SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 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 (Section 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 20, 1998, there were 119,840,795 shares of Common Stock
outstanding.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 20, 1998, was approximately $865.0 million.
DOCUMENTS INCORPORATED BY REFERENCE:
Parts I, II and IV: Portions of registrant's 1997 Annual Report to
Shareholders.
Part III: Portions of registrant's Proxy Statement for its 1998
Annual Meeting of Shareholders.
IVAX CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business......................................................... 1
Item 2. Properties....................................................... 15
Item 3. Legal Proceedings................................................ 16
Item 4. Submission of Matters to a Vote of Security Holders.............. 20
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 21
Item 6. Selected Financial Data.......................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....... 22
Item 8. Financial Statements and Supplementary Data...................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 22
PART III
Item 10. Directors and Executive Officers of the Registrant............... 22
Item 11. Executive Compensation........................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and Management... 22
Item 13. Certain Relationships and Related Transactions................... 23
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.. 23
PART I
ITEM 1. BUSINESS
GENERAL
IVAX Corporation is a holding company with core subsidiaries engaged
primarily in the research, development, manufacture and marketing of generic and
branded pharmaceuticals. IVAX was incorporated in Florida in 1993, as successor
to a Delaware corporation formed in 1985, and its principal executive offices
are located at 4400 Biscayne Boulevard, Miami, Florida 33137; its telephone
number is (305) 575-6000. All references to "IVAX" in this Form 10-K mean IVAX
Corporation and its subsidiaries unless the context otherwise requires.
RESTRUCTURING PROGRAMS
Beginning in the third quarter of 1996 and continuing throughout 1997,
IVAX announced and initiated several restructuring programs in an effort to
enhance operating efficiencies and reduce costs. These objectives are to be
achieved through workforce reductions, facility consolidations and other cost
saving measures throughout the organization, with primary emphasis on IVAX's
United States generic pharmaceutical business. During this period, IVAX reduced
its workforce from approximately 8,100 to approximately 4,500 employees,
including reductions resulting from the sale of non-core businesses. Also
during this period, IVAX closed certain of its United States pharmaceutical
manufacturing facilities and consolidated its United States pharmaceutical
distribution facilities into a single leased distribution center in Kenton
County, Kentucky. IVAX also implemented strict controls on capital expenditures
and working capital spending. IVAX's restructuring program anticipates the
closure or sale of up to five additional manufacturing facilities by the end of
1998.
DISPOSITION OF NON-CORE BUSINESSES
During 1997, IVAX's Board of Directors determined to refocus IVAX's
business on branded and generic pharmaceuticals, and to divest its intravenous
products, personal care products and specialty chemicals businesses. As a result
of this determination, IVAX restated its financial statements to reflect these
businesses as discontinued operations, and, unless otherwise noted, all of the
financial information contained herein reflects this restatement. Effective May
30, 1997, IVAX sold McGaw, Inc. ("McGaw"), its intravenous products business.
During the third quarter of 1997, IVAX completed the sale of a significant
portion of the assets of its specialty chemicals business, and in February 1998,
IVAX completed the divestiture of this business. IVAX is pursuing the sale of
its personal care products business. These businesses accounted for
approximately 30%, 42% and 37% of IVAX's consolidated net revenues before the
restatements described above during the years ended December 31, 1997, 1996 and
1995, respectively (see "Discontinued Operations").
REFOCUS
In connection with the restructuring programs described above, IVAX
determined to refocus its business primarily in three areas: oncology products,
respiratory products and specialty generic pharmaceuticals. IVAX's refocused
strategy is to leverage its expertise and talent in each of these three areas.
In the oncology area, IVAX intends to continue its efforts to bring its
proprietary drug Paxene/Registered trademark/ to market and to license from
others oncology compounds that will complement Paxene/Registered trademark/. In
the respiratory
area, IVAX intends to capitalize and expand on its expertise in mechanical
devices and in developing respiratory products with propellants that do not
contain chlorofluorocarbons ("CFCs"). In the generic drug area, IVAX is seeking
to improve its worldwide generic drug business by supplementing its generic
product portfolio through the development and introduction of specialty generic
products that, because of one or more unique characteristics, are likely to
encounter less intensive competition. Such products include those which are
difficult to formulate or manufacture, which involve regulatory challenges or
potential patent challenges, or for which limited raw material suppliers exist.
IVAX believes that, by emphasizing the development of such products, it can
mitigate the pricing pressure surrounding other generic drugs and thereby
realize higher margins from the sale of generic drugs.
PHARMACEUTICALS
IVAX's pharmaceutical business historically had grown through the
development and acquisition of brand name, generic and over-the-counter
pharmaceutical products, the license of technology and products from third
parties, and the acquisition of other businesses. IVAX markets 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.
IVAX also maintains direct operations in Argentina, Canada, the Czech Republic,
Hong Kong, Ireland, Italy, Germany, Poland, Russia, the Slovak Republic, and
Uruguay, and markets its products through distributors or joint ventures in
other foreign markets, including China.
BRAND NAME PRODUCTS
In September 1997, IVAX sold the United States and Canadian marketing
rights to its proprietary drug Elmiron/Registered trademark/, an innovative drug
used for the treatment of interstitial cystitis; 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 ("ALZA"). IVAX
retained the rights to these products outside of the United States and Canada.
IVAX received $75.0 million in up-front payments and may receive additional fees
based on the achievement of specified sales levels of Elmiron/Registered
trademark/ during the next five years, as well as payments from ALZA based on
sales of the products. No assurance can be given that IVAX will receive
additional product fees and payments from ALZA.
IVAX markets a number of brand name products treating a variety of
conditions, primarily through its Baker Norton division in the United Kingdom
and Ireland. These products are marketed by IVAX's direct sales force to
physicians, pharmacies, hospitals, managed health care organizations and
government agencies, and are sold primarily to wholesalers, distributors,
hospitals and physicians. In the aggregate, the Baker Norton division of IVAX's
United Kingdom business had 1997 net revenues of approximately $90.0 million, or
15% of IVAX's 1997 consolidated net revenues.
IVAX has substantial expertise in the development, manufacture and
marketing of respiratory drugs in metered dose inhaler ("MDI") formulations.
IVAX holds patents on a breath activated MDI which is designed to overcome the
difficulty many persons experience with conventional MDIs in attempting to
coordinate their inhalation with the emission of the medication. IVAX's device,
called Easi-Breathe/Trademark/, emits the medication automatically upon
inhalation, minimizing coordination problems and better ensuring that the
medication is delivered to the lungs. IVAX markets its Easi-Breathe/Trademark/
breath activated inhaler through its Baker Norton division. In December 1996,
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IVAX licensed the Easi-Breathe/Trademark/ device to Glaxo Wellcome PLC for use
with Glaxo Wellcome's range of inhaled compounds (including, among others,
beclomethasone and salbutamol) mixed with CFC or hydrofluoroalkane ("HFA")
propellants. The license generally grants Glaxo Wellcome the exclusive right to
use the Easi-Breathe/Trademark/ device for these compounds on a worldwide basis.
IVAX retained all rights to market all other compounds, branded or generic, in
its Easi-Breathe/Trademark/ inhaler. The license term remains effective at least
for the duration of the Easi-Breathe/Trademark/ patents, which expire in the
year 2011. IVAX will receive a combination of fixed payments and annual volume
and revenue related royalties under the license agreement. No assurance can be
given regarding the amount of volume and revenue related royalties that IVAX
will receive under the license agreement. Fixed payments under the license
agreement are expected to total approximately $78.0 million during the term of
the license, of which $26.5 million was received in 1996 and $8.2 was received
in 1997.
GENERIC PRODUCTS
Generic drugs are therapeutically equivalent to their brand name
counterparts, but are generally sold at lower prices as alternatives to the
brand name products. After giving effect to the restatement described above in
"General - Disposition of Non-Core Businesses," approximately 49%, 62% and 61%
of IVAX's consolidated net revenues for the years ended December 31, 1997, 1996
and 1995, respectively, were attributable to worldwide sales of generic
prescription and over-the-counter drugs and vitamin supplements.
During 1997, as part of its restructuring program, IVAX reduced the
number of products in its United States generic pharmaceutical product line. In
the United States, IVAX now manufactures and markets under the "Zenith Goldline"
and "Goldline" names approximately 46 generic prescription drugs in capsule or
tablet forms in an aggregate of approximately 99 dosage strengths. IVAX
distributes in the United States (but does not manufacture) approximately 422
additional generic prescription and over-the-counter drugs and vitamin
supplements, in various dosage forms, dosage strengths and package sizes. IVAX's
domestic generic drug distribution network encompasses most classes of the
pharmaceutical market, including wholesalers, retail drug chains, retail
pharmacies, hospital groups, nursing home providers and government agencies.
Approximately 52% of IVAX's 1997 United States generic pharmaceutical sales were
made to the top five customers of that business, none of which individually
represents more than 10% of IVAX's consolidated net revenues. The loss of any of
these customers would have an adverse effect on IVAX's business and results of
operations (see "Competition").
In the United Kingdom, IVAX is the largest manufacturer and distributor
of generic pharmaceuticals. IVAX manufactures and markets under the "Norton"
trade name approximately 118 generic prescription and over-the-counter drugs in
various dosage forms, dosage strengths and package sizes, constituting an
aggregate of approximately 236 products. Such products are marketed to
wholesalers, retail pharmacies, hospitals, physicians and government agencies.
In addition, IVAX manufactures and markets primarily in the United Kingdom
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. IVAX also contract
manufactures pharmaceutical products in the United Kingdom and Ireland for other
companies.
In 1994, IVAX acquired a 60% interest in Galena a.s. ("Galena"), one of
the oldest and more established pharmaceutical companies based in the Czech
Republic. Through open market purchases made in 1995 and 1996, IVAX increased
its ownership interest in Galena from 60% to 74%. Galena
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develops, manufactures and markets a variety of pharmaceutical and veterinary
products, as well as raw materials used in the manufacture of pharmaceuticals,
including cyclosporin and ergot alkaloids. Galena sells its products primarily
in Eastern European countries, including Russia. As part of the acquisition,
IVAX contributed to Galena rights to manufacture and market certain products and
products under development in certain countries. Galena had 1997 net revenues,
including intercompany sales, of $70.5 million.
In March 1996, IVAX acquired Elvetium S.A. (Argentina) and Alet
Laboratorios S.A.E.C.I. y E., both headquartered in Buenos Aires and engaged in
the business of manufacturing and marketing pharmaceuticals in Argentina, and
Elvetium S.A. (Uruguay), headquartered in Montevideo and engaged in the business
of manufacturing and marketing pharmaceuticals in Uruguay. These companies had
combined 1997 net revenues of $34.6 million.
IVAX is a 50% partner in two Chinese joint ventures, one with the
Peoples Republic of China named Beijing JiAi Pharmaceuticals Limited Liability
Company, which manufactures and markets inhalation products for respiratory
ailments, and the other with Kunming Pharmaceutical Factory named Kunming Baker
Norton Pharmaceutical Co., Ltd., which manufactures and markets a variety of
pharmaceutical products. These joint ventures had combined 1997 net revenues of
$14.2 million.
OTHER BUSINESSES
VETERINARY PRODUCTS
IVAX formulates, packages and distributes under the "DVM
Pharmaceuticals" trade name various veterinary products in the United States,
primarily dermatological products used for small companion animals. These
products are marketed through IVAX's direct sales force and a national network
of ethical veterinary distributors primarily to small animal practitioners.
IVAX's veterinary products business had net revenues of $17.0 million, $15.0
million and $17.3 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
In December 1997, IVAX announced that it executed a letter of intent
regarding a business combination between its veterinary business and Orion
Acquisition Corp. II, a publicly-held corporation which was capitalized in 1996
to serve as a vehicle to effect a business combination with an operating entity.
Under the terms of the letter of intent, IVAX would own approximately 80% of the
combined entity's outstanding common stock after giving effect to the
transaction. The transaction is subject to a number of conditions including
satisfactory completion of due diligence and negotiation and execution of a
definitive agreement. There can be no assurance, therefore, that this
transaction will be completed.
DIAGNOSTICS
IVAX's diagnostics group develops, manufactures and markets
diagnostic reagents and instrumentation. IVAX manufactures and markets a line of
enzyme immunoassays ("EIAs") which are used to detect the presence of infectious
and auto-immune diseases, and a line of auto-immune antigens, reagents and other
related products. IVAX also manufactures and markets EIA instrumentation that
allows the diagnostic group's EIA products to be run in an automated system
format. The diagnostic group's products are marketed to clinical reference
laboratories, hospital
4
laboratories, research institutions and other commercial entities in the United
States through IVAX's direct sales force. IVAX also markets 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
IVAX's diagnostic products are also made through independent distributors in
various other foreign markets. IVAX's diagnostics group had net revenues of $8.1
million, $14.0 million and $14.8 million for the years ended December 31, 1997,
1996 and 1995, respectively.
DISCONTINUED OPERATIONS
During 1997, IVAX's Board of Directors determined to divest its
intravenous products, personal care products and specialty chemicals businesses.
As a result, IVAX classified these businesses as discontinued operations. IVAX
has completed the sale of its intravenous products and specialty chemicals
businesses. IVAX continues to pursue the disposition of its personal care
products business and expects to complete the disposition in 1998. See Note 5,
Divestitures, and Note 7, Discontinued Operations, to the Consolidated Financial
Statements and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" incorporated by reference from the 1997 Annual Report
to Shareholders for additional information.
INTRAVENOUS PRODUCTS
IVAX's intravenous products business manufactured and marketed a broad
line of basic and specialty intravenous solutions, irrigation solutions,
intravenous administration sets, infusion pumps and other infusion supplies and
equipment, primarily to hospitals and alternate site health care locations in
the United States and, through independent distributors, in various foreign
markets. The intravenous products business had net revenues, including
intercompany sales, of $140.6 million for the five months ended May 30, 1997,
and $343.0 million and $340.0 million for the years ended December 31, 1996 and
1995, respectively.
Effective May 30, 1997, IVAX sold McGaw, its intravenous products
subsidiary, to B. Braun of America, Inc. ("B. Braun"), a subsidiary of B. Braun
Melsungen AG, for $320 million in cash (subject to certain post-closing
adjustments), additional payments of up to $80 million contingent upon the
combined operating results of McGaw and B. Braun's principal United States
operating subsidiary, and certain royalties based on sales of the
Duplex/Trademark/ drug delivery system. The Duplex/Trademark/ system, presently
in development by McGaw, is a multi-compartment intravenous drug delivery system
devised for drugs that have limited stability after mixing. IVAX used the
proceeds of the sale to pay off its revolving credit facility. There can be no
assurance that B. Braun and McGaw will achieve combined operating results
sufficient to result in payment of any or all of the $80 million contingent
payments described above, or that B. Braun and McGaw will receive approval to
market any drugs in the Duplex/Trademark/ system or that such product may be
successfully marketed, because of, among other things, competitive conditions in
the intravenous products industry and uncertainties associated with product
development and the regulatory approval process.
SPECIALTY CHEMICALS
IVAX's specialty chemicals group manufactured and marketed, primarily
in the United States and Canada, several hundred chemical products in three
distinct market segments: vacuum pump fluids, textile and denim products, and
cleaning products. IVAX's specialty chemicals group had net revenues, including
intercompany sales, of $41.6 million for the period in 1997 during which such
5
businesses were owned by IVAX, and $67.9 million and $66.9 million for the years
ended December 31, 1996 and 1995, respectively.
During the third quarter of 1997, IVAX completed the sale of a
significant portion of the assets of its specialty chemicals business in three
separate transactions in which IVAX received an aggregate of approximately $41.1
million in cash. In February 1998, IVAX completed the divestiture of its
specialty chemicals business by selling its vacuum pump fluids business for
approximately $3.9 million (subject to certain post-closing adjustments). IVAX
retained certain real estate assets of the specialty chemicals business which it
is seeking to sell.
PERSONAL CARE PRODUCTS
IVAX's personal care products group develops, manufactures and markets
a variety of personal care products, primarily within the United States. IVAX
markets over 250 products in three principal areas: hair care products designed
primarily for African American consumers, cosmetic products designed primarily
for dark-skinned women, and corrective cosmetics. Hair care products for the
retail consumer market are sold principally through distributors servicing
national and regional drug, grocery and mass merchandising chains. Professional
products are sold mainly through distributors serving beauty salons and barber
shops. IVAX's cosmetic products are marketed through department stores, major
retailers, drug stores, mass merchandisers and food stores. IVAX's line of
corrective cosmetics is sold in major department stores and mass merchandising
outlets. A portion of IVAX's personal care products are manufactured to IVAX's
specifications by third parties. IVAX's personal care products group had net
revenues, including intercompany sales, of $73.9 million, $80.0 million and
$65.4 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
RESEARCH AND DEVELOPMENT
For the years ended December 31, 1997, 1996 and 1995, IVAX spent $53.4
million, $51.7 million and $45.6 million, respectively, for company-sponsored
research and development activities. In 1997, 97% of such amount was dedicated
to pharmaceutical research and development. From time to time, IVAX may
supplement its research and development efforts by entering into research and
development agreements, joint ventures and other collaborative arrangements with
other companies to defray the cost of product development. IVAX intends to
pursue a balanced strategy of developing proprietary pharmaceutical products
with an emphasis on the oncology and respiratory fields, as well as generic
pharmaceutical products with an emphasis on specialty generics (see "General -
Refocus").
Statements in this Form 10-K concerning the timing of regulatory
filings and approvals are forward looking statements which are subject to risks
and uncertainties. The length of time necessary to complete clinical trials and
from submission of an application for market approval to a final decision by a
regulatory authority varies significantly. No assurance can be given that IVAX
will successfully complete the development of products under development, that
IVAX will be able to obtain regulatory approval for any such product, or that
any approved product may be produced in commercial quantities, at reasonable
costs, and be successfully marketed. Similarly, there can be no assurance that
IVAX's competitors will not develop and introduce products that will adversely
affect IVAX's business and results of operations.
6
PROPRIETARY PHARMACEUTICALS
IVAX is 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.
IVAX seeks to accelerate product development and introduction 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. IVAX intends to emphasize the development of drug products in the
oncology and respiratory fields, and has a variety of proprietary
pharmaceuticals in varying stages of development.
ELMIRON/Registered trademark/. IVAX received its first United States
approval to market a proprietary drug in September 1996, when the United States
Food and Drug Administration (the "FDA") cleared IVAX's New Drug Application
("NDA") for the marketing of its 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 afflicting primarily women. In September 1997, IVAX sold the marketing
rights to Elmiron/Registered trademark/ and certain other products in the United
States and Canada to ALZA, but retained such rights outside the United States
and Canada. See "Pharmaceuticals - Brand Name Products" above for a more
complete description of this transaction. IVAX has identified a number of other
potential uses for Elmiron/Registered trademark/, and has conducted studies in
collaboration with the National Institute of Diabetes and Digestive and Kidney
Diseases (NIDDK) of the National Institutes of Health (NIH) regarding kidney
disease and atherosclerosis. Based on these studies, IVAX has concluded that
Elmiron/Registered trademark/ merits further investigation as a potential
treatment for kidney disease and atherosclerosis in humans. As part of the ALZA
transaction, IVAX and ALZA agreed to collaborate in the development of
Elmiron/Registered trademark/ to treat conditions other than interstitial
cystitis. ALZA has marketing rights to Elmiron/Registered trademark/ for all
indications in the United States and Canada.
PAXENE/Registered trademark/. Paxene/Registered trademark/, IVAX's
tradename for 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 ("KS").
Bristol-Myers Squibb Company ("Bristol-Myers") currently markets a product
containing paclitaxel under the brand name Taxol/Registered trademark/ for the
treatment of ovarian and breast cancers and KS.
IVAX submitted an NDA for Paxene/Registered trademark/ for the
treatment of KS in March 1997, and in December 1997, the FDA determined
Paxene/Registered trademark/ to be safe and effective for the treatment of KS,
but indicated 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 granted to Taxol/Registered trademark/
under the Orphan Drug Act, which was approved for KS earlier in 1997. IVAX is
exploring alternate strategies to market Paxene/Registered trademark/ for KS in
advance of the expiration of Taxol/Registered trademark/'s exclusivity period.
Taxol/Registered trademark/'s market exclusivity does not apply to NDAs or
Abbreviated New Drug Applications ("ANDAs") for the use of paclitaxel to treat
indications other than KS and does not apply in any market other than the United
States. IVAX filed an ANDA for paclitaxel in December 1997 and filed an
application for regulatory approval of Paxene/Registered trademark/ to treat KS
in the European Union in 1997. IVAX has also conducted clinical studies of
Paxene/Registered trademark/ for other indications, and intends to file an NDA
for the use of Paxene/Registered trademark/ to treat one or more of such other
indications. 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 IVAX's NDA for Paxene/Registered
trademark/ or its ANDA for paclitaxel is approved, IVAX will not be able to
market paclitaxel if Bristol-Myers successfully enforces such patents against
IVAX. In addition, under the Waxman-Hatch Act, if Bristol-Myers sues IVAX within
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a certain period of time, IVAX's paclitaxel ANDA may not be approved by the FDA
until the earlier of August 2000 or the date when a court finally determines
that certain of Bristol-Myers' patents are either unenforceable or not infringed
by IVAX's product (see "Governmental Regulation").
ORAL PAXENE/Registered trademark/. Presently, paclitaxel is marketed
only in injectible form. IVAX is developing an oral formulation of
Paxene/Registered trademark/ that IVAX believes may provide significant
advantages over the injectible dosage form in terms of patient convenience and
reduced side-effects. IVAX is currently conducting human clinical trials to test
the safety and efficacy of oral Paxene/Registered trademark/, and in a single
dose proof-of-concept study, IVAX has determined that it is possible to achieve
therapeutic levels of paclitaxel via oral administration. It is, however,
premature to conclude that the drug is safe and effective when administered
orally.
INHALATION AEROSOL PRODUCTS. IVAX is continuing to develop the
Easi-Breathe/Trademark/ inhaler for use with compounds not subject to the Glaxo
Wellcome license (see "Pharmaceuticals - Brand Name Products"). During 1996,
IVAX commenced marketing the asthma drug Cromogen/Trademark/ (sodium
cromoglycate) in the Easi-Breathe/Trademark/ inhaler in the United Kingdom and
Ireland. In light of international agreements calling for the eventual phase out
of CFCs, IVAX is developing inhalation aerosol products which do not contain
CFCs. In 1997, IVAX received regulatory approval to market CFC-free
beclomethasone in Ireland (in its standard MDI and its Easi-Breathe/trademark/
inhaler) and France (in its standard MDI), the first such approval for any
company anywhere in the world. Glaxo Wellcome has the exclusive right to market
this product in the Easi-Breathe/trademark/ inhaler pursuant to the license
agreement discussed above. Also, IVAX has developed a multi-dose dry powder
inhaler ("MDPI") which uses no gas propellant at all and is believed to have
superior dosing accuracy than competing models. In 1996, IVAX commenced clinical
trials in the United Kingdom for budesonide in IVAX's MDPI. In developing
environmentally friendly, non-CFC containing formulations for MDIs, IVAX and
many of its competitors have obtained or licensed patents on formulations
containing alternative propellants. There are many existing patents covering the
use of hydrofluoroalkane with pharmaceuticals, and successful product
development by IVAX may require that IVAX incur substantial expense in seeking
to develop formulations that do not infringe competitors' patents, or that IVAX
license or invalidate such patents. IVAX successfully invalidated certain
relevant United Kingdom and European patents in the United Kingdom during 1997,
but there can be no assurance that it will be successful in defeating the
corresponding patents in the United States or other foreign jurisdictions.
GENERIC PHARMACEUTICALS
IVAX also develops generic pharmaceutical products. IVAX is seeking to
supplement its portfolio of generic products by emphasizing the development of
"specialty generics," defined as those products which, because of one or more
unique characteristics, are likely to encounter less intensive competition. Such
drugs include those which are difficult to formulate or manufacture, which
involve regulatory challenges or potential patent challenges, or for which
limited raw material suppliers exist. By emphasizing the development of
specialty generics, IVAX seeks to introduce generic products that its
competitors cannot easily develop and thereby obtain higher margins from sales
of its generic products. In addition, in evaluating which generic pharmaceutical
product development projects to undertake, IVAX considers whether the new
product, once developed, will complement other IVAX products in the same
therapeutic family, or will otherwise assist in making IVAX's product line more
complete. Developing specialty generic pharmaceutical products involves a
greater degree of risk than developing common generic pharmaceutical products
and will require substantial time and resources. No assurance can be given
8
that IVAX will successfully build a consistent, profitable pipeline of specialty
generics or be able to obtain regulatory approval to market any such products.
During 1997, IVAX received final FDA approval of 8 ANDAs relating to 7
chemical compounds, and approval of 18 Abridged Product License Applications
("APLAs"), the United Kingdom equivalent of an ANDA, from the United Kingdom
Medicines Control Agency (the "MCA") relating to 11 chemical compounds. As of
March 20, 1998, IVAX had received final FDA approval in 1998 of one ANDA
relating to one chemical compound and had 10 ANDAs relating to 9 chemical
compounds pending at the FDA, and 2 APLAs relating to 2 chemical compounds
pending at the MCA. The products covered by IVAX's pending ANDAs do not
constitute specialty generics.
GOVERNMENTAL REGULATION
IVAX's 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. IVAX devotes
significant time, effort and expense addressing the extensive government
regulations applicable to its business, and in general, the trend is towards
more stringent regulation.
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, which 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, which involve the administration of
the drug to a limited number of patients for a specific disease to determine
dose response, efficacy and safety; and phase III clinical trials, which 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, the drug must be shown to be bioequivalent to the previously
approved drug. The NDA and ANDA approval process generally takes a number of
years and involves 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 finally approve 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 IVAX,
9
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.
IVAX's diagnostic products are considered medical devices, which
require either a 510(k) premarket notification clearance ("510(k)") or an
approved Premarket Approval Application ("PMA") from the FDA prior to marketing.
A product qualifies for a 510(k) 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 PMA or has previously received 510(k) premarket notification clearance
and is lawfully on the market. The 510(k) approval 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 PMA application indicates that the FDA has determined that a device has
been proven to be safe and effective for its intended use. The PMA 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 by the FDA. Compliance with good
manufacturing practices guidelines requires the dedication of substantial
resources and requires significant costs. The FDA periodically inspects IVAX's
manufacturing facilities and procedures to assure compliance. The FDA may cause
a recall or withdraw product approvals if regulatory standards are not
maintained. 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 IVAX's business and results of operations.
In connection with its activities outside the United States, IVAX is
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
10
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, IVAX cannot predict what impact any reform
proposal ultimately adopted may have on the pharmaceutical or diagnostic
industries or on the business or operating results of IVAX.
RAW MATERIALS
Raw materials essential to IVAX's business are generally readily
available from multiple sources. Certain raw materials and components used in
the manufacture of IVAX's products are, however, available from limited sources,
and in some cases, a single source. Any curtailment in the availability of such
raw materials could be accompanied by production or other delays, and, in the
case of products for which only one raw material supplier exists, could result
in a material loss of sales, with consequent adverse effects on IVAX's business
and results of operations. In addition, because raw material sources for
pharmaceutical products must generally be approved by regulatory authorities,
changes in raw material suppliers may result in production delays, higher raw
material costs and loss of sales and customers. IVAX obtains a significant
portion of its raw materials from foreign suppliers, and its arrangements with
such suppliers are subject to, among other things, FDA, customs and other
government clearances, duties and regulation by the countries of origin.
COMPETITION
The pharmaceutical industry is highly competitive and includes numerous
established pharmaceutical companies, many of which have considerably greater
financial, technical, clinical, marketing and other resources and experience
than IVAX. The markets in which IVAX competes are undergoing, and are expected
to continue to undergo, rapid and significant technological change, and IVAX
expects competition to intensify as technological advances are made. IVAX
intends to compete in this marketplace by developing or licensing pharmaceutical
products that are either patented or proprietary and which are primarily for
indications having relatively large patient populations or for which limited or
inadequate treatments are available, and, with respect to generic
pharmaceuticals, by developing therapeutic equivalents to previously patented
products which, because of one or more unique characteristics, are expected to
have less intensive competition. There can be no assurance, however, that
developments by others will not render IVAX's pharmaceutical products or
technologies obsolete or uncompetitive.
In addition to product development, other competitive factors in the
pharmaceutical industry include product quality and price, customer service, and
reputation. Price is a key competitive factor in the generic pharmaceutical
business. To effectively compete on the basis of price and remain profitable, a
generic drug manufacturer must manufacture its products in a cost-effective
manner. IVAX's manufacturing costs have had a negative impact on its operating
results, and the restructuring programs initiated in 1996 and 1997 were aimed,
in part, at reducing IVAX's manufacturing costs.
Revenues and gross profit derived from generic pharmaceutical products
tend to follow a pattern based on regulatory and competitive factors unique to
the generic pharmaceutical industry. As patents for brand name products and
related exclusivity periods mandated by regulatory authorities expire, the first
generic manufacturer to receive regulatory approval for generic equivalents of
such products is usually able to achieve relatively high market share, revenues
and gross profit. As other generic manufacturers receive regulatory approvals,
sales volumes, market
11
share and prices typically decline. Accordingly, the level of revenues and gross
profit attributable to generic products developed and manufactured by IVAX is
dependent, in part, on IVAX's ability to maintain a pipeline of products in
development and to develop and rapidly introduce new products, the timing of
regulatory approval of such products, the number and timing of regulatory
approvals of competing products, and IVAX's ability to manufacture such products
efficiently. Because of the regulatory and competitive factors discussed above,
IVAX's revenues and results of operations historically have fluctuated from
period to period. IVAX expects this fluctuation to continue as long as a
significant part of its revenues are generated from sales of generic
pharmaceuticals.
In addition to competition from other generic drug manufacturers, IVAX
faces competition from brand name companies as they increasingly sell their
products into the generic market directly by establishing, acquiring or forming
licensing or business arrangements with generic pharmaceutical companies. No
regulatory approvals are required for a brand name manufacturer to sell directly
or through a third party to the generic market, nor do such manufacturers face
any other significant barriers to entry into such market. In addition, brand
name companies are increasingly pursuing strategies to prevent or delay the
introduction of generic competition. These strategies include, among other
things, seeking to establish regulatory obstacles to the demonstration of the
bioequivalence of generic drugs to their brand name counterparts, and
instituting legal actions based on process or other patents that allegedly are
infringed by the generic products.
During 1996 and 1997, certain national drug wholesalers instituted
programs designed to provide cost savings to independent retail pharmacies on
their purchases of certain generic pharmaceutical products. Pursuant to the
programs, retail pharmacies generally agreed to purchase their requirements of
generic pharmaceutical products from one wholesaler and permitted the wholesaler
to select the product suppliers. Each wholesaler encouraged generic drug
suppliers to participate in its program by offering to purchase the wholesaler's
requirements of particular products from a single supplier. The programs
encouraged generic drug suppliers to aggressively bid to be the exclusive
supplier of products under the programs. The existence of the programs also
resulted in reduced prices to non-wholesaler customers. As a result of the
institution of the programs, the generic drug industry experienced a significant
reduction in the prices charged by suppliers for many generic pharmaceutical
products during the second and third quarters of 1996. Price declines continued
throughout 1997, but at a slower rate than in 1996.
A significant amount of IVAX's United States generic pharmaceutical
sales are made to a relatively small number of drug wholesalers and retail
drug chains, which represent an essential part of the distribution chain of
pharmaceutical products in the United States. Both of these industries have
undergone, and are continuing to undergo, significant consolidation, which has
resulted in IVAX's customers gaining more purchasing leverage and consequently
increasing the pricing pressures facing IVAX's United States generic
pharmaceutical business. Further consolidation among IVAX's customers may result
in even greater pricing pressures and correspondingly reduce the gross margins
of this business, and may also cause such customers to reduce their purchases of
IVAX's products.
Other competitive factors affecting IVAX's business include the
prevalence and influence of managed care organizations and similar institutions
that are able to seek price discounts on pharmaceutical products. As the
influence of these entities continues to grow, IVAX may face increased pricing
pressure on the products it markets.
12
PATENTS AND TRADEMARKS
IVAX seeks to obtain patent protection on its products and products
under development where possible. IVAX currently owns or is licensed under
various United States, United Kingdom and other foreign patents and patent
applications covering certain of its products, products under development,
product uses and manufacturing processes. Protection for individual products,
product uses or manufacturing processes extends for varying periods in
accordance with the date of grant and the legal life of the patents in the
various countries. The protection afforded, which may also vary from country to
country, depends on the type of patent and its scope of coverage. There is no
assurance that patents will be issued on pending applications or as to the scope
or degree of protection patents will afford IVAX, or that IVAX's patents will be
held valid by a court of competent jurisdiction. Although IVAX believes that its
patents and licenses are important to its business, no single patent or license
is currently material in relation to IVAX's business as a whole. Any litigation
regarding IVAX's patents could result in substantial cost to IVAX.
IVAX sells certain of its products under trademarks and seeks to obtain
protection for its trademarks by registering them in the United States, United
Kingdom and other countries where the products are marketed. At present, IVAX
does not consider its trademarks, individually or in the aggregate, to be
material in relation to its business as a whole. The trademarks of the personal
care products group, however, are well established and recognized within its
industry, and IVAX believes that in the aggregate such trademarks are of
material importance to the personal care products group.
IVAX's success also depends on trade secrets which, in some cases,
cannot be patented or as to which seeking patents may harm IVAX's competitive
position. While IVAX generally requires its employees, advisors and consultants
to execute confidentiality agreements prohibiting such persons from disclosing
IVAX's trade secrets or using them in a manner harmful to IVAX, there can be no
assurance that these agreements will provide adequate protection or that IVAX
can meaningfully protect its proprietary interest in unpatented trade secrets.
LICENSING
IVAX has obtained licenses to technology and compounds for development
into new pharmaceutical products from various inventors, universities and the
United States Government, and will continue to seek new licenses from such
parties and others, including pharmaceutical companies. Generally, these
licenses grant IVAX the right to complete development efforts initiated by
others and to market any resulting products. IVAX generally is required to pay a
royalty based on sales of the product. There can be no assurance that any
licenses desired by IVAX will be obtainable on commercially reasonable terms or
that any licensed patents or proprietary rights will be valid and enforceable.
IVAX also grants licenses to other pharmaceutical companies relating to
technologies or compounds under development and, in some cases, finished
products. Generally, these licenses grant the licensees the right to complete
development work of the technology or compound, or obtain regulatory approvals
of a product, and thereafter market the product in specified territories. These
licenses often involve the payment of an up-front fee and fees upon completion
of certain development milestones, and also provide for the payment of royalties
based on sales of the product. IVAX often retains the right to supply the
product to the licensees.
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SEASONALITY
While certain of IVAX's individual products may have a degree of
seasonality, there are no significant seasonal aspects to IVAX's business,
except that sales of pharmaceutical products indicated for colds and flu
symptoms are higher during the fourth quarter as customers supplement
inventories in anticipation of the cold and flu season.
ENVIRONMENT
IVAX believes that its operations comply in all material respects with
applicable laws and regulations concerning the environment. While it is
impossible to accurately predict the future costs associated with environmental
compliance and potential remediation activities, compliance with environmental
laws is not expected to require significant capital expenditures and has not
had, and is not presently expected to have, a material adverse affect on IVAX's
earnings or competitive position.
EMPLOYEES
As of February 28, 1998, IVAX had approximately 4,500 full time
employees, of which approximately 2,700 were engaged in research and
development, production and associated support, 900 were engaged in sales,
marketing and distribution, and 900 were engaged in finance and general
administration. The employees were divided approximately as follows: 1,270 in
domestic pharmaceuticals, 2,650 in international pharmaceuticals, 320 in
personal care products, 100 in diagnostics, 80 in veterinary and 80 in
corporate. The foregoing information includes approximately 940 employees of
Galena, which is owned 74% by IVAX. IVAX's recent financial results and
workforce reductions have negatively impacted employee morale and have created
employee recruitment and retention issues that could have a negative impact on
IVAX's business and operating results.
YEAR 2000 COMPLIANCE
IVAX has engaged a consultant to assist in evaluating its computer
systems and facilities for any potential Year 2000 compliance issues. IVAX has
determined that a portion of its operating systems and equipment require
modification or replacement to ensure that they will be capable of recognizing
and processing dates beyond December 31, 1999. IVAX believes, based on existing
information, that its Year 2000 compliance issues can be mitigated, and it has
developed a plan to implement the required system and equipment modifications
and replacements. IVAX is also coordinating with its customers, suppliers and
other persons with which it interacts electronically to coordinate its Year 2000
compliance program.
IVAX anticipates that it will spend up to $15.0 million over the next
two years in connection with its plan to implement the required system and
equipment modifications and replacements. Amounts spent on modifying existing
systems and equipment will be expensed as incurred, and the cost of any new
software and equipment purchased will be capitalized. IVAX expects to complete
the implementation of its system and equipment modifications or replacements by
mid-1999. The expected costs of the Year 2000 compliance program and the date on
which IVAX expects to complete the implementation of the plan are based on
management's best estimates and involve certain assumptions, and actual results
could differ materially from the estimates set forth herein. There can be no
assurance that IVAX's Year 2000 compliance program will be successful. In
addition, the
14
implementation of new information systems and the modification or replacement of
equipment involves risks that the systems and equipment will not perform as
expected and that productivity may suffer until employees are properly trained.
No assurance can be given that any such implementation will not adversely affect
IVAX's operations.
RISK OF PRODUCT LIABILITY CLAIMS
Testing, manufacturing and marketing pharmaceutical products subjects
IVAX to the risk of product liability claims. IVAX is a defendant in a number of
product liability cases, none of which IVAX believes will have a material
adverse effect on IVAX's business, financial condition or results of operations.
IVAX believes that it maintains an adequate amount of product liability
insurance, but there can be no assurance that its insurance will cover all
existing and future claims or that IVAX will be able to maintain existing
coverage or obtain additional coverage at reasonable rates. There can be no
assurance that claims arising under any pending or future product liability
cases, whether or not covered by insurance, will not have a material adverse
effect on IVAX's business, financial condition or results of operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, the matters
discussed herein are forward looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting IVAX's
operations, markets, products and prices, and other factors discussed elsewhere
in this report and the documents filed by IVAX with the Securities and Exchange
Commission ("SEC"). These factors may cause IVAX's results to differ materially
from the statements made in this report or otherwise made by or on behalf of
IVAX.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Specific financial information with respect to IVAX's foreign and
domestic operations is provided in Note 13, Geographic Information, in the Notes
to Consolidated Financial Statements incorporated by reference to page 41 of
IVAX's 1997 Annual Report to Shareholders.
ITEM 2. PROPERTIES
IVAX owns or leases an aggregate of approximately 3.3 million square
feet of space in Argentina, Canada, Germany, Hong Kong, Ireland, Italy, Poland,
Russia, the Slovak Republic, the United Kingdom, the United States, and Uruguay,
which is used by the pharmaceutical business (82%), the personal care products
business (7%), and the diagnostics business (2%). The remaining portion (9%) was
used by the specialty chemicals business. In connection with the sale of the
specialty chemicals business, IVAX retained ownership of its manufacturing
facilities in Rock Hill, South Carolina and Marion, Ohio, and is pursuing the
sale of these facilities. IVAX believes its facilities are in satisfactory
condition, are suitable for their intended use and, in the aggregate, have
capacities in excess of those necessary to meet IVAX's present needs.
IVAX operates sixteen pharmaceutical manufacturing facilities, two of
which are located in each of Waterford, Ireland; Miami, Florida; and London,
England; and one of which is located in each of Kirkland, Canada; Buenos Aires,
Argentina; Northvale, New Jersey; St. Croix, Virgin
15
Islands; Cidra, Puerto Rico; Syosset, New York; Falkenhagen, Germany; Harlow,
England; Runcorn, England; and Montevideo, Uruguay. IVAX's personal care
products manufacturing facility is located in Chicago, Illinois. IVAX's
diagnostics manufacturing facilities are located in Miami, Florida and
Springdale, Arkansas. IVAX owns its Chicago, Miami, Kirkland, Buenos Aires,
Cidra, Syosset, and Falkenhagen manufacturing facilities, and leases its
remaining manufacturing facilities.
In connection with restructuring programs instituted by IVAX in 1996
and 1997 to, among other things, reduce costs and improve efficiencies in its
United States generic pharmaceutical operations, IVAX is consolidating certain
of its facilities. IVAX closed its Shreveport, Louisiana pharmaceutical
manufacturing facility in the fourth quarter of 1996; consolidated its United
States pharmaceutical distribution facilities into a single leased distribution
center in Kenton County, Kentucky in 1997; closed its Ft. Lauderdale, Florida
office, packaging and warehouse facility and its Syosset, New York
pharmaceutical manufacturing facility in the first quarter of 1998; is pursuing
the sale of its Kirkland, Canada pharmaceutical manufacturing facility; expects
to close one of its London, England manufacturing facilities in 1998; and may
sell its Falkenhagen, Germany facility and one of its Miami, Florida
manufacturing facilities before the end of 1998. Production from those
facilities has been or will be transferred to other IVAX facilities.
IVAX maintains sales offices and distribution centers in Argentina,
China, Hong Kong, Italy, Poland, Russia, Uruguay, and various parts of the
United States and the United Kingdom, most of which are held pursuant to leases.
None of such leases are material to IVAX.
A portion of IVAX's pharmaceutical manufacturing capacity and its
research and development activities, as well as its corporate headquarters and
other critical business functions are located in areas subject to hurricane
casualty risk. Although IVAX has certain limited protection afforded by
insurance, IVAX's business, earnings and competitive position could be
materially adversely affected in the event of a major windstorm.
ITEM 3. LEGAL PROCEEDINGS
In late April 1995, Zenith Laboratories, Inc., a wholly-owned
subsidiary of IVAX ("Zenith"), received approvals from the FDA to manufacture
and market the antibiotic cefaclor in capsule and oral suspension formulations.
Cefaclor is the generic equivalent of Ceclor/Registered trademark/, a product of
Eli Lilly and Company ("Lilly"). On April 27, 1995, Lilly filed a lawsuit
against Zenith and others styled ELI LILLY AND COMPANY V. AMERICAN CYANAMID
COMPANY, BIOCRAFT LABORATORIES, INC., ZENITH LABORATORIES, INC. AND BIOCHIMICA
OPOS S.p.A. in the United States District Court for the Southern District of
Indiana, Indianapolis Division. In general, the lawsuit alleges that Biochimica
Opos S.p.A. ("Opos"), Zenith's cefaclor raw material supplier, manufactured
cefaclor raw material in a manner which infringed two process patents owned by
Lilly, and that Zenith and the other defendants knowingly and willfully
infringed and induced Opos to infringe the patents by importing the raw material
into the United States. The lawsuit seeks to enjoin Zenith and the other
defendants from infringing or inducing the infringement of the patents and from
making, using or selling any product incorporating the raw material provided by
Opos, and seeks an unspecified amount of monetary damages and the destruction of
all cefaclor raw material manufactured by Opos and imported into the United
States. In August 1995, the Court denied Lilly's motion for preliminary
injunction which sought to prevent Zenith from selling cefaclor until the merits
of Lilly's allegations could be determined at trial. On May 10, 1996, the United
States Court of Appeals for the Federal Circuit affirmed the district court's
denial of Lilly's motion for preliminary injunction. On February 28,
16
1997, Lilly filed an amended complaint which alleges the infringement of an
additional patent, and also filed a motion to add to the lawsuit additional
defendants who are not affiliated with IVAX or Zenith. Zenith ceased selling
cefaclor in January 1997, when it announced a recall in the United States of
cefaclor as a result of the recall by Opos of the raw material used to
manufacture the product.
On April 18, 1997, Lilly filed a complaint in the United States
District Court for the District of New Jersey styled ELI LILLY AND COMPANY V.
ROUSSEL CORP., ET AL against various defendants, including Zenith. With respect
to Zenith, the complaint asserts claims for violation of the Lanham Act, unfair
competition under New Jersey state law, common law unfair competition and unjust
enrichment. Also named as defendants are Roussel Corporation, Roussel UCLAF
Holdings Corporation, Roussel UCLAF S.A., Hoechst Marion Roussel North America,
and Biochimica Opos S.p.A. (collectively, the "Roussel Defendants"), The Rugby
Group, Inc., and Rugby Laboratories, Inc. (collectively, "Rugby"), and American
Home Products Corporation and American Cyanamid Company (collectively, the
"American Home Defendants"). The claims asserted against the American Home
Defendants and Rugby are essentially the same as those asserted against Zenith.
Additional claims are asserted against the Roussel Defendants, including fraud,
negligent misrepresentation, common law conspiracy, tortious interference with
business relations, and violations of both the federal and state Racketeer
Influenced And Corrupt Organizations Acts. All of the asserted claims arise out
of what Lilly contends were fraudulent misrepresentations to Lilly and the FDA
by Opos regarding the methods utilized by Opos to manufacture bulk cefaclor and
the location of the manufacturing facility of such cefaclor. According to Lilly,
through these alleged misrepresentations, Opos fraudulently obtained approval
from FDA to market bulk cefaclor in the United States. The claims asserted
against Zenith are predicated on Zenith's sale in the United States of retail
dosage units of cefaclor manufactured using Opos' bulk cefaclor. Lilly alleges
that Zenith, in marketing and selling retail dosage units of cefaclor
manufactured from Opus' bulk cefaclor, used false and misleading descriptions
and representations regarding Zenith's cefaclor product. The relief sought by
Lilly against Zenith, jointly and severally with the American Home Defendants
and Rugby, is an accounting to Lilly for any and all profits derived by Zenith
from the sale of cefaclor and an award of damages to Lilly, in an unspecified
amount, allegedly sustained by Lilly as a result of Zenith's alleged acts of
misrepresentation and unfair competition. Lilly further seeks an award of treble
damages and litigation costs, including attorneys' fees and interest. Under its
unjust enrichment claim, Lilly seeks restitution in an unspecified amount
against Zenith, jointly and severally with the other defendants. Zenith filed a
motion to dismiss the action in August 1997, which motion remains pending.
In July 1994, an action styled ABS MB INVESTMENT LIMITED PARTNERSHIP
AND ABS MB LTD. VS. IVAX Corporation was filed against IVAX in the United States
District Court for the District of Maryland. Plaintiffs, shareholders of McGaw
at the time of its acquisition by IVAX, alleged that IVAX violated Sections 11
and 12(2) of the Securities Act of 1933, as amended (the "Securities Act"), as
well as certain state securities laws, and that it breached certain provisions
of the merger agreement and IVAX's bylaws, by issuing to plaintiffs shares of
IVAX common stock subject to the restrictions imposed by Rule 145 promulgated
under the Securities Act and Accounting Series Release 135. The plaintiffs claim
that, as a result of the restrictions imposed on the certificates issued to
them, they suffered damages from the loss of value of their shares, and seek
damages of $11.0 million, plus expenses and attorneys' fees. In June 1995, the
Court entered an order denying plaintiffs' motion for summary judgment with
respect to the claims alleging that IVAX breached certain provisions of the
merger agreement and IVAX's bylaws and granted IVAX's motion to dismiss such
counts. The
17
Court denied IVAX's motion to dismiss the counts relating to alleged violation
of Sections 11 and 12(2) of the Securities Act and alleged violations of certain
state securities laws, as well as its motion to transfer venue. In October 1995,
the Court entered an order granting the plaintiffs' motion to amend their
complaint to assert new causes of action under the Uniform Commercial Code and
granting the plaintiffs' motion for reconsideration of the dismissal of the
counts alleging breach of IVAX's bylaws, and ordered that such counts be
reinstated. During April and May 1997, the parties filed cross motions for
summary judgment, which motions remain pending.
In November 1996, individuals purporting to be shareholders of IVAX
filed a class action complaint styled MALIN, ET AL. VS. IVAX CORPORATION AND
PHILLIP FROST, ET AL. against IVAX and certain of its current or former officers
or directors in the United States District Court for the Southern District of
Florida which consolidates, amends and supplements a number of similar
complaints filed earlier in 1996. The plaintiffs seek to act as representatives
of a class consisting of all purchasers of IVAX common stock between July 31,
1995 and June 27, 1996. The consolidated amended complaint alleges violations of
Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") and Rule 10b-5 promulgated by the Securities and Exchange
Commission, and also asserts a claim for negligent misrepresentation. The
complaint generally alleges that IVAX made untrue statements of material fact
and omitted to state material facts necessary to make statements made not
misleading in its public disclosure documents and in communications to the
public regarding its operations and financial results and that its financial
statements were not prepared in accordance with generally accepted accounting
principles. These allegations are centered around allegations that IVAX failed
to disclose that it offered its customers shelf stock adjustments and failed to
establish reserves for such adjustments. In general, the complaint seeks an
unspecified amount of compensatory damages, pre-judgment interest, litigation
costs and attorney's fees. In January 1997, the IVAX defendants filed a motion
to dismiss the action, which motion remains pending.
On March 5, 1997, individuals purporting to be shareholders of IVAX
Corporation filed a class action complaint styled ALAN M. HARRIS AND YITZCHOK
WOLPIN V. IVAX CORPORATION, PHILLIP FROST AND MICHAEL W. FIPPS against IVAX, its
chairman and its former chief financial officer in the United States District
Court for the Southern District of Florida. Plaintiffs seek to act as
representatives of a class consisting of all persons who purchased IVAX common
stock or call options during the period from September 30, 1996 through November
11, 1996 and who were allegedly damaged thereby. The complaint alleges
violations of Section 10(b) of the 1934 Act and negligent misrepresentation. The
complaint alleges that defendants made untrue statements of material fact and
omitted to state material facts necessary to make statements made not misleading
in a September 30, 1996 press release regarding IVAX's forecasted earnings for
the third quarter of 1996. The complaint seeks unspecified compensatory damages,
pre-judgment interest, attorneys' fees and litigation costs.
On April 21, 1997, individuals purporting to be shareholders of IVAX
filed a class action complaint styled FAUSTO POMBAR V. IVAX CORPORATION, PHILLIP
FROST AND MICHAEL W. FIPPS against IVAX, its chairman and its former chief
financial officer in the United States District Court for the Southern District
of Florida. Plaintiffs seek to act as representatives of a class consisting of
all persons who purchased IVAX common stock or call options during the period
from August 2, 1996 through November 11, 1996, inclusive. The complaint alleges
claims for violation of Section 10(b) of the 1934 Act and Rule 10b-5 and for
negligent misrepresentation. The complaint alleges, among other things, that
during the class period defendants made untrue statements of material fact and
omitted to state material facts necessary to make statements made not misleading
in its statements to
18
the public, including in a September 30, 1996 press release regarding IVAX's
forecasted earnings for the third quarter of 1996. The complaint seeks
unspecified compensatory damages, interest, attorneys' fees, costs of suit and
unspecified other and further relief from the court.
With respect to the HARRIS and POMBAR cases, on June 19, 1997, the court
entered an order dismissing the POMBAR action without prejudice and ordered the
plaintiffs in both actions to file an amended complaint incorporating the
allegations in both the HARRIS and POMBAR actions under a single case styled
ALAN M. HARRIS, YITZCHOK WOLPIN AND FAUSTO POMBAR V. IVAX CORPORATION, PHILLIP
FROST AND MICHAEL W. FIPPS. The amended complaint was filed on July 10, 1997,
and plaintiffs therein seek to act as representatives of a class consisting of
all persons who purchased IVAX common stock or call options during the period
from August 2, 1996 through November 11, 1996, inclusive. In July 1997, the IVAX
defendants filed a motion to dismiss the action, which motion remains pending.
In March of 1995, Baxter International Inc. and Baxter HealthCare Corp.
(collectively, "Baxter") filed an action against former IVAX subsidiary McGaw
styled BAXTER INTERNATIONAL INC. AND BAXTER HEALTHCARE CORP. V. MCGAW, INC., in
the United States District Court for the Northern District of Illinois. The
plaintiffs alleged that McGaw's SafeLine/Trademark/ Needle Free System infringes
three United States patents owned by Baxter. After a trial, the jury found in
favor of McGaw, determining that each of the claims of the asserted patents was
either invalid or was not infringed by McGaw. In addition, the judge found that
two of Baxter's patents are unenforceable because of inequitable conduct.
Judgment was entered in favor of McGaw in March 1996, and Baxter's appeal is
presently pending in the United States Court of Appeals for the Federal Circuit.
In connection with IVAX's sale of McGaw in June 1997, IVAX agreed to continue to
conduct the defense of this action at its expense and to hold the purchaser of
McGaw harmless against any judgment rendered or settlement entered into with
respect to this action. Any such judgment or settlement will have the effect of
limiting the amount of contingent payments IVAX may receive under the agreement
governing the sale of McGaw.
On February 19, 1993, Smith & Nephew, Inc., a Delaware corporation
("S&N"), filed an action against IVAX and Solopak, Inc., a Delaware corporation
and wholly-owned subsidiary of IVAX ("Subsidiary"), in the Cook County, Illinois
Circuit Court styled SMITH & NEPHEW, INC. VS. IVAX CORPORATION AND SOLOPAK, INC.
S&N alleged that IVAX breached an Asset Purchase Agreement (the "Agreement"),
dated February 28, 1992, among IVAX, the Subsidiary and S&N, pursuant to which,
among other things, S&N agreed to sell to Subsidiary substantially all of the
assets of Smith & Nephew Solopak, a division of S&N (the "Division"), for $19.0
million in cash, by failing to close when all conditions precedent to the
closing were satisfied. S&N further alleged that in November 1992, it sold the
Division to another party for $13.5 million. S&N is seeking damages of $5.5
million, the difference between the $19.0 million purchase price specified in
the Agreement and the eventual sale price, plus attorneys' fees and costs. S&N
has claimed additional unspecified damages resulting from IVAX's alleged
interference with S&N's employees during the due diligence process. IVAX has
counterclaimed against S&N for breach of the Agreement and is seeking as damages
the expenses incurred in connection with the failed acquisition plus attorneys'
fees and costs. The case is presently set for trial the week of July 20, 1998.
IVAX intends to vigorously defend each of the foregoing lawsuits, but
their respective outcomes cannot be predicted. Any of such lawsuits, if
determined adversely to IVAX, could have a material adverse effect on IVAX's
financial position and results of operations. IVAX's ultimate liability with
respect to any of the foregoing proceedings is not presently determinable.
19
With respect to the case styled JAMES M. SWEENEY, ET AL. V. IVAX
CORPORATION AND PHILLIP FROST, M.D., previously reported in IVAX's Annual Report
on Form 10-K for the year ended December 31, 1996, on January 28, 1998, the
parties entered into a Settlement Agreement pursuant to which they settled the
lawsuit in its entirety in exchange for the payment by the defendants and their
insurers of $1.75 million. Pursuant to the Settlement Agreement, the lawsuit was
dismissed with prejudice on January 30, 1998.
With respect to the case styled VENTANA PARTNERSHIP III, L.P. AND
VENTANA EQUITY EXPANSION PARTNERSHIP IV, L.P. VS. IVAX CORPORATION, PHILLIP
FROST, M.D., ISAAC KAYE AND ANDREW ZINZI, previously reported in IVAX's Annual
Report on Form 10-K for the year ended December 31, 1996, on December 11, 1997,
the parties entered into a Settlement Agreement pursuant to which they settled
the lawsuit in its entirety in exchange for the payment by the defendants and
their insurers of $258,000. Pursuant to the Settlement Agreement, the lawsuit
was dismissed with prejudice on January 7, 1998.
IVAX is involved in various other legal proceedings arising in the
ordinary course of business, some of which involve substantial amounts. While it
is not feasible to predict or determine the outcome of these proceedings, in the
opinion of management, based on a review with legal counsel, any losses
resulting from such legal proceedings will not have a material adverse impact on
IVAX's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is a list of the names, ages, positions held and
business experience during the past five years of the persons serving as
executive officers of IVAX as of March 20, 1998. Officers serve at the
discretion of the Board of Directors. There is no family relationship between
any of the executive officers, and there is no arrangement or understanding
between any executive officer and any other person pursuant to which the
executive officer was selected.
THOMAS E. BEIER. Mr. Beier, age 52, has served as Senior Vice President
- - Finance and Chief Financial Officer of IVAX since October 1997. From December
1996 to October 1997, he served as a Vice President - Finance for IVAX. Prior to
joining IVAX, he served as Executive Vice President and Chief Financial Officer
of Intercontinental Bank from 1989 until August 1996.
DAVID R. BETHUNE. Mr. Bethune, age 57, has served as President and
Chief Operating Officer of IVAX since July 1997. From 1995 until he joined IVAX,
he served as President and Chief Executive Officer of Aesgen, Inc. (generic
pharmaceuticals). From 1992 until 1995, Mr. Bethune was Group Vice President of
American Cyanamid with responsibility for that company's worldwide
pharmaceutical operations. From 1988 until 1992, he served as President of
Lederle Laboratories, a division of American Cyanamid. From 1983 until 1988, he
served as President of G.D. Searle & Co.'s North American Operations. He is a
director of Atrix Laboratories, Inc. (dental pharmaceuticals), Female Health Co.
(female products), and Southern Research Institute (not-for-profit medical
research).
20
SAMUEL BRODER, M.D. Dr. Broder, age 53, has served as IVAX's Senior
Vice President-Research and Development and Chief Scientific Officer since March
1995. Prior to joining IVAX, he held various positions at the National Cancer
Institute since 1972, serving as its Director from 1989 until February 1995.
PHILLIP FROST, M.D. Dr. Frost, age 61, has served as Chairman of the
Board of Directors and Chief Executive Officer of IVAX since 1987. He served as
IVAX's 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 (managed 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.
RAFICK G. HENEIN, PH.D. Dr. Henein, age 57, has served as a Senior Vice
President of IVAX and as the President and Chief Executive Officer of Zenith
Goldline Pharmaceuticals, Inc., IVAX's principal United States-based generic
pharmaceutical subsidiary, since July 1997. He held various positions in the
Novopharm Limited organization (pharmaceuticals) since 1988, rising to the
position of President and Chief Executive Officer of Novopharm International in
1996.
JANE HSIAO, PH.D. Dr. Hsiao, age 50, has served as a director of IVAX
and as IVAX's Vice Chairman-Technical Affairs since February 1995, and as
Chairman, Chief Executive Officer and President of DVM Pharmaceuticals, Inc.,
IVAX's veterinary products subsidiary, since March 1998. From 1992 until
February 1995, she served as IVAX's Chief Regulatory Officer and Assistant to
the Chairman, and as Vice President-Quality Assurance and Compliance of Baker
Norton Pharmaceuticals, Inc., IVAX's 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. Mr. Kaye, age 68, has served as Deputy Chief Executive
Officer and a director of IVAX since 1990, and as Chief Executive Officer of
Norton Healthcare Limited, IVAX's principal United Kingdom pharmaceutical
subsidiary, since 1990.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
IVAX's common stock is listed on the American Stock Exchange and is
traded under the symbol IVX. Additional information required by item 5 is
incorporated by reference to page 48 of the 1997 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by item 6 is incorporated by reference to page
1 of the 1997 Annual Report to Shareholders.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by item 7 is incorporated by reference to
pages 2 - 15 of the 1997 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by item 7A is incorporated by reference to
page 15 of the 1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by item 8 is incorporated by reference to
pages 17 - 45 of the 1997 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required by item 10 is
incorporated by reference to IVAX's Proxy Statement for its 1998 Annual Meeting
of Shareholders. The information concerning executive officers required by item
10 is contained in the discussion entitled "Executive Officers of the
Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by item 11 is incorporated by reference to
IVAX's Proxy Statement for its 1998 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by item 12 is incorporated by reference to
IVAX's Proxy Statement for its 1998 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by item 13 is incorporated by reference to
IVAX's Proxy Statement for its 1998 Annual Meeting of Shareholders.
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The following consolidated financial statements, related notes and
independent auditors' report, from the 1997 Annual Report to Shareholders, are
incorporated by reference into Item 8 of Part II of this report:
PAGE IN THE
1997 ANNUAL
REPORT TO
SHAREHOLDERS
------------
Report of Independent Certified Public Accountants 16
Consolidated Balance Sheets 17
Consolidated Statements of Operations 18
Consolidated Statements of Shareholders' Equity 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 23
(A)(2) FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule of IVAX is filed as a part
of this report:
Schedule II Valuation and Qualifying Accounts for the three years
ended December 31, 1997
All other schedules have been omitted because the required information
is not applicable or the information is included in the consolidated financial
statements or the notes thereto.
The independent auditors' report with respect to Schedule II is also
filed as part of this report.
(A)(3) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
3.1 Articles of Incorporation. Incorporated by reference to IVAX's
Form 8-B dated July 28, 1993.
3.2 Amended and Restated Bylaws. Incorporated by reference to IVAX's
Form 10-Q for the quarter ended
September 30, 1997.
23
4.1 Indenture dated November 26, 1991, between IVAX Incorporated by reference to IVAX's
Corporation and First Trust National Association, as Form 10-K for the year ended
Trustee, with respect to IVAX Corporation's 6 1/2% December 31, 1991.
Convertible Subordinated Notes due November 15, 2001.
4.2 Form of 6 1/2% Convertible Subordinated Notes due November Incorporated by reference to IVAX's
15, 2001 in Global Form. Form 10-K for the year ended
December 31, 1991.
4.3 Rights Agreement, dated December 29, 1997, between IVAX Incorporated by reference to IVAX's
Corporation and ChaseMellon Shareholder Services, L.L.C., Form 8-K dated December 19, 1997.
with respect to the IVAX Corporation Shareholder Rights
Plan.
10.1 IVAX Corporation 1985 Stock Option Plan, as amended.* Filed herewith.
10.2 IVAX Corporation 1994 Stock Option Plan, as amended.* Filed herewith.
10.3 Form of Indemnification Agreement for Directors. Incorporated by reference to IVAX's
Form 8-B dated July 28, 1993.
10.4 Form of Indemnification Agreement for Officers. Incorporated by reference to IVAX's
Form 8-B dated July 28, 1993.
10.5 Agreement Containing Consent Order, dated December 6, Incorporated by reference to IVAX's
1994, between IVAX Corporation and the United States Form 10-K for the year ended
Federal Trade Commission. December 31, 1994.
10.6 Employment Agreement, dated November 28, 1997, between Filed herewith.
IVAX Corporation and Phillip Frost, M.D. *
10.7 Employment Agreement, dated November 28, 1997, between Filed herewith.
IVAX Corporation and Isaac Kaye.*
24
10.8 Employment Agreement, dated November 28, 1997, between Filed herewith.
IVAX Corporation and David R. Bethune.*
10.9 Employment Agreement, dated January 19, 1998, between Filed herewith.
IVAX Corporation and Jane Hsiao, Ph.D.*
10.10 Employment Agreement, dated July 28, 1997, between IVAX Incorporated by reference to IVAX's
Corporation and Rafick G. Henein, Ph.D.* Form 10-Q for the quarter ended June
30, 1997.
10.11 Form of Employment Agreement (Change in Control) between Filed herewith.
IVAX Corporation and certain of its executive officers.*
10.12 Stock Purchase Agreement, dated May 30, 1997, between Incorporated by reference to IVAX's
IVAX Corporation and B. Braun of America Inc.** Form 8-K dated June 24, 1997.
13.1 The 1997 Annual Report to Shareholders, which, except for Filed herewith.
those portions expressly incorporated herein by
reference, is furnished solely for the information of the
Commission and is not to be deemed "filed".
21.1 Subsidiaries of IVAX Corporation. Filed herewith.
23.1 Consent of Arthur Andersen LLP Filed herewith.
27 Financial Data Schedule Filed herewith.
<FN>
- ----------------------
* Compensation Plan or Agreement.
** Certain exhibits and schedules to this document have not been filed. The
Registrant agrees to furnish a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
</FN>
(b) REPORTS ON FORM 8-K.
IVAX filed a Current Report on Form 8-K dated December 19, 1997
relating to the adoption of its Shareholder Rights Plan.
25
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: March 31, 1998 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 March 31, 1998
- ----------------------------- Chief Executive Officer
Phillip Frost, M.D. (Principal Executive Officer)
/s/ THOMAS E. BEIER Chief Financial Officer March 31, 1998
- ----------------------------- (Principal Financial Officer)
Thomas E. Beier
/s/ MICHAEL METZKES Vice President - Accounting March 31, 1998
- ----------------------------- (Principal Accounting Officer)
Michael Metzkes
/s/ MARK ANDREWS Director March 31, 1998
- -----------------------------
Mark Andrews
/s/ ERNST BIEKERT, PH.D. Director March 31, 1998
- -----------------------------
Ernst Biekert, Ph.D.
/s/ JACK FISHMAN, PH.D. Director March 31, 1998
- -----------------------------
Jack Fishman, Ph.D.
26
/s/ NEIL FLANZRAICH Director March 31, 1998
- -----------------------------
Neil Flanzraich
/s/ JANE HSIAO, PH.D. Director and Vice Chairman- March 31, 1998
- ----------------------------- Technical Affairs
Jane Hsiao, Ph.D.
/s/ ISAAC KAYE Director and Deputy Chief March 31, 1998
- ----------------------------- Executive Officer
Isaac Kaye
27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF IVAX CORPORATION:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in IVAX Corporation's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated March 20, 1998. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The Financial Statement
Schedule listed in Item 14 is presented for purposes of complying with the
Securities and Exchange Commission rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
March 20, 1998.
SCHEDULE II
IVAX CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
(In thousands)
BALANCE AT CHARGED TO
BEGINNING COST AND NET BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OTHER END OF YEAR
- -------------------------------- ------------- ---------- ---------- -------- -----------
ALLOWANCES FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1997 $ 20,061 8,973 (8,702) (1,106) $ 19,226
============= ======= ========= ======== ========
Year ended December 31, 1996 $ 11,064 30,737 (20,343) (1,397)(A) $ 20,061
============= ======= ========= ======== ========
Year ended December 31, 1995 $ 8,286 4,579 (1,708) (93)(B) $ 11,064
============ ======= ========= ======== ========
<FN>
(A) Includes additions to the accounts receivable allowances as a result of the
acquisition of Elvetium.
(B) Includes additions to the accounts receivable allowances as a result of the
acquisition of Immunovision, Inc.
</FN>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.1 IVAX Corporation 1985 Stock Option Plan, as amended.
10.2 IVAX Corporation 1994 Stock Option Plan, as amended.
10.6 Employment Agreement, dated November 28, 1997, between
IVAX Corporation and Phillip Frost, M.D.
10.7 Employment Agreement, dated November 28, 1997, between
IVAX Corporation and Isaac Kaye.
10.8 Employment Agreement, dated November 28, 1997, between
IVAX Corporation and David R. Bethune.
10.9 Employment Agreement, dated January 19, 1998, between
IVAX Corporation and Jane Hsiao, Ph.D.
10.11 Form of Employment Agreement (Change in Control) between
IVAX Corporation and certain of its executive officers.
13.1 The 1997 Annual Report to Shareholders, which, except for
those portions expressly incorporated herein by
reference, is furnished solely for the information of the
Commission and is not to be deemed "filed".
21.1 Subsidiaries of IVAX Corporation.
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule