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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 and Aronex Pharmaceuticals on July
12, 2001 in a transaction accounted for as a purchase business combination.
The unaudited pro forma condensed consolidated balance sheet as of March
31, 2001 has been prepared as if the merger occurred on March 31, 2001. The
unaudited pro forma condensed consolidated balance sheet combines the historical
consolidated balance sheets of Antigenics and Aronex Pharmaceuticals at March
31, 2001 incorporated by reference or appearing elsewhere in this filing, 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, 2000. These
unaudited pro forma condensed consolidated statements of operations combine the
historical consolidated statements of operations of Antigenics for the year
ended December 31, 2000 (adjusted to reflect Antigenics' acquisition of Aquila
Biopharmaceuticals, Inc. as if it had also occurred on January 1, 2000 and
excluding the related acquired in-process research and development write-off)
and the historical consolidated statements of operations of Antigenics for the
three months ended March 31, 2001 with the historical statements of operations
of Aronex Pharmaceuticals for the year ended December 31, 2000 and the three
months ended March 31, 2001, respectively, incorporated by reference or
appearing elsewhere in this filing, and gives effect to the unaudited pro forma
adjustments necessary to account for the merger as a purchase.
The unaudited pro forma adjustments are based on an estimated purchase
price and preliminary purchase price allocations made by Antigenics based on
available information and assumptions that Antigenics believes to be reasonable.
Therefore, the amounts in the unaudited pro forma condensed consolidated
financial statements are subject to change. 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 consolidated financial
statements and accompanying notes of Antigenics and Aronex Pharmaceuticals which
are incorporated by reference or appearing elsewhere in this filing.
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ANTIGENICS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
MARCH 31, 2001
--------------------------------------------------------------
HISTORICAL
ARONEX HISTORICAL ADJUSTMENTS FOR
PHARMACEUTICALS ANTIGENICS MERGER PRO FORMA
--------------- ---------- --------------- ---------
ASSETS:
Current assets:
Cash and cash equivalents............ $ 4,485 $ 90,078 $ 94,563
Accounts receivable.................. -- 865 865
Inventories.......................... -- 1,043 1,043
Prepaid expenses and other assets.... 246 1,095 1,341
--------- -------- --------
Total current assets.............. 4,731 93,081 97,812
Long-term assets....................... 773 2,436 3,209
Furniture, equipment, and leasehold
improvements, net.................... 1,679 14,399 $ (827)A 15,251
Intangibles, net....................... -- 6,372 4,262 A 10,634
Goodwill, net.......................... -- 2,962 2,962
--------- -------- --------
Total assets...................... $ 7,183 $119,250 $129,868
========= ======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY:
Current liabilities:
Accounts payable and accrued
expenses.......................... $ 2,516 $ 4,602 $ 4,584 A $ 11,702
Current portion of debt.............. 424 2,217 2,641
Current portion deferred revenue..... 1,196 -- (1,196)C --
--------- -------- --------
Total current liabilities......... 4,136 6,819 14,343
Notes payable.......................... 3,071 2,264 5,335
Deferred revenue....................... 374 -- (374)C --
Stockholders' (deficit) equity:
Common stock......................... 26 274 15 B 289
(26)B
Additional paid-in capital........... 118,697 203,014 30,589 B 233,603
(118,697)B
Common stock warrants................ 3,439 -- (3,439)B --
Treasury stock....................... (11) -- 11 B --
Accumulated other comprehensive
loss.............................. -- (312) (312)
Deferred compensation................ -- (1,156) (1,156)
Accumulated deficit.................. (122,549) (91,653) 122,549 B (122,234)
(30,581)A
--------- -------- --------
Total stockholders' (deficit) equity... (398) 110,167 110,190
--------- -------- --------
Total liabilities and stockholders'
(deficit) equity..................... $ 7,183 $119,250 $129,868
========= ======== ========
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
DATA.
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ANTIGENICS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2000
-------------------------------------------------------------
HISTORICAL
ARONEX ADJUSTED ADJUSTMENTS FOR
PHARMACEUTICALS ANTIGENICS(H) MERGER PRO FORMA
--------------- ------------- --------------- ---------
Revenues.................................... $ 3,219 $ 4,543 $ 7,762
Costs and expenses:
Cost of sales............................. -- 1,614 1,614
Research and development.................. 16,611 22,928 $ 426 D 39,965
General and administrative................ 3,241 13,088 (88)E 16,241
-------- -------- --------
Operating loss.............................. (16,633) (33,087) (50,058)
Other income (expense):
Interest income........................... 926 6,214 7,140
Interest expense.......................... (448) (825) (1,273)
Other non-operating income................ 2,653 -- 2,653
-------- -------- --------
Loss before nonrecurring charges directly
attributable to the Aquila
Biopharmaceuticals, Inc. and Aronex
Pharmaceuticals, Inc. acquisitions and
change in accounting principle............ $(13,502) $(27,698) F $(41,538)
======== ======== ========
Loss before nonrecurring charges directly
attributable to the Aquila
Biopharmaceuticals, Inc. and Aronex
Pharmaceuticals, Inc. acquisitions and
change in accounting principle per common
share, basic and diluted.................. $ (1.03) $ (1.46)
======== ========
Weighted average number of common shares
outstanding, basic and diluted............ 26,856 1,548 G 28,404
======== ========
THREE MONTHS ENDED MARCH 31, 2001
----------------------------------------------------------
HISTORICAL
ARONEX HISTORICAL ADJUSTMENTS FOR
PHARMACEUTICALS ANTIGENICS MERGER PRO FORMA
--------------- ---------- --------------- ---------
Revenues...................................... $ 92 $ 884 $ 976
Cost and expenses:
Cost of sales............................... -- 226 226
Research and development.................... 2,090 6,168 $ 107 D 8,365
General and administrative.................. 1,009 2,949 (22)E 3,936
-------- -------- --------
Operating loss................................ (3,007) (8,459) (11,527)
Other income (expense):
Interest income............................. 106 1,314 1,420
Interest expense............................ (162) (162) (324)
-------- -------- --------
Loss before nonrecurring charges directly
attributable to the Aronex Pharmaceuticals,
Inc. acquisition and change in accounting
principle................................... $ (3,063) $ (7,307) F $(10,455)
======== ======== ========
Loss before nonrecurring charges directly
attributable to the Aronex Pharmaceuticals,
Inc. acquisition and change in accounting
principle per common share, basic and
diluted..................................... $ (0.27) $ (0.36)
======== ========
Weighted average number of common shares
outstanding, basic and diluted.............. 27,341 1,548 G 28,889
======== ========
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
DATA.
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ANTIGENICS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A.
Reflects the allocation of the purchase price to the net assets of Aronex
Pharmaceuticals. Under purchase accounting, the assets and liabilities of Aronex
Pharmaceuticals are required to be adjusted to their fair values. The estimated
purchase price of $33,400 is the sum of (i) $28,647 representing the assumed
issuance of approximately 1,548 shares of Antigenics common stock valued at
$18.505 per share, which represents the average closing price per share of
Antigenics common stock for the ten trading days ending the second trading day
before July 12, 2001, to be issued at an exchange ratio of 0.0594 shares of
Antigenics common stock for each of the 26,061 outstanding shares of Aronex
Pharmaceuticals common stock as of July 11, 2001, (ii) $1,958 representing the
fair value of Aronex Pharmaceuticals options and warrants to acquire Aronex
Pharmaceuticals common stock which will be vested upon the consummation of the
merger and exchanged for options and warrants to purchase 282 shares of
Antigenics common stock and (iii) an estimated $2,795 of Antigenics's costs of
the merger, costs to sever the employment of certain Aronex Pharmaceuticals
employees, and costs associated with the closing of Aronex Pharmaceuticals's
facility. The fair value of the Aronex Pharmaceuticals options and warrants has
been calculated using an option pricing model with the following weighted
average assumptions: life of the option or warrant -- employees and directors
options -- 4 years and non-employee options and warrants -- remaining
contractual life of 6 years; dividend yield -- nil; risk-free interest rate --
5.50%; price volatility -- 74.0%. Cash is payable in lieu of any fractional
shares of Antigenics common stock otherwise issuable in the merger for a price
equal to the fraction times $17.41, the closing price of Antigenics' common
stock on July 12, 2001. The final purchase price will be dependent upon the
number of shares of Antigenics common stock actually exchanged and the other
costs of the transaction.
The estimated purchase price does not include any effect of the issuance of
the contingent value rights issued to Aronex Pharmaceuticals stockholders and
option and warrant holders. The issuance of additional consideration is
dependent upon Aronex Pharmaceuticals receiving FDA approval for ATRAGEN on or
before July 6, 2002. If the approval is received within the required time period
and certain merger transaction expenses are less than $4,500, the value of the
contingent value rights at such time will be recorded as additional purchase
price.
The following are the pro forma adjustments made to reflect the preliminary
allocation of the purchase price to the estimated fair value of the net assets
acquired based upon available information. These adjustments are subject to the
determination of the final purchase price as described above and the completion
of valuations as of the date of consummation of the merger. Valuations of
specifically identifiable intangible assets and acquired in-process research and
development are in progress. Consequently, the actual allocation of the purchase
price could differ from that presented below. The preliminary valuation of
acquired in-process research and development below represents the estimated fair
value of products under development at Aronex Pharmaceuticals calculated using
an income approach. This involves estimating the fair value of the acquired
in-process research and development using the present value of the estimated
after-tax cash flows expected to be generated by the purchased in-process
research and development projects. The risk adjusted discount rates range from
45% to 55%, depending on the risks associated with each specific project. Cash
inflows from projects begin primarily in 2005 and 2006, the expected dates of
product approvals. Gross margins on products are estimated at levels consistent
with industry expectations. The preliminary fair values of the acquired non-
current assets and acquired in-process research and development have been
proportionately reduced by the amount that the estimated fair value of the net
assets acquired exceeds the estimated purchase price (negative goodwill).
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ANTIGENICS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Purchase price.............................................. $33,400
Net assets of Aronex Pharmaceuticals(1)..................... 1,172
-------
Subtotal.................................................. 32,228
Fair value adjustments:
Core developed technology................................. 1,674
Acquired in-process research and development(2)........... 30,581
Developed technology and patents.......................... 2,588
Fixed assets.............................................. (827)
Liabilities assumed(3).................................... (1,788)
-------
$ --
=======
- ---------------
(1) Reflects the historical Aronex Pharmaceuticals net assets as of March 31,
2001 adjusted to eliminate deferred revenue of $1,570.
(2) Antigenics recorded an immediate write-off of acquired in-process research
and development costs at the consummation of the merger. The write-off is
not 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 March 31, 2001 as an increase to accumulated deficit.
(3) Reflects the estimated additional transaction-related expenses to be
incurred and recognized by Aronex Pharmaceuticals between March 31, 2001 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 Aronex Pharmaceuticals equity
balances and the issuance of Antigenics's common stock, options and warrants as
consideration for the merger.
NOTE C.
Reflects the elimination of Aronex Pharmaceuticals's historical deferred
revenue.
NOTE D.
Reflects the amortization of intangible assets resulting from the merger on
a straight-line basis over 10 years for developed technology and patents.
NOTE E.
Reflects the reduction in amortization of leasehold improvements that will
be abandoned with the closing of Aronex Pharmaceuticals's facility.
NOTE F.
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 G.
The weighted average number of outstanding common shares outstanding
assumes that the shares issued in the merger (1,548 shares of Antigenics common
stock) are outstanding throughout each period. Options and warrants to purchase
Aronex Pharmaceuticals common stock became options and warrants to purchase
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ANTIGENICS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Antigenics common stock. The convertible note became convertible into Antigenics
common stock. The pro forma loss before nonrecurring charges directly
attributable to the acquisition and change in accounting principle and weighted
average number of common shares outstanding used for computing diluted loss
before nonrecurring charges directly attributable to the acquisition and change
in accounting principle per common share are the same as that used for computing
basic loss before nonrecurring charges directly attributable to the acquisition
and change in accounting principle per common share for each period because
inclusion of the options, warrants and convertible note in the calculation
would be antidilutive (i.e., would reduce the loss per common share).
NOTE H.
The Adjusted Antigenics statement of operations for the year ended December
31, 2000 has been prepared to reflect Antigenics's acquisition of Aquila
Biopharmaceuticals, Inc. on November 16, 2000 as if it had also occurred on
January 1, 2000.
HISTORICAL ANTIGENICS
FOR THE YEAR ENDED PRO FORMA ADJUSTED
DECEMBER 31, 2000 ADJUSTMENTS ANTIGENICS
--------------------- ----------- ----------
Revenues.......................................... $ 443 4,100 (1) $ 4,543
Costs and expenses:
Cost of sales................................... 363 1,251 (1) 1,614
Research and development........................ 17,575 5,353 (2) 22,928
General and administrative...................... 9,190 3,898 (2) 13,088
Acquired in-process research and development.... 25,800 (25,800)(3) --
---------- ----------
Operating loss.................................... (52,485) (33,087)
Other income (expense):
Interest income................................. 6,180 34 (4) 6,214
Interest expense................................ (424) (401)(4) (825)
---------- ----------
Net loss before nonrecurring charges directly
attributable to the Aquila Biopharmaceuticals,
Inc. and Aronex Pharmaceuticals, Inc.
acquisitions and the change in accounting
principle....................................... $ (46,729) $ (27,698)
========== ==========
Net loss before nonrecurring charges directly
attributable to the Aquila Biopharmaceuticals,
Inc. and Aronex Pharmaceuticals, Inc.
acquisitions and the change in accounting
principle per share, basic and diluted.......... $ (1.90) $ (1.03)
========== ==========
Weighted average number of shares outstanding,
basic and diluted............................... 24,659 (5) 26,856
========== ==========
- ---------------
(1) To reflect the revenue and related cost of sales based upon Aquila's results
of operations from January 1, 2000 to November 15, 2000.
(2) To record the excess amortization on the acquired intangible assets over the
historical amortization of Aquila's intangible assets and to record Aquila's
research and development and general and administrative expenses from
January 1, 2000 to November 15, 2000.
(3) To eliminate the immediate write-off of acquired in-process research and
development costs acquired in the Aquila merger because the charge is
nonrecurring in nature.
(4) To reflect interest expense and income based upon Aquila's results of
operations from January 1, 2000 to November 15, 2000.
(5) To adjust the weighted average number of shares outstanding to reflect that
the shares issued in the merger with Aquila are outstanding throughout all
of 2000.