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FORM 10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 0-12104
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IMMUNOMEDICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 61-1009366
(State of Incorporation) (I.R.S. Employer Identification No.)
300 AMERICAN ROAD, MORRIS PLAINS,
NEW JERSEY 07950
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (201) 605-8200
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 requirement for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of 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 23, 1996, 34,880,365 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 $185,906,081.
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 6, 1996 (THE
"1996 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.
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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, now called a Biologics License
Application ("BLA"), 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(R). In April 1996, the Company received a
letter from the FDA indicating that the BLA for CEA-Scan(R) for colorectal
cancer imaging was approvable. On June 28, 1996, the FDA licensed CEA-Scan(R)
for use with standard diagnostic modalities ("SDM") for the detection of
recurrent and/or metastatic colorectal cancer. In February 1992, the Company
filed with the Health Protection Branch ("HPB") to market CEA-Scan(R) in
Canada, and in March 1992, the Company filed with the Committee for
Proprietary Medicinal Products ("CPMP") to market the product in Europe. On
May 22, 1996, CEA-Scan(R) was recommended for European approval in a unanimous
opinion by the CPMP. This constitutes the final regulatory step before
marketing authorization is granted by the European Commission for use of the
product in the 15 countries comprising the European Union. The Company
continues to work diligently with Canadian regulatory authorities and remains
fully committed to the eventual approval of CEA-Scan(R) in Canada. Clinical
trials of CEA-Scan(R) for the detection of lung and breast cancers are
currently in Phase III and Phase II trials, respectively. However, no
assurance can be given as to if or when final regulatory approvals for any of
the products named above (for which final regulatory approval has not yet been
received) will be forthcoming.
With respect to LeukoScan(R), 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 15 countries which are members of the European Union. The
application seeks approval for LeukoScan(R) to be used in the detection and
diagnosis of osteomyelitis (bone infection) in long bones and in diabetic foot
ulcer patients. In preparation for filing an application for this product with
the FDA, the Company conducted 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 included the
continued enrollment of patients into the Phase III trial for these
indications. The Company is now in the final stages of assembling the
application and believes it will be in a position to file a BLA for
LeukoScan(R) with the FDA before the end of calendar year 1996. 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 filing will be
acceptable for review, or ultimately approved, by the FDA or other regulatory
agencies. 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(TM)), currently in a Phase II clinical trial, and lymphomas
(LymphoScan(TM)), for which a Phase III clinical trial was recently begun (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(TM)-LL2, its non-Hodgkin's 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(TM)-LL2 into Phase III trials with the murine antibody form (see "In
Vivo Therapeutic Products").
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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 Manufacturing Principles ("cGMP"). In
addition, the Newark Facility has been inspected and approved by the FDA as
part of the process of approving the BLA for CEA-Scan(R). The Company has also
recently completed construction of a manufacturing facility at its Morris
Plains headquarters (see "Manufacturing").
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical B.V. ("Mallinckrodt Medical"), a leading producer and
distributor of radiopharmaceuticals in Europe and an affiliate of Mallinckrodt
Group Inc. ("Mallinckrodt Group" and with Mallinckrodt Medical, collectively,
"Mallinckrodt"). Mallinckrodt Medical will market, sell and distribute CEA-
Scan(R) throughout Western Europe and in specified Eastern European countries,
subject to receipt of regulatory approval in the specified countries. In April
1996, the Company entered into a Marketing and Distribution Agreement with
Mallinckrodt Group, pursuant to which Mallinckrodt Group will market, sell and
distribute CEA-Scan(R) for use in colorectal cancer diagnostic imaging in the
U.S. on a consignment basis (see "Marketing and Sales").
In August 1995, the Company announced that its license agreement with
Pharmacia, Inc. (which subsequently became Pharmacia & Upjohn Inc.--
"Pharmacia") had been terminated. In June 1996, the Company filed a claim
against Pharmacia before the American Arbitration Association claiming damages
for breach of contract and fiduciary duty in an amount in excess of $60
million plus punitive damages (see "Marketing and Sales").
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. The Company has also
formed a subsidiary, Immunomedics, B.V., with offices located in Petten, The
Netherlands, to manage the Company's sales and marketing efforts and
coordinate clinical trials in Europe.
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 distant 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.
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On June 28, 1996, the FDA licensed CEA-Scan(R) for the detection of
colorectal cancer in conjunction with SDM. A license application for CEA-
Scan(R) was filed with the Canadian HPB in February 1992 and with the European
Community CPMP in March 1992 (see "Introduction"). Immunomedics also 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, and one for the specific imaging of Pneumocystis carinii pneumonia
("PCP").
The antibody in CEA-Scan(R) 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. As part of
receiving FDA approval for CEA-Scan(R), the Company has agreed to conduct
Phase IV clinical studies to evaluate the product following readministration.
The Company also is performing Phase III clinical trials, using CEA-Scan(R),
for imaging lung cancer. In addition, Phase II clinical trials for breast
cancer imaging are nearing completion.
LeukoScan(R) 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(R), and in August 1995, the Company filed for European regulatory
approval to market the product for detecting and diagnosing osteomyelitis
(bone infection) in long bones and in diabetic foot ulcer patients. In
addition, Phase III clinical trials are continuing for the use of LeukoScan(R)
in the detection of infected prosthetic joints and in appendicitis (see
"Introduction").
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(TM), employing an antibody capable of targeting an antigen on
non-Hodgkin's B-cell lymphoma (Phase III clinical trial is underway).
-- AFP-Scan(TM), 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 trial is underway).
PCP-Scan(TM) has been studied for the imaging and diagnosis of Pneumocystis
carinii pneumonia ("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"). This trial has shown that specific antibodies against a
pathogenic organism, such as Pneumocystis, can target the disease site.
Further studies to evaluate this potential product are planned. 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").
In managing and allocating resources related to its clinical trial program,
the Company's top priorities are the commencement of commercial shipments of
CEA-Scan(R) in the U.S. and approval and launch of CEA-Scan(R) in Europe, as
well as the BLA filing for LeukoScan(R). It is the Company's intention,
however, to increase resources allocated to its diagnostic imaging clinical
trial program.
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(TM)-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(TM)-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
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is working towards advancing its humanized antibody program into Phase I
clinical trials; therefore it does not currently plan to advance ImmuRAIT(TM)-
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 incurred approximately $12,504,000, $12,492,000, and $14,698,000
in total research and development expense during fiscal years 1996, 1995 and
1994, 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, while minimizing 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). Moreover, using the techniques
of molecular biology, the Company's scientists have re-engineered the
humanized antibodies with improved characteristics, such as favorable
pharmacokinetic properties and increased radionuclide and drug loading
capacities.
During fiscal years 1996, 1995 and 1994, the Company, in collaboration with
CMMI, demonstrated successful targeting in patients with the Company's
humanized monoclonal antibodies (hMN-14 and hLL2) against the CEA cancer
marker and non-Hodgkin's B-cell lymphoma, respectively, as compared to the
murine counterparts (MN-14 and LL2). The anticancer humanized antibodies are
about 95% human and have shown very good uptake in the patients' tumors. In
August 1995, data were presented from a pilot clinical trial which
demonstrated 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 is proceeding with clinical testing at
therapeutic doses.
Alternative Radioisotopes
The Company is using iodine-131 to label its anti-lymphoma antibody (LL2)
currently in a phase I/II clinical trial against non-Hodgkin's lymphoma.
Investigators at several institutions have found that this disease responds
well to radioimmunotherapy using iodine-131 labeled anti-lymphoma antibodies.
However, one potential drawback of an iodine-131-labeled LL2 antibody is the
finding that LL2, as a rapidly internalizing antibody, is readily metabolized
with the iodine-131-bound metabolite and is quickly excreted from the target
cell. This means that full advantage is not taken of the eight-day half-life
of the iodine-131 radionuclide. In contrast, yttrium-90 from administered
yttrium-90 labeled LL2 has been shown to be retained inside lymphoma cells for
long periods after antibody metabolism. For this reason, and also for reasons
of greater efficacy against larger tumors and the potential for out-patient
use due to lack of any associated gamma-ray emissions, the Company's
scientists are developing yttrium-90-LL2 as a second-generation product (see
"Government Grants").
New Conjugation Methods
During fiscal year 1996, the Company made additional progress in the
development of new methods for the construction of immunoconjugates, including
the discovery of novel carbohydrate components 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. These carbohydrate
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components are relatively distant from the antigen binding site, representing
novel conjugation sites which would not interfere with the immunoreactivity of
the antibody. This is 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. In August 1995, a
patent was issued to the Company relating to the use of one of these sites for
conjugation. There can be no assurance, however, that these developments will
lead to products that are successful for treating cancers.
Other Antibody-Directed Therapy Approaches
The Company is continuing work on selective coupling of therapeutic site-
specific agents onto engineered carbohydrate residues on antibody fragments.
The proprietary antibody constructs offer the advantage of loading multiple
therapeutic moieties onto antibody fragments at a particular site and in a
manner which is known not to interfere with antigen binding. The Company is
also investigating "pre-targeting", whereby an antibody is administered first
and then followed by a separate radionuclide administration. Secondary
recognition groups are attached, one to the targeting antibody and the other
to the radionuclide, such that the radionuclide is localized to the antibody
pre-targeted to the tumor site. Using such methods in preclinical animal tumor
models, target-to-blood uptake ratios of radionuclide have been improved by
orders of magnitude compared to the antibody radiolabeled in the conventional
manner. The advantage of markedly increased target-to-blood ratios is somewhat
offset by the greater complexity involved in multiple administration and
timing of reagents. Accordingly, there can be no assurance at the present time
that this "pre-targeting" approach will offer a practical alternative for
radioimmunotherapy.
Peptides
During fiscal year 1996, the Company successfully developed proprietary
methods for technetium-99m radiolabeling of peptides up to clinical-scale
levels using single vial kits. These new automated synthetic methods will be
generally applicable to the preparation of radioconjugates of other diverse
chelate-peptides. This will enable rapid evaluation of different peptide-
receptor systems directly with peptide analogs labeled with technetium-99m,
the optimum imaging radionuclide. In related work, the Company has used
similar novel synthetic methods to prepare chelate-peptide conjugates which
can be radiolabeled with indium-111 and yttrium-90.
Government Grants
In September 1996, the Company was awarded a Phase II Small Business
Innovation Research ("SBIR") grant from the National Cancer Institute ("NCI")
of the National Institutes of Health ("NIH"), totaling $750,000 and payable
over two years. These funds will support development of a yttrium-90
radiolabeled humanized LL2 antibody for clinical radioimmunotherapy of
radiosensitive non-Hodgkin's lymphoma. The work aims to identify the optimal
form of the radioimmunoconjugate and advance this product through a Phase I/II
trial. The Company has also applied for two $100,000 SBIR Phase I grants, each
of which is concerned with therapy applications using the Company's
antibodies. The first application covers the identification of an optimal drug
conjugate anti-PCP antibody to be used for treatment of AIDS patients
suffering from this type of infection. The second application covers the
development of radioiodinated antibodies, prepared using novel chemistries,
from which the iodine-131 is retained for extended periods inside tumor cells,
like yttrium-90, for enhanced iodine-131 radioimmunotherapy. Each of the
applications has received recommendation for funding in the NCI peer review
process. However, there can be no assurance as to if or when either grant will
be received.
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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, but will be moving in the near future to improved
facilities in Belleville, New Jersey. 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 devotes 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, Executive Officers of the
Company, are adjunct members of 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.
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 its then recently
completed tax-exempt financing. Under the terms of the amended license
agreement, the Company has 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 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. 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 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 of the Company (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 $64,000, $57,000, and $548,000 during fiscal years
1996, 1995 and 1994, 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 fiscal years 1996, 1995 and 1994, the Board of Directors of the
Company authorized grants to CMMI of $200,000, $300,000, 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.
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BUSINESS RISKS
The Company's products are in various stages of development and face a high
degree of technological, regulatory and competitive risk. In addition, the
Company's products must be approved for marketing by the FDA and other
regulatory agencies (with the exception of CEA-Scan(R), which has been
licensed by the FDA for limited use), and no assurance can be given as to if
or when such approvals will be forthcoming. Product discovery and product
development activities are capital intensive. At least until CEA-Scan(R) 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. In addition, the Company does not
presently have a sales and marketing component. However, the Company has
entered into agreements with Mallinckrodt for the distribution of CEA-Scan(R)
in the U.S. and Europe (see "Marketing and Sales"). To date, the Company has
not manufactured or sold significant commercial quantities of its products,
and 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,
among others, 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.
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(R), AFP-Scan(TM)
and LymphoScan(TM) 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 the
marketing and selling rights and assumed financial responsibility for all
future clinical, marketing and selling activities for LymphoScan(TM) and AFP-
Scan(TM). On August 2, 1995, the Company announced that its agreement with
Pharmacia was terminated, and that the Company had regained the North American
marketing and selling rights for CEA-Scan(R) from Pharmacia. Subsequent to
termination of the Agreement, the Company and Pharmacia were unable to agree
on the amount of a final payment by Pharmacia to the Company to satisfy
Pharmacia's remaining obligations. In June 1996, the Company filed a claim
against Pharmacia before the American Arbitration Association claiming damages
for breach of contract and fiduciary duty in the amount of $60 million plus
punitive damages. However, no assurance can be given as to the amount, if any,
that the Company may receive with respect to this claim.
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical, pursuant to which Mallinckrodt Medical will market, sell
and distribute CEA-Scan(R) throughout Western Europe and in specified Eastern
European countries, subject to receipt of regulatory approval in the specified
countries. The Company will manufacture CEA-Scan(R), for which Mallinckrodt
Medical will pay the Company a pre-determined royalty per vial or a pre-
determined percentage of the net selling price.
In April 1996, the Company entered into a Marketing and Distribution
Agreement with Mallinckrodt Group, pursuant to which Mallinckrodt Group will
market, sell and distribute CEA-Scan(R) for use in colorectal cancer
diagnostic imaging in the U.S. on a consignment basis, and will commit
financial resources to this effort. The
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Company will retain manufacturing and co-promotional rights, will pay
Mallinckrodt Group a pre-determined amount or percentage of the net selling
price, and will potentially commit additional financial resources to
promotional activities.
The Company's intent, possibly in collaboration with another corporate
partner, is to combine LymphoScan(TM) 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(R)". 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 will receive royalty payments through June 2003 on annual
sales derived from such products. In fiscal year 1996, the Company recorded
royalty income of $131,000 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(R)
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.
MANUFACTURING
The Company has to date manufactured all monoclonal antibody products used
in its clinical trial programs and currently manufactures CEA-Scan(R) for
commercial use. The Company currently performs antibody processing and
purification of its clinical products at its Newark Facility (see
"Properties"). The Company has agreed to manufacture and supply all of
Mallinckrodt's requirements for CEA-Scan(R), subject to certain conditions and
limitations, and will receive transfer fees in consideration therefor (see
"Marketing and Sales"). The Company has entered into a manufacturing agreement
with Pharmacia, pursuant to which Pharmacia will perform certain end-stage
portions of the manufacturing process. Under the terms of such agreement, the
Company will pay according to an established price structure for these
services. The Company is presently negotiating with a second entity to perform
similar end-stage manufacturing.
The Newark Facility has been approved by both the FDA and European
regulatory authorities for the manufacture of CEA-Scan(R). The Company has
scaled-up to commercial levels its antibody purification and fragmentation
manufacturing processes. The Company believes the Newark Facility is in
compliance with the regulations established by the FDA for good laboratory and
manufacturing practices.
The Company has completed construction of a 7,500 square-foot commercial-
scale antibody manufacturing facility at its headquarters in Morris Plains,
New Jersey, which also houses the Company's regulatory, medical, research and
development, finance, marketing and executive offices (see "Properties"). The
new manufacturing facility consists of four independent antibody manufacturing
suites, several support areas, and a quality control ("QC") laboratory.
Validation of the new facility has recently begun, whereby the Company intends
to adopt a new, more efficient manufacturing process. However, there can be no
assurance if or when this facility will be approved by the regulatory
authorities to meet the manufacturing needs of the Company in a timely manner.
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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 for the production of ascites fluid.
Although CEA-Scan(R) has been approved in the U.S. and recommended for
approval in Europe, 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 control procedures
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
will be adequate for future products. The Company's effort to convert to cell
culture production for certain monoclonal antibodies is progressing. Products
manufactured by cell culture involve a substantial change in process which
will require FDA approval, as well as additional manufacturing equipment and
resources.
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 30 issued United States
patents and 143 issued foreign patents, with 49 United States patent
applications pending, of which one has been allowed, and 116 foreign patent
applications pending, of which 10 have been allowed. Included in the foregoing
are eight United States patents and their foreign counterparts, to which the
Company has exclusive rights pursuant to a 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.
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. The U.S. Patent & Trademark
Office issued a patent in May 1996 covering claims successfully defended in
the interference.
In January 1996, the Company was issued a U.S. patent covering several pre-
targeting methods for detecting and treating cancerous, infectious and
cardiovascular lesions. The patented methods use a polymeric carrier molecule
at one or more stages of the pre-targeting sequence for amplification, which
greatly increases the number of targets at the lesion for attachment of a drug
or radioisotope.
In April 1996, the Company was issued three patents in Japan covering
imaging and therapy technologies as well as most of its products. The first
patent covers radiolabeled antibodies and fragments against a variety of
cancer-associated substances used to treat diverse cancer types, where the
cancer-associated substances are present either on or within the cancer cell.
The second patent covers the use of anti-antibodies to reduce the therapeutic
antibody's deposition in normal tissues to enhance the specific targeting of
cancers or sites of infection. The third patent covers the Company's method of
directly labeling a protein or antibody with the imaging isotope, technetium-
99m, or the therapeutic isotopes, rhenium-186 and rhenium-188.
In May 1996, the Company was issued a U.S. patent covering methods for
labeling proteins particularly monovalent antibody fragments, with technetium
and rhenium isotopes. This was the Company's third U.S. patent covering
technetium labeling technology, and the fifth to cover CEA-Scan(R).
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In June 1996, two additional U.S. patents were issued to the Company. The
first patent covers new methods of detecting and/or treating certain disease
conditions such as cancers, infectious diseases and cardiovascular conditions.
The second patent covers a pre-targeting method involving a three-or four-step
procedure that is intended to increase the binding of antibodies to cancers or
other diseased tissues, as well as to increase the deposition of the detection
or therapeutic agents in lesions.
In August 1996, the Company was issued a U.S. patent covering new conjugates
useful in cancer or infectious disease therapy. These conjugates involve
diverse drugs or toxins bound to a targeting substance, such as an antibody,
which binds to a cancer or to an infectious organism. In a series of 16
claims, the patent covers the treatment of various forms of cancer, toxoplasma
and mycoplasma, as well as viruses, bacteria and fungi.
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 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 "Incentive Payments"). A $100,000 annual minimum payment will be
paid in the aggregate against all Revenue Incentive Compensation and Incentive
Payments ("Annual Minimum Payment").
Dr. Goldenberg will also receive a percent, not less than 20%, to be
determined by the Board of Directors of the Company, 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 Board
of Directors of the Company, Dr. Goldenberg will also not be entitled to any
Revenue Incentive Compensation or Incentive 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.
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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(R)), 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 believes that its patents are valid and will be upheld if
challenged.
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.
The mark "IMMUNOMEDICS" is registered in the United States and 21 foreign
countries, and the Company's logo also is registered in the United States and
in several foreign countries. The mark "IMMUSTRIP" is registered in the United
States and Canada. The mark "CEA-SCAN" is registered in the United States and
6 foreign countries, applications are pending in 5 foreign countries and an
application for a European Community Trademark is pending. The mark
"LEUKOSCAN" is registered in the United States and 8 foreign countries,
applications are pending in 4 foreign countries and an application for a
European Community Trademark is pending. An application for the mark
"LYMPHOSCAN" is pending in the United States, the mark is registered in 7
foreign countries, applications are pending in 5 foreign countries and an
application for a European Community Trademark is pending. In addition, the
Company has applied for registration in the United States for 4 other
trademarks for use on products now in development or testing, and for
corresponding foreign and/or European Community Trademarks for certain 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 Biologics 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 filing of a Biologics License
Application with 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, as was the case with CEA-Scan(R). 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
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compound will make in improving the diagnosis and/or treatment of the disease
in question and the workload at the FDA. There can be no assurance that any
new product 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 BLA. In
addition to obtaining FDA approval for each product, the FDA must also 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 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 BLA. The BLA 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 BLA is submitted to the FDA for product marketing approval. The FDA must
approve the BLA and manufacturing facilities 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.
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, i.e., diseases affecting fewer than 200,000
persons in the United States. The Company has received Orphan Drug designation
for, among others, AFP-Scan(TM), LymphoScan(TM) and ImmuRAIT(TM)-LL2, the
Company's liver and germ cell imaging, lymphoma imaging and lymphoma
therapeutic products, respectively, and for CEA-Scan(R) for the diagnosis of
medullary thyroid cancer. 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.
Manufacture of a biological product must be in a facility approved by the
FDA for such product. 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
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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 successfully commercialize its products may 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
payers 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 its
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 current products or
products 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 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 current or 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 current and
proposed diagnostic imaging products, including the ease of use (e.g., single
vial, rapid imaging), employment of technetium-99m (the most
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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
As of September 23, 1996, the Company employed 92 persons on a full-time
basis, 26 of whom are engaged in research and development, 23 of whom are
engaged in clinical research and regulatory affairs, 27 of whom are engaged in
operations and manufacturing, and 16 of whom are engaged in finance,
administration and marketing. Of these employees, 23 hold M.D., Ph.D. or other
advanced degrees. The Company believes that it has been 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 is 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 recently completed the construction and equipping of a
7,500 square-foot commercial-scale manufacturing facility at its Morris Plains
headquarters, which consists of four independent antibody manufacturing
suites, several support areas, and a QC laboratory (see "Manufacturing").
The Company also leases approximately 12,000 square feet to house its Newark
Facility as well as 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.
In August 1995, the Company exercised its right to extend this lease through
March 1, 1997. Upon or before expiration of the lease, the Company intends to
relocate personnel and equipment from the Newark Facility to its Morris Plains
headquarters.
ITEM 3--LEGAL PROCEEDINGS
The Company is involved in various claims and litigation arising in the
normal course of business. Management believes that the outcome of such claims
and litigation will not have a material adverse effect on the Company's
financial position and results of operations.
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 1996.
----------------
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Company and their positions with the Company
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
David M. Goldenberg.............................. 58 Chairman of the Board, CEO
and Director
Hans J. Hansen................................... 63 Vice President
Research and Development
Carl M. Pinsky................................... 58 Vice President
Medical Affairs
Donald H. Marks.................................. 47 Vice President
Clinical Research
</TABLE>
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Each of the Executive Officers was elected as such by the Board of Directors
of the Company and holds his office at the discretion of the Board of
Directors or until his 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. He has also served as Chief
Executive Officer of the Company from July 1982 through July 1992 and as
Treasurer of the Company since July 1996. 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 900 journal articles, book chapters and abstracts on
cancer research, detection and treatment, and has researched and written
extensively in the area of 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 position of Adjunct Professor of
Microbiology and Immunology with the New York Medical College in Valhalla, New
York. 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, he
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. Dr.
Goldenberg was also named the co-recipient of the 1994 Abbott Award by the
International Society for Oncodevelopmental Biology and Medicine.
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 37 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.
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 30 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.
Dr. Donald H. Marks has been Vice President, Clinical Research, since July
1996. From June 1995 through July 1996, he was Director, Clinical Research and
Regulatory Affairs at PerImmune Inc., a monoclonal antibody research company,
and prior thereto, Director, Clinical Research at Pasteur-Merieux-Connaught
from January 1992 through June 1995. From 1988 to 1991 he had been Associate
Director, Clinical Research for Hoffmann-LaRoche, Inc. Dr. Marks is a graduate
of the University of California at Los Angeles (M.D., Ph.D.) and is a board-
certified internal medicine physician.
15
<PAGE>
PART II
ITEM 5--MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS MATTERS
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 23, 1996, there were approximately 1,200 holders of record
of the Company's Common Stock.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
- -------------------- ------ -----
<S> <C> <C>
September 30, 1994................................................. 5 3/8 3
December 31, 1994.................................................. 5 1/8 3
March 31, 1995..................................................... 4 1/8 2 3/4
June 30, 1995...................................................... 3 5/8 2 1/8
September 30, 1995................................................. 8 1/2 2 1/4
December 31, 1995.................................................. 8 1/4 3 3/4
March 31, 1996..................................................... 10 3/8 5 1/8
June 30, 1996...................................................... 9 7/8 6 1/2
</TABLE>
ITEM 6--SELECTED FINANCIAL DATA (fiscal year ends June 30)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
IN THOUSANDS EXCEPT PER SHARE AMOUNTS
<S> <C> <C> <C> <C> <C>
Total revenues................. $ 1,700 $ 3,189 $ 4,237 $ 5,055 $ 8,810
Total operating expenses....... 15,000 14,593 19,293 14,482 10,198
Net loss....................... (13,300) (11,404) (15,056) (9,427) (1,388)
Net loss per share............. (0.40) (0.38) (0.50) (0.32) (0.05)
Weighted average shares out-
standing...................... 32,904 30,098 30,051 29,420 26,461
Cash, cash equivalents and mar-
ketable securities............ $ 28,691 $ 22,814 $ 25,230 $41,813 $50,288
Total assets................... 35,720 28,224 31,833 46,165 53,687
Stockholders' equity(1)........ 31,153 23,629 27,395 42,622 51,735
</TABLE>
- --------
(1) The Company has not paid cash dividends on its Common Stock since its
inception.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Business" and elsewhere
in this Annual Report on Form 10-K.
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. On June 28,
1996, the FDA licensed CEA-Scan(R) for the detection of recurrent and/or
metastatic colorectal cancer. In February 1992, the Company filed with the
Health Protection Branch ("HPB") to market CEA-Scan(R) in Canada. In March
1992, the Company filed with the Committee for Proprietary Medicinal Products
("CPMP") to market the product in Europe. On May 22, 1996, CEA-Scan(R) was
recommended for European approval in a unanimous opinion by the CPMP. This
constitutes the final regulatory step before marketing authorization is
granted by the European Commission for use of the product in the 15 countries
comprising the European Union. The Company also has filed for regulatory
approval with the EMEA, seeking approval to market LeukoScan(R) in all 15
countries which are members of the European Union (see "Business--
Introduction").
16
<PAGE>
The Company is also engaged in developing other biopharmaceutical products,
which are in various states of development and clinical testing. The Company
has not achieved profitable operations and does not anticipate achieving
profitable operations during fiscal 1997. The Company will continue to
experience operating losses until such time, if at all, that it is able to
generate sufficient revenues from sales of CEA-Scan(R) and its other proposed
in vivo products. Further, the Company's working capital will continue to
decrease until such time, if at all, that the Company is able to generate
positive cash flow from operations or until such time, if at all, that 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.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of," which is effective for fiscal years beginning after December 15, 1995. In
October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which is also effective for fiscal years beginning after
December 15, 1995. Neither of these standards is expected to have any effect
on either the results of operations or financial position of the Company.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues for fiscal 1996 were $1,700,000 as compared to $3,189,000 in fiscal
1995, representing a decrease of $1,489,000. The decrease was principally due
to a decrease in research and development revenue resulting from the
termination, in August 1995, of the Development and License Agreement with
Pharmacia. Accordingly, research and development revenues decreased by
$1,728,500 to $150,000 in fiscal 1996. In fiscal 1995, these revenues totaled
$1,878,500, of which $1,665,000 were received from Pharmacia. Partly
offsetting the decline in research and development revenue was increased
interest income of $254,000 in fiscal 1996, as compared to fiscal 1995,
primarily as a result of higher levels of cash available for investment
resulting from completion of two financing transactions (see "Liquidity and
Capital Resources").
Total operating expenses for fiscal 1996 were $15,000,000 as compared to
$14,593,000 in fiscal 1995, representing an increase of $407,000. The increase
was due to higher general and administrative expense, largely due to increases
in consulting, recruiting and employee benefits expenses of $178,000, $102,000
and $96,000, respectively. The higher consulting expenses were primarily due
to a strategic planning study undertaken in fiscal 1996. The higher employee
benefits expenses reflected higher payroll taxes, due in part to the exercise
of stock options by employees, and higher expenses for life insurance for an
Executive Officer of the Company. Research and development costs in fiscal
1996 were essentially unchanged from fiscal 1995.
Net loss for fiscal 1996 was $13,299,000, or $0.40 per share, as compared to
a net loss of $11,404,000, or $0.38 per share, in fiscal 1995. The greater net
loss resulted principally from lower research and development revenue and
increased general and administrative expense, as explained above. The net loss
per share for fiscal 1996 was impacted by the higher weighted average number
of shares outstanding during such period as compared to fiscal 1995, which
increase was principally due to the conversion of the Company's preferred
stock (see "Liquidity and Capital Resources").
FISCAL 1995 COMPARED TO FISCAL 1994
Revenues for fiscal 1995 were $3,189,000 as compared to $4,237,000 in fiscal
1994, representing a decrease of $1,048,000. Sales and royalties on the
Company's in vitro diagnostic products accounted for $193,000 of the decrease
in revenues for fiscal 1995 as compared to fiscal 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 will
receive royalty payments through June 2003 on annual sales derived from such
products and recorded $120,000 in royalties during fiscal 1995. Interest
income in
17
<PAGE>
fiscal 1995 as compared to fiscal 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 1995 included $1,665,000 of research
and development payments received from Pharmacia, as compared to $2,250,000 of
such revenue recorded in fiscal 1994 (see "Liquidity and Capital Resources").
Total operating expenses for fiscal 1995 were $14,593,000 as compared to
$19,293,000 in fiscal 1994, representing a decrease of $4,700,000. Research
and development costs for fiscal 1995 decreased by $2,206,000 as compared to
fiscal 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(R). 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(R) in fiscal 1995, as
well as the reduced costs associated with regulatory reviews for CEA-Scan(R).
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 1995 as compared to fiscal 1994 (see "Business--
Relationship with The Center for Molecular Medicine and Immunology").
General and administrative expense for fiscal 1995 decreased by $2,333,000
as compared to fiscal 1994. This was largely due to a decrease in legal
expenses of $1,631,000, principally associated with patent-related activities.
Net loss for fiscal 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 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.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $25,043,000,
representing an increase of $6,136,000 from June 30, 1995, and had no long-
term debt other than certain lease obligations (see Note 11 of Notes to
Consolidated Financial Statements). The increase in working capital resulted
principally from the cash received from financing transactions in September
1995 and June 1996, partially offset by the net loss during fiscal year 1996
of $13,299,000.
On June 27, 1996, the Company completed an equity financing pursuant to
Regulation S under the Securities Act of 1933 ("Regulation S"), pursuant to
which several foreign investors purchased 200,000 shares of 5% Series D
Convertible Preferred Stock (the "Series D Preferred") for $10,000,000. The
terms of the transaction allow the investors, at their discretion, to convert
the Series D Preferred into shares of the Company's common stock during a
twenty-four month period beginning in June 1996, at a price equal to 89% of
the average market price per share over a 20-day trading period surrounding
the date of conversion. Dividends on the Series D Preferred are payable
annually commencing June 30, 1997, on all shares of Series D Preferred that
have not been converted into common stock as of the dividend payment date. As
of September 23, 1996, 44,670 shares of Series D Preferred had been converted
into 333,809 shares of common stock.
On September 29, 1995, the Company completed an equity financing pursuant to
Regulation S, pursuant to which several foreign investors purchased 200,000
shares of non-dividend paying Series C Convertible Preferred Stock (the
"Series C Preferred") for $10,000,000. The terms of the transaction allowed
the investors, at their discretion, to convert the Series C Preferred into
shares of the Company's common stock during a twenty-two month period
beginning in September 1995, at pre-determined discounts from the average
market price per share over a 30-day trading period surrounding the date of
conversion. As of June 30, 1996, 171,585 shares of Series C Preferred had been
converted into 1,356,041 shares of common stock. In July 1996, the remaining
28,415 shares of Series C Preferred were converted into 182,646 shares of
common stock.
18
<PAGE>
In addition, during fiscal 1996, the remaining 124,527 shares of the
Company's non-dividend paying Series B Preferred Stock (the "Series B
Preferred") were converted into 2,000,584 shares of the Company's common
stock. The Company had issued an aggregate of 150,000 shares of the Series B
Preferred in fiscal 1995 for $7,500,000.
On August 2, 1995, the Company announced that its Development and License
Agreement with Pharmacia was terminated and that the Company had regained the
North American marketing and selling rights for CEA-Scan(R) from Pharmacia
(see "Business--Marketing and Sales").
In March 1995, the Company entered into a license agreement with
Mallinckrodt Medical for distribution of CEA-Scan(R) in Europe and in April
1996, the Company entered into a distribution agreement with Mallinckrodt
Group for the distribution of CEA-Scan(R) in the United States (see
"Business--Marketing and Sales").
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 for each equipment schedule take-down 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, 1996, the Company has
leased equipment aggregating $2,014,000 under the master lease agreement and
recorded lease expense for fiscal 1996 of $406,000.
The Company's liquid asset position, as measured by its cash, cash
equivalents and marketable securities, was $28,691,000 at June 30, 1996,
representing an increase of $5,877,000 from June 30, 1995. It is anticipated
that working capital and cash, cash equivalents, and marketable securities
will decrease during fiscal 1997 as a result of planned operating expenses and
capital expenditures, offset in part by projected revenues from CEA-Scan(R) in
the U.S. and Europe. However, there can be no assurance, as to the amount of
revenues, if any, that CEA-Scan(R) will provide. At present, the Company
believes that its financial resources will be sufficient to fund anticipated
operating expenses and capital expenditures through calendar year 1997. 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.
19
<PAGE>
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
IMMUNOMEDICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 13,646,000 $ 7,162,837
Marketable securities............................. 15,044,821 15,651,369
Inventory......................................... 193,672 --
Other current assets.............................. 725,291 687,674
------------ ------------
Total current assets............................. 29,609,784 23,501,880
Property and equipment, net of accumulated
depreciation of $5,372,000 and $4,427,000 at June
30, 1996 and 1995, respectively................... 6,110,191 4,722,604
------------ ------------
$ 35,719,975 $ 28,224,484
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................. 1,631,071 1,932,908
Other current liabilities......................... 2,935,698 2,662,401
------------ ------------
Total current liabilities........................ 4,566,769 4,595,309
------------ ------------
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
Series C convertible, authorized 200,000 shares;
issued and outstanding 28,415 shares at June 30,
1996............................................ 284 --
Series D convertible, authorized 200,000 shares;
issued and outstanding 200,000 shares at June
30, 1996........................................ 2,000 --
Common stock; $.01 par value,
authorized 50,000,000 shares; issued and
outstanding
34,305,485 and 30,624,585 shares at June 30, 1996
and 1995, respectively........................... 343,055 306,246
Capital contributed in excess of par.............. 92,894,349 72,098,771
Accumulated deficit............................... (62,080,861) (48,781,384)
Accumulated net unrealized (loss)/gain on securi-
ties............................................. (5,621) 4,297
------------ ------------
31,153,206 23,629,175
------------ ------------
$ 35,719,975 $ 28,224,484
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Product sales and royalties......... $ 185,887 $ 201,006 $ 394,039
Research and development............ 150,000 1,878,500 2,412,500
Interest............................ 1,364,205 1,109,721 1,430,276
------------ ------------ ------------
1,700,092 3,189,227 4,236,815
COSTS AND EXPENSES:
Cost of goods sold.................. 28,124 41,829 202,930
Research and development............ 12,503,837 12,491,847 14,698,025
General and administrative.......... 2,467,608 2,059,279 4,391,831
------------ ------------ ------------
14,999,569 14,592,955 19,292,786
------------ ------------ ------------
NET LOSS............................. ($13,299,477) ($11,403,728) ($15,055,971)
============ ============ ============
NET LOSS PER SHARE................... ($0.40) ($0.38) ($0.50)
============ ============ ============
Weighted average number of shares
outstanding......................... 32,903,764 30,097,584 30,051,434
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE CAPITAL ACCUMULATED
PREFERRED STOCK COMMON STOCK CONTRIBUTED UNREALIZED
------------------- -------------------- IN EXCESS ACCUMULATED (LOSS)/GAIN
SHARES PAR VALUE SHARES PAR VALUE OF PAR DEFICIT ON SECURITIES TOTAL
-------- --------- ---------- --------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at June 30,
1993................... -- $ -- 30,040,219 $300,402 $64,642,797 $(22,321,685) -- $42,621,514
Exercise of options to
purchase common stock. -- -- 15,250 153 34,160 -- -- 34,313
Net unrealized loss on
securities............ -- -- -- -- -- -- (204,435) (204,435)
Net loss............... -- -- -- -- -- (15,055,971) -- (15,055,971)
-------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance, at June 30,
1994................... -- -- 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 -- -- 7,371,000 -- -- 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) -- -- --
Exercise of options to
purchase common stock. -- -- 25,000 250 56,000 -- -- 56,250
Net unrealized gain on
securities............ -- -- -- -- -- -- 208,732 208,732
Net loss............... -- -- -- -- -- (11,403,728) -- (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
Issuance of common
stock in exchange for
convertible preferred
stock (Series B), net. (124,527) (1,246) 2,000,584 20,006 (18,761) -- -- --
Issuance of convertible
preferred stock
(Series C), net....... 200,000 2,000 -- -- 9,980,500 -- -- 9,982,500
Issuance of common
stock in exchange for
convertible preferred
stock (Series C), net. (171,585) (1,716) 1,368,041 13,550 (11,844) -- -- --
Issuance of convertible
preferred stock
(Series D), net....... 200,000 2,000 -- -- 9,980,500 -- -- 9,982,500
Exercise of options to
purchase common stock. -- -- 324,275 3,243 865,183 -- -- 868,426
Net unrealized loss on
securities............ -- -- -- -- -- -- (9,918) (9,918)
Net loss............... -- -- -- -- -- (13,299,477) -- (13,299,477)
-------- ------- ---------- -------- ----------- ------------ -------- -----------
Balance, at June 30,
1996................... 228,415 $ 2,284 34,305,485 $343,055 $92,894,349 $(62,080,861) $ (5,621) $31,153,206
======== ======= ========== ======== =========== ============ ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
IMMUNOMEDICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING
ACTIVITIES:
Net loss............................ $(13,299,477) $(11,403,728) $(15,055,971)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization...... 944,282 937,107 1,042,307
Amortization of bond premium....... 61,632 113,318 311,245
Changes in operating assets and li-
abilities:
Inventory......................... (193,672) -- --
Other current assets.............. (37,617) 399,778 444,619
Accounts payable.................. (301,837) (258,407) 716,747
Other current liabilities......... 273,297 416,102 206,591
------------ ------------ ------------
Net cash used in operating activi-
ties............................. (12,553,392) (9,795,830) (12,334,462)
------------ ------------ ------------
CASH FLOWS (USED IN)/PROVIDED BY
INVESTING ACTIVITIES:
Purchase of marketable securities... (32,047,487) (11,639,212) (20,493,754)
Proceeds from maturities of market-
able securities.................... 32,582,485 14,691,866 27,097,771
Proceeds from sale of marketable se-
curities........................... -- 250,000 5,274,821
Additions to property and equipment. (2,331,869) (143,982) (3,738,277)
------------ ------------ ------------
Net cash (used in)/provided by in-
vesting activities............... (1,796,871) 3,158,672 8,140,561
------------ ------------ ------------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Issuance of convertible preferred
stock, net......................... 19,965,000 7,372,500 --
Exercise of stock options........... 868,426 56,250 34,313
Principal payments of long-term
debt............................... -- -- (29,486)
------------ ------------ ------------
Net cash provided by financing ac-
tivities......................... 20,833,426 7,428,750 4,827
------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................... 6,483,163 791,592 (4,189,074)
CASH AND CASH EQUIVALENTS, AT
BEGINNING OF YEAR................... 7,162,837 6,371,245 10,560,319
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF
YEAR................................ $ 13,646,000 $ 7,162,837 $ 6,371,245
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED 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 begins 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.
INVENTORY
Inventory is stated at the lower of average cost (which approximates first-
in, first-out) or market, and includes materials, labor and manufacturing
overhead. Inventory at June 30, 1996 consists of the cost of vials of CEA-
Scan(R) which were produced following the Company's receipt on April 9, 1996
of an approvability letter from the U.S. Food and Drug Administration. Final
marketing clearance for this product was received on June 28, 1996.
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.
24
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
INCOME TAXES
The Company utilizes Statement of Financial Accounting Standards Number 109
("SFAS No. 109") to account 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.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain 1995 and 1994 balances have been reclassified to conform to the 1996
presentation.
3.MARKETABLE SECURITIES
The Company utilizes Statement of Financial Accounting Standards Number 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
Securities," to account for investments in marketable securities. Under this
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 $6,000
unrealized holding loss and a $4,000 unrealized holding gain are recorded in a
separate component of stockholders' equity as of June 30, 1996 and 1995,
respectively. Marketable securities at June 30, 1996 and 1995 consist of the
following:
25
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FAIR UNREALIZED
COST MARKET HOLDING
JUNE 30, 1996 BASIS VALUE GAIN/(LOSS)
- ------------- ----------- ----------- -----------
<S> <C> <C> <C>
Securities with contractual maturities
from date of
acquisition of one year or less:
U.S. Debt Securities...................... $ 2,934,000 $ 2,984,000 $ 50,000
Corporate Debt Securities................. 7,399,000 7,397,000 (2,000)
Equity Securities......................... 541,000 470,000 (71,000)
----------- ----------- --------
$10,874,000 $10,851,000 $(23,000)
=========== =========== ========
Securities with contractual maturities
from date of
acquisition greater than one year:
U.S. Debt Securities...................... $ 4,177,000 $ 4,194,000 $ 17,000
=========== =========== ========
Total Marketable Securities............... $15,051,000 $15,045,000 $ (6,000)
=========== =========== ========
<CAPTION>
FAIR UNREALIZED
COST MARKET HOLDING
JUNE 30, 1995 BASIS VALUE GAIN/(LOSS)
- ------------- ----------- ----------- -----------
<S> <C> <C> <C>
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
=========== =========== ========
</TABLE>
4.OTHER CURRENT ASSETS
Included in other current assets is accrued interest income earned on
marketable securities and cash equivalents of approximately $181,000 and
$231,000 at June 30, 1996 and 1995, respectively. Also included in other
current assets are prepaid expenses of $314,000 and $88,000 at June 30, 1996
and 1995, respectively.
5.PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Machinery and equipment......................... $ 3,069,000 $ 2,936,000
Leasehold improvements.......................... 7,343,000 5,199,000
Furniture and fixtures.......................... 548,000 530,000
Computer equipment.............................. 522,000 485,000
----------- -----------
11,482,000 9,150,000
Accumulated depreciation and amortization....... (5,372,000) (4,427,000)
----------- -----------
$ 6,110,000 $ 4,723,000
=========== ===========
</TABLE>
26
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $546,000 and $468,000 at June 30, 1996 and 1995, respectively.
Also included are amounts payable to various legal counsel of approximately
$177,000 and $284,000, and accrued health insurance liabilities of
approximately $246,000 and $252,000 at June 30, 1996 and 1995, respectively.
Further, included at June 30, 1996 and 1995 is $1,042,000 and $912,000,
respectively, received from a former corporate partner for the funding of
ongoing clinical trials (see Note 10).
7.STOCKHOLDERS' EQUITY
The Certificate of Incorporation of the Company authorizes the issuance of
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.
On January 18, 1995, the Company completed an equity financing pursuant to
Regulation S under the Securities Act of 1933 ("Regulation S"), pursuant to
which several foreign investors purchased 150,000 shares of non-dividend
paying Series B Convertible Preferred Stock (the "Series B Preferred") for
$7,500,000. The terms of the transaction allowed 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, 1996, all
150,000 shares of Series B Preferred had been converted into 2,544,700 shares
of the Company's common stock.
On September 29, 1995, the Company completed an equity financing pursuant to
Regulation S, pursuant to which several foreign investors purchased 200,000
shares of non-dividend paying Series C Convertible Preferred Stock (the
"Series C Preferred") for $10,000,000. The terms of the transaction allowed
the investors, at their discretion, to convert the Series C Preferred into
shares of the Company's common stock during a twenty-two month period
beginning in September 1995, at pre-determined discounts from the average
market price per share over a 30-day trading period surrounding the date of
conversion. As of June 30, 1996, 171,585 shares of Series C Preferred had been
converted into 1,356,041 shares of the Company's common stock. In July 1996,
the remaining 28,415 shares of Series C Preferred were converted into 182,646
shares of common stock.
On June 27, 1996, the Company completed an equity financing pursuant to
Regulation S, pursuant to which several foreign investors purchased 200,000
shares of 5% Series D Convertible Preferred Stock (the "Series D Preferred")
for $10,000,000. The terms of the transaction allow the investors, at their
discretion, to convert the Series D Preferred into shares of the Company's
common stock during a twenty-four month period beginning in June 1996, at a
price equal to 89% of the average market price per share over a 20-day trading
period surrounding the date of conversion. As of August 1, 1996, no shares of
Series D Preferred had been converted into shares of the Company's common
stock.
Under the terms of the Company's 1983 Stock Option, 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, although
options granted under the 1983 plan which have not terminated may continue to
be exercised. On November 5, 1992, 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
27
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
for possible future issuance upon exercise of stock options, of which
1,101,525 were still available at June 30, 1996 for future grant. At June 30,
1996, 3,252,725 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
is granted, on the date he or she joins the Board of Directors, an option to
purchase 10,000 shares of the Company's common stock at fair market value. In
addition, each outside Director of the Company who had been a Director prior
to July 1 is granted, on the first business day of July of each year, an
option to purchase 10,000 shares of the Company's common stock (subject to
proration for Directors who have served less than a full year) at fair market
value. On July 1, 1996, 60,000 stock options were granted to these Directors,
and on June 26, 1996, the Company granted 10,000 stock options to a Director
who joined the board on such date.
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.
Information concerning options for the years ended June 30, 1996, 1995 and
1994 is summarized as follows:
<TABLE>
<CAPTION>
FISCAL 1996
------------------------------
SHARES OPTION PRICE RANGE
---------- ------------------
<S> <C> <C>
Outstanding, July 1, 1995.................. 1,800,000 $2.25 - 10.75
Granted.................................... 890,500 2.31 - 9.50
Exercised.................................. (324,275) 2.25 - 6.75
Terminated................................. (85,750) 2.63 - 6.63
---------- -------------
Outstanding, June 30, 1996................. 2,280,475 $2.25 - 10.75
========== =============
Exercisable, June 30, 1996................. 569,475
==========
<CAPTION>
FISCAL 1995
------------------------------
SHARES OPTION PRICE RANGE
---------- ------------------
<S> <C> <C>
Outstanding, July 1, 1994.................. 1,655,750 $2.25 - 10.75
Granted.................................... 1,214,000 2.63 - 3.38
Exercised.................................. (25,000) 2.25
Terminated................................. (1,044,750) 2.25 - 9.13
---------- -------------
Outstanding, June 30, 1995 1,800,000 $2.25 - 10.75
========== =============
Exercisable, June 30, 1995................. 558,750
==========
<CAPTION>
FISCAL 1994
------------------------------
SHARES OPTION PRICE RANGE
---------- ------------------
<S> <C> <C>
Outstanding, July 1, 1993.................. 1,675,500 $2.25 - 10.75
Granted.................................... 461,000 3.63 - 7.12
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
==========
</TABLE>
28
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8.INCOME TAXES
The Company utilizes SFAS No. 109 to account for income taxes. 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, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................. $ 24,362,000 $ 18,882,000
Research and development credits.................. 3,253,000 2,640,000
Property and equipment............................ 293,000 226,000
Other............................................. 422,000 62,000
------------ ------------
Total............................................. 28,330,000 21,810,000
Valuation allowance................................. (28,330,000) (21,810,000)
------------ ------------
Net deferred taxes.................................. $ -- $ --
============ ============
</TABLE>
The valuation allowances for fiscal year 1996, 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 valuation allowances as of June
30, 1996, 1995 and 1994 include $6,520,000, $4,851,000 and $6,500,000 relating
to fiscal years 1996, 1995 and 1994 operations, respectively.
At June 30, 1996, the Company has available net operating loss carryforwards
for Federal income tax reporting purposes of approximately $61,147,000, which
expire beginning in fiscal year 1998. The Company made no payments of Federal
or state income taxes during fiscal years 1996, 1995 and 1994.
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, Treasurer, 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, and certain Executive Officers of the Company are adjunct members of
CMMI.
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 its then 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 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.
29
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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 $64,000, $57,000 and $548,000 during the years ended
June 30, 1996, 1995 and 1994, 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, 1996, 1995 and 1994, the Board of Directors
of the Company authorized grants to CMMI of $200,000, $300,000 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
On August 2, 1995, the Company announced that its Development and License
Agreement with Pharmacia, Inc. (which subsequently became Pharmacia & Upjohn
Inc.--"Pharmacia") was terminated and that the Company regained the North
American marketing and selling rights for CEA-Scan(R). The Company and
Pharmacia were subsequently unable to agree on the amount of a final payment
by Pharmacia to the Company to satisfy Pharmacia's remaining obligations. In
June 1996, the Company filed a claim against Pharmacia before the American
Arbitration Association, claiming damages for breach of contract and fiduciary
duty in the amount of $60 million plus punitive damages. Payments previously
received from Pharmacia to fund ongoing clinical trials for CEA-Scan(R) are
being recorded as income as the trials are conducted (see Note 6).
In March 1995, the Company entered into a License Agreement with
Mallinckrodt Medical B.V., ("Mallinckrodt Medical"), pursuant to which,
Mallinckrodt Medical will market, sell and distribute CEA-Scan(R) throughout
Western Europe and in specified Eastern European countries, subject to receipt
of regulatory approval in the specified countries. The Company will
manufacture CEA-Scan(R), for which Mallinckrodt Medical will pay the Company a
pre-determined royalty per vial or a pre-determined percentage of the net
selling price.
In April 1996, the Company signed a U.S. Marketing and Distribution
Agreement for CEA-Scan(R) with Mallinckrodt Group Inc. ("Mallinckrodt Group").
Under the terms of the agreement, Mallinckrodt Group will market, sell and
distribute CEA-Scan(R) in the U.S. on a consignment basis, and will commit
financial resources to this effort. The Company will retain manufacturing and
co-promotional rights, will pay Mallinckrodt Group a pre-determined amount or
percentage of the net selling price, and will potentially commit additional
financial resources to these activities.
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
will receive royalty payments through June 2003 on annual sales derived from
such products. In fiscal years 1996 and 1995, the Company recorded royalty
income of $131,000 and $120,000, respectively.
30
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. Effective July 1, 1996, the
Board of Directors increased Dr. Goldenberg's annual base salary to $250,000.
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 to, 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 "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 "Incentive Payments"). A $100,000
annual minimum payment will be paid in the aggregate against all Revenue
Incentive Compensation and Incentive Payments. Dr. Goldenberg will also
receive a percent, not less than 20%, to be determined by the Board of
Directors of the Company, 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 for each equipment schedule take-down 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, 1996, the Company has
leased equipment aggregating $2,014,000 under the master lease agreement and
recorded lease expense of $406,000 and $332,000 for fiscal years 1996 and
1995, respectively.
31
<PAGE>
IMMUNOMEDICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is obligated under two operating leases for facilities used for
research and development, manufacturing and office space. The leases currently
expire in March 1997 and May 1999, with the latter containing renewal
provisions as specified in the respective lease. 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 $453,000, $495,000 and $484,000 in fiscal years 1996, 1995 and
1994, respectively. Minimum lease commitments for facilities and equipment are
as follows:
<TABLE>
<S> <C>
1997................................ $975,000
1998................................ $988,000
1999................................ $699,000
Thereafter.......................... 0
</TABLE>
The Company is involved in various claims and litigation arising in the
normal course of business. Management believes that the outcome of such claims
and litigation will not have a material adverse effect on the Company's
financial position and results of operations.
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Immunomedics, Inc.:
We have audited the accompanying consolidated balance sheets of
Immunomedics, Inc. and subsidiary as of June 30, 1996 and 1995, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended June 30,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Immunomedics, Inc. and subsidiary as of June 30, 1996 and 1995, and the
results of its operations and its cash flows for each of the years in the
three-year period ended June 30, 1996, in conformity with generally accepted
accounting principles.
Short Hills, New Jersey
August 1, 1996 KPMG Peat Marwick LLP
33
<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 1996 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 1996 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 1996 Definitive Proxy Statement.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required for this item is incorporated herein by reference
to the 1996 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.Consolidated Financial Statements:
Consolidated Balance Sheets--June 30, 1996 and 1995
Consolidated Statements of Operations for the years ended June 30, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity for the years ended June
30, 1996, 1995, and 1994
Consolidated Statements of Cash Flows for the years ended June 30, 1996,
1995, and 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report--KPMG Peat Marwick LLP
2.Financial Statements Schedules:
All schedules have been omitted because of the absence of conditions under
which they would be required or because the required information is
included in the consolidated financial statements or the notes thereto.
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]
34
<PAGE>
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 Incorporation 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 of the
Company's Series A Convertible Preferred Stock, as filed 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 Incorporation of the
Company, as 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
Company's Series B Convertible Preferred Stock, as filed with the
Secretary of State of the State of Delaware on December 21, 1994 (m)
3.1(j) Certificate of Designation of Rights and Preferences of the
Company's Series C Convertible Preferred Stock, as filed with the
Secretary of State of the State of Delaware on September 25,
1995 (q)
3.1(k) Certificate of Designation of Rights and Preferences of the
Company's Series D Convertible Preferred Stock, as filed with the
Secretary of State of the State of Delaware on June 26, 1996.
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]
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 Dentistry 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. Goldenberg, 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]
35
<PAGE>
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 Amended and Restated License Agreement among the Company, CMMI and
David M. Goldenberg, dated December 11, 1990 [h]
10.12 Development and License Agreement with Adria Laboratories Division of
Erbamont Inc. (Confidential treatment has been requested for certain
portions of the Agreement) [h]
10.13 Lease Agreement with Baker Properties Limited partnership, dated
January 16, 1992 [i]
10.14 Amendment to Lease between the University of Medicine and Dentistry
of New Jersey and Immunomedics, Inc., dated August 13, 1992 [j]
10.15 Immunomedics, Inc. 1992 Stock Option Plan [k]
10.16 Amended and Restated Employment Agreement, dated November 1, 1993,
between the Company and Dr. David M. Goldenberg [l]
10.17 Convertible Stock Purchase Agreement, dated January 6, 1995, between
the Company and purchasers named therein [n]
10.18 License Agreement, dated March 10, 1995, between the Company and
Mallinckrodt Medical, B.V. (Confidential treatment has been requested
for certain portions of the Agreement) [o]
10.19 Amendment, dated March 11, 1995, to the Amended and Restated License
Agreement among the Company, CMMI, and David M. Goldenberg, dated
December 11, 1990. [p]
10.20 Convertible Stock Purchase Agreement, dated September 29, 1995,
between the Company and the purchasers named therein [q]
10.21 Distribution and Marketing Agreement, dated April 4, 1996, between
the Company and Mallinckrodt Medical, Inc. (Confidential treatment
has been requested for certain portions of the Agreement) [r]
10.22 Manufacturing Agreement, dated June 14, 1996, between the Company and
Pharmacia & Upjohn Oncology Division (Confidential treatment has been
requested for certain portions of the Agreement)
10.23 Convertible Stock Purchase Agreement, dated June 27, 1996, between
the Company and the purchasers named therein
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.
21. Subsidiaries of the registrant--Immunomedics, B.V.
23. Consent of Experts and Counsel
23.1 Consent of Independent Auditors--KPMG Peat Marwick LLP
27. Financial Data Schedule
----------------
36
<PAGE>
[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.
[h] Incorporated by reference from the Exhibits to the Registrant's
Registration Statement on Form S-2 effective July 24, 1991 (Commission File
No. 33-41053).
[i] Incorporated by reference from the Exhibits to 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 from the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993.
[m] Incorporated by reference from the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1994.
[n] Incorporated by reference from the Exhibits to Amendment No. 1 to the
Registrant's Quarterly Report on Form 10-Q/A for the fiscal quarter ended
December 31, 1994.
[o] Incorporated by reference from the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995.
[p] Incorporated by reference from the Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995.
[q] Incorporated by reference from the Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1995.
[r] Incorporated by reference from the Exhibits to Amendment No. 1 to the
Registrant's Quarterly Report on Form 10-Q/A for the fiscal quarter ended
March 31, 1996.
(b)REPORTS ON FORM 8-K:
The Company filed a Current Report on Form 8-K dated June 28, 1996, with
respect to Item 5--Other Events.
37
<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, 1996 By: /s/ DAVID M. GOLDENBERG
----------------------------------
David M. Goldenberg,
Chairman, Chief Executive Officer
and Treasurer
(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, 1996 By: /s/ DAVID M. GOLDENBERG
----------------------------------
David M. Goldenberg, Chairman
Chief Executive Officer, and
Treasurer
(Principal Executive Officer and
Principal Accounting Officer)
Date: September 26, 1996 By: /s/ ALBERT D. ANGEL
----------------------------------
Albert D. Angel, Director
Date: September 26, 1996 By: /s/ A.E. COHEN
----------------------------------
A.E. Cohen, Director
Date: September 26, 1996 By: /s/ ROLF H. HENEL
----------------------------------
Rolf H. Henel, Director
Date: September 26, 1996 By: /s/ MARVIN E. JAFFE
----------------------------------
Marvin E. Jaffe, Director
Date: September 26, 1996 By: /s/ RICHARD R. PIVIROTTO
----------------------------------
Richard R. Pivirotto, Director
Date: September 26, 1996 By: /s/ WARREN W. ROSENTHAL
----------------------------------
Warren W. Rosenthal, Director
Date: September 26, 1996 By: /s/ RICHARD C. WILLIAMS
----------------------------------
Richard C. Williams, Director
38
CERTIFICATE OF DESIGNATION
SETTING FORTH THE PREFERENCES, RIGHTS
AND LIMITATIONS OF SERIES D CONVERTIBLE PREFERRED
STOCK OF IMMUNOMEDICS, INC.
IMMUNOMEDICS, INC. , a Delaware corporation (the
"Company") certifies that pursuant to the authority contained in
Article IV of its Certificate of Incorporation, and in accordance
with the provisions of Section 151 of the General Corporation Law
of the State of Delaware, its Board of Directors has adopted the
following resolution creating a series of its preferred stock to
be designated Series D Convertible Preferred Stock:
RESOLVED, that a series of the class of authorized
preferred stock of the Company be hereby created, and that the
designation and amount thereof and the voting powers, preferences
and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations and
restrictions thereof are as follows:
Section 1. Designation, Amount, Ranking and Par
Value. The designation of the series of Preferred Stock
shall be "Series D Convertible Preferred Stock" (this
"Series") and the number of shares constituting this Series
shall be 200,000. The par value of each share of this
Series shall be $0.01. Shares of this Series shall have a
stated value of $50 per share (the "Stated Value"). The
shares of this Series shall rank prior to the Junior Stock
(as defined below) as to distribution of assets (upon
liquidation or otherwise) and payment of dividends.
Section 2. Dividends.
(a) The Holders shall be entitled to receive,
when and as declared by the Board of Directors out of funds
legally available for the purpose, dividends at the rate of
$2.50 per share per annum, payable at the option of the
Company, either in cash or shares of Common Stock (valued
at the average of the Per Share Market Value for the ten
Trading Days preceding the record date for determination of
Holders entitled to receive such dividend). The Company
shall give the Holders at least 30 days prior notice in the
event it elects to pay a dividend in shares of Common
Stock. Dividends on shares of this Series will accumulate
and be payable annually on June 30 of each year, commencing
June 30, 1997. Dividends on shares of this Series will be
cumulative whether or not earned or declared and whether or
not there shall be funds of the Company legally available
for the payment of such dividends. Accruals and
accumulations of dividends shall not bear interest.
Notwithstanding the foregoing, no dividends shall be
payable in respect of shares of this Series which are
converted prior to the June 30 payment date for the
respective year.
(b) So long as any shares of this Series are
outstanding, no dividend or distribution in cash or other
property on the Junior Stock (other than a dividend or
<PAGE>
distribution described in Section 6) shall be declared or
paid or set apart for payment unless, at the same time, the
same dividend or distribution is declared or paid or set
apart, as the case may be, on each share of this Series in
the amount equal to the product of (i) the declared
dividend on the Junior Stock and (ii) the Conversion Ratio
(defined below) in effect on the Record Date (as defined
below). Any record date (the "Record Date") and the
payment date for this Series shall be the same as the
respective record date and payment date for dividends or
distributions on any Junior Stock.
Section 3. Redemption. Prior to the expiration of the
Conversion Term (as defined below), the shares of this
Series shall not be redeemable at the option of the
Company, except by agreement between the Company and the
Holder. After expiration of the Conversion Term, the
Company may redeem any shares of this Series at a price
equal to the Stated Value.
Section 4. Voting Rights. The holders shall not be
entitled to vote on matters submitted to the vote of the
holders of Common Stock. However, so long as any shares of
this Series are outstanding, the Company shall not, without
the affirmative vote of the Holders of two-thirds of the
outstanding shares of this Series, (i) alter or change the
powers, preferences or rights given to this Series
adversely or (ii) authorize or create any series or class
of capital stock or issue any shares of capital stock
ranking as to dividends or distribution of assets (upon
liquidation or otherwise) prior to or pari passu with this
Series.
Section 5. Liquidation. In the event of any complete
liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, the Holders shall be
entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share
of this Series an amount equal to $50.00 per share before
any distribution shall be made to the holders of Junior
Stock of the Company, and if the assets of the Company
shall be insufficient to pay in full such amounts, then
such assets shall be distributed among such Holders ratably
in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were
paid in full.
Section 6. Conversion.
(a) Each share of this Series shall be
convertible into shares of Common Stock at the Conversion
Ratio, at the option of the Holder in whole or in part at
any time prior to the expiration of the Conversion Term.
The Company shall give to each Holder 30 days prior written
notice of the expiration of the Conversion Term. The
Holders shall effect conversions by delivering to the
Company a written notice substantially in the form of
conversion notice set forth on the reverse of the
certificate evidencing shares of this Series (the
"Conversion Notice"), which Conversion Notice, once given,
shall be irrevocable.
<PAGE>
(b) No later than five Trading Days following
the last day of the applicable Pricing Period, each Holder,
who is converting shares, shall deliver to the Company the
certificate or certificates representing the shares of the
Series to be converted and within five Trading days
thereafter the Company will deliver to such Holder (i) a
certificate or certificates which shall be free of
restrictive legends and "stop transfer" restrictions
representing the number of shares of Common Stock being
acquired upon the conversion of shares of this Series and
(ii) if the Holder is converting less than all shares of
this Series, a certificate for such number of shares of
this Series as have not been converted.
(c)(i) The Conversion Price (the "Conversion
Price") in effect on any Conversion Date or Record Date
shall equal 89% of the Pricing Period Average Price.
(ii) If the Company, during any Pricing
Period, shall (A) pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Stock
payable in shares of its capital stock (whether payable in
shares of its Common Stock or of capital stock of any
class), (B) subdivide outstanding shares of Common Stock
into a larger number of shares, (C) combine outstanding
shares of Common Stock into a smaller number of shares,
(D) issue by reclassification of shares of Common Stock any
shares of capital stock of the Company, (E) issue rights or
warrants to all holders of Common Stock (but not to the
Holders) entitling them (for a period expiring within 45
days after the record date mentioned below) to subscribe
for or purchase shares of Common Stock at a price per
share less than the Per Share Market Value of Common Stock
at the record date for determining holders entitled to
receive such rights, (F) distribute to all holders of
Common Stock (and not to the Holders) rights or warrants to
subscribe for or purchase any security (excluding those
referred to in subsection 6(c)(ii)(E) above), or (G) take
any other action similar to the above which materially and
adversely affects the rights of the Holders different than
or distinguished from the effects generally on the rights
of the holders of any other class of the Company's capital
stock), the Company shall make an appropriate adjustment to
the Sales Price for each Trading Day in the Pricing Period
prior to the record date or effective date of such event so
as to continue to give to each Holder, the economic value
of the Conversion Price formula set forth in Section
6(c)(i), as determined by the Board of Directors of the
Company in good faith; provided, however that if the
Holders of a majority in interest of the shares of this
Series ("Majority in Interest") disagree with the
determination of the Board of Directors, then the Holders
of a Majority in Interest and the Company shall each in
good faith select a national or regional investment banking
firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an
"Appraiser") who shall mutually agree on the amount, if any
of the adjustment required by this section and provided,
further that if the Appraisers are unable to agree, the
amount of the adjustment be equal to the average of the
determinations by each such Appraiser.
<PAGE>
(iii) Whenever an adjustment is required
pursuant to Section 6(c)(ii), the Company shall promptly
mail to each Holder a notice setting forth the Sales Prices
after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.
(iv) In case of any reclassification of
the Common Stock, any consolidation or merger of the
Company with or into another person, sale or transfer of
all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which share
exchange the Common Stock is converted into other
securities, cash or property, then the Holders shall have
the right thereafter to convert such shares only into the
kind and amount of shares of stock and other securities and
property receivable upon or deemed be held following such
reclassification, consolidation, merger, sale, transfer or
share exchange by a Holder of a number of shares of the
Common Stock of the Company into which such shares this
Series could have been converted immediately prior to such
reclassification, consolidation, merger, sale, transfer or
share exchange. The terms of any such consolidation,
merger, sale, transfer or share exchange shall include such
terms so as to continue to give to each Holder, the
economic value of the Conversion Price formula set forth in
Section 6(c)(i) following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly
apply to successive reclassification, consolidation,
mergers, sales, transfers or share exchanges.
(v) All calculations under this Section
6 shall be made to the nearest cent or the nearest 1/l00th
of a share, as the case may be.
(d) The Company shall at all times reserve and
keep available, out of its authorized and unissued Common
Stock solely for the purpose of issuance upon conversion of
this Series as herein provided, free from preemptive rights
or any other actual or contingent purchase rights of
Persons other than the Holders, such number of shares of
Common Stock as shall be issuable upon the conversion of
all outstanding shares of this Series. All shares of
Common Stock that shall be so issued upon conversion of
shares of this Series shall be duly and validly issued and
fully paid and nonassessable.
(e) The Company shall not be required to issue
stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based
on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, each
Holder shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
<PAGE>
(f) The issuance of certificates for shares of
Common Stock on conversion of this Series shall be made
without charge to the Holders for any documentary stamp or
similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided, that the Company
shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and
delivery of any such certificate in a name other than that
of the Holder converted and the Company shall not be
required to issue or deliver such certificates unless or
until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company
that such tax has been paid.
(g) The Company shall have no right to require
any Holder to convert any or all of this Series into Common
Stock.
(h) Shares of this Series converted into
Common Stock shall be canceled and shall have the status of
authorized but unissued shares of Preferred Stock but may
not be reissued as shares of this Series.
(i) If the Company shall authorize or declare
the taking of any event set forth in Section 6(c)(ii) or
(iv) during a Pricing Period, the Holders of a Majority in
Interest may in their sole discretion, elect by written
notice to the Company to reduce the term of the Pricing
Period to the Trading Day immediately preceding the date of
such authorization or declaration and to accelerate the
delivery of the shares to a date which is five business
days after the date of the notice given by such Holders.
(j) If Company intends to initiate a public
offering of its securities during the Conversion Term, in
an amount exceeding $12 million in the aggregate (excluding
any shares sold by selling shareholders or pursuant to the
exercise of an overallotment option) and the Company
reasonably believes that the conversion of any shares of
this Series may have an adverse effect on the ability of
the Company to complete such offering or the price at which
such securities could be sold therein, the Company, upon at
least 30 days' prior written notice to all Holders, may
suspend the right of all Holders to convert such shares
pursuant to Section 6 for the period commencing on the date
the Company files with the Securities and Exchange
Commission a registration statement under the Securities
Act of 1933 and terminating 30 days after the closing of
the public offering relating thereto; provided, however,
that such period shall not exceed four months and provided,
further, that the last day of the Conversion Term shall be
extended for 120% of such number of days as the conversion
right was suspended.
Section 7. Definitions. For the purposes hereof,
the following terms shall have the following meanings:
<PAGE>
"Common Stock" means shares now or hereafter
authorized of the class of Common Stock, $0.01 par value,
of the Company presently authorized and stock of any other
class into which such shares may hereafter have been
reclassified or changed.
"Conversion Date" means the last day of the
relevant Pricing Period.
"Conversion Ratio" means a fraction, of which
the numerator is Stated Value, and of which the denominator
is the Conversion Price.
"Conversion Term" means the period commencing
on the date that the shares of this Series are issued and
ending on the second anniversary of the date of such
issuance, or such later date as the Company and the Holder
may agree in writing
"Junior Stock" means the Common Stock of the
Company and any other capital stock of the Company, except
as to shares of capital stock of any series or class which,
by its terms, is prior in right of distribution to the
shares of this Series.
"Holder" means a holder of record of
outstanding shares of this Series. Any notice required or
permitted to be given to a Holder shall be given to such
Holder at its last address as it shall appear upon the
stock books of the Company.
"Per Share Market Value" means on any
particular date (a) the last sale price per share of the
Common Stock on such date on the principal stock exchange
or The Nasdaq Stock Market, as the case may be, on which
the Common Stock is then traded or, if there is no such
price on such date, then the last price on such exchange on
the date nearest preceding such date, or (b) if the Common
Stock is not listed on any stock exchange or The Nasdaq
Stock Market, the average of the bid and asked price for a
share of Common Stock in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions
of reporting prices), or (c) if the Common Stock is no
longer publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good
faith by the Holders of a Majority in Interest; provided,
however, that if the Company, after receipt of the
determination by such Appraiser shall have the right to
select an additional Appraiser, in which case, the fair
market value shall be equal to the average of the
determinations by each such Appraiser; provided further
that none of the transactions related to the foregoing
determination shall include purchases by any "affiliate"
(as such term is defined in the General Rules and
Regulations under the Securities Act of 1933) of the
Company.
"Person" means a corporation, an association,
a partnership, organization, a business, an individual, a
government or political subdivision thereof or a
governmental agency.
<PAGE>
"Pricing Period" means the 10 Trading Days
immediately preceding the date of the related Conversion
Notice (or Record Date for distributions) and the 10
Trading Days commencing on the date of the related
Conversion Notice (or Record Date for distributions).
"Pricing Period Average Price" means the
average of the Sales Price during each day of the relevant
Pricing Period.
"Sales Price" means, with respect to any
Trading Day, (a) if the Common Stock is then listed or
quoted on a principal stock exchange or The Nasdaq Stock
Market, the low sales price on such day of the Pricing
Period or (b) if the Common Stock is not listed or quoted
on a principal stock exchange or The Nasdaq Stock Market
but is quoted in the over-the-counter market, the closing
bid price on such day.
"Trading Day" means (a) a day on which the
Common Stock is traded on the principal stock exchange or
The Nasdaq Stock Market, as the case may be, as reported
by such stock exchange or The Nasdaq Stock Market, or (b)
if the Common Stock is not traded on a principal stock
exchange or The Nasdaq Stock Market, a day on which the
Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding to its
functions of reporting prices).
<PAGE>
IN WITNESS WHEREOF, IMMUNOMEDICS, INC. has caused this
Certificate of Designation to be executed by its Chairman of
the Board and Chief Executive Officer and attested to by its
Secretary this 26th day of June, 1996.
IMMUNOMEDICS, INC.
By /s/ David M. Goldenberg
________________________________
David M. Goldenberg
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Amy Factor
______________________
Amy Factor
Secretary
MANUFACTURING AGREEMENT
* Confidential portions omitted and filed separately with the Commission.
Pharmacia & Upjohn
Oncology Division
Albuquerque, New Mexico
and
Immunomedics, Inc.
Morris Plains, New Jersey
June, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1
1.01 Bulk Solution . . . . . . . . . . . . . . . . . . 1
1.02 Product(s). . . . . . . . . . . . . . . . . . . . 1
1.03 Finished. . . . . . . . . . . . . . . . . . . . . 1
1.04 Specifications. . . . . . . . . . . . . . . . . . 1
1.05 Master Batch Record . . . . . . . . . . . . . . . 1
1.06 PLA . . . . . . . . . . . . . . . . . . . . . . . 1
1.07 Calendar Year . . . . . . . . . . . . . . . . . . 2
1.08 Effective Date. . . . . . . . . . . . . . . . . . 2
1.09 Affiliate . . . . . . . . . . . . . . . . . . . . 2
1.10 Person. . . . . . . . . . . . . . . . . . . . . . 2
1.11 Schedules . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. THE WORK. . . . . . . . . . . . . . . . . . . . . . 2
2.01 Statement of Work . . . . . . . . . . . . . . . . 2
2.02 Amendments to Statement of Work . . . . . . . . . 2
2.03 Addition of Other Products to the Agreement . . . 2
2.04 Work Performed by POD . . . . . . . . . . . . . . 3
2.05 Preparation of Bulk Solution. . . . . . . . . . . 3
2.06 Use of POD Facilities by IMMUN. . . . . . . . . . 3
2.07 Equipment Provided by IMMUN . . . . . . . . . . . 3
2.08 Compliance With Applicable Rules at the POD
Facility . . . . . . . . . . . . . . . . . . . . 3
2.09 Responsibility for Bulk Solution. . . . . . . . . 4
2.10 Endotoxin Testing . . . . . . . . . . . . . . . . 4
2.11 Availability of POD Facilities. . . . . . . . . . 4
2.12 Processing of Product in Quarantine . . . . . . . 4
2.13 Regulatory Support. . . . . . . . . . . . . . . . 4
2.14 Facilities Inspection . . . . . . . . . . . . . . 5
ARTICLE III. FORECAST OF REQUIREMENTS . . . . . . . . . . . . . 5
3.01 Forecast. . . . . . . . . . . . . . . . . . . . . 5
3.02 POD Obligation to Meet Requirements . . . . . . . 5
3.03 Placement of an Order . . . . . . . . . . . . . . 5
ARTICLE IV. SHIPMENT & STORAGE OF, & PAYMENT FOR PRODUCT . . . . 5
4.01 Storage . . . . . . . . . . . . . . . . . . . . . 5
4.02 Transfer of Product to IMMUN. . . . . . . . . . . 6
4.03 Payment for Product . . . . . . . . . . . . . . . 6
4.04 Cancellation Fee. . . . . . . . . . . . . . . . . 6
4.05 Component Fee . . . . . . . . . . . . . . . . . . 6
4.06 Late Payment Penalty. . . . . . . . . . . . . . . 6
(i)
<PAGE>
ARTICLE V. PRICE OF MANUFACTURE. . . . . . . . . . . . . . . . . 6
5.01 Price . . . . . . . . . . . . . . . . . . . . . . 6
5.02 Price Increase. . . . . . . . . . . . . . . . . . 7
5.03 Notification of Price Increase. . . . . . . . . . 7
5.04 Verification of Increase by Accountant. . . . . . 7
5.05 Accountant's Report . . . . . . . . . . . . . . . 7
5.06 Determination that Increase is Unjustified. . . . 7
5.07 Price Decrease. . . . . . . . . . . . . . . . . . 7
ARTICLE VI. WARRANTIES OF POD . . . . . . . . . . . . . . . . . 8
6.01 The POD Facility. . . . . . . . . . . . . . . . . 8
6.02 Aseptic Processing Environment. . . . . . . . . . 8
6.03 Failure to Comply with Sections 6.01 and 6.02 . . 8
ARTICLE VII. OWNERSHIP OF COMPONENTS AND RISK OF LOSS. . . . . . 8
7.01 Ownership of Components . . . . . . . . . . . . . 8
7.02 Ownership of Finished Product . . . . . . . . . . 8
7.03 Ownership of Bulk Solution. . . . . . . . . . . . 8
7.04 Ownership of Equipment. . . . . . . . . . . . . . 8
ARTICLE VIII. TERM AND TERMINATION . . . . . . . . . . . . . . . 9
8.01 Term. . . . . . . . . . . . . . . . . . . . . . . 9
8.02 Voluntary Termination . . . . . . . . . . . . . . 9
8.03 Termination for Material Breach . . . . . . . . . 9
8.04 Termination for Insolvency. . . . . . . . . . . . 9
8.05 Effect of Expiration or Termination . . . . . . . 9
8.06 POD Obligations Upon Expiration or Termination. . 9
ARTICLE IX. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . 10
9.01 POD Indemnity . . . . . . . . . . . . . . . . . . 10
9.02 IMMUN Indemnity . . . . . . . . . . . . . . . . . 10
ARTICLE X. POD LIABILITY TO IMMUN FOR PRODUCT LOSSES . . . . . . 11
10.01 Liability for Loss of Product, Bulk
Solution, Equipment and Components. . . . . . . 11
10.02 Parties Disagree Whether Product Out of
Specification . . . . . . . . . . . . . . . . . 11
ARTICLE XI. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . 11
11.01 Confidential Information. . . . . . . . . . . . 11
11.02 Limitations on Confidentiality. . . . . . . . . 12
11.03 Disclosure Required by Law. . . . . . . . . . . 12
11.04 Equitable Remedies for Breach of
Confidentiality . . . . . . . . . . . . . . . . 12
(ii)
<PAGE>
ARTICLE XII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 12
12.01 Force Majeure . . . . . . . . . . . . . . . . . 12
12.02 New Mexico Gross Receipts & Compensating Tax. . 13
12.03 Relationship. . . . . . . . . . . . . . . . . . 13
12.04 Governing Law . . . . . . . . . . . . . . . . . 13
12.05 Notice. . . . . . . . . . . . . . . . . . . . . 13
12.06 Legal Construction. . . . . . . . . . . . . . . 14
12.07 Entire Agreement, Modifications, Consents,
Waivers . . . . . . . . . . . . . . . . . . . . 14
12.08 Section Headings; Construction. . . . . . . . . 15
12.09 Execution Counterparts. . . . . . . . . . . . . 15
12.10 Product Manufactured Prior to Effective Date. . 15
ARTICLE XIII. BINDING EFFECT, ASSIGNMENT . . . . . . . . . . . . 15
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . 16
ATTACHMENTS TO AGREEMENT
SCHEDULE 1.04 - Specifications
SCHEDULE 2.01 - Statement of Work
SCHEDULE 2.07 - Equipment List
SCHEDULE 5.01 - Product Pricing Schedule
(iii)
<PAGE>
MANUFACTURING AGREEMENT
THIS AGREEMENT entered into this__14 th__day of June, 1996, between
Pharmacia & Upjohn Oncology Division, 4272 Balloon Park Road, N.E.
Albuquerque, New Mexico 87109 (hereinafter referred to as "POD"), and
IMMUNOMEDICS, INC., 300 American Road, Morris Plains, New Jersey 07950
(hereinafter referred to as "IMMUN").
WHEREAS, IMMUN is a biotechnology company which, using its
proprietary technology and know-how, has developed in vivo cancer imaging
products known as "CEA-Scan " and LeukoScan (the Products); and
WHEREAS, POD has expertise in the finishing of pharmaceutical
products and has the necessary and proper facilities and employees to
undertake such finishing services and is willing to do so;
NOW, THEREFORE, in consideration of the mutual covenants exchanged
herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
1.01 Bulk Solution. As used herein the term "Bulk Solution"
refers to the formulated solution of Injectable grade in vivo imaging
agent solution prepared at the POD facility by IMMUN personnel.
1.02 Product(s). As used herein the term "Product(s)" shall mean
"finished" Bulk Solutions which are final pharmaceutical dosage forms
having the trade names "CEA-Scan " or LeukoScan and which are useful as
in vivo imaging agents.
1.03 Finished. The term "finish" or "finished" refers to Bulk
Solution which has been filled into vials, lyophilized, inspected, and
packaged by POD in order to produce finished pharmaceutical dosage forms
of the Product(s). The term "finishing" refers to the process of filling,
lyophilization, and packaging of the Bulk Solution.
1.04 Specifications. As used herein the term "Specification"
shall mean the "Master Batch Record" for each Product and the standards
set forth in Schedule 1.04 attached hereto.
1.05 Master Batch Record. The term "Master Batch Record" as used
herein shall mean the master production and control records required by
the FDA to be kept for each Product pursuant to 21 CFR 600.12.
1.06 PLA. The term "PLA" is used herein to mean the Product
License Application No. 91-0209 for CEA-Scan and the Product License
Application No. _________________for LeukoScan covering the Product(s)
filed with the United States Food and Drug Administration ("FDA").
<PAGE>
1.07 Calendar Year. The term "Calendar Year" shall mean the
consecutive twelve (12) month period beginning January 1 of a year and
ending December 31 of such year.
1.08 Effective Date. The "Effective Date" of this Agreement shall
be the date first written hereinabove.
1.09 Affiliate. The term "Affiliate" as used herein shall mean
with respect to any specified Person, any other Person that directly or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified. For purposes
of this definition, "control" including, with correlative meanings, the
terms "controlled by" and "under common control with" means ownership
directly or indirectly of more than thirty percent (30%) of the equity
capital having the right to vote for election of directors in the case of
a corporation and more than thirty percent (30%) of the beneficial
interest in the case of a business entity other than a corporation.
1.10 Person. As used herein the term "Person" shall mean any
individual, corporation, partnership, business trust, business
association, governmental entity, governmental authority or other legal
entity.
1.11 Schedules. The Schedules to this Agreement are listed below
and are an integral part of this Agreement and are incorporated herein.
Schedule Description
________ _________________
1.04 Specifications
2.01 Statement of Work
2.07 Equipment List
5.01 Price
ARTICLE II. THE WORK
2.01 Statement of Work. The work to be performed by POD pursuant
to the terms of this Agreement shall be as set forth in the Statement of
Work attached hereto as Schedule 2.01 and as such may be amended from time
to time.
2.02 Amendments to Statement of Work. Any amendments made to the
Statement of Work must be mutually agreed to by the parties in writing and
must be attached to Schedule 2.01 whereupon such amendment shall become
part of this Agreement.
2.03 Addition of Other Products to the Agreement. With the
written consent of POD, IMMUN may add additional products to the Agreement
to be finished by POD; provided, however, that POD shall have the
unilateral right to decide whether it wishes to finish such additional
<PAGE>
products pursuant to this Agreement. Any additional products added to the
Agreement will require their own Specifications, Statements of Work and
determination of "cost" in order to set the price pursuant to Section 5.01.
2.04 Work Performed by POD. POD shall be responsible for
"finishing" the formulated bulk Solution supplied to it by IMMUN in
accordance with the Statement of Work to produce Product which meets the
Specifications set forth in Schedule 1.04 attached hereto.
2.05 Preparation of Bulk Solution. IMMUN shall be responsible for
the preparation of the Bulk Solution according to the PLA and shall be
responsible for providing such Bulk Solution to POD, at POD's facilities
at such time and in such quantities as to enable POD to produce Product
in accordance with the Statement of Work.
2.06 Use of POD Facilities by IMMUN. POD shall make its
facilities (including all equipment reasonably required for the
preparation of Bulk Solution) available for IMMUN personnel to prepare
Bulk Solution in the quantity required for the manufacture of lots of
Product scheduled for production in accordance with the scheduling
procedures of Section 3.03.
2.07 Equipment provided by IMMUN. IMMUN, where possible, shall
provide all equipment and spare parts for such equipment which will come
in contact with the Bulk Solution for each Product and which shall be
suitable and sufficient for the preparation, holding and filling of each
of the Bulk Solutions. Such equipment shall be provided to POD new and
in good working order. POD agrees to clean, maintain and store such
equipment and use it solely for the purpose of manufacturing the IMMUN
product for which it is dedicated. IMMUN shall be responsible for the
repair or replacement of all equipment that becomes inoperative because
of normal wear and tear or improper use by IMMUN employees. POD shall be
responsible for the replacement of such equipment that becomes inoperative
because of improper use by POD employees. A list of the equipment to be
provided by IMMUN is attached as Schedule 2.07.
2.08 Compliance With Applicable Rules at the POD Facility. While
performing the formulation activities at the POD facilities described in
Section 2.05, IMMUN personnel shall comply with applicable current Good
Manufacturing Practice as set forth in 21 CFR Part 211, as amended from
time to time ("FDA GMP") and POD's written Standard Operating Procedures
("SOPs") as disclosed to IMMUN prior to the date hereof. IMMUN agrees to
assume any and all risks of its personnel entering and being in POD's
facilities for such formulation activities and releases POD from any and
all claims which may arise due to any injury, damage or loss which may be
suffered by such personnel on such premises; provided, however, that such
assumption and release shall not apply to any risk, injury, damage or loss
caused by or resulting substantially from the negligence of POD, its
employees and agents.
<PAGE>
2.09 Responsibility for Bulk Solution. Except as otherwise
provided herein, IMMUN shall be solely liable for any damage to or loss
of the Bulk Solution prepared by IMMUN at the POD facility. POD shall
have no obligation or responsibility to IMMUN for any damage to or loss
of such Bulk Solution until IMMUN provides such Bulk Solution to POD
personnel to begin finishing the Bulk Solution into Product, unless such
loss or damage is due to the negligence of POD.
2.10 Endotoxin Testing. Unless otherwise agreed to by the
parties, POD shall retain a sample of each batch of final formulated Bulk
Solution provided to it by IMMUN for finishing and POD shall assay the
retained sample of final formulated Bulk Solution for presence of
endotoxin to provide a baseline endotoxin measurement to be used to
determine whether endotoxin was introduced into the Product during the
finishing process. If the results of the endotoxin test indicates that
endotoxin was introduced into the Product after compounding and during
finishing then failure of the Product to meet the Endotoxin Specifications
shall be presumed to be the fault of POD and the provisions of Section
10.01 shall apply.
2.11 Availability of POD Facilities. In the event that the POD
facilities should become unavailable for any reason and for any period of
time resulting in IMMUN being unable to use such facilities to prepare the
Bulk Solution, POD shall promptly notify IMMUN, in writing, and shall use
its best efforts to promptly restore the availability of the facilities
for the use of IMMUN. In the event the POD facilities become unavailable
to IMMUN for use through no fault of POD, POD shall have no liability to
IMMUN either direct or indirect, consequential or inconsequential for any
loss or damage suffered by IMMUN as a result of the unavailability of the
POD facilities.
2.12 Processing of Product in Quarantine. In the event POD elects
to process "in quarantine" as set forth in Paragraph 11 of Schedule 2.01,
if a batch or lot of product so processed is rejected, POD shall be
responsible for additional labor and materials costs associated with
reworking of the batch or lot; provided, however, that if IMMUN requests
that the batch or lot be further processed in quarantine, then IMMUN shall
be responsible for the additional labor and material costs if the batch
or lot so processed is rejected and must be reworked.
2.13 Regulatory Support. POD shall provide IMMUN at no additional
charge, with regulatory support for the Drug Master File and for the POD
facilities inspections by the FDA or equivalent foreign health care
regulatory authorities. In the event regulatory support additional to
that just described is required by IMMUN, POD shall provide such support
and shall charge IMMUN for the labor and materials used. Labor shall be
charged at the rate specified in Schedule 5.01 herein and materials shall
be charged at cost.
<PAGE>
2.14 Facilities Inspection. IMMUN shall have the right to audit
POD's facilities for Good Manufacturing Practices compliance during each
year of the term of the Agreement; provided IMMUN gives POD reasonable
prior notice and the date of the audit is mutually agreed to by the
parties. IMMUN agrees that its employees or agents which inspect POD
facilities will comply with POD rules, regulations and GMP's. IMMUN
specifically assumes liability for any injuries, damages or delays in
production resulting solely from the action of its employees or agents at
POD facilities. There shall be no charge to IMMUN for POD's cooperation
unless more than one audit per year is scheduled on IMMUN's behalf.
ARTICLE III. FORECAST OF REQUIREMENTS
3.01 Forecast. Within fifteen (15) days after the Effective Date,
IMMUN shall deliver to POD a forecast of the quantity (by batch size) of
Product to be produced by POD for the period from the Effective Date until
December 31, 1996 (the "Initial Forecast"). The first three months of the
forecast will be considered a firm commitment for production quantities
and the remainder of the forecast shall be advisory only. Beginning on
June 1, 1996, and thereafter on June 1 of each calendar year of the
Agreement, IMMUN shall deliver to POD a forecast of its requirements for
Product for the Calendar Year and shall thereafter update such Calendar
Year forecasts on a monthly basis in order to allow POD to plan its
production schedule for the batch size of Product to be produced. In the
event that IMMUN anticipates a material deviation from the forecast at any
time, IMMUN shall promptly notify POD.
3.02 POD Obligation to Meet Requirements. POD agrees to supply,
in each Calendar Year, all orders placed by IMMUN up to one hundred
percent (100%) of IMMUN's Calendar Year forecast. POD shall use
reasonable efforts to supply any quantity ordered by IMMUN of Product in
excess of the forecast subject to POD's production scheduling capabilities
and commitments to other customers.
3.03 Placement of an Order. IMMUN shall initiate an order for
Product by sending to POD a specific purchase order for Product. Once POD
takes possession of the Bulk Solution and begins to finish such Bulk
Solution pursuant to the Statement of Work, IMMUN shall be obligated to
accept delivery of and pay for the Product produced from such Bulk
Solution, provided such Product meets the Specifications. Purchase orders
shall be submitted to the attention of Contract Manufacturing.
ARTICLE IV. SHIPMENT & STORAGE OF, & PAYMENT FOR PRODUCT
4.01 Storage. Finished vials will be stored at the recommended
controlled temperature until shipped as instructed by IMMUN. POD will
store the finished dosage form at no cost up to two weeks after the lots
are released to IMMUN by POD's Quality Assurance Department. Beyond two
<PAGE>
weeks an additional charge will be incurred as noted in Schedule 5.01.
The parties agree that the storage of the finished product by POD shall
not create or constitute an agency relationship between the parties.
Title to all Product whether approved or unapproved shall remain with
IMMUN and subject to the Provisions of 10.01, risk of loss of such product
shall rest with IMMUN.
4.02 Transfer of Product to IMMUN. Product shall be shipped to
IMMUN by POD F.O.B. Albuquerque; any deviation from this Section 4.02 must
be in writing and agreed to by POD. There shall be only one shipment per
lot of Product.
4.03 Payment for Product. POD shall invoice IMMUN for approved
Product which is "released" in accordance with applicable FDA rules and
regulations. The invoice date shall be either the date of shipment of
Product or the date the lot is released by POD's Quality Department (in
the event the lot is not shipped following release in quarantine to IMMUN
by POD's Quality Department). Payment terms are [*]% in advance with the
payment and purchase order received prior to the manufacture of each lot
(F.O.B. Albuquerque). The remaining [*]% of the price shall be due within
ten (10) working days of completion of batch record review by POD and
receipt of the lot(s) by IMMUN if the lots are shipped to IMMUN or an
IMMUN designated location or, if POD stores the lot(s) of Product, payment
of the remaining [*]% will be due ten (10) days after completion of batch
record review by POD.
4.04 Cancellation Fee. A cancellation fee of [*]
Dollars [*], plus an additional charge for labor and
materials if applicable, shall be billed to IMMUN if cancellation or
rescheduling by IMMUN of any scheduled batch production occurs within one
(1) week (7 days) of the scheduled manufacture date.
4.05 Component Fee. A component fee equal to [*] times the
cost of POD's components used plus [*] times the costs associated
with component preparation shall be billed to IMMUN if IMMUN fails to
cancel a lot one week (7 days) prior to the scheduled manufacture date.
4.06 Late Payment Penalty. All invoices paid later than ten (10)
days from completion of batch record review by POD will be charged 1.5%
interest per month.
ARTICLE V. PRICE OF MANUFACTURE
5.01 Price. IMMUN shall pay POD for Product in accordance with
the price set forth in Schedule 5.01 attached hereto.
5.02 Price Increase. The price charged by POD for the manufacture
of Product as specified in Section 5.01 shall remain in effect until
December 31, 1996. On January 1, of each Calendar Year thereafter, POD
shall have the right to increase the price set forth in Schedule 5.01 to
<PAGE>
reflect increased manufacturing costs and increased fixed costs incurred
by POD during the previous twelve (12) month period. Any such price
increase shall not exceed ten percent (10%) of the sum of the
manufacturing cost and fixed cost for the Product determined for the
previous twelve (12) month period.
5.03 Notification of Price Increase. POD must notify IMMUN no
later than December 1, 1996 that POD intends to take a price increase and
the amount of the increase (hereinafter the "Increased Cost Notice"). At
the time POD provides IMMUN with the Increased Cost Notice, POD shall
provide IMMUN with a statement which sets forth, in reasonable detail, the
increased costs and the computation thereof.
5.04 Verification of Increase by Accountant. Within forty-five
(45) days after receipt of the Increased Cost Notice from POD, IMMUN shall
have the right to have any such increase in cost verified by an
independent certified public accountant of its choosing who shall be
reasonably acceptable to POD and who shall execute such nondisclosure
agreement with respect to POD's confidential information as may reasonably
be required by POD (a "Nondisclosure Agreement").
5.05 Accountant's Report. The independent accountant described
in Section 5.05 shall issue a report within thirty (30) days of the
completion of the audit, and copies of such report shall be delivered to
IMMUN and POD. IMMUN shall be obligated to pay the increased price for
the Product during the period of the audit and completion of the report.
5.06 Determination that Increase is Unjustified. In the event the
audit of the increased costs shows that such increase is not based on
reasonable evidence of increased costs to POD, the parties shall negotiate
in good faith to determine an acceptable price increase, if any. If the
independent auditor determines that the price increase requested by POD
is more than 1.5 times the increase the independent auditor finds to be
supported, POD shall pay for the cost of such audit.
5.07 Price Decrease. If, as a result of a cooperative effort
between POD and IMMUN relating to the manufacture of IMMUN's products, POD
experiences a decrease in cost of manufacture of Product, e.g., materials,
direct labor and the like or overhead related to the services to be
performed by POD under this Agreement, POD shall notify IMMUN of such
decrease and grant IMMUN a reduction in price equal to the related cost
reduction. IMMUN shall have the right, upon reasonable notice to POD, to
have an independent certified public accountant reasonably acceptable to
POD (who shall execute a Nondisclosure Agreement) review the books and
records of POD once every Calendar Year to verify if any such cost
reductions resulting from the joint efforts of IMMUN and POD have
occurred.
<PAGE>
ARTICLE VI. WARRANTIES OF POD
6.01 The POD Facility. POD represents and warrants that it shall
use its best efforts to maintain its facilities in such a fashion as to
be in compliance with all applicable federal, state and local rules and
regulations. POD agrees that it will maintain a Type I Drug Master File
("DMF") for the POD facility.
6.02 Aseptic Processing Environment. POD represents and warrants
that it shall use its best efforts to insure that all filtration, filling
and lyophilization of the Product by POD shall be done in an aseptic
processing environment and in accordance with the Statement of Work.
6.03 Failure to Comply with Sections 6.01 and 6.02. In the event
that POD determines that it is unable to comply with its obligations as
specified in Section 6.01 and Section 6.02, it shall promptly notify IMMUN
of its inability to comply and shall advise IMMUN of what actions POD
shall take in order to be in compliance.
ARTICLE VII. OWNERSHIP OF COMPONENTS AND RISK OF LOSS
7.01 Ownership of Components. All raw materials, active and
inactive ingredients, and secondary components supplied by IMMUN to POD,
as between POD and IMMUN, shall be owned by IMMUN, who shall retain title
thereto at all times and subject to the provisions of Section 10.01, IMMUN
shall bear all risk of loss therefore.
7.02 Ownership of Finished Product. The finished Product shall
be owned by IMMUN, and subject to the provisions of Section 10.01, IMMUN
shall bear the risk of loss for such product while stored at POD's
manufacturing or warehouse facility.
7.03 Ownership of Bulk Solution. IMMUN shall own the Bulk
Solution prepared by IMMUN at POD's facilities pursuant to the provisions
of Section 2.04 and subject to the provisions of Section 10.01, IMMUN
shall bear the risk of loss for such Bulk Solution.
7.04 Ownership of Equipment. IMMUN shall own the product contact
equipment IMMUN purchases and provides to POD for use only on the
Products. Subject to the provisions of Section 10.01, IMMUN shall bear
the risk of loss for such equipment while stored at POD's manufacturing
or warehouse facility. POD shall take steps necessary to identify all
equipment belonging to IMMUN sufficient to differentiate such equipment
from POD's own equipment.
<PAGE>
ARTICLE VIII. TERM AND TERMINATION
8.01 Term. Upon execution by both parties, this Agreement shall
be effective as of the date first set forth above and shall expire on
December 31, 1998. IMMUN may renew this Agreement for successive one (1)
year periods by giving notice to POD of IMMUN's intent to renew at least
ninety (90) days prior to the expiration of the term; provided however,
that POD must consent to the renewal. POD shall notify IMMUN no later
than fifteen (15) days after receipt of the notice whether it consents to
the renewal.
8.02 Voluntary Termination. IMMUN or POD may terminate this
Agreement for any reason, provided that the terminating party first serves
written notice of such termination on the other party no later than one
hundred eighty (180) days prior to the date of such termination.
8.03 Termination for Material Breach. Either party may terminate
this Agreement in the event of a material breach by the other, provided
that the party asserting such breach first serves written notice of the
alleged breach on the offending party and such alleged breach is not cured
within thirty (30) days of said notice.
8.04 Termination for Insolvency. In the event that either party
shall admit in writing that it can not pay its debts, or shall suspend its
business, or shall file a voluntary petition or any answer admitting the
jurisdiction of the court and the material allegations of, or shall
consent to, an involuntary petition pursuant to or purporting to be
pursuant to any reorganization or insolvency law of any jurisdiction, or
shall make an assignment for the benefit of creditors, or shall apply for
or consent to the appointment of a receiver or trustee of all or a
substantial part of its property (such party, upon the occurrence of any
such event, a "Bankrupt Party"), then to the extent permitted by the law
the other party hereto may thereafter immediately terminate this Agreement
by giving notice of termination to the Bankrupt Party.
8.05 Effect of Expiration or Termination. Expiration or earlier
termination of this Agreement shall not extinguish rights or obligations
previously accrued or vested.
8.06 POD Obligations Upon Expiration or Termination. Upon the
expiration of this Agreement or its earlier termination, POD shall:
a) at the request of IMMUN, and at IMMUN's expense,
return or dispose of all raw materials, ingredients,
components, equipment, packaging and finished Product
to IMMUN or to a third party pursuant to the
instructions of IMMUN; and
<PAGE>
b) use its best efforts to assist IMMUN in the transfer
of relevant manufacturing technology and information
not considered to be proprietary to POD to another
qualified manufacturing site; IMMUN shall pay POD for
such efforts in an amount to be determined by the
parties.
ARTICLE IX. INDEMNIFICATION
9.01 POD Indemnity. POD agrees to indemnify, protect and defend
IMMUN and hold IMMUN harmless from and against any claims, damages,
liability, harm, loss, costs, penalties, lawsuits, threats of lawsuit,
recalls or other governmental action, including reasonable attorneys'
fees, brought or claimed by any third party which (i) arise as the result
of POD's breach of this Agreement or of any warranty or representation
made to IMMUN under this Agreement; or, (ii) which result from any claim
made against IMMUN in connection with POD's manufacture of defective
Product for IMMUN. Upon the filing of any such legal claim or lawsuit
against IMMUN, IMMUN shall promptly notify POD, in writing, of any such
claim and POD shall, at its expense, with attorneys reasonably acceptable
to IMMUN, handle, defend and control such claim or lawsuit. Failure to
notify POD promptly of the commencement of any such action, if prejudicial
to the ability to defend such action, shall relieve POD of any liability
to IMMUN under this Section 9.01. IMMUN shall have the right to
participate in the defense of such action at its expense with counsel of
its choosing.
9.02 IMMUN Indemnity. IMMUN agrees to indemnify, protect, and
defend POD and hold POD harmless from and against any claims, damages,
liabilities, harm, loss, costs, penalties, lawsuits, threats of lawsuit,
recalls or other governmental action, including reasonable attorneys'
fees, brought or claimed by any third party, which (i) arise out of
IMMUN's breach of this Agreement or of any warranty or representation to
POD under this Agreement; or, (ii) result from the negligent acts or
willful malfeasance on the part of IMMUN or employees or agents, in
connection with IMMUN's sale, marketing or distribution of Product
manufactured by POD or other activities or actions in connection with the
Product. Upon the filing of any such legal claim or lawsuit against POD,
POD shall promptly notify IMMUN, in writing, of any such claim and IMMUN
shall, at its expense, with attorneys reasonably acceptable to POD,
handle, defend, and control such claim or lawsuit. Failure to notify
IMMUN promptly of the commencement of any such action, if prejudicial to
the ability to defend such action, shall relieve IMMUN of any liability
to POD under this Section 9.02. POD shall have the right to participate
in the defense of such action at its expense with counsel of its choosing.
<PAGE>
ARTICLE X. POD LIABILITY TO IMMUN FOR PRODUCT LOSSES
10.01 Liability for Loss of Product, Bulk Solution, Equipment, and
Components. POD's liability to IMMUN for loss of Product, Bulk Solution,
equipment, component parts of said Product (for example, active drug
substance, excipients), or for out of Specification Product which cannot
be reworked, occurring during the manufacturing process due to the fault
of POD shall be limited to the lesser of the following:
a) [*] per batch or lot of Product; or
b) The actual cost of the Product, Bulk Solution,
equipment or components of the Product.
In the event of a third-party claim, the provisions of Article IX shall
govern and shall supersede the provisions of this Article X. The parties
specifically agree that the limitation of liability set forth in this
Section 10.01 shall apply to the following Sections: Section 2.09,
Section 4.01, Section 4.02, Section 7.01, Section 7.02, Section 7.03 and
Section 7.04.
10.02 Parties Disagree Whether Product Out of Specification. In
the case of a disagreement between the parties as to whether the Product
meets the Specifications, a third party laboratory which is reasonably
acceptable to both parties shall be chosen to act as a neutral referee.
The decision of the neutral referee shall be binding on the parties. The
cost of such testing performed by the laboratory shall be borne by the
party found to be in error.
ARTICLE XI. CONFIDENTIALITY
11.01 Confidential Information. Each party ("Receiving Party")
shall maintain in confidence all information heretofore or hereafter
disclosed by the other ("Disclosing Party") which such party knows or has
reason to know are trade secret and other proprietary information owned
by or licensed to the other, including, but not limited to, information
relating to the Product (including without limitation, information
developed in preclinical and clinical studies), and licenses, patents,
patent applications, technology or processes and business plans of the
other party, including, without limitation, information designated as
confidential in writing from one party to the other (all of the foregoing
hereinafter referred to as "Confidential Information"), and shall not use
such Confidential Information except as permitted by this Agreement or
disclose the same to anyone other than those of its officers, directors
or employees as are necessary in connection with such party's activities
as contemplated by this Agreement. Each party shall use the same efforts
such party would use to protect its own information to ensure that its
officers, directors and employees do not disclose or make any unauthorized
use of such Confidential Information. Each party shall notify the other
<PAGE>
promptly upon discovery of any unauthorized use or disclosure of the
other's Confidential Information.
11.02 Limitations on Confidentiality. The obligation of
confidentiality contained in this Article XI shall not apply to the extent
that: i) the Receiving Party is required to disclose information by
applicable law, regulation or order of a governmental agency or a court
of competent jurisdiction; ii) the Receiving Party can demonstrate that
the disclosed information was at the time of disclosure already in the
public domain other than as a result of actions or failure to act of the
Receiving Party, its officers, directors or employees, in violation
hereof; iii) the disclosed information was rightfully known by the
Receiving Party (as shown by its written records) prior to the date of
disclosure to the Receiving Party in connection with this Agreement; or
iv) the disclosed information was received by the Receiving Party on an
unrestricted basis from a source which is not under a duty of
confidentiality to the other party.
11.03 Disclosure Required by Law. In the event that the Receiving
Party shall be required to make disclosure pursuant to the provisions of
Section 11.02 (i) as a result of the issuance of a court order or other
government process, the Receiving Party shall promptly, but in no event
more than forty-eight (48) hours after learning of such court order or
other government process, notify, by personal delivery or facsimile, all
pursuant to Section 12.04 hereof, the Disclosing Party and, at the
Disclosing Party's expense, the Receiving Party shall: a) take all
reasonably necessary steps requested by the Disclosing Party to defend
against the enforcement of such court order or other government process,
and b) permit the Disclosing Party to intervene and participate with
counsel of its choice in any proceeding relating to the enforcement
thereof.
11.04 Equitable Remedies for Breach of Confidentiality. The
parties acknowledge that their failure to comply with the provisions of
Section 11.01 of this Article XI may cause irreparable harm and damage to
the name and reputation of the other party for which no adequate remedy
may be available at law. Accordingly, the parties agree that upon a
breach by a party of such provisions, the non-breaching party may, at its
option, enforce the obligations of the breaching party under those
provisions by seeking equitable remedies in a court of competent
jurisdiction.
ARTICLE XII. MISCELLANEOUS
12.01 Force Majeure. Neither of the parties to this Agreement
shall be liable to the other party for any loss, injury, delay, damage or
other casualty suffered or incurred by such other party due to strikes,
lockouts, accidents, fire, delays in manufacture, transportation or
delivery of material, embargoes, inability to ship, explosions, floods,
war, governmental action or any other cause similar thereto which is
<PAGE>
beyond the reasonable control of such other party and any failure or delay
by a party in the performance of any of its obligations under this
Agreement shall not be considered as a breach of this Agreement due to,
but only so long as there exists, one or more of the foregoing causes;
provided, however, that if POD cannot complete an order within ninety (90)
days due to any such cause, IMMUN may cancel the order without liability
to POD.
12.02 New Mexico Gross Receipts & Compensating Tax. IMMUN hereby
agrees to be liable for and to pay to POD any sales, use, gross receipts
or any other taxes, licenses or fees (excluding income and franchise
taxes) legally incurred by POD from the State of New Mexico or any other
state or tax jurisdiction as a result of purchasing materials, rendering
services, transferring property or any other action necessary to be taken
by POD in order to fulfill the terms of this Agreement.
12.03 Relationship. This Agreement shall not be construed to
create between the parties hereto or their respective successors or
permitted assignees the relationship of principal and agent, joint
venturers, co-partners or any other similar relationship, the existence
of which is hereby expressly denied by each party. Neither party shall
be liable to any third party in any way for engagement, obligation,
contract, representation or transaction or for any negligent act or
omission to act of the other except as expressly provided.
12.04 Governing Law. The provisions of this Agreement shall be
governed in all respects by the laws of the State of New York.
12.05 Notice. All notices, proposals, submissions, offers,
approvals, agreements, elections, consents, acceptances, waivers, reports,
plans, requests, instructions and other communications required or
permitted to be made or given hereunder (all of the foregoing hereinafter
collectively referred to as "Communications") shall be in writing, and
shall be deemed to have been duly made or given when: a) delivered
personally with receipt acknowledged; b) sent by registered or certified
mail or equivalent, return receipt requested, or c) sent by facsimile or
telex (which shall promptly be confirmed by a writing sent by registered
or certified mail or equivalent, return receipt requested), or d) sent by
recognized overnight courier for delivery within twenty-four (24) hours,
in each case addressed or sent to the parties at the following addresses
and facsimile numbers or to such other or additional address or facsimile
as any party shall hereafter specify by Communication to the other
parties:
To POD: H. Joseph Larsen
Sr. Vice President/General Manager
Pharmacia & Upjohn Oncology Division
4272 Balloon Park Road, N.E.
Albuquerque, New Mexico 87109
Fax No. (505) 345-7513
<PAGE>
For All Issues to POD: Jan Holland Hickey
Director of Contract Manufacturing
Pharmacia & Upjohn Oncology Division
4272 Balloon Park Road, N.E.
Albuquerque, New Mexico 87109
Fax No. (505) 345-7513
For Quality Issues to POD: Donald E. Hagman. Ph.D.
Vice President, Development/Quality Assurance
Pharmacia & Upjohn Oncology Division
4272 Balloon Park Road, N.E.
Albuquerque, New Mexico 87109
Fax No. (505) 345-7513
To IMMUN: David M. Goldenberg, Sc.D., M.D.
Chairman and CEO
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
Fax No.: 201-605-8282
With a Copy to: Cynthia L. Sullivan
Executive Director, Operations
Immunomedics, Inc.
300 American Road
Morris Plains, New Jersey 07950
Fax No.: 201-605-8282
Notice of change of address shall be deemed given when actually received,
all other Communications shall be deemed to have been given, received and
dated on the earlier of: (i) when actually received, or on the date when
delivered personally; (ii) one (1) day after being sent by facsimile,
cable, telex (each promptly confirmed by a writing as aforesaid) or
overnight courier; or four (4) business days after mailing (except that
in the case of any communication given to a person with an address outside
the United States, then ten (10) business days after mailing).
12.06 Legal Construction. In case any one or more of the
provisions contained in this Agreement shall be invalid or unenforceable
in any respect, the validity and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby and the parties will attempt to agree upon a valid and enforceable
provision which shall be a reasonable substitute for such invalid and
unenforceable provision in light of the tenor of this Agreement, and, upon
so agreeing, shall incorporate such substitute provision in this
Agreement.
12.07 Entire Agreement, Modifications, Consents, Waivers. This
Agreement together with the Schedules hereto contains the entire agreement
of the parties with respect to the subject matter hereof. This Agreement
<PAGE>
may not be modified or amended except by an instrument or instruments in
writing signed by the party against whom enforcement of any such
modification or amendment is sought. Each party hereto may, by an
instrument in writing, waive compliance by the other party hereto with any
term or provision of this Agreement on the part of such other party to be
performed or complied with. The waiver by either party hereto of a breach
of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach. Neither anything in this Agreement nor
the execution or performance hereof shall be deemed to prejudice in any
way, and each party hereto expressly reserves, any and all rights,
remedies, and claims which each party may now or hereafter have against
or with respect to the other party or any of such other party's
Affiliates, relating to any matter which is not expressly covered by this
Agreement.
12.08 Section Headings; Construction. The section headings and
titles contained herein are each for reference only and shall not be
deemed to affect the meaning or interpretation of this Agreement. The
words "hereby", "herein", "hereinabove", "hereinafter", "hereof" and
"hereunder", when used anywhere in this Agreement, refer to this Agreement
as a whole and not merely to a subdivision in which such words appear,
unless the context otherwise requires. The singular shall include the
plural, the conjunctive shall include the disjunctive and the masculine
gender shall include the feminine and neuter, and vice versa, unless the
context otherwise requires.
12.09 Execution Counterparts. This Agreement may be executed in any
number of counterparts and each such duplicate counterpart shall
constitute an original, any one of which may be introduced in evidence or
used for any other purpose without the production of its duplicate
counterpart. Moreover, notwithstanding that any of the parties did not
execute the same counterpart, each counterpart shall be deemed for all
purposes to be an original, and all such counterparts shall constitute one
and the same instrument, binding on all of the parties hereto.
12.10 Product Manufactured Prior to Effective Date. The parties
specifically acknowledge that only Product manufactured by POD upon or
after the Effective date is covered by this Agreement and Product
manufactured by POD for IMMUN prior to the Effective Date is not covered
by this Agreement.
ARTICLE XIII. BINDING EFFECT, ASSIGNMENT
In entering into this Agreement, each party hereto has relied upon
the expertise and capabilities of the other. Accordingly, neither party
may directly or indirectly assign, delegate, encumber or in any other
manner transfer any of its rights, remedies, obligations, liabilities or
interests in or arising under this Agreement, without the prior consent
of the other, which consent shall not be unreasonably withheld or delayed,
except that either party may directly or indirectly assign, delegate,
<PAGE>
encumber or in any other manner transfer any of its rights, remedies,
obligations, liabilities or interests in or arising under this Agreement,
upon prior notice to the other party but without obtaining the prior
consent of such party to:
a) any affiliate of a party; or
b) to any entity which succeeds, by purchasing stock or assets,
by merger or otherwise, to all or substantially all of the
assets of a party or in the case of IMMUN, to any right,
title and interest of IMMUN's to the Product.
Any attempted assignment, delegation, encumbrance or other transfer in
violation of this Agreement shall be void and of no effect, and shall be
a material breach hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first written above.
IMMUNOMEDICS, INC. PHARMACIA & UPJOHN
ONCOLOGY DIVISION
By: /s/ D M Goldenberg By: /s/ H J Larsen
___________________ _________________
D. M. Goldenberg H. Joseph Larsen
Title: __Chairman & CEO__ Title: __Sr. Vice President/General Manager__
Date: __June 14, 1996__ Date: __6/12/96__
<PAGE>
Schedule 1.04
SPECIFICATIONS
Current revisions of the Master Batch Record, Document No. 10-228, and
Packaging Batch Record, Document No. PL-IMR, for CEA-Scan and current
revisions of the Master Batch Record, Document No. 10-290, and Packaging
Batch Record, Document No. PL-IMM, for LeukoScan and the standards set
forth on this page constitute the Specifications.
POD is responsible for the Products meeting the following standards:
[ * ]
<PAGE>
Schedule 2.01
STATEMENT OF WORK
[ * ]
<PAGE>
SCHEDULE 2.07
EQUIPMENT LIST
Quantity Description
[ * ]
<PAGE>
SCHEDULE 5.01
PRODUCT PRICE SCHEDULE
FIRM UNTIL DECEMBER 31, 1996
[ * ]
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") dated as of June 27, 1996 between Immunomedics, Inc.,
a corporation organized and existing under the laws of the State
of Delaware (the "Company") and the persons listed on the
signature page hereto (each, a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, the Company desires to issue and sell to the
Purchasers and the Purchasers desire to acquire 200,000 shares of
the Company's Series D Convertible Preferred Stock, par value
$0.01 per share (the "Series D Preferred").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchasers agree as follows:
ARTICLE I
Purchase and Sale of Series D Preferred
1.1 Purchase and Sale of Series D Preferred. Upon the
terms and conditions set forth herein, the Company shall issue and
sell to each of the Purchasers, and each of the Purchasers shall
purchase, such number of shares (the "Shares") of Series D
Preferred as is set forth opposite such Purchaser's name on the
signature page hereto. The Series D Preferred shall contain the
terms and provisions set forth in the Certificate of Designation
(the "Certificate of Designation"), a copy of which is attached
hereto as Exhibit A. Capitalized terms used herein not otherwise
defined shall have the meanings set forth in the Certificate of
Designation.
1.2 Purchase Price. The aggregate purchase price for the
Shares purchased by each Purchaser (the "Aggregate Purchase
Price") shall equal the product of the number of Shares purchased
by such Purchaser and $50.00 (the "Purchase Price Per Share").
1.3 The Closing.
(a) The closing of the purchase and sale of the
Shares (the "Closing") shall take place at the offices of Warshaw
Burstein Cohen Schlesinger & Kuh, LLP, 555 Fifth Avenue, New York,
New York 10017 at 10:00 a.m., New York City on June 27, 1996 or
on such other earlier date as the Purchasers and the Company may
agree or as provided in Section 1.3(b). The date of the Closing
is hereinafter referred to as the Closing Date.
(b) At the Closing, (i) the Company shall deliver to
each Purchaser or its representative one or more stock
certificates representing the Shares, which shall be free of
restrictive legends or "stop transfer" restrictions, registered
in the name of the Purchaser and (ii) each Purchaser shall deliver
to the Company the Aggregate Purchase Price as determined pursuant
to this Article I in immediately available funds by wire transfer
to such account as shall be designated in writing by the Company.
In addition, each of the Company and the Purchasers shall deliver
all documents, instruments and writings required to be delivered
by any of them pursuant to this Agreement at or prior to Closing.
<PAGE>
ARTICLE II
Representations and Warranties
2.1 Representations, Warranties and Agreements of the
Company. The Company hereby makes the following representations,
warranties and agreements with and to the Purchasers:
(a) Organization and Qualification. The Company is
a corporation duly and validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate
power to own its properties and to carry on its business as now
being conducted. Except as set forth on Schedule 2.1(a), as of
the date hereof, the Company does not have any subsidiaries. The
Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature
of the business conducted or property owned by it makes such
qualification necessary and where the failure so to qualify could
reasonably be expected to have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on the
operations, properties, prospects, or financial condition of the
Company.
(b) Authorization; Enforcement. (i) The Company has
the requisite corporate power and authority to enter into and
perform this Agreement and to issue the Shares and the shares of
Common Stock issuable upon conversion of the Shares (the
"Underlying Shares" and with the Shares, the "Securities") in
accordance with the terms hereof and the Certificate of
Designation, (ii) the execution and delivery of this Agreement by
the Company and the consummation by it of the transactions
contemplated hereby has been duly authorized by the Company's
Board of Directors and no further consent or authorization of the
Company or its Board of Directors or stockholders is required,
(iii) this Agreement has been duly executed and delivered by the
Company and (iv) this Agreement constitutes a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company as of June 21, 1996 is
as set forth in Schedule 2.1(c). No shares of Common Stock or
other securities of the Company are entitled to preemptive rights.
Except as disclosed in Schedule 2.1(c), as of June 21, 1996, there
were no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings,
or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of Common Stock,
or options, warrants, scrip, rights to subscribe to, or
commitments to purchase or acquire, any shares, or securities or
rights convertible into shares, of capital stock of the Company.
The Company has furnished to the Purchasers true and correct
copies of the Company's Certificate of Incorporation, as amended,
in effect on the date hereof (the "Certificate of Incorporation")
and, the Company's Amended and Restated By-Laws, as in effect on
the date hereof (the "By-Laws").
<PAGE>
(d) Issuance of Shares. The Shares are duly
authorized, and when paid for in accordance with the terms hereof
shall be validly issued, fully paid and nonassessable and free and
clear of all liens, claims and encumbrances. The Underlying
Shares are duly authorized, and when issued upon conversion in
accordance with the terms of the Certificate of Designation shall
be validly issued, fully paid and nonassessable and free and clear
of all liens, claims and encumbrances. The Company has and will
maintain an adequate reserve of shares of Common Stock to enable
it to perform its obligations under this Agreement.
(e) No Conflicts. The execution, delivery and
performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby or relating
hereto do not and will not (i) result in the violation of the
Company's Certificate of Incorporation or By-laws or (ii) conflict
with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
the Company is a party, or to the actual knowledge of the Company,
result in a violation of any law, rule, regulation, order,
judgment or decree (including Federal and state securities laws
and regulations) applicable to the Company, or by which any
property or asset of the Company is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect). The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental
entity, except for possible violations which either singly or in
the aggregate could not reasonably be expected to have a Material
Adverse Effect. The Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for
it to execute, deliver or perform any of its obligations under
this Agreement or issue and sell the Securities in accordance with
the terms hereof and the Certificate of Designation, except for
the filing of the Certificate of Designation with the Secretary
of State of the State of Delaware, which filing shall be effected
prior to the Closing Date.
(f) SEC Documents Financial Statements. The Common
Stock of the Company is registered pursuant to section 12(g) of
the Securities and Exchange Act of 1934, as amended (the "Exchange
Act") and through and including the date hereof, the Company has
filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and
Exchange Commission (the "SEC") pursuant to the reporting
requirements of the Exchange Act, including material filed
pursuant to section 13(a) or 15(d) (all of the foregoing filed
prior to the date hereof being hereinafter referred to herein as
the "SEC Documents"). The Company previously has delivered to the
Purchasers or their representatives true and complete copies of
the SEC Documents (other than documents incorporated by reference
therein but not filed therewith) filed with the SEC since June 30,
<PAGE>
1994. The Company has not provided any non-public information to
the Purchasers. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC
Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statement, to normal year-end
audit adjustments).
(g) Absence of Material Changes. Except as
otherwise publicly disclosed, since June 30, 1995, there has been
no event, occurrence or development that could reasonably be
expected to have a Material Adverse Effect. Except as otherwise
publicly disclosed, since June 30, 1995, no event has occurred
which the Company would be required to disclose pursuant to
applicable statute, law, rule or regulation but which has not so
been disclosed.
(h) No Undisclosed Liabilities. Except as set forth
in the SEC Documents or otherwise publicly disclosed, the Company
has no liabilities or obligations (whether direct, indirect,
contingent or otherwise) which have had or in the Company's
reasonable judgment could have a Material Adverse Effect if the
Company were required to perform such obligations.
2.2 Representations and Warranties of the Purchasers. Each
Purchaser, as applicable, hereby makes the following
representations and warranties to the Company as to itself, but
not as to any other Purchaser:
(a) Organization; Authorization; Enforcement. (i)
The Purchaser is a corporation or partnership duly and validly
existing and in good standing under the laws of the jurisdiction
of its incorporation or organization and has the requisite power
to own its properties and to carry on its business as now being
conducted, (ii) the Purchaser has the requisite power and
authority to enter into and perform this Agreement, (iii) the
execution and delivery of this Agreement by the Purchaser and the
consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action, and no further
consent or authorization of the Purchaser or its Board of
Directors or stockholders or partners is required, (iv) this
Agreement has been duly executed and delivered by the Purchaser
<PAGE>
(or on Purchaser's behalf by its investment manager duly
authorized to act on its behalf) and (v) this Agreement
constitutes a valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
(b) No Conflicts. The execution, delivery and
performance of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated
hereby or relating hereto do not and will not (i) result in the
violation of the Purchaser's charter documents or By-Laws or other
organizational documents, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, any agreement, indenture or
instrument to which the Purchaser is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree
of any court of governmental agency applicable to the Purchaser
or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have
a material adverse effect on the Purchaser). The Purchaser is not
required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency
in order for it to execute, deliver or perform any of its
obligations under this Agreement or purchase the Shares in
accordance with the terms hereof.
(c) Non U.S. Ownership. The Purchaser is not a U.S.
Person as defined within Regulation S ("Regulation S") promulgated
under the Securities Act of 1933 (the "Securities Act") and is not
purchasing the Shares for the account or benefit of a U.S. Person.
If the Shares are being purchased on Purchaser's behalf by its
investment manager, such investment manager is a dealer or other
professional fiduciary in accordance with Rule 902(o)(2) of
Regulation S. The Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating
the merits and risks of the investments contemplated by this
Agreement. The Purchaser has been afforded, to the satisfaction
of the Purchaser, the opportunity to review the SEC Documents and
obtain such additional publicly available information concerning
the Company and its business, and to ask such questions and
receive such answers (based upon publicly available information),
as the Purchaser deems necessary to make an informed investment
decision.
(d) Investment Intent. The Purchaser is purchasing
the Securities for investment purposes and not with a view towards
distribution. The Purchaser has no present intention to sell the
Securities and has no present arrangement (whether or not legally
binding) to sell the Securities to or through any person or
entity; provided, however, that by making the foregoing
representation and warranty, the Purchaser does not agree to hold
the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance
with the Securities Act and any other applicable securities laws.
<PAGE>
ARTICLE III
Covenants
3.1 Regulation S. (a) The Company shall take all necessary
reasonable corporate action and proceedings as may be required by
applicable law, rule or regulation for the legal and valid
issuance of the Shares to the Purchasers at the Closing in
accordance with this Agreement, for the legal and valid issuance
of the Underlying Shares upon conversion of the Shares in
accordance with this Agreement and the Certificate of Designation,
and for any transfer or other disposition or financing thereof,
when and as permitted under Regulation S without registration
under the Securities Act or other applicable law. Neither the
Company nor any of its affiliates have engaged or will engage in
any "directed selling efforts" (as such term is defined under
Regulation S) with respect to the Shares or the Underlying Shares
and have complied and will comply with the "offering restrictions"
requirements of Regulation S.
(b) Each Purchaser acknowledges as to itself, but
not as to any other Purchaser, that the Shares and the Underlying
Shares have not been nor, except as otherwise provided in this
Agreement, will be registered under the Securities Act. Such
Purchaser covenants (i) that it is not, and does not intend to be
a "distributor" (as such term is defined by Regulation S) of the
Shares or the Underlying Shares, but if it so acts then such
Purchaser will comply with all applicable requirements under
Regulation S in connection therewith, (ii) that, (A) during the
40-day restricted period, it will not offer or sell the Shares or
the Underlying Shares within the United States or to, or for the
account or benefit of, any "U.S. person" (as each such term is
defined in Regulation S) and (B) following the expiration of the
40-day restricted period, it will not offer or sell the Shares or
the Underlying Shares within the United States or to, or for the
account or benefit of, any "U.S. person" (as each such term is
defined in Regulation S), except in accordance with the provisions
of Rule 903 or Rule 904 of Regulation S or pursuant to an
exemption from the registration requirements of the Securities
Act, (iii) that neither the Purchaser, its affiliates, nor persons
acting on their behalf, have engaged or will engage in "directed
selling efforts" (as such term is defined by Regulation S) with
respect to the Shares and the Underlying Shares and that, if a
distributor, each of them has complied and will comply with the
"offering restrictions" requirements of Regulation S.
(c) The Company acknowledges that the Purchasers may
from time to time engage in purchases, sales, financings or
transactions in the Common Stock separate and apart from the
Securities acquired pursuant to this Agreement.
3.2 Common Stock. From the date hereof through the Closing
Date, the Company shall not (i) amend its Certificate of
Incorporation or By-laws so as to adversely affect any rights of
the Purchasers; (ii) split, combine or reclassify its outstanding
capital stock; (iii) declare or set aside or pay any dividend or
other distribution with respect to the Common Stock; (iv)
repurchase or offer to repurchase shares of its stock; (v) sell
equity or equity related securities (except shares issued upon
exercise of options granted under the Company's stock option plan)
or (vi) enter into any agreement with respect to the foregoing.
<PAGE>
3.3 Purchasers' Rights if Regulation S is Amended. In the
event that at any time on or after the Closing Date and prior to
the expiration of the Conversion Term, the Purchasers and the
Company jointly agree (or in the event they are unable to so agree
upon receipt by the Company of an opinion of a third party,
mutually acceptable to the Company and the Purchasers, who is
experienced in transactions of this type) that Regulation S has
been amended or interpreted in a manner so as to adversely effect
the marketability of the Shares or the shares of Common Stock
underlying the Shares, other than as a result of the actions taken
by the Purchasers, then, at the Company's option, the Company
shall promptly (i) file a registration statement under the
Securities Act of 1933, as amended, to register for sale the
Underlying Shares and to use its reasonable efforts to cause such
registration statement to be declared effective or (ii) redeem the
Shares and the Underlying Shares, at an aggregate purchase price,
in the case of the Shares, equal to the Stated Value of the Shares
to be redeemed plus interest from the date of issuance at a rate
equal to the monthly LIBOR, and in the case of the Underlying
Shares, the Market Value (as defined below) of the Underlying
Shares to be redeemed. For purposes of this Article III, the
Market Value shall equal the average of the Per Share Market Value
for the 10 Trading Days ending 5 Trading Days prior to the date
the Underlying Shares are to be redeemed.
3.4 Purchasers' Rights if Trading in Common Stock is
Suspended. In the event that at any time on or after the Closing
Date and prior to the expiration of the Conversion Term, trading
in the shares of the Company's Common Stock is suspended on the
principal market or exchange for such shares (including The Nasdaq
Stock Market), for a period of five consecutive Trading Days,
other than as a result of the suspension of trading in securities
generally, then, at each Purchaser's option, the Company shall
redeem the Shares at an aggregate purchase price, in the case of
the Shares, equal to the Stated Value of the Shares to be redeemed
and in the case of the Underlying Shares, the Market Value of the
Underlying Shares to be redeemed.
3.5 Limitations on Purchasers' Right to Convert.
Notwithstanding anything to the contrary contained herein or in
the Certificate of Designation, a Purchaser, shall be entitled to
convert only such number of Shares such that the number of shares
of Common Stock that such Purchaser is then entitled to receive
upon the conversion of such number of Shares as is then being
submitted for conversion, together with any other shares of Common
Stock then held will not equal or exceed 5% of the issued and
outstanding shares of Common Stock, after giving effect to the
shares of Common Stock to be issued pursuant to such Conversion
Notice. Each Conversion Notice shall contain a representation as
to the foregoing. If at the expiration of the Conversion Term,
a Purchaser, as a result of the provisions of this Section 3.5,
shall be unable to exercise its right to convert Shares, the
Conversion Term shall be extended for such additional time, not
to exceed three months, to permit such Purchaser to convert, at
its option, such remaining Shares as it shall then own giving
effect to (i) an increase in the Conversion Price, (ii) an
increase in the number of outstanding shares of Common Stock, or
(iii) a decrease in the number of shares of Common Stock owned by
such Purchaser.
<PAGE>
3.6 Limitations on Purchaser's Right to Sell Common Stock.
Each Purchaser agrees that during the period commencing on the
Closing Date and ending 40 days thereafter, it will not engage in
any short selling or other hedging transaction in the Securities
including, without limitation, option writing equity swaps or
other types of derivative transactions, the intent of which is to
transfer incidence of ownership into the United States during such
period. Each Purchaser hereby further agrees that during the
period commencing on the date that a Conversion Notice is
delivered to the Company until the end of the relevant Pricing
Period, such Purchaser will not, nor direct any affiliate or
broker acting on its behalf to, enter into (i) a sale of the
Common Stock at a price which is then below the then low daily
trading price of the Common Stock or (ii) any "market open" or
"market close" transaction which would result in establishing a
new low daily trading price for the Common Stock on such day.
3.7 Adjustment to Conversion Price. In the event that at
any time on or after the Closing Date and prior to the expiration
of the Conversion Term but not later than the first anniversary
of the Closing Date (the "Adjustment Period"), the Company shall
issue, in a private placement or an offering under Regulation S,
Common Stock or any securities convertible into or exercisable for
Common Stock, which the Company determines, in its reasonable
judgment, has a sales price (in the case of Common Stock) or a
conversion or exercise price (in the case of securities
convertible into or exercisable for Common Stock), as the case may
be (the "Adjusted Conversion Price"), as a percentage of the Sales
Price on the date of issuance, that is less than the Conversion
Price of the Series D Preferred Stock, as a percentage of the
Pricing Period Average Prices, then, upon the request of the
holders of a Majority in Interest of the then outstanding Shares,
the Company shall promptly file a certificate of amendment to the
Certificate of Designation to permit the then outstanding Shares
to thereafter be converted into Common Stock at the Adjusted
Conversion Price. During the Adjustment Period, the Company
agrees to promptly notified each holder of Shares of any issuance
of securities in a private placement or offering under Regulation S.
<PAGE>
ARTICLE IV
Conditions
4.1 Conditions Precedent to the Obligation of the Company
to Sell the Shares. The Obligation hereunder of the Company to
sell the Shares to the Purchasers is further subject to the
satisfaction, at or before the Closing, of each of the following
conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any
time in its sole discretion.
(a) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of the Purchaser
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time.
(b) Performance by the Purchasers. The Purchasers
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by
the Purchasers at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court of
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
(d) No Change in Regulation S. Regulation S shall
not have been, nor proposed to be, amended or interpreted in a
manner, which, in the reasonable judgment of the Company, would
materially adversely affect the issuance or sale of the Securities
by the Company.
(e) Filing of the Certificate of Designation. The
Certificate of Designation shall have been duly filed with the
Secretary of State of the State of Delaware and a certified copy
thereof shall have been returned to the Company.
4.2 Conditions Precedent to the Obligation of the
Purchasers to Purchase the Shares. The obligation of each
Purchaser hereunder to acquire and pay for the Shares is subject
to the satisfaction, at or before the Closing, of each of the
following conditions set forth below. These conditions are for
each Purchaser's sole benefit and may be waived by such Purchaser
at any time in its sole discretion.
(a) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time
(except for representations and warranties set forth in Section
2.1(f) that speak as of a particular date).
(b) Performance by the Company. The Company shall
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
<PAGE>
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court of
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
(d) Adverse Changes. Since June 30, 1995, no event
has occurred that could reasonably be expected to have a Material
Adverse Effect on the Company.
(e) No Change in Regulation S. Regulation S shall
not have been, nor proposed to be, amended or interpreted in a
manner, which, in the reasonable judgment of the Purchaser, would
materially adversely affect the purchase of the Securities by the
Purchaser.
(f) No Suspension of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
SEC or the National Association of Securities Dealers, Inc. (the
"NASD") (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding
the Company).
(g) Legal Opinion. The Company shall have delivered
to the Purchaser the opinion of Warshaw Burstein Cohen Schlesinger
& Kuh, LLP, counsel to the Company, in form and substance
reasonably satisfactory to the Purchaser.
(h) Officer's Certificate. The Company shall have
delivered to the Purchaser a certificate, executed by an executive
officer of the Company, to the effect that all the conditions to
the closing shall have been satisfied.
(i) Filing of the Certificate of Designation. The
Certificate of Designation shall have been duly filed with the
Secretary of State of the State of Delaware and a certified copy
thereof shall have been returned to the Company.
<PAGE>
ARTICLE V
Termination
5.1 Termination by Mutual Consent. This Agreement may be
terminated at any time by the mutual consent of the Company and
the Purchasers.
ARTICLE VI
Miscellaneous
6.1 Fees and Expenses: No Brokers. Each party shall pay
the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay
all stamp and other taxes and duties levied in connection with the
issuance of the Securities pursuant hereto. Each party represents
that it has not used the services of any broker in connection with
this transaction, other than a broker as to which such party shall
be solely responsible for the payment of any fees and expenses
incurred in connection herewith.
6.2 Entire Agreement; Amendments. This Agreement,
together with the Exhibit and Schedules attached hereto, contains
the entire understanding of the parties with respect to the
matters covered hereby and, except as specifically set forth
herein, neither the Company nor the Purchasers makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is
sought.
6.3 Notices. Any notice, consent or other communication
(collectively, "Communications") required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery
by telex (with correct answer back received), telecopy or
facsimile (with transmission confirmation report) at the address
or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other
than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
Communications shall be:
to the Company: Immunomedics, Inc.
300 American Road
Morris Plains, NJ 07950
Facsimile No.: (201) 605-8282
Attn: Chief Executive Officer
<PAGE>
With copies to: Howard M. Cohen, Esq.
Warshaw Burstein Cohen Schlesinger & Kuh, LLP
555 Fifth Avenue - 11th Floor
New York, NY 10017
Facsimile No.: (212) 972-9150
If to a Purchaser: At the address set forth on the
signature page hereto.
Either party hereto may from time to time change its address for
notices under this Section 6.3 by giving at least 10 days' notice
of such changed address to the other party hereto pursuant to this
Section 6.3. Any notice of a change in address shall be effective
upon receipt thereof.
6.4 Waivers. No waiver by either party of any default
with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any other provision, condition or requirement
hereof; nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. Any waiver must be in
writing.
6.5 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
6.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
successors and permitted assigns. Neither the Company nor any
Purchaser shall assign this Agreement or any rights or obligations
hereunder without the prior consent of the other (which consent
may be withheld for any reason in the sole discretion of the party
from whom consent is sought) and any such purported assignment
shall be void, except that the Company shall assign this agreement
to any successor by merger or any purchaser of all or
substantially all of the assets of the Company. The assignment
by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
6.7 No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their
respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
6.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the
State of New York without regard to the principles of conflicts
of law.
6.9 Availability of Equitable Remedies; Consent to
Jurisdiction. (a) The Company and the Purchasers agree that since
a breach of the provisions of this Agreement could not adequately
be compensated by money damages, any party shall be entitled,
either before or after the Closing, in addition to any other right
or remedy available to it, to an injunction restraining such
breach or a threatened breach and to specific performance of any
such provision of this Agreement and the parties hereby consent
to the issuance of such injunction and to the ordering of specific
performance.
<PAGE>
(b) Each of the Company and the Purchasers hereby (i)
irrevocably consents to the jurisdiction of the federal courts
located in the State of New York (or the courts of the State of
New York if the federal court decline to accept jurisdiction) in
connection with any action or proceeding arising out of or
relating to this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this
Agreement, or a breach of this Agreement or any such document or
instrument and (ii) in any such action or proceeding, waives
personal service of any summons, complaint, or other process and
agrees that service thereof may be made in accordance with Section
6.3 and shall constitute good and sufficient service of process
and notice thereof.
6.10 Survival. The agreements and covenants of the Company
and the Purchasers contained in Article III and this Article VI
shall survive the termination of this Agreement or the
consummation of the transactions contemplated hereby. The
representations and warranties of the Company and the Purchasers
contained in Article II shall survive until a date that is one
year after the Closing.
6.11 Execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original for
all purposes and any one of which may be introduced into evidence
or used for any other purpose without the production of its
duplicate counterpart, and all of which shall be considered one
and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign
the same counterpart. In the event any signature is delivered by
facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be
physically delivered to the other party within five days of the
execution and delivery hereof.
6.12 Publicity. The Company and the Purchasers shall
consult with each other in issuing any press releases or otherwise
making public statements with respect to the transactions
contemplated hereby. Except to the extent required by law, neither
party shall issue any press release or otherwise make any public
statement without the prior consent of the other, which consent
shall not be unreasonably withheld or delayed.
6.13 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in
any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be
affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, in light of the tenor of this
Agreement, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the date hereof.
IMMUNOMEDICS, INC.
By /s/ David M. Goldenberg
________________________
David M. Goldenberg
Chairman of the Board and
Chief Executive Officer
<PAGE>
PURCHASERS' SIGNATURE PAGE
[Name of Purchaser]
By: ________________________
Name:
Title:
Shares Purchased:
Aggregate Purchase Price:
Address for Notice:
<PAGE>
Schedule 2.1(a)
Name of Subsidiary Jurisdiction of Incorporation
___________________________ _____________________________
Immunomedics Ltd. Israel
(inactive corporation)
Immunomedics, B.V. Netherlands
<PAGE>
Schedule 2.1(c)
Capitalization of the Company
Issued and
Class Authorized Outstanding
_______________________________ __________ ___________
Preferred Stock, $.01 par value 10,000,000
Series B convertible 200,000 0
Series C convertible 200,000 28,415
Series D convertible 200,000 0
Common Stock, $.01 par value 50,000,000 34,305,485
par value
Outstanding Options Warrants and Rights
The Company has outstanding options to purchase 2,270,475
shares of Common Stock, at prices ranging from $2.20 to $10.75.
Exhibit 23.1
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
reported dated August 1, 1996 relating to the consolidated balance
sheets of Immunomedics, Inc. as of June 30, 1996 and 1995, and the
related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years in the
three-year period ended June 30, 1996, which report is included in
the June 30, 1996 Annual Report on Form 10-K of Immunomedics, Inc.
Short Hills, New Jersey
September 26, 1996
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Jun-30-1996
<PERIOD-START> Jul-01-1995
<PERIOD-END> Jun-30-1996
<CASH> 13,646,000
<SECURITIES> 15,044,821
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 193,672
<CURRENT-ASSETS> 29,609,784
<PP&E> 11,482,191
<DEPRECIATION> 5,372,000
<TOTAL-ASSETS> 35,719,975
<CURRENT-LIABILITIES> 4,566,769
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<COMMON> 343,055
0
2,284
<OTHER-SE> 30,807,867
<TOTAL-LIABILITY-AND-EQUITY> 35,719,975
<SALES> 185,887
<TOTAL-REVENUES> 1,700,092
<CGS> 28,124
<TOTAL-COSTS> 14,999,569
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (13,299,477)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,299,477)
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<NET-INCOME> (13,299,477)
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