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EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements reflect the merger of Antigenics Inc. and Aquila Biopharmaceuticals,
Inc. in a transaction accounted for as a purchase business combination.
The unaudited pro forma condensed consolidated balance sheet as of
September 30, 2000 has been prepared as if the merger had occurred on September
30, 2000. The unaudited pro forma condensed consolidated balance sheet combines
the historical balance sheets of Antigenics and Aquila at September 30, 2000,
and gives effect to the unaudited pro forma adjustments necessary to account for
the merger as a purchase.
The unaudited pro forma condensed consolidated statements of operations
have been prepared as if the merger had occurred on January 1, 1999. These
unaudited pro forma condensed consolidated statements of operations combine the
historical statements of operations of Antigenics for the year ended December
31, 1999 and the nine months ended September 30, 2000 with the historical
statements of operations of Aquila for the year ended December 31, 1999 and the
nine months ended September 30, 2000, respectively, and give effect to the
unaudited pro forma adjustments necessary to account for the merger as a
purchase.
The unaudited pro forma adjustments reflect the purchase price allocations
made by Antigenics based on an appraisal of the intangible assets of Aquila and
other available information that Antigenics believes to be reasonable. The
unaudited pro forma condensed consolidated financial statements are provided for
illustrative purposes only and do not purport to represent what Antigenics'
results of operations or financial position would actually have been, had the
merger in fact occurred on such dates, nor do they purport to project the
results of operations or financial position of Antigenics for any future period
or date.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the audited and unaudited financial statements and
accompanying notes of Antigenics, which have been previously filed, and of
Aquila, which are included elsewhere in this filing.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
Nine Months Ended September 30, 2000
----------------------------------------------------------------------
Historical Historical Adjustments
Antigenics Aquila for Merger Pro Forma
---------- ---------- ----------- ---------
ASSETS
Current assets:
Cash, cash equivalents and marketable
securities................................ $ 101,553 $ 6,458 $ 108,011
Receivables, net............................ -- 930 930
Inventories................................. -- 666 666
Deferred acquisition costs.................. 690 -- (690)A --
Other current assets........................ 500 175 675
--------- --------- ---------
Total current assets........................ 102,743 8,229 110,282
Plant and equipment, net........................... 8,624 5,656 14,280
Intangible assets.................................. -- 19 (19)A 6,710
6,710 A --
Goodwill........................................... -- -- 2,718 A 2,718
Other assets....................................... 731 1,088 (150)C 1,669
--------- --------- ---------
Total assets................................ $ 112,098 $ 14,992 $ 135,659
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable................................... $ 1,710 $ 366 $ 2,076
Accrued liabilities................................ 1,338 1,496 1,930 A 4,764
Current portion, long-term debt.................... 906 1,360 2,266
--------- --------- ---------
Total current liabilities................... 3,954 3,222 9,106
Long-term debt..................................... 1,463 1,728 3,191
Other Liabilities.................................. -- 150 (150)C --
Stockholders' Equity:
Common stock................................ 248 86 25 B 273
(86)B
Treasury Stock.............................. -- (34) 34 B --
Additional paid-in capital.................. 159,326 145,743 42,456 B 201,782
(145,743)B
Deferred compensation....................... (1,316) -- (1,316)
Accumulated deficit......................... (51,577) (135,903) (25,800)A (77,377)
135,903 B
--------- --------- ---------
Total stockholders' equity.................. 106,681 9,892 123,362
--------- --------- ---------
Total liabilities and stockholders' equity.. 112,098 14,992 135,659
========= ========= =========
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31, 1999
------------------------------------------------------------
Historical Historical Adjustments
Antigenics Aquila for Merger Pro Forma
---------- ---------- ----------- ---------
Revenue............................................. $ - $ 2,068 $ 2,068
Costs and expenses:
Cost of sales......................... - 858 858
Research and development.............. 11,845 6,643 $ 993 D 19,481
General and administrative............ 7,012 3,026 10,038
---------- ---------- ---------
Operating loss........... (18,857) (8,459) (28,309)
Other income (expense);
Interest income....................... 1,014 544 1,558
Other, net............................ (281) (280) (561)
---------- ---------- ---------
Loss before nonrecurring charges directly
attributable to the acquisition................ $ (18,124) $ (8,195) E $ (27,312)
========== ========== =========
Weighted average number of common shares
outstanding, basic and diluted................. 18,144 2,498 F 20,642
========== =========
Loss before nonrecurring charges directly
attributable to the acquisition per common
share, basic and diluted....................... $ (1.00) $ (1.32)
========== =========
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Nine Months Ended September 30, 2000
------------------------------------------------------------
Historical Historical Adjustments
Antigenics Aquila for Merger Pro Forma
---------- ---------- ----------- ---------
Revenue............................................ $ - $ 3,523 $ 3,523
Costs and expenses:
Cost of sales........................ - 1,040 1,040
Research and development............. 12,694 4,526 $ 768 D 17,988
General and administrative........... 5,491 2,045 (145)G 7,391
---------- ---------- ---------
Operating loss.......... (18,185) (4,088) (22,896)
Other income (expense);
Interest income...................... 4,521 285 4,806
Other, net........................... (296) 368 72
---------- ---------- ---------
Loss before nonrecurring charges directly
attributable to the acquisition............... $ (13,960) $ (3,435) E $ (18,018)
========== ========== =========
Weighted average number of common shares
outstanding, basic and diluted................ 24,193 2,498 F 26,691
========== =========
Loss before nonrecurring charges directly
attributable to the acquisition per common
share, basic and diluted...................... $ (0.58) $ (0.68)
========== =========
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Note A.
Reflects the allocation of the purchase price to the net assets of Aquila.
Under purchase accounting, the assets and liabilities of Aquila are
required to be adjusted to their fair values. The purchase price of
$44,496,000 is the sum of (i) $39,936,000 representing approximately
2,498,000 shares of Antigenics stock valued at approximately $15.98 per
share, which represents the average closing price per share of Antigenics
stock for the five days before and after the announcement of the merger on
August 18, 2000, issued at an exchange ratio of 0.2898 shares of Antigenics
common stock for each of the 8,619,000 outstanding shares of Aquila stock
as of November 16, 2000 (the consummation date of the merger), (ii)
$2,545,000 representing the fair value of Aquila options and warrants to
acquire Aquila stock which was vested upon the consummation of the merger
and exchanged for options to purchase 264,000 shares of Antigenics common
stock and warrants to purchase 18,000 shares of Antigenics common stock and
(iii) an estimated $2,015,000 of Antigenics' costs of the merger and the
cost to sever the employment of Aquila's president. The fair value of the
Aquila options and warrants has been calculated using an option pricing
model with the following weighted average assumptions: life of the option -
6 years; dividend yield - nil; risk-free interest rate - 5.50%; price
volatility - 74.0%.
The following are the pro forma adjustments made to reflect the allocation
of the purchase price to the estimated fair value of the net assets
acquired based upon valuations of Aquila's intangible assets and other
available information. The valuation of acquired in-process research and
development below represents the estimated fair value of products under
development at Aquila calculated using an income approach. This involves
estimating the fair value of the in-process research and development using
the present value of the estimated after-tax cash flows expected to be
generated by the acquired in-process research and development projects. A
risk-adjusted discount rate of 60% has been utilized for each specific
product. Cash inflows from projects begin primarily in 2003 and 2004, the
expected dates of product approvals. Gross margins on products are
estimated at levels consistent with industry expectations.
Purchase price......................................................... $ 44,496,000
Net assets of Aquila (1)............................................... (9,873,000)
------------
Subtotal..................................................... 34,623,000
------------
Fair value adjustments:
Core and developed technology.................................... 6,200,000
Assembled work force............................................. 510,000
Acquired in-process research and development (2)................. 25,800,000
Liabilities assumed (3).......................................... (605,000)
------------
Subtotal.................................................... 31,905,000
------------
Excess of cost over fair value of net assets acquired (goodwill)....... $ 2,718,000
============
(1) Represents the historical Aquila net assets adjusted to eliminate
historical patents and purchased technology, net of $19,000.
(2) Antigenics will record an immediate write-off of acquired in-process
research and development costs at the consummation of the merger. The
write-off is not
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reflected in the unaudited pro forma condensed consolidated statements
of operations because it is nonrecurring in nature. This nonrecurring
charge is reflected in the unaudited pro forma condensed consolidated
balance sheet as of September 30, 2000 as an increase to accumulated
deficit.
(3) Reflects the additional transaction-related expenses incurred by
Aquila between September 30, 2000 and the date of the merger. Such
expenses have not been reflected in the unaudited pro forma condensed
consolidated statements of operations because they are nonrecurring in
nature.
Note B.
Reflects the elimination of the historical Aquila equity balances and the
issuance of Antigenics' common stock, options and warrants as consideration
for the merger.
Note C.
Reflects the elimination of deferred revenue and related other assets.
Note D.
Reflects the amount by which the pro forma amortization of core and
developed technology resulting from the merger on a straight-line basis
over 10 years and the amortization of the assembled workforce on a
straight-line basis over 3 years ($790,000 per year or $593,000 for nine
months) exceeds the amortization of Aquila's historical intangible
amortization ($69,000 and $29,000 for the year ended December 31, 1999 and
the nine months ended September 30, 2000, respectively) and the
amortization of goodwill resulting from the merger on a straight-line basis
over 10 years ($272,000 per year and $204,000 for the nine months).
Note E.
No pro forma income tax provision (benefit) is recognized because of a loss
before income taxes in each period and the need to recognize a valuation
allowance on deferred tax assets. Given the history of incurring losses,
Antigenics believes that it is more likely than not that any deferred tax
assets will not be realized.
Note F.
The weighted average number of outstanding common shares outstanding
assumes that the shares issued in the merger (2,498,000 shares of
Antigenics common stock) are outstanding throughout each period. Options
and warrants to purchase Aquila common stock will become options and
warrants to purchase Antigenics stock. The pro forma loss before
nonrecurring charges directly attributable to the acquisition and the
weighted average number of common shares outstanding used for computing
diluted loss before nonrecurring charges directly attributable to the
acquisition per common share are the same as that used for computing basic
loss before nonrecurring charges directly attributable to the acquisition
per common share for each period because inclusion of the options and
warrants in the calculation would be antidilutive (i.e., would reduce the
loss per common share).
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Note G.
Reflects the nonrecurring transaction-related expenses incurred by Aquila
prior to September 30, 2000.