-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DNnips+WrUpBiWQq6iehbAB5Qh03vm2USDTY+/ff+RvDFqvQUeH8OIGzc5IvKjZp lSHIytJrJKqWv09DDhD+YA== 0000912057-95-009580.txt : 19951119 0000912057-95-009580.hdr.sgml : 19951119 ACCESSION NUMBER: 0000912057-95-009580 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUNEX CORP /DE/ CENTRAL INDEX KEY: 0000719529 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 510346580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12406 FILM NUMBER: 95589258 BUSINESS ADDRESS: STREET 1: 51 UNIVERSITY ST CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 2065870430 MAIL ADDRESS: STREET 1: 51 UNIVERSITY STREET CITY: SEATLE STATE: WA ZIP: 98101 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 1995 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period From __________ To __________ Commission File Number 0-12406 IMMUNEX CORPORATION (exact name of registrant as specified in its charter) WASHINGTON 51-0346580 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 51 UNIVERSITY STREET, SEATTLE, WA 98101 (Address of principal executive offices) (zip code) (206) 587-0430 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, $.01 PAR VALUE 39,601,899 - ---------------------------- ---------- Class Outstanding at November 7, 1995 IMMUNEX CORPORATION QUARTERLY REPORT ON FORM 10-Q SEPTEMBER 30, 1995 TABLE OF CONTENTS PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: a) Consolidated Balance Sheets - September 30, 1995 and December 31, 1994 3 b) Consolidated Statements of Operations - For the three-month periods ended September 30, 1995 and September 30, 1994 4 c) Consolidated Statements of Operations - For the nine-month periods ended September 30, 1995 and September 30, 1994 5 d) Consolidated Statements of Cash Flows - For the nine-month periods ended September 30, 1995 and September 30, 1994 6 e) Notes to the Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS IMMUNEX CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, 1995 December 31, (unaudited) 1994 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 14,311 $ 14,818 Securities available-for-sale - 9,919 Accounts receivable, net 21,707 18,259 Inventories 8,833 11,725 Other assets 2,533 2,618 --------- --------- Total current assets 47,384 57,339 Property, plant and equipment, net 89,699 96,323 Other assets 36,483 39,003 --------- --------- $ 173,566 $ 192,665 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,058 $ 21,520 Accrued compensation and related items 4,507 4,109 Current portion of long-term debt 553 11,595 Other liabilities 2,531 4,498 --------- --------- Total current liabilities 29,649 41,722 Note payable - Cyanamid - 34,000 Long-term liabilities 5,040 5,016 Shareholders' equity: Common stock, $.01 par value 581,055 547,182 Guaranty payment receivable from Cyanamid (33,873) (35,768) Accumulated deficit (408,305) (399,487) --------- --------- Total shareholders' equity 138,877 111,927 --------- --------- $ 173,566 $ 192,665 ========= =========
3 Item 1. FINANCIAL STATEMENTS (continued) IMMUNEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) (unaudited)
Three months Three months ended ended September 30, September 30, 1995 1994 ------------- ------------- Revenues: Product sales $33,464 $33,100 Royalty and contract revenue 4,132 2,003 ------- ------- 37,596 35,103 Operating expenses: Cost of product sales 5,607 6,714 Research and development 21,124 19,161 Selling, general and administrative 13,506 16,411 ------- ------- 40,237 42,286 ------- ------- Operating loss (2,641) (7,183) Other income (expense): Interest income 336 243 Interest expense (92) (639) Other income (expense), net 16 (1) ------- ------- 260 (397) ------- ------- Loss before income taxes (2,381) (7,580) Provision for income taxes 79 65 ------- ------- Net loss $(2,460) $(7,645) ======= ======= Net loss per common share $ (.06) $ (.20) ======= ======= Number of shares used for per share amounts 39,602 39,283 ======= =======
4 Item 1. FINANCIAL STATEMENTS (continued) IMMUNEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) (unaudited)
Nine months Nine months ended ended September 30, September 30, 1995 1994 ------------- ------------- Revenues: Product sales $103,107 $102,253 Royalty and contract revenue 12,614 6,398 -------- -------- 115,721 108,651 Operating expenses: Cost of product sales 18,523 21,512 Research and development 62,389 59,046 Selling, general and administrative 43,036 52,450 -------- -------- 123,948 133,008 -------- -------- Operating loss (8,227) (24,357) Other income (expense): Interest income 858 658 Interest expense (1,019) (1,729) Other income (expense), net (480) (435) -------- -------- (641) (1,506) -------- -------- Loss before income taxes (8,868) (25,863) Provision for income taxes 198 1,892 -------- -------- Net loss $ (9,066) $(27,755) ======== ======== Net loss per common share $ (.23) $ (.71) ======== ======== Number of shares used for per share amounts 39,586 39,087 ======== ========
5 Item 1. FINANCIAL STATEMENTS (continued) IMMUNEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine months Nine months ended ended September 30, September 30, 1995 1994 ------------- ------------- Cash flows from operating activities: Net loss $ (9,066) $ (27,755) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 11,997 10,845 Accounts receivable (3,448) 7,413 Inventories 2,892 1,482 Accounts payable, accrued liabilities and other current liabilities (301) (4,649) Other current assets 872 563 -------- --------- Net cash provided by (used in) operating activities 2,946 (12,101) -------- --------- Cash flows from investing activities: Purchases of property, plant and equipment (3,760) (6,229) Proceeds from sale of properties - 12,490 Proceeds from sales and maturities of securities available-for-sale 9,897 4,016 Purchases of securities available-for-sale - (3,917) Other (340) (1,317) -------- --------- Net cash provided by investing activities 5,797 5,043 -------- --------- Cash flows from financing activities: Construction loan payments (10,600) (3,600) Cyanamid line of credit (34,000) 16,000 Guaranty payments received from Cyanamid 35,768 7,416 Other (418) (1,489) -------- --------- Net cash provided by (used in) financing activities (9,250) 18,327 -------- --------- Net increase (decrease) in cash and cash equivalents (507) 11,269 Cash and cash equivalents, beginning of period 14,818 2,968 -------- --------- Cash and cash equivalents, end of period $ 14,311 $ 14,237 ======== =========
6 Item 1. FINANCIAL STATEMENTS (continued) IMMUNEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) NOTE 1. BASIS OF PRESENTATION The consolidated financial statements included herein have been prepared by Immunex Corporation without audit, according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods indicated. The statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. The results of operations for the nine-month period ended September 30, 1995, are not necessarily indicative of results to be expected for the entire year ending December 31, 1995. NOTE 2. INVENTORIES Inventories consist of the following (in thousands):
September 30, December 31, 1995 1994 ------------- ------------ Raw materials $1,093 $ 1,600 Work in process 5,399 6,253 Finished goods 2,341 3,872 ------ ------- Total $8,833 $11,725 ====== =======
NOTE 3. CONTINGENT LIABILITIES In September 1993, Cistron Biotechnology Inc. ("Cistron") filed suit against Immunex asserting that Immunex misappropriated information regarding Interluekin-1 beta ("IL-1 beta") and that such information was used by Immunex in patent applications relating to IL-1 beta. Immunex filed a complaint seeking a declaratory judgment that Cistron's claims are preempted by patent law, barred by a judgment in a patent interference decided by the United States Patent and Trademark Office and time-barred by the statue of limitations and doctrine of laches. In June 1994, the Court entered an order finding that issues of fact existed concerning the applicability of the statute of limitations and laches to Cistron's claims and, accordingly, denied Immunex's motion on the time bar issues. A trial has been scheduled for April 1996. The Company has, and intends to continue to, vigorously defend the allegations of the suit. Based on the available information, management of the Company does not expect the suit to have a material adverse impact on the financial condition or results of operations of the Company. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three and nine-month periods ended September 30, 1995, the Company's net losses decreased to $2.5 million and $9.1 million, respectively, compared to net losses of $7.6 million and $27.8 million in the respective 1994 periods. The improved operating results during the current year periods are attributable to both increased operating revenues and decreased operating expenses. The Company has increased its operating revenues primarily by utilizing the available capacity at its manufacturing development center to perform contract manufacturing services. Expense levels of the Company have declined due to improved gross margins on product sales combined with a decrease in expenditures related to the Company's selling, general and administrative activities. Product sales for the quarter ended September 30, 1995 totaled $33.5 million, compared to $33.1 million in the prior year quarter. For the nine-month periods ended September 30, 1995 and 1994, product sales totaled $103.1 million and $102.3 million, respectively. Product sales for the nine months ended September 30, 1994 includes $2.1 million of revenue from the sale of certain products licensed to the Company from Bristol-Myers Squibb Company. The Company ceased marketing these products in January 1994. Improvements in product sales during the 1995 periods is attributable primarily to the launch in February 1995 of THIOPLEX, an improved formulation of THIOTEPA, combined with growth in sales of NOVANTRONE. Net sales of NOVANTRONE and THIOPLEX for the three and nine months ended September 30, 1995 totaled $16.0 million and $47.3 million, respectively, an increase of $2.0 million and $6.3 million compared to the respective 1994 periods. Sales of leucovorin calcium for the nine months ended September 30, 1995 are slightly ahead of the sales level achieved in the comparable 1994 nine month-period. However, leucovorin calcium sales experienced a downturn during the quarter ended September 30, 1995 as compared to the sales levels during the first six months of 1995 and to the quarter ended September 30, 1994. This decrease in sales reflects a decrease in units sold and declining average selling prices resulting from recent entrants into the leucovorin calcium market. Sales of LEUKINE increased to $10.1 million for the quarter ended September 30, 1995, from $9.2 million in the second quarter of 1995. For the nine months ended September 30, 1995 LEUKINE sales totaled $30.5 million. The 1995 three and nine-month results represent a decline from the net sales of LEUKINE during the three and nine months ended September 30, 1994 of $11.3 million and $34.2 million, respectively. In September 1995, the FDA approved LEUKINE for treatment of Acute Myelogenous Leukemia. This expanded label indication is expected to contribute to future increases in LEUKINE sales, however, there can be no assurances as to the impact this approval will have on sales of LEUKINE. Royalty and contract revenue increased to $4.1 million and $12.6 million for the three and nine-month periods ended September 30, 1995, respectively, compared to $2.0 million and $6.4 million in the comparable prior year periods. In 1995, the Company commenced a program of utilizing the available capacity at its manufacturing development center to perform contract manufacturing services for certain customers. Contract manufacturing revenue recognized for the three and nine months ended September 30, 1995 totaled $1.5 million and $5.2 million, respectively. No related revenue was recognized during 1994. The amount of revenue from these services will fluctuate from period to period depending on the available capacity at the Company's manufacturing development center and to the extent that demand for these services continues. Royalty revenue has also increased during 1995, contributing to the increase in royalty and contract revenue for the 1995 three and nine-month periods. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued RESULTS OF OPERATIONS, CONTINUED Cost of product sales was $5.6 million, or 16.8% of product sales and $6.7 million or 20.3% of product sales for the quarters ended September 30, 1995 and 1994, respectively. For the nine months ended September 30, 1995 and 1994, cost of product sales was $18.5 million or 18.0% of product sales and $21.5 million, or 21.0% of product sales, respectively. The decrease in cost of product sales as a percentage of product sales during the 1995 periods is primarily attributable to the February 1995 launch of THIOPLEX, which has a lower production cost than THIOTEPA, combined with a favorable change in the mix of product sales to include a relatively higher percentage of the Company's more profitable products. In addition, trademark royalties incurred on the sale of the former Lederle oncology products, which is expensed to cost of product sales, have been reduced to a nominal amount following the relabeling of most product lines with an Immunex label. For the three and nine months ended September 30, 1994, royalties incurred on the former Lederle products totaled $0.4 million and $1.3 million, respectively. For the three and nine months ended September 30, 1995, research and development expense increased to $21.1 million and $62.4 million, respectively, versus $19.2 million and $59.0 million in the respective 1994 periods. Cost to fund certain collaborative research agreements increased a total of $1.0 million and $2.2 million for the three and nine-month periods ended September 30, 1995 compared to the same periods in 1994. The remaining increase in research and development expense is due primarily to costs associated with operating the Company's manufacturing development center. The manufacturing development center is used primarily for the production of clinical material; accordingly, the costs of operating the facilities, which are not inventoriable, are expensed to research and development. As a result, the costs classified as research and development expense may fluctuate from period to period. Selling, general and administrative expense totaled $13.5 million and $43.0 million for the three and nine-month periods ended September 30, 1995, respectively, a decrease of $2.9 million and $9.4 million compared to the respective 1994 periods. The decrease in selling, general and administrative expenditures is primarily attributable to certain expense reduction programs initiated during the third quarter of 1994. The 1994 expense level includes a charge of $1.7 million related to the implementation of these programs. In addition, the Company has eliminated, or brought in-house, virtually all of the services formerly provided by American Cyanamid Company ("Cyanamid") under a transitional services agreement with the majority shareholder. Costs incurred under this agreement totaled $1.7 million and $5.1 million for the September 30, 1994 three and nine-month periods, respectively, compared to less than $22,000 during the third quarter of 1995 and $0.9 million for the nine-months ended September 30, 1995. These cost reductions have, to a certain extent, been offset by transition costs and ongoing support costs associated with bringing these services in-house. The reductions in selling, general and administrative expenses have been partially offset by increased legal defense costs related to litigation between the Company and Cistron Biotechnology, Inc. The Company has incurred costs totaling approximately $3.0 million in defense of this lawsuit during the first nine months of 1995 compared to $0.7 million for the nine months ended September 30, 1994. It is expected that these expenses will continue until such time that the litigation is resolved. Trial is currently scheduled for April 1996. For the three and nine months ended September 30, 1995 interest income totaled $0.3 million and $0.9 million, respectively, compared to $0.2 million and $0.7 million for the three and nine months ended September 30, 1994, respectively. Funds available for investment purposes have stabilized over the past year as a result of improvements in the Company's cash flows. Interest income is expected to remain at a similar level until such time that the Company is able to increase its funds available for investment. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued RESULTS OF OPERATIONS, CONTINUED Interest expense has decreased to a nominal level following the pay-off of the outstanding balance of the Cyanamid line of credit and the Company's construction loan in March 1995 and is not expected to be significant over the last quarter of 1995. Last year, at September 30, the Company owed $26.0 million under the Cyanamid loan agreement and had a balance payable on its construction loan of $11.8 million. Other income (expense) was nominal for the three-month periods ended September 30, 1995 and 1994. For the nine-month periods ended September 30, 1995 and 1994, other expense totaled $0.5 million and $0.4 million, respectively. These expenses resulted from the Company's equity investment in Targeted Genetics Corporation ("TGC"). The 1994 amount was partially offset by revenue generated from certain income producing properties which the Company sold in June 1994. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and securities available-for-sale totaled $14.3 million at September 30, 1995, compared to $24.7 million at December 31, 1994. The December 31, 1994 balance included $10.0 million which was restricted in accordance with the terms of the Company's construction loan. As of September 30, 1995, there were no restrictions on cash, cash equivalents or securities available-for-sale. During the nine months ended September 30, 1995, the Company received $35.8 million from Cyanamid as settlement of their 1994 revenue guaranty obligations and generated an additional $2.9 million from operating activities. These funds were used primarily for payment of the $34.0 million outstanding balance on the Cyanamid loan agreement, the final $10.6 million payment on the Company's construction loan and for investments in property, plant and equipment of $3.8 million. For the first nine months of 1995, the Company has achieved positive cash flow from operating activities through a combination of a decreased net loss and working capital management. The Company anticipates cash flow from operating activities to be positive or approximate break even through the remainder of 1995. It is anticipated that the existing cash reserves will be sufficient to meet the Company's funding needs through the end of 1995. The Company has accrued $33.9 million related to the 1995 Cyanamid revenue guaranty obligation. This amount is due to be paid to the Company near the end of the first quarter of 1996. If additional funds are required, the Company's borrowing capacity under the Cyanamid loan agreement at September 30, 1995 was $37.3 million. RECENT EVENTS On November 1, 1995, the Company received an unsolicited letter form American Home Products Corporation ("AHP") proposing to purchase all of the Company's outstanding shares of common stock not held by AHP at $14.50 per share. AHP is the indirect owner of 54.6% of the Company's common stock. The Board of Directors of the Company has formed a special committee, composed of three independent directors, two directors who are also members of the Company's management, and one director who was formerly a member of management, to evaluate the proposed offer. The Company has retained outside financial and legal advisors to assist the special committee and the independent directors. 10 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Following AHP's announcement on November 1, 1995 that it proposed to purchase the Company's outstanding shares of common stock not held by AHP (see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Recent Events"), two putative class action shareholder suits were served on the Company and its Board of Directors. Both complaints allege, among other things, that the terms of the proposed offer are inadequate and the defendants are breaching their fiduciary duties as officers and directors of the Company. The plaintiff shareholders are seeking to block the transaction or to recover unspecified damages. The first action, captioned BARISH V. FRITZKY, is currently pending before the Superior Court of the State of Washington for King County. The second action captioned BRODY V. FRITZKY, is currently pending before the Court of Chancery of the State of Delaware for New Castle County. Additional shareholder suits may be filed against the Company similar to those described above. The Company expects that the suits which have been served and any such additional shareholder suits, may be consolidated by the courts into a single matter. The description of additional legal proceedings is incorporated by reference to Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K None 11 SIGNATURES Pursuant to requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMMUNEX CORPORATION Date: November 9, 1995 /s/ Edward V. Fritzky --------------------- -------------------------------------------- Edward V. Fritzky, Chairman and Chief Executive Officer (Principal Executive Officer) Date: November 9, 1995 /s/ Douglas G. Southern --------------------- -------------------------------------------- Douglas G. Southern, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 12 EX-27.1 2 EX. 27.1
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995, AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 14,311 0 21,707 358 8,833 47,384 112,910 23,211 173,566 29,649 0 581,055 0 0 (442,178) 173,566 103,107 115,721 18,523 123,948 480 207 1,019 (8,868) 198 (9,066) 0 0 0 (9,066) (.23) (.23)
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