Amgen 2002 Annual Report Download - page 25

AMGEN 2002 ANNUAL REPORT
Acquisition of Immunex Corporation
On July 15, 2002, the Company acquired all of the
outstanding common stock of Immunex Corporation
(“Immunex”) in a transaction accounted for as a business
combination. Immunex was a leading biotechnology com-
pany dedicated to developing immune system science to pro-
tect human health. The acquisition of Immunex is expected
to further advance Amgen’s role as a global biotechnology
leader with the benefits of accelerated growth and increased
size, product base, product pipeline, and employees. The
acquisition is also intended to enhance Amgen’s strategic
position within the biotechnology industry by strength-
ening and diversifying its (1) product base and product
pipeline in key therapeutic areas, and (2) discovery research
capabilities in proteins and antibodies.
Each share of Immunex common stock outstanding at
July 15, 2002 was converted into 0.44 of a share of Amgen
common stock and $4.50 in cash. As a result, Amgen issued
approximately 244.6 million shares of common stock and
paid approximately $2.5 billion in cash to former Immunex
shareholders. Amgen also paid Wyeth $25 million at the
closing of the merger for the termination of certain Immunex
product rights in favor of Wyeth, as specified in the agree-
ment regarding governance and commercial matters. In
addition, each employee stock option to purchase Immunex
common stock outstanding at July 15, 2002 was assumed
by Amgen and converted into an option to purchase Amgen
common stock based on the terms specified in the merger
agreement. As a result, approximately 22.4 million options
to purchase Amgen common stock were assumed, on a con-
verted basis. The acquisition was structured to qualify as a
tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code.
Unless otherwise indicated, the discussions in this
report of the results of operations for the year ended
December 31, 2002 and financial condition at December
31, 2002 include the results of operations of Immunex
commencing from July 16, 2002. Comparisons are made
to the results of operations for the years ended December
31, 2001 and 2000 and financial condition at December 31,
2001, which include only the historical results of Amgen.
Liquidity and Capital Resources
Cash, cash equivalents, and marketable securities
The Company had cash, cash equivalents, and marketable
securities of $4,663.9 million and $2,662.2 million at
December 31, 2002 and 2001,
respectively. Of the total cash,
cash equivalents, and mar-
ketable securities at December
31, 2002, approximately $2.0
billion represents cash gener-
ated from operations in foreign
tax jurisdictions and is intended
for use in such foreign oper-
ations (see “Results of Oper-
ations — Income taxes”). If
these funds are repatriated for
use in the Company’s U.S. oper-
ations, additional taxes on cer-
tain of these amounts would be
required to be paid. The Company does not currently antic-
ipate a need to repatriate these funds to the United States.
The primary objectives for the Company’s fixed income
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.
Cash flows
Cash provided by operating activities has been and is
expected to continue to be the Company’s primary recur-
ring source of funds. In 2002, operations provided $2,248.8
million of cash compared with $1,480.2 million in 2001.
The increase in cash provided by operating activities in
2002 resulted primarily from higher earnings, excluding the
one-time, non-cash write-off of in-process research and
development, and depreciation and amortization.
In July 2002, the Company paid the cash portion of the
merger consideration of approximately $2.5 billion upon
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Page 23
Cash, Cash Equivalents and
Marketable Securities
($ in millions)
98 99 00 01 02
2002
2001
2000
1999
1998
$4,663.9
2,662.2
2,028.1
1,333.0
1,276.0