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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12477
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AMGEN INC.
(Exact name of registrant as specified in its charter)
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Delaware 95-3540776
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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One Amgen Center Drive, Thousand Oaks, California 91320-1799
(Address of principal executive offices) (Zip Code)
805-447-1000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.0001 par value, preferred share 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. [X]
The approximate aggregate market value of voting and non-voting stock held
by non-affiliates of the registrant was $59,737,121,000 as of February 11,
2000 (A)
1,023,544,175
(Number of shares of common stock outstanding as of February 11, 2000)
DOCUMENTS INCORPORATED BY REFERENCE:
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Form 10-K
Document Parts
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Definitive 2000 Proxy Statement, to be filed within
120 days of December 31, 1999 (specified portions).............. III
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(A) Excludes 69,658,019 shares of common stock held by directors and officers,
and any stockholders whose ownership exceeds five percent of the shares
outstanding, at February 11, 2000. 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
discovers, develops, manufactures and markets human therapeutics based on
advances in cellular and molecular biology.
The Company manufactures and markets four human therapeutic products,
EPOGEN(R) (Epoetin alfa), NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon
alfacon-1) and STEMGEN(R) (Ancestim). EPOGEN(R) stimulates the production of
red blood cells and is marketed by Amgen in the United States for the treatment
of anemia associated with chronic renal failure in patients on dialysis.
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, for reducing
symptoms in patients with severe chronic neutropenia, for supporting peripheral
blood progenitor cell ("PBPC") transplants and for reducing the recovery time
of neutrophils and the duration of fever following chemotherapy treatment in
patients being treated for acute myelogenous leukemia ("AML"). NEUPOGEN(R) is
also marketed in the EU, Canada and Australia for use in treating neutropenia
in patients infected with the human immunodeficiency virus ("HIV") receiving
antiviral and/or other myelosuppressive medications. INFERGEN(R) is a non-
naturally occurring type-1 interferon which stimulates the immune system to
fight viral infections and is indicated for the treatment of chronic hepatitis
C viral infection. The Company markets INFERGEN(R) in the United States and
Canada. STEMGEN(R) stimulates the production, mobilization and maturation of
progenitor cells and is indicated for use in support of stem cell
transplantation. The Company markets STEMGEN(R) in Canada, Australia and
New Zealand.
The Company focuses its research efforts on secreted protein and small
molecule human therapeutics, with particular emphasis on cancer, inflammation
and neurobiology. It concentrates its development efforts on human therapeutics
in the areas of hematology and oncology, bone and inflammatory disorders, and
neuroendocrine and neurodegenerative diseases. 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 the People's
Republic of China. In addition to internal research and development efforts,
the Company has acquired certain product and technology rights and has
established research and development collaborations.
Amgen operates commercial manufacturing facilities located in the United
States, Puerto Rico and The Netherlands. A sales and marketing force is
maintained in the United States, Europe, Canada, Australia, New Zealand and the
People's Republic of China. In addition, Amgen has entered into licensing and
co-promotion agreements to market EPOGEN(R), NEUPOGEN(R) and INFERGEN(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 One Amgen Center Drive, Thousand Oaks, California 91320-1799.
Products
Recombinant human erythropoietin
EPOGEN(R) (proper name--Epoetin alfa) is Amgen's registered trademark for
its recombinant human erythropoietin product, a protein that stimulates red
blood cell production. Red blood cells transport oxygen to all cells of the
body. Without adequate amounts of erythropoietin, the red blood cell count is
reduced, thereby diminishing the ability of the blood to deliver sufficient
amounts of oxygen to the body, resulting in anemia.
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People with chronic renal failure suffer from anemia because they do not
produce sufficient amounts of erythropoietin, which is normally produced in
healthy kidneys. EPOGEN(R) is effective in the treatment of anemia associated
with chronic renal failure for patients who are on dialysis and is indicated to
elevate or maintain the red blood cell level (as determined by hematocrit or
hemoglobin measurements) and to eliminate the need for maintenance 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, Inc. ("Kirin-
Amgen"), a joint venture between Kirin Brewery Company, Limited ("Kirin") and
Amgen (see "Joint Ventures and Business Relationships--Kirin Brewery Company,
Limited"). The Company began selling EPOGEN(R) in 1989 when the U.S. Food and
Drug Administration ("FDA") approved its use in the treatment of anemia
associated with chronic renal failure. In November 1999, the FDA approved
EPOGEN(R) for the treatment of anemia in children with chronic renal failure
who are on dialysis.
The Company has retained exclusive rights to market EPOGEN(R) in the United
States for dialysis patients. Amgen has granted Ortho Pharmaceutical
Corporation (which has assigned its rights under the Product License Agreement
to Ortho Biotech, Inc.), a subsidiary of Johnson & Johnson, hereafter referred
to as "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. Johnson & Johnson markets its recombinant human
erythropoietin product under the trademark PROCRIT(R) in the United States. See
Note 1 to the Consolidated Financial Statements, "Summary of significant
accounting policies--Product sales" and Note 4 to the Consolidated Financial
Statements, "Contingencies--Johnson & Johnson arbitrations". 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 manufacture and market erythropoietin under the trademark
EPREX(R) in several countries. See "Joint Ventures and Business Relationships--
Johnson & Johnson".
In Japan and the People's Republic of China, Kirin was granted rights to
market recombinant human erythropoietin under licensing agreements with Kirin-
Amgen (see "Joint Ventures and Business Relationships--Kirin Brewery Company,
Limited"). Kirin manufactures and markets its recombinant human erythropoietin
product under the trademark ESPO(R).
For EPOGEN(R) sales information for the years ended December 31, 1999, 1998
and 1997, see Note 10 to the Consolidated Financial Statements.
Recombinant-methionyl human granulocyte colony-stimulating factor
NEUPOGEN(R) (proper name--Filgrastim) is Amgen's registered trademark for
its recombinant-methionyl human granulocyte colony-stimulating factor ("G-
CSF"), a 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, a condition called neutropenia.
Myelosuppressive chemotherapy, one treatment option for individuals with
cancer, targets cell types which grow rapidly, such as tumor cells, neutrophils
and other types of blood cells. Providing NEUPOGEN(R) as an adjunct to
myelosuppressive chemotherapy can reduce the duration of neutropenia and
thereby reduce the potential for infection.
Severe chronic neutropenia is an example of disease-related neutropenia. In
severe chronic 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 severe chronic neutropenia.
Patients undergoing bone marrow transplantation are treated with NEUPOGEN(R)
to accelerate recovery of neutrophils following chemotherapy and bone marrow
infusion. NEUPOGEN(R) also has been shown to induce
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immature blood cells (progenitor cells or sometimes referred to as stem cells)
to migrate (mobilize) from the bone marrow into the blood circulatory system.
When these peripheral blood progenitor cells (PBPC) are collected from the
blood, stored and re-infused (transplanted) after high dose chemotherapy,
recovery of platelets, red blood cells and neutrophils is accelerated. PBPC
transplantation may be an alternative to autologous bone marrow transplantation
for some patients.
In the United States, 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.
Subsequently, the FDA approved NEUPOGEN(R) for additional indications: to
reduce the duration of neutropenia for patients with non-myeloid malignancies
undergoing myeloablative therapy followed by bone marrow transplantation; to
reduce the incidence and duration of neutropenia-related consequences in
symptomatic patients with congenital neutropenia, cyclic neutropenia or
idiopathic neutropenia (collectively, severe chronic neutropenia); for use in
mobilization of PBPC for stem cell transplantation; and to reduce the recovery
time of neutrophils and the duration of fever following chemotherapy treatment
in patients being treated for AML. In the EU, Canada and Australia, NEUPOGEN(R)
is marketed for the same indications.
The Company also markets NEUPOGEN(R) in Canada and Australia for the
treatment of neutropenia in HIV patients receiving antiviral and/or other
myelosuppressive medications. In October 1999, NEUPOGEN(R) was approved for use
in the EU as a supportive therapy to treat neutropenia in people with advanced
HIV infection. A trial for the treatment of neutropenia in HIV infected
patients was completed and a supplemental licensing application for approval of
this indication was submitted to the FDA in 1996. The FDA has raised concerns
about whether this submission is approvable; the Company remains in discussions
with the FDA and cannot predict the outcome of these discussions.
The Company has discontinued clinical trials investigating the potential
benefits of NEUPOGEN(R) for patients with severe pneumonia. In April 1999, the
Company announced that a phase 3 clinical trial in patients with multi-lobar
pneumonia did not demonstrate a statistically significant benefit. Clinical
trials investigating NEUPOGEN(R) as an adjunct to dose-intensified chemotherapy
in patients with various tumor types are ongoing.
The Company began selling NEUPOGEN(R) in the United States in February 1991
pursuant to a licensing agreement with Kirin-Amgen. Kirin markets GRAN(R), its
G-CSF product, in Japan, the People's Republic of China, Taiwan and Korea under
licensing agreements with Kirin-Amgen (see "Joint Ventures and Business
Relationships--Kirin Brewery Company, Limited"). In the EU, NEUPOGEN(R) is
commercialized by Amgen and F. Hoffmann-La Roche Ltd ("Roche") under a co-
promotion agreement (see "Joint Ventures and Business Relationships--F.
Hoffmann-La Roche Ltd"). In geographic areas of the world other than those
above, Roche markets NEUPOGEN(R) under licenses from Amgen and Kirin-Amgen (see
"Joint Ventures and Business Relationships--Kirin Brewery Company, Limited" and
"Joint Ventures and Business Relationships-- F. Hoffmann-La Roche Ltd").
For NEUPOGEN(R) sales information for the years ended December 31, 1999,
1998 and 1997, see Note 10 to the Consolidated Financial Statements.
Other products
INFERGEN(R) (proper name--Interferon alfacon-1) is Amgen's registered
trademark for its recombinant consensus interferon, a non-naturally occurring
protein that combines structural features of many interferon sub-types.
Interferons are natural proteins produced by the body which stimulate the
immune system to fight viral infections. Hepatitis C viral infection is a
potentially deadly disease that, if not treated, may lead to cirrhosis and
hepatocellular carcinoma, or liver cancer.
The Company began selling INFERGEN(R) in the United States in October 1997.
Amgen markets INFERGEN(R) for the treatment of adults with chronic hepatitis C
viral infection. INFERGEN(R) was initially approved for the treatment of newly
diagnosed or previously untreated patients and for a higher dose in patients
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who relapsed or failed to respond to initial interferon treatment. The duration
of treatment was 24 weeks for both groups of patients. In December 1999, the
FDA approved the extension of the duration of subsequent treatment from 24
weeks to 48 weeks. Subsequent treatment is an important part of interferon
therapy since many patients infected with the hepatitis C virus fail initial
treatment. In March 1999, Amgen received marketing approval for INFERGEN(R) for
the treatment of chronic hepatitis C viral infection from the Canadian
regulatory authorities.
In 1996, Amgen licensed to Yamanouchi Pharmaceutical Co., Ltd. of Japan
("Yamanouchi") the rights to develop, manufacture and commercialize Interferon
alfacon-1 for all indications around the world except in the United States and
Canada. Yamanouchi granted rights to the Company to co-develop and market
Interferon alfacon-1 in Japan, the People's Republic of China and Taiwan (see
"Joint Ventures and Business Relationships--Yamanouchi Pharmaceutical Co.,
Ltd.").
STEMGEN(R) (proper name--Ancestim) is Amgen's registered trademark for its
recombinant-methionyl human stem cell factor. STEMGEN(R), when used in
combination with NEUPOGEN(R), has been shown to induce immature blood cells
(progenitor cells or sometimes referred to as stem cells) to migrate (mobilize)
from the bone marrow into the blood circulatory system. When these peripheral
blood progenitor cells (PBPC) are collected from the blood, stored and re-
infused (transplanted) after high dose chemotherapy, recovery of platelets, red
blood cells and neutrophils is accelerated. PBPC transplantation may be an
alternative to autologous bone marrow transplantation for some patients. In
1999, STEMGEN(R) was approved for use in support of stem cell transplantation
by the regulatory authorities in Canada, Australia and New Zealand. Discussions
with other regulatory agencies are continuing. The Company is also
investigating the potential benefits of STEMGEN(R) for patients with aplastic
anemia in a phase 1/2 clinical trial.
Product Candidates
The Company focuses its research efforts on secreted protein and small
molecule human therapeutics, with particular emphasis on cancer, inflammation
and neurobiology. It concentrates its development efforts on human therapeutics
in the areas of hematology and oncology, bone and inflammatory disorders, and
neuroendocrine and neurodegenerative diseases (see "Factors That May Affect
Amgen--Product development").
Hematology and Oncology
Hematopoietic growth factors are proteins which influence growth, migration
and maturation of certain types of blood cells. Novel Erythropoiesis
Stimulating Protein ("NESP") stimulates the production of red blood cells. Data
from phase 3 clinical trials suggest that NESP may permit less frequent dosing
than Epoetin alfa in the treatment of anemia in patients with chronic renal
insufficiency and chronic renal failure. In December 1999, the Company filed
regulatory submissions for the use of NESP in patients with chronic renal
insufficiency and chronic renal failure in the United States and the EU. In
early 2000, the Company filed regulatory submissions for the use of NESP in the
same indications in Canada, Australia and New Zealand. In April 1999, the
Company announced that phase 2 clinical trials of NESP for the treatment of
anemia resulting from chemotherapy had been initiated.
The Company has entered into an agreement with Kirin to jointly develop NESP
through its joint venture, Kirin-Amgen (see "Joint Ventures and Business
Relationships--Kirin Brewery Company, Limited"). Amgen has been granted an
exclusive license by Kirin-Amgen to manufacture and market NESP in the United
States, all European countries, Canada, Australia, New Zealand, Mexico and all
Central and South American countries. Kirin has been granted similar rights by
Kirin-Amgen for Japan, the People's Republic of China, Taiwan, Korea and
certain other countries in Southeast Asia.
In March 1999, Amgen acquired the rights from PRAECIS PHARMACEUTICALS
INCORPORATED ("Praecis") to develop and commercialize abarelix-depot (see
"Joint Ventures and Business Relationships--
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PRAECIS PHARMACEUTICALS INCORPORATED"). Data from phase 2 clinical trials
suggest that abarelix-depot, a gonadotropin releasing hormone ("GnRH")
antagonist, may inhibit the action of endogenous GnRH on the pituitary gland
thereby reducing the production of testosterone in men and estrogen in women.
The reduction of testosterone or estrogen through the use of pharmaceuticals, a
practice known as hormonal therapy, may confer a therapeutic benefit to
patients with a number of diseases and medical conditions including prostate
cancer and endometriosis. Abarelix-depot is currently in phase 3 clinical
trials in patients with hormonally-responsive prostate cancer. Abarelix-depot
is also in a phase 2 clinical trial in patients with endometriosis, a painful
gynecologic condition resulting from abnormal growth of uterine tissue, usually
in the pelvic or abdominal area.
Another hematopoietic growth factor in development at Amgen is a sustained
duration version of G-CSF called SD/01. While NEUPOGEN(R) is indicated to
reduce the duration and severity of neutropenia, appropriate doses must be
administered in a timely manner to be most effective. SD/01 is being developed
to provide for less frequent dosing, possibly once-per-cycle of chemotherapy,
and thereby potentially improve compliance and patient satisfaction. In October
1999, the Company announced that a phase 3 clinical trial of SD/01 in breast
cancer patients receiving multiple cycles of chemotherapy had been initiated.
Soft tissue growth factors are believed to play a role in accelerating or
improving tissue regeneration and wound healing. Mucositis is a side effect
often experienced by patients undergoing radiation therapy and chemotherapy and
is characterized as the irritation or ulceration of the lining of the
gastrointestinal tract. Amgen currently is conducting research with
Keratinocyte Growth Factor ("KGF") as a treatment for mucositis. Phase 2
clinical trials of KGF in cancer patients suffering from mucositis are ongoing.
Bone and Inflammatory disorders
The inflammatory response is essential for defense against harmful
microorganisms and for the repair of damaged tissues. The failure of the body's
control mechanisms regulating inflammatory response occurs in conditions such
as rheumatoid arthritis, acute respiratory distress syndrome and asthma.
Interleukin-1 receptor antagonist (formerly known as "IL-1ra" and currently
referred to as "KINERET(TM)" (proper name--Anakinra)) and tumor necrosis factor
binding protein were two product candidates added to the Company's inflammation
research program through the acquisition of Synergen, Inc. ("Synergen") (see
"Joint Ventures and Business Relationships--Other business relationships").
In July 1999, the Company announced that a large, controlled phase 2
clinical trial of KINERET(TM) in combination with methotrexate demonstrated
benefit over methotrexate alone for patients with rheumatoid arthritis. In
December 1999, the Company filed a licensing application with the FDA for
KINERET(TM) for the treatment of rheumatoid arthritis.
In April 1999, the Company announced that a phase 2 clinical trial of a
second generation inhibitor of tumor necrosis factor, soluble tumor necrosis
factor-receptor type I ("sTNF-RI"), was initiated in patients with rheumatoid
arthritis.
Osteoprotegerin ("OPG") is implicated in the regulation of bone mass. Bone
mass is maintained in the body by the regulation of the competing activities of
bone-forming cells (osteoblasts) and bone resorbing cells (osteoclasts). Cancer
metastasis to bone causes bone destruction, leading to fractures and bone pain.
In preclinical studies, OPG has been shown to inhibit the osteoclast-mediated
bone destruction induced by invading cancer cells. Low bone mass is thought to
be a result of bone breaking down more quickly than it is formed. Osteoporosis
is characterized by low bone mass leading to fragile bones and increased
susceptibility to fractures. The Company's OPG program is in a phase 1 clinical
trial in healthy post-menopausal women.
Neuroendocrine and Neurodegenerative diseases
The Company is currently developing leptin, a protein produced by the
obesity gene. Leptin is made in fat cells and is believed to help regulate the
amount of fat stored by the body. In 1995, the Rockefeller University
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granted to the Company an exclusive license which allows the Company to develop
products based on the obesity gene. In October 1998, the Company announced the
results of an interim analysis of preliminary three-month clinical data from
two phase 2 clinical trials. This analysis revealed that there was no
statistically significant difference in weight loss between native leptin and
placebo for the study population as a whole. In April 1999, the Company
announced that development of native leptin for both obesity and diabetes was
being discontinued. The Company's leptin program now focuses on the development
of second generation leptin analogues. The leptin program is in phase 2
clinical trials in obese subjects.
Amgen entered into a license agreement with Progenitor, Inc. ("Progenitor")
which granted the Company certain exclusive rights for the development and
commercialization of products using Progenitor's leptin receptor technology.
Progenitor assigned its rights to the leptin receptor technology, including its
rights and obligations under the license agreement with Amgen, to Interneuron
Pharmaceuticals, Inc. ("Interneuron"). Amgen has entered into an amended and
restated license agreement with Interneuron pursuant to which Amgen has been
granted additional exclusive rights for the development and commercialization
of products using the leptin receptor technology.
Another focus of the Company's effort in endocrinology is in the area of
hyperparathyroidism ("HPT"). Primary HPT is a disorder that causes excessive
secretion of parathyroid hormone from the parathyroid gland, leading to
elevated serum calcium, called hypercalcemia. This disorder currently lacks
effective treatment other than surgery. Secondary HPT is commonly seen as a
result of kidney failure, affecting a majority of dialysis patients. Symptoms
of HPT include bone loss, muscle weakness, depression and forgetfulness. The
Company has entered into a license agreement with NPS Pharmaceuticals, Inc.
("NPS") for Amgen to develop and commercialize NPS's calcimimetic small
molecules based on NPS's proprietary calcium receptor technology for the
treatment of HPT. The Company is in separate phase 2 clinical trials for
primary and secondary HPT with a second generation calcimimetic compound.
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 and
peripheral nervous systems, nerve injury and trauma. Human clinical trials of
brain-derived neurotrophic factor ("BDNF"), are currently being conducted in
collaboration with Regeneron Pharmaceuticals, Inc. ("Regeneron") (see "Joint
Ventures and Business Relationships--Regeneron Pharmaceuticals, Inc."). In
January 1997, Amgen announced that a phase 3 clinical trial investigating
subcutaneous delivery of BDNF for the treatment of patients with amyotrophic
lateral sclerosis ("ALS") did not demonstrate clinical efficacy in the
endpoints measured in patients with this disease. Regeneron continues to
investigate subcutaneous administration of BDNF in a subset of ALS patients on
behalf of the collaboration with the Company. Amgen is currently conducting a
phase 2 clinical trial investigating intrathecal delivery of BDNF in patients
with ALS. On behalf of the collaboration with the Company, Regeneron is also
conducting clinical trials with Neurotrophin-3 ("NT-3") for the treatment of
chronic constipation.
Another neurotrophic factor the Company investigated was glial cell-line
derived neurotrophic factor ("GDNF"). In April 1999, the Company announced that
a phase 1/2 clinical trial of GDNF in Parkinson's disease failed to demonstrate
a statistically significant benefit and as a result, GDNF was being
discontinued from further development.
In 1997, Amgen acquired the rights from Guilford Pharmaceuticals Inc.
("Guilford") for a novel class of small molecule, orally-active, neurotrophic
agents called neuroimmunophilin compounds (see "Joint Ventures and Business
Relationships--Other business relationships"). The neuroimmunophilin compounds
are initially being developed to promote nerve regeneration and repair in
neurodegenerative disorders. In August 1999, Amgen announced that it had
initiated clinical trials in Europe. In January 2000, the Company announced
that a phase 1 clinical trial in the United States had been initiated.
Parkinson's disease is expected to be the first indication to be pursued in the
neuroimmunophilin program.
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Joint Ventures and Business Relationships
The Company generally intends to self-market its products. From time to
time, the Company may enter into joint ventures and other business
relationships to provide additional marketing and product development
capabilities in certain countries. In addition to internal research and
development efforts, the Company has acquired certain product and technology
rights and has established research and development collaborations. Amgen has
established the relationships described below and may establish others in the
future.
F. Hoffmann-La Roche Ltd
Amgen and Roche have entered into an agreement providing for the
commercialization of NEUPOGEN(R) (Filgrastim) in the EU. Under this agreement,
the companies collaborate in the EU on the commercialization and further
clinical development of the product, and Amgen has a majority share in the
related costs and profits from sales. Amgen has most of the responsibilities
for marketing, promotion, distribution and other key functions relating to
product sales, and the Company distributes the product in most EU countries
from its European Logistics Center in Breda, The Netherlands. Amgen and Roche
have also 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. Amgen and Roche are also collaborating on the development of a
second generation G-CSF product, SD/01, for the EU.
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 license. For a discussion of this matter, see Note 4
to the Consolidated Financial Statements, "Contingencies--Johnson & Johnson
arbitrations". 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 human erythropoietin as a human therapeutic for all uses
under a licensing agreement with Kirin-Amgen.
Kirin Brewery Company, Limited
The Company has a 50-50 joint venture (Kirin-Amgen) with Kirin. Kirin-Amgen,
which was formed in 1984, develops and commercializes certain of the Company's
and Kirin's technologies which have been transferred to this joint venture.
Kirin-Amgen has given exclusive licenses to Amgen and Kirin to manufacture and
market erythropoietin in the United States and Japan, respectively. Kirin-Amgen
has licensed to Johnson & Johnson rights to erythropoietin in certain
geographic areas of the world (see "--Johnson & Johnson"). 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-Amgen has
licensed to Kirin similar rights with respect to G-CSF in Japan, Taiwan and
Korea. Kirin markets recombinant human erythropoietin and recombinant-methionyl
human granulocyte colony-stimulating factor in the People's Republic of China
under a separate agreement. Kirin-Amgen and Roche have entered into an
agreement to commercialize NEUPOGEN(R) in certain territories not covered by
the various Amgen/Roche agreements (see "--F. Hoffmann-La Roche Ltd"). Under
this agreement, Roche markets NEUPOGEN(R) in these countries and pays a royalty
to Kirin-Amgen on these sales.
In 1996, Kirin-Amgen licensed to Amgen and Kirin the rights to develop and
market NESP. Amgen has been granted an exclusive license by Kirin-Amgen to
manufacture and market NESP in the United States, all European countries,
Canada, Australia, New Zealand, Mexico and all Central and South American
countries. Kirin has been licensed by Kirin-Amgen with similar rights for NESP
in Japan, the People's Republic of China, Taiwan, Korea and certain other
countries in Southeast Asia.
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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 negotiated rates. Included in
revenues from corporate partners in the Company's Consolidated Financial
Statements for the years ended December 31, 1999, 1998 and 1997, are $138.5
million, $121 million and $87.9 million, respectively, related to these
agreements.
In connection with its various license agreements with Kirin-Amgen, the
Company pays Kirin-Amgen royalties based on sales. During the years ended
December 31, 1999, 1998 and 1997, Kirin-Amgen earned royalties from Amgen of
$128.1 million, $105 million and $91.4 million, respectively, under such
agreements.
Yamanouchi Pharmaceutical Co., Ltd.
In 1996, Amgen licensed to Yamanouchi the rights to develop, manufacture and
commercialize Interferon alfacon-1 for the treatment of hepatitis C viral
infection and any additional indications around the world except in the United
States and Canada. Amgen markets Interferon alfacon-1 under the trademark
INFERGEN(R) in the United States and Canada. Amgen has earned and will earn
additional amounts if certain milestones are achieved by Yamanouchi and will
receive royalties on sales. Yamanouchi has granted to Amgen K.K., the Company's
Japanese subsidiary, certain co-development and co-promotion/co-marketing
rights in Japan and has granted to Amgen Greater China, Ltd., Amgen's
subsidiary in Hong Kong, certain co-development and co-promotion rights in the
People's Republic of China and Taiwan.
PRAECIS PHARMACEUTICALS INCORPORATED
In March 1999, Amgen entered into a collaboration with Praecis relating to
the commercialization of abarelix-depot. Amgen has been granted the exclusive
right to commercialize abarelix-depot for all indications, including prostate
cancer and endometriosis in the United States, Canada, Australia, Japan and
several secondary markets. Amgen will conduct and pay for certain research,
development and commercialization activities. In general, Praecis will receive
a transfer price and royalty based on a sharing of the resulting profits on
sales of abarelix products in the United States; Praecis will receive a royalty
on net sales of abarelix products in Amgen's territories outside of the United
States.
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. To
facilitate this collaboration, the Company and Regeneron formed Amgen-Regeneron
Partners, a 50-50 partnership. In addition, Regeneron licensed these potential
products to Amgen for development in certain other countries.
Other business relationships
In December 1994, the Company acquired Synergen, a biotechnology company.
With the acquisition of Synergen, Amgen principally added GDNF and Synergen's
inflammation program to its product candidate pipeline.
Synergen Clinical Partners, L.P. ("SCP"), the general partner of which was a
subsidiary of Synergen, was formed to fund development and commercialization of
KINERET(TM) in certain geographic areas. As a result of the acquisition of
Synergen, the general partner of SCP became a subsidiary of Amgen. In
connection with the settlement of certain litigation relating to Synergen and
SCP, Amgen acquired all of the limited partnership units of SCP and, pursuant
to the terms of the settlement, terminated SCP. Amgen may be required to pay
future amounts to the former limited partners that were members of the
plaintiff class, other members of the plaintiff class and their counsel if the
FDA should grant approval to market KINERET(TM) (as more specifically defined
in the related settlement agreement) and additional amounts if certain product
revenues are realized.
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In 1997, Amgen and Guilford entered into an agreement granting Amgen
worldwide rights for Guilford's neuroimmunophilin compounds, a novel class of
small molecule neurotrophic agents that may represent a new approach in the
treatment of neurodegenerative disorders. Under the terms of the agreement,
Amgen will receive worldwide rights to neuroimmunophilin compounds for all
human therapeutic and diagnostic applications. Amgen will conduct and pay for
all clinical development and manufacturing of products, market products
worldwide and pay royalties to Guilford on such sales. In connection with this
agreement, Amgen made an equity investment in Guilford.
Also in 1997, Amgen and SangStat Medical Corporation ("SangStat") entered
into a licensing agreement for the registration, marketing and distribution of
SangStat's proprietary CYCLOSPORINE product (proper name--Cyclosporine oral
solution), an immunosuppressive drug used in transplantation to prevent graft
rejection. Under the terms of the agreement, Amgen has exclusive rights to
market CYCLOSPORINE in Australia, New Zealand, the People's Republic of China
and Taiwan.
In 1998, Amgen entered into an agreement with The Liposome Company, Inc.
("TLC") to market TLC's product, ABELCET(R) (proper name--Amphotericin B Lipid
Complex Injection), in Australia and New Zealand. ABELCET(R) is a proprietary
drug developed and manufactured by TLC to treat severe, systemic fungal
infections which occur primarily in patients whose immune systems are
compromised, such as cancer patients undergoing chemotherapy, bone marrow
transplant ("BMT") recipients, solid organ transplant recipients and AIDS
patients.
Marketing
Amgen uses wholesale distributors of pharmaceutical products as the
principal means of distributing the Company's products to clinics, hospitals
and pharmacies. The Company monitors the financial condition of its larger
distributors and seeks to limit its credit exposure by setting appropriate
credit limits and requiring collateral from certain customers. Sales to two
large wholesalers accounted for more than 10% of total revenues for the years
ended December 31, 1999, 1998 and 1997. Sales to one of these wholesalers,
Bergen Brunswig Corporation, were $1,078 million, $856.2 million and $580.9
million for the years ended December 31, 1999, 1998 and 1997, respectively.
Sales to the other wholesaler, Cardinal Distribution, were $438.2 million,
$366.5 million and $333.8 million for the years ended December 31, 1999, 1998
and 1997, respectively.
Dialysis providers are primarily reimbursed for EPOGEN(R) by the federal
government through the End Stage Renal Disease Program ("ESRD Program") of
Medicare. The ESRD Program reimburses approved providers for 80% of allowed
dialysis costs; the remainder is paid by other sources, including Medicaid,
private insurance, and to a lesser extent, state kidney patient programs. The
ESRD Program reimbursement rate is established by Congress and is monitored by
the Health Care Financing Administration ("HCFA"). In 1997 and 1998, HCFA
implemented reimbursement changes that affected sales of EPOGEN(R). See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations--Product sales--EPOGEN(R) (Epoetin alfa)".
The Clinton administration has proposed a Medicare cost savings plan which
includes a provision for cutting Medicare reimbursement to dialysis providers
for EPOGEN(R) by 10%. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Financial Outlook". Changes in
coverage and reimbursement policies could have a material adverse effect on
EPOGEN(R) sales (see "Factors That May Affect Amgen--Reimbursement; Third party
payors").
NEUPOGEN(R) is reimbursed by both private and public payors, and changes in
coverage and reimbursement policies of these payors could have a material
adverse effect on sales of NEUPOGEN(R) (see "Factors That May Affect Amgen--
Reimbursement; Third party payors"). The Clinton administration has proposed a
reduction in the basis upon which Medicare reimburses for outpatient
prescription drugs, including NEUPOGEN(R). See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations--Financial
Outlook".
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In the EU, Amgen and Roche share commercialization responsibilities for
NEUPOGEN(R) under a co-promotion agreement (see "Joint Ventures and Business
Relationships--F. Hoffmann-La Roche Ltd"). NEUPOGEN(R) is principally
distributed to wholesalers and/or hospitals in all EU countries depending upon
the distribution practice for products in each country. Most patients receiving
NEUPOGEN(R) for approved indications are covered by government health care
programs. Generally, the use of NEUPOGEN(R) is affected by EU government
pressures on physician prescribing practices in response to ongoing government
initiatives to reduce health care expenditures, and to a lesser extent,
competition.
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.
INFERGEN(R) is marketed by the Company in the United States and Canada.
INFERGEN(R) is reimbursed through both private and public sources, with primary
reimbursement through private payors.
STEMGEN(R) is marketed by the Company directly to hospitals, pharmacies and
medical practitioners in Canada, Australia and New Zealand. Distribution is
handled by third party contractors.
Competition
Competition among biotechnology, pharmaceutical and other companies that
research, develop, manufacture or market pharmaceuticals is intense and is
expected to increase. See "Factors That May Affect Amgen--Competition". Some
competitors, principally large pharmaceutical companies, have greater clinical,
research, regulatory and marketing resources and experience than the Company,
particularly in the area of small molecule therapeutics. In addition, certain
specialized biotechnology firms have entered into cooperative arrangements with
major companies for development and commercialization of products, creating an
additional source of competition. The Company faces competition with respect to
products which it manufactures and markets from firms in the United States,
countries of the EU, Canada, Australia and elsewhere. Additionally, some of the
Company's competitors, including biotechnology and pharmaceutical companies,
are actively engaged in the research and development of products in areas where
the Company is also developing product candidates, as more fully discussed
below.
The introduction of new products or the development of new processes by
competitors or new information about existing products may result in product
replacements or price reductions, even for products protected by patents. In
addition, the timing of entry of a new product into the market can be an
important factor in determining the product's eventual success and
profitability. Early entry may have important advantages in gaining product
acceptance and market share. Accordingly, in some cases, the relative speed
with which the Company can develop products, complete the testing and approval
process and supply commercial quantities of the product to the market is
expected to be important to Amgen's competitive position. Competition among
pharmaceutical products approved for sale also may be based on, among other
things, patent position, product efficacy, safety, reliability, availability
and price.
A significant amount of research and development in the biotechnology
industry is conducted by small companies, academic institutions, governmental
agencies and other public and private research organizations. These entities
may seek patent protection and enter into licensing arrangements to collect
royalties for use of technology or for the sale of products they have
discovered or developed. Amgen also may face competition in its licensing or
acquisition activities from pharmaceutical companies and large biotechnology
companies that also seek to acquire technologies or product candidates from
these entities. Accordingly, the Company may have difficulty acquiring
technologies or product candidates on acceptable terms. Additionally, the
Company competes with these entities and with pharmaceutical and biotechnology
companies to attract and retain qualified scientific and technical personnel.
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Any products or technologies that are directly or indirectly successful in
addressing anemia could negatively impact the market for EPOGEN(R) or for NESP.
Aventis S.A. ("Aventis") is currently conducting clinical trials on gene-
activated erythropoietin for the treatment of anemia (see "Item 3. Legal
Proceedings--Transkaryotic Therapies and Aventis S.A. litigation"). In
addition, Alkermes, Inc. and Johnson & Johnson are currently conducting
clinical trials with a sustained delivery formulation of Epoetin alfa for the
treatment of anemia.
Similarly, any products or technologies that are directly or indirectly
successful in addressing 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) 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 CSF product, granulocyte
macrophage colony stimulating factor ("GM-CSF") and from the chemoprotectant,
amifostine. Potential future sources of competition include other G-CSF
products, GM-CSF products, FLT-3 ligand, myelopoietin, PGG-glucan,
promegapoietin, and progenipoietin, among others.
Chugai Pharmaceuticals Co., Ltd. ("Chugai") markets a G-CSF product in Japan
as an adjunct to chemotherapy and as a treatment for BMT patients. Chugai and
Aventis market a G-CSF product in certain EU countries as an adjunct to
chemotherapy and as a treatment in BMT settings. The Company believes that
Chugai has expanded its presence in Europe. Chugai, through its licensee,
AMRAD, markets this G-CSF product in Australia as an adjunct to chemotherapy
and as a treatment for BMT patients. Under an agreement with Amgen, Chugai is
precluded from selling its G-CSF product in the United States, Canada and
Mexico.
Immunex Corporation ("Immunex") markets two formulations of GM-CSF in the
United States for BMT and PBPC transplant patients and as an adjunct to
chemotherapy treatments for acute non-lymphocytic leukemia ("ANLL") and AML.
Immunex is also pursuing other indications for its GM-CSF product including use
in treating HIV-infected patients, other infectious diseases and as an adjunct
to chemotherapy outside the limited settings of ANLL and AML. Novartis AG
markets another GM-CSF product for use in BMT 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. Nartograstim, a modified G-CSF protein, is sold by Kyowa Hakko Kogyo
Co., Ltd. in Japan.
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 STEMGEN(R) and SD/01.
INFERGEN(R) competes with other interferons and related products, several of
which are in development or on the market. Schering-Plough Corporation and
Roche are major suppliers of interferons. (See "Item 3. Legal Proceedings--
INFERGEN(R) litigation"). The Company cannot predict the extent to which it
will maintain its market share or further penetrate this market. Interferon
Sciences, Inc. could be a potential competitor in this arena.
Abarelix-depot could face competition from products currently marketed by
TAP Pharmaceuticals, Inc., AstraZeneca PLC and Pharmacia & Upjohn, Inc. which
treat both prostate cancer and endometriosis. In addition, other products to
treat prostate cancer are currently being developed by ALZA Corporation, ASTA
Medica AG, Atrix Laboratories, Inc. and Takeda Chemical Industries, Ltd.
Many companies are developing products that promote wound healing, soft
tissue regeneration and chemoprotection. Companies such as Human Genome
Sciences, Inc., Genetics Institute, Inc., U.S. Bioscience, Inc./MedImmune, Inc.
and ALZA Corporation are currently among many companies that are developing
products which could be potential competitors for KGF.
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KINERET(TM) and sTNF-RI could face competition from a number of companies in
the inflammation arena, particularly for rheumatoid arthritis treatments.
Current anti-arthritic treatments include generic methotrexate and other
products marketed by Centocor, Inc./Johnson & Johnson, Immunex/American Home
Products Corporation ("AHP"), Merck & Co., Inc. ("Merck"), Monsanto Company,
Novartis AG, Sanofi-Synthelabo and G.D. Searle & Co./Pfizer Inc. In addition, a
number of companies have cytokine inhibitors in development including
Genentech, Inc./Roche, Genetics Institute, Inc., Inhale Therapeutic Systems
Inc., Knoll AG (a subsidiary of BASF AG), SmithKline Beecham Corporation and
Taisho Pharmaceutical Co., Ltd.
The OPG program could face competition from products currently marketed by
Eli Lilly and Company ("Eli Lilly"), Merck, AHP, Novartis AG, The Procter &
Gamble Company and Aventis for the treatment of osteoporosis. In addition,
other products to treat osteoporosis are currently being developed by Eli
Lilly, Roche, Novartis AG, Pfizer Inc. and SmithKline Beecham Corporation.
Many companies currently market or are believed to be developing obesity
treatments that could compete with the leptin program. Potential future
competitors include Millennium Pharmaceuticals, Inc. (in collaboration with
Roche), Neurogen Corporation (in collaboration with Pfizer Inc.), Bristol Myers
Squibb Company, Novartis AG, Eli Lilly and Merck. Knoll AG and Roche currently
market obesity treatments in various countries.
The calcimimetic program could face competition from products currently
marketed by Abbott Laboratories, Genzyme Corporation and Roche which treat
secondary HPT. In addition, other products to treat HPT are currently being
developed by Abbott Laboratories, Bone Care International, Inc. (a subsidiary
of the Lunar Corporation) and Chugai.
Several companies are developing neurotrophic factors that could compete
with BDNF, NT-3 or the neuroimmunophilin program. These companies include
Abbott Laboratories, Astra AB, Cephalon Inc., Genentech, Inc., Regeneron, SIBIA
Neurosciences, Inc./Merck and Vertex Pharmaceuticals Incorporated.
Research and Development
The Company's primary sources of new product candidates are internal
research and acquisition and licensing from third parties. Amgen's internal
research capabilities include an expertise in secreted protein therapeutics.
Additionally, the Company has emerging small molecule capabilities that include
combinatorial chemistry, biosystems and the use of high throughput screening to
potentially develop novel, orally available therapeutic product candidates.
Amgen's capabilities in these areas complement its human genome program;
however, Amgen has only recently entered the small molecule field (see "--
Competition"). The Company's human genome program may yield genes that both
lead to the development of secreted protein therapeutics and provide targets
for small molecules. The Company develops and invests in proteins, small
molecules, monoclonal antibodies and gene therapy vectors as forms of
therapeutic delivery. Research and development expenses for the years ended
December 31, 1999, 1998 and 1997 were $822.8 million, $663.3 million and $630.8
million, respectively.
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 (see
"Factors That May Affect Amgen--Regulatory matters").
In order to clinically test, manufacture and market products for therapeutic
use, Amgen must satisfy mandatory procedures and safety standards established
by various regulatory bodies. In the United States, the Federal Food, Drug and,
Cosmetic Act, as amended, and the regulations promulgated thereunder, and other
federal and state statutes and regulations govern, among other things, the
testing, manufacture, labeling, storage, record keeping, approval, advertising
and promotion of the Company's products on a product-by-product basis. Product
development and approval within this regulatory framework take a number of
years and
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involve the expenditure of substantial resources. After preclinical testing,
laboratory analysis and testing in animals, an investigational new drug
application is filed with the FDA to begin human testing. Typically, a three-
phase human clinical testing program is then undertaken. In phase 1, small
clinical trials are conducted to determine the safety of the product. In phase
2, clinical trials are conducted to assess safety, acceptable dose and gain
preliminary evidence of the efficacy of the product. In phase 3, clinical
trials are conducted to provide sufficient data for the statistically valid
proof of safety and efficacy. The time and expense required to perform this
clinical testing can vary and is substantial. No action can be taken to market
any therapeutic product in the United States until an appropriate marketing
application has been approved by the FDA. Even after initial FDA approval has
been obtained, further clinical trials may be required to provide additional
data on safety and effectiveness and are required to gain clearance for the use
of a product as a treatment for 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 or approval for other indications, limit uses or expose the
Company to product liability claims.
In addition to regulating and auditing human clinical trials, the FDA
regulates and inspects equipment and facilities used in the manufacturing of
such products prior to providing approval to market a product. If after
receiving clearance from the FDA, a material change is made in manufacturing
equipment, location or process, additional regulatory review may be required.
The Company also must adhere to current Good Manufacturing Practice and
product-specific regulations enforced by the FDA through its facilities
inspection program. The FDA conducts regular, periodic visits to re-inspect
equipment, facilities and processes following the initial approval. If, as a
result of these inspections, the FDA determines that the Company's equipment,
facilities or processes do not comply with applicable FDA regulations, the FDA
may seek civil, criminal, or administrative sanctions and/or remedies against
Amgen, including the suspension of the Company's manufacturing operations.
In the EU countries, Canada and Australia, regulatory requirements and
approval processes are similar in principle to those in the United States.
Additionally, depending on the type of drug for which approval is sought, there
are currently two potential tracks for marketing approval in the EU countries:
mutual recognition and the centralized procedure. These review mechanisms may
ultimately lead to approval in all EU countries, but each method grants all
participating countries some decision making authority in product approval.
The Company is also subject to various federal and state laws pertaining to
health care "fraud and abuse", including anti-kickback laws and false claims
laws. Anti-kickback laws make it illegal for a prescription drug manufacturer
to solicit, offer, receive or pay any remuneration in exchange for, or to
induce, the referral of business, including the purchase or prescription of a
particular drug. The federal government has published regulations that identify
"safe harbors" or exemptions for certain payment arrangements that do not
violate the anti-kickback statutes. The Company seeks to comply with the safe
harbors where possible. Due to the breadth of the statutory provisions and the
absence of guidance in the form of regulations or court decisions addressing
some of the Company's practices, it is possible that the Company's practices
might be challenged under anti-kickback or similar laws. False claims laws
prohibit anyone from knowingly and willingly presenting, or causing to be
presented for payment to third party payors (including Medicare and Medicaid)
claims for reimbursed drugs or services that are false or fraudulent, claims
for items or services not provided as claimed, or claims for medically
unnecessary items or services. Amgen's activities relating to the sale and
marketing of its products may be subject to scrutiny under these laws.
Violations of fraud and abuse laws may be punishable by criminal and/or civil
sanctions, including fines and civil monetary penalties, as well as the
possibility of exclusion from federal health care programs (including Medicare
and Medicaid). The Company believes its sales, marketing and other activities
comply with all such laws although there can be no assurance that the Company's
activities will not be subject to challenge for the reasons discussed above and
due to the broad scope of these laws and the increasing attention being given
to them by law enforcement authorities.
Since 1991, the Company has participated in the Medicaid rebate program
established by the Omnibus Budget Reconciliation Act of 1990, and under
amendments of that law that became effective in 1993, participation has
included extending comparable discounts under the Public Health Service ("PHS")
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pharmaceutical pricing program. Under the Medicaid rebate program, the Company
pays a rebate for each unit of its product reimbursed by Medicaid. The amount
of the rebate for each product is set by law as a minimum 15.1% of the average
manufacturer price ("AMP") of that product, or if it is greater, the difference
between AMP and the best price available from the Company to any customer. The
rebate amount also includes an inflation adjustment if AMP increases faster
than inflation. The PHS pricing program extends discounts comparable to the
Medicaid rebate to a variety of community health clinics and other entities
that receive health services grants from the PHS, as well as hospitals that
serve a disproportionate share of poor Medicare and Medicaid beneficiaries. The
rebate amount is recomputed each quarter based on the Company's reports of its
current average manufacturer price and best price for each of its products to
HCFA. The terms of the Company's participation in the program impose an
obligation to correct the prices reported in previous quarters, as may be
necessary. Any such corrections could result in an overage or underage in the
Company's rebate liability for past quarters, depending on the direction of the
correction. In addition to retroactive rebates (and interest, if any), if the
Company were found to have knowingly submitted false information to the
government, in addition to other penalties available to the government, the
statute provides for civil monetary penalties in the amount of $100,000 per
item of false information.
The Company also makes its products available to authorized users of the
Federal Supply Schedule ("FSS") of the General Services Administration. Since
1993, as a result of the Veterans Health Care Act of 1992 (the "VHC Act"),
federal law has required that product prices for purchases by the Veterans
Administration, the Department of Defense, Coast Guard and the PHS (including
the Indian Health Service) be discounted by a minimum of 24 percent off the AMP
to non-federal customers (the non-federal average manufacturer price, "non-
FAMP"). The Company's computation and report of non-FAMP is used in
establishing the price, and the accuracy of the reported non-FAMP may be
audited by the government under applicable federal procurement laws. Among the
remedies available to the government for infractions of these laws is
recoupment of any overages paid by FSS users during the audited years. In
addition, if the Company were found to have knowingly reported a false non-
FAMP, the VHC Act provides for civil monetary penalties of $100,000 per item
that is incorrect.
Amgen is also subject to regulation under the Occupational Safety and Health
Act, the Toxic Substances Control Act, the Resource Conservation and Recovery
Act and other current and potential future federal, state or local regulations.
The Company's research and development activities involve the controlled use of
hazardous materials, chemicals, biological materials and various radioactive
compounds. The Company believes that its procedures comply with the standards
prescribed by state and federal regulations; however, the risk of injury or
accidental contamination cannot be completely eliminated. Amgen's research and
manufacturing activities also are conducted in voluntary compliance with the
National Institutes of Health Guidelines for Recombinant DNA Research.
Additionally, the U.S. Foreign Corrupt Practices Act, to which the Company
is subject, prohibits corporations and individuals from engaging in certain
activities to obtain or retain business or to influence a person working in an
official capacity. It is illegal to pay, offer to pay, or authorize the payment
of anything of value to any foreign government official, government staff
member, political party or political candidate in an attempt to obtain or
retain business or to otherwise influence a person working in an official
capacity. The Company's present and future business has been and will continue
to be subject to various other laws and regulations.
Patents and Trademarks
Patents are very important to the Company in establishing proprietary rights
to the products it has developed or licensed. The patent positions of
pharmaceutical and biotechnology companies, including the Company, can be
uncertain and involve complex legal, scientific and factual questions. See
"Factors That May Affect Amgen--Intellectual property and legal matters".
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The Company has filed applications for a number of patents and has been
granted patents relating to its erythropoietin, G-CSF, consensus interferon and
various potential products. In the United States, the U.S. Patent and Trademark
Office (the "USPTO") has issued to the Company patents relating to
erythropoietin that generally cover DNA and host cells (issued in 1987);
processes for making erythropoietin (issued in 1995 and 1997); certain product
claims to erythropoietin (issued in 1996 and 1997); cells that make certain
levels of erythropoietin (issued in 1998); and pharmaceutical compositions of
erythropoietin (issued in 1999). These patents have varying expiration dates,
with the latest erythropoietin related patents expiring in 2015; all other
patents expire earlier. The USPTO has also issued to the Company patents
relating to aspects of DNAs, vectors, cells and processes relating to
recombinant G-CSF (issued in 1989); other aspects of DNAs, vectors, cells and
processes relating to recombinant G-CSF (issued in 1991); G-CSF polypeptides
(issued in 1996); methods of treatment using G-CSF polypeptides (issued in
1996); methods of enhancing bone marrow transplantation and treating burn
wounds (issued in 1997); methods for recombinant production of G-CSF (issued in
1998); and analogs of G-CSF (issued in 1999). The last to issue G-CSF patents
expire in 2014; all other patents expire earlier. Additionally, U.S. patents
pertaining to pegylated G-CSF (SD/01) expire in 2015. The patent relating to
erythropoietin for the EU expires in 2004. The patent relating to G-CSF for the
EU expires in 2006.
There can be no assurance that Amgen's patents or licensed patents will
afford legal protection against competitors or provide significant proprietary
protection or competitive advantage. In addition, there can be no assurance
that Amgen's patents or licensed patents will not be held invalid or
unenforceable by a court, or that Amgen's patents or licensed patents will not
be infringed or circumvented by others, or that others will not obtain patents
that the Company would need to license or circumvent. Competitors or potential
competitors may have filed patent applications or received patents, and may
obtain additional patents and proprietary rights relating to proteins, small
molecules, compounds or processes competitive with those of the Company.
Additionally, for certain of the Company's product candidates, competitors or
potential competitors may claim that their existing or pending patents prevent
the Company from commercializing such product candidates in certain
territories.
In general, the Company has obtained licenses from various parties which it
deems to be necessary or desirable for the manufacture, use or sale of its
products. These licenses generally require Amgen to pay royalties to the
parties on product sales. In addition, 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 will be
available for license on acceptable terms or at all. The Company is engaged in
various legal proceedings relating to certain of its patents. See "Item 3.
Legal Proceedings".
Trade secret protection for its unpatented confidential and proprietary
information is important to Amgen. To protect its trade secrets, the Company
generally requires its employees, material consultants, scientific advisors and
parties to collaboration and licensing agreements to execute confidentiality
agreements upon the commencement of employment, the consulting relationship or
the collaboration or licensing arrangement with the Company. There can be no
assurance, however, that others will not either develop independently the same
or similar information or obtain access to Amgen's proprietary information.
The Company has obtained U.S. registration of its EPOGEN(R), NEUPOGEN(R),
INFERGEN(R) and STEMGEN(R) trademarks. In addition, these trademarks have been
registered in other countries.
Manufacturing and Raw Materials
Amgen has manufacturing facilities which produce commercial quantities of
Epoetin alfa, NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon alfacon-1) and
STEMGEN(R) (Ancestim) (see "Item 2. Properties"). The Company additionally
supplies Epoetin alfa to Johnson & Johnson under a supply agreement and
utilizes an outside party to perform the filling process for such vials. There
can be no assurance that the Company will be able to accurately anticipate
future demand for Epoetin alfa, NEUPOGEN(R), INFERGEN(R) and STEMGEN(R) or
maintain adequate manufacturing capacity (see "Factors That May Affect Amgen--
Rapid growth").
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Certain raw materials necessary for the Company's commercial manufacturing
of its products are proprietary products of other companies, and in some cases,
such proprietary products are specifically cited in the Company's drug
application with the FDA such that they must be obtained from that specific,
sole source. The Company currently attempts to manage the risk associated with
such sole sourced raw materials by active inventory management. Amgen attempts
to remain apprised of the financial condition of its suppliers, their ability
to supply the Company's needs and the market conditions for these raw
materials. Also, certain of the raw materials required in the commercial
manufacturing of the Company's products are derived from biological sources.
The Company is investigating screening procedures with respect to certain
biological sources and alternatives to them. Raw materials may be subject to
contamination and/or recall. A material shortage, contamination and/or recall
could adversely impact or disrupt Amgen's commercial manufacturing of its
products.
Human Resources
As of December 31, 1999, the Company had approximately 6,400 employees, of
which approximately 3,400 were engaged in research and development,
approximately 1,200 were engaged in sales and marketing and approximately 1,800
were engaged in other activities. 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 good.
Executive Officers of the Registrant
The executive officers of the Company, their ages as of March 1, 2000 and
positions are as follows:
Mr. Gordon M. Binder, age 64, 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. Mr. Binder was elected
Chief Executive Officer in October 1988 and Chairman of the Board in July 1990.
Mr. Binder has announced that he intends to retire as Chief Executive Officer
on the day of the annual meeting of stockholders, May 11, 2000, and will retire
as Chairman of the Board and a director by December 31, 2000. Mr. Binder will
continue to provide certain services to the Company thereafter as a non-
executive officer employee of the Company.
Mr. Kevin W. Sharer, age 51, has served as a director of the Company since
November 1992. He also 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 Unocal Corporation. Mr.
Sharer will become the Company's Chief Executive Officer on the day of the
annual meeting of stockholders, May 11, 2000.
Mr. Stan M. Benson, age 48, has served as Senior Vice President, Sales and
Marketing, since joining the Company in June 1995. Prior to joining the
Company, Mr. Benson held a number of executive management positions at Pfizer
Inc., a pharmaceutical company, from 1987 to 1995.
Dr. Fabrizio Bonanni, age 53, has served as Senior Vice President, Quality
and Compliance, since joining the Company in April 1999. Prior to joining the
Company, Dr. Bonanni had been the Corporate Vice President for
Regulatory/Clinical Affairs for Baxter International ("Baxter") from December
1997 to April 1999, Corporate Vice President, Quality System from November 1994
to December 1997, and has held a variety of quality, regulatory and
manufacturing positions with Baxter in Europe and in the U.S. since 1974.
Mr. Marc M.P. de Garidel, age 41, became Vice President, Controller and
Chief Accounting Officer in December 1998, having served as Senior Director,
Financial Planning & Analysis, since July 1998. Previously,
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Mr. de Garidel was the Vice President, Finance and Administration for Amgen
Europe, from April 1995 to July 1998. Prior to joining the Company, he was
Finance Director for Eli Lilly and Company, a pharmaceutical company, in
Germany from 1992 to April 1995.
Ms. Kathryn E. Falberg, age 39, became Senior Vice President, Finance and
Chief Financial Officer in December 1998, having served as Vice President,
Finance, Chief Financial Officer and Chief Accounting Officer since May 1998
and as Vice President, Corporate Controller and Chief Accounting Officer from
June 1997 to May 1998. Previously, Ms. Falberg had served as Vice President and
Treasurer from December 1996 to June 1997, and as Treasurer since joining the
Company in January 1995. Prior to joining the Company, Ms. Falberg had been
Vice President, Chief Financial Officer and Treasurer for Applied Magnetics
Corporation, a computer components manufacturer, since May 1993 and had been
its Treasurer from 1991 to May 1993.
Dr. Dennis M. Fenton, age 48, became Executive Vice President, Operations,
in March 2000, having served as Senior Vice President, Operations, since
January 1995, as Senior Vice President, Sales and Marketing, from August 1992
to January 1995, and 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. Edward F. Garnett, age 52, became Vice President, Human Resources, in
October 1994, having served as Director, Sales and Marketing Operations, since
March 1994. Previously, Mr. Garnett had served as Director, Logistics, from
April 1990 to March 1994.
Dr. George Morstyn, age 49, became Senior Vice President, Development and
Chief Medical Officer in October 1999, having served as Vice President, Product
Development and Chief Medical Officer since June 1998 and as Vice President,
Clinical Development and Chief Medical Officer from September 1993 to June
1998. Dr. Morstyn previously served as Vice President, Clinical and Medical
Affairs from July 1991 to September 1993.
Mr. Steven M. Odre, age 50, became Senior Vice President, General Counsel
and Secretary in March 2000, having served as Vice President, Intellectual
Property, and Associate General Counsel since October 1988, and as Associate
General Counsel from March 1988 to October 1988. From May 1986 to March 1988,
he served as Director of Intellectual Property.
Dr. Lawrence M. Souza, age 46, became Senior Vice President, Research, in
May 1997, having served as Vice President, Exploratory Research, since October
1988. Previously, Dr. Souza had served as Director, Exploratory Research, from
February 1986 to October 1988.
Geographic Area Financial Information
For financial information concerning the geographic areas in which the
Company operates, see Note 10 to the Consolidated Financial Statements.
Factors That May Affect Amgen
Amgen operates in a rapidly changing environment that involves a number of
risks, some of which are beyond our control. The following discussion
highlights some of these risks and others are discussed elsewhere herein.
Product development
We intend to continue an aggressive product development program. Successful
product development in the biotechnology industry is highly uncertain, and very
few research and development projects produce a
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commercial product. Product candidates that appear promising in the early
phases of development, such as in early human clinical trials, may fail to
reach the market for a number of reasons, such as:
-- the product candidate did not demonstrate acceptable clinical trial
results even though it demonstrated positive preclinical trial results
-- the product candidate was not effective in treating a specified
condition or illness
-- the product candidate had harmful side effects on humans
-- the necessary regulatory bodies (such as the FDA) did not approve our
product candidate for an indicated use
-- the product candidate was not economical for us to manufacture it
-- other companies or people have or may have proprietary rights to our
product candidate (e.g. patent rights) and will not let us sell it on
reasonable terms, or at all
-- the product candidate is not cost effective in light of existing
therapeutics
Several product candidates have failed at various stages in the product
development process, including BDNF, Megakaryocyte Growth and Development
Factor (MGDF) and GDNF. For example, in 1997, we announced the failure of BDNF
(for the treatment of ALS by subcutaneous injection administration route),
because the product candidate, as administered, did not produce acceptable
clinical results in a specific indication after a phase 3 trial, even though
BDNF had progressed successfully through preclinical and earlier clinical
trials. Of course, there may be other factors that prevent us from marketing a
product. We cannot guarantee we will be able to produce commercially successful
products. Further, clinical trial results are frequently susceptible to varying
interpretations by scientists, medical personnel, regulatory personnel,
statisticians and others which may delay, limit or prevent further clinical
development or regulatory approvals of a product candidate. Also, the length of
time that it takes for us to complete clinical trials and obtain regulatory
approval for product marketing has in the past varied by product and by the
indicated use of a product. We expect that this will likely be the case with
future product candidates and we cannot predict the length of time to complete
necessary clinical trials and obtain regulatory approval. See "--Regulatory
matters."
Regulatory matters
Our research, preclinical testing, clinical trials, facilities,
manufacturing, pricing and sales and marketing are subject to extensive
regulation by numerous state and federal governmental authorities in the U.S.,
such as the FDA and the Health Care Financing Administration ("HCFA"), as well
as by foreign countries and the European Union (the "EU"). Currently, we are
required in the U.S. and in foreign countries to obtain approval from those
countries' regulatory authorities before we can market and sell our products in
those countries. The success of our current and future products will depend in
part upon obtaining and maintaining regulatory approval to market products in
approved indications in the U.S. and foreign markets. In our experience, the
regulatory approval process is a lengthy and complex process, both in the U.S.
and in foreign countries, including countries in the EU. Even if we obtain
regulatory approval, both our manufacturing processes and our marketed products
are subject to continued review. Later discovery of previously unknown problems
with our products or manufacturing processes may result in restrictions on such
products or manufacturing processes, including withdrawal of the products from
the market. Our failure to obtain necessary approvals, or the restriction,
suspension or revocation of any approvals, or our failure to comply with
regulatory requirements could prevent us from manufacturing or selling our
products which could have a material adverse effect on us and our results of
operations.
Reimbursement; Third party payors
In both domestic and foreign markets, sales of our products are dependent,
in part, on the availability of reimbursement from third party payors such as
state and federal governments (for example, under Medicare and
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Medicaid programs in the U.S.) and private insurance plans. In certain foreign
markets, the pricing and profitability of our products generally are subject to
government controls. In the U.S., there have been, and we expect there will
continue to be, a number of state and federal proposals that limit the amount
that state or federal governments will pay to reimburse the cost of drugs. In
addition, we believe the increasing emphasis on managed care in the U.S. has
and will continue to put pressure on the price and usage of our products, which
may impact product sales. Further, when a new therapeutic is approved, the
reimbursement status and rate of such a product is uncertain. In addition,
current reimbursement policies for existing products may change at any time.
Changes in reimbursement or our failure to obtain reimbursement for our
products may reduce the demand for, or the price of, our products, which could
result in lower product sales or revenues which could have a material adverse
effect on us and our results of operations. For example, in the U.S. the use of
EPOGEN(R) in connection with treatment for end stage renal disease is funded
primarily by the U.S. federal government. Therefore, as in the past, EPOGEN(R)
sales could be affected by future changes in reimbursement rates or the basis
for reimbursement by the federal government. For example, in early 1997, HCFA
instituted a reimbursement change for EPOGEN(R) which adversely affected the
Company's EPOGEN(R) sales, until the policies were revised. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations--Product sales--EPOGEN(R) (Epoetin alfa)."
Guidelines
Government agencies promulgate regulations and guidelines directly
applicable to us and to our products. However, professional societies, practice
management groups, private health/science foundations and organizations
involved in various diseases may also publish, from time to time, guidelines or
recommendations to the health care and patient communities. These organizations
may make recommendations that affect a patient's usage of certain therapies,
drugs or procedures, including our products. Recommendations of government
agencies or these other groups/organizations may relate to such matters as
usage, dosage, route of administration and use of concomitant therapies.
Recommendations or guidelines that are followed by patients and health care
providers could result in, among other things, decreased use of our products
which could have a material adverse effect on our results of operations. In
addition, the perception by the investment community or stockholders that such
recommendations or guidelines will be followed could adversely affect
prevailing market prices for our common stock.
Intellectual property and legal matters
The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and often involve complex legal, scientific and factual
questions. To date, there has emerged no consistent policy regarding breadth of
claims allowed in such companies' patents. Accordingly, the patents and patent
applications relating to our products, product candidates and technologies may
be challenged, invalidated or circumvented by third parties and might not
protect us against competitors with similar products or technology. For certain
of our product candidates, there are third parties who have patents or pending
patents that they may claim prevent us from commercializing these product
candidates in certain territories. Patent disputes are frequent and can
preclude commercialization of products. We are currently, and in the future may
be, involved in patent litigation. The results of such litigation could subject
us to competition and/or significant liabilities, could require us to enter
into third party licenses or could cause us to cease using the technology or
product in dispute. In addition, we cannot guarantee that such licenses will be
available on terms acceptable to us.
The Company is currently involved in arbitration proceedings with Ortho
Pharmaceutical Corporation (which has assigned its rights under the Product
License Agreement to Ortho Biotech, Inc.), a subsidiary of Johnson & Johnson
("Johnson & Johnson"), relating to a license granted by the Company to Johnson
& Johnson for sales of Epoetin alfa in the U.S. for all human therapeutic uses
except dialysis. See Note 4 to the Consolidated Financial Statements,
"Contingencies--Johnson & Johnson arbitrations".
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Competition
We operate in a highly competitive environment. Our principal competitors
are pharmaceutical and biotechnology companies. Some of our competitors, mainly
large pharmaceutical corporations, have greater clinical, research, regulatory
and marketing resources than we do. In addition, some of our competitors may
have technical or competitive advantages over us for the development of
technologies and processes and may acquire technology from academic
institutions, government agencies and other private and public research
organizations. We cannot guarantee that we will be able to produce or acquire
rights to products that have commercial potential. Even if we achieve
successful product commercialization, we cannot guarantee that one or more of
our competitors will not achieve product commercialization earlier than we do,
obtain patent protection that dominates or adversely affects our activities, or
have significantly greater marketing capabilities.
Fluctuations in operating results
Our operating results may fluctuate from period to period for a number of
reasons. In budgeting our operating expenses, some of which are fixed in the
short term, we assume that revenues will continue to grow. Accordingly, even a
relatively small revenue shortfall may cause a period's results to be below our
expectations. A revenue shortfall could arise from any number of factors, such
as:
-- lower than expected demand for our products
-- changes in the government's or private payor's reimbursement policies
for our products
-- changes in wholesaler buying patterns
-- increased competition from new or existing products
-- fluctuations in foreign currency exchange rates
-- changes in our product pricing strategies
Of course, there may be other factors that affect the Company's revenues in
any given period.
Rapid growth
We have an aggressive growth plan that includes substantial and increasing
investments in research and development and facilities. Our plan has a number
of risks, such as:
-- the need to generate higher revenues to cover a higher level of
operating expenses
-- the need to attract and assimilate a large number of new employees
-- the need to manage complexities associated with a larger and faster
growing organization
-- the need to accurately anticipate demand for the products we
manufacture and maintain adequate manufacturing capacity
Of course, there may be other risks and we cannot guarantee that we will be
able to successfully manage these or other risks.
Stock price volatility
Our stock price, like that of other biotechnology companies, is highly
volatile. Our stock price may be affected by, among other things, clinical
trial results and other product-development announcements by us or our
competitors, regulatory matters, announcements in the scientific and research
community, intellectual property and legal matters, changes in reimbursement
policies or medical practices or broader industry and market trends unrelated
to our performance. In addition, if our revenues or earnings in any period fail
to meet the investment community's expectations, there could be an immediate
adverse impact on our stock price.
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Item 2. PROPERTIES
Amgen's principal executive offices and a majority of its administrative,
manufacturing and research and development facilities are located in thirty-
seven buildings in Thousand Oaks, California. Thirty-three of the buildings are
owned and four are leased. Adjacent to these buildings are facilities that are
under construction and additional property for future expansion. The Thousand
Oaks, California facilities include manufacturing plants licensed by various
regulatory bodies that produce commercial quantities of Epoetin alfa,
NEUPOGEN(R) (Filgrastim), INFERGEN(R) (Interferon alfacon-1) and STEMGEN(R)
(Ancestim). NESP can also be produced in commercial quantities in one of these
plants, and the Company plans to obtain licenses from various regulatory bodies
for its manufacture in this facility.
Amgen owns two buildings and leases six buildings in Boulder, Colorado,
housing research facilities and a manufacturing plant that can produce
commercial quantities of KINERET(TM). In 1999, the Company completed
construction of a manufacturing complex in Longmont, Colorado, that produces
commercial quantities of Epoetin alfa. The plants in Boulder and Longmont are
in the process of obtaining approval by various regulatory bodies. Amgen also
plans on using the Longmont facility to produce commercial quantities of NESP.
The Company has acquired approximately 159 acres of undeveloped land adjacent
to the Longmont site to accommodate future expansion.
Elsewhere in North America, the Company owns a distribution center in
Louisville, Kentucky, and leases a research facility and administrative offices
in Canada, an administrative office in Washington, D.C. and five regional sales
offices in the U.S. The Company also owns land in Cambridge, Massachusetts,
where a research facility is currently being constructed.
Outside North America, the Company has a manufacturing facility in Juncos,
Puerto Rico, and a European packaging and distribution center in Breda, The
Netherlands, which have been licensed by various regulatory bodies. The Company
leases facilities in thirteen European countries, Australia, Japan, Taiwan and
the People's Republic of China for administration, marketing and research and
development.
Amgen believes that its current facilities plus anticipated additions are
sufficient to meet its needs for the next several years.
Item 3. LEGAL PROCEEDINGS
Certain of the Company's legal proceedings are discussed below and in the
Note 4 to the Consolidated Financial Statements, "Contingencies". While it is
impossible to predict accurately or to determine the eventual outcome of these
matters, the Company believes that the outcome of these proceedings will not
have a material adverse effect on the annual financial statements of the
Company.
Biogen litigation
On March 10, 1995, Biogen, Inc. ("Biogen") filed suit in the United States
District Court for the District of Massachusetts alleging infringement by the
Company of certain claims of U.S. Patent No. 4,874,702 (the " '702 Patent"),
relating to vectors for expressing cloned genes. Biogen alleges that Amgen has
infringed its patent by manufacturing and selling NEUPOGEN(R). On March 28,
1995, Biogen filed an amended complaint further alleging that the Company is
also infringing the claims of two additional patents allegedly assigned to
Biogen, U.S. Patent No. 5,401,642 (the " '642 Patent") and U.S. Patent No.
5,401,658 (the " '658 Patent"), relating to vectors, methods for making vectors
and expressing cloned genes. The amended complaint seeks injunctive relief,
unspecified compensatory damages and treble damages. On April 24, 1995, the
Company answered Biogen's amended complaint, denying its material allegations
and pleading counterclaims for declaratory judgment of non-infringement, patent
invalidity and unenforceability. The Court exerted jurisdiction over claims 9
and 17 of the '702 Patent, and dismissed all claims and counterclaims relating
to any other claims of the '702 Patent. The Court has issued a final claim
construction order that essentially limits the
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Biogen patent claims to a single particular type of vector. The judge has ruled
that, to be covered by claim 1 of the '702 Patent (the claim that forms the
crux of the asserted claims), a plasmid vector must contain the entire DNA
sequence as represented in Figure 6 of the '702 Patent, as well as at least one
endonuclease recognition site inserted at the converted HaeIII site at 73.1% of
bacteriophage lambda or at another site downstream of HaeIII, said endonuclease
recognition site being within 300 base pairs of the HincII site at -33, and
prior to any sequences of lambda DNA downstream of the HaeIII site. On November
17, 1999, a hearing was held on Amgen's motion for summary judgment on non-
infringement under the doctrine of equivalents and the judge orally ruled that
Amgen does not literally infringe although there has been no order issued. As
of yet there has been no determination as to non-infringement under the
doctrine of equivalents. In addition, the following Amgen motions have been
filed and are still pending before the court: summary judgment of invalidity of
the certain claims of the '702 and '658 Patents based on prior public uses of
the claimed subject matter; motion for partial interpretation of the claims at
issue; motion to dismiss the lawsuit in its entirety based on Biogen's lack of
standing to bring the lawsuit in view of Biogen's lack of ownership of the
patents-in-suit; motion to dismiss for lack of subject matter jurisdiction and
standing in view of Biogen's lack of necessary ownership right in the patents-
in-suit. Both parties have submitted claim briefs with the court. Discovery in
the case is substantially completed. A trial date has not been set.
In a separate matter, on July 30, 1997, Biogen filed a complaint in the
United States District Court for the District of Massachusetts in Boston
alleging that Amgen infringes claims 9 and 17 of the '702 Patent, and the '642
Patent and the '658 Patent by making and using the claimed subject matter in
the United States in the manufacture of INFERGEN(R), the Company's consensus
interferon product. On September 17, 1997, Amgen responded to the complaint by
filing a motion to dismiss the case in its entirety due to Biogen's lack of
standing to bring the lawsuit in view of Biogen's lack of ownership of the
patents-in-suit. Amgen also filed a motion for summary judgment of patent
invalidity of particular claims of the patents-in-suit due to abandonment of
the invention. The Court has ordered the Company to file an answer to Biogen's
complaint but has stayed all discovery in this matter until certain discovery
in the NEUPOGEN(R) matter described above is completed. The Company has filed a
motion to dismiss the complaint on the grounds that the Court lacks
jurisdiction over the matter as Biogen lacks the necessary ownership rights to
afford it standing. A trial date has not been set.
INFERGEN(R) litigation
On December 3, 1996, Schering-Plough Corporation ("Schering") filed suit in
the U.S. District Court for the District of Delaware (the "Delaware Court")
against the Company alleging infringement of U.S. Patent No. 4,530,901 (the
" '901 Patent") by the manufacture and use of INFERGEN(R). The complaint seeks
unspecified damages and injunctive relief. Biogen has been added as a plaintiff
in the Delaware action. On July 30, 1998, the Delaware Court entered an order
construing the meaning of the claims of the 901 Patent. The Delaware Court
limited the scope of the claims to include DNAs that encode only "an immature,
fused, and/or incomplete form" of Interferon-alpha-1. On February 3, 1999, the
Delaware Court entered judgment of noninfringement in favor of Amgen that
INFERGEN(R) does not infringe the 901 Patent. Schering and Biogen have appealed
and the appeal was argued in December 1999. A decision on the appeal is
pending.
Genentech litigation
On October 16, 1996, Genentech, Inc. ("Genentech") filed suit in the United
States District Court for the Northern District of California seeking an
unspecified amount of compensatory damages, treble damages and injunctive
relief on its U.S. Patent No.'s 4,704,362, 5,221,619 and 4,342,832 (the " '362,
'619 and '832 Patents"), relating to vectors for expressing cloned genes and
the methods for such expression. Genentech alleges that Amgen has infringed its
patents by manufacturing and selling NEUPOGEN(R). On December 2, 1996, Amgen
was served with this lawsuit. On January 21, 1997, the Company answered the
complaint and asserted counterclaims relating to invalidity and non-
infringement of the patents-in-suit. On February 10, 1997, Genentech served
Amgen with a reply to the counterclaim and an additional counterclaim asserting
U.S. Patent
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No. 5,583,013 (the " '013 Patent"), issued December 10, 1996, seeking relief
similar to that sought for the '362, '619 and '832 Patents. On March 31, 1997,
Amgen answered this pleading and asserted counterclaims relating to invalidity
and non-infringement of the '013 Patent. At a hearing held on May 29, 1998, the
parties stipulated to: (i) the dismissal with prejudice of Genentech's first
claim for patent infringement against Amgen with respect to the '832 Patent, as
alleged in Genentech's complaint filed October 16, 1996 and (ii) dismissal with
prejudice of Amgen's first, second, third and fourth claims for relief with
respect to the '832 Patents as alleged in Amgen's answer to complaint and
counterclaims filed on January 21, 1997. The judge issued a final claim
construction ruling interpreting the '362, '619 and '013 Patent claims which,
among other things, essentially limited the claim term "control region" to DNA
taken from a single operon and not constructed from control elements derived
from various operons. It may not be constructed portion-by-portion from
multiple operons. In light of the judge's departure from the bench, the case
has been re-assigned to a new judge, and is re-commencing after having been
stayed. On February 18, 2000, Amgen filed a motion to amend its answer to
allege inequitable conduct. Discovery is ongoing.
Transkaryotic Therapies and Aventis S.A. litigation
On April 15, 1997, Amgen filed suit in the United States District Court in
Boston, Massachusetts against Transkaryotic Therapies, Inc. ("TKT") and Hoechst
Marion Roussel, Inc. ("HMR"--now Aventis S.A.) alleging infringement of several
U.S. patents owned by Amgen that claim an erythropoietin product and processes
for making erythropoietin. The suit seeks an injunction preventing the
defendants from making, importing, using or selling erythropoietin in the U.S.
On July 9, 1997, the court denied TKT's motion to dismiss the lawsuit on the
pleadings. On April 15, 1998, the court issued an order granting the
defendants' motion for summary judgment of non-infringement on the grounds that
defendants' activities to date were protected by the clinical trial exemption.
The court also ruled that the action would be administratively closed to be re-
opened upon motion of either party for good cause shown. In June 1999, TKT and
HMR filed a motion to reopen the case with which Amgen concurred. On October 7,
1999, Amgen filed an amended complaint which added two additional patents to
the litigation. Defendants' amended answer asserts that all five of the
patents-in-suit are not infringed, are invalid or are unenforceable due to
inequitable conduct. Discovery by both sides was completed in 1999. Summary
judgment motions have been filed by both parties. TKT and HMR's motion for
summary judgment of invalidity of three of the patents was denied on January
18, 2000. Amgen's motion for summary judgment of infringement and validity on
three of the patents and defendants' motion for non-infringement are pending
decision by the court. Also pending is Amgen's motion for summary judgment of
no inequitable conduct. Trial is set for April 2000.
FoxMeyer Health Corporation
On January 10, 1997, FoxMeyer Health Corporation, now known as Avatex
Corporation ("Avatex"), filed suit (the "FoxMeyer Lawsuit") in the District
Court of Dallas County, Dallas, Texas, alleging that defendant McKesson
Corporation ("McKesson") defrauded Avatex, misused confidential information
received from Avatex about subsidiaries of Avatex (FoxMeyer Corporation and
FoxMeyer Drug Corporation, collectively the "FoxMeyer Subsidiaries"), and
attempted to monopolize the market for pharmaceutical and health care product
distribution by attempting to injure or destroy FoxMeyer Subsidiaries. The
Company is named as one of twelve "Manufacturer Defendants" alleged in Counts
1, 2 and 3 ("Counts 1-3") to have conspired with McKesson in doing, among other
things, the above and (i) inducing Avatex to refrain from seeking other
suitable purchasers for the FoxMeyer Subsidiaries and (ii) causing Avatex to
believe that McKesson was serious about purchasing Avatex's assets at fair
value, when in fact, McKesson was not. The Manufacturer Defendants and McKesson
(hereinafter referred to, collectively, as the "Defendants") are also alleged
to have intentionally and tortiously interfered with a number of business
expectancies and opportunities and to have disparaged Avatex. The complaint
seeks from the Defendants compensatory damages of at least $400 million and
punitive damages in an unspecified amount, as well as Avatex's costs and
attorney's fees. The Defendants had intervened in an action that was brought by
the Chapter 7 Trustee of the FoxMeyer Subsidiaries (the "Trustee") in the
Federal Bankruptcy Court in Delaware that sought to enjoin the Foxmeyer
Lawsuit. On
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September 17, 1999, Amgen entered into a settlement agreement with the Trustee
settling and releasing all claims asserted by the Trustee against Amgen in the
FoxMeyer Lawsuit. Similarly, on December 30, 1999, Amgen entered into a
settlement agreement with Avatex settling and releasing all claims asserted by
Avatex against Amgen in the FoxMeyer Lawsuit. Amounts paid by Amgen to settle
the foregoing lawsuits were not material.
Securities litigation
On August 7, 1998, two substantially related class action complaints were
filed against the Company and certain of its current and former officers in the
United States District Court for the Central District of California and in the
California Superior Court for the County of Ventura (the "Securities
Litigation"). The actions were filed by the same law firm on behalf of
different named plaintiffs. The plaintiffs in both actions seek to represent
the same class of investors who purchased Amgen common stock between January
23, 1997 and August 11, 1997 (the alleged "Class Period"). Both complaints
allege that the market price of the Company's common stock was artificially
inflated during the Class Period as a result of alleged misrepresentations made
to the investing public. The complaints allege that Amgen and several of its
current and former senior executives issued false statements regarding: (i) the
demand for and sales growth of two of Amgen's products, EPOGEN(R) and
NEUPOGEN(R); (ii) an arbitration proceeding between Amgen and Johnson & Johnson
regarding entitlement to millions of dollars in "spillover" sales of EPOGEN(R)
and (iii) Amgen's 1996 fourth quarter and 1997 first and second quarter
results.
In October 1998, the Company obtained a stay of the state court action and,
in February 1999, filed a motion to dismiss the federal action. In June 1999,
before the motion to dismiss was decided, the parties entered into a memorandum
of understanding regarding settlement of the Securities Litigation. On February
17, 2000, the parties filed an amended stipulation of settlement in the federal
court. On February 18, 2000, the federal court entered an order preliminarily
approving the settlement and providing for notice. The order provides for
certification of a settlement class and for notice of the contemplated
settlement to the members of the settlement class. The settlement provides
generally for a settlement of $1 million to be distributed among eligible
members of the settlement class who purchased shares of the Company's common
stock during the Class Period and later sold such stock at a net loss, and who
file proofs of claim as prescribed in the notice. The settlement contemplates
that the named plaintiffs and members of the settlement class will release
Amgen and the named defendants from certain claims and that the Securities
Litigation will be dismissed with prejudice. The settlement is subject to final
court approval.
Johnson & Johnson arbitrations
The Company is engaged in arbitration proceedings with one of its licensees.
See Note 4 to the Consolidated Financial Statements, "Contingencies--Johnson &
Johnson arbitrations".
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, 1999.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the
symbol AMGN. As of March 1, 2000, there were approximately 14,000 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 utilize any earnings
for development of the Company's business and for repurchases of its common
stock. The Company's Board of Directors approved a two-for-one split of the
common stock effected in the form of a 100 percent stock dividend on
outstanding stock distributed on November 19, 1999, to stockholders of record
on November 5, 1999.
The following table sets forth, for the fiscal periods indicated, the range
of high and low closing sales prices (adjusted for the two-for-one split) of
the common stock as quoted on The Nasdaq Stock Market for the years 1999 and
1998:
<TABLE>
<CAPTION>
High Low
--------- ---------
<S> <C> <C>
1999
4th Quarter.......................................... $64 7/8 $37 27/32
3rd Quarter.......................................... 43 25/32 29 1/2
2nd Quarter.......................................... 40 26 5/32
1st Quarter.......................................... 39 17/32 26 9/64
1998
4th Quarter.......................................... $26 7/32 $17 17/64
3rd Quarter.......................................... 19 29/32 15 7/32
2nd Quarter.......................................... 16 11/16 13 61/64
1st Quarter.......................................... 15 13/32 11 25/32
</TABLE>
26
<PAGE>
Item 6. SELECTED FINANCIAL DATA
(in millions, except per share data)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues:
Product sales(1)............. $3,042.8 $2,514.4 $2,219.8 $2,088.2 $1,818.6
Other revenues............... 297.3 203.8 181.2 151.6 121.3
Total revenues(1).......... 3,340.1 2,718.2 2,401.0 2,239.8 1,939.9
Research and development
expenses...................... 822.8 663.3 630.8 528.3 451.7
Selling, general and
administrative expenses....... 654.3 515.4 483.8 470.6 418.4
Legal (award) assessment(2).... (49.0) (23.0) 157.0 -- --
Net income(1).................. 1,096.4 863.2 644.3 679.8 537.7
Diluted earnings per
share(1)(2)................... 1.02 0.82 0.59 0.61 0.48
Cash dividends declared per
share......................... -- -- -- -- --
<CAPTION>
At December 31,
----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Total assets................... $4,077.6 $3,672.2 $3,110.2 $2,765.6 $2,432.8
Long-term debt................. 223.0 223.0 229.0 59.0 177.2
Stockholders' equity........... 3,023.5 2,562.2 2,139.3 1,906.3 1,671.8
</TABLE>
- --------
(1) Due to Year 2000 contingency planning in the fourth quarter of 1999, the
Company offered extended payment terms on limited shipments of EPOGEN(R)
and NEUPOGEN(R) to certain wholesalers. These Year 2000 related sales
totaled $45 million, or $0.02 per share. The Company expects sales to be
reduced by approximately the same amount during the first quarter of 2000.
If these Year 2000 related sales and the reduction in the potential
spillover liabilities in 1999 (see Note 2 below) had not occurred, diluted
earnings per share in 1999 would have been $0.05 less than the reported
amount.
(2) Includes spillover liability reductions of $49 million, or $0.03 per share,
and $23 million, or $0.01 per share, related to reduced uncertainty for
potential spillover liabilities to Johnson & Johnson in 1999 and 1998,
respectively, and a legal assessment of $157 million, or $0.09 per share,
related to the arbitration proceedings with Johnson & Johnson in 1997 (see
Note 4 to the Consolidated Financial Statements).
27
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The Company had cash, cash equivalents and marketable securities of $1,333
million at December 31, 1999, compared with $1,276 million at December 31,
1998. Cash provided by operating activities has been and is expected to
continue to be the Company's primary source of funds. In 1999, operations
provided $1,075.3 million of cash compared with $1,041.5 million in 1998.
Capital expenditures totaled $304.2 million in 1999 compared with $407.8
million in 1998. The Company anticipates spending approximately $450 million to
$550 million in 2000 on capital projects and equipment to expand the Company's
global operations.
The Company receives cash from the exercise of employee stock options. In
1999, employee stock option exercises and their related tax benefits provided
$400.4 million of cash compared with $453.7 million in 1998. Proceeds from the
exercise of employee stock options and their related tax benefits have varied
and are expected to continue to 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.
The Company has a stock repurchase program primarily to reduce the dilutive
effect of its employee stock option and stock purchase plans. In 1999, the
Company repurchased 27.1 million shares of its common stock at a total cost of
$1,024.7 million, and in 1998, the Company repurchased 57.4 million shares of
common stock at a cost of $912.1 million. In October 1999, the Board of
Directors authorized the Company to repurchase up to an additional $2 billion
of common stock through December 31, 2000, replacing the remaining amount
authorized in October 1998. At December 31, 1999, $1,648.3 million was
available for stock repurchases. The Company expects to repurchase fewer shares
in 2000 than in 1999 if stock prices are similar to the closing price on
December 31, 1999.
To provide for financial flexibility and increased liquidity, the Company
has established several sources of debt financing. As of December 31, 1999, the
Company had $223 million of unsecured debt securities outstanding. These
unsecured debt securities consisted of: 1) $100 million of debt securities that
bear interest at a fixed rate of 6.5% and mature in 2007 that were issued in
December 1997 under a $500 million debt shelf registration (the "Shelf"), 2)
$100 million of debt securities that bear interest at a fixed rate of 8.1% and
mature in 2097 and 3) $23 million of debt securities that bear interest at a
fixed rate of 6.2% and mature in 2003. Under the Shelf, all of the remaining
$400 million of debt securities available for issuance may be offered under the
Company's medium-term note program.
The Company's sources of debt financing also include a commercial paper
program which provides for short-term borrowings up to an aggregate face amount
of $200 million. As of December 31, 1999, commercial paper with a face amount
of $100 million was outstanding. These borrowings had maturities of less than
two months and had effective interest rates averaging 6%. In addition, the
Company has an unsecured $150 million credit facility that expires on May 28,
2003. This credit facility supports the Company's commercial paper program. As
of December 31, 1999, no amounts were outstanding under this line of credit.
The primary objectives for the Company's investment portfolio are liquidity
and safety of principal. Investments are made to achieve the highest rate of
return to the Company, consistent with these two objectives. The Company's
investment 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 invests its excess
cash in securities with varying maturities to meet projected cash needs.
The Company believes that existing funds, cash generated from operations and
existing sources of debt financing are adequate to satisfy its working capital
and capital expenditure requirements for the foreseeable future, as well as to
support its stock repurchase program. However, the Company may raise additional
capital from time to time.
28
<PAGE>
Results of Operations
Product sales
Product sales were $3,042.8 million in 1999, an increase of $528.4 million
or 21% over the prior year. In 1998, product sales were $2,514.4 million, an
increase of $294.6 million or 13% over the prior year. Quarterly product sales
volume is influenced by a number of factors including underlying demand and
wholesaler inventory management practices. Due to Year 2000 contingency
planning in the fourth quarter of 1999, the Company offered extended payment
terms on limited shipments of EPOGEN(R) and NEUPOGEN(R) to certain wholesalers.
This Year 2000 wholesaler stocking totaled approximately $16 million for
EPOGEN(R) and $29 million for NEUPOGEN(R). The Company expects sales of
EPOGEN(R) and NEUPOGEN(R) to be reduced by approximately the same amounts
during the first quarter of 2000 (see "--Financial Outlook"). The Company
believes that any additional wholesaler or end user stockpiling of the
Company's products beyond the shipments with extended payment terms was not
material.
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $1,759.1 million in 1999, an increase of $377.1 million
or 27% over the prior year. In 1998, EPOGEN(R) sales were $1,382 million, an
increase of $221.3 million or 19% over the prior year. These increases were
primarily due to the administration of higher doses and the continuing growth
in the U.S. dialysis patient population. The administration of higher doses of
EPOGEN(R) was principally due to dialysis providers managing more patients into
the hematocrit range of 33 to 36 percent as recommended by the Dialysis
Outcomes Quality Initiative ("DOQI") and by changes in reimbursement announced
in March and June 1998 by the Health Care Financing Administration ("HCFA"),
discussed below, as well as the use of hemoglobin instead of hematocrit to
measure red blood cell volume.
In September 1997, HCFA implemented changes (the "HCFA Policy Changes") to
its reimbursement policy for EPOGEN(R) that had been set out in a May 1997
program memorandum. Prior to the HCFA Policy Changes, fiscal intermediaries
under contract with HCFA were authorized to pay reimbursement claims for
patients whose hematocrits exceeded 36 percent, the top of the suggested target
hematocrit range in the product's labeling, if deemed medically justified.
Under the HCFA Policy Changes, medical justification was not accepted for
payment of claims of hematocrits that exceeded 36 percent and, if the current
month's hematocrit was greater than 36 percent and the patient's hematocrit
exceeded 36.5 percent on an historical 90-day "rolling average" basis,
reimbursement for the current month would be denied in full. Beginning in the
second quarter of 1997, the Company experienced a decline in the growth rate of
EPOGEN(R) sales as dialysis providers attempted to lower hematocrits by
lowering or withholding EPOGEN(R) doses in order to avoid or minimize claim
denials under the HCFA Policy Changes. In March 1998, HCFA announced the easing
of restrictions on reimbursement that had been instituted under the HCFA Policy
Changes. In June 1998, HCFA announced that it was replacing the previous
policies (September and March) with new guidelines.
In March 1998, HCFA issued a program memorandum with two revisions to the
HCFA Policy Changes. The first revision provided that, for a month in which the
three month "rolling average" hematocrit exceeds 36.5 percent, HCFA would pay
the lower of 100 percent of the actual dosage billed for that month, or
80 percent of the prior month's allowable EPOGEN(R) dosage. The second revision
re-established authorization to make payment for EPOGEN(R) when a patient's
hematocrit exceeded 36 percent when accompanied by documentation establishing
medical necessity.
Following its announcement in June 1998, HCFA issued a program memorandum in
July 1998 (the "July Program Memorandum"), with new reimbursement guidelines,
which replaced the previous program memoranda cited above. (As noted in the
July Program Memorandum, it may be discarded after one year.) The July Program
Memorandum stated that pre-payment review of claims would be eliminated and
fiscal intermediaries should conduct post-payment reviews of those dialysis
providers with an atypical number of patients with hematocrit levels above a
90-day "rolling average" of 37.5 percent. Additionally, HCFA stated
29
<PAGE>
that it would encourage dialysis providers to maintain a hematocrit level
within the range of 33 to 36 percent as recommended by DOQI. HCFA also stated
in its July Program Memorandum that it planned to develop a national policy for
medical justification for patients whose hematocrits should be maintained over
36 percent. In the interim, physicians were to document and provide medical
justification for patients whose hematocrits need to be maintained over 36
percent.
NEUPOGEN(R) (Filgrastim)
Worldwide NEUPOGEN(R) sales were $1,256.6 million in 1999, an increase of
$140 million or 13% over the prior year. This increase was primarily due to the
growth in demand worldwide within the cancer chemotherapy markets, the effect
of higher prices in the U.S. and the impact of additional sales related to
Year 2000 contingency planning noted previously. In 1998, worldwide NEUPOGEN(R)
sales were $1,116.6 million, an increase of $60.9 million or 6% over the prior
year. This increase was primarily due to growth in demand within the U.S.
cancer chemotherapy market and the effect of higher prices in the U.S.
Other product sales
Other product sales primarily consist of INFERGEN(R) (Interferon alfacon-1).
INFERGEN(R) sales were $26.2 million in 1999, an increase of $10.4 million or
66% over the prior year. In 1998, the first full year INFERGEN(R) was on the
market, sales were $15.8 million, an increase of $12.4 million or 365% over the
prior year. INFERGEN(R) was launched in October 1997 for the treatment of
chronic hepatitis C virus infection. There are other treatments, including
combination therapy, for this infection against which INFERGEN(R) competes. The
Company cannot predict the extent to which it will maintain its share or
further penetrate this market.
Cost of sales
Cost of sales as a percentage of product sales was 13.2%, 13.7% and 13.6%
for 1999, 1998 and 1997, respectively.
Research and development
In 1999, research and development expenses increased $159.5 million or 24%
over the prior year. This increase was primarily due to product licensing and
development costs related to the collaboration with PRAECIS PHARMACEUTICALS
INCORPORATED and higher staff-related costs necessary to support ongoing
product development activities. In 1998, research and development expenses
increased $32.5 million or 5% over the prior year. This increase was primarily
due to higher clinical, preclinical and occupancy costs partially offset by
lower staff-related and product licensing costs.
Selling, general and administrative
In 1999, selling, general and administrative ("SG&A") expenses increased
$138.9 million or 27% over the prior year primarily due to higher staff-related
costs, outside marketing expenses and consulting fees as the Company prepared
for anticipated new product launches. In 1998, SG&A expenses increased $31.6
million or 7% over the prior year primarily due to higher staff-related costs,
outside marketing expenses and occupancy costs. These increases were partially
offset by lower European marketing costs and lower expenses related to the
Johnson & Johnson spillover arbitration.
Legal award/assessment
Included in 1999 and 1998 were credits of $49 million and $23 million,
respectively, which reflected reduced uncertainty for the Company's potential
spillover liabilities to Johnson & Johnson. During 1997, the Company recorded a
charge of $157 million relating to a spillover arbitration award to Johnson &
Johnson. See Note 4 to the Consolidated Financial Statements, "Contingencies--
Johnson & Johnson arbitrations".
30
<PAGE>
Interest and other income
In 1999, interest and other income increased $42.6 million or 93% over the
prior year. In 1998, interest and other income decreased $26.9 million or 37%
over the prior year. This decrease was primarily due to the write-downs of
certain non-current assets, primarily cost method equity investments, partially
offset by a gain realized on the sale of stock in an unaffiliated company. The
increase in 1999 was principally due to the absence of such write-downs.
Income taxes
The Company's effective tax rate was 30%, 29.5% and 25.2% for 1999, 1998 and
1997, respectively. The tax rate in all three years reflected the tax benefits
from the sale of products manufactured in the Company's Puerto Rico
manufacturing facility. The 1999 and 1998 tax rates were higher as a result of
higher pretax income combined with a provision in the federal tax law which
took effect in 1998 that caps tax benefits associated with the Company's Puerto
Rico operations at the 1995 income level. In addition, the 1997 tax rate was
lower due to reduced pretax income resulting from the legal assessment recorded
in the third quarter of 1997 (see "--Legal award/assessment") without a
corresponding reduction in tax benefits related to the Company's Puerto Rico
operations.
Foreign currency transactions
The Company has a program to manage certain portions of its exposure to
fluctuations in foreign currency exchange rates arising from international
operations. The Company generally hedges certain of its assets and liabilities
with foreign currency forward contracts, which typically mature within one to
three months. The Company uses foreign currency option contracts and forward
contracts which generally expire within 12 months to hedge certain anticipated
future sales and expenses. At December 31, 1999, outstanding foreign currency
option and forward contracts totaled $37.4 million and $119.7 million,
respectively.
Year 2000
The Year 2000 problem (the "Year 2000 Problem" or "Year 2000") was to have
resulted from computer programs and devices that did not differentiate between
the year 1900 and the year 2000 because they were written using two digits
rather than four to define the applicable year; accordingly, computer systems
that have time-sensitive calculations potentially would not properly recognize
the year 2000. This could have resulted in system failures or miscalculations
causing disruptions of the Company's operations, including, without limitation,
manufacturing, distribution, clinical development, research and other business
activities. The Year 2000 Problem potentially affected the Company across its
worldwide locations and within substantially all of its business activities.
The Company believes that as a result of its Year 2000 remediation and
planning programs, the Year 2000 Problem has not, as of February 22, 2000, had
a material adverse effect on the operations or financial results of the
Company. As of December 31, 1999, the Company estimates that it had incurred
approximately $43 million in its Year 2000 efforts, including without
limitation, internal staff costs, outside consulting fees and computer systems
upgrades; approximately one-third of this amount has been capital expenditures.
The Company does not expect that any future expenditures to address the Year
2000 Problem will be material. The statements set forth herein concerning the
Year 2000 Problem which are not historical facts are forward-looking statements
and there can be no guarantee that any estimates or other forward-looking
statements will be achieved and actual results could differ significantly from
those contemplated.
Financial Outlook
If the sales to wholesalers related to Year 2000 contingency planning (see
"Results of Operations--Product sales") had not occurred, the Company would
expect the EPOGEN(R) sales growth rate in 2000 to be
31
<PAGE>
in the mid-teens. The Company believes that increases in the U.S. dialysis
patient population and average doses will continue to grow EPOGEN(R) sales in
the near term. As the average hematocrit has risen, the rate of dose growth has
slowed and the Company expects this trend to continue in the future. Patients
receiving treatment for end stage renal disease are covered primarily under
medical programs provided by the federal government. Therefore, EPOGEN(R) sales
may also be affected by future changes in reimbursement rates or a change in
the basis for reimbursement by the federal government.
In their fiscal year 2001 budget, the Clinton administration has proposed a
Medicare cost savings plan which includes a provision for cutting Medicare
reimbursement of EPOGEN(R) by 10%. This proposal will be addressed during the
federal government's fiscal year 2001 budget process. The Company believes the
proposal, if enacted, would primarily affect dialysis providers that use
EPOGEN(R) and it is difficult to predict its impact on Amgen.
If the sales to wholesalers related to Year 2000 contingency planning (see
"Results of Operations--Product sales") had not occurred, the Company would
expect the NEUPOGEN(R) sales growth rate in 2000 to be in the high single
digits. Future NEUPOGEN(R) sales growth is dependent primarily upon further
penetration of existing markets, the effects of competitive products and the
timing and nature of additional indications for which the product may be
approved. NEUPOGEN(R) usage is expected to continue to be affected by cost
containment pressures from governments and private insurers on health care
providers worldwide. In addition, reported NEUPOGEN(R) sales will continue to
be affected by changes in foreign currency exchange rates. In both domestic and
foreign markets, sales of NEUPOGEN(R) are dependent, in part, on the
availability of reimbursement from third party payors such as governments (for
example, Medicare and Medicaid programs in the U.S.) and private insurance
plans. Therefore, NEUPOGEN(R) sales may also be affected by future changes in
reimbursement rates or changes in the bases for reimbursement.
In their fiscal year 2001 budget, the Clinton administration has proposed a
reduction in the basis upon which Medicare reimburses for outpatient
prescription drugs from the current 95% of average wholesale price ("AWP") to a
proposed 83% of AWP. This proposal would impact reimbursement of NEUPOGEN(R).
The Company believes that this new recommendation, if enacted, would primarily
affect customers that use NEUPOGEN(R) and it is difficult to predict its impact
on Amgen.
INFERGEN(R) (Interferon alfacon-1) was launched in October 1997 for the
treatment of chronic hepatitis C virus infection. There are other treatments,
including combination therapy, for this infection against which INFERGEN(R)
competes. The Company cannot predict the extent to which it will maintain its
share or further penetrate this market.
In 2000, SG&A expenses are expected to significantly increase as the Company
continues to prepare for anticipated new product launches.
If the sales to wholesalers related to Year 2000 contingency planning (see
"Results of Operations--Product sales") and the benefit from reduced
uncertainty related to potential spillover liabilities to Johnson & Johnson
(see "Results of Operations--Legal award/assessment") had not occurred, in
2000, the Company would expect the growth rates of total product sales and
earnings per share to be in the low double digits.
Taking into account the Year 2000 wholesaler stocking that actually occurred
in 1999 (see "Results of Operations--Product sales"), the Company expects that
in 2000, EPOGEN(R) sales growth will be in the low-teens, that NEUPOGEN(R)
sales growth will be a mid single-digit rate, that total product sales growth
will be in the high single digits and that earnings per share will be in a
range of $1.05 to $1.07. Estimates of future product sales, operating expenses
and earnings per share are necessarily speculative in nature and are difficult
to predict with accuracy.
Except for the historical information contained herein, the matters
discussed herein are by their nature forward-looking. Investors are cautioned
that forward-looking statements or projections made by the Company,
32
<PAGE>
including those made in this document, are subject to risks and uncertainties
that may cause actual results to differ materially from those projected.
Reference is made in particular to forward-looking statements regarding product
sales, earnings per share and expenses. Amgen operates in a rapidly changing
environment that involves a number of risks, some of which are beyond the
Company's control. Future operating results and the Company's stock price may
be affected by a number of factors, including, without limitation: (i) the
results of preclinical and clinical trials; (ii) regulatory approvals of
product candidates, new indications and manufacturing facilities; (iii)
reimbursement for Amgen's products by governments and private payors;
(iv) health care guidelines and policies relating to Amgen's products; (v)
intellectual property matters (patents) and the results of litigation; (vi)
competition; (vii) fluctuations in operating results and (viii) rapid growth of
the Company. These factors and others are discussed herein and in the sections
appearing under the heading "Item 1. Business--Factors That May Affect Amgen",
which sections are incorporated herein by reference.
Legal Matters
The Company is engaged in arbitration proceedings with one of its licensees.
For a discussion of these matters, see Note 4 to the Consolidated Financial
Statements.
33
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest income earned on the Company's investment portfolio is affected by
changes in the general level of U.S. interest rates. The Company's short-term
borrowings effectively bear interest at variable rates and therefore, changes
in U.S. interest rates affect interest expense incurred thereon. The Company
has reduced this exposure to interest rate changes by entering into an interest
rate swap agreement that effectively changes interest expense incurred on a
portion of its short-term borrowings to a fixed rate. Changes in interest rates
do not affect interest expense incurred on the Company's long-term borrowings
because they all bear interest at fixed rates. The following tables provide
information about the Company's financial instruments that are sensitive to
changes in interest rates. For the Company's investment portfolio and debt
obligations, the tables present principal cash flows and related weighted-
average interest rates by expected maturity dates. Additionally, the Company
has assumed its available-for-sale debt securities, comprised primarily of
corporate debt instruments and treasury securities, are similar enough to
aggregate those securities for presentation purposes. For the interest rate
swap, the tables present the notional amount and weighted-average interest
rates by contractual maturity date. The notional amount is used to calculate
the contractual cash flows to be exchanged under the contract.
Interest Rate Sensitivity
Principal Amount by Expected Maturity as of 12/31/98
Average Interest Rate
(Dollars in millions)
<TABLE>
<CAPTION>
Fair Value
1999 2000 2001 2002 2003 Thereafter Total 12/31/98
------ ------ ------ ----- ----- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale debt
securities............. $341.5 $524.3 $244.2 $65.1 $71.9 -- $1,247.0 $1,266.2
Interest rate........... 6.1% 5.7% 5.9% 6.6% 6.7% --
Commercial paper........ $100.0 -- -- -- -- -- $ 100.0 $ 100.0
Interest rate........... 5.4% -- -- -- -- --
Long-term debt
(including current
portion)............... $ 6.0 -- -- -- $23.0 $200.0 $ 229.0 $ 255.0
Interest rate........... 5.5% -- -- -- 6.2% 7.3%
Interest rate swap
related to commercial
paper issuances:
Pay fixed/receive
variable............... -- $ 50.0 -- -- -- -- $ 50.0 $ (0.2)
Avg. pay rate........... -- 5.3% -- -- -- --
Avg. receive rate....... -- 5.0% -- -- -- --
</TABLE>
Interest Rate Sensitivity
Principal Amount by Expected Maturity as of 12/31/99
Average Interest Rate
(Dollars in millions)
<TABLE>
<CAPTION>
Fair Value
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
------ ------ ------ ----- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale debt
securities............. $376.8 $721.8 $177.7 $17.0 $5.0 -- $1,298.3 $1,293.6
Interest rate........... 5.6% 6.4% 6.5% 6.0% 5.6% --
Commercial paper........ $100.0 -- -- -- -- -- $ 100.0 $ 100.0
Interest rate........... 6.4% -- -- -- -- --
Long-term debt.......... -- -- -- $23.0 -- $200.0 $ 223.0 $ 216.6
Interest rate........... -- -- -- 6.2% -- 7.3%
Interest rate swap
related to commercial
paper issuances:
Pay fixed/receive
variable............... $ 50.0 -- -- -- -- -- $ 50.0 $ 0.3
Avg. pay rate........... 5.3% -- -- -- -- --
Avg. receive rate....... 6.0% -- -- -- -- --
</TABLE>
34
<PAGE>
The Company is exposed to equity price risks on the marketable portion of
equity securities included in its portfolio of investments entered into for the
promotion of business and strategic objectives. These investments are generally
in small capitalization stocks in the biotechnology industry sector. The
Company typically does not attempt to reduce or eliminate its market exposure
on these securities. A 35% adverse change in equity prices would result in a
decrease of approximately $32 million and $21 million in the fair value of the
Company's available-for-sale equity securities at December 31, 1999 and 1998,
respectively.
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 DISCLOSURES
None.
35
<PAGE>
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 2000 Annual Meeting to
be filed with the Securities and Exchange Commission within 120 days of
December 31, 1999 (the "Proxy Statement"). For information concerning the
executive officers of the Company, see "Item 1. Business--Executive Officers of
the Registrant".
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 and Exchange Commission.
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.
36
<PAGE>
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:
<TABLE>
<CAPTION>
Page
Number
----------
<S> <C>
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, 1999............................. F-2
Consolidated Balance Sheets at December 31, 1999 and 1998.......... F-3
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 1999................. F-4
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1999............................. F-5
Notes to Consolidated Financial Statements......................... F-6 - F-20
</TABLE>
(a)2. Index to Financial Statement Schedules
The following Schedule is filed as part of this Form 10-K Annual Report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
II Valuation Accounts................................................... F-21
</TABLE>
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
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation as amended.(17)
3.2 Amended and Restated Bylaws.(25)
3.3 Certificate of Amendment of Restated Certificate of Incorporation.(25)
3.4 Certificate of Amendment of Certificate of Designations of Series A
Junior Participating Preferred Stock.(25)
4.1 Indenture dated January 1, 1992 between the Company and Citibank N.A.,
as trustee.(8)
4.2 First Supplement to Indenture, dated February 26, 1997 between the
Company and Citibank N.A., as trustee.(14)
4.3 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, as supplemented, establishing a series of securities "8-
1/8% Debentures due April 1, 2097."(16)
4.4 8-1/8% Debentures due April 1, 2097.(16)
4.5 Form of stock certificate for the common stock, par value $.0001 of
the Company.(17)
4.6 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, dated as of January 1, 1992, as supplemented by the First
supplemental Indenture, dated as of February 26, 1997, each between
the Company and Citibank, N.A., as Trustee, establishing a series of
securities entitled "6.50% Notes Due December 1, 2007".(19)
4.7 6.50% Notes Due December 1, 2007 described in Exhibit 4.6.(19)
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
4.8 Corporate Commercial Paper--Master Note between and among Amgen Inc.,
as Issuer, Cede & Co., as nominee of The Depository Trust Company and
Citibank, N.A. as Paying Agent.(22)
10.1+ Company's Amended and Restated 1991 Equity Incentive Plan.(25)
10.2+ Sixth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated April 1, 1996.(24)
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 Amended and Restated Employee Stock Purchase Plan.(12)
10.8 Research, Development Technology Disclosure and License Agreement PPO,
dated January 20, 1986, by and between the Company and Kirin Brewery
Co., Ltd.(4)
10.9 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)
10.10 Assignment and License Agreement, dated October 16, 1986, between the
Company and Kirin-Amgen, Inc. (with certain confidential information
deleted therefrom).(5)
10.11 G-CSF European License Agreement, dated December 30, 1986, between
Kirin-Amgen, Inc. and the Company (with certain confidential
information deleted therefrom).(5)
10.12 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)
10.13+ Company's Amended and Restated 1988 Stock Option Plan.(12)
10.14+ Company's Amended and Restated Retirement and Savings Plan.(12)
10.15 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.(6)
10.16 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).(7)
10.17 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.(9)
10.18*+ Amgen Inc. Supplemental Retirement Plan (As Amended and Restated
Effective November 1, 1999).
10.19 Promissory Note of Mr. Kevin W. Sharer, dated June 4, 1993.(10)
10.20+ Amended and Restated Amgen Performance Based Management Incentive
Plan.(25)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.21 Credit Agreement, dated as of May 28, 1998, among Amgen Inc., the
Borrowing Subsidiaries named therein, the Banks named therein,
Citibank, N.A., as Issuing Bank, and Citicorp USA, Inc., as
Administrative Agent.(23)
10.22 Promissory Note of Mr. George A. Vandeman, dated December 15,
1995.(11)
10.23 Promissory Note of Mr. George A. Vandeman, dated December 15,
1995.(11)
10.24*+ Agreement between Amgen Inc. and Dr. N. Kirby Alton, dated October 11,
1999.
10.25+ Amendment No. 1 to the Company's Amended and Restated Retirement and
Savings Plan.(12)
10.26+ Seventh Amendment to the Amgen Retirement and Savings Plan as Amended
and Restated effective April 1, 1996.(25)
10.27+ Amendment Number 2 to the Company's Amended and Restated Retirement
and Savings Plan dated April 1, 1996.(15)
10.28+ Amgen Inc. Change of Control Severance Plan effective as of October
20, 1998.(24)
10.29 Preferred Share Rights Agreement, dated February 18, 1997, between
Amgen Inc. and American Stock Transfer and Trust Company, Rights
Agent.(13)
10.30+ First Amendment, effective January 1, 1998, to the Company's Amended
and Restated Employee Stock Purchase Plan.(18)
10.31+ Third Amendment, effective January 1, 1997, to the Company's Amended
and Restated Retirement and Savings Plan dated April 1, 1996.(18)
10.32*+ Agreement between Amgen Inc. and Dr. Fabrizio Bonanni, dated March 3,
1999.
10.33 Promissory Note of Ms. Kathryn E. Falberg, dated April 7, 1995.(20)
10.34 Promissory Note of Mr. Edward F. Garnett, dated July 18, 1997.(20)
10.35+ Fourth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated effective April 1, 1996.(20)
10.36+ Fifth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated effective April 1, 1996.(20)
10.37+ Company's Amended and Restated 1987 Directors' Stock Option Plan.(15)
10.38 Amended and Restated Agreement on G-CSF in the EU between Amgen Inc.
and F. Hoffmann-La Roche Ltd (with certain confidential information
deleted therefrom).(22)
10.39 Collaboration and License Agreement, dated December 15, 1997, between
the Company, GPI NIL Holdings, Inc. and Guilford Pharmaceuticals Inc.
(with certain confidential information deleted therefrom).(21)
10.40*+ Promissory Note of Dr. Fabrizio Bonanni, dated August 7, 1999.
10.41* Promissory Note of Dr. Fabrizio Bonanni, dated October 29, 1999.
21* Subsidiaries of the Company.
23 Consent of Ernst & Young LLP, Independent Auditors. The consent set
forth as page 43 is incorporated herein by reference.
24 Power of Attorney. The Power of Attorney set forth on page 42 is
incorporated herein by reference.
27* Financial Data Schedule for the Year Ended December 31, 1999.
</TABLE>
- --------
* Filed herewith.
+ 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.
39
<PAGE>
(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 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.
(7) Filed as an exhibit to the Form 8 dated November 8, 1989, amending the
Annual Report on Form 10-K for the year ended March 31, 1989 on June 28,
1989 and incorporated herein by reference.
(8) Filed as an exhibit to Form S-3 Registration Statement dated December 19,
1991 and incorporated herein by reference.
(9) Filed as an exhibit to the Form 8-A dated March 31, 1993 and incorporated
herein by reference.
(10) 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.
(11) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1995 on March 29, 1996 and incorporated herein by reference.
(12) Filed as an exhibit to the Form 10-Q for the quarter ended September 30,
1996 on November 5, 1996 and incorporated herein by reference.
(13) Filed as an exhibit to the Form 8-K Current Report dated February 18, 1997
on February 28, 1997 and incorporated herein by reference.
(14) Filed as an exhibit to the Form 8-K Current Report dated March 14, 1997 on
March 14, 1997 and incorporated herein by reference.
(15) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1996 on March 24, 1997 and incorporated herein by reference.
(16) Filed as an exhibit to the Form 8-K Current Report dated April 8, 1997 on
April 8, 1997 and incorporated herein by reference.
(17) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1997
on May 13, 1997 and incorporated herein by reference.
(18) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1997
on August 12, 1997 and incorporated herein by reference.
(19) Filed as an exhibit to the Form 8-K Current Report dated and filed on
December 5, 1997 and incorporated herein by reference.
(20) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1997 on March 24, 1998 and incorporated herein by reference.
(21) Filed as Exhibit 10.40 to the Guilford Pharmaceuticals Inc. Form 10-K for
the year ended December 31, 1997 on March 27, 1998 and incorporated herein
by reference.
(22) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1998
on May 13, 1998 and incorporated herein by reference.
(23) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1998
on August 14, 1998 and incorporated herein by reference.
(24) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1998 on March 16, 1999 and incorporated herein by reference.
(25) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1999
on August 3, 1999 and incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K during the three months ended
December 31, 1999. The report filed on October 21, 1999 reported under Item 5
that the Company's Board of Directors had declared a two-for-one split of the
Company's common stock effected in the form of a 100 percent stock dividend on
outstanding stock to stockholders of record on November 5, 1999.
40
<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)
/s/ Kathryn E. Falberg
Date: 3/6/00 By: _________________________________
Kathryn E. Falberg
Senior Vice President, Finance
and Chief Financial Officer
41
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kathryn E. Falberg and Marc M.P. de
Garidel, or either of them, his or her attorney-in-fact, each with the power of
substitution, for him or her 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 or her
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:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gordon M. Binder Chairman of the Board, Chief March 6, 2000
____________________________________ Executive Officer and
Gordon M. Binder Director (Principal
Executive Officer)
/s/ Kevin W. Sharer President, Chief Operating March 6, 2000
____________________________________ Officer and Director
Kevin W. Sharer
/s/ Kathryn E. Falberg Senior Vice President, March 6, 2000
____________________________________ Finance and Chief Financial
Kathryn E. Falberg Officer
/s/ Marc M.P. de Garidel Vice President, Controller March 6, 2000
____________________________________ and Chief Accounting
Marc M.P. de Garidel Officer
/s/ David Baltimore Director March 6, 2000
____________________________________
David Baltimore
/s/ William K. Bowes, Jr. Director March 6, 2000
____________________________________
William K. Bowes, Jr.
/s/ Jerry D. Choate Director March 6, 2000
____________________________________
Jerry D. Choate
/s/ Frederick W. Gluck Director March 6, 2000
____________________________________
Frederick W. Gluck
/s/ Franklin P. Johnson, Jr. Director March 6, 2000
____________________________________
Franklin P. Johnson, Jr.
/s/ Steven Lazarus Director March 6, 2000
____________________________________
Steven Lazarus
/s/ Gilbert S. Omenn Director March 6, 2000
____________________________________
Gilbert S. Omenn
/s/ Judith C. Pelham Director March 6, 2000
____________________________________
Judith C. Pelham
</TABLE>
42
<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 Amended and
Restated 1988 Stock Option Plan of Amgen Inc., in the Registration Statement
(Form S-8 No. 33-39183) pertaining to the Amended and Restated Employee Stock
Purchase Plan, in the Registration Statement(Form S-8 No. 33-39104) pertaining
to the Amended and Restated Amgen Retirement and Savings Plan, in the
Registration Statements (Form S-3/S-8 No. 33-29791 and Form S-8 No. 33-42501)
pertaining to the Amended and Restated 1987 Directors' Stock Option Plan, in
the Registration Statement (Form S-8 No. 33-42072) pertaining to the Amgen Inc.
Amended and Restated 1991 Equity Incentive Plan, in the Registration Statement
(Form S-8 No. 33-47605) pertaining to the Retirement and Savings Plan for Amgen
Puerto Rico, Inc., in the Registration Statement (Form S-8 No. 333-44727)
pertaining to the Amgen Inc. 1997 Special Non-Officer Equity Incentive Plan, in
the Registration Statement (Form S-3 No. 333-19931) of Amgen Inc., in the
Registration Statement (Form S-3 No. 333-40405) of Amgen Inc., in the
Registration Statement (Form S-8 No. 333-62735) pertaining to the Amgen Inc.
Amended and Restated 1997 Special Non-Officer Equity Incentive Plan, in the
Registration Statement (Form S-3 No. 333-53929) pertaining to the Amgen Inc.
1997 Special Non-Officer Equity Incentive Plan, the Amgen Inc. Amended and
Restated 1991 Equity Incentive Plan, the Amended and Restated 1988 Stock Option
Plan of Amgen Inc. and the Amended and Restated 1987 Directors' Stock Option
Plan and in the Registration Statement (Form S-8 No. 333-74585) pertaining to
the Amgen Limited Sharesave Plan and in the related Prospectuses of our report
dated January 24, 2000, with respect to the consolidated financial statements
and financial statement schedule of Amgen Inc. included in this Annual Report
(Form 10-K) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Los Angeles, California
March 6, 2000
43
<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, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amgen Inc. as
of December 31, 1999 and 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in accordance with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Los Angeles, California
January 24, 2000
F-1
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999, 1998 and 1997
(In millions, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Product sales............. $3,042.8 $2,514.4 $2,219.8
Corporate partner
revenues................. 161.4 127.9 125.9
Royalty income............ 135.9 75.9 55.3
-------- -------- --------
Total revenues.......... 3,340.1 2,718.2 2,401.0
-------- -------- --------
Operating expenses:
Cost of sales............. 402.1 345.2 300.8
Research and development.. 822.8 663.3 630.8
Selling, general and
administrative........... 654.3 515.4 483.8
Loss of affiliates, net... 16.8 28.6 36.1
Legal (award) assessment.. (49.0) (23.0) 157.0
-------- -------- --------
Total operating
expenses............... 1,847.0 1,529.5 1,608.5
-------- -------- --------
Operating income............ 1,493.1 1,188.7 792.5
Other income (expense):
Interest and other income,
net...................... 88.3 45.7 72.6
Interest expense, net..... (15.2) (10.0) (3.7)
-------- -------- --------
Total other income...... 73.1 35.7 68.9
-------- -------- --------
Income before income taxes.. 1,566.2 1,224.4 861.4
Provision for income taxes.. 469.8 361.2 217.1
-------- -------- --------
Net income.................. $1,096.4 $ 863.2 $ 644.3
======== ======== ========
Earnings per share:
Basic..................... $ 1.07 $ 0.85 $ 0.61
Diluted................... $ 1.02 $ 0.82 $ 0.59
Shares used in calculation
of earnings per share:
Basic..................... 1,021.7 1,020.2 1,056.5
Diluted................... 1,078.3 1,057.3 1,098.5
</TABLE>
See accompanying notes.
F-2
<PAGE>
AMGEN INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
(In millions, except per share data)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................ $ 130.9 $ 201.1
Marketable securities.................................... 1,202.1 1,074.9
Trade receivables, net of allowance for doubtful accounts
of $26 in 1999 and $17.1 in 1998........................ 412.2 319.9
Inventories.............................................. 184.3 110.8
Other current assets..................................... 135.8 156.6
-------- --------
Total current assets................................... 2,065.3 1,863.3
Property, plant and equipment at cost, net................. 1,553.6 1,450.2
Investments in affiliated companies........................ 132.8 120.9
Other assets............................................... 325.9 237.8
-------- --------
$4,077.6 $3,672.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable......................................... $ 83.4 $ 121.6
Commercial paper......................................... 99.5 99.7
Accrued liabilities...................................... 648.2 659.7
Current portion of long-term debt........................ -- 6.0
-------- --------
Total current liabilities.............................. 831.1 887.0
Long-term debt............................................. 223.0 223.0
Contingencies
Stockholders' equity:
Preferred stock; $0.0001 par value; 5 shares authorized;
none issued or outstanding.............................. -- --
Common stock and additional paid-in capital; $0.0001 par
value; 1,500 shares authorized; outstanding--1,017.9
shares in 1999 and 1,018.5 shares in 1998............... 2,072.3 1,671.9
Retained earnings........................................ 966.0 894.3
Accumulated other comprehensive loss..................... (14.8) (4.0)
-------- --------
Total stockholders' equity............................. 3,023.5 2,562.2
-------- --------
$4,077.6 $3,672.2
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998 and 1997
(In millions)
<TABLE>
<CAPTION>
Common
stock and Accumulated
Number additional other
of paid-in Retained comprehensive
shares capital earnings income/(loss) Total
------- ---------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. 1,058.7 $1,029.2 $ 879.4 $ (2.3) $ 1,906.3
---------
Comprehensive Income:
Net income........... -- -- 644.3 -- 644.3
Other comprehensive
loss, net of tax:
Unrealized losses on
securities, net of
reclassification
adjustments........ -- -- -- (1.1) (1.1)
Foreign currency
translation
adjustments........ -- -- -- (18.7) (18.7)
---------
Total other
comprehensive
loss............. -- -- -- -- (19.8)
---------
Comprehensive income... -- -- -- -- 624.5
Issuance of common
stock upon the
exercise of employee
stock options and in
connection with an
employee stock
purchase plan......... 29.0 134.3 -- -- 134.3
Tax benefits related to
employee stock option
exercises............. -- 54.7 -- -- 54.7
Reclassification of put
warrant obligation.... -- -- 157.4 -- 157.4
Repurchases of common
stock................. (54.6) -- (737.9) -- (737.9)
------- -------- --------- ------ ---------
Balance at December 31,
1997.................. 1,033.1 1,218.2 943.2 (22.1) 2,139.3
---------
Comprehensive Income:
Net income........... -- -- 863.2 -- 863.2
Other comprehensive
income, net of tax:
Unrealized gains on
securities, net of
reclassification
adjustments........ -- -- -- 9.1 9.1
Foreign currency
translation
adjustments........ -- -- -- 9.0 9.0
---------
Total other
comprehensive
income........... -- -- -- -- 18.1
---------
Comprehensive income... -- -- -- -- 881.3
Issuance of common
stock upon the
exercise of employee
stock options and in
connection with an
employee stock
purchase plan......... 42.8 345.5 -- -- 345.5
Tax benefits related to
employee stock option
exercises............. -- 108.2 -- -- 108.2
Repurchases of common
stock................. (57.4) -- (912.1) -- (912.1)
------- -------- --------- ------ ---------
Balance at December 31,
1998.................. 1,018.5 1,671.9 894.3 (4.0) 2,562.2
---------
Comprehensive Income:
Net income........... -- -- 1,096.4 -- 1,096.4
Other comprehensive
loss, net of tax:
Unrealized gains on
securities, net of
reclassification
adjustments........ -- -- -- 7.3 7.3
Foreign currency
translation
adjustments........ -- -- -- (18.1) (18.1)
---------
Total other
comprehensive
loss............. -- -- -- -- (10.8)
---------
Comprehensive income... -- -- -- -- 1,085.6
Issuance of common
stock upon the
exercise of employee
stock options......... 26.5 248.8 -- -- 248.8
Tax benefits related to
employee stock option
exercises............. -- 151.6 -- -- 151.6
Repurchases of common
stock................. (27.1) -- (1,024.7) -- (1,024.7)
------- -------- --------- ------ ---------
Balance at December 31,
1999.................. 1,017.9 $2,072.3 $ 966.0 $(14.8) $ 3,023.5
======= ======== ========= ====== =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
AMGEN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999, 1998 and 1997
(In millions)
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,096.4 $ 863.2 $ 644.3
Depreciation and amortization.................. 176.8 143.8 117.1
Other non-cash expenses........................ -- 33.1 --
Gain on sale of investments.................... -- (17.3) --
Deferred income taxes.......................... 9.8 (5.6) (31.4)
Loss of affiliates, net........................ 16.8 28.6 36.1
Cash provided by (used in):
Trade receivables, net....................... (92.3) (50.9) (43.6)
Inventories.................................. (73.5) (1.6) (11.8)
Other current assets......................... (9.0) (21.2) 5.0
Accounts payable............................. (38.2) 17.7 28.9
Accrued liabilities.......................... (11.5) 51.7 158.3
--------- -------- -------
Net cash provided by operating activities.. 1,075.3 1,041.5 902.9
--------- -------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment..... (304.2) (407.8) (387.8)
Proceeds from maturities of marketable
securities.................................... 40.0 20.1 244.3
Proceeds from sales of marketable securities... 843.5 466.2 647.1
Purchases of marketable securities............. (1,032.7) (766.3) (767.5)
Other.......................................... (10.1) 14.1 (38.3)
--------- -------- -------
Net cash used in investing activities...... (463.5) (673.7) (302.2)
--------- -------- -------
Cash flows from financing activities:
(Decrease) increase in commercial paper........ (0.2) 99.7 --
Repayment of long-term debt.................... (6.0) (30.0) (118.2)
Proceeds from issuance of long-term debt....... -- -- 200.0
Net proceeds from issuance of common stock upon
the exercise of employee stock options and in
connection with an employee stock purchase
plan.......................................... 248.8 345.5 134.3
Tax benefits related to employee stock option
exercises..................................... 151.6 108.2 54.7
Repurchases of common stock.................... (1,024.7) (912.1) (737.9)
Other.......................................... (51.5) (17.1) (63.8)
--------- -------- -------
Net cash used in financing activities...... (682.0) (405.8) (530.9)
--------- -------- -------
(Decrease) increase in cash and cash
equivalents..................................... (70.2) (38.0) 69.8
Cash and cash equivalents at beginning of
period.......................................... 201.1 239.1 169.3
--------- -------- -------
Cash and cash equivalents at end of period....... $ 130.9 $ 201.1 $ 239.1
========= ======== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. Summary of significant accounting policies
Business
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology company that
discovers, develops, manufactures and markets human therapeutics based on
advances in 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 in 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% or less owned and 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. The caption "Loss of affiliates, net" includes Amgen's equity in the
operating results of affiliated companies and the minority interest others hold
in the operating results of Amgen's majority controlled affiliates.
Available-for-sale securities
The Company considers cash equivalents to be only those investments which
are highly liquid, readily convertible to cash and which mature within three
months from date of purchase.
The Company considers its investment portfolio and cost method equity
investments available-for-sale as defined in Statement of Financial Accounting
Standards ("SFAS") No. 115 and accordingly, these investments are recorded at
fair value (see Note 9). Unrealized gains totaled $47 million and $21.7 million
as of December 31, 1999 and 1998, respectively. Unrealized losses totaled $21.8
million and $9.5 million as of December 31, 1999 and 1998, respectively. There
were no material realized gains and losses for the years ended December 31,
1999 and 1997. Realized gains and losses for the year ended December 31, 1998
were $17.3 million and $33.1 million, respectively. The cost of securities sold
is based on the specific identification method. The fair value of available-
for-sale investments by type of security, contractual maturity and
classification in the balance sheets are as follows (in millions):
<TABLE>
<CAPTION>
December 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Type of security:
Corporate debt securities.............................. $ 953.4 $ 846.0
U.S. Treasury securities and obligations of U.S.
government agencies................................... 208.3 166.3
Other interest bearing securities...................... 131.9 253.9
-------- --------
Total debt securities................................ 1,293.6 1,266.2
Equity securities...................................... 104.6 65.4
-------- --------
$1,398.2 $1,331.6
======== ========
Contractual maturity:
Maturing in one year or less........................... $ 376.4 $ 344.6
Maturing after one year through three years............ 896.0 739.9
Maturing after three years............................. 21.2 181.7
-------- --------
Total debt securities................................ 1,293.6 1,266.2
Equity securities...................................... 104.6 65.4
-------- --------
$1,398.2 $1,331.6
======== ========
</TABLE>
F-6
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Classification in balance sheets:
Cash and cash equivalents.............................. $ 130.9 $ 201.1
Marketable securities.................................. 1,202.1 1,074.9
Other assets--noncurrent............................... 144.6 105.4
-------- --------
1,477.6 1,381.4
Less cash.............................................. (79.4) (49.8)
-------- --------
$1,398.2 $1,331.6
======== ========
</TABLE>
The primary objectives for the Company's investment portfolio are liquidity
and safety of principal. Investments are made to achieve the highest rate of
return to the Company, consistent with these two objectives. The Company's
investment 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 invests its excess
cash in securities with varying maturities to meet projected cash needs.
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
consist of currently marketed products and product candidates which the Company
expects to commercialize. The inventory balance of such product candidates
totaled $20.3 million as of December 31, 1999. Inventories are shown net of
applicable reserves and allowances. Inventories consisted of the following (in
millions):
<TABLE>
<CAPTION>
December 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Raw materials.................................................. $ 37.5 $ 18.1
Work in process................................................ 96.6 49.1
Finished goods................................................. 50.2 43.6
------ ------
$184.3 $110.8
====== ======
</TABLE>
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.
Useful lives by asset category are as follows:
<TABLE>
<CAPTION>
Asset category Years
-------------- -----
<S> <C>
Buildings and building improvements.................................. 10-30
Manufacturing equipment.............................................. 5-10
Laboratory equipment................................................. 5-10
Furniture and office equipment....................................... 3-10
</TABLE>
F-7
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Long-lived assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
Product sales
Product sales primarily consist of sales of EPOGEN(R) (Epoetin alfa) and
NEUPOGEN(R) (Filgrastim) (see Note 10).
The Company has the exclusive right to sell Epoetin alfa for dialysis,
diagnostics and all non-human uses in the United States. The Company sells
Epoetin alfa under the brand name EPOGEN(R). Amgen has granted to Ortho
Pharmaceutical Corporation, a subsidiary of Johnson & Johnson ("Johnson &
Johnson"), a license relating to Epoetin alfa for sales in the United States
for all human uses except dialysis and diagnostics. Pursuant to this license,
Amgen does not recognize product sales it makes into the exclusive market of
Johnson & Johnson and does recognize the product sales made by Johnson &
Johnson into Amgen's exclusive market. Sales in Amgen's exclusive market and
adjustments thereto are derived from Company shipments and from third-party
data on shipments to end users and their usage (see Note 4, "Contingencies--
Johnson & Johnson arbitrations"). Sales of the Company's other products are
recognized when shipped.
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.
Foreign currency transactions
The Company has a program to manage foreign currency risk. As part of this
program, it has purchased foreign currency option and forward contracts to
hedge against possible reductions in values of certain anticipated foreign
currency cash flows generally over the next 12 months. At December 31, 1999,
the Company had option contracts and forward contracts to exchange foreign
currencies for U.S. dollars of $37.4 million and $73.7 million, respectively,
all having maturities of eleven months or less. The option contracts, which
have only nominal intrinsic value at the time of purchase, are designated as
effective hedges of anticipated foreign currency transactions for financial
reporting purposes and accordingly, the net gains on such contracts are
deferred and recognized in the same period as the hedged transactions. The
forward contracts do not qualify as hedges for financial reporting purposes and
accordingly, are marked-to-market. Net gains on option contracts (including
option contracts for hedged transactions whose occurrence are no longer
probable) and changes in market values of forward contracts are reflected in
"Interest and other income, net". The deferred premiums on option contracts and
fair values of forward contracts are included in "Other current assets".
The Company has additional foreign currency forward contracts to hedge
exposures to foreign currency fluctuations of certain assets and liabilities
denominated in foreign currencies. At December 31, 1999, the Company had
forward contracts to exchange foreign currencies for U.S. dollars of $46
million, all having maturities of less than one month. These contracts are
designated as effective hedges and accordingly, gains and losses on these
forward contracts are recognized in the same period the offsetting gains and
losses of hedged assets and liabilities are realized and recognized. The fair
values of the forward contracts are included in the corresponding captions of
the hedged assets and liabilities. Gains and losses on forward contracts, to
the extent they differ in amount from the hedged assets and liabilities, are
included in "Interest and other income, net".
F-8
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The date
required for adoption of this statement has been delayed until fiscal years
beginning after June 15, 2000. Because of the Company's minimal use of
derivatives, management anticipates that the adoption of this new statement
will not have a significant effect on earnings or the financial position of the
Company.
Interest rate swap
The Company has an interest rate swap agreement with a notional amount of
$50 million that changes the nature of the interest rate paid on a portion of
its commercial paper. Under the agreement, the Company pays a fixed interest
rate of approximately 5.3% in exchange for the receipt of variable interest
rate payments. The agreement will terminate in 2000. The differential in the
variable rate interest payments is recognized as an increase/decrease in
interest expense related to debt. The related amounts payable to and receivable
from the counterparty are recorded in accrued liabilities. The fair value of
the swap agreement is 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, 1999, 1998 and
1997, were $11.6 million, $19.2 million and $10.5 million, respectively.
Employee stock option and stock purchase plans
The Company's employee stock option and stock purchase plans are accounted
for under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees" (see Note 7).
Earnings per share
Basic earnings per share is based upon the weighted-average number of common
shares outstanding. Diluted earnings per share is based upon the weighted-
average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the
Company's employee stock option plans which are included under the treasury
stock method.
The following table sets forth the computation for basic and diluted
earnings per share (in millions, except per share information):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share--
net income.......................................... $1,096.4 $ 863.2 $ 644.3
======== ======== ========
Denominator:
Denominator for basic earnings per share--weighted-
average shares.................................... 1,021.7 1,020.2 1,056.5
Effect of dilutive securities--employee stock
options........................................... 56.6 37.1 42.0
-------- -------- --------
Denominator for diluted earnings per share--
adjusted weighted-average shares.................. 1,078.3 1,057.3 1,098.5
======== ======== ========
Basic earnings per share............................. $ 1.07 $ 0.85 $ 0.61
======== ======== ========
Diluted earnings per share........................... $ 1.02 $ 0.82 $ 0.59
======== ======== ========
</TABLE>
F-9
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Options to purchase 1.6 million, 3 million and 42.8 million shares with
exercise prices greater than the average market prices of common stock were
outstanding at December 31, 1999, 1998 and 1997, respectively. These options
were excluded from the respective computations of diluted earnings per share
because their effect would be anti-dilutive.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. Related party transactions
The Company owns a 50% interest in Kirin-Amgen, Inc. ("Kirin-Amgen"), a
corporation formed in 1984 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 negotiated rates. Included in revenues from corporate partners for the years
ended December 31, 1999, 1998 and 1997, are $138.5 million, $121 million and
$87.9 million, 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 pays Kirin-Amgen royalties based on sales. During the
years ended December 31, 1999, 1998 and 1997, Kirin-Amgen earned royalties from
Amgen of $128.1 million, $105 million and $91.4 million, respectively, under
such agreements, which are included in "Cost of sales" in the accompanying
consolidated statements of operations.
At December 31, 1999, Amgen's share of Kirin-Amgen's undistributed retained
earnings was approximately $87.1 million.
3. Debt
The Company has a commercial paper program which provides for unsecured
short-term borrowings up to an aggregate of $200 million. As of December 31,
1999, commercial paper with a face amount of $100 million was outstanding.
These borrowings had maturities of less than two months and had effective
interest rates averaging 6%. Commercial paper with a face amount of $100
million and with effective interest rates averaging 5.5% was outstanding at
December 31, 1998.
In November 1997, the Company established a $500 million debt shelf
registration statement. In December 1997, pursuant to this registration
statement, the Company issued $100 million of debt securities that bear
interest at a fixed rate of 6.5% and mature in 2007 (the "Notes") and
established a $400 million medium-term note program. The Company may offer and
issue medium-term notes from time to time with terms to be determined by market
conditions.
In April 1997, the Company issued $100 million of debt securities that bear
interest at a fixed rate of 8.1% and mature in 2097 (the "Century Notes").
These securities may be redeemed in whole or in part at the
F-10
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company's option at any time for a redemption price equal to the greater of the
principal amount to be redeemed or the sum of the present values of the
principal and remaining interest payments discounted at a determined rate plus,
in each case, accrued interest.
In addition to the Notes and the Century Notes, debt securities outstanding
at December 31, 1999 include $23 million of debt securities that bear interest
at a fixed rate of 6.2% and mature in 2003. The terms of the debt securities
require the Company to meet certain debt to tangible net asset ratios and
places limitations on liens and sale/leaseback transactions and, except with
respect to the Notes and the Century Notes, places limitations on subsidiary
indebtedness.
The Company has an unsecured credit facility (the "credit facility") that
includes a commitment expiring on May 28, 2003 for up to $150 million of
borrowings under a revolving line of credit (the "revolving line commitment").
As of December 31, 1999, $150 million was available under the revolving line
commitment for borrowing. Borrowings under the revolving line commitment bear
interest at various rates which are a function of, at the Company's option,
either the prime rate of a major bank, the federal funds rate or a Eurodollar
base rate. Under the terms of the credit facility, the Company is required to
meet a minimum interest coverage ratio and maintain a minimum level 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, 1999, are as follows: none in 2000 through 2002; $23 million in
2003; none in 2004; and $200 million after 2004.
4. Contingencies
Johnson & Johnson arbitrations
In September 1985, the Company granted Johnson & Johnson's affiliate, Ortho
Pharmaceutical Corporation, a license relating to certain patented technology
and know-how of the Company to sell a genetically engineered form of
recombinant human erythropoietin, called Epoetin alfa, throughout the
United States for all human uses except dialysis and diagnostics. A number of
disputes have arisen between Amgen and Johnson & Johnson as to their respective
rights and obligations under the various agreements between them, including the
agreement granting the license (the "License Agreement").
A dispute between Amgen and Johnson & Johnson that has been the subject of
an arbitration proceeding relates to the audit methodology currently employed
by the Company to account for Epoetin alfa sales. The Company and Johnson &
Johnson are required to compensate each other for Epoetin alfa sales that
either party makes into the other party's exclusive market, sometimes described
as "spillover" sales. The Company has established and is employing an audit
methodology to measure each party's spillover sales and to allocate the net
profits from those sales to the appropriate party. On September 12, 1997, the
arbitrator in this matter (the "Arbitrator") issued an opinion adopting the
Company's audit methodology with certain adjustments. The Company estimated
that the effect of the opinion would be a net spillover payment to Johnson &
Johnson which, after benefit of income tax effects, was $78 million for the
1991-1994 period and interest in the amount of $18 million after tax. As a
result of the opinion, the Company took a charge of $0.09 per share in the
third quarter of 1997 for the spillover payment and interest. Pursuant to the
final order in the arbitration, an independent panel was formed principally (i)
to address ongoing challenges to the survey results for the years 1995 through
1999 and (ii) to refine the procedures for measuring the erythropoietin market
as may be necessary. Johnson & Johnson has brought challenges under this
procedure to certain survey results for certain periods. As a result of
decisions made by this independent panel regarding certain of these challenges
as well as other reduced uncertainties, the Company has reduced amounts
previously provided for potential spillover liabilities by $49 million in the
third quarter of 1999 and $23 million in the fourth quarter of 1998.
F-11
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Because the Arbitrator ruled that the Company was the successful party in
the arbitration, Johnson & Johnson was ordered to pay to the Company all costs
and expenses, including reasonable attorneys' fees, that the Company incurred
in the arbitration as well as one-half of the audit costs. The Company
submitted a bill for such costs and expenses incurred over an eight year period
in the amount of approximately $110 million. Johnson & Johnson contested
substantially all such costs and expenses. On January 26, 2000, the Arbitrator
ruled that the Company is entitled to recover approximately $77.5 million of
its costs and expenses from Johnson & Johnson. On October 26, 1998, Johnson &
Johnson filed a petition in the Circuit Court of Cook County, Illinois seeking
to vacate or modify the Arbitrator's award to the Company of all costs and
expenses, including reasonable attorney's fees and costs, that the Company
incurred in the arbitration. The Company has filed a motion to dismiss Johnson
& Johnson's petition. That motion remains pending. Due to remaining
uncertainties the Company has not recognized any benefit from the recovery of
attorneys' fees and costs or audit costs.
The Company has filed a demand in the arbitration to terminate Johnson &
Johnson's rights under the License Agreement and to recover damages for breach
of the License Agreement based on the Company's claim that Johnson & Johnson
has intentionally sold PROCRIT(R) (the brand name under which Johnson & Johnson
sells Epoetin alfa) into the Company's exclusive dialysis market. Pursuant to
the Arbitrator's ruling, discovery has commenced. Both Amgen and Johnson &
Johnson filed motions for summary judgment which were argued in January 2000.
The Arbitrator's decisions on these motions for summary judgment are pending. A
trial date has been set for February 2001. The Company is unable to predict at
this time the outcome of its demand for termination of the License Agreement or
when it will be resolved.
While it is not possible to predict accurately or determine the eventual
outcome of the above described legal matters 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 its
annual financial statements.
5. Income taxes
The provision for income taxes includes the following (in millions):
<TABLE>
<CAPTION>
Years ended
December 31,
---------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Current provision:
Federal (including U.S. possessions)................ $422.8 $339.6 $227.2
State............................................... 37.2 27.2 21.2
------ ------ ------
Total current provision........................... 460.0 366.8 248.4
------ ------ ------
Deferred provision (benefit):
Federal (including U.S. possessions)................ 5.3 (4.7) (25.6)
State............................................... 4.5 (0.9) (5.7)
------ ------ ------
Total deferred provision (benefit)................ 9.8 (5.6) (31.3)
------ ------ ------
$469.8 $361.2 $217.1
====== ====== ======
</TABLE>
F-12
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred income taxes reflect the net tax effects of net operating loss and
credit 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 are as follows (in millions):
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------- ------
<S> <C> <C>
Deferred tax assets:
Expense accruals.......................................... $ 84.0 $126.4
Acquired net operating loss and credit carryforwards...... 64.3 57.0
Expenses capitalized for tax purposes..................... 27.9 32.6
Fixed assets.............................................. 22.9 25.8
Other..................................................... 27.4 7.9
Total deferred tax assets............................... 226.5 249.7
Valuation allowance....................................... (46.0) (69.0)
Net deferred tax assets................................... 180.5 180.7
------- ------
Deferred tax liabilities:
Purchase of technology rights............................. (78.1) (65.8)
Other..................................................... (23.9) (20.9)
------- ------
Total deferred tax liabilities.......................... (102.0) (86.7)
------- ------
$ 78.5 $ 94.0
</TABLE>
At December 31, 1999, the Company had operating loss carryforwards available
to reduce future federal taxable income of which $45.4 million expire in 2008
and $84 million expire in 2009. These operating loss carryforwards relate to
the acquisition of a company. Utilization of these operating loss carryforwards
is limited to approximately $16 million per year.
The provision for income taxes varies from income taxes provided based on
the federal statutory rate as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory rate applied to income before income taxes.. 35.0% 35.0% 35.0%
Benefit of Puerto Rico operations, net of Puerto Rico
income taxes......................................... (2.3)% (3.2)% (7.3)%
Utilization of tax credits, primarily research and
experimentation...................................... (2.1)% (2.4)% (2.9)%
Other, net............................................ (0.6)% 0.1% 0.4%
---- ---- ----
30.0% 29.5% 25.2%
==== ==== ====
</TABLE>
Income taxes paid during the years ended December 31, 1999, 1998 and 1997,
totaled $318.7 million, $251.3 million and $176.1 million, respectively.
6. Stockholders' equity
Stockholder Rights agreement
On February 18, 1997, the Board of Directors of the Company redeemed the
rights under the Company's former common stock rights plan and declared a
dividend of one preferred share purchase right (a "Right") for
F-13
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
each then outstanding share of common stock of the Company and authorized the
distribution of one Right with respect to each subsequently issued share of
common stock. The Rights were distributed to stockholders of record on March
21, 1997.
Each share of common stock outstanding has attached to it one-quarter (1/4)
of a Right. One-quarter of a Right represents the right to purchase one four-
thousandth (1/4000) of a share of Series A Junior Participating Preferred
Stock of the Company at $56.25. The Rights will expire on March 21, 2007.
Under certain circumstances, if an acquiring person or group acquires 10% or
more of the Company's outstanding common stock, an exercisable Right will
entitle its holder (other than the acquirer) to buy shares of common stock of
the Company having a market value of two times the exercise price of one Right.
However, in limited circumstances approved by the outside directors of the
Board, a stockholder who enters into an acceptable standstill agreement may
acquire up to 20% of the outstanding shares without triggering the Rights. If
an acquirer acquires at least 10%, but less than 50%, of the Company's common
stock, the Board may exchange each Right (other than those of the acquirer) 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, an exercisable Right will entitle its holder
to buy shares of common stock of the acquiring company having a market value of
two times the exercise price of one Right. The Company may redeem the Rights at
$0.00025 per Right at any time prior to the public announcement that a 10%
position has been acquired.
Stock repurchase program
The Company has a stock repurchase program primarily to reduce the dilutive
effect of its employee stock option and stock purchase plans. Stock repurchased
under the program is retired. In October 1999, the Board of Directors
authorized the Company to repurchase up to $2 billion of common stock through
December 31, 2000, replacing the remaining amount authorized in October 1998.
As of December 31, 1999, $1,648.3 million was available for stock repurchases.
Other comprehensive income/(loss)
SFAS No. 130, "Reporting Comprehensive Income", requires unrealized gains
and losses on the Company's available-for-sale securities and foreign currency
translation adjustments to be included in other comprehensive income/(loss).
Information regarding the components of accumulated other comprehensive
income/(loss) are as follows (in millions):
<TABLE>
<CAPTION>
Accumulated
Unrealized Foreign Other
Gains on Currency Comprehensive
Securities Translation Income/(Loss)
---------- ----------- -------------
<S> <C> <C> <C>
Balance at December 31, 1998.......... $ 8.0 $(12.0) $ (4.0)
Current year other comprehensive
income/(loss)........................ 7.3 (18.1) (10.8)
----- ------ ------
Balance at December 31, 1999.......... $15.3 $(30.1) $(14.8)
===== ====== ======
</TABLE>
F-14
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Information regarding the income tax effects for items of other
comprehensive income/(loss) are as follows (in millions):
<TABLE>
<CAPTION>
Tax
Before-Tax Benefit/ After-Tax
Amount (Expense) Amount
---------- --------- ---------
<S> <C> <C> <C>
For the year ended December 31, 1997:
Net unrealized losses on available-for-sale
securities................................. $ (1.8) $ 0.7 $ (1.1)
Foreign currency translation adjustments.... (18.7) -- (18.7)
------ ----- ------
Other comprehensive loss.................... $(20.5) $ 0.7 $(19.8)
====== ===== ======
For the year ended December 31, 1998:
Unrealized losses on available-for-sale
securities................................. $ (1.8) $ 0.7 $ (1.1)
Less: Reclassification adjustments for
losses realized in net income.............. (15.8) 5.6 (10.2)
------ ----- ------
Net unrealized gains on available-for-sale
securities................................. 14.0 (4.9) 9.1
Foreign currency translation adjustments.... 9.0 -- 9.0
------ ----- ------
Other comprehensive income.................. $ 23.0 $(4.9) $ 18.1
====== ===== ======
For the year ended December 31, 1999:
Unrealized gains on available-for-sale
securities................................. $ 12.0 $(5.3) $ 6.7
Less: Reclassification adjustments for
losses realized in net income.............. (1.0) 0.4 (0.6)
------ ----- ------
Net unrealized gains on available-for-sale
securities................................. 13.0 (5.7) 7.3
Foreign currency translation adjustments.... (18.1) -- (18.1)
------ ----- ------
Other comprehensive loss.................... $ (5.1) $(5.7) $(10.8)
====== ===== ======
</TABLE>
Other
In addition to common stock, the Company's authorized capital includes 5
million shares of preferred stock, $0.0001 par value, of which 1.5 million
shares have been designated Series A Junior Participating Preferred Stock. At
December 31, 1999 and 1998, no shares of preferred stock were issued or
outstanding.
At December 31, 1999, the Company had reserved 212.1 million shares of its
common stock which may be issued through its employee stock option and stock
purchase plans and had reserved 1.5 million shares of preferred stock in
connection with its preferred stock rights plan.
In October 1999, the Board of Directors approved a two-for-one split of the
Company's common stock effected in the form of a 100 percent stock dividend.
The dividend was distributed on November 19, 1999, to stockholders of record on
November 5, 1999. Accordingly, all share information in the accompanying
consolidated financial statements and notes thereto have been retroactively
adjusted to give recognition to this stock split.
7. Employee stock option, stock purchase and defined contribution plans
Employee stock option plans
The Company's employee 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 years from the
date of grant. Most employees are eligible to receive a grant of stock options
periodically with the number
F-15
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of shares generally determined by the employee's salary grade, performance
level and the stock price. In addition, certain management and professional
level employees normally receive a stock option grant upon hire. In 1997, most
employees received an additional stock option grant (the "Special Stock
Options") in which all shares vest upon the earlier of: (i) five years from
date of grant and (ii) the date on which the closing price of Amgen stock
equals or exceeds $18.75 per share. The Special Stock Options vested in 1998.
As of December 31, 1999, the Company had 78.9 million shares of common stock
available for future grant under its employee stock option plans.
Stock option information with respect to all of the Company's employee stock
option plans follows (shares in millions):
<TABLE>
<CAPTION>
Exercise Price
-------------------------------
Weighted-
Shares Low High Average
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Balance unexercised at December 31, 1996... 122.2 $ 0.44 $16.03 $ 7.25
Granted.................................. 52.0 $11.63 $16.97 $13.64
Exercised................................ (28.6) $ 0.44 $14.56 $ 4.59
Forfeited................................ (3.7) $ 1.08 $16.38 $11.43
-----
Balance unexercised at December 31, 1997... 141.9 $ 0.58 $16.97 $10.02
Granted.................................. 33.5 $11.78 $26.22 $16.53
Exercised................................ (42.4) $ 0.58 $20.77 $ 8.14
Forfeited................................ (6.8) $ 4.48 $18.52 $13.57
-----
Balance unexercised at December 31, 1998... 126.2 $ 0.66 $26.22 $12.18
Granted.................................. 19.0 $26.25 $57.69 $31.48
Exercised................................ (26.9) $ 0.66 $39.44 $ 9.45
Forfeited................................ (2.5) $ 5.48 $44.97 $17.76
-----
Balance unexercised at December 31, 1999... 115.8 $ 0.92 $57.69 $15.88
=====
</TABLE>
At December 31, 1999, 1998 and 1997, employee stock options to purchase 61.7
million, 66.1 million and 60.1 million shares were exercisable at weighted-
average prices of $11.80, $9.76 and $6.84, respectively.
Fair value disclosures of employee stock options
Employee stock option grants are set at the closing price of the Company's
common stock on the date of grant and the related number of shares granted are
fixed at that point in time. Therefore, under the principles of APB Opinion No.
25, the Company does not recognize compensation expense associated with the
grant of employee stock options. SFAS No. 123, "Accounting for Stock-Based
Compensation," requires the use of option valuation models to provide
supplemental information regarding options granted after 1994. Pro forma
information regarding net income and earnings per share shown below was
determined as if the Company had accounted for its employee stock options and
shares sold under its employee stock purchase plan under the fair value method
of that statement.
The fair value of the options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of
5.8%, 5.4% and 6.0%; dividend yields of 0%, 0% and 0%; volatility factors of
the expected market price of the Company's common stock of 38%, 34% and 33%;
and expected life of the options of 3.4 years, 3.4 years and 3.7 years. These
assumptions resulted in weighted-average fair values of $10.55, $5.11 and $4.49
per share for employee stock options granted in 1999, 1998 and 1997,
respectively.
F-16
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options. The Company's employee stock options have
characteristics significantly different from those of traded options such as
vesting restrictions and extremely limited transferability. In addition, the
assumptions used in option valuation models (see above) are highly subjective,
particularly the expected stock price volatility of the underlying stock.
Because changes in these subjective input assumptions can materially affect the
fair value estimate, in management's opinion, existing valuation models do not
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair values of the
options are amortized over the options' vesting periods. The pro forma effect
on net income for 1998 and 1997 is not representative of the pro forma effect
on net income in 1999 and future years because it does not take into
consideration pro forma compensation related to option grants made prior to
1995. Pro forma information in 1999 reflects and in future years will reflect
the amortization of a larger number of employee stock options granted in
several succeeding years. In addition, the 1998 pro forma amounts were reduced
due to the vesting in 1998 of the Special Stock Options which occurred
substantially earlier than the expected life assumption used in the Black-
Scholes option valuation model for such grants. The Company's pro forma
information is as follows (in millions, except per share information):
<TABLE>
<CAPTION>
Years ended
December 31,
----------------------
1999 1998 1997
-------- ------ ------
<S> <C> <C> <C>
Pro forma net income................................. $1,030.0 $735.9 $575.8
Pro forma earnings per share:
Basic.............................................. $ 1.01 $ 0.72 $ 0.55
Diluted............................................ $ 0.95 $ 0.70 $ 0.53
</TABLE>
Information regarding employee stock options outstanding as of December 31,
1999 is as follows (shares in millions):
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
---------------------------- ----------------
Weighted-
Weighted- Average Weighted-
Average Remaining Average
Exercise Contractual Exercise
Price Range Shares Price Life Shares Price
----------- ------ --------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
$10.00 and under............... 24.9 $ 7.05 1.8 years 23.9 $ 6.95
Over $10.00 to $15.00.......... 43.7 $13.74 4.4 years 29.3 $13.60
Over $15.00 to $30.00.......... 29.1 $16.95 5.5 years 7.4 $16.94
Over $30.00.................... 18.1 $31.56 6.5 years 1.1 $33.78
</TABLE>
Employee stock purchase plan
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 each of the years
ended December 31, 1998 and 1997, employees purchased 1 million shares at
prices of approximately $11.46 and $11.50 per share, respectively. No shares
were purchased under the employee stock purchase plan during 1999 because the
Company commenced a 15 month offering period which extends from January 1, 1999
to March 31, 2000. At December 31, 1999, the Company had 17.5 million shares
available for future issuance under this plan.
F-17
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Defined contribution plans
The Company has defined contribution plans covering substantially all
employees in the United States and its possessions. Under these plans, the
Company makes certain amounts of matching contributions for those employees who
elect to contribute to the plans and makes additional contributions based upon
the compensation of eligible employees regardless of whether or not the
employees contribute to the plans. In addition, the Company has other defined
contribution plans covering certain officers of the Company and employees of
its foreign affiliates. The Company's expense for its defined contribution
plans totaled $34.3 million, $26.7 million and $26.9 million for the years
ended December 31, 1999, 1998 and 1997, respectively.
8. Balance sheet accounts
Property, plant and equipment consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
<S> <C> <C>
Land..................................................... $ 110.1 $ 100.2
Buildings and building improvements...................... 841.4 685.0
Manufacturing equipment.................................. 251.8 142.6
Laboratory equipment..................................... 306.3 260.6
Furniture and office equipment........................... 577.8 445.5
Leasehold improvements................................... 50.8 48.3
Construction in progress................................. 177.0 369.7
-------- --------
2,315.2 2,051.9
Less accumulated depreciation and amortization........... (761.6) (601.7)
-------- --------
$1,553.6 $1,450.2
======== ========
</TABLE>
Accrued liabilities consisted of the following (in millions):
<TABLE>
<CAPTION>
December 31,
-------------
1999 1998
------ ------
<S> <C> <C>
Due to affiliated companies and corporate partners............ $160.8 $194.0
Employee compensation and benefits............................ 149.1 124.9
Sales incentives, royalties and allowances.................... 135.7 118.8
Income taxes.................................................. 87.5 96.4
Other......................................................... 115.1 125.6
------ ------
$648.2 $659.7
====== ======
</TABLE>
9. Fair values of financial instruments
The carrying amounts of cash, cash equivalents, marketable securities and
cost method equity investments approximated their fair values. Fair values of
cash equivalents, marketable securities and cost method equity investments are
based on quoted market prices.
The carrying amount of commercial paper approximated its fair value as of
December 31, 1999 and 1998. The fair values of debt securities at December 31,
1999 and 1998 were approximately $216.6 million and $255 million, respectively.
The fair values of commercial paper and debt securities were estimated based on
quoted market rates for instruments with similar terms and remaining
maturities.
F-18
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair value of the interest rate swap agreement was not significant based
on the estimated amount that the counterparty would receive or pay to terminate
the swap agreement taking into account current interest rates.
The fair values of the foreign currency forward contracts and purchased
foreign currency option contracts were not significant based on the estimated
amounts at which the contracts could be settled taking into account current
market exchange rates.
10. Segment information
Enterprise-wide disclosures about revenues by product, revenues and long-
lived assets by geographic area and revenues from major customers are presented
below.
Revenues
Revenues consisted of the following (in millions):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
EPOGEN(R)......................................... $1,759.1 $1,382.0 $1,160.7
NEUPOGEN(R)....................................... 1,256.6 1,116.6 1,055.7
Other product sales............................... 27.1 15.8 3.4
-------- -------- --------
Total product sales............................... 3,042.8 2,514.4 2,219.8
Other revenues.................................... 297.3 203.8 181.2
-------- -------- --------
Total revenues.................................... $3,340.1 $2,718.2 $2,401.0
======== ======== ========
</TABLE>
Geographic information
The Company sells NEUPOGEN(R) through its foreign affiliates in countries of
the European Union, Canada and Australia. Information regarding revenues and
long-lived assets (consisting of property, plant and equipment) attributable to
the United States and to all foreign countries collectively is stated below.
The geographic classification of product sales was based upon the location of
the customer. The geographic classification of all other revenues was based
upon the domicile of the entity from which the revenues were earned.
Information is as follows (in millions):
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States and possessions.................. $3,024.5 $2,441.6 $2,093.0
Foreign countries.............................. 315.6 276.6 308.0
-------- -------- --------
Total revenues............................... $3,340.1 $2,718.2 $2,401.0
======== ======== ========
<CAPTION>
December 31,
--------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Long-lived assets:
United States and possessions.................. $1,475.7 $1,360.8 $1,103.1
Foreign countries.............................. 77.9 89.4 83.1
-------- -------- --------
Total long-lived assets...................... $1,553.6 $1,450.2 $1,186.2
======== ======== ========
</TABLE>
F-19
<PAGE>
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Major customers
Amgen uses wholesale distributors of pharmaceutical products as the
principal means of distributing the Company's products to clinics, hospitals
and pharmacies. The Company monitors the financial condition of its larger
distributors and limits its credit exposure by setting appropriate credit
limits and requiring collateral from certain customers. Sales to two large
wholesalers accounted for more than 10% of the total revenues for the years
ended December 31, 1999, 1998 and 1997. Sales to one wholesaler were $1,078
million, $856.2 million and $580.9 million for the years ended December 31,
1999, 1998 and 1997, respectively. Sales to another wholesaler were $438.2
million, $366.5 million and $333.8 million for the years ended December 31,
1999, 1998 and 1997, respectively. At December 31, 1999 and 1998, amounts due
from three large wholesalers accounted for 52% and 54%, respectively, of gross
trade receivables.
11. Quarterly financial data (unaudited)
(in millions, except per share data):
<TABLE>
<CAPTION>
1999 Quarter Ended Dec. 31(1) Sept. 30(2) June 30 Mar. 31
- ------------------ ---------- ----------- ------- -------
<S> <C> <C> <C> <C>
Product sales........................... $847.4 $769.2 $737.9 $688.3
Gross margin from product sales......... 735.4 670.3 639.1 595.9
Net income.............................. 281.6 300.0 267.6 247.2
Earnings per share:
Basic................................. 0.28 0.29 0.26 0.24
Diluted............................... 0.26 0.28 0.25 0.23
<CAPTION>
1998 Quarter Ended Dec. 31(3) Sept. 30 June 30 Mar. 31
- ------------------ ---------- ----------- ------- -------
<S> <C> <C> <C> <C>
Product sales........................... $694.6 $641.8 $611.2 $566.8
Gross margin from product sales......... 599.5 554.6 527.3 487.8
Net income.............................. 238.6 221.0 216.3 187.3
Earnings per share:
Basic................................. 0.23 0.22 0.21 0.18
Diluted............................... 0.22 0.21 0.21 0.18
</TABLE>
- --------
(1) Due to Year 2000 contingency planning in the fourth quarter of 1999, the
Company offered extended payment terms on limited shipments of EPOGEN(R)
and NEUPOGEN(R) to certain wholesalers. These Year 2000 related sales
totaled $45 million, or $0.02 per share on a diluted basis. The Company
expects sales to be reduced by approximately the same amount during the
first quarter of 2000.
(2) During the third quarter of 1999, due to reduced uncertainties, the Company
reduced its potential spillover liabilities to Johnson & Johnson by $49
million, or $0.03 per share on a diluted basis (see Note 4,
"Contingencies--Johnson & Johnson arbitrations").
(3) During the fourth quarter of 1998, due to reduced uncertainties, the
Company reduced its potential spillover liabilities to Johnson & Johnson by
$23 million, or $0.01 per share on a diluted basis (see Note 4,
"Contingencies--Johnson & Johnson arbitrations").
F-20
<PAGE>
SCHEDULE II
AMGEN INC.
VALUATION ACCOUNTS
Years ended December 31, 1999, 1998 and 1997
(In millions)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Period Expenses Deductions of Period
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful accounts.... $17.1 $10.1 $1.2 $26.0
Year ended December 31, 1998:
Allowance for doubtful accounts.... $14.2 $ 3.6 $0.7 $17.1
Year ended December 31, 1997:
Allowance for doubtful accounts.... $11.8 $ 2.8 $0.4 $14.2
</TABLE>
F-21
<PAGE>
EXHIBIT 10.18
AMGEN INC. SUPPLEMENTAL
RETIREMENT PLAN
(As Amended and Restated Effective November 1, 1999)
<PAGE>
AMGEN SUPPLEMENTAL RETIREMENT PLAN
----------------------------------
(As Amended and Restated Effective November 1, 1999)
ARTICLE I
INTRODUCTION AND PLAN PURPOSE
-----------------------------
The Amgen Supplemental Retirement Plan (the "Plan") was established by Amgen
Inc. (the "Company") effective as of January 1, 1993, was amended and restated
effective January 1, 1998, and was amended and restated again effective November
1, 1999. The purpose of this Plan is to provide benefits to employees of the
Company and certain of its affiliates whose Matching Contributions and
Nonelective Contributions are limited under the Amgen Inc. Retirement and
Savings Plan (the "Retirement Plan"). The Company intends that the Plan will
aid in retaining and attracting employees of exceptional ability by providing
them with these benefits.
ARTICLE II
DEFINITIONS
-----------
For the purposes of this Plan, the following terms, when capitalized, have the
following meanings. Any capitalized term in this Plan that is not defined in
this Article II has the meaning given such term in the Retirement Plan.
2.1 Account means the Account maintained by the Company in accordance with
-------
Article IV with respect to Matching Credits, Core Credits and Earnings.
2.2 Beneficiary means the person, persons or entity entitled under Article VI
-----------
to receive Plan benefits payable in the event of your death.
2.3 Board means the Board of Directors of the Company.
-----
2.4 Code means the Internal Revenue Code of 1986, as amended.
----
2.5 Committee means the Compensation Committee of the Company's Board.
---------
2.6 Company means Amgen Inc. or any subsidiary or affiliate of Amgen Inc.
-------
selected by the Board or the Committee to participate in the Plan.
2.7 Compensation has the same meaning as such term has under the Retirement
------------
Plan, except that, for purposes of this Plan, Compensation is not limited by the
Salary Cap and Compensation for purposes of this Plan will not include any
foreign assignment differential, that is, an amount paid to you to compensate
for costs unique to an overseas assignment.
1
<PAGE>
2.8 Core Credit means the amount credited to your Account under Section 4.2(a)
-----------
of the Plan.
2.9 Deferral Commitment means the election to defer "Participant Elected
-------------------
Contributions," as described in the Retirement Plan.
2.10 Earnings means the amount credited to your Account under Section 4.3 of
--------
the Plan.
2.11 Hour of Service has the same meaning as such term in the Retirement Plan
---------------
except that, for purposes of determining Hours of Service under this Plan, you
will be credited only for the period during which you are a Regular Full-Time
Employee, including any period during which you are on a leave of absence that
has been approved by the Company.
2.12 Matching Credit refers to amounts credited to your Account under Section
---------------
4.2(b) of the Plan.
2.13 Normal Retirement Date means the first day of the month coinciding with or
----------------------
next following your attainment of age 65.
2.14 Participation Agreement means the agreement you file with the Committee
-----------------------
acknowledging the terms of the Plan and enrolling in the Plan.
2.15 Plan means this Amgen Inc. Supplemental Retirement Plan.
----
2.16 Regular Full-Time Employee means an Employee of the Company who is
--------------------------
classified as a Regular Full-Time Employee by the Company, in its sole
discretion. The Company's classification of you as a Regular Full-Time Employee
or something other than a Regular Full-Time Employee will be conclusive and
binding. You will not be a Regular Full-Time Employee if the Company does not
withhold federal income and employment taxes from your Compensation or if the
Company classifies you as a part-time employee, leased employee, temporary
employee, independent contractor, or consultant, regardless of the length of
time you have held such position with the Company.
2.17 Retirement Plan means the Amgen Inc. Retirement and Savings Plan.
---------------
2.18 Salary Cap means the highest level of compensation that can be considered
----------
for the purpose of calculating benefits under Section 401(a)(17) of the Code.
2.19 Spouse means your wife or husband who is lawfully married to you at the
------
time of your death.
2.20 Year of Service means each calendar year or portion thereof during which
---------------
you are credited with 1,000 Hours of Service.
2
<PAGE>
ARTICLE III
ELIGIBILITY AND PARTICIPATION
------------------------------
3.1 Eligibility. You are eligible to elect to receive credits in your Account
-----------
as provided in Section 4.2 of the Plan during the time you are a Regular Full-
Time Employee and your Compensation for the relevant calendar year is in excess
of the Salary Cap.
3.2 Election. Once you are eligible under Section 3.1 of the Plan, you may
--------
elect to receive credits under the Plan by submitting a Participation Agreement
to the Committee by the last day of the calendar year in which you are eligible
and wish to receive credits. Your Participation Agreement will remain in effect
unless and until you submit a new Participation Agreement changing or canceling
your future election.
3.3 Participation. After you first become eligible and elect to receive
-------------
credits under the Plan, you will continue to participate in the Plan (that is,
you will receive Earnings on the balance in your Account) as long as you have
not received a distribution of your Account, even if you are no longer eligible
to receive credits under the Plan.
ARTICLE IV
CREDITS TO YOUR ACCOUNT
-----------------------
4.1 Account. For record keeping purposes only, an Account will be maintained
-------
for all persons participating in the Plan. Your Account will be used solely to
determine the amounts to be paid to you under the Plan. Your Account will not
constitute or be treated as a trust fund for your benefit.
4.2 Credits. The Company will credit your Account with your share of Matching
-------
Credits and Core Credits.
(a) Core Credits. The amount of Core Credits to be credited to your account
------------
will be determined by calculating first what you would have received as a
Nonelective Contribution under the Retirement Plan as if the Salary Cap
were not in effect, less the amount of Nonelective Contributions that were
actually contributed on your behalf to the Retirement Plan.
(b) Matching Credits. The amount of Matching Credits to be credited to your
----------------
account will be the amount of matching contributions that would have been
made on your behalf under the Retirement Plan as if the Salary Cap were not
in effect, based on your Deferral Commitment in effect at the time your
Compensation reaches the Salary Cap for the year (provided that you can
demonstrate to the Company that you have set aside for investment an amount
equal to the amount you were prevented from deferring because of the Salary
Cap), less the amount of matching contributions that were actually
contributed on your behalf to the Retirement Plan.
3
<PAGE>
4.3 Earnings. Your Account will be credited with Earnings with respect to the
--------
investments of the Core and Matching Credits credited to your Account. Earnings
will be credited at the rate declared by the Committee, acting in its sole
discretion, after taking into account the investment performance of the
investment vehicles selected by the Committee, or, if the Committee permits,
selected by you from among the investment vehicles available under the
Retirement Plan.
4.4 Vesting of Your Account. Your Account will become fully vested upon
-----------------------
termination of your employment with the Company on or after (1) your Normal
Retirement Date, (2) the date of your Disability, or (3) your death. If your
employment with the Company is terminated for any other reason, your Account
will be vested in accordance with the following schedule:
Years of Service Vested Percentage
---------------- -----------------
Less than 5 0%
5 but less than 6 50%
6 but less than 7 60%
7 but less than 8 70%
8 but less than 9 80%
9 but less than 10 90%
10 or more 100%
All Accounts will be subject to the creditors of the Company in the event of the
insolvency of the Company.
4.5 Determination of Accounts. Your Account will consist of all your credited
-------------------------
Matching Credits, Core Credits, and Earnings.
4.6 Statement of Accounts. Prior to March 1 of each year or at such other time
---------------------
as determined by the Committee, the Committee will distribute statements to you
showing the balance of your Account.
4
<PAGE>
ARTICLE V
DISTRIBUTIONS
-------------
5.1 Distributions. Following the termination of your employment with the
-------------
Company, the Company will pay you the vested balance in your Account. The
payments will be made to you in cash and may be paid either in a lump sum or in
periodic installments at such time and in such form as determined by the
Committee. If you are paid in periodic installments, the amount of each
installment will be equal to the vested balance in your Account divided by the
number of remaining installments that you are to receive. Any unpaid balance
will continue to receive Earnings. In the event of your death prior to receiving
your full distribution, the unpaid balance will be paid to your Beneficiary at
such times and in such form as the Committee determines in its sole discretion.
5.2 Withholding Payroll Taxes. The Company will withhold any taxes required to
-------------------------
be withheld from payments made from the Plan to satisfy any federal, state, or
local requirements regarding tax withholding.
5.3 Payment to Guardian. If a Plan benefit is payable to a minor, a person
-------------------
declared incompetent or a person incapable of handling the disposition of
property, the Committee may direct payment of such Plan benefit to the guardian,
legal representative or person having the care and custody of such minor,
incompetent or person. The Committee may require proof of incompetency,
minority, incapacity or guardianship as may be appropriate prior to distribution
of the Plan benefit. Such distribution completely discharges the Committee and
the Company from all liability with respect to such benefit.
ARTICLE VI
BENEFICIARY DESIGNATION
-----------------------
6.1 Beneficiary Designation. Your Beneficiary under the Plan will be the same
-----------------------
Beneficiary you select under the Retirement Plan. If you change your
Beneficiary designation under the Retirement Plan, your Beneficiary designation
under the Plan will automatically change as well.
6.2 No Beneficiary Designation. If you fail to designate a Beneficiary under
--------------------------
the Retirement Plan, or if the Beneficiary you designate dies before you or
before complete distribution of your benefits, your designated Beneficiary will
be the first of the following classes in which there is a survivor:
(a) your surviving Spouse;
(b) your children, except if any of the children predecease you but leave
surviving issue, then such issue will take by right of representation
the share the parent would have taken if living;
5
<PAGE>
(c) your estate.
6.3 Effect of Payment. The distribution to the Beneficiary completely
-----------------
discharges Company's obligations under this Plan.
ARTICLE VII
ADMINISTRATION
--------------
7.1 Committee; Duties. This Plan is administered by the Committee. The
-----------------
Committee is responsible for making such rules, interpretations and computations
as may be appropriate. Any decision of the Committee with respect to the Plan
including, without limitation, any determination of eligibility to receive
credits under the Plan and any calculation of Plan benefits, is conclusive and
binding on all persons. The Committee may appoint a panel consisting of any
number of individuals, who may or may not be employees of the Company, to carry
out the Committee's duties and responsibilities under the Plan.
7.2 Agents. The Committee may employ other agents and delegate to them such
------
administrative duties as it sees fit, and may from time to time consult with
counsel who may be counsel to the Company.
7.3 Binding Effect of Decisions. The decisions or actions of the Committee
---------------------------
with respect to any question arising out of or in connection with the
administration, interpretation or application of the Plan and the rules or
regulations promulgated hereunder will be final, conclusive and binding upon all
persons having any interest in the Plan.
7.4 Indemnity of Committee. The Company will indemnify and hold harmless the
----------------------
members of the Committee against any and all claims, loss, damage, expense or
liability arising from any action or failure to act with respect to this Plan,
except in the case of the Committee's gross negligence or willful misconduct.
7.5 Claims Procedure. The Claims Procedure under the Plan is the same as that
----------------
under the Retirement Plan, except that the Committee will be substituted for the
Review Panel.
ARTICLE VIII
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
8.1 Amendment. The Committee may at any time amend the Plan in whole or in
---------
part. No amendment may decrease or restrict the amount accrued in any Account
maintained under the Plan through the date of Amendment.
6
<PAGE>
8.2 Company's Right to Terminate. The Board may at any time partially or
----------------------------
completely terminate the Plan if, in its judgment, the tax, accounting, or other
effects of the continuance of the Plan, or potential payments thereunder, would
not be in the best interests of the Company.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Unfunded Plan. This Plan is intended to be an unfunded plan for tax law
-------------
purposes and for purposes of Title I of the Employee Retirement Income Act of
1974, as amended ("ERISA"), maintained primarily to provide benefits for a
select group of management or highly compensated employees. This Plan is not
intended to create an investment contract, but to provide tax planning
opportunities and retirement benefits to eligible individuals who have elected
to participate in the Plan. Eligible individuals are members of management who,
by virtue of their position with the Company, are uniquely informed as to the
Company's operations and have the ability to materially affect the Company's
profitability and operations.
9.2 Unsecured General Creditor. Neither you nor your Beneficiaries, heirs,
--------------------------
successors and assigns will have any legal or equitable rights, interest or
claims in any property or assets of the Company, nor will they be Beneficiaries
of, or have any rights, claims or interests in any life insurance policies,
annuity contracts or the proceeds therefrom owned or which may be acquired by
the Company. Such policies or other assets of the Company will not be held
under any trust for your benefit or that of your Beneficiaries, heirs,
successors or assigns, or held in any way as collateral security for the
fulfilling of the obligations of the Company under this Plan. Any and all of
the Company's assets and policies will be, and remain, the general, unpledged,
unrestricted assets of the Company. The Company's obligation under the Plan
will be that of an unfunded and unsecured promise of the Company to pay money in
the future.
9.3 Trust Fund. The Company will pay all Plan benefits. At its discretion,
----------
the Company may establish one or more trusts, with such trustees as the Board
may approve, for the purpose of providing for the payment of such benefits.
Such trust or trusts may be irrevocable, but the assets thereof will be subject
to the claims of the Company's creditors. To the extent any benefits provided
under the Plan are actually paid from any such trust, the Company will have no
further obligation with respect thereto, but to the extent not so paid, such
benefits will remain the obligation of, and paid by, the Company.
9.4 Nonassignability. Neither you nor any other person may commute, sell,
----------------
assign, transfer, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, which are expressly
declared to be nonassignable and nontransferable. No part of the amounts
payable will, prior to actual payment, be subject to seizure or sequestration
for the payment of any debts, judgments, alimony or separate
7
<PAGE>
maintenance owed by you or any other person (other than amounts owed to the
Company's creditors in the event of the Company's insolvency), nor be
transferable by operation of law in the event of the bankruptcy or insolvency of
you or any other person (other than the Company). Notwithstanding the above,
vested benefits will be payable to an individual other than you under this Plan
in accordance with a court order upon the determination by the Committee that
such order (i) has been issued by a court with appropriate jurisdiction (ii) has
been properly served on the Company, (iii) is reasonably clear to, and
administrable by, the Committee, (iv) does not require any benefit not otherwise
provided under the Plan, and (v) requires payment of a portion of your vested
Account to someone other than you.
9.5 Not a Contract of Employment. The terms and conditions of this Plan may
----------------------------
not be construed to constitute a contract of employment between you and the
Company and you (or your Beneficiary) will have no rights against the Company
except as otherwise specifically provided herein. Moreover, nothing in this
Plan will be deemed to give you the right to be retained in the service of the
Company as a Regular Full-Time Employee or otherwise, or to interfere with the
right of the Company to discipline or discharge you at any time.
9.6 Cooperation. You are required to cooperate with the Company by furnishing
-----------
any and all information requested by the Company in order to facilitate the
payment of benefits hereunder.
9.7 Terms. Whenever words are used in this Plan in the masculine they will be
-----
construed as though they were used in the feminine in all cases where they would
so apply; and whenever any words are used in this Plan in the singular or in the
plural, they will be construed as though they were used in the plural or the
singular, as the case may be, in all cases where they would so apply.
9.8 Captions. The captions of the articles, sections and paragraphs of this
--------
Plan are for convenience only and do not control or affect the meaning or
construction of any of its provisions.
9.9 Governing Law. The provisions of this Plan are to be construed and
-------------
interpreted according to the laws of the State of California to the extent that
they have not been preempted by federal law.
9.10 Validity. In case any provision of this Plan is found to be held illegal
--------
or invalid for any reason, said illegality or invalidity will not affect the
remaining parts hereof, but this
8
<PAGE>
Plan will be construed and enforced as if such illegal and invalid provision had
never been inserted herein.
Adopted this 1st day of November 1999.
/s/ Edward F. Garnett
Edward F. Garnett
Vice President, Human Resources
9
<PAGE>
EXHIBIT 10.24
October 11 , 1999
Dr. N. Kirby Alton
815 Country Valley Road
Thousand Oaks, CA 91362
Re: Agreement Regarding Part-Time Special Assignment Position
---------------------------------------------------------
Dear Kirby:
On behalf of Amgen Inc. ("Amgen"), I am pleased to confirm in this letter
agreement (the "Agreement") the terms and conditions under which you will
continue to be employed by Amgen from and after the date upon which you cease to
serve as Amgen's Senior Vice President of Development, which we currently
contemplate will occur on October 20, 1999 (the "Effective Date"). You will
remain in your current position and receive all compensation and benefits of
that position between now and the Effective Date. This Agreement also provides
for the termination of your employment with Amgen on or before October 19, 2002,
as set forth below.
1. POSITION AND DUTIES
-------------------
On the Effective Date, you will cease to be a regular full-time employee of
Amgen and will resign from all offices you hold in Amgen and its
subsidiaries, but you will continue to be employed by Amgen as an employee
in a part-time special assignment position, at grade level 37, with the
title of Special Advisor, Development (in connection with resigning your
offices, you agree to execute and return to Amgen with this Agreement a
signed original resignation letter (the "Resignation Letter") on your Amgen
letterhead in the form provided in Appendix A to this Agreement. Appendix
A is hereby incorporated into and made part of the Agreement by reference).
As Special Advisor, Development, it is anticipated that you will work with
George Morstyn on Amgen's Product Development efforts. As we have
discussed, George would like you to assist him in monitoring regulatory
developments in the Pharmaceutical industry as they relate to Amgen's
current products, products which Amgen is in the process of developing and
potential future products, including those which Amgen may acquire by
corporate or other acquisitions. You will provide to George from time to
time, upon his reasonable request, written or oral reports and/or copies of
other written materials with regard to the foregoing.
Also as we have discussed, the position of Special Advisor, Development is
a part-time special assignment position in which you will be expected to
work a minimum of ten (10) hours per month and no more than twenty (20)
hours per month. The times and places where this work will be performed
will be at your choosing. You will maintain a log showing the time you
have spent performing the foregoing services and this log shall be deemed
conclusive evidence of the time spent.
<PAGE>
We have agreed that your part-time special assignment will continue until
October 19, 2002, subject to extension as you and Amgen may agree in
writing or to earlier termination by you or Amgen as set forth in Paragraph
8 of this Agreement. As long as you are employed by Amgen, you will
continue to be subject to Amgen's policies and procedures, including but
not limited to those relating to the non-disclosure of proprietary and
confidential information and you will continue to be subject to the Amgen
Inc. Proprietary Information and Inventions Agreement, executed by you on
or about January 15, 1982 (the "Proprietary Agreement") (which also
contains obligations that survive the termination of your employment with
Amgen).
2. COMPENSATION AND BENEFITS
-------------------------
Following is a brief description of the compensation and benefits you will
receive under this Agreement during your part-time special assignment. The
terms and conditions of all of your benefits are subject to the terms and
conditions of each of the applicable plans, policies or arrangements, as
they may be amended or terminated by Amgen from time to time.
2.1 Compensation: Your compensation will be $72,250 per month, subject to
------------
applicable income tax and employment tax withholding requirements. In
addition, Amgen will reimburse you for any reasonable business
expenses you incur in performing your duties, subject to Amgen's
standard employee expense reimbursement policies.
2.2 Administrative Support: Amgen will provide you with an office and
----------------------
secretarial assistance at our Thousand Oaks headquarters. You will
also have access to the services of Amgen's travel department.
2.3 Management Incentive Plan: You will not be eligible to participate in
-------------------------
Amgen's Management Incentive Plan (the "MIP") for the calendar year
1999 or for any year after 1999.
2.4 Special Bonus for 1999 Calendar Year: As part of the transition to
------------------------------------
the part-time special assignment position, you will be entitled to a
special bonus in the amount that is the greater of: (1) the MIP
payment that you would have received for the calendar year 1999 based
on what would have been your MIP rating for the 1999 calendar year, if
you had been eligible for that MIP payment and if you had been deemed
to have been a regular full-time employee for the entire year for
purposes of the MIP or (2) the MIP payment you received for the 1998
calendar year. This special bonus will be paid to you at the same
time that MIP distributions are made to participants in the MIP in
2000.
2.5 Employee Stock Purchase Plan: You will be eligible to continue to
----------------------------
participate in Amgen's Employee Stock Purchase Plan (the "ESPP") until
the end of the current purchase period (March 31, 2000). However, due
to the fact that you will be working less than twenty (20) hours per
week, you will not be eligible to participate in the ESPP after the
current purchase period.
2
<PAGE>
2.6 Supplemental Retirement Plan: You will be eligible to participate in
----------------------------
Amgen's Supplemental Retirement Plan (the "SRP") if you continue to
meet the eligibility requirements of the SRP. Notwithstanding the
foregoing, Amgen acknowledges and agrees that your inability to
participate in the Amgen Retirement and Savings Plan (the "401(k)
Plan") shall not make you ineligible to participate in the SRP.
2.7 Retirement and Savings Plan: Pursuant to Section 3.3 of the 401(k)
---------------------------
Plan, employees that are eligible to participate in the 401(k) Plan
are those that are classified as "regular full-time" or "regular part-
time" employees. By signing below, you expressly acknowledge and
agree that Amgen is not classifying you as a regular full-time or
regular part-time employee and therefore, as of the Effective Date,
you will not be eligible to make contributions or to have
contributions made on your behalf to the 401(k) Plan. This letter
qualifies as an agreement pursuant to Section 3.3(c)(2) of the 401(k)
Plan. You will, however, be able to maintain your 401(k) account in
the Amgen plan to the extent allowed by law.
2.8 Change of Control Severance Plan: You will continue to be eligible to
--------------------------------
participate in the Amgen Inc. Change of Control Severance Plan (the
"CIC Plan"). However, on the Effective Date you will cease to be a
Group I Participant and will become a Group II Participant in the CIC
Plan by virtue of your ceasing to be a member of Amgen's Operating
Committee. Notwithstanding the foregoing, in the event that the
aggregate benefits provided for in this Agreement are greater than
those provided in the CIC Plan upon a termination of employment for
which you would be eligible to receive benefits under the terms and
conditions of the CIC Plan, this Agreement, rather than the CIC Plan
shall govern and control your rights upon a termination of employment;
provided, that, in such event, and if applicable, you shall also
receive the 280G tax gross-up benefit provided in Section 4.1(G) of
the CIC Plan.
2.9 Stock Options:
-------------
2.9.1 No New Grants: As an employee in a part-time special
-------------
assignment position, you will not be eligible to receive
additional stock option grants after the Effective Date.
2.9.2 Accelerated Vesting: Amgen shall take the necessary action to
-------------------
accelerate the vesting of the following options from previous
grants (and no others, unless an acceleration takes place
pursuant to Paragraph 8 of this Agreement) so that the
following options will be immediately and fully vested as of
the Effective Date (provided that the Agreement shall be
effective as provided in Subparagraph 1.2(e) of Appendix B to
this Agreement by October 20, 1999) to the extent that they
have not previously vested:
3
<PAGE>
<TABLE>
<CAPTION>
No. of Option Shares Grant No. Originally Scheduled
- ------------------------ --------- --------------------
Expiration Date
--------------------
<S> <C> <C>
3,052 933511 7/1/03
1,642 945177 7/1/04
18,948 938853 7/1/03
8,013 945178 7/1/03
6,372 945178 7/1/04
</TABLE>
Amgen shall provide you with a copy of the resolutions taking
the action described in this Subparagraph 2.9.2.
2.9.3 Vesting During Special Assignment: To the extent that you
---------------------------------
continue in your part-time special assignment, you will be
eligible to continue to vest in all unvested options that have
previously been granted to you by Amgen on the dates and in the
manner provided in your stock option grant agreements and
applicable stock option plans, except as provided in
Subparagraph 2.9.2. No stock options will vest following the
Termination Date as defined in Paragraph 8 of this Agreement.
2.9.4 Cooperation To Restructure: As we have discussed, it is our
--------------------------
intention that your ability to continue to vest in and exercise
options while in your part-time special assignment position
will not result in any additional compensation charges to Amgen
in accordance with U.S. generally accepted accounting
principles. Accordingly, if at any time Amgen determines that
it is reasonably likely that Amgen will incur a compensation
charge as a result of your vesting or exercising options in
your part-time special assignment position then you agree that
you will use your reasonable best efforts to cooperate with
Amgen to restructure this Agreement and your position as Amgen
reasonably determines is necessary for you to continue to be
able to vest and exercise your options without creating a
compensation charge to Amgen in accordance with U.S. generally
accepted accounting principles and without causing you to lose
any of the benefits of this Agreement. However, if no such
accommodation is possible without materially affecting your
rights hereunder, your rights as set forth herein shall not be
modified or altered in any fashion which would have any adverse
effect on you.
2.9.5 No Amendment to Stock Option Grant Agreements or Stock Option
-------------------------------------------------------------
Plans: Nothing in this Agreement shall be deemed to alter,
-----
amend, or otherwise modify the terms of your stock option grant
agreements or the terms of the applicable stock option plans.
2.10 Medical, Dental, and Vision Insurance and COBRA: Your medical,
-----------------------------------------------
dental, and vision insurance coverage will terminate on the Effective
Date. If after the Effective Date, you or your eligible dependents
should elect to continue coverage under
4
<PAGE>
Amgen's group health plan(s) under the Consolidated Omnibus Budget
Reconciliation Act ("COBRA") continuation rights, and you or your
eligible dependents timely take the required steps to initiate such
coverage, then Amgen will pay the cost of COBRA coverage for you and
your eligible dependents until the earlier of April 19, 2001, or until
you and/or your eligible dependents no longer qualify for COBRA
continuation rights or, in the case of your dependents, the date on
which such dependents cease to be eligible dependents under Amgen's
group health plan(s), whichever occurs first. If you and/or your
eligible dependents qualify for COBRA benefits on or after April 19,
2001, then you and/or your eligible dependents will have the option of
continuing coverage under Amgen's group health plan(s), under COBRA
and at Amgen's expense until October 19, 2002 and at your own expense
thereafter. If you obtain health insurance coverage for you and/or
your COBRA eligible dependents for the period between April 19, 2001
and the Termination Date as defined in Paragraph 8 of this Agreement,
then Amgen will reimburse you for the full cost of such insurance
premiums. To receive reimbursement, submit copies of the health
insurance premium invoices and other applicable information on a
monthly basis to Amgen. For a complete description of the rights and
responsibilities you and your eligible dependents have under COBRA,
you must refer to the COBRA documents that will be sent to you by
Amgen or its designee under separate cover.
2.11 Basic Life Insurance: Your Basic Life Insurance coverage will
--------------------
terminate on the Effective Date. If you are interested in converting
this insurance to an individual policy, please contact Jean Ellis at
Aetna (860) 273-7252 within thirty (30) days after the Effective Date.
2.12 Long-Term Disability Insurance: Your Long-Term Disability Plan
------------------------------
coverage will terminate on the Effective Date and there is no
conversion policy or plan available for this coverage.
2.13 Other Benefits: As an employee in a part-time special assignment
--------------
position, you will not be eligible to participate in the following
Amgen benefit plans and programs as well as any other benefits not
specifically listed in this letter: Dependent Care Assistance
Program; Medical Flexible Spending Account; Voluntary and Dependent
Life Insurance Coverage; Accidental Death and Dismemberment benefit;
use of Amgen Fitness Center facilities; use of Amgen Child Care Center
facilities; personal illness; vacation/optional holiday pay; family
illness/personal time; bereavement leave or holidays. Your accrued
and unused vacation hours and optional holiday pay will be paid to you
on the next regularly scheduled payroll date following the Effective
Date.
3. TRANSFER OF COMPANY PROPERTY
------------------------------
Except as provided in the remainder of this Subparagraph, you promise that
on or before the Termination Date, as defined in Paragraph 8 of this
Agreement, you will return to Amgen all files, memoranda, documents,
records, copies of the foregoing, credit cards, keys, and
5
<PAGE>
any other Amgen property in your possession or under your control. As an
employee in a part-time special assignment position, you will continue to
have access to and use of those two telecopier machines and two laptop
computers that Amgen previously provided to you. As of the termination of
your employment with Amgen, you will be entitled to retain the equipment
referenced in the preceding sentence provided that you take the steps
necessary to ensure that all of Amgen's proprietary information is deleted
from the two laptop computers by Amgen's computer services department as of
the Termination Date as defined in Paragraph 8 of this Agreement.
4. OFFICERS AND DIRECTORS INSURANCE
--------------------------------
During your part-time special assignment and for four (4) years following
the Termination Date, you will be covered by such officers and directors
insurance coverage that Amgen provides to its senior executive officers at
your salary grade level during that time period. In addition, Amgen shall
indemnify and hold you harmless both during and after the entire term of
your employment (including your service hereunder) to the fullest extent
permitted by law with regards to actions or inactions in relation to your
duties performed at Amgen, both before and after the date of this
Agreement. Furthermore, you will be entitled to reimbursement of expenses
incurred in accordance with your rights under California Labor Code Section
2802.
5. LEGAL FEE AND FINANCIAL/TAX CONSULTING REIMBURSEMENT
----------------------------------------------------
Amgen will reimburse you for the legal expenses reasonably incurred by you
in connection with the review of this Agreement up to a maximum amount of
$20,000. Amgen will also reimburse you for financial and/or tax counseling
expenses that you reasonably incur, up to a maximum amount of $3,000 per
year, for each year of this Agreement.
6. REFERENCE
---------
Amgen will provide you with a positive written factual reference. I should
be listed as your work reference. You agree to confer with me on the form
and nature of the reference to be provided to prospective employers and
other third parties concerning the work that you have performed at Amgen.
If, by sixty (60) days after the Effective Date, you are unable to reach
agreement with me on the written reference to be provided, then Amgen's
only obligation will be to respond to inquiries by confirming to
prospective employers or other third parties the dates of your employment
at Amgen and the last position you held as an Amgen employee.
7. RELOCATION
----------
If you decide to relocate outside of the fifty (50) mile radius of your
Residence (as defined below) during the period of your part-time special
assignment or immediately at the termination thereof for any reason other
than for a Stated Reason, as defined below, and sell your current, local,
primary residence located in North Ranch, California (the "Residence")
6
<PAGE>
so that the sale escrow closes no later than October 19, 2002, then Amgen
will provide you with the following:
7.1 If your new employer, if any, provides for part of the following
expenses, then Amgen would pay normal and customary amounts beyond
those which such new employer paid, up to the amounts that Amgen would
normally pay, as of the date your employment with Amgen terminated, to
newly hired Amgen employees in your job: normal and customary costs
for the packing, shipping, delivery, storage (for up to ninety (90)
days) and unpacking of your common household goods and furnishings.
7.2 If you shall sell your Residence so that the close of escrow on the
sale occurs prior to October 19, 2002, then in such event, Amgen will
reimburse you for those normal and non-recurring customary sales costs
associated with the sale of such residence, subject to the following
terms and conditions:
7.2.1 Amgen's obligation will be limited to that amount which, as of
the day immediately prior to the date of this Agreement, Amgen
would pay to reimburse other employees of your then salary
grade level;
7.2.2 to the extent that your new employer, if any, reimburses you
for, or pays any of, such non-recurring customary sales costs,
then Amgen will only reimburse you for that portion of the non-
recurring customary sales costs that exceed the amount paid for
by such new employer; and
7.2.3 you provide all documentation requested by Amgen in connection
with this Subparagraph 7.2, upon the request of Amgen.
7.3 If you meet the above conditions and so elect, Amgen will grant you
the opportunity to place your Residence in the "Amgen Marketing
Assistance and Homesale Program" (the "Program"). For a description
of the Program, please contact Christine Swinburne of the Amgen Human
Resources Department. In order to participate in the Program, you
must notify Ms. Swinburne in writing, of your election to participate
in the Program no later than April 19, 2002, in order to complete the
home sale process by October 19, 2002. In order for Amgen to provide
you with the assistance provided for in this Subparagraph 7.3 in
connection with the sale of your Residence, you must give Amgen
control over the disposition of the property, must provide such
documentation as Amgen may request and must cooperate with Amgen in
the sale of the Residence.
8. EARLY TERMINATION OF SPECIAL ASSIGNMENT
---------------------------------------
We have agreed that you will continue in your part-time special assignment
position until October 19, 2002, at which time your employment with Amgen
will terminate, provided however, that Amgen may terminate your
7
<PAGE>
employment prior to October 19, 2002 in the event that a Stated Reason (as
defined below) occurs, and you may terminate your employment prior to
October 19, 2002 upon thirty (30) days prior written notice to Amgen in the
event of a Covered Breach (as defined below) or otherwise.
For purposes of this Paragraph 8, a "Stated Reason" means (i) your
conviction of a felony, or (ii) the engaging by you in conduct that
constitutes willful gross neglect or willful gross misconduct in carrying
out your duties set forth in Paragraph 1 of this Agreement, resulting, in
either case, in material economic harm to Amgen, unless you believed in good
faith that such conduct was in, or not contrary to, the best interests of
Amgen. For purposes hereof, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good
faith.
For purposes of this Paragraph 8, a "Covered Breach" means a breach by Amgen
of its obligations under this Agreement in the following manner only (i) any
reduction in your salary or benefits provided for in this Agreement or (ii)
the assignment of duties to you that are inconsistent with, or greater in
scope than, those set forth in Paragraph 1 of this Agreement or (iii) a
reduction in your title or position or the requirement that you work with
anyone other than George Morstyn or a mutually agreed successor to George
Morstyn or (iv) a failure by Amgen to have any successor expressly assume
this Agreement in accordance with Paragraph 17 of this Agreement. In order
for an event described in the preceding sentence to qualify as a Covered
Breach, you must give written notice of the event to Amgen and Amgen must
fail to cure the event within 30 days of receipt of that written notice.
In the event your employment is terminated by Amgen for a Stated Reason or
if you terminate your employment for any reason other than a Covered Breach
then your payments and benefits from Amgen under this Agreement, including
but not limited to the vesting of your stock options, will cease as of the
effective date of the termination of your employment.
In the event your employment is terminated by Amgen not for a Stated Reason
or if you terminate your employment for a Covered Breach, then (i) you shall
be paid in a cash lump-sum all of the remaining payments due to you under
this Agreement from the date of your termination through October 19, 2002,
(ii) you shall continue to be provided the benefits set forth in Paragraph
2.10 of this Agreement through October 19, 2002 and (iii) Amgen shall take
the necessary action to accelerate the vesting of all of your outstanding
and then unvested stock options so that they shall vest and become
immediately exercisable in full as of the Termination Date; such stock
options, as so accelerated shall be exercisable as provided in your stock
option grant agreements and applicable stock option plans. Amgen shall
provide you with a copy of the resolutions taking the action described in
clause (iii) of the preceding sentence.
The date of the termination of your employment for any of the foregoing
reasons, or upon your death, is hereinafter referred to as the "Termination
Date."
8
<PAGE>
9. DEATH
-----
In the event of the termination of your employment hereunder by reason of
your death prior to October 19, 2002, all of the remaining payments
pursuant to Paragraph 2.1 of this Agreement will be payable to the
beneficiary or beneficiaries that you designate in writing to Amgen. Your
other remaining benefits will be treated according to their specific terms
concerning such death. For purposes of Paragraph 10(a) of the Amgen Inc.
Amended and Restated 1991 Equity Incentive Plan, your employment with Amgen
shall be deemed to have commenced in 1982.
10. RELEASE
-------
In exchange for consideration provided to you under this Agreement, you
hereby agree to execute and be bound by the General Release attached hereto
as Appendix B (the "General Release") and to return the executed Agreement,
together with the executed General Release, to me on or before October 12,
1999. The General Release is hereby incorporated into and made part of the
Agreement by this reference.
11. INTERPRETATION
--------------
This Agreement, Resignation Letter attached hereto as Appendix A, and the
General Release attached hereto as Appendix B shall be construed as a whole
according to their fair meaning, and not strictly for or against any of the
parties. Unless the context indicates otherwise, the term "or" shall be
deemed to include the term "and" and the singular or plural number shall be
deemed to include the other. Paragraph headings used in this Agreement and
the General Release are intended solely for convenience of reference and
shall not be used in the interpretation of any of this Agreement or the
General Release.
12. NOTICES
-------
For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested,
postage prepaid, addressed, if to you, to the last address on file with
Amgen and if to Amgen, to its executive offices or to such other address as
any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall be effective only
upon receipt.
13. LEGAL FEES; ARBITRATION
-----------------------
13.1 Agreement to Arbitrate: Any dispute (an "Arbitrable Dispute")
----------------------
arising between the parties, including but not limited to those
concerning the formation, validity, interpretation, effect, or alleged
violations of this Agreement or the General Release, must be submitted
to binding arbitration for resolution in Los Angeles, California in
accordance with the rules and procedures of the Employment Dispute
Resolution
9
<PAGE>
Rules of the American Arbitration Association then in effect. The
decision of the arbitrator shall be final and binding on both parties,
and any court of competent jurisdiction may enter judgment upon the
award. Amgen shall pay all expenses relating to such arbitration,
including, but not limited to, your legal fees. Except for an action
taken outside of arbitration pursuant to Subparagraph 13.3 of this
Agreement, should either party pursue any other legal or
administrative action against the other, the responding party shall be
entitled to the return of any payments that party made under the
Agreement and shall be entitled to recover all costs, expenses and
attorneys' fees the responding party incurs as a result of such
action. The arbitrator may not modify or change this Agreement or the
General Release in any way.
13.2 Exclusive Remedy: Arbitration in this manner shall be the exclusive
----------------
remedy for any Arbitrable Dispute. The arbitrator's decision or award
shall be fully enforceable and subject to an entry of judgment by a
court of competent jurisdiction. Except for an action taken outside
of arbitration pursuant to Subparagraph 13.3 of this Agreement, should
you or Amgen, without the consent of the other party, attempt to
resolve an Arbitrable Dispute by any method other than arbitration
pursuant to this Paragraph 13, the responding party shall be entitled
to recover from the initiating party all damages, expenses and
attorneys' fees incurred as a result.
13.3 Sole Exception: Notwithstanding the foregoing, a dispute relating to
--------------
the alleged use or disclosure of information which is prohibited by
the Proprietary Agreement, and/or the criticism, denigration or
disparagement of Amgen, any other Amgen Releasee, as defined in
Subparagraph 1.1 of the General Release, or any of Amgen's products,
processes, experiments, policies, practices, standards of business
conduct, or areas or techniques of research may be resolved through a
means other than arbitration, at Amgen's sole option.
14. GOVERNING LAW
-------------
This Agreement is governed by, and is to be construed and enforced in
accordance with, the laws of the State of California, without regard to
principles of conflicts of laws.
15. TAXES
-----
You acknowledge and agree that all payments made pursuant to this Agreement
shall be made less applicable tax withholdings and/or other withholdings as
required by law. You acknowledge and agree that you, and not Amgen, shall
be solely responsible for any taxes imposed upon you as a result of the
payments and benefits you receive under the Agreement with the sole
exception of the potential 280G tax gross-up as provided in Subparagraph
2.8 of this Agreement.
10
<PAGE>
16. MITIGATION
----------
You shall not be required to mitigate amounts payable under this Agreement
by seeking other employment or otherwise, and there shall be no offset
against amounts due you under this Agreement on account of subsequent
employment. Additionally, amounts owed to you under this Agreement shall
not be offset by any claims Amgen may have against you and Amgen's
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder, shall not be affected by
any other circumstances, including, without limitation, any counterclaim,
recoupment, defense or other right which Amgen may have against you or
others.
17. SUCCESSORS; BINDING AGREEMENT
-----------------------------
17.1 Amgen's Successors: No rights or obligations of Amgen under this
------------------
Agreement may be assigned or transferred except that Amgen will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Amgen to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that
Amgen would be required to perform it if no such succession had taken
place. As used in this Agreement, "Amgen" shall mean Amgen as herein
before defined and any successor to its business and/or assets (by
merger, purchase or otherwise) which executes and delivers the
agreement provided for in this Paragraph 17 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation
of law.
17.2 Your Successors: No rights or obligations of you under this
---------------
Agreement may be assigned or transferred by you other than your rights
to payments or benefits hereunder, which may be transferred only by
will or the laws of descent and distribution. Upon your death, this
Agreement and all rights of you hereunder shall inure to the benefit
of and be enforceable by your beneficiary or beneficiaries, personal
or legal representatives, or estate, to the extent any such person
succeeds to your interests under this Agreement. You shall be
entitled to select and change a beneficiary or beneficiaries to
receive any benefit or compensation payable hereunder following your
death by giving Amgen written notice thereof. In the event of your
death or a judicial determination of your incompetence, reference in
this Agreement to you shall be deemed, where appropriate, to refer to
your beneficiary(ies), estate or other legal representative(s). If
your should die following your Termination Date while any amounts
would still be payable to you hereunder if you had continued to live,
all such amounts unless otherwise provided herein shall be paid in
accordance with the terms of this Agreement to such person or persons
so appointed in writing by you, or otherwise to your legal
representatives or estate.
11
<PAGE>
18. ENTIRE AGREEMENT
----------------
Other than the Proprietary Agreement, your stock option agreements and
applicable stock option plans, and the CIC Plan, this Agreement, the
Resignation Letter attached hereto as Appendix A, and the General Release
attached hereto as Appendix B constitute the entire agreement, arrangement
and understanding between you and Amgen; they may not be modified or
canceled in any manner except by a writing signed by both you and Amgen.
This Agreement and the General Release supersede any prior or
contemporaneous agreement, arrangement or understanding on this subject
matter. By executing this Agreement, the Resignation Letter, and the
General Release below, you expressly acknowledge the termination of any
such prior agreement, arrangement or understanding. Also, by executing
this Agreement, the Resignation Letter, and the General Release, you affirm
that no one has made any written or verbal statement that contradicts the
provisions of this Agreement, the Resignation Letter, or the General
Release.
Sincerely yours,
/s/ Gordon M. Binder
------------------------------------
Amgen Inc.
By: Gordon M. Binder
Chief Executive Officer and Chairman
Acknowledged and Agreed:
/s/ Dr. N. Kirby Alton
- -----------------------
Dr. N. Kirby Alton Dated: 10/11/99
---------
12
<PAGE>
APPENDIX A
[To be printed on Dr. N. Kirby Alton's Amgen Stationery]
RESIGNATION
-----------
The undersigned hereby resigns as an officer and/or director of the following
corporations, effective October 20, 1999:
Amgen Inc.
Kirin Amgen, Inc.
/s/ Dr. N. Kirby Alton
---------------------------------
Dr. N. Kirby Alton
<PAGE>
APPENDIX B
MUTUAL GENERAL RELEASE
By signing below, Amgen Inc. ("Amgen" or the "Company") and you, Dr. N.
Kirby Alton, agree to all of the terms and conditions set forth in this Mutual
General Release, which resolves all issues between you and the Company
including, but not limited to, those related to your employment with the
Company, and the termination thereof.
1. COMPLETE RELEASE
----------------
1.1 Release: In exchange for consideration provided to you and the
-------
Company under the Agreement, the receipt of which and adequacy thereof
you and the Company hereby acknowledge, you irrevocably and
unconditionally release all the claims described in Subparagraph 1.2
of this General Release that you may have against the following
persons or entities (collectively the "Amgen Releasees"): Amgen, all
related or affiliated companies and all of Amgen's or such related or
affiliated companies' predecessors, successors, and assigns; and, with
respect to each such entity, all of its past and present employees,
officers, directors, stockholders, owners, representatives, assigns,
attorneys, agents, insurers, employee benefit programs (and the
trustees, administrators, fiduciaries and insurers of such programs)
and any other persons acting by, through, under or in concert with any
of the persons or entities listed in this Subparagraph and each of
them; and the Company irrevocably and unconditionally releases all the
claims described in Subparagraph 1.2 of this General Release that the
Company may have against you, your employees, agents, attorneys,
representatives, successors, and assigns, past and present and each of
them.
1.2 Claims Released: Except as provided in Subparagraph 1.4 of this
---------------
General Release, the claims released include all claims of whatever
nature, whether known or unknown, suspected or unsuspected, by either
you or Amgen which you or Amgen now owns or holds or has at any time
previously held, or (with the sole exception of claims covered by
Subparagraph 1.4 of this General Release) ever in the future may hold
including statutory claims arising under the employment discrimination
laws. In particular, you acknowledge and agree that by signing the
Agreement and this General Release, in addition to the matters
discussed above, you are waiving and releasing any and all claims,
charges, or rights you may have under the Age Discrimination In
Employment Act of 1967, as amended (the "ADEA"), that this waiver and
release is knowing and voluntary, and that the consideration given for
this waiver and release is in addition to anything of value to which
you were already entitled as an employee of Amgen. You further
acknowledge that you have been advised that: (a) you should consult
with an attorney (at your own expense, subject to your right to
reimbursement as set forth in Paragraph 5 of the Agreement) prior to
executing the Agreement and this General Release; (b) you have at
least twenty-one (21) days in which to consider the Agreement and this
General Release (although you may choose to execute the Agreement and
this General Release earlier and waive all of or part of the 21-day
period); (c) the Agreement and this General
<PAGE>
Release do not waive or release any rights or claims you may have
under the ADEA which may arise after you execute the Agreement and
this General Release; (d) you have seven (7) days following execution
of the Agreement and this General Release to revoke your consent to
the Agreement and this General Release (to be effective, any
revocation must be actually received in writing by me by 5:30 p.m. on
the seventh day); and (e) the Agreement and this General Release shall
not be effective until the seven (7) day revocation period has
expired. In the event that you exercise this right to revoke this
General Release, you and Amgen agree that the Agreement (including
without limitation the Resignation Letter attached to the Agreement as
Appendix A) will be simultaneously revoked. You also acknowledge and
agree that you were given a copy of the Agreement and this General
Release on September 21, 1999, that you have been given the
opportunity to consult with whomever you wish regarding the Agreement
and this General Release and that you have entered into the Agreement
and this General Release voluntarily and with full knowledge of its
final and binding effect.
1.3 Release Extends to Both Known and Unknown Claims: This General
------------------------------------------------
Release covers both claims that you and/or Amgen know about and those
you and/or Amgen do not know about. You understand the significance
of this release of unknown claims and this waiver of statutory
protection against a release of unknown claims by both you and Amgen.
You and Amgen each expressly waive all rights afforded by any statute
which limits the effect of a release with respect to unknown claims.
You and Amgen each expressly waive the protection of (S) 1542 of the
Civil Code of the State of California.
1.4 Claims Not Released: This General Release does not release your right
-------------------
or the Company's right to enforce the Agreement.
2. YOUR PROMISES
-------------
In addition to the release of claims provided for in Paragraph 1 of this
General Release, you also agree to the following:
2.1 No Future Employment: You understand that, as provided in Paragraph 8
--------------------
of the Agreement, your employment with Amgen and all related or
affiliated companies will terminate forever on the Termination Date
and you promise never to seek employment with Amgen or its related or
affiliated companies in the future. If your employment is not
terminated by Amgen for a Stated Reason, Amgen shall treat this
termination as a resignation on its records. You acknowledge and
agree that the Agreement, together with this General Release,
contemplates your termination from Amgen on the Termination Date, and
that the release in Paragraph 1 of this General Release shall cover
your entire employment with Amgen and the termination of that
employment. On the day after the Termination Date, you and Amgen each
promise to execute and be bound by a second General Release which
contains all of the provisions set forth in this General Release and
which reconfirms each party's release of such claims as of the
Termination Date.
B-2
<PAGE>
2.2 You are Not to Harm Amgen: You agree not to knowingly and willfully
-------------------------
criticize, denigrate or otherwise disparage Amgen, any other Amgen
Releasee, or any of Amgen's products, processes, experiments,
policies, practices, standards of business conduct, or areas or
techniques of research to the extent that such conduct causes
demonstrable injury to Amgen; provided, however, that nothing in this
General Release shall prohibit you from complying with any lawful
subpoena or court order.
2.3 No Knowledge of Violations: You represent that you are not aware of
--------------------------
any facts that would (a) establish, (b) tend to establish, or (c) in
any way support an allegation of a violation by Amgen of the federal
False Claims Act (or any similar state or federal qui tam statute).
--- ---
3. CONSEQUENCES OF YOUR VIOLATION OF YOUR PROMISES
-----------------------------------------------
3.1 General Consequences: If you break any of the promises made in the
--------------------
Agreement or this General Release, for example, by filing or
prosecuting a lawsuit based on claims that you have released, or
declining to execute the second General Release contemplated by
Paragraph 2.1, or if any representation made by you in this General
Release was false when made, you (a) shall forfeit all right to future
benefits under the Agreement; (b) must repay all benefits previously
received, other than the monthly compensation paid to you under
Paragraph 2.1 of the Agreement, upon Amgen's demand; and (c) must pay
reasonable attorneys' fees and all other costs incurred as a result of
your breach or false representation, such as the cost of defending any
suit brought with respect to a released claim by you or other owner of
a released claim. It is agreed that your breach of Subparagraph 2.2
of this Agreement will not be covered by this Paragraph 3.1 unless you
are given written notice by the Company specifying your breach of
Subparagraph 2.2 and you fail to cure such a breach within 14 days of
receipt of such notice.
In addition, in order to ensure that you have complied fully with your
obligations under Paragraph 2.3 of this General Release, you hereby
covenant and agree that to the full extent permitted by law, you
hereby waive and release any and all rights or claims you may have to
any personal claim for proceeds or awards that you may be entitled to
under any qui tam proceeding brought against Amgen. You further agree
--- ---
that you shall deliver any such money, proceeds, or awards to the U.S.
government.
3.2 Injunctive Relief: You further agree that Amgen would be irreparably
-----------------
harmed by any use or disclosure of information that is prohibited by
the Amgen Inc. Proprietary Information and Inventions Agreement,
executed by you on or about January 15, 1982 (the "Proprietary
Agreement") (which contains obligations that survive the termination
of your employment with Amgen), and that Amgen shall be entitled to an
injunction prohibiting you from committing any such violation.
3.3 Challenges to Validity: Should you attempt to challenge the formation
----------------------
or enforceability of the Agreement and/or this General Release, you
shall initially
B-3
<PAGE>
tender, by certified check delivered to Amgen, all amounts received
pursuant to the Agreement, other than the monthly compensation paid to
you under Paragraph 2.1 of the Agreement, plus interest at the legal
rate and invite Amgen to cancel the Agreement. In the event Amgen
accepts this offer, the Agreement shall be canceled. In the event
Amgen does not accept this offer, Amgen shall so notify you and the
amount tendered by you shall be placed in an interest-bearing account
pending a determination of the enforceability of the Agreement and/or
this General Release. If the Agreement and this General Release are
determined to be enforceable, the amount in the account shall be
repaid to you; if the Agreement and/or this General Release are
determined not to be enforceable, the amount in the account shall be
retained by Amgen or its designee.
4. VOLUNTARILY ENTERING AGREEMENT
------------------------------
You acknowledge that you (a) have had a sufficient period to consider and
review the Agreement and this General Release before signing them; (b) have
carefully read the Agreement and this General Release; and (c) fully
understand the Agreement and this General Release and are entering into
them voluntarily.
5. SEVERABILITY
------------
The provisions of this General Release are severable. If any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable in any respect and
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be affected or impaired in any way, it being intended that all of
the parties' rights and privileges arising hereunder shall be enforceable
to the fullest extent permitted by law.
PLEASE READ THIS GENERAL RELEASE CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN
AND UNKNOWN CLAIMS.
Executed at Thousand Oaks, California this 11th day of October, 1999.
---- -------
/s/ Dr. N. Kirby Alton
- ---------------------
Dr. N. Kirby Alton
Executed at Thousand Oaks, California this 11th day of October, 1999.
---- -------
/s/ Gordon M. Binder
- --------------------
Amgen Inc.
By: Gordon M. Binder
Chief Executive Officer and Chairman
B-4
<PAGE>
EXHIBIT 10.32
March 3, 1999
Fabrizio Bonanni, Ph.D.
872 Burr Ave.
Winnetka, IL 60093
Dear Fabrizio,
On behalf of Amgen, I am pleased to offer you the position of Sr. Vice
President, Quality and Compliance, salary grade E37, reporting to me. Your
base salary will be $29,167.00 per month.
Upon acceptance of this offer you will be entitled to a $300,000.00 sign on
bonus. The net amount of this bonus (after federal and state tax deductions)
will be paid within 30 days of your date of hire.
In addition, subject to the approval of the Compensation Committee of the Amgen
Board of Directors, you will be granted the option to purchase 100,000 shares of
Amgen common stock at a price equal to 100% of the fair market value at the
close of the stock market on your date of hire. The shares will be granted as
Incentive Stock Options (ISO's) to the extent permitted by law, with the balance
being issued as Non-Qualified (NQ's) stock options. The options will have a
seven year term and will vest over five (5) years in equal annual installments
of 20,000 shares commencing with your first anniversary. Amgen will guarantee
that, calculated as if you had not sold any of the underlying stock, the then
vested portion of the 100,000 share options will appreciate in value by at least
$2,500,000.00 on at least one day on or before the fifth anniversary of your
start date. Of course, Amgen will not guarantee that you will actually realize
this profit if you do not sell all of the vested option shares on that date.
You will be eligible to participate in the Amgen Management Incentive Plan (MIP)
with a target award of 58% of base salary. We would guarantee MIP at 100%
achievement through 2001.
You will also have the opportunity to participate in our comprehensive benefits
program. Amgen's excellent health care plan currently includes medical, dental,
and vision coverage for you and your eligible dependents. Amgen currently pays
the major expense for these programs while staff members share through payroll
deductions. Please be advised that in order for you and your dependents to be
eligible for Amgen's medical coverage you must:
<PAGE>
Fabrizio Bonanni
March 3, 1999
1. Report to work at Amgen or another location to which you are required to
travel and perform the regular duties of your employment.
2. Complete the required enrollment paperwork within 31 days of your hire date.
3. Meet all other eligibility requirements under the plan.
In the event that your job is eliminated or you are terminated without cause or
you terminate your employment with Amgen for good cause within three (3) years
of your start date, you will be entitled to a severance package which will
include two (2) years of Salary Continuation. The definition of "good cause"
for purposes of this paragraph is (i) a diminution in your position (including
status or title), authority, duties or responsibilities, and such diminution was
not made by mutual agreement set forth in writing between you and Amgen at the
time such diminution was made, or (ii) a reduction in your base salary or bonus
opportunity. The definition of the components of "Salary Continuation" for
purposes of this paragraph are (i) your base salary, (ii) the average of your
MIP payments during your term of employment at Amgen (or, should your employment
at Amgen terminate before your first year, your target MIP) and (iii) continued
stock option vesting during the period of Salary Continuation.
You shall have no obligation to seek other employment or take any other action
by way of mitigation of the amounts payable to you pursuant to this agreement
and such amounts shall not be reduced or offset by any amounts, including
compensation from other employment. As a member of the Operating Committee, you
are also covered under the Amgen Change in Control Plan.
Amgen's Retirement & Savings 401(k) Plan provides an opportunity for you to save
up to 15% of your pay on a tax deferred basis. Amgen will also contribute to
your 401(k) account to help you save for your future financial goals. The
benefits, services and programs are summarized in the enclosed brochure called
"Welcome to Amgen - Total Compensation and Benefits at Amgen."
Amgen provides director and officer insurance to cover its officers should they
be named in a suit against Amgen as a result of acting in the course and scope
of their employment at Amgen. Such coverage extends beyond the period of an
officer's employment at Amgen if such officer is being named in a suit against
Amgen as a result of their past period of employment at Amgen and in connection
with such officer's acting within the course and scope of such employment.
This offer is contingent upon the successful completion of the verification of
the information listed on your application for employment at Amgen.
<PAGE>
Fabrizio Bonanni
March 3, 1999
Enclosed and included as part of this offer (Attachment 1) is information
regarding Amgen's Proprietary Information and Inventions Agreement, the
Immigration Reform & Control Act, and a packet of materials entitled
"Arbitration of Disputes - Amgen Inc." which includes a Mutual Agreement to
Arbitrate Claims. This offer is contingent upon your completing the items
described in Attachment 1.
Also enclosed and included as part of this offer (Attachment 2) is information
about the main points of the relocation assistance which Amgen will provide to
you to relocate to the "local area." The brochures included describe each
component in more detail. Upon acceptance of this offer, please contact Kristen
McCloskey, Relocation Coordinator, at (805) 447-2854 to initiate your relocation
benefits.
By signing this letter, with the exception of Amgen's obligation under this
letter to pay you Salary Continuation as described herein, you understand and
agree that your employment with Amgen is at-will. Therefore, your employment
can terminate, with or without cause, and with or without notice, at any time,
at your option or Amgen's option, and Amgen can terminate or change all other
terms and conditions of your employment, with or without cause, and with or
without notice, at any time. This at-will relationship will remain in effect
throughout your employment with Amgen Inc. or any of its subsidiaries, or
affiliates. This letter constitutes the entire agreement, arrangement and
understanding between you and Amgen on the nature and terms of your employment
with Amgen. This letter supersedes any prior or contemporaneous agreement,
arrangement or understanding on this subject matter. By executing this letter
as provided below, you expressly acknowledge the termination of any such prior
agreement, arrangement or understanding. Also, by your execution of this
letter, you affirm that no one has made any written or verbal statement that
contradicts the provisions of this letter. The at-will nature of your
employment, as set forth in this paragraph, can be modified only by a written
agreement signed by both Amgen's Vice President of Human Resources and you which
expressly alters it. This at-will relationship may not be modified by any oral
or implied agreement, or by any Company policies, practices or patterns of
conduct.
Fabrizio, we are enthusiastic about the contribution you can make, and we
believe that Amgen can provide you with attractive opportunities for personal
achievement and growth. I look forward to your favorable reply before March 17,
1999. If you accept our offer, please sign and date the copy of the letter and
return it in the enclosed
<PAGE>
Fabrizio Bonanni
March 3, 1999
envelope to Ed Garnett along with the completed and signed Proprietary
Information and Inventions Agreement and the Mutual Agreement to Arbitrate
Claims. Please retain the original offer letter for your records. If you have
any questions regarding this offer, please contact Ed Garnett at (805) 447-3003.
Sincerely,
/s/Ed Garnett for Kevin Sharer
Kevin Sharer
President and Chief Operating Officer
KS:EG:cg
Enclosures
/s/Fabrizio Bonanni, March 12, 1999
- ------------------------------------
Signature of Acceptance Date
April 12, 1999
- --------------
Anticipated Start Date
(Please select a Monday start date if possible in order to coincide with our New
Hire Orientation Schedule)
<PAGE>
Fabrizio Bonanni
March 3, 1999
ATTACHMENT 1
In order to accept our offer you will be required to:
A) Complete, date and sign the Amgen Proprietary Information and
Inventions Agreement and return it with your signed offer letter.
B) Date and sign the enclosed Mutual Agreement to Arbitrate Claims and
return it with your signed offer letter.
C) You will be required to provide Amgen with proof of your identity and
eligibility for employment per requirements of the Immigration Reform
and Control Act of 1986 within 3 (three) days of hire. Information
pertaining to this Act and required proof are enclosed.
<PAGE>
Fabrizio Bonanni
March 3, 1999
ATTACHMENT 2
Page 1
RELOCATION ASSISTANCE COVERAGE
All relocation expense coverage to be provided as a part of your Amgen
employment offer is outlined in this attachment. This relocation expense
coverage is designed to offset most of the cost of your relocation. However,
as a new staff member, it is expected that you will make every effort to
reduce or eliminate relocation expense wherever possible.
Please Note: Upon acceptance of your offer, please contact Kristen McCloskey,
Relocation Coordinator, at (805) 447-2854 to initiate your relocation
benefits.
Marketing Assistance, Home Sale, and Home Sale Incentive Program
----------------------------------------------------------------
A Marketing Assistance Program is available to assist in the sale
of your current primary residence. Also, through the Home Sale Program, we
will offer you the opportunity for a third party purchase of your current
primary residence if you are unable to sell your home within 90 days.
Under this program, an interest-free equity bridge loan is available to
assist in the purchase of your new residence. The seller's normal, non-
recurring closing costs associated with the sale of your home (i.e., real
estate commission, title expense, etc.) will be paid by Amgen through this
program. You are also eligible for the Home Sale Incentive Program which
is designed to reward you for helping expedite the sale of your home. For
additional information, and to initiate the program contact the Relocation
Coordinator. You must contact the Relocation Coordinator before taking any
-----------------
action to sell your home.
------------------------
Additionally, should you close escrow on the purchase of a home
in the new "local area" prior to the sale of your current residence, Amgen
will reimburse up to 3 months of your current mortgage payment and other
reasonable related costs (i.e., utilities, prorated taxes, insurance,
etc.).
House Hunting Trip
------------------
Amgen will provide to you a lump sum allowance to assist you with
your house hunting efforts. The intent of this allowance is to cover
round-trip airfare, ground transportation and hotel for up to 5 days, and
a food per diem, for you and your household members. You should call
Dollie Grajczak at 805-447-2318 in Amgen's Corporate Travel Dept. for
assistance with your travel plans. You will receive the lump sum
reimbursement upon your presenting evidence that you took such trip (in the
form of the airline tickets or hotel bill associated with this trip) to the
Relocation Coordinator.
<PAGE>
Fabrizio Bonanni
March 3, 1999
Temporary Living Expenses
-------------------------
Temporary living lodging expense will be covered for a period of up to 90
--
days in Amgen leased lodging units. If you need to stay in the temporary
lodging unit more than 90 days, you will be responsible for the cost of the
---
unit at the daily rate negotiated by Amgen. Since Amgen has contracted for
these temporary lodging accommodations, there is no need to make
arrangements on your own. The Relocation Coordinator will assist in making
these lodging arrangements for you. Amgen will also determine a per diem
allowance, to be paid to you as a lump sum for food, telephone and
miscellaneous expenses you may incur during your 90 day temporary living
--
period.
One-Way Travel Expenses
-----------------------
Amgen will reimburse one-way travel expenses for you and your household
members to take residence in the "local area." If Amgen has arranged for
your car to be moved by a moving company, Amgen will also pay for rental of
one automobile, for up to 14 days. You should contact Dollie Grajczak at
805-447-2318 in Amgen's Corporate Travel Dept. to make your travel
reservations.
Moving Household Goods
----------------------
Amgen will arrange for packing, moving, and unpacking of normal
household possessions, including up to two automobiles. Amgen will also
pay for up to 90 days storage of household goods, if necessary. Amgen will
--
initiate contact with moving companies and will handle all details with the
company assigned to your move.
Relocation Allowance
--------------------
Amgen will provide you with a $2,500.00 relocation allowance to be used at
your discretion, to cover incidental expenses associated with your move
which are not covered in other sections of relocation coverage. Receipts or
other accounting for the use of this allowance are not required.
Renter Assistance - Lease Termination Former Residence
------------------------------------------------------
Amgen will reimburse you for the penalty incurred by the premature
termination of your current documented lease agreement, in an amount not to
exceed the equivalent of two months' rent.
Rental Assistance - Security Deposit New Residence
--------------------------------------------------
Amgen will reimburse you for the deposit on a rental property in the new
"local area" in an amount not to exceed the equivalent of one month's rent,
plus application fees.
OR
<PAGE>
Fabrizio Bonanni
March 3, 1999
Non-Recurring Home Purchase Closing Costs
-----------------------------------------
Reimbursement of the buyer's normal, non-recurring closing costs associated
with the purchase of a home in the "local area", including up to two points
(2%) of the mortgage amount for loan origination or discount expense.
Adjustable Rate Secured Loan
----------------------------
To aid in the purchase of a home in the "local area", Amgen is prepared to
offer you a five year, adjustable rate loan which will be secured as a
second mortgage on your new home. However, you will be expected to provide
a minimum down payment investment of at least 5% of the purchase price from
your own funds or other sources which are not secured by this home.
The amount of the loan can be up to 20% of the documented purchase price of
a home not to exceed $250,000. The loan will be funded prior to close of
escrow at a date to be determined solely by Amgen. This loan will not be
funded prior to you beginning your employment at Amgen.
The 1999 rate on the loan is 4.4 %. The rate is adjusted January 1st of
each year based on the average "Introduction Rates" on adjustable loans as
offered by California banks and savings & loans. The most the rate will
change each year is 1% with a cap of 3% over the life of the initial loan.
You will be required to make semi-monthly interest-only payments by payroll
deduction, with the principal amount due on or before the end of the five-
year period.
In addition to the usual relocation package, Amgen will offer the
following:
Amgen will forgive 20% of the loan principle on each anniversary date of
employment until the loan principle is zero. Each year the principle
amount is reduced by 20%, the interest of only payments will be reduced
accordingly, and the loan amount that is forgiven will be reported as
income to you and will be subject to federal, state, and other applicable
taxes.
Tax Gross-up Assistance
-----------------------
Amgen will provide for tax assistance (gross-up) for the non-deductible
portion of those reimbursed relocation expenses which are considered as
ordinary income for state or federal income tax purposes.
<PAGE>
Fabrizio Bonanni
March 3, 1999
Local Area
----------
References to the "local area" generally means the new work site is a
minimum of a 90 minute commute (during peak a.m. commute hours as
determined by a commuting study performed for the Company) from the staff
member's current residence, and the move to the new residence reduces
commuting time by at least 50%.
Duration of Relocation
----------------------
This relocation expense coverage is intended to assist in getting you
established in your new residence in the "local area" as quickly as
possible. Therefore, it is required that all relocation assistance
provided for in this attachment and all expense reimbursements for this
assistance be completed within one year from your date of hire in your new
location.
<PAGE>
EXHIBIT 10.40
PROMISSORY NOTE
---------------
$250,000.00
1. Promise to Pay.
--------------
For value received, I, Fabrizio Bonanni ("Staff Member"), a married man,
and I, Lorraine Bonanni, wife of Staff Member, promise to pay to the order
of Amgen Inc., a Delaware corporation ("Payee"), at its office at Amgen
Center, Thousand Oaks, CA 91320-1789, the sum of Two Hundred Fifty Thousand
Dollars and No Cents ($250,000.00) (the "Principal"). Amgen will forgive
twenty percent (20%) of the loan principle on each anniversary date of
Staff Member's employment until the loan principle is paid in full. Each
year the principle amount is reduced by twenty percent (20%), the interest
only payments will be reduced accordingly. The loan amount that is forgiven
each year will be reported as income to Staff Member and will be subject to
federal, state, and other applicable taxes. If Staff Member ceases to be an
employee of Payee, this Note shall become payable in full thirty (30) days
from the date on which Staff Member ceases to be an employee of Payee,
together with interest on the Principal from the date of this Note until
such date as the Note is paid in full. Interest on this Note shall be
computed as set forth below. The interest rate for the period from the date
of this Note through December 31, 1999 (the "initial rate") is 4.4% per
annum on the unpaid Principal. After December 31, 1999 the interest rate on
this Note shall change as set forth below.
2. Adjustable Interest Rate.
------------------------
The interest rate shall be adjusted annually on January 1 of each year (the
"Change Date") so as to equal the average interest rate designated as the
"Introduction Rates" on adjustable rate loans as publicly offered by the
banks and savings and loans in California as published by the Los Angeles
Times in its Sunday edition. The rate shall be set using the rates
published in the Los Angeles Times on the Sunday immediately preceding the
Change Date. In the event that the "Introduction Rates" list is not
published in the Los Angeles Times for any reason, then, in such event, the
Payee shall establish the interest rate based on a survey by it of the
introductory interest rates on adjustable loans offered by no fewer than
five banking institutions located in Southern California that the Payee, in
its sole discretion, deems representative of banking institutions in the
Ventura and Los Angeles County areas. Payee shall give Staff Member notice
if the interest rate shall be determined using this alternative method.
Notwithstanding the foregoing, the interest rate shall never be increased
or decreased on any single Change Date by more than one percentage point
from the interest rate for the preceding 12 months. At no time during the
term of this Note shall the annual interest rate exceed 7.4% per annum.
Payee shall deliver or mail to Staff Member a notice of any changes in the
adjustable interest rate on this Note and the amount of the Staff Member's
semi-monthly payroll deductions before the effective date of any change.
The notice shall include information required by law to be given to Staff
Member and also the title and telephone number of a person who shall answer
any questions Staff Member may have regarding the notice.
3. Salary Deduction.
----------------
The interest on this Note shall be payable by semi-monthly deductions from
Staff Member's salary. The amount of such deductions shall initially be
Four Hundred Fifty-Eight Dollars and Thirty-Three Cents ($458.33) per
installment; provided, however, that the manner of payment of this Note
shall not be limited to deductions from Staff Member's salary. The amount
of such deductions shall be adjusted annually concurrently with any
adjustment in the interest rate on this Note to ensure that interest to be
incurred during the ensuing
<PAGE>
calendar year shall be paid in twenty-four (24) equal payments. The first
such installment shall be on August 31, 1999; the second installment shall
be on September, 15, 1999; and each successive installment shall be on the
fifteenth and last days of each successive month until the Principal is
repaid. Payee shall give Staff Member at least seven (7) days advance
notice of any adjustment in the amount of said payroll deductions. Staff
Member acknowledges and agrees that by executing this Note, Staff Member
agrees to the payroll deductions described in this Note.
4. Prepayment.
----------
Staff Member may prepay without penalty this Note in whole or in part at
any time. Any and all payments or prepayments under this Note may be made
by Staff Member to Payee at the following address (or such other address as
it designates in writing to Staff Member):
AMGEN INC.
Amgen Center
Thousand Oaks, California 91320-1789
Attention: Accounting Manager
5. Attorneys' Fees.
---------------
Staff Member agrees to pay all costs and expenses, including, without
limitation, collection agency fees and expenses, reasonable attorneys'
fees, costs of suit and costs of appeal, which Payee may incur in the
exercise, preservation or enforcement of its right, powers and remedies
hereunder, or under any documents or instruments securing this Note, or
under law.
6. Modification of Terms.
---------------------
Payee may, with or without notice to Staff Member, cause additional parties
to be added to this Note, or release any party to this Note, or revise,
extend, or renew the Note, or extend the time for making any installment
provided for by this Note, or accept any installment in advance, all
without affecting the liability of Staff Member. Staff Member may not
assign or transfer in any manner whatsoever this Note or any of Staff
Member's obligations under this Note.
7. Security Interest.
-----------------
The purpose of this loan is to purchase a personal residence. Staff Member
shall secure this loan by executing and causing to be filed, immediately
upon close of escrow, a trust deed on this residence, commonly known as 343
South Beverly Glen, Los Angeles, CA 90024 whose property description is as
follows:
Lot 22 in Block 3 of Tract No. 7733, in the City of Los Angeles,
County of Los Angeles, State of California, as per Map recorded in
Book 130, Pages 28, 29 and 30 of Maps, in the Office of the County
Recorder of said County.
8. Acceleration.
------------
A) In the event Staff Member fails to pay when due any sums under this
Note, then:
(1) the entire unpaid balance of this Note shall, at the option of
the Payee hereof, immediately become due and payable in full and
unpaid Principal thereafter shall bear
2
<PAGE>
interest at the lesser of the maximum rate permitted by law or at the
rate of 7.4% per annum; and
(2) Staff Member authorizes Payee to deduct any sums due to Payee
under this Note from any monies, including any wages due, otherwise
owing to Staff Member.
B) If Staff Member sells the residence which is purchased with the funds
herein provided, this Note shall immediately become due and payable upon
the sale of such residence.
9. Waiver of Rights by Staff Member.
--------------------------------
Staff Member waives (1) presentment, demand, protest, notice of dishonor
and/or protest and notice of non-payment; (2) the right, if any, to the
benefit of, or to direct the application of, any security hypothecated to
Payee until all indebtedness of Staff Member to Payee, however arising, has
been paid; and (3) the right to require the Payee to proceed against any
party to this Note, or to pursue any other remedy in Payee's power. Payee
may proceed against Staff Member directly and independently of any other
party to this Note, and the cessation of the liability of any other party
for any reason other than full payment, or any revision, renewal,
extension, forbearance, change of rate of interest, or acceptance, release
or substitution of security, or any impairment or suspension of Payee's
remedies or rights against any other party, shall not in any way affect the
liability of Staff Member.
10. Obligations of Persons Under this Note.
--------------------------------------
If more than one person signs this Note, each person is fully and
personally obligated to keep all of the promises made in this Note,
including the promise to pay the full amount owed. Any person who is a
guarantor, surety, or endorser of this Note is also obligated to do these
things. Any person who takes over these obligations, including the
obligations of a guarantor, surety or endorser of this Note, is also
obligated to keep all of the promises made in this Note. Payee may enforce
its rights under this Note against each person individually or against all
of the signatories to this Note. This means that any one of the signatories
to this Note may be required to pay all of the amounts owed under this
Note.
11. Governing Law.
-------------
This Note and the obligations under this Note of Staff Member or any other
signatory to this Note shall be governed by and interpreted and determined
in accordance with the laws of the State of California as applied to
contracts between California residents entered into and to be performed
entirely within said State.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has/have executed and delivered this Note as
of the 7th day of August, 1999.
/s/ Fabrizio Bonanni
--------------------
FABRIZIO BONANNI
/s/ Lorraine Bonanni
--------------------
LORRAINE BONANNI
4
<PAGE>
EXHIBIT 10.41
PROMISSORY NOTE
---------------
$250,000.00
1. Promise to Pay.
--------------
For value received, I, Fabrizio Bonanni ("Staff Member"), a married man, and
I, Lorraine Bonanni, wife of Staff Member, promise to pay to the order of
Amgen Inc., a Delaware corporation ("Payee"), at its office at One Amgen
Center Drive, Thousand Oaks, CA 91320-1789, the sum of Two Hundred Fifty
Thousand Dollars and No Cents ($250,000.00) (the "Principal"), payable in
full on the earlier of five (5) years from date of execution of this Note or
thirty (30) days from the date on which Staff Member ceases to be an
employee of Payee, whichever first occurs, together with interest on the
Principal from the date of this Note until such date as the Note is paid in
full. Interest on this Note shall be computed as set forth below. The
interest rate for the period from the date of this Note through December 31,
1999 (the "initial rate") is 4.4% per annum on the unpaid Principal. After
December 31, 1999 the interest rate on this Note shall change as set forth
below.
2. Adjustable Interest Rate.
------------------------
The interest rate shall be adjusted annually on January 1 of each year (the
"Change Date") so as to equal the average interest rate designated as the
"Introduction Rates" on adjustable rate loans as publicly offered by the
banks and savings and loans in California as published by the Los Angeles
Times in its Sunday edition. The rate shall be set using the rates
published in the Los Angeles Times on the Sunday immediately preceding the
Change Date. In the event that the "Introduction Rates" list is not
published in the Los Angeles Times for any reason, then, in such event, the
Payee shall establish the interest rate based on a survey by it of the
introductory interest rates on adjustable loans offered by no fewer than
five banking institutions located in Southern California that the Payee, in
its sole discretion, deems representative of banking institutions in the
Ventura and Los Angeles County areas. Payee shall give Staff Member notice
if the interest rate shall be determined using this alternative method.
Notwithstanding the foregoing, the interest rate shall never be increased or
decreased on any single Change Date by more than one percentage point from
the interest rate for the preceding 12 months. At no time during the term
of this Note shall the annual interest rate exceed 7.4% per annum.
Payee shall deliver or mail to Staff Member a notice of any changes in the
adjustable interest rate on this Note and the amount of the Staff Member's
semi-monthly payroll deductions before the effective date of any change.
The notice shall include information required by law to be given to Staff
Member and also the title and telephone number of a person who shall answer
any questions Staff Member may have regarding the notice.
3. Salary Deduction.
----------------
The interest on this Note shall be payable by semi-monthly deductions from
Staff Member's salary. The amount of such deductions shall initially be
Four Hundred Fifty Eight Dollars and Thirty Three Cents ($458.33) per
installment; provided, however, that the manner of payment of this Note
shall not be limited to deductions from Staff Member's salary. The amount
of such deductions shall be adjusted annually concurrently with any
adjustment in the interest rate on this Note to ensure that interest to be
incurred during the ensuing calendar year shall be paid in twenty-four (24)
equal payments. The first such installment shall be on November 30, 1999;
the second installment shall be on December 15, 1999; and each successive
installment shall be on the fifteenth and last days of each successive month
until the Principal is repaid. Payee shall give Staff Member at least seven
(7) days advance notice of any adjustment in the amount of said payroll
deductions. Staff Member
<PAGE>
acknowledges and agrees that by executing this
Note, Staff Member agrees to the payroll deductions described in this Note.
4. Option to Convert.
-----------------
At the end of the term of this Note, Staff Member shall have the option to
seek to convert this loan to a loan amortized over an additional five-year
period by executing a new Promissory Note at terms to be mutually agreed
upon by Staff Member and Payee. In the event that Staff Member and Payee
are unable to reach agreement on such terms, this Note shall become
immediately due and payable.
5. Prepayment.
----------
Staff Member may prepay without penalty this Note in whole or in part at any
time. Any and all payments or prepayments under this Note may be made by
Staff Member to Payee at the following address (or such other address as it
designates in writing to Staff Member):
AMGEN INC.
One Amgen Center Drive
Thousand Oaks, California 91320-1789
Attention: Accounting Manager
6. Attorneys' Fees.
---------------
Staff Member agrees to pay all costs and expenses, including, without
limitation, collection agency fees and expenses, reasonable attorneys' fees,
costs of suit and costs of appeal, which Payee may incur in the exercise,
preservation or enforcement of its right, powers and remedies hereunder, or
under any documents or instruments securing this Note, or under law.
7. Modification of Terms.
---------------------
Payee may, with or without notice to Staff Member, cause additional parties
to be added to this Note, or release any party to this Note, or revise,
extend, or renew the Note, or extend the time for making any installment
provided for by this Note, or accept any installment in advance, all without
affecting the liability of Staff Member. Staff Member may not assign or
transfer in any manner whatsoever this Note or any of Staff Member's
obligations under this Note.
8. Security Interest.
-----------------
The purpose of this loan is to purchase a personal residence. Staff Member
shall secure this loan by executing and causing to be filed, immediately
upon close of escrow, a trust deed on this residence, commonly known as 343
South Beverly Glen Blvd., Los Angeles, CA 90024 whose property description
is as follows:
Lot 22 in Block 3 of Tract No. 7733, in the City of Los Angeles, County
of Los Angeles, State of California, as per Map recorded in Book 130,
Pages 28, 29 and 30 of Maps, in the Office of the County Recorder of
said County.
9. Acceleration.
------------
A) In the event Staff Member fails to pay when due any sums under this Note,
then:
2
<PAGE>
(1) the entire unpaid balance of this Note shall, at the option of the
Payee hereof, immediately become due and payable in full and unpaid
Principal thereafter shall bear interest at the lesser of the maximum rate
permitted by law or at the rate of 7.4% per annum; and
(2) Staff Member authorizes Payee to deduct any sums due to Payee under
this Note from any monies, including any wages due, otherwise owing to
Staff Member.
B) If Staff Member sells the residence which is purchased with the funds
herein provided, this Note shall immediately become due and payable upon the
sale of such residence.
10. Waiver of Rights by Staff Member.
--------------------------------
Staff Member waives (1) presentment, demand, protest, notice of dishonor
and/or protest and notice of non-payment; (2) the right, if any, to the
benefit of, or to direct the application of, any security hypothecated to
Payee until all indebtedness of Staff Member to Payee, however arising, has
been paid; and (3) the right to require the Payee to proceed against any
party to this Note, or to pursue any other remedy in Payee's power. Payee
may proceed against Staff Member directly and independently of any other
party to this Note, and the cessation of the liability of any other party
for any reason other than full payment, or any revision, renewal, extension,
forbearance, change of rate of interest, or acceptance, release or
substitution of security, or any impairment or suspension of Payee's
remedies or rights against any other party, shall not in any way affect the
liability of Staff Member.
11. Obligations of Persons Under this Note.
--------------------------------------
If more than one person signs this Note, each person is fully and personally
obligated to keep all of the promises made in this Note, including the
promise to pay the full amount owed. Any person who is a guarantor, surety,
or endorser of this Note is also obligated to do these things. Any person
who takes over these obligations, including the obligations of a guarantor,
surety or endorser of this Note, is also obligated to keep all of the
promises made in this Note. Payee may enforce its rights under this Note
against each person individually or against all of the signatories to this
Note. This means that any one of the signatories to this Note may be
required to pay all of the amounts owed under this Note.
12. Governing Law.
-------------
This Note and the obligations under this Note of Staff Member or any other
signatory to this Note shall be governed by and interpreted and determined
in accordance with the laws of the State of California as applied to
contracts between California residents entered into and to be performed
entirely within said State.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has/have executed and delivered this Note as
of the 29th day of October, 1999.
/s/ Fabrizio Bonanni
--------------------
FABRIZIO BONANNI
/s/ Lorraine Bonanni
--------------------
LORRAINE BONANNI
4
<PAGE>
AMGEN INC.
Exhibit 21
SUBSIDIARY STATE OF
INCORPORATION
(Name under which OR
subsidiary does business) ORGANIZATION
Amgen AB Sweden
Amgen Australia Pty Limited Australia
Amgen (Bermuda) Clinical Development,
Limited Bermuda
Amgen (Bermuda) Clinical Development 2,
Limited Bermuda
Amgen (Bermuda) Clinical Development 3,
Limited Bermuda
Amgen (Bermuda) Clinical Development 4,
Limited Bermuda
Amgen (Bermuda) Clinical Development 5,
Limited Bermuda
Amgen (Bermuda) Clinical Development 6,
Limited Bermuda
Amgen (Bermuda) Clinical Development 7,
Limited Bermuda
Amgen (Bermuda) Clinical Development 8,
Limited Bermuda
Amgen (Bermuda) Clinical, Limited Bermuda
Amgen (Bermuda) Development, Limited Bermuda
Amgen (Bermuda), Limited Bermuda
Amgen (Bermuda) Manufacturing, Limited Bermuda
Amgen - Bio-Farmaceutica, Lda. Portugal
Amgen Boulder Development
Corporation Colorado
Amgen Boulder Production
Corporation Colorado
Amgen B.V. The Netherlands
1
<PAGE>
AMGEN INC.
Exhibit 21
SUBSIDIARY STATE OF
INCORPORATION
(Name under which OR
subsidiary does business) ORGANIZATION
Amgen Cambridge Real Estate
Holdings Inc. Delaware
Amgen Canada Inc. Canada
Amgen Caribe Corporation Puerto Rico
Amgen (Europe) AG Switzerland
Amgen Europe B.V. The Netherlands
Amgen GmbH Austria
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 N.V. Belgium
Amgen Puerto Rico, Inc. Delaware
Amgen Sales Corporation Barbados
Amgen S.A. France
Amgen, S.A. Spain
Amgen S.p.A. Italy
Kirin-Amgen, Inc. Delaware
Synergen B.V. The Netherlands
Synergen Europe, Inc. Colorado
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 131
<SECURITIES> 1,202
<RECEIVABLES> 438
<ALLOWANCES> 26
<INVENTORY> 184
<CURRENT-ASSETS> 2,065
<PP&E> 2,315
<DEPRECIATION> 762
<TOTAL-ASSETS> 4,078
<CURRENT-LIABILITIES> 831
<BONDS> 223
0
0
<COMMON> 0
<OTHER-SE> 3,024
<TOTAL-LIABILITY-AND-EQUITY> 4,078
<SALES> 3,043
<TOTAL-REVENUES> 3,340
<CGS> 402
<TOTAL-COSTS> 402
<OTHER-EXPENSES> 823<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 1,566
<INCOME-TAX> 470
<INCOME-CONTINUING> 1,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,096
<EPS-BASIC> 1.07<F2>
<EPS-DILUTED> 1.02<F2>
<FN>
<F1>Item consists of research and development expenses.
<F2>Reflects a two-for-one split of the common stock effected in the form of a
100 percent stock dividend distributed on November 19, 1999 to stockholders of
record on November 5, 1999. Financial data schedules from prior annual periods
have not been restated to reflect this stock split.
</FN>
</TABLE>
