<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 0-12406
IMMUNEX CORPORATION
(exact name of registrant as specified in its charter)
Washington 51-0346580
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 University Street, Seattle, WA 98101
(Address of principal executive offices)
Registrant's telephone number, including area code (206) 587-0430
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value 81,449,432
- ---------------------------------- --------------------------------
Class Outstanding at May 7, 1999
<PAGE>
IMMUNEX CORPORATION
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1999
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements:
a) Consolidated Condensed Balance Sheets - 4
March 31, 1999 and December 31, 1998
b) Consolidated Condensed Statements of Operations - 5
for the three-month periods ended March 31, 1999
and March 31, 1998
c) Consolidated Condensed Statements of Cash Flows - 6
for the three-month periods ended March 31, 1999
and March 31, 1998
d) Notes to Consolidated Condensed Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial 10 - 14
Condition and Results of Operations
Item 3. Market Risks 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES
2
<PAGE>
PART I. FINANCIAL INFORMATION
The consolidated condensed financial statements included herein have been
prepared by Immunex Corporation without audit, according to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The financial statements reflect, in the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position and results of
operations as of and for the periods indicated. The statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The results of operations for the three-month period ended March 31, 1999, are
not necessarily indicative of results to be expected for the entire year ending
December 31, 1999.
3
<PAGE>
Item 1. FINANCIAL STATEMENTS
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(unaudited) 1998
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 47,605 $ 43,600
Marketable securities 96,325 101,245
Accounts receivable, net 46,417 28,939
Inventories 20,735 23,475
Other current assets 4,782 4,726
--------- ---------
Total current assets 215,864 201,985
Property, plant and equipment, net 92,100 90,092
Other assets 39,860 33,248
--------- ---------
$ 347,824 $ 325,325
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,743 $ 39,256
Accounts payable - AHP 21,959 13,950
Accrued compensation and related items 7,077 13,756
Current portion of long-term obligations 3,477 3,477
Other current liabilities 6,881 5,074
--------- ---------
Total current liabilities 79,137 75,513
Long-term obligations 2,396 2,349
Shareholders' equity:
Common stock, $.01 par value 743,874 725,192
Unrealized gain on investment, net 1,123 1,228
Accumulated deficit (478,706) (478,957)
--------- ---------
Total shareholders' equity 266,291 247,463
--------- ---------
$ 347,824 $ 325,325
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Product sales $95,237 $ 38,816
Royalty and contract revenue 2,940 3,050
------- --------
98,177 41,866
Operating expenses:
Cost of product sales 27,209 7,091
Research and development 28,209 26,906
Selling, general and administrative 44,273 18,437
------- --------
99,691 52,434
------- --------
Operating loss (1,514) (10,568)
Other income (expense):
Interest income 1,874 1,540
Interest expense (69) (110)
Other income, net 80 171
------- --------
1,885 1,601
------- --------
Income (loss) before income taxes 371 (8,967)
Provision for income taxes 120 58
------- --------
Net income (loss) $ 251 $ (9,025)
======= =========
Net income (loss) per common share:
Basic $ 0.00 $ (0.11)
======= ========
Diluted $ 0.00 $ (0.11)
======= ========
Number of shares used for per share amounts:
Basic 80,700 79,468
======= ========
Diluted 86,629 79,468
======= ========
</TABLE>
See accompanying notes.
5
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Operating Activities:
Net income (loss) $ 251 $ (9,025)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 4,690 4,259
Deferred income tax provision 110 --
License fee received as common stock (990) --
Cash flow impact of changes to:
Accounts receivable (17,478) 389
Inventories 999 1,186
Accounts payable, accrued liabilities and
other current liabilities 5,365 (1,373)
Other current assets (56) (908)
--------- ---------
Net cash used in operating activities (7,109) (5,472)
--------- ---------
Investing Activities:
Purchases of property, plant and equipment (5,394) (3,151)
Purchases of marketable securities (10,400) (49,543)
Proceeds from sales and maturities of marketable
securities 14,828 11,054
Acquisition of product rights, net (6,500) (5,000)
Other (148) 285
-------- --------
Net cash used in investing activities (7,614) (46,355)
-------- ---------
Financing Activities:
Proceeds from the issuance of common stock to AHP 13,688 --
Proceeds from exercise of stock options 4,993 1,152
Guaranty payment received from AHP -- 60,032
Other 47 (68)
-------- ---------
Net cash provided by financing activities 18,728 61,116
-------- --------
Net increase in cash and cash equivalents 4,005 9,289
Cash and cash equivalents, beginning of period 43,600 66,176
-------- --------
Cash and cash equivalents, end of period $ 47,605 $ 75,465
======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements (unaudited)
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 condensed 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.
American Home Products Corporation (AHP), holds a majority interest in Immunex,
totaling approximately 54%. All references to AHP include AHP and its various
affiliates, divisions and subsidiaries.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost, using a weighted-average method, or
market. The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Raw materials $ 1,360 $ 807
Work in process 14,831 17,953
Finished goods 4,544 4,715
------- -------
Totals $20,735 $23,475
======= =======
</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. Goodwill is being amortized evenly
over a 10 year period. Intangible product rights and other intangible assets are
amortized evenly over their estimated useful lives, ranging from five to 15
years.
7
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements (continued)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
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
Revenues received under royalty, licensing and contract manufacturing agreements
are recognized based on the terms of the underlying contractual agreements.
NOTE 3. REPORTING COMPREHENSIVE INCOME
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. During the first quarter of 1999 and 1998,
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.
For quarterly reporting purposes, the following table sets forth the components
of comprehensive income (loss), (in thousands):
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net income (loss) $ 251 $ (9,025)
Unrealized loss on investments (105) (2,095)
------ ---------
Comprehensive income (loss) $ 146 $(11,120)
===== =========
</TABLE>
NOTE 4. EARNINGS PER COMMON 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.
Accordingly, outstanding stock options are not included in the calculation
during net loss periods.
8
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements (unaudited)
NOTE 4. EARNINGS PER COMMON SHARE, CONTINUED
The components of calculating net income (loss) per share is set forth in the
following table (in thousands, except per share data):
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net income (loss) $ 251 $ (9,025)
======== ========
Weighted average common
shares outstanding, basic 80,700 79,468
Net effect of dilutive stock
Options 5,929 --
------- -------
Weighted average common
shares outstanding, diluted 86,629 79,468
======= =======
Net income (loss) per common share, basic $ 0.00 $ (0.11)
======= ========
Net income (loss) per common share, diluted $ 0.00 $ (0.11)
======= ========
</TABLE>
NOTE 5. STOCK SPLIT
In March 1999, the Company effected a two-for-one common stock split in the form
of a stock dividend. Accordingly, all prior share and per share amounts in the
condensed consolidated financial statements and footnotes have been
retroactively adjusted to reflect these events.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
INTRODUCTION
Our disclosure and analysis in this report 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 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 described in
our latest Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
OVERVIEW
For the three months ended March 31, 1999, we generated net income
of $0.3 million, compared to a net loss of $9.0 million for the comparable
1998 period. The improvement in operating results is due primarily to U.S.
sales of ENBREL-Registered Trademark- (etanercept) which we began selling in
November 1998 following U.S. FDA approval oF ENBREL for treatment of advanced
rheumatoid arthritis. ENBREL is being promoted by AHP 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 both companies share the selling,
marketing, distribution and other costs to support sales of ENBREL. If
current sales trends for ENBREL continue throughout the remainder of the
current year, we expect to be profitable for 1999.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
REVENUES
<TABLE>
<CAPTION>
Three months ended
March 31,
(in millions)
1999 1998
------------------
<S> <C> <C>
ENBREL $59.7 $ --
LEUKINE-Registered Trademark- (sargramostim, GM-CSF) 16.0 15.1
NOVANTRONE-Registered Trademark- (mitoxantrone) 10.8 13.4
Other product sales 8.7 10.3
----- -----
Total product sales 95.2 38.8
Royalty and contract revenue 3.0 3.1
----- -----
Total revenue $98.2 $41.9
===== =====
</TABLE>
Product sales increased to $95.2 million from $38.8 million for the
three months ended March 31, 1999 and 1998, respectively. The improvement is due
to sales of ENBREL, which was launched in the U.S. in November 1998. Sales of
ENBREL totaled $59.7 million during the first quarter of 1999. In addition,
sales of LEUKINE increased to $16.0 million compared to $15.1 million during the
prior year period. These sales increases were partially offset by lower sales of
NOVANTRONE and our other products during the first three months of 1999. Sales
levels of NOVANTRONE declined from prior period levels beginning in the fourth
quarter of 1998. Sales of NOVANTRONE totaled $10.8 million and $9.4 million
during the first quarter of 1999 and the fourth quarter of 1998, respectively,
compared to $13.4 million for the first quarter of 1998.
Royalty and contract revenue totaled $3.0 million and $3.1 million for
the three-month periods ended March 31, 1999 and 1998, respectively. Revenue
recognized during both periods presented is due largely to recurring amounts
recognized under existing royalty and license agreements. Royalty and contract
revenue is expected to fluctuate significantly depending on the achievement of
milestones under existing agreements and new business opportunities that may be
identified. Under the ENBREL Promotion Agreement entered into with AHP in
September 1997, we will earn a one-time payment of $10.0 million if net sales of
ENBREL in North America exceed $200.0 million in any 12 consecutive months. If
current sales trends for ENBREL continue throughout the remainder of the current
year, we expect to earn this payment during 1999.
OPERATING EXPENSES
Cost of product sales was 28.6% and 18.3% of product sales for the
quarters ended March 31, 1999 and 1998, respectively. The increase in the cost
of product sales percentage during the current year period is 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), and
- Unfavorable change in the mix of other products.
Cost of product sales as a percentage of product sales is expected to
increase in the future if sales of ENBREL continue to grow.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Research and development expense increased to $28.2 million from $26.9
million for the three months ended March 31, 1999 and 1998, respectively. The
increase is due primarily to the following:
- Increased costs for development of NUVANCE-TM- (IL-4 receptor)
and MOBIST-TM- (Flt-3 ligand), two of our product candidates,
and
- Increased spending on discovery research.
These expense increases were partially offset by the cessation of
expenses incurred under an oncology discovery research agreement with AHP that
was terminated effective July 1, 1998. Expenses incurred under this agreement
totaled $4.1 million during the first quarter of 1998. In addition, spending on
development of ENBREL has decreased from prior year levels. However, this
continues to be our largest area of research and development expenditure as we
are pursuing indications for ENBREL in disease modification in early rheumatoid
arthritis patients and for treatment of chronic heart failure.
Selling, general and administrative expense increased to $44.3 million
from $18.4 million for the three-month periods ended March 31, 1999 and 1998,
respectively. The increase is due primarily to expenses associated with the
launch, selling and marketing of ENBREL during the first quarter of 1999. Under
the terms of the ENBREL Promotion Agreement, AHP assumed a majority of these
expenses and will share in the gross profits from U.S. sales of ENBREL. Selling,
general and administrative expenses in 1999 include our share of these expenses
and the amount of the gross profits shared with AHP from sales of ENBREL during
the first quarter of 1999. In addition to expenses incurred under the ENBREL
Promotion Agreement, selling, general and administrative expense increased due
to the following:
- Product liability insurance for ENBREL,
- Expenses associated with information systems, and
- Spending on selling activities related to our oncology products.
OTHER INCOME (EXPENSE)
Interest income increased to $1.9 million for the three months ended
March 31, 1999, compared to $1.5 million for the comparable period in 1998. The
improvement reflects an increase in funds available for investment purposes and
the interest earned on these funds.
PROVISION FOR INCOME TAXES
The provision for income taxes was $0.1 million for the quarters ended
March 31, 1999 and 1998. The provision for income taxes during 1999 is primarily
for federal income taxes. This tax provision is a non-cash transaction because
we will utilize our net operating tax loss carryforwards to satisfy the federal
tax liability. To the extent that our income subject to tax is 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 until the
goodwill balance is zero. After the goodwill balance reaches zero, the remaining
net operating loss carryforwards will be used to offset tax expense and then
recorded to equity. The tax provision recorded during the first quarter of 1998
consisted only of our tax obligation in the states in which we sell our
products.
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities totaled $143.9 million
and $144.8 million at March 31, 1999 and December 31, 1998, respectively. These
amounts are held in a variety of interest-bearing instruments including
government and corporate obligations and money market accounts.
Operating activities used cash of $7.1 million during the first three
months of 1999. The use of cash is due primarily to increased working capital
requirements associated with the launch and sale of ENBREL. Accounts receivable
increased significantly due to sales of ENBREL. This was partially offset by
increased accounts payable due to AHP for amounts owed under the ENBREL
Promotion Agreement.
Cash used in investing activities totaled $7.6 million for the first
quarter of 1999. In the first three months of 1999, expenditures for capital
equipment totaled $5.4 million, primarily for purchases of computer hardware and
software and purchases of lab equipment. Additionally, in January 1999, we
entered into an agreement to settle certain patent issues related to ENBREL. As
a result of the agreement, we paid an initial license fee of $11.0 million, of
which $4.5 million was reimbursed by AHP. Our share of the payment was
capitalized as a cost of acquired product rights and is being amortized to cost
of products sold over the estimated life of ENBREL. A subsequent milestone fee
of $5.0 million will also be paid if ENBREL is approved in Europe, of which $2.5
million will be reimbursed by AHP. In addition, we are paying royalties under
this and other agreements on net sales of ENBREL.
Financing activities provided cash of $18.7 million for the three-month
period ended March 31, 1999. 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. Under the terms of the Governance Agreement, we received
$13.7 million from the issuance of 257,092 shares of our common stock to AHP
during the first quarter of 1999. An additional $5.0 million was received from
the exercise of employee stock options during the same period.
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 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.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
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
- Phase III: Implementation and Contingency Planning
Assessment activities for each functional area are complete. Testing
and remediation is well underway and has been completed for many systems. 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. We have initiated the process of developing contingency plans for
certain critical systems. These contingency plans involve, among other actions,
adjusting production schedules, increasing inventories, and developing manual
workarounds. 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 Complete Complete
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 $6.3 million ($1.6 million of expense and $4.7 million capital).
Through March 31, 1999, we have incurred approximately $2.3 million ($0.7
million of expense and $1.6 million capital). These amounts do not include any
internal costs. We plan on utilizing 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.
The Year 2000 disclosures discussed above are based on numerous
expectations which are subject to uncertainties. Certain risk factors which
could have a material adverse effect on the Company's results of operations and
financial condition include but are not limited to: failure to identify critical
systems which will experience failures, errors in the remediation efforts,
unexpected failures by key Business Partners, inability to obtain new
replacements for non-compliant systems or equipment, failures by governmental
agencies causing delays in approval of new products or sales of approved
products, general economic downturn relating to Year 2000 failures in the U.S.
and in other countries, failures in global banking systems and capital markets,
or extended failures by public and private utility companies or common carriers
supplying services to the Company.
14
<PAGE>
Item 3. MARKET RISKS
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 $4.0 million.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The description of legal proceedings is incorporated by reference to
Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 Financial Data Schedule
b) Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
IMMUNEX CORPORATION
Date: /s/ Edward V. Fritzky
---------------------
Edward V. Fritzky
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: /s/ David A. Mann
----------------------
David A. Mann
Vice President, Finance and Interim Chief Financial
Officer
(Principal Financial and Accounting Officer)
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998, AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 47,605
<SECURITIES> 96,325
<RECEIVABLES> 37,515
<ALLOWANCES> 923
<INVENTORY> 20,735
<CURRENT-ASSETS> 215,864
<PP&E> 161,431
<DEPRECIATION> 69,330
<TOTAL-ASSETS> 347,824
<CURRENT-LIABILITIES> 79,137
<BONDS> 0
0
0
<COMMON> 743,874
<OTHER-SE> (477,583)
<TOTAL-LIABILITY-AND-EQUITY> 347,824
<SALES> 95,237
<TOTAL-REVENUES> 98,177
<CGS> 27,209
<TOTAL-COSTS> 99,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 115
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 371
<INCOME-TAX> 120
<INCOME-CONTINUING> 251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
