Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - Sucampo Pharmaceuticals, Inc. | exh_992.htm |
| EX-99.1 - EXHIBIT 99.1 - Sucampo Pharmaceuticals, Inc. | exh_991.htm |
| EX-23.1 - EXHIBIT 23.1 - Sucampo Pharmaceuticals, Inc. | exh_231.htm |
| 8-K/A - FORM 8-K/A - Sucampo Pharmaceuticals, Inc. | f8ka_051917.htm |
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
On March 31, 2017, Sucampo Pharmaceuticals, Inc. (the “Company”) entered into a merger agreement (the “Merger Agreement”) with Vtesse, Inc. (“Vtesse”), and on April 3, 2017, the Company completed the transactions contemplated by the Merger Agreement (the “Merger”), for an initial purchase price of $200.0 million. The initial purchase price was paid on April 3, 2017 and consisted of the issuance of 2,782,676 shares of Class A common stock of the Company and the payment of $170.0 million of cash. Substantially all of the fair value of Vtesse is related to VTS-270, its only significant asset. VTS-270 is an investigational drug candidate currently being evaluated in a pivotal Phase 2b/3 clinical trial for the treatment of NPC-1, an ultra-orphan, progressive and fatal disease. The Company expects to account for the Merger as an asset acquisition, as Vtesse does not meet the definition of a business under ASC 805. As a result, the Company will incur an acquired in-process research and development (“IPR&D”) charge in the second quarter of 2017. The Company’s preliminary estimate of this IPR&D expense is in the range of $180.0 million to $200.0 million. The Company does not expect to receive any current tax benefit related to the IPR&D expense.
The Company has also agreed to pay to equityholders of Vtesse (A) contingent consideration based on mid-single-digit to double-digit royalties on global net sales of VTS-270, tiered based on increasing net sales levels, and (B) a share of net proceeds that may be generated from the monetization of any priority review voucher that may be granted to Vtesse in the future.
The following unaudited pro forma combined consolidated financial statements have been prepared to give effect to the Merger of Vtesse with and into a subsidiary of the Company and certain other adjustments listed below, which are collectively referred to as the acquisition adjustments. These unaudited pro forma combined consolidated financial statements are derived from the historical consolidated financial statements of the Company and Vtesse. These financial statements have been adjusted as described in the notes to the unaudited pro forma combined consolidated financial statements.
The unaudited pro forma combined consolidated balance sheets combine the unaudited consolidated balance sheets of the Company and Vtesse as of March 31, 2017 and include preliminary adjustments to reflect the events that are directly attributable to the Merger and factually supportable. The unaudited pro forma combined consolidated statements of operations combine the historical consolidated results of the Company and Vtesse for the three months ended March 31, 2017 and for the year ended December 31, 2016, and have also been adjusted to give effect to pro forma events that are directly attributable to the Merger, are factually supportable and are expected to have a continuing impact on the combined results. The unaudited pro forma combined consolidated statements of operations have been prepared assuming the Merger closed on January 1, 2016.
These unaudited pro forma combined consolidated financial statements have been prepared using the asset acquisition method of accounting, as Vtesse does not meet the definition of a business under ASC 805 and substantially all of the fair value of Vtesse is attributable to the VTS-270 IPR&D asset. Based on the asset acquisition method of accounting, the consideration paid in the Merger is allocated primarily to the IPR&D asset acquired (and immediately expensed because the IPR&D asset has no other alternate use), and the balance is allocated to the remaining assets and liabilities based on their estimated fair values. The unaudited pro forma combined consolidated statements of operations also include certain purchase accounting adjustments, including items expected to have a continuing impact on the combined results and the utilization of any tax benefits.
The unaudited pro forma combined consolidated financial statements have been prepared based on the assumptions and adjustments that the Company believes are reasonable and which are described in the accompanying notes. The unaudited pro forma combined consolidated financial statements are presented for illustrative purposes only and do not purport to represent what the financial position or results of operations would actually have been if the Merger had occurred as of the dates indicated or what the financial position or results would be for any future periods.
The unaudited pro forma combined consolidated financial statements should be read in conjunction with (1) the accompanying notes to the unaudited pro forma combined consolidated financial statements, (2) the unaudited financial statements of the Company as of and for the three months ended March 31, 2017 and notes thereto, included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2017, which was filed with the SEC on May 3, 2017, (3) the audited financial statements of the Company for the fiscal year ended December 31, 2016 and notes thereto, included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 8, 2017, (4) the audited financial statements of Vtesse for the fiscal year ended December 31, 2016 and notes thereto, included as Exhibit 99.1 to this Current Report on Form 8-K/A (Amendment No. 1) and (5) the unaudited financial statements of Vtesse as of and for the three months ended March 31, 2017 and notes thereto, included as Exhibit 99.2 to this Current Report on Form 8-K/A (Amendment No. 1).
| SUCAMPO PHARMACEUTICALS, INC. | ||||||||||||||||||
| UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||||||
| YEAR ENDED DECEMBER 31, 2016 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||
| Historical | ||||||||||||||||||
| Year Ended | ||||||||||||||||||
| December 31, 2016 | ||||||||||||||||||
| Sucampo | Vtesse | Transaction Adjustments (see Note 5) | Pro Forma Combined Consolidated | |||||||||||||||
| Revenues: | ||||||||||||||||||
| Product royalty revenue | $ | 82,480 | $ | - | $ | - | $ | 82,480 | ||||||||||
| Product sales revenue | 128,796 | - | - | 128,796 | ||||||||||||||
| Research and development revenue | 12,839 | - | - | 12,839 | ||||||||||||||
| Contract and collaboration revenue | 5,941 | - | - | 5,941 | ||||||||||||||
| Total revenues | 230,056 | - | - | 230,056 | ||||||||||||||
| Costs and expenses: | ||||||||||||||||||
| Costs of goods sold | 76,003 | - | - | 76,003 | ||||||||||||||
| Impairment of in-process research & development | 7,286 | - | 191,017 | (d) | 198,303 | |||||||||||||
| Research and development | 46,615 | 10,818 | 75 | (b) | 57,508 | |||||||||||||
| General and administrative | 43,798 | 5,001 | (647 | ) | (a), (b) | 48,152 | ||||||||||||
| Selling and marketing | 2,478 | - | - | 2,478 | ||||||||||||||
| Total costs and expenses | 176,180 | 15,819 | 190,445 | 382,444 | ||||||||||||||
| Income from operations | 53,876 | (15,819 | ) | (190,445 | ) | (152,388 | ) | |||||||||||
| Non-operating income (expense): | ||||||||||||||||||
| Interest income | 72 | - | - | 72 | ||||||||||||||
| Interest expense | (23,761 | ) | - | - | (23,761 | ) | ||||||||||||
| Loss on debt extinguishment | (14,047 | ) | - | - | (14,047 | ) | ||||||||||||
| Other non-operating income (expense), net | (1,765 | ) | (6 | ) | 24 | (a) | (1,747 | ) | ||||||||||
| Total non-operating income (expense) | (39,501 | ) | (6 | ) | 24 | (39,483 | ) | |||||||||||
| Income (loss) before income taxes | 14,375 | (15,825 | ) | (190,421 | ) | (191,871 | ) | |||||||||||
| Income (tax) benefit provision | 4,112 | - | 6,157 | (c) | 10,269 | |||||||||||||
| Income (loss) from operations | $ | 18,487 | $ | (15,825 | ) | $ | (184,264 | ) | $ | (181,602 | ) | |||||||
See accompanying notes to unaudited pro forma combined consolidated financial statements.
| 2 |
| SUCAMPO PHARMACEUTICALS, INC. | ||||||||||||||||||
| UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||||||
| THREE MONTHS ENDED MARCH 31, 2017 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||
| Historical | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| March 31, 2017 | ||||||||||||||||||
| Sucampo | Vtesse | Transaction Adjustments (see Note 5) | Pro Forma Combined Consolidated | |||||||||||||||
| Revenues: | ||||||||||||||||||
| Product royalty revenue | 18,435 | - | - | 18,435 | ||||||||||||||
| Product sales revenue | 34,154 | - | - | 34,154 | ||||||||||||||
| Research and development revenue | 3,448 | - | - | 3,448 | ||||||||||||||
| Contract and collaboration revenue | 246 | - | - | 246 | ||||||||||||||
| Total revenues | 56,283 | - | - | 56,283 | ||||||||||||||
| Costs and expenses: | ||||||||||||||||||
| Costs of goods sold | 16,883 | - | - | 16,883 | ||||||||||||||
| Research and development | 10,333 | 3,773 | 64 | (b) | 14,170 | |||||||||||||
| General and administrative | 17,691 | 8,469 | (13,977 | ) | (a), (b) | 12,183 | ||||||||||||
| Selling and marketing | 516 | - | - | 516 | ||||||||||||||
| Total costs and expenses | 45,423 | 12,242 | (13,913 | ) | 43,752 | |||||||||||||
| Income from operations | 10,860 | (12,242 | ) | 13,913 | 12,531 | |||||||||||||
| Non-operating income (expense): | ||||||||||||||||||
| Interest income | 28 | - | - | 28 | ||||||||||||||
| Interest expense | (2,890 | ) | (1 | ) | - | (2,891 | ) | |||||||||||
| Other non-operating income (expense), net | 211 | - | - | 211 | ||||||||||||||
| Total non-operating income (expense) | (2,651 | ) | (1 | ) | - | (2,652 | ) | |||||||||||
| Income (loss) before income taxes | 8,209 | (12,243 | ) | 13,913 | 9,879 | |||||||||||||
| Income (tax) provision benefit | (3,585 | ) | - | (83 | ) | (c) | (3,668 | ) | ||||||||||
| Income (loss) from operations | $ | 4,624 | $ | (12,243 | ) | $ | 13,830 | $ | 6,211 | |||||||||
See accompanying notes to unaudited pro forma combined consolidated financial statements.
| 3 |
| SUCAMPO PHARMACEUTICALS, INC. | ||||||||||||||||||
| UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET | ||||||||||||||||||
| AS OF MARCH 31, 2017 | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||
| Historical | ||||||||||||||||||
| As Of | ||||||||||||||||||
| March 31, 2017 | March 31, 2017 | |||||||||||||||||
| Sucampo | Vtesse | Transaction Adjustments (see Note 4) | Pro Forma Combined Consolidated | |||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: | - | |||||||||||||||||
| Cash and cash equivalents | 243,480 | 12,331 | (187,931 | ) | (a), (f) | 67,880 | ||||||||||||
| Product royalties receivable | 18,426 | - | - | 18,426 | ||||||||||||||
| Accounts receivable, net | 20,537 | - | - | 20,537 | ||||||||||||||
| Restricted cash | 213 | - | - | 213 | ||||||||||||||
| Inventories, net | 22,978 | - | - | 22,978 | ||||||||||||||
| Prepaid expenses and other current assets | 16,725 | 444 | - | 17,169 | ||||||||||||||
| Total current assets | 322,359 | 12,775 | (187,931 | ) | 147,203 | |||||||||||||
| Investments, non-current | 5,556 | - | - | 5,556 | ||||||||||||||
| Property and equipment, net | 6,197 | 27 | (27 | ) | (a) | 6,197 | ||||||||||||
| Intangible assets, net | 121,381 | 65 | (65 | ) | (a) | 121,381 | ||||||||||||
| Goodwill | 73,022 | - | - | 73,022 | ||||||||||||||
| Deferred tax assets, net | - | - | 6,294 | (b) | 6,294 | |||||||||||||
| Other assets | 688 | 108 | - | 796 | ||||||||||||||
| Total assets | $ | 529,203 | $ | 12,975 | $ | (181,729 | ) | $ | 360,449 | |||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Accounts payable | 8,006 | 1,522 | - | 9,528 | ||||||||||||||
| Accrued expenses | 17,096 | 6,988 | (13,596 | ) | (c) | 10,488 | ||||||||||||
| Accrued interest | 2,538 | - | - | 2,538 | ||||||||||||||
| Deferred revenue, current | 834 | - | - | 834 | ||||||||||||||
| Income tax payable | 3,477 | - | (7,832 | ) | (b) | (4,355 | ) | |||||||||||
| Other current liabilities | 2,876 | 10 | - | 2,886 | ||||||||||||||
| Total current liabilities | 34,827 | 8,520 | (21,428 | ) | 21,919 | |||||||||||||
| Notes payable, non-current | 290,979 | - | - | 290,979 | ||||||||||||||
| Deferred revenue, non-current | 1,572 | - | - | 1,572 | ||||||||||||||
| Deferred tax liability, net | 18,375 | - | - | 18,375 | ||||||||||||||
| Other liabilities | 9,142 | - | - | 9,142 | ||||||||||||||
| Total liabilities | $ | 354,895 | $ | 8,520 | $ | (21,428 | ) | $ | 341,987 | |||||||||
| Stockholders' equity: | - | |||||||||||||||||
| Preferred stock | - | 42,446 | (42,489 | ) | (e) | (43 | ) | |||||||||||
| Common Stock | 464 | 10 | (10 | ) | (d) | 464 | ||||||||||||
| Additional paid-in capital | 123,984 | 286 | (12,880 | ) | (d) | 111,390 | ||||||||||||
| Accumulated other comprehensive income | 54,451 | - | - | 54,451 | ||||||||||||||
| Treasury stock | (46,269 | ) | - | 42,250 | (d) | (4,019 | ) | |||||||||||
| Retained earnings (Accumulated Deficit) | 41,678 | (38,287 | ) | (147,172 | ) | (a), (e) | (143,781 | ) | ||||||||||
| Total stockholders' equity | 174,308 | 4,455 | (160,301 | ) | 18,462 | |||||||||||||
| Total liabilities and stockholders' equity | $ | 529,203 | $ | 12,975 | $ | (181,729 | ) | $ | 360,449 | |||||||||
See accompanying notes to unaudited pro forma combined consolidated financial statements.
| 4 |
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Description of the Merger
On March 31, 2017, Sucampo Pharmaceuticals, Inc. (the “Company”) entered into a merger agreement (the “Merger Agreement”) with Vtesse, Inc. (“Vtesse”), and on April 3, 2017, the Company completed the transactions contemplated by the Merger Agreement (the “Merger”), for an initial purchase price of $200.0 million. The initial purchase price is subject to adjustment as set forth in the Merger Agreement.
The initial purchase price was paid on April 3, 2017 and consisted of the issuance of 2,782,676 shares of Class A common stock of the Company and the payment of $170.0 million of cash. Substantially all of the fair value of Vtesse is related to VTS-270, its only significant asset. VTS-270 is an investigational drug candidate currently being evaluated in a pivotal Phase 2b/3 clinical trial for the treatment of NPC-1, an ultra-orphan, progressive and fatal disease. The Company expects to account for the Merger as an asset acquisition, Vtesse does not meet the definition of a business under ASC 805. As a result, the Company will incur an acquired in-process research and development (“IPR&D”) charge in the second quarter of 2017. The Company’s preliminary estimate of this IPR&D expense is in the range of $180.0 million to $200.0 million. The Company does not expect to receive any current tax benefit related to the IPR&D expense.
The Company has also agreed to pay to equityholders of Vtesse (A) contingent consideration based on mid-single-digit to double-digit royalties on global net sales of VTS-270, tiered based on increasing net sales levels, and (B) a share of net proceeds that may be generated from the monetization of any priority review voucher that may be granted to Vtesse in the future
Note 2 — Basis of Presentation
The accompanying unaudited pro forma combined consolidated financial statements were prepared in accordance with Article 11 of SEC Regulation S-X. The unaudited pro forma combined consolidated balance sheet was prepared using the historical balance sheets of the Company and Vtesse as of March 31, 2017 and assume the Merger closed on January 1, 2016. Vtesse’s assets and liabilities have been estimated at their respective fair values as of January 1, 2016. The preliminary fair values were estimated using information that was available to management at the time these pro forma financial statements were prepared.
The asset purchase accounting is subject to finalization of the Company’s analysis of the fair value of the assets and liabilities of Vtesse as of April 3, 2017, the closing date of the Merger. Accordingly, the preliminary determined fair value in the unaudited pro forma combined financial statements is preliminary and will be adjusted upon completion of the final valuation. Such adjustments could be material.
Note 3 — Purchase Price
The following is a summary of the preliminary allocation of the purchase price reflected in the unaudited pro forma combined consolidated balance sheet as of March 31, 2017 as if the Merger had closed on January 1, 2016 (in thousands):
| 5 |
| Total purchase price | $ | 200,000 | ||
| Total fair value of tangible assets acquired and liabilities assumed | ||||
| Deferred Tax Assets | 4,129 | |||
| Net Assets (Other) | 4,854 | |||
| Total IPR&D asset | $ | 191,017 |
Note 4 – Unaudited Pro Forma Combined Consolidated Balance Sheet Adjustments
(a) Reflects adjustments related to asset acquisition.
(b) Reflects adjustments to tax accounts related to the inclusion of Vtesse and the utilization of Vtesse’s net operating loss carryforwards.
(c) Reflects accrual for unpaid transaction costs.
(d) Reflects the issuance of Class A common stock of the Company in the Merger.
(e) Reflects adjustments to eliminate Vtesse’s historical stockholders’ equity.
(f) Reflects $170.0 million in cash consideration paid in connection with the Merger.
Note 5 – Unaudited Pro Forma Combined Consolidated Statements of Operations Adjustments
(a) Reflects the removal of transaction costs directly attributable to the Merger.
(b) Reflects compensation adjustments of Vtesse employees to align with the Company’s compensation structure.
(c) Reflects adjustments to income tax expense and the tax effect of the transaction adjustments. The tax effect of the pro forma adjustments was calculated using historic statutory rates in effect for the periods presented.
(d) Reflects IPR&D asset acquisition expense.
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