SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
August 12, 1999
Date of Report (Date of earliest event reported)
SUPERGEN, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-27628 91-1841574
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Two Annabel Lane, Suite 220, San Ramon, California 94583
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (925) 327-0200
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Financial Information...............................................3
Unaudited Pro Forma Combined Balance Sheet as of June 30, 1999...................................4
Unaudited Pro Forma Combined Statement of Operations
for the Year Ended December 31, 1998.........................................................5
Unaudited Pro Forma Combined Statement of Operations
for the Six Months Ended June 30, 1999.......................................................6
Notes to Unaudited Pro Forma Combined Financial Information......................................7
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined financial information for SuperGen,
Inc. ("SuperGen") gives effect to the Sparta Pharmaceuticals, Inc. ("Sparta")
merger applying the purchase method of accounting. The unaudited pro forma
combined balance sheet gives effect to the merger as if it had occurred on June
30, 1999, and reflects the allocation of the purchase price to the Sparta assets
acquired, including in-process research and development, and liabilities
assumed. These pro forma combined financial statements should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of SuperGen and Sparta.
The unaudited pro forma combined statements of operations combine the
historical statements of operations of SuperGen and Sparta as if the merger had
occurred at the beginning of the earliest period presented. SuperGen's
consolidated statement of operations for the fiscal year ended December 31, 1998
and the unaudited consolidated statement of operations for the six-month period
ended June 30, 1999 have been combined with Sparta's consolidated statement of
operations for the fiscal year ended December 31, 1998 and the unaudited
consolidated statement of operations for the six-month period ended June 30,
1999.
The SuperGen statement of operations for the quarter ending September
30, 1999 will include a significant charge for acquired in-process research and
development, currently estimated to be approximately $7.45 million or 77% of the
purchase price. This amount represents the values determined by management,
using a discounted cash flow methodology, to be attributable to the ongoing
in-process research and development programs of Sparta based on a valuation of
such programs. Assuming each of these research programs continues through all
stages of clinical development, the projected future research and development
expenditures related to these programs, excluding the cost of research and
development which may be performed by corporate collaborators, is approximately
$45 million. The programs are forecasted to be completed at various times
between 2004-2008.
Management of SuperGen believes that the allocation of the purchase
price to these programs is appropriate given the future potential of these
programs to contribute to the operations of SuperGen. If, at a later date,
management of SuperGen decides to no longer pursue one or all of these
in-process programs, decides to indefinitely postpone the research effort
related to one or more of the programs, or determines that the programs will no
longer meet the anticipated date of regulatory approval or projections
underlying the valuations, it will disclose that fact to investors in the
appropriate Form 10-K or 10-Q.
The unaudited pro forma combined information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have actually been reported if the
merger had been consummated as of the beginning of the periods presented, nor is
it necessarily indicative of future operating results or financial position of
the combined companies.
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SUPERGEN AND SPARTA
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
ASSETS
HISTORICAL
------------------------ PRO FORMA REFERENCES PRO FORMA
SUPERGEN SPARTA ADJUSTMENTS (NOTE 2) COMBINED
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Current assets:
Cash and equivalents............. $ 13,690 $1,216 $ - $ 14,906
Marketable securities............ 1,229 - - 1,229
Accounts receivable, net......... 1,086 - - 1,086
Inventories...................... 1,396 - - 1,396
Due from related parties......... 111 - - 111
Prepaid loan commitment fees..... 1,305 - - 1,305
Prepaid expenses and other
current assets................. 2,108 45 - 2,153
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Total current assets....... 20,925 1,261 - 22,186
Property, plant and equipment, net.. 2,775 35 - 2,810
Developed technology................ 1,145 - - 1,145
Investment in preferred stock of
related party.................... 500 - - 500
Due from related parties............ 450 450
Intangible assets, net.............. - - 475 A 475
Goodwill............................ - - 680 B 680
Other assets........................ 123 99 - 222
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Total assets............... $25,918 $1,395 $ 1,155 $ 28,468
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities.................... $ 3,112 $ 380 $ 250 C $ 3,742
Accrued employee benefits......... 488 - - 488
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Total current liabilities.. 3,600 380 250 4,230
Stockholders equity:
Preferred stock.................. - 1 (1) D -
Common stock..................... 22 4 (4) D 22
Additional paid in capital....... 88,454 28,682 (19,312) D,E 97,824
Stock subscription receivable.... - (67) 67 D -
Deferred compensation............ - (67) 67 D -
Accumulated other comprehensive
loss........................... (99) - - (99)
Accumulated deficit................ (66,059) (27,538) 20,088 D,F (73,509)
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Total stockholders' equity. 22,318 1,015 905 24,238
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Total liabilities and
stockholders' equity..... $25,918 $1,395 $ 1,155 $ 28,468
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See accompanying notes to the unaudited pro forma combined
financial statements.
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SUPERGEN AND SPARTA
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
HISTORICAL
----------------------------- PRO FORMA PRO FORMA
SUPERGEN SPARTA ADJUSTMENTS COMBINED
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Net sales................................. $ 3,004 $ - $ - $ 3,004
Grant income and contract revenue......... - 613 - 613
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Total revenues............................ 3,004 613 - 3,617
Operating expenses:
Cost of sales.......................... 1,925 - - 1,925
Research and development............... 10,511 3,663 - 14,174
Sales and marketing.................... 3,232 - - 3,232
General and administrative............. 3,814 1,248 - 5,062
Amortization expense................... - - 281 281
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Total operating expenses.................. 19,482 4,911 281 24,674
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Loss from operations...................... (16,478) (4,298) (281) (21,057)
Interest income........................... 901 236 - 1,137
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Net loss.................................. $(15,577) $ (4,062) $ (281) $ (19,920)
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Basic and diluted net loss per share...... $ (0.77) $ ( 1.18) $ (0.96)
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Weighted average number of shares......... 20,353 3,446 20,782
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See accompanying notes to the unaudited pro forma combined
financial statements.
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SUPERGEN AND SPARTA
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
HISTORICAL
----------------------------- PRO FORMA PRO FORMA
SUPERGEN SPARTA ADJUSTMENTS COMBINED
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Net sales................................. $ 2,340 $ - $ - $ 2,340
Grant income and contract revenue......... - 207 - 207
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Total revenues............................ 2,340 207 - 2,547
Operating expenses:
Cost of sales.......................... 1,192 - - 1,192
Research and development............... 6,795 1,051 - 7,846
Sales and marketing.................... 2,466 - - 2,466
General and administrative............. 1,641 588 - 2,229
Amortization expense................... - - 109 109
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Total operating expenses.................. 12,094 1,639 109 13,842
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Loss from operations...................... (9,754) (1,432) (109) (11,295)
Interest income........................... 283 38 - 321
Gain on sale of fixed assets.............. - 163 - 163
Amortization of prepaid loan commitment
fee....................................... (695) - - (695)
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Net loss.................................. $ (10,166) $ (1,231) $ (109) $ (11,506)
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Basic and diluted net loss per share...... $ (0.48) $ ( 0.33) $ (0.53)
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Weighted average number of shares......... 21,325 3,690 21,754
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See accompanying notes to the unaudited pro forma combined
financial statements.
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SUPERGEN, INC. AND SPARTA
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1
The unaudited pro forma combined consolidated financial statements reflect the
conversion of all of the outstanding shares of Sparta common stock, including
the conversion of preferred stock to common stock, into 429,055 shares of
SuperGen's common stock and 220,945 warrants exercisable for SuperGen common
stock pursuant to the merger.
Certain options and warrants to purchase approximately 2,900,000 shares of
Sparta common stock will be assumed by SuperGen pursuant to the merger and
converted into options and warrants to purchase approximately 110,600 shares of
SuperGen common stock. The total costs of the proposed merger are estimated as
follows (in thousands):
Fair value of SuperGen shares (calculated using the 30 day average
fair value per share as of August 12, 1999) $ 7,800
Value of warrants issued to acquire SuperGen common stock 1,558
Value of Sparta warrants and options assumed 12
SuperGen transactions costs, primarily financial advisory, legal and
accounting fees 250
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$ 9,620
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Based upon a preliminary valuation of tangible and intangible assets acquired
and liabilities assumed, SuperGen has allocated the total cost of the merger to
the net assets of Sparta at June 30, 1999 as follows (in thousands):
Tangible assets acquired $ 1,395
In-process research and development 7,450
Goodwill 680
Other purchased intangible assets 475
Liabilities assumed (380)
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$ 9,620
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Sparta is engaged in the business of acquiring rights to, and developing for
commercialization, technologies and drugs for the treatment of a number of
life-threatening diseases including cancer, cardiovascular disorders, chronic
metabolic diseases and inflammation. Sparta is in the development stage and its
research and development programs in these areas are in various stages of early
clinical trials. No products using Sparta's research efforts have been approved
for marketing to date. The Sparta research and development programs currently in
process were valued as follows (in thousands):
Oral anticancer drug for the treatment of breast, colorectal
and other cancers (5-FP, a prodrug of 5-FU) $ 3,430
Chronic metabolic disease drug (PZG) 1,380
SPARTAJECT method for the delivery of certain
anti-cancer compounds 2,640
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$ 7,450
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The in-process research and development has been written off against the
combined retained earnings. Because the charge is non-recurring, it has not been
reflected in the pro forma combined statements of operations. Such charge will
be included in the SuperGen consolidated statement of operations in the quarter
ending September 30, 1999.
NOTE 2
The unaudited pro forma combined balance sheet includes the adjustments
necessary to give effect to the merger as if it had occurred on June 30, 1999
and to reflect the allocation of the proposed acquisition cost to the fair value
of tangible and intangible assets acquired and liabilities assumed as noted
above, including the charge to retained earnings for in-process technology
acquired and the elimination of Sparta's equity accounts.
Adjustments included in the unaudited pro forma consolidated balance sheet are
summarized as follows (in thousands, except for share and per share amounts):
A) Valuation of acquired technology license and other intangible assets of
approximately $475;
B) Valuation of goodwill as the excess or purchase price over fair value of
net assets acquired of $680;
C) Accrual of transaction-related costs of approximately $250 principally for
financial advisory, legal and accounting services;
D) Elimination of the Sparta equity accounts;
E) Issuance of SuperGen common stock, $0.001 par value, and assumption of
options and warrants to purchase common stock, as discussed in Note 1. The
value of SuperGen's common stock is equal to the product of 429,055 shares
multiplied by $18.18 per share, the average closing price of SuperGen's
common stock during the 30 trading days before the closing of the merger on
August 12, 1999, and the issuance of 220,945 warrants to purchase shares of
SuperGen's common stock. The fair value of the warrants issued based on the
Black-Scholes model is $1,558. The assumed options and warrants have been
assigned a valued of approximately $12.
F) Charge to operations for in-process research and development technology of
approximately $7,450
Adjustments included in the pro forma combined statement of operations are
related to the amortization of goodwill and other intangible assets.
NOTE 3
The unaudited pro forma combined statements of operations includes the
adjustments to give effect to the merger as if it had occurred on January 1,
1998. Adjustments consist of the amortization of goodwill and other intangible
assets using an estimated useful life of five years.
NOTE 4
Pro forma basic and diluted net loss per share amounts for the year ended
December 31, 1998 and the six-month period ended June 30, 1999, are based upon
the historical weighted average number of SuperGen common shares outstanding
adjusted to reflect the issuance of 429,055 shares of SuperGen common stock, as
if the shares had been outstanding for the period. The effect of stock options
and warrants assumed in the merger were excluded from the calculation as their
exercise price exceeded the market value of SuperGen common stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SUPERGEN, INC.
Date: October 13, 1999 By: /s/ Joseph Rubinfeld
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Joseph Rubinfeld, Ph.D.
Chief Executive Officer, President
and Director
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