UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 4, 2004
CONNETICS CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-27406 94-3173928
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(State or Other (Commission File (IRS Employer
Jurisdiction of Incorporation) Number) Identification No.)
3290 West Bayshore Road, Palo Alto, California 94303
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (650) 843-2800
Item 2. Acquisition or Disposition of Assets.
As reported on its Current Report on Form 8-K filed with the Securities
and Exchange Commission on March 16, 2004, on March 4, 2004, Connetics
Corporation completed its acquisition of exclusive U.S. rights to Hoffmann-La
Roche Inc.'s Soriatane(R)-brand (acitretin), an approved oral therapy for the
treatment of severe psoriasis in adults.
On April 30, 2004, Connetics Corporation filed a Form 8-K/A to amend the
Current Report on Form 8-K filed on March 16, 2004 to include the financial
statements of the Soriatane product line under Item 7(a) of Form 8-K and the pro
forma financial information of Connetics Corporation under Item 7(b) of
Form 8-K.
This Form 8-K/A is being filed to include pro forma financial information
that adjusts the pro forma financial information included under Item 7(b) of the
Form 8-K/A filed on April 30, 2004. Specifically, the pro forma statement of
operations included below under Item 7(b) removes a pro forma adjustment which
eliminated certain non-recurring restructuring charges incurred by Hoffmann-La
Roche Inc. related to the Soriatane product line.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
Page
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Unaudited Pro Forma Consolidated Financial Statements....................... 3
Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 2003...................................................... 4
Notes to Unaudited Pro Forma Consolidated Balance Sheet..................... 5
Unaudited Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 2003................................... 6
Notes to Unaudited Pro Forma Consolidated Statement of Operations........... 7
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CONNETICS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements
have been prepared to give effect to the recent acquisition by Connetics
Corporation ("Connetics") of the exclusive U.S. rights to Soriatane(R)-brand
(acitretin) from Hoffmann-La Roche Inc. (the "Soriatane Product Line") on March
4, 2004. The Unaudited Pro Forma Consolidated Balance Sheet as of December 31,
2003, gives effect to the acquisition as if it had occurred on December 31,
2003. The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 2003 gives effect to the acquisition as if it had occurred on
January 1, 2003.
The pro forma adjustments are based upon available information and
certain assumptions that Connetics believes are reasonable under the
circumstances. Pro forma adjustments are applied to the historical financial
statements of Connetics and the acquisition. The transaction was accounted for
as an acquisition of intangible assets.
The Unaudited Pro Forma Consolidated Financial Statements should be
read in conjunction with (1) Connetics' historical Consolidated Financial
Statements and related Notes thereto, Management's Discussion and Analysis of
Financial Condition and Results of Operations included in Connetics' Annual
report on Form 10-K for the year ended December 31, 2003, and (2) the financial
statements of the Soriatane Product Line included in the Current Report on Form
8-K/A filed April 30, 2004. The Unaudited Pro Forma Consolidated Financial
Statements and related notes are provided for information purposes only and do
not purport to be indicative of the results which would have actually been
obtained had the acquisition been completed on the date indicated or which may
be expected to occur in the future.
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CONNETICS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003
(In thousands)
SORIATANE PRO FORMA
CONNETICS PRODUCT LINE ADJUSTMENTS PRO FORMA
ASSETS
Current assets:
Cash, cash equivalents and
marketable securities $ 114,662 $ 56,910 (1) $ 48,572
(123,000)(2)
Restricted cash - current 304 304
Accounts receivable, net 2,594 2,594
Prepaid expenses and other current assets 4,814 1,460 6,274
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Total current assets 122,374 1,460 (66,090) 57,744
Property and equipment, net 5,628 5,628
Debt issuance costs, deposits and other assets 5,418 5,418
Goodwill, net 6,271 6,271
Other intangible assets, net 6,206 127,241 (3) 133,447
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Total assets $ 145,897 $ 1,460 $ 61,151 $ 208,508
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,884 $ 3,884
Accrued payroll and related expenses 3,792 3,792
Accrued clinical trial costs 857 857
Current portion of deferred revenue 19 19
Other accrued liabilities 1,575 3,741 1,960 (4) 7,276
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Total current liabilities 10,127 3,741 1,960 15,828
Convertible senior notes 90,000 90,000
Other non-current liabilities 16 16
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value:
5,000,000 shares authorized; none issued
or outstanding -- --
Common stock, $0.001 par value;
50,000,000 shares authorized; shares
issued and
outstanding: 31,885,404 in 2003 and
31,180,436 in 2002 32 32
Additional paid-in capital 174,080 56,910 (1) 230,990
Net assumed liabilities of acquired
product line -- (2,281) 2,281 (3) --
Deferred stock compensation (31) (31)
Accumulated deficit (130,188) (130,188)
Accumulated other comprehensive income 1,861 1,861
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Total shareholders' equity 45,754 (2,281) 59,191 102,664
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Total liabilities and shareholders' equity $ 145,897 $ 1,460 $ 61,151 $ 208,508
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See Notes to Unaudited Pro Forma Consolidated Balance Sheet
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Reflects the net proceeds from the issuance of 3,000,000 shares of
common stock in a private placement in February 2004. These net
proceeds from this private placement were used to help finance the
acquisition of the Soriatane Product Line.
(2) Reflects the payment of $123.0 million to Hoffmann-La Roche Inc. upon
closing of the Soriatane Product Line acquisition.
(3) Reflects the acquisition of the Soriatane Product Line from Hoffmann-La
Roche Inc. for a purchase price of $123.0 million plus estimated
acquisition costs of $500,000 and assumed liabilities of approximately
$3.7 million.
(4) Reflects an accrued liability of approximately $1.5 million for the
purchase of Soriatane inventory plus estimated acquisition costs of
$500,000.
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CONNETICS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(In thousands, except per share data)
SORIATANE PRO FORMA
CONNETICS PRODUCT LINE ADJUSTMENTS PRO FORMA
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TOTAL NET REVENUES $ 75,331 $ 41,187 $116,518
OPERATING COSTS AND EXPENSES:
Cost of product revenues 5,129 1,915 7,044
Research and development 30,109 30,109
Selling, general and administrative 42,600 15,301 57,901
Amortization of acquired product rights 12,724(1) 12,724
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Total operating costs and expenses 77,838 17,216 12,724 107,778
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INCOME (LOSS) FROM OPERATIONS (2,507) 23,971 (12,724) 8,740
INTEREST AND OTHER INCOME (EXPENSE):
Interest income 972 972
Interest expense (1,632) (1,632)
Other income (expense), net 234 234
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Income (loss) before income taxes (2,933) 23,971 (12,724) 8,314
Income tax provision 1,167 4,499(2) 5,666
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Net income (loss) $ (4,100) $ 23,971 $(17,223) $ 2,648
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BASIC INCOME (LOSS) PER COMMON SHARE -- $ (0.13) $ 0.08
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DILUTED INCOME (LOSS) PER COMMON SHARE -- $ (0.13) $ 0.07
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Shares used to compute basic net income (loss) per share 31,559 3,000(3) 34,559
Shares used to compute diluted net income (loss) per share 31,559 3,000 36,377(4)
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See Notes to Unaudited Pro Forma Consolidated Statement of Operations
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(1) Represents amortization of intangible assets acquired over the
estimated useful lives of 10 years.
(2) Assumes a combined federal and state statutory rate of 40% for 2003
applied to the unaudited incremental pro forma income before taxes.
Connetics did not consider the use of any available net operating loss
carry forwards.
(3) Reflects shares issued in a private placement of common stock in
February 2004 to help finance the acquisition of the Soriatane Product
Line.
(4) Includes 49,321 weighted average warrants and 1,769,242 weighted
average stock options outstanding during the period.
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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 hereunto duly authorized.
CONNETICS CORPORATION
/s/ Katrina J. Church
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Katrina J. Church
Executive Vice President, General
Counsel and Secretary
Date: May 6, 2004
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