SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-12477
AMGEN INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3540776
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Dehavilland Drive, Thousand Oaks, California 91320-1789
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 805-447-1000
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.0001 par value, Common shares purchase rights,
Contractual contingent payment rights
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The approximate aggregate market value of voting stock held by non-
affiliates of the registrant was $8,146,310,000 as of January 31, 1995 (A)
132,491,196
(Number of shares of common stock outstanding as of January 31, 1995)
Documents incorporated by reference:
Document Form 10-K Parts
Definitive Proxy Statement, to be filed within 120 days of
December 31, 1994 (specified portions) III
(A) Excludes 2,410,394 shares of common stock held by directors and
officers, and stockholders whose ownership exceeds five percent of the
shares outstanding, at January 31, 1995. Exclusion of shares held by any
person should not be construed to indicate that such person possesses the
power, directly or indirectly, to direct or cause the direction of the
management or policies of the registrant, or that such person is controlled
by or under common control with the registrant.
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PART I
Item 1. BUSINESS
Overview
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology
company that develops, manufactures and markets human therapeutics based on
advanced cellular and molecular biology.
The Company manufactures and markets two human therapeutic products,
NEUPOGEN(R) (Filgrastim) and EPOGEN(R) (Epoetin alfa). NEUPOGEN(R)
selectively stimulates the production of neutrophils, one type of white
blood cell. The Company markets NEUPOGEN(R) in the United States,
countries of the European Union ("EU"), Canada and Australia for use in
decreasing the incidence of infection in patients undergoing
myelosuppressive chemotherapy. In addition, NEUPOGEN(R) is marketed in
most of these countries for use in reducing the duration of neutropenia for
patients undergoing myeloablative therapy followed by bone marrow
transplantation and for treating patients with severe chronic neutropenia.
EPOGEN(R) stimulates the production of red blood cells and is marketed by
Amgen in the United States and the People's Republic of China for the
treatment of anemia associated with chronic renal failure in patients on
dialysis. EPOGEN(R) is also approved for the treatment of anemia related
to therapy with Zidovudine (AZT) in patients infected with the human
immunodeficiency virus ("HIV") in the People's Republic of China.
The Company focuses its research on biological cell/tissue events and
its development efforts on human therapeutics in the areas of
hematopoiesis, neurobiology, inflammation and soft tissue repair and
regeneration. The Company has research facilities in the United States and
Canada and has clinical development staff in the United States, the EU,
Canada, Australia, Japan and Hong Kong. To augment internal research and
development efforts the Company has established external research
collaborations and has acquired certain product and technology rights.
Amgen operates commercial manufacturing facilities for NEUPOGEN(R) and
EPOGEN(R) in the United States and Puerto Rico. The facility in Puerto
Rico, which performs formulation, fill and finish operations, was approved
by the U.S. Food and Drug Administration ("FDA") in December 1994. The
Company maintains a sales and marketing force in the United States, the EU,
Canada, Australia and the People's Republic of China. In addition, Amgen
has entered into licensing and co-promotion agreements to market
NEUPOGEN(R) and EPOGEN(R) in certain geographic areas.
The Company was incorporated in California in 1980 and was merged into
a Delaware corporation in 1987. Amgen's principal executive offices are
located at 1840 Dehavilland Drive, Thousand Oaks, California 91320-1789.
Products and product candidates
Recombinant human granulocyte colony-stimulating factor
NEUPOGEN(R) (proper name - Filgrastim) is Amgen's trademark for its
recombinant human granulocyte colony-stimulating factor ("G-CSF"), a
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protein that selectively stimulates production of certain white blood cells
known as neutrophils. Neutrophils are the body's first defense against
infection. Treatments for various diseases and diseases themselves can
result in extremely low numbers of neutrophils, or neutropenia.
Myelosuppressive chemotherapy, one treatment option for individuals with
cancer, targets cell types which grow rapidly, including tumor cells,
neutrophils and other blood cells. Providing NEUPOGEN(R) as adjunct to
myelosuppressive chemotherapy can reduce the duration of neutropenia and
thereby reduce the potential for infection.
Congenital neutropenia is an example of disease-related neutropenia.
In congenital neutropenia, the body fails to manufacture sufficient
neutrophils. Chronic administration of NEUPOGEN(R) has been shown to
reduce the incidence and duration of neutropenia-related consequences such
as fever and infections in patients with congenital neutropenia.
NEUPOGEN(R) has also been shown to induce immature blood cells
(progenitor cells) to migrate (mobilize) from the bone marrow into the
blood circulatory system. Studies have shown that when these progenitor
cells are collected from the blood, stored, and re-infused after
chemotherapy (transplanted), recovery of platelets, the cells which play a
critical role in blood clotting, is accelerated. In 1994, NEUPOGEN(R)
received a positive opinion from the Committee for Proprietary Medicinal
Products ("CPMP") in the EU to mobilize progenitor cells for peripheral
blood progenitor cell ("PBPC") transplantation. PBPC transplantation is
becoming an alternative to autologous bone marrow transplantation in some
countries.
In the United States, the Company began selling NEUPOGEN(R) in
February 1991 upon receiving approval of its product license application
from the FDA (see "Joint Ventures and Business Relationships - Limited
Partnership"). NEUPOGEN(R) was initially indicated to decrease the
incidence of infection as manifested by febrile neutropenia for patients
with non-myeloid malignancies undergoing myelosuppressive chemotherapy. In
June 1994, the FDA approved a supplement to the Filgrastim product license
which included a claim to reduce the duration of neutropenia for patients
with non-myeloid malignancies undergoing myeloablative therapy followed by
bone marrow transplantation. In December 1994, the FDA approved an
additional supplement to the Filgrastim product license which included a
claim to reduce the incidence and duration of neutropenia-related
consequences in symptomatic patients with congenital neutropenia, cyclic
neutropenia or idiopathic neutropenia. Amgen markets NEUPOGEN(R) in the
United States through its national sales force.
In the EU, the CPMP issued an opinion in February 1991 that
NEUPOGEN(R) meets the requirements for marketing authorization as an
adjunct to chemotherapy entitling the Company to seek marketing approval in
individual EU countries. Marketing approvals were subsequently received
from all EU countries and product sales commenced in these countries. In
May 1992, the CPMP issued a favorable opinion regarding the use of
NEUPOGEN(R) in reducing the duration of neutropenia for patients undergoing
myeloablative therapy followed by bone marrow transplantation.
Substantially all of the EU countries have now approved the product for use
in this indication. In September 1993, a favorable opinion was issued
regarding the use of NEUPOGEN(R) in treating severe chronic neutropenia,
and subsequently, a majority of the EU countries have approved the product
for use in this indication. In December 1994, the CPMP issued a favorable
opinion for the use of NEUPOGEN(R) in mobilizing progenitor cells for PBPC
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transplantation. Several EU countries have approved the product for use in
this additional indication. Amgen and F. Hoffmann-La Roche Ltd. ("Roche")
jointly market NEUPOGEN(R) in the EU under a co-promotion agreement (see
"Marketing").
In Canada, the Company began selling NEUPOGEN(R) in February 1992 when
the product was approved for use as an adjunct to chemotherapy. In October
1993, the Canadian regulatory authorities approved NEUPOGEN(R) for
treatment of severe chronic neutropenia.
In Australia, the Company began selling NEUPOGEN(R) in May 1992 when
the product was approved for sale both as an adjunct to chemotherapy and to
reduce the duration of neutropenia in patients receiving marrow-ablative
therapy followed by autologous bone marrow transplantation. In July 1993,
the Australian regulatory authorities approved NEUPOGEN(R) for the
treatment of severe chronic neutropenia.
In Japan, Korea and Taiwan, Kirin Brewery Company, Limited ("Kirin"),
was granted rights to market G-CSF under licensing agreements with Kirin-
Amgen, Inc. ("Kirin-Amgen"). Kirin-Amgen is a joint venture between the
Company and Kirin (see "Joint Ventures and Business Relationships - Kirin
Brewery Company, Limited"). Kirin received marketing approval in Japan and
Taiwan in October 1991 and August 1992, respectively, and subsequently
began selling GRAN(R), Kirin's G-CSF product. GRAN(R) is approved for use
to prevent febrile neutropenia in patients undergoing myelosuppressive
chemotherapy, to reduce the duration of neutropenia following bone marrow
transplants, for the treatment of severe chronic neutropenia, for the
treatment of neutropenia accompanying aplastic anemia and for the treatment
of congenital idiopathic neutropenia.
The Company is conducting many clinical trials with NEUPOGEN(R).
Later stage trials are examining NEUPOGEN(R) as an adjunct to chemotherapy
in patients with acute myelogenous leukemia, as an adjunct to dose-
intensified chemotherapy in patients with various tumor types, for the
treatment of neutropenia in HIV-infected patients and for the treatment of
severe community-acquired pneumonia.
For the years ended December 31, 1994, 1993 and 1992, sales of
NEUPOGEN(R) accounted for approximately 50%, 52% and 50%, respectively, of
Amgen's total revenues.
Recombinant human erythropoietin
EPOGEN(R) (proper name - Epoetin alfa) is Amgen's trademark for its
recombinant human erythropoietin product, a protein that stimulates red
blood cell production. EPOGEN(R) is effective in the treatment of anemia
associated with chronic renal failure for patients on dialysis and is
indicated to elevate or maintain the red blood cell level (as manifested by
hematocrit or hemoglobin determinations) and to decrease the need for blood
transfusions in these patients.
In the United States, Amgen was granted rights to market recombinant
human erythropoietin under a licensing agreement with Kirin-Amgen (see
"Joint Ventures and Business Relationships - Kirin Brewery Company,
Limited"). The Company began selling EPOGEN(R) in 1989 upon receiving
approval of its product license application from the FDA. EPOGEN(R) is
indicated for use in the treatment of anemia associated with chronic renal
failure. The FDA also designated EPOGEN(R) as an orphan drug, and such
<PAGE>
designation will expire in 1996. In July 1994, the FDA approved a
supplement to the Epoetin alfa product license which included an expanded
target hematocrit range for patients with chronic renal failure. The
target hematocrit, or percentage of red blood cells, was expanded to a
range of 30 to 36 percent from the previously indicated range of 30 to 33
percent. Ongoing clinical trials are investigating whether there are
additional benefits for dialysis patients in maintaining a higher, even
more normal, hematocrit range. Through its national sales force, the
Company markets EPOGEN(R) in the United States for dialysis patients, the
market to which Amgen has maintained exclusive rights.
Amgen has granted Ortho Pharmaceutical Corporation a license to pursue
commercialization of recombinant human erythropoietin as a human
therapeutic in the United States in all markets other than dialysis.
(Ortho Pharmaceutical Corporation is a subsidiary of Johnson & Johnson and
will be referred to hereafter as Johnson & Johnson.) In December 1990, the
FDA approved a supplement to the Epoetin alfa product license to include
treatment of anemia related to therapy with AZT in HIV-infected patients.
Also, the FDA approved Amgen's supplement to name Johnson & Johnson a
distributor of Epoetin alfa under the trademark PROCRIT(R). In January
1991, Johnson & Johnson began distributing Epoetin alfa in the United
States. In April 1993, the FDA approved an additional supplement to the
Epoetin alfa product license to include the treatment of anemia in patients
with non-myeloid malignancies undergoing chemotherapy. The Company is
engaged in arbitration proceedings regarding its license with Johnson &
Johnson. For a complete discussion of this matter, see Note 5 to the
Consolidated Financial Statements - "Johnson & Johnson arbitration".
In the People's Republic of China, the Company received government
approval in September 1992 and began marketing EPOGEN(R) for treatment of
anemia associated with chronic renal failure and anemia related to therapy
with AZT in HIV-infected patients.
In Japan, Kirin was granted rights to market recombinant human
erythropoietin under a licensing agreement with Kirin-Amgen (see "Joint
Ventures and Business Relationships - Kirin Brewery Company, Limited"). In
1990, Kirin received approval from the Japanese government and began
marketing ESPO(R), Kirin's recombinant human erythropoietin product.
ESPO(R) is approved for treatment of anemia associated with chronic renal
failure.
In countries other than the United States, the People's Republic of
China and Japan, Johnson & Johnson was granted rights to pursue the
commercialization of erythropoietin as a human therapeutic under a
licensing agreement with Kirin-Amgen. Affiliates of Johnson & Johnson
market erythropoietin for treatment of anemia associated with chronic renal
failure under the trademark EPREX(R) in several countries.
For the years ended December 31, 1994, 1993 and 1992, sales of
EPOGEN(R) accounted for approximately 44%, 42% and 46%, respectively, of
Amgen's total revenues.
Consensus interferon
Interferons are a class of naturally occurring proteins with anti-
viral and anti-tumor activity that also modulate the immune system.
INFERGEN(TM), Amgen's consensus interferon, is a non-naturally occurring
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protein that combines structural features of many interferon sub-types.
The Company is performing clinical trials with INFERGEN(TM) for the
treatment of chronic hepatitis C viral infection. Hepatitis C viral
infection is a potentially deadly disease that, if not treated, may lead to
cirrhosis and liver cancer. INFERGEN(TM) is also being investigated for
other indications.
Hematopoiesis
Hematopoietic growth factors are proteins which influence growth,
migration, and maturation of certain types of blood cells. EPOGEN(R) and
NEUPOGEN(R) are hematopoietic growth factors which affect the development
of red blood cells and neutrophils, respectively. Stem cell factor
("SCF"), another of the Company's hematopoietic growth factors in
development, may influence the production, mobilization, and maturation of
progenitor cells. Human clinical trials are underway to investigate the
utility of SCF in combination with NEUPOGEN(R) for improved mobilization of
progenitor cells prior to PBPC transplantation.
Megakaryocyte growth and development factor ("MGDF"), another
hematopoietic growth factor, has been shown in pre-clinical models to be
useful in ameliorating the thrombocytopenia caused by intensive
chemotherapy or irradiation. Thrombocytopenia, or severely depressed
platelet numbers, can result in severe internal bleeding. The Company is
collaborating in the development of MGDF with Kirin (see "Joint Ventures
and Business Relationships - Kirin Brewery Company, Limited") and plans to
initiate human clinical testing in 1995.
Cell therapy
Cell separation technology complements the Company's research and
development efforts in hematopoiesis. Amgen's hematopoietic growth factors
together with selected hematopoietic cells enable the Company to pursue the
investigation of new and potentially more effective cancer therapy
protocols. In 1994, Amgen acquired an equity interest in AmCell Inc.
("AmCell"), a U.S. company which will develop and manufacture cell
separation and characterization devices based on the technology of Miltenyi
Biotec GmbH. Amgen and AmCell entered into an agreement whereby AmCell
will manufacture certain cell selection devices for Amgen, and Amgen will
clinically develop and commercialize these devices (see "Joint Ventures and
Business Relationships - AmCell").
Neurobiology
The Company has extensive discovery programs in neurological and
neuroendocrine disorders. Neurotrophic factors are proteins which play a
role in nerve cell protection and regeneration and which may therefore, be
useful in treating a variety of neurological disorders, including
neurodegenerative diseases of the central nervous system, nerve injury or
trauma. Human clinical testing of two neurotrophic factors, brain-derived
neurotrophic factor ("BDNF") and neurotrophin-3 ("NT-3"), is currently
being conducted in collaboration with Regeneron Pharmaceuticals, Inc.
("Regeneron") (see "Joint Ventures and Business Relationships - Regeneron
Pharmaceuticals, Inc."). BDNF is being investigated to treat amyotrophic
lateral sclerosis (Lou Gehrig's disease), a fatal disorder which causes
rapid degeneration of motor neurons that innervate skeletal muscles. More
recently, clinical testing began with NT-3.
<PAGE>
Glial derived neurotrophic factor ("GDNF") was added to the Company's
neurobiology research program through the acquisition of Synergen, Inc.
("Synergen") (see "Joint Ventures and Business Relationships - Synergen
acquisition"). GDNF is being investigated as a treatment for Parkinson's
disease.
Inflammation
The inflammatory response is essential for defense against harmful
micro-organisms and for the repair of damaged tissues. The failure of
control mechanisms over inflammatory response occurs in conditions such as
rheumatoid arthritis, acute respiratory distress syndrome and asthma.
Tumor necrosis factor binding protein ("TNFbp") and interleukin-1 receptor
antagonist ("IL-1ra") are two product candidates added to the Company's
inflammation research program through the acquisition of Synergen (see
"Joint Ventures and Business Relationships - Synergen acquisition"). TNFbp
is being investigated as a treatment for rheumatoid arthritis, and IL-1ra
is currently in clinical testing for the same indication. The Company is
also conducting research to discover and develop other molecules for the
treatment of inflammatory diseases.
Soft tissue repair and regeneration
Soft tissue growth factors are believed to play a role in accelerating
or improving tissue regeneration and wound healing. These growth or wound
healing factors regulate a broad range of cellular activities. Amgen
currently is conducting research on certain tissue growth factors including
keratinocyte growth factor.
Other therapeutics
Amgen's recombinant hepatitis B vaccine and interleukin-2 ("IL-2")
were licensed to Johnson & Johnson in 1985. In March 1991, Johnson &
Johnson returned the rights to develop and market these products to Amgen
(see Note 5 to the Consolidated Financial Statements - "Johnson & Johnson
arbitration"). In May 1991, Johnson & Johnson assigned its FDA
authorizations to conduct clinical testing of recombinant hepatitis B
vaccine and IL-2 to Amgen, and the Company is currently conducting clinical
development for hepatitis B vaccine and IL-2.
Joint Ventures and Business Relationships
The Company intends to self-market its products where possible. From
time to time it may supplement this effort by using joint ventures and
other business relationships to provide additional marketing and product
development capabilities. The Company also supplements its internal
research and development efforts with acquisitions of product and
technology rights and external research collaborations. Amgen has
established the relationships described below and may establish others in
the future.
Synergen acquisition
In December 1994, the Company acquired Synergen, a publicly held
biotechnology company engaged in the discovery and development of protein-
based pharmaceuticals. The addition of Synergen's product candidates and
<PAGE>
research and development staff has allowed the Company to significantly
expand its research efforts in the areas of neurobiology and inflammation.
Synergen was acquired for $254,493,000, including related acquisition
costs. The preliminary assignment of the purchase price among identifiable
tangible and intangible assets (including in-process technology) was based
on an analysis of the fair values of those assets. The value assigned to
in-process technology of $116,367,000 was expensed on the acquisition date.
This business combination has been accounted for using the purchase method.
F. Hoffmann-La Roche Ltd.
In 1988, Amgen and Roche entered into a co-promotion agreement for the
sale of NEUPOGEN(R) (Filgrastim) in the EU. Under this agreement, Amgen
and Roche share the clinical development, regulatory and commercialization
responsibilities for the product. Amgen manufactures NEUPOGEN(R) and the
two companies share in the profits from sales of NEUPOGEN(R). This
agreement allows Amgen the option to regain complete control for marketing
the product in the future.
In 1989, Amgen and Roche entered into another agreement to
commercialize NEUPOGEN(R) in certain European countries not located within
the EU. Under this agreement, Roche markets NEUPOGEN(R) in these countries
and pays a royalty to Amgen on these sales.
Johnson & Johnson
Amgen granted Johnson & Johnson a license to pursue commercialization
of recombinant human erythropoietin as a human therapeutic in the United
States in all markets other than dialysis. The Company is engaged in
arbitration proceedings regarding this agreement. For a complete
discussion of this matter, see Note 5 to the Consolidated Financial
Statements - "Johnson & Johnson arbitration".
Kirin Brewery Company, Limited
The Company has a 50-50 joint venture (Kirin-Amgen) with Kirin.
Kirin-Amgen was formed to develop and commercialize certain of the
Company's technologies. Amgen and Kirin have been exclusively licensed by
Kirin-Amgen to manufacture and market recombinant human erythropoietin in
the United States and Japan, respectively. Kirin-Amgen has also granted
Amgen an exclusive license to manufacture and market G-CSF in the United
States, Europe, Canada, Australia and New Zealand. Kirin has been licensed
by Kirin-Amgen with similar rights for G-CSF in Japan, Taiwan and Korea.
Both Amgen and Kirin have been licensed to market recombinant human
erythropoietin and G-CSF in the People's Republic of China. Marketing of
these products by Amgen and Kirin in the People's Republic of China is
conducted under a separate co-promotion agreement which is currently being
reevaluated. In 1994, Kirin-Amgen licensed to Amgen and Kirin the rights
to develop and market MGDF.
Pursuant to the terms of agreements entered into with Kirin-Amgen, the
Company conducts certain research and development activities on behalf of
Kirin-Amgen and is paid for such services at a negotiated rate. Included
in revenues from corporate partners in the Company's Consolidated Financial
Statements for the years ended December 31, 1994, 1993 and 1992, are
<PAGE>
$58,638,000, $41,247,000 and $24,554,000, respectively, related to these
agreements.
In connection with its various agreements with Kirin-Amgen, the
Company has been granted sole and exclusive licenses for the manufacture
and sale of certain products in specified geographic areas of the world.
In return for such licenses, the Company paid Kirin-Amgen stated amounts
upon the receipt of the licenses and/or pays Kirin-Amgen royalties based on
sales. During the years ended December 31, 1994, 1993 and 1992, Kirin-
Amgen earned royalties from Amgen of $67,526,000, $53,122,000 and
$42,793,000, respectively, under such agreements.
Limited Partnership
Amgen Clinical Partners, L.P. (the "Limited Partnership"), a limited
partnership, was formed to develop and commercialize products from certain
technologies for human pharmaceutical use in the United States. In
connection with the formation of the Limited Partnership, Amgen was granted
options to purchase all of the limited partners' interests in the Limited
Partnership. During 1993, Amgen exercised these options and made cash
advance payments to the former limited partners aggregating $20,860,000.
In addition, each former limited partner receives quarterly payments,
subject to certain adjustments, equal to a stated percentage of Amgen's
sales of certain products in specified geographic areas through December
31, 2005. The cash advance payments are recoverable against certain of
these quarterly payments commencing in 1997.
The Limited Partnership and Amgen formed Amgen Ventures, a joint
venture, to manufacture and market the Limited Partnership's products in
the United States. Amgen was responsible for marketing and manufacturing
products on behalf of the joint venture in return for an annual commission
of 60% of Amgen Ventures' net product sales and was reimbursed its costs of
manufacturing, as defined. Amgen consolidated the results of Amgen
Ventures' operations and reflected the Limited Partnership's equity in
earnings of these operations as royalty expense. During the years ended
December 31, 1993 and 1992, the Limited Partnership's equity in these
earnings aggregated $11,131,000 and $36,306,000, respectively.
In connection with the sale of limited partnership interests in 1987,
Amgen issued warrants to the limited partners to purchase 18,153,000 shares
of its common stock in exchange for the options to purchase the limited
partners' interests in the Limited Partnership. Substantially all these
warrants were exercised prior to their expiration on June 30, 1994.
Regeneron Pharmaceuticals, Inc.
In 1990, the Company entered into a Collaboration Agreement with
Regeneron to co-develop and commercialize BDNF and NT-3 in the United
States. In addition, Regeneron licensed these potential products to Amgen
for certain other countries.
To facilitate this collaboration, the Company and Regeneron formed
Amgen-Regeneron Partners, a 50-50 partnership. Amgen-Regeneron Partners
commenced operations with respect to BDNF in June 1993 upon Amgen's
determination that preclinical development of BDNF by Amgen and Regeneron
warranted the preparation of an Investigational New Drug Application
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("IND"). Operations with respect to NT-3 began in January 1994 when Amgen
determined that an IND should also be prepared for this product.
AmCell
During 1994, Amgen acquired an equity interest in AmCell, a company
which will manufacture cell separation and characterization devices based
on the technology of Miltenyi Biotec GmbH ("Miltenyi"). Amgen has an
exclusive license to clinically develop and commercialize selected products
of AmCell incorporating Miltenyi technology in exchange for development
funding and milestone payments.
Synergen Clinical Partners
Synergen Clinical Partners, L.P. ("SCP"), a limited partnership, was
formed to develop and commercialize products for human therapeutic use in
certain geographic areas from Synergen's IL-1ra technology which was
acquired by a wholly-owned subsidiary of Amgen (see "Synergen
acquisition"). This wholly-owned subsidiary would be obligated to pay SCP
royalties on sales of such products and a milestone payment upon receiving
the first FDA marketing approval of an IL-1ra product. In connection with
the formation of SCP, Synergen was granted options to purchase all of the
limited partners' interests in SCP upon the occurrence of certain future
events for a specified amount of consideration.
Other business relationships
In February 1995, the Company reached an agreement in principle with
The Rockefeller University to develop products based on a gene thought to
play a key role in the regulation of body weight. In April 1994, the
Company entered into a collaboration agreement with Alanex Inc. to perform
research and development in the field of neurobiology. In June 1993, the
Company entered into a collaboration agreement with Arris Pharmaceutical
Corporation to develop synthetic cytokine mimetics. In December 1992, the
Company entered into a collaboration agreement with Sugen, Inc. to perform
research, development and commercialization in the fields of
megakaryocytopoiesis and neurobiology. In addition, the Company has
an extensive number of other corporate and academic research collaborations.
Marketing
Worldwide changes in health care policy are a significant source of
challenge for the Company. These challenges include uncertainty regarding
the outcome of U.S. health care reform and its impact on sales growth,
changing reimbursement policies in worldwide markets and continued health
care cost containment pressures worldwide. Market forces are also changing
the economics of the human therapeutics business through voluntary limits
on price increases by the U.S. pharmaceutical industry, increases in the
purchasing power of large buying groups, and increased influence on medical
care and treatment decisions by managed care organizations. The Company is
responding to this changing health care environment through programs that
optimize the use of its products for the treatment of patients and clinical
trials designed to evaluate cost and quality-of-life parameters as well as
clinical safety and efficacy. In addition, the Company is adapting to
legislative mandates in foreign markets.
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In the United States, the Company's sales force markets its products
to physicians and pharmacists primarily in hospitals and clinics. The
Company has chosen to use major wholesale distributors of pharmaceutical
products as the principal means of distributing EPOGEN(R) (Epoetin alfa)
and NEUPOGEN(R) (Filgrastim) to clinics, hospitals and pharmacies. Sales
to Bergen Brunswig Corporation and Cardinal Distribution, two major
distributors of these products, accounted for 22% and 16%, respectively, of
total revenues for the year ended December 31, 1994. Sales to Bergen
Brunswig Corporation and McKesson Drug Company, accounted for 23% and 10%,
and 22% and 11%, of total revenues for the years ended December 31, 1993
and 1992, respectively.
NEUPOGEN(R) is reimbursed by both public and private payors, and
changes in coverage and reimbursement policies of these payors could have a
material effect on sales of NEUPOGEN(R). EPOGEN(R) is primarily reimbursed
by the Federal Government through the End Stage Renal Disease Program
("ESRD") of Medicare. The ESRD Program reimburses approved providers for
80% of allowed dialysis costs; the remainder is paid by other sources,
including Medicaid, state kidney patient programs and private insurance.
The reimbursement rate is established by Congress and is monitored by the
Health Care Financing Administration. The reimbursement rate for EPOGEN(R)
is subject to yearly review. Changes in coverage and reimbursement
policies could have a material effect on the sales of EPOGEN(R). The
Federal Government enacted legislation effective January 1, 1994 to lower
reimbursement provided to facilities that administer EPOGEN(R) from $11 per
thousand units administered to $10 per thousand units administered. This
change in reimbursement has not had a material adverse effect on EPOGEN(R)
sales.
Except for purchases by Veterans Administration hospitals, the Company
does not receive any payments directly from the Federal Government nor does
it have any significant supply contracts with the Federal Government.
However, the consumption of NEUPOGEN(R) and EPOGEN(R) by hospitals,
clinics, and physicians may be impacted by the amount and methods of
reimbursement that they receive from the Federal Government.
In the EU, Amgen and Roche share clinical development, regulatory and
commercialization responsibilities for NEUPOGEN(R) under a co-promotion
agreement. In addition, Amgen manufactures NEUPOGEN(R) for sale in the EU,
and the two companies share in the profits from sales of the product.
NEUPOGEN(R) is distributed to wholesalers and/or hospitals in all EU
countries depending upon the distribution practice of hospital products in
each country. Patients receiving NEUPOGEN(R) for approved indications are
covered by government health care programs. The consumption of NEUPOGEN(R)
is affected by budgetary constraints imposed by certain EU countries.
NEUPOGEN(R) sales volumes in both the United States and Europe are
influenced by a number of factors including underlying demand, government
financial constraints, private sector financial constraints, seasonality of
cancer chemotherapy administration, and wholesaler management practices.
In Canada and Australia, NEUPOGEN(R) is marketed by the Company
directly to hospitals, pharmacies and medical practitioners. Distribution
is handled by third party contractors.
In the People's Republic of China, the Company markets EPOGEN(R)
directly to hospitals, pharmacies and medical practitioners. Distribution
is handled by third party contractors.
<PAGE>
Competition
Competition is intense among companies that develop and market
products based on advanced cellular and molecular biology. Amgen has a
number of competitors, including Chiron Corp., Chugai Pharmaceutical Co.,
Ltd., Immunex Corp. (a subsidiary of American Home Products), Rhone-
Poulenc-Rorer, Sandoz Ltd. and Schering-Plough Corp. For products which
the Company manufactures and markets, it faces significant competition from
these and other biotechnology and pharmaceutical firms in the United
States, Europe and elsewhere. Certain specialized biotechnology firms have
also entered into cooperative arrangements with major companies for
development and commercialization of products, creating an additional
source of competition.
Any products or technologies that successfully address anemias could
negatively impact the market for recombinant human erythropoietin.
Similarly, any products or technologies that successfully address the
causes or incidence of low levels of neutrophils could negatively impact
the market for G-CSF. These include products that could receive approval
for indications similar to those for which NEUPOGEN(R) (Filgrastim) has
been approved, development of chemotherapy treatments that are less
myelosuppressive than existing treatments and the development of anti-
cancer modalities that reduce the need for myelosuppressive chemotherapy.
NEUPOGEN(R) currently faces market competition from a competing G-CSF
product, from granulocyte macrophage colony-stimulating factor ("GM-CSF")
products and from the chemoprotectant, amifostine (WR-2721). Potential
future sources of competition include other GM-CSF products, PIXY 321, and
PGG-glucan, among others.
Chugai Pharmaceuticals Co., Ltd. ("Chugai") markets a G-CSF product in
Japan as an adjunct to chemotherapy and as a treatment for bone marrow
transplant patients. In June 1993, Chugai and Rhone-Poulenc-Rorer received
a favorable opinion from the CPMP for this G-CSF product in the adjunct to
chemotherapy and bone marrow transplant settings and began market launches
in certain EU countries by early 1994. Chugai, through its licensee,
AMRAD, markets this G-CSF product in Australia as an adjunct to
chemotherapy and for patients receiving a bone marrow transplant. Under an
agreement with Amgen, Chugai is precluded from selling their G-CSF product
in the United States, Canada or Mexico.
Immunex Corp. markets GM-CSF in the United States for patients
receiving a bone marrow transplant and is pursuing other indications
including use as an adjunct to chemotherapy. Behringwerke AG markets this
GM-CSF product in Europe in similar settings. Sandoz Ltd. markets a
separate GM-CSF product for use in bone marrow transplant patients, as an
adjunct to chemotherapy and as an adjunct to gancyclovir treatment of HIV-
infected patients in the EU and certain other countries. This GM-CSF
product is currently being developed for similar indications in the United
States and Canada.
In 1994, amifostine received a favorable opinion from the CPMP to
reduce the neutropenia-related risk of infection due to the combination
regimen cyclophosphamide and cisplatinum in patients with advanced ovarian
carcinoma. Schering Plough markets amifostine in the EU. U.S. Bioscience
continues to develop amifostine as an adjunct to chemotherapy in the United
States.
<PAGE>
Immunex Corp. is developing PIXY 321 in the United States as an
adjunct to chemotherapy and for patients receiving a bone marrow
transplant. PIXY 321 is being developed for use outside North America by
American Home Products. Alpha Beta Technologies is developing PGG-glucan
for the treatment of certain infectious diseases and as an adjunct to
chemotherapy.
Other products which address potential markets for G-CSF may be
identified and developed by competitors in the future. Such products could
also present competition in potential markets for SCF. Research and
development of other hematopoietic growth factors, including MGDF, is being
conducted by several companies including Genentech, Inc., ZymoGenetics,
Inc. (a subsidiary of Novo Nordisk A/S), Immunex Corp., Sandoz Ltd. and
Genetics Institute, Inc.
INFERGEN(TM) would face competition from interferons and other related
products, several of which are in development or on the market. Schering-
Plough Corp. and Roche are major suppliers of interferons.
Several companies are developing neurotrophic factors including
Cephalon Inc., Genentech, Inc. and Regeneron Pharmaceuticals, Inc. Many
companies are believed to be conducting research in the area of
inflammation including Celltech, Ltd., ICOS Corporation and AutoImmune.
Companies believed to be developing certain tissue growth factors include
Creative Biomolecules, Inc., Chiron Corp. (in collaboration with Johnson &
Johnson), Genentech, Inc., Immunex Corp., Scios Nova Inc. and ZymoGenetics,
Inc.
Several hepatitis B vaccines are marketed in the United States,
Europe, Japan and other countries. SmithKline Beecham, p.l.c., Merck &
Co., Inc. and Rhone-Poulenc, S.A. are major suppliers of hepatitis B
vaccines. Chiron Corp. currently markets an IL-2 product in the United
States, Europe and Japan.
Research and Development
The Company's two primary sources of new product candidates are
internal research and development and acquisition and licensing from third
parties. Research and development expense, which includes technology
license fees paid to third parties, for the years ended December 31, 1994,
1993 and 1992 were $323,629,000, $255,321,000 and $182,297,000,
respectively. The amount for the year ended December 31, 1994 excludes a
$116,367,000 write-off of in-process technology purchased in connection
with the acquisition of Synergen (see "Joint Ventures and Business
Relationships - Synergen acquisition").
Government Regulation
Regulation by governmental authorities in the United States and other
countries is a significant factor in the production and marketing of the
Company's products and its ongoing research and development activities. In
order to clinically test, manufacture and market products for therapeutic
use, Amgen must satisfy mandatory procedures and safety standards
established by the FDA and comparable agencies in foreign countries.
In the United States, the Company's products are regulated primarily
on a product by product basis under the U.S. Food, Drug and Cosmetic Act
and Section 351(a) of the Public Health Service Act. Most of the Company's
products and product candidates are or will be classified as biologics
<PAGE>
rather than drugs and, therefore, are subject to regulation by the Center
for Biologics Evaluation and Research. Approval of a biologic for
marketing requires both a license for the product and a license for the
manufacturing facility.
The Company's products are subject to rigorous FDA approval
procedures. After purification, laboratory analysis and testing in
animals, a sponsor files an investigational new drug application with the
FDA to begin human testing. A three-phase human clinical testing program
must then be undertaken. In Phase 1, studies are conducted to determine
the safety and optimal dosage for administration of the product. In Phase
2, studies are conducted to gain preliminary evidence of the efficacy of
the product. In Phase 3, studies are conducted to provide sufficient data
for the statistical proof of safety and efficacy. The time and expense
required to perform this clinical testing can far exceed the time and
expense of the research and development initially required to create the
product. No action can be taken to market any therapeutic product in the
United States until an appropriate product license application has been
approved by the FDA. Even after initial FDA approval has been obtained,
further studies may be required to provide additional data on safety and
would be required to gain approval for the use of a product as a treatment
for clinical indications other than those initially approved. In addition,
use of products during testing and after initial marketing could reveal
side effects that could delay, impede or prevent marketing approval, limit
uses or expose the Company to product liability claims.
In addition to receiving product approval from the FDA, Amgen is
required to file an establishment license application with the FDA to
obtain approval of Amgen's manufacturing facilities. Prior to granting an
establishment license, the FDA reviews manufacturing procedures and
inspects equipment and facilities. If, after receiving approval from the
FDA, a material change is made in manufacturing equipment, location or
process, additional regulatory review may be needed.
In Europe, regulatory requirements are similar in principle to those
in the United States. A two-part product approval process is required in
the EU. Clinical testing and manufacturing facilities and procedures data
are presented in a Marketing Authorization Application filed with the CPMP.
The CPMP reviews the application in order to express an opinion that the
product meets the requirements for marketing authorization. Approvals to
market the product must then be obtained from the appropriate government
agency of each EU country. Such government agencies may require an
inspection of the manufacturing facilities.
In Canada, a New Drug Submission is filed with the Health Protection
Branch ("HPB") of the Canadian government. The submission includes clinical
testing, manufacturing facilities and procedures data. In a process which
parallels that in the United States, the HPB reviews these data and
inspects the manufacturing facilities in order to issue a Notice of
Compliance which allows the Company to market the product.
In Australia, an application for registration of a drug is evaluated
by the Therapeutic Goods Administration ("TGA"), which is part of the
Ministry of Human Services and Health. In a process similar to that in the
United States, the TGA reviews data on the manufacture, animal testing and
<PAGE>
clinical trials of the product and, on approval, issues a Certificate of
Registration permitting the Company to market the product.
In the People's Republic of China, a United States free sales
certificate and proven safety and efficacy data by local clinical trials
are required by the Ministry of Public Health for the registration of the
product.
The Company's present and future business in the United States will be
subject to regulation under the United States Atomic Energy Act, the Clean
Air Act, the Federal Water Pollution Control Act, the Environmental
Protection Act, the Occupational Safety and Health Act, the National
Environmental Policy Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Medical Waste Tracking Act, national
restrictions and other present or possible future local, state and federal
regulations. Also, Amgen's research and manufacturing activities are
conducted in voluntary compliance with the National Institutes of Health
Guidelines for Recombinant DNA Research. The Company's research operations
in Canada are subject to a generally similar set of requirements.
Patents and Trademarks
Patents are very important to the Company in establishing proprietary
rights to the products it has developed. The Company has filed
applications for a number of patents and it has been granted patents
relating to recombinant human erythropoietin, G-CSF, consensus interferon
and various potential products. The Company has obtained licenses from and
pays royalties to third parties. Other companies have filed patent
applications or have been granted patents in areas of interest to the
Company. There can be no assurance any licenses required under such
patents would be available for license on reasonable terms or at all. The
Company is engaged in arbitration proceedings with Johnson & Johnson and
various patent litigation. For a discussion of these matters see Note 5 to
the Consolidated Financial Statements - "Johnson & Johnson arbitration" and
Item 3, "Legal Proceedings".
The Company has obtained U.S. registration of its EPOGEN(R) and
NEUPOGEN(R) trademarks. In addition, these trademarks have been registered
in several other countries. The Company has applied for registration of the
INFERGEN(TM) trademark in the United States and several other countries.
Human Resources
As of February 28, 1995, the Company had 3,546 employees (including
staff added in connection with the acquisition of Synergen), of which 1,632
were engaged in research and development, 572 were engaged in manufacturing
and associated support, 772 were engaged in sales and marketing and 570
were engaged in finance and general administration. There can be no
assurance that the Company will be able to continue attracting and
retaining qualified personnel in sufficient numbers to meet its needs.
None of the Company's employees are covered by a collective bargaining
agreement, and the Company has experienced no work stoppages. The Company
considers its employee relations to be excellent.
<PAGE>
Geographic Area Financial Information
For financial information concerning the geographic areas in which
the Company operates see Note 12 to the Consolidated Financial Statements.
Item 2. PROPERTIES
Amgen's principal executive offices and a majority of its
administrative, manufacturing and research and development facilities are
located in 29 buildings totaling approximately 1,440,000 square feet in
Thousand Oaks, California. Twenty-five of the buildings are owned and four
are leased. Adjacent to these facilities are three buildings totaling
approximately 230,000 square feet that are under construction. In
addition, the Company has acquired other property adjacent to these
facilities in anticipation of future expansion. The Thousand Oaks,
California facilities include a manufacturing plant that produces
commercial quantities of Epoetin alfa and another manufacturing plant that
can produce several products including commercial quantities of NEUPOGEN(R)
(Filgrastim). These manufacturing plants have been licensed by various
regulatory bodies.
Elsewhere in North America, Amgen owns research facilities and a pilot
plant in Boulder, Colorado totaling approximately 310,000 square feet
(including facilities obtained through the acquisition of Synergen) and an
80,000 square foot distribution center in Louisville, Kentucky. The
Company leases additional facilities including a research facility and
administrative offices in Toronto, Canada totaling 37,000 square feet, an
administrative office in Washington, D.C. and five regional sales offices.
Outside North America, the Company has a 320,000 square foot
formulation, fill and finish facility in Juncos, Puerto Rico which has been
licensed by various regulatory bodies. In addition, the Company has leased
facilities in nine European countries, Australia, Japan, Hong Kong and the
People's Republic of China for administration, marketing and research and
development aggregating approximately 270,000 square feet.
Amgen believes that its current facilities plus anticipated additions
are sufficient to meet its needs for the next several years.
Item 3. LEGAL PROCEEDINGS
The Company is engaged in arbitration proceedings with one of its
licensees. For a complete discussion of this matter see Note 5 to the
Consolidated Financial Statements - "Johnson & Johnson arbitration". Other
legal proceedings are discussed below. While it is not possible to predict
accurately or to determine the eventual outcome of these matters, the
Company believes that the outcome of these legal proceedings will not have
a material adverse effect on the financial statements of the Company.
Synergen litigation
Acquisition litigation
The Company and its wholly-owned subsidiary, Amgen Boulder Inc.
(formerly Synergen) have been named as defendants in several lawsuits filed
in connection with the Company's December 1994 acquisition of Synergen (the
`` Acquisition''). One suit, Stanley, et al. v. Soll, et al., was filed on
November 18, 1994 by two stockholders in the Court of Chancery of the State
of Delaware in New Castle County against Synergen and certain of its former
<PAGE>
officers and directors. Plaintiffs, who seek to represent a class of
stockholders of Synergen common stock, allege that the defendants breached
their fiduciary duties by failing to maximize stockholder value.
Plaintiffs seek an unspecified amount of compensatory damages, an order
rescinding the Acquisition, and related equitable relief. Other
stockholders seeking the same relief filed suits on November 23 and 29,
1994 in United States District Court, County of Boulder, State of Colorado.
In Livergood v. Synergen, Inc., et al. and Weld, et al. v. Amgen Inc., et
al., the plaintiffs allege that defendants Synergen, Amgen and certain of
Synergen's former officers and directors breached their fiduciary duties
and defrauded the plaintiffs by omitting to disclose allegedly material
information concerning Synergen's future prospects. Plaintiffs in both
cases seek to represent a class of stockholders of Synergen common stock.
Another suit, Glick v. Synergen, Inc., et al., was filed in the Superior
Court of the State of California, County of Los Angeles, as a class action
on January 24, 1995 by plaintiffs who seek to represent all warrant holders
of Synergen who claim to have been deprived of the benefit of their
warrants. Plaintiffs seek general damages in the sum of $34,334,499
against Synergen, Amgen and former officers and directors of Synergen based
on allegations of conspiracy, breach of duty, self-dealing, interference
with prospective business advantage and unjust enrichment.
ANTRIL(TM) litigation
Several lawsuits have been filed against Synergen alleging
misrepresentations in connection with its research and development of
ANTRIL(TM) for the treatment of sepsis. In re Synergen, Inc. Securities
Litigation, a class action complaint filed on April 15, 1993 in the United
States District Court for the District of Colorado, alleged violations of
federal and state securities laws by various classes of Synergen's
stockholders. Synergen and certain of its former officers and directors
were named as defendants. The Court dismissed the state law claims on
April 8, 1994 and approved a settlement of the remaining claims on March 7,
1995. The settlement involves payment by Synergen and its insurers of an
amount that is not material to the Company's financial statements and the
plaintiffs' agreement to dismiss the action with prejudice. In Temple, et
al. v. Synergen, Inc., et al., three stockholders filed suit on November
15, 1994 in the District Court for the City and County of Denver, State of
Colorado, against Synergen and a former director and executive officer,
alleging violations of state securities law, fraud and misrepresentation.
Plaintiffs seek an unspecified amount of compensatory damages and punitive
damages. In Johnson v. Amgen Boulder, Inc., et al., suits filed on
February 14, 1995 in the Superior Court for the State of Washington, King
County and in the United States District Court for the Western District of
Washington, plaintiff seeks rescission of certain payments made to one of
the defendants (or unspecified damages not less than $50,000,000) and
treble damages. Plaintiff, a limited partner of defendant Synergen
Clinical Partners, L.P., seeks to represent a class of other limited
partners. The complaints allege violations of federal and state securities
laws, violations of other federal and state statutes, fraud, negligence,
breach of contract, conspiracy and breach of fiduciary duty. The
defendants include Synergen, Synergen Clinical Partners, L.P., Synergen
Development Corporation and former officers and directors of Synergen.
<PAGE>
Elanex Pharmaceuticals litigation
In October 1993, the Company filed a complaint for patent infringement
against defendants Elanex Pharmaceuticals, Inc. ("Elanex"), Laboratorios
Elanex De Costa Rica, S. A., Bio Sidus S.A., Merckle GmbH, Biosintetica S.
A. and other unknown defendants. The complaint, filed in the United States
District Court for the Western District of Washington at Seattle, seeks
injunctive relief and damages for Elanex's infringement of the Company's
patent for DNA sequences and host cells useful in producing recombinant
erythropoietin. The complaint also alleges that the foreign defendants
entered into agreements with Elanex relating to the production or sale of
recombinant erythropoietin and thereby have induced Elanex's infringement.
In December 1993, Elanex responded to the complaint denying the
material allegations thereof, and filed a counterclaim seeking a
declaratory judgment that the Company's patent is invalid and that Elanex's
recombinant erythropoietin technology does not infringe any valid claims of
the Company's patent. The counterclaim also seeks an award of reasonable
attorneys' fees and other costs of defense but does not seek damages
against the Company. The case is currently in discovery.
Erythropoietin patent litigation
Amgen has been engaged in litigation (the "Amgen suit") with Genetics
Institute, Inc. ("Genetics Institute") and its commercial partner, Chugai
Pharmaceutical Co., Ltd., regarding the infringement of Amgen's patent on
the DNA sequence used in the production of erythropoietin (the "Amgen
Patent") and the infringement by Amgen's erythropoietin product of a patent
held by Genetics Institute.
Genetics Institute and the Company announced on May 11, 1993 that they
agreed to settle all outstanding patent disputes between them regarding
erythropoietin in the United States. As part of the settlement, Genetics
Institute paid the Company $13.9 million during the quarter ended September
30, 1993. An additional $2 million may be paid to the Company contingent
upon the outcome of certain future events. As a result of the settlement
of the litigation, Amgen expects to receive patents on the process for
producing recombinant erythropoietin and on the recombinant erythropoietin
product.
In August 1991, Johnson & Johnson, together with eleven of Johnson &
Johnson's Cilag European subsidiaries, filed a suit in the United States
District Court for the District of Massachusetts in Boston, the site of the
Amgen suit against Genetics Institute (the "Boston Court"), seeking damages
from Genetics Institute for infringement of the Amgen Patent (the "Johnson
& Johnson suit") and moved to consolidate the Johnson & Johnson suit with
the original suit filed by Amgen. The two suits were consolidated by the
Boston Court. Amgen was allowed to intervene in the Johnson & Johnson suit
for the limited purpose of seeking a summary judgment dismissing the
Johnson & Johnson suit. In December 1992, the Boston Court determined that
Johnson & Johnson had no standing to sue Genetics Institute and entered
judgment and dismissed the Johnson & Johnson suit. Also, in December 1992,
the Boston Court denied motions by Johnson & Johnson to intervene in the
Amgen suit for the limited purpose of seeking a summary judgment limiting
Amgen's damages against Genetics Institute. Johnson & Johnson has appealed
the Boston Court's December 1992 rulings. The appeal by Johnson & Johnson,
together with eleven of its Cilag European subsidiaries, is pending.
<PAGE>
Genetics Institute litigation
On June 21, 1994, Genetics Institute filed suit in the United States
District Court for the District of Delaware in Wilmington, against Johnson
& Johnson, a licensee and distributor of the Company, seeking damages for
the alleged infringement of a recently issued U.S. Patent 5,322,837
relating to Johnson & Johnson's manufacture, use, and sale of
erythropoietin.
On September 12, 1994, the Company filed suit in the United States
District Court for the District of Massachusetts in Boston, against
Genetics Institute, seeking declaratory judgment of patent non-
infringement, invalidity and unenforceability against Genetics Institute in
respect to U.S. Patent 5,322,837 issued to Genetics Institute, which
relates to homogeneous erythropoietin. Genetics Institute answered the
complaint and filed a counterclaim against the Company alleging
infringement of the same patent. On February 14, 1995, the United States
District Court for the District of Massachusetts granted Amgen's motion for
a summary judgment enforcing a prior judgment against Genetics Institute
and barring Genetics Institute from asserting its U.S. Patent 5,322,837
against Amgen's recombinant erythropoietin. On March 13, 1995, Genetics
Institute filed notice of appeal.
Biogen litigation
On June 15, 1994, Biogen, Inc. ("Biogen") filed suit in the Tokyo
District Court in Japan, against Amgen K.K., a subsidiary of the Company,
seeking injunctive relief for the alleged infringement of two Japanese
patents relating to alpha-interferon.
On March 10, 1995, Biogen filed suit in the United States District
Court for the District of Massachusetts seeking an unspecified amount of
compensatory damages, treble damages and injunctive relief of its U.S.
Patent 4,874,702 relating to vectors for expressing cloned genes. Biogen
alleges that Amgen has infringed its patent by manufacturing and selling
NEUPOGEN(R).
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1994.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Price Range of Common Stock
The Company's common stock trades on The Nasdaq Stock Market under the
symbol AMGN. As of March 15, 1995, there were approximately 11,600 holders
of record of the Company's common stock. No cash dividends have been paid
on the common stock to date, and the Company currently intends to retain
any earnings for development of the Company's business and for repurchases
of its common stock.
The following table sets forth, for the fiscal periods indicated, the
range of high and low closing sales prices of the common stock as quoted on
The Nasdaq Stock Market for the years 1994 and 1993:
High Low
1994 ------- -------
4th Quarter................... $59-3/8 $50-7/8
3rd Quarter................... 56-7/8 43-1/4
2nd Quarter................... 47-3/16 35-23/64
1st Quarter................... 51-3/4 37-3/4
1993
4th Quarter.................. $50-7/8 $39-1/4
3rd Quarter.................. 41-5/8 31-1/2
2nd Quarter.................. 42-1/2 32-1/8
1st Quarter.................. 70-3/4 33
<PAGE>
Item 6. SELECTED FINANCIAL DATA
Years Ended December 31,
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
Consolidated Statement of
Operations Data:
Revenues:
Product sales.............. $281.4 $645.3 $1,050.7 $1,306.3 $1,549.6
Other revenues............. 17.3 36.7 42.3 67.5 98.3
Total revenues.............. 298.7 682.0 1,093.0 1,373.8 1,647.9
Research and development
expenses(1)............... 72.4 120.9 182.3 255.3 323.6
Write-off of in-process
technology................ - - - - 116.4
Marketing and selling
expenses.................. 50.1 122.2 184.5 214.1 236.9
General and administrative
expenses.................. 51.1 80.4 107.7 114.3 122.9
Legal assessment (award).... - 129.1 (77.1) (13.9) -
Net income(2)............... 3.9 97.9 357.6 383.3 319.7
Primary earnings per share(2) .03 .67 2.43 2.67 2.29
Cash dividends declared per
share..................... - - - - -
At December 31,
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
Consolidated Balance Sheet
Data:
Working capital............ $198.1 $294.9$ 562.4 $ 642.2 $ 579.2
Total assets............... 459.5 865.5 1,374.3 1,765.5 1,994.1
Long-term debt............. 63.3 39.7 129.9 181.2 183.4
Stockholders' equity....... 309.1 531.1 933.7 1,172.0 1,274.3
(1) Excludes $54.7 million of royalty obligation buyouts in 1990.
(2) Includes an increase to net income of $8.7 million, or $.06 per share,
to reflect the cumulative effect of a change in accounting principle
to adopt Statement of Financial Accounting Standard No. 109 in 1993
(see Note 1 to Consolidated Financial Statements). Also includes the
write-off of in-process technology purchased of $116.4 million, or
$.83 per share, associated with the acquisition of Synergen in 1994
(see Note 2 to Consolidated Financial Statements).
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash provided by operating activities has been and is expected to
continue to be the Company's primary source of funds. In 1994, operations
provided $531.9 million of cash compared to $433.0 million in 1993. This
cash was used primarily to fund the acquisition of Synergen, Inc.
("Synergen") ($240.8 million, net of cash acquired), capital expenditures,
and the repurchase of shares of the Company's common stock. The Company
had cash, cash equivalents, and marketable securities of $696.7 million at
December 31, 1994, compared with $723.2 million at December 31, 1993.
Capital expenditures totaled $130.8 million in 1994 compared with
$209.9 million in 1993. The reduction in capital expenditures is due to
the completion of several facilities in 1993, including the Puerto Rico
fill and finish facility. Over the next few years, the Company expects to
spend approximately $100 million to $200 million per year on capital
projects to expand the Company's global operations.
The Company receives cash from the exercise of stock options and
warrants. In 1994, stock options and their related tax benefits provided
$67.5 million of cash compared with $56.3 million in 1993. Proceeds from
the exercise of stock options and their related tax benefits will vary from
period to period based upon, among other factors, fluctuations in the
market value of the Company's stock relative to the exercise price of such
options. In 1994, the exercise of warrants associated with Amgen Clinical
Partners, L.P. provided $15.3 million of cash compared to $5.9 million in
1993. The right to exercise these warrants expired on June 30, 1994.
The Company has a common stock repurchase program (see Note 7 to the
Consolidated Financial Statements). Since its inception in 1992 through
December 31, 1994, the Company has repurchased 12.9 million shares of its
common stock at a total cost of $593.8 million. The Company is currently
authorized to purchase up to an additional $331.2 million of common stock
through December 31, 1995.
To provide for financial flexibility and increased liquidity, the
Company has established several sources of debt financing. The Company has
filed a shelf registration statement with the Securities and Exchange
Commission under which it could issue up to $200 million of Medium Term
Notes. At December 31, 1994, $113 million of Medium Term Notes were
outstanding which mature in two to nine years. The Company has a
commercial paper program which provides for short-term borrowings up to an
aggregate face amount of $200 million. At December 31, 1994, $99.7 million
of commercial paper was outstanding, all with maturities of less than four
months. The Company also has a $150 million revolving line of credit,
principally to support the Company's commercial paper program. No
borrowings on this line of credit were outstanding at December 31, 1994.
The Company invests its cash in accordance with a policy that seeks to
maximize returns while ensuring both liquidity and minimal risk of
principal loss. The policy limits investments to certain types of
instruments issued by institutions with investment grade credit ratings,
and places restrictions on maturities and concentration by type and issuer.
<PAGE>
The Company's fixed income investments are subject to the risk of market
interest rate fluctuations, and all of the Company's investments are
subject to risks associated with the ability of the issuers to perform
their obligations under the instruments.
The Company has a program to manage certain portions of its exposure
to fluctuations in foreign currency exchange rates. These exposures
primarily result from European sales. The Company hedges the related
receivables with foreign currency forward contracts, all of which mature
within six months. The Company uses purchased foreign currency option and
forward contracts to hedge anticipated future cash flows related to sales
which generally expire within 12 months. At December 31, 1994, outstanding
forward and option contracts totaled $31.8 million and $78.0 million,
respectively. The gains and losses on these contracts were not material
for 1994, 1993, and 1992.
The Company believes that existing funds, cash generated from
operations, and existing sources of debt financing should be adequate to
satisfy its working capital and capital expenditure requirements and to
support its common stock repurchase program for the foreseeable future.
However, the Company may raise additional capital from time to time to take
advantage of favorable conditions in the markets or in connection with the
Company's corporate development activities.
Results of Operations
Product sales
In 1994, product sales increased $243.2 million or 19% over the prior
year. In 1993, product sales increased $255.7 million or 24% over the
prior year.
NEUPOGEN(R) (Filgrastim)
NEUPOGEN(R) sales were $828.9 million in 1994, an increase of $109.5
million or 15% over the prior year. In 1993, sales were $719.4 million, an
increase of $175.0 million or 32% over the prior year.
Domestic sales of NEUPOGEN(R) were $617.2 million in 1994, an increase
of $71.7 million or 13% over the prior year. In 1993, domestic sales were
$545.5 million, an increase of $123.3 million or 29% over the prior year.
These increases were primarily due to increased penetration of the current
market for colony stimulating factors.
International sales of NEUPOGEN(R), primarily in Europe, were $211.7
million in 1994, an increase of $37.8 million or 22% over the prior year.
In 1993, international sales were $173.9 million, an increase of $51.7
million or 42% over the prior year. Without the effect of changes in
foreign currency exchange rates, annual sales volumes increased by 22% and
62% in 1994 and 1993, respectively, due to increased penetration of the
market for colony-stimulating factors.
During the first quarter of 1994, Rhone-Poulenc Rorer and Chugai
Pharmaceutical Co., Ltd. began jointly marketing a G-CSF product in the
European Union ("EU"). Although there has been no significant effect on
the Company's worldwide NEUPOGEN(R) sales, it is not possible to predict
<PAGE>
the ultimate impact this competitive product will have on future EU
NEUPOGEN(R) sales.
Quarterly NEUPOGEN(R) sales volumes in both the United States and
Europe are influenced by a number of factors including underlying demand,
seasonality of cancer chemotherapy administration, and wholesaler inventory
management practices. The Company's experience has shown that reduced
chemotherapy usage occurs in the third calendar quarter in many EU
countries to varying degrees resulting in corresponding decreases in sales.
In the U.S., reduced chemotherapy usage occurs in the fourth quarter. This
factor along with wholesaler inventory reductions depresses Amgen sales in
the first calendar quarter.
The Company believes that 1995 NEUPOGEN(R) sales will continue to grow
at a double digit rate but lower than the 1994 growth rate. NEUPOGEN(R)
sales increases are primarily dependent upon further penetration of
existing markets, the timing and nature of additional indications for which
the product may be approved, and the effects of competitive products. In
addition, international NEUPOGEN(R) sales will continue to be subject to
changes in foreign currency exchange rates and increased competition.
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $720.6 million in 1994, an increase of $133.7
million or 23% over the prior year. In 1993, EPOGEN(R) sales were $586.9
million, an increase of $80.6 million or 16% over the prior year. These
increases were primarily due to an increase in the dialysis patient
population, the administration of higher average doses of EPOGEN(R) per
patient, and increased penetration of the dialysis market. The federal
government enacted legislation effective January 1, 1994 to lower
reimbursement provided to facilities that administer EPOGEN(R) from $11 per
thousand units administered to $10 per thousand units administered. This
change in reimbursement did not have a material adverse effect on EPOGEN(R)
sales in 1994.
The Company anticipates that increases in the U.S. dialysis patient
population and increases in dosing will continue to drive EPOGEN(R) sales.
The annual growth rate for 1995 is expected to be in double digits but
lower than the 1994 growth rate. In addition, the continued growth in
sales volume may be affected by future changes in reimbursement rates or
the basis for reimbursement by the federal government.
Cost of sales
Cost of sales as a percentage of product sales was 15.4%, 16.8% and
17.6% for the years ended December 31, 1994, 1993 and 1992, respectively.
The improvement in 1994 primarily reflects the commencement of commercial
production and building of inventories at the Puerto Rico fill-and-finish
facility and the commencement of commercial production at a new NEUPOGEN(R)
manufacturing facility. Annual cost of sales as a percentage of product
sales is not expected to vary significantly for the foreseeable future.
Research and development
In 1994 and 1993, research and development expenses increased $68.3
million or 27% and $73.0 million or 40%, respectively, compared with the
<PAGE>
prior years primarily due to expansion of the Company's research and
development staff and increased expenditures on external research
collaborations. In connection with the acquisition of Synergen, the
Company increased its research and development staff in order to exploit
the technologies that were acquired in those therapeutic areas of interest.
Annual research and development expenses are expected to increase at a rate
exceeding the anticipated annual product sales growth rate due to planned
increases in internal efforts on new product discovery and development and
increases in external research collaboration costs, including acquisitions
of product and technology rights.
Write-off of in-process technology purchased
In December 1994, the Company completed its acquisition of Synergen, a
biotechnology company engaged in the discovery and development of protein-
based pharmaceuticals. Synergen was acquired for $254.5 million in cash,
including related acquisition costs. The purchase price was assigned to
the acquired tangible and intangible assets based on their estimated fair
values at the date of acquisition. The value assigned to in-process
technology of $116.4 million was expensed during the quarter ended December
31, 1994.
Marketing and selling
In 1994, marketing and selling expenses increased $22.7 million or 11%
compared with the prior year. This increase is primarily due to marketing
efforts to expand NEUPOGEN(R) market penetration and EPOGEN(R) marketing
efforts to bring more patients within the target hematocrit range. In
1993, marketing and selling expenses increased $29.7 million or 16%
compared with the prior year primarily due to increases in both domestic
and international sales and marketing expenses in support of NEUPOGEN(R)
market penetration. The future growth rate of marketing and selling
expenses is expected to be less than the anticipated annual product sales
growth rate.
General and administrative
In 1994 and 1993, general and administrative expenses increased $8.6
million or 8% and $6.6 million or 6%, respectively, compared with the
prior years. The future growth rate of general and administrative expenses
is expected to be less than the anticipated annual product sales growth
rate.
Legal award
In June 1993, the Company recorded a $13.9 million legal award as part
of the settlement with Genetics Institute for outstanding patent disputes
regarding erythropoietin in the United States.
In September 1992, an arbitrator found that the Company was entitled
to damages from Johnson & Johnson related to hepatitis B vaccine and
interleukin-2, two of the three products included in an arbitration
proceeding. (See Note 5 to the Consolidated Financial Statements - Johnson
& Johnson arbitration.) In January 1993, the arbitrator subsequently
determined the amount of the award to be $89.7 million. The Company
recorded $77.1 million of this award in 1992 and deferred recognition of
<PAGE>
$12.6 million related to the further development of hepatitis B vaccine and
interleukin-2 to future periods.
Interest and other income
During 1994, interest rates increased significantly which caused a
decrease in the market value of the Company's fixed income investments.
Consistent with its investment policy, the Company elected to sell certain
of these investments, resulting in capital losses, in order to reposition
the portfolio to improve yields and reduce risk. Further capital losses
occurred in connection with the liquidation of investments to fund the
Company's acquisition of Synergen in December 1994. During 1994, net
losses from sales of marketable securities totaled $16.1 million, and at
December 31, 1994, there were no significant unrealized losses remaining in
the Company's investment portfolio. Interest income decreased in 1993
compared with the prior year primarily due to a decline in interest rates.
In 1993 and 1992, there were no significant gains or losses related to the
sale of fixed income investments.
Income taxes
In 1994, the Company's effective tax rate was 45.7%, which is higher
than the Company's statutory rate. This is primarily due to the write-off
of in-process technology purchased in connection with the Synergen
acquisition, which is not deductible for income tax purposes. In 1993, the
Company's effective tax rate of 36.8% reflected: 1) an increase in the
federal tax rate from 34% to 35% due to federal tax law changes enacted in
1993, and 2) a decrease in the equity in earnings of an affiliated company.
These items were substantially offset by a reduction related to the
retroactive reinstatement to July 1, 1992 of the research and
experimentation and orphan drug tax credits. In addition, the provision
for state income taxes decreased in 1993 due to changes in the
apportionment of taxable income among states. In 1992, the Company's
effective tax rate of 36.5% reflected a reduction in state income taxes as
a percentage of pretax income principally due to the legal award having no
impact on taxable income for state income tax purposes.
In January 1995, the Company began receiving tax benefits from
manufacturing products at its facility in Puerto Rico. Realization of
these tax benefits is expected to result in an annualized effective tax
rate of 32%-34%.
Legal Matters
The Company is engaged in arbitration proceedings with one of its
licensees and various legal proceedings relating to Synergen. For a
complete discussion of these matters see Note 5 to the Consolidated
Financial Statements.
Outlook
Operating in rapidly changing health care policy arenas and market
environments presents many significant and unique challenges. Market
forces are changing the economics of health care in the United States
through voluntary limits on price increases by the pharmaceutical industry,
increases in the purchasing power of large buying groups, and increased
influence on medical care and treatment decisions by managed care
<PAGE>
organizations. The Company is meeting the challenges of this changing
health care environment through programs that work to optimize the use of
its products in the treatment of patients and clinical trials designed to
evaluate cost and quality-of-life parameters as well as clinical safety and
efficacy. In addition, the Company is adapting to legislative mandates in
foreign markets.
The Company's current goals include achieving strong financial results
and expanding its product portfolio through both increased research and
development efforts and the acquisition of businesses and/or licensing of
technologies and products which meet certain strategic and financial
objectives.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference to the financial statements listed in Item 14(a) of Part IV of
this Form 10-K Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of the Company is incorporated by
reference to the section entitled "Election of Directors" in the Company's
definitive Proxy Statement with respect to the Company's 1994 Annual
Meeting to be filed with the Securities and Exchange Commission within 120
days of December 31, 1994 (the "Proxy Statement").
The executive officers of the Company, their ages as of February 28,
1995 and positions are as follows:
Mr. Gordon M. Binder, age 59, has served as a director of the Company
since October 1988. He joined the Company in 1982 as Vice President-
Finance and was named Senior Vice President-Finance in February 1986. In
October 1988, Mr. Binder was elected Chief Executive Officer. In July
1990, Mr. Binder became Chairman of the Board.
Mr. Kevin W. Sharer, age 46, has served as a director of the Company
since November 1992. He has served as President and Chief Operating
Officer since October 1992. Prior to joining the Company, Mr. Sharer
served as President of the Business Markets Division of MCI Communications
Corporation, a telecommunications company, from April 1989 to October 1992,
and served in numerous executive capacities at General Electric Company
from February 1984 to March 1989. Mr. Sharer also serves as a director of
Geotek Communications, Inc.
<PAGE>
Mr. Robert S. Attiyeh, age 60, has served as Senior Vice President,
Finance and Corporate Development, since joining the Company in July 1994.
Prior to joining the Company, Mr. Attiyeh served as a director of McKinsey
& Company, a consulting firm, in its Los Angeles, Japan and Scandinavian
offices from 1967 to 1994.
Dr. N. Kirby Alton, age 44, became Senior Vice President, Development,
in August 1993, having served as Senior Vice President, Therapeutic Product
Development, since August 1992. Dr. Alton previously served as Vice
President, Therapeutic Product Development, Responsible Head, from October
1988 to August 1992, and as Director, Therapeutic Product Development, from
February 1986 to October 1988.
Dr. Dennis M. Fenton, age 43, became Senior Vice President,
Operations, in January 1995, having served as Senior Vice President, Sales
and Marketing, since August 1992, and having served as Vice President,
Process Development, Facilities and Manufacturing Services, from July 1991
to August 1992. Dr. Fenton previously had served as Vice President, Pilot
Plant Operations and Clinical Manufacturing, from October 1988 to July
1991, and as Director, Pilot Plant Operations, from 1985 to October 1988.
Mr. Daryl D. Hill, age 49, became Senior Vice President, Asia Pacific,
in January 1994, having served as Vice President, Quality Assurance, from
October 1988 to January 1994, and as Director of Quality Assurance from
January 1984 to October 1988.
Mr. Larry A. May, age 45, became Vice President, Corporate Controller
and Chief Accounting Officer in October 1991, having served as Corporate
Controller and Chief Accounting Officer from October 1988 to October 1991,
and as Controller from January 1983 to October 1988.
Dr. Daniel Vapnek, age 56, became Senior Vice President, Research, in
October 1988, having served as Vice President, Research, since January
1986.
Mr. Thomas E. Workman, Jr., age 67, was appointed Vice President,
Secretary and General Counsel in December 1992, having served as Acting
General Counsel since September 1992. Prior to joining the Company, Mr.
Workman was an advisory partner of Pillsbury Madison & Sutro, a law firm,
from January 1992 to September 1992, and was a regular partner of Pillsbury
Madison & Sutro from 1986 through December 1991.
Dr. Linda R. Wudl, age 49, became Vice President, Quality Assurance,
in January 1994, having served as Director of Quality Control from April
1991 to January 1994, and as Manager of Quality Control from April 1987 to
April 1991.
Item 11. EXECUTIVE COMPENSATION
The section labeled "Executive Compensation" appearing in the
Company's Proxy Statement is incorporated herein by reference, except for
such information as need not be incorporated by reference under rules
promulgated by the Securities Exchange Commission.
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section labeled "Security Ownership of Directors and Executive
Officers and Certain Beneficial Owners" appearing in the Company's Proxy
Statement is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section labeled "Certain Transactions" appearing in the Company's
Proxy Statement is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements
The following Financial Statements are included herein:
Page
Number
Report of Ernst & Young LLP, Independent Auditors .................F-1
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 1994...............F-2 - F-3
Consolidated Balance Sheets at December 31, 1994 and 1993 .........F-4
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 31, 1994.....F-5 - F-6
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1994...............F-7 - F-8
Notes to Consolidated Financial Statements .................F-9 - F-28
(a) 2. Index to Financial Statement Schedules
The following Schedules are filed as part of this Form 10-K Annual
Report:
Page
Number
VIII Valuation Accounts ......................................F-29
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated statements or notes thereto.
(a) 3. Exhibits
Exhibit No. Description
3.1 Restated Certificate of Incorporation. (7)
3.2 Certificate of Amendment to Restated Certificate of
Incorporation, effective as of July 24, 1991. (14)
3.3 Bylaws, as amended to date. (20)
<PAGE>
4.1 Indenture dated January 1, 1992 between the Company and
Citibank N.A., as trustee. (15)
4.2 Forms of Commercial Paper Master Note Certificates. (19)
10.1* Company's 1991 Equity Incentive Plan, as amended. (16)
10.2* Company's 1984 Stock Option Plan, as amended, and forms of
Incentive Stock Option Grant and Nonqualified Stock Option
Grant used in connection therewith. (16)
10.3 Shareholder's Agreement of Kirin-Amgen, Inc., dated May 11,
1984, between the Company and Kirin Brewery Company, Limited
(with certain confidential information deleted therefrom). (1)
10.4 Amendment Nos. 1, 2, and 3, dated March 19, 1985, July 29,
1985 and December 19, 1985, respectively, to the Shareholder's
Agreement of Kirin-Amgen, Inc., dated May 11, 1984 (with
certain confidential information deleted therefrom). (3)
10.5 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated, September 30, 1985
between the Company and Ortho Pharmaceutical Corporation (with
certain confidential information deleted therefrom). (2)
10.6 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated September 30, 1985 between
Kirin-Amgen, Inc. and Ortho Pharmaceutical Corporation (with
certain confidential information deleted therefrom). (3)
10.7* Company's Employee Stock Purchase Plan, amended April 1, 1992.
(17)
10.8 Agreement, dated February 12, 1986, between the Company and
Sloan-Kettering Institute for Cancer Research (with certain
confidential information deleted therefrom). (4)
10.9 Amendment No. 2, dated November 13, 1990, to Agreement, dated
February 12, 1986, between the Company and Sloan-Kettering
Institute for Cancer Research (with certain confidential
information deleted therefrom). (13)
10.10 Research, Development Technology Disclosure and License
Agreement PPO, dated January 20, 1986, by and between the
Company and Kirin Brewery Co., Ltd. (4)
10.11 Research Collaboration Agreement, dated August 31, 1990,
between Amgen Inc. and Regeneron Pharmaceuticals, Inc. (with
certain confidential information deleted therefrom). (13)
10.12 Amendment Nos. 4 and 5, dated October 16, 1986 (effective July
1, 1986) and December 6, 1986 (effective July 1, 1986),
respectively, to the Shareholders Agreement of Kirin-Amgen,
Inc. dated May 11, 1984 (with certain confidential information
deleted therefrom). (5)
10.13 Assignment and License Agreement, dated October 16, 1986,
between the Company and Kirin-Amgen, Inc. (with certain
confidential information deleted therefrom). (5)
10.14 G-CSF European License Agreement, dated December 30, 1986,
between Kirin-Amgen, Inc. and the Company (with certain
confidential information deleted therefrom). (5)
10.15 Research and Development Technology Disclosure and License
Agreement: GM-CSF, dated March 31, 1987, between Kirin Brewery
Company, Limited and the Company (with certain confidential
information deleted therefrom). (5)
10.16* Company's 1987 Directors' Stock Option Plan, as amended. (13)
10.17 Cross License Agreement, dated June 1, 1987, between Amgen
Inc. and Amgen Clinical Partners, L.P. (6)
<PAGE>
10.18 Development Agreement, dated June 1, 1987, between Amgen Inc.
and Amgen Clinical Partners, L.P. (6)
10.19 Joint Venture Agreement, dated June 1, 1987, between Amgen
Inc. and Amgen Clinical Partners, L.P. (6)
10.20 Partnership Purchase Option Agreement, dated June 1, 1987,
between Amgen Inc. and Amgen Clinical Partners, L.P. (6)
10.21* Company's 1988 Stock Option Plan, as amended. (16)
10.22* Company's Retirement and Savings Plan, amended and restated as
of January 1, 1993. (17)
10.23 Amendment, dated June 30, 1988, to Research, Development,
Technology Disclosure and License Agreement: GM-CSF dated
March 31, 1987, between Kirin Brewery Company, Limited and the
Company. (7)
10.24 Amending Agreement, dated June 30, 1988, to Development
Agreement, Partner Purchase Option Agreement, Cross License
Agreement and Joint Venture Agreement, dated June 1, 1987,
between the Company and Amgen Clinical Partners, L.P. (7)
10.25 Agreement on G-CSF in the EU, dated September 26, 1988,
between Amgen Inc. and F. Hoffmann-La Roche & Co. Limited
Company (with certain confidential information deleted
therefrom). (9)
10.26 Supplementary Agreement to Agreement dated January 4, 1989 to
Agreement on G-CSF in the EU, dated September 26, 1988,
between the Company and F. Hoffmann-La Roche & Co. Limited
Company, (with certain confidential information deleted
therefrom). (9)
10.27 Agreement on G-CSF in Certain European Countries, dated
January 1, 1989, between Amgen Inc. and F. Hoffmann-La Roche &
Co. Limited Company (with certain confidential information
deleted therefrom). (9)
10.28 Rights Agreement, dated January 24, 1989, between Amgen Inc.
and American Stock Transfer and Trust Company, Rights Agent.
(8)
10.29 First Amendment to Rights Agreement, dated January 22, 1991,
between Amgen Inc. and American Stock Transfer and Trust
Company, Rights Agent. (11)
10.30 Second Amendment to Rights Agreement, dated April 2, 1991,
between Amgen Inc. and American Stock Transfer and Trust
Company, Rights Agent. (12)
10.31 Credit Agreement, dated as of November 15, 1991, among Amgen
Inc., The Borrowing Subsidiaries therein named, the Banks
therein named, Swiss Bank Corporation, as issuing Bank and
Swiss Bank Corporation and Citicorp USA, Inc., as Co-Agents.
(17)
10.32 Deed of Trust and Security Agreement, dated June 1, 1989,
between the Company and UNUM Life Insurance Company of
America. (10)
10.33 Note, dated June 1, 1989, between the Company and UNUM Life
Insurance Company of America. (10)
10.34 Agency Agreement, dated November 21, 1991, between Amgen
Manufacturing, Inc. and Citicorp Financial Services
Corporation. (17)
10.35 Agency Agreement, dated May 21, 1992, between Amgen
Manufacturing, Inc. and Citicorp Financial Services
Corporation. (17)
<PAGE>
10.36 Guaranty, dated July 29, 1992, by the Company in favor of
Merck Sharp & Dohme Quimica de Puerto Rico, Inc. (17)
10.37 936 Promissory Note No. 01, dated December 11, 1991, issued by
Amgen Manufacturing, Inc. (17)
10.38 936 Promissory Note No. 02, dated December 11, 1991, issued by
Amgen Manufacturing, Inc. (17)
10.39 936 Promissory Note No. 001, dated July 29, 1992, issued by
Amgen Manufacturing, Inc. (17)
10.40 936 Promissory Note No. 002, dated July 29, 1992, issued by
Amgen Manufacturing, Inc. (17)
10.41 Guaranty, dated November 21, 1991, by the Company in favor of
Citicorp Financial Services Corporation. (17)
10.42 First Amendment, dated as of June 16, 1992, to the Credit
Agreement, dated as of November 15, 1991, among Amgen Inc.,
The Borrowing Subsidiaries therein named, the Banks therein
named, Swiss Bank Corporation, as issuing Bank and Swiss Bank
Corporation and Citicorp USA, Inc., as Co-Agents. (17)
10.43 Second Amendment, dated as of November 6, 1992, to the Credit
Agreement, dated as of November 15, 1991, among Amgen Inc.,
The Borrowing Subsidiaries therein named, the Banks therein
named, Swiss Bank Corporation, as issuing Bank and Swiss Bank
Corporation and Citicorp USA, Inc., as Co-Agents. (17)
10.44 Lease and Agreement relating to Lease, dated March 27, 1986
and April 1, 1986, respectively, for 2003 Oak Terrace Lane
between 2001 Hillcrest Partnership and the Company. (20)
10.45 Partnership Purchase Agreement, dated March 12, 1993, between
the Company, Amgen Clinical Partners, L.P., Amgen Development
Corporation, the Class A limited partners and the Class B
limited partner. (18)
10.46* Amgen Supplemental Retirement Plan dated June 1, 1993. (21)
10.47 Promissory Note of Mr. Kevin W. Sharer, dated June 4, 1993.
(21)
10.48 Amendment No. 3 dated June 25, 1993 to the Credit Agreement,
dated November 15, 1991, among the Company, The Borrowing
Subsidiaries therein named, the Banks therein named, the Swiss
Bank Corporation, as issuing Bank and Swiss Bank Corporation
and Citicorp USA, Inc., as Co-Agents. (21)
10.49 Promissory Note of Mr. Larry A. May, dated February 24, 1993.
(22)
10.50* First Amendment dated October 26, 1993 to the Company's
Retirement and Savings Plan. (22)
10.51* Amgen Performance Based Management Incentive Plan. (22)
10.52 Fourth Amendment, dated as of June 24, 1994, to the Credit
Agreement, dated November 15, 1991, among the Company, The
Borrowing Subsidiaries therein named, the Banks therein named,
the Swiss Bank Corporation, as issuing Bank and Swiss Bank
Corporation and Citicorp USA, Inc., as Co-Agents. (23)
10.53 Agreement and Plan of Merger, dated as of November 17, 1994,
among Amgen Inc., Amgen Acquisition Subsidiary, Inc. and
Synergen, Inc. (24)
10.54 Third Amendment to Rights Agreement, dated as of February 21,
1995, between Amgen Inc. and American Stock Transfer Trust and
Trust Company (25)
11 Computation of earnings per share.
21 Subsidiaries of the Company.
<PAGE>
23 Consent of Ernst & Young LLP, independent auditors. The
consent set forth on page 37 is incorporated herein by
reference.
24 Power of Attorney. The Power of Attorney set forth on page 36
is incorporated herein by reference.
27 Financial Data Schedule.
_____________
* Management contract or compensatory plan or arrangement.
(1) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended March 31, 1984 on June 26, 1984 and incorporated herein by
reference.
(2) Filed as an exhibit to Quarterly Report on Form 10-Q for the quarter
ended September 30, 1985 on November 14, 1985 and incorporated herein
by reference.
(3) Filed as an exhibit to Quarterly Report on Form 10-Q for the quarter
ended December 31, 1985 on February 3, 1986 and incorporated herein by
reference.
(4) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (Registration No. 33-3069) on March 11, 1986 and
incorporated herein by reference.
(5) Filed as an exhibit to the Form 10-K Annual Report for the year ended
March 31, 1987 on May 18, 1987 and incorporated herein by reference.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1987 on August 12, 1987 and incorporated herein
by reference.
(7) Filed as an exhibit to Form 8 amending the Quarterly Report on Form
10-Q for the quarter ended June 30, 1988 on August 25, 1988 and
incorporated herein by reference.
(8) Filed as an exhibit to the Form 8-K Current Report dated January 24,
1989 and incorporated herein by reference.
(9) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended March 31, 1989 on June 28, 1989 and incorporated herein by
reference.
(10) Filed as an exhibit to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 on August 14, 1989 and incorporated herein
by reference.
(11) Filed as an exhibit to the Form 8-K Current Report dated January 22,
1991 and incorporated herein by reference.
(12) Filed as an exhibit to the Form 8-K Current Report dated April 12,
1991 and incorporated herein by reference.
(13) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended March 31, 1991 on July 1, 1991 and incorporated herein by
reference.
(14) Filed as an exhibit to the Form 8-K Current Report dated July 24, 1991
and incorporated herein by reference.
(15) Filed as an exhibit to Form S-3 Registration Statement dated December
19, 1991 and incorporated herein by reference.
(16) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended December 31, 1991 on March 30, 1992 and incorporated herein by
reference.
(17) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended December 31, 1992 on March 30, 1993 and incorporated herein by
reference.
<PAGE>
(18) Filed as an exhibit to the Form 8-A dated March 31, 1993 and
incorporated herein by reference.
(19) Filed as an exhibit to the Form 10-Q for the quarter ended March 31,
1993 on May 17, 1993 and incorporated herein by reference.
(20) Filed as an exhibit to the Form 10-Q for the quarter ended June 30,
1993 on August 16, 1993 and incorporated herein by reference.
(21) Filed as an exhibit to the Form 10-Q for the quarter ended September
30, 1993 on November 12, 1993 and incorporated herein by reference.
(22) Filed as an exhibit to the Annual Report on Form 10-K for the year
ended December 31, 1993 on March 25, 1994 and incorporated herein by
reference.
(23) Filed as an exhibit to the Form 10-Q for the ended September 30, 1994
on November 9, 1994 and incorporated herein by reference.
(24) Filed as an exhibit to the Form 8-K Current Report dated November 18,
1994 on December 2, 1994 and incorporated herein by reference.
(25) Filed as an exhibit to the Form 8-K Current Report dated February 21,
1995 on March 7, 1995 and incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated November 18, 1994
reporting the execution of a definitive agreement by which the Company
would acquire Synergen, Inc. and its subsidiaries. The Company
subsequently filed a report on Form 8-K/A dated November 18, 1994 amending
the Form 8-K to report the completion of the acquisition of Synergen, Inc.
and its subsidiaries and certain pro forma financial information regarding
the Company.
The Company filed a report on Form 8-K dated February 21, 1995
reporting an amendment to its Rights Agreement, dated as of January 24,
1989, between Amgen Inc. and American Stock Transfer & Trust Company, as
Rights Agent, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Amgen Inc.
(Registrant)
Date: 3/28/95 By: /s/ ROBERT S. ATTIYEH
Robert S. Attiyeh
Senior Vice President,
Finance and Corporate
Development, and
Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert S. Attiyeh and Larry A. May,
or either of them, his attorney-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to
this Report, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
/s/ GORDON M. BINDER 3/28/95
Gordon M. Binder /s/ WILLIAM K. BOWES, JR. 3/28/95
Chairman of the Board William K. Bowes, Jr.
Chief Executive Officer and Director
Director
(Principal Executive Officer)
/s/ FRANKLIN P. JOHNSON, JR. 3/28/95
Franklin P. Johnson, Jr.
Director
/s/ KEVIN W. SHARER 3/28/95
Kevin W. Sharer
President,
Chief Operating Officer and /s/ STEVEN LAZARUS 3/28/95
Director Steven Lazarus
Director
/s/ ROBERT S. ATTIYEH 3/28/95
Robert S. Attiyeh
Senior Vice President, /s/ EDWARD J. LEDDER 3/28/95
Finance and Corporate Edward J. Ledder
Development, and Director
Chief Financial Officer
/s/ LARRY A. MAY 3/28/95
Larry A. May /s/ GILBERT S. OMENN 3/28/95
Vice President, Gilbert S. Omenn
Corporate Controller and Director
Chief Accounting Officer
/s/ RAYMOND F. BADDOUR 3/28/95
Raymond F. Baddour /s/ BERNARD H. SEMLER 3/28/95
Director Bernard H. Semler
Director
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-5111) pertaining to the 1984 Stock Option Plan,
1981 Incentive Stock Option Plan and Nonqualified Stock Option Plan of
Amgen Inc., in the Registration Statement (Form S-8 No. 33-24013)
pertaining to the 1988 Stock Option Plan of Amgen Inc., in the Registration
Statement (Form S-8 No. 33-39183) pertaining to the Amgen Employee Stock
Purchase Plan, in the Registration Statement (Form S-8 No. 33-39104)
pertaining to the Amgen Retirement and Savings Plan, in the Registration
Statement (Form S-8 No. 33-42501) pertaining to the Amgen Inc. 1987
Directors' Stock Option Plan, in the Registration Statement (Form S-8 No.
33-42072) pertaining to the Amgen Inc. 1991 Equity Incentive Plan, in the
Registration Statement (Form S-8 No. 33-47605) pertaining to the Retirement
and Savings Plan for Amgen Manufacturing, Inc. and in the Registration
Statements (Form S-3 No. 33-22544 and Form S-3 No. 33-44454) of Amgen Inc.
and in the related Prospectuses of our report dated February 1, 1995 with
respect to the consolidated financial statements and financial statement
schedules of Amgen Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 1994.
/s/ ERNST & YOUNG LLP
Los Angeles, California
March 24, 1995
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
Amgen Inc.
We have audited the accompanying consolidated balance sheets of Amgen Inc.
as of December 31, 1994 and 1993, and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1994. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Amgen Inc. at December 31, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
Los Angeles, California
February 1, 1995
F-1
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1994, 1993 and 1992
(In thousands, except per share data)
1994 1993 1992
---------- ---------- ----------
Revenues:
Product sales................ $1,549,567 $1,306,322 $1,050,654
Corporate partner revenues... 70,400 48,631 29,621
Royalty income............... 27,937 18,889 12,766
---------- ---------- ----------
Total revenues.......... 1,647,904 1,373,842 1,093,041
---------- ---------- ----------
Operating expenses:
Cost of sales................ 238,123 220,046 184,735
Research and development..... 323,629 255,321 182,297
Write-off of in-process
technology purchased...... 116,367 - -
Marketing and selling........ 236,858 214,132 184,482
General and administrative... 122,936 114,295 107,656
(Earnings) loss of
affiliates, net........... 31,227 12,589 (16,940)
Legal award.................. - (13,900) (77,076)
---------- ---------- ----------
Total operating
expenses............. 1,069,140 802,483 565,154
---------- ---------- ----------
Operating income............... 578,764 571,359 527,887
Other income (expense):
Interest and other income.... 21,526 27,161 35,388
Interest expense, net........ (12,021) (6,150) (141)
---------- ---------- ----------
Total other income
(expense)............ 9,505 21,011 35,247
---------- ---------- ----------
Income before income taxes and
cumulative effect of a
change in accounting
principle.................... 588,269 592,370 563,134
Provision for income taxes..... 268,604 217,795 205,534
---------- ---------- ----------
Income before cumulative
effect of a change in
accounting principle......... 319,665 374,575 357,600
Cumulative effect of a change
in accounting principle...... - 8,738 -
---------- ---------- ----------
Net income..................... $ 319,665 $ 383,313 $ 357,600
========== ========== ==========
See accompanying notes.
(Continued on next page)
F-2
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
Years ended December 31, 1994, 1993 and 1992
(In thousands, except per share data)
1994 1993 1992
------ ------ ------
Earnings per share:
Primary:
Income before cumulative
effect of a change in
accounting principle..... $2.29 $2.61 $2.43
Cumulative effect of a
change in accounting
principle................ - .06 -
----- ----- -----
Net income................. $2.29 $2.67 $2.43
===== ===== =====
Fully diluted:
Income before cumulative
effect of a change in
accounting principle.... $2.27 $2.60 $2.42
Cumulative effect of a
change in accounting
principle............... - .06 -
----- ----- -----
Net income................ $2.27 $2.66 $2.42
===== ===== =====
Shares used in calculation
of:
Primary earnings per share.. 139,790 143,611 147,297
Fully diluted earnings per
share.................... 141,099 144,322 147,726
See accompanying notes.
F-3
<PAGE>
AMGEN
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(In thousands, except per share data)
1994 1993
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents........... $ 211,323 $ 128,505
Marketable securities............... 485,358 594,679
Trade receivables, net of allowance
for doubtful accounts of $13,284
in 1994 and $12,161 in 1993....... 194,712 164,337
Inventories......................... 98,004 74,712
Deferred tax assets, net............ 70,176 58,937
Other current assets................ 56,065 33,340
---------- ----------
Total current assets.............. 1,115,638 1,054,510
Property, plant and equipment at cost,
net................................. 665,314 586,912
Investments in affiliated companies.... 82,263 59,276
Other assets........................... 130,932 64,825
---------- ----------
$1,994,147 $1,765,523
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................... $ 30,476 $ 23,056
Commercial paper.................... 99,667 109,767
Accrued liabilities................. 406,287 279,438
---------- ----------
Total current liabilities......... 536,430 412,261
Long-term debt......................... 183,407 181,242
Contingencies
Stockholders' equity:
Common stock, $.0001 par value;
750,000 shares authorized;
outstanding - 132,328 shares in
1994 and 134,214 in 1993.......... 13 13
Additional paid-in capital.......... 719,310 636,217
Retained earnings................... 554,987 535,790
---------- ----------
Total stockholders' equity........ 1,274,310 1,172,020
---------- ----------
$1,994,147 $1,765,523
========== ==========
See accompanying notes.
F-4
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1994, 1993 and 1992
(In thousands)
Number Common Additional
of Common paid-in Retained
shares stock capital earnings
-------- ------ --------- --------
Balance at December 31, 1991.. 131,864 $13 $442,931 $88,201
Issuance of common stock
upon the exercise of stock
options and in connection
with an employee stock
purchase plan.............. 3,844 1 36,922 -
Issuance of common stock
upon the exercise of
warrants................... 1,985 - 17,618 -
Reduction in current income
tax liability related to
stock options.............. - - 76,316 -
Repurchases of common stock... (1,372) - - (85,870)
Net income.................... - - - 357,600
------- ----- -------- --------
Balance at December 31, 1992.. 136,321 14 573,787 359,931
Issuance of common stock
upon the exercise of stock
options and in connection
with an employee stock
purchase plan.............. 2,329 - 21,682 -
Issuance of common stock
upon the exercise of
warrants................... 636 - 5,913 -
Reduction in current income
tax liability related to
stock options.............. - - 34,835 -
Repurchases of common stock... (5,072) (1) - (207,454)
Net income.................... - - - 383,313
------- ----- -------- --------
Balance at December 31, 1993.. 134,214 $13 $636,217 $535,790
See accompanying notes.
(Continued next page)
F-5
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
Years ended December 31, 1994, 1993 and 1992
(In thousands)
Number Additional
of Common paid-in Retained
shares stock capital earnings
-------- ------ --------- --------
Balance at December 31, 1993.. 134,214 $13 $636,217 $535,790
Issuance of common stock
upon the exercise of stock
options and in connection
with an employee stock
purchase plan.............. 2,855 - 44,785 -
Issuance of common stock
upon the exercise of
warrants................... 1,704 - 15,330 -
Reduction in current income
tax liability related to
stock options.............. - - 22,978 -
Repurchases of common stock (6,445) - - (300,468)
Net income.................... - - - 319,665
------- ----- -------- --------
Balance at December 31, 1994.. 132,328 $13 $719,310 $554,987
======= ===== ======== ========
See accompanying notes.
F-6
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
-------- -------- --------
Cash flows from operating
activities:
Net income.......................$ 319,665 $383,313 $357,600
Write-off of in-process
technology purchased........... 116,367 - -
Depreciation and amortization.... 74,520 50,743 33,569
Other non-cash expenses.......... 2,794 7,933 8,670
Deferred income taxes............ 2,443 17,379 (8,012)
(Earnings) loss of affiliates,
net............................ 31,227 12,589 (16,940)
Cash provided by (used in):
Trade receivables, net......... (30,375) (8,294) (67,852)
Inventories.................... (23,292) (17,911) (16,632)
Other current assets........... 1,760 (4,820) (13,375)
Accounts payable............... 4,550 (14,970) 8,518
Accrued liabilities............ 32,231 7,045 7,253
---------- -------- --------
Net cash provided by
operating activites....... 531,890 433,007 292,799
---------- -------- --------
Cash flows from investing
activities:
Purchases of property, plant
and equipment................. (130,813) (209,904) (219,775)
Increase in marketable
securities.................... - (131,313) (232,049)
Proceeds from maturities of
marketable securities......... 87,726 - -
Proceeds from sales of
marketable securities......... 1,505,776 - -
Purchases of marketable
securities.................... (1,395,139) - -
Cost to acquire company, net of
cash acquired................. (240,762) - -
Increase in investments in
affiliated companies.......... (21,824) (22,370) (7,668)
Distributions from affiliated
companies..................... - 673 3,074
Decrease (increase) in other
assets........................ 4,042 (27,032) (15,772)
---------- -------- --------
Net cash used in investing
activities............... (190,994) (389,946) (472,190)
---------- -------- --------
See accompanying notes.
(Continued on next page)
F-7
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
-------- -------- --------
Cash flows from financing
activities:
(Decrease) increase in commercial
paper........................... (10,100) 109,767 -
Proceeds from issuance of long-
term debt....................... 12,490 53,054 100,997
Repayment of long-term debt....... (12,009) (1,991) (10,556)
Net proceeds from issuance of
common stock upon the exercise
of stock options and in
connection with an employee
stock purchase plan............. 44,555 21,454 34,236
Tax benefit related to stock
options......................... 22,978 34,835 76,316
Net proceeds from issuance of
common stock upon the exercise
of warrants..................... 15,330 5,913 17,618
Repurchases of common stock....... (300,468) (207,454) (85,870)
Other............................. (30,854) (22,182) (7,756)
-------- -------- --------
Net cash (used in) provided
by financing activities.... (258,078) (6,604) 124,985
-------- -------- --------
Increase (decrease) in cash and cash
equivalents....................... 82,818 36,457 (54,406)
Cash and cash equivalents at
beginning of period............... 128,505 92,048 146,454
-------- -------- --------
Cash and cash equivalents at end of
period............................ $211,323 $128,505 $ 92,048
======== ======== ========
See accompanying notes.
F-8
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
1. Summary of significant accounting policies
Business
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology
company that develops, manufactures and markets human therapeutics based on
advanced cellular and molecular biology.
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries as well as affiliated companies
for which the Company has a controlling financial interest and exercises
control over their operations ("majority controlled affiliates"). All
material intercompany transactions and balances have been eliminated in
consolidation. Investments in affiliated companies which are 50% owned
and/or where the Company exercises significant influence over operations
are accounted for using the equity method. All other equity investments
are accounted for under the cost method. Earnings (loss) of affiliates,
net includes equity in earnings (loss) of affiliated companies and the
minority interest in (earnings) loss of majority controlled affiliates.
Cash equivalents and marketable securities
The Company considers only those investments which are highly liquid,
readily convertible to cash and which mature within three months from date
of purchase as cash equivalents.
The Company considers its investment portfolio available-for-sale as
defined in Statement of Financial Accounting Standards ("SFAS") No. 115.
There were no material unrealized gains or losses nor any material
differences between the estimated fair values and costs of securities in
the investment portfolio at December 31, 1994. Realized gains and losses
totaled $5,048,000 and $21,110,000, respectively, for the year ended
December 31, 1994. The cost of securities sold is based on the specific
identification method. The cost of the investment portfolio by type of
security, contractual maturity and its classification in the balance sheet
at December 31, 1994 is as follows (in thousands):
F-9
<PAGE>
Corporate debt securities................... $365,033
U.S. Treasury securities and obligations of
U.S. government agencies.................. 170,940
Other interest bearing securities........... 151,524
--------
$687,497
========
Maturing in one year or less................ $411,002
Maturing after one year through three years. 132,838
Maturing after three years.................. 143,657
--------
$687,497
========
Cash and cash equivalents................... $211,323
Marketable securities....................... 485,358
--------
696,681
Less cash................................... (9,184)
--------
$687,497
========
The Company invests its cash in accordance with a policy that seeks to
maximize returns while ensuring both liquidity and minimal risk of
principal loss. The policy limits investments to certain types of
instruments issued by institutions with investment grade credit ratings,
and places restrictions on maturities and concentration by type and issuer.
The Company's fixed income investments are subject to the risk of market
interest rate fluctuations, and all the Company's investments are subject
to risks associated with the ability of the issuers to perform their
obligations under the instruments.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined in a manner which approximates the first-in, first-out (FIFO)
method. Inventories are shown net of applicable reserves and allowances.
Inventories consist of the following (in thousands):
December 31,
1994 1993
------- -------
Raw materials.................... $10,943 $ 8,001
Work in process.................. 54,032 47,138
Finished goods................... 33,029 19,573
------- -------
$98,004 $74,712
======= =======
F-10
<PAGE>
Depreciation and amortization
Depreciation of buildings and equipment is provided over their
estimated useful lives on a straight-line basis. Leasehold improvements
are amortized on a straight-line basis over the shorter of their estimated
useful lives or lease terms, including periods covered by options which are
expected to be exercised.
Product sales
Product sales consist of two products, EPOGEN(R) (Epoetin alfa) and
NEUPOGEN(R) (Filgrastim).
As a result of an agreement between Amgen and Ortho Pharmaceutical
Corporation, a subsidiary of Johnson & Johnson ("Johnson & Johnson")
covering the U.S. market for the Company's Epoetin alfa product, Amgen does
not recognize product sales it makes into the contractual market of Johnson
& Johnson and does recognize the product sales made by Johnson & Johnson
into Amgen's contractual market. These sales amounts, and adjustments
thereto, are derived from third-party data on shipments to end users and
their usage as the data becomes available (see Note 5, "Contingencies -
Johnson & Johnson arbitration").
Research and development costs
Research and development costs are expensed as incurred. Payments
related to the acquisition of technology rights, for which development work
is in-process, are expensed and considered a component of research and
development costs (Note 2).
Foreign currency transactions
The Company has a program to manage foreign currency risk. As part of
this program, the Company has purchased foreign currency option contracts
to hedge against reductions in values of anticipated foreign currency cash
flows over the next 12 months, primarily resulting from its sales in
Europe. At December 31, 1994, the Company had option contracts to exchange
foreign currencies, primarily Swiss francs, for U.S. dollars of
$77,968,000, all having maturities of less than one year. These options
are designated and effective as hedges of anticipated foreign currency
transactions, and accordingly, the net gains on such contracts are deferred
and will be recognized primarily in product sales in the same period as the
hedged transactions.
The Company also has foreign currency forward contracts to hedge
certain exposures to foreign currency fluctuations of net monetary assets
denominated in foreign currencies. At December 31, 1994, the Company had
forward contracts to exchange foreign currencies, primarily Swiss francs,
for U.S. dollars of $31,800,000, all having maturities of less than six
months. These contracts are designated and effective as hedges, and
accordingly, gains and losses on these forward contracts are recognized in
the same period the offsetting gains and losses of hedged net monetary
assets are realized and recognized.
F-11
<PAGE>
Interest rate swaps
The Company has two interest rate swap agreements that change the
nature of the fixed rate interest paid on $50,000,000 of its medium term
debt securities ("Medium Term Notes") outstanding (Note 4). Under the
first agreement, the Company pays a variable rate (LIBOR) of interest in
exchange for the receipt of fixed rate interest payments of approximately
6.1%. Under the second agreement, the Company makes fixed rate interest
payments of approximately 4.7% and receives variable rate (LIBOR) interest
payments at the same time payments are exchanged under the first agreement.
These agreements both have notional amounts of $50,000,000, terminate in
1997, and involve the same counterparty. The differential in the fixed
rate interest payments is recognized as a reduction of interest expense
related to the debt. The related amounts payable to and receivable from
the counterparty are recorded in accrued liabilities. The fair values of
the swap agreements are not recognized in the financial statements.
Interest
Interest costs are expensed as incurred except to the extent such
interest is related to construction in progress, in which case interest is
capitalized. Interest costs capitalized for the years ended December 31,
1994, 1993 and 1992, were $3,733,000, $3,973,000, and $6,102,000,
respectively.
Income taxes
Effective January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," which supersedes SFAS No. 96. As permitted
under this new accounting standard, prior years' financial statements have
not been restated. Net income for the year ended December 31, 1993, was
increased by $8,738,000, or $.06 per share on a primary and fully diluted
basis, to reflect the cumulative effect of a change in accounting principle
to adopt SFAS No. 109 (Note 6).
Earnings per share
Earnings per share are computed in accordance with the treasury stock
method. Primary and fully diluted earnings per share are based upon the
weighted average number of common shares and dilutive common stock
equivalents outstanding. Common stock equivalents include outstanding
options under the Company's stock option plans and outstanding warrants to
purchase shares of the Company's common stock.
Reclassification
Certain prior year amounts have been reclassified to conform to the
current year presentation.
F-12
<PAGE>
2. Business combination
On December 22, 1994, the Company acquired the outstanding stock of
Synergen, Inc. ("Synergen"), a publicly held biotechnology company engaged
in the discovery and development of protein-based pharmaceuticals.
Synergen was acquired for $254,493,000, including related acquisition
costs. The preliminary assignment of the purchase price among identifiable
tangible and intangible assets was based on an analysis of the fair values
of those assets. Specifically, purchased in-process technology was
evaluated through analysis of data concerning each of Synergen's product
candidates. The fair values of the identifiable tangible and intangible
assets acquired, net of liabilities assumed, exceeded the purchase price,
and accordingly, the values of the noncurrent assets (including in-process
technology) were reduced pro rata. The value assigned to in-process
technology of $116,367,000 was expensed on the acquisition date.
This business combination has been accounted for using the purchase
method. Therefore, the operating results of Synergen are included in the
accompanying consolidated financial statements from December 22, 1994. The
following unaudited pro forma consolidated financial information assumes
the acquisition of Synergen occurred on January 1, 1994 and 1993,
respectively (in thousands, except per share data):
1994 1993
---------- ----------
Revenues........... $1,662,251 $1,387,022
Net income......... 259,829 209,619
Earnings per
share:
Primary.......... $1.86 $1.42
Fully diluted.... $1.84 $1.41
The pro forma information does not purport to be indicative of the
operating results which would have been achieved had the combination
occurred on January 1, 1994 or 1993, respectively, and should not be
construed as representative of future operating results.
3. Related party transactions
Kirin-Amgen
The Company owns a 50% interest in Kirin-Amgen, Inc. ("Kirin-Amgen"),
a corporation formed for the development and commercialization of certain
products based on advanced biotechnology. Pursuant to the terms of
agreements entered into with Kirin-Amgen, the Company conducts certain
research and development activities on behalf of Kirin-Amgen and is paid
for such services at a negotiated rate. Included in revenues from
corporate partners for the years ended December 31, 1994, 1993 and 1992,
are $58,638,000, $41,247,000 and $24,554,000, respectively, related to
these agreements.
In connection with its various agreements with Kirin-Amgen, the
Company has been granted sole and exclusive licenses for the manufacture
and sale of certain products in specified geographic areas of the world.
In return for such licenses, the Company paid Kirin-Amgen stated amounts
upon the receipt of the licenses and/or pays Kirin-Amgen royalties based on
sales. During the years ended December 31, 1994, 1993 and 1992, Kirin-
F-13
<PAGE>
Amgen earned royalties from Amgen of $67,526,000, $53,122,000 and
$42,793,000, respectively, under such agreements, which are included in
cost of sales in the accompanying consolidated statements of operations.
At December 31, 1994, Amgen's share of Kirin-Amgen's undistributed
retained earnings was approximately $39,350,000.
Limited Partnership
Amgen Clinical Partners, L.P. (the "Limited Partnership"), a limited
partnership, was formed to develop and commercialize products from certain
technologies for human pharmaceutical use in the United States. In
connection with the formation of the Limited Partnership, Amgen was granted
options to purchase all of the limited partners' interests in the Limited
Partnership. During 1993, Amgen exercised these options and made cash
advance payments to the former limited partners aggregating $20,860,000.
In addition, each former limited partner receives quarterly payments,
subject to certain adjustments, equal to a stated percentage of Amgen's
sales of certain products in specified geographic areas through December
31, 2005. The cash advance payments are recoverable against certain of
these quarterly payments commencing in 1997.
The Limited Partnership and Amgen formed Amgen Ventures, a joint
venture, to manufacture and market the Limited Partnership's products in
the United States. Amgen consolidated the results of Amgen Ventures'
operations and reflected the Limited Partnership's equity in earnings of
these operations as royalty expense. During the years ended December 31,
1993 and 1992, the Limited Partnership's equity in these earnings
aggregated $11,131,000 and $36,306,000, respectively, which are included in
cost of sales in the accompanying consolidated statements of operations.
4. Debt
The Company has a commercial paper program which provides for
unsecured short-term borrowings up to an aggregate of $200,000,000.
Commercial paper issued under this program is supported by the Company's
credit facility (discussed below). At December 31, 1994, $99,666,000 of
commercial paper was outstanding at effective interest rates averaging 6.0%
and maturities of less than four months. At December 31, 1993,
$109,767,000 of commercial paper was outstanding at effective interest
rates averaging 3.3% and maturities of less than three months.
F-14
<PAGE>
Long-term debt consists of the following (in thousands):
December 31,
1994 1993
-------- --------
Medium Term Notes................ $113,000 $103,000
Promissory notes................. 68,200 68,200
Other long-term obligations...... 2,252 11,771
-------- --------
183,452 182,971
Less current portion............. (45) (1,729)
-------- --------
$183,407 $181,242
======== ========
The Company has registered $200,000,000 of unsecured Medium Term Notes
of which $113,000,000 were outstanding at December 31, 1994. These Medium
Term Notes mature in two to nine years and bear interest at fixed rates
averaging 5.8%. The Company may offer and issue these securities from time
to time with terms determined by market conditions. Under the terms of
these securities, the Company is required to meet certain debt to tangible
net worth ratios. In addition, these securities place limitations on liens
and sale/leaseback transactions.
The Company's promissory notes, which mature in 1997, were issued to
assist in financing the acquisition and related construction of a
manufacturing facility in Puerto Rico. These notes bear interest, which is
payable quarterly, at a floating rate equal to 81% of a Eurodollar base
rate, not to exceed 12%. At December 31, 1994, the effective interest rate
on these notes was approximately 4.3%. Amounts borrowed in connection with
these promissory notes and related interest are secured by letters of
credit which aggregate approximately $72,400,000.
At December 31, 1994, the Company had an unsecured credit facility
(the "credit facility") which provides for up to $150,000,000 in borrowings
pursuant to a revolving line of credit. The revolving line of credit
expires in June 1995. At December 31, 1994, $150,000,000 was available for
borrowing and to support the Company's commercial paper program.
Borrowings under the line of credit bear interest at: 1) the higher of the
prime rate of a major bank or the federal funds rate plus 1/2%; or 2) a
Eurodollar base rate plus 1/2% to 3/4%. Under the terms of the credit
facility, the Company is required to meet certain working capital, debt to
tangible net worth and interest coverage ratios and maintain certain levels
of tangible net worth. In addition, the credit facility contains
limitations on investments, liens and sale/leaseback transactions.
The aggregate stated maturities of all long-term obligations due
subsequent to December 31, 1994, are as follows: $45,000 - 1995; $2,207,000
- 1996; $118,200,000 - 1997; $30,000,000 - 1998; $10,000,000 - 1999 and
$23,000,000 thereafter.
F-15
<PAGE>
5. Contingencies
Johnson & Johnson arbitration
In September 1985, the Company granted Johnson & Johnson an exclusive
license under certain patented technology and know how of the Company to
sell erythropoietin throughout the United States for all human uses except
dialysis and diagnostics.
In January 1989, Johnson & Johnson initiated arbitration proceedings
with respect to a number of disputes which had arisen between Amgen and
Johnson & Johnson as to the respective rights and obligations of the
parties under the various agreements between them. Amgen filed a cross
petition for arbitration raising additional disputes for resolution by the
arbitrator. The scope of the arbitration covers erythropoietin, hepatitis
B vaccine and interleukin-2.
In April 1990, the arbitrator ruled that Johnson & Johnson must
purchase from Amgen all of Johnson & Johnson's actual United States sales
requirements of recombinant human erythropoietin. In December 1990, the
U.S. Food and Drug Administration approved Amgen's application to name
Johnson & Johnson a distributor of Epoetin alfa under the trademark
PROCRIT(R). In January 1991, Johnson & Johnson began distributing Epoetin
alfa.
In June 1991, the arbitrator issued an opinion awarding Johnson &
Johnson $164,000,000 on its claims regarding erythropoietin. In September
1992, the arbitrator found that Johnson & Johnson had breached its
obligations regarding hepatitis B vaccine and interleukin-2, and in January
1993 awarded the Company approximately $90,000,000 in damages against
Johnson & Johnson. In January 1993, the Company paid Johnson & Johnson the
sum of $82,400,000, representing the difference between the damages awarded
Johnson & Johnson as a result of its erythropoietin claims, and the amounts
awarded Amgen against Johnson & Johnson as a result of its hepatitis B
vaccine and interleukin-2 claims, plus interest. Johnson & Johnson
returned to the Company the rights to develop and market hepatitis B
vaccine and interleukin-2 in March 1991.
The Company and Johnson & Johnson are required to compensate each
other for Epoetin alfa sales which either party makes into the other
party's contractual market. The Company has established and is employing
an accounting methodology to assign the proceeds of sales of EPOGEN(R) and
PROCRIT(R) in Amgen's and Johnson & Johnson's respective contractual
markets. The Company has made payments to Johnson & Johnson based upon the
results of the Company's accounting methodology. Johnson & Johnson has
disputed the methodology employed by the Company and is proposing an
alternative methodology for adoption by the arbitrator. If, as a result of
the arbitration proceeding, a methodology different from that currently
employed by the Company is instituted to assign the proceeds of sales
between the parties, it may yield results that are different from the
results of the accounting methodology currently employed by the Company.
As a result of the arbitration, it is possible that the Company would
recognize a different level of EPOGEN(R) sales than are currently being
recognized. As a result of the arbitration, the Company may be required to
pay additional compensation to Johnson & Johnson for sales during prior
periods, or Johnson & Johnson may be required to pay compensation to the
Company for such prior period sales. Due to the uncertainties of any
F-16
<PAGE>
arbitrated result, the Company has established net liabilities that exceed
the amounts paid to Johnson & Johnson.
A trial date has been set for October 2, 1995 before the arbitrator
regarding the accounting methodologies and compensation for sales by
Johnson & Johnson into Amgen's contractual market and sales by Amgen into
Johnson & Johnson's contractual market. Discovery as to these issues is in
progress.
Synergen litigation
Acquisition litigation
The Company and its wholly owned subsidiary, Amgen Boulder Inc.
(formerly Synergen), have been named as defendants in several lawsuits
filed in connection with the Company's December 1994 acquisition of
Synergen (the ``Acquisition''). One suit, brought by plaintiffs seeking to
represent a class of Synergen warrant holders who claim to have been
deprived of the benefit of their warrants, includes a request for general
damages in the sum of $34,334,000. The balance of the suits have been
brought by plaintiffs who seek to represent a class of stockholders of
Synergen common stock. These plaintiffs seek an unspecified amount of
compensatory damages, an order rescinding the Acquisition and related
equitable relief based upon allegations that the defendants breached their
fiduciary duties by failing to maximize stockholder value and defrauded the
plaintiffs by omitting to disclose allegedly material information
concerning Synergen's future prospects.
ANTRIL(TM) litigation
Several lawsuits have been filed against Synergen alleging
misrepresentations in connection with its research and development of
ANTRIL(TM) for the treatment of sepsis. One of these suits is a class
action brought by various classes of Synergen stockholders alleging
violations of federal and state securities laws. This suit has been
approved for settlement for an amount that is not material to the Company's
financial statements. Another suit brought by three Synergen stockholders
alleges violations of state securities laws, fraud and misrepresentation
and seeks an unspecified amount of compensatory damages and punitive
damages. Two additional suits, proposed as class actions, filed by a
limited partner of a partnership with which Synergen is affiliated, seek
rescission of certain payments made to one of the defendants (or
unspecified damages not less than $50,000,000) and treble damages based on
a variety of allegations.
While it is not possible to predict accurately or determine the
eventual outcome of the Johnson & Johnson arbitration, the Synergen
litigation or various other legal proceedings (including patent disputes)
involving Amgen, the Company believes that the outcome of these proceedings
will not have a material adverse effect on the financial statements of the
Company.
F-17
<PAGE>
6. Income taxes
The provision for income taxes includes the following (in thousands):
Years Ended December 31,
1994 1993 1992
-------- -------- --------
Current provision:
Federal..................... $231,306 $165,822 $178,609
State....................... 34,855 25,856 34,937
-------- -------- --------
Total current provision... 266,161 191,678 213,546
-------- -------- --------
Deferred provision (benefit):
Federal..................... 516 19,723 (8,012)
State....................... 1,927 6,394 -
-------- -------- --------
Total deferred provision
(benefit).............. 2,443 26,117 (8,012)
-------- -------- --------
$268,604 $217,795 $205,534
======== ======== ========
F-18
<PAGE>
Deferred income taxes reflect the net tax effects of net operating
loss carryforwards and temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities as of December 31, 1994 and 1993 are as
follows (in thousands):
December 31,
1994 1993
-------- -------
Deferred tax assets:
Net operating loss carryforwards... $ 89,478 $ 3,913
Expense accruals................... 78,481 42,834
Fixed assets....................... 17,018 7,280
Royalty obligation buyouts......... 11,772 12,936
State income taxes................. 9,499 6,501
Research collaboration expenses.... 8,033 7,865
Other.............................. 7,215 6,969
-------- -------
Total deferred tax assets....... 221,496 88,298
Valuation allowance.................. (79,497) (17,805)
-------- -------
Net deferred tax assets......... 141,999 70,493
-------- -------
Deferred tax liabilities:
Purchase of technology rights...... (25,708) (9,608)
Other.............................. (5,649) (1,948)
-------- -------
Total deferred tax liabilities.. (31,357) (11,556)
-------- -------
$110,642 $58,937
======== =======
The net change in the valuation allowance for deferred tax assets
during the year ended December 31, 1994 was $61,692,000. This change
primarily relates to the net operating loss carryforwards acquired through
the purchase of Synergen (Note 2).
At December 31, 1994, the Company had operating loss carryforwards
available to reduce future federal and foreign taxable income which expire
as follows (in thousands):
Federal Foreign
-------- --------
1997 - 2002... $ 1,935 $35,755
2003 - 2006... 26,799 -
2007.......... 33,180 -
2008.......... 94,382 -
2009.......... 98,722 -
-------- -------
$255,018 $35,755
======== =======
Approximately $238,000,000 of the federal operating loss carryforwards
relate to the acquisition of Synergen. Utilization of these operating loss
carryforwards is limited to approximately $16,000,000 per year.
F-19
<PAGE>
The provision for income taxes varies from taxes based on the federal
statutory rate of 35% for 1994 and 1993, and 34% for 1992 as follows (in
thousands):
1994 1993 1992
-------- -------- --------
Statutory rate applied to income
before income taxes............... $205,894 $207,330 $191,466
Write-off of purchased in-process
technology not deductible......... 40,728 - -
State income taxes, net of federal
income tax benefit................ 23,908 20,963 23,058
Retroactive effects of enacted tax
law changes....................... - (9,582) -
Equity in earnings of affiliated
company, not taxable.............. (2,994) (3,834) (8,229)
Other, net........................... 1,068 2,918 (761)
-------- -------- --------
$268,604 $217,795 $205,534
======== ======== ========
The tax provision for the year ended December 31, 1993 was reduced by
$9,582,000 due to changes in federal tax laws enacted in August 1993. This
amount principally relates to the retroactive reinstatement of research and
experimentation and orphan drug tax credits to July 1, 1992.
Income taxes paid during the years ended December 31, 1994, 1993 and
1992, totaled $234,233,000, $146,270,000 and $134,105,000, respectively.
7. Stockholders' equity
On January 24, 1989, the Company's Board of Directors declared a
dividend of one common share purchase right ("Right") for each outstanding
share of common stock. The Rights will become exercisable 10 days after a
person acquires 10% or more of the common stock, or 10 days after a person
announces a tender offer which would result in such person acquiring 10% or
more of the common stock. Subject to certain conditions, the Rights may be
redeemed by the Board of Directors. The current redemption price is $.0017
per Right, subject to adjustment. The Rights will expire on January 24,
1999.
Under certain circumstances, if an acquirer purchases 10% or more of
the Company's outstanding common stock, each Rightholder (other than the
acquirer) is entitled for a specified period to buy shares of common stock
of the Company at 50% of the then current market price. The number of
shares which a holder may purchase upon exercise will be determined by a
formula which includes a current exercise price of $160 per share, subject
to adjustment. If an acquirer purchases at least 10% of the Company's
common stock, but has not achieved a 50% stake, the Board may exchange the
Rights (other than the acquirer's Rights) for one share of common stock per
Right. In addition, under certain circumstances, if the Company is
involved in a merger or other business combination where it is not the
surviving corporation, a Rightholder may buy shares of common stock of the
acquiring company at 50% of the then current market value.
F-20
<PAGE>
In connection with the sale of limited partnership interests in 1987,
Amgen issued warrants to the limited partners to purchase 18,153,000 shares
of its common stock in exchange for the options to purchase the limited
partners' interests in the Limited Partnership. Substantially all warrants
were exercised prior to their expiration on June 30, 1994.
In addition to common stock, the Company's authorized capital also
includes 5,000,000 shares of preferred stock, $.0001 par value. At
December 31, 1994, no shares of preferred stock were issued or outstanding.
At December 31, 1994, the Company has reserved 181,023,000 shares of
its common stock which may be issued through its stock option and stock
purchase plans and in connection with the stockholder Rights agreement.
In 1992, the Company initiated a program to repurchase shares of its
own common stock. The program has been expanded to allow repurchases of up
to an aggregate of $925,000,000 before December 31, 1995. As of December
31, 1994, $331,208,000 of this total remained available for repurchase.
Stock repurchased under the program has been retired and such repurchases
have partially offset the dilutive effect of the Company's stock option and
stock purchase plans.
8. Stock option and purchase plans
The Company's stock option plans provide for option grants designated
as either nonqualified or incentive stock options. The options generally
vest over a three to five year period and expire seven to ten years from
the date of grant. In general, stock option grants are set at the closing
price of the Company's common stock on the date of grant. As of December
31, 1994, the Company had 4,167,000 shares of common stock available for
future grant under its stock option plans.
Most U.S. employees and certain employees outside the U.S. are
eligible to receive a grant of stock options periodically with the number
of shares generally determined by the employee's salary grade and
performance level. In addition, certain management and professional level
employees normally receive a stock option grant upon hire. Non-employee
directors of the Company receive a grant of stock options annually.
F-21
<PAGE>
The total number of options granted to executive officers and
directors and to other Amgen personnel is as follows (in thousands):
Years ended December 31,
1994 1993 1992
------------- ------------- --------------
Shares % Shares % Shares %
------ ---- ------ ---- ------ ----
Executive officers
and directors... 540 13% 391 10% 300 13%
Other Amgen
personnel....... 3,692 87% 3,621 90% 2,001 87%
------ ---- ------ ---- ------ ----
Total........... 4,232 100% 4,012 100% 2,301 100%
====== ==== ====== ==== ====== ====
Stock option information with respect to all of the Company's stock
option plans follows (in thousands, except price information):
Price
-------------------------
Weighted
Shares Low High Average
------ --- ---- --------
Balance December 31, 1991,
unexercised.............. 16,889 $ 3.52 $62.75 $14.13
Granted............... 2,301 $50.00 $77.75 $59.74
Exercised............. (3,803) $ 3.53 $66.25 $ 9.46
Cancelled............. (262) $ 4.50 $73.75 $18.51
------
Balance December 31, 1992,
unexercised.............. 15,125 $ 3.53 $77.75 $22.17
Granted............... 4,012 $32.13 $70.63 $37.85
Exercised............. (2,274) $ 3.53 $61.00 $ 9.23
Cancelled............. (324) $ 4.50 $76.75 $30.42
------
Balance December 31, 1993,
unexercised.............. 16,539 $ 3.53 $77.75 $27.43
Granted............... 4,232 $35.36 $59.00 $44.13
Exercised............. (2,772) $ 3.86 $56.00 $13.89
Cancelled............. (479) $ 7.38 $74.75 $43.83
------
Balance December 31, 1994,
unexercised.............. 17,520 $ 3.53 $77.75 $33.16
======
F-22
<PAGE>
The following table shows the maximum number of shares that will vest
based on the number of options outstanding at December 31, 1994 (in
thousands, except price range amounts):
Exercise 1994 and 1997 and Total Aggregate
Price Range Prior 1995 1996 Thereafter Shares Price
---------- -------- ----- ----- ---------- ------ --------
Under $10.. 2,951 107 - - 3,058 $ 19,307
$10 - $29.. 2,627 336 56 180 3,199 48,317
$30 - $60.. 2,759 2,629 2,158 2,651 10,197 443,639
Over $60... 520 223 194 129 1,066 69,680
----- ----- ----- ----- ------ --------
Total.... 8,857 3,295 2,408 2,960 17,520 $580,943
===== ===== ===== ===== ====== ========
Unless exercised, options outstanding as of December 31, 1994, will
expire as follows (in thousands, except price range amounts):
Exercise 1997 and Total Aggregate
Price Range 1995 1996 Thereafter Shares Price
----------- ----- ----- ---------- ------ --------- -
Under $10............ 444 1,602 1,012 3,058 $ 19,307
$10 - $29............ 131 - 3,068 3,199 48,317
$30 - $60............ 78 5 10,114 10,197 443,639
Over $60............. 23 - 1,043 1,066 69,680
--- ----- ------ ------ --------
Total.............. 676 1,607 15,237 17,520 $580,943
=== ===== ====== ====== ========
The Company has an employee stock purchase plan whereby, in accordance
with Section 423 of the Internal Revenue Code, eligible employees may
authorize payroll deductions of up to 10% of their salary to purchase
shares of the Company's common stock at the lower of 85% of the fair market
value of common stock on the first or last day of the offering period.
During the years ended December 31, 1994, 1993 and 1992, respectively,
99,000, 94,000 and 81,000 shares, respectively, were purchased by employees
at prices of $41.76, $42.07 and $60.03 per share, respectively. At
December 31, 1994, the Company had 2,661,000 shares available for future
issuance under this plan.
F-23
<PAGE>
9. Balance sheet accounts
Property, plant and equipment consist of the following (in thousands):
December 31,
1994 1993
-------- --------
Land................................. $ 58,354 $ 44,984
Buildings............................ 330,172 281,917
Manufacturing equipment.............. 53,173 47,416
Laboratory equipment................. 123,624 87,389
Furniture and office equipment....... 137,646 90,152
Leasehold improvements............... 53,697 48,572
Construction in progress............. 116,708 130,231
-------- --------
873,374 730,661
Less accumulated depreciation and
amortization...................... (208,060) (143,749)
-------- --------
$665,314 $586,912
======== ========
Other accrued liabilities consist of the following (in thousands):
December 31,
1994 1993
-------- --------
Employee compensation and benefits... $ 63,357 $ 32,369
Legal costs.......................... 60,733 29,597
Sales incentives, royalties and
allowances......................... 60,023 69,039
Due to affiliated companies and
corporate partners................ 51,832 57,345
Income taxes......................... 35,050 24,137
Clinical costs....................... 29,874 7,703
Other................................ 105,418 59,248
-------- --------
$406,287 $279,438
======== ========
10. Fair values of financial instruments
The following is information concerning the fair values of each class
of financial instruments at December 31, 1994:
Cash, cash equivalents and marketable securities
The carrying amounts of cash, cash equivalents and marketable
securities approximate their fair values. Fair values of cash equivalents
and marketable securities are based on quoted market prices.
F-24
<PAGE>
Debt
The carrying value of commercial paper approximates its fair value due
to the short maturity of these liabilities. The fair value of Medium Term
Notes was approximately $105,711,000. This amount was estimated based on
quoted market rates for instruments with similar terms and remaining
maturities. The carrying value of the promissory notes approximates its
fair value since the interest rate on the notes is reset quarterly.
Interest rate swap agreements
The fair values of interest rate swap agreements were not significant
based on estimated amounts that the counterparty would receive or pay to
terminate the swap agreements taking into account current interest rates.
Foreign currency contracts
The fair values of the foreign currency forward contracts and
purchased foreign currency option contracts were not significant based on
quoted market rates.
11. Major customers
Amgen has chosen to use major wholesale distributors of pharmaceutical
products as the principal means of distributing the Company's products to
clinics, hospitals and pharmacies. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral. For the years ended December 31, 1994, 1993 and 1992, sales to
two major wholesale distributors as a percentage of total revenues were 22%
and 16%, 23% and 10%, and 22% and 11%, respectively.
12. Geographic information
Information about the Company's operations in the United States and
its possessions, Europe, and other international markets, which include
Canada, Australia, China and Japan, for the years ended December 31, 1994,
1993 and 1992, is as follows (in thousands):
1994 1993 1992
---------- ---------- ----------
Sales to unaffiliated customers:
United States and possessions.... $1,333,752 $1,130,040 $ 927,986
Europe........................... 193,019 165,746 118,841
Other............................ 22,796 10,536 3,827
Transfers between geographic areas:
United States and possessions.... 15,688 5,441 4,799
Other revenue...................... 98,337 67,520 42,387
Adjustments and eliminations....... (15,688) (5,441) (4,799)
---------- ---------- ----------
Total revenues..................... $1,647,904 $1,373,842 $1,093,041
========== ========== ==========
F-25
<PAGE>
1994 1993 1992
-------- -------- --------
Operating profit (loss):
United States and possessions.... $624,055 $592,949 $542,851
Europe........................... 50,258 35,826 3,854
Other............................ (25,628) (14,886) (8,233)
Adjustments and eliminations....... (2,809) 954 (1,941)
-------- -------- --------
Total operating profit............. 645,876 614,843 536,531
Interest and other income, net..... 9,505 21,011 35,247
Earnings (loss) of affiliates, net. (31,227) (12,589) 16,940
General corporate expenses......... (35,885) (30,895) (25,584)
-------- -------- --------
Income before income taxes and
cumulative effect of a change
in accounting principle.......... $588,269 $592,370 $563,134
======== ======== ========
Operating profit (loss) represents revenue less operating expenses
directly related to each geographic area. Operating profit (loss) excludes
interest and other income, earnings (loss) of affiliates, net and other
expenses attributable to general corporate operations.
Included in the operating profit for the United States and its
possessions is a write-off of in-process technology purchased of
$116,367,000 for the year ended December 31, 1994 and legal awards of
$13,900,000 and $77,076,000, for the years ended December 31, 1993 and
1992, respectively. Earnings (loss) of affiliates, net includes the
minority interest in earnings of majority controlled European affiliates of
$30,854,000, $22,182,000 and $7,756,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
Information about the Company's identifiable assets in each geographic
area at December 31, 1994 and 1993 is as follows (in thousands):
December 31,
1994 1993
---------- ----------
Identifiable assets:
United States and possessions...... $ 906,370 $ 792,602
Europe............................. 50,679 42,728
Other.............................. 22,348 9,936
Adjustments and eliminations.......... (2,809) 954
---------- ----------
Total identifiable assets............. 976,588 846,220
Corporate assets including equity
method investments................. 1,017,559 919,303
---------- ----------
Total assets.......................... $1,994,147 $1,765,523
========== ==========
Identifiable assets are those assets of the Company that are
identified with the operations in each geographic area. Europe's
identifiable assets include accounts receivable of approximately
$34,400,000 and $27,500,000 as of December 31, 1994 and 1993, respectively,
denominated in foreign currencies. Corporate assets, which are excluded
F-26
<PAGE>
from identifiable assets, are principally comprised of cash, cash
equivalents and marketable securities. At December 31, 1994 and 1993,
total international assets approximated $93,819,000 and $68,029,000,
respectively, and total international liabilities approximated $16,561,000
and $12,268,000, respectively.
13. Quarterly financial data (unaudited, in thousands, except per share
data):
1994 Quarter Ended Dec. 31 Sept. 30 June 30 Mar. 31
------------------ -------- -------- -------- --------
Product sales..... $413,566 $401,695 $388,575 $345,731
Gross margin from
product sales... 352,246 342,569 324,181 292,448
Net income........ 4,785 (1) 113,956 107,464 93,460
Earnings per
share:
Primary......... .03 .82 .77 .66
Fully diluted... .03 .82 .77 .66
1993 Quarter Ended Dec. 31 Sept. 30 June 30 Mar. 31
------------------ -------- -------- -------- --------
Product sales..... $347,289 $335,752 $327,829 $295,452
Gross margin from
product sales... 289,969 277,491 274,268 244,548
Income before
cumulative
effect of a
change in
accounting
principle....... 91,099 102,692 100,224 80,560
Net income........ 91,099 102,692 (2) 100,224 (3) 89,298 (4)
Earnings per
share:
Primary:
Income before
cumulative
effect of a
change in
accounting
principle.. .64 .72 .70 .55
Net income... .64 .72 .70 .61
Fully diluted:
Income before
cumulative
effect of a
change in
accounting
principle.. .64 .72 .70 .55
Net income... .64 .72 .70 .61
(1) During the fourth quarter of 1994, net income was reduced by
$116,367,000 due to the write-off of in-process technology purchased in
connection with the acquisition of Synergen (Note 2).
F-27
<PAGE>
(2) During the third quarter of 1993, the provision for income taxes
was reduced by $9,582,000 due to changes in federal tax laws enacted during
the period. This amount principally relates to the reinstatement of
research and experimentation and orphan drug tax credits retroactive to
July 1, 1992 (Note 6).
(3) During the second quarter of 1993, the Company recorded a
$13,900,000 legal award, which resulted in an after tax credit of
$8,618,000, as part of the settlement with Genetics Institute for
outstanding patent disputes regarding erythropoietin in the United States.
(4) During the first quarter of 1993, net income was increased by
$8,738,000, to reflect the cumulative effect of a change in accounting
principle to adopt SFAS No. 109 (Note 1).
F-28
<PAGE>
SCHEDULE VIII
AMGEN INC.
VALUATION ACCOUNTS
Years ended December 31, 1994, 1993 and 1992
(In thousands)
Balance Additions
at Charged Balance
Beginning to Costs at End
of and of
Period Expenses Deductions Period
-------- -------- ---------- -------
Year ended December 31, 1994:
Allowance for doubtful
accounts................ $12,161 $1,489 $ 366 $13,284
Inventory reserves........ 1,990 6,000 4,973 3,017
Year ended December 31, 1993:
Allowance for doubtful
accounts................ $11,770 $ 938 $ 547 $12,161
Inventory reserves........ 1,862 128 - 1,990
Year ended December 31, 1992:
Allowance for doubtful
accounts................ $ 6,988 $5,112 $ 330 $11,770
Inventory reserves........ 4,693 8 2,839 1,862
F-29
<PAGE>
EXHIBIT 11
AMGEN INC.
COMPUTATION OF PER SHARE EARNINGS
PRIMARY COMPUTATION
Years ended December 31, 1994, 1993 and 1992
(In thousands, except earnings per share data)
1994 1993 1992
------- ------- -------
Income before cumulative effect of a
change in accounting principle....... $319,665 $374,575 $357,600
Cumulative effect of a change in
accounting principle................. - 8,738 -
-------- -------- --------
Net income............................. $319,665 $383,313 $357,600
======== ======== ========
Applicable common and common stock
equivalent shares:
Weighted average shares of common
stock outstanding during the
period.......................... 133,155 135,257 134,305
Incremental number of shares
outstanding during the period
resulting from the assumed
exercises of stock options and
warrants........................ 6,635 8,354 12,992
------- ------- -------
Weighted average shares of common stock
and common stock equivalents
outstanding during the period........ 139,790 143,611 147,297
======= ======= =======
Earnings per common share primary:
Income before cumulative effect of a
change in accounting principle.... $ 2.29 $ 2.61 $ 2.43
Cumulative effect of a change in
accounting principle.............. - .06 -
------- ------- -------
Net income........................... $ 2.29 $ 2.67 $ 2.43
======= ======= =======
<PAGE>
EXHIBIT 11
AMGEN INC.
COMPUTATION OF PER SHARE EARNINGS
FULLY DILUTED COMPUTATION
Years ended December 31, 1994, 1993 and 1992
(In thousands, except earnings per share data)
1994 1993 1992
-------- -------- -------
Income before cumulative effect of
a change in accounting principle....... $319,665 $374,575 $357,600
Cumulative effect of a change in
accounting principle................... - 8,738 -
-------- -------- --------
Net income............................... $319,665 $383,313 $357,600
======== ======== ========
Applicable common and common stock
equivalent shares:
Weighted average shares of common
stock outstanding during the
period............................ 133,155 135,257 134,305
Incremental number of shares
outstanding during the period
resulting from the assumed
exercises of stock options and
warrants.......................... 7,944 9,065 13,421
------- -------- -------
Weighted average shares of common stock
and common stock equivalents
outstanding during the period.......... 141,099 144,322 147,726
======= ======= =======
Income before cumulative effect of a
change in accounting principle....... $ 2.27 $ 2.60 $ 2.42
Cumulative effect of a change in
accounting principle................. - .06 -
------- ------- -------
Net income............................. $ 2.27 $ 2.66 $ 2.42
======= ======= =======
EXHIBIT 21
AMGEN INC.
SUBSIDIARY STATE OF INCORPORATION
(Name under which OR
subsidiary does business) ORGANIZATION
------------------------- ----------------------
Amgen Australia Pty Limited Australia
Amgen-Biofarmaceutica, Lda. Portugal
Amgen Boulder Inc. Delaware
Amgen B.V. The Netherlands
Amgen Canada Inc. Canada
Amgen Development Corporation Delaware
Amgen (Europe) AG Switzerland
Amgen GmbH Germany
Amgen Greater China, Ltd. Hong Kong
Amgen Holding, Inc. California
Amgen International Inc. Delaware
Amgen Kabushiki Kaisha Japan
Amgen Limited United Kingdom
Amgen Manufacturing, Inc. Delaware
Amgen N.V. Belgium
Amgen Sales Corporation Barbados
Amgen S.A. France
Amgen S.A. Spain
Amgen S.p.A. Italy
Kirin-Amgen, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 211,323
<SECURITIES> 485,358
<RECEIVABLES> 207,996
<ALLOWANCES> 13,284
<INVENTORY> 98,004
<CURRENT-ASSETS> 1,115,638
<PP&E> 665,314
<DEPRECIATION> 74,520
<TOTAL-ASSETS> 1,994,147
<CURRENT-LIABILITIES> 536,430
<BONDS> 0
<COMMON> 13
0
0
<OTHER-SE> 1,274,297
<TOTAL-LIABILITY-AND-EQUITY> 1,994,147
<SALES> 1,549,567
<TOTAL-REVENUES> 1,647,904
<CGS> 238,123
<TOTAL-COSTS> 1,069,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,021
<INCOME-PRETAX> 588,269
<INCOME-TAX> 268,604
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319,665
<EPS-PRIMARY> 2.29
<EPS-DILUTED> 2.27
</TABLE>
