SQNM Sequenom, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 30, 2014

 

 

SEQUENOM, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		000-29101		77-0365889
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

3595 John Hopkins Court, San Diego, CA		92121
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 202-9000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01

Entry into a Material Definitive Agreement.

The information provided in Item 2.01 is incorporated herein by reference.

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

On May 30, 2014, Sequenom, Inc. (the “Company”) entered into a Stock and Asset Purchase Agreement (the “Purchase Agreement”) with BioSciences Acquisition Company (“BioSciences”), pursuant to which BioSciences purchased substantially all of the assets used in the Company’s bioscience business segment, which develops, manufactures, markets, sells and services mass spectrometry analytical instruments and related instruments, software, reagents and consumables for use in the field of mass spectrometry (the “Business”). Pursuant to the Purchase Agreement, BioSciences acquired the right, title and interest in and to specified intellectual property, equity interests of certain of the Company’s foreign subsidiaries, inventory, accounts receivable, manufacturing and other equipment, customer contracts and other related assets used in the Business (collectively, the “Transferred Assets”), and BioSciences assumed the Company’s existing Business contracts, including the lease for its facility, and trade and other payables. BioSciences also has offered employment to all employees of the Business and assumed responsibility for any employee retention and severance obligations. The Company has retained all of its existing right, title and interest in and to any and all of Company’s assets that are not Transferred Assets. The aggregate cash purchase price was $31.8 million, adjusted for working capital plus the Company has the right to receive a $2 million milestone payment if a specified regulatory clearance is obtained by September 30, 2014 or $1 million if that regulatory clearance is obtained after September 30, 2014 and on or before December 31, 2014, and $2 million if recognized net revenue of the Business in 2014 equals or exceeds a specified revenue target. The purchase price is subject to a post-closing working capital adjustment.

At the closing, $1.5 million of the purchase price was deposited in escrow to secure the Company’s indemnification obligations and any working capital adjustment. On May 30, 2015, $500,000 (less any claims paid under the escrow agreement) is scheduled to be released to the Company and the remaining escrow is scheduled to be released on the 18^th month anniversary of closing, subject to any unresolved claims. Pursuant to the Purchase Agreement, the Company has certain indemnification obligations for potential breaches of representations and warranties made by the Company, each of which survives for a period of 18 months, and also for the covenants and obligations set forth in the Purchase Agreement and for the satisfaction of all excluded liabilities. The Company is not required to make any indemnification payments with regards to its representations and warranties until aggregate damages exceed $250,000. The Company’s maximum indemnification liability is capped at $3.5 million subject to a limited exception for a retained liability. BioSciences also has certain indemnification obligations for potential breaches of representations and warranties made by BioSciences, for the covenants and obligations set forth in the Purchase Agreement and for the satisfaction of its assumed liabilities.

In connection with entering into the Purchase Agreement the Company also concurrently entered into a License Agreement with BioSciences (the “License Agreement”) pursuant to which the Company granted BioSciences a worldwide, non-exclusive, royalty-free, fully-paid license, without the right to sublicense, with respect to its intellectual property, to make, use, sell and import products and perform services in operation of the Transferred Assets in the bioscience business. Pursuant to the terms of the License Agreement, BioSciences granted the Company a worldwide, non-exclusive, royalty-free, fully-paid license, without the right to sublicense, with respect to the intellectual property purchased by BioSciences in the transaction described herein for the Company’s use in the Company’s molecular diagnostic laboratory business.

In accordance with the Purchase Agreement, the Company and BioSciences entered into a Supply Agreement (the “Supply Agreement”), pursuant to which BioSciences agreed to supply and the Company agreed to purchase mass spectrometry analytical instruments and related instruments, software, reagents and consumables for use in the Company’s molecular diagnostic laboratory business for mutually-agreed upon prices to be paid by the Company to BioSciences, for an initial term.

In accordance with the Purchase Agreement, the Company and BioSciences entered into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which the Company agreed to provide certain services to BioSciences until December 31, 2014, unless the Transition Services Agreement is earlier terminated. Under the terms of the Transition Services Agreement, the Company will not charge Biosciences for the services rendered thereunder, however, Biosciences will reimburse the Company for certain third party charges and out-of-pocket costs that may be incurred by the Company.

Pursuant to the terms of the Purchase Agreement, the Company and BioSciences entered into a Non-Competition and Non-Solicitation Agreement (the “Non-Competition Agreement”), which restricts the Company’s global activities in the Business for a period of five years. The Non-Competition Agreement also restricts the Company from soliciting for employment or hiring any BioSciences officer or employee that works in BioSciences’ bioscience operations for a period of three years. In addition, the Non-Competition Agreement restricts the Company’s persuasion of any supplier or customer of the Business to terminate or alter its relationship with BioSciences.

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The foregoing descriptions of the terms of the Purchase Agreement, the License Agreement and the Supply Agreement are qualified in their entirety by reference to the Purchase Agreement, the License Agreement and the Supply Agreement, which will be filed by the Company as an exhibit to its Quarterly Report on Form 10-Q for the quarter ending June 30, 2014.

Forward-Looking Statements

Statements contained in this Current Report on Form 8-K regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Risks are described more fully in the Company’s filings with the Securities and Exchange Commission, including without limitation the Company’s most recent Quarterly Report on Form 10-Q and other documents subsequently filed with or furnished to the Securities and Exchange Commission. All forward-looking statements contained in this Current Report on Form 8-K speak only as of the date on which they were made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

 

Item 9.01

Financial Statements and Exhibits.

 

(b)	Pro Forma Financial Information.

The required unaudited pro forma condensed consolidated financial information is included as Exhibit 99.1 hereto and incorporated herein by reference.

 

(d)

Exhibits.

 

Exhibit Number		Description
99.1		Unaudited Pro Forma Condensed Consolidated Financial Information.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				SEQUENOM, INC.
Dated: June 3, 2014				By:		/s/ R. William Bowen
				Name:		R. William Bowen
				Title:		Senior Vice President and General Counsel

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Unaudited Pro Forma Condensed Consolidated Financial Information.

Exhibit 99.1

SEQUENOM, INC.

INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

(Unaudited)

The accompanying unaudited pro forma condensed consolidated statement of operations for three months ended March 31, 2014 and the years ended December 31, 2013, 2012 and 2011 give effect to the disposition of certain assets related to the Company’s Bioscience business as if it had been consummated at the beginning of each period presented. The accompanying unaudited pro forma condensed consolidated balance sheet as of March 31, 2014 gives effect to the disposition of certain assets related to the Company’s Bioscience business as if it had been consummated as of March 31, 2014.

The historical financial information on which the pro forma statements are based is included in the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 1, 2014 and the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014. The pro forma consolidated financial statements and the notes thereto should be read in conjunction with these historical consolidated financial statements.

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are subject to a number of assumptions which may not be indicative of the results of operations that would have occurred had the disposition been completed at the dates indicated or what the results will be for any future periods. The unaudited pro forma consolidated statements of operations do not include the gain or loss that the Company may recognize for the sale of certain assets related to the Company’s Bioscience business if the transaction was completed at the beginning of the periods presented.

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SEQUENOM, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

 

		March 31, 2014
		As Reported				Pro Forma Adjustments						Pro Forma
Assets
Current assets:
Cash and cash equivalents		$	45,340			$	27,660			A		$	73,000
Marketable securities			10,988				—						10,988
Accounts receivable, net			10,231				(6,807	)		B			3,424
Inventories			13,015				(5,703	)		B			7,312
Other current assets and prepaid expenses			3,487				34			C			3,521
Total current assets			83,061				15,184						98,245
Property, equipment and leasehold improvements, net			23,568				(858	)		B			22,710
Goodwill			10,007				—						10,007
Other assets			6,215				866			D			7,081
Total assets		$	122,851			$	15,192					$	138,043
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable		$	9,846			$	(1,137	)		B		$	8,709
Accrued expenses			20,159				(3,532	)		B			16,627
Long-term debt and obligations, current portion			7,656				—						7,656
Other current liabilities			4,627				(2,190	)		B			2,437
Total current liabilities			42,288				(6,859	)					35,429
Long-term debt and obligations, less current portion			7,760				—						7,760
5.00% Convertible Senior Notes due 2017			130,000				—						130,000
Other long-term liabilities			1,442				(560	)		B			882
Commitments and contingencies
Stockholders’ deficit:
Common stock, par value $0.001; 185,000 shares authorized, 116,393 shares issued and outstanding at March 31, 2014			116				—						116
Additional paid-in capital			970,564				—			E			970,564
Accumulated other comprehensive income			664				(517	)		F			147
Accumulated deficit			(1,029,983	)			23,128			G			(1,006,855	)
Total stockholders’ deficit			(58,639	)			22,611						(36,028	)
Total liabilities and stockholders’ deficit		$	122,851			$	15,192					$	138,043

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SEQUENOM, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except per share information)

 

		March 31, 2014
		As Reported				Pro Forma Adjustments						Pro Forma
Statements of Operations
Revenues:
Diagnostic services		$	37,061			$	—					$	37,061
Bioscience product sales and services			9,212				(9,212	)		1			—
Total revenues			46,273				(9,212	)					37,061
Cost of revenues:
Cost of diagnostic services			22,770				—						22,770
Cost of bioscience product sales and services			3,340				(3,340	)		1			—
Total cost of revenues			26,110				(3,340	)					22,770
Gross margin			20,163				(5,872	)					14,291
Operating expenses:
Selling and marketing			11,769				(3,210	)		1			8,559
Research and development			8,161				(1,372	)		1			6,789
General and administrative			12,767				(287	)		1			12,480
Restructuring costs			929				(19	)		1			910
Total operating expenses			33,626				(4,888	)					28,738
Income (loss) from operations			(13,463	)			(984	)					(14,447	)
Interest expense, net			(2,077	)			—						(2,077	)
Other income (expense), net			50				(72	)		1			(22	)
Income (loss) before income taxes			(15,490	)			(1,056	)					(16,546	)
Income tax expense			(184	)			60			1			(124	)
Net loss from continuing operations		$	(15,674	)		$	(996	)				$	(16,670	)
Net loss per common share, basic and diluted:		$	(0.13	)								$	(0.14	)
Weighted average number of shares outstanding, basic and diluted			116,134										116,134

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SEQUENOM, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except per share information)

 

		December 31, 2013
		As Reported				Pro Forma Adjustments						Pro Forma
Statements of Operations
Revenues:
Diagnostic services		$	119,556			$	—					$	119,556
Bioscience product sales and services			42,870				(42,870	)		1			—
Total revenues			162,426				(42,870	)					119,556
Cost of revenues:
Cost of diagnostic services			87,302				—						87,302
Cost of bioscience product sales and services			15,436				(15,436	)		1			—
Total cost of revenues			102,738				(15,436	)					87,302
Gross margin			59,688				(27,434	)					32,254
Operating expenses:
Selling and marketing			51,360				(13,772	)		1			37,588
Research and development			46,532				(7,797	)		1			38,735
General and administrative			54,166				(1,621	)		1			52,545
Restructuring costs			6,037				(284	)		1			5,753
Total operating expenses			158,095				(23,474	)					134,621
Income (loss) from operations			(98,407	)			(3,960	)					(102,367	)
Interest expense, net			(8,443	)			—						(8,443	)
Other income (expense), net			(255	)			144			1			(111	)
Income (loss) before income taxes			(107,105	)			(3,816	)					(110,921	)
Income tax expense			(301	)			100			1			(201	)
Net loss from continuing operations		$	(107,406	)		$	(3,716	)				$	(111,122	)
Net loss per common share, basic and diluted:		$	(0.93	)								$	(0.96	)
Weighted average number of shares outstanding, basic and diluted			115,378										115,378

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SEQUENOM, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except per share information)

 

		December 31, 2012
		As Reported				Pro Forma Adjustments						Pro Forma
Statements of Operations
Revenues:
Diagnostic services		$	46,457			$	—					$	46,457
Bioscience product sales and services			43,240				(43,240	)		1			—
Total revenues			89,697				(43,240	)					46,457
Cost of revenues:
Cost of diagnostic services			47,283				—						47,283
Cost of bioscience product sales and services			15,025				(15,025	)		1			—
Total cost of revenues			62,308				(15,025	)					47,283
Gross margin			27,389				(28,215	)					(826	)
Operating expenses:
Selling and marketing			48,587				(14,792	)		1			33,795
Research and development			50,525				(10,283	)		1			40,242
General and administrative			41,090				(1,308	)		1			39,782
Total operating expenses			140,202				(26,383	)					113,819
Income (loss) from operations			(112,813	)			(1,832	)					(114,645	)
Interest expense, net			(3,318	)			—						(3,318	)
Other income (expense), net			(1,167	)			1,155			1			(12	)
Income (loss) before income taxes			(117,298	)			(677	)					(117,975	)
Income tax (expense) benefit			269				150			1			419
Net loss from continuing operations		$	(117,029	)		$	(527	)				$	(117,556	)
Net loss per common share, basic and diluted:		$	(1.03	)								$	(1.03	)
Weighted average number of shares outstanding, basic and diluted			113,646										113,646

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SEQUENOM, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except per share information)

 

		December 31, 2011
		As Reported				Pro Forma Adjustments						Pro Forma
Statements of Operations
Revenues:
Diagnostic services		$	8,319			$	—					$	8,319
Bioscience product sales and services			47,588				(47,588	)		1			—
Total revenues			55,907				(47,588	)					8,319
Cost of revenues:
Cost of diagnostic services			10,031				—						10,031
Cost of bioscience product sales and services			16,360				(16,360	)		1			—
Total cost of revenues			26,391				(16,360	)					10,031
Gross margin			29,516				(31,228	)					(1,712	)
Operating expenses:
Selling and marketing			28,224				(14,510	)		1			13,714
Research and development			53,313				(9,271	)		1			44,042
General and administrative			22,185				(1,667	)		1			20,518
Total operating expenses			103,722				(25,448	)					78,274
Income (loss) from operations			(74,206	)			(5,780	)					(79,986	)
Interest expense, net			(330	)			—						(330	)
Other income, net			497				(31	)		1			466
Income (loss) before income taxes			(74,039	)			(5,811	)					(79,850	)
Income tax benefit (expense)			(95	)			130			1			35
Net loss from continuing operations		$	(74,134	)		$	(5,681	)				$	(79,815	)
Net loss per common share, basic and diluted:		$	(0.75	)								$	(0.81	)
Net loss per common share, diluted:			99,143										99,143

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SEQUENOM, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1— BASIS OF PRESENTATION

The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The pro forma adjustments reflected in the accompanying unaudited pro forma condensed consolidated financial information reflects estimates and assumptions that the Company’s management believes to be reasonable. Actual results may differ from those estimates. Pro forma adjustments related to the unaudited pro forma financial information presented below were computed assuming the sale of the Bioscience segment was consummated on the dates indicated on the financial statement and include adjustments which give effect to events that are (i) directly attributable to the segment sale, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable.

The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transactions occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results. This unaudited pro forma condensed consolidated financial information and the accompanying unaudited notes should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 1, 2014 and the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.

NOTE 2— UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

The unaudited pro forma condensed consolidated balance sheet at March 31, 2014 reflects the following pro forma adjustments:

 

(A)

Reflects the pro forma impact of the cash proceeds of the Bioscience segment sale of $31.8 million less the following: (i) $1.8 million in estimated transaction costs, and; (ii) $840,000 purchase price adjustment based on estimated reduction in working capital at May 30, 2014 and; (iii) $1.5 million deposited in escrow to secure the Company’s indemnification obligations and any working capital adjustment. The escrow funds are presented in this pro forma in other current assets and prepaid expenses ($500,000) and in other assets ($1 million). The pro forma adjustment of cash proceeds does not reflect potential future milestone payments from the purchaser.

 

(B)

Adjustment to reflect the assets and liabilities sold in the Bioscience segment sale.

 

(C)

Adjustment to reflect the assets sold in the Bioscience segment sale net of $500,000 allocated to other current assets and prepaid expenses as part of the purchase proceeds deposited in escrow to secure the Company’s indemnification obligations and any future working capital adjustments.

 

(D)

Adjustment to reflect the assets sold in the Bioscience segment sale net of $1 million allocated to other assets as part of the purchase proceeds deposited in escrow to secure the Company’s indemnification obligations and any future working capital adjustments.

 

(E)

The pro forma adjustments do not account for stock based compensation that may be attributable to the Bioscience segment.

 

(F)

Represents the accumulated translation adjustment associated with the divested Bioscience segment.

 

(G)

Represents the estimated after tax-gain from the Bioscience segment sale as if the transaction closed on the balance sheet date.

NOTE 3— UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2014 and the years ended December 31, 2013, 2012 and 2011 reflect the following pro forma adjustments:

 

(1)

Amount eliminates the revenues, cost of sales, operating and tax expenses of the Bioscience segment being sold.