8-K/A

UNITED STATES

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

Date of Report (Date of earliest event reported): June 4, 2013

Sagent Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Commission File Number: 1-35144

Delaware	98-0536317
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

1901 N. Roselle Road, Suite 700, Schaumburg, Illinois 60195

(Address of principal executive offices, including zip code)

(847) 908-1600

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On July 5, 2013, Sagent Pharmaceuticals, Inc., a Delaware corporation (the “Company”) filed a Current Report on Form 8-K reporting that the Company received final approval for its acquisition of Kanghong Sagent (Chengdu) Pharmaceutical Co. Ltd. (“KSCP”), and that the transaction had been completed.

This Form 8-K/A amends Item 9.01 the Form 8-K we filed on July 5, 2013 to include KSCP’s audited financial statements as of and for the year ended December 31, 2012, KSCP’s unaudited financial statements as of and for the three months ended March 31, 2013, and the unaudited pro forma condensed combined financial information related to our acquisition of KSCP, as required by Items 9.01(a) and 9.01(b) of Form 8-K.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

The financial statements of KSCP as of and for the year ended December 31, 2012 are attached as Exhibit 99.3 to this Form 8-K/A, and are incorporated by reference into this Form 8-K/A.

The financial statements of KSCP as of and for the three months ended March 31, 2013 are attached as Exhibit 99.2 to this Form 8-K/A and are incorporated by reference into this Form 8-K/A.

(b) Pro Forma Financial Information

The following unaudited pro forma condensed combined financial information related to the KSCP acquisition is attached as Exhibit 99.1 to this Form 8-K/A and incorporated by reference into this Form 8-K/A:

(1) Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2012;

(2) Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2013; and

(3) Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2013.

(d) The following exhibits are being filed as part of this Current Report on Form 8-K/A

Exhibit Number	Description
99.1	Unaudited Pro Forma Condensed Combined Financial Information
99.2	Kanghong Sagent (Chengdu) Pharmaceutical Co. Ltd. Financial Statements as of and for the three months ended March 31, 2013
99.3	Kanghong Sagent (Chengdu) Pharmaceutical Co. Ltd. Financial Statements as of and for the year ended December 31, 2012 (Incorporated by reference to Item 15(a) in the Company’s Annual Report on Form 10-K filed March 18, 2013).

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.

		SAGENT PHARMACEUTICALS, INC.
Date: August 5, 2013		/S/ MICHAEL LOGERFO
	Name:	Michael Logerfo
	Title:	Executive Vice President, Chief Legal Officer and Corporate Secretary

EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On April 30, 2013, Sagent Pharmaceuticals, Inc., a Delaware corporation (the “Company” or “Sagent”) entered into a Share Purchase Agreement with Chengdu Kanghong Pharmaceuticals (Group) Co. Ltd. (“Kanghong”) pursuant to which the Company agreed to acquire Kanghong’s 50% interest in Kanghong Sagent (Chengdu) Pharmaceutical Co. Ltd. (“KSCP”) in exchange for $25 million, payable in installments through September 2015. The acquisition was subject to customary closing conditions, including approval by the Chengdu Hi-Tech Industrial Development Zone Bureau of Investment Services (“BIS”). On June 4, 2013, the Company received final approval for the transaction from the BIS. As a result of the completion of the transaction, KSCP is now a wholly-owned subsidiary of the Company.

The following unaudited pro forma condensed combined balance sheet presents our historical financial position combined with KSCP as if the acquisition and the financing for the acquisition had occurred on March 31, 2013, and includes adjustments which give effect to events that are directly attributable to the transaction and that are factually supportable. The unaudited pro forma condensed combined statements of operations present the combined results of our operations with KSCP as if the acquisition and the financing for the acquisition had occurred at the beginning of the periods presented and include adjustments that are directly attributable to the acquisition, are expected to have a continuing impact on the combined results, and are factually supportable. The unaudited pro forma condensed combined consolidated financial statements are not necessarily indicative of what our financial position or results of operations actually would have been had we completed the acquisition at the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the following:

• accompanying notes to the unaudited pro forma condensed combined financial statements;

• consolidated financial statements of Sagent included in our Annual Report on Form 10-K for the year ended December 31, 2012 and the condensed consolidated financial statements of Sagent included in our Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2013 and the notes relating thereto; and

• financial statements of KSCP for the year ended December 31, 2012 and the notes relating thereto, included on Pages S-2 through S-19 of the Sagent Pharmaceuticals, Inc., Annual Report on Form 10-K for the year ended December 31, 2012 and the condensed financial statements of KSCP as of and for the three months ended March 31, 2013 and the notes relating thereto, included as Exhibit 99.2 to this Current Report on Form 8-K.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2012

(In thousands, except per-share data)

	Sagent			KSCP			Pro Forma Adjustments			(Note)		Pro Forma Combined
Net revenue	$	183,615		$	—		$	—				$	183,615
Cost of sales		152,508			—			—					152,508
Gross profit		31,107			—			—					31,107
Operating expenses:
Pre-production expenses		—			3,759			(3,759	)		3(k)		—
Product development		17,136			—			3,786			3(k), 3(d)		20,922
Selling, general and administrative		30,093			3,417			30			3(d)		33,540
Management reorganization		708			—			—					708
Equity in net (income) loss of joint ventures		(1,337	)		—			(3,814	)		3(f)		(5,151	)
Total operating expenses		46,600			7,176			(3,757	)				50,019
Income (loss) from operations		(15,493	)		(7,176	)		3,757					(18,912	)
Interest income and other		243			90			—					333
Interest expense and other		(1,567	)		38			(615	)		3(c)		(2,144	)
Income (loss) before income taxes		(16,817	)		(7,048	)		3,142					(20,723	)
Provision for income taxes		—			—			—			3(j)		—
Net income (loss)	$	(16,817	)	$	(7,048	)	$	3,142				$	(20,723	)
Net income (loss) per common share:
Basic	$	(0.60	)									$	(0.74	)
Diluted	$	(0.60	)									$	(0.74	)
Weighted-average of shares used to compute net income (loss) per common share:
Basic		27,980											27,980
Diluted		27,980											27,980

See notes to pro forma financial statements

Unaudited Pro Forma Condensed Combined Statement of Operations

For the three months ended March 31, 2013

(In thousands, except per-share data)

	Sagent			KSCP			Pro Forma Adjustments			(Note)		Pro Forma Combined
Net revenue	$	60,211		$	—		$	—				$	60,211
Cost of sales		41,753			—			—					41,753
Gross profit		18,458			—			—					18,458
Operating expenses:
Pre-production expenses		—			583			(583	)		3(k)		—
Product development		4,261			—			590			3(k), 3(d)		4,851
Selling, general and administrative		8,867			897			8			3(d)		9,772
Equity in net (income) loss of joint ventures		443			—			(984	)		3(f)		(541	)
Total operating expenses		13,571			1,480			(969	)				14,082
Termination fee		5,000			—			—					5,000
Income (loss) from operations		9,887			(1,480	)		969					9,376
Interest income and other		16			2			—					18
Interest expense		(65	)		—			(156	)		3(c)		(221	)
Income (loss) before income taxes		9,838			(1,478	)		813					9,173
Provision for income taxes		—			—			—			3(j)		—
Net income (loss)	$	9,838		$	(1,478	)	$	813				$	9,173
Net income (loss) per common share:
Basic	$	0.35										$	0.33
Diluted	$	0.34										$	0.32
Weighted-average of shares used to compute net income (loss) per common share:
Basic		28,135											28,135
Diluted		28,746											28,746

See notes to pro forma financial statements

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2013

(In thousands, except per-share data)

	Sagent			KSCP			Pro Forma Adjustments			Note		Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents	$	28,118		$	1,055		$	(10,000	)		3(a)i	$	19,173
Short-term investments		42,861			—			—					42,861
Accounts receivable, net of chargebacks and other deductions		35,842			—			—					35,842
Inventories, net		49,773			1,560			—					51,333
Due from related party		4,695			—			(1,647	)		3(g)		3,048
Prepaid expenses and other current assets		3,105			259			—					3,364
Total current assets		164,394			2,874			(11,647	)				155,621
Property, plant, and equipment, net		808			52,154			4,024			3(k), 3(a)ii,		56,986
Investment in joint ventures		18,295			—			(15,949	)		3(a), 3(i)		2,346
Intangible assets, net		2,971			1,827			(1,827	)		3(k)		2,971
Goodwill		—			—			6,038			3(a), 3(h)		6,038
Other assets		347			—			—					347
Total assets	$	186,815		$	56,855		$	(19,361	)			$	224,309
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	22,397		$	—		$	146			3(k)	$	22,543
Accrued employee benefits		—			938			(938	)		3(k)		—
Due to related party		5,566			1,647			(1,647	)		3(g)		5,566
Other payables		—			1,293			(1,293	)				—
Accrued profit sharing		6,504			—			—					6,504
Accrued liabilities		8,416			—			2,085			3(b), 3(k)		10,501
Current portion of deferred KSCP purchase price		—			—			2,434			3(a)		2,434
Current portion of long-term debt		—			1,595			—					1,595
Total current liabilities		42,883			5,473			787					49,143
Long term liabilities:
Long term portion of deferred KSCP purchase price		—			—			11,402			3(a)		11,402
Long-term debt		—			17,228			—					17,228
Government grants		—			1,117			(1,117	)		3(k)		—
Other long-term liabilities		6			—			1,117			3(k)		1,123
Total liabilities		42,889			23,818			12,189					78,896
Stockholders’ equity:
Common stock		281			50,000			(50,000	)		3(e)		281
Additional paid-in capital		274,986			1,509			(1,509	)		3(e)		274,986
Accumulated other comprehensive income		2,472			5,086			(7,868	)		3(e), 3(i)		(310	)
Accumulated deficit		(133,813	)		(23,558	)		27,827			3(e), 3(i)		(129,544	)
Total stockholders’ equity		143,926			33,037			(31,550	)				145,413
Total liabilities and stockholders’ equity	$	186,815		$	56,855		$	(19,361	)			$	224,309

See notes to pro forma financial statements

Notes to Unaudited Pro Forma Condensed Combined Financial Information

(amounts in thousands)

NOTE 1. BASIS OF PRESENTATION:

The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the SEC and are intended to show how the acquisition might have affected the historical financial statements if it had been completed on January 1, 2012 for the purposes of the condensed combined statements of operations and March 31, 2013 for the purposes of the condensed combined balance sheet. The pro forma adjustments reflecting the completion of the acquisition are based upon the accounting rules for business combinations, specifically, the acquisition method of accounting in accordance with U.S. GAAP, and upon the assumptions set forth herein.

The unaudited pro forma financial information should be read in conjunction with the underlying financial information from which it was extracted without material adjustment: (a) the condensed consolidated financial statements of Sagent Pharmaceuticals, Inc. as of and for the three months ended March 31, 2013 included in the Quarterly Report on Form 10-Q, filed with the SEC on May 6, 2013; (b) the audited consolidated financial statements of Sagent Pharmaceuticals, Inc as of and for the year ended December 31, 2012, included in our Annual Report on Form 10-K for the year ended December 31, 2012; (c) the audited financial statements of KSCP as of and for the year ended December 31, 2012, included in our Annual Report on Form 10-K for the year ended December 31, 2012; and (d) the condensed financial statements of KSCP as of and for the three months ended March 31, 2013, included in Exhibit 99.2 to this Current Report on Form 8-K.

The KSCP acquisition has been treated as an acquisition, with Sagent as the acquirer and KSCP as the acquiree, assuming that the KSCP acquisition had been completed on January 1, 2012, the beginning of the periods presented, for the unaudited pro forma condensed combined statement of operations and on March 31, 2013, for the unaudited pro forma condensed combined balance sheet.

This unaudited pro forma financial information is not intended to reflect the financial position and results of operations which would have actually resulted had the KSCP acquisition been effected on the dates indicated. Further, the pro forma results of operations are not necessarily indicative of the results of operations that may be obtained in the future.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The unaudited pro forma financial information has been compiled in a manner consistent with the accounting policies adopted by Sagent. These accounting policies differ in certain respects from those of KSCP.

NOTE 3. PRO FORMA ADJUSTMENTS:

(a) Purchase of remaining 50% equity interest in KSCP

We acquired control of KSCP upon the completion of our purchase of the remaining 50% equity interest in KSCP from Kanghong. Under the acquisition method of accounting, the total consideration transferred for the 100% equity interest has been preliminarily allocated to the net identifiable assets based on their estimated fair value at the date of acquisition. The excess of the consideration transferred over the net identifiable assets has been recorded as goodwill. The Company expects the determination of fair value to be finalized in 2013. The Company does not expect a material change in the preliminary determination of fair value of the net assets acquired.

Purchase Price	Amount (in thousands)
Cash	$	10,000
Present value of remaining purchase consideration		13,836	i.
Previously held equity interest		15,949	ii.
Gain on remeasurement of previously held interest in KSCP		154	ii.
Total Purchase Price	$	39,939
Less: book value of net assets acquired		(31,704	)
Less: fair value adjustment		(2,197	)
Residual Goodwill		6,038

i. Sagent acquired KSCP for a total of $25,000, payable in the following installments:

At closing (June 4, 2013)	$	10,000
On December 31, 2013		2,500
On September 30, 2014		3,500
On September 1, 2015		9,000

For purposes of preparing these pro forma financial statements, we have assumed that the timing of the deferred payments remains consistent with the contractual timetable.

ii. Fair value adjustments

Except as it relates to property, plant and equipment, the carrying value of assets and liabilities in KSCP’s financial statements are considered to be a proxy for the fair value of those assets and liabilities. As this allocation is based on preliminary estimates, additional adjustments to record the fair value of all assets and liabilities and adjustments for consistency of accounting policies may be required. An adjustment of $2,197 was made to increase KSCP’s property, plant and equipment to a total value of $54,351, reflecting our preliminary estimate of fair value.

No other adjustment was made to the assets and liabilities of KSCP. Goodwill representing the total excess of the purchase consideration over the fair value of the assets acquired was $6,038. This allocation is based on preliminary estimates; the final acquisition cost allocation may differ materially from the preliminary assessment outlined above. Any changes to the initial estimates of the fair value of the assets and liabilities will be allocated to goodwill.

(b) Transaction costs

The Company has estimated that total KSCP acquisition related costs that had not been incurred by March 31, 2013 will be $410. These costs have been accrued as a current liability. Because we are required to expense these costs as they are incurred, we have charged them to retained earnings as of March 31, 2013. Sagent incurred $68 of transaction costs for the three months ended March 31, 2013. No adjustment has been made to the unaudited pro forma condensed combined statement of operations because they are non-recurring.

(c) Interest expense

An adjustment to increase interest expense related to the deferred consideration of $615 and $156 for the year ended December 31, 2012 and for the three months ended March 31, 2013, respectively was made. The interest charges are based on the accretion that would be charged to interest expense for the deferred purchase consideration had the transaction closed on January 1, 2012 and the timing of the remaining payments remained the same. An interest rate of 4.75% was used to calculate the accretion charge.

(d) Depreciation expense

Property, plant and equipment was increased by $2,197 to its fair value. An adjustment to increase estimated depreciation expense of $30 and $8 was made for the year ended December 31, 2012 and for the three months ended March 31, 2013, respectively, as the KSCP facility is not yet ready for its intended use, the assets associated with manufacturing remain classified as construction in process.

(e) Elimination of KSCP Shareholders’ Equity

An adjustment to eliminate KSCP common stock of $50,000, additional paid in capital of $1,509, accumulated deficit of $23,558, and accumulated other comprehensive income of $5,086 was recorded on the pro forma condensed combined balance sheet as of March 31, 2013.

(f) Equity in net (income) loss of joint ventures

An adjustment to eliminate our share of KSCP results included in equity in net loss of joint venture of $3,814 and $984 was made for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively, that we had recognized using the equity method of accounting for our 50% previously held equity interest in KSCP.

(g) Intercompany elimination

An adjustment to record the elimination of a company receivable and a KSCP payable of $1,647 was recorded on the pro forma condensed combined balance sheet as of March 31, 2013.

(h) Goodwill

An adjustment of $6,038 to record the excess purchase consideration over the estimated fair value of the identifiable net assets acquired from KSCP.

(i) Remeasurment of previously held equity interest in KSCP

With the purchase of the remaining equity interest of KSCP, the company recorded an adjustment of $15,949 to record a decrease of the carrying value of the 50% interest in KSCP. The gain on our previously held equity interest of KSCP has been excluded from the pro forma condensed combined statement of operations as it is non-recurring.

(j) Provision for income taxes

Represents the tax effect of the above pro forma adjustments as calculated at the statutory rate. The tax effect of the adjustments is determined to be zero because both Sagent and KSCP currently maintain a full valuation allowance against deferred tax assets.

(k) Reclassifications

Certain balances were reclassified from the financial statements of KSCP so their presentation would be consistent with Sagent.

The following reclassifications were made to the condensed combined balance sheet as of March 31, 2013:

	Inc (dec)
Property, plant, and equipment	$	1,827
Intangible assets, net		(1,827	)
Accrued employee benefits	$	938
Other payables		1,293
Accounts payable		(146	)
Accrued liabilities		(2,085	)
Government Grants	$	1,117
Other long-term liabilities		(1,117	)

The following reclassifications were made to the condensed combined statement of operations for the three months ended March 31, 2013:

	Inc (Dec)
Product development	$	583
Pre-production expenses		(583	)

The following reclassifications were made to the condensed combined statement of operations for the year ended December 31, 2012:

	Inc (Dec)
Product development	$	3,759
Pre-production expenses		(3,759	)

EX-99.2

Exhibit 99.2

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Balance Sheets

(Amounts in thousands of U.S. Dollars)

(Unaudited)

	March 31, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	1,055		$	2,372
Prepaid expenses and other current assets		259			380
Inventory		1,560			965
Total current assets		2,874			3,717
Non-current assets:
Property, plant and equipment, net		52,154			51,894
Intangible assets, net		1,827			1,834
Total non-current assets		53,981			53,728
Total assets	$	56,855		$	57,445
Liabilities and shareholders’ equity
Current liabilities:
Accrued employee benefits		938			1,140
Other payables		1,293			1,813
Amount due to related parties		1,647			197
Current portion of long-term bank loans		1,595			1,591
Total current liabilities		5,473			4,741
Non-current liabilities:
Long-term bank loans		17,228			17,182
Government grants		1,117			1,114
Total non-current liabilities		18,345			18,296
Total liabilities		23,818			23,037
Commitments and contingencies
Shareholders’ equity:
Paid-in capital (no par value)		50,000			50,000
Additional paid-in capital		1,509			1,491
Deficit accumulated during the development stage		(23,558	)		(22,080	)
Accumulated other comprehensive income		5,086			4,997
Total shareholders’ equity		33,037			34,408
Total liabilities and shareholders’ equity	$	56,855		$	57,445

The accompanying notes are an integral part of these financial statements

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Statements of Loss

(Amounts in thousands of U.S. Dollars)

(Unaudited)

							Period from
							December 29, 2006
							(date of
							inception) to
	Three months ended March 31,						March 31,
	2013			2012			2013
Operating expenses:
Pre-production expenses	$	(583	)	$	(632	)	$	(9,727	)
General and administrative expenses		(897	)		(848	)		(14,098	)
Loss from operations		(1,480	)		(1,480	)		(23,825	)
Other income / (expense)		—			(2	)		19
Interest income		2			—			248
Loss before income taxes		(1,478	)		(1,482	)		(23,558	)
Income tax expense		—			—			—
Net loss	$	(1,478	)	$	(1,482	)	$	(23,558	)

The accompanying notes are an integral part of these financial statements

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Statements of Comprehensive Loss

(Amounts in thousands of U.S. Dollars)

(Unaudited)

							Period from
							December 29, 2006
							(date of
							inception) to
	Three months ended March 31,						March 31,
	2013			2012			2013
Net loss	$	(1,478	)	$	(1,439	)	$	(23,558	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments		89			(56	)		5,086
Total other comprehensive income (loss), net of tax		89			(56	)		5,086
Comprehensive loss	$	(1,389	)	$	(1,495	)	$	(18,472	)

The accompanying notes are an integral part of these financial statements

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Statements of Cash Flows

(Amounts in thousands of U.S. Dollars)

(Unaudited)

							Period from
							December 29, 2006
	Three months ended March 31						(date of inception) to
	2013			2012			March 31, 2013
Operating activities
Net loss	$	(1,479	)	$	(1,482	)	$	(23,559	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		193			150			1,581
Share based payments		18			25			293
Salary expense of certain employee paid by a shareholder		—			—			1,216
Amortization		7			18			248
Loss on disposal of property, plant and equipment		—			—			2
Pre-production expenses offset by government grants received		—			—			(31	)
Changes in operating assets and liabilities:
Inventories		(592	)		—			(1,557	)
Prepaid expenses and other current assets		122			45			(342	)
Amount due to a related party		1,448			(44	)		1,601
Accrued employee benefits and other payables		(729	)		(856	)		1,185
Net cash used in operating activities		(1,012	)		(2,144	)		(19,363	)
Investing activities
Purchases of property, plant and equipment		(314	)		(1,629	)		(48,061	)
Proceeds from sale of property, plant and equipment		—			—			1
Purchases of intangible assets		—			—			(1,573	)
Government grants received		—			—			1,054
Restricted cash		—			—			—
Net cash used in investing activities		(314	)		(1,629	)		(48,579	)
Financing activities
Repayment of short-term bank loans		—			—			(317	)
Proceeds from long-term bank loans		—			—			18,579
Capital contribution from shareholders		—			—			50,000
Net cash provided by financing activities		—			—			68,262
Net (decrease)/ increase in cash and cash equivalents		(1,326	)		(3,773	)		320
Effect of foreign exchange rate changes on cash		9			(51	)		735
Cash and cash equivalents, at beginning of year/period		2,372			12,601			—
Cash and cash equivalents, at end of year/period	$	1,055		$	8,777		$	1,055
Supplemental disclosures of cash flow information:
Acquisition of property, plant and equipment included in other payables	$	—		$	239		$	1,050
Interest paid	$	305		$	332		$	2,342
Noncash financing activity
Capital contribution from a shareholder	$	18		$	25		$	1,509

The accompanying notes are an integral part of these financial statements

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Statements of Shareholders’ Equity

(Amounts in thousands of U.S. Dollars)

(Unaudited)

	Paid-in Capital		Additional Paid in Capital		Deficit accumulated during the development stage			Other comprehensive income		Total
Balance as of December 29, 2006 and January 1, 2007	$	—	$	—	$	—		$	—	$	—
Net loss		—		—		(196	)		—		(196	)
Other comprehensive income, net		—		—		—			365		365
Capital contribution from shareholders		10,200		—		—			—		10,200
Balance as of December 31, 2007		10,200		—		(196	)		365		10,369
Net loss		—		—		(760	)		—		(760	)
Other comprehensive income, net				—		—			890		890
Capital contribution from shareholders		14,501		—		—			—		14,501
Balance as of December 31, 2008		24,701		—		(956	)		1,255		25,000
Net loss		—		—		(1,685	)		—		(1,685	)
Other comprehensive income, net				—		—			23		23
Capital contribution from shareholders		16,000		—		—			—		16,000
Balance as of December 31, 2009		40,701		—		(2,641	)		1,278		39,338
Net loss		—		—		(3,810	)		—		(3,810	)
Other comprehensive income, net				—		—			1,429		1,429
Capital contribution from shareholders		9,299		—		—			—		9,299
Balance as of December 31, 2010		50,000		—		(6,451	)		2,707		46,256
Net loss		—		—		(8,581	)		—		(8,581	)
Other comprehensive income, net				—		—			2,191		2,191
Capital contribution from a shareholder		—		1,178		—			—		1,178
Balance as of December 31, 2011		50,000		1,178		(15,032	)		4,901		41,047
Net loss		—		—		(7,048	)		—		(7,048	)
Other comprehensive income, net		—		—		—			96		96
Capital contribution from a shareholder		—		313		—			—		313
Balance as of December 31, 2012		50,000		1,491		(22,080	)		4,997		34,408
Net loss		—		—		(1,478	)		—		(1,478	)
Other comprehensive income, net		—		—		—			89		89
Capital contribution from a shareholder		—		18		—			—		18
Balance as of March 31, 2013	$	50,000	$	1,509	$	(23,558	)	$	5,086	$	33,037

The accompanying notes are an integral part of these financial statements

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Notes to Financial Statements

(amounts in thousands)

1. Basis of Presentation

The interim condensed financial statements are unaudited. The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). It is management’s opinion that these financial statements include all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of our financial position, operating results, and cash flows. Operating results for any interim period are not necessarily indicative of future or annual results.

On April 30, 2013, one of our owners, Sagent Pharmaceuticals, Inc., a Delaware corporation (“Sagent”) entered into a Share Purchase Agreement, with Chengdu Kanghong Pharmaceuticals (Group) Co. Ltd. (“Kanghong”) pursuant to which Sagent agreed to acquire Kanghong’s 50% interest in KSCP in exchange for $25,000, payable in installments through September 2015. The acquisition was subject to customary closing conditions, including approval by the Chengdu Hi-Tech Industrial Development Zone Bureau of Investment Services (“BIS”). On June 4, 2013, Sagent received final approval for the transaction from the BIS. Accordingly, the transaction has been completed. As a result of the completion of the transaction, we are now a wholly-owned subsidiary of Sagent.

You should read these statements in conjunction with our financial statements and related notes for the year ended December 31, 2012, included on Pages S-2 through S-19 of the Sagent Pharmaceuticals, Inc., Annual Report on Form 10-K, filed on March 18, 2013.

2. Inventory

Inventory consists of the following:

	March 31, 2013			December 31, 2012
Raw materials	$	1,237		$	965
Finished goods		403			—
Inventory reserve		(80	)		—
	$	1,560		$	965

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Notes to Financial Statements

(amounts in thousands)

3. Property, Plant and Equipment

Property, plant and equipment consists of the following:

	March 31, 2013			December 31, 2012
At cost:
Building	$	1,101		$	1,098
Machinery		3,920			2,395
Office equipment		363			1,874
Vehicles		143			143
		5,527			5,510
Less accumulated depreciation		(1,599	)		(1,406	)
		3,928			4,104
Construction in progress		48,226			47,790
	$	52,154		$	51,894

For the three months ended March 31, 2013 and 2012, and for the period from December 29, 2006 (date of inception) to March 31, 2013, depreciation expense was $193, $150, and $1,581, respectively. The amount of depreciation expense included in pre-production expenses was $189, $146, and $1,218 for the respective periods, and the amount included in general and administrative expenses was $4, $4, and $358 for the respective periods. As of March 31, 2013, the net book values of property, plant and equipment pledged as collateral for bank loans was $49,360. Construction in progress included capitalized interest of $301, $332, and $2,338 for the months ended March 31, 2013 and 2012 and for the period from December 29, 2006 (date of inception) to March 31, 2013, respectively.

4. Intangible Assets

Intangible assets consist of the following:

March 31, 2013	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
	(In years)
Purchased software		2	$	71	$	(67	)	$	4
Land use right		50		2,016		(193	)		1,823
Total			$	2,087	$	(260	)	$	1,827

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Notes to Financial Statements

(amounts in thousands)

December 31, 2012	Estimated Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Book Value
	(In years)
Purchased software		2	$	71	$	(65	)	$	6
Land use right		50		2,016		(188	)		1,828
Total			$	2,087	$	(253	)	$	1,834

Amortization expenses of intangible assets for the three months ended March 31, 2013, and 2012 and for the period from December 29, 2006 (date of inception) to March 31, 2013 were $7, $12 and $253, respectively, and were recorded in general and administrative expenses.

The future amortization of intangible assets is as follows:

Year Ending March 31,
2014		45
2015		40
2016		40
2017		40
2018		40
Thereafter		1,617
	$	1,822

5. Long-Term Bank Loans

The Company obtained two credit facilities in the amount of RMB37,000 ($5,902) and RMB83,000 ($13,239) in June 2011 and August 2010, respectively, each with a five year term. Both credit facilities are secured by certain fixed assets of the Company. The interest rate of the credit facilities is the prevailing interest rate of People’s Bank of China on the date of the draw downs. Repayment will be accelerated if the liabilities to assets ratio of the Company exceeds 70% and 80% during the term of the RMB 37,000 and RMB83,000 credit facilities, respectively, or if the Company is unable to achieve 50% of its projected revenues when the Company commences commercial activities. During the three months ended and as of March 31, 2013, the Company was in compliance with these covenants. All interest costs were capitalized in all periods presented as the funds were used to finance the build-out of the Company’s manufacturing facility (see Note 3).

Principal payments due on the long-term bank loans are as follows:

Year ending March 31,
2014	$	1,595
2015		7,976
2016		9,252
	$	18,823

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Notes to Financial Statements

(amounts in thousands)

6. Shareholder Contribution

Sagent granted stock options to one of the Company’s employees and also provided cash compensation to one of these employees for the three months ended March 31, 2013 and 2012. Twenty-five percent of these options are to be vested on each anniversary date from the vesting commencement date of the respective grants over a four year period. These stock options are accounted for as non-employee stock options given these stock options were granted to employees of an investee by a non-controlling shareholder. Therefore, these grants are recorded at fair value at each reporting date during the vesting period. The Company recorded $18, $25 and $1,509 as a shareholder contribution and recognized the associated stock-based and cash compensation expense in the general and administrative expense for the three months ended March 31, 2013 and 2012 and for the period from December 29, 2006 (date of inception) to March 31, 2013.

7. Commitment and Contingencies

Purchase Commitments

As of March 31, 2013, the Company had outstanding purchase commitments related to property, plant and equipment in the amount of $59, which are all due within one year.

8. Fair Value Measurement

The Company applies ASC topic 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided around fair value measurement.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Includes other inputs that are directly or indirectly observable in the marketplace.

Level 3 — Unobservable inputs which are supported by little or no market activity.

ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

In accordance with ASC 820, the Company measures cash equivalents at fair value. Cash equivalents are classified within Level 1 as the cash equivalents are valued using either quoted market prices.

9. Related Party Transactions

Name and Related Party Relationship:

Name of related party	Relationship with the Company
Sagent Pharmaceuticals, Inc.	Joint venture shareholder
Chengdu Kanghong Pharmaceutical (Group) Co., Ltd.	Joint venture shareholder

Kanghong Sagent (Chengdu) Pharmaceutical Co., Ltd.

(a development stage company)

Notes to Financial Statements

(amounts in thousands)

As of March 31, 2013, we had a related party payable of $1,647 to Sagent. The amounts were for raw material purchased on our behalf and a $1,000 advanced payment of a finished goods inventory. As of December 31, 2012, we had a related party payable of $280 that was for raw material purchases on our behalf. All balances with related parties were unsecured, non-interest bearing and payable on demand.

10. Subsequent Events

In accordance with ASC 855, “Subsequent Events”, as amended by ASU 2010-09, we evaluated subsequent events through August 5, 2013, which was also the date the financial statements were available to be issued, and there is a subsequent event requiring disclosure. For more details, please see Note 1, “Basis of Presentation”.