EX-99.2 3 exhibit992.htm EXHIBIT 99.2 Exhibit


SPECTRUM PHARMACEUTICALS, INC.
Pro Forma Consolidated Financial Statements
(Unaudited)
On March 1, 2019, Spectrum Pharmaceuticals, Inc. (the “Company”), completed the sale of its seven commercialized drugs, including FUSILEV ®, KHAPZORY™, FOLOTYN ®, ZEVALIN ®, MARQIBO ®, BELEODAQ ®, and EVOMELA ® (the “Product Portfolio”), to Acrotech Biopharma LLC, a Delaware limited liability company (the "Buyer"). Upon transaction closing, the Company received $158.8 million in an upfront cash payment (of which $4 million will be held in escrow for six months), and is entitled to receive up to an aggregate of $140 million for the Buyer's achievement of certain regulatory and sales-based milestones relating to this product portfolio (the "Acrotech Transaction").
The unaudited Pro Forma Consolidated Balance Sheet is presented below and was derived from the Company's historical consolidated financial statements, in order to give effect to the Acrotech Transaction as if it occurred on December 31, 2018. The unaudited Pro Forma Statements of Operations were derived from the historical consolidated financial statements in order to give effect to the Acrotech Transaction as if it occurred on January 1, 2016. The pro forma adjustments remove all of the assets, liabilities, and results of operations attributable to the Product Portfolio, and give effect to an adjustment to reflect the net cash proceeds, restricted cash, and gain from the Acrotech Transaction. The unaudited Pro Forma Consolidated Balance Sheet and the unaudited Consolidated Statements of Operations do not purport to be indicative of the results as of such date, or for such periods, nor are they necessarily indicative of future results that would have been obtained if the sale had been completed as of the dates indicated in the notes to these Pro Forma Consolidated Financial Statements.
The pro forma adjustments are based on the best information currently available and various assumptions that management believes are factually supportable, reasonable, and directly attributable to the Acrotech Transaction. These adjustments are expected to have a continuing impact on the Company's consolidated results; however, such adjustments are subject to change with additional information and analysis. The unaudited Pro Forma Consolidated Balance Sheet and the unaudited Pro Forma Consolidated Statements of Operations should be read in conjunction with the historical financial statements and notes thereto contained in the Company's 2018 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission ("SEC") on February 28, 2019.





SPECTRUM PHARMACEUTICALS, INC.

PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2018
(In thousands, except share and per share amounts)
(Unaudited)

 
Historical
 
Pro Forma Adjustments
 
Pro Forma
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
157,480

 
$
154,764

(a)
$
312,244

Restricted cash
—

 
4,000

(a)
4,000

Marketable securities
46,508

 
—

 
46,508

Accounts receivable, net of allowance for doubtful accounts of $67
29,873

 
—

 
29,873

Other receivables
3,698

 
—

 
3,698

Inventories
3,550

 
(3,550
)
(b)
—

Prepaid expenses and other assets
9,579

 
(2,006
)
(b)
7,573

Total current assets
250,688

 
153,208

 
403,896

Property and equipment, net of accumulated depreciation
385

 
—

 
385

Intangible assets, net of accumulated amortization
111,594

 
(111,594
)
(b)
—

Goodwill
18,061

 
(18,061
)
(b)
—

Other assets
10,158

 
(2,970
)
(b)
7,188

Total assets
$
390,886

 
$
20,583

 
$
411,469

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable and other accrued liabilities
$
69,460

 
$
—

 
$
69,460

Accrued payroll and benefits
9,853

 
—

 
9,853

Contract liabilities
4,850

 
—

 
4,850

FOLOTYN development liability
2,311

 
(2,311
)
(b)
—

Total current liabilities
86,474

 
(2,311
)
 
84,163

FOLOTYN development liability, less current portion
9,686

 
(9,686
)
(b)
—

Acquisition-related contingent obligations
4,345

 
(4,345
)
(b)
—

Deferred tax liabilities
1,469

 
(1,469
)
(e)
—

Other long-term liabilities
5,650

 
—

 
5,650

Total liabilities
107,624

 
(17,811
)
 
89,813

Commitments and contingencies
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
—

 
—

 
—

Common stock, $0.001 par value; 300,000,000 shares authorized; 110,525,141 issued and outstanding at December 31, 2018
110

 
—

 
110

Additional paid-in capital
886,740

 
—

 
886,740

Accumulated other comprehensive loss
(3,702
)
 
—

 
(3,702
)
Accumulated deficit
(599,886
)
 
38,394

(c)
(561,492
)
Total stockholders’ equity
283,262

 
38,394

 
321,656

Total liabilities and stockholders’ equity
$
390,886

 
$
20,583

 
$
411,469







SPECTRUM PHARMACEUTICALS, INC.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2018
(In thousands, except share and per share amounts)
(Unaudited)
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
 
 
 
(d)
 
 
Revenues:
 
 
 
 
 
Product sales, net
$
104,466

 
$
(104,466
)
 
$
—

License fees and service revenue
4,867

 
(4,867
)
 
—

Total revenues
109,333

 
(109,333
)
 
—

Operating costs and expenses:
 
 
 
 
 
Cost of sales (excludes amortization of intangible assets)
26,756

 
(26,756
)
 
—

Selling, general and administrative
90,700

 
(28,010
)
 
62,690

Research and development
94,956

 
(19,799
)
 
75,157

Amortization of intangible assets
28,098

 
(28,098
)
 
—

Total operating costs and expenses
240,510

 
(102,663
)
 
137,847

Loss from continuing operations
(131,177
)
 
(6,670
)
 
(137,847
)
Other income (expense):
 
 
 
 
 
Interest expense, net
(340
)
 
—

 
(340
)
Change in fair value of contingent consideration related to acquisitions
1,927

 
(1,927
)
 
—

Other income, net
9,580

 
—

 
9,580

Total other income
11,167

 
(1,927
)
 
9,240

Loss from continuing operations before income taxes
(120,010
)
 
(8,597
)
 
(128,607
)
(Provision) benefit for income taxes from continuing operations
(1
)
 
30

(e)
29

Net loss from continuing operations
$
(120,011
)
 
$
(8,567
)
 
$
(128,578
)
 
 
 
 
 
 
Net loss per share from continuing operations:
 
 
 
 
 
Basic
$
(1.16
)
 
$
(0.08
)
 
$
(1.24
)
Diluted
$
(1.16
)
 
$
(0.08
)
 
$
(1.24
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
103,305,911

 
 
 
103,305,911

Diluted
103,305,911

 
 
 
103,305,911













SPECTRUM PHARMACEUTICALS, INC.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2017
(In thousands, except share and per share amounts)
(Unaudited)
 
Historical
 
Pro Forma Adjustments
 
Pro Forma
Revenues:
 
 
(d)
 
 
Product sales, net
$
116,178

 
$
(116,178
)
 
$
—

License fees and service revenue
12,189

 
(12,189
)
 
—

Total revenues
128,367

 
(128,367
)
 
—

Operating costs and expenses:
 
 
 
 
 
Cost of sales (excludes amortization of intangible assets)
42,859

 
(42,859
)
 
—

Cost of service revenue
4,359

 
(4,359
)
 
—

Selling, general and administrative
84,267

 
(19,508
)
 
64,759

Research and development
65,895

 
(14,370
)
 
51,525

Amortization of intangible assets
27,647

 
(27,647
)
 
—

Total operating costs and expenses
225,027

 
(108,743
)
 
116,284

Loss from continuing operations
(96,660
)
 
(19,624
)
 
(116,284
)
Other (expense) income:
 
 
 
 
 
Interest expense, net
(6,798
)
 
—

 
(6,798
)
Change in fair value of contingent consideration related to acquisitions
(4,957
)
 
4,957

 
—

Other income, net
389

 
—

 
389

Total other income (expenses)
(11,366
)
 
4,957

 
(6,409
)
Loss from continuing operations before income taxes
(108,026
)
 
(14,667
)
 
(122,693
)
Benefit for income taxes from continuing operations
16,778

 
(5,233
)
(e)
11,545

Net loss from continuing operations
$
(91,248
)
 
$
(19,900
)
 
$
(111,148
)
 
 
 
 
 
 
Net loss per share from continuing operations:
 
 
 
 
 
Basic
$
(1.07
)
 
$
(0.24
)
 
$
(1.31
)
Diluted
$
(1.07
)
 
$
(0.24
)
 
$
(1.31
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
85,115,592

 
 
 
85,115,592

Diluted
85,115,592

 
 
 
85,115,592









SPECTRUM PHARMACEUTICALS, INC.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 2016
(In thousands, except share and per share amounts)
(Unaudited)

 
Historical
 
Pro Forma Adjustments
 
Pro Forma
Revenues:
 
 
(d)
 
 
Product sales, net
$
128,596

 
$
(128,596
)
 
$
—

License fees and service revenue
17,848

 
(17,848
)
 
—

Total revenues
146,444

 
(146,444
)
 
—

Operating costs and expenses:
 
 
 
 
 
Cost of sales (excludes amortization of intangible assets)
27,953

 
(27,953
)
 
—

Cost of service revenue
7,890

 
(7,890
)
 
—

Selling, general and administrative
88,418

 
(28,096
)
 
60,322

Research and development
59,123

 
(16,688
)
 
42,435

Amortization of intangible assets
25,946

 
(25,946
)
 
—

Total operating costs and expenses
209,330

 
(106,573
)
 
102,757

Loss from continuing operations
(62,886
)
 
(39,871
)
 
(102,757
)
Other (expense) income:
 
 
 
 
 
Interest expense, net
(9,435
)
 
—

 
(9,435
)
Change in fair value of contingent consideration related to acquisitions
(649
)
 
649

 
—

Other income, net
887

 
—

 
887

Total other (expense) income
(9,197
)
 
649

 
(8,548
)
Loss from continuing operations before income taxes
(72,083
)
 
(39,222
)
 
(111,305
)
Benefit for income taxes from continuing operations
2,313

 
(96
)
(e)
2,217

Net loss from continuing operations
$
(69,770
)
 
$
(39,318
)
 
$
(109,088
)
 
 
 
 
 
 
Net loss per share from continuing operations:
 
 
 
 
 
Basic
$
(0.96
)
 
$
(0.54
)
 
$
(1.50
)
Diluted
$
(0.96
)
 
$
(0.54
)
 
$
(1.50
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic
72,824,070

 
 
 
72,824,070

Diluted
72,824,070

 
 
 
72,824,070










SPECTRUM PHARMACEUTICALS, INC.
NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


Description of the Transaction and Basis of Presentation
The unaudited Pro Forma Consolidated Balance Sheet and the unaudited Pro Forma Consolidated Statements of Operations are derived from the historical Consolidated Financial Statements of the Company, which were included in its Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019. In accordance with SEC rules and regulations, the unaudited Pro Forma Consolidated Balance Sheet was derived from the Company's historical consolidated financial statements in order to give effect to the Acrotech Transaction, as if it occurred on December 31, 2018. The unaudited Pro Forma Consolidated Statements of Operations were derived from the historical consolidated financial statements in order to give effect to the Acrotech Transaction as if it occurred on January 1, 2016.

Pro Forma Adjustments

(a) Represents cash proceeds received at the closing of Acrotech Transaction, of which $4 million is held in escrow.

(b) Represents the removal of the assets and liabilities related to the Product Portfolio from the unaudited Pro Forma Consolidated Balance Sheet.

(c) Represents the non-recurring estimated gain that would have been recorded if we had completed the Acrotech Transaction on December 31, 2018.

(d) Amounts reflect the pro forma effect of eliminating the results of operations of the Product Portfolio for the years ended December 31, 2018, 2017, and 2016, respectively, from the presentation of continuing operations in these unaudited Pro Forma Consolidated Statements of Operations.

(e) The pro forma benefit for income taxes from continuing operations for the years ended December 31, 2018, 2017, and 2016, respectively, was computed under the “with-and-without” approach. Under the “with-and-without” approach, the pro forma income tax expense or benefit was determined by excluding the tax effects of tax adjustments solely attributable to the assets and liabilities of the Product Portfolio. The pro forma adjustments represent the removal of these amounts for the years ended December 31, 2018, 2017, and 2016, respectively, from the unaudited Pro Forma Consolidated Statements of Operations, and the removal of deferred tax liabilities from the unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2018, associated with intangible assets of the Product Portfolio.