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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 14, 1999
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Questcor Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
0-20772
(Commission File Number)
California 33-0476164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
26118 Research Road
Hayward, California 94545
(Address of principal executive offices, with zip code)
(510) 732-5551
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Audited financial statements of RiboGene, Inc., the
acquired business, prepared pursuant to Rule 3-05 of
Regulation S-X are incorporated herein by reference from
Cypros Pharmaceutical Corporation's Registration Statement on
Form S-4 (File No. 333-47737) filed with the Securities and
Exchange Commission on September 23, 1999. Unaudited financial
statements of RiboGene prepared pursuant to Rule 3-05 of
Regulation S-X are incorporated by reference from RiboGene's
quarterly report on Form 10-Q for the quarter ended September
30, 1999 filed with the Securities and Exchange Commission on
November 15, 1999. Concurrent with Cypros' acquisition of
Ribogene, Cypros changed its name to Questcor Pharmaceuticals,
Inc.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma information is presented for
illustrative purposes only and is not necessarily indicative
of the operating results or financial position that would have
occurred if the merger had been consummated as of the dates
indicated, nor is it necessarily indicative of future
operating results or financial position. The unaudited pro
forma combined condensed financial statements have been
derived from the historical financial statements of Cypros and
RiboGene and give effect to (1) the merger as a purchase of
RiboGene by Cypros for accounting purposes, and (2) costs
associated with the completion of the merger. The unaudited
pro forma combined condensed balance sheet gives effect to the
merger as if it had occurred on July 31, 1999 and reflects the
allocation of the purchase price to the RiboGene assets
acquired, including in-process research and development, and
liabilities assumed, using Cypros' July 31, 1999 balance sheet
and RiboGene's September 30, 1999 balance sheet. The unaudited
pro forma combined condensed statement of operations combines
the results of operations of Cypros and RiboGene for the years
ended July 31, 1999 and September 30, 1999, respectively. The
pro forma adjustments are based on preliminary estimates,
available information and assumptions that management deems
appropriate. Questcor is obtaining a valuation of the acquired
intangible assets and in-process research and development, and
is actively engaged in the disposition of excess equipment and
termination of excess personnel, and thus, may modify the
purchase price allocation accordingly based upon the results
obtained.
The Questcor statement of operations for the period
ending December 31, 1999 (Questcor is in the process of
changing the fiscal year end from July 31 to December 31) will
include a significant charge for acquired in-process research
and development, currently estimated to be $16 million. This
amount represents the value determined by management, using a
discounted cash flow methodology, to be attributable to
RiboGene's development program for Emitasol. However, the
Company intends to obtain an independent valuation for such
charge. Assuming this program continues through the final
stages of clinical development, the projected future domestic
and international development expenditures related to this
program total $7 million. The Emitasol program is forecasted
to be completed in approximately two to three years. If less
of the purchase price had been allocated to this program,
2.
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the value would have been recorded as goodwill on the balance
sheet and amortized over the expected benefit period,
resulting in increased amortization expense during that
period.
Management believes that the allocation of the
purchase price to the Emitasol program is appropriate given
the future potential of the program to contribute to
Questcor's operations. If, at a later date, management of
Cypros decides to no longer pursue or indefinitely postpones
this in-process program, or determines that the discounted
cash flows will no longer meet the projection underlying the
valuation, or revises its estimate of the anticipated time of
regulatory approval, it will disclose that fact to investors
in the appropriate Form 10-K or 10-Q with a supporting
explanation, if material.
The pro forma financial information does not purport
to represent what the combined company's financial position or
results of operations would actually have been if the merger
in fact had been completed on those dates or to project the
combined company's financial position or results of operations
for any future period. Questcor is also incurring additional
costs, which are not expected to be significant to the
combined results of operations, in connection with integrating
the operations of the two companies. Integration-related costs
are not included in the accompanying unaudited pro forma
condensed combined financial statements.
3.
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PRO FORMA COMBINED CONDENSED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Cypros Ribogene
July 31, September 30,
1999 1999 Acquisition
Assets (Unaudited) (Unaudited) Adjustments Combined
--------------------------------------------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,509 $ 9,167 $ - $ 11,676
Short-term investments, held to maturity 2,964 13,260 - 16,224
Accounts receivable 392 - - 392
Inventories 205 - - 205
Prepaid expenses and other current assets 113 132 (132) (1) 113
--------------------------------------------- ---------
Total current assets 6,183 22,559 (132) 28,610
Investment grade securities, non-current portion 1,789 - - 1,789
Property, equipment and leasehold
improvements, net 1,472 1,589 (903) (2) 2,158
Goodwill and other purchased intangibles - - 999 (3) 999
Purchased technology, net 3,266 - 458 (3) 3,724
Licenses and patents, net 158 - - 158
Deferred financing costs - 491 (491) (1) -
Other assets 271 185 (185) (1) 271
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Total assets $ 13,139 $ 24,824 $ (254) $ 37,709
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 498 $ 602 $ 2,037 (4) $ 3,137
Accrued development costs - 1,108 - 1,108
Accrued compensation 201 220 - 421
Other accrued liabilities 63 1 - 64
Deferred revenue---related party - 667 - 667
Other current liabilities - 1,027 - 1,027
Current portion of long-term debt 54 317 - 371
Current portion of capital lease obligations 106 160 - 266
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Total current liabilities 922 4,102 2,037 7,061
Non-current portion of notes payable 7 5,955 - 5,962
Non-current portion of capital lease obligations 140 103 - 243
Deferred rent 156 - - 156
Other noncurrent liabilities - 12 - 12
Shareholders' equity:
RiboGene preferred stock, 5,000,000 shares, $0.001 par value
authorized, 1,428,572 shares issued and outstanding as of
September 30, 1999 - 1 (1)(5) -
RiboGene common stock, 30,000,000 shares, $0.001 par value
authorized, 5,763,017 shares issued and outstanding as of
September 30, 1999 (none at close of merger) - 6 (6)(5) -
Common stock, 30,000,000 shares authorized, 15,711,877
shares issued and outstanding as of July 31, 1999; 24,361,113
shares outstanding at the closing of the merger 41,497 - 18,380 (6) 59,877
Cypros preferrred stock, 5,000,000 shares authorized, none
issued and outstanding as of July 31, 1999; 2,134,534 shares
of Series A preferred stock outstanding at the closing of
the merger - - 4,535 (6) 4,535
Additional paid in capital - 67,125 (61,315) (5),(8) 5,810
Notes receivable from stockholders - (1) 1 (5) -
Accumulated other comprehensive loss - (44) 44 (5) -
Deferred compensation (69) (1,278) 1,278 (5) (69)
Accumulated deficit (29,514) (51,157) 34,793 (5),(7) (45,878)
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Total shareholders' equity 11,914 14,652 (2,291) 24,275
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Total liabilities and shareholders' equity $ 13,139 $ 24,824 $ (254) $ 37,709
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</TABLE>
4.
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(1) Adjustment to record the writeoff of this asset in connection with the
merger.
(2) Adjustment to reflect the estimated net salvage value of certain of
RiboGene's equipment, which is to be disposed of following the merger.
(3) Adjustment to reflect $876 in goodwill (3 year life), $458 in Italian
rights to Emitasol (5 year life) and $123 in assembled work force (2
year life) acquired by Cypros.
The unaudited estimated fair value of assets acquired and liabilities
assumed is summarized as follows:
<TABLE>
<S> <C>
Fair market value of Cypros' stock, to be issued
in connection with the merger.......................................... $22,915
Fair value of options and warrants assumed............................. 5,810
Fair value of liabilities assumed...................................... 10,172
Other acquisition costs................................................ 2,037
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Total cost.......................................................... 40,934
Fair value of tangible assets acquired................................. 23,113
Acquired in-process research and development........................... 16,364
Identifiable intangible assets......................................... 581
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Total identifiable assets acquired.................................. 40,058
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Excess of cost over identifiable assets acquired (goodwill)............ $876
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</TABLE>
(4) Adjustment to reflect $2,037 in transaction costs expected to be
incurred by Cypros and RiboGene related to the merger.
(5) Adjustments to reflect the elimination of RiboGene's equity accounts,
totaling $14,652.
(6) Adjustment to reflect $28,725 relating to the issuance of 8,649,236
shares of Cypros common stock, 2,134,534 shares of Cypros Series A
preferred stock (convertible on a one-for-one basis into Cypros common
stock) in exchange for all outstanding shares of RiboGene common stock
and RiboGene Series A preferred stock.
(7) Adjustment to expense the acquired in-process research and development
amounting to $16,364, based on management assumptions of the value of
Emitasol, which has not yet completed clinical development in the
United States.
(8) To record the $5,810 estimated fair value of Cypros stock options and
warrants to be issued to RiboGene option and warrant holders in
connection with the merger.
5.
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PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Cypros Ribogene
Twelve Months Twelve Months
Ended July 31, Ended September 30, Pro Forma Pro Forma
1999 1999 (1) Adjustments Combined
--------------------------------------------------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Net product sales $ 2,518 $ - $ - $ 2,518
Contract research - 2,183 - 2,183
Grants 51 - - 51
Roylaties - 8 - 8
--------------------------------------------------------- ------------
Total revenues 2,569 2,191 - 4,760
Operating expenses:
Cost of product sales 771 - - 771
Sales and marketing 1,703 - - 1,703
General and administrative 3,327 4,894 - 8,221
Clinical testing and regulatory 2,438 1,341 - 3,779
Pre-clinical research and development 548 6,722 - 7,270
Amortization of goodwill - - 292 (2) 292
Depreciation and amortization 1,239 455 (27) (3) 1,667
--------------------------------------------------------- ------------
Total operating expenses 10,026 13,412 265 23,703
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Loss from operations (7,457) (11,221) (265) (18,943)
Interest and other income, net 590 788 - 1,378
Sublease income, net 83 - - 83
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Net loss $ (6,784) $ (10,433) $ (265) $ (17,482)
--------------------------------------------------------- ------------
--------------------------------------------------------- ------------
Net loss per share, basic and diluted $ (0.43) $ (1.84) $ (0.82)
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Shares used in computing net loss per
share, basic and diluted (4) 15,712 5,670 21,382
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</TABLE>
6.
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(1) RiboGene's results for the twelve months ended September 30, 1999 are
calculated based on the unaudited consolidated financial information
for the nine months ended September 30, 1999 and the audited three
months ended December 31, 1998.
(2) Adjustment to recognize goodwill arising from the merger over three
years.
(3) Adjustment to recognize $154 of amortization of other intangible assets
arising from the merger over two to five years, offset by a $181
reduction in depreciation expense as a result of the $903 write down
of some RiboGene assets acquired.
(4) Preferred shares, stock options and warrants are excluded from the
computation of diluted net loss per share due to their antidilutive
nature. Pro forma combined basic and diluted net loss per share are
based on the historical weighted average shares of Cypros common
outstanding, adjusted to reflect the issuance as of August 1, 1998 of
8,649,236 shares in connection with the merger.
Excluded from the above is the adjustment to expense $16,364 of
acquired in-process research and development associated with the
merger based on management assumptions of the value of RiboGene's
late-stage clinical development program for Emitasol in the United
States. This amount has been included as an increase to accumulated
deficit in the pro forma combined condensed balance sheet at July
31, 1999. Also excluded from the above are charges totaling $1,711
to write down some assets to their estimated fair value. These
charges have been excluded as they relate to the merger and are
nonrecurring in nature.
7.
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(c) EXHIBITS
2.1 Agreement and Plan of Reorganization dated August 4,
1999 between the Registrant Pharmaceutical Corporation
and RiboGene, Inc.(*)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
99.1 Press Release, dated November 17, 1999.(**)
- ----------------------------
(*) Incorporated by reference to the Registrant' Current Report on Form
8-K dated August 16, 1999.
(**) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated December 2, 1999.
8.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Questcor Pharmaceuticals, Inc.
Date: December 14, 1999 By: /s/ Michael D. Rose
-----------------------------
Michael D. Rose
Acting Chief Financial Officer
(Principal Financial and
Accounting Officer)
9.
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Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (No. 33-81243) pertaining to the 1992 Stock Option Plan and the 1993
Non-Employee Directors' Equity Incentive Plan of Questcor Pharmaceuticals, Inc,
(formerly Cypros Pharmaceutical Corporation), and in the Registration Statements
on Form S-3 (Nos. 333-25661, 333-32159, 333-23085, 333-17501 and 333-03507) of
Questcor Pharmaceuticals, Inc., of our report dated February 12, 1999 with
respect to the financial statements of RiboGene, Inc. incorporated by reference
in this Report (Form 8-K).
/s/Ernst & Young LLP
Palo Alto, California
December 10, 1999
