Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 Commission File Number 1-09623
IVAX CORPORATION
Incorporated under the laws of the I.R.S. Employer Identification Number
State of Florida 16-1003559
4400 Biscayne Boulevard, Miami, Florida 33137
305-575-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class Name of each
exchange
on which registered
Common Stock, Par Value $.10 American Stock Exchange
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of February 28, 2001, there were 160,246,936 shares of Common Stock
outstanding.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on February 28, 2001, was approximately $4.8 billion.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain information required by Parts II and IV are incorporated by
reference from portions of the Registrants 2000 Annual Report to Shareholders.
IVAX CORPORATION
Annual Report on Form 10-K
for the year ended December 31, 2000
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business.................................................................... 1
Item 2. Properties.................................................................. 22
Item 3. Legal Proceedings........................................................... 23
Item 4. Submission of Matters to a Vote of Security Holders......................... 25
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters....... 26
Item 6. Selected Financial Data..................................................... 26
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................. 26
Item 8. Financial Statements and Supplementary Data................................. 26
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 27
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 27
Item 11. Executive Compensation...................................................... 30
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 34
Item 13. Certain Relationships and Related Transactions.............................. 35
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.............. 35
PART I
Item 1. Business
Business
Overview
We are a multinational company engaged in the research, development,
manufacture and marketing of pharmaceutical products. We were incorporated in
Florida in 1993, as successor to a Delaware corporation formed in 1985.
We manufacture and/or market several brand name pharmaceutical products
and a wide variety of generic and over-the-counter pharmaceutical products,
primarily in the United States and the United Kingdom. We also have subsidiaries
located throughout the world, some of which are among the leading pharmaceutical
companies in their markets. We maintain marketing and manufacturing operations
in Argentina, Canada, China, the Czech Republic, Germany, Hong Kong, Hungary,
Ireland, Italy, Mexico, Peru, Uruguay and Venezuela. We also have sales
operations in Finland, France, India, Kazakhstan, Latvia, Poland, Russia, the
Slovak Republic, Sweden, Switzerland, Taiwan and Ukraine and market our products
through distributors or joint ventures in other foreign markets.
Growth Strategies
We expect our future growth to come from:
o discovering and developing and/or acquiring new products;
o leveraging proprietary technology and development strengths in the
respiratory and oncology areas;
o pursuing complementary, accretive or strategic acquisitions; and
o strategically expanding sales and distribution of our proprietary
and branded products as well as our generic products.
Discovery and Development and/or Acquisition of New Products
We expect that new products that we discover, develop and/or acquire
will provide a cornerstone for our future growth. In October 1999, we
dramatically increased the size and scope of our new product development
capability through our acquisition of the Institute for Drug Research, which had
approximately 250 employees engaged in drug research and development. We
currently have over 700 people involved in our drug research and development
programs. In 2000, we spent $65.3 million for company-sponsored research and
development activities compared to $53.4 million in 1999 and $47.9 million in
1998.
Among the new products that have either entered or are about to enter
clinical trials in the near future are:
o the Paxoral(TM)oral form of paclitaxel;
o a product for the treatment of multiple sclerosis;
o a patented drug for allergic disorders;
o a product for the treatment of severe epilepsy;
o a compound for the treatment of brain cancer;
o one or more of the soft steroids that we are developing for asthma
and gastrointestinal indications both in humans and companion
animals; and
o a patented drug to treat benign prostatic hypertrophy.
Other new compounds in earlier stages of development are being designed
to treat cystic fibrosis, asthma, cancer by inhibiting angiogenesis and
thrombotic states and neurological disorders such as epilepsy, Parkinson's
disease, multiple sclerosis and Alzheimer's disease.
We believe that our basic research programs at the Institute for Drug
Research will allow us to develop further improved forms of some of these drugs
as well as other novel compounds and delivery systems.
Leverage Proprietary Technology and Development Strengths
We intend to continue to leverage our proprietary technology and
development strengths to develop a significant portfolio of proprietary, high
value pharmaceutical products in the areas of respiratory diseases and oncology.
Primary among these strengths are:
o our patented inhalation technology and our expertise in developing
and commercializing respiratory products; and
o our experience in the development and commercialization of oncology
drugs.
Our technology and capabilities in these areas have also allowed us to
pursue new business opportunities in the form of strategic collaborations with
pharmaceutical partners desiring to license our technologies and utilize our
expertise. In the respiratory area, we have successfully challenged a number of
European patents held by 3M Corporation on CFC-free formulations of
anti-asthmatic drugs and have become the first company to obtain approvals of
our own CFC-free formulations of these drugs.
In the oncology field, we were the first company after Bristol-Myers
Squibb to complete original clinical trials accepted by the United States Food
and Drug Administration, known as the FDA, as establishing the safety and
efficacy of paclitaxel. The product is currently being marketed, under the
trademarks Paxene(R) and Onxol(TM), by our subsidiaries in the United States,
Eastern Europe and the European Union. Through these activities, we have
developed a considerable body of clinical data, technology and know-how that is
proprietary to us. We believe that our regulatory and marketing experience with
paclitaxel will be beneficial as we continue to seek improved formulations of
paclitaxel and develop complementary products such as Paxoral(TM), our
angiogenesis inhibitor and compounds we are studying for the treatment of brain
cancer. In addition, we expect that the relationships that we establish with
oncology drug distributors, hospitals and cancer centers will assist us in
marketing generic biotech drugs, such as the colony-stimulating factors,
interferon and human growth hormone, that we are in the process of developing.
Pursue Complementary, Accretive or Strategic Acquisitions
Acquisitions have in the past helped to build our company, and we
expect to use well-timed, carefully selected acquisitions to continue to drive
our growth. We intend to pursue primarily acquisitions that will complement our
existing businesses and provide new product and market opportunities, as well as
leverage our existing assets. In assessing strategic opportunities, we will
consider whether the acquisition:
o is accretive to earnings;
o allows us to leverage our expertise in our areas of therapeutic
focus by adding new products or product development capabilities;
2
o offers geographic expansion opportunities into key strategic
markets; and
o allows us to further penetrate our existing markets, thereby
enabling us to take advantage of economies of scale.
In addition to business acquisitions, we will continue to actively
pursue strategic product acquisitions and other collaborative arrangements.
Integral to these initiatives is our ability to leverage our existing
infrastructure by adding sales from acquired products while minimizing
incremental costs.
Strategically Expand Sales and Distribution of Our Products
We intend to continue to strategically expand the sales and
distribution of our products. We currently have research, manufacturing,
distribution and/or marketing operations in more than 20 countries throughout
the world, and our products are distributed in approximately 70 countries. We
reacquired rights to our Easi-Breathe(R) and paclitaxel products in various
European countries and we are developing sales capabilities in those countries
to market these and future products. We have begun marketing additional products
through our subsidiaries in the United States and in Eastern Europe.
We recently completed acquisitions of pharmaceutical companies in
Venezuela and Mexico which complement our operations in Argentina, Peru and
Uruguay and continue the expansion of our Latin American operations. Our future
plans include the acquisition of additional manufacturing and distribution
capabilities in Europe and Latin America.
In Asia, we believe that we can complement the operations of our
subsidiaries IVAX Asia Limited and Beijing Jiai Pharmaceuticals, and our joint
venture with the Kunming Pharmaceutical Factory, by establishing additional
joint ventures and selectively establishing distribution channels for our major
products.
At the same time, we are attempting to integrate operations and seeking
to identify and exploit the cross-marketing and distribution opportunities that
exist among our various subsidiaries. For example, our Czech Republic subsidiary
is a large producer of bulk cyclosporin, a drug used to prevent rejection in
organ transplant recipients. Bulk cyclosporin is one of the ingredients used in
our Paxoral(TM) product.
Pharmaceutical Business
Current Proprietary and Branded Products
We market a number of proprietary and brand name products treating a
variety of conditions through our subsidiaries throughout the world. These
products are marketed by our direct sales force to physicians, pharmacies,
hospitals, managed health care organizations and government agencies. These
products are sold primarily to wholesalers, retail pharmacies, distributors,
hospitals and physicians.
Oncology
We have a strong foundation in the oncology field based on our
proprietary anti-cancer drug Paxene(R) (paclitaxel).
Paxene(R)/Onxol(TM). The active substance in the injectable drug
paclitaxel is an unpatented compound which, in clinical trials sponsored by the
National Cancer Institute, exhibited promising results in the treatment of
ovarian and breast cancer and AIDS-related Kaposi's Sarcoma. Bristol-Myers
Squibb currently markets an injectable product containing paclitaxel under the
brand name Taxol(R) for the treatment of ovarian and breast cancer and
AIDS-related Kaposi's Sarcoma. Our formulation of injectable
3
paclitaxel is marketed under a license from NaPro BioTherapeutics and is
marketed in Europe as Paxene(R) and in the United States as Onxol(TM).
We submitted a New Drug Application, or NDA, for Paxene(R) for the
treatment of AIDS-related Kaposi's Sarcoma in March 1997. In December 1997, the
FDA determined Paxene(R) to be safe and effective for that purpose, but
concluded that Paxene(R) could not be finally approved for this indication until
August 4, 2004. The delay in final approval is due to a seven-year market
exclusivity period under the Orphan Drug Act granted to Taxol(R), which was
approved for AIDS-related Kaposi's Sarcoma earlier in 1997. The Orphan Drug
exclusivity of Taxol(R) does not apply to NDAs or Abbreviated New Drug
Applications, known as ANDAs, for the use of paclitaxel to treat indications
other than AIDS-related Kaposi's Sarcoma and does not apply in any market other
than the United States.
We filed an application for regulatory approval of Paxene(R) to treat
AIDS-related Kaposi's Sarcoma in the European Union in 1997, and the European
Committee for Proprietary Medical Products approved this application in July
1999. In April 2000, Paxene(R) was approved for the same indication in Canada by
the Health Protection Branch.
We filed our own ANDA for paclitaxel with the FDA in December 1997. In
August 1998 we purchased Immunex Corporation's ANDA for paclitaxel, which was
the first ANDA filed with the FDA for paclitaxel injection. This ANDA was
approved on September 15, 2000 and we are marketing paclitaxel in the United
States under the name Onxol(TM). In connection with such approval, we received
an exclusivity period which allows our product to be the only generic paclitaxel
on the market for a period of 180 days. We are marketing Onxol(TM) in the United
States through our direct sales force to oncologists and distributors of
oncological drugs. We believe that these relationships can be used in the future
to facilitate our commercialization of Paxoral(TM) and other oncology products.
Our Galena subsidiary received an exception from registration to market
Paxene(R) for various indications in Belarus in July 1999, and in the Czech
Republic in September 2000. In March 2000 our product was approved in Poland for
breast and ovarian cancers and is being marketed in Poland under the name
Paxenor. We have also applied for approval to market Paxene(R) in other
countries.
Respiratory
We have substantial expertise in the development, manufacture and
marketing of respiratory drugs, primarily for asthma, in metered-dose inhaler
formulations. Our Norton Healthcare Limited subsidiary in the United Kingdom is
the third largest respiratory company in that market. At the core of our
respiratory franchise are advanced delivery systems, which include a patented
metered-dose inhaler called Easi-Breathe(R) , and a unique new dry powder
inhaler, as well as conventional metered-dose inhalers.
Easi-Breathe(R). We hold patents on Easi-Breathe(R), our
breath-activated metered-dose inhaler, which is designed to overcome the
difficulty many persons experience with conventional metered-dose inhalers in
attempting to coordinate their inhalation with the emission of the medication.
Easi-Breathe(R) emits the medication automatically in one step upon inhalation,
minimizing coordination problems and better ensuring that the medication is
delivered to the lungs. We market our Easi-Breathe(R) breath-activated inhaler
through our Norton Healthcare Limited subsidiary in the United Kingdom and
through our Galena subsidiary in the Czech Republic.
We have pioneered the development of propellants for aerosol products
that do not contain CFCs, chemicals believed to be harmful to the environment
which are being phased out on a global basis. In November 1997, we received the
world's first approval for a CFC-free beclomethasone, and in April 2000, we
received approval in the United Kingdom for a CFC-free albuterol. Both
beclomethasone and albuterol are widely-prescribed anti-asthmatic drugs.
4
Urology
Elmiron(R). We received our first United States approval to market our
patented prescription medication Elmiron(R) (pentosan polysulfate sodium) in
September 1996. Elmiron(R) is approved in the United States and Canada for the
treatment of interstitial cystitis, a chronic, progressive and debilitating
urinary bladder disease primarily affecting women. In September 1997, we sold
the United States and Canadian marketing rights to Elmiron(R) and the urological
medications Bicitra(R), Polycitra(R), Polycitra-K Crystals(R), Polycitra-LC(TM),
Neutra-Phos(R), and Neutra-Phos-K(TM), to ALZA Corporation. Although this sale
represented an exit by us from the urology business in 1997, we retained the
marketing rights to these products outside of the United States and Canada and
all proprietary rights and are currently seeking product approvals in various
countries. We also retained rights to Elmiron(R) for veterinary uses and are
developing it to treat feline interstitial cystitis.
New Proprietary and Branded Products Under Development
We are committed to the cost-effective development of proprietary
pharmaceuticals directed primarily towards indications having relatively large
patient populations or for which limited or inadequate treatments are available.
We seek to accelerate product development and commercialization by in-licensing
compounds, especially after clinical testing has begun, and by developing new
dosage forms of existing products or new therapeutic indications for existing
products. We intend to emphasize the development of drug products in the
oncology and respiratory fields and have a variety of proprietary
pharmaceuticals in varying stages of development.
Paxoral(TM). Presently, paclitaxel, which is one of the leading
anticancer drugs in the world, is marketed only in injectable form. We are
developing an oral formulation of paclitaxel that we believe may provide
significant advantages over the injectable dosage form in terms of patient
convenience and reduced side-effects. We believe that our patented new system
will allow patients to obtain effective doses of paclitaxel through oral
administration and that this patented system can be applied to other
chemotherapeutic agents that are not currently orally available. We are
currently conducting human clinical trials to test the safety and efficacy of
Paxoral(TM).
Inhalation Aerosol Products. We are continuing to develop the
Easi-Breathe(R) inhaler for use with various compounds. In light of
international agreements calling for the eventual phase-out of
chlorofluorocarbons, we are developing CFC-free inhalation aerosol products. We
received regulatory approval to market CFC-free beclomethasone in Ireland and
France in 1997 in our standard metered-dose inhaler and our Easi-Breathe(R)
inhaler, the first such approvals for any company anywhere in the world. We
received regulatory approval to market CFC-free beclomethasone in our standard
metered-dose inhaler in Belgium, Italy, Finland and Portugal in 1999 and in
Japan, Germany and Spain in 2000. In 1998, we also applied for approval to
market an albuterol CFC-free formulation in various European countries, and in
April 2000, this product was approved for marketing in the United Kingdom. This
approval will provide the basis for expedited approvals in other European
countries under the mutual recognition procedure. We have also developed a
multi-dose dry powder inhaler which uses no propellant and is believed to have
superior dosing accuracy than competing models. In 1998, we completed clinical
trials in the United Kingdom for budesonide in our multi-dose dry powder
inhaler. In 1999, we submitted Marketing Authorization Applications in the
United Kingdom for approval to market a multi-dose dry powder inhaler for use
with albuterol and budesonide. In the United States Phase III clinical trials to
support U.S. marketing approval of CFC-free albuterol and beclomethasone are in
progress.
5
In developing environmentally friendly, CFC-free formulations for
metered-dose inhalers, we and many of our competitors have obtained or licensed
patents on formulations containing alternative propellants. There are many
existing patents covering the use of hydrofluoroalkane with pharmaceuticals, and
successful product development by us may require that we incur substantial
expense in seeking to develop formulations that do not infringe competitors'
patents, or that we license or invalidate such patents. We successfully
invalidated certain relevant United Kingdom and European patents in the United
Kingdom during 1997, 1998 and 1999.
Soft Drug Technology. In December 1999, we acquired Soft Drugs, Inc., a
private company with a significant patent portfolio. This acquisition enters us
into a new field of technology and provides us with several new chemical
entities to add to our growing pipeline of proprietary new drugs. These chemical
entities include a corticosteroid that is rapidly converted to an inactive form
after absorption, which will minimize the side effects normally associated with
these drugs. Initial applications will be to treat asthma (as an inhaled
product) and inflammatory diseases of the large intestine (in a special oral
form).
Generic Products
Another important part of our pharmaceutical business is the broad line
of generic products, both prescription and over-the-counter, that are marketed
by our various subsidiaries as generic substitutes or under a brand name.
Generic drugs are therapeutically equivalent to their brand name counterparts,
but are generally sold at lower prices and as alternatives to the brand name
products. In order to remain successful in the generic pharmaceutical business,
we are working to develop new formulations and to obtain marketing
authorizations which will enable us to be the first or among the first to launch
generic products on the market.
In the United States, our IVAX Pharmaceuticals, Inc. subsidiary (which
changed its name from Zenith Goldline Pharmaceuticals, Inc. in February 2001)
manufactures and markets approximately 56 generic prescription drugs in capsule
or tablet forms in an aggregate of approximately 123 dosage strengths under the
"Zenith Goldline" and "Goldline" trade names. We also distribute in the United
States approximately 282 additional generic prescription and over-the-counter
drugs and vitamin supplements, in various dosage forms, dosage strengths and
package sizes. Our domestic generic drug distribution network encompasses most
trade classes of the pharmaceutical market, including wholesalers, retail drug
chains, retail pharmacies, mail order companies, managed care organizations,
hospital groups, nursing home providers and government agencies.
In the United Kingdom, we are a leading provider of generic
pharmaceuticals. We market approximately 110 generic prescription and
over-the-counter drugs, about half of which we manufacture, in various dosage
forms and dosage strengths, constituting an aggregate of approximately 229
products under the "Norton" trade name. Such products are marketed to
wholesalers, retail pharmacies, hospitals, physicians and government agencies.
In addition, we manufacture and market various "blow-fill-seal" pharmaceutical
products, such as solutions for injection or irrigation, and unit-dose vials for
nebulization to treat respiratory disorders.
Generic products (but not including branded generic products)
represented 49%, 56% and 51% of our revenues for the years ended December 31,
2000, 1999 and 1998, respectively.
New Generic Products Under Development
We are seeking to supplement our portfolio of generic products by
emphasizing the development of specialty generics, defined as those products
which, because of one or more special characteristics, are
6
likely to encounter less competition. Specialty generic products include those:
o which are difficult to formulate or manufacture;
o which involve regulatory obstacles or potential patent challenges;
or
o for which limited raw material suppliers exist.
By emphasizing the development of specialty generics, we seek to
introduce generic products that our competitors cannot easily develop, which is
advantageous because the products are subject to less competition and less
pricing pressure. In addition, in evaluating which generic pharmaceutical
product development projects to undertake, we consider whether the new product,
once developed, will complement our other products in the same therapeutic
family, or will otherwise assist in making our product line more complete.
Developing specialty generic pharmaceutical products generally involves more
time and resources than developing common generic pharmaceutical products.
During 2000 we received final FDA approval of 9 ANDAs, tentative FDA
approval of 5 ANDAs, approval of 7 Abridged Product License Applications, or
APLAs, the United Kingdom equivalent of an ANDA, from the United Kingdom
Medicines Control Agency and approval of 2 APLAs in 2 other European Countries.
As of January 1, 2001, we had ANDAs or its foreign equivalent pending
as follows:
Number Pending Country
37 United States
30 England
9 Ireland
10 Germany
3 France
1 Canada
Acquisitions
A significant component of the expansion of our pharmaceutical business
has been the acquisition of strategic and complementary businesses. Some of our
recent acquisitions are described below.
Laboratorios Fustery, S.A. de C.V. In February 2001, we acquired
Laboratorios Fustery, S.A. de C.V., which is based in Mexico City, Mexico.
Fustery manufactures, markets and distributes a broad range of prescription
pharmaceutical products and is a leading manufacturer of antibiotics and
injectable products in Mexico. Fustery's therapeutic areas of primary emphasis
are antibiotics, anti-inflammatories, analgesics, cardiovascular and
gastrointestinal products. Fustery employs over 120 medical representatives
whose objective is to promote Fustery's prescription products.
Wakefield Pharmaceuticals, Inc. In September 2000, we acquired
Wakefield Pharmaceuticals, Inc. which is based in Georgia. Wakefield markets and
sells respiratory products to allergists, ear, nose and throat doctors, lung
doctors and primary care physicians. Wakefield employs over 50 marketing
professionals to market and sell respiratory products.
Laboratorios Elmor, S.A. In June 2000, we acquired Laboratorios Elmor,
S.A., which is based in Caracas, Venezuela. Elmor manufactures, markets and
distributes a broad range of pharmaceutical products in Venezuela. Elmor is the
second largest Venezuelan pharmaceutical company in terms of units sold, and one
of the fastest growing pharmaceutical companies in Venezuela.
7
Institute for Drug Research. In October 1999, we acquired the Institute
for Drug Research, which is based in Budapest, Hungary. The Institute for Drug
Research employs approximately 250 scientists and support staff and engages in
original drug discovery and provides contract research services to other
pharmaceutical companies. It was originally founded in 1950 as a
government-owned pharmaceutical research and development center for the
Hungarian pharmaceutical industry. Through our acquisition of the Institute for
Drug Research, we obtained a research capability that includes drug discovery,
screening, synthesis and pre-clinical development. Additionally, the Institute
for Drug Research has a depository of more than 1,500 microorganisms to produce
chemicals of medicinal value through fermentation. As part of the acquisition,
we also acquired rights to several important compounds, including a patented
drug for the treatment of benign prostatic hypertrophy which is currently
undergoing clinical trials. The Institute for Drug Research also has a number of
other new drug candidates that are now in clinical trials, including a
tri-peptide with anti-thrombin activity similar to heparin, which helps prevent
blood clots.
Galena, a.s. In 1994, we acquired a 60% interest in Galena, a.s., one
of the oldest and best known pharmaceutical companies based in the Czech
Republic. Through open market purchases made in 1995, 1996, 1999 and 2000, and
public tender offers made in 1999 and 2000, we increased our ownership interest
in Galena to 98%. Galena develops, manufactures and markets a variety of human
pharmaceutical and veterinary products, as well as syrup for a herbal based cola
and an energy sport beverage, and active ingredients and herbal extracts used in
the manufacture of pharmaceuticals, including cyclosporin and ergot alkaloids.
All such products are manufactured in the Czech Republic. Galena sells its
products primarily in Central and Eastern European countries, including Russia.
Collaborative Agreements
We also seek to enter into collaborative alliances which allow us to
exploit our drug discovery and development capabilities or provide us with
valuable intellectual property and technologies. Some of these collaborative
alliances are described below.
Eli Lilly. In February 2001, we entered into an exclusive agreement
with Eli Lilly and Company to develop and market talampanel, a compound
discovered by our subsidiary The Institute for Drug Research, for the treatment
of epilepsy.
Center for Blood Research. In December 2000, we entered into a license
and collaborative agreement with the Center for Blood Research, Inc., an
affiliate of the Harvard Medical School. Pursuant to this agreement we will be
collaborating with the Center to develop products to treat cystic fibrosis using
technology licensed from the Center.
Scripps Research Institute. In December 2000, we entered into an
exclusive agreement with The Scripps Research Institute to develop and market
cladribine for the treatment of multiple sclerosis.
Bristol-Myers. In November 1999, we entered into a three-year product
collaboration and development services agreement with Bristol-Myers Squibb
Company in the areas of inhalation technology and oncology. With respect to
inhalation technology, the agreement calls for us and Bristol-Myers to
collaborate to develop one or more of Bristol-Myers' proprietary molecules using
our patented devices, which Bristol-Myers would purchase from us. Bristol-Myers
would retain the worldwide rights to market respiratory products containing its
compounds.
Indiana Protein Technologies, Inc. In August 1999, we entered into an
agreement with Indiana Protein Technologies, Inc., a privately held company, to
use Indiana Protein Technologies' recombinant technology in the joint
development of a number of generic peptide-based pharmaceutical products, such
as human growth hormone and interferon, for which no current generic equivalents
exist.
8
We continue to seek strategic collaborations with third parties in
order to exploit our proprietary technologies on an opportunistic basis.
Licensing
We have obtained licenses to technology and compounds for development
into new pharmaceutical products from various inventors, universities and the
United States government. For example, we are working with compounds licensed
from The National Institutes of Health to develop a potential new treatment for
brain cancer. We also grant licenses to other pharmaceutical companies relating
to technologies or compounds under development and, in some cases, finished
products. We will continue to seek new licenses from third parties, including
pharmaceutical companies.
Other Businesses
Neutraceuticals
Utilizing herbal extracts manufactured by our Galena subsidiary, we
manufacture a line of high quality herbal neutraceutical products in soft
gelatin capsules. We also provide contract manufacturing services for the
nutritional supplement industry from our encapsulating facility in Miami,
Florida. Turnkey services include custom formulation, raw material sourcing,
soft gelatin encapsulation, and specialized packaging.
Veterinary Products
We formulate, package and distribute under the "DVM Pharmaceuticals"
trade name various veterinary products in the United States, primarily
neutraceutical and dermatological products for companion animals. These products
are marketed through our direct sales force and a national network of veterinary
product distributors primarily to small animal practitioners. DVM
Pharmaceuticals has submitted a New Animal Drug Application for a product to
treat certain feline urological disorders. DVM Pharmaceuticals is also
developing proprietary products in the therapeutic areas of asthma,
gastrointestinal disorders and skin conditions in companion animals.
Diagnostics
In March 2001, our diagnostics group merged with b2bstores.com forming
IVAX Diagnostics, Inc., a publicly traded company which is listed on the
American Stock Exchange under the symbol IVD. We own approximately 70% of the
equity of IVAX Diagnostics, Inc.
IVAX Diagnostics, Inc. develops, manufactures and markets diagnostic
test kits or assays that are used to aid in the detection of disease markers
primarily in the area of autoimmune and infectious diseases. These tests which
are designed to aid in the identification of the causes of illness and disease,
assist physicians in selecting appropriate patient treatment. Most of IVAX
Diagonistics' tests are based on Enzyme Linked ImmunoSorbent Assay (ELISA)
technology, a clinical technology used worldwide. In addition to an extensive
line of diagnostic kits, IVAX Diagnostics also designs and manufactures
laboratory instruments that perform the tests and provide fast and accurate
results, while reducing labor costs. These products are marketed to clinical
reference laboratories, hospital laboratories, research institutions and other
commercial entities in the United States and in Italy through their direct sales
force and through independent distributors in various other foreign markets. In
May 1999, IVAX Diagnostics entered into a three year agreement to supply
automated walk-away instrumentation for clinical laboratories to Sigma
Diagnostics, Inc.
9
Patents and Proprietary Rights
We believe that patents and other proprietary rights are important to
our business. Our policy is to file patent applications to protect our products,
technologies, inventions and improvements that we consider important to the
development of our business. We also rely upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain our competitive position.
We hold approximately 470 United States and foreign patents and have
filed several hundred United States and foreign patent applications. In
addition, we have exclusively licensed several additional United States and
foreign patents and patent applications. Our success depends, in part, on our
ability to obtain United States and foreign patent protection for our products,
to preserve our trade secrets and proprietary rights and to operate without
infringing on the proprietary rights of third parties or having third parties
circumvent our rights. Because of the length of time and expense associated with
bringing new products through development and regulatory approval to the
marketplace, the pharmaceutical industry has traditionally placed considerable
importance on obtaining patent and trade secret protection for significant new
technologies, products and processes.
Government Regulation
Our pharmaceutical and diagnostic operations are subject to extensive
regulation by governmental authorities in the United States and other countries
with respect to the testing, approval, manufacture, labeling, marketing and sale
of pharmaceutical and diagnostic products. We devote significant time, effort
and expense to addressing the extensive government regulations applicable to our
business. In general, the trend is towards more stringent regulation.
In the United States, the FDA requires extensive testing of new
pharmaceutical products to demonstrate that such products are both safe and
effective in treating the indications for which approval is sought. Testing in
humans may not be commenced until after an Investigational New Drug exemption is
granted by the FDA. An NDA must be submitted to the FDA for new drugs that have
not been previously approved by the FDA and for new combinations of, and new
indications and new delivery methods for, previously approved drugs. Three
phases of clinical trials must be successfully completed before an NDA is
approved. Phase I clinical trials involve the administration of the drug to a
small number of healthy subjects to determine safety, tolerance, absorption and
metabolism characteristics. Phase II clinical trials involve the administration
of the drug to a limited number of patients for a specific disease to determine
dose response, efficacy and safety. Phase III clinical trials involve the study
of the drug to gain confirmatory evidence of efficacy and safety from a wide
base of investigators and patients. In the case of a drug that has been
previously approved by the FDA, an abbreviated approval process is available.
For such drugs an ANDA may be submitted to the FDA for approval. For an ANDA to
be approved, among other requirements, the drug must be shown to be
bioequivalent to the previously approved drug. The NDA and ANDA approval
processes generally take a number of years and involve the expenditure of
substantial resources. Even so, the time and resources devoted to seeking
regulatory approval for new products will not necessarily result in product
approvals or earnings.
The owner of an approved drug is required to list with the FDA all
patents which cover the approved drug and its approved uses. A company filing an
ANDA and seeking approval to market a product before expiration of all listed
patents must certify that such patents are invalid or will not be infringed by
the manufacture, use or sale of the applicant's product, and must notify the
patent owner and the owner of the approved drug of its filing. If the approved
drug owner sues the ANDA filer for patent infringement within 45 days after it
receives such notice, then the FDA will not grant final approval of the
10
ANDA until the earlier of 30 months from the date the approved drug owner
receives such notice or the date when a court finally determines that the
applicable patents are either invalid or would not be infringed by the
applicant's product. As a result, generic drug manufacturers, including us, are
often involved in lengthy, expensive patent litigation against brand name drug
companies that have considerably greater resources and that are typically
inclined to actively pursue patent litigation in an effort to protect their
franchises.
On an ongoing basis, the FDA reviews the safety and efficacy of
marketed pharmaceutical products and products considered medical devices and
monitors labeling, advertising and other matters related to the promotion of
such products. The FDA also regulates the facilities and procedures used to
manufacture pharmaceutical and diagnostic products in the United States or for
sale in the United States. Such facilities must be registered with the FDA and
all products made in such facilities must be manufactured in accordance with
"good manufacturing practices" established by the FDA. Compliance with good
manufacturing practices guidelines requires the dedication of substantial
resources and requires significant costs. The FDA periodically inspects our
manufacturing facilities and procedures to assure compliance. The FDA may cause
a recall or withdraw product approvals if regulatory standards are not
maintained. The FDA approval to manufacture a drug is site-specific. In the
event an approved manufacturing facility for a particular drug becomes
inoperable, obtaining the required FDA approval to manufacture such drug at a
different manufacturing site could result in production delays, which could
adversely affect our business and results of operations.
In connection with our activities outside the United States, we are
also subject to regulatory requirements governing the testing, approval,
manufacture, labeling, marketing and sale of pharmaceutical and diagnostic
products, which requirements vary from country to country. Whether or not FDA
approval has been obtained for a product, approval of the product by comparable
regulatory authorities of foreign countries must be obtained prior to marketing
the product in those countries. The approval process may be more or less
rigorous from country to country, and the time required for approval may be
longer or shorter than that required in the United States. No assurance can be
given that clinical studies conducted outside of any country will be accepted by
such country, and the approval of any pharmaceutical or diagnostic product in
one country does not assure that such product will be approved in another
country.
The federal and state governments in the United States, as well as many
foreign governments, including the United Kingdom, from time to time explore
ways to reduce medical care costs through health care reform. These efforts have
resulted in, among other things, government policies that encourage the use of
generic drugs rather than brand name drugs to reduce drug reimbursement costs.
Virtually every state in the United States has a generic substitution law which
permits the dispensing pharmacist to substitute a generic drug for the
prescribed brand name product. The debate to reform the United States' health
care system is expected to be protracted and intense. Due to uncertainties
regarding the ultimate features of reform initiatives and their enactment and
implementation, we cannot predict what impact any reform proposal ultimately
adopted may have on the pharmaceutical or diagnostic industries or on our
business or operating results.
Competition
The pharmaceutical market is highly competitive and includes many
established companies. Some of our major competitors are:
o 3M
o Astra Zeneca
o Boehringer Ingelheim
o Bristol-Myers Squibb
o Geneva Pharmaceuticals
11
o Glaxo Welcome
o Eli Lilly
o Mylan Pharmaceuticals
o Novartis Pharmaceuticals
o Schering-Plough
o Teva Pharmaceuticals
Our competitors may be able to develop products and processes
competitive with or superior to our own for many reasons, including that they
may have:
o significantly greater financial resources;
o larger research and development and marketing staffs;
o larger production facilities; or
o extensive experience in preclinical testing and human clinical
trials.
The pharmaceutical market is undergoing, and is expected to continue to
undergo, rapid and significant technological change, and we expect competition
to intensify as technological advances are made. We intend to compete in this
marketplace by developing or licensing pharmaceutical products that are either
patented or proprietary and which are primarily for indications having
relatively large patient populations or for which limited or inadequate
treatments are available, and, with respect to generic pharmaceuticals, by
developing therapeutic equivalents to previously patented products which we
expect to have less intensive competition. Developments by others could make our
pharmaceutical products or technologies obsolete or uncompetitive.
In addition to product development, other competitive factors in the
pharmaceutical industry include product quality, price, customer service, and
reputation. Price is a key competitive factor in the generic pharmaceutical
business. To compete effectively on the basis of price and remain profitable, a
generic drug manufacturer must manufacture its products in a cost-effective
manner.
Revenues and gross profit derived from generic pharmaceutical products
tend to follow a pattern based on regulatory and competitive factors unique to
the generic pharmaceutical industry. As patents for brand-name products and
related exclusivity periods mandated by regulatory authorities expire, the first
generic manufacturer to apply for regulatory approval for generic equivalents of
such products may be entitled to a 180-day period of marketing exclusivity under
the Hatch-Waxman act. During this exclusivity period, the FDA cannot approve any
other generic equivalent. If we are not the first generic applicant, our generic
product will be kept off the market for an additional 180 days after the first
generic commercial launch of the product. The first generic equivalent on the
market is usually able to achieve relatively high revenues and gross profit. As
other generic manufacturers receive regulatory approvals and enter the market
prices typically decline. Accordingly, the level of revenues and gross profit
attributable to generic products developed and manufactured by us is dependent,
in part, on:
o our ability to maintain a pipeline of products in development;
o our ability to develop and rapidly introduce new products;
o the timing of regulatory approval of such products;
o the number and timing of regulatory approvals of competing products;
and
o our ability to manufacture such products efficiently.
Because of the regulatory and competitive factors discussed above, our
revenues and results of operations historically have fluctuated from period to
period. We expect this fluctuation to continue as long as a significant part of
our revenues are generated from sales of generic pharmaceuticals.
12
In addition to competition from other generic drug manufacturers, we
face competition from brand-name companies as they increasingly sell their
products into the generic market directly by establishing, acquiring or forming
licensing or business arrangements with generic pharmaceutical companies. No
regulatory approvals are required for a brand-name manufacturer to sell directly
or through a third party to the generic market, nor do such manufacturers face
any other significant barriers to entry into such market.
In addition, many large drug companies are increasingly pursuing
strategies to prevent or delay the introduction of generic competition. These
strategies include:
o seeking to establish regulatory obstacles to demonstrating that
there is no significant difference in the rate and extent to which
the active ingredient in the generic product becomes available at
the site of drug action as compared to the brand name counterpart;
o instituting legal actions that automatically delay approval of
generic products the approval of which requires certifications that
the brand name drug's patents are invalid or would not be infringed
by the generic;
o obtaining approvals of patented drugs for a rare disease or
condition and, as a result, obtaining seven years of exclusivity for
that indication;
o obtaining extensions of patent exclusivity by conducting trials of
brand name drugs using children; and
o persuading the FDA to withdraw the approvals of brand name drugs the
patents for which are about to expire so that the brand name company
can substitute a new patented product.
Additionally, in the United States, some companies have lobbied
Congress for amendments to the Hatch-Waxman legislation which could give them
additional advantages over generic competitors such as us. For example, although
the life of a drug company's drug patent is extended for a period equal to the
time that it takes the FDA to approve the drug, some companies have proposed
eliminating the five-year maximum on the period of those patent extensions and
extending the patent life by a full year for each year spent in clinical trials,
rather than the one-half year that is currently allowed. If proposals like these
become effective, our entry into the U.S. market and our ability to generate
revenues associated with these products will be delayed.
The Food and Drug Modernization Act of 1997 includes a pediatric
exclusivity provision that may provide an additional six months of market
exclusivity in the United States for indications of new or currently marketed
drugs, if certain agreed upon pediatric studies are completed by the applicant.
Brand-name companies are utilizing this provision to increase their period of
market exclusivity and are increasingly pursuing other strategies to prevent or
delay the introduction of generic competition. These strategies include, among
other things, initiating legislative efforts in various states to limit the
substitution of generic versions of certain types of branded pharmaceuticals,
seeking to establish regulatory obstacles to the demonstration of the
bioequivalence of generic drugs to their brand-name counterparts, and
instituting legal actions based on process or other patents that allegedly are
infringed by the generic products.
A significant amount of our United States generic pharmaceutical sales
are made to a relatively small number of drug wholesalers and retail drug
chains, which represent an essential part of the distribution chain of generic
pharmaceutical products in the United States. Drug wholesalers and retail drug
chains have undergone, and are continuing to undergo, significant consolidation,
which has resulted in our customers gaining more purchasing leverage and
consequently increasing the pricing pressures facing our United States generic
pharmaceutical business. Further consolidation among our customers may result in
even greater pricing pressures and correspondingly reduce the gross margins of
this business.
13
Other competitive factors affecting our business include the emergence
of large buying groups representing independent retail pharmacies and the
prevalence and influence of managed care organizations and similar institutions,
which are able to seek price discounts on pharmaceutical products. As the
influence of these entities continues to grow, we may continue to face increased
pricing pressure on the products we market.
Backlog Orders
As of February 21, 2001, the dollar amount of backlog orders for IVAX
Pharmaceuticals was $20.6 million compared to $6.6 million as of February 21,
2000, and for Norton Healthcare Limited was $0.8 million compared to $2.4
million. Approximately $5.6 million of the backlog orders for IVAX
Pharmaceuticals may not be filled during our current fiscal year.
Raw Materials
Raw materials needed for our business are generally readily available
from multiple sources. Certain raw materials and components used in the
manufacture of our products are, however, available from limited sources, and in
some cases, a single source. A problem with the availability of such raw
materials could cause production or other delays, and, in the case of products
for which only one raw material supplier exists, could result in a material loss
of sales, with consequent adverse effects on our business. In addition, because
raw material sources for pharmaceutical products must generally be approved by
regulatory authorities, changes in raw material suppliers may result in
production delays, higher raw material costs and loss of sales and customers. We
obtain a significant portion of our raw materials from foreign suppliers, and
our arrangements with such suppliers are subject to FDA, customs and other
government clearances, duties and regulation by the countries of origin.
Returns
Based on industry practice, generic manufacturers, including us, have
liberal return policies and have been willing to give customers post-sale
inventory allowances. Under these arrangements, the manufacturers give customers
credits on the manufacturer's generic products which the customers hold in
inventory after decreases in the market prices of the generic products. Like our
competitors, we also give credits for charge-backs to wholesale customers that
have contracts with us for their sales to hospitals, group purchasing
organizations, pharmacies or other retail customers.
Seasonality
While certain of our individual products may have a degree of
seasonality, there are no significant seasonal aspects to our business, except
that sales of pharmaceutical products indicated for colds and flu symptoms are
higher during the fourth quarter as customers supplement inventories in
anticipation of the cold and flu season. In addition, revenues that are
contingent upon licensees achieving certain sales targets during the year tend
to be higher in the second half of the year.
Environment
We believe that our operations comply in all material respects with
applicable laws and regulations concerning the environment. While it is
impossible to accurately predict the future costs associated with environmental
compliance and potential remediation activities, compliance with environmental
laws is not expected to require significant capital expenditures and has not
had, and is not presently expected to have, a material adverse effect on our
earnings or competitive position.
14
Disposition of Non-Core Businesses
During 1997 and 1998, we divested our intravenous products, specialty
chemicals and personal care products businesses, all of which had been
classified as discontinued operations since 1997. Income from discontinued
operations totaled $600,000 and $48.9 million for the years ended December 31,
1999 and 1998, respectively.
On September 18, 1997, we sold the United States and Canadian marketing
rights to our proprietary drug Elmiron(R) and three additional urology products
to ALZA. Although this sale represented an exit by us from the urology business
in 1997, we retained the rights to these products outside of the United States
and Canada.
Employees
As of February 28, 2001, we had approximately 5,800 employees
worldwide.
Risk Factors
You should carefully consider the following risks regarding our
company. These and other risks could materially and adversely affect our
business, operating results or financial condition. You should also refer to the
other information contained or incorporated by reference in this report.
Risks Relating to Our Company
Our research and development expenditures may not result in commercially
successful products.
We spent approximately $65.3 million during 2000 on our research and
development efforts. This amount represents a significant increase in the
amounts we allocated to research and development in prior periods. We may in the
future increase the amounts we expend for research and development. As a result,
our research and development expenditures may have an adverse impact on our
earnings in the short term. Further, we cannot be sure that our research and
development expenditures will, in the long term, result in the discovery or
development of products which prove to be commercially successful.
Our potential acquisitions may reduce our earnings, be difficult for us to
combine into our operations or require us to obtain additional financing.
We search for and evaluate acquisitions which will provide new product
and market opportunities, benefit from and maximize our existing assets and add
critical mass. Acquisitions commonly involve risks and may have a material
effect on our results of operations. Any acquisitions we make may:
o fail to accomplish our strategic objectives;
o not be successfully combined with our operations; and
o not perform as expected.
In addition, based on current acquisition prices in the pharmaceutical
industry, our acquisitions could initially reduce our per share earnings and add
significant intangible assets and related goodwill amortization charges. Our
acquisition strategy may require us to obtain additional debt or equity
financing, resulting in additional leverage or increased debt obligations as
compared to equity and dilution of ownership. We may not be able to finance
acquisitions on terms satisfactory to us.
15
We depend on our development, manufacture and marketing of new products for our
future success.
Our future success is largely dependent upon our ability to develop,
manufacture and market commercially successful new pharmaceutical products and
generic versions of pharmaceutical products that are no longer subject to
patents. Generally, the commercial marketing of pharmaceutical products depends
upon:
o continually developing and testing products;
o proving that new products are safe and effective in clinical trials;
o proving that there is no significant difference in the rate and
extent to which the active ingredient in the generic product becomes
available at the site of drug action as compared to the brand name
version; and
o receiving requisite regulatory approval for all new products.
Delays in the development, manufacture and marketing of new products
will impact our results of operations. Each of the steps in the development,
manufacture and marketing of our products, as well as the process taken as a
whole, involves significant periods of time and expense. We cannot be sure that:
o any of our products presently under development, if and when fully
developed and tested, will perform as we expect;
o we will obtain necessary regulatory approvals in a timely manner, if
at all; or
o we can successfully and profitably produce and market any of our
products.
We depend on our patents and proprietary rights and cannot be certain of their
confidentiality and protection.
Our success with our proprietary products depends, in large part, on
our ability to protect our current and future technologies and products and to
defend our intellectual property rights. If we fail to adequately protect our
intellectual property, competitors may manufacture and market products similar
to ours. We have numerous patents covering our technologies. We have filed, and
expect to continue to file, patent applications seeking to protect newly
developed technologies and products in various countries, including the United
States. The United States Patent and Trademark Office does not publish patent
applications or make information about pending applications available to the
public until it issues the patent. Since publication of discoveries in the
scientific or patent literature tends to follow actual discovery by several
months, we cannot be certain that we were the first to file patent applications
on our discoveries. We cannot be sure that we will receive patents for any of
our patent applications or that any existing or future patents that we receive
or license will provide competitive advantages for our products. We also cannot
be sure that competitors will not challenge, invalidate or avoid the application
of any existing or future patents that we receive or license. In addition,
patent rights may not prevent our competitors from developing, using or selling
products that are similar or functionally equivalent to our products.
We also rely on trade secrets, unpatented proprietary know-how and
continuing technological innovation. We use confidentiality agreements with
licensees, suppliers, employees and consultants to protect our trade secrets,
unpatented proprietary know-how and continuing technological innovation. We
cannot assure you that these parties will not breach their agreements with us.
We also cannot be certain that we will have adequate remedies for any breach.
Disputes may arise concerning the ownership of intellectual property or the
applicability of confidentiality agreements. Furthermore, we cannot be sure that
our trade secrets and proprietary technology will not otherwise become known or
that our
16
competitors will not independently develop our trade secrets and proprietary
technology. We also cannot be sure, if we do not receive patents for products
arising from research, that we will be able to maintain the confidentiality of
information relating to our products.
Third parties may claim that we infringe their proprietary rights and may
prevent us from manufacturing and selling some of our products.
The manufacture, use and sale of new products that are the subject of
conflicting patent rights have been the subject of substantial litigation in the
pharmaceutical industry. These lawsuits relate to the validity and infringement
of patents or proprietary rights of third parties. We may have to defend against
charges that we violated patents or proprietary rights of third parties. This is
especially true for the sale of the generic version of products on which the
patent covering the branded product is expiring, an area where infringement
litigation is prevalent. Our defense against charges that we infringed third
party patents or proprietary rights could require us to incur substantial
expense and to divert significant effort of our technical and management
personnel. If we infringe on the rights of others, we could lose our right to
develop or make some products or could be required to pay monetary damages or
royalties to license proprietary rights from third parties.
Although the parties to patent and intellectual property disputes in
the pharmaceutical product area have often settled their disputes through
licensing or similar arrangements, the costs associated with these arrangements
may be substantial and could include ongoing royalties. Furthermore, we cannot
be certain that the necessary licenses would be available to us on terms we
believe to be acceptable. As a result, an adverse determination in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
us from manufacturing and selling a number of our products.
Marketing practices such as returns, allowances and charge-backs and marketing
programs adopted by wholesalers may reduce sales revenues in subsequent periods.
Based on industry practice, generic manufacturers, including us, have
liberal return policies and have been willing to give customers post-sale
inventory allowances. Under these arrangements, the manufacturers give customers
credits on the manufacturer's generic products which the customers hold in
inventory after decreases in the market prices of the generic products. Like our
competitors, we also give credits for charge-backs to wholesale customers that
have contracts with us for their sales to hospitals, group purchasing
organizations, pharmacies or other retail customers. A charge-back is the
difference between the price the wholesale customer pays and the price that the
wholesale customer's end-customer pays for a product. Although we establish
reserves based on our prior experience and our best estimates of the impact that
these policies may have in subsequent periods, we cannot ensure that our
reserves are adequate or that actual product returns, inventory allowances and
charge-backs will not exceed our estimates. In the second quarter of 1996, based
upon price declines at a time of significant inventory levels, these credits
were approximately $44 million higher than the average levels that we
experienced in prior quarters. Following our announcement of the expected
credits prior to the end of the second quarter, the market price of our common
stock immediately fell approximately 36%, and a number of persons subsequently
filed class action litigation against us based on the decline. That class action
litigation was resolved in our favor when the court dismissed it on the merits.
The concentration of ownership among our principal shareholders may permit those
shareholders to influence corporate matters and policies.
As of February 28, 2001, our executive officers, directors and two
additional shareholders currently have or share voting control over
approximately 26% of our issued and outstanding common
17
stock. As a result, these persons may have the ability to significantly
influence the election of the members of our board of directors and other
corporate decisions.
A number of internal and external factors have caused and may continue to cause
the market price of our stock to be volatile.
The market prices for securities of companies engaged in pharmaceutical
development, including us, have been volatile. Many factors, including many over
which we have no control, may have a significant impact on the market price of
our common stock, including without limitation:
o our or our competitors' announcement of technological innovations or
new commercial products;
o changes in governmental regulation;
o our or our competitors' receipt of regulatory approvals;
o our or our competitors' developments relating to patents or
proprietary rights;
o publicity regarding actual or potential medical results for products
that we or our competitors have under development; and
o period-to-period changes in financial results.
Political and economic instability and foreign currency fluctuations may
adversely affect the revenues our foreign operations generate.
Currency exchange fluctuations and restrictions, political instability
in some countries, and uncertainty as to the enforceability of, and government
control over, commercial rights may affect our foreign operations.
We sell products in many countries that are susceptible to significant
foreign currency risk. We generally sell these products for United States
dollars, which eliminates our direct currency risk but increases our credit risk
if the local currency devalues significantly and it becomes more difficult for
customers to purchase the United States dollars required to pay us. Acquisitions
we are currently evaluating or pursuing may increase our foreign currency risk.
On June 20, 2000, we announced our acquisition of Laboratorios Elmor, S.A., a
pharmaceutical company based in Venezuela. Venezuela is considered a highly
inflationary country. Any future acquisition of additional operations that we
may make may expose us to additional risk.
Future inability to obtain raw materials or products from contract manufacturers
could seriously affect our operations.
We currently obtain raw materials and other products from single
domestic or foreign suppliers. Although to date we have not experienced
difficulty in obtaining these raw materials and products, we cannot assure you
that supply interruptions will not occur in the future or that we will not have
to obtain substitute materials or products, which would require additional
regulatory approvals. Further, we cannot assure you that our third party
suppliers will continue to supply us. In addition, changes in our raw material
suppliers could result in delays in production, higher raw material costs and
loss of sales and customers because regulatory authorities must generally
approve raw material sources for pharmaceutical products. Any significant
interruption of supply could have a material adverse effect on our operations.
18
Increased indebtedness may impact our financial condition and results of
operations.
On December 31, 2000, we had approximately $256.6 million of
consolidated indebtedness. We may incur additional indebtedness in the future.
Our level of indebtedness will have several important effects on our future
operations, including, without limitation:
o we will use a portion of our cash flow from operations for the
payment of any principal or interest due on our outstanding
indebtedness;
o our outstanding indebtedness and leverage will increase the impact
of negative changes in general economic and industry conditions, as
well as competitive pressures; and
o the level of our outstanding debt may affect our ability to obtain
additional financing for working capital, capital expenditures or
general corporate purposes.
General economic conditions, industry cycles and financial, business
and other factors affecting our operations, many of which are beyond our
control, may affect our future performance. As a result, these and other factors
may affect our ability to make principal and interest payments on our
indebtedness. We anticipate that approximately $14.6 million of cash flow from
operations will be required to discharge our annual obligations on our currently
outstanding indebtedness. Our business might not continue to generate cash flow
at or above current levels. If we cannot generate sufficient cash flow from
operations in the future to service our debt, we may, among other things:
o seek additional financing in the debt or equity markets;
o refinance or restructure all or a portion of our indebtedness;
o sell selected assets;
o or reduce or delay planned capital expenditures.
These measures might not be sufficient to enable us to service our
debt. In addition, any financing, refinancing or sale of assets might not be
available on economically favorable terms.
We have enacted a shareholder rights plan and charter provisions that may have
anti-takeover effects.
We have in place a shareholders rights plan under which we issued
common stock purchase rights. As a result of the plan, each share of our common
stock carries with it one common stock purchase right. Each common stock
purchase right entitles the registered holder to purchase from us one-half of a
share of our common stock at a price of $15 per one-half of a share, subject to
adjustment. The common stock purchase rights are intended to cause substantial
dilution to a person or group who attempts to acquire us on terms that our board
of directors has not approved. The existence of the common stock purchase rights
could make it more difficult for a third party to acquire a majority of our
common stock. Other provisions of our articles of incorporation and bylaws may
also have the effect of discouraging, delaying or preventing a merger, tender
offer or proxy contest, which could have an adverse effect on the market price
of our common stock.
Risks Relating to Our Industry
Our revenues and profits from generic pharmaceuticals will decline as we or our
competitors introduce additional generic equivalents of those products.
Revenues and gross profit derived from generic pharmaceutical products
tend to follow a pattern based on regulatory and competitive factors unique to
the generic pharmaceutical industry. As patents for brand name products and the
related exclusivity periods established by regulation expire, the first generic
manufacturer to apply for regulatory approval for a generic equivalent of a
brand name product may be entitled to a 180-day period of marketing exclusivity
under the Hatch-Waxman Act. During this exclusivity period, the United States
Food and Drug Administration, or FDA, cannot approve any other
19
generic equivalent. If we are not the first generic applicant, our generic
product will be kept off the market for an additional 180 days after the brand
name drug's patents expire. Whether due to the 180-day period of marketing
exclusivity or other factors that delay the approval of other generic
competitors, the first generic equivalent on the market is usually able to
initially achieve relatively high revenues and gross profit. As other generic
manufacturers receive regulatory approvals on competing products, prices and
revenues typically decline. The timing of these declines is unpredictable and
can result in a significantly curtailed period of profitability for a generic
product. The level of revenues and gross profit attributable to generic products
that we develop and manufacture is dependent, in part, on:
o our ability to develop and introduce new generic products;
o the timing of regulatory approval of generic products;
o the number and timing of regulatory approvals of competing products;
o strategies brand name companies adopt to maintain their market
share; and
o our cost of manufacturing.
Generic products (but not including branded generic products)
represented 49%, 56% and 51% of our revenues for the years ended December 31,
2000, 1999 and 1998, respectively.
Legislative proposals, reimbursement policies of third parties, cost containment
measures and health care reform could affect the marketing, pricing and demand
for our products.
Various legislative proposals, including proposals relating to
prescription drug benefits, could materially impact the pricing and sale of our
products. Further, reimbursement policies of third parties may affect the
marketing of our products. Our ability to market our products will depend in
part on reimbursement levels for the cost of the products and related treatment
established by health care providers, including government authorities, private
health insurers and other organizations, such as health maintenance
organizations, or HMOs, and managed care organizations, or MCOs. Insurance
companies, HMOs, MCOs, Medicaid and Medicare administrators and others are
increasingly challenging the pricing of pharmaceutical products and reviewing
their reimbursement practices. In addition, the following factors could
significantly influence the purchase of pharmaceutical products, which would
result in lower prices and a reduced demand for our product:
o the trend toward managed health care in the United States;
o the growth of organizations such as HMOs and MCOs;
o legislative proposals to reform health care and government insurance
programs; and
o price controls and non-reimbursement of new and highly priced
medicines for which the economic therapeutic rationales are not
established.
These cost containment measures and health care reform proposals could affect
our ability to sell our products.
The reimbursement status of a newly approved pharmaceutical product may
be uncertain. Reimbursement policies may not include some of our products. Even
if reimbursement policies of third parties grant reimbursement status for a
product, we cannot be sure that these reimbursement policies will remain in
effect. Limits on reimbursement could reduce the demand for our products. The
unavailability or inadequacy of third party reimbursement for our products would
reduce or possibly eliminate demand for our products. We are unable to predict
whether governmental authorities will enact additional legislation or regulation
which will affect third party coverage and reimbursement that reduces demand for
our products.
20
Our industry is highly competitive which affects our product selection, pricing,
gross profit and market share.
The pharmaceutical industry is intensely competitive. Most or all of
the products that we sell or license will face competition from different
chemical or other agents intended to treat the same diseases. Our current and
future products will also face competition from traditional forms of drug
delivery and from advanced delivery systems others are developing. Our
competitors vary depending upon geographic regions, product categories, and
within each product category, upon dosage strengths and drug delivery systems.
Some of our major competitors are:
o 3M
o Astra Zeneca
o Barr Laboratories
o Boehringer Ingelheim
o Bristol-Myers Squibb
o Geneva Pharmaceuticals
o Glaxo Wellcome
o Eli Lilly
o Mylan Pharmaceuticals
o Novartis Pharmaceuticals
o Schering-Plough
o Teva Pharmaceuticals
Our competitors may be able to develop products and processes competitive with
or superior to our own for many reasons, including that they may have:
o significantly greater financial resources;
o larger research and development and marketing staffs; or
o larger production facilities or extensive experience in preclinical
testing and human clinical trials.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This annual report on Form 10-K and the documents that are incorporated
by reference into this Form 10-K contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements concern expectations, beliefs,
projections, future plans and strategies, anticipated events or trends and
similar expressions concerning matters that are not historical facts.
Specifically, this Form 10-K and the documents incorporated into this Form 10-K
by reference contain forward-looking statements regarding:
o our intention to generate growth through the introductions of new
proprietary drugs, the expanded sale and distribution of our current
products, the acquisition of new businesses and products and
strategic collaborations;
o the ability of our research programs to develop improved forms of
drugs, novel compounds and new delivery systems, including the
development of improved formulations of paclitaxel and complementary
products;
o our ability to integrate operations and exploit opportunities among
our subsidiaries;
o our capacity to become a worldwide leader in the asthma market;
o our ability to capitalize on current relationships in the oncology
market to market new generic biotech drugs and our commercialization
of Paxoral(trademark) and other oncology products;
21
o our capability to identify, acquire and successfully integrate new
acquisitions of companies and products;
o the ability of our new patented oral administration system to
provide patients effective doses of paclitaxel with more convenience
and reduced side-effects and the applicability of this system to
other chemotherapeutic agents;
o our ability to develop Easi-Breathe(registered trademark) for use
with various compounds;
o our ability to further develop CFC-free inhalation aerosol products;
o our ability to develop a corticosteroid with minimal side effects
to treat asthma and inflammatory diseases of the large intestine;
o our ability to develop new formulations and obtain marketing
authorizations which will enable us to be the first, or among the
first, to launch generic products;
o our ability to further develop and market talampanel, cladribine,
human growth hormone, interferon and products to treat
cystic fibrosis;
o our ability to develop or license proprietary products for
indications having large patient populations, or for which limited
or inadequate treatments exist;
o our capacity to accelerate product development and commercialization
by in-licensing products and by developing new dosage forms or new
therapeutic indications for existing products;
o anticipated trends in the pharmaceutical industry and the effect of
technological advances on competition;
o our estimates regarding the capacity of our facilities; and
o our intention to fund 2001 capital expenditures from existing cash
and internally generated funds.
These forward-looking statements reflect our current views about future
events and are subject to risks, uncertainties and assumptions. We wish to
caution readers that certain important factors may have affected and could in
the future affect our actual results and could cause actual results to differ
significantly from those expressed in any forward-looking statement. The most
important factors that could prevent us from achieving our goals, and cause the
assumptions underlying forward-looking statements and the actual results to
differ materially from those expressed in or implied by those forward-looking
statements include, but are not limited to, the following:
o difficulties in product development;
o efficacy or safety concerns with respect to marketed products,
whether or not scientifically justified, leading to recalls,
withdrawals or declining sales;
o our ability to identify potential acquisitions and to successfully
acquire and integrate such operations or products;
o the ability of the company to obtain approval from the FDA to market
new pharmaceutical products
o the acceptance of new products by the medical community as effective
as alternative forms of treatment for indicated conditions;
o the outcome of any pending or future litigation; and
o the impact of new regulations or court decisions regarding the
protection of patents and the exclusivity period for the marketing
of branded drugs.
You should also read carefully the section of this annual report on
Form 10-K under the heading "Risk Factors".
Financial Information about Foreign and Domestic Operations
Specific financial information with respect to our foreign and domestic
operations is provided in Note 13, Business Segment Information, in the Notes to
Consolidated Financial Statements incorporated by reference to the Financial
Information section of our 2000 Annual Report to Shareholders.
Item 2. Properties
Our corporate headquarters are located in Miami, Florida. We maintain
offices, warehouses, research and development facilities and/or distribution
centers in Argentina, China, the Czech Republic, Finland, Germany, Hong Kong,
Hungary, India, Ireland, Italy, Kazakhstan, Mexico, Latvia, Peru, Poland,
Russia, the Slovak Republic, Sweden, Switzerland, Taiwan, Ukraine, Uruguay,
Venezuela and various parts of the United
22
States and the United Kingdom, most of which are held pursuant to leases. None
of these leases are material to us.
We operate pharmaceutical manufacturing facilities in Buenos Aires,
Argentina; Beijing, China; Opava-Komarov, Czech Republic; Runcorn, England;
Miami, Florida; Falkenhagen, Germany; Budapest, Hungary; Waterford, Ireland;
Mexico City and Monterey, Mexico; Northvale, New Jersey; Cidra, Puerto Rico; St.
Croix, US Virgin Islands; Montevideo, Uruguay; and Guacara, Venezuela. IVAX
Diagnostics, Inc. has manufacturing facilities located in Springdale, Arkansas;
Miami, Florida; and Rome, Italy. We own our Miami, Budapest, Buenos Aires,
Cidra, Guacara, Mexico City, Monterey, Montevideo, Opava-Komarov and Falkenhagen
manufacturing facilities, and lease our remaining manufacturing facilities. In
connection with the sale of the specialty chemicals business, we retained
ownership of our manufacturing facilities in Rock Hill, South Carolina and
Marion, Ohio which we are seeking to sell.
We believe our facilities are in satisfactory condition, are suitable
for their intended use and, in the aggregate, have capacities in excess of those
necessary to meet our present needs. A portion of our pharmaceutical
manufacturing capacity and our research and development activities, as well as
our corporate headquarters and other critical business functions are located in
areas subject to hurricane casualty risk. Although we have certain limited
protection afforded by insurance, our business and our earnings could be
materially adversely affected in the event of a major windstorm.
Item 3. Legal Proceedings
In late April 1995, IVAX Pharmaceuticals, NV (which was formerly named
Zenith Laboratories, Inc.), one of our wholly-owned subsidiaries ("Zenith"),
received approvals from the FDA to manufacture and market the antibiotic
cefaclor in capsule and oral suspension formulations. Cefaclor is the generic
equivalent of Ceclor(R), a product of Eli Lilly and Company ("Lilly"). On April
27, 1995, Lilly filed a lawsuit against Zenith and others styled Eli Lilly and
Company v. American Cyanamid Company, Biocraft Laboratories, Inc., Zenith
Laboratories, Inc. and Biochimica Opos S.p.A. in the United States District
Court for the Southern District of Indiana, Indianapolis Division. In general,
the lawsuit alleges that Biochimica Opos S.p.A. ("Opos"), Zenith's cefaclor raw
material supplier, manufactured cefaclor raw material in a manner which
infringed two process patents owned by Lilly, and that Zenith and the other
defendants knowingly and willfully infringed and induced Opos to infringe the
patents by importing the raw material into the United States. The lawsuit seeks
to enjoin Zenith and the other defendants from infringing or inducing the
infringement of the patents and from making, using or selling any product
incorporating the raw material provided by Opos, and seeks an unspecified amount
of monetary damages and the destruction of all cefaclor raw material
manufactured by Opos and imported into the United States. In August 1995, the
Court denied Lilly's motion for preliminary injunction which sought to prevent
Zenith from selling cefaclor until the merits of Lilly's allegations could be
determined at trial. On May 10, 1996, the United States Court of Appeals for the
Federal Circuit affirmed the district court's denial of Lilly's motion for
preliminary injunction. On February 28, 1997, Lilly filed an amended complaint
alleging the infringement of an additional patent. Lilly subsequently filed a
second amended complaint but did not revise its allegations regarding Zenith.
Zenith has asserted a counterclaim, which remains pending. Zenith ceased selling
cefaclor in January 1997, when it announced a recall in the United States of
cefaclor as a result of the recall by Opos of the raw material used to
manufacture the product.
On December 21, 1998, an action purporting to be a class action, styled
Louisiana Wholesale Drug Co. vs. Abbott Laboratories, Geneva Pharmaceuticals,
Inc. and Zenith Goldline Pharmaceuticals, Inc., was filed against IVAX
Pharmaceuticals and others in the United States District Court for the Southern
District of Florida, alleging a violation of Section 1 of the Sherman Antitrust
Act. Plaintiffs purport to represent a class consisting of customers who
purchased a certain proprietary drug directly from Abbott Laboratories during
the period beginning on October 29, 1998. Plaintiffs allege that, by settling
patent-related litigation
23
against Abbott in exchange for quarterly payments, the defendants engaged in an
unlawful restraint of trade. The complaint seeks unspecified treble damages and
injunctive relief. Fourteen additional class action lawsuits containing
allegations similar to those in the Louisiana Wholesale case were filed in
various jurisdictions between July 1999 and February 2001, the majority of which
have been consolidated with the Louisiana Wholesale case. On December 13, 2000
plaintiffs' motion for summary judgement on the issue of whether the settlement
agreement constituted a per se violation of Section 1 of the Sherman Antitrust
Act in the Louisiana Wholesale case was granted. IVAX Pharmaceuticals has sought
leave to appeal to the United States Court of Appeals for the Eleventh Circuit.
On March 13, 2000 the Federal Trade Commission ("FTC") announced that it had
issued complaints against, and negotiated consent decrees with, Abbott
Laboratories and Geneva Pharmaceuticals arising out of an investigation of the
same subject matter that is involved in these lawsuits. The FTC took no action
against IVAX Pharmaceuticals.
IVAX Pharmaceuticals has been named in a number of individual and class
action lawsuits in both state and federal courts involving the diet drug
combination of fenfluramine and phentermine, commonly known as "fen-phen."
Generally, these lawsuits seek damages for personal injury, wrongful death and
loss of consortium, as well as punitive damages, under a variety of liability
theories including strict products liability, breach of warranty and negligence.
IVAX Pharmaceuticals did not manufacture either fenfluramine or phentermine, but
did distribute the generic version of phentermine manufactured by Eon Labs
Manufacturing, Inc. ("Eon") and Camall Company. Although IVAX Pharmaceuticals
had a very small market share, as of January 31, 2001, IVAX Pharmaceuticals has
been named in approximately 4,950 cases and has been dismissed from
approximately 3,381 cases, with additional dismissals pending. IVAX
Pharmaceuticals intends to vigorously defend all of the lawsuits, and while
management believes that its defense will succeed, as with any litigation, there
can be no assurance of this. Currently Eon is paying for approximately 50% of
IVAX Pharmaceuticals' costs in defending these suits and is fully indemnifying
IVAX Pharmaceuticals against any damages IVAX Pharmaceuticals may suffer as a
result of cases involving product manufactured by Eon. In the event Eon
discontinues providing this defense and indemnity, IVAX Pharmaceuticals has its
own product liability insurance. While IVAX Pharmaceuticals' insurance carriers
have issued reservations of rights, IVAX Pharmaceuticals believes that it has
adequate coverage. Although it is impossible to predict with certainty the
outcome of litigation, in the opinion of management, this litigation will not
have a material adverse impact on our financial condition or results of
operation.
On March 7, 2000, individuals purporting to be our shareholders filed a
class action complaint styled Goldfisher v. IVAX Corporation, et al. against us
and certain of our current and former officers and directors in the Circuit
Court of the 11th Judicial Circuit in and for Dade County, Florida. The
plaintiff seeks to act as the representative of a class consisting of all
purchasers of our common stock between December 19, 1997 and the date of class
certification. The complaint generally alleges that our adoption of a
shareholder rights plan containing a provision that would limit the ability of
certain members who might be added to the Board of Directors following a change
of control to approve a decision to redeem the rights, which is commonly known
as a "dead hand" provision, is a violation of the Florida Business Corporation
Act and our articles of incorporation and by-laws. Plaintiffs seek an injunction
invalidating this provision, as well as damages in an unspecified amount which,
in the opinion of management, would not be material. On February 8, 2001, a
motion for summary judgment was granted in our favor. Plaintiffs have a Motion
for Attorneys' Fees pending.
Paclitaxel Related Litigation
On March 26, 1998, Bristol Myers Squibb Company ("BMS") filed a
complaint in the United States District Court for the District of New Jersey
styled Bristol Myers Squibb Company v. Zenith Goldline Pharmaceuticals, Inc., et
al. alleging patent infringement of two of its patents relating to Taxol(R).
IVAX Pharmaceuticals filed various counterclaims based on antitrust and unfair
competition.
24
On March 3, 2000, the court granted IVAX Pharmaceuticals's motion for summary
judgment of invalidity. On April 17, 2000, BMS filed an appeal which remains
pending. IVAX Pharmaceuticals' counterclaims have been stayed.
On August 11, 2000, American BioScience, Inc. ("ABI") filed a complaint
in the United States District Court for the Central District of California
styled American BioScience, Inc. v. Bristol Myers Squibb Company for a temporary
restraining order and preliminary injunction compelling BMS to list in the FDA's
Orange Book ABI's `331 patent, which purportedly covers BMS's Taxol(R) product.
The listing of the patent in the FDA's Orange Book would have the effect of
blocking generic competition. A hearing was held on September 6, 2000 and the
Court denied ABI's request for preliminary injunction, declined to approve the
settlement between ABI and BMS and dismissed ABI's complaint and ordered that
BMS de-list the `331 patent. ABI appealed and sought a stay of the Order from
the Ninth Circuit Court of Appeals, which was denied on September 13, 2000. The
appeal remains pending.
On September 7, 2000, ABI filed a lawsuit for patent infringement
styled American BioScience, Inc. v. Baker Norton Pharmaceuticals, Inc., Zenith
Goldline Pharmaceuticals, Inc., and IVAX Corporation in the United States
District Court for Central District of California alleging infringement of its
`331 patent, which purports to cover paclitaxel, and seeking damages in an
unspecified amount. This matter remains pending.
On September 20, 2000, ABI filed a complaint in the United States
District Court for the District of Columbia styled American BioScience, Inc. v.
Donna E. Shalala, et al., which sought by temporary restraining order and
preliminary injunction a rescission of Baker Norton Pharmaceuticals' final
marketing approval by the FDA for its generic paclitaxel product. Both BMS and
Baker Norton Pharmaceuticals intervened in the action. On October 3, 2000, the
Court denied ABI's request for relief. Thereafter, ABI sought an emergency
injunction pending appeal from the United States Court of Appeals for the
District of Columbia Circuit, which was also denied on October 13, 2000. ABI's
appeal remains pending.
On October 16, 2000, ABI filed a complaint in the United States
District Court for the Central District of California styled American
BioScience, Inc. v. Donna E. Shalala, et al., which recites virtually the same
claims as the action ABI filed in the District of Columbia Court set out above.
IVAX Pharmaceuticals moved to intervene and opposed ABI's request for
preliminary injunction. On November 7, 2000, the United States District Court of
the District of Columbia ordered ABI to refrain from pursuing this litigation,
or any other litigation that duplicates the litigation ABI initiated in the
District of Columbia Circuit.
We intend to vigorously defend each of the foregoing lawsuits, but
their respective outcomes cannot be predicted. Any of such lawsuits, if
determined adversely to us, could have a material adverse effect on our
financial position and results of operations. Our ultimate liability with
respect to any of the foregoing proceedings is not presently determinable.
We are involved in various other legal proceedings arising in the
ordinary course of business, some of which involve substantial amounts. In order
to obtain generic approvals prior to the expiration of patents on branded
products, and to benefit from the exclusivity allowed to ANDA applicants that
successfully challenge these patents, we frequently become involved in patent
infringement litigation brought by branded pharmaceutical companies (see
"Governmental Regulation"). Although these lawsuits involve products that are
not yet marketed and therefore pose little or no risk of liability for damages,
the legal fees and costs incurred in defending such litigation can be
substantial. While it is not feasible to predict or determine the outcome or the
total cost of these proceedings, in the opinion of
25
management, based on a review with legal counsel, any losses resulting from such
legal proceedings will not have a material adverse impact on our financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
quarter ended December 31, 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Our common stock is listed on the American Stock Exchange and is traded
under the symbol IVX. As of the close of business on February 28, 2001, there
were approximately 3,843 holders of record of our common stock. The following
table sets forth the high and low sales price of a share of our common stock for
each quarter in 1999 and 2000 as reported by the American Stock Exchange and
restated to give effect to the 3 for 2 stock split paid on February 22, 2000:
2000 High Low
---- ---- ---
First Quarter $28.63 $17.00
Second Quarter 44.25 24.88
Third Quarter 52.88 24.25
Fourth Quarter $48.23 $33.40
1999
First Quarter $9.96 $7.37
Second Quarter 9.96 7.37
Third Quarter 11.79 9.54
Fourth Quarter $17.21 $10.25
We did not paid cash dividends on our common stock during 1999 or 2000
and we do not intend to pay any cash dividends in the foreseeable future.
Item 6. Selected Financial Data
The information required by item 6 is incorporated by reference to page
2 of the Financial Information section of the 2000 Annual Report to
Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by item 7 is incorporated by reference to
pages 3-14 of the Financial Information section of the 2000 Annual Report to
Shareholders.
26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by item 7A is incorporated by reference to
page 14 of the Financial Information section of the 2000 Annual Report to
Shareholders.
Item 8. Financial Statements and Supplementary Data
The information required by item 8 is incorporated by reference to
pages 16-47 of the Financial Information section of the 2000 Annual Report to
Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Officers
Set forth below are of the names, ages, officer's positions held and
business experience during the past five years of certain of our executive
officers as of February 28, 2001. Officers serve at the discretion of the Board
of Directors. There is no family relationship between any of the executive
officers, and there is no arrangement or understanding between any executive
officer and any other person pursuant to which the executive officer was
selected. Information regarding Mr. Flanzraich, Dr. Frost, Dr. Hsiao and Mr.
Kaye is provided below under directors.
Thomas Beier.
Thomas Beier, age 55, has served as our Senior Vice President - Finance
and Chief Financial Officer since October 1997. From December 1996 to October
1997, he served as our Vice President - Finance. Prior to joining us, he served
as Executive Vice President and Chief Financial Officer of Intercontinental Bank
from 1989 until August 1996.
Rafick Henein, Ph.D.
Rafick Henein, age 60, has served as one of our Senior Vice Presidents
and as the President and Chief Executive Officer of IVAX Pharmaceuticals, Inc.,
our principal United States-based generic pharmaceutical subsidiary, since July
1997. He held various positions in the Novopharm Limited organization
(pharmaceuticals) since 1988, rising to the position of President and Chief
Executive Officer of Novopharm International in 1996.
Directors
Set forth below are the names, ages, positions held and business
experience during the past five years of the persons who currently serve as our
directors.
Mark Andrews Director since 1987
Mark Andrews, age 50, has served as the Chairman and President of Great
Spirits Company LLC (consumer products) since founding it in 1998. He served as
the Chairman of the Board of Directors and Chief Executive Officer of American
Exploration Company (oil and gas exploration and production) from 1980 until its
merger into Louis Dreyfus Natural Gas Corp. (oil and gas exploration and
production) in October 1997 when he became the Vice Chairman of the Board of
Directors of the combined entity. Mr. Andrews has also served as Chairman of the
Board of Directors of Vault Mortgage Company (mortgage brokerage) since 1998.
27
Ernst Biekert, Ph.D. Director since 1991
Ernst Biekert, age 76, is a professor at the University of Heidelberg
in Germany. He was the Chairman of the Board and Chief Executive Officer of
Knoll A.G. (pharmaceuticals) from 1968 to 1985. Dr. Biekert was a consultant to
BASF A.G. (chemicals and pharmaceuticals) from 1985 to 1987 and was Chairman of
its pharmaceutical division from 1975 to 1985.
Charles M. Fernandez Director since 1998
Charles M. Fernandez, age 39, has been the President, Chief Executive
Officer, and a director of Big City Radio, Inc. (broadcasting/internet) since
1999. He has also been the Chairman of the Board of Continucare Corporation
(integrated health care) since 1996 and was its Chief Executive Officer from
1996 to 1999. He has also been Vice-Chairman of HealthCare2Net Solutions
(internet solutions) since 1999. From 1985 to 1996, he was the Executive Vice
President and a director of Heftel Broadcasting Corporation (radio
broadcasting). From 1998 to 1999 he was a director of Frost Hanna Capital Group,
Inc. (investment company).
Jack Fishman, Ph.D. Director since 1987
Jack Fishman, age 70, is an Adjunct Professor at The Rockefeller
University and director of Research of Strang Cornell Cancer Research
Laboratory, a non-profit entity associated with Cornell University Medical
College. He served as our Chief Scientific Officer from 1991 to 1995, as a Vice
Chairman of the Board from 1991 to 1997 and as our President from 1988 to 1991.
Dr. Fishman served as a Research Professor of Biochemistry and Molecular Biology
at the University of Miami from 1988 to 1992.
Neil Flanzraich Director since 1997
Neil Flanzraich, age 57, has served as our Vice Chairman and President
since May 1998. He was a shareholder and served as Chairman of the Life Sciences
Legal Practices Group of Heller Ehrman White & McAuliffe from 1995 to 1998. From
1981 to 1994, he served in various capacities at Syntex Corporation
(pharmaceuticals), most recently as its Senior Vice President, General Counsel
and a member of the Corporate Executive Committee. From 1994 to 1995, after
Syntex Corporation was acquired by Roche Holding Ltd., he served as Senior Vice
President and General Counsel of Syntex (U.S.A.) Inc., a Roche subsidiary. He
was Chairman of the Board of Directors of North American Vaccine, Inc. (vaccine
research and development) from 1991 to 2000. He is a director of Whitman
Education Group, Inc. (proprietary education).
Phillip Frost, M.D. Director since 1987
Phillip Frost, age 64, has served as our Chairman of the Board of
Directors and Chief Executive Officer since 1987. He served as our President
from July 1991 until January 1995. He was the Chairman of the Department of
Dermatology at Mt. Sinai Medical Center of Greater Miami, Miami Beach, Florida
from 1972 to 1990. Dr. Frost was Chairman of the Board of Directors of Key
Pharmaceuticals, Inc. from 1972 to 1986 and Vice Chairman of the Board of
Directors of North American Vaccine, Inc. (vaccine research and development)
from 1989 to 2000. He is Chairman of the Board of Directors of Whitman Education
Group, Inc. (proprietary education), Vice Chairman of the
28
Board of Directors of Continucare Corporation (integrated health care), and a
director of Northrop Grumman Corp. (aerospace). He is Vice Chairman of the Board
of Trustees of the University of Miami and a member of the Board of Governors of
the American Stock Exchange.
Jane Hsiao, Ph.D. Director since 1995
Jane Hsiao, age 53, has served as our Vice Chairman-Technical Affairs
since February 1995, as our Chief Technical Officer since July 1996, and as
Chairman, Chief Executive Officer and President of DVM Pharmaceuticals, Inc.,
our veterinary products subsidiary, since March 1998. From 1992 until February
1995, she served as our Chief Regulatory Officer and Assistant to the Chairman,
and as Vice President-Quality Assurance and Compliance of Baker Norton
Pharmaceuticals, Inc., our principal proprietary pharmaceutical subsidiary. From
1987 to 1992, Dr. Hsiao was Vice President-Quality Assurance, Quality Control
and Regulatory Affairs of Baker Norton Pharmaceuticals, Inc.
Isaac Kaye Director since 1990
Isaac Kaye, age 71, has served as our Deputy Chief Executive Officer
since 1990 and as Chairman of Norton Healthcare Limited, our principal United
Kingdom pharmaceutical subsidiary, since 1990.
Director Compensation
During 2000, each director who was not employed by us received an
annual fee of $15,000 for his or her service as a director. In addition, each
director is reimbursed for expenses incurred in attending board and committee
meetings. Pursuant to our 1994 Stock Option Plan, non-employee directors
automatically are granted each year, on the first business day following our
annual meeting of shareholders, non-qualified options to purchase 7,500 shares
of common stock at an exercise price equal to the fair market value of the
common stock on the date of the grant, and having a term of ten years.
Meetings and Committees of the Board of Directors
The Board held 8 meetings during 2000. During 2000, all incumbent
directors attended at least seventy-five percent (75%) of the meetings of the
Board and the committees of the Board on which they served. The Board does not
have a nominating committee, and the usual functions of such a committee are
performed by the entire Board.
Audit Committee - 6 Meetings
The American Stock Exchange has adopted new regulations applying to
audit committees and audit committee members which we must be in compliance with
no later than June 14, 2001. These rules require that we adopt an audit
committee charter, and that all members of our audit committee be "Independent,"
as defined in the American Stock Exchange listing standards. In response to this
our Board of Directors adopted an Audit Committee Charter. Additionally, we
expect our audit committee to be composed solely of independent directors by
June 14, 2001.
29
Function Members
- -------- -------
o Review adequacy of internal systems of o Charles M. Fernandez (Chairman)
accounting controls o Mark Andrews
o Recommend appointment of independent o Jack Fishman, Ph.D.
auditors o Jane Hsiao, Ph.D.
o Meet with independent auditors and
internal auditors regarding their
examination of the books and records
o Review financial statements
o Review management's disclosures
o Review findings and recommendations of auditors
o Reviewing other matters regarding financial
affairs and internal policies and procedures
Compensation and Stock Option Committee - 7 Meetings
Function Members
- -------- -------
o Recommend or approve compensation of o Mark Andrews (Chairman)
directors, executive officers and other highly o Ernst Biekert, Ph.D.
paid employees o Charles M. Fernandez
o Review employee benefit programs
o Authorize stock option grants and establish
terms of stock option agreements
Regulatory Compliance Committee - 2 Meetings
Function Members
- -------- -------
o Review compliance with regulatory o Ernst Biekert, Ph.D. (Chairman)
requirements o Jack Fishman, Ph.D.
o Review quality assurance functions of o Jane Hsiao, Ph.D.
worldwideoperations.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and ten percent (10%) shareholders to file initial
reports of ownership and reports of changes in ownership of common stock and
other of our equity securities with the Securities and Exchange Commission and
the American Stock Exchange. Directors, executive officers and ten percent (10%)
shareholders are required to furnish us with copies of all Section 16(a) reports
they file. Based on a review of the copies of such reports furnished to us and
written representations from our directors and executive officers that no other
reports were required, we believe that, during 2000, our directors, executive
officers and ten percent (10%) shareholders complied with all Section 16(a)
filing requirements applicable to them except that one Form 4 was inadvertently
filed late by each of Mr. Andrews, Dr. Biekert, Dr. Frost, Dr. Hsiao and Mr.
Kaye.
Compensation Committee Interlocks and Insider Participation
Charles M. Fernandez is the Chairman of the Board of Continucare
Corporation and serves on the Compensation and Stock Option Committee of our
Board. Phillip Frost, M.D. serves on the Board of Directors of Continucare
Corporation and is an executive officer and director of ours.
30
Item 11. Executive Compensation
Executive Compensation
The following table contains certain information regarding aggregate
compensation paid or accrued by us during 1998, 1999 and 2000 to the Chief
Executive Officer and to each of the four highest paid executive officers other
than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
---------------------------------------------------- Compensation
Shares
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Stock Options Compensation
------------------ ---- ------ ----- ------------ ------------- ------------
($) ($) ($) (#) ($)(1)
Phillip Frost, M.D. 2000 700,000 650,000 0 450,000 5,100
Chief Executive Officer 1999 575,000 316,250(2) 0 0 4,800
1998 575,000 0 0 225,000 4,800
Isaac Kaye (3) 2000 667,175 531,130 * 450,000 0
Deputy Chief Executive Officer 1999 541,716 287,500 * 0 0
1998 550,301 0 * 225,000 0
Neil Flanzraich (4) 2000 600,000 525,000 0 375,000 5,100
President 1999 500,000 275,000(2) 0 0 4,800
1998 296,154 147,754 0 600,000 4,800
Jane Hsiao, Ph.D. 2000 600,000 525,000 * 375,000 5,100
Chief Technical Officer 1999 400,000 270,000(2) * 0 4,800
1998 338,462 200,000 * 300,000 4,800
Rafick G. Henein, Ph.D. 2000 648,500 200,000 0 120,000 5,100
Senior Vice President 1999 635,123 279,900(2) 0 56,250 4,800
1998 613,500 75,000 * 112,500 4,800
* Value of perquisites and other personal benefits paid does not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
the executive officer.
(1) The amounts set forth in the "All Other Compensation" column represent
matching contributions made by us under the IVAX Corporation Employee
Savings Plan, an employee retirement plan maintained under Section 401(k)
of the Internal Revenue Code.
(2) The amount included in "bonus" for 1999 includes a retention bonus of 5% of
1999 base salary, which was paid to all our employees who were employed in
the United States for the period from July 1, 1998 through June 30, 1999,
excluding those employees subject to collective bargaining agreements or
other retention programs.
(3) Mr. Kaye's salary and other compensation are paid in British pounds. The
information in the table is based on the average exchange rate during the
applicable year.
(4) Mr. Flanzraich's employment commenced in May 1998.
Employment Agreements
In November 1997, we entered into employment agreements with Dr. Frost
and Mr. Kaye, pursuant to which Dr. Frost serves as Chairman and Chief Executive
Officer and Mr. Kaye serves as Deputy Chief Executive Officer and as Chief
Executive Officer of Norton Healthcare Limited, our United Kingdom subsidiary.
Pursuant to the agreements, Dr. Frost receives an annual base salary of not less
than $575,000, and Mr. Kaye receives an annual base salary of not less than
$575,000 less certain automobile-related expenses paid on his behalf. The
agreements provide for severance payments if either executive's employment is
terminated under certain
31
circumstances. The agreements have five-year terms, and automatically renew for
additional two-year terms thereafter unless terminated by either party.
In July 1997, we entered into an employment agreement with Dr. Henein
pursuant to which he serves as our Senior Vice President and as the President
and Chief Executive Officer of IVAX Pharmaceuticals, Inc. Pursuant to the
agreement, Dr. Henein was paid a signing bonus of $200,000 and he was granted
options to purchase 375,000 shares of common stock. He is entitled to an annual
base salary of not less than $575,000, an additional annual cash payment of
$38,500 and certain employee benefits, and he is eligible for an annual bonus of
up to one hundred percent (100%) of his base salary dependent on the performance
of IVAX Pharmaceuticals, Inc. We also agreed to pay Dr. Henein's relocation
expenses, including a $100,000 payment to cover the loss on the sale of his
former residence. The agreement provides for severance benefits if Dr. Henein's
employment is terminated under certain circumstances. The agreement has a
five-year term, and automatically renews for additional two-year terms
thereafter unless terminated by either party.
In January 1998, we entered into an employment agreement with Dr. Hsiao
pursuant to which she serves as our Chief Technical Officer. Pursuant to the
agreement, Dr. Hsiao receives an annual base salary of not less than $300,000.
The agreement provides for severance payments if Dr. Hsiao's employment is
terminated under certain circumstances. The agreement has a five-year term, and
automatically renews for additional two-year terms thereafter unless terminated
by either party.
In May 1998, we entered into an employment agreement with Mr.
Flanzraich pursuant to which he serves as our Vice Chairman and President.
Pursuant to the agreement, Mr. Flanzraich was paid a signing bonus of $100,000
and is entitled to receive an annual base salary of not less than $500,000. The
agreement provides for severance payments if Mr. Flanzraich's employment is
terminated under certain circumstances. The agreement has a five-year term, and
automatically renews for additional two-year terms thereafter unless terminated
by either party.
Change in Control Agreements
We have entered into change in control employment agreements with
certain officers, including Dr. Frost, Mr. Kaye, Mr. Flanzraich, Dr. Hsiao and
Dr. Henein. These agreements are intended to provide protection to key employees
and to provide for continuity of management in the event of a change in control.
The agreements become effective if a change in control occurs during the
three-year period that commences on the execution of the agreement. The period
is automatically renewed each year for an additional three years, unless we
provide notice of non-renewal.
Under the change in control agreements, a change in control includes
any of the following events: (1) the acquisition of forty percent (40%) or more
of our common stock by a person or group; (2) a change in the majority of our
board (other than a change approved by the incumbent board); (3) approval by the
shareholders of a reorganization, merger or consolidation; or (4) approval by
the shareholders of a liquidation or dissolution or sale of all or substantially
all of our assets. Exceptions are provided for certain transactions, including
those where our existing shareholders maintain effective control.
Once the agreements become effective upon a change in control, they
have a term of three years. Each agreement provides that a covered officer will
have a position, responsibilities and authority at least commensurate with those
held during the ninety days preceding the change in control. Each agreement also
provides that the covered officer will be paid an annual base salary equal to
the highest salary received during the twelve months preceding the change in
control; will be entitled to an annual bonus equal to the average annual bonus
paid during the three years preceding the change in control; will be entitled to
a one-time special bonus equal to his annual base salary plus the higher of his
last annual
32
bonus or the average annual bonus paid during the three years preceding the
change in control if the officer remains employed with us through the six month
anniversary of the change in control; and will be entitled to continued
participation in our benefit plans, fringe benefits, office support and staff,
vacation, and expense reimbursement on the same basis as prior to the change in
control, and in any case no less favorable than those provided by us to peer
executives (as defined in the agreements).
If, following a change in control, the officer is terminated for any
reason other than death, disability or for cause, or if such officer terminates
his or her employment agreement for good reason (as defined in the agreements)
or for any reason during the thirty-day period following the six month
anniversary of the change in control, then the officer is entitled to a
severance payment equal to two times the officer's annual base salary (as
defined in the agreements) plus the higher of his last annual bonus or the
average annual bonus paid during the three years preceding the change in
control. In addition, if the special bonus has not been paid to the officer, the
severance payment shall be increased by the amount of the special bonus. The
agreements also provide that the officer is entitled to continue to participate
in our welfare benefit plans for the full three-year period.
In the event that any payments made in connection with a change in
control would be subjected to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, we will "gross-up" the officer's
compensation for all federal, state and local income and excise taxes and any
penalties and interest.
Stock Options
The following table sets forth information concerning stock option
grants made during 2000 to the executive officers named in the "Summary
Compensation Table." All stock options identified in the table are nonqualified
options and vest in equal portions over four years.
STOCK OPTION GRANTS IN FISCAL YEAR 2000
Potential Realizable Value
Percent of at Assumed Annual Rates of
Shares Total Stock Price Appreciation for
Underlying Options Option Term
Options Granted to Exercise Expiration ----------------------------
Name Granted Employees Price Date 5% 10%
---- ------- --------- ----- ----
(#) (%) ($) ($) ($)
Phillip Frost, M.D. 450,000 8.9 18.2917 1/12/10 3,350,951 7,809,142
Isaac Kaye 450,000 8.9 18.2917 1/12/10 3,350,951 7,809,142
Neil Flanzraich 375,000 7.4 18.2917 1/12/10 2,792,460 6,507,618
Jane Hsiao, Ph.D. 375,000 7.4 18.2917 1/12/10 2,792,460 6,507,618
Rafick G. Henein, Ph.D. 120,000 2.4 23.0833 2/02/10 1,127,667 2,627,943
The following table sets forth information concerning stock option
exercises during 2000 by each of the executive officers named in the "Summary
Compensation Table" and the year-end value of unexercised options held by such
officers, based on the closing price of $38.30 on December 29, 2000.
33
STOCK OPTION EXERCISES IN FISCAL YEAR 2000
AND FISCAL YEAR-END OPTION VALUES
Shares Number of Shares Value of Unexercised
Acquired Underlying Unexercised in-the-Money Options
on Value Options at Fiscal Year-End at Fiscal Year-End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
(#) ($) (#) (#) ($) ($)
Phillip Frost, M.D. 375,000 1,918,770 337,500 562,500 8,702,820 12,642,176
Isaac Kaye 300,000 2,714,259 412,500 562,500 9,831,570 12,642,176
Neil Flanzraich 0 0 307,500 675,000 9,969,758 17,243,123
Jane Hsiao, Ph.D. 337,500 3,287,123 262,500 562,500 8,194,384 13,468,744
Rafick G. Henein, Ph.D. 50,000 1,689,585 395,312 218,438 12,743,461 4,884,847
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table indicates, as of February 28, 2001, information
about the beneficial ownership of our common stock by (1) each director, (2)
each executive officer named in the "Summary Compensation Table," (3) all
directors and executive officers as a group, and (4) each person who we know
beneficially owns more than 5% of our common stock. All shares were owned
directly with sole voting and investment power unless otherwise indicated.
Name or Identity Shares Percent
of Group Beneficially Owned(1) of Class
-------- --------------------- --------
Mark Andrews 60,200(2) *
Ernst Biekert, Ph.D. 39,000(3) *
Charles M. Fernandez 172,500(4) *
Jack Fishman, Ph.D. 2,949,923(5) 1.84%
Neil Flanzraich 564,236(6) *
Phillip Frost, M.D. 24,595,405(7) 15.35%
Rafick G. Henein, Ph.D. 466,904(8) *
Jane Hsiao, Ph.D. 5,056,780(9) 3.16%
Isaac Kaye 495,000(10) *
Putnam Investment, LLC 10,655,169(11) 6.65%
Putnam Investment Management, LLC 8,651,470(11) 5.40%
All directors and executive 34,455,397(12) 21.50%
officers as a group (10 persons)
- --------------------
* Represents beneficial ownership of less than one percent (1%).
(1) For purposes of this table, beneficial ownership is computed pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934.
(2) Includes 12,500 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001. Mr. Andrews disclaims
beneficial ownership of 4,200 shares held by a trust for the benefit of his
children.
(3) Includes 5,000 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001.
(4) Includes 27,500 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001.
(5) Includes 5,000 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001. Dr. Fishman disclaims
beneficial ownership of 10,000 shares held by his wife.
(6) Includes 551,250 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001.
(7) Includes 450,000 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001, 19,235,540 shares held by
Frost-Nevada Limited Partnership ("FNLP") and 750,000 shares which may be
acquired by FNLP upon exercise of a warrant. Dr. Frost is the sole limited
34
partner of FNLP and the sole shareholder of Frost-Nevada Corporation, the
general partner of FNLP. Dr. Frost disclaims beneficial ownership of
244,550 shares held by his wife. Dr. Frost's business address is 4400
Biscayne Boulevard, Miami, Florida 33137.
(8) Includes 425,312 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001.
(9) Includes 1,476,427 shares held as trustee for the benefit of certain family
members and 393,750 shares which may be acquired pursuant to stock options
exercisable within 60 days of March 31, 2001.
(10) Includes 45,000 shares owned by Woodworth Investment Ltd. and 450,000
shares which may be acquired pursuant to stock options exercisable within
60 days of March 31, 2001
(11) Based on information contained in a Schedule 13G dated February 20, 2001,
filed by Marsh & McLennan Companies, Inc. Includes 8,651,470 shares owned
by Putnam Investment Management, LLC and 2,003,699 shares owned by The
Putnam Advisory Company, LLC, wholly owned subsidiaries of Putnam
Investment, LLC. Putnam Investment, LLC disclaims beneficial ownership of
these shares. Putnam Investment, LLC's and Putnam Investment Management,
LLC's business address is One Post Office Square, Boston, Massachusetts
02109.
(12) Includes all of the shares of common stock, identified in notes 2 through
10 above, that may be acquired pursuant to stock options exercisable within
60 days of March 31, 2001, plus 26,250 additional shares that may be
acquired pursuant to stock options exercisable within 60 days of March 31,
2001.
Item 13. Certain Relationships and Related Transactions
Whitman Education Group, Inc. ("Whitman") leases approximately 6,964
square feet of office space from us in Miami, Florida at an annual rental of
$153,031. The lease may be terminated by either party upon 180 days notice.
Certain of our executive officers and directors serve as directors of Whitman.
In addition, Dr. Frost is a principal shareholder of Whitman.
We paid $1,968,525 to PharmAir Corporation ("PharmAir") for use of an
airplane in 2000 and intend to make additional payments to PharmAir for use of
the airplane in 2001. PharmAir is indirectly beneficially owned by Dr. Frost.
In November 1999, we borrowed fifty million dollars ($50,000,000) from
Frost-Nevada Limited Partnership to pay for part of the purchase of our common
stock from BASF Corporation. The loan had an original term of fourteen (14)
months and bore simple interest at the rate of ten percent (10%) per year. On
June 30, 2000 the loan was repaid. In connection with this transaction, we also
granted to Frost-Nevada Limited Partnership a warrant to purchase seven hundred
fifty thousand (750,000) shares of common stock at a price of $12.00 per share,
exercisable immediately and expiring seven (7) years from the date of grant.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The following consolidated financial statements, related notes and
independent auditors' report, from the Financial Information section of the 2000
Annual Report to Shareholders, are incorporated by reference into item 8 of Part
II of this report:
35
Page in the
Financial
Information
Section of 2000
Annual Report to
Shareholders
------------
Report of Independent Certified Public Accountants 15
Consolidated Balance Sheets 16
Consolidated Statements of Operations 17
Consolidated Statements of Shareholders' Equity 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 22
(a)(2) Financial Statement Schedule
The following financial statement schedule is filed as a part of this
report:
Schedule II Valuation and Qualifying Accounts for the three years
ended December 31, 2000
All other schedules have been omitted because the required information
is not applicable or the information is included in the consolidated financial
statements or the notes thereto.
The independent auditors' report with respect to Schedule II is also
filed as part of this report.
(a)(3) Exhibits
Exhibit
Number Description Method of Filing
------ ----------- ----------------
3.1 Articles of Incorporation. Incorporated by reference to our
Form 8-B dated July 28, 1993.
3.2 Amended and Restated Bylaws. Incorporated by reference to our
Form 10-Q for the quarter ended
September 30, 1997.
4.1 Indenture dated May 12, 2000, between IVAX Corporation Incorporated by reference to our
and U.S. Bank Trust National Association, as Trustee, Form S-3 dated August 7, 2000.
with respect to IVAX Corporation's 5 1/2% Convertible
Subordinated Notes due May 15, 2007.
4.2 Form of 5 1/2% Convertible Subordinated Notes due May 15, Incorporated by reference to our
2007 in Global Form. Form S-3 dated August 7, 2000.
36
4.3 Rights Agreement, dated December 29, 1997, between IVAX Incorporated by reference to our
Corporation and ChaseMellon Shareholder Services, L.L.C., Form 8-K dated December 19, 1997.
with respect to the IVAX Corporation Shareholder Rights
Plan.
10.1 IVAX Corporation 1985 Stock Option Plan. Incorporated by reference to our
Form 10-K for the year ended
December 31, 1997.
10.2 IVAX Corporation 1994 Stock Option Plan. Incorporated by reference to our
Form 10-K for the year ended
December 31, 1997.
10.3 Form of Indemnification Agreement for Directors. Incorporated by reference to our
Form 8-B dated July 28, 1993.
10.4 Form of Indemnification Agreement for Officers. Incorporated by reference to our
Form 8-B dated July 28, 1993.
10.5 Agreement Containing Consent Order, dated December 6, Incorporated by reference to our
1994, between IVAX Corporation and the United States Form 10-K for the year ended
Federal Trade Commission. December 31, 1994.
10.6 Employment Agreement, dated November 28, 1997, between Incorporated by reference to our
IVAX Corporation and Phillip Frost, M.D. Form 10-K for the year ended
December 31, 1997.
10.7 Employment Agreement, dated November 28, 1997, between Incorporated by reference to our
IVAX Corporation and Isaac Kaye. Form 10-K for the year ended
December 31, 1997.
10.8 Employment Agreement, dated January 19, 1998, between Incorporated by reference to our
IVAX Corporation and Jane Hsiao, Ph.D. Form 10-K for the year ended
December 31, 1997.
10.9 Employment Agreement, dated July 28, 1997, between IVAX Incorporated by reference to our
Corporation and Rafick G. Henein, Ph.D. Form 10-Q for the quarter ended June
30, 1997.
10.10 Employment Agreement, dated as of May 26, 1998, between Incorporated by reference to our
IVAX Corporation and Neil Flanzraich. Form 10-Q for the quarter ended
September 30, 1998.
10.11 Form of Employment Agreement (Change in Control) between Incorporated by reference to our
IVAX Corporation and certain of its executive officers. Form 10-K for the year ended
December 31, 1998.
10.12 Stock Purchase Agreement, dated May 30, 1997, between Incorporated by reference to our
IVAX Corporation and B. Braun of America Inc. Form 8-K dated June 24, 1997.
37
10.13 Purchase Agreement, dated June 16, 1998, by and between Incorporated by reference to our
IVAX Corporation and Carson, Inc. Form 10-Q for the quarter ended June
30, 1998.
10.14 Credit Agreement, dated as of July 14, 1998, among IVAX Incorporated by reference to our
Corporation, Carson, Inc. and Carson Products Company. Form 10-Q for the quarter ended June
30, 1998.
10.15 Product Collaboration and Development Services Agreement
Incorporated by reference to our dated November 18, 1999,
among IVAX Corporation, Norton Form 10-K for the year ended
Healthcare Limited, Baker Norton International GmbH and
December 31, 1999. Bristol-Myers Squibb Company.
(Confidential Treatment Granted)
10.16 IVAX Corporation 1999 Employee Stock Purchase Plan. Incorporated by reference to our
Form 10-K for the year ended
December 31, 1999.
10.17 Stock Purchase Agreement dated June 19, 2000 between IVAX Incorporated by reference to our
Corporation and Alpha Centura Holdings, N.V. Form 10-Q for the quarter ended June
30, 2000.
10.18 Stock Purchase Agreement dated June 19, 2000 between IVAX Incorporated by reference to our
Corporation and Mountainrise Trading Limited. Form 10-Q for the quarter ended June
30, 2000.
10.19(a) Agreement and Plan of Merger dated August 3, 2000 among Incorporated by reference to our
IVAX Corporation, Wakefield Pharmaceuticals, Inc., the Form 10-Q for the quarter ended
Principal Stockholders of Wakefield Pharmaceuticals, Inc. September 30, 2000.
and WPI Merger Corporation.
10.19(b) Amendment to Agreement and Plan of Merger dated August Incorporated by reference to our
14, 2000 among IVAX Corporation, Wakefield Form 10-Q for the quarter ended
Pharmaceuticals, Inc., the Principal Stockholders of September 30, 2000.
Wakefield Pharmaceuticals, Inc. and WPI Merger
Corporation.
10.20 Stock Purchase Agreement between Morcob, CVA and IVAX Incorporated by reference to our
Corporation Form 8-K dated February 23, 2001.
10.21 IVAX Corporation 1997 Stock Option Plan. Incorporated by reference to our
Form S-8 dated December 22, 1997.
10.22 Non-Negotiable Promissory Note dated November 18, 1999 Filed herewith.
between IVAX Corporation as Maker and Frost-Nevada
Limited Partnership as Payee.
38
10.23 Warrant to Purchase Shares of Common Stock of IVAX Filed herewith.
Corporation dated November 18, 1999 between IVAX
Corporation and Frost-Nevada Limited Partnership.
13 The Financial Information section of the 2000 Annual Filed herewith.
Report to Shareholders. With the exception of those
portions of said Annual Report which are specifically
incorporated by reference in this report on Form 10-K and
filed as an exhibit to this report, said Annual Report is
not to be deemed "filed" with the Commission.
21 Subsidiaries of IVAX Corporation. Filed herewith.
23 Consent of Arthur Andersen LLP. Filed herewith.
- --------------------------------------------------------------------------------
(b) Reports on Form 8-K.
On November 30, 2000, we filed a report on Form 8-K providing, as
additional information, an Exhibit which showed net revenues by geographic
region for certain previous quarterly periods to make them consistent with the
information provided in our Form 10-Q for the three months ended September 30,
2000.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
IVAX CORPORATION
Dated: March 30, 2001 By: /s/ Phillip Frost, M.D.
---------------------------------
Phillip Frost, M.D.
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ Phillip Frost, M.D. Chairman of the Board and March 30, 2001
- ------------------------------------ Chief Executive Officer
Phillip Frost, M.D. (Principal Executive Officer)
/s/ Thomas E. Beier Chief Financial Officer March 30, 2001
- ------------------------------------ (Principal Financial Officer)
Thomas E. Beier
/s/ Thomas E. McClary Vice President - Accounting March 30, 2001
- ------------------------------------ (Principal Accounting Officer)
Thomas E. McClary
/s/ Mark Andrews Director March 30, 2001
- ---------------------------
Mark Andrews
/s/ Ernst Biekert, Ph.D. Director March 30, 2001
- ------------------------------------
Ernst Biekert, Ph.D.
/s/ Charles M. Fernandez Director March 30, 2001
- ---------------------------
Charles M. Fernandez
/s/ Jack Fishman, Ph.D. Director March 30, 2001
- ------------------------------------
Jack Fishman, Ph.D.
/s/ Neil Flanzraich Director, President and Vice Chairman March 30, 2001
- ------------------------------------
Neil Flanzraich
/s/ Jane Hsiao, Ph.D. Director and Vice Chairman- March 30, 2001
- ------------------------------------ Technical Affairs
Jane Hsiao, Ph.D.
/s/ Isaac Kaye Director and Deputy Chief March 30, 2001
- ------------------------------------
Isaac Kaye Executive Officer
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors and Shareholders
of IVAX Corporation:
We have audited in accordance with auditing standards generally accepted in the
United States, the financial statements included in IVAX Corporation's annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 5, 2001 (except with respect to the
matters discussed in Note 17, as to which the date is March 14, 2001). Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The Financial Statement Schedule II listed in Item 14 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This financial statement schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 5, 2001.
SCHEDULE II
IVAX CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2000
(in thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
- --------------------------------
Balance at Charged to
Beginning Cost and Net Balance at
Description of Year Expenses Deductions Other End of Year
- ----------------------------------------- ----------- -------- ---------- ------ -----------
Year ended December 31, 1998 $ 19,226 7,650 (4,643) 601 $22,834
=========== ======== ========== ====== =======
Year ended December 31, 1999 $ 22,834 4,147 (3,747) (1,176) $22,058
=========== ======== ========== ====== =======
Year ended December 31, 2000 $ 22,058 (132) (1,680) (543) $19,703
=========== ======== ========== ====== =======
ENVIRONMENTAL AND LITIGATION ACCRUAL RELATED TO DISCONTINUED OPERATIONS
- -----------------------------------------------------------------------
Balance at Charged to
Beginning Cost and Net Balance at
Description of Year Expenses Deductions End of Year
- --------------------------- ---------- --------- ---------- -----------
Year ended December 31, 1998 $2,000 2,900 (464) $4,436
====== ===== ====== ======
Year ended December 31, 1999 $4,436 308 (1,524) $3,220
====== ===== ====== ======
Year ended December 31, 2000 $3,220 -- (1,636) $1,584
====== ===== ====== ======
RESTRUCTURING RESERVES
- ----------------------
Employee
Termination Plant
Benefits Closures Total
----------- -------- --------
Balance at January 1, 1998 $ 4,547 $ 9,367 $ 13,914
1998 restructuring costs 6,305 8,740 15,045
Reversals of restructuring costs charged in prior years (442) (7,741) (8,183)
Cash payments during 1998 (3,538) (3,042) (6,580)
Non-cash activity (1,098) 936 (162)
-------- -------- --------
Balance at December 31, 1998 5,774 8,260 14,034
Reversals of restructuring costs charged in prior years (73) -- (73)
Cash payments during 1999 (4,264) (3,539) (7,803)
Non-cash activity 123 (298) (175)
-------- -------- --------
Balance at December 31, 1999 1,560 4,423 5,983
Reversals of restructuring costs charged in prior years (628) (3,907) (4,535)
Cash payments during 2000 (795) (422) (1,217)
Non-cash activity (27) 525 498
-------- -------- --------
Balance at December 31, 2000 $ 110 $ 619 $ 729
======== ======== ========
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.22 Non-Negotiable Promissory Note dated November 18, 1999
between IVAX Corporation as Maker and Frost-Nevada Limited
Partnership as Payee.
10.23 Warrant to Purchase Shares of Common Stock of IVAX
Corporation dated November 18, 1999 between IVAX Corporation
and Frost-Nevada Limited Partnership.
13 The Financial Information section of the 2000 Annual Report
to Shareholders. With the exception of those portions of
said Annual Report which are specifically incorporated by
reference in this report on Form 10-K and filed as an
exhibit to this report, said Annual Report is not to be
deemed "filed" with the Commission.
21 Subsidiaries of IVAX Corporation.
23 Consent of Arthur Andersen LLP.