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þ | No fee required. |
o | Fee computed on table below per Exchange ActRules 14a-6(i)(1) and0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
o | Fee paid previously with preliminary materials. |
o | Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of such securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to appropriate registration or qualification under the securities laws of such jurisdiction. |
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852 Winter Street
Waltham, Massachusetts 02451
TO BE HELD , 2011
Chairman, President and CEO
Alkermes, Inc.
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Q: | Why am I receiving this proxy statement/prospectus? | |
A: | Alkermes has entered into the merger agreement that is described in this proxy statement/prospectus providing for the business combination described in this document. The merger, which is one of the essential elements of the business combination, may only be completed if Alkermes shareholders adopt the merger agreement and thereby approve the business combination. | |
This document and the enclosed materials describe the business combination and provide information as to how to grant a proxy or vote your shares by mail, telephone or over the Internet. | ||
Your vote is very important. | ||
Alkermes encourages you to submit your proxy or vote your shares by mail, telephone or Internet as soon as possible. | ||
Q: | What are the proposals on which I am being asked to vote? | |
A: | You are being asked to vote to adopt the merger agreement and thereby approve the business combination. In addition, you are being asked to approve the distributable reserves proposal to facilitate the creation of distributable reserves through a reduction of New Alkermes’ share premium account. You are also being asked to vote to approve a proposal to adjourn the special meeting if necessary or appropriate, including if more time is needed to solicit proxies. | |
Q: | What is the business combination? | |
A: | Pursuant to the merger agreement, EDT will be carved-out of Elan and reorganized under New Alkermes. This transaction is sometimes referred to in this proxy statement/prospectus as the reorganization. Following the reorganization, Antler Acquisition Corp., which is referred to in this proxy statement/prospectus as Merger Sub, will merge with and into Alkermes, with Alkermes surviving as a wholly-owned indirect subsidiary of New Alkermes. This transaction is sometimes referred to in this proxy statement/prospectus as the merger. Additionally, Alkermes will, subject to certain conditions, transfer all of its rights with respect to certain intellectual property and related contractual rights to an Irish subsidiary of New Alkermes. This transaction is sometimes referred to in this proxy statement/prospectus as the IP Transfer. Taken together these transactions constitute the business combination. |
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Q: | What are the reasons for the business combination? | |
A: | Alkermes believes that the business combination will create a larger, faster-growing biopharmaceutical company that is immediately and sustainably profitable on a cash earnings basis with a diversified portfolio of commercial products, including five key products with long patent lives, and with expertise in developing treatments for central nervous system diseases. New Alkermes will have deep scientific, development and manufacturing capabilities, which will provide competitive advantages in the creation of innovative biopharmaceutical products for itself and its partners. | |
Q: | Why am I being asked to approve the distributable reserves proposal? | |
A: | Under Irish law, dividends must be paid (and share repurchases must generally be funded) out of “distributable reserves,” which New Alkermes will not have immediately following the completion of the merger. Please see “Creation of Distributable Reserves of New Alkermes.” Common shareholders of Alkermes are also being asked at the special meeting to approve the creation of distributable reserves of New Alkermes (through the reduction of the share premium account of New Alkermes), in order to permit New Alkermes to be able to pay dividends (and repurchase or redeem shares) after the merger (though it is not currently intended that Alkermes will pay dividends or repurchase or redeem shares after the merger). The approval of the distributable reserves proposal is not a condition to the consummation of the merger. Accordingly, if common shareholders of Alkermes approve the merger but do not approve the distributable reserves proposal, and the merger is consummated, New Alkermes may not have sufficient distributable reserves to pay dividends (or to repurchase or redeem shares) following the merger. In addition, the creation of distributable reserves requires the approval of the Irish High Court. Although New Alkermes is not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, the issuance of the required order is a matter for the discretion of the Irish High Court and there is no guarantee that such approval will be forthcoming. Please see “Risk Factors” and “Creation of Distributable Reserves of New Alkermes.” | |
Q: | What is the position of the Alkermes board of directors regarding the proposals being put to a vote at the Alkermes special meeting? | |
A: | The Alkermes board of directors approved the merger agreement and business combination, and determined that the merger agreement and the business combination are fair to and in the best interests of Alkermes and its shareholders. The Alkermes board of directors recommends that Alkermes shareholders vote “FOR” the proposal to adopt the merger agreement, “FOR” the proposal to create distributable reserves of New Alkermes, and “FOR” the proposal to adjourn the special meeting if necessary or appropriate, including to permit further solicitation of proxies. | |
Q: | What will the Alkermes shareholders receive as consideration in the merger? | |
A: | If the proposed transactions are consummated, each share of Alkermes common stock issued and outstanding immediately prior to the merger will be canceled and automatically converted into one New Alkermes ordinary share. Theone-for-one conversion ratio is fixed, and, as a result, the number of New Alkermes ordinary shares received by the Alkermes shareholders in the merger will not fluctuate up or down based on the market price of a share of Alkermes common stock prior to the merger. It is expected that the New Alkermes ordinary shares will be registered with the Securities and Exchange Commission and are expected to be listed on NASDAQ. Following the merger, Alkermes common stock will be delisted from NASDAQ. | |
Q: | What percentage of the ordinary shares of New Alkermes will the Alkermes shareholders own following the proposed transactions? | |
A: | The New Alkermes ordinary shares that will be received by the former Alkermes shareholders in the merger will represent approximately 75% of the New Alkermes ordinary shares outstanding immediately after the merger. |
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Q: | What percentage of New Alkermes ordinary shares will be owned by Elan following the proposed transactions? | |
A: | Immediately prior to the merger, Elan Science Three Limited, a subsidiary of Elan, which is sometimes referred to in this proxy statement/prospectus as the Elan Shareholder, will hold all of the then outstanding 31,900,000 New Alkermes ordinary shares, subject to the terms of a shareholder’s agreement to be entered into upon completion of the merger among Elan, the Elan Shareholder and New Alkermes, which is referred to in this proxy statement/prospectus as the shareholder’s agreement. As a result, immediately following the merger, Elan will indirectly hold approximately 25% of New Alkermes ordinary shares. | |
Q: | Is Elan receiving any other consideration in connection with the proposed transactions? | |
A: | In addition to the New Alkermes ordinary shares, Alkermes will pay Elan $500 million subject to certain adjustments as additional consideration for its contribution of EDT to New Alkermes. | |
Q: | How are Alkermes stock options and equity awards treated in the merger? | |
A: | At the time the merger takes effect, all currently issued and outstanding options to purchase Alkermes common stock granted under any stock option plan will be converted into options to purchase, on substantially the same terms and conditions, the same number of New Alkermes ordinary shares at the same exercise price. In addition, all currently issued and outstanding awards of Alkermes common stock will be converted into awards, on substantially the same terms and conditions, of the same number of New Alkermes ordinary shares. | |
Q: | Will appraisal rights be available for dissenting shareholders? | |
A: | No. Holders of Alkermes common stock do not have appraisal or dissenters’ rights with respect to the merger or the other transactions described in this proxy statement/prospectus. | |
Q: | What is the IP Transfer transaction? | |
A: | Alkermes will, subject to certain conditions, transfer all of its rights with respect to the intellectual property and related contractual rights related specifically toBydureontm (exenatide for extended-release injectable suspension) to an Irish subsidiary of New Alkermes in exchange for $202.1 million in the form of an interest-bearing note.Bydureon is a trademark of Amylin Pharmaceuticals, Inc. | |
Q: | When is the business combination expected to be completed? | |
A: | As of the date of this proxy statement/prospectus, the business combination is expected to be completed in the second half of 2011. However, no assurance can be provided as to when or if the business combination will occur. The required vote of Alkermes shareholders to adopt the merger agreement at the special meeting, as well as the necessary regulatory consents and approvals, must first be obtained and certain other conditions specified in the merger agreement must be satisfied or, to the extent permissible, waived. | |
Q: | What are the material U.S. federal income tax consequences of the merger to U.S. holders of Alkermes common stock? | |
A: | If you are a U.S. holder (as defined herein), while not entirely free from doubt, New Alkermes believes that the receipt of the New Alkermes ordinary shares for shares of Alkermes common stock by U.S. holders (as defined below) pursuant to the merger should be a taxable transaction for U.S. federal income tax purposes. In general, under such treatment, a U.S. holder will recognize capital gain or loss equal to the difference between the holder’s adjusted tax basis in the shares of the Alkermes common stock surrendered in the exchange, and the fair market value of the New Alkermes ordinary shares received as consideration in the merger. A U.S. holder’s adjusted basis in the shares of Alkermes common stock generally should equal such holder’s purchase price for such shares of Alkermes common stock, as adjusted to take into account stock dividends, stock splits or similar transactions. It is possible that the IRS could assert an alternative characterization of the merger that would prevent a U.S. holder from recognizing a taxable loss on the exchange of Alkermes common stock for New Alkermes ordinary shares pursuant to the merger. However, a U.S. holder would be required to recognize any taxable gain on the exchange in all circumstances. Alkermes |
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recommends that U.S. holders consult their own tax advisers as to the particular tax consequences of the merger, including the effect of U.S. federal, state and local tax laws or foreign tax laws. See “Certain Tax Consequences of the Merger” for a more detailed description of the U.S. federal income tax consequences of the merger. | ||
Q: | What will be the relationship between Alkermes and New Alkermes after the proposed transactions? | |
A: | After the proposed transactions, Alkermes will be an indirect wholly-owned subsidiary of New Alkermes and its financial statements will be included in New Alkermes’ consolidated financial statements. It is expected that the New Alkermes ordinary shares will be listed and traded on NASDAQ using the same NASDAQ trading symbol currently used for Alkermes. | |
Q: | When and where will the special meeting be held? | |
A: | Alkermes will hold a special meeting of shareholders at 10 a.m. Eastern Daylight Time on , 2011 at its principal executive offices located at 852 Winter Street, Waltham, Massachusetts. | |
Q: | What vote is required to adopt the merger agreement? | |
A: | The adoption of the merger agreement requires the affirmative vote of a majority of the votes cast by holders of Alkermes common stock outstanding at the record date and entitled to vote, assuming a quorum is present at the special meeting. Consequently, as long as a quorum is present, a failure to vote, an abstention from voting or a broker non-vote will have no effect on the proposal to adopt the merger agreement and approve the business combination. | |
Q: | Who is entitled to vote? | |
A: | Alkermes shareholders of record as of the close of business on , 2011 are entitled to receive notice of and to vote at the Alkermes special meeting and any adjournments and postponements thereof. | |
Q: | How do I vote? | |
A: | If you are an Alkermes shareholder of record, you may vote your shares at the Alkermes special meeting in one of the following ways: | |
• by mailing your completed and signed proxy card in the enclosed return envelope; | ||
• by voting by telephone or over the Internet as instructed on the enclosed proxy card; or | ||
• by attending the Alkermes special meeting and voting in person. | ||
If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee instructing them on how to vote your shares. | ||
Q: | If my shares are held in “street name” by my bank, broker or other nominee will my bank, broker or other nominee, vote my shares for me? | |
A: | Only if you provide your bank, broker or other nominee with instructions on how to vote your shares. Therefore, you should instruct your bank, broker or other nominee to vote your shares, by following the directions your bank, broker or other nominee provides. If you do not instruct your bank, broker or other nominee, your bank, broker or other nominee will generally not have the discretion to vote your shares. | |
Q: | How many votes do I have? | |
A: | You are entitled to one vote for each share of Alkermes common stock that you owned as of the close of business on the Alkermes record date. As of the close of business on the Alkermes record date, an aggregate of shares of Alkermes common stock were outstanding and will be entitled to vote at the special meeting. | |
Q: | What constitutes a quorum? | |
A: | A quorum of the special meeting of the Alkermes shareholders consists of the presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders of Alkermes |
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are entitled to vote on a particular matter on the record date. In addition to shares present in person and voting at the special meeting, Alkermes intends to count the following shares as present at the special meeting for the purpose of determining a quorum: | ||
• shares of common stock present in person at the special meeting but not voting or abstaining on any matter; | ||
• shares of common stock represented by a proxy on which the shareholder has not directed a vote or abstained on any matter; and | ||
• shares of common stock represented by proxies that are voted on any issue other than a procedural motion. | ||
Q: | Should I send in my stock certificates now? | |
A: | No. Alkermes shareholders should keep their existing stock certificates at this time. After the proposed business combination is completed, you will receive written instructions for exchanging your Alkermes stock certificates for New Alkermes ordinary shares. | |
Q: | What do I need to do now? | |
A: | After carefully reading and considering the information contained in this proxy statement/prospectus, including the Annexes and the documents incorporated by reference, please fill out and sign the proxy card, and then mail your completed and signed proxy card in the enclosed prepaid envelope as soon as possible so that your shares of Alkermes common stock may be voted at the special meeting, or you may follow the instructions on the proxy card and vote your shares of Alkermes common stock by telephone or over the Internet. Your proxy card or your telephone or Internet directions will instruct the persons identified as your proxy to vote your shares at the Alkermes special meeting as directed by you. | |
If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be voted “FOR” each of the proposals. | ||
If you hold your shares of Alkermes common stock through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee when instructing them on how to vote your shares of Alkermes common stock. If you do not instruct your bank, broker or other nominee how to vote your shares of Alkermes common stock, your bank, broker or other nominee will generally not vote your Alkermes shares, such failure to vote being referred to as a “broker non-vote,” which will have no effect on the proposal to adopt the merger agreement. | ||
Q: | May I change my vote after I have mailed my signed proxy card or voted by telephone or over the Internet? | |
A: | Yes, you may change your vote at any time before your proxy is voted at the special meeting. You can do this in one of four ways: | |
• timely deliver a valid later-dated proxy by mail; | ||
• before the meeting, provide written notice that you have revoked your proxy to Alkermes’ secretary, at the following address: | ||
Alkermes, Inc. 852 Winter Street Waltham, MA 02451;1420 Attention: Kathryn L. Biberstein, Corporate Secretary | ||
• submit revised voting instructions by telephone or over the Internet by following the instructions set forth on the proxy card; or | ||
• attend the special meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy or change your voting instructions; you must vote by ballot at the meeting to change your vote. |
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If you have instructed a bank, broker or other nominee to vote your shares, you must follow directions received from your bank, broker or other nominee to change your vote or revoke your proxy. | ||
Q: | Who can help answer my questions? | |
A: | If you have any questions about the proposed transactions, need assistance in voting your shares, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact: |
MacKenzie Partners, Inc. 105 Madison Avenue New York, NY 10016 Banks and Brokers call collect: (212) 929-5500 All others call toll free: (800) 322-2885 Email: proxy@mackenziepartners.com | Alkermes Investor Relations (781) 609-6378 |
Q: | Where can I find more information about Alkermes and EDT? | |
A: | You can find more information about Alkermes and EDT from various sources described under“Where You Can Find More Information.” |
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Treasury Building Lower Grand Canal Street
Dublin 2, Ireland
+353-1-709-4000
852 Winter Street
Waltham, Massachusetts 02451
(781) 609-6000
Treasury Building Lower Grand Canal Street
Dublin 2, Ireland
+353-1-709-4000
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Monksland, Athlone
County Westmeath, Ireland
+353-90 6495000
800 Gateway Boulevard
South San Francisco, CA 94080
(650) 877-0900
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• | combining Alkermes and EDT will create a larger, faster-growing biopharmaceutical company that is immediately and sustainably profitable on a cash earnings basis with growing revenues in excess of $450 million and growing adjusted earnings before interest, tax, depreciation, amortization, share-based compensation expense and other non-recurring items, which are referred to in this proxy statement/prospectus as adjusted EBITDA margins; | |
• | New Alkermes will have a diversified portfolio of products including five key products with long patent lives:Ampyra®,Vivitrol,Bydureon,Risperdal ConstaandInvega® Sustenna®; | |
• | New Alkermes will be a leader in the development of medicines for the treatment of central nervous system diseases with an established track record of successful innovation. It will have a powerful |
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combination of commercial stage products and new pipeline candidates developed in collaboration with major pharmaceutical companies and for its own account; |
• | New Alkermes will have deep scientific, development and manufacturing capabilities which will provide competitive advantages in the creation of innovative biopharmaceutical products for itself and its partners; | |
• | New Alkermes will have the scale, diversification and technical and manufacturing capabilities to accelerate the ongoing business transition from a provider of drug delivery technologies and services to a developer of proprietary innovative pharmaceutical products; and | |
• | New Alkermes will have enhanced financial resources to invest in its proprietary drug candidates, pursue additional growth opportunities and reduce its cost of capital. |
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• | adopt the merger agreement; | |
• | create distributable reserves of New Alkermes; and | |
• | adjourn the special meeting to a later date or dates if necessary or appropriate, including for the purpose of permitting the further solicitation of proxies. |
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• | the adoption of the merger agreement by Alkermes shareholders; | |
• | the absence of any law, order or injunction enacted, issued or promulgated by any court or governmental authority that is in effect and has the effect of making the merger illegal or otherwise prohibits consummation of the merger or the business combination; | |
• | the expiration or termination of the waiting period applicable to the merger under the HSR Act and the filing or receipt of all other governmental authorizations required to be made or obtained by Alkermes, Elan or any of their subsidiaries to consummate the business combination, other than those the failure of which to make or obtain would not, individually or in the aggregate, be reasonably likely to have a Business Material Adverse Effect (as defined in the merger agreement); | |
• | the authorization for listing on NASDAQ of the New Alkermes ordinary shares to be issued in the merger, subject to official notice of issuance; |
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• | the effectiveness of the registration statement of which this proxy statement/prospectus is a part, the absence of a stop order issued by the SEC, suspending the effectiveness of that registration statement and the absence of any proceedings initiated for that purpose by the SEC; | |
• | the validation and filing with the Irish Companies Registration Office of all Irish financial assistance issues arising in respect of the reorganization as contemplated by the merger agreement in accordance with Section 60 of the Irish Companies Act 1963; | |
• | the re-registration of New Alkermes as a public limited company in accordance with the provisions of the Irish Companies (Amendment) Act 1983 and the delivery of a certificate of incorporation on re-registration from the Irish Companies Registration Office; | |
• | the material accuracy of the representations and warranties made by Alkermes and Elan and material compliance by Alkermes and Elan with their respective obligations under the merger agreement; | |
• | the completion of the reorganization; | |
• | material compliance by Elan and certain of its subsidiaries with their respective obligations under the merger agreement; | |
• | material compliance by Alkermes with its obligations under the merger agreement; | |
• | the absence of indebtedness of New Alkermes and the New Alkermes Group Entities (as defined in the merger agreement) as of the closing date of the business combination (other than Elan reorganization indebtedness and indebtedness in respect of the transfer by Alkermes of certain intellectual property as described in this proxy statement/prospectus); | |
• | the absence of any material difference between the audited financial statements delivered by Elan to Alkermes under the merger agreement from the historical financial statements of EDT specified in the merger agreement, other than in respect of the different accounting standards under which they were prepared and any applicable agreed adjustments; | |
• | the delivery of all the certificates, instruments, agreements and other documents as specified in the merger agreement; and | |
• | the absence of any change in law with respect to Section 7874 of Internal Revenue Code of 1986, as amended, which is referred to in this proxy statement/prospectus as the Code, or official interpretation thereof, that, in the opinion of Cleary Gottlieb Steen & Hamilton LLP, which is referred to in this proxy statement/prospectus as Cleary Gottlieb, (or other nationally recognized tax counsel), would materially increase the risk that New Alkermes would be treated as a United States domestic corporation for United States federal tax purposes. |
• | by mutual written consent of Alkermes and Elan; | |
• | by either Alkermes or Elan if: the business combination has not been consummated by November 5, 2011; provided, that this right to terminate the merger agreement is not available to any party that has breached its obligations under the merger agreement in a manner that has caused or resulted in the failure of the business combination to have been consummated by such date; | |
• | any law, order or injunction that permanently restrains, enjoins or otherwise prohibits the merger or the other transactions contemplated by the merger agreement shall have become final and nonappealable; or | |
• | the vote of the Alkermes shareholders on the adoption of the merger agreement has been held but the required vote was not obtained; |
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• | by Alkermes if: |
• | Elan breaches its representations and warranties, covenants or other agreements contained in the merger agreement such that the relevant closing condition is not satisfied and the breach cannot be cured or, if curable, is not cured within 20 calendar days after Alkermes gives written notice to Elan of the breach or failure to perform; |
• | by Elan if: |
• | prior to the Alkermes shareholders meeting, the Alkermes board of directors withdraws or modifies in any manner adverse to Elan its recommendation that the shareholders of Alkermes approve the merger or has resolved to take any such action; or | |
• | Alkermes breaches its representations and warranties, covenants or other agreements contained in the merger agreement such that the relevant closing condition is not satisfied and the breach cannot be cured or, if curable, is not cured within 20 calendar days after Elan gives written notice to Alkermes of the breach or failure to perform. |
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• | the diversion of management’s attention to integration matters; | |
• | difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from combining the business of EDT with that of Alkermes; | |
• | difficulties in the integration of operations and systems; | |
• | difficulties in the assimilation of employees; | |
• | difficulties in replacing the support functions currently provided by Elan to EDT; | |
• | challenges in keeping existing customers and obtaining new customers; | |
• | challenges in attracting and retaining key personnel; and | |
• | deterioration of general industry and business conditions. |
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• | non-approval, set-backs or delays in the development or manufacture of New Alkermes’ product candidates and success of New Alkermes’ research and development programs; | |
• | public concern as to the safety of drugs developed by New Alkermes or others; | |
• | announcements of issuances of ordinary shares or acquisitions by New Alkermes; | |
• | uncertainties relating to possible sales of ordinary shares held by the Elan Shareholder; | |
• | failure, limitation or delay in the commercialization of products by New Alkermes or its corporate collaborators; | |
• | the announcement and timing of new product introductions by New Alkermes or others; | |
• | material public announcements; | |
• | events related to New Alkermes’ products or those of its competitors, including the withdrawal or suspension of products from the market; | |
• | availability and level of third party reimbursement; | |
• | political developments or proposed legislation in the pharmaceutical or healthcare industry; | |
• | economic or other external factors, disaster or crisis; | |
• | currency exchange controls or fluctuations in the relative values of currencies; | |
• | termination or delay of development program(s) by New Alkermes’ corporate partners; | |
• | announcements and timing of technological innovations or new therapeutic products or methods by New Alkermes or others; | |
• | changes in patent legislation or adverse changes to patent law; | |
• | changes in or loss of any key members of management; | |
• | failure to meet New Alkermes’ financial expectations or changes in opinions of analysts who follow New Alkermes stock; or | |
• | general market conditions. |
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• | requiring New Alkermes to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing the availability of its cash flow for other purposes, including business development efforts and research and development; | |
• | limiting New Alkermes’ flexibility in planning for, or reacting to, changes in its business and the industry in which it operates, thereby placing it at a competitive disadvantage compared to its competitors that may have less debt; | |
• | limiting New Alkermes’ ability to take advantage of significant business opportunities, such as acquisition opportunities; and | |
• | increasing New Alkermes’ vulnerability to adverse economic and industry conditions. |
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• | Alkermes may be required to pay to Elan or Elan may be required to pay to Alkermes a termination fee of $25 million if the business combination and merger are not consummated under certain circumstances, as described in the merger agreement and summarized under the caption “The Business Combination Agreement and Plan of Merger — Termination of the Merger Agreement;” | |
• | Alkermesand/or Elan will be required to pay certain costs relating to the proposed business combination, including legal, accounting, filing and possible other fees and mailing, financial printing and other expenses in connection with the transactions whether or not the business combination is consummated; or | |
• | matters relating to the business combination (including integration planning) may require substantial commitments of time and resources by Alkermes management and EDT management, which could otherwise have been devoted to other opportunities that may have been beneficial to Elan, EDT, Alkermes or New Alkermes, as the case may be. |
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• | the timing of the completion of the merger; | |
• | the failure of the Alkermes shareholders to approve the adoption of the merger agreement; | |
• | the possibility that the businesses of Alkermes and EDT may suffer as a result of the uncertainty surrounding the business combination; | |
• | the failure to obtain and retain expected synergies from the proposed business combination; | |
• | rates of success in executing, managing and integrating key acquisitions and transactions, including the proposed business combination; | |
• | the ability to achieve business plans for the combined company; | |
• | the ability to manage and maintain key collaboration agreements; | |
• | the conditions to the completion of the proposed business combination may not be satisfied; | |
• | delays in obtaining, or adverse conditions contained in, any regulatory or third-party approvals in connection with the proposed transactions; | |
• | the ability to fund debt service obligations through operating cash flow; | |
• | the ability to obtain additional financing in the future and react to competitive and technological changes and scientific developments; | |
• | the ability to comply with restrictive covenants in the combined company’s indebtedness; | |
• | the ability to compete with a range of other providers of pharmaceutical products and services; | |
• | the effect of technological changes and scientific developments on the combined company’s businesses; | |
• | the functionality or market acceptance of new products that the combined company may introduce; | |
• | the extent to which the combined company’s future earnings will be sufficient to cover its fixed charges; | |
• | the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transactions; | |
• | the pressures from an intensely competitive business environment; | |
• | the failure of New Alkermes to protect its intellectual property rights; | |
• | limits on New Alkermes’ rights to indemnification against liabilities in certain circumstances or its ability to collect such indemnification; |
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• | currency and interest rate risks; and | |
• | the risk factors explained in Alkermes’ most recent Annual Report onForm 10-K, as amended. |
• | adopt the merger agreement; | |
• | create distributable reserves of New Alkermes; and | |
• | adjourn the special meeting to a later date or dates if necessary or appropriate, including for the purpose of permitting further solicitation of proxies. |
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• | delivering a written revocation letter to the Secretary of Alkermes; | |
• | submitting your voting instructions again by telephone or over the Internet; | |
• | signing and returning a proxy card with a later date so that it is received prior to the special meeting; or | |
• | attending the special meeting and voting by ballot in person. |
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• | combining Alkermes and EDT will create a larger, faster growing biopharmaceutical company that is immediately and sustainably profitable on a cash earnings basis with growing revenues in excess of $450 million and growing margins of adjusted EBITDA; | |
• | New Alkermes will have a diversified portfolio of products including five key products with long patent lives:Ampyra,Vivitrol,Bydureon,Risperdal ConstaandInvega Sustenna; | |
• | New Alkermes will be a leader in the development of medicines for the treatment of central nervous system diseases with an established track record of successful innovation. It will have a powerful combination of commercial stage products and new pipeline candidates developed in collaboration with major pharmaceutical companies and for its own account; | |
• | New Alkermes will have deep scientific, development and manufacturing capabilities which will provide competitive advantages in the creation of innovative biopharmaceutical products for itself and its partners; | |
• | New Alkermes will have the scale, diversification and technical and manufacturing capabilities to accelerate the ongoing business transition from a provider of drug delivery technologies and services to a developer of proprietary innovative pharmaceutical products; and | |
• | New Alkermes will have enhanced financial resources to invest in its proprietary drug candidates, pursue additional growth opportunities and reduce its cost of capital. |
• | the anticipated market capitalization, strong balance sheet, free cash flow, liquidity and capital structure of New Alkermes; | |
• | the significant value represented by the expected increased cash flow and earnings improvement of New Alkermes; | |
• | that Alkermes’ and EDT’s intellectual property portfolios, product lines and geographic scopes are generally complementary, and do not present areas of significant overlap, and that in particular, |
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New Alkermes will receive royalties from two important long-acting injectable antipsychotic drugs,Risperdal ConstaandInvega Sustenna; |
• | that New Alkermes will have manufacturing facilities with unique and complementary capabilities to manufacture complex drug formulations in Athlone, Ireland, Gainesville, Georgia and Wilmington, Ohio; | |
• | that, subject to certain limited exceptions, Elan is prohibited from soliciting, participating in any discussion or negotiations, providing information to any third party or entering into any agreement providing for the acquisition of New Alkermes; | |
• | the limited number and nature of the conditions to Elan’s obligation to complete the business combination; | |
• | that Elan must pay Alkermes a termination fee of $25 million if the merger agreement is terminated under circumstances specified in the merger agreement, as described in the section entitled“The Business Combination Agreement and Plan of Merger — Termination Fee”; | |
• | the fact that any New Alkermes ordinary shares issued to the Alkermes shareholders as a result of the merger will be registered onForm S-4 and will be unrestricted for the Alkermes shareholders; | |
• | the fact that the business combination is subject to the adoption of the merger agreement by the Alkermes shareholders; | |
• | the likelihood that the business combination will be completed on a timely basis; | |
• | its knowledge of the Alkermes business, operations, financial condition, earnings, strategy and future prospects; | |
• | its knowledge of the EDT business, operations, financial condition, earnings, strategy and future prospects and the results of Alkermes’ due diligence review of EDT; | |
• | the financial statements of EDT; | |
• | the likelihood that Alkermes would be able to obtain the necessary financing given the financing commitments from the commitment parties; | |
• | the current and prospective competitive climate in the industry in which Alkermes and EDT operate, including the potential for further consolidation; | |
• | the tax benefits to New Alkermes as an Irish tax resident and incorporated corporation, the benefits of which would accrue to Alkermes shareholders, as shareholders of New Alkermes; | |
• | the presentation and the financial analyses of Morgan Stanley and its opinion that, as of May 8, 2011, and based upon the various assumptions, considerations, qualifications and limitations set forth in its written opinion, the consideration to be paid by Alkermes pursuant to the merger agreement was fair from a financial point of view to Alkermes, in each case as more fully described in the section entitled“The Business Combination — Opinion of Alkermes’ Financial Adviser”; | |
• | its consideration with its legal and financial advisers of alternatives to the business combination, the ability, and extent to which it might be able, to increase the value of Alkermes for its shareholders through these alternatives and the timing and likelihood of effecting any alternative; | |
• | the current and prospective economic environment and increasing competitive burdens and constraints facing Alkermes; | |
• | Elan’s agreement to limit its competitive activities for three years after the completion of the business combination; and | |
• | the terms of the shareholder’s agreement to be entered into in connection with the business combination, including the standstill,lock-up and voting provisions as described in the section entitled“Other Related Agreements — Shareholder’s Agreement.” |
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• | the combination of the businesses currently conducted by Alkermes and EDT will create numerous risks and uncertainties which could adversely affect New Alkermes’ operating results; | |
• | uncertainties associated with New Alkermes may cause the combined business to lose significant business partners, including pharmaceutical companies who are in discussions with EDT to provide contract manufacturing services; | |
• | the existing and potential challenges by generic companies to the intellectual property rights covering certain of EDT’s products; | |
• | the risk that New Alkermes may lose key personnel, which could lead to loss of partners and a decline in revenues, or otherwise adversely affect the operations of the combined business; | |
• | the risk of not being able to realize all of the anticipated cost savings and operational synergies between Alkermes and EDT and the risk that other anticipated benefits to New Alkermes might not be realized; | |
• | the risk that regulatory agencies may not approve the merger or may impose terms and conditions on their approvals that adversely affect the business and financial results of New Alkermes (see“Summary — Regulatory Approvals Required”); | |
• | the risk that the business combination might not be consummated in a timely manner or at all; | |
• | failure to complete the business combination could cause Alkermes to incur significant fees and expenses and could lead to negative perceptions among investors, potential investors and customers; | |
• | the business combination is expected to be taxable to the Alkermes shareholders; | |
• | New Alkermes does not expect to pay dividends in the immediate future, and Alkermes shareholders must rely on increases in the trading prices of the New Alkermes ordinary shares for returns on their investment; | |
• | Elan’s ability to compete with New Alkermes without restriction three years after the effective time of the merger; | |
• | New Alkermes may have potential conflicts of interest with Elan relating to their ongoing relationship; | |
• | subject to the terms of the shareholder’s agreement, Elan will have rights reflecting its approximately 25% interest in New Alkermes. As a result, the ability of Alkermes shareholders to influence the outcome of matters requiring shareholder approval could be limited if the voting provisions of the shareholder’s agreement lapse after the completion of the business combination; | |
• | the fact that the merger agreement prohibits Alkermes from taking a number of actions relating to the conduct of its business prior to the completion of the business combination without the prior consent of Elan; | |
• | the fact that certain provisions of the merger agreement, although reciprocal, may have the effect of discouraging alternative acquisition transactions involving Alkermes, including: (1) the restrictions on Alkermes’ ability to solicit proposals for alternative transactions; and (2) the requirement that Alkermes pay a termination fee of $25 million to Elan in certain circumstances following the termination of the merger agreement; | |
• | the increased leverage of New Alkermes, which will result in interest payments and could negatively affect the combined business’ credit ratings, limit access to credit markets or make such access more expensive and reduce operational and strategic flexibility; and | |
• | the risks of the type and nature described under the sections entitled“Risk Factors” and“Cautionary Statement Regarding Forward-Looking Statements.” |
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• | reviewed certain publicly available financial statements and other business and financial information of EDT and Alkermes, respectively; | |
• | reviewed certain internal financial statements and other financial and operating data concerning EDT and Alkermes, respectively; | |
• | reviewed certain financial projections prepared by the managements of Alkermes and Elan concerning EDT and certain financial projections prepared by the management of Alkermes concerning Alkermes; | |
• | reviewed information relating to certain strategic, financial, tax and operational benefits anticipated from the business combination, prepared by the managements of Alkermes and Elan; |
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• | discussed the past and current operations and financial condition and the prospects of EDT, including information relating to certain strategic, financial, tax and operational benefits anticipated from the business combination, with the management of Elan; | |
• | discussed the past and current operations and financial condition and the prospects of Alkermes, including information relating to certain strategic, financial, tax and operational benefits anticipated from the business combination, with the management of Alkermes; | |
• | reviewed the pro forma impact of the business combination on Alkermes’ earnings, cash flow, consolidated capitalization and financial ratios; | |
• | reviewed the reported prices and trading activity for Alkermes common stock; | |
• | compared the financial performance of EDT and Alkermes with that of certain other publicly-traded companies comparable to EDT and Alkermes, respectively; | |
• | participated in certain discussions and negotiations among representatives of Elan and Alkermes and their financial and legal advisers; | |
• | reviewed the merger agreement, the draft commitment letter from certain lenders to Alkermes substantially in the form of the draft dated May 7, 2011 (the “commitment letter”), the shareholder’s agreement and certain related documents; and | |
• | performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate. |
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Multiple Range | Implied Value | |||
Alkermes Management Case: | ||||
Aggregate Value to Estimated 2011 EBITDA | 5.0x — 10.0x | $470 million — $940 million | ||
Elan Management Case: | ||||
Aggregate Value to Estimated 2011 EBITDA | 5.0x — 10.0x | $575 million — $1,145 million |
Multiple Range | Implied Value | |||
Alkermes Management Case with Synergies: | ||||
Aggregate Value to Estimated 2011 EBITDA | 5.0x — 10.0x | $710 million — $1,180 million | ||
Elan Management Case with Synergies: | ||||
Aggregate Value to Estimated 2011 EBITDA | 5.0x — 10.0x | $775 million — $1,350 million |
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Case | Implied Value | |||||||||
Alkermes Management Case | $ | 885 million | — | $ | 930 million | |||||
Alkermes Management Case withAmpyraUpside | $ | 975 million | — | $ | 1,065 million | |||||
Elan Management Case | $ | 1,070 million | — | $ | 1,155 million | |||||
Alkermes Management Case including Synergies | $ | 1,085 million | — | $ | 1,180 million | |||||
Alkermes Management Case withAmpyraUpside including Synergies | $ | 1,205 million | — | $ | 1,310 million | |||||
Elan Management Case including Synergies | $ | 1,265 million | — | $ | 1,365 million |
Scenario | Implied Value | |
Exit Scenario | $700 million — $900 million | |
Harvest Scenario | $500 million — $700 million |
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Year Ended December 31, | ||||||||||||||||||||||||
2011E | 2012E | 2013E | 2014E | 2015E | 2016E | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Total Revenue | $ | 277.8 | $ | 286.8 | $ | 340.2 | $ | 380.1 | $ | 438.4 | $ | 511.4 | ||||||||||||
Gross Margin | 191.3 | 202.1 | 242.7 | 279.9 | 317.6 | 385.4 | ||||||||||||||||||
OPEX | (76.7 | ) | (78.8 | ) | (79.1 | ) | (79.5 | ) | (79.9 | ) | (80.4 | ) | ||||||||||||
EBITDA | $ | 114.6 | 123.4 | 163.5 | 200.4 | 237.7 | 305.0 | |||||||||||||||||
Operating Profit | 87.4 | 97.3 | 137.4 | 174.2 | 211.4 | 278.7 |
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Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2011E | 2012E | 2013E | 2014E | 2015E | 2016E | 2017E | 2018E | 2019E | 2020E | 2021E | ||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | $ | 250.2 | $ | 255.7 | $ | 285.1 | $ | 326.6 | $ | 372.6 | $ | 411.8 | $ | 428.2 | $ | 472.6 | $ | 412.8 | $ | 410.7 | $ | 431.0 | ||||||||||||||||||||||
Cost of Sales | 85.5 | 86.9 | 93.1 | 100.9 | 114.1 | 107.1 | 110.6 | 121.4 | 103.6 | 100.7 | 97.6 | |||||||||||||||||||||||||||||||||
R&D | 44.8 | 47.1 | 48.4 | 48.9 | 49.4 | 51.9 | 54.5 | 57.2 | 60.0 | 63.0 | 66.2 | |||||||||||||||||||||||||||||||||
SG&A | 17.3 | 16.7 | 17.2 | 17.7 | 18.2 | 19.1 | 20.0 | 21.0 | 22.1 | 23.2 | 24.3 | |||||||||||||||||||||||||||||||||
Corp Expenses | 8.4 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | |||||||||||||||||||||||||||||||||
EBITDA | $ | 94.2 | 98.5 | 119.8 | 152.7 | 184.4 | 227.3 | 233.8 | 260.7 | 206.3 | 193.9 | 180.6 | ||||||||||||||||||||||||||||||||
EBITDA (includingAmpyra Upside) | 94.2 | 98.5 | 119.8 | 152.7 | 184.4 | 227.3 | 235.8 | 264.8 | 216.3 | 210.3 | 219.7 |
• | consummation of the merger in accordance with the merger agreement, prior to or substantially simultaneously with the funding of the Term Loan Facilities; | |
• | the absence of a “Business Material Adverse Effect” (as defined in the merger agreement) since December 31, 2010 (See“The Business Combination Agreement and Plan of Merger — Covenants — Additional Agreements”); | |
• | the execution and delivery of definitive loan documentation for the Term Loan Facilities, including, but not limited to, credit agreements, security agreements and guaranties; | |
• | delivery of certain historical and pro forma financial information for EDT and pro forma financial statements for New Alkermes; | |
• | a 20-business-day period (with customary black-out dates) for marketing and syndication of the Term Loan Facilities after delivery by Alkermes of a confidential information memorandum relating to the Term Loan Facilities; and | |
• | other customary financing conditions. |
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Shares | Percent | |||
Beneficially | Beneficially | |||
Name | Owned(1) | Owned(2) | ||
5% Shareholders | ||||
FMR LLC(3) | 14,275,434 | 14.68% | ||
82 Devonshire Street | ||||
Boston, MA 02109 | ||||
Federated Investors, Inc.(4) | 10,090,672 | 10.37% | ||
Federated Investors Tower | ||||
Pittsburgh, PA 15222 | ||||
Wellington Management Company, LLP(5) | 9,731,403 | 10.01% | ||
75 State Street | ||||
Boston, MA 02109 | ||||
Blackrock, Inc.(6) | 5,906,881 | 6.07% | ||
40 East 52nd Street | ||||
New York, NY 10022 | ||||
James E. Flynn(7) | 5,711,931 | 5.87% | ||
780 Third Avenue, 37th Floor | ||||
New York, NY 10017 |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to shares. Unless otherwise indicated below, to the knowledge of Alkermes, all persons listed have sole voting and investment power with respect to their shares of common stock. | |
(2) | Applicable percentable of ownership as of June 17, 2011, is based upon 97,261,483 shares of Alkermes common stock outstanding. | |
(3) | Based solely on a Schedule 13G/A dated February 11, 2011, FMR LLC, a parent holding company, has sole voting power over 33,050 shares of Alkermes common stock and sole investment power over 14,275,434 shares of Alkermes common stock. Of the shares reported as beneficially owned by FMR LLC: |
• | 10,182,261 shares were owned by Fidelity Growth Company Fund, an investment company registered under the Investment Company Act of 1940. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 14,246,684 shares owned by the funds. Fidelity Management & Research Company, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 14,246,684 shares of the common stock outstanding of Alkermes. | |
• | 28,750 shares were owned by Pyramis Global Advisors, LLC, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, which is referred to in this proxy statement/prospectus as PGALLC. Edward C. Johnson 3d and FMR LLC, through its control of PGALLC, each has sole dispositive power and sole voting power over such 28,750 shares and, therefore, may be deemed to beneficially own the shares reported as beneficially owned by PGALLC. |
(4) | Based solely on a Schedule 13G/A dated February 8, 2011, Federated Investors, Inc., which is referred to in this proxy statement/prospectus as Federated, in its capacity as investment adviser, may be deemed to |
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beneficially own and has sole voting and dispositive power with respect to 10,090,672 shares of Alkermes common stock. Federated is the parent holding company of investment advisers that act as advisers to registered investment companies and separate accounts that own shares of Alkermes common stock. All of Federated’s outstanding stock is held in the Voting Shares Revocable Trust for which John F. Donahue, Rhodora J. Donahue and J. Christopher Donahue act as trustees. As trustees, these individuals are each deemed to beneficially own and share voting and dispositive power with respect to the 10,090,672 shares. | ||
(5) | Based solely on a Schedule 13G/A dated April 11, 2011, Wellington Management Company, LLP, which is referred to in this proxy statement/prospectus as Wellington Management, in its capacity as investment adviser, may be deemed to beneficially own 9,731,403 shares of Alkermes common stock which are held of record by clients of Wellington Management. Wellington Management shares voting power over 7,271,980 shares of Alkermes common stock and shares investment power over 9,731,403 shares of Alkermes common stock. | |
(6) | Based solely on a Schedule 13G/A dated January 21, 2011, Blackrock, Inc. beneficially owns and has sole dispositive and voting power with respect to 5,906,881 shares of Alkermes common stock. | |
(7) | Based solely on a Schedule 13G/A dated February 2, 2011, James E. Flynn, beneficially owns 5,711,931 shares of Alkermes common stock. Of the shares beneficially owned by Mr. Flynn: |
• | 2,364,730 shares are held by Deerfield Capital, L.P. and Deerfield Partners, L.P. Mr. Flynn, Deerfield Capital, L.P. and Deerfield Partners, L.P. have shared dispositive and voting power with respect to 2,364,730 shares of Alkermes common stock. | |
• | 3,347,201 shares are held by Deerfield Management Company, L.P. and Deerfield International Limited. Mr. Flynn, Deerfield Management Company, L.P., and Deerfield International Limited have shared dispositive and voting power with respect to 3,347,201 shares of Alkermes common stock. |
Percent | ||||||||||||||||
Directors and Named | Number of Alkermes | Number of Shares | Beneficially | |||||||||||||
Executive Officers | Common | Issuable(1) | Total | Owned(2) | ||||||||||||
David W. Anstice | 10,000 | 80,000 | 90,000 | * | ||||||||||||
Floyd E. Bloom | 140,375 | 200,000 | 340,375 | * | ||||||||||||
Robert A. Breyer | 64,156 | 166,450 | 230,606 | * | ||||||||||||
Wendy L. Dixon | — | 35,000 | 35,000 | * | ||||||||||||
Geraldine A. Henwood | — | 198,000 | 198,000 | * | ||||||||||||
Paul J. Mitchell | 8,000 | 188,000 | 196,000 | * | ||||||||||||
Richard F. Pops | 412,279 | 2,707,500 | 3,119,779 | 3.21 | % | |||||||||||
Alexander Rich | 348,400 | 200,000 | 548,400 | * | ||||||||||||
Mark B. Skaletsky | 5,000 | 159,000 | 164,000 | * | ||||||||||||
Michael A. Wall | 608,450 | 195,000 | 803,450 | * | ||||||||||||
Elliot W. Ehrich | 16,579 | 471,700 | 488,279 | * | ||||||||||||
James M. Frates | 84,064 | 738,250 | 822,314 | * | ||||||||||||
Michael J. Landine | 144,164 | 537,625 | 681,789 | * | ||||||||||||
Gordon G. Pugh | 18,615 | 602,050 | 620,665 | * | ||||||||||||
All directors and executive officers as a group (15 individuals in total) | 1,887,629 | 6,935,825 | 8,823,454 | 9.07 | % |
* | Less than 1% | |
(1) | Shares that can be acquired through stock options exercisable and restricted stock unit awards vesting on or before August 15, 2011, which is 60 days from June 16, 2011. | |
(2) | Applicable percentable of ownership as of June 17, 2011, is based upon 97,261,483 shares of Alkermes common stock outstanding. |
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• | each person that, based on current ownership of Alkermes common stock or otherwise, is expected to be a beneficial owner of more than 5% of New Alkermes ordinary shares; | |
• | each of the named executive officers of New Alkermes; | |
• | each of the individuals who will be a director or prospective director of New Alkermes; and | |
• | all directors and executive officers of New Alkermes, taken together. |
Number of | ||||||||||||
Shares | Number of | |||||||||||
of Alkermes | Ordinary Shares | Percentage | ||||||||||
Name and Address of Beneficial Owner | Common Stock | of New Alkermes | Beneficially Owned | |||||||||
Shareholders Owning Approximately 5% or more: | ||||||||||||
Elan Science Three Limited | 0 | 31,900,000 | 24.70 | % | ||||||||
FMR LLC(1) | 14,275,434 | 14,275,434 | 11.05 | % | ||||||||
Federated Investors, Inc.(2) | 10,090,672 | 10,090,672 | 7.81 | % | ||||||||
Wellington Management Company, LLP(3) | 9,731,403 | 9,731,403 | 7.53 | % |
(1) | Based solely on a Schedule 13G/A dated February 11, 2011, FMR LLC, a parent holding company, has sole voting power over 33,050 shares of Alkermes common stock and sole investment power over 14,275,434 shares of Alkermes common stock. Of the shares reported as beneficially owned by FMR LLC: | |
• | 10,182,261 shares were owned by Fidelity Growth Company Fund, an investment company registered under the Investment Company Act of 1940. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 14,246,684 shares owned by the funds. Fidelity Management & Research Company, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, is the beneficial owner of 14,246,684 shares of the common stock outstanding of Alkermes. | |
• | 28,750 shares were owned by PGALLC a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisors Act of 1940. Edward C. Johnson 3d and FMR LLC, through its control of PGALLC each has sole dispositive power and sole voting power over such 28,750 shares and therefore, may be deemed to beneficially own the shares reported as beneficially owned by PGALLC. |
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In addition, due to their ownership, directly or through trusts, of shares representing 49% of the voting power of FMR LLC, the members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, may be deemed to beneficially own the shares reported as beneficially owned by FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds, which power resides in the funds’ Board of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the funds’ Board of Trustees. | ||
(2) | Based solely on a Schedule 13G/A dated February 8, 2011, Federated, in its capacity as investment adviser, may be deemed to beneficially own and has sole voting and dispositive power with respect to 10,090,672 shares of Alkermes common stock. Federated is the parent holding company of investment advisors that act as advisers to registered investment companies and separate accounts that own shares of Alkermes common stock. All of Federated’s outstanding stock is held in the Voting Shares Revocable Trust for which John F. Donahue, Rhodora J. Donahue and J. Christopher Donahue act as trustees. As trustees, these individuals are each deemed to beneficially own and share voting and dispositive power with respect to the 10,090,672 shares. | |
(3) | Based solely on a Schedule 13G/A dated April 11, 2011, Wellington Management, in its capacity as investment advisor, may be deemed to beneficially own 9,731,403 shares of Alkermes common stock, which are held of record by clients of Wellington Management. Wellington Management shares voting power over 7,271,980 shares of Alkermes common stock and shares investment power over 9,731,403 shares of Alkermes common stock. |
Total Number of | Total Number of | |||||||||||
Shares of Alkermes | Ordinary Shares of | Beneficially Owned | ||||||||||
Directors and Named Executive Officers | Common Stock(1) | New Alkermes | Percent(2) | |||||||||
David W. Anstice | 90,000 | 90,000 | * | |||||||||
Floyd E. Bloom | 340,375 | 340,375 | * | |||||||||
Robert A. Breyer | 230,606 | 230,606 | * | |||||||||
Wendy L. Dixon | 35,000 | 35,000 | * | |||||||||
Geraldine A. Henwood | 198,000 | 198,000 | * | |||||||||
Paul J. Mitchell | 196,000 | 196,000 | * | |||||||||
Richard F. Pops | 3,119,779 | 3,119,779 | 2.42 | % | ||||||||
Mark B. Skaletsky | 164,000 | 164,000 | * | |||||||||
Shane Cooke | — | — | * | |||||||||
Elliot W. Ehrich | 488,279 | 488,279 | * | |||||||||
James M. Frates | 822,314 | 822,314 | * | |||||||||
Gordon G. Pugh | 620,665 | 620,665 | * | |||||||||
All directors and executive officers as a group (14 individuals in total) | 7,471,604 | 7,471,604 | 5.79 | % |
* | Less than 1% | |
(1) | Includes common stock held as of June 16, 2011 as well as shares that can be acquired through stock options exercisable and restricted stock unit awards vesting on or before August 15, 2011, which is 60 days from June 16, 2011. | |
(2) | Percentage of ownership of New Alkermes is based on 97,261,483 shares of Alkermes common stock outstanding plus 31,900,000 million ordinary shares that the Elan Shareholder will receive in connection with the business combination. |
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• | an individual shareholder resident for tax purposes in a “relevant territory,” and the individual is neither resident nor ordinarily resident in Ireland. “Relevant territories” for the purposes of DWT are defined to include; Albania; Australia; Austria; Bahrain; Belarus; Belgium; Bosnia & Herzegovina; Bulgaria; Canada; Chile; China; Croatia; Cyprus; Czech Republic; Denmark; Estonia; Finland; France; Georgia; Germany; Greece; Hong Kong; Hungary; Iceland; India; Israel; Italy; Japan; Korea; Kuwait; Latvia; Lithuania; Luxembourg; Macedonia; Malaysia; Malta; Mexico; Moldova; Montenegro; Morocco; The Netherlands; New Zealand; Norway; Pakistan; Poland; Portugal; Romania; Russia; Serbia; Singapore; Slovak Republic; Slovenia; South Africa; Spain; Sweden; Switzerland; Turkey; United Arab Emirates; United Kingdom; United States; Vietnam; and Zambia; | |
• | a corporate shareholder that is not resident for tax purposes in Ireland and which is ultimately controlled, directly or indirectly, by persons resident in a “relevant territory”; | |
• | a corporate shareholder resident for tax purposes in a “relevant territory” provided that the corporate shareholder is not under the control, whether directly or indirectly, of a person or persons who is or are resident in Ireland; | |
• | a corporate shareholder that is not resident for tax purposes in Ireland and whose principal class of shares (or those of its 75% parent) is substantially and regularly traded on a recognized stock exchange either in a “relevant territory” or on such other stock exchange approved by the Irish Minister for Finance; or |
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• | a corporate shareholder that is not resident for tax purposes in Ireland and is wholly-owned, directly or indirectly, by two or more companies where the principal class of shares of each of such companies is substantially and regularly traded on a recognized stock exchange in a “relevant territory” or on such other stock exchange approved by the Irish Minister for Finance, |
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• | the respective corporate organization, existence and good standing and requisite corporate power and authority to carry on the respective businesses of Elan and each of its applicable subsidiaries and of Alkermes and each of its subsidiaries; | |
• | the respective authority of Elan and Alkermes to enter into the merger agreement and due execution, delivery and enforceability of the merger agreement and related agreements; | |
• | the absence of conflicts with charter documents of Elan or certain of its subsidiaries, New Alkermes or any of its subsidiaries or of Alkermes; | |
• | the absence of a violation or a change in rights relating to any contract, government authorization, permit or license of Alkermes, New Alkermes or any of its subsidiaries or Elan or certain of its subsidiaries or, in the case of Elan, an encumbrance on any of the contributed assets or the assets of a contributed subsidiary; | |
• | the respective capital structures and equity securities of Alkermes, New Alkermes and certain subsidiaries of New Alkermes and Elan; | |
• | certain financial statements of EDT (audited and unaudited) and the financial statements of Alkermes, in each case, including their preparation in accordance with U.S. GAAP and that they fairly present, in all material respects, the relevant financial position and results of operations; | |
• | the absence of undisclosed material liabilities concerning EDT or Alkermes or any of their respective subsidiaries; | |
• | the absence of undisclosed brokers’ fees or finders’ fees relating to the transaction; | |
• | the receipt of a fairness opinion; and | |
• | the approval of the merger agreement and the business combination by the respective boards of directors of Elan and Alkermes. |
• | the title of Elan and certain of its subsidiaries to the outstanding capital stock of the subsidiaries to be contributed to New Alkermes by Elan; | |
• | other than filings required under the HSR Act, the absence of any need for filings with or consents or approvals of government authorities or any other person in respect of the business combination by Elan, New Alkermes or any of their respective subsidiaries; | |
• | title and rights to, and condition of, real and personal property of EDT; | |
• | the sufficiency of the assets Elan and its subsidiaries will contribute to New Alkermes under the merger agreement, in combination with other services to be provided, to conduct the EDT business; | |
• | the absence of certain changes, including a material adverse change to EDT since December 31, 2010; | |
• | the absence of undisclosed litigation or injunctions concerning the EDT business; | |
• | intellectual property of EDT; | |
• | licenses and permits of EDT; | |
• | labor matters relating to EDT; | |
• | the compliance by Elan and its subsidiaries with respect to EDT with laws and government regulations, including environmental laws; | |
• | the absence of any unlawful payments by Elan and its subsidiaries relating to EDT; |
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• | insurance relating to EDT; | |
• | certain material contracts of EDT, including validity and enforceability; | |
• | the absence of a required shareholder vote of Elan; | |
• | environmental matters and compliance with environmental laws relating to EDT; | |
• | the employee benefits and Employment Retirement Income Security Act, which is referred to in this proxy statement/prospectus as ERISA, and similarnon-U.S. law compliance relating to EDT; | |
• | the absence of activities of New Alkermes and certain entities that will be subsidiaries of New Alkermes at the time of the business combination other than those incident to organization or related to the merger agreement or the business combination; | |
• | the absence of certain product recalls relating to EDT; and | |
• | solely with respect to those subsidiaries of Elan to be contributed to New Alkermes, and New Alkermes itself, representations on the proper filing of all tax returns, payment of tax liabilities, compliance with tax laws, absence of any deficiencies in those filings, absence of tax audits, tax basis of property transferred in the reorganization, and other customary tax representations. |
• | the absence of certain changes, including a material adverse change to Alkermes and its subsidiaries since March 31, 2010; | |
• | other than filings required under the HSR Act, the absence of any need for filings with or consents or approvals of government authorities or any other person in respect of the business combination by Alkermes or any of its subsidiaries; | |
• | the absence of undisclosed litigation or injunctions concerning Alkermes or any of its subsidiaries; | |
• | the compliance by Alkermes and its subsidiaries with laws and government regulations, including environmental laws; | |
• | the SEC filings and the accuracy and completeness of the information contained in the SEC filings, including the financial statements, made by Alkermes since January 1, 2008; | |
• | the requisite vote of shareholders of Alkermes; | |
• | the actions taken by Alkermes to ensure the inapplicability of restrictions under takeover statutes; and | |
• | financing commitment and related matters of Alkermes. |
• | any event, change, occurrence or development that, individually or when taken together with all other events, changes, occurrences or developments, has a material adverse effect on: |
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• | any event, change, occurrence or development that, individually or when taken together with all other events, changes, occurrences or developments, has a material adverse effect on: |
• | certain events or conditions (including changes in laws, acts of God, changes in economic, financial market, regulatory or political conditions or changes in accounting principles applicable to Alkermes and its subsidiaries) that generally affect participants in the industries and markets similar to Alkermes and its subsidiaries except to the extent that they adversely affect Alkermes and its subsidiaries disproportionately compared to such other participants; | |
• | any delays in, or rejection of, approval for commercial sale by the FDA, the European Medicines Agency, which is referred to in this proxy statement/prospectus as the EMA, or any other applicable governmental authority ofBydureon; or | |
• | any change in the market price or trading volume of Alkermes common stock in and of itself, it being understood that, except as provided above, any event, change, occurrence or development causing or contributing to such change may be considered for purposes of determining a material adverse effect. |
• | repurchase, redeem or otherwise acquire any shares of capital stock or other securities of, or other ownership interests in, New Alkermes or any of its subsidiaries; | |
• | issue, deliver, pledge, encumber or sell any shares of capital stock of or other equity interests in New Alkermes or any of its subsidiaries, or any securities convertible into any such shares of capital stock or other equity interests, or any rights, warrants or options to acquire any such shares of capital stock or other equity interests; | |
• | amend or otherwise alter (or propose any amendment or alteration to) the governing documents of New Alkermes or any of its subsidiaries or amend any terms of the outstanding securities of New Alkermes or any of its subsidiaries; |
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• | with respect to EDT, New Alkermes and its subsidiaries only, merge or consolidate with any other person, make any investment in any other person, including any joint venture, or acquire the stock or assets or rights of any other person other than, in each case, in the ordinary course of business; | |
• | sell, lease, license, assign, transfer, abandon, convey or otherwise dispose of (1) any assets, securities, rights or property of New Alkermes or any of its subsidiaries or (2) any asset, rights or properties used in the EDT business, other than in each case (A) sales of inventory and equipment in the ordinary course of business, (B) transactions that are in the ordinary course of business and not individually in excess of $1 million, (C) transfers of cash and cash equivalents to or as directed by Elan or (D) transactions disclosed by Elan to Alkermes at or prior to the date of the merger agreement; | |
• | manage modified working capital and the net cash amount other than in the ordinary course of business, or take any action for the purpose of changing the calculation or amount of modified working capital or net cash amount; | |
• | fail to maintain inventory of EDT (as determined in accordance with U.S. GAAP) at a level between 85% and 115% of inventory reflected on the unaudited balance sheet of EDT as of December 31, 2010; | |
• | with respect to New Alkermes and its subsidiaries, incur any indebtedness, enter into any new or amend existing facilities relating to indebtedness, issue or sell any debt securities or warrants or other rights to acquire any debt securities or guarantee any debt securities; | |
• | create or permit the creation of (A) any lien on the equity interests of certain subsidiaries of New Alkermes or (B) any lien (other than certain permitted liens) on any asset of EDT other than in the ordinary course of business or that would not materially and adversely affect the ability to conduct the EDT business following the effective time in the same manner as currently conducted; | |
• | except in the ordinary course of business, enter into or adopt any new, or amend or terminate any existing, employee plan (including any trust or other funding arrangement), other than as required by law; | |
• | except to the extent required by employee plans existing on the date of the merger agreement, or as disclosed by Elan to Alkermes on the date of the merger agreement, make any new grants or awards to, vest, accelerate or otherwise modify any grant, benefit or awards made to, or increase the compensation payable or to become payable to its officers, directors or employees or pay any severance or bonus not otherwise due to its officers, directors or employees; | |
• | enter into or forgive any loan to employees, directors, or consultants; | |
• | enter into any new collective bargaining agreement or agreement with a trade union; | |
• | contribute any material amount to any trust or other arrangement funding any employee plan, except to the extent required by the existing terms of such employee plan, trust or other funding arrangement, by any collective bargaining agreement, by any written employment agreement existing on the date of the merger agreement, or by applicable law; | |
• | (A) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization or (B) enter into any agreement or exercise any discretion providing for acceleration of payment or performance as a result of a change of control of New Alkermes or any of its subsidiaries; | |
• | renew or (except pursuant to transactions disclosed by Elan to Alkermes as of the date of the merger agreement) enter into any non-compete, exclusivity or similar agreement that would restrict or limit the operations of New Alkermes or any of its subsidiaries or, after the effective time, of Alkermes or its Subsidiaries; | |
• | modify in any material respect, amend in any material respect or terminate any material contract of EDT; |
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• | enter into any contract other than (A) as a result of the transactions disclosed by Elan to Alkermes as of the date of the merger agreement or (B) in the ordinary course of business and that does not require (x) a term in excess of one year or (y) payments by New Alkermes or any of its subsidiaries in excess of $1 million; | |
• | settle or compromise any material litigation relating to EDT (unless such settlement calls only for the payment of money by Elan or any person that will continue to be a subsidiary of Elan after the effective time), or waive, release or assign any material claims relating to EDT, including with respect to any intellectual property rights owned or licensed and used or held for use in the EDT business (collectively, the “business intellectual property rights”); | |
• | adopt any change, other than as required by applicable generally accepted accounting principles, in its accounting policies, procedures or practices; | |
• | license (except pursuant to the transactions disclosed by Elan to Alkermes as of the date of the merger agreement) or permit any rights to lapse in any business intellectual property rights; | |
• | with respect to any subsidiary of New Alkermes, (A) make any change in any annual accounting period or adopt or change a method of accounting for tax purposes, except as required by applicable law, (B) make or change any tax election, (C) file or amend any tax return or (D) enter into any closing agreement, settle any tax claim or assessment relating to Elan or any of its subsidiaries, surrender any right to claim a refund of taxes, or consent to any extension or waiver of the limitation period applicable to any tax claim or assessment relating to Elan or any of its subsidiaries, other than elections, filings, settlements, closing agreements, extensions or waivers made in the ordinary course of business; | |
• | fail to make any capital expenditures with respect to EDT consistent with the ordinary course of business; or take any action that is reasonably likely to result in any of the conditions to the reorganization or the merger not being satisfied; or | |
• | agree or commit to do any of the foregoing. |
• | in the case of Alkermes only, amend or otherwise change its governing documents, or amend, modify or terminate the rights agreement, dated as of February 7, 2003, as amended, between Alkermes and EquiServe Trust Company, N.A.; | |
• | in the case of Alkermes only, (A) declare, set aside, make or pay any dividend or other distribution, payable in stock, with respect to any of its capital stock, (B) split, combine or reclassify its outstanding shares of capital stock, or (C) repurchase, redeem or otherwise acquire, except in connection with any employee benefit plans or arrangements and except pursuant to Alkermes’ ongoing stock repurchase program or hedging activities, or permit any of its subsidiaries to purchase or otherwise acquire, any shares of Alkermes’ capital stock or any securities convertible into or exchangeable or exercisable for any shares of Alkermes’ capital stock; | |
• | in the case of Alkermes only, adopt a plan of complete or partial liquidation or dissolution; |
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• | in the case of Alkermes only, issue, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class or other equity interests, other than (A) issued upon the exercise of Alkermes options or other rights outstanding as of the date hereof, (B) issuable pursuant to any employee option or benefit plan or arrangement, (C) issued in connection with any merger, consolidation or acquisition permitted by the following paragraph, and (D) issued in other issuances that do not, in the aggregate, represent more than 5% of the outstanding Alkermes common stock; | |
• | acquire by merger, consolidation or acquisition of stock or assets (from any person other than Alkermes or any of its subsidiaries) any corporation, partnership or other business organization or division thereof if such acquisition would be reasonably likely to prevent the merger from occurring prior to the close of business on the 180th day following the date of the merger agreement; or | |
• | agree or commit to do any of the foregoing. |
• | solicit, initiate, encourage or facilitate any EDT acquisition proposal (as defined below) or EDT alternative transaction (as defined below); | |
• | participate in any discussions or negotiations relating to, assist or cooperate with any person (other than Alkermes and its designees) to make, or furnish any person (other than Alkermes and its designees) with information in connection with, or take any other action to facilitate, any EDT acquisition proposal or EDT alternative transaction, except for any notification by Elan to any such person that Elan is contractually restricted from engaging in any such discussions or negotiations; | |
• | disclose any information to any person (other than Alkermes and its designees) concerning the business, technologies or properties of EDT, or afford to any person (other than Alkermes and its designees) access to the properties, technologies or books and records of EDT, other than in the ordinary course of business or as required by applicable law; or | |
• | propose, authorize or enter into any agreement or understanding (whether binding or nonbinding, written or oral) relating to, or engage in or consummate, any EDT alternative transaction or any agreement or understanding requiring Elan to abandon, terminate or fail to consummate the business combination or breach its obligations thereunder. |
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• | solicit, initiate, encourage or facilitate any Alkermes acquisition proposal (as defined below) or Alkermes alternative transaction (as defined below); | |
• | participate in any discussions or negotiations relating to, assist or cooperate with any person (other than Elan and its designees) to make, or furnish any person (other than Elan and its designees) with information in connection with, or take any other action to facilitate, any Alkermes acquisition proposal or Alkermes alternative transaction, except for any notification by Alkermes to any such person that Alkermes is contractually restricted from engaging in any such discussions or negotiations; | |
• | disclose any information to any person (other than Elan and its designees) concerning the business, technologies or properties of Alkermes, or afford to any person (other than Elan and its designees) access to the properties, technologies or books and records of Alkermes, other than in the ordinary course of business or as required by applicable law; or | |
• | propose, authorize or enter into any agreement or understanding (whether binding or nonbinding, written or oral) relating to, or engage in or consummate, any Alkermes alternative transaction or any agreement or understanding requiring Alkermes to abandon, terminate or fail to consummate the business combination or breach its obligations thereunder. |
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• | Elan has agreed to ensure that New Alkermes and its subsidiaries hold all of the assets and liabilities of EDT (including certain designated assets and contracts), other than certain identified assets and liabilities (referred to in this proxy statement/prospectus as excluded assets), as well as certain additional assets of Elan, which are referred to in this proxy statement/prospectus as additional assets. | |
• | Elan has agreed to use its reasonable best efforts to obtain in respect of all contracts relating to EDT (other than specified contracts that are excluded assets), any necessary consents, waivers or approvals of any parties to such contracts that are required in connection with the transactions or for such contracts to remain in force and preserve the rights of, and benefits to, EDT under such contracts from and after the effective time. | |
• | Elan and Alkermes have each agreed to, and will cause each of their respective subsidiaries that is a party to an ancillary agreement to, execute each ancillary agreement to the merger agreement to which it is a party at or prior to the effective time. | |
• | Following the effective time, to the extent any assets or rights of the EDT business have been retained by Elan or its subsidiaries, Elan will and will cause such subsidiaries to use their best efforts to convey such assets or rights to New Alkermes, its subsidiaries or Alkermes as promptly as practicable. | |
• | Elan will and will cause its subsidiaries to terminate all affiliate agreements with New Alkermes and its subsidiaries other than certain affiliate agreements contemplated by the merger agreement. | |
• | Elan will, and will cause its subsidiaries to, use its reasonable best efforts to terminate all sale and leaseback agreements entered into by Elan or any of its subsidiaries in respect of any assets primarily used in the EDT business and provide to Alkermes evidence and documentation relating to such terminations. If any such arrangements are not terminated prior to the effective time, Elan will, and will cause its subsidiaries to, continue to use its reasonable best efforts to terminate such arrangements and until such termination is obtained, Elan and Alkermes will mutually agree in good faith on alternative arrangements that provide to New Alkermes and its subsidiaries all the benefits of ownership of the underlying assets of EDT to the extent permitted by applicable law. | |
• | Prior to the effective time, Elan will, and will cause its subsidiaries to, take such steps as are reasonably requested by Alkermes to provide for the governance of New Alkermes and its subsidiaries from and after the effective time, including electing directors and forming appropriate committees of the board of directors of New Alkermes or any subsidiary thereof, adopting committee charters, codes of conduct or other guidelines for New Alkermes and its subsidiaries and adopting and approving employee benefit plans, including equity-based plans. | |
• | Elan has agreed on behalf of itself and its subsidiaries not to, directly or indirectly, subject to certain specified exceptions, for a period of three years following the effective time, engage in any competing business, own any interest in or manage or operate any competing business, or manufacture, market or |
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distribute under, or use in any way, any intellectual property of EDT in connection with a competing business. |
• | Until the eighteen-month anniversary of the effective time, Elan and its affiliates will not, directly or indirectly, solicit for employment or any similar arrangement, or hire, any transferred employee or any employee of Alkermes or any of its subsidiaries who is employed on the date of the merger agreement or at the effective time, other than such employees whose employment has been terminated by New Alkermes and its subsidiaries and other than general solicitations of employment not targeted specifically to such employees. | |
• | Alkermes and Elan have agreed that all rights to exculpation, indemnification and advancement of expenses for acts or omissions occurring at or prior to the completion of the business combination now existing in favor of the current or former directors, officers or employees of Alkermes or its subsidiaries or of New Alkermes or its subsidiaries shall survive the completion of the business combination and remain in full force and effect. Alkermes and Elan have agreed to use their respective reasonable best efforts to cause New Alkermes or one of its subsidiaries to enter into agreements effective as from the effective time with the directors, company secretary and officers of New Alkermes providing such individuals with such exculpation, indemnification and advancement of expenses to the extent permitted by applicable law. | |
• | Alkermes has entered into a debt commitment letter with MSSF and HSBC, pursuant to which MSSF and HSBC have committed, subject to customary conditions as further described below, to provide the First-Lien Term Loan Facility and the Second-Lien Term Loan Facility. The term of the First-Lien Term Loan Facility is six years and the term of the Second-Lien Term Loan Facility is seven years. The newly committed financing, in addition to existing cash balances, will be used to fund the cash portion of the merger consideration, to repay and redeem existing indebtedness of Alkermes and New Alkermes and their respective subsidiaries, if any, and to pay transaction fees and expenses. The debt financing commitments are available until November 5, 2011 and are subject to: |
• | consummation of the merger in accordance with the merger agreement, prior to or substantially simultaneously with the funding of the Term Loan Facilities; | |
• | the absence of a “Business Material Adverse Effect” (as defined in the merger agreement) since December 31, 2010; | |
• | the execution and delivery of definitive loan documentation for the Term Loan Facilities, including, but not limited to, credit agreements, security agreements and guaranties; | |
• | delivery of certain historical and pro forma financial information for Alkermes and EDT; | |
• | a 20-business-day period (with customary black-out dates) for marketing and syndication of the Term Loan Facilities after delivery by Alkermes of a confidential information memorandum relating to the Term Loan Facilities; and | |
• | other customary financing conditions. |
• | In the merger agreement, Alkermes has agreed to use its reasonable best efforts to obtain debt financing on the terms and conditions described in the debt commitment letter. Alkermes may amend, replace, supplement or otherwise modify, or waive its rights under the debt commitment letter, unless such amendment, replacement, supplement, modification or waiver would (A) expand upon the conditions precedent or contingencies to the financing commitment as set forth in the commitment letter or (B) would reasonably be expected to impair, materially delay or prevent the availability of the financing commitmentand/or the consummation of the business combination. Alkermes is further permitted to reduce the aggregate amount of the financing commitment, subject to (A) and (B) above, and provided that such a reduction would not reduce the committed amount of the financing commitment to an amount below the amount that is required, together with the financial resources of Alkermes (including its cash on hand), to pay the cash portion of the merger consideration. |
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• | Alkermes’ obligations under the Term Loan Facilities will be guaranteed by New Alkermes, certain of its direct and indirect wholly-owned subsidiaries, including certain direct and indirect wholly-owned U.S. subsidiaries of Alkermes, and will be secured by substantially all the assets of Alkermes and the guarantors. |
• | Elan and New Alkermes have agreed to the following relating to the employees of Elan and its subsidiaries who will be transferred to New Alkermes as a result of the business combination: |
• | New Alkermes will maintain a performance-based bonus plan for the benefit of the transferred employees for calendar year 2011 pursuant to which New Alkermes will pay bonuses to the transferred employees that are no less than the sum of (A) the accrued bonus amounts under the Elan performance-based bonus plan prior to the closing date of the merger and (B) an additional amount based on the actual results of New Alkermes and its affiliates, on a consolidated basis, from the closing date of the merger through December 31, 2011, that is consistent with each transferred employee’s bonus opportunity under the Elan performance-based bonus plan. | |
• | New Alkermes will credit transferred employees with (A) prior service with Elan for purposes of eligibility and vesting, and solely for purposes of any vacation pay plan and stock option accelerated vesting and extended exercise period, for benefit accrual purposes and (B) the amount of deductibles borne by transferred employees (on an individual basis) prior to the closing date of the merger under any welfare benefit plan for purposes of satisfying the deductible limitation under each New Alkermes employee plan maintained after the closing date of the merger that is a corresponding welfare benefit plan. | |
• | New Alkermes will, and will cause its subsidiaries to, continue to provide, for one year following the closing date of the merger, all U.S. transferred employees with (A) base compensation that is no less than the base compensation such employees received prior to the closing date of the merger and (B) benefits under employee benefit plans that are no less favorable in the aggregate than the benefits such employees received prior to the closing date of the merger or, at the election of New Alkermes, benefits that are no less favorable in the aggregate than those provided to similarly situated employees of Alkermes, in each case excluding equity compensation. | |
• | Elan will, and will cause its subsidiaries to, ensure that accounts for the U.S. transferred employees under the Elan 401(k) defined contribution plan qualified under section 401(a) of the Code are distributed and eligible for rollover into the New Alkermes defined contribution plan. New Alkermes will, and will cause its subsidiaries to, provide for receipt of such rollovers. | |
• | Elan and New Alkermes agree that Elan will remain responsible for the obligations under the Consolidated Omnibus Budget Reconciliation Act, which is referred to in this proxystatement/prospectus as COBRA (healthcare continuation), for any qualifying event arising prior to the effective time with respect to U.S. transferred employees and New Alkermes will be responsible for any such obligations with respect to any qualifying event arising after the effective time with respect to such employees. | |
• | Elan and New Alkermes will cause to be delivered to the Irish transferred employees letters and notices notifying the employees of the transfer of their employment under applicable Irish law. | |
• | New Alkermes will, and will cause its subsidiaries to, continue to provide, for one year following the closing date of the merger, all Irish transferred employees with (A) base compensation that is no less than the base compensation such employees received prior to the closing date of the merger and (B) benefits under employee benefit plans that are required to be continued after the effective time under Irish law and that are no less favorable in the aggregate than the benefits such employees received prior to the official employment transfer date under Irish law (excluding equity compensation), except that in respect of pension and death benefits, the benefits that are required to be continued shall be no less favorable overall than the benefits provided under the Elan Defined Contribution Plan for Staff. |
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• | Elan will, and will cause its subsidiaries to, ensure all salaries, wages, and all other employer obligations related to Irish transferred employees are discharged or accrued and all tax deductions and pay-related social insurance obligations related to the employees are complied with and made by Elan and its subsidiaries for all periods prior to the closing date of the merger. |
• | Elan and New Alkermes have agreed to the following relating to tax matters: |
• | Elan will file or cause to be filed any combined, consolidated or unitary tax return that includes Elan or any continuing affiliates of Elan after the effective time for any tax period, and any tax returns of New Alkermes or its subsidiaries for taxable periods ending on or prior to the effective time. New Alkermes will file or cause to be filed all other tax returns of New Alkermes or its subsidiaries, subject to the consent of Elan for all such tax returns that include taxes attributable to periods on or prior to the effective time. | |
• | The parties have agreed to (A) provide cooperation, documentation and information reasonably requested by the other party in connection with the filing of a tax return or claim for a refund of taxes, determining a tax liability or indemnification obligation with respect to taxes, conducting any audit, examination, contest, litigation or other proceeding involving a taxing authority, and determining the allocation of tax liabilities to periods on or before, and after, the effective time and (B) retain all material records relating to tax matters. | |
• | New Alkermes and its affiliates, on the one hand, and Elan and its affiliates after the effective time, on the other hand, agreed to terminate any and all tax allocation or sharing agreements, and other agreements relating to tax matters, among themselves, as of the day before the closing date. | |
• | Elan shall have the right to control any audit, examination, contest, litigation or other proceeding involving a taxing authority in respect of New Alkermes or its affiliates for taxable periods ending on or before the effective time, the portion of any other taxable period ending on or before the effective time if the proceeding relates to a matter that is indemnifiable under the merger agreement, and certain other specified matters. Alkermes shall have the right to control all other proceedings in respect of such entities. | |
• | New Alkermes has agreed not to dispose of shares in Elan Science 4 Limited if such disposition would cause a clawback of certain Irish stamp duty relief granted in respect of a transfer of such shares in the reorganization. | |
• | EDT Pharma Holdings Limited has agreed to certain other restrictions to preserve the benefits sought to be obtained by the reorganization. |
• | the adoption of the merger agreement by the Alkermes shareholders; | |
• | the absence of any law, order or injunction enacted, issued or promulgated by any court or government entity that is in effect and restrains or enjoins or otherwise prohibits consummation of the merger or the reorganization; | |
• | the expiration or termination of the waiting period applicable to the merger under the HSR Act and the filing or receipt of all other governmental authorizations required to be made or obtained by Elan or Alkermes other than those the failure of which to make or obtain would not, individually or in the aggregate, be reasonably likely to have a material adverse effect with respect to EDT; | |
• | the authorization for listing on NASDAQ of the New Alkermes ordinary shares to be issued in the merger, subject to official notice of issuance; |
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• | the effectiveness of the registration statement of which this proxy statement/prospectus is a part, the absence of a stop order issued by the SEC suspending the effectiveness of that registration statement and the absence of any proceedings initiated for that purpose by the SEC; | |
• | all Irish financial assistance issues arising in respect of the reorganization shall have been validated in accordance with Section 60 of the Irish Companies Act 1963 and filed with the Irish Companies Registration Office; and | |
• | New Alkermes shall have been re-registered as a public limited company in accordance with the provisions of the Irish Companies (Amendment) Act 1983 and a certificate of incorporation on re-registration to this effect from the Irish Companies Registration Office shall have been provided to Alkermes. |
• | the accuracy of the representations and warranties made by Elan, without regard to any materiality qualifier contained therein, in each case, as of the date of the merger agreement and as of the date of completion of the business combination, except where any inaccuracy would not, individually or in the aggregate with any other such inaccuracy, have a material adverse effect with respect to EDT; | |
• | material compliance by Elan and certain of its subsidiaries with their respective obligations under the merger agreement; | |
• | the reorganization shall have been effected; | |
• | New Alkermes and its subsidiaries shall have no indebtedness as of the date of completion of the business combination other than indebtedness related to the reorganization; | |
• | the audited combined financial statements of EDT delivered pursuant to the merger agreement containing balance sheets as of December 31, 2010, 2009 and 2008, and the statements of operations and of cash flows of EDT for each of the fiscal years in the three-year period ended December 31, 2010, in each case prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods involved and audited in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), shall not have differed in any material respect from the historical financial statements provided by Elan to Alkermes on or prior to the date of the merger agreement, other than in respect of the differing accounting standards under which they were prepared and any applicable agreed adjustments; | |
• | the execution and delivery by Elan and its subsidiaries to the extent applicable of the ancillary agreements including (i) a duly executed counterpart of the shareholder’s agreement, (ii) counterparts to the IP transfer agreement and IP transfer loan note, effective as of immediately prior to the closing, and (iii) such other documents, instruments and certificates as Alkermes may reasonably request; | |
• | there shall have been no change in law with respect to Section 7874 of the Code, or official interpretation thereof, that in the opinion of nationally recognized tax counsel, would materially increase the risk that New Alkermes would be treated as a United States domestic corporation for United States federal tax purposes; | |
• | the general release and discharge from Elan, on behalf of itself and its subsidiaries, executed and delivered to New Alkermes releasing and discharging New Alkermes and its subsidiaries from any and all liabilities to Elan or any of its subsidiaries or any of their respective officers, directors and employees or agents, in such capacity, at or prior to the effective time, except to the extent such liabilities are expressly contemplated to be retained or assumed by New Alkermes or its subsidiaries pursuant to the merger agreement; and | |
• | delivery of (i) certificates or notarial assignment deeds for, or such other instruments evidencing ownership by New Alkermes (directly or indirectly) under applicable law of, the purchased interests and all other outstanding equity of New Alkermes and its subsidiaries which constitute and will |
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constitute as of the closing of the merger, 100% of the issued and outstanding shares of capital stock or other equity interests of New Alkermes and its subsidiaries, in each case with appropriate stock powers or other instruments of transfer and requisite tax stamps (including Irishe-stamping certificates) attached and properly signed (and, in the event that the reorganization includes the transfer of assetsand/or assumption of liabilities by New Alkermes and its subsidiaries such other documentation as may be reasonably requested by Alkermes to reflect the transfer of such assets and liabilities to New Alkermes or the applicable subsidiary of New Alkermes) and, in the case of any Irish incorporated company, share registers showing the correct legal ownership of shares in such company; (ii) a bill of sale or other appropriate document of transfer, in form and substance reasonably acceptable to Alkermes, transferring certain assets designated by Elan and Alkermes; (iii) all transferred books and records, if any, in the possession of Elan to the extent not then in the custody of New Alkermes and its subsidiaries or located on the premises of New Alkermes and its subsidiaries, other than transferred books and records that are not reasonably practicable to deliver at the closing of the merger; (iv) counterparts to the IP transfer agreement and IP transfer loan note; (v) documentation reasonably satisfactory to Alkermes evidencing the payment in full of the Elan reorganization indebtedness; (vi) resignations in agreed form effective as of the effective time of those directors and officers of New Alkermes and its subsidiaries; (vii) a receipt acknowledging payment of the cash payment in full satisfaction of the Elan reorganization indebtedness (but subject to any further obligations contained in this Agreement); (viii) any written releases obtained by Elan pursuant to letters of credit and letters of comfort disclosed to Alkermes by Elan; and (ix) such other documents, instruments and certificates as Alkermes may reasonably request in connection with the transactions contemplated by the merger agreement or any ancillary agreements. |
• | the accuracy of the representations and warranties made by Alkermes and its subsidiaries without regard to any materiality qualifier contained therein, in each case, as of the date of the merger agreement and as of the date of completion of the business combination, except where any inaccuracy would not, individually or in the aggregate with any other such inaccuracy, have a material adverse effect with respect Alkermes; | |
• | material compliance by Alkermes with its obligations under the merger agreement; | |
• | the execution and delivery by Alkermes and its subsidiaries to the extent applicable of the ancillary agreements including (i) a duly executed counterpart of the shareholder’s agreement, (ii) counterparts to the IP transfer agreement and IP transfer loan note, effective as of immediately prior to the closing, and (iii) such other documents, instruments and certificates as Elan may reasonably request; | |
• | the general release and discharge from New Alkermes, on behalf of itself and its subsidiaries, executed and delivered to Elan releasing and discharging Elan and its subsidiaries from any and all liabilities to New Alkermes or any of its subsidiaries or any of their respective officers, directors and employees or agents, in such capacity, at or prior to the effective time, except to the extent such liabilities are expressly contemplated to be retained or assumed by Elan or its subsidiaries pursuant to the merger agreement; and | |
• | the payment by wire transfer from or on behalf of Alkermes, New Alkermes or their respective subsidiaries, as applicable, of immediately available funds in an amount equal to $500 million subject to certain adjustments, in full and final satisfaction of the Elan reorganization indebtedness. |
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• | any inaccuracy in or breach of any of the representations and warranties of Elan contained in the merger agreement or any ancillary agreement or of any breach or nonfulfillment of any covenants or agreements of Elan or any of its subsidiaries contained in the merger agreement or any ancillary agreement (as defined in the merger agreement); | |
• | any liability or obligation of any of New Alkermes or any of its subsidiaries (including Alkermes) arising from or relating to the excluded assets or any business or conduct of such entity prior to the effective time other than the EDT business; | |
• | except as specifically set forth in the merger agreement, (A) the employment of any employee or consultant by Elan or its subsidiaries in respect of EDT prior to the effective time, (B) otherwise in respect of employee matters as a result of the business combination, including (X) any benefit in the nature of severance pay arising from the consummation of the business combination, (Y) with respect to any employee or consultant whose employment or consulting service is transferred (or who claims that his or her employment or consulting service is transferred) pursuant to the European Communities (Protection of Employees of Transfer of Undertakings) Transfer Regulations, 2003 Transfer Regulations, which are referred to in this proxy statement/prospectus as the Transfer Regulations, arising out of any failure by Elan or any of its subsidiaries to comply with obligations under the Transfer Regulations, or (Z) arising from any claim by or on behalf of any person, other than certain employees in Ireland disclosed by Elan to Alkermes as of the date of the merger agreement, who asserts that he or she is entitled to transfer to the employment of New Alkermes or a subsidiary thereof whether pursuant to the Transfer Regulations or otherwise, including all costs, to include remuneration costs, incurred as a result of New Alkermes or a subsidiary thereof being compelled to employ such person as a result of any such claim, (C) other than a claim for pension or death benefit entitlements in respect of service after the effective time, any matter or thing related to certain Irish defined benefit plans and any action or omission of Elan or any of its subsidiaries with respect to employees, or related to any Elan employee plan other than certain Irish defined benefit plans or (D) any liabilities of Elan or any entity that is treated as a single employer with Elan for purposes of certain provisions of ERISA or the Code; | |
• | any and all non-compliance with environmental laws or environmental licenses by or in respect of, any actions pursuant to environmental laws against, any liability resulting from release of or handling of hazardous substances, or any remediation required by environmental law in respect of, EDT, New Alkermes or its subsidiaries or the additional assets to the extent attributable to events, acts, failures to act or conditions which occurred or existed prior to or at the effective time, actions pursuant to environmental laws; | |
• | the excluded assets; | |
• | any pre-closing taxes of New Alkermes or those subsidiaries of Elan to be contributed to New Alkermes, taxes incurred in connection with Elan’s reorganization, and any taxes that may be imposed on Elan or any of its affiliates other than those affiliates contributed to New Alkermes, or New Alkermes, for which any of New Alkermes or its subsidiaries may be held liable as successor, transferee, on a joint and several basis, by contract, or otherwise; |
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• | the reorganization, including as a result of any failure to seek or obtain a ruling or other relief from any governmental authority in respect of the reorganization, and | |
• | actions or claims by transferred employees relating to or arising from Elan’s stock option plans. |
• | any inaccuracy in or breach of any of the representations and warranties of Alkermes contained in the merger agreement or any ancillary agreement or of any breach or nonfulfillment of any covenants or agreements of Alkermes or, solely in respect of covenants or agreements to be performed after the effective time, by New Alkermes or any of its subsidiaries, contained in the merger agreement or any ancillary agreement; | |
• | any liability or obligation of any of New Alkermes or any of its subsidiaries (including Alkermes) arising from or relating to the assets primarily used or held for use in EDT other than the excluded assets, other than any liability for which the Elan indemnified parties have indemnified the Alkermes indemnified parties, or intellectual property rights transferred to a subsidiary of New Alkermes pursuant to the IP Transfer Agreement; | |
• | any action taken by Elan or its subsidiaries to provide for the governance of New Alkermes and its subsidiaries at the request of Alkermes prior to the effective time; or | |
• | (A) the employment of any employee or consultant by New Alkermes or its subsidiaries in respect of EDT after the effective time, including (X) any benefit in the nature of severance pay arising from the consummation of the business combination, (Y) with respect to any employee or consultant whose employment or consulting service is transferred (or who claims that his or her employment or consulting service is transferred) pursuant to the Transfer Regulations, arising out of any failure by Alkermes or any of its subsidiaries to comply with obligations under the Transfer Regulations from and after the effective time, including all costs, to include remuneration costs, incurred as a result of Elan being compelled to provide severance or to re-employ any such person or (Z) any claim to pension or death benefits in respect of services after the effective time, or (B) any action or omission of Alkermes or any of its subsidiaries with respect to employees, or related to any employment, severance or similar plan or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock option, or other stock-related rights or other forms of incentive or deferred compensation, perquisites, vacation benefits, disability benefits and post-employment or retirement benefits maintained for the benefit of transferred employees in respect of service after the effective time by New Alkermes or any subsidiary thereof. |
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As of and for the Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Total revenue | $ | 274,119 | $ | 275,886 | $ | 301,561 | $ | 295,495 | $ | 282,143 | ||||||||||
Operating income | $ | 60,928 | (1) | $ | 71,086 | (2) | $ | 85,782 | $ | 84,768 | (3) | $ | 118,573 | (4) | ||||||
Net income | $ | 48,889 | (1) | $ | 48,380 | (2) | $ | 60,522 | $ | 61,048 | (3) | $ | 96,751 | (4) | ||||||
Balance Sheet Data (at year end): | ||||||||||||||||||||
Total Assets | $ | 344,765 | $ | 369,049 | $ | 428,575 | $ | 436,180 | $ | 479,702 | ||||||||||
Total invested equity | $ | 305,215 | $ | 333,013 | $ | 396,207 | $ | 403,770 | $ | 428,784 |
(1) | Includes other net charges of $2.3 million, primarily relating to severance, restructuring and other costs. | |
(2) | Includes other net charges of $5.7 million, primarily relating to severance, restructuring and other costs. | |
(3) | Includes other net charges of $3.6 million, primarily relating to severance, restructuring and other costs. | |
(4) | Includes other net gains of $46.6 million, primarily relating to an arbitration award of $49.8 million, offset in part by severance, restructuring and other costs of $3.2 million. |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Product revenue | $ | 261,420 | $ | 257,199 | $ | 281,557 | ||||||
Contract revenue | 12,699 | 18,687 | 20,004 | |||||||||
Total revenue | 274,119 | 275,886 | 301,561 | |||||||||
Cost of sales | 118,379 | 116,251 | 123,654 | |||||||||
Gross margin | 155,740 | 159,635 | 177,907 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative expenses | 38,933 | 35,919 | 44,534 | |||||||||
Research and development expenses | 53,579 | 46,961 | 47,591 | |||||||||
Other net charges | 2,300 | 5,669 | — | |||||||||
Total operating expenses | 94,812 | 88,549 | 92,125 | |||||||||
Operating income | 60,928 | 71,086 | 85,782 | |||||||||
Net interest (income)/expense | (575 | ) | 1,824 | (538 | ) | |||||||
Net income before income taxes | 61,503 | 69,262 | 86,320 | |||||||||
Provision for income taxes | 12,614 | 20,882 | 25,798 | |||||||||
Net income | $ | 48,889 | $ | 48,380 | $ | 60,522 | ||||||
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2010 | 2009 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Manufacturing revenue (includes royalties on manufactured products): | ||||||||||||
Ampyra | $ | 56,781 | $ | 17 | $ | — | ||||||
Focalin XR/Ritalin® LA | 32,998 | 32,617 | 33,468 | |||||||||
Verelan® | 21,824 | 22,085 | 24,601 | |||||||||
Naprelan® | 12,615 | 15,955 | 11,083 | |||||||||
Avinza | 12,027 | 12,624 | 13,388 | |||||||||
Diltiazem | 7,617 | 7,504 | 13,674 | |||||||||
Zanaflex | 5,944 | 11,559 | 12,741 | |||||||||
Rapamune | 5,940 | 6,600 | 4,960 | |||||||||
Luvox CR | 3,955 | 2,584 | 7,450 | |||||||||
Cymbalta®(1) | 2,778 | 14,367 | 13,360 | |||||||||
Other | 7,555 | 9,542 | 15,825 | |||||||||
Total manufacturing revenue | 170,034 | 135,454 | 150,550 | |||||||||
Royalty revenue: | ||||||||||||
TriCor 145 | 54,459 | 61,635 | 67,697 | |||||||||
Skelaxin®(2) | 5,930 | 34,901 | 39,709 | |||||||||
Megace® ES | 8,207 | 8,959 | 9,791 | |||||||||
Invega Sustenna | 7,656 | 1,667 | — | |||||||||
Emend®(3) | 8,347 | 7,939 | 7,070 | |||||||||
Other | 6,787 | 6,644 | 6,740 | |||||||||
Total royalty revenue | 91,386 | 121,745 | 131,007 | |||||||||
Total product revenue | $ | 261,420 | $ | 257,199 | $ | 281,557 | ||||||
(1) | Cymbalta is a registered trademark of Eli Lilly and Company. |
(2) | Skelaxin is a registered trademark of King Pharmaceuticals Research and Development, Inc. |
(3) | Emend is a registered trademark of Merck Sharp & Dohme Corporation. |
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• | In March 2010, EDT’s partner, Acorda, launchedAmpyrafollowing its approval by the FDA in late January 2010 as a treatment to improve walking abilities of patients with MS.Ampyra is marketed and distributed in the United States by Acorda and outside the United States, where it is calledFampyra(prolonged-release fampridine tablets), it will be marketed and distributed by Biogen Idec.Ampyrais the first New Drug Application, which is referred to as NDA in this proxy statement/prospectus, approved by the FDA for a product using EDT’s MXDAS® (matrix drug absorption system) technology and is the first medicine approved by the FDA indicated to improve walking speed in people with MS. | |
• | In January 2010, Biogen Idec announced the submission of a Marketing Authorization Application (MAA) to the EMA forFampyra. Biogen Idec also announced that it has filed a New Drug Submission (NDS) with Health Canada. In January 2011, the CHMP of the EMA issued a negative opinion, recommending against approval ofFampyra.Biogen Idec appealed this opinion and requested a re-examination of the decision of the CHMP. In May 2011, the CHMP of the EMA recommended conditional marketing authorization ofFampyra. In May 2011,Fampyra was approved for use in Australia by the Australian Therapeutic Goods Administration. Biogen Idec also received a notice of deficiency from Health Canada for its application to sellFampyrain Canada. EDT has the right to manufacture supplies ofAmpyrafor the global market at its Athlone, Ireland facility. | |
• | In 2010, the hydrocodone ER product (ZX002) from EDT’s U.S. partner, Zogenix, Inc., which is referred to as Zogenix in this proxy statement/prospectus, progressed in Phase 3 clinical trials. By the end of 2010, the enrollment of the twelve-month safety study, which is referred to as Study 802 in this proxy statement/prospectus, was completed and the twelve-week doubleblind, placebo controlled efficacy study was underway with full enrollment completed in February 2011. Pending positive clinical results, Zogenix expects to submit an NDA to the FDA by early 2012. ZX002 is a novel controlled release formulation of hydrocodone, developed by EDT using its SODAS® (spheroidal oral drug absorption system) technology and is in clinical trials for the treatment of moderate to severe chronic pain in individuals who require continuous opioid treatment for pain management. | |
• | In March 2011, EDT’s partner Janssen Pharmaceutical N.V. announced the approval ofXeplion®, a once monthly atypical antipsychotic injection, by the European Commission. This is the first European approval of an injectible product using EDT’sNanoCrystaltechnology.Xeplion ismarketed in the United States under the nameInvega Sustenna. Other regulatory advances included approvals for new strengths forFocalin XR (25mg and 35mg) in the United States, andMorphelan® filed in the European Union by Elan. |
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Net income | $ | 48,889 | $ | 48,380 | $ | 60,522 | ||||||
Net interest (income)/expense | (575 | ) | 1,824 | (538 | ) | |||||||
Provision for income taxes | 12,614 | 20,882 | 25,798 | |||||||||
Depreciation and amortization | 32,554 | 33,161 | 35,915 | |||||||||
Amortized fees, net | (180 | ) | 34 | (2,498 | ) | |||||||
EBITDA | $ | 93,302 | $ | 104,281 | $ | 119,199 | ||||||
Share-based compensation expense | 7,929 | 7,176 | 9,865 | |||||||||
Other net charges | 2,300 | 5,669 | — | |||||||||
Adjusted EBITDA | $ | 103,531 | $ | 117,126 | $ | 129,064 | ||||||
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Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 48,889 | $ | 48,380 | $ | 60,522 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Amortization of deferred revenue | (180 | ) | 34 | (2,498 | ) | |||||||
Depreciation and amortization | 32,554 | 33,161 | 35,915 | |||||||||
Share-based compensation | 7,929 | 7,176 | 9,865 | |||||||||
(Recognition)/utilization of deferred tax asset | (1,037 | ) | 224 | 202 | ||||||||
Excess tax benefit from share-based compensation | — | — | (1,567 | ) | ||||||||
Other | — | 639 | 1,222 | |||||||||
Net changes in assets and liabilities: | ||||||||||||
(Increase)/decrease in accounts receivable | (1,678 | ) | 42,480 | (18,855 | ) | |||||||
Decrease/(increase) in prepaid and other assets | 403 | (1,948 | ) | 4,655 | ||||||||
Decrease/(increase) in inventory | 8,172 | (5,882 | ) | (1,371 | ) | |||||||
Increase in accounts payable and accruals and other liabilities | 4,439 | 3,821 | 2,486 | |||||||||
Net cash provided by operating activities | 99,491 | 128,085 | 90,576 | |||||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from disposal of property, plant and equipment | 44 | 26 | — | |||||||||
Purchase of property, plant and equipment | (15,108 | ) | (9,774 | ) | (11,696 | ) | ||||||
Purchase of intangible assets | (301 | ) | (96 | ) | (930 | ) | ||||||
Net cash used in investing activities | (15,365 | ) | (9,844 | ) | (12,626 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Excess tax benefit from share-based compensation | — | — | 1,567 | |||||||||
Net funding transfer to Elan | (84,126 | ) | (118,241 | ) | (79,517 | ) | ||||||
Net cash used in financing activities | $ | (84,126 | ) | $ | (118,241 | ) | $ | (77,950 | ) | |||
Net increase/(decrease) in cash and cash equivalents | — | — | — | |||||||||
Cash and cash equivalents at beginning of year | — | — | — | |||||||||
Cash and cash equivalents at end of year | — | — | — | |||||||||
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Less than | 1-3 | 3-5 | More than | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating lease obligations | $ | 17,291 | $ | 1,931 | $ | 3,945 | $ | 3,731 | $ | 7,684 | ||||||||||
Purchase obligations(1) | 7,208 | 7,208 | — | — | — | |||||||||||||||
Total contractual obligations | $ | 24,499 | $ | 9,139 | $ | 3,945 | $ | 3,731 | $ | 7,684 | ||||||||||
(1) | Includes all open purchase orders as of December 31, 2010 for capital and operating expenditures. Excludes capital expenditures of $2.2 million that had been authorized by the directors of Elan for EDT and had not been contracted for as of December 31, 2010. |
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Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Euro | $ | (10,224 | ) | $ | (8,020 | ) | ||
Sterling | — | (396 | ) | |||||
Total | $ | (10,224 | ) | $ | (8,416 | ) | ||
Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Euro | $ | 1,022 | $ | 802 | ||||
Sterling | — | 40 | ||||||
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Elan Drug | New | |||||||||||||||||||
Technologies | Alkermes | |||||||||||||||||||
Alkermes, Inc. | December 31, | Pro Forma | Pro Forma | |||||||||||||||||
March 31, 2011 | 2010 | Adjustments | Notes | Combined | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 38,394 | $ | — | $ | — | $ | 38,394 | ||||||||||||
Investments — short-term | 162,928 | — | (50,000 | ) | (A | ) | 112,928 | |||||||||||||
Receivables | 22,969 | 60,030 | (600 | ) | (M | ) | 82,399 | |||||||||||||
Inventory | 20,425 | 18,296 | 6,300 | (C | ) | 45,021 | ||||||||||||||
Deferred tax assets — current | — | 1,555 | (1,555 | ) | (L | ) | — | |||||||||||||
Prepaid expenses and other current assets | 8,244 | 3,071 | (236 | ) | (M | ) | 11,079 | |||||||||||||
Total Current Assets | 252,960 | 82,952 | (46,091 | ) | 289,821 | |||||||||||||||
INTANGIBLE ASSETS, NET | — | 3,654 | 713,100 | (D | ) | 713,100 | ||||||||||||||
— | — | (3,654 | ) | (H | ) | |||||||||||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 95,020 | 203,415 | 13,277 | (C | ) | 311,712 | ||||||||||||||
INVESTMENTS — LONG TERM | 93,408 | — | — | 93,408 | ||||||||||||||||
GOODWILL | — | 49,684 | 81,645 | (D | ) | 81,645 | ||||||||||||||
— | — | (49,684 | ) | (H | ) | |||||||||||||||
OTHER ASSETS | 11,060 | 5,060 | 10,800 | (B | ) | 26,720 | ||||||||||||||
— | — | (200 | ) | (M | ) | |||||||||||||||
TOTAL ASSETS | $ | 452,448 | $ | 344,765 | $ | 719,193 | $ | 1,516,406 | ||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Accounts payable and accrued expenses | $ | 44,934 | $ | 27,950 | $ | 10,800 | (B | ) | $ | 78,146 | ||||||||||
— | — | (5,538 | ) | (M | ) | |||||||||||||||
Deferred revenue — current | 3,123 | 425 | (425 | ) | (I | ) | 3,123 | |||||||||||||
Deferred tax liabilities — current | — | — | 551 | (L | ) | 551 | ||||||||||||||
Total current liabilities | 48,057 | 28,375 | 5,388 | 81,820 | ||||||||||||||||
DEBT — LONG-TERM | — | — | 450,000 | (B | ) | 450,000 | ||||||||||||||
DEFERRED REVENUE — LONG-TERM | 4,837 | — | — | 4,837 | ||||||||||||||||
DEFERRED TAX LIABILITY | — | 1,338 | 47,874 | (L | ) | 49,212 | ||||||||||||||
OTHER LONG-TERM LIABILITIES | 7,536 | 9,837 | (8,152 | ) | (K | ) | 8,660 | |||||||||||||
— | — | (561 | ) | (M | ) | |||||||||||||||
TOTAL LIABILITIES | 60,430 | 39,550 | 494,549 | 594,529 | ||||||||||||||||
SHAREHOLDERS’ EQUITY: | ||||||||||||||||||||
Common stock | 1,055 | — | 319 | (A | ) | 1,374 | ||||||||||||||
Non-voting common stock | 4 | — | — | 4 | ||||||||||||||||
Treasury stock, at cost | (131,095 | ) | — | — | (131,095 | ) | ||||||||||||||
Additional paid-in capital | 936,295 | 305,215 | 529,540 | (A | ) | 1,465,835 | ||||||||||||||
— | — | (305,215 | ) | (J | ) | |||||||||||||||
Accumulated other comprehensive loss | (3,013 | ) | — | — | (3,013 | ) | ||||||||||||||
Accumulated deficit | (411,228 | ) | — | — | (411,228 | ) | ||||||||||||||
TOTAL SHAREHOLDERS’ EQUITY | 392,018 | 305,215 | 224,644 | 921,877 | ||||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 452,448 | $ | 344,765 | $ | 719,193 | $ | 1,516,406 | ||||||||||||
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Twelve Months Ended | ||||||||||||||||||||
Elan Drug | New | |||||||||||||||||||
Technologies | Alkermes | |||||||||||||||||||
Alkermes, Inc. | December 31, | Pro Forma | Pro Forma | |||||||||||||||||
March 31, 2011 | 2010 | Adjustments | Notes | Combined | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
REVENUES: | ||||||||||||||||||||
Manufacturing revenues | $ | 118,521 | $ | 170,034 | $ | — | $ | 288,555 | ||||||||||||
Royalty revenues | 38,319 | 91,386 | — | 129,705 | ||||||||||||||||
Product sales, net | 28,920 | — | — | 28,920 | ||||||||||||||||
Research and development revenue | 880 | 12,699 | — | 13,579 | ||||||||||||||||
Total revenues | 186,640 | 274,119 | — | 460,759 | ||||||||||||||||
EXPENSES: | ||||||||||||||||||||
Cost of goods manufactured and sold | 52,185 | 118,379 | — | 165,012 | ||||||||||||||||
— | — | 6,102 | (G | ) | ||||||||||||||||
— | — | (11,654 | ) | (H | ) | |||||||||||||||
Research and development | 97,239 | 53,579 | (513 | ) | (H | ) | 132,783 | |||||||||||||
— | — | (17,522 | ) | (M | ) | |||||||||||||||
Selling, general and administrative | 82,847 | 38,933 | (1,115 | ) | (F | ) | 116,301 | |||||||||||||
— | — | (18 | ) | (H | ) | |||||||||||||||
— | — | (4,346 | ) | (M | ) | |||||||||||||||
Amortization of intangible assets | — | — | 45,958 | (E | ) | 45,958 | ||||||||||||||
Restructuring | — | 2,300 | — | 2,300 | ||||||||||||||||
Total Expenses | 232,271 | 213,191 | 16,892 | 462,354 | ||||||||||||||||
OPERATING (LOSS) INCOME | (45,631 | ) | 60,928 | (16,892 | ) | (1,595 | ) | |||||||||||||
OTHER (EXPENSE) INCOME: | ||||||||||||||||||||
Interest income | 2,728 | — | — | 2,728 | ||||||||||||||||
Interest expense | (3,298 | ) | — | (34,000 | ) | (B | ) | (39,458 | ) | |||||||||||
— | — | (2,160 | ) | (B | ) | |||||||||||||||
Other (expense) income, net | (290 | ) | 575 | — | 285 | |||||||||||||||
Total other expense, net | (860 | ) | 575 | (36,160 | ) | (36,445 | ) | |||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | (46,491 | ) | 61,503 | (53,052 | ) | (38,040 | ) | |||||||||||||
(BENEFIT) PROVISION FOR INCOME TAXES | (951 | ) | 12,614 | (12,195 | ) | (L | ) | (532 | ) | |||||||||||
NET (LOSS) INCOME | $ | (45,540 | ) | $ | 48,889 | $ | (40,857 | ) | $ | (37,508 | ) | |||||||||
(LOSS) PER COMMON SHARE | ||||||||||||||||||||
BASIC | $ | (0.48 | ) | $ | — | $ | (1.28 | ) | $ | (0.29 | ) | |||||||||
DILUTED | $ | (0.48 | ) | $ | — | $ | (1.28 | ) | $ | (0.29 | ) | |||||||||
SHARES USED IN CALCULATING BASIC AND DILUTED LOSS PER COMMON SHARE | 95,610 | — | 31,900 | (A | ) | 127,510 | ||||||||||||||
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1. | Description of Transaction and Basis of Presentation |
2. | Purchase Price |
Upfront payment in accordance with agreement | $ | 500,000 | ||
Equity consideration in accordance with agreement | 529,859 | |||
Total estimated purchase price | $ | 1,029,859 | ||
Receivables | $ | 59,430 | ||
Inventory | 24,596 | |||
Prepaid expenses and other assets | 2,835 | |||
Property plant and equipment | 216,692 | |||
Acquired identifiable intangible assets, net | 713,100 | |||
Goodwill | 81,645 | |||
Other assets | 4,860 | |||
Accounts payable and accrued expenses | (22,412 | ) | ||
Deferred tax liabilities | (49,763 | ) | ||
Other long-term liabilities | (1,124 | ) | ||
Total | $ | 1,029,859 | ||
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Collaboration agreements | $ | 510,300 | ||
NanoCrystal technology | 76,300 | |||
Oral Controlled Release technology | 69,000 | |||
In-process research and development | 54,300 | |||
Trademark | 3,200 | |||
Total | $ | 713,100 | ||
3. | Pro Forma Adjustments |
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4. | Forward-Looking Statements |
5. | Comparative Per Share Data |
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Alkermes, Inc. | ||||||||
Year Ended March 31, | ||||||||
2011 | ||||||||
Historical | Pro Forma | |||||||
(LOSS) PER COMMON SHARE: | ||||||||
BASIC | $ | (0.48 | ) | $ | (0.29 | ) | ||
DILUTED | $ | (0.48 | ) | $ | (0.29 | ) | ||
SHARES USED IN CALCULATING BASIC AND DILUTED LOSS PER COMMON | 95,610 | 127,510 |
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• | enhancing oral bioavailability; | |
• | increased therapeutic effectiveness; | |
• | reducing/eliminating fed/fasted variability; | |
• | sustaining duration of IV/IM release; and | |
• | optimizing delivery. |
Trademark | ||||||||
Marketer | Product | Registered by | Indication | Territory | ||||
Merck Inc. | Emend | Merck Sharp & Dohme Corporation | Nausea post chemo | All major territories worldwide | ||||
Pfizer Inc. | Rapamune | Wyeth LLC | Transplant rejection | All major territories worldwide | ||||
Par Pharmaceuticals (Strativa) | MegaceES | E.R. Squibb & Sons L.L.C. | Cachexia | U.S. | ||||
Abbott Labs | Tricor145 Lipanthyl® | Fournier Industrie et. Sante (S.A.S.) | Cholesterol reduction | U.S. Certain European territories | ||||
Janssen | Invega Sustenna Xeplion | Johnson & Johnson Corporation | Schizophrenia | U.S. EU |
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• | SODAS Technology: SODAS(Spheroidal Oral Drug Absorption System) technology is based on the production of uniform spherical beads of 1 to 2 mm in diameter containing drug plus excipients and coated with product-specific modified-release polymers. As each candidate drug presents itself with different physiochemical and pharmacokinetic properties, the composition of the polymer membrane will differ for each individualSODASformulation. Varying the nature and combination of polymers within a selectively permeable membrane enables varying degrees of modified release depending upon the required product profile.SODASis a registered trademark of Elan Pharma International Limited. | |
• | CODAS Technology: CODAS(Chronotherapeutic Oral Drug Absorption System) enables the delayed onset of drug release incorporating the use of specific polymers, resulting in a drug release profile that more accurately complements circadian patterns.CODASis a registered trademark of Elan Pharma International Limited. | |
• | IPDAS Technology: IPDAS(Intestinal Protective Drug Absorption System) technology confers the advantages of multiparticulate technology in a table dosage form initially targeted for use in compounds known for gastrointestinal irritation.IPDAS conveys its gastrointestinal protection by a wide dispersion of the irritant drug candidates throughout the gastrointestinal tract in a controlled and gradual manner. TheIPDASdelivery system is comprised of numerous high-density controlled-release beads compressed into a tablet form. Release characteristics can be modified by the application of polymers to the micro matrix and subsequent coatings which form a rate-limiting semi-permeable membrane.IPDASis a registered trademark of Elan Pharma International Limited. | |
• | MXDAS Technology: MXDAS(Matrix Drug Absorption System) formulates the drug candidate in a hydrophilic matrix, involves the incorporation of one or more hydrophilic matrix forming polymers into a solid oral dosage form, which controls the release of drug through a process of diffusion and erosion in the gastrointestinal tract controlling the release of the active drug ingredient.MXDASis a registered trademark of Elan Pharma International Limited. |
Trademark | ||||||||
Marketer | Product | Registered by | Indication | Territory | ||||
Acorda Therapeutics, Inc. | Zanaflex Capsules® | Acorda Therapeutics, Inc. | Muscle spasticity | U.S. | ||||
Acorda Therapeutics, Inc. | Ampyra | Acorda Therapeutics, Inc. | Walking disability associated with MS | U.S. | ||||
Jazz Pharmaceuticals Inc. | Luvox CR | Abbott Products Inc. | Social Anxiety Disorder and Obsessive Compulsive Disorder | U.S. | ||||
Pfizer Inc | Avinza | King Pharmaceuticals Research and Development Inc. | Chronic pain | U.S. | ||||
Novartis AG | Focalin XR/Ritalin LA | Novartis AG | Attention Deficit Hyperactivity Disorder | All major territories worldwide | ||||
Victory Pharma | Naprelan | Elan Pharma International Limited | Non-Steroidal Anti-Inflammatory Drug — Pain | U.S. |
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• | formulation through process development,scale-up and full scale commercial manufacturing; | |
• | specialized capabilities for the development and manufacturing of controlled substances; and | |
• | full project leadership and management. |
• | dedicated development,scale-up and commercial manufacturing facilities; | |
• | FDA and EMA inspected sites with capacity to manufacture up to 1.5 billion units annually of solid oral dosage product; | |
• | 270,000 square feet of facilities compliant with current good manufacturing practices between EDT’s sites in Ireland and the United States; | |
• | process and analytical equipment, a site controlled by the U.S. Drug Enforcement Administration (which is referred to in this proxy statement/prospectus as the DEA), packaging facilities in United States and Ireland; and | |
• | other services include regulatory support, supply chain support, and launch management. |
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Partner | Product | Indication | Territory | |||
Abbott Laboratories | TriCor 145, Lipanthyl | Cholesterol reduction | U.S. Certain European territories | |||
Acorda Therapeutics, Inc. | Zanaflex Capsules | Muscle spasticity | U.S. | |||
Acorda Therapeutics, Inc. | Ampyra, Fampyra(not being sold yet in the E.U.) | Walking disability associated with MS | U.S. E.U. | |||
Janssen | Invega Sustenna, Xeplion | Schizophrenia | U.S. E.U. | |||
Jazz Pharmaceuticals Inc. | Luvox CR | Social Anxiety Disorder and Obsessive Compulsive Disorder | U.S. | |||
Pfizer Inc. | Avinza | Chronic pain | U.S. | |||
Merck & Co., Inc. | Emend | Nausea post chemo | All major territories worldwide | |||
Novartis AG | Focalin XR/Ritalin LA | Attention Deficit Hyperactivity Disorder | All major territories worldwide | |||
Par Pharmaceutical Co., Inc. (Strativa) | Megace ES | Cachexia | U.S. | |||
Pfizer Inc. | Rapamune | Anti-rejection | All major territories worldwide | |||
Victory Pharma | Naprelan | Non-Steroidal Anti-Inflammatory Drug — Pain | U.S. and Canada | |||
UCB | Verelan, Verelan® PM | Hypertension | U.S. |
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(1) | Approved in the United States. Filed in European Union and Canada. | |
(2) | Improved Existing Product. |
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Location and Ownership Interest | Use | Size (Sq. Ft.) | ||||
Owned: Athlone, Ireland | R&D, manufacturing and administration | 463,000 | ||||
Owned: Gainesville, GA, United States | R&D, manufacturing and administration | 89,000 |
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Position: Senior Vice President, Government Relations and Public Policy, General Counsel and Secretary, and Chief Compliance Officer
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Position: President
Position: Senior Vice President, Research and Development, and Chief Medical Officer
Position: Senior Vice President, Chief Financial Officer and Treasurer
Position: Senior Vice President, Corporate Development
Position: Chairman and Chief Executive Officer
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Position: Senior Vice President, Chief Operating Officer and Chief Risk Officer
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Alkermes | New Alkermes | |||
Authorized and Outstanding Capital Stock | The authorized share capital of Alkermes is 165 million shares, of which 160,000,000 are common shares, par value $0.01 per share, and 450,000 shares are non-voting common stock, par value $0.01 per share. In addition, Alkermes has authorized 3,000,000 shares of preferred stock, of which 3,000 are designated as 2002 Redeemable Convertible Preferred Stock and 110,000 are designated Series A junior Participating Preferred Stock reserved for issuance upon the exercise of the rights distributed to holders of Alkermes common stock pursuant to the rights agreement. | The authorized share capital of New Alkermes is €40,000 and $5,000,000, of which 40,000 are ordinary shares with a nominal value of €1.00 each, 450,000,000 are ordinary shares with a nominal value of $0.01 each and 50,000,000 are undesignated preferred shares with a nominal value of $0.01 each. |
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authorize the board of directors of New Alkermes to issue new ordinary or preferred shares without shareholder approval for a period of five years from the date of adoption. | ||||
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board of directors, but only out of funds legally available for this purpose. | realized profits less accumulated realized losses and includes reserves created by way of capital reduction. In addition, no distribution or dividend may be made unless the net assets of New Alkermes are equal to, or in excess of, the aggregate of New Alkermes’ called up share capital plus undistributable reserves and the distribution does not reduce New Alkermes’ net assets below such aggregate. Undistributable reserves include the share premium account, the capital redemption reserve fund and the amount by which New Alkermes’ accumulated unrealized profits, so far as not previously utilized by any capitalization, exceed New Alkermes’ accumulated unrealized losses, so far as not previously written off in a reduction or reorganization of capital. |
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Alkermes | New Alkermes | |||
the corporation it acquires to the status of authorized but unissued shares. | New Alkermes may pay dividends in U.S. dollars or any other currency. |
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treasury shares. Treasury shares may be canceled by New Alkermes or re-issued subject to certain conditions. | ||||
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Alkermes | New Alkermes | |||
New Alkermes, in an aggregate amount approximately equal to the then remaining authorization under the existing Alkermes share repurchase program. This authorization is expected to take effect as of the effective time and will expire no later than 18 months after the effective date and it is expected that New Alkermes would seek shareholder approval to renew this authorization at future annual general meetings. | ||||
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Alkermes | New Alkermes | |||
Alkermes board is not currently classified. Under the Alkermes bylaws, directors will be elected by the shareholders at each annual meeting to hold office until the next succeeding annual meeting and until their successors have been elected and qualified. | The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of one- third of the total number of directors constituting the entire board. The term of the initial Class I directors shall terminate on the date of the 2012 annual general meeting; the term of the initial Class II directors shall terminate on the date of the 2013 annual general meeting; and the term of the initial Class III directors shall terminate on the date of the 2014 annual general meeting. At each annual general meeting of members beginning in 2012, successors to the class of directors whose term expires at that annual general meeting will be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. In no case will a decrease in the number of directors shorten the term of any incumbent director. A director may hold office until the annual general meeting for the year in which his or her term expires and until his or her successor is elected and duly qualified, subject, to prior death, resignation, retirement, disqualification or removal from office. |
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Alkermes | New Alkermes | |||
Companies Acts and the articles) only until the conclusion of the next annual general meeting of New Alkermes unless he or she is reelected. | ||||
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shareholders, employees, customers, creditors and communities and the short- term and long-term interests of the corporation. In considering the best interests of the corporation or the effects of any action, directors are not required to regard any corporate interest or the interests of any particular group affected by such action, including the interests of shareholders, as a dominant or controlling interest or factor. | common law fiduciary duties of good faith and exercising due care and skill. The statutory duties include ensuring the maintenance of proper books of account, having annual accounts prepared, having an annual audit performed, the duty to maintain certain registers and make certain filings as well as disclosure of personal interests. For public limited companies like New Alkermes, directors are under a specific duty to ensure that the secretary is a person with the requisite knowledge and experience to discharge the role. | |||
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specifically approved in good faith by vote of those shareholders; or | the contracts and the contract or transaction has been approved by a majority of the disinterested directors. | |||
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advanced if it is ultimately determined by final judicial decision that the indemnified person is not entitled to indemnification. | New Alkermes’ articles of association also contain indemnification and expense advancement provisions for current or former executives who are not directors or the secretary of New Alkermes. | |||
Limitation on Director Liability |
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shareholder may have, whether individually or in the right of a company, on account of any action taken or the failure to take any action in the performance of his or her duties to the company. | ||||
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Alkermes | New Alkermes | |||
Under the PBCL, the shareholders of a registered corporation, such as Alkermes, are not entitled by statute to call a special meeting. | Alkermes carrying voting rights or (iii) on requisition of New Alkermes’ auditors. Extraordinary general meetings are generally held for the purposes of approving shareholder resolutions of New Alkermes as may be required from time to time. At any extraordinary general meeting only the business set forth in the notice may be conducted. Notice of an extraordinary general meeting must be given to all shareholders of New Alkermes and to the auditors of New Alkermes. Under Irish law and the New Alkermes articles of association, the minimum notice periods are 21 days’ notice in writing for an extraordinary general meeting to approve a special resolution and 14 days’ notice in writing for any other extraordinary general meeting. The purpose of an extraordinary general meeting convened by shareholders of New Alkermes must be set out in the requisition notice. The board must set a meeting dating within 21 days of receipt of the requisition notice and the meeting must be held within two months of the receipt of the requisition notice. If the board of directors does not convene the meeting within 21 days, the requisitioning shareholders, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting that must be held within three months of the receipt of the requisition notice. | |||
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meeting of shareholders, (b) the date fixed for the payment of any dividend or distribution, (c) the date for the allotment of rights or (d) the date when any change or conversion or exchange of shares will be made or will go into effect, as the record date to determine the shareholders (i) entitled to notice of or to vote at any such meeting, (ii) entitled to receive payment of any dividend or distribution, (iii) entitled to receive any such allotment of rights or (iv) entitled to exercise the rights in respect to any such change, conversion or exchange of shares. | shareholders entitled to notice of or to vote at a meeting of the shareholders that is no more than 90 days and no less than 10 days before the date of the meeting, and (ii) for the purpose of determining the shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose that is no more than 90 days prior to the date of payment of the dividend or the date of any other action to which the determination of shareholders is relevant. The record date may not precede the date upon which the resolution fixing the record date is adopted by the directors. | |||
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Alkermes | New Alkermes | |||
address of the nominating shareholders, (v) the number of shares of Alkermes owned by the nominating shareholder(s), (vi) such other information about each nominee proposed by such shareholder(s) as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated or intended to be nominated by the board of directors and (vii) the consent of each nomine to serve as a director of Alkermes if so elected. Nominations not made in accordance with the bylaws shall be disregarded. | Such written notice and information must be received by the Secretary of New Alkermes not less than 90 days nor more than 150 days before the first anniversary of the date of New Alkermes’ proxy statement for the prior year’s annual general meeting. | |||
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Alkermes | New Alkermes | |||
Shareholder Meetings | proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on a particular matter, except that in the case of a meeting called for the election of directors and adjourned for the lack of a quorum, shareholders entitled to vote who attend a second adjourned meeting, although less than a quorum, shall constitute a quorum for the election of directors. | shall be transacted at any general meeting unless a quorum is present. One or more shareholders present in person or by proxy holding not less than a majority of the issued and outstanding shares of New Alkermes entitled to vote at the meeting in question shall be a quorum. | ||
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to be elected, and they may cast the whole number of their votes for one candidate or distribute them among the candidates. | Irish company law also distinguishes between “ordinary business” and “special business”. Most matters are deemed “special” with the exception of declaring a dividend, the consideration of the accounts, balance sheets and the reports of the directors and auditors, the election of directors, the re-appointment of the retiring auditors and the fixing of the remuneration of the auditors, all of which are deemed to be “ordinary business”. | |||
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Alkermes | New Alkermes | |||
If a derivative action is instituted or maintained by holders or owners of less than 5% of the outstanding shares of any class of shares, unless the aggregate fair market value of such shares is in excess of $200,000, the corporation shall be entitled to require the plaintiffs to give security for reasonable expenses, including attorneys’ fees. | (d) where a fraud has been perpetrated upon a minority by those in control; and | |||
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Alkermes | New Alkermes | |||
voting shares. In connection with a control transaction, shareholders have the right to demand from the controlling person fair value for their shares under specified procedures. | to the aggregate nominal value of the shares in which the shareholder is interested as a proportion of the entire nominal value of New Alkermes’ share capital. Where the percentage level of the shareholder’s interest does not amount to a whole percentage, this figure may be rounded down to the next whole number. All such notifications must be made within five business days of the transaction or alteration of the shareholder’s interests that gave rise to the requirement to notify. If these notification requirements are not complied with, no right or interest of any kind whatsoever in respect of any shares in New Alkermes concerned held by such person shall be enforceable, whether directly or indirectly, by action or legal proceeding. However, such person may apply to the court to have the rights attaching to the shares reinstated. In addition, New Alkermes, under the Companies Acts, may by notice in writing require a person whom New Alkermes knows or has reasonable cause to believe to be, or at any time during the three years immediately preceding the date on which such notice is issued, to have been interested in shares comprised in New Alkermes’ relevant share capital to: (i) indicate whether or not it is the case; and (ii) where such person holds or has during that time held an interest in the shares of New Alkermes, to give such further information as may be required by New Alkermes including particulars of such person’s own past or present interests in shares of New Alkermes. Any information given in response to the notice is required to be given in writing within such reasonable time as may be specified in the notice. |
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Alkermes | New Alkermes | |||
the right to be issued with shares and any issue of shares, shall be void; | ||||
• no voting rights shall be exercisable in respect of those shares; • no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder of those shares; and • no payment shall be made of any sums due from New Alkermes on those shares, whether in respect of capital or otherwise. Where the shares in New Alkermes are subject to these restrictions, the court may order the shares to be sold and may also direct that the shares shall cease to be subject to these restrictions. | ||||
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majority of all shares entitled to vote, excluding votes of shares held by the interested shareholder, and at the time of such vote, the interested shareholder is the beneficial owner of at least 80% of the voting shares of the corporation. This exception applies only if the value of the consideration to be paid by the interested shareholder in connection with the business combination satisfies certain fair price requirements. | ||||
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Alkermes | New Alkermes | |||
shareholders. Pennsylvania law allows corporations to opt-out of these anti- takeover sections. A general summary of these applicable anti-takeover provisions is set forth below. | aspects of the Irish Takeover Rules are described below. | |||
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Alkermes | New Alkermes | |||
the restoration of voting rights. First, the approval of an absolute majority of all voting power must be obtained. All voting shares are entitled to participate in this vote. Second, the approval of an absolute majority of all disinterested shareholders must be obtained. | Mandatory Bid |
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Alkermes | New Alkermes | |||
Alkermes Ordinary Shares — Disclosure of Interests in Shares.” | 12 months prior to the commencement of the offer period which represent more than 10% of the total ordinary shares of New Alkermes or (ii) at any time after the commencement of the offer period, the offer shall be in cash (or accompanied by a full cash alternative) and the price per New Alkermes ordinary share shall be not less than the highest price paid by the bidder or its concert parties during, in the case of (i), the period of 12 months prior to the commencement of the offer period and, in the case of (ii), the offer period. The Irish Takeover Panel may apply this rule to a bidder who, together with its concert parties, has acquired less than 10% of the total ordinary shares of New Alkermes in the 12 month period prior to the commencement of the offer period if the Irish Takeover Panel, having regard to the General Principles, considers it just and proper to do so. | |||
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Alkermes | New Alkermes | |||
Frustrating Action | ||||
171
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Alkermes | New Alkermes | |||
group, will be entitled to acquire Alkermes’ common stock (and in certain instances, the stock of the acquirer) at a discount. | rights or adopting a shareholder rights plan as an anti-takeover measure. However, there is no directly relevant case law on the validity of such plans under Irish law. | |||
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Alkermes | New Alkermes | |||
affirmative vote of the shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on such matters. | ||||
173
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Alkermes | New Alkermes | |||
must be met before the foreign judgment will be deemed to be enforceable in Ireland: | ||||
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• | Annual Report onForm 10-K of Alkermes, Inc. for the Fiscal Year Ended March 31, 2011. |
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Period | High | Low | Average(1) | Period End | ||||||||||||
2006 | 1.33 | 1.18 | 1.26 | 1.32 | ||||||||||||
2007 | 1.49 | 1.29 | 1.37 | 1.46 | ||||||||||||
2008 | 1.60 | 1.24 | 1.50 | 1.39 | ||||||||||||
2009 | 1.51 | 1.25 | 1.39 | 1.43 | ||||||||||||
2010 | 1.45 | 1.20 | 1.33 | 1.33 |
Period | High | Low | Average | Period End | ||||||||||||
December 2010 | 1.34 | 1.31 | 1.32 | 1.33 | ||||||||||||
January 2011 | 1.37 | 1.29 | 1.34 | 1.37 | ||||||||||||
February 2011 | 1.38 | 1.35 | 1.37 | 1.38 | ||||||||||||
March 2011 | 1.42 | 1.38 | 1.40 | 1.42 | ||||||||||||
April 2011 | 1.48 | 1.41 | 1.44 | 1.48 | ||||||||||||
May 2011 | 1.49 | 1.40 | 1.43 | 1.44 |
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F-2
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For the Years Ended December 31, 2010, 2009 and 2008
Notes | 2010 | 2009 | 2008 | |||||||||||||
(In thousands) | ||||||||||||||||
Product revenue | $ | 261,420 | $ | 257,199 | $ | 281,557 | ||||||||||
Contract revenue | 12,699 | 18,687 | 20,004 | |||||||||||||
Total revenue | 3 | 274,119 | 275,886 | 301,561 | ||||||||||||
Cost of sales | 118,379 | 116,251 | 123,654 | |||||||||||||
Gross margin | 155,740 | 159,635 | 177,907 | |||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 38,933 | 35,919 | 44,534 | |||||||||||||
Research and development expenses | 53,579 | 46,961 | 47,591 | |||||||||||||
Other net charges | 5 | 2,300 | 5,669 | — | ||||||||||||
Total operating expenses | 94,812 | 88,549 | 92,125 | |||||||||||||
Operating income | 60,928 | 71,086 | 85,782 | |||||||||||||
Net interest (income)/expense | 6 | (575 | ) | 1,824 | (538 | ) | ||||||||||
�� | ||||||||||||||||
Net income before income taxes | 61,503 | 69,262 | 86,320 | |||||||||||||
Provision for income taxes | 7 | 12,614 | 20,882 | 25,798 | ||||||||||||
Net income | $ | 48,889 | $ | 48,380 | $ | 60,522 | ||||||||||
F-3
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Notes | 2010 | 2009 | 2008 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 48,889 | $ | 48,380 | $ | 60,522 | ||||||||||
Other comprehensive income/(loss): | ||||||||||||||||
Movement on unrealized components of defined benefit pension plans | 15 | (3,246 | ) | 917 | (9,131 | ) | ||||||||||
Total comprehensive income | $ | 45,643 | $ | 49,297 | $ | 51,391 | ||||||||||
F-4
Table of Contents
Notes | 2010 | 2009 | ||||||||||
(In thousands) | ||||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Accounts receivable, net | 8 | $ | 60,030 | $ | 58,352 | |||||||
Inventory | 9 | 18,296 | 26,468 | |||||||||
Deferred tax assets — current | 7 | 1,555 | 1,747 | |||||||||
Prepaid and other current assets | 10 | 3,071 | 4,907 | |||||||||
Total current assets | 82,952 | 91,474 | ||||||||||
Non-Current Assets: | ||||||||||||
Property, plant and equipment, net | 11 | 203,415 | 208,709 | |||||||||
Goodwill and other intangible assets, net | 12 | 53,338 | 65,239 | |||||||||
Other non-current assets | 13 | 5,060 | 3,627 | |||||||||
Total assets | $ | 344,765 | $ | 369,049 | ||||||||
LIABILITIES AND INVESTED EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Accounts payable | 14 | $ | 4,085 | $ | 5,500 | |||||||
Accruals and other current liabilities | 24,290 | 21,640 | ||||||||||
Total current liabilities | 14 | 28,375 | 27,140 | |||||||||
Other non-current liabilities | 11,175 | 8,896 | ||||||||||
Total liabilities | 39,550 | 36,036 | ||||||||||
Invested equity | 305,215 | 333,013 | ||||||||||
Total liabilities and invested equity | $ | 344,765 | $ | 369,049 | ||||||||
F-5
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Total Invested | ||||
Equity | ||||
(in thousands) | ||||
Balance at January 1, 2008 | $ | 403,770 | ||
Net income | 60,522 | |||
Share-based compensation | 9,865 | |||
Excess tax benefit related to equity awards | 1,567 | |||
Net funding transfer to Elan | (79,517 | ) | ||
Balance at December 31, 2008 | $ | 396,207 | ||
Net income | 48,380 | |||
Share-based compensation | 7,176 | |||
Net tax shortfall related to equity awards | (509 | ) | ||
Net funding transfer to Elan | (118,241 | ) | ||
Balance at December 31, 2009 | $ | 333,013 | ||
Net income | 48,889 | |||
Share-based compensation | 7,929 | |||
Net tax shortfall related to equity awards | (490 | ) | ||
Net funding transfer to Elan | (84,126 | ) | ||
Balance at December 31, 2010 | $ | 305,215 | ||
F-6
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2010 | 2009 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 48,889 | $ | 48,380 | $ | 60,522 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Amortization of deferred revenue | (180 | ) | 34 | (2,498 | ) | |||||||
Depreciation and amortization | 32,554 | 33,161 | 35,915 | |||||||||
Share-based compensation | 7,929 | 7,176 | 9,865 | |||||||||
(Recognition)/utilization of deferred tax asset | (1,037 | ) | 224 | 202 | ||||||||
Excess tax benefit from share-based compensation | — | — | (1,567 | ) | ||||||||
Other | — | 639 | 1,222 | |||||||||
Net changes in assets and liabilities: | ||||||||||||
(Increase)/decrease in accounts receivable | (1,678 | ) | 42,480 | (18,855 | ) | |||||||
Decrease/(increase) in prepaid and other assets | 403 | (1,948 | ) | 4,655 | ||||||||
Decrease/(increase) in inventory | 8,172 | (5,882 | ) | (1,371 | ) | |||||||
Increase in accounts payable and accruals and other liabilities | 4,439 | 3,821 | 2,486 | |||||||||
Net cash provided by operating activities | 99,491 | 128,085 | 90,576 | |||||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from disposal of property, plant and equipment | 44 | 26 | — | |||||||||
Purchase of property, plant and equipment | (15,108 | ) | (9,774 | ) | (11,696 | ) | ||||||
Purchase of intangible assets | (301 | ) | (96 | ) | (930 | ) | ||||||
Net cash used in investing activities | (15,365 | ) | (9,844 | ) | (12,626 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Excess tax benefit from share-based compensation | — | — | 1,567 | |||||||||
Net funding transfer to Elan | (84,126 | ) | (118,241 | ) | (79,517 | ) | ||||||
Net cash used in financing activities | $ | (84,126 | ) | $ | (118,241 | ) | $ | (77,950 | ) | |||
Net increase/(decrease) in cash and cash equivalents | — | — | — | |||||||||
Cash and cash equivalents at beginning of year | — | — | — | |||||||||
Cash and cash equivalents at end of year | — | — | — | |||||||||
Supplemental cash flow information: | ||||||||||||
Cash paid for income taxes by EDT | $ | 1,012 | $ | 3,128 | $ | 2,199 |
F-7
Table of Contents
1. | Description of Business |
2. | Significant Accounting Policies |
(a) | Basis of preparation and presentation of financial information |
F-8
Table of Contents
• | Accounting, information technology, taxation, legal, corporate strategy, investor relations, corporate governance and other professional services; | |
• | Employee benefit administration, including equity award and pension services; and | |
• | Cash and treasury management. |
F-9
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(b) | Use of estimates |
(c) | Accounts receivable |
(d) | Inventory |
(e) | Property, plant and equipment |
Buildings | 15-40 years | |
Plant and equipment | 3-10 years | |
Leasehold improvements | Shorter of expected useful life or lease term |
F-10
Table of Contents
(f) | Leasing |
(g) | Property, plant and equipment, goodwill and other intangible assets and impairment |
(h) | Derivative financial instruments |
F-11
Table of Contents
(i) | Revenue |
F-12
Table of Contents
(j) | Advertising expenses |
(k) | Research and development |
(l) | Taxation |
F-13
Table of Contents
(m) | Foreign exchange transactions |
(n) | Share-based compensation |
(o) | Pensions and other employee benefit plans |
F-14
Table of Contents
(p) | Contingencies |
3. | Revenue |
2010 | 2009 | 2008 | ||||||||||
Product revenue | $ | 261,420 | $ | 257,199 | $ | 281,557 | ||||||
Contract revenue | 12,699 | 18,687 | 20,004 | |||||||||
Total revenue | $ | 274,119 | $ | 275,886 | $ | 301,561 | ||||||
F-15
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2010 | 2009 | 2008 | ||||||||||
Manufacturing revenue (includes royalties on manufactured products): | ||||||||||||
Ampyra | $ | 56,781 | $ | 17 | $ | — | ||||||
Focalin XR/Ritalin LA | 32,998 | 32,617 | 33,468 | |||||||||
Verelan | 21,824 | 22,085 | 24,601 | |||||||||
Naprelan | 12,615 | 15,955 | 11,083 | |||||||||
Avinza | 12,027 | 12,624 | 13,388 | |||||||||
Diltiazem | 7,617 | 7,504 | 13,674 | |||||||||
Zanaflex | 5,944 | 11,559 | 12,741 | |||||||||
Rapamune | 5,940 | 6,600 | 4,960 | |||||||||
Luvox CR | 3,955 | 2,584 | 7,450 | |||||||||
Cymbalta | 2,778 | 14,367 | 13,360 | |||||||||
Other | 7,555 | 9,542 | 15,825 | |||||||||
Total manufacturing revenue | 170,034 | 135,454 | 150,550 | |||||||||
Royalty revenue: | ||||||||||||
TriCor145 | 54,459 | 61,635 | 67,697 | |||||||||
Skelaxin | 5,930 | 34,901 | 39,709 | |||||||||
Megace ES | 8,207 | 8,959 | 9,791 | |||||||||
Invega Sustenna | 7,656 | 1,667 | — | |||||||||
Emend | 8,347 | 7,939 | 7,070 | |||||||||
Other | 6,787 | 6,644 | 6,740 | |||||||||
Total royalty revenue | 91,386 | 121,745 | 131,007 | |||||||||
Total product revenue | $ | 261,420 | $ | 257,199 | $ | 281,557 | ||||||
2010 | 2009 | 2008 | ||||||||||
Research revenue | $ | 8,249 | $ | 8,203 | $ | 17,904 | ||||||
Milestone payments | 4,450 | 10,484 | 2,100 | |||||||||
Total contract revenue | $ | 12,699 | $ | 18,687 | $ | 20,004 | ||||||
4. | Segment, Geographical and Major Customers Information |
F-16
Table of Contents
2010 | 2009 | 2008 | ||||||||||
United States | $ | 186,447 | $ | 170,782 | $ | 169,728 | ||||||
Ireland | 56,096 | 65,835 | 71,550 | |||||||||
Rest of world | 31,576 | 39,269 | 60,283 | |||||||||
Total revenue | $ | 274,119 | $ | 275,886 | $ | 301,561 | ||||||
2010 | 2009 | |||||||
Ireland | $ | 283,054 | $ | 295,768 | ||||
United States | 60,776 | 72,457 | ||||||
Rest of world | 935 | 824 | ||||||
Total assets | $ | 344,765 | $ | 369,049 | ||||
2010 | 2009 | |||||||
Ireland | $ | 159,818 | $ | 162,515 | ||||
United States | 43,597 | 46,194 | ||||||
Total property, plant and equipment | $ | 203,415 | $ | 208,709 | ||||
2010 | 2009 | |||||||
Ireland | $ | 53,041 | $ | 64,534 | ||||
United States | 297 | 705 | ||||||
Total goodwill and other intangible assets | $ | 53,338 | $ | 65,239 | ||||
2010 | 2009 | 2008 | ||||||||||
Acorda | 24 | % | 8 | % | 3 | % | ||||||
Fournier Pharma Corp | 20 | % | 23 | % | 23 | % | ||||||
Novartis | 12 | % | 12 | % | 10 | % | ||||||
King Pharmaceuticals, Inc | 5 | % | 15 | % | 16 | % |
F-17
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5. | Other Net Charges |
6. | Net Interest Expense |
2010 | 2009 | 2008 | ||||||||||
Foreign exchange (gain)/loss | $ | (575 | ) | $ | 1,134 | $ | (293 | ) | ||||
Other | — | 690 | (245 | ) | ||||||||
Net interest (income)/expense | $ | (575 | ) | $ | 1,824 | $ | (538 | ) | ||||
7. | Income Taxes |
2010 | 2009 | 2008 | ||||||||||
Irish corporation tax — current | $ | 3,636 | $ | 2,800 | $ | 231 | ||||||
Irish corporation tax — deferred | $ | — | $ | — | $ | 952 | ||||||
Foreign taxes — current | $ | 10,015 | $ | 17,858 | $ | 25,365 | ||||||
Foreign taxes — deferred | $ | (1,037 | ) | $ | 224 | $ | (750 | ) | ||||
Provision for income taxes | $ | 12,614 | $ | 20,882 | $ | 25,798 | ||||||
Tax expense/(benefit) reported in invested equity related to equity awards | $ | 490 | $ | 509 | $ | (1,567 | ) |
F-18
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Irish standard tax rate | 12.5 | % | 12.5 | % | 12.5 | % | ||||||
Taxes at the Irish standard rate | $ | 7,688 | $ | 8,658 | $ | 10,790 | ||||||
Irish income at rates other than Irish standard rate | (457 | ) | (367 | ) | (8 | ) | ||||||
Foreign income at rates other than the Irish standard rate | 5,619 | 12,224 | 16,769 | |||||||||
Permanent differences | 354 | 195 | 459 | |||||||||
R&D tax credit | (343 | ) | (330 | ) | (2,491 | ) | ||||||
Other | (247 | ) | 502 | 279 | ||||||||
Provision for income taxes | $ | 12,614 | $ | 20,882 | $ | 25,798 | ||||||
Effective tax rate | 20.5 | % | 30.1 | % | 29.9 | % | ||||||
2010 | 2009 | 2008 | ||||||||||
Ireland | $ | 32,433 | $ | 20,266 | $ | 22,026 | ||||||
Foreign | 29,070 | 48,996 | 64,294 | |||||||||
Income before provision for income taxes | $ | 61,503 | $ | 69,262 | $ | 86,320 | ||||||
2010 | 2009 | |||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | $ | (8,775 | ) | $ | (9,058 | ) | ||
Total deferred tax liabilities | $ | (8,775 | ) | $ | (9,058 | ) | ||
Deferred tax assets: | ||||||||
Net operating losses | $ | 19,676 | $ | 19,676 | ||||
Reserves/provisions | 1,117 | 1,330 | ||||||
Share-based compensation expense | 3,193 | 2,891 | ||||||
Other | 438 | 417 | ||||||
Total deferred tax assets | $ | 24,424 | $ | 24,314 | ||||
Valuation allowance | $ | (15,432 | ) | $ | (15,586 | ) | ||
Net deferred tax asset/(liability) | $ | 217 | $ | (330 | ) | |||
F-19
Table of Contents
At December 31, 2010 | ||||||||||||||||||||
U.S. | Rest of | |||||||||||||||||||
Ireland | U.S. State | Federal | World | Total | ||||||||||||||||
More than five years | $ | 442,331 | $ | — | $ | — | $ | — | $ | 442,331 | ||||||||||
8. | Accounts Receivable, Net |
2010 | 2009 | |||||||
Accounts receivable | $ | 60,405 | $ | 58,352 | ||||
Less amounts provided for doubtful accounts | (375 | ) | — | |||||
Accounts receivable, net | $ | 60,030 | $ | 58,352 | ||||
2010 | 2009 | |||||||
Balance at January 1 | $ | — | $ | (429 | ) | |||
Charge in the year | (375 | ) | — | |||||
Amounts released | — | 429 | ||||||
Balance at December 31 | $ | (375 | ) | $ | — | |||
F-20
Table of Contents
2010 | 2009 | |||||||
Fournier | 26 | % | 29 | % | ||||
Acorda | 24 | % | 9 | % | ||||
Novartis | 11 | % | 7 | % | ||||
King Pharmaceuticals, Inc. | 3 | % | 17 | % |
9. | Inventory |
2010 | 2009 | |||||||
Raw materials | $ | 9,945 | $ | 10,750 | ||||
Work-in-process | 6,025 | 8,096 | ||||||
Finished goods | 2,326 | 7,622 | ||||||
Total inventory | $ | 18,296 | $ | 26,468 | ||||
10. | Prepaid and Other Current Assets |
2010 | 2009 | |||||||
Prepayments | $ | 2,062 | $ | 2,814 | ||||
Other current assets | 1,009 | 2,093 | ||||||
Total prepaid and other current assets | $ | 3,071 | $ | 4,907 | ||||
F-21
Table of Contents
11. | Property, Plant and Equipment |
Land & | Plant & | |||||||||||
Buildings | Equipment | Total | ||||||||||
(In thousands) | ||||||||||||
Cost: | ||||||||||||
At January 1, 2009 | $ | 223,100 | $ | 223,470 | $ | 446,570 | ||||||
Additions | 1,083 | 7,720 | 8,803 | |||||||||
Disposals | (283 | ) | (3,690 | ) | (3,973 | ) | ||||||
At December 31, 2009 | $ | 223,900 | $ | 227,500 | $ | 451,400 | ||||||
Additions | 4,046 | 11,092 | 15,138 | |||||||||
Disposals | — | (1,435 | ) | (1,435 | ) | |||||||
Transfers | 1,188 | (1,188 | ) | — | ||||||||
At December 31, 2010 | $ | 229,134 | $ | 235,969 | $ | 465,103 | ||||||
Accumulated depreciation and impairment: | ||||||||||||
At January 1, 2009 | $ | (67,080 | ) | $ | (157,895 | ) | $ | (224,975 | ) | |||
Charged in year | (6,232 | ) | (14,679 | ) | (20,911 | ) | ||||||
Disposals | — | 3,195 | 3,195 | |||||||||
At December 31, 2009 | $ | (73,312 | ) | $ | (169,379 | ) | $ | (242,691 | ) | |||
Charged in year | (5,873 | ) | (14,496 | ) | (20,369 | ) | ||||||
Disposals | — | 1,372 | 1,372 | |||||||||
At December 31, 2010 | $ | (79,185 | ) | $ | (182,503 | ) | $ | (261,688 | ) | |||
Net book value: December 31, 2010 | $ | 149,949 | $ | 53,466 | $ | 203,415 | ||||||
Net book value: December 31, 2009 | $ | 150,588 | $ | 58,121 | $ | 208,709 | ||||||
F-22
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Cost of sales | $ | 15,682 | $ | 15,884 | $ | 17,601 | ||||||
Research and development expenses | 4,665 | 5,000 | 5,580 | |||||||||
Selling, general and administrative expenses | 22 | 27 | 206 | |||||||||
Total | $ | 20,369 | $ | 20,911 | $ | 23,387 | ||||||
12. | Goodwill and Other Intangible Assets |
Other | ||||||||||||
Intangible | ||||||||||||
Goodwill | Assets | Total | ||||||||||
(In thousands) | ||||||||||||
Cost: | ||||||||||||
At January 1, 2009 | $ | 49,684 | $ | 164,198 | $ | 213,882 | ||||||
Additions | — | 139 | 139 | |||||||||
At December 31, 2009 | $ | 49,684 | $ | 164,337 | $ | 214,021 | ||||||
Additions | — | 284 | 284 | |||||||||
At December 31, 2010 | $ | 49,684 | $ | 164,621 | $ | 214,305 | ||||||
Accumulated amortization: | ||||||||||||
At January 1, 2009 | $ | — | $ | (136,532 | ) | $ | (136,532 | ) | ||||
Charged in year | — | (12,250 | ) | (12,250 | ) | |||||||
At December 31, 2009 | $ | — | $ | (148,782 | ) | $ | (148,782 | ) | ||||
Charged in year | — | (12,185 | ) | (12,185 | ) | |||||||
At December 31, 2010 | — | (160,967 | ) | (160,967 | ) | |||||||
Net book value: December 31, 2010 | $ | 49,684 | $ | 3,654 | $ | 53,338 | ||||||
Net book value: December 31, 2009 | $ | 49,684 | $ | 15,555 | $ | 65,239 | ||||||
2010 | 2009 | |||||||
NanoSystems | $ | 2,470 | $ | 2,810 | ||||
Verelan | — | 10,735 | ||||||
Other intangible assets | 1,184 | 2,010 | ||||||
Total other intangible assets | $ | 3,654 | $ | 15,555 | ||||
F-23
Table of Contents
2010 | 2009 | 2008 | ||||||||||
Cost of sales | $ | 11,654 | $ | 11,693 | $ | 11,647 | ||||||
Research and development expenses | 513 | 550 | 874 | |||||||||
Selling, general and administrative expenses | 18 | 7 | 7 | |||||||||
Total | $ | 12,185 | $ | 12,250 | $ | 12,528 | ||||||
Year ending December 31, 2011 | $ | 1,193 | ||
2012 | 567 | |||
2013 | 417 | |||
2014 | 388 | |||
2015 | 340 | |||
2016 and thereafter | 749 | |||
Total | $ | 3,654 | ||
13. | Other Assets |
2010 | 2009 | |||||||
Maintenance spares | $ | 3,541 | $ | 3,427 | ||||
Other receivables | 1,289 | — | ||||||
Other | 230 | 200 | ||||||
Total other assets | $ | 5,060 | $ | 3,627 | ||||
F-24
Table of Contents
14. | Accruals and Other Current Liabilities, and Other Long-Term Liabilities |
2010 | 2009 | |||||||
Payroll and related taxes | $ | 13,684 | $ | 13,743 | ||||
Clinical accruals | 2,423 | — | ||||||
Trade accruals | 1,597 | 1,276 | ||||||
Legal accruals | 967 | 926 | ||||||
Severance, restructuring and other charges accrual | 444 | 639 | ||||||
Deferred revenue | 425 | 605 | ||||||
Other accruals | 4,750 | 4,451 | ||||||
Total accruals and other current liabilities | $ | 24,290 | $ | 21,640 | ||||
2010 | 2009 | |||||||
Unfunded pension liability | $ | 8,152 | $ | 5,757 | ||||
Deferred tax liability | 1,338 | 2,077 | ||||||
Other liabilities | 1,685 | 1,062 | ||||||
Total other long-term liabilities | $ | 11,175 | $ | 8,896 | ||||
Balance at January 1, 2009 | $ | — | ||
Restructuring and other charges | 5,669 | |||
Cash payments | (5,030 | ) | ||
Balance at December 31, 2009 | $ | 639 | ||
Restructuring and other charges | 2,300 | |||
Cash payments | (2,495 | ) | ||
Balance at December 31, 2010 | $ | 444 | ||
15. | Pension and Other Employee Benefit Plans |
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2010 | 2009 | |||||||
Projected benefit obligation at January 1 | $ | 31,188 | $ | 25,816 | ||||
Service cost | 2,182 | 1,869 | ||||||
Interest cost | 1,662 | 1,318 | ||||||
Plan participants’ contributions | 694 | 773 | ||||||
Actuarial loss/(gain) | 6,710 | 1,341 | ||||||
Benefits paid and other disbursements | (465 | ) | (631 | ) | ||||
Foreign currency exchange rate changes | (2,073 | ) | 702 | |||||
Projected benefit obligation at December 31 | $ | 39,898 | $ | 31,188 | ||||
2010 | 2009 | |||||||
Fair value of plan assets at beginning of year | $ | 25,431 | $ | 20,444 | ||||
Actual gain/(loss) on plan assets | 6,584 | 3,198 | ||||||
Employer contribution | 1,224 | 1,203 | ||||||
Plan participants’ contributions | 694 | 773 | ||||||
Benefits paid and other disbursements | (465 | ) | (631 | ) | ||||
Foreign currency exchange rate changes | (1,722 | ) | 444 | |||||
Fair value of plan assets at end of year | $ | 31,746 | $ | 25,431 | ||||
Unfunded status at end of year | $ | (8,152 | ) | $ | (5,757 | ) | ||
Unamortized net actuarial loss in invested equity | 13,453 | 10,174 | ||||||
Unamortized prior service cost in invested equity | 225 | 258 | ||||||
Net amount recognized | $ | 5,526 | $ | 4,675 | ||||
2010 | 2009 | |||||||
Unfunded status — non-current liability | $ | (8,152 | ) | $ | (5,757 | ) | ||
Invested equity | 13,678 | 10,432 | ||||||
Net amount recognized | $ | 5,526 | $ | 4,675 | ||||
2010 | 2009 | 2008 | ||||||||||
Service cost | $ | 2,182 | $ | 1,869 | $ | 2,727 | ||||||
Interest cost | 1,662 | 1,318 | 1,480 | |||||||||
Expected return on plan assets | (1,980 | ) | (1,256 | ) | (2,138 | ) | ||||||
Amortization of net actuarial loss | 489 | 489 | 47 | |||||||||
Net periodic pension cost | $ | 2,353 | $ | 2,420 | $ | 2,116 | ||||||
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2010 | 2009 | |||||||
Discount rate | 4.7 | % | 5.0 | % | ||||
Expected return on plan assets | 6.2 | % | 7.1 | % | ||||
Rate of compensation increase | 3.5 | % | 3.6 | % |
2010 | 2009 | |||||||
Females | 23.3 | 23.2 | ||||||
Males | 21.6 | 21.5 |
2010 | 2009 | |||||||
Females | 24.3 | 24.1 | ||||||
Males | 22.5 | 22.4 |
2010 | 2009 | |||||||
Females | 25.2 | 25.1 | ||||||
Males | 23.4 | 23.2 |
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Increase/ | Increase/ | Increase/ | ||||||||||
(Decrease) in | (Decrease) in | (Decrease) in | ||||||||||
Projected Benefit | Service | Net Periodic | ||||||||||
Obligation | Cost | Pension Cost | ||||||||||
Increase of 0.25% in discount rate | $ | (2,789 | ) | $ | (237 | ) | $ | (321 | ) | |||
Decrease of 0.25% in discount rate | 3,038 | 261 | 346 | |||||||||
Increase of 0.25% in salary and inflation rates | 2,859 | 250 | 412 | |||||||||
Decrease of 0.25% in salary and inflation rates | (2,655 | ) | (250 | ) | (380 | ) | ||||||
Increase of one year in life expectancy | 1,071 | 80 | 143 | |||||||||
Decrease of one year in life expectancy | (1,071 | ) | (80 | ) | (143 | ) | ||||||
Increase of 0.25% in pension increase assumption | 1,026 | 75 | 137 | |||||||||
Decrease of 0.25% in pension increase assumption | (1,026 | ) | (75 | ) | (137 | ) |
2010 | 2009 | |||||||
Equities | 60.2 | % | 71.9 | % | ||||
Bonds | 20.7 | % | 17.9 | % | ||||
Property | 0.9 | % | 1.1 | % | ||||
Cash | — | — | ||||||
Absolute return fund | 18.2 | % | 9.1 | % | ||||
Total | 100.0 | % | 100.0 | % | ||||
Equities | 60 | %-80% | ||
Bonds | 10 | %-40% | ||
Property | 0 | %-10% | ||
Other | 0 | %-10% |
• | Interest rate risk — the risk that changes in interest rates result in a change in value of the liabilities not reflected in the changes in the asset values. This risk is managed by allocating a portion of the trusts’ assets to assets that are expected to behave in a manner similar to the liabilities. | |
• | Inflation risk — the risk that the inflation-linked liabilities of salary growth and pension increases increase at a faster rate than the assets held. This risk is managed by allocating a portion of the plans’ to investments with returns that are expected to exceed inflation. | |
• | Market risk — the risk that the return from assets is not sufficient to meet liabilities. This risk is managed by monitoring the performance of the assets and requesting regular valuations of the liabilities. A professionally qualified actuary performs regular valuations of the plans and the progress |
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of the assets is examined against the plans’ funding target. Further, the assets of the plans are invested in a range of asset classes in order to limit exposure to any particular asset class or security. |
• | Manager risk — the risk that the chosen manager does not meet its investment objectives, or deviates from its intended risk profile. This risk is managed by regularly monitoring the managers responsible for the investment of the assets relative to the agreed objectives and risk profile. | |
• | Cash flow risk — the risk that the cash flow needs of the plan requires a disinvestment of assets at an inopportune time. As part of the asset allocation strategy, the proportion of assets held by the plans in liability matching assets will explicitly consider the cash flows expected to arise in the near term. |
2010 | 2009 | |||||||
Equities | 7.3 | % | 8.0 | % | ||||
Property | 6.3 | % | 7.0 | % | ||||
Bonds | 3.8 | % | 4.3 | % | ||||
Cash | 2.1 | % | 2.3 | % | ||||
Absolute return fund | 5.5 | % | 5.6 | % |
Quoted Prices | Other | |||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Equities | $ | 19,111 | $ | — | $ | — | $ | 19,111 | ||||||||
Bonds | 6,542 | — | — | 6,542 | ||||||||||||
Property | — | — | 286 | 286 | ||||||||||||
Absolute return fund | 5,807 | — | — | 5,807 | ||||||||||||
Total | $ | 31,460 | $ | — | $ | 286 | $ | 31,746 | ||||||||
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Total | ||||
Beginning balance at January 1, 2010 | $ | 286 | ||
Unrealized loss on property assets | — | |||
Ending balance at December 31, 2010 | $ | 286 | ||
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16. | Share-based Compensation |
2010 | 2009 | |||||||
1996 Plan | 633 | 644 | ||||||
1998 Plan | 215 | 224 | ||||||
1999 Plan | 713 | 1,186 | ||||||
2006 Long Term Incentive Plan | 1,400 | 873 | ||||||
Total | 2,961 | 2,927 | ||||||
Weighted Average | Aggregate | |||||||||||||||
Remaining | Intrinsic | |||||||||||||||
No. of Options | WAEP(1) | Contractual Life | Value | |||||||||||||
(In thousands) | (In years) | (In thousands) | ||||||||||||||
Outstanding at December 31, 2008 | 3,253 | $ | 23.55 | |||||||||||||
Exercised | (11 | ) | 2.40 | |||||||||||||
Granted | 377 | 7.70 | ||||||||||||||
Forfeited | (15 | ) | 12.42 | |||||||||||||
Expired | (275 | ) | 32.29 | |||||||||||||
Transfers | (402 | ) | 25.41 | |||||||||||||
Outstanding at December 31, 2009 | 2,927 | $ | 20.58 | |||||||||||||
Exercised | (24 | ) | 2.44 | |||||||||||||
Granted | 341 | 6.85 | ||||||||||||||
Forfeited | (7 | ) | 7.57 | |||||||||||||
Expired | (480 | ) | 38.63 | |||||||||||||
Transfers | 204 | 16.03 | ||||||||||||||
Outstanding at December 31, 2010 | 2,961 | $ | 15.94 | 5.1 | $ | 906 | ||||||||||
Vested and expected to vest at December 31, 2010 | 2,897 | $ | 16.12 | 5.0 | $ | 902 | ||||||||||
Exercisable at December 31, 2010 | 2,004 | $ | 19.07 | 3.6 | $ | 886 | ||||||||||
(1) | Weighted-average exercise price |
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Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Options | Remaining | Options | Remaining | |||||||||||||||||||||
Outstanding | Contractual Life | WAEP | Outstanding | Contractual Life | WAEP | |||||||||||||||||||
(In thousands) | (In years) | (In thousands) | (In years) | |||||||||||||||||||||
$ 1.93 — $10.00 | 1,368 | 6.2 | $ | 6.38 | 603 | 3.3 | $ | 5.17 | ||||||||||||||||
$10.01 — $25.00 | 1,106 | 4.9 | 15.70 | 959 | 4.6 | 15.76 | ||||||||||||||||||
$25.01 — $40.00 | 170 | 5.6 | 25.39 | 125 | 5.0 | 25.52 | ||||||||||||||||||
$40.01 — $58.60 | 317 | 0.4 | 52.91 | 317 | 0.4 | 52.87 | ||||||||||||||||||
$ 1.93 — $58.60 | 2,961 | 5.1 | $ | 15.94 | 2,004 | 3.6 | $ | 19.07 | ||||||||||||||||
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2010 | 2009 | 2008 | ||||||||||
Risk-free interest rate | 2.02 | % | 1.46 | % | 2.97 | % | ||||||
Expected volatility | 67.1 | % | 95.6 | % | 71.9 | % | ||||||
Expected dividend yield | — | — | — | |||||||||
Expected life(1) | — | — | — |
(1) | The expected lives of options granted in 2010, as derived from the output of the binomial model, ranged from 4.9 years to 7.5 years (2009: 4.5 years to 7.1 years; 2008: 4.5 years to 7.3 years). The contractual life of the options, which is not later than 10 years from the date of grant, is used as an input into the binomial model. |
Weighted-Average | ||||||||
Grant Date Fair | ||||||||
No. of RSUs | Value | |||||||
Non-vested at December 31, 2008 | 702 | $ | 19.27 | |||||
Granted | 336 | 7.75 | ||||||
Vested | (209 | ) | 18.12 | |||||
Forfeited | (41 | ) | 15.58 | |||||
Transfers | (94 | ) | 19.10 | |||||
Non-vested at December 31, 2009 | 694 | $ | 16.44 | |||||
Granted | 548 | 7.05 | ||||||
Vested | (184 | ) | 18.45 | |||||
Forfeited | (28 | ) | 11.00 | |||||
Transfers | 22 | 14.84 | ||||||
Non-vested at December 31, 2010 | 1,052 | $ | 9.88 | |||||
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2010 | 2009 | 2008 | ||||||||||
Weighted-average share price | $ | 5.65 | $ | 6.61 | $ | 23.27 | ||||||
Weighted-average exercise price | $ | 4.80 | $ | 5.62 | $ | 18.93 | ||||||
Expected volatility(1) | 64.0 | % | 82.7 | % | 74.6 | % | ||||||
Expected life | 6 months | 3 months | 3 months | |||||||||
Expected dividend yield | — | — | — | |||||||||
Risk-free interest rate | 0.21 | % | 0.15 | % | 1.52 | % |
(1) | The expected volatility was determined based on the implied volatility of traded options on Elan’s stock. |
2010 | 2009 | 2008 | ||||||||||
Cost of sales | $ | 1,474 | $ | 1,592 | $ | 1,993 | ||||||
Selling, general and administrative expenses | 4,550 | 4,134 | 6,079 | |||||||||
Research and development expenses | 1,905 | 1,450 | 1,793 | |||||||||
Total | $ | 7,929 | $ | 7,176 | $ | 9,865 | ||||||
2010 | 2009 | 2008 | ||||||||||
RSUs | $ | 5,828 | $ | 4,857 | $ | 6,108 | ||||||
Stock options | 1,978 | 2,134 | 3,526 | |||||||||
Employee equity purchase plans | 123 | 185 | 231 | |||||||||
Total | $ | 7,929 | $ | 7,176 | $ | 9,865 | ||||||
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17. | Fair Value Measurements |
18. | Leases |
Due in: | ||||
2011 | $ | 1,931 | ||
2012 | 1,950 | |||
2013 | 1,995 | |||
2014 | 1,838 | |||
2015 | 1,893 | |||
2016 and thereafter | 7,684 | |||
Total | $ | 17,291 | ||
19. | Commitments and Contingencies |
2010 | 2009 | |||||||
Contracted for | $ | 3,124 | $ | 4,007 | ||||
Not-contracted for | 2,176 | 3,995 | ||||||
Total | $ | 5,300 | $ | 8,002 | ||||
20. | Litigation |
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21. | Related Parties |
• | Accounting, information technology, taxation, legal, corporate strategy, investor relations, corporate governance and other professional services; | |
• | Employee benefit administration, including equity award and pension services; and | |
• | Cash and treasury management. |
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22. | Subsequent Events |
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Annex A | Business Combination Agreement and Plan of Merger | |
Annex B | Opinion of Morgan Stanley & Co. Incorporated | |
Annex C | Form of Shareholder’s Agreement | |
Annex D | Form of Amended and Restated Articles of Incorporation of Alkermes | |
Annex E | Form of Memorandum and Articles of Association of New Alkermes |
Table of Contents
BY AND AMONG
ELAN CORPORATION, PLC,
ANTLER SCIENCE TWO LIMITED,
ELAN SCIENCE FOUR LIMITED,
EDT PHARMA HOLDINGS LIMITED,
EDT US HOLDCO INC.,
ANTLER ACQUISITION CORP.,
AND
ALKERMES, INC.
DATED AS OF MAY 9, 2011
Table of Contents
Page | ||||||
Article I Certain Definitions | ||||||
Section 1.1. | Definitions | A-2 | ||||
Section 1.2. | Usage | A-15 | ||||
Article II The Merger; Closing of Transactions | ||||||
Section 2.1. | Time and Place of Closing | A-16 | ||||
Section 2.2. | Elan Proceeds | A-16 | ||||
Section 2.3. | Alkermes Payments | A-16 | ||||
Section 2.4. | The Merger | A-16 | ||||
Section 2.5. | Effective Time | A-16 | ||||
Section 2.6. | Effects of the Merger | A-16 | ||||
Section 2.7. | Governing Documents | A-17 | ||||
Section 2.8. | Officers and Directors | A-17 | ||||
Section 2.9. | Effect on Capital Stock | A-17 | ||||
Section 2.10. | Exchange of Shares and Certificates | A-18 | ||||
Section 2.11. | Alkermes Stock Based Awards | A-20 | ||||
Section 2.12. | Additional Assets | A-20 | ||||
Section 2.13. | Deliveries by Elan and the Continuing Affiliates | A-20 | ||||
Section 2.14. | Deliveries by Alkermes | A-21 | ||||
Section 2.15. | Closing Payments Adjustment | A-22 | ||||
Article III Representations and Warranties of Elan | ||||||
Section 3.1. | Incorporation; Authorization | A-24 | ||||
Section 3.2. | Capitalization; Structure | A-25 | ||||
Section 3.3. | No Consents | A-26 | ||||
Section 3.4. | Financial Statements | A-26 | ||||
Section 3.5. | No Undisclosed Liabilities | A-26 | ||||
Section 3.6. | Properties; Sufficiency | A-26 | ||||
Section 3.7. | Absence of Certain Changes | A-27 | ||||
Section 3.8. | Litigation; Orders | A-27 | ||||
Section 3.9. | Intellectual Property | A-28 | ||||
Section 3.10. | Licenses; Authorizations; Reports | A-28 | ||||
Section 3.11. | Labor Matters | A-29 | ||||
Section 3.12. | Compliance with Laws | A-29 | ||||
Section 3.13. | Insurance | A-30 | ||||
Section 3.14. | Material Contracts | A-31 | ||||
Section 3.15. | Brokers, Finders | A-31 | ||||
Section 3.16. | Opinion | A-32 | ||||
Section 3.17. | Board Approval | A-32 | ||||
Section 3.18. | No Shareholder Vote | A-32 | ||||
Section 3.19. | Environmental Health and Safety Matters | A-32 | ||||
Section 3.20. | Employee Benefit Plans | A-33 | ||||
Section 3.21. | Acquisition of Shares for Investment | A-35 | ||||
Section 3.22. | Operations of Certain Entities | A-35 | ||||
Section 3.23. | Products; Recalls | A-35 |
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Page | ||||||
Article IV Representations and Warranties of Alkermes | ||||||
Section 4.1. | Incorporation; Authorization | A-35 | ||||
Section 4.2. | Capitalization; Structure | A-36 | ||||
Section 4.3. | Litigation; Orders | A-37 | ||||
Section 4.4. | Authorizations; Consents | A-37 | ||||
Section 4.5. | Compliance with Laws | A-37 | ||||
Section 4.6. | SEC Reports; Financial Statements | A-37 | ||||
Section 4.7. | No Undisclosed Liabilities | A-37 | ||||
Section 4.8. | Absence of Certain Changes | A-38 | ||||
Section 4.9. | Brokers, Finders | A-38 | ||||
Section 4.10. | Opinions of Alkermes Financial Advisor | A-38 | ||||
Section 4.11. | Board Approval | A-38 | ||||
Section 4.12. | Required Shareholder Vote | A-38 | ||||
Section 4.13. | Antitakeover Statute | A-38 | ||||
Section 4.14. | Financing | A-38 | ||||
Article V Covenants of the Parties | ||||||
Section 5.1. | Access to Information; Retention of Records; Confidentiality | A-39 | ||||
Section 5.2. | Filings; Other Actions; Notification | A-41 | ||||
Section 5.3. | Further Assurances | A-42 | ||||
Section 5.4. | Conduct of Business | A-45 | ||||
Section 5.5. | Public Announcements | A-47 | ||||
Section 5.6. | Guarantees | A-47 | ||||
Section 5.7. | Affiliate Agreements | A-48 | ||||
Section 5.8. | No Solicitation | A-48 | ||||
Section 5.9. | Non-Compete; Employment Non-Solicitation | A-49 | ||||
Section 5.10. | Notices of Certain Events | A-49 | ||||
Section 5.11. | Preparation of SEC Documents | A-50 | ||||
Section 5.12. | Shareholder Meetings; Board Recommendations | A-51 | ||||
Section 5.13. | Stock Exchange Listing | A-51 | ||||
Section 5.14. | Insurance | A-51 | ||||
Section 5.15. | Indebtedness | A-51 | ||||
Section 5.16. | Alkermes Common Stock | A-51 | ||||
Section 5.17. | Resignations | A-51 | ||||
Section 5.18. | Designated Assets | A-51 | ||||
Section 5.19. | Directors and Officers Indemnification | A-51 | ||||
Section 5.20. | Additional Financial Statements | A-52 | ||||
Section 5.21. | Financing | A-52 | ||||
Section 5.22. | Re-registration | A-55 | ||||
Section 5.23. | Change of Name of Antler Science One Public Limited Company | A-55 | ||||
Section 5.24. | Reduction of Share Capital | A-55 | ||||
Section 5.25. | Acquisition of Ordinary Shares of New Alkermes Denominated in Euro | A-55 | ||||
Section 5.26. | Purchase of Own Shares and Re-issue of Treasury Shares | A-56 | ||||
Section 5.27. | Transfer and Assumption of Alkermes Equity Incentive Plans | A-56 | ||||
Section 5.28. | Transfer Out of Irish Dormant Companies | A-56 |
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Page | ||||||
Article VI Employee Benefits Matters | ||||||
Section 6.1. | Employee Plans | A-56 | ||||
Section 6.2. | U.S. Employees | A-57 | ||||
Section 6.3. | Ireland Employees | A-57 | ||||
Section 6.4. | Miscellaneous | A-58 | ||||
Article VII Tax Matters | ||||||
Section 7.1. | Tax Representations of Elan | A-59 | ||||
Section 7.2. | Tax Indemnification | A-60 | ||||
Section 7.3. | Allocation of Certain Taxes | A-61 | ||||
Section 7.4. | Carryovers, Refunds and Related Matters | A-62 | ||||
Section 7.5. | Preparation and Filing of Tax Returns | A-62 | ||||
Section 7.6. | Tax Contests | A-63 | ||||
Section 7.7. | Cooperation | A-64 | ||||
Section 7.8. | Termination of Tax Sharing Agreements | A-64 | ||||
Section 7.9. | Tax Election | A-64 | ||||
Section 7.10. | Certain Disputes | A-65 | ||||
Section 7.11. | Definitions | A-65 | ||||
Section 7.12. | Survival | A-66 | ||||
Section 7.13. | Treatment for U.S. Federal Income Tax Purposes | A-66 | ||||
Section 7.14. | Adjustments | A-66 | ||||
Article VIII Conditions Precedent | ||||||
Section 8.1. | Conditions to Each Party’s Obligation | A-66 | ||||
Section 8.2. | Additional Conditions to Alkermes’ Obligations | A-67 | ||||
Section 8.3. | Additional Conditions to Obligations of the Elan Parties | A-68 | ||||
Article IX Survival; Indemnification | ||||||
Section 9.1. | Survival | A-68 | ||||
Section 9.2. | Indemnification by Elan | A-68 | ||||
Section 9.3. | Indemnification by Alkermes | A-69 | ||||
Section 9.4. | Indemnification Procedures | A-70 | ||||
Section 9.5. | Limitations; Additional Procedures | A-71 | ||||
Section 9.6. | Exclusive Tax Indemnification | A-72 | ||||
Article X Termination | ||||||
Section 10.1. | Termination | A-72 | ||||
Section 10.2. | Procedure and Effect of Termination | A-73 | ||||
Section 10.3. | Termination Payments | A-73 | ||||
Article XI Miscellaneous | ||||||
Section 11.1. | Counterparts | A-74 | ||||
Section 11.2. | Governing Law; Jurisdiction and Forum; Waiver of Jury Trial | A-74 | ||||
Section 11.3. | Entire Agreement; Third Party Beneficiaries | A-75 | ||||
Section 11.4. | Expenses | A-75 |
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Page | ||||||
Section 11.5. | Notices | A-76 | ||||
Section 11.6. | Successors and Assigns | A-77 | ||||
Section 11.7. | Headings; Definitions | A-77 | ||||
Section 11.8. | Amendments and Waivers | A-77 | ||||
Section 11.9. | Severability | A-77 | ||||
Section 11.10. | Specific Performance | A-77 |
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A-1
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A-2
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A-3
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A-4
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A-5
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A-6
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A-7
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A-8
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A-9
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A-10
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A-11
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Term | Section | |
Accrued Bonus Expense | 6.1(b) | |
Acquired Confidential Information | 5.1(c) | |
Adjustment Payment Date | 2.15(f) | |
Affiliate Agreement | 3.14 | |
Agreement | Preamble | |
Alkermes | Preamble | |
Alkermes Balance Sheet | 4.7 | |
Alkermes Balance Sheet Date | 4.7 | |
Alkermes Certificates | 2.10(b) | |
Alkermes Change in Recommendation | 10.1(e) | |
Alkermes Disclosure Schedule | Article IV | |
Alkermes Financial Statements | 4.6(b) | |
Alkermes Indemnified Parties | 9.2(a) | |
Alkermes Options | 4.2(a) | |
Alkermes Proxy Statement | 5.11(a) | |
Alkermes SEC Reports | 4.6 | |
Alkermes Shareholders Meeting | 5.12 | |
Alkermes Stock Awards | 4.2(a) | |
Alkermes Tax Indemnitees | 7.11(a) | |
Ancillary Agreements | Recitals | |
Anti-Bribery Laws | 3.12(d)(i) | |
Articles of Merger | 2.5 | |
Balance Sheet Date | 3.4(a) | |
Business Assets | Recitals | |
Business Balance Sheet | 3.4(a) | |
Business Material Contracts | 3.14 | |
Business Real Property | 3.6(b) | |
Cash Payment | 2.2 | |
Closing | 2.1 | |
Closing Date | 2.1 |
A-12
Table of Contents
Term | Section | |
Closing Modified Working Capital | 2.15(b) | |
Closing Net Cash Amount | 2.15(b) | |
Closing Payment Certificate | 2.15(a) | |
Closing Payments | 2.2 | |
COBRA coverage | 6.2(b) | |
Commitment Letter | 4.14(a) | |
Confidentiality Agreement | 5.1(c) | |
Deeds of Transfer | 5.3(i) | |
Definitive Financing Agreements | 5.21(a) | |
Designated Assets | 5.18 | |
Effective Time | 2.5 | |
Elan | Preamble | |
Elan Disclosure Schedule | Article III | |
Elan Indemnified Parties | 9.3(a) | |
Elan Parties | Preamble | |
Elan Shareholder | Recitals | |
Elan Tax Indemnitors | 7.11(b) | |
ELN005 Agreement | 5.7(b) | |
Estimated Closing Adjustment Amount | 2.15(a) | |
Estimated Modified Working Capital | 2.15(a) | |
Estimated Net Cash Amount | 2.15(a) | |
Exchange Agent | 2.10(a) | |
Exchange Fund | 2.10(a) | |
Exchange Ratio | 2.9(a) | |
FDA | 3.10 | |
FDCA | 3.10 | |
Final Closing Adjustment Amount | 2.15(d) | |
Final Modified Working Capital | 2.15(d) | |
Final Net Cash Amount | 2.15(d) | |
Financing | 4.14(a) | |
Financing Parties | 5.21(b) | |
Governmental Antitrust Authority | 5.2(c) | |
Historical Financial Statements | 3.4(a) | |
Holdco | Preamble | |
IMB | 3.10 | |
Import/Export Control Laws | 3.12(b) | |
Indemnity Recipient | 7.14 | |
Interco | Preamble | |
Irish Revenue | 7.6(b) | |
Licenses | 3.10 | |
Merger | Recitals | |
Merger Consideration | 2.9(a) | |
Merger Sub | Preamble | |
Neutral Auditors | 2.15(d) |
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Term | Section | |
New Alkermes | Preamble | |
New Alkermes 401(k) Plan | 6.2(c) | |
New Alkermes Transition Bonus Plan | 6.1(b) | |
Notice of Claim | 9.4(a) | |
Parties | Preamble | |
PHSA | 3.10 | |
Plan of Merger | Recitals | |
Post-Closing Period | 7.11(c) | |
Post-Closing Straddle Period | 7.11(h) | |
Pre-Closing Period | 7.11(d) | |
Pre-Closing Straddle Period | 7.11(e) | |
Proposed Final Closing Adjustment Amount | 2.15(b) | |
Purchased Interests | Recitals | |
Receiving Party | 5.1(c) | |
Reorganization | Recitals | |
Relevant Indemnity Payments | 7.14 | |
Reorganization Transfer Agreements | Recitals | |
Reorganization Transfers | Recitals | |
Required Alkermes Vote | 4.12 | |
Required Financial Information | 5.21(b) | |
Resolution Period | 2.15(c) | |
Retained Confidential Information | 5.1(c) | |
Returns | 7.11(f) | |
Rights | 4.2(a) | |
SDCA | 7.6(d) | |
Shareholder’s Agreement | Recitals | |
Straddle Period | 7.11(g) | |
Straddle Period Return | 7.5(c) | |
Surviving Corporation | 2.4 | |
Tax | 7.11(i) | |
Taxes | 7.11(i) | |
Tax Accounting Referee | 7.11(j) | |
Tax Benefits | 7.14(b) | |
Tax Claim | 7.11(k) | |
Tax Proceeding | 7.6(e) | |
Tax Returns | 7.11(f) | |
Taxing Authority | 7.11(l) | |
TCA | 7.1(f) | |
Termination Date | 10.1(b) | |
Threshold | 9.5 | |
Transactions | Recitals | |
Transfer Tax | 7.11(m) | |
Transferring Subsidiaries | Recitals | |
U.S. Holdco | Preamble |
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Attn.: | Daniel S. Sternberg, Esq. |
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By: | /s/ William F. Daniel |
By: | /s/ William F. Daniel |
By: | /s/ William F. Daniel |
By: | /s/ William F. Daniel |
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EDT US HOLDCO INC. | ||
By: | /s/ John L. Donahue |
Title: | Vice President and Secretary |
By: | /s/ John L. Donahue |
Title: | Vice President and Secretary |
By: | /s/ Gordon G. Pugh |
Title: | Senior Vice President and Chief Operating Officer |
By: | /s/ James M. Frates |
Title: | Senior Vice President, Chief Financial Officer and Treasurer |
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ARTICLE I DEFINITIONS | ||||||
Section 1.1 | Definitions | C-1 | ||||
Section 1.2 | Other Definitional Provisions | C-6 | ||||
ARTICLE II REPRESENTATIONS AND WARRANTIES | ||||||
Section 2.1 | Representations and Warranties of the Company | C-7 | ||||
Section 2.2 | Representations and Warranties of the Shareholder and the Shareholder Parent | C-7 | ||||
ARTICLE III CORPORATE GOVERNANCE | ||||||
Section 3.1 | Board Representation | C-8 | ||||
Section 3.2 | Use of Information | C-10 | ||||
ARTICLE IV STANDSTILL; VOTING | ||||||
Section 4.1 | Standstill Restrictions | C-10 | ||||
Section 4.2 | Attendance at Meetings | C-13 | ||||
Section 4.3 | Voting | C-13 | ||||
Section 4.4 | Preemption Rights | C-13 | ||||
ARTICLE V TRANSFER RESTRICTIONS | ||||||
Section 5.1 | Transfer Restrictions | C-13 | ||||
Section 5.2 | Legends on Shareholder Shares; Securities Act Compliance | C-15 | ||||
Section 5.3 | Change of Control of the Shareholder Parent | C-16 | ||||
ARTICLE VI REGISTRATION RIGHTS | ||||||
Section 6.1 | Demand Request | C-17 | ||||
Section 6.2 | Piggy-Back Registration | C-19 | ||||
Section 6.3 | Termination of Registration Obligation | C-21 | ||||
Section 6.4 | Registration Procedures | C-21 | ||||
Section 6.5 | Registration Expenses | C-24 | ||||
Section 6.6 | Indemnification; Contribution | C-25 | ||||
Section 6.7 | Indemnification Procedures | C-27 | ||||
Section 6.8 | Shelf Take-Down | C-27 | ||||
Section 6.9 | Rule 144; Rule 144A | C-28 | ||||
Section 6.10 | Holdback | C-28 |
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ARTICLE VII MISCELLANEOUS | ||||||
Section 7.1 | Termination | C-28 | ||||
Section 7.2 | Injunctive Relief | C-28 | ||||
Section 7.3 | Assignments | C-29 | ||||
Section 7.4 | Amendments; Waiver | C-29 | ||||
Section 7.5 | Notices | C-29 | ||||
Section 7.6 | Governing Law; Submission to Jurisdiction; Selection of Forum; Waiver of Trial by Jury | C-30 | ||||
Section 7.7 | Interpretation | C-31 | ||||
Section 7.8 | Entire Agreement; No Other Representations | C-31 | ||||
Section 7.9 | No Third-Party Beneficiaries | C-31 | ||||
Section 7.10 | Severability | C-31 | ||||
Section 7.11 | Counterparts | C-31 | ||||
Section 7.12 | Effectiveness | C-31 | ||||
Section 7.13 | Relationship of the Parties | C-31 | ||||
Section 7.14 | Accounting Matters | C-31 | ||||
Section 7.15 | Further Assurances | C-32 | ||||
Section 7.16 | Rights and Obligations of Parties | C-32 |
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OF
ALKERMES, INC.
ARTICLES OF INCORPORATION
OF
ALKERMES, INC.
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of
ALKERMES PUBLIC LIMITED COMPANY
Earlsfort Centre
Earlsfort Terrace
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A PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
of
Alkermes Public Limited Company
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Names, Addresses and Descriptions of Subscribers | Number of Shares Taken by Each Subscriber | |
Goodbody Subscriber One Limited International Financial Services Centre North Wall Quay Dublin 1 | One ordinary share of US$0.01 | |
Limited liability company |
Name: | Isabel Hyde |
Address: | A&L Goodbody |
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A PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
of
Alkermes Public Limited Company
“1963 Act” | means the Companies Act 1963 (No. 33 of 1963) as amended by the Companies Acts 1977 to 2005 and Parts 2 and 3 of the Investment Funds, Companies and Miscellaneous Provisions Act 2006 and all statutory instruments which are to be read as one with, or construed, or read together as one with the Companies Acts. | |
“1983 Act” | means the Companies (Amendment) Act 1983. | |
“1990 Act” | means the Companies Act 1990. | |
“Address” | includes, without limitation, any number or address used for the purposes of communication by way of electronic mail or other electronic communication. | |
“Articles”or“Articles of Association” | means these articles of association of the Company, as amended from time to time by Special Resolution. | |
“Assistant Secretary” | means any person appointed by the Secretary from time to time to assist the Secretary. | |
“Auditors” | means the persons for the time being performing the duties of auditors of the Company. | |
“Board” | means the board of directors for the time being of the Company. | |
“clear days” | means, in relation to a period of notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect. | |
“Companies Acts” | means the Companies Acts1963-2009. | |
“Company” | means the above-named company. | |
“Court” | means the Irish High Court. | |
“Directors” | means the directors for the time being of the Company. | |
“dividend” | includes interim dividends and bonus dividends. | |
“Dividend Periods” | shall have the meaning given to such term in Article 15.2. | |
“electronic communication” | shall have the meaning given to those words in the Electronic Commerce Act 2000. |
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“electronic signature” | shall have the meaning given to those words in the Electronic Commerce Act 2000. | |
“Exchange” | means any securities exchange or other system on which the Shares of the Company may be listed or otherwise authorised for trading from time to time. | |
“Exchange Act” | shall have the meaning given to such term in Article 100. | |
“Member” | means a person who has agreed to become a Member of the Company and whose name is entered in the Register of Members as a registered holder of Shares. | |
“Memorandum” | means the memorandum of association of the Company as amended from time to time by Special Resolution. | |
“Merger” | means the merger between Alkermes, Inc. and Antler Acquisition Corp. consummated at the time these Articles became effective and as a result of which Alkermes, Inc. became the surviving entity and an indirect wholly-owned subsidiary of the Company. | |
“month” | means a calendar month. | |
“officer” | means any executive of the Company that has been designated by the Company the title “officer” and for the avoidance of doubt does not have the meaning given to such term under the 1963 Act. | |
“Ordinary Resolution” | means an ordinary resolution of the Company’s Members within the meaning of section 141 of the 1963 Act. | |
“paid-up” | meanspaid-up as to the nominal value and any premium payable in respect of the issue of any Shares and includes credited aspaid-up. | |
“Redeemable Shares” | means redeemable shares in accordance with section 206 of the 1990 Act. | |
“Register of Members”or“Register” | means the register of Members of the Company maintained by or on behalf of the Company, in accordance with the Companies Acts and includes (except where otherwise stated) any duplicate Register of Members. | |
“registered office” | means the registered office for the time being of the Company. | |
“Seal” | means the seal of the Company, if any, and includes every duplicate seal. | |
“Secretary” | means the person appointed by the Board to perform any or all of the duties of secretary of the Company and includes an Assistant Secretary and any person appointed by the Board to perform the duties of secretary of the Company. | |
“Share”and“Shares” | means a share or shares in the capital of the Company. | |
“Shareholder Rights Plan” | means a shareholder rights plan providing for the right of Members to purchase securities of the Company in the event of any proposed acquisition of a majority of the Shares where such plan is not approved or recommended by the Board. | |
“Special Resolution” | means a special resolution of the Company’s Members within the meaning of section 141 of the 1963 Act. |
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CHANGE OF LOCATION OF REGISTERED OFFICE; AND
ALTERATION OF CAPITAL
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Arthur Cox Building
Earlsfort Terrace
Dublin 2
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