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Exhibit 99.2
CONNETICS CORPORATION
INDEX TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
Page
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Unaudited Pro Forma Consolidated Financial Statements................................. 2
Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 2003................................................................ 3
Notes to Unaudited Pro Forma Consolidated Balance Sheet............................... 4
Unaudited Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 2003............................................. 5
Notes to Unaudited Pro Forma Consolidated Statement of Operations..................... 6
1
CONNETICS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements
have been prepared to give effect to the recent acquisition by Connetics
Corporation ("Connetics") of the exclusive U.S. rights to Soriatane(R)-brand
(acitretin) from Hoffmann-La Roche Inc. (the "Soriatane Product Line") on March
4, 2004. The Unaudited Pro Forma Consolidated Balance Sheet as of December 31,
2003, gives effect to the acquisition as if it had occurred on December 31,
2003. The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 2003 gives effect to the acquisition as if it had occurred on
January 1, 2003.
The pro forma adjustments are based upon available information and
certain assumptions that Connetics believes are reasonable under the
circumstances. Pro forma adjustments are applied to the historical financial
statements of Connetics and the acquisition. The transaction was accounted for
as an acquisition of intangible assets.
The Unaudited Pro Forma Consolidated Financial Statements should be
read in conjunction with (1) Connetics' historical Consolidated Financial
Statements and related Notes thereto, Management's Discussion and Analysis of
Financial Condition and Results of Operations included in Connetics' Annual
report on Form 10-K for the year ended December 31, 2003, and (2) the financial
statements of the Soriatane Product Line included elsewhere in this Current
Report on Form 8-K/A dated March 4, 2004. The Unaudited Pro Forma Consolidated
Financial Statements and related notes are provided for information purposes
only and do not purport to be indicative of the results which would have
actually been obtained had the acquisition been completed on the date indicated
or which may be expected to occur in the future.
2
CONNETICS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003
(In thousands)
SORIATANE PRO FORMA
CONNETICS PRODUCT LINE ADJUSTMENTS PRO FORMA
ASSETS
Current assets:
Cash, cash equivalents and
marketable securities $ 114,662 $ 56,910 (1) $ 48,572
(123,000)(2)
Restricted cash - current 304 304
Accounts receivable, net 2,594 2,594
Prepaid expenses and other current assets 4,814 1,460 6,274
- -----------------------------------------------------------------------------------------------------------------
Total current assets 122,374 1,460 (66,090) 57,744
Property and equipment, net 5,628 5,628
Debt issuance costs, deposits and other assets 5,418 5,418
Goodwill, net 6,271 6,271
Other intangible assets, net 6,206 127,241 (3) 133,447
- -----------------------------------------------------------------------------------------------------------------
Total assets $ 145,897 $ 1,460 $ 61,151 $ 208,508
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,884 $ 3,884
Accrued payroll and related expenses 3,792 3,792
Accrued clinical trial costs 857 857
Current portion of deferred revenue 19 19
Other accrued liabilities 1,575 3,741 1,960 (4) 7,276
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 10,127 3,741 1,960 15,828
Convertible senior notes 90,000 90,000
Other non-current liabilities 16 16
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value:
5,000,000 shares authorized; none issued
or outstanding -- --
Common stock, $0.001 par value;
50,000,000 shares authorized; shares
issued and
outstanding: 31,885,404 in 2003 and
31,180,436 in 2002 32 32
Additional paid-in capital 174,080 56,910 (1) 230,990
Net assumed liabilities of acquired
product line -- (2,281) 2,281 (3) --
Deferred stock compensation (31) (31)
Accumulated deficit (130,188) (130,188)
Accumulated other comprehensive income 1,861 1,861
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 45,754 (2,281) 59,191 102,664
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 145,897 $ 1,460 $ 61,151 $ 208,508
=================================================================================================================
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
3
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) Reflects the net proceeds from the issuance of 3,000,000 shares of
common stock in a private placement in February 2004. These net
proceeds from this private placement were used to help finance the
acquisition of the Soriatane Product Line.
(2) Reflects the payment of $123.0 million to Hoffmann-La Roche Inc. upon
closing of the Soriatane Product Line acquisition.
(3) Reflects the acquisition of the Soriatane Product Line from Hoffmann-La
Roche Inc. for a purchase price of $123.0 million plus estimated
acquisition costs of $500,000 and assumed liabilities of approximately
$3.7 million.
(4) Reflects an accrued liability of approximately $1.5 million for the
purchase of Soriatane inventory plus estimated acquisition costs of
$500,000.
4
CONNETICS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(In thousands, except per share data)
SORIATANE PRO FORMA
CONNETICS PRODUCT LINE ADJUSTMENTS PRO FORMA
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REVENUES $ 75,331 $ 41,187 $116,518
OPERATING COSTS AND EXPENSES:
Cost of product revenues 5,129 1,915 7,044
Research and development 30,109 30,109
Selling, general and administrative 42,600 15,301 (1,364)(1) 56,537
Amortization of acquired product rights 12,724 (2) 12,724
- ------------------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses 77,838 17,216 11,360 106,414
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (2,507) 23,971 (11,360) 10,104
INTEREST AND OTHER INCOME (EXPENSE):
Interest income 972 972
Interest expense (1,632) (1,632)
Other income (expense), net 234 234
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (2,933) 23,971 (11,360) 9,678
Income tax provision 1,167 5,044 (3) 6,211
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (4,100) $ 23,971 $(16,404) $ 3,467
==============================================================================================================================
BASIC INCOME (LOSS) PER COMMON SHARE -- $ (0.13) $ 0.10
==============================================================================================================================
DILUTED INCOME (LOSS) PER COMMON SHARE -- $ (0.13) $ 0.10
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Shares used to compute basic net income (loss) per share 31,559 3,000(4) 34,559
Shares used to compute diluted net income (loss) per share 31,559 3,000 36,377 (5)
==============================================================================================================================
See Notes to Unaudited Pro Forma Consolidated Statement of Operations
5
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(1) To remove non-recurring restructuring related charges incurred by
Hoffmann-La Roche Inc.
(2) Represents amortization of intangible assets acquired over the
estimated useful lives of 10 years.
(3) Assumes a combined federal and state statutory rate of 40% for 2003
applied to the unaudited incremental pro forma income before taxes.
Connetics did not consider the use of any available net operating loss
carry forwards.
(4) Reflects shares issued in a private placement of common stock in
February 2004 to help finance the acquisition of the Soriatane Product
Line.
(5) Includes 49,321 weighted average warrants and 1,769,242 weighted
average stock options outstanding during the period.
6