SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 26, 1999
ALGOS PHARMACEUTICAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 000-28844 22-3142274
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
1333 Campus Parkway, Neptune, New Jersey 07753
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(Address of principal executive offices) (Zip Code)
(732) 938-5959
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(Registrants' telephone number, including area code)
N/A
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(former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
On November 26, 1999, Algos Pharmaceutical Corporation (the
"Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Endo Pharmaceuticals Holdings Inc. ("Endo") and Endo's
wholly owned subsidiary, Endo Inc. ("Merger Sub"). The Merger Agreement
provides that, upon satisfaction of certain conditions, the Company will
merger into Merger Sub, with Merger Sub surviving the merger as a wholly
owned subsidiary of Endo (the "Merger"). Pursuant to the Merger Agreement,
each share of common stock of the Company ("Company Common Stock") will be
exchanged for one share of common stock of Endo, such that the holders of
the Company Common Stock will own 20% of the combined public company's
approximately 89.5 million pro forma fully diluted shares outstanding. In
addition, each holder of Company Common Stock will receive a warrant (the
"Warrants") for each share of Company Common Stock that the holder
exchanges in the Merger. The Warrants will be subject to a warrant
agreement and will be exercisable for a nominal price per share upon
approval of MorphiDex(R) by the Food and Drug Administration (the "FDA").
If FDA approval of MorphiDex(R) is obtained on or before December 31, 2001,
then upon exercise of the Warrants, holders of the Warrants will receive an
additional 15% of the pro forma combined company (to be calculated as if
all Warrants had been exercised at the closing of the Merger). This
percentage will be reduced by an amount that represents five percentage
points for each six-month period after December 31, 2001 that MorphiDex(R)
is not approved. If FDA approval of MorphiDex(R) is not attained by
December 31, 2002, the Warrants expire unexercised. In addition, in the
event that Endo (excluding revenue and expenses related to the Company)
does not meet or exceed a specified gross profit target of $147.4 million
for fiscal year 2000, shares held by current Endo stockholders will be
returned to treasury such that the current Company stockholders' ownership
will increase by an additional five percentage points.
In addition, immediately prior to the Merger, each current Endo
stockholder will receive a warrant to be exercised for a nominal price per
share into Endo common shares if FDA approval of MorphiDex(R) is not
attained by December 31, 2002, in which case holders of these warrants will
receive upon exercise of the warrants an addition 5% of the pro forma
combined company (to be calculated as if all of these warrants had been
exercised at the closing of the Merger). If FDA approval of MorphiDex(R) is
attained by December 31, 2002, these warrants expire unexercised.
Also in connection with the Merger, certain stockholders of the
Company who own approximately 24% of the outstanding Company Common Stock
in the aggregate have each agreed pursuant to a separate voting agreement
with Endo to vote in their capacities as stockholders in favor of the
Merger and against any competing offer.
On November 29, 1999, the Company and Endo issued a press release
related to the Merger Agreement. The press release is attached hereto as
Exhibit 99.1. In addition, the Company and Endo have prepared an investor
presentation regarding the Merger. This presentation is attached hereto as
Exhibit 99.2.
The Exhibits hereto are incorporated by reference herein and form
an integral part hereof.
Item 7. Financial Statements and Exhibits.
Exhibits.
99.1 Press Release dated November 29, 1999.
99.2 Investor Presentation dated November 29, 1999.
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.
Dated: November 26, 1999
ALGOS PHARMACEUTICAL CORPORATION
By: /s/ John W. Lyle
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John W. Lyle
President and Chief Executive Officer
EXHIBIT INDEX
Sequentially
Exhibit No. Numbered Page
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99.1 Press Release dated November 29, 1999
99.2 Investor Presentation dated November 29, 1999
Company Contacts: Media Contacts:
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Carol A. Ammon Linda Seaton/Kathy Witz
President and CEO Mentus, Inc.
Endo Pharmaceuticals Holdings Inc. 858-455-5500, x133/x140
610-558-9800
John W. Lyle
President and CEO
Algos Pharmaceutical Corporation
732-938-5959
ALGOS PHARMACEUTICAL TO MERGE WITH ENDO
PHARMACEUTICALS HOLDINGS
-- Combined Company will be a US Leader in Pain Management --
CHADDS FORD, PA AND NEPTUNE, NJ - NOVEMBER 29, 1999 - Endo
Pharmaceuticals Holdings Inc. and Algos Pharmaceutical Corporation (NASDAQ:
ALGO) announced today that they have entered into a definitive merger
agreement pursuant to which Algos Pharmaceutical will merge with a
subsidiary of Endo Pharmaceuticals Holdings in a tax-free, all-stock
transaction. The merger combines Endo's leading position in pharmaceutical
products for pain management with the proprietary technology and product
pipeline of Algos Pharmaceutical. In addition, Algos and Endo have entered
into a separate agreement pursuant to which the parties will co-develop
oxycodone-based products using Algos' proprietary technology, and Endo will
be the exclusive worldwide marketer of these products. The merger is
expected to be completed by the second quarter of 2000.
The combined company will be a leader in the fast growing
multibillion dollar pain management market with established brand products
from Endo, which include Percocet(R), Percodan(R) and Lidoderm(R), and a
strong pipeline of development products from Endo and Algos, which include
Algos' MorphiDex(R). The combined company will benefit from a salesforce of
over 300 representatives, strong research and development skills and a
successful track record of acquiring and marketing new product lines.
Carol A. Ammon, the current President and Chief Executive Officer of
Endo Pharmaceuticals Holdings, will remain as President and Chief Executive
Officer of the combined company. John W. Lyle, the current President and
Chief Executive Officer of Algos Pharmaceutical, will serve as Chairman of
the Board of Directors of the combined company. The headquarters of the
combined business will be located at the current headquarters of Endo
Pharmaceuticals Holdings in Chadds Ford, Pennsylvania.
Commenting on the merger, Ms. Ammon stated, "This transaction
will broaden our current research and development efforts and provide us
with patented proprietary technology. This technology will enable us to
immediately start development work on our next generation Percocet(R) line
of pain management products." Mr. Lyle stated, "We are delighted to become
part of such an established pain management company. Endo's existing sales
and marketing infrastructure and demonstrated regulatory expertise will
allow us to accelerate the development and commercialization of our
pipeline, starting with MorphiDex(R)."
Under the terms of the merger agreement, which has been approved by
each company's board of directors, stockholders of Algos Pharmaceutical
will receive one share of Endo Pharmaceuticals Holdings common stock for
each share of Algos common stock held by them. After the merger, Algos
stockholders will own 20% of the combined public company's approximately
89.5 million pro forma fully-diluted shares outstanding. Each stockholder
of Algos will also receive warrants to be exercised for a nominal price per
share into Endo Pharmaceuticals Holdings common shares upon FDA approval of
MorphiDex(R). If FDA approval of MorphiDex(R) is obtained on or before
December 31, 2001, then upon exercise of these warrants, holders of these
warrants will receive an additional 15% of the pro forma combined company
(to be calculated as if all warrants had been exercised at the closing of
the merger). This percentage will be reduced by an amount that represents 5
percentage points for each of six months after December 31, 2001 that
MorphiDex(R) is not approved. If FDA approval of MorphiDex(R) is not
attained by December 31, 2002, these warrants expire unexercised. In
addition, in the event that Endo (excluding Algos-related revenue and
expenses) does not meet or exceed a specified gross profit target of $147.4
million for fiscal year 2000, shares held by current Endo Pharmaceuticals
Holdings stockholders will be returned to treasury such that current Algos
stockholders' ownership will increase by an additional 5 percentage points.
In addition, immediately prior to the merger, each current Endo
Pharmaceuticals Holdings stockholder will receive a warrant to be exercised
for a nominal price per share into Endo Pharmaceuticals Holdings common
shares if FDA approval of MorphiDex(R) is not attained. If FDA approval of
MorphiDex(R) is not attained by December 31, 2002, then, upon exercise of
these warrants, holders of these warrants will receive an additional 5% of
the pro forma combined company (to be calculated as if all of these
warrants had been exercised at the closing of the merger). If FDA approval
of MorphiDex(R) is attained by December 31, 2002, these warrants expire
unexercised.
The merger is subject to approval by the stockholders of Algos,
Hart-Scott-Rodino clearance and other customary closing conditions. The
merger will be treated as a purchase for accounting purposes. Certain
existing stockholders of Algos, including John W. Lyle, Algos' current
President and Chief Executive Officer, and others, which, in the aggregate,
own approximately 24 percent of Algos' outstanding common stock, have
agreed to vote in favor of the merger.
Endo Pharmaceuticals Holdings Inc. is a fully integrated
specialty pharmaceutical company with market leadership in pain management.
The company researches, develops, produces and markets both branded and
generic pharmaceuticals primarily for the treatment of pain. Endo
Pharmaceuticals Holdings has a portfolio of fourteen branded products that
include established brands such as Percocet(R) 5.0 and Percodan(R), opioid
analgesics that are generally recognized by physicians and pain specialists
as the gold standard for the treatment of moderate to severe pain. In late
1999, Endo Pharmaceuticals Holdings launched new branded products,
Percocet(R) 2.5, 7.5 and 10.0 mg tablets and the Lidoderm(R) patch,
complimenting the launch of Zydone(R) 5.0, 7.5 and 10.0 mg tablets in early
1999. Percocet(R) and Zydone(R) are branded opioid analgesics that compete
in the large and growing market for the treatment of moderate to severe
pain. Lidoderm(R), which was launched in September 1999, is the first and
only product approved by the FDA for the treatment of post-herpetic
neuralgia, a condition associated with shingles that currently affects
approximately 200,000 Americans each year.
Endo Pharmaceuticals Holdings revenues for the fiscal year ended
December 31, 1998 were $108.4 million and for the fiscal year-end 1999 are
expected to be in excess of $130 million. Endo Pharmaceuticals Holdings
expects revenue to increase substantially in fiscal year 2000 due to the
recent introduction of Percocet(R) 2.5, 7.5 and 10.0 mg tablets, Zydone(R)
and Lidoderm(R) and several other products in a market that historically
has shown significant growth rates.
Endo Pharmaceuticals Holdings is currently owned by affiliates of
Kelso & Company, members of the management of Endo Pharmaceuticals Holdings
and other investors. Kelso & Company affiliates will own a majority of the
shares of the combined company upon completion of the merger. Endo
Pharmaceuticals Holdings expects to make an application to the NASDAQ
National Market to list the shares of Endo Pharmaceuticals Holdings,
including the shares and warrants to be issued to the Algos stockholders in
the merger. More information about Endo Pharmaceuticals Holdings, which is
currently a private company, will be available when a registration
statement relating to the shares and warrants being issued in the merger
becomes publicly available.
Algos Pharmaceutical Corporation is a leader in developing
proprietary pain management products. The company's products combine
analgesics and anesthetics with NMDA-receptor antagonist drugs to enhance
the efficacy of existing pain management drugs such as morphine. Algos'
products in development include opioid analgesics (MorphiDex(R),
HydrocoDex(TM) and OxycoDex(TM)) for moderate to severe pain, a non-opioid
analgesic (NeuroDex(TM)) for neuropathic pain, long-lasting local
anesthetics (LidoDex(TM) IED) for post-operative pain, an intranasal
anaesthetic (LidoDex(TM) NS) for migraine pain and products for the
treatment of opiate and nicotine addictions. Algos has also licensed
certain of its worldwide rights to McNeil Consumer Products Company (a
Johnson & Johnson company) to develop two over-the-counter pain medications
that combine NMDA-receptor antagonist with acetaminophen and ibuprofen,
respectively.
To the extent any statements made in this release contain
information that is not historical, these statements are essentially
forward-looking and are subject to risks and uncertainties. As a result of
such risks and uncertainties, which include, but are not limited to, the
difficulty of predicting FDA approvals, risks with respect to technology
and product development, the effect of competing products and prices,
uncertainties regarding intellectual property protection, changes in
operating results and other risks discussed from time to time in Algos
Pharmaceutical's filings with the Securities and Exchange Commission,
actual results may differ materially from those expressed or implied by the
forward-looking statements.
Any offering of securities in connection with the merger will be
made only by means of a prospectus. A registration statement relating to
these securities shall be filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities described herein, nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
# # #
Endo Pharmaceuticals Inc.
&
Algos Pharmaceutical Corporation
November/December 1999
Agenda
o Background on Endo Pharmaceuticals and Algos Pharmaceutical
o Strategic Rationale
o Endo's Strengths
o Algos' Strengths
o Terms of Merger
Endo Pharmaceuticals Inc.
A Pharmaceuticals Company formed in August 1997 to:
o Be an innovative, therapeutically-focused pharmaceuticals company
with a strong presence in acute and chronic pain management
o Market and develop branded pain products
o Be recognized for its ability to supply high-quality, innovative
products to the marketplace
Endo's Marketing Strategy for Existing Brands
o Capitalize on strong brand equity inherent in each product
o Revitalize existing brands through increased marketing directly to
prescription writers
o Focus on promotionally sensitive products which have not been
marketed in many years preparing market for future products
o Build Franchise - line extensions, novel new technology and new
chemical entities
Algos Pharmaceutical Corporation
o A specialty pharmaceutical company with a focus on pain management
o Develop and commercialize proprietary technology, in an attempt to
improve the efficacy, side-effect profile and duration of action
of existing, FDA-approved compounds
o Multiple late-stage products in clinical trials
- Lead product, MorphiDex(R), once approved by the FDA, will
compete in the $1 billion strong opioid segment of the US
pain management market
Strategic Rationale
o Combined Company will be a US leader in Pain Management with brand
equity and novel proprietary technology
- Leading franchise with critical mass
o Marriage of established specialty pharmaceutical Company with a
broad technology development Company
o Significant growth potential through:
- Existing marketed products
- Newly launched branded products
- Pipeline of late stage development products
o Diversification of clinical development risk
- Creates a publicly-held company with immediate positive cash
flow
Strategic Rationale
o Focus on large, fast-growing Pain Management markets
- Multiple, billion-dollar target markets
o Accelerated market penetration of Algos' patented technology
through existing Endo sales force
- Leverages Endo's existing distribution capabilities with a
broader product portfolio
o Potential to maximize OxycoDex(TM) sales through Percocet(R) brand
Strategic Rationale
o Complementary strengths:
- Management team
- Product formulation and manufacturing
- Existing sales force
- Distribution network
- Clinical development
- Regulatory
Corporate Philosophy of Combined Company
o Sales and marketing driven culture
o Focused, effective research and development
o Flexible cost structure
Pain Management: Key Drivers of Market Growth
o Demographics
o Increase in number of surgical procedures
o Changing attitudes towards pain management
o Introduction of new forms of pain medications
Endo's Strengths
o Established business and focused strategy in Pain Management with
strong brand equity
- 1998 Revenue of $108.4 million
o 1999 launch of new brands including Percocet(R) 2.5, 7.5 and 10.0
mg, Lidoderm(R) and Zydone(R) 5.0, 7.5 and 10.0 mg
o Substantial growth opportunities exist in R&D pipeline
o Efficient and flexible operating structure
Endo's Strengths
o High operating margins and steady cash flow generated by Endo's
core products including Percocet(R), Lidoderm(R) and Zydone(R)
o Experienced and entrepreneurial management team
o Long-term competitive manufacturing agreement
Algos' Strengths
o Focused strategy in Pain Management
o Patented combinations of approved drugs that more effectively
manage pain
o Six patented products in late stage clinical development
- 4 pain products
- 2 addiction treatment products
o Blue chip collaboration partner (J&J)
o Experienced and entrepreneurial management team
<TABLE>
<CAPTION>
Combined Product Portfolio
Moderate Moderately Severe Severe
- -------------------------------------------------------------------------------------------->
<S> <C> <C> <C>
Established Brands: Nubain(R) Percocet(R) 5.0,Percodan(R), Percolone(R)
Numorphan(R)
New Marketed Brands: Percocet(R) 2.5 Percocet(R)7.5 Percocet(R) 10
Zydone(R) 5 Zydone(R) 7.5 Zydone(R) 10
Lidoderm(R)
Late Stage Development: HydrocoDex(TM) OxycoDex(TM) MorphiDex(R)
EN3222 EN3212 Numorphan(R) IR and CR
NeuroDex(TM)
Early Stage Development: LidoDexIED(TM)
EN3215 EN3216 LidoDexNS(TM)
</TABLE>
Terms of Merger
o Tax-free stock for stock purchase transaction with uninterrupted
public trading
o 80% (Endo)/20% (Algos) ownership at closing
- Opportunity for Algos to increase its ownership to 35%,
through the exercise of warrants, if FDA approval for
MorphiDex(R) received by December 31, 2001
- Algos' ownership will increase by an additional 5% if Endo
(excluding Algos-related revenue and expenses) does not
achieve a specified gross profit target for fiscal year 2000
- Warrant to Endo for an additional 5% ownership if
MorphiDex(R) approval not obtained by December 31, 2002
o Carol A. Ammon named President and CEO and John W. Lyle named
Chairman of the Board
o OxycoDex(TM) collaboration agreement
