Here is some info on immunex by the CEO
April 30, 1997
Good morning and welcome to the annual meeting of Immunex shareholders.
I am Ed Fritzky Immunex chairman and chief executive officer.
It is my pleasure to welcome you today on behalf of our more than 800 employees in Seattle and
across the United States.
1996 was an action-packed year for your company, and I am pleased for our shareholders that the
stock market has begun to recognize company progress. Progress since our last shareholder's
meeting has been accomplished on three fronts:
First, we have enhanced the value of our existing product franchises. We have gained new
FDA approvals for broadening the clinical utility of NOVANTRONEr (mitoxantrone) and
LEUKINEr (sargramostim), our largest products. In the first quarter, these new claims have
increased product sales and positioned Immunex to land strategic deals with new customers
in the cancer field.
Second, in product development, we are more encouraged than ever over our new product
line-up. Our rheumatoid arthritis therapeutic ENBRELT (TNF receptor) has advanced to
Phase III testing since we last met, and other new product candidates Flt3 ligand and IL-4
receptor have cleared safety testing. Flt 3 ligand is a new cancer care product and IL-4
receptor is Immunex's first product lead in the asthma market.
Third, in discovery research, the bedrock of the company, Immunex scientists have added
three new candidates to our preclinical portfolio. They are IL-17 receptor CD39 and
TRAIL. These new molecules represent the potential to broaden our cancer business and
lead us into additional new markets such as cardiovascular disease. And our basic science
remains vibrant. Immunex scientists patented their 25th human gene in 1996 and now hold
over 300 patents worldwide.
Improving the Value of Marketed Oncology Products
1996 has indeed been a year of excitement and we have begun to attract broader interest on Wall
Street and have added considerably to the company's market value.
New claims and new product opportunities are the value drivers.
As I've told you in past years expanding the marketing claims for our cancer products is a key goal.
Our cancer franchise is important because it generates the cash we need for future product
development.
In 1996 we bolstered the value of our cancer franchise when we gained approval for a great new
claim for Novantrone and a new form of Leukine. Both of these approvals came in the fourth
quarter of 1996.
New Claim for Novantrone
The new use of Novantrone is an important addition for our business and for patients.
At this meeting last year we told you of our new data supporting Novantrone's use in advanced
prostate cancer, and today thousands of patients are benefiting from it.
The FDA review and approval of Novantrone, in combination with corticosteroids, for treatment of
pain related to advanced hormone-refractory prostate cancer was accomplished in just six months
and stands out in my mind as one of the cleanest smoothest interactions with the FDA I've
witnessed in my 24 years in this business.
And Novantrone's help for prostate cancer patients is having an early effect on sales.
In the first quarter, which we just reported, sales were up 25 percent over the fourth quarter of
1996, and up 44 percent over the first quarter of 1996.
This early sales growth is being generated by cancer specialists. A majority of cancer specialists
have now prescribed Novantrone for advanced prostate cancer patients. That's the good news. The
challenge now is to create Novantrone awareness with the urologist, the primary care-giver for the
patient with prostate cancer.
To grow Novantrone demand further we need to stimulate urologist referrals to the oncologist who
is experienced with chemotherapy.
We believe the prostate cancer patient himself and his family will help prompt referrals, thus we
have begun Novantrone patient awareness campaigns.
We have brought along examples of patient education materials. These include the first handbook
for patients on how to deal with the demands of advanced prostate cancer. This new patient
information is a product of a lot of hard work of patient advocacy groups, urologists, oncologists,
pain specialists, and psychologists. This handbook is highly recommended for anyone who has
prostate cancer.
And this summer we will test a consumer advertising campaign that urges wives and family members
of prostate cancer sufferers to ask their doctors about Novantrone as a new treatment option.
You can see that we are working to take full commercial advantage of our new claim. From that
standpoint, 1996 was a good year for Leukine as well.
New Leukine Formulation
Last year we gained a strong foothold in the hospital market where sales were up in the 20 percent
range, and now we have new Leukine Liquid FDA approved. It is a product form that is more
convenient to use than the original Leukine launched way back in 1991.
Since its launch in January, new Leukine has gained nearly immediate acceptance and represents
three-quarters of total Leukine sales just 60 days after introduction.
And most important, it is sparking a new interest in Leukine in the outpatient clinical setting, where
our competition has dominated.
New Leukine coupled with new clinical research positions us to gain market share in cancer today
and to enter new markets in the future.
Last month we announced new data showing that Leukine may extend life for cancer patients
suffering from advanced melanoma.
And, we have just learned from another clinical study that Leukine may improve the effectiveness of
certain vaccines, such as the flu vaccine. By the end of this year we will learn if Leukine protects
premature infants from the risk of deadly infections.
All of this new Leukine research has been costly -- but essential for achieving the commercial
potential of Leukine.
In fact, product improvements and new research have recently helped us sign on new strategic
customers such as American Oncology Resources.
This is a company with 250 oncologists who treat some 60,000 new cancer patients a year in 15
states. They are the largest provider of community cancer services in America.
Partnerships like this one are having a positive effect on market share.
Leukine's market share in the American Oncology system before our deal was 15 percent, today it
is 70 percent.
Also, in the past year, new prestigious institutions are including Leukine in treatment protocols for
the first time. A few examples from across the country are: M.D. Anderson in Houston, Barnes in
St. Louis, Roswell Park in Buffalo, Hahnemann in Philadelphia, and the Cleveland Clinic.
On the other hand we have lots more work to do.
We are fortunate to have tough customers like the Fred Hutchinson Cancer Research Center in our
own back yard.
While we hope to make all tough customers great customers, I seek comfort in knowing that the
famous professor at the Harvard Business School -- Michael Porter -- recently said that companies
are better off in the long run if they have their toughest customers in their own back yard.
We do.
Sales of Leukine overall are moving, and total market share is increasing. Leukine sales in the first
quarter of 1997 were $13 million, an increase of 22 percent over the fourth quarter of '96 and up
18 percent over the first quarter of '96.
These are encouraging sales trends, but as always, with new products, we will want to see another
six month's worth of sales history to understand more fully adoption patterns for Leukine and
Novantrone.
These new opportunities will help us offset declines in other products that have had aggressive
generic competition.
In 1996 we were hurt badly by competitive pricing pressure aimed at our leucovorin product
franchise. The pricing in that market had declined some 50 percent.
Our near-term answer to that competitive pressure is developing improved product offerings. But
that is only a temporary defense. The long-term defense is really an offense -- it's new claims for
proprietary products, and new patented products.
Overall, we are forecasting sales growth this year in the range of ten percent.
Product sales growth is vital. It provides the cash to fund new product development, which is our
second area of business focus.
Enhancing New Product Development
Our progress here is a direct result of increased investments in this key area, which Immunex had
not emphasized in the past.
Over the last few years our development investment has grown some 50 percent, and
newly-recruited clinical and regulatory executives have increased our depth of experience.
This has been a key strategy in transforming the company from a scientific enterprise to a
commercial success.
And today we have very good development opportunities to invest in. As I described it last year,
we are investing heavily on what may be the company's most substantial opportunity ever, a
potential new treatment for rheumatoid arthritis called Enbrel, technically known as the TNF
Receptor.
Enbrel in Rheumatoid Arthritis
Rheumatoid arthritis is a debilitating disease that afflicts two and a half million people in the U.S.
About half of these patients are dissatisfied with current therapies.
Last year I showed you our Phase II research data. Now we have new data on patients who have
been on therapy for as long as six months. And I am pleased to share these data with you.
In 47 patients on Enbrel for six months, the numbers of tender and swollen joints decreased by
about 2/3 from some 30 per patient to only about 10. This patient improvement profile is consistent
with earlier research which showed that Enbrel is effective and well tolerated.
Now what's left to do?
Our Phase III study will be completed this fall involving some 245 patients who are now on therapy
and our manufacturing scale-up will be completed at about the same time. If all goes according to
plan, it is possible that an FDA filing for Enbrel will be made in 1998.
As enthusiastic as we are today about Enbrel's prospects, we also recognize our challenges.
The first two challenges are the most significant -- efficacy and long-term safety. These risks will be
with us until we complete our Phase III research program this fall.
We also need to complete the scale-up of our manufacturing capability in order to supply the
worldwide market. This scale up required substantial investment in 1996 and more this year.
And finally with regard to our risks, there are many competitive approaches and products for
rheumatoid disease, so there is no guarantee that Enbrel will be the best or the first to market.
But that is why we have made Enbrel the number one corporate priority in 1997 in terms of focus,
human energy, and money.
Our investment is sizable.
Without our commitment to Enbrel this year, Immunex would have achieved the first profitable year
from operations in it's history.
This year we are investing some $30 million dollars on Enbrel in clinical research and in
manufacturing. The Enbrel investment represents one third of our total 1997 R&D budget.
That figure is net of the cash contributed by our development partner Wyeth-Ayerst. Wyeth will
develop and market Enbrel outside of North America.
What we are aiming for is a major product success worldwide.
Wall Street analysts estimate the market potential for a new therapy for advanced rheumatoid
disease anywhere between one half a billion to a billion dollars.
A slice of this market could take Immunex to a new chapter in its business history and value. While I
am looking forward to this milestone, experience teaches us the importance of not banking on the
success of any one product opportunity.
It also teaches us the importance of a broad product portfolio.
We can't count on any one product to drive our value -- the risks are too great in this industry.
We have no guarantees that Enbrel, or any other molecule, will be a success. That's the nature of
our business.
Flt3 Ligand in Cancer-- IL-4 in Asthma
So, in 1996 I am pleased we have advanced two new products through Phase I testing: Flt 3
Ligand and IL-4 Receptor. Both of these products have now completed safety studies and are
entering early Phase II research.
Our research teams are also staging two new cancer products for human testing over the next 12 to
18 months: CD 40 Ligand and IL-15.
Flt3 Ligand is a stem cell growth factor and has antitumor effects which are believed to be related to
dendritic cell stimulation -- a novel biological activity. This may be the most promising commercial
application for this molecule. We expect our preclinical data to be published next month.
IL-4 Receptor is another product of considerable interest. It may be Immunex's first product
opportunity for asthma patients.
Results of our first human study were presented at the National Asthma and Allergy meeting in
February. The data document that IL-4 Receptor was biologically active and could be dosed safely.
We also learned that IL-4 Receptor may be dosed on a once a week basis which would be a first
for asthma. We now have four additional studies underway to validate our early research.
Aside from the research to be done, we are fortunate to have a very strong patent position on both
IL-4 Receptor and Flt3 Ligand with new patents being issued recently.
Increasing the Discovery Pipeline
The third area of business progress is in discovery. Scientific progress has never been a challenge
for this company. Immunex scientists are at the top of their fields.
We will achieve another milestone in May with the publication of our 1,000th scientific paper --
incredible when you consider that each one publication signifies a new discovery of some kind.
But the ultimate goal of our research is not publication, or even patents, it is the discovery of new
human therapeutics and 1996 was a banner year for product discovery.
The latest additions to our long pipeline list are products of immune system science with three widely
different therapeutic applications.
IL-17 Receptor -- CD39 -- TRAIL
A new product, the IL-17 Receptor, has shown an ability to inhibit organ transplant rejection. IL-17
Receptor was discovered in a program we call viral factors a research effort that uses viruses as a
source of new molecules.
CD39 has also joined the product line up. CD39 may play an important role in the early genesis of
blood clot formation. As such it may have therapeutic value in cardiovascular disease.
Next is TNF Related Apoptosis Inducing Ligand, or TRAIL. It is a new discovery that may be
useful as an anti-tumor agent.
In closing on discovery, I should point out that the science and technology that have made Immunex
a scientific winner in the past won't cut it in the future.
We are bringing new technologies into the company, focusing on identifying the biological function of
DNA sequences faster. And we have recently totally overhauled how we shape the very early
product development course. Technology and processes are changing and we need to constantly
adapt and improve to be a vital player in the next century.
So, that summarizes our business, development and research progress.
And over the past year the stock market has recognized our momentum.
Our Immunex share price has improved from $16 at this time last year to $ 27.80 at yesterday's
close -- an increase of 42%. That compares to a 13% loss for the NASDAQ Biotech Index and an
average gain of 20% for the Dow Jones Industrial Average.
Employee Achievements are Recognized
For this value improvement, we as shareholders owe recognition to Immunex employees.
In closing I'd like to provide special recognition today to a few of our employees across the
organization.
First, Keith Bridges and Pauline McBride of your sales team. They successfully
negotiated the agreement with American Oncology Resources that will increase use of
Immunex products. Keith joined Immunex to build our sales capability in new emerging
markets.
Clinical Research Associate Bill Lownsbury assured the success of a study with Leukine as
a vaccine adjuvant in the elderly. He got the study enrolled quickly even as the flu season was
slipping away. With that data now in hand, we'll be able to evaluate another potential use of
Leukine.
Bob DuBose and Subashini Srinivasan developed our research INTRANET, an
incredible web of data and tools which provides our scientists with the latest in information
gathering technology.
Immunologist Jacques Peschon developed and analyzed data demonstrating the key role of
TNF Receptor and TACE in an inflammatory response.
Roberta Hanna is testing all the patient serum samples from Enbrel clinical studies for
antibodies -- an important task in the continued documentation of Enbrel's profile.
The entire Bothell cell manufacturing organization made an enormous effort to upgrade
equipment, facilities, and documentation which led to our Enbrel clinical production success.
They basically squeezed 12 to 18 months of work into 6 months.
Another outstanding Enbrel achievement was the effort led by Ann Dugan and her team of
clinical research associates. They deserve credit for the record patient enrollment into our
Phase III Enbrel trial. This study was opened in November '96 and fully enrolled by the end
of January '97 and that effort brought us six months closer to having final clinical results.
And, Charlie Maliszewski and Richard Gayle cloned CD 39 which I reported on earlier.
This product may position us in a new market -- cardiovascular disease.
These employees and others like them are responsible for generating the momentum that we believe
will create new value for all of us.
We still have work to do -- and there are risks along the way.
But our road to success is clear:
achieving sales growth by capitalizing on new claims,
aiming high with Enbrel,
and maximizing the value of our pipeline, which, I believe, is becoming the best in the
business.
We appreciate your continuing interest in Immunex, and look forward to reporting on our progress
throughout the year.
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