In July 2021, the Company completed the purchase of a drug product biologics manufacturing facility from EirGen Pharma Limited (“EirGen”), a subsidiary of OPKO Health, Inc. in Waterford, Ireland for $67.9 million, which included an upfront cash payment of $64.8 million and $3.1 million of additional transaction costs, legal fees and liabilities assumed. The facility, which is located in an Industrial Development Agency Ireland (“IDA Ireland”) business park, includes a filling line and lyophilizer, or freeze dryer, that can be used for certain of the Company’s commercial medicines, including its rare disease biologics TEPEZZA, KRYSTEXXA and UPLIZNA, as well as certain of its medicine candidates in development, following build-out, validation and regulatory approval processes. The Company accounted for the transaction as an asset acquisition.

On March 15, 2021, the Company completed its acquisition of Viela Bio, Inc. (“Viela”) and acquired all of the issued and outstanding shares of Viela’s common stock for $53.00 per share. The acquisition added an additional rare disease medicine, UPLIZNA, to the Company’s commercial medicine portfolio. The Viela acquisition also provides multiple opportunities to drive long-term growth and solidify the Company’s future as an innovation-driven biotech company. Viela’s mid-stage biologics pipeline, R&D team and on-market medicine UPLIZNA, made it a complementary strategic fit with the Company’s pipeline, commercial portfolio and therapeutic areas of focus. Following completion of the acquisition, Viela became a wholly-owned subsidiary of the Company. The Company financed the transaction through cash on hand and $1.6 billion of aggregate principal amount of term loans pursuant to the Company’s existing credit agreement, as described in Note 13.

During the year ended December 31, 2021, the Company incurred $28.6 million in Viela transaction costs, including advisory, legal, accounting, valuation and other professional and consulting fees, which were accounted for as “Selling, general and administrative expenses” in the consolidated statement of comprehensive income.

Pursuant to ASC 805, the Company accounted for the Viela acquisition as a business combination using the acquisition method of accounting. Identifiable assets and liabilities of Viela, including identifiable intangible assets, were recorded based on their estimated fair values as of the date of the closing of the acquisition. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. While all amounts were subject to adjustments, the areas subject to the most significant potential adjustments were inventory, intangible assets, IPR&D assets and deferred income taxes. As a result, the Company recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Such preliminary valuation required estimates and assumptions including, but not limited to, estimating future cash flows and direct costs in addition to developing the appropriate discount rates and current market profit margins. The Company’s management believes the fair values recognized for the assets acquired and the liabilities assumed were based on reasonable estimates and assumptions.

During the year ended December 31, 2021, the Company recorded measurement period adjustments related to deferred tax liabilities, accrued expenses and other current liabilities, accrued trade discounts and rebates, accounts receivable, prepaid expenses and other current assets and inventory, which resulted in a net reduction in goodwill of $9.7 million.

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


	Before			Adjustments			After
Deferred tax liabilities, net	$	(457,928	)	$	6,589		$	(451,339	)
Accrued expenses and other current liabilities		(73,401	)		(335	)		(73,736	)
Other long-term liabilities		(22,631	)		—			(22,631	)
Accounts payable		(4,768	)		—			(4,768	)
Accrued trade discounts and rebates		(1,492	)		(373	)		(1,865	)
Marketable securities		400			—			400
Property, plant and equipment		1,747			—			1,747
Other long-term assets		3,253			1,613			4,866
Accounts receivable		8,053			(267	)		7,786
Prepaid expenses and other current assets		16,444			152			16,596
Inventories		149,348			2,300			151,648
Cash and cash equivalents		342,347			—			342,347
In-process research and development		910,000			—			910,000
Developed technology		1,460,000			—			1,460,000
(Liabilities assumed) and assets acquired		2,331,372			9,679			2,341,051
Goodwill		662,719			(9,679	)		653,040
Fair value of consideration paid	$	2,994,091		$	—		$	2,994,091

Inventories acquired included raw materials, work in process and finished goods for UPLIZNA. Inventories were recorded at their estimated fair values. The fair value of finished goods was determined based on the estimated selling price, net of selling costs and a margin on the selling activities. The fair value of work in process was determined based on estimated selling price, net of selling costs and costs to complete the manufacturing, and a margin on the selling and manufacturing activities. The fair value of raw materials was estimated to equal the replacement cost. A step-up in the value of inventory of $149.3 million was originally recorded in connection with the acquisition, which was composed of $10.1 million for raw materials, $119.0 million for work-in-process and $20.2 million for finished goods. During the year ended December 31, 2021, the step-up in value of inventory was increased to $151.6 million following the recording of $2.3 million in measurement period adjustments which was composed of $1.9 million for work-in-process and $0.4 million for finished goods. During the year ended December 31, 2022, the Company recorded inventory step-up expense of $91.7 million related to UPLIZNA based on the acquired units sold during the period. During the year ended December 31, 2021, the Company recorded inventory step-up expense of $27.6 million related to UPLIZNA based on the acquired units sold during the period.

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

Developed technology as of the acquisition date was an intangible asset that reflected the estimated fair value of the rights to UPLIZNA in the United States. The estimated fair values of the developed technology represent valuations performed with the assistance of an independent appraisal firm based on management’s estimates, forecasted financial information and reasonable and supportable assumptions. The fair value of developed technology was determined using an income approach. The income approach explicitly recognizes that the fair value of an asset is premised upon the expected receipt of future economic benefits such as earnings and cash inflows based on current sales projections and estimated direct costs for UPLIZNA. Indications of value were developed by discounting these benefits to their acquisition-date fair value at a discount rate of 11.5% that reflects the return requirements of the market.

Some of the most significant assumptions inherent in the development of the asset valuation include the estimated net cash flows for each year (including net sales, cost of goods sold, sales and marketing costs and R&D costs) and the discount rate. The fair value of the UPLIZNA developed technology was capitalized as of the Viela acquisition date and is subsequently being amortized over approximately 14 years.

Each IPR&D asset is considered separable from the business as each project could be sold to a third party. The fair value of each IPR&D asset 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 12.5% that reflects the return requirements of the market. Some of the most significant assumptions inherent in the development of the asset valuations include the estimated net cash flows for each year (including net sales, cost of goods sold, sales and marketing costs and R&D costs), the discount rate, the assessment of each asset’s life cycle and the potential regulatory and commercial success risk. The fair value of the various IPR&D assets 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. The Company reviews amounts capitalized as acquired IPR&D for impairment annually and whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable.

Deferred tax assets and liabilities arise from acquisition accounting adjustments where book values of certain assets and liabilities differ from their tax bases. Deferred tax assets and liabilities are recorded at the currently enacted rates which will be in effect at the time when the temporary differences are expected to reverse in the country where the underlying assets and liabilities are located. The developed technology, IPR&D assets and inventory acquired through the Viela acquisition were located in the United States as of the acquisition date, where a U.S. tax rate of 23.8% was utilized and a significant deferred tax liability of $451.3 million was recorded.

Goodwill represents the excess of the total consideration over the estimated fair value of net assets acquired and was recorded in the consolidated balance sheet as of the acquisition date. The goodwill was primarily attributable to the establishment of a deferred tax liability for the developed technology intangible asset and the IPR&D intangible assets. Viela’s mid-stage biologics pipeline, R&D team and on-market medicine UPLIZNA, made it a complementary strategic fit with the Company’s pipeline, commercial portfolio and therapeutic areas of focus. The Company does not expect any portion of this goodwill to be deductible for tax purposes.

The following table presents certain pro forma combined results of the Company and Viela for the years ended December 31, 2021 and 2020 as if the acquisition of Viela had occurred on January 1, 2020 (in thousands):


	For the Year Ended December 31,
	2021							2020
	As reported		Pro forma adjustments			Pro forma		As reported		Pro forma adjustments			Pro forma
Net sales	$	3,226,410	$	10,588		$	3,236,998	$	2,200,429	$	11,652		$	2,212,081
Net income		534,491		(30,804	)		503,687		389,796		(291,730	)		98,066

The pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and Viela. In order to reflect the pro forma information as if the acquisition occurred on January 1, 2020, the pro forma financial information includes adjustments to reflect incremental amortization expense to be incurred based on the current fair values of the identifiable intangible assets acquired; the incremental cost of medicines sold related to the fair value adjustments associated with acquisition date inventory; the additional interest expense associated with the issuance of debt to finance the acquisition; and the reclassification of transaction costs incurred during the year ended December 31, 2021 to the year ended December 31, 2020. Significant non-recurring pro forma adjustments include transaction costs of $86.6 million which were assumed to have been incurred on January 1, 2020 and were recognized as if incurred during the year ended December 31, 2020. The pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition actually been completed on January 1, 2020. In addition, the pro forma financial information is not a projection of future results of operations of the combined company nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

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

Under the terms of the acquisition agreement, the Company acquired Curzion for a $45.0 million upfront cash payment with additional payments contingent on the achievement of development and regulatory milestones. Pursuant to ASC 805 (as amended by ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU No. 2017-01”)), the Company accounted for the Curzion acquisition as the purchase of an IPR&D asset and, pursuant to ASC Topic 730, Research and Development (“ASC 730”), recorded the purchase price as acquired IPR&D and milestones expenses during the year ended December 31, 2020. HZN-825 was originally discovered and developed by Sanofi-Aventis U.S. LLC, which is eligible to receive contingent payments upon the achievement of development and commercialization milestones and royalties based on revenue thresholds. A member of the Company’s board of directors was also a member of the board of directors of, and held a beneficial interest in, Curzion. This related party transaction was conducted in the normal course of business on an arm’s length basis.

On October 27, 2020, the Company sold its rights to develop and commercialize RAVICTI and BUPHENYL in Japan to Medical Need Europe AB, part of the Immedica Group, for $5.4 million and recorded a gain of $4.9 million on the sale in the fourth quarter of 2020. The Company has retained the rights to RAVICTI and BUPHENYL in North America.

On May 8, 2017, the Company acquired 100% of the equity interests in River Vision Development Corp. (“River Vision”) for upfront cash payments totaling approximately $150.3 million, including cash acquired of $6.3 million, with additional potential future milestone and royalty payments contingent on the satisfaction of certain regulatory milestones and sales thresholds. Pursuant to ASU No. 2017-01, the Company accounted for the River Vision acquisition as the purchase of an IPR&D asset (teprotumumab, now known as TEPEZZA) and, pursuant to ASC 730, recorded the purchase price as R&D expense during the year ended December 31, 2017.

Under the acquisition agreement for River Vision, the Company agreed to pay up to $325.0 million upon the attainment of various milestones, composed of $100.0 million related to U.S. Food and Drug Administration (“FDA”) approval and $225.0 million related to net sales thresholds for TEPEZZA. The agreement also includes a royalty payment of 3 percent of the portion of annual worldwide net sales exceeding $300.0 million. The Company made the milestone payment of $100.0 million related to FDA approval during the first quarter of 2020 which is now capitalized as a finite-lived intangible asset representing the developed technology for TEPEZZA.

Additionally, under the Company’s license agreement with Roche, the Company made a milestone payment of CHF5.0 million ($5.2 million when converted using a CHF-to-Dollar exchange rate at the date of payment of 1.0382), during the first quarter of 2020 which the Company also capitalized as a finite-lived intangible asset representing the developed technology for TEPEZZA.

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

In addition, during the year ended December 31, 2020, the Company recorded $120.8 million as a finite-lived intangible asset representing the developed technology for TEPEZZA, composed of $67.0 million in relation to the expected future attainment of various net sales milestones payable under the acquisition agreement for River Vision and CHF50.0 million ($53.8 million when converted using a CHF-to-Dollar exchange rate as of the date the intangible asset was recorded) in relation to the expected future attainment of various net sales milestones payable to Roche. The liabilities relating to these TEPEZZA net sales milestones were recorded in accrued expenses and other current liabilities on the consolidated balance sheet as of December 31, 2020. The Company paid such TEPEZZA net sales milestones to Roche in February 2021 and to the former River Vision stockholders in April 2021 and, following such payments, there are no further TEPEZZA net sales milestone obligations remaining to Roche and the former River Vision stockholders. The Company’s remaining obligation to Roche relating to the attainment of various TEPEZZA development and regulatory milestones is CHF43.0 million ($46.5 million when converted using a CHF-to-Dollar exchange rate at December 31, 2022 of 1.0823).

On November 22, 2022, the Company entered into a research collaboration and option agreement with Xeris Pharmaceuticals, Inc. (“Xeris”) under which Xeris is obligated to use its proprietary formulation technology platform, XeriJect, to conduct a research program to develop an ultra-concentrated, ready-to-use, subcutaneous injection of TEPEZZA. The Company received an option to obtain a commercial license for any reformulated product developed under the research program. An upfront payment of $2.75 million was recorded as acquired IPR&D and milestones expenses in the consolidated statement of comprehensive income and paid during the year ended December 31, 2022. In addition, Xeris is entitled to receive a milestone payment of $6.0 million upon the earlier of either (i) the exercise of the Company’s option or (ii) the achievement of the minimally acceptable target product profile by a reformulated product generated through the research program. If the Company exercises its option to continue development of and commercialize the reformulated product, Xeris may also be entitled to receive additional development and regulatory milestones and royalties on future sales.

On August 12, 2022, the Company entered into a collaboration and option agreement with Q32 Bio Inc. (“Q32”) related to its pipeline candidate ADX-914, a monoclonal antibody antagonist of the interleukin-7 receptor for the treatment of autoimmune and inflammatory diseases. Under the terms of the agreement, the Company received an option to acquire the ADX-914 program, exercisable through a period of time following completion of certain planned Phase 2a trials. An upfront payment of $15.0 million and milestone-based development funding of $17.5 million were paid during the year ended December 31, 2022, and recorded as acquired IPR&D and milestones expenses in the consolidated statement of comprehensive income. The Company may also be obligated to pay up to $22.5 million in the form of additional milestone-based development funding. If the Company exercises the option, it may be obligated to make up to an additional $645.0 million in closing and milestone payments, as well as tiered royalties on net sales from a high single-digit to a low double-digit percentage, inclusive of certain amounts payable to a third party under a pre-existing license agreement.

On December 15, 2021, the Company entered into an exclusive license agreement with Alpine Immune Sciences, Inc. (“Alpine”) for the development and commercialization of up to four preclinical candidates generated from Alpine’s unique discovery platform. The agreement includes licensing of a lead, potential first-in-class preclinical candidate, as well as a research partnership to jointly generate additional novel candidates. These candidates include multi-specific fusion protein-based therapeutic candidates for autoimmune and inflammatory diseases.

In connection with the execution of the license agreement, the Company entered into a stock purchase agreement with Alpine to purchase a minority stake of 951,980 shares of Alpine’s common stock in a private placement. Under the terms of the agreements, the Company paid Alpine $15.0 million in the fourth quarter of 2021 to purchase the shares of Alpine common stock and paid $25.0 million in the first quarter of 2022 as an upfront payment for the license. The shares of Alpine’s common stock were purchased at a premium to their fair value at the transaction closing date. The premium consisted of acquiring the shares at a price above the fair value based on a premium to the 30-day volume-weighted average share price prior to entering into the agreement. The Company recorded an asset of $11.9 million in other long-term assets in its consolidated balance sheet reflecting the fair value of the common stock. In addition, the Company recorded a charge of $28.1 million to acquired IPR&D and milestones expenses in its consolidated statement of comprehensive income for the year ended December 31, 2021, of which $25.0 million relates to the upfront payment and $3.1 million relates to the premium paid for shares of Alpine’s common stock. The $28.1 million was accounted for as the acquisition of an IPR&D asset during the year ended December 31, 2021.

In addition, Alpine is eligible to receive up to $381.0 million per program, or approximately $1.52 billion in total, in future success-based payments related to development, regulatory and commercial milestones. Alpine is also eligible to receive tiered royalties from a mid-single-digit percentage to a low double-digit percentage on worldwide net sales of licensed medicines. Alpine is required to advance candidate molecules to pre-defined preclinical milestones, and the Company will be responsible for the costs. The Company will then be required to assume responsibility for development and commercialization activities and costs.

On June 18, 2021, the Company entered into a global agreement with Arrowhead Pharmaceuticals, Inc. (“Arrowhead”) for HZN-457, a discovery-stage investigational RNA interference (“RNAi”) therapeutic being developed by Arrowhead as a potential treatment for uncontrolled gout. Arrowhead granted the Company a worldwide exclusive license to develop, manufacture and commercialize medicines based on the RNAi therapeutic. Arrowhead is required to use commercially reasonable efforts to conduct research and preclinical development activities for the RNAi therapeutic products. The Company must use commercially reasonable efforts in, and will be responsible for, clinical development and commercialization of the RNAi therapeutic products. Under the terms of the agreement, the Company paid Arrowhead an upfront cash payment of $40.0 million in July 2021 and agreed to pay additional potential future milestone payments of up to $660.0 million contingent on the achievement of certain development, regulatory and commercial milestones, and low to mid-teens royalties on worldwide calendar year net sales of licensed medicines. The $40.0 million upfront payment was accounted for as the acquisition of an IPR&D asset and was recorded as acquired IPR&D and milestones expenses in the consolidated statement of comprehensive income during the year ended December 31, 2021. In addition, a $15.0 million development milestone was recognized in the fourth quarter of 2022 and recorded as acquired IPR&D and milestones expenses in the consolidated statement of comprehensive income during the year ended December 31, 2022.

On November 21, 2020, the Company entered into a global agreement with Halozyme Therapeutics, Inc. (“Halozyme”) that gives the Company exclusive access to Halozyme’s ENHANZE® drug delivery technology for subcutaneous (“SC”) formulation of medicines targeting IGF-1R. The Company is exploring ENHANZE to develop a SC formulation of TEPEZZA, indicated for the treatment of thyroid eye disease, a serious, progressive and vision-threatening rare autoimmune disease, potentially shortening drug administration time, reducing healthcare practitioner time and offering additional flexibility and convenience for patients. Under the terms of the agreement, the Company paid Halozyme an upfront cash payment of $30.0 million in December 2020, with additional potential future milestone payments of up to $160.0 million contingent on the satisfaction of certain development and sales thresholds. Halozyme will also be entitled to receive mid-single digit royalties on sales of commercialized medicines using the ENHANZE technology. The $30.0 million upfront payment was accounted for as the acquisition of an IPR&D asset and was recorded as acquired IPR&D and milestones expenses in the consolidated statement of comprehensive income during the year ended December 31, 2020.