<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter ended March 31, 2000.
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
SICOR INC.
-----------
(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.)
19 Hughes
Irvine, California 92618
------------------------------
(Address of principal executive offices and zip code)
(949) 455-4700
----------------------
(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
----- -----
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 90,321,696
- --------------------------- --------------------------------------
Class Outstanding at March 31, 2000
<PAGE>
SICOR INC.
INDEX
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION
Item 1: FINANCIAL STATEMENTS PAGE
<S> <C> <C>
Consolidated Balance Sheets at March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Operations and Comprehensive Income (Loss)
for the three months ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - for the three months ended
March 31, 2000 and 1999 11
Liquidity and Capital Resources 12
Impact of Year 2000 14
Item 2A: Quantitative and Qualitative Disclosures about Market Risk 14
PART II OTHER INFORMATION
Item 1: Legal Proceedings 21
Item 6: Exhibits and Reports on Form 8-K 21
SIGNATURES 22
</TABLE>
2
<PAGE>
SICOR INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 43,359 $ 47,506
Accounts receivable, net 50,484 49,623
Inventories, net 51,573 47,716
Other current assets 8,625 9,514
----------- -----------
Total current assets 154,041 154,359
Property and equipment, net 101,194 101,839
Other noncurrent assets 22,696 22,551
Intangibles, net 42,806 42,971
Goodwill, net 63,081 64,459
----------- -----------
$ 383,818 $ 386,179
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,394 $ 35,363
Accrued payroll and related expenses 7,158 5,858
Other accrued liabilities 20,335 25,680
Short-term borrowings 28,487 36,685
Current portion of long-term debt 6,765 6,974
Current portion of capital lease obligations 1,332 1,521
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Total current liabilities 98,471 112,081
Other long-term liabilities 11,030 9,599
Long-term debt, less current portion 33,706 35,661
Long-term capital lease obligations, less current portion 2,083 2,447
Deferred taxes 16,907 17,537
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized,
1,600 issued and outstanding, liquidation preference of
$80,000 16 16
Common stock, $.01 par value, 125,000 shares authorized,
90,322 and 88,848 shares issued and outstanding
at March 31, 2000 and December 31, 1999, respectively 903 888
Additional paid-in capital 565,418 558,802
Accumulated deficit (341,171) (348,310)
Accumulated other comprehensive loss (3,545) (2,542)
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Total stockholders' equity 221,621 208,854
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$ 383,818 $ 386,179
=========== ===========
</TABLE>
See accompanying notes.
3
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SICOR INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues:
Product sales $ 67,545 $ 48,357
Contract research and license fees -- 5,303
------------ ------------
Total revenues 67,545 53,660
Costs and expenses:
Cost of sales 38,229 33,287
Research and development 3,904 5,322
Selling, general and administrative 10,441 9,623
Non-cash compensation 2,579 --
Amortization expense 1,498 1,528
Interest and other, net 2,194 2,595
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Total costs and expenses 58,845 52,355
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Net income before income taxes 8,700 1,305
Provision for income taxes (1,561) (1,501)
------------ ------------
Net income (loss) before minority interest 7,139 (196)
Minority interest -- 31
------------ ------------
Net income (loss) 7,139 (165)
Dividends on preferred stock (1,488) (1,488)
------------ ------------
Net income (loss) applicable to common shares 5,651 (1,653)
Other comprehensive loss:
Foreign currency translation (1,003) (1,231)
------------ ------------
Comprehensive net income (loss) $ 4,648 $ (2,884)
============ ============
Net income (loss) per share
- Basic $ .06 $ (.02)
============ ============
- Diluted $ .06 $ (.02)
============ ============
Shares used in calculating per share amounts
- Basic 89,916 79,813
============ ============
- Diluted 100,475 79,813
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
SICOR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,139 $ (165)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,976 4,875
Gain on disposal of property & equipment (12) --
Non-cash compensation 2,673 --
Minority interest -- (31)
Deferred income tax 412 (9)
Inventory purchase price allocation adjustments 450 104
Change in operating assets and liabilities:
Accounts receivable (1,706) (3,067)
Inventories (5,522) (306)
Prepaid expenses and other assets (619) 610
Accounts payable and accrued expenses (4,023) 7,532
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Net cash provided by operating activities 3,768 9,543
Cash flows from investing activities:
Purchases of property and equipment (4,759) (8,166)
Proceeds from sale of property 26 --
Other noncurrent assets 483 --
----------- -----------
Net cash used in investing activities (4,250) (8,166)
Cash flows from financing activities:
Payments of cash dividends on preferred stock (1,488) (1,488)
Issuance of common stock and warrants, net 6,446 511
Change in short-term borrowings (6,744) (3,174)
Issuance of long-term debt and capital lease obligations 904 6,532
Principal payments on long-term debt and capital lease obligations (2,425) (1,716)
----------- -----------
Net cash (used in) provided by financing activities (3,307) 665
Effect of exchange rate changes on cash (358) (1,337)
----------- -----------
(Decrease) increase in cash and cash equivalents (4,147) 705
Cash and cash equivalents at beginning of period 47,506 24,461
----------- -----------
Cash and cash equivalents at end of period $ 43,359 $ 25,166
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
ORGANIZATION
SICOR Inc. (formerly Gensia Sicor Inc.) ("SICOR" or the "Company"), a
Delaware corporation, was incorporated November 17, 1986. SICOR is a specialty
pharmaceutical company focused on the development, manufacture and marketing of
products for worldwide oncology and injectable pharmaceutical markets. The
Company is headquartered in Irvine, California. On February 28, 1997, 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 S.p.A.") 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. ("Sicor de Mexico"). In addition, in December 1997, Sicor S.p.A. purchased
a 50% equity interest in Diaspa S.p.A. ("Diaspa"), an Italian company engaged in
the manufacture of certain raw materials used in Sicor S.p.A.'s business. In
June 1998, Sicor S.p.A. purchased the remaining 50% of Diaspa. During the second
quarter of 1999, the Company divested a 46% interest in Metabasis Therapeutics,
Inc. ("Metabasis"), a proprietary research and development subsidiary, after
which the Company retains a 46% interest.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiary companies, all of which are wholly owned. Affiliated
companies in which the Company does not have a controlling interest, or for
which control is expected to be temporary, are accounted for using the equity
method. The four wholly owned subsidiaries are as follows: Rakepoll Holding
B.V., Gensia Sicor Pharmaceuticals, Inc. ("Gensia Sicor Pharmaceuticals"),
Gensia Development Corporation and Genchem Pharma Ltd. ("Genchem Pharma"). All
significant intercompany accounts and transactions have been eliminated.
Subsequent to the divestiture of a 46% interest in Metabasis, the Company
retains a 46% equity interest in Metabasis. Accordingly, starting in the second
quarter of 1999, investment in Metabasis was accounted for using the equity
method, as the Company no longer had control of Metabasis.
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-month periods ended March 31, 2000 and 1999 have been made. The
results of operations for the three-month period ended March 31, 2000 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 1999 Form 10-K filed with the Securities and Exchange Commission.
FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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
reporting period. Actual results could differ from those estimates. Certain
prior year amounts have been reclassified to conform to the current year
presentation.
6
<PAGE>
SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
2. 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. Income and expense items are translated
at average monthly rates of exchange.
3. CHANGE IN ACCOUNTING PRINCIPLES
Sicor S.p.A., at the time of acquisition in 1997, used the LIFO method
to determine inventory valuation. Effective January 1, 1999, Sicor S.p.A.
changed to the FIFO method. The change in accounting principal, which has been
applied retroactively for the years 1999, 1998, and 1997 (from the date of the
Rakepoll acquisition), was made to conform the inventory valuation method of
Sicor S.p.A. to the method used for all of the Company's other operations. At
the time of acquisition, this change was considered but delayed because of the
relative insignificance of the accounting change and the need to concentrate on
other more pressing merger related issues. As expected, since the acquisition,
the Company has been more fully integrated and management believes one worldwide
inventory valuation method is preferable. Additionally, the Company has been in
a stable price environment where LIFO and FIFO are approximately the same and
prices are not expected to increase significantly in the foreseeable future. As
such, FIFO more closely represents current costs in the current stable price
environment.
The effect of this change in 1999 was to decrease net income by $0.9
million ($0.01 per share), as follows (in thousands):
<TABLE>
<CAPTION>
Adjustment to 1999 Net Income
------------------------------------
Quarter Total Per Share
- ------- ---------------- ---------------
<S> <C> <C>
First $ - $ -
Second (217) -
Third (113) -
Fourth (617) (0.01)
---------------- ---------------
$ (947) $ (0.01)
================ ===============
</TABLE>
4. NON-CASH COMPENSATION
In September 1997, the stockholders approved the Chairman's Options
(the "Chairman's Options"). Under the Chairman's Options, the Company's
Chairman of the Board was issued 500,000 shares of common stock of which
200,000 shares were fully vested at the time of grant, and the remaining
300,000 shares were to vest in increments of 100,000 shares subject to
meeting certain performance conditions. During the first quarter of 2000, the
remaining 300,000 shares vested upon attainment of the stipulated conditions.
Accordingly, the Company recorded $1.6 million in compensation expense due to
the vesting of such options in the first quarter of 2000. An additional
incentive compensation expense of $1 million relating to the Company's
chairman was also recorded in the first quarter of 2000, upon the Company
reaching the market capitalization of $1 billion in accordance with the terms
of an agreement between the Company and the Chairman of the Board. Payments
will be made through the issuance of common stock to be distributed in equal
annual installments over ten years.
7
<PAGE>
SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
5. NET INCOME (LOSS) PER SHARE
Basic EPS includes no dilution and is computed by dividing net income,
after deducting preferred stock dividends, by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilutive effect of additional common shares that are issuable upon exercise of
outstanding stock options, warrants, and other dilutive securities. The
calculations of basic and diluted weighted average shares outstanding are as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------
2000 1999
------ ------
<S> <C> <C>
BASIC:
Net income (loss) applicable to common shares $ 5,651 $ (1,653)
Basic weighted average common shares outstanding 89,916 79,813
----------- -----------
Basic net income (loss) per share $ .06 $ (.02)
=========== ===========
DILUTED:
Net income (loss) applicable to common shares $ 5,651 $ (1,653)
Add 2.675% interest expense on subordinated
convertible notes 296 --
----------- -----------
Net income (loss) applicable to diluted shares $ 5,947 $ (1,653)
=========== ===========
Basic weighted average common shares outstanding 89,916 79,813
Net effect of dilutive stock options - based on
the treasury stock method 2,595 --
Net effect of dilutive warrants - based on the
treasury stock method 2,561 --
Net effect of potential shares issuable in connection with
stock compensation expense 112 --
Assumed conversion of 2.675% subordinated
convertible notes 5,291 --
----------- -----------
Diluted weighted average common shares outstanding 100,475 79,813
=========== ===========
Diluted net income (loss) per share $ .06 $ (.02)
=========== ===========
</TABLE>
The net effect of dilutive shares has not been included in the
computation of diluted net loss per share for the period ended March 31, 1999
since the effects of such conversions and exercises would have been
anti-dilutive.
6. COMPREHENSIVE NET INCOME (LOSS)
SFAS No. 130, "Reporting Comprehensive Income," requires the
reporting and display of comprehensive income and its components, which, for
the Company includes net income (loss) and foreign currency translation
adjustments.
In accordance with SFAS No. 130, the accumulated balance of other comprehensive
income (loss) is disclosed as a separate component of stockholders' equity.
8
<PAGE>
SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
7. INVENTORIES
Inventories at March 31, 2000 and December 31, 1999 consisted of (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Raw materials $ 24,573 $ 24,767
Work-in-process 11,957 9,421
Finished goods 18,919 17,904
---------- ----------
55,449 52,092
Less reserves (3,876) (4,376)
---------- ----------
$ 51,573 $ 47,716
========== ==========
</TABLE>
8. CONTINGENCIES
In February 1999, a lawsuit was filed by AstraZeneca plc (formerly Zeneca
Limited) ("AstraZeneca") in the U.S. District Court in Baltimore, Maryland
against the Food and Drug Administration ("FDA") with regard to Gensia Sicor
Pharmaceuticals' Abbreviated New Drug Application ("ANDA") for propofol. In the
suit, AstraZeneca alleged that the FDA improperly approved Gensia Sicor
Pharmaceuticals' propofol product. The Company believes this lawsuit is without
merit, and that it represents AstraZeneca's continued legal maneuvering to stop
the FDA approval of generic propofol. Gensia Sicor Pharmaceuticals intervened in
the lawsuit to protect its interest and support the FDA in its defense of this
lawsuit. The court denied AstraZeneca's motion for a preliminary injunction on
March 26, 1999, and on August 11, 1999, granted Gensia Sicor Pharmaceuticals'
and the FDA's motion for summary judgment and entered judgment in favor of the
defendants. AstraZeneca has appealed this judgment to the United States Court of
Appeals for the Fourth Circuit. Should AstraZeneca ultimately succeed on appeal
in its litigation against the Company and the FDA, it could have a material
adverse effect on the Company's financial position, results of operations or
cash flows.
It has been reported that certain United States governmental agencies,
including the Department of Justice and the Department of Health and Human
Services, have been investigating issues surrounding pricing information
reported by drug manufacturers and used in the calculation of reimbursements
under the Medicaid program administered jointly by the federal government and
the states. The Company has supplied documents in connection with these
investigations and has had preliminary discussions with representatives of the
9
<PAGE>
SICOR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
federal and state governments, but is unable to estimate at this time what
effect, if any, these investigations will have on the Company's pricing
policies or its financial statements. There can be no assurance that these
investigations will not result in changes to the Company's pricing policies
or other actions which might have a material adverse effect on the Company's
financial position, results of operations or cash flows.
The Company is also a defendant in various actions, claims, and legal
proceedings arising from its normal business operations. Management believes the
Company has meritorious defenses and intends to vigorously defend against all
allegations and claims. As the ultimate outcome of these matters is uncertain,
no contingent liabilities or provisions have been recorded in the accompanying
financial statements for such matters. However, in management's opinion,
liabilities arising from such matters, if any, will not have a material adverse
effect on consolidated financial position, results of operations or cash flows.
9. SUBSEQUENT EVENTS
On April 25, 2000, the holders of $20 million of 2.675% subordinated
convertible notes elected to convert all outstanding principal into 5,291,005
shares of the Company's common stock at a conversion price of $3.78 per
share. Common shares pursuant to the conversion were issued on May 1, 2000.
The conversion shares have been reflected in the Company's Fully Diluted
Earnings per Share calculations for the first quarter of 2000. Prior to the
first quarter of 2000, the net effect of the conversion shares were not
included in the computation of diluted net loss per share since the effects
of such conversions and exercises would have been antidilutive. Beginning in
the second quarter of 2000, the newly issued shares will be recorded as equity
and will be reflected in both the basic and fully diluted earnings per share
calculations on a going forward basis.
In April 2000, Michael D. Cannon, Executive Vice President and Chief
Scientific Officer was named Executive Vice President and President of the
Company's Biotechnology Division.
10
<PAGE>
SICOR INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
When used in this Form 10-Q, the words "expects," "anticipates,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements involve risks and uncertainties, including the
timely development, regulatory approvals, successful marketing of new products
and acceptance of new products, the impact of competitive products, product
costs and pricing, changing market conditions and the other risks detailed
throughout this Form 10-Q and in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 including those listed under "RISK FACTORS THAT
MAY AFFECT RESULTS." Actual results may differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which represent the Company's judgment as of the date of the filing
of this Form 10-Q. The Company disclaims, however, any intent or obligation to
update these forward-looking statements.
RESULTS OF OPERATIONS
The Company reported net income of $5.7 million, or $.06 per common
share (after dividends on preferred stock of $1.5 million), in the first quarter
ended March 31, 2000 compared to a net loss of $1.7 million, or $.02 per common
share (after dividends on preferred stock of $1.5 million), in the first quarter
of 1999.
Product sales in the first quarter of 2000 increased to $67.5 million
from $48.4 million in the first quarter of 1999. The increase in product sales
was mainly from the launch of the new product propofol in the U.S. in April
1999, representing incremental revenues over the first quarter of 1999. The
increase was offset by a one-time sale of oncology finished goods inventory to
Abbott Laboratories ("Abbott") as a result of the Sales and Distribution
Agreement entered into with Abbott in January 1999. The Company's propofol
product is being sold in the U.S. through Baxter Pharmaceutical Products, Inc.
("Baxter"), which is the Company's marketing partner for a variety of the
products sold in the U.S. In addition, the Company also launched a new product
hydralazine in the U.S. during the first quarter of 2000, and had increased
sales from its international units of $5.0 million over the first quarter of
1999, primarily due to higher sales of existing products.
Cost of sales in 2000 was $38.2 million which yielded a product gross
margin of 43%, compared to a cost of sales of $33.3 million in 1999 which
yielded a gross margin of 31%. The increase in gross margin was primarily due to
a more profitable product mix. New products positively impacted this mix, namely
the introduction of propofol and haloperidol in 1999 and hydralazine during the
first quarter of 2000.
Contract research and license fees in the first quarter of 2000
decreased by $5.3 million from the first quarter of 1999. The decrease was
mainly due to a non-recurring reimbursement received in March 1999 from Baxter
for expenses incurred by the Company for propofol research and development. Also
contributing to the decrease was the absence of license fees paid to Metabasis,
which was partially divested by the Company in the second quarter of 1999.
Research and development expenses in the first quarter of 2000 were
$3.9 million compared to $5.3 million in the same period of 1999. The reduction
was primarily due to the absence of research and development expenses incurred
by Metabasis, which was partially divested by the Company in the second quarter
of 1999. Offsetting the reduction were increased research and development
expenses at Gensia Sicor Pharmaceuticals.
11
<PAGE>
Selling, general and administrative expenses in the first quarter of
2000 were $10.4 million compared to $9.6 million in the same period of 1999. The
increase was mainly due to higher general and administrative costs associated
with company-wide growth. Offsetting the increase was the absence of Metabasis'
selling, general and administrative expenses due to its partial divestiture in
the second quarter of 1999.
The Company recognized non-cash compensation expense of $2.6 million
in the first quarter of 2000 for performance incentives earned by Mr. Donald
Panoz under the terms of his agreement to serve as SICOR`s non-executive
Chairman of the Board. Accordingly, the Company recorded $1.6 million in
compensation expense due to the vesting of stock options in the first quarter
of 2000. An additional incentive compensation expense of $1 million relating
to the Company's chairman was also recorded in the first quarter of 2000 upon
the Company reaching the market capitalization of $1 billion in accordance
with the agreement. Payments will be made through the issuance of common
stock to be distributed in equal annual installments over ten years.
The Company recorded amortization expense of $1.5 million in the
first quarter of 2000 compared to $1.5 million in the first quarter of 1999.
Interest and other expenses in the first quarter of 2000 decreased to $2.2
million from $2.6 million in the first quarter of 1999 primarily due to
increased interest income earned on higher cash balances and decreased
interest expenses due to the reduction of debt, offset by higher foreign
exchange losses. In connection with the conversion of $20 million of 2.675%
subordinated convertible notes, see Note 9, the Company expects to avoid
approximately $0.3 million in interest expense per quarter on a going forward
basis.
Income tax expense in the first quarter of 2000 was $1.6 million
compared to income tax expense of $1.5 million in the first quarter of 1999. The
increase in income tax expense was primarily due to increased earnings in the
U.S. operations, and was substantially offset by the application of the
Company's net operating loss carryforwards, for which a benefit had not
previously been claimed.
The Company recorded no minority interest in the operations of
Metabasis for the first quarter of 2000 compared to $31,000 in the first quarter
of 1999 as Metabasis was partially divested in the second quarter of 1999 and
the remainder book value of the Company's investment in Metabasis was written
off at that time.
Dividends relate to the Company's convertible exchangeable preferred stock
issued in February 1993. The Company paid cash dividends on its preferred stock
totaling $1.5 million in the first quarter of 2000 compared to $1.5 million in
the first quarter of 1999. In order to reduce its cash usage, the Company's
Board of Directors determined not to declare the preferred stock quarterly
dividend payments for June, September and December 1995 and March and June 1996.
The Company resumed payments of preferred stock dividends in September 1996.
Through March 2000, the Company has approximately $7.5 million in undeclared
cumulative preferred dividends. If the Company chooses not to declare dividends
for six cumulative quarters, the holders of $3.75 Convertible Exchangeable
Preferred Stock, $.01 par value ("Convertible Preferred Stock"), voting
separately as a class, will be entitled to elect two additional directors until
the dividend in arrears has been paid.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, SICOR had cash and cash equivalents of $43.4
million and working capital of $55.5 million compared to $47.5 million and $42.3
million, respectively, as of December 31, 1999. The decrease in cash was
primarily the result of the Company having generated $3.8 million of cash from
operations offset by the investment of $4.3 million in long term assets, and the
net use of $3.3 million in financiing activities. Additionally, the negative
impact of exchange rates reduced cash by $0.4 million.
Significant changes in operating assets and liabilities during the
first quarter of 2000 included a $5.5 million increase in inventory, a $4.0
million decrease in accounts payable and accrued expenses, a $1.7 million
increase in accounts receivable and a $0.6 million increase in prepaid expenses
and other assets. The decrease in accounts payable and accrued expenses
12
<PAGE>
reflected large one-time payments to vendors, and the increase in accounts
receivable reflected the Company's efforts to launch new products, and
continued growth in propofol sales.
The Company's financing activities during the first quarter of 2000
primarily consisted of cash proceeds of $6.4 million from the exercise of
stock options and warrants, offset by the net reduction of $6.7 million in
short-term borrowings, principal payments of $2.4 million on long-term debt
and capital lease obligations, and the payment of cash dividends on the
Company's preferred stock.
In the first quarter of 2000, the Company paid cash dividends on its
preferred stock totaling $1.5 million. At March 31, 2000, the Company had five
cumulative quarters, or approximately $7.5 million, in undeclared cumulative
preferred dividends. If the Company chooses to not declare dividends for six
cumulative quarters, the holders of the preferred stock, voting separately as a
class, will be entitled to elect two additional directors until the dividend in
arrears has been paid.
The Company expects to incur additional costs, including manufacturing
and marketing costs, to support anticipated product launches. The planned
spending on sales and marketing activities during 2000 related to promoting
products is approximately $14.5 million. Management also plans to invest in
plant and equipment to increase and improve existing manufacturing capacity,
including the expansion of facilities in Italy and Lemery and to make further
investments in the oncology manufacturing facility at Gensia Sicor
Pharmaceuticals in Irvine, California. Additional investments in plant and
equipment are also planned for propofol production at Gensia Sicor
Pharmaceuticals. Future spending relating to these planned capital
expenditures in Italy, Mexico and Irvine, California, along with new planned
capital expenditures, are estimated to total $34 million during 2000. The
Company anticipates funding capital spending through cash flow from
operations and new lease agreements.
The Company anticipates that its operating cash flows, combined with its
current cash and cash equivalents on hand at March 31, 2000 of $43.4 million and
commitments from third parties, will enable it to maintain its current and
planned operations. In connection with its plans for expanding its business, to
accomplish its core strategy of being a leading fully-integrated provider of
injectable pharmaceutical products and services, the Company's management and
Board of Directors will continue to evaluate the need to raise additional
capital and, if appropriate, pursue equity, debt or lease financing, or a
combination of these, for its capital and investment needs. Such financings may
not be available on acceptable terms, or at all. If financing is not available,
the Company may have to reduce planned expenditures, discontinue certain
operations, or otherwise restructure to continue operations.
As discussed in Note 8, it has been reported that certain U.S.
governmental agencies, including the Department of Justice and the Department of
Health and Human Services, have been investigating issues surrounding pricing
information reported by drug manufacturers and used in the calculation of
reimbursements under the Medicaid program administered jointly by the federal
government and the states. There can be no assurance that these investigations
will not result in changes to the Company's pricing policies or other actions
which might have a material adverse effect on the Company's financial position,
results of operations or cash flows.
In March 1999, the Company's Italian subsidiary, Sicor S.p.A., entered
into twenty monthly U.S. $1 million U.S. Dollar put/Lira call options
exercisable in 1999, ten at a strike price of Lira 1,696 per U.S. $1 and
13
<PAGE>
an additional ten at a strike price of Lira 1,750 per U.S. $1. Additionally, in
September 1999, Sicor S.p.A. entered into sixteen monthly U.S. Dollar put/Lira
call options, the first four contracts, exercisable in 1999, were for U.S. $0.5
million and the next twelve contracts, exercisable starting in January 2000,
were for U.S. $1 million at a strike price of Lira 1,800 per U.S. $1. In
addition, in November 1999, Sicor S.p.A. entered into twelve monthly U.S. $1
million U.S. Dollar put/Lira call options at a strike price of Lira 1,800 per
U.S. $1 exercisable starting in January 2000. As of March 31, 2000, no contracts
have been exercised.
NEW ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition In Financial
Statements." SAB No. 101 provides guidance in applying generally accepted
accounting principles to revenue recognition in financial statements,
including the recognition of nonrefundable up-front fees received in
conjunction with a research and development arrangement. The evaluation of
the impact of SAB No. 101 has not been completed. However, to the extent SAB
No. 101 would be applicable and have a material impact, we would implement
this new pronouncement beginning with the second quarter of 2000.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The cost incurred
to date for the Year 2000 transition was approximately $1.7 million which
includes software and hardware upgrades that would have been purchased in the
normal course of business to accommodate future growth and worldwide
integration. The Company is not aware of any material problems resulting from
Year 2000 issues, either with its products, its internal systems, or the
products and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the Year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
ITEM 2A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk with respect to its debt outstanding
and foreign currency transactions. Most of the Company's long-term borrowings
are based on fixed interest rates and therefore not subject to material risk
from changes in interest rates. Short-term borrowings, however, are based on
prime or other indicative base rates plus a premium. If these indicative base
rates increase, the Company will incur higher relative interest expense and
similarly, a decrease in the rates will reduce relative interest expense. In
recent years, there have not been significant fluctuations in the prime or other
indicative base rates. A 1.0% change in the prime rate or other indicative base
rates would not materially change interest expense assuming levels of debt
consistent with historical amounts. Due to the Company's international
operations, certain transactions are conducted in foreign currencies. The
Company's Italian operations hedge against transactional risks by borrowing
against its receivables and against economic risk by buying monthly call options
to strike at a rate equal to or above the budgeted exchange rate.
RISK FACTORS THAT MAY AFFECT RESULTS
This report includes forward-looking statements about the Company's
business and results of operations, which are subject to risks and uncertainties
that could cause the Company's actual results to vary materially from those
indicated in such forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this Form 10-Q and in the Company's Annual Report on Form
10-K for the year ended December 31, 1999. The factors discussed below should be
read in conjunction with the risk factors discussed in the Company's Annual
Report on Form 10-K, which are incorporated by reference.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company anticipates that its operating cash flows, combined with its
current cash and cash equivalents on hand at March 31, 2000 of $43.4 million,
and commitments from third parties, will enable it
14
<PAGE>
to maintain its current and planned operations. The Company will continue to
evaluate the need for additional capital and, if appropriate, pursue equity,
debt or lease financing, or a combination of these, for its capital needs. Such
financings may not be available on acceptable terms, or at all. If the Company
is unable to obtain additional financing, the Company may have to reduce its
capital expenditures, spending for the development of new products, and its
workforce. Such reductions would have a material adverse effect on the Company.
In addition, at March 31, 2000, approximately $106 million of the Company's $384
million in assets consisted of either intangibles or goodwill. The Company may
not be able to realize any value from these intangible assets. The Company
reviews long-lived assets and certain identifiable intangibles for impairment
whenever events or changes in circumstances indicate that the total amount of an
asset may not be recoverable. An impairment loss is recognized when estimated
future cash flows expected to result from the use of the asset and its eventual
disposition are less than its carrying amount.
LOSS HISTORY; UNCERTAINTY OF FUTURE PROFITABILITY
Until 1999, the Company was unprofitable on an annual basis since its
inception in 1986. As of March 31, 2000, the Company had an accumulated deficit
of approximately $341.2 million. The Company may not be profitable on a
quarterly or annual basis in the future. The Company believes that future
operating results will be subject to quarterly and annual fluctuations due to a
variety of factors, including whether and when new products are successfully
developed and introduced by the Company, market acceptance of current or new
products, regulatory delays, product recalls, manufacturing delays or
inefficiencies, shipment problems, seasonal customer demand, the timing of
significant orders, changes in reimbursement policies, competitive pressures on
average selling prices, changes in the mix of products sold and uncertainty with
respect to patent matters.
COMPETITION
SICOR operates in a rapidly evolving business environment. Competition
from large pharmaceutical companies, biotechnology companies, and other
companies is intense. Many of these companies have substantially greater
resources and experience in developing, manufacturing and marketing
pharmaceutical products than SICOR. There can be no assurance that competitors
will not succeed in developing technologies and products that are more effective
or that would render the technology and products of SICOR obsolete or
noncompetitive.
A significant portion of SICOR's business is dependent on winning bids
from the Mexican government public hospital program. The bidding for this
program is highly competitive with numerous other pharmaceutical manufacturers
participating, many of which are established companies with greater financial
and other resources than SICOR. The Company may not be able to continue to
compete effectively with respect to this program.
GOVERNMENT REGULATION; NO ASSURANCE OF OBTAINING REGULATORY APPROVALS
The testing, manufacture and marketing of SICOR's products are subject to
regulation by numerous federal, state and local governmental authorities in the
United States, and by similar agencies in other countries in which SICOR
develops, manufactures and markets drugs. SICOR must receive approval for each
of its drugs from the applicable regulatory agencies before it may be marketed
as a drug in a particular country. The regulatory process can take many years
and may require SICOR to expend substantial resources. In addition, SICOR may
encounter delays or rejections based on changes in regulatory agency policies
during the period in which a potential drug is being developed and/or the period
required for review of any application for regulatory agency approval. Delays in
obtaining regulatory agency approvals could negatively
15
<PAGE>
affect the marketing of any potential drug, result in the imposition of costly
procedures on SICOR's activities, and negatively affect SICOR's ability to
receive royalties. SICOR may not obtain regulatory approvals for potential
drugs.
Moreover, if SICOR obtains regulatory agency approval for a drug, such
approval may be limited regarding the indicated uses for which the drug may be
marketed and this would limit SICOR's potential market for the drug.
Furthermore, the marketing and manufacture of drug products remain subject to
extensive regulatory requirements. The discovery of previously unknown problems
with any of SICOR's drugs could result in restrictions on such drugs including
withdrawal of the drugs from the market. If SICOR fails to comply with
regulatory requirements, it could be fined, its regulatory approvals suspended,
its operations restricted and it could be involved in criminal prosecution. In
addition, regulatory agency approval of pricing is required in many countries
and may be required for the marketing in such countries of any drug SICOR
develops.
DEPENDENCE ON KEY PERSONNEL
The success of SICOR depends in large part upon its ability to attract and
retain qualified scientific, manufacturing, marketing and management personnel.
SICOR faces competition for such personnel from other companies, academic
institutions, government entities and other organizations. In addition, the
success of SICOR will be dependent upon key personnel, the loss of which may
have a material adverse effect on the Company's business.
UNCERTAINTY OF ABILITY TO OPERATE WITHOUT INFRINGING ON PATENTS AND PROPRIETARY
TECHNOLOGY OF OTHERS
The success of SICOR will depend, in part, on its ability to maintain
trade secret protection and operate without infringing on the proprietary rights
of third parties. The patents others have, or may acquire, may have an adverse
effect on the ability of SICOR to commercialize its products. Litigation, which
could result in substantial costs to the Company, may be necessary to determine
the scope and validity of the proprietary rights of third parties. If any of the
Company's products are found to infringe upon the patents or other rights owned
by third parties, SICOR may be subject to significant liabilities to third
parties and may be required to obtain licenses to patents or other proprietary
rights of third parties which may not be available on acceptable terms. If SICOR
does not obtain such licenses, product introductions could be delayed or
foreclosed. SICOR may not have sufficient funds to obtain licenses that may be
required in order to develop and commercialize its products, to contest patents
obtained by third parties, or to defend against suits brought by third parties.
SICOR also relies on protecting its proprietary technology in part through
confidentiality agreements with its corporate collaborators, employees,
consultants and certain contractors. These agreements may be breached and SICOR
may not have adequate remedies for any breach. In addition, SICOR's trade
secrets may otherwise become known or independently discovered by its
competitors.
POTENTIAL INABILITY TO OBTAIN RAW MATERIALS OR MANUFACTURE PRODUCTS
SICOR depends on third party manufacturers for bulk raw materials for many
of its products. These raw materials are generally available from a limited
number of sources, and certain raw materials are available only from foreign
sources. In addition, Gensia Sicor Pharmaceuticals utilizes sole sources of
supply for certain raw materials used in the manufacture of its products and
certain packaging components. Any disruption in one or more of these supply
sources could have a material adverse effect on SICOR.
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<PAGE>
UNCERTAINTY OF PHARMACEUTICAL PRICING, REIMBURSEMENT AND RELATED MATTERS
The levels of revenues and profitability of pharmaceutical companies will
be affected by the continuing efforts of governmental and third party payors to
contain or reduce the costs of health care through various means. For example,
in certain foreign markets pricing or profitability of prescription
pharmaceuticals is subject to government control. Domestically and
internationally, there have been, and SICOR expects that there will continue to
be, a number of legislative proposals to implement government controls. While
SICOR cannot predict whether any such legislative or regulatory proposals or
reforms will be adopted, or the effect such proposals or reforms may have on its
businesses, the announcement of such proposals or reforms could have a material
adverse effect on SICOR's ability to raise capital. Additionally, the adoption
of such proposals or reforms could have a material adverse effect on SICOR's
business, financial condition and profitability.
In addition, in both the United States and elsewhere, sales of
prescription pharmaceuticals are dependent in part on the availability of
reimbursement to the consumer from third party payors, such as government and
private insurance plans. Third party payors are increasingly challenging the
prices charged for medical products and services. The products of SICOR may not
be considered cost effective and reimbursement to the consumer may not be
available or may not be sufficient to allow SICOR to sell its products on a
competitive basis. If purchasers or users of SICOR's products are not able to
obtain adequate reimbursement for the cost of using SICOR's products, they may
forego or reduce their use. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and whether
adequate third party coverage will be available.
It has been reported that certain United States governmental agencies,
including the Department of Justice and the Department of Health and Human
Services, have been investigating issues surrounding pricing information
reported by drug manufacturers and used in the calculation of reimbursements
under the Medicaid program administered jointly by the federal government and
the states. The Company has supplied documents in connection with these
investigations and has had preliminary discussions with representatives of the
federal and state governments, but is unable to estimate at this time what
effect, if any, these investigations will have on the Company's pricing policies
or its financial statements. There can be no assurance that these investigations
will not result in changes to the Company's pricing policies or other actions
which might have a material adverse effect on the Company's financial position,
results of operations or cash flows.
PRODUCT LIABILITY EXPOSURE; INADEQUACY OR UNAVAILABILITY OF PRODUCT LIABILITY
INSURANCE
SICOR, as a manufacturer of finished drug products, faces an inherent
exposure to product liability claims in the event that the use of any of its
technology or products is alleged to have resulted in adverse effects. This
exposure exists even with respect to those products that receive regulatory
approval for commercial sale, as well as those undergoing clinical trials. While
SICOR has taken and will continue to take what it believes are appropriate
precautions, there can be no assurance that it will avoid significant product
liability exposure.
In addition, as a manufacturer of bulk drug substances, SICOR supplies
other pharmaceutical companies with active ingredients, which are contained in
finished products. The ability of SICOR to avoid significant product liability
exposures depends in part upon its ability to negotiate appropriate commercial
terms and conditions with its customers and its customers' manufacturing,
quality control and quality assurance practices. SICOR may not be able to
negotiate satisfactory terms and conditions with its customers. Although SICOR
maintains insurance for product liability claims, which the Company believes is
in line with the insurance coverage carried by other companies in its industry,
the insurance coverage may not be sufficient. In addition, adequate insurance
coverage might not continue to be available at acceptable costs, if at all, and
17
<PAGE>
product liability claims could adversely affect the business or financial
condition of SICOR.
UNCERTAINTY REGARDING MEXICAN ECONOMIC FACTORS, GOVERNMENT POLICIES AND
INFLATION
The Mexican government has exercised and continues to exercise significant
influence over many aspects of the Mexican economy. Accordingly, Mexican
government actions could have a significant effect on Lemery and Sicor de
Mexico, and on market conditions and prices in Mexico. The majority of the
finished multisource drug products manufactured by Lemery are sold to the
Mexican government public hospital program. Sales to the Mexican government
public hospital program may not continue in the future. In addition, although
the Mexican government has paid Lemery on a timely basis, this payment pattern
may not continue in the future. Further, as recently as 1995, Mexico experienced
high double-digit inflation and it may experience similar high inflation in the
future. Future actions by the Mexican government, or developments in the Mexican
economy and changes in Mexico's political, social or economic situation may
adversely affect the operations of Lemery and Sicor de Mexico.
RISKS RELATED TO INTERNATIONAL OPERATIONS
Operations outside of Canada, Western Europe, Japan and the United States
are subject in varying degrees to greater business risks such as war, civil
disturbances, adverse governmental actions (which may disrupt or impede
operations and markets, restrict the movement of funds, impose limitations on
foreign exchange transactions or result in the expropriation of assets) and
economic and governmental instability. SICOR may experience material adverse
financial results with respect to its business in these markets if such events
were to occur.
ENVIRONMENTAL MATTERS
SICOR's business involves the controlled storage, use and disposal of
hazardous materials and biological hazardous materials. SICOR is subject to
numerous environmental regulations in the jurisdictions in which it operates.
Although SICOR believes that its safety procedures for handling and disposing of
these hazardous materials comply with the standards prescribed by law and
regulation in each of its locations, the risk of accidental contamination or
injury from hazardous materials cannot be completely eliminated. In the event of
an accident, SICOR could be held liable for any damages that result, and such
liability could exceed the Company's resources. SICOR's operations, business and
assets may be substantially and detrimentally affected by current or future
environmental laws or regulations. SICOR maintains liability insurance for some
environmental risks which the Company's management believes to be appropriate
and in accordance with industry practice. However, SICOR may incur liabilities
beyond the limits or outside the coverage of its insurance and may not be able
to maintain insurance on acceptable terms.
UNCERTAINTY OF OUTCOME OF LEGAL PROCEEDINGS
The Company is involved in various actions, claims, and legal proceedings
arising from its business operations. The ultimate outcome of these matters is
uncertain and could have a material adverse effect on the Company's financial
position, results of operations or cash flows. See Legal Proceedings.
CURRENCY FLUCTUATIONS
SICOR has significant operations in several countries, including the
United States, Italy, Mexico and Switzerland. In addition, purchases and sales
are made in a large number of other countries. As a result, its business is
subject to the risk and uncertainties of foreign currency fluctuations. While
18
<PAGE>
SICOR has policies and strategies to minimize this risk, there can be no
assurance that such policies and strategies will be effective in preventing
significant negative financial adjustments in the future.
CONTROL BY PRINCIPAL STOCKHOLDER
Carlo Salvi, the Company's President, Chief Executive Officer and a
director beneficially owns approximately 37% of the Company's Common Stock. In
addition, pursuant to a shareholder's agreement, dated as of November 12, 1996,
as amended (the "Shareholder's Agreement") Rakepoll Finance, an entity
controlled by Mr. Salvi, is entitled to designate three of SICOR's directors,
who in turn are entitled to designate (jointly with two executive officer
directors of SICOR) five additional directors. The consent of the Rakepoll
Finance designated directors is required for SICOR to take certain actions, such
as a merger or sale of all or substantially all of the business or assets of
SICOR and certain issuances of securities. As a result of his ownership of SICOR
Common Stock, Mr. Salvi may be able to control substantially all matters
requiring approval by the stockholders of SICOR, including the election of
directors and the approval of mergers or other business combination
transactions.
POSSIBLE VOLATILITY OF STOCK PRICE; DIVIDEND POLICY
The market price of the shares of SICOR Common Stock, like that of the
common stock of many other pharmaceutical companies, has been and is likely to
continue to be highly volatile. The market for securities of such companies has
from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. The market price
of SICOR Common Stock could be subject to significant fluctuations in response
to variations in SICOR's anticipated or actual operating results, sales of
substantial amounts of SICOR Common Stock, other issuances of SICOR Common Stock
pursuant to pre-existing obligations, announcements concerning SICOR or its
competitors, including the results of testing, technological innovations or new
commercial products or services, developments with SICOR's collaborators,
developments in patent or other proprietary rights of SICOR or its competitors,
including litigation, conditions in the pharmaceuticals industry, governmental
regulation, health care legislation, public concern as to the safety of SICOR's
products, changes in estimates of SICOR's performance by securities analysts,
market conditions for pharmaceutical stocks in general, and other events or
factors not within SICOR's control.
SICOR has never paid cash dividends on SICOR Common Stock. SICOR presently
intends to retain earnings, if any, for the development of its businesses and
does not anticipate paying any cash dividends on SICOR Common Stock in the
foreseeable future. Unless full cumulative dividends are paid on SICOR's
outstanding Convertible Preferred Stock, cash dividends may not be paid or
declared and set aside for payment on SICOR Common Stock. At March 31, 2000,
SICOR had approximately $7.5 million in undeclared cumulative preferred
dividends on such Convertible Preferred Stock. If SICOR chooses not to declare
dividends for six cumulative quarters, the holders of Convertible Preferred
Stock, voting separately as a class, will be entitled to elect two additional
directors until the dividend in arrears has been paid.
SUBORDINATION OF COMMON STOCK TO NOTES AND PREFERRED STOCK
SICOR's Common Stock is expressly subordinate to $20 million of 2.675%
subordinated convertible notes due May 1, 2004, and to the series A preferred
stock into which the notes are convertible, in the event of SICOR's liquidation,
dissolution or winding up. SICOR's Common Stock is also subordinate to the
approximately $80 million (plus accrued and unpaid dividends) liquidation
preference of SICOR's outstanding Convertible Exchangeable Preferred Stock. If
SICOR was to cease operations and liquidate its assets, there may not be any
remaining value available for distribution to the holders of common stock after
19
<PAGE>
providing for the above liquidation preferences. On April 25, 2000, the
holders of $20 million of 2.675% Subordinated Convertible Notes elected to
convert all outstanding principal into 5,291,005 shares of the Company's
Common Stock at a conversion price of $3.78 per share, see Note 9.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
SICOR's Certificate of Incorporation and Bylaws include provisions that
could discourage potential takeover attempts and make attempts by its
stockholders to change management more difficult. The approval of 66-2/3% of
SICOR's voting stock is required to approve certain transactions and to take
certain stockholder actions, including the calling of a special meeting of
stockholders and the amendment of any of the anti-takeover provisions contained
in SICOR's Certificate of Incorporation. SICOR also has a stockholder rights
plan, the effect of which may also deter or prevent takeovers. These rights will
cause a substantial dilution to a person or group that attempts to acquire SICOR
on terms not approved by the SICOR Board of Directors and may have the effect of
deterring hostile takeover attempts.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
------ -----------------------
27.1 Financial Data Schedule.
(b) Reports on Form 8-K during the first quarter
None.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SICOR INC.
Date: May 15, 2000 By: /s/ Carlo Salvi
------------------------------------
Carlo Salvi, President
and Chief Executive Officer
Date: May 15, 2000 By: /s/ John W. Sayward
------------------------------------
John W. Sayward, Executive Vice
President, Finance, Chief Financial
Officer and Treasurer
Date: May 15, 2000 By: /s/ David C. Dreyer
------------------------------------
David C. Dreyer, Vice President,
Corporate Controller and Chief
Accounting Officer
22
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