-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KVo4PHiGWYX97Fc7Nhl9ukt3vITqIrX6gQnin96HIdr+nZCK0N9rOQ2Tb/2V3mhd xLQ3mO/XBCmAs7UrIG5hxg== 0000318154-97-000008.txt : 19970515 0000318154-97-000008.hdr.sgml : 19970515 ACCESSION NUMBER: 0000318154-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMGEN INC CENTRAL INDEX KEY: 0000318154 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 953540776 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12477 FILM NUMBER: 97603145 BUSINESS ADDRESS: STREET 1: 1840 DEHAVILLAND DR CITY: THOUSAND OAKS STATE: CA ZIP: 91320-1789 BUSINESS PHONE: 0854471000 MAIL ADDRESS: STREET 1: 1840 DEHAVILLAND DR. STREET 2: MAIL STOP 10-1-B-512 CITY: THOUSAND OAKS STATE: CA ZIP: 91320-1789 FORMER COMPANY: FORMER CONFORMED NAME: AMGEN DATE OF NAME CHANGE: 19870305 10-Q 1 FIRST QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-12477 AMGEN INC. (Exact name of registrant as specified in its charter) Delaware 95-3540776 ------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1840 DeHavilland Drive, Thousand Oaks, California 91320-1789 --------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (805) 447-1000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of March 31, 1997, the registrant had 264,872,827 shares of Common Stock, $.0001 par value, outstanding. AMGEN INC. INDEX Page No. PART I FINANCIAL INFORMATION Item 1.Financial Statements .......................3 Condensed Consolidated Statements of Operations - three months ended March 31, 1997 and 1996 ...................4 Condensed Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 ............5 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 1997 and 1996 ...............6 - 7 Notes to Condensed Consolidated Financial Statements ......................................8 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations ................................15 PART II OTHER INFORMATION Item 1.Legal Proceedings .........................20 Item 5.Other Information .........................22 Item 6.Exhibits and Reports on Form 8-K ..........22 Signatures........................................23 Index to Exhibits.................................24 PAGE 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements The information in this report for the three months ended March 31, 1997 and 1996 is unaudited but includes all adjustments (consisting only of normal recurring accruals) which Amgen Inc. ("Amgen" or the "Company") considers necessary for a fair presentation of the results of operations for those periods. The condensed consolidated financial statements should be read in conjunction with the Company's financial statements and the notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Interim results are not necessarily indicative of results for the full fiscal year. PAGE 3 AMGEN INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three Months Ended March 31, 1997 1996 ------- ------- Revenues: Product sales .................... $536.0 $476.9 Corporate partner revenues ....... 27.4 21.8 Royalty income ................... 12.1 9.2 ------ ------ Total revenues ............... 575.5 507.9 ------ ------ Operating expenses: Cost of sales .................... 72.0 66.9 Research and development ......... 147.7 130.6 Marketing and selling ............ 68.1 67.6 General and administrative ....... 44.4 39.2 Loss of affiliates, net .......... 8.5 13.3 ------ ------ Total operating expenses ..... 340.7 317.6 ------ ------ Operating income .................. 234.8 190.3 ------ ------ Other income (expense): Interest and other income ........ 15.9 19.0 Interest expense, net ............ (0.3) (2.3) ------ ------ Total other income (expense) . 15.6 16.7 ------ ------ Income before income taxes ........ 250.4 207.0 Provision for income taxes ........ 70.1 63.4 ------ ------ Net income ........................ $180.3 $143.6 ====== ====== Earnings per share: Primary earnings per share ....... $0.65 $0.51 Fully diluted earnings per share . $0.65 $0.51 Shares used in calculation of: Primary earnings per share ....... 278.1 283.6 Fully diluted earnings per share . 278.1 283.6 See accompanying notes. PAGE 4 AMGEN INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except per share data) (Unaudited) March 31, December 31, 1997 1996 --------- ----------- ASSETS Current assets: Cash and cash equivalents ............... $ 264.8 $ 169.3 Marketable securities ................... 779.5 907.7 Trade receivables, net .................. 206.5 225.4 Inventories ............................. 100.4 97.4 Other current assets .................... 86.0 102.8 -------- -------- Total current assets................. 1,437.2 1,502.6 Property, plant and equipment at cost, net 981.6 910.5 Investments in affiliated companies....... 113.0 109.6 Other assets.............................. 241.3 242.9 -------- -------- $2,773.1 $2,765.6 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................ $ 76.6 $ 75.0 Accrued liabilities ..................... 422.3 449.7 Current portion of long-term debt ....... 40.0 118.2 -------- -------- Total current liabilities............ 538.9 642.9 Long-term debt............................ 59.0 59.0 Put warrants.............................. 157.4 157.4 Commitments and contingencies Stockholders' equity: Common stock, and additional paid-in capital; $.0001 par value; 750 shares authorized; outstanding - 264.9 shares in 1997 and 264.7 shares in 1996................................. 1,059.8 1,026.9 Retained earnings ....................... 958.0 879.4 -------- -------- Total stockholders' equity........... 2,017.8 1,906.3 -------- -------- $2,773.1 $2,765.6 ======== ======== See accompanying notes. PAGE 5 AMGEN INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended March 31, 1997 1996 ------- ------- Cash flows from operating activities: Net income ............................... $180.3 $143.6 Depreciation and amortization ............ 36.4 27.9 Loss of affiliates, net .................. 8.5 13.3 Cash provided by (used in): Trade receivables, net .................. 18.9 (13.7) Inventories ............................. (3.0) (1.4) Other current assets .................... 16.8 1.0 Accounts payable ........................ 1.6 (22.4) Accrued liabilities ..................... (27.4) (55.0) ------ ------ Net cash provided by operating activities .......................... 232.1 93.3 ------ ------ Cash flows from investing activities: Purchases of property, plant and equipment .............................. (102.5) (42.5) Proceeds from maturities of marketable securities ............................. 149.3 84.9 Proceeds from sales of marketable securities ............................. 184.6 383.5 Purchases of marketable securities ....... (205.7) (358.1) Increase in investments in affiliated companies .............................. - (2.0) Increase in other assets ................. (3.4) (17.9) ------ ------ Net cash provided by investing activities ......................... 22.3 47.9 ------ ------ See accompanying notes. (Continued on next page) PAGE 6 AMGEN INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In millions) (Unaudited) Three Months Ended March 31, 1997 1996 ------- ------- Cash flows from financing activities: Decrease in commercial paper ............. $ - $(69.7) Repayment of long-term debt .............. (78.2) - Net proceeds from issuance of common stock upon the exercise of stock options ................................ 24.3 33.4 Tax benefits related to stock options .... 8.6 8.6 Repurchases of common stock .............. (101.7) (104.5) Other .................................... (11.9) (13.3) ------ ------ Net cash used in financing activities .. (158.9) (145.5) ------ ------ Increase (decrease) in cash and cash equivalents ............................. 95.5 (4.3) Cash and cash equivalents at beginning of period .................................. 169.3 66.7 ------ ------ Cash and cash equivalents at end of period $264.8 $ 62.4 ====== ====== See accompanying notes. PAGE 7 AMGEN INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 1. Summary of significant accounting policies Business Amgen Inc. ("Amgen" or the "Company") is a global biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology. Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as well as affiliated companies for which the Company has a controlling financial interest and exercises control over their operations ("majority controlled affiliates"). All material intercompany transactions and balances have been eliminated in consolidation. Investments in affiliated companies which are 50% or less owned and where the Company exercises significant influence over operations are accounted for using the equity method. All other equity investments are accounted for under the cost method. The caption "Loss of affiliates, net" includes Amgen's equity in the operating results of affiliated companies and the minority interest others hold in the operating results of Amgen's majority controlled affiliates. Inventories Inventories are stated at the lower of cost or market. Cost is determined in a manner which approximates the first-in, first-out (FIFO) method. Inventories are shown net of applicable reserves and allowances. Inventories consist of the following (in millions): March 31, December 31, 1997 1996 ------ ------- Raw materials ...... $ 14.2 $15.9 Work in process .... 54.7 56.2 Finished goods ..... 31.5 25.3 ------ ----- $100.4 $97.4 ====== ===== Product sales Product sales consist of two products, EPOGEN(R) (Epoetin alfa) and NEUPOGEN(R) (Filgrastim). Quarterly NEUPOGEN(R) sales volume in the United States is influenced by a number of factors including underlying demand and PAGE 8 wholesaler inventory management practices. Wholesaler inventory reductions tend to reduce domestic NEUPOGEN(R) sales in the first quarter each year. In addition, the discretionary aspects of some cancer chemotherapy administration has had a slight seasonal effect on NEUPOGEN(R) sales. The Company has the exclusive right to sell Epoetin alfa for dialysis, diagnostics and all non-human uses in the United States. The Company sells Epoetin alfa under the brand name EPOGEN(R). Amgen has granted to Ortho Pharmaceutical Corporation, a subsidiary of Johnson & Johnson ("Johnson & Johnson"), a license relating to Epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. Pursuant to this license, Amgen does not recognize product sales it makes into the exclusive market of Johnson & Johnson and does recognize the product sales made by Johnson & Johnson into Amgen's exclusive market. These sales amounts, and adjustments thereto, are derived from third-party data on shipments to end users and their usage (see Note 4, "Contingencies - Johnson & Johnson arbitrations"). Income taxes Income taxes are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109 (Note 3). Stock option and purchase plans The Company's stock options and purchase plans are accounted for under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Earnings per share Earnings per share are computed in accordance with the treasury stock method. Primary and fully diluted earnings per share are based upon the weighted average number of common shares and dilutive common stock equivalents during the period in which they were outstanding. Common stock equivalents are outstanding options under the Company's stock option plans. Put warrants on the Company's common stock may also be dilutive under the reverse treasury stock method. In February 1997, SFAS No. 128, "Earnings Per Share" was issued and is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, primary and fully diluted earnings per share will be replaced with basic and diluted earnings per share. Basic earnings per share excludes the dilutive effect of stock options and will therefore be higher than primary earnings per share. Basic earnings per share for the three months ended March 31, 1997 and 1996 was $.68 and $.54, respectively. Diluted earnings per share under the new standard is expected to be essentially the same as primary earnings per share amounts calculated under principles currently used. PAGE 9 Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Basis of presentation The financial information for the three months ended March 31, 1997 and 1996 is unaudited but includes all adjustments (consisting only of normal recurring accruals) which the Company considers necessary for a fair presentation of the results of operations for these periods. Interim results are not necessarily indicative of results for the full fiscal year. 2. Debt During the three months ended March 31, 1997, the Company paid off $78.2 million of maturing debt consisting of $28.2 million of promissory notes and $50 million of debt securities. Long-term debt consists of the following (in millions): March 31, December 31, 1997 1996 -------- -------- Promissory notes .......... $ 40.0 $ 68.2 Debt securities ........... 59.0 109.0 ------ ------ 99.0 177.2 Less current portion ...... (40.0) (118.2) ------ ------ $ 59.0 $ 59.0 ====== ====== The Company has registered $213 million of unsecured debt securities of which $59 million were outstanding and $100 million were available for issuance at March 31, 1997. The debt securities outstanding at March 31, 1997 bear interest at fixed rates averaging 5.8% and mature in approximately one to six years. In April 1997, the Company issued $100 million of debt securities under its shelf registration which bear interest at a fixed rate of 8.1% and mature on April 1, 2097. These securities may be redeemed in whole or in part at the Company's option at any time for a redemption price equal to the greater of the principal amount to be redeemed or the sum of the present values of the principal and remaining interest payments discounted at a determined rate plus, in each case, accrued interest. These securities place limitations on liens and sale/leaseback transactions. PAGE 10 As of March 31, 1997, $150 million was available under the Company's line of credit for borrowing and to support the Company's commercial paper program. No borrowings on this line of credit were outstanding at March 31, 1997. 3. Income taxes The provision for income taxes consists of the following (in millions): Three Months Ended March 31, 1997 1996 ------ ------ Federal(including U.S. possessions) . $65.1 $57.3 State ............................... 5.0 6.1 ----- ----- $70.1 $63.4 ===== ===== The decrease in the effective tax rate in the current year is the result of a favorable ruling received in the third quarter of 1996 from the Puerto Rican government with respect to tollgate taxes applicable to earnings in Puerto Rico. 4. Contingencies Johnson & Johnson arbitrations In September 1985, the Company granted Johnson & Johnson a license relating to certain patented technology and know-how of the Company to sell a genetically engineered form of recombinant human erythropoietin, called Epoetin alfa, throughout the United States for all human uses except dialysis and diagnostics. Johnson & Johnson sells Epoetin alfa under the brand name PROCRIT(R). A number of disputes have arisen between Amgen and Johnson & Johnson as to their respective rights and obligations under the various agreements between them, including the agreement granting the license (the "License Agreement"). These disputes have been the subject of arbitration proceedings before Judicial Arbitration and Mediation Services, Inc. in Chicago, Illinois commencing in January 1989. A dispute that has not yet been resolved and is the subject of the current arbitration proceeding relates to the audit methodology currently employed by the Company for Epoetin alfa sales. The Company and Johnson & Johnson are required to compensate each other for Epoetin alfa sales which either party makes into the other party's exclusive market. The Company has established and is employing an audit methodology to assign the proceeds of sales of EPOGEN and PROCRIT in Amgen's and Johnson & Johnson's respective exclusive markets. Based upon this audit methodology, the Company is seeking payment of approximately $12.6 million (excluding interest) from Johnson & Johnson for the period 1991 through 1994. Johnson & PAGE 11 Johnson has disputed this methodology and is proposing an alternative methodology for adoption by the arbitrator pursuant to which it is seeking payment of approximately $423 million (including interest through December 1996) for the period 1989 through 1994. If as a result of the arbitration proceeding, a methodology different from that currently employed by the Company is instituted to assign the proceeds of sales between the parties, it may yield results that are different from the results of the audit methodology currently employed by the Company. As a result of the arbitration, it is possible that the Company would recognize a different level of EPOGEN sales than is currently being recognized. As a result of the arbitration, the Company may be required to pay additional compensation to Johnson & Johnson for sales during prior periods, or Johnson & Johnson may be required to pay compensation to the Company for such prior period sales. While it is impossible to predict accurately or determine the outcome of these proceedings, based primarily upon the merits of its claims and based upon certain liabilities established due to the inherent uncertainty of any arbitrated result, the Company believes that the outcome of these proceedings will not have a material adverse effect on its financial statements. A trial commenced in March 1996, regarding the audit methodologies and compensation for sales by Johnson & Johnson into Amgen's exclusive market and sales by Amgen into Johnson & Johnson's exclusive market. In December 1996, testimony in the arbitration ended. Final argument before the arbitrator on the parties' respective audit methodologies and claims is scheduled for May 19, 1997, whereafter the matter will be fully briefed and submitted to the arbitrator for decision. The Company has filed a demand in the arbitration to terminate Johnson & Johnson's rights under the License Agreement and to recover damages for breach of the License Agreement. A hearing on this demand will be scheduled following the adjudication of the audit methodologies for Epoetin alfa sales. On October 2, 1995, Johnson & Johnson filed a demand for a separate arbitration proceeding against the Company before the American Arbitration Association ("AAA") in Chicago, Illinois. Johnson & Johnson alleges in this demand that the Company has breached the License Agreement. The demand also includes allegations of various antitrust violations. In this demand, Johnson & Johnson seeks an injunction, declaratory relief, unspecified compensatory damages, punitive damages and costs. On October 27, 1995, the Company filed a complaint in the Circuit Court of Cook County, Illinois, which is now pending in the United States District Court for the Northern District of Illinois, seeking an order compelling Johnson & Johnson to arbitrate the Company's claim for termination before the arbitrator and any related counterclaims asserted in Johnson & Johnson's October 2, 1995 arbitration demand filed with the AAA. The Company is unable to predict at this time the outcome of the demand for termination or when it will be resolved. The Company has filed a motion to stay the AAA arbitration pending the outcome of the existing arbitration proceedings before Judicial Arbitration and Mediation Services, Inc. discussed above. The Company has also filed an answer and counterclaim denying that AAA has jurisdiction to hear PAGE 12 or decide the claims stated in the demand, denying the allegations in the demand and counter claiming for certain unpaid invoices. Synergen ANTRIL(TM) litigation Lawsuits have been filed against the Company's wholly-owned subsidiary, Amgen Boulder Inc. (formerly Synergen, Inc.), alleging misrepresentations in connection with Synergen's research and development of ANTRIL(TM) for the treatment of sepsis. One suit, filed by a limited partner of the partnership with which Amgen Boulder Inc. is affiliated, has been certified as a class action. That suit seeks rescission of certain payments made by the limited partners to the partnership (or unspecified damages not less than $52 million) and treble damages based on a variety of allegations relating to state and federal law claims. The plaintiffs in that suit also have filed a second amended complaint alleging violations of federal securities laws. In August and September 1996, the parties filed cross-motions for summary judgement. The Court heard argument on November 1, 1996. Since then, the parties' representatives have reached a tentative settlement agreement which is subject to final approval by the Court and the approval of the limited partners of the partnership. Under its terms, the plaintiffs, who include present limited partners of the partnership, will receive $14.5 million in exchange for the transfer of ownership of their units; the suit will be dismissed with prejudice and the parties will exchange mutual releases. In a separate matter, two broker dealers who acted as market makers in Synergen, Inc. options have also filed a suit claiming in excess of $3.2 million in trading losses. FoxMeyer Health Corporation On January 10, 1997, FoxMeyer Health Corporation ("FMHC") filed suit (the "FoxMeyer Lawsuit") alleging that defendant McKesson Corporation defrauded FMHC, misused confidential information received from FMHC about subsidiaries of FMHC (FoxMeyer Corporation and FoxMeyer Drug Corporation, collectively the "FoxMeyer Subsidiaries"), and attempted to monopolize the market for pharmaceutical and health care product distribution by attempting to injure or destroy the FoxMeyer Subsidiaries. The Company is named as one of twelve "Manufacturer Defendants" alleged to have conspired with McKesson Corporation in doing, among other things, the above and (i) inducing FMHC to refrain from seeking other suitable purchasers for the FoxMeyer Subsidiaries and (ii) causing FMHC to believe that McKesson Corporation was serious about purchasing FMHC's assets at fair value, when, in fact, McKesson Corporation was not. The Manufacturer Defendants and McKesson Corporation are also alleged to have intentionally and tortiously interfered with a number of business expectancies and opportunities. The complaint seeks from the Manufacturer Defendants and McKesson Corporation compensatory damages of at least $400 million and punitive damages in an unspecified amount, as well as FMHC's costs and attorney's fees. On January 31, 1997, the Company filed an answer denying FMHC's allegations. On February 4, 1997, a notice of removal was filed in the Federal District Court for Dallas, Texas (the "District Court"), which was referred by the District Court to the Federal Bankruptcy Court in PAGE 13 Dallas, Texas. Subsequently, on February 7, 1997, a motion to transfer venue was filed in the Federal Bankruptcy Court in Dallas, Texas, requesting that this matter be transferred to the Federal Bankruptcy Court in Delaware, where the FoxMeyer Subsidiaries' Chapter XI bankruptcy action is pending. The Company is a creditor in such bankruptcy proceeding. On March 18, 1997, the Manufacturer Defendants filed in the Delaware bankruptcy court a motion to intervene in the creditors committee (the "Chapter XI Committee") action that asserted that the Delaware bankruptcy court should enjoin the FoxMeyer Lawsuit. Also on March 18, 1997, the Delaware bankruptcy court converted the FoxMeyer Subsidiaries' Chapter XI bankruptcy action to a liquidation proceeding under Chapter VII. The order converting the FoxMeyer Subsidiaries' bankruptcy to a Chapter VII proceeding also stayed all adversary proceedings and other proceedings filed in the bankruptcy until a permanent trustee is elected. As such, no substantive resolution of the motions filed in the Delaware bankruptcy court is expected until after election of the permanent trustee. Similarly, on April 1, 1997, the Delaware bankruptcy court ordered that the litigants in the FoxMeyer Lawsuit be stayed from any further litigation until election of the permanent trustee. Accordingly, no substantial resolution of any motions currently pending in the FoxMeyer Litigation is expected until after election of the permanent trustee. False Claims Act matter Amgen has been advised that it and certain purchasers of its products have been named as defendants in a civil lawsuit initiated by a former employee of Amgen in the United States District Court for the Eastern District of Pennsylvania. This suit was filed under the qui tam provisions of the Federal False Claims Act (the "Act") which permit an individual to bring suit in the name of the United States and share in any recovery. The suit alleges, among other things, that Amgen individually and in conspiracy with some of its customers violated the Act as a result of certain of its sales and reporting practices relating to its products. Under the law, the government must investigate the allegations and determine whether it wishes to intervene and take responsibility for the lawsuit. The lawsuit will remain under seal until the government completes its investigation and determines whether to intervene. However, permission from the Court has been obtained by Amgen to make the disclosures contained herein. The Complaint seeks an order requiring Amgen to cease and desist from such allegedly improper practices, as well as treble damages in an unspecified amount plus a civil penalty of not less than $5,000 and not more than $10,000 for each alleged violation of the Act. If the government does not intervene, the plaintiff has the right to continue to pursue the claim on the government's behalf. Amgen is fully cooperating with the government's investigation and is engaged in ongoing discussions with it regarding the allegations. Amgen has advised the government that it disputes and will vigorously contest the allegations in the Complaint. Although it is too early in this action for Amgen to fully assess this matter or reliably predict its outcome, an unfavorable result in this matter could have a material adverse effect on the Company's results of operations in that period. PAGE 14 While it is not possible to predict accurately or determine the eventual outcome of the above described legal matters or various other legal proceedings (including patent disputes) involving Amgen, except with respect to the False Claims Act matter, the Company believes that the outcome of these proceedings will not have a material adverse effect on its financial statements. 5. Stockholders' equity During the three months ended March 31, 1997, the Company repurchased 1.7 million shares of its common stock at a total cost of $101.7 million under its common stock repurchase program. The Board of Directors has authorized the Company to repurchase up to $450 million of shares during 1997. Stock repurchased under the program is retired. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash provided by operating activities has been and is expected to continue to be the Company's primary source of funds. During the three months ended March 31, 1997, operations provided $232.1 million of cash compared with $93.3 million during the same period last year. The Company had cash, cash equivalents and marketable securities of $1,044.3 million at March 31, 1997, compared with $1,077 million at December 31, 1996. Capital expenditures totaled $102.5 million for the three months ended March 31, 1997, compared with $42.5 million for the same period a year ago. Over the next few years, the Company expects to spend approximately $350 million per year on capital projects and equipment to expand the Company's global operations. The Company receives cash from the exercise of employee stock options. During the three months ended March 31, 1997, stock options and their related tax benefits provided $32.9 million of cash compared with $42 million for the same period last year. Proceeds from the exercise of stock options and their related tax benefits will vary from period to period based upon, among other factors, fluctuations in the market value of the Company's stock relative to the exercise price of such options. The Company has a stock repurchase program to offset the dilutive effect of its employee benefit stock option and stock purchase plans. During the three months ended March 31, 1997, the Company purchased 1.7 million shares of its common stock at a cost of $101.7 million compared with 1.8 million shares purchased at a cost of $104.5 million during the same period last year. The Company expects to repurchase up to $450 million of its stock under the program in 1997. PAGE 15 To provide for financial flexibility and increased liquidity, the Company has established several sources of debt financing. The Company had a shelf registration under which it could issue up to $213 million of debt securities. During the three months ended March 31, 1997, $50 million of maturing debt securities under this shelf registration were repaid. The $59 million of debt securities outstanding at March 31, 1997 mature in approximately one to six years. In April 1997, the Company issued the remaining $100 million of debt securities under the shelf registration which bear interest at a fixed rate of 8.1% and mature on April 1, 2097. These debt securities were issued to refinance a portion of debt that has matured or will mature in 1997 (see Note 2 to the Condensed Consolidated Financial Statements). The Company also repaid $28.2 million of promissory notes during the three months ended March 31, 1997. The Company has a commercial paper program which provides for short-term borrowings up to an aggregate face amount of $200 million. As of March 31, 1997, the Company had no outstanding commercial paper. The Company also has a $150 million revolving line of credit. No borrowings on this line of credit were outstanding at March 31, 1997. The primary objectives for the Company's investment portfolio are liquidity and safety of principal. Investments are made to achieve the highest rate of return to the Company, consistent with these two objectives. The Company's investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company invests its excess cash in securities with varying maturities to meet projected cash needs. The Company believes that existing funds, cash generated from operations and existing sources of debt financing are adequate to satisfy its working capital and capital expenditure requirements for the foreseeable future, as well as to support its stock repurchase program. However, the Company may raise additional capital from time to time to take advantage of favorable conditions in the markets or in connection with the Company's corporate development activities. Results of Operations Product sales Product sales increased $59.1 million or 12% for the three months ended March 31, 1997, compared with the same period last year. NEUPOGEN(R) (Filgrastim) Worldwide NEUPOGEN(R) sales were $244.4 million for the three months ended March 31, 1997, an increase of $11.6 million or 5% over the same period last year. This increase is primarily due to demand growth in domestic and, to a lesser extent, international markets. Unfavorable foreign currency effects reduced worldwide NEUPOGEN(R) sales growth by approximately three percentage points. In addition, PAGE 16 tight European governmental budgets have reduced the sales growth rate. Quarterly NEUPOGEN(R) sales volume in the United States is influenced by a number of factors including underlying demand and wholesaler inventory management practices. Wholesaler inventory reductions tend to reduce domestic NEUPOGEN(R) sales in the first quarter each year. In addition, the discretionary aspects of some cancer chemotherapy administration has had a slight seasonal effect on NEUPOGEN(R) sales. Cost containment pressures in the health care marketplace have contributed to the slowing of growth in domestic NEUPOGEN(R) usage over the past several years. These pressures are expected to continue to influence such growth for the foreseeable future. The growth of the colony stimulating factor ("CSF") market in the EU in which NEUPOGEN (R) competes has slowed, and is expected to continue to slow, principally due to governmental budget issues and cost controls in EU countries. Despite these market factors, as well as competition from another granulocyte CSF product, the Company experienced slightly positive NEUPOGEN(R) sales growth, measured in local currencies, in the EU in 1996 and in the current period. Although the Company's CSF market share in the EU has remained relatively constant over the last several quarters, the Company does not expect the competitive intensity to subside in the near future. EPOGEN(R) (Epoetin alfa) EPOGEN(R) sales were $291.6 million for the three months ended March 31, 1997, an increase of $47.5 million or 19% over the same period last year. This increase is primarily due to a continued increase in the U.S. dialysis patient population and the administration of higher doses. Cost of sales Cost of sales as a percentage of product sales was 13.4% and 14.0% for the three months ended March 31, 1997 and 1996, respectively. In 1997, cost of sales as a percentage of product sales is expected to range from 13%-14% reflecting continuing efficiencies of the Puerto Rican operations. Research and development During the three months ended March 31, 1997, research and development expenses increased $17.1 million or 13% compared with the same period last year. This increase is primarily due to staff- related expenses for clinical and preclinical activities necessary to support ongoing product development activities. In 1997, annual research and development expenses are expected to increase at a rate exceeding the Company's product sales growth rate. Increases are planned for internal efforts on development of product candidates, for discovery, and for licensing efforts. PAGE 17 Marketing and selling/General and administrative Marketing and selling expenses increased $0.5 million or 1% during the three months ended March 31, 1997 compared with the same period last year. This increase was relatively small because higher staff-related costs and higher outside marketing expenses were substantially offset by lower European marketing expenses resulting from the favorable effects of foreign currency exchange rates and lower expenses related to the Johnson & Johnson arbitration. General and administrative expenses increased $5.2 million or 13% during the three months ended March 31, 1997 compared with the same period last year. This increase is primarily due to higher legal and staff-related expenses. In 1997, marketing and selling expenses combined with general and administrative expenses are expected to have an aggregate annual growth rate lower than the anticipated annual product sales growth rate due in part to the favorable impact of foreign currency exchange rates on European expenses and reduced expenses related to the Johnson & Johnson arbitration. Interest and other income Interest and other income decreased $3.1 million or 16% during the three months ended March 31, 1997 compared with the same period last year. This decrease is primarily due to capital gains realized in the prior year period which did not reoccur in the current year period. Interest and other income is expected to fluctuate from period to period primarily due to changes in cash balances and interest rates. Income taxes The Company's effective tax rate for the three months ended March 31, 1997 was 28.0% compared with 30.6% for the same period last year. The decrease in the tax rate is the result of a favorable ruling received in the third quarter of 1996 from the Puerto Rican government with respect to tollgate taxes applicable to earnings in Puerto Rico. Foreign currency transactions The Company has a program to manage certain portions of its exposure to fluctuations in foreign currency exchange rates arising from international operations. The Company generally hedges the receivables and payables with foreign currency forward contracts, which typically mature within six months. The Company uses foreign currency option and forward contracts which generally expire within 12 months to hedge certain anticipated future sales and expenses. At March 31, 1997, outstanding foreign currency option and forward contracts totaled $34.6 million and $107.2 million, respectively. PAGE 18 Financial Outlook Worldwide NEUPOGEN(R) (Filgrastim) sales for 1997 are expected to grow at a rate lower than the 1996 growth rate. Future NEUPOGEN(R) sales increases are dependent primarily upon further penetration of existing markets, the timing and nature of additional indications for which the product may be approved and the effects of competitive products. Although not approved or promoted for use in the United States, the Company believes that approximately 15%-20% of its domestic NEUPOGEN(R) sales are from off-label use as a supportive therapy for various AIDS-related treatments. Changes in AIDS therapies, including therapies that may be less myelosuppressive, may affect such sales. NEUPOGEN(R) usage is expected to continue to be affected by cost containment pressures on health care providers worldwide. In addition, international NEUPOGEN(R) sales will continue to be subject to changes in foreign currency exchange rates. EPOGEN(R) (Epoetin alfa) sales for 1997 are expected to remain strong but grow at a rate lower than the 1996 growth rate. The Company anticipates that increases in both the U.S. dialysis patient population and dosing will continue to drive EPOGEN(R) sales. The Company believes that as more dialysis patients' hematocrits reach target levels, the contribution of dosing to sales increases will diminish. Patients receiving treatment for end stage renal disease are covered primarily under medical programs provided by the federal government. Therefore, EPOGEN(R) sales may also be affected by future changes in reimbursement rates or the basis for reimbursement by the federal government. On February 12, 1997, the Health Care Finance Administration ("HCFA") issued an Electronic Program Memorandum to their Fiscal Intermediaries and Carriers (as defined by HCFA) regarding the institution of a ninety day rolling hematocrit edit when hematocrits exceed 36%. The new method of calculation is referred to as the hematocrit measurement audit (HMA). The HMA allows reimbursement for patients who temporarily exceed 36% through the averaging of submitted claims for the previous 90 days. The HMA eliminates reimbursement for the last submitted claim if an average hematocrit of 36.5% is exceeded for the previous 90 days and also eliminates medical justification for hematocrits being kept over 36%. Fiscal Intermediaries and Carriers must implement this change by July 1, 1997. The Company anticipates that total product sales and earnings will grow at double digit rates in 1997, but these growth rates are expected to be lower than 1996 growth rates. Estimates of future product sales and earnings, however, are necessarily speculative in nature and are difficult to predict with accuracy. Except for the historical information contained herein, the matters discussed herein are by their nature forward-looking. For reasons stated, or for various unanticipated reasons, actual results may differ materially. Amgen operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company's control. Future operating results and matters which may affect the Company's stock price may be affected by a number of factors, certain of which are discussed elsewhere herein and are discussed in the sections appearing under the heading "Management's PAGE 19 Discussion and Analysis of Financial Condition and Results of Operations--Factors That May Affect Future Results" in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, which sections are incorporated herein by reference and filed as an exhibit hereto. Legal Matters The Company is engaged in arbitration proceedings with one of its licensees and various other legal proceedings. For a discussion of these matters, see Note 4 to the Condensed Consolidated Financial Statements. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is engaged in arbitration proceedings with one of its licensees. For a complete discussion of these matters see Note 4 to the Condensed Consolidated Financial Statements - "Contingencies - Johnson & Johnson arbitrations". Other legal proceedings are also reported in Note 4 to the Condensed Consolidated Financial Statements and in the Company's Form 10-K for the year ended December 31, 1996, with material developments since that report described below. While it is not possible to predict accurately or to determine the eventual outcome of these matters, except with respect to the False Claims Act matter, the Company believes that the outcome of these legal proceedings will not have a material adverse effect on the financial statements of the Company. Transkaryotic Therapies and Hoechst litigation On April 15, 1997, Amgen filed suit in the United States District Court in Boston Massachusetts against Transkaryotic Therapies Inc. and Hoechst Marion Roussel alleging infringement of several U.S. patents owned by Amgen that claim an erythropoietin product and processes for making erythropoietin. The suit seeks an injunction preventing the defendants from making, importing, using or selling erythropoietin in the U.S. Genentech litigation On October 16, 1996, Genentech, Inc. filed suit in the United States District Court for the Northern District of California seeking an unspecified amount of compensatory damages, treble damages and injunctive relief on its U.S. Patents 4,704,362, 5,221,619 and 4,342,832 (the "`362, `619 and `832 Patents"), relating to vectors for expressing cloned genes and the methods for such expression. Genentech, Inc. alleges that Amgen has infringed its patents by manufacturing and selling NEUPOGEN(R). On December 2, 1996, Amgen was served with this lawsuit. On January 21, 1997, the Company answered the complaint and asserted counterclaims relating to invalidity and non-infringement of the patents-in-suit. On February 10, 1997, Genentech, Inc. served Amgen with a reply to the PAGE 20 counterclaim and an additional counterclaim asserting U.S. Patent 5,583,013 (the "`013 Patent"), issued December 10, 1996, seeking relief similar to that sought for the `362, `619 and `832 Patents. On March 31, 1997, Amgen answered this pleading and asserted counterclaims relating to invalidity and non-infringement of the `013 Patent. FoxMeyer Health Corporation On January 10, 1997, FoxMeyer Health Corporation ("FMHC") filed suit (the "FoxMeyer Lawsuit") in the District Court of Dallas County, Dallas, Texas, alleging that defendant McKesson Corporation defrauded FMHC, misused confidential information received from FMHC about subsidiaries of FMHC (FoxMeyer Corporation and FoxMeyer Drug Corporation, collectively the "FoxMeyer Subsidiaries"), and attempted to monopolize the market for pharmaceutical and health care product distribution by attempting to injure or destroy the FoxMeyer Subsidiaries. The Company is named as one of twelve "Manufacturer Defendants" alleged to have conspired with McKesson Corporation in doing, among other things, the above and (i) inducing FMHC to refrain from seeking other suitable purchasers for the FoxMeyer Subsidiaries and (ii) causing FMHC to believe that McKesson Corporation was serious about purchasing FMHC's assets at fair value, when, in fact, McKesson Corporation was not. The Manufacturer Defendants and McKesson Corporation are also alleged to have intentionally and tortiously interfered with a number of business expectancies and opportunities. The complaint seeks from the Manufacturer Defendants and McKesson Corporation compensatory damages of at least $400 million and punitive damages in an unspecified amount, as well as FMHC's costs and attorney's fees. On January 31, 1997, the Company filed an answer denying FMHC's allegations. On February 4, 1997, a notice of removal was filed in the Federal District Court for Dallas, Texas (the "District Court"), which was referred by the District Court to the Federal Bankruptcy Court in Dallas, Texas. Subsequently, on February 7, 1997, a motion to transfer venue was filed in the Federal Bankruptcy Court in Dallas, Texas, requesting that this matter be transferred to the Federal Bankruptcy Court in Delaware, where the FoxMeyer Subsidiaries' Chapter XI bankruptcy action is pending. The Company is a creditor in such bankruptcy proceeding. On March 18, 1997, the Manufacturer Defendants filed in the Delaware bankruptcy court a motion to intervene in the creditors committee (the "Chapter XI Committee") action that asserted that the Delaware bankruptcy court should enjoin the FoxMeyer Lawsuit. Also on March 18, 1997, the Delaware bankruptcy court converted the FoxMeyer Subsidiaries' Chapter XI bankruptcy action to a liquidation proceeding under Chapter VII. The order converting the FoxMeyer Subsidiaries' bankruptcy to a Chapter VII proceeding also stayed all adversary proceedings and other proceedings filed in the bankruptcy until a permanent trustee is elected. As such, no substantive resolution of the motions filed in the Delaware bankruptcy court is expected until after election of the permanent trustee. Similarly, on April 1, 1997, the Delaware bankruptcy court ordered that the litigants in the FoxMeyer Lawsuit be stayed from any further litigation until election of the permanent trustee. Accordingly, no substantial resolution of any motions currently pending in the PAGE 21 FoxMeyer Litigation is expected until after election of the permanent trustee. Consensus interferon litigation On December 3, 1996, Schering Corporation filed suit in the U.S. District Court for the District of Delaware against the Company alleging infringement of U.S. Patent No. 4,530,901 (the "`901 Patent") by the manufacture and use of the Company's consensus interferon product. The complaint seeks unspecified damages and injunctive relief. The Company filed a motion to dismiss (the "Motion to Dismiss") the action on January 24, 1997. On January 22, 1997, the Company filed an action for declaratory relief in the United States District Court for the Central District of California in Los Angeles naming Biogen Inc. and Schering Corporation as parties. The action seeks a declaration that the `901 Patent is not infringed by the Company's use of Infergen(R) and/or that the `901 Patent is invalid. By agreement between the parties, the Motion to Dismiss was withdrawn and a motion to transfer the case to California was filed on March 10, 1997. Item 5. Other Information The Company's 1998 Annual Meeting of Stockholders will be held on May 7, 1998, at 10:30 A.M., PDT, at the Regent Beverly Wilshire, 9500 Wilshire Boulevard, Los Angeles, California, 90212. Item 6. Exhibits and Reports on Form 8-K (a) Reference is made to the Index to Exhibits included herein. (b) Reports on Form 8-K The Company filed three Current Reports on Form 8-K each reporting events under Item 5 thereof during the three months ended March 31, 1997. The report filed on February 26, 1997 contains a press release reporting the Company's results of operations for the year ended December 31, 1996 and a discussion of various legal matters involving the Company. The report filed on February 28, 1997 contains information regarding the Company's new Stockholder Rights Plan and redemption of rights under the then existing rights plan. The report filed on March 14, 1997 contains a press release reporting the Company's clinical progress and new research programs and the first supplemental indenture to the indenture providing for issuance of the Company's debt securities. PAGE 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Amgen Inc. (Registrant) Date: 5/12/97 By:/s/ Robert S. Attiyeh ------------------ ------------------------------------ Robert S. Attiyeh Senior Vice President, Finance and Corporate Development, and Chief Financial Officer Date: 5/12/97 By:/s/ Larry A. May ------------------ ------------------------------------ Larry A. May Vice President, Corporate Controller and Chief Accounting Officer PAGE 23 AMGEN INC. INDEX TO EXHIBITS Exhibit No. Description *3.1 Restated Certificate of Incorporation as amended. 3.2 Amended and Restated Bylaws. (21) 4.1 Indenture dated January 1, 1992 between the Company and Citibank N.A., as trustee. (11) 4.2 Forms of Commercial Paper Master Note Certificates. (14) 4.3 First Supplement to Indenture, dated February 26, 1997 between the Company and Citibank N.A., as trustee. (24) 4.4 Officer's Certificate pursuant to Sections 2.1 and 2.3 of the Indenture, as supplemented, establishing a series of securities "8-1/8% Debentures due April 1, 2097." (26) 4.5 8-1/8% Debentures due April 1, 2097. (26) *4.6 Form of stock certificate for the common stock, par value $.0001 of the Company. 10.1 Company's Amended and Restated 1991 Equity Incentive Plan. (25) 10.2 Company's Amended and Restated 1984 Stock Option Plan. (22) 10.3 Shareholder's Agreement of Kirin-Amgen, Inc., dated May 11, 1984, between the Company and Kirin Brewery Company, Limited (with certain confidential information deleted therefrom). (1) 10.4 Amendment Nos. 1, 2, and 3, dated March 19, 1985, July 29, 1985 and December 19, 1985, respectively, to the Shareholder's Agreement of Kirin-Amgen, Inc., dated May 11, 1984 (with certain confidential information deleted therefrom). (3) 10.5 Product License Agreement, dated September 30, 1985, and Technology License Agreement, dated, September 30, 1985 between the Company and Ortho Pharmaceutical Corporation (with certain confidential information deleted therefrom). (2) 10.6 Product License Agreement, dated September 30, 1985, and Technology License Agreement, dated September 30, 1985 between Kirin-Amgen, Inc. and Ortho Pharmaceutical Corporation (with certain confidential information deleted therefrom). (3) 10.7 Company's Amended and Restated Employee Stock Purchase Plan. (22) 10.8 Research, Development Technology Disclosure and License Agreement PPO, dated January 20, 1986, by and between the Company and Kirin Brewery Co., Ltd. (4) 10.9 Amendment Nos. 4 and 5, dated October 16, 1986 (effective July 1, 1986) and December 6, 1986 (effective July 1, 1986), respectively, to the Shareholders Agreement of Kirin-Amgen, Inc. dated May 11, 1984 (with certain confidential information deleted therefrom). (5) PAGE 24 10.10 Assignment and License Agreement, dated October 16, 1986, between the Company and Kirin-Amgen, Inc. (with certain confidential information deleted therefrom). (5) 10.11 G-CSF European License Agreement, dated December 30, 1986, between Kirin-Amgen, Inc. and the Company (with certain confidential information deleted therefrom). (5) 10.12 Research and Development Technology Disclosure and License Agreement: GM-CSF, dated March 31, 1987, between Kirin Brewery Company, Limited and the Company (with certain confidential information deleted therefrom). (5) 10.13 Company's Amended and Restated 1987 Directors' Stock Option Plan. (25) 10.14 Company's Amended and Restated 1988 Stock Option Plan. (22) 10.15 Company's Amended and Restated Retirement and Savings Plan. (22) 10.16 Amendment, dated June 30, 1988, to Research, Development, Technology Disclosure and License Agreement: GM-CSF dated March 31, 1987, between Kirin Brewery Company, Limited and the Company. (6) 10.17 Agreement on G-CSF in the EU, dated September 26, 1988, between Amgen Inc. and F. Hoffmann-La Roche & Co. Limited Company (with certain confidential information deleted therefrom). (8) 10.18 Supplementary Agreement to Agreement dated January 4, 1989 to Agreement on G-CSF in the EU, dated September 26, 1988, between the Company and F. Hoffmann-La Roche & Co. Limited Company, (with certain confidential information deleted therefrom). (8) 10.19 Agreement on G-CSF in Certain European Countries, dated January 1, 1989, between Amgen Inc. and F. Hoffmann-La Roche & Co. Limited Company (with certain confidential information deleted therefrom). (8) 10.20 Rights Agreement, dated January 24, 1989, between Amgen Inc. and American Stock Transfer and Trust Company, Rights Agent. (7) 10.21 First Amendment to Rights Agreement, dated January 22, 1991, between Amgen Inc. and American Stock Transfer and Trust Company, Rights Agent. (9) 10.22 Second Amendment to Rights Agreement, dated April 2, 1991, between Amgen Inc. and American Stock Transfer and Trust Company, Rights Agent. (10) 10.23 Agency Agreement, dated November 21, 1991, between Amgen Manufacturing, Inc. and Citicorp Financial Services Corporation. (12) 10.24 Agency Agreement, dated May 21, 1992, between Amgen Manufacturing, Inc. and Citicorp Financial Services Corporation. (12) 10.25 Guaranty, dated July 29, 1992, by the Company in favor of Merck Sharp & Dohme Quimica de Puerto Rico, Inc. (13) 10.26 936 Promissory Note No. 01, dated December 11, 1991, issued by Amgen Manufacturing, Inc. (12) 10.27 936 Promissory Note No. 02, dated December 11, 1991, issued by Amgen Manufacturing, Inc. (12) 10.28 936 Promissory Note No. 001, dated July 29, 1992, issued by Amgen Manufacturing, Inc. (12) PAGE 25 10.29 936 Promissory Note No. 002, dated July 29, 1992, issued by Amgen Manufacturing, Inc. (12) 10.30 Guaranty, dated November 21, 1991, by the Company in favor of Citicorp Financial Services Corporation. (12) 10.31 Partnership Purchase Agreement, dated March 12, 1993, between the Company, Amgen Clinical Partners, L.P., Amgen Development Corporation, the Class A limited partners and the Class B limited partner. (13) 10.32 Amgen Supplemental Retirement Plan dated June 1, 1993. (15) 10.33 Promissory Note of Mr. Kevin W. Sharer, dated June 4, 1993. (15) 10.34 Promissory Note of Mr. Larry A. May, dated February 24, 1993. (16) 10.35 Amgen Performance Based Management Incentive Plan. (25) 10.36 Agreement and Plan of Merger, dated as of November 17, 1994, among Amgen Inc., Amgen Acquisition Subsidiary, Inc. and Synergen, Inc. (17) 10.37 Third Amendment to Rights Agreement, dated as of February 21, 1995, between Amgen Inc. and American Stock Transfer Trust and Trust Company (18) 10.38 Credit Agreement, dated as of June 23, 1995, among Amgen Inc., the Borrowing Subsidiaries named therein, the Banks named therein, Swiss Bank Corporation and ABN AMRO Bank N.V., as Issuing Banks, and Swiss Bank Corporation, as Administrative Agent. (19) 10.39 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995. (20) 10.40 Promissory Note of Mr. George A. Vandeman, dated December 15, 1995. (20) 10.41 Promissory Note of Mr. Stan Benson, dated March 19, 1996. (20) 10.42 Amendment No. 1 to the Company's Amended and Restated Retirement and Savings Plan. (22) 10.43 Amendment Number 5 to the Company's Amended and Restated Retirement and Savings Plan dated January 1, 1993. (25) 10.44 Amendment Number 2 to the Company's Amended and Restated Retirement and Savings Plan dated April 1, 1996. (25) 10.45 First Amendment to Credit Agreement, dated as of December 12, 1996, among Amgen Inc., the Borrowing Subsidiaries named therein, and Swiss Bank Corporation as Administrative Agent. (25) 10.46 Fourth Amendment to Rights Agreement, dated February 18, 1997 between Amgen Inc. and American Stock Transfer and Trust Company, Rights Agent. (23) 10.47 Preferred Share Rights Agreement, dated February 18, 1997, between Amgen Inc. and American Stock Transfer and Trust Company, Rights Agent. (23) 10.48 Consulting Agreement, dated November 15, 1996, between the Company and Daniel Vapnek. (25) 10.49 Agreement, dated May 30, 1995, between the Company and George A. Vandeman. (25) *11 Computation of per share earnings. *27 Financial Data Schedule. *99 Sections appearing under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Factors That May Affect Future Results" in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. ---------------- PAGE 26 * Filed herewith. (1) Filed as an exhibit to the Annual Report on Form 10-K for the year ended March 31, 1984 on June 26, 1984 and incorporated herein by reference. (2) Filed as an exhibit to Quarterly Report on Form 10-Q for the quarter ended September 30, 1985 on November 14, 1985 and incorporated herein by reference. (3) Filed as an exhibit to Quarterly Report on Form 10-Q for the quarter ended December 31, 1985 on February 3, 1986 and incorporated herein by reference. (4) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration Statement (Registration No. 33-3069) on March 11, 1986 and incorporated herein by reference. (5) Filed as an exhibit to the Form 10-K Annual Report for the year ended March 31, 1987 on May 18, 1987 and incorporated herein by reference. (6) Filed as an exhibit to Form 8 amending the Quarterly Report on Form 10-Q for the quarter ended June 30, 1988 on August 25, 1988 and incorporated herein by reference. (7) Filed as an exhibit to the Form 8-K Current Report dated January 24, 1989 and incorporated herein by reference. (8) Filed as an exhibit to the Annual Report on Form 10-K for the year ended March 31, 1989 on June 28, 1989 and incorporated herein by reference. (9) Filed as an exhibit to the Form 8-K Current Report dated January 22, 1991 and incorporated herein by reference. (10) Filed as an exhibit to the Form 8-K Current Report dated April 12, 1991 and incorporated herein by reference. (11) Filed as an exhibit to Form S-3 Registration Statement dated December 19, 1991 and incorporated herein by reference. (12) Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1992 on March 30, 1993 and incorporated herein by reference. (13) Filed as an exhibit to the Form 8-A dated March 31, 1993 and incorporated herein by reference. (14) Filed as an exhibit to the Form 10-Q for the quarter ended March 31, 1993 on May 17, 1993 and incorporated herein by reference. (15) Filed as an exhibit to the Form 10-Q for the quarter ended September 30, 1993 on November 12, 1993 and incorporated herein by reference. (16) Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1993 on March 25, 1994 and incorporated herein by reference. (17) Filed as an exhibit to the Form 8-K Current Report dated November 18, 1994 on December 2, 1994 and incorporated herein by reference. (18) Filed as an exhibit to the Form 8-K Current Report dated February 21, 1995 on March 7, 1995 and incorporated herein by reference. PAGE 27 (19) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1995 on August 11, 1995 and incorporated herein by reference. (20) Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1995 on March 29, 1996 and incorporated herein by reference. (21) Filed as an exhibit to the Form 10-Q for the quarter ended June 30, 1996 on August 12, 1996 and incorporated herein by reference. (22) Filed as an exhibit to the Form 10-Q for the quarter ended September 30, 1996 on November 5, 1996 and incorporated herein by reference. (23) Filed as an exhibit to the Form 8-K Current Report dated February 18, 1997 on February 28, 1997 and incorporated herein by reference. (24) Filed as an exhibit to the Form 8-K Current Report dated March 14, 1997 on March 14, 1997 and incorporated herein by reference. (25) Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1996 on March 24, 1997 and incorporated herein by reference. (26) Filed as an exhibit to the Form 8-K Current Report dated April 8, 1997 on April 8, 1997 and incorporated herein by reference. PAGE 28 EX-11 2 COMPUTATION OF EPS EXHIBIT 11 AMGEN INC. COMPUTATION OF PER SHARE EARNINGS PRIMARY COMPUTATION (In millions, except per share data) (Unaudited) Three Months Ended March 31, 1997 1996 ------ ------ Net income ................................. $180.3 $143.6 ====== ====== Applicable common and common stock equivalent shares: Weighted average shares of common stock outstanding during the period ........... 265.2 266.0 Incremental number of shares outstanding during the period resulting from the assumed exercises of stock options ...... 12.9 17.6 ------ ------ Weighted average shares of common stock and common stock equivalents outstanding during the period ................................. 278.1 283.6 ====== ====== Earnings per common share primary ........... $ .65 $ .51 ====== ====== EXHIBIT 11 AMGEN INC. COMPUTATION OF PER SHARE EARNINGS FULLY DILUTED COMPUTATION (In millions, except per share data) (Unaudited) Three Months Ended March 31, 1997 1996 ------ ------ Net income ................................. $180.3 $143.6 ====== ====== Applicable common and common stock equivalent shares: Weighted average shares of common stock outstanding during the period ........... 265.2 266.0 Incremental number of shares outstanding during the period resulting from the assumed exercises of stock options ...... 12.9 17.6 ------ ------ Weighted average shares of common stock and common stock equivalents outstanding during the period ................................. 278.1 283.6 ====== ====== Earnings per common share fully diluted ..... $ .65 $ .51 ====== ====== EX-3.1 3 RESTATED CERTIFICATE OF INCORPORATION AS AMENDED EXHIBIT 3.1 CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of AMGEN INC. (Pursuant to Section 151 of the Delaware General Corporation Law) Amgen Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on February 18, 1997. RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $.0001 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows: Series A Junior Participating Preferred Stock: Section 1. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 750,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. Section 2. Dividends and Distributions. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.0001 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share- by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision, combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. Section 9. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock, except to the extent that any such other series specifically provides that it shall rank on a parity with or junior to the Series A Preferred Stock. Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Chairman of the Board and attested by its Secretary this 9th day of April, 1997. /s/ Gordon M. Binder --------------------- Chairman of the Board Gordon M. Binder Attest: /s/ George A. Vandeman ---------------------- Secretary George A. Vandeman CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF AMGEN INC. AMGEN INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify: FIRST: That a resolution was duly adopted by the Board of Directors of the Corporation setting forth a proposed amendment to the Restated Certificate of Incorporation of the Corporation, and declaring said amendment to be advisable and recommended for approval by the stockholders of the Corporation. The resolution setting forth the proposed amendment is as follows: NOW, THEREFORE, BE IT RESOLVED, that the first paragraph of the Fourth Article of the restated Certificate of Incorporation of the Corporation be, and it hereby is, amended to read in full as follows: "FOURTH: This corporation is authorized to issue two (2) classes of stock to be designated, respectively, "Preferred Stock" and "Common Stock." The total number of shares which this corporation is authorized to issue is Seven Hundred Fifty-Five Million (755,000,000) shares, of which Five Million (5,000,000) shares shall be Preferred Stock and Seven Hundred Fifty Million (750,000,000) shares shall be Common Stock, all with a par value of $.000l." SECOND: That, thereafter, pursuant to a resolution of the Board of Directors, the officers of the Corporation solicited the vote of the stockholders thereof at the Annual Meeting of Stockholders in favor of the amendment, and the stockholders of the Corporation approved the amendment by a majority of the outstanding stock entitled to vote thereon. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. FOURTH: That the capital of said corporation shall not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, AMGEN INC. has caused this Certificate of Incorporation to be signed by Gordon M. Binder, its Chief Executive Officer, and Arthur F. Staubitz, its Secretary, on this 24th day of July, 1991. /s/ Gordon M. Binder -------------------- Gordon M. Binder, Chief Executive Officer ATTEST: /s/ Arthur F. Staubitz ---------------------- Arthur F. Staubitz, Secretary CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF AMGEN INC. Amgen Inc., a corporation organized under the General Corporation Law of the State of Delaware (the "Corporation") does hereby certify: FIRST: That at a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation, declaring said amendment to be advisable and calling for the officers of the Corporation to solicit the stockholders thereof to adopt such amendment. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the first paragraph of the Fourth Article of the Restated Certificate of Incorporation of the Corporation be, and it hereby is, amended to read in full as follows: "FOURTH: This corporation is authorized to issue two (2) classes of stock to be designated respectively, "Preferred Stock" and "Common Stock." The total number of shares which this corporation is authorized to issue is one hundred thirty million (130,000,000) shares, of which Five Million (5,000,000) shares shall be Preferred Stock and one hundred twenty-five million (125,000,000) shares shall be Common Stock, all with a par value of $.0001." SECOND: That thereafter, pursuant to a resolution of the Board of Directors, the officers of the Corporation solicited the vote of the stockholders thereof at the Annual Meeting of Stockholders in favor of the amendment, and the stockholders of the Corporation approved the amendment by a majority of the outstanding stock entitled to vote thereon. THIRD: That said amendment was adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, Amgen Inc. has caused this Certificate of Amendment to be signed by the undersigned Chief Executive Officer of the Corporation this 27th day of July, 1989. AMGEN INC. By: /s/ Gordon M. Binder -------------------- Gordon M. Binder Chief Executive Officer ATTEST: /s/ Robert D. Weist ------------------- Robert D. Weist Secretary RESTATED CERTIFICATE OF INCORPORATION OF AMGEN INC. AMGEN, INC., a corporation (the "Corporation") organized and existing under the General Corporation Law of the State of Delaware HEREBY CERTIFIES: FIRST: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on October 31, 1986. SECOND: The Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. THIRD: The Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated by reference. IN WITNESS WHEREOF, Amgen Inc. Has caused this Certificate to be signed by its duly authorized officers this 18th day of August, 1988. AMGEN INC. By /s/ George B. Rathmann ---------------------- George B. Rathmann President ATTEST: /s/ Robert D. Weist ------------------- Robert D. Weist Secretary AMGEN INC. RESTATED CERTIFICATE OF INCORPORATION FIRST: The name of this corporation is Amgen Inc. SECOND: The address of the registered office of this corporation in the State of Delaware is 229 South State Street, in the City of Dover, County of Kent, and the name of its registered agent at that address is The United States Corporation Company. THIRD: The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the Delaware Corporations Code. FOURTH: This corporation is authorized to issue two (2) classes of stock to be designated, respectively, "Preferred Stock" and "Common Stock." The total number of shares which this corporation is authorized to issue is Fifty-Five Million (55,000,000) shares, of which Five Million (5,000,000) shares shall be Preferred Stock and Fifty Million (50,000,000) shares shall be Common Stock, all with a par value of one hundredth cent ($.0001). The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is expressly authorized in the resolution or resolutions providing for the issue of any wholly unissued series of Preferred Stock, to fix, state and express the powers, rights, designations, preferences, qualifications, limitations and restrictions thereof, including, without limitation: the rate of dividends upon which and the times at which dividends on shares of such series shall be payable and the preference, if any, which such dividends shall have relative to dividends on shares of any other class or classes or any other series of stock of this corporation; whether such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which dividends on shares of such series shall be cumulative; the voting rights, if any, to be provided for shares of such series; the rights, if any, which the holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of this corporation; the rights, if any, which the holders of shares of such series shall have to convert such shares into or exchange such shares for shares of stock of this corporation and the terms and conditions, including price and rate of exchange of such conversion or exchange; the redemption (including sinking fund provisions), if any, for shares of such series; and such other powers, rights, designations, preferences, qualifications, limitations and restrictions as the Board of Directors may desire to so fix. The Board of Directors is also expressly authorized to fix the number of shares constituting such series and to increase or decrease the number of shares of any series prior to the issue of shares of that series and to decrease, but not increase, the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding (in case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series). FIFTH: (a) The number of directors which shall constitute the whole Board of Directors of this corporation shall be specified in the bylaws of this corporation, subject to the provisions of this Article Fifth. (b) At the 1987 annual meeting, the Board of Directors shall be divided into three classes: Class I, Class II and Class III, which shall be as nearly equal in number as possible. Each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which the director was elected; provided, however, that each initial director in Class I shall hold office until the annual meeting of stockholders in 1988; each initial director in Class II shall hold office until the annual meeting of stockholders in 1989; and each initial director in Class III shall hold office until the annual meeting of stockholders in 1990. Notwithstanding the foregoing provisions of this Article, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. (c) In the event of any increase or decrease in the authorized number of directors, the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal as possible. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (d) Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office (and not by stockholders), even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. SIXTH: A director of this corporation shall not be personally liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to this corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. SEVENTH: This corporation reserves the right at any time and from time to time to amend, alter, change, or appeal any provisions contained herein, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law, and all rights, preferences, and privileges of whatsoever nature conferred upon stockholders, directors, or any other persons whomsoever by or pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article. EIGHTH: All the powers of this corporation, insofar as the same may be lawfully vested by this Certificate of Incorporation in the Board of Directors, are hereby conferred upon the Board of Directors, who shall have full control over the affairs of this corporation. In furtherance and not in limitation of the powers conferred by law and by this Certificate of Incorporation, the Board of Directors is hereby expressly authorized: 1. To make, amend, repeal, or otherwise alter the Bylaws of this corporation, without any action on the part of the stockholders; provided, however, that any Bylaws made by the directors and any and all powers conferred by any of said Bylaws may be amended, altered, or repealed by the stockholders. 2. To fix, determine, and vary the amount to be reserved or maintained for any proper purpose, and to fix the times for the declaration and payment of dividends. 3. To transfer all or any part of the assets of this corporation by way of mortgage, or in trust or in pledge, to secure indebtedness of this corporation, without any vote or consent of stockholders, and to authorize and to cause to be executed instruments evidencing any and all such transfers. 4. To sell, lease, or exchange any part less than all or less than substantially all of the property and assets, including good will and corporate franchises, of this corporation upon such terms and conditions as the Board of Directors may deem expedient for the best interests of this corporation, without any authorization, affirmative vote, or written consent or other action of the stockholders or any class thereof. NINTH: (a) Vote Required for Certain Business Combinations. (1) Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in paragraph (b) of this Article NINTH: (i) any merger or consolidation of this corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) to, with or for the benefit of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets, securities or commitments of this corporation or any Subsidiary having an aggregate Fair Market Value equal to or greater than ten percent (10%) of the corporation's assets as set forth on the corporation's most recent audited, consolidated financial statements filed with the Securities and Exchange Commission; or (iii) the adoption of any plan or proposal for the liquidation or dissolution of this corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (iv) any reclassification of securities (including any reverse stock split) or recapitalization of this corporation, or any merger or consolidation of this corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of this corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) the issuance or transfer by this corporation or any Subsidiary (in a transaction or a series of transactions) of any securities of this corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of Twenty Million Dollars ($20,000,000) or more; shall require the affirmative vote of the holders of a least sixty- six and two-thirds percent (66-2/3%) of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors (the "Voting Stock") not then held by the Interested Stockholder, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) Definition of "Business Combination." The term "Business Combination" as used in this Article NINTH shall mean any transaction which is referred to in any one or more clauses (i) through (v) of subparagraph (1) of this paragraph (a). (b) When Higher Vote is Not Required. The provisions of paragraph (a) of this Article NINTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of this Certificate of Incorporation, if all of the conditions specified in either of the following subparagraphs (b)(1) or (b)(2) are met: (1) Approval by Disinterested Directors. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined). (2) Price and Procedure Requirements. All of the following conditions shall have been met: (i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Stockholder, whichever is higher; and (B) the Fair Market Value per share of Common Stock (1) on the Announcement Date or (2) on the date on which the Interested Stockholder became an Interested Stockholder (such latter date is referred to in this Article NINTH as the "Determination Date"), whichever is higher. (ii) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this subparagraph (b)(2)(ii) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it (1) within the two-year period immediately prior to the Announcement Date, or (2) in the transaction in which it became an Interested Stockholder, whichever is higher; (B) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of this corporation; and (C) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (iii) The consideration to be received by holders of any particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. The price determined in accordance with subparagraphs (b)(2)(i) and (b)(2)(ii) shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (iv) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations thereunder (or any subsequent provisions replacing the Exchange Act or such rules or regulations) shall be mailed to public stockholders of this corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (v) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (A) except as approved by a majority of the Board entitled to vote thereon (determined in a manner similar to that set forth in subparagraph (b)(1) above), there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding Preferred Stock; (B) there shall have been (I) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Board entitled to vote thereon (determined in a manner similar to that set forth in subparagraph (b)(1) above), and (II) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Board entitled to vote thereon (determined in a manner similar to that set forth in subparagraph (b)(1) above); and (C) such Interested Stockholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. (vi) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by this corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (c) Certain Definitions. For the purposes of this Article NINTH: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean any person (other than this corporation or any Subsidiary) who or which: (i) is the beneficial owner, directly or indirectly, of more than twenty percent (20%) of the voting power of the outstanding Voting Stock; or (ii) is an Affiliate of this corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. (3) A person shall be a "beneficial owner" of any Voting Stock: (i) that such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) that such person or any of its Affiliates or Associates has: (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to an agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the beneficial owner of securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such persons' Affiliates or Associates until such tendered securities are accepted for purchase; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the beneficial owner of any security if the agreement, arrangement or understanding to vote such security (I) arises solely from a revocable proxy or consent given to such person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the Exchange Act and (II) is not also then reportable on Schedule 13D under the Exchange Act (or a comparable or successor report); or (iii) that is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except to the extent permitted by the proviso of subparagraph (c)(3)(ii)(B) above) or disposing of any shares of Voting Stock. (4) For the purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (c)(2), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph (c)(3), but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (5) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on January 1, 1988. (6) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by this corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in subparagraph (c)(2), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by this corporation. (7) "Disinterested Director" means any member of the Board of Directors of this corporation (the "Board") who is unaffiliated with the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board. (8) "Majority of the Disinterested Directors" means a majority of the Disinterested Directors, whether or not the number of such Disinterested Directors then constitutes a quorum of the Board of Directors of this corporation. (9) "Fair Market Value" means: (i) in the case of stock, the average of the closing sale prices during the ten (10)-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if the stock is not listed on any such exchange but is listed as a National Market System stock in the National Association of Securities Dealers, Inc. Automated Quotation System, as reported in that National Market System, if such stock is not listed on any such exchange or reported in such system the average of the closing bid quotations with respect to a share of such stock during the ten (10)-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith. (10) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in subparagraphs (b)(2)(i) and (ii) of this Article NINTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (d) Powers of the Board of Directors. A majority of the Disinterested Directors of this corporation shall have the power and duty to determine for the purposes of this Article NINTH on the basis of information known to them after reasonable inquiry: (i) whether a person is an Interested Stockholder; (ii) the number of shares of Voting Stock beneficially owned by any person; (iii) whether a person is an Affiliate or Associate of another; and (iv) the Fair Market Value of the assets that are the subject of any Business Combination. A majority of the Disinterested Directors of this corporation shall have the further power to interpret all of the terms and provisions of the Article NINTH. Any such determination made in good faith shall be binding and conclusive on all parties. (e) No Effect on Fiduciary Obligations of Interested Stockholders or Directors. (1) Nothing contained in this Article Ninth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. (2) The fact that any Business Combination complies with the provisions of Section (b) of this Article NINTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of the corporation, and such compliance shall not limit, prohibit or otherwise restrict in any manner the Board of Directors, or any members thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. (f) Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the bylaws of this corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the bylaws of this corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) or more of the outstanding Voting Stock not then held by any Interested Stockholder, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with this Article NINTH. TENTH: Any action required or permitted to be taken by the stockholders of this corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. At any annual meeting or special meeting of stockholders of this corporation, only such business shall be conducted as shall have been brought before such meeting in the manner provided by the bylaws of this corporation. EX-4.6 4 FORM OF STOCK CERTIFICATE FOR COMMON STOCK EXHIBIT 4.6 [AMGEN LOGO] NUMBER SHARES AMGEN INC. INCORPORATED UNDER THE LAWS SEE REVERSE FOR OF THE STATE OF DELAWARE CERTAIN DEFINITIONS THIS CERTIFIES THAT CUSIP 031162 10 0 is the record holder of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.0001 PAR VALUE, OF AMGEN INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon the surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /s/George A. Vandeman /s/Gordon M. Binder --------------------- -------------------- SECRETARY CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER [AMGEN SEAL] COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY (NEW YORK) TRANSFER AGENT AND REGISTRAR BY -------------------------------- AUTHORIZED SIGNATURE This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Amgen Inc. and American Stock Transfer & Trust Company, dated as of February 18, 1997, as the same may be amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Amgen Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Amgen Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. As described in the Right Agreement, Rights which are held or have been held by Acquiring Persons or Associates or Affiliates thereof (as defined in the Rights Agreement) shall become null and void. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM--as tenants in common TEN ENT--as tenants by the entireties JT TEN--as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT-- Custodian ------ ------ (Cust) (Minor) under Uniform Gifts to Minors Act --------------------------------- (State) UNIF TRF MIN ACT-- Custodian (until age --) ------ (Cust) ------ under Uniform Transfers (Minor) ------ to Minors Act ------- (State) Additional abbreviations may also be used though not in the above list. For Value received, -------------- hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ---------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) ---------------------------------------------------------------------- ---------------------------------------------------------------------- ----------------------------------------------------------------shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint --------------------------------------------------------------Attorney to transfer the said stock on the books of the within named Company with full power of substitution in the premises. Dated -------------------- ------------------------- Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever. Signature(s) Guaranteed: By ----------------------------------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANK, STOCKBROKER, SAVINGS AND LOAN ASSOCIATION AND CREDIT UNION WITH MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-99 5 SECTIONS UNDER MD&A HEADING Exhibit 99 Factors That May Affect Future Results Amgen operates in a rapidly changing environment that involves a number of risks, some of which are beyond the Company's control. The following discussion highlights some of these risks, and others are discussed elsewhere herein and in other documents filed by the Company with the Securities and Exchange Commission. Product development The Company intends to continue an aggressive product development program. Successful product development in the biotechnology industry is highly uncertain, and only a small minority of research and development programs ultimately result in the commercialization of a product. Of the candidates that are commercialized, all may not be commercially successful. Product candidates that appear promising in the early phases of development may fail to reach the market for numerous reasons, including, without limitation, results indicating lack of effectiveness or harmful side effects in clinical or preclinical testing, failure to receive necessary regulatory approvals, uneconomical manufacturing costs, the existence of third party proprietary rights, failure to be cost effective in light of existing therapeutics or other factors. There can be no assurance that the Company will be able to produce future products that have commercial potential. Additionally, success in preclinical and early clinical trials does not ensure that large scale clinical trials will be successful. Clinical results are frequently susceptible to varying interpretations which may delay, limit or prevent further clinical development or regulatory approvals. The length of time necessary to complete clinical trials and receive approval for product marketing by regulatory authorities varies significantly by product and indication and is often difficult to predict. See "--Regulatory approvals." Regulatory approvals The Company's research and development, preclinical testing, clinical trials, facilities, manufacturing and marketing of its products are subject to extensive regulation by numerous governmental authorities in the U.S. and other countries. The success of the Company's current products and future product candidates will depend in part upon obtaining and maintaining regulatory approval to market products in approved indications. Even if regulatory approval is obtained, a marketed product and its manufacturer are subject to continued review. Later discovery of previously unknown problems with a product or manufacturer may result in restrictions on such product or manufacturer, including withdrawal of the product from the market. Failure to obtain necessary approvals, or the restriction, suspension or revocation of any approvals or the failure to comply with regulatory requirements could have a material adverse effect on the Company. Reimbursement; Third party payors In both domestic and foreign markets, sales of the Company's products are dependent in part on the availability of reimbursement from third party payors such as governments and private insurance plans. In certain foreign markets pricing and profitability of prescription pharmaceuticals are subject to government controls. In the United States, there has been, and the Company expects there to continue to be, a number of state and federal proposals to implement price controls. In addition, an increasing emphasis on managed care in the United States has and will continue to increase the pressure on pharmaceutical pricing and usage. Further, significant uncertainties exist as to the reimbursement status of newly approved therapeutic products, and current reimbursement policies for existing products may change. Changes in reimbursement or failure to obtain reimbursement may reduce the demand for, or the price of, the Company's products which could have a material adverse effect on the Company including results of operations. Specifically, patients in the U.S. receiving EPOGEN(R) in connection with treatment for end stage renal disease are covered primarily under medical programs provided by the federal government. Therefore, EPOGEN(R) sales may be affected by future changes in reimbursement rates or the basis for reimbursement by the federal government. Guidelines In addition to government agencies that promulgate regulations and guidelines directly applicable to the Company and its products, private health/science foundations and organizations involved in various diseases may also publish, from time to time, guidelines or recommendations to the healthcare and patient communities. These private organizations may make recommendations that affect the usage of certain therapies, drugs or procedures, including the Company's products. Such recommendations may relate to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines that are followed by patients and healthcare providers and that result in, among other things, decreased use of the Company's products could have a material adverse effect on the Company. In addition, the perception that such recommendations or guidelines will be followed could adversely affect prevailing market prices for the Company's common stock. Intellectual property and legal matters The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal, scientific and factual questions. To date there has emerged no consistent policy regarding breadth of claims allowed in such companies' patents. Accordingly, there can be no assurance that patents and patent applications relating to the Company's products and technologies will not be challenged, invalidated or circumvented or will afford protection against competitors with similar products or technology. Patent disputes are frequent and can preclude commercialization of products. The Company currently is, and may in the future be, involved in patent litigation. Such litigation, if decided adversely, could subject the Company to significant liabilities, cause the Company to obtain third party licenses or cease using the technology or product in dispute. However, there can be no assurance that such licenses will be available on terms acceptable to the Company, or at all. The Company is currently involved in arbitration proceedings with Ortho Pharmaceutical Corporation, a subsidiary of Johnson & Johnson ("Johnson & Johnson"), relating to a license granted by the Company to Johnson & Johnson for sales of Epoetin alfa in the United States for all human uses except dialysis and diagnostics. See Note 4 to the Condensed Consolidated Financial Statements, "Contingencies - Johnson & Johnson arbitrations." Competition Amgen operates in a highly competitive environment. The Company competes with pharmaceutical and biotechnology companies, some of which may have technical or competitive advantages, for, among other things, the development of technologies and processes and the acquisition of technology from academic institutions, government agencies and other private and public research organizations. There can be no assurance that the Company will be able to produce or acquire rights to products that have commercial potential. Even if the Company achieves product commercialization, there can be no assurance that one or more of the Company's competitors will not: (1) achieve product commercialization earlier than the Company, (2) receive patent protection that dominates or adversely affects the Company's activities or (3) have significantly greater marketing capabilities. Fluctuations in operating results The Company's operating results may fluctuate from period to period for a number of reasons. Historically the Company has planned its operating expenses, many of which are relatively fixed in the short term, on the basis that revenues will continue to grow. Accordingly, even a relatively small revenue shortfall may cause a period's results to be below Company expectations. Such a revenue shortfall could arise from any number of factors, including, without limitation, lower than expected demand, changes in wholesaler buying patterns, changes in product pricing strategies, increased competition from new and existing products, fluctuations in foreign currency exchange rates, changes in government or private reimbursement, transit interruptions, overall economic conditions or natural disasters (including earthquakes). The Company also experiences a degree of seasonality in its operating results. See "Results of Operations - Product sales - NEUPOGEN(R) (Filgrastim)." Rapid growth The Company has adopted an aggressive growth plan that includes substantial and increased investments in research and development and investments in facilities that will be required to support significant growth. This plan carries with it a number of risks, including a higher level of operating expenses, the difficulty of attracting and assimilating a large number of new employees, and the complexities associated with managing a larger and faster growing organization. Stock price volatility The Company's stock price, like that of other biotechnology companies, is subject to significant volatility. The stock price may be affected by, among other things, clinical trial results and other product development related announcements by Amgen or its competitors, regulatory matters, announcements in the scientific and research community, intellectual property and legal matters, changes in reimbursement policies or medical practices or broader industry and market trends unrelated to the Company's performance. In addition, if revenues or earnings in any quarter fail to meet the investment community's expectations, there could be an immediate adverse impact on the Company's stock price. EX-27 6 FINANCIAL DATA SCHEDULES
5 1000000 3-MOS DEC-31-1997 MAR-31-1997 265 780 207 0 100 1437 982 36 2773 539 0 0 0 0 2018 2773 536 576 72 341 0 0 0 250 70 0 0 0 0 180 .65 .65
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