8-K 1 a2049128z8-k.txt 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 22, 2001 GENZYME CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 0-14680 06-1047163 (State or other jurisdiction of (Commission file (IRS employer incorporation or organization) number) identification number) ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (617) 252-7500 ITEM 5. OTHER EVENTS. As reported on our current report on Form 8-K dated April 25, 2001 (filed April 26, 2001), on April 25, 2001 we entered into an Agreement and Plan of Merger with Focal, Inc. ("Focal") to effect a business combination through the merger of a wholly-owned subsidiary of ours with and into Focal. In addition, in May 2001 we entered into a stock purchase agreement with Wyntek Diagnostics, Inc. ("Wyntek") and its stockholders, pursuant to which Genzyme will acquire all or substantially all of the outstanding capital stock of Wyntek for approximately $65.0 million in cash. We are filing this report to include (1) the audited financial statements of Focal as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, including the report of independent auditors dated January 31, 2001, (2) the unaudited financial statements of Focal as of and for the three months ended March 31, 2001 and 2000 and (3) unaudited pro forma combined financial information which describes the pro forma effect of our planned acquisitions of Focal and Wyntek on the unaudited statements of operations for the three months ended March 31, 2001 and the year ended December 31, 2000 and the unaudited balance sheet as of March 31, 2001 of both Genzyme Corporation and Genzyme Biosurgery, the division of Genzyme Corporation to which the assets and liabilities and operations of Focal will be allocated. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits: 2 Agreement and Plan of Merger, dated as of April 25, 2001, among Genzyme Corporation, Sammy Merger Corp. and Focal, Inc. Attached as Annex A to the proxy statement/prospectus contained in Genzyme's registration statement on Form S-4 (No. 333-61296) filed with the SEC on May 21, 2001 and incorporated herein by reference. 23 Consent of Ernst & Young LLP. Filed herewith. 99.1 The audited financial statements of Focal as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, including the report of independent auditors dated January 31, 2001. Filed herewith. 99.2 The unaudited financial statements of Focal as of and for the three months ended March 31, 2001 and 2000. Filed herewith. 2 SIGNATURE 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. GENZYME CORPORATION Dated: May 22, 2001 By: /s/ Michael Wyzga ------------------------------- Michael Wyzga Senior Vice President Finance, Chief Financial Officer and Chief Accounting Officer 3 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION Genzyme and Focal, Inc. ("Focal") entered into a planned merger agreement on April 25, 2001. The acquisition will be structured as a merger of a wholly-owned subsidiary of Genzyme with and into Focal. On April 30, 2001 Genzyme also entered into a stock purchase agreement with Wyntek Diagnostics, Inc. ("Wyntek") and its stockholders pursuant to which Genzyme will acquire all or substantially all of the outstanding capital stock of Wyntek. The Focal merger requires the approval of Focal's shareholders, which has not yet been obtained. On December 14, 2000, Genzyme completed the acquisition of GelTex Pharmaceuticals, Inc. ("GelTex"). The acquisition was structured as a merger of GelTex with and into one of Genzyme's wholly-owned subsidiaries pursuant to an Agreement and Plan of Merger, dated as of September 11, 2000. On December 18, 2000, Genzyme completed the acquisition of Biomatrix. The acquisition was structured as a merger of Biomatrix with and into one of Genzyme's wholly-owned subsidiaries pursuant to an Agreement and Plan of Merger, dated as of March 6, 2000. Concurrent with the completion of Genzyme's acquisition of Biomatrix, Genzyme amended its charter to create Genzyme Biosurgery Division Common Stock ("Biosurgery Stock") and eliminate Genzyme Surgical Products Division Common Stock ("Surgical Products Stock") and Genzyme Tissue Repair Division Common Stock ("Tissue Repair Stock"). The following unaudited pro forma combined financial information describes the pro forma effect of Genzyme's acquisitions of Focal and Wyntek on the: - unaudited statements of operations for the three months ended March 31, 2001 and the year ended December 31, 2000; and - unaudited balance sheet as of March 31, 2001 of both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the assets and liabilities and operations of Focal will be allocated. The following unaudited pro forma combined financial information also describes the pro forma effect of Genzyme's merger with GelTex and Genzyme's merger with Biomatrix on the unaudited statement of operations for the year ended December 31, 2000 of both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the assets and liabilities and operations of Biomatrix were allocated, as if these mergers took place on January 1, 2000. In addition, the Genzyme pro forma statement of operations for the year ended December 31, 2000 reflects the change in earnings allocations resulting from the creation of Biosurgery Stock and elimination of Surgical Products Stock and Tissue Repair Stock as if this took place on January 1, 2000. The purpose of this pro forma financial information is to demonstrate how the combined financial statements of these businesses might have appeared if each of the mergers had been completed at the beginning of the periods presented. The results of operations of GelTex and Biomatrix are included in the results of Genzyme beginning on the respective dates of acquisition. To determine earnings per share, Genzyme allocates its earnings to each series of its common stock based on the earnings attributable to that series of stock. The earnings attributable to each series of stock are defined in Genzyme's charter as the net income or loss of the corresponding division determined in accordance with generally accepted accounting principles and as adjusted for tax benefits allocated to or from the division in accordance with Genzyme's management and accounting policies. Genzyme's charter also requires that all income and expenses of Genzyme be allocated among the divisions in a reasonable and consistent manner. Genzyme's board of directors, however, retains considerable discretion in determining the types, magnitudes and extent of allocations to each series of common stock without shareholder approval. 4 Because the earnings allocated to Genzyme Biosurgery Stock are based on the income or losses attributable to Genzyme Biosurgery, Genzyme included pro forma financial statements of Genzyme Biosurgery to aid investors in evaluating its performance. Holders of Genzyme Biosurgery Stock have no specific rights to the assets allocated to Genzyme Biosurgery. Genzyme Corporation continues to hold title to all of the assets allocated to Genzyme Biosurgery and is responsible for all of its liabilities, regardless of what Genzyme deems for financial statement presentation purposes as allocated to any division. Holders of Genzyme Biosurgery Stock, as common stockholders, are therefore subject to the risks of investing in the businesses, assets and liabilities of Genzyme, as a whole. Genzyme has prepared the pro forma financial information using the purchase method of accounting for all four transactions. Genzyme expects to have reorganization and restructuring expenses as well as potential operating efficiencies as a result of the transactions with Focal and Wyntek. The unaudited pro forma information does not reflect these potential expenses and efficiencies. PENDING ACQUISITION OF FOCAL As a result of the merger with Focal, each outstanding share of Focal common stock not already owned by Genzyme will automatically convert into the right to receive 0.1545 of a share of Biosurgery Stock, except for 10,000 shares of Focal common stock that will be purchased for cash. Genzyme will account for the merger using the purchase method of accounting. Under the purchase method, the assets and liabilities of Focal, including intangible assets, will be recorded at their fair market values. The results of operations and cash flows of Focal will be included in Genzyme's financial statements following the completion of the merger. The assets, liabilities and operations of Focal will be allocated to Genzyme Biosurgery. Additionally, each option and warrant to purchase shares of Focal common stock outstanding immediately before the effective time of the merger will be assumed by Genzyme after the merger and will become an option or warrant to acquire Biosurgery Stock. The conversion of options to purchase Focal common stock will be accounted for in accordance with Financial Accounting Standards Board Interpretation No. 44 ("FIN 44"). PENDING ACQUISITION OF WYNTEK Under the stock purchase agreement with Wyntek, Genzyme will purchase all of the outstanding stock of Wyntek for approximately $65.0 million in cash. Genzyme will account for the transaction using the purchase method of accounting. Under this method, the assets and liabilities of Wyntek, including intangible assets, will be recorded at their fair market values. The results of operations and cash flows of Wyntek will be included in Genzyme's financial statements following the completion of the transaction. No options or warrants will be assumed by Genzyme in connection with the purchase. The assets, liabilities and operations of Wyntek will be allocated to Genzyme General. ACQUISITION OF GELTEX Genzyme issued approximately 7.9 million shares of Genzyme General Stock and paid cash of $515.2 million for all of the outstanding stock of GelTex. In addition, Genzyme issued options and warrants to purchase Genzyme General Stock in exchange for all outstanding GelTex options and warrants. The conversion of options to purchase GelTex common stock was accounted for in accordance with FIN 44. 5 ACQUISITION OF BIOMATRIX Genzyme issued approximately 17.5 million shares of Biosurgery Stock and paid cash of $252.4 million for all of the outstanding stock of Biomatrix. In addition, Genzyme issued options to purchase Biosurgery Stock in exchange for all outstanding Biomatrix options. The conversion of options to purchase Biomatrix common stock was accounted for in accordance with FIN 44. TRACKING STOCK EXCHANGES In connection with the merger with Biomatrix, Genzyme effected an exchange of its tracking stock whereby outstanding shares of Tissue Repair Stock and Surgical Products Stock converted into Biosurgery Stock, the dividend and other provisions of which are designed to track the financial performance of the Genzyme Biosurgery division. Holders of Tissue Repair Stock and Surgical Products Stock, therefore, remain holders of Genzyme common stock, but hold a security whose dividend and other provisions are designed to track a different subset of Genzyme's operations and assets. Additionally, the votes and liquidation units per share of their holdings changed. Upon completion of the tracking stock exchanges, each outstanding share of Surgical Products Stock converted into the right to receive 0.6060 of a share of Biosurgery Stock and each outstanding share of Tissue Repair Stock converted into the right to receive 0.3352 of a share of Biosurgery Stock. Additionally, all outstanding options to purchase Surgical Products Stock and Tissue Repair Stock converted into options to purchase Biosurgery Stock at the respective conversion rates. The earnings attributable to Biosurgery Stock are defined in Genzyme's charter as the net income or loss of Genzyme Biosurgery determined in accordance with generally accepted accounting principles and as adjusted for tax benefits allocated to or from Genzyme Biosurgery in accordance with Genzyme's management and accounting policies. Prior to the tracking stock exchange, the earnings attributable to Surgical Products Stock and Tissue Repair Stock were defined in Genzyme's charter as the net income or loss of Genzyme Surgical Products and Genzyme Tissue Repair, respectively, determined in accordance with generally accepted accounting principles and as adjusted for tax benefits allocated to or from the division. Accordingly, the tracking stock exchanges involved a change in Genzyme's methodology for allocating its earnings to its series of common stock. These unaudited pro forma balance sheets and statements of operations are for informational purposes only. They do not purport to indicate the results that would have actually been obtained had the mergers been completed on the assumed date or for the periods presented, or which may be obtained in the future. To produce the pro forma financial information, Genzyme allocated the purchase price for the Focal and Wyntek mergers using its best estimates. The unaudited pro forma balance sheets and statements of operations should be read in conjunction with the historical consolidated financial statements, including the notes thereto, of each of Genzyme, Focal, Wyntek, GelTex and Biomatrix. For Genzyme, those financial statements are included in Genzyme's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (filed on May 15, 2001) and its Annual Report on Form 10-K for the year ended December 31, 2000 (filed on April 2, 2001). For GelTex those financial statements are included in GelTex's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (filed on November 14, 2000) and its Annual Report on Form 10-K for the year ended December 31, 1999 (filed on March 30, 2000), as amended on November 7, 2000. For Biomatrix, those financial statements are included in Biomatrix's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (filed on November 14, 2000) and its Annual Report on Form 10-K for the year ended December 31, 1999 (filed on March 30, 2000), as amended on April 26, 2000 and October 26, 2000. For Wyntek, those financials are included in Exhibit 99.1 to Genzyme's Current Report on Form 8-K filed on May 18, 2001. For Focal, those financial statements are included in Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K. 6 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS)
HISTORICAL GENZYME CORPORATION HISTORICAL PRO FORMA NOTE HISTORICAL PRO FORMA AND SUBSIDIARIES BIOMATRIX, INC. ADJUSTMENTS REFERENCE GELTEX ADJUSTMENTS ---------------- ---------------- ----------- --------- ---------- ----------- Revenues: Net product sales................ $ 811,897 $65,401 $ -- $ -- $ 6,166 Net service sales................ 84,482 -- -- -- -- -- Collaborative joint venture project reimbursement.......... -- -- -- -- 5,409 (5,409) Revenues from research and development contracts: Related parties................ 509 -- -- -- -- Other.......................... 6,432 -- -- 36,585 15 Income from licenses, royalties, research contracts and grants......................... -- 10,221 -- -- -- --------- ------- -------- ------- -------- Total revenues................. 903,320 75,622 -- 41,994 772 --------- ------- -------- ------- -------- Operating costs and expenses: Cost of products sold............ 232,383 20,395 11,330 B2 -- 8,156 6,471 Cost of services sold............ 50,177 -- -- -- -- Selling, general and administrative................. 264,551 33,576 21 B2 (105) B2 11,729 5,870 1,671 1,761 Collaborative joint venture project costs.................. -- -- -- 5,409 (5,409) Research and development (including research and development relating to contracts)..................... 169,478 10,184 -- 33,727 7,042 4,568 Amortization of intangibles...... 22,974 -- 35,617 B1 -- 59,876 Purchase of in-process research and development................ 200,191 -- (82,143) B8 -- (118,048) Charge for impaired asset........ 4,321 -- -- -- -- --------- ------- -------- ------- -------- Total operating costs and expenses..................... 944,075 64,155 (35,280) 50,865 (28,042) --------- ------- -------- ------- -------- Operating income (loss)............ (40,755) 11,467 35,280 (8,871) 28,814 --------- ------- -------- ------- -------- Other income (expenses): Equity in net loss of unconsolidated affiliates...... (44,965) -- -- 1,582 8,277 1,812 (1,582) Gain on affiliate sale of stock.......................... 22,689 -- -- -- -- Gain on sale of investment in equity securities.............. 23,173 -- -- -- -- Minority interest................ 4,625 -- -- -- -- Charge for impaired investments.................... (7,300) -- -- -- -- Other............................ 5,188 (301) -- -- -- Investment income................ 45,593 3,402 (2,738) B6 6,942 (18,923) Interest expense................. (15,710) (975) (14,375) B6 (697) 269 (10,781) --------- ------- -------- ------- -------- Total other income (expenses)................... 33,293 2,126 (17,113) 7,827 (20,928) --------- ------- -------- ------- -------- Income (loss) before income taxes............................ (7,462) 13,593 18,167 (1,044) 7,886 (Provision for) benefit from income taxes............................ (55,478) (6,513) 19,661 B5 -- 27,824 --------- ------- -------- ------- -------- Net income (loss).................. $ (62,940) $ 7,080 $ 37,828 $(1,044) $ 35,710 ========= ======= ======== ======= ======== PRO FORMA GENZYME CORPORATION, NOTE BIOMATRIX REFERENCE AND GELTEX --------- --------------- Revenues: Net product sales................ G6 $ 883,464 Net service sales................ 84,482 Collaborative joint venture project reimbursement.......... G5 -- Revenues from research and development contracts: Related parties................ 509 Other.......................... G6 43,032 Income from licenses, royalties, research contracts and grants......................... 10,221 ---------- Total revenues................. 1,021,708 ---------- Operating costs and expenses: Cost of products sold............ G2 G6 278,735 Cost of services sold............ 50,177 Selling, general and administrative................. G6 G2 G2 319,074 Collaborative joint venture project costs.................. G5 Research and development (including research and development relating to contracts)..................... G2 G6 224,999 Amortization of intangibles...... G1,G6 118,467 Purchase of in-process research and development................ G9 -- Charge for impaired asset........ 4,321 ---------- Total operating costs and expenses..................... 995,773 ---------- Operating income (loss)............ 25,935 ---------- Other income (expenses): Equity in net loss of unconsolidated affiliates...... G6 G6 G6 (34,876) Gain on affiliate sale of stock.......................... G5 22,689 Gain on sale of investment in equity securities.............. 23,173 Minority interest................ 4,625 Charge for impaired investments.................... (7,300) Other............................ 4,887 Investment income................ G4 34,276 Interest expense................. G4 G4 (42,269) ---------- Total other income (expenses)................... 5,205 ---------- Income (loss) before income taxes............................ 31,140 (Provision for) benefit from income taxes............................ G7 (14,506) ---------- Net income (loss).................. $ 16,634 ==========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 7 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS)
PRO FORMA GENZYME CORPORATION, HISTORICAL BIOMATRIX WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA AND GELTEX DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS --------------- ------------------ ----------- --------- ----------- ----------- Revenues: Net product sales................ $ 883,464 $17,546 $ -- $ 1,721 $(1,454) Net service sales................ 84,482 -- -- -- Collaborative research and development revenue............ -- -- -- 874 (874) Revenue from research and development contracts: -- -- -- -- Related parties................ 509 -- -- -- -- Other.......................... 43,032 -- -- -- -- Income from licenses, royalties, research contracts and grants......................... 10,221 -- -- -- -- ---------- ------- ------- -------- ------- Total revenues................. 1,021,708 17,546 -- 2,595 (2,328) ---------- ------- ------- -------- ------- Operating costs and expenses: Cost of products sold............ 278,735 8,457 318 W7 2,842 5,078 (1,230) Cost of services sold............ 50,177 -- -- -- -- Selling, general and administrative................. 319,074 1,557 -- 6,000 867 Collaborative joint venture project costs.................. -- -- -- -- -- Research and development (including research and development relating to contracts)..................... 224,999 1,686 -- 8,112 -- Amortization of intangibles...... 118,467 -- 5,025 W6 -- 318 Purchase of in-process research and development................ -- -- -- -- -- Charge for impaired asset........ 4,321 -- -- -- -- ---------- ------- ------- -------- ------- Total operating costs and expenses..................... 995,773 11,700 5,343 16,954 5,033 ---------- ------- ------- -------- ------- Operating income (loss)............ 25,935 5,846 (5,343) (14,359) (7,361) ---------- ------- ------- -------- ------- Other income (expenses): Equity in net loss of unconsolidated affiliates...... (34,876) -- -- -- -- Gain on affiliate sale of stock.......................... 22,689 -- -- -- -- Gain on sale of investment in equity securities.............. 23,173 -- -- -- -- Minority interest................ 4,625 -- -- -- -- Charge for impaired investment... (7,300) -- -- -- 7,300 Other............................ 4,887 -- -- 475 -- Investment income................ 34,276 258 (3,572) W8 705 -- Interest expense................. (42,269) -- -- (298) -- ---------- ------- ------- -------- ------- Total other income (expenses)................... 5,205 258 (3,572) 882 7,300 ---------- ------- ------- -------- ------- Income (loss) before income taxes............................ 31,140 6,104 (8,915) (13,477) (61) (Provision for) benefit from income taxes............................ (14,506) (2,208) 3,209 W9 4,874 ---------- ------- ------- -------- ------- Income (loss) before cumulative effect of change in accounting principle........................ 16,634 3,896 (5,706) (13,477) 4,813 Cumulative effect of a change in accounting principle, net of tax.............................. -- -- -- (5,600) 5,600 ---------- ------- ------- -------- ------- Net income (loss).................. $ 16,634 $ 3,896 $(5,706) $(19,077) $10,413 ========== ======= ======= ======== ======= PRO FORMA GENZYME CORPORATION NOTE AND REFERENCE SUBSIDIARIES --------- ------------ Revenues: Net product sales................ F10 $ 901,277 Net service sales................ 84,482 Collaborative research and development revenue............ F11 -- Revenue from research and development contracts: -- Related parties................ 509 Other.......................... 43,032 Income from licenses, royalties, research contracts and grants......................... 10,221 ---------- Total revenues................. 1,039,521 ---------- Operating costs and expenses: Cost of products sold............ F9 F10 294,200 Cost of services sold............ 50,177 Selling, general and administrative................. F9 327,498 Collaborative joint venture project costs.................. -- Research and development (including research and development relating to contracts)..................... 234,797 Amortization of intangibles...... F8 123,810 Purchase of in-process research and development................ -- Charge for impaired asset........ 4,321 ---------- Total operating costs and expenses..................... 1,034,803 ---------- Operating income (loss)............ 4,718 ---------- Other income (expenses): Equity in net loss of unconsolidated affiliates...... (34,876) Gain on affiliate sale of stock.......................... 22,689 Gain on sale of investment in equity securities.............. 23,173 Minority interest................ 4,625 Charge for impaired investment... F10 -- Other............................ 5,362 Investment income................ 31,667 Interest expense................. (42,567) ---------- Total other income (expenses)................... 10,073 ---------- Income (loss) before income taxes............................ 14,791 (Provision for) benefit from income taxes............................ F12 (8,631) ---------- Income (loss) before cumulative effect of change in accounting principle........................ 6,160 Cumulative effect of a change in accounting principle, net of tax.............................. F11 -- ---------- Net income (loss).................. $ 6,160 ==========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 8 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL GENZYME CORPORATION HISTORICAL PRO FORMA NOTE HISTORICAL PRO FORMA AND SUBSIDIARIES BIOMATRIX, INC. ADJUSTMENTS REFERENCE GELTEX ADJUSTMENTS ---------------- --------------- ----------- --------- ---------- ----------- NET INCOME (LOSS) PER SHARE: ALLOCATED TO GENZYME GENERAL STOCK: Genzyme General net income....... $ 85,956 $ -- $ 34,666 Tax benefit allocated from Genzyme Molecular Oncology..... 7,476 -- -- Tax benefit allocated from Genzyme Biosurgery............. 28,023 (352) B7 -- -------- -------- --------- Net income allocated to Genzyme General Stock.................. $121,455 $ (352) $ 34,666 ======== ======== ========= Net income per share of Genzyme General Stock: Basic.......................... $ 1.41 ======== Diluted........................ $ 1.35 ======== Weighted average shares outstanding: Basic.......................... 86,131 7,062 ======== ========= Diluted........................ 89,683 14,463 ======== ========= ALLOCATED TO MOLECULAR ONCOLOGY STOCK: Net loss......................... $(23,096) ======== Net loss per share of Molecular Oncology Stock--basic and diluted........................ $ (1.60) ======== Weighted average shares outstanding.................... 14,446 ======== ALLOCATED TO SURGICAL PRODUCTS STOCK: Net loss......................... $(54,748) $ 54,748 B4 ======== ======== Net loss per share of Surgical Products Stock--basic and diluted........................ $ (3.67) $ 3.67 B4 ======== ======== Weighted average shares outstanding.................... 14,900 (14,900) B3 ======== ======== ALLOCATED TO TISSUE REPAIR STOCK: Net loss......................... $(19,833) $ 19,833 B4 ======== ======== Net loss per share of Tissue Repair Stock--basic and diluted........................ $ (0.69) $ 0.69 B4 ======== ======== Weighted average shares outstanding.................... 28,716 (28,716) B3 ======== ======== BIOMATRIX, INC.: Net income....................... $ 7,080 $ (7,080) B4 ======= ======== Net income per Biomatrix common share-basic.................... $ 0.30 $ (0.30) B4 ======= ======== Weighted average shares outstanding.................... 23,401 (23,401) B3 ======= ======== Net income per Biomatrix common and common equivalent share-diluted.................. $ 0.29 $ (0.29) B4 ======= ======== Adjusted weighted average shares outstanding.................... 24,395 (24,395) B3 ======= ======== ALLOCATED TO BIOSURGERY STOCK: Genzyme Biosurgery net loss...... $(87,636) $(42,821) B4 Allocated tax benefit............ 448 13,500 B9 -------- ======== Net loss allocated to Biosurgery Stock.......................... $(87,188) $(29,321) B4 ======== ======== Net loss per share of Biosurgery Stock--basic and diluted....... $ (2.40) ======== Weighted average shares outstanding.................... 36,359 (686) B3 ======== ======== GELTEX PHARMACEUTICALS, INC.: Net loss......................... $(1,044) $ 1,044 ======= ========= Net loss per share of GelTex common stock--basic and diluted........................ $ (0.05) $ 0.05 ======= ========= Weighted average shares outstanding.................... 19,872 (19,872) ======= ========= PRO FORMA GENZYME CORPORATION, NOTE BIOMATRIX REFERENCE AND GELTEX --------- ------------ NET INCOME (LOSS) PER SHARE: ALLOCATED TO GENZYME GENERAL STOCK: Genzyme General net income....... G8 $ 120,622 Tax benefit allocated from Genzyme Molecular Oncology..... 7,476 Tax benefit allocated from Genzyme Biosurgery............. 27,671 --------- Net income allocated to Genzyme General Stock.................. $ 155,769 ========= Net income per share of Genzyme General Stock: Basic.......................... $ 1.67 ========= Diluted........................ $ 1.59 ========= Weighted average shares outstanding: Basic.......................... G3 93,193 ========= Diluted........................ G3 104,146 ========= ALLOCATED TO MOLECULAR ONCOLOGY STOCK: Net loss......................... $ (23,096) ========= Net loss per share of Molecular Oncology Stock--basic and diluted........................ $ (1.60) ========= Weighted average shares outstanding.................... 14,446 ========= ALLOCATED TO SURGICAL PRODUCTS STOCK: Net loss......................... $ -- ========= Net loss per share of Surgical Products Stock--basic and diluted........................ $ -- ========= Weighted average shares outstanding.................... -- ========= ALLOCATED TO TISSUE REPAIR STOCK: Net loss......................... $ -- ========= Net loss per share of Tissue Repair Stock--basic and diluted........................ $ -- ========= Weighted average shares outstanding.................... -- ========= BIOMATRIX, INC.: Net income....................... $ -- ========= Net income per Biomatrix common share-basic.................... $ -- ========= Weighted average shares outstanding.................... -- ========= Net income per Biomatrix common and common equivalent share-diluted.................. $ -- ========= Adjusted weighted average shares outstanding.................... -- ========= ALLOCATED TO BIOSURGERY STOCK: Genzyme Biosurgery net loss...... $(130,457) Allocated tax benefit............ 13,948 ========= Net loss allocated to Biosurgery Stock.......................... $(116,509) ========= Net loss per share of Biosurgery Stock--basic and diluted....... $ (3.27) ========= Weighted average shares outstanding.................... 35,673 ========= GELTEX PHARMACEUTICALS, INC.: Net loss......................... G8 $ -- ========= Net loss per share of GelTex common stock--basic and diluted........................ G8 $ -- ========= Weighted average shares outstanding.................... G3 -- =========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 9 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA GENZYME CORPORATION, HISTORICAL BIOMATRIX WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA AND GELTEX DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS ------------ ----------------- ----------- --------- ----------- ----------- NET INCOME (LOSS) PER SHARE: ALLOCATED TO GENZYME GENERAL STOCK: Genzyme General net income....... $ 120,622 $ (1,810) W10 $ -- Tax benefit allocated from Genzyme Molecular Oncology..... 7,476 -- -- Tax benefit allocated from Genzyme Biosurgery............. 27,671 -- 4,874 --------- -------- -------- Net income allocated to Genzyme General Stock.................. $ 155,769 $ (1,810) $ 4,874 ========= ======== ======== Net income per share of Genzyme General Stock: Basic.......................... $ 1.67 ========= Diluted........................ $ 1.59 ========= Weighted average shares outstanding: Basic.......................... 93,193 ========= Diluted........................ 104,146 ========= ALLOCATED TO MOLECULAR ONCOLOGY STOCK: Net loss......................... $ (23,096) ========= Net loss per share of Molecular Oncology Stock--basic and diluted........................ $ (1.60) ========= Weighted average shares outstanding.................... 14,446 ========= ALLOCATED TO BIOSURGERY STOCK: Genzyme Biosurgery net loss...... $(130,457) $(13,538) Allocated tax benefit............ 13,948 -- --------- -------- Net loss allocated to Biosurgery Stock.......................... $(116,509) $(13,538) ========= ======== Net loss per share of Biosurgery Stock--basic and diluted....... $ (3.27) ========= Weighted average shares outstanding.................... 35,673 2,086 ========= ======== WYNTEK DIAGNOSTICS, INC. Net income....................... $ 3,896 $ (3,896) W10 ======= ======== Net income per share of Wyntek common stock--basic............ $ 0.95 $ (0.95) W10 ======= ======== Weighted average shares outstanding.................... 4,120 (4,120) W10 ======= ======== Net income per share of Wyntek common stock--diluted.......... $ 0.87 $ (0.87) W10 ======= ======== Adjusted weighted average shares outstanding.................... 4,488 (4,488) W10 ======= ======== FOCAL, INC. Net loss......................... $(19,077) $ 19,077 ======== ======== Net loss per Focal common share--basic and diluted....... $ (1.30) $ 1.30 ======== ======== Weighted average shares outstanding.................... 14,707 (14,707) ======== ======== PRO FORMA GENZYME NOTE CORPORATION REFERENCE AND SUBSIDIARIES ---------- ---------------- NET INCOME (LOSS) PER SHARE: ALLOCATED TO GENZYME GENERAL STOCK: Genzyme General net income....... $ 118,812 Tax benefit allocated from Genzyme Molecular Oncology..... 7,476 Tax benefit allocated from Genzyme Biosurgery............. F14 32,545 --------- Net income allocated to Genzyme General Stock.................. $ 158,833 ========= Net income per share of Genzyme General Stock: Basic.......................... $ 1.70 ========= Diluted........................ $ 1.62 ========= Weighted average shares outstanding: Basic.......................... 93,193 ========= Diluted........................ 104,146 ========= ALLOCATED TO MOLECULAR ONCOLOGY STOCK: Net loss......................... $ (23,096) ========= Net loss per share of Molecular Oncology Stock--basic and diluted........................ $ (1.60) ========= Weighted average shares outstanding.................... 14,446 ========= ALLOCATED TO BIOSURGERY STOCK: Genzyme Biosurgery net loss...... F13 $(143,995) Allocated tax benefit............ 13,948 --------- Net loss allocated to Biosurgery Stock.......................... $(130,047) ========= Net loss per share of Biosurgery Stock--basic and diluted....... $ (3.44) ========= Weighted average shares outstanding.................... F13 37,759 ========= WYNTEK DIAGNOSTICS, INC. Net income....................... Net income per share of Wyntek common stock--basic............ Weighted average shares outstanding.................... Net income per share of Wyntek common stock--diluted.......... Adjusted weighted average shares outstanding.................... FOCAL, INC. Net loss......................... F13 $ -- ========= Net loss per Focal common share--basic and diluted....... F13 $ -- ========= Weighted average shares outstanding.................... F13 -- =========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 10 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL GENZYME HISTORICAL CORPORATION WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA AND SUBSIDIARIES DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS ---------------- ----------------- ----------- --------- ----------- ----------- Revenues: Net product sales................ $250,830 $5,855 $ -- $ 613 $ (571) Net service sales................ 23,760 -- -- Collaborative research and development revenue............ 249 (249) Revenue from research and development contracts: Related parties................ 319 -- -- -- -- Other.......................... 3,352 -- -- -- -- -------- ------ -------- ----------- --------- Total revenues............... 278,261 5,855 -- 862 (820) -------- ------ -------- ----------- --------- Operating costs and expenses: Cost of products sold............ 76,532 2,208 -- 771 (429) Cost of services sold............ 13,421 -- -- -- -- Selling, general and administrative................. 91,114 864 -- 1,446 217 Research and development (including research and development related to contracts)..................... 57,110 490 -- 1,369 -- Amortization of intangibles...... 28,991 -- 1,256 W6 -- 80 -------- ------ -------- ----------- --------- Total operating costs and expenses................... 267,168 3,562 1,256 3,586 (132) -------- ------ -------- ----------- --------- Operating income (loss)............ 11,093 2,293 (1,256) (2,724) (688) -------- ------ -------- ----------- --------- Other income (expenses): Equity in net loss of unconsolidated affiliates...... (9,015) -- -- -- 536 Minority interest................ 1,274 -- -- -- -- Other............................ (3,710) -- -- -- -- Investment income................ 10,148 66 (893) W8 99 -- Interest expense................. (11,370) -- -- -- -- -------- ------ -------- ----------- --------- Total other income (expenses)................. (12,673) 66 (893) 99 536 -------- ------ -------- ----------- --------- Income (loss) before income taxes............................ (1,580) 2,359 (2,149) (2,625) (152) (Provision for) benefit from income taxes............................ 670 (850) 774 W9 -- 1,000 -------- ------ -------- ----------- --------- Income (loss) before cumulative effect of change in accounting principle........................ (910) 1,509 (1,375) (2,625) 848 Cumulative effect of change in accounting principle, net of tax.............................. 4,167 -- -- -- -- -------- ------ -------- ----------- --------- Net income (loss).................. $ 3,257 $1,509 $ (1,375) $ (2,625) $ 848 ======== ====== ======== =========== ========= PRO FORMA GENZYME CORPORATION NOTE AND REFERENCE SUBSIDIARIES --------- --------------- Revenues: Net product sales................ F10 $ 256,727 Net service sales................ 23,760 Collaborative research and development revenue............ F11 Revenue from research and development contracts: Related parties................ 319 Other.......................... 3,352 ----------- Total revenues............... 284,158 ----------- Operating costs and expenses: Cost of products sold............ F10 79,082 Cost of services sold............ 13,421 Selling, general and administrative................. F9 93,641 Research and development (including research and development related to contracts)..................... 58,969 Amortization of intangibles...... F8 30,327 ----------- Total operating costs and expenses................... 275,440 ----------- Operating income (loss)............ 8,718 ----------- Other income (expenses): Equity in net loss of unconsolidated affiliates...... (8,479) Minority interest................ 1,274 Other............................ (3,710) Investment income................ 9,420 Interest expense................. (11,370) ----------- Total other income (expenses)................. (12,865) ----------- Income (loss) before income taxes............................ (4,147) (Provision for) benefit from income taxes............................ F12 1,594 ----------- Income (loss) before cumulative effect of change in accounting principle........................ (2,553) Cumulative effect of change in accounting principle, net of tax.............................. 4,167 ----------- Net income (loss).................. $ 1,614 ===========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 11 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED) FOR THE THREE MONTHS ENDED MARCH 31, 2001 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL HISTORICAL GENZYME WYNTEK CORPORATION DIAGNOSTICS, PRO FORMA NOTE HISTORICAL PRO FORMA AND SUBSIDIARIES INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS ---------------- ------------ ----------- --------- ----------- ----------- NET INCOME (LOSS) PER SHARE: ALLOCATED TO GENZYME GENERAL STOCK: Genzyme General net income before cumulative effect of change in accounting principle........... $ 25,145 $ 134 W10 $ -- Cumulative effect of change in accounting principle, net of tax............................ 4,167 -- -- -------- -------- -------- Genzyme General net income....... 29,312 134 -- Tax benefit allocated from Genzyme Biosurgery............. 8,116 -- 1,000 Tax benefit allocated from Genzyme Molecular Oncology..... 2,826 -- -- -------- -------- -------- Net income allocated to Genzyme General Stock.................. $ 40,254 $ 134 $ 1,000 ======== ======== ======== Net income per share of Genzyme General Stock: Basic: Net income per share before cumulative effect of change in accounting principle........... $ 0.38 Per share cumulative effect of change in accounting principle, net of tax..................... 0.04 -------- Net income per share allocated to Genzyme General Stock.......... $ 0.42 ======== Diluted: Net income per share before cumulative effect of change in accounting principle........... $ 0.36 Per share cumulative effect of change in accounting principle, net of tax..................... 0.04 -------- Net income per share allocated to Genzyme General Stock.......... $ 0.40 ======== Weighted average shares outstanding: Basic............................ 95,875 ======== Diluted.......................... 100,400 ======== ALLOCATED TO MOLECULAR ONCOLOGY STOCK: Net loss......................... $ (6,274) ======== Net loss per share of Molecular Oncology Stock--basic and diluted........................ $ (0.39) ======== Weighted average shares outstanding.................... 15,907 ======== FOCAL, INC.: Net loss......................... $(2,625) $ 2,625 ======= ======== Net loss per share of Focal common stock--basic and diluted........................ $ (0.15) $ 0.15 ======= ======== Weighted average shares outstanding.................... 17,283 (17,283) ======= ======== ALLOCATED TO BIOSURGERY STOCK: Genzyme Biosurgery net loss...... $(35,327) $ (2,777) Allocated tax benefit............ 4,604 -- -------- -------- Net loss allocated to Biosurgery Stock.......................... $(30,723) $ (2,777) ======== ======== Net loss per share of Biosurgery Stock--basic and diluted....... $ (0.84) ======== Weighted average shares outstanding.................... 36,402 2,086 ======== ======== WYNTEK DIAGNOSTICS, INC.: Net income....................... $ 1,509 $ (1,509) W10 ======= ======== Net income per share of Wyntek common stock--basic............ $ 0.37 $ (0.37) W10 ======= ======== Weighted average shares outstanding.................... 4,125 (4,125) W10 ======= ======== Net income per share of Wyntek common stock and equivalent share--diluted................. $ 0.34 $ (0.34) W10 ======= ======== Adjusted weighted average shares outstanding.................... 4,487 (4,487) W10 ======= ======== PRO FORMA GENZYME NOTE CORPORATION REFERENCE AND SUBSIDIARIES --------- ---------------- NET INCOME (LOSS) PER SHARE: ALLOCATED TO GENZYME GENERAL STOCK: Genzyme General net income before cumulative effect of change in accounting principle........... $ 25,279 Cumulative effect of change in accounting principle, net of tax............................ 4,167 -------- Genzyme General net income....... 29,446 Tax benefit allocated from Genzyme Biosurgery............. F14 9,116 Tax benefit allocated from Genzyme Molecular Oncology..... 2,826 -------- Net income allocated to Genzyme General Stock.................. $ 41,388 ======== Net income per share of Genzyme General Stock: Basic: Net income per share before cumulative effect of change in accounting principle........... $ 0.39 Per share cumulative effect of change in accounting principle, net of tax..................... 0.04 -------- Net income per share allocated to Genzyme General Stock.......... $ 0.43 ======== Diluted: Net income per share before cumulative effect of change in accounting principle........... $ 0.37 Per share cumulative effect of change in accounting principle, net of tax..................... 0.04 -------- Net income per share allocated to Genzyme General Stock.......... $ 0.41 ======== Weighted average shares outstanding: Basic............................ 95,875 ======== Diluted.......................... 100,400 ======== ALLOCATED TO MOLECULAR ONCOLOGY STOCK: Net loss......................... $ (6,274) ======== Net loss per share of Molecular Oncology Stock--basic and diluted........................ $ (0.39) ======== Weighted average shares outstanding.................... 15,907 ======== FOCAL, INC.: Net loss......................... F13 $ -- ======== Net loss per share of Focal common stock--basic and diluted........................ F13 $ -- ======== Weighted average shares outstanding.................... F13 -- ======== ALLOCATED TO BIOSURGERY STOCK: Genzyme Biosurgery net loss...... F13 $(38,104) Allocated tax benefit............ 4,604 -------- Net loss allocated to Biosurgery Stock.......................... $(33,500) ======== Net loss per share of Biosurgery Stock--basic and diluted....... $ (0.87) ======== Weighted average shares outstanding.................... F13 38,488 ======== WYNTEK DIAGNOSTICS, INC.: Net income....................... $ -- ======== Net income per share of Wyntek common stock--basic............ $ -- ======== Weighted average shares outstanding.................... -- ======== Net income per share of Wyntek common stock and equivalent share--diluted................. $ -- ======== Adjusted weighted average shares outstanding.................... -- ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 12 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF MARCH 31, 2001 (AMOUNTS IN THOUSANDS)
HISTORICAL GENZYME HISTORICAL CORPORATION AND WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA SUBSIDIARIES DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS --------------- ----------------- ----------- --------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents........... $ 207,582 $ 4,779 $ (65,650) W1 $ 5,490 $ (507) Short-term investments.............. 122,557 -- -- 201 Accounts receivable, net............ 211,452 3,826 -- 432 (370) Inventories......................... 165,437 2,091 318 W3 1,511 5,078 Prepaid expenses and other current assets............................ 36,537 100 -- 406 -- Deferred tax assets--current........ 45,024 229 (229) W4 -- -- ---------- -------- --------- -------- --------- Total current assets............ 788,589 11,025 (65,561) 8,040 4,201 Property, plant and equipment, net.... 512,386 1,970 -- 2,020 -- Long-term investments................. 289,475 -- -- -- -- Notes receivable--related party....... 10,159 -- -- 174 (37) Intangibles, net...................... 1,536,065 -- 49,122 W1 -- 3,817 Investments in equity securities...... 76,903 -- -- -- -- Other noncurrent assets............... 50,835 40 -- -- 2,600 (6,165) ---------- -------- --------- -------- --------- Total assets.................... $3,264,412 $ 13,035 $ (16,439) $ 10,234 $ 4,416 ========== ======== ========= ======== ========= PRO FORMA GENZYME NOTE CORPORATION AND REFERENCE SUBSIDIARIES --------- --------------- ASSETS Current assets: Cash and cash equivalents........... F1 $ 151,694 Short-term investments.............. 122,758 Accounts receivable, net............ F5 215,340 Inventories......................... F4 174,435 Prepaid expenses and other current assets............................ 37,043 Deferred tax assets--current........ 45,024 ---------- Total current assets............ 746,294 Property, plant and equipment, net.... 516,376 Long-term investments................. 289,475 Notes receivable--related party....... F3 10,296 Intangibles, net...................... F1 1,589,004 Investments in equity securities...... 76,903 Other noncurrent assets............... F6 F5 47,310 ---------- Total assets.................... $3,275,658 ==========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 13 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET (CONTINUED) AS OF MARCH 31, 2001 (AMOUNTS IN THOUSANDS)
HISTORICAL HISTORICAL GENZYME WYNTEK PRO FORMA NOTE HISTORICAL PRO FORMA CORPORATION DIAGNOSTICS, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS ----------- ----------------- ----------- --------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................. $ 30,133 $ 1,021 $ -- $ 278 $ -- Accrued expenses................. 110,960 1,836 1,000 W2 1,909 1,125 700 Income taxes payable............... 48,956 605 -- -- -- Deferred revenue................... 5,401 -- -- 883 (883) Current portion of notes payable and long-term debt and capital lease obligations................ 19,869 -- -- 600 -- ---------- -------- --------- ------- --------- Total current liabilities.... 215,319 3,462 1,000 3,670 942 Notes payable and long-term debt and capital lease obligations.... 381,089 -- -- 535 -- Convertible notes and debentures, net.............................. 283,485 -- -- -- -- Deferred Revenue--noncurrent....... -- -- -- 3,800 (3,800) Deferred tax liabilities--noncurrent.......... 206,980 -- -- -- -- Other noncurrent liabilities....... 9,182 -- -- -- -- ---------- -------- --------- ------- --------- Total liabilities............ 1,096,055 3,462 1,000 8,005 (2,858) ---------- -------- --------- ------- --------- Stockholders' equity: Genzyme General Stock, $.01 par value.......................... 963 -- -- -- -- Molecular Oncology Stock, $.01 par value...................... 160 -- -- -- -- Biosurgery Stock, $.01 par value.......................... 365 -- -- -- 21 Treasury Stock--at cost.......... (901) -- -- -- -- Additional paid-in capital--Genzyme General Stock.......................... 1,290,189 -- -- -- -- Additional paid-in capital--Molecular Oncology Stock.......................... 111,665 -- -- -- -- Additional paid-in capital--Biosurgery Stock...... 823,631 -- -- -- 9,513 389 Notes receivable--related parties........................ (11,529) -- -- -- (420) Deferred compensation.............. (7,319) -- -- -- -- Accumulated deficit................ (2,481) -- (7,866) W1 -- -- Wyntek Diagnostics, Inc. preferred stock, none issued............... -- -- -- -- -- Wyntek Diagnostics, Inc. common stock............................ -- 3,357 (3,357) W5 -- -- Wyntek Diagnostics, Inc. additional paid-in capital.................. -- -- -- -- -- Wyntek Diagnostics, Inc. notes receivable--related parties...... -- -- -- -- -- Wyntek Diagnostics, Inc. retained earnings......................... -- 6,216 (6,216) W5 -- -- Wyntek Diagnostics, Inc. treasury stock, at cost................... -- -- -- -- -- Focal, Inc. preferred stock, none issued........................... -- -- -- -- -- Focal, Inc. common stock, $.0001 par value........................ -- -- -- 174 (174) Focal, Inc. additional paid-in capital.......................... -- -- -- 100,344 (100,344) Focal, Inc. notes receivable--related parties...... -- -- -- (420) 420 Focal, Inc. accumulated deficit.... -- -- -- (97,870) 97,870 Focal, Inc. treasury stock, at cost............................. -- -- -- -- -- Accumulated other comprehensive income (loss).................... (36,386) -- -- 1 (1) ---------- -------- --------- ------- --------- Total stockholders' equity..... 2,168,357 9,573 (17,439) 2,229 7,274 ---------- -------- --------- ------- --------- Total liabilities and stockholders' equity.......... $3,264,412 $ 13,035 $ (16,439) $10,234 $ 4,416 ========== ======== ========= ======= ========= PRO FORMA GENZYME CORPORATION NOTE AND REFERENCE SUBSIDIARIES --------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................. $ 31,432 Accrued expenses................. F2 F2 117,530 Income taxes payable............... 49,561 Deferred revenue................... F7 5,401 Current portion of notes payable and long-term debt and capital lease obligations................ 20,469 ----------- Total current liabilities.... 224,393 Notes payable and long-term debt and capital lease obligations.... 381,624 Convertible notes and debentures, net.............................. 283,485 Deferred Revenue--noncurrent....... F7 -- Deferred tax liabilities--noncurrent.......... 206,980 Other noncurrent liabilities....... 9,182 ----------- Total liabilities............ 1,105,664 ----------- Stockholders' equity: Genzyme General Stock, $.01 par value.......................... 963 Molecular Oncology Stock, $.01 par value...................... 160 Biosurgery Stock, $.01 par value.......................... F1 386 Treasury Stock--at cost.......... (901) Additional paid-in capital--Genzyme General Stock.......................... 1,290,189 Additional paid-in capital--Molecular Oncology Stock.......................... 111,665 Additional paid-in capital--Biosurgery Stock...... F1 F1 833,533 Notes receivable--related parties........................ F3 (11,949) Deferred compensation.............. (7,319) Accumulated deficit................ (10,347) Wyntek Diagnostics, Inc. preferred stock, none issued............... -- Wyntek Diagnostics, Inc. common stock............................ -- Wyntek Diagnostics, Inc. additional paid-in capital.................. -- Wyntek Diagnostics, Inc. notes receivable--related parties...... -- Wyntek Diagnostics, Inc. retained earnings......................... -- Wyntek Diagnostics, Inc. treasury stock, at cost................... -- Focal, Inc. preferred stock, none issued........................... -- Focal, Inc. common stock, $.0001 par value........................ F3 -- Focal, Inc. additional paid-in capital.......................... F3 -- Focal, Inc. notes receivable--related parties...... F3 -- Focal, Inc. accumulated deficit.... F3 -- Focal, Inc. treasury stock, at cost............................. -- Accumulated other comprehensive income (loss).................... F3 (36,386) ----------- Total stockholders' equity..... 2,169,994 ----------- Total liabilities and stockholders' equity.......... $ 3,275,658 ===========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 14 GENZYME BIOSURGERY A DIVISION OF GENZYME CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (AMOUNTS IN THOUSANDS)
HISTORICAL GENZYME HISTORICAL PRO FORMA NOTE HISTORICAL PRO FORMA NOTE BIOSURGERY BIOMATRIX, INC. ADJUSTMENTS REFERENCE FOCAL, INC. ADJUSTMENTS REFERENCE ---------- --------------- ----------- --------- ----------- ----------- --------- Revenues: Net product sales................ $ 121,870 $65,401 $ -- $ 1,721 $ (1,454) F24 Net service sales................ 23,321 -- -- -- -- Collaborative research and development revenue............ -- -- 874 (874) F25 Revenue from research and development contracts.......... 23 -- -- -- -- Income from licenses, royalties, research contracts............. -- 10,221 -- -- -- --------- ------- -------- -------- -------- Total revenues................. 145,214 75,622 -- 2,595 (2,328) --------- ------- -------- -------- -------- Operating costs and expenses: Cost of products sold............ 69,489 20,395 11,330 B11 2,842 5,078 F23 (1,230) F24 Cost of services sold............ 12,298 -- -- -- -- Selling, general and administrative................. 92,238 33,576 21 B11 (105) B11 6,000 867 F23 Research and development (including research and development relating to contracts)..................... 37,000 10,184 -- 8,112 -- Amortization of intangibles...... 7,096 -- 35,617 B10 -- 318 F22 Purchase of in-process research and development................ 82,143 -- (82,143) B14 -- -- Charge for impaired asset........ 4,321 -- -- -- --------- ------- -------- -------- -------- Total operating costs and expenses..................... 304,585 64,155 (35,280) 16,954 5,033 --------- ------- -------- -------- -------- Operating income (loss)............ (159,371) 11,467 35,280 (14,359) (7,361) --------- ------- -------- -------- -------- Other income (expenses): Charge for impaired investment... (7,300) -- -- -- 7,300 F24 Other............................ (15) (301) -- 475 -- Investment income................ 5,833 3,402 (2,738) B13 705 -- Interest expense................. (1,364) (975) (14,375) B13 (298) -- --------- ------- -------- -------- -------- Total other income (expenses)................... (2,846) 2,126 (17,113) 882 7,300 --------- ------- -------- -------- -------- Income (loss) before income taxes............................ (162,217) 13,593 18,167 (13,477) (61) Provision for income taxes......... (6,513) 6,513 B12 -- -- --------- ------- -------- -------- -------- Loss before cumulative effect of change in accounting principle... (162,217) 7,080 24,680 (13,477) (61) Cumulative effect of change in accounting principle, net of tax.............................. -- -- -- (5,600) 5,600 F25 --------- ------- -------- -------- -------- Division net loss.................. $(162,217) $ 7,080 $ 24,680 $(19,077) $ 5,539 ========= ======= ======== ======== ======== PRO FORMA GENZYME BIOSURGERY ----------- Revenues: Net product sales................ $ 187,538 Net service sales................ 23,321 Collaborative research and development revenue............ -- Revenue from research and development contracts.......... 23 Income from licenses, royalties, research contracts............. 10,221 --------- Total revenues................. 221,103 --------- Operating costs and expenses: Cost of products sold............ 107,904 Cost of services sold............ 12,298 Selling, general and administrative................. 132,597 Research and development (including research and development relating to contracts)..................... 55,296 Amortization of intangibles...... 43,031 Purchase of in-process research and development................ -- Charge for impaired asset........ 4,321 --------- Total operating costs and expenses..................... 355,447 --------- Operating income (loss)............ (134,344) --------- Other income (expenses): Charge for impaired investment... -- Other............................ 159 Investment income................ 7,202 Interest expense................. (17,012) --------- Total other income (expenses)................... (9,651) --------- Income (loss) before income taxes............................ (143,995) Provision for income taxes......... -- --------- Loss before cumulative effect of change in accounting principle... (143,995) Cumulative effect of change in accounting principle, net of tax.............................. -- --------- Division net loss.................. $(143,995) =========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS. 15 GENZYME BIOSURGERY A DIVISION OF GENZYME CORPORATION UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 (AMOUNTS IN THOUSANDS)
HISTORICAL PRO FORMA GENZYME HISTORICAL PRO FORMA NOTE GENZYME BIOSURGERY FOCAL, INC. ADJUSTMENTS REFERENCE BIOSURGERY ---------- ----------- ----------- --------- ---------- Revenues: Net product sales............................. $ 48,624 $ 613 $ (571) F24 $ 48,666 Net service sales............................. 5,528 -- 5,528 Collaborative research and development revenue..................................... -- 249 (249) F25 -- Revenue from research and development contracts................................... 4 -- -- 4 -------- ------- ------- -------- Total revenues.............................. 54,156 862 (820) 54,198 -------- ------- ------- -------- Operating costs and expenses: Cost of products sold......................... 28,638 771 (429) F24 28,980 Cost of services sold......................... 3,137 -- 3,137 Selling, general and administrative........... 30,692 1,446 217 F23 32,355 Research and development...................... 10,719 1,369 12,088 Amortization of intangibles................... 11,321 -- 80 F22 11,401 -------- ------- ------- -------- Total operating costs and expenses.......... 84,507 3,586 (132) 87,961 -------- ------- ------- -------- Operating loss.................................. (30,351) (2,724) (688) (33,763) -------- ------- ------- -------- Other income (expense): Equity in net loss of unconsolidated affiliates.................................. (536) -- 536 F24 -- Other......................................... 7 -- -- 7 Investment income............................. 512 99 -- 611 Interest expense.............................. (4,959) -- -- (4,959) -------- ------- ------- -------- Total other income (expense)................ (4,976) 99 536 (4,341) -------- ------- ------- -------- Division net loss............................... $(35,327) $(2,625) $ (152) $(38,104) ======== ======= ======= ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 16 GENZYME BIOSURGERY A DIVISION OF GENZYME CORPORATION UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF MARCH 31, 2001 (AMOUNTS IN THOUSANDS)
HISTORICAL PRO FORMA GENZYME HISTORICAL PRO FORMA NOTE GENZYME BIOSURGERY FOCAL, INC. ADJUSTMENTS REFERENCE BIOSURGERY ---------- ----------- ----------- --------- ---------- ASSETS Current assets: Cash and cash equivalents........................ $ 21,548 $ 5,490 $ (507) F15 $ 26,531 Short-term investments........................... -- 201 -- 201 Accounts receivable, net......................... 39,588 432 (370) F18 39,650 Inventories...................................... 57,460 1,511 5,078 F21 64,049 Prepaid expenses and other current assets........ 9,590 406 -- 9,996 -------- -------- --------- -------- Total current assets........................... 128,186 8,040 4,201 140,427 Property, plant and equipment, net................. 56,835 2,020 -- 58,855 Notes receivable, related party.................... -- 174 (37) F17 137 Intangibles, net................................... 576,970 -- 3,817 F15 580,787 Other noncurrent assets............................ 8,140 -- 2,600 F19 (6,165) F18 4,575 -------- -------- --------- -------- Total assets................................... $770,131 $ 10,234 $ 4,416 $784,781 ======== ======== ========= ======== LIABILITIES AND DIVISION EQUITY Current liabilities: Accounts payable................................. $ 9,794 $ 278 -- $ 10,072 Accrued expenses................................. 34,719 1,909 700 F16 1,125 F16 38,453 Due to Genzyme General............................. 17,459 -- -- 17,459 Deferred revenue................................... -- 883 (883) F20 -- Current portion of notes payable, long-term debt and capital lease obligations.................... 18,421 600 -- 19,021 -------- -------- --------- -------- Total current liabilities...................... 80,393 3,670 942 85,005 Convertible notes.................................. 10,000 -- -- 10,000 Notes payable, long-term debt and capital lease obligations...................................... 200,887 535 -- 201,422 Deferred revenue--noncurrent....................... -- 3,800 (3,800) F20 -- Other noncurrent liabilities....................... 77 -- -- 77 -------- -------- --------- -------- Total liabilities.............................. 291,357 8,005 (2,858) 296,504 -------- -------- --------- -------- Division equity: Focal common stock............................... 174 (174) F17 -- Focal additional-paid in capital................. 100,344 (100,344) F17 -- Focal notes receivable--related parties.......... (420) 420 F17 -- Focal retained earnings.......................... (97,870) 97,870 F17 -- Focal other comprehensive loss................... 1 (1) F17 -- Division equity.................................. 478,774 -- 21 F15 9,513 F15 389 F15 (420) F17 488,277 -------- -------- --------- -------- Total division equity.............................. 478,774 2,229 7,274 488,277 -------- -------- --------- -------- Total liabilities and division equity.......... $770,131 $ 10,234 $ 4,416 $784,781 ======== ======== ========= ========
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 17 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (1) ACCOUNTING POLICIES AND PRO FORMA INFORMATION The unaudited pro forma combined financial statements reflect the pro forma effect of Genzyme's merger with Focal and Genzyme's purchase of Wyntek's common stock on the: - unaudited statements of operations for the three months ended March 31, 2001 and the year ended December 31, 2000 and - unaudited balance sheet as of March 31, 2001 of both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the assets, liabilities and operations of Focal will be allocated. The pro forma balance sheets give effect to Genzyme's transactions with Focal and Wyntek as if they occurred on March 31, 2001. The unaudited pro forma combined financial statements also reflect the pro forma effect of Genzyme's merger with GelTex and Genzyme's merger with Biomatrix on the unaudited statement of operations for the year ended December 31, 2000 of both Genzyme and Genzyme Biosurgery, the division of Genzyme to which the assets, liabilities and operations of Biomatrix were allocated, as if these mergers took place on January 1, 2000. In addition, the Genzyme pro forma statement of operations for the year ended December 31, 2000 reflects the change in earnings allocations resulting from the creation of Biosurgery Stock and elimination of Surgical Products Stock and Tissue Repair Stock as if this change took place on January 1, 2000. (2) GENZYME'S ACQUISITIONS (A) GENZYME'S ACQUISITION OF BIOMATRIX Genzyme entered into the merger agreement to acquire Biomatrix on March 6, 2000. Concurrently with the merger: - Genzyme Biosurgery was created as a new division of Genzyme; - the businesses of Genzyme Surgical Products and Genzyme Tissue Repair were reallocated to Genzyme Biosurgery; and - the businesses of Biomatrix was allocated to Genzyme Biosurgery. The following exchange ratios were used to determine the number of shares of Biosurgery Stock distributed: - 0.6060 multiplied by the number of shares of Surgical Products Stock outstanding; - 0.3352 multiplied by the number of shares of Tissue Repair Stock outstanding; and - 0.7162 multiplied by the number of Biomatrix shares outstanding (based on a one-for-one exchange ratio for 71.62% of the Biomatrix shares). This resulted in approximately: - 9,092,763 shares of Biosurgery Stock exchanged for 15,004,560 shares of Surgical Products Stock; - 9,679,769 shares of Biosurgery Stock exchanged for 28,877,593 shares of Tissue Repair Stock; and 18 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (2) GENZYME'S ACQUISITIONS (CONTINUED) - 17,516,712 shares of Biosurgery Stock and approximately $252.4 million of cash, exchanged for 24,338,908 shares of Biomatrix common stock. In addition, options to purchase: - 3,252,386 shares of Surgical Products Stock under the Genzyme equity plans; - 3,923,281 shares of Tissue Repair Stock under the Genzyme equity plans; and - 1,706,639 shares of Biomatrix common stock under the Biomatrix equity plans converted to options to purchase approximately 1,970,944, 1,315,083, and 1,222,300 shares of Biosurgery Stock, respectively. Using the acquisition price of Biomatrix common stock and certain other assumptions in the Black-Scholes option valuation model, the Biosurgery options issued in exchange for the Biomatrix options have been valued at approximately $11.4 million. In accordance with FIN 44, the intrinsic value of the portion of the unvested options related to the future service period of approximately $66,000 was allocated to deferred compensation in stockholders' equity for Genzyme or division equity for Genzyme Biosurgery, rather than to goodwill. The unvested portion is being amortized to operating expense over the remaining vesting periods of approximately three years. (B) GENZYME'S ACQUISITION OF GELTEX Genzyme entered into a merger agreement to acquire GelTex on September 11, 2000. Genzyme paid approximately $515.2 million in cash and issued $491.2 million in Genzyme General Stock for all of the outstanding shares of GelTex common stock, using the stock price of Genzyme General Stock based on the average trading price over three days before and after the September 11, 2000 announcement of the merger. Approximately 7.9 million shares of Genzyme General Stock were issued in exchange for shares of GelTex common stock. In addition, options and warrants to purchase approximately 2.1 million shares of GelTex common stock were exchanged for options and warrants to purchase approximately 1.6 million shares of Genzyme General Stock. The vesting of GelTex options granted to employees of GelTex before the effective date of the merger will be accelerated as of the first anniversary of the effective date of the merger as long as they remain employees of GelTex or Genzyme on the one year anniversary date. Additionally, the vesting of stock options granted to directors and several officers of GelTex were accelerated immediately upon the effective time of the merger. Using the Black-Scholes valuation model, the options and warrants to purchase Genzyme General Stock issued in exchange for the GelTex options and warrants had a value of approximately $62.9 million. In accordance with FIN 44, the intrinsic value of the portion of the unvested options related to the future service period of $10.2 million was allocated to deferred compensation in stockholders' equity for Genzyme. The unvested portion is being amortized to operating expense over the remaining vesting period of approximately one year. (C) GENZYME'S PENDING ACQUISITION OF FOCAL Genzyme entered into a merger agreement to acquire Focal on April 25, 2001. For purposes of the unaudited pro forma financial statements, we assumed that Genzyme would issue approximately 2,086,000 shares of Biosurgery Stock and approximately $7,000 in cash for all of the outstanding shares of Focal common stock excluding shares owned by Genzyme which will be cancelled in the merger. Using the price of Biosurgery Stock based on the average trading price over three days before and after April 25, 2001, the value of the shares of Biosurgery Stock would be approximately $9.5 million. In addition, options to purchase 1,742,664 shares of Focal common stock and warrants to purchase 43,782 shares of Focal common stock will be exchanged for options to purchase approximately 276,705 19 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (2) GENZYME'S ACQUISITIONS (CONTINUED) shares of Biosurgery Stock. Using the Black-Scholes valuation model, the options and warrants to purchase Biosurgery Stock issued in exchange for options and warrants to purchase Focal common stock have a value of approximately $389,000. In accordance with FIN 44, any intrinsic value of the portion of the unvested options related to future service periods would be allocated to deferred compensation in stockholders' equity for Genzyme. Based on the value of Biosurgery Stock on April 25, 2001, there was no intrinsic value allocated to deferred compensation. (D) GENZYME'S PENDING ACQUISITION OF WYNTEK Genzyme entered into a stock purchase agreement on April 30, 2001 to acquire all or substantially all of the outstanding capital stock of Wyntek. For purposes of the unaudited pro forma financial statements, we assumed that Genzyme would pay $65.0 million in cash for all of the outstanding Wyntek common stock and all outstanding options to acquire Wyntek common stock. No options or warrants to purchase Wyntek common stock will be assumed by Genzyme in the transaction. (3) PURCHASE PRICE ALLOCATION (A) BIOMATRIX The aggregate purchase price of $482.4 million was allocated to the acquired tangible and intangible assets and liabilities based on their estimated respective fair values as of December 18, 2000 (amounts in thousands): Cash and cash equivalents................................... $ 56,137 Current assets.............................................. 37,639 Property, plant & equipment................................. 38,479 Notes receivable from stockholders.......................... 14,760 Intangible assets (to be amortized over 1.5 to 11.0 years).................................................... 284,854 Goodwill (to be amortized over 11.0 years).................. 112,262 In-process research and development......................... 82,143 Deferred tax asset.......................................... 922 Deferred compensation....................................... 66 Assumed liabilities......................................... (31,099) Liabilities for exit activities and integration............. (6,716) Deferred tax liability...................................... (107,044) --------- Aggregate purchase price.................................. $ 482,403 =========
In connection with the purchase of Biomatrix, Genzyme allocated approximately $82.1 million of the purchase price to in-process research and development, or IPR&D. Genzyme management assumes responsibility for determining the IPR&D valuation. Genzyme engaged an independent third-party appraisal company to assist in the valuation of the intangible assets acquired. For a complete description of the allocation of the purchase price to the fair value of the acquired tangible and intangible assets and liabilities, refer to Note D., "Acquisitions" to Genzyme's consolidated financial statements included in Genzyme's Annual Report on Form 10-K for the year ended December 31, 2000. 20 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (3) PURCHASE PRICE ALLOCATION (CONTINUED) (B) GELTEX The aggregate purchase price of $1,076.0 million was allocated to the acquired tangible and intangible assets and liabilities based on their estimated respective fair value as of December 14, 2000 (amounts in thousands): Cash and investments........................................ $ 142,994 Current assets.............................................. 32,825 Property, plant & equipment................................. 45,477 Intangible assets (to be amortized over 5 to 15 years)...... 465,109 Goodwill (to be amortized over 15 years).................... 449,634 In-process research and development......................... 118,048 Deferred tax asset.......................................... 35,016 Deferred compensation....................................... 10,206 Assumed liabilities......................................... (47,789) Deferred tax liability...................................... (175,485) ---------- Aggregate purchase price.................................. $1,076,035 ==========
As part of the acquisition of GelTex, Genzyme acquired all of GelTex's interest in RenaGel LLC, a joint venture between Genzyme and GelTex. Prior to the acquisition of GelTex, Genzyme accounted for its investment in RenaGel LLC under the equity method. The adjustments below also reflect the consolidation of RenaGel LLC into Genzyme's financial statements and accounting for the purchase by Genzyme of GelTex's 50%-interest in the joint venture using the purchase method of accounting. The assets and liabilities of the joint venture are reflected in the amounts above. Because Genzyme already owned a 50% interest in RenaGel LLC, the assets of RenaGel LLC were adjusted to fair value only to the extent of the 50%-interest Genzyme acquired. In connection with the purchase of GelTex, Genzyme expects approximately $118.0 million of the purchase price to be allocated to IPR&D. Genzyme management assumes responsibility for determining the IPR&D valuation. Genzyme engaged an independent third-party appraisal company to assist in the valuation of the intangible assets acquired. For a complete description of the allocation of the purchase price to the fair value of the acquired tangible and intangible assets and liabilities, refer to Note D., "Acquisitions" to Genzyme's consolidated financial statements included in Genzyme's Annual Report on Form 10-K for the year ended December 31, 2000. 21 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (3) PURCHASE PRICE ALLOCATION (CONTINUED) (C) FOCAL For purposes of the unaudited pro forma financial statements, the aggregate purchase price of $16.6 million was allocated to the acquired tangible and intangible assets and liabilities based on their estimated respective fair values as of March 31, 2001 (amounts in thousands): Cash and cash equivalents................................... $ 5,490 Current assets.............................................. 7,258 Property, plant & equipment................................. 2,020 Notes receivable from related party......................... 420 Intangible assets (to be amortized over 12 years)........... 3,817 Other assets................................................ 2,737 Assumed liabilities......................................... (5,147) -------- Aggregate purchase price.................................. $ 16,595 ========
The total purchase price, the fair value of assets and liabilities acquired, the allocation of purchase price and the lives of intangible assets will be determined upon completion of the merger and may vary from the amounts presented herein. (D) WYNTEK For purposes of the unaudited pro forma financial statements, the aggregate purchase price of $65.7 million was allocated to the acquired tangible and intangible assets and liabilities based on their estimated respective fair values as of March 31, 2001 (amounts in thousands): Cash and cash equivalents................................... $ 4,779 Current and other assets.................................... 6,375 Property, plant & equipment................................. 1,970 Intangible assets (to be amortized over 5 to 10 years)...... 34,924 Goodwill (to be amortized over 10 years).................... 14,198 In-process research and development......................... 7,866 Assumed liabilities......................................... (4,462) ------- Aggregate purchase price.................................. $65,650 =======
The total purchase price, the fair value of assets and liabilities acquired, the allocation of purchase price and the lives of intangible assets will be determined upon completion of the transaction and may vary from the amounts presented herein. In connection with the purchase of Wyntek stock, Genzyme expects approximately $7.9 million of the purchase price to be allocated to IPR&D. Genzyme management assumes responsibility for determining the IPR&D valuation and expects the final valuation will be completed upon closing the transaction. The fair value assigned to purchased IPR&D was estimated by discounting, to present value, the cash flows expected to result from the project once it has reached technological feasibility. A discount rate consistent with the risks of the project was used to estimate the present value of cash flows. In estimating future cash flows, management considered other tangible and intangible assets required for successful exploitation of the technology resulting from the purchased IPR&D project and adjusted future cash flows for a charge reflecting the contribution to value of these assets. The value assigned to purchased IPR&D was the amount attributable to the efforts of Wyntek up to the time of 22 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (3) PURCHASE PRICE ALLOCATION (CONTINUED) acquisition. This amount was estimated through application of the "stage of completion" calculation by multiplying total estimated revenue for IPR&D by the percentage of completion of the purchased research and development project at the time of acquisition. The nature of the efforts to develop the purchased IPR&D into commercially viable products, principally relates to the completion and/or acceleration of existing development programs, including the mandatory completion of several phases of clinical trials and the costs necessary to manage the projects and trials. Assuming the approval of the product by the FDA, costs related to the wide scale manufacturing, distribution, and marketing of the product are included in the projection. The resulting net cash flows from such project are based on Genzyme management's estimates of revenues, cost of sales, research and development expenses, sales and marketing expenses, general and administrative expenses, and the anticipated income tax effect. The discounting of net cash flows back to their present value is based on the weighted average cost of capital, or WACC. The WACC calculation produces the average required rate of return of an investment in an operating enterprise, based on various required rates of return from investments in various areas of that enterprise. The discount rate utilized in discounting the net cash flows from purchased IPR&D was 25%. This discount rate is higher than Genzyme's WACC due to the inherent uncertainties surrounding the successful development of the purchased IPR&D. The forecast data employed in the analyses was based upon product level forecast information obtained by Genzyme from numerous internal and external resources. These resources included external market research and internal experts. Genzyme senior management reviewed and challenged the forecast data and related assumptions and utilized the information in analyzing IPR&D. The forecast data and assumptions are inherently uncertain and unpredictable. However, based upon the information available at this time, Genzyme management believes the forecast data and assumptions to be reasonable. These assumptions may be incomplete or inaccurate, and no assurance can be given that unanticipated events and circumstances will not occur. Accordingly, actual results may vary from the forecasted results. Any such variance may result in a material adverse effect on Genzyme's financial condition and results of operations. In the allocation of purchase price to the IPR&D, the concept of alternative future use was specifically considered for the program under development. The acquired IPR&D consists of Wyntek's work to complete the program. There are no alternative uses for the in-process program in the event that the program fails in clinical trials or is otherwise not feasible. The development effort for the acquired IPR&D does not possess an alternative future use for Genzyme as defined by generally accepted accounting principles. Below is a brief description of the IPR&D program associated with Wyntek's cardiovascular disease diagnostic product, including an estimation of when management believes Genzyme may realize revenues from the sale of this product. Wyntek is currently developing a cardiovascular product to rapidly measure the quantitative levels of cardiac marker proteins. These are the leading markers for the diagnosis of Acute Myocardial Infraction. The product consists of a mobile, stand-alone, quantitative diagnostic device and a reaction strip that detects disease specific marker proteins. The device will be used to read reaction strips at the patient's bedside or in an emergency room setting. Wyntek expects to complete the regulatory review process and file the PMA early in 2002 and begin selling the product during the second half of 2002. Studies to date have demonstrated the viability of this product but there can be no assurance that the 23 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (3) PURCHASE PRICE ALLOCATION (CONTINUED) regulatory authorities will approve this product. A discount rate of 25% was used in valuing the projected cash flows. (4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX These adjustments reflect the retirement of all Surgical Products Stock, Tissue Repair Stock and Biomatrix common stock and the issuance of Biosurgery Stock. The value ascribed to the Biosurgery Stock exchanged for Biomatrix common stock for purchase price accounting is $11.79 per share. The aggregate purchase price is comprised of the following (amounts in thousands): Issuance of 17,516,712 shares of Biosurgery Stock........... $206,522 Cash payment................................................ 252,421 -------- Subtotal.................................................. 458,943 Issuance of Biosurgery options to Biomatrix optionholders... 11,373 Acquisition costs........................................... 12,087 -------- Aggregate purchase price............................ $482,403 ========
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENT OF OPERATIONS (B1) To record the amortization of acquired intangible assets and goodwill (amounts in thousands):
ASSIGNED ANNUAL VALUE AMORTIZATION -------- ------------ INTANGIBLE ASSETS: Workforce (5 years)................................. $ 2,017 $ 404 Non-compete agreements (1.5 years).................. 640 427 Distribution agreements (8 years)................... 13,950 1,744 Trademark/trade name (11 years)..................... 48,746 4,431 Patented core technology (11 years)................. 59,877 5,443 Current products technology (11 years).............. 159,624 14,511 Goodwill (11 years)................................. 112,262 10,206 -------- ------- Pro forma adjustment for amortization of intangibles..................................... $397,116 $37,166 ======== =======
(B2) To record the following: - Amortization of deferred compensation associated with Genzyme Biosurgery options that were issued in exchange for Biomatrix options; - Impact of the additional expense associated with the increased basis for the Biomatrix inventory; - Impact of the reduced depreciation expense related to the decreased basis of Biomatrix's fixed assets. (B3) To eliminate Biomatrix' weighted average shares outstanding, and to record the cancellation of Surgical Products Stock and Tissue Repair Stock. Also gives effect to the conversion of Surgical Products Stock and Tissue Repair Stock into Biosurgery Stock as though the tracking 24 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX (CONTINUED) stock exchanges occurred on January 1, 2000, and to the issuance of Biosurgery Stock for Biomatrix common stock as though the Biomatrix acquisition occurred on January 1, 2000. (B4) To record the creation of Biosurgery Stock. Net losses for Genzyme Surgical Products and Genzyme Tissue Repair and net income for Biomatrix have been transferred to the calculation of loss per share allocated to Biosurgery Stock. The net income amount for Biomatrix of $7.1 million for the year ended December 31, 2000 reflects the elimination of the $6.5 million tax provision because Genzyme Biosurgery incurred a pro forma net loss for each period. (B5) To adjust the tax provision for the impact of the amortization of acquired intangibles, the reduction in investment income, the additional interest expense and the amortization of the deferred tax liability established in purchase accounting. Income taxes are allocated to Genzyme Biosurgery based upon the financial statement income, taxable income, credits and other amounts properly allocable to each division under generally accepted accounting principles as if it were a separate taxpayer. The realizability of deferred tax assets is assessed at the division level. (B6) To record interest expense that would have been incurred on the $200.0 million of debt, at a rate of 7.5% per annum; and to reduce the investment income balance to reflect the payment of $52.4 million of cash at a rate of return of 5.45% per annum. (B7) To allocate the pro forma tax benefits of Genzyme Biosurgery to Genzyme General. Genzyme's management and accounting policies provide that, if as of the end of any fiscal quarter, a division can not use any projected annual tax benefit attributable to it to offset or reduce its current or deferred income tax expense, Genzyme may allocate the tax benefit to other divisions in proportion to their taxable income without any compensating payments or allocation to the division generating the benefit. The tax benefits allocated to Genzyme General from Genzyme Biosurgery totaled $28.0 million for the year ended December 31, 2000. On a pro forma basis, the tax benefits allocated to Genzyme General from Genzyme Biosurgery would have been $27.7 million for the year ended December 31, 2000. The tax benefits generated by Genzyme Biosurgery and allocated to Genzyme General are lower on a pro forma basis due primarily to Biomatrix' profitability offsetting losses incurred by Genzyme Biosurgery. (B8) To eliminate the charge for acquired in-process research and development recorded by Genzyme in connection with the acquisition. This amount was eliminated as it reflects a material non-recurring charge directly resulting from the acquisition. (B9) To record the tax benefits related to the Biomatrix pro forma adjustments which are allocated to Genzyme Biosurgery. 25 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX (CONTINUED) II. PRO FORMA ADJUSTMENTS TO GENZYME BIOSURGERY'S COMBINED STATEMENT OF OPERATIONS (B10) To record the amortization of acquired intangible assets and goodwill (amounts in thousands):
ASSIGNED ANNUAL VALUE AMORTIZATION -------- ------------ INTANGIBLE ASSETS: Workforce (5 years)................................. $ 2,017 $ 404 Non-compete agreements (1.5 years).................. 640 427 Distribution agreements (8 years)................... 13,950 1,744 Trademark/trade name (11 years)..................... 48,746 4,431 Patented core technology (11 years)................. 59,877 5,443 Current products technology (11 years).............. 159,624 14,511 Goodwill (11 years)................................. 112,262 10,206 -------- ------- Pro forma adjustment for amortization of intangibles................................... $397,116 $37,166 ======== =======
(B11) To record the following: - Amortization of deferred compensation associated with Genzyme Biosurgery options that were issued in exchange for Biomatrix options; - Impact of the additional expense associated with the increased basis for the Biomatrix inventory; - Impact of the reduced depreciation expense related to the decreased basis of Biomatrix's fixed assets. (B12) To eliminate the tax provision because Genzyme Biosurgery incurred a pro forma net loss for each period. (B13) To record interest expense that would have been incurred on the $200.0 million of debt, at a rate of 7.5% per annum; and to reduce the investment income balance to reflect the payment of $52.4 million of cash at a rate of return of 5.45% per annum. (B14) To eliminate the charge for acquired in-process research and development recorded by Genzyme in connection with the acquisition. This amount was eliminated as it reflects a material non-recurring charge directly resulting from the acquisition. (5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX The following adjustments reflect the acquisition of GelTex by Genzyme for a combination of cash and stock and the replacement of GelTex options and warrants with options and warrants to purchase Genzyme General Stock. As part of the acquisition of GelTex, Genzyme acquired all of GelTex's interest in RenaGel LLC, a joint venture between Genzyme and GelTex. Prior to the acquisition of GelTex, Genzyme accounted for its investment in RenaGel LLC under the equity method. The adjustments below reflect the consolidation of RenaGel LLC into Genzyme's financial statements and accounting for Genzyme's purchase of GelTex' interest in the joint venture using the purchase method of accounting. 26 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX (CONTINUED) To record the acquisition of the net assets of GelTex for an aggregate purchase price of $1,076.0 million. The aggregate purchase price is comprised of the following (amounts in thousands): Issuance of 7,886,404 shares of Genzyme General Stock....... $ 491,181 Cash payment................................................ 515,151 ---------- Subtotal.................................................... 1,006,332 Basis of GelTex investment.................................. 2,500 Issuance of Genzyme General options and warrants to GelTex option and warrant holders................................ 62,882 Acquisition costs........................................... 4,321 ---------- Aggregate purchase price.................................... $1,076,035 ==========
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENTS OF OPERATIONS (G1) To record the amortization of acquired intangible assets and goodwill (amounts in thousands):
ASSIGNED VALUE ANNUAL AMORTIZATION -------------- ------------------- INTANGIBLE ASSETS: Workforce (5 years)......................... $ 2,327 $ 465 Patents (15 years).......................... 115,772 7,718 Trademarks/trade name (15 years)............ 6,526 435 Core technology (15 years).................. 65,313 4,354 Current products technology (5 to 15 years).................................... 275,171 19,948 Goodwill (15 years)......................... 449,634 29,976 -------- ------- Pro forma adjustment for amortization of intangibles............................... $914,743 $62,896 ======== =======
(G2) To record the following: - Amortization of deferred compensation associated with Genzyme General options that were issued in exchange for GelTex options; - Impact of the additional expense associated with the increased basis for the Renagel LLC inventory of $8.2 million; - Impact of the additional depreciation expense related to the increased basis of GelTex's fixed assets. (G3) To eliminate GelTex's weighted average shares outstanding, to reflect the issuance of 7,886,404 shares of Genzyme General Stock and to reflect the dilutive effect of the issuance of options to purchase Genzyme General Stock to holders of GelTex options. (G4) To record interest expense that would have been incurred on the $150.0 million of debt, at a rate of 7.5% per annum; to record the amortization of the value of the acquired interest rate swaps; and to reduce the investment income balance to reflect the payment of $365.2 million of cash at a rate of return of 5.45% per annum. (G5) To eliminate intercompany transactions between Genzyme, GelTex and RenaGel LLC. 27 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX (CONTINUED) (G6) To eliminate Genzyme's and GelTex's equity in the net loss of RenaGel LLC and to consolidate RenaGel LLC with Genzyme. (G7) To adjust the tax provision for the impact of the reduction in investment income, the additional interest expense and the amortization of the deferred tax liability established in purchase accounting. (G8) The net loss of GelTex has been transferred to the calculation of net income per share allocated to Genzyme General Stock. The adjustment to Genzyme General net income in the calculation of income allocated to Genzyme General Stock reflects the aggregate impact of all pro forma adjustments on the Genzyme General division net income. (G9) To eliminate the charge for acquired in-process research and development recorded by the Company in connection with the acquisition. This amount was eliminated as it reflects a material non-recurring charge directly resulting from the acquisition. (6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL The following adjustments reflect the acquisition of outstanding Focal common stock not already owned by Genzyme for a combination of cash and stock and the replacement of Focal options and warrants with options and warrants to purchase Biosurgery Stock. The aggregate purchase price is comprised of the following (amounts in thousands): Issuance of 2,086,151 shares of Biosurgery Stock............ $ 9,534 Cash payment................................................ 7 ------- Subtotal.................................................. 9,541 Issuance of Biosurgery options to Focal optionholders....... 389 Acquisition costs........................................... 500 Basis of Focal investment................................... 6,165 ------- Aggregate purchase price............................ $16,595 =======
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED BALANCE SHEET (F1) To record the acquisition of the net assets of Focal for an aggregate purchase price of $16.6 million (see Note 2C). The intangible assets of approximately $3.8 million are as follows (amounts in thousands):
ASSIGNED DESCRIPTION VALUE ----------- ---------- Patented core technology (12 years)......................... $ 142 Current products technology (12 years)...................... 3,675 -------- Total................................................... $ 3,817 ========
The purchase price includes $389,000 for the estimated fair value of the Genzyme Biosurgery options that were issued in exchange for the Focal options. This estimated fair value was calculated using the Black-Scholes option pricing model based on a stock price of $4.57, which 28 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL (CONTINUED) is the value ascribed to the Biosurgery Stock for purchase price accounting, and other assumptions in the Black-Scholes model. No unvested options have intrinsic value that would require allocation to deferred compensation. (F2) To record $1.1 million of accrued expenses related to Focal's estimated acquisition costs and $700,000 related to management bonuses that have not been reflected in the historical balances as of March 31, 2001. (F3) To eliminate Focal historical stockholders' equity amounts totaling $2.2 million, except for the Focal notes receivable of $420,000, which will remain outstanding upon completion of the transaction. Focal received these notes in exchange for the purchase of Focal common stock. Also to give effect to the forgiveness of accrued interest totaling approximately $37,000 by Focal prior to the merger. (F4) To record inventory of Focal at fair value, by increasing the inventory by $5.1 million. The increased basis for the inventory valuation will result in a $5.1 million decrease in gross margin as the units are sold, after the acquisition. (F5) To eliminate the $6.2 million carrying value of Genzyme's existing investment in Focal. Also to eliminate Focal's accounts receivable from Genzyme totaling $370,000. (F6) To record the fair value of favorable lease arrangements to which Focal is party. (F7) To eliminate deferred revenue recorded by Focal that will not require Genzyme to incur any significant costs. II. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENTS OF OPERATIONS (F8) To record the amortization of acquired intangible assets and goodwill (amounts in thousands):
ASSIGNED ANNUAL QUARTERLY VALUE AMORTIZATION AMORTIZATION -------- ------------ ------------ INTANGIBLE ASSETS: Patented care technology (12 years)...... $ 142 $ 12 $ 3 Current products technology (12 years)... 3,675 306 77 -------- ------- --- Pro forma adjustment for amortization of intangibles..................... $ 3,817 $ 318 $80 ======== ======= ===
(F9) To record the following: - Impact of the additional expense associated with the increased basis for the Focal inventory; and - Impact of additional expense for the favorable lease arrangement. (F10) To eliminate sales and cost of sales related to transactions between Genzyme and Focal. Also to eliminate the $7.3 million impairment charge recorded by Genzyme in the year ended December 31, 2000 related to its investment in Focal common stock, and to eliminate the equity in net loss of Focal recognized by Genzyme in the three months ended March 31, 2001. 29 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL (CONTINUED) (F11) To eliminate the cumulative effect of a change in accounting principle recorded by Focal upon adoption of Staff Accounting Bulletin No. 101, REVENUE RECOGNITION. The cumulative effect adjustment to record deferred revenue would not have been required if Focal had been acquired on January 1, 2000 and purchase accounting had been applied as of that date. Also to reverse the amortization of deferred revenue during the twelve months ended December 31, 2000 and the three months ended March 31, 2001. (F12) To adjust the tax provision for the net loss incurred by Focal and for the pro forma adjustments related to the Focal merger. (F13) To eliminate Focal's weighted average shares outstanding, and to give effect to the issuance of Biosurgery Stock for Focal common stock as though the merger occurred on January 1, 2000. The net loss of Focal has been transferred to the calculation of net loss per share allocated to Biosurgery Stock. The adjustment to Genzyme Biosurgery net loss in the calculation of income allocated to Biosurgery Stock reflects the aggregate impact of all pro forma adjustments on the Genzyme Biosurgery division net loss. (F14) To allocate the pro forma tax benefits of the Focal net losses and pro forma adjustments to Genzyme General. Genzyme's management and accounting policies provide that, if as of the end of any fiscal quarter, a division can not use any projected annual tax benefit attributable to it to offset or reduce its current or deferred income tax expense, Genzyme may allocate the tax benefit to other divisions in proportion to their taxable income without any compensating payments or allocation to the division generating the benefit. III. PRO FORMA ADJUSTMENTS TO GENZYME BIOSURGERY'S COMBINED BALANCE SHEET (F15) To record the acquisition of the net assets of Focal for an aggregate purchase price of $16.6 million (see Note 2C). The intangible assets of approximately $3.8 million are as follows (amounts in thousands):
ASSIGNED DESCRIPTION VALUE ----------- ---------- Patented core technology (12 years)......................... 142 Current products technology (12 years)...................... 3,675 ------ Total................................................... $3,817 ======
The purchase price includes $389,000 for the estimated fair value of the Genzyme Biosurgery options that were issued in exchange for the Focal options. This estimated fair value was calculated using the Black-Scholes option pricing model based on a stock price of $4.57, which is the value ascribed to the Biosurgery Stock for purchase price accounting, and other assumptions in the Black-Scholes model. No unvested options have intrinsic value that would require allocation to deferred compensation. (F16) To record $1.1 million of accrued expenses related to Focal's estimated acquisition costs and $700,000 related to management bonuses that have not been reflected in the historical balances as of March 31, 2001. (F17) To eliminate Focal's historical stockholders' equity amounts totaling $2.2 million, except for the Focal notes receivable of $420,000, which will remain outstanding upon completion of the 30 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL (CONTINUED) transaction. Focal received these notes in exchange for the purchase of Focal common stock. Also to give effect to the forgiveness of accrued interest totaling approximately $37,000 by Focal prior to the merger. (F18) To eliminate the $6.2 million carrying value of Genzyme's existing investment in Focal, which is allocated to Genzyme Biosurgery. Also to eliminate Focal's accounts receivable from Genzyme totaling $370,000. (F19) To record the fair value of favorable lease arrangements to which Focal is party. (F20) To eliminate deferred revenue recorded by Focal that will not require Genzyme Biosurgery to incur any additional costs. (F21) To record inventory of Focal at fair value, by increasing the inventory by $5.1 million. The increased basis for the inventory valuation will result in a $5.1 million decrease in gross margin as the units are sold, after the acquisition. IV. PRO FORMA ADJUSTMENTS TO GENZYME BIOSURGERY'S COMBINED STATEMENTS OF OPERATIONS (F22) To record the amortization of acquired intangible assets and goodwill (amounts in thousands):
ASSIGNED ANNUAL QUARTERLY VALUE AMORTIZATION AMORTIZATION -------- ------------ ------------ INTANGIBLE ASSETS: Patented core technology (12 years)...... $ 142 $ 12 $ 3 Current products technology (12 years)... 3,675 306 77 -------- ------- --- Pro forma adjustment for amortization of intangibles..................... $ 3,817 $ 318 $80 ======== ======= ===
(F23) To record the following: - Impact of the additional expense associated with the increased basis for the Focal inventory; and - Impact of additional expense for the favorable lease arrangement. (F24) To eliminate sales and cost of sales related to transactions between Genzyme Biosurgery and Focal. Also to eliminate the $7.3 million impairment charge recorded by Genzyme Biosurgery in the year ended December 31, 2000 related to its investment in Focal common stock and to eliminate the equity in net loss of Focal recognized by Genzyme Biosurgery in the three months ended March 31, 2001. (F25) To eliminate the cumulative effect of a change in accounting principle recorded by Focal upon adoption of Staff Accounting Bulletin No. 101, REVENUE RECOGNITION. The cumulative effect adjustment to record deferred revenue would not have been required if Focal had been acquired on January 1, 2000 and purchase accounting had been applied as of that date. Also to reverse the amortization of deferred revenue during the twelve months ended December 31, 2000 and the three months ended March 31, 2001. 31 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (7) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF WYNTEK STOCK The following adjustments reflects the acquisiton of Wyntek Stock for cash. The aggregate purchase price is comprised of the following (amounts in thousands): Cash payment................................................ $ 65,000 Acquisition costs........................................... 650 -------- Aggregate purchase price............................ $ 65,650 ========
I. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED BALANCE SHEET (W1) To record the acquisition of the net assets of Wyntek for an aggregate purchase price of $65.7 million (see Note 2D). The intangible assets of approximately $49.1 million are as follows (amounts in thousands):
ASSIGNED DESCRIPTION VALUE ----------- ---------- Workforce (5 years)......................................... $ 1,125 Patented core technology (10 years)......................... 688 Current products technology (10 years)...................... 33,111 Goodwill (10 years)......................................... 14,198 ------- Total................................................... $49,122 =======
The $7.9 million allocated to in-process technology has been charged to accumulated deficit for the purposes of the pro forma balance sheet presentation only and will be charged to expense in Genzyme's historical financial statements upon completion of the merger with Wyntek. The goodwill of $14.2 million consists of the excess of the purchase price over the fair market value of net assets acquired. (W2) To record $1.0 million of accrued expenses related to the estimated acquisition costs to be incurred by Wyntek that have not been reflected in the historical balances as of March 31, 2001. (W3) To record inventory of Wyntek at fair value, by increasing the inventory by $318,000. The increased basis for the inventory valuation will result in a $318,000 decrease in gross margin as the units are sold, after the acquisition. (W4) To reverse deferred tax assets recorded by Wyntek, as such assets will not be realizable by Genzyme following the merger. (W5) To eliminate Wyntek historical stockholders' equity amounts totaling $9.6 million. 32 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) II. PRO FORMA ADJUSTMENTS TO GENZYME CORPORATION'S COMBINED STATEMENTS OF OPERATIONS (W6) To record the amortization of acquired intangible assets and goodwill (amounts in thousands):
ASSIGNED ANNUAL QUARTERLY VALUE AMORTIZATION AMORTIZATION -------- ------------ ------------ INTANGIBLE ASSETS: Workforce (5 years)....................... $ 1,125 $ 225 $ 56 Patented core technology (10 years)....... 688 69 17 Current products technology (10 years).... 33,111 3,311 828 Goodwill (10 years)....................... 14,198 1,420 355 ------- ------ ------ Pro forma adjustment for amortization of intangibles...................... $49,122 $5,025 $1,256 ======= ====== ======
(W7) To record the impact of the additional expense associated with the increased basis for the Wyntek inventory. (W8) To reduce investment income to reflect the payment of $65.7 million of cash at a rate of return of 5.45% per annum. (W9) To adjust the tax provision for the impact of the Wyntek pro forma adjustments. (W10) To eliminate Wyntek's weighted average shares outstanding. The net income of Wyntek has been transferred to the calculation of net income per share allocated to Genzyme General Stock. The adjustment to Genzyme General net income in the calculation of income allocated to Genzyme General Stock reflects the aggregate impact of all pro forma adjustments on the Genzyme General division net income. 33 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 2 Agreement and Plan of Merger, dated as of April 25, 2001, among Genzyme Corporation, Sammy Merger Corp. and Focal, Inc. Attached as Annex A to the proxy statement/prospectus contained in Genzyme's registration statement on Form S-4 (No. 333-61296) filed with the SEC on May 21, 2001 and incorporated herein by reference. 23 Consent of Ernst & Young LLP. Filed herewith. 99.1 The audited financial statements of Focal as of December 31, 2000 and 1999 and for each of the three years in the period ended December 31, 2000, including the report of independent auditors dated January 31, 2001. Filed herewith. 99.2 The unaudited financial statements of Focal as of and for the three months ended March 31, 2001 and 2000. Filed herewith.