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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-12477
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.)
One Amgen Center Drive, Thousand Oaks, California 91320-1799
- -------------------------------------------------------------------------------
(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, 1999, the registrant had 509,955,945 shares of Common Stock,
$.0001 par value, outstanding.
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, 1999 and 1998.................................. 4
Condensed Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998........................... 5
Condensed Consolidated Statements of
Cash Flows - six months
ended June 30, 1999 and 1998.................................. 6
Notes to Condensed Consolidated Financial
Statements.................................................... 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.......................................... 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................... 23
Item 4. Submission of Matters to a Vote of
Security Holders.................................... 24
Item 5. Other Information................................... 25
Item 6. Exhibits and Reports on Form 8-K.................... 25
Signatures...................................................... 26
Index to Exhibits............................................... 27
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The information in this report for the three and six months ended June 30,
1999 and 1998 is unaudited but includes all adjustments (consisting only of
normal recurring accruals, unless otherwise indicated) which Amgen Inc. ("Amgen"
or the "Company") considers necessary for a fair presentation of the results of
operations for those periods.
The condensed consolidated 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 year ended
December 31, 1998.
Interim results are not necessarily indicative of results for the full
fiscal year.
3
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- -------------- ----------------- -----------------
Revenues:
Product sales $737.9 $611.2 $1,426.2 $1,178.0
Corporate partner revenues 49.0 29.9 76.0 52.5
Royalty income 33.6 15.8 63.8 31.8
-------------- -------------- ----------------- -----------------
Total revenues 820.5 656.9 1,566.0 1,262.3
-------------- -------------- ----------------- -----------------
Operating expenses:
Cost of sales 98.8 83.9 191.2 162.9
Research and development 194.1 152.4 382.1 304.9
Selling, general and administrative 157.2 122.0 290.1 235.1
Loss of affiliates, net 9.2 10.2 12.0 16.4
-------------- -------------- ----------------- -----------------
Total operating expenses 459.3 368.5 875.4 719.3
-------------- -------------- ----------------- -----------------
Operating income 361.2 288.4 690.6 543.0
Other income (expense):
Interest and other income 24.5 23.9 43.0 39.1
Interest expense, net (3.3) (3.3) (5.5) (5.5)
-------------- -------------- ----------------- -----------------
Total other income (expense) 21.2 20.6 37.5 33.6
-------------- -------------- ----------------- -----------------
Income before income taxes 382.4 309.0 728.1 576.6
Provision for income taxes 114.8 92.7 213.3 173.0
-------------- -------------- ----------------- -----------------
Net income $267.6 $216.3 $ 514.8 $ 403.6
============== ============== ================= =================
Earnings per share:
Basic $ 0.52 $ 0.43 $ 1.01 $ 0.79
Diluted $ 0.50 $ 0.41 $ 0.96 $ 0.77
Shares used in calculation of earnings
per share:
Basic 510.5 507.9 511.2 510.2
Diluted 536.9 525.0 538.7 526.4
See accompanying notes.
4
AMGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
June 30, December 31,
1999 1998
----------------- ---------------------
ASSETS
Current assets:
Cash and cash equivalents $ 199.6 $ 201.1
Marketable securities 1,168.7 1,074.9
Trade receivables, net 363.6 319.9
Inventories 121.8 110.8
Other current assets 157.1 156.6
----------------- ---------------------
Total current assets 2,010.8 1,863.3
----------------- ---------------------
Property, plant and equipment at cost, net 1,484.0 1,450.2
Investments in affiliated companies 124.6 120.9
Other assets 270.2 237.8
----------------- ---------------------
$3,889.6 $3,672.2
================= =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 144.0 $ 121.6
Commercial paper 99.8 99.7
Accrued liabilities 637.4 659.7
Current portion of long-term debt - 6.0
----------------- ---------------------
Total current liabilities 881.2 887.0
----------------- ---------------------
Long-term debt 223.0 223.0
Contingencies
Stockholders' equity:
Preferred stock: $.0001 par value; 5 shares
authorized; none issued or outstanding - -
Common stock and additional paid-in capital;
$.0001 par value; 1,500 shares authorized;
outstanding - 510.0 shares in 1999 and
509.2 shares in 1998 1,870.5 1,671.9
Retained earnings 938.3 894.3
Accumulated other comprehensive loss (23.4) (4.0)
----------------- ---------------------
Total stockholders' equity 2,785.4 2,562.2
----------------- ---------------------
$3,889.6 $3,672.2
================= =====================
See accompanying notes.
5
AMGEN INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions, except per share data)
(Unaudited)
Six Months Ended
June 30,
1999 1998
-------------- ---------------
Cash flows from operating activities:
Net income $ 514.8 $ 403.6
Depreciation and amortization 89.2 72.7
Gain on sale of investments - (13.2)
Loss of affiliates, net 12.0 16.4
Cash provided by (used in):
Trade receivables, net (43.7) (22.2)
Inventories (11.0) (4.1)
Other current assets 3.7 3.7
Accounts payable 22.4 (18.9)
Accrued liabilities (22.3) 63.8
-------------- ---------------
Net cash provided by operating activities 565.1 501.8
-------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and equipment (147.0) (236.0)
Proceeds from maturities of marketable securities 10.5 -
Proceeds from sales of marketable securities 373.3 272.1
Purchases of marketable securities (494.0) (348.5)
Other (2.0) 7.0
-------------- ---------------
Net cash used in investing activities (259.2) (305.4)
-------------- ---------------
Cash flows from financing activities:
Increase in commercial paper - 99.5
Repayment of long-term debt (6.0) (25.0)
Net proceeds from issuance of common stock upon
the exercise of stock options 131.6 91.8
Tax benefits related to stock options 66.9 30.0
Repurchases of common stock (470.7) (457.0)
Other (29.2) (16.8)
-------------- ---------------
Net cash used in financing activities (307.4) (277.5)
-------------- ---------------
Decrease in cash and cash equivalents (1.5) (81.1)
Cash and cash equivalents at beginning of period 201.1 239.1
-------------- ---------------
Cash and cash equivalents at end of period $ 199.6 $ 158.0
============== ===============
See accompanying notes.
6
AMGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
1. Summary of significant accounting policies
Business
Amgen Inc. ("Amgen" or the "Company") is a global biotechnology company
that discovers, develops, manufactures and markets human therapeutics based on
advances in 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% or less owned and 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 millions):
June 30, December 31,
1999 1998
----------------- -----------------
Raw materials $ 23.5 $ 18.1
Work in process 50.7 49.1
Finished goods 47.6 43.6
----------------- -----------------
$121.8 $110.8
================= =================
7
Product sales
Product sales primarily consist of sales from EPOGEN(R) (Epoetin alfa) and
NEUPOGEN(R) (Filgrastim).
The Company has the exclusive right to sell Epoetin alfa for dialysis,
diagnostics and all non-human uses in the United States. The Company sells
Epoetin alfa under the brand name EPOGEN(R). Amgen has granted to Ortho
Pharmaceutical Corporation (which has assigned its rights under the product
license agreement to Ortho Biotech, Inc.), a subsidiary of Johnson & Johnson
("Johnson & Johnson"), a license relating to Epoetin alfa for sales in the
United States for all human uses except dialysis and diagnostics. Pursuant to
this license, Amgen does not recognize product sales it makes into the exclusive
market of Johnson & Johnson and does recognize the product sales made by Johnson
& Johnson into Amgen's exclusive market. Sales in Amgen's exclusive market and
adjustments thereto are derived from Company shipments and from third-party data
on shipments to end users and their usage (see Note 6, "Contingencies - Johnson
& Johnson arbitrations"). Sales of the Company's other products are recognized
when shipped.
Foreign currency transactions
The Company has a program to manage foreign currency risk. As part of this
program, it has purchased foreign currency option and forward contracts to hedge
against possible reductions in values of certain anticipated foreign currency
cash flows generally over the next 12 months, primarily resulting from its sales
in Europe. At June 30, 1999, the Company had option and forward contracts to
exchange foreign currencies for U.S. dollars of $57.7 million and $13.1 million,
respectively, all having maturities of six months or less. The option
contracts, which have only nominal intrinsic value at the time of purchase, are
designated as effective hedges of anticipated foreign currency transactions for
financial reporting purposes and accordingly, the net gains on such contracts
are deferred and recognized in the same period as the hedged transactions. The
forward contracts do not qualify as hedges for financial reporting purposes and
accordingly, are marked-to-market. Net gains on option contracts (including
option contracts for hedged transactions whose occurrence are no longer
probable) and changes in market values of forward contracts are reflected in
"Interest and other income". The deferred premiums on option contracts and fair
values of forward contracts are included in "Other current assets".
The Company has additional foreign currency forward contracts to hedge
exposures to foreign currency fluctuations of certain assets and liabilities
denominated in foreign currencies. At June 30, 1999, the Company had forward
contracts to exchange foreign currencies for U.S. dollars of $23.5 million, all
having maturities of less than six months. These contracts are designated as
effective hedges and accordingly, gains and losses on these forward contracts
are recognized in the same period the offsetting gains and losses of hedged
assets and liabilities are realized and recognized. The fair values of the
forward contracts are included in the corresponding captions of the hedged
assets and liabilities. Gains
8
and losses on forward contracts, to the extent they differ in amount from the
hedged assets and liabilities, are included in "Interest and other income".
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The date required for adoption of this
statement has been delayed until fiscal years beginning after June 15, 2000.
Because of the Company's minimal use of derivatives, management anticipates that
the adoption of this new statement will not have a significant effect on
earnings or the financial position of the Company.
Employee stock option and stock purchase plans
The Company's employee stock option and stock purchase plans are accounted
for under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees".
Earnings per share
Basic earnings per share is based upon the weighted-average number of
common shares outstanding. Diluted earnings per share is based upon the
weighted-average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the
Company's employee stock option plans which are included under the treasury
stock method.
The following table sets forth the computation for basic and diluted
earnings per share (in millions, except per share information):
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
Numerator for basic and diluted
earnings per share - net income $267.6 $216.3 $514.8 $403.6
============== ============== ============== ==============
Denominator:
Denominator for basic earnings
per share - weighted-average shares 510.5 507.9 511.2 510.2
Effect of dilutive securities -
employee stock options 26.4 17.1 27.5 16.2
-------------- -------------- -------------- --------------
Denominator for diluted earnings
per share - adjusted weighted-
average shares 536.9 525.0 538.7 526.4
============== ============== ============== ==============
Basic earnings per share $ 0.52 $ 0.43 $ 1.01 $ 0.79
Diluted earnings per share $ 0.50 $ 0.41 $ 0.96 $ 0.77
9
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
Basis of presentation
The financial information for the three and six months ended June 30, 1999
and 1998 is unaudited but includes all adjustments (consisting only of normal
recurring accruals, unless otherwise indicated) 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 year amounts have been reclassified to conform to the current
year presentation.
2. Debt
As of June 30, 1999, the Company had $223 million of unsecured debt
securities outstanding. These unsecured debt securities consisted of: 1) $100
million of debt securities that bear interest at a fixed rate of 6.5% and mature
in 2007 that were issued in December 1997 under a $500 million debt shelf
registration (the "Shelf"), 2) $100 million of debt securities that bear
interest at a fixed rate of 8.1% and mature in 2097, and 3) $23 million of debt
securities that bear interest at a fixed rate of 6.2% and mature in 2003. Under
the Shelf, all of the remaining $400 million of debt securities available for
issuance may be offered under the Company's medium term note program from time
to time with terms to be determined by market conditions.
The Company has a commercial paper program which provides for unsecured
short-term borrowings up to an aggregate of $200 million. As of June 30, 1999,
commercial paper with a face amount of $100 million was outstanding. These
borrowings had maturities of less than three months and had effective interest
rates averaging 5.1%.
The Company also has an unsecured $150 million credit facility that expires
on May 28, 2003. As of June 30, 1999, no amounts were outstanding under this
line of credit.
10
3. Income taxes
The provision for income taxes consists of the following (in millions):
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- ------------- -------------- --------------
Federal (including U.S. possessions) $105.9 $86.6 $196.6 $161.5
State 8.9 6.1 16.7 11.5
-------------- ------------- -------------- --------------
$114.8 $92.7 $213.3 $173.0
============== ============= ============== ==============
The Company's effective tax rate for the three and six months ended June
30, 1999 was 30.0% and 29.3%, respectively, compared with 30.0% for each of the
same periods last year.
4. Stockholders' equity
During the six months ended June 30, 1999, the Company repurchased 7
million shares of its common stock at a total cost of $470.7 million under its
common stock repurchase program. In October 1998, the Board of Directors
authorized the Company to repurchase up to an additional $1 billion of common
stock through December 31, 1999. At June 30, 1999, $329.3 million of this
authorization remained. Stock repurchased under the program is retired.
On May 4, 1999, the Company's stockholders approved an increase in the
number of authorized shares of common stock from 750,000,000 to 1,500,000,000.
5. Comprehensive income
During the three and six months ended June 30, 1999, total comprehensive
income was $260.7 million and $495.4 million, respectively. During the three
and six months ended June 30, 1998, total comprehensive income was $208.1
million and $392.4 million, respectively. The Company's other comprehensive
income/loss is comprised of unrealized gains and losses on the Company's
available-for-sale securities and foreign currency translation adjustments.
6. Contingencies
Johnson & Johnson arbitrations
In September 1985, the Company granted Johnson & Johnson's affiliate, Ortho
Pharmaceutical Corporation, a license relating to certain patented technology
and know-how of the Company to sell a genetically engineered form of recombinant
human erythropoietin, called Epoetin alfa, throughout the United States for all
human uses except dialysis and diagnostics. A number of disputes have arisen
11
between Amgen and Johnson & Johnson as to their respective rights and
obligations under the various agreements between them, including the agreement
granting the license (the "License Agreement").
A dispute between Amgen and Johnson & Johnson that has been the subject of
an arbitration proceeding relates to the audit methodology currently employed by
the Company to account for Epoetin alfa sales. The Company and Johnson & Johnson
are required to compensate each other for Epoetin alfa sales that either party
makes into the other party's exclusive market, sometimes described as
"spillover" sales. The Company has established and is employing an audit
methodology to measure each party's spillover sales and to allocate the net
profits from those sales to the appropriate party. The arbitrator in this
matter (the "Arbitrator") issued an opinion adopting the Company's audit
methodology with certain adjustments and, subsequently, issued his final order
confirming that the Company was the successful party in the arbitration. As a
result, Johnson & Johnson was ordered to pay to the Company all costs and
expenses, including reasonable attorneys' fees, that the Company incurred in the
arbitration as well as one-half of the audit costs. The Company submitted a
bill for such costs incurred over an eight year period in the amount of
approximately $110 million. On January 20, 1999, Johnson & Johnson informed the
Company that it intends to contest substantially all costs and expenses,
including reasonable attorneys' fees, that the Company incurred in the
arbitration as well as one-half of the audit costs.
On April 15, 1999, the Arbitrator ruled that the Company cannot recover
certain of its fees and costs. Although further clarification of the
Arbitrator's order will be required, and although he will determine at a later
date the specific amount of the unrecoverable fees, the Company has estimated
that the ruling reduces the Company's potential recovery of such fees and costs
by approximately $12 million. In addition to determining that amount, the
Arbitrator will determine how much of the Company's remaining claim the Company
is entitled to recover from Johnson & Johnson.
On October 26, 1998, Johnson & Johnson filed a petition in the Circuit
Court of Cook County, Illinois seeking to vacate or modify the Arbitrator's
award to the Company of all costs and expenses, including reasonable attorney's
fees and costs, that the Company incurred in the arbitration. On January 8,
1999, the Company filed a motion to dismiss Johnson & Johnson's petition. That
motion remains pending. Due to remaining uncertainties the Company has not
recognized any benefit from the recovery of attorneys' fees and costs or audit
costs.
The Company has filed a demand in the arbitration to terminate Johnson &
Johnson's rights under the License Agreement and to recover damages for breach
of the License Agreement based on the Company's claim that Johnson & Johnson has
intentionally sold PROCRIT(R) (the brand name under which Johnson & Johnson
sells Epoetin alfa) into the Company's exclusive dialysis market. Johnson &
Johnson disputed the Arbitrator's jurisdiction to decide the Company's demand.
On March 2, 1999, the Illinois Court of Appeals denied Johnson & Johnson's
appeal of the Company's successful motion for summary judgment
12
affirming the Arbitrator has jurisdiction over this matter. Pursuant to the
Arbitrator's ruling, discovery has commenced. No trial date has been set. The
Company is unable to predict at this time the outcome of its demand for
termination of the License Agreement or when it will be resolved.
While it is not possible to predict accurately or determine the eventual
outcome of the above described legal matters 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
annual financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company had cash, cash equivalents and marketable securities of
$1,368.3 million at June 30, 1999, compared with $1,276 million at December 31,
1998. 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, 1999, operations provided $565.1 million of cash compared with
$501.8 million during the same period last year.
Capital expenditures totaled $147 million for the six months ended June 30,
1999, compared with $236 million for the same period a year ago. The Company
anticipates spending approximately $300 million to $400 million in 1999 on
capital projects and equipment to expand the Company's global operations.
Thereafter, over the next few years, the Company anticipates that capital
expenditures will average in excess of $300 million per year.
The Company receives cash from the exercise of employee stock options.
During the six months ended June 30, 1999, stock options and their related tax
benefits provided $198.5 million of cash compared with $121.8 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, among other
factors, fluctuations in the market value of the Company's stock relative to the
exercise price of such options.
The Company has a stock repurchase program primarily to offset the dilutive
effect of its employee stock option and stock purchase plans. During the six
months ended June 30, 1999, the Company purchased 7 million shares of its common
stock at a cost of $470.7 million compared with 16.4 million shares purchased at
a cost of $457 million during the same period last year. In October 1998, the
Board of Directors authorized the Company to repurchase up to an additional $1
billion of common stock through December 31, 1999. At June 30, 1999, $329.3
million of this authorization remained.
To provide for financial flexibility and increased liquidity, the Company
has established several sources of debt financing. As of June 30, 1999, the
Company had $223 million of unsecured debt
13
securities outstanding. These unsecured debt securities consisted of: 1) $100
million of debt securities that bear interest at a fixed rate of 6.5% and mature
in 2007 that were issued in December 1997 under a $500 million debt shelf
registration (the "Shelf"), 2) $100 million of debt securities that bear
interest at a fixed rate of 8.1% and mature in 2097 and 3) $23 million of debt
securities that bear interest at a fixed rate of 6.2% and mature in 2003. Under
the Shelf, all of the remaining $400 million of debt securities available for
issuance may be offered under the Company's medium-term note program.
The Company's sources of debt financing also include a commercial paper
program which provides for short-term borrowings up to an aggregate face amount
of $200 million. As of June 30, 1999, commercial paper with a face amount of
$100 million was outstanding. These borrowings had maturities of less than
three months and had effective interest rates averaging 5.1%. In addition, the
Company has an unsecured $150 million credit facility that expires on May 28,
2003. This credit facility supports the Company's commercial paper program. As
of June 30, 1999, no amounts were outstanding under this line of credit.
The primary objectives for the Company's investment portfolio are liquidity
and safety of principal. Investments are made to achieve the highest rate of
return to the Company, consistent with these two objectives. The Company's
investment 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 invests its excess
cash in securities with varying maturities to meet projected cash needs.
The Company believes that existing funds, cash generated from operations
and existing sources of debt financing are adequate to satisfy its working
capital and capital expenditure requirements for the foreseeable future, as well
as to support its stock repurchase program. However, the Company may raise
additional capital from time to time.
Results of Operations
Product sales
Product sales were $737.9 million and $1,426.2 million during the three and
six months ended June 30, 1999, respectively. These amounts represent increases
of $126.7 million and $248.2 million or 21% over each of the same periods last
year. Quarterly product sales volume is influenced by a number of factors,
including underlying demand and wholesaler inventory management practices.
14
EPOGEN(R) (Epoetin alfa)
EPOGEN(R) sales were $428 million and $822.9 million for the three and six
months ended June 30, 1999, respectively. These amounts represent increases of
$91.5 million and $182 million or 27% and 28%, respectively, over the same
periods last year. These increases were primarily due to the administration of
higher doses and the continuing growth in the U.S. dialysis patient population.
The administration of higher doses of EPOGEN(R) was principally due to changes
in reimbursement announced in March and June 1998 by the Health Care Financing
Administration ("HCFA"), discussed below, as well as many dialysis providers
using better anemia management practices, including using hemoglobin instead of
hematocrit to measure red blood cell counts.
In September 1997, HCFA implemented changes (the "HCFA Policy Changes") to
its reimbursement policy. Prior to the HCFA Policy Changes, fiscal
intermediaries under contract with HCFA were authorized to pay reimbursement
claims for patients whose hematocrits exceeded 36 percent, the top of the
suggested target hematocrit range in the Company's labeling, if deemed medically
justified. Under the HCFA Policy Changes, medical justification was not
accepted for payment of claims of hematocrits that exceeded 36 percent and, if
the current month's hematocrit was greater than 36 percent and the patient's
hematocrit exceeded 36.5 percent on an historical 90-day "rolling average"
basis, reimbursement for the current month would be denied in full. Beginning
in the second quarter of 1997, the Company experienced a decline in the growth
rate of EPOGEN(R) sales as dialysis providers attempted to lower hematocrits by
lowering or withholding EPOGEN(R) doses in order to avoid or minimize claim
denials under the HCFA Policy Changes. However, in March 1998, HCFA announced
the easing of restrictions on reimbursement that had been instituted under the
HCFA Policy Changes. In June 1998, HCFA announced further revisions.
In March 1998, HCFA issued two revisions (the "March HCFA Revisions") to
the HCFA Policy Changes in a program memorandum. The first revision provided
that, for a month in which the three month "rolling average" hematocrit exceeds
36.5 percent, HCFA would pay the lower of 100 percent of the actual dosage
billed for that month, or 80 percent of the prior month's allowable EPOGEN(R)
dosage. The second revision re-established authorization to make payment for
EPOGEN(R) when a patient's hematocrit exceeded 36 percent when accompanied by
documentation establishing medical necessity. In June 1998, HCFA issued another
program memorandum establishing additional revisions (the "June HCFA Revisions")
to the reimbursement policy. The policy now states that pre-payment review of
claims has been eliminated and fiscal intermediaries should conduct post-payment
reviews of those dialysis providers with an atypical number of patients with
hematocrit levels above a 90-day "rolling average" of 37.5 percent.
Additionally, HCFA stated that it is encouraging dialysis providers to maintain
a hematocrit level within the range of 33 to 36 percent as recommended by the
Dialysis Outcomes Quality Initiative. HCFA also stated that it plans to develop
a national policy for medical justification for physicians who target their
patients' hematocrits greater than 36 percent. In
15
the interim, individual patient treatment will continue to be subject to the
physician's discretion and documentation must satisfy the judgment of the fiscal
intermediary. The June HCFA Revisions supersede the HCFA Policy Changes and the
March HCFA Revisions.
NEUPOGEN(R) (Filgrastim)
Worldwide NEUPOGEN(R) sales were $303.5 million and $590.5 million for the
three and six months ended June 30, 1999. These amounts represent increases of
$32.9 million and $58.7 million or 12% and 11%, respectively, over the same
periods last year. These increases were primarily due to the growth in demand
worldwide within the cancer chemotherapy markets and the effect of higher prices
in the U.S.
Cost containment pressures in the U.S. health care marketplace have limited
growth in domestic NEUPOGEN(R) sales. These pressures are expected to continue
to influence growth for the foreseeable future.
The growth of the colony stimulating factor ("CSF") market in the European
Union ("EU") in which NEUPOGEN(R) competes has remained essentially flat,
principally due to EU government pressures on physician prescribing practices in
response to ongoing government initiatives to reduce health care expenditures.
Additionally, the Company faces competition from another granulocyte CSF
product. Amgen's CSF market share in the EU has remained relatively constant
over the last few years, however, the Company expects that the competitive
intensity may increase in the near future.
Other product sales
INFERGEN(R) (Interferon alfacon-1) sales were $6.3 million and $12.6
million for the three and six months ended June 30, 1999. These amounts
represent increases of $2.2 million and $7.3 million or 54% and 138%,
respectively, over the same periods last year. INFERGEN(R) was launched in
October 1997 for the treatment of chronic hepatitis C virus infection. There
are existing treatments, including a new therapy launched in 1998, for this
infection against which INFERGEN(R) competes. The Company cannot predict the
extent to which it will penetrate this market.
Cost of sales
Cost of sales as a percentage of product sales was 13.4% for both the three
and six months ended June 30, 1999, respectively, compared with 13.7% and 13.8%
for the same periods last year.
Research and development
During the three and six months ended June 30, 1999, research and
development expenses increased $41.7 million and $77.2 million, or 27% and 25%,
respectively, compared with the same periods last year. These increases were
primarily due to higher staff-related costs necessary to support ongoing product
development activities
16
and costs related to the collaboration with PRAECIS PHARMACEUTICALS
INCORPORATED.
Selling, general and administrative
Selling, general and administrative expenses increased $35.2 million and
$55 million, or 29% and 23%, during the three and six months ended June 30, 1999
compared with the same periods last year. These increases were primarily due to
higher staff-related costs, outside marketing expenses and information
management consulting fees.
Income taxes
The Company's effective tax rate for the three and six months ended June
30, 1999 was 30.0% and 29.3%, respectively, compared with 30.0% for each of the
same periods last year.
Foreign currency transactions
The Company has a program to manage certain portions of its exposure to
fluctuations in foreign currency exchange rates arising from international
operations. The Company generally hedges the receivables and payables with
foreign currency forward contracts, which typically mature within one to three
months. The Company uses foreign currency option and forward contracts which
generally expire within 12 months to hedge certain anticipated future sales and
expenses. At June 30, 1999, outstanding foreign currency option and forward
contracts totaled $57.7 million and $36.6 million, respectively.
Year 2000
The Year 2000 problem (the "Year 2000 Problem") results from computer
programs and devices that do not differentiate between the year 1900 and the
year 2000 because they were written using two digits rather than four to define
the applicable year; accordingly, computer systems that have time-sensitive
calculations may not properly recognize the year 2000. This could result in
system failures or miscalculations causing disruptions of the Company's
operations, including, without limitation, manufacturing, distribution, clinical
development, research and other business activities. The Year 2000 Problem is
likely to affect the Company's computer hardware, software, systems, devices,
applications and manufacturing equipment, including without limitation, its non-
information technology systems (such as elevators, HVAC equipment, security
systems and other equipment containing embedded technology such as
microcontrollers) (collectively, "Computer Systems"). Amgen is not currently
year 2000 compliant. Like many corporations, the Company does not have any
previous experience with an issue like the Year 2000 Problem. The Year 2000
Problem potentially affects the Company across its worldwide locations and
within substantially all of its business activities. Although the Company
believes it is developing an appropriate program to address the Year 2000
Problem, it cannot guarantee that its program will succeed or will be timely.
The following is a discussion of the Company's year 2000 program.
17
Amgen has conducted a review of its Computer Systems to identify those
areas that could be affected by the Year 2000 Problem and has established a
program to address year 2000 issues. The Company has substantially completed
its evaluation of its functional areas and site locations worldwide.
Additionally, the Company has appointed a program manager for year 2000
compliance. The Company has identified the following three principal areas of
potential Computer Systems exposure at Amgen to the Year 2000 Problem, in
addition to supplier and customer issues which are discussed elsewhere:
- - Process Control, Instruments and Environmental Monitoring and Control Systems:
these types of systems are used in the Company's manufacturing and clinical
trial processes, among other operations. These generally are systems, devices
and instruments which utilize date functionality and generate, send, receive
or manipulate date-stamped data and signals. These systems may be found in
data acquisition/processing software, laboratory instrumentation and other
equipment with embedded code, for example. These devices and instruments may
be controlled by installed software, firmware or other embedded control
algorithms.
- - Servers, Desktops and Infrastructure: these generally are desktop computers
(PCs and Macintosh) and server computer equipment (NT and UNIX),
telecommunications, local area networks, wide area networks, and include
system hardware, firmware, installed commercial application software, e-mail,
video teleconferencing and electronic calendaring systems, for example.
- - Custom Applications and Business Systems: these generally are systems which
the Company either wrote or for which the Company has purchased the source
code, or applications purchased from an external vendor. These systems include
applications developed or purchased by a functional area on computer systems
located within Amgen's corporate departments and operated by departmental
personnel, such as Amgen's core business systems (including financial systems
and sales operations systems), fund transfer systems and personnel management
systems.
For each of these areas, Amgen has planned an inventory, business risk
assessment, remediation, testing and implementation phase. The Company has
substantially completed the first four of these phases and expects to have
substantially completed the implementation phase by September 30, 1999. Upon
completion of remediation and testing, the Company plans to implement
appropriate Computer Systems in their year 2000-compliant form. Since the
commencement of its year 2000 efforts, the Company has in the past missed some
deadlines at various stages of developing and implementing its program.
However, the majority of schedule slippage has been recovered and the Company is
working to recover the remainder. The Company is currently behind schedule in
some projects. The Company cannot guarantee that it will meet internal or
external deadlines for year 2000 compliance.
The Company is using both internal and external resources to identify,
correct/reprogram and test its Computer Systems for year
18
2000 compliance. However, the Company cannot guarantee that these resources will
be available at a reasonable cost or at all, due, in part, to competing demands
for these resources which the Company anticipates will increase as January 1,
2000 nears. Further, while the Company plans to complete modifications of its
business critical Computer Systems prior to the year 2000, if modifications of
such business critical Computer Systems, or Computer Systems of Suppliers (as
defined below) are not completed in a timely manner, the Year 2000 Problem could
have a material adverse effect on the operations and financial position of the
Company.
The Company has identified critical providers of information, goods and
services ("Suppliers") in order to assess their year 2000 compliance/readiness.
Suppliers have been prioritized based on business criticality and year 2000
surveys were distributed. The Company has substantially completed its
assessment of year 2000 surveys completed and returned by its Suppliers.
Although the Company cannot control Suppliers' response time, the Company hopes
to have confirmed year 2000 readiness of selected Suppliers by August 31, 1999.
The Company does not intend to contact entities that are not critical and cannot
guarantee that such entities will be year 2000 compliant. The Company plans to
visit selected Suppliers to confirm their year 2000 compliance. In some cases,
the Company also plans to stock extra inventory and qualify alternate suppliers,
although the Company cannot guarantee the availability of additional supplies or
the year 2000 compliance of alternate suppliers. The failure of Suppliers to
become year 2000 compliant on a timely basis, or at all, could have a material
adverse effect on the Company.
The Company has identified its key customers and is working to understand
year 2000 exposure and compliance in that area. However, the Company believes
that the failure of its key customers to become year 2000 compliant on a timely
basis, or at all, could have a material adverse effect on the Company.
The Company may also be affected by the failure of other third parties to
be year 2000 compliant even though these third parties do not directly conduct
business with Amgen. For example, the failure of state, federal and private
payors or reimbursers to be year 2000 compliant and thus unable to make timely,
proper or complete payments to sellers and users of the Company's products,
could have a material adverse effect on the Company. The Government Accounting
Office has stated that the Health Care Financing Administration ("HCFA"), the
principal federal reimburser for the Company's marketed products, may not become
fully year 2000 compliant on a timely basis.
In developing a contingency plan for the Year 2000 Problem, the Company
believes that its "most reasonably likely worst case year 2000 scenario" (the
"Scenario") includes periodic, sporadic disruptions to the delivery of power,
water and normal telecommunication services to the Company's worldwide locations
and impaired transportation, including limited air traffic capacity, which may
occur in the first few months of 2000. The Scenario also contemplates the
failure of Computer Systems of third parties that use the Company's products and
seek reimbursement for the cost of these products (such as hospitals, physicians
and dialysis providers)
19
and of third parties who reimburse for such costs (such as HCFA). Under the
Scenario, the Company's manufacturing, distribution, and research and clinical
development activities, among others, could be adversely affected. Although the
Company believes it has identified the major elements of its "most reasonably
likely worst case year 2000 scenario," there can be no assurance that the
Company has accurately or adequately anticipated the effects of the Year 2000
Problem on the Company or third parties, or that the Company will develop an
adequate contingency plan based on the Scenario or otherwise. The Company
anticipates finalizing its contingency plan by September 1, 1999 and
implementing such plan by November 1999.
As of June 30, 1999, total expenditures related to the Company's year 2000
program, including, without limitation, anticipated upgrades, remediation and
new Computer Systems, are expected to range from $45 million to $55 million,
approximately one-third of which is expected to be capital expenditures.
However, these amounts are only estimates and are based on information currently
available to the Company; the Company cannot guarantee that these amounts will
be adequate to address the Company's year 2000 compliance needs. As of June 30,
1999, the Company estimates that it had incurred approximately $27 million in
its year 2000 efforts, including without limitation, internal staff costs,
outside consulting fees and Computer Systems upgrades.
The statements set forth herein concerning the Year 2000 Problem which are
not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. There can be no guarantee that any estimates or
other forward-looking statements will be achieved and actual results could
differ significantly from those planned or contemplated. The Company plans to
update the status of its year 2000 program as necessary in its periodic filings
and in accordance with applicable securities laws.
Financial Outlook
The Company expects the sales growth rate for EPOGEN(R) in 1999 to be in
the mid-twenties. The Company believes that dialysis providers have increased
doses primarily in response to the June HCFA Revisions and due to certain
dialysis providers using hemoglobin instead of hematocrit to measure red blood
cell counts (see "Results of Operations - Product sales - EPOGEN(R) (Epoetin
alfa)"). The Company also believes that increases in the U.S. dialysis patient
population and dose will continue to grow EPOGEN(R) sales in the near term,
although the Company anticipates dose may grow at a slower rate. Patients
receiving treatment for end stage renal disease are covered primarily under
medical programs provided by the federal government. Therefore, EPOGEN(R) sales
may also be affected by future changes in reimbursement rates or a change in the
basis for reimbursement by the federal government.
The Clinton administration has proposed a Medicare cost savings plan which
includes a provision for cutting Medicare reimbursement of EPOGEN(R) by 10%.
This proposal will be addressed during the
20
federal government's fiscal year 2000 budget process. The Company believes the
proposal, if enacted, would primarily affect dialysis providers that use
EPOGEN(R) and it is difficult to predict its impact on Amgen.
The Company expects a high single- to low double-digit sales growth rate
for NEUPOGEN(R) in 1999. Future NEUPOGEN(R) sales growth is dependent primarily
upon further penetration of existing markets, the effects of competitive
products and the timing and nature of additional indications for which the
product may be approved. NEUPOGEN(R) usage is expected to continue to be
affected by cost containment pressures on health care providers worldwide. In
addition, reported NEUPOGEN(R) sales will continue to be affected by changes in
foreign currency exchange rates, government budgets and increased competition in
Europe.
Generally, in the U.S. the cost of drugs and biologicals administered to
Medicare-eligible patients receiving outpatient services, such as chemotherapy
infusion, is reimbursed under Medicare only if those drugs and biologicals
qualify for coverage under Medicare Part B. Generally, drugs and biologicals
that are "usually self-administered" are not covered by Medicare. However,
Medicare does pay for some drugs and biologicals that are furnished incident to
a physician's services. Currently, NEUPOGEN(R) is reimbursed by HCFA under
Medicare Part B. HCFA has established broad Medicare coverage policies and, in
some cases, interpretations of its policies. However, the Medicare program is
administered by local carriers (typically a private insurance organization that
contracts with HCFA) in each state, which is overseen by a medical director
under contract with HCFA. These carriers and medical directors have the
authority to interpret Medicare reimbursement coverage policies. Although
medical directors in a few states have preliminarily considered that NEUPOGEN(R)
should not be eligible for reimbursement under Medicare Part B principally
because, in their opinions, it is "usually self-administered" when delivered
subcutaneously, neither HCFA nor any local carrier has adopted guidelines or
coverage policies that would exclude NEUPOGEN(R) from Medicare Part B coverage.
However, there can be no assurance that carriers, or HCFA itself, will not in
the future adopt interpretations or guidelines under Medicare Part B or
otherwise, that could exclude or limit reimbursement for NEUPOGEN(R). Any
guidelines or policies that limit or eliminate reimbursement for NEUPOGEN(R)
could adversely affect NEUPOGEN(R) sales.
The Clinton administration has proposed a reduction in the basis upon which
Medicare reimburses outpatient prescription drugs from the current 95% of
average wholesale price ("AWP") to a proposed 83% of AWP. This proposal would
impact reimbursement of NEUPOGEN(R). The Company believes that this new
recommendation, if enacted, would primarily affect customers that use
NEUPOGEN(R) and it is difficult to predict its impact on Amgen.
The Company anticipates the growth rate for total product sales in 1999 to
be in the high teens. For 1999, Amgen expects earnings per share will be at the
high end of a range of $1.90 to $1.95, assuming that the federal government will
extend the research and
21
experimentation tax credit for the second half of 1999. Estimates of future
product sales, operating expenses, and earnings per share are necessarily
speculative in nature and are difficult to predict with accuracy.
Except for the historical information contained herein, the matters
discussed herein are by their nature forward-looking. Investors are cautioned
that forward-looking statements or projections made by the Company, including
those made in this document, are subject to risks and uncertainties that may
cause actual results to differ materially from those projected. Reference is
made in particular to forward-looking statements regarding product sales,
earnings per share and expenses. Amgen operates in a rapidly changing
environment that involves a number of risks, some of which are beyond the
Company's control. Future operating results and the Company's stock price may
be affected by a number of factors, including, without limitation: (i) the
results of preclinical and clinical trials; (ii) regulatory approvals of product
candidates, new indications and manufacturing facilities; (iii) reimbursement
for Amgen's products by governments and private payors; (iv) health care
guidelines and policies relating to Amgen's products; (v) intellectual property
matters (patents) and the results of litigation; (vi) competition; (vii)
fluctuations in operating results and (viii) rapid growth of the Company. These
factors and others are discussed herein and in the sections appearing in "Item
1. Business - Factors That May Affect Amgen" in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 which sections are incorporated
herein by reference and filed as an exhibit hereto.
Legal Matters
The Company is engaged in arbitration proceedings with one of its
licensees. For a discussion of these matters, see Note 6 to the Condensed
Consolidated Financial Statements.
22
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Legal proceedings are reported in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998, with material developments since that
report described in the Company's Form 10-Q for the quarter ended March 31,
1999, and below. 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 proceedings will not have a material adverse effect on the annual
financial statements of the Company.
Transkaryotic Therapies and Hoechst litigation
On June 9, 1999, Transkaryotic Therapies, Inc. and Hoechst Marion Roussel
Inc. filed a motion with the court to re-open proceedings. Amgen filed a notice
with the court on June 10, 1999, that Amgen joined in the motion thereby re-
opening the litigation. The court has set April 2000 for the start of the
trial.
Genentech litigation
A final claim construction order was issued May 14, 1999. The judge's
ruling, among other things, essentially limited the claim term "control region"
to DNA taken from a single operon and not constructed from control elements
derived from various operons. It may not be constructed portion-by-portion from
multiple operons. Currently the case has been stayed in light of the judge's
departure from the bench. The parties are waiting for a notice of reassignment
to a new judge.
FoxMeyer Health Corporation
On January 7, 1999, the Federal Bankruptcy Court in Texas (the "Texas
Bankruptcy Court") entered an order: a) denying Avatex Corporation's ("Avatex")
motion which had requested dismissal of three counts ("Counts 1-3"), in the suit
filed in the District Court of Dallas County, Dallas, Texas by FoxMeyer Health
Corporation without prejudice; b) denying stay pending the remand appeal sought
by the Company and McKesson Corporation and the eleven other manufacturer
defendants (the "Defendants") and c) granting a limited interim stay until
February 8, 1999 to permit the Defendants to make an orderly request for stay
from the U.S. District Court judge hearing the appeals. Avatex has cross
appealed the dismissal with prejudice of Counts 1-3 by the Texas Bankruptcy
Court. That issue is still under advisement in the U.S. District Court in
Dallas. The U.S. District Court in Dallas affirmed the decision of the Texas
Bankruptcy Court directing remand of the case to the Texas State Court. That
decision affirming the remand also denied as moot the appeal of the earlier
order denying a transfer venue to Delaware. Various Defendants joined in an
appeal to the Fifth Circuit from the order mooting the appeal of denial of
change of venue; Amgen did not join in that appeal. In the Texas State Court
the parties have stipulated to extensions of time for any discovery.
23
Securities litigation
In June 1999, the parties entered into a memorandum of understanding
regarding settlement of the actions pending in the U.S. District Court for the
Central District of California (the "Federal Action") and in California Superior
Court for the County of Ventura (the "State Action"). The memorandum of
understanding provides generally that the Company will reimburse brokerage fees,
subject to a maximum of $500 per claimant, associated with the repurchase of
Amgen common stock by claimants who are members of the settlement class, who
purchased shares during the class period, and who later sold such shares at a
loss. The plaintiffs and members of the settlement class will release Amgen and
the named defendants from certain claims and will dismiss the Federal Action and
State Action with prejudice. The contemplated settlement is subject to court
approval.
Johnson & Johnson arbitrations
The Company is engaged in arbitration proceedings with one of its
licensees. See Note 6 to the Condensed Consolidated Financial Statements,
"Contingencies-Johnson & Johnson arbitrations".
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on May 4, 1999.
(b) Omitted pursuant to Instruction 3 to Item 4 of Form 10-Q.
(c) The five matters voted upon at the meeting were: (i) to elect three
directors to hold office until the Annual Meeting of Stockholders in
the year 2002; (ii) to approve an amendment to the Company's Restated
Certificate of Incorporation, as amended, to increase the authorized
number of shares of Common Stock from 750,000,000 shares to
1,500,000,000 shares ("Proposal Two"); (iii) to approve the material
terms of the performance goals under which management incentive plan
Section 162(m) awards are to be paid under the Amended and Restated
Management Incentive Plan ("Proposal Three"); (iv) to approve the
Company's Amended and Restated 1991 Equity Incentive Plan, as amended,
to (x) extend the term of such plan, (y) delete provisions of such
plan that permit the repricing of outstanding options and the
cancellation and regrant of options, and (z) make certain other
conforming changes to such plan, and as restated in 1999 to reflect
such amendments and all prior amendments ("Proposal Four"); and (v) to
ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the year ending December 31, 1999 ("Proposal Five").
(i) With respect to each of the nominees for director, William K.
Bowes, Jr., received 450,138,326 shares
24
in favor and 2,736,027 shares were withheld, Judith C. Pelham
received 450,157,600 shares in favor and 2,716,753 shares were
withheld, Kevin W. Sharer received 450,111,379 shares in favor
and 2,762,974 shares were withheld, and there were no
abstentions or broker non-votes. All nominees were declared to
have been elected as directors to hold office until the Annual
Meeting of Stockholders in the year 2002.
(ii) With respect to Proposal Two, 369,593,840 shares were in favor,
81,551,609 shares were against, 1,728,903 shares abstained and
there was 1 broker non-vote. Proposal Two was declared to have
been approved.
(iii) With respect to Proposal Three, 432,129,802 shares were in
favor, 13,872,825 shares were against, 3,648,292 shares
abstained and there were 3,223,434 broker non-votes. Proposal
Three was declared to have been approved.
(iv) With respect to Proposal Four, 407,158,100 shares were in
favor, 39,162,662 shares were against, 3,330,157 shares
abstained and there were 3,223,434 broker non-votes. Proposal
Four was declared to have been approved.
(v) With respect to Proposal Five, 449,997,785 shares were in favor,
848,477 shares were against, 2,028,041 shares abstained and
there were 50 broker non-votes. Proposal Five was declared to
have been ratified.
(d) Not applicable.
Item 5. Other Information
The Company's 2000 Annual Meeting of Stockholders will be held on May 11,
2000.
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 - none
25
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: 8/3/99 By:/s/Kathryn E. Falberg
- --------------- ----------------------------------
Kathryn E. Falberg
Senior Vice President, Finance
and Chief Financial Officer
Date: 8/3/99 By:/s/Marc M.P. de Garidel
- ---------------- ----------------------------------
Marc M.P. de Garidel
Vice President, Controller and
Chief Accounting Officer
26
AMGEN INC.
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Certificate of Incorporation as amended. (17)
3.2* Amended and Restated Bylaws.
3.3* Certificate of Amendment of Restated Certificate of Incorporation.
3.4* Certificate of Amendment of Certificate of Designations of Series A
Junior Participating Preferred Stock.
4.1 Indenture dated January 1, 1992 between the Company and Citibank
N.A., as trustee. (8)
4.2 First Supplement to Indenture, dated February 26, 1997 between the
Company and Citibank N.A., as trustee. (14)
4.3 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, as supplemented, establishing a series of securities "8-
1/8% Debentures due April 1, 2097." (16)
4.4 8-1/8% Debentures due April 1, 2097. (16)
4.5 Form of stock certificate for the common stock, par value $.0001 of
the Company. (17)
4.6 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the
Indenture, dated as of January 1, 1992, as supplemented by the First
supplemental Indenture, dated as of February 26, 1997, each between
the Company and Citibank, N.A., as Trustee, establishing a series of
securities entitled "6.50% Notes Due December 1, 2007". (20)
4.7 6.50% Notes Due December 1, 2007 described in Exhibit 4.6. (20)
4.8 Corporate Commercial Paper - Master Note between and among Amgen
Inc., as Issuer, Cede & Co., as nominee of The Depository Trust
Company and Citibank, N.A. as Paying Agent. (23)
10.1* Company's Amended and Restated 1991 Equity Incentive Plan.
10.2 Sixth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated April 1, 1996. (25)
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, July 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
27
(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 Amended and Restated Employee Stock Purchase Plan. (12)
10.8 Research, Development Technology Disclosure and License Agreement
PPO, dated January 20, 1986, by and between the Company and Kirin
Brewery Co., Ltd. (4)
10.9 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)
10.10 Assignment and License Agreement, dated October 16, 1986, between
the Company and Kirin-Amgen, Inc. (with certain confidential
information deleted therefrom). (5)
10.11 G-CSF European License Agreement, dated December 30, 1986, between
Kirin-Amgen, Inc. and the Company (with certain confidential
information deleted therefrom). (5)
10.12 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)
10.13 Company's Amended and Restated 1988 Stock Option Plan. (12)
10.14 Company's Amended and Restated Retirement and Savings Plan. (12)
10.15 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. (6)
10.16 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).
(7)
10.17 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. (9)
10.18 Amgen Inc. Supplemental Retirement Plan (As Amended and Restated
Effective January 1, 1998). (23)
10.19 Promissory Note of Mr. Kevin W. Sharer, dated June 4, 1993. (10)
10.20* Amended and Restated Amgen Performance Based Management Incentive
Plan.
10.21 Credit Agreement, dated as of May 28, 1998, among Amgen Inc., the
Borrowing Subsidiaries named therein, the Banks named therein,
Citibank, N.A., as Issuing Bank, and Citicorp USA, Inc., as
Administrative Agent. (24)
10.22 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995.
(11)
10.23 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995.
(11)
28
10.24 Promissory Note of Mr. Stan Benson, dated March 19, 1996. (11)
10.25 Amendment No. 1 to the Company's Amended and Restated Retirement and
Savings Plan. (12)
10.26* Seventh Amendment to the Amgen Retirement and Savings Plan as
Amended and Restated effective April 1, 1996.
10.27 Amendment Number 2 to the Company's Amended and Restated Retirement
and Savings Plan dated April 1, 1996. (15)
10.28 Amgen Inc. Change of Control Severance Plan effective as of October
20, 1998. (25)
10.29 Preferred Share Rights Agreement, dated February 18, 1997, between
Amgen Inc. and American Stock Transfer and Trust Company, Rights
Agent. (13)
10.30 First Amendment, effective January 1, 1998, to the Company's Amended
and Restated Employee Stock Purchase Plan. (18)
10.31 Third Amendment, effective January 1, 1997, to the Company's Amended
and Restated Retirement and Savings Plan dated April 1, 1996. (18)
10.32 Binding Term Sheet, dated August 20, 1997, between Guilford
Pharmaceuticals Inc. and GPI NIL Holdings, Inc., and Amgen Inc.
(with certain confidential information deleted therefrom). (19)
10.33 Promissory Note of Ms. Kathryn E. Falberg, dated April 7, 1995. (21)
10.34 Promissory Note of Mr. Edward F. Garnett, dated July 18, 1997. (21)
10.35 Fourth Amendment to the Company's Amended and Restated Retirement
and Savings Plan as amended and restated effective April 1, 1996.
(21)
10.36 Fifth Amendment to the Company's Amended and Restated Retirement and
Savings Plan as amended and restated effective April 1, 1996. (21)
10.37 Company's Amended and Restated 1987 Directors' Stock Option Plan.
(15)
10.38 Amended and Restated Agreement on G-CSF in the EU between Amgen Inc.
and F. Hoffmann-La Roche Ltd (with certain confidential information
deleted therefrom). (23)
10.39 Collaboration and License Agreement, dated December 15, 1997,
between the Company, GPI NIL Holdings, Inc. and Guilford
Pharmaceuticals Inc. (with certain confidential information deleted
therefrom). (22)
27* Financial Data Schedule.
99* Sections appearing under the heading "Business - Factors That May
Affect Amgen" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
- ----------------
* Filed herewith.
(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.
29
(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 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.
(7) Filed as an exhibit to the Form 8 dated November 8, 1989, amending the
Annual Report on Form 10-K for the year ended March 31, 1989 on June 28,
1989 and incorporated herein by reference.
(8) Filed as an exhibit to Form S-3 Registration Statement dated December 19,
1991 and incorporated herein by reference.
(9) Filed as an exhibit to the Form 8-A dated March 31, 1993 and incorporated
herein by reference.
(10) 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.
(11) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1995 on March 29, 1996 and incorporated herein by reference.
(12) Filed as an exhibit to the Form 10-Q for the quarter ended September 30,
1996 on November 5, 1996 and incorporated herein by reference.
(13) Filed as an exhibit to the Form 8-K Current Report dated February 18, 1997
on February 28, 1997 and incorporated herein by reference.
(14) Filed as an exhibit to the Form 8-K Current Report dated March 14, 1997 on
March 14, 1997 and incorporated herein by reference.
(15) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1996 on March 24, 1997 and incorporated herein by reference.
(16) Filed as an exhibit to the Form 8-K Current Report dated April 8, 1997 on
April 8, 1997 and incorporated herein by reference.
(17) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1997
on May 13, 1997 and incorporated herein by reference.
(18) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1997 on
August 12, 1997 and incorporated herein by reference.
(19) Filed as exhibit 10.47 to the Guilford Pharmaceuticals Inc. Form 8-K
Current Report dated August 20, 1997 on September 4, 1997 and incorporated
herein by reference.
(20) Filed as an exhibit to the Form 8-K Current Report dated and filed on
December 5, 1997 and incorporated herein by reference.
30
(21) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1997 on March 24, 1998 and incorporated herein by reference.
(22) Filed as Exhibit 10.40 to the Guilford Pharmaceuticals Inc. Form 10-K for
the year ended December 31, 1997 on March 27, 1998 and incorporated herein
by reference.
(23) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1998
on May 13, 1998 and incorporated herein by reference.
(24) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1998
on August 14, 1998 and incorporated herein by reference.
(25) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1998 on March 16, 1999 and incorporated herein by reference.
31