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ASTX > SEC Filings for ASTX > Form 8-K/A on 30-Sep-2011All Recent SEC Filings

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Form 8-K/A for ASTEX PHARMACEUTICALS, INC


30-Sep-2011

Completion of Acquisition or Disposition of Assets, Financial Statem


Item 2.01 Completion of Acquisition or Disposition of Assets

On July 26, 2011, Astex Pharmaceuticals, Inc. ("Astex Pharmaceuticals" or the "Company," formerly known as SuperGen, Inc.) filed a report on Form 8-K to report the completion of the acquisition of all of the outstanding shares of Astex Therapeutics Limited ("ATL"), which was completed on July 20, 2011. At that time, Astex Pharmaceuticals stated in such Form 8-K that it intended to file the required pro forma financial information within 71 days from the date that such Form 8-K was required to be filed. By this amendment to such Form 8-K, the Registrant is amending and supplementing Item 9.01 thereof to include the required pro forma financial information.



Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined balance sheet at June 30, 2011 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010 and the six months ended June 30, 2011 presented herein are based on the historical financial statements of Astex Pharmaceuticals and ATL after giving effect to the acquisition of ATL by Astex Pharmaceuticals using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes.

The unaudited pro forma condensed combined balance sheet as of June 30, 2011 gives effect to the acquisition of ATL by Astex Pharmaceuticals as if it occurred on June 30, 2011 and combines the historical balance sheets of Astex Pharmaceuticals and ATL as of June 30, 2011. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010 and the six months ended June 30, 2011 give effect to the acquisition of ATL by Astex Pharmaceuticals as if it occurred on January 1, 2010, and combine the historical results of Astex Pharmaceuticals and ATL for the year ended December 31, 2010 and the six months ended June 30, 2011.

The Astex Pharmaceuticals balance sheet and statement of operations information as of and for the six months ended June 30, 2011 was derived from its unaudited condensed consolidated financial statements included in its Form 10-Q for the quarterly period ended June 30, 2011, incorporated by reference herein. The Astex Pharmaceuticals statement of operations information for the year ended December 31, 2010 was derived from its audited consolidated financial statements included in its Form 10-K for the year ended December 31, 2010, incorporated by reference herein.

The ATL balance sheet and statement of operations information as of and for the six months ended June 30, 2011 was derived from its unaudited financial statements as of June 30, 2011, and its statement of operations information for the year ended December 31, 2010 was derived from its audited financial statements as of and for the year ended December 31, 2010, previously filed with the Securities and Exchange Commission by Astex Pharmaceuticals in its Proxy Statement on May 2, 2011 and incorporated by reference herein. Such financial information was converted from being prepared in accordance with International Financial Reporting Standards (IFRS) to being prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and translated from British Pounds Sterling into U.S. Dollars, only for purposes of these unaudited pro forma condensed combined financial statements.


Astex Pharmaceuticals has not completed a full, detailed valuation analysis necessary to determine the fair values of ATL's assets acquired and liabilities assumed. However, a preliminary valuation of certain intangible assets was performed related to in-process research and development, developed technology and collaboration and license agreements, as well as deferred revenue, deferred acquisition consideration, and assumed and replaced stock awards. This preliminary valuation was performed as of June 30, 2011, the date on which the acquisition of ATL by Astex Pharmaceuticals occurred for purposes of the pro forma balance sheet. Similarly, the estimated ATL acquisition consideration in these unaudited pro forma condensed combined financial statements was based on the number of shares of Astex Pharmaceuticals common stock outstanding and the market value of these shares as of June 30, 2011. Accordingly, the unaudited pro forma condensed combined financial statements include only a preliminary estimate and allocation of acquisition consideration. The final allocation of acquisition consideration may differ significantly from these preliminary estimates. The actual acquisition accounting upon closing of the acquisition of ATL by Astex Pharmaceuticals will be based on the fair value of the consideration paid and fair values of ATL's assets and liabilities as determined at the time of closing.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition of ATL by Astex Pharmaceuticals. The unaudited pro forma condensed combined financial data also do not include any integration costs. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Astex Pharmaceuticals and ATL been a combined company during the specified periods. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the historical consolidated financial statements of Astex Pharmaceuticals included in its Annual Report on Form 10-K for the year ended December 31, 2010 incorporated by reference herein, and the historical financial statements of ATL for the year ended December 31, 2010, filed by Astex Pharmaceuticals in its Proxy Statement dated May 2, 2011, incorporated by reference herein.


                          ASTEX PHARMACEUTICALS, INC.

              UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

                              AS OF JUNE 30, 2011

                                 (In thousands)



                                               Historical                       Pro Forma
                                            Astex
                                       Pharmaceuticals     ATL(1)      Adjustments         Combined

              ASSETS
Current assets:
Cash and cash equivalents             $          30,028   $  13,861   $     (24,858 ) C    $  19,031
Marketable securities                            95,129      11,440               -          106,569
Accounts receivable                                   -       3,879          (1,545 ) M        2,334
Income tax receivable                                 -       1,241               -            1,241
Inventories                                           -          95             (95 ) G            -
Prepaid expenses and other current                                                    M
assets                                            1,496           -           1,545            3,041
Total current assets                            126,653      30,516         (24,953 )        132,216

Marketable securities, non-current                3,465           -               -            3,465
Property, plant and equipment, net                3,857       3,487               -            7,344
Goodwill                                            731           -          45,428   L       46,159
Other intangible assets                               -                      95,697   K       95,697
Other assets                                        554           -               -              554
Total assets                          $         135,260   $  34,003   $     116,172        $ 285,435

   LIABILITIES AND STOCKHOLDERS'
              EQUITY

Current liabilities:
Accounts payable                      $           2,181   $   3,898   $      (1,920 ) M    $   4,159
Accrued compensation                              2,663           -             316   I        4,354
                                                                                681   J
                                                                                694   M
Deferred acquisition consideration                    -           -          10,092   D       10,092
Other accrued liabilities                           693           -             974   F        2,893
                                                                              1,226   M
Deferred revenue                                    509       8,159          (6,544 ) H        2,124
Deferred tax liability                                -           -           3,298   N        3,298
Total current liabilities                         6,046      12,057           8,817           26,920

Deferred rent, non-current                           21           -               -               21
Warrant liability                                     -           -             307   O          307
Deferred acquisition consideration,
non-current                                           -           -          17,824   D       17,824
Deferred tax liability, non-current                   -           -          12,347   N       12,347
Deferred revenue, non-current                     1,175       5,784          (5,784 ) H        1,175
Total liabilities                                 7,242      17,841          33,511           58,594

Commitments and contingencies

Stockholders' equity:
Preferred stock                                       -          32             (32 ) A            -
Common stock                                         60           8              (8 ) A           93
                                                                                 33   B
Additional paid in capital                      461,091     130,981        (130,981 ) A      560,815
                                                                             96,377   B
                                                                              3,347   E
Accumulated other comprehensive                                                       A
income                                              786          82             (82 )            786
Accumulated deficit                            (333,919 )  (114,941 )       114,941   A     (334,853 )
                                                                               (934 ) F
Total stockholders' equity                      128,018      16,162          82,661          226,841
Total liabilities and stockholders'
equity                                $         135,260   $  34,003   $     116,172        $ 285,435



(1) ATL historical financial statements have been prepared using its reporting currency of British Pounds Sterling. For purposes of these unaudited pro forma financial statements, the ATL balance sheet has been translated into U.S. dollars using the conversion rate in effect on June 30, 2011 (1.6018).

See accompanying notes to the unaudited pro forma condensed combined financial statements


                          ASTEX PHARMACEUTICALS, INC.

         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

                      FOR THE YEAR ENDED DECEMBER 31, 2010

                    (In thousands, except per share amounts)



                                               Historical                       Pro Forma
                                            Astex
                                       Pharmaceuticals     ATL(1)      Adjustments         Combined
Revenues:
Royalty revenue                       $          52,463   $       -   $           -        $  52,463
Development and license revenue                     509      13,960          (5,317 ) W        9,152
Total revenues                                   52,972      13,960          (5,317 )         61,615
Operating expenses:
Research and development                         28,394      20,513              77   Q       56,804
                                                                               (187 ) S
                                                                                498   T
                                                                              7,509   U
General and administrative                        9,442       4,718            (903 ) R       13,360
                                                                                (63 ) S
                                                                                166   T
Gain on sale of products                           (750 )         -               -             (750 )
Total operating expenses                         37,086      25,231           7,097           69,414
Income (loss) from operations                    15,886     (11,271 )       (12,414 )         (7,799 )
Interest income                                     182         295               -              477
Other income (expense)                              244        (188 )        (1,305 ) P       (1,249 )
Income (loss) before income tax
benefit (provision)                              16,312     (11,164 )       (13,719 )         (8,571 )
Income tax benefit (provision)                      (39 )     3,851           3,729   V        7,541
Net income (loss)                     $          16,273   $  (7,313 ) $      (9,990 )      $  (1,030 )
Net income (loss) per common share:
Basic                                 $            0.27   $   (0.30 )                      $   (0.01 )
Diluted                               $            0.27   $   (0.30 )                      $   (0.01 )
Weighted average shares
outstanding:
Basic                                            60,287      24,612                           92,635
Diluted                                          60,635      24,612                           92,635



(1) ATL historical financial statements have been prepared using its reporting currency of British Pounds Sterling. For purposes of these unaudited pro forma financial statements, the ATL Statement of Operations has been translated into U.S. Dollars using the average conversion rate in effect during 2010 (1.5458).

See accompanying notes to the unaudited pro forma condensed combined financial statements


                          ASTEX PHARMACEUTICALS, INC.

         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

                     FOR THE SIX MONTHS ENDED JUNE 30, 2011

                    (in thousands, except per share amounts)



                                               Historical                       Pro Forma
                                            Astex
                                       Pharmaceuticals     ATL(1)      Adjustments         Combined
Revenues:
Royalty revenue                       $          28,510   $       -   $           -        $  28,510
Development and license revenue                     254      12,056          (3,367 ) W        8,943
Total revenues                                   28,764      12,056          (3,367 )         37,453
Operating expenses:
Research and development                         15,985      12,165              32   Q       32,028
                                                                               (102 ) S
                                                                                193   T
                                                                              3,755   U
General and administrative                        7,152       3,726          (4,290 ) R        6,618
                                                                                (34 ) S
                                                                                 64   T
Gain on sale of products                           (700 )         -               -             (700 )
Total operating expenses                         22,437      15,891            (382 )         37,946
Income (loss) from operations                     6,327      (3,835 )        (2,985 )           (493 )
Interest income                                     106          46               -              152
Other income (expense)                               10           -            (446 ) P         (436 )
Income (loss) before income tax
benefit (provision)                               6,443      (3,789 )        (3,431 )           (777 )
Income tax benefit (provision)                      (50 )     1,396           1,964   V        3,310
Net income (loss)                     $           6,393   $  (2,393 ) $      (1,467 )      $   2,533
Net income (loss) per common share:
Basic                                 $            0.11   $   (0.10 )                      $    0.03
Diluted                               $            0.10   $   (0.10 )                      $    0.02
Weighted average shares
outstanding:
Basic                                            60,382      24,844                           92,734
Diluted                                          61,044      24,844                          104,512



(1) ATL historical financial statements have been prepared using its reporting currency of the British Pounds Sterling. For purposes of these unaudited pro forma financial statements, the ATL Statement of Operations has been translated into U.S. Dollars using the average conversion rate in effect during the six months ended June 30, 2011 (1.6160).

See accompanying notes to the unaudited pro forma condensed combined financial statements


ASTEX PHARMACEUTICALS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

1. Basis of Presentation

On April 6, 2011, Astex Pharmaceuticals, Inc. ("Astex Pharmaceuticals" or the "Company"), formerly known as SuperGen, Inc., entered into an Implementation Agreement (the "Implementation Agreement") with Astex Therapeutics Limited, a U.K. corporation ("ATL"), by which Astex Pharmaceuticals would acquire ATL (the "Transaction"). The Implementation Agreement was unanimously approved by the Boards of Directors of both companies. The Transaction was completed on July 20, 2011. After the Transaction, the Company changed its name from SuperGen, Inc. to Astex Pharmaceuticals, Inc. and listed its shares under the NASDAQ symbol "ASTX." At the effective time of the Transaction, Astex Pharmaceuticals paid approximately $25 million in cash and issued shares in Astex Pharmaceuticals common stock representing nearly 35% of the total post-closing shares of Astex Pharmaceuticals. Subsequently, Astex Pharmaceuticals is obligated to pay deferred consideration of $30 million, to be paid at the discretion of the combined company in stock, cash or a combination of stock and cash.

Because Astex Pharmaceuticals security holders prior to the Transaction own approximately 65% of the voting stock of the combined company after the Transaction and the management of Astex Pharmaceuticals retained a majority of key positions in the management of the combined company, Astex Pharmaceuticals is deemed to be the acquiring company, and the transaction will be accounted for under the acquisition method of accounting for business combinations.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting, as prescribed by Accounting Standards Codification (ASC) 805, Business Combinations, based on the historical financial statements of Astex Pharmaceuticals and ATL, with Astex Pharmaceuticals being the legal and accounting acquirer. Certain reclassifications have been made to the historical financial statements to conform to the financial statement presentation to be adopted by the combined company. These adjustments are related to the presentation of accounts receivable, accounts payable, accrued compensation and accrued liabilities. In addition, ATL financial information was converted from being prepared in accordance with IFRS to being prepared in accordance with U.S. GAAP, and was converted from British Pounds Sterling into U.S. Dollars.

The total estimated acquisition consideration for the purchase of ATL was determined as of June 30, 2011, the date on which the acquisition of ATL by Astex Pharmaceuticals is deemed to have occurred for purposes of the unaudited pro forma condensed combined balance sheet. The total estimated acquisition consideration is comprised of the market value of the common shares of Astex Pharmaceuticals, cash, and the fair values of the deferred consideration and ATL's stock options and warrants assumed in the transaction. Total consideration is as follows (in thousands):

Market value of Astex Pharmaceuticals common stock exchanged       $      96,410
Cash                                                                      24,858
Deferred consideration in the form of cash or Astex
Pharmaceuticals common stock                                              27,916
Options replaced                                                           3,347
Warrants assumed                                                             307
Total estimated acquisition consideration                          $     152,838

Deferred Consideration: Deferred consideration represents $30 million which will be paid on or prior to January 20, 2014, in semi-annual installments. The amount of each installment may vary depending on the amount of collaboration milestones that Astex Pharmaceuticals receives during each


respective semi-annual period, with the initial 5 million and 50% of all subsequent milestones to be paid with the next scheduled semiannual installment. The aggregate amount paid will equal $30 million regardless of the total amount of milestones received. A minimum of $15 million will be paid by January 20, 2013. The fair value of the deferred consideration was determined by estimating the timing and probabilities of milestone receipts and discounting the stream of installment payments using the Company's incremental borrowing rate over the installment payment period. Deferred consideration is classified as a liability and will be remeasured at fair value at each future reporting date.

Options: Astex Pharmaceuticals issued to ATL employees options to replace the existing ATL options under the same terms and aggregate purchase price as the existing options. The acquisition consideration includes fair value of the replaced options as attributable to the pre-acquisition service, which was estimated using the Black-Scholes pricing model and requires the input of highly subjective assumptions. The following assumptions were used in estimating the fair value: expected option terms of 0.2 to 8.8 years; risk free interest rates of 0.6% to 3.2%; dividend yield of 0% and volatility of 42% to 70%.

Warrant Liability: The warrant liability represents the fair value of ATL warrants to purchase 85,840 shares of ATL Series C convertible preferred stock as of June 30, 2011. The warrants can be exercised at a price of 4.82 and expire in October 2017. Upon exercise, the warrants will entitle the holder to receive that number of common shares of Astex Pharmaceuticals (2.16 shares per warrant) and that amount of cash ($1.66 per warrant) which would have been received had the warrants been exercised immediately prior to the consummation of the transaction. The warrants are classified as a liability as their exercise price is denominated in British Pounds Sterling, and will be remeasured at fair value at each future reporting date. The fair value of the warrants was estimated using the Black-Scholes pricing model and requires the input of highly subjective assumptions. The following assumptions were used in estimating the fair value: expected warrant term of 6.25 years; risk free interest rate of 1.95%; dividend yield of 0% and volatility of 56%.

Under the acquisition method of accounting, the total estimated acquisition consideration as shown in the table above is allocated to the ATL tangible net assets and identifiable intangible assets acquired based on their estimated fair values as of the date of the closing of the transaction.

The estimated acquisition consideration and the preliminary allocation of the estimated acquisition consideration are, in part, based upon a preliminary management valuation, as described below.

Cash and cash equivalents, marketable securities and other tangible assets and liabilities: The tangible assets and liabilities were valued at their respective carrying amounts, except for adjustments to inventories, deferred revenue, and other liabilities, as discussed below, as Astex Pharmaceuticals and ATL believe that these amounts approximate their current fair values.

Identifiable intangible assets: Identifiable intangible assets acquired include developed technology, trademark, collaboration and license agreements, and in-process research and development. The fair value of intangible assets is based on management's preliminary valuation. Estimated useful lives (where relevant for the purposes of these pro forma statements) are based on the time periods during which the intangibles are expected to result in incremental cash flows to Astex Pharmaceuticals.

Developed technology: Developed technology represents the value associated with the Pyramid platform, an integrated fragment based drug discovery approach which defines a process by which a range of high-throughput biophysical and computational techniques are used to experimentally characterize the interactions of very low molecular weight compounds,


or fragments, with their target proteins. The fair value of developed technology was determined using a cost replacement approach. Under the cost replacement approach, valuation is based on the premise that a prudent investor would pay no more for an asset than the amount for which the asset could be replaced or recreated. The fair value of developed technology will be capitalized as of the acquisition date and subsequently amortized over an estimated useful life of seven years.

Trademark: The Company changed its name to Astex Pharmaceuticals, Inc. on September 9, 2011. Management believes the name of Astex is a recognized name in the industry and an established brand name. The Income Approach using the "relief from royalty" method is a commonly used technique to value intangible assets when comparable licensing transactions are available to benchmark the royalty rate that could be expected to be generated by the subject asset. Using the relief from royalty method, the value of the Astex trademark has been estimated by determining the royalties the Company is relieved from paying because it owns the asset. The fair value of the trademark . . .

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