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Dr. Ernest Mario, PhDChairman and CEO Rounding out our top three largest-selling products was Concerta,™ an OROS® therapy for It is a particular pleasure to present to you our 2000 Attention Deficit Hyperactivity Disorder, designed to annual report, reflecting the best year ever in the have a 12-hour duration of effect, lasting from home history of ALZA Corporation. Building upon 32 years to homework. Concerta™ was approved by the U.S.
of technological innovation, our more recent focus on Food & Drug Administration in the third quarter strategic product commercialization has culminated in of 2000 and launched within days of approval in another year of record financial performance. And we order to meet the need of the new school year.
head into 2001 with great confidence, buoyed by the Our sales reached $68 million in just five months, hard work and commitment of dedicated employees presaging a far larger number when we complete The primary rationale for launching ALZA’s Our total revenue in 2000 reached a record pharmaceutical sales and marketing effort seven $988 million to which net sales contributed a record years ago was our belief that doing so would signifi- $607 million, 36 percent higher than in 1999. Much cantly improve our overall profitability. And every year of the credit for our net sales growth goes to our ALZA since, our strategy has been revalidated by the steady Pharmaceuticals sales and marketing team members, and continuous improvement in our financials.
whose achievements exceeded our expectations.
A prime reflection of ALZA’s increased profitability We continue to benefit enormously from leverag- is our gross margin on net sales. In 2000 our gross ing ALZA’s long-established technological capability to margin hit a record 70 percent, up from a record develop products for commercialization by our own 65 percent in 1999 and 57 percent in 1998. We sales organization. Our three biggest-selling products also saw a very direct indication of our increased in 2000 all incorporate proprietary innovations in profitability in our diluted earnings per share, which advanced drug delivery from ALZA Technologies.
increased significantly this year over last.
ALZA’s most successful product for 2000 was In 2000, investors recognized the success of our clearly Ditropan XL,® our once-a-day treatment for multi-year strategic plan by dramatically increasing overactive bladder, which was launched in 1999, and their valuation of ALZA stock. We appreciate this incorporates our OROS® technology. Initially we set recognition, which enabled a 2-for-1 split in ALZA a target of $140 million in sales for Ditropan XL® in common stock in November. Our increased valuation 2000; midway through the year we increased that also gives us greater latitude in looking at potential target to $170 million. Our final figures for 2000 acquisitions of additional products, technologies or show $179 million in sales of Ditropan XL,® more companies to bolster our future growth.
than double what we achieved in 1999.
In second place in product sales this past ALZA enjoyed much good news in 2000, some of year was Doxil,® the cancer therapeutic featuring which has already been noted in describing our our STEALTH® liposomal technology. Sales of this product reached $82 million in 2000 and are likely Our accomplishments began in March with the to increase with continued strong demand. Growth is approval of Viadur,™ a twelve-month implant for the also expected to come from the product’s October palliative treatment of advanced prostate cancer approval in the European Union for treatment of and the first product to incorporate ALZA’s DUROS® advanced ovarian cancer after first-line platinum-based implant technology. In April we announced that Bayer Corporation would market and sell Viadur™ in the U.S., would become the first oral pharmacologic product with ALZA manufacturing the product and receiving indicated for the treatment of rapid ejaculation. Given milestone and royalty payments based on net sales, that this condition is the most common form of male and payments for supply of the product. Bayer expects sexual dysfunction, we expect our development of dapoxetine to result in a very significant addition In May we announced two additional partnerships with Bayer: the co-promotion of Ditropan XL® through At the end of the year, Isaac Stein retired from Bayer’s urology specialty sales force, and ALZA’s the ALZA board after serving for 15 years. We offer co-promotion of Bayer’s Avelox® and Cipro® products.
him best wishes and sincere thanks. Joining us on Another partnership agreement that has proven the board is Jerry T. Jackson, who most recently served tremendously valuable is our Concerta™ co-promotion as executive vice president of Merck & Co. His agreement with McNeil Consumer Healthcare, a pharmaceutical industry expertise is a great addition division of Johnson & Johnson, which we announced in April. McNeil’s years of experience and significant sales force in the pediatric health care market have Behind the scenes in 2000 we also enjoyed some substantially supplemented ALZA’s own team and quieter successes that bode well for our future.
helped ensure our early success with this product.
We entered the final phase III stage of clinical In the third quarter of 2000 the FDA gave final testing on E-TRANS® fentanyl, a pain management approval to Concerta,™ enabling us to make this product and the first application of our unique product available to physicians, patients and parents E-TRANS® technology platform. We intend to complete at the start of a new school year. We are particularly our clinical program in 2001 and anticipate submitting proud of the focus and speed with which we devel- a New Drug Application in the first half of 2002.
oped this product and conducted the clinical trials Also in 2000, six new product development necessary to gain approval. The development of partnerships were signed, many of them involving our Concerta™ also testifies to the capabilities of our newer technologies. We anticipate that some of these technology teams, who created a new, innovative agreements will ultimately result in commercialization tri-layer OROS® system specifically for Concerta.™ of exciting new products incorporating our proprietary But most important, we are proud of Concerta™ technology. This increased R&D activity represents a because of its positive impact on the lives of separate product pipeline from which ALZA can expect hundreds of thousands of patients and their families.
to see manufacturing revenues and royalties in the In December we secured an exclusive license future that rival the many partnerships that have sup- Letter from the President & CEO Letter to Shareholders to PPD GenuPro’s compound dapoxetine, for ported and continue to support our long-term growth.
genitourinary therapies, including rapid ejaculation.
We also continued to leverage our core expertise A member of the selective serotonin reuptake inhibitor and leadership position in drug delivery technology (SSRI) class of compounds, upon approval, dapoxetine in 2000 to create important new pharmaceutical On the ALZA Technologies side, we expect to products for marketing by ALZA. As noted earlier, it is establish more development partnerships in 2001.
particularly rewarding that our three top-selling ALZA In support for ex-U.S. sales by our partners and our Pharmaceuticals products and a number of others in overall expansion goals, we kicked off the year with our portfolio use ALZA technology to achieve their agreements for the purchase of land in Ireland for our superior performance. We have demonstrated that first manufacturing facility outside the United States.
taking established pharmacologic compounds and This purchase will expand our transdermal pharmaceu- significantly improving their interaction with the human tical production capabilities. We also expect 2001 to body is valuable to patients and valuable in the be another year of 20 percent growth in our earnings marketplace. And our innovative work with existing compounds also enables us to develop new products We also anticipate the crossing of a major more quickly than other pharmaceutical companies.
milestone, with ALZA generating more than $1 billion To maintain our leadership position in advanced in annual revenues for the first time in 2001. We came drug delivery and product development, we increased very close to doing so in 2000, and given the steady our investment in research and development in 2000 and substantial progression in our revenues in each to nearly $200 million and plan to increase this of the last five years we should easily pass this investment by another 20 percent in 2001. Also, as of the fourth quarter, ALZA acquired Crescendo The credit for all of this goes to our employees.
Pharmaceuticals, which had for several years funded During this time, our employees ensured that ALZA the R&D from which our portfolio now benefits. The enhanced its longstanding commitment to core fact that ALZA is now funding increased research and values including workplace diversity, investment in development from its own product revenues — while our community, and high regard for the environment simultaneously delivering excellent growth in earnings and our corporate citizenship. Given the uncertainty per share for our stockholders — is perhaps the ultimate they faced at the end of 1999, their enthusiasm sign of our successful transition into a fully integrated and dedication in 2000 is particularly noteworthy.
research-based pharmaceutical company.
The record results of ALZA’s best year ever are a In 2001 we expect to see continued strong real tribute to the strength of our organization and growth in sales from ALZA Pharmaceuticals, with gross margins continuing to increase. We have expanded our specialty urology and primary care sales force by 50 percent, and have expanded our agreement with UCB Pharma for the promotion of Ditropan XL.® Our Canadian sales and marketing organization has been strengthened, and European regulatory submissions Chairman and Chief Executive OfficerMarch 15, 2001

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