UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2022, AND FOR THE YEAR ENDED DECEMBER 31, 2021
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION AS OF
AND FOR THE SIX MONTHS ENDED JUNE 30, 2022, AND FOR THE YEAR ENDED DECEMBER 31, 2021
Unaudited Pro Forma Financial Information
On August 2, 2022, MDxHealth SA (“mdxhealth” or the “Company”) entered into an asset purchase agreement (the “Acquisition”) with Genomic Health, Inc., a subsidiary of Exact Sciences Corporation (“Exact Sciences”), to acquire the Oncotype DX® GPS (Genomic Prostate Score®) test from Exact Sciences.
Under the terms of the Acquisition, mdxhealth acquired the Oncotype DX GPS prostate cancer business of Exact Sciences for an aggregate purchase price of up to $100 million, of which an amount of $25 million was paid in cash and an amount of $5 million was settled through the delivery of 691,171 American Depositary Shares (“ADSs”) of the Company, at a price per ADS of $7.23. Following the closing, an additional aggregate earn-out amount of up to $70 million is to be paid by mdxhealth to Exact Sciences upon achievement of certain revenue milestones related to fiscal years 2023 through 2025, with the maximum earn-out payable in relation to 2023 and 2024 not to exceed $30 million and $40 million, respectively.
The following unaudited condensed combined pro forma balance sheet as of June 30, 2022, gives effect to the Acquisition as if it had been completed as of June 30, 2022. The Acquisition was considered to be a business combination accounted for under International Financial Reporting Standards (“IFRS”) acquisition method of accounting. Accordingly, the assets acquired, and liabilities assumed have been recorded at their estimated fair values at the date of the Acquisition. The purchase price has been allocated on a preliminary basis to the assets acquired and the liabilities assumed based upon estimates of their respective fair values, which are subject to potential adjustment upon finalization of the purchase price allocation.
The following unaudited condensed combined pro forma Statements of Operations for the six months ended June 30, 2022, and the year ended December 31, 2021, give effect to the Acquisition as if it had been completed on January 1, 2021.
The pro forma information has been prepared by our management and it may not be indicative of the results that actually would have occurred had the transaction been in effect on the dates indicated, nor does it purport to indicate the results that may be obtained in the future. The pro forma information is based on provisional amounts allocated by management to various assets and liabilities acquired and may be eventually different than currently presented.
The pro forma information has been developed from, and should be read in conjunction with, the special purpose financial statements and notes thereto of the Oncotype DX Prostate Score® Test (“GPS”) filed herewith as Exhibit 99.1, and the Company’s financial statements and notes thereto for the interim period ended June 30, 2022 filed on Form 6-K on August 26, 2022, as well as with the Company’s Annual Report on Form 20-F for the year ended December 31, 2021, filed on April 25, 2022.
Unaudited Combined Pro Forma Condensed Balance Sheet as of June 30, 2022
U.S. dollars in thousands
| MDxHealth | GPS | Pro-forma | ||||||||||||||||||||||||||
| As of June 30, 2022 | Historical | Historical | Pro-forma transaction accounting adjustments | Combined | ||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||
| Goodwill | 29,218 | (D) | 29,218 | |||||||||||||||||||||||||
| Intangible assets | 3,104 | 43,398 | 1,161 | (D) | 47,663 | |||||||||||||||||||||||
| Property, plant and equipment | 2,364 | 2,364 | ||||||||||||||||||||||||||
| Right-of-use assets | 3,168 | 3,168 | ||||||||||||||||||||||||||
| Non-current assets | 8,636 | 43,398 | 30,379 | - | - | - | 82,413 | |||||||||||||||||||||
| Inventories | 2,089 | 2,089 | ||||||||||||||||||||||||||
| Trade receivables | 5,036 | 5,036 | ||||||||||||||||||||||||||
| Prepaid expenses and other current assets | 2,724 | 2,724 | ||||||||||||||||||||||||||
| Cash and cash equivalents | 40,025 | (25,000 | )(A) | (3,458 | )(E) | 34,280 | (F) | (10,172 | )(G) | 35,675 | ||||||||||||||||||
| Current assets | 49,874 | - | (25,000 | ) | (3,458 | ) | 34,280 | (10,172 | ) | 45,524 | ||||||||||||||||||
| Total assets | 58,510 | 43,398 | 5,379 | (3,458 | ) | 34,280 | (10,172 | ) | 127,937 | |||||||||||||||||||
| EQUITY | ||||||||||||||||||||||||||||
| Share capital | 128,454 | 5,000 | (B) | 133,454 | ||||||||||||||||||||||||
| Issuance premium | 153,177 | 153,177 | ||||||||||||||||||||||||||
| Accumulated deficit | (262,406 | ) | (3,458 | )(E) | (11 | )(F) | (1,032 | )(G) | (266,907 | ) | ||||||||||||||||||
| Share-based compensation | 10,986 | 10,986 | ||||||||||||||||||||||||||
| Foreign currency translation reserves | (449 | ) | (449 | ) | ||||||||||||||||||||||||
| Total equity | 29,762 | - | 5,000 | (3,458 | ) | (11 | ) | (1,032 | ) | 30,261 | ||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||
| Deferred tax liability | 129 | 129 | ||||||||||||||||||||||||||
| Loans and borrowings | 3,291 | 33,265 | (F) | (1,993 | )(G) | 34,563 | ||||||||||||||||||||||
| Lease liabilities | 2,454 | 2,454 | ||||||||||||||||||||||||||
| Other non-current financial liabilities | 1,934 | 43,777 | (C) | (810 | )(G) | 44,901 | ||||||||||||||||||||||
| Non-current liabilities | 7,808 | - | 43,777 | - | 33,265 | (2,803 | ) | 82,047 | ||||||||||||||||||||
| Loans and borrowings | 7,760 | (7,147 | )(G) | 613 | ||||||||||||||||||||||||
| Lease liabilities | 870 | 870 | ||||||||||||||||||||||||||
| Trade payables | 9,836 | 9,836 | ||||||||||||||||||||||||||
| Other current liabilities | 2,062 | 2,062 | ||||||||||||||||||||||||||
| Other current financial liabilities | 412 | 1,026 | (F) | 810 | (G) | 2,248 | ||||||||||||||||||||||
| Current liabilities | 20,940 | - | - | - | 1,026 | (6,337 | ) | 15,629 | ||||||||||||||||||||
| Total liabilities | 28,748 | - | 43,777 | - | 34,291 | (9,140 | ) | 97,676 | ||||||||||||||||||||
| Total equity and liabilities | 58,510 | - | 48,777 | (3,458 | ) | 34,280 | (10,172 | ) | 127,937 | |||||||||||||||||||
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Unaudited Combined Pro Forma Statement of Operations
for the year ended December 31, 2021
and for the six months ended June 30, 2022
U.S. dollars in thousands
| For the year ended December 31, 2021 | MDxHealth Historical | GPS Historical | Pro-forma transaction accounting adjustments | Pro-forma Combined | ||||||||||||||||
| Services | 21,937 | 37,464 | 59,401 | |||||||||||||||||
| Licenses | 250 | 250 | ||||||||||||||||||
| Royalties and other revenues | 52 | 52 | ||||||||||||||||||
| Revenues | 22,239 | 37,464 | - | - | 59,703 | |||||||||||||||
| Cost of goods & services sold | (11,675 | ) | (8,084 | ) | (19,759 | ) | ||||||||||||||
| Gross Profit | 10,564 | 29,380 | - | - | 39,944 | |||||||||||||||
| Research and development expenses | (6,673 | ) | (2,295 | ) | (8,968 | ) | ||||||||||||||
| Selling and marketing expenses | (17,744 | ) | (31,077 | ) | (48,821 | ) | ||||||||||||||
| General and administrative expenses | (14,149 | ) | (3,458 | )(E) | (17,607 | ) | ||||||||||||||
| Amortization | (5,900 | ) | 2,929 | (H) | (2,971 | ) | ||||||||||||||
| Other operating income, net | 1,161 | - | 1,161 | |||||||||||||||||
| Operating loss | (26,841 | ) | (9,892 | ) | (3,458 | ) | 2,929 | (37,262 | ) | |||||||||||
| Financial income | 11 | 11 | ||||||||||||||||||
| Financial expenses | (2,172 | ) | (1,032 | )(G) | (2,840 | )(I) | (6,044 | ) | ||||||||||||
| Loss before income tax | (29,002 | ) | (9,892 | ) | (4,490 | ) | 89 | (43,295 | ) | |||||||||||
| Income tax | - | - | ||||||||||||||||||
| Loss for the period | (29,002 | ) | (9,892 | ) | (4,490 | ) | 89 | (43,295 | ) | |||||||||||
| Loss for the period attributable to the parent | (29,002 | ) | (9,892 | ) | (4,490 | ) | 89 | (43,295 | ) | |||||||||||
| Loss per share attributable to parent in USD | ||||||||||||||||||||
| Basic and diluted | (0.24 | ) | (0.34 | ) | ||||||||||||||||
| Weighted-average shares outstanding | 121,935,741 | 6,911,710 | (J) | 128,847,451 | ||||||||||||||||
| For the six months ended June 30, 2022 | MDxHealth Historical | GPS Historical | Pro-forma transaction accounting adjustments | Pro-forma Combined | ||||||||||||
| Services | 12,975 | 18,513 | 31,488 | |||||||||||||
| Licenses | - | - | ||||||||||||||
| Royalties and other revenues | 34 | 34 | ||||||||||||||
| Revenues | 13,009 | 18,513 | - | 31,522 | ||||||||||||
| Cost of goods & services sold | (7,237 | ) | (4,702 | ) | (11,939 | ) | ||||||||||
| Gross Profit | 5,772 | 13,811 | - | 19,583 | ||||||||||||
| Research and development expenses | (3,585 | ) | (1,104 | ) | (4,689 | ) | ||||||||||
| Selling and marketing expenses | (9,848 | ) | (15,512 | ) | (25,360 | ) | ||||||||||
| General and administrative expenses | (9,636 | ) | (9,636 | ) | ||||||||||||
| Amortization | (2,950 | ) | 1,465 | (H) | (1,485 | ) | ||||||||||
| Other operating income, net | 274 | - | 274 | |||||||||||||
| Operating loss | (17,023 | ) | (5,755 | ) | 1,465 | (21,313 | ) | |||||||||
| Financial income | 27 | 27 | ||||||||||||||
| Financial expenses | (1,107 | ) | (1,478 | )(I) | (2,585 | ) | ||||||||||
| Loss before income tax | (18,103 | ) | (5,755 | ) | (13 | ) | (23,871 | ) | ||||||||
| Income tax | (1 | ) | (1 | ) | ||||||||||||
| Loss for the period | (18,104 | ) | (5,755 | ) | (13 | ) | (23,872 | ) | ||||||||
| Loss for the period attributable to the parent | (18,104 | ) | (5,755 | ) | (13 | ) | (23,872 | ) | ||||||||
| Loss per share attributable to parent in USD | ||||||||||||||||
| Basic and diluted | (0.12 | ) | (0.15 | ) | ||||||||||||
| Weighted-average shares outstanding | 155,969,226 | 6,911,710 | (J) | 162,880,936 | ||||||||||||
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1. Basis of Presentation
On August 2, 2022, MDxHealth SA (“mdxhealth” or the “Company”) entered into an asset purchase agreement (the “Acquisition”) with Genomic Health, Inc., a subsidiary of Exact Sciences Corporation (“Exact Sciences”), to acquire the Oncotype DX® GPS (Genomic Prostate Score®) test from Exact Sciences.
The unaudited pro forma condensed combined balance sheet as of June 30, 2022, gives effect to the Acquisition as if it had occurred on June 30, 2022. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2021, and for the six months ended June 30, 2022, are presented as if the Acquisition had occurred on January 1, 2021.
The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting, based on the historical financial statements of mdxhealth and the special purpose financial statements of the Oncotype DX Prostate Score® Test.
2. Preliminary Purchase Price Allocation
The Acquisition was accounted for under the purchase method of accounting and is being treated as a business combination in accordance with IFRS. The purchase price was preliminarily allocated based on the estimated fair value of net assets acquired and liabilities assumed at the date of the acquisition. The preliminary purchase price allocation is subject to further refinement and may require adjustments to arrive at the final purchase price allocation. The Company expects to finalize the purchase price allocation within the context of its 2022 yearend reporting.
The acquisition consideration was comprised of (in thousands):
| Cash | $ | 25,000 | ||
| Stock | 5,000 | |||
| Contingent consideration (1) | 43,777 | |||
| Total acquisition consideration | $ | 73,777 |
| (1) | Following the closing, an additional aggregate earn-out amount of up to $70 million is to be paid by mdxhealth to Exact Sciences upon achievement of certain revenue milestones related to fiscal years 2023 through 2025, with the maximum earn-out payable in relation to 2023 and 2024 not to exceed $30 million and $40 million, respectively. On a preliminary basis the contingent consideration has been assessed at $43.8 million. The liability recognized reflects a probability-weighted estimate at the current net present value at the date of acquisition which is expected to become payable Future fair value adjustments to this contingent consideration liability will be recognized in the statement of profit or loss, after finalization of the purchase price allocation. |
On a preliminary basis, and until the purchase price allocation has been finalized, the purchase price in excess of the fair value of net assets acquired (refer to adjustment (d) in Note 3, Pro Forma Transaction Accounting Adjustments), has been considered as residual Goodwill. Goodwill will not be amortized but will be tested for impairment at least annually or whenever certain indicators of impairment are present. If, in the future, it is determined that goodwill is impaired, an impairment charge would be recorded at that time. Should the final purchase price allocation result in additional intangible assets to be recognized, Goodwill will be decreased accordingly, and amortization charges will be applied to the intangible assets.
3. Pro Forma Transaction Accounting Adjustments
For the purpose of the pro-forma combined financial information, the Company considers the valuation of the intangible assets as preliminary value. The final purchase price allocation might result in material changes to recognized intangibles assets and its related useful lives, which in that case could also result in a change in amortization charges on these intangible assets, recognized contingent consideration liability, related deferred tax impacts on the purchase price allocation, and the residual goodwill amount.
| (A) | To record the cash paid for assets acquired in the Acquisition |
| (B) | To record the issuance of 691,171 American Depositary Shares (“ADSs”) of the Company, at a price per ADS of $7.23 as part of the Acquisition |
| (C) | To record contingent consideration of the net present value of expected future earnout payments (as described in Note 2, Preliminary Purchase Price Allocation) |
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| (D) | To record purchase price in excess of fair value of net assets acquired, based on a preliminary purchase price allocation: |
| Cash | $ | 25,000 | ||
| Stock | 5,000 | |||
| Contingent consideration | 43,777 | |||
| Total acquisition consideration | $ | 73,777 | ||
| Net book value as of June 30, 2022 in the special purpose financial statements of the Oncotype DX Prostate Score® Test | 43,398 | |||
| Fair value adjustment to the net book value of the intangible asset, based on preliminary purchase price allocation | 1,161 | |||
| Goodwill | $ | 29,218 |
| (E) | To record costs associated with the Acquisition |
| (F) | To record the debt facility with Innovatus associated with the Acquisition. The Innovatus debt facility is considered a hybrid financial instrument, which includes a host financial liability and an embedded derivative call option to convert up to 15% of the aggregate outstanding principal into equity at a fixed rate of $11.21 per ADS. The host financial liability, which is accounted for at amortized cost applying the effective interest rate method, is recorded under Loans and borrowings (non-current) while the derivative financial liability is recorded under Other non-current financial liabilities |
| (G) | To record the extinguishment of the Kreos Capital debt facility, replaced by the new debt facility with Innovatus as well as reclassification of remaining liability related to the derivative financial liability for the initial Kreos drawdown fee from non-current to current |
| (H) | To adjust estimated amortization charges of the intangible asset resulting from preliminary fair value assessment, with an estimated remaining useful life of 15 years |
| (I) | To adjust financial expenses to reflect higher financial charges associated with the Innovatus debt facility which replaced previously accounted for financial charges related to the Kreos debt facility. The Innovatus debt facility accrues interest at a floating per annum rate equal to the sum of (a) the greater of (i) the prime rate published in The Wall Street Journal in the “Money Rates” section or (ii) 4.00%, plus (b) 4.25%, and require interest-only payments for the initial four years. A change in the effective interest rate of 0.125% would result in an annual change in interest charges of approximately $38,000. |
| (J) | To reflect the issuance of shares as part of the Acquisition |
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