SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 COMMISSION FILE NUMBER 1-09623
IVAX CORPORATION
INCORPORATED UNDER THE LAWS OF THE I.R.S. EMPLOYER IDENTIFICATION NUMBER
STATE OF FLORIDA 16-1003559
4400 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33137
305-575-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class Name of each exchange
on which registered
COMMON STOCK, PAR VALUE $.10 AMERICAN STOCK EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of March 31, 2000, there were 156,269,324 shares of Common Stock
outstanding.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 31, 2000, was approximately $3.3 billion.
IVAX CORPORATION
ANNUAL REPORT ON FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business................................................................................ 1
Item 2. Previously Filed
Item 3. Previously Filed
Item 4. Previously Filed
PART II
Previously Filed
PART III
Item 10. Directors and Executive Officers of the Registrant...................................... 13
Item 11. Executive Compensation.................................................................. 16
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 20
Item 13. Certain Relationships and Related Transactions.......................................... 21
PART IV
Previously Filed
i
PART I
ITEM 1. BUSINESS
OVERVIEW
We are a multi-national company engaged in the research, development,
manufacture and marketing of pharmaceutical products. We have subsidiaries
located throughout the world, some of which are among the leading
pharmaceutical companies in their markets. Our current business is well
established, generating net revenues in 1999 of $656 million and net income of
approximately $70 million. While we expect continued growth from our current
products, we recognize that our long-term growth will depend on the discovery
and development of new products that will satisfy currently unmet medical
needs. Accordingly, we are focusing on expanding our portfolio of proprietary
and brand name pharmaceutical products through our research and development
efforts and through strategic acquisitions and collaborations. As a result,
although our strategy is to continue to expand our generic business, we
anticipate an increasing amount of our future revenues to be generated from the
sale of proprietary and branded products.
NEW DRUG DISCOVERY
We have discovered, developed and acquired rights in leading edge
technologies that we believe form the basis of a strong pipeline of new
proprietary drugs. Among our discoveries is Paxoral/trademark/, a patented
system for the oral administration of paclitaxel, which is one of the leading
anticancer drugs in the world. Paclitaxel is currently available only in
intravenous formulations because the drug is not biologically available when
administered orally. We believe that our patented new system will allow
patients to obtain effective doses of paclitaxel through oral administration
and that this patented system can be applied to other chemotherapeutic agents
that are not currently orally available.
We have also developed and patented a group of novel compounds to treat
asthma and allergic disorders. These products have shown efficacy in
preclinical studies. These compounds are pharmacologically active by oral
administration, inhalation and injection.
We recently entered an additional field of technology by acquiring Soft
Drugs, Inc., a privately-owned research company. This technology, which we refer
to as "soft-drug technology," as applied to steroids results in compounds that
have the same efficacy as conventional steroids but have minimum systemic side
effects due to their rapid conversion in the body into inactive metabolites. We
are currently studying these drugs for use in asthma and gastro-intestinal
inflammatory conditions such as colitis and ileitis.
Through our recent acquisition of the Institute for Drug Research, we
obtained a research capability that includes drug discovery, screening,
synthesis and pre-clinical development. As part of the acquisition, we also
acquired rights to several important compounds, including one for the treatment
of benign prostatic hypertrophy which is currently entering clinical trials.
Other new compounds in earlier stages of development are being designed to
treat cancer by inhibiting angiogenesis and to treat neurological disorders
such as Alzheimer's Disease. The Institute for Drug Research employs
approximately 200 scientists.
We have also acquired new technologies useful for drug development
pursuant to licenses from third parties. For example, we are using technology
licensed from a university to develop sustained release formulations of several
drugs. Additionally, we are working with Indiana Protein Technologies, Inc. to
develop generic equivalents of peptide-based products such as human growth
hormone and interferon, for which no current generic equivalents exist.
COLLABORATIVE AGREEMENTS
Drug discovery and development not only add new products to our pipeline
but also provide us with valuable intellectual property and technologies that
we are able to exploit through collaborative
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alliances. During 1999, we received revenues under agreements with Abbott
Laboratories, ALZA Corporation, BASF A.G., Bristol-Myers Squibb Company, Glaxo
Wellcome plc, and Yamanouchi Pharmaceutical Co., Ltd., as well as under other
licensing and distribution agreements. We continue to seek strategic
collaborations with third parties in order to exploit our proprietary
technologies on an opportunistic basis.
MARKETED PRODUCTS
Our extensive research programs are supported by the revenues of our
worldwide pharmaceutical businesses. We have a strong franchise in the
respiratory field, and our Baker Norton subsidiary in the United Kingdom is the
third largest respiratory company in that market. At the core of this franchise
are advanced delivery systems, which include a patented metered-dose inhaler
called Easi-Breathe/trademark/, and a unique new dry powder inhaler, as well as
conventional metered-dose inhalers. We have also pioneered the development of
propellants for aerosol products that do not contain CFCs, chemicals believed
to be harmful to the environment and being phased out on a global basis. In
November 1997, we received the world's first approval for a CFC-free
beclomethasone, and in April 2000, we received approval in the United Kingdom
for a CFC-free albuterol. Both beclomethasone and albuterol are
widely-prescribed anti-asthmatic drugs. We are also developing CFC-free
propellant formulations of other asthma medications, including some that are
proprietary to other companies and are being developed under collaborative
research arrangements. Revenues from these and other respiratory products are
generated by our direct sales forces in several countries as well as through
royalties on sales by our distributors. We are seeking to establish direct
sales capabilities and distributorships in additional geographic areas. By
formulating a range of propellants and molecules for delivery by our patented
inhalers, we expect to be able to introduce a steady stream of new respiratory
products that will help to increase our share of the $10 billion global asthma
market.
We also have a strong franchise in the oncology field based on our
proprietary anti-cancer drug Paxene/registered trademark/ (paclitaxel), which
has been approved for AIDS-related Kaposi's Sarcoma in the European Union and
for additional indications in certain other countries. We anticipate that, upon
approval of our ANDA for paclitaxel injection in the United States, it will be
the only generic paclitaxel on the market for a period of six months. We expect
that this will assure us a strong market position and enable us to maximize the
commercial potential of the product. We plan to market Paxene/registered
trademark/ in the United States through our direct sales force to oncologists
and distributors of oncological drugs. We believe that these relationships can
be used in the future to facilitate our commercialization of Paxoral/trademark/
and other oncology products.
A third important segment of our business is the broad line of generic
pharmaceutical products, both prescription and over-the-counter, that are
marketed by our various subsidiaries. In order to remain successful in the
generic pharmaceutical business, we are working to develop new formulations and
to obtain marketing authorizations which will enable us to be the first or
among the first to launch generic products on the market. The increased
profitability of our continuing operations for the year ended December 31,
1999, was in part due to increased efficiencies in our generic business.
GROWTH STRATEGIES
We expect our future growth to come from:
/bullet/ discovering and developing new products;
/bullet/ leveraging proprietary technology and development strengths in the
respiratory and oncology areas;
/bullet/ pursuing complementary, accretive acquisitions; and
/bullet/ strategically expanding sales and distribution of our products.
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DISCOVERY AND DEVELOPMENT OF NEW PRODUCTS
Over the past several years, we have dramatically increased the size and
scope of our new product development capability. We currently have over 500
people (approximately 10% of our total workforce) involved in our drug research
and development programs. In 1999, we spent $54.2 million for company-sponsored
research and development activities, of which approximately 97% was for
pharmaceutical research and development, and of the amount spent on
pharmaceutical research and development, approximately 67% was associated with
proprietary products. We have projected a 50% increase in research and
development spending during 2000 without regard to the use of proceeds from
this offering. With the increased resources that will be generated by the
present offering, we anticipate that we will be able to develop our current
programs even more quickly and to undertake additional programs that will
expand our new product pipeline. The recent acquisition of the Institute for
Drug Research has served to enhance our expertise in drug discovery, screening,
synthesis and pre-clinical development. Among the new products that have either
entered or are about to enter clinical trials in the near future are:
/bullet/ the Paxoral/trademark/ oral form of paclitaxel;
/bullet/ a novel patented anti-asthmatic drug;
/bullet/ one or more of the soft steroids that we are developing for asthma
and gastrointestinal indications both in humans and companion
animals; and
/bullet/ our new compound to treat benign prostatic hypertrophy.
We also hope through our basic research programs at the Institute for Drug
Research to develop further improved forms of these drugs as well as other
novel compounds and delivery systems.
LEVERAGE PROPRIETARY TECHNOLOGY AND DEVELOPMENT STRENGTHS
Two of the main linchpins of our growth strategy are:
/bullet/ our patented inhalation technology and our expertise in developing
and commercializing respiratory products; and
/bullet/ our experience in the development and commercialization of
oncology drugs.
We have been successful in leveraging these strengths to develop a significant
portfolio of proprietary, high value pharmaceutical products in the areas of
respiratory diseases and oncology. Our technology and capabilities in these
areas have also allowed us to pursue new business opportunities in the form of
strategic collaborations with pharmaceutical partners desiring to license our
technologies and utilize our expertise. In the respiratory area, we have
successfully challenged a number of European patents held by 3M Corporation on
CFC-free formulations of anti-asthmatic drugs and have become the first company
to obtain approvals of our own CFC-free formulations of these drugs. With our
pioneering position in this technology, our expertise in the formulation of
CFC-free propellants, and our award winning, patented inhalation devices, we are
well positioned to become a worldwide leader in the $10 billion global market
for products to treat asthma. In the oncology field, we were the first company
after Bristol-Myers to complete original clinical trials accepted by the FDA as
establishing the safety and efficacy of Paxene/registered trademark/. The
product is currently being marketed by our subsidiaries in Eastern Europe and
the European Union. Through these activities, we have developed a considerable
body of clinical data, technology and know-how that is proprietary to us. As we
continue to seek improved formulations of paclitaxel, and as we develop
complementary products such as Paxoral/trademark/ and our angiogenesis
inhibitor, we believe that we will be able to build on our regulatory and
marketing experience with paclitaxel. In addition, we expect that the
relationships that we establish with oncology drug distributors, hospitals and
cancer centers will assist us in marketing generic biotech drugs, such as the
colony-stimulating factors, interferon and human growth hormone, that we are in
the process of developing.
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PURSUE COMPLEMENTARY, ACCRETIVE ACQUISITIONS
Acquisitions have in the past helped to build our company, and we expect
to use well-timed, carefully selected acquisitions to continue to drive our
growth. We intend to pursue primarily acquisitions that will complement our
existing businesses and provide new product and market opportunities, as well
as leverage our existing assets. In assessing strategic opportunities, we will
consider whether the acquisition:
/bullet/ is accretive to earnings;
/bullet/ allows us to leverage our expertise in our areas of therapeutic
focus by adding new products or product development capabilities;
/bullet/ offers geographic expansion opportunities into key strategic
markets; and
/bullet/ allows us to further penetrate our existing markets, thereby
enabling us to take advantage of economies of scale.
In addition to business acquisitions, we will continue to actively pursue
strategic product acquisitions and other collaborative arrangements. Integral
to these initiatives is our ability to leverage our existing infrastructure by
adding sales from acquired products while minimizing incremental costs.
STRATEGICALLY EXPAND SALES AND DISTRIBUTION OF OUR PRODUCTS
We currently have research, manufacturing, distribution and/or marketing
operations in more than 15 countries throughout the world, and our products are
distributed in approximately 70 countries. Recently we reacquired rights to our
Easi-Breathe/trademark/ and paclitaxel products in various European countries
and we are developing sales capabilities in those countries to market these and
future products. We have now established a sales force in France for
respiratory products, and have begun marketing additional products through our
subsidiaries in the United States and in Eastern Europe. Our future plans
include the acquisition of additional manufacturing and distribution
capabilities in Europe and Latin America. In Asia, we hope to complement the
operations of our joint venture with the Kunming Pharmaceutical Factory by
establishing additional joint ventures and selectively establishing
distribution channels for our major products.
At the same time, we are seeking to identify and exploit the synergies
that exist among our various subsidiaries. For example, our Czech Republic
subsidiary is a large producer of bulk cyclosporin, a drug used to prevent
rejection in organ transplant recipients. Bulk cyclosporin is one of the
ingredients used in our Paxoral/trademark/ product. Most of our subsidiaries
began as independent companies, owned and operated by residents of the
countries in which they are located and, therefore, are strongly rooted in the
cultures in which they operate. We believe this is an advantage over other
multi-national companies, which often fail in their attempts to import
corporate cultures and marketing strategies developed in one country into other
countries and markets. At the same time, we are attempting to integrate
operations and seeking to exploit synergies that provide growth opportunities
in each market.
PHARMACEUTICAL BUSINESSES AND PRODUCTS
We market several brand name pharmaceutical products and a wide variety of
generic and over-the-counter pharmaceutical products, primarily in the United
States and the United Kingdom. We also maintain direct operations in Argentina,
China, the Czech Republic, Germany, Hong Kong, Hungary, India, Ireland, Italy,
Kazakhstan, Latvia, Peru, Poland, Russia, the Slovak Republic, Ukraine and
Uruguay, and market our products through distributors or joint ventures in
other foreign markets.
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Our pharmaceutical business historically has grown through:
/bullet/ the development and acquisition of brand name, generic and
over-the-counter pharmaceutical products;
/bullet/ the license of technology and products from third parties; and
/bullet/ collaborative alliances and the acquisition of pharmaceutical and
other businesses.
PROPRIETARY AND BRANDED PRODUCTS
We market a number of brand name products treating a variety of conditions
through our subsidiaries throughout the world. These brand name products are
marketed by our direct sales force to physicians, pharmacies, hospitals,
managed health care organizations and government agencies. These brand name
products are sold primarily to wholesalers, retail pharmacies, distributors,
hospitals and physicians.
PAXENE/registered trademark/. The active substance in the injectable drug
paclitaxel is an unpatented compound which, in clinical trials sponsored by the
National Cancer Institute, exhibited promising results in the treatment of
ovarian and breast cancer and AIDS-related Kaposi's Sarcoma. Bristol-Myers
currently markets an injectable product containing paclitaxel under the brand
name Taxol/registered trademark/ for the treatment of ovarian and breast cancer
and AIDS-related Kaposi's Sarcoma. Paxene/registered trademark/, our
formulation of injectable paclitaxel, is marketed under a license from NaPro
BioTherapeutics.
We submitted a New Drug Application, or NDA, for Paxene/registered
trademark/ for the treatment of AIDS-related Kaposi's Sarcoma in March 1997. In
December 1997 the FDA determined Paxene/registered trademark/ to be safe and
effective for that purpose, but concluded that Paxene/registered trademark/
could not be finally approved for this indication until August 4, 2004. The
delay in final approval is due to a seven-year market exclusivity period under
the Orphan Drug Act granted to Taxol/registered trademark/, which was approved
for AIDS-related Kaposi's Sarcoma earlier in 1997. The Orphan Drug exclusivity
of Taxol/registered trademark/ does not apply to NDAs or ANDAs for the use of
paclitaxel to treat indications other than AIDS-related Kaposi's Sarcoma and
does not apply in any market other than the United States. We filed an ANDA for
paclitaxel with the FDA in December 1997. In August 1998, we purchased Immunex
Corporation's ANDA for paclitaxel, the first filed with the FDA for paclitaxel
injection. We filed an application for regulatory approval of Paxene/registered
trademark/ to treat AIDS-related Kaposi's Sarcoma in the European Union in
1997, and in July 1999 the European Committee for Proprietary Medical Products
approved this application. In April 2000, Paxene/registered trademark/ was
approved for the same indication in Canada by the Health Protection Branch. Our
Galena subsidiary received an exception from registration to market
Paxene/registered trademark/ for various indications in the Czech Republic in
January 1999, and in March 2000 our product was approved in Poland for breast
and ovarian cancers. We have also applied for approval to market
Paxene/registered trademark/ in other countries.
Bristol-Myers has obtained numerous patents relating to paclitaxel,
including patents covering the production of paclitaxel, its administration to
patients and its formulation. Even if our NDA for Paxene/registered trademark/
or our ANDA for paclitaxel is approved, we will not be able to market
paclitaxel if Bristol-Myers successfully enforces such patents against us. In
January 1998, Bristol-Myers initiated patent infringement litigation against
Immunex Corporation and, under the Waxman-Hatch Act, our paclitaxel ANDA filed
by Immunex Corporation may not be approved by the FDA until the earlier of June
2000 or the date when a court determines that certain of Bristol-Myers' patents
are either unenforceable or not infringed by our product. In April 2000, the
federal district court presiding over the paclitaxel patent infringement
litigation entered judgment in our favor in connection with all of
Bristol-Myers' patent infringement claims. Bristol-Myers' has filed a notice of
appeal and as part of the ruling, the parties agreed to an expedited briefing
schedule.
EASI-BREATHE/trademark/. We have substantial expertise in the development,
manufacture and marketing of respiratory drugs, primarily for asthma, in
metered-dose inhaler formulations. We hold patents on a
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breath-activated metered-dose inhaler which is designed to overcome the
difficulty many persons experience with conventional metered-dose inhalers in
attempting to coordinate their inhalation with the emission of the medication.
Our device, called Easi-Breathe/trademark/, emits the medication automatically
in one step upon inhalation, minimizing coordination problems and better
ensuring that the medication is delivered to the lungs. We market our
Easi-Breathe/trademark/ breath-activated inhaler through our Baker Norton
subsidiary in the United Kingdom and through our Galena subsidiary in the Czech
Republic. In the United Kingdom and Ireland, we market the asthma drug
Cromogen/trademark/ (sodium cromoglycate) in the Easi-Breathe/trademark/
inhaler under our own name, and the asthma drugs Ventolin/registered trademark/
(albuterol) and Becotide/registered trademark/ (beclomethasone) in the
Easi-Breathe/trademark/ inhaler under Glaxo Wellcome's name.
Ventolin/registered trademark/ and Becotide/registered trademark/ are
registered trademarks of Glaxo Wellcome.
ELMIRON/registered trademark/. We received our first United States
approval to market a proprietary drug in September 1996, when the FDA cleared
our NDA for the marketing of our patented prescription medication
Elmiron/registered trademark/ (pentosan polysulfate sodium). Elmiron/registered
trademark/ is approved in the United States and Canada for the treatment of
interstitial cystitis, a chronic, progressive and debilitating urinary bladder
disease primarily affecting women. In September 1997, we sold the United States
and Canadian marketing rights to Elmiron/registered trademark/ and the
urological medications Bicitra/registered trademark/, Polycitra/registered
trademark/, Polycitra-K Crystals/registered trademark/,
Polycitra-LC/trademark/, Neutra-Phos/registered trademark/, and
Neutra-Phos-K/trademark/, to ALZA Corporation. Although this sale represented
an exit by us from the urology business in 1997, we retained the rights to
these products outside of the United States and Canada and are currently
seeking product approvals in various countries. We also retained rights to
Elmiron/registered trademark/ for veterinary uses and are developing it to
treat feline interstitial cystitis.
NEW PROPRIETARY AND BRANDED PRODUCTS UNDER DEVELOPMENT
We are committed to the cost-effective development of proprietary
pharmaceuticals directed primarily towards indications having relatively large
patient populations or for which limited or inadequate treatments are
available. We seek to accelerate product development and commercialization by
in-licensing compounds, especially after clinical testing has begun, and by
developing new dosage forms of existing products or new therapeutic indications
for existing products. We intend to emphasize the development of drug products
in the oncology and respiratory fields and have a variety of proprietary
pharmaceuticals in varying stages of development.
PAXORAL/trademark/. Presently, paclitaxel is marketed only in injectable
form. We are developing an oral formulation of paclitaxel that we believe may
provide significant advantages over the injectable dosage form in terms of
patient convenience and reduced side-effects. We are currently conducting human
clinical trials to test the safety and efficacy of Paxoral/trademark/.
INHALATION AEROSOL PRODUCTS. We are continuing to develop the
Easi-Breathe/trademark/ inhaler for use with various compounds. In light of
international agreements calling for the eventual phase-out of
chlorofluorocarbons, we are developing CFC-free inhalation aerosol products. We
received regulatory approval to market CFC-free beclomethasone in Ireland and
France in 1997 in our standard metered-dose inhaler and our
Easi-Breathe/trademark/ inhaler, the first such approvals for any company
anywhere in the world. In October 1999, we received regulatory approval to
market CFC-free beclomethasone in our standard metered-dose inhaler in Belgium,
Italy, Finland and Portugal. In 1998, we also applied for approval to market an
albuterol CFC-free formulation in various European countries, and in April
2000, this product was approved for marketing in the United Kingdom. That
approval will provide the basis for expedited approvals in other European
countries under the mutual recognition procedure. Also, we have developed a
multi-dose dry powder inhaler which uses no propellant and is believed to have
superior dosing accuracy than competing models. In 1998, we completed clinical
trials in the United Kingdom for budesonide in our multi-dose dry powder
inhaler. In 1999, we submitted Marketing Authorization Applications in the
United Kingdom for approval to market a multi-dose dry powder inhaler for use
with albuterol and budesonide.
In developing environmentally friendly, CFC-free formulations for
metered-dose inhalers, we and many of our competitors have obtained or licensed
patents on formulations containing alternative
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propellants. There are many existing patents covering the use of
hydrofluoroalkane with pharmaceuticals, and successful product development by
us may require that we incur substantial expense in seeking to develop
formulations that do not infringe competitors' patents, or that we license or
invalidate such patents. We successfully invalidated certain relevant United
Kingdom and European patents in the United Kingdom during 1997, 1998, and early
1999, but there can be no assurance that we will be successful in defeating the
corresponding patents in the United States or other foreign jurisdictions.
OTHER PRODUCTS. Additionally, we are working on other products in early
states of development, including:
/bullet/ steroids derived with our "soft-drug technology" that have the
same efficacy as conventional steroids but reduced side effects;
/bullet/ products for the treatment of benign prostatic hypertrophy; and
/bullet/ compounds designed to treat cancer by inhibiting angiogenesis.
GENERIC PRODUCTS
Generic drugs are therapeutically equivalent to their brand name
counterparts, but are generally sold at lower prices and as alternatives to the
brand name products.
In the United States, we manufacture and market under the "Zenith
Goldline" and "Goldline" trade names approximately 57 generic prescription
drugs in capsule or tablet forms in an aggregate of approximately 116 dosage
strengths. We also distribute in the United States approximately 349 additional
generic prescription and over-the-counter drugs and vitamin supplements, in
various dosage forms, dosage strengths and package sizes. Our domestic generic
drug distribution network encompasses most trade classes of the pharmaceutical
market, including wholesalers, retail drug chains, retail pharmacies, mail
order companies, managed care organizations, hospital groups, nursing home
providers and government agencies.
In the United Kingdom, we are the largest manufacturer and distributor of
generic pharmaceuticals. We market under the "Norton" trade name approximately
110 generic prescription and over-the-counter drugs, about half of which we
manufacture, in various dosage forms and dosage strengths, constituting an
aggregate of approximately 229 products. Such products are marketed to
wholesalers, retail pharmacies, hospitals, physicians and government agencies.
In addition, we manufacture and market various "blow-fill-seal" pharmaceutical
products, such as contact lens solutions, unit-dose eye drops, solutions for
injection or irrigation, and unit-dose vials for nebulization to treat
respiratory disorders.
NEW GENERIC PRODUCTS UNDER DEVELOPMENT
We are seeking to supplement our portfolio of generic products by
emphasizing the development of specialty generics, defined as those products
which, because of one or more special characteristics, are likely to encounter
less competition. Specialty generic products include those:
/bullet/ which are difficult to formulate or manufacture;
/bullet/ which involve regulatory obstacles or potential patent
challenges; or
/bullet/ for which limited raw material suppliers exist.
By emphasizing the development of specialty generics, we seek to introduce
generic products that our competitors cannot easily develop, which is
advantageous because the products are subject to less
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competition and less pricing pressure. In addition, in evaluating which generic
pharmaceutical product development projects to undertake, we consider whether
the new product, once developed, will complement our other products in the same
therapeutic family, or will otherwise assist in making our product line more
complete. Developing specialty generic pharmaceutical products generally
involves more time and resources than developing common generic pharmaceutical
products.
From January 1999 through March 2000, we received final FDA approval of 7
ANDAs, tentative FDA approval of 5 ANDAs, approval of 6 Abridged Product
License Applications, or APLAs, the United Kingdom equivalent of an ANDA, from
the United Kingdom Medicines Control Agency and approval of 12 APLAs in 4 other
European Countries.
As of March 31, 2000, we had ANDAs or its foreign equivalent pending as
follows:
NUMBER PENDING COUNTRY
- ---------------- --------------
25 United States
29 England
7 Ireland
10 Germany
2 France
1 Canada
COLLABORATIVE ALLIANCES, ACQUISITIONS AND JOINT VENTURES
GLAXO WELLCOME. In December 1996, we licensed the Easi-Breathe/trademark/
device to Glaxo Wellcome for use with a number of inhaled compounds (including,
among others, beclomethasone and albuterol) mixed with CFC or HFA propellants.
The license granted Glaxo Wellcome the exclusive right to use the
Easi-Breathe/trademark/ device for these compounds on a worldwide basis. We
renegotiated this agreement in order to regain rights to market our
Easi-Breathe/trademark/ inhaler containing beclomethasone and albuterol
worldwide, except in the United Kingdom and Ireland where we and Glaxo Wellcome
will continue to jointly market the Easi-Breathe/trademark/ inhaler until the
end of 2000. We and Glaxo Wellcome are continuing to discuss a number of
possible ways in which to strengthen our alliance.
BRISTOL-MYERS. In November 1999, we entered into a three-year product
collaboration and development services agreement with Bristol-Myers in the
areas of inhalation technology and oncology. With respect to inhalation
technology, the agreement calls for us and Bristol-Myers to collaborate to
develop one or more of Bristol-Myers' proprietary molecules using our patented
devices, which Bristol-Myers would purchase from us. Bristol-Myers would retain
the worldwide rights to market respiratory products containing its compounds.
INSTITUTE FOR DRUG RESEARCH. In October 1999, we acquired the Institute
for Drug Research, which is based in Budapest, Hungary. The Institute for Drug
Research employs approximately 200 scientists and support staff and engages in
original drug discovery and provides contract research services to other
pharmaceutical companies. It was originally founded in 1950 as a
government-owned pharmaceutical research and development center for the
Hungarian pharmaceutical industry. It has expertise in drug discovery,
screening, synthesis, and pre-clinical development. Additionally, the Institute
for Drug Research has a depository of more than 1,500 microorganisms to produce
chemicals of medicinal value through fermentation. The Institute for Drug
Research has a number of new drugs that are now in Phase I clinical trials,
including a tri-peptide with anti-thrombin activity similar to heparin, which
helps prevent blood clots.
SOFT DRUGS. In December 1999, we acquired Soft Drugs, a private company
with a significant patent portfolio. This acquisition provides us with several
new chemical entities to add to our growing pipeline of proprietary new drugs.
These chemical entities include a corticosteroid that is rapidly converted to
an inactive form after absorption, which will minimize the side effects
normally associated with these drugs. Initial applications will be to treat
asthma (as an inhaled product) and inflammatory diseases of the large intestine
(in a special oral form).
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INDIANA PROTEIN TECHNOLOGIES. In August 1999, we entered into an agreement
with Indiana Protein Technologies, a privately held company, to use Indiana
Protein Technologies' recombinant technology in the joint development of a
number of generic peptide-based pharmaceutical products.
GALENA. In 1994, we acquired a 60% interest in Galena, one of the oldest
and best known pharmaceutical companies based in the Czech Republic. Through
open market purchases made in 1995, 1996 and 1999, and a public tender offer
made in 1999, we increased our ownership interest in Galena to 86%. Galena
develops, manufactures and markets a variety of human pharmaceutical and
veterinary products, as well as syrup for a herbal based cola and an energy
sport beverage, and active ingredients and herbal extracts used in the
manufacture of pharmaceuticals, including cyclosporin and ergot alkaloids. All
such products are manufactured in the Czech Republic. Galena sells its products
primarily in Central and Eastern European countries, including Russia. As part
of the 1994 acquisition, we contributed to Galena rights to manufacture and
market certain products and products under development by us in certain
countries.
ELVETIUM. In 1996, we acquired Elvetium S.A. (Argentina), Alet
Laboratorios S.A.E.C.I. y E. and Elvetium S.A. (Uruguay). In 1998, Alet
Laboratorios S.A.E.C.I. y E. merged into Elvetium S.A. (Argentina), which is
headquartered in Buenos Aires and is engaged in the business of manufacturing
and marketing pharmaceuticals in Argentina. Elvetium S.A. (Uruguay) is
headquartered in Montevideo and is engaged in the business of manufacturing and
marketing pharmaceuticals in Uruguay.
KUNMING BAKER NORTON. Since 1992, we have been a 50% partner in a Chinese
joint venture with Kunming Pharmaceutical Factory, named Kunming Baker Norton
Pharmaceutical Co., Ltd., which manufactures and markets a variety of
pharmaceutical products.
OTHER BUSINESSES
NUTRACEUTICALS
We provide contract manufacturing services for the nutritional supplement
industry from our encapsulating facility in Miami, Florida. Turnkey services
include custom formulation, raw material sourcing, soft gelatin encapsulation,
and specialized packaging. Utilizing herbal extracts manufactured by our Galena
subsidiary, we also manufacture a line of high quality herbal nutraceutical
products in soft gelatin capsules.
VETERINARY PRODUCTS
We formulate, package and distribute under the "DVM Pharmaceuticals" trade
name various veterinary products in the United States, primarily nutraceutical
and dermatological products for companion animals. These products are marketed
through our direct sales force and a national network of veterinary product
distributors primarily to small animal practitioners. DVM Pharmaceuticals has
submitted a New Animal Drug Application for a product to treat certain feline
urological disorders. DVM Pharmaceuticals is also developing proprietary
products in the therapeutic areas of asthma, gastrointestinal disorders and
skin conditions in companion animals.
DIAGNOSTICS
Our diagnostics group develops, manufactures and markets diagnostic
reagents and instrumentation. We manufacture and market a line of enzyme
immunoassays which are used to detect the presence of infectious and autoimmune
diseases, and a line of autoimmune antigens, reagents and other related
products. We also manufacture and market automatic instruments for enzyme
immunoassays. Our diagnostic group's products are marketed to clinical
reference laboratories, hospital laboratories, research institutions and other
commercial entities in the United States through our direct sales force. In May
1999, our diagnostics group entered into a three year
9
agreement to supply automated walk-away instrumentation for clinical
laboratories to Sigma Diagnostics, Inc. We also market these products, as well
as diagnostic products manufactured by others, in Italy through a direct sales
force to public hospitals and private medical laboratories. Sales of our
diagnostic products are also made through independent distributors in various
other foreign markets.
PATENTS AND PROPRIETARY RIGHTS
We believe that patents and other proprietary rights are important to our
business. Our policy is to file patent applications to protect our products,
technologies, inventions and improvements to each that we consider important to
the development of our business. We also rely upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain our competitive position.
We hold approximately 200 United States and foreign patents and have filed
several hundred United States and foreign patent applications. In addition, we
have exclusively licensed several additional United States and foreign patents
and patent applications. Our success depends, in part, on our ability to obtain
United States and foreign patent protection for our products, to preserve our
trade secrets and proprietary rights and to operate without infringing on the
proprietary rights of third parties or having third parties circumvent our
rights. Because of the length of time and expense associated with bringing new
products through development and regulatory approval to the marketplace, the
pharmaceutical industry has traditionally placed considerable importance on
obtaining patent and trade secret protection for significant new technologies,
products and processes.
GOVERNMENT REGULATION
Our pharmaceutical and diagnostic operations are subject to extensive
regulation by governmental authorities in the United States and other countries
with respect to the testing, approval, manufacture, labeling, marketing and sale
of pharmaceutical and diagnostic products. We devote significant time, effort
and expense to addressing the extensive government regulations applicable to our
business. In general, the trend is towards more stringent regulation.
10
In the United States, the FDA requires extensive testing of new
pharmaceutical products to demonstrate that such products are both safe and
effective in treating the indications for which approval is sought. Testing in
humans may not be commenced until after an Investigational New Drug exemption
is granted by the FDA. An NDA must be submitted to the FDA for new drugs that
have not been previously approved by the FDA and for new combinations of, and
new indications and new delivery methods for, previously approved drugs. Three
phases of clinical trials must be successfully completed before an NDA is
approved. Phase I clinical trials involve the administration of the drug to a
small number of healthy subjects to determine safety, tolerance, absorption and
metabolism characteristics. Phase II clinical trials involve the administration
of the drug to a limited number of patients for a specific disease to determine
dose response, efficacy and safety. Phase III clinical trials involve the study
of the drug to gain confirmatory evidence of efficacy and safety from a wide
base of investigators and patients. In the case of a drug that has been
previously approved by the FDA, an abbreviated approval process is available.
For such drugs an ANDA may be submitted to the FDA for approval. For an ANDA to
be approved, among other requirements, the drug must be shown to be
bioequivalent to the previously approved drug. The NDA and ANDA approval
process generally take a number of years and involve the expenditure of
substantial resources. There can be no assurance that the time and resources
devoted to seeking regulatory approval for new products will result in product
approvals or earnings.
The owner of an approved drug is required to list with the FDA all patents
which cover the approved drug and its approved uses. A company filing an ANDA
and seeking approval to market a product before expiration of all listed
patents must certify that such patents are invalid or will not be infringed by
the manufacture, use or sale of the applicant's product, and must notify the
patent owner and the owner of the approved drug of its filing. If the approved
drug owner sues the ANDA filer for patent infringement within 45 days after it
receives such notice, then the FDA will not grant final approval of the ANDA
until the earlier of 30 months from the date the approved drug owner receives
such notice or the date when a court finally determines that the applicable
patents are either invalid or would not be infringed by the applicant's
product. As a result, generic drug manufacturers, including us, are often
involved in lengthy, expensive patent litigation against brand name drug
companies that have considerably greater resources and that are typically
inclined to actively pursue patent litigation in an effort to protect their
franchises.
Our diagnostic products are considered medical devices, and as such
require either a 510(k) premarket notification clearance or an approved
Premarket Approval Application from the FDA prior to marketing. A product
qualifies for a 510(k) premarket notification clearance if it is substantially
equivalent to another medical device that was on the market prior to May 28,
1976 and does not now have a Premarket Approval Application or has previously
received 510(k) premarket notification clearance and is lawfully on the market.
The 510(k) premarket notification clearance process can take several months and
may involve the submission of data demonstrating its equivalency to similar
products in the market together with other supporting information. An approved
Premarket Approval Application indicates that the FDA has determined that a
device has been proven to be safe and effective for its intended use. The
Premarket Approval Application process typically can last several years and
requires the submission of significant quantities of preclinical and clinical
data as well as manufacturing and other information.
On an ongoing basis, the FDA reviews the safety and efficacy of marketed
pharmaceutical products and products considered medical devices and monitors
labeling, advertising and other matters related to the promotion of such
products. The FDA also regulates the facilities and procedures used to
manufacture pharmaceutical and diagnostic products in the United States or for
sale in the United States. Such facilities must be registered with the FDA and
all products made in such facilities must be manufactured in accordance with
"good manufacturing practices" established
11
by the FDA. Compliance with good manufacturing practices guidelines requires
the dedication of substantial resources and requires significant costs. The FDA
periodically inspects our manufacturing facilities and procedures to assure
compliance. The FDA may cause a recall or withdraw product approvals if
regulatory standards are not maintained. The FDA approval to manufacture a drug
is site-specific. In the event an approved manufacturing facility for a
particular drug becomes inoperable, obtaining the required FDA approval to
manufacture such drug at a different manufacturing site could result in
production delays, which could adversely affect our business and results of
operations.
In connection with our activities outside the United States, we are also
subject to regulatory requirements governing the testing, approval,
manufacture, labeling, marketing and sale of pharmaceutical and diagnostic
products, which requirements vary from country to country. Whether or not FDA
approval has been obtained for a product, approval of the product by comparable
regulatory authorities of foreign countries must be obtained prior to marketing
the product in those countries. The approval process may be more or less
rigorous from country to country, and the time required for approval may be
longer or shorter than that required in the United States. No assurance can be
given that clinical studies conducted outside of any country will be accepted
by such country, and the approval of any pharmaceutical or diagnostic product
in one country does not assure that such product will be approved in another
country.
The federal and state governments in the United States, as well as many
foreign governments, including the United Kingdom, from time to time explore
ways to reduce medical care costs through health care reform. These efforts
have resulted in, among other things, government policies that encourage the
use of generic drugs rather than brand name drugs to reduce drug reimbursement
costs. Virtually every state in the United States has a generic substitution
law which permits the dispensing pharmacist to substitute a generic drug for
the prescribed brand name product. The debate to reform the United States'
health care system is expected to be protracted and intense. Due to
uncertainties regarding the ultimate features of reform initiatives and their
enactment and implementation, we cannot predict what impact any reform proposal
ultimately adopted may have on the pharmaceutical or diagnostic industries or
on our business or operating results.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Below are the names, ages, and brief biographies of those persons who currently
serve as our directors.
MARK ANDREWS Director since 1987
Mark Andrews, age 49, has served as the Chairman of the Board of
Directors and Chief Executive Officer of American Exploration Company (oil and
gas exploration and production) since 1980, and was its President from 1980 to
1988. Upon the merger of American Exploration Company into Louis Dreyfus Natural
Gas Corp. (oil and gas exploration and production) in October 1997, Mr. Andrews
became the Vice Chairman of the Board of Directors of the combined entity. Mr.
Andrews has also served as Chairman of the Board of Directors of Vault Mortgage
Company (mortgage brokerage), and as President of Great Spirits Company LLC
(consumer products distribution) since 1998.
ERNST BIEKERT, PH.D. Director since 1991
Ernst Biekert, age 75, is a professor at the University of Heidelberg
in Germany. He was the Chairman of the Board and Chief Executive Officer of
Knoll A.G. (pharmaceuticals) from 1968 to 1985. Dr. Biekert was a consultant to
BASF A.G. (chemicals and pharmaceuticals) from 1985 to 1987 and was Chairman of
its pharmaceutical division from 1975 to 1985.
CHARLES M. FERNANDEZ Director since 1998
Charles M. Fernandez, age 38, has been the President, Chief Executive
Officer, and a director of Big City Radio, Inc. (broadcasting/internet) since
1999. He has also been the Chairman of the Board of Continucare Corporation
(integrated health care) since 1996 and was its Chief Executive Officer from
1996 to 1999. He has also been Vice-Chairman of HealthCare2Net Solutions
(internet solutions) since 1999. From 1985 to 1996, he was the Executive Vice
President and a director of Heftel Broadcasting Corporation (radio
broadcasting). From 1998 to 1999 he was a director of Frost Hanna Capital Group,
Inc. (investment company).
JACK FISHMAN, PH.D. Director since 1987
Jack Fishman, age 69, is an Adjunct Professor at The Rockefeller
University and director of Research of Strang Cornell Cancer Research
Laboratory, a non-profit entity associated with Cornell University Medical
College. He served as our Chief Scientific Officer from 1991 to 1995, as a Vice
Chairman of the Board from 1991 to 1997 and as our President from 1988 to 1991.
Dr. Fishman served as a Research Professor of Biochemistry and Molecular Biology
at the University of Miami from 1988 to 1992.
NEIL FLANZRAICH Director since 1997
Neil Flanzraich, age 56, has served as our Vice Chairman and President
since May 1998. He was a shareholder and served as Chairman of the Life Sciences
Legal Practices Group of Heller Ehrman White & McAuliffe from 1995 to 1998. From
1981 to 1994, he served in various capacities at Syntex Corporation
(pharmaceuticals), most recently as its Senior Vice President, General Counsel
and a member of the Corporate Executive Committee. From 1994 to 1995, after
Syntex Corporation was acquired by Roche Holding Ltd., he served as Senior Vice
President and General Counsel of Syntex (U.S.A.) Inc., a Roche subsidiary. He is
13
Chairman of the Board of Directors of North American Vaccine, Inc. (vaccine
research and development), and is a director of Whitman Education Group, Inc.
(proprietary education).
PHILLIP FROST, M.D. Director since 1987
Phillip Frost, age 63, has served as our Chairman of the Board of
Directors and Chief Executive Officer since 1987. He served as our President
from July 1991 until January 1995. He was the Chairman of the Department of
Dermatology at Mt. Sinai Medical Center of Greater Miami, Miami Beach, Florida
from 1972 to 1990. Dr. Frost was Chairman of the Board of Directors of Key
Pharmaceuticals, Inc. from 1972 to 1986. He is Chairman of the Board of
Directors of Whitman Education Group, Inc. (proprietary education), Vice
Chairman of the Board of Directors of North American Vaccine, Inc. (vaccine
research and development), Vice Chairman of the Board of Directors of
Continucare Corporation (integrated health care), and a director of Northrop
Grumman Corp. (aerospace). He is Vice Chairman of the Board of Trustees of the
University of Miami and a member of the Board of Governors of the American Stock
Exchange.
JANE HSIAO, PH.D. Director since 1995
Jane Hsiao, age 52, has served as our Vice Chairman-Technical Affairs
since February 1995, as our Chief Technical Officer since July 1996, and as
Chairman, Chief Executive Officer and President of DVM Pharmaceuticals, Inc.,
our veterinary products subsidiary, since March 1998. From 1992 until February
1995, she served as our Chief Regulatory Officer and Assistant to the Chairman,
and as Vice President-Quality Assurance and Compliance of Baker Norton
Pharmaceuticals, Inc., our principal proprietary pharmaceutical subsidiary. From
1987 to 1992, Dr. Hsiao was Vice President-Quality Assurance, Quality Control
and Regulatory Affairs of Baker Norton Pharmaceuticals, Inc.
ISAAC KAYE Director since 1990
Isaac Kaye, age 70, has served as our Deputy Chief Executive Officer
since 1990 and as Chairman of Norton Healthcare Limited, our principal United
Kingdom pharmaceutical subsidiary, since 1990.
DIRECTOR COMPENSATION
During 1999, each director who was not employed by us received an
annual fee of $10,000 for his or her service as a director. Beginning in 2000,
this annual fee was increased to $15,000. In addition, each director is
reimbursed for expenses incurred in attending board and committee meetings.
Pursuant to our 1994 Stock Option Plan, non-employee directors automatically are
granted each year, on the first business day following our annual meeting of
shareholders, non-qualified options to purchase 7,500 shares of common stock at
an exercise price equal to the fair market value of the common stock on the date
of the grant, and having a term of ten years.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held six meetings during 1999. During 1999, all incumbent
directors attended at least seventy-five percent (75%) of the meetings of the
Board and the committees of the Board on which they served. The Board does not
have a nominating committee, and the usual functions of such a committee are
performed by the entire Board.
14
AUDIT COMMITTEE - 6 MEETINGS
FUNCTION MEMBERS
o Review adequacy of internal systems of accounting o Charles M. Fernandez (Chairman)
controls o Mark Andrews
o Recommend appointment of independent auditors o Jack Fishman, Ph.D.
o Meet with independent auditors and internal o Jane Hsiao, Ph.D.
auditors regarding their examination of the books
and records
o Review financial statements
o Review management's disclosures
o Review findings and recommendations of auditors
o Reviewing other matters regarding financial
affairs and internal policies and procedures
COMPENSATION AND STOCK OPTION COMMITTEE - 6 MEETINGS
FUNCTION MEMBERS
o Recommend or approve compensation of directors, o Mark Andrews (Chairman)
executive officers and other highly paid employees o Ernst Biekert, Ph.D.
o Review employee benefit programs o Charles M. Fernandez
o Authorize stock option grants and establish terms
of stock option agreements
REGULATORY COMPLIANCE COMMITTEE - 2 MEETINGS
FUNCTION MEMBERS
o Review compliance with regulatory requirements o Ernst Biekert, Ph.D. (Chairman)
o Review quality assurance functions of worldwide o Jack Fishman, Ph.D.
operations. o Jane Hsiao, Ph.D.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and ten percent (10%) shareholders to file initial
reports of ownership and reports of changes in ownership of common stock and
other of our equity securities with the Securities and Exchange Commission and
the American Stock Exchange. Directors, executive officers and ten percent (10%)
shareholders are required to furnish us with copies of all Section 16(a) reports
they file. Based on a review of the copies of such reports furnished to us and
written representations from our directors and executive officers that no other
reports were required, we believe that, during 1999, our directors, executive
officers and ten percent (10%) shareholders complied with all Section 16(a)
filing requirements applicable to them, except that one Form 4 was inadvertently
filed late by each of Mark Andrews and Jack Fishman, and Rafick G. Henein
inadvertently filed late his Form 5.
15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Charles M. Fernandez is the Chairman of the Board of Continucare
Corporation and serves on the Compensation and Stock Option Committee of our
Board. Phillip Frost, M.D. serves on the Board of Directors of Continucare
Corporation and is an executive officer and director of ours.
ITEM 11. EXECUTIVE COMPENSATION
The following table contains certain information regarding aggregate
compensation paid or accrued by us during 1999 to the Chief Executive Officer
and to each of the four highest paid executive officers other than the Chief
Executive Officer.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------- -------------
SHARES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
------------------ ---- ------ ----- ------------ ------------- ------------
($) ($) ($) (#) ($)(1)
Phillip Frost, M.D. 1999 575,000 316,250(2) 0 0 4,800
CHIEF EXECUTIVE OFFICER 1998 575,000 0 0 225,000 4,800
1997 575,000 0 0 0 4,800
Isaac Kaye (3) 1999 541,716 287,500 * 0 0
DEPUTY CHIEF EXECUTIVE OFFICER 1998 550,301 0 * 225,000 0
1997 521,520 0 * 0 0
Neil Flanzraich (4) 1999 500,000 275,000(2) 0 0 4,800
PRESIDENT 1998 296,154 147,754 0 600,000 4,800
1997 -- -- 0 -- --
Jane Hsiao, Ph.D. 1999 400,000 270,000(2) * 0 4,800
CHIEF TECHNICAL OFFICER 1998 338,462 200,000 * 300,000 4,800
1997 299,808 25,000 * 150,000 4,800
Rafick G. Henein, Ph.D. (5) 1999 635,123 279,900(2) 0 56,250 4,800
SENIOR VICE PRESIDENT 1998 613,500 75,000 * 112,500 4,800
1997 204,365 200,000 109,708 375,000 4,800
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the executive officer.
(1) The amounts set forth in the "All Other Compensation" column represent
matching contributions made by us under the IVAX Corporation Employee
Savings Plan, an employee retirement plan maintained under Section 401(k)
of the Internal Revenue Code.
(2) The amount included in "bonus" for 1999 includes a retention bonus of 5%
of 1999 base salary, which was paid to all our employees who were employed
in the United States for the period from July 1, 1998 through June 30,
1999, excluding those employees subject to collective bargaining
agreements or other retention programs.
(3) Mr. Kaye's salary and other compensation is paid in British pounds. The
information in the table is based on the average exchange rate during
the applicable year.
(4) Mr. Flanzraich's employment commenced in May 1998.
(5) Dr. Henein's employment commenced in July 1997. For Dr. Henein, the
amount included in "salary" for each year includes additional cash
compensation of $38,500 payable pursuant to his employment agreement
and the amount included in "Other Annual Compensation" for 1997
represents taxable relocation expenses and a $100,000 payment to cover
the loss on the sale of his former residence.
16
EMPLOYMENT AGREEMENTS
In November 1997, we entered into employment agreements with Dr. Frost
and Mr. Kaye, pursuant to which Dr. Frost serves as Chairman and Chief Executive
Officer and Mr. Kaye serves as Deputy Chief Executive Officer and as Chief
Executive Officer of Norton Healthcare Limited, our United Kingdom subsidiary.
Pursuant to the agreements, Dr. Frost receives an annual base salary of
$575,000, and Mr. Kaye receives an annual base salary of $575,000 less certain
automobile-related expenses paid on his behalf. The agreements provide for
severance payments if either executive's employment is terminated under certain
circumstances. The agreements have five-year terms, and automatically renew for
additional two-year terms thereafter unless terminated by either party.
In July 1997, we entered into an employment agreement with Dr. Henein
pursuant to which he serves as our Senior Vice President and as the President
and Chief Executive Officer of Zenith Goldline Pharmaceuticals, Inc. Pursuant to
the agreement, Dr. Henein was paid a signing bonus of $200,000 and he was
granted options to purchase 375,000 shares of common stock. He is entitled to an
annual base salary of $575,000, an additional annual cash payment of $38,500 and
certain employee benefits, and he is eligible for an annual bonus of up to one
hundred percent (100%) of his base salary dependent on the performance of Zenith
Goldline Pharmaceuticals, Inc. We also agreed to pay Dr. Henein's relocation
expenses, including a $100,000 payment to cover the loss on the sale of his
former residence. The agreement provides for severance benefits if Dr. Henein's
employment is terminated under certain circumstances. The agreement has a
five-year term, and automatically renews for additional two-year terms
thereafter unless terminated by either party.
In January 1998, we entered into an employment agreement with Dr. Hsiao
pursuant to which she serves as our Chief Technical Officer. Pursuant to the
agreement, Dr. Hsiao receives an annual base salary of not less than $300,000.
The agreement provides for severance payments if Dr. Hsiao's employment is
terminated under certain circumstances. The agreement has a five-year term, and
automatically renews for additional two-year terms thereafter unless terminated
by either party.
In May 1998, we entered into an employment agreement with Mr.
Flanzraich pursuant to which he serves as our Vice Chairman and President.
Pursuant to the agreement, Mr. Flanzraich was paid a signing bonus of $100,000
and is entitled to receive an annual base salary of not less than $500,000. The
agreement provides for severance payments if Mr. Flanzraich's employment is
terminated under certain circumstances. The agreement has a five-year term, and
automatically renews for additional two-year terms thereafter unless terminated
by either party.
CHANGE IN CONTROL AGREEMENTS
We have entered into change in control employment agreements with
certain officers, including Dr. Frost, Mr. Kaye, Mr. Flanzraich, Dr. Hsiao and
Dr. Henein. These agreements are intended to provide protection to key employees
and to provide for continuity of management in the event of a change in control.
The agreements become effective if a change in control occurs during the
three-year period that commences on the execution of the agreement. The period
is automatically renewed each year for an additional three years, unless we
provide notice of non-renewal.
Under the change in control agreements, a change in control includes
any of the following events: (1) the acquisition of forty percent (40%) or more
of our common stock by a person or group; (2) a change in the majority of our
board (other than a change approved by the incumbent board); (3) approval by the
shareholders of a reorganization, merger or consolidation; or (4) approval by
the shareholders of a liquidation or dissolution or sale of all or substantially
all of our assets. Exceptions are provided for certain transactions, including
those where our existing shareholders maintain effective control.
17
Once the agreements become effective upon a change in control, they
have a term of three years. Each agreement provides that a covered officer will
have a position, responsibilities and authority at least commensurate with those
held during the ninety days preceding the change in control. Each agreement also
provides that the covered officer will be paid an annual base salary equal to
the highest salary received during the twelve months preceding the change in
control; will be entitled to an annual bonus equal to the average annual bonus
paid during the three years preceding the change in control; will be entitled to
a one-time special bonus equal to his annual base salary plus the higher of his
last annual bonus or the average annual bonus paid during the three years
preceding the change in control if the officer remains employed with us through
the six month anniversary of the change in control; and will be entitled to
continued participation in our benefit plans, fringe benefits, office support
and staff, vacation, and expense reimbursement on the same basis as prior to the
change in control, and in any case no less favorable than those provided by us
to peer executives (as defined in the agreements).
If, following a change in control, the officer is terminated for any
reason other than death, disability or for cause, or if such officer terminates
his or her employment agreement for good reason (as defined in the agreements)
or for any reason during the thirty-day period following the six month
anniversary of the change in control, then the officer is entitled to a
severance payment equal to two times the officer's annual base salary (as
defined in the agreements) plus the higher of his last annual bonus or the
average annual bonus paid during the three years preceding the change in
control. In addition, if the special bonus has not been paid to the officer, the
severance payment shall be increased by the amount of the special bonus. The
agreements also provide that the officer is entitled to continue to participate
in our welfare benefit plans for the full three-year period.
In the event that any payments made in connection with a change in
control would be subjected to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, we will "gross-up" the officer's
compensation for all federal, state and local income and excise taxes and any
penalties and interest.
18
STOCK OPTIONS
The following table sets forth information concerning stock option
grants made during 1999 to the executive officers named in the "Summary
Compensation Table." All stock options identified in the table are nonqualified
options and vest in equal portions over four years.
STOCK OPTION GRANTS IN FISCAL YEAR 1999
PERCENT OF POTENTIAL REALIZABLE VALUE
SHARES TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE EXPIRATION OPTION TERM
NAME GRANTED EMPLOYEES PRICE DATE ------------------------------
---- ------- --------- ----- ---- 5% 10%
(#) (%) ($) ($) ($)
Phillip Frost, M.D. 0 0 - - - -
Isaac Kaye 0 0 - - - -
Neil Flanzraich 0 0 - - - -
Jane Hsiao, Ph.D. 0 0 - - - -
Rafick G. Henein, Ph.D. 56,250 6.3 8.9167 6/03/06 204,187 475,842
The following table sets forth information concerning stock option
exercises during 1999 by each of the executive officers named in the "Summary
Compensation Table" and the year-end value of unexercised options held by such
officers, based on the closing price of $17.1667 on December 31, 1999.
STOCK OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
SHARES NUMBER OF SHARES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
-------------------------- ------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
Phillip Frost, M.D. 0 0 628,125 196,875 1,939,871 1,891,418
Isaac Kaye 0 0 628,125 196,875 1,939,871 1,891,418
Neil Flanzraich 0 0 157,500 450,000 1,771,258 5,100,030
Jane Hsiao, Ph.D. 0 0 459,375 328,125 2,087,520 3,165,645
Rafick G. Henein, Ph.D. 0 0 309,375 234,375 3,467,599 2,460,559
19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SECURITY HOLDERS
The following table indicates, as of March 31, 2000, information about
the beneficial ownership of our common stock by (1) each director, (2) each
executive officer named in the "Summary Compensation Table," (3) by all
directors and executive officers as a group, and (4) and by each person who we
know beneficially owns more than 5% of our common stock. All shares were owned
directly with sole voting and investment power unless otherwise indicated.
NAME OR IDENTITY SHARES PERCENT
OF GROUP BENEFICIALLY OWNED(1) OF CLASS
-------- --------------------- --------
Mark Andrews 55,200(2) *
Ernst Biekert, Ph.D. 60,000(3) *
Charles M. Fernandez 172,500(3) *
Jack Fishman, Ph.D. 2,995,363(4) 1.92%
Neil Flanzraich 312,293(5) *
Phillip Frost, M.D. 24,478,454(6) 15.56%
Jane Hsiao, Ph.D. 4,905,394(7) 3.13%
Isaac Kaye 401,250(3) *
Rafick G. Henein, Ph.D. 355,514(8) *
All directors and executive 33,846,017(9) 21.29%
officers as a group (10 persons)
- --------------------
* Represents beneficial ownership of less than one percent (1%).
(1) For purposes of this table, beneficial ownership is computed pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934.
(2) Includes 7,500 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2000 and 4,200 shares held by a
trust for the benefit of Mr. Andrews' children. Mr. Andrews disclaims
beneficial ownership of the shares held by the trust for the benefit of
his children.
(3) Includes shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2000 as follows: Dr. Biekert
(60,000), Mr. Fernandez (22,500) and Mr. Kaye (356,250).
(4) Includes 30,000 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2000. Dr. Fishman disclaims
beneficial ownership of an additional 13,800 shares held by his wife.
(5) Includes 307,500 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2000 and 1,404 shares held for Mr.
Flanzraich's benefit under the IVAX Corporation Employee Savings Plan.
(6) Includes 4,209,334 shares held directly, 2,328 shares held for Dr. Frost's
benefit under the IVAX Corporation Employee Savings Plan, 356,250 shares
which may be acquired pursuant to stock options exercisable within 60 days
of March 31, 2000, 19,160,542 shares held by Frost-Nevada Limited
Partnership ("FNLP") and 750,000 shares which may be acquired by FNLP upon
exercise of a warrant. Dr. Frost is the sole limited partner of FNLP and
the sole shareholder, an officer and a director of Frost-Nevada
Corporation, the general partner of FNLP. Dr. Frost disclaims beneficial
ownership of an additional 244,551 shares held by his wife. Dr. Frost's
business address is 4400 Biscayne Boulevard, Miami, Florida 33137.
(7) Includes 1,476,427 shares held as trustee for the benefit of certain
family members, 412,500 shares which may be acquired pursuant to stock
options exercisable within 60 days of March 31, 2000 and 3,059 shares held
on Dr. Hsiao's behalf under the IVAX Corporation Employee Savings Plan.
20
(8) Includes 309,375 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2000 and 220 shares held for Dr.
Henein's benefit under the IVAX Corporation Employee Savings Plan.
(9) Includes all of the shares of common stock, identified in notes 1 through
7 above, that may be acquired pursuant to stock options exercisable within
60 days of March 31, 2000, plus 109,374 additional shares that may be
acquired pursuant to stock options exercisable within 60 days of March 31,
2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Whitman Education Group, Inc. ("Whitman") leases approximately 7,885
square feet of office space from us in Miami, Florida at an annual rental of
$147,221. The lease may be terminated by either party upon 180 days notice.
Certain of our executive officers and directors serve as directors of Whitman.
In addition, Dr. Frost is a principal shareholder of Whitman.
We paid $1,637,453 to PharmAir Corporation ("PharmAir") for use of an
airplane in 1999 and intend to make additional payments to PharmAir for use of
the airplane in 2000. PharmAir is indirectly beneficially owned by Dr. Frost.
As of March 31, 1999, BASF Corporation ("BASF") owned more than five
percent (5%) of our outstanding common stock. On November 19, 1999, we purchased
6,832,650 shares of our common stock from BASF for $12.00 per share. The closing
price of the common stock on that date was $13.67. We borrowed fifty million
dollars ($50,000,000) from Frost-Nevada Limited Partnership to pay for part of
the purchase of the stock from BASF. The loan has a term of fourteen (14) months
and bears simple interest at the rate of ten percent (10%) per year. In
connection with this transaction, we also granted to Frost-Nevada Limited
Partnership a warrant to purchase seven hundred fifty thousand (750,000) shares
of common stock at a price of $12.00 per share, exercisable immediately and
expiring seven (7) years from the date of grant.
Big City Radio, Inc. is negotiating to lease approximately 2,000 square
feet of office space from us in Miami, Florida at an annual rental of
approximately $42,000. The lease may be terminated by either party upon 30 days
notice. One of our directors serves as an officer and director of Big City
Radio, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IVAX CORPORATION
Dated: May 1, 2000 By: /S/ PHILLIP FROST, M.D.
------------------------
Phillip Frost, M.D.
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
NAME CAPACITY DATE
- ---- -------- ----
/S/ PHILLIP FROST, M.D. Chairman of the Board and May 1, 2000
- ---------------------------------------- Chief Executive Officer
Phillip Frost, M.D. (Principal Executive Officer)
/S/ THOMAS E. BEIER Chief Financial Officer May 1, 2000
- ---------------------------------------- (Principal Financial Officer)
Thomas E. Beier
/S/ THOMAS E. MCCLARY Vice President - Accounting May 1, 2000
- ---------------------------------------- (Principal Accounting Officer)
Thomas E. McClary
/S/ MARK ANDREWS Director May 1, 2000
- ---------------------------
Mark Andrews
/S/ ERNST BIEKERT, PH.D. Director May 1, 2000
- ------------------------------------------
Ernst Biekert, Ph.D.
/S/ CHARLES M. FERNANDEZ Director May 1, 2000
- ----------------------------------------
Charles M. Fernandez
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NAME CAPACITY DATE
- ---- -------- ----
/S/ JACK FISHMAN, PH.D. Director May 1, 2000
- ----------------------------------------
Jack Fishman, Ph.D.
/S/ NEIL FLANZRAICH Director, President and Vice Chairman May 1, 2000
- ------------------------------------
Neil Flanzraich
/S/ JANE HSIAO, PH.D. Director and Vice Chairman- May 1, 2000
- ------------------------------------ Technical Affairs
Jane Hsiao, Ph.D.
/S/ ISAAC KAYE Director and Deputy Chief May 1, 2000
- ------------------------------------ Executive Officer
Isaac Kaye
23