Exhibit 99.1
ZOGENIX, INC.
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
The accompanying unaudited pro forma consolidated statement of operations for the years ended December 31, 2014, 2013 and 2012 give effect to the disposition of certain assets related to the Company’s Zohydro ER business as if it had been consummated at the beginning of each period presented. The accompanying unaudited pro forma consolidated balance sheet as of December 31, 2014 gives effect to the disposition of certain assets related to the Company’s Zohydro ER business as if it had been consummated as of December 31, 2014.
The historical financial information on which the pro forma statements are based is included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2015. The pro forma consolidated financial statements and the notes thereto should be read in conjunction with these historical consolidated financial statements.
The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are subject to a number of assumptions which may not be indicative of the results of operations that would have occurred had the disposition been completed at the dates indicated or what the results will be for any future periods. The unaudited pro forma consolidated statements of operations do not include the gain or loss that the Company may recognize for the sale of certain assets related to the Company’s Zohydro ER business if the transaction was completed at the beginning of the periods presented.
ZOGENIX, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
December 31, 2014 | ||||||||||||||||||||
As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 42,205 | $ | 70,927 | A | $ | 113,132 | |||||||||||||
Restricted cash | 8,500 | 10,000 | A | 18,500 | ||||||||||||||||
Investments | — | 11,926 | A | 11,926 | ||||||||||||||||
Trade accounts receivable, net | 8,877 | — | 8,877 | |||||||||||||||||
Inventory | 13,439 | (972) | B | 12,467 | ||||||||||||||||
Prepaid expenses | 2,224 | (1,767) | B | 457 | ||||||||||||||||
Other current assets | 2,733 | 3,380 | B, C | 6,113 | ||||||||||||||||
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Total current assets | 77,978 | 93,494 | 171,472 | |||||||||||||||||
Property and equipment, net | 10,618 | — | 10,618 | |||||||||||||||||
Intangible assets | 102,500 | — | 102,500 | |||||||||||||||||
Goodwill | 6,234 | — | 6,234 | |||||||||||||||||
Other assets | 5,505 | (2,673) | B | 2,832 | ||||||||||||||||
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Total assets | $ | 202,835 | $ | 90,821 | $ | 293,656 | ||||||||||||||
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Liabilities and stockholders’ equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 8,523 | $ | — | $ | 8,523 | ||||||||||||||
Accrued expenses | 15,486 | 2,200 | D | 17,686 | ||||||||||||||||
Common stock warrant liabilities | 5,093 | — | 5,093 | |||||||||||||||||
Accrued compensation | 5,090 | — | 5,090 | |||||||||||||||||
Revolving credit facility | 1,450 | — | 1,450 | |||||||||||||||||
Deferred revenue | 8,595 | — | 8,595 | |||||||||||||||||
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Total current liabilities | 44,237 | 2,200 | 46,437 | |||||||||||||||||
Long-term debt | 21,703 | — | 21,703 | |||||||||||||||||
Deferred revenue, less current portion | 7,063 | — | 7,063 | |||||||||||||||||
Contingent purchase consideration | 53,000 | — | 53,000 | |||||||||||||||||
Deferred tax liability | 20,500 | — | 20,500 | |||||||||||||||||
Other long-term liabilities | 1,053 | — | 1,053 | |||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Common stock | 153 | — | 153 | |||||||||||||||||
Additional paid-in capital | 456,786 | — | 456,786 | |||||||||||||||||
Accumulated deficit | (401,660) | 88,621 | E | (313,039) | ||||||||||||||||
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Total stockholders’ equity | 55,279 | 88,621 | 143,900 | |||||||||||||||||
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Total liabilities and stockholders’ equity | $ | 202,835 | $ | 90,821 | $ | 293,656 | ||||||||||||||
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ZOGENIX, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
Year Ended December 31, 2014 | ||||||||||||||||||||
As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||||||||||
Revenues: | ||||||||||||||||||||
Net product revenue | $ | 21,715 | $ | (11,584) | 1 | $ | 10,131 | |||||||||||||
Contract manufacturing revenue | 15,392 | — | 15,392 | |||||||||||||||||
Service and other revenue | 3,424 | (1,529) | 2 | 1,895 | ||||||||||||||||
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Total revenues | 40,531 | (13,113) | 27,418 | |||||||||||||||||
Operating (income) expense: | ||||||||||||||||||||
Cost of goods sold | 15,817 | (10,001) | 1 | 5,816 | ||||||||||||||||
Cost of contract manufacturing | 14,342 | — | 14,342 | |||||||||||||||||
Royalty expense | 1,718 | (1,127) | 1 | 591 | ||||||||||||||||
Research and development | 18,936 | (7,043) | 1 | 11,893 | ||||||||||||||||
Selling, general and administrative | 88,899 | (57,302) | 1 | 31,597 | ||||||||||||||||
Impairment of long-lived assets | 838 | — | 838 | |||||||||||||||||
Net gain on sale of business | (79,980) | — | (79,980) | |||||||||||||||||
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Total operating (income) expense | 60,570 | (75,473) | (14,903) | |||||||||||||||||
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Income (loss) from operations | (20,039 | ) | 62,360 | 42,321 | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 20 | — | 20 | |||||||||||||||||
Interest expense | (3,090) | — | (3,090) | |||||||||||||||||
Loss on extinguishment of debt | (1,254) | — | (1,254) | |||||||||||||||||
Change in fair value of warrant liabilities | 25,332 | — | 25,332 | |||||||||||||||||
Change in fair value of embedded derivatives | (14) | — | (14) | |||||||||||||||||
Other income (expense) | 7,716 | (8,500) | 3 | (784) | ||||||||||||||||
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Total other income (expense) | 28,710 | (8,500) | 20,210 | |||||||||||||||||
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Net income before income taxes | 8,671 | 53,860 | 62,531 | |||||||||||||||||
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Provision for income taxes | (84) | — | (84) | |||||||||||||||||
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Net income | $ | 8,587 | $ | 53,860 | $ | 62,447 | ||||||||||||||
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Net income per share, basic | $ | 0.06 | $ | 0.44 | ||||||||||||||||
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Net income per share, diluted | $ | 0.06 | $ | 0.43 | ||||||||||||||||
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Weighted average shares outstanding, basic | 142,607 | 142,607 | ||||||||||||||||||
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Weighted average shares outstanding, diluted | 145,046 | 145,046 | ||||||||||||||||||
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ZOGENIX, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
Year Ended December 31, 2013 | ||||||||||||||||||
As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||||||||
Revenues: | ||||||||||||||||||
Net product revenue | $ | 31,699 | — | $ | 31,699 | |||||||||||||
Service and other revenue | 1,313 | — | 1,313 | |||||||||||||||
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Total revenues | 33,012 | — | 33,012 | |||||||||||||||
Operating expenses: | ||||||||||||||||||
Cost of goods sold | 21,241 | — | 21,241 | |||||||||||||||
Royalty expense | 1,242 | — | 1,242 | |||||||||||||||
Research and development | 12,805 | (4,433) | 1 | 8,372 | ||||||||||||||
Selling, general and administrative | 50,040 | (3,586) | 1 | 46,454 | ||||||||||||||
Restructuring | 876 | 876 | ||||||||||||||||
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Total operating expenses | 86,204 | (8,019) | 78,185 | |||||||||||||||
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Loss from operations | (53,192) | 8,019 | (45,173) | |||||||||||||||
Other income (expense): | ||||||||||||||||||
Interest income | 18 | — | 18 | |||||||||||||||
Interest expense | (6,610) | — | (6,610) | |||||||||||||||
Change in fair value of warrant liabilities | (21,927) | — | (21,927) | |||||||||||||||
Change in fair value of embedded derivatives | 759 | — | 759 | |||||||||||||||
Other income (expense) | 96 | — | 96 | |||||||||||||||
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Total other income (expense) | (27,664) | — | (27,664) | |||||||||||||||
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Net income (loss) before income taxes | (80,856) | 8,019 | (72,837) | |||||||||||||||
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Provision for income taxes | — | — | — | |||||||||||||||
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Net income (loss) | $ | (80,856) | 8,019 | $ | (72,837) | |||||||||||||
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Net income (loss) per share, basic and diluted | $ | (0.74) | $ | (0.67) | ||||||||||||||
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Weighted average shares outstanding, basic and diluted | 108,568 | 108,568 | ||||||||||||||||
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ZOGENIX, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
Year Ended December 31, 2012 | ||||||||||||||||||
As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||||||||
Revenues: | ||||||||||||||||||
Net product revenue | $ | 35,826 | — | $ | 35,826 | |||||||||||||
Contract revenue | 8,462 | — | 8,462 | |||||||||||||||
Service and other revenue | 38 | — | 38 | |||||||||||||||
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Total revenues | 44,326 | — | 44,326 | |||||||||||||||
Operating expenses: | ||||||||||||||||||
Cost of goods sold | 19,496 | — | 19,496 | |||||||||||||||
Royalty expense | 1,353 | — | 1,353 | |||||||||||||||
Research and development | 21,414 | (11,543) | 1 | 9,871 | ||||||||||||||
Selling, general and administrative | 49,494 | (1,933) | 1 | 47,561 | ||||||||||||||
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Total operating expenses | 91,757 | (13,476) | 78,281 | |||||||||||||||
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Loss from operations | (47,431) | (13,476) | 33,955 | |||||||||||||||
Other income (expense): | - | |||||||||||||||||
Interest income | 53 | — | 53 | |||||||||||||||
Interest expense | (10,313) | — | (10,313) | |||||||||||||||
Change in fair value of warrant liabilities | 11,811 | — | 11,811 | |||||||||||||||
Change in fair value of embedded derivatives | (147) | — | (147) | |||||||||||||||
Other income (expense) | (1,354) | — | (1,354) | |||||||||||||||
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Total other income (expense) | 50 | — | 50 | |||||||||||||||
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Net income (loss) before income taxes | (47,381) | (13,476) | (33,905) | |||||||||||||||
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Provision for income taxes | (5) | — | (5) | |||||||||||||||
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Net income (loss) | $ | (47,386) | (13,476) | $ | (33,910) | |||||||||||||
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Net income (loss) per share, basic and diluted | $ | (0.59) | $ | (0.42) | ||||||||||||||
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Weighted average shares outstanding, basic and diluted | 80,558 | 80,558 | ||||||||||||||||
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ZOGENIX, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1— BASIS OF PRESENTATION
The preparation of the unaudited pro forma consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflects estimates and assumptions that the Company’s management believes to be reasonable. Actual results may differ from those estimates. Pro forma adjustments related to the unaudited pro forma financial information presented below were computed assuming the sale of Zohydro ER business was consummated on the dates indicated on the financial statement and include adjustments which give effect to events that are (i) directly attributable to the segment sale, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable.
The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transactions occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results. This unaudited pro forma consolidated financial information and the accompanying unaudited notes should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2015.
NOTE 2— UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet at December 31, 2014 reflects the following pro forma adjustments:
(A) | Reflects the pro forma impact of the consideration received for the Zohydro ER business of $80.0 million in cash and $11.9 million in Pernix common stock (based on Pernix’s closing market price of $7.09 on April 24, 2015) plus additional $927,000 in cash paid for inventory transferred, less $10.0 million deposited in escrow to secure the Company’s indemnification obligations. The escrow funds are presented in this pro forma as restricted cash. The pro forma adjustment of cash proceeds does not reflect potential future milestone payments that may be received from the purchaser. |
(B) | Adjustment to reflect the assets and liabilities sold in the Zohydro ER business sale. |
(C) | Reflects receivable from the Purchaser for reimbursement of vendor inventory discounts of $2.5 million and prepaid research and development costs of $500,000. |
(D) | Adjustment to reflect the estimated transaction costs of $1.7 million and severance liability related to the divestiture of the Zohydro ER business of $500,000. |
(E) | Represents the estimated gain from the Zohydro ER business sale as if the transaction closed on the balance sheet date. |
NOTE 3— UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited pro forma consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012 reflect the following pro forma adjustments:
(1) | Amount eliminates the revenues, cost of sales and operating expenses of the Zohydro ER business being sold. |
(2) | Amount eliminates service fees revenue generated through co-promotion activities conducted by the Zohydro ER sales force. |
(3) | Amount eliminates income of $5.0 million received with respect to the grant of a regulatory exclusivity period waiver and $3.5 million for a right of reference to certain carcinogenicity data generated by the Company for Zohydro ER. |