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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12477
AMGEN INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3540776
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Dehavilland Drive, Thousand Oaks, California 91320-1789
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 447-1000
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
As of June 30, 1995, the registrant had 263,477,780(A) shares of
Common Stock, $.0001 par value, outstanding.
- ---------------
(A)All share numbers have been adjusted retroactively to reflect a
two-for-one split of the Common Stock to be effected in the form
of a 100 percent stock dividend to be distributed on August 15,
1995 to stockholders of record on August 1, 1995.
AMGEN INC.
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements ......................3
Condensed Consolidated Statements of
Operations - three and six months
ended June 30, 1995 and 1994 ................4 - 5
Condensed Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 .............6
Condensed Consolidated Statements of
Cash Flows - six months
ended June 30, 1995 and 1994 ................7 - 8
Notes to Condensed Consolidated Financial
Statements ......................................9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ...............................14
PART II OTHER INFORMATION
Item 1. Legal Proceedings ........................18
Item 4. Submission of Matters to a Vote of
Security Holders .........................20
Item 5. Other Information ........................20
Item 6. Exhibits and Reports on Form 8-K .........20
Signatures........................................21
Index to Exhibits.................................22
Page 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The information in this report for the three and six months ended
June 30, 1995 and 1994, is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which Amgen Inc. ("Amgen"
or the "Company") considers necessary for a fair presentation of the
results of operations for those periods.
The condensed financial statements should be read in conjunction
with the Company's financial statements and the notes thereto
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994.
Interim results are not necessarily indicative of results for
the full fiscal year.
Page 3
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
Revenues:
Product sales .......... $462,533 $388,575 $873,770 $734,306
Corporate partner
revenues .............. 21,535 18,838 41,311 32,829
Royalty income ......... 9,644 7,272 17,997 11,548
-------- -------- -------- --------
Total revenues ....... 493,712 414,685 933,078 778,683
-------- -------- -------- --------
Operating expenses:
Cost of sales .......... 76,438 64,394 143,011 117,677
Research and
development ........... 108,358 80,230 222,241 153,955
Marketing and selling .. 69,880 59,591 128,641 112,764
General and
administrative ........ 34,538 30,186 69,176 58,494
Loss of affiliates, net 13,320 8,627 26,005 15,884
-------- -------- -------- --------
Total operating
expenses ........... 302,534 243,028 589,074 458,774
-------- -------- -------- --------
Operating income ........ 191,178 171,657 344,004 319,909
-------- -------- -------- --------
Other income (expense):
Interest and other
income ................ 18,361 3,724 31,260 9,235
Interest expense, net .. (3,750) (2,747) (7,534) (5,387)
-------- -------- -------- --------
Total other income
(expense) .......... 14,611 977 23,726 3,848
-------- -------- -------- --------
Income before income
taxes .................. 205,789 172,634 367,730 323,757
Provision for income
taxes .................. 68,085 65,170 121,402 122,833
-------- -------- -------- --------
Net income .............. $137,704 $107,464 $246,328 $200,924
======== ======== ======== ========
See accompanying notes.
(Continued on next page)
Page 4
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- --------- ---------
Earnings per share:
Primary ............... $ .49 $ .38 $ .88 $ .72
Fully diluted ......... $ .49 $ .38 $ .87 $ .72
Shares used in
calculation of:
Primary earnings per
share ................ 278,830 279,218 279,230 280,972
Fully diluted earnings
per share ............ 280,298 279,262 281,534 280,972
See accompanying notes.
Page 5
AMGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
June 30, December 31,
1995 1994
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ................ $ 194,858 $ 211,323
Marketable securities .................... 655,790 485,358
Trade receivables, net ................... 218,307 194,712
Inventories .............................. 80,304 98,004
Deferred tax assets, net ................. 70,176 70,176
Other current assets ..................... 52,530 56,065
---------- ----------
Total current assets ................... 1,271,965 1,115,638
Property, plant and equipment at cost, net 677,981 665,314
Investments in affiliated companies....... 74,339 82,263
Other assets.............................. 135,828 130,932
---------- ----------
$2,160,113 $1,994,147
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................... $ 38,069 $ 30,476
Commercial paper ......................... 99,120 99,667
Other accrued liabilities ................ 444,883 406,287
---------- ----------
Total current liabilities .............. 582,072 536,430
Long-term debt............................ 181,200 183,407
Contingencies
Stockholders' equity:
Common stock, $.0001 par value; 750,000
shares authorized; outstanding - 263,478
shares in 1995 and 264,655 shares in
1994 .................................... 26 26
Additional paid-in capital ............... 769,019 719,297
Retained earnings ........................ 627,796 554,987
---------- ----------
Total stockholders' equity ............. 1,396,841 1,274,310
---------- ----------
$2,160,113 $1,994,147
========== ==========
See accompanying notes.
Page 6
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1995 1994
-------- ----------
Cash flows from operating activities:
Net income .......................... $246,328 $ 200,924
Depreciation and amortization ....... 42,373 36,865
Other non-cash expenses ............. 72 2,679
Deferred income taxes ............... - 3,536
Loss of affiliates, net ............. 26,005 15,884
Cash provided by (used in):
Trade receivables, net ............ (23,595) (15,962)
Inventories ....................... 17,700 (5,027)
Other current assets .............. 3,535 5,929
Accounts payable .................. 7,593 (6,065)
Accrued liabilities ............... 38,622 (21,396)
-------- ----------
Net cash provided by operating
activities ...................... 358,633 217,367
-------- ----------
Cash flows from investing activities:
Purchases of property, plant and
equipment ......................... (55,040) (65,637)
Proceeds from maturities of
marketable securities ............. 48,445 61,239
Proceeds from sales of marketable
securities ........................ 604,072 1,001,761
Purchases of marketable securities .. (822,949) (935,167)
Decrease (increase) in investments
in affiliated companies ........... 5,366 (17,647)
Increase in other assets ............ (4,896) (10,305)
-------- ----------
Net cash (used in) provided by
investing activities ............ (225,002) 34,244
-------- ----------
See accompanying notes.
(Continued on next page)
Page 7
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1995 1994
-------- ----------
Cash flows from financing activities:
Decrease in commercial paper ........ $ (547) $ (10,033)
Proceeds from issuance of long-term
debt .............................. - 12,499
Repayment of long-term debt ......... (2,233) (1,061)
Net proceeds from issuance of common
stock upon the exercise of stock
options ........................... 40,782 11,797
Tax benefit related to stock options. 8,868 7,400
Net proceeds from issuance of common
stock upon the exercise of warrants - 15,330
Repurchases of common stock ......... (173,519) (150,481)
Other ............................... (23,447) (14,004)
-------- ----------
Net cash used in financing
activities ...................... (150,096) (128,553)
-------- ----------
Increase in cash and cash equivalents. (16,465) 123,058
Cash and cash equivalents at
beginning of period ................. 211,323 128,505
-------- ----------
Cash and cash equivalents at end of
period .............................. $194,858 $ 251,563
======== ==========
See accompanying notes.
Page 8
AMGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
1. Summary of significant accounting policies
Business
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology
company that develops, manufactures and markets human therapeutics
based on advanced cellular and molecular biology.
Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries as well as affiliated
companies for which the Company has a controlling financial interest
and exercises control over their operations ("majority controlled
affiliates"). All material intercompany transactions and balances
have been eliminated in consolidation. Investments in affiliated
companies which are 50% owned and/or where the Company exercises
significant influence over operations are accounted for using the
equity method. All other equity investments are accounted for under
the cost method. The caption "Loss of affiliates, net" includes
Amgen's equity in the operating results of affiliated companies and
the minority interest others hold in the operating results of Amgen's
majority controlled affiliates.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined in a manner which approximates the first-in, first-out
(FIFO) method. Inventories are shown net of applicable reserves and
allowances. Inventories consist of the following (in thousands):
June 30, December 31,
1995 1994
------- -------
Raw materials .......... $ 9,508 $10,943
Work in process ........ 40,933 54,032
Finished goods ......... 29,863 33,029
------- -------
$80,304 $98,004
======= =======
Product sales
Product sales consist of two products, EPOGEN(R) (Epoetin alfa)
and NEUPOGEN(R) (Filgrastim).
Quarterly NEUPOGEN(R) sales volume in the United States is
influenced by a number of factors including underlying demand,
seasonality of cancer chemotherapy administration and wholesaler
Page 9
inventory management practices. Wholesaler inventory reductions tend
to reduce domestic NEUPOGEN(R) sales in the first quarter each year.
NEUPOGEN(R) sales in the European Union ("EU") have experienced a
decline in the third quarter in prior years due to seasonality.
As a result of an agreement between Amgen and Ortho
Pharmaceutical Corporation, a subsidiary of Johnson & Johnson
("Johnson & Johnson") covering the U.S. market for the Company's
Epoetin alfa product, Amgen does not recognize product sales it makes
into the contractual market of Johnson & Johnson and does recognize
the product sales made by Johnson & Johnson into Amgen's contractual
market. These sales amounts, and adjustments thereto, are derived
from third-party data on shipments to end users and their usage (see
Note 4, "Contingencies - Johnson & Johnson arbitration").
Income taxes
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109 (Note 3).
Earnings per share
Earnings per share are computed in accordance with the treasury
stock method. Primary and fully diluted earnings per share are based
upon the weighted average number of common shares and dilutive common
stock equivalents during the period in which they were outstanding.
Common stock equivalents include outstanding options under the
Company's stock option plans and warrants to purchase shares of the
Company's common stock. The warrants expired on June 30, 1994.
Basis of presentation
The financial information for the three and six months ended
June 30, 1995 and 1994 is unaudited but includes all adjustments
(consisting only of normal recurring accruals) which the Company
considers necessary for a fair presentation of the results of
operations for these periods. Interim results are not necessarily
indicative of results for the full fiscal year.
Reclassification
Certain prior period amounts have been reclassified to conform
to the current period presentation.
2. Debt
As of June 30, 1995, $99.1 million of commercial paper was
outstanding. These borrowings generally had maturities of three
months or less and had effective interest rates averaging 6.1%.
During the three months ended June 30, 1995, the Company
replaced its existing unsecured credit facility with a new unsecured
Page 10
credit facility (the "credit facility"). The credit facility
includes a commitment expiring on June 23, 2000 for up to $150.0
million of borrowings under a revolving line of credit (the
"revolving line commitment") and a commitment expiring on December 5,
1997 for up to an additional $73.0 million of letters of credit (the
"letters of credit commitment"). As of June 30, 1995, $150.0 million
was available under the revolving line commitment for borrowing and
to support the Company's commercial paper program. Also, as of June
30, 1995, letters of credit totaling $73.0 million were issued and
outstanding to secure the Company's promissory notes and accrued
interest thereon. Borrowings under the revolving line commitment
bear interest at various rates which are a function of, at the
Company's option, either the prime rate of a major bank, the federal
funds rate or a Eurodollar base rate. Under the terms of the credit
facility, the Company is required to meet a minimum interest coverage
ratio and maintain a minimum level of tangible net worth. In
addition, the credit facility contains limitations on investments,
liens and sale/leaseback transactions.
Long-term debt consists of the following (in thousands):
June 30, December 31,
1995 1994
-------- --------
Medium Term Notes ............. $113,000 $113,000
Promissory notes .............. 68,200 68,200
Other obligations ............. 19 2,252
-------- --------
181,219 183,452
Less current portion .......... (19) (45)
-------- --------
$181,200 $183,407
======== ========
The Company has registered $200.0 million of unsecured medium
term debt securities ("Medium Term Notes") of which $113.0 million
were outstanding at June 30, 1995. These Medium Term Notes bear
interest at fixed rates averaging 5.8% and mature in two to eight
years.
3. Income taxes
The provision for income taxes consists of the following (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
Federal ............ $61,639 $56,026 $110,177 $105,887
State .............. 6,446 9,144 11,225 16,946
------- ------- -------- --------
Total ............ $68,085 $65,170 $121,402 $122,833
======= ======= ======== ========
Page 11
The decrease in the current year tax rate is due to tax benefits
from the sale of products manufactured in the Puerto Rico fill-and-
finish facility which began in the first quarter of 1995.
4. Contingencies
Johnson & Johnson arbitration
In September 1985, the Company granted Johnson & Johnson an
exclusive license under certain patented technology and know-how of
the Company to sell erythropoietin throughout the United States for
all human uses except dialysis and diagnostics.
In January 1989, Johnson & Johnson initiated arbitration
proceedings with respect to a number of disputes which had arisen
between Amgen and Johnson & Johnson as to the respective rights and
obligations of the parties under the various agreements between them.
Amgen filed a cross petition for arbitration raising additional
disputes for resolution by the arbitrator. The scope of the
arbitration covered erythropoietin, hepatitis B vaccine and
interleukin-2.
In April 1990, the arbitrator ruled that Johnson & Johnson must
purchase from Amgen all of Johnson & Johnson's actual United States
sales requirements of recombinant human erythropoietin. In December
1990, the U.S. Food and Drug Administration approved Amgen's
application to name Johnson & Johnson a distributor of Epoetin alfa
under the trademark PROCRIT(R). In January 1991, Johnson & Johnson
began distributing Epoetin alfa.
In June 1991, the arbitrator issued an opinion awarding Johnson
& Johnson $164 million on its claims regarding erythropoietin. In
September 1992, the arbitrator found that Johnson & Johnson had
breached its obligations regarding hepatitis B vaccine and
interleukin-2, and in January 1993 awarded the Company approximately
$90 million in damages against Johnson & Johnson. In January 1993,
the Company paid Johnson & Johnson the sum of $82.4 million,
representing the difference between the damages awarded Johnson &
Johnson as a result of its erythropoietin claims, and the amounts
awarded Amgen against Johnson & Johnson as a result of its hepatitis
B vaccine and interleukin-2 claims, plus interest. Johnson & Johnson
returned to the Company the rights to develop and market hepatitis B
vaccine and interleukin-2 in March 1991.
The Company and Johnson & Johnson are required to compensate
each other for Epoetin alfa sales which either party makes into the
other party's contractual market. The Company has established and is
employing an accounting methodology to assign the proceeds of sales
of EPOGEN(R) and PROCRIT(R) in Amgen's and Johnson & Johnson's
respective contractual markets. Johnson & Johnson has disputed the
methodology employed by the Company, which is the subject of the
current arbitration proceeding, and is proposing an alternative
methodology for adoption by the arbitrator. If, as a result of the
arbitration proceeding, a methodology different from that currently
employed by the Company is instituted to assign the proceeds of sales
between the parties, it may yield results that are different from the
Page 12
results of the accounting methodology currently employed by the
Company. As a result of the arbitration, it is possible that the
Company would recognize a different level of EPOGEN(R) sales than are
currently being recognized. As a result of the arbitration, the
Company may be required to pay additional compensation to Johnson &
Johnson for sales during prior periods, or Johnson & Johnson may be
required to pay compensation to the Company for such prior period
sales. Due to the uncertainties of any arbitrated result, the
Company has established net liabilities that exceed the amounts paid
to Johnson & Johnson.
A trial date has been reset for March 1, 1996 before the
arbitrator regarding the accounting methodologies and compensation
for sales by Johnson & Johnson into Amgen's contractual market and
sales by Amgen into Johnson & Johnson's contractual market.
Discovery as to these issues is in progress.
Synergen litigation
Acquisition litigation
The Company and its wholly owned subsidiary, Amgen Boulder Inc.
(formerly Synergen, Inc.), have been named as defendants in several
lawsuits filed in connection with the Company's December 1994
acquisition of Synergen (the "Acquisition"). One suit, brought by
plaintiffs seeking to represent a class of Synergen warrant holders
who claim to have been deprived of the benefit of their warrants,
includes a request for general damages in the sum of $34.3 million
and also names Amgen Boulder Development Corporation as a defendant.
The balance of the suits have been brought by plaintiffs who seek to
represent a class of stockholders of Synergen common stock. These
plaintiffs seek an unspecified amount of compensatory damages, an
order rescinding the Acquisition and related equitable relief based
upon allegations that the defendants breached their fiduciary duties
by failing to maximize stockholder value and defrauded the plaintiffs
by omitting to disclose allegedly material information concerning
Synergen's future prospects.
ANTRIL(TM) litigation
Several lawsuits have been filed against Synergen alleging
misrepresentations in connection with its research and development of
ANTRIL(TM) for the treatment of sepsis. One suit brought by three
Synergen stockholders alleges violations of state securities laws,
fraud and misrepresentation and seeks an unspecified amount of
compensatory damages and punitive damages. Another suit, proposed as
a class action, filed by a limited partner of a partnership with
which Synergen is affiliated, seeks rescission of certain payments
Page 13
made to one of the defendants (or unspecified damages not less than
$50.0 million) and treble damages based on a variety of allegations.
Broker-dealers who acted as market makers in Synergen options have
also filed a suit claiming in excess of $3.2 million in trading
losses.
While it is not possible to predict accurately or determine the
eventual outcome of the Johnson & Johnson arbitration, the Synergen
litigation or various other legal proceedings (including patent
disputes) involving Amgen, the Company believes that the outcome of
these proceedings will not have a material adverse effect on its
financial statements.
5. Capital stock
During the six months ended June 30, 1995, the Company acquired
5.0 million shares of its common stock at a total cost of $173.5
million under its common stock repurchase program. At June 30, 1995,
$157.7 million of the amount approved by the Board of Directors
remained available for repurchase through December 31, 1995. Stock
repurchased under the program has been retired and such repurchases
offset the dilutive effect of the Company's stock option and stock
purchase plans.
In July 1995, the Board of Directors approved a two-for-one
split of the Company's Common Stock to be effected in the form of a
100 percent stock dividend. The dividend will be distributed on
August 15, 1995, to stockholders of record on August 1, 1995.
Accordingly, the condensed consolidated financial statements and
and accompanying notes have been retroactively adjusted to give
recognition to this stock split.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash provided by operating activities has been and is expected
to continue to be the Company's primary source of funds. During the
six months ended June 30, 1995, operations provided $358.6 million of
cash compared with $217.4 million during the same period last year.
The Company had cash, cash equivalents and marketable securities of
$850.6 million at June 30, 1995, compared with $696.7 million at
December 31, 1994.
Capital expenditures totaled $55.0 million for the six months
ended June 30, 1995, compared with $65.6 million for the same period
a year ago. Over the next few years, the Company expects to spend
approximately $100.0 million to $200.0 million per year on capital
projects to expand the Company's global operations.
The Company receives cash from the exercise of employee stock
options. During the six months ended June 30, 1995, stock options
Page 14
and their related tax benefits provided $49.7 million of cash
compared with $19.2 million for the same period last year. Proceeds
from the exercise of stock options and their related tax benefits
will vary from period to period based upon fluctuations in the market
value of the Company's stock relative to the exercise price of such
options, among other factors.
The Company has a common stock repurchase program to offset the
dilutive effect of its employee benefit stock option and stock
purchase plans. Since its inception in 1992 through June 30, 1995,
the Company has repurchased $767.3 million of its common stock and is
authorized to purchase up to an additional $157.7 million through
December 31, 1995. During the six months ended June 30, 1995, the
Company purchased 5.0 million shares of common stock at a cost of
$173.5 million compared with 7.0 million shares purchased at a cost
of $150.5 million during the same period last year.
To provide for financial flexibility and increased liquidity,
the Company has established several sources of debt financing. The
Company has filed a shelf registration statement with the Securities
and Exchange Commission under which it could issue up to $200.0
million of Medium Term Notes. At June 30, 1995, $113.0 million of
Medium Term Notes were outstanding which mature in two to eight
years. The Company has a commercial paper program which provides for
short-term borrowings up to an aggregate face amount of $200.0
million. At June 30, 1995, $99.1 million of commercial paper was
outstanding, generally with maturities of three months or less.
The Company also has a $150.0 million revolving line of credit,
principally to support the Company's commercial paper program. No
borrowings on this line of credit were outstanding at June 30, 1995.
The Company invests its cash in accordance with a policy that
seeks to maximize returns while ensuring both liquidity and minimal
risk of principal loss. The policy limits investments to certain
types of instruments issued by institutions with investment grade
credit ratings, and places restrictions on maturities and
concentration by type and issuer. The Company's fixed income
investments are subject to the risk of market interest rate
fluctuations, and all of the Company's investments are subject to
risks associated with the ability of the issuers to perform their
obligations under the instruments.
The Company has a program to manage certain portions of its
exposure to fluctuations in foreign currency exchange rates. These
exposures primarily result from European sales. The Company hedges
the related receivables with foreign currency forward contracts, which
typically mature within six months. The Company uses foreign currency
option and forward contracts which generally expire within 12 months
to hedge certain anticipated future cash flows related to these
sales. At June 30, 1995, outstanding option and forward contracts
totaled $38.6 million and $66.9 million, respectively.
The Company believes that existing funds, cash generated from
operations, and existing sources of debt financing will be adequate
to satisfy its working capital and capital expenditure requirements
and to support its common stock repurchase program for the
Page 15
foreseeable future. However, the Company may raise additional
capital from time to time to take advantage of favorable conditions
in the markets or in connection with the Company's corporate
development activities.
Results of Operations
Product sales
Product sales increased 19% for both the three and six months
ended June 30, 1995, compared with the same periods last year.
NEUPOGEN(R) (Filgrastim)
The Company's worldwide NEUPOGEN(R) sales were $247.0 million
and $459.4 million for the three and six months ended June 30, 1995,
respectively. These amounts represent increases of 16.5% and 16.7%,
respectively, over the same periods last year.
Domestic sales of NEUPOGEN(R) were $175.8 million and $323.1
million for the three and six months ended June 30, 1995,
respectively. These amounts represent increases of $17.4 million and
$32.7 million, or 11.0% and 11.3%, respectively, over the same
periods last year. These increases were primarily due to increased
penetration of the market for colony-stimulating factors.
International sales of NEUPOGEN(R), primarily in Europe, were
$71.2 million and $136.2 million for the three and six months ended
June 30, 1995, respectively. These amounts represent increases of
$17.6 million and $32.9 million, or 32.7% and 31.9%, respectively,
over the same periods last year. Three factors, each contributing
approximately one third of reported sales growth, account for these
increases: increased market penetration, the favorable effects of
strengthened foreign currencies, and the inclusion of sales from
three additional countries as the result of Austria, Sweden, and
Finland joining the EU on January 1, 1995. Prior to the entry of
these countries into the EU, F. Hoffmann La Roche paid the Company
royalties on sales in these countries under a license agreement. The
Company's overall share of the colony-stimulating factor market in
the EU has decreased slightly since the introduction in 1994 of
competing colony stimulating factor products.
Quarterly NEUPOGEN(R) sales volume in the United States is
influenced by a number of factors including underlying demand,
seasonality of cancer chemotherapy administration and wholesaler
inventory management practices. Wholesaler inventory reductions tend
to reduce domestic NEUPOGEN(R) sales in the first quarter each year.
In prior years, NEUPOGEN(R) sales in the EU have experienced a
decline to varying degrees in the third quarter due to seasonality.
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $215.5 million and $414.4 million for the
three and six months ended June 30, 1995, respectively, increases of
$39.0 million and $73.8 million or 22.1% and 21.7% over the same
periods last year.
Page 16
These increases were primarily due to an increase in the U.S.
dialysis patient population, the administration of higher doses of
EPOGEN(R) per patient, and, to a lesser extent, increased penetration
of the dialysis market.
Cost of sales
Cost of sales as a percentage of product sales was 16.5% and
16.4% for the three and six months ended June 30, 1995, respectively,
compared with 16.6% and 16.0% for the same periods last year. Cost
of sales as a percentage of product sales is expected to decline
slightly in the second half of the current year when benefits
of the Puerto Rico fill-and-finish facility are realized.
Research and development
During the three and six months ended June 30, 1995, research
and development expenses increased $28.1 million and $68.3 million,
or 35.1% and 44.4%, respectively, compared with the same periods last
year. These increases are primarily due to an expansion of the
Company's internal research and development staff, partially as a
result of the acquisition of Synergen. In addition, the current year
six month period includes a $20 million signing payment made in the
first quarter to The Rockefeller University for an exclusive license
to certain technologies. Annual research and development expenses
are expected to increase at a rate exceeding the anticipated annual
product sales growth rate due to planned increases in internal
efforts on new product discovery and development and increases in
external research collaboration costs, including acquisitions of
product and technology rights.
Marketing and selling
Marketing and selling expenses increased $10.3 million and $15.9
million, or 17.3% and 14.1%, respectively, during the three and six
months ended June 30, 1995 compared with the same periods last year.
These increases primarily reflect marketing efforts to improve
NEUPOGEN(R) market penetration and EPOGEN(R) marketing efforts to
bring more patients within the target hematocrit range. Future
marketing and selling expenses combined with future general and
administrative expenses are expected to have an aggregate annual
growth rate lower than the anticipated annual growth in product
sales.
General and administrative
General and administrative expenses increased $4.4 million and
$10.7 million, or 14.4% and 18.3%, respectively, during the three and
six months ended June 30, 1995 compared with the same periods last year.
These increases are primarily due to staff-related expenses. Future
general and administrative expenses combined with future marketing
and selling expenses are expected to have an aggregate annual growth
rate lower than the anticipated annual growth in product sales.
Interest and other income
Interest and other income increased $14.6 million or 393.0% and
$22.0 million or 238% during the three and six months ended June 30,
1995, respectively, compared with the same periods last year. These
increases are primarily due to: 1) capital gains realized in the
Page 17
Company's investment portfolio during the current year periods while
capital losses were incurred in the prior year periods, and 2) higher
interest rates earned by the Company's investment portfolio during
the current year periods. Capital gains and losses realized will
fluctuate from period to period.
Income taxes
The Company's effective tax rate for the three and six months
ended June 30, 1995 was 33.1% and 33.0% compared to 37.8% and 37.9%,
respectively, for the same periods last year. These decreases in the
tax rate were due to tax benefits from the sale of products
manufactured in the Puerto Rico fill-and-finish facility which began
in the first quarter of 1995. These tax benefits are expected to
result in an annualized effective tax rate of 32%-34%.
Financial Outlook
Worldwide NEUPOGEN(R) sales for 1995 are expected to grow at a
double digit rate but lower than the 1994 growth rate. Future
NEUPOGEN(R) sales increases are dependent primarily upon further
penetration of existing markets, the timing and nature of additional
indications for which the product may be approved, and the effects of
competitive products. In addition, international NEUPOGEN(R) sales
will continue to be subject to changes in foreign currency exchange
rates and increased competition.
EPOGEN(R) sales for 1995 are anticipated to grow at an annual
rate approaching 20%. The Company anticipates that increases in
both the U.S. dialysis patient population and dosing will continue to
drive EPOGEN(R) sales. EPOGEN(R) sales may be affected also by
future changes in reimbursement rates or the basis for reimbursement
by the federal government.
The Company expects double digit earnings growth in 1995
primarily as a result of the anticipated increases in product sales,
increases realized in interest and other income, and the
decrease in the 1995 tax rate. Estimates of future product sales and
earnings, however, are necessarily speculative in nature and are
difficult to predict with accuracy.
Legal Matters
The Company is engaged in arbitration proceedings with one of
its licensees and various legal proceedings relating to Synergen.
For a discussion of these matters see Note 4 to the Condensed
Consolidated Financial Statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is engaged in arbitration proceedings with one of
its licensees. For a complete discussion of this matter see Note 4
to the Condensed Consolidated Financial Statements - "Johnson &
Johnson arbitration". Other legal proceedings are also reported in
Page 18
Note 4 to the Condensed Consolidated Financial Statements and in the
Company's Form 10-K for the year ended December 31, 1994, with
material developments since that report described below except to the
extent otherwise reported in the Company's Form 10-Q for the period
ended March 31, 1995. While it is not possible to predict accurately
or to determine the eventual outcome of these matters, the Company
believes that the outcome of these legal proceedings will not have a
material adverse effect on the financial statements of the Company.
Synergen litigation
Acquisition litigation
In Glick v. Synergen, Inc., et al., a lawsuit brought by a class
of Synergen warrant holders who claim to have been deprived of the
benefit of their warrants as the result of the Company's 1994
acquisition of Synergen, Inc., the plaintiffs have filed a third
amended complaint. Previously, this action had been dismissed by the
court with leave to amend the complaint. The third amended complaint
added Amgen Boulder Development Corporation as a defendant, dropped
former officers and directors of Synergen as defendants and added
claims for breach of contract and fraud.
ANTRIL(TM) litigation
A new lawsuit, Susquehanna Investment Group, et al. v. Amgen
Boulder, Inc., et al., has been filed in the United States District
Court in Denver, Colorado against Amgen Boulder, Inc. (formerly
Synergen, Inc.) alleging misrepresentations in connection with the
research and development of ANTRIL(TM) for the treatment of sepsis.
This suit, filed on May 19, 1995, is brought by broker-dealers who
acted as market makers in Synergen options. The plaintiffs claim in
excess of $3.2 million in trading losses on option positions as the
result of the alleged misrepresentations.
Erythropoietin patent litigation
Johnson & Johnson has filed a petition for certiorari with the
United States Supreme Court requesting review of an April 5, 1995
decision by the United States Court of Appeals for the Federal
Circuit. This decision upheld rulings made in December 1992 by the
United States District Court for the District of Massachusetts and
described in the Company's Form 10-K for the year ended
December 31, 1994.
Page 19
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on
May 9, 1995. The three matters voted upon at the meeting were to
elect three directors to hold office until the 1998 Annual Meeting of
Stockholders, to approve the Company's Amended and Restated 1991
Equity Incentive Plan, and to ratify the selection of Ernst & Young
LLP as the independent auditors of the Company for the year ending
December 31, 1995.
The following votes were cast for or were withheld with respect
to each of the nominees: Mr. Steven Lazarus: 233,695,044 votes for
and 1,374,586 votes withheld; Mr. Edward J. Ledder: 233,671,300
votes for and 1,398,330 votes withheld; and Dr. Gilbert S. Omenn:
233,696,080 votes for and 1,373,550 votes withheld. All nominees
were declared to have been elected as directors to hold office until
the 1998 Annual Meeting of Stockholders. No abstentions or broker
non-votes were cast for the election of directors.
With respect to the proposal to approve the Company's Amended
and Restated 1991 Equity Incentive Plan, 123,810,578 votes were cast
for the proposal, 67,409,952 votes were cast against the proposal and
2,865,206 votes abstained. 40,983,894 broker non-votes were cast in
connection with the proposal. The Company's Amended and Restated
1991 Equity Incentive Plan was declared to have been approved.
With respect to the proposal to ratify the selection of Ernst &
Young LLP as the Company's independent auditors, 233,895,390 votes
were cast for the proposal, 479,764 votes were cast against the
proposal and 594,476 votes abstained. No broker non-votes were cast
in connection with the proposal. The selection of Ernst & Young LLP
as the Company's independent auditors for the year ending December
31, 1995 was declared to have been ratified.
Item 5. Other Information
In July 1995, the Board of Directors approved a two-for-one
split of the Company's Common Stock to be effected in the form of a
100 percent stock dividend. The dividend will be distributed on
August 15, 1995 to stockholders of record on August 1, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Reference is made to the Index to Exhibits included herein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 1995.
Page 20
SIGNATURES
Pursuant to the 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.
Amgen Inc.
(Registrant)
Date: 8/11/95 By:/s/ Robert S. Attiyeh
- ------------------ ------------------------------------
Robert S. Attiyeh
Senior Vice President Finance
and Corporate Development, and
Chief Financial Officer
Date: 8/11/95 By:/s/ Larry A. May
- ------------------ ------------------------------------
Larry A. May
Vice President, Corporate
Controller and Chief
Accounting Officer
Page 21
AMGEN INC.
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Certificate of Incorporation. (7)
3.2 Certificate of Amendment to Restated Certificate of
Incorporation, effective as of July 24, 1991. (14)
3.3 Bylaws, as amended to date. (20)
4.1 Indenture dated January 1, 1992 between the Company and
Citibank N.A., as trustee. (15)
4.2 Forms of Commercial Paper Master Note Certificates. (19)
10.1* Company's 1991 Equity Incentive Plan, as amended. (16)
10.2* Company's 1984 Stock Option Plan, as amended, and forms
of Incentive Stock Option Grant and Nonqualified Stock
Option Grant used in connection therewith. (16)
10.3 Shareholder's Agreement of Kirin-Amgen, Inc., dated May
11, 1984, between the Company and Kirin Brewery Company,
Limited (with certain confidential information deleted
therefrom). (1)
10.4 Amendment Nos. 1, 2, and 3, dated March 19, 1985, Jul y
29, 1985 and December 19, 1985, respectively, to the
Shareholder's Agreement of Kirin-Amgen, Inc., dated May
11, 1984 (with certain confidential information deleted
therefrom). (3)
10.5 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated, September 30, 1985
between the Company and Ortho Pharmaceutical Corporation
(with certain confidential information deleted
therefrom). (2)
10.6 Product License Agreement, dated September 30, 1985, and
Technology License Agreement, dated September 30, 1985
between Kirin-Amgen, Inc. and Ortho Pharmaceutical
Corporation (with certain confidential information
deleted therefrom). (3)
10.7* Company's Employee Stock Purchase Plan, amended April 1,
1992. (17)
10.8 Agreement, dated February 12, 1986, between the Company
and Sloan-Kettering Institute for Cancer Research (with
certain confidential information deleted therefrom). (4)
10.9 Amendment No. 2, dated November 13, 1990, to Agreement,
dated February 12, 1986, between the Company and Sloan-
Kettering Institute for Cancer Research (with certain
confidential information deleted therefrom). (13)
10.10 Research, Development Technology Disclosure and License
Agreement PPO, dated January 20, 1986, by and between
the Company and Kirin Brewery Co., Ltd. (4)
10.11 Research Collaboration Agreement, dated August 31, 1990,
between Amgen Inc. and Regeneron Pharmaceuticals, Inc.
(with certain confidential information deleted
therefrom). (13)
10.12 Amendment Nos. 4 and 5, dated October 16, 1986
(effective July 1, 1986) and December 6, 1986 (effective
July 1, 1986), respectively, to the Shareholders
Agreement of Kirin-Amgen, Inc. dated May 11, 1984 (with
certain confidential information deleted therefrom). (5)
10.13 Assignment and License Agreement, dated October 16,
1986, between the Company and Kirin-Amgen, Inc. (with
certain confidential information deleted therefrom). (5)
10.14 G-CSF European License Agreement, dated December 30,
1986, between Kirin-Amgen, Inc. and the Company (with
certain confidential information deleted therefrom). (5)
10.15 Research and Development Technology Disclosure and
License Agreement: GM-CSF, dated March 31, 1987, between
Kirin Brewery Company, Limited and the Company (with
certain confidential information deleted therefrom). (5)
10.16* Company's 1987 Directors' Stock Option Plan, as amended.
(13)
10.17 Cross License Agreement, dated June 1, 1987, between
Amgen Inc. and Amgen Clinical Partners, L.P. (6)
10.18 Development Agreement, dated June 1, 1987, between Amg en
Inc. and Amgen Clinical Partners, L.P. (6)
10.19 Joint Venture Agreement, dated June 1, 1987, between
Amgen Inc. and Amgen Clinical Partners, L.P. (6)
10.20 Partnership Purchase Option Agreement, dated June 1,
1987, between Amgen Inc. and Amgen Clinical Partners,
L.P. (6)
10.21* Company's 1988 Stock Option Plan, as amended. (16)
10.22* Company's Retirement and Savings Plan, amended and
restated as of January 1, 1993. (17)
10.23 Amendment, dated June 30, 1988, to Research,
Development, Technology Disclosure and License
Agreement: GM-CSF dated March 31, 1987, between Kirin
Brewery Company, Limited and the Company. (7)
10.24 Amending Agreement, dated June 30, 1988, to Development
Agreement, Partner Purchase Option Agreement, Cross
License Agreement and Joint Venture Agreement, dated
June 1, 1987, between the Company and Amgen Clinical
Partners, L.P. (7)
10.25 Agreement on G-CSF in the EU, dated September 26, 1988,
between Amgen Inc. and F. Hoffmann-La Roche & Co.
Limited Company (with certain confidential information
deleted therefrom). (9)
10.26 Supplementary Agreement to Agreement dated January 4,
1989 to Agreement on G-CSF in the EU, dated September
26, 1988, between the Company and F. Hoffmann-La Roche &
Co. Limited Company, (with certain confidential
information deleted therefrom). (9)
10.27 Agreement on G-CSF in Certain European Countries, dated
January 1, 1989, between Amgen Inc. and F. Hoffmann-La
Roche & Co. Limited Company (with certain confidential
information deleted therefrom). (9)
10.28 Rights Agreement, dated January 24, 1989, between Amgen
Inc. and American Stock Transfer and Trust Company,
Rights Agent. (8)
10.29 First Amendment to Rights Agreement, dated January 22,
1991, between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (11)
10.30 Second Amendment to Rights Agreement, dated April 2,
1991, between Amgen Inc. and American Stock Transfer and
Trust Company, Rights Agent. (12)
10.31 Deed of Trust and Security Agreement, dated June 1,
1989, between the Company and UNUM Life Insurance
Company of America. (10)
10.32 Note, dated June 1, 1989, between the Company and UNUM
Life Insurance Company of America. (10)
10.33 Agency Agreement, dated November 21, 1991, between Amgen
Manufacturing, Inc. and Citicorp Financial Services
Corporation. (17)
10.34 Agency Agreement, dated May 21, 1992, between Amgen
Manufacturing, Inc. and Citicorp Financial Services
Corporation. (17)
10.35 Guaranty, dated July 29, 1992, by the Company in favor
of Merck Sharp & Dohme Quimica de Puerto Rico, Inc. (17)
10.36 936 Promissory Note No. 01, dated December 11, 1991,
issued by Amgen Manufacturing, Inc. (17)
10.37 936 Promissory Note No. 02, dated December 11, 1991,
issued by Amgen Manufacturing, Inc. (17)
10.38 936 Promissory Note No. 001, dated July 29, 1992, issued
by Amgen Manufacturing, Inc. (17)
10.39 936 Promissory Note No. 002, dated July 29, 1992, issued
by Amgen Manufacturing, Inc. (17)
10.40 Guaranty, dated November 21, 1991, by the Company in
favor of Citicorp Financial Services Corporation. (17)
10.41 Lease and Agreement relating to Lease, dated March 27,
1986 and April 1, 1986, respectively, for 2003 Oak
Terrace Lane between 2001 Hillcrest Partnership and the
Company. (20)
10.42 Partnership Purchase Agreement, dated March 12, 1993,
between the Company, Amgen Clinical Partners, L.P.,
Amgen Development Corporation, the Class A limited
partners and the Class B limited partner. (18)
10.43* Amgen Supplemental Retirement Plan dated June 1, 1993.
(21)
10.44 Promissory Note of Mr. Kevin W. Sharer, dated June 4,
1993. (21)
10.45 Promissory Note of Mr. Larry A. May, dated February 24,
1993. (22)
10.46* First Amendment dated October 26, 1993 to the Company's
Retirement and Savings Plan. (22)
10.47* Amgen Performance Based Management Incentive Plan. (22)
10.48 Agreement and Plan of Merger, dated as of November 17,
1994, among Amgen Inc., Amgen Acquisition Subsidiary,
Inc. and Synergen, Inc. (23)
10.49 Third Amendment to Rights Agreement, dated as of
February 21, 1995, between Amgen Inc. and American Stock
Transfer Trust and Trust Company (24)
10.50 Credit Agreement, dated as of June 23, 1995, among Amgen
Inc., the Borrowing Subsidiaries named therein, the
Banks named therein, Swiss Bank Corporation and ABN AMRO
Bank N.V., as Issuing Banks, and Swiss Bank Corporation,
as Administrative Agent.
11 Computation of per share earnings.
27 Financial Data Schedule.
* Mangagement contract or compensatory plan or arrangement
- ----------------
(1) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1984 on June 26, 1984 and incorporated
herein by reference.
(2) Filed as an exhibit to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1985 on November 14, 1985 and
incorporated herein by reference.
(3) Filed as an exhibit to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1985 on February 3, 1986 and
incorporated herein by reference.
(4) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (Registration No. 33-3069) on March 11, 1986 and
incorporated herein by reference.
(5) Filed as an exhibit to the Form 10-K Annual Report for the year
ended March 31, 1987 on May 18, 1987 and incorporated herein by
reference.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1987 on August 12, 1987 and incorporated
herein by reference.
(7) Filed as an exhibit to Form 8 amending the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988 on August 25, 1988
and incorporated herein by reference.
(8) Filed as an exhibit to the Form 8-K Current Report dated January
24, 1989 and incorporated herein by reference.
(9) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1989 on June 28, 1989 and incorporated
herein by reference.
(10) Filed as an exhibit to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989 on August 14, 1989 and incorporated
herein by reference.
(11) Filed as an exhibit to the Form 8-K Current Report dated January
22, 1991 and incorporated herein by reference.
(12) Filed as an exhibit to the Form 8-K Current Report dated April
12, 1991 and incorporated herein by reference.
(13) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended March 31, 1991 on July 1, 1991 and incorporated
herein by reference.
(14) Filed as an exhibit to the Form 8-K Current Report dated July
24, 1991 and incorporated herein by reference.
(15) Filed as an exhibit to Form S-3 Registration Statement dated
December 19, 1991 and incorporated herein by reference.
(16) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1991 on March 30, 1992 and incorporated
herein by reference.
(17) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1992 on March 30, 1993 and incorporated
herein by reference.
(18) Filed as an exhibit to the Form 8-A dated March 31, 1993 and
incorporated herein by reference.
(19) Filed as an exhibit to the Form 10-Q for the quarter ended March
31, 1993 on May 17, 1993 and incorporated herein by reference.
(20) Filed as an exhibit to the Form 10-Q for the quarter ended June
30, 1993 on August 16, 1993 and incorporated herein by
reference.
(21) Filed as an exhibit to the Form 10-Q for the quarter ended
September 30, 1993 on November 12, 1993 and incorporated herein
by reference.
(22) Filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1993 on March 25, 1994 and incorporated
herein by reference.
(23) Filed as an exhibit to the Form 8-K Current Report dated
November 18, 1994 on December 2, 1994 and incorporated herein by
reference.
(24) Filed as an exhibit to the Form 8-K Current Report dated
February 21, 1995 on March 7, 1995 and incorporated herein by
reference.