<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
( ) 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)
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)
Registrant's telephone number, including area code (206) 587-0430
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 39,709,978
- --------------------------------- ---------------------------------
Class Outstanding at November 6, 1997
<PAGE>
<TABLE>
<CAPTION>
IMMUNEX CORPORATION
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1997
TABLE OF CONTENTS
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements:
a) Consolidated Condensed Balance Sheets - 4
September 30, 1997 and December 31, 1996
b) Consolidated Condensed Statements of Operations - 5
for the three-month periods ended September 30, 1997
and September 30, 1996
c) Consolidated Condensed Statements of Operations - 6
for the nine-month periods ended September 30, 1997
and September 30, 1996
d) Consolidated Condensed Statements of Cash Flows - 7
for the nine-month periods ended September 30, 1997
and September 30, 1996
e) Notes to Consolidated Condensed Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
The consolidated condensed 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, 1996.
The results of operations for the nine-month period ended September 30, 1997,
are not necessarily indicative of results to be expected for the entire year
ending December 31, 1997.
3
<PAGE>
Item 1. FINANCIAL STATEMENTS
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 63,725 $ 23,861
Marketable securities 17,732 -
Accounts receivable, net 21,211 18,428
Inventories 8,578 8,893
Other current assets 3,058 3,429
------------- ------------
Total current assets 114,304 54,611
Property, plant and equipment, net 76,371 80,021
Other assets 44,806 43,155
------------- ------------
$ 235,481 $ 177,787
------------- ------------
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,355 $ 22,305
Accrued compensation and related items 6,722 4,858
Current portion of long-term obligations 3,288 3,491
Other current liabilities 2,059 843
------------- ------------
Total current liabilities 40,424 31,497
Long-term obligations 8,962 8,580
Shareholders' equity:
Common stock, $.01 par value 694,426 648,475
Guaranty payment receivable from AHP (44,901) (56,000)
Unrealized gain on investment 11,942 9,406
Accumulated deficit (475,372) (464,171)
------------- ------------
Total shareholders' equity 186,095 137,710
------------- ------------
$ 235,481 $ 177,787
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
4
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- ------------
<S> <C> <C>
Revenues:
Product sales $ 37,674 $ 30,334
Royalty and contract revenue 18,287 3,023
------------- ------------
55,961 33,357
Operating expenses:
Cost of product sales 6,207 4,920
Research and development 28,003 22,251
Selling, general and administrative 16,489 17,425
------------- ------------
50,699 44,596
------------- ------------
Operating income (loss) 5,262 (11,239)
Other income (expense):
Interest income 1,131 616
Interest expense (150) (45)
Other income, net 11 25
------------- ------------
992 596
------------- ------------
Income (loss) before income taxes 6,254 (10,643)
Provision for income taxes 55 7
------------- ------------
Net income (loss) $ 6,199 $ (10,650)
------------- ------------
------------- ------------
Net income (loss) per common share $ 0.15 $ (0.27)
------------- ------------
------------- ------------
Number of shares used for per share amounts 41,714 39,602
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- ------------
<S> <C> <C>
Revenues:
Product sales $ 112,534 $ 97,631
Royalty and contract revenue 25,880 19,093
------------- ------------
138,414 116,724
Operating expenses:
Cost of product sales 18,713 16,531
Research and development 78,735 72,557
Selling, general and administrative 54,388 52,160
------------- ------------
151,836 141,248
------------- ------------
Operating loss (13,422) (24,524)
Other income (expense):
Interest income 2,840 1,705
Interest expense (466) (197)
Other income, net 17 36
------------- ------------
2,391 1,544
------------- ------------
Loss before income taxes (11,031) (22,980)
Provision for income taxes 170 119
------------- ------------
Net loss $ (11,201) $ (23,099)
------------- ------------
Net loss per common share $ (0.28) $ (0.58)
------------- ------------
------------- ------------
Number of shares used for per share amounts 39,622 39,602
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
6
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (11,201) $ (23,099)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 12,360 11,476
Cash flow impact of changes to:
Accounts receivable (2,781) 364
Inventories 316 22
Accounts payable, accrued liabilities and
other current liabilities 9,129 (7,970)
Other current assets (179) (3,266)
---------- ----------
Net cash provided by (used in) operating activities 7,644 (22,473)
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (6,348) (3,585)
Purchases of marketable securities (24,960) -
Proceeds from maturities of marketable securities 7,862 -
Other (1,563) (965)
---------- ----------
Net cash used in investing activities (25,009) (4,550)
---------- ----------
Cash flows from financing activities:
Guaranty payments received from AHP 56,000 45,288
Proceeds from exercise of stock options 1,050 -
Other 179 (426)
---------- ----------
Net cash provided by financing activities 57,229 44,862
---------- ----------
Net increase in cash and cash equivalents 39,864 17,839
Cash and cash equivalents, beginning of period 23,861 20,437
---------- ----------
Cash and cash equivalents, end of period $ 63,725 $ 38,276
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
7
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Immunex Corporation (the "Company") is a biopharmaceutical company that
discovers, develops, manufactures and markets human therapeutic products to
treat cancer, infectious diseases and immunological disorders.
The Company operates in a highly regulated and competitive environment. The
manufacturing and marketing of pharmaceutical products requires approval from
and is subject to ongoing oversight by the United States Food and Drug
Administration ("FDA") and by comparable agencies in other countries.
Obtaining approval for a new therapeutic product is never certain and may
take several years and involve expenditure of substantial resources.
Competition in researching, developing and marketing pharmaceutical products
is intense. Any of the technologies covering the Company's existing products
or products under development could become obsolete or diminished in value by
discoveries and developments of other organizations.
The Company's market for pharmaceutical products is the United States, Canada
and Puerto Rico ("North America"). The Company has arrangements with
Wyeth-Ayerst Canada, Inc. and Wyeth-Ayerst Laboratories Puerto Rico, Inc. for
distribution and sale of its pharmaceutical products in Canada and Puerto
Rico, respectively. Products are sold primarily to wholesalers, oncology
distributors, clinics and hospitals in the United States.
The financial statements are prepared in conformity with generally accepted
accounting principles which require management estimates and assumptions that
affect the amounts reported on the financial statements and accompanying
notes. Actual results could differ from those estimates.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents consist principally of deposits in money market accounts
available on demand or securities with purchased maturities of 90 days or
less.
MARKETABLE SECURITIES
Marketable securities are classified as available-for-sale and are stated at
fair value. At September 30, 1997, the Company had an unrealized gain of
$86,000. Marketable securities consist of United States government and
corporate obligations.
8
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INVENTORIES
Inventories are stated at the lower of cost, using a weighted-average method,
or market. The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials $ 1,284 $ 2,453
Work in process 4,355 2,689
Finished goods 2,939 3,751
------------- ------------
Totals $ 8,578 $ 8,893
------------- ------------
------------- ------------
</TABLE>
DEPRECIATION AND AMORTIZATION
Depreciation of buildings, equipment and capital leases is calculated using
the straight-line method over the estimated useful lives of the related
assets which range from 3 to 31.5 years. Leasehold improvements are
amortized on a straight-line basis over the lesser of the estimated useful
life or the term of the lease. The costs of acquiring leasehold interests
are amortized over the remaining term of the lease.
REVENUES
Product sales are recognized when product is shipped. The Company performs
ongoing credit evaluations of its customers and does not require collateral.
Product sales are recorded net of reserves for estimated chargebacks,
returns, discounts, Medicaid rebates and administrative fees. The Company
maintains reserves at a level which management believes is sufficient to
cover estimated future requirements.
Revenues received under royalty, licensing and contract manufacturing
agreements are recognized based on the terms of the underlying contractual
agreements. Expenses related to the performance of contract manufacturing
services by the Company are included in research and development expense.
NET INCOME (LOSS) PER COMMON SHARE
Net income or loss per common share is calculated by dividing net income or
loss by the weighted average number of common shares, and if dilutive, all
common stock equivalents outstanding during the period.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December
31, 1997. The adoption of Statement No. 128 will require the Company to
replace the current presentation of per share data with "basic" and "diluted"
per share data. Due to the Company's net loss for the periods requiring
restatement, outstanding common stock equivalents are antidilutive and
therefore adoption of Statement No. 128 will not have a material impact on
the Company's per share data.
9
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income," which is effective for periods
beginning after December 15, 1997. Statement No. 130 establishes standards
for reporting comprehensive income and its components. The adoption of
Statement No. 130 will increase disclosure only and will have no impact on
the Company's financial position or results of operations.
NOTE 3. RELATED PARTY TRANSACTIONS
AGREEMENT WITH AMERICAN HOME PRODUCTS CORPORATION ("AHP") TO PROMOTE
ENBREL-TM- (TNFR-FC)
In September 1997, the Company entered into an agreement with AHP to promote
ENBREL, if and when approved by the FDA, in the United States and Canada.
Immunex received milestone revenue of $15.0 million upon signing of the
agreement. AHP holds a majority interest in Immunex, totaling approximately
54%.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion of results of operations, liquidity and capital
resources includes certain forward-looking statements. The words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
such forward-looking statements. Such statements are based on current
expectations and are subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated by the
statements made by the Company. Certain risk factors have been identified
which could affect the Company's actual results and are described in the
Company's latest Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
OVERVIEW
For the three months ended September 30, 1997, the Company recognized net
income of $6.2 million versus a net loss of $10.7 million for the comparable
1996 period. For the nine-month periods ended September 30, 1997 and 1996,
the Company incurred net losses of $11.2 million and $23.1 million,
respectively. The improved 1997 operating results are attributable to growth
in sales of the Company's two lead products, NOVANTRONE-Registered Trademark-
(mitoxantrone) and LEUKINE-Registered Trademark- (sargramostim), combined
with the recognition of $15.0 million in revenue upon signing of a promotion
agreement with AHP in September 1997 relating to AHP's right to promote
ENBREL, if and when approved by the FDA, in North America. The revenue
increases have been partially offset by increased expenditures related to the
Company's developmental research activities and, to a lesser extent,
increased selling, general and administrative expense levels.
The Company has several non-recurring transactions pending which may be
finalized during the fourth quarter of 1997. Due to the nature of these
types of transactions, the timing of completion is uncertain. However,
agreements, if completed, will generate incremental revenues or expenses that
are not evident from current trends.
REVENUES
Product sales increased to $37.7 million from $30.3 million and to $112.5
million from $97.6 million for the three and nine months ended September 30,
1997 and 1996, respectively. The increase reflects growth in sales of
NOVANTRONE and LEUKINE. In November 1996, the Company received an expanded
label indication for NOVANTRONE for use in the treatment of patients with
pain related to hormone refractory prostate cancer. In January 1997, the
Company launched a multi-dose liquid formulation of LEUKINE. Sales and
marketing programs intended to capitalize on these opportunities were
implemented for both products. The Company believes that both products have
become more widely accepted in the market, resulting in increased sales
levels. For the three and nine-month periods ended September 30, 1997, sales
of NOVANTRONE totaled $13.4 million and $37.9 million, respectively, versus
$9.9 million and $27.7 million for the comparable 1996 periods. Sales of
LEUKINE totaled $14.1 million and $39.6 million for the three and nine months
ended September 30, 1997, respectively, compared to $9.2 million and $33.0
million for the 1996 three and nine-month periods.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
In June 1997, a competitor received FDA approval to market a 350 mg vial
of leucovorin calcium. This vial size was the one remaining leucovorin
calcium product the Company markets which did not have direct competition.
Sales of leucovorin calcium declined significantly during the third quarter
of 1997 and sales of leucovorin calcium are not expected to be a significant
revenue source for the Company in the future.
Royalty and contract revenue increased to $18.3 million from $3.0 million
and to $25.9 million from $19.1 million for the three and nine-month periods
ended September 30, 1997 and 1996, respectively. In September 1997, the
Company and AHP entered into a promotion agreement for AHP to promote ENBREL,
if and when approved by the FDA, in North America. The Company received
milestone revenue of $15.0 million upon signing of the agreement. In
addition, revenue earned under royalty agreements has increased moderately
during the 1997 three and nine-month periods, as compared to 1996. During
the first quarter of 1996, the Company entered into two license agreements
which generated income of $4.5 million and was receiving quarterly payments
from AHP to retain the international rights to ENBREL. This agreement was
revised in July 1996 and as a result, the quarterly payments ceased effective
July 1, 1996. Finally, due to internal manufacturing needs for the
development and manufacturing of its clinical and preclinical product
candidates, the Company ceased initiating new contract manufacturing
arrangements in 1996. For the nine months ended September 30, 1996, the
Company recognized revenue under such agreements totaling approximately $3.3
million. No related revenue has been earned during 1997, nor is anticipated
to be earned for the foreseeable future.
OPERATING EXPENSES
Cost of product sales was $6.2 million, or 16.5% of product sales and
$4.9 million, or 16.2% of product sales for the quarters ended September 30,
1997 and 1996, respectively. For the nine months ended September 30, 1997
and 1996, cost of product sales was $18.7 million, or 16.6% of product sales
and $16.5 million, or 16.9% of product sales, respectively. Fluctuations in
cost of product sales as a percentage of product sales will occur from period
to period, reflecting a change in the mix of product sales. The change in
the cost of product sales percentage for each of the respective 1997 and 1996
periods reflects changes in the mix of products sold during the period and to
a lesser extent, the impact of deteriorating margins on sales of leucovorin
calcium.
Research and development expense increased to $28.0 million from $22.2
million and to $78.7 million from $72.6 million for the three and nine months
ended September 30, 1997 and 1996, respectively. The increase reflects
significant investments in the Company's lead development product, ENBREL.
The Company has accelerated development of ENBREL during 1997 and continues
working with a contract manufacturer for the production of clinical material.
During the third quarter of 1997, the manufacturing scale-up of ENBREL to
commercial quantities was successfully completed. Spending on other product
candidates including MOBIST-TM- (Flt3-Ligand), IL-4 receptor and CD40 Ligand
has also increased during the current year. In July 1996, the Company and
AHP amended their agreements related to research and development of new
oncology products and development of ENBREL. The revised research and
development agreement resulted in a decrease of the Company's funding
obligation for AHP's oncology research and development to $12.2 million for
the first nine months of 1997 compared to $17.1 million for the first nine
months of 1996. In addition, the Company and AHP have established joint
project management systems to share equally in the costs of developing ENBREL
and MOBIST in North America and Europe. The result of these agreements has
been a net expense reduction of $14.5 million for the nine months ending
September 30, 1997 versus a net expense reduction of $1.4 million in the
comparable 1996 period.
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Selling, general and administrative expense for the three and nine months
ended September 30, 1997 totaled $16.5 million and $54.4 million,
respectively, versus $17.4 million and $52.2 million for the comparable 1996
periods. Expenses increased during the first half of 1997 due primarily to
costs of certain selling and marketing programs intended to capitalize on the
expanded label indication for NOVANTRONE and a multi-dose liquid formulation
approval for LEUKINE. Spending in these areas slowed during the third
quarter of 1997 and contributed to the decrease in expense levels from those
incurred during the first and second quarter of 1997. The Company has
incurred increased costs during the current year related to investment in
information technology and strengthening its patent position with respect to
its existing products and product pipeline. Selling, general and
administrative expense levels in 1996 include certain costs not incurred in
1997. These expenses consist of costs related to the adoption of certain
employee retention programs, investment banking and legal fees following
AHP's November 1995 offer to purchase all outstanding shares of the Company's
common stock. Also, in 1996, the Company was incurring legal defense costs
associated with litigation between the Company and Cistron Biotechnology,
Inc. ("Cistron"). This litigation was settled in November 1996. Finally, in
the third quarter of 1996, severance payments under an employment agreement
totaling approximately $1.0 million were made to a former officer of the
Company.
OTHER INCOME (EXPENSE)
Other income improved moderately during the comparable three and
nine-month periods ended September 30, 1997 and 1996 due to an increase in
interest income. The Company's funds available for investment purposes
increased substantially following the receipt of $56.0 million from AHP in
February 1997 as settlement of the 1996 revenue shortfall obligation. The
level of funds earning interest has also benefited from a substantial
improvement in operating cash flow for the nine months ended September 30,
1997. The increase in interest income was partially offset by increased
interest expense. The increase in interest expense represents the imputed
interest on the deferred portion of the Cistron settlement obligation.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities totaled $81.5 million
and $23.9 million at September 30, 1997 and December 31, 1996, respectively.
In February 1997, the Company received $56.0 million from AHP as settlement
of the 1996 revenue shortfall obligation. These funds were added to the
Company's cash reserves and are held in a variety of interest bearing
instruments including government and corporate obligations and money market
funds.
The improvement in the Company's operating results during 1997 combined
with a favorable change in the Company's working capital requirements
resulted in positive cash from operating activities during the first nine
months of 1997. Investment activities utilized $25.0 million of cash,
representing investments in plant and equipment of $6.3 million and a net
increase in marketable securities.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The Company is currently evaluating certain property in the vicinity of
its corporate headquarters for possible development and relocation of its
corporate offices and research facilities. The Company has entered into a
purchase and sale agreement for the property which, as currently amended,
expires in late 1997, and the Company has completed initial environmental
impact and other studies with respect to such property. There remain certain
contingencies that are expected to be completed prior to the expiration of
the purchase and sale agreement. Under the terms of the current agreement,
the Company anticipates closing on the sale during the first quarter of 1998.
Expenditures for land and related closing costs are expected to total
approximately $15.0 million.
Following the positive clinical results in September 1997 from a pivotal
Phase III study of ENBREL for treatment of advanced rheumatoid arthritis, the
Company began implementing plans for the possible commercialization of
ENBREL. The Company is working with AHP, under the terms of a promotion
agreement for ENBREL, to coordinate the sales, marketing, distribution,
customer service and other related systems which will be necessary to support
sales of ENBREL, if and when approved by the FDA. In addition, based on the
successful manufacturing scale-up of ENBREL to commercial quantities by the
contract manufacturer utilized by the Company, the Company has initiated
steps in an effort to ensure that inventory of ENBREL is available to meet
the Company's expected initial commercial requirements. At the end of the
third quarter of 1997, the Company had made commitments for the raw materials
necessary for the production of the estimated inventory of ENBREL required at
the time of launch. In addition, the Company has made an initial order of
launch inventory of ENBREL from the contract manufacturer. The launch
inventory requirements of ENBREL are expected to be invoiced to the Company
beginning in mid-1998. Completion of these commercialization related steps,
as discussed above, will require significant cash investments by the Company
currently estimated at approximately $40.0 million by the end of 1998.
Although the Phase III data for ENBREL released by the Company in September
1997 were positive, there can be no assurance that ENBREL will be approved by
the FDA, or if approved, whether the Company's estimates of launch inventory
requirements will reflect actual demand for the product. Certain risk
factors have been identified which could affect the Company's ability to
commercialize ENBREL and are described in the Company's latest Annual Report
on Form 10-K filed with the Securities and Exchange Commission, including
competition, patents, regulatory approval, supply and third-party
reimbursement. Accordingly, any amounts capitalized related to launch
inventory of ENBREL are subject to risk until such uncertainties are
resolved.
Operating activities are expected to use cash over the last three months
of 1997 to fund operations and satisfy existing obligations. Existing cash
reserves are believed to be sufficient to support the Company's operating
requirements and planned capital and financing expenditures for the remainder
of 1997. The Company expects to receive its final payment under the AHP
revenue guaranty in early 1998, the maximum amount of which is $60.0 million.
In addition, under the terms of the promotion agreement with AHP, the
Company will earn a $20.0 million milestone payment if and when the FDA
accepts a Biologics License Application ("BLA") for ENBREL, which the
Company expects to submit in the second quarter of 1998. There can be no
assurance that the BLA for ENBREL will in fact be submitted in the second
quarter of 1998, or that, if submitted, the FDA will accept such BLA
submission for review. Existing funds, combined with the final AHP revenue
guaranty payment and the $20.0 million milestone payment, will be used to
fund operations including the anticipated purchase of commercial inventory of
ENBREL and other related costs in 1998. Beyond 1998, the Company intends to
rely on accumulated cash reserves and cash generated from operations, which
will be highly dependent on the Company's successful development and
commercialization of ENBREL and its other products and technology.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The description of legal proceedings is incorporated by reference to Item
3 of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 11 Computation of Earnings Per Share is on page 17.
Exhibit 27 Financial Data Schedule
b) Reports on Form 8-K
A current report on Form 8-K dated September 25, 1997, was filed with
the Securities and Exchange Commission reporting that Immunex Corporation
entered into a promotion agreement for ENBREL with AHP acting through its
Wyeth-Ayerst Laboratories Division.
15
<PAGE>
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: November 7, 1997 /s/ Edward V. Fritzky
--------------------- -------------------------------------
Edward V. Fritzky
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 7, 1997 /s/ Douglas G. Southern
--------------------- -------------------------------------
Douglas G. Southern
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
16
<PAGE>
Exhibit 11
IMMUNEX CORPORATION
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- ------------
<S> <C> <C>
PRIMARY
Average shares outstanding 39,645 39,602
Net effect of dilutive stock options and stock warrants
based on the treasury stock method using average
market price during the period 1,556 0
------------- ------------
Number of shares used for per share amounts 41,201 39,602
------------- ------------
------------- ------------
Net income per common share $ 0.15 $ (0.27)
------------- ------------
------------- ------------
FULLY DILUTED
Average shares outstanding 39,645 39,602
Net effect of dilutive stock options and stock warrants
based on the treasury stock method using closing
market price during the period 2,069 0
------------- ------------
Number of shares used for per share amounts 41,714 39,602
------------- ------------
------------- ------------
Net income per common share $ 0.15 $ (0.27)
------------- ------------
------------- ------------
</TABLE>
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997, AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 63,725
<SECURITIES> 17,732
<RECEIVABLES> 29,850
<ALLOWANCES> 8,639
<INVENTORY> 8,578
<CURRENT-ASSETS> 114,304
<PP&E> 126,272
<DEPRECIATION> 49,901
<TOTAL-ASSETS> 235,481
<CURRENT-LIABILITIES> 40,424
<BONDS> 0
0
0
<COMMON> 694,426
<OTHER-SE> 508,331
<TOTAL-LIABILITY-AND-EQUITY> 235,481
<SALES> 112,534
<TOTAL-REVENUES> 138,414
<CGS> 18,713
<TOTAL-COSTS> 151,836
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 155
<INTEREST-EXPENSE> 466
<INCOME-PRETAX> (11,031)
<INCOME-TAX> 170
<INCOME-CONTINUING> (11,201)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,201)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
