SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Event Reported): May 23, 1997
AGOURON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
California 0-15609 33-0061928
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
10350 North Torrey Pines Road
La Jolla, California 92037
(Address of principal executive offices) Zip Code
(619) 622-3000
(Registrant's telephone number, including area code)
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The following financial statements of Alanex Corporation are filed with this
report:
Page
------
Independent Auditors' Report F - 1
Balance Sheets as of December 31, 1995 and 1996 F - 2
Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 F - 3
Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996 F - 4
Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 F - 5
Notes to Financial Statements, December 31, 1994, 1995, and
1996 F - 7
Unaudited Balance Sheet as of March 31, 1997 F - 18
Unaudited Statement of Operations for the three months ended
March 31, 1997 and 1996 F - 19
Unaudited Statement of Cash Flows for the three months ended
March 31, 1997 and 1996 F - 20
(b) Pro forma financial information
The following pro forma condensed combined financial statements are filed with
this report:
Pro Forma Condensed Combined Balance Sheet at March 31, 1997 F - 21
Pro Forma Condensed Combined Statements of Operations:
Fiscal year ended June 30, 1996 F - 22
Nine-months ended March 31, 1997 F - 23
The pro forma condensed combined balance sheet of the Registrant as of March 31,
1997 reflects the financial position of the Registrant after giving effect to
the acquisition of Alanex Corporation discussed in Item 2 and assumes the
acquisition took place on March 31, 1997 and was accounted for as a purchase.
The pro forma condensed combined statements of operations for the fiscal year
ended June 30, 1996 and the nine-months ended March 31, 1997 assume that the
acquisition occurred on July 1, 1995, and are based on the operations of
Registrant and Alanex for the year ended June 30, 1996 and the nine-months ended
March 31, 1997. The fiscal 1996 operating results for Alanex were derived from
Alanex's operating results for the last six months of calendar 1995 and the
first six months of calendar 1996. The nine month operating results of Alanex
were derived from Alanex's operating results for the last six months of calendar
1996 and the first three months of calendar 1997.
The unaudited pro forma condensed combined financial statements have been
prepared by Registrant based upon assumptions deemed proper by it. The unaudited
pro forma condensed combined financial statements presented herein are shown for
illustrative purposes only and are not necessarily indicative of the future
financial position or future results of operations of Registrant, or of the
financial position or results of operations of Registrant that would have
actually occurred had the transaction been in effect as of the date or for the
periods presented. In addition, it should be noted that Registrant's financial
statements will reflect the acquisition only from May 23, 1997, the Closing
Date.
2
<PAGE>
The unaudited pro forma condensed combined financial statements should be read
in conjunction with the historical financial statements and related notes of
Registrant.
The acquisition of Alanex was facilitated by the issuance (or potential
issuance) of 995,921 shares of Agouron common stock as follows:
<TABLE>
<CAPTION>
Shares $ Value*
---------- --------------
<S> <C> <C>
In exchange for all of the outstanding common stock of Alanex 722,118 $ 49,104,000
Reserved for issuance against all of the outstanding options to
purchase common stock of Alanex 189,042 12,855,000
Reserved for issuance against all of the outstanding warrants to
purchase common stock of Alanex 84,761 5,7621,000
Total Agouron shares/purchase value 995,921 $ 67,723,000
======= ============
</TABLE>
*At $68.00 per share; the five day average closing stock price of Agouron
common stock for this period of April 22, 1997 through April 28, 1997. The
estimated allocation of the purchase value is as follows:
Assets (capitalized) $ 7,435,000
Liabilities (capitalized) (6,020,000
In process R&D technology (expensed) 66,308,000
----------
$67,723,000
This allocation is preliminary and based on management's estimates. The
final allocation will depend on the results of an independent in-process
valuation and may differ from management's estimates.
The identifiable intangibles of Alanex include several drug discovery programs,
a proprietary drug discovery technology, a chemical compound library and an
assembled work force. Each of these intangibles will be valued using either a
replacement cost approach (work force, library and proprietary technology) or an
income approach (research programs). Values assigned to the chemical compound
library and proprietary drug discovery technology will be capitalized as such
intangibles are of a general nature and may have a number of alternative future
uses. Values assigned to the drug discovery programs will be expensed as such
programs are pursuing specific drug targets or chemical compounds, the
technological feasibility of which has not been demonstrated, and there may be
no alternative future uses for such targets or chemical compounds if the
programs are ultimately less than successful. Value assigned to the assembled
work force will be expensed as the work force is not contractually obligated to
Alanex and all employment relationships are "at-will" in nature.
Initial management estimates of value resulted in substantially all of the
purchase price being allocated to the research programs. A third party valuation
will be utilized to determine the value of the consideration paid for Alanex,
the value of the tangible and intangible assets, and the allocation of the
purchase price to the tangible and intangible assets.
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Reorganization dated as of
April 28, 1997, between Agouron Pharmaceuticals, Inc.,
Agouron Acquisition Corporation and Alanex Corporation.
(Previously filed.)
23.1 Consent of KPMG Peat Marwick LLP. (Previously filed.)
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 18, 1997
AGOURON PHARMACEUTICALS, INC.
By /s/ Steven S. Cowell
---------------------------
Steven S. Cowell
Corporate Vice President,
Finance and Chief Financial
Officer and Chief Accounting
Officer
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Alanex Corporation:
We have audited the accompanying balance sheets of Alanex Corporation as of
December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996. These financial statements are the
responsibility of the Company'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 Alanex Corporation as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Diego, California
March 3, 1997
F-1
<PAGE>
ALANEX CORPORATION
Balance Sheets
December 31, 1995 and 1996
<TABLE>
<CAPTION>
December 31,
---------------------------------------
Assets (note 5) 1995 1996
----------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 114,000 $ 1,375,000
Debt securities available for sale 2,053,000 3,555,000
Inventory 131,000 209,000
Prepaid expenses and other current assets 167,000 131,000
----------------- ------------------
Total current assets 2,465,000 5,270,000
Notes receivable from officers (note 4) 60,000 110,000
Property and equipment, net (note 3) 3,122,000 3,002,000
Deposits and other assets 111,000 97,000
----------------- ------------------
Total assets $ 5,758,000 $ 8,479,000
================= ==================
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit (note 5) $ 725,000 $ 480,000
Current maturities of long-term debt (note 5) 347,000 331,000
Accounts payable and accrued expenses 305,000 905,000
Accrued payroll, payroll taxes and benefits 242,000 409,000
Deferred contract revenue (note 6) 94,000 813,000
----------------- ------------------
Total current liabilities 1,713,000 2,938,000
Long-term debt, less current maturities (note 5) 1,164,000 4,051,000
----------------- ------------------
Total liabilities 2,877,000 6,989,000
Stockholders' equity (notes 7 and 8):
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 2,978,000
Series A shares issued and outstanding at December 31,
1995; none outstanding at December 31, 1996 4,430,000 --
Common stock, $0.001 par value; 40,000,000 shares authorized;
3,723,000 and 3,752,000 shares issued and outstanding at
December 31, 1995 and 1996, respectively 4,000 4,000
Additional paid-in capital 260,000 1,762,000
Note receivable from officer for purchase of common stock (12,000) --
Accumulated deficit (1,801,000) (276,000)
----------------- ------------------
Total stockholders' equity 2,881,000 1,490,000
----------------- ------------------
Commitments (note 10)
Total liabilities and stockholders' equity $ 5,758,000 $ 8,479,000
================= ==================
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
ALANEX CORPORATION
Statements of Operations
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
1994 1995 1996
---------------- --------------- ----------------
<S> <C> <C> <C>
Revenue:
Contract revenue (note 6) $ 1,490,000 $ 3,509,000 $ 4,718,000
Project initiation fees (note 6) 250,000 250,000 4,000,000
Other revenue 16,000 7,000 3,000
---------------- --------------- ----------------
Total revenue 1,756,000 3,766,000 8,721,000
Operating expenses:
Research and development 2,181,000 3,685,000 5,112,000
General and administrative 585,000 804,000 999,000
Non-recurring charge (note 1) -- -- 598,000
---------------- --------------- ----------------
Total operating expenses 2,766,000 4,489,000 6,709,000
---------------- --------------- ----------------
Income (loss) from operations (1,010,000) (723,000) 2,012,000
---------------- --------------- ----------------
Other income (expense):
Interest income 97,000 180,000 180,000
Interest expense (25,000) (168,000) (338,000)
Gain (loss) on disposal of property and equipment -- (49,000) 2,000
---------------- --------------- ----------------
Other income (expense) 72,000 (37,000) (156,000)
---------------- --------------- ----------------
Income (loss) before income taxes (938,000) (760,000) 1,856,000
Income taxes (note 9) (1,000) (2,000) (331,000)
---------------- --------------- ----------------
Net income (loss) $ (939,000) $ (762,000) $1,525,000
================ =============== ================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ALANEX CORPORATION
Statements of Stockholders' Equity
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Preferred stock Common stock Additional
------------------------------ ------------------------------ paid in
Shares Amount Shares Amount capital
--------------- ---------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 -- $ -- 3,500,000 $ 4,000 $ 171,000
Issuance of Series A Preferred Stock
and common stock warrants to Amgen
2,978,000 4,430,000 -- -- 67,000
Issuance of common stock -- -- 140,000 -- 14,000
Net loss -- -- -- -- --
--------------- ---------------- -------------- ------------- ----------------
Balance at December 31, 1994 2,978,000 4,430,000 3,640,000 4,000 252,000
Payments received on note receivable
from officer for purchase of
common stock -- -- -- -- --
Issuance of common stock on exercise
of stock options -- -- 83,000 -- 8,000
Net loss -- -- -- -- --
--------------- ---------------- -------------- ------------- ----------------
Balance at December 31, 1995 2,978,000 4,430,000 3,723,000 4,000 260,000
Redemption of Series A Preferred
Stock (note 7) (2,978,000) (4,430,000) -- -- 1,499,000
Issuance of common stock on exercise
of stock options -- -- 29,000 -- 3,000
Payments received on note receivable
from officer for purchase of
common stock -- -- -- -- --
Net income -- -- -- -- --
--------------- ---------------- -------------- ------------- ----------------
Balance at December 31, 1996 -- $ -- 3,752,000 $ 4,000 $1,762,000
=============== ================ ============== ============= ================
<CAPTION>
<S> <C> <C> <C>
Balance at December 31, 1993 $ (18,000) $ (100,000) $ 57,000
Issuance of Series A Preferred Stock
and common stock warrants to Amgen
-- -- 4,497,000
Issuance of common stock -- -- 14,000
Net loss -- (939,000) (939,000)
--------------- ----------------- ----------------
Balance at December 31, 1994 (18,000) (1,039,000) 3,629,000
Payments received on note receivable
from officer for purchase of
common stock 6,000 -- 6,000
Issuance of common stock on exercise
of stock options -- -- 8,000
Net loss -- (762,000) (762,000)
--------------- ----------------- ----------------
Balance at December 31, 1995 (12,000) (1,801,000) 2,881,000
Redemption of Series A Preferred
Stock (note 7) -- -- (2,931,000)
Issuance of common stock on exercise
of stock options -- -- 3,000
Payments received on note receivable
from officer for purchase of
common stock 12,000 -- 12,000
Net income -- 1,525,000 1,525,000
--------------- ------------------ ----------------
Balance at December 31, 1996 $ -- $ (276,000) $ 1,490,000
=============== ================== ================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
Statements of Cash Flows
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
1994 1995 1996
---------------- --------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (939,000) $ $ 1,525,000
(762,000)
Adjustments to reconcile net income (loss) to net
cash provided by (used in)operating activities:
Depreciation and amortization 274,000 641,000 664,000
(Gain) loss on sale of property and equipment -- 49,000 (2,000)
Changes in assets and liabilities:
Inventory (64,000) (67,000) (78,000)
Prepaid expenses and other current assets (72,000) (133,000) 36,000
Accounts payable and accrued expenses 90,000 214,000 600,000
Accrued payroll, payroll taxes and benefits 145,000 97,000 167,000
Deferred contract revenue 145,000 (101,000) 719,000
---------------- --------------- ----------------
Net cash provided by (used in) operating
activities (421,000) (62,000) 3,631,000
---------------- --------------- ----------------
Cash flows from investing activities:
Proceeds from sale of property and equipment -- 28,000 29,000
Purchase of property and equipment (1,276,000) (2,568,000) (571,000)
Purchase of investment securities available for sale (4,454,000) (1,495,000) (2,998,000)
Proceeds from sale and maturities of investment
securities available for sale 1,526,000 2,413,000 1,496,000
Notes receivable from officers, net -- (54,000) (38,000)
Deposits and other assets (33,000) (19,000) 14,000
---------------- --------------- ----------------
Net cash used in investing activities (4,237,000) (1,695,000) (2,068,000)
---------------- --------------- ----------------
Cash flows from financing activities:
Net borrowings on line of credit 506,000 219,000 (245,000)
Proceeds from issuance of long-term debt 482,000 1,670,000 390,000
Payments on long-term debt (468,000) (401,000) (450,000)
Proceeds from issuance of common stock 14,000 -- --
Proceeds from issuance of Series A Preferred Stock 4,430,000 -- --
Proceeds from issuance of common stock warrants and
options 67,000 8,000 3,000
---------------- --------------- ----------------
Net cash provided by (used in) financing
activities 5,031,000 1,496,000 (302,000)
---------------- --------------- ----------------
Net increase (decrease) in cash and cash equivalents 373,000 (261,000) 1,261,000
Cash and cash equivalents at beginning of year 2,000 375,000 114,000
---------------- --------------- ----------------
Cash and cash equivalents at end of year $ 375,000 $ 114,000 $ 1,375,000
================ =============== ================
(continued)
</TABLE>
F-5
<PAGE>
ALANEX CORPORATION
Statements of Cash Flows, Continued
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------
1994 1995 1996
---------------- --------------- -----------------
<S> <C> <C> <C>
Supplemental cash flow disclosures:
Cash paid during the period for interest $ 23,000 $ 163,000 $ 210,000
Cash paid during the period for income taxes $ 1,000 $ 2,000 $
--
Supplemental schedule of noncash investing and financing activities:
Redemption of Series A Preferred Stock in exchange for
note payable (notes 5 and 7) $ -- $ -- $ 2,931,000
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements
December 31, 1994, 1995 and 1996
(1) Organization and Summary of Significant Accounting Policies
Organization
Alanex Corporation (the "Company") was incorporated in November 1993,
under the laws of the state of California. In July 1996, the Company was
reincorporated under the laws of the state of Delaware. The Company is a
drug discovery company that is applying its highly integrated and
comprehensive approach to rapidly and cost-effectively discover and
optimize novel, small molecule drug candidates.
The 1994 and 1995 financial statements were consolidated to include the
Company's subsidiary, Plictrix, Inc. Plictrix, Inc. was dissolved in
September 1996 and all assets and liabilities were transferred to the
Company. All material intercompany balances and transactions were
eliminated in consolidation.
Cash Equivalents
Cash equivalents consist of short-term money market funds and are stated
at cost, which approximates fair market value. For purposes of the
statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
Debt Securities Available for Sale
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115),
requires that investments be classified as "held to maturity," "available
for sale" or "trading securities." Investments held to maturity are to be
reported at amortized cost. Other investments in debt and equity
securities are to be recorded at fair market value. The Company adopted
SFAS 115 effective January 1, 1994. The adoption of SFAS 115 did not have
a material impact on the Company's financial position or results of
operations.
Management determines the appropriate classification of its investments
in debt and equity securities at the time of purchase and reevaluates
such determination at each balance sheet date. Debt securities for which
the Company does not have the intent or ability to hold to maturity are
classified as available for sale. As of December 31, 1995 and 1996, debt
securities available for sale consisted of government-backed and
corporate debt instruments. Debt securities available for sale are
carried at fair value, which approximates cost, with any unrealized gains
and losses, net of tax, reported as a separate component of stockholders'
equity. These securities mature at various dates throughout 1997.
Inventory
Inventory consists of chemical materials and supplies and is
stated at the lower of cost or net realizable value. Cost is
determined on a first-in, first-out basis.
F-7
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
Depreciation and Amortization
Depreciation and amortization are computed using the double declining
balance method over the estimated useful lives of the related assets or
over the terms of the related capital leases, whichever is shorter (three
to fifteen years). Renewals and replacements which extend the useful life
of the asset are capitalized.
Contract Revenue
Contract revenue is recognized at the time research and development
activities are performed under the terms of the research contracts.
Contract payments are generally received in advance of the performance of
the related research activities under the contract quarterly. Payments
received in excess of amounts earned are recorded as deferred contract
revenue. Project initiation fees are nonrefundable and the Company has no
future performance obligations related to such fees or payments. Project
initiation fees are recognized as revenue when earned. Revenue from
milestone payments will be recognized if and when the results or events
stipulated in the agreement have been achieved. Through December 31,
1996, the Company has not received any milestone payments under any of
its collaboration agreements.
Research and Development Costs
All research and development costs are expensed in the period incurred.
Patents
Costs to obtain, maintain and defend patents are expensed in the period
incurred.
Non-recurring Charge
In 1996, the Company incurred $598,000 of costs related to a planned
stock offering. Due to a downturn in market conditions, the Company
ceased its efforts and wrote-off the associated deferred offering costs.
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB Opinion
No. 25). On January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation", which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the grant date. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123.
F-8
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenue and expenses
and the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Reclassifications
Certain amounts in the 1994 and 1995 statements of operations have been
reclassified to conform with the 1996 method of presentation.
(2) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that fair values be
disclosed for the Company's financial instruments. The carrying amount of
cash, other current assets, accounts payable and accrued expenses, and
deferred contract revenue are considered to be representative of their
respective fair values due to the short-term nature of those instruments.
Debt securities available for sale are carried at fair value. The
carrying amount of the line of credit and long-term debt are reasonable
estimates of their fair values as the debt bears interest based on market
rates currently available for debt with similar terms.
(3) Property and Equipment
Property and equipment consist of the following at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
1995 1996
------------------ ------------------
<S> <C> <C>
Laboratory equipment $ 1,752,000 $ 1,949,000
Office and computer equipment 689,000 806,000
Leasehold improvements 1,747,000 1,903,000
Construction in progress -- 46,000
------------------ ------------------
4,188,000 4,704,000
Accumulated depreciation and amortization (1,066,000) (1,702,000)
------------------ ------------------
$ 3,122,000 $ 3,002,000
================== ==================
</TABLE>
Laboratory and office equipment acquired under a capital lease
obligation totaled $193,000, $170,000, and $170,000 net of
accumulated amortization of $152,000, $145,000 and $148,000 at
December 31, 1994, 1995 and 1996, respectively.
F-9
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
(4) Notes Receivable from Officers
As of December 31, 1996, the Company had an unsecured note receivable
from an officer of the Company in the amount of $60,000, due May 1999
with interest payable annually at the minimum rate of interest required
to avoid imputed interest (6.75% at December 31, 1996). In addition, at
December 31, 1995, there was an outstanding receivable from this officer
in the amount of $10,000.
As of December 31, 1995 and 1996, the Company had a second unsecured
note receivable from another officer in the amount of $50,000, due
November 1998 with interest payable annually at the minimum rate of
interest required to avoid imputed interest (6.75% at December 31, 1996).
(5) Long-term Debt
Long-term debt at December 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
------------------ ------------------
<S> <C> <C>
Unsecured, non-interest bearing, term obligation for
preferred stock redemption, face value of $4,500,000,
discounted to an 8.95% effective rate, including imputed
interest of $128,000, due June 28, 2001 (Note 7).
$ $ 3,060,000
--
Term note payable to bank, interest at 30-day commercial
paper rate plus 2.95% (8.91% at December 31, 1996),
principal payments of $20,000 plus interest due monthly
through August 1997;
secured by equipment.
160,000 160,000
Capital lease obligation for equipment, interest at 8.5%
per annum, monthly installments due through October
1996, secured by equipment. 36,000 --
Term obligation for tenant improvements, interest at 11% per
annum, monthly installments of $24,000 due through
2002; secured by leasehold improvements.
1,315,000 1,162,000
------------------ ------------------
1,511,000 4,382,000
Current maturities (347,000) (331,000)
------------------ ------------------
$ 1,164,000 $ 4,051,000
================== ==================
</TABLE>
F-10
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
Maturities of long-term debt as of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 331,000
1998 191,000
1999 213,000
2000 237,000
2001 4,798,000
Thereafter 52,000
------------------
5,822,000
Less imputed interest 1,440,000
------------------
4,382,000
Current maturities (331,000)
------------------
$ 4,051,000
==================
</TABLE>
In connection with the secured term note payable, the Company has an
available line of credit for the difference between the balance
outstanding on the term notes and $960,000 and $720,000 at December 31,
1995 and 1996, respectively. The credit facility requires $240,000 of the
loan principal balance to be converted to a term loan and paid annually.
The line of credit bears interest at the 30-day commercial paper rate
plus 2.95%. The balance outstanding on this line of credit was $725,000
and $480,000 at December 31, 1995 and 1996, respectively. Both the term
note payable and line of credit are secured by all of the assets of the
Company and are guaranteed by Amgen Inc. (Note 7).
(6) Research and License Agreements
Aurora Biosciences
In November 1996, the Company and Aurora Biosciences (Aurora) entered
into a material transfer and screening agreement whereby Alanex will
provide Aurora one sample of the Alanex compound library consisting of
150,000 small organic compounds for new lead generation in Aurora's
proprietary assay screening systems. Any identified activity in Aurora's
screens would be developed in a joint research collaboration.
Roche Bioscience
In June 1996, the Company and Roche Bioscience entered into a three-year
collaboration agreement to discover an antagonist for an undisclosed
target for the treatment of pain. The agreement provides for Roche
Bioscience to pay to the Company a non-refundable project initiation fee
of $4.0 million which was received by the Company and recognized as a
project initiation fee in 1996. Roche Bioscience is obligated to make
additional payments upon the achievement of certain milestones. In
addition, during the term of the agreement, Roche Bioscience will provide
a minimum of $5.5 million in additional funding to support research
personnel at the Company, and the Company will work exclusively with
Roche Bioscience on the selected molecular target. To date, Alanex has
received $1.7 million in contract revenue under the collaboration. The
agreement provides Roche Bioscience, upon the payment of a milestone
payment, to an exclusive worldwide license to commercialize any compounds
resulting from the research that is selected by Roche Bioscience for
further development and to pay royalties on any sales of products
developed from the collaboration. Alanex will retain all
F-11
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
rights to compounds not selected by Roche Bioscience for development,
provided that Roche Bioscience is not developing a structurally-related
compound on which Roche Bioscience will be paying milestones and
royalties to the Company, and Alanex may pursue such compounds following
termination of the collaboration. Upon completion of the first year of
the agreement, Roche Bioscience may terminate the collaboration at any
time upon six months prior written notice. In the event the collaboration
agreement is terminated prior to its expiration, all licenses granted by
the parties to one another will terminate and revert back to the
respective parties, provided however, that Roche Bioscience will retain
the right to commercialize any products resulting from the research
efforts under licenses granted by the Company prior to the termination.
In January 1997, Alanex achieved the first research milestone stipulated
in the terms of the collaboration agreement and received the related
milestone payment. The payment will be recognized as income in 1997.
Mount Sinai
In June 1996, the Company and Mount Sinai entered into an agreement to
conduct research relating to the human GnRH receptor. Under the
agreement, the Company funded the initial phase of the research and is
obligated to provide additional funding upon the achievement of certain
milestones. The Company recorded $108,000 of research and development
expense related to this agreement in 1996. In connection with the
research agreement, Mount Sinai granted the Company, (i) a non-exclusive
worldwide license to develop and commercialize any products based upon
certain inventions and technologies owned by Mount Sinai relating to the
human GnRH receptor and (ii) an exclusive worldwide license to develop
and commercialize any products based upon know-how or patents or patent
applications covering inventions made during the course of the research.
Pursuant to the terms of the licenses, the Company is obligated to pay
Mount Sinai a percentage of any milestone payments received by the
Company from third-party sublicenses and royalties on sales of products.
The Company may terminate the licenses upon 60 days written notice
whereupon all rights granted under the licenses will revert back to Mount
Sinai.
Novo Nordisk
In October 1995, the Company and Novo Nordisk entered into a three-year
collaboration agreement for the characterization of novel, non-peptide
ligands with desired receptor ligand binding affinities to be used to
develop small molecule drugs for the treatment of diabetes. Novo Nordisk
paid the Company a project initiation fee of $250,000 in 1995 and is
obligated to make additional payments to the Company upon the achievement
of certain milestones. In addition, Novo Nordisk is obligated to provide
up to $4.5 million of additional funding to support research at the
Company in the field of collaboration. The agreement provides that, in
the event the collaboration results in a drug candidate which Novo
Nordisk elects to pursue to commercialization, Novo Nordisk will be
granted an exclusive worldwide license to develop and commercialize such
drug candidate and the Company will receive royalties on the sales of any
such drug. To date, Alanex has received $2.2 million in contract revenue
under the collaboration. Novo Nordisk may, at any time, terminate the
collaboration upon three months written notice. Upon any such early
termination, any licenses granted to Novo Nordisk by Alanex under the
collaboration agreement will continue in full force and effect, unless
otherwise specifically terminated.
F-12
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
Astra Pharma
In December 1994, the Company and Astra AB entered into a three-year
collaboration agreement for the identification and optimization of lead
compounds that interact with a specific opiate receptor which may have
application in the treatment of pain. The agreement was subsequently
assigned to Astra Pharma, an affiliate of Astra AB. The Company was paid
a project initiation fee of $250,000 and, Astra Pharma is obligated to
make additional payments upon the achievement of certain milestones.
Astra Pharma is obligated to provide up to $2.25 million of additional
funding to support research undertaken in connection with the agreement.
To date, Alanex has received $1.6 million in contract revenue under the
collaboration. Under the terms of the collaboration, Astra Pharma owns
all rights in and has title to any and all compounds discovered and
products developed as a result of the research collaboration. The Company
has no right to commercialize and is not entitled to receive royalties on
the sales of any products resulting from the collaboration agreement.
Astra Pharma may terminate the collaboration agreement at any time upon
three months written notice. In the event of early termination of the
collaboration agreement, Astra Pharma shall have exclusive title to all
compounds and associated intellectual property rights discovered as a
result of the collaboration.
Amgen
In April 1994, the Company entered into a collaboration agreement with
Amgen under which Alanex granted to Amgen a worldwide exclusive license
to drugs discovered by Alanex to treat neurological diseases and a
worldwide non-exclusive license to Alanex, a proprietary software program
developed by the Company to analyze peptides. Under the terms of the
agreement, the Company received a negotiated amount for each research
full-time equivalent (FTE) devoted to the programs per year. Included in
contract revenue for 1995 and 1996 is $2,565,000 and $1,215,000,
respectively, recognized under this agreement. This research agreement
was terminated by mutual agreement in June 1996. Under the termination
agreement, Alanex provided to Amgen on a non-exclusive basis certain
compounds that were included in the Alanex technology licensed to Amgen
under the collaboration agreement. In exchange for such compounds, Amgen
paid Alanex $400,000 in February 1997. In connection with the
termination, all licenses, options and other rights to the Company's
technology granted to Amgen under the collaboration agreement were
terminated (Note 7).
(7) Stockholders' Equity
In connection with the 1994 Amgen collaboration agreement, the Company
issued to Amgen 2,978,182 shares of Series A Preferred Stock at a
purchase price of $1.51 per share and a warrant to purchase 703,636
shares of common stock at an exercise price of $0.005 per share. In June
1996, the collaboration agreement between the Company and Amgen was
terminated. In connection with the termination of the Amgen agreement,
(i) except as set forth below, all rights to the Company's technology
reverted to the Company, (ii) Amgen's warrant to purchase 703,636 shares
of common stock was canceled and the Company issued a new warrant to
Amgen to purchase 450,000 shares of common stock at an exercise price of
$1.51 per share with a term of seven years, and (iii) the Company
redeemed Amgen's 2,978,182 shares of Series A Preferred Stock
(representing all of the issued and outstanding preferred stock of the
Company), at a repurchase price of $1.51 per share, payable with an
unsecured, non-interest bearing promissory note for $4,500,000 due June
28, 2001.
F-13
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
(8) Stock Options
In November 1993, the Company adopted the Alanex Corporation 1993 Stock
Plan (the "1993 Plan"). Upon adoption of the 1993 Plan, 1,050,000 shares
of common stock were reserved for issuance under the 1993 Plan. In
December 1993, the number of shares of common stock issuable under the
1993 Plan was increased to 1,350,000. At December 31, 1996, there were
8,313 remaining shares available for grant under the 1993 Plan.
In July 1996, the Company adopted the Alanex Corporation 1996 Equity
Incentive Plan (the "1996 Plan). Upon adoption of the 1996 Plan, 500,000
shares of common stock were reserved for issuance. At December 31, 1996,
there were 467,800 remaining shares available for grant under the 1996
Plan.
Under both the 1993 Plan and the 1996 Plan, the Board of Directors may
grant incentive stock options to purchase common stock at prices which
are not less than the fair market value at the date of grant.
Nonstatutory stock options are granted at prices which are to be
determined by the Board of Directors, but not less than 85% of fair
market value at the date of grant. Other terms and conditions are
established by the Board of Directors at the time of grant. Options
under the Plans generally vest over 4 years and have a term of 10 years
from the date of grant.
The Company has from time to time granted options to purchase shares of
common stock outside of the Plans ("Non-Plan Options") to certain
directors, officers and employees of the Company. As of December 31,
1996, Non-Plan Options, granted on January 19, 1996, were outstanding to
purchase an aggregate of 210,000 shares of common stock at a weighted
average exercise price of $0.50 per share, and no Non-Plan Options had
been exercised. These Non-Plan Options vest monthly and ratably over a
three-year period. Non-Plan Options have a term of ten years, except that
Non-Plan Options generally expire 30 days after the termination of an
optionee's employment or other service relationship with the Company. In
general, if an optionee dies while in an employment or service
relationship with the Company, that person's option may be exercised up
to six months after his death.
The per share weighted-average fair value of stock options granted during
1995 and 1996 was $0.05 and $0.19 on the date of grant using the Black
Scholes option-pricing model with the following weighted-average
assumptions: 1995 - expected dividend yield 0%, risk-free interest rate
of 6.3% and an expected life of 5 years; 1996 - expected dividend yield
0%, risk-free interest rate of 6.3% and an expected life of 5 years.
The Company applies the provisions of APB Opinion No. 25 in accounting
for its Plans and, accordingly, no compensation cost has been recognized
for its stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant date
for stock options under SFAS No. 123, the Company's net income (loss)
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
------------------ ------------------
<S> <C> <C>
Net income (loss), as reported $ (762,000) $ 1,525,000
Pro forma $ (766,000) $ 1,470,000
</TABLE>
F-14
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
Pro forma net income reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation cost is reflected over the
options' vesting period of 4 years and compensation cost for options
granted prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Weighted
average
Number of exercise price
shares per share
----------------- -----------------
<S> <C> <C>
Outstanding at December 31, 1993 349,000 $ .10
Options granted 171,000 .10
-----------------
Outstanding at December 31, 1994 520,000 .10
Options granted 148,000 .10
Options exercised (83,000) .10
Options canceled (29,000) .10
-----------------
Outstanding at December 31, 1995 556,000 .10
Options granted 492,000 .40
Options exercised (29,000) .10
Options canceled (36,000) .10
-----------------
Outstanding at December 31, 1996 983,000 .25
=================0
</TABLE>
At December 31, 1996, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $0.10 - $1.50
and 8.6 years, respectively.
At December 31, 1995 and 1996, the number of options exercisable was
367,000 and 478,000, respectively, and the weighted average exercise
price of those options was $0.10 and $0.12, respectively.
F-15
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
(9) Income Taxes
The Company's income taxes for 1994, 1995 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Current:
Federal $ $ $ 200,000
-- --
State 1,000 2,000 131,000
------------------ ------------------ ------------------
1,000 2,000 331,000
------------------ ------------------ ------------------
Deferred:
Federal -- -- --
State -- -- --
------------------ ------------------ ------------------
-- -- --
------------------ ------------------ ------------------
$ 1,000 $ 2,000 $ 331,000
================== ================== ==================
</TABLE>
The following table summarizes the tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and
deferred tax liability at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards - federal $ 587,000 $
--
Net operating loss carryforwards - state 109,000 --
Accrued employee benefits 27,000 92,000
Depreciable and amortizable assets -- 116,000
Other credits -- 59,000
----------------- -----------------
Gross deferred tax assets 723,000 267,000
Valuation allowance (723,000) (267,000)
----------------- -----------------
Net deferred tax asset $ $
-- --
================= =================
</TABLE>
The Company has recorded a valuation allowance against any deferred tax
assets for deductible temporary differences and tax operating loss
carryforwards. The Company increased (decreased) its valuation allowance
by approximately $300,000, $322,000 and ($456,000) for the years ended
December 31, 1994, 1995 and 1996, respectively, primarily as a result of
the increase (utilization) in tax operating loss carryforwards.
As of December 31, 1995, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $1,800,000 which were
available to offset future federal taxable income, if any, through 2010,
and net operating loss carryforwards for state income tax purposes of
approximately $900,000 which were available to offset future state
taxable income, if any, through 2000. As of December 31, 1996, the
Company had no net operating loss carryforwards for federal or state
purposes.
F-16
<PAGE>
ALANEX CORPORATION
Notes to Financial Statements, Continued
(10) Commitments
Leases that do not meet the criteria for capitalization are classified as
operating leases with related rentals charged to operations as incurred.
Future minimum lease payments under noncancellable operating leases (with
initial lease terms in excess of one year) as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 211,000
1998 211,000
1999 211,000
2000 211,000
2001 211,000
Thereafter 88,000
------------------
$ 1,143,000
==================
</TABLE>
Total 1994, 1995 and 1996 rent expense for operating leases was $128,000,
$258,000 and $211,000, respectively.
In January 1997, Alanex entered into a Construction and Financing
Agreement (the "Agreement") with Genesee Properties and General Atomics
for the expansion of Alanex facilities to be completed no later than June
1997. The cost of the tenant improvements associated with the expansion
will be financed by Genesee Properties in an amount not to exceed $1.6
million. Any tenant improvement costs in excess of this will be paid
directly by Alanex. Construction period financing on cumulative
construction draws shall extend from the date of the start of
construction through September 30, 1997. Interest will accrue on amounts
drawn at the rate of 11% per annum. On October 1, 1997, all accrued
interest on the construction period financing will be due, and a Secured
Promissory Note amortized at 11% annual interest, due May 2002, will be
executed.
(11) Employee Benefits Plan
Effective January 1, 1995, the Board of Directors approved the Alanex
401(k) Compensation Deferral Savings Plan (the "401k Plan"), adopting
provisions of the Internal Revenue Code Section 401(k). The 401k Plan was
approved by the IRS in 1995. The 401k Plan is for the benefit of all
qualifying employees, and permits employee voluntary contributions and
Company profit sharing contributions. At the discretion of the Board of
Directors, the Company may match employee contributions equal to a
discretionary percentage of the employee's salary reductions, limited to
the maximum contribution allowable for income tax purposes. Employer
contributions vest ratably over five years of service. No employer
contributions have been approved by the Board of Directors through
December 31, 1996.
F-17
<PAGE>
ALANEX CORPORATION
Balance Sheet
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31,
1997
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 283
Short-term investments 3,339
Accounts receivable --
Inventory 233
Other current assets 276
-------------
Total current assets 4,131
Property and equipment, net 3,304
-------------
$ 7,435
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 483
Accrued liabilities 453
Deferred revenue 237
Current portion of long-term debt 776
-------------
Total current liabilities 1,949
-------------
Long-term debt, less current portion 4,071
-------------
Stockholders' equity:
Common stock, 3,834 shares issued and outstanding 1,774
Accumulated deficit (359)
-------------
Total stockholders' equity 1,415
-------------
$ 7,435
=============
</TABLE>
F-18
<PAGE>
ALANEX CORPORATION
Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
----------------- ---------------
<S> <C> <C>
Revenues:
Contracts $ 2,313 $ 1,142
--------------- ---------------
Operating expenses:
Research and development 1,511 1,087
General and administrative 834 270
--------------- ---------------
2,345 1,357
--------------- ---------------
Operating income (loss) (32) (215)
---------------- ----------------
Other income (expenses):
Interest, net (48) (12)
Taxes (2) 0
---------------- ---------------
(50) (12)
---------------- ----------------
Net income (loss) $ (82) $ (227)
================ ================
Net income (loss) per common share $ (.02) $ (.06)
================ ================
Shares used in computing net loss
per common share 3,790 3,725
================ ================
</TABLE>
F-19
<PAGE>
ALANEX CORPORATION
Statement of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (82) $ (227)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 170 171
Amortization of note discount 66 --
Net change in assets and liabilities (984) (23)
--------------- ----------------
Net cash used in operating activities (830) (79)
--------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (470) (141)
Proceeds from investment securities held for sale, 171 539
net
Notes receivable from officers, net 110 (50)
--------------- ----------------
Net cash used in investing activities (189) 348
--------------- ---------------
Cash flows from financing activities:
Payments on long-term debt, net (81) (99)
Proceeds from issuance of common stock options 8 --
-------------- ---------------
Net cash used by investing activities (73) (99)
-------------- ----------------
Net increase (decrease) in cash (1,092) 170
Cash and cash equivalents at beginning of period 1,375 114
--------------- ---------------
Cash and cash equivalents at end of period $ 284 $ 284
=============== ===============
Supplemental cash flow disclosures:
Cash paid during the period for interest $ 44 $ 54
Cash paid during the period for income taxes $ 46 $ --
</TABLE>
F-20
<PAGE>
AGOURON PHARMACEUTICALS, INC.
Pro Forma Condensed Combined Balance Sheet
March 31, 1997
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- --------------------------
Agouron Alanex(1) Adjustments Combined
------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,595 $ 283 $ (2,000)(2) $ 5,878
Short-term investments 75,332 3,339 78,671
Accounts receivable 16,481 -- 16,481
Inventory 42,657 233 42,890
Other current assets 1,006 276 0 1,282
----------- ----------- ----------- -----------
143,071 4,131 (2,000) 145,202
Property and equipment, net 11,905 3,304 0 15,209
----------- ----------- ----------- -----------
$ 154,976 $ 7,435 $ (2,000) $ 160,411
=========== =========== ============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,015 $ 483 $ 0 $ 14,498
Accrued liabilities 7,501 453 7,954
Deferred revenue 7,489 237 7,726
Current portion of long-term debt 427 776 1,203
----------- ----------- ----------- -----------
Total current liabilities 29,432 1,949 0 31,381
----------- ----------- ----------- -----------
Long term liabilities:
Long-term debt 534 4,071 4,605
Accrued rent 1,158 0 1,158
----------- ----------- ----------- -----------
Total long-term liabilities 1,692 4,071 0 5,763
----------- ----------- ----------- -----------
Stockholders' equity:
Common stock 238,899 1,774 65,954(3) 306,627
Accumulated deficit (115,047) (359) (67,954) (183,360)
----------- ----------- ------------ -----------
Total stockholders' equity 123,852 1,415 (2,000) 123,267
----------- ----------- ------------ -----------
$ 154,976 $ 7,435 $ (2,000) $ 160,411
=========== =========== ============ ===========
<FN>
- -----------------------------
1 To consolidate the assets and liabilities included in the balance sheet of
Alanex Corporation as of March 31, 1997. Assumes that the book value of
such assets and liabilities reflect their fair market value.
2 To record estimated transaction costs.
3 To record estimated allocation of $67,728 purchase price: Assumes that the
book value of Alanex assets and liabilities at March 31, 1997 reflect the
fair market value of such assets and liabilities and that the excess purchase
price is allocated to in-process research and development activities and
expensed.
Note: Actual transaction costs and the actual amount and allocation of the
purchase price may vary from these estimates.
</FN>
</TABLE>
F-21
<PAGE>
AGOURON PHARMACEUTICALS, INC.
Pro forma Condensed Combined Statement of Operations
Fiscal Year Ended June 30, 1996
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- --------------------------
Agouron Alanex(4) Adjustments Combined
------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Contract $ 40,955 $ 6,437 $ 0 $ 47,392
License fees 15,000 0 15,000
Net sales 0 0 0
----------- ----------- ----------- -----------
55,955 5,437 0 62,392
----------- ----------- ----------- -----------
Operating expenses:
Research and development 71,010 4,251 75,261
General and administrative 9,016 1,374 0 10,390
Cost of goods sold 0 0 0 0
----------- ----------- ----------- -----------
80,026 5,625 0 85,651
----------- ----------- ----------- -----------
Operating income (loss) (24,071) 812 0 (23,259)
----------- ----------- ----------- ------------
Other income and expense:
Interest, net 4,548 (107) 4,441
Taxes 0 (3) (3)
----------- ----------- ----------- -----------
4,548 (110) 0 4,438
----------- ----------- ----------- -----------
Net income (loss) $ (19,523) $ 702 $ 0 $ (18,821)
=========== =========== =========== ===========
Net income (loss) per common share $ (1.98) n/a n/a $ (1.78)
=========== =========== =========== ===========
Shares used in computing net income
(loss) per common share 9,844 0 722(5) 10,566
=========== =========== === ===========
<FN>
- -------------------------
4 To consolidate the assets and liabilities included in the balance sheet of
Alanex Corporation as of March 31, 1997. Assumes that the book value of
such assets and liabilities reflect their fair market value.
5 To reflect the issuance of 722 shares of Agouron Common Stock as
consideration for the outstanding common stock of Alanex in the merger.
</FN>
</TABLE>
F-22
<PAGE>
AGOURON PHARMACEUTICALS, INC.
Pro Forma Combined Condensed Statement of Operations
Nine Months Ended March 31, 1997
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- --------------------------
Agouron Alanex(6) Adjustments Combined
------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenue:
Contract $ 48,835 $ 6,809 $ 0 $ 55,644
License fees 9,000 0 9,000
Net sales 13,401 0 13,401
----------- ----------- ----------- -----------
71,236 6,809 0 78,045
----------- ----------- ----------- -----------
Operating expenses:
Research and development 81,367 4,363 0 85,730
General and administrative 19,802 1,855 0 21,657
Cost of goods sold 6,023 0 0 6,023
----------- ----------- ----------- -----------
107,192 6,218 0 113,410
----------- ----------- ----------- -----------
Operating income (loss) (35,956) 591 0 (35,365)
----------- ----------- ----------- -----------
Other income and expense:
Interest, net 4,872 (178) 0 4,694
Taxes (918) (331) 0 (1,249)
------------ ----------- ----------- ------------
3,954 (509) 0 3,445
----------- ----------- ----------- -----------
Net income (loss) $ (32,002) $ 82 $ 0 $ (31,920)
=========== =========== =========== ===========
Net income (loss) per common share $ (2.42) n/a $ 0 $ (2.29)
=========== =========== =========== ===========
Shares used in computing net increase
(loss) per common share 13,239 n/a $ 722(7) 13,961
=========== =========== = === ===========
<FN>
- -----------------------
6 To consolidate the assets and liabilities included in the balance sheet of
Alanex Corporation as of March 31, 1997. Assumes that the book value of
such assets and liabilities reflect their fair market value.
7 To reflect the issuance of 722 shares of Agouron Common Stock as
consideration for the outstanding common stock of Alanex in the merger.
</FN>
</TABLE>
F-23
