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
January 22, 2002
Date of Report (Date of earliest event reported)
OSI PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-15190 13-3159796
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
58 SOUTH SERVICE ROAD
MELVILLE, NY 11747
(Address of principal executive offices)
(631) 962-2000
(Registrant's telephone number, including area code)
N/A
(Former name or former address,
if changed since last report.)
ITEM 5. OTHER EVENTS
On January 22, 2002, OSI Pharmaceuticals, Inc., a Delaware corporation
("OSI") announced a reorganization of its senior research and development
management team following the recent acquisition of the oncology assets of
Gilead Sciences, Inc. On January 22, 2002, OSI also announced that Nicholas G.
Bacopoulos, Ph.D., former President and Head of Research and Development, has
accepted the post of Chief Executive Officer of Aton Pharma, Inc., a New York
based, privately held company. Details regarding the new research and management
team are contained in OSI's press release, dated January 22, 2002, which is
attached as Exhibit 99 and incorporated herein by reference.
ITEM 7. EXHIBITS
EXHIBIT NO. DESCRIPTION
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99 Press release, dated January 22, 2002.
ITEM 9. REGULATION FD DISCLOSURE
On January 7, 2002, OSI filed a Form 8-K with respect to the
acquisition of certain oncology assets from Gilead Sciences, Inc. ("Gilead") in
December 2001. Set forth below is unaudited pro forma financial information with
respect to the acquisition which is disclosed in a preliminary offering
memorandum describing OSI's offer of Convertible Subordinated Notes to qualified
institutional buyers under Rule 144A of the Securities Act of 1933, as amended.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
On December 21, 2001, we acquired certain assets from Gilead. The
assets purchased by us include: (a) a pipeline of three clinical oncology
candidates, (b) certain related intellectual property, and (c) rights to
Gilead's leased facilities located in Boulder, Colorado, as well as leasehold
improvements and certain fixed assets. In connection with the acquisition, we
have retained 121 Gilead employees.
In consideration for such assets, we 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. We would also be obligated to pay to Gilead
up to an additional $30 million in either cash or common stock or a combination
of cash or common stock, at our option, upon the achievement of certain
milestones related to the development of OSI-211, the most advanced of Gilead's
oncology product candidates acquired by us. Additionally, we have assumed
Gilead's royalty and milestone obligations to third parties in connection with
the oncology candidates acquired.
The following unaudited pro forma condensed combined statement of
operations give effect to the acquisition of the Gilead oncology assets as if
such acquisition occurred on October 1, 2000. The condensed combined pro forma
statements are derived from the audited consolidated financial statements of OSI
for the fiscal year ended September 30, 2001 and the unaudited financial
statements of the Gilead oncology assets for the 12-month period ended September
30, 2001. The purchase method of accounting for the acquisition of a business
was used in preparation of the pro forma condensed combined statements. In July
2001, the Financial Accounting Board issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 is effective for acquisitions and other intangibles acquired on or
after July 1, 2001. We will adopt the applicable provisions of SFAS No. 142 for
the accounting of the acquisition of the Gilead oncology assets, which occurred
after July 1, 2001. For the purpose of the pro forma condensed combined
statements, the applicable provisions of SFAS No. 142 have been applied to the
accounting of the Gilead oncology assets. As such, no goodwill amortization
expense has been recorded.
The pro forma statements are presented for illustrative purposes only
and are not necessarily indicative of the operating results or financial
position that would have occurred had the acquisition of the Gilead oncology
assets been consummated on the dates assumed and are not necessarily indicative
of our future operating results or financial position.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS DATA(b)
TWELVE MONTHS ENDED SEPTEMBER 30, 2001
--------------------------------------------------------------------------------
GILEAD PRO FORMA
OSI(a) ONCOLOGY PRO FORMA COMBINED
ASSETS ADJUSTMENTS RESULTS
--------------------------------------------------------------------------------
Revenues ...................................... $ 26,021,916 $ -- $ -- $ 26,021,916
------------- ------------- ------------- -------------
Expenses:
Research & development ........................ 56,038,070 25,676,448 574,202(c) 82,288,720
Production and service costs .................. 262,080 -- -- 262,080
Selling, general & administrative ............. 15,770,805 5,412,838 152,636(c) 21,336,279
Amortization of intangibles ................... 741,910 -- -- 741,910
------------- ------------- ------------- -------------
72,812,865 31,089,286 726,838 104,628,989
------------- ------------- ------------- -------------
Loss from operations .......................... $ (46,790,949) $ (31,089,286) $ (726,838) $ (78,607,073)
------------- ------------- ------------- -------------
Interest and other income (expense) ........... 25,660,515 -- (7,507,232)(d) 18,153,283
Loss before cumulative effect of change
in accounting policy ....................... $ (21,130,434) $ (31,089,286) $ (8,234,070) $ (60,453,790)
============= ============= ============= =============
Basic and diluted loss per share before
cumulative effect of accounting change ..... $ (0.62) N/A N/A $ (1.74)
============= ============= ============= =============
Basic and diluted weighted average
number of shares of common stock
outstanding ................................... 33,851,735 -- 924,984(e) 34,776,719
============= ============= ============= =============
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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET DATA
The following selected balance sheet data as of September 30, 2001 are
derived from the audited consolidated financial statements of OSI and from the
unaudited financial statements of the Gilead oncology assets.
The balance sheet data are presented:
- on an actual basis, and
- on a pro forma basis assuming the acquisition of the Gilead
oncology assets had occurred on September 30, 2001.
With assistance from a third party valuation firm, we have estimated
that the purchase price for the Gilead oncology assets exceeded the fair value
of the net tangible assets acquired by approximately $166 million. We have
preliminarily allocated approximately $130 million and $36 million of this
excess to in-process research and development and goodwill, respectively. The
unaudited pro forma condensed combined balance sheet data includes a reduction
in stockholders' equity as a result of the charge for in-process research and
development. The unaudited pro forma financial information reflects adjustments
which are based upon preliminary estimates of the allocation of the purchase
price to the acquired Gilead oncology assets. The final allocation of the
purchase price, which may be significantly different from the current estimate,
will be based upon appraisals prepared by a third-party valuation firm and a
comprehensive final evaluation of the fair value of the acquired intangible and
tangible assets and in-process research and development as of the closing date
of the acquisition. 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.
AS OF SEPTEMBER 30, 2001
UNAUDITED
-------------------------------------
PRO FORMA
OSI(a) COMBINED
------------ ------------------
Cash, cash equivalents, investment securities
and restricted investment securities ......... $551,478,461 $416,535,961(f)
Total assets .................................... 591,689,187 503,666,787(g)
Long-term liabilities ........................... 14,060,528 14,241,093(h)
Stockholders' equity ............................ 549,832,346 459,632,346(b)(e)
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NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) The fiscal 2001 consolidated financial statements include a cumulative
effect of the change in accounting principle of $2.6 million relating
to the adoption of SAB No. 101; the acquisition of certain assets from
British Biotech for $13.9 million; $25 million in upfront fees received
upon the execution of collaboration agreements with Genentech, Inc. and
Roche; net proceeds of approximately $404 million from a public
offering of common stock in November 2000; the sale of newly-issued
shares of common stock to Genentech and Roche for an aggregate purchase
price of $35 million each and a charge to operations of $5.1 million
for the estimated cost of closing our Tarrytown, New York and
Birmingham, England facilities.
(b) The estimated charge to earnings of $130.2 million resulting from
purchased in-process research and development costs has been reflected
as a reduction of stockholders' equity in the pro forma balance sheet
as of September 30, 2001. This same charge has been excluded from the
pro forma statement of operations for the 12 months ended September 30,
2001 since the charge is non-recurring and directly related to the
acquisition.
A third-party valuation firm was used to assess and value the purchased
in-process research and development from the acquisition. The value was
determined by estimating the projected net cash flows related to
products under development based upon future revenues to be earned upon
commercialization of such products. These cash flows were discounted
back to their net present value. The resulting projected net cash flows
from such projects were based on management's estimates of revenues and
operating profits related to such products.
(c) Represents additional depreciation expense totaling ($727,000) relating
to the mark-up to fair value of the fixed assets acquired. The
depreciation expense is allocated to research and development expense
($574,202) and to selling, general and administrative expense
($152,636).
(d) Represents a reduction of interest income as a result of the cash
payment of approximately $134.9 million relating to the acquisition of
the Gilead oncology assets and the net decrease in cash related to the
operations of the Gilead oncology assets, which is assumed to have
occurred evenly over the 12 month period.
(e) Reflects shares issued to Gilead valued at $40 million as part of the
purchase price for the acquisition of the Gilead oncology assets.
(f) Reflects the cash payment of $134.9 million related to the acquisition
of the Gilead oncology assets.
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(g) Reflects (f) and the fair value of the assets acquired resulting from
the allocation of the purchase price. This preliminary purchase price
allocation was determined with assistance from a valuation performed by
a third-party valuation firm. The preliminary purchase price and
purchase-price allocation of the acquisition are as follows:
Purchase Price Paid
Cash, including estimated transaction expenses...................... $134,942,500
Common Stock........................................................ 40,000,000
------------
$174,942,500
Purchase Price allocation
In-process research and development ................................ $130,200,000
Notes receivable ................................................... 622,500
Other assets ....................................................... 41,000
Fixed assets ....................................................... 10,528,700
Liabilities assumed ................................................ (2,177,600)
------------
Total allocation.................................................... $139,214,600
Excess purchase price over identifiable assets
and liabilities..................................................... $ 35,727,900
============
(h) Reflects the estimated fair value of long-term liabilities acquired
resulting from the allocation of the purchase price.
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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 25, 2002 OSI PHARMACEUTICALS, INC.
By: /s/ Robert L. Van Nostrand
-----------------------------------------
Robert L. Van Nostrand
Vice President and Chief Financial
Officer (Principal Financial Officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99 Press release, dated January 22, 2002.
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