<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

           (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

    ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934

                        Commission File Number 0-12406

                              IMMUNEX CORPORATION
            (exact name of registrant as specified in its charter)

                     Washington                51-0346580
              ------------------------- -------------------------
                   (State or other          (I.R.S. Employer
                   jurisdiction of         Identification No.)
                  incorporation or
                    organization)

                    51 University Street, Seattle, WA 98101
                   (Address of principal executive offices)

       Registrant's telephone number, including area code (206) 587-0430

          Securities registered pursuant to Section 12(b) of the Act:

                                     None

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.01 par value

   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 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
amendments to this Form 10-K. [ ]

   The approximate aggregate market value of the voting stock held by
nonaffiliates of the registrant as of February 28, 2002 was: $7,769,539,784.82.

   Common stock outstanding at February 28, 2002: 548,236,557 shares.

Documents incorporated by reference
(1) Portions of the Registrant's definitive proxy statement for the annual
    meeting of shareholders to be held on May 16, 2002, are incorporated by
    reference. We will file the definitive proxy statement with the Securities
    Exchange Commission within 120 days after the end of the fiscal year to
    which this report relates.

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                               <C>
PART I
ITEM 1.  BUSINESS................................................................................   1
   General.......................................................................................   1
   Pending Merger with Amgen.....................................................................   2
   Products......................................................................................   3
       Cytokines and Cytokine Receptors..........................................................   3
       Marketed Products.........................................................................   3
   Research and Product Development..............................................................   5
       New Indications for Marketed Products.....................................................   5
       Investigational Products in Human Clinical Trials.........................................   7
       Preclinical Research and Development Pipeline.............................................   8
       Research Collaborations...................................................................   9
   Relationship with AHP.........................................................................  11
       Background................................................................................  11
       Governance Agreement......................................................................  12
       Product Rights Agreement..................................................................  13
       TACE Agreements...........................................................................  14
       TNFR License and Development Agreement....................................................  14
       Agreements Related to the Manufacturing of Enbrel.........................................  15
       Enbrel Promotion Agreement................................................................  15
       Voting Agreement..........................................................................  16
   Marketing and Distribution....................................................................  17
       Enbrel....................................................................................  17
       Leukine and Novantrone....................................................................  17
       Distribution..............................................................................  17
   Competition...................................................................................  17
       Enbrel....................................................................................  18
       Leukine...................................................................................  20
       Novantrone................................................................................  20
       Thioplex..................................................................................  21
   Raw Materials and Supply......................................................................  21
       Overview..................................................................................  21
       BI Pharma Supply Agreement................................................................  21
       MedImmune Supply Transfer Agreement.......................................................  22
       Expansion of Manufacturing Facilities.....................................................  22
   Governmental Regulation.......................................................................  23
   Patents, Licenses and Trademarks..............................................................  24
       Patents on Biological Products............................................................  24
       Patents on Nonbiological Products.........................................................  26
       Patent and Technology Licenses............................................................  27
       Trademarks................................................................................  27
   Properties....................................................................................  27
   Personnel.....................................................................................  28
   Important Factors That May Affect Our Business, Our Results of Operations and Our Stock Price.  29
       Risks Related to Our Business.............................................................  29
       Risks Related to Our Share Price and Corporate Control....................................  37
       Risks Related to Our Proposed Merger with Amgen...........................................  38
</TABLE>

                                       i

<PAGE>

<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                      <C>
ITEM 2.  PROPERTIES.....................................................................  39
ITEM 3.  LEGAL PROCEEDINGS..............................................................  39
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................  40

PART II
ITEM 5.  MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED
        STOCKHOLDER MATTERS.............................................................  41
ITEM 6.  SELECTED FINANCIAL DATA........................................................  41
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS.......................................................  42
   Overview.............................................................................  42
   Results of Operations................................................................  42
       Revenues.........................................................................  42
       Gross Margin.....................................................................  44
       Operating Expenses...............................................................  44
       Merger-related costs.............................................................  46
       Other Income (Expense)...........................................................  46
       Provision for Income Taxes.......................................................  47
   Liquidity and Capital Resources......................................................  47
   Outlook..............................................................................  49
ITEM 7A.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK....................  52
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................  53
   Consolidated Balance Sheets..........................................................  54
   Consolidated Statements of Income....................................................  55
   Consolidated Statements of Shareholders' Equity......................................  56
   Consolidated Statements of Cash Flows................................................  57
   Notes to Consolidated Financial Statements...........................................  58
       Note 1. Organization.............................................................  58
       Note 2. Basis of Presentation and Summary of Significant Accounting Policies.....  58
       Note 3. Investments..............................................................  62
       Note 4. Property, Plant and Equipment............................................  63
       Note 5. Helix Project............................................................  63
       Note 6. Long-Term Obligations....................................................  64
       Note 7. Shareholders' Equity.....................................................  64
       Note 8. Sale of Product Rights...................................................  66
       Note 9. Income Taxes.............................................................  67
       Note 10. Employee Benefits.......................................................  68
       Note 11. Transactions with AHP...................................................  68
       Note 12. Commitments and Contingencies...........................................  71
       Note 13. Concentrations of Risk..................................................  72
       Note 14. Net Income per Common Share.............................................  73
       Note 15. Agreement to Merge with Amgen Inc.......................................  74
       Note 16. Subsequent Event........................................................  74
       Note 17. Quarterly Financial Results (unaudited).................................  75
       Report of Ernst & Young LLP, Independent Auditors................................  76

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE........................................................  77
</TABLE>

                                      ii

<PAGE>

<TABLE>
<CAPTION>
                                                                       Page
                                                                       ----
     <S>                                                               <C>

     PART III
     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....  77
     ITEM 11.  EXECUTIVE COMPENSATION.................................  77
     ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT..............................................  77
     ITEM 13.  RELATIONSHIPS AND RELATED TRANSACTIONS.................  77

     PART IV
     ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
              FORM 8-K................................................  78
</TABLE>


                                      iii

<PAGE>

                                    PART I

Item 1. Business

   Our disclosure and analysis in this report and in our 2001 Annual Report to
shareholders, of which this report is a part, contain forward-looking
statements. Forward-looking statements provide our current expectations or
forecasts of future events. In particular, forward-looking statements include:

   .   information concerning possible or assumed future results of operations,
       trends in financial results and business plans, including those relating
       to earnings growth and revenue growth;

   .   statements about our merger with Amgen Inc., including with respect to
       business strategies, expected operating efficiencies or synergies,
       competitive positions, growth opportunities for existing products, plans
       and objectives of management, and markets for our stock and Amgen's
       stock;

   .   statements about our product development schedule;

   .   statements about our expectations for regulatory approvals for any of
       our product candidates;

   .   statements about our future product manufacturing capabilities and
       product sales;

   .   statements about the level of our costs and operating expenses relative
       to our revenues, and about the expected composition of our revenues;

   .   statements about our future capital requirements and the sufficiency of
       our cash, cash equivalents, investments and other financing proceeds to
       meet these requirements;

   .   statements about the outcome of contingencies such as legal proceedings;

   .   other statements about our plans, objectives, expectations and
       intentions; and

   .   other statements that are not historical fact.

   From time to time, we also may provide oral or written forward-looking
statements in other materials we release to the public. Any or all of our
forward-looking statements in this report, in our 2001 Annual Report and in any
other public statements that we make may turn out to be wrong. Inaccurate
assumptions we might make and known or unknown risks and uncertainties can
affect our forward-looking statements. Consequently, no forward-looking
statement can be guaranteed and our actual results may differ materially.

   We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any further disclosures we make on related
subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
Annual Reports on Form 10-K. Also note that we provide a cautionary discussion
of risks, uncertainties and possibly inaccurate assumptions relevant to our
business under the caption Important Factors That May Affect Our Business, Our
Results of Operations and Our Stock Price in this report. These are risks that
we think could cause our actual results to differ materially from expected or
historical results. Other risks besides those listed in this report could also
adversely affect us.

General

   We are a leading biopharmaceutical company dedicated to developing immune
system science to protect human health. Applying our scientific expertise in
the fields of immunology, cytokine biology, vascular biology, antibody-based
therapeutics and small molecule research, we work to discover new targets and
new therapeutics for treating rheumatoid arthritis, or RA, asthma and other
inflammatory diseases, as well as cancer and cardiovascular diseases.

                                      1

<PAGE>

   We have successfully developed two products, Enbrel(R) (etanercept) and
Leukine(R) (sargramostim, GM-CSF), and are currently marketing in the United
States four products treating multiple indications, Enbrel, Leukine,
Novantrone(R) (mitoxantrone for injection concentrate) and Thioplex(R)
(thiotepa for injection). Our products improve quality of life and help people
enjoy longer, healthier and more productive lives. Our products are all
currently marketed in the United States and Enbrel is also marketed in Canada.
All are available by prescription only.

   We are actively expanding our commercial manufacturing capacity. We
currently operate a facility that produces Leukine in Seattle, Washington. On
January 1, 2002, we purchased a manufacturing facility in West Greenwich, Rhode
Island, from American Home Products Corporation, or AHP, that we and AHP have
worked together to retrofit to accommodate the commercial production of Enbrel.
We have begun preparing the supplemental filing for the Rhode Island
manufacturing facility to obtain U.S. Food and Drug Administration, or FDA,
approval for the facility and expect to complete the filing by mid-2002. We
estimate FDA approval of this manufacturing facility in the second half of
2002. We have also broken ground on a new manufacturing facility adjacent to
the retrofitted manufacturing facility in Rhode Island. When this facility is
completed and approved by the FDA, which we estimate will occur in 2005, it is
scheduled to produce Enbrel and possibly other products currently in
development.

   AHP beneficially owns approximately 41% of our outstanding common stock as
of December 31, 2001. AHP is one of the world's largest research-based
pharmaceutical and healthcare products companies.

   We are a Washington state corporation and were founded in 1981. Our
principle executive offices are located at 51 University Street, Seattle,
Washington 98101-2936.

Pending Merger with Amgen

   On December 17, 2001, we announced that we had entered into an Agreement and
Plan of Merger with Amgen Inc. and AMS Acquisition Inc., a wholly-owned
subsidiary of Amgen. Under the terms of the agreement, AMS Acquisition Inc.
will be merged with and into us, we will become a wholly-owned subsidiary of
Amgen and each issued and outstanding share of our common stock will be
converted into the right to receive 0.44 of a share of Amgen common stock and
$4.50 in cash. The merger cannot be completed unless certain conditions are
satisfied, including the approval by Amgen stockholders of the issuance of
shares of Amgen common stock in connection with the merger and the approval by
our shareholders of the merger agreement. Approval of the merger agreement
requires the affirmative vote of the holders of a majority of our common stock
entitled to vote. AHP and two of its subsidiaries, MDP Holdings, Inc. and
Lederle Parentals, Inc. have entered into a voting agreement with Amgen in
which they have agreed, among other things, to vote their shares of our stock
in favor of the merger. As noted above, AHP beneficially owns approximately 41%
of our outstanding common stock as of December 31, 2001. The merger is also
subject to antitrust laws, including the reporting and waiting provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On January 7, 2002,
we and Amgen made the required premerger notification filings with the Federal
Trade Commission, or FTC, and the Antitrust Division of the Department of
Justice. On February 6, 2002, the FTC requested additional information and
documents from us and from Amgen. In connection with the proposed merger, we
intend to sell the product rights to Leukine. The divestiture of Leukine is
anticipated to occur only if the proposed merger is completed. Failure to
complete the merger could have a material adverse effect on our financial
condition and results of operations. We have provided additional information
about some of the potential adverse effects of the proposed merger under the
caption Important Factors That May Affect Our Business, Our Results of
Operations and Our Stock Price in this report.

                                      2

<PAGE>

Products

Cytokines and Cytokine Receptors

   Many of our current biotechnology products and products under development
are recombinant analogs of cytokines and cytokine receptors. Cytokines are
protein messengers that coordinate the functions of immune cells, which are
white blood cells, and other types of cells and tissues. We have developed
recombinant cytokine products capable of expanding and activating these immune
cell populations, all of which must interact to provide a normal immune
response.

   Cytokines act upon their target cells by binding to specific cell surface
receptors. The binding of a cytokine to its receptor triggers a complex series
of events within a responsive cell that transmits the cytokine's signal to that
cell. This signal can stimulate cell division or production of antibodies,
enzymes or other cytokines. In this way, circulating cytokines can control and
coordinate the function of cells located throughout the body.

   We have also cloned and expressed genes encoding cytokine receptors. Using
genetic engineering techniques, our scientists have produced soluble versions
of cytokine receptors. A soluble cytokine receptor retains the ability to bind
to a specific cytokine, but lacks that portion of the natural receptor that is
attached to a cell. This property enables the soluble cytokine receptor to
circulate in the body after administration, where it can bind to and inactivate
specific cytokines. By preventing interaction of the cytokines with immune
cells, the soluble cytokine receptor can stop the development of cytokine
stimulated responses. We have shown with Enbrel that soluble cytokine receptors
can be effective as therapeutics to counteract cytokine mediated diseases such
as RA and psoriatic arthritis, or PsA.

Marketed Products

   Our product revenues come from the following four marketed products and are
discussed below.

      Enbrel
      Leukine
      Novantrone
      Thioplex

   Enbrel.  Enbrel is a soluble tumor necrosis factor, or TNF, receptor that
inhibits the binding of TNF to TNF cell surface receptors, resulting in a
significant reduction in inflammatory activity in RA and PsA. RA is a serious,
chronic autoimmune disorder that causes the body's immune system to attack the
lining of the joints, and can lead to joint deformity or destruction, organ
damage, disability and premature death. Like RA, PsA is a chronic inflammatory
disease causing joint pain and swelling that can lead to crippling along with
inflamed and irritated scaly patches of skin throughout the body.

   Following its launch in November 1998, Enbrel has been approved by the FDA
for reducing signs and symptoms and inhibiting the progression of structural
damage in patients with moderately to severely active RA. In May 1999, the FDA
approved Enbrel for treating moderately to severely active polyarticular-course
juvenile RA, or JRA, in patients who have had an inadequate response to one or
more disease-modifying, antirheumatic drugs, or DMARDs. In December 2000, the
Canadian Health Protection Bureau approved Enbrel in adults for reduction in
signs and symptoms of moderately to severely active RA in patients who have had
an inadequate response to one or more DMARDs. Enbrel is the only TNF inhibitor
that can be used as a monotherapy, without methotrexate, and the only biologic
response modifier approved for use as a first-line monotherapy for RA.

   In January 2002, the FDA approved Enbrel for reducing the signs and symptoms
of active arthritis in patients with PsA. As with RA, PsA patients can use
Enbrel without methotrexate or with methotrexate in patients who do not respond
adequately to methotrexate alone. Enbrel is currently the only FDA-approved
treatment for PsA.

                                      3

<PAGE>

   Revenues from sales of Enbrel were $761.9 million, or approximately 77% of
our total revenue, in 2001, $652.4 million, or approximately 76% of our total
revenue, in 2000, and $366.9 million, or approximately 68% of our total
revenue, in 1999. We expect to continue to depend on sales of Enbrel for a
substantial majority of our revenues.

   Enbrel was the first in a new class of drugs, known as biologic response
modifiers, for treating RA and PsA. Enbrel represents a new approach to RA and
PsA management and the first breakthrough treatment in many years for people
with RA and PsA, who previously were treated primarily with methotrexate, a
DMARD. Enbrel is sold in a powder formulation and is administered to patients
twice a week as a subcutaneous injection, which means that it is injected under
the skin. Because RA and PsA are chronic disorders, patients must continue
taking Enbrel to continue experiencing any beneficial effects of treatment.

   Enbrel is a recombinant protein, which means that it is man-made by genetic
engineering. Enbrel is based on a naturally occurring protein normally produced
in the body and acts by binding to and neutralizing TNF thereby supplementing
the body's natural process of regulating levels of TNF. TNF is one of the
dominant cytokines or proteins that play an important role in the cascade of
reactions that cause the inflammatory process of RA and PsA. It has been
implicated in the pathogenesis of RA, PsA, psoriasis, ankylosing spondylitis,
Wegener's granulomatosis, chronic heart failure, amyloidosis, myelodysplastic
syndrome, cachexia and numerous other conditions.

   Because demand for Enbrel was projected to temporarily exceed supply, we
began an Enbrel enrollment program in November 2000 to help ensure
uninterrupted therapy for United States patients prescribed Enbrel before
January 1, 2001. The Enbrel enrollment program called for these patients to
register with us and receive an enrollment number. Through an extensive
outreach campaign, the vast majority of these patients successfully enrolled
and are continuing to receive Enbrel therapy. Also, as of January 1, 2001,
patients considering therapy with Enbrel, but not yet receiving treatment, were
invited to enroll in the program and were placed on a waiting list. These
patients receive Enbrel on a first come, first served basis once additional
supply of Enbrel becomes available.

   In August 2001, we announced the initiation of a 10,000-patient RA study
designed to collect data on treatment practices, tolerability of therapies, and
efficacy of current DMARDs and biologic response modifiers. The study is
divided into two parts with part one a study of 5,000 RA patients requiring a
change in DMARD therapy and part two a study of an additional 5,000 RA patients
who will begin new treatment with Enbrel. Part one of the study began in 2001
and part two is planned to begin in 2002 when additional clinical supplies of
Enbrel become available. Data from both parts is scheduled to be collected for
at least five years.

   We own rights to Enbrel in the United States and Canada, and AHP owns rights
to Enbrel in all other countries. Accordingly, we do not receive either
royalties or a share of gross profits from sales of Enbrel outside the United
States and Canada. We and AHP are marketing Enbrel in the United States and
Canada under the Enbrel promotion agreement, which we discuss under the caption
Relationship With AHP.

   Leukine.  We launched Leukine in the United States in 1991 as our first
marketed product. Leukine is a yeast produced granulocyte-macrophage colony
stimulating factor, or GM-CSF. Leukine is a recombinant form of a protein,
called a cytokine, that is almost identical to a protein normally produced in
the body. Leukine helps to increase the number and improve the function of
specific types of white blood cells. These white blood cells, which are made in
the bone marrow, help prevent infections.

   The FDA has approved Leukine for the following indications:

   .   facilitating allogeneic and autologous bone marrow transplant therapies
       currently used for treating acute myelogenous leukemia, lymphoma and
       Hodgkin's disease, and in rescuing patients whose bone marrow transplant
       grafts have failed;

                                      4

<PAGE>

   .   accelerating neutrophil recovery and reducing mortality in treating
       patients with acute myelogenous leukemia; and

   .   for use in peripheral blood progenitor cell mobilization and
       post-transplantation support.

   Leukine is only available in the United States and is marketed by our
specialty sales force. While Leukine is available in both multi-dose liquid and
powder formulations, most of our sales are of the multi-dose liquid
formulation. Revenues from sales of Leukine totaled $108.4 million, or
approximately 11% of our total revenue, in 2001, $88.3 million, or
approximately 10% of our total revenue, in 2000, and $69.1 million, or
approximately 13% of our total revenue, in 1999.

   Novantrone.  Novantrone is a compound similar to doxorubicin and idarubicin,
two chemotherapeutic agents frequently used to treat some cancers, but with a
molecular change that results in less damage to the heart.

   The FDA has approved Novantrone for the following indications:

   .   initial therapy of acute nonlymphocytic leukemia;

   .   in combination with steroids for treating patients with pain related to
       hormone refractory prostate cancer; and

   .   reducing neurologic disability and/or the frequency of clinical relapses
       in patients with secondary progressive, progressive relapsing or
       worsening relapsing-remitting MS.

   In October 2000, the FDA approved Novantrone for the MS indication described
above. MS is a chronic, debilitating disease of the central nervous system that
can result in a variety of symptoms that range from numbness in the limbs to
complete paralysis. Novantrone is sold in a concentrated liquid form for
injection. Revenues from sales of Novantrone totaled $71.2 million, or
approximately 7% of our total revenue, in 2001, $59.9 million, or approximately
7% of our total revenue, in 2000, and $44.5 million, or approximately 8% of our
total revenue, in 1999.

   Thioplex.  Thioplex is a powder formulation of thiotepa for injection.
Thiotepa is a cytotoxic agent, which means that it kills cells. Thioplex is
approved for the palliative treatment of a wide variety of tumor types, which
means that it alleviates symptoms without curing the underlying disease. The
FDA has approved Thioplex for a number of oncology indications. In 2001,
Thioplex began to face generic competition.

Research and Product Development

   Since Immunex was founded in 1981, we have focused our scientific efforts on
understanding the biology of the immune system. Our goal is to understand the
complex interactions between cells of the immune system and other tissues that
can trigger the underproduction or overabundance of key immune system
components, leading to or perpetuating serious human diseases. From this
research focus we have created a portfolio of proprietary molecules and other
technology that has produced a number of promising biological therapeutic
candidates. We intend to further solidify our position as a leader in the
innovation and commercialization of products that treat a variety of immune
system disorders and inflammatory diseases and to expand our new product
development into treating numerous other conditions. We spent $204.6 million in
2001, $166.7 million in 2000 and $126.7 million in 1999 on research and
development. These amounts include expenses related to third-party research
collaborations and the acquisition of third-party rights to development stage
products.

New Indications for Marketed Products

   We believe that an efficient way to generate increased revenue is to add new
indications to a product that is already being marketed. We have increased our
focus on development activities to find potential new indications for our
existing drugs. By securing new indications, our strategy is to build
pharmaceutical franchises and expand

                                      5

<PAGE>

the commercial usefulness and revenue-producing ability of our key products. We
are studying our key marketed products in the indications and research areas
listed below.

   Enbrel.  We are seeking to expand the indications of Enbrel to include the
following disorders, which are characterized by poor regulation of TNF:

   .   Psoriasis.  Psoriasis is a skin disorder that most commonly appears as
       inflamed swollen skin lesions, which can be extremely painful and
       disfiguring. In August 2001, we announced the results of a six-month
       randomized, placebo-controlled, double-blind Phase 2 clinical trial
       indicating that psoriasis patients treated with Enbrel experienced
       significant improvement compared to patients who were treated with
       placebo. We also collected data in our Phase 2 and 3 clinical trials in
       psoriatic arthritis that will assist us in evaluating the safety and
       efficacy of Enbrel in treating patients with psoriasis. We commenced a
       Phase 2/3 dose ranging clinical trial in psoriasis in the fourth quarter
       of 2001. We anticipate beginning another Phase 2/3 clinical trial in
       psoriasis during the first half of 2002. We currently expect data from
       the first Phase 2/3 trial to be available in 2002 and data from the
       second Phase 2/3 trial to be available in the first half of 2003.
       Although regulatory approval is never certain, we currently estimate FDA
       approval in 2004.

   .   Ankylosing spondylitis.  Ankylosing spondylitis is a unique form of
       chronic inflammatory arthritis characterized by joint stiffness, pain
       and extra bone growth that can result in partial or complete fusion of
       the spine. In November 2001, we announced results of a four-month
       randomized, placebo-controlled, double-blind Phase 2 clinical trial of
       Enbrel in patients with ankylosing spondylitis. In the trial, patients
       receiving Enbrel achieved a positive clinical response compared to
       patients receiving placebo. In the fourth quarter of 2001, we initiated
       a large Phase 3 clinical trial in ankylosing spondylitis. We currently
       expect to complete this trial in the second half of 2002.

   .   Wegener's granulomatosis.  Wegener's granulomatosis is an uncommon
       disease, characterized by inflammation of the blood vessels and
       primarily involving the lungs, kidneys, and upper respiratory tract.
       Following the announcement of positive Phase 2 results in 2000, we are
       supporting two Phase 2/3 clinical trials of Enbrel in Wegener's
       granulomatosis.

   We are also researching the use of Enbrel in treating amyloidosis,
myelodysplastic syndrome, cachexia and numerous other conditions.

   In March 2001, we announced that guidance from an independent data
monitoring board indicated that ongoing studies of Enbrel in chronic heart
failure, or CHF, would not be able to meet efficacy endpoints. Based on this
guidance, we and AHP ended two large randomized, placebo-controlled,
double-blind Phase 2/3 clinical trials of Enbrel in patients with CHF. We are
currently completing the analysis of all data from these studies.

   Leukine.  A number of clinical trials are underway to investigate whether
Leukine could be approved for additional uses. These investigational uses
include:

   .   Crohn's Disease.  In the fourth quarter of 2001, we initiated a
       randomized, placebo-controlled, double-blind Phase 2 clinical trial of
       Leukine in patients with Crohn's disease. We currently expect to
       complete this trial in the second half of 2002.

   .   Malignant Melanoma.  In 1997, we announced positive results of an
       open-label Phase 2 clinical trial of Leukine as an adjuvant therapy
       following surgery to remove tumors in patients with advanced melanoma
       who were at high risk for relapse or death. This trial demonstrated that
       using Leukine as a therapy following surgery increased the one-year
       survival rate of patients with advanced stages of malignant melanoma
       when compared to matched historical control patients. We are supporting
       a controlled Phase 3 trial of Leukine in this patient population with a
       cooperative oncology group.

   .   Mucositis.  Data from pilot clinical trials have indicated that Leukine
       may ameliorate chemo/radiotherapy-induced oral mucositis. We are
       supporting a controlled Phase 3 clinical trial of this potential
       indication with a cooperative radiation-oncology group.

                                      6

<PAGE>

   .   Anti-tumor Adjuvancy.  We are supporting Phase 2 clinical trials
       conducted by an oncology group to study the potential of Leukine as an
       immune adjuvant therapy in several forms of cancer.

Investigational Products in Human Clinical Trials

   We or our collaborators are studying the following proprietary
investigational biotechnology products in the indications and research areas
listed below.

   ABX-EGF.  In July 2000, we entered into a joint development and
commercialization agreement for ABX-EGF, a fully human antibody created by
Abgenix, Inc. ABX-EGF targets the receptor for human epidermal growth factor,
or EGFr, which is overexpressed on some of the most prevalent human tumor
types, including lung, prostate, pancreatic, colorectal, renal cell and
esophageal. It has been demonstrated that cancer cells can become dependent on
growth signals mediated through EGFr for their survival. ABX-EGF in mouse
models can both eradicate established human tumors and block the growth of
human tumors.

   In May 2001, we announced preliminary results from an ongoing Phase 1
clinical trial of ABX-EGF as monotherapy, without concomitant chemotherapy, in
patients with various types of cancer. The primary objective of this Phase 1
clinical trial is to evaluate the tolerability of ABX-EGF at multiple dose
levels. Following the announcement of the preliminary Phase 1 results, we and
Abgenix initiated a series of Phase 2 clinical trials to evaluate the
tolerability and efficacy of ABX-EGF for the treatment of several types of
cancers. These include clinical trials in patients with kidney, colorectal,
prostate and non-small cell lung cancer.

   IL-1 Receptor Type 2.  Overproduction or inappropriate production of
interleukin-1, or IL-1, has been implicated in the development of autoimmune,
inflammatory and allergic diseases such as RA, diabetes, asthma, systemic lupus
erythematosus and inflammatory bowel disease, and also in the development of
osteoporosis, septic shock, stroke and periodontal disease. We have been
developing IL-1 Receptor Type 2, a natural regulator of IL-1. IL-1 Receptor
Type 2 works by competitively binding IL-1, which prevents IL-1 from binding to
cell-surface receptors, potentially preventing a signal to the cell which can
lead to inflammatory disease. Based on preclinical data, we believe that IL-1
Receptor Type 2 may be of therapeutic value in treating a number of
inflammatory diseases such as those mentioned above, either alone or in
combination with Enbrel. In July 2001, we announced the initiation of a Phase 1
clinical trial program of IL-1 Receptor Type 2 in RA to assess tolerability. We
currently expect to have results from this program in mid-2002. Pending these
results, we expect to begin a Phase 2 clinical study in the second half of 2002.

   HuMax(TM)-IL-15.  In May 1999, we entered into an agreement with Genmab A/S,
or Genmab, for HuMax-IL-15, a fully human antibody against interleukin-15, or
IL-15. IL-15 is a cytokine that plays a role in the cascade of reactions that
cause the inflammatory process involved in diseases such as RA, psoriasis and
Crohn's disease. Under the terms of the agreement, Genmab is responsible for
developing, at its cost, HuMax-IL-15 through Phase 2 clinical trials, but we
retain an exclusive option to assume development responsibility of Phase 3
clinical trials, and then to market and sell HuMax-IL-15 should it receive FDA
approval. In October 2001, Genmab announced the initiation of a Phase 1/2
clinical trial of HuMax-IL-15 in patients with RA.

                                      7

<PAGE>

Preclinical Research and Development Pipeline

   Innovation by our research and development operations is very important to
the success of our business. Our goal is to discover, develop and bring to
market innovative products that address major unmet healthcare needs. This goal
has been supported by our substantial research and development investments. To
obtain the most value from our development portfolio, we are focusing first on
those product candidates that we believe have the largest market potential. Our
most promising preclinical candidates are described below.

<TABLE>
<CAPTION>
Molecule                                     Indication/Research Area  Status
--------                                     ------------------------  ------
<S>                                          <C>                       <C>

.. Receptor activator of nuclear factor Kappa Bone metabolism,          Preclinical
  B, or RANK                                 multiple myeloma

.. a-IL-4R                                    Asthma                    Preclinical

.. TNF Related Apoptosis Inducing Ligand, or  Cancer                    Preclinical;
  TRAIL/Apo2 ligand                                                    collaboration with
                                                                       Genentech, Inc.

.. TEK/ORK/TIE2                               Anti-angiogenesis, cancer Preclinical

.. a-IL-18R                                   Inflammation              Preclinical;
                                                                       collaboration with
                                                                       Cambridge
                                                                       Antibody
                                                                       Technology
                                                                       Limited, or CAT

.. a-CD30L                                    Inflammation/             Preclinical;
                                             autoimmunity              collaboration with
                                                                       CAT

.. a-TRAIL-R2                                 Cancer                    Preclinical;
                                                                       collaboration with
                                                                       Abgenix

.. a-4-1BB                                    Cancer, autoimmunity      Preclinical

.. a-CD148                                    Anti-angiogenesis         Preclinical

.. TWEAK inhibitor                            Anti-angiogenesis, cancer Preclinical

.. a-IL-1R Type 1                             Inflammation              Preclinical

.. TNF-alpha converting enzyme, or TACE,      Inflammation, RA          Preclinical; licensed
  antagonist                                                           to AHP
</TABLE>

   RANK.  We have obtained preclinical data suggesting that RANK could be
useful to treat cancer and are focused on developing the molecule as a
treatment for multiple myeloma. In addition, stimulation of the receptor RANK
results in development of osteoclasts, which resorb bone. We are also
evaluating the potential of a soluble RANK receptor as an inhibitor of
osteoclast development for osteoporosis and other conditions of bone
resorption. Pending the results of further preclinical studies, we anticipate
filing an IND for RANK in the second half of 2002.

                                      8

<PAGE>

   a-IL-4R.  We have initiated a therapeutic monoclonal antibody program to
develop fully human monoclonal antibodies. We are developing an antibody
directed against the IL-4R alpha chain. This receptor molecule is part of the
receptor complex for both IL-4 and IL-13, two cytokines demonstrated to be
important in the treatment of asthma and atopic diseases. Atopic diseases are
characterized by symptoms of hay fever, asthma or hives, which are triggered
upon exposure to antigens. Preclinical work with an antibody which blocks both
mouse IL-4 and IL-13 from binding to their respective receptors has
demonstrated that blocking both cytokines may provide beneficial biological
control of disease signs and symptoms. We have derived fully human candidate
antibodies of high affinity and with the ability to block binding and
biological function of human IL-4 and IL-13. Following the receipt of positive
results from preclinical studies of the IL-4 and IL-13 antibodies, we expect to
file an IND in 2003.

   TRAIL/Apo2L.  In May 1999, We entered into a worldwide collaboration with
Genentech to co-develop and market TRAIL/Apo2L. In animal models, TRAIL/Apo2L
appears to suppress tumor growth and cause remission of tumors by a direct and
specific mechanism known as apoptosis. TRAIL/Apo2L binds to distinct receptors
found on many tumor cells and signals these cells to destroy themselves through
apoptosis. In preclinical research, TRAIL/Apo2L has been shown to cause a wide
variety of tumor cells in animal models to undergo apoptosis while sparing
normal cells. Preliminary toxicology studies have shown that combinations of
TRAIL/Apo2L with Cisplatin(R) (platinol) can cause liver damage. Additional
studies to understand the generalizability of this observation to other
chemotherapies and the mechanism of action are being pursued prior to filing an
IND.

   TEK/ORK/TIE2.  We cloned the human receptor tyrosine kinase, called TEK, and
received a patent on the DNA encoding TEK. Tek is the receptor for the
angiopoietins that stimulate the process of blood vessel development. We have
constructed a soluble TEK molecule, which has been shown in preclinical models
to prevent tumor angiogenesis, or new blood vessel development. This molecule
has also been shown to retard tumor growth in experimental models of cancer.
ORK and TIE2 are other names for TEK.

   Therapeutic Monoclonal Antibodies.  In addition to the antibody targeted
against IL-4R mentioned above, we have identified as part of our therapeutic
monoclonal antibody program candidate antibodies that are directed against
CD148, 4-1BB, TRAIL-R2, IL-4R, IL-18R, IL-1R Type 1, CD30L and TWEAK receptor.
Within this group of antibodies, the antibodies targeted against CD148, 4-1BB,
TRAIL-R2 and TWEAK-R are each being investigated as potential treatments for
cancer. Finally, inflammation and autoimmunity is the research focus of our
antibodies targeted against IL-18R, IL-1R Type 1, 4-1BB and CD30L. In addition
to these antibodies, we are actively validating other targets for our antibody
development program.

   TACE.  TACE, or TNF-alpha converting enzyme, is a metalloprotease that
releases TNF and a variety of other proteins from the cell surface. In 1995, we
entered into research and license agreements with AHP under which we granted
AHP exclusive worldwide rights to develop compounds that inhibit TACE. AHP is
working to develop therapeutically useful inhibitors.

Research Collaborations

   The biotechnology industry is moving rapidly to discover and develop novel
therapeutics, in part by utilizing the rapidly accumulating knowledge
concerning the human genome. Several biotechnology companies have accumulated
significant genetic information from large-scale genomic DNA sequencing. Much
of these data have already been incorporated into patent applications by these
companies, and these companies will be incorporating more of these data into
future patent applications. We currently do not know the impact that this
patent application activity will have on our future gene discovery efforts. We
have entered into a number of important research collaborations using varied
technology platforms in our continuing efforts to identify new drug candidates
and capitalize on research and knowledge developed by others. Our corporate
collaborators include: Abgenix, Affymetrix, Inc., Array Biopharma, Inc., CAT,
Celera Genomics, Digital Gene Technologies, Inc., Genentech, Genesis Research
and Development Corporation Limited, Genmab, Lexicon Genetics, Inc., Medarex,
Inc., and Evotec OAI. The following discussion summarizes our key
collaborations.

   Abgenix.  In July 2000, we entered into a joint development and
commercialization agreement with Abgenix for ABX-EGF, a fully human antibody
created by Abgenix. Under the agreement, we made two license

                                      9

<PAGE>

fee payments to Abgenix upon signing of the agreement and upon commencement of
Phase 2 clinical trials of ABX-EGF. Development and commercialization costs
will be shared equally, as would any potential profits from sales of ABX-EGF.
We have formed a joint steering committee and project team with Abgenix that
will manage the development process, for which each company will share
responsibility, and allocate clinical responsibilities. Abgenix has
responsibility for completing the ongoing Phase 1 clinical trial, we share
responsibility with Abgenix for ongoing and future Phase 2 clinical trials and
we have primary responsibility for future Phase 3 clinical trials. If the
clinical trials for ABX-EGF are successful and regulatory approval is received,
we would play the primary role in marketing ABX-EGF, while Abgenix would retain
co-promotion rights.

   In November 2000, we entered into a second collaboration with Abgenix to
jointly discover, develop and potentially commercialize up to ten fully human
monoclonal antibody therapies for the treatment of various forms of cancer.
Each company will contribute five cancer-specific antigen targets during the
first five years of the collaboration. Abgenix will be responsible for
generating, screening and characterizing human monoclonal antibodies directed
against each antigen target. We will be responsible for the performance of
preclinical studies of the antibodies. Each company will have an option,
exercisable at various stages of development of each antibody, to continue or
discontinue its participation in the development of the antibody. If both
companies decide to continue in development of an antibody, the development and
commercialization costs will be shared equally, as would any potential profits
from the sale of the antibody. If only one company decides to continue in the
development of an antibody, it may do so at its own expense and would then be
required to pay the other company a royalty on product sales.

   Genentech.  In May 1999, we entered into a worldwide collaboration with
Genentech to co-develop and market TRAIL/Apo2L. Each company had previously
conducted extensive preclinical testing of different forms of TRAIL/Apo2L. The
companies have formed a joint steering committee and project team which has
selected Genentech's lead molecule for development, which will manage the
development process, and allocate clinical, manufacturing and marketing
responsibilities to each company. We and Genentech each have filed patent
applications covering TRAIL/Apo2L and its uses, and we were awarded a patent
covering the TRAIL gene in June 1998. Under the terms of the collaboration
agreement, the companies will share all development and commercialization
costs. If TRAIL/Apo2L is successful in possible future clinical trials and
receives regulatory approval, both companies have the right to co-promote
TRAIL/Apo2L worldwide, and will share profits from the worldwide sales of the
product.

   Cambridge Antibody Technology.  In December 2000, we entered into a
five-year agreement with CAT to obtain a non-exclusive license to CAT's
proprietary antibody phage display library for the discovery, development and
potential commercialization of human monoclonal antibodies. Pursuant to the
agreement, we pay a license fee to utilize the antibody library for reagent
generation and target validation in support of our drug discovery programs. In
addition, we will receive eight exclusive therapeutic antibody product options
to develop antibodies against up to eight specific targets selected by us. The
exercise of an exclusive product option will require us to pay CAT clinical
milestone fees and royalty payments on product sales. If, after exercising an
exclusive product option, we decide to terminate development of the antibody
associated with that option, then we and CAT have the opportunity to co-develop
the antibody or CAT has an option to solely develop the antibody, which would
require CAT to pay us clinical milestone fees and royalty payments on product
sales. We have already exercised an exclusive product option to develop
antibodies against a specific target.

   In May 2001, we entered into a collaboration agreement with CAT to jointly
discover, develop and potentially commercialize two particular antibodies
against IL-18R and CD30L for the potential treatment of inflammatory and
autoimmune disorders. Under the agreement, each company will share equal
responsibility for all research and development, and split equally any
potential profits generated by product sales. We contribute two proprietary
targets, scientific and development expertise to the collaboration. CAT
contributes its proprietary human antibody phage display technology and high
throughput screening capabilities to identify human antibodies.

                                      10

<PAGE>

   Genmab.  In October 2001, we entered into a license agreement and granted
Genmab a worldwide exclusive license under our patents to research, develop and
commercialize antibodies against IL-15 and IL-15 receptor. Under the terms of
the resulting collaboration, Genmab has responsibility for creating the
antibodies against these targets and for developing them through Phase 2
clinical trials. We retain an exclusive option on each of these antibodies
exercisable after Phase 2 clinical trials. Should we exercise our option for an
antibody, we would complete the clinical development and would pay Genmab a
license fee, milestones and share profits upon commercialization. If we do not
exercise our option, Genmab will retain the right to continue to develop and
potentially commercialize the antibodies and would pay milestone fees and
royalties to us.

   Celera.  In June 2000, we entered into a five-year comprehensive genomics
agreement with Celera Genomics, including a subscription to Celera's current
database products. The database subscription gives our researchers access to
four databases developed by Celera until 2005, which is extendable until 2007
at our option. All four of Celera's databases include Celera proprietary
information, as well as publicly available data. Access to the databases also
provides us with associated comprehensive bioinformatics systems and tools for
viewing, browsing and analyzing genomic information. We may have to make
clinical milestone and royalty payments for products created using Celera
database products.

   Medarex.  In January 1999, we entered into an agreement with Medarex to
access Medarex's HuMab transgenic mouse technology for the development of fully
human antibodies to disease targets identified by us. We will develop and
commercialize human antibody products resulting from this agreement. We are
obligated to pay Medarex technology access fees and could be required to pay
research payments, license fees and milestone payments, as well as royalties on
commercial sales of products resulting from our agreement.

Relationship with AHP

Background

   In June 1993, we merged with American Cyanamid Company's Lederle Oncology
business. In November 1994, AHP acquired all of the outstanding shares of
common stock of Cyanamid. Thus, AHP became the owner of Cyanamid's then
approximate 54% interest in our common stock. AHP reduced its ownership
interest in our common stock by participating in our public offering in
November 2000 as a selling shareholder and, as of December 31, 2001, AHP
beneficially owns approximately 41% of our outstanding common stock. Before
AHP's purchase of Cyanamid, we entered into an agreement with AHP under which
AHP agreed to protect our rights under our agreements with Cyanamid and be
bound by Cyanamid's obligations under these agreements. AHP or, in some cases,
divisions or affiliates of AHP have assumed some of the rights and obligations
of Cyanamid under the agreements that we entered into with Cyanamid at or after
the time of the 1993 merger, including various supply, license and distribution
agreements. In the following discussion, AHP refers to AHP, or its various
divisions or affiliates, including Cyanamid.

   Immunex and AHP are parties to numerous agreements that AHP assumed from
Cyanamid or that Immunex entered into directly with AHP. The agreements
summarized below, in particular the governance agreement and the product rights
agreement, establish the framework for our ongoing relationship with AHP. The
summary is not complete and is qualified in its entirety by reference to the
governance agreement and the product rights agreement themselves, which are
filed as exhibits to various reports, proxy statements or other information we
have filed with the SEC. In addition, as noted below, a number of these
agreements will be modified (or, in some cases, terminated) upon the
effectiveness of our proposed merger with Amgen. AHP has entered into certain
agreements with Amgen to take effect if and when the merger is completed. We
have noted certain of these agreements in this report, although we are not a
party to any of these agreements. For more information on these agreements, you
should refer to the definitive joint proxy statement/prospectus relating to the
proposed merger, and Amgen's registration statement on Form S-4, filed with the
SEC.

                                      11

<PAGE>

Governance Agreement

   The governance agreement includes, among other matters, provisions relating
to:

   .   our corporate governance, including the composition of our board of
       directors;

   .   AHP's right to purchase additional shares of our common stock from us if
       specified events occur;

   .   future purchases and sales of our common stock by AHP;

   .   the requirement that members of our board designated by AHP approve
       specified corporate actions; and

   .   the requirement that a supermajority of the members of our board approve
       specified corporate actions.

   In August 2000, we and AHP amended some terms of the governance agreement.
The changes took effect in November 2000, after AHP's ownership interest in our
common stock fell below 45% as a result of its participation as a selling
shareholder in our public offering.

   Under the governance agreement, AHP is prohibited from transferring shares
of our common stock except in an underwritten public offering, or as permitted
by the volume and manner of sale limitations of Rule 144 under the Securities
Act of 1933, as amended, or to a wholly-owned AHP subsidiary. Also, except in
an underwritten public offering, AHP may not transfer an amount in excess of 1%
of the outstanding shares of our common stock on any given day, nor may any AHP
transfer result in the creation of a 5% shareholder of our common stock.

   AHP may, however, transfer all, but not less than all, of the shares of our
common stock it beneficially owns to any other person other than an affiliate
of AHP, provided that the other person has offered to acquire all of our
outstanding shares of common stock on the same terms and conditions as those
offered to AHP. If AHP intends to transfer its shares of our common stock, AHP
is required to notify us of that intent and, for three months after that
notice, we have the opportunity to present to AHP a potential buyer willing to
purchase all, but not less than all, of the shares of our common stock
beneficially owned by AHP and its wholly-owned subsidiaries. In the event that
we present a potential buyer, AHP may not consummate a sale on terms less
favorable to AHP than those proposed by the potential buyer.

   The governance agreement will terminate when AHP beneficially owns 95% of
all classes and series of our common stock, or when AHP no longer owns any of
our common stock. Concurrently with the signing of the merger agreement, Amgen
and AHP entered into an agreement regarding governance and commercial matters
that will become effective upon the consummation of the merger. Pursuant to
this agreement regarding governance and commercial matters, AHP has agreed to
take all action reasonably requested by Amgen to terminate the governance
agreement.

   If our proposed merger with Amgen is completed, AHP will beneficially own
approximately 8% of the combined entity (based on the number of Amgen and
Immunex shares outstanding as of December 31, 2001). AHP entered into a
Stockholders' Rights Agreement with Amgen in connection with the execution of
the merger agreement containing certain provisions relating to Amgen corporate
governance and AHP's conduct as a stockholder of Amgen. Among other things, AHP
has agreed with Amgen:

   .   not to participate in a proxy contest relating to Amgen or otherwise
       seek to control or influence Amgen's management, board of directors or
       policies at any time before December 16, 2006;

   .   to vote its shares in accordance with the recommendation of the Amgen
       board of directors until its beneficial ownership falls below 2% of the
       outstanding shares of Amgen common stock;

   .   not to sell any of the Amgen stock acquired in the merger for a period
       of 90 days following the completion of the merger; and

   .   to abide by specified quarterly volume limitations for any proposed
       transfer of Amgen common stock after the lock-up period expires.

                                      12

<PAGE>

   Amgen has agreed to file a shelf registration statement after the closing of
the merger registering the resale from time to time by AHP of the Amgen common
stock received by AHP in the merger. Amgen also granted additional demand
registration rights to AHP, as specified in the stockholders' rights agreement,
beginning on the first anniversary of the closing of the merger, and "piggy
back" rights to participate in any underwritten public offering proposed by
Amgen (if any), subject to customary limitations. Except as noted above, the
stockholders' rights agreement between Amgen and AHP would terminate on the
first date on which AHP beneficially owns less than 5 million shares of Amgen
common stock.

Product Rights Agreement

   In July 1998, we entered into a product rights agreement with AHP, under
which we granted AHP an option to obtain royalty-bearing worldwide exclusive
licenses to a limited number of our products for all clinical indications. This
option is referred to as a "product call." Under the product rights agreement,
AHP also owns a right of first refusal to our covered products and technologies
that may only be exercised if our board decides that we will not market a
covered product or technology by ourself in any part of the world where we have
or acquire marketing rights. AHP's right of first refusal, which is subject to
specified negotiation periods and establishment of mutually acceptable terms,
applies to our covered products and technologies in all fields, including
ABX-EGF, IL-1 Receptor Type 2 and TRAIL, but not including Leukine, IL-15 and
several of our other products. We are not obligated to accept any offer for our
covered products and technologies under AHP's right of first refusal.

   The product rights agreement provides AHP with a product call for up to four
of our products over the period discussed below. The product rights agreement
also provides that AHP must exercise a product call within specified time
periods beginning with our decision to formally designate the product as an
investigational new drug, or IND, track product and ending when the first
positive Phase 2 clinical data for that product is available, or AHP will lose
the right to use a product call on that product. Some of our products are
excluded from AHP's product calls, including Enbrel, Nuvance, Leukine,
Novantrone, IL-15, any product we marketed on or before July 1, 1998, and
several other products. We are currently within the time period during which
AHP may exercise a product call with respect to ABX-EGF, IL-1 Receptor Type 2
and TRAIL/Apo2L. We are developing ABX-EGF in collaboration with Abgenix and
TRAIL/Apo2L in collaboration with Genentech. AHP's product call with respect to
ABX-EGF and TRAIL/Apo2L covers only our, and not our collaborators', rights to
the product.

   If AHP exercises a product call for one of our products, we will enter into
an elected product agreement with AHP granting AHP exclusive worldwide rights
(or if less than exclusive worldwide rights are held by us, all of our rights)
to this product for all indications. Under the elected product agreement, AHP
will pay us an initial fee, milestone payments and royalties on any future
worldwide net sales of the product after regulatory approvals. The initial fee,
milestone payments and royalties are determined by the development stage of the
product when AHP exercises the product call. In total, the initial fees and
milestone payments range from $25 million if we have given the product IND
status, up to $70 million if we have given notice to AHP that data from the
first positive Phase 2 clinical trial results are available for the product.
The royalties AHP pays to us increase based on the development stage of the
product and based on the product attaining specified annual net sales
thresholds.

   Under the product rights agreement, we have the right to keep ownership of
up to two of our products for which AHP has exercised product calls, referred
to as a "conversion right," in exchange for our commitment to pay milestone
payments and royalties to AHP and, in the case of the second exercise of our
conversion right only, an initial fee. Our milestone payments to AHP are fixed
at one-half the amount AHP would otherwise pay us for a product call, and our
royalties payable to AHP are always fixed at the lowest of the four levels of
royalties that AHP would otherwise pay us after exercising a product call. If
we exercise one of our conversion rights for one of our products, which must be
exercised within 30 days after AHP exercises one of its product calls, we will
enter into a converted product agreement with AHP for the product that provides
for us to make payments to AHP as discussed above, unless AHP has exercised its
option to obtain a replacement product call,

                                      13

<PAGE>

as discussed below. We cannot exercise our conversion rights on both of the
first two product calls AHP exercises. If we exercise a conversion right, AHP
may within 30 days elect to obtain one replacement product call from us. AHP's
right to elect a replacement call may be exercised only one time. If AHP makes
this election, AHP waives its right to receive any applicable initial fee,
milestone payments and royalties from us on this converted product. If either
party exercises its rights under the product rights agreement and acquires or
retains rights to one of our products, the company that exercised these rights
assumes independent development responsibility for that product, including the
payment of all costs for future product development.

   AHP's rights to exercise product calls under the product rights agreement
terminates upon the first to occur of the following events:

   .   AHP has exercised product calls and entered into elected product
       agreements for four of our products, subject to our two conversion
       rights and AHP's replacement product call;

   .   June 30, 2008, with an additional year if we exercise both of our
       conversion rights; or

   .   the later of June 30, 2003, or the date following which AHP has received
       a total of eight opportunities to exercise a product call for a product
       for which AHP has requested and obtained specified product information,
       except that this number increases to nine opportunities in specified
       circumstances.

   AHP's right of first refusal to our covered products and technologies
terminates June 30, 2003. In connection with the proposed merger between us and
Amgen, AHP and Amgen have entered into an agreement regarding governance and
commercial matters which relates to, among other things, AHP's rights under the
product rights agreement. AHP and Amgen have agreed that, upon the closing of
the merger and in exchange for a payment to AHP of $25 million, AHP's rights
under the product rights agreement will be terminated.

   AHP has entered into an Agreement Regarding Governance and Commercial
Matters with Amgen. This agreement provides that, among other things, if AHP
exercises a product call, replacement product call or right of first refusal at
any time before completion of the proposed merger with Amgen, and the merger is
completed, AHP will rescind its exercise of such product call in exchange for
refund by Amgen or Immunex of payments previously made by AHP in connection
with the product call, replacement product call or right of first refusal.

TACE Agreements

   In December 1995, we entered into research and license agreements with AHP
relating to tumor necrosis factor alpha converting enzyme, or TACE. Pursuant to
these TACE agreements, we granted AHP a worldwide exclusive license under our
intellectual property relating to TACE, and agreed to collaborate with AHP in
developing TACE inhibitors, in consideration of specified fixed payments for
research services, and contingent additional payments that are payable upon
achieving specified research and clinical milestone events. In September 1997,
in conjunction with the promotion agreement for Enbrel discussed below, we and
AHP amended one of the TACE agreements to substantially increase the royalty
payable by AHP to us on the first TACE molecule approved by the FDA, if any.

TNFR License and Development Agreement

   In July 1996, we entered into a TNFR license and development agreement with
AHP under which we retained marketing rights to Enbrel in the United States and
Canada, and AHP retained marketing rights to Enbrel outside of the United
States and Canada. The TNFR agreement also addresses joint project management,
cost sharing for development activities related to Enbrel, manufacturing
responsibilities, intellectual property protection and disposition of rights
upon relinquishment or termination of product development.

                                      14

<PAGE>

Agreements Related to the Manufacturing of Enbrel

   Under the TNFR agreement, we agreed with AHP to negotiate the terms of a
supply agreement for the commercial supply of Enbrel to AHP outside the United
States and Canada. In November 1998, we and AHP entered into an Enbrel Supply
Agreement with Boehringer Ingelheim Pharma KG, or BI Pharma, for the commercial
supply of Enbrel to Immunex in the United States and Canada, and to AHP outside
of the United States and Canada.

   In August 2000, we and AHP entered into several new agreements related to
the manufacturing of Enbrel, including a preliminary agreement that we would
purchase the biotechnology manufacturing facility in West Greenwich, Rhode
Island owned by AHP, which has been retrofitted to increase manufacturing
capacity of Enbrel. In addition, we and AHP agreed that a substantial majority
of the Enbrel produced by BI Pharma will be allocated to us until the Rhode
Island manufacturing facility receives regulatory approval and produces
specified quantities of Enbrel. In November 2001, we signed a definitive
purchase agreement for the Rhode Island manufacturing facility. We assumed
ownership of the facility on January 1, 2002 and subsequently made a deposit
toward the purchase price. A final payment is due for final costs incurred by
AHP in December 2001. In connection with the signing of the purchase agreement
for the Rhode Island manufacturing facility, we and AHP entered into a
collaboration and global supply agreement related to the manufacture, supply,
inventory, and allocation of defined supplies of Enbrel produced at the Rhode
Island manufacturing facility, and a new Rhode Island manufacturing facility
under construction as well as particular supplies of Enbrel produced by either
BI Pharma in Germany or AHP at a manufacturing facility AHP is constructing in
Ireland. However, until the Rhode Island manufacturing facility receives
regulatory approval, our August 2000 agreement with AHP will continue to govern
the allocation of supplies of Enbrel.

Enbrel Promotion Agreement

   In September 1997, we entered into an Enbrel promotion agreement with AHP,
under which AHP, acting through its subsidiary Wyeth-Ayerst, acquired the
rights to promote Enbrel to all appropriate customer segments in the United
States and Canada for all approved indications other than oncology. Under the
terms of the Enbrel promotion agreement, AHP was obligated to pay us up to $100
million in nonrefundable scheduled payments for the United States and Canadian
promotion rights to Enbrel. We have earned and received all of the scheduled
payments.

   Under the Enbrel promotion agreement, AHP has agreed to reimburse us for
more than a majority of the clinical and regulatory expenses we incur in
connection with the filing and approval of any new indications for Enbrel in
the United States and Canada, excluding oncology and RA indications. AHP's
reimbursement of these clinical and regulatory expenses under the Enbrel
promotion agreement is in addition to the existing cost-sharing arrangement
between us for development costs related to Enbrel as provided in the TNFR
agreement. The additional AHP reimbursement for clinical and regulatory
expenses under the Enbrel promotion agreement, a portion of which is payable
upon regulatory filing of any new indication and the remainder of which is
payable upon regulatory approval of any new indication, if any, applies for
that part of the United States and Canadian clinical and regulatory expenses
for Enbrel for which we are otherwise financially responsible under the
cost-sharing provisions in the TNFR agreement. AHP has also agreed to reimburse
us under the Enbrel promotion agreement for less than a majority of specified
patent expenses related to Enbrel, including any up-front license fees and
milestones, as well as patent litigation and interference expenses. In
addition, AHP agreed to pay a majority of the marketing expenses and sales
force costs for Enbrel incurred prior to and during the two years following
commercial launch of Enbrel in the United States and Canada. In November 2000,
we began sharing AHP's United States marketing and selling expenses for Enbrel
equally. Similarly, beginning with the third year following commercial launch
of Enbrel in Canada, we will share AHP's Canadian marketing and selling
expenses for Enbrel equally.

   Under the Enbrel promotion agreement, we may elect at any time to supplement
AHP's detailing and promotion of Enbrel in the United States with our own sales
force to detail Enbrel for any approved indications promoted by AHP. Detailing
means visiting and communicating with physicians by sales representatives to

                                      15

<PAGE>

increase physician prescribing preferences for the detailed product. We will
share our sales force costs with AHP on an equal basis. In February 2002, our
own sales force began detailing Enbrel in the United States for both its RA and
PsA indications.

   We record any and all product sales of Enbrel in the United States and
Canada under the Enbrel promotion agreement. We pay AHP a percentage of any and
all annual gross profits of Enbrel in the United States and Canada attributable
to all indications for Enbrel, other than oncology indications, on a scale that
increases as gross profits increase.

   We retain a majority percentage of these nononcology gross profits in the
United States and Canada on an annual basis. We are entitled to keep all of the
gross profits attributable to any future United States or Canadian oncology
indications for Enbrel. Also, we will pay AHP specified residual royalties on a
declining scale based on any and all net sales of Enbrel in the United States
and Canada in the three years following the expiration or termination of AHP's
detailing and promotion of Enbrel.

   If AHP sells or distributes a biologic product in the United States and
Canada that is directly competitive with Enbrel, as defined in the Enbrel
promotion agreement, and subject to several exclusions, AHP will give us prior
written notice and, upon our request, we will attempt in good faith to either
establish mutually acceptable terms with AHP under which we will co-promote
this competitive biologic product or establish other terms for a commercial
relationship with AHP, or negotiate an adjustment to the gross profits
allocated to AHP under the Enbrel promotion agreement. If we are unable to
establish acceptable terms with AHP within 90 days of our request, we may at
our option reacquire from AHP all marketing rights to Enbrel in the United
States and Canada and terminate the Enbrel promotion agreement, subject to our
payment of substantial amounts to AHP over a defined period. If AHP obtains a
biologic product that is directly competitive with Enbrel through the
acquisition of another company and we reacquire the marketing rights to Enbrel
in the United States and Canada, AHP's primary field sales force that had
detailed Enbrel in the relevant territory within the United States and Canada
for a specified period may not sell, detail or otherwise distribute the
competitive biologic product for a specified period in the United States and
Canada.

   Under the Enbrel promotion agreement, an Enbrel management committee was
formed containing an equal number of representatives from us and from AHP. The
Enbrel management committee is responsible for areas including strategic
planning, approval of an annual marketing plan and product pricing.

   In connection with the proposed merger between us and Amgen, AHP and Amgen
have entered into an amended and restated promotion agreement related to the
promotion of Enbrel in the United States and Canada. If the merger is completed
and we become a wholly-owned subsidiary of Amgen, this agreement would take
effect, and Amgen has agreed that it would cause us to sign the agreement.
Under the amended and restated promotion agreement, AHP and Immunex will
jointly market and sell Enbrel to all appropriate customer segments in the
United States and Canada for all approved indications other than oncology. The
rights to promote Enbrel for oncology in the United States and Canada are
reserved to Immunex under the amended and restated promotion agreement.

Voting Agreement

   In connection with the proposed merger between us and Amgen, AHP and two of
its subsidiaries entered into a voting agreement with Amgen in which they
agreed, among other things, to vote their shares of our stock in favor of the
merger and against competing acquisition proposals and certain other material
changes to us, including changes to the board of directors, our capitalization
and our corporate structure. Further, AHP and its subsidiaries agreed not to
transfer any of their shares of our common stock, other than to an AHP
shareholder or wholly-owned subsidiary of AHP that is subject to the voting
agreement. As of December 31, 2001, AHP beneficially owns approximately 41% of
our outstanding common stock.

                                      16

<PAGE>

Marketing and Distribution

   Through our marketing and professional services organization, we explain the
approved uses and advantages of our products to medical professionals in the
United States. We work to have our products included in managed care
organization formularies, which are lists of recommended or approved medicines
and other products compiled by pharmacists and physicians, by demonstrating the
qualities and treatment benefits of our products. AHP's marketing organization,
working together with us, performs similar activities for Enbrel.

   Marketing prescription pharmaceuticals depends to a degree on complex
decisions about the scope of clinical trials made years before product
approval. All drugs must complete clinical trials required by regulatory
authorities to show that they are safe and effective for treating one or more
particular medical problems. A manufacturer may choose, however, to undertake
additional studies to demonstrate additional advantages of a product, such as a
better tolerability profile or greater cost effectiveness than existing
therapies.

Enbrel

   Under the Enbrel promotion agreement, Immunex and Wyeth-Ayerst jointly
promote Enbrel in the United States and AHP promotes Enbrel in Canada to
healthcare providers such as doctors and hospitals, pharmacy benefit managers
and managed care organizations. AHP sales representatives currently detail
Enbrel in the United States and Canada. As discussed under the caption
Relationship With AHP, we also have the right to supplement AHP's detailing of
Enbrel in the United States and Canada with our own sales force. In February
2002, we began detailing Enbrel in the United States through our own dedicated
sales force. We have focused our sales force on double covering certain key
rheumatologists currently visited by Wyeth-Ayerst sales representatives and on
promoting the new PsA indication for Enbrel to dermatologists. In addition to
AHP's and our coordinated selling and marketing efforts for Enbrel in the
United States, we have allied health professionals to support educational needs
of healthcare providers in the United States relating to Enbrel.

Leukine and Novantrone

   We market Leukine and Novantrone to healthcare providers in the United
States through a specialty sales force of over 100 sales representatives and
sales managers.

Distribution

   We distribute our products through pharmaceutical wholesalers and specialty
distributors, as well as to end users such as oncology clinics, physicians'
offices, hospitals and pharmacies. A significant majority of our sales are made
to three pharmaceutical wholesalers. For Enbrel, rather than stocking inventory
of product at wholesalers, we drop-ship wholesaler orders for Enbrel directly
to pharmacies for end users. We receive and process product orders through a
centralized customer service and sales support group. A third party provides us
with shipping, warehousing and data processing services on a fee basis.

   Because demand for Enbrel was projected to temporarily exceed supply, we
began an Enbrel enrollment program in November 2000 to help ensure
uninterrupted therapy for United States patients prescribed Enbrel before
January 1, 2001. The Enbrel enrollment program called for these patients to
register with us and receive an enrollment number. Through an extensive
outreach campaign, the vast majority of these patients have successfully
enrolled and are continuing to receive Enbrel therapy. Also, as of January 1,
2001, patients considering therapy with Enbrel, but not yet receiving
treatment, were invited to enroll in the program and were placed on the waiting
list. These patients receive Enbrel on a first come, first served basis once
additional supply of Enbrel becomes available.

Competition

   Competition in researching, developing, manufacturing and marketing
biopharmaceuticals, and pharmaceutical products generally, is intense. There
are other companies, including established pharmaceutical

                                      17

<PAGE>

and biotechnology companies, that are researching, developing and marketing
products based on related or competing technologies that are or will compete
with our currently marketed products or products being developed by us. These
competitors, in some cases, have substantially greater capital resources,
greater marketing experience, and larger research and development staffs and
manufacturing facilities than we do.

   The principal means of competition vary among product categories. The
following technological innovations are important to success in our business:

   .   efficacy;

   .   tolerability;

   .   ease of use by patients; and

   .   cost effectiveness.

   We compete with other pharmaceutical firms in performing research and
clinical testing, acquiring patents, developing efficient manufacturing
processes, securing regulatory approvals and marketing the resulting products
to physicians. We believe that our strategic focus on immunology has resulted
in expertise that can be applied to reduce development times, create innovative
and cost-saving research techniques, optimize product quality, and discover new
products and applications. We possess manufacturing facilities to produce
recombinant protein products using microbial or mammalian cell culture
technologies. Professional services, clinical, legal, regulatory affairs,
marketing and sales staffs have been developed to enhance our scientific
resources. We possess a sales force and offer comprehensive professional
services, including continuing medical educational programs, publications,
literature searches and treatment information. These professional services are
particularly important for our oncology products because, historically, new
cancer drugs provide incremental treatment advances, but few outright cures.
Therefore, physicians rely heavily on peer-reviewed clinical data in making
treatment decisions.

Enbrel

   A number of companies, including those listed below, are marketing or
developing biological or other products that compete or are expected to compete
with Enbrel to some degree.

   Johnson & Johnson.  In November 1999, Johnson & Johnson received FDA
approval for Remicade for use with methotrexate for treating patients with RA
who have had inadequate response to methotrexate alone. In January 2001, the
FDA granted marketing approval to Remicade, in combination with methotrexate,
for inhibiting the progression of structural damage in patients with moderately
to severely active RA who have had an inadequate response to methotrexate. The
FDA had previously approved Remicade for treating Crohn's disease in August
1998. Remicade is a chimeric part-mouse, part-human monoclonal antibody.
Centocor and Ortho-McNeil Pharmaceutical, Inc., both Johnson & Johnson
affiliates, are co-promoting Remicade for RA in the United States.

   Other companies, as listed below, have developed nonbiological and
biological products for treating some aspects of RA. Although we do not
currently expect these products to directly compete with Enbrel in patients
with advanced RA, they may compete with Enbrel in patients with earlier-stage
RA or be used in patients that do not respond to Enbrel. Some of these products
are COX-2 inhibitors, a relatively new class of drugs for arthritis and pain
that are generally as effective as initial RA therapy with nonsteroidal
anti-inflammatory drugs. We believe that Enbrel may be effective in combination
with some of these products, as well as with some other DMARDs for RA.

   .   Aventis.  In September 1998, Hoechst Marion Roussel (now Aventis)
       received FDA approval for Arava(R) (leflunomide) for treating active RA
       to reduce signs and symptoms and to retard structural damage as
       evidenced by x-ray erosions and joint space narrowing. Arava is an oral
       treatment for RA, has side effects similar to methotrexate, and is
       priced significantly less than Enbrel.

                                      18

<PAGE>

   .   Pharmacia Corporation.  Pharmacia received FDA approval for Celebrex(R)
       (celecoxib) in December 1998 for relieving the signs and symptoms of
       osteoarthritis and RA. Celebrex is a COX-2 inhibitor, and is priced
       significantly less than Enbrel. Celebrex is an oral treatment and is
       co-promoted by G.D. Searle & Co., a pharmaceutical unit of Pharmacia,
       and Pfizer Inc.

   .   Merck.  Merck received FDA approval for Vioxx(R) (rofecoxib) in May 1999
       for relieving the signs and symptoms of osteoarthritis, for managing
       acute pain in adults, and for treating primary dysmenorrhea. Vioxx is a
       COX-2 inhibitor, and is priced significantly less than Enbrel.

   .   Various Generic Competitors.  Methotrexate (rheumatrex) is a cytotoxic
       or immunosuppressive that acts as an anti-inflammatory agent. It is a
       DMARD used in conjunction with other DMARDs or other therapies for
       treatment of severe RA. Other DMARDs for RA include gold, sulphaslazine
       and Plaquinil.

   .   Amgen.  In November 2001, Amgen received FDA approval for Kineret(TM)
       (anakinra) for the reduction in signs and symptoms of moderately to
       severely active RA in adult patients who have failed one or more DMARDs.
       Kineret can be used alone or in combination with DMARDs, except it is
       not labeled for use with Enbrel or Remicade. Kineret requires a high
       dose in a daily injection when used in combination with other drugs,
       such as methotrexate.

   In addition, there are several other pharmaceutical and biotech companies,
including those listed below, conducting research and development activities
with respect to potential RA therapies. Further, immune modifying drugs
currently marketed for treatment of other diseases are being evaluated in RA.
Some or all of these potential RA therapies may gain regulatory approval and
compete, directly or indirectly, with Enbrel.

   .   Abbott Laboratories/Knoll.  Abbott and its affiliate Knoll
       Pharmaceuticals Company Inc. are developing D2E7 as a fully human
       monoclonal antibody that binds to TNF. D2E7 is currently the subject of
       a pivotal development program for RA. In March 2001, Abbott acquired the
       pharmaceutical business of BASF, which includes the global operations of
       Knoll.

   .   Pharmacia/Celltech Group plc.  Pharmacia and Celltech are developing
       CDP870, a humanized, pegylated TNF-alpha inhibitor. Pegylation is a
       process whereby the active molecule is combined with polyethylene
       glycol. Pegylation can increase the time the molecule remains in the
       body and extend the time between administrations. Pharmacia and Celltech
       have completed Phase 2 clinical trials of CDP870 and are scheduled to
       initiate Phase 3 clinical trials in 2002.

   .   Genentech/Hoffman-LaRoche Inc and Ares-Serono. Genentech and Roche are
       evaluating Rituxan(R), marketed for treatment of non-Hodgkin's lymphoma,
       in a Phase 2 clinical study for RA. In a similar strategy, Ares-Serono
       has completed enrollment in Phase 2 clinical trials for Rebif(R), which
       is currently marketed outside the United States for multiple sclerosis,
       and its TNF antagonist TBP-1, in RA. Either or both of these companies
       could pursue regulatory approval for these products for use in RA.

   .   Regeneron Pharmaceuticals Incorporated.  Regeneron is developing a
       biologic against IL-1, IL-1 TRAP. Favorable results of this molecule
       were released at the November 2001 American College of Rheumatology
       meeting and Regeneron has stated publicly that it will move into Phase 2
       testing shortly.

   .   Amgen.  Amgen is developing sTNF-R1 (soluble TNF-receptor type 1), a TNF
       modulator, which is in Phase 2 clinical trials in RA. Amgen is also
       conducting trials to evaluate the safety and efficacy of using a
       combination of sTNF-RI and Kineret in the treatment of moderate to
       severe RA.

   .   Various Competitors.  P38 MAP kinase is an enzyme that regulates the
       production of IL-1ss, IL-6 and TNF-a and modulates COX-2. This target is
       considered by many scientists to be a promising target for RA therapy.
       Several pharmaceutical and biotechnology companies, including Vertex and
       Scios, have development programs against this target.

                                      19

<PAGE>

   .   Vertex Pharmaceuticals Incorporated/Aventis Pharmaceuticals.  Vertex and
       its partner Aventis are working together to develop and commercialize
       pralnacasan, an orally available IL-1ss Converting Enzyme, or ICE,
       inhibitor for the treatment of inflammatory disease. Pralnacasan is
       currently in Phase 2 trials in patients with RA.

   .   Alexion Pharmaceuticals Inc.  Alexion is developing an antibody that
       inhibits the complement cascade. Phase 2 clinical data presented at the
       November 2001 American College of Rheumatology meeting have shown merit
       to this approach as a potential RA therapy. In January 2000, Alexion
       initiated Phase 2b clinical trials and is developing plans to conduct
       further studies towards FDA approval.

   .   Various Competitors.  Celgene is working with Selective Cytokine
       Inhibitory Drugs, or SelCIDs, to combat inflammation. SelCIDs have been
       determined to have an inhibitory effect on phosphodiesterase type 4
       enzyme, or PDE-4, which in turn may inhibit TNF-a production. In
       addition, Glaxo SmithKline and Altana have begun Phase 3 development
       programs for PDE-4 inhibitors in respiratory indications and ICOS
       Corporation has begun Phase 1 development programs for PDE-4 with RA as
       the lead indication. Successful development of these products would
       likely lead to testing in treatment of RA.

   .   Immune Response Corporation.  Immune Response Corporation, or IRC, has
       completed a Phase 2b clinical trial with RA patients using a proprietary
       immune-based vaccine therapy. IRC identified unique T cell receptors, or
       TCRs, so that patients may be vaccinated with portions of these TCR
       proteins, called TCR peptides, that are specific to these autoreactive T
       cells. The Phase 2b clinical trial reportedly demonstrated safety and a
       significant treatment effect.

Leukine

   Several companies are marketing or developing products that compete or are
expected to compete with Leukine. For example, Amgen has been marketing its
competing granulocyte-colony stimulating factor, or G-CSF, product since early
1991 and has achieved a majority share of sales of CSF in the United States.
Amgen has developed a sustained duration G-CSF molecule, Neulasta(TM)
(pegfilgrastim), Amgen's pegylated version of Neupogen that was approved by the
FDA on January 31, 2002.

Novantrone

   A number of companies, including those listed below, are marketing products
that compete with Novantrone for its oncology indications or may compete with
Novantrone for its new MS indication. In October 2000, the FDA approved
Novantrone for reducing neurologic disability and/or the frequency of clinical
relapses in patients with secondary progressive, progressive relapsing or
worsening relapsing-remitting MS. It is not approved for primary progressive
MS. Other treatments currently approved for MS require a subcutaneous or
intramuscular self-injection on a daily or weekly basis. If the FDA were to
approve new MS indications for any of the marketed MS products covering any of
the MS indications for Novantrone, our sales of Novantrone in MS could be
adversely affected.

   .   Biogen.  Biogen is marketing Avonex(R) (interferon beta-1a) for
       relapsing-remitting forms of MS. Avonex recently completed a Phase 3
       clinical trial in secondary progressive MS. Biogen, in co-development
       with Elan, has just begun phase 3 clinical trials of the new product,
       Antegren (natalizumab) in relapsing-remitting MS.

   .   Berlex Laboratories, Inc.  Berlex, a subsidiary of Schering A.G., is
       marketing Betaseron(R) (interferon beta-1b) for relapsing-remitting MS.
       Berlex filed for FDA approval of an expanded indication for Betaseron
       for secondary progressive MS in June 1998.

   .   Serono.  Serono is seeking marketing approval for use of Rebif(R) in
       treatment of relapsing-remitting MS. Serono announced on October 8, 2001
       that it had submitted to the FDA a supplemental biologics license
       application, or sBLA, for this indication.

                                      20

<PAGE>

   .   Teva Pharmaceuticals Industries Limited.  Teva is marketing Copaxone(R)
       (glatiramer acetate for injection) for relapsing-remitting MS.

   .   Pharmacia.  Pharmacia has been marketing Idamycin(R) (idarubicin) for
       acute myelogenous leukemia and Emcyt (estramustine) for prostate cancer.

   .   Bedford Laboratories.  Bedford Laboratories, a division of Ben Venue
       Laboratories, Inc., is marketing Cerubidine(R) (daunorubicin) for acute
       myelogenous leukemia.

Thioplex

   In 2001, Thioplex began to face generic competition.

Raw Materials and Supply

Overview

   Along with our third-party manufacturers, we purchase raw materials
essential to our business in the ordinary course of business from numerous
suppliers. Substantially all the raw materials used to manufacture our
recombinant protein products and other products are available from multiple
sources. However, two of the raw materials used in the production of Enbrel and
our other recombinant protein products, other than Leukine, are manufactured by
single suppliers. No serious shortages or delays in obtaining raw materials
were encountered in 2001.

   All finished dosage forms of Enbrel are currently manufactured by BI Pharma
and packaged by a third-party contract packager. We manufacture all Leukine
bulk drug substance, which is then vialed and labeled by third parties. All
finished dosage forms for our nonbiological products, Novantrone and Thioplex,
are manufactured by AHP subsidiaries or sourced by AHP from third-party
manufacturers.

   We presently do not have our own capabilities for producing and labeling
final drug products from bulk drug substances or bulk proteins. We rely upon
unaffiliated third parties and AHP to vial and label the drug products we
market.

BI Pharma Supply Agreement

   In November 1998, we and AHP entered into a long-term supply agreement with
BI Pharma to manufacture commercial quantities of Enbrel. Until our retrofitted
Rhode Island manufacturing facility receives FDA approval, our sales of Enbrel
are entirely dependent on BI Pharma manufacturing the product. We have made
significant purchase commitments to BI Pharma under the BI Pharma supply
agreement to manufacture commercial inventory of Enbrel.

   Under the BI Pharma supply agreement, BI Pharma has reserved a specified
level of production capacity for Enbrel, and our purchase commitments for
Enbrel are manufactured from that reserved production capacity. The BI Pharma
supply agreement contains provisions for increasing or decreasing BI Pharma's
reserved production capacity for Enbrel, subject to lead-times and other
related terms. Because of the long lead-time required for ordering raw
materials for Enbrel and for scheduling BI Pharma's facilities, we are required
to submit a rolling three-year forecast for manufacturing the bulk drug for
Enbrel, and a rolling forecast for a shorter period for the number of finished
vials of Enbrel to be manufactured from the bulk drug. A significant portion of
each of the above forecasts becomes a purchase commitment when issued to BI
Pharma. We have submitted firm orders for the maximum production capacity that
BI Pharma currently has reserved for Enbrel.

   BI Pharma's pricing of Enbrel depends on specified production assumptions
that the parties have made relating to the production efficiency of
manufacturing Enbrel. Under the BI Pharma supply agreement, the pricing of
Enbrel is also subject to volume discounts depending on the amount of Enbrel
ordered during each

                                      21

<PAGE>

calendar year. We and AHP will be responsible for substantial payments to BI
Pharma if we and AHP fail to use a specified percentage of the production
capacity that BI Pharma has reserved for Enbrel each calendar year, or if the
BI Pharma supply agreement is terminated prematurely under specified conditions.

   In June 2000, we, AHP and BI Pharma amended the BI Pharma supply agreement
to offer BI Pharma financial incentives to provide additional near-term
production capacity for Enbrel, to facilitate process improvements for Enbrel,
and to extend the term of the agreement. As an incentive to BI Pharma, we will
pay more to BI Pharma on a per unit basis for any additional production runs
provided over a specified period, which will result in an increase in our
incremental costs for these runs. BI Pharma's ability to provide additional
production runs depends in part on factors beyond its control, including
contractual commitments to other customers. BI Pharma was able to provide
limited additional capacity in 2001 and we expect similar additional capacity
to be provided in 2002. Limited additional production capacity may be available
in future years.

   For a discussion of the factors affecting our supply of Enbrel under the BI
Pharma supply agreement, see the caption Important Factors That May Affect Our
Business, Our Results of Operations and Our Stock Price--Limits on our current
source of supply for Enbrel will constrain our sales growth unless and until
additional manufacturing capacity for Enbrel is approved in this report.

MedImmune Supply Transfer Agreement

   In March 2001, we entered into a supply transfer agreement with MedImmune
Inc. in order to potentially increase our supply of Enbrel from BI Pharma. Both
Enbrel and MedImmune's product Synagis(R) (palivizumab) are manufactured by BI
Pharma. The transfer agreement provided that, in the event additional
manufacturing capacity for Synagis is obtained elsewhere and MedImmune
relinquished manufacturing capacity that it had reserved at BI Pharma with
respect to defined time periods, we would pay MedImmune specified amounts, if
any capacity relinquished by MedImmune is transferred by BI Pharma to the
manufacture of Enbrel. We also pay BI Pharma more on a per unit basis for these
additional production runs. We have received some additional supplies of Enbrel
as a result of the transfer agreement.

Expansion of Manufacturing Facilities

   On January 1, 2002, we purchased from AHP a large-scale biopharmaceutical
manufacturing facility in West Greenwich, Rhode Island. We and AHP have
invested substantial sums and worked closely together to retrofit the Rhode
Island manufacturing facility to accommodate the commercial production of
Enbrel bulk drug. As presently configured, we currently estimate that, when
fully completed and approved by the FDA, the retrofitted Rhode Island
manufacturing facility could, on an annual basis, double our current United
States and Canadian supply of Enbrel.  We have begun preparing for the
supplemental filing for the Rhode Island facility with the FDA and expect to
complete the filing by mid-2002. We estimate FDA approval of this facility in
the second half of 2002.

   In November 2001, we broke ground on the BioNext Project(TM), a new
manufacturing plant to be built adjacent to our existing retrofitted
manufacturing facility in Rhode Island. When the facility is completed and
approved by the FDA which we estimate will occur in 2005, it is scheduled to
produce Enbrel and possibly other products currently in development. We may
also build additional manufacturing capacity at Rhode Island or other locations
to help meet the manufacturing requirements for Enbrel and our products under
development and to improve our ability to attract collaborative partners with
products under development.

   For a discussion of our agreements with AHP related to the manufacturing of
Enbrel, see the caption Relationship with AHP--Agreements Related to the
Manufacturing of Enbrel in this report.

                                      22

<PAGE>

Governmental Regulation

   The manufacturing and marketing of pharmaceutical products in the United
States requires the approval of the FDA under the federal Food, Drug and
Cosmetic Act. Similar approvals by comparable agencies are required in foreign
countries. The FDA has established mandatory procedures and safety standards
that apply to the clinical testing, manufacture and marketing of pharmaceutical
and biotechnology products. Obtaining FDA approval for a new therapeutic
product is never assured, may take several years and involves spending
substantial resources.

   Data from human clinical trials are submitted to the FDA in a new drug
application, or NDA, for drugs or a BLA for biologics. For products to be
marketed in Canada, these submissions are made to the Canadian Health
Protection Bureau, or CHPB, in a new drug submission, or NDS. Data from
clinical trials for new indications or uses for approved products are submitted
to the FDA in a supplemental NDA for drugs and in sBLA. Data regarding
manufacturing and bioequivalence of generic drug products are submitted to the
FDA in an abbreviated new drug application, and to the CHPB in an abbreviated
NDS. Preparing any of these regulatory submissions involves considerable data
collection, verification and analysis.

   Completion of clinical trials may take several years or more. The length of
time generally varies substantially according to the type, complexity, novelty
and intended use of the product candidate. We estimate that clinical trials of
the type we generally conduct are typically completed over the following
timelines:

<TABLE>
<CAPTION>
                                                              Estimated
                                                              Completion
       Clinical Phase                                           Period
       --------------                                         ----------
       <S>                                                    <C>
         Phase 1                                              1 Year
         Phase 2                                              1-2 Years
         Phase 3                                              2-4 Years
</TABLE>

   Our commencement and rate of completion of clinical trials may vary or be
delayed by many factors, including those described in this report.

   Any products manufactured or distributed by us pursuant to FDA approvals are
subject to extensive continuing regulation by the FDA, including record-keeping
requirements and a requirement to report adverse experiences with the drug. In
addition to continued compliance with standard regulatory requirements, the FDA
also may require post-marketing testing and surveillance to monitor the safety
and efficacy of the marketed product. Adverse experiences with the product must
be reported to the FDA and may result in changes in labeling of products.
Product approvals may be withdrawn if compliance with regulatory requirements
is not maintained or if problems concerning safety or efficacy of the product
are discovered following approval.

   The federal government regulates recombinant DNA research activity through
National Institutes of Health, or NIH, guidelines for research involving
recombinant DNA molecules. We comply with the NIH guidelines which, among other
things, restrict or prohibit some types of recombinant DNA experiments and
establish levels of biological and physical containment of recombinant DNA
molecules that must be met for various types of research.

   Many other laws regulate our operations, including, among others, the
Occupational Safety and Health Act, the Environmental Protection Act, the
Nuclear Energy and Radiation Control Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, Title III of the Superfund
Amendments and Reauthorization Act (Community Right-to-Know and Emergency
Response Act), national restrictions on technology transfer, federal
regulations on the protection of human subjects in clinical studies, the
protection of animal welfare in preclinical studies, import, export and customs
regulations and other present or possible future local, state or federal
regulation. From time to time Congressional committees and federal agencies
have indicated an interest in implementing further regulation of biotechnology
and its applications.

                                      23

<PAGE>

Patents, Licenses and Trademarks

   Patents, trade secrets and other proprietary rights are very important to
us. We have obtained U.S. and foreign patents and have filed applications for
additional U.S. and foreign patents covering numerous aspects of our
technology. We cannot be certain that any of our pending or future applications
will result in issued patents or that the rights granted under existing or
future patents will provide competitive advantages to us or our licensees. We
also rely on trade secrets, unpatented proprietary know-how and continuing
technological innovation to develop and maintain our competitive position. We
cannot be certain that others will not acquire or independently develop the
same or similar technology, or that our issued patents will not be
circumvented, invalidated or rendered obsolete by new technology.

   Due to unresolved issues regarding the scope of protection provided by some
of the patents owned or licensed to us, as well as the possibility of patents
being granted to others, we cannot be certain that the patents owned by or
licensed to us and our licensees will provide substantial protection or
commercial benefit. The rapid rate of development and the intense research
efforts throughout the world in biotechnology, the significant time lag between
the filing of a patent application and its review by appropriate authorities
and the lack of sufficient legal precedents concerning the validity and
enforceability of some types of biotechnology patent claims make it difficult
to predict accurately the breadth or degree of protection that patents will
afford our or our licensees' biotechnology products or their underlying
technology. It is also difficult to predict whether valid patents will be
granted based on biotechnology patent applications or, if they are granted, to
predict the nature and scope of the claims of these patents or the extent to
which they may be enforceable.

   Under United States law, although a patent has a statutory presumption of
validity, the issuance of a patent is not conclusive as to validity or as to
the enforceable scope of its claims. Accordingly, we cannot be certain that the
patents owned or licensed to us will afford protection against competitors with
similar inventions, nor can we be certain that those patents will not be
infringed or designed around by others or that others will not obtain patents
that we will need to license or design around.

   It is our policy to respect the valid patent rights of others. We have
obtained patent licenses from various parties covering technologies relating to
our products. However, we may need to acquire additional licenses or, if these
licenses are denied or are unavailable on commercially reasonable terms, we may
need to prevail in the event that litigation is commenced by patent owners to
interfere with the development or commercialization of our products.

   We intend to pursue protection of multiple forms of intellectual property
where appropriate, including, but not limited to, patents and trade secrets for
all significant inventions, discoveries and developments in our various areas
of research. In addition, we will seek Orphan Drug exclusivity for all
significant inventions, discoveries and developments when appropriate. Under
our product rights agreement with AHP, AHP has an option to obtain
royalty-bearing worldwide exclusive licenses to a limited number of our
products for all product indications. This option is discussed more fully under
the caption Relationship With AHP.

Patents on Our Biological Products

   Enbrel.  Enbrel is a fusion protein consisting of a dimer of two subunits,
each comprising a TNF receptor domain derived from a TNF receptor known as
"p80," fused to a segment derived from a human antibody molecule known as an
"Fc domain." We believe that we were the first to isolate a recombinant DNA
encoding p80 TNFR and also the first to express the protein using recombinant
DNA technology. We have been issued U.S. patents covering p80 TNFR, DNAs
encoding p80 TNFR, and methods of using TNFR:Fc, including for the treatment of
arthritis. We were granted a European patent in December 1995 covering p80 TNFR
DNAs, proteins and related technology.

   Two other companies, BASF and Yeda Research & Development Company, Ltd.,
filed patent applications disclosing partial amino acid sequence information of
specified TNF-binding proteins, or TBPs, shortly prior to the time we filed our
patent applications claiming the full-length p80 TNFR DNAs and proteins
corresponding in part to the TBPs disclosed by BASF and Yeda Research. BASF was
issued a U.S. patent based on its TBP

                                      24

<PAGE>

disclosure. Due to limitations in the claims of the BASF U.S. patent, we
believe that it cannot be asserted to cover Enbrel. Consequently, we have not
entered into a license with BASF for its U.S. patent. This BASF U.S. patent
lost an interference proceeding, which BASF is currently appealing through a
United States district court action. In June 2000, we entered into a
royalty-bearing license agreement with respect to the BASF TBP patent family
excepting the U.S. patent. If BASF were able to validly assert its U.S. TBP
patent to cover TNFR:Fc in the United States, our commercialization of Enbrel
made in the United States could be impeded.

   The Yeda Research TBP patents and patent applications are controlled by
Ares-Serono International S.A. and its affiliate Inter-Lab Ltd. (collectively
Serono). In January 1999, we entered into a settlement agreement with Serono
under which we and Serono agreed to settle potential disputes concerning the
patents and patent applications controlled by Serono that relate to TBPs. Under
the settlement, Serono has agreed not to assert any of the foregoing patent
rights against the manufacture, use or sale of Enbrel in any territory in
consideration of the payment of fees and royalties by us to Serono for a
specified term in respect of the net sales of Enbrel sold or manufactured in
designated countries, including Germany and the United States, where Yeda
Research's patent rights have been filed.

   After the effective dates on which we filed our patent applications,
Hoffmann-La Roche, or Roche, and Amgen, through Synergen Inc., also filed
patent applications directed to p80 TNFR DNAs. No patents covering full-length
TNFR or the intact extracellular domain of TNFR have been issued to Roche. In
January 1998, the European Patent Office granted a patent to Amgen claiming DNA
and amino acid sequences encoding a variant of p80 TNFR disclosed in the Amgen
application that differs from that disclosed in our granted patents covering
p80 TNFR. We have filed an opposition to this Amgen patent. Since an
application giving rise to our patents covering TNFR and disclosing the
relevant DNA sequence was filed earlier than Amgen's first application
disclosing the relevant DNA sequence, we believe that the Amgen patent cannot
be legally asserted to cover TNFR:Fc, which includes the sequences patented by
us. If Amgen were able to validly assert TNFR patents to cover TNFR:Fc, our or
AHP's commercialization of Enbrel could be impeded in any territories in which
these patents were in force, which territories include Germany but do not
currently include the United States. Amgen has agreed with AHP, however, that
if our proposed merger with Amgen is completed, Amgen will not assert these
rights against AHP in connection with AHP's development, distribution or sale
of Enbrel anywhere in the world outside of the United States and Canada.

   We have also been granted a royalty-bearing worldwide exclusive license
under patent rights jointly owned by Aventis SA (through its predecessor
Hoechst AG) and Massachusetts General Hospital claiming cytokine receptor-Fc
fusion proteins, including TNFR:Fc. Roche has filed patent applications with
claims covering TNFR:Fc fusions, which were filed after the Aventis and
Massachusetts General Hospital patent applications licensed to us. Roche has
been granted a patent containing these claims in Japan. In September 1999, we
entered into a royalty-bearing worldwide co-exclusive license agreement with
Roche under these Roche patents and patent applications.

   ZymoGenetics, Inc. and Genentech have separately been issued U.S. patents
having claims directed to specified fusion proteins comprising immunoglobulin
constant region domains and specified processes for making these proteins, and
have also filed corresponding European applications that have not yet been
granted. On March 7, 2002, ZymoGenetics filed a patent infringement lawsuit
against us in the United States District Court for the Western District of
Washington. ZymoGenetics seeks a declaration of infringement and available
remedies under the patent laws, including monetary damages and injunctive
relief. We fully intend to vigorously defend ourselves against the allegations
of ZymoGenetics. In May 1999, we entered into a royalty-bearing worldwide
co-exclusive license agreement under the Genentech patents under which we made
an up-front payment to Genentech, a portion of which was reimbursed to us by
AHP under the Enbrel promotion agreement.

   The Kennedy Institute of Rheumatology has been issued a patent having some
claims directed to a method of treating arthritis by co-administering
methotrexate and a soluble TNF receptor or a functional portion thereof. We do
not believe that the Kennedy Institute of Rheumatology patent would be
successfully asserted against Enbrel.

                                      25

<PAGE>

   In general, with respect to any of the patents discussed above, it is our
intention to mount a vigorous defense should any patent be asserted against
activities relating to Enbrel, or, in appropriate cases, to take a license
under appropriate terms. At this time, however, we do not know whether any of
these patents will be asserted against activities relating to Enbrel, and, if
so, what the outcome of any litigation or licensing negotiations would be.

   We may be required to obtain licenses to patents or other proprietary rights
from third parties to label and sell Enbrel for new indications. Licenses
required under third-party patents or proprietary rights may not be made
available on terms acceptable to us, if at all. If we do not obtain any
required licenses, we could be unable to label and sell Enbrel for one or more
new indications.

   Leukine.  We have been issued three U.S. patents covering an altered, or
analog, form of GM-CSF (sargramostim) that we market under the Leukine
trademark. From July 1990 to January 1998, a GM-CSF interference proceeding had
been pending in the U.S. Patent and Trademark Office, or PTO, directed to human
GM-CSF DNAs. Novartis AG prevailed in the interference and has subsequently
received several patents relating to GM-CSF. As part of the resolution of the
interference, Novartis agreed not to assert its GM-CSF patent rights against us
in exchange for royalties on sales of Leukine in the United States and Canada.
Research Corporation Technologies, Inc., or RCT, has also received a U.S.
patent relating to GM-CSF. We have received a royalty-bearing nonexclusive
license to the RCT GM-CSF patent in the United States and Canada.

   ABX-EGF.  Under our collaboration agreement with Abgenix, each company has
cross-licensed to the other company certain proprietary rights related to the
development and commercialization of ABX-EGF.

   Glaxo Wellcome Inc. has a family of patents that it is asserting against
Genentech in ongoing litigation. If any of the claims of these patents are
finally determined in the litigation to be valid and if they can be asserted by
Glaxo to be infringed by ABX-EGF, then we may need to obtain a license should
one be available. Should a license be denied or unavailable on commercially
reasonable terms, our commercialization of ABX-EGF could be impeded in any
territories in which these patents were in force.

   Genentech owns a U.S. patent that relates to inhibiting the growth of tumor
cells involving an anti-EGF receptor antibody in combination with a cytotoxic
factor We do not believe that this Genentech patent would be successfully
asserted against any currently anticipated commercial sales of ABX-EGF.

   ImClone Systems, Inc. has announced that it has rights to a patent covering
a composition of matter of any EGFr monoclonal antibody that inhibits the
binding of EGF to its receptor in combination with any anti-neoplastic agent,
as well as the therapeutic use of such combinations. We do not believe that
this patent would be successfully asserted against any currently anticipated
commercial sales of ABX-EGF. In addition, other third parties have or may
receive other patents relating to EGFr monoclonal antibodies, their
manufacture, or their use. We will evaluate the scope and validity of each such
patent to ascertain the relevance of such patent to our planned activities.

   IL-1R Type 2.  In 1998, we were granted a U.S. patent covering methods of
using soluble IL-1R Type 2 to regulate an IL-1 mediated immune or inflammatory
response in a mammal. Previously we have received two U.S. patents covering the
DNA and the protein for IL-1R Type 2. We have additional U.S. and foreign
patent applications pending relating to IL-1R Type 2.

Patents on Nonbiological Products

   Novantrone.  Certain uses of Novantrone are covered by two U.S. patents. A
U.S. patent assigned to us covering methods of using mitoxantrone to treat
leukemia and solid tumors does not expire until April 2006, and another U.S.
patent covering methods of using mitoxantrone to treat neuroimmunologic
diseases, including MS, which is licensed to us, does not expire until June
2005.

                                      26

<PAGE>

Patent and Technology Licenses

   Under our royalty-bearing patent and technology license agreements, we are
obligated to pay royalties on our sales of products produced using the licensed
technologies. We pay royalties to university licensors of specific yeast and
mammalian-cell expression technologies employed in making Leukine and some
other products. We are also obligated to pay royalties to Aventis, Novartis and
RCT on sales of Leukine, and to Aventis, Massachusetts General Hospital,
Serono, Genentech, Roche and Abbot Laboratories (formerly BASF Corporation) on
sales of Enbrel. From time to time we may elect to enter into other
royalty-bearing license agreements with licensors of patents with claims
related to our products or technologies. We cannot be sure, however, that
patent license negotiations with any licensors can be successfully completed,
or that the total royalties payable under any agreements resulting from license
negotiations will not have a material adverse effect on our business.

   We have also commenced a licensing program under our cytokine receptor
patents to enable other companies to use our patented cytokine receptors in
drug screening. Under this program, we granted a license to use G-CSF receptor,
or G-CSFR, for drug screening to multiple companies over the past few years.

   We have commenced a licensing program under our patents covering our
Expression Augmenting Sequence Element, or EASE. We have granted nonexclusive
royalty-bearing licenses to two companies and are actively negotiating licenses
with others.

Trademarks

   We own all of our trademarks used in our business.

Properties

   Our principal place of business is located in two adjacent buildings in
downtown Seattle, Washington. These buildings, comprising a total of 197,574
square feet, house our primary laboratory and office facilities, as well as a
10,000-square-foot microbial pharmaceutical manufacturing facility licensed by
the FDA to produce Leukine. The current lease for these buildings extends to
2005, and both buildings have two five-year renewal options. In addition to our
primary facility, we lease a total of approximately 203,673 square feet of
additional office and research space in multiple other buildings located in
downtown Seattle and approximately 34,000 square feet of office and laboratory
space in two buildings in Bothell, Washington. The total current rent payments
for the foregoing facilities were approximately $12.8 million in 2001 and are
forecast to be approximately $14.1 million in 2002.

   We own a manufacturing and development center in Bothell, Washington that
includes a process development facility, completed in 2000, dedicated to
accelerating development of our manufacturing processes. This center also
includes a large-scale microbial protein manufacturing facility and a separate
mammalian cell-based protein manufacturing facility. These facilities were used
to produce Enbrel for our clinical trials in 1997; however, these facilities
lack sufficient capacity to produce commercial quantities of Enbrel. We own
approximately 20 acres of undeveloped land adjacent to our manufacturing and
development center in Bothell, Washington.

   On January 1, 2002, we purchased a commercial biopharmaceutical
manufacturing facility from AHP. The manufacturing facility, which we and AHP
worked together to retrofit to accommodate the commercial production of Enbrel
bulk drug, is located on a 75-acre site in West Greenwich, Rhode Island. In
November 2001, we broke ground on the BioNext Project(TM), a new manufacturing
plant to be built adjacent to the existing manufacturing facility in Rhode
Island. When the BioNext Project is completed and approved by the FDA, which we
estimate will occur in 2005, it is scheduled to produce Enbrel and, possibly,
other products currently in development. The total cost for the BioNext
Project, excluding financing costs, is expected to be up to approximately $550
million.

                                      27

<PAGE>

   We also own 29 acres of land in Seattle, Washington known as Terminal 88.
The Terminal 88 site is the location for our new research and technology center
currently under construction, which we expect will allow us to consolidate most
of our non-manufacturing operations to one site. The initial phase of the
center is known as the Helix Project. We have also acquired additional acreage
adjacent to Terminal 88 for potential future expansion of the project, and may
continue these acquisitions. We currently expect to complete the Helix Project
and take occupancy in late 2003. The total cost for the project, including
financing costs, is expected to be up to $750 million.

   In March 2001, we entered into a seven and one-half year lease to finance
the Helix Project. The total cost of the project, including financing costs, is
expected to be up to $750.0 million. As part of the lease transaction we are
required to restrict, as collateral, cash or investment securities worth $765.0
million during the construction of the project and 102% of the funds borrowed
by the lessor thereafter. The restricted investments consist primarily of money
market investments with maturities of one-year or less and are carried at fair
value. These investments are held in our name, are restricted as to their
withdrawal and are classified as non-current on our balance sheet until such
assets are available to be released from the collateral. The lease is
classified as an operating lease for financial reporting purposes, which means
that the cost to construct the facility and related financing obligation are
not reflected on our balance sheet.

   The construction costs of the Helix Project are paid by the lessor, who is
the borrower under a loan that is funded using the proceeds of commercial
paper. We have the ability to purchase the project at any time prior to the
expiration of the lease for the then-remaining lease balance and, upon the
occurrence of particular events, we may be required to purchase the project
from the lessor for the then-remaining lease balance. The then-remaining lease
balance would be equal to the outstanding amount of the lessor's financing of
project costs. At the end of the lease term, if we elect not to renew the lease
or do not exercise our option to purchase the facility, we have guaranteed to
pay any loss incurred by the lessor upon the sale of the facility for amounts
up to 89.5% of the project costs.

   At December 31, 2001 the construction costs incurred and the amount financed
under the lease totaled approximately $106.0 million and is expected to total
$750.0 million at completion of the Helix Project. Lease payments begin upon
completion of the facility, which is expected to be no later than September
2003, and are variable throughout the lease term based on a LIBOR rate.

Personnel

   In our innovation-intensive business, our employees are vital to our
success. We believe we have good relationships with our employees, and none of
our employees is covered by a collective bargaining agreement. As of December
31, 2001, we employed 1,618 people, 454 of whom have graduate degrees in
various subjects. The employee count as of December 31, 2001 includes
approximately:

   .   671 employees in research and development;

   .   347 employees in manufacturing; and

   .   285 employees in sales and marketing.

   These numbers do not include an aggregate of approximately 350 employees who
joined Immunex as a result of our acquisition of the biopharmaceutical
manufacturing facility that we purchased from AHP effective January 1, 2002.

   Each of our employees has entered into a confidentiality agreement that
contains terms requiring disclosure of ideas, developments, discoveries or
inventions conceived during employment, and assignment to us of all proprietary
rights to these matters.

                                      28

<PAGE>

   The success of our business depends, in large part, on our continued ability
to attract and retain highly qualified management, scientific, manufacturing
and sales and marketing personnel. Competition for personnel among companies in
the biotechnology and pharmaceutical industries is intense, and we cannot
assure you that we will be able to attract and retain necessary personnel.

Important Factors That May Affect Our Business, Our Results of Operations and
Our Stock Price

Risks Related to Our Business

We may be unable to sustain or increase profitability or raise sufficient
additional capital, which could result in a decline in our stock price.

   Future operating performance is never certain, and if our operating results
fall below the expectations of securities analysts or investors, the trading
price of our common stock will likely decline. Although we have been profitable
in each year for the past four years, we may be unable to sustain or increase
profitability on a quarterly or annual basis. Moreover, we anticipate that our
operating and capital expenditures will increase significantly in 2002 and in
future years primarily due to:

   .   additional spending to support the marketing and sales of Enbrel;

   .   working capital requirements for sales of Enbrel;

   .   growth in research and development expenses as we progress with the
       development of our clinical and preclinical product candidates;

   .   design and construction of our planned new research and technology
       center in Seattle, Washington;

   .   investment in additional manufacturing capacity for our existing
       products and products in development, including additional investment in
       the retrofitted manufacturing facility in Rhode Island that we purchased
       from AHP in January 2002 and in constructing a new commercial
       manufacturing facility at the same location; and

   .   expenditures on merger-related costs if the merger with Amgen is not
       completed.

   Our ability to generate sufficient cash flow, or to raise sufficient
capital, to fund our operating and capital expenditures depends on our ability
to improve operating performance. This in turn depends, among other things, on
increasing sales of our existing products, especially Enbrel, and initiating
and growing sales of new products. In order to realize adequate sales on new
products, we must successfully acquire new products from others or successfully
complete product development efforts and obtain timely regulatory approvals of
our lead clinical products. We may not successfully acquire, develop and
commercialize these products.

If we are unable to increase sales of Enbrel, or if sales of Enbrel decline,
our revenue growth will be significantly limited, which could result in a
decline in our stock price.

   Because we depend, and expect to continue to depend, on sales of a single
product, Enbrel, for a substantial majority of our revenues, decreased or
lower-than-anticipated demand for Enbrel, or our inability to meet demand,
could materially adversely affect our operating results and harm our business.
Because we only began marketing Enbrel in 1998, its long-term effects are
largely unknown. Adverse developments regarding the long-term safety and
efficacy of Enbrel could adversely affect demand for the product, or restrict
our ability to market and sell it for its current or potential indications.
Other factors that would adversely affect sales of Enbrel include:

   .   competition from existing products for treating RA or development of new
       products;

   .   our inability to maintain adequate and uninterrupted sources of supply
       to meet demand;

                                      29

<PAGE>

   .   events adversely affecting the ability of our manufacturing
       collaborators to produce Enbrel;

   .   our inability to gain FDA approval to produce Enbrel at our retrofitted
       manufacturing facility in Rhode Island;

   .   contamination of product lots or product recalls;

   .   our inability to gain regulatory approval to market Enbrel for
       indications other than RA; and

   .   changes in private health insurer reimbursement rates or policies for
       Enbrel.

   For the year ended December 31, 2001 and 2002, sales of Enbrel accounted for
79% of our product sales. We expect revenue generated by Enbrel to continue to
account for a substantial majority of our product sales.

Limits on our current source of supply for Enbrel will constrain our sales
growth unless and until additional manufacturing capacity for Enbrel is
approved.

   We may be limited in our ability to expand our operations or improve
operating results because our sales growth is constrained by limits on our
current source of supply for Enbrel. We estimate that all foreseeable supply of
Enbrel from BI Pharma in 2002 should support the actively ordering patients
enrolled in the Enbrel enrollment program. The enrolled patients do not include
the patients on the program's waiting list. This base of enrolled patients,
together with new patients that would receive Enbrel based on FDA approval of
our retrofitted manufacturing facility in Rhode Island, which we estimate will
occur in the second half of 2002, could potentially yield U.S. and Canadian
sales of Enbrel up to approximately $1.0 billion in 2002. Actual United States
and Canadian supply of Enbrel could be lower since our supply is impacted by
many manufacturing and production variables, such as whether and when our Rhode
Island manufacturing facility will be approved by the FDA, the timing and
actual number of production runs, production success rate, bulk drug yield and
the timing and outcome of product quality testing. Our sales of Enbrel will be
adversely affected if we at any time are unable to provide an uninterrupted
supply of Enbrel to all of the patients enrolled in the program.

   We have worked with AHP to substantially increase our supply of Enbrel for
sale in the United States and Canada. We anticipate that in the near term
Enbrel would be produced at two sites: BI Pharma, currently our sole source
supplier, and our retrofitted Rhode Island manufacturing facility, which we
estimate will be approved by the FDA in the second half of 2002. Actual U.S.
and Canadian supply of Enbrel in 2002 will be primarily dependent on BI
Pharma's production schedule for Enbrel, the result of manufacturing process
improvements for Enbrel, the timing of FDA approval of the Rhode Island
manufacturing facility to produce Enbrel, and the other factors listed below.
It is difficult to predict our actual near-term supply of Enbrel with certainty
because of the many complex variables involved in the supply equation. Factors
that will affect our actual supply of Enbrel at any time include, without
limitation, the following:

   .   Variability in BI Pharma's production cycle.  BI Pharma does not produce
       Enbrel continuously; rather, it produces the drug through a series of
       periodic campaigns throughout the year. The amount of commercial
       inventory available to us at any time depends on a variety of factors,
       including the timing and actual number of BI Pharma's production runs,
       level of production yields and success rates, timing and outcome of
       product quality testing and amount of vialing capacity. We have made
       substantial investments in manufacturing process improvements for Enbrel
       produced by BI Pharma, and have received FDA approval of the process
       improvements, that we anticipate could result in an incremental increase
       in the level of production yields for Enbrel commencing in early 2002.

   .   Timely completion and approval of the Rhode Island manufacturing
       facility.  We have invested substantial sums and worked closely together
       with AHP to retrofit the Rhode Island manufacturing facility that we
       purchased from AHP in January 2002 to accommodate the commercial
       production of Enbrel bulk drug. We and AHP have reached agreements
       regarding the allocation of Enbrel produced at the BI Pharma facility
       and that may be produced at the Rhode Island manufacturing facility. As
       presently configured, we currently estimate that, once fully operational
       and approved by the FDA, the

                                      30

<PAGE>

       Rhode Island manufacturing facility could, on an annual basis, double
       our current U.S. and Canadian supply of Enbrel. We anticipate commencing
       production runs and building commercially significant quantities of
       inventory of Enbrel bulk drug at the Rhode Island manufacturing facility
       prior to estimated FDA approval of the facility. We would not be able to
       sell, and may be required to write off, inventory unless and until the
       Rhode Island manufacturing facility and our contract manufacturer for
       vialing the Enbrel bulk drug manufactured at the Rhode Island facility
       are approved by the FDA, which approval is not assured. We estimate FDA
       approval of the Rhode Island manufacturing facility and our vialing
       contract manufacturer in the second half of 2002. We cannot assure you
       that any of these estimated dates will prove accurate.

   .   Potential bottlenecks in the vialing process.  BI Pharma schedules the
       vialing production runs for Enbrel in advance, based on the expected
       timing and yield of bulk drug production runs. Therefore, if BI Pharma
       realizes production yields beyond expected levels, or provides
       additional manufacturing capacity for Enbrel, it may not have sufficient
       vialing capacity for all of the Enbrel bulk drug that it produces. As a
       result, even if we are able to increase our supply of Enbrel bulk drug,
       BI Pharma may not be able to vial the extra bulk drug in time to prevent
       any supply interruptions. Similarly, once the Rhode Island manufacturing
       facility has been approved by the FDA, we will be dependent on the
       vialing capacity of a third party or third parties for the Enbrel bulk
       drug produced.

   If the market demand for Enbrel continues to grow, there may be further
supply limitations even after the Rhode Island manufacturing facility begins
producing Enbrel. For the longer term, our plan includes construction of a new
large-scale cell culture commercial manufacturing facility, known as the
BioNext Project, at the site of the current Rhode Island manufacturing
facility, which is estimated to be completed in 2005. In addition, AHP is
constructing a new manufacturing facility in Ireland, which is expected to
increase the United States and Canadian supply of Enbrel. We and AHP also have
reached an agreement regarding the allocation of Enbrel that may be produced at
the new Rhode Island manufacturing facility and the Ireland manufacturing
facility. If additional manufacturing capacity at the Rhode Island site or the
Ireland manufacturing facility is not completed, or if these manufacturing
facilities do not receive FDA approval before we encounter supply constraints,
our future sales growth would again be restricted.

If third-party manufacturers or suppliers fail to perform, we will be unable to
meet demand for some of our products.

   For all drug products that we market, we rely on unaffiliated third parties
and AHP to fill and label vials with our bulk drugs and to provide packaging
and, in the case of Enbrel, the self-injection syringe. We would be unable to
obtain these materials or products for an indeterminate period of time if AHP's
subsidiaries or third-party manufacturers or suppliers, including BI Pharma,
were to cease or interrupt production or services or otherwise fail to supply
these materials, products or services to us or AHP for any reason, including
due to labor shortages or disputes or due to regulatory requirements or action.
This in turn could materially reduce our ability to satisfy demand for these
products, which could adversely affect our operating results. AHP either
manufactures through its subsidiaries or sources through third-party
manufacturers all finished dosage forms and bulk active raw materials for our
nonbiological products, Novantrone and Thioplex. In addition, two of the raw
materials used to produce Enbrel and our other recombinant protein products
under development are manufactured by single suppliers.

Our preclinical and clinical testing of potential products could be
unsuccessful, which could adversely affect our operating results.

   Before obtaining regulatory approvals for the sale of any of our potential
products, we must subject these products to extensive preclinical and clinical
testing to demonstrate their safety and effectiveness in humans. If these tests
are unsuccessful, we will be unable to commercialize new products and, as a
result, we may be unable to sustain or increase profitability. Results of
initial preclinical and clinical testing are not necessarily indicative

                                      31

<PAGE>

of results to be obtained from later preclinical and clinical testing and, as a
result, we may suffer significant setbacks in advanced clinical trials. We may
not complete our clinical trials of products under development and the results
of the trials may fail to demonstrate the safety and effectiveness of new
products to the extent necessary to obtain regulatory approvals.

   The rate of completion of clinical trials depends, in part, on the
enrollment of patients, which in turn depends on factors such as the size of
the patient population, the proximity of target patients to clinical sites, the
eligibility criteria for the trial and the existence of competitive clinical
trials. Any delay in planned patient enrollment in our current or future
clinical trials may result in increased costs, trial delays or both.

Our products and product candidates are subject to extensive regulatory
approval processes and ongoing regulation, which can be costly and
time-consuming and subject us to unanticipated delays or lost sales.

   The FDA imposes substantial requirements on our products before it permits
us to manufacture, market and sell them to the public. Compliance with these
requirements is costly and time-consuming, and could delay or prevent sales of
new products or sales of our existing products for new indications. To meet FDA
requirements, we must spend substantial resources on lengthy and detailed
laboratory tests and clinical trials. It typically takes many years to complete
tests and trials for a product. The actual length of time involved depends on
the type, complexity and novelty of the product. The FDA may not approve on a
timely basis, if at all, some or all of our future products or may not approve
some or all of our applications for additional indications for our previously
approved products.

   If we violate regulatory requirements at any stage, whether before or after
marketing approval is obtained, we may be fined or forced to remove a product
from the market or may experience other adverse consequences, including delay
or increased costs, which could materially harm our financial results.
Additionally, we may not be able to obtain approval for the labeling claims
necessary or desirable for promoting our products. Even if approval is
obtained, we may be required or may elect to undertake post-marketing trials.

We may be required to perform additional clinical trials or change the labeling
of our products if we or others identify side effects after our products are on
the market, which could adversely affect sales of the affected products.

   If we or others identify side effects after any of our products are on the
market, or if manufacturing problems occur, regulatory approval may be
withdrawn and reformulation of our products, additional clinical trials,
changes in labeling of our products and changes to or re-approvals of our
manufacturing facilities may be required, any of which could have a material
adverse effect on sales of the affected products and on our business and
results of operations.

   Because Enbrel has only been marketed since 1998, its long-term effects on
the development or course of serious infection, malignancy and autoimmune
disease are largely unknown and more rarely occurring side effects may not be
known. In May 1999, we announced an update to the package insert for Enbrel to
advise doctors not to start using Enbrel in patients who have an active
infection, and for doctors to exercise caution when considering using Enbrel in
patients with a history of recurring infections or with underlying conditions
that may predispose patients to infections. In October 2000, we again revised
the package insert for Enbrel in response to spontaneous adverse events
reported to us, including rare cases of hematologic and central nervous system
disorders. The causal relationship between these adverse events and therapy
with Enbrel remains unclear. In January 2001, we revised the package insert for
Enbrel to advise doctors that rare cases of central nervous system disorders,
include seizures, and rare cases of tuberculosis have also been reported in
patients using Enbrel. It is possible that additional spontaneous adverse
events will be reported to us as experience with Enbrel continues. If we or
others identify new adverse events for patients treated with Enbrel, additional
precautions, warnings or other changes in the label for Enbrel may be required.

                                      32

<PAGE>

Our ability to discover, develop or commercialize products could be adversely
affected if our research and marketing collaborations are terminated.

   We have relationships with various collaborators who conduct research at our
request. Some of our collaborators also have shared marketing rights to
products subject to the collaboration. These collaborators are not our
employees. As a result, we have limited control over their activities and,
except as otherwise required by our collaboration agreements, can expect only
limited amounts of their time to be dedicated to our activities. Our ability to
discover, develop and commercialize products will depend in part on the
continuation of these collaborations. If any of these collaborations are
terminated, we may not be able to enter into other acceptable collaborations.
In addition, our existing collaborations may not be successful. Disputes may
arise between us and our collaborators as to a variety of matters, including
financing obligations under our agreements and ownership of intellectual
property rights. These disputes may be both costly and time-consuming and may
result in delays in the development and commercialization of products.

Competition and technological developments could render our products obsolete
or noncompetitive.

   To succeed, we must maintain a competitive position with respect to
technological advances. We are engaged in fields characterized by extensive
research efforts and rapid technological development. New drug discoveries and
developments in the fields of genomics, rational drug design and other drug
discovery technologies are accelerating. Many companies and institutions, both
public and private, are developing synthetic pharmaceuticals and
biotechnological products for human therapeutic application, including the
applications we have targeted.

   Several products are currently approved for treating RA. In particular, we
face competition for Enbrel, principally from the generic drug methotrexate and
from Johnson & Johnson's product Remicade. There are other products in
late-stage development that are targeting RA. Depending on the market
acceptance of these products or potential products, our sales of Enbrel could
be adversely affected.

   A number of our competitors have substantially more capital, research and
development, regulatory, manufacturing, marketing, human and other resources
and experience than we have. Furthermore, large pharmaceutical companies
recently have been consolidating, which has increased their resources and
concentrated valuable intellectual property assets. As a result, our
competitors may:

   .   develop products that are more effective or less costly than any of our
       current or future products or that render our products obsolete;

   .   produce and market their products more successfully than we do;

   .   establish superior proprietary positions; or

   .   obtain FDA approval for labeling claims that are more favorable than
       those for our products.

If we are unable to protect and enforce our patents and proprietary rights and
gain access to patent and proprietary rights of others, we may be unable to
compete effectively.

   Our success depends in part on obtaining, maintaining and enforcing our
patents and other proprietary rights and on our ability to avoid infringing the
proprietary rights of others. Third parties have obtained or are seeking
patents which, if issued or granted, may have a material adverse effect on our
ability to successfully commercialize Enbrel in the United States. On March 7,
2002, ZymoGenetics filed a patent infringement lawsuit against us in the United
States District Court for the Western District of Washington. ZymoGenetics
seeks a declaration of infringement and available remedies under the patent
laws, including monetary damages and injunctive relief. If ZymoGenetics
prevails, our ability to market and sell Enbrel could be adversely affected
unless we are able to negotiate a license or similar arrangement.

   Although we have a substantial intellectual property portfolio, which
includes patents and patent applications, we cannot be certain that we will be
able to protect and enforce our rights. Patent law relating to the

                                      33

<PAGE>

scope of claims in the biotechnology field is still evolving and, consequently,
patent positions in our industry may not be as strong as in other more
well-established fields. Accordingly, the PTO may not issue patents from the
patent applications owned by or licensed to us. If issued, the patents may not
give us an advantage over competitors with similar technology.

   The issuance of a patent is not conclusive as to its validity or
enforceability and it is uncertain how much protection, if any, will be given
to our patents if we attempt to enforce them or they are challenged in court or
in other proceedings. A third party may challenge the validity or
enforceability of a patent after it is issued by the PTO. It is possible that a
competitor may successfully challenge our patents or that a challenge will
result in limiting their coverage. Moreover, the cost of litigation to uphold
the validity of patents and to prevent infringement can be substantial. If the
outcome of litigation is adverse to us, third parties may be able to use our
patented invention without paying us. It is also possible that competitors may
infringe our patents or successfully avoid them through design innovation.

   While we pursue patent protection for products and processes where
appropriate, we also rely on trade secrets, know-how and continuing
technological advancement to develop and maintain our competitive position.
Therefore, others may independently develop substantially equivalent
information or techniques, or otherwise gain access to or disclose our
technology. We may not be able to effectively protect our rights in unpatented
technology, trade secrets and confidential information.

   Our policy is to have each employee enter into a confidentiality agreement
that contains provisions prohibiting the disclosure of confidential information
to anyone outside Immunex. The research and development contracts we enter into
with our scientific consultants generally contain confidentiality and
nondisclosure provisions. These confidentiality agreements may not be honored
and we may be unable to protect our rights to our unpatented trade secrets.

   We may be required to obtain licenses to patents or other proprietary rights
from third parties to develop, manufacture and commercialize our products, to
label and sell our products for new indications or, in the event we do not
prevail in a dispute over the patent rights of others, in order to continue our
current activities. Licenses required under third-party patents or proprietary
rights may not be made available on terms acceptable to us, if at all. If we do
not obtain the required licenses, we could encounter delays in product
development while we attempt to redesign products or methods or we could be
unable to develop, manufacture or sell products requiring these licenses at all.

Our customers may not get reimbursed from third parties, which could adversely
affect our sales.

   The affordability of our products depends substantially on governmental
authorities, private health insurers and other organizations, such as health
maintenance organizations, reimbursing most of the costs of our products and
related treatments to our customers. Low reimbursement levels may reduce the
demand for, or the price of, our products, which could prevent us from
maintaining or achieving profitability on specific products. Since Medicare
currently will not reimburse patients for self-administered drugs, Medicare
does not cover prescriptions of Enbrel. Although we have been able to obtain
sufficient reimbursement for most of our other products, governmental
authorities or third parties, or both, may decrease their reimbursement rates
or change their reimbursement policies. In addition, we may be unable to obtain
sufficient reimbursement for our future products.

Our selling practices for products reimbursed by Medicare or Medicaid may be
challenged in court, which could result in claims for substantial money damages
or changes in our pricing procedures.

   The federal government and several state agencies have initiated
investigations into our pricing practices and could seek substantial money
damages or changes in the manner in which we price our products. If changes are
mandated, they could adversely affect the sales of those products. In the
United States, pharmaceutical companies frequently grant discounts from list
price to physicians and suppliers who purchase their products. Discounts on
multiple-source, or generic, pharmaceuticals may be substantial. Government
reports have noted

                                      34

<PAGE>

that government programs that reimburse medical providers for drugs on the
basis of the average wholesale price or wholesale acquisition cost, such as
Medicare and Medicaid in many states, may provide significant margins to
providers who are able to obtain large discounts from pharmaceutical companies.

   According to press reports, approximately 20 pharmaceutical companies are
under investigation by the U.S. Department of Justice, U.S. Department of
Health and Human Services and/or state agencies related to the pricing of their
products. We have received a notice from the U.S. Department of Justice
requesting us to produce documents in connection with a Civil False Claims Act
investigation of the pricing of our current and former products for sale and
eventual reimbursement by Medicare or state Medicaid programs. We also have
received similar requests from the U.S. Department of Health and Human Services
and state agencies. Several of our current and former products are or were
regularly sold at substantial discounts from list price. We require in our
contracts of sale that the purchasers appropriately disclose to governmental
agencies the discounts that we give to them. We do not know what action, if
any, the federal government or any state agency will take as a result of their
investigations.

   On November 27, 2001, the Action Alliance of Senior Citizens of Greater
Philadelphia filed suit in the United States District Court for the Western
District of Washington against us alleging monopolistic, anticompetitive
conduct in an industry-wide scheme to defraud the consumer by manipulating the
average wholesale price and selling drugs to physicians at prices below the
reimbursement cost charged to Medicare. On December 19, 2001, Citizens for
Consumer Justice and others filed suit against us and other pharmaceutical
companies in the United States District Court for the District of Massachusetts
making similar allegations. One of these two proposed class action lawsuits
alleges violations of antitrust laws; the other alleges violation of both
antitrust and RICO laws. Similar proposed class actions have been filed in
approximately a dozen courts across the country against most of the major
pharmaceutical companies. At this time, we do not know what relief is being
sought from us.

We may be required to defend lawsuits or pay damages for product liability
claims.

   Product liability is a major risk in testing and marketing biotechnology and
pharmaceutical products. We face substantial product liability exposure in
human clinical trials and for products that we sell after regulatory approval.
Product liability claims, regardless of their merits, could be costly and
divert management's attention, or adversely affect our reputation and the
demand for our products. We currently maintain product liability insurance
coverage based on our product portfolio, sales volumes and claims experienced
to date. However, this insurance may not provide us with adequate coverage
against potential liabilities either for clinical trials or commercial sales.
In the future, insurers may not offer us product liability insurance, may raise
the price of this insurance or may limit the coverage.

We may be required to pay damages for environmental accidents and to incur
significant costs for environmental compliance.

   Our research and development activities involve the controlled use of
hazardous materials, chemicals, viruses and radioactive compounds. In the event
of an environmental accident, we could be held liable for any resulting
damages, and any liability could materially affect our financial condition. We
cannot eliminate the risk of accidental contamination or injury from these
materials. In addition, we may be required to incur significant costs to comply
with federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of these materials and some types
of waste products.

If we are unable to attract and retain key employees and consultants, our
business could be harmed.

   The success of our business depends, in large part, on our continued ability
to attract and retain highly qualified management, scientific, manufacturing
and sales and marketing personnel. Competition for personnel among companies in
the biotechnology and pharmaceutical industries is intense. We may be
disadvantaged in our attempts to attract and retain personnel by the fact that
we have announced the proposed merger with Amgen.

                                      35

<PAGE>

We have taken steps to minimize the effect of the proposed merger on our hiring
and retention efforts. For example, we have adopted the Immunex Corporation
Retention Plan to provide for conditional retention awards to all employees of
Immunex who regularly work at least 20 hours per week, including the executive
officers other than our Chief Executive Officer. This plan provides for a lump
sum cash payment to each such employee who remains employed by Immunex through
the effective time of the proposed merger. However, we cannot assure you that
we will be able to attract or retain the personnel necessary to support the
growth of our business.

A deterioration in the financial condition of major pharmaceutical wholesalers
could result in substantial lost receivables.

   In 2001, approximately 70% of our product sales were made to three
pharmaceutical wholesalers. Financial insolvency by one or more of these
wholesalers would require us to write off all or a portion of the amounts due
us. As of December 31, 2001, the amount due us from these three wholesalers
totaled $82.0 million. We maintained credit insurance coverage during 2001
based on our credit exposure. However, we have elected not to renew this
insurance during the 2002 policy year.

Foreign currency exchange rate fluctuations could cause our profits to decline.

   Adverse currency fluctuations between the U.S. dollar and the Euro could
cause our manufacturing costs to increase and our profitability to decline.
Under the terms of our supply agreement with BI Pharma for Enbrel, the price
for our product orders initially is set in Euros. We have the option, at the
time of any firm order, to pay the purchase price in Euros, or to fix the
currency exchange rate on the date of the order and pay the purchase price in
U.S. dollars. Accordingly, future currency exchange rate fluctuations could
substantially increase the manufacturing cost of our future product orders. In
addition, if we elect to pay the purchase price of any future orders in Euros,
currency fluctuations between the time of that order and the time of payment
could substantially increase our manufacturing costs for that order.

Future acquisitions, mergers or investments in businesses, products or
technologies could harm our business, operating results and stock price.

   We may acquire, merge with or invest in other businesses, products or
technologies that are intended to complement our existing business. From time
to time, we have had discussions and negotiations with companies regarding
business combinations or investing in these companies' businesses, products or
technologies, and we regularly engage in these discussions and negotiations in
the ordinary course of our business. Our management has limited prior
experience in assimilating acquired or merged companies. Any acquisitions or
investments we complete will likely involve some or all of the following risks:

   .   difficulty of assimilating the new operations and personnel, products or
       technologies;

   .   commercial failure of the new products;

   .   disruption of our ongoing business;

   .   diversion of resources;

   .   inability of management to maintain uniform standards, controls,
       procedures and policies;

   .   difficulty of managing our growth and information systems;

   .   reduction in the overall growth rate of the combined organization;

   .   risks of entering markets in which we have little or no prior
       experience; and

   .   impairment of relationships with employees or customers.

   In addition, future acquisitions, mergers or investments could result in
potentially dilutive issuances of equity securities, use of cash or incurrence
of debt and assumption of contingent liabilities, any of which could have an
adverse effect on our business and operating results or the price of our common
stock.

                                      36

<PAGE>

Risks Related to Our Share Price and Corporate Control

Our stock price is volatile and the value of your investment may be subject to
sudden decreases.

   Our common stock price, like that of other biotechnology companies, is
volatile. Our common stock price may fluctuate due to factors such as:

   .   developments related to the pending merger with Amgen or the operating
       results or stock price of Amgen;

   .   actual or anticipated fluctuations in our quarterly and annual operating
       results;

   .   actual or anticipated product supply constraints;

   .   changes in the estimated or actual completion and approval dates for
       future manufacturing facilities;

   .   adverse developments regarding the safety or efficacy of our products or
       changes to the labels for our products;

   .   clinical trial results and other product-development announcements by us
       or our competitors;

   .   loss of any of our key executives;

   .   regulatory announcements, proceedings or changes;

   .   announcements in the scientific and research community;

   .   competitive product developments;

   .   intellectual property and legal developments;

   .   changes in reimbursement policies or medical practices;

   .   mergers or strategic alliances in the biotechnology and pharmaceutical
       industries;

   .   any business combination we may propose or complete;

   .   any financing transactions we may propose or complete; or

   .   broader industry and market trends unrelated to our performance.

   During periods of stock market price volatility, share prices of many
biotechnology companies have often fluctuated in a manner not necessarily
related to the companies' operating performance. Accordingly, our common stock
may be subject to greater price volatility than the market as a whole.

Unless and until the proposed merger with Amgen is completed, AHP has
governance and other rights under existing agreements and owns a substantial
portion of the outstanding shares of our common stock and therefore has
substantial rights in connection with a number of strategic decisions. The
interests of AHP could be different than those of the other holders of our
common stock generally.

   The concentrated holdings of our common stock by AHP and its resulting
control over many of our strategic decisions may result in a delay or the
deterrence of possible changes in our control, which may reduce the market
price of our common stock. As of December 31, 2001, AHP beneficially owns
approximately 41% of the outstanding shares of our common stock. Under our
governance agreement with AHP, unless and until AHP's percentage ownership of
the outstanding shares of our common stock drops below 35%, AHP, through
members of our board of directors designated by AHP, will continue to exercise
significant control over many of our strategic and operational decisions. So
long as AHP has the right to designate at least two directors, which applies if
AHP's beneficial ownership of our common stock is at least 35%, many actions
that we may wish to take will require the approval of at least one director
designated by AHP. These actions include, with specified exceptions:

   .   any change in the composition of our board (other than directors
       designated by us);

   .   consolidations, mergers or similar transactions above a specified
       threshold;

                                      37

<PAGE>

   .   any change in our capital stock; and

   .   any change in our governing documents, as well as specified operating
       decisions, such as incurring incremental indebtedness above a specified
       threshold.

   The interests of AHP with regard to these matters may be different than the
interests of other holders of our common stock generally.

Future sales of shares by AHP could affect our stock price.

   Sales of substantial amounts of our common stock, or the perception that
these sales may occur, could adversely affect prevailing market prices for our
common stock. Under our governance agreement, AHP has demand and piggyback
registration rights with respect to its shares of our common stock. As a
result, AHP could cause a significant number of shares of our common stock to
be registered and sold in the public market, which could cause our stock price
to decline. In connection with the proposed merger between us and Amgen, AHP
and Amgen have entered into a shareholder voting agreement under which AHP has
agreed not to sell or transfer any shares of our common stock, other than to
AHP's subsidiaries, for the term of the voting agreement.

Risks Related to Our Proposed Merger with Amgen

Failure to complete the merger with Amgen could negatively impact our stock
price and future business and operations.

   If the merger with Amgen is not completed for any reason, we may be subject
to a number of material risks, including the following:

   .   if the merger agreement is terminated, we may be required in specific
       circumstances, to pay a termination fee of $475 million to Amgen or
       reimburse up to $15 million of Amgen's expenses,

   .   the price of our common stock may decline to the extent that the current
       market price of that stock reflects an assumption that the merger will
       be completed, and

   .   we must pay our expenses related to the merger, including substantial
       legal, accounting and financial advisory fees, and employee retention
       bonuses, even if the merger is not completed. This could affect our
       results of operations and cash liquidity and potentially our stock price.

   Some customers may, in response to the announcement of the merger, delay or
defer purchasing decisions, which could affect our revenues. Similarly, current
and prospective employees may experience uncertainty about their future role
with Amgen until Amgen's strategies with regard to us are announced or
executed. This may adversely affect our ability to attract and retain key
management, research and development, manufacturing, sales and marketing and
other personnel.

   Further, if the merger agreement is terminated and our board of directors
determines to seek another merger or business combination, it may not be able
to find a partner willing to pay an equivalent or more attractive price than
that which would have been paid in the merger with Amgen.

We believe that the price of our common stock is based in large part on the
price of Amgen common stock; the price of Amgen's common stock may be affected
by factors different from those affecting the price of our common stock.

   Upon completion of the merger with Amgen, the holders of our common stock
will become holders of Amgen common stock. In addition, prior to the completion
of the merger and unless the merger agreement with Amgen is terminated, we
believe that the price of our common stock will be determined in part by the
expectation that the merger will be completed and that our shareholders will
become shareholders of Amgen, and the price of our common stock will be
affected by the price of Amgen common stock.

                                      38

<PAGE>

   Amgen's business differs somewhat from our business, and Amgen's results of
operations and the price of Amgen common stock may be affected by factors
different from those that affect our results of operations and the price of our
common stock before the merger.

Item 2. Properties

   See the disclosure under the caption Properties, in Item 1.

Item 3. Legal Proceedings

   On November 27, 2001, the Action Alliance of Senior Citizens of Greater
Philadelphia filed suit in the United States District Court for the Western
District of Washington against us alleging monopolistic, anticompetitive
conduct in an industry-wide scheme to defraud the consumer by manipulating the
average wholesale price and selling drugs to physicians at prices below the
reimbursement cost charged to Medicare. On December 19, 2001, Citizens for
Consumer Justice and others filed suit against us and other pharmaceutical
companies in the United States District Court for the District of Massachusetts
making similar allegations. One of these two proposed class action lawsuits
alleges violations of antitrust laws; the other alleges violations of both
antitrust and RICO laws. Similar proposed class actions have been filed in
approximately a dozen courts across the country against most of the major
pharmaceutical companies. At this time, we do not know what relief is being
sought from us.

   According to press reports, approximately 20 pharmaceutical companies are
under investigation by the U.S. Department of Justice, U.S. Department of
Health and Human Services and/or state agencies related to the pricing of their
products. We have received a notice from the U.S. Department of Justice
requesting that we produce documents in connection with a Civil False Claims
Act investigation of the pricing of our current and former products for sale
and eventual reimbursement by Medicare or state Medicaid programs. We also have
received similar requests from the U.S. Department of Health and Human Services
and state agencies. Several of our current and former products are or were
regularly sold at substantial discounts from list price. We require in our
contracts of sale that purchasers appropriately disclose to governmental
agencies the discounts that we give to them. We do not know what action, if
any, the federal government or any state agency will take as a result of their
investigations.

   On December 14, 2001, a lawsuit was filed by David Osher against Immunex,
all members of the Immunex board of directors (Edward V. Fritzky, Kirby L.
Cramer, Robert J. Herbold, John E. Lyons, Joseph M. Mahady, Edith W. Martin,
Peggy V. Phillips, Lawrence V. Stein and Douglas E. Williams) and AHP in the
King County Superior Court of Washington. The suit is denominated as a class
action purportedly on behalf of a class of Immunex shareholders. The complaint
alleges that AHP and our board of directors breached their fiduciary duties
owed to our shareholders by stalling the merger discussions as a result of
positions taken by AHP in the negotiations relating to its control of Immunex
and its marketing rights in future Immunex products. The complaint further
alleges that AHP and our board of directors are favoring their own interests
and not acting in good faith toward the plaintiff and other members of the
purported class. The plaintiff seeks relief:

   .   ordering the action to be maintained as a class action and certifying
       plaintiff as the class representative;

   .   enjoining, preliminarily and permanently, defendants from proceeding, or
       closing, the merger or any transaction that improperly favors interests
       of AHP;

   .   rescinding and setting aside the merger in the event that it is
       consummated;

   .   awarding plaintiff the costs of the action including attorneys' and
       experts' fees; and

   .   granting such other and further relief as the court may deem just and
       proper.

   On December 18, 2001, a lawsuit was filed by Adele Brody against Immunex,
Messrs. Fritzky, Williams, Mann and Pea, Ms. Phillips, and the marital
community of each named individual in the King County Superior

                                      39

<PAGE>

Court of Washington. The suit is denominated as a class action purportedly on
behalf of a class of Immunex shareholders. The complaint alleges, among other
things, that the defendants breached their fiduciary duty to the purported
class by failing to take all reasonable steps to assure the maximization of
shareholder value, including the implementation of a bidding mechanism to
foster a fair auction of Immunex to the highest bidder, or the exploration of
strategic alternatives which would return a greater value to plaintiff and the
other members of the purported class. The complaint further alleges that
defendants are continuing to breach their fiduciary duties in order to entrench
themselves in office and to receive the benefits of negotiating only with
Amgen. The plaintiff seeks relief:

   .   ordering the action to be maintained as a class action and certifying
       plaintiff as the class representative;

   .   enjoining, preliminarily and permanently, Amgen's offer for the
       acquisition of Immunex stock owned by plaintiff and the other member of
       the purported class;

   .   rescinding the transaction and granting rescissionary damages in the
       event that the merger is consummated;

   .   directing defendants to pay plaintiff and the other members of the
       purported class damages and to account for all profits and any special
       benefits obtained by defendants;

   .   awarding plaintiff the costs of the action including attorneys' and
       experts' fees; and

   .   granting such other and further relief as the court may deem just and
       proper.

   On December 20, 2001 a lawsuit was filed by Edwin Weiner against Immunex,
Messrs. Fritzky, Williams, Mann and Pea, Ms. Phillips, and the marital
community of each named individual in the King County Superior Court of
Washington. The allegations and the relief requested in the Weiner complaint
are substantially identical to those in the Brody complaint described above.

   While these cases are in their early stages,we believe that the cases are
without merit and we intend to contest them vigorously. AHP has advised Immunex
that it also believes the lawsuit to which it is a defendant is without merit
and AHP intends to contest it vigorously.

   On March 7, 2002, ZymoGenetics filed a patent infringement lawsuit, related
to U.S. patents having claims directed to specified fusion proteins comprising
immunoglobulin constant region domains and specified processes for making these
proteins, against us in the United States District Court for the Western
District of Washington. ZymoGenetics seeks a declaration of infringement and
available remedies under the patent laws, including monetary damages and
injunctive relief. We fully intend to vigorously defend ourselves against the
allegations of ZymoGenetics.

Item 4. Submission of Matters to a Vote of Security Holders

   No matters were submitted to a vote of our shareholders during the fourth
quarter of our fiscal year ended December 31, 2001.

                                      40

<PAGE>

                                    PART II

Item 5. Market Price of the Registrant's Common Stock and Related Stockholder
Matters

   Our common stock is traded on the Nasdaq National Market under the symbol
IMNX.

   The following table sets forth for each period indicated the high and low
sales prices for our common stock as quoted on the Nasdaq National Market.

<TABLE>
<CAPTION>
                                        2001          2000
                                    ------------- -------------
                                     High   Low    High   Low
                                    ------ ------ ------ ------
                <S>                 <C>    <C>    <C>    <C>
                1st Quarter         $46.38 $10.75 $83.60 $27.75

                2nd Quarter          18.99  11.81  69.88  24.19

                3rd Quarter          19.67  13.85  67.13  39.50

                4th Quarter          29.58  18.62  49.88  33.06
</TABLE>

   There were approximately 2,132 holders of record of our common stock as of
February 28, 2002, which does not include the number of shareholders whose
shares are held of record by a broker or clearing agency, but does include such
a broker or clearing agency as a holder of record.

   We have not paid any cash dividends since our inception. We currently do not
intend to pay any cash dividends in the foreseeable future, but intend to
retain all earnings, if any, for use in our business operations.

   Under the terms of the governance agreement with AHP, AHP has the right to
purchase additional shares of our common stock in order to maintain its
percentage ownership interest in us following the issuance of our common stock.
We did not issue any stock to AHP during 2001. We issued to AHP 1,042,995
shares for $28,859,000 in 2000 and 3,498,726 shares for $40,777,000 in 1999. We
believe that the sales of these securities to AHP were exempt from registration
under the Securities Act of 1933, as amended, under Section 4(2) thereof and
Regulation D promulgated thereunder.

Item 6. Selected Financial Data (in millions, except per share amounts)

   The following table shows selected financial data for the fiscal years 1997
to 2001.

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                           --------------------------------------
                                             2001     2000    1999   1998   1997
                                           -------- -------- ------ ------ ------
<S>                                        <C>      <C>      <C>    <C>    <C>
Consolidated Statement of Operations Data:
Product sales                              $  959.6 $  828.8 $519.3 $169.9 $149.7
Other revenues                                 27.2     33.0   22.4   73.6   35.6
Total revenues                                986.8    861.8  541.7  243.5  185.3
Research and development                      204.6    166.7  126.7  120.0  109.3
Selling, general and administrative           423.0    344.4  216.7   93.8   71.3
Net income (loss)                             170.0    154.4   44.3    1.0  (15.8)
Diluted earnings (loss) per share              0.30     0.28   0.08   0.00  (0.03)

                                             2001     2000    1999   1998   1997
                                           -------- -------- ------ ------ ------
Consolidated Balance Sheet Data:
Total assets                               $2,295.3 $2,039.4 $941.2 $325.3 $227.3
Long-term obligations                           0.8      0.8  450.8    2.3    5.6
Shareholders' equity                        2,063.7  1,838.1  355.3  247.5  176.2
</TABLE>

                                      41

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

   In 2001, we generated net income of $170.0 million, compared to net income
of $154.4 million in 2000 and net income of $44.3 million in 1999. The
improvement in operating results is primarily due to increased U.S. sales of
Enbrel, which was first approved by the FDA in November 1998. We have received
additional approvals for Enbrel from the FDA subsequent to the initial approval
in November 1998. Enbrel is currently approved for reducing signs and symptoms,
and for inhibiting the progression of structural damage in patients with
moderately to severely active RA. Enbrel is also approved for treating
moderately to severely active polyarticular-course JRA in patients who have had
an inadequate response to one or more disease-modifying, antirheumatic drugs,
or DMARDs. In 2001, we also began selling Enbrel in Canada. Primarily as a
result of increased sales of Enbrel, revenues increased to $986.8 million in
2001, compared to $861.8 million in 2000 and $541.7 million in 1999.

   Our operating expenses have increased over the past three years, primarily
as a result of manufacturing, selling and marketing expenses for Enbrel. In
addition, we have significantly increased spending on research and development
activities in order to increase our product development opportunities and to
support the ongoing development of Enbrel for use in additional indications.

   Other income has increased significantly primarily due to an increase in
interest income. Our funds available for investment purposes has increased as a
result of a $450.0 million convertible subordinated note issued to AHP in May
1999, net proceeds of $771.2 million from our public offering of common stock
in November 2000 and improved operating cash flow. In addition, interest
expense decreased in 2001 due to the conversion by AHP of its convertible note
into our common stock in October 2000.

Results of Operations

Revenues (in millions)

<TABLE>
<CAPTION>
                                                 2001   2000   1999
                                                ------ ------ ------
            <S>                                 <C>    <C>    <C>
            Enbrel                              $761.9 $652.4 $366.9
            Leukine                              108.4   88.3   69.1
            Novantrone                            71.2   59.9   44.5
            Other product sales                   18.1   28.2   38.8
                                                ------ ------ ------
               Total product sales               959.6  828.8  519.3
            Royalty and contract revenue          27.2   33.0   22.4
                                                ------ ------ ------
               Total revenues                   $986.8 $861.8 $541.7
                                                ====== ====== ======
</TABLE>

   Product sales increased to $959.6 million in 2001, compared to $828.8
million in 2000 and $519.3 million in 1999. This improvement was primarily due
to increased sales volume of Enbrel as the product has continued to gain
acceptance for treatment of RA and, to a lesser extent, higher realized selling
prices through price increases. Sales of Enbrel made up 79% of our total
product sales in 2001. Under an Enbrel promotion agreement with AHP, Enbrel is
being promoted in the United States and Canada by Wyeth-Ayerst, the
pharmaceutical division of AHP. AHP shares in the gross profits from U.S. and
Canadian sales of Enbrel and we share the related costs of selling, marketing
and distributing Enbrel. Our share of these expenses and the amount of gross
profits shared with AHP from sales of Enbrel are included in selling, general
and administrative expenses.

   Growth in sales of Enbrel during 2001 was constrained as demand exceeded the
available supply. To manage the supply of Enbrel we implemented an Enbrel
enrollment program in November 2000 to help ensure that patients in the United
States prescribed Enbrel would receive an uninterrupted supply. Further,
despite the supply constraints, we were able to increase the number of active
patients by approximately 20,000 during 2001. This was accomplished through
active management of supply from our manufacturing collaborator of Enbrel, BI
Pharma. In addition, we offered financial incentives to BI Pharma and were able
to obtain limited additional supply. The increase in sales of Enbrel in 2000
compared to 1999 was primarily due to increased volume and, to a lesser extent,
higher realized selling prices.

                                      42

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)


   Sales of Leukine totaled $108.4 million in 2001, compared to $88.3 million
in 2000 and $69.1 million in 1999. The increase in sales of Leukine during 2001
reflects increased unit demand. We have been able to grow demand for Leukine
through efforts to differentiate Leukine from its competition and through
competitive pricing to our customers. Because of our pricing structure, we
experienced a small decrease in realized selling prices during 2001. The
increase in sales of Leukine during 2000 reflected increased unit demand and
higher realized selling prices. During 2000, we hired additional sales
representatives to promote Leukine. We also discontinued distributor price
discounts, which contributed to improved profitability.

   Sales of Novantrone totaled $71.2 million in 2001, compared to $59.9 million
in 2000 and $44.5 million in 1999. In October 2000, the FDA approved Novantrone
for reducing neurologic disability and/or frequency of clinical relapses in
patients with progressive, progressive relapsing or worsening
relapsing-remitting MS. This led to an increase in sales of Novantrone in 2001
compared to 2000. In addition, we increased the selling price of Novantrone in
both 2001 and 2000. We believe that some of the sales of Novantrone during the
fourth quarter of 2001 represent inventory stocking by distributors. This will
likely have a negative impact on sales of Novantrone in the first quarter of
2002. The improvement in sales of Novantrone during 2000 compared to 1999 is
primarily due to increased unit volume and higher realized selling prices.
During 2000 we hired additional sales representatives to promote Novantrone.

   Sales of our other products decreased to $18.1 million in 2001, compared to
$28.2 million in 2000 and $38.8 million in 1999. On June 30, 2001, we sold our
rights to the pharmaceutical products Amicar, methotrexate sodium injectable,
leucovorin calcium and Levoprome to Xanodyne Pharmacal, Inc., or Xanodyne. The
sale resulted in a gain of $16.0 million, which was included in other income.
We also agreed to sell to Xanodyne, at cost, our remaining inventory for these
products on hand at June 30, 2001. We did not recognize any material revenues
or expenses related to these products in the second half of 2001. As a result
of the sale, our only other marketed product is Thioplex. Two competitors
launched generic versions of Thioplex during 2001 and realized selling prices
and sales volume for Thioplex have declined. Sales of our other products
decreased in 2000 compared to 1999 primarily due to decreased sales volume of
Thioplex.

   Royalty and contract revenue consists primarily of royalties earned under
license agreements, license fees and milestone payments. Royalties are received
quarterly or semi-annually based on product sales made by the licensee in the
preceding royalty reporting period. Royalty revenue is recognized based on the
period in which the underlying products are sold and as such, requires us to
estimate royalty income for the then current quarterly or semi-annual royalty
period. If we are unable to reasonably estimate royalty income under a
particular agreement, for example where the market for the underlying product
is highly variable, we will recognize revenue only when actual amounts are
known. License fees and milestones are recognized in revenue based on the terms
of the underlying agreement. To the extent a license fee or milestone has an
ongoing service or performance requirement or is dependent upon a future
contingency, revenue is deferred and recognized over the applicable service
period or when the contingency is resolved.

   Royalty and contract revenue totaled $27.2 million in 2001, compared to
$33.0 million in 2000 and $22.4 million in 1999. In 2001, royalty revenue
comprised $25.0 million of total royalty and contract revenue compared to $6.6
million in 2000 and $9.4 million in 1999. During 2001, we began recognizing
royalty revenue from Ivax Corporation, or Ivax, on sales of paclitaxel
injection, a generic form of Bristol-Myers Squibb Company's Taxol(R). During
the third quarter of 2001, another competitor began selling an alternative
generic form of Taxol(R). As a result, under our royalty agreement with Ivax,
our royalty revenue from Ivax significantly declined in the fourth quarter of
2001. The remaining royalty and contract revenue during 2001 consisted
primarily of amounts recognized under existing royalty and license agreements.
During 2000, we earned $25.0 million in milestones from AHP under the Enbrel
promotion agreement. In February 2000, we earned a milestone of $10.0 million
from AHP under the Enbrel promotion agreement, when net sales of Enbrel in the
United States exceeded $400.0 million for the preceding 12-month period. In
June 2000, we earned $15.0 million from AHP under the terms of the Enbrel
promotion agreement when an expanded indication for Enbrel was approved by the
FDA for reducing signs and symptoms and delaying structural damage in patients
with

                                      43

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

moderately to severely active RA. These were the final scheduled payments to be
earned by us under the Enbrel promotion agreement with AHP. The remaining
royalty and contract revenue during 2000 consisted primarily of amounts
recognized under existing royalty and license agreements. In 1999, we earned
$10.0 million from AHP when net sales of Enbrel in the United States exceeded
$200.0 million for the preceding 12-month period. The remaining royalty and
contract revenue during 1999 consisted primarily of amounts recognized under
existing royalty and license agreements.

Gross Margin

   Gross margin was 73.3% in 2001, compared to 70.7% in 2000 and 69.3% in 1999.
The increase in gross margin in 2001, compared to 2000, was due to:

   .   lower costs from BI Pharma, our manufacturing collaborator for Enbrel.
       We realized a yield enhancement price reduction that more than offset
       incremental incentive payments to BI Pharma for additional supply;

   .   lower foreign exchange rates on purchases of Enbrel from BI Pharma,
       which is located in Germany;

   .   higher realized prices from sales of Enbrel and Novantrone; and

   .   increased sales of Novantrone, our highest margin product.

   Partially offsetting these items was increased sales of Enbrel. Like
Leukine, Enbrel is a biologic, and generally has a higher manufacturing cost
than traditional pharmaceutical products and is subject to multiple royalty
obligations.

   Gross margin was higher in 2000 compared to 1999 due to:

   .   lower costs for Enbrel primarily due to a reduction in internal costs
       and favorable exchange rates on purchases of Enbrel from BI Pharma; and

   .   a favorable mix of sales of our products.

Operating Expenses

   Research and development expense includes staffing and support costs of our
internal research staff and management, supplies used in research and
development activities, rent and facility expense for our lab and office space
utilized by research and development personnel, depreciation of lab and process
development equipment and owned facilities, the costs of conducting clinical
studies, including clinical drug and expenses of clinical research
organizations, consulting and contracted services directly related to research
and development, our share of costs under collaborative research agreements and
payments to acquire rights to development-stage technology. Research and
development expense does not include an allocation of general and
administrative expense, with the exception of certain shared services such as
information systems, purchasing and engineering services.

   Research and development expense increased to $204.6 million in 2001,
compared to $166.7 million in 2000 and $126.7 million in 1999. During 2001, our
largest expense and the biggest increase in research and development expense
was due to the ongoing development of Enbrel, primarily due to spending on the
following:

   .   Rheumatoid arthritis.  We are conducting several long-term follow-up
       studies and post-approval commitments to the FDA to continue to evaluate
       the safety of Enbrel;

   .   Psoriatic arthritis.  We completed our Phase 3 clinical trial of Enbrel
       in psoriatic arthritis and submitted a supplemental Biologics License
       Application, or sBLA, for use of Enbrel in this indication in July 2001.
       The FDA approved Enbrel for reducing the signs and symptoms of active
       arthritis in patients with psoriatic arthritis in January 2002;

                                      44

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)


   .   Psoriasis.  We completed a Phase 2 clinical trial of Enbrel in patients
       with Psoriasis and we commenced a Phase 3 dose ranging clinical trial in
       the fourth quarter of 2001;

   .   Ankylosing spondylitis.  We completed a Phase 2 clinical trial of Enbrel
       in patients with ankylosing spondylitis and, in the fourth quarter of
       2001, initiated a large Phase 3 clinical trial;

   .   Wegener's granulomatosis.  Following announcement of positive Phase 2
       results in 2000, we are supporting two Phase 2/3 clinical trials of
       Enbrel in Wegener's granulomatosis;

   .   Chronic Heart Failure.  In March 2001, we announced that guidance from
       an independent data monitoring board indicated that ongoing studies in
       chronic heart failure, or CHF, would not be able to meet efficacy
       endpoints. Based on this guidance, we and AHP ended two large Phase 2/3
       clinical trials of Enbrel. We continued to incur costs to close out the
       trials and gather and analyze data from the studies; and

   .   We are researching the use of Enbrel in treating amyloidosis,
       myelodysplastic syndrome, cachexia and numerous other conditions.

   In addition to Enbrel, we incurred significant costs related to development
of other products and product candidates. Our more significant efforts are
described below.

   ABX-EGF.  In July 2000, we entered into a joint development and
commercialization agreement for ABX-EGF, a fully human antibody created by
Abgenix, Inc. In 2001, we completed a Phase 1 clinical trial of ABX-EGF as a
monotherapy in patients with various types of cancer. Following the
announcement of the preliminary Phase 1 results, we and Abgenix initiated a
series of Phase 2 clinical trials to evaluate the tolerability and efficacy of
ABX-EGF for the treatment of several types of cancers. These include clinical
trials in patients with kidney, colorectal, prostate and non-small cell lung
cancer.

   IL-1 Receptor Type 2.  Based on preclinical data, we believe that IL-1
Receptor Type 2 may be of therapeutic value in treating a number of
inflammatory diseases either alone or in combination with Enbrel. In July 2001,
we initiated a Phase 1 clinical trial of IL-1 Receptor Type 2 in RA to assess
tolerability.

   TRAIL/Apo2L.  In May 1999, we entered into a worldwide collaboration with
Genetech to co-develop and market TRAIL/Apo2L. We are continuing preclinical
studies to obtain safety and efficacy information and additional preclinical
studies are planned.

   Leukine.  A number of clinical trials are underway to investigate whether
Leukine could be approved for additional uses. Research and development
spending on Leukine during 2001 was higher as compared to 2000 primarily due to
a potential indication for Leukine in Crohn's disease. In the fourth quarter of
2001, we initiated a Phase 2 clinical trial of Leukine in patients with Crohn's
disease.

   During 2001, we announced results of two Phase 2 studies for Nuvance. The
results of the studies indicated that Nuvance was generally well-tolerated, but
provided no apparent improvement in opening lung airways over a four-week
period for patients with persistent asthma. We are continuing to evaluate the
evidence from the studies to determine any future development options for
Nuvance.

   The increase in research and development expense in 2001 also reflects the
costs of an expanded discovery research effort. Beginning in 2001, we have made
a concerted effort to increase the number of molecules that enter the clinical
development stage each year. Accordingly, we increased the hiring of internal
research staff and have expanded our laboratory space to support this growth.

                                      45

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)


   The increase in research and development expense during 2000 compared to
1999 was due to the continuing development of:

   .   Enbrel for treating CHF, RA, psoriatic arthritis and other diseases;

   .   Nuvance for treating persistent asthma;

   .   Avrend (CD40 ligand) for treating renal cell cancer;

   .   ABX-EGF for treating cancer, in collaboration with Abgenix, Inc., which
       included payment of a $5.0 million initial licensing fee;

   .   TRAIL/Apo2L for treating cancer, in collaboration with Genentech; and

   .   IL-1 Receptor Type 2 for treating inflammation, osteoporosis and other
       diseases.

   The increase in research and development expense during 2000 also reflected
expenses related to additional collaborative agreements we entered into during
2000 with Celera Genomics and Cambridge Antibody Technology Limited. We also
increased staffing, laboratory space and spending on research equipment and
information technology to support our discovery research activities.

   Selling, general and administrative expense increased to $423.0 million in
2001, compared to $344.4 million in 2000 and $216.7 million in 1999. The
increase was primarily due to expenses associated with selling and marketing
Enbrel. Under the terms of the Enbrel promotion agreement, AHP assumed a
majority of these expenses in the United States and Canada in the year
following launch of Enbrel, and a decreasing majority of these expenses in the
second year following launch of Enbrel. In November 2000, we and AHP began to
equally share the U.S. marketing and selling expenses incurred under the Enbrel
promotion agreement equally. AHP also shares in the gross profits from U.S. and
Canadian sales of Enbrel. Our share of costs incurred under the Enbrel
promotion agreement, including the obligation to AHP for its share of the gross
profits from U.S. and Canadian sales of Enbrel, totaled $282.0 million in 2001,
$222.5 million in 2000 and $120.3 million in 1999. In addition to expenses
incurred under the Enbrel promotion agreement, selling, general and
administrative expense increased in 2001 due to the following:

   .   increased staffing levels and other infrastructure costs primarily for
       legal and administrative functions and increased office space;

   .   increased selling and marketing expenses for Leukine and Novantrone; and

   .   an approximate 50% increase in insurance premiums.

   The increase in selling, general and administrative expense in 2000,
compared to 1999, was primarily due to expenses associated with selling and
marketing Enbrel. The increase also reflects spending for:

   .   increased staffing levels and other infrastructure costs;

   .   selling expenses for Leukine and Novantrone; and

   .   preparing for FDA approval for Novantrone for treating worsening forms
       of MS.

Merger-related costs

   On December 17, 2001, we announced that we had entered into an Agreement and
Plan of Merger with Amgen. We incurred $5.6 million of merger-related costs in
the fourth quarter of 2001 related to financial advisory, legal and accounting
fees.

Other income (expense)

   Interest and other income, net increased to $115.1 million in 2001, compared
to $59.8 million in 2000 and $26.4 million in 1999. The increase during 2001 is
primarily due to increased income earned on our investments

                                      46

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

as a result of higher average cash and investment balances. The issuance of a
$450.0 million convertible subordinated note to AHP in May 1999, proceeds from
our public offering of common stock in November 2000 and improved operating
cash flow resulted in a significant increase in funds available for investment
purposes. Additionally, we realized a gain of $16.0 million in the second
quarter of 2001 from the sale of our rights in primarily generic pharmaceutical
products Amicar, methotrexate sodium injectable, leucovorin calcium and
Levoprome. The conversion of the AHP convertible note on October 31, 2000 into
shares of our common stock resulted in a $10.7 million decrease in interest
expense during 2001, as compared to 2000.

   Interest income increased in 2000, as compared to 1999, due to increased
funds available for investment as a result of proceeds from AHP's conversion of
its convertible subordinated note, proceeds from our public offering of common
stock in November 2000, improved operating cash flows and sales of common stock
to AHP and to our employees. Improved investment returns also contributed to
the increase in 2000 compared to 1999.

Provision for income taxes

   The provision for income taxes totaled $42.5 million, or 20% of pre-tax
income in 2001, compared to $2.3 million, or 1% of pre-tax income in 2000 and
$12.5 million, or 22% of pre-tax income in 1999. During 2001, we utilized our
remaining research and experimentation credit carryforwards available to offset
federal tax expense for financial reporting purposes. Accordingly, our
effective tax rate during 2001 reflects a rate based on the federal statutory
rate, adjusted for the benefit of the utilization of our research and
experimentation credits carryforwards to offset reported tax expense. During
2000, federal income tax expense, for financial reporting purposes, was
entirely offset by utilizing net operating loss, or NOL, carryforwards and
research and experimentation credit carryforwards. In 2000, the provision for
income taxes consisted only of our tax obligations in the states in which we
sell our products. During 1999, the benefit from the utilization of our NOL
carryforwards was first used to reduce the recorded value of goodwill and
intangible product rights related to our 1993 merger with a subsidiary of
American Cyanamid Company to zero and then to reduce federal income tax expense
for financial reporting purposes.

Liquidity and Capital Resources

   Cash, cash equivalents and short-term investments totaled $857.8 million at
December 31, 2001 and $1,604.8 million at December 31, 2000. These amounts are
held in a variety of interest-bearing instruments, including government and
corporate obligations and money market accounts.

   Operating activities provided cash of $224.3 million in 2001, compared to
$171.9 million in 2000 and $112.7 million in 1999. The increase in operating
cash flow in 2001 was due primarily to an increase in cash generated from
product sales and an increase in interest earned on our investments. Working
capital changes resulted in a $6.8 million increase in operating cash flow.
Working capital decreased $749.5 million during 2001 due primarily to the
purchase of non-current investments and the deposit on the Rhode Island
manufacturing facility, both discussed below. The increase in operating cash
flow in 2000 was primarily due to improved operating results, partially offset
by a decrease from changes in working capital.

   We expect operating cash flows to be positive in 2002 although lower than in
2001 due to higher working capital requirements related to a build-up of
inventory of Enbrel produced at our Rhode Island manufacturing facility. We
expect to begin full-scale production and building commercially significant
quantities of inventory of Enbrel bulk drug at the Rhode Island manufacturing
facility beginning in the first half of 2002, prior to the estimated FDA
approval of the facility. However, we will not be able to sell this inventory
and may be required to write off inventory unless and until the Rhode Island
facility and our contract manufacturer are approved by the FDA. We expect to
file for FDA approval of the Rhode Island facility and our vialing contract
manufacturer in mid-2002, and we estimate FDA approval in the second half of
2002. Accordingly, we will utilize operating cash flow to fund this inventory
build-up which is expected to total between $80.0 million and $120.0 million
assuming FDA approval in the second half of 2002. We have also made commitments
to purchase inventory

                                      47

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

from our manufacturing collaborator for Enbrel, BI Pharma, totaling $161.0
million over the next three years. In addition, our accounts receivable will
continue to be directly affected by U.S. and Canadian sales of Enbrel and
accounts payable will continue to be affected by costs incurred under the
Enbrel promotion agreement. Accordingly, operating cash flows are highly
dependent on sales and inventory levels of Enbrel.

   Cash used in investing activities totaled $610.6 million in 2001, compared
to $730.6 million in 2000 and $403.2 million in 1999. Investing activities
during 2001 included the purchase of $765.0 million of investments held as
collateral in the lease financing of our planned new research and technology
center, discussed below. We also purchased other investments using funds from
our public offering of common stock in November 2000. These investments were
partially offset by sales of investments as we liquidated some of our long term
debt securities in order to provide the collateral funding.

   In March 2001, we entered into a seven and one-half year lease to finance
construction of our new research and technology center in Seattle, Washington,
known as the Helix Project. The total cost of the project, including financing
costs, is expected to be up to $750.0 million. As part of the lease
transaction, we are required to restrict as collateral cash or investment
securities worth $765.0 million during the construction of the project and 102%
of the funds borrowed by the lessor thereafter. The restricted investments
consist primarily of money market investments with maturities of one-year or
less and are carried at fair value. These investments are held in our name, are
restricted as to their withdrawal and are classified as non-current on our
balance sheet. The lease is classified as an operating lease for financial
reporting purposes, which means that the cost of the facility and related
financing obligation are not reflected on our balance sheet.

   The construction costs of the Helix Project are paid by the lessor, who is
the borrower under a loan that is funded using the proceeds of commercial
paper. In order to support the placement of the commercial paper, a syndicate
of banks has agreed to provide a back-up credit facility that is subject to an
annual renewal commitment. If all or some of the banks elect not to renew their
commitment under this back-up credit facility, they would be required to
provide a bank loan for the duration of the lease term in an amount equal to
the size of their commitment under the back-up credit facility. However, the
rates on such bank loan may not be as favorable as the rates obtained using the
commercial paper for financing. We may, at any time during the term of the
lease, purchase the facility for the amount of cumulative financed project
costs incurred. At the end of the lease term, if we elect not to renew the
lease or do not exercise our option to purchase the facility, we have
guaranteed to pay any loss incurred by the lessor upon the sale of the facility
for amounts up to 89.5% of the project costs.

   Under the terms of the agreement, we are required to maintain certain
financial ratios and meet other covenants regarding the conduct of our
business. If we were to violate any of these covenants and were unable to
restructure the financing or obtain a waiver, we could be obligated to pay the
lessor the cumulative financed project costs at such time. Our proposed merger
with Amgen, discussed below, would violate one of these covenants. We expect to
review this financing arrangement in light of the merger and the anticipated
needs of the combined company. We may be able to renegotiate the relevant terms
of the covenants or obtain a waiver if it was in the best interest of the
combined company.

   At December 31, 2001, the construction costs incurred and amount financed
totaled approximately $106.0 million and is expected to total $750.0 million at
completion of the project. Lease payments begin upon completion of the
facility, which is expected to be no later than September 2003, and are
variable throughout the lease term based on the LIBOR rate.

   We collaborated with AHP on the construction of a large-scale manufacturing
facility in Rhode Island intended for the production of Enbrel. AHP acquired
the facility in 1999 and we have worked together to retrofit the facility to
accommodate the commercial production of Enbrel. In November 2001, we entered
into an

                                      48

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

agreement to acquire the facility on January 1, 2002. As part of the agreement,
we made a $192.8 million deposit in 2001 toward the purchase price. We made an
additional payment totaling $279.9 million following close of the purchase in
January 2002. A final payment totaling $27.1 million is due for final costs
incurred by AHP in December 2001. The purchase of the Rhode Island
manufacturing facility was funded from our existing cash and investments.

   In November 2001, we initiated construction on the BioNext Project, a new
manufacturing plant to be built adjacent to the existing manufacturing facility
in Rhode Island. When the facility is completed, which is currently estimated
to be in 2005, it is planned to produce Enbrel and possibly new products
currently in development. Together, the new facility and the retrofitted
facility are expected to be larger than any other cell culture manufacturing
center currently in existence. We incurred costs totaling approximately $15.2
million during 2001 on the BioNext Project and we anticipate the total cost of
this new facility to be approximately $550.0 million. The costs of the BioNext
Project are being funded through existing cash and investments. We have no
current plans to finance this project.

   Other purchases of property, plant and equipment include costs related to
validation of our process development facility in Bothell, Washington,
purchases of computer hardware, computer software, research equipment and
expansion of our existing office and laboratory space. We also purchased
property adjacent to the location of the Helix Project to be held to
accommodate possible future growth.

   Net cash provided by financing activities totaled $32.4 million in 2001,
compared to $850.7 million in 2000 and $507.6 million in 1999. During 2001, we
received $22.3 million in proceeds from sales of common stock to employees
under our employee stock option plans and employee stock purchase plan. We also
received $10.1 million in proceeds from the lease financing of our research and
technology center. These amounts were a reimbursement for expenditures we
incurred prior to finalizing the lease agreement.

   We believe that our current capital resources, cash generated from
operations and the financing proceeds for our planned research and technology
center are adequate to satisfy our working capital and capital expenditure
requirements for at least the next two years.

Outlook

   On December 17, 2001, we announced that we had entered into an Agreement and
Plan of Merger with Amgen Inc. The merger is contingent upon approval of both
our shareholders and Amgen's stockholders and subject to review by the Federal
Trade Commission, or FTC and other regulatory authorities. We currently expect
the merger to close in the second half of 2002 if we obtain all necessary
approvals and the other conditions to closing are satisfied, however the
closing could be delayed by review of the transaction by the FTC and the
Securities Exchange Commission, or SEC, and other regulatory authorities. In
connection with the proposed merger, we intend to sell the product rights to
Leukine, as it competes directly with Amgen's product Neupogen. The divestiture
of Leukine is anticipated to occur only if the merger is completed. We incurred
$5.6 million of merger related expenses in the fourth quarter of 2001 and will
incur merger-related costs in 2002 in the range of $40.0 to $45.0 million
primarily related to financial advisory, legal and accounting fees. The
majority of the 2002 costs are contingent upon the consummation of the merger
and, accordingly, are not expected to significantly impact our operating
results unless and until the merger is completed.

   We expect product sales to increase in 2002 primarily from increased sales
of our lead product, Enbrel. Demand for Enbrel continues to grow as the product
gains acceptance for treatment of RA. Furthermore, in January 2002, the FDA
approved Enbrel as the first treatment indicated to reduce signs and symptoms
of active arthritis in patients with psoriatic arthritis, adding an additional
market opportunity for the product. We will begin promoting Enbrel to
dermatologists in this indication in the first quarter of 2002. Similar to
2001, growth in sales of Enbrel will continue to be limited by supply, however,
we estimate that, when approved by the FDA, our manufacturing facility in Rhode
Island could, on an annual basis double our current United States and

                                      49

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

Canadian supply of Enbrel. We estimate this approval in the second half of
2002. The increase in supply of Enbrel is expected from the following sources:

   .   Manufacturing yield improvements from a new manufacturing process
       recently implemented at our manufacturing collaborator for Enbrel, BI
       Pharma;

   .   A small increase in production runs at BI Pharma obtained by acquiring
       manufacturing capacity previously committed by BI Pharma to MedImmune;
       and

   .   FDA approval of the Rhode Island manufacturing facility for the
       production of Enbrel, which we estimate in the second half of 2002.

   During 2002, we expect a temporary decline in the gross margin of Enbrel. In
order to secure additional supply of Enbrel, we have offered BI Pharma
financial incentives to provide additional near-term production capacity for
Enbrel. BI Pharma was able to provide limited additional capacity in 2001 and
we expect similar amounts of additional capacity to be provided in 2002. Also,
as noted above, we were able to obtain access to BI Pharma manufacturing
capacity previously committed to MedImmune. We agreed to make payments to
MedImmune for the rights to this capacity. The supply of Enbrel from these
production runs will be received in early 2002 and will negatively impact our
gross margin as the incremental payments to MedImmune flow through cost of
product sales. Lastly, we expect to begin full-scale production of Enbrel at
our Rhode Island manufacturing facility beginning in the first half of 2002.
Our per-unit production costs may initially be higher than current costs per
unit due to inefficiencies and other costs associated with the start-up of a
major manufacturing facility. Enbrel manufactured at the Rhode Island facility
will not be available for sale until such time that the facility is approved by
the FDA. We expect FDA approval in the second half of 2002 and the cost of
inventory produced at that time to be in the range of $80.0 million to $120.0
million. If we were unable to sell the inventory manufactured at the facility,
we would be required to charge the costs to expense. Beyond 2002 we expect
gross margins on Enbrel to improve as production becomes more efficient at the
Rhode Island manufacturing facility and the incremental costs associated with
additional manufacturing capacity at BI Pharma are reduced.

   We also expect to realize increased sales of Novantrone due to continuing
penetration in the market for MS. The approval of Novantrone for treatment of
worsening MS in October 2000 represents a timely market opportunity for this
product as sales in the oncology setting are gradually eroding due to increased
competition. We are focusing our promotional efforts for Novantrone on the top
neurologists and MS treatment centers and anticipate that increased sales in
our MS indication will exceed any near term decline in oncology sales.

   The rate of increase in demand for Leukine is expected to moderate in 2002.
We have successfully increased sales of Leukine in recent years through product
differentiation and targeted sales and marketing efforts. Our promotional
efforts in 2002 will continue to focus on markets where we believe Leukine
provides unique advantages and growth opportunities. The growth rates of
Leukine may be impacted by the FDA approval in early 2002 of Neulasta, Amgen's
pegylated version of Neupogen, a product that competes directly with Leukine in
its major markets. It is uncertain what impact this new product will have on
sales of Leukine. As noted above, we currently plan to divest Leukine in
connection with our proposed merger with Amgen.

   Our only other marketed product is Thioplex. Two competitors launched
generic versions of Thioplex during 2001 and as a result, realized selling
prices and sales volume have declined. Sales of Thioplex are not expected to be
significant in the future.

   Revenues earned from existing royalty, license and other similar agreements
are expected to decrease in 2002 primarily due to decreased royalty revenue
earned on sales by Ivax of paclitaxel injection, a generic form of Taxol. The
royalty rate on sales of paclitaxel injection decreased significantly following
the introduction into the market in June 2001 of additional generic
formulations of Taxol. We have identified several internal technology and
product candidate outlicensing opportunities and we may enter into agreements
to license the technology or

                                      50

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

product rights. We cannot predict the timing of such agreements, if any, or the
amount of any revenue recognized from those agreements.

   We expect to continue to increase spending on research and development in
2002 by 10% to 15% as compared to 2001, reflecting an increased investment in
discovery research and spending on clinical and process development. We have
made a concerted effort to increase the number of molecules that enter the
clinical development stage each year. These efforts are reflected as an
increase in discovery research expense through increased staffing and facility
costs as we expand our efforts in the search for promising product candidates.
Correspondingly, as the number of product candidates entering the development
stage increase, our costs associated with scaling-up process development to
manufacture the clinical product requirements as well as the costs of
conducting the clinical trials are also increasing.

   During 2002 our largest research and development expense will continue to be
incurred in the ongoing development and support of Enbrel. In addition to
supporting several long-term follow-up clinical trials of Enbrel in RA, we are
initiating a 10,000 patient study to provide information about the use, safety
and efficacy of Enbrel in RA. In the fourth quarter of 2001, we initiated Phase
2/3 clinical trials of Enbrel in ankylosing spondylitis and psoriasis and we
anticipate beginning an additional Phase 2/3 clinical trial in psoriasis during
the first half of 2002. We are also supporting two Phase 2/3 clinical trials of
Enbrel in Wegener's granulomatosis and are researching the use of Enbrel in
numerous other diseases. We will continue to incur significant costs on the
development of ABX-EGF for treatment of several types of cancer, in
collaboration with Abgenix. ABX-EGF is currently in Phase 2 clinical trials.
Spending on development of IL-1 Receptor Type 2 will increase significantly as
Phase 1 clinical trials continue in 2002 and, depending on the results of these
trials, we expect to initiate a Phase 2 clinical trial in mid-2002. Other
expense increases are expected from development of RANK, a molecule that we
anticipate moving into Phase 1 clinical trials in 2002 for treatment of cancer
and on studies of Leukine for treatment of Crohn's disease. Spending on
development of TRAIL/Apo2L for treatment of cancer, in collaboration with
Genentech, is not expected to increase from prior periods as further
preclinical studies to evaluate safety and efficacy are planned.

   Selling, general and administrative expense potentially could increase by
approximately 20% in 2002, driven primarily by expenses associated with selling
and marketing Enbrel. Under the Enbrel promotion agreement with AHP, AHP shares
in the gross profits from U.S. and Canadian sales of Enbrel and we share the
costs of selling, marketing and distributing Enbrel in the U.S. and Canada. In
anticipation of FDA approval of the Rhode Island manufacturing facility for the
production of Enbrel, which we estimate in the second half of 2002, we are
increasing our promotional and selling activities to capitalize on the
additional supply that is expected to become available. In addition, we will
incur increased costs related to the launch of Enbrel in psoriatic arthritis
and we are supplementing AHP's sales efforts related to Enbrel by hiring our
own dedicated sales force. AHP will equally share the costs of our dedicated
sales force. Selling and marketing costs related to Leukine and Novantrone are
not expected to increase. Spending for general and administrative expense is
expected to increase due to increased staffing, expanded facilities and
significantly higher insurance costs for much of our coverage due to higher
premiums in the insurance market.

   Our investments are primarily debt securities that are affected by the
general level of interest rates in the United States. Interest rates have
recently reached historical lows that has depressed, and is expected to
continue to depress, the rate of return we earn on our investments. In
addition, with the purchase of the Rhode Island manufacturing facility from AHP
in January 2002, the amount of funds that are available for investment purposes
is expected, on average, to be lower in 2002 than in 2001. Accordingly, we
expect to see a decline in interest income earned in 2002.

   During 2001 we utilized the remaining research and experimentation credit
carryforwards to reduce our tax expense for financial reporting purpose.
Accordingly, our effective tax rate in 2002 will increase as compared to the
20% effective tax rate in 2001, and is expected to approximate the full federal
statutory rate of 35%. All remaining NOL carryforwards are attributable to
stock option deductions. The benefit of these NOL

                                      51

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)

carryforwards will be recorded as an increase to equity when realized. Due to
the treatment of remaining NOL's and the utilization of all R&D credit
carryovers in 2001, the estimated effective tax rate in the future will
approximate the statutory federal and state tax rates.

Item 7A. Qualitative and Quantitative Disclosures About Market Risk

   We maintain an investment portfolio of various holdings, types, and
maturities. These securities are classified as available for sale and are
recorded on the balance sheet at fair value with unrealized gains or losses
reported as a separate component of accumulated other comprehensive income.

Investments

   The following table presents the impact of hypothetical changes in interest
rates on the fair value of our interest rate sensitive investments, assuming
interest rate changes of 50, 100 and 150 basis points, or BPS (in thousands):

<TABLE>
<CAPTION>
                                 Valuation of Securities                            Valuation of Securities
                                  Given an Interest Rate                             Given an Interest Rate
                                Increase of X Basis Points    Fair Value as of:    Decrease of X Basis Points
                             --------------------------------   December 31,    --------------------------------
                              150 BPS    100 BPS     50 BPS         2001         (50 BPS)  (100 BPS)  (150 BPS)
                             ---------- ---------- ---------- ----------------- ---------- ---------- ----------
<S>                          <C>        <C>        <C>        <C>               <C>        <C>        <C>
Investments with contractual
 maturity dates              $1,442,057 $1,453,038 $1,464,047    $1,473,262     $1,486,089 $1,497,133 $1,508,235
                             ========== ========== ==========    ==========     ========== ========== ==========

                                                              December 31, 2000
                                                              -----------------
Investments with contractual
 maturity dates              $1,557,312 $1,565,564 $1,574,517    $1,582,084     $1,592,489 $1,601,803 $1,609,220
                             ========== ========== ==========    ==========     ========== ========== ==========
</TABLE>

   Market risk exposure at December 31, 2001 has decreased compared to December
31, 2000 due to the decrease in the size of the investment portfolio.

   We also hold investments in equity securities that are sensitive to changes
in the stock market. The fair value of our equity investments at December 31,
2001 was $31,950,000 and $48,627,000 at December 31, 2000. For each one percent
change in the fair value of the underlying securities, the fair value of our
equity investments at December 31, 2001 would change by $320,000.

Foreign exchange forward contracts

   We periodically enter into foreign exchange forward contracts related to
inventory purchases to offset the impact of currency fluctuations in the Euro.
We monitor our foreign currency exposures daily to maximize the overall
effectiveness of our foreign currency hedge positions. It is our policy to
enter into forward contracts with maturity dates of no later than eighteen
months. We do not enter into foreign exchange forward contracts for trading
purposes.

                                      52

<PAGE>

Item 8. Financial Statements and Supplementary Data

<TABLE>
<CAPTION>
                                                                  Page in
                                                                 Form 10-K
                                                                 ---------
     <S>                                                         <C>
     Consolidated Balance Sheets at December 31, 2001 and 2000      54

     Consolidated Statements of Income for the years ended
       December 31, 2001, 2000 and 1999                             55

     Consolidated Statements of Shareholders' Equity for the
       years ended December 31, 2001, 2000 and 1999                 56

     Consolidated Statements of Cash Flows for the years ended
       December 31, 2001, 2000 and 1999                             57

     Notes to Consolidated Financial Statements for the years
       ended December 31, 2001, 2000 and 1999                     58 - 75

     Report of Ernst & Young LLP, Independent Auditors              76
</TABLE>

                                      53

<PAGE>

                              IMMUNEX CORPORATION
                          Consolidated Balance Sheets
                (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                               ----------------------
                                                                                  2001        2000
                                                                               ----------  ----------
<S>                                                                            <C>         <C>
Assets
Current assets:
   Cash and cash equivalents                                                   $  198,777  $  552,767
   Short-term investments                                                         659,037   1,052,043
   Accounts receivable--trade, net                                                 85,005      89,864
   Accounts receivable--AHP                                                        11,462       4,177
   Other receivables                                                               25,382      22,384
   Inventories                                                                     34,440      19,371
   Prepaid expenses and other current assets                                       23,118      15,675
                                                                               ----------  ----------
       Total current assets                                                     1,037,221   1,756,281

Property, plant and equipment, net                                                200,429     174,049

Restricted cash and investments                                                   765,000           -
Deposit to AHP on Rhode Island manufacturing facility                             192,778           -
Property held for future development                                               45,565      33,382
Investments                                                                        31,950      48,627
Intangible product rights and other, net                                           22,365      27,034
                                                                               ----------  ----------
       Total assets                                                            $2,295,308  $2,039,373
                                                                               ==========  ==========
Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable                                                            $  106,967  $   93,905
   Accounts payable--AHP                                                           84,345      75,119
   Accrued compensation and related items                                          31,778      25,422
   Current portion of long-term obligations                                            31          31
   Other current liabilities                                                        7,743       5,964
                                                                               ----------  ----------
       Total current liabilities                                                  230,864     200,441

Long-term obligations                                                                 764         796

Commitments and contingencies

Shareholders' equity:
   Preferred stock, $.01 par value, 30,000,000 shares authorized,
     none outstanding                                                                   -           -
   Common stock, $.01 par value, 1,200,000,000 shares authorized, 545,294,346
     and 540,856,394 outstanding at December 31, 2001 and 2000, respectively    2,153,184   2,092,294
   Accumulated other comprehensive income                                          25,372      30,681
   Accumulated deficit                                                           (114,876)   (284,839)
                                                                               ----------  ----------
       Total shareholders' equity                                               2,063,680   1,838,136
                                                                               ----------  ----------
       Total liabilities and shareholders' equity                              $2,295,308  $2,039,373
                                                                               ==========  ==========
</TABLE>

                            See accompanying notes.

                                      54

<PAGE>

                              IMMUNEX CORPORATION
                       Consolidated Statements of Income
                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                                ----------------------------
                                                  2001      2000      1999
                                                --------  --------  --------
   <S>                                          <C>       <C>       <C>
   Revenues:
      Product sales                             $959,586  $828,828  $519,287
      Royalty and contract revenue                27,219    33,001    22,431
                                                --------  --------  --------
                                                 986,805   861,829   541,718
   Operating expenses:
      Cost of product sales                      256,123   243,144   159,269
      Research and development                   204,649   166,712   126,682
      Selling, general and administrative        422,999   344,383   216,714
      Merger-related costs                         5,619         -         -
                                                --------  --------  --------
                                                 889,390   754,239   502,665
                                                --------  --------  --------
   Operating income                               97,415   107,590    39,053
   Other income (expense):
      Interest and other income, net             115,097    59,795    26,427
      Interest expense                               (58)  (10,737)   (8,656)
                                                --------  --------  --------
                                                 115,039    49,058    17,771
                                                --------  --------  --------
   Income before income taxes                    212,454   156,648    56,824
   Provision for income taxes                     42,491     2,296    12,500
                                                --------  --------  --------
   Net income                                   $169,963  $154,352  $ 44,324
                                                ========  ========  ========
   Net income per common share:
      Basic                                     $   0.31  $   0.30  $   0.09
                                                ========  ========  ========
      Diluted                                   $   0.30  $   0.28  $   0.08
                                                ========  ========  ========
   Number of shares used for per share amounts:
      Basic                                      542,900   506,847   489,390
                                                ========  ========  ========
      Diluted                                    569,077   549,250   529,974
                                                ========  ========  ========
</TABLE>

                            See accompanying notes.

                                      55

<PAGE>

                              IMMUNEX CORPORATION
                Consolidated Statements of Shareholders' Equity
                                (In thousands)

<TABLE>
<CAPTION>
                                                                Accumulated
                                               Common Stock        Other                     Total
                                            ------------------ Comprehensive Accumulated Shareholders'
                                            Shares    Amount      Income       Deficit      Equity
                                            ------- ---------- ------------- ----------- -------------
<S>                                         <C>     <C>        <C>           <C>         <C>
Balance, January 1, 1999                    481,782 $  729,750    $ 1,228     $(483,515)  $  247,463
   Net income for the year ended
     December 31, 1999                            -          -          -        44,324       44,324
   Change in fair value of investments,
     net                                          -          -      1,491             -        1,491
                                                                                          ----------
   Comprehensive income                                                                       45,815
   Common stock issued to employees           8,739     21,275          -             -       21,275
   Common stock issued to AHP                 3,498     40,777          -             -       40,777
                                            ------- ----------    -------     ---------   ----------
Balance, December 31, 1999                  494,019    791,802      2,719      (439,191)     355,330
   Net income for the year ended
     December 31, 2000                            -          -          -       154,352      154,352
   Change in fair value of investments,
     net                                          -          -     27,962             -       27,962
                                                                                          ----------
   Comprehensive income                                                                      182,314
   Proceeds from the sale of common stock,
     net of offering costs of $2,393         20,000    771,207          -             -      771,207
   Conversion of subordinated note by
     AHP, net                                15,544    449,206          -             -      449,206
   Common stock issued to employees          10,250     40,592          -             -       40,592
   Common stock issued to AHP                 1,043     28,859          -             -       28,859
   Capital contribution from AHP                  -     10,628          -             -       10,628
                                            ------- ----------    -------     ---------   ----------
Balance, December 31, 2000                  540,856  2,092,294     30,681      (284,839)   1,838,136
   Net income for the year ended
     December 31, 2001                            -          -          -       169,963      169,963
   Cumulative effect of adopting FAS
     133                                          -          -      7,641             -        7,641
   Change in fair value of forward
     contracts, net                               -          -     (3,348)            -       (3,348)
   Change in fair value of investments,
     net                                          -          -     (9,602)            -       (9,602)
                                                                                          ----------
   Comprehensive income                                                                      164,654
   Tax benefit from stock option
     exercises                                    -     38,554          -             -       38,554
   Common stock issued to employees           4,438     22,336          -             -       22,336
                                            ------- ----------    -------     ---------   ----------
Balance, December 31, 2001                  545,294 $2,153,184    $25,372     $(114,876)  $2,063,680
                                            ======= ==========    =======     =========   ==========
</TABLE>

                            See accompanying notes.

                                      56

<PAGE>

                              IMMUNEX CORPORATION
                     Consolidated Statements of Cash Flows
                                (In thousands)

<TABLE>
<CAPTION>
                                                                           Year ended December 31,
                                                                     -----------------------------------
                                                                        2001         2000        1999
                                                                     -----------  -----------  ---------
<S>                                                                  <C>          <C>          <C>
Operating activities:
 Net income                                                          $   169,963  $   154,352  $  44,324
 Adjustments to reconcile net income to net cash provided by
   operating activities:
     Depreciation and amortization                                        31,110       21,781     20,081
     Deferred income tax provision                                        38,554            -     12,051
     Gain on sale of product rights                                      (16,000)           -          -
     Other                                                                (6,122)           -       (990)
     Cash flow impact of changes to:
       Accounts receivable                                                (5,424)     (54,644)   (32,842)
       Inventories                                                       (14,475)      (6,123)    11,296
       Prepaid expenses and other current assets                          (3,150)      (9,236)    (1,713)
       Accounts payable, accrued compensation and other current
         liabilities                                                      29,829       65,750     60,525
                                                                     -----------  -----------  ---------
          Net cash provided by operating activities                      224,285      171,880    112,732
Investing activities:
 Purchases of restricted cash and investments                           (765,000)           -          -
 Deposit to AHP on Rhode Island manufacturing facility                  (192,778)           -          -
 Purchases of property, plant and equipment                              (65,011)     (80,675)   (35,563)
 Purchases of property held for future development                       (13,413)     (27,509)         -
 Proceeds from sales of investments                                    1,458,545    1,108,858     69,538
 Proceeds from maturities of investments                                 156,116       34,085     38,305
 Purchases of investments                                             (1,205,093)  (1,755,881)  (460,050)
 Proceeds from sale of product rights                                     16,000            -          -
 Acquisition of rights to marketed products, net                               -       (9,500)   (15,500)
 Other                                                                         -            -         78
                                                                     -----------  -----------  ---------
          Net cash used in investing activities                         (610,634)    (730,622)  (403,192)
Financing activities:
 Proceeds from lease financing                                            10,055            -          -
 Proceeds from common stock offering, net                                      -      771,207          -
 Proceeds from common stock issued to employees                           22,336       40,592     21,275
 Proceeds from common stock issued to AHP                                      -       28,859     40,777
 Proceeds from capital contribution from AHP                                   -       10,628          -
 Proceeds from convertible subordinated note--AHP, net                         -            -    449,000
 Other                                                                       (32)        (547)    (3,422)
                                                                     -----------  -----------  ---------
          Net cash provided by financing activities                       32,359      850,739    507,630
                                                                     -----------  -----------  ---------
Net increase (decrease) in cash and cash equivalents                    (353,990)     291,997    217,170
Cash and cash equivalents, beginning of period                           552,767      260,770     43,600
                                                                     -----------  -----------  ---------
Cash and cash equivalents, end of period                             $   198,777  $   552,767  $ 260,770
                                                                     ===========  ===========  =========
</TABLE>

                            See accompanying notes.

                                      57

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 1. Organization

   We are a leading biopharmaceutical company dedicated to developing immune
system science to protect human health. Applying our scientific expertise in
the fields of immunology, cytokine biology, vascular biology, antibody-based
therapeutics and small molecule research, we work to discover new targets and
new therapeutics for treating rheumatoid arthritis, asthma and other
inflammatory diseases, as well as cancer and cardiovascular diseases.

   We operate in a highly regulated and competitive environment. Our business
is regulated primarily by the FDA. The FDA regulates the products we sell, our
manufacturing processes and our promotional activities. Obtaining approval for
a new therapeutic product is never certain, generally takes many years and is
very costly. Competition in researching, developing and marketing biotechnology
and pharmaceutical products is intense. Any of the technologies covering our
existing products or products under development could become obsolete or
diminished in value by discoveries and developments of other organizations.

   Our market for pharmaceutical products is primarily the United States. Our
sales are primarily to pharmaceutical wholesalers. During 2001, approximately
70% of our product sales were made to three of these wholesalers and
approximately 79% of our product sales were from the sale of Enbrel.

   In June 1993, we merged with a subsidiary of American Cyanamid Company, or
Cyanamid. In November 1994, American Home Products, or AHP, acquired all of
Cyanamid's outstanding shares of common stock. Thus, AHP became the owner of
Cyanamid's then approximate 54% interest in our common stock. In November 2000,
AHP sold 60,500,000 shares of our common stock in a public offering. As a
result, AHP now holds an approximate 41% interest in us. We have also entered
into additional agreements with AHP (see Note 11). All references to AHP
include AHP and its various affiliates, divisions and subsidiaries, including
Cyanamid.

   On December 17, 2001, we announced that we had entered into an Agreement and
Plan of Merger with Amgen Inc. (see Note 15).

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Use of Estimates

   The consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States. In preparing the
financial statements, management must make estimates and assumptions that
affect reported amounts and disclosures.

Principles of consolidation

   The consolidated financial statements include our accounts and those of our
wholly-owned subsidiary, Immunex Manufacturing Corporation. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Cash equivalents

   Cash equivalents include items almost as liquid as cash, such as demand
deposits or debt securities with maturity periods of 90 days or less when
purchased. Our cash equivalents are carried at fair market value.

                                      58

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 2. Basis of Presentation and Summary of Significant Accounting Policies,
continued


Investments

   Marketable equity securities and debt securities are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
based on current market rates, with the unrealized gains and losses being
reported as a separate component of shareholders' equity. The amortized cost of
debt securities is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in interest income.
Realized gains and losses are included in other income. The cost of securities
sold is based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in interest income. We
review our investments on a regular basis for impairment. Securities trading
below their original costs for a period of time considered "other than
temporary" are written down to current fair value.

   Our investments in debt securities, excluding the $765,000,000 in restricted
cash and investments (see Note 5), are available for use in our current
operations and have been classified as short-term investments. Our equity
securities are intended to be a long-term investment.

Inventories

   Inventories are stated at the lower of cost, using a weighted-average
method, or market. The components of inventories are as follows (in thousands):

<TABLE>
<CAPTION>
                                                          2001    2000
                                                         ------- -------
       <S>                                               <C>     <C>
       Raw materials                                     $ 4,133 $ 4,779
       Work in process                                    24,602  11,987
       Finished goods                                      5,705   2,605
                                                         ------- -------
       Total inventories                                 $34,440 $19,371
                                                         ======= =======
</TABLE>

Depreciation and amortization

   The cost of buildings and equipment is depreciated evenly over the estimated
useful lives of the assets, which range from three to 31.5 years. Leasehold
improvements are amortized evenly over either their estimated useful life, or
the term of the lease, whichever is shorter.

Property held for future development

   We have purchased land and buildings adjacent to the location of our new
research and technology center in Seattle, Washington. The property will be
held to accommodate future growth. We also own some property intended for the
possible future expansion of our manufacturing facilities. These properties are
recorded at cost.

Intangible product rights

   Intangible product rights and other intangible assets are amortized evenly
over their estimated useful lives, ranging from five to 15 years. Accumulated
amortization totaled $16,556,000 at December 31, 2001 and $13,085,000 at
December 31, 2000.

Derivatives and Hedging Activities

   Effective January 1, 2001, we adopted Statement of Financial Accounting
Standard, or SFAS, 133 (Accounting for Derivative and Hedging Activities) which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging

                                      59

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 2. Basis of Presentation and Summary of Significant Accounting Policies,
continued

activities. SFAS 133, as amended, requires the recognition of all derivative
instruments as either assets or liabilities in the balance sheet at fair value.
The adoption of SFAS 133 impacts our accounting for certain forward exchange
contracts related to hedging cash outflows on future purchases of Enbrel.

   We have entered into forward foreign currency contracts to reduce the impact
of future currency rate fluctuations related to those purchase commitments for
Enbrel that are denominated in Euros. The forward contracts have been
designated as cash-flow hedges and, as of December 31, 2001, were considered
highly effective. The ineffective portion of these hedges was not material
during 2001. We do not enter into any forward contracts for trading purposes.
If it became probable that the cash outflow related to a purchase of inventory
would not occur, we would be required to reclassify gains or losses from the
unused portion of the contract from other comprehensive income to other income
or expense in the statements of income. The unrealized gain from our forward
exchange contracts of approximately $4,293,000 at December 31, 2001 (which
consists of $7,641,000 of unrealized gains upon adoption of SFAS 133, realized
gains of approximately $2,229,000 and unrealized losses of $1,119,000
experienced during 2001) is included in other current assets and accumulated
other comprehensive income. Gains and losses included in other comprehensive
income are reclassified to earnings when the hedged item is recognized in
earnings.

Revenues

   Product sales are recognized when product is shipped to our customers. Our
sales are made FOB shipping point and we believe that collectibility is
reasonably assured at the time of shipment. Product sales are recorded net of
reserves for estimated chargebacks, returns, discounts, Medicaid rebates and
administrative fees. We maintain reserves based on historical results that we
believe are sufficient to cover estimated future requirements. Allowances for
discounts, returns and bad debts, which are netted against accounts receivable,
totaled $25,529,000 at December 31, 2001 and $26,323,000 at December 31, 2000.
Reserves for chargebacks, Medicaid rebates and administrative fees are included
in accounts payable and totaled $18,601,000 at December 31, 2001 and
$18,056,000 at December 31, 2000. Shipping and handling costs are included in
cost of product sales and are not significant.

   Revenues earned under royalty, licensing and other contractual agreements
are recognized based upon required performance under the terms of the
underlying agreements. Royalties from licensees are received quarterly or
semi-annually in arrears, based on third-party product sales and are recognized
based on the period in which the underlying products are sold. If we are unable
to reasonably estimate royalty income under a particular agreement, we will
recognize revenue when actual amounts are known. License fees, milestones and
other contract fees for which no further performance obligations exist, and
there is no continuing involvement by us, are recognized on the earlier of when
the payments are received or when collection is assured. If there is an ongoing
service or performance requirement, or payments are dependent upon a future
contingency, revenue is deferred and recognized over the applicable service
period or when the contingency is resolved.

Advertising Costs

   The costs of advertising are expensed as incurred. We incurred advertising
costs of $5,098,000 in 2001, $4,163,000 in 2000 and $2,843,000 in 1999.

Net income per common share

   Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share is calculated using the weighted average number of common

                                      60

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 2. Basis of Presentation and Summary of Significant Accounting Policies,
continued

shares outstanding plus the weighted average dilutive effect of outstanding
stock options using the "treasury stock" method and the weighted average effect
of convertible debt, if dilutive.

Reclassifications

   For comparison purposes, prior-year amounts in the consolidated financial
statements have been reclassified to conform to current-year presentations.

Impact of Recently Issued Accounting Standards

   During June 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS 141 (Business Combinations) and SFAS 142 (Goodwill and Other Intangible
Assets). SFAS 141 requires all business combinations initiated after June 30,
2001 be accounted for under the purchase method and that certain acquired
intangible assets in a business combination be recognized as assets separate
from goodwill. SFAS 142 requires that ratable amortization of goodwill be
replaced with periodic tests of the goodwill's impairment and that intangible
assets other than goodwill be amortized over their useful lives. The provisions
of SFAS 142 will be effective for January 1, 2002. Currently, we expect that
the adoption of these standards will not have a significant impact on our
financial position, cash flows or results of operations.

   During June 2001, the FASB issued SFAS 143 (Accounting for Asset Retirement
Obligations) which will be effective on January 1, 2003. This Statement
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. We are currently evaluating this statement and do not
anticipate the adoption of SFAS 143 will have a material impact on our
financial position, cash flows or results of operations.

   During August 2001, the FASB issued SFAS 144 (Accounting for the Impairment
or Disposal of Long-Lived Assets) which is effective for the Company on January
1, 2002. This Statement supersedes FASB Statement 121 (Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of)
and other related accounting guidance. We are currently evaluating this
statement and do not anticipate the adoption of SFAS 144 will have a material
impact on our financial position, cash flows or results of operations.

                                      61

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements


Note 3. Investments

   Information about our investments follows (in thousands):

<TABLE>
<CAPTION>
                                                                           Gross      Gross
                                                              Amortized  Unrealized Unrealized
December 31, 2001                                  Fair Value   Cost       Gains      Losses
-----------------                                  ---------- ---------- ---------- ----------
<S>                                                <C>        <C>        <C>        <C>
   Money market, commercial paper and other        $  831,157 $  824,459  $ 7,706    $(1,008)
   Corporate debt securities                          275,732    274,664    4,216     (3,148)
   U.S. government and agency obligations             366,373    358,486    8,417       (530)
   Corporate equity securities                         31,950     26,525    7,639     (2,214)
                                                   ---------- ----------  -------    -------
                                                   $1,505,212 $1,484,134  $27,978    $(6,900)
                                                   ========== ==========  =======    =======
December 31, 2000
-----------------
   Money market, commercial paper and other        $  137,411 $  137,397  $    16    $    (2)
   Corporate debt securities                          667,572    660,583    9,089     (2,100)
   U.S. government and agency obligations             777,101    770,055    7,072        (26)
   Corporate equity securities                         48,627     31,995   22,453     (5,821)
                                                   ---------- ----------  -------    -------
                                                   $1,630,711 $1,600,030  $38,630    $(7,949)
                                                   ========== ==========  =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                          2001       2000
                                                       ---------- ----------
    <S>                                                <C>        <C>
    Classification in the balance sheet:
       Cash and cash equivalents                       $   49,225 $  530,041
       Short-term investments                             659,037  1,052,043
       Restricted cash and investments                    765,000          -
       Investments                                         31,950     48,627
                                                       ---------- ----------
                                                       $1,505,212 $1,630,711
                                                       ========== ==========
</TABLE>

   The following table summarizes contractual maturity information for
securities with known maturity dates at December 31, 2001 (in thousands):

<TABLE>
<CAPTION>
                                                                  Amortized
                                                       Fair Value   Cost
                                                       ---------- ----------
    <S>                                                <C>        <C>
    Less than one year                                 $  652,048 $  648,838
    Due in 1-5 years                                      604,584    593,772
    Due after 5 years                                     216,630    214,999
                                                       ---------- ----------
       Total                                           $1,473,262 $1,457,609
                                                       ========== ==========
</TABLE>

   Realized gains were $16,304,000 for 2001 and $6,438,000 for 2000. Realized
losses were $6,816,000 for 2001 and $2,158,000 for 2000. There were no material
realized gains or losses for 1999.

   We review our investments on a regular basis for impairment. Securities
trading below their original costs for a period of time considered "other than
temporary" are written down to current fair value. During 2001, we wrote down
approximately $1,976,000 of securities meeting this criteria. There were no
securities written down in 2000 and 1999.

                                      62

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements


Note 4. Property, Plant and Equipment

   The major categories of property, plant and equipment, at historical cost,
consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                       2001       2000
                                                     ---------  --------
      <S>                                            <C>        <C>
      Land                                           $  18,273  $ 17,874
      Buildings and improvements                       104,935   103,188
      Equipment                                        147,540   108,886
      Leasehold improvements                            46,960    39,971
                                                     ---------  --------
                                                       317,708   269,919
      Less accumulated depreciation and amortization  (117,279)  (95,870)
                                                     ---------  --------
      Property, plant and equipment, net             $ 200,429  $174,049
                                                     =========  ========
</TABLE>

Note 5. Helix Project

   In March 2001, we entered into a seven and one-half year lease to finance
construction of our new research and technology center in Seattle, Washington,
known as the Helix Project. The total cost of the project, including financing
costs, is expected to be up to $750,000,000. As part of the lease transaction,
we are required to restrict as collateral, cash or investment securities worth
$765,000,000 during the construction of the project and 102% of the funds
borrowed by the lessor thereafter. The restricted investments consist primarily
of money market investments with maturities of one-year or less and are carried
at fair value. These investments are held in our name, are restricted as to
their withdrawal and are classified as non-current on our balance sheet. The
lease is classified as an operating lease for financial reporting purposes,
which means that the cost of the facility and related financing obligation are
not reflected on our balance sheet.

   The construction costs of the Helix Project are paid by the lessor, who is
the borrower under a loan that is funded using the proceeds of commercial
paper. In order to support the placement of the commercial paper, a syndicate
of banks has agreed to provide a back-up credit facility that is subject to an
annual renewal commitment. If all or some of the banks elect not to renew their
commitment under this back-up credit facility, they would be required to
provide a bank loan for the duration of the lease term in an amount equal to
the size of their commitment under the back-up credit facility. However, the
rates on such bank loan may not be as favorable as the rates obtained using
commercial paper for financing. In addition, we may, at any time during the
term of the lease, purchase the facility for the amount of cumulative financed
project costs incurred. At the end of the lease term, if we elect not to renew
the lease or do not exercise our option to purchase the facility, we have
guaranteed to pay any loss incurred by the lessor upon the sale of the facility
for amounts up to 89.5% of the project costs.

   Under the terms of the agreement, we are required to maintain certain
financial ratios and meet other covenants regarding the conduct of our
business. If we were to violate any of these covenants and were unable to
restructure the financing or obtain a waiver, we could be obligated to pay the
lessor the cumulative financed project costs at such time. Our proposed merger
with Amgen (see Note 15) would violate one of these covenants. We expect to
review this financing arrangement in light of the merger and the anticipated
needs of the combined company. We may be able to renegotiate the relevant terms
of the covenants or obtain a waiver if it was in the best interest of the
combined company.

   At December 31, 2001, the construction costs incurred and amount financed
totaled approximately $106,000,000 and is expected to total $750,000,000 at
completion of the project. Lease payments begin upon completion of the
facility, which is expected to be no later than September 2003, and are
variable throughout the lease term based on a LIBOR rate (see Note 12).

                                      63

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements


Note 6. Long-Term Obligations

   Long term obligations totaled $764,000 at December 31, 2001 and $796,000 at
December 31, 2000. Our current portion of long term obligations totaled $31,000
at December 31, 2001 and 2000. We had no interest-bearing debt in 2001. We had
no interest-bearing debt in 2000 or 1999, other than the convertible note held
by AHP. The balance sheet carrying value for all of our financial instruments
approximates fair value based on their short-term nature.

   In May 1999, we issued a seven-year, 3% convertible subordinated note to
AHP. On October 31, 2000, AHP converted the principal amount of the $450
million note into 15,544,041 shares of our common stock. The note, which was
due in 2006, was converted into newly issued shares at a price of $28.95 a
share. Interest paid on the note totaled $13,500,000 in 2000 and $6,038,000 in
1999.

Note 7. Shareholders' Equity

Stock options

   We may grant stock options, both incentive and non qualified, to any
employee, including officers, under the 1993 stock option plan and the 1999
stock option plan. There were a total of 74,703,204 and 36,000,000 shares of
common stock authorized for issuance under the 1993 stock option plan and the
1999 stock option plan, respectively. Options are granted to current employees
by a committee of our Board of Directors. Under both plans, options are not
granted with exercise prices less than the fair market value of our common
stock at the date of grant. Each outstanding option has a term of 10 years from
the date of grant and becomes exercisable at a rate of 20% per year beginning
one year from the date of grant, with the exception of certain grants issued in
2001 which vest 60% beginning three years from the date of grant and vest 20%
in the fourth and fifth year from the date of grant.

   We also have a stock option plan with 1,200,000 shares of common stock
reserved for issuance to nonemployee directors that provides each such director
an initial grant of an option to purchase 10,000 shares of common stock and an
annual grant of 5,000 shares thereafter. The annual grant is subject to
proportionate adjustment for any stock split that occurs within 90 days before
the annual grant. Each option is granted with an exercise price equal to fair
market value of our common stock on the date of grant. Each outstanding option
has a term of 10 years from the date of grant and becomes exercisable at a rate
of 20% per year beginning one year from the date of grant.

                                      64

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 7. Shareholders' Equity, continued


   We have elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and have adopted the disclosure-only
provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Stock
options are granted with an exercise price equal to the fair market value of
the stock on the date of grant and, accordingly, we do not record compensation
expense for stock option grants. The following table summarizes results as if
we had recorded compensation expense for the option grants (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                             2001     2000    1999
                                                           -------- -------- -------
<S>                                                        <C>      <C>      <C>
Net income--as reported                                    $169,963 $154,352 $44,324
Net income--pro forma                                       104,476   70,189   7,003

Net income per common share, basic--as reported            $   0.31 $   0.30 $  0.09
Net income per common share, basic--pro forma              $   0.19 $   0.14 $  0.01

Net income per common share, diluted--as reported reported $   0.30 $   0.28 $  0.08
Net income per common share, diluted--pro forma            $   0.18 $   0.13 $  0.01
</TABLE>

   The estimated fair value of options granted in 2001 was $14.96, compared to
$39.39 in 2000 and $8.17 in 1999 which were calculated using the Black-Scholes
option pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                               2001      2000      1999
                                             --------- --------- ---------
     <S>                                     <C>       <C>       <C>
     Expected life in years                      6         6         6
     Risk-free interest rate                 3.8%-5.3% 5.0%-6.8% 5.1%-6.5%
     Volatility                                 79%       72%       74%
     Dividend yield                              -         -         -
</TABLE>

   Information with respect to our stock option plans is as follows:

<TABLE>
<CAPTION>
                                                 Shares Subject  Exercise    Weighted Average
                                                   to Option    Price Range   Exercise Price
                                                 -------------- ------------ ----------------
<S>                                              <C>            <C>          <C>
Options outstanding balance at January 1, 1999     47,823,888     0.98- 6.40      $ 3.04

   Granted                                         17,762,700    11.48-19.52       11.87
   Exercised                                       (8,670,207)    0.98- 6.40        2.31
   Canceled                                        (1,337,502)    0.98-19.52        5.97
                                                  -----------
Options outstanding balance at December 31, 1999   55,578,879   $ 0.98-19.52      $ 5.90

   Options exercisable                             13,472,337                       2.38

   Granted                                          6,828,120    25.88-64.73       62.10
   Exercised                                      (10,081,844)    0.98-19.52        3.64
   Canceled                                          (739,901)    1.32-64.73       15.62
                                                  -----------
Options outstanding balance at December 31, 2000   51,585,254   $ 1.02-64.73      $13.63

Options exercisable                                15,032,211                       4.14

   Granted                                          6,804,030    13.25-37.31       21.51
   Exercised                                       (4,198,840)    1.04-19.52        4.56
   Canceled                                        (3,388,418)    1.19-64.73       22.83
                                                  -----------
Options outstanding balance at December 31, 2001   50,802,026   $ 1.02-64.73      $14.82
                                                  ===========
   Options exercisable                             23,145,236                       7.86

</TABLE>

                                      65

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 7. Shareholders' Equity, continued


   Shares available for future grant totaled 33,104,815 at December 31, 2001
and 36,520,427 at December 31, 2000.

   The following table summarizes information about stock options outstanding
at December 31, 2001:

<TABLE>
<CAPTION>
                               Outstanding                        Exercisable
                ------------------------------------------ -------------------------
                               Weighted
                               Average         Weighted                  Weighted
   Range of                   Remaining        Average                   Average
Exercise Prices  Options   Contractual Life Exercise Price  Options   Exercise Price
--------------- ---------- ---------------- -------------- ---------- --------------
<S>             <C>        <C>              <C>            <C>        <C>
$ 1.02 -  1.46   6,167,378     4 years          $ 1.29      6,167,378     $ 1.29
  2.02 -  3.48   7,000,263     5 years            2.09      5,085,543       2.11
  5.19 -  5.72  10,402,375     6 years            5.26      5,110,855       5.25
  6.40 - 13.25  16,178,562     7 years           11.41      5,233,600      10.77
 14.14 - 25.88   2,283,855     9 years           16.84        367,015      17.46
 26.26 - 64.73   8,769,593     8 years           51.61      1,180,845      62.36
                ----------                                 ----------
$ 1.02 - 64.73  50,802,026                      $14.82     23,145,236     $ 7.86
                ==========                                 ==========
</TABLE>

Employee Stock Purchase Plan

   In April 1999, we introduced an employee stock purchase plan under which
3,000,000 shares of common stock were reserved for issuance. Eligible employees
may purchase a limited number of shares of our common stock at 85% of the
market value at plan-defined dates. Employees purchased 239,459 shares for
$3,160,000 in 2001 and 165,060 shares for $3,937,000 in 2000 under this plan.

Shares reserved for future issuance

   At December 31, 2001, we have reserved shares of common stock for future
issuances as follows:

<TABLE>
              <S>                                      <C>
              Outstanding stock options                50,802,026
              Stock options available for future grant 33,104,815
              Employee stock purchase plan              2,529,801
                                                       ----------
                                                       86,436,642
                                                       ==========
</TABLE>

Note 8. Sale of Product Rights

   On June 30, 2001, we sold our rights to the pharmaceutical products Amicar,
methotrexate sodium injectable, leucovorin calcium and Levoprome to Xanodyne.
The sale resulted in a gain of $16,000,000, which was included in other income.
We also agreed to sell to Xanodyne, at cost, our remaining inventory for these
products on hand as of June 30, 2001. As a result, we did not recognize any
material revenues or expenses related to these products subsequent to June 30,
2001.

                                      66

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements


Note 9. Income Taxes

   Significant components of the provision for income taxes are as follows (in
thousands):

<TABLE>
<CAPTION>
                                     2001    2000   1999
                                    ------- ------ -------
                     <S>            <C>     <C>    <C>
                     Current taxes
                        Federal     $ 3,350 $    - $     -
                        State           587  2,296     449
                                    ------- ------ -------
                                    $ 3,937 $2,296 $   449
                     Deferred taxes
                        Federal     $38,554 $    - $12,051
                                    ------- ------ -------
                                    $42,491 $2,296 $12,500
                                    ======= ====== =======
</TABLE>

   During 2001 and 2000, federal tax expense, for financial reporting purposes,
was offset by utilizing research and experimentation credits. Also, during 2001
we utilized stock option deductions and NOL carryforwards attributable to stock
option deductions to offset $119,617,000 of taxable income, resulting in a tax
benefit of $38,554,000 which has been recorded as a deferred tax provision and
as an increase to equity. During 2000 and 1999 we utilized all of our NOL
carryforwards that had been generated through operations. During 1999, a
portion of the benefit from utilizing our NOL carryforwards was used to reduce
the recorded value of goodwill and certain intangible product rights by
$12,051,000. We paid income taxes totaling $4,317,000 in 2001, $1,681,000 in
2000 and $383,000 in 1999.

   Reconciliation of the U.S. federal statutory tax rate to our effective tax
rate is as follows:

<TABLE>
<CAPTION>
                                                        2001   2000   1999
                                                        -----  -----  -----
    <S>                                                 <C>    <C>    <C>
    U.S. federal statutory tax rate                      35.0%  35.0%  35.0%
    Utilization of NOL carryforwards                        -  (34.6) (15.1)
    Utilization of research and experimentation credits (16.5)  (0.7)     -
    Non deductible merger related costs                   0.9      -      -
    Non deductible amortization of goodwill                 -      -    0.5
    State taxes (net of federal tax benefit)              0.2    1.5    0.8
    Other                                                 0.4    0.3    0.9
                                                        -----  -----  -----
       Effective tax rate                                20.0%   1.5%  22.1%
                                                        =====  =====  =====
</TABLE>

                                      67

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 9. Income Taxes, continued


   Significant components of deferred tax assets and liabilities at December 31
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                       2001       2000
                                                     ---------  ---------
     <S>                                             <C>        <C>
     Deferred tax assets:
        Net operating loss carryforwards             $ 191,697  $ 207,608
        Research and experimentation credits                 -     34,493
        In-process research and development              6,299      4,997
        Accounts receivable allowances                   9,446      9,213
        Accrued liabilities                              9,624      8,358
        Other                                            8,640      3,300
                                                     ---------  ---------
            Total deferred tax assets                  225,706    267,969
        Valuation allowance for deferred tax assets   (214,804)  (255,557)
                                                     ---------  ---------
            Net deferred tax assets                     10,902     12,412
     Deferred tax liabilities:
        Tax over book depreciation                       1,461      1,294
        Other                                            9,441     11,118
                                                     ---------  ---------
            Total deferred tax liabilities              10,902     12,412
                                                     ---------  ---------
                                                     $       -  $       -
                                                     =========  =========
</TABLE>

   Our deferred tax assets consist primarily of the benefit resulting from
unused NOL carryforwards. The amount of the NOL carryforwards are approximately
$532,491,000 at December 31, 2001. The NOL carryforwards expire from 2002
through 2020. The remaining NOL carryforwards are attributable to stock option
deductions and will be recorded as a reduction in federal income tax for tax
purposes, but will not be used to reduce federal tax expense for financial
reporting purposes. In the future, for financial reporting purposes, the
benefit of all remaining NOL carryforwards will be recorded as an increase to
equity when realized.

   Our ability to generate sufficient future taxable income for tax purposes in
order to realize the benefits of our net deferred tax assets is uncertain
primarily as a result of potential future stock option deductions. Therefore, a
reserve of $214,804,000 and $255,557,000 has been recorded for financial
reporting purposes at December 31, 2001 and 2000. This represents a decrease in
the reserve of approximately $40,753,000 during 2001 and an increase of
$115,837,000 during 2000.

Note 10. Employee Benefits

   As a retirement plan, we offer a defined contribution plan covering
regularly scheduled full-time, part-time and temporary employees. The plan is a
salary deferral arrangement pursuant to Internal Revenue Code section 401(k)
and is subject to the provisions of the Employee Retirement Income Security Act
of 1974. We match 100% of the first 2% of an employee's deferred salary and 50%
of the next 4% of an employee's deferred salary. Employees with five or more
years of service receive a match of 100% of the first 2% of deferred salary and
75% of the next 4% of deferred salary. We recorded compensation expense
resulting from matching contributions to the plan of $4,224,000 in 2001,
$2,970,000 in 2000 and $2,860,000 in 1999.

Note 11. Transactions with AHP

   On June 1, 1993, our predecessor corporation merged with a subsidiary of
Cyanamid. In late 1994, all of the outstanding shares of common stock of
Cyanamid were acquired by AHP. AHP and certain of its subsidiaries

                                      68

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 11. Transactions with AHP, continued

and affiliates have assumed the rights and obligations of Cyanamid under
various agreements entered into at the time of the merger. In addition, we have
entered into additional agreements with AHP. At December 31, 2001, AHP holds an
approximate 41% interest in us. Significant transactions under these agreements
are discussed in the paragraphs below.

Enbrel promotion agreement

   In 1997, we entered into an Enbrel promotion agreement with AHP. Under the
terms of the Enbrel promotion agreement, Enbrel is being promoted in the United
States and Canada by the sales and marketing organization of Wyeth-Ayerst
Laboratories, a division of AHP. We distribute a portion of the gross profits
to AHP from U.S. and Canadian sales of Enbrel and reimburse AHP for a portion
of the selling, marketing, distribution and other costs incurred in the United
States and Canada for sales of Enbrel. Under the Enbrel promotion agreement,
prior to and for two years following the launch of Enbrel, AHP paid a majority
of these expenses. Beginning in November 2000, we and AHP began sharing these
costs equally in the United States. Our obligation for such expenses, including
AHP's share of gross profits from Enbrel, totaled $281,993,000 in 2001,
$222,472,000 in 2000 and $120,276,000 in 1999 and have been recorded as
selling, general and administrative expenses. In addition, under the Enbrel
promotion agreement, we earned revenues of $736,000 in 2001, $25,000,000 in
2000 and $10,000,000 in 1999 which has been recorded as contract revenue.

   Enbrel was approved for use in Canada in December 2000 and became
commercially available in Canada in March 2001. As part of the Enbrel promotion
agreement, AHP acts as a selling agent for us in Canada. Sales of Enbrel to AHP
for sale in Canada are recorded as product is shipped to customers and totaled
$7,603,000 in 2001.

   Under subsequent agreements, we provided product and component requirements
of Enbrel to AHP for sales outside the United States and Canada. We recorded
revenue of $55,000 in 2001, $2,414,000 in 2000 and $3,864,000 in 1999 under
these agreements. In addition, we performed activities related to Enbrel and
the process of manufacturing Enbrel on behalf of AHP, and AHP agreed to
reimburse us for these costs, which totaled $1,834,000 in 2001, $1,594,000 in
2000 and $1,310,000 in 1999.

Distribution

   We have agreed to supply the commercial requirements of our products in
Puerto Rico to Wyeth-Ayerst Laboratories Puerto Rico, Inc., a wholly-owned
subsidiary of AHP. Net revenue recognized under this agreement totaled
$4,458,000 in 2001, $3,608,000 in 2000 and $2,361,000 in 1999.

Oncology Product License Agreements

   AHP and its sublicensees have a royalty-bearing license to sell our existing
nonbiological oncology products outside the United States and Canada. We earned
royalties under the agreement totaling $1,762,000 in 2001, $2,377,000 in 2000
and $2,504,000 in 1999.

TACE Agreements

   In December 1995, we licensed exclusive worldwide rights to tumor necrosis
factor alpha converting enzyme, or TACE, technology to AHP. We recognized
revenue under these agreements of $1,600,000 in 1999. No revenue was recognized
under these agreements in 2001 or 2000. The TACE agreements also include
additional milestone payments and royalties on future product sales. Under the
agreements, AHP will be responsible for further developments of TACE.

                                      69

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 11. Transactions with AHP, continued


Supply and Manufacturing

   We and AHP are parties to a supply agreement and a toll manufacturing
agreement under which AHP manufactures and supplies the reasonable commercial
requirements of oncology products at a price equal to 125% of AHP's or its
subsidiaries' manufacturing costs. We and AHP also had a methotrexate
distributorship agreement under which AHP agreed to supply methotrexate to us
at established prices which are adjusted annually. Our rights under these
agreements pertaining to Amicar, methotrexate sodium injectable, leucovorin
calcium and Levoprome were transferred to Xanodyne (See Note 8). We purchased
inventory totaling $5,177,000 in 2001, $4,370,000 in 2000 and $8,154,000 in
1999 from AHP and its subsidiaries under these agreements.

Rhode Island Manufacturing Facility

   We collaborated with AHP to retrofit a large-scale manufacturing facility in
Rhode Island intended for the production of Enbrel. AHP agreed to reimburse us
for technical assistance provided by our personnel related to the facility. The
amount reimbursable in 2001 totaled $9,446,000 and in 2000 totaled $5,324,000.
In November 2001, we entered into an agreement to acquire the facility from AHP
effective January 1, 2002. As part of the agreement, in December 2001, we made
a deposit towards the purchase price totaling $192,778,000. We assumed
ownership of the facility in January 2002 and made an additional payment
towards the purchase totaling $279,892,000. A final payment totaling
$27,133,000 is due for costs incurred by AHP in December 2001.

Research and Development

   Under a license and development agreement for Enbrel, we and AHP agreed to
share equally the development costs of Enbrel in the United States, Canada and
Europe. AHP's share of the development costs under this agreement totaled
$33,564,000 in 2001, $30,115,000 in 2000 and $23,986,000 in 1999.

   Under the terms of a product rights agreement, AHP may acquire exclusive
worldwide rights to up to four of our future product candidates. If AHP
exercises any of these rights, we would be eligible for payments and royalties
on future sales of these products. However, we may elect to retain the
worldwide rights to up to two of these products. In this case, AHP would be
eligible for payments and royalties on future sales of these products.

Convertible Subordinated Note

   In 1999, we issued a seven-year, 3% coupon, $450 million convertible
subordinated note to AHP (See Note 6). Interest incurred on the note totaled
$11,250,000 in 2000 and $8,288,000 in 1999. On October 31, 2000, AHP converted
the principal amount of the $450 million note into 15,544,041 shares of our
common stock.

Option to Purchase Shares of our Common Stock

   We and AHP are parties to a 1993 governance agreement under which AHP has
the option to purchase from us, on a quarterly basis, additional shares of our
common stock to the extent necessary to maintain AHP's percentage ownership
interest in us as of the immediately preceding quarter. The per share purchase
price of these shares is equal to the fair market value of the shares, as
determined in accordance with the governance agreement, on the date of AHP's
purchase. AHP did not exercise its option to purchase common stock from us
during 2001. AHP exercised the option to purchase 1,042,995 shares for
$28,859,000 in 2000 and 3,498,726 shares for $40,777,000 in 1999.

   In November 2000, AHP sold 60,500,000 shares of our common stock in a public
offering. Under Section 16(b) of the Securities Exchange Act of 1934, as
amended, AHP was required to remit to us $10,628,000

                                      70

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 11. Transactions with AHP, continued

in short-swing profits related to shares of our common stock that were
purchased by AHP on the open market in the second quarter of 2000 and
subsequently sold at a profit by AHP in connection with the November public
offering.

Note 12. Commitments and Contingencies

   We lease office and laboratory facilities under noncancelable operating
leases that expire through December 2010. These leases provide us with options
to renew the leases at fair market rentals through August 2015. A summary of
minimum future rental commitments under noncancelable operating leases at
December 31, 2001 follows (in thousands):

<TABLE>
<CAPTION>
                                                      Operating
                 Year Ended December 31,               Leases
                 -----------------------              ---------
                 <S>                                  <C>
                      2002                             $14,123
                      2003                              13,687
                      2004                              11,379
                      2005                               6,280
                      2006                               1,321
                      Thereafter                         2,714
                                                       -------
                      Total minimum lease payments     $49,504
                                                       =======
</TABLE>

   Rental expense on operating leases was $12,802,000 in 2001, $8,156,000 in
2000 and $5,183,000 in 1999.

   In March 2001, we entered into a seven and one-half year lease to finance
the initial phase of our new research and technology center, known as the Helix
Project (See Note 5). The lease is classified as an operating lease and
provides 30 months to construct the project. Lease payments begin upon
completion of the facility and are variable throughout the lease term based on
a LIBOR rate. The historical 30 day LIBOR rate over the past 10 years has
approximated 5.0% but has decreased to as low as 2.0% during 2001. The
following table summarizes the annual lease payment at various 30 day LIBOR
rates, assuming an estimated cost to construct the facility of $750,000,000:

<TABLE>
<CAPTION>
                                              Corresponding Annual
                                                 Lease Payment
             Average Annual 30 day LIBOR rate    (in thousands)
             -------------------------------- --------------------
             <S>                              <C>
                           2.0%                     $17,000
                           3.0%                      24,500
                           4.0%                      32,000
                           5.0%                      39,500
                           6.0%                      47,000
                           7.0%                      54,500
</TABLE>

   We are utilizing a contract manufacturer for the production of Enbrel. At
December 31, 2001, we had made commitments to purchase inventory totaling at
least $161,000,000 over the next three years. A portion of this inventory will
be purchased by AHP from the contract manufacturer.

                                      71

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 12. Commitments and Contingencies, continued


   Various license agreements exist that require us to pay royalties based on a
percentage of sales of products manufactured using licensed technology or sold
under license. These agreements contain minimum annual royalty provisions as
follows (in thousands):

<TABLE>
<CAPTION>
                                              Minimum Annual
                  Year Ending December 31     Royalty Payment
                  -----------------------     ---------------
                  <S>                         <C>
                       2002                       $2,700
                       2003                          200
                       2004                          200
                       2005                          200
                       2006                          200
                       Per year thereafter           200
</TABLE>

   According to press reports, approximately 20 pharmaceutical companies are
under investigation by the U.S. Department of Justice, U.S. Department of
Health and Human Services and/or state agencies related to the pricing of their
products. We have received notice from the U.S. Department of Justice
requesting us to produce documents in connection with a Civil False Claims Act
investigation of the pricing of our current and former products for sale and
eventual reimbursement by Medicare or state Medicaid programs. We also have
received similar requests from the U.S. Department of Health and Human Services
and state agencies. Several of our current and former products are or were
regularly sold at substantial discounts from list price. We require in our
contracts of sale that the purchasers appropriately disclose to governmental
agencies the discounts that we give to them. We do not know what action, if
any, the federal government or any state agency will take as a result of their
investigations. We do not believe these matters will have a material adverse
impact on our future financial position, liquidity and results of operations.

   On November 27, 2001, the Action Alliance of Senior Citizens of Greater
Philadelphia filed suit in the United States District Court for the Western
District of Washington against us alleging monopolistic, anticompetitive
conduct in an industry-wide scheme to defraud the consumer by manipulating the
average wholesale price and selling drugs to physicians at prices below the
reimbursement cost charged to Medicare. On December 19, 2001, Citizens for
Consumer Justice and others filed suit against us and other pharmaceutical
companies in the United States District Court for the District of Massachusetts
making similar allegations. These two proposed class action lawsuits allege
violations of antitrust laws. Similar proposed class actions have been filed in
approximately a dozen courts across the country against most of the major
pharmaceutical companies. At this time, we do not know what relief is being
sought from us. We do not believe these matters will have a material adverse
impact on our future financial position, liquidity and results of operations.

   There have been three class action suits filed against us related to our
pending merger with Amgen (see Note 15). As these cases are in their
preliminary stages, the likely outcomes of the cases are unknown. We believe
the ultimate resolution of these matters will not have a material adverse
impact on our future financial position, liquidity and results of operations.

   Immunex is party to routine litigation incident to our business. We believe
the ultimate resolution of these routine matters will not have a material
adverse impact on our future financial position, liquidity and results of
operations.

Note 13. Concentrations of Risk

   Financial instruments that potentially subject us to significant
concentrations of credit risk consist principally of investments and trade
accounts receivable.

                                      72

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 13. Concentrations of Risk, continued


   We maintain cash, cash equivalents, and investments with various financial
institutions. These financial institutions are located throughout the country
and our policy is designed to limit exposure to any one institution. Our
investments are managed by outside investment advisers who perform periodic
evaluations of the relative credit standings of those financial institutions
that are considered in our investment strategy.

   The trade accounts receivable balance represents our most significant
concentration of credit risk. We perform ongoing credit evaluations of our
customers, if appropriate, and we do not require collateral on accounts
receivable. Our sales are primarily to pharmaceutical wholesalers. During 2001,
approximately 70% of our product sales were made to three of these wholesalers.
Financial insolvency by one or more of these wholesalers would require us to
write off all or a portion of the amounts due us. As of December 31, 2001, the
amount due us from these wholesalers totaled $82,037,000. We maintained credit
insurance coverage during 2001 based on our credit exposure. However, this
insurance coverage was limited and may not provide us with adequate coverage
against losses. We have elected not to renew our current credit insurance
policy, which expired on January 31, 2002.

   Sales of Enbrel accounted for 79% of total product sales for the year ended
December 31, 2001. Currently, all finished dosage forms of Enbrel are
manufactured for us by a single contract manufacturer. If this source of supply
were disrupted, sales of Enbrel would be adversely affected.

Note 14. Net Income per Common Share

   Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share is calculated using the weighted average number of common shares
outstanding plus the weighted average dilutive effect of outstanding stock
options using the "treasury stock" method. The components for calculating net
income per share are set forth in the following table (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                      Year ended December 31,
                                                     --------------------------
                                                       2001     2000     1999
                                                     -------- -------- --------
 <S>                                                 <C>      <C>      <C>
 Net income                                          $169,963 $154,352 $ 44,324
                                                     ======== ======== ========
 Weighted average common shares outstanding, basic    542,900  506,847  489,390
 Net effect of dilutive stock options                  26,177   42,403   40,584
                                                     -------- -------- --------
 Weighted average common shares outstanding, diluted  569,077  549,250  529,974
                                                     ======== ======== ========
 Net income per common share, basic                  $   0.31 $   0.30 $   0.09
                                                     ======== ======== ========
 Net income per common share, diluted                $   0.30 $   0.28 $   0.08
                                                     ======== ======== ========
</TABLE>

   While the conversion by AHP of its convertible subordinated note was
outstanding during 2000 and 1999, the 15,544,041 shares issuable upon the
conversion of the note were not included in the calculation of diluted earnings
per share because the effect, including the effect on adjusted net income,
would have been anti dilutive.

   Some of our outstanding stock options were not included in the calculation
of diluted earnings per share because the effect would have been anti dilutive.
These shares totaled 9,608,768 in 2001 and 6,121,456 in 2000. All outstanding
stock options were included in the calculation of diluted earnings per share in
1999.

                                      73

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements


Note 15. Agreement to Merge with Amgen Inc.

   On December 17, 2001, we announced that we had entered into an Agreement and
Plan of Merger with Amgen Inc. and AMS Acquisition Inc., a wholly-owned
subsidiary of Amgen. The merger is contingent upon approval of both our
shareholders and Amgen's stockholders and subject to the satisfaction of
certain closing conditions, including the review by the FTC and other
regulatory authorities. We expect the merger to close in the second half of
2002, however this timing may be affected by review of the transaction by the
FTC, the SEC and other regulatory authorities. Under the terms of the
agreement, AMS Acquisition Inc. will be merged with and into us, we will become
a wholly-owned subsidiary of Amgen and each issued and outstanding share of our
common stock will be converted into the right to receive 0.44 of a share of
Amgen common stock and $4.50 in cash. In addition, each outstanding stock
option of our common stock will be exchanged for a certain number of options of
Amgen. During the fourth quarter of 2001, we incurred $5,619,000 in merger
costs and will incur significant merger-related costs in 2002 which we expect
to be in the range of $40,000,000 to $45,000,000 primarily related to financial
advisory, legal and accounting fees. The majority of the 2002 costs are
contingent upon the consummation of the merger and, accordingly, are not
expected to significantly impact our results of operations unless and until the
merger is completed. If the merger is terminated by us, we may be required to
pay a termination fee of $475,000,000 to Amgen or reimburse Amgen for up to
$15,000,000 of Amgen's expenses.

Note 16. Subsequent Event

   On March 7, 2002, ZymoGenetics, Inc., or ZymoGenetics, filed a patent
infringement lawsuit, related to U.S. patents having claims directed to
specified fusion proteins comprising immunoglobulin constant region domains and
specified processes for making these proteins, against us in the United States
District Court for the Western District of Washington. ZymoGenetics seeks a
declaration of infringement and available remedies under the patent laws,
including monetary damages and injunctive relief. We fully intend to vigorously
defend ourselves against the allegations of ZymoGenetics. If ZymoGenetics
prevails, our ability to market and sell Enbrel could be adversely affected
unless we were able to negotiate a license or similar arrangement. As with any
litigation, we are not able to determine the final outcome of the case at this
time. However, we believe the allegations are without merit.

                                      74

<PAGE>

                              IMMUNEX CORPORATION

                  Notes to Consolidated Financial Statements

Note 17. Quarterly Financial Results (unaudited)


   Our consolidated operating results for each quarter of 2001 and 2000 are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                               Three Months Ended
                                 ----------------------------------------------
                                  March 31   June 30   September 30 December 31
                                 ---------- ---------- ------------ -----------
<S>                              <C>        <C>        <C>          <C>
Year ended December 31, 2001:
   Product sales                 $  211,846 $  231,183   $242,832    $273,725
   Royalty and contract revenue       5,993      7,106     10,131       3,989
   Gross profit/2/                  153,063    166,907    179,137     204,356
   Operating income                  16,888     20,787     28,430      31,310
   Net income                    $   39,833 $48,817/1/   $ 39,687    $ 41,626
   Net income per common share:
       Basic                     $     0.07 $     0.09   $   0.07    $   0.08
       Diluted                   $     0.07 $     0.09   $   0.07    $   0.07

Year ended December 31, 2000:
   Product sales                 $  166,698 $  196,196   $217,158    $248,776
   Royalty and contract revenue   12,340/3/  16,954/4/      1,815       1,892
   Gross profit/2/                  118,895    139,167    151,818     175,804
   Operating income                  24,235     32,986     20,644      29,725
   Net income                    $   32,161 $   41,513   $ 31,522    $ 49,156
   Net income per common share:
       Basic                     $     0.06 $     0.08   $   0.06    $   0.09
       Diluted                   $     0.06 $     0.08   $   0.06    $   0.09
</TABLE>
--------
/1/ Includes $16.0 million gain from the sale of our rights in primarily
    generic pharmaceutical products Amicar, methotrexate sodium injectable,
    leucovorin calcium and Levoprome.
/2/ Gross profit is calculated by deducting cost of product sales from product
    sales.
/3/ Includes $10.0 million earned under the Enbrel promotion agreement when
    U.S. sales of Enbrel exceeded $400.0 million for the preceding 12-month
    period.
/4/ Includes $15.0 million earned under the Enbrel promotion agreement when
    Enbrel was approved by the FDA for reducing signs and symptoms and delaying
    structural damage in patients with moderately to severely active RA.

                                      75

<PAGE>

               Report of Ernst & Young LLP, Independent Auditors

Shareholders and Board of Directors
Immunex Corporation

   We have audited the accompanying consolidated balance sheets of Immunex
Corporation as of December 31, 2001 and 2000, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Immunex Corporation as of December 31, 2001 and 2000, and the consolidated
results of its operations and its cash flows for the each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

   As discussed in Note 2 to the consolidated financial statements, Immunex
Corporation adopted Statement of Financial Accounting Standard No. 133,
Accounting for Derivative and Hedging Activities, effective January 1, 2001.

                                          /s/ Ernst & Young LLP

Seattle, Washington
January 22, 2002, except for Note 16
as to which the date is March 8, 2002

                                      76

<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

   None

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

   The information required by this item is incorporated by reference from the
sections labeled "Election of Directors" and "Executive Officers" in our
definitive proxy statement for the annual meeting of shareholders to be held on
May 16, 2002. We will file the proxy statement within 120 days of December 31,
2001.

Item 11. Executive Compensation

   The information required by this item is incorporated by reference from the
section labeled "Executive Compensation" in our definitive proxy statement for
the annual meeting of shareholders to be held on May 16, 2002. We will file the
proxy statement within 120 days of December 31, 2001.

Item 12. Security Ownership of Beneficial Owners and Management

   The information required by this item is incorporated by reference from the
sections labeled "Principal Shareholders" and "Security Ownership of
Management" in our definitive proxy statement for the annual meeting of
shareholders to be held on May 16, 2002. We will file the proxy statement
within 120 days of December 31, 2001.

Item 13. Relationships and Related Transactions

   The information required by this item is incorporated by reference from the
section labeled "Relationship with AHP" in our definitive proxy statement for
the annual meeting of shareholders to be held on May 16, 2002. We will file the
proxy statement within 120 days of December 31, 2001.

                                      77

<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a) The following documents are filed as part of this Form 10-K:

  1. Financial Statements.  The following consolidated financial statements are
     included in Part II, Item 8:
<TABLE>
<CAPTION>
                                                                                   Page in
                                                                                  Form 10-K
                                                                                  ---------
<S>                                                                               <C>
Consolidated Balance Sheets at December 31, 2001, and 2000                           54

Consolidated Statements of Income for the years ended December 31, 2001, 2000
  and 1999                                                                           55

Consolidated Statements of Shareholders' Equity for the years ended December 31,
  2001, 2000 and 1999                                                                56

Consolidated Statements of Cash Flows for the years December 31, 2001, 2000
  and 1999                                                                           57

Notes to Consolidated Financial Statements for the years ended December 31, 2001,
  2000 and 1999                                                                    58 - 75

Report of Ernst & Young LLP, Independent Auditors                                    76
</TABLE>

  2. Financial Statement Schedule.  The following schedule supporting the
     foregoing consolidated financial statements for the years ended December
     31, 2001, 2000 and 1999 is filed as part of this Form 10-K:

<TABLE>
<CAPTION>
                                                        Page in
                                                       Form 10-K
                                                       ---------
                <S>                                    <C>
                II - Valuation and Qualifying Accounts    85
</TABLE>

     All other schedules are omitted because they are not applicable, or not
     required, or because the required information is included in the
     consolidated financial statements or notes thereto.

                                      78

<PAGE>

3. Exhibits

<TABLE>
<CAPTION>
Exhibit
Number  Description
------  -----------
<C>     <S>                                                                                             <C>

   2.1  Amended and Restated Agreement and Plan of Merger, dated as of December 15, 1992, among
          Immunex, American Cyanamid Company, Lederle Parenterals, Inc. and Lederle Oncology
          Corporation. (Exhibit 2.1)                                                                    (B)

   2.2  Agreement and Plan of Merger, dated as of December 16, 2001, by and among Amgen Inc.,
          AMS Acquisition Inc. and Immunex. (Exhibit 2.1)                                               (O)

   3.1  Restated Articles of Incorporation of Immunex Corporation, as filed with the Secretary of State
          of Washington on February 22, 2000. (Exhibit 3.1)                                             (H)

   3.2  Amended and Restated Bylaws. (Exhibit 3.2)                                                      (I)

   9.1  Shareholder Voting Agreement, dated as of December 16, 2001, by and among Amgen Inc.,
          American Home Products Corporation, MDP Holdings, Inc. and Lederle Parenterals, Inc.
          (Exhibit 2.2)                                                                                 (O)

  10.1  Real Estate Purchase and Sale Agreement by and between Cornerstone-Columbia Development
          Company (CCDC) and Immunex, dated November 12, 1986; Master Lease, dated as of
          August 20, 1981 between OTR, an Ohio General Partnership, and CCDC; Assignment of
          Master Lease between CCDC and Immunex, dated December 17, 1986; Consent to
          Assignment of Master Lease from OTR to CCDC, Immunex and Weyerhaeuser Real Estate
          Company, dated as of December 8, 1986. (Exhibit 10.22)                                        (A)

  10.2  Amendment to Master Lease, dated as of May 1, 1994, between Immunex and Watumull
          Enterprises, LTD. (Exhibit 10.2)                                                              (C)

  10.3  Amended and Restated Lease Agreement, dated December 21, 1994, between Immunex and the
          Central Life Assurance Company. (Exhibit 10.3)                                                (C)

  10.4  Amended and Restated Governance Agreement, dated as of December 15, 1992, among
          Immunex, American Cyanamid Company and Lederle Oncology Corporation. (Exhibit 2.2)            (B)

  10.5  Amendment No. 1 to the Amended and Restated Governance Agreement among Immunex,
          American Home Products Corporation and American Cyanamid Company, dated as of
          May 20, 1999. (Exhibit 10.7)                                                                  (H)

  10.6  Amendment No. 2 to the Amended and Restated Governance Agreement among Lederle
          Oncology Corporation, American Cyanamid Company and Immunex Corporation, dated as
          of August 9, 2000. (Exhibit 10.1)                                                             (K)

  10.7  Agreement between Immunex and American Home Products Corporation, dated as of
          September 23, 1994. (Exhibit 10.24)                                                           (C)

  10.8  TNFR License and Development Agreement between Immunex and the Wyeth-Ayerst
          Laboratories division of American Home Products Corporation, dated as of July 1, 1996.
          (Exhibit 10.2)                                                                                (D)

 10.9*  Enbrel Promotion Agreement between Immunex and American Home Products Corporation,
          dated as of September 25, 1997. (Exhibit 10.1)                                                (E)

 10.10* Product Rights Agreement among Immunex, American Home Products Corporation and
          American Cyanamid Company, dated as of July 1, 1998. (Exhibit 10.1)                           (F)

 10.11  Amendment No. 1 to the Product Rights Agreement among Immunex, American Home
          Products Corporation and American Cynamid Company, dated May 20, 1999. (Exhibit 10.15)        (H)

 10.12* Enbrel Supply Agreement among Immunex, American Home Products Corporation and
          Boehringer Ingelheim Pharma KG, dated as of November 5, 1998. (Exhibit 10.18)                 (G)
</TABLE>

                                      79

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number  Description
------  -----------
<C>     <S>                                                                                          <C>

 10.13* Amendment No. 1 to the Enbrel Supply Agreement among Immunex, American Home
          Products Corporation and Boehringer Ingelheim Pharma KG, dated June 27, 2000. (Exhibit
          10.1)                                                                                      (J)

10.14++ Immunex Corporation 1993 Stock Option Plan, as Amended and Restated on April 25, 2000.

10.15++ Addendum to the Immunex Corporation 1993 Stock Option Plan.

10.16++ Immunex Corporation Stock Option Plan for Nonemployee Directors, as Amended and
          Restated on April 18, 2000.

10.17++ Addendum to the Immunex Corporation Stock Option Plan for Nonemployee Directors.

10.18++ Immunex Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated on
          April 25, 2000.

10.19++ Immunex Corporation 1999 Stock Option Plan, as Amended and Restated on April 25, 2000.

10.20++ Addendum to the Immunex Corporation 1999 Stock Option Plan, as Amended and Restated in
          April 25, 2000.

  10.21 Stock Option Grant Program for Nonemployee Directors under the Immunex Corporation
          Amended and Restated 1999 Stock Option Plan, dated as of February 8, 2001. (Exhibit
          10.20)                                                                                     (I)

  10.22 Form of Indemnification Agreement between Immunex and each of its Directors and Executive
          Officers. (Exhibit 10.2)                                                                   (J)

  10.23 Lease between Immunex and Immunex Real Estate Trust 2001, dated as of March 2, 2001.
          (Exhibit 10.1)                                                                             (L)

  10.24 Guarantee among Immunex, Immunex Manufacturing Corporation, Immunex Real Estate Trust
          2001, Immunex Funding Corporation and various financial institutions, dated as of March 2,
          2001. (Exhibit 10.2)                                                                       (L)

  10.25 Agency Agreement between Immunex and Immunex Real Estate Trust 2001, dated as of
          March 2, 2001. (Exhibit 10.3)                                                              (L)

 10.26* Supply Transfer Agreement between Immunex Corporation and MedImmune, Inc., dated as of
          March 21, 2001. (Exhibit 10.1)                                                             (M)

 10.27* Collaboration and Global Supply Agreement, dated as of November 6, 2001, by and between
          Immunex Corporation and American Home Products Corporation, acting through its
          Wyeth-Ayerst Pharmaceuticals division. (Exhibit 10.2)                                      (N)

 10.28* Purchase Agreement, dated as of November 6, 2001, by and among American Home Products
          Corporation, AHP Subsidiary Holding Corporation, and Immunex Corporation. (Exhibit
          10.1)                                                                                      (N)

  10.29 Amendment No. 1 to Purchase Agreement, dated as of December 21, 2001, by and among
          American Home Products Corporation, AHP Subsidiary Holding Corporation and Immunex
          Corporation. (Exhibit 10.2)                                                                (P)

10.30++ Severance Agreement between Immunex Corporation and Peggy V. Phillips, dated as of
          December 16, 2001

10.31++ Severance Agreement between Immunex Corporation and Douglas E. Williams, dated as of
          December 16, 2001.

10.32++ Severance Agreement between Immunex Corporation and David A. Mann, dated as of
          December 16, 2001.
</TABLE>

                                      80

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number  Description
------  -----------
<C>     <S>

10.33++ Severance Agreement between Immunex Corporation and Barry G. Pea, dated as of
          December 16, 2001.

10.34++ Immunex Corporation Retention Plan, dated as of December 16, 2001.

10.35++ Immunex Amended and Restated Leadership Continuity Plan, dated as of October 25, 2001.

 21.1++ Subsidiaries of the Registrant.

 23.1++ Consent of Ernst & Young LLP, Independent Auditors.

 24.1++ Power of Attorney.
</TABLE>
--------
  /* Confidential treatment granted as to certain portions. /

 ++  Filed herewith.

(A) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1986.

(B) Incorporated by reference to designated exhibit included in the
    Registration Statement on Form S-4 (SEC File No. 33-60254) filed by Lederle
    Oncology Corporation March 18, 1993.

(C) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1994.

(D) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated July 1, 1996.

(E) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated September 25, 1997.

(F) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated July 1, 1998.

(G) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1998.

(H) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

(I) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

(J) Incorporated by reference to designated exhibit included with Immunex's
    Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.

(K) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated August 9, 2000.

(L) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated March 5, 2001.

(M) Incorporated by reference to designated exhibit included with Immunex's
    Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.

(N) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated November 6, 2001.

(O) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated December 17, 2001.

(P) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated January 18, 2002.

                                      81

<PAGE>

(b)  Reports on Form 8-K.

   We filed two reports on Form 8-K during the quarter ended December 31, 2001.

   On November 6, 2001, we disclosed that we and AHP had entered into
   agreements related to both the transfer of ownership of a biopharmaceutical
   manufacturing facility in West Greenwich, Rhode Island, from AHP to Immunex
   and the manufacture, supply, inventory, and allocation of supplies of Enbrel
   throughout the world.

   On December 17, 2001, we disclosed that we had entered into an Agreement and
   Plan of Merger with Amgen Inc. and AMS Acquisition Inc., a wholly-owned
   subsidiary of Amgen.

                                      82

<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, hereunto duly authorized.

IMMUNEX CORPORATION
REGISTRANT

By: /S/ DAVID A. MANN                             March 7, 2002
    -----------------------------
    David A. Mann
    Executive Vice President,
    Chief Financial Officer and
    Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:


/S/ EDWARD V. FRITZKY                              March 7, 2002
-----------------------------
Edward V. Fritzky
Chief Executive Officer,
President,
Chairman of the Board and
Director
(Principal Executive Officer)

/S/ PEGGY V. PHILLIPS                              March 7, 2002
-----------------------------
Peggy V. Phillips
Executive Vice President,
Chief Operating Officer and
Director

/S/ DOUGLAS E. WILLIAMS                            March 7, 2002
-----------------------------
Douglas E. Williams
Executive Vice President,
Chief Technology Officer and
Director

/S/ DAVID A. MANN                                  March 7, 2002
-----------------------------
David A. Mann
Executive Vice President,
Chief Financial
Officer and Treasurer
(Principal Financial and
Accounting Officer)

/S/ KIRBY L. CRAMER*                               March 7, 2002
-----------------------------
Kirby L. Cramer
Director

/S/ ROBERT J. HERBOLD*                             March 7, 2002
-----------------------------
Robert J. Herbold
Director

/S/ JOHN E. LYONS*                                 March 7, 2002
-----------------------------
John E. Lyons
Director

                                      83

<PAGE>


/S/ JOSEPH M. MAHADY*                                   March 7, 2002
----------------------------------
Joseph M. Mahady
Director

/S/ EDITH W. MARTIN*                                    March 7, 2002
----------------------------------
Edith W. Martin
Director

/S/ LAWRENCE V. STEIN*                                  March 7, 2002
----------------------------------
Lawrence V. Stein
Director

*By: /S/ DAVID A. MANN                                  March 7, 2002
     -----------------------------
     David A. Mann
     Attorney-in-Fact

                                      84

<PAGE>

                                                                    SCHEDULE II

                              IMMUNEX CORPORATION

                       VALUATION AND QUALIFYING ACCOUNTS
                 Years ended December 31, 2001, 2000 and 1999
                                (In thousands)

<TABLE>
<CAPTION>
                                                                           Additions
                                                                  Balance   Charged
                                                                    at        to                 Balance
                                                                 Beginning  Product             at End of
                                                                 of Period   Sales   Deductions  Period
                                                                 --------- --------- ---------- ---------
<S>                                                              <C>       <C>       <C>        <C>
Year ended December 31, 1999:
   Reserve for discounts, returns and bad debts                   $11,627   $26,622   $16,425    $21,824
                                                                  =======   =======   =======    =======
   Reserve for chargebacks, Medicaid rebates and administrative
     fees                                                         $12,610   $49,702   $40,342    $21,970
                                                                  =======   =======   =======    =======
Year ended December 31, 2000:
   Reserve for discounts, returns and bad debts                   $21,824   $33,336   $28,837    $26,323
                                                                  =======   =======   =======    =======
   Reserve for chargebacks, Medicaid rebates and administrative
     fees                                                         $21,970   $83,845   $87,759    $18,056
                                                                  =======   =======   =======    =======
Year ended December 31, 2001:
   Reserve for discounts, returns and bad debts                   $26,323   $29,141   $29,935    $25,529
                                                                  =======   =======   =======    =======
   Reserve for chargebacks, Medicaid rebates and administrative
     fees                                                         $18,056   $90,434   $89,889    $18,601
                                                                  =======   =======   =======    =======
</TABLE>

                                      85

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number  Description
------  -----------
<C>     <S>                                                                                             <C>

   2.1  Amended and Restated Agreement and Plan of Merger, dated as of December 15, 1992, among
          Immunex, American Cyanamid Company, Lederle Parenterals, Inc. and Lederle Oncology
          Corporation. (Exhibit 2.1)                                                                    (B)

   2.2  Agreement and Plan of Merger, dated as of December 16, 2001, by and among Amgen Inc.,
          AMS Acquisition Inc. and Immunex. (Exhibit 2.1)                                               (O)

   3.1  Restated Articles of Incorporation of Immunex Corporation, as filed with the Secretary of State
          of Washington on February 22, 2000. (Exhibit 3.1)                                             (H)

   3.2  Amended and Restated Bylaws. (Exhibit 3.2)                                                      (I)

   9.1  Shareholder Voting Agreement, dated as of December 16, 2001, by and among Amgen Inc.,
          American Home Products Corporation, MDP Holdings, Inc. and Lederle Parenterals, Inc.
          (Exhibit 2.2)                                                                                 (O)

  10.1  Real Estate Purchase and Sale Agreement by and between Cornerstone-Columbia Development
          Company (CCDC) and Immunex, dated November 12, 1986; Master Lease, dated as of
          August 20, 1981 between OTR, an Ohio General Partnership, and CCDC; Assignment of
          Master Lease between CCDC and Immunex, dated December 17, 1986; Consent to
          Assignment of Master Lease from OTR to CCDC, Immunex and Weyerhaeuser Real Estate
          Company, dated as of December 8, 1986. (Exhibit 10.22)                                        (A)

  10.2  Amendment to Master Lease, dated as of May 1, 1994, between Immunex and Watumull
          Enterprises, LTD. (Exhibit 10.2)                                                              (C)

  10.3  Amended and Restated Lease Agreement, dated December 21, 1994, between Immunex and the
          Central Life Assurance Company. (Exhibit 10.3)                                                (C)

  10.4  Amended and Restated Governance Agreement, dated as of December 15, 1992, among
          Immunex, American Cyanamid Company and Lederle Oncology Corporation. (Exhibit 2.2)            (B)

  10.5  Amendment No. 1 to the Amended and Restated Governance Agreement among Immunex,
          American Home Products Corporation and American Cyanamid Company, dated as of
          May 20, 1999. (Exhibit 10.7)                                                                  (H)

  10.6  Amendment No. 2 to the Amended and Restated Governance Agreement among Lederle
          Oncology Corporation, American Cyanamid Company and Immunex Corporation, dated as
          of August 9, 2000. (Exhibit 10.1)                                                             (K)

  10.7  Agreement between Immunex and American Home Products Corporation, dated as of
          September 23, 1994. (Exhibit 10.24)                                                           (C)

  10.8  TNFR License and Development Agreement between Immunex and the Wyeth-Ayerst
          Laboratories division of American Home Products Corporation, dated as of July 1, 1996.
          (Exhibit 10.2)                                                                                (D)

 10.9*  Enbrel Promotion Agreement between Immunex and American Home Products Corporation,
          dated as of September 25, 1997. (Exhibit 10.1)                                                (E)

 10.10* Product Rights Agreement among Immunex, American Home Products Corporation and
          American Cyanamid Company, dated as of July 1, 1998. (Exhibit 10.1)                           (F)

 10.11  Amendment No. 1 to the Product Rights Agreement among Immunex, American Home
          Products Corporation and American Cynamid Company, dated May 20, 1999. (Exhibit 10.15)        (H)

 10.12* Enbrel Supply Agreement among Immunex, American Home Products Corporation and
          Boehringer Ingelheim Pharma KG, dated as of November 5, 1998. (Exhibit 10.18)                 (G)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number  Description
------  -----------
<C>     <S>                                                                                          <C>

 10.13* Amendment No. 1 to the Enbrel Supply Agreement among Immunex, American Home
          Products Corporation and Boehringer Ingelheim Pharma KG, dated June 27, 2000. (Exhibit
          10.1)                                                                                      (J)

10.14++ Immunex Corporation 1993 Stock Option Plan, as Amended and Restated on April 25, 2000.

10.15++ Addendum to the Immunex Corporation 1993 Stock Option Plan.

10.16++ Immunex Corporation Stock Option Plan for Nonemployee Directors, as Amended and
          Restated on April 18, 2000.

10.17++ Addendum to the Immunex Corporation Stock Option Plan for Nonemployee Directors.

10.18++ Immunex Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated on
          April 25, 2000.

10.19++ Immunex Corporation 1999 Stock Option Plan, as Amended and Restated on April 25, 2000.

10.20++ Addendum to the Immunex Corporation 1999 Stock Option Plan, as Amended and Restated in
          April 25, 2000.

  10.21 Stock Option Grant Program for Nonemployee Directors under the Immunex Corporation
          Amended and Restated 1999 Stock Option Plan, dated as of February 8, 2001. (Exhibit
          10.20)                                                                                     (I)

  10.22 Form of Indemnification Agreement between Immunex and each of its Directors and Executive
          Officers. (Exhibit 10.2)                                                                   (J)

  10.23 Lease between Immunex and Immunex Real Estate Trust 2001, dated as of March 2, 2001.
          (Exhibit 10.1)                                                                             (L)

  10.24 Guarantee among Immunex, Immunex Manufacturing Corporation, Immunex Real Estate Trust
          2001, Immunex Funding Corporation and various financial institutions, dated as of March 2,
          2001. (Exhibit 10.2)                                                                       (L)

  10.25 Agency Agreement between Immunex and Immunex Real Estate Trust 2001, dated as of
          March 2, 2001. (Exhibit 10.3)                                                              (L)

 10.26* Supply Transfer Agreement between Immunex Corporation and MedImmune, Inc., dated as of
          March 21, 2001. (Exhibit 10.1)                                                             (M)

 10.27* Collaboration and Global Supply Agreement, dated as of November 6, 2001, by and between
          Immunex Corporation and American Home Products Corporation, acting through its
          Wyeth-Ayerst Pharmaceuticals division. (Exhibit 10.2)                                      (N)

 10.28* Purchase Agreement, dated as of November 6, 2001, by and among American Home Products
          Corporation, AHP Subsidiary Holding Corporation, and Immunex Corporation. (Exhibit
          10.1)                                                                                      (N)

  10.29 Amendment No. 1 to Purchase Agreement, dated as of December 21, 2001, by and among
          American Home Products Corporation, AHP Subsidiary Holding Corporation and Immunex
          Corporation. (Exhibit 10.2)                                                                (P)

10.30++ Severance Agreement between Immunex Corporation and Peggy V. Phillips, dated as of
          December 16, 2001

10.31++ Severance Agreement between Immunex Corporation and Douglas E. Williams, dated as of
          December 16, 2001.

10.32++ Severance Agreement between Immunex Corporation and David A. Mann, dated as of
          December 16, 2001.

10.33++ Severance Agreement between Immunex Corporation and Barry G. Pea, dated as of
          December 16, 2001.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number  Description
------  -----------
<C>     <S>

10.34++ Immunex Corporation Retention Plan, dated as of December 16, 2001.

10.35++ Immunex Amended and Restated Leadership Continuity Plan, dated as of October 25, 2001.

 21.1++ Subsidiaries of the Registrant.

 23.1++ Consent of Ernst & Young LLP, Independent Auditors.

 24.1++ Power of Attorney.
</TABLE>
--------
  /* Confidential treatment granted as to certain portions. /

 ++  Filed herewith.

(A) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1986.

(B) Incorporated by reference to designated exhibit included in the
    Registration Statement on Form S-4 (SEC File No. 33-60254) filed by Lederle
    Oncology Corporation March 18, 1993.

(C) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1994.

(D) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated July 1, 1996.

(E) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated September 25, 1997.

(F) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated July 1, 1998.

(G) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1998.

(H) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

(I) Incorporated by reference to designated exhibit included with Immunex's
    Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

(J) Incorporated by reference to designated exhibit included with Immunex's
    Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.

(K) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated August 9, 2000.

(L) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated March 5, 2001.

(M) Incorporated by reference to designated exhibit included with Immunex's
    Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001.

(N) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated November 6, 2001.

(O) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated December 17, 2001.

(P) Incorporated by reference to designated exhibit included with Immunex's
    Current Report on Form 8-K, dated January 18, 2002.