-----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, LTsPu15oHGRr7FsD4J7gEGMteYurSqbkgCFiuOFFvyQpdH3Zq16jTwxdGfVpSE4X 2Qum6HOSwl4gOBM7IC6Dsg== /in/edgar/work/20000811/0001032210-00-001637/0001032210-00-001637.txt : 20000921 0001032210-00-001637.hdr.sgml : 20000921 ACCESSION NUMBER: 0001032210-00-001637 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUNEX CORP /DE/ CENTRAL INDEX KEY: 0000719529 STANDARD INDUSTRIAL CLASSIFICATION: [2836 ] IRS NUMBER: 510346580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12406 FILM NUMBER: 694062 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 0001.txt FORM 10-Q FOR THE PERIOD ENDED 6/30/2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ Commission File Number 0-12406 IMMUNEX CORPORATION (exact name of registrant as specified in its charter) Washington 51-0346580 ------------------------------- -------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 51 University Street, Seattle, WA 98101 (Address of principal executive offices) Registrant's telephone number, including area code (206) 587-0430 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 502,912,758 - --------------------------------------- ------------------------------- Class Outstanding at August 8, 2000 IMMUNEX CORPORATION QUARTERLY REPORT ON FORM 10-Q JUNE 30, 2000 TABLE OF CONTENTS Page No. -------- PART I. FINANCIAL INFORMATION 3 Item 1. Financial Statements: a) Consolidated Condensed Balance Sheets - June 30, 2000 and December 31, 1999 4 b) Consolidated Condensed Statements of Income - for the three-month periods ended June 30, 2000 and June 30, 1999 5 c) Consolidated Condensed Statements of Income - for the six-month periods ended June 30, 2000 and June 30, 1999 6 d) Consolidated Condensed Statements of Cash Flows - for the six-month periods ended June 30, 2000 and June 30, 1999 7 e) Notes to Consolidated Condensed Financial Statements 8-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-24 Item 3. Market Risks 25 PART II. OTHER INFORMATION Item 1. Legal Proceedings 26 Item 4. Submission of Matters to a Vote of Security Holders 26 Item 6. Exhibits and Reports on Form 8-K 26 SIGNATURES 27 2 PART I. FINANCIAL INFORMATION --------------------- Immunex Corporation has prepared the consolidated condensed financial statements included herein without audit, according to the rules and regulations of the Securities and Exchange Commission, or SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. The financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. The statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 1999. The results of operations for the six-month period ended June 30, 2000, are not necessarily indicative of results to be expected for the entire year ending December 31, 2000. 3 Item 1. FINANCIAL STATEMENTS -------------------- IMMUNEX CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands)
June 30, December 31, 2000 1999 ---------- --------- ASSETS - ------ Current assets: Cash and cash equivalents $ 151,377 $ 260,770 Short term investments 598,627 449,066 Accounts receivable, net 92,609 61,781 Inventories 19,029 13,125 Other current assets 5,879 6,439 ---------- --------- Total current assets 867,521 791,181 Property, plant and equipment, net 140,773 110,445 Investments 68,890 10,704 Other assets 36,888 28,911 ---------- --------- $1,114,072 $ 941,241 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $ 69,435 $ 71,832 Accounts payable - AHP 52,256 37,088 Accrued compensation and related items 13,825 20,001 Current portion of long-term obligations 1,579 1,578 Interest payable - AHP 2,250 2,250 Other current liabilities 12,154 2,336 ---------- --------- Total current liabilities 151,499 135,085 Convertible subordinated note - AHP 450,000 450,000 Other long-term obligations 836 826 Shareholders' equity: Common stock, $.01 par value 845,940 791,802 Unrealized gain on investments, net 31,314 2,719 Accumulated deficit (365,517) (439,191) ---------- --------- Total shareholders' equity 511,737 335,330 ---------- --------- $1,114,072 $ 941,241 ========== =========
See accompanying notes. 4 Item 1. FINANCIAL STATEMENTS (continued) -------------------- IMMUNEX CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (in thousands, except per share amounts)
Three months ended June 30, --------------------------- 2000 1999 -------- -------- Revenues: Product sales $196,196 $125,854 Royalty and contract revenue 16,954 2,620 -------- -------- 213,150 128,474 Operating expenses: Cost of product sales 57,029 39,678 Research and development 41,192 30,264 Selling, general and administrative 81,943 52,937 -------- -------- 180,164 122,879 -------- -------- Operating income 32,986 5,595 Other income (expense): Interest income 12,182 5,075 Interest expense (3,439) (1,628) Other income, net 74 69 -------- -------- 8,817 3,516 -------- -------- Income before income taxes 41,803 9,111 Provision for income taxes 290 2,250 -------- -------- Net income $ 41,513 $ 6,861 ======== ======== Net income per common share: Basic $0.08 $0.01 ======== ======== Diluted $0.08 $0.01 ======== ======== Number of shares used for per share amounts: Basic 500,640 488,538 ======== ======== Diluted 543,039 531,186 ======== ========
See accompanying notes. 5 Item 1. FINANCIAL STATEMENTS (continued) -------------------- IMMUNEX CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (in thousands, except per share amounts)
Six months ended June 30, --------------------------- 2000 1999 -------- -------- Revenues: Product sales $362,894 $221,091 Royalty and contract revenue 29,294 5,560 -------- -------- 392,188 226,651 Operating expenses: Cost of product sales 104,832 66,887 Research and development 75,892 58,473 Selling, general and administrative 154,243 97,210 -------- -------- 334,967 222,570 -------- -------- Operating income 57,221 4,081 Other income (expense): Interest income 23,193 6,949 Interest expense (6,873) (1,697) Other income, net 847 149 -------- -------- 17,167 5,401 -------- -------- Income before income taxes 74,388 9,482 Provision for income taxes 714 2,370 -------- -------- Net income $ 73,674 $ 7,112 ======== ======== Net income per common share: Basic $0.15 $0.01 ======== ======== Diluted $0.14 $0.01 ======== ======== Number of shares used for per share amounts: Basic 498,974 486,480 ======== ======== Diluted 543,860 525,690 ======== ========
See accompanying notes. 6 Item 1. FINANCIAL STATEMENTS (continued) -------------------- IMMUNEX CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Six months ended June 30, ------------------------------ 2000 1999 --------- --------- Operating Activities: Net income $ 73,674 $ 7,112 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,845 9,728 Deferred income tax provision - 2,075 License fee received in the form of common stock - (990) Cash flow impact of changes to: Accounts receivable (30,828) (26,730) Inventories (7,733) 5,561 Accounts payable, accrued liabilities and other current liabilities 10,742 27,424 Other current assets 560 1,323 --------- --------- Net cash provided by operating activities 57,260 25,503 --------- --------- Investing Activities: Purchases of property, plant and equipment (39,150) (13,562) Purchases of investments (409,720) (317,166) Proceeds from sales and maturities of investments 230,568 25,150 Acquisition of rights to marketed products, net (2,500) (15,500) Other - (370) --------- --------- Net cash used in investing activities (220,802) (321,448) --------- --------- Financing Activities: Proceeds from common stock issued to AHP 28,859 40,777 Proceeds from common stock issued to employees 25,279 12,232 Proceeds from AHP convertible note, net - 449,000 Other 11 93 --------- --------- Net cash provided by financing activities 54,149 502,102 --------- --------- Net increase (decrease) in cash and cash equivalents (109,393) 206,157 Cash and cash equivalents, beginning of period 260,770 43,600 --------- --------- Cash and cash equivalents, end of period $ 151,377 $ 249,757 ========= =========
See accompanying notes. 7 IMMUNEX CORPORATION Notes to Consolidated Condensed Financial Statements Note 1. Organization and Basis of Presentation - ----------------------------------------------- Immunex Corporation is a biopharmaceutical company that discovers, develops, manufactures and markets innovative therapeutic products for the treatment of human diseases, including cancer, infectious diseases and immunological disorders such as rheumatoid arthritis. We operate in a highly regulated and competitive environment. Our business is regulated primarily by the U.S. Food and Drug Administration, or FDA. The FDA regulates the products we sell, our manufacturing processes and our promotional activities. Obtaining approval for a new therapeutic product is never certain, may take several years, and is very costly. Competition in researching, developing and marketing pharmaceutical products is intense. Any of the technologies covering our existing products or products under development could become obsolete or diminished in value by discoveries and developments of other organizations. Our market for pharmaceutical products is primarily the United States. Our sales are primarily to pharmaceutical wholesalers. Approximately 64% of our product sales are made to three of these wholesalers. The consolidated condensed financial statements are prepared in conformity with accounting principles generally accepted in the United States. In preparing the financial statements, management must make some estimates and assumptions that affect reported amounts and disclosures. American Home Products Corporation, or AHP, holds a majority interest in Immunex. All references to AHP include AHP and its various affiliates, divisions and subsidiaries. Note 2. Summary of Significant Accounting Policies - --------------------------------------------------- Inventories Inventories are stated at the lower of cost, using a weighted-average method, or market. The components of inventories are as follows (in thousands): June 30, December 31, 2000 1999 ------- ------- Raw materials $ 1,479 $ 1,387 Work in process 9,110 5,310 Finished goods 8,440 6,428 ------- ------- Totals $19,029 $13,125 ======= ======= Depreciation and amortization The cost of buildings and equipment is depreciated evenly over the estimated useful lives of the assets, which range from three to 31.5 years. Leasehold improvements are amortized evenly over either their estimated useful lives, or the term of the lease, whichever is shorter. Intangible product rights and other intangible assets are amortized evenly over their estimated useful lives, ranging from five to 15 years. 8 IMMUNEX CORPORATION Notes to Consolidated Condensed Financial Statements (continued) Note 2. Summary of Significant Accounting Policies, continued - -------------------------------------------------------------- Revenues Product sales are recognized when product is shipped and are recorded net of reserves for estimated chargebacks, returns, discounts, Medicaid rebates and administrative fees. We maintain reserves at a level that we believe is sufficient to cover estimated future requirements. Revenues received under royalty, licensing and contract manufacturing agreements are recognized based upon performance under the terms of the underlying agreements. Recent Accounting Guidance In December 1999, the SEC issued Staff Accounting Bulletin, or SAB, No. 101, Revenue Recognition in Financial Statements. The new SAB provides guidance related to revenue recognition based on interpretations and practices recommended by the SEC. Within the biotechnology industry, the guidance provided by SAB 101 is anticipated to have its largest impact on the timing of revenue recognition for upfront fees and milestone payments. SAB 101 is effective for the fourth quarter of 2000 and requires companies to report any changes in revenue recognition as a cumulative change in accounting principle at the time of implementation. We will continue to evaluate the interpretations and guidance on revenue recognition and the SEC staff's views on the application of accounting principles to selected revenue recognition issues. During June 1999, the Financial Accounting Standards Board, or FASB, issued SFAS 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement 133. The Statement defers the effective date of SFAS 133 to fiscal 2001. During June 2000, the FASB issued SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which amends certain provisions of SFAS 133. We are currently evaluating these standards and do not believe that their adoption will have a material impact on our financial statements. Note 3. Reporting Comprehensive Income - --------------------------------------- Our investments are considered available-for-sale and are stated at fair value on the balance sheet with the unrealized gains and losses included as a component of shareholders' equity. During the first six months of 2000 and 1999, there were no material realized gains or losses. The following table sets forth the components of comprehensive income, (in thousands):
Three months ended June 30, Six months ended June 30, --------------------------- --------------------------- 2000 1999 2000 1999 ------- ------- -------- ------- Net income $41,513 $ 6,861 $ 73,674 $ 7,112 Unrealized gain (loss) on investments 1,278 (2,199) 28,595 (2,304) ------- ------- -------- ------- Comprehensive income $42,791 $ 4,662 $102,269 $ 4,808 ======= ======= ======== =======
9 IMMUNEX CORPORATION Notes to Consolidated Condensed Financial Statements (continued) Note 4. Income Taxes - -------------------- The provision for income taxes for the three and six-month periods ended June 30, 2000 is comprised of state income taxes. Related federal income taxes have been offset by net operating loss, or NOL, carryforwards. The benefits from use of a portion of the NOL carryforwards in the comparable periods of 1999 were recorded as a reduction of goodwill, thereby resulting in a federal income tax provision for financial reporting purposes. Note 5. Net income per Common Share - ------------------------------------ Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share is calculated using the weighted average number of common shares outstanding plus the dilutive effect of outstanding stock options using the "treasury stock" method, and, if dilutive, the effect of the convertible subordinated note held by AHP using the "if-converted" method. The components for calculating net income per share are set forth in the following table (in thousands, except per share data):
Three months ended June 30, Six months ended June 30, ---------------------------- --------------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Net income $ 41,513 $ 6,861 $ 73,674 $ 7,112 ======== ======== ======== ======== Weighted average common shares outstanding, basic 500,640 488,538 498,974 486,480 Net effect of dilutive stock options 42,399 42,648 44,886 39,210 -------- -------- -------- -------- Weighted average common shares outstanding, diluted 543,039 531,186 543,860 525,690 ======== ======== ======== ======== Net income per common share, basic $ 0.08 $ 0.01 $ 0.15 $ 0.01 ======== ======== ======== ======== Net income per common share, diluted $ 0.08 $ 0.01 $ 0.14 $ 0.01 ======== ======== ======== ========
The 15,544,041 shares issuable upon the conversion of the AHP convertible subordinated note are not included in the calculation of diluted earnings per share because the effect on adjusted net income would be anti-dilutive. Note 6. Stock Split - -------------------- On March 20, 2000, we effected a three-for-one stock split. The record date of the stock split was March 6, 2000. Stockholders were entitled to receive the additional shares on March 20, 2000. All references to accumulated deficit, common stock, average number of common shares outstanding and per share amounts in the financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations prior to the record date of the stock split have been restated to reflect the three-for-one stock split on a retroactive basis. 10 IMMUNEX CORPORATION Notes to Consolidated Condensed Financial Statements (continued) Note 7. Subsequent Event - ------------------------- On August 9, 2000, we filed a shelf registration statement with the SEC that, once it becomes effective, would allow us to sell up to 20 million shares of newly-issued Immunex common stock in a primary offering and AHP to sell up to 50 million shares of Immunex common stock in a secondary offering. 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- INTRODUCTION Our disclosure and analysis in this report contain forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expected performance of third-party manufacturers, expected completion dates for new manufacturing and other facilities, expected progress in clinical trials, expenses, the outcome of contingencies such as legal proceedings, and financial results. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any other public statements we make may turn out to be wrong. Inaccurate assumptions we might make and known or unknown risks and uncertainties can affect our forward-looking statements. Consequently, no forward-looking statement can be guaranteed and our actual results may differ materially. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Annual Reports on Form 10-K. Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under the caption Risks within Item 2 of this report. These are risks that we think could cause our actual results to differ materially from expected and historical results. RESULTS OF OPERATIONS Overview Net income totaled $41.5 million for the three months ended June 30, 2000, compared to net income of $6.9 million for the three months ended June 30, 1999. Net income totaled $73.7 million for the six months ended June 30, 2000, compared to $7.1 million for the six months ended June 30, 1999. The improvement in operating results is due primarily to U.S. sales of Enbrel(R) (etanercept), which was approved in November 1998 by the FDA for treatment of advanced rheumatoid arthritis, or RA. Our operating results also reflect increased costs, primarily related to manufacturing, selling and marketing expenses for Enbrel. In addition, we have increased spending on products in our development pipeline and increased the level of investment in discovery research. Revenues
Three Months Ended June 30, Six Months Ended June 30, --------------------------- --------------------------- (in millions) (in millions) --------------------------- --------------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Enbrel $155.1 $ 86.9 $286.2 $146.5 Specialty therapeutic products 40.4 38.4 75.1 73.0 Other product sales 0.7 0.6 1.6 1.6 ------ ------ ------ ------ Total product sales 196.2 125.9 362.9 221.1 Royalty and contract revenue 17.0 2.6 29.3 5.6 ------ ------ ------ ------ Total revenue $213.2 $128.5 $392.2 $226.7 ====== ====== ====== ======
12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- Product sales increased to $196.2 million for the three months ended June 30, 2000, compared to $125.9 million for the three months ended June 30, 1999. Product sales increased to $362.9 million for the six months ended June 30, 2000, compared to $221.1 for the six months ended June 30, 1999. The improvement during both 2000 periods is primarily due to increased sales of Enbrel. Under an Enbrel Promotion Agreement with AHP, Enbrel is being promoted in the United States by Wyeth-Ayerst Laboratories, or Wyeth-Ayerst, the pharmaceutical division of AHP. AHP shares in the gross profits from U.S. sales of Enbrel and both AHP and Immunex share the selling, marketing and distribution costs of Enbrel in the United States. Our share of these expenses and the amount of gross profits shared with AHP from sales of Enbrel are included in selling, general and administrative expenses. Sales of our specialty therapeutic products, which include Leukine(R) (sargramostim, GM-CSF) and Novantrone(R) (mitoxantrone for injection concentrate), totaled $40.4 million for the three months ended June 30, 2000, compared to $38.4 million for the three months ended June 30, 1999. Sales of our specialty therapeutic products totaled $75.1 for the six months ended June 30, 2000, compared to $73.0 for the six months ended June 30, 1999. Sales of Leukine totaled $20.4 million for the three months ended June 30, 2000, compared to $16.6 million during the three months ended June 30, 1999. Sales of Leukine totaled $35.0 million for the six months ended June 30, 2000, compared to $32.6 million during the six months ended June 30, 1999. In order to improve the profitability of Leukine, we discontinued certain distributor price discounts during the first quarter of 2000. This contributed to a temporary decline in sales volume of Leukine in the first quarter of 2000, as distributors reduced inventory levels before ordering additional product. During the second quarter of 2000, sales of Leukine increased, reflecting a return to prior demand levels at higher realized prices. Sales of Novantrone totaled $13.9 million for the three months ended June 30, 2000, compared to $11.1 million for the three months ended June 30, 1999. Sales of Novantrone totaled $26.7 million for the six months ended June 30, 2000, compared to $21.9 million for the six months ended June 30, 1999. The improvement reflects higher realized selling prices for Novantrone. Royalty and contract revenue totaled $17.0 million for the three months ended June 30, 2000, compared to $2.6 million for the three months ended June 30, 1999. Royalty and contract revenue totaled $29.3 million for the six months ended June 30, 2000, compared to $5.6 million for the comparable 1999 period. In June 2000, we earned $15.0 million from AHP under the terms of the Enbrel Promotion Agreement when an expanded indication for Enbrel was approved by the FDA for reducing signs and symptoms and delaying structural damage in patients with moderately to severely active RA. In February 2000, we earned a one-time payment of $10.0 million from AHP under the Enbrel Promotion Agreement, when net sales of Enbrel in the United States exceeded $400.0 million for the preceding 12-month period. These were the final payments to be earned under the Enbrel Promotion Agreement with AHP. The remaining royalty and contract revenue recognized in 2000 and the royalty and contract revenue recognized during the three and six-month periods ended June 30, 1999 reflects recurring amounts recognized under existing royalty and license agreements. Operating Expenses Cost of product sales was 29.1% of product sales for the three months ended June 30, 2000, compared to 31.5% of product sales for the three months ended June 30, 1999. Cost of product sales was 28.9% of product sales for the six months ended June 30, 2000, compared to 30.3% of product sales for the six months ended June 30, 1999. The decrease in the cost of product sales percentage during the current year periods is due to the following: . a lower than anticipated cost for Enbrel due primarily to a reduction in internal costs and favorable exchange rates on purchases of Enbrel from Boehringer Ingelheim Pharma KG, or BI Pharma, our contract manufacturer for Enbrel, located in Germany; and . a favorable mix of sales of our other products. 13 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- Partially offsetting these items was increased sales of Enbrel (which, like Leukine, is a biologic, and generally has a higher manufacturing cost than traditional pharmaceutical products and, in the case of our biologic products, are subject to multiple royalty obligations). Cost of product sales as a percentage of total product sales is expected to increase to the extent sales of Enbrel become a greater percentage of total product sales. Research and development expense was $41.2 million for the three months ended June 30, 2000, compared to $30.3 million for the three months ended June 30, 1999. Research and development expense was $75.9 million for the six months ended June 30, 2000, compared to $58.5 million for the six months ended June 30, 1999. The increase in research and development expense was due primarily to the continuing development of: . Enbrel for treatment of chronic heart failure; . the TRAIL/Apo2 ligand molecule for treatment of cancer, in collaboration with Genentech, Inc.; . Avrend (CD40 ligand) to treat renal cell cancer; . Nuvance for treatment of asthma; and . Interleukin-1 receptor Type II for treatment of inflammation, osteoporosis and other diseases. In addition, we have increased staffing and laboratory space to support our discovery research activities and incurred increased costs associated with funding of collaborative research activities. Selling, general and administrative expense increased to $81.9 for the three months ended June 30, 2000, compared to $52.9 million for the three months ended June 30, 1999. Selling, general and administrative expense increased to $154.2 million for the six months ended June 30, 2000, compared to $97.2 million for the six months ended June 30, 1999. The increase is due primarily to expenses associated with selling and marketing of Enbrel. Under the terms of the Enbrel Promotion Agreement, AHP is currently assuming a majority of these expenses in the United States. Beginning in November 2000, Immunex and AHP will share AHP's U.S. marketing and selling expenses for Enbrel equally. AHP also shares in the gross profits from U.S. sales and potential Canadian sales of Enbrel. Selling, general and administrative expenses include our share of these expenses and the amounts of the gross profits shared with AHP from these sales of Enbrel. In addition to expenses incurred under the Enbrel Promotion Agreement, selling, general and administrative expense increased due to the following: . increased staffing levels and other infastructure costs; . selling expenses for our specialty therapeutics line of products; and . preparing for anticipated approval of Novantrone in a new multiple sclerosis indication. Other Income (Expense) Interest income totaled $12.2 million for the three months ended June 30, 2000, compared to $5.1 million for the three months ended June 30, 1999. Interest income totaled $23.2 million for the six months ended June 30, 2000, compared to $6.9 million for the six months ended June 30, 1999. The issuance of a $450.0 million convertible subordinated note to AHP in May 1999, additional issuances of common stock and improved cash flow from operations resulted in a significant increase in funds available for investment purposes and the interest income earned on these funds. The increase in interest income was partially offset by an increase in interest expense, incurred on the convertible subordinated note. 14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- Provision for Income Taxes The provision for income taxes was $0.3 million for the three months ended June 30, 2000, compared to $2.3 million for the three months ended June 30, 1999. The provision for income taxes was $0.7 million for the six months ended June 30, 2000, compared to $2.4 million for the six months ended June 30, 1999. The provision for income taxes during the first six months of 2000 consisted only of our tax obligation in the states in which we sell our products. Our federal tax expense in 2000, for financial reporting purposes, was offset by utilizing NOL carryforwards. This is expected to continue for the remainder of 2000. In the first six months of 1999, the benefit of utilizing our NOL carryforwards, for financial reporting purposes, was used to reduce goodwill. As of December 31, 1999, the goodwill balance had been reduced to zero. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents and short term investments totaled $750.0 million at June 30, 2000 and $709.8 million at December 31, 1999. These amounts are held in a variety of interest-bearing instruments including government and corporate obligations, and money market accounts. Operating activities provided cash of $57.3 million during the first six months of 2000, reflecting income earned in operations which was partially offset by increased working capital requirements. The change in working capital is due to an increase in accounts receivable from increased product sales and the $15.0 million earned from AHP under the terms of the Enbrel Promotion Agreement, and an increase in inventory of Enbrel. We expect our operating cash flows to continue to grow in 2000, primarily from increased operating income. Cash used in investing activities totaled $220.8 million for the first six months of 2000. The majority of the cash used for investing activities is due to the net $179.2 million in purchases of investment securities. In addition, expenditures for property, plant and equipment totaled $39.2 million, primarily for purchases of computer hardware and software, lab equipment, leasehold improvements and expenditures on construction of our new process development facility. The process development facility will accelerate the development of the manufacturing processes of materials for clinical trials and is expected to be completed by the end of 2000. We are collaborating with AHP to expand the production capacity for Enbrel. In September 1999, AHP completed the purchase of a large-scale biopharmaceutical manufacturing facility in Rhode Island and Immunex and AHP are working together to retrofit the facility to accommodate the commercial production of Enbrel. Under an agreement with AHP, AHP will sell the Rhode Island facility to us at a future date anticipated to be in the second half of 2002. We have agreed to fund equally the retrofit and make-ready costs of the Rhode Island facility with AHP and at the time ownership is transferred to us, we will reimburse AHP for the remaining retrofit and make-ready costs plus their costs to originally acquire the facility. The total cost to us for the Rhode Island facility is expected to be in the range of $250 million to $300 million. Financing activities provided cash of $54.1 million for the six-month period ended June 30, 2000. We received $23.4 million from the exercise of employee stock options for the purchase of 6,777,553 shares during the first six months of 2000. In addition, under the terms of a Governance Agreement with AHP, AHP can purchase additional shares of our common stock from us in order to maintain its percentage ownership. The purchase price is equal to the fair market value of the shares, as determined in accordance with the Governance Agreement, on the date of AHP's purchase. Under the terms of the Governance Agreement, we received $28.9 million from the issuance of 1,042,995 additional shares of our common stock to AHP during the first half of 2000. 15 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- Risks We may be unable to sustain or increase profitability, which could result in a decline in our stock price. Future operating performance is never certain, and if our operating results fall below the expectations of securities analysts or investors, the trading price of our common stock will decline. Until 1998, we had a history of operating losses. Although we have been profitable for two years, we may be unable to sustain or increase profitability on a quarterly or annual basis. Moreover, we anticipate that our operating and capital expenditures will increase significantly in 2000 and in future years primarily due to: . additional spending to support the marketing and sales of Enbrel; . working capital requirements for sales of Enbrel; . growth in research and development expenses as we progress with the development of our clinical and preclinical product candidates; . increased purchases of capital equipment, including the continued construction of a new process development facility in 2000; . development of our new research and technology center in Seattle, Washington; and . investment in additional manufacturing capacity for our existing products and products in development, including our investment in retrofitting a Rhode Island manufacturing facility to produce Enbrel. Our ability to generate sufficient cash flow, or to raise sufficient capital, to fund these operating and capital expenditures and remain profitable depends on our ability to improve operating performance. This in turn depends, among other things, on increasing sales of our existing products, especially Enbrel, and successfully completing product development efforts and obtaining timely regulatory approvals of our lead clinical products. We may not successfully develop and commercialize these products. If we are unable to increase sales of Enbrel, or if sales of Enbrel decline, our revenues will be limited and our stock price will decline. Because we depend, and expect to continue to depend, on sales of a single product, Enbrel, for a substantial majority of our revenues, decreased or lower- than-anticipated demand for Enbrel, or our inability to meet demand, could materially adversely affect our operating results and harm our business. Factors that could adversely affect sales of Enbrel include: . competition from existing products for the treatment of RA, or development of new, superior products; . our ability to maintain adequate and uninterrupted sources of supply to meet demand; . events adversely affecting the ability of our manufacturing collaborators to produce Enbrel; . adverse developments regarding the safety or effectiveness of Enbrel; . contamination of product lots or product recalls; . our inability to gain regulatory approval to market Enbrel for indications other than RA; and . changes in private health insurer reimbursement rates or policies for Enbrel. 16 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- For the year ended December 31, 1999, sales of Enbrel accounted for 71% of our total product sales, and for the six months ended June 30, 2000, sales of Enbrel accounted for 79% of our total product sales. We expect product revenues generated by Enbrel to continue to account for a substantial majority of our product revenues. If market demand continues to grow, limits on our manufacturing capacity for Enbrel could constrain our sales growth. The market demand for Enbrel in the United States, where we hold rights to Enbrel, is growing and cannot be predicted with certainty. If demand for Enbrel continues to grow, we expect that within the next year our current source of supply of Enbrel will be unable to support growing market demand. This near-term shortfall would continue unless and until the Rhode Island manufacturing facility is able to produce commercial quantities of Enbrel for sale, which is not expected to occur until the first half of 2002. Our current U.S. supply of Enbrel from BI Pharma could potentially support sales of up to a maximum of approximately $800 million annually, assuming current prices. Actual U.S. supply of Enbrel could be lower since our U.S. supply is impacted by many manufacturing and production variables, such as production success rate, bulk drug yield and the timing of production runs and final product release. Our U.S. sales of Enbrel could be adversely affected if we are unable to meet future growth in market demand. We are working with AHP to substantially increase our supply of Enbrel for sale in the United States. In our current plan, we anticipate that in the near term Enbrel would be produced at two sites: BI Pharma, currently our sole source supplier, and a Rhode Island manufacturing facility, which is being retrofitted to produce Enbrel. It is difficult to predict our actual near-term supply of Enbrel with certainty because of the many complex variables involved in the supply equation. Factors that will affect our actual supply of Enbrel include, without limitation, the following: . Variability in BI Pharma's Manufacturing Process. The amount of commercial inventory supplied by BI Pharma will depend on a variety of factors, including BI Pharma's production yields and success rates, availability of qualified personnel, compliance with FDA regulations and development of advanced manufacturing techniques and process controls. If, as a result of any of the preceding manufacturing variables, BI Pharma is unable to deliver the expected quantities of Enbrel within the production capacity BI Pharma has reserved for Enbrel, our supply of Enbrel available for sale would be reduced. . Ability of BI Pharma to provide additional capacity for Enbrel. In June 2000, we, AHP and BI Pharma entered into an amendment to the BI Pharma supply agreement under which BI Pharma was offered contractual incentives to provide additional near-term production capacity for Enbrel. If BI Pharma elects to provide additional production capacity for Enbrel, and depending on the number of additional production runs, our U.S. supply of Enbrel from BI Pharma could potentially increase by up to a maximum of approximately $100 million of sales annually, assuming current prices and depending on the manufacturing variables described above. As an incentive to BI Pharma, we will pay more to BI Pharma on a per unit basis for any of these additional production runs, which will result in an increase in our incremental production costs for these runs. . Timely completion and approval of the Rhode Island manufacturing facility. We and AHP are investing substantial sums to retrofit a Rhode Island facility that AHP purchased in 1999 to accommodate the commercial production of Enbrel bulk drug. We are working closely with AHP to expedite the retrofit of the Rhode Island facility. We and AHP have reached an agreement regarding the allocation of Enbrel produced at this facility and the BI Pharma facility. As presently configured, and assuming FDA approval, we currently estimate that the Rhode Island facility could, on an annual basis, double our current U.S. supply of Enbrel. We expect to file for FDA approval of the Rhode Island facility in the second half of 2001, with estimated FDA approval of the Rhode Island facility in the first half of 2002. We anticipate commencing production runs at the Rhode Island facility and building inventory as early as the first half of 2001. This inventory would not be available for sale in 17 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- the United States unless and until the Rhode Island facility is approved by the FDA, which approval is not assured. If the FDA does not ultimately approve the Rhode Island facility, we would not be able to sell this inventory in the United States. If the FDA approves the Rhode Island facility, BI Pharma would continue to manufacture Enbrel under the terms of the BI Pharma supply agreement. If U.S. market demand for Enbrel continues to grow, we may face future supply limitations even after the Rhode Island facility begins producing Enbrel. AHP plans to establish a new manufacturing facility in Ireland, which would enhance the U.S. supply of Enbrel. If the Ireland facility is not completed, or does not receive FDA approval before we encounter supply constraints, our future U.S. sales growth would again be restricted. Production bottlenecks could result in short-term supply interruptions of Enbrel. BI Pharma schedules in advance the bulk drug and vialing production runs for Enbrel throughout the year. The timing of the BI Pharma production runs and the final product release schedule for these production runs may not always coincide with maintaining an uninterrupted supply of product. Also, if insufficient vialing runs for Enbrel have been scheduled by BI Pharma because of a larger-than-expected amount of bulk drug yielded from the bulk drug production runs, BI Pharma may not have sufficient vialing capacity for all of the Enbrel . bulk drug that it produces. We and AHP are working together with BI Pharma to increase BI Pharma's vialing capacity and to qualify an additional contract manufacturer to vial Enbrel bulk drug produced by BI Pharma and, if approved by the FDA, the Rhode Island facility. We are not sure whether these arrangements can be made or would be established in time to address production bottlenecks. If third-party manufacturers or suppliers fail to perform, we will be unable to meet demand for some of our products. For all drug products that we market, we rely on unaffiliated third parties and AHP to fill and label vials with our bulk drugs. We would be unable to obtain these materials or products for an indeterminate period of time if AHP's subsidiaries or third-party manufacturers or suppliers, including BI Pharma, were to cease or interrupt production or otherwise fail to supply these materials or products to us or AHP. This in turn could materially reduce our ability to satisfy demand for these products as well as adversely affect our operating results. AHP either manufactures through its subsidiaries or sources through third-party manufacturers all finished dosage forms and bulk active raw materials for our nonbiological oncology products, including Novantrone. AHP depends on a single supplier for all of the essential raw material for Amicar(R) (aminocaproic acid). In addition, two of the raw materials used to produce Enbrel and our other recombinant protein products, other than Leukine, are manufactured by single suppliers. Our preclinical and clinical testing of potential products could be unsuccessful, which could adversely affect our operating results. Before obtaining regulatory approvals for the sale of any of our potential products, we must subject these products to extensive preclinical and clinical testing to demonstrate their safety and effectiveness in humans. If these tests are unsuccessful, we will be unable to commercialize new products and, as a result, we may be unable to sustain or increase profitability. Results of initial preclinical and clinical testing are not necessarily indicative of results to be obtained from later preclinical and clinical testing and, as a result, we may suffer significant setbacks in advanced clinical trials. We may not complete our clinical trials of products under development and the results of the trials may fail to demonstrate the safety and effectiveness of new products to the extent necessary to obtain regulatory approvals, which could delay or prevent the approval. The rate of completion of clinical trials depends, in part, on the enrollment of patients, which in turn depends on factors such as the size of the patient population, the proximity of target patients to clinical sites, the eligibility criteria for the trial and the existence of competitive clinical trials. Any delay in planned patient enrollment in our current or future clinical trials may result in increased costs, trial delays or both. 18 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- Our products are subject to extensive regulation, which can be costly and time- consuming and subject us to unanticipated delays or lost sales. The FDA imposes substantial requirements on our products before they permit us to manufacture, market and sell them to the public. Compliance with these requirements can be costly and time-consuming, and could delay sales of new products or sales of our existing products for new indications. To meet FDA requirements, we must spend substantial resources on lengthy and detailed laboratory tests and clinical trials. It typically takes many years to complete tests and trials for a product, and the length of time involved depends on the type, complexity and novelty of the product. The FDA may not approve on a timely basis, if at all, some or all of our future products or may not approve some or all of our applications for additional indications for our previously approved products. If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be fined or forced to remove a product from the market or may experience other adverse consequences, including delay or increased costs, which could materially harm our financial results. Additionally, we may not be able to obtain the labeling claims necessary or desirable for promoting our products. Even if approval is obtained, we may also be required or may elect to undertake post-marketing trials. In addition, if we or others identify side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformation of our products, additional clinical trials, changes in labeling of our products, and additional marketing applications may be required. Our ability to discover new drugs could be adversely affected if our current research collaborators terminate their relationships with us or develop relationships with a competitor. We have relationships with various collaborators who conduct research at our request. These collaborators are not our employees. As a result, we have limited control over their activities and, except as otherwise required by our collaboration agreements, can expect only limited amounts of their time to be dedicated to our activities. Our ability to discover new drugs will depend in part on the continuation of these collaborations. If any of these collaborations are terminated, we may not be able to enter into other acceptable collaborations. In addition, our existing collaborations may not be successful. Disputes may arise between us and our collaborators as to a variety of matters, including financing obligations under our agreements and ownership of intellectual property rights. These disputes may be both costly and time- consuming and may result in delays in the development and commercialization of products. Competition and technological developments could render our products obsolete or noncompetitive. To succeed, we must maintain a competitive position with respect to technological advances. We are engaged in fields characterized by extensive research efforts and rapid technological development. New drug discoveries and developments in the fields of genomics, rational drug design and other drug discovery technologies are accelerating. Many companies and institutions, both public and private, are developing synthetic pharmaceuticals and biotechnological products for human therapeutic application, including the applications we have targeted. Several products are currently approved for the treatment of RA. In particular, we face competition for Enbrel, principally from Johnson & Johnson's product Remicade(R). There are other products in late-stage development that are targeting RA. If any of these other products are approved by the FDA for RA, our sales of Enbrel could be adversely affected. A number of our competitors have substantially more capital, research and development, regulatory, manufacturing, marketing, human and other resources and experience than we have. Furthermore, large pharmaceutical companies recently have been consolidating, which has increased their resources and concentrated valuable intellectual property assets. As a result, our competitors may: . develop products that are more effective or less costly than any of our current or future products or that render our products obsolete; 19 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- . produce and market their products more successfully than we do; . establish superior proprietary positions; or . obtain FDA approval for labeling claims that are more favorable than those for our products. If we are unable to protect and enforce our patents and proprietary rights and gain access to patent and proprietary rights of others, we may be unable to compete effectively. Our success depends in part on obtaining, maintaining and enforcing our patents and other proprietary rights and on our ability to avoid infringing the proprietary rights of others. We have a substantial intellectual property portfolio, including patents and patent applications. Patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving and, consequently, patent positions in our industry may not be as strong as in other more well-established fields. Accordingly, the U.S Patent and Trademark Office, or PTO, may not issue patents from the patent applications owned by or licensed to us. If issued, the patents may not give us an advantage over competitors with similar technology. The issuance of a patent is not conclusive as to its validity or enforceability and it is uncertain how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court or in other proceedings, such as oppositions, which may be brought in foreign jurisdictions to challenge the validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance by the PTO. It is possible that a competitor may successfully challenge our patents or that a challenge will result in limiting their coverage. Moreover, the cost of litigation to uphold the validity of patents and to prevent infringement can be substantial. If the outcome of litigation is adverse to us, third parties may be able to use our patented invention without paying us. Moreover, it is possible that competitors may infringe our patents or successfully avoid them through design innovation. To stop these activities we may need to file a lawsuit. These lawsuits are expensive and would consume time and other resources, even if we were successful in stopping the violation of our patent rights. In addition, there is a risk that a court would decide that our patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of our patents were upheld, a court would refuse to stop the other party on the grounds that its activities do not infringe our patents. Competitors have obtained or are seeking patents which, if issued or granted, may have a material adverse effect on our ability to successfully commercialize Enbrel. While we pursue patent protection for products and processes where appropriate, we also rely on trade secrets, know-how and continuing technological advancement to develop and maintain our competitive position. Therefore, others may independently develop substantially equivalent information or techniques, or otherwise gain access to or disclose our technology. We may not be able to effectively protect our rights in unpatented technology, trade secrets and confidential information. Our policy is to have each employee enter into a confidentiality agreement that contains provisions prohibiting the disclosure of confidential information to anyone outside Immunex. Research and development contracts and relationships with our scientific consultants provide access to aspects of our know-how that are protected generally under confidentiality agreements with the parties involved. These confidentiality agreements may not be honored and we may be unable to protect our rights to our unpatented trade secrets. We may be required to obtain licenses to patents or other proprietary rights from third parties to develop and commercialize our products. Licenses required under third-party patents or proprietary rights may not be made available on terms acceptable to us, if at all. If we do not obtain the required licenses, we could encounter delays in product development while we attempt to redesign products or methods or we could be unable to develop, manufacture or sell products requiring these licenses at all. Our customers may not get reimbursed from third parties, which could adversely affect our sales. The affordability of our products depends substantially on governmental authorities, private health insurers and other organizations, such as health maintenance organizations, reimbursing most of the costs of our 20 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- products and related treatments to our customers. Low reimbursement levels may reduce the demand for, or the price of, our products, which could prevent us from maintaining or achieving profitability on specific products. Since Medicare presently will not reimburse patients for self-administered drugs, Medicare does not cover prescriptions of Enbrel. Although we have been able to obtain sufficient reimbursement for most of our other products, governmental authorities or third parties, or both, may decrease their reimbursement rates or change their reimbursement policies. In addition, we may not be able to obtain sufficient reimbursement for our future products. Our selling practices for oncology products reimbursed by Medicare or Medicaid may be challenged in court, which could result in claims for substantial money damages or changes in our pricing procedures. The federal government and several state agencies have initiated an investigation into our pricing practices and could seek substantial money damages or changes in the manner in which we price our products. If changes are mandated, they could adversely affect the sales of those products. In the United States, pharmaceutical companies frequently grant discounts from list price to physicians and suppliers who purchase their products. Discounts on multiple- source, or generic, pharmaceuticals may be substantial. Government reports have noted that government programs that reimburse medical providers for drugs on the basis of the average wholesale price or wholesale acquisition cost, such as Medicare and Medicaid in many states, may provide significant margins to providers who are able to obtain large discounts from pharmaceutical companies. We have received notice from the U.S. Department of Justice requesting us to produce documents in connection with the Civil False Claims Act investigation of the pricing of our products for sale and eventual reimbursement by Medicare or state Medicaid programs. We also have received a similar state request. Several of our products are regularly sold at substantial discounts from list price. We have consistently required in our contracts of sale that the purchasers appropriately disclose to governmental agencies the discounts that we give to them. We do not know what action, if any, the federal government or any state agency will take as a result of its investigation. We may be required to defend lawsuits or pay damages for product liability claims. Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. Product liability claims, regardless of their merits, could be costly and divert management's attention, or adversely affect our reputation and the demand for our products. We currently maintain product liability insurance coverage based on our product portfolio, sales volumes and claims experienced to date. However, this insurance may not provide us with adequate coverage against potential liabilities either for clinical trials or commercial sales. In the future, insurers may not offer us product liability insurance, may raise the price of this insurance or may limit the coverage. We may be required to pay damages for environmental accidents and to incur significant costs for environmental compliance. Our research and development activities involve the controlled use of hazardous materials, chemicals, viruses and radioactive compounds. In the event of an environmental accident, we could be held liable for any resulting damages, and any liability could materially affect our financial condition. We cannot eliminate the risk of accidental contamination or injury from these materials. In addition, we may be required to incur significant costs to comply with federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials and some types of waste products. If we are unable to attract and retain key employees and consultants, our business could be harmed. The success of our business depends, in large part, on our continued ability to attract and retain highly qualified management, scientific, manufacturing and sales and marketing personnel. Competition for personnel among companies in the biotechnology and pharmaceutical industries is intense. We cannot assure you that we will be able to attract or retain the personnel necessary to support the growth of our business. 21 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- A deterioration in the financial condition of major pharmaceutical wholesalers could result in substantial lost receivables. A significant majority of our sales are made to three pharmaceutical wholesalers. Financial insolvency by one or more of these wholesalers would require us to write off all or a portion of the amounts due us. As of June 30, 2000, the amount due us from these three wholesalers totaled $55.5 million. Foreign currency exchange rate fluctuations could cause our profits to decline. Adverse currency fluctuations between the U.S. dollar and the Euro could cause our manufacturing costs to increase and our profitability to decline. Under the terms of our supply agreement with BI Pharma, the price for our product orders initially is set in Euros. We have the option, at the time of any firm order, to pay the purchase price in Euros, or to fix the currency exchange rate on the date of the order and pay the purchase price in U.S. dollars. Accordingly, future currency exchange rate fluctuations could substantially increase the manufacturing cost of our future product orders, which typically are placed up to nine months in advance. In addition, if we elect to pay the purchase price of any future orders in Euros, currency fluctuations between the time of that order and the time of payment could substantially increase our manufacturing costs for that order. We do not engage in foreign currency hedging transactions. Future acquisitions of or investments in businesses, products or technologies could harm our business, operating results and stock price. We may acquire or invest in other businesses, products or technologies that are intended to complement our existing business. From time to time, we have had discussions and negotiations with companies regarding our acquiring or investing in these companies' businesses, products or technologies, and we regularly engage in these discussions and negotiations in the ordinary course of our business. If completed, these acquisitions or investments will likely involve some or all of the following risks: . difficulty of assimilating the acquired operations and personnel, products or technologies; . commercial failure of acquired products; . disruption of our ongoing business; . diversion of resources; . inability of management to maintain uniform standards, controls, procedures and policies; . difficulty of managing our growth and information systems; . risks of entering markets in which we have little or no prior experience; and . impairment of relationships with employees or customers. Our management has limited prior experience in assimilating acquired companies. We may be unable to successfully integrate any businesses, products, technologies or personnel that might be acquired in the future, and our failure to do so could harm our business and operating results. In addition, future acquisitions or investments could result in potentially dilutive issuances of equity securities, use of cash or incurrence of debt and assumption of contingent liabilities, any of which could have an adverse effect on our business and operating results or the price of our common stock. Risks Related to our Share Price and Corporate Control Our stock price is volatile and the value of your investment may be subject to sudden decreases. Our common stock price, like that of other biotechnology companies, is volatile. As a result, you may not be able to resell your shares at or above the price that you pay for them. Our common stock price may fluctuate due to factors such as: . actual or anticipated product supply constraints; 22 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- . actual or anticipated fluctuations in our quarterly and annual results; . clinical trial results and other product-development announcements by us or our competitors; . regulatory announcements, proceedings or changes; . announcements in the scientific and research community; . competitive product developments; . intellectual property and legal developments; . changes in reimbursement policies or medical practices; . mergers or strategic alliances in the biotechnology and pharmaceutical industries; . any financing transactions we may propose or complete; or . broader industry and market trends unrelated to our performance. During periods of stock market price volatility, share prices of many biotechnology companies have often fluctuated in a manner not necessarily related to the companies' operating performance. Accordingly, our common stock may be subject to greater price volatility than the market as a whole. AHP has a substantial degree of corporate control over many of our strategic decisions, and the interests of AHP could conflict with those of the other holders of our common stock. The concentrated holdings of Immunex common stock by AHP and its resulting control over many of our strategic decisions actions may result in a delay or the deterrence of possible changes in our control, which may reduce the market price of our common stock. As of July 31, 2000, AHP beneficially owned approximately 55% of the outstanding shares of our common stock. As a result, unless and until AHP's percentage ownership of the outstanding shares of our common stock drops below 35%, AHP will continue to exercise significant control over some matters requiring shareholder approval. Under the terms of our governance agreement with AHP, the number of directors AHP is entitled to designate depends on its percentage ownership of our common stock. AHP is currently entitled to designate a total of three out of the nine members of our board of directors. In addition, so long as AHP has the right to designate at least two directors, which applies if AHP's percentage ownership of our common stock is at least 35%, AHP has the right to veto many actions that we may wish to take, including, with specified exceptions: . any change in our capital stock; . any payment of dividends; . any change in the composition of our board (other than directors designated by Immunex); . consolidations, mergers or similar transactions; and . any change in our governing documents, as well as specified operating decisions, such as incurring incremental indebtedness above a specified threshold. The interests of AHP with regard to these matters may conflict with the interests of the other holders of our common stock. Future sales of shares by AHP could affect our stock price. Sales of substantial amounts of our common stock, or the perception that these sales could occur, may adversely affect prevailing market prices for our common stock. On August 9, 2000, we filed a shelf registration statement with the SEC that, once it becomes effective, would allow us to sell up to 20 million shares of newly-issued common stock in a primary offering and AHP to sell up to 50 million shares of Immunex common stock in a secondary-offering. In addition, AHP has demand and piggyback registration rights with respect to its shares of our common stock. As a result, AHP could cause a significant number of additional shares of our common stock to be registered and sold in the public market, which could cause our stock price to decline. Notwithstanding these registration rights, AHP has agreed that, without our prior written 23 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS (continued) ------------------------- consent, it will not, during the period beginning on the date of a sale of our common stock under the shelf registration statement filed August 9, 2000 and ending September 30, 2001, or nine months after the date of the sale, whichever is later: . offer, pledge, sell, contract to sell, sell any option or contract to purchase, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock; or . enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our common stock; whether any transaction described above is to be settled by delivery of our common stock or such other securities, in cash or otherwise. 24 Item 3. MARKET RISKS ------------ We have financial instruments that are subject to interest rate risk including both debt instruments and investment instruments. We invest our cash reserves in marketable securities consisting primarily of U.S. government and corporate obligations. If market interest rates changed relatively by as much as 10%, the net effect on our operating results would not be material. 25 PART II. OTHER INFORMATION ----------------- Item 1. LEGAL PROCEEDINGS ----------------- The description of legal proceedings is incorporated by reference to Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- An annual meeting of the Company's Shareholders ("Shareholders") was held on Tuesday, April 25, 2000 ("Annual Meeting"). Of the 166,608,925 shares outstanding as of the record date, March 8, 2000, there were 152,955,428 shares or 91.8% of the total shares eligible to vote represented in person or by proxy. The following proposal was adopted by the margins indicated: 1. To elect a Board of Directors to hold office until the next annual meeting of shareholders and until their successors are elected and qualified. For Withheld ----------- --------- Edward V. Fritzky 151,655,389 1,300,039 John R. Considine 148,527,062 4,428,366 Kirby L. Cramer 151,717,675 1,237,753 Robert I. Levy 145,168,677 7,786,751 John E. Lyons 151,720,920 1,234,508 Joseph M. Mahady 151,895,362 1,060,066 Edith W. Martin 151,703,686 1,251,742 Peggy V. Phillips 151,609,351 1,346,077 Douglas E. Williams 143,655,384 9,300,004 2. To approve Ernst & Young LLP as the independent auditors to Immunex. For 152,780,027 Against 108,388 Abstain 67,013 Not Voted 13,653,497 Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- a) * Exhibit 10.1 Amendment No.1 to the Enbrel Supply Agreement among Immunex, American Home Products Corporation and Boehringer Ingelheim Pharma KG dated June 27, 2000. Exhibit 10.2 Form of Indemnification Agreement between Immunex and each of its Directors and Executive Officers. Exhibit 27 Financial Data Schedule * Confidential treatment requested as to certain portions b) Reports on Form 8-K None 26 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: 8/10/2000 /s/ Edward V. Fritzky --------- --------------------------------------- Edward V. Fritzky Chief Executive Officer, President, Chairman of the Board and Director (Principal Executive Officer) Date: 8/10/2000 /s/ David A. Mann --------- --------------------------------------- David A. Mann Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 27 EX-10.1 2 0002.txt AMENDMENT NO. 1 TO THE ENBREL SUPPLY AGREEMENT Exhibit 10.1 AMENDMENT NO. 1 TO THE ENBREL(R) SUPPLY AGREEMENT [*] Certain information in this Exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request. AMENDMENT NO. 1 TO THE ENBREL(R) SUPPLY AGREEMENT This Amendment No. 1 ("Amendment No. 1") is made this 27th day of June, 2000 (the "Amendment Effective Date") by and among IMMUNEX CORPORATION, a corporation of the State of Washington, having its principal place of business at 51 University Street, Seattle, Washington 98101, U.S.A., together with its Affiliates ("Immunex"), AMERICAN HOME PRODUCTS CORPORATION, a corporation of the State of Delaware having its corporate headquarters at Five Giralda Farms, Madison, New Jersey 07940, U.S.A. ("AHPC"), acting through its Wyeth-Ayerst Laboratories division, having offices at 555 East Lancaster Avenue, St. Davids, Pennsylvania 19087, U.S.A. ("Wyeth"), and BOEHRINGER INGELHEIM PHARMA KG, a German corporation having a place of business at Birkendorfer Strasse 65, 88397 Biberach an der Riss, Federal Republic of Germany ("BIP"), and amends the Enbrel Supply Agreement effective as of November 5, 1998, by and among Immunex, Wyeth, and BIP (the "Agreement"). WHEREAS, Immunex, Wyeth and BIP have entered into a certain Agreement for BIP's supply of Enbrel(R) (etanercept) to Immunex and Wyeth; WHEREAS, Immunex and Wyeth desire to have BIP manufacture additional quantities of Enbrel, and accordingly, on January 20, 2000, the Parties signed a certain Summary Term Sheet specifying terms and conditions under which BIP would receive certain incentives to enhance the yield from BIP's current production capacity for Enbrel and to perform good faith outsourcing activities with the goal of providing additional near-term bulk drug substance runs for Enbrel; WHEREAS, pursuant to Section 23.9 of the Agreement, the Agreement may only be amended and supplemented by a written instrument signed by the Parties; NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, each intending to be legally bound, hereby agree as follows: 1. Capitalized Terms. All initially capitalized terms used herein and not defined shall have the meanings set forth in the Agreement. 2. New Definitions. Section 1.66 of the Agreement shall be amended to add the following new definitions: Section "Accepted Subsequent Additional Runs" 24.1(d)(2) "Adjusted Annual Minimum" 5.10(c) "Annual Minimum" 5.10(b) "Attempted Original Additional Run" 24.1(a)(2) "Binding Production Schedule" 24.1(a)(1)(i) "Confirmed Outsourcing Costs" 24.1(a) "Outsourcing Activities" 24.1(a) "Original Additional Run" 24.1(a)(1) "ROFR" 24.1(d)(2) "Subsequent Additional Runs" 24.1(c)(3) "Successful Outsourcing Activities" 24.3 "Unsuccessful Outsourcing Activities" 24.2 3. Semi-Exclusive Rights. In consideration of the mutual covenants set forth in this Amendment No. 1, a new Section 3.4 shall be added to the Agreement as follows: 3.4 Semi-Exclusive Rights. Subject to Section 5.10(c) hereof, BIP's rights to manufacture Bulk Drug Substance and Drug Product for Immunex and Wyeth hereunder shall be converted from exclusive (subject to the provisions of Section 3.2 and 3.3 hereof) to semi-exclusive with Immunex and Wyeth. Thus, in addition to the Firm Orders for Bulk Drug Substance and Drug Product placed by the Buyer with BIP in accordance with the terms of this Agreement, Immunex and Wyeth shall also have the right to (a) manufacture any quantities of Bulk Drug Substance in Wyeth's West Greenwich, Rhode Island manufacturing facility or in such other manufacturing facility, including but not limited to, Wyeth's proposed manufacturing facility in Ireland, that is at least [*] percent ([*]%) owned by Immunex or Wyeth or by an Affiliate of either Immunex or Wyeth and (b) determine where the Bulk Drug Substance produced from any such Immunex or Wyeth- owned manufacturing facility would be converted into drug product (unlabeled vials), it being understood that any facility converting such Bulk Drug Substance to drug product for Immunex or Wyeth could be owned by Immunex, Wyeth, by an Affiliate of either Immunex or Wyeth, or by a Third Party. 4. Maximum Request and Annual Minimum. In consideration of BIP's consent to convert its exclusive manufacturing rights to semi-exclusive manufacturing rights described in Paragraph 3 of this Amendment No. 1 and BIP's good faith outsourcing efforts, the Agreement shall be amended to add the following new Section 5.10, as follows: 5.10 Maximum Request; Annual Minimum. (a) Maximum Request. Subject to Section 5.10(c) below, beginning on [*] and continuing through [*], the annual Maximum Request in the Agreement shall be equal to the Annual Minimum as defined in Section 5.10(b) below. Beginning [*], or as otherwise set forth in Section 5.10(c) below, the Maximum Request shall revert to the terms in the original Agreement. Immunex and Wyeth shall waive their ability to reduce the Maximum Request below the Annual Minimum under Section 5.1(b) hereof until an effective date of [*] at the earliest, except to the extent otherwise permitted in Section 5.10(c) below. Subject to Section 5.10(c) below, beginning on [*] and continuing through the [*] Confidential Treatment Requested 2 end of the Supply Term, Immunex and Wyeth shall be entitled to reduce the Maximum Request (unless otherwise agreed in writing among the Parties, to be calculated by using the original Maximum Request herein) by no more than [*] percent ([*]%) per Calendar Year by providing at least the required [*] ([*]) months' prior written notice to BIP (e.g., notice by [*] for a potential reduction in the Maximum Request effective as of [*], etc.). It is understood by the Parties that the Maximum Request valid through [*] shall not constitute a guaranty by BIP to reserve permanent capacity through [*] exceeding the original Maximum Request of [*] Bulk Drug Substance Runs. However, to carry out the Parties' intentions, to the extent that BIP acquires any Original Additional Run or Subsequent Additional Run as a result of its Outsourcing Activities, (1) all such Original Additional Runs shall be reserved for Buyer through [*] and (2) Buyer shall have a ROFR for any Subsequent Additional Run during Calendar Years [*] and [*], and such ROFR shall be exercised according to Section 24.1(d)(2) hereof. Moreover, the absolute minimum of the Maximum Request after permitted reductions under Section 5.1(b) of the original Agreement shall always be the required capacity for [*] kg of Bulk Drug Substance calculated in accordance with the original Production Assumptions herein. (b) Annual Minimum. Buyer shall guarantee BIP an annual minimum of [*] Bulk Drug Substance Runs (the "Annual Minimum") through [*], subject to the terms of this Agreement. The [*] Bulk Drug Substance Runs is believed to be equivalent to the capacity [*] BIP [*] L fermenters. Subject to Section 5.10(c) below, beginning on [*] and continuing through the end of the Supply Term, Immunex and Wyeth shall have the same ability to reduce the Annual Minimum as they have to reduce the Maximum Request as provided in Section 5.10(a) above and Section 5.10(c) below. (c) Potential Adjustment to the Maximum Request and Annual Minimum. Notwithstanding anything herein to the contrary, if Immunex and Wyeth reasonably determine in good faith that the yearly worldwide market requirements for Bulk Drug Substance will fall below the Annual Minimum for a particular Calendar Year (such calculation to be based on the prior year's Production Assumptions and the basic success rate laid down in Section 5.1(a)(1) of the original Agreement), and Immunex and Wyeth provide written notice thereof to BIP, including a certification [*] Confidential Treatment Requested 3 signed by an officer of Immunex and Wyeth that verifies their forecast for worldwide market requirements for Bulk Drug Substance for the respective Calendar Year, then the terms set forth in Section 5.1(b) of the original Agreement regarding downward adjustments in the Maximum Request shall apply and shall supersede the provisions in Section 5.10(a) above regarding revisions to the Maximum Request and the provisions in Section 5.10(b) above regarding revisions to the Annual Minimum. Thereafter, and for so long during the Supply Term that the yearly worldwide market requirements for Bulk Drug Substance remain below the Annual Minimum, and except as otherwise agreed among the Parties, Buyer shall guarantee BIP an adjusted annual minimum (the "Adjusted Annual Minimum") that shall supersede the Annual Minimum. The Adjusted Annual Minimum shall be the greater of (1) [*] contained in the [*] provided to BIP by Immunex and Wyeth for [*] or (2) [*], as such [*] by Immunex and Wyeth pursuant to [*]. If the [*] are higher than the [*] thereof provided by Immunex and Wyeth to BIP [*]shall be adjusted [*]. If the [*] is applicable, then [*]. Immunex and Wyeth shall [*] for [*] greater than either (i) [*] or (ii) [*]. Immunex and Wyeth shall in a timely manner inform BIP in writing of [*], [*] Confidential Treatment Requested 4 and BIP shall within thirty (30) days after receipt of such notice provide its own written notice to Immunex and Wyeth of which option BIP has selected (i.e., either (i) or (ii) in the immediately preceding sentence). By way of example only, if [*] 5. Extension of Supply Term of Agreement. In consideration of BIP's consent to convert its exclusive manufacturing rights to semi-exclusive manufacturing rights as described in Paragraph 3 of this Amendment No. 1, Section 19.1 of the Agreement shall be amended and restated as follows: 19.1 Term; Renewal. Unless sooner terminated pursuant to the terms of this Agreement, the term of this Agreement shall commence upon the Effective Date and shall continue thereafter until at least [*] (the "Supply Term"). This Agreement and the Supply Term shall automatically continue from Calendar Year-to-Calendar Year thereafter unless terminated by either Party by providing at least [*] years' prior [*] Confidential Treatment Requested 5 written notice to the other Party, provided that neither Party may provide such notice prior to the end of the [*] Contract Year, i.e., [*]. For purposes of this Section 19.1, Immunex and Wyeth shall be deemed the same Party. 6. New Article 24. The Agreement shall be amended to add the following new provision, Article 24, as follows: ARTICLE 24. CONTRACTUAL INCENTIVES TO BIP FOR OUTSOURCING ACTIVITIES 24.1 Costs of Outsourcing; Ordering Additional Runs; [*] Pricing for Additional Runs; ROFR; Drug Product and Finished Product Capacity. (a) Costs of Outsourcing. Buyer shall pay [*] percent ([*]%) of the costs of BIP's Outsourcing Activities (as defined below), not to exceed DM [*] ([*]Deutsche Mark), that are directly related to BIP providing the additional Bulk Drug Substance Runs for the Product, as described below. These outsourcing costs, which BIP shall further demonstrate for Buyer by having BIP's outside auditor provide Buyer prior to any payments according to Section 24.1(a)(1) below a letter confirming that the DM [*] ([*] Deutsche Mark) figure, or any other amount not to exceed such figure (the "Confirmed Outsourcing Costs"), is a fair calculation of BIP's costs for Outsourcing Activities, are in the order of DM [*] ([*] Deutsche Mark) for technology transfer and DM [*] ([*] Deutsche Mark) in loss of profitability. For purposes hereof, "Outsourcing Activities" shall mean that BIP has and shall forthwith act in good faith and use commercially reasonable efforts to diligently and in a timely manner pursue the outsourcing of such products that BIP reasonably has determined to be and forthwith reasonably determines would be necessary to free-up the [*] Original Additional Runs (as defined below) within the [*]month period from [*] to [*], which activities shall include BIP's efforts and commitment of financial resources (in the order of DM [*] for technology transfer) and personnel resources commensurate to those efforts and resources that would be employed by BIP to make additional near-term production capacity available for a product having similar market potential as the Product, it being understood that BIP is not promising the success of these efforts nor guaranteeing that it will be able to make available the Original Additional Runs. (1) [*] percent ([*]%) of the Confirmed Outsourcing Costs shall be paid by Buyer to BIP according to the following schedule: (i) [*] percent ([*]%) of the Confirmed Outsourcing Costs shall be paid when BIP provides a written, binding production schedule (the "Binding Production Schedule") to Buyer that [*] Confidential Treatment Requested 6 indicates a total of at least [*] Bulk Drug Substance Runs (comprised of [*] Bulk Drug Substance Runs at the beginning of 2000 carried over from 1999 + [*] Bulk Drug Substance Runs from 2000 + [*] Bulk Drug Substance Runs in the first [*] months of 2001 + at least [*] additional Bulk Drug Substance Runs) over the [*]-month period from [*] to [*], and also indicates a total of at least [*] Bulk Drug Substance Runs (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance Runs in 2000 + [*] Bulk Drug Substance Runs in 2001 + at least [*] additional Bulk Drug Substance Runs) over the [*]- month period from [*] to [*]. Such amount shall be nonrefundable when paid. (ii) [*] percent ([*]%) of the Confirmed Outsourcing Costs shall be paid when BIP provides a Binding Production Schedule to Buyer that indicates a total of at least [*] Bulk Drug Substance Runs (comprised of [*] Bulk Drug Substance Runs at the beginning of 2000 carried over from 1999 + [*] Bulk Drug Substance Runs from 2000 + [*] Bulk Drug Substance Runs in the first [*] months of 2001 + at least [*] additional Bulk Drug Substance Runs) over the [*]-month period from [*] to [*], and also indicates a total of at least [*] Bulk Drug Substance Runs (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance Runs in 2000 + [*] Bulk Drug Substance Runs in 2001 + at least [*] additional Bulk Drug Substance Runs) over the [*]-month period from [*] to [*]. Such amount shall be nonrefundable when paid. (iii) [*] percent ([*]%) of the Confirmed Outsourcing Costs shall be paid when BIP provides a Binding Production Schedule to Buyer that indicates a total of [*] Bulk Drug Substance Runs (comprised of [*] Bulk Drug Substance Runs at the beginning of 2000 carried over from 1999 + [*] Bulk Drug Substance Runs from 2000 + [*] Bulk Drug Substance Runs in the first [*] months of 2001 + [*] additional Bulk Drug Substance Runs) over the [*]-month period from [*] to [*], and also indicates a total of [*] Bulk Drug Substance Runs (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance Runs in 2000 + [*] Bulk Drug Substance Runs in 2001 + [*] additional Bulk Drug Substance Runs) over the [*]-month period from [*] to [*]. Such amount shall be nonrefundable when paid. [*] Confidential Treatment Requested 7 The additional Bulk Drug Substance Runs to be performed by BIP for Buyer over the [*]-month period from [*] to [*] (each of these additional Bulk Drug Substance Runs shall be referred to as an "Original Additional Run," and collectively, as the "Original Additional Runs") shall be incremental to the [*] Bulk Drug Substance Runs for the Product in 2000 (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance Runs) and the [*] Bulk Drug Substance Runs for the Product in 2001. On each Binding Production Schedule, BIP shall clearly identify to Buyer by asterisk or otherwise which Bulk Drug Substance Runs are the Original Additional Runs. Any subsequent revisions to a Binding Production Schedule must be agreed upon in writing by the Parties. (2) Regardless of whether or not BIP has provided a Binding Production Schedule to Buyer under Section 24.1(a)(1) above, [*] percent ([*]%) of the Confirmed Outsourcing Costs shall be paid by Buyer to BIP on an incremental basis, i.e., Buyer shall pay [*] percent ([*]%) of the Confirmed Outsourcing Costs to BIP for each Attempted Original Additional Run prior to [*]. For purposes hereof, an "Attempted Original Additional Run" shall mean that BIP in good faith attempted a Bulk Drug Substance Run that advanced to at least [*]. (b) Firm Order for the Original Additional Runs. Buyer hereby issues a Firm Order for all of the Original Additional Runs made available during the period from [*] through [*]. Such Firm Order shall constitute a binding order for every Original Additional Run that BIP makes available as set forth in the Binding Production Schedule or as otherwise agreed upon in writing by the Parties, not to exceed [*] Original Additional Runs without Buyer's prior written approval. As the Parties are of the common opinion that any Original Additional Run would be the result of BIP's good faith outsourcing activities with the goal of providing additional near-term Bulk Drug Substance Runs for the Product, BIP shall in no way be liable to Buyer or anybody else for the non-fulfillment of such Firm Orders for the Original Additional Runs. (c) [*] Pricing. The Bulk Drug Substance price shall be set at a total of DM [*]/gram for each Bulk Drug Substance Run greater than (1) [*] Bulk Drug Substance Runs (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance Runs in 2000 + [*] Bulk Drug Substance Runs in the first [*] months of 2001) that is performed over the [*]-month period from [*]to [*], (2) [*] Bulk Drug Substance Runs (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance [*] Confidential Treatment Requested 8 Runs in 2000 + [*] Bulk Drug Substance Runs in 2001) that is performed over the [*]-month period from [*]to [*], provided, however, that any Bulk Drug Substance Run eligible for [*] pricing under Section 24.1(c)(1) above shall not be eligible for [*] pricing under this Section 24.1(c)(2), and (3) [*] Bulk Drug Substance Runs that is performed per year for Calendar Years [*] (for each of these [*] Calendar Years, the additional Bulk Drug Substance Runs made available by BIP to Buyer in the particular Calendar Year shall be referred to as the "Subsequent Additional Runs"), provided, however, that the number of Bulk Drug Substance Runs that are performed in each of [*] (for the last [*] months of [*]) [*] that are eligible for the [*] pricing shall not exceed the difference between the number of actual Bulk Drug Substance Runs that are performed between [*]to [*] and [*] Bulk Drug Substance Runs (comprised of the [*] carryover Bulk Drug Substance Runs + [*] Bulk Drug Substance Runs in 2000 + [*] Bulk Drug Substance Runs in 2001). [*] (d) BIP Written Notice of Subsequent Additional Runs; ROFR for Subsequent Additional Runs. (1) By [*], BIP shall provide written notice to Buyer of the number of Subsequent Additional Runs that are available in [*].By [*], BIP shall provide written notice to Buyer of the number of Subsequent Additional Runs that are available in [*]. (2) Buyer shall have the right of first refusal as to any Third Parties (the "ROFR") to order any or all of such Subsequent Additional Runs in [*] and [*] to the extent provided in this paragraph, in either Calendar Year not to exceed [*] Subsequent Additional Runs without Buyer's prior written approval. This ROFR for Subsequent Additional Runs with respect to [*] and [*], respectively, shall be exercised by Buyer, if at all, by providing written notice to BIP, within [*] days after BIP's written notice to Buyer of the number of Subsequent Additional Runs that BIP would make available in [*] or [*], as applicable, of that number of such Subsequent Additional Runs for which Buyer thereby issues a Firm Order (the "Accepted Subsequent Additional Runs"). Upon receipt of any such notice from Buyer, such Firm Orders shall constitute binding orders, and BIP shall dedicate all of such Accepted Subsequent Additional Runs for the production of Bulk [*] Confidential Treatment Requested 9 Drug Substance. (e) Potential Refund of Confirmed Outsourcing Costs. If BIP does not attempt at least [*] Accepted Subsequent Additional Runs in [*], then no later than [*], BIP shall refund to Buyer a total of [*] percent ([*]%) of the Confirmed Outsourcing Costs previously paid by Buyer for the Original Additional Runs under Section [*] above. (f) Drug Product and Finished Product Capacity. BIP hereby undertakes to maintain sufficient manufacturing capacity and a sufficient number of employees with such expertise and experience as is necessary or appropriate to convert the Bulk Drug Substance Lots resulting from the Original Additional Runs and the Accepted Subsequent Additional Runs into Drug Product and, if ordered, Finished Product, in accordance with the terms hereof, including without limitation, Section 4.3 hereof. 24.2 Additional Contractual Incentives for Unsuccessful Outsourcing Activities. Instead of, and not in addition to, the contractual incentives and other terms provided to BIP in Section 24.3 below for Successful Outsourcing Activities (as defined below), BIP shall receive the following contractual incentives and be subject to the following terms set forth in this Section 24.2 as a result of Unsuccessful Outsourcing Activities, or alternatively, under the conditions specified in Section 24.3(e) below. For purposes hereof, "Unsuccessful Outsourcing Activities" shall mean that despite BIP's Outsourcing Activities, BIP has been unable to provide Buyer at least [*] successful harvests (i.e., Bulk Drug Substance Runs resulting in vialed and released Drug Product within customary timeframes after each harvest) by [*]. (a) Bulk Drug Substance Cost. The cost of Bulk Drug Substance shall be fixed at DM [*]/gram, except for (1) Bulk Drug Substance that is [*] priced at DM [*]/gram under Section 24.1(c) above, (2) the potential annual price adjustments resulting from the [*] yield sharing between BIP and Buyer beginning [*] as described in Section 24.2(b) below and (3) the price adjustments permitted under Sections 5.6(a), 5.6(b) and 5.6(c) hereof. (b) Yield Enhancement. BIP and Buyer shall share the benefit of all accrued yield increases from production of Bulk Drug Substance Lots on a [*] basis (i.e., accrued yield increases shall be measured from the Production Assumptions that were in effect on the Effective Date of the Agreement through the Production Assumptions calculated with respect to production through [*]), to be computed annually pursuant to Section 5.3(b) hereof beginning with the first potential annual price adjustment effective [*], provided, however, that the formula and example set forth in Section 5.3(b) hereof shall be adjusted to reflect such [*] sharing of any price adjustments. (c) Risk Sharing. Beginning with respect to Calendar Year [*], BIP and Buyer [*] Confidential Treatment Requested 10 shall each Calendar Year share on a [*] basis the costs of Bulk Drug Substance Runs that do not meet the Bulk Drug Substance Specifications (calculated on the basis of the Product Price and original Production Assumptions hereunder less [*]% for profit), but only to the extent that those failed Bulk Drug Substance Runs represent a failure rate greater than [*] percent ([*]%) of all the Bulk Drug Substance Runs performed during that Calendar Year [*]. Buyer's payment obligations for such Bulk Drug Substance Runs as set forth above shall only apply to the extent that a Bulk Drug Substance Run failed at the [*] in the Process. BIP shall accept the risk of the first [*] percent ([*]%) of Bulk Drug Substance Runs each Calendar Year that fail at the [*] in the Process. Buyer's payment obligations under this Section 24.2(c) shall be deemed to satisfy any payment obligations of Buyer under the provisions of Section 6.3 hereof to the extent any such provisions could be construed to require Buyer to pay any portion of the cost of Bulk Drug Substance Runs that do not meet the Bulk Drug Substance Specifications. 24.3 Contractual Incentives for Successful Outsourcing Activities. Instead of, and not in addition to, the contractual incentives and other terms provided to BIP in Section 24.2 above for Unsuccessful Outsourcing Activities, BIP shall receive the following contractual incentives and be subject to the following terms set forth in this Section 24.3 in the event that BIP's efforts have resulted in Successful Outsourcing Activities, except as otherwise set forth in Section 24.3(e) below. For purposes hereof, "Successful Outsourcing Activities" shall mean that as a result of BIP's Outsourcing Activities, BIP has achieved at least [*] successful harvests (i.e., Bulk Drug Substance Runs resulting in vialed and released Drug Product within customary timeframes after each harvest) by [*]: (a) Bulk Drug Substance Cost. The cost of Bulk Drug Substance shall be fixed at DM [*]/gram, except for (1) Bulk Drug Substance that is [*] priced at DM [*]/gram under Section 24.1(c) above, (2) the potential annual price adjustments resulting from the [*] yield sharing between BIP and Buyer [*] as described in Section 24.3(b) below and (3) the price adjustments permitted under Sections 5.6(a), 5.6(b) and 5.6(c) hereof. (b) Yield Enhancement. BIP shall [*]. Thereafter, BIP and Buyer shall share the benefit of all accrued yield increases from production of Bulk Drug Substance Lots on a [*] basis (i.e., accrued yield increases shall be measured from the Production Assumptions that were in effect on the Effective Date of the Agreement through the Production Assumptions calculated with respect to production through [*]), to be computed annually pursuant to Section 5.3(b) hereof beginning with the first potential annual price [*] Confidential Treatment Requested 11 adjustment effective [*], provided, however, that the formula and example set forth in Section 5.3(b) hereof shall be adjusted to reflect such [*] sharing of any price adjustments. (c) Risk Sharing. Beginning with respect to Calendar Year [*] and continuing with Calendar Years [*], BIP shall accept [*] percent ([*]%) of the risk that Bulk Drug Substance Runs do not meet the Bulk Drug Substance Specifications. In Calendar Year [*] and then beginning again with respect to Calendar Year [*] and thereafter for subsequent Calendar Years through the end of the Supply Term, BIP and Buyer shall each Calendar Year share on a [*] basis the costs of Bulk Drug Substance Runs that do not meet the Bulk Drug Substance Specifications (calculated on the basis of the Product Price and original Production Assumptions hereunder less [*]% for profit), but only to the extent that those failed Bulk Drug Substance Runs represent a failure rate greater than [*] percent ([*]%) of all the Bulk Drug Substance Runs performed during that Calendar Year. Buyer's payment obligations for such Bulk Drug Substance Runs as set forth above shall only apply to the extent that a Bulk Drug Substance Run failed at the [*] in the Process. BIP shall accept the risk of the first [*] percent ([*]%) of Bulk Drug Substance Runs each Calendar Year that fail at the [*] in the Process. Buyer's payment obligations under this Section 24.3(c) shall be deemed to satisfy any payment obligations of Buyer under the provisions of Section 6.3 hereof to the extent any such provisions could be construed to require Buyer to pay any portion of the cost of Bulk Drug Substance Runs that do not meet the Bulk Drug Substance Specifications. (d) Reconciliation. While the Parties will not know if BIP has achieved Successful Outsourcing Activities until [*], the yield enhancement provisions under Section 24.2(b) above contemplate shared savings from yield enhancements beginning on [*]. Therefore, if BIP has achieved Successful Outsourcing Activities, then within a reasonable time after [*], the Parties shall reconcile any shared savings during the first [*] months of [*] with the applicable yield enhancement provisions under Section 24.3(b) above. (e) Reversion to Terms in Section 24.2. If BIP either provides written notice to Buyer under Section 24.1(d) above that BIP will not make available at least [*] Subsequent Additional Runs in [*] or [*], or if BIP in fact does not attempt at least [*] Subsequent Additional Runs in [*] or [*], then from [*] of either [*] or [*], as the case may be depending on which is the first Calendar Year for which BIP provides notice that it will not make available at least [*] Subsequent Additional Runs or does not in fact attempt such [*] Subsequent Additional Runs, and through the remainder of the Supply Term, the terms and conditions in Section 24.3(a) - (c) applicable to Successful Outsourcing Activities shall [*] Confidential Treatment Requested 12 revert to and be superseded by the terms and conditions in Section 24.2(a) - (c) applicable to Unsuccessful Outsourcing Activities, provided, however, that upon such reversion, in no event shall (1) BIP have any obligation to refund to Buyer any benefits which had accrued to BIP from yield enhancement in earlier Calendar Years under Section 24.3(b) above, or (2) Buyer have any additional obligation to BIP for risk sharing costs in earlier Calendar Years under Section 24.2(c) above. 7. Rhode Island Manufacturing Facility. BIP shall provide the assistance to Immunex and Wyeth in the transfer of technology related to manufacture of the Product to Wyeth's manufacturing facility in West Greenwich, Rhode Island in a separate agreement of even date herewith, in which the Parties have agreed upon the requested activities, timelines, manpower and financial terms. 8. Effect of Amendment No. 1 on Agreement. Except as otherwise set forth in this Amendment No. 1, all other terms and provisions of the Agreement shall remain in full force and effect. In the event of any conflict between the terms and conditions of the Agreement and the terms and conditions of this Amendment No. 1, the terms and conditions of this Amendment No. 1 shall control. 9. Counterparts. This Amendment No. 1 may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute together one and the same instrument. IN WITNESS WHEREOF, the Parties have, by their duly authorized persons, executed this Amendment No. 1 as of the Amendment Effective Date. IMMUNEX CORPORATION AMERICAN HOME PRODUCTS CORPORATION, acting through its Wyeth-Ayerst Laboratories division By: /s/ Peggy V. Phillips By: /s/ Kenneth J. Martin ------------------------------- --------------------------------- Name: Peggy V. Phillips Name: Kenneth J. Martin ----------------------------- ------------------------------- Title: Executive VP & COO Title: Sr. Vice President & Chief ---------------------------- ------------------------------ Financial Officer ------------------------------ Date: 6/27/00 Date: 6/27/00 ----------------------------- ------------------------------- BOEHRINGER INGELHEIM PHARMA KG ppa. ppa. By: /s/ Wolfram Carius By: /s/ Rolf Werner ------------------------------- --------------------------------- Name: Wolfram Carius Name: Rolf Werner ----------------------------- ------------------------------- Title: Head of Aidpharm Manuf. Title: CD Biopharmaceuticals ---------------------------- ------------------------------ Date: 30.06.00 Date: 30.06.00 ----------------------------- ------------------------------- 13 EX-10.2 3 0003.txt FORM OF INDEMNIFICATION AGREEMENT Exhibit 10.2 IMMUNEX CORPORATION FORM OF INDEMNIFICATION AGREEMENT INDEMNIFICATION AGREEMENT, dated as of ______________________, 2000, between IMMUNEX CORPORATION, a Washington corporation (the "Company"), and _______________________, a director and/or officer of the Company (the "Indemnitee"). RECITALS A. Indemnitee is a director and/or officer of the Company and in such capacity is performing valuable services for the Company. B. The Company has adopted bylaws (the "Bylaws") providing for the indemnification of the directors and officers of the Company to the full extent permitted by the Business Corporation Law of Washington (the "Statute"). C. The Bylaws and the Statute specifically provide that they are not exclusive, and thereby contemplate that contracts may be entered into between the Company and the members of its Board of Directors and its officers with respect to indemnification of such directors and officers. D. In order to induce Indemnitee to serve, or to continue to serve, as a director and/or officer of the Company, the Company has agreed to enter into this Agreement with Indemnitee. AGREEMENTS In consideration of the recitals above, the mutual covenants and agreements herein contained, and Indemnitee's continued service as a director and/or officer after the date hereof, the parties to this Agreement agree as follows: 1. Indemnity of Indemnitee 1.1 Scope The Company agrees to hold harmless and indemnify Indemnitee to the full extent permitted by law, notwithstanding that such indemnification is not specifically authorized by this Agreement, the Company's Articles of Incorporation, the Bylaws, the Statute or otherwise. In the event of any change, after the date of this Agreement, in any applicable law, statute or rule regarding the right of a Washington corporation to indemnify a member of its board of directors or an officer, such changes, to the extent that they would expand Indemnitee's rights hereunder, shall be within the purview of Indemnitee's rights and the 1 Company's obligations hereunder, and, to the extent that they would narrow Indemnitee's rights hereunder, shall be excluded from this Agreement; provided, however, that any change that is required by applicable laws, statutes or rules to be applied to this Agreement shall be so applied regardless of whether the effect of such change is to narrow Indemnitee's rights hereunder. 1.2 Nonexclusivity The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company's Articles of Incorporation, the Bylaws, any agreement, any vote of shareholders or disinterested directors, the Statute, or otherwise, whether as to action in Indemnitee's official capacity or otherwise. 1.3 Included Coverage If Indemnitee was or is made a party, or is threatened to be made a party, to or is otherwise involved (including, without limitation, as a witness) in any Proceeding (as defined below), the Company shall hold harmless and indemnify Indemnitee from and against any and all losses, claims, damages, liabilities or expenses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, amounts paid in settlement and other expenses incurred in connection with such Proceeding) actually and reasonably incurred or suffered by Indemnitee in connection therewith (collectively, "Damages"). 1.4 Definition of Proceeding For purposes of this Agreement, "Proceeding" shall mean any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, in which Indemnitee is, was or becomes involved (including, without limitation, as a witness) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company or that, being or having been such a director, officer, employee or agent, Indemnitee is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise (collectively, a "Related Company"), whether the basis of such proceeding is alleged action (or inaction) by Indemnitee in an official capacity as such a director, officer, partner, trustee, employee or agent or in any other capacity while serving as such a director, officer, partner, trustee, employee or agent; provided, however, that, except with respect to an action to enforce the provisions of this Agreement, "Proceeding" shall not include any action, suit or proceeding (or part thereof) instituted by or at the direction of Indemnitee unless such action, suit or proceeding is or was authorized or ratified by a majority of the disinterested directors of the Company's Board of Directors. 1.5 Determination of Entitlement In the event that a determination of Indemnitee's entitlement to indemnification is required pursuant to Section 23B.08.550 of the Statute or a successor statute or pursuant to other applicable law, the appropriate decision- maker shall make such determination; 2 provided, however, that Indemnitee shall initially be presumed in all cases to be entitled to indemnification, that Indemnitee may establish a conclusive presumption of any fact necessary to such a determination by delivering to the Company a declaration made under penalty of perjury that such fact is true. 1.6 Survival The indemnification provided under this Agreement shall apply to any and all Proceedings, notwithstanding that Indemnitee has ceased to be a director, officer, employee, trustee or agent of the Company or a Related Company. 2. Expense Advances 2.1 Generally The right to indemnification of Damages conferred by Section 1 shall include the right to have the Company pay Indemnitee's expenses in any Proceeding as such expenses are incurred and in advance of such Proceeding's final disposition (such right is referred to hereinafter as an "Expense Advance"). 2.2 Conditions to Expense Advance The Company's obligation to provide an Expense Advance is subject to the following conditions: 2.2.1 Undertaking If the Proceeding arose in connection with Indemnitee's service as a director or an officer of the Company (and not in any other capacity in which Indemnitee rendered service, including service to any Related Company), then Indemnitee or his or her representative shall execute and deliver to the Company an undertaking, which need not be secured and shall be accepted without reference to Indemnitee's financial ability to make repayment, by or on behalf of Indemnitee to repay all Expense Advances if and to the extent that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Indemnitee is not entitled to be indemnified for such Expense Advance under this Agreement or otherwise. 2.2.2 Cooperation Indemnitee shall give the Company such information and cooperation as it may reasonably request and as shall be within Indemnitee's power. 2.2.3 Affirmation Indemnitee shall furnish, upon request by the Company and if required under applicable law, a written affirmation of Indemnitee's good faith belief that any applicable standards of conduct have been met by Indemnitee. 3 3. Procedures for Enforcement 3.1 Enforcement In the event that a claim for indemnity, an Expense Advance or otherwise is made hereunder and is not paid in full within 60 days (20 days for an Expense Advance) after written notice of such claim is delivered to the Company, Indemnitee may, but need not, at any time thereafter bring suit against the Company to recover the unpaid amount of the claim (an "Enforcement Action"). 3.2 Presumptions in Enforcement Action In any Enforcement Action the following presumptions (and limitation on presumptions) shall apply: (a) The Company shall conclusively be presumed to have entered into this Agreement and assumed the obligations imposed on it hereunder in order to induce Indemnitee to continue as a director and/or officer of the Company; (b) Neither (i) the failure of the Company (including the Company's Board of Directors, independent or special legal counsel or the Company's shareholders) to have made a determination prior to the commencement of the Enforcement Action that indemnification of Indemnitee is proper in the circumstances nor (ii) an actual determination by the Company, its Board of Directors, independent or special legal counsel or shareholders that Indemnitee is not entitled to indemnification shall be a defense to the Enforcement Action or create a presumption that Indemnitee is not entitled to indemnification hereunder; and (c) If Indemnitee is or was serving as a director, officer, employee, trustee or agent of a corporation of which a majority of the shares entitled to vote in the election of its directors is held by the Company or in an executive or management capacity in a partnership, joint venture, trust or other enterprise of which the Company or a wholly owned subsidiary of the Company is a general partner or has a majority ownership, then such corporation, partnership, joint venture, trust or enterprise shall conclusively be deemed a Related Company and Indemnitee shall conclusively be deemed to be serving such Related Company at the request of the Company. 3.3 Attorneys' Fees and Expenses for Enforcement Action In the event Indemnitee is successful in whole or in part in an Enforcement Action, the Company shall indemnify and hold harmless Indemnitee against all of Indemnitee's fees and expenses in bringing and pursuing such Enforcement Action (including attorneys' fees at any stage, including on appeal); provided, however, that the Company shall not be required to provide such indemnity for such attorneys' fees or expenses if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such Enforcement Action was not made in good faith or was frivolous. 4 4. Limitations on Indemnity; Mutual Acknowledgment 4.1 Limitation on Indemnity No indemnity pursuant to this Agreement shall be provided by the Company: (a) On account of any suit in which a final, unappealable judgment is rendered against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company in violation of the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended; or (b) For Damages that have been paid directly to Indemnitee by an insurance carrier under a policy of officers' and directors' liability insurance maintained by the Company. 4.2 Mutual Acknowledgment The Company and Indemnitee acknowledge that, in certain instances, federal law or public policy may override applicable state law and prohibit the Company from indemnifying Indemnitee under this Agreement or otherwise. In all such cases, the Company shall have no indemnification obligation hereunder. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the "SEC") has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Furthermore, Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 5. Notification and Defense of Claim 5.1 Notification Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company shall not relieve the Company from any liability which it may have to Indemnitee under this Agreement unless and only to the extent that such omission can be shown to have prejudiced the Company's ability to defend the Proceeding. 5.2 Defense of Claim With respect to any such Proceeding as to which Indemnitee notifies the Company of the commencement thereof: (a) The Company may participate therein at its own expense; 5 (b) The Company, jointly with any other indemnifying party similarly notified, may assume the defense thereof, with counsel satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election so to assume the defense thereof, the Company shall not be liable to Indemnitee under this Agreement for any legal or other expenses (other than reasonable cost of investigation) subsequently incurred by Indemnitee in connection with the defense thereof unless (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have reasonably concluded, with the concurrence of the Company, which shall not be unreasonably withheld, that there may be a conflict of interest between the Company and Indemnitee in the conduct of the defense of such action, or (iii) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Indemnitee with the Company's consent shall have made the conclusion provided for in (ii) above; (c) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Company's written consent; (d) The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent; (e) Neither the Company nor Indemnitee shall unreasonably withhold its, his or her consent to any proposed settlement; and (f) Any requirement for the Company's consent or concurrence set forth in this Section 5.2 shall be satisfied by obtaining the consent of a majority of the disinterested directors of the Company's Board of Directors. 6. Severability Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company's inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provision of this Agreement shall be severable, as provided in this Section 6. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms. 7. Governing Law; Binding Effect; Amendment and Termination (a) This Agreement shall be interpreted and enforced in accordance with the laws of the State of Washington. 6 (b) This Agreement shall be binding upon Indemnitee and upon the Company, its successors and assigns, and shall inure to the benefit of Indemnitee, Indemnitee's heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns. (c) No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. IMMUNEX CORPORATION By ------------------- Its ------------------- INDEMNITEE: ------------------- (Printed Name) 7 EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheet as of June 30, 2000 and the consolidated statement of operations for the six-month period ended June 30, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1999 JAN-01-2000 JUN-30-2000 151,377 598,627 60,119 1,245 19,029 867,521 228,419 87,646 1,114,072 151,499 450,000 0 0 845,940 (334,203) 1,114,072 362,894 392,188 104,832 334,967 0 485 6,873 74,388 714 73,674 0 0 0 73,674 0.15 0.14
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