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Exhibit 99.2
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 1999
(In thousands)
Pro Forma Adjustments
Historical ------------------------------
---------------------- Assets Not
OSI Cadus Acquired and Pro Forma
June 30, June 30, Liabilities Other June 30,
Assets 1999 1999 Not Assumed (1) Adjustments 1999
--------- --------- --------------- ----------- ---------
Current assets:
Cash and cash equivalents $ 10,498 6,978 (6,978) (2,274)(2) 8,224
Restricted cash -- 296 (296) -
Short-term investments 10,590 -- 10,590
Receivables, including trade receivables 2,301 -- 2,301
Interest receivables 142 -- 142
Grants receivable 235 -- 235
Prepaid expenses and other current assets 890 215 (141) 964
----------------------------------------------------------------------
Total current assets 24,656 7,489 (7,415) (2,274) 22,456
----------------------------------------------------------------------
Restricted cash - noncurrent -- 18,641 (18,641) -
Property, equipment and leasehold improvements -- net 7,500 2,439 (144) (1,265)(6) 8,530
Compound library assets -- net 4,314 -- 1,000 (3) 4,764
(550)(6)
Investments in other ventures -- 1,653 (1,653) -
Intangible assets -- net -- -- 225 (4) 6,728
(125)(6)
Other assets -- net 1,351 1,437 (1,217) (120)(6) 1,451
----------------------------------------------------------------------
Total assets $ 44,449 31,659 (29,070) (3,109) 43,929
======================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 3,606 1,484 (1,334) 3,756
Unearned revenue -- current 982 -- 982
Loans payable -- current 167 304 (304) 167
----------------------------------------------------------------------
Total current liabilities 4,755 1,788 (1,638) 4,905
----------------------------------------------------------------------
Unearned revenue -- long term 429 -- 429
Loans payable -- long term 319 -- 319
Deferred acquisition costs 701 -- 701
Accrued postretirement benefits cost 1,499 -- 1,499
Reserve for litigation damages -- 18,641 (18,641) -
Stockholders' equity:
Preferred Stock -- -- --
Common stock 224 132 (132) 224
Additional paid-in capital 105,050 59,689 (59,689) 105,050
Accumulated deficit (62,203) (48,291) 48,291 (670)(5) (62,873)
Accumulated other comprehensive loss (267) -- (267)
Treasury stock (6,058) (300) 300 (6,058)
----------------------------------------------------------------------
Total stockholders' equity 36,746 11,230 (11,230) (670) 36,076
----------------------------------------------------------------------
Total liabilities and stockholders' equity $ 44,449 31,659 (31,509) (670) 43,929
======================================================================
2
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Statement of Operations
For the nine months ended June 30, 1999
(In thousands)
Pro Forma Adjustments
Historical ----------------------------
-------------------- Revenue and
OSI Cadus Expenses of Pro Forma
June 30, June 30, Activities Other June 30,
1999 1999 Not Assumed (7) Adjustments 1999
-------- -------- --------------- ----------- ---------
Revenues:
Collaborative program revenues $ 12,600 7,704 (5,679) 14,625
Other research revenue 814 -- 814
License revenue 2,171 -- 2,171
Sales 916 -- 916
--------------------------------------------------------------------
16,501 7,704 (5,679) 18,526
--------------------------------------------------------------------
Expenses:
Research and development costs 14,766 11,588 (5,727) 70 (8) 20,697
Production and service costs 1,239 -- 1,239
Selling, general and administrative 6,364 5,702 (5,157) 6,909
Amortization of intangibles 1,096 -- 30 (8) 1,126
--------------------------------------------------------------------
23,465 17,290 (10,884) 100 29,971
--------------------------------------------------------------------
Loss from operations (6,964) (9,586) 5,205 (100) (11,445)
Other income (expense):
Net investment income 658 811 (811) (85)(9) 573
Loss of equity in other ventures - (974) 974 -
Reserve for litigation damages - (18,500) 18,500 -
Other expense -- net (54) 45 (45) (54)
--------------------------------------------------------------------
Net loss $ (6,360) (28,204) 23,823 (185) (10,926)
====================================================================
Weighted average number of shares of
common stock outstanding 21,430 21,430
======== ========
Basic and diluted loss per weighted average
share of common stock outstanding $ (0.30) (0.51)
======== ========
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OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended September 30, 1998
(In thousands)
Pro Forma Adjustments
Historical ----------------------------
-------------------- Revenue and
OSI Cadus Expenses of Pro Forma
Sept 30, Dec. 31, Activities Other Sept 30,
1998 1998 Not Assumed (7) Adjustments 1998
-------- -------- --------------- ----------- ---------
Revenues:
Collaborative program revenues $ 16,166 12,576 (9,876) 18,866
Other research revenue 1,429 - 1,429
License revenue 752 - 752
Sales 1,121 - 1,121
--------------------------------------------------------------------
19,468 12,576 (9,876) 22,168
--------------------------------------------------------------------
Expenses:
Research and development costs 20,350 15,389 (7,565) 28,264
90 (8)
Production and service costs 955 - 955
Selling, general and administrative 8,077 8,977 (8,078) 8,976
Amortization of intangibles 1,461 - 40 (8) 1,501
--------------------------------------------------------------------
30,843 24,366 (15,643) 130 39,696
--------------------------------------------------------------------
--------------------------------------------------------------------
Loss from operations (11,375) (11,790) 5,767 (130) (17,528)
--------------------------------------------------------------------
Other income (expense):
Net investment income 1,468 1,834 (1,834) (115)(9) 1,353
Loss of equity in other ventures - (1,144) 1,144 -
Reserve for litigation damages - (18,500) 18,500 -
Other expense - net (277) (90) 90 (277)
--------------------------------------------------------------------
Net loss $(10,184) (29,690) 23,667 (245) (16,452)
====================================================================
Weighted average number of shares of
common stock outstanding 21,373 21,373
======== ========
Basic and diluted loss per weighted average
share of common stock outstanding $ (0.48) (0.77)
======== ========
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
(1) Book values of assets not acquired and liabilities not assumed by OSI
Pharmaceuticals, Inc. ("OSI") from Cadus Pharmaceutical Corporation
("Cadus") in accordance with the Asset Purchase Agreement dated July 30,
1999 by and between OSI and Cadus (the "Agreement"). The book values of the
assets acquired and the liabilities assumed by OSI from Cadus are
summarized as follows:
Fixed assets $ 2,295
Prepaid expenses 74
Patent costs 220
--------
$ 2,589
========
Employee benefits liability $ 150
========
(2) Cash paid by OSI in connection with the Agreement summarized as follows:
Purchase price to Cadus $ 1,574
Professional fees 700
--------
$ 2,274
========
In addition, OSI assumed $150 of certain employee-related liabilities
resulting in a total acquisition cost of $2,424.
(3) Allocation of the purchase price to compound library acquired by OSI (see
note 5 regarding valuation study).
(4) Allocation of the purchase price to the assembled workforce intangible
(see note 5 regarding valuation study).
(5) Represents an estimated charge of $670 for acquired in-process research and
development costs, net of negative goodwill allocation (see note 6). No tax
benefit has been reflected in connection with this charge in recognition of
the uncertainty that any such tax benefits will be realized by OSI based on
its history of operating losses since OSI's inception. OSI has engaged a
professional services firm to conduct a valuation study of the assets
acquired under the Agreement, including a determination of acquired
in-process research and development costs. This valuation has not yet been
completed. As a result, the allocation of the purchase price is subject to
change upon completion of the valuation study, including the estimated
amount of acquired in-process research and development costs.
The estimated charge of $670 for acquired in-process research and
development costs has been reflected as a reduction of stockholders' equity
in the pro forma condensed combined balance sheet as of June 30, 1999.
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This same charge has been excluded from the pro forma condensed combined
statement of operations for the year ended September 30, 1998 since the
charge is non-recurring and directly related to the Agreement.
(6) Allocation of negative goodwill to reduce noncurrent financial assets on a
pro rata basis. The determination of negative goodwill and the allocation
to noncurrent financial assets are summarized as follows:
Summary of fair value of assets acquired:
Fixed assets $ 2,295
Patents 220
Prepaid expenses 74
Assembled work force 225
Compound library 1,000
In-process research and development costs 1,500
-------
Total fair value of assets acquired 5,314
Purchase price 2,424
-------
Negative goodwill $ 2,890
=======
Pro rata allocation of negative goodwill:
Fixed assets $ 1,265
Patents 120
Assembled work force 125
Compound library 550
In-process research and development costs 830
-------
Negative goodwill $ 2,890
=======
Summary of fair value of assets acquired, net of the allocation of
negative goodwill:
Fixed assets $ 1,030
Patents 100
Prepaid expenses 74
Assembled work force 100
Compound library 450
In-process research and development costs 670
-------
Fair value of assets acquired, net $ 2,424
=======
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(7) Revenues and expenses of activities not assumed by OSI. In accordance with
the Agreement, OSI assumed the operations of Cadus' facility, including
lease obligations for the facility and certain research equipment, 47
research employees and the research program with Solvay Pharmaceuticals
B.V. The determination of the pro forma employee-related expenses is based
on the ratio of research employees hired by OSI to the total number of
Cadus research employees during the pro forma periods. Other research
costs and administrative expenses were estimated based on the operating
activities assumed by OSI as a result of the Agreement. No provision for
income taxes has been made based on the history of the operating losses of
both OSI and Cadus since their inceptions. A summary of revenue and
expenses activity acquired by OSI is as follows:
Year Ended Nine Months Ended
Sept. 30, 1998 Jun. 30, 1999
-------------- -----------------
Research revenue (Solvay) 2,700 2,025
Research costs (47 employees)
including payroll
and direct research costs (7,824) (5,861)
Administrative expenses (899) (545)
------ ------
Net loss (6,023) (4,381)
====== ======
(8) Represents the amortization expense of the compound library (recorded in
research and development costs), patents and workforce intangibles
(recorded in amortization of intangibles) acquired under the Agreement
based on the straight-line method over five years.
(9) Represents the reduction of investment income based on the total payments
of $2,274 assuming an average rate of return of 5% per annum based on
OSI's historical investment performance.