EX-99.3 5 tm2135560d2_ex99-3.htm EXHIBIT 99.3

Exhibit 99.3

 

Unaudited Pro Forma Condensed Combined Financial Statements

 

(amounts in thousands)

 

On December 15, 2021, Assertio Holdings, Inc. (“Assertio” or the “Company”), through its newly formed subsidiary, Otter Pharmaceuticals, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Antares Pharma, Inc. (“Antares”), and concurrently consummated the transactions contemplated by the Purchase Agreement (the “Closing”). Pursuant to the terms of the Purchase Agreement, the Company acquired Antares’ rights, title and interest in and to Otrexup® (methotrexate), a drug device combination single-dose once weekly auto-injector for subcutaneous use (“Otrexup”), including certain related assets, intellectual property and product inventory (the “Transaction”) for (i) $18,000 million in cash payable at the Closing, (ii) $16,021 million in cash payable on May 30, 2022 and (iii) and $10,000 million in cash payable on December 15, 2022. Pursuant to the terms of the Purchase Agreement, the Company also assumed certain contracts, liabilities and obligations of Antares relating to Otrexup.

 

The presentation of the unaudited pro forma condensed combined balance sheet gives effect to the Transaction as if it had occurred on September 30, 2021. The presentation of the unaudited pro forma condensed combined statements of comprehensive income reflects the combined results of operations as if the Transaction had occurred on January 1, 2020, the beginning of the Company’s 2020 fiscal year. The unaudited pro forma condensed combined financial statements include adjustments that reflect the accounting for the Transaction in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

 

As discussed in Note 3 to the unaudited pro forma condensed combined financial statements, the Company has concluded, in accordance with U.S. GAAP, that Otrexup does not meet the definition of a business. However, for purposes of this Form 8-K, and in accordance with Rule 3-05 and Rule 11-01, the Transaction is considered the purchase of a business given the significance of the purchase consideration in relation to the size of Assertio, and since the historical revenue-generating activities from Otrexup will continue in essentially the same fashion following the Transaction.

 

The unaudited pro forma condensed combined financial statements should be read in conjunction with (1) the historical financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 12, 2021 and its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2021 filed with the SEC on November 4, 2021 and (2) the Special Purpose Financial Statements of Otrexup as of and for the years ended December 31, 2020 and 2019, and as of September 30, 2021 and for the nine months ended September 30, 2021 and 2020, included in this Form 8-K.

 

The unaudited pro forma condensed combined financial statements are provided for informational purposes only and are not necessarily indicative of results that would have occurred had the acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to be indicative of the future financial position or operating results of the combined operations and do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the Transaction.

 

 

 

  

ASSERTIO HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of September 30, 2021

(in thousands)

 

         Assertio
(Historical)		         Otrexup
(Historical)
Adjusted for Reclassifications		        
 Transaction Accounting Adjustments                  Pro Forma
Combined		    
        Note 2             
ASSETS                      
Current assets                       
Cash and cash equivalents  $58,726   $-   $(18,000)  Note 3 (a)  $40,726 
Accounts receivable, net   36,145                 36,145 
Inventories, net   5,481    4,116    3,347   Note 3 (b)(c)   12,944 
Prepaid and other current assets   12,193                 12,193 
Total current assets   112,545    4,116    (14,653)      102,008 
Property and equipment, net   1,678                 1,678 
Intangible assets, net   179,143    91    37,467   Note 3 (b)(d)   216,701 
Other long-term assets   5,939                 5,939 
Total assets  $299,305   $4,207   $22,814      $326,326 
LIABILITIES AND SHAREHOLDERS' EQUITY                       
Current liabilities                       
Accounts payable  $7,666   $-   $-      $7,666 
Accrued rebates, returns and discounts   43,830                 43,830 
Accrued liabilities   13,782         27,021   Note 3 (a)   40,803 
Current portion of long-term debt   12,257                 12,257 
Contingent consideration, current portion   7,200                 7,200 
Interest payable   4,193                 4,193 
Other current liabilities   11,552                 11,552 
Total current liabilities   100,480    -    27,021       127,501 
Long-term debt   66,410                 66,410 
Contingent consideration   30,759                 30,759 
Other long-term liabilities   4,796                 4,796 
Total liabilities   202,445    -    27,021       229,466 
Commitment and contingencies                       
Shareholders' equity:                       
Common stock   4                 4 
Additional paid-in capital   530,689                 530,689 
Accumulated deficit   (433,833)                (433,833)
Total shareholders' equity   96,860    -    -       96,860 
Total liabilities and shareholders' equity  $299,305   $-   $27,021      $326,326 

 

 

 

 

ASSERTIO HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME

Year ended December 31, 2020

(in thousands except per share data)

 

         Assertio
(Historical)		         Otrexup
(Historical)
Adjusted for Reclassifications		        
 Transaction
Accounting
Adjustments		                  Pro Forma
Combined		    
           Note 2                  
Revenues:                      
Product sales, net  $93,498   $15,913   $-      $109,411 
Commercialization agreement, net   11,258                 11,258 
Royalties and milestones   1,519                 1,519 
Total revenues   106,275    15,913    -       122,188 
Costs and expenses:                       
Cost of sales (excluding amortization of intangible assets)   19,872    4,232    3,347   Note 3 (b)(c)   27,451 
Research and development expenses   4,213    41            4,254 
Selling, general and administrative expenses   104,324    8,237            112,561 
Amortization of intangible assets   24,783         4,173   Note 3 (d)   28,956 
Loss on impairment of goodwill and intangible assets   17,432                 17,432 
Restructuring charges   17,806                 17,806 
Total costs and expenses   188,430    12,510    7,520       208,460 
(Loss) income from operations   (82,155)   3,403    (7,520)      (86,272)
Other income (expense):                       
Gain on sale of Gralise   126,655                 126,655 
Loss on debt extinguishment   (56,113)                (56,113)
Loss on sale of NUCYNTA   (14,749)                (14,749)
Interest expense   (15,926)                (15,926)
Other loss   (3,225)                (3,225)
Total other income   36,642    -    -       36,642 
Net (loss) income before income taxes   (45,513)   3,403    (7,520)      (49,630)
Income tax benefit   17,369         1,029   Note 4   18,398 
Net (loss) income and Comprehensive (loss) income  $(28,144)  $3,403   $(6,491)     $(31,232)
                        
Basic net loss per share  $(0.27)               $(0.30)
Diluted net loss per share  $(0.27)               $(0.30)
                        
Shares used in computing basic net loss per share   104,835                 104,835 
Shares used in computing diluted net loss per share   104,835                 104,835 

 

 

 

 

ASSERTIO HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME

Nine months ended September 30, 2021

(in thousands except per share data)

                   

    Otrexup   Transaction              
    Assertio   (Historical)   Accounting       Pro Forma  
    (Historical)   Adjusted for Reclassifications   Adjustments       Combined  
        Note 2              
Revenues                    
Product sales, net   $ 77,271   $ 11,061   $ -       $ 88,332  
Royalties and milestones   1,391               1,391  
Other revenue   (976 )             (976 )
Total revenues   77,686   11,061   -       88,747  
Costs and expenses                      
Cost of sales   10,936   2,994           13,930  
Research and development expenses   -   21           21  
Selling, general and administrative expenses   43,279   5,334           48,613  
Amortization of intangible assets   20,939       3,130   Note 3 (d)    24,069  
Restructuring charges   1,089               1,089  
Total costs and expenses   76,243   8,349   3,130       87,722  
Income from operations   1,443   2,712   (3,130 )     1,025  
Other income (expense):                      
Interest expense   (7,783 )             (7,783 )
Other gain   747               747  
Total other expense   (7,036 ) -   -       (7,036 )
Net (loss) income before income taxes   (5,593 ) 2,712   (3,130 )     (6,011 )
Income tax (expense) benefit   (294 )     104   Note 4   (190 )
Net (loss) income and Comprehensive (loss) income   $ (5,887 ) $ 2,712   $ (3,025 )     $ (6,200 )
                       
Basic net loss per share   $ (0.14 )             $ (0.15 )
Diluted net loss per share   $ (0.14 )             $ (0.15 )
                       
Shares used in computing basic net loss per share   42,550               42,550  
Shares used in computing diluted net loss per share   42,550               42,550  

  

 

 

 

Assertio Holdings, Inc.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1. Basis of Presentation

 

The unaudited pro forma condensed combined financial statements have been prepared by the Company in accordance with Article 11 of Regulation S-X, are subject to change and are not necessarily indicative of the results that would have been achieved had the acquisition been completed as of the dates indicated or that may be achieved in future periods. The Company believes the fair value recognized for the assets acquired are based on reasonable estimates and assumptions. Preliminary fair value estimates may change as additional information becomes available. There can be no assurance that the final determination will not result in material changes from these preliminary amounts.

 

The financial statements included in the unaudited pro forma condensed combined financial statements have been prepared in accordance with U.S. GAAP. The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that reflect the accounting for the Transaction in accordance with U.S. GAAP. Where applicable, Assertio has disclosed those adjustments that will not recur in the Company's results of operations beyond a year from the date of the Transaction.

 

The unaudited pro forma condensed combined financial statements have been compiled in a manner consistent with the accounting policies adopted by Assertio. The accounting policies of Otrexup have been determined to be similar in all material respects to Assertio's accounting policies. As a result, no adjustments for accounting policy differences have been reflected in the unaudited pro forma condensed combined financial statements.

 

Note 2. Reclassifications

 

Certain reclassifications have been made to the historical presentation of Otrexup to conform to the financial statement presentation of Assertio, as follows:

 

As of September 30, 2021

 

       Reclassification     
       adjustment to     
       conform Otrexup   Otrexup 
   Otrexup   to Assertio   (Historical) 
   Historical Line Items   presentation   Adjusted for Reclassifications 
(amounts in thousands)            
Inventory   4,116    (4,116)   - 
Inventories, net        4,116    4,116 
Identified intangible assets, net (patents)   91    (91)   - 
Intangible assets, net        91    91 

 

 

 

 

Year Ended December 31, 2020

 

       Reclassification     
       adjustment to     
       conform Otrexup   Otrexup 
   Otrexup   to Assertio   (Historical) 
   Historical Line Items   presentation   Adjusted for Reclassifications 
(amounts in thousands)            
Net product revenue  $15,913   $(15,913)  $- 
Product sales, net        15,913    15,913 
Cost of product sales   4,232    (4,232)   - 
Cost of sales (excluding amortization of intangible assets)        4,232    4,232 
Research and development   41    (41)   - 
Research and development expenses        41    41 
Selling, general and administrative   8,237    (8,237)   - 
Selling, general and administrative expenses        8,237    8,237 

 

Nine Months Ended September 30, 2021

 

       Reclassification     
       adjustment to     
       conform Otrexup   Otrexup 
   Otrexup   to Assertio   (Historical) 
   Historical Line Items   presentation   Adjusted for Reclassifications 
(amounts in thousands)            
Net product revenue  $11,061   $(11,061)  $- 
Product sales, net        11,061    11,061 
Cost of product sales   2,994    (2,994)   - 
Cost of sales        2,994    2,994 
Research and development   21    (21)   - 
Research and development expenses        21    21 
Selling, general and administrative   5,334    (5,334)   - 
Selling, general and administrative expenses        5,334    5,334 

 

 

 

 

Note 3. Transaction Accounting Adjustments

 

Assertio has accounted for the acquisition of Otrexup as an acquisition of assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 805, Business Combinations, and Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, whereby the Company recognized assets acquired based on their estimated fair values on the acquisition date. Due to the screen test as required by ASU 2017-01, the acquisition does not meet the definition of a business as, based on the final terms of the Transaction on the closing date, substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset. Furthermore, Assertio concluded that the acquisition does not meet the definition of a business since a substantive process was not acquired. Specifically, (1) no manufacturing, back office, or other employees are transferring to Assertio, (2) Assertio is not acquiring, inheriting or assuming third-party manufacturing contracts essential to the manufacturing of Otrexup, and (3) Assertio is not acquiring certain patent rights, trademarks, manufacturing know-how, and other intellectual property that would be critical to the ability to manufacture Otrexup itself or through a contract with a third party.

 

For pro forma purposes, the Company has preliminarily allocated the purchase consideration to the acquired assets based on their relative estimated fair values. Therefore, as discussed further below, the assets acquired are provisional and will be finalized after the Company receives and reviews all available data and completes its detailed valuation analysis.

 

(a) Purchase consideration

 

The following table summarizes the components of the purchase consideration:

 

   Pro Forma 
   Adjustment 
(amounts in thousands)    
Closing cash payment   18,000 
Deferred cash payments(i)   26,021 
   Total purchase price   44,021 
Transaction costs(ii)   1,000 
Total purchase consideration   45,021 

 

(i)Under the terms of the Transaction, Assertio is to make a $16,021 payment to Antares on May 30, 2022 and a $10,000 payment to Antares on December 15, 2022

 

(ii)Assertio incurred approximately $1,000 of transaction costs subsequent to September 30, 2021.

       

(b) Preliminary purchase price allocation

 

Assertio has performed a preliminary analysis of the fair value of the Otrexup assets acquired. Assertio has estimated the allocation of the purchase consideration to acquired assets based on their relative fair value. This preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the unaudited pro forma condensed combined balance sheet and statements of comprehensive income. For purposes of preparing the unaudited pro forma condensed combined financial statements, the fair value amounts and corresponding purchase price allocation incorporate the amount of Otrexup assets on hand as of September 30, 2021 or January 1, 2020, as applicable, as required under Article 11. These amounts are different than those on hand at Closing. The final purchase price allocation will incorporate the Otrexup assets on hand at Closing and will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation is expected to be completed when the Company files its report on Form 10-K for the year ended December 31, 2021 and could differ materially from the preliminary allocation used in preparing the transaction accounting adjustments.

 

 

 

 

The following table summarizes the allocation of the purchase consideration:

 

       Less:     
   Preliminary   Otrexup   Pro Forma 
   Purchase Price Allocation   (Historical)   Adjustment 
(amounts in thousands)            
Inventories   7,463    (4,116)   3,347 
Intangible assets   37,558    (91)   37,467 
Total assets acquired   45,021    (4,207)   40,814 

 

(c) Inventories

 

As part of the preliminary valuation analysis, Assertio estimated the purchase price allocation to acquired inventories. The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts. The unaudited pro forma condensed combined statements of comprehensive income for the year ended December 31, 2020 are also adjusted to increase cost of sales by the same amount as the inventory is expected to be sold within 12 months of the acquisition date. Accordingly, this adjustment will not affect the Company’s results of operations beyond 12 months after the acquisition date.

 

(d) Intangible assets, net

 

As part of the preliminary valuation analysis, Assertio identified as an intangible asset the acquired rights to market and sell Otrexup in the United States (the "product rights"). The products rights consist of certain patents and trademarks, at-market contracts and regulatory approvals, customer lists, marketing assets, and other records, and have been valued as a single intangible asset as they are inextricably linked. The fair value of the product rights was determined primarily using an income approach, namely a discounted cash flow model. The preliminary estimate of fair value will likely differ from the final amount Assertio will calculate after completing a detailed valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements. However, a 10% change in fair value would not have a material impact on the balance of acquired inventory or amortization expense, assuming a useful life of 9 years.

 

The following table summarizes the estimated fair value of the acquired product rights and its estimated useful life and uses a straight-line basis of amortization:

 

           Amortization Expense   Amortization Expense 
   Preliminary   Useful   Year Ended   Nine Months Ended 
   Purchase Price Allocation   Life   December 31, 2020   September 30, 2021 
(amounts in thousands)                
Product rights   37,558    9    4,173    3,130 

 

 

 

 

Note 4: Income Taxes

 

The pro forma presentation of the effect on income tax expense (benefit) was calculated using the U.S. estimated statutory rate. The adjustments are summarized in the following tables:

 

Year Ended December 31, 2020

 

   Net (loss) income         
   before income taxes   Statutory Tax Rate   Income tax (expense) benefit 
(amounts in thousands except tax rate)            
Combined pro forma adjustments to net (loss) income before income taxes(i)  $(7,520)   25%  $1,880 
less: income tax on Otrexup income before taxes   3,403    25%   (851)
Pro forma adjustment            $1,029 

 

(i)The tax effects of the adjustment to inventory described in Note 3(c) will not affect the Company’s results of operations beyond 12 months after the acquisition date.

 

Nine months Ended September 30, 2021

 

   Net (loss) income         
   before income taxes   Statutory Tax Rate   Income tax (expense) benefit 
(amounts in thousands except tax rate)               
Combined pro forma adjustments to net (loss) income before income taxes  $(3,130)   25%  $782 
less: income tax on Otrexup income before taxes   2,712    25%   (678)
Pro forma adjustment            $104