Historical | Historical | Pro Forma | OSI Pro Forma |
|||||||||||||||||
OSI | Eyetech | Adjustments | Notes | Combined | ||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||
ASSETS |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 162,855 | $ | 40,664 | $ | (124,704 | ) | C,G | $ | 78,815 | ||||||||||
Investment securities |
392,962 | 190,814 | (583,776 | ) | C | — | ||||||||||||||
Restricted investment securities — short-term |
4,833 | — | 4,833 | |||||||||||||||||
Receivables |
37,363 | 99,946 | 137,309 | |||||||||||||||||
Inventory — net |
16,990 | 10,039 | 8,909 | A | 35,938 | |||||||||||||||
Interest receivables |
2,920 | — | 2,920 | |||||||||||||||||
Prepaid expenses and other current assets |
8,127 | 4,811 | 12,938 | |||||||||||||||||
Total current assets |
626,050 | 346,274 | (699,571 | ) | 272,753 | |||||||||||||||
Restricted cash and investment securities —
long-term |
— | 5,927 | 5,927 | |||||||||||||||||
Property, equipment and leasehold improvements —
net |
44,608 | 21,453 | 66,061 | |||||||||||||||||
Debt issuance costs — net |
3,095 | — | 3,095 | |||||||||||||||||
Goodwill |
39,091 | — | 157,581 | H | 196,672 | |||||||||||||||
Other intangible assets — net |
11,960 | — | 386,000 | H | 397,960 | |||||||||||||||
Other assets |
2,830 | 10,584 | 13,414 | |||||||||||||||||
TOTAL ASSETS |
$ | 727,634 | $ | 384,238 | $ | (155,990 | ) | $ | 955,882 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable and accrued expenses |
$ | 35,327 | $ | 36,610 | $ | $ | 71,937 | |||||||||||||
Unearned revenue — current |
9,275 | 13,406 | (13,406 | ) | B | 9,275 | ||||||||||||||
Collaboration profit share payable |
— | 40,760 | 40,760 | |||||||||||||||||
Capital leases payable and deferred rent — current |
— | 2,421 | 2,421 | |||||||||||||||||
Total current liabilities |
44,602 | 93,197 | (13,406 | ) | 124,393 | |||||||||||||||
Other liabilities: |
||||||||||||||||||||
Capital leases payable and deferred rent — long
term |
2,206 | 8,159 | 10,365 | |||||||||||||||||
Unearned revenue — long-term |
26,668 | 149,820 | (149,820 | ) | B | 26,668 | ||||||||||||||
Convertible senior subordinated notes — long-term |
150,000 | — | 150,000 | |||||||||||||||||
Contingent value rights |
22,047 | — | 22,047 | |||||||||||||||||
Accrued post-retirement benefit |
5,066 | — | 5,066 | |||||||||||||||||
Total liabilities |
250,589 | 251,176 | (163,226 | ) | 338,539 | |||||||||||||||
Stockholders’ equity: |
||||||||||||||||||||
Common stock, $.01 Par Value |
529 | 457 | (457 | ) | E | 586 | ||||||||||||||
57 | F | |||||||||||||||||||
Additional paid-in capital |
1,391,994 | 423,729 | (423,729 | ) | E | 1,607,619 | ||||||||||||||
205,335 | F | |||||||||||||||||||
1,906 | F | |||||||||||||||||||
8,384 | L | |||||||||||||||||||
Deferred compensation |
(762 | ) | (23,096 | ) | 23,096 | E | (9,146 | ) | ||||||||||||
(8,384 | ) | L | ||||||||||||||||||
Accumulated deficit |
(891,424 | ) | (266,475 | ) | 266,475 | E | (958,424 | ) | ||||||||||||
(67,000 | ) | D | ||||||||||||||||||
Accumulated other comprehensive income |
2,159 | (699 | ) | 699 | E | 2,159 | ||||||||||||||
Less: Treasury stock |
(25,451 | ) | (854 | ) | 854 | E | (25,451 | ) | ||||||||||||
Total stockholders’ equity |
477,045 | 133,062 | 7,236 | 617,343 | ||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 727,634 | $ | 384,238 | $ | (155,990 | ) | $ | 955,882 | |||||||||||
OSI | ||||||||||||||||||||
Historical | Historical | Pro Forma | Pro forma | |||||||||||||||||
OSI | Eyetech | Adjustments | Notes | Combined | ||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Product sales and sales commissions |
$ | 35,525 | $ | — | $ | $ | 35,525 | |||||||||||||
Reimbursement of development costs |
— | 43,629 | 43,629 | |||||||||||||||||
License, milestone and other revenues |
7,275 | 5,723 | (5,000 | ) | N | 7,998 | ||||||||||||||
Total revenues |
42,800 | 49,352 | (5,000 | ) | 87,152 | |||||||||||||||
Expenses: |
||||||||||||||||||||
Cost of product sales |
8,985 | — | 8,985 | |||||||||||||||||
Research and development |
110,398 | 102,739 | 2,225 | L | 215,362 | |||||||||||||||
Acquired in-process research and development |
32,785 | — | 67,000 | D | 99,785 | |||||||||||||||
Selling, general and administrative |
98,909 | 50,778 | 2,719 | L | 152,406 | |||||||||||||||
Impairment of intangible asset |
24,599 | — | 24,599 | |||||||||||||||||
Amortization of intangibles |
18,606 | — | 30,880 | I | 49,486 | |||||||||||||||
Total operating expenses |
294,282 | 153,517 | 102,824 | 550,623 | ||||||||||||||||
Loss from operations |
(251,482 | ) | (104,165 | ) | (107,824 | ) | (463,471 | ) | ||||||||||||
Other income (expense): |
||||||||||||||||||||
Investment income — net |
5,259 | 3,810 | (9,069 | ) | J | — | ||||||||||||||
Interest expense |
(13,436 | ) | (151 | ) | (15,891 | ) | M | (29,478 | ) | |||||||||||
Other income (expense) — net |
(712 | ) | — | (712 | ) | |||||||||||||||
Net loss |
(260,371 | ) | (100,506 | ) | (132,784 | ) | (493,661 | ) | ||||||||||||
Preferred stock accretion |
— | (816 | ) | 816 | O | — | ||||||||||||||
Net loss |
$ | (260,371 | ) | $ | (101,322 | ) | $ | (131,968 | ) | $ | (493,661 | ) | ||||||||
Basic and diluted net loss per common share |
$ | (6.50 | ) | $ | (2.70 | ) | $ | (10.79 | ) | |||||||||||
Weighted average shares of common stock
outstanding |
40,083 | 37,587 | (37,587 | ) | K | 45,737 | ||||||||||||||
5,654 | K |
OSI | ||||||||||||||||||||
Historical | Historical | Pro Forma | Pro forma | |||||||||||||||||
OSI | Eyetech | Adjustments | Notes | Combined | ||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Product sales and sales commissions |
$ | 11,756 | $ | — | $ | $ | 11,756 | |||||||||||||
Reimbursement of development costs |
— | 9,808 | 9,808 | |||||||||||||||||
License, milestone and other revenues |
591 | 1,815 | (1,250 | ) | N | 1,156 | ||||||||||||||
Total revenues |
12,347 | 11,623 | (1,250 | ) | 22,720 | |||||||||||||||
Expenses: |
||||||||||||||||||||
Cost of product sales |
(1,247 | ) | — | (1,247 | ) | |||||||||||||||
Research and development |
31,913 | 21,016 | 512 | L | 53,441 | |||||||||||||||
Net expense from unconsolidated joint business |
7,661 | — | 7,661 | |||||||||||||||||
Selling, general and administrative |
20,313 | 21,534 | 625 | L | 42,472 | |||||||||||||||
Amortization of intangibles |
3,804 | — | 7,720 | I | 11,524 | |||||||||||||||
Total operating expenses |
62,444 | 42,550 | 8,857 | 113,851 | ||||||||||||||||
Loss from operations |
(50,097 | ) | (30,927 | ) | (10,107 | ) | (91,131 | ) | ||||||||||||
Other income (expense): |
||||||||||||||||||||
Investment income — net |
2,380 | 1,205 | (3,585 | ) | J | — | ||||||||||||||
Interest expense |
(1,219 | ) | (34 | ) | (5,568 | ) | M | (6,821 | ) | |||||||||||
Other income (expense) — net |
541 | — | 541 | |||||||||||||||||
Net loss |
$ | (48,395 | ) | $ | (29,756 | ) | $ | (19,260 | ) | $ | (97,411 | ) | ||||||||
Basic and diluted net loss per common share |
$ | (1.02 | ) | $ | (0.72 | ) | $ | (1.84 | ) | |||||||||||
Weighted average shares of common stock outstanding |
47,375 | 41,326 | (41,326 | ) | K | 53,029 | ||||||||||||||
5,654 | K |
OSI | ||||||||||||||||||||
Historical | Historical | Pro Forma | Pro forma | |||||||||||||||||
OSI | Eyetech | Adjustments | Notes | Combined | ||||||||||||||||
(Amounts in thousands, except per share amounts) | ||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Net revenue from unconsolidated joint business |
$ | 54,892 | $ | — | $ | $ | 54,892 | |||||||||||||
Royalties on product sales |
1,952 | — | 1,952 | |||||||||||||||||
Product sales and sales commissions |
22,103 | 126,131 | 148,234 | |||||||||||||||||
Reimbursement of development costs |
— | 21,748 | 21,748 | |||||||||||||||||
License, milestone and other revenues |
8,737 | 11,184 | (3,750 | ) | N | 16,171 | ||||||||||||||
Total revenues |
87,684 | 159,063 | (3,750 | ) | 242,997 | |||||||||||||||
Expenses: |
||||||||||||||||||||
Cost of product sales |
3,636 | 26,158 | 29,794 | |||||||||||||||||
Research and development |
86,007 | 66,688 | 522 | L | 153,217 | |||||||||||||||
Acquired in-process research and development |
3,542 | — | 3,542 | |||||||||||||||||
Collaboration profit sharing |
— | 50,226 | 50,226 | |||||||||||||||||
Selling, general and administrative |
65,765 | 49,127 | 639 | L | 115,531 | |||||||||||||||
Amortization of intangibles |
11,435 | — | 23,160 | I | 34,595 | |||||||||||||||
Total operating expenses |
170,385 | 192,199 | 24,321 | 386,905 | ||||||||||||||||
Loss from operations |
(82,701 | ) | (33,136 | ) | (28,071 | ) | (143,908 | ) | ||||||||||||
Other income (expense): |
||||||||||||||||||||
Investment income — net |
10,563 | 5,648 | (12,950 | ) | J | 3,261 | ||||||||||||||
Interest expense |
(3,657 | ) | (171 | ) | (3,828 | ) | ||||||||||||||
Other income (expense) — net |
(1,283 | ) | — | (1,283 | ) | |||||||||||||||
Net loss |
$ | (77,078 | ) | $ | (27,659 | ) | $ | (41,021 | ) | $ | (145,758 | ) | ||||||||
Basic and diluted net loss per common share |
$ | (1.50 | ) | $ | (0.64 | ) | $ | (2.56 | ) | |||||||||||
Weighted average shares of common stock
outstanding |
51,284 | 43,349 | (43,349 | ) | K | 56,938 | ||||||||||||||
5,654 | K |
Cash consideration |
$ | 690,858 | ||
Equity consideration |
207,298 | |||
Transaction costs and fees |
10,450 | |||
Preliminary estimated purchase price |
$ | 908,606 | ||
Fair value of net tangible assets acquired |
$ | 298,025 | ||
Identifiable intangible assets acquired — core technology |
386,000 | |||
In-process research and development |
67,000 | |||
Goodwill |
157,581 | |||
Value assigned to net tangible and intangible assets acquired |
$ | 908,606 | ||
(A) | To eliminate Eyetech’s historical carrying value for inventory and record the estimated fair value of the acquired inventory. The fair value step-up of inventory will result in a $8.9 million decrease in gross margin as the inventory is sold, following consummation of the merger. This impact has not been reflected in the pro forma condensed combined statements of operations because it is a material non-recurring charge that will be reflected in operations in the 12-month period following the merger. |
(B) | To eliminate Eyetech’s unearned revenue, as there are no performance obligations assumed by OSI related to the payments that resulted in the recognition of Eyetech’s as unearned revenue. | ||
(C) | To record cash consideration payable of $690.9 million to Eyetech stockholders under the merger agreement consisting of $107.1 million of cash and $583.8 million of investment securities. | ||
(D) | To record the estimated fair value of the in-process research and development acquired in the merger. | ||
(E) | To eliminate Eyetech stockholders’ equity accounts. | ||
(F) | To record the issuance of approximately 5.7 million shares of OSI common stock to Eyetech stockholders and other equity consideration (stock options) exchanged in the merger. | ||
(G) | To record the estimated transaction costs and fees incurred or expected to be incurred by OSI of $10.4 million in connection with the merger, which will be considered part of the purchase price. Also includes $10.7 million of transaction costs and fees incurred by Eyetech related to the merger and that will be expensed by Eyetech and $3.5 million of cash received from the exercise of Eyetech options prior to the merger consummation date. | ||
(H) | To record the preliminary estimated identifiable intangible assets and goodwill from the merger. | ||
(I) | To record the amortization of acquired intangible identifiable assets with definitive lives from the merger. The preliminary estimated intangible asset and its estimated useful life is as follows: |
Preliminary Estimated | Estimated | ||||||||
Intangible Asset | Fair Value | Useful Life | |||||||
(In thousands) | |||||||||
Core technology |
$ | 386,000 | 12.5 Years |
(J) | To record the reduction in investment income resulting from the reduced cash, cash equivalents and investment balances after payments to effect the merger. | ||
(K) | Pro forma basic and diluted income (loss) per common share amounts for the year ended September 30, 2004, the three-month period ended December 31, 2004, and the nine-month period ended September 30, 2005 are based upon the historical weighted average number of OSI common shares outstanding, adjusted to reflect the issuance of approximately 5.7 million shares of OSI common stock as a result of the acquisition. | ||
(L) | To record the deferred stock-based compensation related to unvested Eyetech restricted shares and options assumed by OSI in the merger of $8.3 million. The amount of the deferred compensation was based on the portion of the intrinsic value of the Eyetech options and restricted stock that relates to the future vesting period. The intrinsic value of the unvested options was measured as the difference between the assumed value of the OSI common stock of $25.38 per share at the consummation date of the merger and the exercise price of the assumed Eyetech options after giving consideration to the exchange of the Eyetech options for OSI options. The deferred compensation is being amortized over the remaining vesting period of the assumed options. The amortization expense has been recorded in the expense category associated with the departmental classification of the grantee. | ||
(M) | To record additional interest expense related to an assumed borrowing arrangement as a result of the combined entities not having sufficient cash to consummate the merger as of October 1, 2003. The interest rate was assumed to be 6.51%. The average borrowings for the twelve months ended September 30, 2004 and the three months ended December 31, 2004 were $244 million and $303 million, respectively. The actual amount to be borrowed in connection with the completion of the merger, if any, may differ significantly from the pro forma amounts used to derive amounts to be borrowed and the pro forma interest expense. A change of 0.125% in the interest rate would result in a change in interest expense and net loss of $305,000 and $107,000 for the year ended September 30, 2004 and the three months ended December 31, 2004. |
(N) | To eliminate the recognition of deferred revenue related to deferred revenue recorded on Eyetech’s balance sheet as of January 1, 2004. | ||
(O) | To eliminate Eyetech’s accretion charge on its preferred stock. |