IDORSIA LTD TWELVE MONTHS 2016 PRO-FORMA FINANCIAL INFORMATION.

Transcription

1 1 IDORSIA LTD TWELVE MONTHS 2016 PRO-FORMA FINANCIAL INFORMATION.

2 2 CONTENTS 03 UNAUDITED CONSOLIDATED PRO-FORMA FINANCIAL INFORMATION OF THE IDORSIA GROUP AS OF AND FOR THE TWELVE MONTH PERIOD ENDED 31 DECEMBER AUDITORS ASSURANCE REPORT

3 3 UNAUDITED CONSOLIDATED PRO-FORMA FINANCIAL INFORMATION OF THE IDORSIA GROUP FOR THE TWELVE MONTH PERIOD ENDED 31 DECEMBER 2016 UNAUDITED CONSOLIDATED PRO-FORMA INCOME STATEMENTS Twelve months ended 31 December 2016 (in CHF thousands, except per share amounts) Actelion Ltd (historical) Pro-Forma adjustments Idorsia Ltd (pro-forma) (audited) (unaudited) (unaudited) Net revenue Product sales 2,412,198 (2,412,198) - Contract revenue 5,740 (5,740) - Total net revenue 2,417,938 (2,417,938) - Operating (expenses) 1 Cost of sales 2 (245,537) 245,537 - Research and development (568,534) 285,915 (282,619) Selling, general and administration (760,158) 719,959 (40,199) Amortization of acquired intangible assets (54,997) 54,997 - Total operating (expenses) (1,629,226) 1,306,408 (322,818) Operating income 788,712 (1,111,530) (322,818) Interest income (expense), net 1,183 (1,318) (135) Interest on loan - (13,239) (13,239) Other financial income (expense), net 2,539 (3,041) (502) Total financial income (expense) 3,722 (17,598) (13,876) Income before income tax benefit (expense) 792,434 (1,129,128) (336,694) Income tax benefit (expense) (97,599) 97,599 - Net income 694,835 (1,031,529) (336,694) Less: Net loss attributable to the noncontrolling interests 1,551-1,551 Net income attributable to shareholders 696,386 (1,031,529) (335,143) Basic net income per share attributable to shareholders 6.66 n.m. 3 (2.81) Weighted-average number of common shares (in thousands) 104,626 n.m ,123 Diluted net income per share attributable to shareholders 6.46 n.m. 3 (2.81) Weighted-average number of common shares (in thousands) 107,811 n.m ,123 1 Includes share-based compensation as follows: Research and development (27,199) 10,359 (16,840) Selling, general and administration (38,025) 31,319 (6,706) Total share-based compensation (65,224) 41,678 (23,546) 2 Excludes amortization of intangible assets as presented separately. 3 Not meaningful

4 4 UNAUDITED CONSOLIDATED PRO-FORMA BALANCE SHEET (in CHF thousands, except number of shares) ASSETS Notes 31 December 2016 Actelion Ltd Pro-Forma Idorsia Ltd (historical) adjustments (pro-forma) (audited) (unaudited) (unaudited) Current assets Cash and cash equivalents 3 495, , ,979 Trade and other receivables, net 445,868 (443,018) 2,850 Inventories 135,820 (135,820) - Other current assets 115,763 (93,367) 22,396 Total current assets 1,192,831 (439,606) 753,225 Noncurrent assets Property, plant and equipment, net 4 350,215 (191,790) 158,425 Intangible assets, net 382,705 (382,705) - Goodwill 135,048 (135,048) - Deferred tax assets 20,528 (20,528) - Other noncurrent assets 25,150 (21,677) 3,473 Total noncurrent assets 913,646 (751,748) 161,898 TOTAL ASSETS 2,106,477 (1,191,354) 915,123 LIABILITIES Current liabilities Trade and other payables 83,009 (72,304) 10,705 Accrued expenses 5 445,730 (390,982) 54,748 Other current liabilities 40,211 (39,787) 424 Total current liabilities 568,950 (503,073) 65,877 Noncurrent liabilities Convertible loan 6-293, ,422 Pension liability 7 66,427 (37,120) 29,307 Contingent considerations 115,630 (115,630) - Other noncurrent liabilities 34,312 (15,764) 18,548 Total noncurrent liabilities 216, , ,277 Total liabilities 785,319 (378,165) 407,154 EQUITY Shareholders' equity 8 Common shares issued 53,881 (47,925) 5,956 Additional paid-in capital - 841, ,495 Accumulated profit (loss) 2,187,889 (2,523,032) (335,143) Treasury shares, at cost (680,053) 680,053 - Accumulated other comprehensive income (loss) (236,220) 236,220 - Total shareholders' equity 1,325,497 (813,189) 512,308 Equity attributable to noncontrolling interests 9 (4,339) - (4,339) Total equity 1,321,158 (813,189) 507,969 TOTAL LIABILITIES AND EQUITY 2,106,477 (1,191,354) 915,123

5 5 NOTES TO UNAUDITED CONSOLIDATED PRO-FORMA FINANCIAL INFORMATION FOR THE TWELVE MONTH PERIOD ENDED 31 DECEMBER 2016 (CHF thousands, except share and per share amounts) NOTE 1. Overview The unaudited consolidated pro-forma financial information of Idorsia Ltd ( Idorsia ) as at and for the period ended 31 December 2016 (the Pro-Forma Financial Information ) is based upon and should be read in conjunction with the historical consolidated financial statements of Actelion Ltd as at and for the period ended 31 December The Pro-Forma Financial Information has been prepared to illustrate the effect of the Demerger in connection with the Transaction between Actelion Ltd and Janssen Holding GmbH, an indirect subsidiary of Johnson & Johnson ( J&J ). The following expressions have the meaning as defined in the Prospectus: Demerger, Reorganization, Demerger Distribution, Listing and Settlement. The Pro-Forma Financial Information simulates the effect of the following events of the Demerger: The Reorganization, as if it had taken place on 31 December 2015; The Demerger Distribution and the Listing of Idorsia, as if they had taken place on1 January The Pro-Forma Financial Information has been prepared for the sole purpose of inclusion in the Prospectus in order to list the ordinary shares of Idorsia in the stock market organized and managed by SIX. Because of its nature, the Pro-Forma Financial Information may be affected by important factors and consequently Idorsia s financial position or results of operations as at and for the twelve month period ended 31 December 2016 may differ materially from the Pro- Forma Financial Information. The Pro-Forma Financial Information does not purport to be indicative of Idorsia s future performance or its financial position and results of operations as the Transactions will only take place at the Settlement expected in the course of the second quarter of NOTE 2. Basis of preparation The Pro-Forma Financial Information has been prepared using consistent accounting policies with those applied in the preparation of the consolidated financial statements of Actelion Ltd as of and for a twelve month period ended 31 December The Pro-Forma Financial Information and pro-forma adjustments are based on available information and certain assumptions and estimates that Management of Idorsia believes are reasonable, of which: Balance sheet Idorsia would be funded at the date of the Demerger Distribution with a gross and net cash position of CHF 1.0 billion of which CHF 420 million resulting from the Reorganization, CHF 580 million resulting from a convertible loan ( Convertible Loan ) provided by Cilag Holding AG ( Cilag ), an indirect subsidiary of J&J; Property, plant and equipment would have been transferred to Idorsia in connection with the Reorganization at their tax value of CHF 167 million; The first tranche of CHF 135 million of the Convertible Loan would have automatically converted on 5 January 2016 resulting in the creation of 11'793'220 new shares of Idorsia; Cilag would not have elected for the conversion of any further tranche of the CHF 445 million of the Convertible Loan before 31 December 2016;

6 6 Idorsia would not have drawn down from the Credit Facility for the CHF equivalent of USD 250 million, during the twelve month period ended 31 December The effect of the currency translation adjustment from the consolidation of foreign subsidiaries and the effects of actuarial gains and/or losses related to pensions accounted for in other comprehensive income would not be material. Based on all available evidence, Idorsia would record a full valuation allowance on deferred tax assets from operating loss carryforwards. Income statement Expenses relating to employees that are expected to join Idorsia at the Settlement would have been incurred on the same terms then prevailing at Actelion from 1 January 2016 to 31 December 2016, such costs mainly consisting of fix salary, bonus, social and pension plan benefits and long term incentives of share-based compensation; General and administrative ( G&A ) expenses other than expenses relating to employees have been prorated based on the allocation of employees between Actelion and Idorsia as agreed upon between J&J and Idorsia; Expenses and revenues from the transitional service agreements that will be rendered after the Settlement between Actelion and Idorsia have not been taken into account as they are not material; Expenses relating to Drug Discovery have been fully allocated to Idorsia as the whole research organization is transferred to Idorsia; Expenses relating to Clinical Development have been allocated based on the compounds of the clinical pipeline transferred to Idorsia in connection with the Reorganization, as if these costs would have been incurred on the same terms then prevailing at Actelion from 1 January 2016 to 31 December 2016; Depreciation in connection with property, plant and equipment transferred would have been at the same level as recognized in the consolidated financial statements of Actelion Ltd for the twelve month period ended 31 December 2016; Vaxxilon would have been consolidated in Idorsia as if the 73.9% equity stake in Vaxxilon would have been transferred to Idorsia on 31 December NOTE 3. Cash and cash equivalents At31December 2016, the gross cash position of CHF 728 million would have consisted of: the initial CHF 420 million resulting from the Reorganization; plus the initial CHF 580 million resulting from the Convertible Loan; less the cash out-flow of CHF 272 million.

7 7 The following table reflects the cash flow for the twelve month period ended 31 December 2016: Twelve months ended (in CHF thousands) 31 December 2016 (unaudited) Cash flow from operating activities Net income (336,694) Adjustments to reconcile net income to net cash provided from operating activities: Depreciation 18,121 Share-based compensation 23,546 Interest on loan 13,239 Changes in operating assets and liabilities: Trade and other receivables 273 Trade and other payables - Accrued expenses 21,262 Other operating cash flow items (3,085) Net cash flow provided by (used in) operating activities (263,338) Cash flow from investing activities Purchase of property, plant and equipment (8,683) Purchase of intangible assets - Net cash flow provided by (used in) investing activities (8,683) Cash flow from financing activities Convertible loan - Equity increase - Net cash flow provided by (used in) financing activities - Net effect of exchange rates on cash and cash equivalents - Net change in cash and cash equivalents (272,021) Cash and cash equivalents at beginning of period 1,000,000 Cash and cash equivalents at end of period 727,979 NOTE 4. Property, plant and equipment Property, plant and equipment of CHF 158 million would mainly have consisted of: the buildings in Allschwil (Hegenheimermattweg 89 and Gewerbestrasse 6) transferred to Idorsia as part of the Reorganization for their tax value of CHF 127 million; equipment, mainly laboratory equipment, transferred to Idorsia as part of the Reorganization for their tax value of CHF 40 million; depreciation of CHF 18 million; capital expenditure of CHF 9 million. NOTE 5. Accrued expenses At 31 December 2016, a total amount of CHF 55 million operating expenses would have been accrued mainly consisting of: Personnel and compensation costs of CHF 26 million; Research and development costs of CHF 17 million; Other accrued expenses of CHF 12 million.

8 8 NOTE 6. Convertible loan The convertible loan of CHF 293 million would have consisted of: the nominal amount of CHF 445 million of the outstanding 10-year convertible debt; less the initial discount of CHF 165 million, calculated by using an interest rate based on a 10 year Swiss interest-bearing straight bond, which management believes does not materially differ from the accounting policy for convertible debt as defined in the Prospectus; plus interest expenses on loan of CHF 13 million. The convertible loan will accrete from CHF 293 million to CHF 445 million over the remaining term of the loan (9 years). NOTE 7. Pension Pension liability was estimated at CHF 29 million which would have consisted of: the projected defined benefit obligation of CHF 197 million in respect of the allocation of employees from Actelion to Idorsia; less the fair value of plan assets of CHF 168 million. NOTE 8. Shareholders' equity The following table reflects the effect of changes in shareholders equity: Common shares (in CHF thousands, except number of shares) Shares Amount Shareholders equity Additional paid-in capital Accumulated profit (loss) Noncontrolling interests Equity attributable to noncontrolling interests Total equity At 1 January 2016 (unaudited) 107,330,210 5, ,722 - (2,788) 521,301 Comprehensive income (loss): Net income (335,143) (1,551) (336,694) Other comprehensive income (loss) Comprehensive income (loss) (335,143) (1,551) (336,694) Convertible equity 11,793, , ,425 Convertible loan premium , ,391 Share-based compensation expense , ,546 At 31 December 2016 (unaudited) 119,123,430 5, ,495 (335,143) (4,339) 507,969 Share Capital The share capital of CHF 5,956,172 ( shares with a par value of CHF 0.05 each) would have consisted of: an initial shares with a par value of CHF 0.05 each issued as part of the Reorganization for a total amount of CHF 5,366,510.50; an additional shares with a par value of CHF 0.05 each issued to Cilag resulting from the conversion of the first tranche of CHF 135 million of the Convertible Loan on 5 January 2016.

9 9 Additional paid-in capital The additional paid-in capital of CHF 841 million would have consisted of: an initial paid-in capital of CHF 519 million mainly resulting from the contribution of CHF 420 million cash and CHF 167 million property, plant and equipment, less net liabilities transferred to Idorsia; a CHF 299 million impact of the convertible loan, including the equity component from the issuance of the convertible loan and the conversion premium of the conversion of the first tranche of the convertible loan; a CHF 24 million impact relating to share-based compensation expense; NOTE 9. Equity attributable to noncontrolling interests At 31 December 2016 the equity attributable to noncontrolling interests of CHF 4 million would have consisted of the contributions of the noncontrolling interests less the loss attributable to Vaxxilon s minority shareholders. NOTE 10. Commitments and guarantees At 31 December 2016 Idorsia would have had the main following commitments: future minimum lease payments under non-cancelable operating leases at 31 December 2016 would have amounted to CHF 75 million; low single-digit royalty payments as well as additional potential payments of up to EUR 41.3 million upon achievement of predefined development, approval and commercialization milestones to Max-Planck Innovation GmbH in connection with Vaxxilon; funding commitment s of up to the CHF equivalent of EUR 19.4 million to Vaxxilon contingent upon successful completion of predefined clinical and development milestones; upon exercise of an option with ReveraGen Biopharma Inc. they would be entitled to receive up to USD 165 million in development and regulatory milestones and up to USD 190 million for further indications depending on achievement of certain development, regulatory approval and commercialization milestones; support of R&D activities up to a maximum amount of USD 1 million p.a. paid to ReveraGen Biopharma Inc. for the next twenty-eight months unless earlier terminated or extended. At 31 December 2016 Idorsia would have had the main following guarantees: a guarantee relating to operating leases for subsidiaries in foreign jurisdictions of CHF 1 million. The Pro-Forma Financial Information was approved by the board of directors of Idorsia Ltd on 2 June On behalf of the Board of Directors of Idorsia Ltd Jean-Pierre Garnier Chairman of the board of directors Jean-Paul Clozel Board member and Chief Executive Officer