<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter ended June 30, 1997.
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________ to
__________.
Commission File No. 0-18549
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GENSIA SICOR INC.
(Formerly Gensia, Inc.)
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(Exact name of registrant as
specified in its charter)
Delaware 33-0176647
- ------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9360 Towne Centre Drive
San Diego, California 92121
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(Address of principal executive offices and zip code)
(619) 546-8300
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock $.01 par value 74,444,298
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Class Outstanding at June 30, 1997
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GENSIA SICOR INC.
INDEX
PART I: FINANCIAL INFORMATION
<TABLE>
Item 1: Financial Statements PAGE
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<S> <C> <C>
Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the three
and six months ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
SIGNATURES 9
</TABLE>
2
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GENSIA SICOR INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,124 $ 16,271
Short-term investments 6,496 5,096
Accounts receivable 35,033 5,038
Inventories 50,352 16,999
Other current assets 7,101 2,316
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Total current assets 122,106 45,720
Property and equipment, net 74,240 33,657
Other noncurrent assets 9,343 8,148
Intangibles, net 53,501 2,025
Goodwill, net 49,795 --
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$ 308,985 $ 89,550
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,490 $ 11,138
Accrued payroll and related expenses 4,558 3,057
Other accrued liabilities 10,378 4,924
Current portion of deferred revenue 2,271 1,771
Short-term borrowings 24,380 --
Current maturities of long-term obligations 3,442 76
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Total current liabilities 85,519 20,966
Other long-term liabilities 4,437 --
Deferred revenue, less current portion 840 500
Long-term obligations, less current maturities 30,681 85
Contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
1,600,000 issued and outstanding, liquidation preference of
$80,000,000. 16 16
Common stock, $.01 par value, 125,000,000 shares authorized,
74,444,298 and 39,657,982 shares issued and outstanding
at June 30, 1997 and December 31, 1996, respectively 744 396
Additional paid-in capital 499,678 332,778
Accumulated deficit (312,749) (265,136)
Unearned compensation -- (55)
Foreign currency translation adjustment (181) --
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Total stockholders' equity 187,508 67,999
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$ 308,985 $ 89,550
========= =========
</TABLE>
See accompanying notes.
3
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GENSIA SICOR INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------ ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 39,401 $ 12,785 $ 59,206 $ 25,679
Contract research and license fees 1,847 792 4,410 792
-------- -------- -------- --------
Total revenues 41,248 13,577 63,616 26,471
Costs and expenses:
Cost of sales 28,090 9,853 44,547 18,324
Research and development 6,667 8,762 12,581 16,959
Selling, general and administrative 10,906 7,792 19,990 15,719
Amortization expense 1,237 -- 1,645 --
Interest and other, net 1,032 (535) 473 (940)
Acquisition of in-process research and development -- -- 29,200 --
-------- -------- -------- --------
Total costs and expenses 47,932 25,872 108,436 50,062
-------- -------- -------- --------
Net loss before income taxes (6,684) (12,295) (44,820) (23,591)
Provision for income taxes (2,166) -- (2,793) --
-------- -------- -------- --------
Net loss (8,850) (12,295) (47,613) (23,591)
Dividends on preferred stock (1,504) (1,504) (2,992) (2,992)
-------- -------- -------- --------
Net loss applicable to common shares $(10,354) $(13,799) $(50,605) $(26,583)
======== ======== ======== ========
Net loss per common share $(.14) $(.38) $(.74) $(.74)
======== ======== ======== ========
Shares used in computing per share amounts 74,395 36,208 67,931 35,833
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
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GENSIA SICOR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss before dividends $ (47,613) $ (23,591)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and equipment 3,708 1,827
Amortization of intangibles and goodwill 1,645 --
Amortization of licenses and other 325 150
Amortization of unearned compensation 56 715
Loss on disposal of property and equipment 6 158
Charge for acquired in-process research and
development 29,200 --
Inventory purchase price allocation adjustment 3,846 --
Change in operating assets and liabilities, net of
effects of the acquisition of Rakepoll Holding:
Accounts receivable (3,269) 3,815
Inventories (1,980) (163)
Prepaid expenses and other assets 4,368 252
Accounts payable 889 1,134
Accrued research and development costs -- (301)
Accrued payroll and related expenses 643 469
Other accrued liabilities (2,757) (1,456)
Deferred revenue 840 3.021
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Net cash used in operating activities (10,093) (13,970)
Cash flows from investing activities:
Acquisition of Rakepoll Holding, net of $2,232 cash acquired (8,868) --
Proceeds from short-term investments 8,253 91,498
Purchases of short-term investments (9,653) (102,233)
Purchase of property and equipment (11,687) (5,122)
Proceeds from sale of property and equipment 18 --
Notes receivable from officers and employees 148 (7)
----------- -----------
Net cash used in investing activities (21,789) (15,864)
Cash flows from financing activities:
Payments of preferred stock dividends (2,992) --
Issuance of common stock and warrants, net 23,624 6,476
Change in short-term borrowings 4,013 --
Issuance of long-term obligations 20,177 206
Principal payments on long-term obligations (1,460) (362)
Discount on long-term obligations (3,571) --
Debt issue costs (931) --
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Net cash provided by financing activities 38,860 6,320
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Effect of exchange rate changes on cash (125) --
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Increase (decrease) in cash and cash equivalents 6,853 (23,514)
Cash and cash equivalents at beginning of period 16,271 47,421
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Cash and cash equivalents at end of period $ 23,124 $ 23,907
=========== ===========
Supplemental schedule of noncash investing activities:
Common stock issued to acquire net assets of Rakepoll Holding:
Fair value of assets acquired, other than cash $207,914 $ --
Liabilities assumed 81,631 --
</TABLE>
See accompanying notes.
5
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GENSIA SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
ORGANIZATION
Gensia Sicor Inc, formerly known as Gensia, Inc. ("Gensia Sicor" or
the"Company"), a Delaware corporation, was incorporated November 17, 1986. On
February 28, 1997, Gensia Sicor completed the acquisition of Rakepoll Holding
B.V. ("Rakepoll Holding") from Rakepoll Finance N.V. ("Rakepoll Finance").
Rakepoll Holding is the parent company of three specialty pharmaceutical
businesses: SICOR-Societa Italiana Corticosteroidi S.p.A. ("SICOR") of Milan,
Italy, and two companies located in Mexico: Lemery, S.A. de C.V. ("Lemery")
and Sicor de Mexico, S.A. de C.V. (formerly Sintesis Lerma, S.A. de C.V.)
("Sicor de Mexico"). Gensia Sicor is a specialty pharmaceutical company
focused on the development, manufacture and marketing of pharmaceutical
products for the worldwide oncology and injectable pharmaceutical markets.
The Company also has a proprietary medical products group focused on the
Laryngeal Mask Airway and the GenESA System and a basic research group
focused on pain, inflammation, diabetes and cardiovascular disease. The newly
combined company is headquartered in San Diego, California.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its nine wholly-owned subsidiaries: Rakepoll Holding, Gensia
Laboratories, Ltd., Gensia Automedics, Inc., Gensia Automedics Limited,
Gensia GmbH, Aramed, Inc., Gensia Development Corporation, Genchem Pharma
Ltd. and Metabasis Therapeutics, Inc. All significant intercompany accounts
and transactions have been eliminated. The accompanying consolidated balance
sheet at June 30, 1997 includes the assets, liabilities and stockholder's
equity of the combined companies. The consolidated statement of operations
and statement of cash flows for the six months ended June 30, 1997 include
the results for Rakepoll Holding from February 28, 1997 (the date of
acquisition), through June 30, 1997, only.
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments, necessary for the fair statement of the results for
the three and six-month periods ended June 30, 1997 and 1996 have been made.
The results of operations for the three and six-month periods ended June 30,
1997 are not necessarily indicative of the results to be expected for the
full fiscal year.
The accompanying consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included
in the Company's 1996 Form 10-K filed with the Securities and Exchange
Commission and the audited financial statements and notes thereto of Rakepoll
Holding B.V. included in the Company's 1997 Form 8-K/A filed with the
Securities and Exchange Commission.
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries outside the United States, except
those subsidiaries located in highly inflationary economies, are generally
measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at
the balance sheet date. The resulting translation adjustments are included
in the cumulative translation adjustment, a separate component of
stockholders' equity. Income and expense items are translated at average
monthly rates of exchange. For subsidiaries operating in highly inflationary
economies, gains and losses from balance sheet translation adjustments are
included in net earnings.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
classifications used in 1997.
6
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GENSIA SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
2. RAKEPOLL HOLDING ACQUISITION
On February 28, 1997, after shareholder approval, Gensia Sicor acquired all
of the outstanding shares of capital stock of Rakepoll Holding from Rakepoll
Finance in exchange for 29,500,000 shares of the Company's Common Stock and
$100,000. The acquisition was accounted for using the purchase method. The
total purchase price was $157.7 million, which was comprised of the fair
value of Common Stock issued of $146.6 million, acquisition costs of $11.0
million, and a cash payment of $100,000.
The purchase price allocation of the acquisition as reflected in the
accompanying financial statements does not reflect the allocation of
deferred income taxes. Management expects to complete such allocation in the
third quarter of 1997, and believes that the final allocation will not have a
material impact on the Company's net loss through June 30, 1997. Based on the
purchase price of $157.7 million, the preliminary allocation of the
acquisition cost is as follows (in thousands):
<TABLE>
<S> <C>
Net tangible assets $ 26,291
Developed technology 45,000
Other intangibles 6,870
In-process research and development 29,200
Goodwill 50,354
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Total $157,715
========
</TABLE>
The developed technology and other intangibles are being amortized over
their estimated lives. The excess of the purchase price over the fair value
of identified assets and liabilities, in the amount of $50.4 million was
recorded as goodwill and is being amortized over its estimated life. The
value assigned to in-process research and development was immediately charged
to the statement of operations. This charge is not deductible for income tax
purposes. The following unaudited proforma data reflects the combined results
of operations of the Company and Rakepoll Holding as if the acquisition had
occurred on January 1, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
June 30,
1997 1996
-------- --------
<S> <C> <C>
Total revenues $ 76,855 $ 63,370
Net loss after preferred
stock dividends (53,175) (56,101)
Net loss per share $ (0.73) $ (0.86)
</TABLE>
3. CONTINGENCIES
During 1995, SICOR received claims from certain of its customers in
connection with shipments of a contaminated product. While no lawsuits have
been filed against SICOR with respect to this matter, SICOR has a
reserve of approximately $2.5 million at June 30, 1997, which represents
management's best estimate of product rework costs, attorneys' costs and
other settlement costs. Actual costs to be incurred in relation to the
ultimate settlement may vary from the amount estimated.
In the second quarter of 1997, Gensia Laboratories was sued for patent
infringement in the United States District Court for the Central District of
California, Research Corporation Technologies, Inc. and Bristol Myers Squibb
----------------------------------------------------------------
Co. v. Gensia Laboratories, Ltd., Civil Action No. 97-3992 TJH (Rcx), based
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upon Gensia Laboratories' submission to the FDA seeking approval to market a
generic injectable Cisplatin product. In this action, Gensia Laboratories has
been accused of infringing a patent relating to therapeutic compositions of
Cisplatin. Cisplatin is a drug under development at Gensia Laboratories, and
there have been no commercial sales of Cisplatin by Gensia Laboratories to
date. The filing of this lawsuit has the immediate effect of delaying the
effective date of any FDA approval for Gensia Laboratories' generic Cisplatin
product for injection until at least November 1999.
7
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GENSIA SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
4. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued Statement
of financial Accounting Standards No. 128, "Earnings Per Share." The Company
will be required to adopt these new rules effective December 15, 1997.
Management does not anticipate any impact resulting from the adoption of this
new standard upon current or previously reported primary earnings per share.
8
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GENSIA SICOR INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
GENSIA SICOR INC.
Date: September 16, 1997 By: /s/ David F. Hale
-------------------------------------
David F. Hale
President and Chief Executive Officer
Date: September 16, 1997 By: /s/ John W. Sayward
-------------------------------------
John W. Sayward
Vice President, Finance,
Chief Financial Officer
and Treasurer
9
