UNITED STATES
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): October 6, 2015
MEDIVATION, INC.
(Exact
name of registrant as specified in its charter)
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| Delaware |
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001-32836 |
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13-3863260 |
| (State or other jurisdiction
of incorporation) |
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(Commission
File No.) |
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(IRS Employer
Identification No.) |
525 Market Street, 36th Floor
San Francisco, California 94105
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (415) 543-3470
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
| ¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
EXPLANATORY NOTE
On August 21, 2015, Medivation, Inc. (“Medivation”) entered into an Asset Purchase Agreement (the “Agreement”) with
BioMarin Pharmaceutical Inc. (“BioMarin”) pursuant to which Medivation acquired all rights to talazoparib (“talazoparib research program”) from BioMarin. The acquired talazoparib assets include all patents, data, know-how, third
party agreements, regulatory materials, and pre-commercial inventories. Medivation also assumed certain costs related to talazoparib to the extent they arise after the closing, including costs for the ongoing clinical trials of talazoparib, and
commitments under certain agreements previously entered into by BioMarin and assigned to Medivation. On October 7, 2015, Medivation filed a Current Report on Form 8-K with the Securities and Exchange Commission (“Initial Form 8-K”) to
report the completion of the acquisition.
In connection with the closing of the transaction, Medivation paid BioMarin an upfront cash
payment of $410.0 million, and will pay BioMarin up to an additional $160.0 million upon the achievement of defined regulatory and sales-based milestones, and mid-single digit royalties on net sales of products that contain talazoparib during the
royalty term specified in the Agreement.
This Current Report on Form 8-K/A is filed as an amendment to the Initial Form 8-K filed by
Medivation on October 7, 2015. This Current Report is filed to provide, and amends the Initial Form 8-K to include, the financial statements and pro forma financial information required by Item 9.01 of Form 8-K.
Item 9.01 Financial Statements and Exhibits.
| (a) |
Financial statements of business acquired |
Medivation has concluded that according to the
guidance in Financial Accounting Standards Board Accounting Standards Codification Topic No. 805, “Business Combinations,” and Article 11 of Regulation S-X, the transaction meets the definition of a “business” and exceeds
the conditions of significance set forth in Rule 1-02(w) of Regulation S-X at the greater than 50% level. The financial statements of the business acquired required by Item 9.01(a) of Form 8-K are included herewith.
| (b) |
Pro forma financial information |
The pro forma financial information required by
Item 9.01(b) of Form 8-K is included herewith.
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| Exhibit
No. |
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Description |
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| 23.1 |
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Consent of Independent Auditors |
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| 99.1 |
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Audited financial statements of the talazoparib research program as of December 31, 2014 and 2013, and the results of operations and cash flows for each of the two years in the period ended December 31, 2014, and related
notes to such audited financial statements |
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| 99.2 |
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Unaudited financial statements of the talazoparib research program as of September 30, 2015 and December 31, 2014, and the related unaudited statements of operations and cash flows for the nine months ended
September 30, 2015 and 2014, and the related notes to such unaudited financial statements |
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| 99.3 |
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Unaudited pro forma condensed combined financial statements as of September 30, 2015, for the nine month period ended September 30, 2015, and for the year ended December 31, 2014, and the related notes to such
unaudited financial statements |
SIGNATURE
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.
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MEDIVATION, INC. |
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| Dated: December 18, 2015 |
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By: |
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/s/ Richard A. Bierly |
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Richard A. Bierly Chief Financial
Officer |
EXHIBIT INDEX
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| Exhibit
No. |
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Description |
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| 23.1 |
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Consent of Independent Auditors |
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| 99.1 |
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Audited financial statements of the talazoparib research program as of December 31, 2014 and 2013, and the results of operations and cash flows for each of the two years in the period ended December 31, 2014, and related
notes to such audited financial statements |
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| 99.2 |
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Unaudited financial statements of the talazoparib research program as of September 30, 2015 and December 31, 2014, and the related unaudited statements of operations and cash flows for the nine months ended
September 30, 2015 and 2014, and the related notes to such unaudited financial statements |
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| 99.3 |
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Unaudited pro forma condensed combined financial statements as of September 30, 2015, for the nine month period ended September 30, 2015, and for the year ended December 31, 2014, and the related notes to such
unaudited financial statements |
Exhibit 23.1
Consent of Independent Auditors
The
Board of Directors
Medivation, Inc.:
We consent to the
incorporation by reference in the registration statement (No. 333-132983, No. 333-190842, No. 333-187203, No. 333-157051 and No. 333-199946) on Form S-8 of Medivation, Inc. of our report dated December 7, 2015, with
respect to the balance sheets of Talazoparib Research Program (A Research Program of BioMarin Pharmaceutical Inc.) as of December 31, 2014 and 2013, and the related statements of operations, statements of research program’s equity and cash
flows for each of the years in the two-year period ended December 31, 2014, which report appears in the Form 8-K of Medivation, Inc. dated December 18, 2015.
Our report dated December 7, 2015, contains an emphasis of matter paragraph that states that the financial statements have been derived from operating
activities attributed to the Talazoparib Research Program from the accounting records of BioMarin Pharmaceutical Inc. The financial statements also include expense allocations for certain corporate functions provided by BioMarin Pharmaceutical Inc.
These allocations may not be reflective of the actual expenses, which would have been incurred had the Talazoparib Research Program operated as a separate entity.
/s/ KPMG LLC
San Francisco, California
December 18, 2015
Exhibit 99.1
TALAZOPARIB RESEARCH PROGRAM
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
FINANCIAL STATEMENTS
For
the two years ended December 31, 2014
TALAZOPARIB RESEARCH PROGRAM
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
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Page |
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| FINANCIAL STATEMENTS |
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| Independent Auditors’ Report |
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3 |
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| Balance Sheets as of December 31, 2014 and 2013 |
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4 |
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| Statements of Operations for the years ended December 31, 2014 and 2013 |
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5 |
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| Statements of Research Program Equity for the years ended December 31, 2014 and 2013 |
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6 |
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| Statements of Cash Flows for the years ended December 31, 2014 and 2013 |
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7 |
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| Notes to the Financial Statements |
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8 |
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2
Independent Auditors’ Report
The Board of Directors
BioMarin Pharmaceutical Inc.:
We have audited the accompanying Talazoparib Research Program (A Research Program of BioMarin Pharmaceutical Inc.) financial statements, which comprise the
balance sheets as of December 31, 2014 and 2013, and the related statements of operations, statements of research program’s equity and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting
principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility
is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of the Talazoparib Research Program as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance
with U.S. generally accepted accounting principles.
Emphasis of Matter
As described in Note 2, these financial statements have been derived from the operating activities attributed to the Talazoparib Research Program from the
accounting records of BioMarin Pharmaceutical Inc. These financial statements also include expense allocations for certain corporate functions provided by BioMarin Pharmaceutical Inc. These allocations may not be reflective of the actual expenses,
which would have been incurred had the Talazoparib Research Program operated as a separate entity.
/s/ KPMG LLC
San Francisco, California
December 7, 2015
3
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
BALANCE SHEETS
December 31, 2014 and 2013
(in thousands of U.S. dollars)
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December 31,
2014 |
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December 31,
2013 |
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| ASSETS |
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| Current Assets: |
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| Prepaid expenses |
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$ |
434 |
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$ |
578 |
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| Total current assets |
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434 |
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578 |
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| Non-current assets: |
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| Acquired intangible assets |
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35,150 |
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35,150 |
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| Goodwill |
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16,328 |
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16,328 |
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| Long-term deposits |
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293 |
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— |
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| Total assets |
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$ |
52,205 |
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$ |
52,056 |
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| LIABILITIES AND RESEARCH PROGRAM EQUITY |
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| Current Liabilities: |
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| Accounts payable and accrued liabilities |
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$ |
9,604 |
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$ |
7,128 |
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| Total current liabilities |
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9,604 |
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7,128 |
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| Non-Current Liabilities: |
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| Contingent acquisition consideration payable |
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11,712 |
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10,845 |
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| Deferred tax liability |
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12,681 |
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12,681 |
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| Total liabilities |
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33,997 |
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30,654 |
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| Research Program Equity: |
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| Investment in research program |
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173,134 |
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104,414 |
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| Accumulated deficit |
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(154,926 |
) |
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(83,012 |
) |
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| Total research program’s equity |
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18,208 |
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21,402 |
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| Total liabilities and research program’s equity |
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$ |
52,205 |
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$ |
52,056 |
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The accompanying notes are an integral part of these Research Program Financial Statements.
4
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
STATEMENTS OF OPERATIONS
Years Ended December 31, 2014 and 2013
(in thousands of U.S. dollars)
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December 31,
2014 |
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December 31,
2013 |
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| OPERATING EXPENSES: |
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| Research and development |
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$ |
64,083 |
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$ |
30,249 |
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| General and administrative |
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6,964 |
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1,279 |
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| Changes in the fair value of contingent consideration |
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867 |
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10,617 |
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| Total operating expenses |
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71,914 |
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42,145 |
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| LOSS FROM OPERATIONS |
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(71,914 |
) |
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(42,145 |
) |
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| NET LOSS |
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$ |
(71,914 |
) |
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$ |
(42,145 |
) |
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The accompanying notes are an integral part of these Research Program Financial Statements.
5
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
STATEMENTS OF RESEARCH PROGRAM’S EQUITY
Years Ended December 31, 2014 and 2013
(in thousands of U.S. dollars)
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Total |
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Investment in |
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Accumulated |
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Research Program |
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Research Program |
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Deficit |
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Equity |
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| Balance at January 1, 2013 |
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$ |
61,980 |
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$ |
(40,867 |
) |
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$ |
21,113 |
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| Net loss |
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— |
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(42,145 |
) |
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(42,145 |
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| Investment in research program |
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42,434 |
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— |
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42,434 |
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| Balance at December 31, 2013 |
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104,414 |
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(83,012 |
) |
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21,402 |
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| Net loss |
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— |
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(71,914 |
) |
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(71,914 |
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| Investment in research program |
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68,720 |
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— |
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68,720 |
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| Balance at December 31, 2014 |
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$ |
173,134 |
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|
$ |
(154,926 |
) |
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$ |
18,208 |
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The accompanying notes are an integral part of these Research Program Financial Statements.
6
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2014 and 2013
(in thousands of U.S. dollars)
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2014 |
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2013 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net loss |
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$ |
(71,914 |
) |
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$ |
(42,145 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Non-cash changes in the fair value of contingent acquisition consideration payable |
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867 |
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6,361 |
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| Changes in operating assets and liabilities: |
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| Other current assets |
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144 |
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(578 |
) |
| Other assets |
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(293 |
) |
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— |
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| Accounts payable and accrued liabilities |
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2,476 |
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(3,011 |
) |
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| Net cash used in operating activities |
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(68,720 |
) |
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(39,373 |
) |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Payment of contingent acquisition consideration payable |
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— |
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(3,061 |
) |
| Investment in research program |
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68,720 |
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42,434 |
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| Net cash provided by financing activities |
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68,720 |
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39,373 |
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| NET INCREASE IN CASH AND CASH EQUIVALENTS |
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— |
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— |
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| Cash and cash equivalents: |
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| Beginning of period |
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$ |
— |
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$ |
— |
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| End of period |
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$ |
— |
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$ |
— |
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|
The accompanying notes are an integral part of these Research Program Financial Statements.
7
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS
(in thousands of U.S. dollars)
Talazoparib is an orally available poly
(ADP-ribose) polymerase (PARP) inhibitor, a class of molecules that has shown clinical activity against cancers involving defects in DNA repair that we are investigating for the treatment of certain cancers. BioMarin Pharmaceutical, Inc. (BioMarin)
initiated a Phase 3 trial in patients with gBRCA mutated breast cancer in October 2013. The Phase 3 trial is an open-label, 2:1 randomized, parallel, two-arm study of talazoparib as compared to the protocol-specified physicians’ choice of
chemotherapy in gBRCA mutated locally advanced and/or metastatic breast cancer patients who have received no more than two prior chemotherapy regimens for metastatic disease.
Additionally, BioMarin initiated a Phase 2 trial in patients with gBRCA mutated breast cancer at the beginning of 2014. The
purpose of this 2-stage, 2-cohort Phase 2 trial is to evaluate the safety and efficacy of talazoparib in patients with locally advanced or metastatic breast cancer with a deleterious gBRCA mutation.
Talazoparib is also being studied as monotherapy and in combination with chemotherapy agents in collaboration with the U.S.
National Cancer Institute under a cooperative research and development agreement in a series of clinical trials.
| (2) |
BASIS OF PRESENTATION |
Basis of Presentation
These accompanying financial statements were prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission under Rule 3-05 of Regulation S-X. Historically, complete financial statements have never been prepared for the Talazoparib Research Program as BioMarin did not maintain the research program as a stand-alone
business, division or subsidiary. The accompanying financial statements for the talazoparib research program have been prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP) and have been derived from
the operating activities directly attributed to the Talazoparib research program from BioMarin’s books and records. All of the research program expenses are paid by BioMarin and reflected as investment in research program. The Statements of
Operations and Cash Flows do not purport to reflect all the costs, expenses, and cash flows that would have been associated had the Talazoparib Research Program been operated as a stand-alone, separate entity. Accordingly, the Statements of
Operations may not be indicative of the operating results going forward given changes in the business that may be made by the acquirer.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and
assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent acquisition consideration payable at the dates of the financial statements, and the reported amounts of expenses, including cost allocations
of certain corporate management functions during the reporting period. Actual results could differ from those estimates.
8
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS – (Continued)
(in thousands of U.S. dollars)
| (3) |
SIGNIFICANT ACCOUNTING POLICIES |
Research and Development
Research and development (R&D) expenses include expenses associated with contract research and development
provided by third-parties, product manufacturing prior to regulatory approval, clinical and regulatory costs, and internal R&D costs. In instances where BioMarin enters into agreements with third-parties for R&D activities, costs are
expensed upon the earlier of when non-refundable amounts are due or as services are performed unless there is an alternative future use of the funds in other R&D projects. Amounts due under such arrangements may be either fixed fee or fee for
service and may include upfront payments, monthly payments and payments upon the completion of milestones or receipt of deliverables. BioMarin accrues costs for clinical trial activities based upon the services received and estimates of related
expenses incurred that have yet to be invoiced by the vendors that perform the activities.
Impairment of Long-Lived
Assets
Goodwill and intangible assets with indefinite lives are not amortized but subject to an annual
impairment analysis.
BioMarin performs its annual impairment review of goodwill and indefinite lived intangibles during
the fourth quarter and whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.
Income Taxes
These financial statements represent the activities of a development program. The tax provision herein is zero as any benefits
associated with the operating losses have been incurred in a zero tax rate jurisdiction, therefore, no deferred assets have been recorded. The deferred tax liability was recorded in 2010 in connection with the original purchase price allocation when
BioMarin acquired LEAD Therapeutics Inc. (LEAD), which included the Talazoparib Research Program. The deferred tax liability relates to the tax impact of future amortization or possible impairments associated with the indefinite-lived intangible
assets acquired, which are not deductible for tax purposes.
Contingent Acquisition Consideration Payable
BioMarin determines the fair value of contingent acquisition consideration payable on the acquisition date using a
probability-based income approach utilizing an appropriate discount rate. Each reporting period thereafter, BioMarin revalues these obligations and records increases or decreases in their fair value as adjustments to Changes in the Fair Value of
Contingent Consideration in the Research Program’s Statements of Operations. Changes in the fair value of the contingent acquisition consideration payable can result from adjustments to the estimated probability and assumed timing of achieving
the underlying milestones, as well as from changes to the discount rates and periods.
9
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS – (Continued)
(in thousands of U.S. dollars)
| (4) |
CORPORATE ALLOCATIONS |
BioMarin performed certain corporate management
functions for the Talazoparib Research Program for the years ended December 31, 2014 and 2013, including, but not limited to, finance and accounting, payroll and human resource administration, treasury services, benefit management, information
technology, legal services and other administration. These corporate function costs, which includes employee compensation, including stock-based compensation expense are allocated to the Talazoparib Research Program based on employee headcount,
square footage, percentage of salaries and wages and other factors deemed appropriate by management based on the nature of the costs to be allocated.
During the fourth quarters of 2014 and 2013, Management
performed its annual impairment review and determined that no impairment existed as of December 31, 2014 or 2013.
The Talazoparib Research Program is an in-process
research and development (IPR&D) asset that was previously acquired by BioMarin and is related to rights to develop and commercialize Talazoparib. These IPR&D assets are considered indefinite-lived until the completion or abandonment of the
associated R&D efforts. During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis and between annual tests if BioMarin becomes aware of any events occurring or
changes in circumstances that would indicate a reduction in the fair value of the IPR&D assets below their respective carrying amounts. If and when development is complete, which generally occurs if and when regulatory approval to market a
product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.
During the fourth quarters of 2014 and 2013, Management performed its annual impairment review and determined that no
impairments existed as of December 31, 2014 or 2013.
The liability measured at fair value using Level 3 inputs
comprised of contingent acquisition consideration payable.
BioMarin’s contingent acquisition consideration payable is
estimated using a probability-based income approach utilizing an appropriate discount rate. Key assumptions used by management to estimate the fair value of contingent acquisition consideration payable include estimated probabilities, the estimated
timing of when a milestone may be attained and assumed discount periods and rates. Subsequent changes in the fair value of the contingent acquisition consideration payable, resulting from management’s revision of key assumptions, was recorded
in Changes in the Fair Value of Contingent Consideration in the Research Program’s Statements of Operations. The probability-based income approach used by management to estimate the fair value of the contingent acquisition consideration is most
sensitive to changes in the estimated probabilities.
|
|
|
|
|
| Contingent consideration payable at December 31, 2013 |
|
$ |
10,845 |
|
| Changes in the fair value of contingent consideration payable |
|
|
867 |
|
|
|
|
|
|
| Contingent consideration payable at December 31, 2014 |
|
$ |
11,712 |
|
|
|
|
|
|
As of December 31, 2014, contingent acquisition consideration payable totaled $25.0
million (undiscounted), of which $15.0 million becomes payable upon the first commercial sale of Talazoparib in the United States and $10.0 million becomes payable upon the first commercial sale of Talazoparib in the European Union.
10
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS – (Continued)
(in thousands of U.S. dollars)
On October 6, 2015, BioMarin completed the sale
of Talazoparib to Medivation, Inc. (Medivation). Pursuant to the Asset Purchase Agreement, Medivation paid BioMarin an upfront payment of $410.0 million upon the closing of the transaction. In addition, contingent upon the successful development and
commercialization of Talazoparib, Medivation will pay BioMarin milestone payments of up to $160.0 million and mid-single digit percentage royalties on net sales of Talazoparib.
11
Exhibit 99.2
TALAZOPARIB RESEARCH PROGRAM
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
FINANCIAL STATEMENTS
(UNAUDITED)
For the nine
months ended September 30, 2015 and 2014
TALAZOPARIB RESEARCH PROGRAM
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
|
|
|
|
|
| |
|
Page |
|
| FINANCIAL STATEMENTS |
|
|
|
|
| Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014 |
|
|
3 |
|
| Statements of Operations (Unaudited) for the nine months ended September 30, 2015 and 2014 |
|
|
4 |
|
| Statements of Research Program Equity for the nine months ended September 30, 2015 (Unaudited) and the year ended
December 31, 2014 |
|
|
5 |
|
| Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2015 and 2014 |
|
|
6 |
|
| Notes to the Financial Statements |
|
|
7 |
|
2
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
BALANCE SHEETS
September 30, 2015 and December 31, 2014
(in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
| |
|
September 30, 2015 |
|
|
December 31, 2014 (1) |
|
| |
|
(Unaudited) |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current Assets: |
|
|
|
|
|
|
|
|
| Prepaid expenses |
|
$ |
814 |
|
|
$ |
434 |
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
814 |
|
|
|
434 |
|
|
|
|
|
|
|
|
|
|
| Non-current assets: |
|
|
|
|
|
|
|
|
| Acquired intangible assets |
|
|
35,150 |
|
|
|
35,150 |
|
| Goodwill |
|
|
16,328 |
|
|
|
16,328 |
|
| Long-term deposits |
|
|
1,070 |
|
|
|
293 |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
53,362 |
|
|
$ |
52,205 |
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND RESEARCH PROGRAM EQUITY |
|
|
|
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued liabilities |
|
$ |
12,428 |
|
|
$ |
9,604 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
12,428 |
|
|
|
9,604 |
|
|
|
|
|
|
|
|
|
|
| Non-Current Liabilities: |
|
|
|
|
|
|
|
|
| Contingent acquisition consideration payable |
|
|
11,508 |
|
|
|
11,712 |
|
| Deferred tax liability |
|
|
12,681 |
|
|
|
12,681 |
|
|
|
|
|
|
|
|
|
|
| Total Liabilities |
|
|
36,617 |
|
|
|
33,997 |
|
|
|
|
|
|
|
|
|
|
| Research Program Equity: |
|
|
|
|
|
|
|
|
| Investment in research program |
|
|
238,489 |
|
|
|
173,134 |
|
| Accumulated deficit |
|
|
(221,744 |
) |
|
|
(154,926 |
) |
|
|
|
|
|
|
|
|
|
| Total research program’s equity |
|
|
16,745 |
|
|
|
18,208 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities and research program’s equity |
|
$ |
53,362 |
|
|
$ |
52,205 |
|
|
|
|
|
|
|
|
|
|
| (1) |
December 31, 2014 balances were derived from the Research Program’s audited financial statements. |
The accompanying notes are an integral part of these Research Program Financial Statements.
3
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2015 and 2014
(in thousands of U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
| |
|
September 30,
2015 |
|
|
September 30,
2014 |
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| Research and development |
|
$ |
59,652 |
|
|
$ |
45,504 |
|
| General and administrative |
|
|
7,370 |
|
|
|
4,757 |
|
| Changes in the fair value of contingent consideration |
|
|
(204 |
) |
|
|
676 |
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
66,818 |
|
|
|
50,937 |
|
|
|
|
|
|
|
|
|
|
| LOSS FROM OPERATIONS |
|
|
(66,818 |
) |
|
|
(50,937 |
) |
|
|
|
|
|
|
|
|
|
| NET LOSS |
|
$ |
(66,818 |
) |
|
$ |
(50,937 |
) |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Research Program Financial Statements.
4
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
STATEMENTS OF RESEARCH PROGRAM’S EQUITY
Nine Months Ended September 30, 2015 and the Year Ended December 31, 2014
(in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Total |
|
| |
|
Investment in |
|
|
Accumulated |
|
|
Research Program |
|
| |
|
Research Program |
|
|
Deficit |
|
|
Equity |
|
| Balance at December 31, 2013 (1) |
|
$ |
104,414 |
|
|
$ |
(83,012 |
) |
|
$ |
21,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
— |
|
|
|
(71,914 |
) |
|
|
(71,914 |
) |
| Investment in research program |
|
|
68,720 |
|
|
|
— |
|
|
|
68,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2014 (1) |
|
|
173,134 |
|
|
|
(154,926 |
) |
|
|
18,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
— |
|
|
|
(66,818 |
) |
|
|
(66,818 |
) |
| Investment in research program |
|
|
65,355 |
|
|
|
— |
|
|
|
65,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at September 30, 2015 (unaudited) |
|
$ |
238,489 |
|
|
$ |
(221,744 |
) |
|
$ |
16,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
December 31, 2014 and 2013 balances were derived from the Research Program’s audited financial statements. |
The accompanying notes are an integral part of these Research Program Financial Statements.
5
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2015 and 2014
(in thousands of U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
| |
|
2015 |
|
|
2014 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(66,818 |
) |
|
$ |
(50,937 |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Non-cash changes in the fair value of contingent acquisition consideration payable |
|
|
(204 |
) |
|
|
676 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Other current assets |
|
|
(380 |
) |
|
|
470 |
|
| Other assets |
|
|
(777 |
) |
|
|
— |
|
| Accounts payable and accrued liabilities |
|
|
2,824 |
|
|
|
3,138 |
|
|
|
|
|
|
|
|
|
|
| Net cash used in operating activities |
|
|
(65,355 |
) |
|
|
(46,653 |
) |
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Payment of contingent acquisition consideration payable |
|
|
— |
|
|
|
— |
|
| Investment in research program |
|
|
65,355 |
|
|
|
46,653 |
|
|
|
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
65,355 |
|
|
|
46,653 |
|
|
|
|
|
|
|
|
|
|
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
— |
|
|
|
— |
|
| Cash and cash equivalents: |
|
|
|
|
|
|
|
|
| Beginning of period |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
| End of period |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Research Program Financial Statements.
6
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS
(in thousands of U.S. dollars)
(Unaudited)
Talazoparib is an orally available poly
(ADP-ribose) polymerase (PARP) inhibitor, a class of molecules that has shown clinical activity against cancers involving defects in DNA repair that we are investigating for the treatment of certain cancers. BioMarin Pharmaceutical, Inc. (BioMarin)
initiated a Phase 3 trial in patients with gBRCA mutated breast cancer in October 2013. The Phase 3 trial is an open-label, 2:1 randomized, parallel, two-arm study of talazoparib as compared to the protocol-specified physicians’ choice of
chemotherapy in gBRCA mutated locally advanced and/or metastatic breast cancer patients who have received no more than two prior chemotherapy regimens for metastatic disease.
Additionally, BioMarin initiated a Phase 2 trial in patients with gBRCA mutated breast cancer at the beginning of 2014. The
purpose of this 2-stage, 2-cohort Phase 2 trial is to evaluate the safety and efficacy of talazoparib in patients with locally advanced or metastatic breast cancer with a deleterious gBRCA mutation.
Talazoparib is also being studied as monotherapy and in combination with chemotherapy agents in collaboration with the U.S.
National Cancer Institute under a cooperative research and development agreement in a series of clinical trials.
| (2) |
BASIS OF PRESENTATION |
Basis of Presentation
These accompanying financial statements were prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission under Rule 3-05 of Regulation S-X. Historically, complete financial statements have never been prepared for the Talazoparib Research Program as BioMarin did not maintain the research program as a stand-alone
business, division or subsidiary. The accompanying financial statements for the talazoparib research program have been prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP) and have been derived from
the operating activities directly attributed to the Talazoparib research program from BioMarin’s books and records. All of the research program expenses are paid by BioMarin and reflected as investment in research program. The Statements of
Operations and Cash Flows do not purport to reflect all the costs, expenses, and cash flows that would have been associated had the Talazoparib Research Program been operated as a stand-alone, separate entity. Accordingly, the Statements of
Operations may not be indicative of the operating results going forward given changes in the business that may be made by the acquirer.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and
assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent acquisition consideration payable at the dates of the financial statements, and the reported amounts of expenses, including cost allocations
of certain corporate management functions during the reporting period. Actual results could differ from those estimates.
7
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS – (Continued)
(in thousands of U.S. dollars)
(Unaudited)
| (3) |
SIGNIFICANT ACCOUNTING POLICIES |
Research and Development
Research and development (R&D) expenses include expenses associated with contract research and development
provided by third-parties, product manufacturing prior to regulatory approval, clinical and regulatory costs, and internal R&D costs. In instances where BioMarin enters into agreements with third-parties for R&D activities, costs are
expensed upon the earlier of when non-refundable amounts are due or as services are performed unless there is an alternative future use of the funds in other R&D projects. Amounts due under such arrangements may be either fixed fee or fee for
service and may include upfront payments, monthly payments and payments upon the completion of milestones or receipt of deliverables. BioMarin accrues costs for clinical trial activities based upon the services received and estimates of related
expenses incurred that have yet to be invoiced by the vendors that perform the activities.
Impairment of Long-Lived
Assets
Goodwill and intangible assets with indefinite lives are not amortized but subject to an annual
impairment analysis.
BioMarin performs its annual impairment review of goodwill and indefinite lived intangibles during
the fourth quarter and whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable.
Income Taxes
These financial statements represent the activities of a development program. The tax provision herein is zero as any benefits
associated with the operating losses have been incurred in a zero tax rate jurisdiction, therefore, no deferred assets have been recorded. The deferred tax liability was recorded in 2010 in connection with the original purchase price allocation when
BioMarin acquired LEAD Therapeutics Inc. (LEAD), which included the Talazoparib Research Program. The deferred tax liability relates to the tax impact of future amortization or possible impairments associated with the indefinite-lived intangible
assets acquired, which are not deductible for tax purposes.
Contingent Acquisition Consideration Payable
BioMarin determines the fair value of contingent acquisition consideration payable on the acquisition date using a
probability-based income approach utilizing an appropriate discount rate. Each reporting period thereafter, BioMarin revalues these obligations and records increases or decreases in their fair value as adjustments to Changes in the Fair Value of
Contingent Consideration in the Research Program’s Statements of Operations. Changes in the fair value of the contingent acquisition consideration payable can result from adjustments to the estimated probability and assumed timing of achieving
the underlying milestones, as well as from changes to the discount rates and periods.
8
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS – (Continued)
(in thousands of U.S. dollars)
(Unaudited)
| (4) |
CORPORATE ALLOCATIONS |
BioMarin performed certain corporate management
functions for the Talazoparib Research Program for the nine months ended September 30, 2015 and 2014, including, but not limited to, finance and accounting, payroll and human resource administration, treasury services, benefit management,
information technology, legal services and other administration. These corporate function costs, which includes employee compensation, including stock-based compensation expense are allocated to the Talazoparib Research Program based on
employee headcount, square footage, percentage of salaries and wages and other factors deemed appropriate by management based on the nature of the costs to be allocated.
During the fourth quarter of 2014, Management performed its
annual impairment review and determined that no impairment existed as of December 31, 2014.
The Talazoparib Research Program is an in-process
research and development (IPR&D) asset that was previously acquired by BioMarin and is related to rights to develop and commercialize Talazoparib. These IPR&D assets are considered indefinite-lived until the completion or abandonment of the
associated R&D efforts. During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis and between annual tests if BioMarin becomes aware of any events occurring or
changes in circumstances that would indicate a reduction in the fair value of the IPR&D assets below their respective carrying amounts. If and when development is complete, which generally occurs if and when regulatory approval to market a
product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.
During the fourth quarter of 2014, Management performed its annual impairment review and determined that no impairment existed
as of December 31, 2014. As of the date of these financial statements, Management has not yet performed its annual impairment review for the 2015 fiscal year, however no specific impairment indicators have been observed through
September 30, 2015.
The liability measured at fair value using Level 3 inputs
comprised of contingent acquisition consideration payable.
BioMarin’s contingent acquisition consideration payable is
estimated using a probability-based income approach utilizing an appropriate discount rate. Key assumptions used by management to estimate the fair value of contingent acquisition consideration payable include estimated probabilities, the estimated
timing of when a milestone may be attained and assumed discount periods and rates. Subsequent changes in the fair value of the contingent acquisition consideration payable, resulting from management’s revision of key assumptions, was recorded
in Changes in the Fair Value of Contingent Consideration in the Research Program’s Statements of Operations. The probability-based income approach used by management to estimate the fair value of the contingent acquisition consideration is most
sensitive to changes in the estimated probabilities.
9
TALAZOPARIB RESEARCH PROGRAM FINANCIAL STATEMENTS
(A RESEARCH PROGRAM OF BIOMARIN PHARMACEUTICAL INC.)
NOTES TO FINANCIAL STATEMENTS – (Continued)
(in thousands of U.S. dollars)
(Unaudited)
|
|
|
|
|
| Contingent consideration payable at December 31, 2014 |
|
$ |
11,712 |
|
| Changes in the fair value of contingent consideration payable |
|
|
(204 |
) |
|
|
|
|
|
| Contingent consideration payable at September 30, 2015 |
|
$ |
11,508 |
|
|
|
|
|
|
As of September 30, 2015, contingent acquisition consideration payable totaled $25.0
million (undiscounted), of which $15.0 million becomes payable upon the first commercial sale of Talazoparib in the United States and $10.0 million becomes payable upon the first commercial sale of Talazoparib in the European Union.
On October 6, 2015, BioMarin completed the sale
of Talazoparib to Medivation, Inc. (Medivation). Pursuant to the Asset Purchase Agreement, Medivation paid BioMarin an upfront payment of $410.0 million upon the closing of the transaction. In addition, contingent upon the successful development and
commercialization of Talazoparib, Medivation will pay BioMarin milestone payments of up to $160.0 million and mid-single digit percentage royalties on net sales of Talazoparib.
10
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introductory Note
Description of the
Transaction
On August 21, 2015, Medivation, Inc. (the “Company”) entered into an Asset Purchase Agreement (the
“Agreement”) with BioMarin Pharmaceutical Inc. (“BioMarin”) pursuant to which the Company acquired all rights to talazoparib (“talazoparib research program”), an orally available poly-ADP ribose polymerase
(“PARP”) inhibitor from BioMarin. The acquired talazoparib assets include all patents, data, know-how, third party agreements, regulatory materials, and pre-commercial inventories. The Company also assumed certain costs related to
talazoparib to the extent they arise after the closing of the transaction, including costs for the ongoing clinical trials of talazoparib, and commitments under certain agreements previously entered into by BioMarin and assigned to the Company.
On October 6, 2015, the Company completed the acquisition of the talazoparib research program from BioMarin. In connection with the
closing of the transaction, the Company paid BioMarin an upfront cash payment of $410.0 million, and will pay BioMarin up to an additional $160.0 million upon the achievement of defined regulatory and sales-based milestones, and mid-single digit
royalties on net sales of products that contain talazoparib during the royalty term specified in the Agreement.
Basis of Presentation
The determination of the accounting for the talazoparib research program acquisition as a business acquisition was based on a review of all of
the pertinent facts and circumstances and was based on a number of factors outlined in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, “Business Combinations,” which provides guidance in
identifying a transaction as an asset acquisition or a business acquisition. After consideration of the factors outlined in the prescribed ASC guidance as well as the state of the development of the late-stage molecule acquired from BioMarin
pursuant to the Agreement, it was determined that the talazoparib research program acquisition should be accounted for as a business acquisition and accounted for using the “acquisition method” of accounting.
The following unaudited pro forma condensed combined financial statements combine the historical financial information of the Company and the
talazoparib research program. The unaudited pro forma condensed combined balance sheet at September 30, 2015 gives effect to the acquisition as if the acquisition had been consummated on that date. The unaudited pro forma condensed combined
statements of operations for the year ended December 31, 2014 and the nine months ended September 30, 2015 are presented as if the acquisition had been completed on January 1, 2014. The unaudited pro forma condensed combined financial
statements were prepared using the acquisition method of accounting are also in accordance with Article 11 of Regulation S-X.
The
unaudited pro forma condensed combined financial information presented below is based on, and should be used in conjunction with (i) the Company’s historical audited consolidated financial statements, and related notes thereto, for the
year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, (ii) the Company’s historical unaudited condensed consolidated financial statements, and related notes
thereto, for the nine months ended September 30, 2015, included in the Company’s Quarterly Report for the nine months ended September 30, 2015, (iii) the historical audited financial statements, and related notes thereto, of the
talazoparib research program for the year ended December 31, 2014 included as Exhibit 99.1 to this Form 8-K/A, and (iv) the historical unaudited financial statements, and related notes thereto, of the talazoparib research program for the
nine months ended September 30, 2015 included as Exhibit 99.2 to this Form 8-K/A.
The Company is not aware of any material
differences between the accounting policies of the Company and the talazoparib research program. Accordingly, the accompanying unaudited pro forma condensed combined financial statements do not assume any material differences in accounting policies
between the Company and the talazoparib research program. The Company has not finalized its review of the historical accounting policies of the talazoparib research
program. Any differences between the Company’s accounting policies and the talazoparib research program’s historical accounting policies could be significant. The unaudited pro forma
condensed combined financial information should be read in conjunction with the accompanying notes.
The Company’s historical
consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) with respect to the statements of operations, expected
to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial statements do not reflect the realization of potential cost savings, or any related restructuring costs, integration costs, or transition costs
that may result from the transaction. These unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations that would have been achieved had the transaction actually take place at the dates
indicated and do not purport to be indicative of future financial position or operating results. The unaudited pro forma condensed combined financial information includes adjustments which are preliminary and may be revised, and any revisions could
be material.
MEDIVATION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
AS OF
SEPTEMBER 30, 2015
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Medivation, Inc.
(Historical) |
|
|
Talazoparib
Research Program
(Historical) |
|
|
Pro Forma
Adjustments |
|
|
See Note
4 |
|
Pro Forma
Combined |
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
488,944 |
|
|
$ |
— |
|
|
$ |
(410,000 |
) |
|
(a) |
|
$ |
78,944 |
|
| Receivable from collaboration partner |
|
|
277,612 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
277,612 |
|
| Deferred income tax assets |
|
|
22,353 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
22,353 |
|
| Prepaid expenses and other current assets |
|
|
15,946 |
|
|
|
814 |
|
|
|
(814 |
) |
|
(b) |
|
|
15,946 |
|
| Restricted cash |
|
|
930 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
805,785 |
|
|
|
814 |
|
|
|
(410,814 |
) |
|
|
|
|
395,785 |
|
| Property and equipment, net |
|
|
49,018 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
49,018 |
|
| Intangible assets |
|
|
101,000 |
|
|
|
35,150 |
|
|
|
538,149 |
|
|
(c) |
|
|
674,299 |
|
| Deferred income tax assets, non-current |
|
|
35,628 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
35,628 |
|
| Restricted cash, net of current |
|
|
12,206 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
12,206 |
|
| Goodwill |
|
|
10,000 |
|
|
|
16,328 |
|
|
|
(7,685 |
) |
|
(d) |
|
|
18,643 |
|
| Other non-current assets |
|
|
6,957 |
|
|
|
1,070 |
|
|
|
(1,070 |
) |
|
(b) |
|
|
6,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
1,020,594 |
|
|
$ |
53,362 |
|
|
$ |
118,580 |
|
|
|
|
$ |
1,192,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable, accrued expenses and other current liabilities |
|
$ |
132,258 |
|
|
$ |
12,428 |
|
|
$ |
(12,428 |
) |
|
(b) |
|
$ |
132,258 |
|
| Borrowings under Revolving Credit Facility |
|
|
75,000 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
75,000 |
|
| Contingent consideration |
|
|
10,000 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
10,000 |
|
| Current portion of build-to-suit lease obligation |
|
|
235 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
217,493 |
|
|
|
12,428 |
|
|
|
(12,428 |
) |
|
|
|
|
217,493 |
|
| Contingent consideration |
|
|
102,799 |
|
|
|
11,508 |
|
|
|
160,434 |
|
|
(e) |
|
|
274,741 |
|
| Deferred tax liability |
|
|
— |
|
|
|
12,681 |
|
|
|
(12,681 |
) |
|
(b) |
|
|
— |
|
| Build-to-suit lease obligation, excluding current portion |
|
|
16,905 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
16,905 |
|
| Other non-current liabilities |
|
|
11,729 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
11,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
348,926 |
|
|
|
36,617 |
|
|
|
135,325 |
|
|
|
|
|
520,868 |
|
| Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
| Common stock |
|
|
1,636 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
1,636 |
|
| Additional paid-in capital |
|
|
626,340 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
626,340 |
|
| Investment in research program |
|
|
— |
|
|
|
238,489 |
|
|
|
(238,489 |
) |
|
(b) |
|
|
— |
|
| Retained earnings (accumulated deficit) |
|
|
43,692 |
|
|
|
(221,744 |
) |
|
|
221,744 |
|
|
(b) |
|
|
43,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
|
671,668 |
|
|
|
16,745 |
|
|
|
(16,745 |
) |
|
|
|
|
671,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and stockholders’ equity |
|
$ |
1,020,594 |
|
|
$ |
53,362 |
|
|
$ |
118,580 |
|
|
|
|
$ |
1,192,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited pro forma condensed combined financial statements which are an integral part of these
financial statements.
MEDIVATION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Medivation, Inc.
(Historical) |
|
|
Talazoparib
Research Program
(Historical) |
|
|
Pro Forma
Adjustments |
|
|
See Note
4 |
|
Pro Forma
Combined |
|
| Collaboration revenue |
|
$ |
565,510 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
$ |
565,510 |
|
| Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development expenses |
|
|
137,841 |
|
|
|
59,652 |
|
|
|
— |
|
|
|
|
|
197,493 |
|
| Selling, general and administrative expenses |
|
|
234,456 |
|
|
|
7,370 |
|
|
|
|
|
|
|
|
|
241,826 |
|
| Change in fair value of contingent consideration |
|
|
— |
|
|
|
(204 |
) |
|
|
204 |
|
|
(f) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
372,297 |
|
|
|
66,818 |
|
|
|
204 |
|
|
|
|
|
439,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from operations |
|
|
193,213 |
|
|
|
(66,818 |
) |
|
|
(204 |
) |
|
|
|
|
126,191 |
|
| Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on extinguishment of Convertible Notes |
|
|
(21,087 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(21,087 |
) |
| Interest expense |
|
|
(11,995 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(11,995 |
) |
| Other, net |
|
|
247 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other income (expense), net |
|
|
(32,835 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(32,835 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income tax (expense) benefit |
|
|
160,378 |
|
|
|
(66,818 |
) |
|
|
(204 |
) |
|
|
|
|
93,356 |
|
| Income tax (expense) benefit |
|
|
(58,160 |
) |
|
|
— |
|
|
|
23,458 |
|
|
(g) |
|
|
(34,702 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
102,218 |
|
|
$ |
(66,818 |
) |
|
$ |
23,254 |
|
|
|
|
$ |
58,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.37 |
|
| Diluted |
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.36 |
|
| Weighted-average common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
159,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
159,198 |
|
| Diluted |
|
|
164,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
164,454 |
|
See notes to unaudited pro forma condensed combined financial statements which are an integral part of these
financial statements.
MEDIVATION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Medivation, Inc.
(Historical) |
|
|
Talazoparib
Research Program
(Historical) |
|
|
Pro Forma
Adjustments |
|
|
See Note
4 |
|
Pro Forma
Combined |
|
| Collaboration revenue |
|
$ |
710,487 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
$ |
710,487 |
|
| Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development expenses |
|
|
189,570 |
|
|
|
64,083 |
|
|
|
— |
|
|
|
|
|
253,653 |
|
| Selling, general and administrative expenses |
|
|
239,071 |
|
|
|
6,964 |
|
|
|
— |
|
|
|
|
|
246,035 |
|
| Change in fair value of contingent consideration |
|
|
— |
|
|
|
867 |
|
|
|
(867 |
) |
|
(f) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
428,641 |
|
|
|
71,914 |
|
|
|
(867 |
) |
|
|
|
|
499,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from operations |
|
|
281,846 |
|
|
|
(71,914 |
) |
|
|
867 |
|
|
|
|
|
210,799 |
|
| Other income (expense), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
(21,690 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(21,690 |
) |
| Other, net |
|
|
38 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other income (expense), net |
|
|
(21,652 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
(21,652 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before income tax benefit |
|
|
260,194 |
|
|
|
(71,914 |
) |
|
|
867 |
|
|
|
|
|
189,147 |
|
| Income tax benefit |
|
|
16,258 |
|
|
|
— |
|
|
|
24,866 |
|
|
(g) |
|
|
41,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
276,452 |
|
|
$ |
(71,914 |
) |
|
$ |
25,733 |
|
|
|
|
$ |
230,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
1.80 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1.50 |
|
| Diluted |
|
$ |
1.71 |
|
|
|
|
|
|
|
|
|
|
(h) |
|
$ |
1.44 |
|
| Weighted-average common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
153,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
153,859 |
|
| Diluted |
|
|
170,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
170,001 |
|
See notes to unaudited pro forma condensed combined financial statements which are an integral part of these
financial statements.
MEDIVATION, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(in
thousands)
On September 15, 2015, Medivation, Inc. (the
“Company”) effected a two-for-one stock split of its common stock in the form of a stock dividend. The information of the Company’s common stock (except par value per share), par, and additional paid-in capital as of
September 30, 2015 and the information of the net income per common share for the periods presented include the effect of the stock split.
During the preparation of the accompanying unaudited pro forma
condensed combined financial statements, the Company was not aware of any material differences between the accounting policies of the Company and the talazoparib research program. Accordingly, the accompanying unaudited pro forma condensed combined
financial statements do not assume any material differences in accounting policies between the Company and the talazoparib research program. The Company has not finalized its review of the historical accounting policies of the talazoparib research
program. Any differences between the Company’s accounting policies and the talazoparib research program’s historical accounting policies could be significant.
| 3. |
Purchase Price Allocation |
The acquisition of the talazoparib research program is
accounted for as a business acquisition using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic No. 805, “Business Combinations,” whereby the net
assets acquired were recognized based their estimated fair values on the acquisition date. Transaction costs associated with the acquisition of the talazoparib asset were not significant.
In connection with the closing of the transaction, the Company made an upfront cash payment of $410.0 million to BioMarin Pharmaceutical Inc.
(“BioMarin”). In addition, BioMarin is entitled to contingent payments totaling up to $160.0 million upon the achievement of defined regulatory and sales-based milestones, and mid-single digit royalties on net sales of products that
contain talazoparib during the royalty term specified in the Agreement.
The following table presents the preliminary allocation of the
purchase consideration, including the contingent consideration payable, based on fair value:
|
|
|
|
|
| Purchase consideration: |
|
|
|
|
| Upfront cash payment |
|
$ |
410,000 |
|
| Acquisition-date fair value of contingent consideration |
|
|
171,942 |
|
|
|
|
|
|
| Total purchase consideration |
|
$ |
581,942 |
|
|
|
|
|
|
| Allocation of the purchase consideration: |
|
|
|
|
| Assets: |
|
|
|
|
| Identifiable intangible assets- IPR&D |
|
$ |
573,299 |
|
|
|
|
|
|
| Net identifiable assets acquired |
|
|
573,299 |
|
| Goodwill |
|
|
8,643 |
|
|
|
|
|
|
| Net assets acquired |
|
$ |
581,942 |
|
|
|
|
|
|
The acquisition-date fair value of the contingent consideration payments totaled $171.9 million and was
estimated by applying a probability-based income model using a discounted cash flow analysis for contingent regulatory and royalty payments and a Monte Carlo simulation model for the contingent sales milestone payments. Both models utilize key
assumptions that included estimated revenues or completion of certain regulatory and sales milestone targets during the earn-out period, volatility, and estimated discount rates corresponding to the periods of expected payments.
Identifiable intangible assets totaled $573.3 million and consist entirely of in-process research
and development (“IPR&D”) for talazoparib. As of the valuation date, the Company determined that talazoparib was the only research and development (“R&D”) project with substance, such that the project had undergone
conceptual stages, and research, development, and preproduction had been started for the project. As such, no other intangible assets were identified in the transaction other than talazoparib separate from goodwill. The excess of the preliminary
purchase consideration over the fair values assigned to the net assets acquired was $8.6 million, which represents the amount of goodwill resulting from the acquisition.
The following is a summary of the adjustments included under the
heading “Pro Forma Adjustments” in the unaudited pro forma condensed combined financial statements. The fair values of the net assets acquired are based on a preliminary valuation of their fair value and may change when the final valuation
is determined. Any such adjustments to the preliminary valuation could be significant.
| a. |
Represents a $410.0 million reduction to the Company’s cash and cash equivalents for the upfront cash payment to BioMarin upon closing of the transaction. |
| b. |
Reflects the elimination of the talazoparib research program’s historical assets, liabilities, and equity, which were not acquired or assumed by the Company in connection with the Agreement and as a result are not
directly attributable to the transaction. |
| c. |
Represents the preliminary estimate of the purchase price allocated to IPR&D for the talazoparib research program totaling $573.3 million and the elimination of the historical intangible assets of the talazoparib
research program totaling $35.2 million. The historical talazoparib research program’s statements of operations do not include amortization of the IPR&D related to talazoparib. As of the valuation date, the Company determined that
talazoparib was the only R&D project with substance, such that the project had undergone conceptual stages, and research, development, and preproduction had been started for the project. As such, no other intangible assets were identified in the
transaction other than talazoparib separate from goodwill. The amount represents the preliminary estimate of the fair value assigned to the incomplete project acquired from BioMarin, which at the time of acquisition, had not yet reached
technological feasibility. The fair value assigned to the IPR&D was determined using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations
of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions used in the income approach from the perspective of a market participant include the estimated net cash flows for each year (including
revenues, costs of sales, research and development costs, selling, general, and administrative costs, and working capital/contributory asset charges), the discount rate that measures the risk inherent in each future cash flow stream, the assessment
of the asset’s life cycle, and competitive trends impacting the asset and each cash flow stream, as well as other factors. |
The amounts are capitalized and accounted for as indefinite-lived long-term assets subject to impairment testing until completion or
abandonment of the project. Upon successful completion of the project, the Company will make a determination as to the then useful life of the intangible asset and begin amortization over that period. No amortization of IPR&D is included in the
pro forma financial statements.
| d. |
Reflects the preliminary estimate of the goodwill totaling $8.6 million resulting from the difference between the purchase price and the fair value of the net assets acquired as a result of the Agreement and the
elimination of historical goodwill of the talazoparib research program totaling $16.3 million. |
| e. |
Represents the preliminary fair value estimate of contingent consideration associated with the Agreement totaling $171.9 million and the elimination
of historical contingent consideration of the talazoparib research program totaling $11.5 million. A portion of the contingent consideration included on the historical talazoparib balance sheet is associated with potential future financial
obligations that have been assumed by the Company. These potential future obligations are included in the estimated fair value of the IPR&D described above. The preliminary fair value of the contingent consideration was estimated utilizing a
model with key assumptions that included estimated revenues or completion of certain regulatory and sales-based milestones during the earn-out period, |
| |
volatility, and estimated discount rates corresponding to the periods of expected payments. The contingent consideration has been classified as long-term based upon the Company’s estimate of
the timing of the potential contingent payments. |
| f. |
Reflects the elimination of changes in the fair value of contingent consideration reflected in the historical statement of operations of the talazoparib research program. |
| g. |
Reflects the estimated income tax impact of the talazoparib research program’s research and development expense and general and administrative expense, computed at the Federal statutory tax rate of approximately
35%. |
| h. |
For the year ended December 31, 2014, the computation of diluted net income per share includes the impact of the Company’s convertible notes. Additional information regarding the computation of diluted net
income per common share is included in the Company’s Annual Report on Form 10-K |
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