Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On January 5, 2018, The Medicines Company, a Delaware corporation (the “Company”), completed the previously disclosed sale of its infectious disease business (the "Business"), including the products Vabomere™, Orbactiv® and Minocin® IV and line extensions thereof, and substantially all of the assets related thereto, other than certain pre-clinical assets, to Melinta Therapeutics, Inc., a Delaware corporation (“Melinta”) pursuant to the Purchase and Sale Agreement dated November 28, 2017 (the “Purchase Agreement”) by and between Melinta and the Company (the "Transaction"). At the closing of the Transaction, the Company received approximately $166.4 million and 3,313,702 shares of Melinta common stock having a market value, based on Melinta's closing share price on January 5, 2018 of approximately $54.5 million. In addition, the Company is entitled to receive (i) a cash payment payable 12 months following the closing of the Transaction equal to $25 million; (ii) a cash payment payable 18 months following the closing of the Transaction equal to $25 million; and (iii) tiered royalty payments of 5% to 25% on worldwide net sales of (a) Vabomere and (b) Orbactiv and Minocin IV collectively. The consideration for the Transaction also included the assumption by Melinta of all royalty, milestone and other payment obligations relating to Vabomere, Orbactiv and Minocin IV.
As a result of the Transaction, the results of operations of the Business for all periods prior to the Transaction will be presented as discontinued operations in the Consolidated Statements of Operations for all periods presented, which will be included in the annual financial statements to be filed on Form 10-K for the year ended December 31, 2017.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2017 has been prepared to give effect to the sale of the Business as if it occurred on September 30, 2017. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2017 and the years ended December 31, 2016, 2015 and 2014 have been prepared to give effect to the sale of the Business as if it occurred on January 1, 2014.
The unaudited pro forma condensed consolidated financial information was prepared utilizing our historical financial data derived from the unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q filed with the SEC on November 9, 2017 and from the audited consolidated financial statements for the year ended December 31, 2016 included in our Annual Report on Form 10-K filed with the SEC on March 1, 2017. The unaudited pro forma condensed consolidated financial statements reflect pro forma adjustments that are based on preliminary estimates and assumptions and other information available at the time of preparation. The Company believes that all such adjustments are (i) directly attributable to the sale of the Business, (ii) factually supportable, and (iii) expected to have a continuing impact on the Company’s future consolidated results of operations or financial condition. The pro forma adjustments are described in the notes to the unaudited pro forma information and are based upon available information and assumptions that we believe are reasonable.
The unaudited pro forma condensed consolidated financial information included herein is for informational purposes only and is not necessarily indicative of what the Company's financial performance and financial position would have been had the Transaction been completed on the dates assumed nor is such unaudited pro forma condensed consolidated financial information necessarily indicative of the results to be expected in any future period. Actual results may differ significantly from those reflected in the unaudited pro forma condensed consolidated financial statements for various reasons, including but not limited to, the differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial statements and actual results.
THE MEDICINES COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2017
(in thousands)
|
| | | | | | | | | | | | | |
| | The Medicines Company Historical | | Sale of Business | | | | Pro Forma |
| ASSETS | | | | | | | |
| Current assets: | | | | | | | |
| Cash and cash equivalents | $ | 166,734 |
| | $ | 166,383 |
| | (a) | | $ | 333,117 |
|
| Available for sale securities | 42,168 |
| | 54,510 |
| | (a) | | $ | 96,678 |
|
| Accounts receivable, net | 7,793 |
| | (4,223 | ) | | (a) | | 3,570 |
|
| Inventory, net | 67,169 |
| | (42,850 | ) | | (a) | | 24,319 |
|
| Prepaid expenses and other current assets | 13,974 |
| | 18,366 |
| | (a) (b) | | 32,340 |
|
| Total current assets | 297,838 |
| | 192,186 |
| | | | 490,024 |
|
| Fixed assets, net | 18,022 |
| | — |
| | | | 18,022 |
|
| Developed product rights, net | 285,965 |
| | (285,965 | ) | | (a) | | — |
|
| Goodwill | 255,629 |
| | (48,109 | ) | | (a) | | 207,520 |
|
| Restricted cash | 5,048 |
| | — |
| | | | 5,048 |
|
| Contingent purchase price from sale of business | 143,700 |
| | 214,000 |
| | (a) (b) | | 357,700 |
|
| Other assets | 778 |
| | 20,840 |
| | (a) (b) | | 21,618 |
|
| Total assets | $ | 1,006,980 |
| | $ | 92,952 |
| | | | $ | 1,099,932 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable | $ | 11,698 |
| | $ | (2,869 | ) | | (a) | | $ | 8,829 |
|
| Accrued expenses | 81,246 |
| | (13,625 | ) | | (a) | | 67,621 |
|
| Current portion of contingent purchase price | 28,700 |
| | (24,400 | ) | | (a) | | 4,300 |
|
| Deferred revenue | 7,269 |
| | — |
| | | | 7,269 |
|
| Total current liabilities | 128,913 |
| | (40,894 | ) | | | | 88,019 |
|
| Contingent purchase price | 34,183 |
| | (18,083 | ) | | (a) | | 16,100 |
|
| Convertible senior note | 642,655 |
| | — |
| | | | 642,655 |
|
| Other liabilities | 13,174 |
| | — |
| | | | 13,174 |
|
| Total liabilities | 818,925 |
| | (58,977 | ) | | | | 759,948 |
|
| Stockholders’ equity: | | | | | | | |
| Preferred stock, $1.00 par value per share, 5,000,000 shares authorized; no shares issued and outstanding | — |
| | — |
| | | | — |
|
| Common stock, $0.001 par value per share, 187,500,000 shares authorized; 75,791,437 issued and 72,778,294 outstanding at September 30, 2017 | 76 |
| | — |
| | | | 76 |
|
| Additional paid-in capital | 1,362,040 |
| | — |
| | | | 1,362,040 |
|
| Treasury stock, at cost; 3,013,1432 shares at September 30, 2017 | (90,016 | ) | | — |
| | | | (90,016 | ) |
| Accumulated deficit | (1,079,096 | ) | | 150,802 |
| | (a) (b) (d) | | (928,294 | ) |
| Accumulated other comprehensive income (loss) | (4,949 | ) | | 1,127 |
| | (a) | | (3,822 | ) |
| Total stockholders’ equity | 188,055 |
| | 151,929 |
| | | | 339,984 |
|
| Total liabilities and stockholders’ equity | $ | 1,006,980 |
| | $ | 92,952 |
| | | | $ | 1,099,932 |
|
See accompanying notes to unaudited pro forma condensed consolidated financial information.
THE MEDICINES COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands, except per share amounts)
|
| | | | | | | | | | | | | |
| | The Medicines Company Historical | | Sale of Business | | | | Pro Forma |
| Net product revenues | $ | 38,135 |
| | $ | (23,635 | ) | | (c) | | $ | 14,500 |
|
| Royalty revenues | 21,694 |
| | — |
| | | | 21,694 |
|
| Total net revenues | 59,829 |
| | (23,635 | ) | | | | 36,194 |
|
| Operating expenses: | | | | | | | |
| Cost of product revenue | 39,436 |
| | (12,681 | ) | | (c) | | 26,755 |
|
| Asset impairment charges | 329,097 |
| | — |
| | | | 329,097 |
|
| Research and development | 117,337 |
| | (34,010 | ) | | (c) | | 83,327 |
|
| Selling, general and administrative | 159,980 |
| | (57,632 | ) | | (c) | | 102,348 |
|
| Total operating expenses | 645,850 |
| | (104,323 | ) | | | | 541,527 |
|
| Loss from operations | (586,021 | ) | | 80,688 |
| | | | (505,333 | ) |
| Co-promotion and license income | 2,283 |
| | — |
| | | | 2,283 |
|
| Interest expense | (36,898 | ) | | — |
| | | | (36,898 | ) |
| Other income (expense) | 916 |
| | 676 |
| | (c) | | 1,592 |
|
| Loss before income taxes | (619,720 | ) | | 81,364 |
| | | | (538,356 | ) |
| Benefit for income taxes | 89,607 |
| | (66,637 | ) | | (c) | | 22,970 |
|
| Loss from continuing operations | $ | (530,113 | ) | | $ | 14,727 |
| | | | $ | (515,386 | ) |
| | | | | | | | |
| Loss from continuing operations per common share: | | | | | | | |
| Basic | $ | (7.39 | ) | | | | | | $ | (7.18 | ) |
| Diluted | $ | (7.39 | ) | | | | | | $ | (7.18 | ) |
| | | | | | | | |
| Weighted average number of common shares outstanding: | | | | | | | |
| Basic | 71,763 |
| | | | | | 71,763 |
|
| Diluted | 71,763 |
| | | | | | 71,763 |
|
See accompanying notes to unaudited pro forma condensed consolidated financial information.
THE MEDICINES COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
(in thousands, except per share amounts)
|
| | | | | | | | | | | | | |
| | The Medicines Company Historical | | Sale of Business | | | | Pro Forma |
| Net product revenues | $ | 96,630 |
| | $ | (24,673 | ) | | (c) | | $ | 71,957 |
|
| Royalty revenues | 71,205 |
| | — |
| | | | 71,205 |
|
| Total net revenues | 167,835 |
| | (24,673 | ) | | | | 143,162 |
|
| Operating expenses: | | | | | | | |
| Cost of revenue | 71,347 |
| | (11,993 | ) | | (c) | | 59,354 |
|
| Research and development | 139,262 |
| | (46,986 | ) | | (c) | | 92,276 |
|
| Selling, general and administrative | 319,151 |
| | (106,670 | ) | | (c) | | 212,481 |
|
| Total operating expenses | 529,760 |
| | (165,649 | ) | | | | 364,111 |
|
| Loss from operations | (361,925 | ) | | 140,976 |
| | | | (220,949 | ) |
| Co-promotion and profit share income | 3,854 |
| | — |
| | | | 3,854 |
|
| Gain on sale of assets | 288,301 |
| | — |
| | | | 288,301 |
|
| Loss on extinguishment of debt | (5,380 | ) | | — |
| | | | (5,380 | ) |
| Interest expense | (44,463 | ) | | — |
| | | | (44,463 | ) |
| Other income (expense) | 327 |
| | 19 |
| | (c) | | 346 |
|
| (Loss) income before income taxes | (119,286 | ) | | 140,995 |
| | | | 21,709 |
|
| (Provision) benefit for income taxes | (70 | ) | | (206 | ) | | (c) | | (276 | ) |
| Loss (income) from continuing operations | (119,356 | ) | | 140,789 |
| | | | 21,433 |
|
| Loss from continuing operations attributable to non-controlling interest | 54 |
| | — |
| | | | 54 |
|
| (Loss) income from continuing operations attributable to The Medicines Company | $ | (119,302 | ) | | $ | 140,789 |
| | | | $ | 21,487 |
|
| | | | | | | | |
| (Loss) income from continuing operations per common share attributable to The Medicines Company: | | | | | | | |
| Basic | $ | (1.71 | ) | | | | | | $ | 0.31 |
|
| Diluted | $ | (1.71 | ) | | | | | | $ | 0.29 |
|
| | | | | | | | |
| Weighted average number of common shares outstanding: | | | | | | | |
| Basic | 69,909 |
| | | | | | 69,909 |
|
| Diluted | 69,909 |
| | | | | | 73,022 |
|
See accompanying notes to unaudited condensed consolidated pro forma financial information.
THE MEDICINES COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
(in thousands, except per share amounts)
|
| | | | | | | | | | | | | |
| | The Medicines Company Historical | | Sale of Business | | | | Pro Forma |
| Net product revenues | $ | 255,148 |
| | $ | (14,460 | ) | | (c) | | $ | 240,688 |
|
| Royalty revenues | 53,859 |
| | — |
| | | | 53,859 |
|
| Total net revenues | 309,007 |
| | (14,460 | ) | | | | 294,547 |
|
| Operating expenses: | | | | | | | |
| Cost of revenue | 119,931 |
| | (15,905 | ) | | (c) | | 104,026 |
|
| Research and development | 123,606 |
| | (33,216 | ) | | (c) | | 90,390 |
|
| Selling, general and administrative | 337,943 |
| | (52,682 | ) | | (c) | | 285,261 |
|
| Total operating expenses | 581,480 |
| | (101,803 | ) | | | | 479,677 |
|
| (Loss) from operations | (272,473 | ) | | 87,343 |
| | | | (185,130 | ) |
| Co-promotion and profit share income | 10,132 |
| | — |
| | | | 10,132 |
|
| Gain on remeasurement of equity investment | 22,597 |
| | — |
| | | | 22,597 |
|
| Gain on sale of investment | 19,773 |
| | — |
| | | | 19,773 |
|
| Legal settlement | 5,000 |
| | — |
| | | | 5,000 |
|
| Interest expense | (37,092 | ) | | — |
| | | | (37,092 | ) |
| Other income | 400 |
| | (194 | ) | | (c) | | 206 |
|
| (Loss) from continuing operations before income taxes | (251,663 | ) | | 87,149 |
| | | | (164,514 | ) |
| Benefit for income taxes | 29,743 |
| | (12,809 | ) | | (c) | | 16,934 |
|
| Loss income from continuing operations | (221,920 | ) | | 74,340 |
| | | | (147,580 | ) |
| Loss from continuing operations attributable to non-controlling interest | (10 | ) | | — |
| | | | (10 | ) |
| (Loss) from continuing operations attributable to The Medicines Company | $ | (221,930 | ) | | $ | 74,340 |
| | | | $ | (147,590 | ) |
| | | | | | | | |
| Loss from continuing operations per common share attributable to The Medicines Company: | | | | | | | |
| Basic | $ | (3.32 | ) | | | | | | $ | (2.21 | ) |
| Diluted | $ | (3.32 | ) | | | | | | $ | (2.21 | ) |
| | | | | | | | |
| Weighted average number of common shares outstanding: | | | | | | | |
| Basic | 66,809 |
| | | | | | 66,809 |
|
| Diluted | 66,809 |
| | | | | | 66,809 |
|
See accompanying notes to unaudited pro forma condensed consolidated financial information.
THE MEDICINES COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands, except per share amounts)
|
| | | | | | | | | | | | | | |
| | The Medicines Company Historical | | | Sale of Business | | | | Pro Forma |
| Net product revenues | $ | 659,690 |
| | | $ | (2,157 | ) | | (c) | | $ | 657,533 |
|
| Operating expenses: | | | | | | | | |
| Cost of revenue | 233,330 |
| | | (4,816 | ) | | (c) | | 228,514 |
|
| Research and development | 139,512 |
| | | (43,255 | ) | | (c) | | 96,257 |
|
| Selling, general and administrative | 314,954 |
| | | (30,844 | ) | | (c) | | 284,110 |
|
| Total operating expenses | 687,796 |
| | | (78,915 | ) | | | | 608,881 |
|
| (Loss) income from operations | (28,106 | ) | | | 76,758 |
| | | | 48,652 |
|
| Co-promotion and profit share income | 24,236 |
| | | — |
| | | | 24,236 |
|
| Legal settlement | 25,736 |
| | | — |
| | | | 25,736 |
|
| Loss in equity investment | (1,711 | ) | | | — |
| | | | (1,711 | ) |
| Investment impairment | (7,500 | ) | | | — |
| | | | (7,500 | ) |
| Interest expense | (15,701 | ) | | | — |
| | | | (15,701 | ) |
| Other income | 918 |
| | | — |
| | | | 918 |
|
| (Loss) income from continuing operations before income taxes | (2,128 | ) | | | 76,758 |
| | | | 74,630 |
|
| Benefit (provision) for income taxes | 2,309 |
| | | (18,725 | ) | | (c) | | (16,416 | ) |
| Income from continuing operations | 181 |
| | | 58,033 |
| | | | 58,214 |
|
| Loss from continuing operations attributable to non-controlling interest | 138 |
| | | — |
| | | | 138 |
|
| Income from continuing operations attributable to The Medicines Company | $ | 319 |
| | | $ | 58,033 |
| | | | $ | 58,352 |
|
| | | | | | | | | |
| Income from continuing operations per common share attributable to The Medicines Company: | | | | | | | | |
| Basic | $ | — |
| | | | | | | $ | 0.91 |
|
| Diluted | $ | — |
| | | | | | | $ | 0.88 |
|
| | | | | | | | | |
| Weighted average number of common shares outstanding: | | | | | | | | |
| Basic | 64,473 |
| | | | | | | 64,473 |
|
| Diluted | 66,668 |
| | | | | | | 66,668 |
|
See accompanying notes to unaudited pro forma condensed consolidated financial information.
THE MEDICINES COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Sale of Business
On January 5, 2018, the Company completed the previously disclosed sale of the Business pursuant to the Purchase Agreement. At the completion of the sale, the Company received approximately $166.4 million and 3,313,702 shares of Melinta common stock having a market value, based on Melinta's closing share price on January 5, 2018, of approximately $54.5 million. In addition, the Company is entitled to receive (i) a cash payment payable 12 months following the closing of the Transaction equal to $25 million; (ii) a cash payment payable 18 months following the closing of the Transaction equal to $25 million; and (iii) tiered royalty payments of 5% to 25% on worldwide net sales of (a) Vabomere and (b) Orbactiv and Minocin IV collectively. The consideration for the Transaction also included the assumption by Melinta of all royalty, milestone and other payment obligations relating to Vabomere, Orbactiv and Minocin IV.
Pro Forma Adjustments
| |
| (a) | Represents adjustments to reflect the disposition of the assets and liabilities associated with the Business in connection with the transaction described above for consideration with an estimated fair value of $477 million, consisting of $215 million of guaranteed cash with an estimated fair value of $208 million, approximately 3.3 million shares of Melinta common stock with an estimated fair value of $54.5 million and, tiered royalty payments of 5% to 25% on worldwide on worldwide net sales of (a) Vabomere and (b) Orbactiv and Minocin IV collectively with an estimated fair value of $214 million. The assets to be disposed of primarily include developed product rights with a net book value of $286.0 million, goodwill of $48.1 million, inventory of $42.9 million, and accounts receivable of $4.2 million. The liabilities to be disposed of primarily consist of the estimated fair value of the contingent purchase price liabilities of $42.5 million, accrued expenses of $13.6 million and accounts payable of $2.9 million. |
| |
| (b) | Represents the delayed cash payments and tiered royalty payments measured at fair value due to the Company from Melinta included in the Purchase Agreement. |
| |
| (c) | Represents adjustments to eliminate the direct operating results of the Business as if the disposition occurred on January 1, 2014. Adjustments to cost of product revenue, research and development, and selling, general and administrative expenses include amounts that are directly related to the Business and that will be eliminated post-closing of the Transaction. Adjustment to the income tax benefit (provision) for the year ended December 31, 2016 was based on statutory rates in effect during that period. For the nine months ended September 30, 2017 and the years ended December 31, 2015 and 2014, the adjustments to the income tax benefit (provision) were primarily attributable to reductions in our recorded valuation allowance against our deferred tax assets as a result of the commencement of amortization of in-process research and development assets associated with the products of the Business upon approval by the FDA. |
| |
| (d) | Represents the gain arising from the sale offset by costs directly attributable to the Transaction and factually supportable but nonrecurring that would have been recorded if we had completed the Transaction on September 30, 2017. We expect to utilize previously recognized net operating loss carryforwards to reduce this gain for income tax purposes and also reverse a previously established valuation allowance against these net operating loss carryforward deferred tax assets. No adjustment has been made to the cash consideration to give effect to any potential post-closing adjustments under the terms of the Purchase Agreement. |
