Attached files
file | filename |
---|---|
8-K/A - FORM 8-K/A - VALEANT PHARMACEUTICALS INTERNATIONAL | a56989e8vkza.htm |
EX-99.2 - EX-99.2 - VALEANT PHARMACEUTICALS INTERNATIONAL | a56989exv99w2.htm |
EX-99.1 - EX-99.1 - VALEANT PHARMACEUTICALS INTERNATIONAL | a56989exv99w1.htm |
EX-23.1 - EX-23.1 - VALEANT PHARMACEUTICALS INTERNATIONAL | a56989exv23w1.htm |
Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Statements of Valeant Pharmaceuticals
International
On May 26, 2010, Valeant Pharmaceuticals International (the Company) completed the acquisition of
Princeton Pharma Holdings LLC, and its wholly owned operating subsidiary, Aton Pharma, Inc.
(collectively, Aton) for cash consideration of $317.5 million, net of cash acquired, subject to
certain closing adjustments. Additionally, we agreed to pay future milestone payments of up to
$390.0 million, with an aggregate fair value at acquisition of $19.7 million, predominately based
upon the achievement of approval and commercial targets for certain pipeline products in
development.
The unaudited pro forma condensed consolidated statements of operations for the year ended December
31, 2009 and for the three months ended March 31, 2010 included in this report have been prepared
as if the acquisition occurred on January 1, 2009. The historical consolidated statements of
operations have been adjusted in the unaudited pro forma condensed consolidated financial
statements to only give effect to pro forma events that are (1) directly attributable to the
acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the
combined results. The unaudited pro forma condensed consolidated financial information should be
read in conjunction with the accompanying notes to the unaudited pro forma condensed consolidated
financial statements. In addition, the unaudited pro forma condensed consolidated financial
information was based on and should be read in conjunction with the:
| Companys historical financial statements and related notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2009; | ||
| Companys historical financial statements and related notes thereto contained in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2010; | ||
| Separate historical financial statements of Aton as of and for the year ended December 31, 2009 and the related notes included within this Form 8-K/A; and | ||
| Separate historical financial statements of Aton as of and for the three months ended March 31, 2010 and the related notes included within this Form 8-K/A. |
The unaudited condensed consolidated balance sheet contained in the Companys Quarterly Report on
Form 10-Q for the quarter ended June 30, 2010 reflects the acquisition of Aton and thus, is not
included in this report.
The unaudited pro forma condensed consolidated financial information has been presented for
illustrative purposes only and is not necessarily indicative of what the combined companys results
of operations actually would have been had the acquisition been completed as of the dates
indicated. Additionally, the unaudited pro forma condensed consolidated financial information does
not purport to project the future operating results of the combined company.
The unaudited pro forma condensed consolidated financial information has been prepared using the
acquisition method of accounting under existing U.S. generally accepted accounting principles,
which are subject to change and interpretation. The unaudited pro forma condensed consolidated
financial information does not reflect any operating synergies or other operational improvements,
if any, that the combined company may achieve as a result of the acquisition, the costs to
integrate the operations of the Company and Aton or the costs necessary to achieve potential
operating synergies and revenue enhancements.
1
Valeant Pharmaceuticals International
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2009
(In thousands, except per share amounts)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2009
(In thousands, except per share amounts)
Year Ended December 31, 2009 | ||||||||||||||||
Pro Forma | ||||||||||||||||
As Reported | Aton | Adjustments | Pro Forma | |||||||||||||
Revenues: |
||||||||||||||||
Product sales |
$ | 710,761 | $ | 59,452 | $ | | $ | 770,213 | ||||||||
Service revenue |
22,389 | | | 22,389 | ||||||||||||
Alliance revenue |
97,311 | | | 97,311 | ||||||||||||
Total revenues |
830,461 | 59,452 | | 889,913 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of goods sold (excluding amortization) |
192,974 | 11,239 | (1,349 | )(a) | 202,864 | |||||||||||
Cost of services |
17,836 | | | 17,836 | ||||||||||||
Selling, general and administrative |
255,782 | 26,561 | | 282,343 | ||||||||||||
Research and development costs, net |
43,977 | 2,024 | | 46,001 | ||||||||||||
Special charges and credits |
6,351 | | | 6,351 | ||||||||||||
Restructuring and acquisition-related costs |
10,068 | | | 10,068 | ||||||||||||
Amortization expense |
70,640 | 2,505 | 21,725 | (b) | 94,870 | |||||||||||
Total costs and expenses |
597,628 | 42,329 | 20,376 | 660,333 | ||||||||||||
Income from operations |
232,833 | 17,123 | (20,376 | ) | 229,580 | |||||||||||
Other expense, net including translation and exchange |
(1,455 | ) | | | (1,455 | ) | ||||||||||
Gain on early extinguishment of debt |
7,221 | | | 7,221 | ||||||||||||
Interest income |
4,321 | 43 | (4,364 | )(c) | | |||||||||||
Interest expense |
(43,571 | ) | (4,114 | ) | (4,937 | )(d) | (52,622 | ) | ||||||||
Income from continuing operations before
income taxes |
199,349 | 13,052 | (29,677 | ) | 182,724 | |||||||||||
Provision (benefit) for income taxes |
(58,270 | ) | 4,488 | (11,277 | )(e) | (65,059 | ) | |||||||||
Income from continuing operations |
257,619 | 8,564 | (18,400 | ) | 247,783 | |||||||||||
Less: income from continuing operations attributable to
noncontrolling interest |
3 | | | 3 | ||||||||||||
Income from continuing operations attributable to
controlling interest |
$ | 257,616 | $ | 8,564 | $ | (18,400 | ) | $ | 247,780 | |||||||
Income per share from continuing operations attributable
controlling interest: |
||||||||||||||||
Basic |
$ | 3.15 | $ | 3.03 | ||||||||||||
Diluted |
$ | 3.07 | $ | 2.95 | ||||||||||||
Shares used in per share computations: |
||||||||||||||||
Basic |
81,781 | 81,781 | ||||||||||||||
Diluted |
83,970 | 83,970 | ||||||||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
2
Valeant Pharmaceuticals International
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2010
(In thousands, except per share amounts)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2010
(In thousands, except per share amounts)
Three Months Ended March 31, 2010 | ||||||||||||||||
Pro Forma | ||||||||||||||||
As Reported | Aton | Adjustments | Pro Forma | |||||||||||||
Revenues: |
||||||||||||||||
Product sales |
$ | 204,507 | $ | 16,143 | $ | | $ | 220,650 | ||||||||
Service revenue |
4,960 | | | 4,960 | ||||||||||||
Alliance revenue |
22,524 | | | 22,524 | ||||||||||||
Total revenues |
231,991 | 16,143 | | 248,134 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of goods sold (excluding amortization) |
54,203 | 2,264 | (337 | )(a) | 56,130 | |||||||||||
Cost of services |
3,166 | | | 3,166 | ||||||||||||
Selling, general and administrative |
70,541 | 8,836 | | 79,377 | ||||||||||||
Research and development costs, net |
10,402 | 935 | | 11,337 | ||||||||||||
Special charges and credits |
538 | | | 538 | ||||||||||||
Restructuring and acquisition-related costs |
1,024 | | | 1,024 | ||||||||||||
Amortization expense |
19,330 | 288 | 5,769 | (b) | 25,387 | |||||||||||
Total costs and expenses |
159,204 | 12,323 | 5,432 | 176,959 | ||||||||||||
Income from operations |
72,787 | 3,820 | (5,432 | ) | 71,175 | |||||||||||
Other expense, net including translation and exchange |
(524 | ) | | | (524 | ) | ||||||||||
Interest income |
459 | 18 | (477 | )(c) | | |||||||||||
Interest expense |
(13,090 | ) | (1,163 | ) | (1,116 | )(d) | (15,369 | ) | ||||||||
Income from continuing operations before
income taxes |
59,632 | 2,675 | (7,025 | ) | 55,282 | |||||||||||
Provision for income taxes |
24,030 | 1,196 | (2,670 | )(e) | 22,556 | |||||||||||
Income from continuing operations |
35,602 | 1,479 | (4,355 | ) | 32,726 | |||||||||||
Less: income from continuing operations attributable to
noncontrolling interest |
1 | | | 1 | ||||||||||||
Income from continuing operations attributable to
controlling interest |
$ | 35,601 | $ | 1,479 | $ | (4,355 | ) | $ | 32,725 | |||||||
Income per share from continuing operations attributable to
controlling interest: |
||||||||||||||||
Basic |
$ | 0.45 | $ | 0.42 | ||||||||||||
Diluted |
$ | 0.43 | $ | 0.40 | ||||||||||||
Shares used in per share computations: |
||||||||||||||||
Basic |
78,465 | 78,465 | ||||||||||||||
Diluted |
82,332 | 82,332 | ||||||||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
3
Valeant Pharmaceuticals International
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(In thousands)
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(In thousands)
Note 1 Basis of Presentation
The unaudited pro forma condensed consolidated statements of operations are based on historical
statements of operations of Valeant Pharmaceuticals International (Valeant or the Company) and
Princeton Pharma Holdings LLC, and its wholly owned operating subsidiary, Aton Pharma, Inc.
(collectively, Aton), after giving effect to the acquisition of Aton as if it occurred on January
1, 2009 for the year ended December 31, 2009 and three months ended March 31, 2010. Certain
reclassifications have been made to the historical financial statements of Aton to conform to
Valeants presentation.
The purchase price for the Aton acquisition consisted of $317.5 million in cash, net of cash
acquired, subject to certain closing adjustments, and contingent consideration of up to $390.0
million for future milestones, with an aggregate fair value at acquisition of $19.7 million,
predominantly based upon the achievement of approval and commercial targets for certain pipeline
products in development. Under accounting rules for business combinations, obligations that are
contingently payable to the sellers based upon the occurrence of one or more future events are to
be recorded as a discounted liability on the Companys balance sheet. The fair value of the
obligation to pay contingent consideration was based on probability-weighted payments adjusted by a
probability of success (POS) factor corresponding to the POS factor for the respective pipeline
product, then discounted using a 4% discount rate. The range of the undiscounted amounts the
Company could be obligated to pay as contingent consideration ranges from $0 to $390.0 million. The
Company will periodically reassess the estimated fair value of the contractual obligation to pay
the contingent consideration and any changes in estimated fair value will be recorded in the
Companys statement of operations. The estimate of the fair value of contingent consideration
requires very subjective assumptions to be made of various potential POS scenarios and discount
rates. Future revisions to these assumptions could materially change the estimate of the fair value
of contingent consideration and therefore materially affect the Companys future financial results.
The following table summarizes the estimated fair values of the net assets acquired:
Accounts receivable |
$ | 11,819 | ||
Inventories |
16,481 | |||
Other current assets |
9,078 | |||
Long-term assets |
8,892 | |||
Identifiable intangible assets: |
||||
Developed technologies |
341,300 | |||
Trade names |
6,900 | |||
Acquired in-process research and development |
9,700 | |||
Goodwill |
103,928 | |||
Current liabilities |
(28,234 | ) | ||
Long-term liabilities, primarily deferred taxes |
(142,632 | ) | ||
Net assets acquired |
$ | 337,232 | ||
Long-term liabilities include a $5.3 million liability for unfavorable international distribution
agreements and $13.4 million for deferred purchase price payments payable in 2012 through 2019. The
deferred purchase price payments relate to certain products acquired by Aton in 2009 and are
contingent on the continued absence of generic competition for one of the products.
The purchase price is subject to certain closing adjustments as defined in the purchase agreement.
Purchase price adjustments recorded subsequent to this date will affect the recorded amount of
goodwill.
4
Valeant Pharmaceuticals International
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements-(Continued)
(In thousands)
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements-(Continued)
(In thousands)
Note 2 Pro Forma Adjustments
(a) | To record the amortization of liability for unfavorable international distribution contracts recorded in connection with the acquisition. | ||
(b) | To record incremental amortization expense for the identified intangible assets for developed technologies and trade names based upon the estimated fair value assigned to these assets at the date of acquisition and useful lives ranging from 5 to 15 years. Amortization expense adjustments are as follows: |
Weighted | Year Ended | Three Months | ||||||||
average | December 31, | Ended March | ||||||||
useful life | 2009 | 31, 2010 | ||||||||
Amortization of developed technology |
13.3 years | $ | 22,850 | $ | 5,712 | |||||
Amortization of trade names |
5 years | 1,380 | 345 | |||||||
Eliminate Atons historical intangible assets amortization |
(2,505 | ) | (288 | ) | ||||||
Total adjustments to amortization expense |
$ | 21,725 | $ | 5,769 | ||||||
(c) | To record the reduction in Valeants interest income due to use of Valeant cash and marketable securities, net of cash acquired, to fund the acquisition. This also reflects the reversal of Atons historical interest income as it is assumed Atons cash would be used to fund the acquisition. | ||
(d) | To record the following interest expense adjustments: |
Year Ended | Three Months | |||||||
December 31, | Ended March | |||||||
2009 | 31, 2010 | |||||||
Eliminate interest expense recorded by Aton related to debt not
assumed
by Valeant and accretion of deferred Timoptic acquisition
payments |
$ | (4,114 | ) | $ | (1,163 | ) | ||
Record interest expense on borrowings to fund the Aton acquisition |
7,793 | 1,948 | ||||||
Record accretion of deferred Timoptic acquisition payments |
469 | 134 | ||||||
Record accretion of contingent consideration |
789 | 197 | ||||||
Total adjustments to interest expense |
$ | 4,937 | $ | 1,116 | ||||
(e) | To record the income tax effect relating to adjustments using the appropriate local statutory tax rates. |
5