1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 8, 2001
NOVAVAX, INC.
-------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-26770 22-2816046
-------- ----------- -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File No.) Identification No.)
8320 GUILFORD ROAD, COLUMBIA, MD 21046
--------------------------------- -----
(Address of principal executive offices) (Zip code)
(301) 854-3900
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Registrant's telephone number, including area code
NOT APPLICABLE
--------------
(Former name or former address, if changed since last report)
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NOVAVAX, INC.
ITEMS TO BE INCLUDED IN THIS REPORT
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Audited Statements of Revenue and Direct Operating Expenses of AVC Product
Line of King Pharmaceuticals, Inc. attached hereto as Appendix I.
(1) Report of Independent Accountants dated March 1, 2001.
(2) Statements of Revenue and Direct Operating Expenses for the year
ended December 31, 1999 and the nine months ended September 30,
2000.
(3) Notes to Statements of Revenue and Direct Operating Expenses.
(b) Unaudited Pro Forma Combined Financial Information of Novavax, Inc. and the
AVC Product Line of King Pharmaceuticals, Inc., attached hereto as Appendix
II.
(1) Unaudited Pro Forma Combined Balance Sheet as of September 30,
2000.
(2) Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1999.
(3) Unaudited Pro Forma Combined Statement of Operations for the
nine-month period ended September 30, 1999.
(4) Notes to the Unaudited Pro Forma Financial Statements.
(c) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP dated March 23, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOVAVAX, INC.
Date: March 23, 2001 By: /s/ DENNIS W. GENGE
------------------------------------
Dennis W. Genge, Vice President
And Chief Financial Officer/Treasurer
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APPENDIX I
AVC PRODUCT LINE
OF KING PHARMACEUTICALS, INC.
Statements of Revenues and Direct Operating Expenses
For the Year Ended December 31, 1999
and the Nine Months Ended September 30, 2000
Together with Report of Independent Accountants
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
King Pharmaceuticals, Inc.:
We have audited the accompanying Statements of Revenues and Direct Operating
Expenses of the AVC Product Line of King Pharmaceuticals, Inc. for the year
ended December 31, 1999 and the nine months ended September 30, 2000. These
statements of Revenues and Direct Operating Expenses are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statements of Revenues and Direct Operating Expenses based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Statements of
Revenues and Direct Operating Expenses are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Statements of Revenues and Direct Operating Expenses. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Statements of Revenues and Direct Operating Expenses. We believe that our
audits provide a reasonable basis for our opinion.
The accompanying Statements of Revenues and Direct Operating Expenses were
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion in the current report on Form
8-K/A of Novavax, Inc.) as described in Note 1 and is not intended to be a
complete presentation of the AVC Product Line's revenues and expenses.
In our opinion, the Statements of Revenues and Direct Operating Expenses
referred to above present fairly, in all material respects, the results of
operations described in Note 1 of the Statement of Revenues and Direct Operating
Expenses for the year ended December 31, 1999 and the nine months ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States of America.
Atlanta, Georgia
March 1, 2001
1
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AVC PRODUCT LINE OF
KING PHARMACEUTICALS, INC.
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
Year ended Nine months ended
December 31, 1999 September 30, 2000
----------------- ------------------
Net sales $ 1,934 $ 869
-------- ------
Cost of sales 429 188
Selling, general and administrative 407 176
Amortization 52 39
-------- ------
Total costs and expenses 888 403
-------- ------
Net product contribution $ 1,046 $ 466
======== ======
The accompanying notes are an integral part of the financial statement.
2
7
AVC PRODUCT LINE OF
KING PHARMACEUTICALS, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
1. Basis of Presentation:
The accompanying statements were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission
for inclusion in the current report on Form 8-K/A of Novavax, Inc.,
("Novavax") and is not intended to be a complete presentation of the AVC
Product Line of King Pharmaceuticals, Inc. (the "AVC Product Line")
revenues and expenses. King Pharmaceuticals, Inc. ("King") does not
prepare financial statements of the AVC Product Line, which would be
intended to report a complete presentation of financial position, results
of operations and cash flows in accordance with accounting principles
generally accepted in the United States of America. Accordingly, the
accompanying statements do not purport to present the results of
operations of the AVC Product Line that would have resulted if King had
operated its AVC Product Line as an independent company.
An Agreement for the Purchase and Sale of Assets relating to the AVC
Product Line ("Purchase Agreement") was entered into between King and
Novavax on January 8, 2001. Novavax acquired certain assets related to
the AVC Product Line for $3,332, as defined in the Purchase Agreement.
The purchase price is subject to a contingent payment by King to Novavax
of up to $2,000 if net sales of the AVC product line do not exceed $850
for each of the calendar years 2001 through 2004.
The assets acquired as of January 8, 2001 represent certain intangible
assets as defined in the Purchase Agreement. These assets include the
right to the tradename in the United States and the goodwill associated
with the tradename; the know-how relating to production, manufacturing,
packaging, release, validation and stability of the products in the
United States; the right to the new drug application for the AVC Product
Line; and the trademark of the AVC Product Line.
In addition to the Purchase Agreement, a supply agreement was also
entered into on January 8, 2001 between King and Novavax. Pursuant to the
supply agreement, King will supply Novavax the AVC Product Line at a
price equal to 110% of King's cost for an initial term of twelve months
from the effective date. The supply agreement will be automatically
extended for an additional twelve months unless one of the parties
terminate the agreement.
3
8
AVC PRODUCT LINE OF
KING PHARMACEUTICALS, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
2. Summary of Significant Accounting Policies:
REVENUE RECOGNITION
Sales are reported net of an estimate for returns and allowances, cash
discounts, rebates and chargebacks. During the fourth quarter of 2000,
King changed its accounting policy for recognizing product sales in
accordance with the SEC's Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." Previously, sales were recognized
upon shipment to the customer. The new policy recognizes that risks of
ownership in some transactions do not substantively transfer to customers
until the product has been received by them without regard to when legal
title has transferred.
NET SALES
Net sales include certain sales deductions. Sales deductions include
deductions specifically attributable to the AVC Product Line and
deductions allocated to the AVC Product Line by management. Management
believes this method of allocation is reasonable. The types of deductions
included in the calculation of net sales are as follows:
- Sales Returns - Sales returns are directly attributable to
identifiable products based on actual sales returns.
- Cash Discounts - Cash discounts are allocated to the AVC Product
Line monthly, as a percentage of actual gross sales to total gross
sales of King.
- Sales Rebates - Rebates are allocated to the AVC Product Line
monthly based on gross sales, using a historical percentage of
gross sales.
- Chargebacks - Chargebacks are allocated to the AVC Product Line
monthly based on gross sales, using a historical percentage of
gross sales.
Year ended Nine months ended
December 31, 1999 September 30, 2000
----------------- ------------------
Gross sales $ 2,610 $ 1,065
Less:
Sales returns 406 79
Cash discounts 61 22
Sales rebates 176 73
Chargebacks 33 22
------- -------
Net Sales $ 1,934 $ 869
======= =======
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9
AVC PRODUCT LINE OF
KING PHARMACEUTICALS, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
2. Summary of Significant Accounting Policies, continued:
COST OF SALES
The products included in the AVC Product Line are manufactured by a third
party. Cost of sales include direct costs paid to the third-party
manufacturer.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling costs consist primarily of sales force employment costs (salaries
and bonuses). General and administrative costs include expenses for
administrative services, such as finance, human resources, legal,
information systems, and other corporate affairs. These costs are
allocated based on a percentage of net sales. Such percentage is
determined by dividing total King selling, general and administrative
costs by total King net sales. Management believes this method of
allocation is reasonable.
AMORTIZATION
Amortization is computed over the estimated useful life of the product,
30 years, using the straight-line method.
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. Revenues and expenses, and
disclosure of contingent assets and liabilities are affected by such
estimates and assumptions. Actual results could differ from those
estimates.
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10
AVC PRODUCT LINE OF
KING PHARMACEUTICALS, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
3. Significant Customers:
The AVC Product Line had sales to three customers representing 50% of
gross sales for the year ended December 31, 1999. The AVC Product Line
had sales to four customers representing 54% of gross sales for the nine
months ended September 30, 2000.
4. Quarterly Financial Data:
The following table summarizes the AVC Product Line statement of revenues
and direct operating expenses for the periods indicated:
For the Quarter Ended
--------------------------------------------------
March 31, 2000 June 30, 2000 September 30, 2000
--------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Net sales $ 120 $ 237 $ 512
------------------------------------------
Cost of sales 27 47 114
General and administrative expense 29 51 96
Amortization 13 13 13
------------------------------------------
Total costs and expenses 69 111 223
------------------------------------------
Net product contribution $ 51 $ 126 $ 289
==========================================
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11
AVC PRODUCT LINE OF
KING PHARMACEUTICALS, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
4. Quarterly Financial Data, continued:
For the Quarter Ended
------------------------------------------------------------------------
March 31, 1999 June 30, 1999 September 30, 1999 December 31, 1999
------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $391 $469 $580 $494
------------------------------------------------------------------------
Cost of sales 81 88 140 120
General and administrative
expense 87 104 119 97
Amortization 13 13 13 13
------------------------------------------------------------------------
Total costs and expenses 181 205 272 230
------------------------------------------------------------------------
Net product contribution $210 $264 $308 $264
========================================================================
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12
APPENDIX II
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Statements of Operations assume that
the acquisition of the AVC Product Line ("AVC") had occurred on January 1, 1999,
combining the results of operations of Novavax, Inc. (the "Company") and AVC for
the year ended December 31, 1999 and for the nine months ended September 30,
2000. The Unaudited Pro Forma Combined Condensed Balance Sheet as of September
30, 2000 reflects the acquisition as if it had occurred on September 30, 2000.
On January 8, 2001, Novavax acquired certain intangible assets related
to the AVC(TM) Product Line of sulfanilamide based vaginal anti-infective cream
and suppositories in the United States and Puerto Rice from King
Pharmaceuticals, Inc. ("King") for $3.3 million. In addition, Novavax agreed to
purchase all AVC inventories that had expiration dates greater than 18 months.
The value of this inventory was approximately $400,000 and was delivered to
Novavax in February 2001. No further liabilities were assumed.
The proforma information is based on the historical financial statements of
the Company and the historical statement of revenues and direct operating
expenses of AVC, after giving effect to the acquisition using the purchase
method of accounting and assumptions and adjustments considered appropriate by
the Company, certain of which are described in the accompanying Notes to
Unaudited Pro Forma Combined Financial Information. The pro forma information is
provided for illustrative purposes only and is not necessarily indicative of the
results of operations or financial condition that actually would have been
obtained if the acquisition had occurred on the dates indicated or of the
results that may be obtained in the future.
The Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the historical financial statements and the related notes
thereto of the Company and the historical statement of revenues and direct
operating expenses of AVC. The historical statement of revenues and direct
operating expenses of AVC and the related notes thereto are included herein. The
historical financial statements of Novavax, Inc. and the related notes thereto
have been previously filed with the Securities and Exchange Commission and are
available from the Company upon written request.
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NOVAVAX, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
AVC Pro Forma
Novavax Product line Adjustments Pro Forma
------- ------------ ----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 10,059 $ $ (3,332)(a) $ 6,727
Accounts receivable 613 613
Inventories 400 400
Prepaid expenses and other current assets 34 34
-------- -------- -------- --------
Total current assets 10,706 400 (3,332) 7,774
Property and equipment, net 1,549 1,549
Patent costs, net 1,603 1,603
Other assets 629 629
Other intangible assets 0 3,332 (a) 3,332
-------- -------- -------- --------
Total assets 14,487 400 -- 14,887
======== ======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 1,925 400 2,325
Accrued payroll 102 102
-------- -------- -------- --------
2,027 400 -- 2,427
-------- -------- -------- --------
Commitments and contingencies
Stockholders' equity:
Common stock 200 200
Additional paid-in-capital 67,194 67,194
Accumulated deficit (50,098) (50,098)
Deferred compensation of stock option (1) (1)
Treasury stock (4,835) (4,835)
-------- -------- -------- --------
Total stockholders' equity 12,460 -- -- 12,460
-------- -------- -------- --------
Total liabilities and stockholders' equity $ 14,487 $ 400 $ -- $ 14,887
======== ======== ======== ========
See accompanying notes to unadudited proforma combined financial information.
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NOVAVAX, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
AVC Pro Forma
Novavax Product line Adjustments Pro Forma
------- ------------ ----------- ---------
Net sales $ 1,181 $ 1,934 $ $ 3,115
Cost of sales 0 429 43(b) 472
------------ ------------ --------- ------------
Gross profit 1,181 1,505 (43) 2,643
------------ ------------ --------- ------------
Operating expenses:
General and administrative 2,393 459 476(c) 3,328
Research and development 3,354 3,354
------------ ------------ --------- ------------
Total operating expenses 5,747 459 476 6,682
------------ ------------ --------- ------------
Operating (loss) profit (4,566) 1,046 (519) (4,039)
Interest income 60 60
Interest expense (200)(d) (200)
------------ ------------ --------- ------------
Net (loss) income $ (4,506) $ 1,046 $ (719) $ (4,179)
============ ============ ========= ============
Per share information: basic and diluted
Net (loss) income $ (0.31) $ (0.29)
============ ============
Weighted average number of common
Shares outstanding 14,511,081 14,511,081
============ ============
See accompanying notes to unadudited proforma combined financial information.
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NOVAVAX, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
AVC Pro Forma
Novavax Product line Adjustments Pro Forma
------- ------------ ----------- ---------
Net sales $ 1,668 $ 869 $ $ 2,537
Cost of sales 0 188 19 (b) 207
------------ ------------ --------- ------------
Gross profit 1,668 681 (19) 2,330
------------ ------------ --------- ------------
Operating expenses:
General and administrative 2,765 215 357 (c) 3,337
Research and development 6,561 6,561
------------ ------------ --------- ------------
9,326 215 357 9,898
------------ ------------ --------- ------------
Operating (loss) profit (7,658) 466 (376) (7,568)
Interest income 454 454
Interest expense (150) (d) (150)
------------ ------------ --------- ------------
Net (loss) income $ (7,204) $ 466 $ (526) $ (7,264)
============ ============ ========= ============
Per share information: basic and diluted
Net (loss) income $ (0.38) $ (0.39)
============ ============
Weighted average number of common
shares outstanding 18,727,414 18,727,414
============ ============
See accompanying notes to unaudited proforma combined financial information.
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NOVAVAX, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
Novavax, Inc. ("Novavax" or the "Company") is a biopharmaceutical company
focused on the research and development of proprietary drug delivery and
encapsulation technologies. The AVC Product Line had been acquired and marketed
by King Pharmaceuticals, Inc. ("King") through King's women's health care sales
force since January 1999.
The Unaudited Pro Forma Combined Statements of Operations assume that the
acquisition of the AVC Product Line ("AVC") had occurred on January 1, 1999,
combining the results of operations of Novavax, Inc. (the "Company") and
Statements of Revenues and Direct Operating Expenses of AVC for the year ended
December 31, 1999 and for the nine months ended September 30, 2000. The
Unaudited Pro Forma Combined Condensed Balance Sheet as of September 30, 2000
reflects the acquisition as if it had occurred on September 30, 2000.
The Unaudited Pro Forma statements were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the current report on Form 8-K/A of Novavax, and are
not intended to be a complete presentation of AVC and Novavax's combined results
of operations. King did not prepare financial statements of AVC, which would be
intended to report a complete presentation of financial position, results of
operations and cash flows in accordance with accounting principles generally
accepted in the United States of America. Accordingly, the accompanying
Unaudited Pro Forma statements do not purport to present the actual results of
operations of AVC that would have resulted if Novavax had acquired AVC in
January 1999.
NOTE 2. ACQUISITION OF BIOMEDICAL SERVICES DIVISION
On January 8, 2001, Novavax acquired certain assets related to the AVC
Product Line of sulfanilamide based vaginal anti-infective cream and
suppositories in the United States and Puerto Rice from King for $3.3 million.
The assets acquired represent certain intangible assets as defined in the
Agreement for the Purchase and Sale of Assets relating to the AVC Product Line
("Purchase Agreement"). These assets include the right to the tradename in the
United States and the goodwill associated with the tradename; the know-how
relating to production, manufacturing, packaging, release, validation and
stability of the products in the United States; and the right to the new drug
application for AVC. In addition to the Purchase Agreement, a Supply Agreement
was also entered into on January 8, 2001 between King and Novavax. Pursuant to
the Supply Agreement, King will supply Novavax the AVC Product Line at a price
equal to 110% of King's cost for an initial term of twelve months from the
effective date. The Supply Agreement will be automatically extended for an
additional twelve months unless one of the parties terminate the agreement.
Novavax initially agreed to purchase all AVC inventories that had expiration
dates greater than 18 months. The value of this inventory was approximately
$400,000 and was delivered to Novavax in February 2001. No other liabilities
were assumed.
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NOTE 3. PRO FORMA ADJUSTMENTS
(a) Represents cash purchase price of AVC of $3,332,000 .
(b) Estimated increase in cost of sales related to contractual 10% service
fee for processing inventory purchases.
(c) Amortization of acquisition cost of AVC product line with an estimated
useful life of seven years
(d) Estimated interest expense resulting from the use of $3,332,000 in cash
to acquire AVC.