Amgen 2001 Annual Report Download - page 30

AMGEN 2001 ANNUAL REPORT
Other items, net
In 2001, other items, net primarily consisted of costs
associated with the termination of collaboration agree-
ments with various third parties, including PRAECIS
PHARMACEUTICALS INCORPORATED and certain acade-
mic institutions. In 2000, other items, net consisted of
three items: 1) legal award associated with the spillover
arbitration with Johnson & Johnson, 2) a write-off of
acquired in-process research and development associated
with the acquisition of Kinetix Pharmaceuticals, Inc.,
and 3) a charitable contribution to the Amgen Foundation.
In 1999, other items, net consisted of a reduction in lia-
bilities related to the spillover arbitration with Johnson &
Johnson. See Note 4 to the Consolidated Financial State-
ments for a discussion of the 2001, 2000, and 1999 items.
Interest and other income, net
In 2001, interest and other income, net increased $22.5
million or 15% over the prior year. This increase was due
to higher interest income generated from the Company’s
investment portfolio as a result of higher average cash
balances, partially offset by lower interest rates in 2001
and higher gains on the sale of equity investments that
occurred in 2000.
In 2000, interest and other income, net increased
$57.9 million or 66% over the prior year. This increase
was primarily due to gains realized on the sale of certain
equity securities in the Company’s portfolio and higher
interest income generated from the Company’s invest-
ment portfolio as a result of higher average cash balances
and higher interest rates.
Income taxes
The Company’s effective tax rate was 33.6%, 32.0%,
and 30.0% for 2001, 2000, and 1999, respectively. The
Company’s tax rate in 2001 has increased, in part, due to
the absence of capital loss carryforwards that benefited
2000. The tax rate in all three years reflected the tax
benefits from the sale of products manufactured in the
Company’s Puerto Rico manufacturing facility. In addi-
tion, the 2001 and 2000 tax rates increased as a result of
increased taxable income combined with a provision in
the federal tax law that caps tax benefits associated with
the Company’s Puerto Rico operations at the 1995
income level. The 2000 tax rate increased also as a result
of the write-off of acquired in-process research and devel-
opment, which is not deductible for tax purposes.
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 companies,
customary regulatory approvals, as well as other custom-
ary closing conditions. More information about this
transaction is available in Amgen’s Current Report on
Form 8-K filed with the SEC on December 17, 2001
which is incorporated herein by reference. Unless other-
wise indicated, the discussions in this document relate
to Amgen as a stand-alone entity and do not reflect the
impact of the proposed merger with Immunex.
Financial Outlook
In the future, the Company expects the growth of its
anemia business to be driven primarily by Aranesp™sales
in new markets. The Company expects growth in its U.S.
dialysis business to come primarily from patient popula-
tion growth and inflation-related price increases. Patients
receiving treatment for end stage renal disease are cov-
ered primarily under medical programs provided by the
federal government. Therefore, EPOGEN®sales may also
be affected by future changes in reimbursement rates or
a change in the basis for reimbursement by the federal
government. Worldwide Aranesp™sales will be depen-
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