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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 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
amendments to this Form 10-K. [ ]
The approximate aggregate market value of the voting stock held by
nonaffiliates of the registrant as of March 9, 1999 was: $2,938,459,987.
Common stock outstanding at March 9, 1999: 40,418,354 shares.
Documents incorporated by reference:
(1) Portions of the Company's definitive Proxy Statement for the annual meeting
of shareholders to be held on April 29, 1999, are incorporated by reference
in Part III.
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS...............................................................................1
General................................................................................1
Marketed Products......................................................................1
RHEUMATOID ARTHRITIS..........................................................1
ONCOLOGY......................................................................2
Research and Product Development ......................................................3
INVESTIGATIONAL PRODUCTS IN HUMAN CLINICAL TRIALS.............................3
MARKETED PRODUCTS IN HUMAN CLINICAL TRIALS FOR ADDITIONAL
CLINICAL INDICATIONS.................................................3
PRECLINICAL RESEARCH AND DEVELOPMENT PIPELINE.................................4
CYTOKINE PRODUCTS.............................................................4
ADDITIONAL CYTOKINES AND OTHER NEW MOLECULES..................................6
OTHER BIOLOGICAL PRODUCTS.....................................................7
RECEPTOR PRODUCTS ............................................................7
RESEARCH COLLABORATIONS......................................................10
NON-BIOLOGICAL ONCOLOGY PRODUCTS.............................................11
Relationship with AHP and Cyanamid....................................................12
1993 MERGER..................................................................12
GOVERNANCE AGREEMENT.........................................................12
1993 MERGER RELATED AGREEMENTS...............................................13
TACE AGREEMENTS..............................................................13
TNFR LICENSE AND DEVELOPMENT AGREEMENT.......................................13
ENBREL PROMOTION AGREEMENT...................................................14
PRODUCT RIGHTS AGREEMENT.....................................................15
Relationship with Hoechst AG..........................................................16
Marketing and Distribution............................................................17
GENERALLY....................................................................17
ENBREL.......................................................................17
ONCOLOGY PRODUCTS............................................................17
DISTRIBUTION.................................................................17
Competition...........................................................................17
GENERALLY....................................................................17
LEUKINE......................................................................18
NOVANTRONE...................................................................19
ENBREL.......................................................................19
GENERIC ONCOLOGY PRODUCTS....................................................20
Raw Materials and Supply..............................................................20
Government Regulation.................................................................21
Patents, Licenses and Trademarks......................................................22
GENERALLY....................................................................22
PATENTS ON BIOLOGICAL PRODUCTS...............................................22
PATENTS ON NON-BIOLOGICAL ONCOLOGY PRODUCTS..................................24
PATENT AND TECHNOLOGY LICENSES...............................................24
TRADEMARKS...................................................................24
Properties............................................................................24
Personnel.............................................................................25
Risk Factors..........................................................................25
ITEM 2. PROPERTIES............................................................................30
ITEM 3. LEGAL PROCEEDINGS.....................................................................30
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS......................................................................30
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PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS..................................................31
ITEM 6. SELECTED FINANCIAL DATA...............................................................31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................................32
Introduction..........................................................................32
Results of Operations.................................................................32
OVERVIEW.....................................................................32
REVENUES.....................................................................32
OPERATING EXPENSES...........................................................33
OTHER INCOME (EXPENSE).......................................................34
PROVISION FOR INCOME TAXES...................................................35
Liquidity and Capital Resources.......................................................35
Outlook .............................................................................36
Year 2000.............................................................................36
Market Risk...........................................................................37
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES
ABOUT MARKET RISK............................................................38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................................38
Consolidated Balance Sheets...........................................................39
Consolidated Statements of Operations.................................................40
Consolidated Statements of Shareholders' Equity.......................................41
Consolidated Statements of Cash Flows.................................................42
Notes to Consolidated Financial Statements............................................43
Note 1. Organization and Basis of Presentation..............................43
Note 2. Summary of Significant Accounting Policies..........................43
Note 3. Investments.........................................................45
Note 4. Property, Plant and Equipment.......................................46
Note 5. Long-term Obligations...............................................46
Note 6. Shareholders' Equity................................................47
Note 7. Income Taxes........................................................49
Note 8. Employee Benefits...................................................51
Note 9. Transactions with AHP...............................................51
Note 10. Commitments and Contingencies......................................53
Note 11. Subsequent Events..................................................54
Note 12. Quarterly Financial Results (unaudited)............................54
Report of Ernst & Young LLP, Independent Auditors............................55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................................56
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................56
ITEM 11. EXECUTIVE COMPENSATION...............................................................56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................................................56
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K..................................................................57
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PART I
ITEM 1. BUSINESS
Our disclosure and analysis in this report and in our 1998 Annual
Report to shareholders contain forward-looking statements. See RISK FACTORS,
below.
GENERAL
Immunex Corporation (which may be referred to as IMMUNEX, WE, US, or
OUR) is a biopharmaceutical company that discovers, develops, manufactures and
markets innovative therapeutic products for the treatment of human diseases,
including cancer, infectious diseases and immunological disorders such as
rheumatoid arthritis. Immunex was founded in 1981. Our products improve the
quality of life of people and help them enjoy longer, healthier and more
productive lives. Our products are currently marketed in the United States
(U.S.), and are available by prescription only. American Home Products
Corporation (AHP), through one of its wholly owned subsidiaries, American
Cyanamid Company (CYANAMID), owns approximately 54.1% of the outstanding common
stock of Immunex. AHP is one of the world's largest research-based
pharmaceutical and health care products companies.
Our home page on the Internet is at www.immunex.com. You can learn
about Immunex by visiting that site. Information contained on our Web site does
not constitute part of this report.
Our business is regulated primarily by the United States Food and Drug
Administration (FDA). The FDA regulates the products we sell, our manufacturing
processes and our promotion and advertising. See GOVERNMENT REGULATION, below.
MARKETED PRODUCTS
Almost all of our product revenues come from products in two major
therapeutic classes: rheumatoid arthritis (also referred to as RA) and oncology.
Our marketed products in the U.S. can be grouped as follows:
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RHEUMATOID ARTHRITIS ONCOLOGY
ENBREL-Registered Trademark- (etanercept) LEUKINE-Registered Trademark- (sargramostim, GM-CSF)
NOVANTRONE-Registered Trademark- (mitoxantrone for
injection concentrate)
THIOPLEX-Registered Trademark- (thiotepa for injection)
Methotrexate sodium injectable
Leucovorin calcium
AMICAR-Registered Trademark- (aminocaproic acid)
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We own rights to ENBREL in the U.S. and Canada (NORTH AMERICA), and AHP
owns ex-North American rights to ENBREL. We own worldwide rights to LEUKINE and
U.S. rights to the other marketed products listed above. A summary of our
marketed products is provided below.
RHEUMATOID ARTHRITIS
ENBREL. ENBREL, our newest product, was approved by the FDA on November
2, 1998, and launched in the U.S. on November 4, 1998. ENBREL is our brand name,
or trademark, for etanercept. Etanercept is the assigned generic name for this
product, which is described more fully below. ENBREL is the first in a new class
of RA drugs known as biologic response modifiers, a new approach to RA
management and the first breakthrough treatment in many years for people with
RA. RA is a serious autoimmune disorder that causes the body's immune system to
attack the lining of the joints and can lead to joint deformity or destruction,
organ damage, disability and premature death. The FDA has approved ENBREL for
the following indications or uses:
- reduction of signs and symptoms of moderately to severely active RA
in patients who have had an inadequate response to one or more
disease modifying antirheumatic drugs (DMARDS), and
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- in combination with methotrexate in patients who do not respond
adequately to methotrexate alone.
The dosage of ENBREL for adult patients with RA is 25 mg given twice
weekly as a subcutaneous (under the skin) injection. ENBREL is sold in a powder
formulation. AHP and Immunex are marketing ENBREL in the U.S. under the ENBREL
Promotion Agreement discussed later. See RELATIONSHIP WITH AHP AND CYANAMID,
below.
ENBREL acts by supplementing the body's natural process of regulating
levels of tumor necrosis factor (TNF), a protein known to be pivotal to the RA
disease process. In clinical trials, ENBREL has been shown to reduce pain and
duration of morning stiffness and improve swollen and tender joints, enabling
patients to better participate in daily activities. ENBREL acts by binding to
and neutralizing TNF. TNF is one of the dominant cytokines or proteins that play
an important role in the cascade of reactions that cause the inflammatory
process of RA. ENBREL inhibits the binding of TNF molecules to cell surface TNF
receptors (TNFR). The binding of ENBREL to TNF renders the bound TNF
biologically inactive, resulting in significant reduction in inflammatory
activity.
ONCOLOGY
LEUKINE. LEUKINE, which was our first marketed product, was launched in
the U.S. in 1991. LEUKINE is our trademark for sargramostim. LEUKINE is
sometimes referred to as granulocyte-macrophage colony stimulating factor or
GM-CSF. LEUKINE is a recombinant (man-made) form of a protein, called a
cytokine, that is almost identical to a protein normally produced in your body.
This cytokine helps to increase the number and improve the function of white
blood cells. White blood cells, which are made in the bone marrow, help prevent
infections. LEUKINE is marketed in the U.S. by our oncology specialty sales
force. LEUKINE is only available in the U.S. While LEUKINE is available in both
multi-dose liquid and powder formulations, most of our sales are of the
multi-dose liquid formulation. The FDA has approved LEUKINE for the following
indications:
- facilitating allogeneic and autologous bone marrow transplant (BMT)
therapies currently used for treatment of acute leukemia, lymphoma,
and Hodgkin's disease and in rescuing patients whose BMT grafts have
failed,
- for accelerating neutrophil recovery and reducing mortality in
treatment of patients with acute myelogenous leukemia (AML), and
- for use in peripheral blood progenitor cell (PBPC) mobilization and
post-transplantation support.
NOVANTRONE. NOVANTRONE is our trademark for mitoxantrone for injection
concentrate. NOVANTRONE is a compound similar to doxorubicin and idarubicin, but
with a molecular change that provides less damage to the heart. NOVANTRONE is
sold in a concentrated liquid form for injection. The FDA has approved
NOVANTRONE for the following indications:
- initial therapy of acute nonlymphocytic leukemia (ANLL), and
- in combination with steroids, for treatment of patients with pain
related to hormone refractory prostate cancer (HRPC).
When used in combination with steroids, therapy with NOVANTRONE has
been demonstrated to significantly reduce pain and improve quality of life in
patients with HRPC. In 1997, the FDA authorized us to supplement the approved
labeling for NOVANTRONE to cite clinical results showing its potential, in
combination with corticosteroids, to reduce levels of prostate-specific antigen
(PSA), an important indicator used by many physicians and patients to monitor
prostate cancer.
THIOPLEX. THIOPLEX is our trademark for a powder formulation of
thiotepa for injection. Thiotepa is a cytotoxic agent (kills cells) approved for
the palliative (alleviation of symptoms without curing the underlying disease)
treatment of a wide variety of tumor types. The FDA has approved THIOPLEX for a
number of oncology indications. We have been selling and distributing THIOPLEX
in the U.S. since FDA approval of a supplemental new drug application (SNDA) in
December 1994.
METHOTREXATE INJECTABLE. Methotrexate injectable is an antimetabolite
(a substance that replaces a particular metabolite) used in the treatment of
certain neoplastic (tumor) diseases. Patients with breast cancer, non-Hodgkin's
lymphoma (NHL) and lung cancer benefit from methotrexate. Methotrexate
injectable has significant generic competition. We distribute methotrexate
injectable in the U.S. under a distribution agreement with Cyanamid.
LEUCOVORIN CALCIUM. Leucovorin is used in methotrexate rescue therapy
and in modulation of 5-fluorouracil drug therapy in advanced colorectal cancer.
We sell both tablet and powder formulations of leucovorin. Leucovorin has
significant generic competition.
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AMICAR. AMICAR is our trademark for aminocaproic acid. AMICAR is a
fibrinolysis-inhibitory agent useful in enhancing hemostasis (prevention of
bleeding) when fibrinolysis contributes to bleeding. AMICAR is used to decrease
bleeding in certain surgical procedures and other medical situations. We sell
syrup, tablet and powder injectable formulations of AMICAR.
RESEARCH AND PRODUCT DEVELOPMENT
Since Immunex was founded in 1981, we have focused our scientific
efforts on understanding the biology of the immune system. Our goal is to
understand the complex interactions between cells that can trigger the
underproduction or overabundance of key immune system components, leading to
serious human diseases. From this singular research focus we have created a
portfolio of proprietary molecules and other technology that has produced a
number of promising biological therapeutic candidates. We spent $120.0 million
in 1998, $109.3 million in 1997 and $96.6 million in 1996 on Immunex-sponsored
research and development. These amounts include expenses related to third-party
research collaborations and the acquisition of product rights from certain third
parties.
INVESTIGATIONAL PRODUCTS IN HUMAN CLINICAL TRIALS
We are currently testing the following proprietary investigational
biotechnology products in human clinical trials. We own worldwide rights to
these products.
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PRODUCT CLINICAL INDICATION DEVELOPMENT STATUS
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- MOBIST(TM) (Flt3 ligand, or Peripheral blood stem cell Phase II
Flt3-L), a cytokine that induces mobilization and transplantation,
the proliferation of blood dendritic cell growth and
progenitor cells and specialized mobilization, immunotherapy of
immune cells (dendritic cells) cancer
- NUVANCE(TM) (Interleukin-4
receptor, or IL-4R), a soluble Asthma Phase I/II
receptor that binds to and
neutralizes Interleukin-4 (IL-4)
- CD40 Ligand (CD40-L), an immune B-cell lymphomas, solid tumors Phase I
system molecule that plays a
primary role in various immune
processes and directly arrests the
growth of certain tumors
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MARKETED PRODUCTS IN HUMAN CLINICAL TRIALS FOR ADDITIONAL CLINICAL INDICATIONS
Immunex recognizes that an efficient way to generate increased revenue
is by adding new indications to a product that is already on the market. We have
increased our focus on development activities to find potential new indications
for our existing drugs. Our goal is to build pharmaceutical franchises and
expand the commercial usefulness and revenue-producing ability of our key
products. Our marketed products listed below have been or are being tested in
clinical trials for the following potential additional clinical indications:
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MARKETED PRODUCT ADDITIONAL CLINICAL INDICATION DEVELOPMENT STATUS
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- ENBREL Juvenile rheumatoid arthritis (JRA) Supplemental biologics license
application (SBLA) filed with
FDA (November 1998)
Disease modification of early RA Phase III
Chronic heart failure (CHF) Phase II/III
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MARKETED PRODUCT ADDITIONAL CLINICAL INDICATION DEVELOPMENT STATUS
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- LEUKINE Treatment of neutropenia resulting from Biologics license application
chemotherapy in solid tumors (BLA) filed with FDA (March
1993)
Treatment of patients infected with the
human immunodeficiency virus (HIV),
malignant melanoma, treatment of
mucositis Phase III
Anti-tumor adjuvancy, vaccine adjuvancy Phase II
- NOVANTRONE Progressive multiple sclerosis (MS) Phase III
NHL Phase II
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PRECLINICAL RESEARCH AND DEVELOPMENT PIPELINE
Innovation by our research and development operations is very important
to the success of our business. Our goal is to discover, develop and bring to
market innovative products that address major unmet health care needs. This goal
has been supported by our substantial research and development investments. To
get the most value from our molecular portfolio, we are focusing first on those
product candidates with the largest market potential. Our most promising
preclinical candidates are listed below.
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MOLECULE POTENTIAL CLINICAL UTILITY STATUS
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- Interleukin-1 receptor Type II Anti-inflammatory, Pre-investigational new
(IL-1R TYPE II) osteoporosis, stroke, myeloma drug application (IND)
development
- TNF related apoptosis inducing Anti-tumor Pre-IND development
ligand (TRAIL)
- Interleukin-15 (IL-15) Mucositis (side effect of Late preclinical
chemotherapy from cancer)
- TNF-alpha converting enzyme Anti-inflammatory Late preclinical;
(TACE) antagonist collaboration with AHP
- 4-1BB ligand (4-1BBL) Anti-tumor Late preclinical
- ORK Anti-angiogenesis (cancer) Late preclinical
- RANK Osteoporosis Early preclinical
- p35 program Asthma, inflammation Early preclinical
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CYTOKINE PRODUCTS
Our biotechnology products are recombinant analogs of cytokines and
cytokine receptors. Cytokines are protein messengers that coordinate the
functions of immune cells (white blood cells) and certain other cells and
tissues. Immune cells include the following:
- granulocytes and macrophages, which are scavenger cells specialized
for uptake and disposal of foreign particles or infectious agents,
- B-cells, which produce antibodies to "flag" foreign particles or
diseased cells for destruction,
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- helper T-cells, which control and coordinate the function of other
immune cells, and
- dendritic cells, which take up and process protein antigens for
presentation to T-cells and B-cells.
We have developed recombinant cytokine products capable of expanding
and activating these immune cell populations, all of which must interact to
provide a normal immune response. We have also cloned and expressed genes
encoding cytokine receptors. Using genetic engineering techniques, we have
produced soluble versions of cytokine receptors, including fusions of soluble
receptors with fragments of human antibodies, that have been shown to be capable
of suppressing cytokine-induced responses by specifically binding to and
inactivating their target cytokines. We have also cloned and expressed genes
coding for certain enzymes that are involved in secretion of cytokines,
intracellular signalling proteins involved in immune responses, and viral
proteins that interact with human immune proteins. These enzymes, signalling
proteins, and viral proteins are being investigated as targets for small
molecule drug discovery or as protein therapeutics.
LEUKINE (SARGRAMOSTIM, GM-CSF). As mentioned earlier, LEUKINE is the
subject of regulatory filings and clinical trials intended to result in
additional FDA-approved indications. These filings and trials are described
below. Apart from our efforts to secure approval of LEUKINE in
chemotherapy-induced neutropenia (CIN), a number of clinical trials were
conducted in 1998 or are underway to investigate whether LEUKINE could be
approved for other uses. These investigational uses include HIV infections,
malignant melanoma, mucositis, anti-tumor adjuvancy and vaccine adjuvancy.
- HIV INFECTIONS. We are conducting a clinical development program to
study LEUKINE as a potential adjunctive AIDS therapy. In 1998,
results of a Phase III randomized, placebo-controlled, blinded
clinical trial indicated that patients who received LEUKINE in
addition to either RETROVIR-Registered Trademark- (zidovudine) or
in combination with another nucleoside analog, experienced
reductions in viral load and increases in CD4+ cell counts. Viral
load is an important marker used by physicians and patients to
monitor HIV disease progression, and CD4+ cells help fight
infections. CD4+ cells are progressively depleted by HIV disease.
In this clinical trial, the most frequently reported adverse event
was anemia, occurring at a similar rate in both the LEUKINE and
placebo groups. RETROVIR is a trademark of GlaxoWellcome Inc.
Results of an earlier small Phase I clinical trial reported in
1998 showed that LEUKINE was well tolerated and may have
contributed to reductions in viral load and increases in CD4+ cell
counts in a number of patients that received LEUKINE in combination
with stable protease inhibitor regimens. In addition to the clinical
trials for Leukine discussed above, we have completed a pivotal
Phase III clinical trial studying the impact of LEUKINE on the
incidence of opportunistic infections, survival, viral load, and
CD4+ cell counts. Results of this Phase III clinical trial, which
involved late-stage AIDS patients with CD4+ cell counts of less than
100, are expected in early 1999.
- MALIGNANT MELANOMA. In 1997 we announced positive results of an
open-label Phase II clinical trial of LEUKINE as an adjuvant therapy
following surgery to remove tumors in patients with advanced
melanoma who were at high risk for relapse or death. This trial
demonstrated that using LEUKINE as a therapy following surgery
increased the one-year survival rate of patients with advanced
stages of malignant melanoma when compared to matched historical
control patients. We are supporting a controlled Phase III trial of
LEUKINE in this patient population with a cooperative oncology
group.
- CIN. In March 1993, we filed an amendment to our BLA for LEUKINE to
obtain FDA approval for an additional label indication for
prophylaxis of CIN. Since the 1993 filing, we have supplemented our
original filing with additional data as it became available. In
April 1995, the FDA Biological Response Modifiers Committee declined
to recommend approval of LEUKINE for the CIN indication. However, we
maintain our BLA amendment at the FDA, and we are continuing to seek
approval of the CIN indication. Although we believe that this
amendment to the BLA for LEUKINE is approvable, no assurances can be
given regarding the duration or outcome of the FDA review process.
- MUCOSITIS. Data from pilot clinical trials have indicated that
LEUKINE may ameliorate chemotherapy/radiotherapy induced oral
mucositis. We are initiating a controlled Phase III clinical trial
of this potential indication with a cooperative oncology group.
- ANTI-TUMOR ADJUVANCY. Besides the clinical trial of LEUKINE in
malignant melanoma mentioned above, we are also supporting clinical
trials conducted by a cooperative oncology group to study the
potential of LEUKINE as an immune adjuvant therapy in breast cancer.
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- VACCINE ADJUVANT. Clinical trials are also being conducted with
various third parties to investigate the potential of LEUKINE as a
vaccine adjuvant.
MOBIST (FLT3-L). In 1993, we cloned cDNAs encoding Flt3-L, which is a
ligand for the Flt3 receptor. Flt3-L binds to a receptor located on primitive
hematopoietic cells, and has been shown to be capable of mobilizing PBPCs alone,
and in combination with other cytokines such as LEUKINE or granulocyte-colony
stimulating factor (G-CSF). In 1997, we completed Phase I safety trials of
MOBIST as a PBPC mobilizer. The trials, which were conducted in healthy
volunteers, showed that both single and multiple doses of MOBIST could be safely
administered. The multiple-dose trial also showed that MOBIST increased the
number of circulating PBPCs. Phase II trials of MOBIST, in conjunction with
either LEUKINE or G-CSF, were begun in 1998 in patients with breast cancer or
NHL. MOBIST may also be useful as an anti-tumor agent or vaccine adjuvant, as a
result of its capacity to generate dendritic cells. In 1998, we also commenced
Phase II trials of MOBIST as an anti-tumor agent in patients with prostate
cancer or NHL, and in patients with malignant melanoma. Results of these
clinical trials are expected in 1999. Clinical trials of MOBIST conducted to
date have demonstrated that MOBIST was well tolerated and provided sustained
increases in dendritic cell populations. We are evaluating the best approach to
using this characteristic of MOBIST to facilitate immunotherapy of cancer or
infectious diseases.
CD40-L. We have also cloned cDNAs encoding a ligand for the cell
surface receptor CD40. This ligand appears to be a required signal in the
development of an antibody-based immune response and is required for the
generation of cytotoxic T-cells. Thus, CD40-L may be useful as a vaccine
adjuvant. In addition, soluble CD40-L has been shown to be useful in directly
arresting the growth of certain B-cell lymphomas and epithelial cancers in
laboratory experiments. In 1998 we commenced a Phase I trial of CD40-L in
patients with B-cell NHL and solid tumors. The results of this clinical trial
are expected in early 1999. If the results of this clinical trial are positive,
in 1999 we intend to begin Phase II clinical trials of CD40-L.
Our soluble CD40-L stops the growth of tumor cells in mice, as
demonstrated by preclinical research conducted by investigators at Immunex, at
the National Cancer Institute and elsewhere. In addition, in 1998 we reported
preclinical data that showed that mice treated with a combination of MOBIST and
CD40-L demonstrated a higher rate of tumor rejection than either molecule alone.
Thus, it may be possible to develop combination cytokine therapies involving the
use of MOBIST and CD40-L.
It has also been shown that CD40-L induces chemokines and down
modulates chemokine receptors on cells infected with HIV. Since HIV uses
chemokine receptors to gain entry to these cells, CD40-L may have the potential
to prevent HIV infection of new cells.
INTERLEUKIN-2 (IL-2). IL-2 is a cytokine that controls the
proliferation and activation of T-cells. It can both augment normal immune
functions and help restore deficient immune responses. In 1983, we entered
into license agreements with Hoffmann-La Roche, Inc. and its parent, F.
Hoffmann La Roche & Company, Limited Company of Basel, Switzerland (ROCHE),
under which we receive royalties on worldwide sales of IL-2 products by Roche
and its sublicensees, including Chiron Corporation. Chiron's
PROLEUKIN-Registered Trademarks- IL-2 is available in over 45 countries, and
is approved in the U.S as a treatment for metastatic kidney cancer and
metastatic melanoma, a form of skin cancer. Chiron is also studying the use
of IL-2 to treat patients with HIV infection. PROLEUKIN is a trademark of
Chiron.
ADDITIONAL CYTOKINES AND OTHER NEW MOLECULES
Our scientists have cloned genes encoding several additional cytokines
and other new molecules that are now being characterized in preclinical studies.
- TRAIL. We have cloned TRAIL, which induces apoptosis (cell death) of
a number of tumor cell types. Recombinant TRAIL, either alone or in
combination with chemotherapy, has been shown to be effective at
reducing tumor growth and tumor incidence in animals.
- IL-15. We have cloned and expressed cDNAs encoding a cytokine known
as IL-15, a growth factor that shares certain biological activities
with IL-2. In preclinical studies, IL-15 has been shown to protect
intestinal epithelial cells in the mucosa from the harmful effects
of chemotherapy or radiation. Other potential uses of IL-15 that
have been suggested by preclinical studies include use as a
treatment for HIV infection or as a treatment for muscle atrophy. We
are currently evaluating our development strategy for IL-15, which
may include licensing IL-15 rights to a collaborator or strategic
alliance partner for continued development.
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- 4-1BBL. Recombinant 4-1BBL is a stimulator of anti-tumor immune
responses via its effects on T-cells. We produced this molecule and
tested it in IN VIVO tumor models in 1998. Combination studies of
4-1BBL with MOBIST in tumor models suggest that these two cytokines
have synergistic effects when used together.
- ORK. We cloned the human receptor tyrosine kinase called ORK and
have received a patent on the DNA encoding ORK in 1995. ORK is the
receptor for the angiopoietins which stimulate the process of blood
vessel development. We have constructed a soluble ORK molecule,
which has been shown to prevent tumor angiogenesis (new blood vessel
development) and retard tumor growth in experimental models of
cancer.
- RANK. Stimulation of the receptor named RANK results in development
of osteoclasts which resorb bone. We are developing a soluble RANK
receptor as an inhibitor of osteoclast development for osteoporosis.
- P35 PROGRAM. p35 is a protein of viral origin that binds to
chemokines (proteins involved in the inflammatory pathway). We are
collaborating with ArQule, Inc. to develop a small molecule
chemokine antagonist for use in various inflammatory conditions. See
RESEARCH COLLABORATIONS, below.
OTHER BIOLOGICAL PRODUCTS
Several other novel cytokines are currently at earlier stages of IN
VITRO assessment with third-party collaborators. We have cloned and expressed
cDNAs for a family of molecules known as "ligands for eph-related protein
kinases" (LERKS), and in 1995, we granted an exclusive, royalty-bearing
worldwide license for neurobiology uses under our LERKS patent rights and
technology to Genentech, Inc. In 1996, we entered into an agreement with Biogen,
Inc. for development outside the U.S. of anti-CD40-L antibodies in the treatment
of humans for all indications other than oncology.
RECEPTOR PRODUCTS
Cytokines act upon their target cells by binding to specific cell
surface receptors. The binding of a cytokine to its receptor triggers a complex
series of events within a responsive cell that transmits the cytokine's signal
to that cell. This signal can stimulate cell division or production of
antibodies, enzymes or other cytokines. In this way, circulating cytokines can
control and coordinate the function of cells located throughout the body.
Using genetic engineering techniques, our scientists have produced
soluble versions of cytokine receptors. A soluble cytokine receptor retains the
ability to bind to a specific cytokine, but lacks that portion of the natural
receptor that is attached to a cell. This property enables the soluble cytokine
receptor to circulate in the body after administration, where it can bind to and
inactivate cytokines, preventing interaction of the cytokines with immune cells
and thereby neutralizing the development of an autoimmune or inflammatory
response. With our success in obtaining FDA approval of ENBREL, we believe that
soluble cytokine receptors can be effective as therapeutics to counteract
autoimmune or inflammatory diseases.
We have developed a comprehensive array of cytokine receptor
technologies, which has led to us obtaining proprietary rights relating to
ENBREL (TNFR p80), NUVANCE (IL-4R), Interleukin-1 receptor Type I (IL-1R TYPE
I), IL-1R Type II, Interleukin-7 receptor (IL-7R), G-CSF receptor (G-CSFR),
IL-15 receptor, Interleukin-17 receptor and TRAIL receptors. ENBREL, a TNF
receptor fusion protein, was approved by the FDA in November 1998, and we are
conducting additional clinical trials of ENBREL as a treatment for early RA and
CHF. We are also conducting clinical trials of NUVANCE as a therapy for asthma.
We have decided to proceed with the development of a natural soluble form of
IL-1R Type II as a potential treatment for inflammation, osteoporosis or other
Interleukin-1 (IL-1) related diseases. We have also commenced a licensing
program under our cytokine receptor patents to enable other companies to use our
patented cytokine receptors in drug screening. Under this program, we granted a
license to use G-CSFR for drug screening to one company in 1997 and to a second
company in 1998. We are continuing license discussions with other companies also
interested in using G-CSFR or our IL-1R receptors in drug screening.
ENBREL. TNF is a cytokine produced by activated T-cells and macrophages
in the course of severe immune reactions. TNF has been implicated in the
pathogenesis of RA, sepsis, asthma, graft-versus-host disease, inflammatory
bowel disease, insulin-dependent diabetes, CHF and numerous other clinical
conditions. We have produced a soluble TNF receptor fusion protein (TNFR:FC)
that combines two p80 TNF-binding domains derived from TNF receptor with a
fragment of a human antibody molecule. Our trademark for TNFR:Fc, generically
known as etanercept, is ENBREL. ENBREL exhibits a long serum half-life and has
been shown to be capable of rapidly lowering serum TNF levels.
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We have successfully developed ENBREL as a new, therapeutic
breakthrough for RA based on TNF inhibition. In September 1997, we announced the
results of our pivotal Phase III randomized, placebo-controlled, blinded
clinical trial of ENBREL in advanced RA, a progressively crippling disorder.
Positive and statistically significant results in favor of treatment with ENBREL
were achieved for all primary and secondary clinical endpoints, the key
measurements used to judge the drug's effectiveness. The drug was found to be
generally safe and well tolerated. These data confirmed results previously
reported from the similarly designed Phase II trial of ENBREL in advanced RA.
In March 1998, we announced the results of a Phase III randomized,
placebo-controlled, blinded clinical trial of ENBREL in combination with
methotrexate versus methotrexate alone in patients with RA. The results
demonstrated that RA patients treated with ENBREL in combination with
methotrexate experienced a statistically significant decrease in disease
activity and an increase in their functional ability when compared to
methotrexate alone. In addition, the results indicated that the combination
therapy of ENBREL and methotrexate was generally well tolerated, and that there
was no significant difference in the rate of occurrence of side effects between
the treatment groups in the trial.
In March 1998, we announced that the FDA designated ENBREL as a "Fast
Track Product" for the treatment of advanced RA patients. Under the FDA
Modernization Act of 1997, Fast Track Product designation meant that the FDA
would take appropriate actions to expedite the development and review of ENBREL.
The designation of ENBREL as a Fast Track Product by the FDA initiated the
application and review process for ENBREL. We submitted portions of our BLA for
ENBREL to the FDA in March 1998, and completed the BLA submission with the FDA
on May 7, 1998 to request a license to market ENBREL for treatment of patients
with active RA. The FDA assigned "priority review" status to our BLA, and
accepted the BLA for filing on June 22, 1998.
On September 16, 1998, ENBREL was unanimously recommended for approval
for the treatment of active RA by the FDA Arthritis Advisory Committee. The
Advisory Committee recommended that ENBREL be approved for use alone in patients
who have failed other DMARDs. In addition, the Advisory Committee recommended
that ENBREL be approved for use in combination with methotrexate.
On November 2, 1998, ENBREL was approved by the FDA. ENBREL is
indicated for the reduction of signs and symptoms of moderately to severely
active RA in patients who have had an inadequate response to one or more DMARDs.
ENBREL can be used in combination with methotrexate in patients who do not
respond adequately to methotrexate alone. The most frequently reported adverse
events in studies with ENBREL were mild to moderate injection site reactions.
However, the long-term effects of treatment with ENBREL on the development or
course of serious infection, malignancy and autoimmune disease are unknown.
In 1998, we announced that ENBREL was generally well tolerated by RA
patients receiving long-term therapy in an open-label safety study of
administration of ENBREL to patients that received the drug in the earlier Phase
II clinical trial, with some patients having received the drug for up to two
years.
In early 1998, we completed a pharmacokinetic study with ENBREL
demonstrating comparability of product manufactured at our Bothell, Washington
mammalian cell-based protein manufacturing facility and product manufactured by
our contract manufacturer, Boehringer Ingelheim Pharma KG (BI PHARMA).
In November 1998, Immunex filed a new drug submission (NDS) for ENBREL
for the treatment of active RA with the Canadian Health Protection Bureau
(CHPB). We cannot be certain that the CHPB will approve this NDS.
ENBREL is the subject of regulatory filings and clinical trials
intended to result in additional FDA-approved indications. These filings and
trials are described below. These investigational uses currently include JRA,
disease modification of early RA, and CHF. In addition, a number of clinical
trials are underway or will be conducted with third party investigators in 1999
to investigate the use of ENBREL in multiple other disease settings.
- JRA. In 1998 we completed a clinical trial of ENBREL in patients
with JRA, which began in 1997. The results were consistent with
results already reported from clinical trials of ENBREL in patients
with adult RA. The results indicated that children and teenagers
suffering from JRA experienced less pain and swelling in their
joints and decreased incidence of disease activity on ENBREL,
compared with patients on placebo. JRA is an immune system disease
that strikes before age 16. On November 25, 1998, we filed an SBLA
with the FDA for ENBREL to treat children and teenagers (age 4-17)
with moderately to severely active polyarticular course JRA. We
cannot be certain that the FDA will approve this SBLA.
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- DISEASE MODIFICATION OF EARLY RA. In early 1999 we intend to
announce the results of a large Phase III randomized,
placebo-controlled, blinded clinical trial of ENBREL in
earlier-stage methotrexate-naive RA patients. This Phase III
clinical trial is aimed at documenting the ability of ENBREL to slow
the progression of joint damage in RA disease over a year of
treatment. If the results of this clinical trial are positive, in
1999 we intend to file an SBLA with the FDA for ENBREL for this
additional indication.
- CHF. In November 1997, results were announced of a small Phase I
clinical trial of ENBREL in patients with CHF. The results indicated
that a single dose of ENBREL reduced circulating levels of TNF and
improved certain clinical parameters. A Phase I randomized,
placebo-controlled, blinded, multiple-dose clinical trial of ENBREL
in patients with CHF has been completed, and based upon the results
announced in March 1998, two large Phase II/III randomized,
placebo-controlled, blinded clinical trials of ENBREL will be
commenced in early 1999 in patients with CHF. One of these Phase
II/III clinical trials will be conducted in the U.S., and the other
Phase II/III clinical trial will be conducted in Europe and
Australia by AHP, our collaborator in the development of ENBREL.
NUVANCE (IL-4R). IL-4 is a cytokine that promotes production of
specific types of antibodies, including the IgE antibody involved in allergic
and asthmatic reactions. NUVANCE, which is a soluble IL-4R, has been shown to
inhibit IL-4-dependent immune responses in animal models. NUVANCE is our
trademark for IL-4R. Based on these preclinical studies, and on the results of
certain clinical trials with NUVANCE, we believe that soluble IL-4R may be
effective in the treatment of asthma and we intend to devote significant
resources to developing NUVANCE for this disease.
In February 1997, we announced the results of a Phase I clinical trial
of NUVANCE in mild asthmatic patients. This dose-escalating trial, which
involved a single dose of NUVANCE by inhalation of a nebulized, water-based
formulation, showed that the product was well tolerated at the doses tested.
During the course of the trial, patients reported reduced use of steroids and a
decrease in asthma symptoms. In 1997, we repeated this Phase I trial of NUVANCE
in moderate asthmatic patients, adding a placebo-control group, and similar
results were obtained in 1998.
We are continuing our clinical development of NUVANCE in Phase I/II
clinical trials in moderate asthmatics. In early 1999 we completed a Phase I/II
repeat dose clinical trial to evaluate primarily the safety of nebulized NUVANCE
in adult patients with moderate asthma. Efficacy parameters were also evaluated
in this clinical trial. Based on the results of this first multi-dose clinical
trial of NUVANCE, Immunex has decided to expedite the clinical development of
NUVANCE. In this Phase I/II clinical trial, NUVANCE was well-tolerated for up to
12 weeks of once weekly treatment, and there were no serious adverse events
related to the drug. The first Phase II clinical trial of NUVANCE is anticipated
to start in the second quarter of 1999 and will evaluate the safety and efficacy
of NUVANCE for the long-term control of asthma. In this Phase II clinical trial,
we plan to deliver NUVANCE as an aerosol by a proprietary pulmonary (inhalation
into the lungs) drug delivery system owned by a third-party collaborator. In
early 1999 we also intend to complete a Phase I safety and pharmacokinetic study
of intravenous, subcutaneous and nebulized NUVANCE.
IL-1R TYPE II. IL-1 alpha and IL-1 beta bind to cell surface receptors
of two types: Type I and Type II. Overproduction or inappropriate production of
IL-1 has been implicated in the development of autoimmune, inflammatory and
allergic diseases such as diabetes, asthma, systemic lupus erythematosus and
inflammatory bowel disease, and also in the development of osteoporosis, RA,
septic shock, stroke and periodontal disease. We have produced genetically
engineered soluble IL-1 receptors of two types, designated Type I and Type II,
and have conducted clinical trials of IL-1R Type I. Recent studies indicate that
IL-1R Type II is superior to IL-1R Type I as an antagonist of IL-1, and we are
currently focused on preclinical testing of IL-1R Type II. Based upon this data,
we believe that IL-1R Type II may be of therapeutic value in the treatment of a
number of inflammatory diseases such as those mentioned above, either alone or
in combination with ENBREL. In late 1998 we designated IL-1R Type II as a
pre-development molecule, and in 1999 we intend to begin process scale-up to
produce IL-1R Type II for future toxicology studies.
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RESEARCH COLLABORATIONS
There is a race in the biotechnology industry to discover and develop
novel therapeutics, in part by utilizing the rapidly accumulating knowledge
concerning the human genome. Several biotechnology companies have accumulated
significant genetic information from large-scale genomic DNA sequencing. Much of
this data is expected to be incorporated into patent applications by these
companies. The impact of such patent application activity upon our future gene
discovery efforts is currently unknown. We have entered into a number of
important research collaborations, using varied technology platforms, in an
effort to provide us with a competitive edge in our continuing efforts to
identify new drug candidates. A summary of these research collaborations is set
forth below.
DIGITAL GENE TECHNOLOGIES. In December 1997 we announced a genomics
research collaboration with Digital Gene Technologies, Inc. (DGT) using DGT's
patented total gene expression analysis (TOGA(TM)) platform to discover novel
approaches to the diagnosis and treatment of inflammatory diseases of the
gastrointestinal (GI) system, including inflammatory bowel disease. TOGA is a
method of identifying and determining the concentration of nearly all of the
genes active in a sample cell or tissue. This program significantly enhances our
discovery research programs in the field of GI biology. TOGA allows us to link
our biological models to an important new technology that may provide us with
new molecules to develop as therapeutics or as targets for small molecule
discovery. For exclusivity in the field of GI inflammation, we have paid an
up-front fee to DGT, with additional fees due over the course of the five-year
agreement. In addition, we will pay DGT for assay processing and identification
of new molecules. For each molecule successfully developed in the U.S. and
Europe, we have agreed to pay DGT certain clinical milestone payments, plus a
royalty on worldwide sales of such molecule. In July 1998 we announced that we
had obtained an experimentation license for the first molecule resulting from
this collaboration.
GENETICS INSTITUTE. In April 1998, we became a participant in
Genetics Institute's DiscoverEase-Registered Trademark- program with a goal
of faster identification of immune system proteins that may have therapeutic
value. Genetics Institute (also referred to as GI) is a wholly owned
subsidiary of AHP. As a participant in this program, we have access to the
DiscoverEase protein library, which is a collection of proprietary novel,
human, secreted proteins, the corresponding genes, and a relational database
of associated information. As mediators of key biological processes, secreted
proteins represent a valuable source of therapeutic candidates, targets for
small molecule drug development, and disease markers useful for the
development of diagnostic tests. We intend to analyze the proteins using our
repertoire of biological assays and bioinformatics expertise to identify
proteins having immune system function and potential therapeutic value. The
DiscoverEase business structure provides for low up-front fees to allow us to
conduct broad laboratory and preclinical research on the library genes and
proteins, and downstream fees that are based on the successful development
and commercialization of therapeutic candidates. GI retains the rights, at
the time of filing an IND, to co-develop and co-commercialize a protein
therapeutic. Immunex has not yet licensed any candidates identified in the
DiscoverEase program.
ARQULE. In March 1998, we entered into a collaboration with ArQule,
Inc. to discover and develop new products for the treatment of inflammatory
diseases. The collaboration provides us with access to ArQule's Mapping
Array(TM) program to identify small molecule therapeutics, based on a new
chemokine gene discovered by us known as p35. ArQule's Mapping Array program is
comprised of libraries of novel, diverse, small organic, pure compounds used for
screening against biological targets in new product discovery. ArQule is using
proprietary assays from us that utilize a novel inhibitor of multiple chemokines
to identify compounds with biological activity from ArQule's Mapping Array
program. The data provided by this program is expected to speed the
identification of specific active drug leads. Once active leads are identified,
we will elect whether to continue preclinical development with ArQule, or to
license the active leads on an exclusive basis, in exchange for milestone and
royalty payments to ArQule for successful clinical and commercial development.
Chemokines control the attraction of white blood cells to tissues, a process
essential for inflammation and host responses to infection. An efficient
inhibitor of chemokines could have potential as a therapeutic in a wide variety
of diseases, such as asthma, acute respiratory distress syndrome, arthritis,
atherosclerosis, inflammatory bowel disease and psoriasis.
MEDAREX. In January 1999 we entered into a licensing agreement with
Medarex, Inc. involving Medarex's HuMAb-Mouse(TM) technology. Under this
agreement, we obtained the rights to use the HuMAb-Mouse technology for an
unlimited number of targets for up to 10 years. We will pay Medarex technology
access fees, and Medarex could receive research payments, license fees and
milestone payments, as well as royalties on commercial sales. The HuMAb-Mouse
technology is a transgenic mouse system that creates high affinity, fully human
antibodies instead of mouse antibodies. Using standard, well proven laboratory
techniques, scientists can produce these antibodies in a matter of months.
Incorporating the HuMAb-Mouse technology into our broad drug discovery program
is expected to significantly enhance our continuing efforts to identify new drug
candidates. The ability to generate human antibodies against our proprietary
antigens will permit us to develop potential therapeutics without the risks
associated with non-human antibodies.
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GENESIS. Since 1994 we have collaborated with Genesis Research and
Development Corporation Limited, a New Zealand company. Genesis has sequenced
cDNA libraries for specialized cell types to create a proprietary DNA database
for Immunex. We are testing several genes identified by Genesis.
NON-BIOLOGICAL ONCOLOGY PRODUCTS
BACKGROUND. As a result of the merger in 1993 (the 1993 MERGER) of the
predecessor to the current Immunex Corporation and Lederle Oncology Corporation,
a subsidiary of Cyanamid created for the purpose of merging Cyanamid's Lederle
Laboratories oncology business in North America with our biopharmaceutical
business, we acquired certain intellectual property rights, including marketing
rights, in North America relating to certain non-biological oncology products,
including the following products that we currently market in the U.S.:
NOVANTRONE (mitoxantrone for injection concentrate), leucovorin calcium,
THIOPLEX (thiotepa for injection), Amicar (aminocaproic acid) and methotrexate
sodium injectable. See MARKETED PRODUCTS, above. As part of the 1993 Merger, we
also acquired rights to certain other non-biological oncology products that have
been either discontinued, sold or returned to AHP. The rights that we acquired
as a result of the 1993 Merger include patents, know-how, trademarks, clinical
and other supporting data, registrations and approvals from the FDA. Cyanamid
also transferred to us its U.S. oncology marketing and sales force, but did not
transfer to us any manufacturing facilities, research assets, other tangible
assets or other personnel. We entered into a number of agreements with Cyanamid
and its subsidiaries at the time of the 1993 Merger relating to these products.
See RELATIONSHIP WITH AHP AND CYANAMID, below.
NOVANTRONE. In addition to its current FDA-approved indications
discussed above, NOVANTRONE is the subject of clinical trials intended to
provide data to support an additional FDA-approved indication for progressive
multiple sclerosis (MS), as discussed below. Other clinical trials are being
conducted by third parties with NOVANTRONE to investigate its potential in NHL.
- PROGRESSIVE MS. NOVANTRONE has been tested in two European clinical
trials in patients with MS. In 1997, it was reported that data from
the smaller European Phase II clinical trial was positive. In 1998,
we reported that in preliminary results of the second European
trial, which was a larger Phase III clinical trial, NOVANTRONE had a
statistically significant impact on relapse rate and disability
progression in patients with progressive MS. Magnetic resonance
imaging (MRI) data were also reported that supported these clinical
findings. In this Phase III clinical trial, NOVANTRONE was
administered by short, intravenous infusion once every three months.
Other treatments currently approved for MS require a subcutaneous or
intramuscular self-injection on a daily or weekly basis. In 1999 we
intend to file an SNDA with the FDA to expand the use of NOVANTRONE
for the treatment of patients with progressive MS. We cannot be
certain that the data from these clinical trials will be deemed
sufficient by the FDA to demonstrate the efficacy of NOVANTRONE in
this patient population. Further, we cannot be certain that the FDA
will approve this SNDA for NOVANTRONE.
PACLITAXEL. Paclitaxel is a chemotherapeutic agent that is used in
treatment of various cancers. Bristol-Myers Squibb Company (BMS) currently
markets paclitaxel for treatment of metastatic breast and ovarian cancers in
North America under the trademark TAXOL-Registered Trademark-. BMS's
marketing exclusivity for paclitaxel in the U.S. under the Drug Price
Competition and Patent Term Restoration Act of 1984 (Waxman-Hatch
Legislation) expired December 29, 1997.
We submitted an abbreviated new drug application (ANDA) to the FDA for
generic Paclitaxel Injection on August 8, 1997, which was accepted for review by
the FDA on October 7, 1997. Our ANDA contains a certification by Immunex, known
as a "Paragraph IV" certification, that U.S. Patents 5,641,803 and 5,670,537
held by BMS and relating to methods of using TAXOL in the treatment of cancer
patients are invalid and not infringed by the filing of our paclitaxel ANDA. On
January 8, 1998, BMS filed a complaint in the U.S. District Court in Newark, New
Jersey, alleging infringement by Immunex of these two U.S. patents pertaining to
TAXOL. We had anticipated the legal action by BMS, and because of BMS's legal
action, the FDA will withhold approval of our ANDA until the earlier of June
2000, which is approximately seven and one-half years after the original
approval of TAXOL, or until a court enters a final judgment finding the BMS
patents invalid, unenforceable or not infringed.
In June 1998, we announced a collaboration with Baker Norton
Pharmaceuticals, a wholly owned subsidiary of IVAX Corporation, to market
paclitaxel products in the U.S., subject to FDA approval. Baker Norton agreed to
buy our paclitaxel ANDA that was filed with the FDA, as well as our paclitaxel
inventory, in exchange for $6.9 million. The FDA has confirmed that Immunex's
ANDA is the first filed with the FDA for a generic paclitaxel product. If
Immunex and Baker Norton prevail in the pending patent litigation with BMS, and
the FDA approves this ANDA, the paclitaxel injection product that is covered by
this ANDA would be entitled to 180 days of shared market exclusivity with TAXOL
prior to the entry of any other generic paclitaxel products. The FDA is expected
to continue its review of this ANDA during the litigation. However, there can be
no assurance that our new collaboration with Baker Norton will be successful or
that this generic paclitaxel
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product will be granted co-exclusivity, that the FDA will approve our ANDA, or
that BMS will not obtain or enforce additional patents relating to TAXOL.
If a paclitaxel injection product based on our ANDA is marketed in the
U.S., Baker Norton will pay us royalties based on net sales of this generic
paclitaxel injection product. Also, at Baker Norton's request, we will help them
promote this generic paclitaxel injection product using our oncology sales
force. Baker Norton has agreed to pay us additional fees for these promotional
efforts.
Both Immunex and Baker Norton have filed ANDAs requesting FDA approval
of generic paclitaxel products and have certified in these ANDA applications
that certain use patents held by BMS relating to TAXOL are invalid or not
infringed by the products covered by these ANDAs. BMS has challenged this
certification, filing lawsuits for infringement of its patents. Baker Norton has
also filed a counterclaim against BMS to invalidate its patents, and has also
asserted claims against BMS for violation of federal anti-trust laws and unfair
competition. Baker Norton, as part of our collaboration, will direct the defense
of both lawsuits, and we will reimburse Baker Norton for a percentage of its
paclitaxel patent litigation expenses relating to these ANDA applications.
Baker Norton also filed an NDA with the FDA for PAXENE-Registered
Trademark-, its branded form of paclitaxel, for use in the treatment of
Kaposi's sarcoma. Baker Norton appointed us to promote PAXENE in the U.S. if
the FDA approves that product. We will earn fees based on all sales of PAXENE
in the U.S. during the time that we promote PAXENE.
RELATIONSHIP WITH AHP AND CYANAMID
1993 MERGER
As a result of the 1993 Merger discussed earlier, Cyanamid currently
owns approximately 54.1% of our outstanding common stock. In late 1994, AHP
purchased all of the common stock of Cyanamid. Thus, AHP owns Cyanamid's
interest in our common stock. Before AHP's purchase of Cyanamid, we entered into
an agreement with AHP under which AHP agreed to protect our rights under our
agreements with Cyanamid and be bound by Cyanamid's obligations under these
agreements. As discussed below, AHP or various divisions or affiliates of AHP,
including Wyeth-Ayerst Research, Wyeth-Ayerst Laboratories and Wyeth-Ayerst
International, Inc., have assumed some of the rights and obligations of Cyanamid
under the various agreements that we entered into with Cyanamid at or after the
time of the 1993 Merger. In the following discussion, AHP refers to AHP, or its
various divisions or affiliates, including Cyanamid.
GOVERNANCE AGREEMENT
At the same time that we entered into the 1993 Merger, we entered into
an Amended and Restated Governance Agreement (GOVERNANCE AGREEMENT) with
Cyanamid. AHP assumed the rights and obligations of Cyanamid under the
Governance Agreement, which includes, among other matters, certain agreements
relating to the following:
- the corporate governance of Immunex, including the composition of
our Board of Directors (BOARD),
- rights of AHP to purchase additional shares of our stock from
Immunex if certain events occur,
- future purchases and sales of our stock by AHP,
- the right of members of our Board designated by AHP to approve
certain of our corporate actions,
- the requirement that a supermajority of the members of our Board
approve certain of our corporate actions, and
- payments to be made by AHP to us in the event that the products
acquired under the 1993 Merger and certain of our other products did
not achieve net sales targets. We received a total of $204.5 million
under this provision of the Governance Agreement, which expired on
December 31, 1997. AHP made its final payment to us under this
provision, in the amount of $60.0 million, in February 1998.
AHP had been subject to certain standstill restrictions included in the
Governance Agreement that prevented AHP from purchasing additional shares of our
stock except under certain circumstances. These restrictions on AHP expired on
June 1, 1998. The practical effect of the lapse of these restrictions is to make
us more susceptible to an unsolicited tender offer by AHP for the shares of our
stock that AHP does not currently own.
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AHP is still prohibited from transferring shares of our stock except
under an underwritten public offering, or as permitted by the volume and manner
of sale limitations of Rule 144 under the Securities Act of 1933, as amended, or
to a wholly owned AHP subsidiary. Also, except under an underwritten public
offering, AHP may not transfer an amount in excess of 1% of the outstanding
shares of our stock on any given day, nor may any AHP transfer result in the
creation of a 5% shareholder of our stock. AHP may, however, transfer all, but
not less than all, of its shares of our stock provided that the purchaser has
offered to purchase all outstanding shares of our stock on the same terms, and
also provided that we have first been notified and allowed three months to find
an alternative purchaser. These restrictions on transfer of our stock continue
beyond June 1, 1998.
1993 MERGER RELATED AGREEMENTS
At the time of the 1993 Merger, Cyanamid, Immunex and certain of their
respective subsidiaries entered into certain related agreements, some of which
have been amended and which are now superseded. Immunex and AHP are parties to
numerous agreements that AHP assumed from Cyanamid or that Immunex entered into
directly with AHP.
One of these agreements was a Research and Development Agreement, which
was replaced in July 1996 by a new Research Agreement (the 1996 RESEARCH
AGREEMENT) among Immunex, Cyanamid and AHP. The 1996 Research Agreement and
another related agreement together provided for the commercialization of new
oncology products by Immunex in North America, and by AHP elsewhere. Under the
1996 Research Agreement, we were obligated to contribute up to 50% of AHP's
oncology discovery research expenditures, up to a maximum amount of $16.0
million per year (adjusted annually for inflation beginning in 1997) and we had
the option to elect which oncology products we would continue to support beyond
the discovery stage. To the extent we developed products or technology other
than new oncology products and determined not to market such products or
technology by ourselves, we agreed to offer AHP exclusive marketing rights to
any such products or technology before offering any marketing rights to third
parties. The 1996 Research Agreement was replaced in July 1998 with a new
Product Rights Agreement that we entered into with AHP and Cyanamid, as
discussed below.
Other agreements entered into as part of the 1993 Merger provide for,
among other matters, the supply and toll manufacture by Cyanamid or its
subsidiaries for Immunex of the non-biological oncology products referred to
earlier, and various other implementing licenses and distribution agreements.
These agreements, in particular the Governance Agreement, together with the new
Product Rights Agreement, establish the framework for the ongoing relationship
between Immunex and AHP.
TACE AGREEMENTS
In December 1995, we entered into certain research and license
agreements with AHP under which we granted AHP exclusive worldwide rights to
develop compounds that inhibit an enzyme known as TACE. TACE is involved in the
processing of cell-bound TNF to provide circulating TNF. There is evidence that
inhibiting this enzyme may be beneficial in treating inflammatory diseases and
conditions such as RA. Under the agreements, AHP will screen compounds using
recombinant TACE provided by Immunex. We will receive license fees, research
payments, commercial development milestone payments and royalties on any
compounds that are commercialized by AHP. In September 1997, in conjunction with
the ENBREL Promotion Agreement with AHP discussed below, the parties amended one
of the TACE agreements in order to substantially increase the royalty payable by
AHP to us on the first TACE molecule approved by the FDA, if any.
TNFR LICENSE AND DEVELOPMENT AGREEMENT
In July 1996, we entered into a TNFR License and Development Agreement
with AHP (TNFR AGREEMENT), under which we retained North American marketing
rights to ENBREL, and AHP retained marketing rights to ENBREL outside of North
America. The TNFR Agreement also addresses joint project management, cost
sharing for development activities related to ENBREL, manufacturing
responsibilities, intellectual property protection and other pertinent terms.
Previously, AHP's rights in ENBREL had been stated in the 1993 Research and
Development Agreement between Immunex and Cyanamid, which has been superseded.
Under the TNFR Agreement, we have agreed with AHP to negotiate the terms of a
supply agreement for the commercial supply of ENBREL to AHP outside North
America. In November 1998, Immunex and AHP entered into an ENBREL Supply
Agreement with BI Pharma for the commercial supply of ENBREL to Immunex in North
America and to AHP outside of North America. See RAW MATERIALS AND SUPPLY,
below. We are negotiating a related supply agreement with AHP for certain
services that we will perform for AHP relating to the supply of ENBREL by BI
Pharma outside North America.
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ENBREL PROMOTION AGREEMENT
In September 1997, we entered into an ENBREL Promotion Agreement with
AHP, under which AHP, acting through its Wyeth-Ayerst Laboratories division, has
the rights to promote ENBREL to all appropriate customer segments in North
America for all approved indications other than oncology. We have reserved the
right to promote ENBREL in North America for any approved oncology indications.
Under the terms of this long-term Promotion Agreement, AHP may pay Immunex up to
$100.0 million in nonrefundable scheduled payments for the North American
promotion rights to ENBREL. We have already received $65.0 million of these
scheduled payments, as follows:
- $15.0 million upon signing of the ENBREL Promotion Agreement, which
was earned in September 1997,
- $20.0 million when our BLA for ENBREL for advanced RA was accepted
for review by the FDA, which was earned in June 1998, and
- $30.0 million upon FDA approval of ENBREL, which was earned in
November 1998.
AHP may pay us an additional $35.0 million in scheduled payments under
the ENBREL Promotion Agreement as follows:
- $15.0 million if and when a disease modification claim for ENBREL is
obtained from the FDA,
- $10.0 million on first achieving $200.0 million in net sales for
ENBREL in North America in any rolling 12-month period, and
- $10.0 million on first achieving $400.0 million in net sales for
ENBREL in North America in any rolling 12-month period.
We cannot be certain of the likelihood or timing of receiving any of
these final three scheduled payments.
Under the ENBREL Promotion Agreement, AHP has agreed to reimburse us
for more than a majority of the clinical and regulatory expenses made by or on
behalf of us in connection with the filing and approval of any new indications
for ENBREL in North America, excluding oncology and RA indications. AHP's
reimbursement of such clinical and regulatory expenses under the ENBREL
Promotion Agreement is in addition to the existing cost-sharing arrangement
between the parties for certain development costs related to ENBREL as set forth
in the TNFR Agreement. The additional AHP reimbursement for clinical and
regulatory expenses under the ENBREL Promotion Agreement, a portion of which is
payable upon regulatory filing of any such new indication and the remainder of
which is payable upon regulatory approval of any such new indication, if any,
applies for that part of the North American clinical and regulatory expenses for
ENBREL for which we are otherwise financially responsible under the cost sharing
provisions in the TNFR Agreement. AHP has also agreed to reimburse us under the
ENBREL Promotion Agreement for less than a majority of certain patent expenses
related to ENBREL, including any up-front license fees and milestones, as well
as patent litigation and interference expenses. In addition, AHP has agreed to
pay substantially more than a majority of the commercial expenses (meaning
marketing expenses and sales force costs) for ENBREL incurred prior to any
commercial launch of ENBREL in North America, and to pay a declining but still
majority percentage of the commercial expenses incurred during the two years
following any commercial launch of ENBREL in North America. Thereafter, we will
share such commercial expenses in North America with AHP on an equal basis.
Under the ENBREL Promotion Agreement, we may elect at any time to
supplement AHP's detailing (meaning visiting and communicating with physicians
by AHP's sales representatives to increase physician prescribing preferences for
ENBREL) and promotion of ENBREL in the U.S. with our own sales force to detail
ENBREL for any approved indications promoted by AHP. We have the same right in
Canada if ENBREL is approved there. We will pay the majority of our sales force
costs for two years beginning on the date, if any, our sales force begins
detailing ENBREL, and we will share our sales force costs with AHP on an equal
basis thereafter.
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We record any and all product sales of ENBREL in North America under
the ENBREL Promotion Agreement. We will pay AHP a percentage of any and all
annual gross profits of ENBREL in North America attributable to all indications
for ENBREL other than oncology indications on a scale that increases as gross
profits increase. We will retain a majority percentage of these gross profits in
North America on an annual basis. Also, we will pay AHP certain residual
royalties on a declining scale based on any and all net sales of ENBREL in North
America in the three years following the expiration or termination of AHP's
detailing and promotion of ENBREL. We do not receive either royalties or a share
of gross profits from sales of ENBREL outside of North America, since AHP owns
rights to ENBREL outside of North America.
If AHP sells or distributes a biologic product in North America that is
directly competitive with Enbrel, as defined in the ENBREL Promotion Agreement,
and subject to certain exclusions, AHP will give us prior written notice and,
upon our request, we will attempt in good faith to either establish mutually
acceptable terms with AHP under which we will co-promote this competitive
biologic product (or other terms for a commercial relationship) with AHP, or
negotiate an adjustment to the gross profits allocated to AHP under the ENBREL
Promotion Agreement. If we are unable to establish such terms with AHP within 90
days of our request, we may at our option reacquire from AHP all marketing
rights to ENBREL in North America and terminate the ENBREL Promotion Agreement,
subject to our payment of certain amounts to AHP. If AHP obtains a biologic
product that is directly competitive with ENBREL through the acquisition of
another company and we reacquire the marketing rights to Enbrel in North
America, AHP's primary field sales force that had detailed ENBREL in the
relevant territory within North America for a specified period may not sell,
detail or otherwise distribute the competitive biologic product for a specified
period in North America.
The ENBREL Promotion Agreement required the parties to form the ENBREL
Management Committee, which is composed of an equal number of representatives
from Immunex and from AHP. The ENBREL Management Committee has responsibility
for such areas as strategic planning, approval of an annual marketing plan and
product pricing.
PRODUCT RIGHTS AGREEMENT
Immunex, AHP and Cyanamid entered into a Product Rights Agreement dated
July 1, 1998 under which several prior agreements among the parties were
terminated and under which we granted AHP an option to obtain exclusive,
royalty-bearing worldwide licenses to certain of our products for all clinical
indications (PRODUCT CALLS). The Product Rights Agreement terminated all
provisions of our 1996 Research Agreement with AHP and Cyanamid, except for
certain rights of first refusal held by AHP. As a result, our $16.0 million
(adjusted annually for inflation) annual oncology research payment obligation to
AHP under the 1996 Research Agreement is canceled. We completed our payment
obligations to AHP under the 1996 Research Agreement by the payment of $8.2
million in 1998. In addition, our exclusive North American rights to certain
oncology products resulting from AHP research and development, and AHP's
exclusive rights outside North America to certain oncology products resulting
from our research and development, are both terminated.
Under the Product Rights Agreement, AHP keeps certain rights of first
refusal which had been included in the 1996 Research Agreement. AHP may exercise
these rights of first refusal if our Board decides that Immunex will not market
a product or technology by itself in any part of the world where Immunex has or
acquires marketing rights. AHP's right of first refusal applies to our products
and technologies in all fields, including NUVANCE, but the right of first
refusal does not apply to LEUKINE, MOBIST, CD40-L, IL-15, and certain other
Immunex products.
The Product Rights Agreement provides AHP with a Product Call for up to
four Immunex products over a period discussed below. The Product Rights
Agreement also provides that AHP must exercise a Product Call for an Immunex
product within certain time periods, or else it will lose the right to use a
Product Call on that Immunex product. Certain Immunex products are excluded from
AHP's Product Calls, including ENBREL, NUVANCE, LEUKINE, MOBIST, CD40-L, IL-15,
any product marketed by Immunex as of July 1, 1998, and certain other products.
If AHP exercises a Product Call for an Immunex product, AHP and Immunex
will enter into an ELECTED PRODUCT AGREEMENT granting AHP exclusive worldwide
rights (or if less than exclusive worldwide rights are held by us, all of our
rights) to this Immunex product for all indications. Under the Elected Product
Agreement, AHP will pay us an initial fee, milestone payments and royalties on
any future worldwide net sales of this Immunex product after regulatory
approvals. The initial fee, milestone payments and royalties are determined by
the development stage of the product when AHP exercises the Product Call. In
total, the initial fees and milestone payments range from $25.0 million if we
have given the product IND status, up to $70.0 million if we have given notice
to AHP that data from the first positive Phase II clinical trial results are
available for the product. The royalties AHP pays to us increase based on the
development stage of the product and based upon the product attaining certain
annual net sales thresholds.
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Under the Product Rights Agreement, we have the right to keep ownership
to up to two of our products for which AHP has exercised Product Calls
(CONVERSION RIGHT) in exchange for our commitment to pay certain milestone
payments and royalties to AHP and, in the case of the second Conversion Right
only, an initial fee. Our milestone payments to AHP are fixed at one-half the
amount AHP would otherwise pay us for a Product Call, and our royalties payable
to AHP are always fixed at the lowest of the four levels of royalties that AHP
would otherwise pay us after exercising a Product Call. If we exercise one of
our Conversion Rights for an Immunex product, which must be exercised within 30
days after AHP exercises one of its Product Calls, we will enter into a
CONVERTED PRODUCT AGREEMENT with AHP for the product that will provide for
Immunex payments to AHP as discussed above, unless AHP has exercised its option
to obtain a replacement Product Call (as discussed below). We may not exercise
our Conversion Rights on both of the first two Product Calls exercised by AHP.
If we exercise a Conversion Right, AHP may within 30 days elect to obtain one
replacement Product Call from Immunex. If AHP makes this election, AHP waives
its right to receive an initial fee (if applicable), milestone payments and
royalties from us on this converted product. If either party exercises its
rights under the Product Rights Agreement and acquires or retains rights to an
Immunex product, the company that exercised these rights assumes independent
development responsibility for that product, including the payment of all costs
for future product development.
The Product Rights Agreement also terminates certain prior agreements
between Immunex and Cyanamid. Under one of those terminated agreements, we had
granted to Cyanamid exclusive ownership rights outside North America to certain
oncology products resulting from our research and development efforts. As a
result of the termination, the applicable oncology product rights outside North
America previously granted to Cyanamid have been returned to Immunex in exchange
for royalty payments from Immunex to AHP on future sales of LEUKINE, MOBIST, and
IL-15 outside North America. These products are not currently approved or sold
outside North America. The Product Rights Agreement also terminated the
agreement between Immunex and AHP for the development of MOBIST, under which we
granted AHP exclusive rights to MOBIST outside North America and AHP committed
to paying us a royalty equal to five percent of the net sales of MOBIST outside
North America.
AHP's rights to exercise Product Calls under the Product Rights
Agreement terminate upon the first to occur of the following events:
- AHP has exercised Product Calls and entered into Elected Product
Agreements for four of our products, subject to our two Conversion
Rights and AHP's replacement Product Call,
- June 30, 2008, with an additional year if we exercise both of our
Conversion Rights, or
- upon the later of June 30, 2003 or the date by which AHP has been
given a total of eight opportunities to exercise a Product Call,
except that this number increases to nine opportunities in certain
circumstances.
AHP's rights of first refusal to our products and technologies terminate
upon the later of
- June 30, 2003 or
- the date that AHP or its affiliates no longer own a majority of our
stock.
RELATIONSHIP WITH HOECHST AG
Under a 1984 research and license agreement that has been amended
periodically, Immunex and Hoechst AG, through its former subsidiary Behringwerke
AG, conducted collaborative research in the field of colony stimulating factors
(CSFs). Behringwerke has been assimilated into Hoechst and its separate
corporate existence ceased in 1997. Under the agreement, we granted exclusive
worldwide license rights to Behringwerke to develop, manufacture and market CSF
products in consideration for technology transfer payments, research support
payments, and royalties on sales of licensed products. Immunex and Behringwerke,
together with Behringwerke's U.S. affiliate, Hoechst-Roussel Pharmaceuticals,
Inc. (now named Hoechst Marion Roussel Inc.) collaborated in the clinical
development of GM-CSF (sargramostim) in the U.S. As a consequence of agreements
with Behringwerke and Hoechst that were completed in 1989, 1993 and 1994, we
reacquired worldwide rights to LEUKINE GM-CSF and all related technologies in
consideration of cash payments, licenses and technology transfers relating to
our soluble cytokine receptors, and royalties on sales of LEUKINE. In 1992 we
reacquired Behringwerke's worldwide rights to TNFR, and we subsequently licensed
rights to TNFR outside North America to AHP as part of the 1993 Merger. In April
1998 we reacquired Hoechst Marion Roussel's rights outside North America to our
soluble receptors IL-4R, IL-1R Type I, IL-1R Type II and IL-7R, and as a result
of these transactions, we have agreed to pay Hoechst Marion Roussel royalties on
worldwide sales of products based on TNFR (including ENBREL), IL-4R (including
Nuvance), IL-1R Type I, IL-1R Type II or IL-7R.
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MARKETING AND DISTRIBUTION
GENERALLY
Through our marketing and professional services organization, we
explain the approved uses and advantages of our products to medical
professionals in the U.S. We work to gain access to managed care organization
formularies (lists of recommended or approved medicines and other products
compiled by pharmacists and physicians) by demonstrating the qualities and
treatment benefits of our products. AHP's marketing organization, working
together with us, performs similar activities for ENBREL.
Marketing of prescription pharmaceuticals depends to a degree on
complex decisions about the scope of clinical trials made years before product
approval. All drugs must complete clinical trials required by regulatory
authorities to show they are safe and effective for treating one or more
particular medical problems. A manufacturer may choose, however, to undertake
additional studies to demonstrate additional advantages of a product, such as a
better safety profile or greater cost effectiveness than existing therapies.
Those studies can be costly, the results are uncertain, and they can
take years to complete. Balancing these considerations makes it difficult to
decide whether and when to undertake such additional studies. When these studies
are successful, they can have a major impact on approved claims and marketing
strategies.
ENBREL
Under the ENBREL Promotion Agreement, the Wyeth-Ayerst Laboratories
division of AHP currently markets ENBREL to appropriate customer segments in the
U.S. for the FDA approved indications for ENBREL. These customer segments
include health care providers such as doctors and hospitals, pharmacy benefit
managers and managed care organizations. We also have the right to supplement
AHP's detailing of ENBREL in the U.S. with our own sales force for certain
customer segments. See RELATIONSHIP WITH AHP AND CYANAMID, above. Several
hundred AHP sales representatives currently detail ENBREL in the U.S. In
addition to AHP's and Immunex's coordinated marketing efforts for ENBREL in the
U.S., we have added a group of approximately 30 allied health professionals to
support educational needs of health care providers in the U.S. relating to
ENBREL.
ONCOLOGY PRODUCTS
We market our other products to health care providers in the U.S.
through an oncology specialty sales force that consists of approximately 108
sales representatives and sales managers. Currently our sales representatives
conduct details in the U.S. for the following products: LEUKINE, NOVANTRONE and
THIOPLEX.
DISTRIBUTION
We distribute our products through pharmaceutical wholesalers and
specialty distributors, as well as to end users such as oncology clinics,
physicians' offices, hospitals and pharmacies. However, for at least the U.S.
launch period for ENBREL, rather than stocking inventory of product at
wholesalers, we are drop-shipping wholesaler orders for ENBREL directly to
pharmacies for end users. We receive and process product orders through a
centralized customer service and sales support group. Shipping, warehousing and
certain data processing services are provided on a fee basis by an outside
contractor.
COMPETITION
GENERALLY
Competition in researching, developing, manufacturing and marketing
biopharmaceuticals and other oncology products is intense. We are marketing a
group of cancer products and simultaneously developing an extensive portfolio of
cytokines, cytokine receptors and other immunological therapeutic products. In
addition, we are collaborating with AHP to market ENBREL for RA in the U.S.
There are other companies, including established pharmaceutical and
biotechnology companies, that are researching, developing and marketing
products, based on related or competing technologies, that will compete with
products being developed by us.
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The principal means of competition vary among various product
categories. The following technological innovations are all important to success
in our business:
- efficacy,
- safety,
- patients' ease of use, and
- cost effectiveness.
Our business focuses on unmet medical needs and improving therapies. Our
emphasis on innovation has led to significant research and development
investments at Immunex. See RESEARCH AND PRODUCT DEVELOPMENT, above.
We compete with other pharmaceutical firms in performing research and
clinical testing, acquiring patents, developing efficient manufacturing
processes, securing regulatory approvals and marketing the resulting products to
physicians. We believe that our strategic focus on immunology has resulted in
expertise that can be applied to reduce development times, create innovative and
cost-saving research techniques, optimize product quality, and discover new
products and applications. We possess manufacturing facilities to produce
recombinant protein products using microbial or mammalian cell culture
technologies. Professional clinical, legal, regulatory affairs, marketing and
sales staffs have been developed to enhance Immunex's scientific resources. We
possess an oncology specialty sales force and offer comprehensive professional
services, including continuing medical educational programs, publications,
literature searches and treatment information. These professional services are
important because, historically, new anticancer drugs have provided incremental
treatment advances, but few outright cures. Therefore, physicians rely heavily
on peer-reviewed clinical data in making treatment decisions.
Most of the cancer products that we market have established
competitors. Significant competitors in the field of oncology include BMS and
Amgen. These competitors, in certain cases, have substantially greater capital
resources, greater marketing experience, and larger research and development
staffs and manufacturing facilities than we do.
LEUKINE
Several companies are marketing or developing products that compete or
are expected to compete with LEUKINE, as listed below.
- AMGEN. Amgen has been marketing its competing G-CSF product since
early 1991 and has achieved a majority share of the U.S. market for
CSFs.
- GENETICS INSTITUTE, INC. In late 1997, Genetics Institute, a
division of AHP, received FDA approval of NEUMEGA-Registered
Trademark-(Interleukin-11) for treatment of thrombocytopenia
caused by cancer chemotherapy. Since NEUMEGA is being marketed
by Genetics Institute for use in combination with G-CSF in
patient populations in which LEUKINE is now being used, sales
of LEUKINE may be adversely affected. We are cooperating with
AHP to study the use of LEUKINE and NEUMEGA together in clinical
trials in patients with breast cancer and AML. If such clinical
trials are positive, Immunex and AHP intend to pursue an expanded
label in the U.S. for their respective products, LEUKINE and
NEUMEGA, to include the use of such products in combination in
certain patient populations.
- CANGENE CORPORATION. Cangene is developing a STREPTOMYCES-derived
GM-CSF product. Cangene commenced a Phase III multicenter clinical
trial in the U.S. with its GM-CSF product in early 1998 for the
mobilization of peripheral blood stem cells in patients with breast
cancer. If the FDA approves the Cangene GM-CSF product, sales of
LEUKINE could be adversely affected.
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NOVANTRONE
A number of companies, including those listed below, are marketing
products that compete with NOVANTRONE for its current indications or are
expected to compete with NOVANTRONE for a potential new indication in
progressive MS.
- PHARMACIA & UPJOHN, INC. (P&U). P&U has been marketing
IDAMYCIN-Registered Trademark- (idarubicin) for AML and
EMCyt(R) (estramustine) for prostate cancer.
- BEDFORD LABORATORIES. Bedford Laboratories, a division of Ben Venue
Laboratories, Inc., is marketing Cerubidine-Registered Trademark-
(daunorubicin) for AML.
- BIOGEN. Biogen is marketing AVONEX-Registered Trademark-
(interferon beta-1a) for relapsing-remitting MS.
- BERLEX LABORATORIES, INC. Berlex is marketing
BETASERON-Registered Trademark- (interferon beta-1b) for
relapsing-remitting MS. Berlex filed for FDA approval of an
expanded indication for BETASERON for secondary progressive
MS in June, 1998.
- TEVA PHARMACEUTICALS INDUSTRIES LIMITED. Teva is marketing
COPAXONE-Registered Trademark- (glatiramer acetate for injection)
for relapsing-remitting MS.
ENBREL
A number of companies, including those listed below, are developing
biological products that are expected to compete with ENBREL. If any of these
products are approved by the FDA for RA, sales of ENBREL could be adversely
affected.
- CENTOCOR INC. Centocor is developing a monoclonal antibody known as
REMICADE-Registered Trademark-(infliximab), an anti-inflammatory
agent that has completed Phase III trials in RA. The FDA approved
REMICADE for treatment of Crohn's disease in August 1998. Centocor
filed for FDA approval of an expanded indication for REMICADE for
RA in January 1999. Unlike ENBREL, which is administered by
subcutaneous injection, REMICADE must be given intravenously.
Since REMICADE is given intravenously, it is likely that REMICADE
will be covered by Medicare. Since Medicare presently will not
reimburse for drugs that are self-administered, we have not
assumed that Medicare would cover prescriptions for ENBREL. As a
result, REMICADE may have a reimbursement advantage for patients
whose drug therapies are covered by Medicare.
- AMGEN. Amgen is developing ANTRIL(TM) (anakinra), a IL-1RA (receptor
antagonist) that is in Phase I/II clinical trials, as well as a
TNFbp (binding protein) that is in Phase I clinical trials.
- BAYER AG AND BASF AG. Both Bayer and BASF are developing monoclonal
antibodies or antibody fragments that bind to TNF.
- ROCHE. Roche is developing TENEFUSE(TM) (lenercept), a TNFR:Fc
fusion protein based upon a distinct and different TNF receptor
designated "p55." In late 1997, Roche terminated its Phase III trial
of lenercept in RA. Roche has continued clinical development of
lenercept in sepsis.
- SMITHKLINE BEECHAM PLC (SKB). SKB is developing a second generation
anti-CD4 monoclonal antibody (IDEC-151) in collaboration with IDEC
Pharmaceuticals Corporation, which is in Phase II clinical trials
for RA. However, SKB announced the suspension of these clinical
trials in January 1999.
Other companies, as listed below, have developed non-biological products for
patients with RA. We do not currently expect such products to compete with
ENBREL in patients with advanced RA, but such products may compete directly with
ENBREL in patients with earlier stage RA. ENBREL is not currently approved by
the FDA in patients with earlier stage RA. Due to its mechanism of action, we
believe that ENBREL may be effective in combination with some of these products
in development, as well as with some existing DMARDs for RA. This belief is
based on clinical results demonstrating that RA patients treated with ENBREL in
combination with the DMARD methotrexate experienced a statistically significant
decrease in disease activity and an increase in their functional ability when
compared to methotrexate alone.
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- HOECHST MARION ROUSSEL. Hoechst Marion Roussel received FDA approval
of ARAVA-Registered Trademark- (leflunomide) in September 1998 for
the treatment of active RA in adults to reduce signs and symptoms
and to retard structural damage as evidenced by x-ray erosions
and joint space narrowing. ARAVA is an oral treatment for RA, and
it is priced significantly less than ENBREL.
- MONSANTO COMPANY. Monsanto received FDA approval of
CELEBREX-Registered Trademark- (celecoxib) in December 1998 for
relief of the signs and symptoms of osteoarthritis and adult RA.
CELEBREX is a COX-2 inhibitor, and is priced significantly less
than ENBREL. CELEBREX is an oral treatment and is co-promoted by
G.D. Searle & Co., the pharmaceutical business unit of Monsanto,
and Pfizer Inc. COX-2 inhibitors are a new class of drugs for
arthritis and pain that are generally as effective as current
initial RA therapy with non-steroidal anti-inflammatory drugs
(NSAIDS).
- MERCK. Merck is developing a COX-2 inhibitor known as VIOXX(TM)
(MK-966). Vioxx has completed Phase III clinical trials and Merck
has filed for FDA approval of this compound.
GENERIC ONCOLOGY PRODUCTS
Competition in the sale of generic pharmaceutical products is intense
due to the entry of multiple sources for each product after expiration of
patents and exclusivity grants previously covering such products. Manufacturers
of generic products compete aggressively, primarily on the basis of price. We
currently face aggressive generic competition from numerous suppliers on
methotrexate injectable and leucovorin calcium, resulting in lower prices and
lower sales. THIOPLEX (thiotepa for injection) may be subject to generic
competition in the future.
RAW MATERIALS AND SUPPLY
Along with our third-party manufacturers, we purchase raw materials
essential to our business in the ordinary course of business from numerous
suppliers. Substantially all the raw materials used to manufacture our
recombinant protein products and other products are available from multiple
sources. No serious shortages or delays in obtaining raw materials were
encountered in 1998.
All finished dosage forms of ENBREL are manufactured by BI Pharma and
packaged by a third-party contract packager. We manufacture all LEUKINE bulk
drug substance, which is then filled and finished by third parties. All finished
dosage forms for our non-biological oncology products are manufactured by AHP
subsidiaries or sourced by AHP from third-party manufacturers. Bulk active raw
materials for our non-biological oncology products are either manufactured by
AHP subsidiaries or sourced by AHP from third-party manufacturers. Aminocaproic
acid for AMICAR is sourced through an unaffiliated third-party vendor and
manufactured by a sole-source supplier, Daiichi Pharmaceutical Co. Ltd., a
Japanese company.
We presently do not have our own fill and finish capabilities for
producing and labeling final drug products from bulk drug substances or bulk
proteins. We rely upon unaffiliated third parties and AHP for the fill and
finish of all drug products we market.
In November 1998, Immunex and AHP entered into a long-term ENBREL
Supply Agreement with BI Pharma to manufacture commercial quantities of ENBREL.
Our sales of ENBREL are entirely dependent on BI Pharma's manufacture of the
product. Before the completion of the ENBREL Supply Agreement, we had operated
under short-term arrangements with BI Pharma to manufacture quantities of
commercial inventory of ENBREL sufficient to launch the product in the U.S., and
we had made significant purchase commitments to BI Pharma for inventory of
ENBREL. Immunex and AHP have made additional significant purchase commitments to
BI Pharma under the ENBREL Supply Agreement to manufacture commercial inventory
of ENBREL.
Under the ENBREL Supply Agreement, BI Pharma has reserved certain
production capacity for ENBREL, and our purchase commitments for ENBREL are
manufactured from that reserved production capacity. The ENBREL Supply Agreement
contains provisions for increasing or decreasing BI Pharma's reserved production
capacity for ENBREL, subject to certain lead-times and other related terms.
Because of the long lead-time required for ordering raw materials for ENBREL and
for the scheduling of BI Pharma's facilities, we are required to submit a
rolling three-year forecast for the manufacture of the bulk drug for ENBREL, and
a rolling forecast for a shorter period for the number of finished vials of
ENBREL to be manufactured from the bulk drug. A significant portion of each of
the above forecasts becomes a purchase commitment when issued to BI Pharma.
Also, we have relocated one of our senior executives in product quality to
Germany to facilitate technical interactions with BI Pharma related to ENBREL.
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BI Pharma's pricing of ENBREL is dependent on certain production
assumptions that the parties have made relating to the production efficiency of
manufacturing ENBREL. The pricing for ENBREL is also subject to certain volume
discounts depending on the amount of ENBREL ordered during each calendar year.
BI Pharma's volume discount pricing of ENBREL to us will be firm throughout
1999, but will be subject to annual increases for inflation and also subject to
annual adjustments depending on certain production efficiencies and the actual
cost of producing ENBREL. Immunex and AHP will be responsible for substantial
payments to BI Pharma if Immunex and AHP fail to utilize a certain percentage of
the production capacity that BI Pharma has reserved for ENBREL each calendar
year, or if the ENBREL Supply Agreement is terminated prematurely under certain
conditions.
Since ENBREL was recently launched in the U.S. in November 1998, the
market demand for ENBREL in the U.S. has not yet matured and cannot be predicted
with certainty. We are not certain that BI Pharma will be able to successfully
manufacture sufficient inventory of ENBREL to satisfy both the commercial demand
for ENBREL in the U.S. as estimated in our current U.S. marketing forecasts and
the demand for ENBREL outside the U.S. Our sales of ENBREL could be adversely
affected if we experienced production shortages of ENBREL within BI Pharma's
existing reserved production capacity for ENBREL. We are actively working with
BI Pharma to ensure that it will have sufficient manufacturing capacity to meet
worldwide commercial demand for ENBREL. However, we are not certain that BI
Pharma has or can acquire sufficient production capacity for ENBREL in a timely
manner should additional indications for ENBREL be approved by the FDA and other
regulatory authorities around the world, or should commercial demand for ENBREL
exceed BI Pharma's ability to manufacture sufficient commercial inventory of
ENBREL.
GOVERNMENT REGULATION
The manufacturing and marketing of pharmaceutical products in the U.S.
requires the approval of the FDA under the Food, Drug and Cosmetic Act. Similar
approvals by comparable agencies are required in foreign countries. The FDA has
established mandatory procedures and safety standards that apply to the clinical
testing, manufacture and marketing of pharmaceutical and biotechnology products.
Obtaining FDA approval for a new therapeutic product may take several years and
involve expenditure of substantial resources.
Data from human clinical trials are submitted to the FDA in a new drug
application (NDA) for drugs or a biologics license application (BLA) for
biologics. For products to be marketed in Canada, these submissions are made to
the Canadian Health Protection Bureau (CHPB) in a new drug submission (NDS).
Data from human clinical trials for new indications or uses for approved
products are submitted to the FDA in a supplemental new drug application (SNDA)
for drugs and in a supplemental biologics license application (SBLA) for
biologics. Data regarding manufacturing and bioequivalence of generic drug
products are submitted to the FDA in an abbreviated new drug application (ANDA)
and to the CHPB in an abbreviated NDS (A/NDS). Preparing any of these regulatory
submissions involves considerable data collection, verification and analysis.
The federal government regulates certain recombinant DNA research
activity through National Institutes of Health guidelines for research involving
recombinant DNA molecules (NIH GUIDELINES). We comply with the NIH Guidelines
which, among other things, restrict or prohibit certain recombinant DNA
experiments and establish levels of biological and physical containment of
recombinant DNA molecules that must be met for various types of research.
Many other laws regulate our operations, including among others, the
Occupational Safety and Health Act, the Environmental Protection Act, the
Nuclear Energy and Radiation Control Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, Title III of the Superfund Amendments
and Reauthorization Act (Community Right-to-Know and Emergency Response Act),
national restrictions on technology transfer, federal regulations on the
protection of human subjects in clinical studies, the protection of animal
welfare in preclinical studies, import, export and customs regulations and other
present or possible future local, state or federal regulation. From time to time
Congressional Committees and federal agencies have indicated an interest in
implementing further regulation of biotechnology and its applications.
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PATENTS, LICENSES AND TRADEMARKS
GENERALLY
Patents, trade secrets and other proprietary rights are very important
to Immunex. We have obtained U.S. and foreign patents and have filed
applications for additional U.S. and foreign patents covering numerous aspects
of our technology. We cannot be certain that any of our pending or future
applications will result in issued patents or that the rights granted thereunder
will provide competitive advantage to Immunex or our licensees. We also rely on
trade secrets, unpatented proprietary know-how and continuing technological
innovation to develop and maintain our competitive position. We cannot be
certain that others will not acquire or independently develop the same or
similar technology, or that Immunex's issued patents will not be circumvented,
invalidated or rendered obsolete by new technology.
Due to unresolved issues regarding the scope of protection provided by
certain of our patents, as well as the possibility of patents being granted to
others, we cannot be certain that the patents owned by or licensed to us and our
licensees will provide substantial protection or commercial benefit. The rapid
rate of development and the intense research efforts throughout the world in
biotechnology, the significant time lag between the filing of a patent
application and its review by appropriate authorities and the lack of sufficient
legal precedents concerning the validity and enforceability of certain types of
biotechnology patent claims make it difficult to predict accurately the breadth
or degree of protection that patents will afford Immunex's or our licensees'
biotechnology products or their underlying technology. It is also difficult to
predict whether valid patents will be granted based on biotechnology patent
applications or, if such patents are granted, to predict the nature and scope of
the claims of such patents or the extent to which they may be enforceable.
Under U.S. law, although a patent has a statutory presumption of
validity, the issuance of a patent is not conclusive as to validity or as to the
enforceable scope of its claims. Accordingly, we cannot be certain that our
patents will afford protection against competitors with similar inventions, nor
can we be certain that our patents will not be infringed or designed around by
others or that others will not obtain patents that we would need to license or
design around.
It is our policy to respect the valid patent rights of others. We have
obtained patent licenses from various parties covering technologies relating to
our products. However, we may need to acquire additional licenses or, if such
licenses are denied or are not available on commercially reasonable terms,
successfully prevail in the event that litigation is commenced by patent owners
to interfere with the development or commercialization of our products.
We intend to pursue protection of all forms of intellectual property,
including, but not limited to, patents, trade secrets, Orphan Drug exclusivity,
and benefits of the Waxman-Hatch Legislation, for all significant inventions,
discoveries and developments in our various areas of research.
PATENTS ON BIOLOGICAL PRODUCTS
GM-CSF. We have been issued three U.S. patents covering an altered, or
analog, form of GM-CSF (sargramostim), that we market under the LEUKINE
trademark. From July 1990 to January 1998, a GM-CSF interference proceeding had
been pending in the U.S. Patent and Trademark Office (USPTO) directed to human
GM-CSF DNAs. The interference had been declared between competing U.S. patent
applications filed by or licensed to Immunex, Novartis AG, Research Corporation
Technologies, Inc. (RCT), Schering-Plough, Inc. and Biogen. As of February 1995,
all parties to the interference except Immunex and Novartis had been eliminated
from future participation in the priority determination. Proceedings in the
interference had been suspended since 1995 to permit the parties to negotiate a
settlement of the interference. In 1997, the USPTO issued RCT a patent covering
DNAs encoding mammalian GM-CSF proteins, including human, outside of the pending
interference. Immunex and RCT entered into a royalty-bearing nonexclusive
license under such patent in 1997. In January 1998, Novartis and Immunex signed
a global GM-CSF Settlement Agreement. Under this agreement, we agreed to concede
priority to Novartis in the interference, and Novartis agreed not to assert its
GM-CSF patent rights to prevent us from making, using or selling sargramostim in
the U.S., or making sargramostim in the U.S. for export to and sale in Canada or
any country in which Novartis or Schering-Plough do not hold GM-CSF patent
rights. In consideration of the foregoing immunity from suit, we agreed to grant
Novartis immunity from suit under certain patent rights we own relating to
methods of using GM-CSF, and to pay Novartis royalties in respect of our future
sales of Leukine. In addition, as part of the resolution of the GM-CSF
interference among the various parties, in early 1998 we paid Genetics
Institute, Inc. $5.0 million.
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ENBREL. ENBREL (etanercept, TNFR:Fc) is a fusion protein consisting of
a dimer of two subunits, each comprising a TNF receptor domain derived from a
TNF receptor known as "p80," fused to a segment derived from a human antibody
molecule known as an "Fc domain." We believe that we were the first to isolate a
recombinant DNA encoding p80 TNFR and also the first to express the protein
using recombinant DNA technology. We have been issued two U.S. patents covering
DNAs encoding p80 TNFR, as well as a U.S. patent covering methods of using
TNFR:Fc, including the treatment of RA. We were granted a European patent in
December 1995 covering p80 TNFR DNAs, proteins and related technology. Two other
companies, however, BASF and Yeda Research & Development Company, Ltd. (YEDA),
filed patent applications disclosing partial amino acid sequence information of
certain TNF-binding proteins (TBPS) shortly prior to the time we filed our
patent applications, claiming the full-length p80 TNFR DNAs and proteins
corresponding in part to the TBPs disclosed by BASF and Yeda. BASF was issued a
U.S. patent based on its TBP disclosure with claim limitations that exclude
TNFR:Fc. In January 1999, Immunex entered into a settlement agreement with
Ares-Serono International S.A., a Swiss company, and its affiliate Inter-Lab
Ltd., an Israeli company (collectively, SERONO) under which Immunex and Serono
agreed to settle certain potential disputes concerning patents and patent
applications filed by Yeda and controlled by Serono that relate to TBPs.
Pursuant to the settlement, Serono has agreed not to assert any of the foregoing
patent rights against the manufacture, use or sale of ENBREL in any territory in
consideration of the payment by Immunex to Serono of certain fees, and royalties
for a specified term in respect of the net sales of ENBREL sold or manufactured
in designated countries where Yeda's patent rights have been filed.
Roche and Amgen, through Synergen Inc., also filed patent applications
directed to p80 TNFR DNAs after the date we filed our patent application. No
patents covering full-length TNFR or the intact extracellular domain of TNFR
have been issued to Roche. In January 1998, the EPO granted a patent to Amgen
claiming DNA and amino acid sequences encoding a variant of p80 TNFR disclosed
in the Synergen application that differs from that disclosed in our granted
patents covering p80 TNFR. We have filed an opposition to this Amgen patent.
Since an application giving rise to our patents covering TNFR and disclosing the
relevant DNA sequence was filed earlier than Synergen's first application
disclosing the relevant DNA sequence, we believe that the Amgen patent cannot be
legally asserted to cover TNFR:Fc, which includes the sequences patented by us.
If BASF, Roche or Amgen were able to validly assert TNFR patents to cover
TNFR:Fc, Immunex's or AHP's commercialization of ENBREL could be impeded in any
territories in which such patents were in force. A U.S. patent has also been
issued to the Board of Regents of the University of Texas System (U.T.) that
contains claims relating to TNFR:Fc fusions. U.T. has assigned this patent to
us. We have also been granted a royalty-bearing worldwide exclusive license
under patent rights jointly owned by Hoechst and Massachusetts General Hospital
(HOECHST/MASS GENERAL) claiming cytokine receptor-Fc fusion proteins, including
TNFR:Fc. Genentech has been issued U.S. patents having claims directed to
certain fusion proteins comprising Fc domains and certain processes for making
such proteins, and has also filed corresponding European applications that have
not yet been granted. Roche has filed patent applications with claims covering
TNFR:Fc fusions, which were filed after the Hoechst/Mass General patent
applications licensed to Immunex. A patent containing such claims has been
granted to Roche in Japan. We believe that an interference may be declared in
the U.S. involving the Hoechst/Mass General, U.T. and Roche patents and patent
applications. We have also completed a comprehensive analysis of the validity
and scope of the Genentech patents, which indicates that substantial defenses
may exist to the enforcement of such patents. If Genentech was able to validly
assert its fusion patents to cover ENBREL, or if additional TNFR:Fc patents were
granted to Roche, Immunex's or AHP's commercialization of ENBREL could be
impeded in any territories in which such patents were in force.
In general, with respect to any of the patents discussed above, it is
our intention to mount a vigorous defense should any patent be asserted against
activities relating to ENBREL, or, in appropriate cases, to take a license under
appropriate terms. At this time, however, it remains uncertain whether any of
these patents will be asserted against activities relating to ENBREL, and, if
so, the outcome of any litigation or licensing negotiations.
MOBIST FLT3-L. In 1996 we were granted a U.S. patent covering Flt3-L
DNA. In 1998, we were granted a U.S. patent covering methods of using Flt3-L. We
are currently seeking other U.S. and foreign patents for Flt3-L proteins, DNAs
and various methods of using Flt3-L.
NUVANCE IL-4R. We have been granted a total of five U.S. patents
relating to IL-4R proteins and DNAs, methods for inhibiting IL- 4R mediated
immune or inflammatory responses, and antibodies immunoreactive with IL-4R.
IL-4R patents have also been granted to us in Europe and certain other foreign
countries. We have additional U.S. and foreign patent applications pending
relating to IL-4R.
CD40-L. In 1998 we were granted a U.S. patent for soluble fusion
proteins that include soluble portions of CD40-L and methods of making them. We
have also received a U.S. patent relating to the use of soluble CD40-L to treat
neoplastic diseases. We have additional U.S. and foreign patent applications
pending relating to CD40-L.
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TRAIL. In 1998 we were granted a U.S. patent covering the DNA encoding
TRAIL. This is believed to be the first U.S. patent granted for this molecule.
We have additional U.S. and foreign patent applications pending relating to
TRAIL.
IL-1R TYPE II. In 1998 we were granted a U.S. patent covering methods
of using soluble IL-1R Type II to regulate an IL-1 mediated immune or
inflammatory response in a mammal. Previously we have received two U.S. patents
covering the DNA and the protein for IL-1R Type II. We have additional U.S. and
foreign patent applications pending relating to IL-1R Type II.
TACE. In 1998 we were granted a U.S. DNA and protein patent on TACE,
which includes claims to methods of using TACE to discover TACE inhibitors. This
is believed to be the first patent issued for this molecule. We have additional
U.S. and foreign patent applications pending relating to TACE. We have licensed
our TACE technology to AHP and are working together to develop and test small
molecule TACE inhibitors. See RELATIONSHIP WITH AHP AND CYANAMID, above.
PATENTS ON NON-BIOLOGICAL ONCOLOGY PRODUCTS
NOVANTRONE. NOVANTRONE (mitoxantrone) is a proprietary product that is
covered by several U.S. and Canadian patents. The patent covering the
mitoxantrone compound in the U.S. expired in August 1997. However, a separate
U.S. patent covering pharmaceutical formulations containing mitoxantrone does
not expire until July 2000. A U.S. patent covering methods of using mitoxantrone
to treat leukemia and solid tumors does not expire until April 2006, and another
U.S. patent covering methods of using mitoxantrone to treat neuroimmunologic
diseases, including MS, does not expire until June 2005.
THIOPLEX. AHP holds a manufacturing process patent on thiotepa in the
U.S. and Canada.
METHOTREXATE, LEUCOVORIN CALCIUM, AMICAR. Although methotrexate is the
subject of certain patents held by AHP, the protection afforded by such patents
is not material. We have no patent protection on leucovorin calcium or AMICAR.
PATENT AND TECHNOLOGY LICENSES
Under our royalty-bearing patent and technology license agreements, we
are obligated to pay royalties on sales of products produced using the licensed
technologies. Following the expiration of the Cohen-Boyer patents in 1997, we
are no longer obligated to pay royalties under such patents for our recombinant
DNA based products. However, we continue to pay royalties to university
licensors of certain yeast and mammalian-cell expression technologies employed
in making LEUKINE and certain other products. We are also obligated to pay
royalties to Hoechst, Novartis and RCT on sales of LEUKINE, and have agreed to
pay royalties to Hoechst, Mass General and Serono on sales of ENBREL. We may
elect to enter into additional royalty-bearing license agreements with licensors
of patents claiming technologies related to ENBREL. Although the total royalty
burden for ENBREL is subject to the successful completion of negotiations with
such licensors, it is not expected to adversely affect Immunex's ability to
successfully commercialize ENBREL. We cannot be sure, however, that patent
license negotiations with any licensors can be successfully completed, or that
the total royalties payable under any agreements resulting from such
negotiations will not have a material adverse effect on our business.
TRADEMARKS
We own all of our trademarks used in our business.
PROPERTIES
Our principal place of business is located in two adjacent buildings
located in the 1200 block of Western Avenue in Seattle, Washington. These
buildings, comprising a total of 160,000 square feet, house our primary
laboratory and office facilities, as well as a 10,000 square foot fermentation
and pharmaceutical manufacturing facility that has been licensed by the FDA to
produce LEUKINE. The current lease terms for these buildings extend through
August 2000, with three five-year renewal options at market value. In addition
to our primary facility, we lease a total of approximately 113,000 square feet
of additional office and research space in several other buildings located in
downtown Seattle. The total current rent payments for the foregoing facilities
was approximately $4.0 million in 1998 and is forecast to be approximately $4.7
million in 1999.
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We own a manufacturing and development center in Bothell, Washington
that includes a large-scale microbial manufacturing facility and a separate
mammalian cell-based protein manufacturing facility. These facilities were used
to produce ENBREL for our clinical trials in 1997; however, such facilities lack
sufficient capacity to produce commercial quantities of ENBREL. See RAW
MATERIALS AND SUPPLY, above. In 1999, we intend to begin construction of a new
process development facility at our site in Bothell, Washington. This new
process development facility is expected to speed process improvements and
development of our recombinant products.
We are currently exploring several alternatives in order to meet our
long-term facility needs. We own approximately 20 acres of undeveloped land
adjacent to our manufacturing and development center in Bothell, Washington. In
addition, in 1998 we completed the purchase of a 29-acre parcel of land located
in Seattle, Washington, known as Terminal 88, for the possible long-term
development of a new campus for our corporate offices and research facilities.
PERSONNEL
In our innovation-intensive business, our employees are vital to our
success. We believe we have good relationships with our employees, and none of
our employees are covered by a collective bargaining agreement. As of December
31, 1998, we employed a total of 1,007 people in our operations, of whom 141
have doctoral degrees. The employee count for three of our key functions is as
follows:
- Research and development--441,
- Manufacturing--179, and
- Sales and marketing--186.
Each of our employees has entered into a confidentiality agreement that
contains terms requiring disclosure of ideas, developments, discoveries or
inventions conceived during employment, and assignment to us of all proprietary
rights to these matters.
Our ability to maintain our competitive position will depend, in part,
upon our continued ability to attract and keep qualified scientific and
managerial people, and certain key employees. Competition for these people is
intense, and there can be no assurance that we will be able to attract and keep
these people.
RISK FACTORS
Our disclosure and analysis in this report and in our 1998 Annual
Report to shareholders contain some forward-looking statements. Forward-looking
statements provide our current expectations or forecasts of future events. In
particular, these include statements relating to future actions, prospective
products or product approvals, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of contingencies such
as legal proceedings, and financial results. From time to time, we also may
provide oral or written forward-looking statements in other materials we release
to the public. Any or all of our forward-looking statements in this report, in
the 1998 Annual Report and in any other public statements we make may turn out
to be wrong. Inaccurate assumptions we might make and known or unknown risks and
uncertainties can affect our forward-looking statements. Consequently, no
forward-looking statement can be guaranteed and our actual results may differ
materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
Annual Reports on Form 10-K. Also note that we provide the following cautionary
discussion of risks, uncertainties and possibly inaccurate assumptions relevant
to our business. These are factors that we think could cause our actual results
to differ materially from expected and historical results. Other factors besides
those listed here could also adversely affect us.
OUR FUTURE OPERATING RESULTS ARE UNCERTAIN AND LIKELY TO FLUCTUATE
We have had a history of operating losses and future operating
performance is never certain. Our accumulated deficit at December 31, 1998 is
$479.0 million. We anticipate that our operating and capital expenditures will
increase significantly in 1999 and in future years due primarily to:
- Spending to support the launch and sale of ENBREL,
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- Working capital requirements for inventory of ENBREL,
- Growth in research and development expenses as we progress with the
development of our clinical and preclinical product candidates,
- Increased purchases of capital equipment including construction of a
new process development facility in 1999, and
- Possible development of Terminal 88 in Seattle, Washington into our
new corporate offices and research facilities.
In addition, our current production facilities cannot produce sufficient
quantities of some of our products for all clinical trials or commercial sales,
including ENBREL. If we decide to add manufacturing capability, we will incur
significant capital expenditures.
Our ability to generate sufficient cash flow to fund such activities is
dependent on our ability to improve operating performance. This in turn depends,
among other things, on increasing sales of our existing products, especially
ENBREL, and successfully completing product development efforts and obtaining
timely regulatory approvals of our lead clinical products. We may also decide to
raise money through various financing transactions or partner with other
companies to license our technology or share the development of our products.
Our accumulated cash reserves and cash generated from operations is
becoming increasingly dependent on ENBREL and our other products and
technologies. We may not successfully develop and commercialize these products
and technologies in the future. Further, our assumptions regarding the levels of
revenue and expenses for these products and technologies may be inaccurate.
OUR PRECLINICAL AND CLINICAL TESTING RESULTS ARE UNCERTAIN
Before obtaining regulatory approvals for the sale of any of our new
products, we must subject these products to extensive preclinical and clinical
testing to demonstrate their safety and effectiveness for humans. Results of
initial preclinical and clinical testing are not necessarily indicative of
results to be obtained from later preclinical and clinical testing. Furthermore,
we may not complete our clinical trials of products under development and the
results of the trials may fail to demonstrate the safety and effectiveness of
such products to the extent necessary to obtain regulatory approvals, which
could delay or prevent regulatory approval of such products. Other companies in
the biotechnology industry have suffered significant setbacks in advanced
clinical trials, even after achieving promising results in earlier trials.
The rate of completion of clinical trials depends on, among other
factors, the enrollment of patients. Enrollment of patients depends on such
factors as the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the study and the existence of
competitive clinical trials. Any delay in planned patient enrollment in our
current or future clinical trials may result in increased costs, program delays
or both.
WE MAY NOT DEVELOP NEW PRODUCTS SUCCESSFULLY
Our long-term profitability depends on the successful commercialization
of our existing products, especially ENBREL, and on the development and
commercialization of products currently under development. We may not develop
these products successfully or receive regulatory approval. Furthermore, even if
these products are developed and approved, we or our contract manufacturers may
fail to manufacture these products or our currently marketed products in
quantities necessary for commercialization, or these products may not receive
market acceptance.
GOVERNMENTAL REGULATORY AGENCIES MAY NOT APPROVE OUR PRODUCTS
Because our products are pharmaceutical products, the FDA and similar
governmental agencies in foreign countries impose substantial requirements on
our products before they permit us to manufacture, market and sell them to the
public. To meet these requirements, we must spend substantial resources on
costly and time-consuming procedures, such as lengthy and detailed laboratory
tests and clinical trials. It typically takes years to meet these requirements
for a product and the length of time involved depends on the type, complexity
and novelty of the product. We cannot predict when we might submit product
applications or submissions for FDA or other regulatory review for our products
under development.
The FDA or other governmental agencies may approve only certain uses of
our products or may subject our products to additional testing and surveillance
programs. In addition, the FDA or other governmental agencies may withdraw or
limit their approval for noncompliance with regulatory standards or the
occurrence of unforeseen problems following initial marketing.
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Governmental regulation may cause us to delay marketing new products
for a considerable period of time or spend more resources to meet additional
requirements. Such governmental regulation ultimately may provide a competitive
advantage to our competitors. The FDA or other governmental agencies may not
approve on a timely basis, if at all, some or all of our future products or may
not approve some or all of our applications for additional indications for our
previously approved products. In addition, if another company that is developing
a product similar to one of our products suffers adverse clinical results, this
could have a negative impact on the regulatory process and timing for our
product. If we fail to obtain regulatory approval for one of our products, or
even if such approval is delayed, our marketing of this and our other products,
as well as our liquidity and capital resources, could be adversely affected. In
addition, we may be adversely affected by future legislation or administrative
action that results in new governmental regulations. We are also subject to
various federal, state and local laws, regulations and recommendations relating
to safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous or potentially
hazardous substances, including radioactive compounds and infectious disease
agents, used in connection with our research. See GOVERNMENT REGULATION, above.
WE MAY NOT GET REIMBURSED FROM THIRD PARTIES
Our ability to sell our products depends substantially on government
authorities, private health insurers and other organizations, such as health
maintenance organizations (HMOS), reimbursing most of the costs of our products
and related treatments. To date, we have been able to obtain sufficient
reimbursement for most of our oncology products, but we may not be able to
obtain similar levels of reimbursement for ENBREL or for our future products. We
may not receive sufficient government and third-party reimbursement to permit us
to realize an appropriate return on our investment in developing new therapies,
including ENBREL. Since Medicare presently will not reimburse for drugs that are
self-administered, we have assumed that Medicare will not cover prescriptions
for ENBREL. Government authorities or third parties (or both), may decrease the
amount of reimbursement we currently receive for certain products or that we
anticipate we will receive for future products. Finally, low reimbursement
amounts may reduce the demand for, or the price of, our products, adversely
affecting our business.
As a part of their efforts to control health care costs, government and
other third-party payors are limiting their coverage of, and the extent of
reimbursement for, new therapeutic products. If adequate coverage and
reimbursement levels are not provided by government and third-party payors for
uses of our therapeutic products, including ENBREL, we will have great
difficulty marketing these products.
Several recent trends may lower the price for therapeutic products,
including:
- Third-party payors are challenging the prices charged for medical
products and services,
- Managed healthcare is increasing in the U.S.,
- Organizations, such as HMOs, that control or significantly influence
the purchase of healthcare services and products, are growing,
- Legislative proposals are being introduced to reform healthcare or
reduce government insurance programs, and
- Healthcare providers are instituting cost-containment measures,
including practice protocols and guidelines and clinical pathways.
All of these trends could affect our ability to sell our existing and
future products. We cannot predict whether additional legislation or regulation
relating to the healthcare industry or third-party coverage and reimbursement
will be enacted in the future or the effect such legislation or regulation could
have on our business.
WE HAVE A LIMITED MANUFACTURING CAPABILITY
Currently, we do not ourselves possess sufficient manufacturing
capacity to manufacture our forecasted commercial requirements for ENBREL or all
of our mammalian cell-based protein products under development. In 1998, Immunex
and AHP entered into a long-term ENBREL Supply Agreement with BI Pharma to
manufacture commercial inventory of ENBREL. BI Pharma is our sole supplier of
ENBREL. We do not know whether BI Pharma will be able to successfully
manufacture sufficient quantities of ENBREL for commercial supply. Therefore, we
may have to invest substantial sums to construct
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facilities sufficient to meet our long-term manufacturing requirements for
ENBREL and other products, or to assist BI Pharma to increase its manufacturing
capacity for ENBREL. See RAW MATERIALS and SUPPLY, above.
WE ARE DEPENDENT ON OTHERS
AHP either manufactures through its subsidiaries or sources through
third-party manufacturers all finished dosage forms and bulk active raw
materials for our non-biological oncology products, including Novantrone. AHP is
dependent on a single supplier for all of the essential raw material for AMICAR.
Substantially all the raw materials used to manufacture our recombinant protein
products are available from multiple sources. We also rely upon an unaffiliated
third party and AHP for the fill and finish of all drug products we market. If
AHP subsidiaries or third-party manufacturers or suppliers were to cease
production or otherwise fail to supply such materials or products to AHP or us,
we would be unable to obtain these products for an indeterminate period of time.
We are entirely dependent upon BI Pharma for manufacturing our
commercial inventory of ENBREL. Since ENBREL was recently launched in the U.S.
in November 1998, the market demand for ENBREL in the U.S. has not yet matured
and cannot be predicted. We are not certain that BI Pharma will be able to
successfully manufacture sufficient inventory of ENBREL to satisfy both the
commercial demand for ENBREL in the U.S. as estimated in our current U.S.
marketing forecasts and the demand for ENBREL outside the U.S. As a result, our
sales of ENBREL could be adversely affected if we experienced production
shortages of ENBREL within BI Pharma's existing reserved production capacity for
ENBREL. We are actively working with BI Pharma to ensure that it will have
sufficient manufacturing capacity to meet worldwide commercial demand for
ENBREL. However, we are not certain that BI Pharma has or can acquire sufficient
production capacity for ENBREL in a timely manner should additional indications
for ENBREL be approved by the FDA and other regulatory authorities around the
world, or should existing commercial demand for ENBREL exceed BI Pharma's
ability to manufacture sufficient commercial inventory of ENBREL. If BI Pharma
ceases production or otherwise fails to supply ENBREL, we would be unable to
obtain this product for an indeterminate period of time. See RAW MATERIALS AND
SUPPLY, above.
THE STATUS OF OUR PATENTS AND PROPRIETARY RIGHTS IS UNCERTAIN
Because of the length of time and expense associated with bringing new
products through development and the governmental approval process to the
marketplace, the biotechnology and pharmaceutical industries rely on patent and
trade secret protection for significant new technologies, products and
processes. We, like other biotechnology and pharmaceutical firms, apply for,
prosecute and maintain patents for our products and technologies. The
enforceability of patents issued to biotechnology and pharmaceutical firms,
however, often is highly uncertain. The legal considerations surrounding the
validity of patents in our field are in a state of transition. In the future,
the historical legal standards surrounding questions of the validity of patents
may not be applied and the current defenses as to issued patents may not protect
our patents. In addition, the degree and range of protection a patent affords is
uncertain. Finally, we may be unsuccessful in obtaining patents and in avoiding
infringements of patents granted to others.
While we pursue patent protection for products and processes where
appropriate, we also rely on trade secrets, know-how and continuing
technological advancement to develop and maintain our competitive position.
Our policy is to have each employee enter into a confidentiality
agreement that contains provisions prohibiting the disclosure of confidential
information to anyone outside Immunex. These confidentiality agreements also
contain provisions requiring disclosure of ideas, developments, discoveries or
inventions conceived during employment, and assign to us all proprietary rights
to such matters. Research and development contracts and relationships with our
scientific consultants provide access to aspects of our know-how that are
protected generally under confidentiality agreements with the parties involved.
These confidentiality agreements may not be honored and we may be unable to
protect our rights to our unpatented trade secrets. Moreover, other people or
entities may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets.
We may be required to obtain licenses to patents or other proprietary
rights from third parties. Licenses required under any patents or proprietary
rights may not be made available on terms acceptable to us, if at all. If we do
not obtain the required licenses, we could encounter delays in product
development while we attempt to redesign products or methods. We also could
discover that the development, manufacture or sale of products requiring such
licenses is simply not possible. In addition, we could incur substantial costs
in defending any patent litigation brought against us or in asserting our patent
rights, including those licensed to us by others, in a suit against another
party. Our competitors have obtained or are seeking patents which, if issued or
granted, may have a material adverse effect on our ability to successfully
commercialize ENBREL. See PATENTS, LICENSES AND TRADEMARKS, above.
28
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TECHNOLOGICAL CHANGE AND COMPETITION
We are engaged in fields characterized by extensive research efforts
and rapid technological development. New drug discoveries and developments in
the fields of genomics, rational drug design and other drug discovery
technologies are accelerating. Many companies and institutions, both public and
private, exist that are engaged in developing synthetic pharmaceuticals and
biotechnological products for human therapeutic application, including the
applications we have targeted.
A number of our competitors have substantially more capital, research
and development, regulatory, manufacturing, marketing, human and other resources
and experience than we have. Furthermore, large pharmaceutical companies have
been consolidating with each other, which has increased the resources available
to them and concentrated the intellectual property assets in a few such
competitors. Such competitors may develop products that are more effective or
less costly than any of our current or future products. Such competitors also
may produce and market their products more successfully then we do. These
competitors may develop technologies and products that are more effective than
any we develop or that render our technology and products obsolete or
noncompetitive. See COMPETITION, above.
WE MAY HAVE PRODUCT LIABILITY
Product liability is a major risk in the testing and marketing of
biotechnology and pharmaceutical products. This risk exists in human clinical
trials and for products that receive regulatory approval for commercial sale. We
may incur significant product liability exposure. We currently maintain product
liability insurance coverage, which our management believes to be adequate,
based on our product portfolio, sales volumes and claims experience to date and
we intend to continue such coverage. In the future, insurers may not offer us
product liability insurance, may raise the price of such insurance or may limit
the coverage of such insurance. In addition, we may not be able to maintain such
insurance in the future on acceptable terms and such insurance may not provide
us with adequate coverage against potential liabilities either for clinical
trials or commercial sales. Successful product liability claims in excess of our
insurance may adversely affect our business.
WE MAY HAVE ENVIRONMENTAL LIABILITY
Our research and development activities involve the controlled use of
hazardous materials, chemicals, viruses and radioactive compounds. We are
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Although we believe that our safety procedures for the handling and
disposal of such materials comply with the standards prescribed by such laws and
regulations, we cannot eliminate the risk of accidental contamination or injury
from these materials.
In the event of such an accident, we could be held liable for any
damages that result and any such liability could exceed our resources. We may be
required to incur significant costs to comply with environmental laws and
regulations in the future. Current or future environmental laws or regulations
may materially adversely affect our operations, business or assets. See
GOVERNMENT REGULATION, above.
YEAR 2000 ISSUE
The "Year 2000" issue is the result of computer programs being unable
to differentiate between the year 1999 and the year 2000 because they were
written using two digits rather than four to define the applicable year. This
could result in a system failure or miscalculations with respect to current
programs.
We are heavily dependent upon the proper functioning of our own
computer systems and software applications. Any failure or malfunctioning on the
part of these or other systems could adversely affect our business in ways that
we currently do not know and cannot discern, quantify or otherwise anticipate.
We have established a Year 2000 Committee which has determined that
certain software, hardware and equipment will have to be modified or replaced so
that they will properly utilize dates beyond December 31, 1999. See MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - YEAR
2000, below.
We anticipate that the required modifications and replacements of our
critical systems and applications will be completed prior to the Year 2000.
However, we may be unable to implement these modifications and replacements and,
even if we do make these modifications and replacements, they may not be
effective in addressing the problems identified. If the required modifications
and replacements are not completed in a timely manner or are not successful, our
business could be materially affected.
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We currently only have limited information on Year 2000 compliance by
our key third-party suppliers, service providers, distributors, wholesalers and
other entities with which we have a business relationship (BUSINESS PARTNERS).
Our Business Partners' operations could be adversely affected if they do not
successfully and timely achieve Year 2000 compliance. If our Business Partners
experience Year 2000 compliance issues, then our business could be materially
affected.
We cannot guarantee that our plan will adequately address the Year 2000
issue in a timely manner or that we will be able to modify and replace any or
all of our critical systems and applications in accordance with our plan. In
addition, we cannot assure that any modifications or replacements will
effectively address the Year 2000 issue. If we do not complete the required
upgrades on time, or if they are not successful, our business could be
materially affected. Furthermore, we cannot guarantee that other companies will
make necessary, timely and successful conversions to their systems on which our
systems depend. Although we intend in the second half of 1999 to develop a
contingency plan detailing actions that we will take in the event the execution
of our Year 2000 plan is not successfully completed on a timely basis, we have
not yet developed such a plan.
ITEM 2. PROPERTIES
See PROPERTIES, above, under Item 1.
ITEM 3. LEGAL PROCEEDINGS
We are involved in an interference involving a patent issued to Yeda
that discloses and claims certain TBP multimers. Because of the license with
Serono discussed above, we do not believe that an adverse result in this
interference would have a material adverse effect on our operations or
prospects. See PATENTS, LICENSES AND TRADEMARKS, above. However, additional
interferences may be declared involving other products or technologies being
developed by Immunex, including ENBREL, MOBIST or CD40-L.
We are not a party to any other material litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our shareholders during the
fourth quarter of our fiscal year ended December 31, 1998.
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PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Immunex's common stock is traded on The Nasdaq Stock Market under the
symbol IMNX.
The following table sets forth for each period indicated the high and
low sales prices for Immunex's common stock as quoted on The Nasdaq Stock
Market. Share prices shown are before our two-for-one stock split effective for
shareholders of record on March 11, 1999.
<TABLE>
<CAPTION>
1998 1997
------------------------ --------------------------
HIGH LOW HIGH LOW
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
1st Quarter 75 3/8 47 1/8 33 18 7/8
2nd Quarter 73 5/8 57 1/2 39 23 1/4
3rd Quarter 73 1/2 48 68 1/4 32 7/8
4th Quarter 126 3/8 47 7/8 80 3/8 45 1/4
</TABLE>
There were approximately 1,142 holders of record of Immunex's common
stock as of March 9, 1999, which does not include the number of shareholders
whose shares are held of record by a broker or clearing agency, but does include
such a broker or clearing agency as a holder of record.
We have not paid any cash dividends since our inception. We currently
do not intend to pay any cash dividends in the foreseeable future, but intend to
retain all earnings, if any, for use in our business operations.
In connection with our stock option plan, we have issued shares of
Immunex common stock upon exercise of employee stock options. Under the terms of
the Governance Agreement with AHP, AHP has the right to purchase shares from
Immunex to maintain AHP's percentage ownership interest following the issuance
of Immunex common stock. See RELATIONSHIP WITH AHP AND CYANAMID in Item 1,
above. Immunex issued 111,283 shares of common stock to AHP for $6,877,000 in
1998 and issued 28,223 shares of common stock to AHP for $1,280,000 in 1997. We
believe that the sale of these securities was exempt from registration under the
Securities Act of 1933, as amended, under Section 4.2 thereof.
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table shows selected financial data for the fiscal years 1994 to
1998.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 243,450 $ 185,297 $ 151,198 $ 156,616 $ 144,332
Net income (loss) 986 (15,772) (53,632) (11,300) (33,104)
Net income (loss) per common
share, basic and diluted 0.02 (0.40) (1.35) (0.29) (0.85)
Total Assets 325,325 227,333 177,787 174,037 192,665
Long-term obligations, including
current portion 5,826 9,093 12,071 5,324 50,611
Shareholders' equity 247,463 176,156 137,710 136,643 111,927
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Our disclosure and analysis in this report and in our 1998 Annual
Report to shareholders contain some forward-looking statements. Forward-looking
statements provide our current expectations or forecasts of future events. In
particular, these include statements relating to future actions, prospective
products or product approvals, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of contingencies such
as legal proceedings, and financial results. From time to time, we also may
provide oral or written forward-looking statements in other materials we release
to the public. Any or all of our forward-looking statements in this report, in
the 1998 Annual Report and in any other public statements we make may turn out
to be wrong. Inaccurate assumptions we might make and known or unknown risks and
uncertainties can affect our forward-looking statements. Consequently, no
forward-looking statement can be guaranteed and our actual results may differ
materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
Annual Reports on Form 10-K. Factors that we think could cause our actual
results to differ materially from expected and historical results include, but
are not limited to, those discussed in the "Risk Factors" section in Item 1
above.
RESULTS OF OPERATIONS
OVERVIEW
In 1998, we generated net income of $1.0 million, compared to net
losses of $15.8 million and $53.6 million in 1997 and 1996, respectively. The
improvement in operating results in each of the years presented reflects
increased product sales and contract revenues. The improvement in 1998
revenues was due largely to the approval and launch of ENBREL-Registered
Trademark- (etanercept) in November 1998 following United States (U.S.) Food
and Drug Administration (FDA) approval of ENBREL for treatment of advanced
rheumatoid arthritis and continued growth in sales of LEUKINE-Registered
Trademark- (sargramostim, GM-CSF). Furthermore, contract revenue totaling
$50.0 million was earned during 1998 under the terms of an ENBREL Promotion
Agreement with American Home Products Corporation (AHP). In 1997, growth in
sales of our products LEUKINE and NOVANTRONE-Registered Trademark-
(mitoxantrone) contributed to the revenuE increase. In addition, $15.0
million was earned in 1997 under the ENBREL Promotion Agreement. The revenue
increases in 1998 and 1997 were partially offset by spending for the
development of ENBREL, investment in our other research and development
projects, and increased spending for selling, general and administrative
activities.
REVENUES (in millions)
<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ----------
<S> <C> <C> <C>
ENBREL $ 12.7 $ -- $ --
LEUKINE 63.8 52.7 43.1
NOVANTRONE 48.8 51.6 36.7
Other product sales 44.6 45.4 49.7
---------- --------- ----------
Total product sales 169.9 149.7 129.5
Royalty and contract revenue 73.5 35.6 21.7
---------- --------- ----------
Total revenue $ 243.4 $ 185.3 $ 151.2
---------- --------- ----------
---------- --------- ----------
</TABLE>
The improvement in product sales in 1998, as compared to 1997, was due
to the launch of ENBREL in November 1998 and increased demand for LEUKINE, as
noted above. Changes in sales levels of our other marketed products, as a whole,
declined slightly during 1998. Also, at the end of 1997, we sold the marketing
rights to certain products in Canada to a wholly owned subsidiary of AHP.
Accordingly, no revenue was earned from sales of those products in 1998.
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<PAGE>
Sales growth in 1997, as compared to 1996, was attributable to sales
increases for both LEUKINE and NOVANTRONE. Increased sales of LEUKINE resulted
from the launch of a liquid formulation in January 1997 and increased selling
and marketing efforts. Sales of NOVANTRONE benefited from an expanded label
indication from the FDA in November 1996, which allows marketing the product to
patients with pain related to hormone refractory prostate cancer (HRPC).
On November 2, 1998, the FDA approved ENBREL for treatment of advanced
rheumatoid arthritis. Sales of ENBREL commenced on November 4, 1998, and totaled
$12.7 million for 1998. Additional sales history for ENBREL is needed before a
meaningful assessment of the acceptance of ENBREL into the rheumatoid arthritis
market in the U.S. can be completed. Under the terms of the ENBREL Promotion
Agreement, AHP is promoting ENBREL in the U.S. through its Wyeth-Ayerst sales
and marketing organization. AHP shares in the gross profits from U.S. sales of
ENBREL and the companies share the selling, marketing, distribution and other
costs to support sales of ENBREL.
Demand for LEUKINE increased significantly beginning in 1997 following
the launch of a liquid formulation of LEUKINE. Previously, LEUKINE was only
available in a powdered formulation that required reconstitution prior to
administration. The liquid formulation provided improved convenience that
resulted in increased acceptance of LEUKINE.
Sales of NOVANTRONE leveled in 1998 following an initial increase in
demand after the product received an expanded label indication for treatment of
HRPC by the FDA in December 1996. In 1998, we recognized that the sales gains
achieved in 1997 were not going to continue throughout the year, due to what we
believe to be increased usage of competitive products for the treatment of
advanced prostate cancer. The increased competition led to a decline in sales of
NOVANTRONE in the fourth quarter of 1998. We cannot predict the extent to which
the decline in sales experienced in the fourth quarter will continue.
In general, the amount of royalty and contract revenue recognized by
Immunex each year has been largely dependent upon business opportunities that
have been identified and the occurrence of certain events or achievement of
milestones under existing contracts. Therefore, the timing and amounts of these
revenues may fluctuate significantly from year to year.
Royalty and contract revenue increased significantly in 1998 due to
revenues earned under the ENBREL Promotion Agreement with AHP. In addition to
promoting ENBREL in North America, as discussed above, AHP agreed to make
payments to Immunex upon the occurrence of certain events. In 1998, we earned
$50.0 million under the ENBREL Promotion Agreement. Of the $50.0 million,
$20.0 million was earned when the Biologics License Application (BLA) for
ENBREL was accepted for review by the FDA and the other $30.0 million was
earned when the FDA approved ENBREL. In June 1998, we sold our U.S. rights to
paclitaxel injection, a generic form of TAXOL-Registered Trademark-, to Baker
Norton Pharmaceuticals, a wholly owned subsidiary of IVAX Corporation. The
sale generated revenues of $6.9 million from license fees and sale of bulk
paclitaxel inventory. Other license fees and contract revenues totaled $8.9
million in 1998, of which $4.0 million was earned under existing agreements
with AHP. Royalty revenue also increased moderately, totaling $7.7 million
for the year.
The increase in royalty and contract revenue in 1997, as compared to
1996, was due primarily to the receipt of $15.0 million upon signing of the
ENBREL Promotion Agreement. Other license fees and contract revenues totaled
$13.8 million in 1997, compared to $16.0 million in 1996. Of these totals, $10.0
million was earned in 1997 and $6.0 million was earned in 1996 under agreements
with AHP. Royalty revenue increased to $6.9 million in 1997 from $5.7 million in
1996.
OPERATING EXPENSES
Cost of product sales was 19.6%, 16.4% and 16.9% of product sales in
1998, 1997 and 1996, respectively. The increase in the cost of product sales
percentage in 1998 was due to the following:
- Launch of ENBREL in November 1998 (ENBREL, like LEUKINE, is a
biologic. Biologics generally have a higher manufacturing cost
than traditional pharmaceutical products and, in the case of our
biologic products, are subject to multiple royalty obligations),
- Unfavorable change in product mix, and
- Increased royalties payable on LEUKINE in 1998.
The unfavorable change in product mix in 1998 reverses a more favorable
trend in 1997 whereby increased sales of certain products had resulted in an
overall decrease in our cost of product sales percentage. The decrease in 1997
was partially offset by increased period costs incurred during the year and
deteriorating margins on sales of leucovorin calcium.
Research and development expense increased to $120.0 million in 1998
compared to $109.3 million and $96.6 million in 1997 and 1996, respectively. We
continue to invest significantly in the development of our product candidates
and
33
<PAGE>
have increased spending on discovery research activities. Spending for the
development of ENBREL increased further in 1998, reflecting expenditures for
clinical trials, expenses associated with the regulatory filings for ENBREL, and
spending by AHP for the development of ENBREL in Europe, the costs of which we
share equally with AHP. In addition, expenditures for development of NUVANCE(TM)
(IL-4 receptor) aND MOBist(TM) (Flt3-L) increased duriNG 1998 due to both
expanded clinical trials for these product candidates and increased costs of
manufacturing the product requirements for the clinical trials. Research and
development expense in 1998 also includes the acquisition of the rights outside
North America to IL-4 receptor and other receptor product candidates for $10.0
million from Hoechst Marion Roussel, Inc. The above increases were partially
offset in 1998 by decreased clinical expenses for LEUKINE and decreased
manufacturing costs for CD40 Ligand. In addition, as discussed below, funding of
AHP's oncology discovery research program ceased effective July 1, 1998.
In July 1998, we ended our oncology collaboration with AHP by
terminating the research agreement and certain other agreements and entering
into a new Product Rights Agreement with AHP. As a result of the termination of
the research agreement, our obligation to fund AHP's oncology discovery research
program ceased effective July 1, 1998. In addition, as a result of the Product
Rights Agreement, certain territorial rights that each party had to the other
party's cancer product candidates was also terminated. Under the terms of the
Product Rights Agreement, AHP may acquire exclusive worldwide rights to up to
four of our future product candidates. If AHP exercises any of these rights, we
would be eligible for certain payments and royalties on future sales of such
products. However, we may elect to retain the worldwide rights to up to two of
such products. In such case, AHP would be eligible for certain payments and
royalties on future sales of such products.
The increase in research and development expense in 1997, as compared
to 1996, was due largely to increased development costs for ENBREL and, to a
lesser extent, increased investment in discovery research. In 1997, accelerating
development of ENBREL became our primary focus. We significantly expanded our
clinical studies for ENBREL and increased our manufacturing effort to meet the
clinical product requirements for such studies. Spending on our other product
candidates also increased in 1997 as these products progressed through early
phase clinical studies or were being prepared for the start of clinical studies.
Selling, general and administrative expense totaled $93.8 million,
$71.3 million and $70.0 million in 1998, 1997 and 1996, respectively. The
increase in 1998 expense was due primarily to spending on pre-launch activities
and on launch related selling and marketing activities for ENBREL. Under the
terms of the ENBREL Promotion Agreement, AHP assumed a majority of these
expenses and will share in the gross profits from the U.S. sales of ENBREL. Our
obligation for such expenses, including AHP's share of gross profits from U.S.
sales of ENBREL, totaled $14.8 million in 1998. We have also incurred additional
expenses on corporate infrastructure related to growth of Immunex. This was
primarily due to the following:
- Increased staffing levels,
- Expenses associated with information systems, including efforts
to address Year 2000 issues, and
- Rent and facilities costs associated with expanded office space.
The increase in selling, general and administrative expense in 1997, as
compared to 1996, was due primarily to the following:
- Selling and marketing programs for LEUKINE and NOVANTRONE,
- Expenses associated with information systems, and
- Patent procurement and defense activities.
The above expense increases were offset by decreased litigation
expenses in 1997. We incurred legal defense costs totaling $4.7 million in 1996
related to litigation that was settled in November 1996.
OTHER INCOME (EXPENSE)
Interest income increased to $6.8 million in 1998, from $3.8 million
and $2.2 million in 1997 and 1996, respectively. The improvement reflects an
increase in funds available for investment purposes and the interest earned on
these funds. Our cash and marketable securities increased significantly
beginning in early 1997 due primarily to payments received from AHP as
settlement of their 1996 and 1997 revenue shortfall obligations assumed under
certain agreements entered into during the merger of Immunex and American
Cyanamid Company (CYANAMID). (See Note 9 in our Notes to Consolidated Financial
Statements for a discussion of our agreements with AHP). In addition, the
improvement in operating results led to positive cash flows from operating
activities in both 1997 and 1998.
In November 1996, we settled ongoing litigation and recorded a charge
of $18.1 million to other expense as our share of the obligation under the
settlement.
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<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes totaled $2.2 million, $0.2 million and
$0.2 million in 1998, 1997 and 1996, respectively. To the extent that income
subject to tax was offset by pre-merger net operating tax loss carryforwards,
accounting rules require that we report a tax provision with the offset to the
goodwill account. This tax provision is a non-cash transaction because we will
utilize our net operating tax loss carryforwards to satisfy the federal tax
liability. At December 31, 1998, our net operating tax loss carryforwards
totaled approximately $252.0 million. The provision for income taxes in 1997 and
1996 consisted only of our tax obligation in the states in which we sell our
products.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities totaled $144.8 million
and $86.5 million at December 31, 1998 and 1997, respectively. Our cash reserves
are held in a variety of interest-bearing instruments including government and
corporate obligations and money market accounts.
Operating activities provided cash of $23.2 million in 1998, compared
to $15.1 million in 1997, and resulted in a net use of cash in operating
activities of $43.0 million in 1996. The increase in 1998 was due primarily to
the improvement in operating results. In addition, changes in working capital
provided cash reflecting an increase in accounts payable and other current
liabilities offset partially by growth in both accounts receivable and
inventory. These changes are primarily due to the U.S. launch of ENBREL in
November 1998 and growth in our operations. The improvement in 1997, as compared
to 1996, was also due largely to the improvement in operating results and a
favorable change in working capital requirements.
Our working capital requirements will increase significantly in 1999 as
we enter our first full year of selling ENBREL in the U.S. Under an ENBREL
Supply Agreement entered into in November 1998 with AHP and with Boehringer
Ingelheim Pharma KG (BI PHARMA), our contract manufacturer of ENBREL, we have
commitments to purchase inventory totaling $198.0 million over the next two
years. A portion of this inventory will be purchased by AHP from BI Pharma. In
addition to inventory of ENBREL, our accounts receivable will be directly
affected by U.S. sales of ENBREL and accounts payable will be affected by costs
incurred under the ENBREL Promotion Agreement. Accordingly, operating cash flows
are highly uncertain in 1999 and are highly dependent on sales and inventory
levels of ENBREL.
Excluding net purchases of marketable securities, net cash used in
investing activities increased to $34.7 million in 1998, compared to $9.4
million and $5.9 million in 1997 and 1996, respectively. The increased use of
cash in 1998 was due to:
- Increase in property, plant and equipment, which includes the
acquisition of property for possible development and relocation
of our corporate offices and research facilities for $15.7
million, and
- Payment of $5.0 million under a GM-CSF patent interference
settlement.
The increase in net cash used in investing activities in 1997, as
compared to 1996, was due to increased purchases of property, plant and
equipment.
Beginning in 1998, capital expenditures increased beyond what had
traditionally been a maintenance level of investment. This trend is expected to
continue in 1999 as we expand our infrastructure, increase purchases of
manufacturing and research equipment, and upgrade or replace systems and
equipment as part of our Year 2000 compliance program. Furthermore, we have
initiated a project to expand our process development capacity. The project to
construct a new process development facility is currently in the design phase
and construction is expected to begin in mid-1999. Costs for the process
development facility are estimated to be approximately $15.0 million in 1999.
Net cash provided by financing activities totaled $70.5 million, $56.0
million and $52.4 million in 1998, 1997 and 1996, respectively. In February
1998, we received the final revenue shortfall obligation from AHP totaling $60.0
million. In 1998 an additional $6.8 million was received from the exercise of
employee stock options and $6.9 million was received from the issuance of
111,283 shares of common stock to AHP. Under the terms of a Governance Agreement
with AHP, AHP can purchase additional shares of our common stock in order to
maintain its percentage ownership. The purchase price is equal to the fair
market value of the shares, as determined in accordance with the Governance
Agreement, on the date of AHP's purchase. These cash inflows were partially
offset by payments of a deferred litigation settlement.
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<PAGE>
The increase in cash provided by financing activities in 1997, as
compared to 1996, was due primarily to an increase in the Revenue Guaranty
payment received in each year. In 1997, we received $56.0 million compared to
$45.3 million in 1996. This was offset by the cash flow impact of the deferred
obligation related to the settlement of litigation.
OUTLOOK
The U.S. launch of ENBREL in November 1998 has had, and will have, a
significant impact on our operations. If current trends continue, ENBREL will be
our highest selling product in 1999. Not only will this increase product sales,
but also will increase our cost of sales percentage. Cost of product sales for
all products as a percentage of product sales in the fourth quarter of 1998, the
first quarter that ENBREL was sold, increased to 22.1%, as compared to 19.6% for
all of 1998. Our cost of sales percentage is expected to increase further in
1999 as sales of ENBREL become a larger percentage of total product sales.
Spending on selling and marketing activities will also increase significantly in
1999 to support the marketing and sales of ENBREL. While the launch process of a
new pharmaceutical product is expensive, we will only incur a portion of such
expenses. Under the terms of the ENBREL Promotion Agreement, AHP will assume a
majority of the marketing and selling costs for ENBREL in the U.S. for the first
two years after launch, after which time we will share equally those costs with
AHP. In addition, we share with AHP a percentage of the gross profits associated
with U.S. sales of ENBREL. Therefore, spending in 1999 and beyond will include
our portion of the ongoing selling, marketing and distribution expenses and
profit sharing related to ENBREL in the U.S.
We are seeking opportunities to increase sales of LEUKINE and
NOVANTRONE by obtaining approval of new uses for these products. We are
conducting clinical studies of LEUKINE in infectious disease and new oncology
indications. In 1998, we obtained data from a Phase III study of NOVANTRONE in
patients with progressive multiple sclerosis. In 1999, we intend to file a
supplemental New Drug Application with the FDA to obtain approval to market
NOVANTRONE in this indication.
A portion of our revenues will continue to be derived from existing
license, royalty and other such agreements. Under the ENBREL Promotion
Agreement, additional revenues may be earned if certain events are achieved. We
will earn $15.0 million under the ENBREL Promotion Agreement if ENBREL is
approved with a claim for disease modification for early rheumatoid arthritis. A
Phase III study of ENBREL for disease modification is expected to be completed
in the second quarter of 1999. If the results are positive, we expect to file a
supplemental BLA for ENBREL with the FDA for disease modification for early
rheumatoid arthritis. The timing and approval of this application is uncertain.
In addition, if net sales of ENBREL in North America exceed $200.0 million in
any 12 consecutive months, we will earn a one-time payment $10.0 million under
the ENBREL Promotion Agreement. We will earn an additional one-time payment of
$10.0 million under the ENBREL Promotion Agreement if net sales of ENBREL in
North America exceed $400.0 million in any 12 consecutive months.
In the future we may enter into additional agreements to license
marketing or technology rights. The timing of such agreements, if any, and the
revenue recognized from those agreements cannot be predicted.
Spending for our internal research and development programs is expected
to be consistent with expense levels incurred in 1998. However, the timing and
progression of certain clinical studies can impact these expense levels.
Clinical studies can be very expensive and the costs can fluctuate significantly
depending on the size of the study and how quickly patients are enrolled in a
study. Accordingly, it is uncertain what level of spending will be required to
support the ongoing clinical studies for ENBREL in early rheumatoid arthritis
patients and for treatment of chronic heart failure. We are also progressing
with clinical trials with NUVANCE for treatment of asthma and with certain other
product candidates.
Growth in selling, general and administrative expense will largely
reflect the launch, selling, marketing and distribution of ENBREL, discussed
above. We also expect spending to increase moderately to support growth in
corporate infrastructure.
YEAR 2000
The "Year 2000" issue is the result of computer programs being unable
to differentiate between the year 1900 and the year 2000 because they were
written using two digits rather than four to define the applicable year. This
could result in a system failure or miscalculations with respect to current
programs. We have established a Year 2000 Committee with representatives from
all of the functional areas at Immunex. The Year 2000 Committee has initiated a
comprehensive review of our computer systems and software applications
(INFORMATION TECHNOLOGY) and equipment that utilize date
36
<PAGE>
sensitive computer chips (EMBEDDED CHIPS). Embedded Chips are utilized in our
security systems and certain manufacturing, laboratory and office equipment.
Based on this review, we have determined that certain software, hardware and
equipment will have to be modified or replaced so that they will properly
utilize dates beyond December 31, 1999. Furthermore, we have initiated contact
with key third-party suppliers, service providers, distributors, wholesalers and
other entities with which we have a business relationship (BUSINESS PARTNERS) to
determine their compliance with Year 2000 requirements.
We anticipate that required modifications and replacements of our
critical systems and applications will be completed prior to the year 2000.
However, if such modifications are not completed in a timely manner, or if there
were a similar such failure on the part of our Business Partners, there could be
a material adverse impact on our operations.
Our plan to resolve the Year 2000 issues is organized into three
functional areas: Information Technology, Embedded Chips and Business Partners.
For each functional area, there are three phases: Phase I: Assessment; Phase II:
Testing and Remediation; and Phase III: Implementation and Contingency Planning.
The Phase I activities for Information Technology is complete and a
substantial portion of the Phase I activities for Embedded Chips and Business
Partners is complete. Various testing and remediation projects are in process
and many have been completed. As a result of this process, certain software
applications have been identified that are not Year 2000 compliant and
replacement of those software applications is in process. The Company is
interviewing its Business Partners to assess Year 2000 readiness. Progress of
our Business Partners to become Year 2000 compliant will be monitored and
remediation and contingency planning will be made as needed. The estimated
completion dates of each phase of the three functional areas are as follows:
<TABLE>
<CAPTION>
Information Technology Embedded Chips Business Partners
---------------------- -------------- -----------------
<S> <C> <C> <C>
Phase I Complete 1999 First Quarter 1999 First Quarter
Phase II 1999 Second Quarter 1999 Second Quarter 1999 Second Quarter
Phase III 1999 Third Quarter 1999 Third Quarter 1999 Third Quarter
</TABLE>
We are utilizing both internal and external resources to identify,
correct and test our computer systems, equipment and other applications for Year
2000 compliance. Our total cost for the Year 2000 project is estimated at
approximately $6.8 million ($2.3 million of expense and $4.5 million capital).
Through December 31, 1998, we have incurred approximately $1.5 million ($0.5
million of expense and $1.0 million capital). These costs do not include any
internal costs. We will utilize our existing cash reserves to fund our Year 2000
compliance program.
We have not identified our most reasonably likely worst case scenario
with respect to possible losses in connection with Year 2000 related problems.
We plan on completing this analysis in mid-1999. We have not begun the
contingency planning process. Contingency plan development is scheduled for
completion in the second half of 1999.
MARKET RISK
We invest our cash reserves in marketable securities consisting
primarily of U.S. government and corporate obligations. Our marketable
securities are subject to interest rate risk. If market interest rates increase
by 10%, the effect on our operating results would not be material. In addition,
we own common stock in two biotechnology companies with a cost of $3.0 million.
37
<PAGE>
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
See MARKET RISK, above, under Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page in
Form 10-K
---------
<S> <C>
Consolidated Balance Sheets at December 31, 1998 and 1997. 39
Consolidated Statements of Operations for the years ended December 31, 1998,
1997 and 1996. 40
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996. 42
Notes to Consolidated Financial Statements for the years ended December 31, 1998,
1997 and 1996. 43 - 54
Report of Ernst & Young LLP, Independent Auditors. 55
</TABLE>
38
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43,600 $ 66,176
Marketable securities 101,245 19,493
Accounts receivable - trade, net 21,570 10,588
Accounts receivable - AHP 967 3,555
Accounts receivable - other 6,402 4,088
Inventories 23,475 9,031
Prepaid expenses and other current assets 4,726 3,662
--------- ---------
Total current assets 201,985 116,593
Property, plant and equipment, net 90,092 73,645
Other assets:
Property held for future development 6,129 5,768
Investments in common stock 3,837 6,859
Intangible product rights and other, net 15,935 13,286
Goodwill, net 7,347 11,182
--------- ---------
Total assets $ 325,325 $ 227,333
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,256 $ 29,007
Accounts payable - AHP 13,950 1,917
Accrued compensation and related items 13,756 8,572
Current portion of long-term obligations 3,477 3,460
Other current liabilities 5,074 2,588
--------- ---------
Total current liabilities 75,513 45,544
Long-term obligations 2,349 5,633
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 100,000,000
shares authorized, 40,161,261 and 39,718,023
outstanding at December 31, 1998 and 1997, respectively 725,192 711,485
Guaranty payment receivable from AHP -- (60,032)
Unrealized gain on investments, net 1,228 4,646
Accumulated deficit (478,957) (479,943)
--------- ---------
Total shareholders' equity 247,463 176,156
--------- ---------
Total liabilities and shareholders' equity $ 325,325 $ 227,333
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
39
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Product sales $ 169,907 $ 149,672 $ 129,528
Royalty and contract revenue 73,543 35,625 21,670
--------- --------- ---------
243,450 185,297 151,198
Operating expenses:
Cost of product sales 33,285 24,552 21,860
Research and development 119,954 109,312 96,612
Selling, general and administrative 93,777 71,275 69,968
--------- --------- ---------
247,016 205,139 188,440
--------- --------- ---------
Operating loss (3,566) (19,842) (37,242)
Other income (expense):
Interest income 6,793 3,790 2,156
Interest expense (425) (596) (293)
Other income (expense), net 384 1,088 (18,093)
--------- --------- ---------
6,752 4,282 (16,230)
--------- --------- ---------
Income (loss) before income taxes 3,186 (15,560) (53,472)
Provision for income taxes 2,200 212 160
--------- --------- ---------
Net income (loss) $ 986 $ (15,772) $ (53,632)
--------- --------- ---------
--------- --------- ---------
Net income (loss) per common share
Basic $ 0.02 $ (0.40) $ (1.35)
--------- --------- ---------
--------- --------- ---------
Diluted $ 0.02 $ (0.40) $ (1.35)
--------- --------- ---------
--------- --------- ---------
Number of shares used for per share amounts
Basic 39,875 39,637 39,602
--------- --------- ---------
--------- --------- ---------
Diluted 41,890 39,637 39,602
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
40
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Guaranty
Payment Accumu-
Common Stock Receivable lated Other Accumu- Total
$.01 Par Value from Comprehen- lated Shareholders'
Shares Amount AHP sive Income Deficit Equity
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 39,601,899 $ 592,470 $ (45,288) $ -- $ (410,539) $ 136,643
Net loss for the year ended
December 31, 1996 -- -- -- -- (53,632) (53,632)
Unrealized gain on
Investments -- -- -- 9,406 -- 9,406
-----------
Comprehensive loss (44,226)
Issuance of common stock upon
the exercise of stock options 326 5 -- -- -- 5
Guaranty payment received
from AHP -- -- 45,288 -- -- 45,288
Guaranty payment receivable
from AHP -- 56,000 (56,000) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 39,602,225 648,475 (56,000) 9,406 (464,171) 137,710
Net loss for the year ended
December 31, 1997 -- -- -- -- (15,772) (15,772)
Unrealized loss on
investments, net -- -- -- (4,760) -- (4,760)
-----------
Comprehensive loss (20,532)
Issuance of common stock upon
the exercise of stock options 87,575 1,698 -- -- -- 1,698
Net proceeds from issuance of
common stock to AHP 28,223 1,280 -- -- -- 1,280
Guaranty payment received
from AHP -- -- 56,000 -- -- 56,000
Guaranty payment receivable
from AHP -- 60,032 (60,032) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 39,718,023 711,485 (60,032) 4,646 (479,943) 176,156
Net income for the year ended
December 31, 1998 -- -- -- -- 986 986
Unrealized loss on
investments, net -- -- -- (3,418) -- (3,418)
-----------
Comprehensive loss (2,432)
Issuance of common stock upon
the exercise of stock options 331,955 6,830 -- -- -- 6,830
Net proceeds from issuance of
common stock to AHP 111,283 6,877 -- -- -- 6,877
Guaranty payment received
from AHP -- -- 60,032 -- -- 60,032
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 40,161,261 $ 725,192 $ -- $ 1,228 $ (478,957) $ 247,463
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
41
<PAGE>
IMMUNEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 986 $ (15,772) $ (53,632)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 18,119 16,930 15,157
Deferred income tax provision (see Note 7) 1,900 -- --
Cash flow impact of changes to:
Accounts receivable (10,708) (90) 2,269
Inventories (6,493) (138) (591)
Prepaid expenses and other current assets (947) 55 (1,990)
Accounts payable, accrued
compensation and other current liabilities 20,371 14,078 (4,262)
--------- --------- ---------
Net cash provided by (used in) operating 23,228 15,063 (43,049)
activities
Cash flows from investing activities:
Purchases of property, plant and equipment (29,389) (7,409) (4,656)
Proceeds from sales and maturities of marketable 40,169 13,804 --
securities
Purchases of marketable securities (121,745) (33,158) --
Acquisition of rights to marketed products (5,000) -- --
Other (312) (1,985) (1,255)
--------- --------- ---------
Net cash used in investing activities (116,277) (28,748) (5,911)
Cash flows from financing activities:
Guaranty payment received from AHP 60,032 56,000 45,288
Proceeds from issuance of common stock 6,877 1,280 --
Proceeds from exercise of stock options 6,831 1,698 --
Deferred portion of settlement obligation -- -- 7,703
Payment under settlement obligation (2,391) (2,235) --
Other (876) (743) (607)
--------- --------- ---------
Net cash provided by financing activities 70,473 56,000 52,384
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (22,576) 42,315 3,424
Cash and cash equivalents, beginning of period 66,176 23,861 20,437
--------- --------- ---------
Cash and cash equivalents, end of period $ 43,600 $ 66,176 $ 23,861
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
42
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Immunex Corporation (which may be referred to as IMMUNEX, WE, US or
OUR) is a biopharmaceutical company that discovers, develops, manufactures and
markets innovative therapeutic products for the treatment of human diseases,
including cancer, infectious diseases and immunological disorders such as
rheumatoid arthritis.
We operate in a highly regulated and competitive environment. Our
business is regulated primarily by the United States (U.S.) Food and Drug
Administration (FDA). The FDA regulates the products we sell, our manufacturing
processes and our promotional activities. Obtaining approval for a new
therapeutic product is never certain, may take several years and is very costly.
Competition in researching, developing and marketing pharmaceutical products is
intense. Any of the technologies covering our existing products or products
under development could become obsolete or diminished in value by discoveries
and developments of other organizations.
The U.S. is our current market for pharmaceutical products. Our sales
to clinics and hospitals are primarily through wholesalers and specialty
distributors.
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles. In preparing the financial statements,
management must make some estimates and assumptions that may affect reported
amounts and disclosures.
On June 1, 1993, the predecessor to the current Immunex Corporation
merged with a subsidiary of American Cyanamid Company (CYANAMID). Cyanamid
received the number of shares equal to 53.5% of our common stock and dilutive
securities outstanding immediately following the merger. In late 1994, American
Home Products Corporation (AHP) acquired all of Cyanamid's outstanding shares of
common stock. AHP and certain of its subsidiaries and affiliates assumed the
rights and obligations of Cyanamid. As a result, AHP now holds a majority
interest in Immunex. We have also entered into additional agreements with AHP
(see Note 9). All references to AHP include AHP and its various affiliates,
divisions and subsidiaries, including Cyanamid.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include our accounts and our
wholly owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.
CASH EQUIVALENTS
Cash equivalents include items almost as liquid as cash, such as demand
deposits or securities with maturity periods of 90 days or less when purchased.
Our cash equivalents are carried at fair market value.
MARKETABLE SECURITIES
Marketable securities consist of securities available-for-sale, which
are stated at fair value with the unrealized gains and losses included as a
component of shareholders' equity on the balance sheet. Cost of securities is
calculated using the specific-identification method. Securities
available-for-sale at December 31, 1998 and 1997 consisted primarily of U.S.
government and corporate obligations.
43
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED 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 at December 31 are as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Raw materials $ 807 $ 1,069
Work in process 17,953 5,377
Finished goods 4,715 2,585
--------- --------
Total inventory $ 23,475 $ 9,031
--------- --------
--------- --------
</TABLE>
DEPRECIATION AND AMORTIZATION
The cost of buildings and equipment is depreciated evenly over the
estimated useful lives of the assets, which range from three to 31.5 years.
Leasehold improvements are amortized evenly over either their estimated useful
life, or the term of the lease, whichever is lower.
PROPERTY HELD FOR FUTURE DEVELOPMENT
We own some property intended for the possible future expansion of our
manufacturing facilities. This property has been recorded at cost.
INVESTMENTS IN COMMON STOCK
We own common stock in two biotechnology companies. These investments
are accounted for as securities available-for-sale and recorded at fair value on
the balance sheet (see Note 3).
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill is being amortized evenly over a 10-year period. Accumulated
amortization totaled $11,319,000 in 1998 and $9,384,000 in 1997. Due to the tax
effect of certain transactions during 1998, we recorded a tax provision and
reduced our goodwill by $1,900,000 (see Note 7).
Intangible product rights and other intangible assets are amortized
evenly over their estimated useful lives, ranging from five to 15 years.
Accumulated amortization totaled $7,069,000 in 1998 and $5,595,000 in 1997.
COMPREHENSIVE INCOME (LOSS)
Immunex adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income," as of January 1, 1998. SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on
Immunex's net income (loss) or shareholders' equity. Statement No. 130 requires
unrealized gains and losses on available-for-sale securities to be included in
other comprehensive income. Prior to adoption they were reported separately in
shareholders' equity. Prior year financial statements have been reclassified to
conform to the requirements of SFAS No. 130.
REVENUES
Product sales are recognized when product is shipped. We perform
ongoing credit evaluations of our wholesalers, specialty distributors and our
end customers, if appropriate, and we do not require collateral. Product sales
are recorded net of reserves for estimated chargebacks, returns, discounts,
Medicaid rebates and administrative fees. We maintain reserves at a level that
we believe is sufficient to cover estimated future requirements. Allowances for
discounts, returns and bad debts, which are netted against accounts receivable,
totaled $11,627,000 in 1998 and $8,653,000 in 1997. Reserves for chargebacks,
Medicaid rebates and administrative fees are included in accounts payable and
totaled $12,610,000 in 1998 and $9,715,000 in 1997.
Revenues received under royalty, licensing and other contractual
agreements are recognized based on the terms of the underlying agreements.
44
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
NET INCOME (LOSS) PER COMMON SHARE
Immunex adopted SFAS No. 128, "Earnings Per Share," in 1997. SFAS No.
128 requires the calculation and presentation of "Basic" and "Diluted" earnings
per share. Basic earnings per share is calculated by dividing net income or net
loss by the weighted average number of common shares outstanding. Diluted
earnings per share is calculated by dividing net income or net loss by the
weighted average common shares outstanding plus the dilutive effect of
outstanding stock options. If we report a net loss, diluted earnings per share
will be the same as basic earnings per share because the effect of outstanding
stock options being added to weighted average shares outstanding would reduce
the loss per share. Therefore, outstanding stock options are not included in the
calculation during net loss periods.
RECLASSIFICATIONS
For comparison purposes, certain prior year amounts in the consolidated
financial statements have been reclassified to conform to current year
presentations.
NOTE 3. INVESTMENTS
Our investments are considered available-for-sale and are stated at
fair value on the balance sheet with the unrealized gains and losses included as
a component of shareholders' equity as comprehensive income. For both 1998 and
1997, there were no material realized gains or losses. Immunex's investment
guidelines state that the maximum average life of any one security shall be five
years with the maximum weighted average life of the investment portfolio being
three years. At December 31, 1998, all of Immunex's investments met these
guidelines. Information about our investments follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Fair Amortized Unrealized Unrealized
Year Ended December 31, 1998 Value Cost Gains Losses
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Type of security:
Commercial paper $ 4,178 $ 4,194 $ -- $ (16)
Corporate debt securities 52,547 52,351 252 (56)
U.S. government and agency
obligations 54,460 54,208 299 (47)
Common stock (see Note 2) 3,837 3,041 796 --
--------- --------- --------- ---------
$ 115,022 $ 113,794 $ 1,347 $ (119)
--------- --------- --------- ---------
--------- --------- --------- ---------
YEAR ENDED DECEMBER 31, 1997
Type of security:
Commercial paper $ 4,988 $ 4,988 $ -- $ --
Corporate debt securities 3,048 3,045 3 --
U.S. government and agency
obligations 23,940 23,804 136 --
Common stock (see Note 2) 6,859 2,352 4,507 --
--------- --------- --------- ---------
$ 38,835 $ 34,189 $ 4,646 $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
Classification in the balance sheet: 1998 1997
--------- ---------
Cash and cash equivalents $ 9,940 $ 12,483
Marketable securities 101,245 19,493
Investment in common stock 3,837 6,859
--------- ---------
$ 115,022 $ 38,835
--------- ---------
--------- ---------
</TABLE>
45
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
The major categories of property, plant and equipment, at historical
cost, consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Land $ 17,851 $ 2,140
Buildings and improvements 50,097 50,001
Equipment 64,727 53,230
Leasehold improvements 23,469 21,469
--------- ---------
156,144 126,840
Less accumulated depreciation and amortization (66,052) (53,195)
--------- ---------
Property, plant and equipment, net $ 90,092 $ 73,645
--------- ---------
--------- ---------
</TABLE>
NOTE 5. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred state sales tax on manufacturing facility,
due in annual installments in 1999 and 2000 $ 1,889 $ 2,576
Deferred portion of litigation settlement obligation 3,077 5,468
Other 860 1,049
------- -------
5,826 9,093
Less current portion (3,477) (3,460)
------- -------
$ 2,349 $ 5,633
======= =======
</TABLE>
In November 1996, we settled litigation. In accordance with the terms
of the settlement, a payment was made at the time of the settlement, to be
followed by four successive annual payments. The deferred payments have been
discounted using a rate of 7%.
We had no interest bearing debt in 1998, 1997 or 1996.
With the exception of deferred state sales tax, the balance sheet
carrying value for our long-term obligations approximates fair value. The fair
value was calculated by discounting future cash flows using our current
estimated incremental borrowing rate. At December 31, 1998 and 1997, the fair
value of deferred state sales tax was calculated as $1,700,000 and $2,203,000,
respectively.
46
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SHAREHOLDERS' EQUITY
STOCK OPTIONS
We may grant stock options, both incentive and non-qualified, to any
employee, including officers, under our stock option plan (the Plan). There have
been 6,225,267 shares of common stock reserved for the Plan. Options are granted
by a committee of our Board of Directors. Under the Plan, options are not
granted with exercise prices less than the fair market value of our common stock
at the date of grant. Each outstanding option has a term of 10 years from the
date of grant and becomes exercisable at a rate of 20% per year beginning one
year from the date of grant.
We also have a stock option plan with 100,000 shares of common stock
reserved for nonemployee directors that provides each independent director a
grant of an option to purchase 10,000 shares of common stock on the day such
director is initially elected or appointed to the Board of Directors and an
annual grant of 5,000 shares thereafter. Each option is granted with an exercise
price equal to fair market value of our common stock at the date of grant. Each
outstanding option has a term of 10 years from the date of grant and becomes
exercisable at a rate of 20% per year beginning one year from the date of grant.
Immunex has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Stock
options are granted with an exercise price equal to the fair market value of the
stock on the date of grant and, accordingly, we do not record compensation
expense for stock option grants. The pro-forma disclosures, assuming that the
fair value of option grants were recorded as compensation, for each of the years
presented is not likely to be representative of the effects in future years
because it does not take into consideration pro-forma amortization of
compensation expense related to grants made prior to 1995. The following table
summarizes results as if we had recorded compensation expense for the 1998, 1997
and 1996 option grants (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ----------
<S> <C> <C> <C>
Net income (loss) - as reported $ 986 $ (15,772) $ (53,632)
Net loss - pro forma (11,413) (20,643) (55,336)
Net income (loss) per common share, basic and diluted -
as reported $ 0.02 $ (0.40) $ (1.35)
Net loss per common share, basic and diluted - pro forma (0.29) (0.52) (1.40)
</TABLE>
The estimated fair value of options granted in 1998, 1997 and 1996 was
calculated using the Black-Scholes option pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Estimated fair value $ 35.35 $ 15.43 $ 8.33
Expected life in years 6 6 6
Risk-free interest rate 4.6% - 5.7% 6.0% - 6.6% 6.3% - 6.7%
Volatility 52% 45% 45%
Dividend yield -- -- --
</TABLE>
47
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. SHAREHOLDERS' EQUITY, CONTINUED
Information with respect to Immunex's stock option plans is as follows:
<TABLE>
<CAPTION>
Weighted
Shares Subject Exercise Average
to Option Price Range Exercise Price
---------- --------------- --------
<S> <C> <C> <C>
Options outstanding balance at December 31, 1995 1,085,370 $ 11.75 - 31.50 $ 22.85
Granted 1,216,000 12.44 - 15.88 15.79
Exercised (326) 11.75 - 15.00 14.00
Canceled (228,480) 11.75 - 31.50 21.53
---------- --------------- --------
Options outstanding balance at December 31, 1996 2,072,564 $ 11.75 - 31.50 $ 18.85
Granted 1,227,650 24.25 - 76.75 30.75
Exercised (87,575) 11.75 - 31.50 19.43
Canceled (110,111) 12.25 - 41.75 21.62
---------- --------------- --------
Options outstanding balance at December 31, 1997 3,102,528 $ 11.75 - 76.75 $ 23.35
Granted 1,393,750 62.25 - 70.63 63.06
Exercised (331,955) 11.75 - 41.75 20.57
Canceled (178,999) 12.25 - 76.75 46.87
---------- --------------- --------
Options outstanding balance at December 31, 1998 3,985,324 $ 11.75 - 76.75 $ 36.42
---------- --------------- --------
---------- --------------- --------
Shares available for future grants at December 31, 1998 1,920,087
----------
----------
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------------------- -----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Prices Options Contractual Life Exercise Price Options Exercise Price
--------------- ------- ---------------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$ 11.75 - 15.00 323,396 6 years $ 14.47 240,116 $ 14.64
15.88 - 15.88 887,480 7 years 15.88 289,400 15.88
17.50 - 18.88 107,420 5 years 18.78 85,180 18.76
24.25 - 24.25 851,000 8 years 24.25 140,740 24.25
27.25 - 41.75 394,543 5 years 31.97 324,543 31.36
62.25 - 76.75 1,421,485 9 years 64.09 21,400 76.75
- ------------------ ------------ ------------ ----------- -----------
$ 11.75 - 76.75 3,985,324 $ 36.42 1,101,379 $ 22.62
- ------------------ ------------ ------------ ----------- -----------
- ------------------ ------------ ------------ ----------- -----------
</TABLE>
GUARANTY PAYMENTS RECEIVABLE FROM AHP
AHP was required to make payments or contribute products to us if
revenues from certain marketed products did not achieve established levels
through December 31, 1997. This was limited to a maximum amount in each year.
Such payments were treated as additional contributions to shareholders' equity.
We recorded a receivable from AHP of $60,032,000 in 1997 and $56,000,000 in 1996
for the revenue shortfall. All receivables have been collected.
48
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES
Significant components of the provision for income taxes are as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Current taxes
Federal $ -- $ -- $ --
State 300 132 148
------ ------ ------
$ 300 $ 132 $ 148
Deferred taxes
Federal $ -- $ -- $ --
State -- -- --
------ ------ ------
$ -- $ -- $ --
Non-cash accounting entry to record tax
expense and to reduce balance sheet
goodwill associated with Cyanamid merger
(see Note 9) $1,900 $ -- $ --
------ ------ ------
Total $2,200 $ 132 $ 148
------ ------ ------
------ ------ ------
</TABLE>
During 1998 we generated taxable income. Our taxable income was offset
by utilizing net operating loss (NOL) carryforwards that originated prior to the
1993 Cyanamid merger. The benefit from utilizing these NOLs has been recorded as
a non-cash charge to tax expense and as a reduction of goodwill by $1,900,000.
Income taxes paid for 1998, 1997 and 1996 totaled $275,000, $132,000 and
$148,000 respectively.
Reconciliation of the U.S. federal statutory tax rate to Immunex's
effective tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
U.S. federal statutory tax rate 35.0% (35.0)% (35.0)%
Non-deductible amortization of goodwill 17.4 4.6 1.3
Increase in valuation reserve -- 29.7 32.0
State taxes (net of federal tax benefit) 6.1 1.4 0.3
Other 10.6 0.7 1.7
------ ------ ------
Effective tax rate 69.1% 1.4% 0.3%
------ ------ ------
------ ------ ------
</TABLE>
49
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES, CONTINUED
Significant components of tax assets and liabilities at December 31 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 88,194 $ 88,232
Research and experimental credits 16,814 13,152
In-process research and development 3,901 1,063
Accounts receivable allowances 4,070 3,029
Accrued liabilities 1,885 2,832
Other 912 1,763
--------- ---------
Total deferred tax assets 115,776 110,071
Valuation allowance for deferred tax assets (109,526) (101,054)
--------- ---------
Net deferred tax assets 6,250 9,017
Deferred tax liabilities:
Tax over book depreciation 1,515 2,334
Purchase accounting adjustments 2,157 2,694
Other 2,578 3,989
--------- ---------
Total deferred tax liabilities 6,250 9,017
--------- ---------
$ -- $ --
--------- ---------
--------- ---------
</TABLE>
Our deferred tax assets consist primarily of the benefit resulting from
unused NOL carryforwards and research and experimentation credit carryforwards.
The amounts of these carryforwards are approximately $252,000,000 and
$16,800,000 respectively at December 31, 1998. The carryforwards expire from
1999 through 2013. In 1998, approximately $3,000,000 of NOL carryforwards and
$360,000 of research and experimentation credits expired.
Our ability to generate sufficient future taxable income to realize the
benefits of our net deferred tax assets is uncertain. Therefore, a reserve of
$109,526,000 and $101,054,000 has been recorded for financial reporting purposes
at December 31, 1998 and 1997 respectively. This represents an increase in the
reserve of approximately $8,472,000 and $7,441,000 during 1998 and 1997
respectively. The amount of the reserve is the difference between our deferred
tax assets and our deferred tax liabilities. The balance sheet effect of this
reserve is to completely offset the value of our net deferred tax assets for
financial reporting purposes.
To the extent we are able to generate taxable income in the future, NOL
carryforwards will be utilized in the following order (in thousands):
<TABLE>
<S> <C>
- Pre-1993 Cyanamid merger NOL to be utilized
to offset goodwill and intangible product
rights $ 32,460
- Pre and post-1993 Cyanamid merger NOL to be
utilized to offset future tax expense 178,417
- Pre and post-1993 Cyanamid merger NOL to be
utilized to increase paid-in capital for the
unrecorded tax benefit of stock
options 41,123
------------
Total NOL carryforward $ 252,000
------------
------------
</TABLE>
50
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. EMPLOYEE BENEFITS
As a retirement plan, we offer a defined contribution plan covering all
full-time salaried employees. The plan is a salary deferral arrangement pursuant
to Internal Revenue Code section 401(k) and is subject to the provisions of the
Employee Retirement Income Security Act of 1974. We match 100% of the first 2%
of an employee's deferred salary and 50% of the next 4% of an employee's
deferred salary. Employees with five or more years of service receive a match of
100% of the first 2% of deferred salary and 75% of the next 4% of deferred
salary. We recorded compensation expense resulting from matching contributions
to the plan of $2,164,000 in 1998, $1,900,000 in 1997 and $1,707,000 in 1996.
NOTE 9. TRANSACTIONS WITH AHP
On June 1, 1993, the predecessor to the current Immunex Corporation
merged with a subsidiary of Cyanamid. In late 1994, all of the outstanding
shares of common stock of Cyanamid were acquired by AHP. AHP and certain of its
subsidiaries and affiliates have assumed the rights and obligations of Cyanamid
under various agreements entered into at the time of the merger or thereafter.
In addition, we have entered into additional agreements with AHP. Significant
transactions under these agreements are discussed in the paragraphs below and
the impact on our statement of operations is summarized in the following table
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Product sales $ 758 $ 2,590 $ 1,957
Royalty and contract revenue 56,687 29,218 10,024
-------- -------- --------
57,445 31,808 11,981
Operating expenses:
Cost of product sales 511 1,281 936
Research and development, net (2,251) 715 20,314
Selling, general and administrative 14,800 -- --
-------- -------- --------
13,060 1,996 21,250
-------- -------- --------
Net contribution to operating results $ 44,385 $ 29,812 $ (9,269)
-------- -------- --------
-------- -------- --------
</TABLE>
ENBREL PROMOTION AGREEMENT
In 1997, we entered into an ENBREL Promotion Agreement with AHP. Under
the terms of the ENBREL Promotion Agreement, AHP is promoting ENBREL in the U.S.
through Wyeth-Ayerst's sales and marketing organization. Immunex distributes a
portion of the gross profits from U.S. sales of ENBREL to AHP and furthermore,
reimburses AHP for a portion of the selling, marketing, distribution and other
costs incurred in the U.S. sales of ENBREL. Our obligation for such expenses,
including AHP's share of gross profits from ENBREL, totaled $14,800,000 in 1998.
In addition, under the ENBREL Promotion Agreement, we received contracted
payments of $50,000,000 and $15,000,000 from AHP in 1998 and 1997, respectively.
TACE AGREEMENTS
In December 1995, we licensed exclusive worldwide rights to tumor
necrosis factor alpha converting enzyme (TACE) technology to AHP. Immunex
received payments of $4,000,000, $6,000,000 and $4,000,000 in 1998, 1997 and
1996, respectively, under these agreements. The TACE agreements also include
additional milestone payments and royalties on future product sales. Under the
agreements, AHP will be responsible for developing inhibitors of TACE.
RESEARCH AND DEVELOPMENT
In July 1998, we ended our oncology collaboration with AHP by
terminating the research agreement and certain other agreements and entered into
a new Product Rights Agreement. As a result of the termination of the research
agreement, our funding requirements of AHP's oncology discovery research program
ceased effective July 1, 1998. Under the superseded agreement, we paid
$8,258,000, $16,240,000 and $21,156,000 in 1998, 1997 and 1996, respectively, to
support AHP's oncology research programs.
51
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. TRANSACTIONS WITH AHP, CONTINUED
Under the terms of the Product Rights Agreement, AHP may acquire
exclusive worldwide rights to up to four of our future product candidates. If
AHP exercises any of these rights, we would be eligible for certain payments and
royalties on future sales of such products. However, we may elect to retain the
worldwide rights to up to two of such products. In such case, AHP would be
eligible for certain payments and royalties on future sales of such products.
Immunex and AHP have an agreement to share equally the development
costs of ENBREL in the U.S. and Canada (NORTH AMERICA) and Europe. We also had a
similar agreement related to MOBIST. However, the agreement related to MOBIST
was terminated as a result of the Product Rights Agreement, discussed above.
AHP's share of the development costs under these two agreements totaled
$10,719,000, $18,768,000 and $3,923,000 in 1998, 1997 and 1996, respectively.
In order to retain the rights to ENBREL outside North America, AHP paid
Immunex $2,000,000 in 1996. The agreement under which AHP made this payment was
superseded by the agreement to share equally the development costs of ENBREL,
discussed above.
ONCOLOGY PRODUCT LICENSE AGREEMENT
As a result of the Product Rights Agreement, certain territorial rights
that each party had to the other party's cancer product candidates were
terminated. Under the terms of the superseded agreements, AHP was entitled to a
royalty bearing license outside North America to any products resulting from our
oncology research and development activities. AHP reimbursed us for certain
costs related to manufacturing and process development. We recognized revenue
under the superseded agreement of $1,246,000 and $1,645,000 in 1997 and 1996,
respectively. No related revenue was earned in 1998.
Under the terms of a subsequent agreement, Immunex and AHP agreed to
collaborate in the development of paclitaxel injection, a generic form of
TAXOL-Registered Trademark-, an oncology product marketed by Bristol-Myers
Squibb Company. We incurred costs under the agreement of $3,243,000 and
$3,081,000 in 1997 and 1996, respectively. There were no such costs incurred
in 1998. In June 1998, we sold our U.S. rights to paclitaxel injection to a
third party, and accordingly are no longer incurring such development
expenses.
AHP and its sublicensees have a royalty bearing license to sell certain
of our existing oncology products outside North America. We earned royalties
under the agreement totaling $2,687,000, $2,972,000 and $2,379,000 in 1998, 1997
and 1996, respectively.
SUPPLY AND MANUFACTURING
Immunex and AHP are parties to a supply agreement and a toll
manufacturing agreement under which AHP manufactures and supplies the reasonable
commercial requirements of certain oncology products at a price equal to 125% of
AHP's or its subsidiaries' manufacturing costs. Immunex and AHP also have a
methotrexate distributorship agreement whereby AHP agreed to supply methotrexate
at certain established prices which are adjusted annually. Immunex purchased
inventory totaling $6,172,000 in 1998 and $7,905,000 in 1997 from AHP and its
subsidiaries under these agreements. In addition, AHP billed us $458,000 in
1998, $988,000 in 1997 and $686,000 in 1996 for other expenses under such
agreement.
DISTRIBUTION
We were party to a distributorship agreement with Wyeth-Ayerst Canada,
Inc, a wholly owned subsidiary of AHP, under which Wyeth-Ayerst Canada
distributed certain oncology products in Canada. We supplied oncology products
to Wyeth-Ayerst Canada at certain established prices, which were subject to
annual adjustment. Inventory totaling $2,010,000 in 1997 and $1,511,000 in 1996
was sold by us to Wyeth-Ayerst Canada. In December 1997, we sold our rights to
these products in Canada to AHP for $4,000,000.
We have agreed to supply the commercial requirements of our products to
Wyeth-Ayerst Laboratories Puerto Rico, Inc., a wholly owned subsidiary of AHP.
Net revenue recognized under this agreement totaled $758,000 in 1998, $580,000
in 1997 and $446,000 in 1996.
52
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVENUE GUARANTY
AHP was required to make payments or contribute products to Immunex if
revenues from certain marketed products did not achieve established levels
through December 31, 1997 (see Note 6). At December 31, 1997, we recorded a
receivable from AHP of $60,032,000 related to the revenue shortfall in 1997,
which was received by us in February 1998.
OPTION TO PURCHASE ADDITIONAL COMMON STOCK OF IMMUNEX
Immunex and AHP are parties to a 1993 Governance Agreement under which
AHP has the option to purchase from us on a quarterly basis, additional shares
of Immunex common stock to the extent necessary to maintain AHP's percentage
ownership interest as of the immediately preceding quarter. The per share
purchase price of such shares is equal to the fair market value of such shares,
as determined in accordance with the Governance Agreement, on the date of AHP's
purchase. AHP exercised its option and purchased 111,283 shares in 1998 and
28,223 shares in 1997 for $6,877,000 and $1,280,000 in 1998 and 1997,
respectively.
NOTE 10. COMMITMENTS AND CONTINGENCIES
We lease office and laboratory facilities under certain noncancelable
operating leases that expire through December 2002. These leases provide us with
options to renew the leases at fair market rentals through August 2015. A
summary of minimum future rental commitments under noncancelable operating
leases at December 31, 1998 follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, Operating Leases
----------------------- ----------------
<S> <C>
1999 $ 4,620
2000 3,195
2001 920
2002 799
Thereafter -
----------------
Total minimum lease payments $ 9,534
----------------
----------------
</TABLE>
Rental expense on operating leases was $4,000,000 in 1998, $3,339,000
in 1997 and $2,781,000 in 1996.
We are utilizing a contract manufacturer for the production of ENBREL.
At December 31, 1998, we had made commitments to purchase inventory totaling
approximately $198,000,000 over the next two years. A portion of this inventory
will be purchased by AHP from the contract manufacturer.
Various license agreements exist that require Immunex to pay royalties
based on a percentage of sales of products manufactured using licensed
technology or sold under license. Royalty costs incurred under these agreements
are included in cost of product sales and totaled $12,997,000 in 1998,
$8,139,000 in 1997, and $6,136,000 in 1996. Certain of these agreements contain
minimum annual royalty provisions as follows (in thousands):
<TABLE>
<CAPTION>
Minimum Annual
Year Ended December 31, Royalty Payment
----------------------- ---------------
<S> <C>
1999 $ 8,630
2000 8,380
2001 8,380
2002 8,380
Per year thereafter 3,380
</TABLE>
We have a 1992 settlement agreement with Hoechst Roussel
Pharmaceuticals, Inc. (HRPI). Under this agreement, a payment of $2,000,000 will
be made to HRPI if we receive an expanded label indication for LEUKINE for
treatment of chemotherapy-induced neutropenia.
Immunex is party to routine litigation incident to our business. We
believe the ultimate resolution of these matters will not have a material
adverse impact on our future financial position and results of operations.
53
<PAGE>
IMMUNEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. SUBSEQUENT EVENTS
On January 11, 1999, we entered into an agreement with another party to
settle certain patent issues related to ENBREL. As a result of the agreement, we
paid an initial license fee of $11,000,000, of which $4,500,000 will be
reimbursed by AHP. A subsequent milestone fee of $5,000,000 will be paid if
ENBREL is approved in Europe, of which $2,500,000 will be reimbursed by AHP.
Royalties will also be payable under the agreement on net sales of ENBREL.
On February 23, 1999, our Board of Directors approved a two-for-one
stock split of Immunex common stock. Shareholders of record on March 11, 1999
will be issued a certificate representing one additional share of our common
stock for each share held on March 11, 1999. Share and per share amounts
reported in our Consolidated Financial Statements and Footnotes have not been
adjusted to reflect the two-for-one stock split.
NOTE 12. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Our consolidated operating results for each quarter of 1998 and 1997
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Product sales $ 38,816 $ 39,961 $ 40,125 $ 51,005
Royalty and contract revenue 3,050 24,194(1) 9,051 37,248(3)
Cost of sales 7,090 7,691 7,242 11,262
Research and development expenses 26,906 36,910(2) 26,894 29,244
Selling, general and administrative expenses 18,437 20,780 21,593 32,967
Operating income (loss) (10,567) (1,226) (6,553) 14,780
Net income (loss) $ (9,024) $ 195 $ (4,925) $ 14,740
Net income (loss) per common share:
Basic $ (0.23) $ 0.00 $ (0.12) $ 0.37
Diluted $ (0.23) $ 0.00 $ (0.12) $ 0.35
Year ended December 31, 1997:
Product sales $ 35,899 $ 38,961 $ 37,674 $ 37,138
Royalty and contract revenue 3,548 4,045 18,287(4) 9,745
Cost of sales 6,278 6,228 6,207 5,839
Research and development expenses 23,962 26,770 28,003 30,577
Selling, general and administrative expenses 18,358 19,541 16,489 16,887
Operating income (loss) (9,151) (9,533) 5,262 (6,420)
Net income (loss) $ (8,701) $ (8,699) $ 6,199 $ (4,571)
Net income (loss) per common share:
Basic $ (0.22) $ (0.22) $ 0.16 $ (0.12)
Diluted $ (0.22) $ (0.22) $ 0.15 $ (0.12)
</TABLE>
(1) Includes $20.0 million earned under the ENBREL Promotion Agreement with AHP
when the BLA for ENBREL was accepted for review by the FDA.
(2) Includes $10.0 million paid to acquire the rights outside North America to
certain receptor product candidates we are developing.
(3) Includes $30.0 million earned under the ENBREL Promotion Agreement with AHP
when the FDA approved ENBREL.
(4) Includes $15.0 million earned upon signing of the ENBREL Promotion
Agreement with AHP.
54
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Immunex Corporation
We have audited the accompanying consolidated balance sheets of Immunex
Corporation as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31,
1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Immunex Corporation as of December 31, 1998 and 1997, and
the consolidated results of its operations and its cash flows for the
each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. 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.
ERNST & YOUNG LLP
Seattle, Washington
January 29, 1999
55
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from
the sections labeled "Proposed Election of Directors" and "Executive Officers"
in Immunex's definitive Proxy Statement for the annual meeting of shareholders
to be held on April 29, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
the section labeled "Executive Compensation" in Immunex's definitive Proxy
Statement for the annual meeting of shareholders to be held on April 29, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from
the sections labeled "Principal Shareholders" and "Security Ownership of
Management" in Immunex's definitive Proxy Statement for the annual meeting of
shareholders to be held on April 29, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
the section labeled "Relationship with American Home Products Corporation and
American Cyanamid Company" in Immunex's definitive Proxy Statement for the
annual meeting of shareholders to be held on April 29, 1999.
56
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. FINANCIAL STATEMENTS. The following consolidated financial
statements are included in Part II, Item 8:
<TABLE>
<CAPTION>
Page in
Form 10-K
---------
<S> <C>
Consolidated Balance Sheets at December 31, 1998, and 1997. 39
Consolidated Statements of Operations for the years ended December 31, 1998, 1997
and 1996. 40
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998, 1997
and 1996. 41
Consolidated Statements of Cash Flows for the years December 31, 1998, 1997
and 1996. 42
Notes to Consolidated Financial Statements for the years ended December 31, 1998, 1997
and 1996. 43 - 54
Report of Ernst & Young LLP, Independent Auditors. 55
</TABLE>
2. FINANCIAL STATEMENT SCHEDULE. The following schedule supporting the
foregoing consolidated financial statements for the years ended
December 31, 1998, 1997 and 1996 is filed as part of this Form 10-K:
<TABLE>
<CAPTION>
Page in
Form 10-K
---------
<S> <C>
II - Valuation and Qualifying Accounts 62
</TABLE>
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in the
consolidated financial statements or notes thereto.
57
<PAGE>
3. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated
as of December 15, 1992, among Immunex, American
Cyanamid Company, Lederle Parenterals, Inc. and Lederle
Oncology Corporation. (Exhibit 2.1) (C)
3.1 Certificate of Incorporation, as filed with the
Secretary of State of Washington on April 14, 1994.
(Exhibit 3.1) (E)
3.2 Amended and Restated Bylaws. (Exhibit 3.4) (C)
10.1 Real Estate Purchase and Sale Agreement by and between
Cornerstone-Columbia Development Company ("CCDC") and
Immunex dated November 12, 1986; Master Lease, dated as
of August 20, 1981 between OTR, an Ohio General
Partnership, and CCDC; Assignment of Master Lease
between CCDC and Immunex dated December 17, 1986;
Consent to Assignment of Master Lease from OTR to CCDC,
Immunex and Weyerhaeuser Real Estate Company, dated
December 8, 1986. (Exhibit 10.22) (A)
10.2 Amendment to Master Lease dated May 1, 1994, between
Immunex and Watumull Enterprises, LTD. (Exhibit 10.2) (E)
10.3 Amended and Restated Lease Agreement dated December 21,
1994, between Immunex and the Central Life Assurance
Company. (Exhibit 10.3) (E)
10.4 Amended and Restated Governance Agreement, dated as of
December 15, 1992, among Immunex, American Cyanamid
Company and Lederle Oncology Corporation. (Exhibit 2.2) (C)
*10.5 Settlement Agreement, dated as of July 22, 1992, among
Immunex, Hoechst-Roussel Pharmaceuticals Inc. and
Behringwerke AG. (Exhibit 10.13) (B)
10.6 United States Royalty-Bearing Trademark License
Agreement between Immunex and American Cyanamid Company
dated as of June 1, 1993. (Exhibit 10.5) (D)
*10.7 Toll Manufacturing Agreement between Immunex Carolina
Corporation, a wholly owned subsidiary of Immunex, and
Lederle Parenterals, Inc. dated as of June 1, 1993.
(Exhibit 10.6) (D)
*10.8 Supply Agreement between Immunex and American Cyanamid
Company dated as of June 1, 1993. (Exhibit 10.7) (D)
**10.9 Separation Agreement between Immunex and Stephen A.
Duzan dated as of May 26, 1993. (Exhibit 10.8) (D)
10.10 Agreement between Immunex and American Home Products
Corporation dated as of September 23, 1994. (Exhibit
10.24) (E)
10.11 Real Estate Purchase and Sales Agreement between Immunex
and the Port of Seattle dated as of July 18, 1994.
(Exhibit 10.17) (G)
10.12 TNFR License and Development Agreement between Immunex
and the Wyeth-Ayerst Laboratories division of American
Home Products Corporation dated as of July 1, 1996.
(Exhibit 10.2) (F)
10.13 Immunex Corporation 1993 Stock Option Plan as Amended
and Restated on February 13, 1997. (Exhibit 10.23) (G)
10.14 Immunex Corporation Stock Option Plan for Nonemployee
Directors Amended and Restated on February 23, 1999.
63-66
*10.15 ENBREL Promotion Agreement between Immunex and American
Home Products Corporation dated as of September 25,
1997. (Exhibit 10.1) (H)
</TABLE>
58
<PAGE>
<TABLE>
<S> <C> <C>
10.16 Fourth Amendment to Real Estate Purchase and Sale
Agreement between Immunex and the Port of Seattle dated
as of December 1, 1997. (Exhibit 10.23) (I)
*10.17 Product Rights Agreement among Immunex, American Home
Products Corporation and American Cyanamid Company dated
as of July 1, 1998. (Exhibit 10.1) (J)
***10.18 ENBREL Supply Agreement among Immunex, American Home
Products Corporation and Boehringer Ingelheim Pharma KG
dated as of November 5, 1998. 67-125
21.1 Subsidiaries of the Registrant. 126
23.1 Consent of Ernst & Young LLP, Independent Auditors. 127
24.1 Power of Attorney. 128
27.1 Financial Data Schedule.
</TABLE>
- ------------------------------------
* Confidential treatment granted as to certain portions.
** Executive compensation plan or arrangement.
*** Confidential treatment requested as to certain portions
(A) Incorporated by reference to designated exhibit included with
Immunex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1986.
(B) Incorporated by reference to designated exhibit included with
Immunex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992.
(C) Incorporated by reference to designated exhibit included in
the Registration Statement on Form S-4 (SEC File No. 33-60254)
filed by Lederle Oncology Corporation March 18, 1993.
(D) Incorporated by reference to designated exhibit included with
Immunex's Current Report on Form 8-K dated June 4, 1993.
(E) Incorporated by reference to designated exhibit included with
Immunex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
(F) Incorporated by reference to designated exhibit included with
Immunex's Current Report on Form 8-K dated July 1, 1996.
(G) Incorporated by reference to designated exhibit included with
Immunex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(H) Incorporated by reference to designated exhibit included with
Immunex's Current Report on Form 8-K dated September 25, 1997.
(I) Incorporated by reference to designated exhibit included with
Immunex's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(J) Incorporated by reference to designated exhibit included with
Immunex's Current Report on Form 8-K dated July 1, 1998.
(b) REPORTS ON FORM 8-K.
None.
59
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, hereunto duly authorized.
IMMUNEX CORPORATION
REGISTRANT
By: /S/ Douglas G. Southern March 15, 1999
-------------------------------------------------
Douglas G. Southern
Senior Vice President, Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Edward V. Fritzky March 15, 1999
- ----------------------------------------------------
Edward V. Fritzky
Chief Executive Officer, Chairman of the
Board and Director
(Principal Executive Officer)
Douglas E. Williams* March 15, 1999
- ----------------------------------------------------
Douglas E. Williams
Sr. Vice President-Discovery Research and
Director
/s/ Peggy V. Phillips March 15, 1999
- ----------------------------------------------------
Peggy V. Phillips
Sr. Vice President-Pharmaceutical
Development and Director
/s/ Douglas G. Southern March 15, 1999
- ----------------------------------------------------
Douglas G. Southern
Senior Vice President, Chief Financial
Officer
and Treasurer
(Principal Financial and Accounting
Officer)
Joseph J. Carr* March 15, 1999
- ----------------------------------------------------
Joseph J. Carr
Director
Kirby L. Cramer* March 15, 1999
- ----------------------------------------------------
Kirby L. Cramer
Director
Robert I. Levy* March 15, 1999
- ----------------------------------------------------
Robert I. Levy
Director
John E. Lyons* March 15, 1999
- ----------------------------------------------------
John E. Lyons
Director
Joseph M. Mahady* March 15, 1999
- ----------------------------------------------------
Joseph M. Mahady
Director
Edith W. Martin* March 15, 1999
- ----------------------------------------------------
Edith W. Martin
Director
60
<PAGE>
*By: /S/ Douglas G. Southern March 15, 1999
- ---------------------------------------------------
Douglas G. Southern
Attorney-in-Fact
61
<PAGE>
SCHEDULE II
IMMUNEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
Balance at Additions Charged to Balance at
Beginning of Period Product Sales Deductions End of Period
------------------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Reserve for discounts, returns
and bad debts $ 6,276 $11,358 $10,453 $ 7,181
------- ------- ------- -------
------- ------- ------- -------
Reserve for chargebacks, Medicaid rebates
and administrative fees $ 9,303 $38,608 $40,331 $ 7,580
------- ------- ------- -------
------- ------- ------- -------
Year ended December 31, 1997:
Reserve for discounts, returns
and bad debts $ 7,181 $11,649 $10,177 $ 8,653
------- ------- ------- -------
------- ------- ------- -------
Reserve for chargebacks, Medicaid rebates
and administrative fees $ 7,580 $47,769 $45,634 $ 9,715
------- ------- ------- -------
------- ------- ------- -------
Year ended December 31, 1998:
Reserve for discounts, returns
and bad debts $ 8,653 $12,147 $ 9,173 $11,627
------- ------- ------- -------
------- ------- ------- -------
Reserve for chargebacks, Medicaid rebates
and administrative fees $ 9,715 $54,794 $51,899 $12,610
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
62
<PAGE>
Exhibit 10.14
IMMUNEX CORPORATION
STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
AMENDED AND RESTATED ON FEBRUARY 23, 1999
SECTION 1. PURPOSES
The purposes of the Immunex Corporation Stock Option Plan for Nonemployee
Directors (this "Plan") are to attract and retain the services of experienced
and knowledgeable nonemployee directors of Immunex Corporation (the "Company")
and to provide an incentive for such directors by providing an opportunity for
stock ownership in the Company.
SECTION 2. SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Section 6 hereof, the total number
of shares of the Company's common stock (the "Common Stock") for which options
may be granted under this Plan is 100,000 as such Common Stock was constituted
on December 13, 1993 (the "Shares"). The Shares shall be shares currently
authorized but unissued or subsequently acquired by the Company and shall
include shares representing the unexercised portion of any option granted under
this Plan which expires or terminates without being exercised in full.
SECTION 3. ADMINISTRATION OF THE PLAN
The administrator of this Plan (the "Plan Administrator") shall be the
Board of Directors of the Company (the "Board"). Subject to the terms of this
Plan, the Plan Administrator shall have the power to construe the provisions of
this Plan, to determine all questions arising hereunder and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable.
SECTION 4. PARTICIPATION IN THE PLAN
4.1 ELIGIBLE DIRECTORS
Each member of the Board elected or appointed who is not otherwise an
employee of the Company, any parent or subsidiary corporation, or a director
appointed by American Cyanamid Company or American Home Products Corporation
pursuant to the Amended and Restated Governance Agreement dated as of December
15, 1992 (an "Eligible Director") shall be eligible to participate in this Plan.
4.2 INITIAL GRANTS
Each Eligible Director who is elected or appointed for the first time after
the date of adoption of this Plan shall automatically receive the grant of an
option to purchase 10,000 Shares on the day such Eligible Director is initially
elected or appointed.
4.3 ANNUAL GRANTS
Each Eligible Director continuing service as an Eligible Director
immediately following an Annual Meeting of Shareholders shall automatically
receive an option to purchase 5,000 Shares immediately following each year's
Annual Meeting of Shareholders as an annual grant; provided, however, that an
Eligible Director who has received an initial grant of an option to purchase
10,000 Shares on such date shall not receive an annual grant until the next
Annual Meeting.
SECTION 5. OPTION TERMS
Each option granted to an Eligible Director under this Plan and the
issuance of Shares hereunder shall be subject to the following terms:
5.1 OPTION AGREEMENT
Each option granted under this Plan shall be evidenced by an option
agreement (an "Agreement") duly executed on behalf of the Company. Each
Agreement shall comply with and be subject to the terms and conditions of this
Plan. Any Agreement may contain such other terms, provisions and conditions not
inconsistent with this Plan as may be determined by the Plan Administrator.
63
<PAGE>
5.2 OPTION EXERCISE PRICE
The option exercise price for an option granted under this Plan shall be
the closing price, or if there is no closing price, the mean between the high
and the low sale price of the Shares covered by the option on the day the option
is granted on the Nasdaq Stock Market or, if no Common Stock was traded on such
date, on the IMMEDIATELY preceding date on which Common Stock was so traded.
5.3 VESTING AND EXERCISABILITY
Each option granted to an Eligible Director shall vest and become
exercisable in accordance with the following schedule:
<TABLE>
<CAPTION>
Period of Eligible Directors' Continuous Service as a
Director With the Company From the Date the Option is Portion of Total Option Which Is
Granted Exercisable
- --------------------------------------------------------- ---------------------------------
<S> <C>
Less than twelve months 0%
Twelve months 20%
Twenty-four months 40%
Thirty-six months 60%
Forty-eight months 80%
Sixty months or greater 100%
</TABLE>
5.4 TIME AND MANNER OF EXERCISE OF OPTION
Each option may be exercised in whole or in part at any time and from time
to time; provided, however, that no fewer than 100 Shares (or the remaining
Shares then purchasable under the option, if less than 100 Shares) may be
purchased upon any exercise of any option hereunder and that only whole Shares
will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the person
exercising the option, to the Company stating the number of Shares with respect
to which the option is being exercised, accompanied by payment in full for such
Shares, which payment may be in whole or in part (a) in cash or by check, (b) in
shares of Common Stock already owned for at least six months by the person
exercising the option, valued at fair market value at the time of such exercise,
or (c) by delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, to properly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price, all in accordance
with the regulations of the Federal Reserve Board.
5.5 TERM OF OPTIONS
Each option shall expire ten years from the date of the granting thereof,
but shall be subject to earlier termination as follows:
(a) In the event that an optionee ceases to be a director of the
Company for any reason other than the death of the optionee the unvested
portion of the options granted to such optionee shall terminate immediately
and the vested portion of the options granted to such optionee may be
exercised by him or her only within three months after the date such
optionee ceases to be a director of the Company.
64
<PAGE>
(b) In the event of the death of an optionee, whether during the
optionee's service as a director or during the three month period referred
to in Section 5.5(a), the unvested portion of the options granted to such
optionee shall terminate immediately and the vested portion of the options
granted to such optionee shall be exercisable, and such options shall
expire unless exercised within twelve months after the date of the
optionee's death, by the legal representatives or the estate of such
optionee, by any person or persons whom the optionee shall have designated
in writing on forms prescribed by and filed with the Company or, if no such
designation has been made, by the person or persons to whom the optionee's
rights have passed by will or the laws of descent and distribution.
5.6 TRANSFERABILITY
During an optionee's lifetime, an option may be exercised only by the
optionee. Options granted under this Plan and the rights and privileges
conferred thereby shall not be subject to execution, attachment or similar
process and may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution. In addition, the Plan Administrator
may permit a recipient of an option to designate in writing during the
optionee's lifetime a beneficiary to receive and exercise options in the event
of the optionee's death (as provided in Section 5.5(b)). Any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any option under
this Plan or of any right or privilege conferred thereby, contrary to the
provisions of this Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby, shall be null and void.
5.7 HOLDING PERIOD
If an individual subject to Section 16 of the Exchange Act of 1934, as
amended (the "Exchange Act") sells shares of Common Stock obtained upon the
exercise of any option granted under this Plan within six months after the date
the option was granted, such sale may result in short-swing profit recovery
under Section 16(b) of the Exchange Act.
5.8 PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS SHAREHOLDER
Neither an optionee nor the optionee's successor(s) in interest shall have
any rights as a shareholder of the Company with respect to any Shares subject to
an option granted to the optionee until such person becomes a holder of record
of such Shares.
5.9 LIMITATION AS TO DIRECTORSHIP
Neither this Plan, nor the granting of an option, nor any other action
taken pursuant to this Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that an optionee has a right to continue as a
director for any period of time or at any particular rate of compensation.
5.10 REGULATORY APPROVAL AND COMPLIANCE
The Company shall not be required to issue any certificate or certificates
for Shares upon the exercise of an option granted under this Plan, or record as
a holder of record of Shares the name of the individual exercising an option
under this Plan, without obtaining to the complete satisfaction of the Plan
Administrator the approval of all regulatory bodies deemed necessary by the Plan
Administrator, and without complying, to the Plan Administrator's complete
satisfaction, with all rules and regulations under federal, state or local law
deemed applicable by the Plan Administrator.
SECTION 6. CAPITAL ADJUSTMENTS
The aggregate number and class of Shares for which options may be granted
under this Plan, the number and class of Shares covered by each outstanding
option and the exercise price per Share thereof (but not the total price) shall
all be proportionately adjusted for any stock dividends, stock splits,
recapitalizations, combinations or exchanges of shares, split-ups, split-offs,
spinoffs, or other similar changes in capitalization. Notwithstanding the
foregoing, if an automatic grant occurs within ninety days following any such
change in capitalization, the aggregate number and class of Shares subject to
such automatic grant shall be proportionately adjusted to be the same number and
class of Shares that would be subject to the automatic grant had it been
outstanding immediately prior to the date of such change in capitalization. Upon
the effective date of a dissolution or liquidation of the Company, or of a
reorganization, merger or consolidation of the Company with one or more
corporations that results in more than 70% of the outstanding voting shares of
the Company being owned by one or more affiliated corporations or other
affiliated entities, or of a transfer of all or substantially all the assets or
more than 70% of the then outstanding shares of the Company to another
corporation or other entity, this Plan and all options granted
65
<PAGE>
hereunder shall terminate. In the event of such dissolution, liquidation,
reorganization, merger, consolidation, transfer of assets or transfer of stock,
each optionee shall be entitled, for a period of twenty days prior to the
effective date of such transaction, to purchase the full number of shares under
his or her option which he or she otherwise would have been entitled to purchase
during the remaining term of such option.
Adjustments under this Section 6 shall be made by the Plan Administrator,
whose determination shall be final. In the event of any adjustment in the number
of Shares covered by any option, any fractional Shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full Shares resulting from such adjustment.
SECTION 7. EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of this Plan
shall be borne by the Company; none of such expenses shall be charged to any
optionee.
SECTION 8. COMPLIANCE WITH RULE 16B-3
It is the intention of the Company that this Plan comply in all respects
with the requirements for a "formula plan" within the meaning attributed to that
term for purposes of Rule 16b-3 promulgated under Section 16(b) of the Exchange
Act. Therefore, if any Plan provision is later found not to be in compliance
with such requirements, that provision shall be deemed null and void, and in all
events this Plan shall be construed in favor of its meeting such requirements.
SECTION 9. TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend this Plan at any time, in its
sole and absolute discretion; provided, however, that if required to qualify
this Plan as a formula plan for purposes of Rule 16b-3 under Section 16(b) of
the Exchange Act, no amendment may be made more than once every six months that
would change the amount, price, timing or vesting of the options, other than to
comply with changes in the Internal Revenue Code of 1986, as amended, or the
rules and regulations thereunder; provided further that no amendment that would
(a) increase the number of Shares that may be issued under this Plan, or (b)
otherwise require shareholder approval under any applicable law or regulation
shall be made without the approval of the Company's shareholders.
SECTION 10. DURATION
This Plan shall continue in effect until December 13, 2003 unless it is
sooner terminated by action of the Board or the Company's shareholders, but such
termination shall not affect the terms of any then-outstanding options.
Adopted by the Company's Board of Directors on December 13, 1993 and
approved by the Company's shareholders on April 27, 1994. Amended and restated
by the Board on February 13, 1997. Amended and restated by the Board on February
23, 1999.
66
<PAGE>
Exhibit 10.18
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ENBREL SUPPLY AGREEMENT
AMONG
IMMUNEX CORPORATION,
AMERICAN HOME PRODUCTS CORPORATION
AND
BOEHRINGER INGELHEIM PHARMA KG
DATED AS OF NOVEMBER 5, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
67
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
ARTICLE 1. DEFINITIONS.................................................1
ARTICLE 2. COORDINATORS................................................9
ARTICLE 3. SUPPLY OF BULK DRUG SUBSTANCE, DRUG
PRODUCT AND FINISHED PRODUCT...............................10
ARTICLE 4. PRE-FIRST COMMERCIAL SALE FIRM ORDERS;
FORECASTS; FIRM ORDERS; DELIVERIES.........................13
ARTICLE 5. PRODUCTION CAPACITY; PRODUCT PRICE; PAYMENT................21
ARTICLE 6. BIP PRODUCT WARRANTIES; SPECIFICATIONS.....................26
ARTICLE 7. PACKAGING..................................................29
ARTICLE 8. CLAIMS.....................................................29
ARTICLE 9. MANUFACTURING AUDITS; CERTIFICATE OF
COMPLIANCE; REGULATORY MATTERS.............................30
ARTICLE 10. RECALLS....................................................34
ARTICLE 11. QUALITY ASSURANCE; QUALITY CONTROL;
VALIDATION; STABILITY......................................35
ARTICLE 12. BIP'S OBLIGATIONS AS MANUFACTURER..........................37
ARTICLE 13. LICENSE GRANTS.............................................40
ARTICLE 14. USE OF DATA; OWNERSHIP OF INTELLECTUAL
PROPERTY; [*]; FUTURE ACTIVITIES...........................41
ARTICLE 15. REPRESENTATIONS AND WARRANTIES.............................41
ARTICLE 16. INDEMNIFICATION............................................42
ARTICLE 17. CONFIDENTIALITY............................................44
ARTICLE 18. PRESS RELEASES; USE OF NAMES...............................47
</TABLE>
68
<PAGE>
PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 19. TERM; TERMINATION..........................................47
ARTICLE 20. FORCE MAJEURE..............................................52
ARTICLE 21. ASSIGNMENT.................................................54
ARTICLE 22. DISPUTE RESOLUTION.........................................54
ARTICLE 23. MISCELLANEOUS..............................................55
</TABLE>
EXHIBITS:
EXHIBIT A BULK DRUG SUBSTANCE SPECIFICATIONS
EXHIBIT B DRUG PRODUCT SPECIFICATIONS
EXHIBIT C FINISHED PRODUCT SPECIFICATIONS
EXHIBIT D VOLUME DISCOUNT PRICING MATRIX FOR BULK DRUG SUBSTANCE [*]
EXHIBIT E VOLUME DISCOUNT PRICING MATRIX FOR FILLING AND LYOPHILIZATION
OPERATIONS FOR [*]
EXHIBIT F VOLUME DISCOUNT PRICING MATRIX FOR LABELING OPERATIONS FOR [*]
EXHIBIT G FIRM ORDER PLANNING SYSTEM OF [*] COMMERCIAL SUPPLY, PRE-FDA
APPROVAL
EXHIBIT H COORDINATORS AND WYETH REPRESENTATIVE
69
<PAGE>
ENBREL SUPPLY AGREEMENT
THIS ENBREL SUPPLY AGREEMENT ("AGREEMENT") is made effective as of November 5,
1998, by and among IMMUNEX CORPORATION, a corporation of the State of
Washington, having its principal place of business at 51 University Street,
Seattle, Washington 98101, U.S.A., together with its Affiliates (as defined
herein) ("IMMUNEX"), AMERICAN HOME PRODUCTS CORPORATION, a corporation of the
State of Delaware having its corporate headquarters at Five Giralda Farms,
Madison, New Jersey 07940, U.S.A. ("AHPC"), acting through its Wyeth-Ayerst
Laboratories division, having offices at 555 East Lancaster Avenue, St. Davids,
Pennsylvania 19087, U.S.A. ("WYETH"), and BOEHRINGER INGELHEIM PHARMA KG (the
successor of Dr. Karl Thomae GmbH ("THOMAE")), a German corporation having a
place of business at Birkendorfer Stra(beta)e 65, 88397 Biberach an der Riss,
Federal Republic of Germany ("BIP").
BACKGROUND
Immunex and Wyeth wish to distribute commercially in their respective
territories a certain Immunex proprietary biological product known as TNFR:Fc
in finished dosage form for human use.
BIP has the experience and expertise necessary to perform manufacturing,
analytical testing and quality assurance services for the manufacturing and
labeling of such product for sale hereunder, and BIP owns specialized cell
culture, processing, protein purification, filling and lyophilization
facilities that are suitable for commercial production of such product.
Immunex and Wyeth desire BIP to perform such services and sell commercial
quantities of such product hereunder, and BIP desires to perform such services
and sell commercial quantities of such product to Immunex on its behalf and on
behalf of Wyeth hereunder, all on the terms and conditions set forth in this
Agreement.
AGREEMENT
IN CONSIDERATION OF the mutual covenants set forth in this Agreement, the
Parties (as defined herein) hereby agree as follows:
ARTICLE 1. DEFINITIONS
The following terms, whether used in the singular or plural, shall have the
meanings assigned to them below for purposes of this Agreement.
1.1 "ACQUISITION COST" shall mean the actual invoiced price paid by a Party to
any Third Party (as defined herein) for acquiring any materials used in the
manufacture of the Product (as defined herein) hereunder, including, but
not limited to, shipping and handling costs and customs duties incurred and
paid by such Party in connection with the acquisition of such materials,
and also including [*] percent ([*]%) of the above amounts to cover such
Party's storage and overhead costs. This definition, including the [*]
percent ([*]%) markup, shall only apply in the circumstances set forth in
Section 6.3(a)(5) and Section 19.3(c)(1) hereof.
1.2 "AFFILIATE" shall mean any corporation or business entity of which a Party
owns directly or indirectly, fifty percent (50%) or more of the assets or
outstanding stock, or any corporation which a Party directly or indirectly
controls, or any parent corporation that owns, directly or indirectly,
fifty percent (50%) or more of the assets or outstanding stock of a Party
or directly or indirectly controls a Party. For purposes of this Agreement,
any Party and the other Affiliates it controls shall not be deemed to be
Affiliates of any other Party.
1.3 "ANNUAL QUANTITY" shall mean the number of kg of Bulk Drug Substance (as
defined herein) for which Buyer (as defined herein) has submitted Firm
Orders (as defined herein) with respect to a particular Calendar Year (as
defined herein).
1.4 "ANNUAL SURCHARGE" shall have the meaning set forth in Section 5.2(b)
hereof.
70
<PAGE>
1.5 "BIP CONFIDENTIAL INFORMATION" shall mean all technical and other
information relating to the Biberach Facility (as defined herein) and
associated BIP technologies that are disclosed or supplied to, or used on
behalf of (as recorded in relevant BIP documentation), Immunex and/or Wyeth
by BIP pursuant to this Agreement, whether patented or unpatented,
including, without limitation, trade secrets, know-how, processes,
concepts, ideas, experimental methods and results and business and
scientific plans.
1.6 "BLA" shall mean a biologics license application, or any successor filing
thereto with the FDA (as defined herein) that generally replaces a
biologics license application.
1.7 "BATCH" shall mean (a) with respect to Bulk Drug Substance, a Bulk Drug
Substance Lot (as defined herein), (b) with respect to Drug Product (as
defined herein), a Large Lyophilization Chamber Lot (as defined herein),
(c) with respect to Finished Product (as defined herein), a Large
Lyophilization Chamber Lot, or (d) any other size batch as agreed to by the
Parties in writing from time to time.
1.8 "BIBERACH FACILITY" shall mean (a) BIP's facility at Birkendorfer
Stra(beta)e 65, 88397 Biberach an der Riss, Federal Republic of Germany, at
which the Product is manufactured (the "ORIGINAL BIBERACH FACILITY") or (b)
such other facility of BIP or a BIP Affiliate at which the Product is
manufactured, provided, however, BIP's manufacturing of the Product may not
be transferred from the Original Biberach Facility without the prior
written approval of Immunex and Wyeth, and provided further, that any
transfer of production of the Product from the Original Biberach Facility
to any other Biberach Facility shall be permitted only to the extent that
such transfer is approved by all applicable regulatory authorities and the
possible interference and any resulting delay in BIP's performance of its
obligations hereunder, as well as any impact on the Product Price (as
defined herein), are agreed upon by the Parties.
1.9 "BULK DRUG SUBSTANCE" shall mean [*] Product (as defined herein) [*] which
has been purified to a concentrated form from one or more Bulk Drug
Substance Lots and can be stored in a liquid or frozen form under
appropriate conditions. [*]
1.10 "BULK DRUG SUBSTANCE LOT" shall mean a single [*] ([*]) L fermentation
scale lot of purified Product, processed to result in Bulk Drug Substance,
which lot shall be manufactured in compliance with cGMP (as defined herein)
and in conformance with the Bulk Drug Substance Specifications (as defined
herein).
1.11 "BULK DRUG SUBSTANCE RUN" shall mean a single run of the Process (as
defined herein) at the [*] ([*]) L fermentation scale, which run is
calculated to result in a Bulk Drug Substance Lot.
1.12 "BULK DRUG SUBSTANCE SPECIFICATIONS" shall mean specifications developed by
Immunex and Wyeth as set forth in the Product BLA for Bulk Drug Substance
which describe testing methods and acceptance criteria for each Bulk Drug
Substance Lot generated, and which are attached hereto as EXHIBIT A, as
such specifications may be amended from time to time by mutual agreement of
the Parties, including without limitation such amendments as may be
required to obtain approval of the Drug Product from the FDA, EMEA (as
defined herein) and other applicable regulatory authorities in the
Territory (as defined herein). BIP shall not unreasonably withhold its
agreement to such specification amendments after agreement of the Parties
on the commercial impact of any such amendments.
1.13 "BUYER" shall mean Immunex; provided, however, that Buyer shall mean Wyeth
if (a) this Agreement is terminated solely with respect to the Immunex
Territory (as defined herein) for any reason, or (b) Immunex or its
permitted successor(s) is no longer a party to this Agreement for any
reason.
1.14 "CGMP" shall mean the regulatory requirements for current good
manufacturing practices promulgated by the FDA under the FD&C Act (as
defined herein), 21 C.F.R. ss. 210 ET SEQ. and under the PHS Act (as
defined herein), 21 C.F.R. ss.ss. 600-610, or the applicable regulatory
guidance documents promulgated by the EMEA, as the case may be, as the same
may be amended from time to time.
1.15 "CALENDAR QUARTER" shall mean each three (3)-month period commencing the
first day of January, April, July and October of each Calendar Year.
71
<PAGE>
1.16 "CALENDAR YEAR" shall mean each twelve (12)-month period commencing January
1st of each year during the Supply Term (as defined herein) through the end
of the Supply Term. The obligations of the Parties with respect to the
Maximum Request (as defined herein), Annual Quantity, Product Price, Annual
Surcharge and other applicable terms hereunder shall be prorated during
1998 and during the last year of the Supply Term to reflect that such years
during the Supply Term may be shorter than a full twelve (12)-month year.
1.17 "CELL LINE" shall mean a proprietary Immunex Chinese Hamster Ovary ("CHO")
cell line that expresses the Product. [*].
1.18 "CERTIFICATE OF ANALYSIS" shall mean a document listing the date of
manufacturing, tests performed, specifications, test date(s), and test
results, including photographs and chromatograms as applicable, as required
by the Bulk Drug Substance Specifications, the Drug Product Specifications
(as defined herein) and the Finished Product Specifications (as defined
herein), as the case may be, the accuracy of which has been certified by a
Party. The Parties shall from time to time agree upon a format or formats
for the Certificate of Analysis to be used hereunder.
1.19 "CERTIFICATE OF COMPLIANCE" shall mean a document (a) listing the
expiration date and quantity of a particular Batch of Bulk Drug Substance,
Drug Product and/or Finished Product, (b) certifying that such Batch was
manufactured in accordance with all Specifications (as defined herein),
cGMP, the BLA/EMEA-dossier for the Product (as applicable), and all
applicable FDA and EMEA regulations, and (c) certifying that such Batch is
acceptable for release. The Parties shall from time to time agree upon a
format or formats for the Certificate of Compliance to be used hereunder.
1.20 "CONFIDENTIAL INFORMATION" shall mean Immunex/Wyeth Confidential
Information (as defined herein) or BIP Confidential Information, as the
context requires.
1.21 "CONTRACT YEAR" shall mean the period of twelve (12) consecutive calendar
months commencing on the first day of the month following First Commercial
Sale (as defined herein).
1.22 "DELIVERY DATE" shall mean a date for which delivery of Bulk Drug
Substance, Drug Product and/or Finished Product, as the case may be, is
stated in a Firm Order.
1.23 "DELIVERY DATE CONFIRMATION" shall mean a written confirmation sent by BIP
to Buyer confirming the Delivery Dates specified in Firm Orders issued
hereunder.
1.24 "DETAILED FORECAST SCHEDULE" shall have the meaning set forth in Section
4.3(a) hereof.
1.25 "DRUG PRODUCT" shall mean Bulk Drug Substance which has been appropriately
formulated, compounded, filled into containers and lyophilized ([*]) by BIP
without labeling ([*]).
1.26 "DRUG PRODUCT SPECIFICATIONS" shall mean specifications developed by
Immunex and Wyeth as set forth in the Product BLA that describe testing
methods and acceptance criteria for Drug Product, as well as in-process
specifications, and which are attached hereto as EXHIBIT B, as such
specifications may be amended from time to time by mutual agreement of the
Parties, including without limitation such amendments as may be required to
obtain approval of the Drug Product from the FDA, EMEA and other regulatory
authorities in the Territory. BIP shall not unreasonably withhold its
agreement to such specification amendments after agreement of the Parties
on the commercial impact of any such amendments.
1.27 "EMEA" shall mean the European Medicines Evaluation Agency, or any
successor agency.
1.28 "EMEA-DOSSIER" shall mean an application-filing for registration with the
EMEA, or any successor filing thereto with the EMEA that generally replaces
such dossier.
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1.29 "EFFECTIVE DATE" shall mean the date first above written, which shall be
the effective date of this Agreement.
1.30 "FD&C ACT" shall mean the United States Federal Food, Drug and Cosmetic
Act, as the same may be amended from time to time.
1.31 "FDA" shall mean the United States Food and Drug Administration, or any
successor agency.
1.32 "FINISHED PRODUCT" shall mean Bulk Drug Substance which has been
appropriately formulated, compounded, filled into containers, lyophilized
([*]) and labeled by BIP, suitable for shipment in bulk packaging to
Immunex, Wyeth and/or their respective designee(s) for final commercial
packaging.
1.33 "FINISHED PRODUCT SPECIFICATIONS" shall mean specifications developed by
Immunex and Wyeth as set forth in the Product BLA that describe testing
methods and acceptance criteria for Finished Product, and which are
attached hereto as EXHIBIT C, as such specifications may be amended from
time to time by mutual agreement of the Parties, including without
limitation such amendments as may be required to obtain approval of the
Finished Product from the FDA, EMEA and other regulatory authorities in the
Territory. BIP shall not unreasonably withhold its agreement to such
specification amendments after agreement of the Parties on the commercial
impact of any such amendments.
1.34 "FIRM ORDER" shall mean (a) the binding and partly binding portions of each
Rolling Forecast Planning Schedule (as defined herein) for Bulk Drug
Substance submitted by Buyer hereunder in accordance with Section 4.2(b)
hereof, (b) the binding portion of each Detailed Forecast Schedule for Bulk
Drug Substance, Drug Product and/or Finished Product submitted by Buyer
hereunder in accordance with Section 4.3(c) hereof, and (c) any separate
order agreed upon in writing by Buyer and BIP that is specified as a firm
order, which on receipt thereof by BIP shall constitute a binding order in
accordance with the terms set forth in Article 4 hereof for Bulk Drug
Substance, Drug Product and/or Finished Product, as set forth in such
Rolling Forecast Planning Schedule, Detailed Forecast Schedule, or written
separate order, as the case may be.
1.35 "FIRST COMMERCIAL SALE" shall mean November 4, 1998, the date of the first
commercial sale of Finished Product following regulatory approval of the
Product by the FDA.
1.36 [*]
1.37 [*]
1.38 "IMMUNEX/WYETH CONFIDENTIAL INFORMATION" shall mean the Cell Line, Master
Cell Bank (as defined herein), Working Cell Bank (as defined herein),
Process, [*] Product, [*], and all technical and other information relating
thereto that is disclosed or supplied to BIP by Immunex and/or Wyeth
pursuant to this Agreement, whether patented or unpatented, including,
without limitation, trade secrets, know-how, processes, concepts, ideas,
experimental methods and results and business and scientific plans.
1.39 "IMMUNEX TERRITORY" shall mean the U.S. (as defined herein) and Canada.
1.40 "LARGE LYOPHILIZATION CHAMBER LOT" shall mean, with respect to the
lyophilization cycles of Bulk Drug Substance to be completed by BIP
hereunder in converting Bulk Drug Substance to Drug Product or Finished
Product, a large scale lyophilization chamber lot with a maximum capacity
of [*] ([*]) 2R (4 ml) vials, and with an average yield of [*] ([*]) 2R (4
ml) vials. The Parties agree that, consistent with standard operating
procedures agreed upon by Buyer and BIP from time to time, pooling and
splitting of Bulk Drug Substance by BIP will be allowed if feasible to
support maximizing any Large Lyophilization Chamber Lot cycles.
1.41 "MASTER CELL BANK" shall mean Immunex's reference deposit or collection of
vials of the Cell Line, from which the Working Cell Bank is derived.
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1.42 "MAXIMUM REQUEST" shall mean that quantity of Bulk Drug Substance [*] in
accordance with Section 5.1(a) - (c) hereof.
1.43 "MINIMUM QUANTITY" shall mean [*] percent ([*]%) of the Maximum Request.
1.44 "PHS ACT" shall mean the Public Health Service Act, Biological Products,
as amended, as the same may be amended from time to time.
1.45 "PARTY" or "PARTIES" shall mean BIP, Immunex and/or Wyeth, as the context
requires.
1.46 "PHASE I AGREEMENT" shall mean the Contract Research Agreement Feasibility
Study for Evaluation of TNFR:Fc Process (Phase I) among Immunex, AHPC and
Thomae effective as of August 1, 1996.
1.47 "PHASE I PROJECT" shall mean the Phase I contract research program
described in the Phase I Agreement, in which Immunex transferred the
Process to Thomae to be implemented, scaled-up and evaluated at the [*]
([*]) L fermentation scale in the Biberach Facility.
1.48 "PHASE II AGREEMENT" shall mean the Production Scale-Up Agreement: TNFR:Fc
Process (Phase II) among Immunex, AHPC and Thomae effective as of April 1,
1997.
1.49 "PHASE II PROJECT" shall mean the Phase II scale-up program described in
the Phase II Agreement. The primary objectives of the Phase II Project were
for Thomae to scale-up the Process from the [*] ([*]) L fermentation scale
to the [*] ([*]) L fermentation scale at the Original Biberach Facility,
including down stream processing, to complete [*] ([*]) Bulk Drug Substance
Lots, and to convert the Bulk Drug Substance from such [*] ([*]) Bulk Drug
Substance Lots to Drug Product and/or Finished Product.
1.50 [*]
1.51 "PRODUCT" shall mean the pharmaceutical product TNFR:Fc, [*].
1.52 "PRODUCT PRICE" shall mean the prices for [*] Product as determined in
accordance with the terms of this Agreement.
1.53 "PRODUCTION ASSUMPTIONS" shall mean the fermentation crude Product titer
(mg/L) and purification yield assumptions with respect to a Bulk Drug
Substance Lot, as set forth in Section 5.3(a) hereof, as such Production
Assumptions may be adjusted in accordance with Section 5.3(b) and (c)
hereof.
1.54 "ROLLING FORECAST PLANNING SCHEDULE" shall have the meaning set forth in
Section 4.2 hereof.
1.55 [*]
1.56 [*]
1.57 "SPECIFICATIONS" shall mean the Bulk Drug Substance Specifications, the
Drug Product Specifications and the Finished Product Specifications, as the
context requires.
1.58 "SUPPLY TERM" shall have the meaning set forth in Section 19.1 hereof.
1.59 [*]
1.60 "TERRITORY" shall mean all countries of the world.
1.61 "THIRD PARTY" shall mean any party other than Immunex, Wyeth, BIP and their
respective Affiliates.
1.62 "U.S." shall mean the United States of America, its territories and
possessions, and the Commonwealth of Puerto Rico.
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1.63 "UNIT" shall mean a 2R (4 ml) vial containing either (a) [*] ([*]) mg or
(b) twenty-five (25) mg of Drug Product or Finished Product, as the case
may be. Other presentations as requested hereunder in writing from time to
time by Immunex after consultation with Wyeth shall be agreed upon in
writing with BIP.
1.64 "WORKING CELL BANK" shall mean a vialed collection of serially
subcultivated cells generated by Immunex and/or BIP that is derived from
the Master Cell Bank. The Working Cell Bank is used to establish seed
cultures of the Cell Line to initiate the Process.
1.65 "WYETH TERRITORY" shall mean all of the countries of the world outside of
the Immunex Territory.
1.66 Each of the following definitions are found in the body of this Agreement
as indicated:
<TABLE>
<CAPTION>
SECTION
<S> <C>
"ACCEPTED UNUSED CAPACITY" 5.1(a)(3)
"ADDITIONAL MANUFACTURING CAPACITY" 3.3(a)
"ADDITIONAL MANUFACTURING CAPACITY PLAN" 3.3(d)
"ANNUAL AUDIT" 9.1(a)
"BUSINESS COORDINATORS" 2.1(a)
"CMC" 12.6(a)(2)
"DATE OF SHIPMENT" 4.5(a)(4)
"EURO" 5.9
"EVENT AUDIT" 9.1(b)(2)
"FORCE MAJEURE EVENT" 20.1
"INDEMNITEE" 16.3(a)
"INDEMNITOR" 16.3(a)
"LIABILITIES" 16.1(a)
"REGULATORY FILING GROUP" 12.6(c)
"TECHNICAL COORDINATORS" 2.1(a)
"THIRD PARTY VENDORS" 6.3(c)
"WARNING LETTER" 9.1(b)(2)(i)
"WYETH REPRESENTATIVE" 2.1(b)
</TABLE>
ARTICLE 2. COORDINATORS
2.1 APPOINTMENT OF COORDINATORS AND WYETH REPRESENTATIVE.
(a) COORDINATORS. Buyer and BIP shall each appoint an authorized business
representative and a backup business representative ("BUSINESS
COORDINATORS"). In addition, Buyer and BIP shall each appoint an
authorized technical representative and a backup technical
representative ("TECHNICAL COORDINATORS"). The initial Business
Coordinators and Technical Coordinators are listed on EXHIBIT H
attached hereto and made a part hereof. Buyer and BIP may each replace
their respective Business Coordinators and Technical Coordinators at
any time for any reason by providing written notice thereof to the
other Parties.
(b) WYETH REPRESENTATIVE. Wyeth shall appoint a Wyeth representative and a
backup Wyeth representative (collectively, the "WYETH
REPRESENTATIVE"), which representative shall receive all notices other
than legal notices which are required or permitted to be given to
Wyeth under this Agreement. The initial Wyeth Representative is listed
on EXHIBIT H hereto. Wyeth may replace its Wyeth Representative at any
time for any reason by providing written notice thereof to the other
Parties.
2.2 RESPONSIBILITY OF COORDINATORS.
(a) BUSINESS COORDINATORS. The Business Coordinators shall be responsible
for communications, other than legal notices, between the Parties
related to forecasts, Firm Orders and deliveries of Bulk Drug
Substance, Drug Product and Finished Product hereunder, and other
matters related thereto.
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(b) TECHNICAL COORDINATORS. The Technical Coordinators shall be
responsible for communications, other than legal notices, between the
Parties in matters of quality, manufacturing, project management and
compliance with respect to Bulk Drug Substance, Drug Product and
Finished Product, and other matters related thereto. [*]
(c) COMMUNICATIONS. Both the Business Coordinators and the Technical
Coordinators will be available on a regular basis for consultation at
pre-arranged times during the course of the Supply Term. Additional
modes or methods of communication and decision making may be
implemented as set forth herein and as agreed upon by the Parties from
time to time. As agreed upon by the applicable Coordinators and/or by
the applicable BIP Coordinator(s) and the Wyeth Representative from
time to time, BIP shall allow the Buyer Technical Coordinator and a
reasonable number of other appropriate Immunex and Wyeth personnel to
be present in BIP's facilities at agreed upon times during the Supply
Term. While at any BIP facility, the Buyer Business Coordinator, Buyer
Technical Coordinator and any other Immunex and Wyeth personnel shall
comply with all applicable BIP security and safety policies and
procedures.
ARTICLE 3. SUPPLY OF BULK DRUG SUBSTANCE, DRUG PRODUCT AND FINISHED PRODUCT
3.1 MANUFACTURE AND SUPPLY OF BULK DRUG SUBSTANCE, DRUG PRODUCT AND FINISHED
PRODUCT.
(a) BULK DRUG SUBSTANCE; DRUG PRODUCT.
(1) During the Supply Term, BIP shall [*] manufacture and sell, and
Buyer shall [*] on its behalf purchase, in each case within the
Maximum Request, Bulk Drug Substance and Drug Product, and Buyer
shall on behalf of Wyeth issue Firm Orders to BIP for Bulk Drug
Substance and Drug Product for payment by Wyeth to BIP, subject
to the terms and conditions of this Agreement, for sale or other
distribution in the Territory.
(2) From time to time during the Supply Term, and within the
provisions of the Rolling Forecast Planning Schedule and the
Detailed Forecast Schedule set forth in Section 4.2 and 4.3
hereof, respectively, Buyer reserves the option to purchase, and
in such event BIP shall manufacture and sell, Bulk Drug Substance
for delivery to Immunex, Wyeth, or/or their respective designee,
for final fill and finish by a party other than BIP. Unless
otherwise agreed by BIP, Buyer shall not purchase more than [*]
percent ([*]%) of its requirements of Product in the form of such
separate purchases of Bulk Drug Substance. The foregoing
provision shall not apply to purchases of Bulk Drug Substance
hereunder to be stored by BIP and that BIP will subsequently
convert to Drug Product and/or Finished Product.
(b) FINISHED PRODUCT. Buyer shall have the option from time to time (and
within the provisions of the Detailed Forecast Schedule) during the
Supply Term to purchase Finished Product from BIP, and BIP shall in
such event manufacture and sell, and Buyer shall on its behalf
purchase, Finished Product, and Buyer shall on behalf of Wyeth issue
Firm Orders to BIP for Finished Product for payment by Wyeth to BIP,
subject to the terms and conditions of this Agreement, for sale or
other distribution in the Territory.
(c) SPECIFICATIONS; CGMP. All Bulk Drug Substance, Drug Product and
Finished Product manufactured by BIP hereunder shall conform to the
Specifications applicable thereto and be manufactured in compliance
with cGMP.
3.2 BACK-UP SUPPLIER(S) OF BULK DRUG SUBSTANCE AND/OR DRUG PRODUCT. Immunex and
Wyeth shall together have the right to solicit estimates from and qualify
for FDA, EMEA or other regulatory authority approval one or more back-up
suppliers to manufacture and supply Bulk Drug Substance and/or Drug Product
to Buyer for sale in the Territory, and to perform any other services
assigned to BIP hereunder in the event that at any time during the Supply
Term [*]. In such event, Buyer may purchase such additional quantities of
Bulk Drug Substance and/or Drug Product in excess of the quantities BIP is
able to supply Buyer pursuant to this Agreement from such alternative
back-up supplier(s), or Buyer may manufacture such quantities itself. If
and when Buyer purchases or intends to
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purchase from any such alternative back-up supplier(s), the Maximum Request
may not be adjusted downward by Buyer in connection therewith. [*]
3.3 RIGHT OF FIRST REFUSAL FOR ADDITIONAL MANUFACTURING CAPACITY.
(a) CONDITION PRECEDENT TO RIGHT OF FIRST REFUSAL. In the event that at
any time during the Supply Term, BIP is unable to supply all of
Immunex's and Wyeth's requirements of Bulk Drug Substance and/or Drug
Product in excess of the Maximum Request for sale in the Territory,
and Immunex and Wyeth make a determination that they will need
additional manufacturing capacity in excess of the Maximum Request (as
of the Effective Date) for Bulk Drug Substance and/or Drug Product for
an extended period (the "ADDITIONAL MANUFACTURING CAPACITY"), Immunex
and Wyeth shall, subject to Section 3.2 above, offer BIP all rights to
provide such Additional Manufacturing Capacity in accordance with the
terms set forth in this Section 3.3.
(b) NOTICE REQUIREMENTS. Immunex and Wyeth shall provide written notice to
the BIP Business Coordinator of any such determination with respect to
Additional Manufacturing Capacity as set forth in Section 3.3(a)
above. Such notice shall include sufficient information to enable BIP
to reasonably evaluate its ability to provide Immunex and Wyeth such
Additional Manufacturing Capacity, including, but not limited to, the
number of additional kilos of Bulk Drug Substance and/or the number of
additional Units of Drug Product required per Calendar Year, a
proposed timeline for providing such Additional Manufacturing Capacity
that is reasonable under the circumstances, the length of time that
Immunex and Wyeth would be prepared to commit to use an acceptable
percentage of such Additional Manufacturing Capacity, and any other
pertinent terms.
(c) COMMENCEMENT OF TIME PERIOD. Upon BIP's receipt of such notice from
Immunex and Wyeth pursuant to Section 3.3(b) above, the Parties shall
have a period of [*] ([*]) days in which to establish mutually
acceptable terms and conditions under which BIP shall build or
otherwise acquire the Additional Manufacturing Capacity, including,
but not limited to, acceptable timelines for engineering and
construction of new or expanded manufacturing facilities, the actual
production capacity to be committed by BIP to Immunex and Wyeth, the
Product Price for such additional quantities of Bulk Drug Substance
and/or Drug Product, the level of commitment to BIP required by
Immunex and Wyeth after such Additional Manufacturing Capacity is
built and qualified, and any other pertinent terms. If the Parties are
able to establish mutually acceptable terms and conditions governing
such Additional Manufacturing Capacity under this Section 3.3(c), then
the Parties shall as soon thereafter as practicable negotiate in good
faith an addendum to this Agreement to cover any changes in this
Agreement as a result of such Additional Manufacturing Capacity,
including, but not limited to, the items described in the immediately
preceding sentence.
At the end of the [*] ([*])-day period referred to in this Section
3.3(c), as such period may be extended by mutual written agreement of
the Parties, if the Parties are unable to establish mutually
acceptable terms and conditions governing such Additional
Manufacturing Capacity, Immunex and Wyeth shall have the right to
offer manufacturing rights for such Additional Manufacturing Capacity
to a Third Party or to Immunex, AHP or any of their Affiliates, on
terms that, taken as a whole, are no less favorable to Immunex and
Wyeth than the terms last offered to BIP. If Immunex and Wyeth desire
to enter into an agreement with a Third Party or between themselves
and/or their Affiliates on terms that, taken as a whole, are more
favorable to such Third Party, Immunex, AHP or any of their Affiliates
than the terms last offered to BIP, then Immunex and Wyeth shall not
enter into an agreement with such Third Party or between themselves
and/or their Affiliates unless Immunex and Wyeth first offer such new
terms to BIP. BIP shall then have [*] ([*]) days from receipt of such
additional offer to accept or reject such new terms.
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(d) ADDITIONAL MANUFACTURING CAPACITY PLAN. BIP shall prepare and deliver
a capital investment plan for such Additional Manufacturing Capacity
(the "ADDITIONAL MANUFACTURING CAPACITY PLAN") to Immunex and Wyeth
within [*] ([*]) days after the Parties have reached any agreement
under Section 3.3(c) above. The Additional Manufacturing Capacity Plan
shall describe in reasonable detail the activities BIP proposes to
undertake and/or has already undertaken in increasing BIP's production
capacity as agreed upon by the Parties, and shall include information
regarding the expected timing of construction of the increased
capacity, and the expected timing of purchases of capital equipment
that must be specially ordered. BIP shall thereafter use all
commercially reasonable efforts to build and qualify the increased
manufacturing capacity in accordance with the timelines agreed by the
Parties. If Immunex and Wyeth can reasonably demonstrate that BIP is
failing to use all commercially reasonable efforts to build and
qualify the increased manufacturing capacity within such timelines,
Immunex and Wyeth may refer this matter to dispute resolution under
Section 22.2 hereof. If the Parties are unable to resolve such dispute
in accordance with the terms of Section 22.2 hereof, Immunex and Wyeth
shall be free to enter into an agreement with a Third Party or between
themselves and/or their Affiliates to provide such Additional
Manufacturing Capacity.
ARTICLE 4. PRE-FIRST COMMERCIAL SALE FIRM ORDERS; FORECASTS; FIRM ORDERS;
DELIVERIES
4.1 PRE-FIRST COMMERCIAL SALE -- FIRST FIVE (5) FIRM ORDERS.
(a) PRE-FIRST COMMERCIAL SALE FIRM ORDERS FOR BULK DRUG SUBSTANCE.
(1) On [*], Buyer sent a letter to BIP with respect to the first Firm
Order for Bulk Drug Substance, which letter authorized BIP to
manufacture sufficient Bulk Drug Substance required to yield [*]
([*]) twenty-five (25) mg Units of Drug Product and/or Finished
Product to be scheduled for delivery during the fourth Calendar
Quarter of 1998.
(2) On [*], Buyer sent a letter to BIP with respect to the second and
third Firm Orders for Bulk Drug Substance, which letter
authorized BIP to manufacture Bulk Drug Substance required to
yield (i) [*] ([*]) twenty-five (25) mg Units of Drug Product
and/or Finished Product to be scheduled for delivery during the
first Calendar Quarter of 1999 (second Firm Order) and [*] ([*])
twenty-five (25) mg Units of Drug Product and/or Finished Product
to be scheduled for delivery during the second Calendar Quarter
of 1999 (third Firm Order).
(3) On [*], Buyer sent a letter to BIP with respect to the fourth
Firm Order for Bulk Drug Substance, which letter authorized BIP
to manufacture Bulk Drug Substance required to yield [*] ([*])
twenty-five (25) mg Units of Drug Product and/or Finished Product
to be scheduled for delivery during the third Calendar Quarter of
1999. [*]
(4) On [*], Buyer sent a letter to BIP with respect to the fifth Firm
Order for Bulk Drug Substance, which letter authorized BIP to
manufacture Bulk Drug Substance required to yield [*] ([*])
twenty-five (25) mg Units of Drug Product and/or Finished Product
to be scheduled for delivery during the fourth Calendar Quarter
of 1999.
(5) Buyer's first five (5) Firm Orders for Bulk Drug Substance are
detailed in EXHIBIT G attached hereto. EXHIBIT G sets forth
details concerning timelines for Buyer's first five (5) Firm
Orders for Bulk Drug Substance during the period prior to First
Commercial Sale in the Immunex Territory, and timelines for
converting such Bulk Drug Substance into [*] ([*]) mg and/or
twenty-five (25) mg vials of Drug Product and/or Finished
Product. In accordance with EXHIBIT G, Buyer shall have the
flexibility in deciding when to have BIP convert Bulk Drug
Substance from such first five (5) Firm Orders into [*] ([*]) mg
and/or twenty-five (25) mg vials of Drug Product and/or Finished
Product for sale in the first five (5) Calendar Quarters after
First Commercial Sale and thereafter in the Immunex Territory,
recognizing that there is inherent uncertainty in predicting the
timing of FDA approval of the Product BLA.
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(6) In accordance with Section 4.3 hereof, Buyer shall on a monthly
basis provide BIP with a Detailed Forecast Schedule for
converting Bulk Drug Substance from such first five (5) Firm
Orders into Drug Product and/or Finished Product. As part of each
such Detailed Forecast Schedule, Buyer shall specify the number
of [*] ([*]) mg vials and the number of twenty-five (25) mg vials
that BIP shall produce from such Bulk Drug Substance from the
first five (5) Firm Orders. Buyer's forecasted quarterly
requirements for supply of Drug Product and/or Finished Product
during the five (5) Calendar Quarters referenced in Section
4.1(a)(1) - (4) above are set forth in Table 1 below:
TABLE 1
QUARTERLY FORECASTED REQUIREMENTS OF DRUG PRODUCT AND/OR FINISHED PRODUCT FOR
FIRST FIVE CALENDAR QUARTERS AFTER FIRST COMMERCIAL SALE IN THE IMMUNEX
TERRITORY
<TABLE>
<CAPTION>
CALENDAR QUARTER BULK DRUG SUBSTANCE REQUIRED TO
YIELD THE FOLLOWING NUMBER OF
UNITS (25 MG VIAL EQUIVALENTS)
<S> <C>
4th Calendar Quarter 1998 [*]
1st Calendar Quarter 1999 [*]
2nd Calendar Quarter 1999 [*]
3rd Calendar Quarter 1999 [*]
4th Calendar Quarter 1999 [*]
TOTALS [*]
</TABLE>
(b) APPLICABLE DATES. The dates applicable to (1) ordering raw materials,
(2) issuing a Firm Order for Bulk Drug Substance, (3) invoicing for
Bulk Drug Substance, (4) issuing a Firm Order date for filling
operations for converting Bulk Drug Substance into [*] ([*]) mg and/or
twenty-five (25) mg vials of Drug Product and/or Finished Product,
consistent with BIP's finite lyophilization capacity, (5) invoicing
for such filling operations, and (6) other related BIP activities with
respect to the quantities of Drug Product and/or Finished Product set
forth in Table 1 above are set forth in EXHIBIT G hereto.
(c) FIRST FIVE FIRM ORDERS GOVERNED BY THIS AGREEMENT. Upon the Effective
Date, the letters referenced in Section 4.1(a) above dated [*],
representing the first through the fifth Firm Orders, shall be deemed
to have been made hereunder and shall be superseded by this Agreement,
and the terms and conditions of this Agreement shall govern such first
through fifth Firm Orders.
4.2 POST-FIRST COMMERCIAL SALE -- THREE (3)-YEAR ROLLING FORECAST PLANNING
SCHEDULE FOR BULK DRUG SUBSTANCE.
(a) MONTHLY ROLLING FORECAST PLANNING SCHEDULE UNTIL [*]. Beginning on or
before the tenth day of each month after First Commercial Sale until
[*], or as otherwise agreed upon by BIP and Buyer, Buyer shall submit
to BIP, a three (3)-year "ROLLING FORECAST PLANNING SCHEDULE" for Bulk
Drug Substance to be manufactured by BIP. The three (3)-year period
shall be that period which commences on the first day of the [*] month
after Buyer submits each Rolling Forecast Planning Schedule. By way of
example only, when the Rolling Forecast Planning Schedule for [*] is
submitted, the three (3)-year planning horizon covered by such
schedule shall commence on [*] and shall end on [*]. Beginning in [*],
or as otherwise agreed upon by BIP and Buyer, the applicable Rolling
Forecast Planning Schedule shall be submitted on a quarterly basis as
set forth in Section 4.2(c) below.
(b) DETERMINATION OF BINDING PORTION OF EACH ROLLING FORECAST PLANNING
SCHEDULE. Each three (3)-year Rolling Forecast Planning Schedule
issued after First Commercial Sale shall be [*], as follows:
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(1) The forecasts for Bulk Drug Substance within the [*].
(2) The forecasts for Bulk Drug Substance within the [*]. Such
forecasts within the [*] of the three (3)-year Rolling Forecast
Planning Schedule can be increased by Buyer by up to [*] percent
([*]%) by providing written notice thereof to BIP, provided that
any such increase, when added together with the forecasted
amount, shall be subject to an upper limit of either the Maximum
Request or the Maximum Request plus BIP's then-currently
available production capacity for the Product as represented by
any Accepted Unused Capacity (see Section 5.1(a)(3) hereof),
whichever upper limit is greater. Any increases above such amount
are subject to Section 4.2(d) below. The following restrictions
shall apply if such forecasts within the [*]:
(i) Within months [*] ([*]) to [*] ([*]), the forecast can be
[*] by up to [*] percent ([*]%);
(ii) Within months [*] ([*]) to [*] ([*]), the forecast can be
[*] by up to [*] percent ([*]%);
(iii) Within months [*] ([*]) to [*] ([*]), the forecast can be
[*] by up to [*] percent ([*]%); and
(iv) Within months [*] ([*]) to [*] ([*]), the forecast can be
[*] by up to [*] percent ([*]%).
[*]
(3) The forecasts for Bulk Drug Substance within the [*].
(c) QUARTERLY ROLLING FORECAST PLANNING SCHEDULE BEGINNING IN [*].
Beginning in [*], or as otherwise agreed by BIP and Buyer, Buyer shall
submit updates to the Rolling Forecast Planning Schedule on a
quarterly basis, by the tenth day of the last month of each Calendar
Quarter during the Supply Term, I.E., at June ---- 10th, September
10th, December 10th and March 10th. The three (3)-year period shall be
that period which commences on the first day of the [*] month after
Buyer submits each quarterly update to the Rolling Forecast Planning
Schedule. By way of example only, when the Rolling Forecast Planning
Schedule for [*] is submitted, the three (3)-year planning horizon
covered by such schedule shall commence on [*] and shall end on [*].
No Rolling Forecast Planning Schedule needs to be given for any period
after the expiration of the Supply Term.
(d) ADDITIONAL REQUIREMENTS OF BULK DRUG SUBSTANCE. BIP shall use all
commercially reasonable efforts to supply to Buyer any requirements of
Bulk Drug Substance which are in excess of those quantities specified
(and any increases to such quantities as permitted by Section
4.2(b)(2) above) in the then-current Rolling Forecast Planning
Schedule as set forth in Section 4.2(b)(1) and Section 4.2(b)(2)
above. BIP shall notify Buyer within thirty (30) days of receipt of
each Rolling Forecast Planning Schedule regarding BIP's ability or
inability, as the case may be, to supply Buyer's requirements of Bulk
Drug Substance in excess of those quantities specified in the
immediately preceding sentence. In addition, to the extent the Maximum
Request has been increased as set forth in Section 5.1(a)(2) hereof
for the respective period, Buyer shall be permitted to increase its
Firm Orders hereunder up to the revised Maximum Request.
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(e) SAFETY STOCK. As soon as practicable after the Effective Date, BIP
shall endeavor at its expense to build a safety stock of [*]. The
applicable safety stock quantities will be calculated based on Buyer's
then current binding monthly Firm Orders for Bulk Drug Substance, Drug
Product and Finished Product, as applicable. BIP shall use all
commercially reasonable efforts to build any additional safety stock
of Bulk Drug Substance requested by Buyer from time to time in excess
of the [*] supply set forth in this Section 4.3(e), provided, however,
that BIP may invoice Buyer for such additional safety stock of Bulk
Drug Substance in accordance with Section 4.4(b)(1) hereof.
4.3 DETAILED FORECAST SCHEDULE FOR BULK DRUG SUBSTANCE, DRUG PRODUCT AND/OR
FINISHED PRODUCT.
(a) MONTHLY DETAILED FORECAST SCHEDULE. Beginning on the tenth day of each
month after the Effective Date, Buyer shall submit to BIP, a "DETAILED
FORECAST SCHEDULE" for (1) the number of kg of Bulk Drug Substance
(within the limitations of Section 3.1(a)(2) above), if any, and (2)
the number of Units of Drug Product and/or Finished Product, to be
delivered to Immunex, Wyeth and/or their respective designee on
Delivery Dates (by week) specified therein during the [*] period
commencing on the first day of the [*] month following, including the
allocation between [*] ([*]) mg and twenty-five (25) mg vials of Drug
Product and/or Finished Product being ordered, and also including an
allocation between the Immunex Territory and the Wyeth Territory,
respectively. By way of example only, when the Detailed Forecast
Schedule for December 10, 1998 is submitted, the [*] period covered by
such Detailed Forecast Schedule shall commence on [*] and shall end on
[*]. Except as set forth in Section 4.3(b) and (c) below, such
Detailed Forecast Schedule shall be non-binding and shall not
constitute an obligation of Buyer to purchase the quantities of Drug
Product and/or Finished Product set forth therein. With respect to
Bulk Drug Substance, such Detailed Forecast Schedule shall only serve
to provide the Delivery Dates applicable thereto, and shall not
supersede the binding portion of the then current Rolling Forecast
Planning Schedule.
(b) PRE-FIRST COMMERCIAL SALE FIRST FIVE (5) ORDERS. With respect to the
first five (5) Firm Orders issued during the pre-First Commercial Sale
period in accordance with Section 4.1 hereof, the Detailed Forecast
Schedule provided under Section 4.3(a) above shall be considered Firm
Orders in accordance with the timelines set forth in EXHIBIT G hereto.
(c) BINDING PORTION OF EACH DETAILED FORECAST SCHEDULE. Except as set
forth in Section 4.3(b) above, the first [*] ([*]) months of each [*]
([*])-month period covered by a Detailed Forecast Schedule delivered
by Buyer to BIP pursuant to Section 4.3(a) above shall be considered
Firm Orders for the quantities of Bulk Drug Substance, Drug Product
and/or Finished Product to be delivered on Delivery Dates that are
specified in such Detailed Forecast Schedule, subject to any
adjustments to such Delivery Dates as set forth in Section 4.3(d)
below. [*]
(d) DELIVERY DATE CONFIRMATIONS; SHIPPING SCHEDULE. Within [*] ([*]) days
after Buyer submits each Firm Order to BIP hereunder, BIP shall issue
a Delivery Date Confirmation confirming to Buyer in writing the
Delivery Dates specified in such Firm Order. In addition, Buyer and
BIP have agreed upon a shipping schedule with a [*] shipping horizon
for deliveries of Drug Product and/or Finished Product hereunder, as
such shipping schedule may generally be modified from time to time
upon agreement of Buyer and BIP.
(e) SUPPLY OF DRUG PRODUCT AND/OR FINISHED PRODUCT PURSUANT TO FIRM
ORDERS; ADDITIONAL REQUIREMENTS OF DRUG PRODUCT AND/OR FINISHED
PRODUCT. BIP shall convert Bulk Drug Substance to Drug Product and
deliver such Drug Product and/or Finished Product in accordance with
Firm Orders and the Delivery Dates set forth therein. Any revisions to
such Firm Orders requested by Buyer shall be negotiated between Buyer
and BIP in good faith, and BIP shall use all commercially reasonable
efforts to (1) deliver any quantities of Drug Product and/or Finished
Product in excess of those quantities specified in such Firm Orders as
directed by Buyer and (2) reallocate the mix as between the number of
Batches of Drug Product and the number of Batches of Finished Product
specified in the applicable Detailed Forecast Schedule. In addition,
and notwithstanding Section 4.3(c) above, if there is a production
shortfall under Section 4.5(b) hereof,
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Buyer shall be permitted to reallocate its then current Detailed
Forecast Schedule between [*] ([*]) mg and twenty-five (25) mg vials
of Drug Product and/or Finished Product, as reasonably needed in order
to respond to then current market needs for the Product, and BIP shall
use all commercially reasonable efforts to accommodate such
reallocation.
(f) SHELF LIFE MANAGEMENT. When converting Bulk Drug Substance to Drug
Product hereunder, and except as otherwise agreed, BIP shall first
utilize the Bulk Drug Substance Lots with the earliest date of
manufacture in order to maximize the shelf life of Bulk Drug
Substance.
4.4 PURCHASE QUANTITIES.
(a) BATCH ORDERS; FIRM ORDERS TO SPECIFY UNITS. Except as otherwise set
forth herein or agreed upon between Buyer and BIP, all Bulk Drug
Substance, Drug Product and Finished Product ordered hereunder must be
ordered in Batch sizes or whole multiples thereof. Except as otherwise
provided in Section 4.1(a) hereof or agreed upon between Buyer and
BIP, each Firm Order for Drug Product and/or Finished Product issued
pursuant to Section 4.3 hereof shall specify the quantity of Units of
Drug Product and/or Finished Product being ordered, as well as the
allocation between [*] ([*]) mg and twenty-five (25) mg vials of Drug
Product and/or Finished Product being ordered.
(b) VARIANCES IN QUANTITIES SHIPPED; INVOICING PREREQUISITES. Quantities
actually shipped pursuant to a given Firm Order may vary from the
quantities reflected in such Firm Order by up to [*] percent ([*]%)
and still be deemed to be in compliance with such Firm Order. In
addition, with respect to each Batch that is part of a particular Firm
Order being shipped hereunder, BIP may ship and Immunex and/or Wyeth,
as the case may be depending on the destination of the applicable
shipment (I.E., Immunex for the Immunex Territory and Wyeth for
the Wyeth Territory), shall be required to pay for (in accordance with
the terms hereof) shipments of additional quantities of Drug Product
and/or Finished Product that vary by greater than [*] percent ([*]%)
from the quantities reflected in the applicable Firm Order, it being
understood that quantities of Drug Product and/or Finished Product
actually produced from each Batch will vary based on such factors as
actual success rate, fermentation crude Product titer, and
purification yield, and provided further, that BIP shall notify
Immunex in a timely manner prior to such shipment of the amount of any
such excess quantities of Drug Product and/or Finished Product being
shipped hereunder. However, Immunex and Wyeth, as applicable, shall
only be invoiced and required to pay for the quantities of Bulk Drug
Substance and Drug Product/Finished Product which (1) in the case of
Bulk Drug Substance, are accompanied by a Certificate of Analysis and
a Certificate of Compliance with respect to such Bulk Drug Substance
and (2) in the case of Drug Product/Finished Product, BIP actually
ships to Immunex, Wyeth and/or their respective designee, and are
accompanied by a Certificate of Analysis and a Certificate of
Compliance with respect to such Drug Product/Finished Product.
4.5 DELIVERIES.
(a) FILLING FIRM ORDERS; SHELF LIFE.
(1) Subject to Section 4.4(b) above, BIP shall fulfill each Firm
Order submitted pursuant to Sections 4.1, 4.2, and 4.3 hereof for
such quantities of Bulk Drug Substance, Drug Product and Finished
Product specified in such Firm Order. Drug Product and Finished
Product ordered pursuant to Sections 4.1 and 4.3 hereof shall be
delivered by each applicable Delivery Date specified in the Firm
Orders applicable thereto.
(2) Upon delivery to Immunex, Wyeth and/or their respective designee,
all Drug Product and Finished Product shall have at least the
percentage set forth in Table 2 below of its then-approved (by
the FDA or EMEA, as applicable) shelf life remaining at the "Date
of Shipment" (as defined below), provided that if the
then-approved shelf life of the Drug Product and Finished Product
is not listed in Table 2 below, then such Drug Product and
Finished Product shall have at least [*] ([*]) of its
then-approved (by the FDA or EMEA, as applicable) shelf life
remaining at the Date of Shipment. [*]
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<TABLE>
<CAPTION>
TABLE 2
SHELF LIFE OF DRUG PRODUCT AND FINISHED PRODUCT
<S> <C>
SHELF LIFE MINIMUM REMAINING SHELF LIFE AT DATE OF
SHIPMENT
[*] months [*] months
[*] months [*] months
[*] months [*] months
[*] months [*] months
[*] months [*] months
</TABLE>
(3) With respect to the "[*] months" row under the "Shelf Life"
column in Table 2 above, from and after the Effective Date and
through [*], BIP shall use all commercially reasonable efforts to
achieve a minimum remaining shelf life of Drug Product and
Finished Product at the date of shipment of [*] ([*]) months.
During such period, BIP shall use special efforts to closely
coordinate with Buyer so that the schedule for producing Batches
of Drug Product and Finished Product within the Biberach Facility
is calculated to result in a [*] ([*])-month shelf life for Drug
Product and Finished Product.
(4) For purposes of determining the date from which the shelf life of
Drug Product and Finished Product shall be calculated under this
Section 4.5(a), the term "DATE OF SHIPMENT" shall mean the
earlier of (i) the scheduled Delivery Date (subject to the terms
of Section 4.3(d) above) for a shipment of Drug Product or
Finished Product, as applicable, provided that BIP is completely
ready to ship such Drug Product or Finished Product according to
the terms hereunder on such Delivery Date and that Buyer has not
delayed taking such shipment by such Delivery Date through any
fault of BIP, or (ii) the date such shipment of Drug Product or
Finished Product, as applicable, is actually delivered to Buyer's
designated carrier(s) in Biberach/Germany.
(b) PRODUCTION SHORTFALLS; DELIVERY DELAYS. If at any time during the
Supply Term there is a shortfall or anticipated shortage of Bulk Drug
Substance, Drug Product, Finished Product, and/or any other essential
raw materials or other components used in the production of Bulk Drug
Substance, Drug Product and/or Finished Product, and/or any delay in
shipment or delivery occasioned by BIP, which shortfall or delay is
reasonably likely to result in BIP's inability to meet any Delivery
Date(s) hereunder, then BIP shall (1) immediately notify Buyer in
writing as to the reason for the shortage of supply and/or delay, and
provide an indication of the duration of the shortfall and/or delay
and (2) use all commercially reasonable efforts to allocate to Buyer
as much Bulk Drug Substance, Drug Product, Finished Product and such
essential raw materials and components as are available as a matter of
priority to meet Firm Orders issued hereunder. BIP shall not grant
higher priority to any Third Party than to Buyer with respect to such
raw materials and components. Nothing in this Section 4.5(b) releases
BIP from its obligations to supply Bulk Drug Substance, Drug Product
and Finished Product under Section 4.5(a) above. In addition, BIP
shall also promptly notify Buyer in writing when any such shortfall
and/or delay is over.
(c) DELIVERY SHORTFALLS. Unless otherwise directed in writing by Buyer
within [*] after Buyer's receipt of notice from BIP under Section
4.5(b) above that a manufacturing shortfall and/or delay as described
above is over, BIP shall use all commercially reasonable efforts to
make up all shortfalls in delivery in accordance with a Firm Order as
promptly as possible and shall promptly supply Bulk Drug Substance,
Drug Product and Finished Product (as applicable) to Immunex, Wyeth
and/or their respective designee, as appropriate, to meet such Firm
Order.
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4.6 DELIVERY TERMS.
BIP shall arrange for shipment of Bulk Drug Substance, Drug Product or
Finished Product, as the case may be, to Immunex, Wyeth and/or their
respective designee, at the expense of the Party receiving such shipment,
and in accordance with Buyer's instructions, including instructions as to
designated carrier(s) to utilize. BIP shall not transport or ship Bulk Drug
Substance, Drug Product or Finished Product until the Party receiving such
shipment informs BIP that it has obtained all appropriate approvals and
consents of any governmental authority necessary for the transportation or
shipment of such Bulk Drug Substance, Drug Product or Finished Product, as
the case may be. BIP shall comply with all applicable German laws and
regulations regarding the transportation or shipment of Bulk Drug
Substance, Drug Product and/or Finished Product, as the case may be. Title
to, and risk of loss of, Bulk Drug Substance, Drug Product and/or Finished
Product, as the case may be, shall remain with BIP until delivery to the
designated carrier specified by Buyer in Biberach/Germany, at which time
the Party to receive such delivery shall assume title to and risk of loss
of the Bulk Drug Substance, Drug Product or the Finished Product, as the
case may be.
ARTICLE 5. PRODUCTION CAPACITY; PRODUCT PRICE; PAYMENT
5.1 PRODUCTION CAPACITY.
(a) MAXIMUM REQUEST; [*]; MILESTONE PAYMENTS.
(1) MAXIMUM REQUEST. BIP shall provide Immunex and Wyeth with
reserved production capacity, including lyophilization and
filling capacity, for Bulk Drug Substance, Drug Product and
Finished Product for the Supply Term based on the initial Maximum
Request of [*] ([*]) kg per Calendar Year, provided that Buyer
may issue Firm Orders for Bulk Drug Substance, Drug Product
and/or Finished Product greater than such amount to the extent
BIP's free available production capacity for Bulk Drug Substance,
Drug Product and/or Finished Product exceeds [*] ([*]) kg per
Calendar Year. The Parties acknowledge and agree that the initial
Maximum Request of [*] ([*]) kg of Bulk Drug Substance per
Calendar Year is based on the initial Production Assumptions set
forth in Section 5.3(a) hereof, and the assumption as of the
Effective Date that a total of [*] ([*]) Bulk Drug Substance Runs
initially reserved for Immunex and Wyeth [*]. The Parties also
understand, however, that BIP's actual production of Bulk Drug
Substance could be either more or less than [*] ([*]) kg per
Calendar Year, depending on such factors as the actual success
rate, fermentation crude Product titer, and purification yield.
(2) UPWARD ADJUSTMENTS TO MAXIMUM REQUEST.
(i) REALLOCATION OF EXISTING PRODUCTION CAPACITY. Prior to
the beginning of each Calendar Year, BIP shall inform
Buyer of any increases to the Maximum Request [*]. Any
such increases to the Maximum Request based on
allocating additional existing production capacity to
Buyer shall require mutual written agreement of the
Parties, including agreement with respect to the number
of Calendar Years for which such increase to the
Maximum Request shall be applicable, and any such
increase to the Maximum Request shall be effective as
of January 1 of the applicable new Calendar Year. After
the end of the last Calendar Year in which the Maximum
Request was increased as provided under this paragraph,
and unless otherwise agreed upon in writing by the
Parties, the Maximum Request shall automatically revert
to the level that applied immediately prior to the
effective date of such increase (I.E., the level that
was in effect prior to the first year of the applicable
---- increase under this paragraph), subject to any
downward adjustments to the Maximum Request that may
have occurred under Section 5.1(b) hereof during the
period of any such increase to the Maximum Request.
(ii) INCREASED PRODUCTION CAPACITY. In addition to potential
increases in the Maximum Request described in Section
5.1(a)(2)(i) above, the Maximum Request shall also be
subject to upward adjustment upon mutually agreed
terms, including an acceptable lead-time (E.G.,
construction of additional production capacity) (see
Section 3.3 hereof regarding Additional Manufacturing
Capacity).
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(3) [*]
(4) [*]
(b) DOWNWARD ADJUSTMENTS TO MAXIMUM REQUEST. The Maximum Request shall be
subject to downward adjustment(s) by Immunex and Wyeth by no more than
[*] percent ([*]%) per step (except as provided below), and shall,
unless otherwise agreed by BIP, in no case result in less than [*]
([*]) kg of Bulk Drug Substance as the Maximum Request as follows: (1)
by [*] year after First Commercial Sale; (2) by [*] year after First
Commercial Sale; and (3) [*].
Notwithstanding the foregoing, to the extent that the BIP production
capacity idled as a result of any Immunex and Wyeth downward
adjustment in the Maximum Request under this Section 5.1(b) will be
utilized by BIP generally and for a sufficiently long period to
manufacture one or more biological products of Immunex, Wyeth, BIP,
any of their Affiliates or any Third Parties within the general time
period corresponding to the effective date of such downward adjustment
to the Maximum Request under Section 5.1(c) below, then the [*]
percent ([*]%) per step limitation provided above may be increased. In
such event, BIP shall provide Immunex and Wyeth with notice of the
amount of any potential percentage increase to the [*] percent ([*]%)
limit on downward adjustments in the Maximum Request that are
available to Immunex and Wyeth with respect to their most recently
exercised downward adjustment in the Maximum Request, such percentage
increase to generally be proportional to the amount of such idle BIP
production capacity that will be utilized as set forth above. Upon
request by Immunex and Wyeth, BIP shall provide Immunex and Wyeth with
accurate and complete information such as is necessary for the
calculation of any potential increase in such downward adjustment in
the Maximum Request, provided that BIP shall have no obligation to
identify the Third Parties whose products are being manufactured by
BIP, or to identify the products themselves. The Parties shall
negotiate in good faith on a case-by-case basis any potential
percentage increase to the downward adjustment in the Maximum Request
hereunder. After the completion of such negotiations, Immunex and
Wyeth shall promptly and in any event within [*] ([*]) days provide
BIP written notice regarding whether and the extent to which Immunex
and Wyeth have elected to take advantage of any such percentage
increase by making a further downward adjustment to the Maximum
Request.
(c) EFFECTIVE DATE OF DOWNWARD ADJUSTMENTS TO MAXIMUM REQUEST. Due to
BIP's lead-time necessary to make capacity adjustments, the downward
adjusted Maximum Request and the corresponding price column for Bulk
Drug Substance and Drug Product in EXHIBIT D and EXHIBIT E hereto
shall be valid from (1) [*] year after First Commercial Sale with
respect to adjustments according to Section 5.1(b)(1) above, (2) [*]
year after First Commercial Sale with respect to adjustments according
to Section 5.1(b)(2) above and (3) upon the expiration of the [*]
([*])-month notice period with respect to adjustments according to
Section 5.1(b)(3) above. By way of example only, if First Commercial
Sale of the Product occurred on December 1, 1998, and if Buyer
provides notice of a downward adjustment of the Maximum Request by [*]
year following First Commercial Sale, I.E., [*], as permitted in
Section 5.1(b)(2) above, then the ---- downward adjusted Maximum
Request and the corresponding price column for Bulk Drug Substance and
Drug Product in EXHIBIT D and EXHIBIT E hereto would be valid from
[*], which would be [*] year after First --------- ---------
Commercial Sale.
5.2 BULK DRUG SUBSTANCE PRICING; ANNUAL SURCHARGE; INVOICING.
(a) BULK DRUG SUBSTANCE PRICING. The price for the Annual Quantity of Bulk
Drug Substance is set forth in the Volume Discount Pricing Matrix for
Bulk Drug Substance [*] set forth in EXHIBIT D hereto. [*]
(b) [*]
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(c) INVOICING IMMUNEX AND WYETH FOR BULK DRUG SUBSTANCE, DRUG PRODUCT AND
FINISHED PRODUCT. BIP may either (1) invoice Immunex ([*], as set
forth in Section 5.7(c) hereof) and Wyeth ([*]) separately for Bulk
Drug Substance in accordance with Section 4.4(b)(1) hereof, or (2)
invoice Immunex ([*], as set forth in Section 5.7(c) hereof) and Wyeth
([*]) for Drug Product or Finished Product (including the Bulk Drug
Substance component) delivered in accordance with Section 4.4(b)(2)
hereof by utilizing the pricing formulas set forth in Sections 5.4 and
5.5 hereof, respectively. If BIP chooses to invoice Immunex and Wyeth
separately for Bulk Drug Substance as set forth in (1) above, then
when BIP invoices Immunex and Wyeth for the incremental cost to
produce Drug Product or Finished Product by utilizing the pricing
formulas set forth in Sections 5.4 and 5.5 hereof, respectively, BIP
shall at the time of such invoice for Drug Product or Finished Product
issue a credit to Immunex and Wyeth, as appropriate, for an amount
which represents that portion of the cost of Bulk Drug Substance
previously paid by Immunex and Wyeth that is attributable to any
filling losses associated with filling the Drug Product or Finished
Product applicable to such invoice. By way of example only, if in
manufacturing Drug Product or Finished Product, BIP experienced a
filling loss of [*] percent ([*]%) of the Bulk Drug Substance used for
such filling, then when BIP invoices Immunex and Wyeth for the
incremental costs for such filling activities, BIP would issue a
credit to Immunex and Wyeth, as applicable, for [*] percent ([*]%) of
the cost previously paid by Immunex and Wyeth for such Bulk Drug
Substance.
5.3 ADJUSTMENT OF BULK DRUG SUBSTANCE PRICING BASED ON PRODUCTION ASSUMPTIONS.
(a) INITIAL PRODUCTION ASSUMPTIONS. The Production Assumptions shall
initially be established at a fermentation crude Product titer of [*]
([*]) mg/L and a purification yield of [*] percent ([*]%), with an
agreed upon total amount of Bulk Drug Substance yielded per Bulk Drug
Substance Lot of [*] ([*]) g. The Production Assumptions shall be
subject to an annual review and potential adjustment as set forth in
Section 5.3(b) below.
(b) [*]
(c) [*]
5.4 DRUG PRODUCT PRICING.
(a) DRUG PRODUCT PRICING. The Drug Product price per Unit (I.E., 2R (4 ml)
vial) will be calculated as follows:
[*]
(b) INITIAL DRUG PRODUCT PRICING. [*]
(c) INVOICING FOR DRUG PRODUCT. BIP may either invoice Immunex ([*], as
set forth in Section 5.7(c) hereof) and Wyeth ([*]) (1) separately for
Drug Product, including the Bulk Drug Substance component, in
accordance with the formula set forth in Section 5.4(a) above or (2)
for the incremental filling and lyophilization costs of Drug Product
as set forth in EXHIBIT E hereto, in each case in accordance with
Section 4.4(b)(2) hereof.
5.5 FINISHED PRODUCT PRICING.
(a) FINISHED PRODUCT PRICING. The Finished Product price per Unit will be
calculated by adding to the applicable Drug Product price per Unit the
applicable labeling cost per Unit in accordance with the Volume
Discount Pricing Matrix for Labeling Operations for [*] set forth in
EXHIBIT F hereto.
[*]
(b) INVOICING FOR FINISHED PRODUCT. BIP may either invoice Immunex ([*],
as set forth in Section 5.7(c) hereof) and Wyeth [*] (1) separately
for Finished Product, including the Bulk Drug Substance component, in
accordance with the formula set forth in Section 5.5(a) above or (2)
for the incremental labeling material and labeling operations costs of
Finished Product set forth in EXHIBIT F hereto, in each case in
accordance with Section 4.4(b)(2) hereof.
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5.6 PRICE ADJUSTMENTS.
(a) ANNUAL PRODUCT PRICE ADJUSTMENT. The initial Product Price for Bulk
Drug Substance (EXHIBIT D), the incremental additional filling and
lyophilization costs for Drug Product (EXHIBIT E) and the incremental
additional labeling material and labeling operations costs for
Finished Product (EXHIBIT F) [*] may each be increased by BIP by [*]
percent ([*]%) annually beginning [*] for increasing cost of labor and
raw materials.
(b) COST INCREASES.
(1) In case any cost (in terms of cost of raw material, labor and/or
regulatory authority requirements) of producing Bulk Drug
Substance, Drug Product and/or Finished Product increases by more
than [*] percent ([*]%) in any Calendar Year, [*], the Parties
shall agree upon the direct amount of such increase based on good
faith negotiations, provided that any price increase taken by BIP
under Section 5.3(b) and/or Section 5.6(a) hereof shall be
credited toward any corresponding increase under this Section
5.6(b). The direct amount of any such increase as agreed upon
under this Section 5.6(b)(1) shall be payable by Immunex and
Wyeth pursuant to a separate BIP invoice within [*] ([*]) days
after receipt thereof.
(2) If Buyer can reasonably demonstrate to BIP that any equivalent
materials or components used for producing Bulk Drug Substance,
Drug Product and/or Finished Product can be purchased at a lower
price than BIP's cost of such materials, and that such materials
or components can be supplied on a reasonably consistent and
reliable basis, then BIP shall accept such lower price for
purposes of Section 5.6(b) and Section 5.6(c) below.
(c) [*]
5.7 PAYMENT DUE DATES; PAYMENT CURRENCY.
(a) PAYMENT DUE DATES. Subject to Section 4.4(b) hereof, the Product Price
for Bulk Drug Substance, Drug Product and/or Finished Product
delivered to Immunex, Wyeth and/or their respective designees under
this Agreement shall be payable to BIP by the Party taking delivery
within [*] ([*]) days from the date of the invoice therefor and
receipt of the related delivery.
(b) PAYMENT CURRENCY. All payments due to BIP under this Agreement shall
be made in (1) [*], as set forth in Section 5.7(c) below and (2) [*],
in each case by wire transfer to an account to be designated in
writing by BIP from time to time.
(c) [*]
5.8 RELIEF FROM ANNUAL SURCHARGE.
An Annual Surcharge shall not be payable hereunder for any Calendar Year(s)
(a) in which BIP fails to deliver Bulk Drug Substance hereunder in
sufficient quantities to fill actual Firm Orders for Bulk Drug
Substance for such Calendar Year(s),
(b) under the circumstances set forth in Section 3.2 hereof; and
(c) under the circumstances set forth in Section 20.5(b) hereof.
5.9 SHIFT FROM DEUTSCHE MARK TO EURODOLLAR; EUROPEAN UNION EURODOLLAR
CONVERSION.
As of January 1, 1999, the "EURO" will replace the Deutsche Mark at the
fixed official exchange rate announced by the European Central Bank and
shall be the valid currency in Europe from that date forward. Consequently,
all amounts in this Agreement shown in Deutsche Mark shall be converted to
the Euro at this fixed official exchange rate and the word "Deutsche Mark"
or "DM" shall automatically be replaced by "Euro" throughout this
Agreement. [*].
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ARTICLE 6. BIP PRODUCT WARRANTIES; SPECIFICATIONS
6.1 WARRANTIES BY BIP.
(a) PRODUCT WARRANTIES. BIP hereby warrants to Immunex and Wyeth that the
Bulk Drug Substance, Drug Product and Finished Product, at the time of
sale and shipment to Immunex, Wyeth and/or their respective designees
by BIP hereunder shall:
(1) with respect to Bulk Drug Substance, conform to the Bulk Drug
Substance Specifications;
(2) with respect to Drug Product, conform to the Drug Product
Specifications;
(3) with respect to Finished Product, conform to the Finished Product
Specifications;
(4) be manufactured in compliance with the requirements of cGMP;
(5) be manufactured in compliance with the requirements of all
applicable national, state and local laws, ordinances and
governmental rules and regulations of Germany and the EMEA; and
(6) be transferred free and clear of any liens or encumbrances of any
kind.
The warranties set forth in this Section 6.1 shall be continuing
warranties and shall be applicable to all Bulk Drug Substance, Drug
Product and Finished Product shipped or delivered by BIP to Immunex,
Wyeth and/or their respective designees hereunder.
(b) BIBERACH FACILITY WARRANTIES. BIP hereby warrants that it owns or
lawfully controls the Biberach Facility, [*].
6.2 DISCLAIMER BY BIP.
BIP makes no warranty that the Bulk Drug Substance, Drug Product or the
Finished Product will be merchantable or fit for any particular purpose,
nor does BIP make any other warranties with respect to the Bulk Drug
Substance, Drug Product or the Finished Product, except as expressly stated
in this Agreement.
6.3 SPECIFICATION CHANGES.
(a) SPECIFICATION CHANGES. In the event that Immunex and Wyeth wish to
change the Specifications, or in the event Immunex and Wyeth are
required to change the Specifications pursuant to applicable law, rule
or regulation or in response to the order or request of a governmental
authority or regulatory body, the following provisions will apply.
(1) Buyer shall promptly advise BIP in writing of any such change(s)
to the Specifications, and BIP shall promptly advise Buyer as to
any scheduling and/or Product Price adjustments which may result
from any such change(s), if any. The notification and approval
procedure shall be in accordance with standard operating
procedures (I.E., change control procedures) agreed upon by Buyer
and BIP from time to time.
(2) Prior to implementation of such change(s) to the Specifications,
the Parties agree to negotiate in good faith in an attempt to
reach agreement on (i) the new Product Price, if any, for any
Bulk Drug Substance, Drug Product and/or Finished Product
manufactured hereunder by BIP which embodies such change(s) to
the Specifications, giving due consideration to the effect of
such change(s) on BIP's direct manufacturing costs for Bulk Drug
Substance, Drug Product and/or Finished Product and (ii) any
other amendments to this Agreement which may be necessitated by
such changes (E.G., an adjustment to the lead time for Firm
Orders).
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(3) Buyer will reimburse BIP for the reasonable and necessary
expenses incurred by BIP as a result of any such change(s) to the
Specifications, including, but not limited to, reimbursing BIP
for its validation and analytical development costs and capital
expenditure costs.
(4) BIP shall cooperate with Immunex and Wyeth in good faith to
implement all changes to the Specifications as soon as
practicable after notice thereof, but in any event within [*]
([*]) days' "lead time," unless otherwise agreed upon by the
Parties or required by an applicable regulatory authority. Buyer
shall not unreasonably require BIP to implement changes to the
Specifications within such [*] ([*])-day period if such changes
would typically require BIP a longer period of time to implement.
(5) If any such change(s) to the Specifications renders obsolete or
unusable any raw materials for Bulk Drug Substance or packaging
components for Drug Product or Finished Product, and to the
extent such raw materials or packaging components may not be
either returned to the appropriate vendor for a credit or
utilized by BIP for its other manufacturing operations, Buyer
shall purchase from BIP, at BIP's Acquisition Cost, that amount
of inventory of such raw materials and/or packaging components,
as the case may be, so rendered obsolete or unusable, not to
exceed the amount of such raw materials and/or packaging
components which would have been required for BIP to manufacture
and supply the total quantity of Bulk Drug Substance, Drug
Product and/or Finished Product specified in Firm Orders issued
hereunder.
(b) PROCEDURE FOR SPECIFICATION CHANGES BY BIP. BIP shall not change the
Specifications, the Process, or any test method or procedures for
manufacturing Bulk Drug Substance, Drug Product or Finished Product
without the prior written approval of the Buyer. The procedure for
deviation and change control approval shall be set forth in standard
operating procedures agreed upon by the Parties from time to time.
(c) [*]
(d) BIP RESPONSIBILITY. Notwithstanding anything herein to the contrary,
neither Immunex or Wyeth shall have any obligation to reimburse BIP
for any expenses (other than payment of the Product Price) incurred by
BIP which are related to enabling BIP to manufacturer Bulk Drug
Substance, Drug Product and Finished Product in conformance with then
current Specifications and in compliance with cGMP.
(e) POST-FDA PRODUCT APPROVAL PROCESS MODIFICATIONS.
(1) Any post-FDA Product approval modifications to the Process shall
be subject to mutual agreement of the Parties, such approval not
to be unreasonably withheld.
(2) [*]
(3) If the Parties, after good faith discussions, are unable to
reasonably determine that particular post-FDA Product approval
modifications to the Process agreed upon hereunder will benefit
both Buyer and BIP, Buyer will (unless otherwise agreed upon by
BIP) reimburse BIP for the reasonable and necessary expenses
incurred by BIP which are directly related to enabling BIP to
manufacture Bulk Drug Substance, Drug Product and Finished
Product in accordance with any such particular post-FDA Product
approval modifications to the Process.
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ARTICLE 7. PACKAGING
7.1 IN GENERAL.
BIP shall package and label the Drug Product according to the Drug Product
Specifications and according to packaging procedures mutually agreed upon
by Buyer and BIP. To the extent Finished Product is the subject of Firm
Orders hereunder, BIP shall package and label the Finished Product
according to the Finished Product Specifications and according to packaging
procedures mutually agreed upon by Buyer and BIP.
7.2 ARTWORK FOR FINISHED PRODUCT.
Within a reasonable time prior to the first Delivery Date of Finished
Product hereunder, and at least [*] ([*]) days prior to any subsequent
modification to the artwork for Finished Product, Buyer shall in a timely
manner provide at no cost to BIP, the digital artwork for all packaging
components to be used in the manufacture of Finished Product for the
Immunex Territory and the Wyeth Territory, which artwork shall meet the
Finished Product Specifications. Notwithstanding the foregoing, BIP shall
use its reasonable efforts to accommodate modifications to such artwork in
a shorter time period.
ARTICLE 8. CLAIMS
8.1 CLAIMS.
(a) NOTICE OF CLAIMS. In the event that any Bulk Drug Substance, Drug
Product or Finished Product delivered hereunder shall fail to conform
with any warranty or any of the Specifications applicable thereto,
Buyer may reject the same after production or after shipment by giving
written notice thereof to BIP within [*] ([*]) days after shipment (or
in the case of a latent defect, within [*] ([*]) days after discovery
of such latent defect, but in no case later than [*] after delivery to
the designated carried specified by Buyer in Biberach, Germany), which
notice shall specify the manner in which such Bulk Drug Substance,
Drug Product or Finished Product, as the case may be, fails to conform
to any warranty or Specification applicable thereto. Alternatively,
rather than initially issuing a notice of rejection, Buyer may give
written notice to BIP within the time period set forth in this Section
8.1(a) of a Buyer decision to investigate whether a potentially
nonconforming shipment should be rejected, which investigation shall,
unless otherwise agreed upon by Buyer and BIP, be completed within the
time period set forth in this Section 8.1(a).
(b) NO BIP LIABILITY. If it is determined by agreement of the Parties (or
in the absence of such agreement, by a mutually acceptable qualified
Third Party whose fees shall be paid by the non-prevailing Party) that
the nonconformity is due to damage to such Bulk Drug Substance, Drug
Product or Finished Product caused by the Party receiving such
shipment or its agents subsequent to delivery of such Bulk Drug
Substance, Drug Product or Finished Product by BIP to the designated
carried specified by Buyer in Biberach, Germany, BIP shall have no
liability to such Party with respect thereto.
(c) BIP LIABILITY; REPLACEMENT OF PRODUCT. If it is determined by
agreement of the Parties (or in the absence of such agreement, by a
mutually acceptable qualified Third Party whose fees shall be paid by
the non-prevailing Party) that the nonconformity is caused by BIP, BIP
shall as soon as reasonably possible if available from either safety
stock (see Section 4.2(e) hereof) or from an existing production
campaign, but if not so available, then in no event later than [*]
([*]) days with respect to Bulk Drug Substance and [*] ([*]) days with
respect to Drug Product or Finished Product (and within the maximum
available capacity of the Biberach Facility), replace such
nonconforming Bulk Drug Substance, Drug Product or Finished Product,
as the case may be, with conforming Bulk Drug Substance, Drug Product
or Finished Product, as the case may be, at no additional cost to
Immunex and Wyeth.
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(d) DISPOSITION OF NONCONFORMING PRODUCT. In any case where Immunex or
Wyeth expects to make a claim against BIP with respect to damaged or
otherwise nonconforming Bulk Drug Substance, Drug Product or Finished
Product, Immunex and Wyeth shall not dispose of or allow to be
disposed such Bulk Drug Substance, Drug Product or Finished Product,
as the case may be, without written authorization and instructions of
BIP either to dispose of or return to BIP such Bulk Drug Substance,
Drug Product or Finished Product. Upon written request by Buyer, BIP
agrees promptly to give the requesting Party such authorization and
instructions within a reasonable period of time.
ARTICLE 9. MANUFACTURING AUDITS, CERTIFICATE OF COMPLIANCE; REGULATORY MATTERS
9.1 MANUFACTURING AUDITS.
(a) ANNUAL AUDIT. BIP shall permit Immunex and Wyeth to conduct an "ANNUAL
AUDIT" once each Calendar Year during the Supply Term upon at least
[*] ([*]) days' prior notice to BIP and during BIP's normal business
hours, (1) to review the originals of all batch records and other
primary documents at BIP's facilities relating to the Product and in
connection with BIP's manufacturing activities hereunder and (2) to
conduct manufacturing audits at the Biberach Facility. To the extent
practicable, any such Annual Audit shall be conducted jointly by
Immunex and Wyeth personnel.
(b) EVENT AUDIT.
(1) In addition to the Annual Audit referred to in Section 9.1(a)
above, BIP shall permit Immunex and Wyeth to conduct an Event
Audit (as defined below) from time to time during the Supply Term
upon such reasonable prior notice to BIP as is appropriate under
the circumstances and during BIP's normal business hours, (i) to
review the originals of all batch records and other primary
documents at BIP's facilities relating to the Product and in
connection with BIP's manufacturing activities hereunder and (ii)
to conduct manufacturing audits at the Biberach Facility.
(2) An "EVENT AUDIT" shall be permitted in any of the following
circumstances:
(i) BIP shall have received a "WARNING LETTER" from the FDA or
EMEA relating to the manufacture, packaging or labeling of
the Product by BIP;
(ii) Buyer has rejected a shipment of Bulk Drug Substance, Drug
Product or Finished Product for a failure to meet any
warranty or Specifications relating thereto;
(iii) Immunex or Wyeth shall have received a series of complaints
(I.E., [*]) from Third Parties within any Calendar Year
relating to the manufacturing, packaging or labeling process
of such Drug Product or Finished Product; or
(iv) in the event of unusual data trends with respect to the
manufacturing, testing, packaging or labeling of Bulk Drug
Substance, Drug Product or Finished Product by BIP,
including, but not limited to, a series of lot failures or
stability failures.
(c) TERMS GENERALLY APPLICABLE TO AUDITS. To the extent practicable,
any Annual Audit or Event Audit shall be conducted jointly by
Immunex and Wyeth personnel and by a reasonable number of such
personnel. During any Annual Audit or Event Audit, as the case
may be, and upon Immunex's or Wyeth's request, BIP shall make
available for Immunex's and Wyeth's review BIP's batch records
for Bulk Drug Substance, Drug Product and/or Finished Product,
other raw materials and packaging components used in the
manufacture or packaging of Bulk Drug Substance, Drug Product
and/or Finished Product hereunder, and quality assurance and
quality control documents, procedures and test results for Bulk
Drug Substance, Drug Product and/or Finished Product, and any
documents required under cGMPs or applicable regulatory
guidelines. BIP shall use its reasonable efforts to facilitate
any such Annual Audits and Event Audits. BIP
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shall provide written responses to the auditing Party within [*]
([*]) days after BIP's receipt of any audit observations
delivered by the auditing Party. While at any BIP facility,
Immunex and Wyeth personnel shall comply with all applicable BIP
security and safety policies and procedures.
9.2 CERTIFICATE OF ANALYSIS AND CERTIFICATE OF COMPLIANCE; MANUFACTURING
ISSUES; RELEASE ACTIVITIES; RECORDS.
(a) CERTIFICATE OF ANALYSIS AND CERTIFICATE OF COMPLIANCE; MANUFACTURING
ISSUES; RELEASE ACTIVITIES. BIP shall furnish the following to
Immunex, Wyeth and/or their respective designee on or before the date
of each shipment or invoice with respect to Bulk Drug Substance, Drug
Product and/or Finished Product hereunder: (1) a Certificate of
Analysis; (2) a Certificate of Compliance; and (3) [*]. In addition,
for each Batch of Bulk Drug Substance, Drug Product and/or Finished
Product manufactured hereunder, Buyer and BIP shall each perform their
respective release activities as are set forth in standard operating
procedures agreed upon by Buyer and BIP from time to time. BIP shall
also furnish to Buyer any testing samples of Bulk Drug Substance, Drug
Product and/or Finished Product that may be reasonably requested by
Buyer for assay and testing purposes.
(b) RECORDS. BIP shall maintain all of its manufacturing and analytical
records, all records of shipments of Bulk Drug Substance, Drug Product
and/or Finished Product hereunder, and all validation data relating to
Bulk Drug Substance, Drug Product and/or Finished Product for the time
periods required by applicable laws and regulations of the FDA and
EMEA. BIP agrees that, in response to any complaint or in the defense
by Immunex and/or Wyeth (as applicable) of any litigation, hearing,
regulatory proceeding or investigation relating to Bulk Drug
Substance, Drug Product and/or Finished Product, BIP shall use
reasonable efforts to make available to Immunex and/or Wyeth (as
applicable) during normal business hours and upon reasonable prior
written notice, such BIP employees and records reasonably necessary to
permit the effective response to, defense of, or investigation of such
matters, subject to appropriate confidentiality protections. Immunex
and/or Wyeth (as applicable) shall reimburse BIP for all reasonable
out-of-pocket costs and expenses incurred by BIP in connection with
the performance of BIP's obligations under the preceding sentence.
9.3 COMPLAINTS.
(a) IMMUNEX TERRITORY. Immunex shall maintain complaint files in accordance
with cGMP for the Immunex Territory. BIP shall provide Immunex and Wyeth
with a copy of any complaints received by BIP from the Immunex Territory
with respect to the Product within [*] ([*]) hours of receipt of notice
thereof. Immunex shall promptly provide BIP and Wyeth with a copy of any
complaints received by Immunex from the Immunex Territory relating to the
manufacture of the Product. Immunex or its designee shall have
responsibility for responding to all complaints from the Immunex Territory,
and for promptly providing BIP and Wyeth with a copy of any responses to
complaints, relating to the manufacture of the Product. Immunex or its
designee shall have responsibility for reporting any complaints relating to
the Product from the Immunex Territory to the FDA and any other regulatory
authority in the Immunex Territory, including, but not limited to,
complaints relating to the manufacture of the Product, as well as adverse
drug experience reports. BIP shall provide a response to Immunex, with a
copy to Wyeth, within [*] ([*]) days of a written request therefor with
respect to any complaint by a Third Party in the Immunex Territory
regarding the manufacturing, packaging or storage of the Product by BIP.
(b) WYETH TERRITORY. Wyeth shall maintain complaint files in accordance with
cGMP for the Wyeth Territory. BIP shall provide Wyeth and Immunex with a
copy of any complaints received by BIP from the Wyeth Territory with
respect to the Product within [*] ([*]) hours of receipt of notice thereof.
Wyeth shall promptly provide BIP and Immunex with a copy of any complaints
received by Wyeth from the Wyeth Territory relating to the manufacture of
the Product. Wyeth or its designee shall have responsibility for responding
to all complaints from the Wyeth Territory, and for promptly providing BIP
and Immunex with a copy of any responses to complaints, relating to the
manufacture of the Product. Wyeth or its designee shall have responsibility
for reporting any complaints relating to the Product from the Wyeth
Territory to the EMEA and any other regulatory authority in the Wyeth
Territory, including, but not limited to, complaints relating to the
manufacture of the Product, as well
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as adverse drug experience reports. BIP shall provide a response to Wyeth,
with a copy to Immunex, within [*] ([*]) days of a written request therefor
with respect to any complaint by a Third Party in the Wyeth Territory
regarding the manufacturing, packaging or storage of the Product by BIP.
9.4 REGULATORY CORRESPONDENCE.
(a) NOTIFICATION TO OTHER PARTIES OF REGULATORY CORRESPONDENCE. Each Party
shall promptly (and in any event, within [*] days of the date of
receipt of notice) notify the other Parties in writing of, and shall
provide the other Parties with copies of, any correspondence and other
documentation received or prepared by such Party in connection with
any of the following events: (1) receipt of a regulatory letter,
Warning Letter, or similar item, from the FDA, EMEA or any other
regulatory authority directed to the manufacture, packaging, and
storage of Bulk Drug Substance, Drug Product and/or Finished Product,
or in connection with any general cGMP inspections applicable to any
BIP facility associated with BIP's activities hereunder; (2) any
recall, market withdrawal or correction of any Batch of Bulk Drug
Substance, Drug Product and/or Finished Product from any market in the
Immunex Territory or Wyeth Territory; and (3) any regulatory comments
relating to the manufacture of Bulk Drug Substance, Drug Product
and/or Finished Product requiring a response or action by a Party.
(b) REGULATORY CORRESPONDENCE REQUIRING A BIP RESPONSE. In the event BIP
receives any regulatory letter or comments from any federal, state or
local regulatory authority directed to its manufacture of Bulk Drug
Substance, Drug Product and/or Finished Product requiring a response
or action by BIP, including, but not limited to, receipt of a Form 483
(Inspectional Observations) or a Warning Letter, Immunex and/or Wyeth
(as applicable) promptly will provide BIP with any data or information
required by BIP in preparing any response relating to BIP's
manufacture of Bulk Drug Substance, Drug Product and/or Finished
Product, and will cooperate fully with BIP in preparing such response.
BIP shall provide Immunex and Wyeth with a copy of each such response
for Immunex's and Wyeth's review and comment prior to BIP's submission
of the response. BIP shall give all due consideration to any Immunex
and Wyeth comments to each such proposed BIP response.
9.5 INSPECTIONS; NON-COMPLIANCE; FAILURE TO MANUFACTURE.
(a) INSPECTIONS. In the event the Biberach Facility will be inspected by
representatives of any federal, state or local regulatory agency
directed to BIP's manufacture of Bulk Drug Substance, Drug Product
and/or Finished Product, BIP shall notify Immunex and Wyeth within [*]
([*]) hours upon learning of such inspection, and shall supply Immunex
and Wyeth with copies of any correspondence or portions of
correspondence which relate to Bulk Drug Substance, Drug Product
and/or Finished Product. [*]
(b) NON-COMPLIANCE; FAILURE TO MANUFACTURE. In the event that any
regulatory agency shall determine, as a result of an inspection
described in Section 9.5(a) above, that BIP is not in compliance with
applicable laws or regulations, BIP shall at its expense (but subject
to Section 6.3(b) hereof) use all reasonable efforts to cure such
non-compliance as soon as practicable if such determination was made
by the FDA or the EMEA. Any potential BIP curative efforts referred to
in the immediately preceding sentence related to any such
determinations by regulatory agencies other than the FDA or the EMEA
shall be mutually agreed upon by the Parties. In the event BIP
receives a Warning Letter from the FDA or EMEA and as a result BIP is
unable to manufacture Bulk Drug Substance, Drug Product and/or
Finished Product for a particular period, then the provisions of
Section 20.4 and Section 20.5 hereof shall apply, MUTATIS MUTANDIS,
it being understood that BIP's inability to manufacture Bulk Drug
Substance, Drug Product and/or Finished Product for the reasons set
forth in this Section 9.5 shall not automatically be deemed a Force
Majeure Event if BIP's inability to manufacture was caused by BIP's
gross negligence or willful misconduct.
9.6 REGULATORY CONTACTS.
Each Party shall notify the other Parties in a timely manner of any
meetings or substantive discussions with the FDA, EMEA or any other
regulatory authority that directly relate to the manufacture, supply and/or
quality control of the Product manufactured by BIP hereunder, and the other
Parties shall have the right but not the obligation to have at least one
representative participate in such meetings or discussions referred to
above.
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ARTICLE 10. RECALLS
10.1 RECALLS.
(a) IMMUNEX TERRITORY. Each Party shall notify the other Parties promptly
(and in any event within [*] days of receipt of written notice) if any
Batch of Bulk Drug Substance, Drug Product or Finished Product is
alleged or proven to be the subject of a recall, market withdrawal or
correction in any country in the Immunex Territory. Immunex and BIP
shall cooperate in the handling and disposition of such recall, market
withdrawal or correction in the Immunex Territory; provided, however,
in the event of a disagreement as to any matters related to such
recall, market withdrawal or correction, other than the determination
of who shall bear the costs as set forth in the immediately following
sentence, Immunex, after consultation with Wyeth, shall have final
authority with respect to such matters in the Immunex Territory, which
authority shall be exercised reasonably and in good faith. Immunex
shall bear the cost of all recalls, market withdrawals or corrections
of Bulk Drug Substance, Drug Product or Finished Product in the
Immunex Territory unless such recall, market withdrawal or correction
shall have been the result of BIP's breach of any of its warranties
set forth in Section 6.1 hereof or shall have been the result of BIP's
grossly negligent breach of any of its obligations hereunder, in which
case BIP shall upon substantiation bear the cost of such recall,
market withdrawal or correction. Immunex or its agent shall in all
events be responsible for conducting any recalls, market withdrawals
or corrections with respect to the Product in the Immunex Territory.
(b) WYETH TERRITORY. Each Party shall notify the other Parties promptly
(and in any event within [*] days of receipt of written notice) if any
Batch of Bulk Drug Substance, Drug Product or Finished Product is
alleged or proven to be the subject of a recall, market withdrawal or
correction in any country in the Wyeth Territory. Wyeth and BIP shall
cooperate in the handling and disposition of such recall, market
withdrawal or correction in the Wyeth Territory; provided, however, in
the event of a disagreement as to any matters related to such recall,
market withdrawal or correction, other than the determination of who
shall bear the costs as set forth in the immediately following
sentence, Wyeth, after consultation with Immunex, shall have final
authority with respect to such matters in the Wyeth Territory, which
authority shall be exercised reasonably and in good faith. Wyeth shall
bear the cost of all recalls, market withdrawals or corrections of
Bulk Drug Substance, Drug Product or Finished Product in the Wyeth
Territory unless such recall, market withdrawal or correction shall
have been the result of BIP's breach of any of its warranties set
forth in Section 6.1 hereof or shall have been the result of BIP's
grossly negligent breach of any of its obligations hereunder, in which
case BIP shall upon substantiation bear the cost of such recall,
market withdrawal or correction. Wyeth or its agent shall in all
events be responsible for conducting any recalls, market withdrawals
or corrections with respect to the Product in the Wyeth Territory.
(c) [*]
ARTICLE 11. QUALITY ASSURANCE; QUALITY CONTROL; VALIDATION; STABILITY
11.1 RESPONSIBILITY FOR QUALITY ASSURANCE AND QUALITY CONTROL.
Responsibility for quality assurance and quality control of Bulk Drug
Substance, Drug Product and Finished Product shall be allocated between
Buyer and BIP as set forth in standard operating procedures agreed upon by
Buyer and BIP from time to time. In general, (a) BIP shall be responsible
for performing a manufacturer's lot release on all Bulk Drug Substance,
Drug Product and Finished Product and (b) Buyer shall be responsible for
performing final release of all Bulk Drug Substance, Drug Product and
Finished Product.
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11.2 VALIDATION OF BIBERACH FACILITY, UTILITIES AND EQUIPMENT. BIP
shall maintain cGMP validation status on the Biberach Facility, as well as
the utilities and equipment used in the manufacture of Bulk Drug Substance,
Drug Product and Finished Product, and shall make validation reports
applicable thereto available to Buyer for onsite review.
11.3 VALIDATION OF PRODUCT MANUFACTURING PROCESS.
BIP shall maintain cGMP validation status of process procedures with
respect to the manufacturing, filling, packaging, shipping and cleaning
procedures that are used in the manufacture of Bulk Drug Substance, Drug
Product and Finished Product, and shall provide copies of validation
reports applicable thereto to Buyer on a frequency and in a format to be
agreed upon by BIP and Buyer.
11.4 CHANGE CONTROL.
Any changes to the Biberach Facility, utilities, equipment or processes
used in the manufacturing, filling, packaging, shipping and cleaning with
respect to the manufacture of Bulk Drug Substance, Drug Product and
Finished Product shall occur pursuant to change control procedures agreed
upon by BIP and Buyer. Such change control procedures shall require BIP to
obtain approval of the Buyer prior to the implementation of any change on
Product specific documents having an impact on the respective
Specifications for Bulk Drug Substance, Drug Product and Finished Product.
BIP shall have responsibility for validating any such changes to cGMP
standards.
11.5 STABILITY.
(a) STABILITY TESTING. BIP shall conduct all necessary stability testing
with Bulk Drug Substance Lots to comply with cGMP. Buyer shall inform
BIP from time to time of any additional stability testing to be done
by BIP in order to comply with any other applicable regulatory
guidelines. All such stability testing shall be conducted in
accordance with stability protocols agreed upon by Buyer. Such
stability testing shall include annual stability lots, supportive data
for process changes and deviations or reprocessing of Bulk Drug
Substance, Drug Product and Finished Product. Such stability testing
shall also include testing as agreed upon by the Parties to validate
the lead times for shipment, the shelf life of Bulk Drug Substance,
Drug Product and Finished Product, and the Specifications applicable
to shipment, storage and handling of Bulk Drug Substance, Drug Product
and Finished Product.
(b) TRENDING OF STABILITY DATA. BIP shall also perform routine trending of
stability data and shall provide such data to Buyer at intervals to be
agreed upon by the Parties. Buyer shall approve all stability
dispositions and changes to stability protocols or stability
specifications as defined in the appropriate standard operating
procedure.
ARTICLE 12. BIP'S OBLIGATIONS AS MANUFACTURER
12.1 CONTROL OF MASTER CELL BANK AND WORKING CELL BANK.
BIP shall maintain a portion of the Master Cell Bank and Working Cell Bank
in safe and secure storage under its control in its facilities and shall
not permit the transfer of the Master Cell Bank or Working Cell Bank to any
Third Party that is not specifically authorized by Immunex and Wyeth. BIP
shall comply with all applicable FDA and EMEA regulatory requirements
relating to general safety and biosafety in handling the Master Cell Bank
and Working Cell Bank and any raw materials used in manufacturing Bulk Drug
Substance, Drug Product and Finished Product hereunder.
12.2 MANUFACTURING CAPABILITIES.
BIP shall at all relevant times throughout the Supply Term (a) own or
lawfully control all the necessary plant, equipment and facilities and (b)
have sufficient numbers of appropriately qualified personnel, in each case
to enable BIP to manufacture Bulk Drug Substance, Drug Product and Finished
Product in accordance with the Specifications and in quantities sufficient
to fulfill the Firm Orders made within the Maximum Request under this
Agreement.
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12.3 COMPLIANCE WITH LAW.
BIP shall perform all work hereunder, including, but not limited to,
manufacturing, labeling, packaging and shipping all Bulk Drug Substance,
Drug Product and Finished Product, in conformance with cGMP and in
conformance with all applicable national, state and local laws, ordinances
and governmental rules or regulations of Germany and the EMEA.
12.4 BIBERACH FACILITY.
BIP undertakes that the Biberach Facility where BIP will manufacture Bulk
Drug Substance, Drug Product and Finished Product, and all the procedures
used in manufacturing and processing, shall be in accordance with cGMP and
shall enable BIP to maintain manufacturing of Bulk Drug Substance, Drug
Product and Finished Product according to the applicable Specifications.
12.5 STORAGE FACILITIES.
BIP shall provide sufficient and suitable storage facilities that meet the
Specifications for Bulk Drug Substance, Drug Product and Finished Product
for all quantities of Bulk Drug Substance, Drug Product and Finished
Product ordered according to the provisions of this Agreement.
12.6 REGULATORY DOCUMENTATION.
(a) IMMUNEX TERRITORY.
(1) BIP shall provide Immunex in a timely manner with a copy of any
BIP manufacturing and control records for Bulk Drug Substance,
Drug Product and Finished Product which are required for any
Immunex regulatory filings with respect to the Product in the
Immunex Territory, which records shall be in BIP's standard
formats unless otherwise agreed upon by Immunex and BIP.
(2) BIP shall provide Immunex with all documents reasonably requested
by Immunex relating to the FDA's and EMEA's pre-approval
inspection of the Biberach Facility, including, but not limited
to, development reports, chemistry, manufacturing and controls
("CMC") sections of Immunex's BLA for the Product, as well as
available stability data. In addition, BIP and Wyeth shall each
provide Immunex within [*] ([*]) days after the end of each
annual reporting period for the Product (as calculated consistent
with appropriate regulations and guidelines) with such
information as is reasonably requested in writing by Immunex for
the preparation of the annual report with respect to the
manufacturing and control of the Product for such annual
reporting period. Thereafter, Immunex shall provide to BIP and
Wyeth at least [*] ([*]) days prior to Immunex's filing with the
respective regulatory authorities a copy of such Immunex annual
report, and Immunex shall take into consideration any BIP and
Wyeth comments to such annual report with respect to the Product.
(b) WYETH TERRITORY.
(1) BIP shall provide Wyeth in a timely manner with a copy of any BIP
manufacturing and control records for Bulk Drug Substance, Drug
Product and Finished Product which are required for any Wyeth
regulatory filings with respect to the Product in the Wyeth
Territory, which records shall be in BIP's standard formats
unless otherwise agreed upon by Wyeth and BIP.
(2) BIP shall provide Wyeth with all documents reasonably requested
by Wyeth relating to the FDA's and EMEA's pre-approval inspection
of the Biberach Facility, including, but not limited to,
development reports, CMC sections of Wyeth's EMEA-dossier for the
Product, as well as available stability data. In addition, BIP
and Immunex shall each provide Wyeth within [*] ([*]) days after
the end of each annual reporting period for the Product (as
calculated consistent with appropriate regulations and
guidelines) with such information as is reasonably requested in
writing by Wyeth for the preparation of the annual report with
respect to the manufacturing and control of the Product for such
annual reporting period. Thereafter, Wyeth shall provide to BIP
and Immunex at least [*] ([*]) days prior to Wyeth's filing with
the respective regulatory authorities a copy of such Wyeth annual
report, and
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Wyeth shall take into consideration any BIP and Immunex comments
to such annual report with respect to the Product.
(c) REGULATORY FILING GROUP.
The Parties shall establish a working group consisting of one or more
representatives of each Party (the "REGULATORY FILING GROUP") to
coordinate the activities of and the flow of information among the
Parties in support of regulatory filings with respect to the Product
in the Territory. The Regulatory Filing Group shall not have decision
making authority, but shall promote cooperation and assistance
necessary to support regulatory filings with respect to the Product.
Meeting schedules and methods of communication shall be informally
established by the Regulatory Filing Group. Each Party may change its
representative(s) in the Regulatory Filing Group at any time for any
reason.
12.7 MATERIALS AND INFORMATION TO BE DELIVERED BY BIP.
(a) [*]
(b) [*]
(c) MANUFACTURING DATA. To assist Buyer in its forecasting and ordering of
Bulk Drug Substance, Drug Product and Finished Product hereunder, BIP
shall collect data on the yield from each Bulk Drug Substance Lot, as
well as the date of manufacture of each such Bulk Drug Substance Lot
and each Batch of Drug Product and Finished Product. BIP shall furnish
such data to Buyer on a regular basis throughout the Supply Term in
the form of a monthly manufacturing status report in BIP's standard
format unless otherwise agreed upon by Buyer and BIP.
(d) [*]
(e) OTHER INFORMATION. BIP shall provide such other information and
materials as are agreed upon by the Parties from time to time.
12.8 RETENTION AND RESERVE SAMPLES. BIP shall isolate, identify and, subject to
Section 19.3(e)(3) hereof, retain retention and reserve samples of all raw
materials and in-process production steps used in the production of Bulk
Drug Substance, Drug Product and Finished Product for such period as agreed
upon by the Parties. BIP shall retain quantities of such retention and
reserve samples at least equal to [*] ([*]) times the amounts required to
perform full testing of such retention and reserve samples. All retention
and reserve samples shall be promptly provided by BIP to Buyer at Buyer's
request, provided that BIP may retain one set of such samples for
documentation purposes. Shipment of such samples shall be at Buyer's cost
and risk.
12.9 ANALYTICAL TESTING. BIP shall not perform any analytical testing on Bulk
Drug Substance, Drug Product or Finished Product unless agreed to by Buyer.
In addition, any decision hereunder to implement any new analytical methods
or testing with respect to Bulk Drug Substance, Drug Product or Finished
Product shall in each case be a joint decision of Buyer and BIP.
12.10 THIRD PARTY VENDORS. The Parties acknowledge that effectively managing and
coordinating the Third Party Vendors (as defined in Section 6.3(c) hereof)
is extremely important and in each of the Parties' best interests. [*]
12.11 DOCUMENTATION. Any records and documentation provided to Immunex and/or
Wyeth hereunder in connection with BIP's manufacture of Bulk Drug
Substance, Drug Product or the Finished Product shall be accurate in all
material respects.
12.12 YEAR 2000. BIP is currently working to ensure that the functionality and
performance of the Biberach Facility and the computer systems and computer
programs which affect or may affect the manufacturing or testing of Bulk
Drug Substance, Drug Product and/or Finished Product hereunder will not be
affected
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by dates prior to, during and after the year 2000. BIP shall use all
commercially reasonable efforts to ensure that it will be able to fulfill
the Firm Orders made within the Maximum Request under this Agreement prior
to, during and after the year 2000.
ARTICLE 13. LICENSE GRANTS
13.1 LICENSE TO USE OF CELL LINE AND INTELLECTUAL PROPERTY. Immunex and Wyeth
hereby grant to BIP a limited right and license to use the Cell Line,
Process and Immunex/Wyeth Confidential Information solely for the purpose
of manufacturing and delivering Bulk Drug Substance, Drug Product and
Finished Product hereunder.
13.2 LICENSE TO BIP CONFIDENTIAL INFORMATION. In consideration of the
development fees previously paid to BIP by Immunex and Wyeth under the
Phase I Agreement and Phase II Agreement, and in consideration of amounts
paid hereunder, BIP hereby grants to Immunex and Wyeth a worldwide,
royalty-free, perpetual, license to use BIP Confidential Information that
is or may during the Supply Term be used in carrying out the Process to
test, develop, register, make, have made, use, market, distribute, import,
offer for sale and sell the Product. Such license to Immunex and Wyeth
shall be (1) exclusive as to BIP and all Third Parties for any Product
specific BIP Confidential Information, subject only to BIP's retained
rights under this Agreement to develop and manufacture Product solely on
behalf of Immunex and Wyeth, and (2) non-exclusive for any non-Product
specific BIP Confidential Information. With respect to the Product, Immunex
and Wyeth's license rights to make and have made as set forth in this
Section 13.2 shall be applicable in the circumstances set forth in Sections
3.2 and 3.3 hereof, and shall also be applicable after the Supply Term.
ARTICLE 14. USE OF DATA; OWNERSHIP OF INTELLECTUAL PROPERTY; [*]; FUTURE
ACTIVITIES
14.1 USE OF MANUFACTURING DATA. In consideration of the amounts paid hereunder,
BIP shall carry out its obligations hereunder and BIP shall transfer and/or
otherwise make available to Immunex and Wyeth in accordance with the terms
hereof all relevant information obtained and reasonably requested by Buyer
in the course of manufacturing the Bulk Drug Substance, Drug Product and
Finished Product. However, this shall not apply to information regarding
BIP's facility and technical equipment. Immunex and Wyeth shall have the
right to use all such transferred information, with the exception of BIP
Confidential Information, for any purpose without further obligation to
BIP.
14.2 OWNERSHIP OF INTELLECTUAL PROPERTY. Immunex and Wyeth shall jointly own the
Cell Line, Master Cell Bank, Working Cell Bank, and the Product, as well as
any and all improvements or enhancements made to the Cell Line, Master Cell
Bank, Working Cell Bank and/or the Product while in BIP's possession or
control. Immunex and Wyeth shall also jointly own all Immunex/Wyeth
Confidential Information. BIP shall own all BIP Confidential Information,
provided, however, that notwithstanding anything herein to the contrary,
and irrespective of whether any BIP Confidential Information is utilized
with respect to any improvements or enhancements made to the Cell Line,
Master Cell Bank, Working Cell Bank and/or the Product, Immunex and Wyeth
shall be the sole and exclusive owners of the Cell Line, Master Cell Bank,
Working Cell Bank and the Product.
14.3 [*]
14.4 FUTURE ACTIVITIES.
(a) [*]
(b) NON-ASSERTION. Immunex and Wyeth shall not assert any right to use the
Biberach Facility at any future date as a result of its use of the
Biberach Facility pursuant to this Agreement, except as expressly
provided for herein.
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ARTICLE 15. REPRESENTATIONS AND WARRANTIES
15.1 IMMUNEX AND WYETH.
Immunex and Wyeth hereby represent and warrant to BIP that:
(a) Immunex and Wyeth are free to supply the Cell Line and Immunex/Wyeth
Confidential Information to BIP;
(b) Immunex and Wyeth are not aware of any special or unusual hazards
involved in handling the Cell Line or the Product;
(c) Immunex and Wyeth have the corporate power and authority and the legal
right to enter into this Agreement and to perform their respective
obligations hereunder; and
(d) Immunex and Wyeth have taken all necessary corporate action on their
part to authorize the execution and delivery of this Agreement and the
performance of their respective obligations hereunder. This Agreement
has been duly executed and delivered on behalf of Immunex and Wyeth,
and constitutes a legal, valid, binding obligation, enforceable
against Immunex and Wyeth in accordance with its terms.
15.2 BIP.
BIP hereby represents and warrants to Immunex and Wyeth that:
(a) BIP is the owner of the BIP Confidential Information;
(b) BIP owns or lawfully controls the Biberach Facility, and has a
sufficient number of employees with such expertise and experience as
is necessary or appropriate to produce Bulk Drug Substance, Drug
Product and Finished Product in accordance with the terms hereof and
in quantities sufficient to fulfill the Firm Orders made within the
Maximum Request under this Agreement;
(c) BIP is not aware of any special or unusual hazards that would arise as
a result of its carrying out of its obligations hereunder;
(d) BIP has the corporate power and authority and the legal right to enter
into this Agreement and to perform its obligations hereunder; and
(e) BIP has taken all necessary corporate action on its part to authorize
the execution and delivery of this Agreement and the performance of
its obligations hereunder. This Agreement has been duly executed and
delivered on behalf of BIP, and constitutes a legal, valid, binding
obligation, enforceable against BIP in accordance with its terms.
ARTICLE 16. INDEMNIFICATION
16.1 INDEMNIFICATION BY IMMUNEX AND WYETH.
(a) INDEMNIFICATION BY IMMUNEX. Subject to the extent of any
indemnification from BIP pursuant to Section 16.2 below, Immunex shall
indemnify, defend and hold BIP, its Affiliates, and their respective
directors, officers, employees and agents harmless from and against
all losses, damages, liabilities, settlements, penalties, fines, costs
and expenses (including, without limitation, reasonable attorneys'
fees and expenses), (collectively, the "LIABILITIES") to the extent
such Liabilities arise out of or result from (1) any
claim, lawsuit or other action by a Third Party caused by the
manufacture, use, handling, distribution, marketing or sale of the
Bulk Drug Substance, Drug Product or Finished Product in the Immunex
Territory, (2) any material breach of the representations, warranties
and covenants made by Immunex hereunder, or (3) Immunex's grossly
negligent acts or omissions or willful misconduct.
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(b) INDEMNIFICATION BY WYETH. Subject to the extent of any indemnification
from BIP pursuant to Section 16.2 below, Wyeth shall indemnify, defend
and hold BIP, its Affiliates, and their respective directors,
officers, employees and agents harmless from and against all
Liabilities to the extent such Liabilities arise out of or result from
(1) any claim, lawsuit or other action by a Third Party caused by the
manufacture, use, handling, distribution, marketing or sale of the
Bulk Drug Substance, Drug Product or Finished Product in the Wyeth
Territory, (2) any material breach of the representations, warranties
and covenants made by Wyeth hereunder, or (3) Wyeth's grossly
negligent acts or omissions or willful misconduct.
(c) ADDITIONAL INDEMNIFICATION BY IMMUNEX AND WYETH. Immunex and Wyeth
shall indemnify, defend and hold BIP, its Affiliates, and their
respective directors, officers, employees and agents harmless from and
against all Liabilities to the extent such Liabilities arise out of or
result from [*].
16.2 INDEMNIFICATION BY BIP.
Subject to the extent of any indemnification from Immunex and/or Wyeth
pursuant to Section 16.1(a), (b), and (c) above, BIP shall indemnify,
defend and hold Immunex, Wyeth and their respective Affiliates, directors,
officers, employees and agents harmless from and against all Liabilities to
the extent such Liabilities arise out of or result from (a) any material
breach of the representations, warranties and covenants made by BIP under
Sections [*] hereof or (b) BIP's grossly negligent acts or omissions or
willful misconduct in the manufacture or labeling of the Bulk Drug
Substance, Drug Product or Finished Product.
16.3 INDEMNIFICATION PROCEDURES.
(a) IDENTIFICATION OF INDEMNITOR AND INDEMNITEE. An "INDEMNITOR" means
Immunex with respect to Section 16.1(a) hereof, Wyeth with respect to
Section 16.1(b) hereof, Immunex and Wyeth with respect to Section
16.1(c) hereof, and BIP with respect to Section 16.2 hereof. An
"INDEMNITEE" means any of BIP, its Affiliates, and their respective
directors, officers, employees and agents with respect to Section
16.1(a), (b), and (c) hereof, and any of Immunex, Wyeth, and their
respective Affiliates, directors, officers, employees and agents with
respect to Section 16.2 hereof.
(b) INDEMNIFICATION PROCEDURES. An Indemnitee which intends to claim
indemnification under Section 16.1 or 16.2 hereof shall promptly
notify the Indemnitor in writing of any claim, lawsuit or other action
in respect of which the Indemnitee, its Affiliates, or any of their
respective directors, officers, employees and agents intend to claim
such indemnification. The Indemnitee shall permit, and shall cause its
Affiliates and their respective directors, officers, employees and
agents to permit, the Indemnitor, at its discretion, to settle any
such claim, lawsuit or other action and agrees to the complete control
of such defense or settlement by the Indemnitor; provided, however,
such settlement does not adversely affect the Indemnitee's rights
hereunder or impose any obligations on the Indemnitee in addition to
those set forth herein in order for it to exercise such rights. No
such claim, lawsuit or other action shall be settled without the prior
written consent of the Indemnitor and the Indemnitor shall not be
responsible for any legal fees or other costs incurred other than as
provided herein. The Indemnitee, its Affiliates and their respective
directors, officers, employees and agents shall cooperate fully with
the Indemnitor and its legal representatives in the investigation and
defense of any claim, lawsuit or other action covered by this
indemnification. The Indemnitee shall have the right, but not the
obligation, to be represented by counsel of its own selection and
expense.
16.4 SURVIVAL OF INDEMNIFICATION OBLIGATIONS.
The provisions of this Article 16 shall survive the termination or
expiration of this Agreement for a period of [*] ([*]) years.
16.5 DISCLAIMER OF CONSEQUENTIAL DAMAGES.
In no event shall any Party be liable to the other Parties for incidental,
special, or consequential damages, including, but not limited to, any
claims for damages based upon lost profits. The foregoing limitation on
damages shall not be applicable to damages which arise out of the willful
misconduct of a Party.
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16.6 LIMITATION OF LIABILITY OF BIP.
BIP's total liability under this Agreement with respect to any Calendar
Year shall not exceed [*] percent ([*]%) of the aggregate Product Price for
any and all Firm Orders for Bulk Drug Substance, Drug Product and Finished
Product with respect to such Calendar Year. For each year within the period
set forth in Section 16.4 above, the relevant year for calculating BIP's
limitation of liability shall be the last full Calendar Year during the
Supply Term.
ARTICLE 17. CONFIDENTIALITY
17.1 CONFIDENTIALITY OBLIGATIONS.
(a) BIP CONFIDENTIALITY OBLIGATIONS. BIP shall not disclose Immunex/Wyeth
Confidential Information to any Third Party other than
(1) its employees or employees of affiliated companies of the
Boehringer Ingelheim group who have a need to know such
information in order to perform their duties in carrying out
BIP's obligations hereunder,
(2) contractors who are bound by similar obligations of
confidentiality and who have a need to know such information in
order to provide direction to BIP or Immunex and/or Wyeth, or
(3) regulatory authorities, for example, the FDA, that require such
information in order to review a BLA or other regulatory filing.
(b) IMMUNEX AND WYETH CONFIDENTIALITY OBLIGATIONS.
Immunex and Wyeth shall not disclose any BIP Confidential Information
to any Third Party other than
(1) their employees, consultants, Affiliates, agents or contractors
who are bound by similar obligations of confidentiality and who
have a need to know such information in order to provide
direction to Immunex and/or Wyeth or to BIP, or
(2) regulatory authorities, for example, the FDA, that require such
information in order to review a BLA or other regulatory filing.
17.2 TERMS OF AGREEMENT. Subject to Section 17.4 hereof, and except for any
disclosure as is deemed necessary, in the reasonable judgment of the
responsible Party, to comply with national, federal or state laws or
regulations with respect to regulatory reporting or disclosure obligations,
neither Party shall, without the prior written consent of the other Party,
disclose in any manner to any Third Party the terms and conditions of this
Agreement. For purposes of this Section 17.2, Immunex and Wyeth shall be
deemed the same Party.
17.3 EXCLUSIONS.
The obligations of confidentiality and nonuse applicable to Immunex/Wyeth
Confidential Information and BIP Confidential Information shall not apply
to any information which:
(a) at the time of disclosure, is known publicly or thereafter becomes
known publicly through no fault of the recipient, its Affiliates or
agents;
(b) becomes available to the recipient from a Third Party which is not
legally prohibited from disclosing such information, provided such
information was not acquired directly or indirectly from the
disclosing Party;
(c) was developed by the recipient independently of information obtained
from the disclosing Party;
(d) was already known to the recipient before receipt from the disclosing
Party, as shown by its prior written records; or
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(e) is released with the prior written consent of the disclosing Party.
17.4 NOTIFICATION OF MANDATORY DISCLOSURE.
(a) NOTIFICATION AND CONSULTATION. In the event that any Party is required
by applicable statute or regulation or by judicial or administrative
process to disclose any part of another Party's Confidential
Information which is disclosed to it hereunder, the recipient shall
(1) promptly notify the disclosing Party of each such requirement and
identify the documents so required thereby, so that the disclosing
Party may seek an appropriate protective order or other remedy and/or
waive compliance by the recipient with the provisions of this
Agreement and (2) consult with the disclosing Party on the
advisability of taking legally available steps to resist or narrow the
scope of such requirement.
(b) LIMITED DISCLOSURE. If, in the absence of such a protective order or
such a waiver by the disclosing Party of the provisions of this
Agreement, the recipient is nonetheless required by mandatory
applicable law to disclose any part of the other Party's Confidential
Information which is disclosed to it hereunder, the recipient may
disclose such Confidential Information without liability under this
Agreement, except that the recipient shall furnish only that portion
of the Confidential Information which is legally required.
17.5 NO LICENSES; MAINTENANCE OF CONFIDENTIALITY; NONUSE OBLIGATIONS.
(a) NO LICENSES. Except as expressly provided in Article 13 hereof, no
right or license, either express or implied, under any patent or
proprietary right is granted hereunder by virtue of the disclosure to
BIP of Immunex/Wyeth Confidential Information, or the disclosure to
Immunex and/or Wyeth of BIP Confidential Information hereunder.
(b) MAINTENANCE OF CONFIDENTIALITY. Each Party shall use reasonable and
customary precautions to safeguard the other Parties' Confidential
Information, including ensuring that all employees, consultants,
agents or contractors who are provided access to such Confidential
Information are informed of the confidential and proprietary nature of
such Confidential Information and agree that all such Confidential
Information is required to be maintained confidential.
(c) NONUSE OBLIGATIONS. Immunex/Wyeth Confidential Information shall not
be utilized by BIP except for purposes of this Agreement, without
first obtaining Immunex's and Wyeth's prior written consent to such
utilization. BIP Confidential Information shall not be utilized by
Immunex or Wyeth except as set forth in this Agreement, without first
obtaining BIP's prior written consent to such utilization.
17.6 SURVIVAL OF CONFIDENTIALITY OBLIGATIONS.
The provisions of this Article 17 shall survive the termination or
expiration of this Agreement for a period of [*] ([*]) years.
ARTICLE 18. PRESS RELEASES; USE OF NAMES
18.1 PRESS RELEASES.
No press release, publicity or other form of public written disclosure
related to this Agreement shall be permitted by either Party to be
published or otherwise disclosed unless the other Party has indicated its
consent to the form of the release in writing, except for any disclosure as
is deemed necessary, in the reasonable judgment of the responsible Party,
to comply with national, federal or state laws or regulations with respect
to regulatory reporting or disclosure obligations. For purposes of this
Section 18.1, Immunex and Wyeth shall be deemed the same Party.
18.2 USE OF NAMES.
BIP shall not make use of the name of the other Parties in any advertising
or promotional material, or otherwise, without the prior written consent of
the other Parties.
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ARTICLE 19. TERM; TERMINATION
19.1 TERM; RENEWAL.
Unless sooner terminated pursuant to the terms of this Agreement, the term
of this Agreement shall commence upon the Effective Date and shall continue
thereafter for not less than [*] ([*]) Contract Years from the Effective
Date (the "SUPPLY TERM"). This Agreement and the Supply Term shall
automatically continue from Contract Year-to-Contract Year thereafter
unless terminated by either Party by providing at least [*] prior written
notice to the other Party, provided that neither Party may provide such
notice prior to the end of the [*] Contract Year, and provided further that
BIP may not provide such notice prior to the end of the [*] Contract Year.
For purposes of this Section 19.1, Immunex and Wyeth shall be deemed the
same Party.
19.2 TERMINATION.
This Agreement may be terminated prior to the period set forth in Section
19.1 above as follows:
(a) MATERIAL BREACH.
(1) BIP MATERIAL BREACH. This Agreement may be terminated in its
entirety by Immunex and Wyeth upon written notice thereof to BIP
in the event of a material breach by BIP which is not cured
within [*] ([*]) days from written notice to BIP specifying in
reasonable detail the nature of such breach or longer if BIP
delivers a certificate that such material breach is not
reasonably capable of being cured within [*] ([*]) days and that
BIP is working diligently to cure such breach, but in no event
shall the time for curing such breach exceed an additional [*]
([*]) days.
(2) IMMUNEX MATERIAL BREACH. This Agreement may be terminated in its
entirety solely with respect to the Immunex Territory by BIP upon
written notice thereof to Immunex in the event of a material
breach by Immunex which is not cured within [*] ([*]) days from
written notice to Immunex specifying in reasonable detail the
nature of such breach or longer if Immunex delivers a certificate
that such material breach is not reasonably capable of being
cured within [*] ([*]) days and that Immunex is working
diligently to cure such breach, but in no event shall the time
for curing such breach exceed an additional [*] ([*]) days. In
such event, Wyeth and BIP shall thereafter enter into good faith
negotiations to amend this Agreement by making any necessary and
appropriate revisions as may be mutually agreed upon.
(3) WYETH MATERIAL BREACH. This Agreement may be terminated in its
entirety solely with respect to the Wyeth Territory by BIP upon
written notice thereof to Wyeth in the event of a material breach
by Wyeth which is not cured within [*] ([*]) days from written
notice to Wyeth specifying in reasonable detail the nature of
such breach or longer if Wyeth delivers a certificate that such
material breach is not reasonably capable of being cured within
[*] ([*]) days and that Wyeth is working diligently to cure such
breach, but in no event shall the time for curing such breach
exceed an additional [*] ([*]) days. In such event, Immunex and
BIP shall thereafter enter into good faith negotiations to amend
this Agreement by making any necessary and appropriate revisions
as may be mutually agreed upon.
(b) MUTUAL AGREEMENT. This Agreement may be terminated in its entirety at
any time upon mutual written agreement between all the Parties signed
by an executive officer of each Party.
(c) PRODUCT NOT COMMERCIALIZED.
(1) IMMUNEX TERRITORY. This Agreement may be terminated by Immunex
(after consultation with Wyeth) solely with respect to the
Immunex Territory upon at least [*] prior written notice to BIP
if (i) the BLA for the Product is not approved by the FDA by [*]
or (ii) the Product is not commercialized in the Immunex
Territory for any reason. In such event, Wyeth and BIP shall
thereafter enter into good faith negotiations to amend this
Agreement by making any necessary and appropriate revisions as
may be mutually agreed upon.
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(2) WYETH TERRITORY. This Agreement may be terminated by Wyeth (after
consultation with Immunex) solely with respect to the Wyeth
Territory upon at least [*] prior written notice to BIP if (i)
the EMEA-dossier for the Product is not approved by the EMEA by
[*] or (ii) the Product is not commercialized in the Wyeth
Territory for any reason. In such event, Immunex and BIP shall
thereafter enter into good faith negotiations to amend this
Agreement by making any necessary and appropriate revisions as
may be mutually agreed upon.
(d) WITHDRAWAL OF PRODUCT.
(1) IMMUNEX TERRITORY. This Agreement may be terminated by Immunex
(after consultation with Wyeth) solely with respect to the
Immunex Territory upon at least [*] prior written notice to BIP
if the BLA for the Product is withdrawn by Immunex. In such
event, unless Wyeth has terminated the Agreement with respect to
the Wyeth Territory pursuant to Section 19.2(d)(2) below, Wyeth
and BIP shall thereafter enter into good faith negotiations to
amend this Agreement by making any necessary and appropriate
revisions as may be mutually agreed upon.
(2) WYETH TERRITORY. This Agreement may be terminated by Wyeth (after
consultation with Immunex) solely with respect to the Wyeth
Territory upon at least [*] prior written notice to BIP if the
EMEA-dossier for the Product is withdrawn by Wyeth or any of its
Affiliates. In such event, unless Immunex has terminated the
Agreement with respect to the Immunex Territory pursuant to
Section 19.2(d)(1) above, Immunex and BIP shall thereafter enter
into good faith negotiations to amend this Agreement by making
any necessary and appropriate revisions as may be mutually agreed
upon.
(e) FAILURE TO SUPPLY. This Agreement may be terminated in its entirety by
Immunex and Wyeth upon at least [*] prior written notice to BIP if in
any [*] consecutive months during the Supply Term, BIP shall have
delivered in at least [*] of those months less than [*] percent ([*]%)
of Drug Product and Finished Product it is required to deliver in
those months pursuant to Firm Orders delivered hereunder, unless such
failure to supply shall have been the result of a Force Majeure Event.
(f) BIBERACH FACILITY. This Agreement may be terminated in its entirety by
Immunex and Wyeth upon written notice thereof to BIP in the event that
BIP or its Affiliates cease to own or otherwise lawfully control the
Biberach Facility to the extent necessary to manufacture the Product
in accordance with the terms hereof in quantities sufficient to
fulfill the Firm Orders made within the Maximum Request under this
Agreement, provided that this Agreement may not be terminated under
this Section 19.2(f) if the conditions specified above are cured
within [*] from written notice to BIP specifying in reasonable detail
the nature of the breach giving rise to notice under this Section
19.2(f).
(g) FORCE MAJEURE. This Agreement may be terminated in its entirety by
Immunex and Wyeth upon at least [*] prior written notice under the
circumstances set forth in Section 20.4 hereof.
(h) [*]
19.3 CONSEQUENCES OF TERMINATION.
(a) PAYMENT OF AMOUNTS DUE; CUMULATIVE REMEDIES. Expiration or termination
of this Agreement for any reason shall not exempt any Party from
paying to any other Party any amounts due to such Party and
outstanding at the time of such expiration or termination. Except as
expressly stated otherwise herein, remedies hereunder are cumulative,
and nothing in this Agreement shall prevent any Party, in the case of
a breach, from not terminating this Agreement and seeking to enforce
its rights hereunder.
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(b) PURCHASE OF BULK DRUG SUBSTANCE, DRUG PRODUCT AND FINISHED PRODUCT.
Upon expiration or termination of this Agreement, whichever is sooner
(but in the case of termination, only if directed by the terminating
Party in the notice of termination), BIP shall manufacture and ship,
and Immunex and/or Wyeth, as applicable, shall purchase in accordance
with the provisions hereof, any and all amounts of Bulk Drug
Substance, Drug Product and Finished Product ordered pursuant to Firm
Orders issued hereunder prior to the date on which notice of such
termination is given, or prior to the expiration date, as applicable.
(c) OTHER FINANCIAL OBLIGATIONS. Upon termination of this Agreement in its
entirety pursuant to Section 19.2(b) hereof, or upon termination of
this Agreement in whole or in part by Immunex and/or Wyeth pursuant to
Section 19.2(c), (d), or (h) hereof, and unless otherwise agreed upon
by the Parties in the event this Agreement is terminated with respect
to the Immunex Territory or the Wyeth Territory, but not both
territories, the following provisions shall apply:
(1) Immunex and/or Wyeth, as the case may be, shall purchase from BIP
at BIP's Acquisition Cost all raw materials, intermediates and
packaging components acquired by BIP specifically for the
manufacture and packaging of Product hereunder; provided,
however, the amount of raw materials, intermediates and packaging
components which Immunex and Wyeth are obligated to purchase
under this Section 19.3(c)(1) at any time shall not exceed the
amount of raw materials and packaging components reasonably
necessary to fulfill outstanding Firm Orders for Bulk Drug
Substance, Drug Product and Finished Product at such time, [*];
and
(2) Immunex and/or Wyeth, as the case may be, may purchase from BIP
all finished Bulk Drug Substance, Drug Product and Finished
Product then in BIP's possession or which BIP can manufacture in
a timely manner with then existing finished Bulk Drug Substance
(which had not been ordered pursuant to Firm Orders) at the then
current Product Price and in accordance with the provisions
hereof.
(d) PAYMENTS FOR PREMATURE TERMINATION. BIP shall be entitled to
reimbursement by Immunex and Wyeth for the following wind-down costs
in the event that this Agreement is terminated in its entirety
pursuant to Section 19.2(b) hereof or by Immunex and Wyeth pursuant to
Section 19.2(c), (d), or (h) hereof, it being understood that Immunex
and Wyeth's total liability under this Section 19.3(d) shall in no
event exceed the following amounts, calculated as follows:
(1) [*] after any termination of this Agreement referred to in this
Section 19.3(d), Immunex and Wyeth shall pay BIP the applicable
Product Price upon delivery according to the terms hereof of any
Firm Orders of Bulk Drug Substance, Drug Product and Finished
Product that are outstanding as of the effective date of such
termination, subject to an offset for any amounts paid to BIP
pursuant to Section 19.3(b) hereof, provided that for purposes of
this section, the Firm Order period for Bulk Drug Substance shall
be limited to [*];
(2) [*]
(3) [*]
(4) [*]
105
<PAGE>
(5) For any of the [*] ([*]) years referred to in this Section
19.3(d), Immunex and Wyeth shall have the right to reduce or
eliminate the applicable termination payment for such year on a
proportional basis to the extent that Immunex, Wyeth and/or any
of their Affiliates are able to utilize BIP's production capacity
(such capacity being measured by the Annual Quantity as of the
effective date of termination, which is the base upon which
Immunex and Wyeth's termination payments are measured) with one
or more of their biological products of comparable volume per
product and technology, including but not limited to, in-licensed
biological products. The applicable technology transfer and
development costs, if any, and the supply price for such products
shall be negotiated in good faith on a case-by-case basis between
the Parties.
By way of example only, if BIP's manufacturing of such biological
products utilizes fifty percent (50%) of BIP's production
capacity (such capacity being measured by such Annual Quantity)
during a particular year, then the termination payment otherwise
owed by Immunex and Wyeth for such year would also be reduced by
fifty percent (50%).
(6) For any of the [*] ([*]) years referred to in this Section
19.3(d), BIP shall also provide a proportional reduction in the
applicable termination payment for such year owed by Immunex and
Wyeth to the extent that [*].
(d) FIRM ORDERS. Upon termination of this Agreement in its entirety by
Immunex and Wyeth pursuant to Section 19.2(a)(1), (e), (f) or (g)
hereof, Buyer may, in its discretion, cancel, in whole or in part, any
Firm Orders previously submitted.
(e) MASTER CELL BANK AND WORKING CELL BANK; RETURN OF IMMUNEX/WYETH
CONFIDENTIAL INFORMATION; RETURN OF RETENTION AND RESERVE SAMPLES.
Upon expiration or termination of this Agreement in its entirety,
unless otherwise directed by Buyer, BIP shall promptly (1) return or
at Buyer's election destroy the Master Cell Bank and Working Cell Bank
as well as the material derived from its culture, any such destruction
to be certified in writing to Immunex by an authorized BIP officer,
(2) return all Immunex/Wyeth Confidential Information to Buyer, except
for a single copy and/or sample for documentation purposes only, and
(3) return to Buyer all retention and reserve samples being held by
BIP pursuant to Section 12.8 hereof, provided that BIP may retain one
set of such samples for documentation purposes only.
(f) RETURN OF BIP CONFIDENTIAL INFORMATION. Upon expiration or termination
of this Agreement in its entirety, and at BIP's written request,
Immunex and Wyeth shall promptly return all BIP Confidential
Information to BIP that is unrelated to the Process, except for a
single copy and/or sample to be retained by Immunex and Wyeth for
documentation purposes only.
(g) ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Except as set forth herein, any
termination or expiration of this Agreement shall be without prejudice
to any right which shall have accrued to the benefit of any Party and
shall not relieve any Party of any obligation which has accrued prior
to the effective date of such termination or expiration, which
obligations shall remain in full force and effect for the period
provided therein or, if no period is provided therein, then such
obligations shall remain in full force and effect indefinitely.
ARTICLE 20. FORCE MAJEURE
20.1 EFFECTS OF FORCE MAJEURE.
No Party shall be in breach of this Agreement if there is any failure of
performance under this Agreement (except for payment of any amounts due
hereunder) occasioned by any act of God, fire, act of government or state,
war, civil commotion, insurrection, embargo, prevention from or hindrance
in obtaining energy or other utilities, labor disputes of whatever nature
or any other reason beyond the control and without the fault or negligence
of the Party affected thereby (a "FORCE MAJEURE EVENT"). Such excuse shall
continue as long as the Force Majeure Event continues. Upon cessation of
such Force Majeure Event, the affected Party shall promptly resume
performance hereunder.
106
<PAGE>
20.2 NOTICE OF FORCE MAJEURE.
Each Party agrees to give the other Parties prompt written notice of the
occurrence of any Force Majeure Event, the nature thereof, and the extent
to which the affected Party will be unable fully to perform its obligations
hereunder. Each Party further agrees to use reasonable efforts to correct
the Force Majeure Event as quickly as possible and to give the other
Parties prompt written notice when it is again fully able to perform such
obligations.
20.3 ALLOCATION OF CAPACITY.
If, as a result of a Force Majeure Event, BIP at any time is unable fully
to supply outstanding Firm Orders for Bulk Drug Substance, Drug Product and
Finished Product, as the case may be, BIP shall use reasonable efforts to
equitably allocate its available resources and production capacity among
BIP, Buyer and BIP's other customers, as the case may be, taking into
consideration the respective requirements of each during a reasonable time
period prior to the allocation, as well as such requirements during the
allocation period. BIP shall not grant a higher priority to any Third Party
than to Buyer with respect to shipment of products from the Biberach
Facility.
20.4 TERMINATION.
If, as a result of a Force Majeure Event, BIP is unable fully to perform
its obligations hereunder for any consecutive period of [*] ([*]) days,
unless the Parties mutually agree in writing upon a shorter time period,
Immunex and Wyeth shall have the right to terminate this Agreement in its
entirety, upon providing written notice thereof to BIP, such termination to
be effective [*] ([*]) days from the effective date of such notice. If this
Agreement is terminated pursuant to this Section 20.4, then upon Immunex's
and Wyeth's written request, BIP will provide reasonable assistance to
Immunex and Wyeth in locating an alternative manufacturer for the Product.
Immunex and Wyeth shall reimburse BIP for its reasonable costs incurred in
rendering such assistance.
20.5 REDUCTION IN MAXIMUM REQUEST AND MINIMUM QUANTITY; PRODUCT PRICES; ANNUAL
SURCHARGE.
(a) MAXIMUM REQUEST AND MINIMUM QUANTITY REDUCTION. The Maximum Request
and Minimum Quantity in the applicable Calendar Year(s) shall be
reduced proportionately for the duration of any Force Majeure Event
which prevents BIP from manufacturing Bulk Drug Substance hereunder.
[*]
(b) PRODUCT PRICE ADJUSTMENT. The Product Price set forth in EXHIBIT D,
EXHIBIT E, and EXHIBIT F hereto shall be adjusted proportionately so
that Buyer is not forced to pay a higher Product Price on account of
BIP's inability to manufacture or deliver Bulk Drug Substance, Drug
Product and/or Finished Product hereunder for the duration of any
Force Majeure Event. [*] A comparable adjustment would also be made to
the Product Price for Drug Product and Finished Product under EXHIBIT
E and EXHIBIT F hereto, respectively. [*]
ARTICLE 21. ASSIGNMENT
21.1 ASSIGNMENT.
This Agreement shall be binding upon the successors and assigns of the
Parties and the name of a Party appearing herein shall be deemed to include
the names of its successors and assigns. No Party may assign its interest
under this Agreement without the prior written consent of the other
Parties, such consent not to be unreasonably withheld; provided, however,
any Party may assign its interest under this Agreement, without the prior
written consent of the other Parties, (a) to an Affiliate, so long as the
assigning Party unconditionally guarantees the obligations of such
Affiliate or (b) to a successor of the assigning Party's business by reason
of merger, sale of all or substantially all of its assets or other form of
acquisition, provided that such successor agrees in writing to assume all
of the obligations of the assigning Party under this Agreement. Any
purported assignment without a required consent shall be void. No
assignment shall relieve any Party of responsibility for the performance
of any obligation which accrued prior to the effective date of such
assignment.
107
<PAGE>
ARTICLE 22. DISPUTE RESOLUTION
22.1 EXCLUSIONS.
Section 22.2 below shall not apply to any disputes arising under Article 16
(Indemnification) or Article 17 (Confidentiality) hereof.
22.2 DISPUTE RESOLUTION.
The Parties recognize that a BONA FIDE dispute as to certain matters may
from time to time arise during the term of this Agreement which relates to
a Party's rights and/or obligations hereunder. In the event of the
occurrence of such a dispute, any Party may, by written notice to the other
Parties, have such dispute referred to their respective officers designated
below, or their successors, for attempted resolution by good faith
negotiations within [*] ([*]) days after such notice is received. Such
designated officers are as follows:
For Immunex - Kenneth B. Seamon, Ph.D., Senior Vice President, Drug
Development
For Wyeth - Roy Sturgeon, Ph.D., Senior Vice President, Quality Assurance
For BIP - Dr. Dieter Jacob, member of the BIP board
In the event the designated officers are not able to resolve such dispute
within such [*] ([*])-day period, or such other period of time as the
Parties may mutually agree in writing, each Party shall have the right to
pursue any and all remedies available at law or in equity.
ARTICLE 23. MISCELLANEOUS
23.1 NOTICES.
Other than notices within the jurisdiction of the respective Business
Coordinators, Technical Coordinators and the Wyeth Representative, which
shall be given to those individuals, any notice required or permitted to be
given hereunder by any Party shall be in writing and shall be (a) delivered
personally, (b) sent by registered mail, return receipt requested, postage
prepaid, (c) sent by a nationally-recognized courier service guaranteeing
next-day or second day delivery, charges prepaid, or (d) delivered by
facsimile (with the original promptly sent by any of the foregoing
manners), to the addresses or facsimile numbers of the other Parties set
forth below, or at such other addresses as may from time to time be
furnished by similar notice by any Party. The effective date of any notice
hereunder shall be the date of receipt by the receiving Party.
If to BIP: Boehringer Ingelheim Pharma KG
Birkendorfer Stra(beta)e 65
D-88397 Biberach an der Riss
Federal Republic of Germany
Attention: Dr. Wolfram Carius
Head of Biopharmaceutical Manufacture
Fax: 0 73 51/54-51 31
Phone: 0 73 51/54-48 00
with a copy to: Boehringer Ingelheim GmbH
Binger Stra(beta)e 173
D-55216 Ingelheim
Federal Republic of Germany
Attention: Prof. Dr. Rolf G. Werner
Head of Industrial Biopharmaceuticals Worldwide
108
<PAGE>
If to Immunex: Immunex Corporation
51 University Street
Seattle, Washington 98101
Attention: Douglas G. Southern
Senior Vice President and
Chief Financial Officer
Fax: (206) 292-9271
Phone: (206) 389-4350
with a copy to: Immunex Corporation
51 University Street
Seattle, Washington 98101
Attention: General Counsel
If to Wyeth: Wyeth-Ayerst Laboratories
555 E. Lancaster
St. Davids, Pennsylvania 19807
Attention: Michael McMullen
Vice President
Global Materials Management
Fax: (610) 688-9498
Phone: (610) 971-5920
with a copy to: American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
23.2 APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the place of domicile of the Party sued (without reference to the
respective choice of law rules) and the courts of the place of domicile of
the Party sued shall have exclusive jurisdiction over all legal matters and
proceedings hereunder. The Parties expressly exclude the application to
this Agreement of the United Nations Convention on Contracts for the
International Sale of Goods.
23.3 HEADINGS.
The table of contents and all headings in this Agreement are for
convenience of reference only and shall not affect the interpretation of
this Agreement.
23.4 EXHIBITS.
All exhibits referred to herein form an integral part of this Agreement and
are incorporated into this Agreement by such reference.
23.5 SEVERABILITY.
Each Party hereby expressly agrees that it has no intention to violate any
public policy, statutory or common laws, rules, regulations, treaty or
decision of any government agency or executive body thereof of any country
or community or association of countries; that if any word, sentence,
paragraph, clause or combination thereof in this Agreement is found by a
court or executive body with judicial powers having jurisdiction over this
Agreement or any Party hereto, in a final unappealed order, to be in
violation of any such provisions in any country or community or association
of countries, such words, sentences, paragraphs, clauses or combination
shall be inoperative in such country or community or association of
countries and the remainder of this Agreement shall remain binding upon the
Parties, so long as enforcement of the remainder does not violate the
Parties' overall intentions in this transaction.
109
<PAGE>
23.6 INDEPENDENT CONTRACTORS.
Each of the Parties is an independent contractor and nothing herein
contained shall be deemed to constitute the relationship of partners, joint
venturers, nor of principal and agent between the Parties. No Party shall
hold itself out to Third Parties as purporting to act on behalf of, or
serving as the agent of, any other Party. For purposes of this Section
23.6, Immunex and Wyeth shall be deemed the same Party.
23.7 WAIVER.
No waiver of any term, provision or condition of this Agreement whether by
conduct or otherwise in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such term, provision or
condition or of any other term, provision or condition of this Agreement.
23.8 COUNTERPARTS.
This Agreement and any amendment hereto may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
23.9 ENTIRETY; AMENDMENTS.
This Agreement, including any exhibits attached hereto and referenced
herein, constitutes the full understanding of the Parties and a complete
and exclusive statement of the terms of their agreement with respect to the
specific subject matter hereof (I.E., supply of Product), and no terms,
conditions, understandings or agreements purporting to modify or vary the
terms thereof shall be binding unless it is hereafter made in writing and
signed by each of the Parties. No modification to this Agreement shall be
effected by the acknowledgment or acceptance of any purchase order or
shipping instruction forms or similar documents containing terms or
conditions at variance with or in addition to those set forth herein. In
the event of a conflict between this Agreement and the exhibits hereto, the
terms of this Agreement shall control. This Agreement may be amended and
supplemented only by a written instrument signed by each of the Parties.
23.10 [*]
[This space is intentionally left blank.]
110
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the Effective Date.
IMMUNEX CORPORATION AMERICAN HOME PRODUCTS
CORPORATION, ACTING THROUGH ITS
WYETH-AYERST LABORATORIES DIVISION
By: By:
-------------------------------- --------------------------------
Douglas G. Southern Robert Essner
Senior Vice President and Executive Vice President
Chief Financial Officer
Date: 12th November 1998 Date: 12th November 1998
BOEHRINGER INGELHEIM PHARMA KG
ppa. ppa.
- -------------------------------- --------------------------------
Dr. Dieter Jacob Prof. Dr. Rolf G. Werner
Member of Board Head of Industrial Biopharmaceuticals
Date: 11th November 1998 Date: 11th November 1998
111
<PAGE>
EXHIBIT A
BULK DRUG SUBSTANCE SPECIFICATIONS
The TNFR:Fc Bulk Drug Substance (BDS) is tested according to the test methods
and specifications listed below to provide assurance of quality, potency,
strength, purity, identity and safety, and have been established as required for
material release. The release testing specifications are defined in SOP [*],
Specifications for [*] Bulk Solution (25 mg/mL).
<TABLE>
<CAPTION>
PROCEDURE ACCEPTANCE CRITERIA
- --------- -------------------
<S> <C>
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
112
<PAGE>
EXHIBIT B
DRUG PRODUCT SPECIFICATIONS
The TNFR:Fc Drug Product is tested according to the test methods and
specifications listed below to provide assurance of quality, potency, strength,
purity, identity, and safety and have been established as required for material
release. The release testing specifications are defined in SOP [*] ([*] mg
dosage form) and [*] (25 mg dosage form).
<TABLE>
<CAPTION>
PROCEDURE ACCEPTANCE CRITERIA
- --------- --------------------
<S> <C>
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
113
<PAGE>
EXHIBIT C
FINISHED PRODUCT SPECIFICATIONS
Each unique lot of labeled ENBREL(TM) Drug Product is tested according to the
test methods and specifications listed below to provide assurance of product
identity, dosage form and correct vial labeling.
PROCEDURE ACCEPTANCE CRITERIA
[*] [*]
[*] [*]
[*] [*]
114
<PAGE>
EXHIBIT D
VOLUME DISCOUNT PRICING MATRIX FOR BULK DRUG SUBSTANCE [*]
See attached.
115
<PAGE>
EXHIBIT D
VOLUME DISCOUNT PRICING MATRIX FOR BULK DRUG SUBSTANCE
PRODUCTION ASSUMPTIONS: [*]
IMMUNEX MAXIMUM REQUEST OF CAPACITY PER YEAR FOR [*] BULK
PRODUCTION/SUPPLY PRICE PER GRAM
[*]
116
<PAGE>
EXHIBIT E
VOLUME DISCOUNT PRICING MATRIX FOR FILLING AND LYOPHILIZATION
OPERATIONS FOR [*]
See attached.
117
<PAGE>
EXHIBIT E
VOLUME DISCOUNT PRICING MATRIX FOR FILLING AND LYOPHILIZATION OPERATIONS FOR
[*]
<TABLE>
<CAPTION>
<S> <C>
PRODUCTION ASSUMPTIONS: [*]
[*]
[*]
</TABLE>
IMMUNEX REQUEST OF CAPACITY PER YEAR FOR [*]
FILLING/LYOPHILIZATION/SUPPLY PRICE PER VIAL
[*]
* = see Section 5.4 of the agreement
118
<PAGE>
EXHIBIT F
VOLUME DISCOUNT PRICING MATRIX FOR LABELING OPERATIONS FOR [*]
See attached.
119
<PAGE>
EXHIBIT F
VOLUME DISCOUNT PRICING MATRIX FOR LABELING OPERATIONS FOR [*]
<TABLE>
<CAPTION>
<S> <C>
PRODUCTION ASSUMPTIONS: [*]
[*]
</TABLE>
[*]
* = see Section 5.4(b) of the agreement
120
<PAGE>
EXHIBIT G
FIRM ORDER PLANNING SYSTEM OF [*] COMMERCIAL SUPPLY,
PRE-FDA APPROVAL
See attached.
121
<PAGE>
EXHIBIT G
FIRM ORDER PLANNING SYSTEM OF [*] COMMERCIAL SUPPLY
PRE FDA APPROVAL
<TABLE>
<CAPTION>
YEAR [*] [*]
MONTH OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
- --------------------- ------ ------- ----- ------ ----- ------- ------- ------- ----- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*]
</TABLE>
122
<PAGE>
EXHIBIT G
ROLLING FORECAST PLANNING SYSTEM OF [*] COMMERCIAL SUPPLY
PRE FDA APPROVAL
<TABLE>
<CAPTION>
YEAR [*] [*]
MONTH OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
- -------------------- ------ ------- ----- ------ ----- ------- ------- ------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*]
</TABLE>
123
<PAGE>
EXHIBIT G
ROLLING FORECAST PLANNING SYSTEM OF [*] COMMERCIAL SUPPLY
PRE FDA APPROVAL
<TABLE>
<CAPTION>
YEAR [*] [*]
MONTH OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
- -------------------- ------ ------- ----- ------ ----- ------- ------- ------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*]
</TABLE>
124
<PAGE>
EXHIBIT H
COORDINATORS AND WYETH REPRESENTATIVE
<TABLE>
<CAPTION>
COORDINATORS
<S> <C>
IMMUNEX:
Business Coordinator: Judy Gikas
Senior Pharmaceutical Planner
Backup Business Coordinator: Dale Scott
Enbrel Project Director, Pharmaceutical Development
Technical Coordinator: Kay Stremler
Director of International Quality Operations
Backup Technical Coordinator: Annette Vahratian
Director of Commercial Quality Operations
BIP:
Business Coordinator: Thomas Maier
Business Economist
Backup Business Coordinator: Alois Konrad
Head of Project Management, Logistic Planning
Technical Coordinator: Dr. Armin Fiedler
Customer Coordinator Technical Affairs
Backup Technical Coordinator: Dr. Eberhard Bill
Head of Protein Chemistry
WYETH REPRESENTATIVE
Wyeth Representative: Michael McMullen
Vice President
Global Materials Management
Backup Wyeth Representative: David Zisa
Senior Director
Strategic Planning
</TABLE>
125
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES:
Immunex Manufacturing Corporation
Incorporated in the State of Washington
51 University Street
Seattle, WA 98101
126
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-59061 and 33-78694) pertaining to the Immunex Corporation 1993
Stock Option Plan as Amended and Restated on February 13, 1997 and the Immunex
Corporation Stock Option Plan for Nonemployee Directors Amended and Restated on
February 23, 1999 of our report dated January 29, 1999, with respect to the
consolidated financial statements and schedule of Immunex Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
Seattle, Washington
March 17, 1999
127
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENT that the individuals whose signatures appear
below, in their capacities as officers and directors of Immunex Corporation,
hereby constitute and appoint Douglas G. Southern their true and lawful
attorney-in-fact, with full power of substitution, to sign on behalf of the
undersigned Immunex's Annual Report on Form 10-K for the 1998 fiscal year
pursuant to Section 13 of the Securities and Exchange Act of 1934 and to file
the same, with exhibits thereto and any other documents in connection therewith,
with the Securities and Exchange Commission. Each of the undersigned does hereby
ratify and confirm all that such attorney-in-fact may do or cause to be done by
virtue hereof.
SIGNATURE TITLE DATE
/S/ Joseph J. Carr Director March 1, 1999
- ----------------------------------- -------------
(Joseph J. Carr)
/S/ Kirby L. Cramer Director February 26, 1999
- ----------------------------------- -----------------
(Kirby L. Cramer)
/S/ Robert I. Levy Director February 26, 1999
- ----------------------------------- -----------------
(Robert I. Levy)
/S/ John E. Lyons Director February 25, 1999
- ----------------------------------- -----------------
(John E. Lyons)
/S/ Joseph M. Mahady Director March 2, 1999
- ----------------------------------- -------------
(Joseph M. Mahady)
/S/ Edith W. Martin Director February 25, 1999
- ----------------------------------- -----------------
(Edith W. Martin)
/S/ Douglas E. Williams Sr. Vice March 8, 1999
- ----------------------------------- President-Discovery -------------
(Douglas E. Williams) Research and Director
128
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN
ITES ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 43,600
<SECURITIES> 101,245
<RECEIVABLES> 21,570
<ALLOWANCES> 1,147
<INVENTORY> 23,475
<CURRENT-ASSETS> 201,985
<PP&E> 156,144
<DEPRECIATION> 66,052
<TOTAL-ASSETS> 325,325
<CURRENT-LIABILITIES> 75,513
<BONDS> 0
0
0
<COMMON> 725,192
<OTHER-SE> (477,729)
<TOTAL-LIABILITY-AND-EQUITY> 325,325
<SALES> 169,907
<TOTAL-REVENUES> 243,450
<CGS> 33,285
<TOTAL-COSTS> 247,016
<OTHER-EXPENSES> 384
<LOSS-PROVISION> 236
<INTEREST-EXPENSE> 425
<INCOME-PRETAX> 3,186
<INCOME-TAX> 2,200
<INCOME-CONTINUING> 986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 986
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
