May 3, 2013 - EX-99.2 - 8-K/A: Current report filing

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In March 2013, we completed the share purchase agreement entered into in January 2013 (the Cytochroma Agreement) to acquire the net assets of Cytochroma Inc. (Cytochroma), a corporation located in Markham, Canada, whose two lead products, both in Phase 3 development, are coded CTAP101 Capsules, a vitamin D prohormone to treat secondary hyperparathyroidism in patients with stage 3 or 4 chronic kidney disease and vitamin D insufficiency, and Fermagate Tablets, a non-absorbed phosphate binder to treat hyperphosphatemia in dialysis patients (the Cytochroma Acquisition). The transaction closed on March 4, 2013.

We entered into the Cytochroma Agreement with OPKO IP Holdings, Inc. a limited company organized under the laws of Cayman Islands, our indirect wholly-owned subsidiary (the Buyer), Cytochroma Inc., a corporation organized under the laws of Ontario (the Seller), Cytochroma Holdings ULC, an unlimited liability company organized under the laws of Alberta (Holdings), Cytochroma Canada Inc., a corporation organized under the laws of Canada (together with Seller and Holdings, the Seller Parties), Cytochroma Development Inc., a corporation organized under the laws of Barbados (Development), Proventiv Therapeutics, LLC, a Delaware limited liability company (Proventiv), and Cytochroma Cayman Islands, Ltd., a limited company organized under the laws of Cayman Islands (Cayman Newco).

Pursuant to the Cytochroma Agreement, the Buyer purchased from the Seller the issued and outstanding equity securities of Cayman Newco and Proventiv in exchange for 20,517,030 shares of our Common Stock, par value $0.01 per share, with a closing value of $146.9 million based on the closing sales price per share of our Common Stock, as reported by the New York Stock Exchange (NYSE) on the actual closing date of the acquisition of $7.16 per share. The number of shares issued was based on the volume-weighted average price per share of our Common Stock as reported on the NYSE for the ten trading days immediately preceding the date of the Cytochroma Agreement, or $4.874 per share (the Stock Consideration). In connection with the Cytochroma Agreement, we issued 20,517,030 shares of our Common Stock to the Seller Parties at the closing.

In addition, the Cytochroma Agreement provides for the payment of up to an additional $190.0 million to the Seller Parties in cash or additional shares of our Common Stock, at the Buyers election, upon the achievement of certain milestones relating to development and annual revenue (the Milestone Consideration). If we elect to pay any portion of the Milestone Consideration in shares of our Common Stock, the amount of shares to be issued will be based on the volume-weighted average price per share of our Common Stock as reported on the NYSE or any other exchange system or market quotation system on which we are then listed for the ten trading days immediately preceding: (i) the milestone being achieved in the case of development milestones; or (ii) the earlier of the completion of the audit of our financial statements or the 105th day after the end of the applicable calendar year in the case of revenue milestones. In certain circumstances, the payment of the Milestone Consideration shall be made by us in cash, including if payment in shares of our Common Stock would trigger an obligation to obtain the approval of our shareholders under applicable securities laws or NYSE regulations. In addition, we have the ability to off-set the payment of any Milestone Consideration by the amount of our potential indemnity claims under the Cytochroma Agreement.

The following unaudited pro forma financial statements of the Company are presented to comply with Article 11 Regulation S-X and follow proscribed SEC guidelines. The historical condensed consolidated financial statements of the Company have been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) expected to have a continuing impact on the Company.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2012, presents pro forma effects of the transaction as if the acquisition had occurred on September 30, 2012. The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2011 and the nine months ended September 30, 2012, present the pro forma effects as if the acquisition occurred on January 1, 2011.

The unaudited pro forma financial statements are presented for informational purposes only and do not purport to present what the Companys results would have been had the acquisition actually occurred on the dates presented or to project the Companys results from operations or financial position for any future period. These unaudited pro forma financial statements and accompanying notes should be read together with the Companys audited consolidated financial statements and the accompanying notes, as of and for the fiscal year ended December 31, 2011 and the Companys unaudited consolidated financial statements and the accompanying notes as of and for the three and nine months ended September 30, 2012.

OPKO Health, Inc. and subsidiaries

Pro-Forma Condensed Consolidated Balance Sheets

As of September 30, 2012 (unaudited)

(in thousands, except share and per share data)


	OPKO Health, Inc. As reported			Cytochroma Canada Inc. (g)			Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	23,428		$	8,800		$	(8,800)	(f)	$	23,428
Marketable securities		18,923									18,923
Accounts receivable, net		19,142									19,142
Inventories, net		21,488									21,488
Prepaid expenses and other current assets		5,004			1,660						6,664
Current assets of discontinued operations

Total current assets		87,985			10,460			(8,800)			89,645
Property and equipment, net		12,845			487						13,332
Intangible assets, net		82,586			417			(417)	(d)		274,326
								191,740	(d)
Goodwill		49,738						1,179	(d)		50,917
Investments, net		14,998									14,998
Other assets		1,870			1,804						3,674

Total assets	$	250,022		$	13,168		$	183,702		$	446,892

LIABILITIES, SERIES D PREFERRED STOCK, AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable	$	7,238		$	1,756		$			$	8,994
Accrued expenses		21,794			402						22,196
Current portion of lines of credit and notes payable		17,408			1,999			(1,999)	(f)		17,408
Current liabilities of discounted operations		1									1

Total current liabilities		46,441			4,157			(1,999)			48,599
Other long-term liabilities, principally contingent consideration and deferred tax liabilities		32,930			8,571			(8,571)	(f)		32,930
								47,810	(e)		47,810

Total liabilities		79,371			12,728			37,240			129,339

Commitments and contingencies:
Series D Preferred Stock - $0.01 par value, 2,000,000 shares authorized; 1,129,032 shares and 1,129,032 shares issued and outstanding (liquidation value of $30,035 and $28,355) at September 30, 2012 and December 31, 2011, respectively		24,386									24,386
Shareholders equity:
Series A Preferred Stock - $0.01 par value, 4,000,000 shares authorized; no shares issued or outstanding at September 30, 2012 or December 30, 2011
Series C Preferred Stock - $0.01 par value, 500,000 shares authorized; no shares issued or outstanding at September 30, 2012 or December 30, 2011
Common Stock - $0.01 par value, 500,000,000 shares authorized; 298,151,813 shares and 297,503,033 shares issued at September 30, 2012 and December 30, 2011, respectively		2,982			144,306			(144,306)	(b)		3,187
								205	(a)
Treasury Stock - 2,293,326 shares and 2,488,477 shares at September 30, 2012 and December 31, 2011, respectively		(7,457	)								(7,457	)
Warrants					9,034			(9,034)	(b)		-
Additional paid-in capital		529,958			240			(240)	(b)		676,655
								146,697	(a)
Accumulated other comprehensive income		9,004									9,004
Accumulated deficit		(388,222	)		(153,140	)		153,140	(b)		(388,222	)

Total shareholders equity		146,265			440			146,462			293,167

Total liabilities, Series D Preferred Stock, and shareholders equity	$	250,022		$	13,168		$	183,702		$	446,892

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

OPKO Health, Inc. and subsidiaries

Pro-Forma Condensed Consolidated Statement of Operations

For the nine months ended September 30, 2012

(unaudited)

(in thousands, except share and per share data)


	OPKO Health, Inc. As reported			Cytochroma Canada Inc. (g)			Pro Forma Adjustments			Pro Forma Combined
Revenues:
Product sales	$	30,051		$			$			$	30,051
Other revenue		732			6,544						7,276

Total revenues		30,783			6,544						37,327
Cost of goods sold, excluding amortization of intangible assets		19,028									19,028

Gross margin, excluding amortization of intangible assets		11,755			6,544						18,299

Operating expenses:
Selling, general and administrative		17,428			2,548						19,976
Research and development		12,942			6,471						19,413
Contingent consideration		2,665									2,665
Other operating expenses, principally amortization of intangible assets		6,277			209			16	(c)		6,502

Total operating expenses		39,312			9,228			16			48,556

Operating loss from continuing operations		(27,557	)		(2,684	)		(16	)		(30,257	)

Other income and (expense), net:
Interest income		123			47						170
Interest expense		(975	)		(2,131	)		2,131	(f)		(975	)
Other income (expense), net		1,279			133						1,412

Other income and (expense), net		427			(1,951	)		2,131			607

Loss from continuing operations before income taxes and investment losses		(27,130	)		(4,635	)		2,115			(29,650	)
Income tax (benefit) provision		89			(726	)					(637	)

Loss from continuing operation before investment losses		(27,219	)		(3,909	)		2,115			(29,013	)
Loss from investments in investees		(1,464	)								(1,464	)

Loss from continuing operations		(28,683	)		(3,909	)		2,115			(30,477	)
Income (loss) from discontinued operations, net of tax		183									183

Net loss		(28,500	)		(3,909	)		2,115			(30,294	)
Net loss and comprehensive loss attributable to non-controlling interests					(10	)					(10	)
Preferred stock dividend		(1,680	)								(1,680	)

Net loss attributable to common shareholders	$	(30,180	)	$	(3,899	)	$	2,115		$	(31,964	)

Loss per share, basic and diluted:
Loss from continuing operations	$	(0.10	)							$	(0.10	)
Income (loss) from discontinued operations		0.00									0.00

Net loss per share	$	(0.10	)							$	(0.10	)

Weighted average number of common shares outstanding, basic and diluted		297,762,469						20,517,030			318,279,499

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

OPKO Health, Inc. and subsidiaries

Pro-Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2011

(unaudited)

(in thousands, except share and per share data)


	OPKO Health, Inc. As reported			Cytochroma Canada Inc. (g)			Pro Forma Adjustments			Pro Forma Combined
Revenues:
Product sales	$	27,844		$			$			$	27,844
Other revenue		135			1,439						1,574

Total revenues		27,979			1,439						29,418
Cost of goods sold, excluding amortization of intangible assets		17,243									17,243

Gross margin, excluding amortization of intangible assets		10,736			1,439						12,175

Operating expenses:
Selling, general and administrative		19,169			4,320						23,489
Research and development		11,352			7,416						18,768
Other operating expenses, principally amortization of intangible assets		3,404			985			21	(c)		4,410

Total operating expenses		33,925			12,721			21			46,667

Operating loss from continuing operations		(23,189	)		(11,282	)		(21	)		(34,492	)

Other income and (expense), net:
Interest income		288			53						341
Interest expense		(1,005	)		(1,156	)		1,156	(f)		(1,005)
Other income (expense), net		(327	)		(104	)					(431	)

Other income and (expense), net		(1,044	)		(1,207	)		1,156			(1,095	)

Loss from continuing operations before income taxes and investment losses		(24,233	)		(12,489	)		1,135			(35,587	)
Income tax benefit		(19,358	)		(775	)					(20,133	)

Loss from continuing operation before investment losses		(4,875	)		(11,714	)		1,135			(15,454	)
Loss from investments in investees		(1,589	)								(1,589	)

Loss from continuing operations		(6,464	)		(11,714	)		1,135			(17,043	)
Income (loss) from discontinued operations, net of tax		5,181									5,181

Net loss		(1,283	)		(11,714	)		1,135			(11,862	)
Net loss and comprehensive loss attributable to non-controlling interests					(199	)					(199	)
Preferred stock dividend		(2,379	)								(2,379	)

Net loss attributable to common shareholders	$	(3,662	)	$	(11,515	)	$	1,135		$	(14,042	)

Loss per share, basic and diluted:
Loss from continuing operations	$	(0.03	)							$	(0.05	)
Income (loss) from discontinued operations		0.02									0.02

Net loss per share	$	(0.01	)							$	(0.03	)

Weighted average number of common shares outstanding, basic and diluted		280,673,122						20,517,030			301,190,152

The accompanying notes are an integral part of these pro forma condensed consolidated financial statements.

Notes:

(a)	Reflects the consideration paid at closing representing $146.9 million in OPKO Common Stock.

(b)	Reflects the elimination of Cytochroma Canada Inc. equity capital

(c)	The pro forma amortization expense assumes the transaction closed on January 1, 2011.

(d)	The following table reflects the estimated fair value of the acquired intangible assets determined in the initial purchase price allocation,which is preliminary and subject to change:


Intangible asset	Purchase price allocation		Estimated useful life
In-process research and development	$	191,530		Indefinite
Patents		210		10 years
Goodwill		1,179		Indefinite

TOTAL	$	192,919

(e)	Reflects the estimated contingent consideration to be paid to the sellers upon the achievement of certain milestones. This amount represents the estimated fair value of the contingent consideration, which is preliminary and subject to change.

(f)	The Buyer purchased the net assets of Cytochroma Inc. The adjustment is required to remove those assets and liabilities that relate to other entities within the consolidated Cytochroma Canada, Inc. that were not acquired.

(g)	All amounts for Cytochroma Canada Inc. have been translated into U.S. dollars from Canadian dollars.

Form: 8-K/A

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