UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
December 21, 2001
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Date of Report (Date of earliest event reported)
OSI PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-15190 13-3159796
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
58 SOUTH SERVICE ROAD
MELVILLE, NY 11747
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(Address of principal executive offices)
(631) 962-2000
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 21, 2001, OSI Pharmaceuticals, Inc., a Delaware corporation
("OSI"), acquired certain assets from Gilead Sciences, Inc., a Delaware
corporation ("Gilead"), pursuant to the terms of an Asset Purchase Agreement
(the "Asset Purchase Agreement") dated as of November 26, 2001 (the
"Transaction"). The assets purchased by OSI (the "Assets") include: (a) a
pipeline of three clinical oncology candidates, (b) related intellectual
property, and (c) rights to Gilead's leased facilities located in Boulder,
Colorado, as well as leasehold improvements and certain fixed assets which are
used and kept in those facilities. In connection with this Transaction, OSI
offered employment to 127 Gilead employees. OSI expects these employees to
complement its development and commercialization capabilities in oncology.
Additionally, OSI's pipeline of gene-targeted small molecule therapeutics for
cancer is augmented with several acquired promising next-generation cytotoxics
currently in clinical development.
In consideration for the Assets, OSI paid Gilead $130 million in cash
and issued to Gilead 924,984 shares of common stock, valued at $40 million as of
the closing date of the Transaction. OSI would also be obligated to pay to
Gilead up to an additional $30 million in either cash or a combination of cash
and common stock upon the achievement of certain milestones related to the
development of NX211, the most advanced of Gilead's oncology product candidates
acquired by OSI. Additionally, OSI is assuming certain royalty and milestone
obligations to third parties in connection with the oncology candidates acquired
as part of the Transaction. The cash portion of the purchase price was paid from
OSI's existing cash resources. Any liabilities assumed as part of the
Transaction will be paid by OSI in the ordinary course of its business.
Under the terms of the Asset Purchase Agreement, OSI entered into the
following additional agreements with Gilead: (a) an Assumption Agreement, (b) an
Investor Rights Agreement, (c) an Employee Matters Agreement, (d) a Transition
Services Agreement, (e) a Data Transfer and Professional Services Agreement, (f)
a Non-Disclosure Agreement, (g) a Manufacturing Agreement, (h) a License
Agreement, (i) a Patent Assignment Agreement, (j) a NCS NX-24 Sublicense, and
(k) a GS7836 Sublicense, as well as additional documents usual and customary for
transactions similar to the Transaction.
Pursuant to the license, the sublicenses and other agreements entered
into in connection with the Transaction, OSI received exclusive, worldwide
development and commercialization rights to Gilead's three clinical oncology
candidates: NX211, GS7836, and GS7904L. NX211 (liposomal lurtotecan), a
proprietary liposomal formulation of the active topoisomerase I inhibitor
lurtotecan, is currently in Phase II clinical trials for the potential treatment
of a variety of solid tumors, including ovarian and small cell lung cancer.
GS7836, a novel nucleoside analogue, is in Phase I clinical trials and has
demonstrated activity in a variety of refractory solid tumor xenograft models.
GS7904L, a liposomal thymidylate synthase inhibitor, is also in Phase I clinical
trials and has demonstrated promising activity in pre-clinical testing for the
potential treatment of various solid tumors.
In connection with the acquisition, OSI adopted a Non-Qualified Stock
Option Plan for
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Former Employees of Gilead Sciences, Inc. to induce certain former employees of
Gilead to accept employment with OSI. OSI will grant options to purchase an
aggregate of 750,249 shares of common stock at a purchase price to be determined
on the date of grant. The options become exercisable one-third after one year
from the date of grant with the remainder vesting ratably on a monthly basis
over the succeeding two years.
The Asset Purchase Agreement and the other material agreements
consisting of the Investor Rights Agreement and Manufacturing Agreement, and the
Gilead Stock Plan are attached hereto as Exhibits 2.1, 2.2, 10.1 and 10.2,
respectively, and are incorporated herein by reference. Further details
regarding the transaction are contained in OSI's press release dated December
21, 2001 attached as Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
OSI is currently in the process of determining
whether the Transaction described above in Item 2
qualifies as an acquisition of a business pursuant to
Article 11 of Regulation S-X of the Securities
Exchange Act of 1934, as amended. If it is determined
that the acquisition was that of a business, the
required financial statements will be filed by an
amendment to this report no later than March 8, 2002.
(b) Pro Forma Financial Information.
As described above in Item 2, on December 21, 2001,
OSI acquired certain assets related to the oncology
business of Gilead for which OSI paid to Gilead $130
million in cash and 924,984 shares of OSI common
stock valued at $40 million upon the closing of the
Transaction. OSI would also be obligated to pay to
Gilead up to an additional $30 million in either cash
or a combination of cash and common stock upon the
achievement of certain milestones related to the
development of NX211.
The unaudited pro forma combined financial
information discussed below is based upon the
historical audited consolidated financial statements
of OSI for the fiscal year ended September 30, 2001
and the unaudited financial information of the
oncology division of Gilead for the 12 month period
ended September 30, 2001. Treating OSI as the
acquired, the unaudited pro forma combined financial
information was determined using the purchase method
of accounting as if the Transaction had been
completed on September 30, 2001 for items related to
the combined balance sheet information and as of
October 1, 2000 for items related to the combined
statement of operations information.
For purposes of the unaudited combined pro forma
financial information, OSI assumed a total purchase
price (prior to payment of the contingent
consideration) of approximately $175 million,
including estimated direct expenses. The unaudited
pro forma financial information reflects adjustments
which are based upon preliminary estimates of the
allocation of the purchase price to the acquired
assets and liabilities of Gilead. The final
allocation of the purchase price, which may be
significantly different from the current estimate,
will be based upon appraisals prepared by an
independent third party and a comprehensive final
evaluation of the fair value of the acquired
intangible and tangible assets, including in-process
research and development, and liabilities assumed as
of the closing date of the Transaction. The final
determination of tangible and intangible assets may
result in depreciation and amortization expenses that
are different than the preliminary estimates of these
amounts. OSI anticipates a significant in-process
research and development charge as of the acquisition
date as a result of the acquisition. As a result of
these uncertainties, the exact amount of the final
purchase price and allocation of such purchase price
may differ from the amounts assumed in this unaudited
pro forma combined financial information, and in the
case of the allocation, the differences may be
material.
The unaudited pro forma combined financial
information is provided for informational purposes
only and does not purport to represent what the
actual results would have been had the acquisition
occurred on the assumed date, nor is it necessarily
indicative of future results or financial position.
The unaudited pro forma combined financial
information does not include the realization of cost
savings from operating efficiencies, synergies or
other restructuring resulting from the Transaction.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Assuming the acquisition occurred on September 30,
2001, OSI's cash and short-term investments would
have decreased by approximately $135 million from
$552 million to $417 million and the working capital
would have decreased by approximately $138 million
from $533 million to $395 million. Additionally,
stockholders equity would have decreased
significantly as a result of the charge for
in-process research and development aquired.
Assuming the acquisition occurred on October 1, 2000,
the combined pro forma net loss before the cumulative
effect of an accounting change for the 12 month
period ended September 30, 2001 would have been
approximately $63 million compared to $21 million.
The pro forma basic and diluted net loss per share
before the cumulative effect of an accounting change
for the 12 months ended September 30, 2001 would have
been ($1.82) based on 34,776,719 weighted average
shares outstanding compared to the historical net
loss of ($0.62) based on 33,851,735 weighted average
shares outstanding. Contributing to the increase in
the net loss are approximately $26 million in
research and development expenses, $6 million of
selling, general and administrative expenses of
Gilead, and a decrease of interest income of
approximately $7 million generated from the cash paid
upon the closing of the Transaction. OSI did not
acquire any revenue producing assets or activities
from Gilead, and therefore, combined pro forma net
revenue for the year ended September 30, 2001
remained unchanged from OSI's reported net income.
(c) Exhibits.
2.1(1) Asset Purchase Agreement, dated
November 26, 2001, by and between
Gilead Sciences, Inc. and OSI
Pharmaceuticals, Inc.
2.2 OSI Pharmaceuticals, Inc.
Non-Qualified Stock Option Plan for
Former Employees of Gilead
Sciences, Inc.
4.1(2) Investor Rights Agreement, dated
December 21, 2001, by and between
Gilead Sciences, Inc. and OSI
Pharmaceuticals, Inc.,
10.1(2)(3) Manufacturing Agreement, dated
December 21, 2001, by and between
Gilead Sciences, Inc. and OSI
Pharmaceuticals, Inc.
99.1 Press release, dated December 21,
2001.
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(1) The schedules and certain exhibits to the Asset
Purchase Agreement have been omitted pursuant to
Item 601(b)(2) of Regulation S-K
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promulgated by the Securities and Exchange
Commission. The omitted schedules and exhibits from
this filing will be provided upon request. Please
see footnote 2 below with respect to certain
exhibits to the Asset Purchase Agreement that have
been filed.
(2) A form of this exhibit is an exhibit to the Asset
Purchase Agreement, and has been omitted therefrom
pursuant to Item 601(b)(2) of Regulation S-K
promulgated by the Securities and Exchange
Commission. The executed, final copy of this
exhibit is filed herewith pursuant to Item
601(b)(10) of Regulation S-K.
(3) Portions of this exhibit have been redacted and are
the subject of a confidential treatment request
filed with the Secretary of the Securities and
Exchange Commission pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934, as amended.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 7, 2002 OSI PHARMACEUTICALS, INC.
By: /s/ ROBERT L. VAN NOSTRAND
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Name: Robert L. Van Nostrand
Title: Vice President, Chief Financial
Officer and Secretary
EXHIBIT INDEX
Exhibit No. Description
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2.1(1) Asset Purchase Agreement, dated November 26, 2001, by
and between Gilead Sciences, Inc. and OSI
Pharmaceuticals, Inc.
2.2 OSI Pharmaceuticals, Inc. Non-Qualified Stock Option
Plan for Former Employees of Gilead Sciences, Inc.
4.1(2) Investor Rights Agreement, dated December 21, 2001, by
and between Gilead Sciences, Inc. and OSI
Pharmaceuticals, Inc.
10.1(2)(3) Manufacturing Agreement, dated December 21, 2001, by
and between Gilead Sciences, Inc. and OSI
Pharmaceuticals, Inc.
99.1 Press release, dated December 21, 2001.
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(1) The schedules and certain exhibits to the Asset Purchase Agreement have
been omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated
by the Securities and Exchange Commission. The omitted schedules and
exhibits from this filing will be provided upon request. Please see
footnote 2 below with respect to certain exhibits to the Asset Purchase
Agreement that have been filed.
(2) A form of this exhibit is an exhibit to the Asset Purchase Agreement,
and has been omitted therefrom pursuant to Item 601(b)(2) of Regulation
S-K promulgated by the Securities and Exchange Commission. The
executed, final copy of this exhibit is filed herewith pursuant to Item
601(b)(10) of Regulation S-K.
(3) Portions of this exhibit have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.