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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 March 31, 1995
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From To
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Commission File Number
0-12406
IMMUNEX CORPORATION
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(exact name of registrant as specified in its charter)
Washington 51-0346580
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 University Street, Seattle, WA 98101
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(Address of principal executive offices) (zip code)
(206) 587-0430
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(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
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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
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Class Outstanding at May 8, 1995
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IMMUNEX CORPORATION
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1995
TABLE OF CONTENTS
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
a) Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3
b) Consolidated Statements of Operations -
for the three-month periods ended March 31, 1995
and March 31, 1994 4
c) Consolidated Statements of Cash Flows -
for the three-month periods ended March 31, 1995
and March 31, 1994 5
d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IMMUNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31,
1995 December 31,
(unaudited) 1994
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,271 $ 14,818
Securities available-for-sale 111 9,919
Accounts receivable 14,878 18,259
Inventories 12,031 11,725
Other assets 1,159 2,618
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Total current assets 47,450 57,339
Property, plant and equipment, net 94,206 96,323
Other assets 38,196 39,003
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$ 179,852 $ 192,665
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,176 $ 21,520
Accrued compensation and related items 3,221 4,109
Current portion of long-term debt 820 11,595
Other liabilities 2,745 4,498
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Total current liabilities 30,962 41,722
Note payable-Cyanamid -- 34,000
Long-term debt and other obligations 4,945 5,016
Shareholders' equity:
Common stock, $.01 par value 558,503 547,182
Guaranty payment receivable from Cyanamid (11,322) (35,768)
Accumulated deficit (403,236) (399,487)
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Total shareholders' equity 143,945 111,927
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$ 179,852 $ 192,665
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</TABLE>
3
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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
March 31, March 31,
1995 1994
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<S> <C> <C>
Revenues:
Product sales $ 35,260 $ 37,264
Royalty and contract revenue 3,647 2,269
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38,907 39,533
Costs and expenses:
Cost of product sales 6,618 7,938
Research and development 20,674 19,798
Selling, general and administrative 14,909 18,184
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42,201 45,920
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Operating loss (3,294) (6,387)
Other income (expense):
Interest income 168 216
Interest expense (830) (498)
Other income (expense), net 6 (521)
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(656) (803)
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Loss before income taxes (3,950) (7,190)
Provision for income taxes 48 1,207
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Net loss $ (3,998) $ (8,397)
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Net loss per common share $ (.10) $ (.22)
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Number of shares used for per share amounts 39,553 38,790
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</TABLE>
4
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Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,998) $ (8,397)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 3,828 3,591
Equity in loss of affiliate -- 747
Accounts receivable 3,381 760
Inventories (305) 703
Interest receivable from securities available-for-sale 125 69
Accounts payable, accrued liabilities and
other current liabilities 278 6,660
Other current assets 1,605 76
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Net cash provided by operating activities 4,914 4,209
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Cash flows from investing activities:
Purchase of property, plant and equipment (1,161) (2,441)
Proceeds from sales of securities available-for-sale 9,786 3,988
Purchases of marketable securities -- (3,917)
Other (7) (136)
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Net cash provided by (used in) investing activities 8,618 (2,506)
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Cash flows from financing activities:
Principal payments under capitalized lease obligations (181) (375)
Construction loan payments (10,600) (1,200)
Cyanamid line of credit (34,000) --
Guaranty payments received from Cyanamid 35,768 7,416
Other (66) (62)
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Net cash provided by (used in) financing activities (9,079) 5,779
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Net increase in cash and cash equivalents 4,453 7,482
Cash and cash equivalents, beginning of period 14,818 2,968
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Cash and cash equivalents, end of period $ 19,271 $ 10,450
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</TABLE>
5
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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 Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
The results of operations for the three-month period ended March 31, 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 1995. The Company intends 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.
6
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three months ended March 31, 1995, the Company incurred a net loss of
$4.0 million, compared to a net loss of $8.4 million for the same period a year
ago. The improvement in the Company's net loss was due primarily to decreased
operating costs resulting from expense reduction programs initiated during 1994
and a decrease in costs under certain agreements with American Cyanamid Company
("Cyanamid").
Sales of the Company's existing oncology products remained consistent with the
sales levels achieved in the prior year, totaling $35.3 million and $35.2
million for the quarters ended March 31, 1995, and 1994, respectively. The
Company recognized an additional $2.1 million of product sales during the 1994
period from the sale of certain products (the "BMS products") licensed to the
Company from Bristol-Myers Squibb Company. The Company ceased marketing these
products in January 1994.
Net sales of Leukine totaled $11.2 million during the three months ended March
31, 1995, compared to $11.7 million during the comparable 1994 period. In April
1995, a U.S. Food and Drug Administration ("FDA") advisory committee recommended
approval of Leukine for two new indications; following chemotherapy in acute
myelogenous leukemia and use with allogenic bone marrow transplant patients.
However, a majority of the advisory committee members declined recommendation of
Leukine for treatment of chemotherapy induced neutropenia. There can be no
assurance that the FDA will follow the recommendations of the advisory
committee, nor is it certain what impact, if any, additional label indications
or the FDA advisory committee recommendations will have on future Leukine sales.
In February 1995, the Company received FDA approval for and began marketing
Thioplex, an improved formulation of Thiotepa. The launch of Thioplex
contributed to increased sales for the quarter ended March 31, 1995, of
approximately $1.4 million, as compared to sales of Thiotepa in the comparable
quarter of the prior year.
Royalty and contract revenue increased to $3.6 million from $2.3 million for the
three-month periods ended March 31, 1995, and 1994, respectively. In January
1995, the Company commenced contract manufacturing services for certain
collaborators at its manufacturing development center. The Company has entered
into contracts totaling approximately $3.0 million, of which $1.5 million was
recognized during the first three months of 1995. The Company intends to
continue to perform these services to the extent the available resources at its
manufacturing development center allow.
Cost of product sales was $6.6 million, or 18.8% of products sales, for the
three months ended March 31, 1995, versus $7.9 million, or 21.3% of product
sales, for the three months ended March 31, 1994. The reduction in cost of
product sales as a percentage of product sales is due primarily to the launch of
Thioplex in February 1995. Thioplex, which replaced Thiotepa, has a lower cost,
as a percentage of product sales, than Thiotepa. In addition, cost of product
sales for the 1994 period includes the cost of the BMS products, which the
Company ceased marketing effective January 31, 1994. The cost of the BMS
products, as a percentage of product sales, was substantially higher than the
Company's existing product line, collectively.
Research and development expense for the quarter ended March 31, 1995 totaled
$20.7 million, an increase of $0.9 million from the comparable 1994 period. The
increase during the 1995 period is attributable to increased costs to support
the Company's ongoing clinical development effort and funding for certain
collaborative research partnerships. Research and development expense will
fluctuate from quarter to quarter depending on a number of factors including the
activities at the Company's manufacturing development center and the progress of
various clinical programs. However, research and development expense is
expected to increase moderately from the level incurred during the first three
months of 1995.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
Selling, general and administrative expense decreased to $14.9 million for the
three months ended March 31, 1995 from $18.2 million in the comparable prior
year period. Beginning in the third quarter of 1994, the Company initiated
several expense reduction programs including a reorganization of the sales
force, elimination of certain non-essential programs and staffing reductions
across the organization. These measures have contributed to reductions in the
costs of operating the Company's core business, as compared to the levels
incurred during the first three months of 1994. In addition, certain ongoing
services provided by Cyanamid have decreased from the 1994 level which reduced
the corresponding costs from $1.7 million during the first quarter of 1994 to
$0.7 million during the first quarter of 1995. These savings were offset in
part by increased legal defense costs related to litigation with Cistron
Biotechnology, Inc. The increased legal costs will continue until such time
that the litigation is resolved.
Interest expense increased for the quarter ended March 31, 1995 to $0.8 million
due to an increased level of borrowings on the Cyanamid loan agreement, as
compared to the first quarter of 1994. The Cyanamid loan agreement was paid off
in March 1995 as well as the remaining balance on the Company's construction
loan. As a result, interest expense is expected to be nominal in the upcoming
quarter but will increase in the last half of 1995 as the Company is expected to
borrow additional funds to meet its operating needs.
Other income (expense) has been reduced to a nominal level following the sale of
certain income producing properties in the second quarter of 1994. During the
three-month period ended March 31, 1994, the Company recognized a loss of $0.7
million from its equity investment in Targeted Genetics Corporation. Due to the
financial position of TGC, the Company may begin recognizing additional equity
losses from this investment in the second quarter of 1995.
During the three-month period ended March 31, 1994, the Company recorded a
provision for income taxes of $1.2 million which was attributable primarily to
the Company's operations in Puerto Rico. The Puerto Rico subsidiary was
dissolved in November 1994, and as a result, the income tax provision in 1995
will consist only of income taxes in the states in which the Company conducts
its business.
FINANCIAL CONDITION
Cash, cash equivalents and securities available-for-sale decreased to $19.3
million at March 31, 1995, compared to $24.7 million at December 31, 1994.
$10.0 million of the December 31, 1994 balance was restricted in accordance with
the terms of the Company's construction loan. As of March 31, 1995, there are
no restrictions on cash, cash equivalents and securities available-for-sale.
The Company received $35.8 million from Cyanamid as settlement of their 1994
revenue guaranty obligation and generated an additional $4.9 million from
operating activities. These funds were used primarily to pay the $34.0 million
outstanding balance on the Cyanamid loan agreement and the final $10.6 million
payment on the Company's construction loan.
The Company's operations are expected to result in net cash outflows in the
upcoming months in order to meet its working capital requirements. The Company
will rely on its existing cash reserves, and to the extent required, utilize the
available funds under the Cyanamid loan agreement to meet these needs. Under
the terms of the Cyanamid loan agreement, the Company's borrowing capacity at
March 31, 1995 was $11.3 million.
8
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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 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1995.
9
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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: May 10, 1995 Edward V. Fritzky
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Edward V. Fritzky, Chairman and
Chief Executive Officer
(Principal Executive Officer)
Date: May 10, 1995 Douglas G. Southern
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Douglas G. Southern, Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
10
