EPRSQ EPIRUS Biopharmaceuticals Inc (CE)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): September 9, 2015

EPIRUS BIOPHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

699 Boylston Street
Eighth Floor
Boston, MA 02116
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (617) 600-3497

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:

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))

Item 2.01 Completion of Acquisition or Disposition of Assets.

On September 9, 2015, EPIRUS Biopharmaceuticals, Inc. (the “Company”) entered into and closed a definitive Stock Purchase Agreement (the “Stock Purchase Agreement”) with Bioceros Holding B.V., a Netherlands company (“Bioceros”), the sellers identified therein (the “Sellers”) and Oscar Schoots and Carine van den Brink as the representatives of the Sellers. Under the Stock Purchase Agreement, the Company purchased all of the outstanding shares of the share capital of Bioceros (the “Share Transfer”), with the result that Bioceros became a wholly-owned subsidiary of the Company following the Share Transfer.

On September 9, 2015, the Company filed a Current Report on Form 8-K (the “Initial Report”) stating that it had completed the Share Transfer and that the financial statements required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b) of Form 8-K would be filed by amendment within 71 calendar days after the date on which the Initial Report was required to be filed. This amended Current Report on Form 8-K/A contains the required financial statements and pro forma financial information.

Item 9.01 Financial Statements and Exhibits.

(a)         Financial Statements of Business Acquired

The Bioceros audited consolidated financial statements for the year ended December 31, 2014 and the Bioceros unaudited consolidated financial statements as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 are attached as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated by reference into this Current Report on Form 8-K/A.

The consent of Ernst & Young Accountants LLP, Bioceros’ independent auditors, is attached as Exhibit 23.1 to this Current Report on Form 8-K/A.

(b)         Pro Forma Financial Information

The unaudited pro forma condensed combined financial information reflecting the acquisition of Bioceros, as required by this item, is attached as Exhibit 99.2 to this Current Report on Form 8-K/A and is incorporated by reference into this Current Report on Form 8-K/A.

(d)   Exhibits

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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.

Date: November 16, 2015

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EXHIBIT INDEX

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Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-205420)  and related Prospectus of EPIRUS Biopharmaceuticals, Inc. for the registration of up to $ 125,000,000 of debt securities, preferred stock, common stock, warrants and/or units,  of our report dated November 16, 2015, with respect to the consolidated financial statements of Bioceros Holding B.V. included in this Current Report (Form 8-K ) of EPIRUS Biopharmaceuticals, Inc. dated November 16, 2015.

/s/ Ernst & Young Accountants LLP

Amsterdam, the Netherlands

November 16, 2015

Exhibit 99.1

Bioceros Holding B.V.

Financial Statements

and

Independent Auditors’ Report

December 31, 2014

and

Unaudited Financial Statements

As of June 30, 2015 and for the Six Months Ended June 30, 2015 and 2014

Utrecht, The Netherlands

(Registered office and actual place of business)

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Index

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Report of Independent Auditors

The Supervisory Board and Shareholders of Bioceros Holding B.V.

We have audited the accompanying consolidated financial statements of Bioceros Holding B.V., Utrecht, the Netherlands, which comprise the consolidated balance sheet as of December 31, 2014, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bioceros Holding B.V., Utrecht, the Netherlands, at December 31, 2014, and the consolidated result of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young Accountants LLP

Amsterdam, 16 November 2015

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Consolidated Balance Sheets

(in thousands of USD, except share and per share amounts)

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

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Consolidated Statements of Income and Comprehensive Income

(in thousands of USD)

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

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Consolidated Statements of Changes in Stockholders’ Equity

(in thousands of USD, except share amounts)

The accompanying notes are an integral part of these consolidated financial statements

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Consolidated Statements of Cash Flows

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Notes to the Consolidated Financial Statements

1. Organization

Activities

Bioceros Holding B.V. (the “Company”), is a biopharmaceutical company incorporated in the Netherlands on May 1, 2003 which is engaged in medical research, as a service-for-fee activity for third parties or for its own risk and benefit, related to the research and development of drugs and other products for therapeutic or prophylactic use in humans, both in the Netherlands and abroad.

On September 9, 2015 the Company was acquired by EPIRUS Biopharmaceuticals, Inc (“EPIRUS”), for an aggregate purchase price of USD 14,623. EPIRUS is a global biopharmaceutical company focused on building a pure-play, sustainable, profitable and global biosimilar business. Upon completion of the sale, the Company became a wholly owned subsidiary of EPIRUS.

2. Summary of Significant Accounting Policies

Basis of presentation and principles of consolidation

The consolidated financial statements include the accounts of Bioceros Holding B.V. and its wholly owned subsidiaries: Bioceros B.V., Bioceros Molecular Biology B.V., Bioceros Antibody Development B.V., Bioceros CLD B.V. and Bioceros PD B.V., all of which are incorporated in Utrecht, The Netherlands. All significant intergroup balances and transactions have been eliminated in consolidation.

These consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).

The preparation of financial statements in conformity with US GAAP requires the use of estimations and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The group bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results may differ significantly from these estimates under different assumptions or conditions.

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Foreign currency translation

The consolidated financial statements are reported in thousands of United States dollars (“USD”), whereas the functional currency of the Company’s operations is the Euro, which represents the currency in which substantially all transactions of the Company are denominated.

The results of the Company’s operations are translated from Euro into US dollars based on the average exchange rates during the period, while assets and liabilities are translated into US dollars using exchange rates in effect at the period end. The resulting foreign currency translation adjustment is included in ‘Other comprehensive income/(loss)’, within the Statement of Changes in Stockholders’ Equity.

The group has not entered into any agreements or purchased any instruments to hedge potential currency risks.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities at the date of purchase of 90 days or less to be cash equivalents. Cash and cash equivalents consist of account balances held at commercial banks.

Machinery and Equipment

Machinery and equipment consists of laboratory and office equipment and is presented at cost less accumulated depreciation and, if applicable, impairments. Costs for periodic maintenance are expensed in the income statement when incurred, unless when the maintenance extends the useful life of the asset in which case the expenditure is capitalized.

Depreciation is based on the expected future useful life and calculated using the straight-line method of depreciation, taking into account any residual value. Depreciation is recorded from the date an asset is placed in service, based on an estimated useful life for each of the asset classes which ranges from three to five years.

The Company performs a review for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company did not identify any long-lived asset impairments for any of the period presented.

Income Taxes

The Company uses the asset and liability method to account for income taxes, in accordance with ASC Topic 740, Income Taxes. Under this method, income tax expense is recognized for the amount of (1) taxes payable or refundable for the current year and (2) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns.

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Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on the weight of the available positive and negative evidence, it is more likely than not, some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We have no material uncertain tax positions for any of the reporting periods presented.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2014 and June 30, 2015 we had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in our statements of income for any of the periods presented.

Revenues and deferred revenue

The Company derives its revenues from licensing arrangements and for performing research activities on the behalf of others.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable and collectability is reasonably assured

Licensing arrangements

Revenues from licensing arrangements are recorded as revenues on a straight line basis over the term of the arrangements, which is generally 12 months.

Revenues from licensing arrangements were USD 282, USD 776 and USD 965 for the periods ended June 30, 2015, June 30, 2014 and December 31, 2014, respectively.

Research activities

During the periods presented, the Company was not able to reasonably estimate the time and materials expended on individual research activity projects for customers and therefore was not able to estimate such projects’ stage of completion.  As a result, revenue on such projects was only recognised upon completion of the project, when all milestones and deliverables had been achieved and delivered.  The corresponding costs incurred for these projects were included in research and development expense in the consolidated statement of income as incurred.

Revenues from research activities were USD 1,453, USD 1,623 and USD 2,523 for the periods ended June 30, 2015, June 30, 2014 and December 31, 2014, respectively.

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Deferred revenues

We generally invoice customers at the time licenses are granted or for research activities, upon reaching certain milestones or as based on the terms of each agreement.  Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized within 12 months from the balance sheet date are classified as long-term deferred revenue.  Deferred revenue will be recognized as revenue in future periods when the applicable revenue recognition criteria have been met.

Research and Development Costs

Research and development costs are charged to expense as incurred. The costs include employee compensation, facilities and overhead and related costs, regulatory and other related costs.

Costs for certain development activities, are recognized based on an evaluation of the progress to completion of specific tasks. At the end of the period, we compare payments made to third-party service providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as additional information becomes available.

Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued research and development expense, as the case may be. Upfront and milestone payments made to third parties who perform research and development services on our behalf are expensed as services are rendered.

Subsidies and other governmental credits to cover research and development costs relating to approved projects are recorded as research and development credits on a systematic basis over the period when such project costs occur.

Employee Benefits

The Company has retirement plans covering substantially all employees. The principal plans are defined contribution plans. Payments to defined contribution plans are recognized as an expense in the statement of income as they become due.  Contributions to such retirement plans were USD 7, USD 8 and USD 16, for the periods ended June 30, 2015, June 30, 2014 and December 31, 2014, respectively.

Fair value of financial instruments

Cash and cash equivalents, trade and other accounts receivable, related party loan receivable, accounts payable and accrued liabilities are reported at amounts that approximate fair value due to the short-term maturities of those instruments.  See Note 4 “Related Party Loan Receivable” for a discussion of the terms and conditions of the related party loan receivable. It was not practical to estimate the fair value of such related party loan.

Recently Issued Accounting Standards

In May 2014, the FASB issued an accounting standard update related to revenue from contracts with customers, which will supersede nearly all current US GAAP guidance on this topic and eliminate industry-specific guidance. The underlying principle is to recognize revenue when

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promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This accounting standard update, as amended, will be effective for the Company beginning in fiscal 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2018.

3. Other Receivables

No allowance for doubtful receivables was recorded for any of the periods presented.

4. Related Party Loan Receivable

A loan in the principal amount of Euro 180 (USD 218) was made to De Boer Biotech Consultancy B.V. (“De Boer”) in May 2013 with an initial term of 12 months, which was subsequently extended for a further two 12 month periods.  De Boer is a related party to Bioceros, as it is controlled by the co-founder of Bioceros, who also served as a member of the Supervisory Board of the Company until the Company’s acquisition by EPIRUS.  De Boer owned 39.53% of the shares of Bioceros prior to the acquisition of the Company by EPIRUS. The loan accrues interest at 8% per annum.  See Note 10 ‘Subsequent Events’.

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5. Machinery and equipment, net

The movements in machinery and equipment are as follows:

6. Income Taxes

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The deferred tax assets result from temporary differences between research and development expenditures, which are expensed when incurred for financial reporting purposes, but capitalized and depreciated for tax purposes. The deferred tax assets are recognized as management is of the opinion that it is more-likely-than-not that they will be realized as a result of the Company’s future expected taxable profits.

A reconciliation of the effective tax rate is as follows:

The tax exempt amounts relate to research and development tax allowances and Netherlands ‘Innovation Box’ tax exempt income.

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7. Other Current Liabilities

8. Commitments and contingencies

Lease obligations

The Company is party to a property lease for its laboratories and offices in Utrecht, the Netherlands, which expires in 2017. Related expense is recognized on a straight-line basis over the term of the lease and was USD 112, USD 112 and USD 223 for the periods ended June 30, 2015, June 30, 2014 and December 31, 2014 respectively.

As of December 31, 2014, future minimum commitments under the operating lease were as follows:

Concentrations of Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Financial instruments that potentially subject the group to concentrations of credit risk are primarily cash and cash equivalents, trade and other receivables and related party loan receivable. The Company does not hold any collateral or other credit enhancements to cover its credit risks associated with its trade, other or related party loan receivables.  The Company has no financial instruments with off-balance-sheet risk of loss.

Revenues from EPIRUS represented 27%, 34% and 24% of the Company’s revenues for the periods ended June 30, 2015, June 30, 2014 and December 31, 2014, respectively. No other customer represented more than 10% of the Company’s revenues for any of the periods presented.

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9. Capital Stock

The group’s authorized capital amounts to 5,300,000 shares, and consists of 2,300,000 preferred shares of EUR 0.10 each (USD 0.13) and 3,000,000 common shares of EUR 0.10 each (USD 0.13). Of these, 479,715 preferred shares and 767,634 common shares have been issued.

The preferred shares have an 8% cumulative dividend preference before dividends can be distributed on common shares.

Preferred shares may be converted into common shares at any time at the option of the holders of preferred shares. Moreover, the preferred shares will automatically convert into common shares at a ratio of 1:1 in the event of a Qualified IPO, being the admission to listing of the Company’s share capital on: i) any stock exchange recognized under any law incorporating the European Council Directives on Investment Services; ii) New York Stock Exchange; or iii) Nasdaq) or where the Company merges into a public company in which the merger consideration is shares which are publicly traded on any of the before mentioned stock exchange (Qualified IPO). Holders of preferred shares shall vote on an “as converted” basis on all matters, together with the holders of common shares, unless explicitly agreed otherwise.

Holders of preferred shares are entitled to receive, upon a liquidation event, the amount equal to all amounts contributed on the preferred shares minus all paid preferred dividends on the preferred shares.  If, and as soon as the paid preferred dividend equals the investment amount of EUR 1.727, the liquidation preference of the holders of preferred shares shall cease to have effect and be deemed waived by all the holders of preferred shares and from that moment, all proceeds resulting from a liquidation shall be distributed in accordance with the proportional shareholding of common shares and preferred shares. See Note 10 ‘Subsequent Events’.

10. Subsequent Events

Immediately prior to the acquisition of the Company by EPIRUS, the related party loan receivable from De Boer, including all accrued but unpaid interest, was repaid in full.  In addition, and also immediately prior to the acquisition, the Company paid its preferred stockholders an aggregate dividend of USD 1,115.  Subsequent to the payment of the preferred stock dividend, the preferred stockholders voted to convert their shareholdings on a 1:1 ratio into common stock of the Company.

As disclosed in Note 1, on September 9, 2015, the Company was acquired by EPIRUS and became a wholly-owned subsidiary of EPIRUS at that time.

The Company has evaluated subsequent events for the period from January 1, 2015 through November 16, 2015, which is the date these financial statements were issued.

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Exhibit 99.2

Unaudited Pro Forma Condensed Combined Financial Information at June 30, 2015 and for the six months ended June 30, 2015 and the year ended December 31, 2014.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On September 9, 2015, EPIRUS Biopharmaceuticals, Inc. (“Epirus”, “Company”, “we”, “our”, or “us”), completed the acquisition of Bioceros Holding B.V. (“Bioceros”).  The accompanying unaudited pro forma condensed combined balance sheet as of June 30, 2015 presents our historical financial position combined with Bioceros as if the acquisition had occurred on June 30, 2015.  The accompanying unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2015 and for the year ended December 31, 2014 present the combined results of our operations with Bioceros as if the acquisition had occurred on January 1, 2014.  The historical unaudited consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results of Bioceros and Epirus.

The unaudited pro forma condensed combined financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes and do not purport to represent what the financial position or results of operations would actually have been if the acquisition occurred as of the dates indicated or what such financial position or results would be for any future periods for the combined company.

The unaudited pro forma condensed combined financial statements are based upon the respective historical consolidated financial statements of Bioceros and Epirus, and should be read in conjunction with the:

·                       accompanying notes to the unaudited pro forma condensed combined financial statements;

·                       separate historical audited consolidated financial statements of Bioceros as of and for the year ended December 31, 2014 and unaudited consolidated financial statements of Bioceros as of and for the six months ended June 30, 2015 included, as an exhibit to this current report on Form 8-K/A;

·                       separate historical unaudited financial statements of Epirus as of and for the six months ended June 30, 2015, included in Epirus’ quarterly report on Form 10-Q for the quarter ended June 30, 2015 filed with the SEC on August 12, 2015;

·                       separate historical audited financial statements of Epirus as of and for the year ended December 31, 2014 included in Epirus’ annual report on Form 10-K filed with the SEC on March 30, 2015;

·                       management’s discussion and analysis of financial condition and results of operations for Epirus and “Risk Factors” included in Epirus’ quarterly report on Form 10-Q filed with the SEC on August 12, 2015 and annual report on Form 10-K filed with the SEC on March 30, 2015; and

·                       other information contained in or incorporated by reference into this current report on Form 8-K/A.

The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed or have not progressed to a stage where there is sufficient information for a definitive measurement. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed, and have been made solely for the purpose of providing unaudited pro forma condensed combined financial statements. Final valuations and studies will be

performed at a later date and differences between these preliminary estimates and the final acquisition accounting may occur. These differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future financial position and results of operations. Fair values determined as of the assumed acquisition dates are based on the most recently available information. To the extent there are significant changes to Bioceros’ or Epirus’ business, or as new information becomes available, the assumptions and estimates herein could change significantly. The unaudited pro forma condensed combined financial statements do not reflect certain transactions that occurred subsequent to June 30, 2015. See Note 5, “Subsequent Transactions,” in the accompanying notes to the unaudited pro forma condensed combined financial statements for additional information.

Bioceros’ assets and liabilities will be measured and recognized at their fair values as of the transaction date and consolidated with the assets and liabilities of Epirus after the consummation of the acquisition.

The unaudited pro forma condensed combined statements of operations include certain purchase accounting adjustments, including items expected to have a continuing impact on the combined results, such as increased amortization expense on acquired intangible assets. The unaudited pro forma condensed combined statements of operations do not include the impacts of any revenue, cost or other operating synergies that may result from the acquisition or any related restructuring costs. The unaudited pro forma condensed combined statements of operations do not reflect certain amounts resulting from the acquisition that were determined to be of a non-recurring nature.

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET

As of June 30, 2015

(in thousands, except share amounts)