<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. 1 )
NEOZYME II CORPORATION AND GENZYME CORPORATION
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
NEOZYME II CORPORATION, GENZYME CORPORATION AND NEOZYME II ACQUISITION CORP.
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
G6420H146
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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
</TABLE>
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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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</TABLE>
/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
</TABLE>
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This Amendment No. 1 to Rule 13e-3 Transaction Statement on Schedule 13E-3
("Amendment") 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") 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 were filed as
Exhibits (d)(1) and (d)(2), respectively, to the Rule 13e-3 Transaction
Statement on Schedule 13E-3 filed by the Company, Genzyme and the Purchaser on
September 27, 1996.
ITEM 3. PAST CONTRACTS, TRANSACTIONS OR NEGOTIATIONS.
The response to Item 3 is hereby amended by adding the following
information regarding the background of the transaction:
In connection with negotiations of the price to be paid for the Shares in
the Second Step Transaction, Mr. McLachlan and other representatives of Genzyme
met on September 17, 1996 with representatives of Robertson, Stephens & Company
to review the valuation analysis performed by Robertson, Stephens & Company and
to discuss possible ranges of value for Neozyme II and the Callable Warrants.
Following these discussions, Genzyme determined to make a proposal to pay $29.00
per Share in cash in the Second Step Transaction. At Mr. McLachlan's request,
representatives of Robertson, Stephens & Company communicated this proposal to
representatives of Hambrecht & Quist, who indicated on a preliminary basis,
subject to review of the proposal with the Special Committee, that they believed
the proposal would be acceptable. As described more fully in the Offer to
Purchase, on September 20, 1996, the Special Committee unanimously determined
that the Offer and the Second Step Transaction were fair to, and in the best
interests of, the Holders and recommended that the Neozyme II Board of Directors
approve the Offer and the Second Step Transaction.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
The response to Item 7 is hereby amended by adding the information set
forth under Item 3 of this Amendment.
2
<PAGE> 3
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
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(a) -- Not applicable.
(b)(1) -- Report of Robertson, Stephens & Company LLC.*
(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. on September 27,
1996 and incorporated herein by reference.
(b)(3) -- Report of Hambrecht and Quist LLC.*
(b)(4) -- Opinion of Hambrecht and Quist LLC. Filed herewith.
(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.
</TABLE>
3
<PAGE> 4
<TABLE>
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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.
on September 27, 1996 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. on September 27, 1996
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. on September 27, 1996
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. on September 27, 1996
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. on September 27, 1996 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. on September 27, 1996 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.
on September 27, 1996 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. on September 27, 1996 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. on September 27, 1996 and
incorporated herein by reference.
</TABLE>
4
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(f) -- Not applicable.
(g)(1) -- Audited financial statements (and related notes) for Neozyme II Corporation as of
December 31, 1994 and 1995 and for the years ended December 31, 1993, 1994 and 1995,
and unaudited financial statements (and related notes) for Neozyme II Corporation
as of June 30, 1996 and 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 as of December 31, 1994 and
1995 and 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 as of June 30, 1996 and 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. on September 27, 1996 and incorporated herein
by reference.
(g)(3) -- Pro forma financial statements (and related notes) for Genzyme Corporation and
Genzyme General Division as of June 30, 1996 and 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. on September 27, 1996 and
incorporated herein by reference.
<FN>
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* Previously filed.
</TABLE>
5
<PAGE> 6
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.
October 28, 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
6
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
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<S> <C> <C> <C>
(b)(1) -- Report of Robertson, Stephens & Company LLC. *
(b)(2) -- Opinion of Robertson, Stephens & Company LLC Set forth in Annex --
II to the Offer to Purchase filed as Exhibit (a)(1) to the
Schedule 14D-1 filed by Genzyme Corporation and Neozyme II
Acquisition Corp. on September 27, 1996 and incorporated herein
by reference.
(b)(3) -- Report of Hambrecht and Quist LLC. *
(b)(4) -- Opinion of Hambrecht and Quist LLC. Filed herewith. --
(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. on September 27, 1996 and
incorporated herein by reference.
</TABLE>
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<TABLE>
<CAPTION>
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. on September 27, 1996 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. on September 27, 1996 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. on September 27, 1996 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. on September 27, 1996 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.
on September 27, 1996 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. on September 27, 1996 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. on September 27, 1996
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. on September 27, 1996 and incorporated herein
by reference.
(g)(1) -- Audited financial statements (and related notes) for Neozyme II --
Corporation as of December 31, 1994 and 1995 and for the years
ended December 31, 1993, 1994 and 1995, and unaudited financial
statements (and related notes) for Neozyme II Corporation as of
June 30, 1996 and 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 as of December 31, 1994 and 1995 and 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 as of
June 30, 1996 and 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. on September 27, 1996 and
incorporated herein by reference.
(g)(3) -- Pro forma financial statements (and related notes) for Genzyme --
Corporation and Genzyme General Division as of June 30, 1996
and 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. on
September 27, 1996 and incorporated herein by reference.
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* Previously filed.
</TABLE>
8
<PAGE> 1
EXHIBIT (b)(4)
[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> 2
The Special Committee of the Board of Directors
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> 3
The Special Committee of the Board of Directors
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 this letter is for the information of the Special
Committee and the Board of Directors 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 /s/ David G. Golden
------------------------
David G. Golden
Managing Director
<PAGE> 1
EXHIBIT(g)(1)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Neozyme II Corporation (A
Development Stage Enterprise):
We have audited the accompanying balance sheets of Neozyme II Corporation (a
development stage enterprise) as of December 31, 1995 and 1994, and the related
statements of operations and cash flows for each of the three years in the
period ended December 31, 1995 and cumulative from March 2, 1992 (date of
inception) to December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Neozyme II Corporation (a
development stage enterprise) as of December 31, 1995 and 1994 and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995 and cumulative from March 2, 1992 (date of inception)
to December 31, 1995 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 1, 1996
<PAGE> 2
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> 3
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> 4
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> 5
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
<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> 12
<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> 13
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
