0000912057-01-532812.txt : 20011008
0000912057-01-532812.hdr.sgml : 20011008
ACCESSION NUMBER: 0000912057-01-532812
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20010920
ITEM INFORMATION: Other events
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20010920
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: GENZYME CORP
CENTRAL INDEX KEY: 0000732485
STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
IRS NUMBER: 061047163
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-14680
FILM NUMBER: 1740831
BUSINESS ADDRESS:
STREET 1: ONE KENDALL SQ
CITY: CAMBRIDGE
STATE: MA
ZIP: 02139
BUSINESS PHONE: 6172527500
MAIL ADDRESS:
STREET 1: ONE KENDALL SQUARE
CITY: CAMBRIDGE
STATE: MA
ZIP: 02139
8-K
1
a2059313z8-k.txt
FORM 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):
SEPTEMBER 20, 2001
GENZYME CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 0-14680 06-1047163
(State or other jurisdiction of (Commission file number) (IRS employer
incorporation or organization) 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 August 6, 2001 (filed
August 22, 2001), on August 6, 2001 we entered into an Agreement and Plan of
Merger with Novazyme Pharmaceuticals, Inc. ("Novazyme") to effect a business
combination through the merger of a wholly-owned subsidiary of ours with and
into Novazyme.
We are filing this report to include the unaudited pro forma combined
financial information which describes the pro forma effect of our planned
acquisition of Novazyme on the unaudited statements of operations for the six
months ended June 30, 2001 and the year ended December 31, 2000 and the
unaudited balance sheet as of June 30, 2001 of both Genzyme Corporation and
Genzyme General, the division to which we will allocate the assets and
liabilities and operations of Novazyme.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
2 Agreement and Plan of Merger, dated as of August 6, 2001, among
Genzyme Corporation, Rodeo Merger Corp. and Novazyme
Pharmaceuticals, Inc. Attached as Exhibit 2.1 to Genzyme's
Current Report on Form 8-K dated August 6, 2001 filed with the
SEC on August 22, 2001 and incorporated herein by reference.
99.1 Unaudited pro forma combined financial information which
describes the pro forma effect of our planned acquisition of
Novazyme on the unaudited statements of operations for the six
months ended June 30, 2001 and the year ended December 31, 2000
and the unaudited balance sheet as of June 30, 2001 of both
Genzyme Corporation and Genzyme General, the division to which we
will allocate the assets and liabilities and operations of
Novazyme. Filed herewith.
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: September 20, 2001 By: /s/ MICHAEL S. WYZGA
------------------------------------
Michael S. Wyzga
Senior Vice President, Finance and
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
2 Agreement and Plan of Merger, dated as of August 6, 2001, among
Genzyme Corporation, Rodeo Merger Corp. and Novazyme
Pharmaceuticals, Inc. Attached as Exhibit 2.1 to Genzyme's Current
Report on Form 8-K dated August 6, 2001 filed with the SEC on August
22, 2001 and incorporated herein by reference.
99.1 Unaudited pro forma combined financial information which describes
the pro forma effect of our planned acquisition of Novazyme on the
unaudited statements of operations for the six months ended June 30,
2001 and the year ended December 31, 2000 and the unaudited balance
sheet as of June 30, 2001 of both Genzyme Corporation and Genzyme
General, the division to which we will allocate the assets and
liabilities and operations of Novazyme. Filed herewith.
EX-99.1
3
a2059313zex-99_1.txt
EXHIBIT 99.1
Exhibit 99.1
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information describes
the pro forma effect of Genzyme's proposed acquisition of Novazyme
Pharmaceuticals, Inc. on the
o unaudited statements of operations for the six months ended June
30, 2001 and the year ended December 31, 2000, and
o unaudited balance sheet as of June 30, 2001
of both Genzyme and Genzyme General, the division to which Genzyme will allocate
the assets and liabilities and operations of Novazyme.
The following unaudited pro forma combined financial information also
describes the pro forma effect of Genzyme's acquisition of GelTex
Pharmaceuticals, Inc., Biomatrix, Inc., Wyntek Diagnostics, Inc. and Focal, Inc.
and the disposition of its 50% ownership interest in ATIII LLC on the unaudited
pro forma combined statements of operations for Genzyme and Genzyme General for
the year ended December 31, 2000 and for the six months ended June 30, 2001 as
if these transactions took place on January 1, 2000 and on the unaudited pro
forma combined balance sheets of Genzyme and Genzyme General as of June 30,
2001. In addition, Genzyme's unaudited 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.
Genzyme allocated the acquisitions of GelTex and Wyntek and the disposition of
its 50% ownership interest in ATIII LLC to Genzyme General. Genzyme allocated
its acquisitions of Biomatrix and Focal to Genzyme Biosurgery. The results of
operations of GelTex, Biomatrix, Wyntek and Focal are included in Genzyme's
results beginning on the respective dates of acquisition and the results of
operations of ATIII LLC are excluded from Genzyme's results as of the date of
disposition. Additional information regarding Genzyme's acquisitions of GelTex
and Biomatrix is included in Genzyme's annual report on Form 10-K for the year
ended December 31, 2000 filed with the SEC on April 2, 2001. Additional
information regarding Genzyme's acquisitions of Wyntek and Focal is included in
Genzyme's quarterly report on Form 10-Q for the quarter ended June 30, 2001
filed with the SEC on August 14, 2001.
ACQUISITION OF GELTEX PHARMACEUTICALS, INC.
On December 14, 2000, Genzyme completed the acquisition of GelTex. Genzyme
issued approximately 15.8 million shares of Genzyme General Stock and paid
$515.2 million in cash 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
Financial Accounting Standards Board Interpretation No. 44, which is referred to
as FIN 44.
ACQUISITION OF BIOMATRIX, INC.
On December 18, 2000, Genzyme completed the acquisition of Biomatrix.
Concurrent with the completion of Genzyme's acquisition of Biomatrix, Genzyme
amended its charter to create Biosurgery Stock and eliminate Surgical Products
Stock and Tissue Repair Stock. Genzyme issued approximately 17.5 million shares
of Biosurgery Stock and paid $252.4 million in cash 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.
1
In connection with the merger with Biomatrix, Genzyme effected an exchange
of its tracking stock whereby all of the 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
Genzyme Biosurgery. Former holders of Tissue Repair Stock and Surgical Products
Stock, therefore, remain holders of Genzyme's 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 were converted into options to
purchase Biosurgery Stock at the respective conversion rates.
ACQUISITION OF WYNTEK DIAGNOSTICS, INC.
In June 2001, Genzyme acquired all of the outstanding capital stock of
privately-held Wyntek Diagnostics, Inc., for $65.0 million in cash. No options
or warrants were assumed by Genzyme in the purchase.
ACQUISITION OF FOCAL, INC.
In January 2001, Focal, Inc. exercised its option to require Genzyme to
purchase $5.0 million in Focal common stock at a price of $2.06 per share. After
that purchase, Genzyme held approximately 22% of the outstanding shares of Focal
common stock and began accounting for its investment under the equity method of
accounting. On June 30, 2001, Genzyme acquired the remaining 78% of the
outstanding Focal common stock in an exchange for 2.1 million shares of
Biosurgery Stock. In addition, Genzyme issued options and warrants to purchase
Biosurgery Stock in exchange for all outstanding options and warrants to
purchase Focal common stock. The conversion of options to purchase Focal common
stock was accounted for in accordance FIN 44.
PENDING ACQUISITION OF NOVAZYME PHARMACEUTICALS, INC.
On August 6, 2001, Genzyme entered into a definitive agreement to acquire
Novazyme for $137.5 million, payable in shares of Genzyme General Stock, subject
to a deduction based on a calculated amount for Novazyme vested options,
warrants and Series B Preferred Stock purchase rights outstanding on the date of
acquisition. Novazyme stockholders are also eligible to receive two subsequent
payments totaling $87.5 million if Genzyme receives U.S. marketing approval for
two products to treat lysosomal storage disorders using certain of Novazyme's
technologies by certain dates. The contingent payments are also payable in
shares of Genzyme General Stock. The results of operations and cash flows of
Novazyme will be included in Genzyme's financial statements following the
completion of the acquisition. Additionally, each option, warrant and Series B
Preferred Stock purchase right to purchase shares of Novazyme common stock
outstanding immediately before the effective date of the acquisition will be
assumed by Genzyme after the acquisition and will be exchanged for an option,
warrant or stock purchase right to purchase Genzyme General Stock. The exchange
of options will be accounted for in accordance with FIN 44.
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
2
charter also requires that all of its income and expenses be allocated among the
divisions in a reasonable and consistent manner. However, subject to its
fiduciary duties, Genzyme's board of directors can, at it discretion, change the
method of allocating earnings to each series of common stock without shareholder
approval. Genzyme intends to allocate earnings using its current methods for the
foreseeable future.
Because the earnings allocated to each series of stock are based on the
income or losses attributable to each corresponding division, Genzyme has
included its unaudited pro forma financial statements and the unaudited pro
forma financial statements of Genzyme General, the division to which Genzyme
will allocate the acquisition of Novazyme, to aid investors in evaluating its
performance and the performance of that division.
While each tracking stock is designed to reflect a division's performance,
it is common stock of Genzyme Corporation and not of a division; each division
is not a company or a legal entity, and therefore does not and cannot issue
stock. Consequently, holders of a series of tracking stock have no specific
rights to assets allocated to the corresponding division. Genzyme Corporation
continues to hold title to all of the assets allocated to each division and is
responsible for all of its liabilities, regardless of what it deems for
financial statement presentation purposes as allocated to any division. Holders
of each tracking stock, as common stockholders, are therefore subject to the
risks of investing in the businesses, assets and liabilities of Genzyme as a
whole. For instance, the assets allocated to each division are subject to
company-wide claims of creditors, product liability plaintiffs and stockholder
litigation. Also, in the event of a Genzyme liquidation, insolvency or similar
event, holders of each tracking stock would only have the rights of common stock
holders in the combined assets of Genzyme.
PURCHASE ACCOUNTING
Genzyme has prepared the unaudited pro forma financial information using
the purchase method of accounting for all five acquisitions. Genzyme expects to
have reorganization and restructuring expenses as well as potential operating
efficiencies as a result of the acquisitions of Wyntek and Focal. The unaudited
pro forma financial statements and related notes do not reflect these potential
expenses and efficiencies.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, or SFAS, No. 141, "Business Combination" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
all business combinations be accounted for under the purchase method only and
that certain acquired intangible assets in a business combination be recognized
as assets apart from goodwill. SFAS No. 142 requires that ratable amortization
of goodwill and certain intangible assets be replaced with periodic tests of the
goodwill's impairment and that other intangible assets be amortized over their
useful lives. SFAS No. 141 is effective for all business combinations initiated
after June 30, 2001 and for all business combinations accounted for by the
purchase method for which the date of acquisition is after June 30, 2001. The
provisions of SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001, and will thus be adopted Genzyme, as required, in fiscal year
2002. Accordingly, because the provision of SFAS No. 141 and SFAS No. 142 will
apply to Genzyme's acquisition of Novazyme, there is no pro forma adjustment to
the statements of operations of Genzyme or Genzyme General for amortization of
goodwill or acquired unpatented technology for the year ended December 31, 2000
and for the six months ended June 30, 2001 resulting from the acquisition of
Novazyme.
These unaudited pro forma statements of operations are for informational
purposes only. They do not purport to indicate the results that would have
actually been obtained had the transactions been completed on the assumed date
or the results which may be obtained in the future. The unaudited pro forma
statements of operations and balance sheets should be read in conjunction with
Genzyme's
3
historical consolidated financial statements, including the notes thereto, and
the consolidated financial statements, including the notes thereto, of each of
GelTex, Biomatrix, Wyntek, Focal and Novazyme. Genzyme's financial statements
are included in its quarterly report on Form 10-Q for the quarter ended June 30,
2001 filed with the SEC on August 14, 2001 and its annual report on Form 10-K
for the year ended December 31, 2000 filed with the SEC on April 2, 2001.
GelTex's financial statements are included in its quarterly report on Form 10-Q
for the quarter ended September 30, 2000 filed with the SEC on November 14, 2000
and its annual report on Form 10-K for the year ended December 31, 1999 filed
with the SEC on March 30, 2000, as amended on November 7, 2000. Biomatrix's
financial statements are included in its quarterly report on Form 10-Q for the
quarter ended September 30, 2000 filed with the SEC on November 14, 2000 and its
annual report on Form 10-K for the year ended December 31, 1999 filed with the
SEC on March 30, 2000, as amended on April 26, 2000 and October 26, 2000.
Wyntek's financial statements are included in Genzyme's current report on Form
8-K filed with the SEC on May 18, 2001. Focal's financial statements are
included in its annual report on Form 10-K for the year ended December 31, 2000
filed with the SEC on April 2, 2001, as amended on April 30, 2001 and its
quarterly report on Form 10-Q for the quarter ended March 31, 2001 filed with
the SEC on May 9, 2001. Novazyme's financial statements are included Genzyme's
current report on Form 8-K filed with the SEC on September 7, 2001.
4
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
GENZYME
CORPORATION
AND HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
SUBSIDIARIES GELTEX ADJUSTMENTS REFERENCE BIOMATRIX ADJUSTMENTS REFERENCE
Revenues:
Net product sales...................... 811,897 $ - $6,166 G1 $65,401 $ -
Net service sales...................... 84,482 - - - -
Collaborative research and development
revenue............................... - 5,409 (5,409) G2 - -
Income from licenses, royalties,
research contracts and grants......... - - - 10,221 -
Revenues from research and development
contracts:
Related parties....................... 509 - - - -
Other................................. 6,432 36,585 15 G1 - -
--------- -------- -------- --------- -------
Total revenues....................... 903,320 41,994 772 75,622 -
--------- -------- -------- --------- -------
Operating costs and expenses:
Cost of products sold.................. 232,383 - 8,156 G3
- - 6,471 G1 20,395 11,330 B1
- -
Cost of services sold.................. 50,177 - - - -
Selling, general and administrative.... 264,551 11,729 5,870 G1 B1
1,671 G3 B1
1,761 G3 33,576 21
(105)
Collaborative joint venture project
costs................................. - 5,409 (5,409) G2 - -
Research and development (including
research and development relating to
contracts) ........................... 169,478 33,727 7,042 G3
4,568 G1 10,184
Amortization of intangibles............ 22,974 - 59,876 G1,G4 - 35,617 B2
Purchase of in-process research and
development........................... 200,191 - (118,048) G5 - (82,143) B3
Charge for impaired assets............. 4,321 - - - -
--------- -------- -------- --------- -------
Total operating costs and expenses... 944,075 50,865 (28,042) 64,155 (35,280)
--------- -------- -------- --------- -------
Operating income (loss).................. (40,755) (8,871) 28,814 11,467 35,280
--------- -------- -------- --------- -------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates............................ (44,965) 1,582 8,277 G1 - -
- - 1,812 G1 - -
- - (1,582) G1 - -
Gain on affiliate sale of stock........ 22,689 - - - -
Gain (loss) on sale of investment in
equity securities..................... 23,173 - - - -
Minority interest in net loss of
subsidiary............................ 4,625 - - - -
Charge for impaired investments........ (7,300) - - - -
Other.................................. 5,188 - - (301) -
Investment income...................... 45,593 6,942 (18,923) G6 3,402 (2,738) B4
Interest expense....................... (15,710) (697) 269 G6
(10,781) G6 (975) (14,375) B4
--------- -------- -------- --------- -------
Total other income (expenses)........ 33,293 7,827 (20,928) 2,126 (17,113)
--------- -------- -------- --------- -------
Income (loss) before income taxes........ (7,462) (1,044) 7,886 13,593 18,167
(Provision for) benefit from income taxes (55,478) - 27,824 G7 (6,513) 19,661 B5
--------- -------- -------- --------- -------
Net income (loss) from continuing
operations............................. $(62,940) $(1,044) $35,710 $7,080 $37,828
========= ======== ======== ========= =======
HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
WYNTEK ADJUSTMENTS REFERENCE FOCAL ADJUSTMENTS REFERENCE
Revenues:
Net product sales...................... $17,546 $ - $1,721 $(1,454) F1
Net service sales...................... - - - -
Collaborative research and development
revenue............................... - - 874 (874) F2
Income from licenses, royalties,
research contracts and grants......... - - - -
Revenues from research and development
contracts:
Related parties....................... - - - -
Other................................. - - - -
--------- ------- ------- --------
Total revenues....................... 17,546 - 2,595 (2,328)
--------- ------- ------- --------
Operating costs and expenses:
Cost of products sold..................
8,457 232 W1 2,842 (1,230) F1
- - - 4,536 F3
Cost of services sold.................. - - - -
Selling, general and administrative....
1,557 - 6,000 -
Collaborative joint venture project
costs................................. - - - -
Research and development (including
research and development relating to
contracts) ...........................
1,686 - 8,112 -
Amortization of intangibles............ - 6,198 W2 - 1,147 F4
Purchase of in-process research and
development........................... - - - -
Charge for impaired assets............. - - - -
--------- ------- ------- --------
Total operating costs and expenses... 11,700 6,430 16,954 4,453
--------- ------- ------- --------
Operating income (loss).................. 5,846 (6,430) (14,359) (6,781)
--------- ------- ------- --------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates............................ - - - -
- - - -
- - - -
Gain on affiliate sale of stock........ - - - -
Gain (loss) on sale of investment in
equity securities..................... - - - -
Minority interest in net loss of
subsidiary............................ - - - -
Charge for impaired investments........ - - - 7,300 F1
Other.................................. - - 475 -
Investment income...................... 258 (3,543) W4 705 -
Interest expense....................... - - (298) -
--------- ------- ------- --------
Total other income (expenses)........ 258 (3,543) 882 7,300
--------- ------- ------- --------
Income (loss) before income taxes........ 6,104 (9,973) (13,477) 519
(Provision for) benefit from income taxes (2,208) 2,888 W5 - 4,691 F5
--------- ------- ------- --------
Net income (loss) from continuing
operations............................. $3,896 $(7,085) $(13,477) $5,210
========= ======= ======= ========
See Notes to Unaudited Pro Forma Financial Statements
5
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DISPOSITION
OF PRO FORMA
50% OWNERSHIP GENZYME
INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE CORPORATION AND
ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE SUBSIDIARIES
Revenues:
Net product sales...................... $ - $ - $ - $901,277
Net service sales...................... - - - 84,482
Collaborative research and development
revenue............................... - - - -
Income from licenses, royalties,
research contracts and grants......... - 250 - 10,471
Revenues from research and development
contracts:
Related parties....................... - - - 509
Other................................. - - - 43,032
------- ------ ------ -------
Total revenues....................... - 250 - 1,039,771
------- ------ ------ ---------
Operating costs and expenses:
Cost of products sold..................
- - - 293,572
Cost of services sold.................. - - - 50,177
Selling, general and administrative.... (2,927) A1 1,995 653 N1 326,352
Collaborative joint venture project
costs................................. - - - -
Research and development (including
research and development relating to
contracts)............................ (11,862) A1 2,016 518 N1 225,469
Amortization of intangibles............ - - - 125,812
Purchase of in-process research and
development........................... - - - -
Charge for impaired assets............. - - - 4,321
------- ------ ------ -------
Total operating costs and expenses... (14,789) 4,011 1,171 1,025,703
------- ------ ------ ---------
Operating income (loss).................. 14,789 (3,761) (1,171) 14,068
------- ------ ------ -------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates............................ - - -
- - -
(2,651) A2 - - (37,527)
Gain on affiliate sale of stock........ - - - 22,689
Gain (loss) on sale of investment in
equity securities..................... - - - 23,173
Minority interest in net loss of
subsidiary............................ (4,625) A3 - - -
Charge for impaired investments........ - - - -
Other.................................. - - - 5,362
Investment income...................... - 138 - 31,834
Interest expense.......................
- (85) - (42,652)
------- ------ ------ -------
Total other income (expenses)........ (7,276) 53 - 2,879
------- ------ ------ -------
Income (loss) before income taxes........ 7,513 (3,708) (1,171) 16,947
(Provision for) benefit from income taxes (2,720) A4 - 1,766 N2 (10,089)
------- ------ ------ -------
Net income (loss) from continuing
operations............................. $ 4,793 $(3,708) $ 595 $ 6,858
======= ======= ====== =======
See Notes to Unaudited Pro Forma Financial Statements
6
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
GENZYME
CORPORATION
AND HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
SUBSIDIARIES GELTEX ADJUSTMENTS REFERENCE BIOMATRIX ADJUSTMENTS REFERENCE
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL STOCK:
Genzyme General net income from
continuing operations................ $85,956 $34,666 G8 $ -
Tax benefit allocated from Genzyme
Biosurgery............................ 28,023 - (352) B6
Tax benefit allocated from Genzyme
Molecular Oncology.................... 7,476 - -
-------- --------- -------
Net income allocated to Genzyme
General Stock......................... $121,455 $34,666 $ (352)
======== ========= =======
Net income per share allocated to
Genzyme General Stock:
Basic................................. $ 0.71
========
Diluted............................... $ 0.68
========
Weighted average shares outstanding:
Basic................................. 172,263
========
Diluted............................... 179,366
========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss............ $(87,636) $(42,821) B7
Allocated tax benefit.................. 448 13,500 B8
-------- --------
Net loss allocated to Biosurgery Stock. $(87,188) $(29,321)
======== ========
Net loss per share of Biosurgery Stock
- basic and diluted................... $ (2.40)
========
Weighted average shares outstanding.... 36,359
========
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 B7
======== =======
Net loss per share of Surgical
Products Stock - basic and diluted.... $ (3.67) $ 3.67 B9
======== =======
Weighted average shares outstanding.... 14,900 (14,900) B9
======== =======
ALLOCATED TO TISSUE REPAIR STOCK:
Net loss............................... $(19,833) $19,833 B7
======== =======
Net loss per share of Tissue Repair
Stock - basic and diluted............. $ (0.69) $ 0.69 B9
======== =======
Weighted average shares outstanding.... 28,716 (28,716) B9
======== =======
HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
WYNTEK ADJUSTMENTS REFERENCE FOCAL ADJUSTMENTS REFERENCE
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL STOCK:
Genzyme General net income from
continuing operations................ $ (3,189) W6 $ -
Tax benefit allocated from Genzyme
Biosurgery............................ - 4,691 F6
Tax benefit allocated from Genzyme
Molecular Oncology.................... - -
-------- --------
Net income allocated to Genzyme
General Stock......................... $ (3,189) $ 4,691
======== ========
Net income per share allocated to
Genzyme General Stock:
Basic.................................
Diluted...............................
Weighted average shares outstanding:
Basic.................................
Diluted...............................
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss............ $(12,958) F7
Allocated tax benefit.................. -
--------
Net loss allocated to Biosurgery Stock. $(12,598)
========
Net loss per share of Biosurgery Stock
- basic and diluted...................
Weighted average shares outstanding....
ALLOCATED TO MOLECULAR ONCOLOGY STOCK:
Net loss...............................
Net loss per share of Molecular
Oncology Stock - basic and diluted....
Weighted average shares outstanding....
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....
See Notes to Unaudited Pro Forma Financial Statements
7
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DISPOSITION
OF PRO FORMA
50% OWNERSHIP GENZYME
INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE CORPORATION AND
ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE SUBSIDIARIES
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL STOCK:
Genzyme General net income from
continuing operations................ $ 4,793 A3 $(3,113) N3 $119,113
Tax benefit allocated from Genzyme
Biosurgery............................ - - 32,362
Tax benefit allocated from Genzyme
Molecular Oncology.................... - - 7,476
------- ------ -------
Net income allocated to Genzyme
General Stock......................... $ 4,793 $(3,113) $158,951
======= ======= ========
Net income per share allocated to
Genzyme General Stock:
Basic................................. $ 0.84
========
Diluted............................... $ 0.80
========
Weighted average shares outstanding:
Basic................................. 189,287
========
Diluted............................... 210,276
========
ALLOCATED TO BIOSURGERY STOCK:
Genzyme Biosurgery net loss............ $(143,415)
Allocated tax benefit.................. 13,948
--------
Net loss allocated to Biosurgery Stock. $(129,467)
=========
Net loss per share of Biosurgery Stock
- basic and diluted................... $ (3.37)
=========
Weighted average shares outstanding.... 38,439
=========
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.... -
=========
See Notes to Unaudited Pro Forma Financial Statements
8
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
GENZYME
CORPORATION
AND HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
SUBSIDIARIES WYNTEK ADJUSTMENTS REFERENCE FOCAL ADJUSTMENTS REFERENCE
Revenues:
Net product sales..................... $524,303 $8,412 $ - $1,050 $ (903) F1
Net service sales..................... 47,995 - - - -
Collaborative research and
development revenue.................. - - - 469 (469) F2
Revenues from research and
development contracts:
Related parties....................... 1,632 - - - -
Other................................. 4,972 - - - -
-------- ------ ------ -------- ------
Total revenues....................... 578,902 8,412 - 1,519 (1,372)
-------- ------ ------ -------- ------
Operating costs and expenses:
Cost of products sold................. 156,132 3,224 - 1,520 (634) F1
Cost of services sold................. 26,849 - - - -
Selling, general and administrative... 194,780 1,438 - 3,330 -
Research and development (including
research and development relating to
contracts)........................... 119,524 759 - 2,820 -
Amortization of intangibles........... 59,165 - 2,583 W2 - 575 F4
Purchase of in-process research and
development.......................... 8,768 - (8,768) W3 - -
-------- ------ ------ -------- ------
Total operating costs and expenses... 565,218 5,421 (6,185) 7,670 (59)
-------- ------ ------ -------- ------
Operating income (loss)................. 13,684 2,991 6,185 (6,151) (1,313)
-------- ------ ------ -------- ------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates........................... (20,811) - - - 1,316 F1
Gain (loss) on sale of investments in
equity securities.................... (1,532) - - - -
Minority interest in net loss of
subsidiary........................... 1,999 - - - -
Other................................. (3,843) (7,729) - 10 -
Investment income..................... 22,641 108 (1,476) W4 119 -
Interest expense...................... (22,136) - - -
-------- ------ ------ -------- ------
Total other income (expenses)........ (23,682) (7,621) (1,476) 129 1,316
-------- ------ ------ -------- ------
Income (loss) before income taxes....... (9,998) (4,630) 4,709 (6,022) 3
(Provision for) benefit from income
taxes................................. 2,734 1,692 1,177 W5 - 2,197 F5
-------- ------ ------ -------- ------
Net income (loss) from continuing
operations............................ $ (7,264) $(2,938) $5,886 $(6,022) $2,200
======== ====== ====== ======== ======
DISPOSITION PRO FORMA
OF 50% GENZYME
OWNERSHIP CORPORATION
INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE AND
ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE SUBSIDIARIES
Revenues:
Net product sales..................... $ - $ - $ - $532,862
Net service sales..................... - - - 47,995
Collaborative research and
development revenue.................. - - - -
Revenues from research and
development contracts:
Related parties....................... - - - 1,632
Other................................. - - - 4,972
-------- ------ ------ --------
Total revenues....................... - - - 587,461
-------- ------ ------ --------
Operating costs and expenses:
Cost of products sold................. - - - 160,242
Cost of services sold................. - - - 26,849
Selling, general and administrative... (1,267) A1 6,611 326 N1 205,218
Research and development (including
research and development relating to
contracts)........................... (2,730) A1 5,282 259 N1 125,914
Amortization of intangibles........... - - - 62,323
Purchase of in-process research and
development.......................... - - - -
-------- ------ ------ -------
Total operating costs and expenses... (3,997) 11,893 585 580,546
-------- ------ ------ -------
Operating income (loss)................. 3,997 (11,893) (585) 6,915
-------- ------- ------ -------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates........................... (513) A2 - - (20,008)
Gain (loss) on sale of investments in
equity securities.................... - - - (1,532)
Minority interest in net loss of
subsidiary........................... (1,999) A3 - - -
Other................................. - - - (11,562)
Investment income..................... - 146 - 21,538
Interest expense...................... - (78) - (22,214)
-------- ------ ------ -------
Total other income (expenses)........ (2,512) 68 - (33,778)
-------- ------ ------ -------
Income (loss) before income taxes....... 1,485 (11,825) (585) (26,863)
(Provision for) benefit from income
taxes................................. (542) A4 - 4,530 N2 11,788
-------- ------ ------ -------
Net income (loss) from continuing
operations............................ $ 943 $(11,825) $3,945 $(15,075)
======== ======= ====== ========
See Notes to Unaudited Pro Forma Financial Statements
9
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
GENZYME
CORPORATION
AND HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
SUBSIDIARIES WYNTEK ADJUSTMENTS REFERENCE FOCAL ADJUSTMENTS REFERENCE
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL STOCK:
Genzyme General net income from
continuing operations................ $46,863 $2,948 W6 $ -
Tax benefit allocated from Genzyme
Biosurgery........................... 17,743 - 2,197 F6
Tax benefit allocated from Genzyme
Molecular Oncology................... 6,680 - -
------- ------ ------
Net income allocated to Genzyme
General Stock........................ $71,286 $2,948 $2,197
======= ====== ======
Net income per share allocated to
Genzyme General Stock
Basic................................ $ 0.37
=======
Diluted.............................. $ 0.35
=======
Weighted average shares outstanding:
Basic................................ 194,086
=======
Diluted.............................. 203,290
=======
ALLOCATED TO BIOSURGERY STOCK:
Net loss.............................. $(72,935) $(6,019) F7
Allocated tax benefit................. 8,990 -
-------- -------
Net loss allocated to Biosurgery Stock $(63,945) $(6,019)
======== =======
Net loss per share of Biosurgery
Stock-basic and diluted.............. $ (1.75)
========
Weighted average shares outstanding... 36,531
========
ALLOCATED TO MOLECULAR ONCOLOGY STOCK:
Net loss.............................. $(14,605)
========
Net loss per share of Molecular
Oncology Stock-basic and diluted..... $ (0.91)
========
Weighted average shares outstanding... 15,998
========
DISPOSITION PRO FORMA
OF 50% GENZYME
OWNERSHIP CORPORATION
INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE AND
ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE SUBSIDIARIES
NET INCOME (LOSS) PER SHARE:
ALLOCATED TO GENZYME GENERAL STOCK:
Genzyme General net income from
continuing operations................ $ 943 A3 $(7,880) N4 $42,874
Tax benefit allocated from Genzyme
Biosurgery........................... - - 19,940
Tax benefit allocated from Genzyme
Molecular Oncology................... - - 6,680
-------- ------- -------
Net income allocated to Genzyme
General Stock........................ $ 943 $(7,880) $69,494
======== ======= =======
Net income per share allocated to
Genzyme General Stock
Basic................................ $ 0.35
=======
Diluted.............................. $ 0.34
=======
Weighted average shares outstanding:
Basic................................ 196,101
=======
Diluted.............................. 205,305
=======
ALLOCATED TO BIOSURGERY STOCK:
Net loss.............................. $(78,954)
Allocated tax benefit................. 8,990
--------
Net loss allocated to Biosurgery Stock $(69,964)
========
Net loss per share of Biosurgery
Stock-basic and diluted.............. $ (1.81)
========
Weighted average shares outstanding... 38,605
========
ALLOCATED TO MOLECULAR ONCOLOGY STOCK:
Net loss.............................. $(14,605)
=========
Net loss per share of Molecular
Oncology Stock-basic and diluted..... $ (0.91)
=========
Weighted average shares outstanding... 15,998
=========
See Notes to Unaudited Pro Forma Financial Statements
10
GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(AMOUNTS IN THOUSANDS)
HISTORICAL DISPOSITION PRO FORMA
GENZYME OF 50% GENZYME
CORPORATION OWNERSHIP CORPORATION
AND INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE AND
SUBSIDIARIES ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE SUBSIDIARIES
ASSETS
Current assets:
Cash and cash equivalents............ $439,304 $ (64) A5 $5,506 $ - $444,746
Short-term investments............... 98,834 - - - 98,834
Accounts receivable, net............. 238,204 - - - 238,204
Inventories.......................... 166,146 - - - 166,146
Prepaid expenses and other current
assets.............................. 44,627 1,022 A5 36 - 45,685
Deferred tax assets -current......... 47,021 - - - 47,021
----------- ---------- --------- ------- -----------
Total current assets................ 1,034,136 958 5,542 - 1,040,636
Property, plant and equipment, net.... 553,358 (163) A5 4,070 - 557,265
Long-term investments................. 456,036 - - - 456,036
Notes receivable -related party....... 10,327 - - - 10,327
Intangibles, net...................... 1,573,563 - 18 46,037 N4 1,619,618
Investments in equity securities...... 116,599 - - - 116,599
Other noncurrent assets............... 52,817 232 A5
(296) A6 48 - 52,801
----------- ---------- --------- ------- -----------
Total assets........................ $3,796,836 $ 731 $9,678 $46,037 $3,853,282
=========== ========== ========= ======= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $33,543 $ - $ 907 $ - $ 34,450
Accrued expenses..................... 139,375 (342) A5 138 879 N5 140,050
Income taxes payable................. 51,687 - - - 51,687
Deferred revenue..................... 3,044 - - - 3,044
Current portion of long-term debt
and capital lease obligations ...... 20,435 - 88 - 20,523
----------- ---------- --------- ------- -----------
Total current liabilities........... 248,084 (342) 1,133 879 249,754
Long-term debt and capital lease
obligations......................... 230,674 - 1,516 - 232,190
Convertible notes and debentures..... 609,210 - 585 (585) N6 609,210
Deferred tax liabilities............. 225,144 - - 4,023 N4 229,167
Other noncurrent liabilities........ 7,672 - - - 7,672
----------- ---------- --------- ------- -----------
Total liabilities................... 1,320,784 (342) 3,234 4,317 1,327,993
Series A Redeemable convertible,
cumulative, participating preferred
stock................................ - - 10,021 (10,021) N6 -
Series B Redeemable convertible,
cumulative, participating preferred
stock................................ - - 8,349 (8,349) N6 -
Stockholders' equity:
Genzyme General Stock, $0.01 par
value............................... 2,074 - - 20 N4 2,094
Biosurgery Stock, $0.01 par value.... 394 - - - N4 394
Molecular Oncology Stock, $0.01 par
value............................... 167 - - - 167
Treasury Stock -Genzyme General -at
cost................................ (901) - - - (901)
Additional paid-in capital -Genzyme
General Stock....................... 2,006,823 17 A5 - 113,978 N4
15,989 N4
8,989 N4 2,145,796
Additional paid-in capital
-Biosurgery Stock................... 448,588 - - - 448,588
Additional paid-in capital
-Molecular Oncology Stock........... 61,759 - - - 61,759
Deferred compensation................ (4,905) - - (3,512) N4 (8,417)
Notes receivable from stockholders... (11,682) - - - (11,682)
Retained earnings (accumulated
deficit)............................ (8,835) 1,352 A5 -
(296) A6 (87,300) N4 (95,079)
Accumulated other comprehensive
income (loss)....................... (17,430) - (17,430)
Novazyme Pharmaceuticals, Inc.
common stock........................ - - 14 (14) N7 -
Novazyme Pharmaceuticals, Inc.
additional paid-in capital.......... - - 4,564 (4,564) N7 -
Novazyme Pharmaceuticals, Inc.
accumulated deficit................. - - (16,504) 16,504 N7 -
----------- ---------- --------- ------- -----------
Total stockholders' equity........... 2,476,052 1,073 (11,926) 60,090 2,525,289
----------- ---------- --------- ------- -----------
Total liabilities and stockholders'
equity............................. $3,796,836 $ 731 $9,678 $46,037 $3,853,282
=========== ========== ========= ======= ===========
See Notes to Unaudited Pro Forma Financial Statements
11
GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(AMOUNTS IN THOUSANDS)
HISTORICAL
GENZYME HISTORICAL PRO FORMA FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE
GENERAL GELTEX ADJUSTMENTS REFERENCE WYNTEK ADJUSTMENTS REFERENCE
------------ ---------- ----------- --------- ---------- ----------- ---------
Revenues:
Net product sales..................... $690,027 $ - $6,166 G1 $17,546 $ -
Net service sales..................... 61,161 - - - -
Collaborative joint venture project
reimbursement........................ - 5,409 (5,409) G2 - -
Grant revenue.........................
Revenues from research and
development contracts:
Related parties...................... 509 - - - -
Other................................ 786 36,585 15 G1 - -
------ ------ ------ ------ ------
Total revenues...................... 752,483 41,994 772 17,546 -
------- ------ ------ ------ ------
Operating costs and expenses:
Cost of products sold................. 162,894 - 8,156 G3
6,471 G1 8,457 232 W1
Cost of services sold................. 37,879 - - - -
Selling, general and administrative... 166,462 11,729 5,870 G1
1,671 G3
1,761 G3 1,557 -
Collaborative joint venture project
costs................................ - 5,409 (5,409) G2 - -
Research and development (including
research and development relating to
contracts)........................... 112,792 33,727 7,042 G3
4,568 G1 1,686 -
Amortization of intangibles........... 10,928 - 59,876 G1,G4 - 6,198 W2
Purchase of in-process research and
development.......................... 118,048 - (118,048) G5 - -
------- ------ -------- ------ ------
Total operating costs and expenses.. 609,003 50,865 (28,042) 11,700 6,430
------- ------ ------- ------ ------
Operating income (loss)................. 143,480 (8,871) 28,814 5,846 (6,430)
------- ------ ------ ------ ------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates........................... (44,965) 1,582 8,277 G1
1,812 G1
(1,582) G1 - -
Gain on affiliate sale of stock....... 22,689 - - - -
Gain (loss) on sale of investment in
equity securities.................... 23,173 - - - -
Minority interest in net loss of
subsidiary........................... 4,625 - - - -
Other................................. 5,203 - - - -
Investment income..................... 38,549 6,942 (18,923) G6 258 (3,543) W4
Interest expense...................... (14,159) (697) 269 G6
(10,781) G6 - -
------ ------ ------- ------ ------
Total other income (expenses)....... 35,115 7,827 (20,928) 258 (3,543)
------ ------ ------- ------ ------
Income (loss) before income taxes....... 178,595 (1,044) 7,886 6,104 (9,973)
(Provision for) benefit from income
taxes................................... (92,639) - 27,824 G7 (2,208) 2,888 W5
------- ------ ------ ------ ------
Division net income (loss).............. $85,956 $(1,044) $35,710 $3,896 $(7,085)
======= ======= ======= ====== =======
DISPOSITION
OF 50%
OWNERSHIP PRO FORMA
INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE GENZYME
ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE GENERAL
----------- --------- ---------- ----------- --------- ---------
Revenues:
Net product sales..................... $ - $ - $ - $713,739
Net service sales..................... - - - 61,161
Collaborative joint venture project
reimbursement........................ - - - -
Grant revenue......................... 250 250
Revenues from research and
development contracts:
Related parties...................... - - - 509
Other................................ - - - 37,386
-------- ------ ------ -------
Total revenues...................... - 250 - 813,045
-------- ------ ------ -------
Operating costs and expenses:
Cost of products sold.................
- - - 186,210
Cost of services sold................. - - - 37,879
Selling, general and administrative...
(2,927) A1 1,995 653 N1 188,771
Collaborative joint venture project
costs................................ - - - -
Research and development (including
research and development relating to
contracts)...........................
(11,862) A1 2,016 518 N1 150,487
Amortization of intangibles........... - - - 77,002
Purchase of in-process research and
development.......................... - - - -
-------- ------ ------ -------
Total operating costs and expenses.. (14,789) 4,011 1,171 640,349
-------- ------ ------ -------
Operating income (loss)................. 14,789 (3,761) (1,171) 172,696
-------- ------ ------ -------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates...........................
(2,651) A2 - - (37,527)
Gain on affiliate sale of stock....... - - - 22,689
Gain (loss) on sale of investment in
equity securities.................... - - - 23,173
Minority interest in net loss of
subsidiary........................... (4,625) A3 - - -
Other................................. - - - 5,203
Investment income..................... - 138 - 23,421
Interest expense......................
- (85) - (25,453)
-------- ------ ------ --------
Total other income (expenses)....... (7,276) 53 - 11,506
-------- ------ ------ -------
Income (loss) before income taxes....... 7,513 (3,708) (1,171) 184,202
(Provision for) benefit from income
taxes................................... (2,720) A4 - 1,766 N2 (65,089)
-------- ------ ------ -------
Division net income (loss).............. $ 4,793 $(3,708) $ 595 $119,113
======== ======= ====== ========
See Notes to Unaudited Pro Forma Financial Statements
12
GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(AMOUNTS IN THOUSANDS)
HISTORICAL
GENZYME HISTORICAL PRO FORMA FOOTNOTE
GENERAL WYNTEK ADJUSTMENTS REFERENCE
---------- ---------- ----------- ---------
Revenues:
Net product sales..................... $421,246 $8,412 $ -
Net service sales..................... 36,537 - -
Revenues from research and
development contracts:
Related parties...................... 1,632 - -
Other................................ 2,276 - -
---------- ---------- ----------- ---------
Total revenues...................... 461,691 8,412 -
---------- ---------- ----------- ---------
Operating costs and expenses:
Cost of products sold................. 95,363 3,224 -
Cost of services sold................. 20,901 - -
Selling, general and administrative... 125,089 1,438 -
Research and development (including
research and development relating to
contracts)........................... 82,591 759 -
Amortization of intangibles........... 35,852 - 2,583 W2
Purchase of in-process research and
development.......................... 8,768 - (8,768) W3
---------- ---------- ----------- ---------
Total operating costs and expenses.. 368,564 5,421 (6,185)
---------- ---------- ----------- ---------
Operating income (loss)................. 93,127 2,991 6,185
---------- ---------- ----------- ---------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates........................... (19,495) - -
Gain (loss) on sale of investment in
equity securities.................... (1,532) - -
Minority interest in net loss of
subsidiary........................... 1,999 - -
Other................................. (3,888) (7,729) -
Investment income..................... 21,011 108 (1,476) W4
Interest expense...................... (13,680) - -
---------- ---------- ----------- ---------
Total other income (expenses)....... (15,585) (7,621) (1,476)
---------- ---------- ----------- ---------
Income (loss) before income taxes....... 77,542 (4,630) 4,709
(Provision for) benefit from income
taxes................................. (30,679) 1,692 1,177 W5
---------- ---------- ----------- ---------
Division net income (loss) from
continuing operations................. $46,863 $(2,938) $5,886
========== ========== =========== =========
DISPOSITION
OF 50%
OWNERSHIP PRO FORMA
INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE GENZYME
ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE GENERAL
----------- --------- ---------- ----------- --------- ---------
Revenues:
Net product sales..................... $ - $ - $ - $429,658
Net service sales..................... - - - 36,537
Revenues from research and
development contracts:
Related parties...................... - - - 1,632
Other................................ - - - 2,276
----------- --------- ---------- ---------- -------- ---------
Total revenues...................... - - - 470,103
----------- --------- ---------- ---------- -------- ---------
Operating costs and expenses:
Cost of products sold................. - - - 98,587
Cost of services sold................. - - - 20,901
Selling, general and administrative... (1,267) A1 6,611 326 N1 132,197
Research and development (including
research and development relating to
contracts)........................... (2,730) A1 5,282 259 N1 86,161
Amortization of intangibles........... - - - 38,435
Purchase of in-process research and
development.......................... - - - -
----------- --------- ---------- ---------- -------- ---------
Total operating costs and expenses.. (3,997) 11,893 585 376,281
----------- --------- ---------- ---------- -------- ---------
Operating income (loss)................. 3,997 (11,893) (585) 93,822
----------- --------- ---------- ---------- -------- ---------
Other income (expenses):
Equity in net loss of unconsolidated
affiliates........................... (513) A2 - - (20,008)
Gain (loss) on sale of investment in
equity securities.................... - - - (1,532)
Minority interest in net loss of
subsidiary........................... (1,999) A3 - - -
Other................................. - - - (11,617)
Investment income..................... - 146 - 19,789
Interest expense...................... - (78) - (13,758)
----------- --------- ---------- ---------- -------- ---------
Total other income (expenses)....... (2,512) 68 - (27,126)
----------- --------- ---------- ---------- --------- ---------
Income (loss) before income taxes....... 1,485 (11,825) (585) 66,696
(Provision for) benefit from income
taxes................................. (542) A4 - 4,530 N2 (23,822)
----------- --------- ---------- ---------- -------- ---------
Division net income (loss) from
continuing operations................. $ 943 $(11,825) $3,945 $42,874
=========== ========= ========== ========== ======== =========
13
See Notes to Unaudited Pro Forma Financial Statements
GENZYME GENERAL
A DIVISION OF GENZYME CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(AMOUNTS IN THOUSANDS)
DISPOSITION
OF 50%
HISTORICAL OWNERSHIP PRO FORMA
GENZYME INTEREST IN FOOTNOTE HISTORICAL PRO FORMA FOOTNOTE GENZYME
GENERAL ATIII LLC REFERENCE NOVAZYME ADJUSTMENTS REFERENCE GENERAL
---------- ------------ --------- ---------- ----------- --------- ----------
ASSETS
Current assets:
Cash and cash equivalents............. $400,142 $ (64) A5 $5,506 $ - $405,584
Short-term investments................ 98,796 - - - 98,796
Accounts receivable, net.............. 191,213 - - - 191,213
Inventories........................... 108,331 - - - 108,331
Prepaid expenses and other current
assets............................... 34,936 1,022 A5 36 - 35,994
Due from Genzyme Biosurgery........... 38,680 - - - 38,680
Due from Molecular Oncology........... 6,655 - - - 6,655
Deferred tax assets - current......... 47,021 - - - 47,021
------- -------- ------ ------ --------
Total current assets................. 925,774 958 5,542 - 932,274
Property, plant and equipment, net...... 495,382 (163) 4,070 - 499,289
Long-term investments................... 456,036 - - - 456,036
Notes receivable - related party........ 10,159 - - - 10,159
Intangibles, net........................ 1,000,223 - 18 46,037 N4 1,046,278
Investments in equity securities........ 116,599 - - - 116,599
Other noncurrent assets................. 50,754 232 A5 -
(296) A6 48 - 50,738
------- -------- ------ ------ --------
Total assets......................... $3,054,927 $ 731 $9,678 $46,037 $3,111,373
========== ======== ====== ======= ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable...................... $22,151 $ - $ 907 $ - $ 23,058
Accrued expenses...................... 107,073 (342) A5 138 879 N5 107,748
Income taxes payable.................. 43,835 - - - 43,835
Deferred revenue...................... 1,189 - - - 1,189
Current portion of long-term debt and
capital lease obligations............ 1,449 - 88 - 1,537
------- -------- ------ ------ --------
Total current liabilities............ 175,697 (342) 1,133 879 177,367
Long-term debt and capital lease
obligations........................... 29,486 - 1,516 - 31,002
Convertible notes and debentures........ 599,210 - 585 (585) N6 599,210
Deferred tax liabilities................ 128,363 - - 4,023 N4 132,386
Other noncurrent liabilities............ 5,652 - - - 5,652
------- -------- ------ ------ --------
Total liabilities.................... 938,408 (342) 3,234 4,317 945,617
Series A redeemable convertible,
cumulative participating preferred
stock................................. - - 10,021 (10,021) N6 -
Series B redeemable convertible,
cumulative participating preferred
stock................................. - - 8,349 (8,349) N6 -
Division equity......................... 2,116,519 1,369 A5 -
(296) A6 - 113,998 N4
15,989 N4
- 8,989 N4
- (3,512) N4
- (87,300) N4 2,165,756
Novazyme Pharmaceuticals, Inc. common
stock................................. 14 (14) N7 -
Novazyme Pharmaceuticals, Inc.
additional paid-in capital............ 4,564 (4,564) N7 -
Novazyme Pharmaceuticals, Inc.
accumulated deficit................... - - (16,504) 16,504 N7 -
------- -------- ------- ------ ---------
Total division equity................ 2,116,519 1,073 (11,926) 60,090 2,165,756
--------- -------- ------- ------ ---------
Total liabilities and division
equity.............................. $3,054,927 $ 731 $9,678 $46,037 $3,111,373
========== ======== ====== ======= ==========
See Notes to Unaudited Pro Forma Financial Statements
14
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 pending acquisition of Novazyme on the
o unaudited statements of operations for the six months ended
June 30, 2001 and the year ended December 31, 2000, and
o unaudited balance sheet as of June 30, 2001
of both Genzyme and Genzyme General, the division to which Genzyme will allocate
the assets and liabilities and operations of Novazyme.
The following unaudited pro forma combined financial information also
describes the pro forma effect of Genzyme's acquisition of GelTex
Pharmaceuticals, Inc., Biomatrix, Inc., Wyntek Diagnostics, Inc. and Focal, Inc.
and the disposition of its 50% ownership interest in ATIII LLC on the unaudited
pro forma combined statements of operations for Genzyme and Genzyme General for
the year ended December 31, 2000 and for the six months ended June 30, 2001 as
if these transactions took place on January 1, 2000 and on the unaudited pro
forma combined balance sheets of Genzyme and Genzyme General as of June 30,
2001. In addition, Genzyme's unaudited 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.
Genzyme allocated the acquisitions of GelTex and Wyntek and the disposition of
its 50% ownership interest in ATIII LLC to Genzyme General. Genzyme allocated
its acquisitions of Biomatrix and Focal to Genzyme Biosurgery. The results of
operations of GelTex, Biomatrix, Wyntek and Focal are included in Genzyme's
results beginning on the respective dates of acquisition and the results of
operations of ATIII LLC are excluded from Genzyme's results as of the date of
disposition.
(2) GENZYME'S ACQUISITIONS AND DISPOSITION
(A) GENZYME'S ACQUISITION OF GELTEX
Genzyme acquired GelTex on December 14, 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 15.8
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 3.2 million shares of Genzyme General Stock.
The vesting period 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 that date. Additionally, the vesting of stock options granted to
directors and several officers of GelTex were accelerated immediately on the
effective date of the merger. Using the acquisition price of GelTex common stock
and certain other assumptions in the Black-Scholes option valuation model, the
Genzyme General options and warrants issued in exchange for the GelTex options
and warrants were valued at approximately $62.9 million. In accordance with
FIN 44,
15
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
the intrinsic value of the portion of the unvested options related to the future
service period of approximately $10.2 million was allocated to deferred
compensation in Genzyme's stockholders' equity or division equity for Genzyme
General, rather than to goodwill. The unvested portion is being amortized to
operating expense over the remaining vesting period of approximately one year.
(B) ACQUISITION OF BIOMATRIX
Genzyme acquired Biomatrix on December 18, 2000. Concurrently with this
acquisition:
o Genzyme Biosurgery was created as a new division of Genzyme;
o the businesses of Genzyme Surgical Products and Genzyme Tissue
Repair were reallocated to Genzyme Biosurgery;
o the outstanding shares of Surgical Products Stock and Tissue
Repair Stock were cancelled in exchange for shares of Biosurgery
Stock; and
o the businesses of Biomatrix were allocated to Genzyme Biosurgery.
The following shares of Biosurgery Stock were distributed:
o 9,092,763 shares of Biosurgery Stock were exchanged for
15,004,560 shares of Surgical Products Stock;
o 9,679,769 shares of Biosurgery Stock were exchanged for
28,877,593 shares of Tissue Repair Stock; and
o 17,516,712 shares of Biosurgery Stock and approximately $252.4
million of cash, were exchanged for 24,338,908 shares of
Biomatrix common stock.
In addition, options to purchase:
o 3,252,386 shares of Surgical Products Stock under Genzyme's
equity plans;
o 3,923,281 shares of Tissue Repair Stock under Genzyme's equity
plans; and
o 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 were 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 Genzyme's stockholders' equity or
division equity for Genzyme Biosurgery,
16
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
rather than to goodwill. The unvested portion is being amortized to operating
expense over the remaining vesting periods of approximately three years.
(C) ACQUISITION OF WYNTEK
Genzyme acquired Wyntek on June 1, 2001 for $65.0 million in cash. Genzyme
assumed no options or warrants to purchase Wyntek common stock in the
transaction. The historical financial information presented for Wyntek
represents Wyntek's results of operations for the five months ended May 31,
2001.
(D) ACQUISITION OF FOCAL
Genzyme acquired Focal on June 30, 2001. Genzyme issued approximately 2.1
million shares of Biosurgery Stock for all of the outstanding shares of Focal
common stock, excluding shares already owned by Genzyme which were canceled 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 date of announcement
of the merger, the value of the shares of Biosurgery Stock was approximately
$9.5 million. In addition, options to purchase approximately 1.5 million shares
of Focal common stock and warrants to purchase approximately 43,782 shares of
Focal common stock were exchanged for options to purchase approximately 232,000
shares of Biosurgery Stock and warrants to purchase approximately 7,000 shares
of Biosurgery Stock. Using the acquisition price of Focal common stock and
certain other assumptions in the Black-Scholes option valuation model, the
Biosurgery options and warrants issued in exchange for the Focal options were
valued at approximately $0.4 million. There was no intrinsic value for the
portion of the unvested options related to the future service period.
(E) DISPOSITION OF GENZYME'S 50% OWNERSHIP INTEREST IN ATIII LLC
On July 31, 2001, Genzyme transferred its 50% ownership interest in ATIII
LLC, its joint venture with Genzyme Transgenics for the development and
commercialization of ATIII, to Genzyme Transgenics. In exchange for its interest
in the joint venture, Genzyme will receive a royalty on worldwide net sales
(excluding Asia) of any of Genzyme Transgenics' products based on ATIII
beginning three years after the first commercial sale up to a cumulative maximum
amount of $30.0 million. Prior to the disposition, Genzyme consolidated the
results of ATIII LLC as Genzyme had control of ATIII LLC through its combined,
direct and indirect ownership interest in the joint venture.
(F) PENDING ACQUISITION OF NOVAZYME
On August 6, 2001, Genzyme entered into a definitive agreement to acquire
Novazyme Pharmaceuticals, Inc., for $137.5 million, payable in shares of Genzyme
General Stock plus the assumption of all outstanding options, warrants and
Series B Preferred Stock purchase rights to purchase shares of Novazyme common
stock on an as-converted basis. Novazyme is a privately held company that is
developing biotherapies for the treatment of lysosomal storage disorders.
Novazyme stockholders are also eligible to receive two subsequent payments
totaling $87.5 million if Genzyme receives U.S. marketing approval for two
products to treat lysosomal storage disorders using certain of Novazyme's
technologies by certain dates. The contingent payments are also payable in
shares of Genzyme General Stock.
17
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
The upfront payment of the merger consideration of $137.5 million, payable
in shares of Genzyme General Stock, is subject to a deduction based on the value
of Novazyme's vested options and warrants and Series B Preferred Stock purchase
rights outstanding on the date of acquisition. Genzyme refers to this deduction
as the "convertible deduction." The convertible deduction is calculated using
the formula set forth in section 1.6(a)(iii) of the merger agreement attached as
Annex A. For purposes of the pro forma financial statements, Genzyme has
calculated the convertible deduction to be approximately $26.0 million at June
30, 2001. Assuming that a measurement date has occurred, the value of the
Genzyme General Stock to be issued in exchange for the outstanding shares of
Novazyme common stock was $114.0 million based on the average trading price over
three days before and after August 7, 2001, the date of announcement of the
merger. In addition, options, warrants and Series B Preferred Stock purchase
rights to purchase approximately 1.10 million shares of Novazyme common stock
will be exchanged for options, warrants and Series B Preferred Stock purchase
rights to purchase approximately 0.6 million shares of Genzyme General Stock.
Using the acquisition price of Novazyme common stock and certain other
assumptions in the Black-Scholes option valuation model, the Genzyme General
options, warrants and Series B Preferred Stock purchase rights issued in
exchange for the Novazyme options, warrants and Series B Preferred Stock
purchase rights were valued at approximately $25.0 million. 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 Genzyme's
stockholders' equity, or division equity for Genzyme General. Based on the value
of Genzyme General Stock on August 7, 2001, approximately $3.5 million would be
allocated to deferred compensation.
(3) PURCHASE PRICE ALLOCATION
(a) 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 values as of December 14, 2000 (amounts in thousands):
Cash and investments................................................... $ 142,994
Current assets......................................................... 32,825
Property, plant and equipment.......................................... 45,477
Intangible assets (to be amortized straight-line over 5 to 15 years)... 465,109
Goodwill (to be amortized straight-line 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)
-----------
Allocated purchase price............................................. $1,076,035
===========
As part of the acquisition of GelTex, Genzyme acquired all of GelTex's
ownership 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 of accounting. The adjustments below also
reflect the consolidation of RenaGel LLC into Genzyme's financial statements and
accounting for its purchase of GelTex's 50% ownership 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% ownership interest in RenaGel LLC, the assets of
18
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
RenaGel LLC were adjusted to fair value only to the extent of the 50% ownership
interest Genzyme acquired.
In connection with the purchase of GelTex, Genzyme allocated approximately
$118.0 million of the purchase price to in-process research and development, or
IPR&D. Genzyme's 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 its
annual report on Form 10-K for the year ended December 31, 2000.
(b) 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 and equipment............................................. 38,479
Notes receivable from stockholders........................................ 14,760
Intangible assets (to be amortized straight-line over 1.5 to 11.0 years).. 284,854
Goodwill (to be amortized straight-line 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)
-----------
Allocated purchase price................................................ $ 482,403
===========
In connection with the purchase of Biomatrix, Genzyme allocated
approximately $82.1 million of the purchase price to IPR&D. Genzyme's 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 its annual report on Form 10-K for the year
ended December 31, 2000.
19
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
(c) WYNTEK
The aggregate purchase price of $65.2 million was allocated to the acquired
tangible and intangible assets and liabilities based on their estimated
respective fair values as of June 30, 2001 (amounts in thousands):
Cash and cash equivalents.............................................. $ 4,974
Current assets......................................................... 4,966
Property, plant and equipment.......................................... 1,843
Deferred tax assets.................................................... 2,312
Intangible assets (to be amortized straight-line over 5 to 10 years)... 39,444
In-process research and development.................................... 8,768
Goodwill (to be amortized straight-line over 10 years)................. 19,908
Deferred tax liability................................................. (14,197)
Assumed liabilities.................................................... (2,784)
----------
Allocated purchase price............................................. $ 65,234
==========
In connection with the acquisition of Wyntek, Genzyme allocated
approximately $8.8 million of the purchase price IPR&D. Genzyme's management
assumes responsibility for determining the IPR&D valuation. 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 date of 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
full disclosure of the methodology used in determining the value Genzyme
assigned to the Wyntek IPR&D programs is included in Genzyme's quarterly report
on Form 10-Q for the quarter ended June 30, 2001.
(d) FOCAL
The aggregate purchase price of $15.9 million was allocated to the acquired
tangible and intangible assets and liabilities based on their estimated
respective fair values as of June 30, 2001 (amounts in thousands):
Cash and cash equivalents............................................. $ 2,331
Current assets........................................................ 6,003
Property, plant and equipment......................................... 1,818
Notes receivable from related party................................... 168
Intangible assets (to be amortized straight-line over 3 to 12 years).. 7,909
Goodwill (to be amortized straight-line over 12 years)................ 615
Assumed liabilities................................................... (3,273)
Notes receivable from stockholders.................................... 367
----------
Allocated purchase price............................................ $ 15,938
==========
No portion of the purchase price was allocated to IPR&D.
20
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
(e) NOVAZYME
For purposes of the unaudited, pro forma combined financial statements, the
aggregate purchase price of $139.9 million was allocated to the acquired
tangible and intangible assets and liabilities based on their estimated
respective fair values as of June 30, 2001 (amounts in thousands):
Cash and cash equivalents.................... $ 5,506
Current assets............................... 36
Property, plant and equipment................ 4,070
Intangible assets............................ 7,618
In-process research and development.......... 87,300
Goodwill..................................... 38,437
Other noncurrent assets...................... 48
Assumed liabilities.......................... (2,649)
Deferred tax liability....................... (4,023)
Deferred compensation........................ 3,512
-----------
Allocated purchase price................... $ 139,855
===========
The total purchase price, the fair values 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 Genzyme has presented in these unaudited pro forma financial statements.
In connection with its acquisition of Novazyme, Genzyme acquired a
technology platform that could be leveraged to treat various lysosomal storage
disorders (LSDs). As of the acquisition date, the technology platform had not
achieved technological feasibility and would require significant further
development to complete. Accordingly, the portion of the purchase price to be
allocated to this technology platform of approximately $87.3 million will be
treated as IPR&D and charged to expense.
Novazyme's biotherapies for the treatment of LSDs are based on proprietary
technologies for the targeted delivery of missing enzymes critical for the
treatment of specific LSDs. The ability to target enzymes to the affected cells
is completely dependent upon each enzyme having the "correct" carbohydrate
structure attached to it. For almost all lysosomal storage diseases, "correct"
means having two phosphate molecules attached to the end of this carbohydrate
structure. Only if these phosphates are attached to the carbohydrate is a
lysosomal enzyme properly "phosphorylated." Likewise, only a properly
phosphorylated lysosomal enzyme can be transmitted to the lysosome of each and
every cell in the a persons body. Thus, phosphorylation is critically important
to the success of nearly all enzyme replacement therapies for lysosomal storage
diseases. Novazyme's proprietary phosphorylation technologies allow it to
replicate the same enzyme and attach carbohydrate structures that a normal
functioning, healthy human produces for lysosomal enzymes.
Genzyme's management assumes responsibility for determining the IPR&D
valuation and engaged an independent third-party appraisal company to assist in
the valuation of the intangible assets acquired. The final valuation will be
completed following the closing date of the transaction.
The fair value assigned to purchased IPR&D was estimated by discounting, to
present value, the probability-adjusted net cash flows expected to result once
the technology has reached technological feasibility and is utilized in the
treatment of certain lysosomal storage disorders. A discount rate of 15%
21
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
was applied to estimate the present value of these cash flows and is
consistent with the overall risks of the platform technology. In estimating
future cash flows, management considered other tangible and intangible assets
required for successful exploitation of the technology and adjusted the future
cash flows to reflect the contribution of value from these assets.
In the allocation of purchase price to the IPR&D, the concept of
alternative future use was specifically considered. The platform technology is
specific to lysosomal storage disorders and there is currently no alternative
use for the technology in the event that it fails as a platform for enzyme
replacement therapy.
(4) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF GELTEX
The following adjustments reflect Genzyme's acquisition of GelTex for a
combination of cash and stock and the exchange of GelTex options and warrants
for options and warrants to purchase Genzyme General Stock. As part of the
acquisition of GelTex, Genzyme acquired all of GelTex's ownership 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 of accounting. The adjustments below reflect the consolidation
of RenaGel LLC into Genzyme's financial statements and Genzyme's purchase of
GelTex's ownership interest in the joint venture using the purchase method of
accounting.
The aggregate purchase price is comprised of the following (amounts in
thousands):
Issuance of 15,772,808 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
===========
The results of operations of GelTex are included in Genzyme's consolidated
financial statements and the combined financial statements of Genzyme General as
of December 14, 2000, the date of acquisition.
I. PRO FORMA ADJUSTMENTS TO THE UNAUDITED, COMBINED STATEMENTS OF
OPERATIONS OF GENZYME AND GENZYME GENERAL
(G1) To eliminate Genzyme's and GelTex's equity in the net loss of RenaGel
LLC and to consolidate RenaGel LLC with Genzyme.
(G2) To eliminate intercompany transactions among Genzyme, GelTex and
RenaGel LLC.
(G3) To record the following:
o amortization of deferred compensation associated with Genzyme
General options that were issued in exchange for GelTex options;
22
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
o impact of the additional expense associated with the increased
basis for the RenaGel LLC inventory of $8.2 million; and
o impact of the additional depreciation expense related to the
increased basis of GelTex's fixed assets.
(G4) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL
VALUE AMORTIZATION
INTANGIBLE ASSETS:
Workforce (to be amortized straight-line over 5 years)....... $ 2,327 $ 465
Patents (to be amortized straight-line over 15 years)........ 115,772 7,718
Trademarks/trade name (to be amortized straight-line
over 15 years)............................................. 6,526 435
Core technology (to be amortized straight-line
over 15 years)............................................. 65,313 4,354
Current products technology (to be amortized
straight-line over 5 to 15 years).......................... 275,171 19,948
Goodwill (to be amortized straight-line over 15 years)....... 449,634 29,976
-------- --------
Total...................................................... $914,743 $ 62,896
======== ========
The pro forma adjustment of $59.9 million for the year ended December 31,
2000 is for the period prior to the effective date of the merger.
(G5) To eliminate the charge for acquired IPR&D recorded by Genzyme in
connection with the GelTex acquisition. This amount was eliminated as
it reflects a material non-recurring charge directly resulting from
the acquisition.
(G6) 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.
(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) To transfer the net loss of GelTex 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 GelTex's weighted average shares outstanding, to reflect
the issuance of 15,772,808 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.
23
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
(5) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF BIOMATRIX
These adjustments reflect Genzyme's acquisition of Biomatrix and 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. They also reflect the exchange of Biomatrix
options with options to purchase Biosurgery Stock.
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
==========
The results of operations of Biomatrix are included in Genzyme's
consolidated financial statements as of December 18, 2000, the date of
acquisition.
I. PRO FORMA ADJUSTMENTS TO GENZYME'S UNAUDITED, COMBINED STATEMENT OF
OPERATIONS
(B1) To record the following:
o amortization of deferred compensation associated with Genzyme
Biosurgery options that were issued in exchange for Biomatrix
options;
o impact of the additional expense associated with the increased
basis for the Biomatrix inventory of $11.3 million; and
o impact of the reduced depreciation expense related to the
decreased basis of Biomatrix's fixed assets.
24
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
(B2) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
ASSIGNED ANNUAL
VALUE AMORTIZATION
INTANGIBLE ASSETS:
Workforce (to be amortized straight-line over 5 years)... $ 2,017 $ 404
Non-compete agreements (to be amortized straight-
line over 1.5 years).................................. 640 427
Distribution agreements (to be amortized straight-line
over 8 years)......................................... 13,950 1,744
Trademark/trade name (to be amortized straight-line
over 11 years)........................................ 48,746 4,431
Patented core technology (to be amortized straight-line
over 11 years)........................................ 59,877 5,443
Current products technology (to be amortized straight-
line over 11 years)................................... 159,624 14,511
Goodwill (to be amortized straight-line over 11 years)... 112,262 10,206
---------- ----------
Total................................................ $ 397,116 $ 37,166
========== ==========
The pro forma adjustment of $35.6 million is for the period prior to the
effective date of the merger.
(B3) To eliminate the charge for acquired IPR&D Genzyme recorded in
connection with the Biomatrix acquisition. This amount was eliminated
as it reflects a material non-recurring charge directly resulting from
the acquisition.
(B4) 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.
(B5) To adjust the tax provision for the impact of the amortization of
acquired intangibles, the reduction in investment income, the
additional interest expense, the historical tax provision 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 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 cannot 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
25
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
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's profitability offsetting losses incurred by
Genzyme Biosurgery.
(B7) To record the creation of Biosurgery Stock. Net losses for Surgical
Products Stock and Tissue Repair Stock and net income for Biomatrix
common stock have been transferred to the calculation of loss per
share allocated to Biosurgery Stock.
(B8) To record the tax benefits related to the Biomatrix pro forma
adjustments which are allocated to Genzyme Biosurgery.
(B9) 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 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.
(6) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF WYNTEK
The following adjustments reflect Genzyme's acquisition of Wyntek for cash.
Genzyme assumed no options or warrants to purchase Wyntek common stock in the
transaction.
The aggregate purchase price is comprised of the following (amounts in
thousands):
Cash payment............................................ $ 65,000
Acquisition costs....................................... 234
----------
Aggregate purchase price................................ $ 65,234
==========
The results of operations of Wyntek are included in Genzyme's consolidated
financial statements and the combined financial statements of Genzyme General as
of June 1, 2001, the date of acquisition.
I. PRO FORMA ADJUSTMENTS TO THE UNAUDITED, COMBINED STATEMENTS OF
OPERATIONS OF GENZYME AND GENZYME GENERAL
(W1) To record the impact of the additional expense associated with the
increased basis for the Wyntek inventory. There is no similar pro
forma adjustment required for the six months ended June 30, 2001 as it
is assumed that all of the acquired inventory would have been sold by
December 31, 2000.
26
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
(W2) To record the amortization of acquired intangible assets and goodwill
for the year ended December 31, 2000 and for the period from January
1, 2001 to May 31, 2001 (amounts in thousands):
ASSIGNED ANNUAL 5 MONTH
VALUE AMORTIZATION AMORTIZATION
INTANGIBLE ASSETS:
Workforce (to be amortized straight-line over 3 years)..... $ 1,125 $ 375 $ 156
Patented core technology (to be amortized straight-line
over 10 years)........................................... 796 80 33
Current products technology (to be amortized straight-
line over 10 years)...................................... 37,523 3,752 1,564
Goodwill (to be amortized straight-line over 10 years)..... 19,908 1,991 830
--------- --------- ---------
Total.................................................. $ 59,352 $ 6,198 $ 2,583
========= ========= =========
(W3) To eliminate the charge for acquired IPR&D recorded by Genzyme in June
2001 in connection with the Wyntek acquisition. This amount was
eliminated as it reflects a material non-recurring charge directly
resulting from the acquisition.
(W4) To reduce investment income for the year ended December 31, 2000 and
for January 1, 2001 to May 31, 2001 to reflect the payment of $65
million of cash at a rate of return of 5.45% per annum.
(W5) To adjust the tax provision for the impact of the historical net loss
incurred by Wyntek and for the pro forma adjustments related to the
acquisition of Wyntek.
(W6) The net income of Wyntek has been re-allocated to the calculation of
net income per share allocated to Genzyme General Stock. The
adjustment to Genzyme General's division net income in the calculation
of income allocated to Genzyme General Stock reflects the aggregate
impact of all pro forma adjustments on Genzyme General's division net
income.
(7) PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITION OF FOCAL
The following adjustments reflect the acquisition of Focal. Genzyme
acquired the outstanding Focal common stock that it did not already own for a
combination of cash and stock and the exchange 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......... $ 9,450
Cash paid to selling securityholder...................... 11
---------
Subtotal................................................. 9,461
Issuance of Biosurgery options to Focal optionholders.... 351
Acquisition costs........................................ 638
Existing equity investment in Focal...................... 5,488
---------
Allocated purchase price............................... $ 15,938
=========
27
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
The results of operations of Focal are included in Genzyme's consolidated
financial statements as of June 30, 2001, the date of acquisition.
I. PRO FORMA ADJUSTMENTS TO GENZYME'S COMBINED STATEMENTS OF OPERATIONS
(F1) To eliminate sales and cost of sales related to product revenue
transactions between Genzyme 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 eliminate the equity in net loss of Focal recognized by
Genzyme in the six months ended June 30, 2001.
(F2) To reverse the collaborative research and development revenue recorded
as a result of the amortization of deferred revenue during the year
ended December 31, 2000 and the six months ended June 30, 2001.
(F3) To record the impact of the additional expense associated with the
increased basis for the Focal inventory. There is no similar pro forma
adjustment required for the six months ended June 30, 2001 as it is
assumed that all of the acquired inventory would have been sold by
December 31, 2000.
(F4) To record the amortization of acquired intangible assets and goodwill
(amounts in thousands):
SEMI-
ASSIGNED ANNUAL ANNUAL
VALUE AMORTIZATION AMORTIZATION
INTANGIBLE ASSETS:
Patented core technology (to be amortized straight-line
over 12 years)............................................ $ 4,928 $ 411 $ 206
Favorable lease (to be amortized straight-line over
3 years).................................................. 1,556 519 260
Patent (to be amortized straight-line over 12 years)........ 1,013 84 42
Workforce (to be amortized straight-line over 5 years)...... 412 82 41
Goodwill (to be amortized straight-line over 10 years)...... 615 51 26
---------- ---------- --------
Total..................................................... $ 8,524 $ 1,147 $ 575
========== ========== ========
(F5) To adjust the tax provision for the net loss incurred by Focal and for
the pro forma adjustments related to the Focal merger.
(F6) 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 cannot 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.
(F7) 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 re-allocated to the
28
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
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.
(8) PRO FORMA ADJUSTMENTS RELATED TO THE DISPOSITION OF GENZYME'S 50% OWNERSHIP
INTEREST IN ATIII LLC
On July 31, 2001, Genzyme transferred its 50% ownership interest in ATIII
LLC, its joint venture with Genzyme Transgenics for the development and
commercialization of ATIII, to Genzyme Transgenics. In exchange for its interest
in the joint venture, Genzyme will receive a royalty on worldwide net sales
(excluding Asia) of any of Genzyme Transgenics' products based on ATIII
beginning three years after the first commercial sale of each such product up to
a cumulative maximum amount of $30.0 million. Prior to the disposition, Genzyme
consolidated the results of ATIII LLC as Genzyme had control of ATIII LLC
through its combined, direct and indirect ownership interest in the joint
venture.
The following adjustments reflect the disposition of Genzyme's 50%
ownership interest in ATIII LLC.
I. PRO FORMA ADJUSTMENTS TO THE UNAUDITED, COMBINED STATEMENTS OF
OPERATIONS OF GENZYME AND GENZYME GENERAL
(A1) To eliminate ATIII LLC's historical results of operations.
(A2) To adjust Genzyme's equity in the net losses of Genzyme Transgenics to
reflect Genzyme Transgenics' assumption of Genzyme's portion of losses
of ATIII LLC (amounts in thousands):
FOR THE FOR THE
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
2000 JUNE 30, 2001
------------ -------------
ATIII LLC's historical net loss.................................... $ (14,789) $ (3,997)
Genzyme's historical share of net loss............................. (10,164) (1,999)
Genzyme's ownership interest in Genzyme Transgenics................ 26.08% 25.67%
Pro forma adjustment to equity in net loss of Genzyme Transgenics.. (2,651) (513)
(A3) To eliminate Genzyme's historical minority interest recorded in
connection with Genzyme's consolidation of the results of ATIII LLC
and which represents Genzyme Transgenics' portion of the losses of
ATIII LLC.
(A4) To adjust the tax provision for the impact of the elimination of the
historical losses of ATIII LLC and for the pro forma adjustments
related to the disposition of Genzyme's 50% ownership interest in
ATIII LLC.
29
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
II. PRO FORMA ADJUSTMENTS TO THE UNAUDITED, COMBINED BALANCE SHEETS OF
GENZYME AND GENZYME GENERAL
(A5) To eliminate the net assets of ATIII LLC on the date of disposition
and record a gain on the disposition of Genzyme's 50% ownership
interest in ATIII LLC (amounts in thousands):
Cash and cash equivalents............................ $ (64)
Property, plant and equipment........................ (163)
Elimination of minority interest in ATIII LLLC....... 232
Accrued liabilities.................................. 342
Due to Genzyme....................................... 1,022
-------
Gain on transfer of 50% ownership interest to Genzyme
Transgenics.................................... $ 1,369
=======
(A6) To record a loss on Genzyme's investment in Genzyme
Transgenics due to the increase Genzyme Transgenics' equity as
a result of acquiring Genzyme's 50% ownership interest in
ATIII LLC.
(9) PRO FORMA ADJUSTMENTS RELATED TO THE PENDING ACQUISITION OF NOVAZYME
The following adjustments reflect Genzyme's acquisition of Novazyme for
stock and the exchange of Novazyme options, warrants and Series B Preferred
Stock purchase rights with options, warrants and stock purchase rights to
purchase shares of Genzyme General Stock.
The aggregate purchase price is comprised of the following (amounts in
thousands):
Issuance of 2,014,814 shares of Genzyme General Stock................ $113,998
Issuance of Series B Preferred Stock purchase rights to purchase
428,373 shares of Genzyme General Stock........................... 15,989
Issuance of options and warrants to purchase 174,154 shares of
Genzyme General Stock to Novazyme option and warrant holders....... 8,989
Acquisition costs.................................................... 879
----------
Aggregate purchase price ........................................ $139,855
==========
The 2.0 million shares of Genzyme General Stock expected to be issued in
exchange for the outstanding shares of Novazyme stock were valued at $114.0
million using an average trading price of Genzyme General Stock over the three
days before and after the August 7, 2001 announcement of the merger (the assumed
measurement date). The exact amount of the number of shares of Genzyme General
Stock to be issued may change as the number of Novazyme common stock changes
prior to closing. The number of outstanding shares of Novazyme stock will
increase prior to closing upon conversion of all shares of Series A Preferred
Stock and Series B Preferred Stock, the conversion of outstanding debentures and
the exercise of outstanding options, warrants and Series B Preferred Stock
purchase rights.
The purchase price includes $25.0 million for the estimated fair value of
the Genzyme General options, warrants and shares of Genzyme General Stock to be
issued in exchange for the Novazyme options, warrants and Series B Preferred
Stock purchase rights. In accordance with FIN 44, the intrinsic value of the
portion of the unvested options related to the future service period of $3.5
million has been allocated to deferred compensation within stockholders' equity
in Genzyme's pro forma, unaudited,
30
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
combined balance sheet as of June 30, 2001 and to division equity in the
unaudited, pro forma combined balance sheet of Genzyme General for the same
period. The unamortized portion is being amortized to operating expense over the
remaining vesting period.
I. PRO FORMA ADJUSTMENTS TO THE UNAUDITED, COMBINED STATEMENTS OF
OPERATIONS OF GENZYME AND GENZYME GENERAL
(N1) Amortization of deferred compensation associated with Genzyme General
options that were issued in exchange for Novazyme options.
(N2) To adjust the tax provision for the impact of the historical losses of
Novazyme and the pro forma adjustments related to the acquisition of
Novazyme.
II. PRO FORMA ADJUSTMENTS TO THE UNAUDITED, COMBINED BALANCE SHEETS OF
GENZYME AND GENZYME GENERAL
(N3) The net losses of Novazyme have been re-allocated to the calculation
of net income per share allocated to Genzyme General Stock. The
adjustment to Genzyme General's division net income from continuing
operations reflects the aggregate impact of all pro forma adjustments
on Genzyme General's division net income from continuing operations.
(N4) To record the acquisition of the net assets of Novazyme for an
aggregate purchase price of $139.9 million (see Note 3(e)) and the
issuance of approximately 2,014,814 shares of Genzyme General Stock.
The intangible assets of approximately $46.0 million are as follows:
ASSIGNED
VALUE
INTANGIBLE ASSETS:
Unpatented technology.............. $ 7,600
Goodwill........................... 38,437
---------
Total.......................... $ 46,037
=========
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards, or SFAS, No. 141,
"Business Combinations and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires that all business
combinations be accounted for under the purchase method only and that
certain acquired intangible assets in a business combination be
recognized as assets apart from goodwill. SFAS No. 142 requires that
ratable amortization of goodwill and certain other intangible assets
be replaced with periodic tests of the goodwill's impairment and that
other intangible assets be amortized over their useful lives. SFAS No.
141 is effective for all business combinations initiated after June
30, 2001 and for all business combinations accounted for by the
purchase method for which the date of acquisition is after June 30,
2001. The provisions of SFAS No. 142 will be effective for fiscal
years beginning after December 15, 2001, and will thus be adopted by
Genzyme, as required, in fiscal year 2002. Accordingly, because the
provisions of SFAS No. 141 and SFAS No. 142 will
31
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (Continued)
apply to Genzyme's acquisition of Novazyme, there is no pro forma
adjustment to the statements of operations of Genzyme or Genzyme
General for amortization of goodwill or acquired unpatented technology
for the year ended December 31, 2000 and for the six months ended June
30, 2001 resulting from the acquisition of Novazyme.
Material non-recurring charges, such as the acquired IPR&D charge of
$87.3 million resulting from the pending acquisition of Novazyme, are
not reflected in Genzyme's unaudited pro forma statements of
operations for the year ended December 31, 2000 or the six months
ended June 30, 2001, or the unaudited pro forma statements of
operations for Genzyme General for the same periods. The $87.3 million
allocated to in-process technology has been charged to accumulated
deficit for purposes of the pro forma balance sheet presentation only
and will be charged to expense in the statements of operations of
Genzyme and Genzyme General upon completion of the acquisition of
Novazyme.
(N5) To record $0.9 million of accrued expenses related to estimated
acquisition costs that have not been reflected in Genzyme's historical
balances as of June 30, 2001.
(N6) To reflect the assumed conversion of Novazyme's historical convertible
debt, Series A Preferred Stock and Series B Preferred Stock into
shares of Novazyme common stock on or before the date of acquisition.
(N7) To eliminate Novazyme's historical stockholders' equity amounts
totaling $(11.9) million.
32