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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 earliest event reported) September 30, 1998
SANGSTAT MEDICAL CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-22890 94-3076-069
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1505 Adams Drive, Menlo Park, California 94025
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (650) 328-0300
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(Former name or Former Address, if Changed Since Last Report.)
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<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Audited statements of net assets and of revenues,
direct expenses and identified corporate expenses
before interest and taxes of IMTIX as of and for the
year ended June 30, 1998 as well as unaudited condensed
statement of revenues, direct expenses and identified
corporate expenses before interest and taxes for the
three months ended September 30, 1998 and 1997 are
attached hereto and filed herewith.
(b) Pro Forma Financial Information.
The attached unaudited pro forma condensed combining
statement of revenues, direct expenses and identified
corporate expenses before interest and taxes for the
year ended December 31, 1997 and for the nine months
ended September 30, 1998 give effect to the purchase of
IMTIX as of the beginning of the periods presented.
The pro forma condensed combining financial information
is presented for illustrative purposes only and is not
necessarily indicative of the operating results that
would have occurred had the acquisition been
consummated at the beginning of the periods presented,
nor is it necessarily indicative of future operating
results.
The pro forma condensed combining financial information
should be read in conjunction with the audited
historical consolidated financial statements and the
related notes thereto of SangStat Medical Corporation
(the "Company") previously filed and the historical
financial statements and related notes thereto of IMTIX
included herein.
The following financial statements are attached hereto
and filed herewith:
- Audited statements of net assets and of revenues,
direct expenses and identified corporate expenses
before interest and taxes of IMTIX as of June 30,
1998 and for the year ended June 30, 1998.
- Unaudited condensed statements of revenues, direct
expenses and identified corporate expenses before
interest and taxes of IMTIX for the three months
ended September 30, 1998 and 1997.
- Unaudited pro forma condensed combining statements
of operations of SangStat Medical Corporation for
the year and nine months ended December 31, 1997 and
September 30, 1998, respectively.
An unaudited proforma condensed combining balance sheet
is not presented herein since the IMTIX assets and
liabilities acquired have previously been included in
the Company's consolidated balance sheet as reported in
the Company's quarterly report on Form 10-Q for the
period ended September 30, 1998.
(c) Exhibits
Exhibit Description
2.1 Master Agreement between Pasteur Merieux Serums &
Vaccins, S.A. dated June 10, 1998, including
Exhibit 8 thereto.(1),(2)
23.1 Independent Auditors' Consent
99.1 Text of Press Release dated September 30, 1998.(2)
- ---------------------
(1) Pursuant to Item 601(b)(2) of Regulation S-K, the remaining
exhibits and schedules to this Master Agreement have been omitted.
Such exhibits and schedules will be submitted to the Securities and
Exchange Commission upon request.
(2) Previously filed as an exhibit to the registrant's form 8-K filed
on October 15, 1998.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
--------- ------------------------------------------------------------
2.1 Master Agreement between SangStat Medical Corporation and
Pasteur Merieux Serums & Vaccins, S.A. dated June 10, 1998,
including Exhibit 8 thereto.(1),(2)
7(a) Financial Statements of Business Acquired.
7(b) Pro Forma Financial Information.
23.1 Independent Auditors' Consent
99.1 Text of Press Release dated September 30, 1998.(2)
- ---------------------
(1) Pursuant to Item 601(b)(2) of Regulation S-K, the remaining
exhibits and schedules to this Master Agreement have been omitted.
Such exhibits and schedules will be submitted to the Securities and
Exchange Commission upon request.
(2) Previously filed as an exhibit to the registrant's form 8-K filed
on October 15, 1998.
<PAGE>
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 hereunto duly authorized.
SANGSTAT MEDICAL CORPORATION
Date: December 14, 1998 By: /s/ James F. Hinrichs
---------------------------------
James F. Hinrichs, CFA
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
<PAGE>
EXHIBIT 7(a)
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Statement of Net Assets at June 30, 1998
Statement of Revenues, Direct Expenses and Identified Corporate Expenses
Before Interest and Taxes for the Year Ended June 30, 1998
Notes to Financial Statements
* * *
Unaudited Condensed Statements of Revenues, Direct Expenses and Identified
Corporate Expenses before Interest and Taxes for the Three Months Ended
September 30, 1998 and 1997
<PAGE>
INDEPENDENT AUDITORS' REPORT
Pasteur Merieux Connaught:
We have audited the statement of net assets of IMTIX, a line of business
owned by Pasteur Merieux Connaught ("PMC"), as of June 30, 1998 and the
related statement of revenues, direct expenses and identified corporate
expenses before interest and taxes for the year then ended. These
financial statements are the responsibility of PMC's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit 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 misstatements. 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 audit
provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of IMTIX as of June 30, 1998 and the results of
its revenues, direct expenses and identified corporate expenses before
interest and taxes for the year then ended in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the financial statements, IMTIX was a line of
business of PMC until its acquisition by SangStat Medical Corporation on
September 30, 1998. IMTIX received managerial and administrative support
from PMC. In addition, the cost of goods sold by IMTIX included indirect
manufacturing costs apportioned to the various divisions of PMC using
internal allocation criteria. As a result, IMTIX's net assets and the
results of its revenues, direct expenses and identified corporate
expenses before interest and taxes may not be indicative of conditions
that would have existed or results that would have occurred had IMTIX
operated as an unaffiliated entity.
Deloitte Touche Tohmatsu
Lyon, France
December 14, 1998
<PAGE>
IMTIX
(A LINE OF BUSINESS OWNED BY PASTEUR MERIEUX CONNAUGHT)
STATEMENT OF NET ASSETS
JUNE 30, 1998
(IN THOUSANDS)
ASSETS
CURRENTS ASSETS
Cash and cash equivalents................. $392
Accounts receivable....................... 6,251
Inventory................................. 10,277
Prepaid expenses and other assets......... 532
------------
Total current assets.................... 17,452
PROPERTY, PLANT AND EQUIPMENT............... 1,242
OTHER ASSETS................................ 30
------------
TOTAL ASSETS................................ 18,724
------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable.......................... 3,629
Notes payable............................. 1,112
Accrued expenses.......................... 1,450
------------
Total current liabilities 6,191
OTHER LIABILITIES 150
------------
TOTAL LIABILITIES 6,341
------------
NET ASSETS $12,383
============
IMTIX
(A LINE OF BUSINESS OWNED BY PASTEUR MERIEUX CONNAUGHT)
STATEMENT OF REVENUES, DIRECT EXPENSES AND IDENTIFIED
CORPORATE EXPENSES BEFORE INTEREST AND TAXES
FOR THE YEAR ENDED JUNE 30, 1998
(IN THOUSANDS)
NET REVENUES................................ $24,339
------------
EXPENSES:
Cost of sales and manufacturing expenses.. 10,110
Research and development.................. 6,240
Selling, general and administrative....... 8,864
------------
Total expenses.............................. 25,214
------------
EXPENSES IN EXCESS OF REVENUES BEFORE
INTEREST AND TAXES....................... ($875)
============
IMTIX
(A LINE OF BUSINESS OWNED BY PASTEUR MERIEUX CONNAUGHT)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization - The IMTIX business ("IMTIX" or the "Business"), a
line of business owned by Pasteur Merieux Connaught ("PMC"), a
subsidiary of Rhone-Poulenc Pharma, S.A. is dedicated to the research,
development, manufacturing and marketing of pharmaceuticals and
biologics for organ transplantation. The Business includes
manufacturing, research, regulatory and administrative personnel at
its manufacturing facility in Lyon, France as well as certain sales,
marketing, regulatory, clinical and administrative personnel at the
Business' headquarters in Lyon, France and its four subsidiaries
located in the U.K., Italy, Germany and the Netherlands. Most of the
customers of the Business are hospitals and distributors.
Basis of Presentation - The Business is not a "stand-alone" division
or subsidiary of PMC and was not generally accounted for separately.
As a result, the distinct and separate accounts necessary to present
individual balance sheets and income statements of the Business as of
June 30, 1998 and for the year then ended have not been maintained.
The Business does not maintain stand-alone accounting, corporate
treasury, legal, tax and other similar corporate support functions.
For purposes of preparing the financial statements, certain corporate
costs with other PMC expenses were allocated to the Business by PMC
using PMC's established internal allocation methods (see below).
However, PMC's systems and procedures do not provide sufficient
information to develop a reasonable cost allocation for all such
expenses.
Cash flows, purchases of inventory, payroll, capital and other
expenditures are funded by PMC. Sales are billed and collected by
PMC. Accordingly, the Business maintains only a minimal cash balance.
For purposes of reporting the June 30, 1998 balance sheet, the
accounts payable and accounts receivable represent the identified
amounts within PMC's accounts payable and accounts receivable balances
that were directly related to the Business.
FINANCIAL STATEMENT PRESENTATION - Due to the limitations noted above,
the following financial information is presented:
- Statement of Net Assets. These statements
include only the net assets of the Business being purchased by
SangStat Medical Corporation.
- Statements of Revenues, Direct Expenses and Identified Corporate
Expenses before Interest and Taxes, including all corporate
cost allocations for which a reasonable method of allocating
the costs to the operations can be developed.
Statements of Cash Flows are not presented as the Business has
essentially no cash flows as such transactions are managed by PMC.
CORPORATE ALLOCATIONS - The Business does not maintain stand-alone
accounting, corporate treasury, legal, tax and other similar corporate
support functions. The Business does record certain corporate
expenses related primarily to employee payroll and benefits, marketing
and selling expenses, and corporate facilities costs. For purposes of
preparing the financial information for the Business, certain expenses
of PMC were allocated to the Business by PMC using their internal
allocation system, which is based upon a variety of factors including
sales of the Business, the number of employees of the Business and the
identification of costs specifically attributable to the Business.
Management believes that these allocations are based on assumptions
that are reasonable under the circumstances; however, the Business'
net assets to be acquired and the result of revenues, direct expenses
and identified corporate expenses before interest and taxes may not be
indicative of conditions that would have existed or results that would
have occurred had the Business operated as an unaffiliated entity.
The following represents a summary of the corporate costs allocated to
the Business which were included in the statements of Revenues, Direct
Expenses and Identified Corporate Expenses before Interest and Taxes
(in thousands):
Year Ended
June 30, 1998
--------------
Research and Development................ $ 1,125
Selling, General and Administrative..... $ 3,191
Revenue Recognition - Revenue from product sales is recognized upon
shipment, net of estimated sales allowances.
Inventories - Inventories are stated at the lower of cost
(which approximates cost using the first-in, first-out method) or
market. Inventory valuation includes indirect manufacturing costs
that were allocated by PMC using internal allocation methods.
Property and Equipment - Property and equipment are stated at fair value
of the assets based upon an independent appraisal. Management
believes such amount is not materially different than the historical
net book value of the assets, which is not available.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Risks and Uncertainties - The Business sells its products to
organizations in the healthcare industry, primarily in Canada, Europe,
Japan and South America, and does not require its customers to provide
collateral or other security to support accounts receivable. The
Business maintains allowances for estimated potential bad debt losses.
The Business participates in the dynamic global biopharmaceutical
industry. The Business believes that changes in any of the following
areas could have a negative impact on the Business in terms of its
future financial position and results of operations: successful
product development; manufacturing and marketing capabilities; ability
to negotiate acceptable collaborative relationships; obtaining
necessary Food & Drug Administration and foreign regulatory approvals;
ability to attract and retain key personnel; increased competition;
uncertainty regarding health care reimbursement and reform; and
potential exposure for product liability and hazardous materials.
2. INVENTORIES
Inventories consist of (in thousands):
June 30, 1998
-------------
Raw materials and work in process....... $ 8,388
Finished goods.......................... 1,889
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Total........................... $10,277
=============
3. PROPERTY AND EQUIPMENT
Property and equipment consist of (in thousands):
June 30, 1998
-------------
Machinery and equipment................. $ 700
Furniture and fixtures.................. 542
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Total........................... $1,242
=============
4. NOTES PAYABLE
Notes payable consist of (in thousands):
June 30, 1998
-------------
Notes due Rhone-Poulenc Group........... $ 1,112
=============
These notes consist of cash advances made by Rhone-Poulenc Pharma, S.A
to IMTIX's subsidiaries in Germany and the Netherlands. The notes
bear interest at approximately 3.5% and were repaid by October 31, 1998.
5. SUBSEQUENT EVENT
On September 30, 1998, SangStat Medical Corporation completed the
acquisition of the IMTIX business. The acquisition was accounted for
using the purchase method of accounting. The resulting wholly owned
subsidiary of SangStat, named IMTIX-SangStat, is dedicated to the
research, development, manufacturing and marketing of pharmaceuticals
and biologics for organ transplantation. The aggregate purchase price
of approximately $31 million consisted of $10 million paid upon
closing and $21 million payable over five years as follows: $3 million
in 1999, $3 million in 2000, $6 million in 2001, $5 million in 2002
and $4 million in 2003. In addition, the Company will pay PMC
royalties on IMTIX-SangStat product sales that are variable and
contingent upon the sales of certain IMTIX-SangStat products.
* * *
<PAGE>
IMTIX
(A LINE OF BUSINESS OWNED BY PASTEUR MERIEUX CONNAUGHT)
UNAUDITED CONDENSED STATEMENTS OF REVENUES, DIRECT EXPENSES AND IDENTIFIED
CORPORATE EXPENSES BEFORE INTEREST AND TAXES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
NET REVENUES................................ $5,693 $5,986
------------ ------------
EXPENSES:
Cost of sales and manufacturing expenses.. 3,014 2,430
Research and development.................. 1,267 1,128
Selling, general and administrative....... 3,102 2,090
------------ ------------
Total expenses.............................. 7,383 5,648
------------ ------------
REVENUES IN EXCESS OF (LESS THAN) EXPENSES
BEFORE INTEREST AND TAXES................ ($1,690) $338
============ ============
</TABLE>
<PAGE>
EXHIBIT 7(b)
PRO FORMA FINANCIAL INFORMATION
INDEX TO PROFORMA FINANCIAL STATEMENTS
Unaudited Pro Forma Combining Condensed Statement of Operations for the
Year Ended December 31, 1997
Unaudited Pro Forma Combining Condensed Statement of Operations for the
Nine Months Ended September 30, 1998
Notes to Pro Forma Combining Condensed Financial Statements
<PAGE>
SANGSTAT MEDICAL CORPORATION AND IMTIX
UNAUDITED PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma for the
Historical IMTIX Acquisition
------------------- ---------------------
SangStat IMTIX Adjustments Combined
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Net product sales.................... $3,777 $20,406 ($676)(a) $23,507
Revenue from collaborative
agreements.......................... 750 -- -- 750
--------- --------- --------- ---------
Total revenues..................... 4,527 20,406 (676) 24,257
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales and manufacturing
expenses............................ 3,736 10,433 (624)(b) 13,545
Research and development............. 16,210 5,129 (52)(b) 21,287
Selling, general and administrative.. 11,068 8,251 -- 19,319
Amortization of intangible assets.... -- -- 1,402 (d) 1,402
--------- --------- --------- ---------
Total costs and operating expenses. 31,014 23,813 726 55,553
--------- --------- --------- ---------
LOSS FROM OPERATIONS................... (26,487) (3,407) (1,402) (31,296)
INTEREST INCOME - NET.................. 5,507 -- (2,090)(e) 3,417
--------- --------- --------- ---------
NET LOSS...............................($20,980) ($3,407) ($3,492) ($27,879)
========= ========= ========= =========
NET LOSS PER SHARE - Basic and
diluted.............................. ($1.36) ($1.81)
========= =========
WEIGHTED AVERAGE COMMON SHARES......... 15,376 15,376
========= =========
</TABLE>
<PAGE>
SANGSTAT MEDICAL CORPORATION AND IMTIX
UNAUDITED PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma for the
Historical IMTIX Acquisition
------------------- ---------------------
SangStat IMTIX Adjustments Combined
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Net product sales.................... $7,097 $17,251 ($611)(a) $23,737
Revenue from collaborative
agreements.......................... 364 -- -- 364
--------- --------- --------- ---------
Total revenues..................... 7,461 17,251 (611) 24,101
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales and manufacturing
expenses............................ 6,864 7,340 (507)(b) 13,697
Research and development............. 12,110 4,622 (104)(b) 16,628
Selling, general and administrative.. 17,273 7,766 -- 25,039
Acquired in-process research and
development......................... 3,218 -- (3,218)(c) --
Amortization of intangible assets.... -- -- 1,051 (d) 1,051
--------- --------- --------- ---------
Total costs and operating expenses. 39,465 19,728 (2,778) 56,415
--------- --------- --------- ---------
LOSS FROM OPERATIONS................... (32,004) (2,477) 2,167 (32,314)
INTEREST INCOME - NET.................. 2,787 (1,567)(e) 1,220
--------- --------- --------- ---------
NET LOSS...............................($29,217) ($2,477) $600 ($31,094)
========= ========= ========= =========
NET LOSS PER SHARE - Basic and
diluted.............................. ($1.82) ($1.94)
========= =========
WEIGHTED AVERAGE COMMON SHARES......... 16,054 16,054
========= =========
</TABLE>
<PAGE>
SANGSTAT MEDICAL CORPORATION
NOTES TO PRO FORMA COMBINING CONDENSED FINANCIAL STATEMENTS
1. ACQUISITION
SangStat Medical Corporation ("SangStat" or the "Company") is a
specialty pharmaceutical company applying a disease management
approach to improve the outcome of organ transplantation.
On September 30, 1998, the Company completed the acquisition of
Pasteur Merieux Connaught's organ transplant business known as IMTIX.
The acquisition was accounted for using the purchase method of
accounting. The resulting wholly owned subsidiary of the Company,
named IMTIX-SangStat, is dedicated to the research, development,
manufacturing and marketing of pharmaceuticals and biologics for organ
transplantation. The aggregate purchase price of approximately $31
million consisted of $10 million paid upon closing and $21 million
payable over five years as follows: $3 million in 1999, $3 million in
2000, $6 million in 2001, $5 million in 2002 and $4 million in 2003.
In addition, the Company will pay PMC royalties on IMTIX-SangStat
product sales that are variable and contingent upon the sales of
certain IMTIX-SangStat products. The discounted purchase price and
approximately $2 million of acquisition costs were allocated to the
net tangible assets acquired, intangible assets and purchased in-
process research and development. Purchased in-process research and
development of approximately $3.2 million was charged to the Company's
operations in the third quarter of 1998 and represents the value of
products in the development stage that have not yet reached
technological feasibility. Approximately $14.4 million of the
purchase price was allocated to various specified intangible assets
and is being amortized over their estimated useful lives ranging from
five to fourteen years.
2. PRO FORMA ADJUSTMENTS
The accompanying pro forma financial statements are presented in
accordance with Article II of Regulation S-X.
To prepare the pro forma unaudited consolidated statement of
operations, the SangStat statement of operations for the year ended
December 31, 1997 has been combined with the statement of revenues,
direct expenses and identified corporate expenses before interest and
taxes of IMTIX for the twelve month period ended December 31, 1997.
Also, the Sangstat statement of operations for the nine months ended
September 30, 1998 has been combined with the statement of revenues,
direct expenses and identified corporate expenses before interest and
taxes of IMTIX for the nine months ended September 30, 1998. This
method of combining the entities is only for the presentation of pro
forma unaudited consolidated condensed financial statements. Actual
statements of operations of the companies will be combined from the
effective date of the acquisition, with no retroactive restatement.
The unaudited pro forma consolidated financial statements should be
read in conjunction with the historical financial statements of
SangsStat.
The following pro forma adjustments have been made to the pro forma
consolidated condensed financial statements.
(a) Adjustment to eliminate historical sales, including research and
development related revenues between IMTIX and the Company.
(b) Adjustment to eliminate cost of sales for historical sales and for
research and development expense arising from transactions between
IMTIX to the Company.
(c) Reflects the reversal of the one-time charge for purchased in-
process research and development arising from this acquisition, as
it is a material nonrecurring charge. This charge has been
included in the actual consolidated statement of operations of
SangStat in the third quarter of fiscal 1998.
(d) Reflects pro forma amortization of the purchased intangible assets
over the estimated useful life ranging from five to fourteen years
for the year ended December 31, 1997 and the nine months ended
September 30, 1998.
(e) Reflects interest expense that would have been incurred and
reduction of interest income as a result of the payables due to PMC
and reduction of cash used in connection with the acquisition.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 333-53181, 333-63345, 33-77300, and 33-80155, of SangStat Medical
Corporation on Forms S-8 and in Registration Statement Nos. 33-91994, 33-
96766 and 333-20301 of SangStat Medical Corporation on Forms S-3 of our
report dated December 14, 1998 on the financial statements of IMTIX (a
line of business owned by Pasteur Merieux Connaught) as of June 30, 1998
and for the year then ended, appearing in this Current Report on Form 8-
K/A dated September 30, 1998 of SangStat Medical Corporation.
Deloitte Touche Tohmatsu
Lyon, France
December 14, 1998
