SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 1-09623
IVAX CORPORATION
INCORPORATED UNDER THE LAWS OF THE I.R.S. EMPLOYER IDENTIFICATION NUMBER
STATE OF FLORIDA 16-1003559
4400 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33137
305-575-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class Name of each exchange
on which registered
COMMON STOCK, PAR VALUE $.10 AMERICAN STOCK EXCHANGE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss 229.405 of this chapter) 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 amendment to this Form 10-K. [ ]
As of February 29, 2000, there were 153,770,029 shares of Common Stock
outstanding.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on February 29, 2000, was approximately $2.9 billion.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain information required by Parts II and IV are incorporated by
reference from portions of the Registrants 1999 Annual Report to Shareholders.
Information required by Part III is incorporated by reference to
portions of the Registrant's Proxy Statement for the 2000 Annual Meeting of
Shareholders which will be filed with the Securities and Exchange Commission
within 120 days after the close of the 1999 fiscal year.
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IVAX CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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PART I
Item 1. Business........................................................... 1
Item 2. Properties.........................................................13
Item 3. Legal Proceedings..................................................14
Item 4. Submission of Matters to a Vote of Security Holders................17
PART II
Item 5. Market for Registrant's Common Equity and
Related Shareholder Matters......................................18
Item 6. Selected Financial Data............................................18
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.........19
Item 8. Financial Statements and Supplementary Data........................19
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................19
PART III
Item 10. Directors and Executive Officers of the Registrant.................19
Item 11. Executive Compensation.............................................19
Item 12. Security Ownership of Certain Beneficial Owners and Management.....19
Item 13. Certain Relationships and Related Transactions.....................19
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K....20
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PART I
ITEM 1. BUSINESS
GENERAL
IVAX Corporation is a holding company with subsidiaries engaged in the
research, development, licensing, manufacture, marketing and distribution of
proprietary and generic pharmaceutical products in the United States and foreign
markets. IVAX was incorporated in Florida in 1993, as successor to a Delaware
corporation formed in 1985. Its principal executive offices are located at 4400
Biscayne Boulevard, Miami, Florida 33137 and its telephone number is (305)
575-6000. All references to "IVAX" in this Form 10-K mean IVAX Corporation
and/or its subsidiaries unless the context otherwise requires.
FOCUS AND STRATEGY
IVAX has determined to focus its business primarily in three areas: (i)
proprietary pharmaceuticals, (ii) generic pharmaceuticals, especially specialty
generics, and (iii) collaborative alliances with other pharmaceutical companies
to further develop or license IVAX' proprietary pharmaceuticals, devices, and
technologies. IVAX intends to leverage its expertise and talent in each of these
areas.
While IVAX has a strong pipeline of proprietary drugs in various areas,
the two areas that are most developed are oncology and respiratory. In the
oncology area, IVAX intends to continue its efforts to bring its proprietary
drug Paxene(R) to market and to license from others oncology compounds that will
complement Paxene (see "Research and Development - PROPRIETARY
PHARMACEUTICALS"). In the respiratory area, IVAX intends to capitalize and
expand on its expertise in inhalation devices for asthma, both dry powder and
aerosol, including those with propellants that contain chlorofluorocarbons
("CFCs") and those that do not contain chlorofluorocarbons ("CFC-Free").
In the generic drug area, IVAX is seeking to improve its worldwide
generic drug business by supplementing its generic product portfolio through the
development and introduction of specialty generic products which, because of one
or more characteristics, are likely to encounter less competition. Such products
include those which are difficult to formulate or manufacture, which involve
regulatory obstacles or potential patent challenges, or for which limited raw
material suppliers exist. IVAX believes that by emphasizing the development of
such products, it can mitigate the pricing pressure on other generic drugs and
thereby realize better margins from the sale of generic drugs. In keeping with
this strategy, IVAX plans to launch generic paclitaxel in the United States in
the second half of 2000.
In the area of collaborative alliances, IVAX has benefited from
licensing or partnering arrangements with major international companies, such as
Glaxo Wellcome plc, BASF Aktiengesellschaft, Yamanouchi Pharmaceutical Co., Ltd.
and Abbott Laboratories. During 1999, IVAX entered into agreements with each of
Indiana Protein Technologies to jointly develop generic peptide-based
pharmaceutical products, and Bristol-Myers Squibb Company to collaborate and
develop products in the areas of inhalation technology and with an option to
negotiate a license for an oral formulation of paclitaxel (see "Licensing and
Collaboration"). IVAX continues to seek strategic collaborations with third
parties to exploit its proprietary technologies on an opportunistic basis.
IVAX also has small, but growing subsidiaries in the areas of
veterinary pharmaceuticals, diagnostic assays and analyzers, and nutritional
supplements and herbal medications.
PHARMACEUTICALS
IVAX' pharmaceutical business historically has grown through the
development and acquisition of brand name, generic and over-the-counter
pharmaceutical products, the license of technology and products
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from third parties, and the acquisition of pharmaceutical and other businesses.
IVAX markets several brand-name pharmaceutical products and a wide variety of
generic and over-the-counter pharmaceutical products primarily in the United
States and the United Kingdom. IVAX also maintains direct operations in
Argentina, China, the Czech Republic, Germany, Hong Kong, Hungary, India,
Ireland, Italy, Kazakhstan, Latvia, Peru, Poland, Russia, the Slovak Republic,
Ukraine and Uruguay, and markets its products through distributors or joint
ventures in other foreign markets.
PROPRIETARY PRODUCTS
IVAX has substantial expertise in the development, manufacture and
marketing of respiratory drugs, primarily for asthma, in metered-dose inhaler
("MDI") formulations. IVAX holds patents on a breath-activated MDI which is
designed to overcome the difficulty many persons experience with conventional
MDIs in attempting to coordinate their inhalation with the emission of the
medication. IVAX' device, called Easi-Breathe(TM), emits the medication
automatically in one step upon inhalation, minimizing coordination problems and
better ensuring that the medication is delivered to the lungs. IVAX markets its
Easi-Breathe breath-activated inhaler through its Baker Norton division in the
U.K. and through Galena a.s. in the Czech Republic. In December 1996, IVAX
licensed the Easi-Breathe device to Glaxo Wellcome for use with a number of
inhaled compounds (including, among others, beclomethasone and albuterol) mixed
with CFC or hydrofluoroalkane ("HFA") propellants. The license granted Glaxo
Wellcome the exclusive right to use the Easi-Breathe device for these compounds
on a worldwide basis. IVAX renegotiated this agreement in order to regain rights
to market IVAX' Easi-Breathe inhaler containing beclomethasone and albuterol
worldwide, except that IVAX and Glaxo Wellcome will continue to jointly market
the Easi-Breathe inhaler in the United Kingdom and Ireland until the end of
2000. The parties are discussing a number of other ways in which to strengthen
their alliance.
In September 1997, IVAX sold the United States and Canadian marketing
rights to its proprietary drug Elmiron(R), an innovative drug used for the
treatment of interstitial cystitis, and the urological medications Bicitra(R),
Polycitra(R), Polycitra-K Crystals(R), Polycitra-LC(TM), Neutra-Phos(R), and
Neutra-Phos-K(TM), to ALZA Corporation ("ALZA"). Although this sale represented
an exit by IVAX from the urology business in 1997, IVAX retained the rights to
these products outside of the United States and Canada. IVAX received $75.0
million in up-front payments from ALZA and recognized a $43 million gain on the
sale in 1997. IVAX also received milestone and royalty payments based on the
achievement of specified sales levels in 1998 and 1999, which are included in
other income as additional gain on sale of product rights. IVAX may receive
additional milestone and royalty payments. However, no assurance can be given
that IVAX will receive additional payments from ALZA.
IVAX markets a number of brand-name products treating a variety of
conditions through its subsidiaries throughout the world. These products are
marketed by IVAX' direct sales force to physicians, pharmacies, hospitals,
managed health care organizations and government agencies, and are sold
primarily to wholesalers, retail pharmacies, distributors, hospitals and
physicians. Approximately 20%, 15% and 26% of IVAX' consolidated net revenues
for the years ended December 31, 1999, 1998 and 1997, respectively, were
attributable to worldwide sales of branded drugs.
GENERIC PRODUCTS
Generic drugs are therapeutically equivalent to their brand-name
counterparts, but are generally sold at lower prices as alternatives to the
brand-name products. After giving effect to the restatement described below in
"Disposition of Non-Core Businesses," approximately 57%, 65% and 49% of IVAX'
consolidated net revenues for the years ended December 31, 1999, 1998 and 1997,
respectively, were attributable to worldwide sales of generic prescription and
over-the-counter drugs and vitamin supplements.
In the United States, IVAX manufactures and markets under the "Zenith
Goldline" and "Goldline" trade names approximately 57 generic prescription drugs
in capsule or tablet forms in an aggregate of
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approximately 116 dosage strengths. IVAX distributes in the United States (but
does not manufacture) approximately 349 additional generic prescription and
over-the-counter drugs and vitamin supplements, in various dosage forms, dosage
strengths and package sizes. IVAX' domestic generic drug distribution network
encompasses most trade classes of the pharmaceutical market, including
wholesalers, retail drug chains, retail pharmacies, mail order companies,
managed care organizations, hospital groups, nursing home providers and
government agencies. Approximately 48% of IVAX' 1999 United States generic
pharmaceutical sales were made to the top five customers of that business. None
of these customers individually represents 10% or more of IVAX' consolidated net
revenues. The loss of any of these customers would have an adverse effect on
IVAX' business and results of operations (see "Competition").
In the United Kingdom, IVAX is the largest manufacturer and distributor
of generic pharmaceuticals. IVAX markets under the "Norton" trade name
approximately 110 generic prescription and over-the-counter drugs, about half of
which IVAX manufactures, in various dosage forms and dosage strengths,
constituting an aggregate of approximately 229 products. Such products are
marketed to wholesalers, retail pharmacies, hospitals, physicians and government
agencies. In addition, IVAX manufactures and markets primarily in the United
Kingdom various "blow-fill-seal" pharmaceutical products, such as contact lens
solutions, unit-dose eye drops, solutions for injection or irrigation, and
unit-dose vials for nebulization to treat respiratory disorders. IVAX also
contract manufactures pharmaceutical products in the United Kingdom and Ireland
for other companies.
ACQUISITIONS AND JOINT VENTURES
In October 1999, IVAX acquired the Institute for Drug Research, Ltd.
("IDR"), which is based in Budapest, Hungary. IDR employs approximately 200
scientists and support staff and engages in original drug discovery and provides
contract research services to other pharmaceutical companies. It was originally
founded in 1950 as a government-owned pharmaceutical research and development
center for the Hungarian pharmaceutical industry. It has expertise in drug
discovery, screening, synthesis, and pre-clinical development. Additionally, IDR
has a depository of more than 1,500 microorganisms to produce chemicals of
medicinal value through fermentation. IDR has a number of new drugs that are now
in Phase 1 clinical trials, including a tri-peptide with anti-thrombin activity
similar to heparin, which helps prevent blood clots.
In 1996, IVAX acquired Elvetium S.A. (Argentina), Alet Laboratorios
S.A.E.C.I. y E. and Elvetium S.A. (Uruguay). In 1998, Alet Laboratorios
S.A.E.C.I. y E. merged into Elvetium S.A. (Argentina), which is headquartered in
Buenos Aires and engaged in the business of manufacturing and marketing
pharmaceuticals in Argentina. Elvetium S.A. (Uruguay) is headquartered in
Montevideo and engaged in the business of manufacturing and marketing
pharmaceuticals in Uruguay.
In 1994, IVAX acquired a 60% interest in Galena a.s. ("Galena"), one of
the oldest and best known pharmaceutical companies based in the Czech Republic.
Through open market purchases made in 1995, 1996 and 1999, and a public tender
offer made in 1999, IVAX increased its ownership interest in Galena to 86%.
Galena develops, manufactures and markets a variety of human pharmaceutical and
veterinary products, as well as syrup for a herbal based cola and an energy
sport beverage, active ingredients and herbal extracts used in the manufacture
of pharmaceuticals, including cyclosporin and ergot alkaloids. All products are
manufactured in the Czech Republic. Galena sells its products primarily in
Central and Eastern European countries, including Russia. As part of the 1994
acquisition, IVAX contributed to Galena rights to manufacture and market certain
products and products under development by IVAX in certain countries.
IVAX is a 50% partner in two Chinese joint ventures, one with Kunming
Pharmaceutical Factory, named Kunming Baker Norton Pharmaceutical Co., Ltd.,
which manufactures and markets a variety of pharmaceutical products, and the
other with Beijing Ji-Zhi Pharmaceuticals Technology Development Company of the
Pharmaceuticals Research and Development Centre, China, named Beijing JiAi
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Pharmaceuticals Limited Liability Company, which manufactures and markets
inhalation products for respiratory ailments.
OTHER BUSINESSES
NEUTRACEUTICALS
IVAX provides contract manufacturing services for the nutritional
supplement industry from its encapsulating facility in Miami, Florida. Turnkey
services include custom formulation, raw material sourcing, soft gelatin
encapsulation, and specialized packaging. Utilizing herbal extracts manufactured
by its Galena a.s. subsidiary, IVAX also manufactures a line of high quality
herbal neutraceutical products in soft gelatin capsules.
VETERINARY PRODUCTS
IVAX formulates, packages and distributes under the "DVM
Pharmaceuticals" trade name various veterinary products in the United States,
primarily neutraceutical and dermatological products for companion animals.
These products are marketed through IVAX' direct sales force and a national
network of veterinary product distributors primarily to small animal
practitioners. DVM is developing several proprietary veterinary products,
including one for feline urological syndrome.
DIAGNOSTICS
IVAX' diagnostics group develops, manufactures and markets diagnostic
reagents and instrumentation. IVAX manufactures and markets a line of enzyme
immunoassays ("EIAs") which are used to detect the presence of infectious and
autoimmune diseases, and a line of autoimmune antigens, reagents and other
related products. IVAX also manufactures and markets automatic instruments for
these assays. The diagnostic group's products are marketed to clinical reference
laboratories, hospital laboratories, research institutions and other commercial
entities in the United States through IVAX' direct sales force. In May 1999,
IVAX' diagnostics group entered into a three year agreement to supply automated
walk-away instrumentation for clinical laboratories to Sigma Diagnostics, Inc.
IVAX also markets these products, as well as diagnostic products manufactured by
others, in Italy through a direct sales force to public hospitals and private
medical laboratories. Sales of IVAX' diagnostic products are also made through
independent distributors in various other foreign markets.
RESEARCH AND DEVELOPMENT
For the years ended December 31, 1999, 1998 and 1997, IVAX spent $54.2
million, $48.6 million and $53.4 million, respectively, for company-sponsored
research and development activities. In 1999, approximately 97% of such amount
was dedicated to pharmaceutical research and development. From time to time,
IVAX may supplement its research and development efforts by entering into
research and development agreements, joint ventures and other collaborative
arrangements with other companies to defray the cost of product development.
IVAX intends to pursue a balanced strategy of developing proprietary
pharmaceutical products with an emphasis on the oncology and respiratory fields,
as well as generic pharmaceutical products with an emphasis on specialty
generics (see "General - Focus and Strategy").
Statements in this Form 10-K concerning IVAX' product development
strategy and the timing of regulatory filings and approvals are forward-looking
statements which are subject to risks and uncertainties. The length of time
necessary to complete clinical trials and from submission of an application for
market approval to a final decision by a regulatory authority varies
significantly. No assurance can be given that IVAX will successfully complete
the development of products under development, that IVAX will be able to obtain
regulatory approval for any such product, or that any approved product may be
produced in
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commercial quantities, at reasonable costs, and be successfully marketed.
Similarly, there can be no assurance that IVAX' competitors will not develop and
introduce products that will adversely affect IVAX' business and results of
operations.
PROPRIETARY PHARMACEUTICALS
IVAX is committed to the cost-effective development of proprietary
pharmaceuticals directed primarily towards indications having relatively large
patient populations or for which limited or inadequate treatments are available.
IVAX seeks to accelerate product development and introduction by in-licensing
compounds, especially after clinical testing has begun, and by developing new
dosage forms of existing products or new therapeutic indications for existing
products. IVAX intends to emphasize the development of drug products in the
oncology and respiratory fields, and has a variety of proprietary
pharmaceuticals in varying stages of development.
ELMIRON(R). IVAX received its first United States approval to market a
proprietary drug in September 1996, when the United States Food and Drug
Administration (the "FDA") cleared IVAX' New Drug Application ("NDA") for the
marketing of its patented prescription medication Elmiron (pentosan polysulfate
sodium). Elmiron is approved in the United States and Canada for the treatment
of interstitial cystitis, a chronic, progressive and debilitating urinary
bladder disease primarily afflicting women. In September 1997, IVAX sold the
marketing rights to Elmiron for all indications, as well as rights to certain
other products in the United States and Canada, to ALZA Corporation, but
retained such rights outside the United States and Canada. (See "Pharmaceuticals
- - PROPRIETARY PRODUCTS" and Note 6 of Notes to Consolidated Financial Statements
for a more complete description of this transaction.)
PAXENE(R). The active substance in the injectable drug paclitaxel is an
unpatented compound which, in clinical trials sponsored by the National Cancer
Institute, exhibited promising results in the treatment of ovarian and breast
cancer and AIDS-related Kaposi's Sarcoma ("KS"). Bristol-Myers Squibb Company
("Bristol-Myers") currently markets an injectable product containing paclitaxel
under the brand name Taxol(R) for the treatment of ovarian and breast cancer and
KS. Paxene, IVAX' formulation of injectable paclitaxel, is marketed under a
license from NaPro BioTherapeutics, Inc.
IVAX submitted an NDA for Paxene for the treatment of KS in March 1997,
and in December 1997, the FDA determined Paxene to be safe and effective for the
treatment of KS, but indicated that Paxene could not be finally approved for
this indication until August 4, 2004. The delay in final approval is due to a
seven-year market exclusivity period under the Orphan Drug Act granted to Taxol,
which was approved for KS earlier in 1997. Taxol's Orphan Drug exclusivity does
not apply to NDAs or Abbreviated New Drug Applications ("ANDAs") for the use of
paclitaxel to treat indications other than KS and does not apply in any market
other than the United States. IVAX filed an ANDA for paclitaxel with the FDA in
December 1997. In August 1998, IVAX purchased Immunex Corporation's ANDA for
paclitaxel, the first filed with the FDA for paclitaxel injection. IVAX filed an
application for regulatory approval of Paxene to treat KS in the European Union
in 1997 and, in July 1999, the European Committee for Proprietary Medical
Products approved this application. IVAX' Galena subsidiary received an
exception from registration to market Paxene for KS in the Czech Republic in
January 1999. IVAX has also applied for approval to market Paxene in other
countries.
Bristol-Myers has obtained numerous patents relating to paclitaxel,
including patents covering the production of paclitaxel, its administration to
patients and its formulation. Even if IVAX' NDA for Paxene or its ANDA for
paclitaxel is approved, IVAX will not be able to market paclitaxel if
Bristol-Myers successfully enforces such patents against IVAX. In January 1998,
Bristol-Myers initiated patent infringement litigation against Immunex and,
under the Waxman-Hatch Act, the IVAX-owned paclitaxel ANDA filed by Immunex may
not be approved by the FDA until the earlier of June 2000 or the date when a
court determines that certain of Bristol-Myers' patents are either unenforceable
or not infringed by IVAX' product (see "Governmental Regulation").
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PAXORAL(R). Presently, paclitaxel is marketed only in injectable form.
IVAX is developing an oral formulation of paclitaxel that IVAX believes may
provide significant advantages over the injectable dosage form in terms of
patient convenience and reduced side-effects. IVAX is currently conducting human
clinical trials to test the safety and efficacy of Paxoral.
INHALATION AEROSOL PRODUCTS. IVAX is continuing to develop the
Easi-Breathe(TM) inhaler for use with various compounds. IVAX markets the asthma
drug Cromogen(TM) (sodium cromoglycate) under its own name, and the asthma drugs
Ventolin(R) (albuterol) and Becotide(R) (beclomethasone) under Glaxo Wellcome's
name, in the Easi-Breathe inhaler in the United Kingdom and Ireland. Ventolin
and Becotide are registered trademarks of Glaxo Wellcome. In light of
international agreements calling for the eventual phase-out of CFCs, IVAX is
developing CFC-Free inhalation aerosol products. IVAX received regulatory
approval to market CFC-Free beclomethasone in Ireland and France in 1997 in its
standard MDI and its Easi-Breathe inhaler, the first such approvals for any
company anywhere in the world. In October 1999, IVAX received regulatory
approval to market CFC-Free beclomethasone in its standard MDI in Belgium,
Italy, Finland and Portugal. In 1998, IVAX also applied for approval to market
an albuterol CFC-Free formulation in various European countries. Also, IVAX has
developed a multi-dose dry powder inhaler ("MDPI") which uses no propellant and
is believed to have superior dosing accuracy than competing models. In 1998,
IVAX completed clinical trials in the United Kingdom for budesonide in IVAX'
MDPI. In 1999, IVAX submitted Marketing Authorization Applications in the United
Kingdom for approval to market an MDPI for use with albuterol and budesonide.
In developing environmentally friendly, CFC-Free formulations for MDIs,
IVAX and many of its competitors have obtained or licensed patents on
formulations containing alternative propellants. There are many existing patents
covering the use of hydrofluoroalkane with pharmaceuticals, and successful
product development by IVAX may require that IVAX incur substantial expense in
seeking to develop formulations that do not infringe competitors' patents, or
that IVAX license or invalidate such patents. IVAX successfully invalidated
certain relevant United Kingdom and European patents in the United Kingdom
during 1997, 1998, and early 1999, but there can be no assurance that it will be
successful in defeating the corresponding patents in the United States or other
foreign jurisdictions.
GENERIC PHARMACEUTICALS
IVAX also develops generic pharmaceutical products. During 1999, IVAX
received final FDA approval of 3 ANDAs, tentative FDA approval of 5 ANDAs,
approval of 6 Abridged Product License Applications ("APLAs"), the United
Kingdom equivalent of an ANDA, from the United Kingdom Medicines Control Agency
(the "MCA") and approval of 8 APLAs in 4 other European Countries.
As of January 1, 2000, IVAX had ANDAs or its foreign equivalent pending
as follows:
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NUMBER PENDING COUNTRY
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29 United States
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28 England
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11 Ireland
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8 Germany
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2 France
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1 Canada
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IVAX is seeking to supplement its portfolio of generic products by
emphasizing the development of specialty generics, defined as those products
which, because of one or more special characteristics, are likely to encounter
less competition. Such drugs include those which are difficult to formulate or
manufacture, which involve regulatory obstacles or potential patent challenges,
or for which limited raw
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material suppliers exist. By emphasizing the development of specialty generics,
IVAX seeks to introduce generic products that its competitors cannot easily
develop and thereby obtain better margins from sales of its generic products. In
addition, in evaluating which generic pharmaceutical product development
projects to undertake, IVAX considers whether the new product, once developed,
will complement other IVAX products in the same therapeutic family, or will
otherwise assist in making IVAX' product line more complete. Developing
specialty generic pharmaceutical products involves a greater degree of risk than
developing common generic pharmaceutical products and will require substantial
time and resources. No assurance can be given that IVAX will successfully build
a consistent, profitable pipeline of specialty generics or be able to obtain
regulatory approval to market any such products.
GOVERNMENTAL REGULATION
IVAX' pharmaceutical and diagnostic operations are subject to extensive
regulation by governmental authorities in the United States and other countries
with respect to the testing, approval, manufacture, labeling, marketing and sale
of pharmaceutical and diagnostic products. IVAX devotes significant time, effort
and expense to addressing the extensive government regulations applicable to its
business, and in general, the trend is towards more stringent regulation.
In the United States, the FDA requires extensive testing of new
pharmaceutical products to demonstrate that such products are both safe and
effective in treating the indications for which approval is sought. Testing in
humans may not be commenced until after an Investigational New Drug exemption is
granted by the FDA. An NDA must be submitted to the FDA for new drugs that have
not been previously approved by the FDA and for new combinations of, and new
indications and new delivery methods for, previously approved drugs. Three
phases of clinical trials must be successfully completed before an NDA is
approved: phase I clinical trials, which involve the administration of the drug
to a small number of healthy subjects to determine safety, tolerance, absorption
and metabolism characteristics; phase II clinical trials, which involve the
administration of the drug to a limited number of patients for a specific
disease to determine dose response, efficacy and safety; and phase III clinical
trials, which involve the study of the drug to gain confirmatory evidence of
efficacy and safety from a wide base of investigators and patients. In the case
of a drug that has been previously approved by the FDA, an abbreviated approval
process is available. For such drugs an ANDA may be submitted to the FDA for
approval. For an ANDA to be approved, among other requirements, the drug must be
shown to be bioequivalent to the previously approved drug. The NDA and ANDA
approval process generally takes a number of years and involves the expenditure
of substantial resources. There can be no assurance that the time and resources
devoted to seeking regulatory approval for new products will result in product
approvals or earnings.
The owner of an approved drug is required to list with the FDA all
patents which cover the approved drug and its approved uses. A company filing an
ANDA and seeking approval to market a product before expiration of all listed
patents must certify that such patents are invalid or will not be infringed by
the manufacture, use or sale of the applicant's product, and must notify the
patent owner and the owner of the approved drug of its filing. If the approved
drug owner sues the ANDA filer for patent infringement within 45 days after it
receives such notice, then the FDA will not grant final approval of the ANDA
until the earlier of 30 months from the date the approved drug owner receives
such notice or the date when a court finally determines that the applicable
patents are either invalid or would not be infringed by the applicant's product.
As a result, generic drug manufacturers, including IVAX, are often involved in
lengthy, expensive patent litigation against brand-name drug companies that have
considerably greater resources and that are typically inclined to actively
pursue patent litigation in an effort to protect their franchises.
IVAX' diagnostic products are considered medical devices, and as such
require either a 510(k) premarket notification clearance ("510(k)") or an
approved Premarket Approval Application ("PMA") from the FDA prior to marketing.
A product qualifies for a 510(k) if it is substantially equivalent to another
medical device that was on the market prior to May 28, 1976 and does not now
have a PMA or has
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previously received 510(k) premarket notification clearance and is lawfully on
the market. The 510(k) approval process can take several months and may involve
the submission of data demonstrating its equivalency to similar products in the
market together with other supporting information. An approved PMA application
indicates that the FDA has determined that a device has been proven to be safe
and effective for its intended use. The PMA process typically can last several
years and requires the submission of significant quantities of preclinical and
clinical data as well as manufacturing and other information.
On an ongoing basis, the FDA reviews the safety and efficacy of
marketed pharmaceutical products and products considered medical devices and
monitors labeling, advertising and other matters related to the promotion of
such products. The FDA also regulates the facilities and procedures used to
manufacture pharmaceutical and diagnostic products in the United States or for
sale in the United States. Such facilities must be registered with the FDA and
all products made in such facilities must be manufactured in accordance with
"good manufacturing practices" established by the FDA. Compliance with good
manufacturing practices guidelines requires the dedication of substantial
resources and requires significant costs. The FDA periodically inspects IVAX'
manufacturing facilities and procedures to assure compliance. The FDA may cause
a recall or withdraw product approvals if regulatory standards are not
maintained. FDA approval to manufacture a drug is site-specific. In the event an
approved manufacturing facility for a particular drug becomes inoperable,
obtaining the required FDA approval to manufacture such drug at a different
manufacturing site could result in production delays, which could adversely
affect IVAX' business and results of operations.
In connection with its activities outside the United States, IVAX is
also subject to regulatory requirements governing the testing, approval,
manufacture, labeling, marketing and sale of pharmaceutical and diagnostic
products, which requirements vary from country to country. Whether or not FDA
approval has been obtained for a product, approval of the product by comparable
regulatory authorities of foreign countries must be obtained prior to marketing
the product in those countries. The approval process may be more or less
rigorous from country to country, and the time required for approval may be
longer or shorter than that required in the United States. No assurance can be
given that clinical studies conducted outside of any country will be accepted by
such country, and the approval of any pharmaceutical or diagnostic product in
one country does not assure that such product will be approved in another
country.
The federal and state governments in the United States, as well as many
foreign governments, including the United Kingdom, from time to time explore
ways to reduce medical care costs through health care reform. These efforts have
resulted in, among other things, government policies that encourage the use of
generic drugs rather than brand-name drugs to reduce drug reimbursement costs.
Virtually every state in the United States has a generic substitution law which
permits the dispensing pharmacist to substitute a generic drug for the
prescribed brand-name product. The debate to reform the United States' health
care system is expected to be protracted and intense. Due to uncertainties
regarding the ultimate features of reform initiatives and their enactment and
implementation, IVAX cannot predict what impact any reform proposal ultimately
adopted may have on the pharmaceutical or diagnostic industries or on the
business or operating results of IVAX.
BACKLOG ORDERS
As of December 31, 1999, the dollar amount of backlog orders for Zenith
Goldline was $3.9 million and for Norton Healthcare was $3.2 million.
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RAW MATERIALS
Raw materials essential to IVAX' business are generally readily
available from multiple sources. Certain raw materials and components used in
the manufacture of IVAX' products are, however, available from limited sources,
and in some cases, a single source. Any curtailment in the availability of such
raw materials could be accompanied by production or other delays, and, in the
case of products for which only one raw material supplier exists, could result
in a material loss of sales, with consequent adverse effects on IVAX' business
and results of operations. In addition, because raw material sources for
pharmaceutical products must generally be approved by regulatory authorities,
changes in raw material suppliers may result in production delays, higher raw
material costs and loss of sales and customers. IVAX obtains a significant
portion of its raw materials from foreign suppliers, and its arrangements with
such suppliers are subject to, among other things, FDA, customs and other
government clearances, duties and regulation by the countries of origin.
COMPETITION
The pharmaceutical industry is highly competitive and includes numerous
established pharmaceutical companies, many of which have considerably greater
financial, technical, clinical, marketing and other resources and experience
than IVAX. The markets in which IVAX competes are undergoing, and are expected
to continue to undergo, rapid and significant technological change, and IVAX
expects competition to intensify as technological advances are made. IVAX
intends to compete in this marketplace by developing or licensing pharmaceutical
products that are either patented or proprietary and which are primarily for
indications having relatively large patient populations or for which limited or
inadequate treatments are available, and, with respect to generic
pharmaceuticals, by developing therapeutic equivalents to previously patented
products which, because of one or more unique characteristics, are expected to
have less intensive competition. There can be no assurance, however, that
developments by others will not render IVAX' pharmaceutical products or
technologies obsolete or uncompetitive.
In addition to product development, other competitive factors in the
pharmaceutical industry include product quality and price, customer service, and
reputation. Price is a key competitive factor in the generic pharmaceutical
business. To compete effectively on the basis of price and remain profitable, a
generic drug manufacturer must manufacture its products in a cost-effective
manner. As a result of its ongoing cost-control and restructuring programs, IVAX
has reduced its manufacturing costs.
Revenues and gross profit derived from generic pharmaceutical products
tend to follow a pattern based on regulatory and competitive factors unique to
the generic pharmaceutical industry. As patents for brand-name products and
related exclusivity periods mandated by regulatory authorities expire, the first
generic manufacturer to receive regulatory approval for and market generic
equivalents of such products is usually able to achieve relatively high market
share, revenues and gross profit. As other generic manufacturers receive
regulatory approvals and enter the market, sales volumes, market share and
prices typically decline. Accordingly, the level of revenues and gross profit
attributable to generic products developed and manufactured by IVAX is
dependent, in part, on IVAX' ability to maintain a pipeline of products in
development and to develop and rapidly introduce new products, the timing of
regulatory approval of such products, the number and timing of regulatory
approvals of competing products, and IVAX' ability to manufacture such products
efficiently. Because of the regulatory and competitive factors discussed above,
IVAX' revenues and results of operations historically have fluctuated from
period to period. IVAX expects this fluctuation to continue as long as a
significant part of its revenues are generated from sales of generic
pharmaceuticals.
In addition to competition from other generic drug manufacturers, IVAX
faces competition from brand-name companies as they increasingly sell their
products into the generic market directly by establishing, acquiring or forming
licensing or business arrangements with generic pharmaceutical companies. No
regulatory approvals are required for a brand-name manufacturer to sell directly
or through
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a third party to the generic market, nor do such manufacturers face any other
significant barriers to entry into such market.
The Food and Drug Modernization Act of 1997 includes a pediatric
exclusivity provision that may provide an additional six months of market
exclusivity in the United States for indications of new or currently marketed
drugs, if certain agreed upon pediatric studies are completed by the applicant.
Brand-name companies are utilizing this provision to increase their period of
market exclusivity and are increasingly pursuing other strategies to prevent or
delay the introduction of generic competition. These strategies include, among
other things, initiating legislative efforts in various states to limit the
substitution of generic versions of certain types of branded pharmaceuticals,
seeking to establish regulatory obstacles to the demonstration of the
bioequivalence of generic drugs to their brand-name counterparts, and
instituting legal actions based on process or other patents that allegedly are
infringed by the generic products.
A significant amount of IVAX' United States generic pharmaceutical
sales are made to a relatively small number of drug wholesalers and retail drug
chains, which represent an essential part of the distribution chain of
pharmaceutical products in the United States. Both of these industries have
undergone, and are continuing to undergo, significant consolidation, which has
resulted in IVAX' customers gaining more purchasing leverage and consequently
increasing the pricing pressures facing IVAX' United States generic
pharmaceutical business. Further consolidation among IVAX' customers may result
in even greater pricing pressures and correspondingly reduce the gross margins
of this business, and may also cause such customers to reduce their purchases of
IVAX' products.
Other competitive factors affecting IVAX' business include the
emergence of large buying groups representing independent retail pharmacies and
the prevalence and influence of managed care organizations and similar
institutions, which are able to seek price discounts on pharmaceutical products.
As the influence of these entities continues to grow, IVAX may continue to face
increased pricing pressure on the products it markets.
PATENTS AND TRADEMARKS
IVAX seeks to obtain patent protection on its products and products
under development where appropriate. IVAX currently owns or has licenses under
various United States and foreign patents and patent applications, which cover
certain of its products, products under development, product uses and
manufacturing processes. Protection for individual products, product uses or
manufacturing processes extends for varying periods in accordance with the date
of grant and the legal life of the patents in the various countries. The
protection afforded, which may also vary from country to country, depends on the
type of patent and its scope of coverage. There is no assurance that patents
will be issued on pending applications or as to the scope or degree of
protection patents will afford IVAX, or that IVAX' patents will be held valid by
a court of competent jurisdiction. Although IVAX believes that its patents and
licenses are important to its business, no single patent or license is currently
material in relation to IVAX' business as a whole. Any litigation regarding
IVAX' patents could result in substantial cost to IVAX.
IVAX sells certain of its products under trademarks and seeks to obtain
protection for its trademarks by registering them in the United States, United
Kingdom and other countries where the products are marketed. At present, IVAX
does not consider its trademarks, individually or in the aggregate, to be
material in relation to its business as a whole.
IVAX' success also depends on trade secrets which, in some cases,
cannot be patented or as to which seeking patents may harm IVAX' competitive
position. While IVAX generally requires its employees, advisors and consultants
to execute confidentiality agreements prohibiting such persons from disclosing
IVAX' trade secrets or using them in a manner harmful to IVAX, there can be no
assurance that these agreements will provide adequate protection or that IVAX
can meaningfully protect its proprietary interest in unpatented trade secrets.
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LICENSING AND COLLABORATION
IVAX has obtained licenses to technology and compounds for development
into new pharmaceutical products from various inventors, universities and the
United States government, and will continue to seek new licenses from such
parties and others, including pharmaceutical companies. Generally, these
licenses grant IVAX the right to complete development efforts initiated by
others and to market any resulting products. IVAX generally is required to pay a
royalty based on sales of the product. There can be no assurance that any
licenses desired by IVAX will be obtainable on commercially reasonable terms or
that any licensed patents or proprietary rights will be valid and enforceable.
IVAX also grants licenses to other pharmaceutical companies relating to
technologies or compounds under development and, in some cases, finished
products. Generally, these licenses grant the licensees the right to complete
development work of the technology or compound, or obtain regulatory approvals
of a product, and thereafter market the product in specified territories. These
licenses often involve the payment of an up-front fee and fees upon completion
of certain development milestones, and also provide for the payment of royalties
based on sales of the product. IVAX often retains the right to supply the
product to the licensees.
In August 1999, IVAX entered into an agreement with Indiana Protein
Technologies ("IPT"), a privately held company, to use IPT's recombinant
technology in the joint development of a number of generic peptide-based
pharmaceutical products.
In November 1999, IVAX entered into a three year product collaboration
and development services agreement with Bristol-Myers in the areas of inhalation
technology and oncology. With respect to inhalation technology, the agreement
calls for IVAX and Bristol-Myers to collaborate to develop one or more of
Bristol-Myers' proprietary molecules using IVAX' patented devices, which
Bristol-Myers would purchase from IVAX. Bristol-Myers would retain the worldwide
rights to market respiratory products containing its compounds. On the oncology
side, Bristol-Myers' Taxol(R) (paclitaxel) is the leading anti-cancer drug in
the world, with 1999 sales estimated to reach approximately $1.5 billion.
However, Taxol is an injectable product and is not orally available. As part of
the agreement, Bristol-Myers was granted an option to negotiate a license to
IVAX' patented system for making paclitaxel orally available.
SEASONALITY
While certain of IVAX' individual products may have a degree of
seasonality, there are no significant seasonal aspects to IVAX' business, except
that sales of pharmaceutical products indicated for colds and flu symptoms are
higher during the fourth quarter as customers supplement inventories in
anticipation of the cold and flu season. In addition, revenues that are
contingent upon licensees achieving certain sales targets during the year tend
to be higher in the second half of the year.
ENVIRONMENT
IVAX believes that its operations comply in all material respects with
applicable laws and regulations concerning the environment. While it is
impossible accurately to predict the future costs associated with environmental
compliance and potential remediation activities, compliance with environmental
laws is not expected to require significant capital expenditures and has not
had, and is not presently expected to have, a material adverse effect on IVAX'
earnings or competitive position.
INCREASES IN EFFICIENCY
Beginning in the third quarter of 1996 and continuing throughout 1999,
IVAX announced and initiated restructuring programs in an effort to enhance
operating efficiencies and reduce costs. These objectives were achieved through
workforce reductions, facility consolidations and other cost-saving measures
throughout the organization. (see "Properties"). During this period, IVAX
reduced its worldwide
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workforce from approximately 8,100 to approximately 3,800 employees, including
reductions resulting from the sale of non-core businesses. IVAX also implemented
strict controls on capital expenditures and working capital spending.
In connection with the restructuring programs, IVAX consolidated its
United States pharmaceutical distribution facilities into a single leased
distribution center in Kenton County, Kentucky in 1997; sold its office,
packaging and warehouse facility in Fort Lauderdale, Florida and its
pharmaceutical manufacturing facilities in Syosset, New York and Kirkland,
Quebec, Canada in 1998; sold its pharmaceutical manufacturing facility in
Shreveport, Louisiana (which was closed in 1996) in 1998; and has substantially
ceased manufacturing at its Northvale, New Jersey pharmaceutical manufacturing
facility in 1999. Production from these facilities has been transferred to
Cidra, Puerto Rico or other existing IVAX facilities.
During 1998 and 1999, a focus of IVAX' restructuring program was the
pharmaceutical operations of its Norton Healthcare Limited subsidiary located in
the United Kingdom. As in the United States, this program included workforce
reductions, facility consolidations and other cost-saving measures. As part of
this restructuring, IVAX reduced its workforce in the United Kingdom from
approximately 1,460 to approximately 1,200. During 1998, IVAX closed two
manufacturing plants in southeast London, England and consolidated its U.K.
manufacturing activities at its Waterford, Ireland facility. In 1999, IVAX
consolidated its U.K. packaging operations into its Waterford, Ireland facility
from Harlow, England and all other functions, including research and
development, were consolidated into its new facility located in the Royal Docks
area of London.
DISPOSITION OF NON-CORE BUSINESSES
During 1997 and 1998, IVAX divested its intravenous products, specialty
chemicals and personal care products businesses, all of which had been
classified as discontinued operations since 1997. As a result of its decision to
divest these businesses, in 1997 IVAX restated its financial statements to
reflect these businesses as discontinued operations. Unless otherwise noted, all
of the financial information contained herein reflects this restatement. IVAX
completed the sale of the last of these businesses in July 1998. See Note 5,
Divestitures, and Note 7, Discontinued Operations, to the Consolidated Financial
Statements and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" incorporated by reference from the Financial
Information section of the 1999 Annual Report to Shareholders for additional
information. These businesses accounted for approximately 6% and 43% of IVAX'
consolidated net revenues before the restatement described above during the
years ended December 31, 1998 and 1997, respectively.
Effective May 30, 1997, IVAX sold McGaw, Inc. ("McGaw"), its
intravenous products subsidiary. IVAX' intravenous products business
manufactured and marketed a broad line of basic and specialty intravenous
solutions, irrigation solutions, intravenous administration sets, infusion pumps
and other infusion supplies and equipment, primarily to hospitals and
alternate-site health care locations in the United States and, through
independent distributors, in various foreign markets. The intravenous products
business had net revenues, including intercompany sales, of $140.6 million for
the five months ended May 30, 1997 and $343.0 million for the year ended
December 31, 1996.
IVAX' specialty chemicals group manufactured and marketed, primarily in
the United States and Canada, several hundred chemical products in three
distinct market segments: vacuum pump fluids, textile and denim products, and
cleaning products. IVAX' specialty chemicals group had net revenues, including
intercompany sales, of $9 million and $41.6 million for the years ended December
31, 1998 and 1997, respectively. During the third quarter of 1997, IVAX
completed the sale of a significant portion of the assets of its specialty
chemicals business in three separate transactions in which IVAX received an
aggregate of approximately $41.1 million in cash. In February 1998, IVAX
completed the divestiture of its specialty chemicals business by selling its
vacuum pump fluids business for approximately $3.9 million
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(subject to certain post-closing adjustments). IVAX retained certain real estate
assets of the specialty chemicals business which it is seeking to sell.
IVAX' personal care products group developed, manufactured and
marketed, primarily within the United States, a variety of personal care
products, mainly through distributors, stores and mass merchandisers, in three
principal areas: hair care products designed primarily for African-American
consumers, cosmetic products designed primarily for dark-skinned women, and
corrective cosmetics. IVAX' personal care products group had net revenues,
including intercompany sales, of $42.6 million for the seven months ended July
31, 1998, and $73.9 million and $80.0 million for the years ended December 31,
1997 and 1996, respectively. Effective July 14, 1998, IVAX sold Johnson Products
Co., Inc., its personal care products subsidiary, to Carson Products Company, a
wholly-owned subsidiary of Carson, Inc., for approximately $84.7 million (after
certain post-closing adjustments). At closing, IVAX received $35 million in cash
and a secured note for $50 million, which IVAX subsequently sold, without
recourse, for $48.5 million in cash. In a separate transaction, IVAX sold the
Flori Roberts(R), Patti LaBelle(TM) and IMAN(R) product lines of Johnson
Products Co., Inc. to Color Me Beautiful, Inc. IVAX no longer maintains a
personal care products business.
On September 18, 1997, IVAX sold the United States and Canadian
marketing rights to its proprietary drug Elmiron(R) and three additional urology
products to ALZA. Although this sale represented an exit by IVAX from the
urology business in 1997, IVAX retained the rights to these products outside of
the United States and Canada. The gain on the sale of IVAX' urology business in
the United States and Canada ($13 million, $27.3 million and $43.2 million in
1999, 1998 and 1997, respectively) is included in other income as it does not
represent the sale of a discontinued business segment under Accounting
Principles Board Opinion No. 30.
EMPLOYEES
As of January 1, 2000, IVAX had approximately 3,800 employees
worldwide.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report and the documents incorporated by referenced herein contain
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. "Forward-looking" statements are any statements that are not based
on historical information. Such statements involve risks and uncertainties,
including but not limited to economic, competitive, governmental and
technological factors affecting IVAX' operations, markets, products and prices,
and other factors discussed elsewhere in this report and the documents filed by
IVAX with the Securities and Exchange Commission ("SEC"). These factors may
cause IVAX' results to differ materially from the statements made in this report
or otherwise made by or on behalf of IVAX.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Specific financial information with respect to IVAX' foreign and
domestic operations is provided in Note 13, Business Segment Information, in the
Notes to Consolidated Financial Statements incorporated by reference to the
Financial Information section of IVAX' 1999 Annual Report to Shareholders.
ITEM 2. PROPERTIES
IVAX' corporate headquarters are located in Miami, Florida. IVAX
maintains offices, warehouses, research and development facilities and/or
distribution centers in Argentina, China, the Czech Republic, Germany, Hong
Kong, Hungary, India, Ireland, Italy, Kazakhstan, Latvia, Peru, Poland, Russia,
the Slovak Republic, Ukraine, Uruguay and various parts of the United States and
the United Kingdom, most of which are held pursuant to leases. None of such
leases are material to IVAX.
IVAX operates pharmaceutical manufacturing facilities in Buenos Aires,
Argentina; Opava-Komarov, Czech Republic; London and Runcorn, England; Miami,
Florida; Falkenhagen, Germany; Budapest, Hungary; Waterford, Ireland; Rome,
Italy; Cidra, Puerto Rico; St. Croix, US Virgin Islands; and Montevideo,
Uruguay. IVAX' diagnostics manufacturing facilities are located in Miami,
Florida and Springdale, Arkansas. IVAX owns its Miami, Budapest, Buenos Aires,
Cidra, Montevideo, Opava-Komarov and Falkenhagen manufacturing facilities, and
leases its remaining manufacturing facilities. In connection with the sale of
the specialty chemicals business, IVAX retained ownership of its
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manufacturing facilities in Rock Hill, South Carolina and Marion, Ohio, and is
pursuing the sale of these facilities.
IVAX believes its facilities are in satisfactory condition, are
suitable for their intended use and, in the aggregate, have capacities in excess
of those necessary to meet IVAX' present needs. A portion of IVAX'
pharmaceutical manufacturing capacity and its research and development
activities, as well as its corporate headquarters and other critical business
functions are located in areas subject to hurricane casualty risk. Although IVAX
has certain limited protection afforded by insurance, IVAX' business, earnings
and competitive position could be materially adversely affected in the event of
a major windstorm.
ITEM 3. LEGAL PROCEEDINGS
In late April 1995, Zenith Laboratories, Inc., a wholly-owned
subsidiary of IVAX ("Zenith"), received approvals from the FDA to manufacture
and market the antibiotic cefaclor in capsule and oral suspension formulations.
Cefaclor is the generic equivalent of Ceclor(R), a product of Eli Lilly and
Company ("Lilly"). On April 27, 1995, Lilly filed a lawsuit against Zenith and
others styled ELI LILLY AND COMPANY V. AMERICAN CYANAMID COMPANY, BIOCRAFT
LABORATORIES, INC., ZENITH LABORATORIES, INC. AND BIOCHIMICA OPOS S.P.A. in the
United States District Court for the Southern District of Indiana, Indianapolis
Division. In general, the lawsuit alleges that Biochimica Opos S.p.A. ("Opos"),
Zenith's cefaclor raw material supplier, manufactured cefaclor raw material in a
manner which infringed two process patents owned by Lilly, and that Zenith and
the other defendants knowingly and willfully infringed and induced Opos to
infringe the patents by importing the raw material into the United States. The
lawsuit seeks to enjoin Zenith and the other defendants from infringing or
inducing the infringement of the patents and from making, using or selling any
product incorporating the raw material provided by Opos, and seeks an
unspecified amount of monetary damages and the destruction of all cefaclor raw
material manufactured by Opos and imported into the United States. In August
1995, the Court denied Lilly's motion for preliminary injunction which sought to
prevent Zenith from selling cefaclor until the merits of Lilly's allegations
could be determined at trial. On May 10, 1996, the United States Court of
Appeals for the Federal Circuit affirmed the district court's denial of Lilly's
motion for preliminary injunction. On February 28, 1997, Lilly filed an amended
complaint alleging the infringement of an additional patent, and also filed a
motion to add to the lawsuit additional defendants who are not affiliated with
IVAX or Zenith. Lilly subsequently filed a second amended complaint but did not
revise its allegations regarding Zenith. Zenith has filed a motion for partial
summary judgment and has asserted a counterclaim, which remain pending. Zenith
ceased selling cefaclor in January 1997, when it announced a recall in the
United States of cefaclor as a result of the recall by Opos of the raw material
used to manufacture the product.
On April 18, 1997, Lilly filed a complaint in the United States
District Court for the District of New Jersey styled ELI LILLY AND COMPANY V.
ROUSSEL CORP., ET AL. against various defendants, including Zenith. With respect
to Zenith, the complaint asserts claims for violation of the Lanham Act, unfair
competition under New Jersey State law, common law unfair competition and unjust
enrichment. Also named as defendants are Roussel Corporation, Roussel UCLAF
Holdings Corporation, Roussel UCLAF S.A., Hoechst Marion Roussel North America,
and Biochimica Opos S.p.A. (collectively, the "Roussel Defendants"), The Rugby
Group, Inc., and Rugby Laboratories, Inc. (collectively, "Rugby"), and American
Home Products Corporation and American Cyanamid Company (collectively, the
"American Home Defendants"). The claims asserted against the American Home
Defendants and Rugby are essentially the same as those asserted against Zenith.
All of the asserted claims arise out of what Lilly contends were fraudulent
misrepresentations to Lilly and the FDA by Opos regarding the methods utilized
by Opos to manufacture bulk cefaclor and the location of the manufacturing
facility of such cefaclor. According to Lilly, through these alleged
misrepresentations, Opos fraudulently obtained approval from the FDA to market
bulk cefaclor in the United States. The claims asserted against Zenith are
predicated on Zenith's sale in the United States of retail dosage units of
cefaclor manufactured using Opos' bulk cefaclor. Lilly alleges that Zenith, in
marketing and selling retail dosage units of cefaclor manufactured from Opos'
bulk cefaclor, used false and misleading descriptions and representations
regarding Zenith's cefaclor product.
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The relief sought by Lilly against Zenith, jointly and severally with the
American Home Defendants and Rugby, is an accounting to Lilly for any and all
profits derived by Zenith from the sale of cefaclor and an award of damages to
Lilly, in an unspecified amount, allegedly sustained by Lilly as a result of
Zenith's alleged acts of misrepresentation and unfair competition. Lilly further
seeks an award of treble damages and litigation costs, including attorneys' fees
and interest. Under its unjust enrichment claim, Lilly seeks restitution in an
unspecified amount against Zenith, jointly and severally with the other
defendants. In June 1997, Zenith filed a motion to dismiss the action, which was
granted in June 1998. Plaintiffs filed an amended complaint and, on November 6,
1998, Zenith filed another motion to dismiss, which remains pending.
In November 1996, individuals purporting to be shareholders of IVAX
filed a class action complaint styled MALIN, ET AL. VS. IVAX CORPORATION AND
PHILLIP FROST, ET AL. against IVAX and certain of its current and former
officers or directors in the United States District Court for the Southern
District of Florida which consolidated, amended and supplemented a number of
similar complaints filed earlier in 1996. The plaintiffs seek to act as
representatives of a class consisting of all purchasers of IVAX common stock
between July 31, 1995 and June 27, 1996. The consolidated amended complaint
alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of
1934, as amended (the "1934 Act") and Rule 10b-5 promulgated by the Securities
and Exchange Commission, and also asserts a claim for negligent
misrepresentation. The complaint generally alleges that IVAX made untrue
statements of material fact and omitted to state material facts necessary to
make statements made not misleading in its public disclosure documents and in
communications to the public regarding its operations and financial results and
that its financial statements were not prepared in accordance with generally
accepted accounting principles. These allegations are centered around
allegations that IVAX failed to disclose that product sales were subject to
shelf stock adjustments and failed to establish reserves for such adjustments.
On August 18, 1998, the United States District Court granted the IVAX
defendant's motion to dismiss the action without prejudice. The plaintiffs
subsequently filed a further amended complaint, and on November 9, 1998, IVAX
filed a motion to dismiss the amended complaint, which was granted on July 1,
1999. Plaintiffs have filed a notice of appeal.
In 1997, two class action complaints were filed by individuals
purporting to be shareholders of IVAX Corporation against IVAX, its chairman and
its former chief financial officer in federal court. One of these actions was
subsequently dismissed without prejudice, and the complaint in the other action,
which was amended to incorporate the allegations in both actions, is now pending
as ALAN M. HARRIS, YITZCHOK WOLPIN AND FAUSTO POMBAR V. IVAX CORPORATION,
PHILLIP FROST AND MICHAEL W. FIPPS. The plaintiffs in that action seek to act as
representatives of a class consisting of all persons who purchased IVAX common
stock and/or call options during the period from August 2, 1996 through November
11, 1996, inclusive. The complaint alleges claims for violation of Section 10(b)
of the 1934 Act and Rule 10b-5 and for negligent misrepresentation. The
complaint alleges, among other things, that during the class period defendants
made untrue statements of material fact and omitted to state material facts
necessary to make statements made not misleading in its statements to the
public, including in a September 30, 1996 press release regarding IVAX'
forecasted earnings for the third quarter of 1996. The complaint seeks
unspecified compensatory damages, interest, attorneys' fees, costs of suit and
unspecified other and further relief from the court. On March 30, 1998, the
court dismissed the complaint with prejudice. An appeal was filed on May 19,
1998 and on July 27, 1999, the district court's opinion was affirmed. Plaintiffs
have filed a motion for rehearing, which remains pending.
On December 21, 1998, an action purporting to be a class action, styled
LOUISIANA WHOLESALE DRUG CO. VS. ABBOTT LABORATORIES, GENEVA PHARMACEUTICALS,
INC. AND ZENITH GOLDLINE PHARMACEUTICALS, INC., was filed against Zenith
Goldline and others in the United States District Court for the Southern
District of Florida, alleging a violation of Section 1 of the Sherman Antitrust
Act. Plaintiffs purport to represent a class consisting of customers who
purchased a certain proprietary drug directly from Abbott Laboratories during
the period beginning on October 29, 1998. Plaintiffs allege that, by settling
patent-related litigation against Abbott in exchange for quarterly payments, the
defendants engaged in an unlawful restraint of trade.
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The complaint seeks unspecified treble damages and injunctive relief. Nine
additional class action lawsuits containing allegations similar to those in the
LOUISIANA WHOLESALE case were filed in various jurisdictions between July 1999
and January 2000. Zenith Goldline has filed a potentially dispositive motion in
the LOUISIANA WHOLESALE case raising defenses that would also be applicable to
the other pending cases. All cases are in the early stages of litigation, and
any prediction as to their eventual outcomes would be premature. On March 13,
2000 the Federal Trade Commission ("FTC") announced that it had issued
complaints against, and negotiated consent decrees with, Abbott Laboratories and
Geneva Pharmaceuticals arising out of an investigation of the same subject
matter that is involved in these lawsuits. The FTC took no action against Zenith
Goldline. The FTC determinations are subject to a thirty-day public comment
period, after which they will be final.
Zenith Goldline has been named in a number of individual and class
action lawsuits in both state and federal courts involving the diet drug
combination of fenfluramine and phentermine, commonly known as "fen-phen."
Generally, these lawsuits seek damages for personal injury, wrongful death and
loss of consortium, as well as punitive damages, under a variety of liability
theories including strict products liability, breach of warranty and negligence.
Zenith Goldline did not manufacture either fenfluramine or phentermine, but did
distribute the generic version of phentermine manufactured by Eon Labs
Manufacturing, Inc. ("Eon") and Camall Company. Although Zenith Goldline had a
very small market share, as of March 14, 2000, Zenith Goldline has been named in
approximately 4,482 cases and has been dismissed from approximately 763 cases,
with an additional 1,127 dismissals pending. Zenith Goldline intends to
vigorously defend all of the lawsuits, and while management believes that its
defense will succeed, as with any litigation, there can be no assurance of this.
Currently Zenith Goldline is being defended and indemnified by Eon. In the event
that Eon discontinues providing this defense and indemnity, Zenith Goldline has
its own product liability insurance. While Zenith Goldline's insurance carriers
have issued reservations of rights, Zenith Goldline believes that it has
adequate coverage. Although it is impossible to predict with certainty the
outcome of litigation, in the opinion of management, this litigation will not
have a material adverse impact on the financial condition or results of
operation of IVAX.
In March 2000, individuals purporting to be shareholders of
IVAX filed a class action complaint styled GOLDFISHER V. IVAX CORPORATION, ET
AL. against IVAX and certain of its current and former officers and directors in
the Circuit Court of the 11th Judicial Circuit in and for Dade County, Florida.
The plaintiff seeks to act as the representative of a class consisting of all
purchasers of IVAX common stock between December 19, 1997 and the date of class
certification. The complaint generally alleges that IVAX' adoption of a
shareholder rights plan containing a provision that would limit the ability of
certain members who might be added to the Board of Directors following a change
of control to approve a decision to redeem the rights, which is commonly known
as a "dead hand" provision, is a violation of the Florida Business Corporation
Act and IVAX' articles of incorporation and by-laws. Plaintiffs seek an
injunction invalidating this provision, as well as damages in an unspecified
amount which, in the opinion of management, would not be material.
IVAX intends to vigorously defend each of the foregoing lawsuits, but
their respective outcomes cannot be predicted. Any of such lawsuits, if
determined adversely to IVAX, could have a material adverse effect on IVAX'
financial position and results of operations. IVAX' ultimate liability with
respect to any of the foregoing proceedings is not presently determinable.
With respect to the case styled SMITH & NEPHEW, INC. V. IVAX
CORPORATION, previously reported in IVAX' Annual Report on Form 10-K for the
year ended December 31, 1998, on June 17, 1999, the parties entered into a
settlement agreement pursuant to which the lawsuit was dismissed with prejudice
on August 11, 1999.
16
<PAGE>
IVAX is involved in various other legal proceedings arising in the
ordinary course of business, some of which involve substantial amounts. In order
to obtain generic approvals prior to the expiration of patents on branded
products, and to benefit from the exclusivity allowed to ANDA applicants that
successfully challenge these patents, IVAX frequently becomes involved in patent
infringement litigation brought by branded pharmaceutical companies (see
"Governmental Regulation"). Although these lawsuits involve products that are
not yet marketed and therefore pose little or no risk of liability for damages,
the legal fees and costs incurred in defending such litigation can be
substantial. While it is not feasible to predict or determine the outcome or the
total cost of these proceedings, in the opinion of management, based on a review
with legal counsel, any losses resulting from such legal proceedings will not
have a material adverse impact on IVAX' financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is a list of the names, ages, positions held and
business experience during the past five years of the persons serving as
executive officers of IVAX as of March 24, 2000. Officers serve at the
discretion of the Board of Directors. There is no family relationship between
any of the executive officers, and there is no arrangement or understanding
between any executive officer and any other person pursuant to which the
executive officer was selected.
THOMAS E. BEIER. Mr. Beier, age 54, has served as Senior Vice President
- - Finance and Chief Financial Officer of IVAX since October 1997. From December
1996 to October 1997, he served as Vice President - Finance for IVAX. Prior to
joining IVAX, he served as Executive Vice President and Chief Financial Officer
of Intercontinental Bank from 1989 until August 1996.
NEIL FLANZRAICH. Mr. Flanzraich, age 56, has served as Vice Chairman
and President of IVAX since May 1998 and as a director of IVAX since 1997. He
was a shareholder and served as Chairman of the Life Sciences Legal Practices
Group of Heller Ehrman White & McAuliffe from 1995 to May 1998. From 1981 to
1994, he served in various capacities at Syntex Corporation (pharmaceuticals),
most recently as its Senior Vice President, General Counsel and a member of the
Corporate Executive Committee. From 1994 to 1995, after Syntex Corporation was
acquired by Roche Holding Ltd., he served as Senior Vice President and General
Counsel of Syntex (U.S.A.) Inc., a Roche subsidiary. He is Chairman of the Board
of Directors of North American Vaccine, Inc. (vaccine research and development),
and is a director of Whitman Education Group, Inc. (proprietary education).
PHILLIP FROST, M.D. Dr. Frost, age 63, has served as Chairman of the
Board of Directors and Chief Executive Officer of IVAX since 1987. He served as
IVAX' President from July 1991 until January 1995. He was the Chairman of the
Department of Dermatology at Mt. Sinai Medical Center of Greater Miami, Miami
Beach, Florida from 1972 to 1990. Dr. Frost was Chairman of the Board of
Directors of Key Pharmaceuticals, Inc. from 1972 to 1986. He is Chairman of the
Board of Directors of Whitman Education Group, Inc. (proprietary education),
Vice Chairman of the Board of Directors of North American Vaccine, Inc. (vaccine
research and development), Vice Chairman of the Board of Directors of
Continucare Corporation (integrated health care), and a director of Northrop
Grumman Corp. (aerospace). He is Vice Chairman of the Board of Trustees of the
University of Miami and a member of the Board of Governors of the American Stock
Exchange.
17
<PAGE>
RAFICK G. HENEIN, PH.D. Dr. Henein, age 59, has served as a Senior Vice
President of IVAX and as the President and Chief Executive Officer of Zenith
Goldline Pharmaceuticals, Inc., IVAX' principal United States-based generic
pharmaceutical subsidiary, since July 1997. He held various positions in the
Novopharm Limited organization (pharmaceuticals) since 1988, rising to the
position of President and Chief Executive Officer of Novopharm International in
1996.
JANE HSIAO, PH.D. Dr. Hsiao, age 52, has served as a director of IVAX
and as IVAX' Vice Chairman-Technical Affairs since February 1995, as IVAX' Chief
Technical Officer since July 1996, and as Chairman, Chief Executive Officer and
President of DVM Pharmaceuticals, Inc., IVAX' veterinary products subsidiary,
since March 1998. From 1992 until February 1995, she served as IVAX' Chief
Regulatory Officer and Assistant to the Chairman, and as Vice President-Quality
Assurance and Compliance of Baker Norton Pharmaceuticals, Inc., IVAX' principal
proprietary pharmaceutical subsidiary. From 1987 to 1992, Dr. Hsiao was Vice
President-Quality Assurance, Quality Control and Regulatory Affairs of Baker
Norton Pharmaceuticals, Inc.
ISAAC KAYE. Mr. Kaye, age 70, has served as Deputy Chief Executive
Officer and a director of IVAX since 1990, and as Chairman of Norton Healthcare
Limited, IVAX' principal United Kingdom pharmaceutical subsidiary, since 1990.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
IVAX' common stock is listed on the American Stock Exchange and is
traded under the symbol IVX. As of the close of business on February 29, 2000,
there were approximately 4,433 holders of record of IVAX common stock. The
following table sets forth the high and low sales price of a share of IVAX'
common stock for each quarter in 1998 and 1999 as reported by the American Stock
Exchange and restated to give effect to the 3 for 2 stock split paid on February
22, 2000:
1998 HIGH LOW
---- ---- ---
First Quarter 6.33 4.13
Second Quarter 7.04 5.63
Third Quarter 6.79 4.92
Fourth Quarter 8.37 4.87
1999
----
First Quarter 9.96 7.37
Second Quarter 9.96 7.37
Third Quarter 11.79 9.54
Fourth Quarter 17.21 10.25
IVAX has not paid cash dividends on its common stock during 1998 and
1999 and does not intend to pay any cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The information required by item 6 is incorporated by reference to
page 1 of the Financial Information section of the 1999 Annual Report to
Shareholders.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by item 7 is incorporated by reference to
pages 2-12 of the Financial Information section of the 1999 Annual Report to
Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by item 7A is incorporated by reference to
page 12 of the Financial Information section of the 1999 Annual Report to
Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by item 8 is incorporated by reference to
pages 14-42 of the Financial Information section of the 1999 Annual Report to
Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required by item 10 is
incorporated by reference to IVAX' Proxy Statement for its 2000 Annual Meeting
of Shareholders which will be filed with the Securities and Exchange Commission
within 120 days after the close of IVAX' fiscal year end. The information
concerning executive officers required by item 10 is contained in the discussion
entitled "Executive Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by item 11 is incorporated by reference to
IVAX' Proxy Statement for its 2000 Annual Meeting of Shareholders, which will be
filed with the Securities and Exchange Commission within 120 days after the
close of IVAX' 1999 fiscal year end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by item 12 is incorporated by reference to
IVAX' Proxy Statement for its 2000 Annual Meeting of Shareholders, which will be
filed with the Securities and Exchange Commission within 120 days after the
close of IVAX' 1999 fiscal year end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by item 13 is incorporated by reference to
IVAX' Proxy Statement for its 2000 Annual Meeting of Shareholders, which will be
filed with the Securities and Exchange Commission within 120 days after the
close of IVAX' 1999 fiscal year end.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The following consolidated financial statements, related notes and
independent auditors' report, from the Financial Information section of the 1999
Annual Report to Shareholders, are incorporated by reference into item 8 of Part
II of this report:
PAGE IN THE FINANCIAL
INFORMATION SECTION
OF 1999 ANNUAL REPORT
TO SHAREHOLDERS
---------------------
Report of Independent Certified Public Accountants 14
Consolidated Balance Sheets 15
Consolidated Statements of Operations 16
Consolidated Statements of Shareholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 21
(A)(2) FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule of IVAX is filed as a part
of this report:
Schedule II Valuation and Qualifying Accounts for the three years
ended December 31, 1999
All other schedules have been omitted because the required information
is not applicable or the information is included in the consolidated financial
statements or the notes thereto.
The independent auditors' report with respect to Schedule II is also
filed as part of this report.
(A)(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation. Incorporated by reference to IVAX'
Form 8-B dated July 28, 1993.
3.2 Amended and Restated Bylaws. Incorporated by reference to IVAX'
Form 10-Q for the quarter ended
September 30, 1997.
4.1 Indenture dated November 26, 1991, between IVAX Incorporated by reference to IVAX'
Corporation and First Trust National Form 10-K for the year ended
Association, as Trustee, with December 31, 1991.
respect to IVAX Corporation's 6 1/2%
Convertible Subordinated Notes due November 15, 2001.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<S> <C> <C>
4.2 Form of 6 1/2% Convertible Subordinated Notes due November Incorporated by reference to IVAX'
15, 2001 in Global Form. Form 10-K for the year ended
December 31, 1991.
4.3 Rights Agreement, dated December 29, 1997, between IVAX Incorporated by reference to IVAX'
Corporation and ChaseMellon Shareholder Services, L.L.C., Form 8-K dated December 19, 1997.
with respect to the IVAX Corporation Shareholder
Rights Plan.
10.1 IVAX Corporation 1985 Stock Option Plan, as amended. Incorporated by reference to IVAX'
Form 10-K for the year ended
December 31, 1997.
10.2 IVAX Corporation 1994 Stock Option Plan, as amended. Incorporated by reference to IVAX'
Form 10-K for the year ended
December 31, 1997.
10.3 Form of Indemnification Agreement for Directors. Incorporated by reference to IVAX'
Form 8-B dated July 28, 1993.
10.4 Form of Indemnification Agreement for Officers. Incorporated by reference to IVAX'
Form 8-B dated July 28, 1993.
10.5 Agreement Containing Consent Order, dated December 6, Incorporated by reference to IVAX'
1994, between IVAX Corporation and the United States Form 10-K for the year ended December 31, 1994.
Federal Trade Commission.
10.6 Employment Agreement, dated November 28, 1997, between Incorporated by reference to IVAX'
IVAX Corporation and Phillip Frost, M.D. Form 10-K for the year ended
December 31, 1997.
10.7 Employment Agreement, dated November 28, 1997, between Incorporated by reference to IVAX'
IVAX Corporation and Isaac Kaye. Form 10-K for the year ended
December 31, 1997.
10.8 Employment Agreement, dated January 19, 1998, between Incorporated by reference to IVAX'
IVAX Corporation and Jane Hsiao, Ph.D. Form 10-K for the year ended
December 31, 1997.
10.9 Employment Agreement, dated July 28, 1997, between IVAX Incorporated by reference to IVAX'
Corporation and Rafick G. Henein, Ph.D. Form 10-Q for the quarter ended June
30, 1997.
10.10 Employment Agreement, dated as of May 26, 1998, between Incorporated by reference to IVAX'
IVAX Corporation and Neil Flanzraich. Form 10-Q for the quarter ended
September 30, 1998.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<S> <C> <C>
10.11 Form of Employment Agreement (Change in Control) between Incorporated by reference to IVAX'
IVAX Corporation and certain of its executive officers. Form 10-K for the year ended
December 31, 1998.
10.12 Stock Purchase Agreement, dated May 30, 1997, between Incorporated by reference to IVAX'
IVAX Corporation and B. Braun of America Inc. Form 8-K dated June 24, 1997.
10.13 Purchase Agreement, dated June 16, 1998, by and between Incorporated by reference to IVAX'
IVAX Corporation and Carson, Inc. Form 10-Q for the quarter ended June
30, 1998.
10.14 Credit Agreement, dated as of July 14, 1998, among IVAX Incorporated by reference to IVAX'
Corporation, Carson, Inc. and Carson Products Company. Form 10-Q for the quarter ended June
30, 1998.
10.15 Product Collaboration and Development Services Agreement Filed herewith.
dated November 18, 1999, among IVAX Corporation, Norton
Healthcare Limited, Baker Norton International GmbH and
Bristol-Myers Squibb Company.
(Requesting Confidential Treatment)
10.16 IVAX Corporation 1999 Employee Stock Purchase Plan. Filed herewith.
13 The Financial Information section of the 1999 Annual Filed herewith.
Report to Shareholders. With the exception of those
portions of said Annual Report which are specifically
incorporated by reference in this report on Form 10-K
and filed as an exhibit to this report, said Annual
Report is not to be deemed "filed" with the Commission.
21 Subsidiaries of IVAX Corporation. Filed herewith.
23 Consent of Arthur Andersen LLP. Filed herewith.
27 Financial Data Schedule. Filed herewith.
27.1 Financial Data Schedule. Filed herewith.
27.2 Financial Data Schedule. Filed herewith.
</TABLE>
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by IVAX during the quarter ended
December 31, 1999.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
IVAX CORPORATION
Dated: March 30, 2000 By: /S/ PHILLIP FROST, M.D.
------------------------
Phillip Frost, M.D.
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
NAME CAPACITY DATE
- ---- -------- ----
/S/ PHILLIP FROST, M.D. Chairman of the Board and March 30, 2000
- ---------------------------Chief Executive Officer
Phillip Frost, M.D. (Principal Executive Officer)
/S/ THOMAS E. BEIER Chief Financial Officer March 30, 2000
- ---------------------------(Principal Financial Officer)
Thomas E. Beier
/S/ THOMAS E. MCCLARY Vice President - Accounting March 30, 2000
- ---------------------------(Principal Accounting Officer)
Thomas E. McClary
/S/ MARK ANDREWS Director March 30, 2000
- ---------------------------
Mark Andrews
/S/ ERNST BIEKERT, PH.D. Director March 30, 2000
- ---------------------------
Ernst Biekert, Ph.D.
/S/ CHARLES M. FERNANDEZ Director March 30, 2000
- ---------------------------
Charles M. Fernandez
/S/ JACK FISHMAN, PH.D. Director March 30, 2000
- ---------------------------
Jack Fishman, Ph.D.
23
<PAGE>
NAME CAPACITY DATE
- ---- -------- ----
/S/ NEIL FLANZRAICH Director, President March 30, 2000
- ---------------------------and Vice Chairman
Neil Flanzraich
/S/ JANE HSIAO, PH.D. Director and Vice Chairman- March 30, 2000
- ---------------------------Technical Affairs
Jane Hsiao, Ph.D.
/S/ ISAAC KAYE Director and Deputy Chief March 30, 2000
- ---------------------------Executive Officer
Isaac Kaye
24
<PAGE>
SCHEDULE II
IVAX CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1999
(in thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COST AND NET BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OTHER END OF YEAR
- ------------------------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997 $ 20,061 8,973 (8,702) (1,106) $ 19,226
============= ============= ============= ============= ==============
Year ended December 31, 1998 $ 19,226 7,650 (4,643) 601 $ 22,834
============= ============= ============= ============= ==============
Year ended December 31, 1999 $ 22,834 4,147 (3,747) (1,176) $ 22,058
============= ============= ============= ============= ==============
</TABLE>
ENVIRONMENTAL AND LITIGATION ACCRUAL RELATED TO DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COST AND NET BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
- ------------------------------- --------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997 $ - 2,000 - $ 2,000
============= ============= ============= ==============
Year ended December 31, 1998 $ 2,000 2,900 (464) $ 4,436
============= ============= ============= ==============
Year ended December 31, 1999 $ 4,436 308 (1,524) $ 3,220
============= ============= ============= ==============
</TABLE>
RESTRUCTURING COSTS AND ASSET WRITE-DOWNS
<TABLE>
<CAPTION>
EMPLOYEE
ASSET TERMINATION PLANT
WRITE-DOWNS BENEFITS CLOSURES TOTAL
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $ - $ 1,954 $ 2,654 $ 4,608
1997 restructuring costs and asset write-downs 23,814 5,094 9,180 38,088
Cash payments during 1997 - (2,400) (1,360) (3,760)
Non-cash activity (23,814) (101) (1,107) (25,022)
----------- ----------- ----------- -----------
Balance at December 31, 1997 - 4,547 9,367 13,914
1998 restructuring costs and asset write-downs 14,164 6,305 8,740 29,209
Reversals of restructuring costs and asset write-downs
charged in prior years (8,804) (442) (7,741) (16,987)
Cash payments during 1998 - (3,538) (3,042) (6,580)
Non-cash activity (5,360) (1,098) 936 (5,522)
----------- ----------- ----------- -----------
Balance at December 31, 1998 - 5,774 8,260 14,034
Reversals of restructuring costs and asset write-downs
charged in prior years (539) (73) - (612)
Cash payments during 1999 - (4,264) (3,539) (7,803)
Non-cash activity 539 123 (298) 364
----------- ----------- ----------- -----------
Balance at December 31, 1999 $ - $ 1,560 $ 4,423 $ 5,983
=========== =========== =========== ===========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF IVAX CORPORATION:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in IVAX Corporation's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 2000 (except with respect to the stock split
discussed in Note 12 and the matters discussed in Note 16, as to which the dates
are February 22, 2000 and March 10, 2000, respectively). Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
Financial Statement Schedule II listed in Item 14 is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This financial statement schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 4, 2000.
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
10.15 Product Collaboration and Development Services Agreement
dated November 18, 1999, among IVAX Corporation,
Norton Healthcare Limited, Baker Norton International GmbH
and Bristol-Myers Squibb Company.
(Requesting Confidential Treatment)
10.16 IVAX Corporation 1999 Employee Stock Purchase Plan.
13 The Financial Information section of the 1999
Annual Report to Shareholders. With the
exception of those portions of said Annual
Report which are specifically incorporated by
reference in this report on Form 10-K and filed
as an exhibit to this report, said Annual
Report is not to be deemed "filed" with the
Commission.
21 Subsidiaries of IVAX Corporation.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
EXHIBIT 10.15
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
NON-CONFIDENTIAL EXHIBIT A
PRODUCT COLLABORATION AND
DEVELOPMENT SERVICES AGREEMENT
This Product Collaboration and Development Services Agreement dated as
of November 18, 1999 (the "Agreement"), is entered into by and among IVAX
CORPORATION, a Florida corporation having an office at 4400 Biscayne Boulevard,
Miami, Florida 33137, NORTON HEALTHCARE LTD. ("NHL"), an English limited company
having an address at Albert Basin, 1 Royal Docks, London E16 2QJ, BAKER NORTON
INTERNATIONAL GmbH ("BNI"), a Swiss limited company, having an address in care
of Invico Capital Corporation AG, Kirchgasse 24, P.O. Box 4754, 8022 Zurich,
Switzerland, and BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation having an
address at P.O. Box 4000, Rte 206 and Province Line Road, Princeton, New Jersey
08543-4000("BMS").
RECITALS
1. The parties have been in discussion as to areas of possible
collaboration in the fields of inhalation technology and of oncology as
well as other areas of mutual interest, and BMS recognises that IVAX
Corporation, NHL and BNI have relevant skills, competence and expertise
related to the formulation and development of products for delivery by
inhalation and devices related thereto. BMS is interested in engaging
IVAX Corporation and its Affiliates to perform development work with
regard to certain proprietary compounds of BMS (the "Services"), and
IVAX Corporation and its Affiliates are willing to perform such
Services and to collaborate with BMS with respect to the development of
certain pharmaceutical formulations or delivery systems having
potentially beneficial therapeutic use in the treatment of disease.
2. IVAX Corporation and/or its indirect wholly owned subsidiary BNI has
proprietary technology pertaining to a system for oral administration
of paclitaxel (the "Oral Delivery System") for which it has filed
patent applications and obtained patents throughout the world, which it
is willing to make available to BMS to assess its practical use and
application and to grant BMS an option to take a licence for its
commercial exploitation.
3. BMS is the holder of marketing authorisations for the anti-cancer agent
TAXOL paclitaxel ("TAXOL"), inter alia, in all countries of the
European Union ("EU") based upon an application under E.C. Directive
87/22 pursuant to which procedure the first authorisation for TAXOL
within the EU was granted in The Netherlands on September 20th 1993,
indicated for the treatment of first and second line ovarian cancer,
treatment of second line breast cancer and treatment of
1
<PAGE>
non small cell lung cancer. By virtue of EC Directive 65/65, as
amended, the data submitted by BMS in support of such marketing
authorisations is subject to protection for a period of ten years from
the date of first authorisation in the EU.
4. IVAX Corporation through NHL has applied for a marketing authorisation
in the EU for its injectable formulation of paclitaxel marketed under
the trademark PAXENE, which application was approved by the European
Medicines Evaluation Agency pursuant to the procedure under Regulation
(EC) No. 2309/93 on July 19th, 1999 for the limited indication of
AIDS-related kaposi's sarcoma after failure of prior liposomal
anthracycline therapy (the "PAXENE Authorisation"). The data submitted
in support of the PAXENE Authorisation is likewise subject to
protection for a period of ten years from the date of authorisation.
5. Recognising that the market for PAXENE in respect of its limited
indication is small whilst that for treatment of those conditions for
which TAXOL is indicated is substantial, and that there exists a
potential for the use of PAXENE outside its indicated use, the parties
are in dispute as to the acceptable manner in which IVAX Corporation,
its Affiliates or other appointed representatives may promote PAXENE
and as to the likelihood that the promotion of PAXENE could be
perceived as implying that it has been approved for uses for which
TAXOL is indicated but for which PAXENE is not so indicated, in
evidence whereof BMS has filed suit and obtained an injunction against
the prospective IVAX appointed representative in Germany.
6. In conjunction with the parties' desire to collaborate in the
development of new products, pharmaceutical formulations or delivery
systems, and having regard to their respective interests in the field
of oncology and specifically in relation to the active ingredient
paclitaxel, the parties are desirous (a) of seeking to avoid issues as
to the medical appropriateness of PAXENE being prescribed for uses
outside its approved indication in HIV patients in accordance with the
limited indications approved by the EMEA, and (b) of avoiding any
adverse consequences of any confusion amongst patients and physicians
as to the proper use of the respective products that might arise from
PAXENE being made available to patients not suffering from the
condition for which its use is indicated; and (c) of clarifying their
respective rights and interests in relation respectively to TAXOL and
PAXENE so as to avoid any inadvertent encroachment or infringement by
either in respect of the proprietary rights of the other whilst
exercising fully their respective rights where to do so would not
impinge upon the legitimate rights and interests of the other; and (d)
of avoiding the requirement for BMS to continually monitor the
activities of IVAX or its Affiliates or other appointed representatives
in the promotion and sale of PAXENE and its use outside the approved
indication; and (e) of eliminating the costs and expenses in both time
and money likely to be incurred by both parties if they or their
Affiliates or other appointed
2
<PAGE>
representatives are engaged in frequent or repetitive litigation
concerning the promotion and use of PAXENE, all to the ultimate
detriment of patients.
AGREEMENT
In consideration of the Recitals and the mutual promises contained in
this Agreement, IVAX and BMS agree as set forth below.
ARTICLE I
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, certain terms
are defined in Attachment 2. Whenever a capitalised term is used, it is intended
to have the meaning stated in Attachment 2.
ARTICLE II
PRODUCT DEVELOPMENT
2.1 DEVELOPMENT PLAN. Forthwith on receipt from BMS of the initial sum due
pursuant to Article VIII hereof, the parties will meet to agree upon a
Development Plan and Budget and will thereafter use all reasonable
efforts and due diligence to finalise the Development Plan and Budget.
The Development Plan will include an initial feasibility study for a
product containing one of the Active Ingredients, as determined by BMS,
(the "First Product") with defined endpoints and performance criteria,
and a target product profile for the First Product. Upon successful
completion of the feasibility study, the parties will again meet to
complete the details of the Development Plan, including a time and
responsibility schedule for the remainder of the development work and
Budget therefor. Under the Development Plan IVAX will have primary
responsibility for formulation and preclinical testing of the First
Product, and BMS will have primary responsibility for conducting
clinical trials. During this process, BMS will supply to IVAX such of
BMS's Technical Information concerning the Active Ingredient of the
First Product that will be needed by IVAX to conduct the development
work hereunder, and IVAX will supply to BMS such of IVAX's Technical
Information that will be needed by BMS for assisting in the development
work and for conducting clinical trials of the First Product t.
2.2 SUBSEQUENT DEVELOPMENT PROJECT. Upon successful completion or
termination of the initial development project under Section 2.1, if
BMS desires to proceed to develop the second Active Ingredient, the
parties will again meet to agree upon the criteria for a feasibility
study and will agree upon a Development Plan and Budget and a target
product profile for a product containing the second Active
3
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
Ingredient (the "Second Product"). For purposes of this Agreement, the
term "Development Plan" refers to the development plans for both the
First Product and the Second Product, and the term "Product" refers to
either or both of the First Product and the Second Product, as the
context may indicate.
2.3 CONDUCT OF DEVELOPMENT.
(a) IVAX will provide all personnel, facilities and resources
necessary to perform the feasibility, formulation and
preclinical testing phases of the development work and will
conduct these activities in accordance with current good
laboratory practices and current good manufacturing practices
and in compliance with all applicable laws and regulations.
(b) BMS will provide all personnel, facilities and resources
necessary to conduct clinical trials of the Product and will
conduct these activities in accordance with good laboratory
practices and in compliance with all applicable laws and
regulations.
(c) During the course of the development work, each party will
keep the other informed of its progress in the conduct of the
development, and will make appropriate personnel available to
discuss the development work at mutually agreeable times upon
either party's reasonable request.
(d) During the course of the development work, BMS will provide *
such quantities of the Active Ingredient as IVAX may
reasonably request for use in developing the Product, and all
costs of manufacturing clinical trial supplies of Product and
placebo will be borne by BMS.
2.4 TECHNICAL INFORMATION. IVAX shall supply to BMS such Technical
Information as it may generate or that becomes available to it during
the continuance of this Agreement and that may be necessary in
registering the Product or improvements, modifications or adaptations
thereto. BMS shall supply to IVAX such Technical information as it may
generate or that becomes available to it during the continuance of this
Agreement, and that may be necessary in developing or manufacturing the
Product or improvements, modifications or adaptations thereto. Neither
party shall be obliged to supply to the other party any Technical
Information other than that referred to above. The parties do not
envisage that BMS will need to supply to IVAX any Technical Information
relating to its manufacturing processes for the Active Ingredient
except to the extent necessary in formulating or testing the Product.
IVAX may use Technical Information concerning the Device for any
purposes whatsoever but may use any Technical Information concerning
the Active Ingredient only for the purposes of developing or
manufacturing the Product or improvements, modifications or adaptations
thereto.
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* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
2.5. *
ARTICLE III
ADDITIONAL AGREEMENTS
3.1 SUPPLY AND MANUFACTURING AGREEMENT. During the development process,
provided that BMS shall determine that the results of the feasibility
study are favourable, the parties will negotiate in order to enter into
an agreement or agreements under which BMS will purchase its
requirements of the Devices and, at BMS's option, of the finished
Product, from the appropriate IVAX Affiliate, and IVAX will agree to
supply to BMS the Devices for use in the Product and/or to manufacture
the Product for BMS. Such agreement or agreements (i) shall be on terms
and conditions customary in the pharmaceutical industry for comparable
drug delivery technology and pharmaceutical products, including those
factors referred to in Section 12.2(a), (ii) may, at BMS's option,
include a license to use the "Easi-Breathe" trademark in connection
with the Product(s) and (iii) shall incorporate such provisions of this
Agreement and such other provisions as reasonably and properly required
to permit the registration, distribution, marketing and sale of the
Product in the countries of Territory A under the Patent Rights and/or
IVAX's Technical Information pertaining to the Product for a term
expiring on the date of the last to expire of the Patent Rights.
3.2 DISTRIBUTION RIGHTS. IVAX grants to BMS, in consideration of BMS's
contribution of financial and technical resources to the development of
the Products, the non-exclusive right, and any necessary non-exclusive
license under the Patent Rights and the Technical Information, to
register, distribute, market and sell the Products in Territory A.
3.3 LIMITATIONS ON RIGHTS. BMS shall have no other rights to use or refer
to IVAX's Technical Information and shall have no right whatsoever
under the Patent Rights or under the Technical Information, other than
the right to commercialise the Product as set forth in Section 3.2.
3.4 RIGHTS RETAINED. IVAX shall not be restricted in any way from granting
licenses or distributorships for devices embodying any invention
claimed in the Patent Rights (including devices having the same form as
the Device) for use with products containing active ingredients
(including the Active Ingredients, subject to any BMS patent or other
intellectual property rights relating thereto) for the treatment of any
medical condition, including, but not limited to, respiratory diseases
and other conditions for which the Products are indicated.
3.5 NO LICENSE TO IVAX. Nothing herein shall be construed as giving IVAX
any license under any patent rights owned by BMS relating to the Active
Ingredients,
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except the right to manufacture Products containing the Active
Ingredients and to supply them on an exclusive basis to BMS.
ARTICLE IV
REGULATORY MATTERS
4.1 BMS UNDERTAKINGS.
(a) Subject to successful completion of the development of a
Product and conduct of clinical trials, BMS shall use
reasonable commercial efforts and the appropriate method to
obtain, as soon as reasonably possible, registrations of the
Product with the health authorities or other competent
authorities in the Principal Territories.
(b) BMS shall furnish IVAX every six months with a report on the
progress of registration of the Product in the Territory A.
(c) Upon obtaining requisite government and health authority
approval, including pricing and reimbursement approval if
necessary, in any country of Territory A upon terms acceptable
to BMS, BMS shall introduce the Product as soon as practicable
in that country, provided that this is commercially viable in
the circumstances of the particular country, and shall
thereafter market, distribute and sell the Product in that
country using efforts and resources equivalent to those
normally used by large pharmaceutical companies selling
products of the same commercial significance in the same
markets.
(d) BMS undertakes not to do anything that would breach the terms
of the health registrations for the Device or the Product in
Territory A, and to ensure that clinical recommendations for
the Device and Product made by it, its distributors and its
and their customers are strictly in accordance with such
health registrations, to the extent that any such breach or
non-compliance would or might reasonably be expected to have
an adverse impact upon or otherwise be to the detriment of the
Device or of IVAX.
(e) Notwithstanding any other provision of this Agreement, BMS
reserves the right in its sole discretion to discontinue the
development or marketing of any Product, to license any
Product to a third party or to third parties, or to copromote
or comarket any Product with a third party or third parties.
4.2 IVAX UNDERTAKINGS. IVAX shall not be obliged to provide any Technical
Information in support of the Product registrations beyond that which
it may have available from time to time and shall not be obliged to
generate information or carry out any work other than that contemplated
under the Development Plan.
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* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
However IVAX will assist BMS by providing advice and consultation in
the event that BMS has problems in registering the Product in the
Principal Territories.
ARTICLE V
PATENTS AND COPYRIGHT
5.1 OWNERSHIP OF INVENTIONS. Rights to all inventions, discoveries,
improvements, modifications or adaptations affecting solely the Device
that are made by either party during the Term shall belong to IVAX, and
BMS shall have the non-exclusive right to use the same in any country
of Territory A * for the duration of this Agreement and any agreement
entered into pursuant to Sections 3.1 or 8.7. Rights to all inventions,
discoveries, improvements, modifications or adaptations affecting
solely the Active Ingredients or the Product that are made by BMS
during the Term shall belong to BMS, provided that in respect of any
such discovery, improvement, modification or adaptation affecting the
Device results in the grant of patent rights in respect thereof to BMS,
IVAX shall be entitled to a non-exclusive * licence thereunder for the
duration of this Agreement and of any agreement entered into between
the parties either pursuant to Article 8.7. or pursuant to the
provisions of Article III, whichever shall be longer. In the event that
such term should expire prior to the expiration of the relevant BMS
patent to which such licence relates, IVAX shall be entitled to call
for an ongoing non-exclusive * licence. Rights to all inventions,
discoveries, improvements, modifications or adaptations affecting the
Product or affecting solely the Active Ingredients that are made by
IVAX during the Term shall belong to IVAX, provided that in respect of
any such discovery, improvement, modification or adaptation affecting
solely the Active Ingredients results in the grant of patent rights in
respect thereof to IVAX, BMS shall be entitled to an exclusive *
licence thereunder for the duration of this Agreement and of any
agreement entered into between the parties either pursuant to Section
8.7. or pursuant to the provisions of Article III, whichever shall be
longer. In the event that such term should expire prior to the
expiration of the relevant IVAX patent to which such licence relates,
BMS shall be entitled to call for an ongoing exclusive licence *. In
relation to any other discovery, improvement, modification or
adaptation affecting either the Product or the Active Ingredients BMS
shall have the exclusive right to market, register and distribute the
Product in any country of Territory A for the duration of this
Agreement, subject to the payment provisions provided in this Agreement
and the supply and manufacturing agreements to be entered into
subsequently.
5.2 PROSECUTION OF PENDING APPLICATIONS. IVAX shall at its own cost
diligently prosecute to grant all subsisting patent applications within
the Patent Rights in the Principal Territories and shall maintain all
patents within the Patent Rights in force for the full terms thereof.
IVAX gives no warranty that the said patent applications will proceed
to grant, and any payments made by BMS hereunder shall not be repayable
in the event that patents are not granted.
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5.3 FILING OF NEW APPLICATIONS. Where either party develops or acquires an
improvement, modification or adaptation affecting the Product (other
than information relating solely to the Device or the Active
Ingredient), it shall promptly notify the other, and neither party
shall publish the same or do anything that might prejudice the validity
of any patent application that might subsequently be filed with respect
to such improvement, modification or adaptation. In the event that BMS
considers that it is desirable to make further patent applications in
the Principal Territories with respect to improvements, modifications
or adaptations affecting the Product made by either party, it shall
notify IVAX of its decision within sixty (60) days of giving or
receiving the disclosure, and IVAX shall diligently prepare and
prosecute such applications, in detailed consultation with BMS, the
cost thereof to be borne by BMS. In the event that BMS elects not to
make any patent application, or if it has not advised IVAX of its
desire to make a patent application within sixty (60) days of giving or
receiving the disclosure, and if IVAX considers that it is desirable to
make any such patent application, IVAX shall prepare and prosecute such
application and shall bear the cost thereof. In either case, BMS shall
cooperate as needed in the patent prosecution and shall make its
personnel available at no cost to IVAX. Any such further patent
applications shall be included within the term "Patent Rights"
hereunder. If neither party elects to file a patent application within
ninety (90) days after a disclosure is made, or, if either party elects
to file a patent application, after the patent application has been
filed, the disclosing party may proceed to publish information
regarding its improvement, modification or adaptation, provided that
the other party is given a copy of the proposed publication and allowed
to remove therefrom any of its Technical Information.
5.4 DEFENCE OF PATENT RIGHTS. In the event of opposition or challenge by
any third party to any of the Patent Rights, IVAX shall take reasonable
steps to defend the Patent Rights and shall keep BMS fully informed of
the action taken by it, provided that IVAX shall not be obliged to
undertake any action which, in its opinion, is not commercially
justified. IVAX shall notify BMS if, in its opinion, it is not
commercially justified to defend the Patent Rights, and in such event,
BMS shall have the right to defend the Patent Rights itself in
consultation with and on terms agreed by IVAX and shall keep IVAX fully
informed of the actions taken by it. Notwithstanding any action by BMS
hereunder, IVAX shall have the right to take subsequent action itself
to defend the Patent Rights. The proceeds of any action against any
third party pursuant to this Section 5.4 shall belong to the party
taking action against such third party.
5.5 CLAIMS OF INFRINGEMENT. To the best of IVAX's knowledge and belief the
exercise of the rights granted or to be granted to BMS hereunder will
not result in the infringement of valid patents of third parties.
Subject thereto, IVAX gives no warranty in this respect and does not
give BMS any indemnity against costs, damages, expenses or royalties
arising out of proceedings brought against BMS or
8
<PAGE>
any distributor or customer of BMS by any third party. Should BMS be
sued for infringement of any patent or patents of the third party by
reason of its use or sale of the Device or Product, IVAX shall on
request assist BMS in its defence to such action to the extent that in
all the circumstances it is reasonable to do so but shall otherwise be
under no obligations in respect thereof. All costs of any such action
shall be borne by BMS, to whom shall belong all sums that may be
recovered from the third party. BMS shall not oppose, and shall take
steps to permit, intervention by IVAX in any such proceedings at IVAX's
cost if IVAX believes that its intervention is necessary to protect the
Patent Rights or any other rights of IVAX.
5.6 TERMINATION. On termination or expiration of this Agreement, BMS shall
have no further right to use or refer to the Technical Information or
the Patent Rights, and BMS shall transfer to IVAX all documentation
embodying or referring to the Technical Information; provided, however,
that this provision will not prevent any continued rights therein that
may be granted to BMS under an agreement entered into pursuant to
Section 3.1 or 8.7.
5.7 COPYRIGHT. IVAX owns all copyrights pertaining to the Device, and BMS
acquires no right or interest in or to such copyrights under this
Agreement.
ARTICLE VI
OPTION FOR LICENCE TO ORAL DELIVERY SYSTEM
6.1. OPTION FOR LICENSE TO ORAL DELIVERY SYSTEM. IVAX will cause BNI to
grant to BMS an option giving BMS the exclusive right to negotiate for
a license to the Oral Delivery System in accordance with the terms of
the Licence Option Agreement attached hereto as in Attachment 5 (the
"Option Agreement").
ARTICLE VII
UNDERTAKINGS REGARDING PACLITAXEL
7.1 PROPER PROMOTION OF PAXENE. In recognising the rights of BMS as more
particularly detailed in Recital 4 to this Agreement, IVAX maintains
its right and entitlement (which BMS acknowledges) to use all
commercially reasonable efforts to market, distribute and sell PAXENE
for the Indicated Use in the European Union under the PAXENE
Authorisation and under any additional marketing authorisations that it
may receive in Territory B to market, distribute and sell PAXENE for
the Indicated Use, whilst avoiding the marketing and/or sale of PAXENE
by IVAX, its Affiliates or other appointed representatives for any use
or indication for which it is not appropriately authorised and in
respect of which TAXOL is approved in these countries and which would,
directly or indirectly, impinge upon the BMS data protection rights.
9
<PAGE>
7.2 PROPER PROMOTION OF TAXOL. In recognising the rights of IVAX as more
particularly detailed in Recital 4 to this Agreement, BMS likewise
acknowledges the need to avoid the marketing and/or sale of TAXOL by
BMS, its Affiliates or other appointed representatives for any use or
indication for which it is not appropriately authorised and in respect
of which PAXENE is approved in Territory B and which would, directly or
indirectly impinge upon the IVAX data protection rights.
7.3 AVAILABILITY OF PAXENE. Without prejudice to the foregoing, IVAX agrees
to use its best efforts to ensure the availability of PAXENE to all
patients suffering from advanced AIDS-related kaposi's sarcoma who have
failed prior liposomal anthracycline therapy and to patients suffering
from any other disease or condition for which it may subsequently be
approved.
7.4 AVAILABILITY OF TAXOL. Without prejudice to the foregoing, BMS agrees
to use its best efforts to ensure the availability of TAXOL to all
patients suffering from conditions or diseases for which it is
indicated and to patients suffering from any other disease or condition
for which it may subsequently be approved.
7.5 ADDITIONAL INDICATIONS. Without prejudice to the foregoing, it is
expressly agreed by and between the parties that this Agreement shall
not preclude either party from seeking to expand the indications of
their respective paclitaxel products in respect of any overlapping or
other indications. Each of the parties confirm their commitment to
ongoing research and the conduct of clinical trials to make available
all necessary information and data to support applications to the
responsible Authorities to secure the approval for the marketing and
sale of their respective products for such additional indications
including by IVAX in respect of breast, ovarian and non-small cell lung
cancer and, for the avoidance of any doubt which might otherwise arise,
the provisions of Sections 7.1 and 7.2 above shall not preclude either
party from conducting clinical trials in relation to those areas of
treatment for which the product of the other is indicated for use.
7.6 ADDITIONAL INDICATIONS. In the event that during the term of this
Agreement relevant to this Article VII, the PAXENE Authorisation shall
be amended to include any additional indication other than one for
which TAXOL is indicated, the definition of Indicated Use shall be
amended accordingly, and the terms of this Article and of the Agreement
shall apply to the sale and supply of PAXENE for such revised Indicated
Use, and the parties shall negotiate in good faith as to the terms
applicable thereto pursuant to Section 8.6 (b) and as to the
appropriate market therefor.
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* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
ARTICLE VIII
TERM, TERMINATION AND PAYMENTS
8.1 DURATION. This Agreement shall become effective on the date hereof and
shall continue in effect for a period expiring on November 15, 2002
provided that (a) the duration of the Option for Licence of the Oral
Delivery System shall be for a term of 6 months only expiring May 15,
2000 and (b) the duration of the obligations accepted by the parties
under Article VII shall be for a term expiring on November 15, 2001.
Notwithstanding the foregoing, BMS may, at its option, extend the
obligations of the parties under Article VII for the third year of the
Agreement. If BMS shall wish to exercise such right, BMS shall so
advise IVAX by written notice to IVAX given not later than May 15,
2001. BMS shall notify IVAX in any event prior to the said May 15, 2001
whether it does or does not intend to exercise such option.
8.2. In consideration for the rights granted to BMS for the first and second
years of the Agreement under Articles III and VI, and the obligations
accepted by IVAX under Articles II and VII, BMS shall pay IVAX the
following amounts, without deduction or credit for the amount paid
under the letter agreement dated August 24, 1999, which letter
agreement is hereby amended accordingly:
*
8.3. (a) In consideration of the rights granted to BMS for the third
year of the Agreement under Article III and the obligations
accepted by IVAX under the provisions of Article II, if BMS
does not extend the Agreement in accordance with Section 8.1,
BMS shall pay to IVAX on May 15, 2001, the sum of *
(b) In the event, however, that BMS elects to extend the Agreement
in accordance with Section 8.1, BMS shall pay to IVAX on the
fifteenth day of November 2001 the sum of *
8.4. CURRENCY AND BUSINESS DAYS. All payments under Sections 8.2 and 8.3
will be made in US dollars. Any payment falling due on a day which is a
weekend or holiday shall be paid on the next succeeding business day
thereafter.
8.5. TERMINATION BY EITHER PARTY. This Agreement may be terminated by either
party upon written notice to the other party before its set term:
(a) immediately in the case of bankruptcy, insolvency, application
for suspension of payments, dissolution or liquidation of the
other party;
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* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission; approximately
3 pages omitted.
(b) in the event the other party fails to comply with any provision
of this Agreement in any material way and does not remedy the
breach within ninety days after having been notified by the
other party; and
8.6. TERMINATION BY BMS.
*
8.7. CONTINUATION OF PRODUCT DEVELOPMENT. If upon expiration of the Term of
this Agreement the development of the Product under the provisions of
Articles II and III hereof shall be incomplete and BMS shall notify
IVAX that it desires the development arrangements to continue, the
parties shall enter into such new or further Agreement to provide
therefor upon the same or essentially similar terms as the relevant
terms hereof (including specifically but not limited to the provisions
of Articles II, III, IV and V of this Agreement) but upon the basis
that the rights granted to BMS under Article III and obligations
accepted by IVAX under the provision of Articles II and III are fully
paid up by virtue of the payments made by BMS hereunder, but in all
respects subject to ongoing payment by BMS of the agreed developments
costs and to the financial terms of the manufacturing and supply
agreements entered or to be entered into between the parties pursuant
to the provisions of Article III.
8.8. SURVIVAL. Termination of this Agreement for any reason, or the
invalidity or partial invalidity hereof, shall not bring to an end the
obligations under Articles 8.7, 8.9, X and XI, and in view of the
survival of these obligations, the parties will work together to agree
upon an alternative means to accomplish their commercial objectives as
nearly as possible, notwithstanding the invalidity, partial invalidity
or termination of this Agreement.
8.9. RETURN OF DATA. Subject to the provisions of Section 8.7. above, on
termination of this Agreement for any reason, (a) IVAX will promptly
return to BMS all documents and data of any kind relating to the Active
Ingredient within the custody or control of IVAX, (b) BMS will promptly
return to IVAX all documents and data of any kind relating to the
Device within the custody or control of BMS, and c) BMS will pay to
IVAX all payments accrued hereunder prior to the effective date of
termination and permit IVAX to keep all payments previously received
(except as provided in Section 8.6 (e)).
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
9.1 IVAX REPRESENTATIONS AND WARRANTIES. IVAX represents and warrants to
BMS that
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* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission; approximately
3 pages omitted.
(a) This Agreement has been approved by all requisite corporate
action and that it constitutes the valid and binding agreement
of IVAX and of each of its Affiliates that is a party hereto;
and
(b) It will obtain and maintain all necessary permits,
registrations and licenses required to develop the Product
under this Agreement.
9.2 BMS REPRESENTATIONS AND WARRANTIES. BMS represents and warrants to IVAX
that
(a) This Agreement has been approved by all requisite corporate
action and that it constitutes the valid and binding agreement
of BMS; and
(b) It will obtain and maintain all necessary permits,
registrations and licenses required to supply the Active
Ingredient and conduct clinical trials of the Product under
this Agreement.
9.3 COMPLIANCE WITH LAWS. IVAX and BMS will each obtain and maintain all
necessary permits, registrations and licenses required to perform their
respective obligations under this Agreement. BMS will comply with all
laws, rules and regulations in effect from time to time applicable to
the registration, marketing, distribution and sale of the Product or
any other activities to be performed by BMS hereunder.
9.4 *
ARTICLE X
CONFIDENTIALITY
10.1 OBLIGATION OF CONFIDENTIALITY. Each party agrees to maintain secret and
confidential all Technical Information obtained from the other both
pursuant to this Agreement and prior to and in contemplation of it and
all other information that it may acquire from the other in the course
of this Agreement, to respect the other's proprietary rights therein,
to use the same exclusively for the purposes of this Agreement, and to
disclose the same only to those of its employees, contractors and
distributors pursuant to this Agreement (if any) to whom and to the
extent that such disclosure is reasonably necessary for the purpose of
this Agreement and to the health authorities in Territory A insofar as
this is necessary or desirable in order to obtain registration of the
Product with such health authorities.
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10.2 EXCLUSIONS. The foregoing obligations of Section 10.1 above shall not
apply to Technical Information or other information that:
(a) prior to receipt thereof from one party was in the possession
of the other and at its free disposal;
(b) is subsequently disclosed to the recipient party without any
obligations of confidence by a third party who has not derived
it directly or indirectly from the other under a
confidentiality obligation;
(c) is or becomes generally available to the public in printed
publications in general circulation in Territory A through no
act or default of the recipient party or its agents or
employees; or
(d) is legally required to be disclosed, provided that the
recipient party notifies the disclosing party prior to making
such disclosure and cooperates with the disclosing party to
seek any legal protections that may be available with respect
to such disclosure.
10.3 EMPLOYEES AND CONTRACTORS. Each party shall procure that all its
employees, contractors, distributors and (in the case of IVAX)
licensees (if any) who have access pursuant to this Agreement to any
information of the other to which the obligations of Section 10.1 apply
are subject to these obligations and shall further procure that so far
as is reasonably practicable all of such contractors, distributors and
licensees enter into written undertakings to this end.
10.4 PUBLIC ANNOUNCEMENTS. Neither party will make any public announcement
or other public disclosure of the existence of this Agreement or its
terms without the prior written consent of the other party, provided
that, if either party is required to disclose the existence of this
Agreement or its terms under applicable securities or other laws, the
parties will co-operate with respect to the required disclosure to
achieve a mutually acceptable statement or statements and to prepare
appropriately redacted copies of documents for filing, if required. Any
press release or other announcement issued by IVAX shall conform to the
statement set out in Attachment 4.
10.5 LITIGATION. The parties agree not to introduce as evidence, or refer in
any way to this Agreement, the Exhibits hereto, or any information
concerning any of them, in any litigation involving the parties or
their Affiliates, whether currently pending or hereafter instituted,
except in any litigation claiming a breach of this Agreement. For
purposes of any such litigation the parties hereby stipulate, for
themselves and their Affiliates, that the existence of this Agreement
and any related agreements or arrangements, and any terms or conditions
thereof, is irrelevant and inadmissible for any purpose whatsoever.
Each party consents to
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the other's use of a copy of this Section 10.5 for the sole purpose of
preventing or opposing any act prohibited hereby.
10.6. TAX WITHHOLDING. All sums due under this Agreement:
(a) are exclusive of any value added tax, which shall be payable
in addition on the rendering by IVAX of any appropriate value
added tax invoice;
(b) shall be made by telegraphic transfer to the credit of IVAX's
bank account to be designated in writing by IVAX; and
(c) shall be made in full without deduction of taxes charges and
other duties that may be imposed. The parties shall cooperate
in all respects necessary to take advantage of such double
taxation agreements as may be available. If any government
entity asserts that withholding taxes should have been paid on
payments made hereunder, or should be paid on payments to be
made hereunder, IVAX shall be fully responsible for payment of
such withholding taxes; BMS will not pay any such tax or
assessment but will refer the claim directly to IVAX.
ARTICLE XI
INDEMNITY
11.1 INDEMNITY BY IVAX. IVAX will defend, indemnify and hold BMS and its
Affiliates and their respective officers, directors and employees
harmless from and against any and all liability, damage, loss, cost or
expense (including reasonable attorney's fees and expenses) arising out
of or resulting from any claim by a third party that the grant by IVAX
of the rights granted to BMS under Articles III or IV or the
obligations accepted by IVAX under Articles II and VII are in breach of
any contract, understanding, or commitment between IVAX or its
Affiliates and such third party. This provision and the provisions of
Section 11.2 below shall not apply to any claim subject to the
provisions of Article V (Patents and Copyright).
11.2 INDEMNITY PROCEDURE. In the case of any indemnity under Section 11.1.
above, BMS will promptly notify IVAX of any such claim or proceeding
and will permit IVAX, at its expense, to appoint counsel and control
the defence of such claim or proceeding; provided, however, that BMS
may in its discretion participate at its own expense in such defence;
and provided further, that the IVAX will not settle any such claim or
proceeding without the prior written consent of BMS, which consent will
not be unreasonably withheld.
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ARTICLE XII
MISCELLANEOUS
12.1 NOTICE.
(a) All notices, requests, consents and other communications
required or permitted under this Agreement will be in writing
and will be (as elected by the person giving such notice) sent
by facsimile (with confirmation received of the recipient's
number) to the numbers set forth below or will be hand
delivered by messenger or courier service, or mailed by
registered or certified mail (postage prepaid), return receipt
requested, or delivered by overnight delivery service,
addressed to:
If to IVAX: IVAX Corporation
4400 Biscayne Blvd.
Miami, Florida 33137
Attention: President
Facsimile: (305) 575-6016
with a copy to: IVAX Corporation
4400 Biscayne Blvd.
Miami, Florida 33137
Attention: General Counsel
Facsimile: (305) 575-6049
If to BMS: Bristol-Myers Squibb Company
P.O. Box 4000
Route 206 and Province Line Road
Princeton, New Jersey 08543-4000
Attention: Senior Vice President, Worldwide Medicines
Group and Associate General Counsel
Facsimile: 609-252-6151
(b) Each such notice will be deemed delivered (1) on the date
delivered if by personal or overnight delivery, (2) on the
date sent by telecopy if so sent, and (3) on the date upon
which the return receipt is signed or delivery is refused or
the notice is designated by the postal authorities as not
deliverable, as the case may be, if mailed.
(c) By giving to the other parties at least fifteen (15) days
written notice thereof, the parties and their respective
successors and permitted assigns will have the right from time
to time and at any time during the term of this Agreement to
change their respective addresses.
16
<PAGE>
12.2 FURTHER ASSURANCES. Each party agrees to execute and deliver any and
all such other and additional instruments and documents and do any and
all such other acts and things as may be necessary or expedient to
effectuate more fully this Agreement and to carry out the business
contemplated by this Agreement.
12.3 FORCE MAJEURE. The inability of any party to commence or complete its
obligations hereunder by the dates herein required resulting from
delays caused by strikes, insurrection, acts of God, war, acts of
judicial bodies or other government entities, emergencies, shortages or
unavailability of materials, or other similar causes beyond the party's
reasonable control which will have been timely communicated to the
other party, will extend the period for the performance of the
obligations for the period equal to the period(s) of any such
delays(s); provided that such party will continue to perform to the
extent feasible in view of such force majeure; and provided further,
that if such force majeure will continue for a period of six (6)
months, either party will have the right to terminate this Agreement
upon written notice to the other.
12.4 ASSIGNMENT; BINDING EFFECT. Either party may assign this Agreement
without the other's consent to any of its Affiliates or delegate all or
part of its obligations to an Affiliate; provided, however, that the
assignee or delegate shall assume and be bound by the provisions of
this Agreement, and its performance hereunder shall be guaranteed by
the original party to this Agreement. Except as specifically permitted
herein, neither party may assign its rights and/or obligations
hereunder or any interest therein to any other party without the prior
written consent of the other party; provided however that, for the
avoidance of doubt, a change of control of either party will not be
deemed an assignment and thus will not require the other party's
consent save in respect of any change of control of IVAX where any
acquiring party shall be a corporation having an interest in the field
of oncology and being authorised to market and sell any pharmaceutical
product containing a taxane as an active ingredient. Subject to the
foregoing, this Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted
assigns.
12.5 WAIVER AND AMENDMENT. Any representation, warranty, covenant, term or
condition of this Agreement which may legally be waived, may be waived,
or the time of performance thereof extended, at any time by the party
hereto entitled to the benefit thereof, and any term, condition or
covenant (including, without limitation, the period during which any
condition is to be satisfied or any obligation performed) may be
amended by the parties hereto at any time. Any such waiver, extension
or amendment will be evidenced by an instrument in writing executed by
an officer authorised to execute waivers, extensions or amendments. No
waiver by any party, whether express or implied, of its rights under
any provision of this Agreement will constitute a waiver of such
party's rights under such provisions at any other time or a waiver of
such party's rights under any other provision of this Agreement. No
failure by any party to take any
17
<PAGE>
action against any breach of this Agreement or default by another party
will constitute a waiver of the former party's right to enforce any
provision of this Agreement or to take action against such breach or
default or any subsequent breach or default by such other party.
12.6 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement will be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement will
remain in full force and effect, and such invalid, void or
unenforceable provision will be interpreted in a manner which
accomplishes, to the extent possible, the original purpose of such
provision. The foregoing is not intended to supersede any specific
provision of this Agreement. is specifically agreed that BMS's decision
to discontinue the development work shall not, in and of itself, affect
the payments provided under Sections 8.2 and 8.3.which will continue
until they have all been made, except as stated in Section 8.6(e).
12.7 SECTION HEADINGS. The section headings in this Agreement are for
convenience of reference only and will not be deemed to affect the
interpretation of any provision of this Agreement.
12.8 NO THIRD PARTY RIGHTS. The provisions of this Agreement are for the
exclusive benefit of the parties to this Agreement, and no other Person
(including without limitation any creditor of any party to this
Agreement) will have any right or claim against any party to this
Agreement by reason of those provisions or be entitled to enforce any
of those provisions against any party to this Agreement.
12.9 RELATIONSHIP OF PARTIES. This Agreement will not constitute or be
construed as creating a marketing partnership or distribution
arrangement with respect to paclitaxel injection or any other form of
partnership or joint venture between or among the parties, and no party
will be liable for any debts or obligations of the other parties. No
party will in any way be considered as being an agent or representative
of the other parties in any dealings with any third party, and no party
may act for, or bind, the other parties in any such dealings.
12.10 GOVERNING LAW. This Agreement has been entered into and will be
construed and enforced in accordance with the laws of England without
reference to the choice of law principles thereof.
12.11 JURISDICTION; VENUE. Any suit, action or proceeding against any party
with respect to this Agreement or any judgement entered by any court in
respect of this Agreement will be brought in the High Court of Justice
in London, England, and the parties hereto accept the exclusive
jurisdiction of those courts for the purpose of any such suit, action
or proceeding. In addition, the parties irrevocably waive, to the
fullest extent permitted by law, any objection which they may now or
hereafter have to the laying of venue of any suit, action or proceeding
arising out
18
<PAGE>
of or relating to this Agreement, or any judgement entered by any court
in respect hereof brought in London, England, and further irrevocably
waive any claim that any suit, action or proceeding brought in London,
England was brought in an inconvenient forum. The parties will jointly
petition the court to maintain all records of any such proceeding under
seal, including all pleadings, briefs, evidence, transcripts, and other
documents pertaining to the proceeding, and not to make the same
publicly available except as may be necessary to enter and enforce any
judgement rendered in any such proceeding or to take an appeal
therefrom, provided, however, that any appellate proceeding will also
be kept under seal.
12.12 Arbitration.
(a) In the event that either party gives written notice of its
desire to arbitrate a dispute regarding a revised payment
schedule under Section 8.6 (g), such dispute shall be settled
by arbitration in London, England, in accordance with the
then-existing international arbitration rules (the "Rules") of
the American Arbitration Association ("AAA"), and judgement
upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof; provided, however, that
the law applicable to any controversy shall be the law of
England. In any arbitration pursuant to this provision, the
award or decision shall be rendered by a majority of the
members of a Board of Arbitration consisting of three (3)
members, one of whom shall be appointed by each party and the
third of whom shall be the chairman of the panel and be
appointed by mutual agreement of said two party-appointed
arbitrators. The persons appointed as arbitrators will have at
least five (5) years' experience in the field of
pharmaceutical licensing and distribution, including senior
negotiating responsibilities with major pharmaceutical
companies, and will not have had any prior affiliation with
either party, whether as employees, consultants, directors,
legal counsel, or any similar relationship. In the event of
failure of the two party-appointed arbitrators to agree within
sixty (60) days after the commencement of the arbitration
proceeding upon the appointment of the third arbitrator, the
third arbitrator shall be appointed by the AAA in accordance
with the Rules. In the event that either party shall fail to
appoint an arbitrator within thirty (30) days after the
commencement of the arbitration proceeding, such arbitrator
and the third arbitrator shall be appointed by the AAA in
accordance with the Rules. In determining the schedule of
payments to be made for the remaining Services and rights
granted under the Agreement, the arbitrators will be directed
to consider all of the following:
(i) Contractual arrangements regarding similar
pharmaceutical products entered into by others in
similar circumstances and by the parties themselves;
but as to existing agreements, taking account of
19
<PAGE>
improvements made and achievements recognised since
their most recent product development agreements;
(ii) The uniqueness of the IVAX technology, including its
patented inventions and its know-how, and the
experience of its Affiliates in developing and
manufacturing pulmonary drugs, including their
knowledge of propellants, product formulations,
regulatory requirements, and manufacturing methods;
(iii) The advantages of the IVAX inhalation device over
conventional devices, such as its ease of use,
convenience, dosing accuracy, reliability in
delivering product directly to the lungs, and success
in obtaining regulatory approvals;
(iv) The cost that BMS would incur to develop or contract
for the development of its own inhalation device for
use with the Active Ingredients, such as design,
engineering, testing, procurement of manufacturing
equipment, and hiring of personnel, as well as the
loss of potential product sales during the time that
would be required to develop the necessary
capabilities and facilities; and
(v) the fact that one of the devices that may be used in
the Products has received numerous awards for design
and engineering excellence.
(b) The arbitrators will be further instructed to select a value
and to establish a payment schedule consisting of at least
four (4) substantial milestone payments, reimbursement of
costs and expenses, and ongoing royalties in an amount
reflecting royalties paid by others in the industry for the
use of proprietary technology, as well as amounts received by
IVAX for similar arrangements, taking account of improvements
made and achievements recognised since finalisation of its
most recent product development agreements.
(c) Any dispute arising under this Agreement except those covered
by sub-paragraph 12.12 (a) will be resolved in a private
judicial proceeding pursuant to Section 12.11.
12.13 EQUITABLE REMEDIES. Each of the parties acknowledges and agrees that,
in the event of a breach or threatened breach of this Agreement by any
party or the failure of a party to perform in accordance with the
specific terms hereof, the other party hereto will be irreparably
damaged and that monetary damages would not provide an adequate remedy.
Accordingly, it is agreed that, in addition to any and all other rights
which may be available, at law or in equity, the non-breaching
20
<PAGE>
party will be entitled to injunctive relief and/or specifically to
enforce the terms and provisions hereof in any court of competent
jurisdiction.
12.14 REMEDIES CUMULATIVE. The rights and remedies given in this Agreement to
a non-defaulting party will be deemed cumulative, and the exercise of
one of such remedies will not operate to bar the exercise of any other
rights and remedies reserved to a non-defaulting party under the
provisions of this Agreement or given to a non-defaulting party at law
or in equity.
12.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
authorised representatives effective as of the date first above written.
IVAX CORPORATION BRISTOL-MYERS SQUIBB COMPANY
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
BAKER NORTON NORTON HEALTHCARE LTD.
INTERNATIONAL, GmbH.
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
21
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
ATTACHMENT 1
ACTIVE INGREDIENTS
*
Second compound to be determined by BMS during the first eighteen (18) months of
the Agreement.
- ----------------------
* Subject to verification at the time of negotiation of the initial Development
Plan.
22
<PAGE>
ATTACHMENT 2
DEFINITIONS
"Active Ingredient" means either of the compounds identified on
Attachment 1.
"Affiliate" means any Person that controls, is controlled by or is
under common control with BMS or IVAX, as the case may be. The term "control"
means the ownership, directly or indirectly, or the power to direct the voting
or disposition, of fifty percent (50%) or more of the voting stock or income
interests of the subject Person, or such other arrangement as in fact
constitutes actual control. For purposes solely of Section 8.6(a), an Affiliate
shall also be deemed to include any third party acting by right of reference to
or making use authorised by IVAX of any preclinical or clinical data of IVAX or
any other IVAX Affiliate in obtaining a marketing authorisation referred to
implicitly or explicitly therein.
"Budget" means the costs agreed by the parties, which are reasonably
anticipated to be incurred by IVAX on a quarterly basis for the development of
the Product.
"Development Plan" means a plan mutually devised and agreed by IVAX and
BMS relating to the development of any Product, defining the responsibilities of
each party for development and registration work and the time schedules for such
work.
"Device" means an inhalation device developed, modified or adapted for
use in connection with an Active Ingredient under this Agreement, which may be
covered under one or more of the Patent Rights.
"Indicated Use" means (in relation to PAXENE) the treatment of patients
with advanced AIDS related kaposi's sarcoma who have failed prior liposomal
anthracycline therapy.
"IVAX" means IVAX Corporation, a Florida corporation, or its Affiliate
owning the rights or performing the services in question, which is NHL or BNI,
as the case may be.
"Know-How" means all confidential information of any type concerning
the Device that is known to IVAX, or that may become known to IVAX during the
term of this Agreement. Such information shall include, without limitation,
information concerning manufacturing methods and skills, and physical data.
"Patent Rights" means:
(a) the patents and applications as briefly described in
Attachment 3 hereto;
23
<PAGE>
(b) all patent applications that may hereafter be filed in
Territory A by or on behalf of IVAX which either are based on
or claim priority from any of the foregoing patents and
applications or which are in respect of any improvements to
the device claimed in the patents and patent applications set
out in Attachment 3 hereto;
(c) all patents which may be granted pursuant to any of the
foregoing patent applications; and
(d) all supplementary patent certificates granted in relation to
the patents and patent applications referred to in sub-clauses
(a) through (c) above;
"PAXENE" means any injectable paclitaxel product marketed under or by
reference to the PAXENE Authorisation.
"Person" means any natural person, corporation, unincorporated
organisation, partnership, association, joint stock company, joint venture,
limited liability company, trust or government, or any agency or political
subdivision of any government, or any other entity.
"Principal Territories" means the countries currently comprising the
European Union (Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, the Netherlands, Spain, Sweden, Portugal, and the
United Kingdom),the People's Republic of China, Canada, Mexico, South Africa,
the United States, and any other significant pharmaceutical markets in Territory
A. A "Principal Territory" shall mean one of these Principal Territories.
"Product" means a pharmaceutical product in finished dosage form
including an Active Ingredient that is developed by means of the Services to be
provided pursuant to this Agreement.
"Regulatory Application" means a formal application submitted to the
appropriate Regulatory Authority under applicable law seeking approval to market
a Product within Territory A.
"Regulatory Approval" means a communication in writing from the
appropriate Regulatory Authority permitting the marketing of a Product within
Territory A.
"Regulatory Authority" means a governmental regulatory authority which
has authority over the clinical testing, manufacturing, marketing, or sale of
pharmaceutical products in any jurisdiction covered by this Agreement.
"Technical Information" means Know-How, processes, formulations,
concepts, ideas, preclinical, clinical, pharmacological or other data and
testing results, experimental methods or results, and other information relating
to the development, formulation, registration or manufacture of the Product or
relating to the Active Ingredient.
24
<PAGE>
"Term" means the period during which this Agreement is in effect.
"Territory A" means the world.
"Territory B" means all countries of the European Union, together with
Iceland, Liechtenstein, Monaco, and Switzerland.
25
<PAGE>
ATTACHMENT 3
PATENT RIGHTS
See attached.
26
<PAGE>
BAI PATENT LIST
[MEDICAMENT DISPENSING DEVICE]
STATUS AS OF JULY 12, 1999
AP AFRICAN REGIONAL PROPERTY ORGANIZATION
APPLICATION NO.: AP/P/92/00390
FILED: 15 MAY 1992
PATENT NO.: AP320
STATUS: GRANTED
AR ARGENTINA
APPLICATION NO.: 322442
FILED 1 JUNE 1992
PATENT NO.: 246183
STATUS: GRANTED
AU AUSTRALIA
APPLICATION NO.: 90340/91
FILED 29 NOVEMBER 1991
PATENT NO.: 644925
STATUS: GRANTED
BG BULGARIA
APPLICATION NO.: 96390
FILED 28 MAY 1992
PATENT NO.: 61027
STATUS: GRANTED
BR BRAZIL
APPLICATION NO.: PI 9202048
FILED: 29 MAY 1992
PATENT NO.:
STATUS: GRANTED-AWAITING LETTERS PATENT AND PATENT NUMBER
CA CANADA
APPLICATION NO.: 2091367
FILED: 29 NOVEMBER 1991
PATENT NO.: 2091367
STATUS: GRANTED
1
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
*
*
*
*
*
*
*
*
*
EP EUROPE
APPLICATION NO.: 929003212.8
FILED: 29 NOVEMBER 1991
PATENT NO.: 559736
STATUS: GRANTED.
EPC NATIONAL FILINGS IN:
AT AUSTRIA
BG BELGIUM
CH SWITZERLAND
DE GERMANY
DK DENMARK
ES SPAIN
FR FRANCE
GB GREAT BRITAIN
GR GREECE
IT ITALY
LI LIECHTENSTEIN
LU LUXEMBOURG
NL THE NETHERLANDS
SE SWEDEN
2
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
REGISTERED IN:
BERMUDA
(REGISTERED AS NO. 135)
BAHRAIN
(REGISTERED AS NO. 1100)
BOTSWANA
(REGISTERED AS NO. EP 559736)
CYPRUS
(REGISTERED AS NO. 1904)
HONG KONG
(REGISTERED AS 1140/96)
JERSEY
(REGISTERED AS NO. 577)
*
*
*
*
*
HU HUNGARY
APPLICATION NO.: 9201803
FILED: 29 MAY 1992
PATENT NO.: 213685
STATUS: GRANTED
ID INDONESIA
APPLICATION NO.: P-001042
FILED: 30 NOVEMBER 1991
PATENT NO.: ID 300297
STATUS: GRANTED
IE IRELAND
APPLICATION NO.: 4063/91
FILED: 22 NOVEMBER 1991
PATENT NO.: 73212
STATUS: GRANTED
3
<PAGE>
IL ISRAEL
APPLICATION NO.: 100342
FILED: 11 DECEMBER 1991
PATENT NO.: 100342
STATUS: GRANTED
IN INDIA
APPLICATION NO.: 325/CAL/92
FILED: 13 MAY 1992
PATENT NO.: 177774
STATUS: GRANTED
JP JAPAN
APPLICATION NO.: 4/501197
FILED: 29 NOVEMBER 1991
PATENT NO.: 2535297
STATUS: GRANTED
KR SOUTH KOREA
APPLICATION NO.: 92-9443
FILED: 92-9443
PATENT NO.: 130915
STATUS: GRANTED
LK SRI LANKA
APPLICATION NO.: 10385
FILED: 29 MAY 1992
PATENT NO.: 10385
STATUS: GRANTED
MX MEXICO
APPLICATION NO.: 92/02525
FILED: 28 MAY 1992
PATENT NO.: 178369
STATUS: GRANTED
4
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
MY MALAYSIA
APPLICATION NO.: PI 9200827
FILED: 15 MAY 1992
PATENT NO.: 110200-A
STATUS: GRANTED
NG NIGERIA
APPLICATION NO.: 115/92
FILED: 21 MAY 1992
PATENT NO.: 12159
STATUS: GRANTED
NO NORWAY
APPLICATION NO.: 930484
FILED: 29 NOVEMBER 1991
PATENT NO.: 304461
STATUS: GRANTED
NZ NEW ZEALAND
APPLICATION NO.: 240742
FILED: 26 NOVEMBER 1991
PATENT NO.: 240742
STATUS: GRANTED
OA AFRICAN INTELLECTUAL PROPERTY ORGANIZATION
APPLICATION NO.: 60219
FILED: 27 MAY 1992
PATENT NO.: 10046
STATUS: GRANTED
*
*
*
*
*
5
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
PK NORTH KOREA
APPLICATION NO.: 250/92
FILED: 24 MAY 1992
PATENT NO.: 133218
STATUS: GRANTED
PL POLAND
APPLICATION NO.: P294799
FILED: 4 JUNE 1992
PATENT NO.: 169729
STATUS: GRANTED
PT PORTUGAL
APPLICATION NO.: 99710
FILED: 6 DECEMBER 1991
PATENT NO.:
STATUS: GRANTED/AWAITING LETTERS PATENT AND PATENT NUMBER
RO ROMANIA
APPLICATION NO.: 92 200744
FILED: 29 MAY 1992
PATENT NO.: 108415
STATUS: GRANTED
RU RUSSIA
APPLICATION NO.: 5052149.14
FILED: 29 MAY 1992
PATENT NO.: 2088264
STATUS: GRANTED
*
*
*
*
*
6
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
*
*
*
*
*
*
*
*
*
*
TR TURKEY
APPLICATION NO.: 431/92
FILED: 29 MAY 1992
PATENT NO.: 26977
TW TAIWAN
APPLICATION NO.: 80109372
FILED: 30 MAY 1991
PATENT NO.: 62015
STATUS: GRANTED
VE VENEZUELA
APPLICATION NO.: 92/00752
FILED: 26 MAY 1992
Patent No.: I-752-92
STATUS: GRANTED/AWAITING LETTERS PATENT
*
*
*
*
*
7
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
US UNITED STATES
APPLICATION NO.: 039,302
FILED: 29 NOVEMBER 1991
PATENT NO.: 5,447,150
STATUS: ISSUED
*
*
*
*
*
ZA SOUTH AFRICA
APPLICATION NO.: 919521
FILED: 3 DECEMBER 1991
PATENT NO.: 919521
STATUS: GRANTED
8
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
STATUS AT 4/10/99
NORTON HEALTHCARE LIMITED
PATENTS/APPLICATIONS - INHALERS
MULTIDOSE DRY POWDER INHALER
P69654 Page 9
- ------
<TABLE>
<CAPTION>
COUNTRY APPLN DATE APPLN NO. PATENT NO PROGRESS STATUS
- ------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C>
*
AD 2 JUNE 92 AP/P/92/00394 AP 272 GRANTED
AR 9 JUNE 92 322489 246873 GRANTED
AU 29 NOV 93 99326/91 647851 GRANTED
BG 12 JUN 92 96457 61218 GRANTED
BR 15 JUN 92 PI 9202223 GRANTED
CA 29 NOV 91 2091366 2091366 GRANTED
*
CO 12 JUNE 92 361.045 24.961 GRANTED
CZ 3 JUNE 92 PV 1678-92(CS) 281662 GRANTED
EP# 29 NOV 91 91920759.7 0561830 GRANTED
*
HU 11 JUNE 92 9201956 216770 GRANTED - Await Letters Patent
ID 14 DEC 91 P-001152 ID 000312 GRANTED
IE 6 DEC 91 4240/91 76470 GRANTED
IL 11 DEC 91 100341 100341 GRANTED
IN 21 MAY 92 346/CAL/92 190711 GRANTED
*
JP 29 NOV 91 4/500057 2535296 GRANTED
KR 15 JUNE 92 92-10412 128232 GRANTED
LK 15 JUNE 92 10393 10393 GRANTED
*
*
NG 8 JUNE 92 134/92 11327 GRANTED
NO 29 NOV 91 P930382 305785 GRANTED
NZ 2 DEC 91 240833 240833 GRANTED
OA 3 JUNE 92 60224 10031 GRANTED
</TABLE>
9
<PAGE>
* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
STATUS AT 4/10/99
NORTON HEALTHCARE LIMITED
PATENTS/APPLICATIONS - INHALERS
MULTIDOSE DRY POWDER INHALER
P69654 Page 10
- ------
<TABLE>
<CAPTION>
COUNTRY APPLN DATE APPLN NO. PATENT NO PROGRESS STATUS
- ------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C>
*
PK 3 JUNE 92 264/92 133022 GRANTED
PL 12 JUNE 92 P294877 169814 GRANTED
FT 13 DEC 91 99805 99805 GRANTED - Await Letters Patent
RO 12 JUNE 92 92-200787 111825 GRANTED
RU 11 JUNE 92 5052303.14 2077893 GRANTED
*
*
SK 3 JUNE 92 PV 1678-92(SK) 278819 GRANTED
TR 15 JUNE 92 523/92 25963 GRANTED
TW 9 DEC 91 80109644 62016 GRANTED
US 29 NOV 91 039301 5503144 GRANTED
VE 12 JUNE 92 815/92 I-815-92 GRANTED - Await Letters Patent
*
*
ZA 27 NOV 91 919363 919363 GRANTED
</TABLE>
The European Patent has been registered in:
Hong Kong (Registered as No. 483/97)
Jersey (Registered as No. 589)
Cyprus (Registered as No. 1999)
# Designated AT/BE/CH/LI/DE/DK/ES/FR/GB/GR/IT/LU/NL/SE
10
<PAGE>
ATTACHMENT 4
IVAX SIGNS PRODUCT COLLABORATION AND DEVELOPMENT SERVICES
AGREEMENT WITH BRISTOL-MYERS SQUIBB
MIAMI - November 19, 1999 -- IVAX Corporation (AMEX:IVX) today
announced it has entered into a product collaboration and development services
agreement with Bristol-Myers Squibb Company (BMS) in the areas of inhalation
technology and oncology.
IVAX subsidiaries and BMS will collaborate to develop one or more of
Bristol-Myers Squibb's proprietary molecules for use with IVAX's patented
inhalation devices, primarily for the treatment of asthma. Bristol-Myers Squibb
will retain worldwide rights to market respiratory products containing its
compounds. BMS will purchase the devices that IVAX will manufacture from IVAX on
terms to be agreed upon.
In the field of oncology, Bristol-Myers Squibb, which markets
paclitaxel for injection under the brand name Taxol(R) for the treatment of
various forms of cancer, has been granted an option to license IVAX's patented
system for the oral administration of paclitaxel on terms to be agreed upon.
Additionally, each party has agreed to respect the other's lawful data
protection rights in its marketing of paclitaxel in the European Union, where
IVAX recently received approval of its proprietary Paxene(R) (paclitaxel
injection) product to treat AIDS-related Kaposi's sarcoma.
The initial term of the agreement is three years. The agreement may be
terminated under certain specified circumstances. Subject to the possible events
of termination, the payments to be received during the term of the agreement
could be significant to IVAX.
Dr. Phillip Frost, chairman and chief executive officer of IVAX
Corporation, commented, "This collaboration agreement with Bristol-Myers Squibb
utilizes the combination of our innovative, award-winning, patented inhalation
devices and Bristol-Myers Squibb's next-
1
<PAGE>
generation asthma molecules to create respiratory products of major commercial
significance. Further, the possibility of a collaboration with Bristol-Myers
Squibb in developing and commercializing our oral system for administering
paclitaxel, the most important oncology drug in the world, is another
significant step in the advancement of IVAX's oncology program."
IVAX Corporation, headquartered in Miami, Florida, is a holding company
with subsidiaries engaged in the research, development, manufacture, and
marketing of branded and generic pharmaceuticals and veterinary and diagnostic
products in the U.S. and international markets.
Except for the historical matters contained herein, statements in this
press release, including those relating to the development and commercialization
of pharmaceutical products and the receipt by IVAX of future payments from
Bristol-Myers Squibb, are forward-looking and are made pursuant to the safe
harbor provisions of the Securities Litigation Reform Act of 1995. Investors are
cautioned that forward-looking statements involve risks and uncertainties which
may affect IVAX's business and prospects, including the risk that the
collaborative agreement with Bristol-Myers Squibb may not result in successful
development or commercialization of respiratory, oncology, or other products,
the risk that the agreement may terminate before IVAX has received any
significant amount of payments, and certain other risks and uncertainties based
on economic, competitive, governmental, technological and other factors
discussed in the Company's filings with the Securities and Exchange Commission.
CONTACT:
Sara L. Wilkins
Director, Investor Relations and Corporate Communications
IVAX Corporation
305-575-6043
[email protected]
www.ivax.com
2
<PAGE>
ATTACHMENT 5
LICENSE OPTION AGREEMENT
This Agreement is entered into effective November 18, 1999, 1999 (the
"Effective Date") by and between Baker Norton International GmbH, a Swiss
corporation having an office at Zurich Switzerland ("BNI"), and Bristol-Myers
Squibb Company, a Delaware corporation having an office at Rte. 206 and Province
Line Road, Princeton, NJ 08543-4000 ("BMS").
RECITALS
WHEREAS, BNI owns proprietary technology (the "BNI Technology")
pertaining to an system of making paclitaxel available by oral administration
(the "Oral Product"), for which it has filed patent applications and obtained
patents throughout the world; and
WHEREAS, BNI is an indirect wholly-owned subsidiary of IVAX
Corporation, which has provided to BMS certain confidential and proprietary data
of BNI regarding the Oral Product; and
WHEREAS, BMS desires to further review BNI's confidential material and
to negotiate with BNI on an exclusive basis for a license under the BNI
Technology to manufacture and market the Oral Product, it being understood that
obtaining rights to the Oral Product would be a beneficial line extension for
BMS and that BMS would obtain an advantage over other prospective licensees by
the exclusive negotiation period granted hereunder;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto agree as follows:
1. GRANT OF OPTION. BNI hereby grants to BMS the exclusive right to
negotiate for a license under the BNI Technology in the European Union (the
"Territory").
2. TERM. The exclusive negotiation period granted to BMS hereunder
shall begin on the Effective Date and shall expire six (6) months thereafter, on
March 31, 2000 (the "Term"). During the Term, BNI will not negotiate with any
person other than BMS regarding the licensing of rights to the Oral Product in
the Territory.
3. CONFIDENTIALITY. All documentation provided by either party to the
other hereunder will be subject to the confidential disclosure agreement entered
into between BMS and IVAX Corporation on January 23, 1997, as amended on August
24, 1999.
4. NO GRANT OF LICENSE. No license or warranty is granted, conveyed or
implied with respect to the BNI Technology, and neither BNI nor any of its
Affiliates shall have any liability to BMS or any of its Affiliates resulting
from the licensing negotiations or the use of BNI's confidential information by
BMS or its Affiliates. Nothing in this Agreement shall be construed to create,
constitute, give effect to or otherwise imply a joint venture, partnership,
agency or employment relationship of any kind between the Parties.
5. TERMINATION. This Agreement may not be amended or terminated except
by the parties' mutual written consent.
6. EFFECT OF TERMINATION. Upon the termination or expiration hereof, if
no license agreement is entered into, BMS will return to BNI all documents,
samples and other materials that it has received from BNI and
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its Affiliates pertaining to the Oral Product, or developed by use of materials
received from BNI, retaining no copies thereof.
7. GOVERNING LAW. This Agreement and the performance of the parties'
obligations hereunder, shall be governed by the law of the State of New York
applicable to commercial transactions, notwithstanding the choice of law
principles of New York or any other jurisdiction.
8. JURISDICTION. The exclusive jurisdiction for the adjudication of any
legal claim that may arise under, out of, in connection with, or relating to
this Agreement or any breach hereof, shall be the proper Florida state court
based on the amount in controversy, and venue shall be in Dade County. BMS
hereby submits to the jurisdiction of such courts and agrees to accept service
of process by mail to its address set forth in Section 10.1 or by any other
manner of service legally permitted by such court for actions arising out of
contracts entered into in the State of Florida. BMS hereby waives any objection
that it might otherwise have to jurisdiction in such forum, including, but not
limited to, objections based on lack of jurisdiction, inconvenient forum, and
the like.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date stated in the opening paragraph hereof.
BAKER NORTON INTERNATIONAL GMBH BRISTOL-MYERS SQUIBB COMPANY
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
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* Portions of this document have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
* Portions of the Attachments to this document have been omitted pursuant to a
request for Confidential Treatment and filed separately with the Commission.
PRODUCT COLLABORATION AND
DEVELOPMENT SERVICES AGREEMENT
INDEX
-----
ARTICLE PAGE
- ------- ----
I. Definitions 3
II. Product Development 3
III. Additional Agreements 5
IV. Regulatory Matters 6
V. Patents and Copyright 7
VI. Option for Licence to Oral Delivery System 9
VII. Undertakings Regarding Paclitaxel 10
VIII. Term, Termination and Payments 11
IX. Representations and Warranties 16
X. Confidentiality 17
XI. Indemnity 18
XII. Miscellaneous 19
ATTACHMENTS
- -----------
1. Active Ingredients
2. Definitions
3. Patent Rights
4. Press Statement
5. Licence Option Agreement
EXHIBIT 10.16
IVAX CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of this Plan is to provide Employees of the
Company and its Designated Subsidiaries with an opportunity to purchase shares
of Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have this Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of this Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "COMMON STOCK" shall mean the $0.10 par value common stock
of the Company.
(d) "COMPANY" shall mean IVAX Corporation and any Designated
Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight-time gross
earnings and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses, severance and other
compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary which
has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of this Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds ninety (90)
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the ninety-first day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each
Offering Period.
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value
of Common Stock determined as follows:
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(1) a national market system, including without
limitation the NASDAQ National Market System or the NASDAQ SmallCap Market, then
its Fair Market Value shall be the closing sales price for such Common Stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system
for the last Trading Day on or before the date of such determination, as
reported in THE WALL STREET JOURNAL or such other source as the Board deems
reliable;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, then its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable; or
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(k) "OFFERING PERIOD" shall mean the period of approximately
three (3) months during which an option granted pursuant to this Plan may be
exercised. There will be four Offering Periods each calendar year. The first
Offering Period will begin on the first Trading Day on or after January 1 and
end on the last Trading Day on or before March 31, the second Offering Period
will begin on the first Trading Day on or after April 1 and end on the last
Trading Day on or before June 30, the third Offering Period will begin on the
first Trading Day on or after July 1 and end on the last Trading Day on or
before September 30, and the fourth Offering Period will begin on the first
Trading Day on or after October 1 and end on the last Trading Day on or before
December 31. The duration and timing of an Offering Period may be changed
pursuant to Section 4 hereof.
(l) "PLAN" shall mean this 1999 Employee Stock Purchase Plan.
(m) "PURCHASE PRICE" shall mean eighty-five (85%) of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower; provided however, that in the event a
participant sells, assigns or otherwise transfers (other than by will or the
laws of descent and distribution) any shares of Common Stock acquired under this
Plan before the expiration of three (3) years from the Exercise Date on which
the participant purchased such shares of Common Stock, the Purchase Price for
any shares of Common Stock purchased under this Plan during the next four
Offering Periods following the sale, assignment or transfer will be equal to the
full Fair Market Value. The Purchase Price may be adjusted from time to time by
the Board pursuant to Section 19 hereof.
(n) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under this Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
this Plan but not yet placed under option.
(o) "SUBSIDIARY" shall mean a corporation, domestic or
foreign, of which not less than fifty percent (50%) of the voting shares are
held by the Company or a Subsidiary, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or a Subsidiary.
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(p) "TRADING DAY" shall mean a day on which national stock
exchanges and the NASDAQ System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in this Plan.
(b) Notwithstanding anything to the contrary contained herein,
no Employee shall be granted an option under this Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such capital stock equaling five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiaries accrues at a rate which exceeds twenty-five thousand dollars
($25,000) worth of stock (determined based on the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. OFFERING PERIODS. This Plan shall be implemented through a series of
consecutive Offering Periods. For each year that the Plan is in effect, the
first Offering Period will begin on the first Trading Day on or after January 1
and end on the last Trading Day on or before March 31, the second Offering
Period will begin on the first Trading Day on or after April 1 and end on the
last Trading Day on or before June 30, the third Offering Period will begin on
the first Trading Day on or after July 1 and end on the last Trading Day on or
before September 30, and the fourth Offering Period will begin on the first
Trading Day on or after October 1 and end on the last Trading Day on or before
December 31. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in this Plan
by completing a participation agreement, in the form set forth as Exhibit A to
this Plan, and an enrollment form authorizing payroll deductions and by filing
such participation agreement and enrollment form with the Company's Corporate
Human Resource Department prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant.
6. PAYROLL DEDUCTIONS.
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(a) At the time a participant files his or her enrollment
form, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding twenty percent (20%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under this Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
this Plan or may increase or decrease the rate of his or her future payroll
deductions for the next Offering Period (but not the current Offering Period) by
completing or filing with the Company a new enrollment form authorizing a change
in payroll deduction rate. The change in such rate shall be effective for the
next Offering Period. A participant's enrollment form shall remain in effect for
successive Offering Periods unless a new enrollment form is completed and
delivered to the Company.
(d) Notwithstanding anything to the contrary contained herein,
to the extent necessary to comply with Section 423(b)(8) of the Code and Section
3(b) hereof, a participant's payroll deduction rate may be decreased to zero
percent (0%) at any time during an Offering Period. Payroll deductions shall
recommence at the rate provided in such participant's enrollment form at the
beginning of the next Offering Period, unless terminated by the participant.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the shares of Common Stock issued under this Plan
are disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or upon the disposition of the shares of Common
Stock. At any time, the Company may, but shall not be obligated to, withhold
from the participant's Compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of the shares of Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of Common Stock determined
by dividing such Employee's payroll deductions accumulated prior to such
Exercise Date and retained in the participant's account as of the Exercise Date
by the applicable Purchase Price; provided, however, that in no event shall an
Employee be permitted to purchase during each Offering Period more than such
number of shares of Common Stock (subject to any adjustment pursuant to Section
18 hereof), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 11 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of Common Stock an Employee may purchase during each Offering
Period. Exercise of the option shall occur as provided in Section 8 hereof. The
option shall expire on the last day of the Offering Period.
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<PAGE>
8. EXERCISE OF OPTION.
(a) Each participant's option for the purchase of shares of
Common Stock shall be exercised automatically on the Exercise Date, and the
maximum number of shares of Common Stock under the option, including fractional
shares (computed to four decimal places), shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account, subject to the limitations set forth in
Sections 3(b), 7 and 11 hereof. During a participant's lifetime, a participant's
option to purchase shares of Common Stock hereunder is exercisable only by him
or her.
(b) If the Board determines that, on a given Exercise Date,
the number of shares of Common Stock with respect to which options are to be
exercised may exceed (i) the number of shares of Common Stock that were
available for sale under this Plan on the Enrollment Date of the applicable
Offering Period, or (ii) the number of shares of Common Stock available for sale
under this Plan on such Exercise Date, then the Board may in its sole discretion
(x) provide that the Company shall make a pro rata allocation of the shares of
Common Stock available for purchase on such Enrollment Date or Exercise Date, as
applicable, in as uniform a manner as shall be practicable and as it shall
determine in its sole discretion to be equitable among all participants
exercising options to purchase shares of Common Stock on such Exercise Date, and
continue the Offering Period then in effect, or (y) provide that the Company
shall make a pro rata allocation of the shares of Common Stock available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
shares of Common Stock on such Exercise Date, and terminate any Offering Period
then in effect pursuant to Section 19 hereof. The Company may make pro rata
allocation of the shares of Common Stock available on the Enrollment Date of any
applicable Offering Period pursuant to the preceding sentence, notwithstanding
any authorization of additional shares of Common Stock for issuance under this
Plan by the Company's shareholders subsequent to such Enrollment Date.
9. CERTIFICATES. Certificates for shares of Common Stock purchased
under the Plan will generally not be issued to participants until requested.
Shares credited to any account under the Plan will be showing on the
participants' statements of account sent after each purchase. Certificates for
any number of shares up to the full number of whole shares credited to an
account under the Plan and held for at least three years will be issued upon
request of a participant. Any remaining whole shares and fractional shares will
continue to be credited to the participant's account.
10. TERMINATION OF EMPLOYMENT. Upon a participant's ceasing to be an
Employee, all payroll deductions accumulated while an Employee shall be applied
toward the purchase of shares of Common Stock in the then current Offering
Period as provided in Section 8 above.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in this Plan.
12. COMMON STOCK.
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(a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 18 hereof, the maximum number of shares of
Common Stock which shall be made available for sale under this Plan shall be two
million eight hundred thousand (2,800,000) shares, plus an annual increase to be
added on the first day of the Company's fiscal year equal to (i) the lesser of
(A) sixteen thousand (16,000) shares, and (B) the amount which causes the
aggregate number of shares of Common Stock which shall be made available for
sale under this Plan to equal two and one-half percent (2.5%) of the then
outstanding shares of Common Stock of the Company or (ii) a lesser amount
determined by the Board.
(b) The participant shall have no interest or voting right in
shares of Common Stock covered by his or her option until such option has been
exercised.
(c) Shares of Common Stock to be delivered to a participant
under this Plan shall be registered in the name of the participant or in the
name of the participant and his or her spouse.
13. ADMINISTRATION. This Plan shall be administered by the Board or a
committee of members of the Board approved by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of this Plan, to determine eligibility and to
adjudicate all disputed claims filed under this Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares of Common Stock and cash, if any, from
the participant's account under this Plan in the event of such participant's
death subsequent to an Exercise Date on which the option is exercised but prior
to delivery to such participant of such shares of Common Stock and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, then spousal consent
shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares of Common Stock and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), then the Company, in its
discretion, may deliver such shares of Common Stock and/or cash to the spouse or
to any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
(c) The designation of beneficiary and any changes thereto
should be filed with the Company's Corporate Human Resource Department.
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15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares of Common Stock under this Plan may be assigned, transferred,
pledged or otherwise disposed of in any way (other than by will, the laws of
descent and distribution or as provided in Section 14 hereof) by the
participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect.
16. USE OF FUNDS. All payroll deductions received or held by the
Company under this Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts shall be maintained for each
participant in this Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price and the number of shares of Common Stock
purchased.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the Reserves, the maximum number of shares
of Common Stock each participant may purchase each Offering Period (pursuant to
Section 7 hereof), as well as the price per share of Common Stock and the number
of shares of Common Stock covered by each option under this Plan which has not
yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date") and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date.
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(c) MERGER OR ASSET SALE. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, the
Offering Period then in progress shall be shortened by setting a New Exercise
Date and the Offering Period then in progress shall end on the New Exercise
Date. The New Exercise Date shall be before the date of the Company's proposed
sale or merger. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date.
19. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate or
amend this Plan. Except as provided in Section 18 hereof, no such termination
can affect options previously granted, provided that an Offering Period may be
terminated by the Board on any Exercise Date if the Board determines that the
termination of the Offering Period or this Plan is in the best interests of the
Company and its shareholders. Except as provided in Section 18 hereof and in
this Section 19, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Section 423 of the Code (or any successor rule or
provision or any other applicable law, regulation or stock exchange rule), the
Company shall obtain shareholder approval in such a manner and to such a degree
as is required.
(b) Without shareholder consent and without regard to whether
any participants' rights may be considered to have been "adversely affected,"
the Board shall be entitled to change the Offering Periods, limit the frequency
and/or number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, permit payroll withholding in excess of the amount designated
by a participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of shares of Common Stock for
each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board determines in its sole discretion advisable which are consistent
with this Plan.
(c) In the event the Board determines that the ongoing
operation of this Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend this Plan to reduce or eliminate such accounting
consequences including, but not limited to:
(1) altering the Purchase Price for any Offering
Period including an Offering Period underway at the time of the change in
Purchase Price;
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(2) shortening any Offering Period so that Offering
Period ends on a new Exercise Date, including an Offering Period underway at the
time of the Board action; and
(3) allocating shares of Common Stock. Such
modifications or amendments shall not require stockholder approval or the
consent of any Plan participants.
20. TRANSFER OF SHARES. A participant shall not sell, assign or
otherwise transfer (other than by will or the laws of descent and distribution)
any or all shares of Common Stock acquired under this Plan before the expiration
of one (1) year from the Exercise Date on which the participant purchased such
shares of Common Stock. Additionally, as described in Section 2(m) of this Plan,
any participant who sells, assigns or otherwise transfers shares of Common Stock
acquired under this Plan before the expiration of three (3) years from the
Exercise Date on which the participant purchased such shares of Common Stock
will be permitted to purchase additional shares of Common Stock during the next
four Offering Periods following such sale, assignment or transfer only at the
full Fair Market Value, rather than eighty-five percent (85%) of such Fair
Market Value.
21. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares of Common Stock shall
not be issued with respect to an option unless the exercise of such option and
the issuance and delivery of such shares of Common Stock pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or system upon which the
shares of Common Stock may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such exercise
that the shares of Common Stock are being purchased only for investment and
without any present intention to sell or distribute such shares of Common Stock
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
23. TERM OF PLAN. This Plan shall become effective on January 1, 2000,
and shall continue in effect until January 1, 2010, unless sooner terminated
under Section 19 hereof.
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EXHIBIT A
IVAX CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
PARTICIPATION AGREEMENT
_____ Original Agreement Enrollment Date: _______________
_____ Change of Beneficiary(ies)
1. ___________________ hereby elects to participate in the IVAX Corporation 1999
Employee Stock Purchase Plan (the "Plan") and subscribes to purchase shares of
Common Stock in accordance with a separate enrollment form and the Plan. Terms
capitalized, but undefined, in this participation agreement shall have the
meanings defined in the Plan.
2. I understand that my payroll deductions authorized under the enrollment form
shall be accumulated for the purchase of shares of Common Stock at the
applicable Purchase Price determined in accordance with the Plan. I understand
that all accumulated payroll deductions shall be used to automatically exercise
my option.
3. I have received a copy of the complete Plan. I understand that my
participation in the Plan is in all respects subject to the terms of the Plan.
4. I understand that the shares of Common Stock received by me pursuant to the
Plan will be restricted for a period of three (3) years from the Exercise Date.
I will not be able to sell any shares of Common Stock at all during the one (1)
year period following the Exercise Date and in the event I sell any shares of
Common Stock less than three (3) years from the Exercise Date when I acquired
such shares, all subsequent purchases of Common Stock by me under the Plan
during the one (1) year period following such sale will be at full Fair Market
Value, rather than eighty-five percent (85%) of such Fair Market Value.
5. I understand that if I dispose of any shares of Common Stock received by me
pursuant to the Plan within two (2) years after the Enrollment Date or one (1)
year after the Exercise Date, then I will be treated for federal income tax
purposes as having received ordinary income at the time of such disposition in
an amount equal to the excess of the Fair Market Value of the shares of Common
Stock at the time such shares of Common Stock were purchased by me over the
price which I paid for the shares of Common Stock. I HEREBY AGREE TO NOTIFY THE
COMPANY IN WRITING WITHIN THIRTY (30) DAYS AFTER THE DATE OF ANY DISPOSITION OF
MY SHARES OF COMMON STOCK AND I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE
OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION
OF THE SHARES OF COMMON STOCK. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or early
disposition of the shares of
10
<PAGE>
Common Stock by me. If I dispose of such shares of Common Stock at any time
after the expiration of the two (2) year and one (1) year holding periods, then
I understand that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the lesser
of (i) the excess of the fair market value of the shares of Common Stock at the
time of such disposition over the purchase price which I paid for the shares of
Common Stock, or (ii) fifteen percent (15%) of the Fair Market Value of the
shares of Common Stock on the first day of the Offering Period. The remainder of
the gain, if any, recognized on such disposition will be taxed as a capital
gain.
6. I hereby agree to be bound by the terms of the Plan. The effectiveness of
this participation agreement is dependent upon my eligibility to participate in
the Plan.
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares of Common Stock due me under
the Plan:
NAME: (First) (Middle) (Last)
RELATIONSHIP:
--------------------------------------------------
ADDRESS:
-------------------------------------------------------
Dated:
---------------------------------------------------------
Employee's Social Security Number:
-----------------------------
Employee's Address:
--------------------------------------------
Signature of Employee:
-----------------------------------------
Spouse's Signature
(If beneficiary other than spouse):
----------------------------
11
EXHIBIT 13
IVAX CORPORATION
1999
FINANCIAL INFORMATION
<PAGE>
TABLE OF CONTENTS
Selected Financial Data 1
Management's Discussion and Analysis of Financial Condition
and Results of Operations 2
Report of Independent Certified Public Accountants 14
1999 Consolidated Financial Statements 15
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- --------------- ------------- -------------- --------------
(in thousands, except per share data) (1) (2)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Net revenues (3) $ 656,269 $ 625,573 $ 594,286 $ 658,745 $ 785,949
Gross profit 287,134 228,821 114,304 161,969 312,753
Selling 78,979 79,508 100,220 98,770 70,964
General & administrative 85,102 88,434 116,185 111,122 71,769
Research and development 54,164 48,615 53,409 51,729 45,594
Amortization 3,121 3,673 3,760 4,594 2,632
Restructuring & asset
write-downs (612) 12,222 38,088 69,073 -
Merger expenses - - 2,343 557 3,392
------------ ------------- ------------ ------------- ------------
Operating income (loss) 66,380 (3,631) (199,701) (173,876) 118,402
Interest income 6,142 11,972 5,738 1,126 1,453
Interest expense (5,556) (6,857) (14,685) (15,996) (8,066)
Other income (3) 19,513 32,777 53,366 6,623 17,533
Income taxes (benefit) 14,850 10,047 60,166 (52,488) 29,701
Minority interest (2,085) 403 (4,086) (5,354) (5,302)
------------ ------------- ------------ ------------- ------------
Income (loss) from continuing
operations 69,544 24,617 (219,534) (134,989) 94,319
Income (loss) from discontinued
operations 585 48,904 (8,701) (23,690) 20,482
Net income (loss) 70,722 71,594 (233,254) (160,752) 114,835
Basic earnings (loss) per common
share (4):
Continuing operations 0.43 0.14 (1.21) (0.76) 0.53
Discontinued operations - 0.27 (0.05) (0.13) 0.12
Net earnings (loss) 0.44 0.40 (1.28) (0.89) 0.66
Diluted earnings (loss) per common
share (4):
Continuing operations 0.42 0.14 (1.21) (0.76) 0.53
Discontinued operations - 0.27 (0.05) (0.13) 0.11
Net earnings (loss) 0.43 0.40 (1.28) (0.89) 0.64
Weighted average number of
common shares outstanding (4):
Basic 161,508 178,674 182,243 181,424 174,098
Diluted 164,401 178,897 182,243 181,424 179,309
Cash dividends per common share $ - $ - $ - $ 0.05 $ 0.08
BALANCE SHEET DATA
Working capital (5) $ 124,373 $ 269,511 $ 238,918 $ 415,927 $ 354,733
Total assets 634,514 778,015 790,736 1,333,648 1,184,828
Total long-term debt, net of
current portion 93,473 77,776 94,193 442,819 210,759
Shareholders' equity 292,371 453,208 435,039 695,128 789,172
<FN>
(1) The acquisition of Elvetium S.A. (Argentina), Alet Laboratories
S.A.E.C.I. y E. and Elvetium S.A. (Uruguay) (collectively "Elvetium"),
which was accounted for under the pooling of interests method of
accounting, was recorded as of January 1, 1996. Historical figures have
not been restated to give retroactive effect to the Elvetium
acquisition due to the immateriality of the related amounts. Figures
include the results of ImmunoVision Inc. since its purchase on July 17,
1995.
(2) Figures have been restated to reflect the classification of IVAX'
intravenous products, personal care products and specialty chemicals
businesses as discontinued operations.
(3) Figures for 1998 have been reclassified to conform to current period's
presentation.
(4) Figures have been retroactively restated to reflect the 3-for-2 stock
split effective February 22, 2000.
(5) Excludes net assets of discontinued operations.
</FN>
</TABLE>
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the 1999 Consolidated Financial Statements and the related Notes to
Consolidated Financial Statements on pages 21 to 42 of this Financial
Information Section. Except for historical information contained herein, the
matters discussed below are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to
economic, competitive, governmental, and technological factors affecting IVAX'
operations, markets, products and prices, and other factors discussed elsewhere
in this report and the documents filed by IVAX with the Securities and Exchange
Commission ("SEC"). These factors may cause IVAX' results to differ materially
from the statements made in this report or otherwise made by or on behalf of
IVAX.
RESULTS OF OPERATIONS
OVERVIEW
IVAX' operations are conducted through subsidiaries involved primarily
in proprietary and generic pharmaceuticals. Presently, a significant portion of
IVAX' revenues and gross profits are generated from sales of generic
prescription and over-the-counter pharmaceutical products. IVAX' future success
is largely dependent upon its ability to develop, obtain approval for,
efficiently manufacture, and market commercially viable proprietary and generic
pharmaceutical products.
All per share amounts, except for cash dividends per share, have been
retroactively restated to reflect the 3-for-2 stock split payable February 22,
2000. Certain prior period amounts presented herein have been reclassified to
conform to the current period's presentation.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Net income for the year ended December 31, 1999 was $70.7 million
compared to $71.6 million for the prior year. Income from continuing operations
was $69.5 million for the year ended December 31, 1999 compared to $24.6 million
for the prior year. The years ended December 31, 1999 and 1998 included $.6
million and $1.1 million net extraordinary gains relating to the extinguishment
of debt (See Note 9, Debt, in the Notes to Consolidated Financial Statements).
Results for the year ended December 31, 1998 included a $48.9 million gain from
discontinued operations (See Note 7, Discontinued Operations, in the Notes to
Consolidated Financial Statements) and a $3.0 million charge resulting from the
write-off of start-up costs previously capitalized, reflected as a cumulative
effect of a change in accounting principle (See Note 2, Summary of Significant
Accounting Policies - Change in Accounting Principle, in the Notes to
Consolidated Financial Statements).
Net earnings per share (diluted) were $.43 for the year ended December
31, 1999, compared to $.40 for the prior year. Earnings per share (diluted) from
continuing operations were $.42 for the year ended December 31, 1999 compared to
$.14 for the prior year. The early extinguishment of debt during 1999 and 1998
resulted in $.01 gains per share. In addition, during 1998, discontinued
operations resulted in $.27 earnings per share and the cumulative effect of a
change in accounting principle resulted in a $.02 loss per share.
NET REVENUES AND GROSS PROFIT
Net revenues for the year ended December 31, 1999 totaled $656.3
million, an increase of $30.7 million, or 4.9%, from the $625.6 million reported
in the prior year. This increase is comprised of an
2
<PAGE>
increase of $23.9 million in net revenues from domestic operations and an
increase of $6.8 million in net revenues from international operations.
Domestic net revenues totaled $303.4 million for the year ended
December 31, 1999, compared to $279.5 million in 1998. The $23.9 million, or
8.5%, increase was primarily attributable to increased sales volume and lower
sales returns and allowances offset by lower sales prices of certain generic
pharmaceutical products. Domestic operations recorded provisions for sales
returns and allowances that reduced gross sales by $90.8 million and $112.8
million in 1999 and 1998, respectively. Net revenues included $19.4 million and
$18.0 million in 1999 and 1998, respectively, from the settlement of litigation
with Abbott Laboratories ("Abbott") concerning patents for terazosin
hydrochloride, the generic equivalent of Abbott's Hytrin(R). Under the
settlement, Abbott agreed to pay IVAX $6.0 million per quarter until the earlier
of February 2000 or the market introduction of a generic version of terazosin
hydrochloride by anyone other than IVAX. During the third quarter of 1999, a
generic version of terazosin hydrochloride was introduced into the market by a
competitor reducing quarterly payments that IVAX receives under the settlement
from $6.0 million to $3.0 million.
In November 1999, IVAX entered into a three-year product collaboration
and development services agreement with Bristol-Myers Squibb Company ("BMS") in
the areas of inhalation technology and oncology. With respect to inhalation
technology, the agreement calls for IVAX and BMS to collaborate to develop one
or more of BMS' proprietary molecules using IVAX' patented devices, which BMS
would purchase from IVAX. BMS would retain the worldwide rights to market
respiratory products containing its compounds. On the oncology side, BMS'
Taxol(R) (paclitaxel) is the leading anti-cancer drug in the world, with 1999
sales estimated to reach approximately $1.5 billion. However, Taxol is an
injectable product and is not orally available. As part of the agreement, BMS
has been granted an option to negotiate a license to IVAX' patented system for
making paclitaxel orally available. IVAX received $5.0 million under the
agreement during 1999.
International operations generated net revenues of $352.8 million for
the year ended December 31, 1999, compared to $346.0 million for 1998. The $6.8
million, or 2%, increase was primarily due to increased net sales in the United
Kingdom and the Middle East that were offset by decreases in Eastern Europe,
Latin America and Pacific rim countries. The increases resulted from increased
volume and the offsetting decreases were attributable to decreased volume and
the effect of foreign exchange rate differences. International operations
recorded provisions for sales returns and allowances that reduced gross sales by
$30.4 million and $18.5 million in 1999 and 1998, respectively.
Gross profit for the year ended December 31, 1999 increased $58.3
million or 25.5% to $287.1 million (43.8% of net revenues) from $228.8 million
(36.6% of net revenues) for the year ended December 31, 1998. The increase in
the gross profit percentage is primarily attributable to product mix, lower cost
of sales due to reduced raw material costs, lower operating costs due to plant
consolidation, lower sales returns and allowances, and increased other revenue.
OPERATING EXPENSES
Selling expenses decreased $.5 million, or .7%, to $79.0 million in
1999 (12.0% of net revenues) from $79.5 million (12.7% of net revenues) in 1998.
General and administrative expenses totaled $85.1 million (13.0% of net
revenues) in 1999, a decrease of $3.3 million, or 4.0%, from $88.4 million
(14.1% of net revenues) in 1998. The decrease is primarily attributable to lower
executive severance payments at Corporate headquarters and $3.2 million received
in settlement of a patent infringement lawsuit offset by higher legal fees at
domestic operations, higher bad debt provisions at Asian operations and
increased accruals for incentive compensation.
3
<PAGE>
Research and development expenses totaled $54.2 million (8.3% of net
revenues) in 1999 compared to $48.6 million (7.8% of net revenues) in 1998, an
increase of $5.5 million, or 11.4%. The future level of research and development
expenditures will depend on, among other things, the outcome of clinical testing
of products under development, delays or changes in government required testing
and approval procedures, technological and competitive developments, strategic
marketing decisions and liquidity.
During 1999 and 1998, IVAX recorded restructuring costs and asset
write-downs of ($.6) million and $12.2 million, respectively. The credit
recorded in 1999 is primarily due to reversals of previously recorded asset
impairments. In 1999, manufacturing was substantially ceased at the Northvale,
New Jersey pharmaceutical facility and production transferred to other
manufacturing facilities.
OTHER INCOME (EXPENSE)
Interest income decreased $5.8 million to $6.1 million in 1999 from
$12.0 million in 1998 due to lower levels of cash on hand primarily due to the
repurchase of common stock outstanding.
Interest expense decreased $1.3 million to $5.6 million in 1999 from
$6.9 million in 1998 primarily due to the retirement of IVAX' 6 1/2% Convertible
Subordinated Notes in the amount of $31.4 million during 1999.
Other income, net, totaled $19.5 million in 1999, compared to $32.8
million in 1998, a decrease of $13.3 million. Royalty and milestone payments
from the 1997 sale of rights to Elmiron(R) and certain other urology products in
the United States and Canada to ALZA Corporation ("ALZA") amounted to $13.0
million and $12.4 million in 1999 and 1998, respectively, and are included in
other income as additional gain on the sale of product rights. During 1998, IVAX
reversed $15.0 million of previously recorded reserves related to a 1997
research and development cost sharing arrangement with ALZA that was terminated
in July, 1998. The reserve was established for IVAX' obligations under the cost
sharing arrangement that resulted from IVAX' 1997 sale of product rights to
Elmiron(R) and three other urology products in the United States and Canada to
ALZA. The reserve reversal reflects an adjustment to increase a previously
recognized gain on the sale of the product rights.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Net income for the year ended December 31, 1998 was $71.6 million
compared to a net loss of $233.3 million for the year ended December 31, 1997.
Income from continuing operations was $24.6 million for the year ended December
31, 1998 compared to a loss from continuing operations of $219.5 million for the
prior year. The years ended December 31, 1998 and 1997 included a $1.1 million
net extraordinary gain and a $2.1 million net extraordinary loss, respectively,
relating to the extinguishment of debt (See Note 9, Debt, in the Notes to
Consolidated Financial Statements). Results for 1998 and 1997 also included a
$3.0 million charge and a $2.9 million charge, respectively, resulting from a
cumulative effect of a change in accounting principle (See Note 2, Summary of
Significant Accounting Policies - Change in Accounting principle, in the Notes
to Consolidated Financial Statements).
Net earnings per share were $.40 for the year ended December 31, 1998,
compared to a net loss per share of $1.28 for the prior year. Earnings per share
from continuing operations were $.14 for the year ended December 31, 1998
compared to a net loss per common share of $1.21 for the prior year. Earnings
per share from discontinued operations were $.27 for the year ended December 31,
1998, compared to a loss from discontinued operations of $.05 for the prior
year. The net extraordinary gain recorded in 1998 and the net extraordinary loss
recorded in 1997 relating to the early extinguishment of
4
<PAGE>
debt resulted in a $.01 gain per share and a $.01 loss per share, respectively.
The cumulative effect of a change in accounting principle resulted in a $.02
loss per share in 1998 and a $.01 loss per share in 1997.
NET REVENUES AND GROSS PROFIT
Net revenues for the year ended December 31, 1998 totaled $625.6
million, an increase of $31.3 million, or 5.3%, from the $594.3 million reported
in the prior year. This increase is comprised of an increase of $80.3 million in
net revenues from domestic operations, offset by a decrease of $49.1 million in
net revenues from international operations.
Domestic net revenues totaled $279.5 million for the year ended
December 31, 1998, compared to $199.2 million for 1997. The $80.3 million, or
40.3%, increase in domestic net revenues was primarily attributable to lower
sales returns and allowances, increased sales volume of certain generic
pharmaceutical products and $18.0 million recognized from the settlement of
litigation with Abbott concerning patents for terazosin hydrochloride, the
generic equivalent of Abbott's Hytrin (R). During 1998 and 1997, domestic
generic pharmaceutical operations recorded provisions for sales returns and
allowances which reduced gross sales by $112.8 million and $217.9 million,
respectively.
International operations generated net revenues of $346.0 million in
1998 compared to $395.1 million for 1997. The $49.1 million, or 12.4%, decrease
was primarily due to decreased sales at IVAX' United Kingdom and Czech Republic
operations. The decrease in sales at the United Kingdom operations was due to
lower net revenues from a license agreement related to its breath-operated
inhaler device, the discontinuance of certain contract manufacturing
arrangements, and price declines for generic products. This decrease was
partially offset by net revenues attributable to a license agreement related to
IVAX' dry-powder inhaler device and to sales growth and product launches of
branded products. The decrease in sales at the Czech Republic operations is
primarily due to lower sales of raw materials primarily resulting from loss of
market share, and to a lesser extent, lower export sales primarily to Russia as
a result of unfavorable economic conditions. During 1998 and 1997, international
operations recorded provisions for sales returns and allowances that reduced
gross sales by $18.5 million and $10.7 million, respectively.
Gross profit for the year ended December 31, 1998 increased $114.5
million, or 100.2%, from the prior year. Gross profit was $228.8 million (36.6%
of net revenues) for the year ended December 31, 1998, compared to $114.3
million (19.2% of net revenues) for the year ended December 31, 1997. The
increase in the gross profit percentage was primarily due to lower sales returns
and allowances, and to a lesser extent, lower manufacturing costs, lower
inventory provisions, revenues attributable to the Abbott settlement at IVAX'
domestic generic pharmaceutical operations and the 1998 launch of a high margin
generic pharmaceutical product.
OPERATING EXPENSES
Selling expenses totaled $79.5 million (12.7% of net revenues) in 1998,
compared to $100.2 million (16.9% of net revenues) in 1997. The decrease of
$20.7 million was primarily attributable to reduced sales force and promotional
costs at domestic proprietary pharmaceutical operations as a result of the sale
of the rights to Elmiron(R) and certain other urology products in the United
States and Canada to ALZA in September 1997. The implementation of restructuring
plans also resulted in reduced selling expenses at domestic generic
pharmaceutical operations due to reductions in sales personnel and promotional
costs.
General and administrative expenses totaled $88.4 million (14.1% of net
revenues) in 1998, compared to $116.2 million (19.6 % of net revenues) in 1997,
a decrease of $27.8 million. The decrease is primarily attributable to lower
costs at IVAX' domestic generic pharmaceutical operations, its
5
<PAGE>
corporate headquarters, and its United Kingdom operations as a result of the
implementation of restructuring plans, and to a lesser extent, lower
depreciation and bad debt expense at IVAX' United Kingdom and United States
pharmaceutical operations.
Research and development expenses in 1998 decreased $4.8 million, or
9%, compared to 1997, to a total of $48.6 million (7.8% of net revenues).
During 1998 and 1997, IVAX recorded restructuring costs and asset
write-downs of $12.2 million and $38.1 million, respectively. During 1998, IVAX
continued its efforts to reduce costs and enhance operating efficiency by
initiating restructuring programs at its United Kingdom pharmaceutical
operations and continuing restructuring of its domestic pharmaceutical
operations. During 1998, IVAX recorded pre-tax charges totaling $13.6 million,
consisting of $5.4 million in asset write-downs resulting from management's
re-evaluation of the carrying value of certain long-lived assets related to
facility consolidation, $4.3 million associated with lease commitments, $3.6
million of severance and other employee termination benefits, and $.2 million
for the write-down of leasehold improvements relating to the consolidation of
certain packaging operations in the United Kingdom. The United Kingdom
restructuring eliminated approximately 260 positions. Also, during 1998, IVAX
recorded a pre-tax charge of $15.6 million comprised of $8.6 million for asset
write-downs resulting from management's decision to cease manufacturing at its
Northvale, New Jersey pharmaceutical facility and the re-evaluation of the
carrying value of certain long-lived assets, $4.4 million for estimated plant
closure costs due to facility consolidation and market conditions and $2.7
million for severance and other employee termination benefits at IVAX' domestic
generic pharmaceutical operations. The New Jersey restructuring plan eliminated
approximately 165 positions. This impact was offset by the reversal of $17.0
million of previously recorded restructuring reserves that were ultimately not
needed primarily related to two facilities that were sold in 1998.
Pursuant to the restructuring programs, during 1998 IVAX sold its Ft.
Lauderdale, Florida office, packaging and warehouse facility and its Syosset,
New York pharmaceutical manufacturing facility which were closed in the first
quarter of 1998; sold its Kirkland, Quebec, Canada pharmaceutical manufacturing
facility; and sold its Shreveport, Louisiana pharmaceutical manufacturing
facility which was closed in the fourth quarter of 1996 and closed two of its
London, England manufacturing facilities. During 1997, IVAX consolidated its
domestic pharmaceutical distribution facilities into a single leased
distribution center in Kenton County, Kentucky.
OTHER INCOME (EXPENSE)
Interest income increased $6.3 million in 1998 to $12.0 million
compared to $5.7 million in 1997. Higher levels of cash on hand resulting from
proceeds received from the divestiture of certain businesses classified as
discontinued operations and the sale of certain product rights during 1997
accounted for the increase (See Note 5, Divestitures, and Note 6, Sale of
Product Rights in the Notes to Consolidated Financial Statements).
Interest expense decreased $7.8 million to $6.9 million in 1998 from
$14.7 million in 1997, primarily due to the repayment of IVAX' revolving credit
facility during the second quarter of 1997.
Other income, net was $32.8 million in 1998, compared to $53.4 million
in 1997. In the third quarter of 1997, a $43.2 million pre-tax gain was
recognized on the sale of the rights to Elmiron(R) and three other urology
products in the United States and Canada to ALZA (See Note 6, Sale of Product
Rights in the Notes to Consolidated Financial Statements). At the time of the
sale, a reserve of $15.0 million was established for IVAX' obligations under a
research and development cost sharing arrangement with ALZA related to the sale.
During the third quarter of 1998, IVAX and ALZA
6
<PAGE>
terminated the cost-sharing arrangement and, as a result, the $15.0 million
reserve was reversed, reflecting an adjustment to increase the previously
recognized gain on the sale of those product rights. Also included in other
income in 1998 was $12.4 million in royalty and milestone payments received from
the sale of rights to Elmiron and certain other urology products to Alza.
RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
REVENUE RECOGNITION IN FINANCIAL STATEMENTS, ("SAB No. 101") which requires
implementation by June 30, 2000. As a result, IVAX commenced a review of its
revenue recognition policies for conformity with SAB No. 101. IVAX believes its
revenue recognition policies comply with the guidance provided in SAB No. 101,
except with respect to up-front and possibly milestone cash payments received
under certain licensing arrangements. SAB No. 101 generally provides that
up-front payments, whether or not they are refundable, should be deferred as
revenue and recognized over the license period. IVAX' accounting policy is to
immediately recognize as revenue such cash payments that are nonrefundable or
where the probability of refund is remote. IVAX believes its accounting policy
is in accordance with generally accepted accounting principles and practice in
the pharmaceutical industry.
SAB No. 101 will require IVAX to change its accounting method for such
licensing payments by June 30, 2000. IVAX is reviewing recent contracts that
involved the receipt of significant up-front payments, but is awaiting further
implementation guidance from the SEC staff with respect to SAB No. 101 before
completing this review. To date, IVAX has identified one licensing arrangement
which may require a change in accounting method for payments received. This
arrangement may result in a cumulative change in accounting principle charge of
approximately $6.3 million, net of tax, when SAB No. 101 is implemented. The
offsetting impact will result in deferred revenue which will be recognized in
income through 2011. At this time, IVAX has not identified any other contracts
that will be impacted by SAB No. 101, but its review is continuing. Although
IVAX anticipates implementing SAB No. 101 in the second quarter of 2000, the
cumulative effect of a change in accounting principle must be retroactively
adopted as of the beginning of the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, working capital, excluding net assets of
discontinued operations, was $124.4 million compared to $269.5 million and
$238.9 million at December 31, 1998 and 1997, respectively. Cash and cash
equivalents were $41.4 million at December 31, 1999, compared to $208.6 million
and $199.2 million at December 31, 1998 and 1997, respectively.
Net cash provided by operations during 1999 was $62.7 million compared
to $59.3 million and $90.8 million in 1998 and 1997, respectively. The increase
in cash provided by operating activities during 1999 compared to 1998 was
primarily due to non-cash items. The decrease in cash provided by operating
activities in 1998 compared to 1997 was primarily due to the 1997 receipt of a
$52.5 million federal income tax refund and reductions in accounts receivable
and inventory resulting from increased cash collections, lower net revenues and
improved inventory management at United States generic pharmaceutical
operations.
Net cash of $37.5 million was used for investing activities during 1999
compared to $40.0 million and $372.7 million provided by investing activities in
1998 and 1997, respectively. The increase in cash used by investing activity in
1999 is primarily attributable to the payments of $5 million for the acquisition
of additional common stock of Galena, a.s., the Czech Republic subsidiary,
increasing IVAX' ownership from 74% to 86%, and $3.4 million for 100% ownership
of Institute for Drug Research, Ltd., ("IDR") in Budapest, Hungary. The 1998
cash generated by investing activities was attributable to the sale of IVAX'
personal care products business for net proceeds of $84.7 million, two
manufacturing facilities for $13.3 million, an office, packaging and warehousing
facility for $5.8 million and $12.4 million from the sale of product rights.
Offsetting
7
<PAGE>
these impacts were reductions of $21.9 million for capital expenditures and
$16.6 million for acquisition of patents, trademarks, licenses and other
intangibles in 1999. The decrease in 1998 compared to 1997 was due to the 1997
sale of McGaw, Inc., the intravenous products business, for $320.0 million in
cash (subject to certain post-closing adjustments), a significant portion of the
specialty chemicals business for $41.1 million in cash and certain product
rights for $75.0 million.
The additional shares of Galena, a.s. were purchased primarily under a
tender offer, initiated May 19, 1999 and expired July 19, 1999, for all
outstanding shares. IVAX may purchase additional shares of the Czech Republic
subsidiary, as they become available.
At the 1998 sale of the personal care products business, IVAX received
$35.0 million in cash and a $50 million secured note due November 30, 1998. In
August 1998, the $50 million note was sold without recourse for $48.5 million.
During the second quarter of 1998, IVAX sold its Kirkland, Quebec,
Canada pharmaceutical manufacturing facility (acquired in the first quarter of
1997) and its Syosset, New York pharmaceutical manufacturing facility for a
total of $13.3 million (subject to certain post-closing adjustments). During the
fourth quarter of 1998, IVAX sold its Ft. Lauderdale, Florida office, packaging
and warehouse facility for a total of $5.8 million.
The sale of the intravenous products business in the second quarter of
1997 to B. Braun of America, Inc. ("B. Braun"), a subsidiary of B. Braun
Melsungen A.G., for $320.0 million in cash also included additional future
payments of up to $80.0 million contingent upon the combined operating results
of McGaw and B. Braun's principal United States operating subsidiary, and
certain royalties based on sales of the Duplex(TM) drug delivery system. The
Duplex system, presently in development by McGaw, is a multi-compartment
intravenous drug delivery system devised for drugs that have limited stability
after mixing. To date, no contingent payments have been collected under the B.
Braun purchase agreement.
During the third quarter of 1997, IVAX completed the sale of a
significant portion of the assets of its specialty chemical business in three
separate transactions in which IVAX received a total of $41.1 million in cash.
During the third quarter of 1997, IVAX sold the United States and
Canadian marketing rights to its proprietary drug Elmiron(R) and three
additional urology products to ALZA. IVAX retained the rights to these products
outside of the United States and Canada. IVAX received $75 million in up-front
payments in 1997. Royalty and milestone payments from the 1997 sales of rights
to Elmiron amounted to $13 million and $12.4 million in 1999 and 1998,
respectively.
In connection with the sale of its intravenous products and specialty
chemicals businesses, as well as certain of its facilities, IVAX has retained
certain contingent liabilities related to, among other things, environmental and
litigation matters. In addition, IVAX has agreed to indemnify the purchasers of
these operations and facilities against losses resulting from breaches of
representations and warranties made by IVAX in the agreements governing these
dispositions, as well as against certain other potential risks and
contingencies. Although IVAX does not expect these indemnification obligations
to materially adversely affect its operating results, liquidity or financial
position, there can be no assurance that IVAX will not be subject to material
indemnification claims arising out of these transactions.
Cash utilized for capital expenditures were $42.7 million in 1999
compared to $64.6 million in 1998 and $45.7 million in 1997. The decrease in
1999 compared to 1998 and the increase in 1998 compared to 1997 was due to $29.1
million of costs incurred in 1998 to complete a new headquarters at IVAX' United
Kingdom pharmaceutical operations allowing consolidation into one location.
8
<PAGE>
During 1998, IVAX paid $14.6 million to NaPro BioTherapeutics, Inc.
("NaPro") as consideration for a license to NaPro's pending patents for a
paclitaxel formulation in the United States, Europe and certain other world
markets. In connection with the license, IVAX and NaPro terminated their
paclitaxel development and marketing agreement. During the third quarter of
1998, IVAX purchased Immunex's Abbreviated New Drug Application for paclitaxel,
the first filed with the U.S. Food and Drug Administration.
During the first quarter of 1997, IVAX purchased a pharmaceutical
manufacturing facility in Kirkland, Quebec, Canada (mentioned above) for $10.5
million.
Net cash of $189.0 million was used for financing activities in 1999
compared to $88.2 million in 1998 and $344.9 million in 1997. The increase in
1999 compared to 1998 was primarily due to increased repurchases of common
stock. The decrease in 1998 compared to 1997 reflected the payoff of IVAX'
revolving credit facility with a bank syndicate in the second quarter of 1997
totaling $270.1 million.
In December 1997, IVAX' Board of Directors approved a share repurchase
program authorizing IVAX to repurchase up to 5 million shares of IVAX common
stock. In December 1998, IVAX' Board of Directors approved an increase of 7.5
million shares to the share repurchase program. On April 13, 1999, June 17, 1999
and November 2, 1999, IVAX' Board of Directors approved additional increases in
the share repurchase program of 5.0 million, 1.5 million and 5.0 million shares,
respectively, of IVAX' common stock to supplement the 12.5 million shares
authorized in prior years, bringing the total to 24.0 million shares authorized
for repurchase. Through December 31, 1999, approximately 21.9 million shares
have been repurchased and 2.1 million remain authorized for repurchase. During
the second quarter of 1999, IVAX received $2.1 million in premiums on the
issuance of 1.5 million freestanding put options for IVAX common stock, in
connection with the share repurchase program. The put options bear strike prices
ranging from $13.44 to $13.50 (pre-split) and mature between March and June
2000. In the event the put options are exercised, IVAX may elect to settle by
one of three methods: physical settlement by payment in exchange for IVAX
shares, net cash settlement or net share settlement. The maximum repurchase
obligation under the physical settlement method is $20.2 million (See Note 12,
Shareholders Equity in the Notes to Consolidated Financial Statements).
On October 12, 1999, IVAX acquired 100% ownership of the Institute for
Drug Research, Ltd., ("IDR") a pharmaceutical research and development company
in Budapest, Hungary, for $3.4 million plus assumption of $3.5 million in loans.
On November 18, 1999, IVAX issued a $50 million promissory note to
Frost-Nevada, Limited Partnership ("FNLP"), an entity related to IVAX' Chairman
and CEO. The note is due January 17, 2001 and bears interest at 10% payable
quarterly. Proceeds from the note were used to purchase IVAX common stock under
the share repurchase program (See Note 12, Shareholder's Equity). In conjunction
with the loan, FNLP was issued a warrant to purchase 500,000 shares (pre-split)
of IVAX common stock at an exercise price equal to the price paid for the
repurchased shares, $18 per share (pre-split).
On June 24, 1997, IVAX utilized a portion of the McGaw sale proceeds in
the amount of $270.1 million to pay off the then outstanding balance of its
revolving credit facility with a bank syndicate. The facility was terminated in
conjunction with the payment and IVAX recognized a net extraordinary loss of
$2.1 million on the early extinguishment of debt.
During the third quarter of 1998, IVAX' Board of Directors authorized
the repurchase of $20 million face value of its 6 1/2% Convertible Subordinated
Notes. In December 1998, IVAX' Board of Directors renewed its authorization to
purchase up to $20 million face value of the Notes, which includes
9
<PAGE>
the amount remaining unpurchased from the July authorization. On August 11,
1999, IVAX' Board of Directors approved an increase of $15.0 million of
repurchases of the 6 1/2% Notes. During 1999 and 1998, IVAX repurchased a total
of $31.4 million and $16.0 million of its 6 1/2% Convertible Subordinated Notes
due November 2001. On February 9, 2000 IVAX called for redemption of the
remaining balance of $43.7 million of 6 1/2% Notes.
In the first quarter of 1998, IVAX retired the remaining $6.7 million
of industrial revenue bonds that were due 2008. Also during 1998, IVAX'
international subsidiaries repaid $7.0 million of bank debt.
Proceeds from the exercise of stock options totaled $12.2 million, $3.0
million and $.2 million during 1999, 1998 and 1997, respectively.
No cash dividends were paid during 1999, 1998 or 1997.
IVAX plans to spend substantial amounts of capital in 2000 to continue
the research and development of pharmaceutical products. Although research and
development expenditures are expected to be between $70 million and $80 million
during 2000, actual expenditures will depend on, among other things, the outcome
of clinical testing or products under development, delays or changes in
government required testing and approval procedures, technological and
competitive developments, strategic marketing decisions and liquidity. In
addition, IVAX plans to spend between $45 million and $50 million in 2000 to
improve and expand its pharmaceutical and other related facilities.
IVAX' principal source of short term liquidity are existing cash and
internally generated funds, which IVAX believes will be sufficient to meet its
operating needs and anticipated capital expenditures over the short term. For
the long term, IVAX intends to utilize principally internally generated funds,
which are anticipated to be derived primarily from the sale of existing
pharmaceutical products and pharmaceutical products currently under development.
There can be no assurance that IVAX will successfully complete products under
development, that IVAX will be able to obtain regulatory approval for any such
product, or that any approved product will be produced in commercial quantities,
at reasonable costs, and be successfully marketed. IVAX may consider issuing
debt or equity securities in the future to fund potential acquisitions and
growth.
CURRENCY FLUCTUATIONS
For 1999, 1998 and 1997, IVAX' net revenues attributable to operations
principally generated in currencies other than the United States dollar
approximated 54%, 55% and 66%, respectively. Fluctuations in the value of
foreign currencies relative to the United States dollar affect the reported
results of operations for IVAX. If the United States dollar weakens relative to
the foreign currency, the earnings generated in the foreign currency will, in
effect, increase when converted into United States dollars and vice versa.
Although IVAX does not speculate in the foreign exchange market, it does from
time to time manage exposures that arise in the normal course of business
related to fluctuations in foreign currency exchange rates by entering into
offsetting positions through the use of foreign exchange forward contracts. At
December 31, 1999 and 1998, no IVAX subsidiaries were domiciled in highly
inflationary environments. As a result of exchange rate differences, net
revenues decreased by $11 million in 1999 compared to 1998, and decreased by $.2
million in 1998 compared to 1997.
INCOME TAXES
IVAX' effective tax rate was 17%, 29% and (39%) in 1999, 1998 and 1997,
respectively. IVAX recognized a $14.9 million tax provision for 1999 of which
$18.3 million relates to foreign operations and included a valuation allowance
of $4.1 million recorded in the second quarter against the UK deferred tax
10
<PAGE>
asset. Offsetting the impact of the foreign provision was a net credit for
domestic taxes of $3.4 million resulting primarily from the reversal of $11.4
million of valuation allowances previously recorded against the domestic net
deferred tax asset. The effective tax rate in 1997 was negative primarily due to
an increase in the tax provision for the establishment of a valuation allowance
on deferred tax assets of $114.7 million at a time when domestic operations had
significant losses. The establishment of this valuation allowance in 1997
generated domestic deferred tax expense of $50.1 million, despite the fact that
IVAX' domestic operations generated losses.
At December 31, 1999 and 1998, IVAX had substantial net operating loss
and credit carryforwards, some of which are subject to certain limitations (See
Note 10, Income Taxes in the Notes to Consolidated Financial Statements).
IVAX' future effective tax rate will depend on the mix between foreign
and domestic taxable income or losses, the statutory tax rates of the related
tax jurisdictions, and the timing of the release, if any, of the domestic
valuation allowance. The mix between IVAX' foreign and domestic taxable income
may be significantly affected by the jurisdiction in which new products are
developed and manufactured. The release of domestic valuation reserve recorded
in 1999 was based on management's estimate of U.S. taxable income in 2000.
Estimates beyond one year were not considered reliable due to the significant
losses incurred in 1996 and 1997.
At December 31, 1999, domestic and foreign net deferred tax assets
totaled $11.4 million and $10.3 million, respectively. Realization of the net
deferred tax assets is dependent upon generating sufficient future domestic and
foreign taxable income. Although realization is not assured, management believes
it is more likely than not that the net deferred tax assets will be realized.
Management's estimates of future taxable income are subject to revision due to,
among other things, regulatory and competitive factors affecting the
pharmaceutical industries in the markets in which IVAX operates.
IVAX has historically received a United States tax credit under Section
936 of the Internal Revenue Code for certain income generated by its Puerto Rico
and Virgin Islands operations. For 1999, 1998 and 1997, this credit was
approximately $2.4 million, $0 and $1.5 million, respectively, and completely
offset the entire United States tax liability of such operations. The Section
936 tax credit will be phased out over 4 years beginning in 2002.
SALES RETURNS AND ALLOWANCES
IVAX' pharmaceutical revenues may be affected by the level of
provisions for estimated returns and inventory credits, as well as other sales
returns and allowances established by IVAX. The custom in the pharmaceutical
industry is generally to grant customers the right to return purchased goods. In
the generic pharmaceutical industry, this custom has resulted in a practice of
suppliers issuing inventory credits (also known as shelf-stock adjustments) to
customers based on the customers' existing inventory following decreases in the
market price of the related generic pharmaceutical product. The determination to
grant a credit to a customer following a price decrease is generally at the
discretion of IVAX, and generally not pursuant to contractual agreements with
customers. These credits allow customers with established inventories to compete
with those buying product at the current market price, and allow IVAX to
maintain shelf space, market share and customer loyalty.
Provisions for estimated returns and inventory credits are established
by IVAX concurrently with the recognition of revenue. The provisions are
established in accordance with generally accepted accounting principles based
upon consideration of a variety of factors, including actual return and
inventory credit experience for products during the past several years by
product type, the number and timing of regulatory approvals for the product by
competitors of IVAX, both historical and projected, the
11
<PAGE>
market for the product, estimated customer inventory levels by product and
projected economic conditions. Actual product returns and inventory credits
incurred are, however, dependent upon future events, including price competition
and the level of customer inventories at the time of any price decreases. IVAX
continually monitors the factors that influence the pricing of its products and
customer inventory levels and makes adjustments to these provisions when
management believes that actual product returns and inventory credits may differ
from established reserves.
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations totaled $.6 million, $48.9
million and ($8.7) million for the years ended December 31, 1999, 1998 and 1997,
respectively. Discontinued operations, net of taxes, in 1999 and 1998 included
the amortization of a deferred gain ($2.5 million at time of sale) on the
divestiture of the personal care products business representing principal and
interest, as collected, on a note receivable from the 1998 sale of one of the
personal care products subsidiaries that was fully reserved at the time of the
sale. Discontinued operations, net of taxes, in 1998 includes the results of
operations of the personal care products business (through its sale in July
1998) and the vacuum pump fluids segment of the specialty chemical business
(through its sale in February 1998). The personal care products business had
break-even operations during 1998. Discontinued operations in 1998 reflected a
net gain on the divestiture of the personal care products business of $48.9
million. Losses incurred on the sales and operations of the vacuum pump fluids
segment were charged against previously established reserves. The year ended
December 31, 1997 included a net gain on sales of the intravenous products and
specialty chemicals businesses of $12.6 million. In 1998, IVAX completed the
divestiture of its businesses classified as discontinued operations (See Note 5,
Divestitures, and Note 7, Discontinued Operations, in the Notes to Consolidated
Financial Statements).
RISK OF PRODUCT LIABILITY CLAIMS
Testing, manufacturing and marketing pharmaceutical products subject
IVAX to the risk of product liability claims. IVAX is a defendant in a number of
product liability cases, none of which IVAX believes will have a material
adverse effect on IVAX' business, results of operations or financial condition.
IVAX believes that it maintains an adequate amount of product liability
insurance, but there can be no assurance that its insurance will cover all
existing and future claims or that IVAX will be able to maintain existing
coverage or obtain additional coverage at reasonable rates. There can be no
assurance that claims arising under any pending or future product liability
cases, whether or not covered by insurance, will not have a material adverse
effect on IVAX' business, results of operations or financial condition (See Note
14, Commitments and Contingencies, in the Notes to Consolidated Financial
Statements).
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the
consolidated financial position, results of operations or cash flows of IVAX.
IVAX, in the normal course of doing business, is exposed to the risks associated
with foreign currency exchange rates and changes in interest rates.
FOREIGN CURRENCY EXCHANGE RATE RISK - IVAX is exposed to exchange rate
risk when its U.S. and non-U.S. subsidiaries enter into transactions denominated
in currencies other than their functional currency. Certain firmly committed
transactions are hedged with forward foreign exchange contracts. As exchange
rates change, gains and losses on the exposed transactions are partially offset
by gains and losses related to the hedging contracts. Both the exposed
transactions and the hedging contracts are translated at current spot rates,
with gains and losses included in earnings. IVAX' derivative activities,
12
<PAGE>
which primarily consist of forward foreign exchange contracts, are initiated
primarily to hedge third-party transactions.
The forward foreign exchange contracts generally require IVAX to
exchange local currencies for foreign currencies based on pre-established
exchange rates at the contracts' maturity dates. If the counterparties to the
exchange contracts do not fulfill their obligations to deliver the contracted
currencies, IVAX could be at risk for currency related fluctuations. IVAX enters
into these contracts with counterparties that it believes to be credit worthy
and does not enter into any leveraged derivative transactions. As of December
31, 1999, IVAX had $35.5 million in forward foreign exchange contracts
outstanding.
INTEREST RATE RISK - IVAX' only material debt obligations relate to the
6 1/2% Convertible Subordinated Notes and the FNLP Note, which bear fixed rates
of interest. IVAX believes that its exposure to market risk relating to interest
rate risk is not material.
COMMODITY PRICE RISK - IVAX does not believe it is subject to any
material risk associated with commodity prices.
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF IVAX CORPORATION:
We have audited the accompanying consolidated balance sheets of IVAX
Corporation, a Florida corporation, and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 financial position of IVAX Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States of America.
ARTHUR ANDERSEN LLP
Miami, Florida
February 4, 2000 (except with respect to the stock split discussed in Note
12 and the matters discussed in Note 16, as to which the dates are February
22, 2000 and March 10, 2000, respectively).
14
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1999 1998
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,408 $ 208,593
Accounts receivable, net of allowances for doubtful
accounts of $22,058 ($22,834 in 1998) 110,472 109,732
Inventories 146,624 135,324
Other current assets 36,265 33,143
------------- --------------
Total current assets 334,769 486,792
Property, plant and equipment, net 226,198 210,228
Intangible assets, net 55,745 56,150
Other assets 17,802 24,845
------------- --------------
Total assets $ 634,514 $ 778,015
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 746 $ 1,229
Current portion of long-term debt 763 890
Accounts payable 48,675 48,614
Accrued income taxes payable 13,058 5,082
Accrued expenses and other current liabilities 147,154 161,466
------------- --------------
Total current liabilities 210,396 217,281
Long-term debt, net of current portion 47,854 77,776
Note payable - related party, net 45,619 -
Other long-term liabilities 8,672 12,617
Minority interest 9,414 17,133
Put options 20,188 -
Shareholders' equity:
Common stock, $.10 par value, authorized 250,000 shares,
issued and outstanding 152,235 shares (172,253 in 1998) 15,224 11,484
Capital in excess of par value 232,318 453,293
Retained earnings (accumulated deficit) 71,689 (700)
Accumulated other comprehensive loss (26,860) (10,869)
------------- --------------
Total shareholders' equity 292,371 453,208
------------- --------------
Total liabilities and shareholders' equity $ 634,514 $ 778,015
============= ==============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE BALANCE SHEETS.
15
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
------------- ------------- -----------
<S> <C> <C> <C>
NET REVENUES $ 656,269 $ 625,573 $ 594,286
COST OF SALES 369,135 396,752 479,982
------------- ------------- -----------
Gross profit 287,134 228,821 114,304
------------- ------------- -----------
OPERATING EXPENSES:
Selling 78,979 79,508 100,220
General and administrative 85,102 88,434 116,185
Research and development 54,164 48,615 53,409
Amortization of intangible assets 3,121 3,673 3,760
Restructuring costs and asset write-downs (612) 12,222 38,088
Merger expenses - - 2,343
------------- ------------- -----------
Total operating expenses 220,754 232,452 314,005
------------- ------------- -----------
Income (loss) from operations 66,380 (3,631) (199,701)
OTHER INCOME (EXPENSE):
Interest income 6,142 11,972 5,738
Interest expense (5,556) (6,857) (14,685)
Other income, net 19,513 32,777 53,366
------------- ------------- -----------
Total other income 20,099 37,892 44,419
------------- ------------- -----------
Income (loss) from continuing operations before income
taxes and minority interest 86,479 34,261 (155,282)
PROVISION FOR INCOME TAXES 14,850 10,047 60,166
------------- ------------- -----------
Income (loss) from continuing operations before minority
interest 71,629 24,214 (215,448)
MINORITY INTEREST (2,085) 403 (4,086)
------------- ------------- -----------
Income (loss) from continuing operations 69,544 24,617 (219,534)
DISCONTINUED OPERATIONS, NET OF TAXES 585 48,904 (8,701)
------------- ------------- -----------
Income (loss) before extraordinary item and cumulative effect
of a change in accounting principle 70,129 73,521 (228,235)
EXTRAORDINARY ITEM:
Gains (losses) on extinguishment of debt, net of tax 593 1,121 (2,137)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE, net of a tax benefit of $1,295 in 1997 - (3,048) (2,882)
------------- ------------- -----------
NET INCOME (LOSS) $ 70,722 $ 71,594 $ (233,254)
============= ============= ===========
</TABLE>
(Continued)
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
16
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
------------- ------------- -----------
<S> <C> <C> <C>
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.43 $ 0.14 $ (1.21)
Discontinued operations - 0.27 (0.05)
Extraordinary items 0.01 0.01 (0.01)
Cumulative effect of a change in accounting principle - (0.02) (0.01)
-------------- -------------- -------------
Net income (loss) $ 0.44 $ 0.40 $ (1.28)
============== ============== =============
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ 0.42 $ 0.14 $ (1.21)
Discontinued operations - 0.27 (0.05)
Extraordinary items 0.01 0.01 (0.01)
Cumulative effect of a change in accounting principle - (0.02) (0.01)
-------------- -------------- -------------
Net income (loss) $ 0.43 $ 0.40 $ (1.28)
============== ============== =============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 161,508 178,674 182,243
============== ============= ==============
Diluted 164,401 178,897 182,243
============== ============= ==============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
17
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
RETAINED ACCUMULATED
COMMON STOCK CAPITAL IN EARNINGS OTHER
NUMBER EXCESS OF (ACCUMULATED COMPREHENSIVE
OF SHARES AMOUNT PAR VALUE DEFICIT) INCOME (LOSS) TOTAL
-------------- -------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 121,476 $ 12,148 $ 515,070 $ 160,960 $ 6,950 $ 695,128
Comprehensive loss:
Net loss - - - (233,254) - (233,254)
Translation adjustment - - - - (20,773) (20,773)
Unrealized net loss on
available-for-sale equity
securities - - - - (6,230) (6,230)
----------
Comprehensive loss (260,257)
Exercise of stock options 42 4 148 - - 152
Effect of tax deductions
received from the exercise
of stock options - - 16 - - 16
-------------- -------- ---------- ---------- ------------- ----------
BALANCE, December 31, 1997 121,518 12,152 515,234 (72,294) (20,053) 435,039
----------
Comprehensive income:
Net income - - - 71,594 - 71,594
Translation adjustment - - - - 8,225 8,225
Unrealized net gain on
available-for-sale equity
securities - - - - 959 959
----------
Comprehensive income 80,778
Exercise of stock options 397 40 2,918 - - 2,958
Repurchase of common stock (7,080) (708) (65,223) - - (65,931)
Value of stock options issued
to non-employees - - 364 - - 364
--------- ---------- ---------- ---------- ---------- ----------
BALANCE, December 31, 1998 114,835 11,484 453,293 (700) (10,869) 453,208
----------
Comprehensive income:
Net income - - - 70,722 - 70,722
Translation adjustment - - - - (16,077) (16,077)
Unrealized net gain on
available-for-sale equity
securities - - - - 86 86
----------
Comprehensive income 54,731
Exercise of stock options 1,263 126 12,098 - - 12,224
Repurchase of common stock (14,851) (1,485) (219,913) - - (221,398)
Shares issued in acquisition 243 24 4,976 - - 5,000
Premium received on put options - - 2,079 - - 2,079
Put options - temporary equity - - (20,188) - - (20,188)
Warrants issued - - 4,875 - - 4,875
Pre-acquisition earnings of
acquired company - - - 1,667 - 1,667
Value of stock options issued
to non-employees - - 173 - - 173
Effect of 3-for-2 stock split 50,745 5,075 (5,075) - - -
--------- ---------- ---------- ---------- ---------- ----------
BALANCE, December 31, 1999 152,235 $ 15,224 $ 232,318 $ 71,689 $ (26,860) $ 292,371
========= ========== ========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
18
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1999 1998 1997
------------- ------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 70,722 $ 71,594 $(233,254)
Adjustments to reconcile net income (loss) to net cash
flows from operating activities:
Restructuring costs and asset write-downs (612) 12,222 38,088
Depreciation and amortization 29,108 32,552 38,462
Deferred tax provision (benefit) (4,910) 3,623 50,194
Provision for allowance for doubtful accounts 4,147 7,650 8,973
Minority interest 2,085 (403) 4,086
Gain on sale of product rights (13,033) (27,350) (43,224)
Losses on disposal of assets, net 338 844 2,861
Losses (gains) on extinguishment of debt (593) (1,121) 2,137
Cumulative effect of a change in accounting principle - 3,048 4,177
Loss (income) from discontinued operations (585) (48,904) 8,701
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (9,195) (9,586) 75,783
Decrease (increase) in inventories (16,631) 13,699 50,294
Decrease (increase) in other current assets 6,785 (10,567) 51,583
Decrease (increase) in other assets 1,266 8,000 (5,603)
Increase (decrease) in accounts payable, accrued expenses
and other current liabilities (3,038) (2,867) 21,954
Increase (decrease) in other long-term liabilities (3,310) 907 (292)
Other, net (446) 891 (998)
Net cash provided by operating activities of discontinued
operations 585 5,028 16,876
---------- ----------- ----------
Net cash flows from operating activities 62,683 59,260 90,798
---------- ----------- ----------
Cash flows from investing activities:
Proceeds from divestitures - 87,885 361,105
Proceeds from sale of product rights 13,033 12,350 75,000
Capital expenditures (42,685) (64,622) (45,741)
Proceeds from sales of assets 932 22,159 8,757
Acquisitions of patents, trademarks, licenses and other intangibles (903) (17,543) (1,710)
Acquisitions of businesses and facilities, net of cash acquired (8,345) - (10,500)
Investment in affiliated companies 465 - -
Net investing activities of discontinued operations - (202) (14,186)
---------- ----------- ----------
Net cash flows from investing activities (37,503) 40,027 372,725
---------- ----------- ----------
Cash flows from financing activities:
Borrowings on long-term debt and loans payable 53,059 3,895 47,989
Payments on long-term debt and loans payable (34,956) (29,152) (392,914)
Issuance of common stock 12,224 2,958 152
Repurchases of common stock (219,319) (65,931) -
Net financing activities of discontinued operations - 10 (92)
---------- ----------- ----------
Net cash flows from financing activities (188,992) (88,220) (344,865)
---------- ----------- ----------
Effect of exchange rate changes on cash (3,373) (1,709) (229)
---------- ----------- ----------
Net increase (decrease) in cash and cash equivalents (167,185) 9,358 118,429
Cash and cash equivalents at the beginning of the year 208,593 199,235 80,806
---------- ----------- ----------
Cash and cash equivalents at the end of the year $ 41,408 $ 208,593 $ 199,235
========== =========== ==========
</TABLE>
(Continued)
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
19
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997
-------------- ------------- --------------
<S> <C> <C>
Supplemental disclosures:
Interest paid $ 4,572 $ 6,628 $ 21,313
============== ============= ==============
Income tax payments (refunds) $ 3,913 $ 16,196 $ (42,683)
============== ============= ==============
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
Information with respect to 1999 acquisitions which were accounted for
under the purchase method of accounting is summarized as follows:
Fair value of assets acquired $ 12,308
Liabilities assumed 3,941
--------------
8,367
Reduction of minority interest 7,046
--------------
Net assets acquired 15,413
--------------
Purchase price:
Cash (including related acquisition costs) 8,345
Fair market of stock issued 5,000
--------------
Total 13,345
--------------
Negative goodwill $ (2,068)
==============
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE STATEMENTS.
20
<PAGE>
IVAX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(1) ORGANIZATION:
IVAX Corporation is a holding company with subsidiaries engaged
primarily in the research, development, manufacture and marketing of proprietary
and generic pharmaceuticals. These products are sold primarily to customers
within the United States and the United Kingdom. All references to "IVAX" mean
IVAX Corporation and its subsidiaries unless otherwise required by the context.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of IVAX Corporation and its subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. Investments in affiliates representing 20% to 50% ownership
interests are recorded under the equity method of accounting. Investments in
affiliates representing less than 20% ownership interests are recorded at cost.
The minority interest held by third parties in a majority owned subsidiary is
separately stated. Certain amounts presented in the accompanying consolidated
financial statements for prior periods have been reclassified to conform to the
current period's presentation.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. IVAX' actual results in subsequent periods may
differ from the estimates and assumptions used in the preparation of the
accompanying consolidated financial statements. Significant estimates include
amounts for accounts receivable exposures, deferred tax asset allowances,
inventory reserves, environmental reserves, litigation, restructuring costs and
sales returns and allowances, including chargebacks, rebates, returns and
shelf-stock adjustments. Significant assumptions include IVAX' belief that the
outcome of contingencies indemnified by IVAX in the sale of certain businesses
will not have a material effect on future operations and that the probability of
a refund of previously recognized licensing revenue and gain on sale of product
rights is remote.
CASH AND CASH EQUIVALENTS - IVAX considers all investments with a
maturity of three months or less as of the date of purchase to be cash
equivalents.
INVENTORIES - Inventories are stated at the lower of cost (first-in,
first-out) or market. Components of inventory cost include materials, labor and
manufacturing overhead. In evaluating whether inventory is stated at the lower
of cost or market, management considers such factors as the amount of inventory
on hand, estimated time required to sell such inventory, remaining shelf life
and current market conditions. Reserves are provided as appropriate. Inventories
consist of the following:
DECEMBER 31,
---------------------------------
1999 1998
------------- --------------
Raw materials $ 62,932 $ 47,528
Work-in-process 10,773 27,878
Finished goods 72,919 59,918
------------- --------------
Total inventories $ 146,624 $ 135,324
============= ==============
21
<PAGE>
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are
carried at cost less accumulated depreciation and amortization and consist of
the following:
DECEMBER 31,
--------------------
1999 1998
-------- --------
Land $ 12,443 $ 9,816
Buildings and improvements 164,139 148,182
Machinery and equipment 159,654 154,141
Furniture and computer equipment 55,577 51,691
-------- --------
Total cost 391,813 363,830
Less: Accumulated depreciation and amortization 165,615 153,602
-------- --------
Property, plant and equipment, net $226,198 $210,228
======== ========
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as follows: buildings and improvements
(10-50 years), machinery and equipment (3-15 years) and furniture and computer
equipment (2-10 years). Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or their estimated useful lives.
Costs of major additions and improvements are capitalized and expenditures for
maintenance and repairs that do not extend the life of the assets are expensed.
Upon sale or disposition of property, plant and equipment, the cost and related
accumulated depreciation or amortization are eliminated from the accounts and
any resulting gain or loss is credited or charged to operations.
INTANGIBLE ASSETS - Intangible assets are carried at cost less
accumulated amortization and consist of the following:
DECEMBER 31,
------------------
1999 1998
------- -------
Cost in excess of net assets of acquired companies $12,936 $15,492
Patents, trademarks, licenses and other intangibles 60,986 61,946
------- -------
Total cost 73,922 77,438
Less: Accumulated amortization 18,177 21,288
------- -------
Intangible assets, net $55,745 $56,150
======= =======
Cost in excess of net assets of acquired companies (goodwill) is
amortized using the straight-line method over periods not exceeding 40 years.
Patents, trademarks, licenses and other intangibles are amortized using the
straight-line method over their respective estimated lives (ranging from 4-20
years). During 1999, IVAX acquired a variety of patents in a purchase of Soft
Drugs for $5,000 of IVAX stock. IVAX also paid $5,000 for additional shares of
Galena a.s. which resulted in negative goodwill of $2,068. Intangible assets,
net decreased from 1998 to 1999 as a result of currency translation partially
offset by the above transactions. During 1998, IVAX paid $14,565, consisting of
$12,448 in cash and $2,117 investment in common stock and a note receivable for
a patent license for a paclitaxel formulation in the United States, Europe and
certain other world markets and also acquired an Abbreviated New Drug
Application for paclitaxel.
Following any acquisition, IVAX continually evaluates whether later
events and circumstances have occurred that indicate that the remaining
estimated useful life of intangible assets may require revision or that the
remaining balance of goodwill may not be recoverable. When factors indicate that
an asset acquired in a purchase business combination and related goodwill may be
impaired, IVAX uses various methods to estimate the asset's future cash flows
expected to result from the use of the asset and
22
<PAGE>
its eventual disposition. If the sum of the expected future undiscounted cash
flows is less than the carrying amount of the asset, an impairment loss is
recognized based on the excess of the carrying amount over the estimated fair
value of the asset. Any impairment amount is charged to operations (See Note 3,
Restructuring Costs and Asset Write-Downs).
FOREIGN CURRENCIES - IVAX' operations include subsidiaries which are
located outside of the United States. Assets and liabilities as stated in the
local reporting currency are translated at the rate of exchange prevailing at
the balance sheet date. The gains or losses that result from this process are
shown in the "Accumulated Other Comprehensive Loss" caption in the shareholders'
equity section of the accompanying consolidated balance sheets. Amounts in the
statements of operations are translated at the average rates for the period.
FINANCIAL INSTRUMENTS - The carrying amounts of cash and cash
equivalents, accounts receivable, loans payable and accounts payable approximate
fair value due to the short maturity of the instruments and reserves for
potential losses, as applicable. The disclosed fair value of other assets and
long-term debt is estimated using quoted market prices, whenever available, or
an appropriate valuation method (See Note 8, Investments In and Advances to
Unconsolidated Affiliates, and Note 9, Debt).
IVAX does not speculate in the foreign exchange market. IVAX may,
however, from time to time, manage exposures that arise in the normal course of
business related to fluctuations in foreign currency rates by entering into
foreign exchange forward contracts. IVAX enters into these contracts with
counterparties that it believes to be creditworthy and does not enter into any
leveraged derivative transactions. Gains and losses on these contracts are
included in the consolidated statements of operations as they arise. Costs
associated with entering into these contracts are amortized over the contracts'
lives, which typically are less than one year. IVAX held foreign exchange
forward contracts with notional principal amounts of $35,515 at December 31,
1999, which mature January 2000 through September 2000, and $22,499 at December
31, 1998, which matured in January 1999 through September 1999.
In addition, IVAX has short-term intercompany balances that are
denominated in foreign currencies. A portion of these balances are hedged, from
time to time, using foreign exchange forward contracts, and gains and losses on
these contracts are included in the consolidated statements of operations as
they arise. IVAX Corporation, the parent company, itself did not hold foreign
exchange forward contracts at December 31, 1999, 1998 or 1997. For the years
ended December 31, 1999 and 1998, IVAX recorded net foreign exchange losses of
$2,934 and $893, respectively. IVAX recorded net foreign exchange gains of $426
during 1997.
REVENUE RECOGNITION - Revenues and the related cost of sales are
recognized at the time product is shipped. Net revenues are comprised of gross
revenues less provisions for expected customer returns, inventory credits,
discounts, promotional allowances, volume rebates, chargebacks and other
allowances. These sales provisions totaled $121,286, $131,273 and $228,634 in
the years ended December 31, 1999, 1998 and 1997, respectively. The reserve
balances related to these provisions and included in "Accounts receivable, net
of allowances for doubtful accounts" and "Accrued expenses and other current
liabilities" in the accompanying consolidated balance sheets are $38,065 and
$61,241, respectively, at December 31, 1999 and $42,366 and $69,044,
respectively, at December 31, 1998.
The custom in the pharmaceutical industry is generally to grant
customers the right to return purchased goods. In the generic pharmaceutical
industry, this custom has resulted in a practice of suppliers issuing inventory
credits (also known as shelf-stock adjustments) to customers based on the
customers' existing inventory following decreases in the market price of the
related generic pharmaceutical product. The determination to grant a credit to a
customer following a price decrease is
23
<PAGE>
generally at the discretion of IVAX, and generally not pursuant to contractual
arrangements with customers.
Provisions for estimated returns and inventory credits are established
by IVAX concurrently with the recognition of revenue. The provisions are
established in accordance with generally accepted accounting principles based
upon consideration of a variety of factors, including actual return and
inventory credit experience for products during the past several years by
product type, the number and timing of regulatory approvals for the product by
competitors of IVAX, both historical and projected, the market for the product,
estimated customer inventory levels by product and projected economic
conditions. Actual product returns and inventory credits incurred are, however,
dependent upon future events, including price competition and the level of
customer inventories at the time of any price declines. IVAX continually
monitors the factors that influence the pricing of its products and customer
inventory levels and makes adjustments to these provisions when management
believes that actual product returns and inventory credits may differ from
established reserves.
Royalty and license fee income are recognized when obligations
associated with earning the royalty or licensing fee have been satisfied and are
included in "Net revenues" in the accompanying consolidated statements of
operations. Up-front and milestone payments that are nonrefundable or where the
probability of refund is remote are recognized as revenue when cash is received.
Net revenues in 1999 and 1998 included $1,214 and $8,286, respectively, of
milestone and up-front payments received under a license agreement that is
refundable based on the occurrence of certain events. IVAX believes the
probability of occurrence of these events is remote as the events are
controllable by IVAX.
RESEARCH AND DEVELOPMENT COSTS - Research and developments costs
related to future products are expensed currently.
INCOME TAXES - The provision for income taxes is based on the
consolidated United States entities' and individual foreign companies' estimated
tax rates for the applicable year. Deferred taxes are determined utilizing the
asset and liability method based on the estimated future tax effects of
differences between the financial accounting and tax bases of assets and
liabilities under the applicable tax laws. Deferred income tax provisions and
benefits are based on the changes in the deferred tax asset or tax liability
from period to period (See Note 10, Income Taxes).
EARNINGS (LOSS) PER COMMON SHARE - All weighted average share amounts
have been restated to reflect the 3-for-2 stock split which was effective
February 22, 2000 (See Note 12, Shareholders' Equity). A reconciliation of the
denominator of the basic and diluted earnings per share computation is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1999 1998 1997
-------------- ------------- --------------
<S> <C> <C> <C>
Basic weighted average number of shares outstanding 161,508 178,674 182,243
Effect of dilutive securities - stock options and warrants 2,893 223 -
-------------- ------------- --------------
Diluted weighted average number of shares outstanding 164,401 178,897 182,243
============== ============= ==============
Not included in the calculation of diluted earnings per
share because their impact is antidilutive:
Stock options outstanding 3,179 6,953 15,086
Warrants 2,063 3,546 4,300
Put options 2,250 - -
</TABLE>
STOCK-BASED COMPENSATION PLANS - As permissible under Statement of
Financial Accounting Standards ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, IVAX accounts for all stock-based compensation arrangements using
the intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and discloses pro forma net
earnings and earnings per share amounts as if the fair value method had been
adopted. Accordingly, no
24
<PAGE>
compensation cost is recognized for stock option awards granted at or above fair
market value. Additionally, the pro forma net earnings and earnings per share
amounts are presented in Note 12, Shareholders' Equity.
CHANGE IN ACCOUNTING PRINCIPLE - Statement of Position ("SOP") 98-5,
REPORTING ON THE COST OF START-UP ACTIVITIES, requires that costs of start-up
activities, as well as organizational costs, be expensed as incurred. The
initial application has been reported by IVAX as a cumulative effect of a change
in accounting principle reflecting a write-off of start-up costs of $3,048, or
$.02 per share during 1998.
Emerging Issues Task Force ("EITF") Abstract No. 97-3 requires that the
costs of business process reengineering activities be expensed as incurred.
Accordingly, during the fourth quarter of 1997, IVAX reported a charge of $2,882
(net of a tax benefit of $1,295), or $.01 per share, for the write-off of
business process reengineering costs previously capitalized. Such costs are
being expensed as incurred prospectively.
RECENTLY ISSUED ACCOUNTING STANDARDS - IVAX is required to adopt SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No.
137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF
THE EFFECTIVE DATE OF FASB STATEMENT NO. 133, amends the effective date of SFAS
No. 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity shall
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. Management believes that the
adoption of SFAS No. 133 will not have a material impact on IVAX' consolidated
financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
REVENUE RECOGNITION IN FINANCIAL STATEMENTS, ("SAB No. 101") which requires
implementation by June 30, 2000. As a result, IVAX commenced a review of its
revenue recognition policies for conformity with SAB No. 101. IVAX believes its
revenue recognition policies comply with the guidance provided in SAB No. 101,
except with respect to up-front and possibly milestone cash payments received
under certain licensing arrangements. SAB No. 101 generally provides that
up-front payments, whether or not they are refundable, should be deferred as
revenue and recognized over the license period. IVAX' accounting policy is to
immediately recognize as revenue such cash payments that are nonrefundable or
where the probability of refund is remote. IVAX believes its accounting policy
is in accordance with generally accepted accounting principles and practice in
the pharmaceutical industry.
SAB No. 101 will require IVAX to change its accounting method for such
licensing payments by June 30, 2000. IVAX is reviewing recent contracts that
involved the receipt of significant up-front payments, but is awaiting further
implementation guidance from the SEC staff with respect to SAB No. 101 before
completing this review. To date, IVAX has identified one licensing arrangement
which may require a change in accounting method for payments received. This
arrangement may result in a cumulative change in accounting principle charge of
approximately $6,300, net of tax, when SAB No. 101 is implemented. The
offsetting impact will result in deferred revenue which will be recognized in
income through 2011. At this time, IVAX has not identified any other contracts
that will be impacted by SAB No. 101, but its review is continuing. Although
IVAX anticipates implementing SAB No. 101 in the second quarter of 2000, the
cumulative effect of a change in accounting principle must be retroactively
adopted as of the beginning of the first quarter of 2000.
25
<PAGE>
(3) RESTRUCTURING COSTS AND ASSET WRITE-DOWNS:
During 1997, IVAX continued its efforts to reduce costs and enhance
operating efficiency by initiating further restructuring programs primarily at
its corporate headquarters and United States generic pharmaceutical operations.
As a result, during 1997, IVAX recorded a pre-tax charge of $14,274 comprised of
$5,094 for severance and other employee termination benefits and $9,180 for
certain costs associated primarily with further manufacturing facility closures
and additional costs associated with the facilities held for sale in connection
with the 1996 restructuring program. The employee termination benefits during
1997 primarily represented severance pay and other benefits associated with the
elimination of approximately 275 employee positions at IVAX' corporate
headquarters and throughout all functions of IVAX' United States generic
pharmaceutical operations. In addition, IVAX recorded a charge of $23,814 to
reduce the carrying value of certain assets to their estimated fair market value
in conjunction with these initiatives.
During 1998, IVAX continued it efforts to reduce costs and enhance
operating efficiency by initiating restructuring programs at its United Kingdom
pharmaceutical operations and continuing restructuring of its United States
pharmaceutical operations. During 1998, IVAX recorded a pre-tax charge of
$13,562 comprised of $3,648 for severance and other employee termination
benefits, $4,308 associated with lease commitments, $215 for the write-down of
leasehold improvements and $5,391 in asset write-downs resulting from
management's re-evaluation of the carrying value of certain long-lived assets
primarily in conjunction with initiatives to further consolidate facilities of
IVAX' United Kingdom operations. This restructuring plan eliminated 260
positions from the workforce through all functions.
Also during 1998, IVAX recorded a pre-tax charge of $15,647 comprised
of $2,657 for severance and other employee termination benefits, $4,432 for
estimated plant closure costs and $8,558 for asset write-downs resulting from
management's decision to cease manufacturing at its Northvale, New Jersey
pharmaceutical facility and the re-evaluation of the carrying value of certain
long-lived assets of IVAX' domestic generic pharmaceutical operations due to
facility consolidation and market conditions. The New Jersey restructuring plan
eliminated 165 positions. This restructuring and the continued consolidation of
manufacturing are anticipated to generate approximately $3,400 of annual pre-tax
cost savings. This impact was offset by the reversal of $16,987 of previously
recorded restructuring reserves that were ultimately not needed primarily
related to two facilities that were sold in 1998.
Pursuant to the restructuring programs, during 1998 IVAX sold its Ft.
Lauderdale, Florida office, packaging and warehouse facility, its Syosset, New
York pharmaceutical manufacturing facility, its Kirkland, Quebec, Canada
pharmaceutical manufacturing facility, and its Shreveport, Louisiana
pharmaceutical manufacturing facility and closed two of its London, England
manufacturing facilities. During 1997, IVAX consolidated its United States
pharmaceutical distribution facilities into a single leased distribution center
in Kenton County, Kentucky. In 1999, IVAX substantially ceased manufacturing at
its Northvale, New Jersey manufacturing facility. Production from these
facilities has been transferred to other IVAX manufacturing facilities.
These restructuring costs and asset write-downs are shown as
"Restructuring costs and asset write-downs" in the accompanying consolidated
statements of operations. Management determined the amount of the write-downs by
estimating the fair market value of the impaired assets using various valuation
techniques, including discounted cash flow analysis, independent appraisals and
third party offers.
26
<PAGE>
The components of the restructuring costs and asset write-downs,
spending and other activity, as well as the remaining reserve balances at
December 31, 1999, 1998 and 1997, which are included in "Property, plant and
equipment, net" and in "Accrued expenses and other current liabilities" in the
accompanying consolidated balance sheets, are as follows:
<TABLE>
<CAPTION>
EMPLOYEE
ASSET TERMINATION PLANT
WRITE-DOWNS BENEFITS CLOSURES TOTAL
----------- ----------- --------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $ -- $ 1,954 $ 2,654 $ 4,608
1997 restructuring costs and asset
write-downs 23,814 5,094 9,180 38,088
Cash payments during 1997 -- (2,400) (1,360) (3,760)
Non-cash activities (23,814) (101) (1,107) (25,022)
-------- -------- -------- --------
Balance at December 31, 1997 -- 4,547 9,367 13,914
1998 restructuring costs and asset
write-downs 14,164 6,305 8,740 29,209
Reversal of restructuring costs and
asset write-downs charged in
prior years (8,804) (442) (7,741) (16,987)
Cash payments during 1998 -- (3,538) (3,042) (6,580)
Non-cash activity (5,360) (1,098) 936 (5,522)
-------- -------- -------- --------
Balance at December 31, 1998 -- 5,774 8,260 14,034
Reversal of restructuring costs and
asset write-downs charged in
prior years (539) (73) -- (612)
Cash payments during 1999 -- (4,264) (3,539) (7,803)
Non-cash activities 539 123 (298) 364
-------- -------- -------- --------
Balance at December 31, 1999 $ -- $ 1,560 $ 4,423 $ 5,983
======== ======== ======== ========
</TABLE>
(4) MERGERS AND ACQUISITIONS:
During 1999, IVAX increased its ownership interest in Galena, a.s. from
74% to 86% primarily through a tender offer and open market purchases. The total
cost of the shares acquired was $4,978. The net book value underlying the share
purchases was $7,046, resulting in negative goodwill of $2,068 being recorded in
the accompanying consolidated balance sheet.
On August 9, 1999, IVAX acquired a 30% interest in Indiana Protein
Technologies ("IPT"), a U.S. biotechnology research company, in exchange for a
development agreement in which IVAX, through its U.S. subsidiary, Baker Norton
Pharmaceuticals, will fund research and development of certain peptide-based
biotech pharmaceutical products. In the event that these projects are
successful, IVAX will receive an exclusive worldwide license to market the
products, with a royalty payable to IPT on profit from the sale of the products.
During 1999, $775 was funded to IPT, $233 of which is recorded in other assets
and the remainder is expensed as "Research and development expenses" in the
accompanying statement of operations for 1999.
On October 12, 1999, IVAX, through its Netherlands subsidiary, IVAX
International B.V. and Swiss subsidiary, IVAX Holdings A.G., acquired 100%
ownership of the Institute for Drug Research, Ltd., ("IDR") a pharmaceutical
research and development company in Budapest, Hungary, for $3,367 plus
assumption of $3,540 in loans.
27
<PAGE>
On December 20, 1999, IVAX acquired Soft Drugs, a U.S. company with
ownership of certain patents for $5,000 in stock of IVAX, which was accounted
for as a purchase. In the event that IVAX does not utilize at least one of these
patents within thirty months, the prior owners may be required to return half of
the stock in exchange for the return of certain patents.
(5) DIVESTITURES:
Effective May 30, 1997, IVAX sold McGaw, Inc., its intravenous products
business, for $320,000 in cash (subject to certain post-closing adjustments),
additional payments of up to $80,000 contingent upon the combined operating
results of McGaw and the buyer's principal United States operating subsidiary
and certain royalties based on sales of McGaw's Duplex(TM) drug delivery system.
To date, no contingent payments have been collected.
During the third quarter of 1997, IVAX completed the sale of a
significant portion of the assets of its specialty chemical's business in three
separate transactions in which IVAX received an aggregate of $41,105 in cash.
During the first quarter of 1998, IVAX sold its vacuum pump fluids
business, the only remaining segment of IVAX' specialty chemicals business, for
$3,885 in cash (subject to certain post-closing adjustments). IVAX retained
certain real estate assets of the specialty chemicals business, which are held
for sale.
Effective July 14, 1998, IVAX completed the sale of its personal care
products business for $84,700 (after certain post-closing adjustments). At
closing IVAX received $35,000 in cash and a $50,000 secured note due November
30, 1998. On August 27, 1998, IVAX sold the $50,000 note, without recourse, for
$48,500 in cash. In addition, IVAX received a note for $2,500 as partial
consideration from the sale of one of the personal care product subsidiaries.
The note is payable at $250 of principal plus interest per quarter. As of
December 31, 1999 and 1998, $1,500 and $2,250, respectively, of the gain on sale
related to this note was deferred. The gain on sale and results of operations of
the intravenous products, specialty chemicals and personal care products
businesses were classified as part of discontinued operations during 1998 and
1997 (See Note 7, Discontinued Operations).
(6) SALE OF PRODUCT RIGHTS:
On September 18, 1997, IVAX sold the United States and Canadian
marketing rights to its proprietary drug Elmiron(R) and three additional urology
products to ALZA Corporation ("ALZA"). Although this sale represented an exit by
IVAX from the urology business in 1997, IVAX retained the rights to these
products outside of the United States and Canada. IVAX received $75,000 in
up-front payments in 1997. Included in "Other income, net" in the accompanying
consolidated statements of operations for the year ended December 31, 1997 is a
$43,224 gain on the sale. The gain is net of $15,000 in reserves provided for a
related research and development cost-sharing arrangement included in "Accrued
expenses and other current liabilities" in the accompanying consolidated balance
sheet as of December 31, 1997, and the write-off of $11,774 in certain assets of
the domestic proprietary pharmaceutical operations, $3,000 in payments due to a
third party associated with an existing licensing agreement, and $2,002
primarily in severance and other employee termination benefits associated with
workforce reductions in IVAX' domestic proprietary pharmaceutical operations. On
July 24, 1998, IVAX and ALZA terminated the research and development
cost-sharing arrangement and, as a result of the termination, the reserve of
$15,000 was reversed during the third quarter of 1998, reflecting an adjustment
to increase the previously recognized gain on the sale of those product rights.
Royalty and milestone payments from the 1997 sale of rights to Elmiron(R) and
certain other urology products in the
28
<PAGE>
United States and Canada to ALZA amounted to $13,033 and $12,350 in 1999 and
1998, respectively, and are included in other income as additional gain on the
sale of product rights. Royalties and milestone payments receivable from ALZA
included in "Other current assets" in the accompanying consolidated balance
sheets totaled $10,344 and $10,005 at December 31, 1999 and 1998, respectively.
IVAX may receive additional royalties and milestone payments from ALZA based on
sales of the products during the next few years. A portion of the up-front and
milestone payments received and included in other income, $32,200 as of December
31, 1999, is refundable if a generic equivalent of Elmiron(R) is introduced by
another company and IVAX' patent rights are found to be invalid. IVAX believes
the probability of occurrence of these events is remote.
(7) DISCONTINUED OPERATIONS:
During 1997, IVAX' Board of Directors decided to divest its intravenous
products, personal care products and specialty chemicals businesses. As a
result, IVAX classified these businesses as discontinued operations and has
included their results of operations in "Discontinued operations, net of taxes"
in the accompanying consolidated statements of operations. The divestiture of
businesses classified as discontinued operations was completed in 1998. Results
of these operations were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
INTRAVENOUS PRODUCTS (THROUGH MAY 30, 1997)
Net revenues (1) $ -- $ -- $ 140,634
========= ========= =========
Income from operations before taxes (2) $ -- $ -- $ 3,770
Income tax benefit -- -- (427)
--------- --------- ---------
Income from operations $ -- $ -- $ 4,197
--------- --------- ---------
PERSONAL CARE PRODUCTS (THROUGH JULY 14, 1998)
Net revenues (1) $ -- $ 42,583 $ 73,870
========= ========= =========
Loss from operations before taxes (2) $ -- $ -- $ (18,254)
Income tax provision -- -- 3,283
--------- --------- ---------
Loss from operations $ -- $ -- $ (21,537)
--------- --------- ---------
SPECIALTY CHEMICALS (3)
Net revenues (1) $ -- $ 850 $ 41,562
========= ========= =========
Loss from operations before taxes (2) $ -- $ -- $ (1,749)
Income tax provision -- -- 2,235
--------- --------- ---------
Loss from operations $ -- $ -- $ (3,984)
--------- --------- ---------
Sub-total loss from operations $ -- $ -- $ (21,324)
--------- --------- ---------
DIVESTITURES (SEE NOTE 5)
Pre-tax gain on divestitures $ 585 $ 48,904 $ 44,715
Income tax provision -- -- 32,092
--------- --------- ---------
Net gain on divestitures $ 585 $ 48,904 $ 12,623
--------- --------- ---------
Total income (loss) from discontinued operations $ 585 $ 48,904 $ (8,701)
========= ========= =========
<FN>
(1) Net revenues include intersegment sales of $14 and $569 for 1998 and
1997, respectively.
(2) Includes an allocation of interest expense of $(232) and $5,799 for
1998 and 1997, respectively, based on the ratio of net assets of each
of the discontinued businesses to IVAX' consolidated total capital.
29
<PAGE>
(3) Includes results of operations of a significant portion of the
specialty chemical business through its sale during the third quarter
of 1997 and the results of operations of the vacuum pump fluids
business through its sale in February 1998.
</FN>
</TABLE>
(8) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES:
IVAX has ownership interests of 50% in various unconsolidated
affiliates. Undistributed earnings of these affiliates, as well as IVAX' equity
in their earnings, were not significant in any of the periods presented in the
accompanying consolidated financial statements.
At December 31, 1999 and 1998, IVAX held marketable equity securities
which it classified as available-for-sale. Based on quoted market prices, the
securities are stated at fair value of $918 and $785, respectively, and are
included in "Other assets" in the accompanying consolidated balance sheets. At
December 31, 1999 and 1998, net unrealized gains of $86 and $959, respectively,
are included in "Accumulated other comprehensive loss" in the accompanying
consolidated balance sheets.
(9) DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
6 1/2% Convertible Subordinated Notes due 2001. Interest payable
semi-annually. Convertible at the option of the holders into
1,375 and 2,364 shares (pre-split) of common stock at
December 31, 1999 and 1998, respectively, at a conversion
rate of $31.75 per share (pre-split). $43,661 $75,066
International subsidiaries' debt 4,945 3,551
Other 11 49
------- -------
Total long-term debt 48,617 78,666
Current portion of long-term debt 763 890
------- -------
Long-term debt, net of current portion $47,854 $77,776
======= =======
10% Note from related party due January 2001. Interest payable quarterly. $45,619 $ --
======= =======
</TABLE>
During 1997, IVAX utilized a portion of the proceeds from the sale of
its intravenous products business (See Note 5, Divestitures) to pay the $270,147
then outstanding balance of its revolving credit facility. The facility was
terminated in conjunction with this payment, resulting in IVAX recording an
extraordinary loss of $2,137 primarily related to the write-off of deferred
financing costs.
In July 1998, IVAX' Board of Directors authorized the repurchase of
$20,000 face value of its 6 1/2% Convertible Subordinated Notes. In December
1998, IVAX' Board of Directors renewed its authorization to purchase up to
$20,000 face value of the Notes, which includes the amount remaining unpurchased
from the July authorization. On August 11, 1999, IVAX' Board of Directors
approved an increase of $15,000 of repurchases of the 6 1/2% Notes. During 1999
and 1998, IVAX repurchased a total of $31,405 and $15,959 of its 6 1/2%
Convertible Subordinated Notes due November 2001. Extraordinary gains of $593
and $1,121 were recorded related to the debt repurchases during the years ended
December 31, 1999 and 1998, respectively.
On November 18, 1999, IVAX issued a $50,000 promissory note to
Frost-Nevada, Limited Partnership ("FNLP"), an entity related to IVAX' Chairman
and CEO. The note is due January 17, 2001
30
<PAGE>
and bears interest at 10% payable quarterly. Proceeds from the note were used to
purchase IVAX common stock under the share repurchase program (See Note 12,
Shareholders' Equity). In conjunction with the loan, FNLP was issued a warrant
to purchase 500 shares (pre-split) of IVAX common stock at an exercise price
equal to the price paid for the repurchased shares, $18 per share (pre-split).
The warrant is exercisable through November 2006. The fair value of the warrant
using the Black-Scholes option pricing model was $4,875 which was credited to
capital in excess of par value. The note is recorded net of the remaining value
of the warrant, which is being amortized to interest expense over the term of
the note.
Certain of IVAX' international subsidiaries maintain relationships with
foreign banks providing short-term lines of credit in the aggregate amount of
approximately $19,000 at December 31, 1999 and 1998. Short-term borrowings
totaled $746 and $1,229 at December 31, 1999 and 1998, respectively, and are
included as "Loans payable" in the accompanying consolidated balance sheets.
The estimated fair values of long term notes and debt are as follows:
DECEMBER 31,
------------------
1999 1998
------- -------
6 1/2% Convertible Subordinated Notes due 2001 $42,569 $72,063
10% Note 45,619 --
Other 4,956 3,600
------- -------
Total $93,144 $75,663
======= =======
Fair value of the 6 1/2% Convertible Subordinated Notes due 2001 is
based on available quoted market prices. Management believes that the carrying
amounts of other debt approximate the fair value.
The stated future maturities of all long-term debt for the next five
years and thereafter are approximately $763, $90,026, $629, $632, $7 and $2,179,
respectively.
(10) INCOME TAXES:
The provision for income taxes on continuing operations consists of the
following:
YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
-------- -------- --------
Current:
U.S. Federal $ 6,505 $ -- $ --
State 1,439 -- --
Puerto Rico and the U.S. Virgin Islands 81 509 679
Foreign 11,735 5,915 9,293
Deferred (4,910) 3,623 50,194
-------- -------- --------
Total $ 14,850 $ 10,047 $ 60,166
======== ======== ========
The components of income (loss) from continuing operations before
income taxes and minority interest are as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
--------- --------- ---------
United States $ 43,339 $ 29,128 $(189,427)
Puerto Rico and the U.S. Virgin Islands 6,874 (991) 4,389
Foreign 36,266 6,124 29,756
--------- --------- ---------
Total $ 86,479 $ 34,261 $(155,282)
========= ========= =========
31
<PAGE>
A reconciliation of the difference between the expected provision
(benefit) for income taxes using the statutory U.S. Federal tax rate and IVAX'
actual provision is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Tax using statutory U.S. Federal tax rate $ 30,268 $ 11,991 $ (54,349)
Effect of state income taxes 833 -- --
Write-down of non-deductible cost in excess of
net assets of acquired companies 63 71 3,270
Utilization of net operating loss carryforwards (18,900) -- --
Establishment (reduction) of valuation
allowance on deferred tax assets (11,365) (10,575) 114,660
Foreign tax rate differential (2,194) (2,476) (5,949)
Effect of Puerto Rico taxes and tollgate 81 509 679
Puerto Rico and U.S. possessions tax incentives (2,406) -- (1,536)
Foreign operating losses 5,275 3,523 3,568
Tax claims and other matters 5,094 3,033 --
Other 8,101 3,971 (177)
--------- --------- ---------
Total $ 14,850 $ 10,047 $ 60,166
========= ========= =========
</TABLE>
During 1997, IVAX established $114,660 in valuation allowances,
primarily against its domestic deferred tax assets generated from losses
incurred by its domestic operations. Previously reserved net operating loss
carryforwards were utilized to offset domestic taxable income and, as a result,
the valuation allowance was reduced by $18,900 in 1999 and $44,975 in 1998. All
of the $18,900 reduction in 1999 was used against domestic continuing
operations. The $44,975 reduction in 1998 was comprised of a $10,575 decrease
related to utilization against domestic continuing operations, a $28,200
decrease due to utilization against domestic discontinued operations, and a
$6,200 decrease related to an adjustment to the domestic net operating loss
carryforward based on adjustments made to prior tax periods. During 1999, the
valuation allowance was also reduced by $11,365 in recognition of future net
operating loss benefits reasonably expected to be realized in the coming year
and the related deferred tax asset is included in other current assets in the
accompanying consolidated balance sheets. Estimates beyond one year were not
considered reliable due to the significant losses incurred in 1996 and 1997. The
domestic deferred tax asset was fully reserved as of December 31, 1997 and 1998,
and approximately 90 percent reserved as of December 31, 1999.
Net foreign deferred tax assets amounted to $10,337 at December 31,
1999. Realization of the net deferred tax assets is dependent upon generating
sufficient future domestic and foreign taxable income. Although realization is
not assured, management believes it is more likely than not that the remaining
additional net deferred tax assets will be realized based upon estimated future
taxable income. Management's estimates of future taxable income are subject to
revision due to, among other things, regulatory and competitive factors
affecting the pharmaceutical industries in the markets in which IVAX operates.
United States income taxes have not been provided on undistributed
earnings of foreign subsidiaries, as such earnings are being retained
indefinitely by such subsidiaries for reinvestment. The distribution of these
earnings would first reduce the domestic valuation allowance before resulting in
additional United States income taxes.
32
<PAGE>
Deferred taxes arise due to timing differences in reporting of certain
income and expense items for book purposes and income tax purposes. A detail of
the significant components of deferred tax assets (liabilities) included in
"Other current assets," "Other assets" and "Other long-term liabilities," in the
accompanying consolidated balance sheets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
-------- --------
<S> <C> <C>
Accounts receivable allowances $ 26,698 $ 13,710
Reserves and accruals 18,939 22,411
Differences in capitalization of inventory costs 347 321
Other 217 (337)
Valuation allowance (33,952) (34,851)
-------- --------
Amount included in "Other current assets" 12,249 1,254
-------- --------
Basis differences on fixed assets 9,240 9,085
Depreciation differences on fixed assets 3,640 3,731
Recognition of revenue (1,137) (708)
Carrying value of long-term assets 18 8,266
Other (288) 1,991
Tax credits 10,960 10,946
Net operating losses 39,977 55,776
Valuation allowance (52,957) (73,407)
-------- --------
Amount included in "Other assets" 9,453 15,680
-------- --------
Other (2,286) (2,314)
-------- --------
Amount included in "Other long-term liabilities" (2,286) (2,314)
-------- --------
Net deferred tax asset $ 19,416 $ 14,620
======== ========
</TABLE>
Income from Zenith Laboratories, Inc.'s ("Zenith") Puerto Rico
manufacturing operations is subject to certain tax exemptions under the terms of
a grant from the Puerto Rico government which will expire in 2017. The grant
reduced tax expense by approximately $747, $0 and $575 for the years ended
December 31, 1999, 1998 and 1997, respectively. Under the terms of the grant,
Zenith is required to maintain certain employment levels.
IVAX has historically received a United States tax credit under Section
936 of the Internal Revenue Code for certain income generated by its Puerto Rico
and Virgin Islands operations. For 1999, 1998 and 1997, this credit was
approximately $2,406, $0 and $1,536, respectively, and completely offset the
entire United States tax liability of such operations. In 1996, Congress
repealed the Section 936 tax credit and it will be phased out over 4 years
beginning in 2002. Under the current tax law, no tax credit will be available
after December 31, 2005.
At December 31, 1999, IVAX has a U.S. net operating loss carryforward
of $105,203, which is comprised of:
BEGIN TO EXPIRE AMOUNT
---------------- -----------
2003 $ 25,650
2012 79,553
-----------
Total $ 105,203
===========
Of this amount, $25,650 represents limited net operating loss carryover
which can be used only at an annual rate of $3,028.
33
<PAGE>
A portion of the net operating loss carryforwards, $21,120, relate to
the exercise of certain stock options, and, as a result, the future benefits of
$7,390 which will be recognized from the reduction of the valuation allowances
related to these net operating loss carryforwards will increase paid in capital.
This increase will be recorded once the domestic valuation allowance has been
fully utilized.
At December 31, 1999, IVAX had consolidated tax credit carryforwards of
$10,960. The tax credits are comprised of foreign tax credits of $1,496, which
begin to expire in 2000, $1,131 of research and development credits, which begin
to expire in 2008, and $8,333 of minimum tax credits, which never expire.
Minority interest included in the accompanying consolidated statements
of operations is net of a provision for income taxes of ($2,049), $996, and
$2,228 for the years ended December 31, 1999, 1998 and 1997, respectively.
(11) 401(K) PLANS:
IVAX' employees within the United States and the Virgin Islands are
eligible to participate in a 401(k) retirement plan and Puerto Rico employees
are eligible to participate in a 165(e) plan, which permit pre-tax employee
payroll contributions (subject to certain limitations) and discretionary
employer matching contributions. Total matching contributions (including those
of discontinued operations) for the years ended December 31, 1999, 1998 and 1997
were $816, $627 and $2,025, respectively.
(12) SHAREHOLDERS' EQUITY:
STOCK SPLIT - On January 14, 2000, IVAX' Board of Directors approved a
3-for-2 stock split effective February 22, 2000, in the form of a stock dividend
for shareholders of record February 1, 2000. All weighted average share,
outstanding share, per share earnings and price and stock plan data contained in
the accompanying financial statements have been retroactively restated to give
effect to the stock split. To reflect the split, common stock was increased and
capital in excess of par value was decreased by $5,075.
STOCK OPTION PLANS - IVAX administers and has stock options outstanding
under IVAX' 1997 Employee Stock Option Plan ("1997 Plan"), IVAX' 1994 Stock
Option Plan ("1994 Plan"), IVAX' 1985 Stock Option Plan ("1985 Plan"), and
certain stock option plans assumed in business acquisitions. The options
outstanding under the plans assumed in the business acquisitions were converted
into options to acquire IVAX common stock using the applicable exchange ratios.
No additional stock options may be issued under the 1985 Plan or the plans
assumed in the business acquisitions.
The 1997 Plan permits the issuance of options to employees and
consultants to purchase up to 6,000 shares (post-split) of IVAX common stock. On
February 26, 1999, IVAX' Board of Directors approved an increase to 12,000
shares (post-split) of IVAX common stock that may be issued under the 1997
Plan. The 1994 Plan permits the issuance of options to employees, non-employee
directors and consultants to purchase up to 10,500 shares (post-split) of IVAX
common stock. Both plans provide that the exercise price of the issued options
shall be no less than the fair market value of the common stock on the date of
grant and that the option terms shall not exceed ten years.
34
<PAGE>
The following table presents additional information concerning the
activity in the stock option plans (number of shares in thousands and
post-split):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- ---------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE
-------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year 13,445 $ 9.50 15,086 $ 13.25 15,153 $ 15.00
Granted 894 9.53 8,046 5.83 3,731 7.11
Exercised (1,895) 6.45 (597) 4.96 (63) 2.39
Terminated (2,652) 12.00 (9,090) 12.77 (3,735) 14.41
-------- -------- --------
Balance at end of year 9,792 9.14 13,445 9.50 15,086 13.25
======== ======== ========
Exercisable at December 31, 5,326 $ 10.83 7,395 $ 11.62 9,330 $ 13.75
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1999 (number of shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------------
NUMBER WEIGHTED AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
- ---------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
0.00 - 2.43 1 2.6 $ 2.38 1 $ 2.38
2.44 - 4.85 252 4.5 4.57 139 4.56
4.86 - 7.28 5,494 4.9 5.98 2,279 5.84
7.29 - 9.70 890 5.5 8.55 248 8.27
9.71 - 12.13 502 5.5 10.76 142 11.15
12.14 - 14.55 1,456 1.1 13.86 1,441 13.86
14.56 - 16.98 210 2.6 16.10 210 16.10
16.99 - 19.40 764 3.1 18.06 645 18.11
19.41 - 21.83 23 1.9 20.89 21 20.94
21.84 - 24.25 200 1.1 23.25 200 23.25
------- -------
9,792 4.1 9.14 5,326 10.83
======= =======
</TABLE>
In December 1997, IVAX instituted a stock option exchange program in
which it offered holders of certain outstanding out-of-the-money (exercise price
in excess of then market prices) stock options, excluding executive officers and
directors of IVAX, the right to exchange such options for the same or a lesser
number of new options with a lower exercise price and, in some cases, a modified
vesting schedule and term. As a result of the exchange program, on January 23,
1998, on a post-split basis approximately 4,500 stock options with exercise
prices ranging from $6.59 to $23.25 were exchanged for approximately 3,150 stock
options with an exercise price of $5.55.
35
<PAGE>
IVAX' pro forma net income (loss), pro forma net income (loss) per
common share and pro forma weighted average fair value of options granted, with
related assumptions, assuming IVAX had adopted the fair value method of
accounting for all stock-based compensation arrangements consistent with the
provisions of SFAS No. 123, using the Black-Scholes option pricing model for all
options granted after January 1, 1995, are indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Net income (loss) as reported $ 70,722 $ 71,594 $ (233,254)
Pro forma net income (loss) 66,298 65,973 (241,452)
Basic EPS as reported 0.44 0.40 (1.28)
Pro forma basic EPS 0.41 0.37 (1.33)
Diluted EPS as reported 0.43 0.40 (1.28)
Pro forma diluted EPS 0.40 0.37 (1.32)
Pro forma weighted average fair value of options granted $ 4.05 $ 1.53 $ 4.80
Expected life (years) 4.1 4.6 4.8
Risk-free interest rate 4.57%-6.08% 4.37%-5.65% 5.51%-6.75%
Expected volatility 27% 27% 28%
Dividend yield 0% 0% 0%
</TABLE>
As the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. In
addition, valuations are based on highly subjective assumptions about the
future, including stock price, volatility and exercise patterns.
EMPLOYEE STOCK PURCHASE PROGRAM - On June 17, 1999, the IVAX
Corporation 1999 Employee Stock Purchase Plan ("ESPP") was approved at the
Annual Meeting of Shareholders. IVAX' Board of Directors also approved the
purchase of common stock in the open market, as needed, for the ESPP. The
maximum number of shares available for sale under the ESPP is 2,800 (pre-split)
subject to future increases as stated in the plan. The ESPP became effective
January 1, 2000 for employees based in the United States and Puerto Rico and
allows them to purchase IVAX common stock at 85% of the fair market value on the
enrollment date or exercise date, whichever is lower. The maximum amount of
stock an employee may purchase in a year is $25 and subsequent resale is
restricted as stated in the plan.
SHARE REPURCHASE PROGRAM - In December 1997, IVAX' Board of Directors
approved a share repurchase program authorizing IVAX to repurchase up to 5,000
shares of IVAX common stock. In December 1998, IVAX' Board of Directors approved
an increase of 7,500 shares to a total of 12,500 shares of IVAX common stock
that may be repurchased. In April, June and November 1999, IVAX' Board of
Directors approved increases of 5,000, 1,500, and 5,000 shares, respectively in
the share repurchase program. Cumulatively through December 31, 1999, IVAX
repurchased 21,931 shares of common stock at a total cost, including
commissions, of $287,329. Under Florida law, repurchased shares constitute
authorized but unissued shares.
PUT OPTIONS- During the second quarter of 1999, IVAX issued 1,500
free-standing put options for IVAX common stock in connection with its share
repurchase program, as approved by the Board of Directors. These put options
bear strike prices ranging from $13.44 to $13.50 (pre-split) and will mature
between March 2000 and June 2000, and generated premiums totaling $2,079 which
were credited to "Capital in excess of par value" in the accompanying
consolidated balance sheet. In the event the put options are exercised, IVAX may
elect to settle by one of three methods: physical settlement by payment in
exchange for IVAX shares, net cash settlement or net share settlement. The
maximum potential repurchase obligation of $20,188 for physical settlement has
been reclassified from "Capital in excess of
36
<PAGE>
par" into a temporary equity account - "Put options" in the accompanying
consolidated balance sheet at December 31, 1999. In the event the put options
expire unexercised, the obligation associated with these instruments will be
extinguished and the amount reclassified into "Capital in excess of par". At
December 31, 1999, the market value of IVAX' common stock exceeded the strike
prices of the put options.
DIAGNOSTICS STOCK OPTION PLAN - Effective June 29, 1999, the Board of
Directors of IVAX Diagnostics, Inc., a wholly owned subsidiary of IVAX, approved
the IVAX Diagnostics, Inc. 1999 Stock Option Plan. The plan permits the issuance
of options to employees, non-employee directors and consultants of IVAX
Diagnostics to purchase up to 1,460 shares of the 14,600 authorized shares of
IVAX Diagnostics Inc. On June 29, 1999, non-qualified options of 796 shares of
common stock were granted with an exercise price of $1 per share, a vesting
schedule of 50% at the end of year 2 and 25% at the end of years 3 and 4 and an
expiration date of June 28, 2006.
CONVERTIBLE DEBT - In August 1999, IVAX' Board of Directors approved
the repurchase of an additional $15,000 face value of 6 1/2% Convertible
Subordinated Notes due November 2001. At December 31, 1999 and 1998, IVAX had
outstanding $43,661 and $75,066, respectively of these Notes (See Note 9, Debt).
The Notes are convertible at the option of the holders into 1,375 and 2,364,
respectively, of IVAX common stock at a conversion rate of $31.75 per share
(pre-split).
DIVIDENDS - IVAX did not pay dividends during the years ended December
31, 1999, 1998 and 1997.
(13) BUSINESS SEGMENT INFORMATION:
IVAX is a holding company with subsidiaries that operate in the
pharmaceutical business and are engaged in the development, manufacture,
marketing and sale of pharmaceutical products. Pharmaceutical products include
prescription drugs, over-the-counter products and animal health products (See
Note 5, Divestitures, and Note 7, Discontinued Operations for information
regarding operations that have been sold). IVAX adopted SFAS No. 131,
Disclosures about Segment of an Enterprise and Related Information, as of
December 31, 1998. As a result, the company reports as one business segment-
pharmaceutical products. Operations of the animal health business are not
material and are included with pharmaceutical products for purposes of segment
reporting. The table below exhibits net revenues based on the location of the
third-party customers. All intercompany transactions have been eliminated.
Long-lived assets are segregated by country of physical location.
<TABLE>
<CAPTION>
UNITED UNITED CZECH
GEOGRAPHIC AREAS: STATES KINGDOM REPUBLIC OTHER TOTAL
--------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues 1999 $ 303,420 $ 229,761 $ 20,700 $ 102,388 $ 656,269
1998 279,532 203,863 19,076 123,102 625,573
1997 199,208 217,489 22,595 154,994 594,286
Long-lived assets 1999 75,569 158,544 23,600 32,579 290,292
1998 83,007 149,569 25,645 17,324 275,545
1997 84,704 125,040 15,485 30,592 255,821
</TABLE>
No single customer accounted for 10% or more of IVAX' consolidated net
revenues for any of the three years ended December 31, 1999. Other revenues
included in net revenues in the accompanying consolidated statements of
operations consist of license fees, royalties, and development services fees
totaling $51,863, $43,737 and $11,542 in 1999, 1998, and 1997, respectively.
Other revenues include $19,402 and $18,000 during 1999 and 1998, respectively,
from the settlement of patent litigation with Abbott Laboratories discussed in
Note 14, Commitments and Contingencies.
37
<PAGE>
In November 1999, IVAX entered into a three-year product collaboration
and development services agreement with Bristol-Myers Squibb Company ("BMS") in
the areas of inhalation technology and oncology. With respect to inhalation
technology, the agreement calls for IVAX and BMS to collaborate to develop one
or more of BMS' proprietary molecules using IVAX' patented devices, which BMS
would purchase from IVAX. BMS would retain the worldwide rights to market
respiratory products containing its compounds. On the oncology side, BMS'
Taxol(R) (paclitaxel) is the leading anti-cancer drug in the world, with 1999
sales estimated to reach approximately $1.5 billion. However, Taxol(R) is an
injectable product and is not orally available. As part of the agreement, BMS
has been granted an option to negotiate a license to IVAX' patented system for
making paclitaxel orally available. IVAX received $5,000 under the agreement
during 1999.
Long-lived assets exclude the long-term net deferred tax asset included
in "Other assets" on the accompanying consolidated balance sheets.
(14) COMMITMENTS AND CONTINGENCIES:
LEASES - IVAX leases office, plant and warehouse facilities and
automobiles under noncancellable operating leases. Motor vehicles, production
equipment and certain manufacturing facilities are also leased under capital
leases. Rent expense for the three years ended December 31, 1999 totaled
approximately $5,626, $5,226 and $5,022, respectively. The future minimum lease
payments under noncancellable capital leases and their related assets recorded
at December 31, 1999 and 1998 were not material. The future minimum lease
payments under noncancellable operating leases with initial or remaining terms
of one year or more at December 31, 1999, were as follows:
OPERATING
LEASES
---------
2000 $ 4,333
2001 2,767
2002 1,657
2003 846
2004 842
Thereafter 305
--------
Total minimum lease payments $ 10,750
========
LEGAL PROCEEDINGS - In April 1995, Zenith received approvals from the
FDA to manufacture and market the antibiotic cefaclor in capsule and oral
suspension formulations. Cefaclor is the generic equivalent of Ceclor(R), a
product of Eli Lilly and Company ("Lilly"). On April 27, 1995, Lilly filed a
lawsuit against Zenith and others in federal court alleging that Zenith's
cefaclor raw material supplier, a third party unaffiliated with IVAX,
manufactured cefaclor raw material in a manner which infringed two process
patents owned by Lilly, and that Zenith and the other defendants knowingly and
willfully infringed and induced the supplier to infringe the patents by
importing the raw material into the United States. The lawsuit seeks to enjoin
Zenith and the other defendants from infringing or inducing the infringement of
the patents and from making, using or selling any product incorporating the raw
material provided by such supplier, and seeks an unspecified amount of monetary
damages and the destruction of all cefaclor raw material manufactured by the
supplier and imported into the United States. In August 1995, the Court denied
Lilly's motion for preliminary injunction which sought to prevent Zenith from
selling cefaclor until the merits of Lilly's allegations could be determined at
trial. On May 10, 1996, the United States Court of Appeals for the Federal
Circuit affirmed the district court's denial of Lilly's motion for preliminary
injunction. On February 28, 1997, Lilly filed an amended complaint alleging the
38
<PAGE>
infringement of an additional patent and also filed a motion to add to the
lawsuit additional defendants who are not affiliated with IVAX or Zenith. Lilly
subsequently filed a second amended complaint but did not revise its allegations
regarding Zenith. Zenith has filed a motion for partial summary judgment and has
asserted a counterclaim, which remain pending. Zenith ceased selling cefaclor in
January 1997, when it announced a recall in the United States of cefaclor as a
result of the recall by Zenith's supplier of raw material used to manufacture
the product.
On April 18, 1997, Lilly initiated another federal court action
involving cefaclor against various defendants, including Zenith. With respect to
Zenith, the complaint asserts claims for violation of the Lanham Act, unfair
competition under New Jersey State law, common law unfair competition and unjust
enrichment. Also named as defendants are Roussel Corporation, Roussel UCLAF
Holdings Corporation, Roussel UCLAF S.A., Hoechst Marion Roussel North America,
and Biochimica Opos S.p.A. (collectively, the "Roussel Defendants"), The Rugby
Group, Inc., and Rugby Laboratories, Inc. (collectively, "Rugby"), and American
Home Products Corporation and American Cyanamid Company (collectively, the
"American Home Defendants"). The claims asserted against the American Home
Defendants and Rugby are essentially the same as those asserted against Zenith.
All of the asserted claims arise out of what Lilly contends were fraudulent
misrepresentations to Lilly and the Food and Drug Administration ("FDA") by
Biochimica Opos S.p.A. ("Opos"), Zenith's supplier of cefaclor raw material,
regarding the methods utilized by Opos to manufacture bulk cefaclor and the
location of the manufacturing facility of such cefaclor. According to Lilly,
through these alleged misrepresentations, Opos fraudulently obtained approval
from the FDA to market bulk cefaclor in the United States. The claims asserted
against Zenith are predicated on Zenith's sale in the United States of retail
dosage units of cefaclor manufactured using Opos' bulk cefaclor. Lilly alleges
that Zenith, in marketing and selling retail dosage units of cefaclor
manufactured from Opos' bulk cefaclor, used false and misleading descriptions
and representations regarding Zenith's cefaclor product. The relief sought by
Lilly against Zenith, jointly and severally with the American Home Defendants
and Rugby, is an accounting to Lilly for any and all profits derived by Zenith
from the sale of cefaclor and an award of damages to Lilly, in an unspecified
amount, allegedly sustained by Lilly as a result of Zenith's alleged acts of
misrepresentation and unfair competition. Lilly further seeks an award of treble
damages and litigation costs, including attorneys' fees and interest. Under its
unjust enrichment claim, Lilly seeks restitution in an unspecified amount
against Zenith, jointly and severally with the other defendants. In June 1997,
Zenith filed a motion to dismiss the action, which was granted in June 1998.
Plaintiffs filed an amended complaint and, in November 1998, Zenith filed
another motion to dismiss which remains pending.
In November 1996, individuals purporting to be shareholders of IVAX
filed a class action complaint against IVAX and certain of its current and
former officers or directors in federal court which consolidated, amended and
supplemented a number of similar complaints filed earlier in 1996. The
plaintiffs seek to act as representatives of a class consisting of all
purchasers of IVAX common stock between July 31, 1995 and June 27, 1996. The
consolidated amended complaint alleges violations of federal securities laws and
also asserts a claim for negligent misrepresentation. The complaint generally
alleges that IVAX made untrue statements of material fact and omitted to state
material facts necessary to make statements made not misleading in its public
disclosure documents and in communications to the public regarding its
operations and financial results and that its financial statements were not
prepared in accordance with generally accepted accounting principles. These
allegations are centered around claims that IVAX failed to disclose that product
sales were subject to shelf stock adjustments and failed to establish reserves
for such adjustments. On August 18, 1998, the court dismissed the action without
prejudice and, on September 30, 1998, plaintiffs filed an amended complaint. On
November 9, 1998, IVAX filed a motion to dismiss the amended complaint, which
was granted on July 1, 1999. Plaintiffs have filed a notice of appeal.
39
<PAGE>
In 1997, two class action complaints were filed in federal court by
individuals purporting to be shareholders of IVAX Corporation against IVAX, its
chairman and its former chief financial officer. The two actions were
subsequently consolidated, and the plaintiffs in the consolidated action seek to
act as representatives of a class consisting of all persons who purchased IVAX
common stock and/or call options during the period from August 2, 1996 through
November 11, 1996, inclusive. The complaint alleges claims for violation of
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 and for
negligent misrepresentation. The complaint alleges, among other things, that
during the class period defendants made untrue statements of material fact and
omitted to state material facts necessary to make statements made not misleading
in its statements to the public, including in a September 30, 1996 press release
regarding IVAX' forecasted earnings for the third quarter of 1996. The complaint
seeks unspecified compensatory damages, interest, attorneys' fees, costs of suit
and unspecified other and further relief from the court. On March 30, 1998, the
court dismissed the complaint with prejudice. An appeal was filed on May 19,
1998 and on July 27, 1999, the district court's opinion was affirmed. Plaintiffs
have filed a motion for rehearing, which remains pending.
In December 1998, Louisiana Wholesale Drug Co. filed an action
purporting to be a class action in the United States District Court for the
Southern District of Florida against Abbott Laboratories, Geneva Pharmaceuticals
and Zenith, alleging a violation of Section 1 of the Sherman Antitrust Act.
Plaintiffs purport to represent a class consisting of customers who purchased a
certain proprietary drug directly from Abbott during the period beginning on
October 29, 1998. Plaintiffs allege that, by settling patent-related litigation
against Abbott in exchange for quarterly payments, the defendants engaged in an
unlawful restraint of trade. The complaint seeks unspecified treble damages and
injunctive relief. Nine additional class action lawsuits containing allegations
similar to those in the Louisiana Wholesale suit were filed in various
jurisdictions between July 1999 and January 2000. Zenith Goldline has filed a
potentially dispositive motion in the Louisiana Wholesale case raising defenses
that would also be applicable to the other pending cases. All cases are in the
early stages of litigation, and any prediction as to their eventual outcomes
would be premature. On March 13, 2000 the Federal Trade Commission ("FTC")
announced that it had issued complaints against, and negotiated consent decrees
with, Abbott Laboratories and Geneva Pharmaceuticals arising out of an
investigation of the same settlements that are being challenged in these
lawsuits. The FTC took no action against Zenith Goldline. The FTC determinations
are subject to a thirty-day public comment period, after which they will be
final.
Zenith has been named in a number of individual and class action
lawsuits in both state and federal courts involving the diet drug combination of
fenfluramine and phentermine, commonly known as "fen-phen". Generally, these
lawsuits seek damages for personal injury, wrongful death and loss of
consortium, as well as punitive damages, under a variety of liability theories
including strict product liability, breach of warranty and negligence. Zenith
did not manufacture either fenfluramine or phentermine, but did distribute the
generic version of phentermine manufactured by Eon Labs Manufacturing, Inc.
("Eon") and Camall Company. Although Zenith had a very small market share, to
date Zenith has been named in approximately 4,482 cases and has been dismissed
from approximately 763 cases, with an additional 1,127 dismissals pending.
Zenith intends to vigorously defend all of the lawsuits, and while management
believes that its defense will succeed, as with any litigation, there can be no
assurance of this. Currently Zenith is being defended and indemnified by Eon. In
the event that Eon discontinues providing this defense and indemnity, Zenith has
its own product liability insurance. While Zenith's insurance carriers have
issued reservations of rights, Zenith believes that it has adequate coverage.
Although it is impossible to predict with certainty the outcome of litigation,
in the opinion of management, this litigation will not have a material adverse
impact on the financial condition or results of operation of IVAX.
IVAX intends to vigorously defend each of the foregoing lawsuits, but
their respective outcomes cannot be predicted. Any of such lawsuits, if
determined adversely to IVAX, could have a material
40
<PAGE>
adverse effect on IVAX' financial position and results of operations. IVAX'
ultimate liability with respect to any of the foregoing proceedings is not
presently determinable.
In February 1993, Smith & Nephew, Inc., a Delaware corporation, filed
an action against IVAX and Solopak, Inc., a Delaware corporation, in Illinois
state court. On June 17, 1999, the parties entered into a settlement agreement
pursuant to which the lawsuit was dismissed with prejudice on August 11, 1999.
IVAX is involved in various other legal proceedings arising in the
ordinary course of business, some of which involve substantial amounts. While it
is not feasible to predict or determine the outcome of these proceedings, in the
opinion of management, based on a review with legal counsel, any losses
resulting from such legal proceedings will not have a material adverse impact on
the financial position or results of operations of IVAX.
(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following tables summarize selected quarterly data of IVAX for the
years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FULL
QUARTER QUARTER QUARTER QUARTER YEAR
--------- --------- --------- --------- ---------
1999
- ----
<S> <C> <C> <C> <C> <C>
Net revenues (1) $ 147,616 $ 154,309 $ 163,310 $ 191,034 $ 656,269
Gross profit (1) 61,778 67,647 72,798 84,911 287,134
Income from continuing operations (2) 9,717 13,120 16,929 29,778 69,544
Income from discontinued operations 290 290 5 -- 585
Net income 10,040 13,495 17,409 29,778 70,722
Basic earnings per common share:
Continuing operations 0.06 0.08 0.10 0.19 0.43
Extraordinary item -- -- 0.01 -- 0.01
Net earnings 0.06 0.08 0.11 0.19 0.44
Diluted earnings per common share:
Continuing operations 0.06 0.08 0.10 0.18 0.42
Extraordinary item -- -- 0.01 -- 0.01
Net earnings 0.06 0.08 0.11 0.18 0.43
1998
- ----
Net revenues (1) $ 145,195 $ 149,526 $ 157,945 $ 172,907 $ 625,573
Gross profit (1) 48,769 55,061 60,319 64,672 228,821
Income (loss) from continuing
operations (3) (3,661) 3,577 7,488 17,213 24,617
Income from discontinued operations -- -- 40,733 8,171 48,904
Net income (loss) (4) (6,709) 3,577 48,536 26,190 71,594
Basic and diluted earnings (loss)
per common share:
Continuing operations (0.02) 0.02 0.04 0.10 0.14
Discontinued operations -- -- 0.23 0.04 0.27
Extraordinary item -- -- -- 0.01 0.01
Net earnings (loss) (4) (0.04) 0.02 0.27 0.15 0.40
<FN>
(1) Amounts have been restated to conform to current period's presentation.
(2) The third and fourth quarters of 1999 include restructuring costs of
$586 and a reversal of previously recorded restructuring reserves of
$1,198, respectively.
41
<PAGE>
(3) The first, third, and fourth quarters of 1998 include restructuring
costs and asset write-downs of $696, $12,865, and ($1,339),
respectively.
(4) The first quarter of 1998 was restated in the third quarter to reflect
the adoption of SOP 98-5, Reporting on the Cost of Start-Up Activities,
which resulted in a $3,048 loss from the cumulative effect of a change
in accounting principle.
</FN>
</TABLE>
(16) SUBSEQUENT EVENTS:
On February 9, 2000, IVAX called for redemption the remaining balance
of $43,661 of the 6 1/2% Convertible Subordinated Notes. On March 10, 2000, IVAX
redeemed $273 of the 6 1/2% Notes in cash and the remainder by issuance of 2,032
shares of common stock.
In March 2000, individuals purporting to be shareholders of IVAX filed
a class action complaint against IVAX and certain of its current and former
officers and directors in the Circuit Court of the 11th Judicial Circuit in and
for Dade County, Florida. The plaintiff seeks to act as the representative of a
class consisting of all purchasers of IVAX common stock between December 19,
1997 and the date of class certification. The complaint generally alleges that
IVAX' adoption of a shareholder rights plan containing a provision that would
limit the ability of certain members who might be added to the Board of
Directors following a change of control to approve a decision to redeem the
rights, which is commonly known as a "dead hand" provision, is a violation of
the Florida Business Corporation Act and IVAX' articles of incorporation and
by-laws. Plaintiffs seek an injunction invalidating this provision, as well as
damages in an unspecified amount which, in the opinion of management, would not
be material.
42
EXHIBIT 21
SUBSIDIARIES OF IVAX CORPORATION(1)
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ------------
DOMESTIC
<S> <C>
Baker Norton Pharmaceuticals, Inc. Florida
Baker Norton U.S., Inc. Florida
Cummins Properties, Inc. Florida
D & N Holding Company Delaware
Diamedix Corporation Florida
DVM Pharmaceuticals, Inc. Florida
Goldcaps, Inc. Florida
Goldline Laboratories, Inc. Florida
Goldline Properties Florida, Inc. Florida
Immunovision, Inc. Florida
Indiana Protein Technologies, Inc. Indiana**
Ivax D Sub, LLC Delaware
IVAX Diagnostics, Inc. Florida
IVAX Specialty Chemicals Sub, LLC Delaware
IVX BioScience, Inc. Florida
IVX Oncology, Inc. Florida
N Holding Company Delaware
Pet Technology Corp. Florida
Pralex Corporation Delaware
Soft Drugs, Inc. Florida
XAVI Corporation Florida
Zenith Goldline Dermatologicals, Inc. Florida
Zenith Goldline Golden Glades, Inc. Florida
Zenith Goldline Pharmaceuticals, Inc. Florida
Zenith Laboratories, Inc. Florida
Zenith Laboratories Caribe, Inc. Delaware
</TABLE>
<PAGE>
SUBSIDIARIES OF IVAX CORPORATION
(Continued)
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ------------
INTERNATIONAL
<S> <C>
AXIV International Limited Ireland
Baker Cummins Inc. Canada
Baker Norton Asia Ltd. Hong Kong
Baker Norton Farmaceutici Srl Italy
Baker Norton International GmbH Switzerland
Becpharm Limited England
Beijing JiAi Pharmaceuticals Limited Liability Company(2) China
Delta Biologicals S.r.l. Italy
Elvetium S.A. Argentina
Elvetium S.A. Uruguay
Elvetium Peru S.A. Peru
Empresas Goanka, S.A. Dominican Republic
Galena a.s.(3) Czech Republic
Institute for Drug Research, Ltd. Hungary
IVAX Holdings, A.G. Switzerland
IVAX Industries UK, Ltd. England
IVAX International, B.V. Netherlands
IVAX International (Luxembourg) Sarl Luxembourg
Kunming Baker Norton Pharmaceutical Co. Ltd(2) China
Norton Gelkaps Gelatine Kapsel Produktion GmbH Germany
Norton Healthcare Limited England
Norton Healthcare (Holdings) Limited England
Norton Healthcare (1999) Limited England
Norton Healthcare (1998) Limited England
Norton SAS France
Norton (Waterford) Limited Ireland
Norton Poland Sp. z. o. o. Poland
Zenith Goldline Pharmaceuticals Canada, Inc. Canada
</TABLE>
- ------------------
(1) As of March 24, 2000, all subsidiaries are wholly-owned
(directly or indirectly) unless otherwise indicated.
(2) Owned 50% by the Company.
(3) Owned 86% by the Company.
(**) Owned 30% by the Company.
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report dated February 4, 2000 (except with respect to the
stock split discussed in Note 12 and the matters discussed in Note 16, as to
which the dates are February 22, 2000 and March 10, 2000, respectively) included
in this Form 10-K, into IVAX's previously filed registration statement on Form
S-8 Nos. 333-30690, 333-30692, 333-07811, 33-82758, 33-67090, 33-39186,
33-44042, 33-53944, 33-88914, 33-88912, 33-65133, 333-24593 and 333-42997, Form
S-3 No. 33-46173, and Form S-4 Nos. 33-44116 and 33-60847. It should be noted
that we have not audited any financial statements of the Company subsequent to
December 31, 1999 or performed any audit procedures subsequent to the date of
our report.
ARTHUR ANDERSEN LLP
Miami, Florida
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IVAX
CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 41,408
<SECURITIES> 0
<RECEIVABLES> 132,530
<ALLOWANCES> 22,058
<INVENTORY> 146,624
<CURRENT-ASSETS> 334,769
<PP&E> 391,813
<DEPRECIATION> 165,615
<TOTAL-ASSETS> 634,514
<CURRENT-LIABILITIES> 210,396
<BONDS> 93,473
0
0
<COMMON> 15,224<F1>
<OTHER-SE> 277,147<F1>
<TOTAL-LIABILITY-AND-EQUITY> 634,514
<SALES> 604,406
<TOTAL-REVENUES> 656,269
<CGS> 369,135
<TOTAL-COSTS> 369,135
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,147
<INTEREST-EXPENSE> 5,556
<INCOME-PRETAX> 86,479
<INCOME-TAX> 14,850
<INCOME-CONTINUING> 69,544
<DISCONTINUED> 585
<EXTRAORDINARY> 593
<CHANGES> 0
<NET-INCOME> 70,722
<EPS-BASIC> .43<F1>
<EPS-DILUTED> .42<F1>
<FN>
<F1>AMOUNT SHOWN REFLECTS 3-FOR-2 STOCK SPLIT PAYABLE FEBRUARY 22, 2000.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IVAX
CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999 DEC-31-1999
<PERIOD-END> MAR-31-1999 JUN-30-1999 SEP-30-1999
<CASH> 149,382 107,557 68,003
<SECURITIES> 0 0 0
<RECEIVABLES> 123,638 116,946 123,595
<ALLOWANCES> 22,040 21,684 22,752
<INVENTORY> 130,747 126,577 145,051
<CURRENT-ASSETS> 403,804 354,368 338,879
<PP&E> 359,396 357,072 372,604
<DEPRECIATION> 156,146 154,320 162,058
<TOTAL-ASSETS> 684,430 637,265 630,373
<CURRENT-LIABILITIES> 200,243 192,810 206,196
<BONDS> 76,193 71,079 45,713
0 0 0
0 0 0
<COMMON> 11,033 10,705 10,549
<OTHER-SE> 374,734 322,779 326,475
<TOTAL-LIABILITY-AND-EQUITY> 684,430 637,265 630,373
<SALES> 136,669 280,248 432,266
<TOTAL-REVENUES> 147,616 301,925 465,235
<CGS> 85,838 172,500 263,012
<TOTAL-COSTS> 85,838 172,500 263,012
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 863 2,479 3,850
<INTEREST-EXPENSE> 1,367 2,687 3,711
<INCOME-PRETAX> 14,826 30,828 52,267
<INCOME-TAX> 4,091 6,485 10,604
<INCOME-CONTINUING> 9,717 22,837 41,663
<DISCONTINUED> 290 580 585
<EXTRAORDINARY> 33 118 593
<CHANGES> 0 0 0
<NET-INCOME> 10,040 23,535 40,944
<EPS-BASIC> .06<F1> .15<F1> .25<F1>
<EPS-DILUTED> .06<F1> .15<F1> .25<F1>
<FN>
<F1>EPS RESTATED FOR EFFECT OF 3 FOR 2 STOCK SPLIT.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IVAX
CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998 DEC-31-1998
<CASH> 161,564 166,954 234,978 208,593
<SECURITIES> 0 0 0 0
<RECEIVABLES> 122,530 118,096 110,033 132,566
<ALLOWANCES> 19,851 21,234 23,744 22,834
<INVENTORY> 145,703 145,961 146,012 135,324
<CURRENT-ASSETS> 468,409 471,080 503,034 486,792
<PP&E> 340,979 336,653 352,317 363,830
<DEPRECIATION> 147,202 147,629 155,818 153,602
<TOTAL-ASSETS> 750,304 747,659 791,680 778,015
<CURRENT-LIABILITIES> 210,335 201,623 203,178 217,281
<BONDS> 94,109 94,178 89,391 77,776
0 0 0 0
0 0 0 0
<COMMON> 11,984 11,992 11,777 11,484
<OTHER-SE> 405,887 410,914 450,381 441,724
<TOTAL-LIABILITY-AND-EQUITY> 750,304 747,659 791,681 778,015
<SALES> 138,538 280,813 424,066 581,836
<TOTAL-REVENUES> 145,195 294,721 452,665 625,573
<CGS> 96,426 190,891 288,517 396,752
<TOTAL-COSTS> 96,426 190,891 288,517 396,752
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 1,266 2,821 5,669 7,650
<INTEREST-EXPENSE> 1,747 3,539 5,348 6,857
<INCOME-PRETAX> (350) 5,823 13,368 34,261
<INCOME-TAX> 2,630 5,026 5,631 10,047
<INCOME-CONTINUING> (3,661) (84) 7,403 24,617
<DISCONTINUED> 0 0 40,733 48,904
<EXTRAORDINARY> 0 0 315 1,121
<CHANGES> (3,048) (3,048) (3,048) (3,048)
<NET-INCOME> (6,709) (3,132) 45,404 71,594
<EPS-BASIC> (.04)<F1> (.02)<F1> .15<F1> .27<F1>
<EPS-DILUTED> (.04)<F1> (.02)<F1> .15<F1> .27<F1>
<FN>
<F1>EPS RESTATED FOR EFFECT OF 3 FOR 2 STOCK SPLIT.
</FN>
</TABLE>
