SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K/A
----------
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 18, 2000
ALEXION PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27756 13-3648318
(State of Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
352 KNOTTER DRIVE, CHESHIRE, CT 06410
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 776-1790
NOT APPLICABLE
(Former name or former address, if changed since last report)
ITEM 2. ACQUISTION OR DISPOSITION OF ASSETS.
This Amendment No. 1 to the Current Report of Alexion Pharmaceuticals,
Inc. (the "Registrant") on Form 8-K dated September 18, 1998 (the "Report")
relates to the Registrant's completion of the acquisition of Prolifaron, Inc., a
California corporation ("Prolifaron"). The purpose of this Amendment is to amend
Item 7 (a) to provide the financial statements of Prolifaron, Item 7 (b) to
provide the required pro forma financial information relating to the business
combination between the Registrant and Prolifaron, which were impracticable to
provide at the time of the initial filing of the Current Report on Form 8-K and
to amend Item 7(c) to include the consent of Arthur Andersen LLP.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Information of Prolifaron, Inc. -
(b) Pro forma Financial Information.
(c) Exhibits.
1. Consent of Arthur Andersen LLP
PROLIFARON, INC.
Financial Statements
As of December 31, 1999 and June 30, 2000
Together With Report of Independent Public Accountants
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Prolifaron, Inc.:
We have audited the accompanying balance sheet of Prolifaron, Inc. (a California
corporation) as of December 31, 1999 and the related statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Prolifaron, Inc. as of December
31, 1999 and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States.
/s/ Arthur Andersen LLP
San Diego, California
June 30, 2000
PROLIFARON, INC.
Balance Sheets - December 31, 1999 and June 30, 2000 (unaudited)
1999 2000
----------- -----------
(unaudited)
Assets
CURRENT ASSETS:
Cash and cash equivalents $ 852,039 $ 788,426
Accounts receivable 375,000 37,500
Prepaid expenses 95,839 33,478
Deferred tax asset 540,797 570,120
----------- -----------
Total current assets 1,863,675 1,429,524
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, net 501,274 571,676
----------- -----------
INTANGIBLES, net 116,000 110,000
DEPOSITS 6,600 6,600
----------- -----------
122,600 116,600
----------- -----------
$ 2,487,549 $ 2,117,800
=========== ===========
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Accounts payable $ 25,713 $ 66,201
Accrued liabilities 34,290 37,919
Income tax payable 579,977 179,908
Deferred research revenue -- 937,107
----------- -----------
Total current liabilities 639,980 1,221,135
----------- -----------
DEFERRED RESEARCH REVENUE 1,333,333 --
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value, 17,000,000 shares
authorized, 6,854,721 shares issued and outstanding 68,547 68,547
Additional paid-in capital 1,532,253 2,010,454
Subscription receivable (450,000) (120,000)
Retained deficit (636,564) (1,062,336)
----------- -----------
Total stockholders' equity 514,236 896,665
----------- -----------
$ 2,487,549 $ 2,117,800
=========== ===========
The accompanying notes are an integral part of these balance sheets.
- -1-
PROLIFARON, INC.
Statements of Operations
For the Year Ended December 31, 1999 and the Six Months Ended June 30, 2000 and
1999 (unaudited)
Six Months Ended
--------------------------
December 31, June 30, June 30,
1999 2000 1999
----------- ----------- ----------
(unaudited) (unaudited)
RESEARCH REVENUES $ 2,438,597 $ 1,221,555 $1,083,333
----------- ----------- ----------
OPERATING EXPENSES:
Research and development 1,542,018 1,735,635 518,207
General and administrative 245,802 197,173 133,407
----------- ----------- ----------
Total operating expenses 1,787,820 1,932,808 651,614
----------- ----------- ----------
Income (loss) from operations 650,777 (711,253) 431,719
INTEREST INCOME 78,826 26,226 44,300
OTHER INCOME (LOSS) (815) -- --
----------- ----------- ----------
Income (loss) before provision for income taxes 728,788 (685,027) 476,019
PROVISION (BENEFIT) FOR INCOME TAXES 521,145 (259,255) 427,097
----------- ----------- ----------
Net income (loss) $ 207,643 $ (425,772) $ 48,922
=========== =========== ==========
The accompanying notes are an integral part of these financial statements.
- -2-
PROLIFARON, INC.
Statements of Stockholders' Equity
For the Year Ended December 31, 1999 and the Six Months Ended June 30, 2000
(unaudited)
Additional
Common Stock Paid-In Subscription Retained
Shares Amount Capital Receivable Deficit Total
Balance, January 1, 1999 6,804,721 $68,047 $1,432,753 $(450,000) $ (844,207) $ 206,593
Issuance of stock for licensed
technology 50,000 500 99,500 -- -- 100,000
Net income -- -- -- -- 207,643 207,643
--------- ------- ---------- --------- ----------- ---------
Balance, December 31, 1999 6,854,721 68,547 1,532,253 (450,000) (636,564) 514,236
The following information is unaudited:
Receipt of stock subscription -- -- -- 330,000 -- 330,000
Compensation expense related to
stock options -- -- 478,201 -- -- 478,201
Net loss -- -- -- -- (425,772) (425,772)
--------- ------- ---------- --------- ----------- ---------
Balance, June 30, 2000 6,854,721 $68,547 $2,010,454 $(120,000) $(1,062,336) $ 896,665
========= ======= ========== ========= =========== =========
The accompanying notes are an integral part of these financial statements.
- -3-
PROLIFARON, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1999 and the Six Months Ended June 30, 2000 and
1999 (unaudited)
Six Months Ended
December 31, June 30, June 30,
1999 2000 1999
------------ --------- -----------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income (loss) $ 207,643 $(425,772) $ 48,922
Adjustments to reconcile net income (loss) to
net cash provided by (used
in) operating activities:
Depreciation and amortization 91,478 76,904 40,141
Loss on sale of fixed assets 815 -- --
Deferred tax asset (540,797) (29,323) (540,797)
Deferred compensation -- 478,201 --
Changes in assets and liabilities:
Accounts receivable (375,000) 337,500 --
Prepaid expenses (53,114) 62,361 36,125
Income tax receivable -- -- --
Deposits (6,600) -- --
Accounts payable 1,074 40,488 (6,777)
Accrued liabilities 21,655 3,629 10,019
Income tax payable 579,977 (400,069) 666,928
Deferred research revenue 833,333 (396,226) 1,166,667
--------- --------- -----------
Net cash provided by (used in) operating activities 760,464 (252,307) 1,421,228
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 350 -- --
Purchases of property, plant and equipment (278,241) (141,306) (90,184)
--------- --------- -----------
Net cash used in investing activities (277,891) (141,306) (90,184)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock subscriptions -- 330,000 --
--------- --------- -----------
Net cash provided by financing activities -- 330,000 --
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 482,573 (63,613) 1,331,044
CASH AND CASH EQUIVALENTS, beginning of year 369,466 852,039 369,466
--------- --------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 852,039 $ 788,426 $ 1,700,510
========= ========= ===========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of licensed technology $ 100,000 $ -- $ --
========= ========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR:
Income taxes $ 482,100 $ 45,137 $ 302,600
========= ========= ===========
The accompanying notes are an integral part of these financial statements.
- -4-
PROLIFARON, INC.
Notes to Financial Statements
December 31, 1999 and June 30, 2000 (unaudited)
1. Business and Organization
Prolifaron, Inc. (the "Company"), a California corporation, is a research
based company specializing in the discovery and early stage development of
novel antibody drug therapies. The Company began operations as a limited
liability corporation in 1997 and was re-incorporated as a C corporation
on March 26, 1999.
The Company is subject to a number of risks and uncertainties associated
with companies at a similar stage of maturity, including reliance on key
personnel, reliance on a small number of customers, limited operating
history and the unproven nature of the Company's technology, revenue and
income potential.
During September 2000, the Company entered into an agreement with Alexion
Pharmaceuticals, Inc. ("Alexion"), whereby Alexion common stock and
options, with an aggregate value of approximately $44 million, was
exchanged for all of the Company's outstanding shares and options. On the
effective date of the agreement, the Company was merged with a
wholly-owned subsidiary of Alexion and renamed Alexion Antibody
Technologies, Inc. These financial statements have not been adjusted to
reflect the merger noted above.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements and related information and the
notes thereto in conformity with accounting principles generally accepted
in the United States requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts
of assets, liabilities, revenues, expenses and disclosures of contingent
assets and liabilities. Actual results could differ from these estimates.
Interim Financial Statements
The accompanying financial statements for the interim period included
herein are unaudited. Certain information and note disclosures normally
included in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States have been
omitted, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. These unaudited
financial statements reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly present the results of operations, changes in cash flows and
financial position as of and for the periods presented. The results for
the interim period presented are not necessarily indicative of results to
be expected for a full year.
Cash and Cash Equivalents
Cash and cash equivalents includes cash in readily available checking and
money market accounts with a maturity of three months or less.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the related
assets, ranging from 3 to 5 years.
- -5-
Property, plant and equipment consists of the following:
December 31, June 30,
1999 2000
------------ --------
(unaudited)
Furniture and fixtures $ 20,481 $ 21,266
Lab equipment 402,938 525,660
Leasehold improvements 157,919 158,944
Computers 51,428 68,202
--------- ---------
632,766 774,072
Less - accumulated depreciation and amortization (131,492) (202,396)
--------- ---------
$ 501,274 $ 571,676
========= =========
Depreciation expense for the year ended December 31, 1999 and the six
months ended June 30, 2000 and 1999 was $89,478, $70,904 and $39,142,
respectively.
Long-Lived Assets
The Company periodically re-evaluates the original assumptions and
rationale utilized in the establishment of the carrying value and
estimated lives of all of its long-lived assets including property,
equipment and intangibles. The determinants for this evaluation include
management's estimate of the asset's ability to generate positive income
from operations and positive cash flow in future periods as well as the
strategic significance of the asset to the Company's business objective.
Intangibles
Intangibles consists of license agreements for patents which are stated at
cost and are amortized using the straight-line method over their estimated
useful lives of 10 years.
Intangibles consists of the following:
December 31, June 30,
1999 2000
------------ --------
(unaudited)
Licensed technology $ 120,000 $ 120,000
Less - accumulated amortization (4,000) (10,000)
--------- ---------
$ 116,000 $ 110,000
========= =========
Amortization expense for the year ended December 31, 1999 and the six
months ended June 30, 2000 and 1999 was $2,000, $6,000 and $1,000,
respectively.
Research and Development Costs
All research and development costs are charged to expense as incurred.
Revenue Recognition
The Company receives revenue under collaborative agreements and research
grants.
- -6-
Collaborative agreements can include advance payments, milestone payments
and royalties on end user sales. Advance payments received in excess of
amounts earned are classified as deferred research revenue and the
resulting revenues are recognized based on the work performed. Milestone
payments earned in connection with research activities performed under the
terms of collaborative agreements are recognized on the achievement of
certain milestones. As of December 31, 1999 and June 30, 2000, the Company
had not received any royalty revenue under collaborative agreements (see
Note 8).
Research grant revenue is recorded as earned as defined within the
specific agreements.
Concentration of Risk
During the year ended December 31, 1999 and the six months ended June 30,
2000, 89% and 95%, respectively, of the Company's research revenues were
derived from a collaborative agreement with Centocor, Inc. ("Centocor").
At December 31, 1999, Centocor represented 100% of the Company's
outstanding accounts receivable (see Note 8). At June 30, 2000,
SmithKline-Beecham represented 100% of the Company's outstanding accounts
receivable.
Income Taxes
Deferred tax assets and liabilities reflect the future tax consequences of
the difference between the financial reporting and tax basis of assets and
liabilities using current enacted tax rates. Valuation allowances are
recorded when the realizability of such deferred tax assets is
questionable.
3. Related Party
During the year ended December 31, 1999 and the six months ended June 30,
2000 and 1999, the firm of Hinshaw & Culbertson, of which a partner was
the Chief Financial Officer of the Company, billed and collected $25,131,
$9,165 and $19,015, respectively from the Company for legal services.
4. Income Taxes
Components of the Company's deferred tax asset as of December 31, 1999
results from the following temporary differences:
Depreciation and amortization $ 7,464
Deferred research revenue 533,333
--------
Total deferred tax asset $540,797
========
The provision for income taxes for the year ended December 31, 1999
consists of
Current:
Federal $ 900,677
State 161,265
-----------
1,061,942
-----------
Deferred:
Federal (459,677)
State (81,120)
-----------
(540,797)
-----------
Total provision for income taxes $ 521,145
===========
Realization of deferred income taxes is dependent on generating sufficient
taxable income during the periods in which temporary differences will
reverse. Although realization is not assured, management believes it is
- -7-
more likely than not that the deferred income taxes will be realized. The
amount of deferred income taxes considered realizable, however, could be
adjusted in the near term if estimates of future taxable income during the
reversal periods are revised.
5. Stockholders' Equity
The Company's Articles of Incorporation authorized the Company's Board of
Directors to issue an aggregate of 17,000,000 voting common shares having
a $0.01 par value and 3,000,000 shares of preferred stock with no par
value. The Board of Directors has the right to establish any rights and
preferences of any series of preferred stock it so authorizes.
In conjunction with a prior year common stock issuance, the Company
received notes from several accredited investors. The notes were
non-interest bearing and provided for scheduled payments. As of December
31, 1999 and June 30, 2000, the outstanding balances due from the notes
were $450,000 and $120,000, respectively.
6. Stock Options
The Company has granted stock options to its employees and consultants
pursuant to either individual non-qualified stock option grants or its
1999 stock option and long-term incentive plan.
The following summarizes stock option activity:
Number of Weighted
Options Average
Outstanding Exercise Price
----------- --------------
Outstanding, December 31, 1998 -- $--
Granted 395,000 2.05
Exercised -- --
Surrendered, forfeited or expired -- --
-------
Outstanding, December 31, 1999 395,000 2.05
Granted 150,000 2.50
Exercised -- --
Surrendered, forfeited or expired 15,000 2.00
-------
Outstanding, June 30, 2000 530,000 2.18
=======
Exercisable, end of period 269,667
=======
Weighted average fair value of options granted 1.61
The outstanding options expire at various dates from April 21, 2009 to
July 1, 2010.
On various dates between April 21, 1999 and February 1, 2000, the Company
issued an aggregate total of 225,000 options to employees and
non-employees at exercise prices of either $2.00 or $2.50, based on the
terms of the respective agreements. The deemed fair values at the
respective grant dates ranged from $1.38 to $1.90. These grants will be
expensed over the vesting periods of the options, which range from
immediate vesting to five-year terms. At June 30, 2000, $478,201 of such
expense was recognized.
- -8-
Stock-based compensation has been included in the accompanying statement
of operations for the six months ended June 30, 2000 as follows:
Operating expenses:
Research and development $429,569
General and administrative 48,632
--------
Total stock-based compensation $478,201
========
As required by SFAS No. 123, the Company has determined, for the year
ended December 31, 1999 and the six months ended June 30, 2000, the pro
forma information for its incentive stock options under SFAS No. 123. The
fair values of the incentive stock option grants were estimated on the
date of grant using the Black-Scholes option pricing model using the
following weighted average assumptions: risk-free interest rate ranging
between 5.28% and 6.72%; dividend yield of 0%; expected market price
volatility factor of 85%; and expected lives of the options of seven
years. Had compensation cost for incentive stock options granted during
the year ended December 31, 1999 been determined consistent with SFAS No.
123, the Company's net income would not have been materially different
from its reported net income. Had compensation cost for incentive stock
options granted during the six months ended June 30, 2000 been determined
consistent with SFAS No. 123, the Company's net loss on a pro forma basis
would be $503,303.
7. Commitments and Contingencies
Legal Matters
The Company may periodically be a defendant in cases incidental to its
business activities. While any litigation or investigation has an element
of uncertainty, the Company believes that the outcome of any of these
matters will not have a materially adverse effect on its financial
condition or operations.
Operating Leases
The Company occupies its office and warehouse space under operating leases
which benefit certain stockholders and are subject to an annual adjustment
based on the Consumer Price Index. Total rent expense for the year ended
December 31, 1999 and the six months ended June 30, 2000 and 1999 was
$92,933, $66,589 and $31,890, respectively.
On September 29, 2000, the Company amended its lease on its office and
warehouse space. The amendment grants the Company use of an additional
suite for a period of one year and seven months. The additional rent is
included in the operating lease commitment schedule.
Minimum future commitments under these operating leases are as follows:
Year Ending December 31,
- ------------------------
2000 $ 133,846
2001 171,412
2002 121,484
2003 2,136
2004 2,136
Thereafter 712
---------
$ 431,726
=========
- -9-
License Agreements
The Company and Dyax Corp. ("Dyax") entered into an agreement dated August
31, 1999, under which Dyax granted the Company use of certain patented
technologies. Under the terms of this agreement, the Company may be
required to make payments totaling $168,000, depending on the achievement
of certain milestones. In addition, an annual maintenance fee of $50,000
must be paid by the Company for the life of the contract, which may extend
fifteen years. The Company has the option to terminate the agreement at
its sole discretion.
8. Collaboration with Centocor, Inc.
In an agreement dated January 1, 1999, the Company and Centocor entered
into an agreement under which the Company agreed to grant to Centocor,
certain exclusive, royalty-bearing licenses to certain technology and
know-how, patents, patent applications, and research results associated
with the Company's targeted research program. Under the terms of the
agreement, the Company may receive up to $6.5 million including a $2.0
million license payment and payments to support research and development
of $4.5 million. In addition, the Company will receive 6% of the net sales
on each licensed product using the targeted antibodies, if any such
products are successfully developed and receive the necessary regulatory
approvals. On June 22, 2000 and effective September 20, 2000, within its
rights under the agreement, Centocor cancelled its agreement with the
Company.
As of December 31, 1999 and June 30, 2000, the Company had received a
total of $3.5 million and $4.6 million, respectively, from Centocor, under
this agreement. Amounts received in 1999 were comprised of the initial
$2.0 million license fee and four quarterly payments of $375,000 each.
Amounts received during the six months ended June 30, 2000 were comprised
of three quarterly payments of $375,000 each.
- -10-
Index
Page
INTRODUCTION 1
FINANCIAL STATEMENTS
Unaudited Pro Forma Consolidated Balance Sheet as of
July 31, 2000 2
Unaudited Pro Forma Consolidated Statement of Operations for
the Year Ended July 31, 2000 3
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 4
ARTICLE 1 Introduction
The following unaudited pro forma consolidated balance sheet as of July 31, 2000
and the unaudited pro forma consolidated statement of operations for the year
ended July 31, 2000 give effect to the merger as of July 31, 2000 for the pro
forma consolidated balance sheet and as of August 1, 1999 for the pro forma
statement of operations.
The unaudited pro forma consolidated financial statements are based on
historical financial statements of Alexion Pharmaceuticals, Inc. (Alexion) and
Prolifaron, Inc. (Prolifaron), giving effect to the merger applying the purchase
method of accounting and the assumptions and adjustments as discussed in the
accompanying notes to the unaudited pro forma consolidated financial statements.
These unaudited pro forma consolidated financial statements have been prepared
by the management of Alexion based upon the consolidated financial statements of
Alexion and Prolifaron as of July 31, 2000 and June 30, 2000, respectively and
for the years then ended. The unaudited pro forma consolidated financial
statements should be read in conjunction with the historical financial
statements and notes thereto. The unaudited pro forma consolidated financial
statements are not necessarily indicative of what actual results of operations
would have been for the period presented had the transaction occurred on the
dates indicated and do not purport to indicate the results of the future
operations.
1
ALEXION PHARMACEUTICALS, INC./PROLIFARON, INC.
Unaudited Pro Forma Consolidated Balance Sheet
As of July 31, 2000
(amounts in thousands)
Merger Merger
Alexion Prolifaron Pro Forma Pro Forma
July 31, 2000 June 30, 2000 Adjustments As Adjusted
(Note B)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 91,858 $ 788 $ (500) $ 92,146
Marketable securities 82,671 -- -- 82,671
Reimbursable contract costs 5,095 38 -- 5,133
Other current assets 456 604 -- 1,060
--------- --------- --------- ---------
Total current assets 180,080 1,430 (500) 181,010
PROPERTY AND EQUIPMENT, net 8,213 572 -- 8,785
PURCHASED INTANGIBLE ASSETS -- -- 22,538 22,538
DEFERRED FINANCING COSTS, net 3,752 -- -- 3,752
OTHER ASSETS 657 116 (110) 663
--------- --------- --------- ---------
Total assets $ 192,702 $ 2,118 $ 21,928 $ 216,748
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Current portion of notes payable $ 369 $ -- $ -- $ 369
Accounts payable 2,100 66 -- 2,166
Accrued expenses 1,229 218 -- 1,447
Accrued interest 2,730 -- -- 2,730
Deferred revenue 750 937 -- 1,687
--------- --------- --------- ---------
Total current liabilities 7,178 1,221 -- 8,399
--------- --------- --------- ---------
NOTES PAYABLE, less current portion
included above 3,920 -- -- 3,920
--------- --------- --------- ---------
CONVERTIBLE SUBORDINATED DEBT 120,000 -- -- 120,000
--------- --------- --------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value 2 -- -- 2
Common stock, $.01 par value -- 69 (69) --
Paid-in capital 128,836 2,010 41,935 172,781
Subscription receivable -- (120) -- (120)
Accumulated deficit (67,214) (1,062) (19,938) (88,214)
Other comprehensive loss (20) -- -- (20)
Treasury stock, at cost -- -- -- --
--------- --------- --------- ---------
Total stockholders' equity 61,604 897 21,928 84,429
--------- --------- --------- ---------
Total liabilities and stockholders'
equity $ 192,702 $ 2,118 $ 21,928 $ 216,748
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
2
ALEXION PHARMACEUTICALS, INC./PROLIFARON, INC.
Unaudited Pro Forma Consolidated Statement of Operations For the Year Ended July
31, 2000 (amounts in thousands, except per share amounts)
Alexion Prolifaron Merger Merger
Year Ended Year Ended Pro Forma Pro Forma
July 31, 2000 June 30, 2000 Adjustments As Adjusted
(Note C)
CONTRACT RESEARCH REVENUES $ 21,441 $ 2,578 $ -- $ 24,019
-------- -------- -------- --------
OPERATING EXPENSES:
Research and development 40,187 2,760 -- 42,947
General and administrative 4,175 310 -- 4,485
Amortization of purchased intangible assets -- -- 3,296 3,296
-------- -------- -------- --------
Total operating expenses 44,362 3,070 3,296 50,728
-------- -------- -------- --------
Loss from operations (22,921) (492) (3,296) (26,709)
OTHER INCOME AND (EXPENSE):
Interest income 5,833 60 -- 5,893
Interest expense (3,139) -- -- (3,139)
-------- -------- -------- --------
Loss before benefit for income taxes (20,227) (432) (3,296) (23,955)
BENEFIT FOR INCOME TAXES -- (165) 165 --
-------- -------- -------- --------
Net loss $(20,227) $ (267) $ (3,461) $(23,955)
======== ======== ======== ========
BASIC AND DILUTED NET LOSS PER
COMMON SHARE $ (1.45) $ (1.68)
======== ========
SHARES USED IN COMPUTING BASIC AND
DILUTED NET LOSS PER COMMON SHARE 13,914 14,270
======== ========
The accompanying notes are an integral part of these financial statements.
3
ALEXION PHARMACEUTICALS, INC./PROLIFARON, INC.
Notes to Unaudited Pro Forma Consolidated Financial Statements
NOTE A
In September 2000, Prolifaron was merged with a wholly-owned subsidiary of
Alexion and renamed Alexion Antibody Technologies, Inc. As consideration for
Alexion's merger with Prolifaron, Alexion has paid to holders of Prolifaron
common stock and stock options pursuant to the terms of the merger agreement,
355,594 shares of Alexion common stock, par value $.0001 per share and fully
vested options to purchase 44,364 shares of Alexion common stock at a weighted
average exercise price of $44.35 per share in exchange for fully vested options
of Prolifaron granted under its stock option plan.
NOTE B
The pro forma consolidated balance sheet includes the estimated adjustments
necessary to give full effect to the merger as if it had occurred on July 31,
2000 and reflects the allocation of the cost of the merger to the estimated fair
value of assets acquired and liabilities assumed including the issuance of
approximately 355,594 shares of Alexion common stock valued at approximately
$39.4 million in the aggregate; issuance of options to purchase 44,364 shares of
Alexion common stock with an estimated fair value of approximately $4.5 million,
in aggregate; payment of $0.5 million in merger transaction costs; and
elimination of Prolifaron's equity accounts.
The pro forma adjustments are summarized as follows (amounts in thousands):
o Use of cash for merger and related transaction costs; $(500)
o Issuance of Alexion common stock and stock options; $43,945
o Elimination of Prolifaron common stock, paid-in capital and accumulated
deficit accounts; $(69), $(2,010), and $1,062, respectively
o In process research and development; $(21,000)
o Purchased intangible assets resulting from transaction; $22,538
o Adjustment to carrying value of an asset; $(110)
In connection with the merger with Prolifaron, Alexion allocated $21.0 million
of the purchase price to in-process research and development projects. This
allocation represented the estimated fair value based on risk-adjusted cash
flows related to the incomplete research and development projects. At the date
of the merger, the development of these projects had not yet reached
technological feasibility and the research and development in progress had no
alternative future uses. Accordingly, these costs were expensed as of the merger
date.
At the merger date, Prolifaron was conducting pre-clinical development and
testing activities with a goal to develop technologies for antibody discovery
and engineering and identify new fully human therapeutic antibodies addressing
multiple disease areas. The drug candidates under development represent
innovative technologies addressing autoimmune and inflammatory disorders, and
cancer.
As of the merger date, Prolifaron had incurred approximately $5.7 million of
expenses on development projects since its inception in 1998, and expected to
spend approximately $8.5 million over the next seven years to complete animal
testing of the developmental drug candidates. Management anticipates the
in-process projects will enter human clinical trials in 3 to 6 years, and if
successful, would be marketed in the U.S. in five to nine years.
4
In making its purchase price allocation, management considered present value
calculations of income, an analysis of project accomplishments and remaining
outstanding items, an assessment of overall contributions, as well as
technological and regulatory risks. The value assigned to purchased in-process
technology was determined by estimating the costs to develop the acquired
technology into commercially viable products, estimating the resulting net cash
flows from the projects, and discounting the net cash flows to their present
value. The revenue projection used to value the in-process research and
development was based on estimates of relevant market sizes and growth factors,
expected trends in technology, and the nature and expected timing of new product
introductions by Prolifaron and its competitors.
The rates utilized to discount the net cash flows to their present value were
based on estimated cost of capital calculations. Due to the risks associated
with the projected cash flow forecast, a discount rate of 40 percent was
considered appropriate for the in-process R&D. The selected rate reflects the
inherent uncertainties surrounding the successful development of the purchased
in-process technology, the useful life of such technology, and the uncertainty
of technological advances that are unknown at this time.
If these projects are not successfully developed, the sales and profitability of
the combined companies may by adversely affected in future periods.
Additionally, the value of other acquired intangible assets may become impaired.
NOTE C
The pro forma consolidated statement of operations includes adjustments
necessary to reflect the merger as if it had occurred on August 1, 1999. For
purposes of the pro forma consolidated statements of operations, acquired
in-process research and development ($21.0 million) was assumed to have been
written off prior to August 1, 1999. Accordingly, the pro forma consolidated
statement of operations does not included such charge.
The pro forma adjustments are summarized as follows (amounts in thousands):
o Amortization of goodwill resulting from the merger based upon an estimated
life of 7 years; $3,163
o Amortization of intangible workforce benefit resulting from the merger
based upon an estimated life of 3 years; $133
o Elimination of the income tax benefit of Proliferon as the pro forma
consolidated net loss before benefit for income taxes would not have
resulted in a tax benefit; $165
The pro forma net loss per share and the pro forma shares used in computing the
pro forma net loss per share for the year ended July 31, 2000 are based upon
Alexion's historical weighted average common shares outstanding for the period
adjusted to reflect the issuance of 355,594 shares of Alexion common stock as
described in Note A. There is no difference in pro forma basic and diluted net
loss per common share as the effect of stock options issued in connection with
the merger is anti-dilutive.
5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALEXION PHARMACEUTICALS, INC.
Dated: November 20, 2000 By: /s/ Leonard Bell
-------------------------------------
Name: Leonard Bell, M.D.
Title: President, Chief Executive
Officer, Secretary and
Treasurer
EXHIBIT INDEX
Exhibit No.
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23.1 Consent of Arthur Andersen LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K, into Alexion Pharmaceuticals, Inc.'s
previously filed Registration Statements File Nos. 333-19905, 333-24863,
333-29617, 333-41397, 333-47645, 333-71879, 333-71985, 333-36738, and 333-47594.
/s/ Arthur Andersen LLP
San Diego, California
November 14, 2000