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IMMUNEX' LEUKINE VOLUME BUYING AGREEMENT WITH AmHS

Executive Summary

IMMUNEX' LEUKINE VOLUME BUYING AGREEMENT WITH AmHS provides the San Diego-based group purchasing organization with an equity stake as an incentive to buy granulocyte macrophage-colony stimulator factor from Immunex. Under the agreement, announced Oct. 10, American Healthcare Systems receives warrants to purchase 100,000 shares of the manufacturer's stock, which will vest automatically at $ 44 per share on Jan. 1. AmHS will have the opportunity to receive up to 150,000 more warrants over five years. Immunex would not speculate on the deal's possible impact on long-term Leukine sales. The deal does not include a minimum purchase requirement or volume discounts, Immunex said. Instead, it is tied to the percentage of GM-CSF that AmHS buys from Immunex rather than from Hoechst-Roussel (which markets Prokine) or from future competitors. The trigger levels vary from 50%-85%, AmHS said. Additional warrants AmHS acquires will have a term of seven years, and potential gains from the warrants will be limited to $ 15 per share, Immunex said. The manufacturer's shares have been trading in the low 40s. Immunex said it now has more than 25 distribution agreements in place for Leukine, although the AmHS deal is the "only such agreement involving warrants to purchase Immunex stock." The agreement with AmHS gives the manufacturer "a competitive advantage in the sale of Leukine within its approved indication over other GM-CSFs now available or which may be approved for sale in the future," Immunex maintained. AmHS represents 1,100 not-for- profit healthcare facilities in 47 states. Inclusion in the agreement of an equity stake is not as unusual for AmHS as for Immunex. AmHS said it has an equity stake in Somatogen and in a number of small device firms. The purchaser said it actively seeks long term deals with companies like Immunex who are small but have a significant niche product. AmHS recently concluded a non-equity deal with SmithKline Beecham for the purchase of a number of that manufacturer's products ("The Pink Sheet" Aug. 26, T&G-7).
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