EX-20.4 6 w41190ex20-4.txt PRO FORMA FINANCIAL STATEMENTS 1 Exhibit 20.4 UNAUDITED PRO FORMA FINANCIAL INFORMATION The following information has been provided to aid you in your analysis of the financial aspects of the merger. The financial information of Cephalon and Anesta were derived from the audited consolidated financial statements for the years ended December 31, 1999, 1998 and 1997 and the unaudited consolidated financial statements for the six months ended June 30, 2000 and 1999. The information is only a summary and should be read together with the historical financial statements and related notes contained in the annual reports and quarterly reports and other information that we have filed with the Securities and Exchange Commission and incorporated by reference. The pro forma combined financial information is not necessarily indicative of the combined financial positions or results of operations that would have been reported if the companies had been combined for all periods presented. POOLING OF INTERESTS ACCOUNTING TREATMENT The merger is expected to be accounted for as a "pooling of interests." This means that, for accounting and financial reporting purposes, the companies will be treated as if they had always been combined. We have presented unaudited pro forma financial information that reflects the pooling of interests method of accounting to provide a picture of what the businesses might have looked like had they always been combined. The unaudited pro forma statements of operations and pro forma balance sheets were prepared by combining the historical amounts of each company. The companies may have performed differently had they always been combined. You should not rely on the unaudited pro forma financial information as being indicative of the historical results that would have occurred or the future results that will occur after the merger. PERIODS COVERED The following unaudited pro forma balance sheets as of June 30, 2000 and December 31, 1999 are presented as if the merger had occurred on June 30, 2000 and December 31, 1999, respectively. The unaudited pro forma statements of operations for the six months ended June 30, 2000 and 1999, and for the years ended December 31, 1999, 1998 and 1997, are presented as if the companies had always been merged. 1 2 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
HISTORICAL ------------------- PRO FORMA CEPHALON ANESTA COMBINED -------- -------- --------- Revenues: Product sales............................................. $ 28,750 $ 3,993 $ 32,743 License and contract...................................... 9,256 678 9,934 -------- -------- -------- 38,006 4,671 42,677 -------- -------- -------- Operating expenses: Cost of product sales..................................... 5,074 1,023 6,097 Research and development.................................. 27,377 5,165 32,542 Selling, general and administrative....................... 28,716 9,702 38,418 -------- -------- -------- 61,167 15,890 77,057 -------- -------- -------- Loss from operations.............................. (23,161) (11,219) (34,380) Other income................................................ 6,761 1,585 8,346 -------- -------- -------- Loss before provision for income taxes............ (16,400) (9,634) (26,034) Provision for income taxes.................................. -- (31) (31) -------- -------- -------- Net loss.......................................... (16,400) (9,665) (26,065) Dividends on preferred stock................................ (4,531) -- (4,531) -------- -------- -------- Net loss applicable to common shares.............. $(20,931) $ (9,665) $(30,596) ======== ======== ======== Basic and diluted loss per share............................ $ (0.63) $ (0.72) $ (0.77) ======== ======== ======== Weighted average number of shares outstanding............... 33,164 13,373 39,536 ======== ======== ========
See accompanying notes to unaudited pro forma combined financial information. 2 3 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
HISTORICAL ------------------ PRO FORMA CEPHALON ANESTA COMBINED -------- ------- --------- Revenues: Product sales............................................. $ 7,252 $ 1,128 $ 8,380 License and contract...................................... 7,727 651 8,378 -------- ------- -------- 14,979 1,779 16,758 -------- ------- -------- Operating expenses: Cost of product sales..................................... 839 371 1,210 Research and development.................................. 20,152 4,835 24,987 Selling, general and administrative....................... 23,780 4,062 27,842 -------- ------- -------- 44,771 9,268 54,039 -------- ------- -------- Loss from operations.............................. (29,792) (7,489) (37,281) Other income (expense)...................................... (1,650) 2,049 399 -------- ------- -------- Loss before provision for income taxes............ (31,442) (5,440) (36,882) Provision for income taxes.................................. -- (15) (15) -------- ------- -------- Net loss.......................................... $(31,442) $(5,455) $(36,897) ======== ======= ======== Basic and diluted loss per share............................ $ (1.09) $ (0.41) $ (1.05) ======== ======= ======== Weighted average number of shares outstanding............... 28,880 13,171 35,156 ======== ======= ========
See accompanying notes to unaudited pro forma combined financial information. 3 4 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
HISTORICAL ------------------- PRO FORMA CEPHALON ANESTA COMBINED -------- -------- --------- Revenues: Product sales............................................. $ 25,370 $ 2,232 $ 27,602 License and contract...................................... 19,549 4,283 23,832 -------- -------- -------- 44,919 6,515 51,434 -------- -------- -------- Operating expenses: Cost of product sales..................................... 3,250 671 3,921 Research and development.................................. 46,420 10,063 56,483 Selling, general and administrative....................... 50,992 9,141 60,133 -------- -------- -------- 100,662 19,875 120,537 -------- -------- -------- Loss from operations.............................. (55,743) (13,360) (69,103) Other income (expense)...................................... (3,014) 3,892 878 -------- -------- -------- Loss before provision for income taxes............ (58,757) (9,468) (68,225) Provision for income taxes.................................. -- (20) (20) -------- -------- -------- Net loss before extraordinary charge.............. (58,757) (9,488) (68,245) Extraordinary charge for early extinguishment of debt....... (11,187) -- (11,187) -------- -------- -------- Net loss.......................................... (69,944) (9,488) (79,432) Dividends on preferred stock................................ (3,398) -- (3,398) -------- -------- -------- Net loss applicable to common shares.............. $(73,342) $ (9,488) $(82,830) ======== ======== ======== Basic and diluted loss per common share: Loss per common share before extraordinary charge......... $ (2.10) $ (0.72) $ (2.00) Extraordinary charge...................................... (0.38) -- (0.31) -------- -------- -------- $ (2.48) $ (0.72) $ (2.31) ======== ======== ======== Weighted average number of shares outstanding............... 29,584 13,227 35,887 ======== ======== ========
See accompanying notes to unaudited pro forma combined financial information. 4 5 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
HISTORICAL ------------------- PRO FORMA CEPHALON ANESTA COMBINED -------- -------- --------- Revenues: Product sales............................................. $ 728 $ 193 $ 921 License and contract...................................... 14,927 482 15,409 -------- -------- -------- 15,655 675 16,330 -------- -------- -------- Operating expenses: Cost of product sales..................................... -- 54 54 Research and development.................................. 43,649 8,812 52,461 Selling, general and administrative....................... 30,947 8,700 39,647 -------- -------- -------- 74,596 17,566 92,162 -------- -------- -------- Loss from operations.............................. (58,941) (16,891) (75,832) Other income................................................ 3,534 1,190 4,724 -------- -------- -------- Loss before provision for income taxes............ (55,407) (15,701) (71,108) Provision for income taxes.................................. -- (16) (16) -------- -------- -------- Net loss.......................................... $(55,407) $(15,717) $(71,124) ======== ======== ======== Basic and diluted loss per share............................ $ (1.95) $ (1.59) $ (2.15) ======== ======== ======== Weighted average number of shares outstanding............... 28,413 9,898 33,129 ======== ======== ========
See accompanying notes to unaudited pro forma combined financial information. 5 6 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
HISTORICAL ------------------- PRO FORMA CEPHALON ANESTA COMBINED -------- -------- --------- Revenues: Product sales............................................. $ -- $ 184 $ 184 License and contract...................................... 23,140 5 23,145 -------- -------- -------- 23,140 189 23,329 -------- -------- -------- Operating expenses: Cost of product sales..................................... -- 52 52 Research and development.................................. 51,587 8,064 59,651 Selling, general and administrative....................... 36,744 6,465 43,209 -------- -------- -------- 88,331 14,581 102,912 -------- -------- -------- Loss from operations.............................. (65,191) (14,392) (79,583) Other income................................................ 4,772 1,845 6,617 -------- -------- -------- Loss before provision for income taxes............ (60,419) (12,547) (72,966) Provision for income taxes.................................. -- (2) (2) -------- -------- -------- Net loss.......................................... $(60,419) $(12,549) $(72,968) ======== ======== ======== Basic and diluted loss per share............................ $ (2.36) $ (1.32) $ (2.42) ======== ======== ======== Weighted average number of shares outstanding............... 25,638 9,500 30,165 ======== ======== ========
See accompanying notes to unaudited pro forma combined financial information. 6 7 UNAUDITED PRO FORMA COMBINED BALANCE SHEET JUNE 30, 2000 (AMOUNTS IN THOUSANDS)
HISTORICAL -------------------- PRO FORMA PRO FORMA CEPHALON ANESTA ADJUSTMENTS COMBINED --------- -------- ----------- --------- (NOTE 2) ASSETS Current assets: Cash and cash equivalents..................... $ 29,010 $ 16,592 $ -- $ 45,602 Short-term investments........................ 121,377 23,078 -- 144,455 Receivables, net.............................. 11,017 2,329 -- 13,346 Inventory..................................... 14,465 -- -- 14,465 Other......................................... 1,026 1,293 -- 2,319 --------- -------- ------- --------- Total current assets.................. 176,895 43,292 -- 220,187 Property and equipment, net..................... 24,339 2,322 -- 26,661 Other........................................... 2,453 25,323 -- 27,776 --------- -------- ------- --------- $ 203,687 $ 70,937 $ -- $ 274,624 ========= ======== ======= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.............................. $ 7,365 $ 1,559 $ -- $ 8,924 Accrued expenses.............................. 19,988 1,776 9,000 30,764 Current portion of unearned revenues.......... -- 93 -- 93 Current portion of long-term debt............. 1,977 333 -- 2,310 --------- -------- ------- --------- Total current liabilities............. 29,330 3,761 9,000 42,091 Unearned revenues............................... -- 1,833 -- 1,833 Long-term debt.................................. 13,486 1,667 -- 15,153 Other........................................... 198 -- -- 198 --------- -------- ------- --------- Total liabilities..................... 43,014 7,261 9,000 59,275 --------- -------- ------- --------- Stockholders' equity: Preferred stock, $.01 par value, 5,000 shares, authorized, 2,500 shares issued and outstanding................................ 25 -- -- 25 Common stock, $.01 par value, 100,000 shares authorized; 41,196 issued and outstanding, pro forma.................................. 348 14 50 412 Additional paid in capital.................... 529,030 131,608 (50) 660,588 Treasury stock................................ (1,480) -- -- (1,480) Accumulated deficit........................... (368,066) (67,832) (9,000) (444,898) Accumulated other comprehensive income (loss)..................................... 816 (114) -- 702 --------- -------- ------- --------- Total stockholders' equity............ 160,673 63,676 (9,000) 215,349 --------- -------- ------- --------- $ 203,687 $ 70,937 $ -- $ 274,624 ========= ======== ======= =========
See accompanying notes to unaudited pro forma combined financial information. 7 8 UNAUDITED PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
HISTORICAL -------------------- PRO FORMA PRO FORMA CEPHALON ANESTA ADJUSTMENTS COMBINED --------- -------- ----------- --------- (NOTE 2) ASSETS Current assets: Cash and cash equivalents..................... $ 13,152 $ 11,746 $ -- $ 24,898 Short-term investments........................ 188,410 59,032 -- 247,442 Receivables, net.............................. 5,578 1,956 -- 7,534 Inventory..................................... 4,258 -- -- 4,258 Other......................................... 988 1,008 -- 1,996 --------- -------- ------- --------- Total current assets.................. 212,386 73,742 -- 286,128 Property and equipment, net..................... 20,001 2,466 -- 22,467 Other........................................... 1,666 2,001 -- 3,667 --------- -------- ------- --------- $ 234,053 $ 78,209 $ -- $ 312,262 ========= ======== ======= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.............................. $ 6,221 $ 410 $ -- $ 6,631 Accrued expenses.............................. 19,328 795 9,000 29,123 Current portion of unearned revenues.......... -- 746 -- 746 Current portion of long-term debt............. 31,906 333 -- 32,239 --------- -------- ------- --------- Total current liabilities............. 57,455 2,284 9,000 68,739 Unearned revenues............................... -- 1,832 -- 1,832 Long-term debt.................................. 14,034 1,667 -- 15,701 Other........................................... 4,207 -- -- 4,207 --------- -------- ------- --------- Total liabilities..................... 75,696 5,783 9,000 90,479 Stockholders' equity: Preferred stock, $.01 par value, 5,000 shares, authorized, 2,500 shares issued and outstanding................................ 25 -- -- 25 Common stock, $.01 par value, 100,000 shares authorized; 38,904 issued and outstanding, pro forma.................................. 326 13 50 389 Additional paid in capital.................... 505,702 130,743 (50) 636,395 Treasury stock................................ (1,290) -- (1,290) Accumulated deficit........................... (347,135) (58,167) (9,000) (414,302) Accumulated other comprehensive income (loss)..................................... 729 (163) -- 566 --------- -------- ------- --------- Total stockholders' equity............ 158,357 72,426 (9,000) 221,783 --------- -------- ------- --------- $ 234,053 $ 78,209 $ -- $ 312,262 ========= ======== ======= =========
See accompanying notes to unaudited pro forma combined financial information 8 9 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (1) The unaudited pro forma combined financial statements for Cephalon and Anesta give retroactive effect to the proposed merger, which will be accounted for as a pooling of interests and, as a result, such statements are presented as if the companies had been combined for all periods presented. There were no material differences between the accounting policies of Cephalon and Anesta. Certain amounts have been reclassified to conform the pro forma presentation. (2) Transaction costs will be incurred to complete the merger and consist primarily of financial advisor, legal, accounting and consulting fees, and printing, mailing, and registration expenses. Due to the non-recurring nature of these costs, they have not been reflected in the pro forma condensed combined statements of operations. These expenses will be included in the results of operations in the quarter the merger is completed. The pro forma combined balance sheets include an accrual of $9.0 million in estimated transaction costs. (3) Pro forma basic and diluted loss per share have been computed using the pro forma weighted average number of shares of common stock outstanding during the periods. Pro forma basic and diluted net loss per share are the same since common stock equivalents outstanding are antidilutive for all periods presented. As a result of the merger, each outstanding share of Anesta common stock will be converted into the right to receive 0.4765 shares of Cephalon common stock. 9