<PAGE> 1
Exhibit 20.4
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following information has been provided to aid you in your analysis of
the financial aspects of the merger. The financial information of Cephalon and
Anesta were derived from the audited consolidated financial statements for the
years ended December 31, 1999, 1998 and 1997 and the unaudited consolidated
financial statements for the six months ended June 30, 2000 and 1999. The
information is only a summary and should be read together with the historical
financial statements and related notes contained in the annual reports and
quarterly reports and other information that we have filed with the Securities
and Exchange Commission and incorporated by reference. The pro forma combined
financial information is not necessarily indicative of the combined financial
positions or results of operations that would have been reported if the
companies had been combined for all periods presented.
POOLING OF INTERESTS ACCOUNTING TREATMENT
The merger is expected to be accounted for as a "pooling of interests."
This means that, for accounting and financial reporting purposes, the companies
will be treated as if they had always been combined. We have presented unaudited
pro forma financial information that reflects the pooling of interests method of
accounting to provide a picture of what the businesses might have looked like
had they always been combined. The unaudited pro forma statements of operations
and pro forma balance sheets were prepared by combining the historical amounts
of each company. The companies may have performed differently had they always
been combined. You should not rely on the unaudited pro forma financial
information as being indicative of the historical results that would have
occurred or the future results that will occur after the merger.
PERIODS COVERED
The following unaudited pro forma balance sheets as of June 30, 2000 and
December 31, 1999 are presented as if the merger had occurred on June 30, 2000
and December 31, 1999, respectively. The unaudited pro forma statements of
operations for the six months ended June 30, 2000 and 1999, and for the years
ended December 31, 1999, 1998 and 1997, are presented as if the companies had
always been merged.
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<PAGE> 2
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 28,750 $ 3,993 $ 32,743
License and contract...................................... 9,256 678 9,934
-------- -------- --------
38,006 4,671 42,677
-------- -------- --------
Operating expenses:
Cost of product sales..................................... 5,074 1,023 6,097
Research and development.................................. 27,377 5,165 32,542
Selling, general and administrative....................... 28,716 9,702 38,418
-------- -------- --------
61,167 15,890 77,057
-------- -------- --------
Loss from operations.............................. (23,161) (11,219) (34,380)
Other income................................................ 6,761 1,585 8,346
-------- -------- --------
Loss before provision for income taxes............ (16,400) (9,634) (26,034)
Provision for income taxes.................................. -- (31) (31)
-------- -------- --------
Net loss.......................................... (16,400) (9,665) (26,065)
Dividends on preferred stock................................ (4,531) -- (4,531)
-------- -------- --------
Net loss applicable to common shares.............. $(20,931) $ (9,665) $(30,596)
======== ======== ========
Basic and diluted loss per share............................ $ (0.63) $ (0.72) $ (0.77)
======== ======== ========
Weighted average number of shares outstanding............... 33,164 13,373 39,536
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
2
<PAGE> 3
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------ PRO FORMA
CEPHALON ANESTA COMBINED
-------- ------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 7,252 $ 1,128 $ 8,380
License and contract...................................... 7,727 651 8,378
-------- ------- --------
14,979 1,779 16,758
-------- ------- --------
Operating expenses:
Cost of product sales..................................... 839 371 1,210
Research and development.................................. 20,152 4,835 24,987
Selling, general and administrative....................... 23,780 4,062 27,842
-------- ------- --------
44,771 9,268 54,039
-------- ------- --------
Loss from operations.............................. (29,792) (7,489) (37,281)
Other income (expense)...................................... (1,650) 2,049 399
-------- ------- --------
Loss before provision for income taxes............ (31,442) (5,440) (36,882)
Provision for income taxes.................................. -- (15) (15)
-------- ------- --------
Net loss.......................................... $(31,442) $(5,455) $(36,897)
======== ======= ========
Basic and diluted loss per share............................ $ (1.09) $ (0.41) $ (1.05)
======== ======= ========
Weighted average number of shares outstanding............... 28,880 13,171 35,156
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
3
<PAGE> 4
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 25,370 $ 2,232 $ 27,602
License and contract...................................... 19,549 4,283 23,832
-------- -------- --------
44,919 6,515 51,434
-------- -------- --------
Operating expenses:
Cost of product sales..................................... 3,250 671 3,921
Research and development.................................. 46,420 10,063 56,483
Selling, general and administrative....................... 50,992 9,141 60,133
-------- -------- --------
100,662 19,875 120,537
-------- -------- --------
Loss from operations.............................. (55,743) (13,360) (69,103)
Other income (expense)...................................... (3,014) 3,892 878
-------- -------- --------
Loss before provision for income taxes............ (58,757) (9,468) (68,225)
Provision for income taxes.................................. -- (20) (20)
-------- -------- --------
Net loss before extraordinary charge.............. (58,757) (9,488) (68,245)
Extraordinary charge for early extinguishment of debt....... (11,187) -- (11,187)
-------- -------- --------
Net loss.......................................... (69,944) (9,488) (79,432)
Dividends on preferred stock................................ (3,398) -- (3,398)
-------- -------- --------
Net loss applicable to common shares.............. $(73,342) $ (9,488) $(82,830)
======== ======== ========
Basic and diluted loss per common share:
Loss per common share before extraordinary charge......... $ (2.10) $ (0.72) $ (2.00)
Extraordinary charge...................................... (0.38) -- (0.31)
-------- -------- --------
$ (2.48) $ (0.72) $ (2.31)
======== ======== ========
Weighted average number of shares outstanding............... 29,584 13,227 35,887
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
4
<PAGE> 5
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ 728 $ 193 $ 921
License and contract...................................... 14,927 482 15,409
-------- -------- --------
15,655 675 16,330
-------- -------- --------
Operating expenses:
Cost of product sales..................................... -- 54 54
Research and development.................................. 43,649 8,812 52,461
Selling, general and administrative....................... 30,947 8,700 39,647
-------- -------- --------
74,596 17,566 92,162
-------- -------- --------
Loss from operations.............................. (58,941) (16,891) (75,832)
Other income................................................ 3,534 1,190 4,724
-------- -------- --------
Loss before provision for income taxes............ (55,407) (15,701) (71,108)
Provision for income taxes.................................. -- (16) (16)
-------- -------- --------
Net loss.......................................... $(55,407) $(15,717) $(71,124)
======== ======== ========
Basic and diluted loss per share............................ $ (1.95) $ (1.59) $ (2.15)
======== ======== ========
Weighted average number of shares outstanding............... 28,413 9,898 33,129
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
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<PAGE> 6
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA
CEPHALON ANESTA COMBINED
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Product sales............................................. $ -- $ 184 $ 184
License and contract...................................... 23,140 5 23,145
-------- -------- --------
23,140 189 23,329
-------- -------- --------
Operating expenses:
Cost of product sales..................................... -- 52 52
Research and development.................................. 51,587 8,064 59,651
Selling, general and administrative....................... 36,744 6,465 43,209
-------- -------- --------
88,331 14,581 102,912
-------- -------- --------
Loss from operations.............................. (65,191) (14,392) (79,583)
Other income................................................ 4,772 1,845 6,617
-------- -------- --------
Loss before provision for income taxes............ (60,419) (12,547) (72,966)
Provision for income taxes.................................. -- (2) (2)
-------- -------- --------
Net loss.......................................... $(60,419) $(12,549) $(72,968)
======== ======== ========
Basic and diluted loss per share............................ $ (2.36) $ (1.32) $ (2.42)
======== ======== ========
Weighted average number of shares outstanding............... 25,638 9,500 30,165
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
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<PAGE> 7
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 2000
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
CEPHALON ANESTA ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 29,010 $ 16,592 $ -- $ 45,602
Short-term investments........................ 121,377 23,078 -- 144,455
Receivables, net.............................. 11,017 2,329 -- 13,346
Inventory..................................... 14,465 -- -- 14,465
Other......................................... 1,026 1,293 -- 2,319
--------- -------- ------- ---------
Total current assets.................. 176,895 43,292 -- 220,187
Property and equipment, net..................... 24,339 2,322 -- 26,661
Other........................................... 2,453 25,323 -- 27,776
--------- -------- ------- ---------
$ 203,687 $ 70,937 $ -- $ 274,624
========= ======== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 7,365 $ 1,559 $ -- $ 8,924
Accrued expenses.............................. 19,988 1,776 9,000 30,764
Current portion of unearned revenues.......... -- 93 -- 93
Current portion of long-term debt............. 1,977 333 -- 2,310
--------- -------- ------- ---------
Total current liabilities............. 29,330 3,761 9,000 42,091
Unearned revenues............................... -- 1,833 -- 1,833
Long-term debt.................................. 13,486 1,667 -- 15,153
Other........................................... 198 -- -- 198
--------- -------- ------- ---------
Total liabilities..................... 43,014 7,261 9,000 59,275
--------- -------- ------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares,
authorized, 2,500 shares issued and
outstanding................................ 25 -- -- 25
Common stock, $.01 par value, 100,000 shares
authorized; 41,196 issued and outstanding,
pro forma.................................. 348 14 50 412
Additional paid in capital.................... 529,030 131,608 (50) 660,588
Treasury stock................................ (1,480) -- -- (1,480)
Accumulated deficit........................... (368,066) (67,832) (9,000) (444,898)
Accumulated other comprehensive income
(loss)..................................... 816 (114) -- 702
--------- -------- ------- ---------
Total stockholders' equity............ 160,673 63,676 (9,000) 215,349
--------- -------- ------- ---------
$ 203,687 $ 70,937 $ -- $ 274,624
========= ======== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
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<PAGE> 8
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
CEPHALON ANESTA ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 13,152 $ 11,746 $ -- $ 24,898
Short-term investments........................ 188,410 59,032 -- 247,442
Receivables, net.............................. 5,578 1,956 -- 7,534
Inventory..................................... 4,258 -- -- 4,258
Other......................................... 988 1,008 -- 1,996
--------- -------- ------- ---------
Total current assets.................. 212,386 73,742 -- 286,128
Property and equipment, net..................... 20,001 2,466 -- 22,467
Other........................................... 1,666 2,001 -- 3,667
--------- -------- ------- ---------
$ 234,053 $ 78,209 $ -- $ 312,262
========= ======== ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 6,221 $ 410 $ -- $ 6,631
Accrued expenses.............................. 19,328 795 9,000 29,123
Current portion of unearned revenues.......... -- 746 -- 746
Current portion of long-term debt............. 31,906 333 -- 32,239
--------- -------- ------- ---------
Total current liabilities............. 57,455 2,284 9,000 68,739
Unearned revenues............................... -- 1,832 -- 1,832
Long-term debt.................................. 14,034 1,667 -- 15,701
Other........................................... 4,207 -- -- 4,207
--------- -------- ------- ---------
Total liabilities..................... 75,696 5,783 9,000 90,479
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares,
authorized, 2,500 shares issued and
outstanding................................ 25 -- -- 25
Common stock, $.01 par value, 100,000 shares
authorized; 38,904 issued and outstanding,
pro forma.................................. 326 13 50 389
Additional paid in capital.................... 505,702 130,743 (50) 636,395
Treasury stock................................ (1,290) -- (1,290)
Accumulated deficit........................... (347,135) (58,167) (9,000) (414,302)
Accumulated other comprehensive income
(loss)..................................... 729 (163) -- 566
--------- -------- ------- ---------
Total stockholders' equity............ 158,357 72,426 (9,000) 221,783
--------- -------- ------- ---------
$ 234,053 $ 78,209 $ -- $ 312,262
========= ======== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information
8
<PAGE> 9
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) The unaudited pro forma combined financial statements for Cephalon and
Anesta give retroactive effect to the proposed merger, which will be
accounted for as a pooling of interests and, as a result, such statements
are presented as if the companies had been combined for all periods
presented. There were no material differences between the accounting
policies of Cephalon and Anesta. Certain amounts have been reclassified to
conform the pro forma presentation.
(2) Transaction costs will be incurred to complete the merger and consist
primarily of financial advisor, legal, accounting and consulting fees, and
printing, mailing, and registration expenses. Due to the non-recurring
nature of these costs, they have not been reflected in the pro forma
condensed combined statements of operations. These expenses will be included
in the results of operations in the quarter the merger is completed. The pro
forma combined balance sheets include an accrual of $9.0 million in
estimated transaction costs.
(3) Pro forma basic and diluted loss per share have been computed using the pro
forma weighted average number of shares of common stock outstanding during
the periods. Pro forma basic and diluted net loss per share are the same
since common stock equivalents outstanding are antidilutive for all periods
presented. As a result of the merger, each outstanding share of Anesta
common stock will be converted into the right to receive 0.4765 shares of
Cephalon common stock.
9
