SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------
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): April 2, 2004
PHARMACEUTICAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE FILE NUMBER 1-10827 22-3122182
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
ONE RAM RIDGE ROAD, SPRING VALLEY, NEW YORK 10977
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (845) 425-7100
Item 2. Acquisition or Disposition of Assets.
- ------ ------------------------------------
As of April 2, 2004, Pharmaceutical Resources, Inc. (the "Registrant")
entered into a stock purchase agreement with Kali Laboratories, Inc. ("Kali"),
VGS Holdings, Inc. and the shareholders of Kali (the "Kali Shareholders") to
acquire all of the capital stock of Kali, a privately-held research and
development company located in Somerset, New Jersey.
The stock purchase agreement requires the Registrant to pay to the Kali
Shareholders approximately $135,000,000 in cash and warrants to purchase shares
of the Registrant's common stock and up to $10,000,000 of contingent cash
consideration. The cash purchase price is subject to reduction, on a
dollar-for-dollar basis, if and to the extent that the cash and cash equivalents
held by Kali as of December 31, 2003 are expended outside of the ordinary course
of its business. The stock purchase agreement contains both customary and
deal-specific representations, warranties, non-compete provisions and other
covenants of Kali and the Kali Shareholders.
The closing of the proposed acquisition is subject, in addition to other
customary conditions, to obtaining clearance to transfer Kali's facility in
Somerset, New Jersey under the New Jersey Industrial Site Recovery Act and
reaching a mutually satisfactory business arrangement with Perrigo Company. The
stock purchase agreement provides for the payment of a termination fee if a
party seeks to terminate the proposed transaction, except for specified rights
to do so.
Kali's business consists of a leased facility in Somerset, New Jersey,
inventory, intellectual property and other assets related to the manufacture,
sale, research and development of pharmaceutical products. Kali currently has 25
pharmaceutical products in development and has filed 14 abbreviated new drug
applications for approval by the United States Food and Drug Administration.
The Registrant's Board of Directors has authorized its management to
proceed with the proposed transaction. As of the date of this Form 8-K, the
Registrant's management has determined that it is reasonably likely that the
conditions to the closing of the acquisition will be satisfied. Accordingly, the
Registrant is filing this Form 8-K now, prior to a closing.
In determining the purchase price of Kali, the Registrant considered, among
various factors, the prices of comparative businesses and the estimated cost and
time required to start and operate a business comparable to Kali's. The purchase
price was determined also on the basis of the negotiated terms and conditions
contained in the stock purchase agreement and the projected cash flows of the
products that Kali has and is anticipated by management of the Registrant to
develop, taking into account expected synergies between the Registrant's
existing businesses and the assets and businesses to be acquired.
It is presently contemplated that the proposed acquisition will close in
the second quarter of 2004. The Registrant currently intends to finance the
acquisition through the use of available cash.
If the proposed acquisition is completed, Dr. Veerappan Subramanian will
continue as President of Kali, which will become a wholly-owned subsidiary of
the Registrant, and he will become Executive Vice President of Par
Pharmaceuticals, Inc., another wholly-owned subsidiary of the Registrant. The
Registrant will enter into a 30-month employment arrangement with Dr.
Subramanian with appropriate non-competition provisions and stock option grants.
If the Registrant completes the proposed acquisition, it presently expects
to operate the business of Kali as a separate subsidiary. The Registrant
currently intends to use the assets of, and to operate, the business to be
acquired in substantially the same manner as Kali is currently using those
assets and operating the business. The Registrant has no present intention of
selling any of those assets or divesting any portion of the business. The
acquisition will be accounted for using the purchase method.
The above is a summary of the principal terms of the stock purchase
agreement, a complete copy of which is attached to this Form 8-K as an exhibit.
The above description of the terms and conditions of the stock purchase
agreement is qualified in its entirety by, and subject to, reference to such
agreement.
On April 13, 2004, the Registrant issued a press release announcing that it
had entered into the stock purchase agreement. The press release is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
- ------ ---------------------------------
(a): Financial Statements of Business Acquired.
The financial statements of Kali are not included with this Current Report
on Form 8-K. Such financial statements will be filed, to the extent required, by
amendment to this Current Report on Form 8-K as soon as practicable, but not
later than June 11, 2004.
(b): Pro Forma Financial Information.
Pro forma financial information is not included with this Current Report on
Form 8-K. Such pro forma financial information will be filed, to the extent
required, by amendment to this Current Report on Form 8-K as soon as
practicable, but not later than June 11, 2004.
(c): Exhibits
10.1 Stock Purchase Agreement, dated as of April 2, 2004, by and among
Pharmaceutical Resources, Inc., Kali Laboratories, Inc., VGS Holdings,
Inc. and the shareholders of Kali Laboratories, Inc.
99.1 Press release, dated April 13, 2004, announcing the execution of the
definitive stock purchase agreement.
2
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 thereunto duly authorized.
Dated as of: April 13, 2004
PHARMACEUTICAL RESOURCES, INC.
------------------------------
(Registrant)
/s/ Dennis J. O'Connor
--------------------------------------------
Dennis J. O'Connor
Vice President and Chief Financial Officer
3
EXHIBIT INDEX
Exhibit No. Description
10.1 Stock Purchase Agreement, dated as of April 2, 2004, by and among
Pharmaceutical Resources, Inc., Kali Laboratories, Inc., VGS Holdings,
Inc. and the shareholders of Kali Laboratories, Inc.
99.1 Press release, dated April 13, 2004, announcing the execution of the
definitive stock purchase agreement.
4