Amgen 2002 Annual Report Download - page 55

Page 53
AMGEN 2002 ANNUAL REPORT
Note 3. Immunex acquisition
On July 15, 2002, the Company acquired all of the out-
standing common stock of Immunex in a transaction
accounted for as a business combination. Immunex was a
leading biotechnology company dedicated to developing
immune system science to protect human health. The
Immunex acquisition is expected to further advance Amgen’s
role as a global biotechnology leader with the benefits of
accelerated growth and increased size, product base, prod-
uct pipeline, and employees. The acquisition is also intended
to enhance Amgen’s strategic position within the biotech-
nology industry by strengthening and diversifying its (1)
product base and product pipeline in key therapeutic areas,
and (2) discovery research capabilities in proteins and anti-
bodies. The results of Immunex’s operations have been
included in the consolidated financial statements com-
mencing July 16, 2002.
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.
The purchase price of the acquisition was (in millions):
Fair value of Amgen shares issued $14,313.0
Cash consideration (including payment to Wyeth) 2,526.2
Fair value of Amgen options issued 870.2
Transaction costs 62.4
Total $17,771.8
The value of the Amgen shares used in determining the
purchase price was $58.525 per share based on the average
of the closing prices of Amgen common stock for a range
of four trading days, two days prior to and two days sub-
sequent to the announcement of the merger on December
16, 2001. The fair values of stock options issued were
also determined based on the $58.525 stock price using
the Black-Scholes option valuation model assuming an
expected weighted average life of 1.5 years, weighted
average risk-free rate of 2.1%, volatility of 50%, and no
expected dividends.
Purchase price allocation
The purchase price was allocated to the tangible and iden-
tifiable intangible assets acquired and liabilities assumed
based on their estimated fair values at the acquisition date.
The excess of the purchase price over the fair values of assets
and liabilities acquired amounted to $9,773.9 million and
was allocated to goodwill. The Company expects that sub-
stantially all of the amount allocated to goodwill will not
be deductible for tax purposes.
The following table summarizes the estimated fair
values of the assets acquired and liabilities assumed as of
the acquisition date (in millions):
Current assets, principally cash and
marketable securities $ 1,624.6
Deferred tax assets 200.2
Property, plant, and equipment 572.4
In-process research and development 2,991.8
Identifiable intangible assets, principally developed
product technology and core technology 4,803.2
Goodwill 9,773.9
Other assets 26.2
Current liabilities (625.0)
Deferred tax liabilities (1,595.5)
Net assets $17,771.8
The allocation of the purchase price was based, in part,
on a third-party valuation of the fair values of in-process
research and development, identifiable intangible assets,
and certain property, plant, and equipment. The purchase
price allocation will remain preliminary until Amgen com-
pletes its evaluation of the various restructuring plans under-
taken following the consummation of the merger, as
discussed below. The final determination of the purchase