<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1995
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From __________ To __________
Commission File Number
0-12406
IMMUNEX CORPORATION
- ------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
<TABLE>
<C> <S>
Washington 51-0346580
- ------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 University Street, Seattle, WA 98101
- --------------------------------------- --------------
(Address of principal executive offices) (zip code)
(206) 587-0430
- ---------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value 39,601,699
- ---------------------------- -----------------------------------
Class Outstanding at August 8, 1995
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IMMUNEX CORPORATION
QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1995
TABLE OF CONTENTS
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
a) Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994. 3
b) Consolidated Statements of Operations -
For the three-month periods ended June 30, 1995 and June 30, 1994. 4
c) Consolidated Statements of Operations -
For the six-month periods ended June 30, 1995 and June 30, 1994 5
d) Consolidated Statements of Cash Flows-
For the six-month periods ended June 30, 1994 and June 30, 1994. 6
e) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IMMUNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30,
1995 December 31,
(unaudited) 1994
--------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,448 $ 14,818
Securities available-for-sale 105 9,919
Accounts receivable 22,580 18,259
Inventories 10,705 11,725
Other assets 990 2,618
------------- -------------
Total current assets 55,828 57,339
Property, plant and equipment, net 91,917 96,323
Other assets 37,064 39,003
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$ 184,809 $ 192,665
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------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 31,466 $ 21,520
Accrued compensation and related items 3,910 4,109
Current portion of long-term debt 653 11,595
Other liabilities 2,567 4,498
------------- ------------
Total current liabilities 38,596 41,722
Note payable - Cyanamid -- 34,000
Long-term debt and other obligations 4,873 5,016
Shareholders' equity:
Common stock, $.01 par value 569,640 547,182
Guaranty payment receivable from Cyanamid (22,458) (35,768)
Accumulated deficit (405,842) (399,487)
------------- ------------
Total shareholders' equity 141,340 111,927
------------ ------------
$ 184,809 $ 192,665
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</TABLE>
3
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
June 30, 1995 June 30, 1994
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<S> <C> <C>
Revenues:
Product sales $ 34,383 $ 31,889
Royalty and contract revenue 4,836 2,126
------------- -------------
39,219 34,015
Costs and expenses:
Cost of product sales 6,297 6,860
Research and development 20,592 20,087
Selling, general and administrative 14,621 17,855
------------ -------------
41,510 44,802
----------- -------------
Operating loss (2,291) (10,787)
Other income (expense):
Interest income 354 199
Interest expense (97) (592)
Other income (expense), net (503) 87
------------ -------------
(246) (306)
------------ -------------
Loss before income taxes (2,537) (11,093)
Provision for income taxes 71 620
----------- --------------
Net loss $ (2,608) $ (11,713)
----------- --------------
----------- --------------
Net loss per common share $ (.07) $ (.30)
----------- --------------
----------- --------------
Number of shares used for per share amounts 39,602 39,182
----------- --------------
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</TABLE>
4
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30, 1995 June 30, 1994
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<S> <C> <C>
Revenues:
Product sales $ 69,644 $ 69,153
Royalty and contract revenue 8,482 4,395
----------- -------------
78,126 73,548
Costs and expenses:
Cost of product sales 12,916 14,798
Research and development 41,265 39,885
Selling, general and administrative 29,530 36,039
----------- -------------
83,711 90,722
----------- -------------
Operating loss (5,585) (17,174)
Other income (expense):
Interest income 521 415
Interest expense (928) (1,090)
Other income (expense), net (495) (434)
----------- --------------
(902) (1,109)
----------- -------------
Loss before income taxes (6,487) (18,283)
Provision for income taxes 119 1,827
----------- -------------
Net loss $ (6,606) $ (20,110)
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Net loss per common share $ (.17) $ (.52)
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----------- -------------
Number of shares used for per share amounts 39,578 38,987
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</TABLE>
5
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30,1995 June 30, 1994
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,606) $ (20,110)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,758 7,132
Accounts receivable (4,321) 6,629
Inventories 1,020 2,033
Accounts payable, accrued liabilities and other
current liabilities 8,251 (4,012)
Other current assets 2,415 711
----------- -------------
Net cash provided by (used in) operating activities 8,517 (7,617)
----------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment (2,228) (4,709)
Proceeds from sale of properties -- 12,490
Proceeds from sales of securities available-for-sale 9,794 4,004
Purchases of marketable securities -- (3,917)
Other (136) (973)
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Net cash provided by investing activities 7,430 6,895
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Cash flows from financing activities:
Construction loan payments (10,600) (2,400)
Cyanamid line of credit (34,000) --
Guaranty payments received from Cyanamid 35,768 7,416
Other (485) (1,128)
----------- -------------
Net cash provided by (used in) financing activities (9,317) 3,888
----------- -------------
Net increase in cash and cash equivalents 6,630 3,166
Cash and cash equivalents, beginning of period 14,818 2,968
----------- -------------
Cash and cash equivalents, end of period $ 21,448 $ 6,134
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</TABLE>
6
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
Immunex Corporation without audit, according to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations. The financial statements reflect, in the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position and results
of operations as of and for the periods indicated. The statements should be
read in conjunction with the financial statements and the notes thereto
included in the Companys Annual Report on Form 10-K for the year ended
December 31, 1994.
The results of operations for the six-month period ended June 30, 1995, are
not necessarily indicative of results to be expected for the entire year
ending December 31, 1995.
NOTE 2. CONTINGENT LIABILITIES
In September 1993, Cistron Biotechnology Inc. ("Cistron") filed suit
against Immunex asserting that Immunex misappropriated information regarding
Interluekin-1 beta ("IL-1 beta") and that such information was used by
Immunex in patent applications relating to IL-1 beta. Immunex filed a
complaint seeking a declaratory judgment that Cistron's claims are preempted
by patent law, barred by a judgment in a patent interference decided by the
United States Patent and Trademark Office and time-barred by the statue of
limitations and doctrine of laches. In June 1994, the Court entered an order
finding that issues of fact existed concerning the applicability of the
statute of limitations and laches to Cistron's claims and, accordingly,
denied Immunex's motion on the time bar issues. A trial has been scheduled
for April 1996. The Company has, and intends to continue to, vigorously
defend the allegations of the suit. Based on the available information,
management of the Company does not expect the suit to have a material adverse
impact on the financial condition or results of operations of the Company.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three and six months ended June 30, 1995, the Company incurred net
losses of $2.6 million and $6.6 million, respectively, versus net losses of
$11.7 million and $20.1 million in the respective 1994 periods. The
improvement in the Company's operating results during the 1995 periods
resulted from continued growth in product sales and contract revenues
combined with decreased operating costs attributable to expense reduction
programs initiated during 1994 and a decrease in costs under certain
agreements with American Cyanamid Company ("Cyanamid"). In addition to
product sales fluctuations, revenue and operating expense levels will
fluctuate from quarter to quarter depending on several factors including
internal manufacturing and clinical drug requirements as well as certain
selling, general and administrative activities. Accordingly, the results
achieved for the first six months of 1995 are not necessarily indicative of
the results to be obtained for the remainder of the year.
Sales of the Company's existing oncology products increased $2.5 million and
$2.6 million during the three and six-month periods ended June 30, 1995,
respectively, compared to the three and six-month periods ended June 30,
1994. Product sales for the six months ended June 30, 1994 also includes $2.1
million of revenue from the sale of certain products licensed to the Company
from Bristol-Myers Squibb Company. The Company ceased marketing these
products in January 1994.
The improvement in product sales during the June 30, 1995 three and six-month
periods is primarily attributable to increased sales of Novantrone and
leucovorin calcium, coupled with the launch in February 1995 of Thioplex, an
improved formulation of Thiotepa. Combined sales of these products for the
three and six months ended June 30, 1995 totaled $21.2 million and $42.4
million, respectively, an increase of $3.6 million and $5.4 million compared
to the respective three and six months ended June 30, 1994. These
improvements in product sales were partially offset by a decline in Leukine
sales as compared to the 1994 levels. For the three and six-month periods
ended June 30, 1994 and 1995, Leukine sales decreased $2.0 million to $9.2
million and $2.6 million to $20.3 million, respectively. The reduction in
Leukine sales during the second quarter of 1995 is believed to primarily be
the result of distribution programs initiated by a competitor during the
period. Sales of Leukine are expected to improve during the third quarter of
1995, however, there is no assurance that Leukine sales will return to the
levels incurred prior to the second quarter of 1995.
Royalty and contract revenue totaled $4.8 million and $8.5 million for the
three and six months ended June 30, 1995, an increase of $2.7 million and
$4.1 million from the comparable 1994 periods, respectively. In 1995, the
Company commenced a program of utilizing the available capacity at its
manufacturing development center to perform contract manufacturing services
for certain customers. For the three and six months ended June 30, 1995, the
Company recognized revenue under these agreements of $2.3 million and $3.8
million, respectively. No related revenue was recognized during the
comparable 1994 periods. To the extent the available capacity at its
manufacturing development center allows, the Company intends to continue to
offer these services.
Cost of product sales was $6.3 million, or 18.3% of product sales and $6.9
million, or 21.5% of product sales for the quarters ended June 30, 1995 and
1994, respectively. For the six months ended June 30, 1995 and 1994, cost of
product sales was $12.9 million, or 18.5% of product sales and $14.8 million,
or 21.4% of product sales, respectively. The decrease in cost of product
sales as a percentage of product sales during the 1995 periods is primarily
attributable to the February 1995 launch of Thioplex, which has a lower
production cost than Thiotepa, combined with a favorable change in the mix of
product sales to include a relatively higher percentage of the Company's more
profitable products. In addition, in accordance with the merger agreement
with Cyanamid, the Company incurs a royalty on all sales of the former
Lederle oncology products which have the Lederle label. In 1995, the
majority of these products have been relabled with an Immunex label and
accordingly, the royalty incurred on the sales of these products has
decreased substantially.
8
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (continued)
For the three and six-month periods ended June 30, 1995, research and
development expense totaled $20.6 million and $41.3 million, respectively, an
increase of $0.5 million and $1.4 million versus the comparable 1994 periods.
The increase in both periods is due to costs associated with the Company's
ongoing clinical development activities and increased funding under certain
collaborative research agreements.
The Company's manufacturing development center is primarily used for the
production of clinical material; accordingly, the costs of operating the
facilities, which are not inventoriable, are expensed to research and
development. As discussed above, the Company has been utilizing the
available capacity at these facilities to perform contract manufacturing
services. While the incremental costs of performing these services has not
been significant, these costs have been expensed to research and development.
Selling, general and administrative expense decreased to $14.6 million and
$29.5 million for the three and six months ended June 30, 1995, compared to
$17.9 million and $36.0 million for the three and six months ended June 30,
1994, respectively. The Company initiated several cost reduction programs
during the third quarter of 1994 which led to a reduction in the expenditures
required to support the Company's ongoing selling, general and administrative
activities. In addition, the Company has eliminated, or brought in-house,
virtually all of the services formerly provided by Cyanamid under the U.S.
Services Agreement. Costs incurred under this agreement for the three and
six-month periods ended June 30, 1995 totaled $0.2 million and $0.9 million,
respectively, compared to $1.7 million and $3.4 million in the respective
1994 periods. Costs under this agreement decrease further to less than
$22,000 per quarter for the remainder of 1995. These reductions in selling,
general and administrative expenses have been partially offset by increased
legal defense costs related to litigation between the Company and Cistron
Biotechnology, Inc. The Company has incurred costs totaling approximately
$2.3 million in defense of this lawsuit during the first six months of 1995
and it is expected that these expenses will continue until such time that the
litigation is resolved. Trial is currently scheduled for April 1996.
Interest expense decreased to a nominal amount during the three months ended
June 30, 1995, following the pay-off of the outstanding balance of the
Cyanamid line of credit and the Company's construction loan in March 1995.
Interest expense currently consists of interest on the Company's remaining
capital lease obligations and certain other long-term liabilities and is not
expected to be significant for the remainder of 1995. At June 30, 1994, the
Company had borrowings under the Cyanamid loan agreement of $10.0 million as
well as a balance payable on its construction loan of $13.0 million.
Other expense increased to $0.5 million from $0.1 million for the
three-months ended June 30, 1995 and 1994, respectively. Under its equity
method of accounting, in April 1995, the Company resumed recognizing losses
from its equity investment in Targeted Genetics Corporation ("TGC"). TGC
completed a secondary equity offering in July 1995 and accordingly, the
Company is not expected to recognize additional losses from this investment
for the remainder of the year. During the comparable 1994 period, the
Company also recognized losses from its investment in TGC. However, this
expense was offset by other revenue generated from certain income producing
properties which the Company sold in June 1994. The other expense incurred
for both the 1995 and 1994 six month periods is also attributable to the
Company's investment in TGC.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS, (continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and securities available-for-sale totaled $21.6
million at June 30, 1995, of which none was restricted, compared to $24.7
million at December 31, 1994, of which $10.0 million was restricted in
accordance with the terms of the Company's construction loan. During the six
months ended June 30, 1995, the Company received $35.8 million from Cyanamid
as settlement of their 1994 revenue guaranty obligation and generated an
additional $8.5 million from operations. These cash inflows were used for
payment of the $34.0 million outstanding balance on the Cyanamid loan
agreement, the final $10.6 million payment on the Company's construction loan
and for investments in property, plant and equipment of $2.2 million.
For the first six months of 1995, the Company has achieved positive cash flow
from operating activities through a combination of a decreased net loss and
working capital management. However, after certain payments are made on the
Company's current obligations, operating activities may result in net cash
outflows over the last six months of 1995. It is anticipated that the
existing cash reserves will be sufficient to meet the Company's operating
needs through the remainder of 1995 and that any borrowings during the year
on the Cyanamid loan agreement, if required, will not be substantial. Under
the terms of the Cyanamid loan agreement, the Company's borrowing capacity at
June 30, 1995 was $24.7 million.
10
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Incorporated by reference to Item 3 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual meeting of the Company's shareholders ("Shareholders") was held
on Wednesday April 26, 1995 ("Annual Meeting"). Of the 39,601,699 shares
outstanding as of the record date, March 14, 1995, there were 35,768,024
shares or 90.3% of the total shares eligible to vote represented in person or
proxy.
Two matters were submitted to a vote of Shareholders at the Annual Meeting.
First, eight directors were elected to serve for a term of one year or until
their successors are elected and qualify, with 35,547,077 affirmative votes,
and 128,584 abstentions. The directors elected were Edward V. Fritzky,
Michael L. Kranda, Steven Gillis, Joseph J. Carr, Kirby L. Cramer, Robert A.
Essner, John E. Lyons and Edith W. Martin.
Second, an increase of 5,000,000 shares in the number of shares issuable
under the Company's Amended 1993 Stock Option Plan was approved with
27,489,378 affirmative votes, 2,959,923 negative votes and 132,861
abstentions.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit (27) Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
11
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SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMMUNEX CORPORATION
Date: August 9, 1995 /s/ Edward V. Fritzky
---------------------- -------------------------------------------
Edward V. Fritzky, Chairman
and Chief Executive Officer
(Principal Executive Officer)
Date: August 9, 1995 /s/ Douglas G. Southern
---------------------- ------------------------------------------
Douglas G. Southern, Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
12
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of June 30, 1995, and the Consolidated Statement
of Operations for the six-month period ended June 30, 1995, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 21,448
<SECURITIES> 105
<RECEIVABLES> 22,580
<ALLOWANCES> 345
<INVENTORY> 10,705
<CURRENT-ASSETS> 55,828
<PP&E> 111,688
<DEPRECIATION> 19,771
<TOTAL-ASSETS> 184,809
<CURRENT-LIABILITIES> 38,596
<BONDS> 0
<COMMON> 569,640
0
0
<OTHER-SE> (428,300)
<TOTAL-LIABILITY-AND-EQUITY> 184,809
<SALES> 69,644
<TOTAL-REVENUES> 78,126
<CGS> 12,916
<TOTAL-COSTS> 83,711
<OTHER-EXPENSES> 495
<LOSS-PROVISION> 180
<INTEREST-EXPENSE> 928
<INCOME-PRETAX> (6,487)
<INCOME-TAX> 119
<INCOME-CONTINUING> (6,606)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,606)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
