EXHIBIT 99.5
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
statements give effect to the Merger of the Registrant and Old Discovery
pursuant to the Merger Agreement. The unaudited pro forma condensed consolidated
balance sheet gives effect to the Merger as if it occurred on September 30,
1997. The unaudited pro forma condensed consolidated statement of operations
gives effect to the Merger as if it occurred on January 1, 1997.
The pro forma condensed consolidated financial statements are
based on the historical financial statements of the Registrant and Old
Discovery. They give effect to the Merger under the purchase method of
accounting and apply the assumptions and adjustments as discussed in the
accompanying notes to the pro forma condensed consolidated financial statements.
The pro forma condensed consolidated financial statements as of and for the nine
months ended September 30, 1997 have been prepared based upon the unaudited
condensed financial statements of the Registrant and the unaudited condensed
consolidated financial statements of Old Discovery as of September 30, 1997 and
for the nine months then ended.
The Merger will be accounted for using the purchase method of
accounting. Although the Registrant was the surviving corporate entity, Old
Discovery's former stockholders own approximately 92% of the merged entity.
Accordingly, the transaction will be accounted for as an acquisition of the
Registrant by Old Discovery. The unaudited pro forma condensed consolidated
financial statements have been prepared on the basis of assumptions described in
the notes thereto and include assumptions relating to the allocation of the
consideration paid for the assets and liabilities of the Registrant based on
preliminary estimates of their fair value. The actual allocation of such
consideration may differ from that reflected in the unaudited pro forma
condensed consolidated financial statements after final valuation procedures are
completed following the closing of the Merger. The final allocations of the
aggregate purchase price for the Merger are not expected to differ materially
from the preliminary allocations. In the opinion of the Registrant, all
adjustments necessary to present fairly the unaudited pro forma condensed
consolidated financial statements have been made based on the terms and
structure of the Merger.
The pro forma information is presented for illustrative
purposed only and is not necessarily indicative of the operating results or
financial position that would have occurred if the Merger had been consummated
on January 1, 1997 or September 30, 1997, respectively, nor is it necessarily
indicative of future operating results or financial position.
The pro forma condensed consolidated financial statements
should be read in conjunction with the historical financial statements and the
related notes thereto of the Registrant and Old Discovery in Amendment No. 2 to
the Ansan Pharmaceuticals, Inc. Form S-4 dated October 24, 1997, and
Management's Discussion and Analysis of Financial Condition and Plan of
Operations included therein.
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UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
September 30, 1997
(in thousands)
Pro Forma
Combined
Discovery Old Pro Forma Reflecting
Laboratories Discovery Adjustments Merger
ASSETS ------------ --------- ----------- ------
------
Current assets
Cash and Cash equivalents $ 274 $ 536 $ 810
$(1232)(A)
Short-term investments 2200 12933 (1300)(D) 12601
Prepaid expenses and other current assets 6 39 45
------- ------ ------- ---------
Total current assets 2480 13508 (2532) 13456
Furniture and equipment net 79 93 172
Other assets 30 30
Deferred merger costs 386 327 (713)(C) --
------- ------ ------- ---------
$2945 $13958 $(3245) $13658
------- ------ ------- ---------
LIABILITIES AND STOCKHOLDERS
EQUITY
Current liabilities
Accounts payable and accrued expenses $ 245 $ 448 $ 412(C) $ 1105
Payable to Titan Pharmaceuticals, Inc. 232 -- (232)(A) --
Other accrued liabilities 17 -- -- 17
Debenture payable to Titan Pharmaceuticals
Inc. 1000 (1000)(A)
------- ------ ------- ---------
Total current liabilities 1494 448 (820) 1122
Commitments
Minority Interest 2200 2200
------- ------ ------- ---------
Stockholders' Equity
Preferred Stock 1300 2 (1300)(D) 2
Common Stock 3 7 (1)(B) 3
(6)(E)
Additional paid-in capital 10697 18999 (10697)(B) 21462
2457(B)
6(E)
Deficit accumulated during the development (10549) (7698) 10549 (11131)
stage (3433)(B)
------- ------ ------- ---------
Total stockholders' equity 1451 11310 (2425) 10336
------- ------ ------- ---------
$2945 $13958 $(3259) $13658
======= ====== ======= =========
- -------------
(A) Reflects the repayment of obligations to Titan Pharmaceuticals, Inc. in
connection with the Merger.
(B) Reflects the allocation of the estimated purchase price of approximately
$2.9 million to the historical balance sheet of the Registrant. The
adjustment includes approximately $4 million of purchased in-process
research and development. Also reflects the elimination of the Registrant's
stockholders' equity accounts.
(C) Reflects the estimated costs incurred by the Registrant and Old Discovery
to complete the Merger.
(D) Reflects the elimination of Old Discovery's investment in the Registrant's
Series A preferred stock.
(E) To reflect the 1- for-3 reverse stock split.
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UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1997
(in thousands, except share and per share amounts)
Pro Forma
Combined
Old Pro Forma Reflecting
Registrant Discovery Adjustments Merger
---------- --------- ----------- ------
Costs and expenses
Research and development $ 760 $ 3503 -- $4263
General and administrative 725 1535 -- 2260
------- --------- ------- ---------
Loss from operations (1485) (5038) -- (6523)
Other income/expenses)
Interest income 73 594 (37)(F) 630
Interest expense (57) -- 57(F) --
------- --------- ------- ---------
Net Loss (1469) (4444) $ 20 $ (5893)
======= ========= ======= =========
Net loss per share (.59) $ (1.69) $ (1.86)
======= ========= =========
Shares used in computing net loss per share 828,427 2,629,772 3,176,203
======= ========= =========
- -------
(F) Reflects the net reduction of interest expense as a result of the repayment
of the indebtedness owed to Titan Pharmaceuticals, Inc. in connection with
the Merger.
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
Note 1
The unaudited pro forma condensed combined balance sheet of the Registrant
and Old Discovery has been prepared as if the Merger was completed as of
September 30, 1997. The Merger will be accounted for as a purchase of the
Registrant by Old Discovery, as Old Discovery's former stockholders own
approximately 92% of the merged entity notwithstanding that the Registrant
survived the Merger. The total cost of the Merger is estimated to be
approximately $2.9 million, including transaction costs incurred by Old
Discovery of approximately $400,000 which includes financial advisory, legal,
and accounting fees.
The purchase cost of the Registrant has been determined based on the
estimated fair market value of Registrant stock at the time of the announcement
of the merger. The estimated purchase price consists of the following (in
thousands):
Estimated value of Common Stock to be held by
pre-existing Registrant stockholders following the
Merger (546,433 shares of Common stock at $4.50 per share) $2459
Estimated transaction costs to be incurred by Old Discovery 400
-----
(Net of prior Old Discovery investment in the Registrant) $2859
=====
Based on a preliminary analysis of tangible and intangible assets the
allocation of the purchase price is as follows:
Tangible assets of the Registrant acquired (less previous
investment by Old Discovery) $1259
In-process research & development 3433
Liabilities of the Registrant assumed (including
transaction costs) (1833)
-----
$2859
The in-process research and development will be charged against earnings.
Such charge has not been reflected in the pro forma condensed statement of
operations as such charge is a non-recurring charge directly attributable to the
Merger.
The pro forma adjustments include accrued liabilities of $1,125,000 to
reflect the estimated costs incurred by both the Registrant and Old Discovery to
complete the Merger.
The pro forma adjustments include the repayment of approximately
$1,200,000 in debt owed to Titan Pharmaceuticals, Inc. (the "Titan
Indebtedness").
No pro forma adjustment has been included to reflect the Sublicense
Agreement entered into between Titan Pharmaceuticals, Inc. and the Registrant at
the time of the Merger as there is no effect on the pro forma periods presented.
Note 2
The unaudited pro forma condensed consolidated statements of operations of
the Registrant and Old Discovery have been prepared as if the Merger was
completed as of January 1, 1997. The condensed consolidated statement of
operations for the nine months ended September 30, 1997, includes an adjustment
to reduce interest expense to reflect the repayment of Titan Indebtedness in
connection with the Merger.
Note 3
Combined pro forma net loss per share for the nine-month period ended
September 30, 1997 is computed using the historical weighted average number of
shares of Old Discovery Common Stock outstanding, adjusted for the exchange
ratio applicable to Common Stock in the Merger plus the shares of the Registrant
Common Stock outstanding following the cancellation of Titan Pharmaceuticals,
Inc.'s holding in the Registrant and adjusted for the 1-for-3 reverse stock
split effected concurrently with the Merger. Preferred stock and other common
stock equivalents issued in the Merger are not included, as their effect is
antidilutive.
F-10