<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, 2000
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 500,555,684
- ----------------------------- --------------------------
Class Outstanding at May 9, 2000
<PAGE>
IMMUNEX CORPORATION
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements:
a) Consolidated Condensed Balance Sheets - 4
March 31, 2000 and December 31, 1999
b) Consolidated Condensed Statements of Income - 5
for the three-month periods ended March 31, 2000
and March 31, 1999
c) Consolidated Condensed Statements of Cash Flows - 6
for the three-month periods ended March 31, 2000
and March 31, 1999
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
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Immunex Corporation has prepared the consolidated condensed financial
statements included herein without audit, according to the rules and regulations
of the Securities and Exchange Commission, or SEC. 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 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 our Annual Report on Form 10-K for the year ended
December 31, 1999.
The results of operations for the three-month period ended March 31,
2000, are not necessarily indicative of results to be expected for the entire
year ending December 31, 2000.
3
<PAGE>
Item 1. FINANCIAL STATEMENTS
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(unaudited) 1999
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 252,968 $ 260,770
Short term investments 507,593 449,066
Accounts receivable, net 68,930 61,781
Inventories 20,299 13,125
Other current assets 6,420 6,439
----------- -----------
Total current assets 856,210 791,181
Property, plant and equipment, net 124,130 110,445
Other assets 69,735 39,615
----------- -----------
$ 1,050,075 $ 941,241
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 69,414 $ 71,832
Accounts payable - AHP 43,942 37,088
Accrued compensation and related items 11,183 20,001
Current portion of long-term obligations 1,579 1,578
Interest payable - AHP 5,625 2,250
Other current liabilities 5,622 2,336
----------- -----------
Total current liabilities 137,365 135,085
Convertible subordinated note - AHP 450,000 450,000
Other long term obligations 835 826
Shareholders' equity:
Common stock, $.01 par value 838,869 791,802
Unrealized gain on investments, net 30,036 2,719
Accumulated deficit (407,030) (439,191)
----------- -----------
Total shareholders' equity 461,875 335,330
----------- -----------
$ 1,050,075 $ 941,241
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
Item 1. FINANCIAL STATEMENTS (continued)
IMMUNEX CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Revenues:
Product sales $ 166,698 $ 95,237
Royalty and contract revenue 12,340 2,940
--------- ---------
179,038 98,177
Operating expenses:
Cost of product sales 47,803 27,209
Research and development 34,700 28,209
Selling, general and administrative 72,300 44,273
--------- ---------
154,803 99,691
--------- ---------
Operating income (loss) 24,235 (1,514)
Other income (expense):
Interest income 11,011 1,874
Interest expense (3,434) (69)
Other income, net 773 80
--------- ---------
8,350 1,885
Income before income taxes 32,585 371
Provision for income taxes 424 120
--------- ---------
Net income $ 32,161 $ 251
========= =========
Net income per common share:
Basic $ 0.06 $ 0.00
========= =========
Diluted $ 0.06 $ 0.00
========= =========
Number of shares used for per share amounts:
Basic 497,256 484,200
========= =========
Diluted 544,357 519,774
========= =========
</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 ENDED MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Operating Activities:
Net income $ 32,161 $ 251
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,004 4,690
Deferred income tax provision -- 110
License fee received in the form of common stock -- (990)
Cash flow impact of changes to:
Accounts receivable (7,149) (17,478)
Inventories (4,218) 999
Accounts payable, accrued liabilities and
other current liabilities (677) 5,365
Other current assets 19 (56)
--------- ---------
Net cash provided by (used in) operating activities 25,140 (7,109)
--------- ---------
Investing Activities:
Purchases of property, plant and equipment (17,789) (5,394)
Purchases of short term investments (214,344) (10,400)
Proceeds from sales and maturities of short term
investments 154,614 14,828
Acquisition of rights to marketed products, net (2,500) (6,500)
Other -- (148)
--------- ---------
Net cash used in investing activities (80,019) (7,614)
--------- ---------
Financing Activities:
Proceeds from common stock issued to AHP 28,858 13,688
Proceeds from common stock issued to employees 18,209 4,993
Other 10 47
--------- ---------
Net cash provided by financing activities 47,077 18,728
--------- ---------
Net increase (decrease) in cash and cash equivalents (7,802) 4,005
Cash and cash equivalents, beginning of period 260,770 43,600
--------- ---------
Cash and cash equivalents, end of period $ 252,968 $ 47,605
========= =========
</TABLE>
See accompanying notes.
6
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements (unaudited)
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Immunex Corporation 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 U.S. Food and Drug Administration, or
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.
Our market for pharmaceutical products is primarily the United States.
Our sales are primarily through wholesalers and specialty distributors.
The consolidated condensed financial statements are prepared in
conformity with generally accepted accounting principles. In preparing the
financial statements, management must make some estimates and assumptions that
affect reported amounts and disclosures.
American Home Products Corporation, or AHP, holds a majority interest
in Immunex. 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,
2000 1999
------- -------
<S> <C> <C>
Raw materials $ 1,287 $ 1,387
Work in process 9,888 5,310
Finished goods 9,124 6,428
------- -------
Total inventories $20,299 $13,125
======= =======
</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 shorter. 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 and 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 upon performance under the terms of the
underlying agreements.
RECENT ACCOUNTING GUIDANCE
In December 1999, the SEC issued Staff Accounting Bulletin, or SAB,
No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. The new SAB provides
guidance related to revenue recognition based on interpretations and
practices recommended by the SEC. SAB 101 is effective for the second quarter
of 2000 and requires companies to report any changes in revenue recognition
as a cumulative change in accounting principle at the time of implementation.
We do not believe that the adoption of SAB 101 will have a significant impact
on our financial position or results of operations. We will continue to
evaluate the interpretations of SAB 101.
During June 1999, the Financial Accounting Standards Board, or FASB,
issued SFAS 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES-
DEFERRAL OF THE EFFECTIVE DATE OF FASB STATEMENT 133. The Statement defers the
effective date of SFAS 133 to fiscal 2001. We are evaluating SFAS 133 and do not
believe that adoption of the Statement will have a material impact on our
financial statements.
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 2000 and 1999,
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, (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
------- -------
<S> <C> <C>
Net income $32,161 $ 251
Unrealized gain (loss) on investments 27,317 (105)
------- -------
Comprehensive income $59,478 $ 146
======= =======
</TABLE>
The unrealized gain on investments for the quarter ended March 31, 2000
was primarily attributable to temporary increases in the price of common stock
held in two biotechnology companies.
8
<PAGE>
IMMUNEX CORPORATION
Notes to Consolidated Condensed Financial Statements (continued)
NOTE 4. INCOME TAXES
The provision for income taxes for the three months ended March 31,
2000 is comprised of state income taxes. Related federal income taxes have been
offset by net operating loss, or NOL, carryforwards. The benefits from use of a
portion of the NOL carryforwards in the first quarter of 1999 were recorded
as a reduction of goodwill, thereby resulting in a federal income tax
provision for financial reporting purposes.
NOTE 5. NET INCOME PER COMMON SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
is calculated using the weighted average number of common shares outstanding
plus the dilutive effect of outstanding stock options using the "treasury stock"
method, and, if dilutive, the effect of the convertible subordinated note held
by AHP using the "if-converted" method.
The components of calculating net income per share is set forth in the
following table (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
Net income $ 32,161 $ 251
======== ========
Weighted average common shares outstanding, basic 497,256 484,200
Net effect of dilutive stock options 47,101 35,574
-------- --------
Weighted average common shares outstanding, diluted 544,357 519,744
======== ========
Net income per common share, basic $ 0.06 $ 0.00
======== ========
Net income per common share, diluted $ 0.06 $ 0.00
======== ========
</TABLE>
The 15,544,041 shares issuable upon the conversion of the AHP
convertible subordinated note are not included in the calculation of diluted
earnings per share because the effect on adjusted net income would be
anti-dilutive.
NOTE 6. STOCK SPLIT
We declared a three-for-one stock split in the first quarter of 2000
that was approved by the Board of Directors on February 17, 2000. The record
date of the stock split was March 6, 2000. Stockholders were entitled to receive
the additional shares on March 20, 2000. All references to accumulated deficit,
common stock, average number of common shares outstanding and per share amounts
in the financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations prior to the record date of the
stock split have been restated to reflect the three-for-one stock split on a
retroactive basis.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 "Risks" section described in our
latest Annual Report on Form 10-K filed with the SEC.
RESULTS OF OPERATIONS
OVERVIEW
Net income totaled $32.2 million for the three months ended March 31,
2000, compared to net income of $0.3 million for the three months ended March
31, 1999. The improvement in operating results is due primarily to U.S. sales of
ENBREL-Registered Trademark- (etanercept), which was approved in November 1998
by the FDA for treatment of advanced rheumatoid arthritis. Our operating results
also reflect increased costs, primarily related to manufacturing, selling and
marketing expenses for ENBREL. In addition, we have increased spending on
products in our development pipeline and increased the level of investment in
discovery research.
REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(IN MILLIONS)
2000 1999
------ ------
<S> <C> <C>
ENBREL $131.1 $ 59.7
Specialty therapeutic products 34.7 34.5
Other product sales 0.9 1.0
------ ------
Total product sales 166.7 95.2
Royalty and contract revenue 12.3 3.0
------ ------
Total revenue $179.0 $ 98.2
====== ======
</TABLE>
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Product sales totaled $166.7 million for the three months ended March
31, 2000, compared to $95.2 million for the three months ended March 31, 1999.
The improvement was due to U.S. sales of ENBREL, which totaled $131.1 million in
the first quarter of 2000 compared to $59.7 million in the first quarter of
1999. Under an ENBREL Promotion Agreement entered into in September 1997 with
AHP, ENBREL is being promoted in the United States by Wyeth-Ayerst Laboratories,
or Wyeth-Ayerst, the pharmaceutical division of AHP. AHP shares in the gross
profits from U.S. sales of ENBREL and both AHP and Immunex share the selling,
marketing and distribution costs of ENBREL in the United States.
Sales of our specialty therapeutic products, which include
LEUKINE-Registered Trademark- (sargramostim, GM-CSF) and NOVANTRONE-Registered
Trademark- (mitoxantrone for injection concentrate), totaled $34.7 million for
the first three months of 2000 compared to $34.5 million for the first three
months of 1999. Sales of LEUKINE decreased to $14.6 million during the first
quarter of 2000, compared to $16.0 million during the first quarter of 1999. In
order to improve the profitability of LEUKINE, we discontinued certain
distributor price discounts during the first quarter of 2000. This contributed
to a temporary decline in sales volume of LEUKINE as distributors reduced
inventory levels before ordering additional product. Sales of NOVANTRONE
increased to $12.8 million for the first quarter of 2000 compared to $10.8
million during the first quarter of 1999. The improvement reflects higher
realized selling prices and moderate growth in sales volume for NOVANTRONE.
On January 28, 2000, an FDA Advisory Panel unanimously recommended
NOVANTRONE for approval to slow the worsening of neurologic disability and to
reduce the relapse rate in patients with clinically worsening forms of
relapsing-remitting and secondary progressive multiple sclerosis. This FDA
Advisory Panel recommendation will be considered by the FDA in its final review
of our new drug application, or NDA, for NOVANTRONE. On April 11, 2000, a
separate FDA Advisory Panel unanimously recommended approval of ENBREL for use
to delay radiographic progression of joint damage in patients with early
rheumatoid arthritis and voted in favor of approval of ENBREL for use to improve
signs and symptoms of patients with early stage rheumatoid arthritis. We
anticipate a response from the FDA on both drugs during the middle of 2000.
Royalty and contract revenue totaled $12.3 million for the three months
ended March 31, 2000, compared to $3.0 million for the three months ended March
31, 1999. In February 2000, we earned a one-time payment of $10.0 million from
AHP under the ENBREL Promotion Agreement, when net sales of ENBREL in North
America exceeded $400.0 million for the preceding 12-month period. We will earn
$15.0 million if and when a rheumatoid arthritis disease modification claim for
ENBREL is obtained from the FDA. The remaining revenue recognized during both
periods presented is due largely to recurring amounts recognized under existing
royalty and license agreements.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING EXPENSES
Cost of product sales was 28.7% of product sales for the three months
ended March 31, 2000, compared to 28.6% of product sales for the three months
ended March 31, 1999. The change in the cost of product sales percentage during
the current year period is due to:
- increased sales of ENBREL (which, like LEUKINE, is a biologic,
and generally has a higher manufacturing cost than traditional
pharmaceutical products and, in the case of our biologic
products, are subject to multiple royalty obligations);
- a lower than anticipated standard cost for ENBREL in the first
quarter of 2000 due to non-recurring adjustments; and
- a favorable mix of sales of our other products.
Cost of product sales as a percentage of total product sales is
expected to increase if sales of ENBREL continue to grow.
Research and development expense totaled $34.7 million for the three
months ended March 31, 2000, compared to $28.2 million for the three months
ended March 31, 1999. The increase in research and development expense was due
primarily to the continuing development of:
- ENBREL for treatment of chronic heart failure and rheumatoid
arthritis;
- NOVANTRONE for multiple sclerosis;
- AVREND (CD40 ligand) to treat renal cell cancer; and
- the TRAIL/Apo2 ligand molecule for treatment of cancer, in
collaboration with Genentech, Inc.
In addition, we have increased staffing and laboratory space to support
our discovery research activities.
Selling, general and administrative expense totaled $72.3 million for
the three months ended March 31, 2000, compared to $44.3 million for the three
months ended March 31, 1999. The increase is due primarily to expenses
associated with the selling and marketing of ENBREL. 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 and potential Canadian sales of
ENBREL. Selling, general and administrative expenses include our share of these
expenses and the amount of the gross profits shared with AHP from sales of
ENBREL. In addition to expenses incurred under the ENBREL Promotion Agreement,
selling, general and administrative expense increased due to the following:
- increased staffing levels and other infrastructure costs;
- preparing for anticipated approval of NOVANTRONE in a new
multiple sclerosis indication; and
- expenses associated with information systems.
OTHER INCOME (EXPENSE)
Interest income increased to $11.0 million for the three months ended
March 31, 2000, compared to $1.9 million for the three months ended March 31,
1999. The issuance of a $450.0 million convertible subordinated note to AHP in
May 1999, additional equity issuances and improved operating cash flow resulted
in a significant increase in funds available for investment purposes and the
interest income earned on these funds. The increase in interest income was
partially offset by a $3.4 million increase in
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
interest expense, incurred on the convertible subordinated note.
PROVISION FOR INCOME TAXES
The provision for income taxes was $0.4 million for the three months
ended March 31, 2000, compared to $0.1 million for the three months ended March
31, 1999. The provision for income taxes during the first quarter of 2000
consisted only of our tax obligation in the states in which we sell our
products. Our federal tax expense in 2000, for financial reporting purposes, was
offset by utilizing NOL carryforwards. This is expected to continue for the
remainder of 2000. In the first quarter of 1999, the benefit of utilizing our
NOL carryforwards, for financial reporting purposes, was used to reduce
goodwill. As of December 31, 1999, the goodwill balance had been reduced to
zero.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short term investments totaled $760.6
million at March 31, 2000 and $709.8 million at December 31, 1999. These amounts
are held in a variety of interest-bearing instruments including government and
corporate obligations, and money market accounts.
Operating activities provided cash of $25.1 million for the three
months ended March 31, 2000, reflecting income earned in operations which was
partially offset by increased working capital requirements. The change in
working capital is due to an increase in accounts receivable from increased
product sales and an increase in ENBREL inventory. We expect our operating cash
flows to continue to grow in 2000, primarily from increased operating income.
Cash used in investing activities totaled $80.0 million for the three
months ended March 31, 2000. The majority of the cash used for investing
activities is due to the net $59.7 million in purchases of short term
investments. In addition, expenditures for property, plant and equipment totaled
$17.8 million, primarily for purchases of computer hardware and software, lab
equipment and expenditures on construction of our new process development
facility. The process development facility will accelerate the development of
the manufacturing processes of materials for clinical trials and is expected to
be completed by the end of 2000.
Financing activities provided cash of $47.1 million for the three
months ended March 31, 2000. We received $18.2 million from the exercise of
employee stock options during the first quarter of 2000. In addition, under
the terms of a Governance Agreement with AHP, AHP has the option to purchase
additional shares of our common stock from us, on a quarterly basis, in order
to maintain its percentage ownership interest in Immunex. 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. AHP's previous
quarterly exercise of this purchase right has provided a source of cash for
us. AHP also has the right to maintain its percentage ownership interest in
Immunex by purchasing shares of our common stock in the open market. Under
the terms of the Governance Agreement, we received $28.9 million from the
issuance of 1,042,995 shares of our common stock to AHP during the first
quarter of 2000, which was attributable to AHP exercising its quarterly
purchase right to maintain its percentage ownership interest in Immunex for
the fourth quarter of 1999. As of May 1, 2000, AHP permitted its quarterly
purchase right applicable to the first quarter of 2000 to expire unexercised.
This decision decreased AHP's percentage ownership interest in Immunex from
55.3% as of December 31, 1999 to 54.8% as of March 31, 2000. These
percentages include shares underlying a convertible subordinated note held by
AHP.
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
YEAR 2000
In prior years, we discussed the nature and progress of our plans to
become Year 2000 ready. In late 1999, we completed our remediation and testing
of systems. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believe those systems
successfully responded to the Year 2000 date change. We are not aware of any
material problems resulting from Year 2000 issues, either with our products, our
internal systems, or the products and services of third parties. We will
continue to monitor our mission critical computer applications and those of our
suppliers and vendors through out the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
14
<PAGE>
Item 3. MARKET RISKS
We have financial instruments that are subject to interest rate risk
including both debt instruments and investment instruments. We invest our cash
reserves in marketable securities consisting primarily of U.S. government and
corporate obligations. If market interest rates changed relatively by as much as
10%, the net effect on our operating results would not be material.
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, 1999.
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: May 11, 2000 /s/ Edward V. Fritzky
----------------- ---------------------------------------------------
Edward V. Fritzky
Chief Executive Officer, President, Chairman of the
Board and Director
(Principal Executive Officer)
Date: May 11, 2000 /s/ David A. Mann
----------------- ---------------------------------------------------
David A. Mann
Senior Vice President, Chief Financial Officer and
Treasurer
(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, 2000, AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE-MONTH PERIOD END MARCH 31, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 252,968
<SECURITIES> 507,593
<RECEIVABLES> 54,821
<ALLOWANCES> 968
<INVENTORY> 20,299
<CURRENT-ASSETS> 856,210
<PP&E> 208,167
<DEPRECIATION> 84,037
<TOTAL-ASSETS> 1,050,075
<CURRENT-LIABILITIES> 137,365
<BONDS> 0
0
0
<COMMON> 838,869
<OTHER-SE> (376,994)
<TOTAL-LIABILITY-AND-EQUITY> 1,050,075
<SALES> 166,698
<TOTAL-REVENUES> 179,038
<CGS> 47,803
<TOTAL-COSTS> 154,803
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 113
<INTEREST-EXPENSE> 3,434
<INCOME-PRETAX> 32,585
<INCOME-TAX> 424
<INCOME-CONTINUING> 32,161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,161
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
