Register today for OSC Dialogue 2024: Inviting, thriving and secure capital markets
Biomarin Pharmaceutical Inc. et al - MRRS Decision
Headnote
Rule 54-501 - Relief grantedfrom the requirement to reconcile to Canadian GAAP certain financialstatements included in an information circular that were preparedin accordance with U.S. GAAP, and relief granted from the requirementthat pro forma financial statements be accompanied bya compilation report.
Statutes Cited
Securities Act, R.S.O. 1990,c. S.5, as am., s. 144.
Ontario Rule Cited
Rule 54-501 Prospectus Disclosurein Certain Information Circulars (2000), 23 OSCB 8519, section3.1.
Rule 41-501 General ProspectusRequirements (2000), 23 OSCB 761, sections 7.10, 9.1 and 9.4;Form 41-501F1 section 8.4 and subsection 8.5(2).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ONTARIO AND ALBERTA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
BIOMARIN PHARMACEUTICAL INC.,
AND
IN THE MATTER OF
BIOMARIN ACQUISITION (NOVASCOTIA) COMPANY
AND
IN THE MATTER OF
GLYKO BIOMEDICAL LTD.
MRRS DECISION DOCUMENT
WHEREAS the local securitiesregulatory authority or regulator (the "Decision Maker")in each of Ontario and Alberta (the "Jurisdictions"),has received an application from BioMarin Pharmaceutical Inc.("BioMarin"), BioMarin Acquisition (Nova Scotia)Company ("BioMarin Nova Scotia") and GlykoBiomedical Ltd. ("Glyko") (collectively, the"Applicant"), for a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that Glyko be exempted from:
(a) the requirement that historicaland pro forma financial statements of BioMarin preparedin accordance with generally accepted accounting principles("GAAP") in the United States ("U.S.")contained in the Circular (as defined below) be accompaniedby a note to explain and quantify the effect of material differencesbetween Canadian GAAP and U.S. GAAP that relate to measurementsand provide a reconciliation of such financial statementsto Canadian GAAP;
(b) the requirement that theBioMarin auditor's report contained in the Circular (as definedbelow) disclose any material differences in the form and contentof its auditor's report as compared to a Canadian auditor'sreport and confirming that the auditing standards appliedare substantially equivalent to Canadian generally acceptedauditing standards;
(c) the requirement that theBioMarin management discussion and analysis ("MD&A")contained in the Circular (as defined below) provide a restatementof those parts of the BioMarin MD&A that would read differentlyif the BioMarin MD&A were based on statements preparedin accordance with Canadian GAAP and the requirement thatthe BioMarin MD&A provide a cross-reference to the notesin the financial statements that reconcile the differencesbetween U.S. GAAP and Canadian GAAP; and
(d) the requirement that thepro forma financial statements of BioMarin, containedin the Circular (as defined below), be accompanied by a compilationreport.
AND WHEREAS under theMutual Reliance Review System for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this application;
AND WHEREAS the Applicanthaving represented to the Decision Makers that:
1. The effect of the Arrangementwill be to provide holders (other than common shares of Glyko("Glyko Common Shares") held by dissentingshareholders (the "Dissenting Shareholders")who ultimately receive fair value for their Shares) with sharesof common stock of BioMarin (the "BioMarin CommonShares") in exchange for their Glyko Common Shares.Each Glyko Shareholder will receive 0.3309 BioMarin CommonShares for each Glyko Common Share held (the "ExchangeRatio"). In no event will the aggregate number ofBioMarin Common Shares issued to Glyko Shareholders exceed11,367,617 BioMarin Common Shares. The Glyko Common Shareswill be transferred to and acquired by BioMarin Nova Scotia,an indirect wholly-owned subsidiary of BioMarin, such thatupon completion of the transaction, BioMarin will own indirectlyall of the Glyko Common Shares.
2. BioMarin is a developerof enzyme therapies to treat serious, life-threatening, chronicgenetic diseases and other diseases and conditions.
3. As at December 31, 2001,BioMarin's total assets were approximately US$171.8. For theyear ended December 31, 2001, BioMarin's revenues and netloss were approximately US$11.7 million and US$67.6 million,respectively. As at March 31, 2002, BioMarin's total assetswere approximately US$157.3 million. For the three monthsended March 31, 2002, BioMarin's revenues and net loss wereapproximately US$3.8 million and US$26.6 million, respectively.
4. BioMarin's principal executiveoffice is located at 371 Bel Marin Keys Boulevard, Suite 210,Novato, California 94949.
5. BioMarin's authorized capitalconsists of (i) 1,000,000 shares of preferred stock, par valueUS$0.001 per share; and (ii) 75,000,000 shares of common stock,par value US$0.001 per share. As of June 27, 2002, there wereno shares of preferred stock and 53,424,129 BioMarin CommonShares issued and outstanding.
6. The BioMarin Common Sharestrade on the Nasdaq National Market and the SWX Swiss Exchange.BioMarin is currently subject to the reporting requirementsof the United States Securities Exchange Act of 1934,as amended. BioMarin is not currently a "reporting issuer"in any province or territory of Canada, will not become a"reporting issuer" by virtue of the Transactionand does not intend to become a "reporting issuer"in any province or territory of Canada after completion ofthe Transaction.
7. BioMarin Nova Scotia, anindirect wholly-owned subsidiary of BioMarin, was incorporatedunder the laws of the Province of Nova Scotia on February6, 2002. BioMarin Nova Scotia was incorporated solely forthe purpose of engaging in the Transaction.
8. BioMarin Nova Scotia'sonly material asset upon completion of the Transaction willbe all of the issued and outstanding Glyko Common Shares.
9. Glyko was incorporatedpursuant to the Canada Business Corporations Act ("CBCA")on June 26, 1992. The registered office of Glyko is 199 BayStreet, Toronto, Ontario, M5L 1A9.
10. Glyko does not have anyoperating activities or operational employees. The principalasset of Glyko is an equity position in BioMarin. As of thedate hereof, Glyko holds 11,367,617 BioMarin Common Shares,representing 21.3% of the outstanding BioMarin Common Shares.
11. The BioMarin Common Sharesheld by Glyko were issued by BioMarin to Glyko upon the inceptionand initial funding of BioMarin and upon subsequent fundingand a subsequent technology license transfer from Glyko toBioMarin.
12. As at January 21, 2002,based upon information provided by the Canadian Depositoryfor Securities Limited ("CDS") and ADP IndependentInvestor Communications Corporation ("IICC"),there were 34,352,823 Glyko Common Shares issued and outstanding.Based upon information provided by CDS and IICC, the Applicantbelieves that 722,639 or 2.1% of the outstanding Glyko CommonShares are held beneficially by approximately 168 shareholdersof Glyko resident in Canada.
13. Glyko's authorized capitalconsists of an unlimited number of Glyko Common Shares. Asof July 3, 2002, there were 34,352,823 Glyko Common Sharesissued and outstanding.
14. As of July 3, 2002, 81,397Glyko Common Shares were reserved for issuance upon the exerciseof outstanding options ("Glyko Options")to purchase Glyko Common Shares under the 1994 Glyko stockoption plan.
15. The Glyko Common Sharesare listed on the Toronto Stock Exchange (the "TSE")under the symbol "GBL".
16. Glyko is a "reportingissuer" or the equivalent in British Columbia, Alberta,Saskatchewan, Manitoba, Ontario, New Brunswick and Nova Scotia.To the best of the knowledge of Glyko, Glyko is not in defaultof any of the requirements of the securities legislation ofsuch jurisdictions.
17. On July 2, 2002, Glykowas granted an interim order under Section 192 of the CBCA(the "Interim Order") by the Ontario SuperiorCourt of Justice (the "Court") which orderspecifies, among other things, certain procedures and requirementsto be followed in connection with the calling and holdingof the Special Meeting (as defined below) and the completionof the Arrangement.
18. A special meeting (the"Special Meeting") of the Glyko Shareholdersis anticipated to be held on August 15, 2002 at which Glykowill seek the requisite Glyko Shareholder approval (which,pursuant to the Interim Order, is expected to be 66 2/3% ofthe votes attached to the Glyko Common Shares representedat the Special Meeting) for a special resolution approvingthe Arrangement and the continuance of Glyko under the lawsof British Columbia (as more fully described in the Circular).
19. In connection with theSpecial Meeting and pursuant to the Interim Order, Glyko willmail on or about July 10, 2002 to each Glyko Shareholder (i)a notice of special meeting, (ii) a form of proxy, and (iii)the Circular. The Circular will be prepared in accordancewith the Legislation, except with respect to any relief grantedtherefrom, and will contain disclosure of the Transactionand the business and affairs of each of BioMarin and Glyko.
20. The Circular will containthe following financial statements:
(a) unaudited pro formaconsolidated balance sheet of BioMarin as of March 31, 2002and unaudited pro forma consolidated statements ofoperations for the year ended December 31, 2001 and forthe three months ended March 31, 2002, respectively, asif the Arrangement had occurred on March 31, 2002, January1, 2001 and January 1, 2001, respectively, prepared in accordancewith U.S. GAAP;
(b) audited annual consolidatedfinancial statements of BioMarin for each of the fiscalyears ended December 31, 2001, December 31, 2000 and December31, 1999, together with balance sheets as at December 31,2001 and December 31, 2000 and the auditor's report thereon,prepared in accordance with U.S. GAAP;
(c) unaudited consolidatedfinancial statements of BioMarin for the three months endedMarch 31, 2002 and March 31, 2001, together with an unauditedbalance sheet as at March 31, 2002, prepared in accordancewith U.S. GAAP;
(d) audited financial statementsof Glyko for each of the fiscal years ended December 31,2001, December 31, 2000 and December 31, 1999, togetherwith balance sheets as at December 31, 2001 and December31, 2000 and the auditor's report thereon, prepared in accordancewith both Canadian GAAP and U.S. GAAP;
(e) unaudited financialstatements of Glyko for the three months ended March 31,2002 and March 31, 2001, together with an unaudited balancesheet as at March 31, 2002, prepared in accordance withboth Canadian GAAP and U.S. GAAP.
21. Arthur Andersen LLP, certifiedpublic accountants, were the independent auditors of BioMarinfrom BioMarin's inception on March 21, 1997 until June 11,2002. BioMarin is not able to obtain a compilation reportfrom Arthur Andersen LLP on the unaudited pro formafinancial statements of BioMarin contained in the Circular.
22. It is expected that uponconsummation of the Arrangement or shortly thereafter theGlyko Common Shares will be delisted from the TSE.
23. Applications will be madeas required by BioMarin to the Nasdaq National Market andthe SWX Swiss Exchange to list the additional BioMarin CommonShares issuable in connection with the transaction.
24. Upon completion of theArrangement, it is expected that the beneficial holders ofBioMarin Common Shares resident in Canada will hold approximately2.8% of the issued and outstanding BioMarin Common Shares.
25. Although BioMarin doesnot intend to become a reporting issuer on completion of theTransaction, if BioMarin were to become a reporting issuer,it would be able to satisfy its continuous disclosure obligationsusing U.S. GAAP financial statements pursuant to the Legislation.
26. In the present case, theBioMarin Common Shares trade on the Nasdaq National Marketand the results reported in U.S. GAAP are the only relevantresults by which financial performance of BioMarin is evaluatedand its shares are traded.
27. The principal asset ofGlyko is 11,367,617 BioMarin Common Shares. As such, the resultsof BioMarin reported in U.S. GAAP are the only relevant resultsby which financial performance of Glyko is currently evaluated.
AND WHEREAS under theSystem, this MRRS Decision Document evidences the decision ofeach Decision Maker (collectively, the "Decision");
AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdictionto make the Decision has been met;
THE DECISION of the DecisionMakers under the Legislation is that Glyko be exempted from:
(a) the requirement that historicaland pro forma financial statements of BioMarin preparedin accordance with U.S. GAAP contained in the Circular beaccompanied by a note to explain and quantify the effect ofmaterial differences between Canadian GAAP and U.S. GAAP thatrelate to measurements and provide a reconciliation of suchfinancial statements to Canadian GAAP;
(b) the requirement that theBioMarin auditor's report contained in the Circular discloseany material differences in the form and content of its auditor'sreport as compared to a Canadian auditor's report and confirmingthat the auditing standards applied are substantially equivalentto Canadian generally accepted auditing standards;
(c) the requirement that theBioMarin MD&A contained in the Circular provide a restatementof those parts of the BioMarin MD&A that would read differentlyif the BioMarin MD&A were based on statements preparedin accordance with Canadian GAAP and the requirement thatthe BioMarin MD&A provide a cross-reference to the notesin the financial statements that reconcile the differencesbetween U.S. GAAP and Canadian GAAP; and
(d) the requirement that thepro forma financial statements of BioMarin containedin the Circular be accompanied by a compilation report.
July 10, 2002.
"Iva Vranic"