Amgen 2001 Annual Report Download - page 49

AMGEN 2001 ANNUAL REPORT
Major customers
Amgen uses wholesale distributors of pharmaceutical
products as the principal means of distributing the
Company’s products to clinics, hospitals, and pharmacies.
The Company monitors the financial condition of its
larger distributors and limits its credit exposure by set-
ting appropriate credit limits and requiring collateral
from certain customers.
For the year ended December 31, 2001, sales to three
large wholesalers each accounted for more than 10% of
total revenues. Sales to these three wholesalers were
$1,470.1 million, $535.8 million, and $459.8 million.
For the years ended December 31, 2000 and 1999, sales
to two large wholesalers each accounted for more than
10% of total revenues. Sales to these wholesalers were
$1,233.4 million and $445.2 million, respectively, for
the year ended December 31, 2000. Sales to these two
wholesalers were $1,078.0 million and $438.2 million,
respectively, for the year ended December 31, 1999.
At December 31, 2001, amounts due from three
large wholesalers each exceeded 10% of gross trade
receivables, and accounted for 64% of gross trade receiv-
ables on a combined basis. At December 31, 2000,
amounts due from four large wholesalers each exceeded
10% of gross trade receivables, and accounted for 51%
of gross trade receivables on a combined basis.
Note 11: Kinetix acquisition
On December 14, 2000, Amgen acquired all of the
outstanding shares of Kinetix Pharmaceuticals, Inc.
(“Kinetix”), a privately held company, in a tax-free
exchange for 2.6 million shares of Amgen common stock.
The acquisition was accounted for under the purchase
method of accounting, and accordingly, the operating
results of Kinetix are included in the accompanying con-
solidated financial statements starting from December
14, 2000. The acquisition was valued at $172.2 million,
including $1.0 million of related acquisition costs and
$6.5 million of Amgen restricted common stock issued
in exchange for Kinetix restricted common stock held
by employees retained from Kinetix. The $6.5 million
is being recognized as compensation expense over the
vesting period of the restricted common stock.
The purchase price was allocated among identifiable
tangible and intangible assets and liabilities of Kinetix
based upon their fair values. A discounted, risk-adjusted
cash flow analysis was performed to value the technology
platform of Kinetix expected to generate future mole-
cules that may be developed into human therapeutics,
as well as in-process research projects. The analysis
resulted in valuing the acquired base technology at
$36.6 million, which was capitalized and will be amor-
tized on a straight-line basis over a 15 year period.
Additionally, $30.1 million of value was assigned to
acquired in-process research and development, and was
expensed on the acquisition date in accordance with gen-
erally accepted accounting principles. The excess of the
purchase price over the fair values of assets and liabilities
acquired of $103.3 million was allocated to goodwill,
which was amortized through December 31, 2001 using
a 15 year useful life. Goodwill amortization ceased
beginning January 1, 2002 (see Note 1, “Summary of
significant accounting policies – Recent accounting
pronouncements”).
Note 12: Proposed merger with Immunex
On December 16, 2001, the Company signed a definitive
agreement to acquire Immunex Corporation (“Immunex”)
in a transaction to be accounted for as a purchase.
Immunex is a biopharmaceutical company dedicated to
developing immune system science to protect human
health. Under the terms of the agreement, each share of
Immunex common stock outstanding at the closing of
the merger, other than shares as to which dissenters’
rights have been validly exercised, will be converted into
0.44 of a share of Amgen common stock and $4.50 cash.
In addition, at the closing of the merger each option out-
standing to purchase a share of Immunex common stock
will be assumed by Amgen and exchanged into an option
to purchase Amgen common stock based on the terms of
the merger agreement. The estimated purchase price is
approximately $17.6 billion, which includes the cash por-
tion of the merger consideration, the estimated fair val-
ues of Amgen stock issued and options to be exchanged,
and the direct transaction costs. The final purchase price
will be determined based upon the number of Immunex
shares and options outstanding at the closing date. The
transaction is expected to close in the second half of
2002, subject to approval by shareholders of both compa-
nies, customary regulatory approvals, as well as other
customary closing conditions.
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