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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. )
NEOZYME II CORPORATION AND GENZYME CORPORATION
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(NAME OF ISSUER)
NEOZYME II CORPORATION, GENZYME CORPORATION AND NEOZYME II ACQUISITION CORP.
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(NAME OF PERSON(S) FILING STATEMENT)
UNITS, EACH CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK, $1.00 PAR VALUE,
OF NEOZYME II CORPORATION AND ONE CALLABLE WARRANT TO PURCHASE TWO SHARES OF
GENERAL DIVISION COMMON STOCK, $.01 PAR VALUE, AND 0.135 OF A SHARE OF TISSUE
REPAIR DIVISION COMMON STOCK, $.01 PAR VALUE, OF GENZYME CORPORATION
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(TITLE OF CLASS OF SECURITIES)
G6420H11
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(CUSIP NUMBER OF CLASS OF SECURITIES)
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PETER WIRTH, ESQ. STEVEN D. SINGER, ESQ. MAUREEN P. MANNING, ESQ.
EXECUTIVE VICE PRESIDENT AND HALE AND DORR PALMER & DODGE LLP
CHIEF LEGAL COUNSEL 60 STATE STREET ONE BEACON STREET
GENZYME CORPORATION BOSTON, MA 02109 BOSTON, MA 02108
ONE KENDALL SQUARE (617) 526-6000 (617) 573-0100
CAMBRIDGE, MA 02139
(617) 252-7500
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
This statement filed in connection with (check the appropriate box):
a. / / The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. / / The filing of a registration statement under the Securities Act of
1933.
c. /X/ A tender offer.
d. / / None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. / /
CALCULATION OF FILING FEE
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Transaction Valuation1: $108,675,000 Amount of Filing Fee: $21,735
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/X/ Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
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Amount previously paid: $21,735 Filing party: Neozyme II Acquisition Corp. and Genzyme
Corporation
Form or registration no.: Schedule 14D-1 Date filed: September 27, 1996
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This Statement on Schedule 13E-3 relates to the offer by Neozyme II
Acquisition Corp. (the "Purchaser"), a British Virgin Islands ("BVI")
international business company and a wholly-owned subsidiary of Genzyme
Corporation ("Genzyme"), a Massachusetts corporation, to purchase all of the
outstanding units ("the Units"), each consisting of one share of Callable Common
Stock, par value $1.00 per share, of Neozyme II Corporation (the "Company"), a
BVI international business company, and one Callable Warrant to purchase two
shares of General Division common stock, par value $.01 per share, and 0.135
share of Tissue Repair Division common stock, par value $.01 per share, of
Genzyme at a purchase price of $45.00 per Unit, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated September 27, 1996 (the "Offer to Purchase,")
filed as Exhibit (a)(1) to the Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") filed with the Securities and Exchange Commission by the
Purchaser and Genzyme on September 27, 1996, and in the related Letter of
Transmittal (the "Letter of Transmittal," which, together with the Offer to
Purchase, as each may be amended or supplemented, constitute the "Offer"). The
Offer to Purchase and Letter of Transmittal are filed as Exhibits (d)(1) and
(d)(2) hereto, respectively. Certain responses to the Items below incorporate by
reference responses set forth in the Schedule 14D-1.
If the Offer is successful, a second-step transaction will be effected in
which holders of shares of the Company's Callable Common Stock included in
untendered Units will be entitled to receive $29.00 in cash for each such share
of Callable Common Stock. The Callable Warrants included in untendered Units
will remain outstanding.
This Schedule 13E-3 is being filed jointly by Genzyme, the Company and the
Purchaser. Genzyme, the Company and the Purchaser have entered into a Purchase
Agreement dated as of September 20, 1996 which provides for the Offer and
second-step transaction. By filing this Schedule 13E-3, none of the joint
signatories hereto concedes that Rule 13E-3 under the Securities Exchange Act of
1934, as amended, is applicable to the tender offer or other transactions
contemplated by the Purchase Agreement.
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CROSS REFERENCE SHEET
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LOCATION IN THE
ITEM UNDER THIS SCHEDULE 14D-1
SCHEDULE 13E-3 (UNLESS OTHERWISE NOTED)
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Item 1(a) - (c)................................................... Item 1(a) - (c)
Item 1(d) - (f)................................................... N/A
Item 2(a) - (g)................................................... Item 2(a) - (g)
Item 3(a)......................................................... Item 3(a) and (b)
Item 3(b)......................................................... N/A
Item 4(a) and (b)................................................. N/A
Item 5(a) - (e)................................................... Item 5(a) - (e)
Item 5(f)......................................................... Item 5(g)
Item 5(g)......................................................... N/A
Item 6(a)......................................................... Item 4(a)
Item 6(b)......................................................... N/A
Item 6(c) and (d)................................................. Item 4(b) and (c)
Item 7(a)......................................................... Item 5(a)
Item 7(b) - (d)................................................... N/A
Item 8............................................................ N/A
Item 9............................................................ N/A
Item 10(a)........................................................ Item 6(a)
Item 10(b)........................................................ Item 6(b) (N/A)
Item 11........................................................... Item 7
Item 12........................................................... N/A
Item 13(a)........................................................ N/A
Item 13(b) and (c)................................................ N/A
Item 14........................................................... Item 7*
Item 15 (a) and (b)............................................... Item 8
Item 16........................................................... Item 10(f)
Item 17(a)........................................................ Item 11(b)
Item 17(b)........................................................ N/A
Item 17(c)........................................................ Item 11(c)
Item 17(d)........................................................ Item 11(a)
Item 17(e)........................................................ N/A
Item 17(f)........................................................ Item 11(f)
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* Location in the Schedule 13E-4 filed by Neozyme II Acquisition Corp.
contemporaneously herewith. This Item is not applicable with respect to the
Schedule 14D-1.
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth in the Offer to Purchase under
"INTRODUCTION," "THE TENDER OFFER -- Section 6. Certain Information Concerning
the Company," "-- Section 7. Certain Information Concerning Genzyme and the
Purchaser" and under Item 1(a) of the Schedule 14D-1 is incorporated herein by
reference.
(b) - (d) The information set forth in the Offer to Purchase under
"INTRODUCTION," "THE TENDER OFFER -- Section 5. Price Range of Units; Dividends"
and under Item 1(b) and (c) of the Schedule 14D-1 is incorporated herein by
reference.
(e) and (f) Not applicable.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (g) The information set forth in the Offer to Purchase under "THE
TENDER OFFER -- Section 6. Certain Information Concerning the Company," "Section
7. Certain Information Concerning Genzyme and the Purchaser," Schedule I to the
Offer to Purchase and under Item 2 to the Schedule 14D-1 is incorporated herein
by reference.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS -- Section 2. Agreements and Relationships between the Company and
Genzyme," "-- Section 3. Background of the Transaction," "-- Section 6. The
Purchase Agreement; Appraisal Rights" and under Item 3 to the Schedule 14D-1 is
incorporated herein by reference.
(a)(2) See Item 4 hereof. The information set forth under Item 3 of the
Schedule 14D-1 is incorporated herein by reference.
(b) The information set forth in the Offer to Purchase under "THE TENDER
OFFER -- Section 7. Certain Information Concerning Genzyme and the Purchaser" is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Offer to Purchase under
"INTRODUCTION," "THE TENDER OFFER -- Section 1. Terms of the Offer; Expiration
Date," "-- Section 2. Acceptance for Payment and Payment for Units," "-- Section
3. Procedures for Accepting the Offer and Tendering Units," "-- Section 4.
Withdrawal Rights" and "-- Section 9. Certain Conditions of the Offer" is
incorporated herein by reference.
(b) Not applicable.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) - (g) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS -- Section 5. Reasons for the Transaction;
Purpose and Structure of the Transaction; Plans for the Company after the
Transaction," "-- Section 6. The Purchase Agreement; Appraisal Rights," "--
Section 8. Certain Effects of the Transaction" and under Item 5 of the Schedule
14D-1 is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Offer to Purchase under "THE TENDER
OFFER -- Section 8. Source and Amount of Funds" and under Item 4(a) of the
Schedule 14D-1 is incorporated herein by reference.
(b) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS -- Section 9. Fees and Expenses" and "THE TENDER OFFER -- Section 12.
Fees and Expenses" is incorporated herein by reference.
(c) Not applicable.
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(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (d) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS -- Section 3. Background of the Transaction," "-- Section 4.
Recommendation of the Company's Board of Directors; Fairness of the
Transaction," "-- Section 5. Reasons for the Transaction; Purpose and Structure
of the Transaction; Plans for the Company after the Transaction," "-- Section 7.
Certain Federal Income Tax Consequences," "-- Section 8. Certain Effects of the
Transaction" and under Item 5(a) of the Schedule 14D-1 is incorporated herein by
reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) - (e) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS -- Section 4. Recommendation of the Company's Board of Directors;
Fairness of the Transaction," "-- Section 6. The Purchase Agreement; Appraisal
Rights" and "THE TENDER OFFER -- Section 9. Certain Conditions of the Offer" is
incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in the Offer to Purchase under
"INTRODUCTION" and "SPECIAL FACTORS -- Section 4. Recommendation of the
Company's Board of Directors; Fairness of the Transaction" is incorporated
herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS -- Section 7. Agreements and Relationships
Between the Company and Genzyme," "THE TENDER OFFER -- Section 7. Certain
Information Concerning Genzyme and the Purchaser," in Schedules I and II to the
Offer to Purchase and under Item 6(a) of the Schedule 14D-1 is incorporated
herein by reference.
(b) Not applicable.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the Offer to Purchase under "INTRODUCTION,"
"SPECIAL FACTORS -- Section 2. Agreements and Relationships between the Company
and Genzyme," "-- Section 3. Background of the Transaction," "-- Section 6. The
Purchase Agreement; Appraisal Rights" and under Item 7 of the Schedule 14D-1 is
incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) and (b) The information set forth in the Offer to Purchase under
"INTRODUCTION" and "SPECIAL FACTORS -- Section 4. Recommendation of the
Company's Board of Directors; Fairness of the Transaction" is incorporated
herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the Offer to Purchase under "SPECIAL
FACTORS -- Section 6. The Purchase Agreement; Appraisal Rights" is incorporated
herein by reference.
(b) Not applicable.
(c) Not applicable.
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ITEM 14. FINANCIAL INFORMATION.
(a) and (b) Pursuant to Instruction D to Schedule 13E-3, the financial
statements of the Company set forth in Exhibit (g)(1) hereto are incorporated
herein by reference. Pursuant to Instruction F to Schedule 13E-3, the
information set forth under Item 7 and in Exhibits (g)(1) and (g)(2) to the
Schedule 13E-4 filed by Neozyme II Acquisition Corp. contemporaneously herewith
are incorporated herein by reference.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) None, except as set forth in Item 6(b) hereof.
(b) The information set forth in the Offer to Purchase under
"INTRODUCTION," "SPECIAL FACTORS -- Section 9. Fees and Expenses," and "THE
TENDER OFFER -- Section 12. Fees and Expenses" and under Item 8 of the Schedule
14D-1 is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Purchase Agreement dated as of September 20, 1996 by and
among Genzyme, the Purchaser and the Company attached hereto as Exhibit (c)(1)
and under Item 10(f) of the Schedule 14D-1 is incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
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(a) -- Not applicable.
(b)(1) -- Report of Robertson, Stephens & Company LLC Filed herewith.
(b)(2) -- Opinion of Robertson, Stephens & Company LLC Set forth in Annex II to the Offer
to Purchase dated September 27, 1996 filed as Exhibit (a)(1) to the Schedule 14D-1
filed by Genzyme Corporation and Neozyme II Acquisition Corp. contemporaneously
herewith and incorporated herein by reference.
(b)(3) -- Report of Hambrecht and Quist LLC. Filed herewith.
(b)(4) -- Opinion of Hambrecht and Quist LLC. Set forth in Annex I to the Offer to Purchase
dated September 27, 1996 filed as Exhibit (a)(1) to the Schedule 14D-1 filed by
Genzyme Corporation and Neozyme II Acquisition Corp. contemporaneously herewith
and incorporated herein by reference.
(c)(1) -- Purchase Agreement dated as of September 20, 1996 by and among Genzyme
Corporation, Neozyme II Acquisition Corp. and Neozyme II Corporation. Filed as
Exhibit A to Amendment No. 2 to the Schedule 13D filed by Genzyme Corporation on
September 24, 1996 and incorporated herein by reference.
(c)(2) -- Technology License Agreement dated April 28, 1992 between Genzyme Corporation and
Neozyme II Corporation. Filed as Exhibit 28.7 to the Genzyme Corporation Quarterly
Report on Form 10-Q for the quarter ended March 31, 1992 and incorporated herein
by reference.
(c)(3) -- Research and Development Agreement dated as of April 28, 1992 between Genzyme
Corporation and Neozyme II Corporation. Filed as Exhibit 28.8 to the Genzyme
Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and
incorporated herein by reference.
(c)(4) -- Purchase Option Agreement dated April 28, 1992 between Genzyme Corporation and
certain other parties named therein. Filed as Exhibit 28.9 to the Genzyme
Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and
incorporated herein by reference.
(c)(5) -- Administrative Agreement dated April 28, 1992 between Genzyme Corporation and
Neozyme II Corporation. Filed as Exhibit 28.10 to the Genzyme Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 and
incorporated herein by reference.
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(c)(6) -- Series 1992 Note of Neozyme II Corporation dated April 28, 1992. Filed as Exhibit
28.11 to the Genzyme Corporation Quarterly Report on Form 10-Q for the quarter
ended March 31, 1992 and incorporated herein by reference.
(c)(7) -- Services Agreement dated April 28, 1992 between Genzyme Corporation and Neozyme II
Corporation. Filed as Exhibit 10.5 to the Genzyme Corporation Annual Report on
Form 10-K for the year ended December 31, 1993 and incorporated herein by
reference.
(c)(8) -- Amendment No. 1 dated as of August 11, 1993 to Technology License Agreement and
Research and Development Agreement between Neozyme II Corporation and Genzyme
Corporation. Filed as Exhibit 10.42 to the Genzyme Corporation Annual Report on
Form 10-K for the year ended December 31, 1993 and incorporated herein by
reference.
(c)(9) -- License and Development Agreement dated as of August 11, 1993 between Genzyme
Corporation and Univax Biologics, Inc. Filed as Exhibit 10.19 to the Form 10-Q of
Univax Biologics, Inc. for the quarter ended September 30, 1993 (File No. 0-19748)
and incorporated herein by reference. Confidential treatment has been granted for
the deleted portions of this Exhibit.
(d)(1) -- Offer to Purchase dated September 27, 1996. Filed as Exhibit (a)(1) to the
Schedule 14D-1 filed by Genzyme Corporation and Neozyme II Acquisition Corp.
contemporaneously herewith and incorporated herein by reference.
(d)(2) -- Letter of Transmittal. Filed as Exhibit (a)(2) to the Schedule 14D-1 filed by
Genzyme Corporation and Neozyme II Acquisition Corp. contemporaneously herewith
and incorporated herein by reference.
(d)(3) -- Notice of Guaranteed Delivery. Filed as Exhibit (a)(3) to the Schedule 14D-1 filed
by Genzyme Corporation and Neozyme II Acquisition Corp. contemporaneously herewith
and incorporated herein by reference.
(d)(4) -- Letter from Robertson, Stephens & Company L.P. to Brokers, Dealers, Banks, Trust
Companies and Other Nominees. Filed as Exhibit (a)(4) to the Schedule 14D-1 filed
by Genzyme Corporation and Neozyme II Acquisition Corp. contemporaneously herewith
and incorporated herein by reference.
(d)(5) -- Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other
Nominees. Filed as Exhibit (a)(5) to the Schedule 14D-1 filed by Genzyme
Corporation and Neozyme II Acquisition Corp. contemporaneously herewith and
incorporated herein by reference.
(d)(6) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9. Filed as Exhibit (a)(6) to the Schedule 14D-1 filed by Genzyme Corporation
and Neozyme II Acquisition Corp. contemporaneously herewith and incorporated
herein by reference.
(d)(7) -- Press Release of Genzyme Corporation dated September 6, 1996. Filed as Exhibit G
to Amendment No. 1 to the Schedule 13D filed by Genzyme Corporation on September
6, 1996 and incorporated herein by reference.
(d)(8) -- Press Release of Genzyme Corporation dated September 23, 1996. Filed as Exhibit B
to Amendment No. 2 to the Schedule 13D filed by Genzyme Corporation on September
24, 1996 and incorporated herein by reference.
(d)(9) -- Summary Advertisement dated September 27, 1996. Filed as Exhibit (a)(10) to the
Schedule 14D-1 filed by Genzyme Corporation and Neozyme II Acquisition Corp.
contemporaneously herewith and incorporated herein by reference.
(d)(10) -- Press Release of Genzyme Corporation dated September 27, 1996. Filed as Exhibit
(a)(9) to the Schedule 14D-1 filed by Genzyme Corporation and Neozyme II
Acquisiton Corp. contemporaneously herewith and incorporated herein by reference.
(e) -- Description of appraisal rights and procedures. Set forth in Annex III to the
Offer to Purchase filed as Exhibit (a)(1) to the Schedule 14D-1 filed by Genzyme
Corporation and Neozyme II Acquisition Corp. contemporaneously herewith and
incorporated herein by reference.
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(f) -- Not applicable.
(g)(1) -- Audited financial statements (and related notes) for Neozyme II Corporation for
the years ended December 31, 1993, 1994 and 1995, and unaudited financial
statements (and related notes) for Neozyme II Corporation for the six months
ended June 30, 1995 and 1996. Filed herewith.
(g)(2) -- Audited financial statements (and related notes) for Genzyme Corporation, Genzyme
General Division and Genzyme Tissue Repair Division for the years ended December
31, 1993, 1994 and 1995, and unaudited financial statements (and related notes) for
Genzyme Corporation, Genzyme General Division and Genzyme Tissue Repair Division
for the six months ended June 30, 1995 and 1996. Filed as Exhibit (g)(1) to the
Schedule 13E-4 filed by Neozyme II Acquisition Corp. contemporaneously herewith
and incorporated herein by reference.
(g)(3) -- Pro forma financial statements (and related notes) for Genzyme Corporation and
Genzyme General Division for the year ended December 31, 1995 and for the six months
ended June 30, 1996. Filed as Exhibit (g)(2) to the Schedule 13E-4 filed by Neozyme
II Acquisition Corp. contemporaneously herewith and incorporated herein by reference.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
September 27, 1996 NEOZYME II CORPORATION
By: /S/ PAUL M. EDWARDS
------------------------------
PAUL M. EDWARDS
President and Treasurer
GENZYME CORPORATION
By: /S/ PETER WIRTH
------------------------------
PETER WIRTH
Executive Vice President, Legal
Affairs
and Chief Legal Counsel
NEOZYME II ACQUISITION CORP.
By: /S/ PETER WIRTH
------------------------------
PETER WIRTH
Secretary
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION PAGE NO.
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(b)(1) -- Report of Robertson, Stephens & Company LLC Filed herewith.
(b)(2) -- Opinion of Robertson, Stephens & Company LLC Set forth in Annex --
II to Exhibit (d)(1) hereto.
(b)(3) -- Report of Hambrecht and Quist LLC. Filed herewith.
(b)(4) -- Opinion of Hambrecht and Quist LLC. Set forth in Annex I to --
Exhibit (d)(1) hereto.
(c)(1) -- Purchase Agreement dated as of September 20, 1996 by and among --
Genzyme Corporation, Neozyme II Acquisition Corp. and Neozyme II
Corporation. Filed as Exhibit A to Amendment No. 2 to the Schedule
13D filed by Genzyme Corporation on September 24, 1996 and
incorporated herein by reference.
(c)(2) -- Technology License Agreement dated April 28, 1992 between Genzyme --
Corporation and Neozyme II Corporation. Filed as Exhibit 28.7 to
the Genzyme Corporation Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992 and incorporated herein by reference.
(c)(3) -- Research and Development Agreement dated as of April 28, 1992 --
between Genzyme Corporation and Neozyme II Corporation. Filed as
Exhibit 28.8 to the Genzyme Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1992 and incorporated herein
by reference.
(c)(4) -- Purchase Option Agreement dated April 28, 1992 between Genzyme --
Corporation and certain other parties named therein. Filed as
Exhibit 28.9 to the Genzyme Corporation Quarterly Report on Form
10-Q for the quarter ended March 31, 1992 and incorporated herein
by reference.
(c)(5) -- Administrative Agreement dated April 28, 1992 between Genzyme --
Corporation and Neozyme II Corporation. Filed as Exhibit 28.10 to
the Genzyme Corporation Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992 and incorporated herein by reference.
(c)(6) -- Series 1992 Note of Neozyme II Corporation dated April 28, 1992. --
Filed as Exhibit 28.11 to the Genzyme Corporation Quarterly Report
on Form 10-Q for the quarter ended March 31, 1992 and incorporated
herein by reference.
(c)(7) -- Services Agreement dated April 28, 1992 between Genzyme --
Corporation and Neozyme II Corporation. Filed as Exhibit 10.5 to
the Genzyme Corporation Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated herein by reference.
(c)(8) -- Amendment No. 1 dated as of August 11, 1993 to Technology License --
Agreement and Research and Development Agreement between Neozyme
II Corporation and Genzyme Corporation. Filed as Exhibit 10.42 to
the Genzyme Corporation Annual Report on Form 10-K for the year
ended December 31, 1993 and incorporated herein by reference.
(c)(9) -- License and Development Agreement dated as of August 11, 1993 --
between Genzyme Corporation and Univax Biologics, Inc. Filed as
Exhibit 10.19 to the Form 10-Q of Univax Biologics, Inc. for the
quarter ended September 30, 1993 (File No. 0-19748) and
incorporated herein by reference. Confidential treatment has been
granted for the deleted portions of this Exhibit.
(d)(1) -- Offer to Purchase dated September 27, 1996. Filed as Exhibit --
(a)(1) to the Schedule 14D-1 filed by Genzyme Corporation and
Neozyme II Acquisition Corp. contemporaneously herewith and
incorporated herein by reference.
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EXHIBIT NO. DESCRIPTION PAGE NO.
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(d)(2) -- Letter of Transmittal. Filed as Exhibit (a)(2) to the Schedule --
14D-1 filed by Genzyme Corporation and Neozyme II Acquisition
Corp. contemporaneously herewith and incorporated herein by
reference.
(d)(3) -- Notice of Guaranteed Delivery. Filed as Exhibit (a)(3) to the --
Schedule 14D-1 filed by Genzyme Corporation and Neozyme II
Acquisition Corp. contemporaneously herewith and incorporated
herein by reference.
(d)(4) -- Letter from Robertson, Stephens & Company L.P. to Brokers, --
Dealers, Banks, Trust Companies and Other Nominees. Filed as
Exhibit (a)(4) to the Schedule 14D-1 filed by Genzyme Corporation
and Neozyme II Acquisition Corp. contemporaneously herewith and
incorporated herein by reference.
(d)(5) -- Letter to Clients for Use by Brokers, Dealers, Banks, Trust --
Companies and Other Nominees. Filed as Exhibit (a)(5) to the
Schedule 14D-1 filed by Genzyme Corporation and Neozyme II
Acquisition Corp. contemporaneously herewith and incorporated
herein by reference.
(d)(6) -- Guidelines for Certification of Taxpayer Identification Number on --
Substitute Form W-9. Filed as Exhibit (a)(6) to the Schedule 14D-1
filed by Genzyme Corporation and Neozyme II Acquisition Corp.
contemporaneously herewith and incorporated herein by reference.
(d)(7) -- Press Release of Genzyme Corporation dated September 6, 1996. --
Filed as Exhibit G to Amendment No. 1 to the Schedule 13D filed by
Genzyme Corporation on September 6, 1996 and incorporated herein
by reference.
(d)(8) -- Press Release of Genzyme Corporation dated September 23, 1996. --
Filed as Exhibit B to Amendment No. 2 to the Schedule 13D filed by
Genzyme Corporation on September 24, 1996 and incorporated herein
by reference.
(d)(9) -- Summary Advertisement dated September 27, 1996. Filed as Exhibit --
(a)(10) to the Schedule 14D-1 filed by Genzyme Corporation and
Neozyme II Acquisition Corp. contemporaneously herewith and
incorporated herein by reference.
(d)(10) -- Press Release of Genzyme Corporation dated September 27, 1996. --
Filed as Exhibit (a)(9) to the Schedule 140-1 filed by Genzyme
Corporation and Neozyme II Acquisition Corp. contemporaneously
herwith and incorporated herein by reference.
(e) -- Description of appraisal rights and procedures. Set forth in Annex --
III to Exhibit (d)(1) hereto.
(g)(1) -- Audited financial statements (and related notes) for Neozyme II
Corporation for the years ended December 31, 1993, 1994 and 1995,
and unaudited financial statements (and related notes) for Neozyme
II Corporation for the six months ended June 30, 1995 and 1996.
Filed herewith.
(g)(2) -- Audited financial statements (and related notes) for Genzyme
Corporation, Genzyme General Division and Genzyme Tissue Repair
Division for the years ended December 31, 1993, 1994 and 1995, and
unaudited financial statements (and related notes) for Genzyme
Corporation, Genzyme General Division and Genzyme Tissue Repair
Division for the six months ended June 30, 1995 and 1996. Filed as
Exhibit (g)(1) to the Schedule 13E-4 filed by Neozyme II
Acquisition Corp. contemporaneously herewith and incorporated
herein by reference.
(g)(3) -- Pro forma financial statements (and related notes) for Genzyme
Corporation and Genzyme General Division for the year ended
December 31, 1995 and for the six months ended June 30, 1996.
Filed as Exhibit (g)(2) to the Schedule 13E-4 filed by Neozyme II
Acquisition Corp. contemporaneously herewith and incorporated
herein by reference.
</TABLE>
11
<PAGE> 1
(Exhibit (b)(1))
HIGHLY CONFIDENTIAL
PROJECT BLUE JEANS
PRESENTATION TO THE BOARD OF DIRECTORS OF GENZYME CORPORATION
SEPTEMBER 17, 1996
ROBERTSON, STEPHENS & COMPANY
555 CALIFORNIA STREET, SUITE 2600
SAN FRANCISCO, CA 94104
<PAGE> 2
PROJECT BLUE JEANS
- --------------------------------------------------------------------------------
PREFACE
This book has been prepared by Robertson, Stephens & Company as part of a
presentation being made in support of our opinion as to the fairness, from a
financial point of view, to Genzyme Corporation ("Genzyme") of the cash
consideration to be paid per unit (the "Units") by Genzyme in the proposed
transaction with Neozyme II Corporation ("Neozyme"). The material in this book
and all analyses contained herein are confidential and are for the use of the
Board of Directors of Genzyme in connection with the proposed transaction with
Neozyme only. Any use of this material or the analyses contained herein for any
other purpose (including the evaluation of any transaction other than the
proposed transaction with Neozyme) or any other publication of this material or
the analyses contained herein without the express written consent of Robertson,
Stephens & Company is strictly prohibited.
Among the activities conducted in the course of our activities as financial
advisor to Genzyme, Robertson, Stephens & Company received and reviewed business
and financial information of Neozyme as developed by Neozyme, including
operating projections, and held discussions with the management of Neozyme
regarding this information. In connection with the analyses contained herein, we
have not independently verified any such information and have relied on all such
information as being complete and accurate in all material respects. In
addition, we have not obtained any independent appraisal of the properties or
assets of either company.
Several analytical methodologies have been employed herein and no one method of
analysis should be regarded as critical to the overall conclusion we have
reached. Each analytical technique has inherent strengths and weaknesses, and
the nature of the available information may further affect the value of
particular techniques. The conclusions we have reached are based on all the
analyses and factors presented herein taken as a whole and also on application
of our own experience and judgment. Such conclusions may involve significant
elements of subjective judgment and qualitative analysis. We therefore give no
opinion as to the value or merit standing alone of any one or more parts of the
material that follows. Our only opinion is the formal written opinion as to the
fairness, from a financial point of view, to Genzyme of the cash consideration
to be paid per Unit by Genzyme in the proposed transaction. The opinion, the
analyses contained herein and all conclusions drawn from such analyses are
necessarily based upon market, economic and other conditions that exist and can
be evaluated as of the date of this book, and on information available to us as
of the date hereof.
<PAGE> 3
PROJECT BLUE JEANS
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
I. SUMMARY INFORMATION FOR NEOZYME
A. Summary of Proposed Transaction
B. Summary of Original Neozyme Offering
C. Summary of Neozyme Returns
D. Neozyme Market Performance
E. Issues for Consideration
F. Neozyme / Genzyme Ownership Overlap
II. VALUATION ANALYSES
A. Valuation Methodologies
B. Current Valuation Components of Neozyme
C. Neozyme's Scientific Accomplishments
D. Valuation Parameters for Comparable Companies
E. Valuation Parameters for Precedent Acquisitions
F. Valuation Parameters for Discounted Cash Flow
G. Neozyme Unit Summary Valuation
H. Warrant Valuation Methodology
<PAGE> 4
I. SUMMARY INFORMATION FOR NEOZYME
- ----------------------------------------------------------------------------
<PAGE> 5
A. SUMMARY OF PROPOSED TRANSACTION
- --------------------------------------------------------------------------------
<PAGE> 6
PROJECT BLUE JEANS
- ------------------------------------------------------------------------
SUMMARY OF PROPOSED TRANSACTION
- Genzyme to acquire all of the outstanding units of Neozyme through a
cash tender offer of $45.00 per unit. Units include:
- One share of Neozyme callable common stock
- One callable warrant to purchase two shares of Genzyme General
Division common stock and 0.135 shares of Genzyme Tissue Repair
common stock
- Aggregate cost of approximately $108.7 million.
- Callable common stock underlying non-tendered units will be acquired
by Genzyme in a Second Step Transaction for $29.00 per share.
- Callable warrants underlying non-tendered units will remain
outstanding until they expire on December 31, 1998.
<PAGE> 7
B. SUMMARY OF ORIGINAL NEOZYME OFFERING
- -------------------------------------------------------------------------------
<PAGE> 8
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY OF NEOZYME OFFERING
<TABLE>
<S> <C>
Offer Date: April 28, 1992
Units Issued: 2,415,000 (includes Underwriters' over-allotment)
Units consisted of: One share callable common stock of Neozyme
One Series N Genyzme Warrant
One Callable Genzyme Warrant
Unit Offering Price: $35.00
Net Proceeds: $78.00 Million
</TABLE>
<PAGE> 9
PROJECT BLUE JEANS
- --------------------------------------------------------------------------------
Neozyme Unit Offering
Page depicts a flow chart delineating the transfer of services, assets, cash and
securities between Genzyme Corporation, Neozyme II Corporation and Neozyme
Shareholders. Technology moves from Genzyme Corporation to Neozyme II
Corporation, and R&D and Services flows from Neozyme II Corporation to Genzyme
Corporation. Licenses flow from Genzyme Corporation into Neozyme II Corporation,
and fees flow out of Neozyme II Corporation into Genzyme Corporation. Warrants
flow from Genzyme Corporation to the Neozyme Shareholders, and Purchase Options
flow from the Neozyme Shareholders to Genzyme Corporation. Shares move from
Neozyme II Corporation to the Neozyme Shareholders, and money moves from Neozyme
Shareholders to Neozyme II Corporation.
<PAGE> 10
C. SUMMARY OF NEOZYME RETURNS
- -------------------------------------------------------------------------------
<PAGE> 11
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY OF NEOZYME RETURNS (AS OF 09/13/96)
<TABLE>
<S> <C>
Neozyme Unit IPO Price $35.00
Current Price:
Neozyme: $44.50
Series N Warrants $11.00
Total Return to Date: 58.6%
Annualized Return to Date 11.6%
IRR of Purchase Option
Exercise Prices on: (excluding Series N Warrant returns)
December 1993 20.7%
December 1994 23.8%
December 1995 26.5%
December 1996 29.4%
</TABLE>
<PAGE> 12
PROJECT BLUE JEANS
- --------------------------------------------------------------------------------
SUMMARY OF NEOZYME OFFERING TERMS
Series N Warrant Terms: Separated from Neozyme Unit on 8/04/92
Exercisable for one Genzyme share and .135 TR
share at $38.25
Expiration date 12/31/96
Series N Warrants are not callable
Callable Warrant Terms: Exercisable from earlier of 1) close of merger or
2) 1/01/97 to 12/31/98
Exercisable for two Genzyme shares and 0.135 TR
share Warrants terminate if Genzyme exercises
Purchase Option
Exercise Price based on average closing price of
Genzyme common stock and 0.135 share of TR common
stock for 20 trading days prior to exercisability
of warrants
Purchase Option Exercise Schedule:
PURCHASE OPTION EXERCISE PRICE (1):
-----------------------------------
EXERCISE PERIOD: PER SHARE AGGREGATE ($MM)
- ---------------- --------- ---------------
On or before December 31, 1993 $48.00 $115.9
From January 1, 1994 through December 31, 1994 62.00 149.7
From January 1, 1995 through December 31, 1995 83.00 200.4
From January 1, 1996 through December 31, 1996 117.00 282.6
Notes:
- ------
(1) In the event option is exercised prior to December of any year, the
exercise price is reduced by a monthly proration.
<PAGE> 13
D. NEOZYME MARKET PERFORMANCE
- -------------------------------------------------------------------------------
<PAGE> 14
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
NEOZYME PRICE/VOLUME PERFORMANCE, 1/03/95 to 9/13/96
Page depicts a graph of Neozyme's closing stock prices and daily trading volume
from January 3, 1995 to September 13, 1996. Daily trading volume is
represented by vertical bars corresponding to values (in thousands) on the left
Y axis. Closing prices are represented by a line corresponding to values on the
right Y axis. Significant events are annotated on the graph with arrows
pointing to the relevant dates. The price and volume data are provided below,
with footnotes specifying the events annotated on specific dates.
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
1/03/95 0 $28.63
1/04/95 0 $28.50
1/05/95 0 $28.63
1/06/95 0 $28.63
1/09/95 0 $28.75
1/10/95 3 $28.63
1/11/95 0 $28.63
1/12/95 0 $28.63
1/13/95 0 $28.63
1/16/95 0 $28.63
1/17/95 12 $28.50
1/18/95 0 $28.63
1/19/95 0 $28.63
1/20/95 0 $28.50
1/23/95 0 $28.63
1/24/95 11 $29.00
1/25/95 3 $29.00
1/26/95 205 $30.50
1/27/95 291 $32.50
1/30/95 0 $32.75
1/31/95 162 $32.75
2/01/95 18 $33.00
2/02/95 17 $33.75
2/03/95 0 $33.75
2/06/95 3 $33.75
2/07/95 17 $34.88
2/08/95 54 $37.25
2/09/95 9 $37.25
2/10/95 6 $37.75
2/13/95 9 $37.75
2/14/95 11 $38.25
2/15/95 2 $37.50
2/16/95 1 $37.88
2/17/95 0 $37.88
2/21/95 20 $37.38
2/22/95 2 $37.50
2/23/95 3 $38.00
2/24/95 0 $37.75
2/27/95 0 $37.75
2/28/95 0 $37.50
3/01/95 0 $38.00
3/02/95 18 $38.25
3/03/95 3 $38.00
3/06/95 0 $38.75
3/07/95 0 $38.00
3/08/95 0 $38.75
3/09/95 3 $38.75
3/10/95 0 $38.00
3/13/95 0 $38.38
3/14/95 0 $38.00
</TABLE>
<PAGE> 15
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
3/15/95 10 $38.25
3/16/95 1 $38.00
3/17/95 0 $38.00
3/20/95 0 $38.38
3/21/95 0 $38.38
3/22/95 0 $38.38
3/23/95 2 $38.75
3/24/95 0 $38.63
3/27/95 1 $38.50
3/28/95 0 $38.63
3/29/95 4 $38.50
3/30/95 0 $38.00
3/31/95 1 $38.00
4/03/95 4 $38.00
4/04/95 0 $38.00
4/05/95 0 $38.38
4/06/95 2 $38.50
4/07/95 40 $38.00
4/10/95 0 $38.06
4/11/95 26 $38.25
4/12/95 25 $38.00
4/13/95 0 $38.25
4/17/95 4 $38.75
4/18/95 0 $38.75
4/19/95 0 $38.38
4/20/95 1 $38.00
4/21/95 1 $38.00
4/24/95 0 $38.38
4/25/95 18 $38.13
4/26/95 0 $38.00
4/27/95 0 $38.75
4/28/95 0 $38.50
5/01/95 3 $38.25
5/02/95 5 $39.00
5/03/95 0 $38.81
5/04/95 6 $38.63
5/05/95 0 $38.63
5/08/95 5 $38.88
5/09/95 7 $39.00
5/10/95 3 $39.00
5/11/95 5 $38.63
5/12/95 7 $39.13
5/15/95 0 $39.13
5/16/95 11 $39.63
5/17/95 0 $39.63
5/18/95 4 $39.63
5/19/95 0 $39.38
5/22/95 0 $39.38
5/23/95 0 $39.56
5/24/95 0 $39.75
</TABLE>
<PAGE> 16
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
5/25/95 1 $39.38
5/26/95 7 $39.75
5/30/95 51 $39.00
5/31/95 0 $39.25
6/01/95 1 $39.50
6/02/95 0 $39.25
6/05/95 2 $39.25
6/06/95 0 $39.25
6/07/95 0 $39.00
6/08/95 1 $39.00
6/09/95 2 $39.00
6/12/95 0 $39.13
6/13/95 1 $39.00
6/14/95 0 $39.13
6/15/95 0 $39.13
6/16/95 2 $38.75
6/19/95 0 $39.13
6/20/95 4 $38.75
6/21/95 0 $38.75
6/22/95 0 $39.13
6/23/95 0 $39.13
6/26/95 0 $39.13
6/27/95 1 $38.75
6/28/95 1 $38.75
6/29/95 6 $38.75
6/30/95 0 $39.13
7/03/95 13 $39.25
7/05/95 9 $38.75
7/06/95 2 $38.75
7/07/95 1 $38.88
7/10/95 0 $39.13
7/11/95 0 $39.13
7/12/95 0 $38.75
7/13/95 0 $39.13
7/14/95 0 $39.13
7/17/95 0 $39.13
7/18/95 4 $39.50
7/19/95 5 $38.75
7/20/95 0 $39.25
7/21/95 8 $38.75
7/24/95 0 $39.13
7/25/95 1 $38.75
7/26/95 0 $39.13
7/27/95 22 $39.50
7/28/95 0 $39.13
7/31/95 0 $39.25
8/01/95 0 $39.25
8/02/95 37 $40.50
8/03/95 1 $39.75
8/04/95 38 $40.00
</TABLE>
<PAGE> 17
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
8/07/95 0 $40.00
8/08/95 0 $39.75
8/09/95 54 $41.00
8/10/95 13 $41.50
8/11/95 2 $41.50
8/14/95 1 $41.38
8/15/95 0 $41.75
8/16/95 4 $42.25
8/17/95 0 $42.13
8/18/95 3 $42.69
8/21/95 10 $42.75
8/22/95 0 $42.75
8/23/95 0 $42.50
8/24/95 3 $42.75
8/25/95 1 $43.25
8/28/95 0 $43.00
8/29/95 0 $43.00
8/30/95 0 $43.00
8/31/95 1 $43.25
9/01/95 0 $42.88
9/05/95 0 $43.25
9/06/95 24 $42.50
9/07/95 0 $43.00
9/08/95 0 $43.50
9/11/95 1 $42.75
9/12/95 2 $42.75
9/13/95 6 $43.50
9/14/95 10 $43.25
9/15/95 1 $42.50
9/18/95 6 $43.25
9/19/95 0 $43.25
9/20/95 0 $42.88
9/21/95 0 $43.25
9/22/95 3 $42.50
9/25/95 0 $42.88
9/26/95 0 $42.50
9/27/95 0 $42.88
9/28/95 0 $42.88
9/29/95 0 $42.88
10/02/95 1 $42.50
10/03/95 1 $42.50
10/04/95 0 $42.88
10/05/95 0 $43.25
10/06/95 0 $42.88
10/09/95 3 $42.38
10/10/95 8 $41.75
10/11/95 0 $42.00
10/12/95 0 $42.00
10/13/95 0 $41.88
10/16/95 5 $42.38
</TABLE>
<PAGE> 18
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
10/17/95 12 $42.50
10/18/95 1 $42.50
10/19/95 4 $43.25
10/20/95 0 $42.50
10/23/95 0 $43.25
10/24/95 2 $42.50
10/25/95 39 $46.00
10/26/95 5 $45.38
10/27/95 1 $45.06
10/30/95 0 $45.38
10/31/95 1 $45.75
11/01/95 0 $45.63
11/02/95 0 $45.63
11/03/95 0 $45.63
11/06/95 4 $46.00
11/07/95 0 $45.63
11/08/95 0 $45.63
11/09/95 0 $46.00
11/10/95 0 $46.00
11/13/95 0 $45.63
11/14/95 0 $45.63
11/15/95 4 $45.50
11/16/95 0 $45.63
11/17/95 0 $45.63
11/20/95 2 $45.25
11/21/95 3 $45.38
11/22/95 0 $45.63
11/24/95 0 $45.63
11/27/95 0 $45.63
11/28/95 0 $45.63
11/29/95 0 $46.00
11/30/95 3 $46.00
12/01/95 51 $47.00
12/04/95 2 $47.00
12/05/95 3 $47.00
12/06/95 3 $47.00
12/07/95 0 $46.75
12/08/95 0 $46.75
12/11/95 11 $46.75
12/12/95 21 $47.00
12/13/95 7 $47.50
12/14/95 2 $47.75
12/15/95 0 $47.50
12/18/95 5 $46.81
12/19/95 1 $47.50
12/20/95 0 $47.13
12/21/95 1 $46.75
12/22/95 0 $47.13
12/26/95 0 $47.13
12/27/95 0 $47.13
</TABLE>
<PAGE> 19
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
12/28/95 2 $47.50
12/29/95 0 $47.13
1/02/96 24 $46.38
1/03/96 3 $46.25
1/04/96 13 $45.50
1/05/96 21 $45.00
1/08/96 0 $44.25
1/09/96 21 $43.25
1/10/96 17 $39.50
1/11/96 0 $39.50
1/12/96 1 $39.50
1/15/96 31 $40.00
1/16/96 24 $39.88
1/17/96 13 $39.38
1/18/96 2 $39.50
1/19/96 15 $38.50
1/22/96 1 $38.50
1/23/96 0 $38.50
1/24/96 14 $39.69
1/25/96 60 $41.25
1/26/96 0 $40.88
1/29/96 0 $40.88
1/30/96 6 $41.25
1/31/96 15 $41.88
2/01/96 14 $43.25
2/02/96 9 $43.13
2/05/96 0 $43.25
2/06/96 11 $43.75
2/07/96 10 $44.75
2/08/96 7 $44.19
2/09/96 73 $47.13
2/12/96 24 $46.75
2/13/96 7 $47.13
2/14/96 57 $47.00
2/15/96 16 $46.00
2/16/96 49 $48.88
2/20/96 21 $49.25
2/21/96 37 $50.75
2/22/96 29 $51.06
2/23/96 18 $51.50
2/26/96 1 $52.00
2/27/96 5 $51.13
2/28/96 11 $51.00
2/29/96 8 $51.00
3/01/96 2 $51.00
3/04/96 4 $51.63
3/05/96 13 $51.50
3/06/96 1 $51.50
3/07/96 5 $51.63
3/08/96 27 $50.00
</TABLE>
<PAGE> 20
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
3/11/96 5 $50.00
3/12/96 0 $49.63
3/13/96 1 $49.25
3/14/96 5 $50.50
3/15/96 40 $50.63
3/18/96 1 $50.50
3/19/96 2 $50.63
3/20/96 0 $50.63
3/21/96 10 $50.81
3/22/96 11 $51.31
3/25/96 32 $53.00
3/26/96 9 $51.75
3/27/96 22 $52.13
3/28/96 2 $51.75
3/29/96 61 $52.50
4/01/96 4 $52.25
4/02/96 14 $52.50
4/03/96 0 $52.13
4/04/96 7 $52.00
4/08/96 2 $52.25
4/09/96 0 $52.00
4/10/96 9 $52.00
4/11/96 1 $51.25
4/12/96 1 $52.00
4/15/96 1 $51.25
4/16/96 1 $51.25
4/17/96 0 $51.63
4/18/96 18 $51.38
4/19/96 1 $51.25
4/22/96 0 $51.63
4/23/96 0 $52.00
4/24/96 0 $51.63
4/25/96 0 $52.00
4/26/96 10 $52.50
4/29/96 0 $52.50
4/30/96 0 $52.25
5/01/96 0 $52.25
5/02/96 0 $51.75
5/03/96 13 $51.25
5/06/96 0 $51.75
5/07/96 0 $51.25
5/08/96 2 $51.25
5/09/96 0 $51.75
5/10/96 7 $51.00
5/13/96 2 $50.75
5/14/96 0 $51.25
5/15/96 3 $50.75
5/16/96 1 $50.75
5/17/96 2 $51.50
5/20/96 0 $51.13
</TABLE>
<PAGE> 21
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
5/21/96 2 $51.25
5/22/96 0 $51.00
5/23/96 0 $50.50
5/24/96 0 $51.00
5/28/96 1 $50.50
5/29/96 0 $50.88
5/30/96 0 $50.88
5/31/96 3 $50.38
6/03/96 0 $50.25
6/04/96 0 $50.63
6/05/96 0 $50.63
6/06/96 1 $50.25
6/07/96 3 $50.25
6/10/96 0 $50.63
6/11/96 1 $50.25
6/12/96 0 $50.63
6/13/96 1 $50.25
6/14/96 0 $50.63
6/17/96 0 $50.25
6/18/96 1 $50.25
6/19/96 0 $50.25
6/20/96 1 $50.25
6/21/96 3 $51.00
(a) 6/24/96 24 $46.25
6/25/96 29 $43.25
6/26/96 14 $42.75
6/27/96 4 $43.50
6/28/96 4 $44.00
7/01/96 1 $43.75
7/02/96 10 $44.00
7/03/96 7 $44.00
7/05/96 1 $44.00
7/08/96 2 $43.25
7/09/96 6 $44.00
7/10/96 5 $44.25
7/11/96 18 $43.25
7/12/96 6 $43.50
7/15/96 0 $43.00
7/16/96 0 $43.50
7/17/96 0 $43.00
7/18/96 1 $43.00
7/19/96 0 $43.50
7/22/96 0 $43.50
7/23/96 1 $43.50
7/24/96 2 $43.25
7/25/96 0 $43.25
7/26/96 5 $43.63
7/29/96 0 $44.00
7/30/96 0 $43.63
7/31/96 0 $43.63
</TABLE>
<PAGE> 22
NIIUF.U NEOZYME II CORP GENZYME CORP
CURRENCY: U.S. Dollar
- -------------------------------
NEOZYME GRAPH PAGE 11
- -------------------------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
8/01/96 6 $44.50
8/02/96 1 $43.75
8/05/96 1 $44.50
8/06/96 5 $43.88
8/07/96 0 $44.13
8/08/96 0 $44.13
8/09/96 0 $43.75
8/12/96 0 $44.13
8/13/96 1 $44.25
8/14/96 0 $44.13
8/15/96 0 $44.13
8/16/96 0 $44.13
8/19/96 0 $44.13
8/20/96 0 $44.13
8/21/96 1 $43.75
8/22/96 54 $44.50
8/23/96 50 $44.88
8/26/96 11 $44.50
8/27/96 1 $44.00
8/28/96 0 $44.00
8/29/96 0 $44.38
8/30/96 0 $44.75
9/03/96 10 $44.06
9/04/96 94 $44.06
9/05/96 0 $44.38
(b)9/06/96 0 $44.75
9/09/96 18 $44.75
9/10/96 4 $44.50
9/11/96 1 $44.50
9/12/96 0 $44.50
9/13/96 1 $44.50
<FN>
Annotations:
(a) 6/24/96: Neozyme II Corp. and NABI Inc. shares fall after the two
companies ended studies of HyperGAM + CF.
(b) 9/6/96: Geozyme Corp. announces agreement in principle to buy Neozyme II
Corp. for $109 MM cash.
</TABLE>
<PAGE> 23
PROJECT BLUE JEANS
- ------------------------------------------------------------------------------
GENZYME SERIES N WARRANT PRICE/VOLUME PERFORMANCE, 1/03/95 to 9/13/96
Page depicts a graph of Genzyme's Series N Warrants closing prices and daily
trading volume from January 3, 1995 to September 13, 1996. Daily trading volume
is represented by vertical bars corresponding to values (in thousands) on the
left Y axis. Closing prices are represented by a line corresponding to values on
the right Y axis. Significant events are annotated on the graph with arrows
pointing to the relevant dates. The price and volume data are provided below,
with footnotes specifying the events annotated on specific dates.
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
1/03/95 78 $ 6.25
1/04/95 27 $ 6.30
1/05/95 29 $ 6.63
1/06/95 65 $ 6.42
1/09/95 12 $ 6.25
1/10/95 7 $ 6.38
1/11/95 33 $ 6.31
1/12/95 27 $ 6.25
1/13/95 36 $ 6.25
1/16/95 28 $ 6.25
1/17/95 1 $ 6.25
1/18/95 2 $ 6.06
1/19/95 113 $ 5.75
1/20/95 54 $ 5.63
1/23/95 39 $ 5.75
1/24/95 42 $ 5.56
1/25/95 161 $ 6.88
1/26/95 544 $ 9.13
1/27/95 189 $ 8.81
1/30/95 129 $ 8.50
1/31/95 65 $ 8.50
2/01/95 71 $ 8.13
2/02/95 13 $ 8.38
2/03/95 121 $ 9.13
2/06/95 32 $ 9.38
2/07/95 82 $ 9.88
2/08/95 178 $10.81
2/09/95 207 $10.00
2/10/95 57 $ 9.50
2/13/95 79 $ 9.94
2/14/95 9 $10.00
2/15/95 49 $10.38
2/16/95 20 $10.13
2/17/95 14 $ 9.88
2/21/95 17 $ 9.63
2/22/95 71 $ 9.25
2/23/95 17 $ 9.00
2/24/95 37 $ 9.75
2/27/95 82 $ 9.88
2/28/95 1 $10.00
3/01/95 23 $10.00
3/02/95 116 $11.00
3/03/95 96 $10.75
3/06/95 18 $10.00
3/07/95 52 $ 9.63
3/08/95 20 $ 9.75
3/09/95 2 $ 9.75
</TABLE>
<PAGE> 24
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
3/10/95 56 $10.50
3/13/95 16 $10.38
3/14/95 23 $10.13
3/15/95 10 $10.38
3/16/95 11 $10.63
3/17/95 18 $10.50
3/20/95 19 $10.38
3/21/95 21 $10.38
3/22/95 35 $ 9.63
3/23/95 48 $ 9.88
3/24/95 1 $ 9.75
3/27/95 3 $ 9.63
3/28/95 37 $ 9.50
3/29/95 25 $ 9.63
3/30/95 12 $ 9.50
3/31/95 4 $ 9.50
4/03/95 6 $ 9.38
4/04/95 119 $10.47
4/05/95 37 $10.50
4/06/95 32 $10.25
4/07/95 5 $10.25
4/10/95 11 $10.50
4/11/95 47 $10.63
4/12/95 94 $ 9.94
4/13/95 7 $10.19
4/17/95 22 $10.00
4/18/95 13 $ 9.75
4/19/95 49 $ 8.88
4/20/95 78 $ 9.31
4/21/95 30 $ 9.25
4/24/95 7 $ 9.13
4/25/95 1 $ 9.00
4/26/95 15 $ 8.75
4/27/95 418 $10.88
4/28/95 144 $11.00
5/01/95 169 $11.63
5/02/95 55 $11.63
5/03/95 40 $11.88
5/04/95 93 $11.75
5/05/95 32 $11.69
5/08/95 47 $11.25
5/09/95 27 $11.13
5/10/95 80 $10.13
5/11/95 97 $ 9.63
5/12/95 10 $ 9.63
5/15/95 62 $10.25
5/16/95 7 $10.50
</TABLE>
<PAGE> 25
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
5/17/95 80 $ 9.88
5/18/95 19 $ 9.63
5/19/95 20 $ 9.63
5/22/95 108 $ 8.81
5/23/95 64 $ 9.25
5/24/95 42 $ 9.50
5/25/95 41 $ 9.25
5/26/95 18 $ 9.25
5/30/95 10 $ 9.13
5/31/95 40 $ 8.69
6/01/95 6 $ 8.50
6/02/95 29 $ 8.63
6/05/95 99 $ 9.50
6/06/95 78 $ 9.25
6/07/95 10 $ 9.25
6/08/95 14 $ 9.25
6/09/95 3 $ 9.13
6/12/95 2 $ 9.25
6/13/95 134 $10.19
6/14/95 31 $10.13
6/15/95 7 $ 9.75
6/16/95 4 $ 9.75
6/19/95 8 $ 9.63
6/20/95 12 $ 9.50
6/21/95 12 $10.13
6/22/95 41 $10.38
6/23/95 34 $10.25
6/26/95 18 $10.38
6/27/95 17 $ 9.50
6/28/95 10 $ 9.75
6/29/95 51 $10.13
6/30/95 10 $10.00
7/03/95 5 $ 9.88
7/05/95 11 $10.25
7/06/95 6 $10.13
7/07/95 15 $10.25
7/10/95 30 $10.63
7/11/95 121 $10.50
7/12/95 37 $10.13
7/13/95 6 $10.38
7/14/95 24 $10.63
7/17/95 36 $11.13
7/18/95 68 $11.25
7/19/95 48 $11.25
7/20/95 171 $12.63
7/21/95 69 $12.38
7/24/95 35 $12.25
</TABLE>
<PAGE> 26
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
7/25/95 36 $12.50
(a)7/26/95 206 $13.50
7/27/95 220 $15.63
7/28/95 172 $15.63
7/31/95 76 $16.63
8/01/95 317 $18.13
8/02/95 287 $19.75
8/03/95 245 $20.00
8/04/95 157 $21.00
8/07/95 363 $23.88
8/08/95 263 $22.88
8/09/95 316 $25.25
8/10/95 117 $25.50
8/11/95 164 $26.63
8/14/95 63 $26.50
8/15/95 39 $27.00
8/16/95 91 $29.13
8/17/95 73 $28.00
8/18/95 44 $29.38
8/21/95 30 $29.38
8/22/95 25 $28.75
8/23/95 80 $27.13
8/24/95 31 $26.00
8/25/95 146 $24.50
8/28/95 65 $24.13
8/29/95 44 $22.75
8/30/95 203 $20.25
8/31/95 216 $23.63
9/01/95 52 $24.88
9/05/95 88 $25.50
9/06/95 38 $24.38
9/07/95 17 $24.00
9/08/95 111 $26.63
9/11/95 54 $26.88
9/12/95 110 $24.88
9/13/95 222 $26.50
9/14/95 20 $26.13
9/15/95 25 $25.00
9/18/95 104 $25.00
9/19/95 100 $26.75
9/20/95 15 $27.38
9/21/95 55 $26.50
9/22/95 26 $26.75
9/25/95 2 $26.50
9/26/95 22 $25.13
9/27/95 67 $24.75
9/28/95 18 $26.63
</TABLE>
<PAGE> 27
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
9/29/95 3 $26.00
10/02/95 26 $25.38
10/03/95 59 $23.50
10/04/95 60 $21.50
10/05/95 78 $21.50
10/06/95 11 $21.63
10/09/95 34 $20.00
10/10/95 21 $19.00
10/11/95 17 $20.50
10/12/95 9 $21.25
(b)10/13/95 67 $21.25
10/16/95 64 $23.50
10/17/95 37 $24.13
10/18/95 147 $26.50
10/19/95 23 $27.63
10/20/95 54 $27.00
10/23/95 32 $28.00
10/24/95 28 $27.50
10/25/95 84 $27.13
10/26/95 60 $25.63
10/27/95 52 $24.50
10/30/95 15 $25.00
10/31/95 172 $27.00
11/01/95 28 $27.50
11/02/95 150 $29.75
11/03/95 32 $30.25
11/06/95 20 $28.75
11/07/95 35 $27.75
11/08/95 7 $29.50
11/09/95 36 $29.00
11/10/95 13 $28.75
11/13/95 14 $29.50
11/14/95 3 $29.00
11/15/95 1 $29.00
11/16/95 19 $28.75
11/17/95 1 $28.75
11/20/95 9 $28.75
11/21/95 16 $26.75
11/22/95 13 $25.50
11/24/95 0 $25.50
11/27/95 3 $26.25
11/28/95 15 $28.25
11/29/95 23 $29.50
11/30/95 84 $32.00
12/01/95 27 $33.00
12/04/95 20 $33.50
12/05/95 58 $34.13
</TABLE>
<PAGE> 28
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
12/06/95 12 $33.25
12/07/95 23 $33.75
12/08/95 63 $29.00
12/11/95 35 $27.00
12/12/95 98 $24.50
12/13/95 85 $22.25
(c)12/14/95 141 $21.25
12/15/95 61 $24.00
12/18/95 25 $21.50
12/19/95 27 $24.00
12/20/95 52 $25.25
12/21/95 21 $26.00
12/22/95 37 $27.50
12/26/95 25 $26.50
12/27/95 13 $26.50
12/28/95 4 $27.75
12/29/95 23 $27.75
1/02/96 32 $29.75
1/03/96 45 $30.75
1/04/96 61 $30.25
1/05/96 14 $30.75
1/08/96 2 $30.50
1/09/96 29 $27.75
1/10/96 21 $27.50
1/11/96 46 $29.25
1/12/96 19 $29.50
1/15/96 12 $29.38
1/16/96 26 $30.75
1/17/96 62 $33.25
1/18/96 53 $32.25
1/19/96 46 $34.00
1/22/96 34 $34.25
1/23/96 7 $33.50
1/24/96 32 $34.50
1/25/96 25 $37.50
1/26/96 80 $37.25
1/29/96 1 $38.25
1/30/96 37 $38.50
1/31/96 33 $42.00
2/01/96 42 $42.50
2/02/96 7 $41.00
2/05/96 13 $39.75
2/06/96 15 $40.00
2/07/96 0 $37.75
2/08/96 3 $37.38
2/09/96 5 $38.50
2/12/96 2 $37.50
</TABLE>
<PAGE> 29
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
2/13/96 5 $40.50
(d)2/14/96 6 $37.75
2/15/96 26 $39.50
2/16/96 21 $38.00
2/20/96 16 $34.25
2/21/96 14 $35.63
2/22/96 36 $42.25
2/23/96 21 $40.75
2/26/96 3 $40.00
2/27/96 5 $40.00
2/28/96 12 $37.50
2/29/96 13 $35.50
3/01/96 39 $34.50
3/04/96 206 $36.50
3/05/96 7 $38.25
3/06/96 17 $39.00
3/07/96 9 $38.00
3/08/96 37 $33.50
3/11/96 32 $33.50
3/12/96 35 $31.75
3/13/96 27 $33.25
3/14/96 19 $35.25
3/15/96 20 $32.75
3/18/96 35 $31.25
3/19/96 73 $29.00
3/20/96 115 $28.50
3/21/96 76 $29.00
3/22/96 45 $30.25
(e)3/25/96 94 $24.25
3/26/96 221 $19.25
3/27/96 126 $19.75
3/28/96 93 $21.00
3/29/96 67 $22.75
4/01/96 60 $22.75
4/02/96 24 $23.50
4/03/96 70 $22.75
4/04/96 33 $21.25
4/08/96 72 $19.38
4/09/96 107 $16.75
4/10/96 85 $17.75
4/11/96 64 $16.38
4/12/96 68 $18.50
4/15/96 87 $18.00
4/16/96 34 $19.75
4/17/96 26 $19.00
4/18/96 9 $19.50
4/19/96 5 $19.50
</TABLE>
<PAGE> 30
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
4/22/96 10 $18.75
4/23/96 22 $20.50
4/24/96 24 $20.00
4/25/96 30 $21.50
4/26/96 88 $22.50
4/29/96 20 $23.25
4/30/96 4 $22.25
5/01/96 9 $22.00
5/02/96 11 $19.75
5/03/96 27 $21.00
5/06/96 49 $21.00
5/07/96 19 $21.75
5/08/96 13 $21.00
5/09/96 2 $21.50
5/10/96 0 $22.25
5/13/96 11 $22.25
5/14/96 46 $23.38
5/15/96 48 $23.00
5/16/96 78 $25.00
5/17/96 48 $25.75
5/20/96 36 $25.25
5/21/96 40 $24.75
5/22/96 17 $24.25
5/23/96 20 $24.25
5/24/96 17 $25.13
5/28/96 10 $22.75
5/29/96 4 $24.00
5/30/96 9 $23.25
5/31/96 8 $22.75
6/03/96 8 $22.25
6/04/96 8 $21.50
6/05/96 8 $21.75
6/06/96 9 $21.50
6/07/96 23 $20.75
6/10/96 21 $20.50
6/11/96 3 $20.00
6/12/96 5 $20.00
6/13/96 42 $19.00
6/14/96 40 $18.25
6/17/96 21 $19.75
6/18/96 20 $18.75
6/19/96 6 $19.00
6/20/96 33 $17.38
6/21/96 25 $17.50
6/24/96 43 $17.38
6/25/96 1 $18.00
6/26/96 11 $17.00
</TABLE>
<PAGE> 31
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
6/27/96 5 $17.00
6/28/96 14 $17.38
7/01/96 5 $17.50
(f)7/02/96 12 $17.25
7/03/96 16 $17.00
7/05/96 3 $16.00
7/08/96 41 $13.38
7/09/96 39 $15.25
7/10/96 11 $14.50
7/11/96 21 $14.25
7/12/96 45 $15.00
7/15/96 28 $14.63
7/16/96 19 $13.13
7/17/96 21 $16.00
7/18/96 23 $16.75
7/19/96 4 $16.00
7/22/96 2 $14.50
7/23/96 45 $12.75
7/24/96 29 $14.00
7/25/96 22 $15.75
7/26/96 38 $16.25
7/29/96 16 $15.00
7/30/96 3 $14.00
7/31/96 16 $15.25
8/01/96 2 $15.50
8/02/96 16 $15.50
8/05/96 9 $15.25
8/06/96 3 $15.00
8/07/96 14 $14.50
8/08/96 4 $14.00
8/09/96 23 $11.50
8/12/96 16 $12.00
(g)8/13/96 141 $17.50
8/14/96 38 $16.00
8/15/96 9 $16.50
8/16/96 5 $16.75
8/19/96 3 $16.00
8/20/96 7 $15.75
8/21/96 9 $14.50
8/22/96 36 $15.50
8/23/96 70 $15.50
8/26/96 20 $15.00
8/27/96 4 $14.75
8/28/96 4 $14.75
8/29/96 2 $14.50
8/30/96 36 $12.50
9/03/96 27 $12.00
</TABLE>
<PAGE> 32
GENZZ& GENZYME CORP
CURRENCY: U.S. Dollar
- ----------------
GRAPH ON PAGE 12
- ----------------
<TABLE>
<CAPTION>
DATE VOLUME (000's) CLOSE
<S> <C> <C>
9/04/96 22 $12.25
9/05/96 18 $12.25
9/06/96 18 $12.13
9/09/96 12 $13.00
9/10/96 9 $13.00
9/11/96 5 $12.00
9/12/96 7 $12.50
9/13/96 36 $11.00
<FN>
Annotations:
(a) 7/26/95: Genzyme Corp. shares rise after a reported 16% increase in 2Q
sales.
(b) 10/13/96: Genzyme Corp. announces 2.5 MM share public offering at $51.25
per share.
(c) 12/14/96: FDA approves filing of Genzyme Corp.'s Seprafilm approval
application.
(d) 2/14/96: Genzyme Corp. to acquire Genetrix Inc. for stock.
(e) 3/25/96: Genzyme Corp. shares fall after FDA panel approves Seprafilm for
limited use only.
(f) 7/2/96: Genzyme Corp. completes $250 MM purchase of Deknatel Snowden Pencer
Inc.
(g) 8/13/96: Genzyme Corp. shares rise after the drug Seprafilm receives FDA
approval.
</TABLE>
<PAGE> 33
E. ISSUES FOR CONSIDERATION
- ------------------------------------------------------------------------------
<PAGE> 34
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
ISSUES FOR CONSIDERATION
- Early stage of development of gene therapy technology
- Gene therapy highly competitive market
- Impact of Protein Replacement and HyperGam project failures; all
values residues in CFTR gene therapy
- Uncertainty regarding pending Neozyme patent claims
<PAGE> 35
F. NEOZYME / GENZYME OWNERSHIP OVERLAP
- --------------------------------------------------------------------------------
<PAGE> 36
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
GENZYME AND NEOZYME INSTITUTIONAL OWNERSHIP OVERLAP
<TABLE>
<CAPTION>
(A) (B)
NEOZYME GENZYME
NEOZYME 5% INSTITUTIONAL OWNERS OWNERSHIP OWNERSHIP
- ------------------------------- --------- ---------
<S> <C> <C>
Goldman Sachs 470,800 0
Lehman Brothers 428,226 12,388
Kingdon Capital Management 325,000 0
William Harris Investments 191,500 165,580
Dawson-Samberg 142,100 0
Merrill Lynch & Co., Inc. 142,000 8,099
Chancellor Capital Management 132,230 379,479
--------- ----------
Total 5% Institutional Ownership 1,831,856 565,546
Total Shares Outstanding 2,415,000 73,934,000
</TABLE>
Notes:
- --------------------------------------------------------
(a) Source: Neozyme Management as of September 17, 1996.
(b) Source: CDA Spectrum as of June 30, 1996.
<PAGE> 37
II. VALUATION ANALYSES
- -------------------------------------------------------------------------------
<PAGE> 38
A. VALUATION METHODOLOGIES
- -------------------------------------------------------------------------------
<PAGE> 39
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
VALUATION METHODOLOGIES
- Valuation of component portions of Neozyme Units
- Technology value of CF programs
- Value residing in Callable Warrants
- Technology valuation estimates based on:
- Public market valuations of comparable companies
- Premiums paid in comparable biotechnology and SWORDS acquisitions
- Discounted cash flow analysis with three management scenarios
- Warrant valuation based on:
- Black-Scholes and binomial option pricing models
- Market valuations of listed options and Series N Warrants
<PAGE> 40
B. CURRENT VALUATION COMPONENTS OF NEOZYME
- -------------------------------------------------------------------------------
<PAGE> 41
PROJECT BLUE JEANS
- --------------------------------------------------------------------------------
Current Valuation Components of Neozyme
At IPO:
Callable Common, Callable Warrant and Series N Warrant are grouped
together as one unit.
As of September 13, 1996 (Post-Split):
Callable Common and Callable Warrant are grouped together as one unit
at a price of $44.50. Series N Warrant, at a price of $11.00, is a separate
unit.
<PAGE> 42
C. NEOZYME'S SCIENTIFIC ACCOMPLISHMENTS
- -------------------------------------------------------------------------------
<PAGE> 43
PROJECT BLUE JEANS
- ---------------------------------------------------------------------------
NEOZYME SCIENTIFIC ACCOMPLISHMENTS
- Potentially strong cystic fibrosis patent estate (if patents
issue)
- Strong lipid-based DNA delivery development program
- Extensive clinical experience in CF gene therapy trials
- Clinical safety and toxicology data are as expected
<PAGE> 44
PROJECT BLUE JEANS
- --------------------------------------------------------------------------------
Neozyme: Summary of R&D Activities
March 1992 Inception of Neozyme to fund development of treatment of Cystic
Fibrosis ("CF")
- Protein Replacement
- Gene Therapy
Page depicts a timeline of R&D activities beginning in March 1992 and ending in
September 1996. Three programs are delineated: CFTR Gene Therapy, CFTR Protein
Replacement and HyperGAM. Time segments are divided by year.
CFTR Gene Therapy R&D begins in March 1992. In mid-1993, successful CF
gene transfer in humans occurs, at which point R&D splits into Adenovirus and
Liposomal. In Adenovirus research, a trial for repeat dose (nasal and sinus)
occurs in the first third of 1994, and a trial for second generation vector
(bronch/aerosol) occurs in early 1995. Adenovirus CFTR Gene Therapy R&D is
ongoing as of September 1996. In Liposomal CFTR Gene Therapy, a lipid
single-dose safety study is initiated in mid-1994, and in the beginning of
1996, a trial for lipid nasal study is started. As of September 1996, Liposomal
CFTR Gene Therapy R&D is ongoing.
CFTR Protein Replacement R&D begins in March 1992. It continues through the
beginning of 1995, at which point the program becomes inactive.
HyperGAM R&D begins in the middle of 1993, when collaboration with Univax/NABI
is initiated. In mid-1994, Phase I trials are completed. In mid-1996, Phase II
interim results show no statistical significance, and in July 1996, the program
is halted.
<PAGE> 45
D. VALUATION PARAMETERS FOR COMPARABLE COMPANIES
- -------------------------------------------------------------------------------
<PAGE> 46
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
VALUATION PARAMETERS FOR PUBLICLY TRADED GENE THERAPY COMPANIES
- Unlike Neozyme, substantially all of the publicly traded gene therapy
companies have broad-based gene therapy technologies potentially
applicable to multiple disease categories
- Such gene therapy companies can be divided into two tiers:
<TABLE>
<CAPTION>
TIER 1 TIER 2A TIER 2B (COMPANIES IN REGISTRATION)
------------- -------------- -----------
<S> <C> <C>
Somatix Avigen Immusol
Vical Cell Genesys Introgen
GeneMedicine Transkaryotic Therapies
Targeted Genetics
</TABLE>
- Tier 1 companies trade at significantly higher market capitalizations
than Tier 2 companies as a result of one or more of the following
reasons:
- More enabling technologies (e.g., Naked DNA, GVAX)
- Large corporate endorsements
- Broader patent estates
- Later stages of clinical development
- More significant disease market opportunities
- Neozyme assets are limited to the application of potential gene
therapy products in the treatment of cystic fibrosis
- A number of competitors have gene therapy, as well as non-gene
therapy, development programs in cystic fibrosis
- Genzyme has rights to all other potential disease markets
<PAGE> 47
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
PUBLIC COMPANY COMPETITIVE GENE THERAPY PROGRAMS
<TABLE>
<CAPTION>
TECHNOLOGY MULTIPLE CF CORPORATE CLINICAL
COMPANY BASE PROGRAMS PROGRAM PARTNER STAGE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Avigen Broad Yes No No Preclinical
(AAV and TVI
vector systems)
Cell Genesys Broad Yes No Yes Phase 2
(Retroviral and (HMR, JT) (AIDS)
AV vectors)
GeneMedicine Broad Yes No Yes Phase 1
(Non-viral gene (Respiratory (Roche, BM) (AAT)
delivery systems) program)
Somatix Broad Yes No Yes Phase 1/2
(Multiple gene transfer (Baxter, Bristol) (cancer
technology platform) vaccine)
Targeted Broad Yes Yes Yes Phase 1/2
Genetics (AAV, retroviral (Immunex) (CF)
and non-viral
vectors)
Vical Broad Yes Yes Yes Phase 2
(Non-viral gene (Genzyme, (cancer)
delivery systems) RPR, Merck)
</TABLE>
<PAGE> 48
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
PRIVATE COMPANY COMPETITIVE GENE THERAPY PROGRAMS
<TABLE>
<CAPTION>
TECHNOLOGY MULTIPLE CF CORPORATE CLINICAL
COMPANY BASE PROGRAMS PROGRAM PARTNER STAGE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GenVec Broad Yes Yes Yes Phase 1/2
(AV vectors) (Genentech)
Immusol(a) Broad Yes No Yes Preclinical
(Ribozyme (Pfizer)
gene therapy)
Megabios Broad Yes Yes Yes Preclinical
(Lipid based gene (Glaxo, (IND in 1996
delivery systems) Pfizer) for CF)
Transgene Broad Yes Yes Yes Phase 1/2
(AV vectors) (Roussel-Uclaf,
Sanofi)
Transkaryotic(a) Broad Yes No Yes Phase 2
Therapies (Non-viral gene (GI, HMR)
delivery systems)
Introgen(a) Broad Yes No Yes Phase 2
(Viral vectors) (RPR)
</TABLE>
Notes:
- ------
(a) Has filed a registration for an initial public offering.
<PAGE> 49
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
NEOZYME TRADING PERFORMANCE RELATIVE TO COMPARABLE GENE THERAPY COMPANIES,
01/03/95 TO 09/13/96
Page depicts a graph with three lines representing (i) the indexed closing
prices of Neozyme, (ii) an average of the Tier 1 Companies and (iii) an average
of the Tier 2a Companies. The three indices each start at 100 and are indexed,
based on the closing prices on January 3, 1995, from January 3, 1995 to
September 13, 1996. Tier 1 Companies include Somatix and Vical. Tier 2a
Companies include Cell Genesys, GeneMedicine and Targeted Genetics. Tier 2a
excludes Avigen because it has only been publicly traded since May 22, 1996.
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/03/95 28.625 3.188 7.750 5.125 5.354 3.000 7.500 5.250 1/03/95 100.000 100.000 100.000
1/04/95 28.500 3.375 7.250 5.500 5.375 3.125 8.125 5.625 1/04/95 99.563 100.386 107.143
1/05/95 28.625 3.313 7.875 5.375 5.521 3.313 8.000 5.657 1/05/95 100.000 103.113 107.743
1/06/95 28.625 3.500 7.250 5.313 5.354 3.250 8.000 5.625 1/06/95 100.000 100.000 107.143
1/09/95 28.750 3.250 7.375 5.250 5.292 3.125 8.250 5.688 1/09/95 100.437 98.830 108.333
1/10/95 28.625 3.375 7.250 5.125 5.250 3.313 7.500 5.407 1/10/95 100.000 98.051 102.981
1/11/95 28.625 3.375 6.875 5.250 5.167 3.250 7.500 5.375 1/11/95 100.000 96.495 102.381
1/12/95 28.625 3.625 6.750 5.063 5.146 3.250 7.750 5.500 1/12/95 100.000 96.109 104.762
1/13/95 28.625 3.813 6.750 4.875 5.146 3.063 8.000 5.532 1/13/95 100.000 96.109 105.362
1/16/95 28.625 3.813 7.250 5.063 5.375 3.063 7.500 5.282 1/16/95 100.000 100.392 100.600
1/17/95 28.500 3.750 7.250 4.875 5.292 3.063 7.500 5.282 1/17/95 99.563 98.830 100.600
1/18/95 28.625 3.625 7.000 5.000 5.208 3.125 7.000 5.063 1/18/95 100.000 97.273 96.429
1/19/95 28.625 3.813 6.750 5.000 5.188 3.063 7.250 5.157 1/19/95 100.000 96.887 98.219
1/20/95 28.500 3.750 6.750 4.875 5.125 3.000 6.875 4.938 1/20/95 99.563 95.717 94.048
1/23/95 28.625 3.438 6.625 4.500 4.854 3.063 6.750 4.907 1/23/95 100.000 90.662 93.457
1/24/95 29.000 3.500 6.375 4.500 4.792 3.063 6.625 4.844 1/24/95 101.310 89.491 92.267
1/25/95 29.000 3.500 6.625 4.375 4.833 2.938 6.813 4.876 1/25/95 101.310 90.270 92.867
1/26/95 30.500 3.500 6.250 4.125 4.625 3.063 6.625 4.844 1/26/95 106.550 86.379 92.267
1/27/95 32.500 3.500 6.375 4.000 4.625 3.125 7.125 5.125 1/27/95 113.537 86.379 97.619
1/30/95 32.750 3.500 6.500 4.375 4.792 3.344 6.750 5.047 1/30/95 114.410 89.491 96.133
1/31/95 32.750 3.438 6.375 4.000 4.604 3.875 6.813 5.344 1/31/95 114.410 85.993 101.790
2/01/95 33.000 3.438 6.375 3.875 4.563 4.375 7.250 5.813 2/01/95 115.284 85.214 110.714
2/02/95 33.750 3.438 6.500 4.375 4.771 4.438 7.000 5.719 2/02/95 117.904 89.105 108.933
2/03/95 33.750 3.594 6.688 4.188 4.823 4.313 7.250 5.782 2/03/95 117.904 90.083 110.124
2/06/95 33.750 3.750 6.688 4.250 4.896 4.313 7.625 5.969 2/06/95 117.904 91.440 113.695
2/07/95 34.875 3.719 6.750 4.375 4.948 4.000 7.625 5.813 2/07/95 121.834 92.411 110.714
2/08/95 37.250 3.750 6.875 4.188 4.938 3.875 7.750 5.813 2/08/95 130.131 92.218 110.714
2/09/95 37.250 3.625 6.750 4.000 4.792 4.375 8.000 6.188 2/09/95 130.131 89.491 117.857
2/10/95 37.750 3.500 6.625 4.375 4.833 4.313 8.000 6.157 2/10/95 131.878 90.270 117.267
2/13/95 37.750 3.750 6.375 4.375 4.833 4.250 7.813 6.032 2/13/95 131.878 90.270 114.886
2/14/95 38.250 3.875 6.375 4.250 4.833 4.063 7.875 5.969 2/14/95 133.624 90.270 113.695
2/15/95 37.500 3.500 6.438 4.188 4.709 3.938 7.875 5.907 2/15/95 131.004 87.941 112.505
</TABLE>
<PAGE> 50
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/16/95 37.875 3.375 6.625 4.188 4.729 4.000 7.750 5.875 2/16/95 132.314 88.327 111.905
2/17/95 37.875 3.250 6.500 4.188 4.646 4.250 7.875 6.063 2/17/95 132.314 86.771 115.476
2/21/95 37.375 3.000 6.500 4.375 4.625 4.250 7.875 6.063 2/21/95 130.568 86.379 115.476
2/22/95 37.500 2.875 6.375 4.375 4.542 4.906 8.250 6.578 2/22/95 131.004 84.822 125.295
2/23/95 38.000 3.000 6.625 4.000 4.542 4.875 8.000 6.438 2/23/95 132.751 84.822 122.619
2/24/95 37.750 3.125 6.000 4.375 4.500 4.594 8.250 6.422 2/24/95 131.878 84.044 122.324
2/27/95 37.750 3.000 6.250 4.000 4.417 4.125 8.125 6.125 2/27/95 131.878 82.488 116.667
2/28/95 37.500 3.500 6.500 4.188 4.729 4.500 8.250 6.375 2/28/95 131.004 88.327 121.429
3/01/95 38.000 3.625 6.000 4.188 4.604 4.563 8.125 6.344 3/01/95 132.751 85.993 120.838
3/02/95 38.250 3.625 6.000 4.000 4.542 4.500 8.625 6.563 3/02/95 133.624 84.822 125.000
3/03/95 38.000 3.750 6.500 4.500 4.917 4.500 8.750 6.625 3/03/95 132.751 91.826 126.190
3/06/95 38.750 3.750 6.375 4.313 4.813 4.500 8.500 6.500 3/06/95 135.371 89.884 123.810
3/07/95 38.000 3.625 6.000 4.500 4.708 4.375 8.375 6.375 3/07/95 132.751 87.935 121.429
3/08/95 38.750 3.688 6.000 5.500 5.063 4.000 7.500 5.750 3/08/95 135.371 94.553 109.524
3/09/95 38.750 3.625 6.063 5.625 5.104 4.125 7.750 5.938 3/09/95 135.371 95.331 113.095
3/10/95 38.000 3.625 6.000 5.625 5.083 4.000 7.750 5.875 3/10/95 132.751 94.939 111.905
3/13/95 38.375 3.625 5.625 6.250 5.167 3.875 7.625 5.750 3/13/95 134.061 96.495 109.524
3/14/95 38.000 3.625 5.500 6.000 5.042 3.500 7.500 5.500 3/14/95 132.751 94.160 104.762
3/15/95 38.250 3.625 5.500 5.750 4.958 3.500 7.250 5.375 3/15/95 133.624 92.604 102.381
3/16/95 38.000 3.750 5.500 6.000 5.083 3.375 7.250 5.313 3/16/95 132.751 94.939 101.190
3/17/95 38.000 4.125 5.625 5.625 5.125 3.500 7.375 5.438 3/17/95 132.751 95.717 103.571
3/20/95 38.375 4.000 5.625 5.625 5.083 3.625 6.875 5.250 3/20/95 134.061 94.939 100.000
3/21/95 38.375 4.000 5.563 5.625 5.063 4.063 6.875 5.469 3/21/95 134.061 94.553 104.171
3/22/95 38.375 4.250 5.375 5.875 5.167 4.000 6.750 5.375 3/22/95 134.061 96.495 102.381
3/23/95 38.750 4.688 5.500 5.875 5.354 3.875 7.063 5.469 3/23/95 135.371 100.000 104.171
3/24/95 38.625 5.000 5.500 5.625 5.375 3.625 7.000 5.313 3/24/95 134.934 100.386 101.190
3/27/95 38.500 5.250 5.375 5.750 5.458 3.688 7.000 5.344 3/27/95 134.498 101.942 101.790
3/28/95 38.625 5.250 5.500 5.500 5.417 3.625 7.000 5.313 3/28/95 134.934 101.164 101.190
3/29/95 38.500 5.250 5.250 5.875 5.458 3.625 7.000 5.313 3/29/95 134.498 101.942 101.190
3/30/95 38.000 5.438 5.250 5.875 5.521 3.625 6.875 5.250 3/30/95 132.751 103.113 100.000
3/31/95 38.000 5.500 5.500 5.875 5.625 3.625 6.625 5.125 3/31/95 132.751 105.055 97.619
4/03/95 38.000 5.625 4.875 5.500 5.333 3.625 6.625 5.125 4/03/95 132.751 99.608 97.619
</TABLE>
<PAGE> 51
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/04/95 38.000 5.875 4.750 4.875 5.167 3.688 6.750 5.219 4/04/95 132.751 96.495 99.410
4/05/95 38.375 5.625 4.500 5.125 5.083 3.625 6.500 5.063 4/05/95 134.061 94.939 96.429
4/06/95 38.500 5.250 4.750 5.000 5.000 3.750 6.875 5.313 4/06/95 134.498 93.382 101.190
4/07/95 38.000 5.250 4.500 5.125 4.958 3.688 6.750 5.219 4/07/95 132.751 92.604 99.410
4/10/95 38.063 5.250 4.500 5.000 4.917 3.563 7.438 5.501 4/10/95 132.971 91.826 104.771
4/11/95 38.250 5.250 4.750 4.875 4.958 3.625 7.500 5.563 4/11/95 133.624 92.604 105.952
4/12/95 38.000 5.250 4.750 5.250 5.083 3.625 7.625 5.625 4/12/95 132.751 94.939 107.143
4/13/95 38.250 5.250 4.688 4.875 4.938 3.625 7.875 5.750 4/13/95 133.624 92.218 109.524
4/17/95 38.750 5.625 4.500 4.750 4.958 3.438 7.625 5.532 4/17/95 135.371 92.604 105.362
4/18/95 38.750 5.375 4.750 4.875 5.000 3.438 7.875 5.657 4/18/95 135.371 93.382 107.743
4/19/95 38.375 5.125 5.250 4.875 5.083 3.500 7.875 5.688 4/19/95 134.061 94.939 108.333
4/20/95 38.000 5.250 4.500 4.375 4.708 3.438 7.500 5.469 4/20/95 132.751 87.935 104.171
4/21/95 38.000 5.250 4.500 4.875 4.875 3.375 7.500 5.438 4/21/95 132.751 91.048 103.571
4/24/95 38.375 5.500 4.750 4.688 4.979 3.250 7.625 5.438 4/24/95 134.061 92.996 103.571
4/25/95 38.125 5.500 4.375 4.688 4.854 3.344 7.750 5.547 4/25/95 133.188 90.662 105.657
4/26/95 38.000 5.875 4.125 4.500 4.833 3.313 7.625 5.469 4/26/95 132.751 90.270 104.171
4/27/95 38.750 5.500 4.000 4.750 4.750 3.375 7.625 5.500 4/27/95 135.371 88.713 104.762
4/28/95 38.500 5.500 4.125 4.500 4.708 3.375 7.875 5.625 4/28/95 134.498 87.935 107.143
5/01/95 38.250 5.625 4.125 4.313 4.688 3.250 7.375 5.313 5/01/95 133.624 87.549 101.190
5/02/95 39.000 5.500 4.125 4.313 4.646 3.250 7.250 5.250 5/02/95 136.245 86.771 100.000
5/03/95 38.813 5.500 4.125 4.313 4.646 3.125 7.375 5.250 5/03/95 135.591 86.771 100.000
5/04/95 38.625 5.500 4.375 4.125 4.667 3.125 7.000 5.063 5/04/95 134.934 87.157 96.429
5/05/95 38.625 5.500 4.250 4.313 4.688 3.125 7.000 5.063 5/05/95 134.934 87.549 96.429
5/08/95 38.875 5.750 4.250 4.000 4.667 3.125 7.000 5.063 5/08/95 135.808 87.157 96.429
5/09/95 39.000 5.500 4.125 3.875 4.500 3.125 6.750 4.938 5/09/95 136.245 84.044 94.048
5/10/95 39.000 5.125 4.375 3.875 4.458 3.063 6.750 4.907 5/10/95 136.245 83.266 93.457
5/11/95 38.625 5.125 4.250 4.000 4.458 3.063 7.000 5.032 5/11/95 134.934 83.266 95.838
5/12/95 39.125 5.250 4.375 4.000 4.542 3.125 7.250 5.188 5/12/95 136.681 84.822 98.810
5/15/95 39.125 5.500 4.125 4.000 4.542 3.188 7.000 5.094 5/15/95 136.681 84.822 97.029
5/16/95 39.625 5.375 3.750 4.000 4.375 3.125 7.063 5.094 5/16/95 138.428 81.710 97.029
5/17/95 39.625 4.750 3.875 4.000 4.208 3.063 7.250 5.157 5/17/95 138.428 78.597 98.219
5/18/95 39.625 5.000 4.000 4.000 4.333 3.063 7.500 5.282 5/18/95 138.428 80.931 100.600
</TABLE>
<PAGE> 52
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/19/95 39.375 5.000 3.813 3.875 4.229 3.250 7.375 5.313 5/19/95 137.555 78.989 101.190
5/22/95 39.375 5.000 3.938 3.750 4.229 3.188 7.250 5.219 5/22/95 137.555 78.989 99.410
5/23/95 39.563 5.000 4.125 3.875 4.333 3.250 8.000 5.625 5/23/95 138.211 80.931 107.143
5/24/95 39.750 5.000 4.750 4.250 4.667 3.250 8.000 5.625 5/24/95 138.865 87.157 107.143
5/25/95 39.375 5.000 4.625 4.250 4.625 3.125 8.125 5.625 5/25/95 137.555 86.379 107.143
5/26/95 39.750 5.375 4.750 4.250 4.792 3.125 7.500 5.313 5/26/95 138.865 89.491 101.190
5/30/95 39.000 5.250 4.688 4.188 4.709 3.063 7.500 5.282 5/30/95 136.245 87.941 100.600
5/31/95 39.250 5.375 4.625 4.125 4.708 3.000 8.000 5.500 5/31/95 137.118 87.935 104.762
6/01/95 39.500 5.250 5.125 4.250 4.875 3.125 8.250 5.688 6/01/95 137.991 91.048 108.333
6/02/95 39.250 5.375 5.375 4.125 4.958 3.125 8.125 5.625 6/02/95 137.118 92.604 107.143
6/05/95 39.250 5.625 5.625 4.125 5.125 3.125 8.250 5.688 6/05/95 137.118 95.717 108.333
6/06/95 39.250 5.438 5.500 4.125 5.021 3.000 8.125 5.563 6/06/95 137.118 93.775 105.952
6/07/95 39.000 5.375 5.500 4.000 4.958 3.000 8.000 5.500 6/07/95 136.245 92.604 104.762
6/08/95 39.000 5.625 5.625 4.000 5.083 3.125 8.000 5.563 6/08/95 136.245 94.939 105.952
6/09/95 39.000 5.625 5.125 3.750 4.833 4.250 7.875 6.063 6/09/95 136.245 90.270 115.476
6/12/95 39.125 5.875 5.125 3.813 4.938 4.000 8.000 6.000 6/12/95 136.681 92.218 114.286
6/13/95 39.000 5.750 5.000 3.750 4.833 4.625 7.875 6.250 6/13/95 136.245 90.270 119.048
6/14/95 39.125 6.375 5.500 3.750 5.208 4.500 7.875 6.188 6/14/95 136.681 97.273 117.857
6/15/95 39.125 6.438 5.500 3.875 5.271 4.063 7.625 5.844 6/15/95 136.681 98.444 111.314
6/16/95 38.750 6.531 5.500 3.938 5.323 4.313 7.625 5.969 6/16/95 135.371 99.415 113.695
6/19/95 39.125 6.750 5.000 3.750 5.167 4.250 7.625 5.938 6/19/95 136.681 96.495 113.095
6/20/95 38.750 6.594 4.813 3.750 5.052 4.250 7.875 6.063 6/20/95 135.371 94.360 115.476
6/21/95 38.750 7.000 4.750 4.125 5.292 4.000 7.750 5.875 6/21/95 135.371 98.830 111.905
6/22/95 39.125 7.750 4.750 3.938 5.479 3.750 8.125 5.938 6/22/95 136.681 102.335 113.095
6/23/95 39.125 7.750 4.500 4.000 5.417 3.531 9.125 6.328 6/23/95 136.681 101.164 120.533
6/26/95 39.125 7.875 4.563 4.000 5.479 3.875 8.750 6.313 6/26/95 136.681 102.335 120.238
6/27/95 38.750 7.625 5.000 4.000 5.542 4.063 9.000 6.532 6/27/95 135.371 103.499 124.410
6/28/95 38.750 7.625 4.563 4.000 5.396 3.875 8.750 6.313 6/28/95 135.371 100.778 120.238
6/29/95 38.750 7.625 4.563 4.000 5.396 3.875 9.875 6.875 6/29/95 135.371 100.778 130.952
6/30/95 39.125 8.375 4.563 3.875 5.604 4.250 9.750 7.000 6/30/95 136.681 104.669 133.333
7/03/95 39.250 8.500 5.375 4.000 5.958 4.375 10.000 7.188 7/03/95 137.118 111.281 136.905
7/05/95 38.750 8.625 5.250 3.875 5.917 4.000 10.000 7.000 7/05/95 135.371 110.502 133.333
</TABLE>
<PAGE> 53
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/06/95 38.750 9.000 5.000 4.125 6.042 4.125 9.625 6.875 7/06/95 135.371 112.837 130.952
7/07/95 38.875 9.063 5.000 3.875 5.979 4.125 8.750 6.438 7/07/95 135.808 111.673 122.619
7/10/95 39.125 9.000 5.000 4.500 6.167 4.625 9.375 7.000 7/10/95 136.681 115.172 133.333
7/11/95 39.125 9.750 5.250 4.500 6.500 4.750 9.875 7.313 7/11/95 136.681 121.397 139.286
7/12/95 38.750 9.875 5.250 4.375 6.500 4.500 11.250 7.875 7/12/95 135.371 121.397 150.000
7/13/95 39.125 10.500 5.250 4.188 6.646 4.625 10.625 7.625 7/13/95 136.681 124.124 145.238
7/14/95 39.125 10.313 5.000 4.375 6.563 4.750 10.875 7.813 7/14/95 136.681 122.567 148.810
7/17/95 39.125 10.125 5.000 4.250 6.458 5.344 10.500 7.922 7/17/95 136.681 120.619 150.895
7/18/95 39.500 9.875 5.125 4.125 6.375 5.688 10.000 7.844 7/18/95 137.991 119.062 149.410
7/19/95 38.750 8.750 5.000 3.875 5.875 5.375 9.875 7.625 7/19/95 135.371 109.724 145.238
7/20/95 39.250 8.375 5.125 4.000 5.833 5.500 10.125 7.813 7/20/95 137.118 108.946 148.810
7/21/95 38.750 8.500 5.125 4.000 5.875 5.750 11.125 8.438 7/21/95 135.371 109.724 160.714
7/24/95 39.125 8.250 5.000 3.875 5.708 6.000 11.375 8.688 7/24/95 136.681 106.611 165.476
7/25/95 38.750 8.000 5.250 4.000 5.750 6.500 11.125 8.813 7/25/95 135.371 107.390 167.857
7/26/95 39.125 8.000 5.250 4.250 5.833 6.500 11.000 8.750 7/26/95 136.681 108.946 166.667
7/27/95 39.500 7.750 5.250 3.938 5.646 6.000 11.125 8.563 7/27/95 137.991 105.447 163.095
7/28/95 39.125 7.625 5.250 3.875 5.583 5.375 10.938 8.157 7/28/95 136.681 104.277 155.362
7/31/95 39.250 8.125 6.000 4.250 6.125 6.000 11.000 8.500 7/31/95 137.118 114.393 161.905
8/01/95 39.250 7.625 6.375 4.250 6.083 6.000 11.000 8.500 8/01/95 137.118 113.615 161.905
8/02/95 40.500 8.250 5.750 4.250 6.083 6.000 10.625 8.313 8/02/95 141.485 113.615 158.333
8/03/95 39.750 8.625 5.875 4.063 6.188 6.000 10.625 8.313 8/03/95 138.865 115.564 158.333
8/04/95 40.000 8.750 6.250 4.250 6.417 5.938 10.500 8.219 8/04/95 139.738 119.841 156.552
8/07/95 40.000 8.375 6.000 4.125 6.167 5.938 10.375 8.157 8/07/95 139.738 115.172 155.362
8/08/95 39.750 8.250 6.125 4.063 6.146 6.125 10.250 8.188 8/08/95 138.865 114.786 155.952
8/09/95 41.000 8.250 6.000 3.750 6.000 6.375 12.125 9.250 8/09/95 143.231 112.059 176.190
8/10/95 41.500 8.250 6.125 4.250 6.208 6.750 12.375 9.563 8/10/95 144.978 115.950 182.143
8/11/95 41.500 8.250 5.938 4.313 6.167 6.375 11.875 9.125 8/11/95 144.978 115.178 173.810
8/14/95 41.375 8.250 6.125 4.375 6.250 6.375 12.125 9.250 8/14/95 144.541 116.728 176.190
8/15/95 41.750 8.000 6.000 4.375 6.125 7.375 11.875 9.625 8/15/95 145.852 114.393 183.333
8/16/95 42.250 8.250 6.125 4.375 6.250 7.250 11.625 9.438 8/16/95 147.598 116.728 179.762
8/17/95 42.125 8.625 7.000 4.938 6.854 6.750 11.875 9.313 8/17/95 147.162 128.015 177.381
8/18/95 42.688 8.500 6.875 5.500 6.958 6.625 11.750 9.188 8/18/95 149.128 129.957 175.000
</TABLE>
<PAGE> 54
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/21/95 42.750 9.000 6.875 5.750 7.208 6.375 11.625 9.000 8/21/95 149.345 134.626 171.429
8/22/95 42.750 8.750 6.750 5.875 7.125 6.250 11.375 8.813 8/22/95 149.345 133.070 167.857
8/23/95 42.500 8.750 6.750 5.500 7.000 6.125 11.875 9.000 8/23/95 148.472 130.735 171.429
8/24/95 42.750 9.000 7.000 5.500 7.167 6.125 12.250 9.188 8/24/95 149.345 133.848 175.000
8/25/95 43.250 9.000 7.125 5.563 7.229 5.938 11.375 8.657 8/25/95 151.092 135.018 164.886
8/28/95 43.000 8.875 6.750 5.500 7.042 6.000 11.125 8.563 8/28/95 150.218 131.513 163.095
8/29/95 43.000 8.750 6.500 5.125 6.792 5.625 10.750 8.188 8/29/95 150.218 126.844 155.952
8/30/95 43.000 8.844 6.750 5.125 6.906 5.875 11.250 8.563 8/30/95 150.218 128.986 163.095
8/31/95 43.250 8.625 6.750 5.375 6.917 6.188 11.625 8.907 8/31/95 151.092 129.179 169.648
9/01/95 42.875 8.625 6.750 5.313 6.896 6.500 11.375 8.938 9/01/95 149.782 128.793 170.238
9/05/95 43.250 8.500 6.875 5.500 6.958 6.375 11.250 8.813 9/05/95 151.092 129.957 167.857
9/06/95 42.500 8.500 7.000 5.688 7.063 6.375 11.000 8.688 9/06/95 148.472 131.906 165.476
9/07/95 43.000 8.500 7.000 5.375 6.958 6.625 11.125 8.875 9/07/95 150.218 129.957 169.048
9/08/95 43.500 8.375 7.000 5.750 7.042 6.750 11.250 9.000 9/08/95 151.965 131.513 171.429
9/11/95 42.750 8.000 6.500 5.375 6.625 6.875 11.750 9.313 9/11/95 149.345 123.732 177.381
9/12/95 42.750 8.375 6.500 5.875 6.917 6.875 11.500 9.188 9/12/95 149.345 129.179 175.000
9/13/95 43.500 8.625 6.625 5.938 7.063 7.125 13.000 10.063 9/13/95 151.965 131.906 191.667
9/14/95 43.250 8.625 6.375 6.375 7.125 6.875 13.250 10.063 9/14/95 151.092 133.070 191.667
9/15/95 42.500 8.500 6.500 6.375 7.125 6.625 12.750 9.688 9/15/95 148.472 133.070 184.524
9/18/95 43.250 8.438 6.313 6.375 7.042 6.250 12.125 9.188 9/18/95 151.092 131.520 175.000
9/19/95 43.250 8.563 6.125 6.125 6.938 6.500 13.375 9.938 9/19/95 151.092 129.571 189.286
9/20/95 42.875 8.500 6.375 6.375 7.083 6.250 13.500 9.875 9/20/95 149.782 132.292 188.095
9/21/95 43.250 9.500 6.125 6.250 7.292 6.125 13.250 9.688 9/21/95 151.092 136.183 184.524
9/22/95 42.500 9.750 5.750 6.000 7.167 5.875 12.000 8.938 9/22/95 148.472 133.848 170.238
9/25/95 42.875 9.063 5.688 5.563 6.771 5.688 12.000 8.844 9/25/95 149.782 126.465 168.457
9/26/95 42.500 9.250 5.750 6.000 7.000 5.875 11.875 8.875 9/26/95 148.472 130.735 169.048
9/27/95 42.875 9.000 6.375 6.000 7.125 6.000 11.250 8.625 9/27/95 149.782 133.070 164.286
9/28/95 42.875 9.500 6.250 5.625 7.125 5.969 11.500 8.735 9/28/95 149.782 133.070 166.371
9/29/95 42.875 9.500 6.250 5.313 7.021 6.125 11.750 8.938 9/29/95 149.782 131.127 170.238
10/02/95 42.500 9.125 6.125 5.250 6.833 5.625 12.000 8.813 10/02/95 148.472 127.622 167.857
10/03/95 42.500 9.188 5.875 5.313 6.792 5.375 10.500 7.938 10/03/95 148.472 126.851 151.190
10/04/95 42.875 9.250 5.875 5.250 6.792 5.000 10.125 7.563 10/04/95 149.782 126.844 144.048
</TABLE>
<PAGE> 55
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/05/95 43.250 8.750 5.875 5.625 6.750 5.250 11.000 8.125 10/05/95 151.092 126.066 154.762
10/06/95 42.875 8.938 6.250 5.625 6.938 5.000 11.125 8.063 10/06/95 149.782 129.571 153.571
10/09/95 42.375 9.000 6.063 5.438 6.834 4.625 10.125 7.375 10/09/95 148.035 127.629 140.476
10/10/95 41.750 8.500 7.500 5.125 7.042 4.500 10.875 7.688 10/10/95 145.852 131.513 146.429
10/11/95 42.000 8.375 8.000 5.063 7.146 4.375 10.438 7.407 10/11/95 146.725 133.462 141.076
10/12/95 42.000 8.375 8.250 5.125 7.250 4.875 11.125 8.000 10/12/95 146.725 135.404 152.381
10/13/95 41.875 8.000 8.000 5.500 7.167 4.875 11.250 8.063 10/13/95 146.288 133.848 153.571
10/16/95 42.375 8.250 8.000 5.000 7.083 4.375 11.250 7.813 10/16/95 148.035 132.292 148.810
10/17/95 42.500 8.000 8.125 5.375 7.167 5.000 11.000 8.000 10/17/95 148.472 133.848 152.381
10/18/95 42.500 8.500 7.875 4.875 7.083 5.063 11.500 8.282 10/18/95 148.472 132.292 157.743
10/19/95 43.250 8.375 7.875 4.781 7.010 5.000 11.250 8.125 10/19/95 151.092 130.928 154.762
10/20/95 42.500 8.250 7.625 4.500 6.792 4.875 11.375 8.125 10/20/95 148.472 126.844 154.762
10/23/95 43.250 7.875 7.750 4.750 6.792 5.000 11.000 8.000 10/23/95 151.092 126.844 152.381
10/24/95 42.500 7.938 7.875 5.125 6.979 5.000 11.000 8.000 10/24/95 148.472 130.349 152.381
10/25/95 46.000 8.250 8.000 4.875 7.042 4.875 11.250 8.063 10/25/95 160.699 131.513 153.571
10/26/95 45.375 7.625 7.625 4.625 6.625 4.625 10.750 7.688 10/26/95 158.515 123.732 146.429
10/27/95 45.063 6.563 7.500 4.625 6.229 5.000 10.750 7.875 10/27/95 157.425 116.342 150.000
10/30/95 45.375 6.500 7.625 4.500 6.208 4.875 10.625 7.750 10/30/95 158.515 115.950 147.619
10/31/95 45.750 6.625 7.500 4.750 6.292 4.875 10.250 7.563 10/31/95 159.825 117.506 144.048
11/01/95 45.625 6.375 7.000 4.750 6.042 4.375 9.750 7.063 11/01/95 159.389 112.837 134.524
11/02/95 45.625 6.375 7.125 5.500 6.333 4.750 9.063 6.907 11/02/95 159.389 118.284 131.552
11/03/95 45.625 6.500 7.375 5.375 6.417 4.750 9.125 6.938 11/03/95 159.389 119.841 132.143
11/06/95 46.000 6.375 7.375 5.250 6.333 4.875 9.500 7.188 11/06/95 160.699 118.284 136.905
11/07/95 45.625 6.500 7.313 5.250 6.354 4.750 9.375 7.063 11/07/95 159.389 118.676 134.524
11/08/95 45.625 6.375 7.250 5.000 6.208 4.500 9.125 6.813 11/08/95 159.389 115.950 129.762
11/09/95 46.000 5.875 7.250 5.000 6.042 4.250 9.500 6.875 11/09/95 160.699 112.837 130.952
11/10/95 46.000 6.125 7.750 5.000 6.292 4.375 9.000 6.688 11/10/95 160.699 117.506 127.381
11/13/95 45.625 5.938 8.250 5.000 6.396 4.125 8.875 6.500 11/13/95 159.389 119.455 123.810
11/14/95 45.625 5.250 8.125 5.250 6.208 3.750 8.750 6.250 11/14/95 159.389 115.950 119.048
11/15/95 45.500 5.750 8.125 5.063 6.313 3.875 9.500 6.688 11/15/95 158.952 117.898 127.381
11/16/95 45.625 5.625 8.000 5.125 6.250 4.000 9.750 6.875 11/16/95 159.389 116.728 130.952
11/17/95 45.625 5.250 7.875 5.000 6.042 4.375 10.000 7.188 11/17/95 159.389 112.837 136.905
</TABLE>
<PAGE> 56
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/20/95 45.250 5.250 7.375 5.000 5.875 4.125 10.125 7.125 11/20/95 158.079 109.724 135.714
11/21/95 45.375 5.375 7.000 5.000 5.792 4.063 10.125 7.094 11/21/95 158.515 108.168 135.124
11/22/95 45.625 6.000 7.250 5.250 6.167 4.063 9.750 6.907 11/22/95 159.389 115.172 131.552
11/24/95 45.625 6.500 7.250 5.125 6.292 3.875 9.750 6.813 11/24/95 159.389 117.506 129.762
11/27/95 45.625 6.750 7.000 5.000 6.250 4.125 10.000 7.063 11/27/95 159.389 116.728 134.524
11/28/95 45.625 6.500 7.250 5.125 6.292 4.500 9.625 7.063 11/28/95 159.389 117.506 134.524
11/29/95 46.000 6.375 8.000 5.000 6.458 5.000 9.438 7.219 11/29/95 160.699 120.619 137.505
11/30/95 46.000 6.500 8.125 5.188 6.604 5.125 9.375 7.250 11/30/95 160.699 123.346 138.095
12/01/95 47.000 6.500 8.000 5.125 6.542 5.125 8.875 7.000 12/01/95 164.192 122.175 133.333
12/04/95 47.000 6.750 8.000 5.375 6.708 5.250 10.000 7.625 12/04/95 164.192 125.288 145.238
12/05/95 47.000 7.000 7.875 5.125 6.667 5.313 10.000 7.657 12/05/95 164.192 124.510 145.838
12/06/95 47.000 7.000 7.875 5.375 6.750 5.125 9.750 7.438 12/06/95 164.192 126.066 141.667
12/07/95 46.750 7.250 7.750 5.375 6.792 4.875 9.750 7.313 12/07/95 163.319 126.844 139.286
12/08/95 46.750 7.250 7.875 5.125 6.750 5.125 9.625 7.375 12/08/95 163.319 126.066 140.476
12/11/95 46.750 7.250 7.875 5.125 6.750 4.813 9.750 7.282 12/11/95 163.319 126.066 138.695
12/12/95 47.000 7.000 7.875 5.375 6.750 5.250 11.250 8.250 12/12/95 164.192 126.066 157.143
12/13/95 47.500 7.000 7.875 5.125 6.667 5.000 10.625 7.813 12/13/95 165.939 124.510 148.810
12/14/95 47.750 7.375 8.000 5.125 6.833 4.875 9.500 7.188 12/14/95 166.812 127.622 136.905
12/15/95 47.500 7.125 7.875 5.375 6.792 4.875 9.625 7.250 12/15/95 165.939 126.844 138.095
12/18/95 46.813 6.750 7.625 5.000 6.458 4.875 9.375 7.125 12/18/95 163.539 120.619 135.714
12/19/95 47.500 6.500 7.625 5.000 6.375 4.875 10.000 7.438 12/19/95 165.939 119.062 141.667
12/20/95 47.125 7.000 7.500 5.000 6.500 5.000 10.125 7.563 12/20/95 164.629 121.397 144.048
12/21/95 46.750 7.375 7.750 5.000 6.708 5.125 11.000 8.063 12/21/95 163.319 125.288 153.571
12/22/95 47.125 7.625 8.000 5.250 6.958 5.375 11.000 8.188 12/22/95 164.629 129.957 155.952
12/26/95 47.125 7.375 8.000 5.250 6.875 5.750 12.125 8.938 12/26/95 164.629 128.401 170.238
12/27/95 47.125 7.250 9.500 5.500 7.417 6.375 12.000 9.188 12/27/95 164.629 138.517 175.000
12/28/95 47.500 7.625 9.563 5.625 7.604 6.250 12.000 9.125 12/28/95 165.939 142.022 173.810
12/29/95 47.125 7.625 10.000 5.625 7.750 6.000 12.125 9.063 12/29/95 164.629 144.743 172.619
1/02/96 46.375 7.750 9.688 6.125 7.854 5.625 12.250 8.938 1/02/96 162.009 146.691 170.238
1/03/96 46.250 7.750 9.938 6.875 8.188 5.750 11.938 8.844 1/03/96 161.572 152.917 168.457
1/04/96 45.500 7.750 9.875 6.938 8.188 6.125 12.125 9.125 1/04/96 158.952 152.917 173.810
1/05/96 45.000 8.250 9.625 6.938 8.271 6.375 12.125 9.250 1/05/96 157.205 154.473 176.190
</TABLE>
<PAGE> 57
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/08/96 44.250 8.250 9.875 7.000 8.375 6.125 13.500 9.813 1/08/96 154.585 156.415 186.905
1/09/96 43.250 7.875 9.688 6.750 8.104 6.000 13.000 9.500 1/09/96 151.092 151.360 180.952
1/10/96 39.500 7.500 9.875 6.125 7.833 6.000 12.500 9.250 1/10/96 137.991 146.299 176.190
1/11/96 39.500 7.375 9.875 5.750 7.667 6.250 13.500 9.875 1/11/96 137.991 143.186 188.095
1/12/96 39.500 7.375 10.125 5.875 7.792 6.188 13.250 9.719 1/12/96 137.991 145.521 185.124
1/15/96 40.000 7.500 9.875 5.500 7.625 6.375 13.875 10.125 1/15/96 139.738 142.408 192.857
1/16/96 39.875 7.500 10.000 5.000 7.500 6.125 13.750 9.938 1/16/96 139.301 140.073 189.286
1/17/96 39.375 7.500 9.750 5.375 7.542 5.750 14.000 9.875 1/17/96 137.555 140.852 188.095
1/18/96 39.500 7.500 9.875 5.625 7.667 6.000 13.750 9.875 1/18/96 137.991 143.186 188.095
1/19/96 38.500 7.500 10.125 5.625 7.750 5.875 13.625 9.750 1/19/96 134.498 144.743 185.714
1/22/96 38.500 7.375 10.125 6.250 7.917 6.000 14.750 10.375 1/22/96 134.498 147.855 197.619
1/23/96 38.500 8.000 9.875 6.500 8.125 6.125 14.875 10.500 1/23/96 134.498 151.746 200.000
1/24/96 39.688 8.000 9.875 6.625 8.167 6.125 15.750 10.938 1/24/96 138.648 152.524 208.333
1/25/96 41.250 8.313 9.875 7.000 8.396 6.500 16.750 11.625 1/25/96 144.105 156.808 221.429
1/26/96 40.875 8.625 11.625 6.625 8.958 6.688 18.500 12.594 1/26/96 142.795 167.310 239.886
1/29/96 40.875 9.000 11.500 7.125 9.208 6.375 17.875 12.125 1/29/96 142.795 171.979 230.952
1/30/96 41.250 8.875 11.125 7.000 9.000 6.250 16.250 11.250 1/30/96 144.105 168.088 214.286
1/31/96 41.875 9.000 9.875 6.938 8.604 6.625 17.000 11.813 1/31/96 146.288 160.698 225.000
2/01/96 43.250 8.625 9.875 7.000 8.500 6.625 16.500 11.563 2/01/96 151.092 158.750 220.238
2/02/96 43.125 8.500 10.625 7.250 8.792 6.750 16.375 11.563 2/02/96 150.655 164.197 220.238
2/05/96 43.250 8.375 10.750 7.000 8.708 6.875 16.375 11.625 2/05/96 151.092 162.641 221.429
2/06/96 43.750 8.500 10.375 7.000 8.625 6.500 16.500 11.500 2/06/96 152.838 161.084 219.048
2/07/96 44.750 8.438 10.375 6.875 8.563 5.750 15.625 10.688 2/07/96 156.332 159.920 203.571
2/08/96 44.188 8.500 10.234 6.875 8.536 5.875 14.625 10.250 2/08/96 154.369 159.429 195.238
2/09/96 47.125 8.375 9.875 7.125 8.458 5.625 14.625 10.125 2/09/96 164.629 157.972 192.857
2/12/96 46.750 8.000 9.750 7.000 8.250 6.000 16.375 11.188 2/12/96 163.319 154.081 213.095
2/13/96 47.125 7.750 9.875 6.375 8.000 5.750 16.000 10.875 2/13/96 164.629 149.412 207.143
2/14/96 47.000 7.625 9.875 6.375 7.958 5.750 15.500 10.625 2/14/96 164.192 148.634 202.381
2/15/96 46.000 7.750 10.125 6.188 8.021 5.875 15.875 10.875 2/15/96 160.699 149.804 207.143
2/16/96 48.875 7.750 10.000 6.750 8.167 5.750 15.750 10.750 2/16/96 170.742 152.524 204.762
2/20/96 49.250 7.625 9.375 6.000 7.667 6.000 15.875 10.938 2/20/96 172.052 143.186 208.333
2/21/96 50.750 7.750 9.000 5.875 7.542 6.125 16.375 11.250 2/21/96 177.293 140.852 214.286
</TABLE>
<PAGE> 58
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/22/96 51.063 7.625 9.188 5.750 7.521 6.375 16.250 11.313 2/22/96 178.386 140.466 215.476
2/23/96 51.500 7.125 9.250 5.750 7.375 6.125 16.500 11.313 2/23/96 179.913 137.739 215.476
2/26/96 52.000 6.875 8.625 5.750 7.083 6.000 16.000 11.000 2/26/96 181.659 132.292 209.524
2/27/96 51.125 6.875 9.250 5.500 7.208 5.625 16.500 11.063 2/27/96 178.603 134.626 210.714
2/28/96 51.000 6.625 9.000 5.625 7.083 5.875 17.125 11.500 2/28/96 178.166 132.292 219.048
2/29/96 51.000 6.750 8.625 5.250 6.875 5.625 17.250 11.438 2/29/96 178.166 128.401 217.857
3/01/96 51.000 6.625 8.625 5.000 6.750 5.875 16.250 11.063 3/01/96 178.166 126.066 210.714
3/04/96 51.625 6.688 8.125 5.500 6.771 6.000 15.875 10.938 3/04/96 180.349 126.458 208.333
3/05/96 51.500 7.125 7.938 5.563 6.875 6.000 16.500 11.250 3/05/96 179.913 128.407 214.286
3/06/96 51.500 7.500 8.250 5.563 7.104 6.000 16.000 11.000 3/06/96 179.913 132.684 209.524
3/07/96 51.625 7.375 8.250 5.500 7.042 5.750 16.000 10.875 3/07/96 180.349 131.513 207.143
3/08/96 50.000 6.375 8.125 4.875 6.458 5.750 15.016 10.383 3/08/96 174.672 120.619 197.771
3/11/96 50.000 6.875 8.500 4.625 6.667 5.750 15.000 10.375 3/11/96 174.672 124.510 197.619
3/12/96 49.625 6.563 8.250 4.375 6.396 6.125 14.375 10.250 3/12/96 173.362 119.455 195.238
3/13/96 49.250 6.500 8.250 5.375 6.708 6.500 14.125 10.313 3/13/96 172.052 125.288 196.429
3/14/96 50.500 6.875 8.625 5.125 6.875 6.625 14.500 10.563 3/14/96 176.419 128.401 201.190
3/15/96 50.625 6.625 8.625 5.250 6.833 6.500 14.375 10.438 3/15/96 176.856 127.622 198.810
3/18/96 50.500 6.375 8.500 5.188 6.688 6.688 14.750 10.719 3/18/96 176.419 124.902 204.171
3/19/96 50.625 6.250 8.500 5.188 6.646 6.750 14.500 10.625 3/19/96 176.856 124.124 202.381
3/20/96 50.625 6.250 7.750 5.000 6.333 6.625 15.500 11.063 3/20/96 176.856 118.284 210.714
3/21/96 50.813 6.000 7.750 5.000 6.250 6.875 15.250 11.063 3/21/96 177.513 116.728 210.714
3/22/96 51.313 6.375 7.750 5.063 6.396 7.125 14.734 10.930 3/22/96 179.259 119.455 208.181
3/25/96 53.000 6.250 7.750 5.063 6.354 6.750 14.250 10.500 3/25/96 185.153 118.676 200.000
3/26/96 51.750 6.125 7.625 5.000 6.250 6.500 14.125 10.313 3/26/96 180.786 116.728 196.429
3/27/96 52.125 6.250 7.625 5.125 6.333 6.625 13.875 10.250 3/27/96 182.096 118.284 195.238
3/28/96 51.750 6.000 7.375 5.063 6.146 6.625 14.063 10.344 3/28/96 180.786 114.786 197.029
3/29/96 52.500 6.000 7.625 5.125 6.250 6.125 14.500 10.313 3/29/96 183.406 116.728 196.429
4/01/96 52.250 6.125 7.375 5.125 6.208 6.625 14.750 10.688 4/01/96 182.533 115.950 203.571
4/02/96 52.500 6.125 7.813 5.000 6.313 6.375 14.250 10.313 4/02/96 183.406 117.898 196.429
4/03/96 52.125 6.000 7.625 5.125 6.250 6.625 13.875 10.250 4/03/96 182.096 116.728 195.238
4/04/96 52.000 6.000 8.125 5.000 6.375 6.438 14.000 10.219 4/04/96 181.659 119.062 194.648
4/08/96 52.250 5.625 8.125 5.125 6.292 6.375 14.000 10.188 4/08/96 182.533 117.506 194.048
</TABLE>
<PAGE> 59
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4/09/96 52.000 5.625 8.250 5.063 6.313 6.750 14.625 10.688 4/09/96 181.659 117.898 203.571
4/10/96 52.000 5.625 8.875 5.063 6.521 6.625 13.750 10.188 4/10/96 181.659 121.789 194.048
4/11/96 51.250 5.625 8.375 5.063 6.354 6.750 13.125 9.938 4/11/96 179.039 118.676 189.286
4/12/96 52.000 5.375 9.000 5.125 6.500 6.750 13.750 10.250 4/12/96 181.659 121.397 195.238
4/15/96 51.250 5.375 8.625 5.063 6.354 6.625 13.375 10.000 4/15/96 179.039 118.676 190.476
4/16/96 51.250 5.625 9.000 5.063 6.563 6.625 13.500 10.063 4/16/96 179.039 122.567 191.667
4/17/96 51.625 5.875 9.000 5.125 6.667 8.125 13.625 10.875 4/17/96 180.349 124.510 207.143
4/18/96 51.375 5.625 9.125 5.250 6.667 7.625 15.000 11.313 4/18/96 179.476 124.510 215.476
4/19/96 51.250 6.250 10.000 5.500 7.250 7.750 15.375 11.563 4/19/96 179.039 135.404 220.238
4/22/96 51.625 6.000 9.750 5.500 7.083 7.875 15.125 11.500 4/22/96 180.349 132.292 219.048
4/23/96 52.000 6.250 9.750 5.625 7.208 7.750 16.375 12.063 4/23/96 181.659 134.626 229.762
4/24/96 51.625 5.875 9.750 6.125 7.250 7.875 16.500 12.188 4/24/96 180.349 135.404 232.143
4/25/96 52.000 6.125 9.500 5.875 7.167 8.250 16.000 12.125 4/25/96 181.659 133.848 230.952
4/26/96 52.500 6.250 9.250 6.125 7.208 8.375 15.750 12.063 4/26/96 183.406 134.626 229.762
4/29/96 52.500 5.875 8.750 5.938 6.854 9.313 15.375 12.344 4/29/96 183.406 128.015 235.124
4/30/96 52.250 5.938 9.000 6.000 6.979 8.500 15.063 11.782 4/30/96 182.533 130.349 224.410
5/01/96 52.250 6.250 9.750 6.000 7.333 9.250 15.250 12.250 5/01/96 182.533 136.961 233.333
5/02/96 51.750 6.500 9.688 5.750 7.313 9.000 16.125 12.563 5/02/96 180.786 136.575 239.286
5/03/96 51.250 6.375 9.750 5.875 7.333 9.000 15.875 12.438 5/03/96 179.039 136.961 236.905
5/06/96 51.750 6.500 9.250 5.875 7.208 9.000 17.375 13.188 5/06/96 180.786 134.626 251.190
5/07/96 51.250 6.188 9.000 5.625 6.938 8.500 17.500 13.000 5/07/96 179.039 129.571 247.619
5/08/96 51.250 6.125 9.000 5.500 6.875 8.625 17.250 12.938 5/08/96 179.039 128.401 246.429
5/09/96 51.750 6.375 9.125 5.500 7.000 8.750 18.375 13.563 5/09/96 180.786 130.735 258.333
5/10/96 51.000 6.875 9.750 5.750 7.458 8.375 19.125 13.750 5/10/96 178.166 139.295 261.905
5/13/96 50.750 7.250 9.625 5.875 7.583 8.750 20.250 14.500 5/13/96 177.293 141.630 276.190
5/14/96 51.250 6.875 9.625 5.875 7.458 9.000 19.000 14.000 5/14/96 179.039 139.295 266.667
5/15/96 50.750 6.625 9.000 5.750 7.125 8.500 19.625 14.063 5/15/96 177.293 133.070 267.857
5/16/96 50.750 6.750 8.625 5.500 6.958 8.750 20.250 14.500 5/16/96 177.293 129.957 276.190
5/17/96 51.500 6.750 9.250 5.500 7.167 8.750 20.000 14.375 5/17/96 179.913 133.848 273.810
5/20/96 51.125 6.625 9.375 5.625 7.208 8.625 20.125 14.375 5/20/96 178.603 134.626 273.810
5/21/96 51.250 6.500 9.000 5.500 7.000 8.500 19.750 14.125 5/21/96 179.039 130.735 269.048
5/22/96 51.000 6.375 9.375 5.750 7.167 8.375 19.875 14.125 5/22/96 178.166 133.848 269.048
</TABLE>
<PAGE> 60
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/23/96 50.500 6.500 9.125 5.750 7.125 8.250 19.875 14.063 5/23/96 176.419 133.070 267.857
5/24/96 51.000 6.313 9.375 5.750 7.146 8.375 18.813 13.594 5/24/96 178.166 133.462 258.933
5/28/96 50.500 6.125 8.750 5.500 6.792 8.125 18.750 13.438 5/28/96 176.419 126.844 255.952
5/29/96 50.875 6.250 9.000 5.500 6.917 7.875 18.375 13.125 5/29/96 177.729 129.179 250.000
5/30/96 50.875 6.313 8.875 5.500 6.896 7.750 18.875 13.313 5/30/96 177.729 128.793 253.571
5/31/96 50.375 6.375 8.688 5.500 6.854 7.750 19.500 13.625 5/31/96 175.983 128.015 259.524
6/03/96 50.250 6.625 8.750 5.500 6.958 8.375 19.625 14.000 6/03/96 175.546 129.957 266.667
6/04/96 50.625 6.438 8.750 5.625 6.938 8.625 19.625 14.125 6/04/96 176.856 129.571 269.048
6/05/96 50.625 6.625 8.875 5.625 7.042 8.625 20.125 14.375 6/05/96 176.856 131.513 273.810
6/06/96 50.250 6.438 8.875 5.750 7.021 9.125 20.250 14.688 6/06/96 175.546 131.127 279.762
6/07/96 50.250 6.250 8.875 5.750 6.958 9.000 19.750 14.375 6/07/96 175.546 129.957 273.810
6/10/96 50.625 6.250 9.125 5.750 7.042 9.125 20.625 14.875 6/10/96 176.856 131.513 283.333
6/11/96 50.250 6.250 8.875 5.750 6.958 9.000 21.250 15.125 6/11/96 175.546 129.957 288.095
6/12/96 50.625 6.000 9.188 6.000 7.063 8.500 20.500 14.500 6/12/96 176.856 131.906 276.190
6/13/96 50.250 5.813 9.000 5.875 6.896 8.250 20.500 14.375 6/13/96 175.546 128.793 273.810
6/14/96 50.625 5.750 9.000 5.625 6.792 8.500 19.000 13.750 6/14/96 176.856 126.844 261.905
6/17/96 50.250 5.625 9.000 5.375 6.667 8.875 18.250 13.563 6/17/96 175.546 124.510 258.333
6/18/96 50.250 5.500 8.750 5.000 6.417 8.375 17.875 13.125 6/18/96 175.546 119.841 250.000
6/19/96 50.250 5.500 8.500 4.938 6.313 7.750 17.750 12.750 6/19/96 175.546 117.898 242.857
6/20/96 50.250 5.625 7.750 4.063 5.813 6.938 17.500 12.219 6/20/96 175.546 108.560 232.743
6/21/96 51.000 5.688 8.000 4.438 6.042 7.500 17.375 12.438 6/21/96 178.166 112.843 236.905
6/24/96 46.250 5.875 8.125 4.625 6.208 7.250 16.375 11.813 6/24/96 161.572 115.950 225.000
6/25/96 43.250 5.625 7.875 4.500 6.000 7.375 16.375 11.875 6/25/96 151.092 112.059 226.190
6/26/96 42.750 5.750 7.500 4.375 5.875 6.875 16.125 11.500 6/26/96 149.345 109.724 219.048
6/27/96 43.500 5.625 7.625 4.250 5.833 7.250 15.875 11.563 6/27/96 151.965 108.946 220.238
6/28/96 44.000 5.625 7.625 4.750 6.000 7.125 16.000 11.563 6/28/96 153.712 112.059 220.238
7/01/96 43.750 5.625 8.000 4.625 6.083 7.000 16.313 11.657 7/01/96 152.838 113.615 222.029
7/02/96 44.000 5.625 7.750 4.750 6.042 6.500 16.250 11.375 7/02/96 153.712 112.837 216.667
7/03/96 44.000 5.625 7.938 4.750 6.104 6.250 15.688 10.969 7/03/96 153.712 114.007 208.933
7/05/96 44.000 5.625 8.000 4.750 6.125 6.125 15.375 10.750 7/05/96 153.712 114.393 204.762
7/08/96 43.250 5.125 7.750 4.625 5.833 6.000 15.500 10.750 7/08/96 151.092 108.946 204.762
7/09/96 44.000 5.250 7.625 4.625 5.833 6.000 15.875 10.938 7/09/96 153.712 108.946 208.333
</TABLE>
<PAGE> 61
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/10/96 44.250 5.250 7.000 4.375 5.542 5.750 14.875 10.313 7/10/96 154.585 103.499 196.429
7/11/96 43.250 5.125 6.750 4.250 5.375 5.375 14.625 10.000 7/11/96 151.092 100.386 190.476
7/12/96 43.250 4.625 6.250 4.500 5.125 5.250 14.500 9.875 7/12/96 151.092 95.717 188.095
7/15/96 43.000 3.875 6.500 4.125 4.833 4.625 12.125 8.375 7/15/96 150.218 90.270 159.524
7/16/96 43.500 4.000 6.750 3.938 4.896 4.625 11.125 7.875 7/16/96 151.965 91.440 150.000
7/17/96 43.000 4.625 6.875 4.125 5.208 4.813 12.000 8.407 7/17/96 150.218 97.273 160.124
7/18/96 43.000 4.500 7.375 4.250 5.375 5.000 13.375 9.188 7/18/96 150.218 100.386 175.000
7/19/96 43.500 4.500 6.625 4.125 5.083 4.875 13.000 8.938 7/19/96 151.965 94.939 170.238
7/22/96 43.500 4.188 6.625 4.000 4.938 4.500 12.750 8.625 7/22/96 151.965 92.218 164.286
7/23/96 43.500 3.875 6.625 4.125 4.875 4.188 11.875 8.032 7/23/96 151.965 91.048 152.981
7/24/96 43.250 3.875 6.875 3.750 4.833 4.375 11.000 7.688 7/24/96 151.092 90.270 146.429
7/25/96 43.250 3.625 6.750 3.875 4.750 4.750 11.875 8.313 7/25/96 151.092 88.713 158.333
7/26/96 43.625 4.125 6.625 3.875 4.875 4.875 12.750 8.813 7/26/96 152.402 91.048 167.857
7/29/96 44.000 4.250 6.375 3.750 4.792 4.938 12.500 8.719 7/29/96 153.712 89.491 166.076
7/30/96 43.625 4.000 6.750 3.750 4.833 4.750 12.500 8.625 7/30/96 152.402 90.270 164.286
7/31/96 43.625 4.000 6.500 3.750 4.750 4.875 13.875 9.375 7/31/96 152.402 88.713 178.571
8/01/96 44.500 4.000 6.000 3.750 4.583 4.750 14.000 9.375 8/01/96 155.459 85.600 178.571
8/02/96 43.750 3.875 6.875 3.875 4.875 4.938 14.750 9.844 8/02/96 152.838 91.048 187.505
8/05/96 44.500 3.875 6.875 3.813 4.854 4.875 14.375 9.625 8/05/96 155.459 90.662 183.333
8/06/96 43.875 3.750 6.500 3.750 4.667 4.750 14.500 9.625 8/06/96 153.275 87.157 183.333
8/07/96 44.125 3.875 6.625 3.875 4.792 5.313 14.375 9.844 8/07/96 154.148 89.491 187.505
8/08/96 44.125 3.875 6.875 3.813 4.854 5.500 14.125 9.813 8/08/96 154.148 90.662 186.905
8/09/96 43.750 3.750 6.875 3.750 4.792 5.250 14.000 9.625 8/09/96 152.838 89.491 183.333
8/12/96 44.125 3.750 6.625 3.750 4.708 5.500 13.750 9.625 8/12/96 154.148 87.935 183.333
8/13/96 44.250 3.500 7.125 3.750 4.792 5.375 13.625 9.500 8/13/96 154.585 89.491 180.952
8/14/96 44.125 3.750 7.000 3.875 4.875 5.125 13.750 9.438 8/14/96 154.148 91.048 179.762
8/15/96 44.125 3.813 6.875 4.000 4.896 5.188 13.625 9.407 8/15/96 154.148 91.440 179.171
8/16/96 44.125 3.875 7.125 3.750 4.917 5.000 13.750 9.375 8/16/96 154.148 91.826 178.571
8/19/96 44.125 3.875 7.188 3.750 4.938 4.938 13.500 9.219 8/19/96 154.148 92.218 175.600
8/20/96 44.125 3.813 7.500 3.625 4.979 5.000 13.125 9.063 8/20/96 154.148 92.996 172.619
8/21/96 43.750 3.750 7.375 3.375 4.833 5.000 12.500 8.750 8/21/96 152.838 90.270 166.667
8/22/96 44.500 4.000 7.375 3.125 4.833 4.750 12.750 8.750 8/22/96 155.459 90.270 166.667
</TABLE>
<PAGE> 62
FACTSET SECURITY PRICE HISTORY REPORT
- ----------------------------------------
DATA FOR GRAPH ON PAGE 29
- ----------------------------------------
<TABLE>
<CAPTION>
Tier 2a Tier 1 Index
-------------------------------- ------------------------ ---------------------------
DATE NIIUF GMED CEGE TGEN Average SOMA VICL Average Date NIIUF Tier 2a Tier 1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/23/96 44.875 4.000 7.250 3.313 4.854 4.813 12.625 8.719 8/23/96 156.769 90.662 166.076
8/26/96 44.500 3.750 7.375 3.500 4.875 4.688 12.250 8.469 8/26/96 155.459 91.048 161.314
8/27/96 44.000 3.875 7.500 3.625 5.000 4.625 12.125 8.375 8/27/96 153.712 93.382 159.524
8/28/96 44.000 3.906 7.500 3.625 5.010 4.625 12.000 8.313 8/28/96 153.712 93.575 158.333
8/29/96 44.375 4.250 6.875 3.500 4.875 4.656 13.375 9.016 8/29/96 155.022 91.048 171.724
8/30/96 44.750 4.500 6.750 3.375 4.875 4.813 13.250 9.032 8/30/96 156.332 91.048 172.029
9/03/96 44.063 4.563 6.875 3.125 4.854 4.625 13.250 8.938 9/03/96 153.932 90.662 170.238
9/04/96 44.063 4.625 6.875 3.313 4.938 4.500 13.000 8.750 9/04/96 153.932 92.218 166.667
9/05/96 44.375 4.500 6.875 3.250 4.875 4.688 12.250 8.469 9/05/96 155.022 91.048 161.314
9/06/96 44.750 4.500 6.500 3.188 4.729 4.625 12.750 8.688 9/06/96 156.332 88.327 165.476
9/09/96 44.750 4.625 6.750 3.500 4.958 4.625 14.125 9.375 9/09/96 156.332 92.604 178.571
9/10/96 44.500 5.125 6.875 4.125 5.375 4.625 13.875 9.250 9/10/96 155.459 100.386 176.190
9/11/96 44.5 5.125 6.875 4.250 5.417 4.813 13.625 9.219 9/11/96 155.459 101.164 175.600
9/12/96 44.5 5.125 6.875 4.625 5.542 4.875 13.625 9.250 9/12/96 155.459 103.499 176.190
9/13/96 44.5 5 6.875 4.25 5.375 4.9375 14.25 9.594 9/13/96 155.459 100.386 182.738
</TABLE>
<PAGE> 63
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY OF TRADING STATISTICS OF COMPARABLE EARLY-STAGE
BIOPHARMACEUTICAL COMPANIES
VALUATION PARAMETERS:
- ---------------------
- - Tier 1 includes Somatix and Vical
- - Tier 2a includes Avigen, Cell Genesys, GeneMedicine, Targeted Genetics
- - Tier 2b includes Immusol, Introgen and Transkaryotic Therapies, all
currently in registration for IPOs
- - Technology Value = Market Capitalization - Cash
PRELIMINARY IMPLIED MEAN TECHNOLOGY VALUE (09/13/96):
- -----------------------------------------------------
<TABLE>
<CAPTION>
TECHNOLOGY VALUE ($MM)
--------------------------------------
HIGH LOW MEAN
------ ------ ------
<S> <C> <C> <C>
Tier 1 $169.3 $104.7 $137.0
Tier 2a $ 57.5 $ 28.4 $ 38.5
Tier 2b $168.5 $115.4 $144.7
</TABLE>
<PAGE> 64
E. VALUATION PARAMETERS FOR PRECEDENT ACQUISITIONS
- -------------------------------------------------------------------------------
<PAGE> 65
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY OF SELECTED SWORDS ACQUISITIONS: OFFER TERMS ANALYSIS
<TABLE>
<CAPTION>
UNIT
SWORDS/SPONSOR COMPANY OFFER DATE COMPOSITION
- ---------------------- ---------- ------------------------------------------------
<S> <C> <C>
PerSeptive Tech. II / 12/21/93 One Callable Common Share of PerSeptive Tech. II
PerSeptive Bio (a) One Class E Warrant to Purchase PerSeptive Bio
Advanced Therapeutic 07/14/93 One Common Share of Advanced Therapeutic Systems
Systems/Elan One Warrant to Purchase one ADS of Elan
CytoRad/Cytogen (a) 02/18/92 One Common Share of CytoRad
One Warrant to Purchase Cytogen
Tocor II/Centocor (a) 01/21/92 One Callable Common Share of Tocor II
One Series T Warrant to Purchase Centocor
One Callable Warrant to Purchase Centocor
Aramed/Gensia 11/27/91 One Callable Common Share of Aramed
Pharmaceuticals (a) One Warrant to Purchase Gensia
SciGenics/Genetics 05/23/91 One Callable Common Share of SciGenics
Institute (a) One Warrant to Purchase Genetics Institute
Neozyme/Genzyme (a) 10/26/90 One Callable Common Share of Neozyme
One Warrant to Purchase Genzyme
Drug Research Corp./Elan 10/17/90 One Callable Share (ADR) of DRC
One Warrant to Purchase Elan
Receptech/Immunex 11/17/89 One Callable Common Share of Receptech
One Warrant to Purchase Immunex
Tocor/Centocor 07/11/89 One Callable Common Share of Tocor
One Warrant to Purchase Centocor
Bio-Electro Systems/Alza 11/21/88 One Common Share of BioElectro
One Warrant to Purchase Alza
- -------------------------------------------------------------------------------
Mean (all companies)
- -------------------------------------------------------------------------------
</TABLE>
Notes:
- ------
(a) Company negotiated buyback terms rather than exercising its purchase option.
<TABLE>
<CAPTION>
OFFER INITIAL
SWORDS/SPONSOR COMPANY PRICE IRR
- ---------------------- ---------- -------
<S> <S> <C>
PerSeptive Tech. II / $22.00 24%
PerSeptive Bio (a)
Advanced Therapeutic $20.00 20%
Systems/Elan
CytoRad/Cytogen (a) $10.00 25%
Tocor II/Centocor (a) $40.00 21%
Aramed/Gensia $20.00 26%
Pharmaceuticals (a)
SciGenics/Genetics $22.00 23%
Institute (a)
Neozyme/Genzyme (a) $23.00 26%
Drug Research Corp./Elan $11.00 22%
Receptech/Immunex $12.00 27%
Tocor/Centocor $12.00 26%
Bio-Electro Systems/Alza $11.00 40%
- ---------------------------------------------------
Mean (all companies) 26%
- ---------------------------------------------------
</TABLE>
<PAGE> 66
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY OF SELECTED SWORDS ACQUISITIONS: PREMIUMS PAID ANALYSIS
<TABLE>
<CAPTION>
SWORDS COMPANY UNIT PRICE (a)
----------------------------- STOCK/UNIT (b)
BUYBACK ANNUAL PREMIUM PAID PREMIUM
ANNOUNCEMENT COMPOUNDED TO MARKET TO MKT.
SWORDS / SPONSOR COMPANY DATE RETURN 28 DAYS PRIOR 28 DAYS PRIOR
- ----------------------------- ------------ -------- ------------- --------------
<S> <C> <C> <C> <C>
PerSeptive Tech. II/PerSeptive Bio (c) 11/02/95 (28.5%) 34.3% 21.4%
Advanced Therapeutic Systems/Elan 9/10/96 20.4% 5.9% 1.5%
CytoRad/Cytogen (c) 07/29/94 (10.4%) 135.6% 143.8%
Tocor II/Centocor (c) 12/10/93 0.0% 77.8% 77.8%
Aramed/Gensia Pharmaceuticals 06/16/95 (13.7%) 35.5% 35.9%
SciGenics/ Genetics Institute (c) 06/22/95 (2.0%) (3.6%) 2.8%
Neozyme/Genzyme (c) 12/10/92 26.4% 40.2% 40.2%
Drug Research Corp./Elan 05/04/93 28.9% 18.3% 18.3%
Receptech/Immunex 12/15/92 28.5% 8.3% 8.3%
Tocor/Centocor 06/20/91 42.9% N/A N/A
Bio-Electro Systems/Alza 11/12/91 28.1% 7.0% 7.0%
- ------------------------------------------------------------------------------------------------------
| Mean (all companies) 11.0% 35.9% 35.7% |
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
| Mean (companies which negotiated buyback terms) -4.7% 53.3% 53.6% |
- ------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
- ------
(a) Calculations include the value of any warrants that have separated.
(b) Represents the premium paid to the unit price for companies whose warrants
did not separate. Represents the premium paid to the stock price for
companies whose warrants and stock traded separately at buyback time.
(c) Company negotiated buyback terms rather than exercising its purchase
option.
<PAGE> 67
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SELECTED PRECEDENT ACQUISITIONS OF NON-SWORDS, EARLY-STAGE
BIOTECHNOLOGY COMPANIES
<TABLE>
<CAPTION>
ANNC.
DATE ACQUIROR TARGET
- ---------- -------------------------- ----------------------------
<S> <C> <C>
4/17/96 Targeted Genetics RGene
12/12/95 Schering-Plough Corp. Canji
10/18/95 Rhone-Poulenc Rorer Inc. Applied Immune Sciences Inc.
7/10/95 Sandoz AG Genetic Therapy Inc.
6/16/95 Cytogen Corp. Cellcor Inc.
3/20/95 Chiron Corp. Viagene Inc.
2/7/95 Ligand Pharmaceutical Inc. Glycomed Inc.
</TABLE>
<PAGE> 68
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY OF SELECTED PRECEDENT ACQUISITIONS OF NON-SWORDS, EARLY-STAGE
BIOTECHNOLOGY COMPANIES
VALUATION PARAMETERS:
- ---------------------
- - Equity consideration for acquisitions less than 100% adjusted to reflect a
100% acquisition.
- - Total R & D reflects all R & D expenses since inception. When applicable,
includes purchase of in-process R & D.
- - Technology Value = (Stock price one month prior * shares
outstanding) - current cash + debt
PRELIMINARY IMPLIED VALUATION MULTIPLES:
- ----------------------------------------
<TABLE>
<CAPTION>
PREMIUM PAID TO MARKET
-----------------------
TOTAL TECHNOLOGY 1 DAY 1 MONTH
R & D VALUE BEFORE BEFORE
----- ---------- ------ -------
<S> <C> <C> <C> <C>
Mean 2.6x 2.3x 69.4% 56.3%
High 7.4x 3.1x 149.4% 95.3%
Low 0.7x 1.5x 33.0% 35.3%
</TABLE>
<PAGE> 69
F. VALUATION PARAMETERS FOR DISCOUNTED CASH FLOW
- ---------------------------------------------------------------------------
<PAGE> 70
PROJECT BLUE JEANS
- ------------------------------------------------------------------------------
SUMMARY OF MANAGEMENT ASSUMPTIONS FOR DCF SENSITIVITY SCENARIOS
- - THREE CASES DEVELOPED BY NEOZYME MANAGEMENT.
- - NO VALUE ASSIGNED TO DISCONTINUED OR SUSPENDED RESEARCH, E.G. HYPERGAM OR
PROTEIN REPLACEMENT THERAPY.
- - UPSIDE CASE:
- Patient growth increases from 1.0% to 3.0% in 2001 and stabilizes at
that level,
- Market penetration commences in 2002 and peaks at 35%.
- ROW revenues per patient per year are projected to be $20,000, the
same as in the United States.
- Assumes that Neozyme receives royalties from unidentified licensees.
- - BASE CASE:
- Patient growth increases from 1.0% to 3.0% in 2001 and stabilizes at
that level.
- Market penetration commences in 2003 and peaks at 35%.
- ROW revenues per patient per year are projected to be $18,000, 10%
lower than in the United States.
- Assumes no royalties received from unidentified licensees.
- - DOWNSIDE CASE:
- Patient growth increases from 1% to 2.5% in 2001 and stabilizes at
that level.
- Market penetration commences in 2004 and peaks at 25%.
- ROW revenues per patient per year are projected to be $18,000, 10%
lower than in the United States.
- Assumes no royalties received from unidentified licensees.
<PAGE> 71
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY COMMON STOCK DISCOUNTED CASH FLOW ANALYSIS
VALUATION PARAMETERS:
- - Discount rate range of 30.0% to 35.0%.
- - Exit multiple range of 8.0x to 10.0x EBIT.
- - Terminal year range of 2006 to 2008.
IMPLIED TECHNOLOGY VALUE: AGGREGATE ($MM)
- -----------------------------------------
<TABLE>
<CAPTION>
30.0% DISCOUNT RATE 32.5% DISCOUNT RATE 35.0% DISCOUNT RATE
------------------- ------------------- -------------------
10.0x 9.0x 8.0x 10.0x 9.0x 8.0x 10.0x 9.0x 8.0x
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UPSIDE CASE
2006 Terminal Yr $153.8 $137.6 $121.3 $121.9 $108.4 $95.0 $96.0 $84.9 $73.7
2007 Terminal Yr $135.6 $122.1 $108.6 $104.6 $93.7 $82.7 $80.0 $71.1 $62.2
2008 Terminal Yr $114.8 $104.1 $93.4 $86.1 $77.6 $69.0 $63.6 $56.8 $49.9
BASE CASE
2006 Terminal Yr $85.0 $73.2 $61.4 $64.9 $55.1 $45.3 $48.8 $40.7 $32.6
2007 Terminal Yr $84.6 $73.5 $62.4 $62.8 $53.8 $44.7 $45.6 $38.2 $30.9
2008 Terminal Yr $67.5 $58.7 $49.9 $47.5 $40.5 $33.5 $32.1 $26.5 $20.9
DOWNSIDE CASE
2006 Terminal Yr $61.4 $51.7 $42.0 $45.9 $37.9 $29.9 $33.6 $26.9 $20.9
2007 Terminal Yr $46.1 $38.5 $30.8 $32.1 $25.9 $19.7 $21.1 $16.1 $11.0
2008 Terminal Yr $34.1 $28.1 $22.0 $21.4 $16.6 $11.8 $11.7 $7.8 $4.0
</TABLE>
<PAGE> 72
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
SUMMARY COMMON STOCK DISCOUNTED CASH FLOW ANALYSIS
VALUATION PARAMETERS:
- ---------------------
- - Discount rate range of 30.0% to 35.0%.
- - Exit multiple range of 8.0x to 10.0x EBIT.
- - Terminal year range of 2006 to 2008.
IMPLIED TECNOLOGY VALUE: PER COMMON SHARE
- -----------------------------------------
<TABLE>
<CAPTION>
30.0% DISCOUNT RATE 32.5% DISCOUNT RATE 35.0% DISCOUNT RATE
------------------------ ---------------------- ----------------------
10.0x 9.0x 8.0x 10.0x 9.0x 8.0x 10.0x 9.0x 8.0x
------------------------ ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UPSIDE CASE
2006 Terminal Year $63.69 $56.96 $50.24 $50.46 $44.90 $39.34 $39.76 $35.15 $30.54
2007 Terminal Year $56.15 $50.56 $44.96 $43.33 $38.79 $34.26 $33.12 $29.43 $25.74
2008 Terminal Year $47.54 $43.11 $38.67 $35.65 $32.12 $28.59 $26.32 $23.50 $20.68
BASE CASE
2006 Terminal Year $35.19 $30.30 $25.41 $26.86 $22.82 $18.78 $20.19 $16.84 $13.48
2007 Terminal Year $35.03 $30.43 $25.83 $25.99 $22.26 $18.53 $18.88 $15.84 $12.80
2008 Terminal Year $27.95 $24.31 $20.66 $19.67 $16.77 $13.87 $13.28 $10.96 $8.64
DOWNSIDE CASE
2006 Terminal Year $25.41 $21.39 $17.38 $19.01 $15.70 $12.38 $13.91 $11.16 $8.41
2007 Terminal Year $19.10 $15.93 $12.76 $13.28 $10.72 $8.15 $8.75 $6.66 $4.57
2008 Terminal Year $14.11 $11.62 $9.12 $8.85 $6.86 $4.87 $4.83 $3.24 $1.65
</TABLE>
<PAGE> 73
G. NEOZYME UNIT SUMMARY VALUATION
- -------------------------------------------------------------------------------
<PAGE> 74
PROJECT BLUE JEANS
- ------------------------------------------------------------------------------
NEOZYME TOTAL SUMMARY VALUATION (A)
<TABLE>
<CAPTION>
VALUATION PARAMETER EQUITY VALUE ($MM) PER UNIT VALUE (B)
-------------------- -------------------- -------------------
NEOZYME
STATISTIC HIGH LOW MEAN HIGH LOW MEAN HIGH LOW MEAN
---------- ------ ----- ----- ------ ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Comparable Companies Trading Tech. Values (c)
---------------------------------------------
Tier 1 $205.8 $141.2 $173.5 $ 85.23 $ 58.46 $71.85
Tier 2a 94.0 64.9 75.0 38.91 26.89 31.06
Tier 2b 205.0 151.9 181.2 84.90 62.90 75.05
All Comparable Companies 205.8 64.9 132.3 85.23 26.89 54.79
2. Comparable SWORDS Acquisitions (d)
----------------------------------
Annual Compounded Return $35.00 26.4% -28.5% -4.7% $209.4 $ (7.2) $ 41.9 $ 86.71 $ (2.97) $17.35
Prem. Pd. to Mkt. 28 days
Prior (9/5/96 44.38 143.8% 2.8% 53.6% 261.2 110.1 164.6 108.16 45.60 68.17
3. Precedent Biotechnology Acquisitions
------------------------------------
Consideration/R&D
Since Inception (e) $ 36.6 7.4x 0.7x 2.6x $306.6 $ 61.2 $132.5 $126.94 $ 25.36 $54.85
Consideration/Tech. Value 71.0 3.1x 1.5x 2.3x 256.1 140.5 197.4 106.06 58.18 81.73
Prem. Pd. to Mkt. 1 Day
Prior (9/5/96) (f) $29.25 149.4% 33.0% 69.4% 212.7 130.5 156.2 88.06 54.03 64.66
Prem. Pd. to Mkt. 1 Month
Prior (9/5/96) (f) 29.25 95.3% 35.3% 56.3% 174.5 132.1 146.9 72.27 54.70 60.85
4. Discounted Cash Flow Analyses
-----------------------------
Upside Case $190.3 $ 86.4 $131.7 $ 78.81 $ 35.79 $54.52
Base Case 121.5 57.4 87.7 50.32 23.78 36.30
Downside Case 97.9 40.5 64.2 40.55 16.78 26.60
</TABLE>
Notes:
- ------
(a) Analysis includes the value of the Genzyme Callable Warrants, valued at
$15.12/Warrant as of 09/13/96.
(b) Per Unit values assume 2.4 million Units outstanding. Does not include
Series N Warrants.
(c) Assumes a cash balance of $0.0 million at the time of acquisition.
(d) Excludes those SWORDS bought back at the option exercise price. Annual
compounded return adjusted to reflect the Series N Warrants, valued at
$11.00 per share as of 09/13/96.
(e) Neozyme R&D excludes that spent on HyperGAM and CFTR protein replacement
therapy.
(f) Neozyme statistic excludes the value of the callable warrant; the callable
warrant value is added back for the equity and per unit valuations.
<PAGE> 75
H. WARRANT VALUATION METHODOLGY
- -------------------------------------------------------------------------------
<PAGE> 76
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
WARRANT VALUATION METHODOLOGY
- Maximum Theoretical Price defined under Black - Scholes model
- Inputs include:
- Stock Price: (2 * Genzyme Share Price) + (0.135 * Tissue
Repair Share)
- Exercise Price: 20 day trailing average of two Genzyme
shares and 0.135 Tissue Repair shares
- Exercise Date: December 31, 1998
- Risk Free Rate: November 1998 Treasury Strip rate of 6.32%
(continuous compounding)
- Volatility: based on historical 100 day volatility of two
Genzyme shares and 0.135 Tissue Repair shares
- Adjusted for warrant dilution
<PAGE> 77
PROJECT BLUE JEANS
- -------------------------------------------------------------------------------
GENZYME CALLABLE WARRANT THEORETICAL VALUATION
Stock Price (Twice Genzyme General Division + 0.135 Genzyme TR)
$46.50 Adjusted
------ --------
40.86% $12.61 $12.19
42.86% 13.12 Warrant 12.68
44.86% 13.63 Dilution 13.18
46.86% 14.14 Adjustment 13.67
48.86% 14.65 ---------- 14.16
Volatility 50.86% 15.15 x 96.6% = 14.64
52.86% 15.65 15.12
54.86% 16.15 15.60
56.86% 16.64 16.08
58.86% 17.13 16.56
60.86% 17.62 17.03
Assumptions:
Black-Scholes Option Valuation Model
Exercise Price: $50.01
Risk-Free Rate: 6.3% November '98 Strips (continuous)
Expiration Date: 12/31/98
Historical Blended Volatility of 52.86% 100 day
Genzyme General Division and TR: 66.73% 50 day
56.90% 30 day
Implied Volatility of April 1997 Call Options (As of 9/13/96)
Genzyme General Division: $22.50 47.49%
25.00 47.61%
30.00 50.80%
Genzyme TR Division: $ 5.00 49.25%
7.50 61.72%
10.00 61.00%
Warrant Dilution Adjustment = Genzyme Shares Outstanding Pre-exercise/
(Genzyme Shares Outstanding Pre-exercise +
Warrants Exercised)
Note: Assumes 49% exercise of callable warrants
<PAGE> 1
EXHIBIT (b)(3)
PROJECT HEDGEHOG
HAMBRECHT & QUIST LLC
SEPTEMBER 20, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION
1. PRINCIPAL TERMS OF THE OFFER
2. BACKGROUND INFORMATION ON NEOZYME II
- COMPANY OVERVIEW
- FINANCIALS
- TRADING HISTORY
- VOLUME ANALYSIS
- OWNERSHIP PROFILE
3. BACKGROUND INFORMATION ON GENZYME
- COMPANY OVERVIEW
- FINANCIALS
4. NEOZYME II VALUATION
- COMPARABLE COMPANIES ANALYSIS
- COMPARABLE TRANSACTIONS ANALYSIS
- DISCOUNTED CASH FLOW ANALYSIS
- WARRANT SUMMARY
<PAGE> 3
TABLE OF CONTENTS
SECTION
5. OFF-BALANCE SHEET COMPANIES ANALYSIS
- ORIGINAL TRANSACTIONS
- NEGOTIATED BUYBACKS
6. THE MERGER
- RATIONALE
- VALUATION SUMMARY
7. FORM OF FAIRNESS OPINION
<PAGE> 4
SECTION 1
PRINCIPAL TERMS OF THE OFFER
<PAGE> 5
PROJECT HEDGEHOG
PRINCIPAL TERMS OF THE OFFER
- - Genzyme Corporation ("Genzyme"), the sponsor company, has offered to
purchase 100% of the 2,415,000 outstanding Neozyme II units (the
"Units") that trade on NASDAQ under the symbol "NIIUF".
- - Each Unit consists of:
- one callable share of common stock (the "Shares") of Neozyme II
Corporation ("Neozyme II"), a British Virgin Islands
corporation;
- one Callable Warrant (the "Callable Warrant") to purchase
two shares of General Division Common Stock of Genzyme and
.135 shares of Tissue Repair Division Common Stock of Genzyme
("GTR").
- - Pursuant to the purchase agreement, Genzyme will launch a tender offer
(the "Offer") to purchase all of the outstanding Units at a price of
$45.00 per Unit. The Offer contains a minimum condition (the "Minimum
Condition") that at least a majority of Units be validly tendered and
accepted by Genzyme.
- - If the Minimum Condition is met but less than all of the outstanding
Units are tendered and accepted pursuant to the Offer, Genzyme will
effect a second step merger (the "Second Step Transaction") pursuant
to which Genzyme will acquire the remaining Neozyme II Shares at
$29.00 per share and merge Neozyme II into a newly created Genzyme
acquisition vehicle.
- - Non-tendering Unit holders will have dissenters' rights under BVI law.
<PAGE> 6
SECTION 2
BACKGROUND INFORMATION ON NEOZYME II
<PAGE> 7
PROJECT HEDGEHOG
NEOZYME II OVERVIEW
- - Neozyme II Corporation is an R&D financing vehicle sponsored by
Genzyme in March 1992.
- - In May 1992, Neozyme II sold a total of 2,415,000 callable shares of
common stock to the public as part of an offering of units, with each
unit consisting of the following:
(i) one Neozyme II callable Common Share (the "Shares");
(ii) one warrant (the "Series N Warrant") to purchase two
shares of General Division Common Stock of Genzyme and .135
shares of GTR; and
(iii) one Callable Warrant (the "Callable Warrant") to
purchase two shares of General Division Common Stock of
Genzyme and .135 shares of GTR.
- - Proceeds to Neozyme II as a result of the unit offering were $84.5
million.
- - The units consisting of (i) and (iii) above trade on NASDAQ under the
symbol "NIIUF" (closing price on 9/6/96 was $44.06 per share). The
Series N Warrants separated from the Neozyme II units on August 3, 1992
and trade under the symbol "GENZZ" (closing price on 9/19/96 was
$11.50 per warrant).
- - Neozyme II was formed to engage in research, development and clinical
testing of products ("Products") for the treatment of cystic fibrosis
(the "Field") by gene therapy or protein replacement therapy.
- - In August 1993, the Field was enlarged to include products to be
developed by Genzyme in collaboration with NABI Inc. ("NABI") in the
area of hyper immune anti-body based products to treat and prevent
pseudomonas infections in cystic fibrosis patients.
<PAGE> 8
PROJECT HEDGEHOG
STRUCTURE
- - Genzyme has licensed Neozyme II its technology for use in developing
Products within the Field.
- - Neozyme II has engaged Genzyme to perform research, development and
clinical testing of the Products.
- - Neozyme II has the exclusive right to commercialize any Products
developed within the Field.
- - All technology developed by Neozyme II that has application outside
the Field is licensed exclusively to Genzyme on a royalty free basis.
<PAGE> 9
PROJECT HEDGEHOG
OPTION AGREEMENT
- - All outstanding shares of Neozyme II stock are subject to a purchase
option agreement pursuant to which Genzyme has the right to purchase
all (but not less than all) of Neozyme II's shares at any time through
December 31, 1996, unless exercisability is accelerated upon exhaustion
of Neozyme II's available funds.
- - If the purchase option is exercised, the Callable Warrants will
terminate.
- - During 1996, Genzyme may purchase each Neozyme II share for escalating
prices up to $117.00 per share in December 1996 (compared to a current
market price per unit of $44.06). The purchase option exercise price
will be reduced by $2.83 per Share per month for each month prior to
December 1996 that Genzyme exercises its purchase option.
- - The purchase option exercise price may be paid in cash, shares of
Genzyme stock or in any combination thereof. Consideration paid in the
form of Genzyme stock must be registered under the Securities Act
of 1933.
- - In the event Genzyme fails to exercise its purchase option, the Callable
Warrant will detach from the Neozyme II unit and will be priced at a
20 day average of Genzyme General Division Common Stock preceding
exercisability.
<PAGE> 10
PROJECT HEDGEHOG
CF APPROACHES
Genzyme has dedicated resources to three principal therapeutic approaches to
treat cystic fibrosis:
- - CFTR Protein Replacement Therapy -- Delivery of CFTR to the lungs of
cystic fibrosis patients intended to replace the missing CFTR protein
in the membrane of cells of the lung lining.
- - HyperGAM + CF -- Immunoglobulin therapy intended to provide passive
immunity for cystic fibrosis patients who are unable to produce an
adequate antibody response to pseudomonas infections. These infections
are a major medical problem associated with cystic fibrosis and a
frequent cause of hospitalization, and in many cases, the immediate
cause of death of cystic fibrosis patients.
- - Gene Therapy -- Delivery of CFTR genes to the cells lining the lungs
in order to allow cystic fibrosis patients to produce their own supply
of functional CFTR protein.
<PAGE> 11
PROJECT HEDGEHOG
CF APPROACHES - PROTEIN REPLACEMENT THERAPY
- - Protein replacement therapy was originally envisioned as an extension
of Genzyme's existing technology that had been used successfully in the
development of a treatment for Gaucher's Disease.
- - In 1992, when Neozyme II was created and financed, Genzyme anticipated
that it would commence clinical testing of a protein replacement product
in 1994, with pivotal trials commencing in 1995 and a PLA for marketing
approval to be filed in 1996.
- - Although the protein replacement program continues to be "technically
feasible," it was suspended in the Fall of 1993 due to:
(i) the difficulty of efficiently and accurately embedding
the CFTR protein in the membrane of cells lining cystic
fibrosis patients' lungs;
(ii) the difficulty in producing sufficient quantities of CFTR
through transgenic protein production;
(iii) the relative progress of gene therapy versus protein
replacement therapy; and
(iv) the relative advantages of a successful gene therapy
approach which would produce a supply of CFTR from the insertion
of genes into the lungs with only periodic readministration
(e.g. several times per year) compared to a protein replacement
approach which would require regular (e.g. daily)
readministration of protein to be effective.
- - Since the Fall of 1993, few resources have been dedicated to the protein
replacement approach.
- - Since inception, Neozyme II has spent approximately $10 million on the
Protein Replacement Therapy program.
<PAGE> 12
PROJECT HEDGEHOG
CF APPROACHES - HYPERGAM + CF
- - In August 1993, Genzyme entered into an alliance with NABI to develop
an immunoglobulin anti-body based product to treat and prevent
pseudomonas infections in cystic fibrosis patients.
- - Under agreement with Genzyme, Neozyme II funded Genzyme's obligations
to NABI in exchange for Genzyme's exclusive rights to market
HyperGAM + CF on a worldwide basis.
- - In June 1996, after an interim analysis of a Phase II trial involving
175 patients showed no evidence of a reduction in the number of acute
pulmonary exacerbations in trial participants, Genzyme and NABI halted
the Phase II trial.
- - Since inception, Neozyme II has spent approximately $14 million on the
HyperGAM + CF program.
<PAGE> 13
PROJECT HEDGEHOG
CF APPROACHES - GENE THERAPY
- - Genzyme has researched the use of both viral and lipid vectors to
deliver the CFTR gene directly to the lungs of cystic fibrosis
patients.
- - Preliminary clinical testing of viral and lipid-based gene therapy
products have been underway and are expected to continue through
1996. No single lead candidate for viral or lipid delivery has been
identified and no pivotal clinical trial is expected to be commenced
within the next few years at the earliest.
- - Since inception, Neozyme II has spent approximately $55 million on the
Gene Therapy program.
<PAGE> 14
PROJECT HEDGEHOG
CF APPROACHES - GENE THERAPY -- VIRAL VECTORS -- ADENOVIRUS
- - The adenovirus ("AV") is a common cold virus that infects the lungs.
- - By disabling the AV genes that cause flu-like symptoms and replacing
them with the CFTR gene, the hope is that the virus will produce the
missing CFTR protein in treated patients.
- - Genzyme is currently conducting its third pilot clinical trial using
a third-generation AV vector (Ad2/CFTR-8). The current trial is a
lung safety trial testing the delivery of Ad2/CFTR-8 via bronchoscope in
twenty-three cystic fibrosis patients. A second arm of the same trial
will test Ad2/CFTR-8 delivered via aerosol.
- - So far, Genzyme has been unable in any of its pilot clinical trials to
overcome several substantial hurdles associated with AV vector delivery
of CFTR genes, including:
(i) an inflammatory response to the AV virus;
(ii) the patient's immune response (both general and antibody-
based) to AV (the presence of antibodies can reduce the
effectiveness of readministration);
(iii) the efficiency of gene transfer; and
(iv) the level and longevity of gene expression.
<PAGE> 15
PROJECT HEDGEHOG
CF APPROACHES - GENE THERAPY -- VIRAL VECTORS -- ADENOASSOCIATED VIRUS
- - Genzyme is in the very early preclinical stages of developing an
adenoassociated virus (AAV) vector as an alternative to AV.
- - The possible advantages of an AAV vector are that AAV is:
(i) highly specific to the lungs;
(ii) initiates no known disease process;
(iii) produces no known viral protein (and is therefore
considered less likely to produce an immune response); and
(iv) is incorporated into the host's genome (promising
longer activity).
- - Nevertheless, two significant obstacles have prevented an unambiguous
evaluation of AAV to date:
(i) the production of a sufficient quantity of AAV vector free
from contaminating helper virus at sufficiently high
concentrations to carry out animal experiments; and
(ii) the apparent low efficacy of AAV gene transfer in vivo.
<PAGE> 16
PROJECT HEDGEHOG
CF APPROACHES -- GENE THERAPY -- LIPID VECTORS
- -- Lipid delivery of the CFTR gene involves placement of the CFTR gene in a
lipid (fat) coating that may mediate entry into the cell.
- -- The principal advantages expected of lipid delivery include (i) the absence
of replication potential since lipids are non-viral and (ii) a smaller chance
of provoking an immune response; the principal disadvantages are expected to
be transient expression and lower efficiency of gene transfer.
- -- Genzyme has developed a proprietary lipid formulation, lipid 67, that in
animal studies yields expression levels comparable to viral vectors and 100
fold greater expression than commercially available lipids.
- -- To date, Genzyme has completed two pilot clinical trials with lipid vectors:
one single dose nasal application of lipid 67 in six healthy volunteers and
one single does nasal application in six cystic fibrosis patients.
- -- Genzyme currently has a single dose aerosol application of lipid 67 involving
18 healthy volunteers and has been seeking (so far unsuccessfully) permission
to begin the same trial in cystic fibrosis patients.
<PAGE> 17
PROJECT HEDGEHOG
CF APPROACHES -- CONCLUSIONS
- -- Genzyme's most advanced approach to cystic fibrosis has been gene therapy
using an adenovirus vector.
- -- This approach has encountered several significant obstacles that make the
development of a gene therapy product unlikely in the next few years.
Assuming it can overcome the significant technical obstacles required to
develop a product, Genzyme forecasts that commercialization could begin as
early as 2003.
- -- While gene therapy approaches using an adenoassociated virus or a lipid
vector hold promise, progress in these areas are in comparatively early
stages and a pivotal trial for a particular vector is not likely in the near
future.
- -- Genzyme's work in the areas of protein replacement and Hypergam + CF have
proved to be disappointments and development of these products have been
suspended.
<PAGE> 18
PROJECT HEDGEHOG
WARRANTS
<TABLE>
<CAPTION>
Warrant Exercise Price Exercisability
------- -------------- --------------
<S> <C> <C>
Series N Warrant $19.13 8/4/92 to 12/31/96
Callable Warrants 20 day average of 1/1/97 to 12/13/98
Genzyme General
Division stock preceding Callable Warrants
1/1/97 plus the terminate if
product of the 20 day purchase option
average of GTR preceding exercised
1/1/97 and 0.135
</TABLE>
<PAGE> 19
PROJECT HEDGEHOG
NEOZYME II FINANCIAL PROJECTIONS
CFGT PROFIT & LOSS STATEMENT -- MANAGEMENT CASE
($000s' Millions, Except Revenues Per Patient and Total Patients)
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Patients on Therapy -- -- -- -- -- -- -- 1,279 8,433 15,200
Revenues per US patient/yr $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Revenues Per Eur/ROW patient/yr $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000 $18,000
REVENUES $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 26 $ 165.0 $ 292.6
Cost of Goods Sold -- -- -- -- -- -- -- 6.4 42.2 76.0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
GROSS PROFIT $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 19.2 $ 122.8 $ 216.6
Depreciation -- -- -- 0.1 0.8 2.0 3.0 3.3 3.3 3.3
S, G & A -- -- -- -- -- -- 3.0 12.8 33.0 58.5
Development Expenses 18.3 15.0 15.0 15.0 15 15 10
Milestones Paid
Royalty Paid -- -- -- -- -- -- -- 2.3 13.2 23.4
Ongoing R & D -- -- -- -- -- -- -- 1.3 2.5 2.9
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL EXPENSES 18.3 15.0 15.0 15.1 15.8 17.0 16.0 19.6 51.9 88.1
Milestones Received
Royalties Received -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
PRE-TAX PROFIT (LOSS) $ (18.3) $ (15.0) $ (15.0) $ (15.1) $ (15.8) $ (17.0) $ (16.0) $ (0.4) $ 70.9 $ 128.5
Tax Provision -- -- -- -- -- -- -- -- (29.1) (52.7)
NOL Tax Benefit 8 6 6 6 6 7 7 0 -- --
============================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
NET INCOME (10.8) (8.9) (8.9) (8.9) (9.3) (10.0) (9.4) (0.3) 41.8 75.8
============================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(+) Amortization Tax Benefit 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(+) Depreciation -- -- -- 0.1 0.8 2.0 3.0 3.3 3.3 3.3
(-) Capital Expenditures -- -- -- 5.0 20.0 30.0 10.0 -- -- --
(-) Change in Working Capital $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 5.0 $ 27.7 $ 25.7
============================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
FREE CASH FLOW $ (10.8) $ (8.9) $ (8.9) $ (13.8) $ (28.5) $ (38.0) $ (16.4) $ (2.0) $ 17.4 $ 53.4
============================== ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 20
PROJECT HEDGEHOG
NEOZYME II FINANCIAL PROJECTIONS -- PROJECTIONS & ASSUMPTIONS
CFGT PROFIT & LOSS STATEMENT -- MANAGEMENT ASSUMPTIONS
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ADDRESSABLE PATIENTS
USA -- -- -- -- -- -- -- -- -- --
Rest of World & Europe -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL ADDRESSABLE PATIENTS -- -- -- -- -- -- -- -- -- --
Patient Growth 0.0% 1.0% 1.0% 1.0% 1.0% 3.0% 3.0% 3.0% 3.0% 3.0%
ELIGIBLE MARKET
USA 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0%
Rest of World & Europe 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0%
MARKET PENETRATION
USA 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.0% 25.0% 35.0%
Rest of World & Europe 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.0% 15.0%
PATIENTS ON THERAPY
USA -- -- -- -- -- -- -- 1,279 6,588 9,500
Rest of World & Europe -- -- -- -- -- -- -- -- 1,845 5,700
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL PATIENTS ON THERAPY -- -- -- -- -- -- -- 1,279 8,433 15,200
CFGT -- KEY ASSUMPTIONS
- ------------------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Revenue Growth NA NA NA NA NA NA NA NM 544.9% 77.4%
Cost of Goods Sold
($5000/patient/yr) 25.0% 25.6% 26.0%
Genzyme's Share of Development
Expense 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
S, G & A as a % of Revenue NA NA NA NA NA 0.0% 0.0% 50.0% 20.0% 20.0%
Ongoing R & D as a % of Revenue NA NA NA NA NA NA NA 5.0% 1.5% 1.0%
Royalties Paid NA NA NA NA NA NA NA 9.0% 8.0% 8.0%
Royalties Received 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Genzyme's Share of Pre-Tax
Profit (Loss) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Tax Rate 41.0% 41.0% 41.0% 41.0% 41.0% 41.0% 41.0% 41.0% 41.0% 41.0%
A/R DOH 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0
Inventory Terms 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4
A/P DOH 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0
Genzyme Dev. Expense Mark-up N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Clinical Trials Schedule
- ------------------------
Phase I - Q1 95 - Q4 97 Phase III - Q2 00 - Q4 01
Phase II - Q2 98 - Q4 99 Filing - Q2 02
Launch - Q2 2003
</TABLE>
<PAGE> 21
PROJECT HEDGEHOG
NEOZYME II STOCK AND VOLUME HISTORY - 1 YEAR
[MOUNTAIN GRAPH AND BAR GRAPH PLOTTING STOCK AND VOLUME HISTORY OF NEOZYME II
FOR THE ONE YEAR PERIOD 9/22/95 TO 9/4/96]
<PAGE> 22
PROJECT HEDGEHOG
RELATIVE PRICE PERFORMANCE
NEOZYME II AND GENZYME VS. THE BIOTECH INDEX
[MOUNTAIN GRAPH PLOTTING STOCK RELATIVE PRICE PERFORMANCE OF NEOZYME II
AND GENZYME VS. THE BIOTECH INDEX]
<PAGE> 23
PROJECT HEDGEHOG
VOLUME TRADED ANALYSIS
<TABLE>
<CAPTION>
NEOZYME II
AUGUST 1992 SERIES N WARRANT SEPARATION DATE TO PRESENT
1996 1995 1994
------------------------------- ------------------------------- --------------------------------
% IN % IN % IN % IN % IN % IN
STOCK PRICE RANGE DAYS RANGE VOLUME RANGE DAYS RANGE VOLUME RANGE DAYS RANGE VOLUME RANGE
- ----------------- ---- ----- ------- ----- ---- ----- ------- ----- ---- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
52.00 - 54.00 11 6.4 145,400 10.3 0 0.0 0 0.0 0 0.0 0 0.0
50.00 - 52.00 71 41.3 296,300 20.9 0 0.0 0 0.0 0 0.0 0 0.0
48.00 - 50.00 6 3.5 103,100 7.3 0 0.0 0 0.0 0 0.0 0 0.0
46.00 - 48.00 7 4.1 211,700 14.9 26 7.9 109,700 6.7 0 0.0 0 0.0
44.00 - 46.00 25 14.5 298,900 21.1 26 10.3 62,300 3.8 0 0.0 0 0.0
42.00 - 44.00 36 20.9 164,800 11.6 45 17.9 103,100 6.3 0 0.0 0 0.0
40.00 - 42.00 5 2.9 80,500 5.7 10 4.0 114,100 6.9 0 0.0 0 0.0
38.00 - 40.00 11 6.4 117,000 8.3 96 38.1 334,900 20.3 0 0.0 0 0.0
36.00 - 38.00 0 0.0 0 0.0 29 11.5 181,100 11.0 53 21.0 196,500 10.7
34.00 - 36.00 0 0.0 0 0.0 1 0.4 16,700 1.0 64 25.4 122,600 6.7
32.00 - 34.00 0 0.0 0 0.0 7 2.8 490,900 29.8 94 37.3 192,900 10.5
30.00 - 32.00 0 0.0 0 0.0 1 0.4 204,800 12.4 18 7.1 197,500 10.7
28.00 - 30.00 0 0.0 0 0.0 17 6.7 28,800 1.7 5 2.0 65,300 3.6
26.00 - 28.00 0 0.0 0 0.0 0 0.0 0 0.0 18 7.1 1,063,200 57.8
24.00 - 26.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
22.00 - 24.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
20.00 - 22.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
18.00 - 20.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
16.00 - 18.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
14.00 - 16.00 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0
TOTAL 172 100.0 1,417,700 100.0 252 100.0 1,646,400 100.0 252 100.0 1,838,000 100.0
</TABLE>
<TABLE>
<CAPTION>
NEOZYME II
AUGUST 1992 SERIES N WARRANT SEPARATION DATE TO PRESENT
1993 1992
------------------------------- -----------------------------
% IN % IN % IN % IN
STOCK PRICE RANGE DAYS RANGE VOLUME RANGE DAYS RANGE VOLUME RANGE
- ----------------- ---- ----- ------- ----- ---- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
52.00 - 54.00 0 0.0 0 0.0 0 0.0 0 0.0
50.00 - 52.00 0 0.0 0 0.0 0 0.0 0 0.0
48.00 - 50.00 0 0.0 0 0.0 0 0.0 0 0.0
46.00 - 48.00 0 0.0 0 0.0 0 0.0 0 0.0
44.00 - 46.00 0 0.0 0 0.0 0 0.0 0 0.0
42.00 - 44.00 0 0.0 0 0.0 0 0.0 0 0.0
40.00 - 42.00 0 0.0 0 0.0 0 0.0 0 0.0
38.00 - 40.00 0 0.0 0 0.0 0 0.0 0 0.0
36.00 - 38.00 0 0.0 0 0.0 0 0.0 0 0.0
34.00 - 36.00 0 0.0 0 0.0 0 0.0 0 0.0
32.00 - 34.00 2 0.8 6,200 0.4 0 0.0 0 0.0
30.00 - 32.00 53 21.0 91,900 5.6 0 0.0 0 0.0
28.00 - 30.00 0 0.0 0 0.0 0 0.0 0 0.0
26.00 - 28.00 32 12.7 14,000 0.9 0 0.0 0 0.0
24.00 - 26.00 16 6.3 133,200 8.1 0 0.0 0 0.0
22.00 - 24.00 55 21.8 145,700 8.8 2 0.8 3,400 0.2
20.00 - 22.00 18 7.1 19,100 1.2 26 10.3 178,000 9.7
18.00 - 20.00 77 30.6 448,200 27.2 33 13.1 98,800 3.4
16.00 - 18.00 0 0.0 0 0.0 27 10.7 206,400 11.2
14.00 - 16.00 0 0.0 0 0.0 17 6.7 278,800 15.2
TOTAL 253 100.4 858,300 52.1 105 41.7 765,400 41.6
</TABLE>
<PAGE> 24
PROJECT HEDGEHOG
NEOZYME II INSTITUTIONAL OWNERSHIP
AS OF 6/30/96
<TABLE>
<CAPTION>
OWNER NAME HOLDINGS
------------------------------------------------
<S> <C>
Goldman Sachs & Co Et Al 460,300
Kingdon Capital Mgmt 325,000
CS First Boston Grp 306,349
Invesco Mim Plc Et Al 195,000
William Harris Invts. 191,500
Dawson-Samberg Cap Mgmt Et Al 167,100
Merrill Lynch & Co Inc 142,000
Chancellor Capital Mgmt 132,230
</TABLE>
<PAGE> 25
SECTION 3
BACKGROUND INFORMATION ON GENZYME
<PAGE> 26
PROJECT HEDGEHOG
GENZYME OVERVIEW
- - Genzyme operates in five business areas as follows:
- Genzyme's activities with respect to therapeutics, diagnostic
services, diagnostic products and pharmaceuticals are organized
as the Genzyme General Division
- Genzyme's activities with respect to products and services for
the treatment and prevention of serious tissue damage are
organized as the Genzyme Tissue Repair Division
- - The General Division reported results as follows ($millions):
- - The General Division's lead product is Ceredase/Cerezyme which has an
annual run rate of $256 million based on 1996 Q2 sales.
- - Recent developments include the broad-labeled approval of Seprafilm in
the United States, the approval of Sepracoat in Europe and the
acquisition of Deknatel Snowden Pencer (manufacturer of surgical
products).
- - Market Capitalization:
- General Division $1.7 Billion
- Tissue Repair Division $96.7 Million
<PAGE> 27
PROJECT HEDGEHOG
GENZYME FINANCIAL HISTORY
GENERAL DIVISION
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data) June 30, 1996 1995 1994 1993 1992
- --------------------------------------------- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues
Net product sales $183,902 $304,373 $238,645 $183,366 $139,568
Net service sales 29,668 47,230 49,686 50,511 40,400
Revenue from research and development
contracts 12,201 26,960 22,396 31,810 36,445
- ----------------------------------------------- -------- -------- -------- -------- --------
Total revenues 225,771 378,563 310,727 265,687 216,413
Research and development costs 31,551 57,907 51,696 45,526 37,324
Purchase of in-process research and development -- 14,216 -- 24,000 51,100
Unusual items -- -- -- 26,517 16,905
Net income (loss) $39,318 $43,680 $32,054 $18,020 $(29,809)
Per share $0.54 $0.73 $0.61 $0.34 $(0.67)
Weighted average common shares outstanding 72,880 60,184 52,338 52,500 44,740
BALANCE SHEET DATA
Cash and investments $298,555 $278,663 $128,652 $168,953 $248,325
Division equity 842,936 659,281 395,651 324,391 322,390
</TABLE>
<PAGE> 28
PROJECT HEDGEHOG
GENZYME FINANCIAL HISTORY
TISSUE REPAIR DIVISION
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data) June 30, 1996 1995 1994 1993 1992
- --------------------------------------------- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues
Net service sales $3,361 $5,220 $324 -- --
Revenue from research and development
contracts -- -- -- 2,684 2,666
Other revenues -- -- -- 2,000 --
- ----------------------------------------------- -------- -------- -------- -------- --------
Total revenues 3,361 5,220 324 4,684 2,666
Research and development costs 4,704 10,938 3,638 2,805 2,351
Purchase of in-process research and development -- -- 11,215 25,000 --
Net income (loss) $(19,242) $(22,030) $(15,751) $(24,115) $(508)
Per Share $(1.55) $(2.28) $(4.40) $(7.43) $(0.17)
Weighted average common shares outstanding 12,411 9,659 3,578 3,245 3,019
BALANCE SHEET DATA
Cash and investments $35,980 $47,573 $24,808 -- --
Division equity 38,109 45,926 23,313 -- (149)
</TABLE>
<PAGE> 29
SECTION 4
NEOZYME II VALUATION
<PAGE> 30
PROJECT HEDGEHOG
VALUATION ANALYSIS OF COMPARABLE COMPANIES
<TABLE>
<CAPTION>
Shares Market
FY Out. Price on 52-WK 52-WK Value
Company Ticker End LTM (mils) 9/5/96 High Low ($mils)
- --------------------------- ------- ------- ------- ------ ---------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Genemedicine GMED Dec 6/96 12.6 $4.50 $9.88 $3.50 $56.7
Vical VICL Dec 6/96 15.4 12.25 22.00 8.50 188.3
Targeted Genetics TGEN Dec 6/96 19.6 3.25 7.25 3.25 63.7
Somatix Therapy SOMA Jun 6/96 23.4 4.69 9.75 3.75 109.7
- -------------------------------------------------------------------------------------------------------------------------------
NEOZYME II NIIUF DEC 6/96 2.4 $44.06 $53.00 $38.12 $105.8
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Mkt/ LTM LTM
Mkt/ Book Book Enterprise Net Burn Survival
Cash Cash Value Value Value Income Rate Index
Company Balance Balance ($mils) Equity ($mils) ($mils) ($mils) (years)
- ------------------------------------ ------- ------- ------- ------ ---------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Genemedicine $36.5 1.6 x $36.8 1.5 x $22.0 $(11.2) $(18.1) 3.5 x
Vical 49.8 3.8 51.3 3.7 138.5 (4.0) (12.4) 13.1
Targeted Genetics (a) 26.9 2.4 26.7 2.4 39.4 (13.9) (12.4) 2.6
Somatix Therapy 9.6 11.4 7.3 15.0 101.3 (20.7) (22.8) 0.5
----------------------------------------------------------------------------------------------------------------------------
Average: 4.8 X 5.7 X $75.3 4.9 X
High: 11.4 15.0 138.5 13.1
Low: 1.6 1.5 22.0 0.5
Average Excluding High and Low: 3.1 X 3.0 X $70.3 3.1 X
----------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
NEOZYME II $8.6 12.3 X $19.2 5.5 X $97.2 $(22.5) $(22.0) 0.9 X
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[a] LTM Net Income excludes a non-cash charge of $13.5 million for the
acquisition of in-process R&D related to the RGene Therapeutics merger.
<PAGE> 31
PROJECT HEDGEHOG
NEOZYME II COMPARABLE COMPANIES
GENEMEDICINE INCORPORATED
- - GeneMedicine's principal focus is on the development of broad-based
non-viral gene delivery and expression technologies.
- - The gene delivery systems consist of polymers, lipids and peptides,
which are designed to transport genes into targeted cells.
- - The gene expression systems consist of (i) cell-specific promoters to
restrict gene expression to targeted cells, (ii) specific DNA sequences
that can increase the duration and level of gene expression and (iii)
"drug-controlled gene switches" to turn gene expression off and on.
- - Each of GeneMedicine's technology platforms is designed for a specific
cell type or tissue and consists of a gene delivery system, a gene
expression system and a method for administration.
- - GeneMedicine is developing technology platforms for (i) the lung airways
for Alpha-1-antitrypsin deficiency and asthma, (ii) skeletal muscle for
focal muscle atrophy, (iii) vascular endothelium for acute respiratory
distress syndrome and pulmonary artery hypertension, (iv) solid tumors
for head and neck cancers and (v) hepatocyte cells for hemophilia.
- - GeneMedicine has a strategic alliances with Roche Biosciences, formerly
Syntex, for the development of gene medicines for certain inflammatory
and immunological disorders and Boehringer Mannheim for the development
of gene medicines for the treatment of head and neck cancers and
melanomas.
<PAGE> 32
PROJECT HEDGEHOG
NEOZYME II COMPARABLE COMPANIES
SOMATIX THERAPY CORPORATION
- - Somatix is a pioneer in the field of gene therapy and is a leader in
the field of in vivo and in vitro gene therapy.
- - The Company has active research and development efforts in several gene
delivery platforms, including retroviral, adeno-associated virus,
adenoviral and synthetic. In addition, Somatix has a program focused
on the genetic modification of hematopoietic stem cells for the
systemic delivery of proteins.
- - Somatix' most advanced program is in the area of retroviral gene
delivery, although acquisitions of other gene therapy companies have
augmented Somatix' adenoviral and adeno-associated viral vectors
as well.
- - Somatix is focusing on four disease areas: cancer, Parkinson's disease,
chronic granulomatous disease and hemophilias A and B.
- - Somatix' lead therapeutic program is the GVAX cancer vaccines.
- Early clinical data in kidney cancer and melanoma patients
suggests that there may be a treatment effect of the GVAX
cancer vaccine.
- A Phase III trial involving 350 melanoma patients with
minimal residual disease was scheduled to begin in May, 1996
and a small clinical trial for prostate cancer is scheduled
for the third quarter of 1996.
- - In vivo gene therapy has emerged as Somatix' favored approach to
treating Parkinson's disease because of the recent development of a
more productive gene construct to effect dopamine production in the
brain and a technique to monitor dopamine levels in circulation. The
in vivo approach is expected to enter clinical trials in the near
future having replaced the ex vivo approach which remains a clinical
candidate. Other gene therapy programs include product candidates
which target chronic granulomatous disease and hemophilias A or B.
- - In April, Somatix announced that it had received a second equity
investment from Bristol-Myers Squibb as a result of Somatix achieving
its milestone of receiving protocol clearance from the FDA for a
Phase III clinical trial for GVAX cancer vaccine.
<PAGE> 33
PROJECT HEDGEHOG
NEOZYME II COMPARABLE COMPANIES
TARGETED GENETICS CORPORATION
- - Targeted Genetics is developing gene and cell therapy technologies for
the treatment of certain acquired and inherited diseases.
- - In the area of gene therapy, the Company is developing adeno-associated
viral, retroviral and non-viral vectors for gene delivery.
- - The Company's most advanced program is in the area of gene therapy for
cystic fibrosis.
- The Company is conducting two Phase I clinical trials examining
the use of adeno-associated viral vectors to deliver the CFTR
gene to the lungs of cystic fibrosis patients.
- A Phase II trial is expected to begin in late 1996.
- The Company is also evaluating the application of its adeno-
associated vector gene delivery technology for certain
cardiovascular diseases and mucosal immunity.
- In addition, the Company has exclusive rights to an improved
type of retroviral vector which has been shown in preclinical
experiments to be more efficient than earlier retroviral
vectors at delivering genes into certain types of blood cells.
- - In the area of cell therapy, the Company is conducting a Phase I trial
examining the use of HIV-specific cytotoxic T lymphocytes to prevent the
onset of full blown AIDS in HIV positive patients.
- - In June of 1996, Targeted Genetics acquired RGene Therapeutics, Inc.,
adding RGene's HER-2/neu inhibitor cancer program to Targeted Genetic's
existing oncological research.
<PAGE> 34
PROJECT HEDGEHOG
NEOZYME II COMPARABLE COMPANIES
VICAL INCORPORATED
- - Vical discovers and develops non-viral, gene based pharmaceutical
product candidates for human gene therapy.
- - Vical's most advanced product development efforts are in the areas of
oncology and infectious disease. Vical also has programs in therapeutic
proteins and cardiovascular diseases.
- - The Company's most advanced gene therapy product candidate is
Aliovectin-7 for the treatment of various solid tumors.
- This product contains a gene that encodes a foreign tissue
antigen which when injected into tumors is believed to cause
the patient's immune system to attack the cancer cells as if
they were foreign tissue.
- After a number of Phase I/II clinical trials showed successful
gene transfer, a biological response on the part of treated
patients, that treatment was well tolerated and feasible and
that some patients experienced measurable tumor shrinkage, a
multi-center Phase II trial involving five tumor types was
commenced in September 1995.
- - The Company is also conducting a Phase I/II trial for a second gene
therapy product, Leuvectin, an FDA-approved anti-cancer agent for
the treatment of melanoma, renal cell carcinoma and other solid tumors.
- - Vical is also developing genetic therapies for infectious diseases,
therapeutic proteins and cardio-vascular disease.
- - Vical has collaborations with Merck and Pasteur Merieux/Connaught for
preventive genetic vaccines in infectious diseases and Genzyme and
Baxter for therapeutic proteins.
<PAGE> 35
PROJECT HEDGEHOG
VALUATION ANALYSIS OF SELECTED GENE THERAPY ACQUISITIONS
<TABLE>
<CAPTION>
Premium
Offer Price Value Of 1 day Cash at
Date Target Business Per Transaction prior to ann. date
Announced Acquiror Name Target Name Description Share ($mils) ann. date ($mils)
- --------- ------------- --------------- --------------------- ------------ ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
4/22/95 Chiron Corp. Viagene Gene Therapy Research $9.00 $102 67% na
7/10/95 Sandoz Genetic Therapy Gene Therapy Research $21.00 $295 38% $66
</TABLE>
<PAGE> 36
PROJECT HEDGEHOG
P/E AND MARGIN ANALYSIS OF ESTABLISHED COMPANIES
<TABLE>
<CAPTION>
Net
P/E Multiples (95-97) Income
------------- Growth Margin
Company Ticker CY96E CY97E Rate (%)
- ------------------------- ------ ----- ----- ------- ------
<S> <C> <C> <C> <C> <C>
Pharmaceutical Companies
- ------------------------
Johnson & Johnson JNJ 22.0 x 19.3 x 15.0% 13.1%
Merck & Co MRK 20.5 17.9 14.8 19.8
Pfizer Inc PFE 24.2 20.8 18.0 15.9
SmithKline Beecham SBH 18.0 15.9 9.3 10.1
Glaxo Wellcome GLX 16.0 15.1 11.1 16.0
Established Biotechs
- ------------------------
Chiron Corp CHIR na x 39.4 x nm% nm%
Amgen Inc AMGN 22.9 20.0 17.3 28.5
Genentech Inc GNE 44.2 41.1 2.0 14.5
</TABLE>
<PAGE> 37
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
BASE CASE
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- ----------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Neozyme II Projections (1)
Revenues $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 25,600 $165,000 $292,600
Net income (2) (10,800) (8,900) (8,900) (8,900) (9,300) (10,000) (9,400) 300 41,800 75,800
2. Free Cash Flow (1)
Net income ($10,800) ($8,900) ($8,900) ($8,900) ($9,300) ($10,000) ($9,400) $ 300 $41,800 $ 75,800
+ Deprec & amort
(excl. goodwill) 0 0 0 100 800 2,000 3,000 3,300 3,300 3,300
- - Working capital requirements 0 0 0 0 0 0 0 5,000 27,700 25,700
- - Capital expenditures 0 0 0 5,000 20,000 30,000 10,000 0 0 0
-------- ------- ------- ------- ------ ------- ------ ------- ------ -------
= Free cash flow ($10,800) ($8,900) ($8,900) ($13,800) ($28,500) ($38,000) ($16,400) ($1,400) $17,400 $53,400
</TABLE>
- -----------------------------
(1) Projections provided by Genzyme
(2) Based on a 40% Tax Rate
<PAGE> 38
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
BASE CASE
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- ------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Valuation (Discounted to June 30, 1996)
Present Value
of Cash Flows
-------------
Discount Rate: 25.0% $(9,645) $(6,359) $(5,087) $(6,310) $(10,419) $(11,113) $(3,837) $(262) $2,604 $6,393 = $(44,035)
30.0% (9,455) (5,994) (4,611) (5,499) (8,730) (8,954) (2,972) (195) 1,865 4,402 = $(40,143)
35.0% (9,276) (5,662) (4,194) (4,817) (7,364) (7,273) (2,325) (147) 1,352 3,074 = $(36,632)
40.0% (9,107) (5,360) (3,829) (4,241) (6,250) (5,952) (1,835) (112) 992 2,175 = $(33,518)
</TABLE>
4. Exit (Terminal) Values (For December 31, 2005)
<TABLE>
<CAPTION>
2005 Market Valuation at
2005 P/E Multiple of:
---------------------------------------------------------------------------
14.0 x 16.0 x 18.0 x 20.0 x 22.0 x 24.0 x
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2005 Net Income: $75,800 $1,061,200 $1,212,800 $1,364,400 $1,516,000 $1,667,600 $1,819,200
Discounted Valuation
---------------------------------------------------------------------------
Discount Rate: 25.0% $ 127,045 $145,194 $163,343 $181,493 $199,642 $217,791
30.0% $ 87,484 $ 99,982 $112,480 $124,978 $137,475 $149,973
35.0% $ 61,097 $ 69,825 $ 78,553 $ 87,281 $ 96,010 $104,738
40.0% $ 43,229 $ 49,405 $ 55,581 $ 61,756 $ 67,932 $ 74,108
</TABLE>
<PAGE> 39
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
BASE CASE
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- --------------------------------------------------------------------------
5. Discounted Cash Flow and Exit Value
2005 Exit Multiples
---------------------------------------------------------------------------
14.0 x 16.0 x 18.0 x 20.0 x 22.0 x 24.0 x
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Discount Rate: 25.0%
Cash flow ($44,035) ($44,035) ($44,035) ($44,035) ($44,035) ($44,035)
Exit value 127,045 145,194 163,343 181,493 199,642 217,791
---------- ---------- ---------- ---------- ---------- ----------
$ 83,010 $101,159 $119,308 $137,458 $155,607 $173,756
Discount Rate: 30.0%
Cash flow ($40,143) ($40,143) ($40,143) ($40,143) ($40,143) ($40,143)
Exit value 87,484 99,982 112,480 124,978 137,475 149,973
---------- ---------- ---------- ---------- ---------- ----------
$ 47,342 $ 59,839 $ 72,337 $ 84,835 $ 97,333 $109,830
Discount Rate: 35.0%
Cash flow ($36,632) ($36,632) ($36,632) ($36,632) ($36,632) ($36,632)
Exit value 61,097 69,825 78,553 87,281 96,010 104,738
---------- ---------- ---------- ---------- ---------- ----------
$ 24,465 $ 33,193 $ 41,921 $ 50,650 $ 59,378 $ 68,106
Discount Rate: 40.0%
Cash flow ($33,518) ($33,518) ($33,518) ($33,518) ($33,518) ($33,518)
Exit value 43,229 49,405 55,581 61,756 67,932 74,108
---------- ---------- ---------- ---------- ---------- ----------
$ 9,712 $ 15,887 $ 22,063 $ 28,239 $ 34,414 $ 40,590
</TABLE>
<PAGE> 40
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
ONE YEAR DELAY SCENARIO
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- ----------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Neozyme II Projections (1)
Revenues $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 25,600 $165,000
Net income (2) (10,800) (8,900) (8,900) (8,900) (9,300) (10,000) (9,400) 0 300 41,800
2. Free Cash Flow (1)
Net income ($10,800) ($8,900) ($8,900) ($8,900) ($9,300) ($10,000) ($9,400) $ 0 $ 300 $ 41,800
+ Deprec & amort
(excl. goodwill) 0 0 0 100 800 2,000 3,000 3,300 3,300 3,300
- - Working capital requirements 0 0 0 0 0 0 0 4,300 5,000 27,700
- - Capital expenditures 0 0 0 5,000 20,000 30,000 10,000 0 0 0
-------- ------- ------- ------- ------ ------- ------ ------- ------ -------
= Free cash flow ($10,800) ($8,900) ($8,900) ($13,800) ($28,500) ($38,000) ($16,400) ($1,000) ($ 1,400) $17,400
</TABLE>
- -----------------------------
(1) Projections provided by Genzyme
(2) Based on a 40% Tax Rate
<PAGE> 41
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
ONE YEAR DELAY SCENARIO
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- ------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
3. Valuation (Discounted to June 30, 1996)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Present Value
of Cash Flows
-------------
Discount Rate: 25.0% ($9,645) ($6,359) ($5,087) ($6,310) ($10,419) ($11,113) ($3,837) ($187) ($210) $2,083 = ($51,084)
30.0% (9,455) (5,994) (4,611) (5,499) (8,730) (8,954) (2,972) (139) (150) 1,434 = ($45,070)
35.0% (9,276) (5,662) (4,194) (4,817) (7,364) (7,273) (2,325) (105) (109) 1,002 = ($40,124)
40.0% (9,107) (5,360) (3,829) (4,241) (6,250) (5,952) (1,835) (80) (80) 709 = ($36,024)
</TABLE>
4. Exit (Terminal) Values (For December 31, 2005)
<TABLE>
<CAPTION>
2005 Market Valuation at
2005 P/E Multiple of:
---------------------------------------------------------------------------
14.0 x 16.0 x 18.0 x 20.0 x 22.0 x 24.0 x
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2005 Net Income: $41,800 $585,200 $668,800 $752,400 $836,000 $919,600 $1,003,200
DISCOUNTED VALUATION
---------------------------------------------------------------------------
Discount Rate: 25.0% $ 70,059 $ 80,068 $ 90,076 $100,084 $110,093 $ 120,101
30.0% $ 48,243 $ 55,135 $ 62,027 $ 68,919 $ 75,811 $ 82,703
35.0% $ 33,692 $ 38,505 $ 43,318 $ 48,131 $ 52,945 $ 57,758
40.0% $ 23,839 $ 27,244 $ 30,650 $ 34,056 $ 37,461 $ 40,867
</TABLE>
<PAGE> 42
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
ONE YEAR DELAY SCENARIO
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- --------------------------------------------------------------------------
5. Discounted Cash Flow and
Exit Value
2005 Exit Multiples
---------------------------------------------------------------------------
14.0 x 16.0 x 18.0 x 20.0 x 22.0 x 24.0 x
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Discount Rate: 25.0%
Cash flow ($51,084) ($51,084) ($51,084) ($51,084) ($51,084) ($51,084)
Exit value 70,059 80,068 90,076 100,084 110,093 120,101
---------- ---------- ---------- ---------- ---------- ----------
$ 18,976 $ 28,984 $ 38,992 $ 49,001 $ 59,009 $ 69,018
Discount Rate: 30.0%
Cash flow ($45,070) ($45,070) ($45,070) ($45,070) ($45,070) ($45,070)
Exit value 48,243 55,135 62,027 68,919 75,811 82,703
---------- ---------- ---------- ---------- ---------- ----------
$ 3,174 $ 10,066 $ 16,958 $ 23,849 $ 30,741 $ 37,633
Discount Rate: 35.0%
Cash flow ($40,124) ($40,124) ($40,124) ($40,124) ($40,124) ($40,124)
Exit value 33,692 38,505 43,318 48,131 52,945 57,758
---------- ---------- ---------- ---------- ---------- ----------
($6,432) ($1,619) $ 3,195 $ 8,008 $ 12,821 $ 17,634
Discount Rate: 40.0%
Cash flow ($36,024) ($36,024) ($36,024) ($36,024) ($36,024) ($36,024)
Exit value 23,839 27,244 30,650 34,056 37,461 40,867
---------- ---------- ---------- ---------- ---------- ----------
($12,185) ($8,780) ($5,374) ($1,969) $ 1,437 $ 4,842
</TABLE>
<PAGE> 43
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
ONE YEAR EARLY SCENARIO
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- -----------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
-------- ------- ------- ------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Neozyme II Projections (1)
Revenues $0 $0 $0 $0 $0 $0 $25,600 $165,000 $292,600 $371,800
Net income (2) (10,800) (8,900) (8,900) (8,900) (9,300) (10,000) 300 41,800 75,800 96,100
2. Free Cash Flow (1)
Net income ($10,800) ($8,900) ($8,900) ($8,900) ($9,300) ($10,000) $300 $41,800 $75,800 $96,100
+Deprec & amort (excl.
goodwill) 0 0 0 100 800 2,000 3,300 3,300 3,300 3,300
- -Working capital requirements 0 0 0 0 0 0 5,000 27,700 25,700 16,200
- -Capital expenditures 0 0 0 5,000 20,000 30,000 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
= Free cash flow ($10,800) ($8,900) ($8,900) ($13,800) ($28,500) ($38,000) ($1,400) $17,400 $53,400 $83,200
</TABLE>
- -----------------------------------
(1) Projections provided by Genzyme
(2) Based on a 40% Tax Rate
<PAGE> 44
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
ONE YEAR EARLY SCENARIO
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- ------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Valuation (Discounted to June 30, 1996)
Present Value
of Cash Flows
-------------
Discount Rate: 25.0% ($9,645) ($6,359) ($5,087) ($6,310) ($10,419) ($11,113) ($328) $3,257 $7,991 $9,961 = ($28,052)
30.0% (9,455) (5,994) (4,611) (5,499) (8,730) (8,954) (254) 2,426 5,723 6,859 = ($28,488)
35.0% (9,276) (5,662) (4,194) (4,817) (7,364) (7,273) (198) 1,827 4,150 4,790 = ($28,017)
40.0% (9,107) (5,360) (3,829) (4,241) (6,250) (5,952) (157) 1,391 3,045 3,389 = ($27,070)
</TABLE>
4. Exit (Terminal) Values (for December 31, 2005)
<TABLE>
<CAPTION>
2005 Market Valuation at
2005 P/E Multiple of:
---------------------------------------------------------------------------
14.0 X 16.0 X 18.0 X 20.0 X 22.0 X 24.0 X
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2005 Net Income: $96,100 $1,345,400 $1,537,600 $1,729,800 $1,922,000 $2,114,200 $2,306,400
Discounted Valuation
---------------------------------------------------------------------------
Discount Rate: 25.0% $161,069 $184,079 $207,089 $230,098 $253,108 $276,118
30.0% $110,914 $126,758 $142,603 $158,448 $174,293 $190,138
35.0% $ 77,459 $ 88,525 $ 99,591 $110,656 $121,722 $132,787
40.0% $ 54,807 $ 62,636 $ 70,466 $ 78,295 $ 86,125 $ 93,954
</TABLE>
<PAGE> 45
PROJECT HEDGEHOG
DISCOUNTED CASH FLOW ANALYSIS
ONE YEAR EARLY SCENARIO
<TABLE>
<CAPTION>
CYSTIC FIBROSIS
ANALYSIS RESULTS (IN THOUSANDS)
- --------- --------------------------------------------------------------------------
5. Discounted Cash Flow and
Exit Value
2005 Exit Multiples
---------------------------------------------------------------------------
14.0 x 16.0 x 18.0 x 20.0 x 22.0 x 24.0 x
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Discount Rate: 25.0%
Cash flow ($28,052) ($28,052) ($28,052) ($28,052) ($28,052) ($28,052)
Exit value 161,069 184,079 207,089 230,098 253,108 276,118
---------- ---------- ---------- ---------- ---------- ----------
$133,017 $156,027 $179,037 $202,046 $225,056 $248,066
Discount Rate: 30.0%
Cash flow ($28,488) ($28,488) ($28,488) ($28,488) ($28,488) ($28,488)
Exit value 110,914 126,758 142,603 158,448 174,293 190,138
---------- ---------- ---------- ---------- ---------- ----------
$ 82,425 $ 98,270 $114,115 $129,960 $145,805 $161,649
Discount Rate: 35.0%
Cash flow ($28,017) ($28,017) ($28,017) ($28,017) ($28,017) ($28,017)
Exit value 77,459 88,525 99,591 110,656 121,722 132,787
---------- ---------- ---------- ---------- ---------- ----------
$ 49,442 $ 60,508 $ 71,573 $ 82,639 $ 93,705 $104,770
Discount Rate: 40.0%
Cash flow ($27,070) ($27,070) ($27,070) ($27,070) ($27,070) ($27,070)
Exit value 54,807 62,636 70,466 78,295 86,125 93,954
---------- ---------- ---------- ---------- ---------- ----------
$ 27,737 $ 35,566 $ 43,396 $ 51,225 $ 59,055 $ 66,884
</TABLE>
<PAGE> 46
PROJECT HEDGEHOG
CALLABLE WARRANT VALUATION - GENZYME GENERAL DIVISION
BASED ON BLACK-SCHOLES ANALYSIS
(ASSUME ONE WARRANT IS EXERCISABLE FOR TWO SHARES)
<TABLE>
<CAPTION>
GENZYME STOCK PRICE
-----------------------------------------------------------------
$18.00 $20.00 $22.00 $24.00 $26.00 $28.00
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
40% $ 9.76 $10.85 $11.93 $13.02 $14.10 $15.19
45% $10.66 $11.84 $13.03 $14.21 $15.40 $16.58
VOLATILITY 50% $11.55 $12.83 $14.12 $15.40 $16.68 $17.97
55% $12.43 $13.81 $15.19 $16.57 $17.96 $19.34
60% $13.30 $14.78 $16.26 $17.74 $19.21 $20.69
</TABLE>
<PAGE> 47
PROJECT HEDGEHOG
CALLABLE WARRANT VALUATION - GENZYME TISSUE REPAIR DIVISION
BASED ON BLACK-SCHOLES ANALYSIS
(ASSUME ONE WARRANT IS EXERCISABLE FOR .135 SHARE)
<TABLE>
<CAPTION>
GENZYME TISSUE REPAIR STOCK PRICE
-----------------------------------------------------------------
$6.00 $7.00 $8.00 $9.00 $10.00 $11.00
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
40% $0.22 $0.26 $0.29 $0.33 $ 0.37 $ 0.40
45% $0.24 $0.28 $0.32 $0.36 $ 0.40 $ 0.44
VOLATILITY 50% $0.26 $0.30 $0.35 $0.39 $ 0.43 $ 0.48
55% $0.28 $0.33 $0.37 $0.42 $ 0.47 $ 0.51
60% $0.30 $0.35 $0.40 $0.45 $ 0.50 $ 0.55
</TABLE>
<PAGE> 48
SECTION 5
OFF-BALANCE SHEET COMPANIES ANALYSIS
<PAGE> 49
PROJECT HEDGEHOG
OFF-BALANCE SHEET ANALYSIS
<TABLE>
<CAPTION>
(In millions, except per share amounts) Warrants
--------------------------------------------------
Exercise Period
---------------------------
Months Months
Exercise Out- to
Sponsor Offering Units Price Capital Exercise Price Stand- Separa-
Sword Company Date Offered Per Unit Raised Price Premiums Begin Expiration ing tion
- ------------------- --------------- -------- ------- -------- ------- -------- -------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bio-Electro Systems ALZA 12/12/88 3.246 $11.00 $35.71 $15.00 34.1% 12/13/90 12/31/93 61.5 24.0
Tocor Centocor 7/11/89 2.875 12.00 34.50 11.25 21.6% 1/1/92 12/31/94 66.6 30.0
Receptech Immunex 11/17/89 2.290 12.00 27.48 20.35 10.0% 2/16/90 1/31/95 63.4 3.0
DRC Elan 11/14/90 3.926 11.00 43.19 7.62 22.7% 11/14/92 11/14/95 60.9 24.0
Neozyme Genzyme 10/26/90 2.059 23.00 47.35 19.00 0.0% 1/30/91 12/31/94 50.9 3.0
SciGenics GT 5/23/91 2.091 22.00 46.00 35.92 11.4% 12/1/92 5/31/96 61.2 18.0
Aramed Gensia 11/27/91 2.875 20.00 57.50 27.67 21.6% 10/1/93 12/31/96 62.0 22.0
Tocor II Centocor 1/21/92 2.250 40.00 90.00 64.50 22.9% 1/1/94 12/31/96 60.2 23.0
CytoRad Cytogen 2/13/92 4.025 10.00 40.25 24.15 11.0% 2/1/94 1/31/97 60.5 24.0
ATS Elan 7/14/93 3.922 20.00 78.44 39.26 149.3% 8/12/95 7/14/98 60.9 24.0
Perseptive Tech II Perseptive Bio 12/21/93 2.645 22.00 58.19 33.00 20.0% 1/1/96 12/31/98 61.2 24.0
ALRT Ligand/Allergan 6/5/95 3.250 10.00 32.50 7.12 20.0% 4/1/95 4/1/00 58.7 24.0
--------------------------------------------------------------------------------------------------------------
AVERAGE $49.26 28.7% 60.8 19.5
--------------------------------------------------------------------------------------------------------------
Neozyme II (a) Genzyme 4/28/92 2.415 35.00 84.53 19.13 0.0% 8/4/92 12/31/96 56.9 3.0
</TABLE>
<TABLE>
<CAPTION>
Unit Price Company Stock Price
Sponsor --------------------------------------------------------------------------------------
Sword Company Offering Current Change IRR Offering Current Adjusted Change IRR
- ------------------- ------------- -------- ------- ------ ----- -------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bio-Electro Systems ALZA $11.00 28.77 161.5% 13.2% $11.19 $26.88 140.3% 11.9%
Tocor Centocor 12.00 15.11 25.9% 3.3% 9.25 14.13 52.8% 6.1%
Receptech Immunex 12.00 17.77 48.0% 5.9% 18.50 13.25 $34.25 (b) 85.1% 9.4%
DRC Elan 11.00 40.84 271.3% 25.1% 6.21 32.13 417.6% 32.4%
Neozyme Genzyme 23.00 33.06 43.7% 6.3% 19.00 23.38 23.1% 3.6%
SciGenics GT 22.00 14.13 (35.8%) (8.0%) 32.25 59.75 55.85 (c) 73.2% 10.8%
Aramed Gensia 20.00 12.02 (39.9%) (10.0%) 22.75 4.88 (78.5%) (27.4%)
Tocor II Centocor 40.00 102.02 155.0% 22.2% 52.50 31.88 (39.3%) (10.1%)
CytoRad Cytogen 10.00 10.64 6.3% 1.3% 21.75 6.13 (71.8%) (24.1%)
ATS Elan 20.00 36.00 80.0% 20.3% 15.75 35.13 123.0% 28.6%
Perseptive Tech II Perseptive Bio 22.00 7.00 (68.2%) (34.1%) 27.50 7.00 (74.5%) (39.2%)
ALRT Ligand/Allergan 10.00 5.78 (42.2%) nm 5.93 12.50 110.7% nm
--------------------------------------------------------------------------------------------------------
AVERAGE 71.6% 8.0% 72.5% 4.1%
--------------------------------------------------------------------------------------------------------
Neozyme II (a) Genzyme 35.00 57.18 63.4% 11.8% 19.13 23.38 22.2% 4.7%
</TABLE>
(a) Does not include callable warrants included in the Neozyme II unit, which
detach from the unit if Genzyme does not repurchase
(b) Adjusted for American Cyanamid acquisition
(c) Adjusted for American Home Products acquisition
<PAGE> 50
- --------------------------------------------------------------------------------
Project Hedgehog----------------------------------------------------------------
Off-Balance Sheet Analysis
<TABLE>
<CAPTION>
BUYBACK
(In millions, except per share amount) --------------------------------------------------------------------------------------
2ND YEAR 3RD YEAR 4TH YEAR
-------------------------- -------------------------- --------------------------
IRR IRR IRR
----------------(d) ----------------(d) ----------------(d)
SPONSOR EXCL. EXCL. EXCL.
SWORD COMPANY PRICE BASE WARRANT PRICE BASE WARRANT PRICE BASE WARRANT
- -------------------- --------------- ------ ----- ------- ------ ----- ------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bio-Electro Systems ALZA $23.00 41.2% 156.2% $23.00 26.5% 89.8% $31.00 28.4% 74.7%
Tocor Centocor 24.00 26.3% 76.0% 32.00 28.0% 64.1%
Receptech Immunex 26.00 27.3% 77.8% 37.00 30.7% 68.6%
DRC Elan 21.00 22.9% 39.1% 28.00 25.4% 37.7%
Neozyme Genzyme 38.00 25.9% 52.0% 50.00 27.6% 45.2% 68.00 29.6% 43.0%
SciGenics GI 33.48 23.0% 95.1% 41.61 23.5% 68.1% 54.04 25.0% 57.7%
Aramed Gensia 32.25 25.6% 110.9% 41.00 26.1% 79.1% 55.40 28.2% 67.2%
Tocor II Centocor 58.00 21.0% 72.0% 76.00 24.4% 56.8% 107.00 28.3% 52.6%
CytoRad Cytogen 19.50 25.2% 169.1% 26.40 27.7% 126.3%
ATS Elan 36.00 19.5% 24.9% 49.00 23.2% 27.4%
Perseptive Tech II Perseptive Bio 33.83 23.6% 71.8% 41.95 23.7% 54.2% 57.23 26.8% 49.6%
ALRT Ligand/Albergan 21.97 32.1% 63.2% 28.56 31.6% 53.8%
---------------------------------------------------------------------------------------------------------
Average 27.4% 97.2% 24.9% 72.6% 27.5% 61.9%
---------------------------------------------------------------------------------------------------------
Neozyme II(a) Genzyme 48.00 20.7% 41.9% 62.00 23.8% 37.0% 83.00 26.5% 36.1%
<CAPTION>
BUYBACK
(In millions, except per share amount) -----------------------------------------------------------
5TH YEAR 6TH YEAR
-------------------------- --------------------------
IRR IRR
----------------(d) ----------------(d)
SPONSOR EXCL. EXCL.
SWORD COMPANY PRICE BASE WARRANT PRICE BASE WARRANT
- -------------------- --------------- ------ ----- ------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bio-Electro Systems ALZA $42.00 29.8% 66.2% $57.00 30.7% 60.8%
Tocor Centocor 44.00 26.8% 51.8%
Receptech Immunex 52.00 32.5% 62.8%
DRC Elan 36.00 26.0% 35.9%
Neozyme Genzyme
SciGenics GI 69.83 25.8% 51.5%
Aramed Gensia
Tocor II Centocor
CytoRad Cytogen 37.10 30.2% 105.5%
ATS Elan 61.00 23.4% 26.8%
Perseptive Tech II Perseptive Bio
ALRT Ligand/Albergan 37.13 31.2% 48.5%
------------------------------------------------------------------------------
Average 27.8% 57.2% 30.7% 60.8%
------------------------------------------------------------------------------
Neozyme II(a) Genzyme 117.00 29.4% 37.1%
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
WARRANT VALUATION
--------------------------------------------------------------
OFFERING
---------------------------------------------------------------
30% VOLATILITY 40% VOLATILITY 50% VOLATILITY
SPONSOR ------------------- ------------------ ------------------
SWORD COMPANY VALUE % OF UNIT VALUE % OF UNIT VALUE % OF UNIT
- -------------------- --------------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Bio-Electro Systems ALZA $ 6.07 55.1% $ 7.92 72.0% $ 9.68 88.0%
Tocor Centocor 6.06 50.5% 7.53 62.7% 8.92 74.4%
Receptech Immunex 6.55 54.6% 7.90 65.8% 9.19 76.6%
DRC Elan 2.81 25.6% 3.54 32.2% 4.24 38.5%
Neozyme Genzyme 6.56 28.5% 7.76 33.8% 8.95 38.9%
SciGenics GI 11.00 50.0% 13.35 60.7% 15.62 71.0%
Aramed Gensia 10.58 52.9% 13.25 66.2% 15.80 79.0%
Tocor II Centocor 15.70 39.2% 19.81 49.5% 23.73 59.3%
CytoRad Cytogen 7.39 73.9% 8.97 89.7% 10.49 104.9%
ATS Elan 1.40 7.0% 2.71 13.5% 4.11 20.6%
Perseptive Tech II Perseptive Bio 8.58 39.0% 10.70 48.7% 12.74 57.9%
ALRT Ligand/Albergan 1.79 35.9% 2.25 45.0% 2.68 53.7%
------------------------------------------------------------------------------------
Average 43.7% 54.6% 65.1%
------------------------------------------------------------------------------------
Neozyme II(a) Genzyme 7.04 20.1% 8.29 23.7% 9.52 27.2%
<CAPTION>
CURRENT VALUATIONS OF UNIT
-------------------------------------------------------------
BUYBACK PURCHASE PRICE
SPONSOR ----------------------
SWORD COMPANY UNIT STOCK WARRANT @ RATIO PER SHARE TOTAL
- -------------------- --------------- ---- ----- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bio-Electro Systems ALZA 13.25 (e) 0.58 $ 15.52 $ 28.77
Tocor Centocor 5.00 (e) 0.72 10.11 15.11
Receptech Immunex 0.00 (e) 0.52 17.77 17.77
DRC Elan 20.50 0.63 20.34 40.84
Neozyme Genzyme 12.50 (e) 0.88 20.56 33.06
SciGenics GI 0.13 Cash 14.00 14.13
Aramed Gensia 0.06 (f) 0.61 2.96 12.02
Tocor II Centocor 3.20 102.02 102.02
CytoRad Cytogen 1.44 (g) 1.50 9.20 10.64
ATS Elan 36.00 36.00
Perseptive Tech II Perseptive Bio (h) 1.00 7.00 7.00
ALRT Ligand/Albergan 5.78 5.78
------------------------------------------------------------------------------------
Average
------------------------------------------------------------------------------------
Neozyme II(a) Genzyme 45.00 12.18 57.18
</TABLE>
(d) IRR excluding warrants assumes the warrant is valued at 40% volatility
(e) Warrant Value is calculated as the in-the-money value at expiration
(f) Assumes CVR is worth $1.00
(g) Assumes CVR is worth $0.00
(h) Assumes repurchase warrant is worth $0.00
- --------------------------------------------------------------------------------
HAMBRECHT & QUIST
<PAGE> 52
PROJECT HEDGEHOG
SUMMARY OF RECENTLY NEGOTIATED BUYBACKS
<TABLE>
<CAPTION>
Option Negotiated Discount
Sponsor Offering Price Repurchase Exercise Original Purchase Actual to Option
Sword Company Date Per Unit Year Price IRR Price IRR Price
- ------------------ -------------- -------- -------- ---------- -------- -------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SciGenics GI 5/23/91 $22.00 5th Year $69.83 25.8% $14.00 (8.6%) (80.0%)
Aramed Gensia 11/27/91 20.00 4th Year 55.40 28.2% 13.00 (10.2%) (76.5%)
Tocor II Centocor 1/21/92 40.00 3rd Year 76.00 24.4% 40.00 0.0% (47.4%)
CytoRad Cytogen 2/13/92 10.00 4th Year 26.40 27.7% 9.20 (2.1%) (65.2%)
Perseptive Tech II Perseptive Bio 12/21/93 22.00 3rd Year 41.95 23.7% 7.00 (24.9%) (83.3%)
-----------------------------------------------------------------------------------
AVERAGE 26.0% (9.2%) (70.5%)
-----------------------------------------------------------------------------------
NEOZYME II GENZYME 4/28/92 $35.00 5th YEAR $117.00 29.4% $45.00 6.5% (61.5%)
</TABLE>
<PAGE> 53
PROJECT HEDGEHOG
NEGOTIATED BUYBACK
TOCOR II
<TABLE>
<S> <C>
Parent Company Centocor, Inc.
SWORD Tocor II, Inc.
Date Issued January 1992
Price per Unit $40.00
Units Offered 2.25 million
Total Proceeds $90.0 million
Per Unit Offer Centocor stock equal in value to $40.00 per Unit; but in no event greater than 3.20
shares nor less than 2.73 shares
Cash (9/30/95) $52.5 million
Purchase Option
Exercise Price Until 12/31/93 $58.00 per share; thereafter
Until 12/31/94 $76.00 per share; thereafter
Until 12/31/95 $107.00 per share
Tocor II Stock Prices
December 9, 1993 (1) $23.00 per share
December 10, 1993 $36.25 per share
</TABLE>
(1) Day prior to announcement.
<PAGE> 54
PROJECT HEDGEHOG
NEGOTIATED BUYBACK
CYTORAD
<TABLE>
<CAPTION>
<S> <C>
Parent Company Cytogen Corporation
SWORD Cytorad Incorporated
Date Issued February 1992
Price per Unit $10.00
Units Offered 4.025 million
Total Proceeds $40.3 million
Per Unit Offer - 1.5 shares of Cytogen common stock (Cytogen price prior to announcement of $4.875 per share)
- 1.0 warrant exercisable at $8.00 per share (expires 1/31/97)
- 1.0 contingent value right (entitles the holder to a fraction (not to exceed 0.5) of a
share of Cytogen common stock with a market value equal to $12.00 less the market price of
1.5 shares of Cytogen and 1.0 warrant exercisable at $8.00 per share. The CVRs will terminate
if the aggregate price of 1.5 shares of Cytogen and 1.0 warrant exercisable at $8.00 per share
is equal to or greater than $12.00 per share for any 45 consecutive day period ending 1/31/97)
Cash $14.5 million
Purchase Option Until 1/31/95 $19.50 per share; thereafter
Exercise Price Until 1/31/96 $26.40 per share; thereafter
Until 1/31/97 $37.10 per share
Cytorad Stock Prices
July 28, 1994 (1) $4.625 per share
July 29, 1994 $6.000 per share
</TABLE>
(1) Day prior to announcement.
<PAGE> 55
PROJECT HEDGEHOG
NEGOTIATED BUYBACK
ARAMED
<TABLE>
<CAPTION>
<S> <C>
Parent Company Gensia, Inc.
SWORD Aramed, Inc.
Date Issued November 1991
Price per Unit $20.00
Units Offered 2.875 million
Total Proceeds $57.5 million
Per Unit Offer - $8.00 in cash
- Gensia stock equal in value to $3.00 per unit; but in no event less than 0.6061 shares
nor more than 0.9091 shares
- 1.0 contingent value right entitles the holder to $1.00 in cash on March 31, 1996 and
on December 31, 1996 either
(i) three-quarter of a share of Parent Common Stock, if the closing price of Parent
Common Stock does not exceed $4.50 per share for any 20 consecutive trading days
from closing until December 31, 1996.
(ii) three-eights of a share of Parent Common Stock, if the closing price of Parent
Common Stock exceeds $4.50 per share for any 20 consecutive trading days from
closing until December 31, 1996, but does not exceed $5.25 per share for any 20
consecutive trading days from closing until December 31, 1996, and
(iii) no shares of Parent Common Stock if the closing price of Parent Common Stocks
exceeds $5.25 per share for any 20 consecutive trading days from closing until
December 31, 1996.
Cash $24.8 million
Purchase Option Price Until 12/31/95 $55.40 per share
Aramed Stock Prices
June 15, 1995 $8.38 per share
June 16, 1995 $10.25 per share
</TABLE>
<PAGE> 56
PROJECT HEDGEHOG
NEGOTIATED BUYBACK
SCIGENICS
<TABLE>
<CAPTION>
<S> <C>
Parent Company Genetics Institutes, Inc.
SWORD SciGenics, Inc.
Date Issued May 1991
Price per Unit $22.00
Units Offered 2.091 million
Total Proceeds $46.0 million
Per Unit Offer $14.00 in cash
Cash (9/30/95) $10.0 million
Purchase Option
Exercise Price Until 5/31/96 $69.83 per share
SciGenics Stock Prices
September 6, 1995 $13.37 per share
September 7, 1995 $13.75 per share
</TABLE>
<PAGE> 57
PROJECT HEDGEHOG
NEGOTIATED BUYBACK
PERSEPTIVE TECHNOLOGIES II
<TABLE>
<Caption)
<S> <C>
Parent Company Perseptive Biosystems, Inc.
SWORD Perseptive Technologies II Corporation
Date Issued December 1993
Price per Unit $22.00
Units Offered 2.64 million
Total Proceeds $58.0 million
Per Unit Offer - 1.0 share of Perseptive Biosystems ($7.00)
- 1.0 warrant to purchase one share of Perseptive Biosystems at $13.50 per share until 8/8/97
Cash na
Purchase Option
Exercise Price Until 12/31/96 $41.95 per share
Perseptive Technologies II Stock Prices
February 7, 1996 $8.62 per share
February 8, 1996 $7.75 per share
</TABLE>
<PAGE> 58
PROJECT HEDGEHOG
GENSIA VS. ARAMED
STOCK PRICE HISTORY
11/27/91 TO 11/21/95
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF GENSIA AND ARAMED FOR THE
PERIOD 11/27/91 TO 11/21/95]
<PAGE> 59
PROJECT HEDGEHOG
GENZYME VS NEOZYME II
STOCK PRICE HISTORY
4/28/92 TO 9/5/96
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF GENZYME AND NEOZYME II
FOR THE PERIOD 4/28/92 TO 9/5/96]
<PAGE> 60
PROJECT HEDGEHOG
PERSEPTIVE BIOSYSTEMS VS. PERSEPTIVE TECH II
STOCK PRICE HISTORY
12/21/93 TO 3/12/96
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF PERSEPTIVE BIOSYSTEMS
AND PERSEPTIVE TECH II FOR THE PERIOD 12/21/93 TO 3/12/96]
<PAGE> 61
PROJECT HEDGEHOG
GENETICS INSTITUTE VS SCIGENICS
STOCK PRICE HISTORY
5/23/91 VS 12/6/95
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF GENETICS
INSTITUTE AND SCIGENICS FOR THE PERIOD 5/23/91 TO 12/6/95]
<PAGE> 62
PROJECT HEDGEHOG
CENTOCOR VS. TOCOR
STOCK PRICE HISTORY
7/11/89 TO 7/1/91 BUYBACK
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF
CENTOCOR AND TOCOR FOR THE PERIOD 7/11/89 TO 7/1/91]
<PAGE> 63
PROJECT HEDGEHOG
IMMUNEX VS. RECEPTECH
STOCK PRICE HISTORY
11/17/89 TO 2/18/93 BUYBACK
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF
IMMUNEX AND RECEPTECH FOR THE PERIOD 11/17/89 TO 2/18/93]
<PAGE> 64
PROJECT HEDGEHOG
GENZYME VS. NEOZYME
STOCK PRICE HISTORY
1/30/91 SEPARATION TO 12/21/93 BUYBACK
[MOUNTAIN GRAPH PLOTTING STOCK PRICE HISTORY OF GENZYME AND
NEOZYME FROM THE 1/30/91 SEPARATION TO THE 12/21/93 BUYBACK]
<PAGE> 65
SECTION 6
The Merger
<PAGE> 66
______________________________________________________________________________
Project Hedgehog
VALUATION SUMMARY
($thousands, except per share data)
- Offer Valuation
Shares Outstanding 2,415
Offer Price Per Share $45.00
--------
Total Valuation $108,675
- Warrant Valuation
Based on a volatility of 50% and the current market prices
of Genzyme and GTR, the Black-Sholes value of the callable
warrant is as follows:
Genzyme $14.52
GTR 0.32
--------
Total $14.84
- Technology Valuation
Offer Calculated
-------- ----------
Offer Price Per Share $45.00 $45.00
Less Warrant Value Per Share 16.00 14.84
-------- ----------
$29.00 $30.16
Shares Outstanding 2,415 2,415
Valuation $70,035 $72,836
Cash $8,600 $8,600
-------- ----------
Technology Valuation $61,435 $64,236
<PAGE> 67
PROJECT HEDGEHOG
VALUATION SUMMARY
($THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
- Discount to Purchase Option Price
Comparable Average 58.7%
Neozyme II 61.5%
- Actual IRR for Negotiated Buybacks
Comparable Average -9.2%
Neozyme II 6.5%
- Market Value of Comparable Publicly Trading Companies
Comparable Average $104,600
Neozyme II $70,035
- Technology Value of Comparable Publicly Trading Companies
Comparable Average $75,300
Neozyme II $61,435
- Discounted Cash Flow Valuation
Base Case $62,400
One-Year Early $99,500
One-Year Delayed $12,988
</TABLE>
- --------------------------------------------------------------------------------
HAMBRECHT & QUIST
<PAGE> 68
PROJECT HEDGEHOG
MERGER RATIONALE
- Development of technology slower than originally anticipated
- Protein replacement therapy and HyperGAM+CF programs terminated
- Significant time to commercialization
- Significant funding necessary
- Gene therapy technology limited to Cystic Fibrosis indications
- Genzyme most likely acquiror
- Premium to investment in gene therapy technology
- Valuation similar to comparable companies
<PAGE> 69
Project Hedgehog
Factors to Consider
- Highly regarded science
- Large upside potential
- Genzyme most likely acquiror
<PAGE> 70
Section 7
Draft Form of Fairness Opinion
<PAGE> 71
[HAMBRECHT & QUIST LLC LETTERHEAD]
September 20, 1996
Confidential
The Special Committee of The Board of Directors
The Board of Directors
Neozyme II Corporation
Todman Building
Main Street
Road Town, Tortola
British Virgin Islands
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of callable common stock, par
value $1.00 per share ("Common Stock"), of Neozyme II Corporation ("Neozyme" or
the "Company") of the consideration to be received by such holders in
connection with a proposed transaction (the "Proposed Transaction") pursuant to
which an affiliate of Genzyme Corporation ("Genzyme") will offer to purchase
the outstanding units of Neozyme (the "Units") at a purchase price of $45.00
per Unit in cash (the "Offer"). As of the date hereof, all of the outstanding
Common Stock is owned as part of a Unit, each of which consists of (i) one
share of Common Stock and (ii) one callable warrant to purchase two shares of
Genzyme General Division Common Stock and 0.135 shares of Genzyme Tissue Repair
Division Common Stock. The Offer will be made by means of offering documents
(the "Offer Documents") to be filed with the Securities and Exchange Commission.
If the Offer is consummated, but not all of the Units are tendered and accepted
or, if the Offer is terminated in accordance with Section 1.1(b)(ii) of the
Purchase Agreement, Genzyme has, pursuant to a Purchase Agreement (the "Purchase
Agreement") dated as of September 20, 1996, agreed to effect a second step
transaction (the "Second Step Transaction") in which Genzyme will acquire,
directly or indirectly, all of the remaining Common Stock in exchange for cash
in an amount equal to $29.00 per share of Common Stock.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment banking
services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Special
Committee of the Board of Directors of Neozyme in connection with the Proposed
Transaction, and we will receive a fee for our services, which include the
rendering of this opinion.
<PAGE> 72
The Special Committee of the Board of Directors
Neozyme II Corporation
Page 2
We are familiar with Genzyme and have, from time to time, provided financial
advisory services to Genzyme, and we have received fees for rendering these
services. In July 1996, we acted as managing underwriter for a public offering
of Genzyme Transgenics Corporation, an affiliate of Genzyme. In the ordinary
course of business, Hambrecht & Quist acts as a market maker and broker in the
publicly traded securities of Neozyme and Genzyme and receives customary
compensation in connection therewith, and also provides research coverage for
Genzyme. In the ordinary course of business, Hambrecht & Quist actively trades
in the equity securities of Neozyme and Genzyme for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities. Hambrecht & Quist may in the future provide
additional investment banking or other financial advisory services to Genzyme.
In connection with our review of the Proposed Transaction, and in arriving at
our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements
of Neozyme for recent years and interim periods to date and certain
other relevant financial and operating data of Neozyme made
available to us from published sources and from the internal
records of Neozyme;
(ii) discussed with certain members of the managements of Neozyme and
Genzyme the business, financial condition and prospects of Neozyme;
(iii) reviewed the publicly available consolidated financial statements
of Genzyme for recent years and interim periods to date;
(iv) reviewed certain internal financial and operating information,
including certain projections, relating to Neozyme prepared by the
management of Genzyme;
(v) reviewed the recent reported prices and trading activity for the
Common Stock and compared such information and certain financial
information of Neozyme with similar information for certain other
companies engaged in businesses we considered comparable to that of
Neozyme;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) reviewed drafts of the Purchase Agreement, the Offer Documents and
certain other materials to be filed with the Securities and
Exchange Commission in connection with the Offer; and
(ix) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations
and financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Neozyme and Genzyme considered
in connection with our review of the Proposed Transaction, and we have not
assumed any responsibility for independent verification of such information. We
have not prepared any independent valuation or appraisal of any of the
<PAGE> 73
The Special Committee of the Board of Directors
Neozyme II Corporation
Page 3
assets or liabilities of Neozyme, nor have we conducted a physical inspection
of the properties and facilities of the Company. With respect to the financial
forecasts and projections made available to us and used in our analysis, we
have assumed that they reflect the best currently available estimates and
judgments of the expected future financial performance of Neozyme. For purposes
of this opinion, we have assumed that Neozyme is not a party to any pending
transactions, including external financings, recapitalizations or material
merger discussions, other than the Proposed Transaction and those activities
undertaken in the ordinary course of conducting its business. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion. We were not requested
to, and did not, formally solicit indications of interest from any other
parties in connection with a possible acquisition of, or business combination
with, Neozyme.
It is understood that his letter is for the information of the Special
Committee and the Board of Directors only and may not be used for any other
purpose without our prior written consent; provided, however, that this letter
may be reproduced in full in any filing with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, including Schedules
14D-1, 14D-9 and 13E-3 to be filed in connection with the Offer. This letter
does not constitute a recommendation to any Neozyme stockholder as to whether
such stockholder should accept the Offer. In addition, we express no opinion,
however, as to the adequacy of any consideration received in the Proposed
Transaction by Genzyme or any of its affiliates.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Units pursuant to the
Offer and the consideration to be received by the holders of the Common
Stock pursuant to the Second Step Transaction is fair to such holders from a
financial point of view.
Very truly yours,
HAMBRECHT & QUIST LLC
By________________________
David G. Golden
Managing Director
<PAGE> 1
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
FOR THE
YEARS ENDED CUMULATIVE
DECEMBER 31, FROM MARCH 2,
----------------------------- 1992 (DATE OF
1995 1994 1993 INCEPTION)
-------- -------- ------- -------------
<S> <C> <C> <C> <C>
Investment income (Note A)............................. $ 1,497 $ 2,522 $ 5,567 $ 12,162
Costs and expenses (Note C):
Technology license fee............................ -- -- -- 5,000
Research and development.......................... 24,128 17,785 12,483 59,579
General and administrative........................ 327 227 324 1,196
-------- -------- ------- --------
Total costs and expenses..................... 24,455 18,012 12,807 65,775
-------- -------- ------- --------
Net loss............................................... $(22,958) $(15,490) $(7,240) $(53,613)
======== ======== ======= ========
Net loss per callable common share (Note A)............ $ (9.51) $ (6.41) $ (3.00) $ (23.26)
======== ======== ======= ========
Weighted average number of callable common shares
outstanding (Note A)................................. 2,415 2,415 2,415 2,305
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 2
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
BALANCE SHEETS
(In thousands)
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 5,546 $ 135
Short-term investments (Notes A and D)............................. 21,501 13,116
Prepaid research and development to Genzyme Corporation............ -- 186
-------- --------
Total current assets.......................................... 27,047 13,437
Long-term investments (Notes A and D)................................... -- 32,958
-------- --------
Total assets............................................................ $ 27,047 $ 46,395
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to Genzyme Corporation (Note C)............................ $ 2,469 $ 729
Accrued expenses................................................... 92 117
-------- --------
Total current liabilities..................................... 2,561 846
Note Payable to Genzyme Corporation (Note C)............................ 100 100
Commitments and contingencies (Note E)
Stockholders' equity (Note B):
Callable common stock, $1.00 par value; authorized 9,000,000
shares, 2,415,000 shares issued and outstanding................... 2,415 2,415
Additional paid-in capital......................................... 75,620 75,620
Deficit accumulated during the development stage................... (53,613) (30,655)
Unrealized loss on investments (Note A)............................ (36) (1,931)
-------- --------
Total stockholders' equity.................................... 24,386 45,449
-------- --------
Total liabilities and stockholders' equity.............................. $ 27,047 $ 46,395
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 3
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
FOR THE YEARS ENDED CUMULATIVE
DECEMBER 31, FROM MARCH 2,
----------------------------- 1992 (DATE OF
1995 1994 1993 INCEPTION)
-------- -------- ------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(22,958) $(15,490) $(7,240) $(53,613)
Reconciliation of net income to net cash used by
operating activities:
(Gain) loss on sale of investments........... 218 (8) (2,104) (1,894)
Amortization of premium...................... 559 602 -- 1,161
Prepaid research and development............. 186 (186) -- --
Payable to Genzyme Limited................... -- (7) (51) --
Payabl to Genzyme Corporation................ 1,740 286 443 2,469
Accrued expenses............................. (25) 6 (39) 92
-------- -------- ------- --------
Net cash used by operating activities........ (20,280) (14,797) (8,991) (51,785)
Cash flows from investing activities:
Purchases of short-term investments............... -- -- (20,160) (31,216)
Purchases of long-term investments................ -- -- (50,839) (109,521)
Sales of short-term investments................... 16,109 12,743 14,313 47,244
Sales of long-term investments.................... 9,582 -- 63,107 72,689
-------- -------- ------- --------
Net cash provided (used) by investing
activities................................. 25,691 12,743 6,421 (20,804)
Cash flows from financing activities:
Issuance of note payable to Genzyme Corporation... -- -- -- 100
Issuance of common stock.......................... -- -- -- 78,035
-------- -------- ------- --------
Net cash provided by financing activities.... -- -- -- 78,135
-------- -------- ------- --------
Increase (decrease) in cash and cash equivalents....... 5,411 (2,054) (2,570) 5,546
Cash and cash equivalents, beginning of period......... 135 2,189 4,759 0
-------- -------- ------- --------
Cash and cash equivalents, end of period............... $ 5,546 $ 135 $ 2,189 $ 5,546
======== ======== ======= ========
Supplemental disclosure:
Classification of investments -- Note A
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 4
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
<CAPTION>
DEFICIT
UNREALIZED ACCUMULATED
COMMON STOCK ADDITIONAL GAIN/(LOSS) DURING THE
-------------------- PAID-IN ON DEVELOPMENT
SHARES AMOUNT CAPITAL INVESTMENTS STAGE
--------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shares issued upon
incorporation............................... 100 $ -- $ -- $ -- $ --
Shares canceled upon public
offering................................. (100) -- -- -- --
Issuance of Common Stock...................... 2,415,000 2,415 75,620 -- --
Net loss...................................... -- -- -- -- (7,925)
--------- ------ ------- ------- --------
Balance, December 31, 1992.................... 2,415,000 2,415 75,620 -- (7,925)
Net loss...................................... -- -- -- -- (7,240)
--------- ------ ------- ------- --------
Balance, December 31, 1993.................... 2,415,000 2,415 75,620 -- (15,165)
Unrealized loss on
investments................................. -- -- -- (1,931) --
Net Loss...................................... -- -- -- -- (15,490)
--------- ------ ------- ------- --------
Balance, December 31, 1994.................... 2,415,000 2,415 75,620 (1,931) (30,655)
Unrealized appreciation on
investments................................. -- -- -- 1,895 --
Net Loss...................................... -- -- -- -- (22,958)
--------- ------ ------- ------- --------
Balance, December 31, 1995.................... 2,415,000 $2,415 $75,620 $ (36) $(53,613)
========= ====== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 5
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: Neozyme II Corporation was incorporated in March 1992 to develop
products for the treatment of cystic fibrosis by gene therapy or protein
replacement (the "Field"). In 1993 Neozyme II's research program was expanded to
include the products to be developed by Genzyme in collaboration with North
American Biologics, Inc. ("NABI," formerly Univax Biologics, Inc.)
The Company began operations on May 5, 1992 and is classified as a
development stage enterprise. The Company will experience significant losses as
substantially all of its capital will be spent to fund development of its
products. It is not anticipated that the Company will receive any significant
revenues unless and until it successfully commercializes any of its programs
upon expiration of the Purchase Option (see Note C).
EXHAUSTION OF AVAILABLE FUNDS Under the Development Agreement, Neozyme II
is obligated to engage Genzyme to perform all of its research, development and
clinical testing activities related to the Products. It is expected that
Available Funds to pay for such activities will be substantially exhausted by
December 31, 1996. There can be no assurance that, at such time, the development
of the Products will have progressed to a point where Genzyme will have enough
information to determine whether to exercise the Purchase Option.
EXERCISE OF PURCHASE OPTION Genzyme may purchase all (but not less
than all) of the Neozyme II Callable Common Stock at any time through December
31, 1996. Genzyme is not obligated to exercise the Purchase Option and will do
so only if Genzyme perceives that such exercise is in its best interest. There
can be no assurance that Genzyme's best interest in this regard will coincide
with the best interest of Neozyme II's shareholders. If Genzyme does not
exercise the Purchase Option, Neozyme II will need to find other ways to
complete clinical testing and commercialize the Products. Neozyme II will have
working capital of at least $1 million to fund these commercialization efforts.
If Genzyme does not exercise the Purchase Option and Neozyme II decides to
complete development, manufacture or market the products itself, Neozyme II
will need substantial additional funds. Genzyme is not obligated to provide
these funds and there can be no assurance that such funds will be available
from others on attractive terms, if at all.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash equivalents, consisting primarily of U.S.
Treasury bills and commercial paper purchased with initial maturities of three
months or less, are valued at cost plus accrued interest, which approximates
market.
INVESTMENTS: Short-term investments include all investments with remaining
maturities of twelve months or less. Long-term investments include all
investments with remaining maturities greater than twelve months. As of December
31, 1995 the Company's investment portfolio, consisting primarily of debt
securities classified as available for sale, is shown at market value and
classified as current assets. It is management's intention to sell these
securities in fiscal 1996. In computing realized gains or losses on the sale of
securities, the Company determines cost on a specific identification basis. In
1994, the Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
The adoption of SFAS 115 did not have a material effect on the financial
position or results of operations of the Company. SFAS 115 requires that, except
for debt securities classified as held-to-maturity which are reported at
amortized cost, investments in debt and equity securities be reported at fair
value. The Company classifies its investments in debt securities as either
held-to-maturity or available-for-sale based on facts and circumstances present
-6-
<PAGE> 6
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
at the time the investments are purchased. As of December 31, 1995, the Company
classified all investments in debt securities as available-for-sale. (See Note D
- -Investments).
LOSS PER SHARE: Loss per share is based upon the weighted average number
of shares of Callable Common Stock outstanding during the period. From March 2,
1992 (date of inception) through May 4, 1992 (immediately prior to the initial
public offering), there were 100 shares outstanding.
UNCERTAINTIES: The Company is subject to risks common to companies in the
Biotechnology industry, including but not limited to, development by the Company
or its competitors of new technological innovations, dependence on key
personnel, protection of proprietary technology, and compliance with FDA
government regulations.
NOTE B. INITIAL PUBLIC OFFERING
In May 1992, the Company completed an initial public offering of 2,415,000
shares of Callable Common Stock for net proceeds of $78.0 million. Each share of
Callable Common Stock was accompanied by a warrant to purchase one share of
Genzyme common stock and a callable warrant to purchase one share of Genzyme
common stock. Neozyme II received all of the net proceeds of the offering and
paid all of the offering costs, fees and expenses. All of the shares of
Callable Common Stock are subject to an outstanding purchase option to Genzyme
which expires on December 31, 1996. (See Note C). Effective December 1994, the
stockholders of Genzyme approved the Genzyme Stock Proposal as described in
Genzyme's Prospectus/Proxy Statement dated November 10, 1994 to redesignate
Genzyme's Common Stock as General Division Common Stock on a share-for-share
basis and a second class of common stock, designated as Tissue Repair Division
Common Stock. Each warrant when exercised will grant the holder one share of
General Division common stock and .135 of one share of Tissue Repair common
stock.
NOTE C. ARRANGEMENTS WITH GENZYME CORPORATION
Neozyme II has entered into the following arrangements with Genzyme:
DEVELOPMENT AGREEMENT: Under the Development Agreement, Genzyme has been
engaged to conduct research and development of the products and the Company is
required to pay Genzyme, based on Genzyme's costs of conducting the research and
development, all of the net proceeds of the initial public offering plus any
interest or other income earned thereon, less amounts for the Company's working
capital ($1.0 million) and administrative expenses and $5.0 million paid to
Genzyme under a technology license agreement. During 1995, 1994 and 1993,
Neozyme II incurred $24,128,000, $17,785,000, and $12,483,000, respectively, of
expenses related to this agreement. At December 31, 1995 and 1994 the Company
had a payable to Genzyme under the agreement of $2,469,000 and $729,000,
respectively.
TECHNOLOGY LICENSE AGREEMENT: The Company has an exclusive, worldwide
license to Genzyme's technology relating to the products for use in the Field.
Under this agreement, Neozyme II paid a nonrefundable fee of $5,000,000 to
Genzyme in 1992.
PURCHASE OPTION AGREEMENT: Under the Purchase Option Agreement, Genzyme
has the option, exercisable not later than December 31, 1996, to purchase all,
but not less than all, of the Callable Common Stock, at stated prices which
increase over time. The purchase price increases based on a formula which pro
rates evenly by month the difference between a given and a prior year purchase
price plus the prior year purchase price.
-7-
<PAGE> 7
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
<CAPTION>
IF THE STOCK PURCHASE OPTION EXERCISE TOTAL
OPTION IS EXERCISED PRICE PER SHARE PAYMENT
- --------------------- --------------- ------------
<S> <C> <C>
During 1995..................... $ 83 $200,445,000
During 1996..................... $117 $282,555,000
</TABLE>
The Purchase Option Agreement terminates following a material incurred
breach of the development agreement or the Technology License Agreement by one
of the parties and the option exercise period may accelerate in the event of
exhaustion of funds.
SERVICES AGREEMENT: Under the Services Agreement, Genzyme's wholly-owned
subsidiary Genzyme Limited is paid for providing certain management and
administrative services to the Company, based upon actual costs. The Company
incurred expenses of $79,000, $78,000, and $88,000 in 1995, 1994 and 1993,
respectively, under this agreement.
SERIES 1992 NOTE: In 1992, the Company issued a promissory note to Genzyme
in the principal amount of $100,000, bearing interest at 7% annually. The note
is due on the day following termination of the Purchase Option Agreement and may
not be prepaid. While the note is outstanding, Neozyme II may not issue
additional capital stock, borrow more than $1 million in the aggregate, declare
or pay dividends utilizing funds committed to be paid to Genzyme under the
Development Agreement, merge, liquidate or sell all or substantially all of its
assets without Genzyme's approval.
NOTE D. INVESTMENTS
<TABLE>
Investments in marketable securities at December 31 consisted of the
following:
<CAPTION>
1995 1994
-------------------------------------
MARKET MARKET
(DOLLARS IN THOUSANDS) COST VALUE COST VALUE
- ---------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Short Term:
Corporate notes......................................... $21,537 $21,501 $13,226 $13,116
======= ======= ======= =======
Long Term:
Corporate notes......................................... $ 0 $ 0 $34,779 $32,958
======= ======= ======= =======
</TABLE>
Gross realized holding losses included in interest income for 1995 were
$218,000. In 1994, investment income included gross realized holding gains and
losses of $17,000 and $9,000, respectively. Net realized gains included in
investment income for 1993 were $2,104,000. Gross unrealized gains and losses
included in stockholders equity at December 31, 1995 were $45,000 and $81,000,
respectively, as compared to gross unrealized holding gains and losses at
December 31, 1994 of $36,000 and $1,931,000, respectively.
NOTE E COMMITMENTS AND CONTINGENCIES
In August 1993, Genzyme entered into a license and development agreement
with NABI whereby Genzyme received a license to the vaccine and passive
immunization antibody products being developed by NABI primarily for use in
treating Pseudomonas infections in cystic fibrosis patients. In connection with
the NABI license and development agreement, Neozyme II and Genzyme agreed to
expand the field of the Technology License Agreement and the Development
Agreement to include the products to be developed with NABI for any clinical
indication. Neozyme II also agreed to (i) assume Genzyme's obligation to make
milestone payments to NABI, (ii) fund Genzyme's share of the development costs
of the products being developed with NABI, (iii) appoint NABI as its agent for
the manufacture of such products and (iv) share the profits resulting from
commercialization of such products with NABI.
-8-
<PAGE> 8
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-Q, JUNE 30, 1996
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Unaudited Condensed Financial Statements
Statements of Operations for the Three Months and
Six Months Ended June 30, 1996 and 1995 and
Cumulative from Inception (March 2, 1992) ............... 4
Balance Sheets as of June 30, 1996 and
December 31, 1995 ....................................... 5
Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 and Cumulative from
Inception (March 2, 1992) ............................... 6
Notes to Unaudited Condensed Financial Statements ....... 7
3
<PAGE> 9
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED CUMULATIVE
JUNE 30, JUNE 30, FROM
--------------------- ---------------------- INCEPTION
1996 1995 1996 1995 (MARCH 2, 1992)
---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Investment income .............. $ 209 $ 340 $ 453 $ 820 $ 12,615
Costs and expenses:
Technology license fee ....... - - - - 5,000
Research and development ..... 5,217 5,949 10,596 11,652 70,175
General and administrative ... 83 98 162 158 1,358
------- ------- -------- -------- --------
5,300 6,047 10,758 11,810 76,533
------- ------- -------- -------- --------
Net loss ....................... $(5,091) $(5,707) $(10,305) $(10,990) $(63,918)
======= ======= ======== ======== ========
Net loss per callable
common share .................. $ (2.11) $ (2.36) $ (4.27) $ (4.55) $ (27.59)
======= ======= ======== ======== ========
Weighted average callable
common shares outstanding ..... 2,415 2,415 2,415 2,415 2,317
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited, condensed financial statements.
4
<PAGE> 10
<TABLE>
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ....................... $ 8,636 $ 5,546
Short-term investments .......................... 5,178 21,501
Prepaid research and development ................ 527 -
-------- --------
$ 14,341 $ 27,047
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to Genzyme Corporation .................. 29 2,469
Accrued expenses ................................ 129 92
-------- --------
Total current liabilities .................... 158 2,561
Note payable to Genzyme Corporation ................ 100 100
Stockholders' Equity:
Callable common Stock, $1.00 par value;
authorized 9,000,000 shares, 2,415,000
shares issued and outstanding .................. 2,415 2,415
Additional paid-in capital ...................... 75,620 75,620
Deficit accumulated during the
development stage .............................. (63,918) (53,613)
Unrealized loss on investments .................. (34) (36)
-------- --------
14,083 24,386
-------- --------
$ 14,341 $ 27,047
======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited, condensed financial statements.
5
<PAGE> 11
<TABLE>
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
JUNE 30, CUMULATIVE
-------------------- FROM INCEPTION
1996 1995 (MARCH 2, 1992)
---- ---- ---------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net loss ............................................ $(10,305) $(10,990) $ (63,918)
Reconciliation of net loss to net cash
used by operating activities:
(Gain)/loss on sale of investments ............... (25) 226 (1,919)
Accrued interest/amortization on investments ..... (365) 276 796
Prepaid research and development ................. (527) (374) (527)
Due from Genzyme Corporation ..................... - - -
Payable to Genzyme Limited ....................... - - -
Payable to Genzyme Corporation ................... (2,440) (729) 29
Accrued expenses ................................. 37 41 129
-------- -------- ---------
Net cash used by operating activities ............... (13,625) (11,550) (65,410)
Cash flow from investing activities:
Purchases of short-term investments ................. - - (31,216)
Purchase of long-term investment .................... - - (109,521)
Sales and maturities of short-term investments ...... 16,715 22,638 63,959
Sales and maturities of long-term investments ....... - - 72,689
-------- -------- ---------
Net cash provided (used) by investing activities .... 16,715 22,638 (4,089)
Cash flow from financing activities:
Issuance of note payable to Genzyme Corporation ..... - - 100
Issuance of callable common stock ................... - - 78,035
-------- -------- ---------
Net cash provided by financing activities ........... - - 78,135
-------- -------- ---------
Increase in cash and cash equivalents ................... 3,090 11,088 8,636
Cash and cash equivalents at beginning of period ........ 5,546 135 -
-------- -------- ---------
Cash and cash equivalents at end of period .............. $ 8,636 $ 11,223 $ 8,636
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these
unaudited, condensed financial statements.
6
<PAGE> 12
NEOZYME II CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
JUNE 30, 1996
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS FOR PRESENTATION:
Neozyme II Corporation ("Neozyme II" or the "Company") is a
development stage enterprise engaged in the research, development and
clinical testing of biotherapeutic products for the treatment of cystic
fibrosis.
These unaudited condensed financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 and the financial statements and footnotes
included therein. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
the Securities and Exchange Commission rules and regulations.
The financial statements for the three and six months ended June 30,
1996 and 1995 are unaudited but include, in the Company's opinion, all
adjustments (consisting only of normally recurring accruals) necessary for
a fair presentation of the results for the periods presented.
2. ACCOUNTING POLICIES:
The accounting policies underlying the quarterly financial statements
are those set forth in Note A of the financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
As of June 30, 1996, investments totaling $5,178,000 were classified
as available for sale and, accordingly, unrealized holding losses totaling
$34,000 have been recognized in a separate component of stockholders'
equity.
3. PURCHASE OPTION AGREEMENT WITH GENZYME CORPORATION:
<TABLE>
Under the Purchase Option Agreement, Genzyme has the option (the
"Purchase Option"), exercisable not later than December 31, 1996, to
purchase all, but not less than all, of the Callable Common Stock, at
stated prices which increase over time. The purchase price increases based
on a formula which prorates evenly by month the difference between a given
and prior year purchase price plus the prior year purchase price.
<CAPTION>
IF THE STOCK PURCHASE OPTION EXERCISE TOTAL
OPTION IS EXERCISED: PRICE PER SHARE PAYMENT
------------------- --------------- ------------
<S> <C> <C>
On or before December 31, 1995... $ 83 $200,445,000
December 31, 1996................ 117 282,555,000
</TABLE>
The purchase price, if exercised at June 30, 1996, was $100.00 per share
for a total payment of $241,500,000.
The Purchase Option Agreement may be terminated by Neozyme II
following expenditure of the funds available for its development program
unless Genzyme funds or obtains funding to continue the development
program.
4. TERMINATION OF LICENSE AND DEVELOPMENT AGREEMENT WITH NABI
Under agreement with Genzyme, Neozyme II funds Genzyme's obligations
to provide development funding to NABI in exchange for the exclusive
rights that Genzyme has acquired to market, on a worldwide basis,
HyperGAM+[Trademark]CF, for the treatment of Pseudomonas lung infections
in Cystic Fibrosis patients. In June 1996, Neozyme II and NABI announced
the halt of their Phase II clinical trial for HyperGAM+[Trademark]CF after
receiving the results of an interim analysis of the data from the trial by
an independent statistician which showed no evidence of a reduction in the
number of acute pulmonary exacerbations in trial participants. No major
issues with the safety of the product were identified. On June 21, 1996,
after review of the interim analysis data, the Board of Directors of
Neozyme II voted unanimously to terminate the License and Development
Agreement with NABI. Under the terms of this Agreement, Neozyme II is
required to reimburse NABI for certain costs incurred in connection with
the wind down of the HyperGAM+[Trademark]CF program up to maximum of
$900,000.
7
