facility

On June 17, 2014, the Company entered into the Senior Secured Credit Facility with a group of lenders and
Citibank, N.A., as administrative and collateral agent. The Senior Secured Credit Facility is governed by a Credit
Agreement dated June 17, 2014. The Senior Secured Credit Facility provides for (i) a committed five-year
$300.0 million term loan facility (the “Term Loan Facility”) with a portion of the proceeds used to effect the
Merger and to pay fees and expenses in connection therewith, and with the balance being used for general
corporate purposes; (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 initial borrower under the Term Loan Facility is U.S. HoldCo (renamed Horizon Pharma Holdings USA,
Inc.). The Credit Agreement allows for the Company and other subsidiaries of the Company to become
borrowers under the accordion facility. Loans under the Senior Secured Credit Facility bear interest, at each
borrower’s option, at a rate equal to either the London Inter-Bank Offer Rate (“LIBOR”), plus an applicable
margin of 8.0% per year (subject to a 1.0% LIBOR floor), or the prime lending rate, plus an applicable margin
equal to 7.0% per year. The Company borrowed the full $300.0 million available on the Term Loan Facility on
September 19, 2014 as a LIBOR-based borrowing. The Company paid a ticking fee to the applicable lenders of
$3.2 million covering the period beginning on the date that was 31 days following the effective date of the Senior
Secured Credit Facility and continuing through the closing of the Merger.

The borrowers’ obligations under the Credit Agreement and any swap obligations entered into with a lender

thereunder are and will be guaranteed by the Company and each of the Company’s existing and subsequently

F-40

acquired or organized 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 borrowers’ obligations under the Credit Agreement 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 U.S. HoldCo, to 65% of the capital stock of such subsidiaries).

U.S. HoldCo is permitted to make voluntary prepayments of loans under the Term Loan Facility, except that
(i) a specified make-whole amount would apply to any repayment or repricing prior to the second anniversary of
the Closing Date, (ii) a 4% premium would apply to any repayment or repricing on or prior to the third
anniversary of the Closing Date, and (iii) a 2% premium would apply to any repayment or repricing on or prior to
the fourth anniversary of the Closing Date. U.S. HoldCo is required to make mandatory prepayments of loans
under the Term Loan Facility (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), and (c) net cash proceeds from
issuances of debt (other than certain permitted debt).

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 the borrowers to timely make payments due under the Credit
Agreement; (ii) material misrepresentations or misstatements in any representation or warranty by any party
when made; (iii) failure by any borrower or guarantor thereunder to comply with the covenants under the Credit
Agreement and other related agreements; (iv) certain defaults under a specified amount of other indebtedness of
the Company or its subsidiaries; (v) insolvency or bankruptcy-related events with respect to the Company or any
of its material subsidiaries; (vi) certain undischarged judgments against the Company or any of its restricted
subsidiaries; (vii) certain ERISA-related events reasonably expected to have a material adverse effect on the
Company and its 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;
and (ix) any loan document or material provision thereof ceasing to be, or any proceeding being instituted
asserting that such loan document or material provision is not, in full force and effect.

As of December 31, 2014, the carrying value of the Senior Secured Credit Facility approximates its fair

value due to its recent issuance.

Commitment Letter

On March 18, 2014, the Company entered into the Commitment Letter with Deerfield and certain Deerfield

Funds pursuant to which the Deerfield Funds had committed to provide up to $250.0 million of senior secured
loans to finance the Merger. The Company paid Deerfield a commitment fee of $5.0 million upon execution of
the Commitment Letter. The $5.0 million commitment fee paid to Deerfield was capitalized as a prepaid expense
and was amortized to expense through June 30, 2014. The Company allowed the Commitment Letter to expire on
June 30, 2014 as a result of the execution of the Senior Secured Credit Facility.

NOTE 17 – SHAREHOLDERS’ EQUITY

In connection with the Merger, each share of HPI’s common stock issued and outstanding was converted

into one ordinary share of New Horizon and each warrant to acquire HPI’s common stock outstanding
immediately prior to the Effective Time and not terminated as of the Effective Time was converted into a warrant
to acquire, on substantially the same terms and conditions as were applicable under such warrant before the
Effective Time, the number of ordinary shares of New Horizon equal to the number of shares of HPI’s common

F-41

stock underlying such warrant immediately prior to the Effective Time. Vidara Holdings retained ownership of
31,350,000 ordinary shares of New Horizon at the Effective Time. Upon consummation of the Merger, the
security holders of HPI (excluding the holders of HPI’s Convertible Senior Notes) owned approximately 74% of
New Horizon and Vidara Holdings owned approximately 26% of New Horizon.

As discussed in Note 16—Debt Agreements, on September 23, 2014, the Company received 384,366 of its

ordinary shares as part of the settlement of the termination of the capped call transaction associated with its
Convertible Senior Notes and recorded the receipt of the ordinary shares as treasury shares.

During the year ended December 31, 2014, the Company issued an aggregate of 8,440,662 ordinary shares

upon the cash exercise of warrants and the Company received proceeds of $38.5 million representing the
aggregate exercise price for such warrants. In addition, warrants to purchase an aggregate of 987,201 ordinary
shares of the Company were exercised in cashless exercises, resulting in the issuance of 549,458 ordinary shares.
Included in these cashless exercises were 162,309 warrants that were exercised in cashless exercises in
connection with the Merger, resulting in an aggregate issuance of 248 ordinary shares. As of December 31, 2014,
there were outstanding warrants to purchase 6,683,811 ordinary shares of the Company.

During the year ended December 31, 2014, the Company issued an aggregate of 864,780 ordinary shares in

connection with the exercise of stock options and vesting of restricted stock units and received $1.6 million in
proceeds in connection with the exercise of stock options. The Company also received proceeds of $1.7 million
upon the issuance of 536,543 ordinary shares of the Company through its employee stock purchase program
during the year ended December 31, 2014.

NOTE 18 – EQUITY INCENTIVE PLANS

Employee Stock Purchase Plan

In July 2010, HPI’s board of directors adopted the 2011 Employee Stock Purchase Plan (the “2011 ESPP”).

In June 2011, HPI’s stockholders approved the 2011 ESPP, and it became effective upon the signing of the
underwriting agreement related to HPI’s initial public offering in July 2011. HPI reserved a total of 463,352
common stock for issuance under the 2011 ESPP. The 2011 ESPP provided that an additional number of shares
would automatically be added to the shares authorized for issuance under the 2011 ESPP each year on January 1,
until 2021. The number of shares added each year was equal to the least of: (a) 4% of the total number of
common stock outstanding on December 31 of the preceding calendar year; (b) 1,053,074 common stock; or (c) a
number of common stock that could be determined each year by HPI’s board of directors that was less than
(a) and (b). Subject to certain limitations, HPI’s employees could elect to have 1% to 15% of their compensation
withheld through payroll deductions to purchase common stock under the 2011 ESPP at the end of a six-month
offering period. Employees purchase common stock at a price per share equal to 85% of the lower of the fair
market value at the start or end of the six-month offering period.

On December 5, 2013, pursuant to the terms of the 2011 ESPP, HPI’s board of directors approved an
increase in the number of shares available for issuance under the 2011 ESPP of 1,053,074 shares, effective
January 1, 2014. As of immediately prior to the closing of the Merger, 614,657 shares had been issued and an
aggregate of 1,201,769 common stock were authorized and available for future grants under the 2011 ESPP.
Upon consummation of the Merger, the Company assumed the 2011 ESPP.

On May 17, 2014, HPI’s board of directors adopted the Horizon Pharma Public Limited Company 2014

Employee Share 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 Merger, the Company assumed the 2014 ESPP, which served as the successor to the 2011 ESPP. The 2014
ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of section 423 of the
Internal Revenue Code of 1986, as amended. The 2014 ESPP provides a means by which employees of the
Company (or any eligible subsidiary) may purchase the Company’s ordinary shares through payroll deductions.

F-42

Generally, each regular employee (including officers) employed by the Company (or a subsidiary company if the
Company’s board of directors designates such company as eligible to participate) will be eligible to participate in
offerings under the 2014 ESPP. At the effective time of the 2014 ESPP, 10,201,769 ordinary shares were
available for purchase under such plan, which number consisted of 9,000,000 ordinary shares of the Company,
plus the 1,201,769 shares remaining available for issuance in the share reserve of the 2011 ESPP as of
immediately prior to the effective time of the Merger. The Company’s board of directors may suspend or
terminate the 2014 ESPP at any time.

As of December 31, 2014, an aggregate of 9,929,336 ordinary shares were authorized and available for

future grants under the 2014 ESPP.

Stock-Based Compensation Plans

In October 2005, HPI adopted the 2005 Stock Plan (the “2005 Plan”). The 2005 Plan provided for the
granting of stock options to employees and consultants of HPI. Options granted under the 2005 Plan were either
incentive stock options or nonqualified stock options. Upon the signing 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. As of
July 28, 2011, the 460,842 common stock reserved for future issuance and the 1,304,713 common stock reserved
for future issuance upon the exercise of options outstanding under the 2005 Plan were transferred to the 2011
Equity Incentive Plan (the “2011 EIP”), as described below. All stock options 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 Merger, the
Company assumed the 2005 Plan.

In July 2010, HPI’s board of directors adopted 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. The 2011 EIP had an initial reserve of 3,366,228 common stock, including 460,842
common stock previously reserved for future issuance under the 2005 Plan, 1,304,713 common stock reserved
for future issuance upon the exercise of options outstanding under the 2005 Plan as of the 2011 EIP’s effective
date and 1,600,673 new common stock reserved. The 2011 EIP provided that an additional number of shares
would automatically be added to the shares authorized for issuance each year on January 1, until 2021. The
number of shares added each year were equal to the least of: (a) 5% of the total number of common stock
outstanding on December 31 of the preceding calendar year; (b) 1,474,304 common stock; or (c) a number of
common stock that could be determined each year by HPI’s board of directors that was less than (a) and (b). On
December 5, 2013, pursuant to the terms of HPI’s 2011 EIP, HPI’s board of directors approved an increase in the
number of shares available for issuance under the 2011 EIP of 1,474,304 shares, effective January 1, 2014. On
November 7, 2013, November 16, 2013 and March 3, 2014, HPI’s board of directors approved amendments to
the 2011 EIP to reserve an additional 200,000 shares, 800,000 shares and 730,000 shares, respectively, of HPI’s
common stock to be used exclusively for grants of awards to individuals who were not previously employees or
directors of HPI (or following a bona fide period of non-employment with HPI), as an inducement material to the
individual’s entry into employment with HPI within the meaning of Rule 5635(c)(4) of the NASDAQ Listing
Rules (“Rule 5635(c)(4)”). On January 10, 2014, HPI’s board of directors approved an amendment to the 2011
EIP to increase the number of shares available for issuance under the 2011 EIP by 703,400 shares (the “January
2014 amendment”), with such increase to the number of shares available for issuance under the 2011 EIP subject
to stockholder approval of the January 2014 amendment.

On May 17, 2014, HPI’s board of directors approved an amendment to the 2011 EIP to among other things:
increase the aggregate number of shares authorized for issuance under the 2011 EIP by an additional 10,000,000
shares; eliminate the annual “evergreen” provision and require stockholder approval for the issuance of
additional shares; and provide that shares reserved as part of the “inducement pool” under Rule 5635(c)(4) may
be used for grants to any eligible participant under the 2011 EIP. On June 27, 2014, HPI’s stockholders approved
the amendment to the 2011 EIP. As of immediately prior to the closing of the Merger, there were 7,341,996
shares available for future grants under the 2011 EIP. Upon consummation of the Merger, the Company assumed
the 2011 EIP.

F-43

On May 17, 2014, HPI’s board of directors adopted the Horizon Pharma Public Limited Company 2014
Equity Incentive Plan (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 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, other stock awards, and performance awards that may be
settled in cash, shares or other property to the employees of the Company (or a subsidiary company). The number
of ordinary shares of the Company that are authorized for issuance under the 2014 Plan will be no more than
22,052,130, which number consists of (i) 15,500,000 ordinary 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. The
Company’s board of directors has authority to suspend or terminate the 2014 EIP at any time.

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 authorized for issuance under the
2014 Non-Employee Equity Plan is 2,500,000. The Company’s board of directors has authority to suspend or
terminate the 2014 Non-Employee Equity Plan at any time.

As of December 31, 2014, an aggregate of 14,264,001 ordinary shares were authorized and available for

future grants under the 2014 EIP.

Stock Options

The following table summarizes stock option activity during the year ended December 31, 2014:

Outstanding as of December 31, 2013 . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options

4,411,080
3,902,836
(497,082)
(789,151)

Outstanding as of December 31, 2014 . . . . . . . . . . . .

7,027,683

Exercisable as of December 31, 2014 . . . . . . . . . . . .

2,938,278

Weighted
Average
Exercise Price

Weighted Average
Remaining
Contractual Term

Aggregate
Intrinsic Value
(in thousands)

$ 6.47
$10.71
$ 5.27
$ 6.16

$ 8.95

$ 8.71

8.1 years

6.6 years

$32,757

$16,333

F-44

The following table summarizes the Company’s outstanding stock options at December 31, 2014:

Exercise Price Ranges

$1.36 - $3.97 . . . . . . . . . . . . . . . . . . . . . . . . .
$4.10 - $5.20 . . . . . . . . . . . . . . . . . . . . . . . . .
$5.21 - $7.47 . . . . . . . . . . . . . . . . . . . . . . . . .
$7.48 - $12.94 . . . . . . . . . . . . . . . . . . . . . . . .
$12.99 - $17.22 . . . . . . . . . . . . . . . . . . . . . . .
$20.78 - $28.83 . . . . . . . . . . . . . . . . . . . . . . .

Options Outstanding

Options Exercisable

Number of options
outstanding

Weighted
Average
Exercise Price

1,574,765
849,484
125,287
3,312,541
915,242
250,364

7,027,683

$ 2.63
$ 4.99
$ 6.85
$10.11
$14.40
$28.05

$ 8.95

Weighted
Average
Remaining
Contractual
Term

8.0 years
6.4 years
8.8 years
8.8 years
8.8 years
3.7 years

Number
Exercisable

780,904
705,644
32,636
966,538
202,192
250,364

Weighted
Average
Exercise
Price

$ 2.62
$ 5.01
$ 6.85
$10.25
$14.10
$28.05

8.1 years

2,938,278

$ 8.71

During the years ended December 31, 2014, 2013 and 2012, the Company granted stock options to purchase
an aggregate of 3,902,836, 2,158,950 and 516,325 ordinary shares (or prior to the Merger, shares of HPI common
stock), respectively, with a weighted average grant date fair value of $10.71, $2.23 and $3.44, respectively.

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 stock 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 stock 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 years ended December 31, 2014, 2013 and 2012, and
assumptions used to value stock options, are as follows:

Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average volatility . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average grant date fair value per share of

For the Years Ended December 31,

2014

2013

2012

—
1.9%
83.1%
6.11

—
1.2%
86.7%
5.98

—
1.0%
89.0%
5.96

options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8.88

$2.82

$2.50

Dividend yields

The Company has never paid dividends and does not anticipate paying any dividends in the near future.

Additionally, the Senior Secured Credit Facility contains covenants that restrict the Company from issuing
dividends.

Risk-Free Interest Rate

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.

Volatility

The Company used an average historical stock price volatility of comparable companies to be representative

of future stock price volatility, as the Company did not have sufficient trading history for its common stock.

F-45

Expected Term

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.

Forfeitures

As stock-based compensation expense recognized in the consolidated statements of operations 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. ASC 718 requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the year ended December 31, 2014:

Outstanding as of December 31, 2013 . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Units

833,001
1,312,722
(338,520)
(188,701)

Outstanding as of December 31, 2014 . . . . . . . . . . . . . . . . . .

1,618,502

Weighted Average
Grant-Date Fair
Value Per Units

$ 2.86
$10.55
$ 3.89
$ 4.73

$ 8.66

During the years ended December 31, 2014, 2013 and 2012, the Company granted 1,312,722, 730,000 and
520,000 restricted stock units to acquire shares of the Company’s ordinary shares (or prior to the Merger, shares
of HPI common stock) to its employees, respectively. The restricted stock units vest over a four-year period on
each anniversary of the vesting commencement date. In December 2013, the Company also granted 101,004 fully
vested deferred issuance restricted stock units to the Company’s named executive officers in connection with a
one-time bonus payment associated with the completion of the Company’s acquisition of the U.S. rights to
VIMOVO.

The following table summarizes share-based compensation expense included in the Company’s consolidated

statements of operations for the years ended December 31, 2014, 2013 and 2012 (in thousands):

For the Years Ended
December 31,

2014

2013

2012

Share-based compensation expense:

Research and development . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
General and administrative.

$ 1,515
4,174
7,509

$1,054
1,465
2,495

$1,186
1,090
2,385

Total share-based compensation expense . . . . . . . . . . .

$13,198

$5,014

$4,661

No income tax benefit has been recognized relating to stock-based compensation expense and no tax

benefits have been realized from exercised stock options, due to the Company’s net loss position. As of
December 31, 2014, the Company estimates that pre-tax unrecognized compensation expense of $39.1 million
for all unvested share-based awards, including both stock options and restricted stock units, will be recognized
through the first quarter of 2018. The Company expects to satisfy the exercise of stock options and future
distribution of shares of restricted stock by issuing new ordinary shares which have been reserved under the 2014
EIP.

F-46

Cash Bonus Program

On November 5, 2014, the compensation committee of the Company’s board of directors approved a
performance cash bonus program for the members of the Company’s executive committee and executive
leadership team, including its executive officers (the “Cash Bonus Program”). Participants in the Cash Bonus
Program will be eligible for a specified cash bonus, the amount of which bonus is determined by whether the
Company’s total compounded annualized shareholder rate of return (“TSR”) for the period from November 5,
2014 to May 6, 2015 is greater than or equal to a specified threshold that ranges between 15% and 60%, and
which bonus will be earned and payable only if the TSR for the period from November 5, 2014 to November 4,
2017 is greater than 15%. The TSR for these periods will be calculated using the 20-day volume weighted
average trading price of the Company’s ordinary shares. The total bonus pool that may be payable under the Cash
Bonus Program will be calculated as of May 6, 2015 and may range from $4.5 million to $17.0 million,
depending upon the TSR for the period from November 5, 2014 to May 6, 2015. The portion of the total bonus
pool payable to individual participants will be based on pre-determined allocations established by the Company’s
compensation committee. Participants must remain employed by the Company through November 4, 2017 unless
a participant’s earlier departure from employment is due to death, disability, termination without cause or a
change in control transaction, to be further defined in a written plan. Bonus payments under the Cash Bonus
Program, if any, will be made after November 4, 2017.

The Company accounts for the Cash Bonus Program under the liability method in accordance with ASC
Topic 718, Compensation–Stock Compensation. Because the value of the Cash Bonus Program pool is dependent
upon the attainment of a target level of TSR, it requires the impact of the market condition to be considered when
estimating the fair value of the bonus pool. As a result, the Monte Carlo model is applied and $1.6 million was
estimated to be the fair value of the award. As of December 31, 2014, the Company recorded $0.1 million of
expense related to the Cash Bonus Program.

NOTE 19 – RELATED PARTY TRANSACTIONS

On June 17, 2014, Mr. Robert De Vaere entered into an executive employment and transition agreement

with the Company (the “Transition Agreement”), as part of his transition as the Company’s then current
Executive Vice President and Chief Financial Officer, to a consulting position. Pursuant to the Transition
Agreement Mr. De Vaere (a) continued to serve as the Company’s Executive Vice President and Chief Financial
Officer through September 30, 2014, (b) will serve as a consultant to the Company for a fee of $50,000 per
month from October 1, 2014 through March 31, 2015, and (c) will serve as a consultant to the Company in a
reduced capacity for a fee of $20,000 per month from April 1, 2015 through September 30, 2015.

In connection with the Merger, the Company entered into an amendment to the employment agreement with
Dr. Virinder Nohria, one of its directors. Pursuant to the amendment to the employment agreement, Dr. Nohria’s
employment with Vidara was terminated, and Dr. Nohria received a $0.5 million lump sum payment that was
contingent on his execution of a general release of claims. The Company also entered into a consulting
agreement with Dr. Nohria. Pursuant to the consulting agreement, Dr. Nohria has been retained as a consultant by
the Company for a term of one year, and is being paid $10,000 per month of service as a consultant.

In November 2014, certain of our shareholders, including Dr. Nohria and an affiliated trust, sold a number
of Horizon Pharma plc ordinary shares in an underwritten public offering. As part of the offering, the Company
agreed to reimburse Dr. Nohria and his affiliated trust, as well as another selling shareholder, for certain of the
underwriting discounts otherwise payable by them in the offering. Based upon the sale by Dr. Nohria and his
affiliated trust of an aggregate of 2,784,512 shares in the offering, the Company reimbursed Dr. Nohria and his
affiliated trust a total of approximately $0.7 million.

F-47

NOTE 20 – INCOME TAXES

The Company’s loss before benefit for income taxes by jurisdiction for the years ended December 31, 2014,

2013 and 2012 is as follows (in thousands):

For the Years Ended December 31,

2014

2013

2012

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . .
Other Foreign . . . . . . . . . . . . . . . . . . . . . .

$ 22,164
(275,080)
(16,771)

—

$
(139,347)
(10,779)

—
56,038
(149,003)

Loss before benefit for income taxes . . . .

$(269,687)

$(150,126)

$ (92,965)

The components of the benefit for income taxes were as follows for the years ended December 31, 2014,

2013 and 2012 (in thousands):

For the Years Ended December 31,

2014

2013

2012

Current provision

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US - Federal and State . . . . . . . . . . . . . . . . .
Other Foreign . . . . . . . . . . . . . . . . . . . . . . . .

$ —
815
55

Total current provision . . . . . . . . . . . . . . . . .

870

$ —

4
43

4
35

Deferred benefit

Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
US - Federal and State . . . . . . . . . . . . . . . . .
Other Foreign . . . . . . . . . . . . . . . . . . . . . . . .

$ —
(3,860)
(3,094)

$ —
—
(1,168)

$ —
—
(5,210)

Total deferred benefit . . . . . . . . . . . . . . . . . .

(6,954)

(1,168)

(5,210)

Total benefit for income taxes . . . . . . . . . . . . . . .

$(6,084)

$(1,121)

$(5,171)

Total benefit for income taxes was $6.1 million, $1.1 million and $5.2 million for the years ended

December 31, 2014, 2013 and 2012, respectively. Current expense of $0.9 million for the year ended December
31, 2014 consisted primarily of alternative minimum tax. During the year ended December 31, 2014, the
Company released a portion of its valuation allowance as a result of the Merger. In connection with the Merger,
the Company recorded additional deferred tax liabilities related to certain acquired assets. Accordingly, the
Company recorded a net benefit for income taxes of $3.0 million for the release of its valuation allowance during
the third quarter of 2014. In addition, the Company eliminated its deferred tax liability of $3.0 million at its
Swiss subsidiary related to the intercompany sale of intellectual property in the fourth quarter of 2014. As a
result, the Company recorded an overall deferred tax benefit for income taxes of $7.0 million, including the net
effect of other deferred tax items, during the year ended December 31, 2014.

During the year ended December 31, 2014, the Company recorded a $215.0 million loss on the derivative

revaluation in connection with the increase in the fair value of the embedded derivative associated with the
Convertible Senior Notes. The loss on derivative revaluation was a permanent tax difference and is not
deductible for income tax reporting purposes. At the end of the third quarter of 2014, the capped call related to
the $150.0 million convertible debt was removed resulting in revaluation of the debt for tax purposes. As a result
of the debt revaluation (for tax purposes only), it was determined that an additional $22.8 million of interest
expense could be claimed. During the fourth quarter of 2014, $89.1 million of the $150.0 million of convertible
debt was converted resulting in a book loss on conversion of $29.4 million. The net result of the convertible debt
settlements was that $14.7 million of the additional interest expense is deductible as a permanent item and
$8.1 million as a temporary item for tax purposes.

F-48

The $6.1 million increase in the income tax benefit during the year ended December 31, 2014 related
primarily to the recognition of the effect of the Merger acquisition liabilities recorded in the third quarter of 2014
for $3.0 million and the elimination of the deferred tax liability due to the intercompany sale of intellectual
property in the fourth quarter of 2014 for $3.0 million. The $4.1 million decrease in the income tax benefit during
the year ended December 31, 2013 was primarily attributable to the absence of one-time tax benefits in 2013 that
were recorded during 2012.

As a result of the Merger in the third quarter of 2014, the Company changed its status from a U.S. company
to an Irish company. Consequently, the controlling statutory income tax rate with respect to the effective income
tax rate analysis is a 12.5% corporate tax rate for an Irish trading company versus the U.S. corporate rate of 35%.

A reconciliation between the Irish rate for 2014 and the U.S. federal statutory income tax rate for 2013 and

2012, respectively, and the Company’s effective tax is as follows (in thousands):

Irish income tax statutory rate (12.5%) . . . . . . . . . . . . .
US federal income tax at statutory rate (35%) . . . . . . . .
Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excise tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock based compensation . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
. . . . . . . . . . . . . . . . . . . . . .
Deferred taxes not benefited . . . . . . . . . . . . . . . . . . . . .
Derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notional interest deduction . . . . . . . . . . . . . . . . . . . . . .
Interest expense on convertible debt inducements . . . . .
Book loss on debt extinguishment . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended December 31,

2014

2013

2012

$(33,711)

—
(5,542)
5,402
3,911
1,460
(64,675)
7,360
75,248
(2,149)
(4,789)
10,286
1,115

$ —
(52,543)
—
—
—
1,107
2,019
23,921
24,255
—
—
—
120

$ —

(32,538)
—
—
—
1,063
4,376
21,715
—
—
—
—
213

Income tax benefit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (6,084)

$ (1,121)

$ (5,171)

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . .

-2.26%

-10.39%

34.70%

No provision has been made for income taxes on undistributed earnings of foreign subsidiaries because it is

the Company’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries. There are no
material undistributed foreign earnings. In the event of the distribution of those earnings in the form of dividends,
a sale of the subsidiaries, or certain other transactions, the Company may be liable for income taxes. As of
December 31, 2014, it was not practicable to determine the amount of the income tax liability related to those
investments.

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 a
valuation allowance 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 year that the change is enacted.

F-49

The tax effects of the temporary differences and net operating losses that give rise to significant portions of

deferred tax assets and liabilities are as follows (in thousands):

As of December 31,

2014

2013

Deferred tax assets:

Net operating and capital loss carry forwards . . . . . . . . . . . .
Alternative minimum tax credit . . . . . . . . . . . . . . . . . . . . . . .
Derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issuance discount related to capped call . . . . . . . . . .
Contingent royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . . . . . . .
Foreign intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 105,182
820
—
6,397
4,952
—
14,495
—
—

$ 121,001
—
14,799
—
7,073
6,740
3,122
2,571
63

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

131,846
(111,555)

155,369
(128,422)

Deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . .

20,291

26,947

Deferred tax liabilities:

Acquisition liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense on convertible debt inducements . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,068
4,791
3,306
—
—
7,137
1,989

—
14,477
—
—
13,009
2,823

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,291

30,309

Net deferred income tax liability . . . . . . . . . . . . . . . . . . . . . . . . . .

—

3,362

The decrease in the deferred tax valuation allowance was $16.9 million for the year ended December 31,

2014 and the increase in the valuation allowance was $32.5 million and $27.8 million for the years ended
December 31, 2013 and 2012, respectively. The decrease in the deferred tax valuation allowance in 2014 was due
primarily to the utilization of net operating losses in the United States and the release of allowances as a result of
acquired Merger liabilities and the intercompany asset sale noted above. The increase in the deferred tax
valuation allowance in 2013 was primarily the result of higher federal and state net operating losses, which were
fully reserved for due to the uncertainty surrounding the realization of these assets. A reconciliation of the
beginning and ending amounts of the valuation allowance for the years ended December 31, 2014 and 2013 are
as follows (in thousands):

Valuation allowance at December 31, 2012 . . . . . . . . . . . . .
Increase for current year activity . . . . . . . . . . . . . . . . .

Valuation allowance at December 31, 2013 . . . . . . . . . . . . .
Decrease for current year activity . . . . . . . . . . . . . . . . .
Release in valuation allowance . . . . . . . . . . . . . . . . . . .

$ (95,970)
(32,452)

$(128,422)
9,507
$
7,360

Valuation allowance at December 31, 2014 . . . . . . . . . . . . .

$(111,555)

As of December 31, 2014, the Company had net operating loss carryforwards of approximately $240.0
million, $55.0 million and $103.0 million available to reduce future taxable income, if any, for federal, state, and

F-50

foreign income tax purposes, respectively. Net operating loss carryforwards for federal income tax purposes will
begin to expire in 2027. State net operating losses expire approximately within the same time period as the
federal losses. Foreign net operating losses expire beginning in 2015. Utilization of the net operating loss
carryforwards may be subject to annual limitations as prescribed by federal and state statutory provisions. The
annual limitation may result in the expiration of net operating loss carryforwards prior to their utilization.

As of December 31, 2014 and 2013, the Company had research and development credit carryforwards for
federal and state income tax purposes of approximately $2.7 million and $0.4 million, respectively, available to
reduce future taxable income. In 2014, the Company determined it is more likely than not that these credits will
not be utilized. Accordingly, the deferred tax assets and the related ASC 740-10 reserve of $0.5 million was
reversed.

The Company accounts for the uncertainty in income taxes by utilizing a comprehensive model for the
recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that
have been taken or are expected to be taken on an income tax return. The changes in the Company’s uncertain
income tax positions for the years ended December 31, 2014, 2013 and 2012 consisted of the following (in
thousands):

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax positions related to current year:

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tax positions related to prior years:

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapses in statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions from current year acquisitions . . . . . . . . . . . . . . . . . . . . . . . .

For the Years
Ended
December 31,

2014

2013

$ 491

$442

775
—

775

—
(491)
—
—
—

(491)

51
—

—

(2)

—
—
—

(2)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 775

$491

As a result of the Merger, the Company acquired $0.8 million in ASC 740-10 liability with respect to net

operating loss carryovers. Further, as noted above, the Company abandoned its claim for research and
development tax credit carryovers and, accordingly, reversed the ASC 740-10 reserve of $0.5 million set up in
prior years.

The Company has assessed that its liability for unrecognized income tax benefits will not significantly
change within the next twelve months. If these unrecognized tax benefits are recognized, the impact on the
Company’s effective tax rate would be immaterial. Additionally, there was no interest or penalties accrued at
December 31, 2014 and 2013, respectively, due to the Company’s net operating loss position.

The Company files income tax returns in the U.S. federal and in various state and foreign jurisdictions. At

December 31, 2014, all open tax years in the federal and some state jurisdictions date back to 2005 due to the
taxing authorities’ ability to adjust operating loss carryforwards. No changes in settled tax years have occurred
through December 31, 2014 and the Company does not anticipate there will be a material change in the total
amount of unrecognized tax benefits within the next 12 months.

F-51

The Company realized no income tax benefit from stock option exercises in each of the periods presented in

these financial statements due to recurring losses and valuation allowances. As of December 31, 2014, the
Company had $0.3 million of total unrecognized compensation expense.

The Company classifies interest and penalties with respect to income tax liabilities as a component of

income tax expense.

NOTE 21 – EMPLOYEE BENEFIT PLANS

The Company sponsors a defined contribution 401(k) retirement savings plan covering all of its U.S.

employees, whereby an eligible employee may elect to contribute a portion of his or her salary on a pre-tax basis,
subject to applicable federal limitations. The Company is not required to make any discretionary matching of
employee contributions. Beginning in 2014, the Company made a matching contribution generally equal to 50%
of each employee’s elective contribution to the plan of up to six percent of the employee’s eligible pay with a
20% graded vesting over five years. For the years ended December 31, 2014, the Company recorded defined
contribution expense of $0.8 million and for the years ended December 31, 2013 and 2012, the Company did not
record any expense under the plan.

The Company’s wholly-owned subsidiary, Horizon Pharma AG, sponsors a defined benefit savings plan

covering all of its employees in Switzerland and a defined contribution plan for its employees in Germany. For
the years ended December 31, 2014, 2013 and 2012, the Company recognized expenses of $0.1 million each,
under these plans.

NOTE 22 – SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table provides a summary of selected financial results of operations by quarter for the years

ended December 31, 2014 and 2013 (in thousands, except per share data):

2014

First

Second

Third

Fourth

$ 51,926
44,307
1,587
(206,250)

$ 66,062
41,252
(7,100)
(27,769)

(3.07) $

(0.38) $

$ 75,126
61,482
(11,961)
2,063
0.03

$ 103,841
71,161
8,983
(31,647)
(0.27)

First

Second

Third

Fourth

8,693
4,924
(18,544)
(22,171)

$ 11,131
8,737
(15,804)
(18,441)

(0.36) $

(0.29) $

$ 24,112
20,905
(2,744)
(5,492)
(0.08) $

$ 30,080
24,825
(5,762)
(102,901)
(1.56)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income per ordinary share-basic and diluted . . . . . . . .

2013

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss per ordinary share-basic and diluted . . . . . . . . . . . . . . . .

F-52

Report of Independent Registered Public Accounting Firm on
Financial Statement Schedule

To the Board of Directors
of Horizon Pharma plc:

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial
reporting referred to in our report dated February 27, 2015 appearing in the 2015 Annual Report to Shareholders
of Horizon Pharma plc (which report and consolidated financial statements are incorporated by reference in this
Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 15(a)(2) of
this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 27, 2015

HORIZON PHARMA PLC

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

For Each of the Three Fiscal Years Ended December 31, 2014, 2013 and 2012:

Valuation and Qualifying Accounts
(in thousands)

Year ended December 31, 2014:

Balance at
beginning
of period

Additions

Charged to
costs and
expenses

Deductions
from
reserves

Balance at
end of
period

Allowance for discounts and returns . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . .

$
431
$128,422

18,254
—

(14,202)
(16,867)

$
4,483
$111,555

Year ended December 31, 2013:

Allowance for discounts and returns . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . .

$
77
$ 95,970

3,270
32,452

(2,916)

$
431
— $128,422

Year ended December 31, 2012:

Allowance for discounts and returns . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . .

170
$
$ 68,194

365
32,034

(458)
(4,258)

77
$
$ 95,970

Exhibit
Number

2.1(15)

INDEX TO EXHIBITS

Description of Document

Transaction Agreement and Plan of Merger, dated March 18, 2014, by and among 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(17)

First Amendment to Transaction Agreement and Plan of Merger, dated June 12, 2014, by and
between Horizon Pharma, Inc. and Vidara Therapeutics Holdings LLC.

3.1(20)

Memorandum and Articles of Association of Horizon Pharma Public Limited Company.

4.1(1)*** Warrant issued by Horizon Pharma, Inc. on December 18, 2007 to Comerica Bank.

4.2(1)*** Warrant issued by Horizon Pharma, Inc. on December 18, 2007 to Hercules Technology Growth

Capital, Inc.

4.3(1)*** Warrant issued by Horizon Pharma, Inc. on November 21, 2008 to Comerica Bank.

4.4(1)*** Warrant issued by Horizon Pharma, Inc. on November 21, 2008 to Hercules Technology Growth

Capital, Inc.

4.5(3)***

Form of Warrant issued by Horizon Pharma, Inc. pursuant to the Securities Purchase Agreement,
dated February 28, 2012, by and among Horizon Pharma, Inc. and the Purchasers and Warrant
Holders listed therein.

4.6(6)***

Form of Warrant issued by Horizon Pharma, Inc. in Public Offering of Units.

4.7(12)

4.8(20)

Indenture, dated as of November 22, 2013, by and between Horizon Pharma, Inc. and U.S. Bank
National Association.

First Supplemental Indenture, dated September 19, 2014, by and among Horizon Pharma, Inc.,
Horizon Pharma Public Limited Company and U.S Bank National Association.

4.9(12)

Form of 5.00% Convertible Senior Note due 2018.

4.10(20)

Registration Rights Agreement, dated September 1, 2014, by and among Vidara Therapeutics
International plc (now known as Horizon Pharma Public Limited Company), Vidara Therapeutics
Holdings LLC and certain shareholders of Vidara Therapeutics International plc.

10.1(20)

10.2(20)

Form of Indemnification Agreement entered into by and between Horizon Pharma Public Limited
Company and certain of its directors, officers and employees.

Form of Indemnification Agreement entered into by and between Horizon Pharma, Inc. and
certain directors, officers and employees of Horizon Pharma Public Limited Company.

10.3+(20)

Horizon Pharma Public Limited Company Non-Employee Director Compensation Policy.

10.4+(1)*** Horizon Pharma, Inc. 2005 Stock Plan and Form of Stock Option Agreement thereunder.

10.5+(11)*** Horizon Pharma, Inc. 2011 Equity Incentive Plan, as amended, and Form of Option Agreement

and Form of Stock Option Grant Notice thereunder.

10.6+(1)*** Horizon Pharma, Inc. 2011 Employee Stock Purchase Plan and Form of Offering Document

thereunder.

10.7+(21)

10.8+(21)

Horizon Pharma Public Limited Company 2014 Equity Incentive Plan 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.

Horizon Pharma Public Limited Company 2014 Non-Employee Equity Incentive Plan 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.

Exhibit
Number

Description of Document

10.9+(21)

Horizon Pharma Public Limited Company 2014 Employee Share Purchase Plan.

10.10*(1)

10.11*(1)

Development and License Agreement, dated August 20, 2004, by and among Horizon Pharma
AG, Jagotec AG and SkyePharma AG.

Amendment to Development and License Agreement, dated August 3, 2007, by and among
Horizon Pharma AG, Jagotec AG and SkyePharma AG.

10.12*(1) Manufacturing and Supply Agreement, dated August 3, 2007, by and between Horizon Pharma

AG and Jagotec AG.

10.13*(1)

10.14*(1)

10.15*(1)

Technology Transfer Agreement, dated August 2, 2004, by and among Horizon Pharma AG,
Horizon Pharma GmbH and Merck KgaA.

Transfer, License and Supply Agreement, dated December 21, 2006, by and among Horizon
Pharma AG, Horizon Pharma GmbH and Merck Serono GmbH (which was subsequently assigned
to Mundipharma Laboratories GmbH in April 2011).

Amendment to Transfer, License and Supply Agreement, dated December 17, 2008, by and
among Horizon Pharma AG, Horizon Pharma GmbH and Merck Serono GmbH (which was
subsequently assigned to Mundipharma Laboratories GmbH in April 2011).

10.16*(1)

Transfer, License and Supply Agreement, dated March 26, 2009, by and among Horizon Pharma
AG, Horizon Pharma GmbH and Merck GesmbH.

10.17+(1)

Form of Employee Proprietary Information and Inventions Agreement.

10.18*(1) Manufacturing and Supply Agreement, dated March 24, 2009, by and between Horizon Pharma

AG and Mundipharma Medical Company.

10.19*(1)

10.20(1)

10.21+(1)

10.22+(1)

10.23*(1)

Exclusive Distribution Agreement, dated March 24, 2009, by and between Horizon Pharma AG
and Mundipharma International Corporation Limited.

Amendment to Exclusive Distribution Agreement, dated July 7, 2009, by and between Horizon
Pharma AG and Mundipharma International Corporation Limited.

Amended and Restated Executive Employment Agreement, dated July 27, 2010, by and between
Horizon Pharma, Inc., Horizon Pharma USA, Inc. and Timothy P. Walbert.

Amended and Restated Executive Employment Agreement, dated July 27, 2010, by and between
Horizon Pharma, Inc., Horizon Pharma USA, Inc. and Jeffrey W. Sherman, M.D. FACP.

Amendment to Manufacturing and Supply Agreement, dated March 4, 2011, by and between
Horizon Pharma AG and Jagotec AG.

10.24*(1) Manufacturing and Supply Agreement, dated May 25, 2011, by and between Horizon Pharma

USA, Inc. and sanofi-aventis U.S. LLC.

10.25*(1)

Sales Contract, dated July 1, 2010, by and between Horizon Pharma USA, Inc. and BASF
Corporation.

10.26*(1) Manufacturing and Supply Agreement, dated November 4, 2010 by and between Horizon Pharma

AG and Mundipharma Medical Company.

10.27*(1)

10.28*(1)

Exclusive Distribution Agreement, dated November 4, 2010 by and between Horizon Pharma AG
and Mundipharma International Corporation Limited.

Letter Agreement, dated March 2, 2011, by and among Horizon Pharma AG, Horizon Pharma
GmbH, Mundipharma International Corporation Limited and Mundipharma Medical Company.

10.29*(10) Amendment to Manufacturing and Supply Agreement, effective as of September 25, 2013, by and

between Horizon Pharma USA, Inc. and sanofi-aventis U.S. LLC.

Exhibit
Number

10.30*(2)

10.31(9)

10.32*(9)

10.33*(4)

10.34(4)

Description of Document

Standard Office Lease, effective August 31, 2011, by and between Horizon Pharma USA, Inc. and
Long Ridge Office Portfolio, L.P.

Letter Agreement, dated October 17, 2012, by and among Horizon Pharma AG, Mundipharma
International Corporation Limited and Mundipharma Medical Company.

Letter Agreement, dated March 21, 2013, by and among Horizon Pharma AG, Mundipharma
International Corporation Limited and Mundipharma Medical Company.

Amendment No. 1 to Exclusive Distribution Agreement, dated March 5, 2012, by and between
Horizon Pharma AG and Mundipharma International Corporation Limited.

Amendment No. 1 to Manufacturing and Supply Agreement, dated March 5, 2012, by and
between Horizon Pharma AG and Mundipharma Medical Company.

10.35+(5)

Amended and Restated Severance Benefit Plan Dated March 1, 2012.

10.36*(7)

First Amendment to Lease, dated July 31, 2012, by and between Horizon Pharma USA, Inc. and
Long Ridge Office Portfolio, L.P.

10.37*(14)

Second Amendment to Lease, dated December 10, 2013, by and between Horizon Pharma USA,
Inc. and Long Ridge Office Portfolio, L.P.

10.38*(19) Third Amendment to Lease, dated June 30, 2014, by and between Horizon Pharma USA, Inc. and

Long Ridge Office Portfolio, L.P.

10.39*(8)

Second Letter Agreement, dated October 6, 2011, by and among Horizon Pharma AG,
Mundipharma International Corporation Limited and Mundipharma Medical Company.

10.40*(14) Amendment No. 2 to Exclusive Distribution Agreement, dated October 25, 2013, by and between

Horizon Pharma AG and Mundipharma International Corporation Limited.

10.41(14)

Amendment No. 2 to Manufacturing and Supply Agreement, dated October 25, 2013, by and
between Horizon Pharma AG and Mundipharma Medical Company.

10.42*(10)

Settlement Agreement, dated August 21, 2013, by and among Horizon Pharma, Inc., Horizon
Pharma USA, Inc., Par Pharmaceutical Companies, Inc. and Par Pharmaceutical, Inc.

10.43*(10) License Agreement, dated August 21, 2013, by and among Horizon Pharma, Inc., Horizon Pharma

USA, Inc., Par Pharmaceutical Companies, Inc. and Par Pharmaceutical, Inc.

10.44*(16) Asset Purchase Agreement, dated November 18, 2013, by and between Horizon Pharma USA,

Inc. and AstraZeneca AB.

10.45*(16) License Agreement, dated November 22, 2013, by and between Horizon Pharma USA, Inc. and

AstraZeneca AB.

10.46*(16) Amended and Restated Collaboration and License Agreement for the United States, dated

November 18, 2013, by and between Horizon Pharma USA, Inc. and POZEN Inc.

10.47*(14) Amendment No. 1 to Amended and Restated Collaboration and License Agreement for the
United States , dated November 18, 2013, by and between Horizon Pharma USA, Inc. and
POZEN Inc.

10.48*(14) Letter Agreement, dated November 18, 2013, by and among Horizon Pharma USA, Inc.,

AstraZeneca AB and POZEN Inc.

10.49*(16) Master Manufacturing Services Agreement, dated October 31, 2013, by and between Horizon

Pharma, Inc. and Patheon Pharmaceuticals, Inc.

10.50+(13)

First Amendment to Amended and Restated Executive Employment Agreement, dated January 16,
2014, by and among Horizon Pharma, Inc., Horizon Pharma USA, Inc. and Timothy P. Walbert.

Exhibit
Number

10.51+(13)

Description of Document

First Amendment to Amended and Restated Executive Employment Agreement, dated January 16,
2014, by and among Horizon Pharma, Inc., Horizon Pharma USA, Inc. and Jeffrey W. Sherman,
M.D., FACP.

10.52+(14) Executive Employment Agreement, effective March 5, 2014, by and among Horizon Pharma,

Inc., Horizon Pharma USA, Inc. and Robert F. Carey.

10.53+(17) Executive Employment and Transition Agreement, dated June 17, 2014, by and among Horizon

Pharma, Inc., Horizon Pharma USA, Inc. and Robert J. De Vaere.

10.54+(17) Executive Employment Agreement, effective June 23, 2014, by and among Horizon Pharma, Inc.,

Horizon Pharma USA, Inc. and Paul W. Hoelscher.

10.55(18)

10.56(22)

10.57(22)

10.58

10.59

10.60

10.61*

10.62*

10.63

10.64*

10.65*

10.66

10.67

10.68*

10.69*

10.70

Credit Agreement, dated June 17, 2014, by and among Horizon Pharma, Inc., as initial signatory,
the lenders party thereto and Citibank N.A., as administrative agent and collateral agent.

Asset Purchase Agreement, dated October 17, 2014, by and between Horizon Pharma Public
Limited Company and Nuvo Research Inc.

Supply Agreement, dated October 17, 2014, by and between Horizon Pharma Public Limited
Company and Nuvo Research Inc.

Lease, dated November 4, 2014, by and among Horizon Pharma Public Limited Company,
Horizon Pharma Services Limited and John Ronan and Castle Cove Property Developments
Limited.

Asset Purchase Agreement, dated May 17, 2012, by and among Vidara Therapeutics International
Public Limited Company, Vidara Therapeutics Holdings LLC, Vidara Therapeutics Research
Limited and InterMune, Inc.†

Amendment to Asset Purchase Agreement, dated June 18, 2012, by and
among Vidara Therapeutics International Public Limited Company, Vidara Therapeutics Holdings
LLC, Vidara Therapeutics Research Limited and InterMune, Inc.

Consolidated Supply Agreement, dated July 31, 2013, by and between Vidara Therapeutics
Research Limited and Boehringer Ingelheim RCV GmbH & Co KG.

License Agreement for Interferon Gamma, dated May 5, 1998, by and between Genentech, Inc.
and Connetics Corporation.

Amendment No. 1 to License Agreement for Interferon Gamma, dated December 28, 1998, by
and between Genentech, Inc. and Connetics Corporation.

Amendment No. 2 to License Agreement for Interferon Gamma, dated January 15, 1999, by and
between Genentech, Inc. and Connetics Corporation.

Amendment No. 3 to License Agreement for Interferon Gamma, dated April 27, 1999, by and
between Genentech, Inc. and Connetics Corporation.

Consent to Assignment Agreement, dated June 23, 2000 (Amendment No. 4), by and among
Genentech, Inc., Connetics Corporation and InterMune Pharmaceuticals, Inc.

Amendment No. 5 to License Agreement for Interferon Gamma, dated January 25, 2001, by and
between Genentech, Inc. and InterMune Pharmaceuticals, Inc.

Amendment No. 6 to License Agreement for Interferon Gamma, dated February 27, 2006, by and
between Genentech, Inc. and InterMune, Inc.

Amendment No. 7 to License Agreement for Interferon Gamma, dated December 17, 2013, by
and between Genentech, Inc. and Vidara Therapeutics International Public Limited Company.

Assignment and Option Agreement, dated June 23, 2000, by and between Connetics Corporation
and InterMune Pharmaceuticals, Inc.

Exhibit
Number

10.71

10.72

10.73+

10.74+

10.75+

10.76+

10.77**

10.78

21.1

23.1

24.1

31.1

31.2

32.1

32.2

Description of Document

Revenue Adjustment Agreement, dated June 27, 2000, by and between InterMune
Pharmaceuticals, Inc. and Connetics Corporation.

License Agreement, dated April 16, 2012, by and among Benton Property Holding Limited (in
receivership), Jim Hamilton and Vidara Therapeutics Research Limited.

Consulting Agreement, dated March 18, 2014 between Horizon Pharma USA, Inc. and Virinder
Nohria.

Executive Employment Agreement, effective September 18, 2014, by and among Horizon
Pharma, Inc., Horizon Pharma USA, Inc. and Barry Moze.

Executive Employment Agreement, effective November 24, 2014, by and among Horizon
Pharma, Inc., Horizon Pharma USA, Inc. and John Kody.

Horizon Pharma Public Limited Company Cash Long Term Incentive Program.

Amendment No. 3 to Exclusive Distribution Agreement, dated September 22, 2014, by and
between Horizon Pharma AG and Mundipharma International Corporation Limited.

Amendment No. 3 to Manufacturing and Supply Agreement, dated September 22, 2014, by and
between Horizon Pharma AG and Mundipharma Medical Company.

Subsidiaries of Horizon Pharma Public Limited Company.

Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.

Power of Attorney. Reference is made to the signature page hereto.

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
Exchange Act.

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
Exchange Act.

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.

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

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

+
†

***

Indicates management contract or compensatory plan.
Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Horizon Pharma Public
Limited Company undertakes to furnish supplemental copies of any of the omitted schedules upon request
by the Securities and Exchange Commission.
Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions
have been filed separately with the Securities and Exchange Commission.
Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions
have been filed separately with the Securities and Exchange Commission.
Indicates an instrument, agreement or compensatory arrangement or plan assumed by Horizon Pharma
Public Limited Company in the merger and no longer binding on Horizon Pharma, Inc.

(1)

(2)

(3)
(4)
(5)

(6)

(7)

(8)

(9)

(10)

(11)
(12)

(13)

(14)

(15)

(16)

(17)
(18)
(19)

(20)

(21)

(22)

Incorporated by reference to Horizon Pharma, Inc.’s Registration Statement on Form S-1 (No.
333-168504), as amended.
Incorporated by reference to Horizon Pharma, Inc.’s Quarterly Report on Form 10-Q, filed on
November 14, 2011.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on March 1, 2012.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on March 8, 2012.
Incorporated by reference to Horizon Pharma, Inc.’s Annual Report on Form 10-K, filed on March 23,
2012.

Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on September 20,
2012.
Incorporated by reference to Horizon Pharma, Inc.’s Quarterly Report on Form 10-Q, filed on
November 13, 2012.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on September 7,
2012.
Incorporated by reference to Horizon Pharma, Inc.’s Quarterly Report on Form 10-Q, filed on May 10,
2013.
Incorporated by reference to Horizon Pharma, Inc.’s Quarterly Report on Form 10-Q, filed on November 8,
2013.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on July 2, 2014.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on November 25,
2013.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on January 16,
2014.
Incorporated by reference to Horizon Pharma, Inc.’s Annual Report on Form 10-K, filed on March 13,
2014.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on March 20,
2014.
Incorporated by reference to Horizon Pharma, Inc.’s Amendment No.1 to Annual Report on Form 10-K,
filed on May 23, 2014.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on June 18, 2014.
Incorporated by reference to Horizon Pharma, Inc.’s Current Report on Form 8-K, filed on June 19, 2014.
Incorporated by reference to Horizon Pharma, Inc.’s Quarterly Report on Form 10-Q, filed on August 7,
2014.
Incorporated by reference to Horizon Pharma Public Limited Company’s Current Report on Form 8-K,
filed on September 19, 2014.
Incorporated by reference to Horizon Pharma Public Limited Company’s Registration Statement on
Form S-8, filed on September 22, 2014.
Incorporated by reference to Horizon Pharma Public Limited Company’s Current Report on Form 8-K,
filed on October 17, 2014.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(in thousands, except share and per share amounts)

For the Year Ended
December 31, 2014

(Unaudited)

Adjusted Non-GAAP Net Income:

GAAP Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP Adjustments:

(263,603)

Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vidara acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENNSAID acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on induced debt conversion / debt extinguishment . . . . . . . . . . . . . . . . . . . . . . .
Secondary offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax benefit resulting from a reduction in valuation allowance due to

acquisition related deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remeasurement of VIMOVO and ACTIMMUNE royalty liabilities . . . . . . . . . . . . .
Loss on derivative revaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization and accretion:

Intangible amortization expense (net of tax effect) . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and deferred financing costs . . . . . . . . . . . . . . . .
Accretion of royalty liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of inventory step-up adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(22,171)
48,427
408
29,390
2,857

(3,048)
10,660
214,995

30,969
9,273
9,020
11,065
(644)
13,198
1,702

Total non-GAAP adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

356,101

Adjusted Non-GAAP Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92,498

Weighted average shares - Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83,751,129

Adjusted Non-GAAP Net Income Per Share - Basic:

GAAP net loss per share - Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted Non-GAAP Net Income per share - Basic . . . . . . . . . . . . . . . . . . . . . . . .

(3.15)
4.25

1.10

Weighted average shares - Diluted

Weighted average shares - Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ordinary stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

83,751,129
20,737,726

Weighted average shares - Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104,488,855

Adjusted Non-GAAP Net Income Per Share - Diluted:

Adjusted Non-GAAP Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Convertible debt interest expense, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

Adjusted Non-GAAP Net Income - Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

GAAP net loss per share - Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share effect of ordinary share equivalents . . . . . . . . . . . . . . . . .

Adjusted Non-GAAP Net Income per share - Diluted . . . . . . . . . . . . . . . . . . . . . .

92,498
6,834

99,332

(3.15)
4.25
(0.15)

0.95

ADDITIONAL GAAP TO NON-GAAP RECONCILIATION
EBITDA

(in thousands)

For the Year Ended
December 31, 2014

(Unaudited)

EBITDA and Adjusted EBITDA:

GAAP Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization and accretion:

$(263,603)
1,702

Intangible amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of royalty liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of inventory step-up adjustment

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

costs)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,306
9,020
(644)
11,065

23,826
(6,084)

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(192,412)

Non-GAAP adjustments:

Remeasurement of VIMOVO and ACTIMMUNE royalty liabilities . . . . . . . . . . . . .
Bargain purchase gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on derivative revaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vidara acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENNSAID acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on induced debt conversion / debt extinguishment . . . . . . . . . . . . . . . . . . . . . . .
Secondary offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,660
(22,171)
214,995
48,427
408
29,390
2,857
13,198

Total Non-GAAP adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 297,764

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 105,352

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MANAGEMENT EXECUTIVE COMMITTEE