UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the fiscal year ended June 30, 1995.
Commission File Number: 0-12104
IMMUNOMEDICS, INC.
(Exact name of registrant as specified in its charter.)
Delaware 61-1009366
(State or Incorporation) (IRS Employer Identification No.)
300 American Road, Morris Plains, New Jersey 07950
(Address of principal executive offices) (Zip code)
(201) 605-8200
(Registrant's telephone number, including area code)
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
(Title of Class)
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.
[X] Yes [ ] 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of September 26, 1995, 32,727,749 shares of the registrant's common
stock were outstanding, and the aggregate market value of common stock held
by non-affiliates of the registrant, computed by reference to the last
reported sale price for the registrant's common stock on the Nasdaq National
Market at that date was $171,175,134.
Documents Incorporated by Reference: Portions of the registrant's definitive
Proxy Statement to be mailed to stockholders in connection with the Annual
Meeting of Stockholders of the registrant to be held on November 8, 1995 (the
"1995 Definitive Proxy Statement"), which will be filed with the Commission
not later than 120 days after the end of the fiscal year to which this report
relates, are incorporated by reference in Part III hereof. Further, portions
of the registrant's 1995 Annual Report to Stockholders are incorporated by
reference in Part IV hereof.
<PAGE>
PART I
Item 1. Business
Introduction
Immunomedics, Inc. (the "Company") is a biopharmaceutical
company applying innovative proprietary technology in antibody selection,
modification and chemistry to the development of products for the detection
and treatment of cancers and infectious diseases. Integral to these products
are highly specific monoclonal antibodies designed to deliver radioisotopes,
chemotherapeutic agents or toxins to tumors and sites of infection.
The Company is developing a line of in vivo imaging products for
the detection of various cancers and infectious diseases. In April 1991, the
Company filed a Product License Application ("PLA"), to which a
supplement was filed in June 1993, with the U.S. Food and Drug
Administration ("FDA") seeking approval to manufacture and market, in
the United States, the Company's proprietary in vivo colorectal cancer
imaging product, CEA-Scan . In May 1994, the Company received a
letter from the FDA indicating that the PLA for CEA-Scan for colorectal
cancer imaging was not approvable at that time. In July 1994, the
Company met with FDA officials to review the status of CEA-Scan and
believes it reached an understanding with the FDA that the results of the
Phase III pivotal clinical trial would be further analyzed to ascertain
potentially approvable claims for the product and what additional steps
would need to be taken to achieve approvability. In March 1995, the
Company submitted a response to the FDA's questions, including an
analysis suggesting that CEA-Scan would be useful in the pre-surgical
evaluation of recurrent colorectal cancer patients, particularly in the
assessment of tumor resectability for these patients. In September 1995,
the FDA scheduled the Company to present clinical trial data on CEA-Scan
to the Oncology Drugs Advisory Committee ("ODAC") on October
17, 1995. At the same time, the FDA sent an action letter to the Company
requesting clarification of the data which the Company had provided in
response to the FDA's May 1994 letter, along with additional information
and analyses. Accordingly, the status of the Company's PLA remained
not-yet-approvable at the time of its notification of the ODAC presentation.
The FDA could delay the meeting if, upon receipt of the clarification to be
provided by the Company, the FDA deemed it needed more time to analyze
the data or that the data did not support the clinical efficacy of the product.
It is the Company's intention to present data to the ODAC supporting the
use of CEA-Scan to better define the spread of colorectal cancer and
provide the surgeon with more complete diagnostic information, helping to
avoid unnecessary surgery in patients who would not benefit from the
procedure. In February 1992, the Company filed with the Health
Protection Branch ("HPB") to market CEA-Scan in Canada, and in March
1992, the Company filed with the Committee for Proprietary Medicinal
Products ("CPMP") to market the product in Europe. In December 1994,
the Company's interim manufacturing facility in Newark, New Jersey (the
"Newark Facility") was certified by the Department of Health Medicines
Control Agency ("MCA") in the United Kingdom to be in general
compliance with the guidelines of Good
<PAGE>
Manufacturing Principles ("cGMP"). The Company continues to work
diligently with the U.S. and foreign regulatory authorities and remains fully
committed to the eventual approval of CEA-Scan in the U.S., Europe and
Canada. However, no assurance can be given as to if or when any such
approvals could be forthcoming. Clinical trials of CEA-Scan for the
detection of lung and breast cancers are currently in Phase III and Phase II
trials, respectively.
With respect to LeukoScan , an in vivo infectious disease diagnostic
imaging product, the Company has filed for regulatory approval with the
European Medicines Evaluation Agency ("EMEA"), seeking approval to
market the product in all fifteen countries which are members of the
European Union. The application seeks approval for LeukoScan to be
used in the detection and diagnosis of osteomyelitis (bone infection) in long
bones and diabetic foot ulcers. In March 1995, the Company held a pre-PLA
filing meeting with FDA officials to obtain input from the FDA on
proposed claims for the product. As a result of the meeting, the Company
is conducting further analysis of its Phase III clinical data for the bone
infection and diabetic foot ulcer indications and has discussed with the FDA
a filing and clinical trial strategy, which includes the continued enrollment
of patients into the Phase III trial for these indications. Accordingly, the
earliest the Company believes it will be in a position to file a PLA for
LeukoScan with the FDA is the fourth quarter of calendar year 1995.
Phase III trials for infected prosthesis and appendicitis are continuing, and
the Company is examining other applications for the product. As with all
regulatory filings, there can be no assurance that such filings will be
acceptable for review, or ultimately approved, by the FDA. In addition,
the Company has developed two other in vivo cancer imaging products for
the detection and diagnosis of liver and germ cell cancers (AFP-Scan ),
currently in a Phase I/II clinical trial, and lymphomas (LymphoScan ), for
which a Phase III clinical trial protocol is in development (see "Clinical
Trial Programs").
The Company is also applying its expertise in antibody selection,
modification and chemistry to develop therapeutic products for cancer using
monoclonal antibodies labeled with radioisotopes or conjugated with drugs.
The Company has been conducting a multicenter Phase I/II clinical trial for
ImmuRAIT -LL2, its B-cell lymphoma therapeutic product. This trial was
designed to obtain knowledge about antibody targeting and dosing. The
Company is working towards advancing its humanized antibody program
into Phase I clinical trials and accordingly does not currently plan to
advance ImmuRAIT -LL2 into Phase III trials with the murine antibody
form (see "In Vivo Therapeutic Products").
In July 1991, the Company entered into a Development and License
Agreement with Pharmacia, Inc. (formerly Adria Laboratories Division of
Erbamont Inc.) ("Pharmacia"), whose parent is Sweden-based Pharmacia
AB, for the exclusive marketing and distribution in the United States and
Canada of the Company's CEA-Scan , AFP-Scan and LymphoScan in
vivo cancer imaging products. In June 1994, the Company and Pharmacia,
in the context of discussions directed towards restructuring their
relationship, released Pharmacia from certain obligations, whereby the
Company regained its marketing and selling rights and assumed financial
responsibility for all future clinical, marketing and selling activities for
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LymphoScan and AFP-Scan . On August 2, 1995, the agreement with
Pharmacia was terminated, and the Company announced that it had
regained the North American marketing and selling rights for CEA-Scan
from Pharmacia. The Company is discussing with Pharmacia the amount
of a final payment by Pharmacia to the Company to satisfy Pharmacia's
remaining obligations. The Company has assumed financial responsibility
for all future clinical, marketing and selling activities for CEA-Scan and
is now discussing the licensing of certain marketing and selling rights to
CEA-Scan with other potential partners.
Immunomedics, Inc. was incorporated in Delaware in 1982. The
Company's principal offices are located at 300 American Road, Morris
Plains, New Jersey 07950. The Company's telephone number is (201) 605-8200.
Clinical Trial Programs
In Vivo Imaging Products
The Company's in vivo imaging products utilize
radioimmunodetection. Radioimmunodetection involves injecting a patient
with a radioisotope linked (conjugated) to an antibody. An antibody is a
protein that can recognize and selectively attach itself to a specific
substance called an antigen. Such antigens are present on tumor cells,
white blood cells which accumulate at the sites of infections, and other
disease entities. By attaching a radioisotope to a disease-targeting antibody,
the radioisotope may be delivered to a disease site for imaging. A gamma
camera (standard nuclear medicine equipment used for imaging) is then
used to display radioisotope concentrations revealing the presence, location
and approximate size of the site of disease.
The Company's in vivo imaging products utilize only one of the
upper arms of the antibody, the Fab' fragment. The Company uses its
proprietary chemistry to produce the Fab' fragment of a mouse-derived
antibody capable of direct and virtually instant attachment or "labeling"
with technetium-99m. Technetium-99m is the radioisotope most frequently
used in nuclear medicine because of its high quality imaging capabilities,
short half-life, widespread availability and low cost. The use of a fragment
of the antibody, rather than the whole, minimizes the human body's
immune response to the injection of mouse-derived antibodies. This benefit
is enhanced by the low Fab' dosage used in the Company's imaging
products. An additional advantage of using technetium-99m and an
antibody fragment is that imaging is enhanced in the liver, the first site of
metastasis for many cancers. Intact antibodies and certain other imaging
radioisotopes accumulate in the liver, potentially interfering with adequate
imaging of tumors in this organ.
The Company's in vivo imaging products, contained in single vials,
can be easily prepared by nuclear medicine technicians without assistance
from a radiochemist or nuclear pharmacist. Once the technetium-99m is
added to the vial, the product is ready for injection in approximately five
minutes.
<PAGE>
Immunomedics has five proposed in vivo imaging products in
various stages of clinical testing and regulatory review, three for cancer
imaging, one for imaging infectious diseases in general, and one for
imaging of Pneumocystis carinii pneumonia ("PCP"). Phase III clinical
trials have been completed for CEA-Scan and a PLA for this product was
filed with the FDA in April 1991, with the Canadian HPB in February
1992 and with the European Community CPMP in March 1992, for the use
of CEA-Scan in patients with recurrent and/or metastatic colorectal cancer
(see "Introduction").
The antibody in CEA-Scan is directed at carcinoembryonic antigen
("CEA"), which is abundant at the site of virtually all cancers of the colon
or rectum (both primary tumors and metastases). CEA is also associated
with many other cancers, and the Company estimates that three quarters of
all human cancer patients have elevated CEA levels at some of their tumor
sites. The Company is performing Phase III clinical trials, using CEA-Scan ,
for imaging lung cancer. In addition, Phase I/II clinical trials for
breast cancer imaging are nearing completion (see "Introduction").
LeukoScan is a monoclonal antibody fragment which seeks out and
binds to granulocytes (white blood cells) associated with a potentially wide
range of infectious diseases. Phase III clinical trials have been completed
for LeukoScan , and the Company has recently filed for European
regulatory approval to market the product for detecting and diagnosing
osteomyelitis (bone infection) in long bones and diabetic foot ulcers. The
Company has discussed with the FDA a filing and clinical trial strategy
which includes the continued enrollment of patients into the Phase III trial
for the diagnosis of osteomyelitis and diabetic foot ulcer indications.
Accordingly, the earliest the Company believes it will be in a position to
file an application for marketing approval is the fourth quarter of calendar
year 1995. In addition, Phase III clinical trials are continuing for the use
of LeukoScan in the detection of infected prosthetic joints and in
appendicitis.
Two other imaging products are being studied pursuant to
Investigational New Drug applications ("IND") submitted to the FDA. The
Company also has ongoing clinical trials in Europe for these agents:
- LymphoScan , employing an antibody capable of targeting
an antigen on non-Hodgkin's lymphoma (Phase III clinical
trial protocol in development).
- AFP-Scan , employing an antibody capable of targeting
alpha-fetoprotein, a marker on liver cancer and germ cell
tumors of the ovaries and testes (Phase II clinical trials).
PCP-Scan is being studied for the imaging and diagnosis of PCP in a pilot
clinical trial in collaboration with the Center for Molecular Medicine and
Immunology ("CMMI"), a not-for-profit cancer research center (see
"Relationship with the Center for Molecular Medicine and Immunology").
In these trials it has been shown that specific antibodies against a
pathogenic organism, such as Pneumocystis, can target to the disease site.
Further studies to evaluate this potential product are in progress. PCP is a
serious opportunistic infection of immunosuppressed patients, such as organ
transplant patients and certain patients with cancer or Acquired Immune
Deficiency Syndrome ("AIDS").
<PAGE>
In managing and allocating resources related to its clinical trial
program, the Company's top priorities remain the approval of CEA-Scan
for colorectal cancer imaging, and the PLA filing for LeukoScan . It is
therefore the Company's intention to maintain its diagnostic imaging
clinical trial program on a steady course until further feedback is received
from the FDA on the review process for CEA-Scan and until the PLA for
LeukoScan is filed.
In Vivo Therapeutic Products
The Company is applying its expertise in antibody selection,
modification and chemistry to the area of therapy, using monoclonal
antibodies labeled with therapeutic radioisotopes or conjugated with drugs.
The Company is engaged in developing products for treating cancer which
primarily use a technique called radioimmunotherapy. The principal
advantage of this technique may be its ability to deliver radioactive
therapeutic agents to tumor sites more selectively while minimizing
debilitating side effects. The Company has been conducting a multicenter
Phase I/II clinical trial for ImmuRAIT -LL2, its non-Hodgkin's B-cell
lymphoma proposed therapeutic product for the past four years. This
product consists of a monoclonal antibody, highly specific in targeting
B-cell lymphomas, labeled with the radioisotope iodine-131. In this Phase
I/II clinical trial of ImmuRAIT -LL2, several patients, all of whom were
late-stage and were unresponsive to other therapies, experienced varying
degrees of tumor regression. Reversible bone marrow toxicity has also
been observed. By conducting this trial the Company has increased its
knowledge of antibody targeting and dosage. The Company is working
towards advancing its humanized antibody program into Phase I clinical
trials; therefore it does not currently plan to advance ImmuRAIT -LL2 into
Phase III trials with the murine antibody form. The Company is currently
conducting, in collaboration with CMMI, research on murine and
humanized forms of targeting antibodies, alternative radioisotopes and new
conjugation methods (see "Research Programs").
Research Programs
The Company spent approximately $12,492,000, $14,698,000 and
$10,639,000 for research and development during its fiscal years ended
June 30, 1995, 1994 and 1993, respectively.
Antibody Engineering
A major obstacle in the field of monoclonal antibody therapy has
been the patient's immune response to mouse-derived antibodies, making
repeated use of such products impracticable. The Company is currently
researching whether this response may be avoided by clinically altering the
dose, antibody form, and schedule of administration. However, this may
be only a partial solution to the problem and, consequently, the Company
is actively investigating methods to engineer the mouse antibody molecule
in such a way that it retains the desirable targeting features to cancer cells,
and also minimizes the amount of mouse-derived protein present. The
Company has made significant progress in humanizing certain mouse
antibodies (i.e., replacing certain components of a mouse antibody with
human antibody components).
<PAGE>
During fiscal years 1995 and 1994 the Company, in collaboration
with CMMI, demonstrated successful targeting in patients with the
Company's humanized monoclonal antibody (hMN-14) against the CEA
cancer marker, as compared to the murine form (MN-14). The anticancer
humanized antibody is about 95% human and has shown very good uptake
in the patients' tumors. In August 1995, data were presented from a pilot
clinical trial which demonostrated that the low immunogenicity and high
cancer-binding capability of these antibodies allowed repeated
administration to increase the amount of therapeutic radiation delivered
directly to the sites of disease. As many as three injections were given
without evoking an immune response to the antibody. Accordingly, the
Company plans to proceed with clinical testing at therapeutic doses.
Alternative Radioisotopes
The Company is employing iodine-131 in its proposed lymphoma
therapy product, currently the subject of a Phase I/II clinical trial.
Iodine-131 has several limitations for radioimmunotherapy, including, in
general, difficulty in forming a stable bond between the antibody and the
radioisotope, an inferior level of radiation for cellular destruction in
large tumors, and, more particularly in the case of the lymphoma antibody,
its rapid intake into the cell followed by release of the radioisotope. The
Company is researching the use of the radioisotope yttrium-90 as a
replacement for iodine-131. Yttrium-90 has the advantage of being
retained in the tumor cell even after uptake of the antibody. It also is
potentially a more effective isotope for killing cancer cells and can
potentially be used in an out-patient clinic. The Company had researched
the use of the radioisotope rhenium-188. However, yttrium-90 was
selected over rhenium-188 because it proved superior in eliminating cancer
grown in immuno-deficient mice. The Company has several issued patents
covering methods of attachment of metallic radioisotopes, such as rhenium-188,
yttrium-90 and technetium-99m, to antibodies and other proteins (see
"Patents and Proprietary Rights").
New Conjugation Methods
One of the limiting factors to the use of monoclonal antibodies as
delivery molecules for certain cytotoxic substances is the limited amount of
the toxic agent which can be "loaded" onto the antibody molecule. The
Company is developing a process to load large amounts of
chemotherapeutic drugs or other agents onto an intermediate carrier and
then link the carrier to the antibody molecule. A patent was issued to
CMMI in October 1991 relating to certain technology utilized in this
process. The Company has a right of first negotiation to market products
covered by this patent.
The Company has made additional progress in the development of
new methods for the construction of immunoconjugates, including the
discovery of a novel carbohydrate component on the variable region of the
lymphoma targeting antibody, LL2, which facilitates the creation of more
efficient immunoconjugates, and which appears to be appropriate for use
with antibody fragments. This carbohydrate component is relatively distant
from the antigen binding site, representing a novel conjugation site which
would not interfere with the immunoreactivity of the antibody. This is
<PAGE>
significant because, to date, efforts to directly link antibodies and drugs
have been limited by a resulting loss of the antibody's ability to bind to the
cancer site. This work supports the Company's hypothesis that by using
antibody engineering techniques, this carbohydrate component can be
"grafted" on the corresponding regions of different antibodies and used as
a conjugation site for the attachment of drugs or radioisotopes, with no
adverse effects on immunoreactivity. Furthermore, the Company's
scientists have been able to engineer this carbohydrate addition site on
antibody fragments. The Company believes that this has the advantage of
greater tumor penetration and less human immune response, potentially
leading to the creation of fragment-based cancer therapeutics as a central
part of the Company's future product development efforts. There can be
no assurance, however, that these developments will lead to products that
are successful for treating cancers in patients.
Peptides
During fiscal year 1995, the Company established a research
program focused on the development of several peptides designed for
imaging and treatment of breast, ovarian, prostate, colon, and lung cancers.
Proprietary methods for rapid radiolabeling of the peptides with
technetium-99m and rhenium-188 have been developed, and evaluation of
the first agent in an animal tumor model is underway.
Government Grants
During fiscal year 1995, the Company received a Phase I Small
Business Innovation Research ("SBIR") grant totaling $100,000, payable
during fiscal years 1995 and 1996, from the National Cancer Institute
("NCI") of the National Institutes of Health ("NIH") to support the
Company's antibody program. The goal of the grant is to determine
whether a humanized, lymphoma-targeting antibody labeled with the
radioisotope yttrium-90 is potentially a clinically efficacious, commercially
useful cancer therapeutic. If the results of the Phase I grant are
encouraging, the Company will be permitted to apply for additional Phase
II grants which may aggregate up to $750,000 each. The Company has
applied for, but with no assurance that it will receive, a $750,000 Phase II
grant covering research for further comparison of several new antibodies
for better imaging in the area of kidney and quicker blood clearance.
Relationship With The Center for Molecular Medicine and Immunology
The Company's product development has involved, to varying
degrees, CMMI, a specialized cancer research center, for the performance
of certain basic research and patient evaluations. CMMI is a not-for-profit
corporation funded primarily by grants from the NCI. CMMI is currently
located adjacent to the Company's Newark facility. Dr. David Goldenberg,
Chairman of the Board and Chief Executive Officer of the Company, was
the founder of, and is currently President and a member of the Board of
Trustees of CMMI. Dr. Goldenberg spends substantially more of his time
working for CMMI than for the Company. Certain consultants to the
Company have employment relationships with CMMI, and Drs. Carl
Pinsky and Hans Hansen, officers of the Company, are Adjunct Members
at CMMI. Despite these relationships, CMMI is independent of the
Company and CMMI's management and fiscal operations are the
responsibility of CMMI's Board of Trustees (see "Certain Relationships
and Related Transactions").
<PAGE>
CMMI performs pilot and pre-clinical trials in product areas of
importance to the Company. In addition, CMMI conducts basic research
and patient evaluations in a number of areas of potential interest to the
Company, the results of which are made available to the Company pursuant
to a collaborative research and license agreement.
In July 1995, the Company amended its license agreement with
CMMI to assist CMMI in complying with Internal Revenue Service criteria
for their recently completed tax-exempt financing. Under the original
terms of the license agreement, the Company had an exclusive, worldwide
license to manufacture and market potential products developed by CMMI
(other than those funded by third parties) for specified royalty payments
and on other specified terms. Under the amended license agreement, the
Company maintains the right of first negotiation to obtain exclusive,
worldwide licenses from CMMI to manufacture and market potential
products and technology covered by the license agreement under the terms
representing fair market price, to be negotiated in good faith at the time the
license is obtained. To date, no products have been licensed from CMMI.
The amended license agreement terminates on December 31, 1999,
with the Company having the right to seek good faith negotiation to extend
the agreement for an additional five-year period. The Company retains
licensing rights to inventions made during the term of the agreement for a
period of five years from the time of disclosure. Prior to amendment, the
license agreement terminated on December 11, 2010, with the Company
having the right to extend the agreement for two additional five-year
periods with specified minimum annual royalties to be paid during these
two periods. The Company is in the process of evaluating what additional
amendments to the license agreement to the license agreement may be
necessary to satisfy Federal laws and rules, including recently issued NIH
guidelines.
The potential for conflicts of interest exists in the relationship
between the Company and CMMI, and the provisions of the agreement
between the Company and CMMI have been designed to prevent such
conflicts from occurring. The Company and CMMI have agreed that
neither will have any right, title or interest in or to the research grants,
contracts or other agreements obtained by the other. The decision as to
whether a potential product has reached the stage of development such that
it must be offered by CMMI to the Company is made by the Board of
Trustees of CMMI, and Dr. Goldenberg has agreed not to participate in the
determination of any such issue. The decision by the Company as to
whether or not to exercise its right of first negotiation or release any
potential product offered by CMMI is determined by a majority vote of the
Board of Directors (or a subcommittee thereof), and Dr. Goldenberg also
has agreed not to participate in the determination of any such issue.
The Company has reimbursed CMMI for expenses incurred on
behalf of the Company, including amounts incurred pursuant to research
contracts, in the amount of approximately $57,000, $548,000 and $426,000
during the years ended June 30, 1995, 1994 and 1993, respectively. The
Company also provides CMMI with laboratory materials and supplies in
connection with research conducted in areas of potential interest to the
Company at no cost to CMMI.
<PAGE>
During the years ending June 30, 1995, 1994 and 1993, the Board
of Directors of the Company authorized grants to CMMI of $300,000,
$200,000 and $200,000, respectively, to support research and clinical work
being performed at CMMI, such grants to be expended in a manner deemed
appropriate by the Board of Trustees of CMMI.
Business Risks
The Company's products are in early and advanced stages of
development and face a high degree of technological, regulatory and
competitive risk. The Company's products must be approved for marketing
by the FDA, and no assurance can be given as to if or when such approvals
could be forthcoming. Product discovery and product development
activities are capital intensive. Until the Company's first product is
successfully commercialized, future revenues will be dependent in large
part upon the Company entering into new arrangements with collaborative
partners and upon public and private financings. It will also need to
finance the construction of a commercial-scale plant or to find other means
of securing adequate production capacity before any additional products can
be launched in the marketplace. Similarly, the Company does not presently
have a sales and marketing component. No assurance can be given that its
manufacturing costs will be economically viable, or that it can develop an
effective sales and marketing strategy to promote any marketed product.
The risks discussed herein reflect the Company's immediate stage of
development. Inherent in this stage is a range of additional risks, including
the Company's history of losses and the need for and uncertainty of future
financing. The Company also faces numerous risks stemming from the
nature of the biopharmaceutical industry, including the risk of competition,
the risk of regulatory change, including potential changes in health care
coverage, and uncertainties associated with obtaining and enforcing patents
and proprietary technology, among others.
Marketing and Sales
In Vivo Products
The Company's marketing strategy includes forming corporate
alliances with nuclear medicine pharmaceutical companies for the sale and
distribution of its proposed in vivo imaging and therapeutic products. A
partner's established marketing, sales and distribution networks will
minimize the Company's need to expend funds to develop these areas of
expertise and increase the likelihood that the Company will maximize
market penetration of its proposed products. However, the financial return
to the Company, in the event the product is a commercial success, may not
be as great had the Company marketed, sold and distributed the proposed
products on its own.
Pursuant to its 1991 agreement with Pharmacia, the Company
granted to Pharmacia an exclusive license to market and sell CEA-Scan ,
AFP-Scan and LymphoScan products for certain specified indications
in the United States and Canada. In June 1994, the Company and
Pharmacia, in the context of discussions directed towards restructuring their
relationship, agreed to release Pharmacia from certain obligations, whereby
the Company regained its marketing and selling rights and assumed
<PAGE>
financial responsibility for all future clinical, marketing and selling
activities for LymphoScan and AFP-Scan . On August 2, 1995, the
Company announced that it had regained the North American marketing
and selling rights for CEA-Scan from Pharmacia. The Company is
discussing with Pharmacia the amount of a final payment by Pharmacia to
the Company to satisfy Pharmacia's remaining obligations. Similarly, the
Company assumed financial responsibility for all future clinical, marketing
and selling activities for CEA-Scan and is now discussing the licensing of
certain marketing and selling rights to CEA-Scan with other potential
partners.
In March 1995, the Company signed a license agreement with
Mallinckrodt Medical, B.V., ("Mallinckrodt"), a leading producer and
distributor of radiopharmaceuticals in Europe. Under the terms of the
agreement, Mallinckrodt will market, sell and distribute CEA-Scan
throughout Western Europe and in select Eastern European countries,
subject to receipt of regualtory approval in the specified countries. In
addition, the Company will manufacture CEA-Scan , for which
Mallinckrodt will pay the Company the greater of a pre-determined fixed
price per vial or a pre-determined percentage of the net selling price.
The Company's intent, possibly in collaboration with another
corporate partner, is to combine LymphoScan with the Company's
proposed lymphoma therapy product as companion detection/therapy
clinical applications to focus on disease management for lymphoma
patients.
In Vitro Products
Through June 1994, the Company marketed and sold in vitro
diagnostic products under the name "ImmuSTRIP ". These products are
used by clinical laboratories in the detection of circulating immune
complexes associated with autoimmune diseases, such as rheumatoid
arthritis and systemic lupus erythematosus. In June 1994, the Company
assigned, to an independent third party, all of the Company's
manufacturing and marketing rights associated with its in vitro diagnostic
products, excluding those rights relating to the Company's HAMA in vitro
diagnostic product. In exchange for assigning these rights, the Company
is to receive royalty payments through June 2003 on annual sales derived
from such products. In fiscal year 1995, the Company recorded royalty
income of $120,000 on sales of these products by the licensee.
The Company has developed and has been distributing for research
purposes two in vitro diagnostic products to detect levels of human
anti-mouse antibodies ("HAMA") produced in patients as an immune response
when injected with monoclonal antibodies derived from mouse cells. One
product is designed to detect response to intact mouse antibodies, and one
to detect response to mouse antibody fragments. In August 1993, the
Company filed a Pre-Market Application ("PMA") with the FDA seeking
approval to market its ImmuSTRIP HAMA-IgG product. Although the
Company believes that it can answer the FDA questions posed with regard
to this submission, it has not yet decided whether it is in its strategic
interest to continue to pursue approval of this product because of its
detracting from other product opportunities.
<PAGE>
Domestic sales of the Company's in vitro diagnostic products
represented approximately 76%, 27%, and 19% of total sales during fiscal
years 1995, 1994, and 1993, respectively. A distribution agreement with
an international distributor expired in March 1993, and for the nine months
ended March 31, 1993, sales through this distributor were $395,000.
Manufacturing
The Company has to date manufactured all materials used in the
Company's clinical trial programs. The Company currently performs
antibody processing and purification of its clinical in vivo products at the
Newark Facility (see "Properties"). The Company has agreed to
manufacture and supply all of Mallinckrodt's requirements for CEA-Scan ,
subject to certain conditions and limitations, and will receive
transfer fees in consideration therefor. The Company is finalizing
manufacturing agreements with Pharmacia and other entities pursuant to
which Pharmacia, currently the primary site, and a second entity will
perform certain end-stage portions of the manufacturing process. Under
the terms of such agreements, the Company will pay according to an
established price structure for these services.
The Company believes it has enhanced the Newark Facility to meet
the requirements of the Establishment License Application ("ELA")
submitted to the FDA (see "Government Regulation") as well as to meet a
portion of what the Company projects will be initial production
requirements for CEA-Scan , subject to FDA licensing of such product and
approval of the manufacturing facility. In December 1994, the Company
received notification from the Department of Health Medicines Control
Agency ("MCA") in the United Kingdom that the Company's
manufacturing operations are in general compliance with the guidelines of
cGMP. However, there can be no assurances as to if or when the product
and facility approvals may be received from either the FDA or the
European authorities. The Company continues to scale-up to commercial
levels its antibody purification and fragmentation manufacturing processes.
The Company believes that it is in compliance with the regulations
established by the FDA for good laboratory and manufacturing practices.
The Company's facility in Morris Plains, New Jersey (see
"Properties") is to be the site of a commercial-scale antibody
manufacturing facility and currently houses the Company's regulatory,
medical, research and development, finance, marketing and executive
offices. The Company has committed approximately $2,700,000 for the
design, construction and equipping of this facility, which will consist of
four independent antibody manufacturing suites, several support areas, and
a quality control ("QC") laboratory. There can be no assurance at this time
that the facility will be approved by the regulatory authorities to meet the
manufacturing needs of the Company in a timely manner.
The Company's proposed monoclonal antibody products are
currently derived from ascites fluid produced in mice, and the Company
has entered into an agreement with a third-party supplier as the source for
the production of ascites fluid. Regulatory authorities, particularly in
Europe, have expressed concerns about the use of ascites for the production
of monoclonal antibodies. The Company believes that its current quality
<PAGE>
control procedures help ensure the purity of the ascites used in its products,
but there can be no assurance that the regulatory authorities will agree that
these procedures are adequate. The Company's effort to convert to in vitro
production (cell fermentation) for certain monoclonal antibodies is
progressing. Products manufactured by in vitro tissue culture processes
will require FDA approval for this substantial change in process, and will
require additional manufacturing equipment and resources for this effort.
Patents and Proprietary Rights
The Company actively pursues a policy of seeking patent protection,
both in the United States and abroad, for its proprietary technology. The
Company has a diverse patent portfolio, currently consisting of 27 issued
United States patents and 114 issued foreign patents, with 41 United States
patent applications and 90 foreign applications pending. Included in the
foregoing are 8 United States patents and their foreign counterparts, to
which the Company has rights pursuant to an exclusive license granted by
Dr. Goldenberg. The Company also has certain rights with respect to
patents and patent applications owned by CMMI, by virtue of a license
agreement between the Company and CMMI. That license agreement is
currently under review to assure compliance with NIH guidelines and to
assure compliance with certain tax provisions relating to CMMI's tax-exempt
status (see "Relationship With The Center For Molecular Medicine
and Immunology"). In addition, one of the Company's in vitro diagnostic
products and the related antibody are covered by a U.S. patent and foreign
counterparts that are owned by the Company and included in the totals
above.
The Company owns or has licensed patents which contain broad
claims covering significant aspects of current radioimmunodetection
technology for tumor imaging with radiolabeled antibodies and antibody
fragments. These United States issued patents expire beginning in 1999,
subject to extension under certain circumstances. The Company's patents
also contain broad claims relating to tumor therapy with radiolabeled
antibodies and antibody fragments. These patents contain claims covering
the Company's potential in vivo cancer imaging and therapeutic products
currently under development.
During fiscal year 1995, the Company was issued several additional
patents throughout the world. In July 1994, the Company was awarded a
U.S. patent covering kits and methods for targeting diagnostic agents to
various kinds of infections, including those caused by viruses, bacteria, and
parasites. The imaging methods involve nuclear or magnetic resonance imaging.
The former method uses a radioisotope attached to the targeting agent,
while the latter targets a magnetic resonance enhancer to the infections.
Whereas virtually all current imaging agents are not specific for particular
infections, but reveal changes in organ appearance, the patented inventions
cover agents and methods for disease or organism-specific imaging, which
could be useful for better diagnosis and detection, as well as for developing
effective therapies. The targeting agents are polyspecific antibodies against
these pathogens, which include such prevalent and threatening organisms as
the HIV of AIDS and Hepatitis virus; Legionella, Streptococci, Tuberculosis
and E. Coli bacteria; and Malaria, Toxoplasma, and other dangerous
parasites.
<PAGE>
In August 1994, the Company was awarded a U.S. patent covering a
method for producing an isotope-labeled monovalent antibody fragment. The
small fragment is labeled with technetium-99m, rhenium-186 or rhenium-188
by a direct, 1-step conjugation process. The fragments to be used in imaging
or therapeutic applications are Fab or Fab' forms, which are one-third the size
of intact IgG antibody molecules, and to which chemical binders can be
attached to reduce their immunogenicity (rendering the compounds
hypoimmunogenic). For therapeutic purposes, the binders can also contain
radiosensitizing chemicals, so that the radiotherapeutic fragment, such as the
rhenium-conjugates, can also target the radiosensitizer to a cancer.
In November 1994, a U.S. patent was awarded to the Company
covering new methods and compounds to detect certain cardiovascular
lesions, such as myocardial infarction, clots, and atherosclerosis. In applying
the patented methods, specific targeting is achieved by an antibody conjugate
directed against two or more antigens present at the lesion, such as white
blood cells, platelets, fibrin, or damaged heart cells.
In August 1995, the Company was issued three patents in Japan as
counterparts to the U.S. patents licensed to the Company in 1982. The
patents cover (1) compositions of antibody-based cancer imaging and
therapeutic agents involving radiolabeled antibodies and fragments, (2) the
imaging of cancers when targeted antigens are either on the surface of, or
inside, the cancer cell, and (3) the neutron-capture therapy method whereby
an inert substance (e.g., boron) is attached to radioactive antibodies and then
activated to produce toxic radiation at a tumor site.
Also in August 1995, two additional U.S. patents were issued to the
Company. The first of these involved novel agents and methods for the
treatment of infectious and inflammatory sites in the body, claiming the use
of antibodies that bind to white blood cells (granulocytes) which accumulate
around infectious and inflammatory lesions in order to deliver a therapeutic
radioisotope or antimicrobial drug to the disease site. The second U.S. patent
covered new substances and methods to image and treat sites of disease and
involves the use of an "immunoconjugate" having a unique carbohydrate site
attached as a binding site for imaging and therapeutic agents.
Two of the Company's granted European patents were involved in
oppositions at the European Patent Office during fiscal year 1995, and in both
cases the opposers were unsuccessful. In an opposition by Behringwerke, the
Company's patent for CEA-specific antibodies was maintained as originally
granted. In an opposition by Akzo, the Company's patent for second
antibody clearance was maintained in amended form.
One of the Company's basic U.S. patent applications for direct
radiolabeling of antibody fragments was involved in an interference with two
issued patents owned by RhoMed. The parties were able to reach a
settlement of the interference which resulted in limitation of the claims of the
RhoMed patents and termination of the interference with a decision affirming
the Company's right to a patent for its labeling methodology.
Pursuant to a License Agreement between the Company and Dr.
Goldenberg, certain patent applications owned by Dr. Goldenberg were
licensed to the Company at the time of the Company's formation in exchange
<PAGE>
for a royalty in the amount of 0.5% of the first $20,000,000 of annual net
sales of all products covered by any of such patents and 0.25% of annual net
sales of such products in excess of $20,000,000. Dr. Goldenberg's Amended
and Restated Employment Agreement with the Company dated November 1,
1993 (the "Employment Agreement") extends the ownership rights of the
Company, with an obligation to diligently pursue all ideas, discoveries,
developments and products, into the entire medical field, which, at any time
during his past or continuing employment by the Company (but not when
performing services for CMMI), Dr. Goldenberg has made or conceived or
hereafter makes or conceives, or the making or conception of which he has
materially contributed to or hereafter contributes to, all as defined in the
Employment Agreement (collectively "Goldenberg Discoveries").
Further, pursuant to the Employment Agreement, Dr. Goldenberg will
receive incentive compensation of 0.5% on the first $75,000,000 of all
defined Annual Net Revenue of the Company and 0.25% on all such Annual
Net Revenue in excess thereof (collectively "Revenue Incentive
Compensation"). Annual Net Revenue includes the proceeds of certain
dispositions of assets or interests therein (other than defined Undeveloped
Assets), including defined Royalties, certain equivalents thereof and, to the
extent approved by the Board, non-royalty license fees. Revenue Incentive
Compensation will be paid with respect to the period of Dr. Goldenberg's
employment, and two years thereafter, unless he unilaterally terminates his
employment without cause or he is terminated by the Company for cause.
With respect to the period that Dr. Goldenberg is entitled to receive Revenue
Incentive Compensation on any given products, it will be in lieu of any other
percentage compensation based on sales or revenue due him with respect to
such products under this Agreement or the existing License Agreement
between the Company and Dr. Goldenberg. With respect to any periods that
Dr. Goldenberg is not receiving such Revenue Incentive Compensation for
any products covered by patented Goldenberg Discoveries or by certain
defined Prior Inventions of Dr. Goldenberg, he will receive 0.5% on
cumulative annual net sales of, royalties on, certain equivalents thereof, and,
to the extent approved by the Board, other consideration received by the
Company for such products, up to a cumulative annual aggregate of
$75,000,000 and 0.25% on any cumulative Annual Net Revenue in excess of
$75,000,000 (collectively "Royalty Payments"). A $100,000 annual
minimum payment will be paid in the aggregate against all Revenue
Incentive Compensation and Royalty Payments ("Annual Minimum
Payment").
Dr. Goldenberg will also receive a percent, not less than 20%, to be
determined by the Board, of net consideration (including license fees) which
the Company receives for any disposition, by sale, license or otherwise
(discussions directed to which commence during the term of his employment
plus two years) of any defined Undeveloped Assets of the Company which
are not budgeted as part of the Company's strategic plan.
Dr. Goldenberg will not be entitled to any incentive compensation
with respect to any products, technologies or businesses acquired from third
parties for a total consideration in excess of $5,000,000, unless the Company
had made a material contribution to the invention or development of such
products, technologies or businesses prior to the time of acquisition. Except
as affected by a defined Change in Control or otherwise approved by the
<PAGE>
Board, Dr. Goldenberg will also not be entitled to any Revenue Incentive
Compensation or Royalty Payments other than the Annual Minimum
Payment with respect to any time during the period of his employment (plus
two years, unless employment is terminated by mutual agreement or by
Dr. Goldenberg's death or permanent disability) that he is not the direct or
beneficial owner of shares of the Company's voting stock with an aggregate
market value of at least twenty times his defined annual cash compensation.
Pursuant to a License Agreement dated July 7, 1983, the Company
must pay to Dr. F. James Primus, a co-inventor with Dr. Goldenberg of
certain monoclonal antibodies and immunoassays which are the subject
matter of a U.S. patent and foreign counterparts thereof that are owned jointly
by Drs. Primus and Goldenberg, a royalty in the amount of 0.25% of the first
$20,000,000 of annual net sales of certain products utilizing a CEA-specific
antibody (e.g., CEA-Scan ), and 0.125% of annual net sales of such
products in excess of $20,000,000.
The Company has entered into patent license agreements with
non-affiliated companies, pursuant to which the Company granted to the
licensee, for an initial non-refundable fee plus royalties, a non-exclusive
license under the Company's patents to manufacture and sell certain cancer
imaging products. To date, no royalties have been received under these
licenses. In addition, the Company has sought to enter into patent license
agreements with companies which may be developing or marketing products which
could infringe on one or more of the patents which the Company owns or has
licensed. In certain situations, such companies have declined to enter into
license agreements with the Company and have raised questions as to the
scope and validity of certain of the Company's patents. Discussions are
continuing with these companies and the Company intends to vigorously
protect and enforce its patent rights. Although there can be no assurances as
to the outcome of any patent disputes, the Company, based upon advice of its
patent counsel, believes that its patents are valid and will be upheld if
challenged (see "Legal Proceedings").
On September 16, 1994, the Company and NeoRx Corporation
("NeoRx") settled a patent infringement lawsuit which NeoRx brought
against the Company in July 1991. The settlement also involved the
Company's counterclaim against NeoRx, which sought certain declarations
regarding the NeoRx patent. Under the settlement, the Company obtained
from NeoRx a non-exclusive, royalty-free license to U.S. Patent No.
4,877,868 for all of the Company's imaging products. In addition, NeoRx
obtained from the Company a non-exclusive, royalty-free license to U.S.
Patent No. 4,331,647 for certain of NeoRx's imaging products. Neither party
will pay or receive cash in consideration for the settlement.
The Company also relies in part on trade secrets, unpatented know-how
and continuing technological advancements to maintain its competitive
position. It is the practice of the Company to enter into confidentiality
agreements with employees, consultants and corporate sponsors. There can
be no assurance, however, that these measures will prevent the unauthorized
disclosure or use of the Company's trade secrets and know-how.
<PAGE>
The mark "IMMUNOMEDICS" is registered in 24 foreign countries
and the Company's logo also is registered in several foreign countries. The
Company is currently applying for re-registration of the marks
"IMMUNOMEDICS" and "IMMUSTRIP" and for the logo in the United
States Patent & Trademark Office. In addition, the Company has applied for
registration in the United States of 9 other trademarks for use on products
now in development or testing, and for corresponding foreign registrations
in 10 countries for 3 of those marks.
Government Regulation
The manufacture and marketing of pharmaceutical or biological
products requires approval of the FDA and comparable agencies in foreign
countries and, to a lesser extent, state regulatory authorities. In the
United States, the regulatory approval process for antibody-based products,
which are considered "biologics" under FDA regulations, is similar to that
for any new drug for human use. The FDA has established mandatory procedures
and safety standards which apply to the clinical testing, manufacturing and
marketing of pharmaceutical products. Noncompliance with applicable
requirements can result in fines, recalls or seizure of products, total or
partial suspension of production, refusal of the FDA to approve product
license applications or to allow the Company to enter into supply contracts,
and criminal prosecution. The FDA also has the authority to revoke previously
granted product licenses and establishment licenses.
Generally, there is a substantial period of time between technological
conception of a proposed product and its availability for commercial sale.
The period between technological conception and product license application
to the FDA is usually five to ten years for in vivo products and a minimum
of two to three years for in vitro diagnostic products. The period between
the date of submission to the FDA and the date of approval has averaged two
to four years for in vivo products, although the approval process may take
longer. The amount of time taken for this approval process is a function of
a number of variables, including the quality of the submission and studies
presented, the potential contribution that the compound will make in
improving the treatment of the disease in question and the workload at the
FDA. There can be no assurance that any new drug will successfully proceed
through this approval process or that it will be approved in any specific
period of time. Depending upon marketing and distribution plans and
arrangements for a particular product, the Company may require additional
time before a proposed in vivo product is available for commercial sale.
The steps required before biological products can be produced and
marketed usually include preclinical non-human studies, the filing of an IND
application, human clinical trials and the filing and approval of a PLA. In
addition to obtaining FDA approval for each product, an Establishment
License Application ("ELA") must be filed and the FDA must approve any
production facilities for the product.
Pre-clinical studies are conducted in the laboratory and in animal
model systems to gain preliminary information on the drug's effectiveness
and to identify major safety problems. The results of these studies are
submitted to the FDA as part of the IND application before approval can be
obtained for the commencement of testing in humans. The human clinical
<PAGE>
testing program required for a new biologic or pharmaceutical product
involves several phases. The initial clinical evaluation, Phase I, consists
of administering the product and testing for safe and tolerable dosages while
noting the effectiveness of the product at the various dose levels. Typically,
for cancer agents, testing is done with a small group of patients with
widespread cancers that have been unresponsive to other forms of therapy.
Phase II involves a study to evaluate the effectiveness of the product for a
particular indication and to refine optimal dosage and schedule of
administration and identify possible side effects and risks in a larger patient
group. When a product is determined to be effective in Phase II trials, it is
then evaluated in Phase III clinical trials. Phase III trials consist of
additional testing for effectiveness and safety with a further expanded patient
group, usually at multiple test sites. A therapeutic cancer product must be
compared to standard treatments, if such treatments exist, to determine its
relative effectiveness in randomized trials.
Human clinical trials of in vivo monoclonal antibody products may
combine Phase I and Phase II trials. In selected cases, a more traditional
Phase II study may be performed to examine the effectiveness of a single
product in one or a limited number of configurations or dose schedules in a
single tumor type.
When Phase III studies are complete, the results of the preclinical and
clinical studies, along with manufacturing information, are submitted to the
FDA in the form of a PLA. The PLA involves considerable data collection,
verification and analysis, as well as the preparation of summaries of the
production and testing processes, pre-clinical studies and clinical trials.
The PLA is submitted to the FDA for product marketing approval, and an ELA
is submitted for licensing of the product production facilities. The FDA must
approve the PLA and ELA before the product may be marketed. The FDA
may also require post-marketing testing, including extensive Phase IV
studies, and surveillance to monitor the effects of the product in general use.
Product approvals may be withdrawn if compliance with regulatory standards
is not maintained or if problems occur following initial marketing. In
addition, the FDA may in some circumstances impose restrictions on the use
of the drug that may limit its market potential, and also make it difficult and
expensive to administer, and usually requires prior approval of promotional
materials.
The Company seeks to have its proposed products, when applicable,
designated as "Orphan Drugs" under the Orphan Drug Act of 1983. The
Orphan Drug Act generally provides incentives to manufacturers to develop
and market products to treat relatively rare diseases or diseases affecting
fewer than 200,000 persons in the United States. The Company has received
Orphan Drug designation for, among others, AFP-Scan , LymphoScan
and ImmuRAIT -LL2, the Company's liver and germ cell imaging,
lymphoma imaging and lymphoma therapeutic products, respectively, and
has other such applications pending at the FDA. A drug that receives Orphan
Drug designation and is the first product to receive FDA marketing approval
for its product claim is entitled to a seven-year exclusive marketing period in
the United States for that product's claim. However, a drug that is considered
by the FDA to be different from a particular Orphan Drug is not barred from
sale in the United States during this seven-year exclusive marketing period.
<PAGE>
Manufacture of a biological product must be in a facility covered by
an FDA-approved ELA. The manufacture, holding and distribution of both
biological and nonbiological drugs must be in compliance with Good
Manufacturing Practices ("GMP"). Manufacturers must continue to expend
time, money and effort in the area of production and quality control to ensure
full technical compliance with those requirements. The labeling, advertising
and promotion of drug or biological product must be in compliance with
FDA regulatory requirements. Failure to comply with applicable
requirements relating to manufacture, distribution or promotion can lead to
FDA demands that production and shipment cease, and, in some cases, that
products be recalled, or to enforcement actions that can include seizures,
injunctions and criminal prosecution. Such failures, or new information
reflecting on the safety and effectiveness of the drug that comes to light after
approval, can also lead to FDA withdrawal of approval to market the product.
The drug approval process is similar in other countries and is also
regulated by specific agencies in each geographic area. Approval by the FDA
does not ensure approval in other countries. Generally, however, products
which are approved by the FDA in the U.S. will ultimately gain marketing
approval in other countries, but may require considerable amounts of time.
The Company's ability to commercialize its products successfully
may also depend in part on the extent to which reimbursement for the cost of
such products and related treatment will be available from government health
administration authorities, private health insurers and other organizations.
Such third-party payors are increasingly challenging the price of medical
products and services. Several proposals have been made that may lead to a
government-directed national health care system. Adoption of such a system
could further limit reimbursement for medical products, and there can be no
assurance that adequate third-party coverage will be available to enable the
Company to maintain price levels sufficient to realize an appropriate return
on this investment in product development. In addition, there can be no
assurance that the U.S. government will not implement a system of price
controls. Any such system might adversely affect the ability of the Company
to market its products profitably.
The Company's present and future business is also subject to
regulation under state and Federal law regarding work place safety,
laboratory practices, the use and handling of radioisotopes, environmental
protection and hazardous substance control and to other present and possible
future local, federal and foreign regulations. The Company believes its
operations comply, in all material respects, with applicable environmental
laws and regulations, and the Company is continuing its efforts to ensure its
full compliance with such laws and regulations.
Competition
The biotechnology industry is highly competitive, particularly in the
area of cancer diagnostic, imaging and therapeutic products. The Company
is likely to encounter significant competition with respect to its proposed
products currently under development. A number of companies which are
engaged in the biotechnology field, and in particular the development of
cancer diagnostic and therapeutic products, have financial, technical and
marketing resources significantly greater than those of the Company. Some
<PAGE>
companies with established positions in the pharmaceutical industry may be
better equipped than the Company to develop, refine and market products
based on technologies applied to the diagnosis and treatment of cancers and
infectious diseases. The Company's ability to compete in the future will
depend, in part, on its ability to foster an environment in which
multi-disciplinary teams work together to develop low-cost, well-defined
processes and bring cost-beneficial products successfully through clinical
testing and regulatory approval. A significant amount of research and
antibody-based technology are also carried out at universities and other
non-profit research organizations, which are becoming increasingly aware of
the commercial value of their findings and are becoming more active in seeking
patent and other proprietary rights, as well as licensing revenues.
The Company is pursuing an area of product development in which
there is the potential for extensive technological innovation in relatively
short periods of time. The Company's competitors may succeed in developing
products that are safer or more effective than those of the Company's
potential products. Rapid technological change or developments by others
may result in the Company's present products and potential products
becoming obsolete or non-competitive.
The Company believes that the technological attributes of its
proposed diagnostic imaging products, including the ease of use (e.g., single
vial, rapid imaging), employment of technetium-99m (the most widely
available radioisotope) and its use of an antibody fragment (better liver
imaging, decreased HAMA response) will enable the Company to compete
effectively in the marketplace.
Employees and Consultants
As of September 21, 1995, the Company employed 85 persons on a
full-time basis, 16 of whom are in research and development departments, 17
of whom are in medical and regulatory affairs departments, 36 of whom are
engaged in operations and manufacturing, and 16 of whom are engaged in
finance, administration and marketing. Of these employees, 35 hold M.D.,
Ph.D. or other advanced degrees. The Company believes that it has been
highly successful in attracting skilled and experienced scientific personnel;
however, competition for such personnel is intensifying. The Company's
employees are not covered by a collective bargaining agreement, and the
Company believes that its relationship with its employees is excellent.
Item 2. Properties
The Company's headquarters are located at 300 American Road,
Morris Plains, New Jersey where it leases approximately 60,000 square feet.
The Company has a seven-year lease expiring in May 1999, plus two renewal
periods for a total of 15 years, at a base annual rental of $410,000 through
May 1997, $471,000 through May 1998 and $448,000 through May 1999.
The lease provides for an option to purchase the facility, subject to certain
terms and conditions as specified in the lease. The Company's regulatory,
medical, research and development laboratories, finance, marketing and
executive offices are currently located in this facility, occupying
approximately 40,000 square feet. The Company has committed
<PAGE>
approximately $2,700,000 for the design, construction and equipping of a
commercial-scale manufacturing facility to occupy the remaining 20,000
square feet at the Morris Plains headquarters. This facility will consist of
four independent antibody manufacturing suites, several support areas, and
a QC laboratory (see "Manufacturing").
The Company also leases approximately 12,000 square feet of office
and laboratory space on the campus of The University of Medicine and
Dentistry of New Jersey ("UMDNJ") at 5 Bruce Street, Newark, New Jersey
at a base annual rental of approximately $93,000 through October 1996. The
lease agreement, as amended, expires on October 1, 1996, subject to the
Company's right to renew the lease through March 1997. In August 1995, the
Company notified UMDNJ of its intent to extend this lease through March
1997. The annual rental upon renewal is subject to adjustment under certain
circumstances.
Item 3. Legal Proceedings
Except as set forth below, the Company is not involved in any
material pending legal proceedings other than ordinary routine litigation
incidental to its business.
In June 1994, the Company and certain of its officers were named in
a complaint filed in the United States District Court for the District of New
Jersey relating to public disclosures since June 30, 1992, about the future
prospects of the Company, particularly as they relate to the Company's ability
to obtain FDA approval for CEA-Scan for colorectal cancer imaging. On
April 18, 1995, the court granted the Company's motion to dismiss the law
suit, holding, among other things, that the claims made by the Plaintiff were
"simply an insufficient basis on which to bring a securities fraud action." In
May 1995, the Plaintiff filed an appeal which is currently pending before the
U.S. Court of Appeals for the Third Circuit.
The Company is involved in various other claims and litigation
arising in the normal course of business. Management believes, based on the
opinion of counsel, that the outcome of such claims and litigation will not
have a material effect on the Company's financial position and results of
operations.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of securities holders during the
fourth quarter of fiscal year 1995.
Executive Officers of the Registrant
The Executive Officers of the Company and their positions with the
Company are as follows:
Name Age Position with the
Company
David M. Goldenberg 57 Chairman of the Board, CEO
and Director
Amy Factor 37 Executive Vice President
Secretary and Treasurer
Hans J. Hansen 62 Vice President
Research and Development
Carl M. Pinsky 57 Vice President
Medical Affairs
Christopher Tama 36 Vice President
Marketing
Each of the Executive Officers was elected as such by the Board of
Directors of the Company and holds his or her office at the discretion of
the Board of Directors or until his or her earlier death or resignation,
except that Dr. Goldenberg holds his office pursuant to an employment
agreement. (See "Executive Compensation".)
Dr. David M. Goldenberg founded the Company in July 1982 and,
since that time, has been Chairman of the Board of the Company. Dr.
Goldenberg has served as Chief Executive Officer since February 1994 and
also served as Chief Executive Officer of the Company from July 1982
through July 1992. Dr. Goldenberg was Professor of Pathology at the
University of Kentucky Medical Center from 1973 until 1983 and Director
of such University's Division of Experimental Pathology from 1976 until
1983. From 1975 to 1980 he also served as Executive Director of the
Ephraim McDowell Community Cancer Network, Inc., and from 1978 to
1980 he was President of the Ephraim McDowell Cancer Research
Foundation, Inc., both in Lexington, Kentucky. Dr. Goldenberg is a
graduate of the University of Chicago College and Division of Biological
Sciences (S.B.), the University of Erlangen-Nuremberg (Germany) Faculty
of Natural Sciences (Sc.D.), and the University of Heidelberg (Germany)
School of Medicine (M.D.). He has written or co-authored more than 800
journal articles, book chapters and abstracts on cancer research, detection
and treatment, and has researched and written extensively in the area of
<PAGE>
radioimmunodetection using radiolabeled antibodies. In addition to his
position with the Company, Dr. Goldenberg is President of CMMI, an
independent non-profit research center, and its clinical unit, the Garden
State Cancer Center. He also holds the positions of Adjunct Professor of
Surgery with The University of Medicine and Dentistry of New Jersey
(New Jersey Medical School) and Adjunct Professor of Microbiology and
Immunology with the New York Medical College. In 1985 and again in
1992, Dr. Goldenberg received an "Outstanding Investigator grant" award
from the National Cancer Institute ("NCI") for his work in
radioimmunodetection, and in 1986, he received the New Jersey Pride
Award in Science and Technology. Dr. Goldenberg was honored as the
ninth Herz Lecturer of the Tel Aviv University Faculty of Life Sciences.
In addition, Dr. Goldenberg received the 1991 Mayneord 3M Award and
Lectureship of the British Institute of Radiology for his contributions to the
development of radiolabeled monoclonal antibodies used in the imaging and
treatment of cancer. He was also named the co-recipient of the 1994
Abbott Award by the International Society for Oncodevelopmental Biology
and Medicine.
Amy Factor has been Executive Vice President since February 1994
and prior thereto had been Vice President - Finance and Administration
since October 1988 and Secretary and Treasurer since October 1989. From
May 1986 to October 1988, Ms. Factor was Vice President, Finance and
Administration for The Vista Organization, Ltd., an entertainment
company, and prior thereto was associated with the accounting firm of
KPMG Peat Marwick LLP. Ms. Factor is a New Jersey Certified Public
Accountant and received her Masters in Business Administration from
Rutgers University and is a member of the Board of Trustees of the
Biotechnology Council of New Jersey.
Dr. Hans J. Hansen has been Vice President - Research and
Development since March 1987. Prior to joining the Company in 1985 as
Director of Cell Biology, he was for three years the Director of Product
Development at Ortho Diagnostic Systems, Inc., a subsidiary of Johnson
& Johnson Corporation, where he developed monoclonal antibodies for the
diagnosis of leukemia and other cancers. From 1969 to 1982, Dr. Hansen
was with Hoffmann-La Roche in a variety of positions, becoming Director
of the Department of Immunology in 1982. While at Hoffmann-La Roche,
he developed the first in vitro diagnostic CEA immunoassay and had a
major role in establishing its clinical importance in the diagnosis and
management of cancer. Dr. Hansen has spent 36 years conducting clinical
and basic research in the fields of cancer and autoimmune disease. His
work has resulted in the issuance of eight United States patents and over 90
publications relating to cancer and autoimmune diseases.
Dr. Carl M. Pinsky has been Vice President - Medical Affairs since
May 1989. From August 1988 through May 1989, Dr. Pinsky was the
Vice President, Medical Affairs of IMRE Corp., a pharmaceutical
company. From 1985 through 1988, Dr. Pinsky was a Branch Chief and
Chief Medical Officer at the Biological Response Modifiers Program
("BRMP") of the National Cancer Institute of the National Institutes of
Health, where he directed a $25 million program of grants and contracts
covering both basic science and clinical trials involving biological response
modifiers. At the BRMP, Dr. Pinsky directed the formulation of the initial
plan for NCI's extramural development of monoclonal antibodies.
<PAGE>
Following his formal training at the University of Pennsylvania (A.B.),
Jefferson Medical College (M.D.) and the University of Kentucky Medical
School (Intern/Resident), Dr. Pinsky has 29 years of diversified experience
in basic and clinical cancer research, including 19 years at Memorial
Sloan-Kettering Cancer Center, where he conducted major studies evaluating
immunodeficiency in cancer patients and helped pioneer the development
of immunotherapy for these patients.
Christopher Tama joined Immunomedics in July 1995 as Vice
President - Marketing. Prior to joining the Company, he served as Vice
President, Marketing, U.S. Operations at the G.D. Searle Division of
Monsanto. From 1981 to 1994, Mr. Tama held various marketing, sales
and strategic planning positions at Pharmacia. Mr. Tama's positions
included Director, Marketing and Sales for the Peptide Hormone Division,
National Sales Manager, Regional Sales Manager and Product Manager in
the areas of cancer and autoimmune disease. Mr. Tama has extensive
international experience in Europe, where he lived and worked from 1985
through 1988. During this period, Mr. Tama held positions in international
product management and strategic business planning where he was
responsible for the launch and re-launch of several products in the U.S. and
international markets. Mr. Tama received his Bachelor of Arts degree
from Villanova University.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The Information appearing under the caption "Price Range of
Common Stock" on page 16 in the Company's 1995 Annual Report to
Stockholders is incorporated herein by reference.
Item 6. Selected Financial Data
The information appearing under the caption "Selected Financial
Data" on page 1 in the Company's 1995 Annual Report to Stockholders is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The information appearing under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
on pages 2,3, and 4 in the Company's 1995 Annual Report to Stockholders
is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Schedules on page F-1 of
this Annual Report on Form 10-K for financial data incorporated herein by
reference.
<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 for this item is incorporated herein
by reference to the 1995 Definitive Proxy Statement. See also "Executive
Officers of the Registrant" in Part I, following Item 4.
Item 11. Executive Compensation
The information required for this item is incorporated herein by
reference to the 1995 Definitive Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required for this item is incorporated herein by
reference to the 1995 Definitive Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required for this item is incorporated herein by
reference to the 1995 Definitive Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Documents filed as part of this Report:
(1) Financial Statements (see index to Financial Statements on
page F-1 of this Annual Report on Form 10-K for financial data
incorporated herein by reference):
Report of Independent Auditors - KPMG Peat Marwick LLP
Balance Sheets at June 30, 1995 and 1994
Statements of Operations for the years ended June 30, 1995,
1994 and 1993
Statements of Changes in Stockholders' Equity for the years
ended June 30, 1995, 1994 and 1993
Statements of Cash Flows for the years ended June 30,
1995, 1994, and 1993
Notes to Financial Statements
<PAGE>
(2) Financial Statement Schedules:
Financial statement schedules not included in this Annual
Report on Form 10-K have been omitted because they are not applicable or
the required information is shown in the financial statements or notes
thereto.
(3) Exhibits:
3. Articles of incorporation and by-laws
3.1(a) Certificate of Incorporation of the Company, as filed with
the Secretary of State of the State of Delaware on July 6,
1982 [e]
3.1(b) Certificate of Amendment of the Certificate of
Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on April 4, 1983 [e]
3.1(c) Certificate of Amendment of the Certificate of
Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on December 14, 1984 [e]
3.1(d) Certificate of Amendment of the Certificate of
Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on March 19, 1986 [e]
3.1(e) Certificate of Amendment of the Certificate of
Incorporation of the Company as filed with the Secretary of
State of the State of Delaware on November 17, 1986 [e]
3.1(f) Certificate of Amendment of the Certificate of Incorpora-
tion of the Company as filed with the Secretary of State of
the State of Delaware on November 21, 1990 [f]
3.1(g) Certificate of Designation of Rights and Preferences and
with the Secretary of State of the State of Delaware on
March 1, 1991 [g]
3.1(h) Certificate of Amendment of the Certificate of Incorpora-
tion of the Company filed with the Secretary of State of
the State of Delaware on December 7, 1992 [k]
3.1(i) Certificate of Designation of Rights and Preferences of the
Registrant's Series B Convertible Preferred Stock (m)
3.2 Amended and Restated By-Laws of the Company [k]
4. Instruments defining the rights of security holders, including indentures
4.1 Specimen Certificate for Common Stock [e]
<PAGE>
10. Material contracts
10.1(a) 1983 Stock Option Plan, as amended [h]
10.1(b) Form of Stock Option Agreement [e]
10.2 Exclusive License Agreement with David M. Goldenberg
dated as of July 14, 1982 [a]
10.3 Agreement among The University of Medicine and Den-
tistry of New Jersey, the Center of Molecular Medicine
and Immunology, Inc. and Immunomedics, Inc., dated
September 16, 1983, including Lease Agreement [a]
10.4 Agreement among the Company, David M. Goldenberg
and the Center for Molecular Medicine and Immunology,
Inc. dated May 1983 [a]
10.5 Memorandum of Understanding with David M. Golden-
berg dated September 10, 1984 [b]
10.6 Immunomedics, Inc. 401(k) Retirement Plan [c]
10.7 Executive Supplemental Benefits Agreement with David
M. Goldenberg dated as of July 18, 1986 [c]
10.8 License Agreement between Hoffmann-La Roche, Inc. and
David M. Goldenberg dated as of April 29, 1986 [c]
10.9 License Agreement with F. James Primus dated July 7,
1983 [d]
10.10 Employment Letter with Carl Pinsky dated April 29, 1989 [e]
10.11 Convertible Preferred Stock Purchase Agreement dated
March 4, 1991 [g]
10.12 Amended and Restated License Agreement among the
Company, CMMI and David M. Goldenberg dated
December 11, 1990 [h]
10.13 Development and License Agreement with Adria
Laboratories Division of Erbamont Inc. (Confidential
treatment has been requested for certain portions of this
Exhibit.) [h]
10.14 Lease Agreement with Baker Properties Limited
partnership dated January 16, 1992 [i]
10.15 Amendment to Lease between the University of Medicine
and Dentistry of New Jersey and Immunomedics, Inc.
dated August 13, 1992 [j]
10.16 Immunomedics, Inc. 1992 Stock Option Plan [k]
10.17 Amended and Restated Employment Agreement dated
November 1, 1993 between the Company and Dr. David
M. Goldenberg [l]
<PAGE>
10.18 Convertible Stock Purchase Agreement, dated as of
January 6, 1995, between the purchasers named therein
[n]
10.19 License Agreement, dated as of March 10, 1995, between
the Registrant and Mallinckrodt Medical, B.V.
Confidentiality has been requested for certain portions of
the Agreement [o]
10.20 Amendment, dated March 11, 1995, to the Amended and
Restated License Agreement among the Company, CMMI,
and David M. Goldenberg dated December 11, 1990.
11. Statement re computation of per share earnings - Not required since
such computation can be clearly determined from the material
contained in this Annual Report on Form 10-K.
12. Statements re computation of ratios - Not applicable.
13. Immunomedics, Inc. 1995 Annual Report to Stockholders, portions of
which are incorporated by reference into this Annual Report on Form
10-K.
21. Subsidiaries of the registrant - None.
23. Consent of Experts and Counsel
23.1 Consent of Independent Auditors - KPMG Peat Marwick LLP
27. Financial Data Schedule
[a] Incorporated by reference from the Exhibits to Registrant's
Registration Statement on Form S-1 effective October 6, 1983 (Commission
File No. 2-84940).
[b] Incorporated by reference from the Exhibits to Registrant's
Annual Report on Form 10-K for the year ended June 30, 1985.
[c] Incorporated by reference from the Exhibits to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1986.
[d] Incorporated by reference from the Exhibits to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1988.
[e] Incorporated by reference from the Exhibits to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1990.
[f] Incorporated by reference from the Exhibits to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
1990.
[g] Incorporated by reference from the Exhibits to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1991.
<PAGE>
[h] Incorporated by reference from the Registrant's Registration
Statement on Form S-2 effective July 24, 1991 (Commission File No. 33-41053).
[i] Incorporated by reference from the Registrant's Registration
Statement on Form S-2 effective January 30, 1992 (Commission File No.
33-44750).
[j] Incorporated by reference from the Exhibits to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1992.
[k] Incorporated by reference from the Exhibits to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1993.
[l] Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1993.
[m] Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended December 31, 1994.
[n] Incorporated by reference to Amendment No. 1 to
Registrant's Quarterly Report on Form 10-Q/A for the fiscal quarter ended
December 31, 1994.
[o] Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1995.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Company during
the fourth quarter of its fiscal year ended June 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
IMMUNOMEDICS, INC.
Date: September 26, 1995 By: /s/ David M. Goldenberg
David M. Goldenberg,
Chairman and Chief Executive Officer
(Principal Executive Officer)
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.
Date: September 26, 1995 By: /s/ David M. Goldenberg
David M. Goldenberg, Director
Date: September 26, 1995 By: /s/ Albert D. Angel
Albert D. Angel, Director
Date: September 26, 1995 By: /s/ A.E. Cohen
A.E. Cohen, Director
Date: September 26, 1995 By: /s/ Marvin E. Jaffe
Marvin E. Jaffe, Director
Date: September 26, 1995 By: /s/ Richard R. Pivirotto
Richard R. Pivirotto, Director
Date: September 26, 1995 By: /s/ Warren W. Rosenthal
Warren W. Rosenthal, Director
Date: September 26, 1995 By: /s/ Richard C. Williams
Richard C. Williams, Director
Date: September 26, 1995 By: /s/ Amy Factor
Amy Factor, Executive Vice President
(Principal Accounting and Financial Officer)
<PAGE>
Immunomedics, Inc.
Index to Financial Statements
Financial Statements: Page
Balance Sheets - June 30, 1995 and 1994 *
Statements of Operations for the years *
ended June 30, 1995, 1994 and 1993
Statements of Stockholders' Equity for the years *
ended June 30, 1995, 1994 and 1993
Statements of Cash Flows for the years *
ended June 30, 1995, 1994 and 1993
Notes to Financial Statements *
Report of Independent Auditors - KPMG Peat Marwick LLP *
__________________________
* The information required appears on pages 5 through 16 of the
Company's 1995 Annual Report to Stockholders and is incorporated by
reference into this Annual Report on Form 10-K.
All schedules are omitted, as the required information is inapplicable or the
information is presented in the financial statements or related notes.
March 13, 1995
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
Gentlemen:
Reference is hereby made to a certain Amended and Restated
License Agreement dated December 11, 1990 (the "Agreement")
by and between the Center for Molecular Medicine and
Immunology, Inc. (the "Center") and Immunomedics, Inc.
("Immunomedics"), made to amend and restate in its entirety
a certain agreement by and among the Center, Immunomedics
and David M. Goldenberg, Sc.D., M.D., dated May 1983. Terms
defined in the Agreement, but not defined herein, shall,
when used herein, have the meanings ascribed to them in the
Agreement.
l. This will confirm our understanding that the
Agreement is hereby amended to provide that Immunomedics
will not use or exploit any technology or rights obtained
under the Agreement for any fee other than a fee which (1)
represents a fair market price for the use of such
technology or rights and (2) is determined at the time the
license of such technology or rights is entered into.
Subject to the foregoing: (a) the first sentence of
paragraph 2.1 of the Agreement is hereby amended to provide
that, except for products developed under a third-party
proposal as set out in paragraph 2.8 of the Agreement,
whenever the Center has developed a Product, the Center
promptly thereafter shall submit a Proposal (as defined in
the Agreement as a "Research and Development Proposal")
regarding said Product to the Immunomedics Liaison; and (b)
paragraphs 3 and 4 of the Agreement are hereby amended to
provide that all Patents and Know-How shall be the property
of the Center, subject to the rights granted to Immunomedics
under the Agreement (as amended by this letter agreement),
and that the Center grants to Immunomedics, for a period of
one-hundred eighty (180) days after submission by the Center
of a Proposal, the first right and option to negotiate, in
good faith, the terms of an exclusive or non-exclusive (as
shall be determined by Immunomedics) worldwide
commercialization license (with the right to sublicense)
with respect to the Patents and Know-How covered by the
Proposal, commercially reasonable under the circumstances
and fairly reflecting the risks incurred by Immunomedics and
the costs of subsequent research and development needed to
bring the Product to the marketplace. The license will
specify the licensed fields of use, breadth of exclusivity,
and royalties payable by the licensee. Royalty rates will
also be based on Product sales and the prevailing rates
conventionally granted in the field identified in the
Proposal for Products with reasonably similar commercial
<PAGE>
potential, based primarily on the royalties payable by
unrelated third parties and Immunomedics for the same (or
comparable) rights to and licenses of the same (or
comparable) technology to independent third parties under
similar circumstances considering all relevant facts,
adjusted to account for material differences in contractual
terms and economic conditions in which transactions
occurred. Royalty rates will be negotiated at the time the
license is entered into. Royalty rates for exclusive
commercialization licenses for Patents and Know-How
generally will not exceed a rate within the following
ranges: for Products resulting from technology developed by
the Center after May 1983 and prior to December 11, 1990 -
1.1-2.3 percent; and for Products resulting from technology
developed by the Center on or after December 11, 1990,
including new Products emerging from a new technology
developed and submitted as a Proposal by the Center
subsequent to the date of this letter agreement - 2.2-4.6
percent. Contingent royalty schemes based on, e.g. patent
issuance or nonissuance, and provisions treating the
stacking of royalties or packaging of other licensed Patents
and Know-How developed under the Proposal or licensed from
the Center may be provided. Any such license will reserve
unto the Center the royalty-free right to use such licensed
Patents and Know-How for research and academic purposes on a
non-commercial basis. In the event a license is not entered
into by the Center and Immunomedics within such 180-day
period, or Immunomedics earlier notifies the Center in
writing that it does not desire to obtain a license, the
Center may thereafter, if it shall have complied with the
provisions of the Agreement, offer to and grant one or more
licenses or other rights in the Patents and Know-How covered
by the Proposal to others without any further obligation to
Immunomedics; provided that the Center shall not offer
substantially the same submission to a third party on terms,
considered as a whole, more favorable than those terms last
offered to Immunomedics without first offering such other
terms to Immunomedics for sixty (60) days.
2. Immunomedics and the Center acknowledge that any
such licensed Patents and Know-How or a portion thereof is
likely to have been or to be developed with financial or
other assistance from the United States of America, and that
applicable statutes, regulations and Executive Orders of the
United States of America, as well as published guidelines
and considerations for recipients of grants and contracts
from the National Institutes of Health and other federal
departments and agencies, may control, apply or affect the
right of Immunomedics to receive any Proposal, any license
granted under such license agreement or any sublicense
thereof, and notwithstanding anything contained herein to
the contrary, the rights and obligations of the parties
under the Agreement are subject to compliance therewith to
the extent controlling, applicable or affecting the rights
<PAGE>
and obligations of the parties. This paragraph shall not be
deemed to be a waiver by Immunomedics of any right it may
have to contest with the appropriate governmental authority
the validity of any statutes, regulations, Executive Orders,
guidelines and considerations or their applicability to all
or any part of the Agreement as amended by this letter
agreement.
3. In addition, paragraph 8.1 of the Agreement is
hereby amended in its entirety to provide that the Agreement
shall continue in full force and effect until December 31,
1999, unless sooner terminated as provided in the Agreement;
provided, that if during the five-year term ending December
31, 1999 (I) the Center shall file a patent application or
(ii) a written invention disclosure or notice of invention
shall be filed by or with the Center or a principal
investigator of the Center, with respect to technology
covered by the Agreement (except for technology developed
under a third-party proposal as set out in paragraph 2.8 of
the Agreement), then subject to the submission by the Center
of a Proposal, during the five years commencing upon the
date of such filing, the rights of Immunomedics under the
Agreement with respect to such technology shall be as
follows:
(a) The Center shall promptly after such filing submit
a licensing proposal to Immunomedics with respect to such
technology (which shall be deemed to be a "Proposal" under
the Agreement) and thereupon Immunomedics shall have the
first right and option, for a period of one-hundred eighty
(180) days after submission by the Center, to negotiate a
license of such technology, upon the terms and conditions
set forth in paragraph 1 above; and
(b) In the event a license is not entered into by the
Center and Immunomedics within such 180-day period, or
Immunomedics earlier notifies the Center in writing that it
does not desire to obtain a license, the Center may
thereafter offer to and grant one or more licenses or other
rights in the technology covered by such (deemed) Proposal
to others without any further obligation to Immunomedics;
provided that, until the expiration of five years after such
filing, the Center shall not offer substantially the same
submission to a third party on terms, considered as a whole,
more favorable than those terms last offered to Immunomedics
without first offering such other terms to Immunomedics for
sixty (60) days.
At least ninety days and not more than one hundred eighty
days prior to the expiration of the initial term of the
Agreement (without considering any rights set forth in
clauses (a) and (b) above), Immunomedics may give to the
Center written notice of its desire to renew the Agreement
for an additional five-year period. In such event, the
<PAGE>
Center and Immunomedics will, during the sixty days after
receipt of such notice, attempt to agree in good faith upon
the terms and conditions of the Agreement to be in effect
during such additional five-year period. In the event that
the Center and Immunomedics shall be unable to agree upon
all of such terms and conditions prior to the expiration of
the term of the Agreement, the Agreement shall terminate in
accordance with its terms.
Except as set forth in this letter agreement, all of the
terms of the Agreement shall continue in full force and
effect. This letter agreement is the legal, valid, binding
and enforceable obligation of the parties. Each of the
parties represents to the other that the execution and
delivery of this letter agreement has been duly authorized
by all necessary corporate action of such party.
It is further acknowledged that the modifications to the
Agreement contained in this letter agreement are being
requested by the Center in order to better conform the
Agreement to the provisions of a certain tax certificate to
be delivered by the Center to the Essex County Improvement
Authority, McCarter & English and others, regarding the
Essex County Improvement Authority $3,600,000 County of
Essex Guaranteed Revenue Bonds, Series 1994 Garden State
Cancer Center Project. This letter agreement shall become
effective upon the closing of the sale of such Bonds, and
shall automatically terminate if such closing shall not
occur on or before May 15, 1995.
Very truly yours,
CENTER FOR MOLECULAR MEDICINE
AND IMMUNOLOGY, INC.
BY: /s/ Raymond Menard, Ph.D.
Agreed:
IMMUNOMEDICS, INC.
By: /s/ Amy Factor
<TABLE>
IMMUNOMEDICS, INC.
Selected Financial Data
<CAPTION>
in thousands except per share amounts 1995 1994 1993 1992 1991
______________________________________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Total revenues $ 3,189 $ 4,237 $ 5,055 $ 8,810 $ 2,100
Total operating expenses 14,593 19,293 14,482 10,198 6,688
Net loss (11,404) (15,056) (9,427) (1,388) (4,588)
Net loss per share (0.38) (0.50) (0.32) (0.05) (0.20)
Weighted average shares outstanding 30,098 30,051 29,420 26,461 23,201
Cash, cash equivalents and
marketable securities $ 22,814 $ 25,230 $ 41,813 $ 50,288 $ 9,966
Total assets 28,224 31,833 46,165 53,687 12,145
Stockholders' equity<F1> 23,629 27,395 42,622 51,735 6,376
<FN>
<F1> The Company has not paid cash dividends on its Common Stock since its inception.
</FN>
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Since its inception, the Company has been engaged primarily in the research
and development of proprietary products relating to the detection,
diagnosis and treatment of cancer, and more recently infectious diseases.
In April 1991, the Company filed a Product License Application ("PLA") with
the U.S. Food and Drug Administration ("FDA") seeking approval to
manufacture and market, in the United States, CEA-Scan , an in vivo
colorectal cancer imaging product. In May 1994, the Company received a
letter from the FDA indicating that the PLA for CEA-Scan for colorectal
cancer imaging was not approvable at that time. In July 1994, the Company
met with FDA officials to review the status of CEA-Scan and believes it
reached an understanding with the FDA that the results of the Phase III
pivotal clinical trial would be further analyzed to ascertain potentially
approvable claims for the product and what additional steps would need to
be taken to achieve approvability. In March 1995, the Company submitted a
response to the FDA's questions, including an analysis suggesting that
CEA-Scan will be useful in the pre-surgical evaluation of recurrent
colorectal cancer patients, particularly in the assessment of tumor
respectability for these patients. In September 1995, the FDA scheduled the
Company to present clinical trial data on CEA-Scan to the Oncology Drugs
Advisory Committee ("ODAC") on October 17, 1995. At the same time, the FDA
sent an action letter to the Company requesting clarification of the data,
additional information, and additional analyses which the Company had
provided in response to the FDA's May 1994 letter. Accordingly, the status
of the Company's PLA remained not-yet-approvable at the time of its
notification of the ODAC presentation. The FDA could delay the meeting if,
upon receipt of the clarification to be provided by the Company, the FDA
deems it needs more time to analyze the data or that the data do not
support the clinical efficacy of the product. It is the Company's intention
to present data to the ODAC supporting the use of CEA-Scan to better
define the spread of colorectal cancer and provide the surgeon with more
complete diagnostic information, helping to avoid unnecessary surgery in
patients who would not benefit from the procedure. In February 1992, the
Company filed with the Health Protection Branch ("HPB") to market CEA-Scan
in Canada. In March 1992, the Company filed with the Committee for
Proprietary Medicinal Products ("CPMP") to market the product in Europe. In
December 1994, the Company received notification from the Department of
Health Medicines Control Agency ("MCA") in the United Kingdom that the
Company's manufacturing operations are in general compliance with the
guidelines of Good Manufacturing Principles ("cGMP"). The Company continues
to work diligently with the U.S. and foreign regulatory authorities and
remains fully committed to the eventual approval of CEA-Scan in the U.S.,
Europe and Canada. However, no assurance can be given as to if or when any
such approvals could be forthcoming.
With respect to LeukoScan , an in vivo infectious disease diagnostic
imaging product, the Company has filed for regulatory approval with the
European Medicines Evaluation Agency ("EMEA"), seeking approval to market
the product in all fifteen countries which are members of the European
Union. The application seeks approval for LeukoScan to be used in the
detection and diagnosis of osteomyelitis (bone infection) in long bones and
<PAGE>
diabetic foot ulcers. In March 1995, the Company held a pre-PLA filing
meeting with FDA officials to obtain input from the FDA on proposed claims
for the product. As a result of the meeting, the Company is conducting
further analysis of its Phase III clinical data for the bone infection and
diabetic foot ulcer indications and has discussed with the FDA a filing and
clinical trial strategy, which includes the continued enrollment of
patients into the Phase III trial for these indications. Accordingly, the
earliest the Company believes it will be in a position to file a PLA for
LeukoScan with the FDA is the fourth quarter of calendar year 1995.
Meanwhile, Phase III trials for infected prosthesis and appendicitis are
continuing, and the Company is examining other applications for the
product. As with all regulatory filings, there can be no assurance that
such filings will be acceptable for review, or ultimately approved, by the
FDA.
The Company is also engaged in developing other biopharmaceutical
products, which are in various stages of development and clinical testing.
The Company has not achieved profitable operations and does not anticipate
achieving profitable operations during fiscal year 1996. The Company will
continue to experience operating losses until such time as it is able to
generate sufficient revenues from sales of its proposed in vivo products.
Further, the Company's working capital will continue to decrease until such
time as the Company is able to generate positive cash flow from operations
or until such time, if at all, as the Company receives an additional
infusion of cash from the sale of the Company's securities or from
corporate alliances to finance the Company's operating expenses and capital
expenditures.
Results of Operations
Fiscal Year 1995 Compared to Fiscal Year 1994
Revenues for the fiscal year ended June 30, 1995 were $3,189,000 as
compared to $4,237,000 in fiscal year 1994, representing a decrease of
$1,048,000. Sales and royalties on the Company's in vitro diagnostic
products represented $193,000 of the decrease in revenues for fiscal year
1995 as compared to fiscal year 1994. In June 1994, the Company assigned,
to an independent third party, all of the Company's manufacturing and
marketing rights associated with its in vitro diagnostic products,
excluding those rights relating to the Company's HAMA in vitro diagnostic
product. In exchange for assigning these rights, the Company is to receive
royalty payments through June 2003 on annual sales derived from such
products and recorded $120,000 in royalties during fiscal year 1995.
Interest income in fiscal year 1995 as compared to fiscal year 1994
decreased by $321,000, primarily as a result of reduced levels of cash
available for investments. (See "Liquidity and Capital Resources.")
Revenues in fiscal year 1995 include $1,665,000 of research and development
and milestone payments received from Pharmacia, Inc. ("Pharmacia"
formerly Adria Laboratories Division of Erbamont, Inc.), as compared to
$2,250,000 of such revenue recorded in fiscal year 1994. (See "Liquidity
and Capital Resources.")
Total operating expenses for the fiscal year ended June 30, 1995 were
$14,593,000 as compared to $19,293,000 in fiscal year 1994, representing a
decrease of $4,700,000. Research and development costs for the fiscal year
ended June 30, 1995 decreased by $2,206,000 as compared to the same period
<PAGE>
in 1994 due to decreased in vivo product manufacturing, clinical and
regulatory, and research and development costs of $1,263,000, $524,000 and
$419,000, respectively. The Company's decrease in manufacturing costs of
$1,263,000 was due principally to the completion of activities directed at
the validation and qualification of the Company's interim manufacturing
process and facility for CEA-Scan . The decrease in clinical and regulatory
costs of $524,000 resulted principally from the lower costs associated with
patient enrollment in Phase III clinical trials for LeukoScan in fiscal
year 1995, as well as the reduced costs associated with regulatory reviews
for CEA-Scan . The decrease in research and development costs of $419,000
was due, in part, to reduced support for the Center for Molecular Medicine
and Immunology ("CMMI") in fiscal year 1995 as compared to fiscal year 1994
(see Note 9 to Financial Statements).
General and administrative costs for the fiscal year ended June 30,
1995 decreased by $2,333,000 as compared to the same period in 1994. This
was largely due to a decrease in legal expenses of $1,631,000, principally
associated with patent-related activities.
Net loss for the year ended June 30, 1995 was $11,404,000, or $0.38 per
share, as compared to a net loss of $15,056,000, or $0.50 per share in
fiscal year 1994. The lower net loss resulted principally from decreased
expenditures in manufacturing, clinical, and legal activities. Lower
revenues, as explained above, partly offset the positive impact the lower
operating expenses had on the net loss.
Fiscal Year 1994 Compared to Fiscal Year 1993
Revenues for the fiscal year ended June 30, 1994 were $4,237,000 as
compared to $5,055,000 in fiscal year 1993, representing a decrease of
$818,000. Sales of the Company's in vitro diagnostic products represented
$655,000 of the decrease in revenues for fiscal year 1994 as compared to
fiscal year 1993. In vitro product sales in fiscal year 1993 included sales
of $395,000 through an international distributor whose distribution
agreement expired in March 1993. Interest income in fiscal year 1994 as
compared to 1993 decreased by $551,000, primarily as a result of reduced
levels of cash available for investments. (See "Liquidity and Capital
Resources.") Revenues in fiscal year 1994 included $2,250,000 of research
and development and milestone payments received from Pharmacia, as compared
to $1,000,000 of such revenue recorded in fiscal year 1993. Fiscal year
1993 revenues also included $1,000,000 of non-refundable license fees
received from Pharmacia. (See "Liquidity and Capital Resources.")
Total operating expenses for the fiscal year ended June 30, 1994 were
$19,293,000 as compared to $14,483,000 in fiscal year 1993, representing an
increase of $4,810,000. Research and development costs for the fiscal year
ended June 30, 1994 increased by $4,059,000 as compared to the same period
in 1993. This increase is due to increased in vivo product manufacturing,
clinical and regulatory, and research and development costs of $1,155,000,
$2,190,000 and $1,470,000, respectively. The Company's increase in
manufacturing costs of $1,155,000 was due to increased pre-commercial
manufacturing activities, scaling-up and validating the manufacturing
process for CEA-Scan for colorectal cancer imaging and LeukoScan for
infectious disease imaging. The increase in clinical and regulatory costs
of $2,190,000 resulted principally from the costs associated with the
<PAGE>
acceleration and completion of Phase III clinical trials for LeukoScan and
the ongoing regulatory reviews for CEA-Scan . The increase in research and
development costs of $1,470,000 is due, in part, to the Company's antibody
humanization program.
General and administrative costs for the fiscal year ended June 30,
1994 increased by $1,062,000 as compared to the same period in 1993,
including an increase in legal costs of $1,015,000 associated with
patent-related activities.
Net loss for the year ended June 30, 1994 was $15,056,000, or $0.50 per
share, as compared to $9,427,000, or $0.32 per share in fiscal year 1993.
This change principally results from expenditures associated with increased
manufacturing, clinical and regulatory and research and development
activities, and decreased revenues, as explained above.
Liquidity and Capital Resources
At June 30, 1995, the Company had working capital of $18,907,000,
representing a decrease of $2,973,000 from June 30, 1994, and had no
long-term debt other than certain lease obligations (see Note 11 to
Financial Statements). The decrease in working capital resulted principally
from the net loss during fiscal year 1995 of $11,404,000, partially offset
by cash received from a financing transaction in January 1995.
On January 18, 1995, the Company completed an equity financing pursuant
to Regulation S under the Securities Act of 1933, pursuant to which a group
of investors purchased 150,000 shares of non-dividend paying Series B
Convertible Preferred Stock (the "Series B Preferred") for $7,500,000. At
the Company's option, one investor was to purchase, in June 1995, an
additional 50,000 shares of the Series B Preferred for $2,500,000, under
substantially the same terms and conditions of the original offering,
provided that the average price of the Company's common stock was equal to
or greater than $2.75 per share during the 20-day trading period
immediately preceding the exercise date of such option. This condition was
not met, and the additional 50,000 shares of Series B Preferred were not
purchased by the investor. The terms of the transaction allow the
investors, at their discretion, to convert the Series B Preferred into
shares of the Company's common stock during a twenty-two month period
beginning in March 1995, at pre-determined discounts from the average
market price per share over a 40-day trading period surrounding the date of
conversion. As of June 30, 1995, 25,473 shares of Series B Preferred had
been converted into 544,116 shares of the Company's common stock. In July
and August 1995, an additional 80,820 shares of Series B Preferred were
converted into 1,545,929 shares of common stock. The proceeds from this
financing transaction will assist the Company in fulfilling its plans to
file for U.S. and European regulatory approval to market LeukoScan ,
advance CEA-Scan through the regulatory review process and initiate
clinical trials for cancer therapeutic products under development.
On August 2, 1995, the Company announced that its Development and
License Agreement with Pharmacia was terminated. Pursuant to this
Agreement, which had originated in July 1991, the Company had granted to
<PAGE>
Pharmacia an exclusive license to market and sell its CEA-Scan , AFP-Scan
and LymphoScan products for certain specified indications in the United
States and Canada. Also pursuant to this Agreement, in fiscal 1993 the
Company received non-refundable license fees of $1,000,000, which were
recorded as revenue when received, and earned research and development
revenue of $1,665,000 and $2,000,000 during the years ended June 30, 1995
and 1994, respectively. In June 1994, the Company and Pharmacia, in the
context of discussions directed towards restructuring their relationship,
agreed to release Pharmacia from its obligations and for the Company to
regain its marketing and selling rights for AFP-Scan and LymphoScan ,
whereby the Company assumed financial responsibility for all future
clinical, marketing and selling activities for these products. In August
1995, the Company regained the North American marketing and selling rights
for CEA-Scan from Pharmacia. The Company is discussing with Pharmacia the
amount of a final payment by Pharmacia to the Company to satisfy remaining
obligations. Similarly, the Company assumed financial responsibility for
all future clinical, marketing and selling activities for CEA-Scan . The
Company is now discussing the licensing of certain North American marketing
and selling rights to CEA-Scan with other potential partners.
In March 1995, the Company signed a license agreement with Mallinckrodt
Medical B.V., ("Mallinckrodt"), a leading producer and distributor of
radiopharmaceuticals in Europe. Under the terms of the agreement,
Mallinckrodt will market, sell and distribute CEA-Scan throughout Western
Europe and in select Eastern European countries, subject to receipt of
regulatory approval in the specified countries. In addition, the Company
will manufacture CEA-Scan , for which Mallinckrodt will pay the Company a
pre-determined royalty.
In February 1994, the Company entered into a master lease agreement,
which was subsequently amended, pursuant to which the Company may lease
equipment for research, development and manufacturing purposes having an
aggregate acquisition cost of up to $2,200,000. The basic lease payments
under the master lease agreement are determined based on current market
rates of interest at the inception of each equipment schedule take-down,
and are payable in monthly installments over a four-year period. The lease
agreement contains an early purchase option, at an amount which is deemed
to be fair value, exercisable no later than ninety days before the
thirty-sixth installment is due. Under the lease agreement, continued
compliance with certain financial ratios is required and, in the event of
default, the Company will be required to provide an irrevocable letter of
credit which is generally equal to the outstanding balance of lease
payments due at the time of default. As of June 30, 1995, the Company has
leased equipment aggregating $1,466,000 under the master lease agreement
and recorded lease expense for fiscal year 1995 of $332,000.
The Company has committed approximately $2,700,000 for the design,
construction and equipping of a commercial manufacturing facility at its
Morris Plains, NJ headquarters. The facility will consist of four
independent antibody manufacturing suites, several support areas, and a
quality control ("QC") laboratory. The Company is also obligated under two
operating leases for facilities used for research and development,
manufacturing, and office space. Total commitments for fiscal year 1996
under these leases and the equipment lease described above are $878,000.
<PAGE>
The Company's liquid asset position, as measured by its cash, cash
equivalents and marketable securities, was $22,814,000 at June 30, 1995,
representing a decrease of $2,416,000 from June 30, 1994. It is anticipated
that working capital and cash, cash equivalents, and marketable securities
will continue to decrease during fiscal year 1996 as a result of planned
operating expenses and capital expenditures. At present, the Company
believes that its financial resources will be sufficient to fund
anticipated operating expenses and capital expenditures through calendar
year 1996. The Company intends to supplement its financial resources from
time to time, as market conditions permit, through additional financing and
through collaborative marketing and distribution agreements. In addition,
the Company continues to evaluate various programs to raise additional
capital and to seek additional revenues from the licensing of its
proprietary technology. At the present time, the Company is unable to
determine whether any of these activities will be successful and, in such
cases, the terms and timing of any definitive agreements or financing.
There can be no assurance that the Company will be able to obtain
additional funds in the future.
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
Balance Sheets
<CAPTION>
June 30, 1995 1994
_____________________________________________________ ____________ ____________
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,162,837 6,371,245
Marketable securities 15,651,369 18,858,609
Other current assets 687,674 1,087,452
____________ ____________
Total Current Assets 23,501,880 26,317,306
Property and Equipment, net of accumulated
depreciation of $4,427,000 and $3,490,000 at
June 30, 1995 and 1994, respectively 4,722,604 5,515,729
____________ ____________
$ 28,224,484 31,833,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 1,932,908 2,191,315
Other current liabilities 2,662,401 2,246,299
____________ ____________
Total current liabilities 4,595,309 4,437,614
Commitments and Contingencies
Stockholders' Equity:
Preferred stock; $.01 par value, authorized
10,000,000 shares; Series B convertible,
authorized 200,000 shares;
issued and outstanding 124,527 shares
at June 30, 1995 1,245 0
Common stock; $.01 par value, authorized
50,000,000 shares; issued and outstanding
30,624,585 and 30,055,469 shares at
June 30, 1995 and 1994, respectively 306,246 300,555
Capital contributed in excess of par 72,098,771 64,676,957
Accumulated deficit (48,781,384) (37,377,656)
Accumulated net unrealized gain/(loss)
on securities 4,297 (204,435)
____________ ____________
23,629,175 27,395,421
____________ ____________
$ 28,224,484 31,833,035
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
Statements of Operations
<CAPTION>
Years Ended June 30, 1995 1994 1993
____________________________ _____________ _____________ _____________
<S> <C> <C> <C>
REVENUES:
Product sales and royalties $ 201,006 $ 394,039 $ 1,049,127
Research & development 1,878,500 2,412,500 1,025,000
License fees 0 0 1,000,000
Interest 1,109,721 1,430,276 1,981,074
_____________ _____________ _____________
3,189,227 4,236,815 5,055,201
COSTS AND EXPENSES:
Cost of goods sold 41,829 202,930 514,072
Research & development 12,491,847 14,698,025 10,638,998
General and administrative 2,059,279 4,391,831 3,329,521
_____________ _____________ _____________
14,592,955 19,292,786 14,482,591
_____________ _____________ _____________
Net loss $ (11,403,728) (15,055,971) (9,427,390)
_____________ _____________ _____________
Net loss per share $ (0.38) (0.50) (0.32)
_____________ _____________ _____________
Weighted average number of
shares outstanding 30,097,584 30,051,434 29,419,933
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
Statements of Changes in Stockholders' Equity
<CAPTION>
Accumulated
Convertible Contributed Realized
Preferred Stock Common Stock in Excess Accumulated Gain/(Loss)
Shares Amount Shares Amount of Par Deficit On Securities Total
____________________________ _________ ________ __________ ________ ___________ ___________ _____________ ____________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at June 30, 1992 80,000 $ 800 28,146,244 $ 281,462 64,347,381 (12,894,295) 0 51,735,348
Issuance of common stock in
exchange for convertible
preferred stock
(Series A), net (80,000) (800) 1,777,600 17,776 (34,342) 0 0 (17,366)
Exercise of options to
purchase common stock 0 0 116,375 1,164 329,758 0 0 330,922
Net loss 0 0 0 0 0 (9,427,390) 0 (9,427,390)
________ ________ __________ _________ ___________ ___________ _____________ ____________
Balance, at June 30, 1993 0 0 30,040,219 300,402 64,642,797 (22,321,685) 0 46,621,514
Exercise of options to
purchase common stock 0 0 15,250 153 34,160 0 0 34,313
Net unrealized loss
on securities 0 0 0 0 0 0 (204,435) (204,435)
Net loss 0 0 0 0 0 (15,055,971) 0 (15,055,971)
________ _________ __________ _________ ___________ ___________ _____________ ____________
Balance, at June 30, 1994 0 0 30,055,469 300,555 64,676,957 (37,377,656) (204,435) 27,395,421
Issuance of convertible
preferred stock
(Series B), net 150,000 1,500 0 0 7,371,000 0 0 7,372,500
Issuance of common stock in
exchange for convertible
preferred stock
(Series B), net (25,473) (255) 544,116 5,441 (5,186) 0 0 0
Exercise of options to
purchase common stock 0 0 25,000 250 56,000 0 0 56,250
Net unrealized loss
on securities 0 0 0 0 0 0 208,732 208,732
Net loss 0 0 0 0 0 (11,403,728) 0 (11,403,728)
________ ________ __________ _________ ___________ ___________ _____________ ____________
Balance, at June 30, 1995 124,527 $ 1,245 30,624,585 $ 306,246 72,098,771 (48,781,384) 4,297 23,629,175
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
IMMUNOMEDICS, INC.
Statements of Cash Flows
<CAPTION>
Years Ended June 30, 1995 1994 1993
____________________________________________________ _____________ _____________ _____________
<S> <C> <C> <C>
Cash Flows Used In Operating Activities:
Net Loss $ (11,403,728) (15,055,971) (9,427,390)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 937,107 1,042,307 632,898
Amortization of bond premium 113,318 311,245 236,051
Changes in operating assets and liabilities:
Other current assets 399,778 444,619 (419,706)
Accounts payable (258,407) 716,747 626,255
Other current liabilities 416,102 206,591 1,011,953
_____________ _____________ _____________
Net cash used in operating activities $ (9,795,830) (12,334,462) (7,339,939)
Cash Flows Provided By Investing Activities:
Purchase of marketable securities (11,639,212) (20,493,754) (31,118,526)
Proceeds from maturities of marketable securities 14,691,866 27,097,771 34,802,727
Proceeds from sale of marketable securities 250,000 5,274,305 4,235,039
Additions to property and equipment (143,982) (1,875,821) (1,166,514)
_____________ _____________ _____________
Net cash provided by investing activities 3,158,672 8,140,561 6,752,726
Cash Flows Provided By Financing Activites:
Issuance of convertible preferred
stock (Series B), net 7,372,500 0 0
Cost of conversion of preferred stock (Series A) 0 0 (17,366)
Exercise of stock options 56,250 34,313 330,922
Principal payments of long-term debt 0 (29,486) (45,635)
_____________ _____________ _____________
Net cash provided by financing activities 7,428,750 4,827 267,921
Increase/(Decrease) In Cash And Cash Equivalents 791,592 (4,189,074) (319,292)
Cash And Cash Equivalents, At Beginning Of Year 6,371,245 10,560,319 10,879,611
_____________ _____________ _____________
Cash And Cash Equivalents, At End Of Year $ 7,162,837 6,371,245 10,560,319
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
Notes to Financial Statements
1. Business Overview
Immunomedics, Inc. (the "Company") is engaged in researching, developing,
manufacturing and marketing biopharmaceutical products, particularly
antibody-based diagnostics and therapeutics for cancer and infectious
diseases.
The Company's operations encompass all the risks inherent in developing
and expanding a new business enterprise, including: (1) a limited operating
history and uncertainty regarding the timing and amount of future revenues
to be derived from the Company's technology; (2) obtaining future capital
as needed; (3) attracting and retaining key personnel; and (4) a business
environment with heightened competition, rapid technological change and
strict government regulation.
2. Summary of Significant Accounting Policies
Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with maturities of
three months or less, at the time of purchase, to be cash equivalents.
The Company's investments in marketable securities are available for
sale to fund growth in operations as the Company moves toward
commercialization of its products. The Company, subject to changes in
market conditions, does not intend to hold all marketable securities to
their maturity dates and, accordingly, the portfolio has been classified as
a current asset. The portfolio primarily consists of U.S. government
securities, corporate bonds, and equity securities.
Concentration of Credit Risk
The Company invests its cash in U.S. government securities and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines relative to diversification
and maturities that are designed to help ensure safety and liquidity. These
guidelines are periodically reviewed to take advantage of trends in yields
and interest rates.
Property and Equipment
Property and equipment are stated at cost and are depreciated on a
straight-line basis over the estimated useful lives (5 -10 years) of the
respective assets.
Revenue Recognition
Payments received under contracts to fund certain research activities are
recognized as revenue in the period in which the research activities are
performed. Payments received in advance which are related to future
performance are deferred and recognized as revenue when the research
projects are performed.
Non-refundable payments received under licensing arrangements are
recognized as revenue in the period in which they are received.
Revenue from the sale of in vitro diagnostic products is recognized at
the time of shipment.
<PAGE>
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards Number 109 ("SFAS No. 109") relating to the accounting
for income taxes. SFAS No. 109 requires the recognition of deferred tax
assets and liabilities relating to the expected future tax consequences of
events that have been recognized in the Company's financial statements and
tax returns. The Company has not recorded any tax benefits associated with
its net deferred tax assets, and therefore the implementation of this
Statement did not have a material effect on the Company's financial
position or results of operations. Prior years' financial statements have
not been restated (see Note 8).
Net Loss Per Share
Net loss per share is based upon the weighted average number of common
shares outstanding. Common share equivalents, consisting of outstanding
stock options and convertible preferred stock, are not included in the
computations since the effect would be antidilutive.
Reclassification
Certain 1994 and 1993 balances have been reclassified to conform to the
1995 presentation.
3. Marketable Securities
Effective June 30, 1994, the Company adopted Statement of Financial
Accounting Standards Number 115 ("SFAS No. 115"), "Accounting for Certain
Investments in Debt and Equity Securities." The effect of adopting this
statement was not material. Under this new accounting standard, securities
for which there is not the positive intent and ability to hold to maturity
are classified as available-for-sale and are carried at fair value.
Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of stockholders'
equity. The Company considers all of its current investments to be
available-for-sale. Consequently, pursuant to SFAS No. 115, a $4,000
unrealized holding gain and a $204,000 unrealized holding loss have been
recorded in a separate component of stockholders' equity as of June 30,
1995 and 1994, respectively. Marketable securities at June 30, 1995 and
1994 consist of the following:
<PAGE>
Fair Unrealized
Cost Market Holding
June 30, 1995: Basis Value Gain/(Loss)
__________________________________________ ___________ ___________ ___________
Securities with contractual maturities
from date of acquisition of one year
or less:
U.S. Debt Securities $ 5,631,000 5,676,000 45,000
Equity Securities 541,000 479,000 (62,000)
___________ ___________ ___________
$ 6,172,000 6,155,000 (17,000)
Securities with contractual maturities
from date of acquisition greater than
one year:
U.S. Debt Securities $ 6,722,000 6,721,000 (1,000)
Corporate Debt Securities 2,753,000 2,775,000 22,000
___________ ___________ ___________
9,475,000 9,496,000 (21,000)
___________ ___________ ___________
Total Marketable Securities $15,647,000 15,651,000 4,000
Fair Unrealized
Cost Market Holding
June 30, 1994: Basis Value Gain/(Loss)
__________________________________________ ___________ ___________ ___________
Securities with contractual maturities
from date of acquisition of one year
or less:
U.S. Debt Securities $ 8,116,000 8,128,000 12,000
Corporate Dept Securities 2,693,000 2,688,000 (5,000)
Equity Securities 534,000 450,000 (84,000)
___________ ___________ ___________
$11,343,000 11,266,000 (77,000)
Securities with contractual maturities
from date of acquisition greater than
one year:
U.S. Debt Securities $ 4,952,000 4,843,000 (109,000)
Corporate Debt Securities 2,768,000 2,750,000 (18,000)
___________ ___________ ___________
7,720,000 7,593,000 (127,000)
___________ ___________ ___________
Total Marketable Securities $19,063,000 18,859,000 (204,000)
<PAGE>
4. Other Current Assets
Included in other current assets is accrued interest income earned on
marketable securities and cash equivalents of approximately $231,000 and
$306,000 at June 30, 1995 and 1994, respectively. Also included in other
current assets at June 30, 1994 is a receivable for $500,000 from a
corporate partner, which was recorded as income in fiscal year 1994 for
research and development funding pursuant to a Development and License
Agreement (see Note 10). The Company received the $500,000 payment in July
1994.
5. Property and Equipment
Property and equipment consists
of the following at June 30: 1995 1994
_________________________________________ ____________ ____________
Machinery and equipment $ 2,936,000 2,962,000
Leasehold improvements 5,199,000 5,101,000
Furniture and fixtures 530,000 520,000
Computer equipment 485,000 423,000
____________ ____________
9,150,000 9,006,000
Accumulated depreciation and amortization (4,427,000) (3,490,000)
$ 4,723,000 5,516,000
6. Other Current Liabilities
Included in other current liabilities are amounts payable to medical
institutions participating in the Company's clinical trial programs of
approximately $468,000 and $612,000 at June 30, 1995 and 1994,
respectively. Also included are amounts payable to various legal counsel of
approximately $284,000 and $400,000, and accrued health insurance
liabilities of approximately $252,000 and $130,000 at June 30, 1995 and
1994, respectively. Further, included at June 30, 1995 is $912,000 received
from a corporate partner for the funding of ongoing clinical trials (see
Note 10).
7. Stockholders' Equity
On November 8, 1990, at the Company's Annual Meeting of Stockholders, the
Company's stockholders ratified a proposal to amend the Certificate of
Incorporation of the Company to authorize 10,000,000 shares of preferred
stock at $.01 par value per share. The preferred stock may be issued from
time to time in one or more series, with such distinctive serial
designations, rights and preferences as shall be determined by the Board of
Directors.
In March 1991, the Company completed a $4 million private placement of
80,000 shares of non-dividend paying Series A Convertible Preferred Stock
("Series A Preferred") at $50 per share. On October 9, 1992, the holders of
the Company's Series A Preferred (the "Preferred Shareholders") converted
all 80,000 outstanding preferred shares into common stock of the Company.
Each share of Series A Preferred was convertible into 22.22 shares of
common stock of the Company; accordingly, 1,777,600 shares of common stock
were issued to the Preferred Shareholders in exchange for the 80,000 shares
of Series A Preferred, all of which were canceled.
<PAGE>
On January 18, 1995, the Company completed an equity financing pursuant
to Regulation S under the Securities Act of 1933, pursuant to which a group
of investors purchased 150,000 shares of non-dividend paying Series B
Convertible Preferred Stock (the "Series B Preferred") for $7,500,000. At
the Company's option, one investor was to purchase, in June 1995, an
additional 50,000 shares of the Series B Preferred for $2,500,000, under
substantially the same terms and conditions of the original offering,
provided that the average price of the Company's common stock was equal to
or greater than $2.75 per share during the 20-day trading period
immediately preceding the exercise date of such option. This condition was
not met, and the additional 50,000 shares of Series B Preferred were not
purchased by the investor. The terms of the transaction allow the
investors, at their discretion, to convert the Series B Preferred into
shares of the Company's common stock during a twenty-two month period
beginning in March 1995, at pre-determined discounts from the average
market price per share over a 40-day trading period surrounding the date of
conversion. As of June 30, 1995, 25,473 shares of Series B Preferred had
been converted into 544,116 shares of the Company's common stock. In July
1995, an additional 16,632 shares of Series B Preferred were converted into
376,244 shares of common stock.
Under the terms of the Company's 1983 Stock Option Plan, as amended
(the "1983 Plan"), stock options were granted to employees and members of
the Board of Directors, as determined by the Compensation Committee of the
Board of Directors, at fair market value, become exercisable at 25% per
year on each of the first through fourth anniversaries of the date of
grant, and terminate if not exercised within ten years. In June 1993, the
1983 Plan expired. On November 5, 1992, at the Company's Annual Meeting of
Stockholders, adoption of the Company's 1992 Stock Option Plan (the "1992
Plan") was ratified. The basic terms of the 1992 Plan are substantially
similar to those under the Company's 1983 Plan. Under the 1992 Plan,
3,000,000 shares were originally reserved for possible future issuance upon
exercise of stock options, of which 1,777,000 were still available at June
30, 1995 for future grant. At June 30, 1995, 3,577,000 shares of common
stock were reserved for possible future issuance upon exercise of stock
options outstanding and future stock option grants.
Pursuant to the terms of the 1992 Plan, each outside Director of the
Company who had been a Director prior to July 1 is granted, on the first
business day of July each year, an option to purchase 10,000 shares of the
Company's common stock at fair market value. On July 3, 1995, 60,000 stock
options were granted to these Directors.
On April 11, 1995, the Compensation Committee of the Board of Directors
granted the Company's employees the opportunity to terminate their existing
options and receive new options at fair market value of the Company's
common stock on April 11, 1995, with a corresponding recommencement of
vesting. Accordingly, options to purchase 790,000 shares were terminated
and an equal number of new options were issued, which is reflected in the
table below.
<PAGE>
Information concerning options for the years ended June 30, 1995, 1994
and 1993 is summarized as follows:
1995
Shares Option Price Range
___________ __________________
Outstanding, July 1, 1994 1,655,750 $ 2.25 - 10.75
Granted 1,214,000 2.63 - 13.38
Exercised (25,000) 2.25
Terminated (1,044,750) 2.25 - 19.13
___________ __________________
Outstanding, June 30, 1995 1,800,000 $ 2.25 - 10.75
___________
Exercisable, June 30, 1995 558,750
1994
Shares Option Price Range
___________ __________________
Outstanding, July 1, 1993 1,675,500 $ 2.25 - 10.75
Granted 461,000 3.63 - 17.12
Exercised (15,250) 2.25
Terminated (465,500) 2.25 - 10.75
___________ __________________
Outstanding, June 30, 1994 1,655,750 $ 2.25 - 10.75
___________
Exercisable, June 30, 1994 771,000
1993
Shares Option Price Range
___________ __________________
Outstanding, July 1, 1992 1,656,750 $ 2.25 - 18.13
Granted 380,000 6.12 - 10.75
Exercised (116,375) 2.25 - 17.88
Terminated (244,875) 2.25 - 19.63
___________ __________________
Outstanding, June 30, 1993 1,675,500 $ 2.25 - 10.75
___________
Exercisable, June 30, 1993 462,750
<PAGE>
8. Income Taxes
The Company adopted SFAS No. 109 effective July 1, 1993. Pursuant to the
accounting standard, the tax effects of temporary differences that give
rise to significant portions of the Company's deferred tax assets as of
June 30, 1995 and 1994 are presented below:
1995 1994
_____________ _____________
Deferred tax assets:
Net operating loss carry forwards $ 18,882,000 14,100,000
Research and development credits 2,640,000 2,693,000
Property and equipment 226,000 160,000
Other 62,000 6,000
_____________ _____________
Total 21,810,000 16,959,000
Valuation allowance (21,810,000) (16,959,000)
_____________ _____________
Net deferred taxes $ 0 0
The valuation allowances for fiscal year 1995 and 1994 have been
applied to offset the deferred tax assets in recognition of the uncertainty
that such tax benefits will be realized. The June 30, 1994 valuation
allowance includes $6,500,000 relating to fiscal year 1994 operations.
At June 30, 1995, the Company has available net operating loss
carryforwards for Federal and state income tax reporting purposes of
approximately $47,289,000 and $46,730,000, respectively. These
carryforwards expire beginning in 1998. The Company made no payments of
Federal or state income taxes during the years ended June 30, 1995, 1994
and 1993.
9. Related-Party Transactions
The Center for Molecular Medicine and Immunology ("CMMI") is a
not-for-profit corporation, established in 1983 by Dr. David M. Goldenberg,
Chairman of the Board, Chief Executive Officer and the major shareholder of
the Company. CMMI is devoted primarily to cancer research.
Dr. Goldenberg currently serves as the President of CMMI pursuant to an
employment agreement and devotes substantially more of his working time to
CMMI than to the Company. Allocations between CMMI and the Company
regarding research projects are overseen by the Board of Trustees of CMMI
and the Board of Directors of the Company, excluding Dr. Goldenberg, to
minimize potential conflicts of interest. Certain employees of CMMI serve
as consultants to the Company.
CMMI is currently conducting basic research and patient evaluations in
a number of areas of potential interest to the Company. Effective in July
1995, the Company amended its license agreement with CMMI to assist CMMI in
complying with Internal Revenue Service criteria for their recently
completed tax-exempt financing. Under the original terms of the license
agreement, the Company had the right to an exclusive, worldwide license to
manufacture and market potential products developed by CMMI (other than
those funded by third parties) for specified royalty payments and on other
<PAGE>
specified terms. Under the amended license agreement, the Company maintains
the right of first negotiation to obtain exclusive, worldwide licenses from
CMMI to manufacture and market potential products and technology covered by
the license agreement under terms representing fair market price, to be
determined at the time the license is obtained.
The amended license agreement terminates on December 31, 1999, with the
Company having the right to seek good-faith negotiation to extend the
agreement for an additional five-year period. The Company retains such
amended licensing rights to inventions made during the term of the
agreement for a period of five years from the time of disclosure. Prior to
amendment, the license agreement terminated on December 11, 2010, with the
Company having the right to extend the agreement for two additional
five-year periods with specified minimum annual royalties to be paid during
these two periods. The Company is in the process of evaluating what
additional amendments to the license agreement may be necessary to satisfy
Federal laws and rules, including recently issued National Institutes of
Health Guidelines.
The Company has reimbursed CMMI for expenses incurred on behalf of the
Company, including amounts incurred pursuant to research contracts, in the
amount of approximately $57,000, $548,000 and $426,000 during the years
ended June 30, 1995, 1994 and 1993, respectively. The Company also provides
CMMI with laboratory materials and supplies in connection with research
conducted in areas of potential interest to the Company at no cost to CMMI.
During the years ending June 30, 1995, 1994 and 1993, the Board of
Directors of the Company authorized grants to CMMI of $300,000, $200,000
and $200,000, respectively, to support research and clinical work being
performed at CMMI, such grants to be expended in a manner deemed
appropriate by the Board of Trustees of CMMI.
10. License and Distribution Agreements
In July 1991, the Company entered into a Development and License Agreement
(the "Agreement") with Pharmacia, Inc. ("Pharmacia" formerly Adria
Laboratories Division of Erbamont, Inc.), whose parent company is
Sweden-based Pharmacia AB. Pursuant to the Agreement, the Company granted
to Pharmacia an exclusive license to market and sell its CEA-Scan ,
AFP-Scan , and LymphoScan products for certain specified indications (the
"products") in the United States and Canada. Also pursuant to the
Agreement, in fiscal year 1993 the Company received non-refundable license
fees of $1,000,000, which were recorded as revenue when received, and
earned research and development revenue of $1,665,000 and $2,000,000 during
the years ended June 30, 1995 and 1994, respectively.
In June 1994, the Company and Pharmacia, in the context of discussions
directed towards restructuring their relationship, agreed for the Company
to regain its marketing and selling rights, whereby the Company assumed
financial responsibility for all future clinical, marketing and selling
activities for AFP-Scan and LymphoScan .
On August 2, 1995, the Company announced that it had regained the North
American marketing and selling rights for CEA-Scan from Pharmacia. The
<PAGE>
Company is discussing with Pharmacia the amount of a final payment by
Pharmacia to the Company to satisfy remaining obligations. Payments which
have been received from Pharmacia to fund ongoing clinical trials for
CEA-Scan will be recorded as income as the trials are conducted (see Note
6).
In March 1995, the Company signed a License Agreement with Mallinckrodt
Medical B.V., ("Mallinckrodt"), a leading producer and distributor of
radiopharmaceuticals in Europe. Under the terms of the agreement,
Mallinckrodt will market, sell and distribute CEA-Scan throughout Western
Europe and in select Eastern European countries, subject to receipt of
regulatory approval in the specified countries. In addition, the Company
will manufacture CEA-Scan , for which Mallinckrodt will pay the Company a
pre-determined royalty on Mallinckrodt sales.
Domestic sales of the Company's in vitro diagnostic products
represented approximately 76%, 27% and 19% of total sales during fiscal
years 1995, 1994 and 1993, respectively. A distribution agreement with an
international distributor expired in March 1993. For the nine months ended
March 31, 1993, sales with this distributor were $395,000. In June 1994,
the Company assigned to an independent third party all of the Company's
manufacturing and marketing rights associated with its in vitro diagnostic
products, excluding those rights relating to the Company's HAMA in vitro
diagnostic product. In exchange for assigning these rights, the Company is
to receive royalty payments through June 2003 on annual sales derived from
such products. In fiscal 1995, the Company recorded royalty income of
$120,000 on sales of these products by the licensee.
11. Commitments and Contingencies
On November 1, 1993, the Company and Dr. Goldenberg entered into a
five-year employment agreement (the "Agreement") with an additional
one-year assured renewal and thereafter automatically renewable for
additional one-year periods unless terminated by either party as provided
in the Agreement. Dr. Goldenberg will receive an annual base salary of not
less than $220,000, subject to increases as determined by the Board of
Directors.
Pursuant to the Agreement, Dr. Goldenberg may engage in other business,
general investment and scientific activities, provided such activities do
not materially interfere with the performance of any of his obligations
under the Agreement, allowing for those activities he presently performs
for CMMI. The Agreement extends the ownership rights of the Company, with
an obligation to diligently pursue all ideas, discoveries, developments and
products, in the entire medical field, which, at any time during his past
or continuing employment by the Company (but not when performing services
for CMMI), Dr. Goldenberg has made or conceived or hereafter makes or
conceives, or the making or conception of which he has materially
contributed to or hereafter contributes to, all as defined in the Agreement
(collectively "Goldenberg Discoveries").
Further, pursuant to the Agreement, Dr. Goldenberg will receive,
subject to certain restrictions, incentive compensation of 0.5% on the
first $75,000,000 of all defined annual net revenue of the Company and
0.25% on all such annual net revenue in excess thereof (collectively
<PAGE>
"Revenue Incentive Compensation"). With respect to the period that Dr.
Goldenberg is entitled to receive Revenue Incentive Compensation on any
given products, it will be in lieu of any other percentage compensation
based on sales or revenue due him with respect to such products under this
Agreement or the existing License Agreement between the Company and Dr.
Goldenberg. With respect to any periods that Dr. Goldenberg is not
receiving such Revenue Incentive Compensation for any products covered by
patented Goldenberg Discoveries or by certain defined prior inventions of
Dr. Goldenberg, he will receive 0.5% on cumulative annual net sales of,
royalties, certain equivalents thereof, and, to the extent approved by the
Board, other consideration received by the Company for such products, up to
a cumulative annual aggregate of $75,000,000 and 0.25% on any cumulative
annual aggregate in excess of $75,000,000 (collectively "Royalty
Payments"). A $100,000 annual minimum payment will be paid in the aggregate
against all Revenue Incentive Compensation and Royalty Payments. Dr.
Goldenberg will also receive a percent, not less than 20%, to be determined
by the Board, of net consideration (including license fees) which the
Company receives for any disposition, by sale, license or otherwise
(discussions directed to which commence during the term of his employment
plus two years) of any defined Undeveloped Assets of the Company which are
not budgeted as part of the Company's strategic plan.
On February 1, 1994, the Company entered into a master lease agreement,
which was subsequently amended, pursuant to which the Company may lease
equipment for research, development and manufacturing purposes having an
aggregate acquisition cost of up to $2,200,000. The basic lease payments
under the master lease agreement are determined based on current market
rates of interest at the inception of each equipment schedule take-down,
and payable in monthly installments over a four-year period. The lease
agreement contains an early purchase option, at an amount which is deemed
to be fair value, exercisable no later than ninety days before the
thirty-sixth installment is due. Under the lease agreement, continued
compliance with certain financial ratios is required and, in the event of
default, the Company will be required to provide an irrevocable letter of
credit which is generally equal to the outstanding balance of lease
payments due at the time of default. As of June 30, 1995, the Company has
leased equipment aggregating $1,466,000 under the master lease agreement
and recorded lease expense for fiscal 1995 of $332,000.
The Company is obligated under two operating leases for facilities used
for research and development, manufacturing and office space. The leases
expire in October 1996 and May 1999, and contain renewal provisions as
specified in the respective leases. The lease expiring in May 1999 provides
for escalating lease payments and an option to purchase the facility,
exercisable by the Company any time after December 1993, subject to certain
terms and conditions as specified in the lease. Lease expense was
approximately $495,000, $484,000 and $439,000 in fiscal years 1995, 1994
and 1993, respectively. Minimum lease commitments for facilities and
equipment are as follows:
1996 $878,000
1997 $814,000
1998 $804,000
1999 $521,000
Thereafter 0
<PAGE>
The Company has committed approximately $2,700,000 for the design,
construction and equipping of a commercial manufacturing facility at its
Morris Plains, New Jersey headquarters.
On April 18, 1995, the Company announced that the United States
District Court for the District of New Jersey granted the Company's motion
to dismiss the shareholder lawsuit that was filed June 2, 1994. The
complaint alleged that public disclosures from January 30, 1992 through May
25, 1994 about the future prospects of the Company were fraudulent and
misleading. The court held, among other things, that the claims made by the
Plaintiff were "simply an insufficient basis on which to bring a securities
fraud action." In May 1995, the Plaintiff filed an appeal, which is
currently pending before the U.S. Court of Appeals for the Third Circuit.
The Company is involved in various other claims and litigation arising
in the normal course of business. Management believes, based on the opinion
of counsel representing the Company in such matters, that the outcome of
such claims and litigation will not have a material effect on the Company's
financial position and results of operations.
Independent Auditors' Report
KPMG Peat Marwick LLP
To the Board of Directors and Stockholders of Immunomedics, Inc.:
We have audited the accompanying balance sheets of Immunomedics, Inc. as of
June 30, 1995 and 1994, and the related statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 an 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 financial statements referred to above present fairly,
in all material respects, the financial position of Immunomedics, Inc. as of
June 30, 1995 and 1994, and the results of its operations and its cash flows
for each of the years in the three-year period ended June 30, 1995, in
conformity with generally accepted accounting principles.
Short Hills, New Jersey
July 27, 1995, except for the
third paragraph of Note 10
which is as of August 2, 1995
<PAGE>
Price Range of Common Stock
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "IMMU". The table below sets forth for the periods indicated the
high and low sales prices for the Company's Common Stock, as reported by The
Nasdaq Stock Market.
As of September 1, 1995, there were approximately 1,150 holders of record
of the Company's Common Stock.
Fiscal Quarter Ended High Low
________________________________________________
September 30, 1993 8 5 3/4
December 31, 1993 7 5/8 5
March 31, 1994 6 1/2 4 3/8
June 30, 1994 5 7/8 2 7/8
________________________________________________
September 30, 1993 5 3/8 3
December 31, 1993 5 1/8 3
March 31, 1994 4 1/8 2 3/4
June 30, 1994 3 5/8 2 1/8
Independent Auditors' Consent
The Board of Directors
Immunomedics, Inc.:
We consent to incorporation by reference in the registration statement
(No. 33-16260) on Form S-8 of Immunomedics, Inc. of our report dated
July 27, 1995, except as to the third paragraph of Note 10, which is as
as August 2, 1995, relating to the balance sheets of Immunomedics, Inc.
as of June 30, 1995 and 1994, and the related statements of operations,
changes in stockholders' equity, and cash flows for each the years in the
three-year period ended June 30, 1995, which report is incorporated by
reference in the June 30, 1995 Annual Report on Form 10-K of Immunomedics,
Inc.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
September 26, 1995
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<FISCAL-YEAR-END> Jun-30-1995
<PERIOD-START> Jul-01-1994
<PERIOD-END> Jun-30-1995
<CASH> 7,162,837
<SECURITIES> 15,651,369
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<CURRENT-ASSETS> 23,501,880
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0
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<TOTAL-REVENUES> 3,189,227
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