UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 12, 2018

 


 

TESARO, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-35587

 

27-2249687

(state or other jurisdiction of

 

(Commission

 

(I.R.S. Employer

incorporation)

 

File Number)

 

Identification No.)

 

1000 Winter Street

 

 

Waltham, Massachusetts

 

02451

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (339) 970-0900

 

 

(Former name or former address, if changed since last report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

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

 

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

 

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

 

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

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging Growth Company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 



 

Section 2 — Financial Information

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

On July 12, 2018, TESARO, Inc. (the “Company”) completed the sale to TerSera Therapeutics LLC (“TerSera”) of the Company’s rights to rolapitant (the “Sale”) in the United States and Canada (the “Territory”).  The Sale was pursuant to the Asset Purchase Agreement (the “APA”) between the Company and TerSera previously announced by the Company in a Current Report on Form 8-K filed on June 29, 2018.  The Sale includes both the oral formulation of rolapitant distributed and sold under the brand name VARUBI® and the intravenous formulation of rolapitant sold under the brand name VARUBI® IV (the “IV Product”).

 

At the closing, the Company was paid $35,000,000 in cash.  Pursuant to the terms of the APA, an additional $5,000,000 in cash will be paid by TerSera to the Company by January 12, 2020.  The Company will also be eligible to receive certain post-closing royalties and milestone payments.  For a period of twelve years after consummation of the Sale (the “Royalty Term”), TerSera will pay to the Company a percentage of any consideration for (i) the transfer of intellectual property rights relating to future sales of rolapitant and (ii) the license or sublicense of any intellectual property rights related to rolapitant, in each case, to the extent allocable to non-oncology indications.  TerSera will also pay to the Company milestone payments of (a) $10,000,000 each time the marketing approval for a new indication of rolapitant in the United States is first granted and (b) $10,000,000 the first time aggregate net sales of a reformulated version of the IV Product during a calendar year reach or exceed $50,000,000.  In addition, during the Royalty Term, TerSera will pay to the Company a royalty at the rate of 20% of the aggregate net sales of the IV Product in the Territory for any calendar year in which such sales reach or exceed $100,000,000 on the net sales that exceed such threshold.

 

In connection with the completion of the Sale, the Company is filing as Exhibit 99.1 hereto certain pro forma financial information giving pro forma effect to the Sale as of the dates indicated therein.

 

Section 9 — Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits.

 

(b)                                 Pro forma financial information.

 

Unaudited pro forma condensed consolidated balance sheet as of March 31, 2018 and unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2018 and the year ended December 31, 2017, in each case giving pro forma effect to the Sale.

 

(d)              Exhibits

 

The following exhibit is being filed herewith:

 

Exhibit No.

 

Document

99.1

 

Pro Forma Financial Information Related to the Sale

 

2



 

SIGNATURES

 

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

 

 

 

TESARO, Inc.

 

 

 

 

 

 

 

By:

/s/ Joseph L. Farmer

 

 

Joseph L. Farmer

 

 

Senior Vice President, General Counsel and Secretary

 

 

 

Dated: July 18, 2018

 

 

 

3


Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

On July 12, 2018, TESARO, Inc. (the “Company”) completed the sale to TerSera Therapeutics LLC (“TerSera”) of the Company’s rights to rolapitant (the “Sale”) in the United States and Canada (the “Territory”).  The Sale was pursuant to the Asset Purchase Agreement (the “APA”) between the Company and TerSera previously announced by the Company in a Current Report on Form 8-K filed on June 29, 2018.  The Sale includes both the oral formulation of rolapitant distributed and sold under the brand name VARUBI® and the intravenous formulation of rolapitant sold under the brand name VARUBI® IV (the “IV Product”).

 

At the closing, the Company was paid $35,000,000 in cash.  Pursuant to the terms of the APA, an additional $5,000,000 in cash will be paid by TerSera to the Company by January 12, 2020.  The Company will also be eligible to receive certain post-closing royalties and milestone payments.  For a period of twelve years after consummation of the Sale (the “Royalty Term”), TerSera will pay to the Company a percentage of any consideration for (i) the transfer of intellectual property rights relating to future sales of rolapitant and (ii) the license or sublicense of any intellectual property rights related to rolapitant, in each case, to the extent allocable to non-oncology indications.  TerSera will also pay to the Company milestone payments of (a) $10,000,000 each time the marketing approval for a new indication of rolapitant in the United States is first granted and (b) $10,000,000 the first time aggregate net sales of a reformulated version of the IV Product during a calendar year reach or exceed $50,000,000.  In addition, during the Royalty Term, TerSera will pay to the Company a royalty at the rate of 20% of the aggregate net sales of the IV Product in the Territory for any calendar year in which such sales reach or exceed $100,000,000 on the net sales that exceed such threshold.

 

The unaudited pro forma condensed consolidated balance sheet as of March 31, 2018 has been prepared to give effect to the Sale as if it occurred on March 31, 2018.  The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2018 and the year ended December 31, 2017 have been prepared to give effect to the Sale as if it occurred on January 1, 2017.

 

The unaudited pro forma condensed consolidated financial information was prepared utilizing the Company’s historical financial data derived from the unaudited condensed consolidated financial statements included in its Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”) on May 3, 2018 and from the audited consolidated financial statements for the year ended December 31, 2017 included in its Annual Report on Form 10-K filed with the SEC on February 28, 2018.  The unaudited pro forma condensed consolidated financial statements reflect pro forma adjustments that are based on preliminary estimates and assumptions and other information available at the time of preparation.  The Company believes that all such adjustments are (i) directly attributable to the Sale, (ii) factually supportable, and (iii) expected to have a continuing impact on the Company’s future consolidated results of operations or financial condition.  The pro forma adjustments are described in the notes to the unaudited pro forma information and are based upon available information and assumptions that the Company believes are reasonable.

 

The unaudited pro forma condensed consolidated financial information included herein is for informational purposes only and is not necessarily indicative of what the Company’s financial performance and financial position would have been had the Sale been completed on the dates assumed, nor is such unaudited pro forma condensed consolidated financial information necessarily indicative of the results to be expected in any future period.  Actual results may differ significantly from those reflected in the unaudited pro forma condensed consolidated financial statements for various reasons, including but not limited to, the differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial statements and actual results.

 



 

TESARO, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2018

(all amounts in 000’s, except share and per share data)

 

 

 

TESARO, Inc.

 

Impact of

 

TESARO, Inc.

 

 

 

Historical

 

Sale

 

Pro Forma

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

498,980

 

$

35,000

(a)

$

533,980

 

Accounts receivable

 

44,182

 

 

44,182

 

Inventories

 

74,444

 

(5,458

)(b)

68,986

 

Other current assets

 

38,184

 

 

38,184

 

Total current assets

 

655,790

 

29,542

 

685,332

 

 

 

 

 

 

 

 

 

Intangible assets, net

 

54,947

 

(17,598

)(c)

37,349

 

Property and equipment, net

 

10,272

 

 

10,272

 

Restricted cash

 

2,556

 

 

2,556

 

Other assets

 

6,127

 

5,000

(d)

11,127

 

Total assets

 

$

729,692

 

$

16,944

 

$

746,636

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

5,079

 

$

 

$

5,079

 

Accrued expenses

 

150,589

 

 

150,589

 

Deferred revenue, current

 

117

 

 

117

 

Other current liabilities

 

7,451

 

 

7,451

 

Total current liabilities

 

163,236

 

 

163,236

 

 

 

 

 

 

 

 

 

Convertible notes, net

 

146,529

 

 

146,529

 

Long-term debt, net

 

293,888

 

 

293,888

 

Deferred revenue, non-current

 

188

 

 

188

 

Other non-current liabilities

 

8,123

 

 

8,123

 

Total liabilities

 

611,964

 

 

611,964

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding at March 31, 2018

 

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized; 54,801,636 shares issued and outstanding at March 31, 2018

 

5

 

 

5

 

Additional paid-in capital

 

1,755,783

 

 

1,755,783

 

Accumulated other comprehensive loss

 

(5,357

)

 

(5,357

)

Accumulated deficit

 

(1,632,703

)

16,944

(e)

(1,615,759

)

Total stockholders’ equity

 

117,728

 

16,944

 

134,672

 

Total liabilities and stockholders’ equity

 

$

729,692

 

$

16,944

 

$

746,636

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial information.

 



 

TESARO, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Three Months Ended March 31, 2018

(all amounts in 000’s, except share and per share data)

 

 

 

TESARO, Inc.

 

Impact of

 

TESARO, Inc.

 

 

 

Historical

 

Sale

 

Pro Forma

 

Revenues:

 

 

 

 

 

 

 

Product revenue, net

 

$

50,172

 

$

(948

)(f)

$

49,224

 

License, collaboration and other revenues

 

(430

)

 

(430

)

Total revenues

 

49,742

 

(948

)

48,794

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Cost of sales — product

 

9,997

 

(3,471

)(f)

6,526

 

Cost of sales — intangible asset amortization

 

1,437

 

(773

)(f)

664

 

Research and development

 

96,755

 

(1,669

)(f)

95,086

 

Selling, general and administrative

 

93,607

 

(1,366

)(f)

92,241

 

Acquired in-process research and development

 

 

 

 

Total expenses

 

201,796

 

(7,279

)

194,517

 

Loss from operations

 

(152,054

)

6,331

 

(145,723

)

 

 

 

 

 

 

 

 

Interest expense

 

(12,092

)

 

(12,092

)

Interest income

 

1,665

 

 

1,665

 

Other income

 

81

 

 

81

 

Loss before income taxes

 

(162,400

)

6,331

 

(156,069

)

 

 

 

 

 

 

 

 

Provision for income taxes

 

416

 

 

416

 

 

 

 

 

 

 

 

 

Net loss

 

$

(162,816

)

$

6,331

 

$

(156,485

)

 

 

 

 

 

 

 

 

Net loss per share applicable to common stockholders - basic and diluted

 

$

(2.98

)

$

0.11

 

$

(2.87

)

 

 

 

 

 

 

 

 

Weighted-average number of common shares used in net loss per share applicable to common stockholders - basic and diluted

 

54,615

 

 

54,615

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial information.

 



 

TESARO, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2017

(all amounts in 000’s, except share and per share data)

 

 

 

TESARO, Inc.

 

Impact of

 

TESARO, Inc.

 

 

 

Historical

 

Sale

 

Pro Forma

 

Revenues:

 

 

 

 

 

 

 

Product revenue, net

 

$

120,700

 

$

(11,799

)(f)

$

108,901

 

License, collaboration and other revenues

 

102,626

 

 

102,626

 

Total revenues

 

223,326

 

(11,799

)

211,527

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Cost of sales — product

 

41,137

 

(25,335

)(f)

15,802

 

Cost of sales — intangible asset amortization

 

6,158

 

(4,508

)(f)

1,650

 

Research and development

 

308,742

 

(15,685

)(f)

293,057

 

Selling, general and administrative

 

336,808

 

(24,458

)(f)

312,350

 

Acquired in-process research and development

 

10,000

 

 

10,000

 

Total expenses

 

702,845

 

(69,986

)

632,859

 

Loss from operations

 

(479,519

)

58,187

 

(421,332

)

 

 

 

 

 

 

 

 

Interest expense

 

(19,758

)

 

(19,758

)

Interest income

 

4,147

 

 

4,147

 

Other income

 

328

 

 

328

 

Loss before income taxes

 

(494,802

)

58,187

 

(436,615

)

 

 

 

 

 

 

 

 

Provision for income taxes

 

1,324

 

 

1,324

 

 

 

 

 

 

 

 

 

Net loss

 

$

(496,126

)

$

58,187

 

$

(437,939

)

 

 

 

 

 

 

 

 

Net loss per share applicable to common stockholders - basic and diluted

 

$

(9.17

)

$

1.07

 

$

(8.10

)

 

 

 

 

 

 

 

 

Weighted-average number of common shares used in net loss per share applicable to common stockholders - basic and diluted

 

54,080

 

 

54,080

 

 

See accompanying notes to unaudited pro forma condensed consolidated financial information.

 



 

TESARO, Inc.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

Sale Transaction

 

On July 12, 2018, TESARO, Inc. (the “Company”) completed the previously disclosed sale of its rights to rolapitant in the United States and Canada to TerSera Therapeutics LLC (“TerSera”) pursuant to the Asset Purchase Agreement dated June 28, 2018 (the “APA”) by and between TerSera and the Company (the “Sale”).  At the closing of the Sale, the Company received $35.0 million in cash.  Pursuant to the terms of the APA, an additional $5.0 million in cash will be paid by TerSera to the Company by January 12, 2020.  The Sale includes both the oral formulation of rolapitant distributed and sold under the brand name VARUBI® and the intravenous formulation of rolapitant sold under the brand name VARUBI® IV.

 

Pro Forma Adjustments

 

(a)         Represents consideration of $35.0 million of cash received at the closing of the Sale.

 

(b)         Represents the disposition of VARUBI inventory associated with the Sale.

 

(c)          Represents the disposition of intangible assets related to VARUBI (acquired and in-licensed rights) associated with the Sale.

 

(d)         Represents the delayed cash payment of $5.0 million due to the Company from TerSera included in the APA.

 

(e)          Represents the pro forma gain arising from the Sale.

 

(f)           Represents the elimination of net product revenues, cost of sales—product, cost of sales—intangible asset amortization, research and development expenses, and selling, general and administrative expenses related to VARUBI, giving effect to the Sale as if it occurred on January 1, 2017.  For the three months ended March 31, 2018 and for the year ended December 31, 2017, cost of sales—product related to VARUBI includes $1.9 million and $18.3 million, respectively, in lower of cost or market write-downs for excess and obsolete inventories and losses on firm purchase commitments.  The adjustment amounts for expenses include allocations of certain expenses, which are based in part on the use of judgments and estimates which the Company believes are reasonable.