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
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
MAY 22, 2001
GENZYME CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 0-14680 06-1047163
(State or other jurisdiction of (Commission file (IRS employer
incorporation or organization) number) identification number)
ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 252-7500
ITEM 5. OTHER EVENTS.
As reported on our current report on Form 8-K dated April 25, 2001
(filed April 26, 2001), on April 25, 2001 we entered into an Agreement and
Plan of Merger with Focal, Inc. ("Focal") to effect a business combination
through the merger of a wholly-owned subsidiary of ours with and into Focal.
In addition, in May 2001 we entered into a stock purchase agreement with
Wyntek Diagnostics, Inc. ("Wyntek") and its stockholders, pursuant to which
Genzyme will acquire all or substantially all of the outstanding capital
stock of Wyntek for approximately $65.0 million in cash. We are filing this
report to include (1) the audited financial statements of Focal as of
December 31, 2000 and 1999 and for each of the three years in the period
ended December 31, 2000, including the report of independent auditors dated
January 31, 2001, (2) the unaudited financial statements of Focal as of and
for the three months ended March 31, 2001 and 2000 and (3) unaudited pro
forma combined financial information which describes the pro forma effect of
our planned acquisitions of Focal and Wyntek on the unaudited statements of
operations for the three months ended March 31, 2001 and the year ended
December 31, 2000 and the unaudited balance sheet as of March 31, 2001 of
both Genzyme Corporation and Genzyme Biosurgery, the division of Genzyme
Corporation to which the assets and liabilities and operations of Focal will
be allocated.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
2 Agreement and Plan of Merger, dated as of April 25, 2001,
among Genzyme Corporation, Sammy Merger Corp. and Focal, Inc.
Attached as Annex A to the proxy statement/prospectus
contained in Genzyme's registration statement on Form S-4 (No.
333-61296) filed with the SEC on May 21, 2001 and incorporated
herein by reference.
23 Consent of Ernst & Young LLP. Filed herewith.
99.1 The audited financial statements of Focal as of December 31,
2000 and 1999 and for each of the three years in the period
ended December 31, 2000, including the report of independent
auditors dated January 31, 2001. Filed herewith.
99.2 The unaudited financial statements of Focal as of and for the
three months ended March 31, 2001 and 2000. Filed herewith.
2
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.
GENZYME CORPORATION
Dated: May 22, 2001 By: /s/ Michael Wyzga
-------------------------------
Michael Wyzga
Senior Vice President Finance,
Chief Financial Officer
and Chief Accounting Officer
3
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Genzyme and Focal, Inc. ("Focal") entered into a planned merger agreement on
April 25, 2001. The acquisition will be structured as a merger of a wholly-owned
subsidiary of Genzyme with and into Focal. On April 30, 2001 Genzyme also
entered into a stock purchase agreement with Wyntek Diagnostics, Inc. ("Wyntek")
and its stockholders pursuant to which Genzyme will acquire all or substantially
all of the outstanding capital stock of Wyntek. The Focal merger requires the
approval of Focal's shareholders, which has not yet been obtained.
On December 14, 2000, Genzyme completed the acquisition of GelTex
Pharmaceuticals, Inc. ("GelTex"). The acquisition was structured as a merger of
GelTex with and into one of Genzyme's wholly-owned subsidiaries pursuant to an
Agreement and Plan of Merger, dated as of September 11, 2000.
On December 18, 2000, Genzyme completed the acquisition of Biomatrix. The
acquisition was structured as a merger of Biomatrix with and into one of
Genzyme's wholly-owned subsidiaries pursuant to an Agreement and Plan of Merger,
dated as of March 6, 2000. Concurrent with the completion of Genzyme's
acquisition of Biomatrix, Genzyme amended its charter to create Genzyme
Biosurgery Division Common Stock ("Biosurgery Stock") and eliminate Genzyme
Surgical Products Division Common Stock ("Surgical Products Stock") and Genzyme
Tissue Repair Division Common Stock ("Tissue Repair Stock").
The following unaudited pro forma combined financial information describes
the pro forma effect of Genzyme's acquisitions of Focal and Wyntek on the:
- unaudited statements of operations for the three months ended March 31,
2001 and the year ended December 31, 2000; and
- unaudited balance sheet as of March 31, 2001
of both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the
assets and liabilities and operations of Focal will be allocated.
The following unaudited pro forma combined financial information also
describes the pro forma effect of Genzyme's merger with GelTex and Genzyme's
merger with Biomatrix on the unaudited statement of operations for the year
ended December 31, 2000 of both Genzyme and Genzyme Biosurgery, the division of
Genzyme to which the assets and liabilities and operations of Biomatrix were
allocated, as if these mergers took place on January 1, 2000. In addition, the
Genzyme pro forma statement of operations for the year ended December 31, 2000
reflects the change in earnings allocations resulting from the creation of
Biosurgery Stock and elimination of Surgical Products Stock and Tissue Repair
Stock as if this took place on January 1, 2000. The purpose of this pro forma
financial information is to demonstrate how the combined financial statements of
these businesses might have appeared if each of the mergers had been completed
at the beginning of the periods presented. The results of operations of GelTex
and Biomatrix are included in the results of Genzyme beginning on the respective
dates of acquisition.
To determine earnings per share, Genzyme allocates its earnings to each
series of its common stock based on the earnings attributable to that series of
stock. The earnings attributable to each series of stock are defined in
Genzyme's charter as the net income or loss of the corresponding division
determined in accordance with generally accepted accounting principles and as
adjusted for tax benefits allocated to or from the division in accordance with
Genzyme's management and accounting policies. Genzyme's charter also requires
that all income and expenses of Genzyme be allocated among the divisions in a
reasonable and consistent manner. Genzyme's board of directors, however, retains
considerable discretion in determining the types, magnitudes and extent of
allocations to each series of common stock without shareholder approval.
4
Because the earnings allocated to Genzyme Biosurgery Stock are based on the
income or losses attributable to Genzyme Biosurgery, Genzyme included pro forma
financial statements of Genzyme Biosurgery to aid investors in evaluating its
performance.
Holders of Genzyme Biosurgery Stock have no specific rights to the assets
allocated to Genzyme Biosurgery. Genzyme Corporation continues to hold title to
all of the assets allocated to Genzyme Biosurgery and is responsible for all of
its liabilities, regardless of what Genzyme deems for financial statement
presentation purposes as allocated to any division. Holders of Genzyme
Biosurgery Stock, as common stockholders, are therefore subject to the risks of
investing in the businesses, assets and liabilities of Genzyme, as a whole.
Genzyme has prepared the pro forma financial information using the purchase
method of accounting for all four transactions. Genzyme expects to have
reorganization and restructuring expenses as well as potential operating
efficiencies as a result of the transactions with Focal and Wyntek. The
unaudited pro forma information does not reflect these potential expenses and
efficiencies.
PENDING ACQUISITION OF FOCAL
As a result of the merger with Focal, each outstanding share of Focal common
stock not already owned by Genzyme will automatically convert into the right to
receive 0.1545 of a share of Biosurgery Stock, except for 10,000 shares of Focal
common stock that will be purchased for cash. Genzyme will account for the
merger using the purchase method of accounting. Under the purchase method, the
assets and liabilities of Focal, including intangible assets, will be recorded
at their fair market values. The results of operations and cash flows of Focal
will be included in Genzyme's financial statements following the completion of
the merger. The assets, liabilities and operations of Focal will be allocated to
Genzyme Biosurgery.
Additionally, each option and warrant to purchase shares of Focal common
stock outstanding immediately before the effective time of the merger will be
assumed by Genzyme after the merger and will become an option or warrant to
acquire Biosurgery Stock. The conversion of options to purchase Focal common
stock will be accounted for in accordance with Financial Accounting Standards
Board Interpretation No. 44 ("FIN 44").
PENDING ACQUISITION OF WYNTEK
Under the stock purchase agreement with Wyntek, Genzyme will purchase all of
the outstanding stock of Wyntek for approximately $65.0 million in cash. Genzyme
will account for the transaction using the purchase method of accounting. Under
this method, the assets and liabilities of Wyntek, including intangible assets,
will be recorded at their fair market values. The results of operations and cash
flows of Wyntek will be included in Genzyme's financial statements following the
completion of the transaction. No options or warrants will be assumed by Genzyme
in connection with the purchase. The assets, liabilities and operations of
Wyntek will be allocated to Genzyme General.
ACQUISITION OF GELTEX
Genzyme issued approximately 7.9 million shares of Genzyme General Stock and
paid cash of $515.2 million for all of the outstanding stock of GelTex. In
addition, Genzyme issued options and warrants to purchase Genzyme General Stock
in exchange for all outstanding GelTex options and warrants. The conversion of
options to purchase GelTex common stock was accounted for in accordance with FIN
44.
5
ACQUISITION OF BIOMATRIX
Genzyme issued approximately 17.5 million shares of Biosurgery Stock and
paid cash of $252.4 million for all of the outstanding stock of Biomatrix. In
addition, Genzyme issued options to purchase Biosurgery Stock in exchange for
all outstanding Biomatrix options. The conversion of options to purchase
Biomatrix common stock was accounted for in accordance with FIN 44.
TRACKING STOCK EXCHANGES
In connection with the merger with Biomatrix, Genzyme effected an exchange
of its tracking stock whereby outstanding shares of Tissue Repair Stock and
Surgical Products Stock converted into Biosurgery Stock, the dividend and other
provisions of which are designed to track the financial performance of the
Genzyme Biosurgery division. Holders of Tissue Repair Stock and Surgical
Products Stock, therefore, remain holders of Genzyme common stock, but hold a
security whose dividend and other provisions are designed to track a different
subset of Genzyme's operations and assets. Additionally, the votes and
liquidation units per share of their holdings changed. Upon completion of the
tracking stock exchanges, each outstanding share of Surgical Products Stock
converted into the right to receive 0.6060 of a share of Biosurgery Stock and
each outstanding share of Tissue Repair Stock converted into the right to
receive 0.3352 of a share of Biosurgery Stock. Additionally, all outstanding
options to purchase Surgical Products Stock and Tissue Repair Stock converted
into options to purchase Biosurgery Stock at the respective conversion rates.
The earnings attributable to Biosurgery Stock are defined in Genzyme's
charter as the net income or loss of Genzyme Biosurgery determined in accordance
with generally accepted accounting principles and as adjusted for tax benefits
allocated to or from Genzyme Biosurgery in accordance with Genzyme's management
and accounting policies. Prior to the tracking stock exchange, the earnings
attributable to Surgical Products Stock and Tissue Repair Stock were defined in
Genzyme's charter as the net income or loss of Genzyme Surgical Products and
Genzyme Tissue Repair, respectively, determined in accordance with generally
accepted accounting principles and as adjusted for tax benefits allocated to or
from the division. Accordingly, the tracking stock exchanges involved a change
in Genzyme's methodology for allocating its earnings to its series of common
stock.
These unaudited pro forma balance sheets and statements of operations are
for informational purposes only. They do not purport to indicate the results
that would have actually been obtained had the mergers been completed on the
assumed date or for the periods presented, or which may be obtained in the
future. To produce the pro forma financial information, Genzyme allocated the
purchase price for the Focal and Wyntek mergers using its best estimates. The
unaudited pro forma balance sheets and statements of operations should be read
in conjunction with the historical consolidated financial statements, including
the notes thereto, of each of Genzyme, Focal, Wyntek, GelTex and Biomatrix. For
Genzyme, those financial statements are included in Genzyme's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2001 (filed on May 15, 2001) and
its Annual Report on Form 10-K for the year ended December 31, 2000 (filed on
April 2, 2001). For GelTex those financial statements are included in GelTex's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (filed on
November 14, 2000) and its Annual Report on Form 10-K for the year ended
December 31, 1999 (filed on March 30, 2000), as amended on November 7, 2000. For
Biomatrix, those financial statements are included in Biomatrix's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000 (filed on
November 14, 2000) and its Annual Report on Form 10-K for the year ended
December 31, 1999 (filed on March 30, 2000), as amended on April 26, 2000 and
October 26, 2000. For Wyntek, those financials are included in Exhibit 99.1 to
Genzyme's Current Report on Form 8-K filed on May 18, 2001. For Focal, those
financial statements are included in Exhibit 99.1 and Exhibit 99.2 to this
Current Report on Form 8-K.
6
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS)
HISTORICAL
GENZYME
CORPORATION HISTORICAL PRO FORMA NOTE HISTORICAL PRO FORMA
AND SUBSIDIARIES BIOMATRIX, INC. ADJUSTMENTS REFERENCE GELTEX ADJUSTMENTS
---------------- ---------------- ----------- --------- ---------- -----------
Revenues:
Net product sales................ $ 811,897 $65,401 $ -- $ -- $ 6,166
Net service sales................ 84,482 -- -- -- -- --
Collaborative joint venture
project reimbursement.......... -- -- -- -- 5,409 (5,409)
Revenues from research and
development contracts:
Related parties................ 509 -- -- -- --
Other.......................... 6,432 -- -- 36,585 15
Income from licenses, royalties,
research contracts and
grants......................... -- 10,221 -- -- --
--------- ------- -------- ------- --------
Total revenues................. 903,320 75,622 -- 41,994 772
--------- ------- -------- ------- --------
Operating costs and expenses:
Cost of products sold............ 232,383 20,395 11,330 B2 -- 8,156
6,471
Cost of services sold............ 50,177 -- -- -- --
Selling, general and
administrative................. 264,551 33,576 21 B2
(105) B2 11,729 5,870
1,671
1,761
Collaborative joint venture
project costs.................. -- -- -- 5,409 (5,409)
Research and development
(including research and
development relating to
contracts)..................... 169,478 10,184 -- 33,727 7,042
4,568
Amortization of intangibles...... 22,974 -- 35,617 B1 -- 59,876
Purchase of in-process research
and development................ 200,191 -- (82,143) B8 -- (118,048)
Charge for impaired asset........ 4,321 -- -- -- --
--------- ------- -------- ------- --------
Total operating costs and
expenses..................... 944,075 64,155 (35,280) 50,865 (28,042)
--------- ------- -------- ------- --------
Operating income (loss)............ (40,755) 11,467 35,280 (8,871) 28,814
--------- ------- -------- ------- --------
Other income (expenses):
Equity in net loss of
unconsolidated affiliates...... (44,965) -- -- 1,582 8,277
1,812
(1,582)
Gain on affiliate sale of
stock.......................... 22,689 -- -- -- --
Gain on sale of investment in
equity securities.............. 23,173 -- -- -- --
Minority interest................ 4,625 -- -- -- --
Charge for impaired
investments.................... (7,300) -- -- -- --
Other............................ 5,188 (301) -- -- --
Investment income................ 45,593 3,402 (2,738) B6 6,942 (18,923)
Interest expense................. (15,710) (975) (14,375) B6 (697) 269
(10,781)
--------- ------- -------- ------- --------
Total other income
(expenses)................... 33,293 2,126 (17,113) 7,827 (20,928)
--------- ------- -------- ------- --------
Income (loss) before income
taxes............................ (7,462) 13,593 18,167 (1,044) 7,886
(Provision for) benefit from income
taxes............................ (55,478) (6,513) 19,661 B5 -- 27,824
--------- ------- -------- ------- --------
Net income (loss).................. $ (62,940) $ 7,080 $ 37,828 $(1,044) $ 35,710
========= ======= ======== ======= ========
PRO FORMA
GENZYME
CORPORATION,
NOTE BIOMATRIX
REFERENCE AND GELTEX
--------- ---------------
Revenues:
Net product sales................ G6 $ 883,464
Net service sales................ 84,482
Collaborative joint venture
project reimbursement.......... G5 --
Revenues from research and
development contracts:
Related parties................ 509
Other.......................... G6 43,032
Income from licenses, royalties,
research contracts and
grants......................... 10,221
----------
Total revenues................. 1,021,708
----------
Operating costs and expenses:
Cost of products sold............ G2
G6 278,735
Cost of services sold............ 50,177
Selling, general and
administrative.................
G6
G2
G2 319,074
Collaborative joint venture
project costs.................. G5
Research and development
(including research and
development relating to
contracts)..................... G2
G6 224,999
Amortization of intangibles...... G1,G6 118,467
Purchase of in-process research
and development................ G9 --
Charge for impaired asset........ 4,321
----------
Total operating costs and
expenses..................... 995,773
----------
Operating income (loss)............ 25,935
----------
Other income (expenses):
Equity in net loss of
unconsolidated affiliates...... G6
G6
G6 (34,876)
Gain on affiliate sale of
stock.......................... G5 22,689
Gain on sale of investment in
equity securities.............. 23,173
Minority interest................ 4,625
Charge for impaired
investments.................... (7,300)
Other............................ 4,887
Investment income................ G4 34,276
Interest expense................. G4
G4 (42,269)
----------
Total other income
(expenses)................... 5,205
----------
Income (loss) before income
taxes............................ 31,140
(Provision for) benefit from income
taxes............................ G7 (14,506)
----------
Net income (loss).................. $ 16,634
==========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
7
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS)
PRO FORMA
GENZYME
CORPORATION, HISTORICAL
BIOMATRIX WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA
AND GELTEX DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS
--------------- ------------------ ----------- --------- ----------- -----------
Revenues:
Net product sales................ $ 883,464 $17,546 $ -- $ 1,721 $(1,454)
Net service sales................ 84,482 -- -- --
Collaborative research and
development revenue............ -- -- -- 874 (874)
Revenue from research and
development contracts: -- -- -- --
Related parties................ 509 -- -- -- --
Other.......................... 43,032 -- -- -- --
Income from licenses, royalties,
research contracts and
grants......................... 10,221 -- -- -- --
---------- ------- ------- -------- -------
Total revenues................. 1,021,708 17,546 -- 2,595 (2,328)
---------- ------- ------- -------- -------
Operating costs and expenses:
Cost of products sold............ 278,735 8,457 318 W7 2,842 5,078
(1,230)
Cost of services sold............ 50,177 -- -- -- --
Selling, general and
administrative................. 319,074 1,557 -- 6,000 867
Collaborative joint venture
project costs.................. -- -- -- -- --
Research and development
(including research and
development relating to
contracts)..................... 224,999 1,686 -- 8,112 --
Amortization of intangibles...... 118,467 -- 5,025 W6 -- 318
Purchase of in-process research
and development................ -- -- -- -- --
Charge for impaired asset........ 4,321 -- -- -- --
---------- ------- ------- -------- -------
Total operating costs and
expenses..................... 995,773 11,700 5,343 16,954 5,033
---------- ------- ------- -------- -------
Operating income (loss)............ 25,935 5,846 (5,343) (14,359) (7,361)
---------- ------- ------- -------- -------
Other income (expenses):
Equity in net loss of
unconsolidated affiliates...... (34,876) -- -- -- --
Gain on affiliate sale of
stock.......................... 22,689 -- -- -- --
Gain on sale of investment in
equity securities.............. 23,173 -- -- -- --
Minority interest................ 4,625 -- -- -- --
Charge for impaired investment... (7,300) -- -- -- 7,300
Other............................ 4,887 -- -- 475 --
Investment income................ 34,276 258 (3,572) W8 705 --
Interest expense................. (42,269) -- -- (298) --
---------- ------- ------- -------- -------
Total other income
(expenses)................... 5,205 258 (3,572) 882 7,300
---------- ------- ------- -------- -------
Income (loss) before income
taxes............................ 31,140 6,104 (8,915) (13,477) (61)
(Provision for) benefit from income
taxes............................ (14,506) (2,208) 3,209 W9 4,874
---------- ------- ------- -------- -------
Income (loss) before cumulative
effect of change in accounting
principle........................ 16,634 3,896 (5,706) (13,477) 4,813
Cumulative effect of a change in
accounting principle, net of
tax.............................. -- -- -- (5,600) 5,600
---------- ------- ------- -------- -------
Net income (loss).................. $ 16,634 $ 3,896 $(5,706) $(19,077) $10,413
========== ======= ======= ======== =======
PRO FORMA
GENZYME
CORPORATION
NOTE AND
REFERENCE SUBSIDIARIES
--------- ------------
Revenues:
Net product sales................ F10 $ 901,277
Net service sales................ 84,482
Collaborative research and
development revenue............ F11 --
Revenue from research and
development contracts: --
Related parties................ 509
Other.......................... 43,032
Income from licenses, royalties,
research contracts and
grants......................... 10,221
----------
Total revenues................. 1,039,521
----------
Operating costs and expenses:
Cost of products sold............ F9
F10 294,200
Cost of services sold............ 50,177
Selling, general and
administrative................. F9 327,498
Collaborative joint venture
project costs.................. --
Research and development
(including research and
development relating to
contracts)..................... 234,797
Amortization of intangibles...... F8 123,810
Purchase of in-process research
and development................ --
Charge for impaired asset........ 4,321
----------
Total operating costs and
expenses..................... 1,034,803
----------
Operating income (loss)............ 4,718
----------
Other income (expenses):
Equity in net loss of
unconsolidated affiliates...... (34,876)
Gain on affiliate sale of
stock.......................... 22,689
Gain on sale of investment in
equity securities.............. 23,173
Minority interest................ 4,625
Charge for impaired investment... F10 --
Other............................ 5,362
Investment income................ 31,667
Interest expense................. (42,567)
----------
Total other income
(expenses)................... 10,073
----------
Income (loss) before income
taxes............................ 14,791
(Provision for) benefit from income
taxes............................ F12 (8,631)
----------
Income (loss) before cumulative
effect of change in accounting
principle........................ 6,160
Cumulative effect of a change in
accounting principle, net of
tax.............................. F11 --
----------
Net income (loss).................. $ 6,160
==========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
8
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL
GENZYME
CORPORATION HISTORICAL PRO FORMA NOTE HISTORICAL PRO FORMA
AND SUBSIDIARIES BIOMATRIX, INC. ADJUSTMENTS REFERENCE GELTEX ADJUSTMENTS
---------------- --------------- ----------- --------- ---------- -----------
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL
STOCK:
Genzyme General net income....... $ 85,956 $ -- $ 34,666
Tax benefit allocated from
Genzyme Molecular Oncology..... 7,476 -- --
Tax benefit allocated from
Genzyme Biosurgery............. 28,023 (352) B7 --
-------- -------- ---------
Net income allocated to Genzyme
General Stock.................. $121,455 $ (352) $ 34,666
======== ======== =========
Net income per share of Genzyme
General Stock:
Basic.......................... $ 1.41
========
Diluted........................ $ 1.35
========
Weighted average shares
outstanding:
Basic.......................... 86,131 7,062
======== =========
Diluted........................ 89,683 14,463
======== =========
ALLOCATED TO MOLECULAR ONCOLOGY
STOCK:
Net loss......................... $(23,096)
========
Net loss per share of Molecular
Oncology Stock--basic and
diluted........................ $ (1.60)
========
Weighted average shares
outstanding.................... 14,446
========
ALLOCATED TO SURGICAL PRODUCTS
STOCK:
Net loss......................... $(54,748) $ 54,748 B4
======== ========
Net loss per share of Surgical
Products Stock--basic and
diluted........................ $ (3.67) $ 3.67 B4
======== ========
Weighted average shares
outstanding.................... 14,900 (14,900) B3
======== ========
ALLOCATED TO TISSUE REPAIR STOCK:
Net loss......................... $(19,833) $ 19,833 B4
======== ========
Net loss per share of Tissue
Repair Stock--basic and
diluted........................ $ (0.69) $ 0.69 B4
======== ========
Weighted average shares
outstanding.................... 28,716 (28,716) B3
======== ========
BIOMATRIX, INC.:
Net income....................... $ 7,080 $ (7,080) B4
======= ========
Net income per Biomatrix common
share-basic.................... $ 0.30 $ (0.30) B4
======= ========
Weighted average shares
outstanding.................... 23,401 (23,401) B3
======= ========
Net income per Biomatrix common
and common equivalent
share-diluted.................. $ 0.29 $ (0.29) B4
======= ========
Adjusted weighted average shares
outstanding.................... 24,395 (24,395) B3
======= ========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss...... $(87,636) $(42,821) B4
Allocated tax benefit............ 448 13,500 B9
-------- ========
Net loss allocated to Biosurgery
Stock.......................... $(87,188) $(29,321) B4
======== ========
Net loss per share of Biosurgery
Stock--basic and diluted....... $ (2.40)
========
Weighted average shares
outstanding.................... 36,359 (686) B3
======== ========
GELTEX PHARMACEUTICALS, INC.:
Net loss......................... $(1,044) $ 1,044
======= =========
Net loss per share of GelTex
common stock--basic and
diluted........................ $ (0.05) $ 0.05
======= =========
Weighted average shares
outstanding.................... 19,872 (19,872)
======= =========
PRO FORMA
GENZYME
CORPORATION,
NOTE BIOMATRIX
REFERENCE AND GELTEX
--------- ------------
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL
STOCK:
Genzyme General net income....... G8 $ 120,622
Tax benefit allocated from
Genzyme Molecular Oncology..... 7,476
Tax benefit allocated from
Genzyme Biosurgery............. 27,671
---------
Net income allocated to Genzyme
General Stock.................. $ 155,769
=========
Net income per share of Genzyme
General Stock:
Basic.......................... $ 1.67
=========
Diluted........................ $ 1.59
=========
Weighted average shares
outstanding:
Basic.......................... G3 93,193
=========
Diluted........................ G3 104,146
=========
ALLOCATED TO MOLECULAR ONCOLOGY
STOCK:
Net loss......................... $ (23,096)
=========
Net loss per share of Molecular
Oncology Stock--basic and
diluted........................ $ (1.60)
=========
Weighted average shares
outstanding.................... 14,446
=========
ALLOCATED TO SURGICAL PRODUCTS
STOCK:
Net loss......................... $ --
=========
Net loss per share of Surgical
Products Stock--basic and
diluted........................ $ --
=========
Weighted average shares
outstanding.................... --
=========
ALLOCATED TO TISSUE REPAIR STOCK:
Net loss......................... $ --
=========
Net loss per share of Tissue
Repair Stock--basic and
diluted........................ $ --
=========
Weighted average shares
outstanding.................... --
=========
BIOMATRIX, INC.:
Net income....................... $ --
=========
Net income per Biomatrix common
share-basic.................... $ --
=========
Weighted average shares
outstanding.................... --
=========
Net income per Biomatrix common
and common equivalent
share-diluted.................. $ --
=========
Adjusted weighted average shares
outstanding.................... --
=========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss...... $(130,457)
Allocated tax benefit............ 13,948
=========
Net loss allocated to Biosurgery
Stock.......................... $(116,509)
=========
Net loss per share of Biosurgery
Stock--basic and diluted....... $ (3.27)
=========
Weighted average shares
outstanding.................... 35,673
=========
GELTEX PHARMACEUTICALS, INC.:
Net loss......................... G8 $ --
=========
Net loss per share of GelTex
common stock--basic and
diluted........................ G8 $ --
=========
Weighted average shares
outstanding.................... G3 --
=========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
9
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
GENZYME
CORPORATION, HISTORICAL
BIOMATRIX WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA
AND GELTEX DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS
------------ ----------------- ----------- --------- ----------- -----------
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL
STOCK:
Genzyme General net income....... $ 120,622 $ (1,810) W10 $ --
Tax benefit allocated from
Genzyme Molecular Oncology..... 7,476 -- --
Tax benefit allocated from
Genzyme Biosurgery............. 27,671 -- 4,874
--------- -------- --------
Net income allocated to Genzyme
General Stock.................. $ 155,769 $ (1,810) $ 4,874
========= ======== ========
Net income per share of Genzyme
General Stock:
Basic.......................... $ 1.67
=========
Diluted........................ $ 1.59
=========
Weighted average shares
outstanding:
Basic.......................... 93,193
=========
Diluted........................ 104,146
=========
ALLOCATED TO MOLECULAR ONCOLOGY
STOCK:
Net loss......................... $ (23,096)
=========
Net loss per share of Molecular
Oncology Stock--basic and
diluted........................ $ (1.60)
=========
Weighted average shares
outstanding.................... 14,446
=========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss...... $(130,457) $(13,538)
Allocated tax benefit............ 13,948 --
--------- --------
Net loss allocated to Biosurgery
Stock.......................... $(116,509) $(13,538)
========= ========
Net loss per share of Biosurgery
Stock--basic and diluted....... $ (3.27)
=========
Weighted average shares
outstanding.................... 35,673 2,086
========= ========
WYNTEK DIAGNOSTICS, INC.
Net income....................... $ 3,896 $ (3,896) W10
======= ========
Net income per share of Wyntek
common stock--basic............ $ 0.95 $ (0.95) W10
======= ========
Weighted average shares
outstanding.................... 4,120 (4,120) W10
======= ========
Net income per share of Wyntek
common stock--diluted.......... $ 0.87 $ (0.87) W10
======= ========
Adjusted weighted average shares
outstanding.................... 4,488 (4,488) W10
======= ========
FOCAL, INC.
Net loss......................... $(19,077) $ 19,077
======== ========
Net loss per Focal common
share--basic and diluted....... $ (1.30) $ 1.30
======== ========
Weighted average shares
outstanding.................... 14,707 (14,707)
======== ========
PRO FORMA
GENZYME
NOTE CORPORATION
REFERENCE AND SUBSIDIARIES
---------- ----------------
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL
STOCK:
Genzyme General net income....... $ 118,812
Tax benefit allocated from
Genzyme Molecular Oncology..... 7,476
Tax benefit allocated from
Genzyme Biosurgery............. F14 32,545
---------
Net income allocated to Genzyme
General Stock.................. $ 158,833
=========
Net income per share of Genzyme
General Stock:
Basic.......................... $ 1.70
=========
Diluted........................ $ 1.62
=========
Weighted average shares
outstanding:
Basic.......................... 93,193
=========
Diluted........................ 104,146
=========
ALLOCATED TO MOLECULAR ONCOLOGY
STOCK:
Net loss......................... $ (23,096)
=========
Net loss per share of Molecular
Oncology Stock--basic and
diluted........................ $ (1.60)
=========
Weighted average shares
outstanding.................... 14,446
=========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss...... F13 $(143,995)
Allocated tax benefit............ 13,948
---------
Net loss allocated to Biosurgery
Stock.......................... $(130,047)
=========
Net loss per share of Biosurgery
Stock--basic and diluted....... $ (3.44)
=========
Weighted average shares
outstanding.................... F13 37,759
=========
WYNTEK DIAGNOSTICS, INC.
Net income.......................
Net income per share of Wyntek
common stock--basic............
Weighted average shares
outstanding....................
Net income per share of Wyntek
common stock--diluted..........
Adjusted weighted average shares
outstanding....................
FOCAL, INC.
Net loss......................... F13 $ --
=========
Net loss per Focal common
share--basic and diluted....... F13 $ --
=========
Weighted average shares
outstanding.................... F13 --
=========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
10
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL
GENZYME HISTORICAL
CORPORATION WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA
AND SUBSIDIARIES DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS
---------------- ----------------- ----------- --------- ----------- -----------
Revenues:
Net product sales................ $250,830 $5,855 $ -- $ 613 $ (571)
Net service sales................ 23,760 -- --
Collaborative research and
development revenue............ 249 (249)
Revenue from research and
development contracts:
Related parties................ 319 -- -- -- --
Other.......................... 3,352 -- -- -- --
-------- ------ -------- ----------- ---------
Total revenues............... 278,261 5,855 -- 862 (820)
-------- ------ -------- ----------- ---------
Operating costs and expenses:
Cost of products sold............ 76,532 2,208 -- 771 (429)
Cost of services sold............ 13,421 -- -- -- --
Selling, general and
administrative................. 91,114 864 -- 1,446 217
Research and development
(including research and
development related to
contracts)..................... 57,110 490 -- 1,369 --
Amortization of intangibles...... 28,991 -- 1,256 W6 -- 80
-------- ------ -------- ----------- ---------
Total operating costs and
expenses................... 267,168 3,562 1,256 3,586 (132)
-------- ------ -------- ----------- ---------
Operating income (loss)............ 11,093 2,293 (1,256) (2,724) (688)
-------- ------ -------- ----------- ---------
Other income (expenses):
Equity in net loss of
unconsolidated affiliates...... (9,015) -- -- -- 536
Minority interest................ 1,274 -- -- -- --
Other............................ (3,710) -- -- -- --
Investment income................ 10,148 66 (893) W8 99 --
Interest expense................. (11,370) -- -- -- --
-------- ------ -------- ----------- ---------
Total other income
(expenses)................. (12,673) 66 (893) 99 536
-------- ------ -------- ----------- ---------
Income (loss) before income
taxes............................ (1,580) 2,359 (2,149) (2,625) (152)
(Provision for) benefit from income
taxes............................ 670 (850) 774 W9 -- 1,000
-------- ------ -------- ----------- ---------
Income (loss) before cumulative
effect of change in accounting
principle........................ (910) 1,509 (1,375) (2,625) 848
Cumulative effect of change in
accounting principle, net of
tax.............................. 4,167 -- -- -- --
-------- ------ -------- ----------- ---------
Net income (loss).................. $ 3,257 $1,509 $ (1,375) $ (2,625) $ 848
======== ====== ======== =========== =========
PRO FORMA
GENZYME
CORPORATION
NOTE AND
REFERENCE SUBSIDIARIES
--------- ---------------
Revenues:
Net product sales................ F10 $ 256,727
Net service sales................ 23,760
Collaborative research and
development revenue............ F11
Revenue from research and
development contracts:
Related parties................ 319
Other.......................... 3,352
-----------
Total revenues............... 284,158
-----------
Operating costs and expenses:
Cost of products sold............ F10 79,082
Cost of services sold............ 13,421
Selling, general and
administrative................. F9 93,641
Research and development
(including research and
development related to
contracts)..................... 58,969
Amortization of intangibles...... F8 30,327
-----------
Total operating costs and
expenses................... 275,440
-----------
Operating income (loss)............ 8,718
-----------
Other income (expenses):
Equity in net loss of
unconsolidated affiliates...... (8,479)
Minority interest................ 1,274
Other............................ (3,710)
Investment income................ 9,420
Interest expense................. (11,370)
-----------
Total other income
(expenses)................. (12,865)
-----------
Income (loss) before income
taxes............................ (4,147)
(Provision for) benefit from income
taxes............................ F12 1,594
-----------
Income (loss) before cumulative
effect of change in accounting
principle........................ (2,553)
Cumulative effect of change in
accounting principle, net of
tax.............................. 4,167
-----------
Net income (loss).................. $ 1,614
===========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
11
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL HISTORICAL
GENZYME WYNTEK
CORPORATION DIAGNOSTICS, PRO FORMA NOTE HISTORICAL PRO FORMA
AND SUBSIDIARIES INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS
---------------- ------------ ----------- --------- ----------- -----------
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL
STOCK:
Genzyme General net income before
cumulative effect of change in
accounting principle........... $ 25,145 $ 134 W10 $ --
Cumulative effect of change in
accounting principle, net of
tax............................ 4,167 -- --
-------- -------- --------
Genzyme General net income....... 29,312 134 --
Tax benefit allocated from
Genzyme Biosurgery............. 8,116 -- 1,000
Tax benefit allocated from
Genzyme Molecular Oncology..... 2,826 -- --
-------- -------- --------
Net income allocated to Genzyme
General Stock.................. $ 40,254 $ 134 $ 1,000
======== ======== ========
Net income per share of Genzyme
General Stock:
Basic:
Net income per share before
cumulative effect of change in
accounting principle........... $ 0.38
Per share cumulative effect of
change in accounting principle,
net of tax..................... 0.04
--------
Net income per share allocated to
Genzyme General Stock.......... $ 0.42
========
Diluted:
Net income per share before
cumulative effect of change in
accounting principle........... $ 0.36
Per share cumulative effect of
change in accounting principle,
net of tax..................... 0.04
--------
Net income per share allocated to
Genzyme General Stock.......... $ 0.40
========
Weighted average shares
outstanding:
Basic............................ 95,875
========
Diluted.......................... 100,400
========
ALLOCATED TO MOLECULAR ONCOLOGY
STOCK:
Net loss......................... $ (6,274)
========
Net loss per share of Molecular
Oncology Stock--basic and
diluted........................ $ (0.39)
========
Weighted average shares
outstanding.................... 15,907
========
FOCAL, INC.:
Net loss......................... $(2,625) $ 2,625
======= ========
Net loss per share of Focal
common stock--basic and
diluted........................ $ (0.15) $ 0.15
======= ========
Weighted average shares
outstanding.................... 17,283 (17,283)
======= ========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss...... $(35,327) $ (2,777)
Allocated tax benefit............ 4,604 --
-------- --------
Net loss allocated to Biosurgery
Stock.......................... $(30,723) $ (2,777)
======== ========
Net loss per share of Biosurgery
Stock--basic and diluted....... $ (0.84)
========
Weighted average shares
outstanding.................... 36,402 2,086
======== ========
WYNTEK DIAGNOSTICS, INC.:
Net income....................... $ 1,509 $ (1,509) W10
======= ========
Net income per share of Wyntek
common stock--basic............ $ 0.37 $ (0.37) W10
======= ========
Weighted average shares
outstanding.................... 4,125 (4,125) W10
======= ========
Net income per share of Wyntek
common stock and equivalent
share--diluted................. $ 0.34 $ (0.34) W10
======= ========
Adjusted weighted average shares
outstanding.................... 4,487 (4,487) W10
======= ========
PRO FORMA
GENZYME
NOTE CORPORATION
REFERENCE AND SUBSIDIARIES
--------- ----------------
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL
STOCK:
Genzyme General net income before
cumulative effect of change in
accounting principle........... $ 25,279
Cumulative effect of change in
accounting principle, net of
tax............................ 4,167
--------
Genzyme General net income....... 29,446
Tax benefit allocated from
Genzyme Biosurgery............. F14 9,116
Tax benefit allocated from
Genzyme Molecular Oncology..... 2,826
--------
Net income allocated to Genzyme
General Stock.................. $ 41,388
========
Net income per share of Genzyme
General Stock:
Basic:
Net income per share before
cumulative effect of change in
accounting principle........... $ 0.39
Per share cumulative effect of
change in accounting principle,
net of tax..................... 0.04
--------
Net income per share allocated to
Genzyme General Stock.......... $ 0.43
========
Diluted:
Net income per share before
cumulative effect of change in
accounting principle........... $ 0.37
Per share cumulative effect of
change in accounting principle,
net of tax..................... 0.04
--------
Net income per share allocated to
Genzyme General Stock.......... $ 0.41
========
Weighted average shares
outstanding:
Basic............................ 95,875
========
Diluted.......................... 100,400
========
ALLOCATED TO MOLECULAR ONCOLOGY
STOCK:
Net loss......................... $ (6,274)
========
Net loss per share of Molecular
Oncology Stock--basic and
diluted........................ $ (0.39)
========
Weighted average shares
outstanding.................... 15,907
========
FOCAL, INC.:
Net loss......................... F13 $ --
========
Net loss per share of Focal
common stock--basic and
diluted........................ F13 $ --
========
Weighted average shares
outstanding.................... F13 --
========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss...... F13 $(38,104)
Allocated tax benefit............ 4,604
--------
Net loss allocated to Biosurgery
Stock.......................... $(33,500)
========
Net loss per share of Biosurgery
Stock--basic and diluted....... $ (0.87)
========
Weighted average shares
outstanding.................... F13 38,488
========
WYNTEK DIAGNOSTICS, INC.:
Net income....................... $ --
========
Net income per share of Wyntek
common stock--basic............ $ --
========
Weighted average shares
outstanding.................... --
========
Net income per share of Wyntek
common stock and equivalent
share--diluted................. $ --
========
Adjusted weighted average shares
outstanding.................... --
========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
12
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 2001
(AMOUNTS IN THOUSANDS)
HISTORICAL
GENZYME HISTORICAL
CORPORATION AND WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA
SUBSIDIARIES DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS
--------------- ----------------- ----------- --------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents........... $ 207,582 $ 4,779 $ (65,650) W1 $ 5,490 $ (507)
Short-term investments.............. 122,557 -- -- 201
Accounts receivable, net............ 211,452 3,826 -- 432 (370)
Inventories......................... 165,437 2,091 318 W3 1,511 5,078
Prepaid expenses and other current
assets............................ 36,537 100 -- 406 --
Deferred tax assets--current........ 45,024 229 (229) W4 -- --
---------- -------- --------- -------- ---------
Total current assets............ 788,589 11,025 (65,561) 8,040 4,201
Property, plant and equipment, net.... 512,386 1,970 -- 2,020 --
Long-term investments................. 289,475 -- -- -- --
Notes receivable--related party....... 10,159 -- -- 174 (37)
Intangibles, net...................... 1,536,065 -- 49,122 W1 -- 3,817
Investments in equity securities...... 76,903 -- -- -- --
Other noncurrent assets............... 50,835 40 -- -- 2,600
(6,165)
---------- -------- --------- -------- ---------
Total assets.................... $3,264,412 $ 13,035 $ (16,439) $ 10,234 $ 4,416
========== ======== ========= ======== =========
PRO FORMA
GENZYME
NOTE CORPORATION AND
REFERENCE SUBSIDIARIES
--------- ---------------
ASSETS
Current assets:
Cash and cash equivalents........... F1 $ 151,694
Short-term investments.............. 122,758
Accounts receivable, net............ F5 215,340
Inventories......................... F4 174,435
Prepaid expenses and other current
assets............................ 37,043
Deferred tax assets--current........ 45,024
----------
Total current assets............ 746,294
Property, plant and equipment, net.... 516,376
Long-term investments................. 289,475
Notes receivable--related party....... F3 10,296
Intangibles, net...................... F1 1,589,004
Investments in equity securities...... 76,903
Other noncurrent assets............... F6
F5 47,310
----------
Total assets.................... $3,275,658
==========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
13
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET (CONTINUED)
AS OF MARCH 31, 2001
(AMOUNTS IN THOUSANDS)
HISTORICAL HISTORICAL
GENZYME WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA
CORPORATION DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS
----------- ----------------- ----------- --------- ----------- -----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 30,133 $ 1,021 $ -- $ 278 $ --
Accrued expenses................. 110,960 1,836 1,000 W2 1,909 1,125
700
Income taxes payable............... 48,956 605 -- -- --
Deferred revenue................... 5,401 -- -- 883 (883)
Current portion of notes payable
and long-term debt and capital
lease obligations................ 19,869 -- -- 600 --
---------- -------- --------- ------- ---------
Total current liabilities.... 215,319 3,462 1,000 3,670 942
Notes payable and long-term debt
and capital lease obligations.... 381,089 -- -- 535 --
Convertible notes and debentures,
net.............................. 283,485 -- -- -- --
Deferred Revenue--noncurrent....... -- -- -- 3,800 (3,800)
Deferred tax
liabilities--noncurrent.......... 206,980 -- -- -- --
Other noncurrent liabilities....... 9,182 -- -- -- --
---------- -------- --------- ------- ---------
Total liabilities............ 1,096,055 3,462 1,000 8,005 (2,858)
---------- -------- --------- ------- ---------
Stockholders' equity:
Genzyme General Stock, $.01 par
value.......................... 963 -- -- -- --
Molecular Oncology Stock, $.01
par value...................... 160 -- -- -- --
Biosurgery Stock, $.01 par
value.......................... 365 -- -- -- 21
Treasury Stock--at cost.......... (901) -- -- -- --
Additional paid-in
capital--Genzyme General
Stock.......................... 1,290,189 -- -- -- --
Additional paid-in
capital--Molecular Oncology
Stock.......................... 111,665 -- -- -- --
Additional paid-in
capital--Biosurgery Stock...... 823,631 -- -- -- 9,513
389
Notes receivable--related
parties........................ (11,529) -- -- -- (420)
Deferred compensation.............. (7,319) -- -- -- --
Accumulated deficit................ (2,481) -- (7,866) W1 -- --
Wyntek Diagnostics, Inc. preferred
stock, none issued............... -- -- -- -- --
Wyntek Diagnostics, Inc. common
stock............................ -- 3,357 (3,357) W5 -- --
Wyntek Diagnostics, Inc. additional
paid-in capital.................. -- -- -- -- --
Wyntek Diagnostics, Inc. notes
receivable--related parties...... -- -- -- -- --
Wyntek Diagnostics, Inc. retained
earnings......................... -- 6,216 (6,216) W5 -- --
Wyntek Diagnostics, Inc. treasury
stock, at cost................... -- -- -- -- --
Focal, Inc. preferred stock, none
issued........................... -- -- -- -- --
Focal, Inc. common stock, $.0001
par value........................ -- -- -- 174 (174)
Focal, Inc. additional paid-in
capital.......................... -- -- -- 100,344 (100,344)
Focal, Inc. notes
receivable--related parties...... -- -- -- (420) 420
Focal, Inc. accumulated deficit.... -- -- -- (97,870) 97,870
Focal, Inc. treasury stock, at
cost............................. -- -- -- -- --
Accumulated other comprehensive
income (loss).................... (36,386) -- -- 1 (1)
---------- -------- --------- ------- ---------
Total stockholders' equity..... 2,168,357 9,573 (17,439) 2,229 7,274
---------- -------- --------- ------- ---------
Total liabilities and
stockholders' equity.......... $3,264,412 $ 13,035 $ (16,439) $10,234 $ 4,416
========== ======== ========= ======= =========
PRO FORMA
GENZYME
CORPORATION
NOTE AND
REFERENCE SUBSIDIARIES
--------- ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 31,432
Accrued expenses................. F2
F2 117,530
Income taxes payable............... 49,561
Deferred revenue................... F7 5,401
Current portion of notes payable
and long-term debt and capital
lease obligations................ 20,469
-----------
Total current liabilities.... 224,393
Notes payable and long-term debt
and capital lease obligations.... 381,624
Convertible notes and debentures,
net.............................. 283,485
Deferred Revenue--noncurrent....... F7 --
Deferred tax
liabilities--noncurrent.......... 206,980
Other noncurrent liabilities....... 9,182
-----------
Total liabilities............ 1,105,664
-----------
Stockholders' equity:
Genzyme General Stock, $.01 par
value.......................... 963
Molecular Oncology Stock, $.01
par value...................... 160
Biosurgery Stock, $.01 par
value.......................... F1 386
Treasury Stock--at cost.......... (901)
Additional paid-in
capital--Genzyme General
Stock.......................... 1,290,189
Additional paid-in
capital--Molecular Oncology
Stock.......................... 111,665
Additional paid-in
capital--Biosurgery Stock...... F1
F1 833,533
Notes receivable--related
parties........................ F3 (11,949)
Deferred compensation.............. (7,319)
Accumulated deficit................ (10,347)
Wyntek Diagnostics, Inc. preferred
stock, none issued............... --
Wyntek Diagnostics, Inc. common
stock............................ --
Wyntek Diagnostics, Inc. additional
paid-in capital.................. --
Wyntek Diagnostics, Inc. notes
receivable--related parties...... --
Wyntek Diagnostics, Inc. retained
earnings......................... --
Wyntek Diagnostics, Inc. treasury
stock, at cost................... --
Focal, Inc. preferred stock, none
issued........................... --
Focal, Inc. common stock, $.0001
par value........................ F3 --
Focal, Inc. additional paid-in
capital.......................... F3 --
Focal, Inc. notes
receivable--related parties...... F3 --
Focal, Inc. accumulated deficit.... F3 --
Focal, Inc. treasury stock, at
cost............................. --
Accumulated other comprehensive
income (loss).................... F3 (36,386)
-----------
Total stockholders' equity..... 2,169,994
-----------
Total liabilities and
stockholders' equity.......... $ 3,275,658
===========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
14
GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS)
HISTORICAL
GENZYME HISTORICAL PRO FORMA NOTE HISTORICAL PRO FORMA NOTE
BIOSURGERY BIOMATRIX, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS REFERENCE
---------- --------------- ----------- --------- ----------- ----------- ---------
Revenues:
Net product sales................ $ 121,870 $65,401 $ -- $ 1,721 $ (1,454) F24
Net service sales................ 23,321 -- -- -- --
Collaborative research and
development revenue............ -- -- 874 (874) F25
Revenue from research and
development contracts.......... 23 -- -- -- --
Income from licenses, royalties,
research contracts............. -- 10,221 -- -- --
--------- ------- -------- -------- --------
Total revenues................. 145,214 75,622 -- 2,595 (2,328)
--------- ------- -------- -------- --------
Operating costs and expenses:
Cost of products sold............ 69,489 20,395 11,330 B11 2,842 5,078 F23
(1,230) F24
Cost of services sold............ 12,298 -- -- -- --
Selling, general and
administrative................. 92,238 33,576 21 B11
(105) B11 6,000 867 F23
Research and development
(including research and
development relating to
contracts)..................... 37,000 10,184 -- 8,112 --
Amortization of intangibles...... 7,096 -- 35,617 B10 -- 318 F22
Purchase of in-process research
and development................ 82,143 -- (82,143) B14 -- --
Charge for impaired asset........ 4,321 -- -- --
--------- ------- -------- -------- --------
Total operating costs and
expenses..................... 304,585 64,155 (35,280) 16,954 5,033
--------- ------- -------- -------- --------
Operating income (loss)............ (159,371) 11,467 35,280 (14,359) (7,361)
--------- ------- -------- -------- --------
Other income (expenses):
Charge for impaired investment... (7,300) -- -- -- 7,300 F24
Other............................ (15) (301) -- 475 --
Investment income................ 5,833 3,402 (2,738) B13 705 --
Interest expense................. (1,364) (975) (14,375) B13 (298) --
--------- ------- -------- -------- --------
Total other income
(expenses)................... (2,846) 2,126 (17,113) 882 7,300
--------- ------- -------- -------- --------
Income (loss) before income
taxes............................ (162,217) 13,593 18,167 (13,477) (61)
Provision for income taxes......... (6,513) 6,513 B12 -- --
--------- ------- -------- -------- --------
Loss before cumulative effect of
change in accounting principle... (162,217) 7,080 24,680 (13,477) (61)
Cumulative effect of change in
accounting principle, net of
tax.............................. -- -- -- (5,600) 5,600 F25
--------- ------- -------- -------- --------
Division net loss.................. $(162,217) $ 7,080 $ 24,680 $(19,077) $ 5,539
========= ======= ======== ======== ========
PRO FORMA
GENZYME
BIOSURGERY
-----------
Revenues:
Net product sales................ $ 187,538
Net service sales................ 23,321
Collaborative research and
development revenue............ --
Revenue from research and
development contracts.......... 23
Income from licenses, royalties,
research contracts............. 10,221
---------
Total revenues................. 221,103
---------
Operating costs and expenses:
Cost of products sold............
107,904
Cost of services sold............ 12,298
Selling, general and
administrative.................
132,597
Research and development
(including research and
development relating to
contracts)..................... 55,296
Amortization of intangibles...... 43,031
Purchase of in-process research
and development................ --
Charge for impaired asset........ 4,321
---------
Total operating costs and
expenses..................... 355,447
---------
Operating income (loss)............ (134,344)
---------
Other income (expenses):
Charge for impaired investment... --
Other............................ 159
Investment income................ 7,202
Interest expense................. (17,012)
---------
Total other income
(expenses)................... (9,651)
---------
Income (loss) before income
taxes............................ (143,995)
Provision for income taxes......... --
---------
Loss before cumulative effect of
change in accounting principle... (143,995)
Cumulative effect of change in
accounting principle, net of
tax.............................. --
---------
Division net loss.................. $(143,995)
=========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS.
15
GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS IN THOUSANDS)
HISTORICAL PRO FORMA
GENZYME HISTORICAL PRO FORMA NOTE GENZYME
BIOSURGERY FOCAL, INC. ADJUSTMENTS REFERENCE BIOSURGERY
---------- ----------- ----------- --------- ----------
Revenues:
Net product sales............................. $ 48,624 $ 613 $ (571) F24 $ 48,666
Net service sales............................. 5,528 -- 5,528
Collaborative research and development
revenue..................................... -- 249 (249) F25 --
Revenue from research and development
contracts................................... 4 -- -- 4
-------- ------- ------- --------
Total revenues.............................. 54,156 862 (820) 54,198
-------- ------- ------- --------
Operating costs and expenses:
Cost of products sold......................... 28,638 771 (429) F24 28,980
Cost of services sold......................... 3,137 -- 3,137
Selling, general and administrative........... 30,692 1,446 217 F23 32,355
Research and development...................... 10,719 1,369 12,088
Amortization of intangibles................... 11,321 -- 80 F22 11,401
-------- ------- ------- --------
Total operating costs and expenses.......... 84,507 3,586 (132) 87,961
-------- ------- ------- --------
Operating loss.................................. (30,351) (2,724) (688) (33,763)
-------- ------- ------- --------
Other income (expense):
Equity in net loss of unconsolidated
affiliates.................................. (536) -- 536 F24 --
Other......................................... 7 -- -- 7
Investment income............................. 512 99 -- 611
Interest expense.............................. (4,959) -- -- (4,959)
-------- ------- ------- --------
Total other income (expense)................ (4,976) 99 536 (4,341)
-------- ------- ------- --------
Division net loss............................... $(35,327) $(2,625) $ (152) $(38,104)
======== ======= ======= ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
16
GENZYME BIOSURGERY
A DIVISION OF GENZYME CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 2001
(AMOUNTS IN THOUSANDS)
HISTORICAL PRO FORMA
GENZYME HISTORICAL PRO FORMA NOTE GENZYME
BIOSURGERY FOCAL, INC. ADJUSTMENTS REFERENCE BIOSURGERY
---------- ----------- ----------- --------- ----------
ASSETS
Current assets:
Cash and cash equivalents........................ $ 21,548 $ 5,490 $ (507) F15 $ 26,531
Short-term investments........................... -- 201 -- 201
Accounts receivable, net......................... 39,588 432 (370) F18 39,650
Inventories...................................... 57,460 1,511 5,078 F21 64,049
Prepaid expenses and other current assets........ 9,590 406 -- 9,996
-------- -------- --------- --------
Total current assets........................... 128,186 8,040 4,201 140,427
Property, plant and equipment, net................. 56,835 2,020 -- 58,855
Notes receivable, related party.................... -- 174 (37) F17 137
Intangibles, net................................... 576,970 -- 3,817 F15 580,787
Other noncurrent assets............................ 8,140 -- 2,600 F19
(6,165) F18 4,575
-------- -------- --------- --------
Total assets................................... $770,131 $ 10,234 $ 4,416 $784,781
======== ======== ========= ========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable................................. $ 9,794 $ 278 -- $ 10,072
Accrued expenses................................. 34,719 1,909 700 F16
1,125 F16 38,453
Due to Genzyme General............................. 17,459 -- -- 17,459
Deferred revenue................................... -- 883 (883) F20 --
Current portion of notes payable, long-term debt
and capital lease obligations.................... 18,421 600 -- 19,021
-------- -------- --------- --------
Total current liabilities...................... 80,393 3,670 942 85,005
Convertible notes.................................. 10,000 -- -- 10,000
Notes payable, long-term debt and capital lease
obligations...................................... 200,887 535 -- 201,422
Deferred revenue--noncurrent....................... -- 3,800 (3,800) F20 --
Other noncurrent liabilities....................... 77 -- -- 77
-------- -------- --------- --------
Total liabilities.............................. 291,357 8,005 (2,858) 296,504
-------- -------- --------- --------
Division equity:
Focal common stock............................... 174 (174) F17 --
Focal additional-paid in capital................. 100,344 (100,344) F17 --
Focal notes receivable--related parties.......... (420) 420 F17 --
Focal retained earnings.......................... (97,870) 97,870 F17 --
Focal other comprehensive loss................... 1 (1) F17 --
Division equity.................................. 478,774 -- 21 F15
9,513 F15
389 F15
(420) F17 488,277
-------- -------- --------- --------
Total division equity.............................. 478,774 2,229 7,274 488,277
-------- -------- --------- --------
Total liabilities and division equity.......... $770,131 $ 10,234 $ 4,416 $784,781
======== ======== ========= ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
17
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(1) ACCOUNTING POLICIES AND PRO FORMA INFORMATION
The unaudited pro forma combined financial statements reflect the pro forma
effect of Genzyme's merger with Focal and Genzyme's purchase of Wyntek's common
stock on the:
- unaudited statements of operations for the three months ended March 31,
2001 and the year ended December 31, 2000 and
- unaudited balance sheet as of March 31, 2001
of both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the
assets, liabilities and operations of Focal will be allocated.
The pro forma balance sheets give effect to Genzyme's transactions with
Focal and Wyntek as if they occurred on March 31, 2001.
The unaudited pro forma combined financial statements also reflect the pro
forma effect of Genzyme's merger with GelTex and Genzyme's merger with Biomatrix
on the unaudited statement of operations for the year ended December 31, 2000 of
both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the
assets, liabilities and operations of Biomatrix were allocated, as if these
mergers took place on January 1, 2000. In addition, the Genzyme pro forma
statement of operations for the year ended December 31, 2000 reflects the change
in earnings allocations resulting from the creation of Biosurgery Stock and
elimination of Surgical Products Stock and Tissue Repair Stock as if this change
took place on January 1, 2000.
(2) GENZYME'S ACQUISITIONS
(A) GENZYME'S ACQUISITION OF BIOMATRIX
Genzyme entered into the merger agreement to acquire Biomatrix on March 6,
2000. Concurrently with the merger:
- Genzyme Biosurgery was created as a new division of Genzyme;
- the businesses of Genzyme Surgical Products and Genzyme Tissue Repair were
reallocated to Genzyme Biosurgery; and
- the businesses of Biomatrix was allocated to Genzyme Biosurgery.
The following exchange ratios were used to determine the number of shares of
Biosurgery Stock distributed:
- 0.6060 multiplied by the number of shares of Surgical Products Stock
outstanding;
- 0.3352 multiplied by the number of shares of Tissue Repair Stock
outstanding; and
- 0.7162 multiplied by the number of Biomatrix shares outstanding (based on
a one-for-one exchange ratio for 71.62% of the Biomatrix shares).
This resulted in approximately:
- 9,092,763 shares of Biosurgery Stock exchanged for 15,004,560 shares of
Surgical Products Stock;
- 9,679,769 shares of Biosurgery Stock exchanged for 28,877,593 shares of
Tissue Repair Stock; and
18
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(2) GENZYME'S ACQUISITIONS (CONTINUED)
- 17,516,712 shares of Biosurgery Stock and approximately $252.4 million of
cash, exchanged for 24,338,908 shares of Biomatrix common stock.
In addition, options to purchase:
- 3,252,386 shares of Surgical Products Stock under the Genzyme equity
plans;
- 3,923,281 shares of Tissue Repair Stock under the Genzyme equity plans;
and
- 1,706,639 shares of Biomatrix common stock under the Biomatrix equity
plans
converted to options to purchase approximately 1,970,944, 1,315,083, and
1,222,300 shares of Biosurgery Stock, respectively. Using the acquisition price
of Biomatrix common stock and certain other assumptions in the Black-Scholes
option valuation model, the Biosurgery options issued in exchange for the
Biomatrix options have been valued at approximately $11.4 million. In accordance
with FIN 44, the intrinsic value of the portion of the unvested options related
to the future service period of approximately $66,000 was allocated to deferred
compensation in stockholders' equity for Genzyme or division equity for Genzyme
Biosurgery, rather than to goodwill. The unvested portion is being amortized to
operating expense over the remaining vesting periods of approximately three
years.
(B) GENZYME'S ACQUISITION OF GELTEX
Genzyme entered into a merger agreement to acquire GelTex on September 11,
2000. Genzyme paid approximately $515.2 million in cash and issued
$491.2 million in Genzyme General Stock for all of the outstanding shares of
GelTex common stock, using the stock price of Genzyme General Stock based on the
average trading price over three days before and after the September 11, 2000
announcement of the merger. Approximately 7.9 million shares of Genzyme General
Stock were issued in exchange for shares of GelTex common stock. In addition,
options and warrants to purchase approximately 2.1 million shares of GelTex
common stock were exchanged for options and warrants to purchase approximately
1.6 million shares of Genzyme General Stock. The vesting of GelTex options
granted to employees of GelTex before the effective date of the merger will be
accelerated as of the first anniversary of the effective date of the merger as
long as they remain employees of GelTex or Genzyme on the one year anniversary
date. Additionally, the vesting of stock options granted to directors and
several officers of GelTex were accelerated immediately upon the effective time
of the merger. Using the Black-Scholes valuation model, the options and warrants
to purchase Genzyme General Stock issued in exchange for the GelTex options and
warrants had a value of approximately $62.9 million. In accordance with FIN 44,
the intrinsic value of the portion of the unvested options related to the future
service period of $10.2 million was allocated to deferred compensation in
stockholders' equity for Genzyme. The unvested portion is being amortized to
operating expense over the remaining vesting period of approximately one year.
(C) GENZYME'S PENDING ACQUISITION OF FOCAL
Genzyme entered into a merger agreement to acquire Focal on April 25, 2001.
For purposes of the unaudited pro forma financial statements, we assumed that
Genzyme would issue approximately 2,086,000 shares of Biosurgery Stock and
approximately $7,000 in cash for all of the outstanding shares of Focal common
stock excluding shares owned by Genzyme which will be cancelled in the merger.
Using the price of Biosurgery Stock based on the average trading price over
three days before and after April 25, 2001, the value of the shares of
Biosurgery Stock would be approximately $9.5 million. In addition, options to
purchase 1,742,664 shares of Focal common stock and warrants to purchase 43,782
shares of Focal common stock will be exchanged for options to purchase
approximately 276,705
19
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(2) GENZYME'S ACQUISITIONS (CONTINUED)
shares of Biosurgery Stock. Using the Black-Scholes valuation model, the options
and warrants to purchase Biosurgery Stock issued in exchange for options and
warrants to purchase Focal common stock have a value of approximately $389,000.
In accordance with FIN 44, any intrinsic value of the portion of the unvested
options related to future service periods would be allocated to deferred
compensation in stockholders' equity for Genzyme. Based on the value of
Biosurgery Stock on April 25, 2001, there was no intrinsic value allocated to
deferred compensation.
(D) GENZYME'S PENDING ACQUISITION OF WYNTEK
Genzyme entered into a stock purchase agreement on April 30, 2001 to acquire
all or substantially all of the outstanding capital stock of Wyntek. For
purposes of the unaudited pro forma financial statements, we assumed that
Genzyme would pay $65.0 million in cash for all of the outstanding Wyntek common
stock and all outstanding options to acquire Wyntek common stock. No options or
warrants to purchase Wyntek common stock will be assumed by Genzyme in the
transaction.
(3) PURCHASE PRICE ALLOCATION
(A) BIOMATRIX
The aggregate purchase price of $482.4 million was allocated to the acquired
tangible and intangible assets and liabilities based on their estimated
respective fair values as of December 18, 2000 (amounts in thousands):
Cash and cash equivalents................................... $ 56,137
Current assets.............................................. 37,639
Property, plant & equipment................................. 38,479
Notes receivable from stockholders.......................... 14,760
Intangible assets (to be amortized over 1.5 to 11.0
years).................................................... 284,854
Goodwill (to be amortized over 11.0 years).................. 112,262
In-process research and development......................... 82,143
Deferred tax asset.......................................... 922
Deferred compensation....................................... 66
Assumed liabilities......................................... (31,099)
Liabilities for exit activities and integration............. (6,716)
Deferred tax liability...................................... (107,044)
---------
Aggregate purchase price.................................. $ 482,403
=========
In connection with the purchase of Biomatrix, Genzyme allocated
approximately $82.1 million of the purchase price to in-process research and
development, or IPR&D. Genzyme management assumes responsibility for determining
the IPR&D valuation. Genzyme engaged an independent third-party appraisal
company to assist in the valuation of the intangible assets acquired. For a
complete description of the allocation of the purchase price to the fair value
of the acquired tangible and intangible assets and liabilities, refer to Note
D., "Acquisitions" to Genzyme's consolidated financial statements included in
Genzyme's Annual Report on Form 10-K for the year ended December 31, 2000.
20
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(3) PURCHASE PRICE ALLOCATION (CONTINUED)
(B) GELTEX
The aggregate purchase price of $1,076.0 million was allocated to the
acquired tangible and intangible assets and liabilities based on their estimated
respective fair value as of December 14, 2000 (amounts in thousands):
Cash and investments........................................ $ 142,994
Current assets.............................................. 32,825
Property, plant & equipment................................. 45,477
Intangible assets (to be amortized over 5 to 15 years)...... 465,109
Goodwill (to be amortized over 15 years).................... 449,634
In-process research and development......................... 118,048
Deferred tax asset.......................................... 35,016
Deferred compensation....................................... 10,206
Assumed liabilities......................................... (47,789)
Deferred tax liability...................................... (175,485)
----------
Aggregate purchase price.................................. $1,076,035
==========
As part of the acquisition of GelTex, Genzyme acquired all of GelTex's
interest in RenaGel LLC, a joint venture between Genzyme and GelTex. Prior to
the acquisition of GelTex, Genzyme accounted for its investment in RenaGel LLC
under the equity method. The adjustments below also reflect the consolidation of
RenaGel LLC into Genzyme's financial statements and accounting for the purchase
by Genzyme of GelTex's 50%-interest in the joint venture using the purchase
method of accounting. The assets and liabilities of the joint venture are
reflected in the amounts above. Because Genzyme already owned a 50% interest in
RenaGel LLC, the assets of RenaGel LLC were adjusted to fair value only to the
extent of the 50%-interest Genzyme acquired.
In connection with the purchase of GelTex, Genzyme expects approximately
$118.0 million of the purchase price to be allocated to IPR&D. Genzyme
management assumes responsibility for determining the IPR&D valuation. Genzyme
engaged an independent third-party appraisal company to assist in the valuation
of the intangible assets acquired. For a complete description of the allocation
of the purchase price to the fair value of the acquired tangible and intangible
assets and liabilities, refer to Note D., "Acquisitions" to Genzyme's
consolidated financial statements included in Genzyme's Annual Report on
Form 10-K for the year ended December 31, 2000.
21
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(3) PURCHASE PRICE ALLOCATION (CONTINUED)
(C) FOCAL
For purposes of the unaudited pro forma financial statements, the aggregate
purchase price of $16.6 million was allocated to the acquired tangible and
intangible assets and liabilities based on their estimated respective fair
values as of March 31, 2001 (amounts in thousands):
Cash and cash equivalents................................... $ 5,490
Current assets.............................................. 7,258
Property, plant & equipment................................. 2,020
Notes receivable from related party......................... 420
Intangible assets (to be amortized over 12 years)........... 3,817
Other assets................................................ 2,737
Assumed liabilities......................................... (5,147)
--------
Aggregate purchase price.................................. $ 16,595
========
The total purchase price, the fair value of assets and liabilities acquired,
the allocation of purchase price and the lives of intangible assets will be
determined upon completion of the merger and may vary from the amounts presented
herein.
(D) WYNTEK
For purposes of the unaudited pro forma financial statements, the aggregate
purchase price of $65.7 million was allocated to the acquired tangible and
intangible assets and liabilities based on their estimated respective fair
values as of March 31, 2001 (amounts in thousands):
Cash and cash equivalents................................... $ 4,779
Current and other assets.................................... 6,375
Property, plant & equipment................................. 1,970
Intangible assets (to be amortized over 5 to 10 years)...... 34,924
Goodwill (to be amortized over 10 years).................... 14,198
In-process research and development......................... 7,866
Assumed liabilities......................................... (4,462)
-------
Aggregate purchase price.................................. $65,650
=======
The total purchase price, the fair value of assets and liabilities acquired,
the allocation of purchase price and the lives of intangible assets will be
determined upon completion of the transaction and may vary from the amounts
presented herein.
In connection with the purchase of Wyntek stock, Genzyme expects
approximately $7.9 million of the purchase price to be allocated to IPR&D.
Genzyme management assumes responsibility for determining the IPR&D valuation
and expects the final valuation will be completed upon closing the transaction.
The fair value assigned to purchased IPR&D was estimated by discounting, to
present value, the cash flows expected to result from the project once it has
reached technological feasibility. A discount rate consistent with the risks of
the project was used to estimate the present value of cash flows. In estimating
future cash flows, management considered other tangible and intangible assets
required for successful exploitation of the technology resulting from the
purchased IPR&D project and adjusted future cash flows for a charge reflecting
the contribution to value of these assets. The value assigned to purchased IPR&D
was the amount attributable to the efforts of Wyntek up to the time of
22
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(3) PURCHASE PRICE ALLOCATION (CONTINUED)
acquisition. This amount was estimated through application of the "stage of
completion" calculation by multiplying total estimated revenue for IPR&D by the
percentage of completion of the purchased research and development project at
the time of acquisition.
The nature of the efforts to develop the purchased IPR&D into commercially
viable products, principally relates to the completion and/or acceleration of
existing development programs, including the mandatory completion of several
phases of clinical trials and the costs necessary to manage the projects and
trials. Assuming the approval of the product by the FDA, costs related to the
wide scale manufacturing, distribution, and marketing of the product are
included in the projection. The resulting net cash flows from such project are
based on Genzyme management's estimates of revenues, cost of sales, research and
development expenses, sales and marketing expenses, general and administrative
expenses, and the anticipated income tax effect.
The discounting of net cash flows back to their present value is based on
the weighted average cost of capital, or WACC. The WACC calculation produces the
average required rate of return of an investment in an operating enterprise,
based on various required rates of return from investments in various areas of
that enterprise. The discount rate utilized in discounting the net cash flows
from purchased IPR&D was 25%. This discount rate is higher than Genzyme's WACC
due to the inherent uncertainties surrounding the successful development of the
purchased IPR&D.
The forecast data employed in the analyses was based upon product level
forecast information obtained by Genzyme from numerous internal and external
resources. These resources included external market research and internal
experts. Genzyme senior management reviewed and challenged the forecast data and
related assumptions and utilized the information in analyzing IPR&D. The
forecast data and assumptions are inherently uncertain and unpredictable.
However, based upon the information available at this time, Genzyme management
believes the forecast data and assumptions to be reasonable. These assumptions
may be incomplete or inaccurate, and no assurance can be given that
unanticipated events and circumstances will not occur. Accordingly, actual
results may vary from the forecasted results. Any such variance may result in a
material adverse effect on Genzyme's financial condition and results of
operations.
In the allocation of purchase price to the IPR&D, the concept of alternative
future use was specifically considered for the program under development. The
acquired IPR&D consists of Wyntek's work to complete the program. There are no
alternative uses for the in-process program in the event that the program fails
in clinical trials or is otherwise not feasible. The development effort for the
acquired IPR&D does not possess an alternative future use for Genzyme as defined
by generally accepted accounting principles.
Below is a brief description of the IPR&D program associated with Wyntek's
cardiovascular disease diagnostic product, including an estimation of when
management believes Genzyme may realize revenues from the sale of this product.
Wyntek is currently developing a cardiovascular product to rapidly measure
the quantitative levels of cardiac marker proteins. These are the leading
markers for the diagnosis of Acute Myocardial Infraction. The product consists
of a mobile, stand-alone, quantitative diagnostic device and a reaction strip
that detects disease specific marker proteins. The device will be used to read
reaction strips at the patient's bedside or in an emergency room setting. Wyntek
expects to complete the regulatory review process and file the PMA early in 2002
and begin selling the product during the second half of 2002. Studies to date
have demonstrated the viability of this product but there can be no assurance
that the
23
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(3) PURCHASE PRICE ALLOCATION (CONTINUED)
regulatory authorities will approve this product. A discount rate of 25% was
used in valuing the projected cash flows.
(4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX
These adjustments reflect the retirement of all Surgical Products Stock,
Tissue Repair Stock and Biomatrix common stock and the issuance of Biosurgery
Stock. The value ascribed to the Biosurgery Stock exchanged for Biomatrix common
stock for purchase price accounting is $11.79 per share.
The aggregate purchase price is comprised of the following (amounts in
thousands):
Issuance of 17,516,712 shares of Biosurgery Stock........... $206,522
Cash payment................................................ 252,421
--------
Subtotal.................................................. 458,943
Issuance of Biosurgery options to Biomatrix optionholders... 11,373
Acquisition costs........................................... 12,087
--------
Aggregate purchase price............................ $482,403
========
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENT OF
OPERATIONS
(B1) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL
VALUE AMORTIZATION
-------- ------------
INTANGIBLE ASSETS:
Workforce (5 years)................................. $ 2,017 $ 404
Non-compete agreements (1.5 years).................. 640 427
Distribution agreements (8 years)................... 13,950 1,744
Trademark/trade name (11 years)..................... 48,746 4,431
Patented core technology (11 years)................. 59,877 5,443
Current products technology (11 years).............. 159,624 14,511
Goodwill (11 years)................................. 112,262 10,206
-------- -------
Pro forma adjustment for amortization of
intangibles..................................... $397,116 $37,166
======== =======
(B2) To record the following:
- Amortization of deferred compensation associated with Genzyme
Biosurgery options that were issued in exchange for Biomatrix options;
- Impact of the additional expense associated with the increased basis
for the Biomatrix inventory;
- Impact of the reduced depreciation expense related to the decreased
basis of Biomatrix's fixed assets.
(B3) To eliminate Biomatrix' weighted average shares outstanding, and to
record the cancellation of Surgical Products Stock and Tissue Repair
Stock. Also gives effect to the conversion of Surgical Products Stock
and Tissue Repair Stock into Biosurgery Stock as though the tracking
24
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX (CONTINUED)
stock exchanges occurred on January 1, 2000, and to the issuance of
Biosurgery Stock for Biomatrix common stock as though the Biomatrix
acquisition occurred on January 1, 2000.
(B4) To record the creation of Biosurgery Stock. Net losses for Genzyme
Surgical Products and Genzyme Tissue Repair and net income for Biomatrix
have been transferred to the calculation of loss per share allocated to
Biosurgery Stock. The net income amount for Biomatrix of $7.1 million
for the year ended December 31, 2000 reflects the elimination of the
$6.5 million tax provision because Genzyme Biosurgery incurred a pro
forma net loss for each period.
(B5) To adjust the tax provision for the impact of the amortization of
acquired intangibles, the reduction in investment income, the additional
interest expense and the amortization of the deferred tax liability
established in purchase accounting. Income taxes are allocated to
Genzyme Biosurgery based upon the financial statement income, taxable
income, credits and other amounts properly allocable to each division
under generally accepted accounting principles as if it were a separate
taxpayer. The realizability of deferred tax assets is assessed at the
division level.
(B6) To record interest expense that would have been incurred on the $200.0
million of debt, at a rate of 7.5% per annum; and to reduce the
investment income balance to reflect the payment of $52.4 million of
cash at a rate of return of 5.45% per annum.
(B7) To allocate the pro forma tax benefits of Genzyme Biosurgery to Genzyme
General. Genzyme's management and accounting policies provide that, if
as of the end of any fiscal quarter, a division can not use any
projected annual tax benefit attributable to it to offset or reduce its
current or deferred income tax expense, Genzyme may allocate the tax
benefit to other divisions in proportion to their taxable income without
any compensating payments or allocation to the division generating the
benefit. The tax benefits allocated to Genzyme General from Genzyme
Biosurgery totaled $28.0 million for the year ended December 31, 2000.
On a pro forma basis, the tax benefits allocated to Genzyme General from
Genzyme Biosurgery would have been $27.7 million for the year ended
December 31, 2000. The tax benefits generated by Genzyme Biosurgery and
allocated to Genzyme General are lower on a pro forma basis due
primarily to Biomatrix' profitability offsetting losses incurred by
Genzyme Biosurgery.
(B8) To eliminate the charge for acquired in-process research and development
recorded by Genzyme in connection with the acquisition. This amount was
eliminated as it reflects a material non-recurring charge directly
resulting from the acquisition.
(B9) To record the tax benefits related to the Biomatrix pro forma
adjustments which are allocated to Genzyme Biosurgery.
25
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX (CONTINUED)
II. PRO FORMA ADJUSTMENTS TO GENZYME BIOSURGERY'S COMBINED STATEMENT OF
OPERATIONS
(B10) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL
VALUE AMORTIZATION
-------- ------------
INTANGIBLE ASSETS:
Workforce (5 years)................................. $ 2,017 $ 404
Non-compete agreements (1.5 years).................. 640 427
Distribution agreements (8 years)................... 13,950 1,744
Trademark/trade name (11 years)..................... 48,746 4,431
Patented core technology (11 years)................. 59,877 5,443
Current products technology (11 years).............. 159,624 14,511
Goodwill (11 years)................................. 112,262 10,206
-------- -------
Pro forma adjustment for amortization of
intangibles................................... $397,116 $37,166
======== =======
(B11) To record the following:
- Amortization of deferred compensation associated with Genzyme
Biosurgery options that were issued in exchange for Biomatrix options;
- Impact of the additional expense associated with the increased basis
for the Biomatrix inventory;
- Impact of the reduced depreciation expense related to the decreased
basis of Biomatrix's fixed assets.
(B12) To eliminate the tax provision because Genzyme Biosurgery incurred a pro
forma net loss for each period.
(B13) To record interest expense that would have been incurred on the $200.0
million of debt, at a rate of 7.5% per annum; and to reduce the
investment income balance to reflect the payment of $52.4 million of
cash at a rate of return of 5.45% per annum.
(B14) To eliminate the charge for acquired in-process research and development
recorded by Genzyme in connection with the acquisition. This amount was
eliminated as it reflects a material non-recurring charge directly
resulting from the acquisition.
(5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX
The following adjustments reflect the acquisition of GelTex by Genzyme for a
combination of cash and stock and the replacement of GelTex options and warrants
with options and warrants to purchase Genzyme General Stock. As part of the
acquisition of GelTex, Genzyme acquired all of GelTex's interest in RenaGel LLC,
a joint venture between Genzyme and GelTex. Prior to the acquisition of GelTex,
Genzyme accounted for its investment in RenaGel LLC under the equity method. The
adjustments below reflect the consolidation of RenaGel LLC into Genzyme's
financial statements and accounting for Genzyme's purchase of GelTex' interest
in the joint venture using the purchase method of accounting.
26
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX (CONTINUED)
To record the acquisition of the net assets of GelTex for an aggregate
purchase price of $1,076.0 million. The aggregate purchase price is comprised of
the following (amounts in thousands):
Issuance of 7,886,404 shares of Genzyme General Stock....... $ 491,181
Cash payment................................................ 515,151
----------
Subtotal.................................................... 1,006,332
Basis of GelTex investment.................................. 2,500
Issuance of Genzyme General options and warrants to GelTex
option and warrant holders................................ 62,882
Acquisition costs........................................... 4,321
----------
Aggregate purchase price.................................... $1,076,035
==========
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENTS OF
OPERATIONS
(G1) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED VALUE ANNUAL AMORTIZATION
-------------- -------------------
INTANGIBLE ASSETS:
Workforce (5 years)......................... $ 2,327 $ 465
Patents (15 years).......................... 115,772 7,718
Trademarks/trade name (15 years)............ 6,526 435
Core technology (15 years).................. 65,313 4,354
Current products technology (5 to 15
years).................................... 275,171 19,948
Goodwill (15 years)......................... 449,634 29,976
-------- -------
Pro forma adjustment for amortization of
intangibles............................... $914,743 $62,896
======== =======
(G2) To record the following:
- Amortization of deferred compensation associated with Genzyme General
options that were issued in exchange for GelTex options;
- Impact of the additional expense associated with the increased basis
for the Renagel LLC inventory of $8.2 million;
- Impact of the additional depreciation expense related to the increased
basis of GelTex's fixed assets.
(G3) To eliminate GelTex's weighted average shares outstanding, to reflect the
issuance of 7,886,404 shares of Genzyme General Stock and to reflect the
dilutive effect of the issuance of options to purchase Genzyme General
Stock to holders of GelTex options.
(G4) To record interest expense that would have been incurred on the $150.0
million of debt, at a rate of 7.5% per annum; to record the amortization
of the value of the acquired interest rate swaps; and to reduce the
investment income balance to reflect the payment of $365.2 million of
cash at a rate of return of 5.45% per annum.
(G5) To eliminate intercompany transactions between Genzyme, GelTex and
RenaGel LLC.
27
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX (CONTINUED)
(G6) To eliminate Genzyme's and GelTex's equity in the net loss of RenaGel LLC
and to consolidate RenaGel LLC with Genzyme.
(G7) To adjust the tax provision for the impact of the reduction in investment
income, the additional interest expense and the amortization of the
deferred tax liability established in purchase accounting.
(G8) The net loss of GelTex has been transferred to the calculation of net
income per share allocated to Genzyme General Stock. The adjustment to
Genzyme General net income in the calculation of income allocated to
Genzyme General Stock reflects the aggregate impact of all pro forma
adjustments on the Genzyme General division net income.
(G9) To eliminate the charge for acquired in-process research and development
recorded by the Company in connection with the acquisition. This amount
was eliminated as it reflects a material non-recurring charge directly
resulting from the acquisition.
(6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL
The following adjustments reflect the acquisition of outstanding Focal
common stock not already owned by Genzyme for a combination of cash and stock
and the replacement of Focal options and warrants with options and warrants to
purchase Biosurgery Stock.
The aggregate purchase price is comprised of the following (amounts in
thousands):
Issuance of 2,086,151 shares of Biosurgery Stock............ $ 9,534
Cash payment................................................ 7
-------
Subtotal.................................................. 9,541
Issuance of Biosurgery options to Focal optionholders....... 389
Acquisition costs........................................... 500
Basis of Focal investment................................... 6,165
-------
Aggregate purchase price............................ $16,595
=======
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED BALANCE SHEET
(F1) To record the acquisition of the net assets of Focal for an aggregate
purchase price of $16.6 million (see Note 2C). The intangible assets of
approximately $3.8 million are as follows (amounts in thousands):
ASSIGNED
DESCRIPTION VALUE
- ----------- ----------
Patented core technology (12 years)......................... $ 142
Current products technology (12 years)...................... 3,675
--------
Total................................................... $ 3,817
========
The purchase price includes $389,000 for the estimated fair value of the
Genzyme Biosurgery options that were issued in exchange for the Focal
options. This estimated fair value was calculated using the Black-Scholes
option pricing model based on a stock price of $4.57, which
28
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL (CONTINUED)
is the value ascribed to the Biosurgery Stock for purchase price
accounting, and other assumptions in the Black-Scholes model. No unvested
options have intrinsic value that would require allocation to deferred
compensation.
(F2) To record $1.1 million of accrued expenses related to Focal's estimated
acquisition costs and $700,000 related to management bonuses that have
not been reflected in the historical balances as of March 31, 2001.
(F3) To eliminate Focal historical stockholders' equity amounts totaling
$2.2 million, except for the Focal notes receivable of $420,000, which
will remain outstanding upon completion of the transaction. Focal
received these notes in exchange for the purchase of Focal common stock.
Also to give effect to the forgiveness of accrued interest totaling
approximately $37,000 by Focal prior to the merger.
(F4) To record inventory of Focal at fair value, by increasing the inventory
by $5.1 million. The increased basis for the inventory valuation will
result in a $5.1 million decrease in gross margin as the units are sold,
after the acquisition.
(F5) To eliminate the $6.2 million carrying value of Genzyme's existing
investment in Focal. Also to eliminate Focal's accounts receivable from
Genzyme totaling $370,000.
(F6) To record the fair value of favorable lease arrangements to which Focal
is party.
(F7) To eliminate deferred revenue recorded by Focal that will not require
Genzyme to incur any significant costs.
II. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENTS OF
OPERATIONS
(F8) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL QUARTERLY
VALUE AMORTIZATION AMORTIZATION
-------- ------------ ------------
INTANGIBLE ASSETS:
Patented care technology (12 years)...... $ 142 $ 12 $ 3
Current products technology (12 years)... 3,675 306 77
-------- ------- ---
Pro forma adjustment for amortization
of intangibles..................... $ 3,817 $ 318 $80
======== ======= ===
(F9) To record the following:
- Impact of the additional expense associated with the increased basis
for the Focal inventory; and
- Impact of additional expense for the favorable lease arrangement.
(F10) To eliminate sales and cost of sales related to transactions between
Genzyme and Focal. Also to eliminate the $7.3 million impairment charge
recorded by Genzyme in the year ended December 31, 2000 related to its
investment in Focal common stock, and to eliminate the equity in net
loss of Focal recognized by Genzyme in the three months ended March 31,
2001.
29
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL (CONTINUED)
(F11) To eliminate the cumulative effect of a change in accounting principle
recorded by Focal upon adoption of Staff Accounting Bulletin No. 101,
REVENUE RECOGNITION. The cumulative effect adjustment to record deferred
revenue would not have been required if Focal had been acquired on
January 1, 2000 and purchase accounting had been applied as of that
date. Also to reverse the amortization of deferred revenue during the
twelve months ended December 31, 2000 and the three months ended
March 31, 2001.
(F12) To adjust the tax provision for the net loss incurred by Focal and for
the pro forma adjustments related to the Focal merger.
(F13) To eliminate Focal's weighted average shares outstanding, and to give
effect to the issuance of Biosurgery Stock for Focal common stock as
though the merger occurred on January 1, 2000. The net loss of Focal has
been transferred to the calculation of net loss per share allocated to
Biosurgery Stock. The adjustment to Genzyme Biosurgery net loss in the
calculation of income allocated to Biosurgery Stock reflects the
aggregate impact of all pro forma adjustments on the Genzyme Biosurgery
division net loss.
(F14) To allocate the pro forma tax benefits of the Focal net losses and pro
forma adjustments to Genzyme General. Genzyme's management and
accounting policies provide that, if as of the end of any fiscal
quarter, a division can not use any projected annual tax benefit
attributable to it to offset or reduce its current or deferred income
tax expense, Genzyme may allocate the tax benefit to other divisions in
proportion to their taxable income without any compensating payments or
allocation to the division generating the benefit.
III. PRO FORMA ADJUSTMENTS TO GENZYME BIOSURGERY'S COMBINED BALANCE SHEET
(F15) To record the acquisition of the net assets of Focal for an aggregate
purchase price of $16.6 million (see Note 2C). The intangible assets of
approximately $3.8 million are as follows (amounts in thousands):
ASSIGNED
DESCRIPTION VALUE
- ----------- ----------
Patented core technology (12 years)......................... 142
Current products technology (12 years)...................... 3,675
------
Total................................................... $3,817
======
The purchase price includes $389,000 for the estimated fair value of the
Genzyme Biosurgery options that were issued in exchange for the Focal
options. This estimated fair value was calculated using the Black-Scholes
option pricing model based on a stock price of $4.57, which is the value
ascribed to the Biosurgery Stock for purchase price accounting, and other
assumptions in the Black-Scholes model. No unvested options have
intrinsic value that would require allocation to deferred compensation.
(F16) To record $1.1 million of accrued expenses related to Focal's estimated
acquisition costs and $700,000 related to management bonuses that have
not been reflected in the historical balances as of March 31, 2001.
(F17) To eliminate Focal's historical stockholders' equity amounts totaling
$2.2 million, except for the Focal notes receivable of $420,000, which
will remain outstanding upon completion of the
30
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL (CONTINUED)
transaction. Focal received these notes in exchange for the purchase of
Focal common stock. Also to give effect to the forgiveness of accrued
interest totaling approximately $37,000 by Focal prior to the merger.
(F18) To eliminate the $6.2 million carrying value of Genzyme's existing
investment in Focal, which is allocated to Genzyme Biosurgery. Also to
eliminate Focal's accounts receivable from Genzyme totaling $370,000.
(F19) To record the fair value of favorable lease arrangements to which Focal
is party.
(F20) To eliminate deferred revenue recorded by Focal that will not require
Genzyme Biosurgery to incur any additional costs.
(F21) To record inventory of Focal at fair value, by increasing the inventory
by $5.1 million. The increased basis for the inventory valuation will
result in a $5.1 million decrease in gross margin as the units are sold,
after the acquisition.
IV. PRO FORMA ADJUSTMENTS TO GENZYME BIOSURGERY'S COMBINED STATEMENTS OF
OPERATIONS
(F22) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL QUARTERLY
VALUE AMORTIZATION AMORTIZATION
-------- ------------ ------------
INTANGIBLE ASSETS:
Patented core technology (12 years)...... $ 142 $ 12 $ 3
Current products technology (12 years)... 3,675 306 77
-------- ------- ---
Pro forma adjustment for amortization
of intangibles..................... $ 3,817 $ 318 $80
======== ======= ===
(F23) To record the following:
- Impact of the additional expense associated with the increased basis
for the Focal inventory; and
- Impact of additional expense for the favorable lease arrangement.
(F24) To eliminate sales and cost of sales related to transactions between
Genzyme Biosurgery and Focal. Also to eliminate the $7.3 million
impairment charge recorded by Genzyme Biosurgery in the year ended
December 31, 2000 related to its investment in Focal common stock and to
eliminate the equity in net loss of Focal recognized by Genzyme
Biosurgery in the three months ended March 31, 2001.
(F25) To eliminate the cumulative effect of a change in accounting principle
recorded by Focal upon adoption of Staff Accounting Bulletin No. 101,
REVENUE RECOGNITION. The cumulative effect adjustment to record deferred
revenue would not have been required if Focal had been acquired on
January 1, 2000 and purchase accounting had been applied as of that
date. Also to reverse the amortization of deferred revenue during the
twelve months ended December 31, 2000 and the three months ended
March 31, 2001.
31
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
(7) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF WYNTEK STOCK
The following adjustments reflects the acquisiton of Wyntek Stock for cash.
The aggregate purchase price is comprised of the following (amounts in
thousands):
Cash payment................................................ $ 65,000
Acquisition costs........................................... 650
--------
Aggregate purchase price............................ $ 65,650
========
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED BALANCE SHEET
(W1) To record the acquisition of the net assets of Wyntek for an aggregate
purchase price of $65.7 million (see Note 2D). The intangible assets of
approximately $49.1 million are as follows (amounts in thousands):
ASSIGNED
DESCRIPTION VALUE
- ----------- ----------
Workforce (5 years)......................................... $ 1,125
Patented core technology (10 years)......................... 688
Current products technology (10 years)...................... 33,111
Goodwill (10 years)......................................... 14,198
-------
Total................................................... $49,122
=======
The $7.9 million allocated to in-process technology has been charged to
accumulated deficit for the purposes of the pro forma balance sheet
presentation only and will be charged to expense in Genzyme's historical
financial statements upon completion of the merger with Wyntek. The
goodwill of $14.2 million consists of the excess of the purchase price
over the fair market value of net assets acquired.
(W2) To record $1.0 million of accrued expenses related to the estimated
acquisition costs to be incurred by Wyntek that have not been reflected
in the historical balances as of March 31, 2001.
(W3) To record inventory of Wyntek at fair value, by increasing the inventory
by $318,000. The increased basis for the inventory valuation will result
in a $318,000 decrease in gross margin as the units are sold, after the
acquisition.
(W4) To reverse deferred tax assets recorded by Wyntek, as such assets will
not be realizable by Genzyme following the merger.
(W5) To eliminate Wyntek historical stockholders' equity amounts totaling
$9.6 million.
32
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED)
II. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENTS OF
OPERATIONS
(W6) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL QUARTERLY
VALUE AMORTIZATION AMORTIZATION
-------- ------------ ------------
INTANGIBLE ASSETS:
Workforce (5 years)....................... $ 1,125 $ 225 $ 56
Patented core technology (10 years)....... 688 69 17
Current products technology (10 years).... 33,111 3,311 828
Goodwill (10 years)....................... 14,198 1,420 355
------- ------ ------
Pro forma adjustment for amortization
of intangibles...................... $49,122 $5,025 $1,256
======= ====== ======
(W7) To record the impact of the additional expense associated with the
increased basis for the Wyntek inventory.
(W8) To reduce investment income to reflect the payment of $65.7 million of
cash at a rate of return of 5.45% per annum.
(W9) To adjust the tax provision for the impact of the Wyntek pro forma
adjustments.
(W10) To eliminate Wyntek's weighted average shares outstanding. The net income
of Wyntek has been transferred to the calculation of net income per share
allocated to Genzyme General Stock. The adjustment to Genzyme General net
income in the calculation of income allocated to Genzyme General Stock
reflects the aggregate impact of all pro forma adjustments on the Genzyme
General division net income.
33
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
2 Agreement and Plan of Merger, dated as of April 25, 2001,
among Genzyme Corporation, Sammy Merger Corp. and Focal, Inc.
Attached as Annex A to the proxy statement/prospectus
contained in Genzyme's registration statement on Form S-4 (No.
333-61296) filed with the SEC on May 21, 2001 and incorporated
herein by reference.
23 Consent of Ernst & Young LLP. Filed herewith.
99.1 The audited financial statements of Focal as of December 31,
2000 and 1999 and for each of the three years in the period
ended December 31, 2000, including the report of independent
auditors dated January 31, 2001. Filed herewith.
99.2 The unaudited financial statements of Focal as of and for the
three months ended March 31, 2001 and 2000. Filed herewith.