SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[December 31, 1999]
Date of Report (Date of earliest event reported)
ABGENIX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-24207 94-3248826
- ---------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation File Number) Identification No.)
7601 DUMBARTON CIRCLE
FREMONT, CA 94555
-----------------
(Address of principal executive offices)
(510) 608-6500
--------------
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 20, 1999, Abgenix, Inc. ("Abgenix") signed several
agreements with JT America Inc. ("JT America") that became effective December
31, 1999 under which Abgenix acquired JT America's interest in
XenoMouse-Registered Trademark-, a technology which is useful for generating
fully human antibody drugs used in treating a wide range of diseases. Under
the agreements, Abgenix paid $47.0 million in cash to JT America for its
50.0% interest in Xenotech, Inc., and its interest in Xenotech, L.P.
("Xenotech"), a limited partnership owned 49.5% by Abgenix, 49.5% by JT
America and 1.0% by Xenotech, Inc. Xenotech was formed in 1991 by Abgenix'
former parent company, Cell Genesys, Inc., and JT Immunotech Inc., a
predecessor in interest to JT America Inc., to develop genetically modified
strains of mice, known as XenoMouse technology, that can produce fully human
monoclonal antibodies and to commercialize products generated from such mice,
Cell Genesys, Inc. assigned its interest in Xenotech to Abgenix upon Abgenix'
formation in 1996. In addition, part of the December 20, 1999 transaction,
Abgenix also paid $10.0 million as compensation to Japan Tobacco, Inc. ("JT")
for relinquishment of certain option and license rights it is currently
entitled to. The amount of consideration paid was determined in an
arms-length negotiation between the parties. Under the agreements, JT will
have a research license to use existing and future XenoMouse technology and
options to license the technology for a small number of antigen targets each
year for which JT paid to Abgenix $4.0 million. For all antibody products
generated using XenoMouse technology and developed by JT, JT will also make
license fee payments to Abgenix, as well as royalty payments on any product
sales under any product licenses. Abgenix also granted to JT other licenses
under related technology. In return for these licenses, JT paid Abgenix $6.0
million. JT also retained options to, or licenses on, several antigen targets
it had previously nominated under the former Xenotech structure.
The foregoing descriptions of the agreements are qualified in their
entirety to the text of the agreements, copies of which are attached hereto
as exhibits.
R. Scott Greer, President and Chief Executive Officer of Abgenix, and
Raymond M. Withy, Ph.D., Chief Business Officer of Abgenix, are also
directors of Xenotech, Inc.
A portion of the proceeds that Abgenix received from the sale of
1,778,000 shares of common stock at $42.00 per share in a private placement
conducted in November 1999 was used to pay JT America for the purchase of JT
America's interest in Xenotech, L.P. and JT's relinquishment of its option
and license rights.
2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The financial statements and pro forma financial information are
filed herewith as follows:
(a) Audited financial statements of the business acquired as of
December 31, 1998 and 1997 and for the three years ended December
31, 1998 and the unaudited financial statements as of September
30, 1999 and for the nine month periods ended September 30, 1999
and 1998.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Xenotech, LP
We have audited the accompanying balance sheets of Xenotech, LP (a
development stage enterprise) as of December 31, 1997 and 1998, and the related
statements of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1998 and for the period from inception
(June 12, 1991) to December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Xenotech, LP (a development
stage enterprise) at December 31, 1997 and 1998 and the results of its
operations and its cash flows for each of the three years ended December 31,
1998 and for the period from inception (June 12, 1991) to December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 22, 1999
3
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(IN THOUSANDS)
ASSETS
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- --------------
(UNAUDITED)
Cash........................................................ $ 58 $ 94 $ 1,329
Short-term investments...................................... 3,750 -- --
Prepaid expenses and other current assets................... 11 11 --
Receivable from partners.................................... 3,750 114 15
-------- -------- --------
Total current assets.................................... $ 7,569 $ 219 $ 1,344
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities......................................... $ 56 $ 67 $ 66
Payable related to cross-license and settlement agreement... 7,500 -- --
-------- -------- --------
Total current liabilities............................... 7,556 67 66
Partners' capital:
Paid-in capital........................................... 60,746 61,707 61,707
Deficit accumulated during the development stage.......... (60,733) (61,555) (60,429)
-------- -------- --------
Total partners' capital................................. 13 152 1,278
======== ======== ========
Total liabilities and partners' capital................. $ 7,569 $ 219 $ 1,344
======== ======== ========
See accompanying notes.
4
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
PERIOD FROM
NINE MONTHS ENDED INCEPTION
YEAR ENDED DECEMBER 31, SEPTEMBER 30, (JUNE 12, 1991)
------------------------------ ------------------- TO SEPTEMBER 30,
1996 1997 1998 1998 1999 1999
-------- -------- -------- -------- -------- -----------------
(UNAUDITED) (UNAUDITED)
Research and license revenues
from partners................ $ 1,912 $ 272 $ 985 $ 310 $1,155 $ 12,444
Expenses:
Research and development..... 8,240 2,396 1,695 1,277 56 48,861
General and administrative... 307 98 82 73 (27) 1,694
Cross-license and settlement
expense.................... -- 22,470 30 -- -- 22,500
-------- -------- ------ ------- ------ --------
Total expenses............. 8,547 24,964 1,807 1,350 29 73,055
Interest income................ 21 12 -- -- -- 182
-------- -------- ------ ------- ------ --------
Net loss....................... $ (6,614) $(24,680) $ (822) $(1,040) $1,126 $(60,429)
======== ======== ====== ======= ====== ========
See accompanying notes.
5
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
LIMITED PARTNERS
----------------------- TOTAL
GENERAL JAPAN PARTNERS'
PARTNER TOBACCO INC. ABGENIX CAPITAL
-------- ------------ -------- ---------
Balance at December 31, 1995......................... $ 19 $ 368 $ 368 $ 755
Capital contributed................................ 63 3,114 3,115 6,292
Net loss........................................... (66) (3,274) (3,274) (6,614)
----- -------- -------- --------
Balance at December 31, 1996......................... 16 208 209 433
Capital contributed................................ 230 12,015 12,015 24,260
Net loss........................................... (246) (12,217) (12,217) (24,680)
----- -------- -------- --------
Balance at December 31, 1997......................... -- 6 7 13
Capital contributed................................ 9 476 476 961
Net loss........................................... (9) (406) (407) (822)
----- -------- -------- --------
Balance at December 31, 1998......................... -- 76 76 152
Capital contributed (unaudited).................... -- -- -- --
Net income (unaudited)............................. 12 557 557 1,126
----- -------- -------- --------
Balance at September 30, 1999 (unaudited)............ $ 12 $ 633 $ 633 $ 1,278
===== ======== ======== ========
See accompanying notes.
6
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS PERIOD FROM
ENDED INCEPTION
YEAR ENDED DECEMBER 31, SEPTEMBER 30, (JUNE 12, 1999) TO
------------------------------ ------------------- SEPTEMBER 30,
1996 1997 1998 1998 1999 1999
-------- -------- -------- -------- -------- -------------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................ $(6,614) $(24,680) $ (822) $(785) $1,126 $(60,429)
Adjustments to reconcile net loss to net
cash used in operating activities:
Charge for cross-license and
settlement........................... -- 7,485 -- -- -- 7,485
Depreciation and amortization
expense.............................. 74 8 -- -- -- 325
Changes in certain assets and
liabilities:
Decrease (increase) in prepaid and
other current assets............... 108 181 -- (231) 11 --
Decrease (increase) in receivable
from partner....................... 30 (3,750) 3,636 -- 99 (15)
Increase (decrease) in accrued
liabilities........................ (298) (3) 11 35 (1) 66
Decrease in deferred revenue......... (250) -- -- -- -- --
Increase (decrease) in payable for
cross-license settlement........... -- 7,500 (7,500) -- -- --
------- -------- ------- ----- ------ --------
Net cash used in operating
activities....................... (6,950) (13,259) (4,675) (981) 1,235 (52,568)
------- -------- ------- ----- ------ --------
CASH USED IN INVESTING ACTIVITIES
Capital expenditures..................... -- -- -- -- -- (325)
Purchases (sales) of short-term
investments............................ -- (3,750) 3,750 (145) -- --
------- -------- ------- ----- ------ --------
Net cash provided by (used in)
investing activities............. -- (3,750) 3,750 (145) -- (325)
------- -------- ------- ----- ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions.................... 6,292 16,775 961 1,088 -- 54,222
------- -------- ------- ----- ------ --------
Net increase (decrease) in cash and
cash equivalents................. (658) (234) 36 (38) 1,235 1,329
Cash and cash equivalents at beginning of
period................................. 950 292 58 58 94 --
------- -------- ------- ----- ------ --------
Cash and cash equivalents at end of
period................................. $ 292 $ 58 $ 94 $ 20 $1,329 $ 1,329
======= ======== ======= ===== ====== ========
See accompanying notes.
7
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
Xenotech, LP, a California limited partnership and a development stage
enterprise (the "Partnership"), was organized on June 12, 1991 pursuant to a
Limited Partnership Agreement between Xenotech, Inc. (the "General Partner"),
Cell Genesys, Inc. ("Cell Genesys") and JT Immunotech USA, Inc., the predecessor
company of JT America, Inc. and a medical subsidiary of Japan Tobacco, Inc.
("JT America"), (the "Limited Partners"), to develop genetically modified
strains of mice which can produce fully human monoclonal antibodies, and to
commercialize products generated therefrom. On July 15, 1996, Cell Genesys
transferred its partnership interest to its subsidiary, Abgenix Inc.
("Abgenix").
The General Partner must make cash contributions as necessary to maintain a
minimum capital balance of 1.0% of the total positive capital account balances
for the Partnership. Since July 1995, net losses are allocated 49.5% to Abgenix,
49.5% to JT America and 1.0% to the General Partner. Prior to July 1995,
operating expenses were allocated 99% to JT America and 1.0% to the General
Partner until JT America had been allocated, on a cumulative basis, partnership
losses and deductions in an amount equal to the sum of JT America's total
research support capital contributions and 50.0% of JT America's initial capital
contribution. Since 1992, interest income has been allocated 49.5% to Abgenix,
49.5% to JT America and 1.0% to the General Partner. No allocation of expenses
and losses shall create a deficit in the Limited Partners' capital accounts.
Such item, to the extent it would increase or create such a deficit, shall be
allocated 100% to the General Partner. Cash distributions are generally to be
made in accordance with the percentage interests.
See related discussion in Note 3--Related Party Transactions. See Note 6 for
a discussion regarding Abgenix's December 1999 acquisition of the 50% interest
in Xenotech, LP and Xenotech, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Research revenues from partners or their affiliates are recorded when earned
as defined under the terms of the respective collaboration agreements. Payments
received in advance under these agreements are recorded as deferred revenue
until earned (see Notes 3 and 4).
DEPRECIATION
The Partnership depreciates equipment using the straight-line method over
the estimated useful lives of the assets, generally four years.
INCOME TAXES
The financial statements include no provision for income taxes as
Partnership income or loss is reported in the Partners' separate income tax
returns.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
8
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS
Abgenix provides contract research and development services to the
Partnership to develop genetically modified strains of mice, which can produce
fully human monoclonal antibodies pursuant to a collaboration agreement under
which Abgenix receives certain minimum payments. During the years ended 1996,
1997 and 1998, the Partnership paid Abgenix $1,200,000, $2,300,000, $1,656,000,
respectively ($42,856,000 for the period from inception to December 31, 1998) to
perform research.
In January 1994, the Partnership, Abgenix and JT America executed an
agreement creating the Xenotech Division within Abgenix to conduct ongoing
preclinical research of fully human monoclonal antibodies derived from the
genetically modified strains of mice. Abgenix and Japan Tobacco Inc. ("Japan
Tobacco"), the indirect parent company of JT America, are providing significant
funding to the Partnership for research funding and in consideration of the
Partnership granting marketing rights for specified products in certain
territories to Abgenix and Japan Tobacco (see Note 4). The Partnership
reimbursed Abgenix for the costs of the operation of the Xenotech Division.
During 1995 and 1996, the Partnership recognized expenses of $5,500,000 and
$5,500,000, respectively ($13,300,000 for the period from inception to
December 31, 1997) which were paid to Abgenix for the costs of operating the
Xenotech Division.
Pursuant to an agreement dated June 28, 1996, the Xenotech Division was
terminated as of December 31, 1996. In conjunction with this agreement, Xenotech
paid Abgenix $1,200,000 to satisfy Xenotech's obligations under the Xenotech
Division Research Agreement. In addition, Abgenix purchased Xenotech's capital
equipment at net book value, and was assigned Xenotech's note receivable, which
was reflected as a reduction of capital contributions.
4. RESEARCH REVENUES
The Partnership recorded research and license revenues of $4,747,000,
$1,912,000 and $272,000 and $985,000 for the years ended December 31, 1995,
1996, 1997 and 1998, respectively. The research revenues were derived from
research payments made by Japan Tobacco and Abgenix. Of research payments made
by Japan Tobacco and Abgenix, $250,000 was deferred revenue at December 31,
1995.
5. CROSS-LICENSE AND SETTLEMENT AGREEMENT
On March 27, 1997, Cell Genesys announced, along with Abgenix, Xenotech and
Japan Tobacco, that it had signed a comprehensive patent cross-license and
settlement agreement with GenPharm, International, Inc. ("GenPharm"), a
subsidiary of Medarex, Inc., that resolved all related litigation and claims
between the parties. As initial consideration for the cross-license and
settlement agreement, Cell Genesys issued a note to GenPharm due September 30,
1998 for $15,000,000 payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, $3,750,000 satisfied certain of Xenotech's
obligations under the agreement. Japan Tobacco also made an initial payment.
During 1997, two patent milestones were achieved and Xenotech was obligated to
pay $7,500,000 for each milestone. Xenotech paid $7,500,000 to satisfy the first
milestone and recorded a payable to GenPharm for the remaining $7,500,000, which
was paid in November 1998. No additional payments will accrue under this
agreement. Xenotech has recognized as a non-recurring charge for cross-license
and settlement, a total of $22,500,000.
9
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SUBSEQUENT EVENT
On December 20, 1999, Abgenix executed several agreements with Japan
Tobacco and JT America that became effective December 31, 1999 under which
Abgenix acquired JT America's interest in the XenoMouse, which is useful for
generating fully human antibody drugs used in treating a wide range of
diseases. Under the agreements, Abgenix paid $47.0 million in cash to JT
America for its 50% interest in the Xenotech joint venture under which the
XenoMouse technology was developed. Abgenix also paid $10.0 million as
compensation to Japan Tobacco for relinquishment of certain option and
license rights. Under the agreements, Japan Tobacco will have a research
license to use existing and future XenoMouse technology and options to
license the technology for a small number of antigen targets each year, for
which Japan Tobacco paid to Abgenix $4.0 million. For all antibody products
generated using XenoMouse technology and developed by Japan Tobacco, Japan
Tobacco will also make license fee payments to Abgenix as well as royalty
payments on any product sales under any product licenses. Abgenix also
granted to Japan Tobacco other licenses under related technology. In return
for these licenses, Japan Tobacco paid Abgenix $6.0 million. Japan Tobacco
also retained product licenses relating to several antigen targets it had
previously nominated under the former Xenotech structure. As of the date of
Abgenix's acquisition of Japan Tobacco's interest in Xenotech, Xenotech
became a wholly-owned subsidiary of Abgenix.
10
ABENIX, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are
presented for illustrative purposes only. These statements are not necessarily
indicative of Abgenix, Inc.'s our financial position or results of operations
for future periods or the results that actually would have been realized had the
acquisition and certain transactions (as defined below) occurred. The unaudited
pro forma condensed combined financial statements, including the notes thereto,
are based on and qualified in their entirety by reference to, and should be read
in conjunction with, the reported audited financial statements and unaudited
condensed combined financial statements of Abgenix and Xenotech and the notes
thereto, which are included elsewhere in this Prospectus.
The unaudited pro forma condensed financial statements give effect to the
Abgenix's acquisition of Japan Tobacco, Inc.'s 50% interest in the Xenotech
joint venture for $47.0 million in cash in December 1999.
The Abgenix Inc. unaudited pro forma condensed combined financial statements
give effect to the acquisition accounted for using the purchase method of
accounting. The unaudited pro forma condensed combined statements of operations
for the year ended December 31, 1998 and the nine months ended September 30,
1999 assumes the acquisition took place on January 1, 1998. The unaudited pro
forma combined condensed balance sheet assumes the acquisition took place on
September 30, 1999. These pro forma financial statements have been prepared on
the basis of assumptions described in the notes including preliminary
assumptions relating to the allocation of the purchase price paid. The actual
allocation of such purchase price may differ from those assumptions reflected in
the Abgenix, Inc. unaudited pro forma condensed combined financial statements
after valuations and other procedures are completed.
The unaudited pro forma condensed combined balance sheet also gives effect
to (i) Abgenix's sale of 1,778,000 shares of its common stock in a private
placement completed in November 1999 for aggregate net cash proceeds of
$71,073,000 and (ii) Abgenix's December 1999 purchase of 418,995 shares of
common stock of CuraGen Corporation for $15.0 million. These transactions have
been reflected in the unaudited pro forma condensed combined balance sheet as if
such transactions had occurred on September 30, 1999. These two transactions
have no effect on the unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1998 or for the nine months ended
September 30, 1999.
11
(b) Pro forma financial information for the year ended December 31,
1998 and as of September 30, 1999.
ABGENIX, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AS OF SEPTEMBER 30, 1999
------------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------------------
AS REPORTED PURCHASE
----------------------------- CERTAIN OF INTEREST PRO FORMA
ABGENIX, INC. XENOTECH, LP TRANSACTIONS IN XENOTECH COMBINED
------------- ------------- --------------- --------------- ----------
ASSETS
Current assets:
Cash and cash equivalents........... $ 4,251 $ 1,329 $ 71,073(a) $ (47,000)(c) $ 14,653
$ (15,000)(b)
Marketable securities............... 51,612 -- -- -- 51,612
Prepaid expenses and other current
assets............................ 4,882 16 -- -- 4,898
-------- -------- --------- --------- ---------
Total current assets.............. 60,745 1,345 56,073 (47,000) 71,163
Property and equipment, net........... 4,992 -- -- -- 4,992
Intangible assets..................... -- -- -- 46,579(d) 46,579
Deposits and other assets............. 1,046 -- 15,000(b) (639)(e) 15,407
-------- -------- --------- --------- ---------
$ 66,783 $ 1,345 $ 71,073 $ (1,060) $ 138,141
======== ======== ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................... $ 712 $ 67 $ -- $ -- $ 779
Deferred revenue.................... 125 -- -- -- 125
Accrued product development costs... 926 -- -- -- 926
Other accrued liabilities........... 1,738 -- -- 218(f) 1,956
Current portion of long-term debt... 1,744 -- -- -- 1,744
-------- -------- --------- --------- ---------
Total current liabilities......... 5,245 67 -- 218 5,530
Long-term debt........................ 867 -- -- -- 867
Commitments
Stockholders' equity and partners'
capital:
Preferred stock, $.0001 per value;
5,000,000 shares authorized, none
outstanding
Common stock........................ 108,965 -- 71,073(a) -- 180,038
Partners' paid-in capital........... -- 61,707 -- (61,707)(g) --
Additional paid-in capital.......... 32,226 -- -- -- 32,226
Deferred compensation............... (795) -- -- -- (795)
Accumulated other comprehensive
loss.............................. (180) -- -- -- (180)
Accumulated deficit................. (79,545) (60,429) -- 60,429(g) (79,545)
-------- -------- --------- --------- ---------
Total stockholder's equity and
partners' capital............... 60,671 1,278 71,073 (1,278) 131,744
-------- -------- --------- --------- ---------
$ 66,783 $ 1,345 $ 71,073 $ (1,060) $ 138,141
======== ======== ========= ========= =========
See accompanying notes.
12
ABGENIX, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------
AS REPORTED
-------------------------- PRO FORMA PRO FORMA
ABGENIX XENOTECH, LP ADJUSTMENTS COMBINED
---------- ------------- ----------- ----------
Revenues:
Revenue from collaborative agreements with
the Xenotech joint venture............... $ 1,344 $ -- $(1,344)(h) $ --
Research and license revenues from Abgenix
and Japan Tobacco........................ -- 985 (760)(h) 225
Contract revenue........................... 2,498 -- -- 2,498
---------- ------ ------- ----------
Total Revenues........................... 3,842 985 (2,104) 2,723
Operating expenses:
Research and development................... 17,588 1,725 (2,408)(h) 16,905
General and administrative................. 3,405 82 3,106 (i) 6,593
Equity in losses from the Xenotech joint
venture.................................. 107 -- (107)(j) --
---------- ------ ------- ----------
Total Operating expenses................. 21,100 1,807 591 23,498
---------- ------ ------- ----------
Operating loss............................... (17,258) (822) (2,695) (20,775)
Other income and expenses:
Interest income............................ (961) -- -- (961)
Interest expense........................... 530 -- -- 530
---------- ------ ------- ----------
Net loss..................................... $ (16,827) $ (822) $(2,695) $ (20,344)
========== ====== ======= ==========
Net loss per share........................... $ (3.00) $ (3.63)
========== ==========
Shares used in computing net loss per
share...................................... 5,602,963 5,602,963
========== ==========
See accompanying notes.
13
ABGENIX, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------------------
AS REPORTED
----------------------- PRO FORMA PRO FORMA
ABGENIX XENOTECH, LP ADJUSTMENTS COMBINED
-------- ------------ ----------- ---------
Revenues:
Research and license revenues from Abgenix and
Japan Tobacco................................... $ -- $1,155 $ (760)(h) $ 1,155
Contract revenue.................................. 5,390 -- -- 4,630
-------- ------ ------- --------
Total revenues.................................. 5,390 1,155 (760) 5,785
Operating expenses:
Research and development.......................... 14,371 29 (760)(h) 13,640
General and administrative........................ 3,428 -- 2,330 (i) 5,758
Equity in income from the Xenotech joint
venture......................................... (558) -- 558 (j) --
-------- ------ ------- --------
Total operating expenses........................ 17,241 29 2,128 19,398
-------- ------ ------- --------
Operating income (loss)............................. (11,851) 1,126 (2,888) (13,613)
Other income and expenses:
Interest income................................... (1,954) -- -- (1,954)
Interest expense.................................. 347 -- -- 347
-------- ------ ------- --------
Net income (loss)................................... $(10,244) $1,126 $(2,888) $(12,006)
======== ====== ======= ========
Net income (loss) per share......................... $ (0.73) $ (0.85)
======== ========
Shares used in computing net income (loss) per
share............................................. 14,049 14,049
======== ========
See accompanying notes.
14
ABGENIX, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The Abgenix, Inc. ("Abgenix" or the "Company") unaudited pro forma condensed
combined financial statements give effect to the acquisition of Japan Tobacco,
Inc.'s 50% interest in the Xenotech joint venture for $47.0 million in cash. The
acquisition was accounted for using the purchase method of accounting. The
unaudited pro forma condensed combined statements of operations for the year
ended December 31, 1998 and the nine months ended September 30, 1999 assume the
acquisition took place on January 1, 1998. The unaudited pro forma condensed
combined balance sheet assumes the acquisition took place on September 30, 1999.
The pro forma financial statements have been prepared on the basis of
assumptions described in Note 2 including preliminary assumptions related to the
allocation of the purchase price. The actual allocation of such purchase price
may differ from those assumptions reflected in the pro forma condensed combined
financial statements after valuations and other procedures are completed.
The unaudited pro forma condensed combined balance sheet also gives effect
to the Company's sale of 1,778,000 shares of its common stock in a private
placement completed in November 1999 for aggregate net cash proceeds of
$71,073,000 and the Company's purchase of 418,595 shares of common stock of
CuraGen Corporation for $15.0 million in December 1999. These transactions have
been reflected in the unaudited pro forma condensed combined balance sheet as if
such transactions had occurred on September 30, 1999. These two transactions
have no effect on the unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1998 or for the nine months ended
September 30, 1999.
Below is a table of the estimated acquisition cost, preliminary purchase
price allocation and annual amortization of the intangible assets acquired (in
thousands):
ANNUAL
AMORTIZATION AMORTIZATION
LIVES (IN YEARS) OF INTANGIBLES
---------------- --------------
Estimated acquisition cost:
Cash consideration..................... $47,000
Acquisition costs...................... 218
-------
Total estimated acquisition cost..... $47,218
=======
Purchase price allocation:
Tangible net assets acquired........... $ 639
Intangible net assets acquired......... 46,579 15 $3,106
------- ------
$47,218 $3,106
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Tangible net assets acquired include cash of $640,000 and accrued
liabilities of $13,000. The Company's intangible assets consist of core
technology and goodwill. Management has not completed its allocation of the
purchase price between core technology and goodwill. For purposes of these pro
forma condensed combined financial statements, the Company has assumed the
intangible asset life of 15 years for both core technology and goodwill.
15
ABGENIX, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- PRO FORMA ADJUSTMENTS
The Abgenix unaudited pro forma condensed combined financial statements give
effect to the following adjustments:
(a) To reflect the issuance of 1,778,000 shares of Abgenix common stock in
November 1999 for net proceeds of $71.1 million.
(b) To reflect the purchase of 418,995 shares of CuraGen Corporation common
stock in December 1999 for $15.0 million in cash.
(c) To reflect the cash consideration paid for the acquisition of the remaining
50% interest in the Xenotech joint venture.
(d) To reflect the intangible assets recorded as a result of the acquisition.
(e) To reflect the elimination of the intercompany investment account on the
Abgenix balance sheet.
(f) To reflect the accrual of acquisition costs arising from the acquisition.
(g) To reflect the elimination of Xenotech's accumulated deficit and partners'
paid-in capital balances.
(h) To eliminate the effect of intercompany transactions between Abgenix and
Xenotech.
(i) To record the effect of the amortization of intangible assets related to the
acquisition of the Xenotech joint venture using a 15 year life.
(j) To eliminate the amount recorded on Abgenix's statement of operations
related to its recognition of its equity share in the profits and losses of
the Xenotech joint venture prior to the acquisition of the Xenotech joint
venture.
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(c) Exhibits
EXHIBIT NO. DESCRIPTION
23.1 Consent of Ernst & Young LLP, Independent Auditors
99.1* Multi-Antigen Research License and Option Agreement by and
between Abgenix, Inc. and Japan Tobacco Inc. effective December
31, 1999.
99.2* Amended and Restated Field License by and among Abgenix,
Inc., JT America Inc. and Xenotech L.P. effective December 31,
1999.
99.3 Agreement to Terminate the Collaboration Agreement by and
among Abgenix, Inc., JT America Inc., and Xenotech L.P.
effective December 31, 1999.
99.4* Agreement to Terminate the Interest of Japan Tobacco Inc. in
the Master Research License and Option Agreement by and among
Abgenix, Inc., Japan Tobacco Inc. and Xenotech L.P. effective
December 31, 1999.
99.5* Amendment of the Expanded Field License by and among Abgenix,
Inc., JT America Inc. and Xenotech L.P. effective December 31,
1999
99.6 Limited Partnership Interest and Stock Purchase Agreement
between Abgenix, Inc. and JT America Inc. made December 20,
1999.
99.7* License Agreement by and between Abgenix, Inc. and Japan
Tobacco Inc. effective December 31, 1999.
*Confidential Treatment Requested.
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SIGNATURE
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.
ABGENIX, INC.
Date: January 28, 2000
By: /s/ R. Scott Greer
-- ------------------
R. Scott Greer
President and Chief Executive Officer
18